Page 1 CONFORMED COPY LOAN NUMBER 7156-SC Loan Agreement (HIV/AIDS Prevention and Control Project) between ST. KITTS AND NEVIS and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated February 28, 2003 Page 2 LOAN NUMBER 7156-SC LOAN AGREEMENT AGREEMENT dated February 28, 2003 between ST. KITTS AND NEVIS (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the project described in Schedule 2 to this Agreement (the Project), has requested the Bank to assist in financing the Project; WHEREAS the Bank has agreed, on the basis, inter alia , of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The “General Conditions Applicable to Loan and Guarantee Agreements for Fixed-Spread Loans” of the Bank dated September 1, 1999 (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) “AIDS” means Acquired Immune Deficiency Syndrome; (b) “Annual Action Plan” means any of the plans referred to in Section 3.05 of this Agreement; (c) “CAREC” means the Caribbean Epidemiology Center, an agency within PAHO, specialized in assisting Caribbean nations in the controlling of HIV/AIDS epidemic and other diseases problems; Page 3 - 2 - (d) “EC Dollars” and “EC$” mean the official currency of the Borrower; (e) “Financial Monitoring Report” and “FMR” mean each report prepared in accordance with Section 4.02 of this Agreement; (f) “HAART” means Highly Active and Anti-Retroviral Therapy; (g) “High-risk Groups” means groups of population within the Borrower’s territory that are highly vulnerable to HIV/AIDS infection, in particular commercial sex workers, patients living with STI (as hereinafter defined), adolescents, street children, drug users, pregnant women, men having sex with men, bisexuals, and hotel and tourism workers; (h) “HIV” means Human Immune-deficiency Virus; (i) “Implementation Letter” means the letter of even date herewith from the Borrower to the Bank setting forth the monitoring and evaluation indicators for the Project; (j) “MOF” means the Borrower’s Ministry of Finance, Development and Planning or any successor thereto; (k) “MOH” means the Borrower’s Ministry of Health or any successor thereto; (l) “NCHA” means the Borrower’s national council on HIV/AIDS, referred to in Section 3.10 of this Agreement; (m) “OECS” means the Organization of Eastern Caribbean States; (n) “OECS/PPS” means the OECS pharmaceutical procurement service, an agency within the OECS, specialized in the procurement of pharmaceuticals and medical supplies on behalf of the OECS members; (o) “OECS/PPS Agreement” means the agreement referred to in Section 3.06 of this Agreement; (p) “Operational Manual” means the manual referred to in Section 3.01 (b) of this Agreement; Page 4 - 3 - (q) “Project Account” means the account referred to in Section 3.03 of this Agreement; (r) “PAHO/CAREC Agreement” means the agreement referred to in Section 3.07 of this Agreement; (s) “PCU” means the Project Coordination Unit, maintained within the office of the Borrower’s MOF, for the purposes referred to in Section 3.04 of this Agreement; (t) “PAHO” means the Pan-American Health Organization; (u) “Special Account” means the account referred to in Section 2.02 (b) of this Agreement; and (v) “STI” means sexually transmitted infections. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, an amount equal to four million forty-five thousand Dollars ($4,045,000), as such amount may be converted from time to time through a Currency Conversion in accordance with the provisions of Section 2.09 of this Agreement. Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of works, goods and services required for the Project and to be financed out of the proceeds of the Loan, and in respect of the fee referred to in Section 2.04 of this Agreement, as well as any premium in respect of an Interest Rate Cap or Interest Rate Collar payable by the Borrower in accordance with Section 4.04 (c) of the General Conditions. (b) The Borrower may, for the purposes of the Project, open and maintain in Dollars a special deposit account in a commercial bank on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure and attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Page 5 - 4 - Section 2.03. The Closing Date shall be June 30, 2008, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a fee in an amount equal to one percent (1%) of the amount of the Loan. On or promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount of said fee. Section 2.05. The Borrower shall pay to the Bank a commitment charge on the principal amount of the Loan not withdrawn from time to time, at a rate equal to: (i) eighty five one-hundredths of one per cent (0.85%) per annum from the date on which such charge commences to accrue in accordance with the provisions of Section 3.02 of the General Conditions to, but not including, the fourth anniversary of such date; and (ii) seventy five one-hundredths of one per cent (0.75%) per annum thereafter. Section 2.06. The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, in respect of each Interest Period at the Variable Rate; provided, that upon a Conversion of all or any portion of the principal amount of the Loan, the Borrower shall, during the Conversion Period, pay interest on such amount in accordance with the relevant provisions of Article IV of the General Conditions. Section 2.07. Interest and other charges shall be payable semiannually in arrears on April 15 and October 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the provisions of Schedule 3 to this Agreement. Section 2.09. (a) The Borrower may at any time request the following Conversion of the terms of the Loan in order to facilitate prudent debt management: (i) a change of the Loan Currency of all or any portion of the principal amount of the Loan, withdrawn or unwithdrawn, to an Approved Currency; (ii) a change of the interest rate basis applicable to all or any portion of the principal amount of the Loan from a Variable Rate to a Fixed Rate, or vice versa; and Page 6 - 5 - (iii) the setting of limits on the Variable Rate applicable to all or any portion of the principal amount of the Loan withdrawn and outstanding by the establishment of an Interest Rate Cap or Interest Rate Collar on said Variable Rate. (b) Any conversion requested pursuant to paragraph (a) of this Section that is accepted by the Bank shall be considered a “Conversion”, as defined in Section 2.01 (7) of the General Conditions, and shall be effected in accordance with the provisions of Article IV of the General Conditions and of the Conversion Guidelines. (c) Promptly following the Execution Date for an Interest Rate Cap or Interest Rate Collar in respect of which the Borrower has requested that the premium be paid out of the proceeds of the Loan, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amounts required to pay any premium payable in accordance with Section 4.04 (c) of the General Conditions up to the amount allocated from time to time for such purpose in the table in paragraph 1 of Schedule 1 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project through the PCU with due diligence and efficiency and in conformity with appropriate public health, technical, administrative, financial, educational and environmental standards and practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation to the provisions of paragraph (a) above, the Borrower shall carry out the Project in accordance with an operational manual, satisfactory to the Bank, containing the detailed procedures for the implementation of the Project, including, inter alia : (A) the organization, terms of reference and staffing of the PCU; (B) the institutional organization and flow of funds; (C) the financial management procedures for the Project; (D) terms of reference for all PCU staff; (E) standard bidding documents and letters of invitation to consultants; (F) mandatory safeguards and mitigation actions for the collection, disposal and treatment of medical waste, which safeguards and actions would be applied to prevent or mitigate any possible negative environmental impact said disposal might otherwise cause; (G) mandatory safeguards and mitigation actions for the rehabilitation and construction of the health facilities, which safeguards and actions would be applied to prevent or mitigate any possible negative environmental impact said construction may otherwise cause, such as, in particular, Page 7 - 6 - increase in deforestation, pollution of groundwater, negative impacts on endangered species, increased soil erosion, and encroachment on natural habitats; and (H) the guidelines for the preparation of the Annual Action Plans. (c) Except as the Bank shall otherwise agree, the Borrower shall not amend, waive or fail to enforce the Operational Manual, or any provision thereof. In case of any conflict between the provisions of this Agreement and those of the Operational Manual, the provisions of this Agreement shall prevail. Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants’ services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section 3.03. Without limitation to the provisions of Section 3.01 above, the Borrower shall make available an amount in EC Dollars equivalent to four hundred sixty- five thousand two hundred Dollars (USD465,200) as counterpart funds for the Project. To that effect, the Borrower shall establish and thereafter maintain, until the completion of the Project, an account (the Project Account) in a commercial bank acceptable to the Bank, on terms and conditions acceptable to the Bank, with an initial deposit of fifty-five thousand Dollars (USD55,000) equivalent prior to the Effective Date. Section 3.04. (a) The Borrower shall maintain a Project coordination unit (the PCU) within the office of the Borrower’s MOF during the implementation of the Project, with functions, staff and responsibilities satisfactory to the Bank which shall include, inter alia : (i) coordination and implementation of the Project; (ii) monitoring and evaluation of the Project; (iii) processing of documentation required for disbursement of the Loan proceeds and for procurement of goods, works and services under the Project; and (iv) preparation and maintenance of the records, accounts and financial statements referred to in Article IV of this Agreement. (b) The Borrower shall: Page 8 - 7 - (i) ensure that the PCU is at all times staffed with at least a Project manager, a procurement officer, an accountant, and an administrative assistant; and (ii) ensure that the PCU is provided with adequate facilities, satisfactory to the Bank, to carry out its responsibilities. Section 3.05. The Borrower shall: (a) not later than November 30 of each year during Project implementation, starting November 30, 2003, furnish to the Bank for its approval an annual action plan (the Annual Action Plan), each said plan to include, inter alia : (i) the project activities to be carried out by the Borrower during the calendar year following the presentation of each said plan; and (ii) the procurement plan for each said calendar year; and (b) thereafter implement each said Annual Action Plan, approved by the Bank, in accordance with its terms. Section 3.06. (a) the Borrower shall, no later than 3 months after the Effective Date, enter into an agreement with the OECS/PPS, under terms and conditions satisfactory to the Bank (the OECS/PPS Agreement), whereby: (i) the Borrower will authorize OECS/PPS to undertake, on behalf of the Borrower, and the OECS/PPS will so undertake, the procurement of drugs (including anti-retroviral drugs), condoms, and pharmaceuticals under the Project, in accordance with the procedures set forth or referred to in this Agreement; (ii) the OECS/PPS will undertake to keep separate records and accounts in respect of such drugs, condoms, and pharmaceuticals; (iii) the Borrower may transfer directly to the OECS/PPS the proceeds of the Loan as required for the OECS/PPS to effect the payments for drugs, condoms, and pharmaceuticals under the Project; (iv) the Borrower will undertake to transfer to the OECS/PPS the counterpart (i.e., non-Loan) funds as required for the OECS/PPS to effect the payment of such drugs, condoms, and pharmaceuticals; and (v) the OECS/PPS will provide the Borrower in a timely manner with whatever information the Borrower needs to comply with the Borrower ’s obligations under Article IV of this Agreement pertaining to Project funds handled by the OECS/PPS. (b) The Borrower shall exercise its rights and comply with its obligations under the OECS/PPS Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate, waive or fail to enforce such agreement or any provision thereof. Section 3.07. (a) no later than 3 months after the Effective Date and for the purposes of assisting in the carrying out of Part C.2 of the Project, the Borrower shall enter into an agreement with PAHO (the PAHO/CAREC Agreement), under terms and conditions satisfactory to the Bank, for the purposes of having CAREC: (i) process PCR Page 9 - 8 - and viral load testing; (ii) confirm HIV/AIDS diagnostic tests; and (iii) provide specialized training. (b) The Borrower shall exercise its rights and comply with its obligations under the PAHO/CAREC Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate, waive or fail to enforce such agreement or any provision thereof. Section 3.08. For the purposes of Section 9.07 of the General Conditions and without limitation thereto, the Borrower shall: (a) prepare, on the basis of guidelines acceptable to the Bank, and furnish to the Bank not later than six (6) months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank a plan designed to ensure the continued achievement of the objectives of the Project; and (b) afford the Bank a reasonable opportunity to exchange views with the Borrower on said plan. Section 3.09. Without limitation on the provisions of Section 9.01 of the General Conditions, the Borrower shall: (a) maintain procedures adequate to enable it to monitor and evaluate, on an ongoing basis, in accordance with the indicators set forth in the Implementation Letter, the carrying out of the Project; (b) in the last FMR of each calendar year, recommend the measures deemed necessary to ensure the efficient completion of the Project and the achievement of the objectives thereof, inform about the availability of counterpart funds, and provide an implementation plan satisfactory to the Bank, updating (if necessary) the targets to be achieved for the implementation of the Project during the succeeding calendar year as set forth in the Implementation Letter; and (c) review with the Bank, on an annual basis upon request by the Bank until the completion of the Project, the relevant FMRs, and thereafter take all measures, satisfactory to the Bank, required to ensure the efficient completion of the Project and the achievement of the objectives thereof. Section 3.10. The Borrower shall appoint and maintain during Project implementation, a national AIDS council (the NCHA), for the purposes of: (a) advising Page 10 - 9 - the Borrower on HIV/AIDS policy; and (b) assisting in the coordination and implementation of the Project. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain a financial management system within the PCU, including records and accounts, and prepare financial statements in a format acceptable to the Bank, adequate to reflect the operations, resources and expenditures related to the Project. (b) The Borrower shall: (i) have the records, accounts and financial statements referred to in paragraph (a) of this Section and the records and accounts for the Special Account and the Project Account for each fiscal year audited, in accordance with auditing standards acceptable to the Bank, consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year an annual audit report which includes: (A) certified copies of the financial statements referred to in paragraph (a) of this Section for such year as so audited; and (B) an opinion on such statements, records and accounts and report of such audit, by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning such records and accounts, and the audit thereof, and concerning said auditors, as the Bank may from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and separate accounts reflecting such expenditures; Page 11 - 10 - (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank’s representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 4.02. (a) The Borrower shall prepare and furnish to the Bank a financial monitoring report, in form and substance satisfactory to the Bank, which: (i) sets forth sources and uses of funds for the Project, both cumulatively and for the period covered by said report, showing separately funds provided under the Loan, and explains variances between the actual and planned uses of such funds; (ii) describes physical progress in Project implementation, both cumulatively and for the period covered by said report, and explains variances between the actual and planned Project implementation as set forth in the Implementation Letter; and (iii) sets forth the status of procurement under the Project, as at the end of the period covered by said report. (b) The first FMR shall be furnished to the Bank not later than forty five (45) days after the end of the first calendar quarter after the Effective Date, and shall cover the period from the incurrence of the first expenditure under the Project through the end of such first calendar quarter; thereafter, each FMR shall be furnished to the Bank not later than forty five (45) days after each subsequent calendar quarter, and shall cover such calendar quarter. Page 12 - 11 - ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as additional conditions to the effectiveness of this Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the Project Account has been opened and an initial amount of at least fifty-five thousand Dollars (USD55,000) equivalent has been deposited therein; (b) the Operational Manual has been adopted by the Borrower; (c) the PCU has been fully staffed in accordance with the provisions of Section 3.04 of this Agreement; (d) the financial management system referred to in Section 4.01 (a) of this Agreement has been established in a manner satisfactory to the Bank; (e) the Annual Action Plan for the first year of the Project has been submitted to the Bank; and (f) the auditors referred to in Section 4.01 (b) (i) of this Agreement have been appointed. Section 5.02. The date May 29, 2003 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of Finance, Development and Planning of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: Page 13 - 12 - For the Borrower: Ministry of Finance, Development and Planning Government Headquarters Church Street Basseterre St. Kitts and Nevis Facsimile: (869) 465-1532 For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: Facsimile: INTBAFRAD 248423 (MCI) or (202) 477-6391 Washington, D.C. 64145 (MCI) Page 14 - 13 - IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in St. Kitts and Nevis, as of the day and year first above written. ST. KITTS AND NEVIS By /s/ Denzil Douglas Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Patricio Márquez Authorized Representative Page 15 - 14 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan % of Allocated Expenditure to Category (Expressed in Dollars ) be Financed (1) Works 1,410,000 90% (2) Goods (except goods covered 1,012,000 100% foreign by categories (3), (4) and (7) expenditures, 85% of below): local expenditures (3) Anti-retroviral drugs 76,000 95% until total expenditures under this Category have reached an amount equivalent to $42,000, and 75% thereafter (4) Laboratory reagents, drugs 245,000 95% until total (except as covered under expenditures under Category (3) above) and this Category have condoms reached an amount equivalent to $123,000, and 75% thereafter (5) Consultants’ Services 775,000 90% (excluding any fees charged by by OECS/PPS under the OECS/PPS Agreement) (6) Training 274,000 100% (7) Operating Costs 148,000 85% (8) Premia for Interest -0- Amount due under Rate Caps and Section 2.09 (c) of this Interest Rate Collars Agreement Page 16 - 15 - Amount of the Loan % of Allocated Expenditure to Category (Expressed in Dollars ) be Financed (9) Front end fee 40,450 Amount due under Section 2.04 of this Agreement (10) Unallocated 64,550 TOTAL 4,045,000 2. For the purposes of this Schedule: (a) the term “foreign expenditures” means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; (b) the term “local expenditures” means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; provided, however, that if the currency of the Borrower is also that of another country from the territory of which goods or services are supplied, expenditures in such currency for such goods or services shall be deemed to be “foreign expenditures”; (c) the term “training” means expenditures (other than those for consultants’ services) incurred by the Borrower to finance reasonable transportation cost and per-diem of trainees and rental of training facilities, equipment and materials for the carrying out of the Project activities under its responsibility; and (d) the term “operating costs” means the reasonable cost of expenditures required for the operations of the PCU and other agencies of the Borrower involved in Project implementation, such as consumable items and utilities, which would not have been incurred absent the Project. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $401,000, may be made in respect of Categories (1) through (7) set forth in the table in paragraph 1 of this Schedule on account of payments made for expenditures within twelve months before that date but after July 1, 2002. Page 17 - 16 - 4. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for expenditures under contracts that are not subject to prior review by the Bank pursuant to Section I, Part D.2, and Section II, Part D.2 of Schedule 4 to this Agreement. Page 18 - 17 - SCHEDULE 2 Description of the Project The objective of the Project is to assist the Borrower in controlling the spread of the HIV/AIDS epidemic through: (a) the scaling up of programs for the prevention, care and control of the epidemic, targeted in particular to HIV/AIDS High-risk Groups; (b) the heightening of awareness with respect to HIV/AIDS infection and prevention amongst the Borrower’s population; and (c) the strengthening of the institutional capacity of the MOH, other related government agencies and civil society organizations to ensure the effectiveness and the sustainability of the Project. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time, to achieve such objective: Part A : Advocacy and Behavior Change 1. Reduction of stigma and discrimination against people living with AIDS, through: (a) the carrying out of advocacy campaigns throughout the Borrower’s territory; and (b) the strengthening of the existing legal framework to prevent discrimination associated with HIV/AIDS. 2. Design and implementation of information, educational and communication programs, through: (a) the carrying out of educational programs for HIV/AIDS High-risk Groups; and (b) the carrying out of outreach campaigns, all for the purposes of raising awareness and understanding among the targeted population with respect to HIV/AIDS transmission, and promoting behavioral changes with respect to safe sex practices among said population to avoid the spread of HIV/AIDS. Part B : Prevention and Control of HIV/AIDS in High-risk Groups and General Population 1. Carrying out of a national program to distribute condoms among the Borrower’s population. 2. Provision of technical assistance, specialized training for health workers, drugs and laboratory equipment for the strengthening of the Borrower’s STI prevention and control program, throughout the Borrower’s network of health centers. Page 19 - 18 - 3. Carrying out a mother-to-child transmission preventive program as part of a holistic approach toward families affected by the disease, which consists of, inter alia : (a) the provision of technical assistance for the preparation and implementation of a mother- to-child transmission protocol; (b) the provision of the anti-retroviral therapy to pregnant women and new born children; and (c) the provision of counseling and treatment for other affected family members. 4. Provision of technical assistance, training and the necessary equipment for the carrying out of counseling and confidential HIV/AIDS testing in selected public clinics. 5. (a) Provision of training to health workers on handling and disposal of medical waste; and (b) acquisition of equipment for the improvement of biomedical waste disposal. Part C : Access to Treatment and Care 1. Dissemination of clinical protocols for HIV/AIDS treatment and care, including the management of common opportunistic infections and tuberculosis, through: (a) the strengthening of the laboratory network to improve the diagnosis of tuberculosis and other opportunistic infections; (b) the provision of training to health workers on HIV/AIDS treatment and care; (c) the provision of anti-tuberculosis drugs; and (d) the provision of technical assistance and specialized training for the dissemination of the HAART protocol. 2. Strengthening of the technical and institutional capacity of health facilities in the Borrower’s territory for the purposes of improving the capacity and quality of HIV/AIDS testing, diagnosis and monitoring of HIV/AIDS infections and preventing HIV cases due to blood transfusions. 3. Rehabilitation of the Pogson Health Facility at Sandy Point. 4. Provision of the necessary laboratory equipment and reagents to provide in- country capability for HIV and CD4 testing in the Borrower’s health facilities. 5. Design and implementation of a program on home care of HIV/AIDS patients which will include, inter alia : (a) the provision of training to community health workers; and (b) the establishment and operation of a day care facility for patients with AIDS. Page 20 - 19 - Part D : Surveillance, Epidemiology and Research Strengthening of the Borrower’s disease surveillance system, through: (a) the design and implementation of an integrated management information system for HIV/AIDS, all for the purposes of improving the Borrower’s resource allocation and decision making concerning HIV/AIDS, as well as to protect the confidentiality of medical records; (b) the implementation of a second generation surveillance system; and (c) the provision of training for the monitoring and evaluation of Project activities and operational research. Part E : Sustainable Management Response 1. Establishment and operation of NCHA. 2. Strengthening the institutional capacity and operation of the PCU. * * * The Project is expected to be completed by December 31, 2007. Page 21 - 20 - SCHEDULE 3 Amortization Schedule 1. The following table sets forth the Principal Payment Dates of the Loan and the percentage of the total principal amount of the Loan payable on each Principal Payment Date (Installment Share). If the proceeds of the Loan shall have been fully withdrawn as of the first Principal Payment Date, the principal amount of the Loan repayable by the Borrower on each Principal Payment Date shall be determined by the Bank by multiplying: (a) the total principal amount of the Loan withdrawn and outstanding as of the first Principal Payment Date; by (b) the Installment Share for each Principal Payment Date, such repayment amount to be adjusted, as necessary, to deduct any amounts referred to in paragraph 4 of this Schedule, to which a Currency Conversion applies. Payment Date Installment Share (Expressed as a %) On each April 15 and October 15 Beginning April 15, 2008 through October 15, 2017 5% 2. If the proceeds of the Loan shall not have been fully withdrawn as of the first Principal Payment Date, the principal amount of the Loan repayable by the Borrower on each Principal Payment Date shall be determined as follows: (a) To the extent that any proceeds of the Loan shall have been withdrawn as of the first Principal Payment Date, the Borrower shall repay the amount withdrawn and outstanding as of such date in accordance with paragraph 1 of this Schedule. (b) Any withdrawal made after the first Principal Payment Date shall be repaid on each Principal Payment Date falling after the date of such withdrawal in amounts determined by the Bank by multiplying the amount of each such withdrawal by a fraction, the numerator of which shall be the original Installment Share specified in the table in paragraph 1 of this Schedule for said Principal Payment Date (the Original Installment Share) and the denominator of which shall be the sum of all remaining Original Installment Shares for Principal Payment Dates falling on or after such date. 3. (a) Withdrawals made within two calendar months prior to any Principal Payment Date shall, for the purposes solely of calculating the principal amounts payable on any Principal Payment Date, be treated as withdrawn and outstanding on the second Principal Payment Date following the date of withdrawal and shall be repayable on each Page 22 - 21 - Principal Payment Date commencing with the second Principal Payment Date following the date of withdrawal. (b) Notwithstanding the provisions of subparagraph (a) of this paragraph 3, if at any time the Bank shall adopt a due date billing system under which invoices are issued on or after the respective Principal Payment Date, the provisions of such subparagraph shall no longer apply to any withdrawals made after the adoption of such billing system. 4. If the principal amount of the Loan withdrawn and outstanding from time to time shall be denominated in more than one Loan Currency, the provisions of this Schedule shall apply separately to the amount denominated in each Loan Currency, so as to produce a separate amortization schedule for each such amount. Page 23 - 22 - SCHEDULE 4 Procurement Section I . Procurement of Goods and Works Part A : General Goods and works shall be procured in accordance with the provisions of Section I of the “Guidelines for Procurement under IBRD Loans and IDA Credits” published by the Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999 (the Guidelines) and the following provisions of Section I of this Schedule. Part B : International Competitive Bidding Except as otherwise provided in Part C of this Section, goods and works shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto. Part C : Other Procurement Procedures 1. National Competitive Bidding Goods estimated to cost less than $100,000 equivalent per contract, and works estimated to cost less than $1,500,000 equivalent per contract, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. Selection of contractors and suppliers under this paragraph shall be carried out using standard bidding documents acceptable to the Bank. 2. International or National Shopping Goods which cannot be grouped into larger bid packages and estimated to cost less than $25,000 equivalent per contract, up to an aggregate amount not to exceed $100,000 equivalent, may be procured under contracts awarded on the basis of international or national shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. Page 24 - 23 - 3. Procurement of Small Works Works estimated to cost less than $100,000 equivalent per contract, up to an aggregate amount not to exceed $100,000 equivalent, may be procured under lump-sum, fixed-priced contracts awarded on the basis of quotations obtained from three qualified domestic contractors in response to a written invitation. The invitation shall include a detailed description of the works, including basic specifications, the required completion date, a basic form of agreement acceptable to the Bank, and relevant drawings, where applicable. The award shall be made to the contractor who offers the lowest price quotation for the required work, and who has the experience and resources to complete the contract successfully. 4. Direct Contracting Anti-retroviral drugs, up to an aggregate amount not to exceed the equivalent of $400,000 may, with the Bank’s prior agreement, be procured in accordance with the provisions of paragraph 3.7 of the Guidelines. Part D : Review by the Bank of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods and works shall be undertaken in accordance with such procurement plan as shall have been approved by the Bank, and with the provisions of said paragraph 1. 2. Prior Review With respect to: (a) each contract for goods procured under Part B of this Section; (b) each contract for goods procured under Part C.4 of this Section; (c) the first two contracts for goods procured under Part C.1 of this Section; and (d) each contract for works procured under Part C.1 of this Section, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 3. Post Review Page 25 - 24 - With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. Section II . Employment of Consultants Part A : General 1. Consultants’ services shall be procured in accordance with the provisions of Sections I and IV of the “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” published by the Bank in January 1997 and revised in September 1997, January 1999 and May 2002 (the Consultant Guidelines), paragraph 1 of Appendix 1 thereto, Appendix 2 thereto, and the following provisions of this Section. 2. The short list of consultants to be selected in accordance with this Section II for services estimated to cost less than $50,000 equivalent per contract may comprise entirely national consultants in accordance with the provisions of paragraph 2.7 and footnote 8 of the Consultant Guidelines. Part B : Quality- and Cost-based Selection Except as otherwise provided in Part C of this Section, consultants’ services shall be procured under contracts awarded in accordance with the provisions of Section II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to quality- and cost- based selection of consultants. Part C : Other Procedures for the Selection of Consultants 1. Selection Based on Consultants’ Qualifications Consultants’ services estimated to cost the equivalent of $50,000 or less per contract, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.7 of the Consultant Guidelines. 2. Least-cost Selection Services of routine nature, such as audit services, estimated to cost the equivalent of $50,000 or less per contract, may be procured under contracts awarded in accordance with the provision of paragraph 3.1 and 3.6 of the Consultant Guidelines. Page 26 - 25 - 3. Single Source Selection Laboratory testing services and specialized training, up to an aggregate amount not to exceed the equivalent of $100,000, may, with the Bank’s prior agreement, be procured in accordance with the provisions of paragraph 3.8 through 3.11 of the Consultant Guidelines. 4. Individual Consultants Specialized advisory services which meet the requirements set forth in paragraph 5.1 of the Consultant Guidelines, up to an aggregate amount not to exceed the equivalent of $300,000, shall be procured under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines. Part D : Review by the Bank of the Selection of Consultants 1. Selection Planning A plan for the selection of consultants, which shall include contract cost estimates, contract packaging, and applicable selection criteria and procedures, shall be furnished to the Bank for its review and approval prior to the issuance to consultants of any request for proposals. Such plan shall be updated every 6 months during the execution of the Project, and each such updating shall be furnished to the Bank for its review and approval. Selection of all consultants’ services shall be undertaken in accordance with such selection plan (as updated from time to time) as shall have been approved by the Bank, and with the provisions of said paragraph 1. 2. Prior Review (a) With respect to: (a) each contract for the employment of consulting firms estimated to cost the equivalent of $50,000 or more; and (b) each contract for the employment of consulting firms procured under Part C.3 of this Section, the procedures set forth in paragraphs 2, 3 and 5 of Appendix 1 to the Consultant Guidelines shall apply. Page 27 - 26 - (b) With respect to each contract for the employment of individual consultants estimated to cost the equivalent of $20,000 or more, the qualifications, experience, terms of reference and terms of employment of the consultants shall be furnished to the Bank for its prior review and approval. The contract shall be awarded only after the said approval shall have been given. The provisions of paragraph 3 of Appendix 1 to the Consultants’ Guidelines shall also apply to such contracts. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shall apply. Page 28 - 27 - SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term “eligible Categories” means Categories (1) through (7) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term “eligible expenditures” means expenditures in respect of the reasonable cost of goods, works and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term “Authorized Allocation” means an amount equivalent to $400,000 Dollars to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Bank shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to $200,000 Dollars until the Bank determines, based on the amounts and frequencies of withdrawal applications, that a higher balance is necessary. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for deposit into the Special Account of an amount or amounts which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required Page 29 - 28 - pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; (b) if the Borrower shall have failed to furnish to the Bank, within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Bank pursuant to said Section in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Bank shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account pursuant to the provisions of Section 6.02 of the General Conditions; or (d) once the total unwithdrawn amount of the Loan allocated to the eligible Categories for the Special Account, minus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank Page 30 - 29 - shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. Page 31 - 30 - wb202290 M:\STKITTS\HIV AIDS Prevention & Control\783-LA.doc December 4, 2002 3:18 PM