Page 1 CONFORMED COPY IDA GRANT NUMBER H079-0-GUA Development Grant Agreement (HIV/AIDS Prevention and Control Project) between CO-OPERATIVE REPUBLIC OF GUYANA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated May 3, 2004 Page 2 IDA GRANT NUMBER H079-0-GUA DEVELOPMENT GRANT AGREEMENT AGREEMENT, dated May 3, 2004, between Co-operative Republic of Guyana (the Recipient) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS (A) the Executive Directors of the Association approved on June 2001 the Caribbean Multi-Country HIV/AIDS Prevention and Control Program (MAP) estimated to cost the amount of $155 million over a period of six years; WHEREAS (B) the Recipient has prepared, approved and is implementing an HIV-AIDS strategic plan for the period from the start of year 2002 through the end of year 2006 (the Recipient’s National HIV/AIDS Program), which is consistent with the eligibility criteria for MAP, and which has as its main objective to reduce the risk and vulnerability to HIV infection through the prevention and control of sexual transmission, promotion of sexual health and improvement in the quality of life of persons living with opportunistic infections, HIV and AIDS; WHEREAS (C) the Recipient, having satisfied itself as to the feasibility and priority of the project described in Schedule 2 to this Agreement (the Project), which is part of the Recipient’s National HIV/AIDS Program, has requested that the Association assist in the financing of the Project; and WHEREAS the Association has agreed, on the basis, inter alia , of the foregoing, to extend an amount (the Grant) to the Recipient 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 Development Credit Agreements” of the Association, dated January 1, 1985 (as amended through October 6, 1999), with the modifications set forth in Schedule 5 to this Agreement (the General Conditions), constitute an integral part of this Agreement. Page 3 - 2 - Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Recitals 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 Work Plan” means any of the plans referred to in Section 3.05 (a) of this Agreement; (c) “ART” means anti-retroviral therapy; (d) “Bank of Guyana” means the Recipient’s central bank; (e) “Eligible Entity” means a non-governmental organization, community- based organization, faith-based organization, an entity in the private sector or a local public sector organization (including municipalities, local public entities and companies) that has been selected in accordance with the criteria set forth in the Operational Manual to carry out a Subproject under Part B.2 of the Project; (f) “Financial Monitoring Report” or “FMR” means each report prepared in accordance with Section 4.02 of this Agreement; (g) “Guyana Dollar” or “GD” means the currency of the Recipient; (h) “HIV” means Human Immune-deficiency Virus; (i) “Implementation Letter” means the letter of even date herewith from the Recipient to the Association setting forth the monitoring and evaluation indicators for the Project; (j) “IPDP” means the indigenous peoples development plan referred to in Section 3.12 (b) of this Agreement; (k) “Line Ministries” means the Recipient’s Ministries of Youth, Sports and Culture; Human Services, Labor, and Social Security; Home Affairs; Amerindian Affairs; and Education and any other Ministries of the Recipient which may be acceptable to the Association in addition to, or in substitution of, those set forth above; (l) “MOH” means the Recipient’s Ministry of Health; Page 4 - 3 - (m) “MOU” means any of the memoranda of understanding referred to in Section 3.06 (a) of this Agreement; (n) “Operational Manual” means the manual referred to in Section 3.01 (b) of this Agreement; (o) “PMU” means the project management unit, within the MOH, referred to in Section 3.04 of this Agreement; (p) “PCHA” means the Recipient’s Presidential Commission on HIV/AIDS referred to in Section 3.10 of this Agreement; (q) “Special Account” means the account referred to in Section 2.02 (b) of this Agreement; (r) “Subproject” means a specific set of activities aimed at responding effectively to the HIV/AIDS pandemic, that has been approved by the Recipient to be carried out by an Eligible Entity under Part B.2 of the Project, and that is consistent with the list of approved activities included in the Operational Manual; (s) “Subproject Agreement” means any of the agreements referred to in Section 3.07 (a) of this Agreement; (t) “STI” means sexually transmitted infections; and (u) “US Dollars” means the currency of the United States of America. ARTICLE II The Grant Section 2.01. The Association agrees to make available to the Recipient, on the terms and conditions set forth or referred to in this Agreement, an amount in various currencies equivalent to six million seven hundred thousand Special Drawing Rights (SDR 6,700,000). Section 2.02. (a) The amount of the Grant may be withdrawn from the Grant Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Association shall so agree, to be made) in respect of the Page 5 - 4 - reasonable cost of goods, works and services required for carrying out the Project and to be financed out of the proceeds of the Grant. (b) The Recipient may, for the purposes of the Project, open and maintain in United States Dollars a special deposit account in the Bank of Guyana on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. (c) Promptly after the Effective Date, the Association shall, on behalf of the Recipient, withdraw from the Grant Account and pay to itself the amount required to repay the principal amount of the Project Preparation Advance withdrawn and outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advance shall thereupon be cancelled. Section 2.03. (a) The Recipient shall pay to the Association a commitment charge on the principal amount of the Grant not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Recipient from the Grant Account or canceled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date and at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next date in that year specified in Section 2.04 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Recipient; and (iii) in Dollars or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of Section 4.02 of the General Conditions. Section 2.04. Commitment charges shall be payable semiannually on June 15 and December 15 in each year. Section 2.05. The Closing Date shall be June 30, 2009 or such later date as the Association shall establish. The Association shall promptly notify the Recipient of such later date. Page 6 - 5 - ARTICLE III Execution of the Project Section 3.01. (a) The Recipient 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 MOH, with the participation of: (i) Line Ministries pursuant to their respective MOU for purposes of Part B.1 of the Project; and (ii) Eligible Entities pursuant to their respective Subproject Agreement for purposes of Part B.2 of the Project, all with due diligence and efficiency and in conformity with appropriate health, technical, administrative, financial, educational, social 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 Recipient shall carry out the Project in accordance with an operational manual (the Operational Manual), satisfactory to the Association, containing detailed procedures for the implementation of the Project, including, inter alia : (i) the organization, terms of reference and staffing of the PMU; (ii) the roles and responsibilities of each agency/entity involved in the implementation of the Project and flow of funds arrangements when applicable; (iii) the financial management procedures for the Project; (iv) standard bidding documents and letters of invitation to consultants; (v) mandatory safeguards and mitigation actions for the collection, disposal and treatment of medical waste, which safeguards and actions shall be applied to prevent or mitigate any possible negative environmental impact said disposal might otherwise cause as a result of Project implementation; (vi) mandatory safeguards and mitigation actions for the construction, rehabilitation and expansion of health facilities, which safeguards and actions shall be applied to prevent or mitigate any possible negative environmental impact said construction may otherwise cause, such as, in particular, increase Page 7 - 6 - in deforestation, pollution of groundwater, negative impacts on endangered species, increased soil erosion, and encroachment on natural habitats; (vii) personal health and safety provisions for the handling and disposal of hazardous wastes; (viii) guidelines for the preparation of Annual Work Plans; (ix) the annual action plan for the first year of Project implementation; (x) the IPDP; and (xi) details and procedures for Subprojects, including: (A) criteria for the selection of Eligible Entities; (B) activities that may be financed under Subprojects; and (C) Subproject cycle, detailed guidelines and formats for preparing Subproject proposals. (c) Except as the Association shall otherwise agree, the Recipient 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 Association 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 Grant shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. Without limitation to the provisions of Section 3.01 above, the Recipient shall make available an amount equivalent to one million Dollars as counterpart funds for the Project. To that effect, the Recipient shall establish and thereafter maintain, until the completion of the Project, an annual budget allocation acceptable to the Association and on terms and conditions acceptable to the Association, with an amount equivalent to the counterpart funds necessary to carry out each Annual Work Plan. Section 3.04. (a) The Recipient shall maintain a Project management unit (the PMU) within the MOH, during implementation of the Project, with functions, staff and responsibilities satisfactory to the Association which shall include, inter alia : Page 8 - 7 - (i) coordination and implementation of the Project; (ii) monitoring and evaluation of the Project; (iii) preparation of Annual Work Plans; (iv) processing of documentation required for disbursement of the Grant proceeds (including disbursement to Eligible Entities for Subprojects) and for procurement of goods, works and services under the Project; and (v) preparation and maintenance of the records, accounts and financial statements referred to in Article IV of this Agreement. (b) The Recipient shall: (i) ensure that the PMU is at all times staffed with at least a Project manager, a procurement officer and a financial manager; and (ii) ensure that the PMU is provided with adequate facilities, satisfactory to the Association, to carry out its responsibilities. Section 3.05. The Recipient, through MOH, shall: (a) not later than November 30 of each year during Project implementation, starting in year 2004, furnish to the Association for its approval an annual work plan (the Annual Work Plan), each said plan to include, inter alia , (i) the Project activities to be carried out by the Recipient during the calendar year following the presentation of each said plan (including activities carried out by the MOH and activities carried out with the participation of Line Ministries under Part B.1 of the Project); (ii) the procurement plan and disbursement plan for said Project activities; and (iii) a budget line for Subprojects under Part B.2 of the Project; (b) thereafter implement each said Annual Work Plan in accordance with its terms; and (c) carry out the Annual Work Plan for the year 2004 as approved by the Association prior to the date of this Agreement. Page 9 - 8 - Section 3.06. (a) For purposes of carrying out Part B.1 of the Project, the MOH shall enter into a Memorandum of Understanding with each Line Ministry selected to participate in the Project (an MOU), under terms and conditions satisfactory to the Association, which shall include, inter alia , (i) the obligation of the respective Line Ministry to prepare and submit to the MOH for its approval an annual work plan by September 30 of each year, starting in the year 2004, and (ii) the obligation to carry out said annual work plan in accordance with its terms and in accordance with the terms of this Agreement and the Operational Manual. (b) The MOH shall exercise its rights and comply with its obligations under each MOU in such a manner as to protect the interests of the Recipient (including the MOH) and the Association and to accomplish the purposes of the Grant, and, except as the Association shall otherwise agree, the MOH shall not assign, amend, abrogate, waive or fail to enforce such memorandum of understanding or any provision thereof. Section 3.07. (a) For purposes of carrying out Part B.2 of the Project, the Recipient shall enter into an Agreement with each Eligible Entity selected to participate in the Project (a Subproject Agreement), under terms and conditions satisfactory to the Association, which shall include, inter alia , (i) the obligation of the respective Eligible Entity to carry out the approved Subproject in accordance with the terms of this Agreement (including the procurement provisions in Schedule 3) and the Operational Manual; and (ii) the obligation of the Recipient to provide the resources needed by the Eligible Entity to carry out the approved Subproject. (b) The Recipient shall exercise its rights and comply with its obligations under each Subproject Agreement in such a manner as to protect the interests of the Recipient and the Association and to accomplish the purposes of the Grant, and, except as the Association shall otherwise agree, the Recipient shall not assign, amend, abrogate, waive or fail to enforce such agreement or any provision thereof. Section 3.08. For the purposes of Section 9.06 of the General Conditions and without limitation thereto, the Recipient shall: (a) prepare, on the basis of guidelines acceptable to the Association, and furnish to the Association not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Recipient and the Association, a plan to ensure the continued achievement of the objectives of the Project; and (b) afford the Association a reasonable opportunity to exchange views with the Recipient on said plan. Page 10 - 9 - Section 3.09. Without limitation on the provisions of Section 9.01 of the General Conditions, the Recipient shall: (a) maintain policies and 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 and the achievement of the objectives thereof; (b) prepare, under terms of reference satisfactory to the Association, and furnish to the Association, not later than six months after the Effective Date and annually thereafter during the period of Project implementation, a report integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section, on the progress achieved in the carrying out of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; and (c) review with the Association not later than two months after the date of such report, or such later date as the Association shall request, each report referred to in paragraph (b) of this Section, and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Association’s views on the matter. Section 3.10. The Recipient shall appoint and maintain during Project implementation, the Presidential Commission on HIV/AIDS (the PCHA) for purposes of: (a) advising the Recipient on HIV/AIDS policy; and (b) providing guidance in the coordination and implementation of the Project. Section 3.11. For purposes of carrying out Part B.2 of the Project, the Recipient shall appoint and maintain during Project implementation, a committee with adequate representation from civil society, Line Ministries and MOH to review and recommend applications from Eligible Entities to carry out Subprojects. Section 3.12. Without limitation to the Recipient’s obligations in Section 3.01 of this Agreement, the Recipient shall: (a) carry out an environmental management plan, acceptable to the Association, in accordance with its terms; and (b) carry out an indigenous peoples development plan (the IPDP), acceptable to the Association, in accordance with its terms. Page 11 - 10 - ARTICLE IV Financial Covenants Section 4.01. (a) The Recipient shall establish and maintain a financial management system, including records and accounts, and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Association, adequate to reflect the operations, resources and expenditures related to the Project. (b) The Recipient shall: (i) have the financial statements referred to in paragraph (a) of this Section for each fiscal year (or other period agreed to by the Association), audited, in accordance with consistently applied auditing standards acceptable to the Association, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year (or such other period agreed to by the Association), (A) certified copies of the financial statements referred to in paragraph (a) of this Section for such year (or other period agreed to by the Association), as so audited, and (B) an opinion on such statements by said auditors, in scope and detail satisfactory to the Association; and (iii) furnish to the Association such other information concerning such records and accounts, and the audit of such financial statements, and concerning said auditors, as the Association may from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Grant Account were made on the basis of statements of expenditure, the Recipient shall: (i) retain, until at least one year after the Association has received the audit report for, or covering, the fiscal year in which the last withdrawal from the Grant Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; Page 12 - 11 - (ii) enable the Association’s representatives to examine such records; and (iii) ensure that such statements of expenditure are included in the audit for each fiscal year (or other period agreed to by the Association), referred to in paragraph (b) of this Section. Section 4.02. (a) Without limitation upon the Recipient’s progress reporting obligations set out in Section 3.09 of this Agreement, the Recipient shall prepare and furnish to the Association a financial monitoring report, in form and substance satisfactory to the Association, 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 Grant, 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; 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 Association not later than 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 Association not later than 45 days after each subsequent calendar quarter, and shall cover such calendar quarter. ARTICLE V Effectiveness; Termination Section 5.01. The following events are specified as conditions to the effectiveness of this Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) that the Operational Manual has been issued and put into effect; Page 13 - 12 - (b) that the PMU has been established and properly staffed as set forth in Section 3.04 (b) of this Agreement; (c) that the financial management system referred to in Section 4.01 (a) of this Agreement, satisfactory to the Association, has been established and become operational; (d) that the auditors referred to in Section 4.01 (b) (i) of this Agreement have been appointed; (e) that the Annual Work Plan and the procurement plan for the first year of Project implementation have been submitted to and approved by the Association; and (f) that the annual budget allocation for the first year of the Project has been appropriated with an initial amount equivalent to the counterpart funds for the first Annual Work Plan. Section 5.02. The date August 2, 2004 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative of the Recipient; Addresses Section 6.01. The Minister of Finance of the Recipient is designated as representative of the Recipient 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: For the Recipient: Minister of Finance Ministry of Finance Main and Urquhart Streets, Georgetown Co-operative Republic of Guyana Facsimile: (592) 225-6088 Page 14 - 13 - For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: Facsimile: INDEVAS 248423 (MCI) (202) 477-6391 Washington, D.C. 64145 (MCI) Page 15 - 14 - IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of Amearica, as of the day and year first above written. CO-OPERATIVE REPUBLIC OF GUYANA By /s/ Leslie Ramsammy Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ David de Ferranti Regional Vice President Latin America and the Caribbean Page 16 - 15 - SCHEDULE 1 Withdrawal of the Proceeds of the Grant 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Grant, the allocation of the amounts of the Grant to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Grant Allocated % of (Expressed in Expenditures Category SDR Equivalent ) to be Financed (1) Works 287,000 100% of foreign expenditures; 80% of local expenditures (2) Goods (except goods covered 1,072,000 100% of foreign by categories (3), (4) and (7) expenditures, 80% of below): local expenditures (3) Anti-retroviral drugs 690,000 100% (4) Laboratory reagents, drugs 638,000 100% of foreign (except as covered under expenditures, 80% of Category (3) above) and local expenditures condoms (5) Consultants’ Services 1,849,000 100% (6) Training 428,000 100% (7) Operating Costs 472,000 50% (8) Grants for Subprojects 638,000 100% of amounts disbursed (9) Refunding of Project 320,000 Amount due pursuant Preparation Advance to Section 2.02 (c) of this Agreement Page 17 - 16 - Amount of the Grant Allocated % of (Expressed in Expenditures Category SDR Equivalent ) to be Financed (10) Unallocated 306,000 TOTAL 6,700,000 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 Recipient for goods or services supplied from the territory of any country other than that of the Recipient; (b) the term “local expenditures” means expenditures in the currency of the Recipient or for goods or services supplied from the territory of the Recipient; (c) the term “training” means expenditures (other than those for consultants’ services) incurred by the Recipient to finance reasonable transportation cost and perdiem 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 PMU and other agencies of the Recipient involved in Project implementation, such as salaries, office supplies, office rent, printing and communication expenses, transportation, perdiem , utilities and consumable items, 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: (a) payments made for expenditures prior to the date of this Agreement; and (b) payments made for expenditures covered by disbursement Category (8) unless a Subproject Agreement has been executed in accordance with eligibility criteria and on terms and conditions set forth or referred to in the Operational Manual and in the provisions of Section 3.07 of this Agreement. 4. The Association may require withdrawals from the Grant Account to be made on the basis of statements of expenditure, under such terms and conditions as the Association shall specify by notice to the Recipient, for expenditures for: Page 18 - 17 - (a) goods and works under contracts which are not subject to prior review pursuant to Part D.2 of Section I of Schedule 3 to this Agreement; (b) services of consulting firms under contracts costing less than $100,000 equivalent; (c) services of individual consultants under contracts costing less than $50,000 equivalent; (d) training; (e) operating costs; and (f) grants for Subprojects. 5. If the Association shall have determined at any time that any amount of the Grant was used in a manner inconsistent with the provisions of this Agreement, the Recipient shall, promptly upon notice from the Association, refund to the Association for deposit into the Grant Account, an amount equivalent to the amount so used. Page 19 - 18 - SCHEDULE 2 Description of the Project The objective of the Project is to assist the Recipient in reducing the incidence of HIV/AIDS related deaths in the Recipient’s territory by: (a) preventing and controlling the transmission of HIV and STIs; (b) prolonging and improving the quality of life of people living with AIDS; and (c) mitigating the negative impact of HIV/AIDS on persons infected with and affected by the disease. The Project consists of the following parts, subject to such modifications thereof as the Recipient and the Association may agree upon from time to time to achieve such objectives: Part A : Institutional Capacity Strengthening, Monitoring, Evaluation and Research 1. Strengthening Institutional Capacity for coordination and management of the Recipient’s National HIV/AIDS Program Supporting the Recipient to coordinate and manage its National HIV/AIDS Program, including, but not limited to the establishment of a financial management and procurement system, through the provision of training, equipment, furniture and financing of administrative operational costs. 2. Strengthening Monitoring and Evaluation (including Information Technology Capabilities) for the Recipient’s National HIV/AIDS Program and the Project (a) Carrying out of impact studies to measure the trend of the HIV/AIDS epidemic, including at least one mid-term evaluation in the third year of the Project and a final term evaluation in the fifth year of the Project. (b) Strengthening the Recipient’s capacity to monitor the Project. (c) Developing and strengthening the Recipient’s HIV/AIDS/STI clinical case management and surveillance system to support monitoring and evaluation of the Recipient’s National HIV/AIDS Program. (d) (i) Supporting research and studies on HIV/AIDS, including behavior surveys among key groups; and (ii) strengthening the analytical and research capacity of inter-sectoral teams on HIV/AIDS. Page 20 - 19 - (e) Supporting: (i) the review of several health legislation documents of the Recipient; and (ii) the preparation of new health legislation by the Recipient. Part B : Scaling up HIV/AIDS Response by Line Ministries and Eligible Entities 1. Scaling Up HIV/AIDS Response by Line Ministries Supporting Line Ministries to expand initiatives included i n the Recipient’s National HIV/AIDS Program and Annual Work Plan, including activities for the Line Ministries’ clients and their own staff, focusing on prevention of HIV/AIDS and STIs through training, education, behavior communication, condom distribution, information dissemination, treatment and care for the infected and affected families, work place policy formulation including reduction of stigma and discrimination and HIV/AIDS impact assessments, all in accordance with the work plan prepared by each Line Ministry pursuant to Section 3.06 (a) of this Agreement. 2. Scaling Up HIV/AIDS Response by Eligible Entities Supporting Eligible Entities to respond effectively to the HIV/AIDS epidemic through the financing of Subprojects. Part C : Expanding Health Sector Prevention, Treatment and Care Services for HIV/AIDS 1. Support to Prevention Interventions (a) Developing a comprehensive communications strategy to guide information, education, communication and behavior change interventions related to HIV/AIDS prevention, treatment and care. (b) Supporting the Recipient to maintain the currently high level of blood safety at the national level and to expand it to cover regional blood transfusion units. (c) Supporting the Recipient to scale up voluntary HIV/AIDS counseling and testing within its health system. (d) Supporting the Recipient to prevent and treat STIs by: (i) strengthening the syndromic management of STIs; (ii) updating the treatment protocols; (iii) improving laboratory capacity; (iv) promoting condoms; (v) training health workers; and (vi) improving contact tracing by social workers. Page 21 - 20 - (e) Supporting the Recipient to manage health care waste by: (i) training health workers on proper handling of infectious wastes, and (ii) providing facilities and equipment for disposal and sterilization of medical waste at the national and the regional levels. 2. Enhancing HIV/AIDS Care, Treatment and Support through the Recipient’s Health Care System (a) Managing HIV/AIDS infections by: (i) developing and implementing standardized protocols and guidelines for HIV/AIDS care at all levels in the Recipient’s health system; (ii) training health workers and medical technologists; (iii) providing laboratory equipment and reagents, drugs and commodities necessary for treatment; and (iv) strengthening the logistical systems to ensure the continuity of supplies. (b) Managing tuberculosis and strengthening the tuberculosis program by: (i) supporting increase screening for HIV/AIDS and tuberculosis; (ii) supporting activities to improve directly observe treatment, short-course (DOTS) coverage and completion rates; (iii) training of health workers and medical technologists; (iv) providing equipment and drugs; and (v) strengthening the Recipient’s logistical support for the tuberculosis program. (c) Managing other opportunistic infections by: (i) developing and implementing standardized protocols and guidelines for opportunistic infections associated with HIV/AIDS; (ii) training health workers and medical technologists; (iii) providing laboratory equipment and reagents, drugs and commodities necessary for treatment; and (iv) strengthening the logistical systems to ensure the continuity of supplies. (d) Co-managing HIV/AIDS and related opportunistic infections by: (i) developing and implementing standardized protocols and guidelines, according to international standards for the management of co-infections; (ii) training of health workers and medical technologists; (iii) providing laboratory equipment and reagents, drugs and commodities necessary for treatment; and (iv) strengthening the logistical systems to ensure the continuity of supplies. (e) Improving the quality of care by: (i) implementing an adequate clinical and laboratory monitoring infrastructure for antiretroviral therapy; (ii) training clinicians and nurses on the delivery and monitoring of antiretroviral therapy; (iii) training medical technologists; (iv) procuring laboratory equipment for monitoring of antiretroviral therapy; (v) developing clinical care monitoring software; (vi) strengthening equipment management and logistics. Page 22 - 21 - * * * The Project is expected to be completed by December 31, 2008. Page 23 - 22 - SCHEDULE 3 Procurement Section I . Procurement of Good 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 this Section. Part B : International Competitive Bidding 1. 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. 2. The following provisions shall apply to goods and works to be procured under contracts awarded in accordance with the provisions of paragraph 1 of this Part B. (a) Grouping of Contracts To the extent practicable: (i) contracts for goods shall be grouped in bid packages estimated to cost $150,000 equivalent or more each; and (ii) contracts for works shall be grouped in bid packages estimated to cost $1,000,000 equivalent or more each. (b) Preference for Domestically Manufactured Goods and Domestic Contractors The provisions of paragraphs 2.54 and 2.55 of the Guidelines and Appendix 2 thereto shall apply to goods manufactured in the territory of the Recipient and works to be carried out by domestic contractors. Page 24 - 23 - Part C : Other Procurement Procedures 1. National Competitive Bidding (a) Goods estimated to cost less than $150,000 equivalent per contract; and (b) works estimated to cost less that $1,000,000 equivalent per contract, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. 2. International or National Shopping (a) Goods estimated to cost less than $25,000 equivalent per contract; and (b) antiretroviral drugs and drugs for opportunistic infections and tuberculosis estimated to cost less than $150,000 equivalent per contract, may be procured under contracts awarded on the basis of international/national shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. 3. Direct Contracting Antiretroviral drugs under patent, laboratory reagents and test kits, and any other goods which should be procured as an extension of an existing contract or must be purchased from the original supplier to be compatible with existing equipment or are of a proprietary nature or must be procured from a particular supplier as a condition of a performance guarantee may, with the Association's prior agreement, be procured in accordance with the provisions of paragraph 3.7 of the Guidelines. 4. Procurement for Subprojects Goods and works required for Subprojects shall be procured in accordance with the provisions of paragraph 3.15 of the Guidelines and in accordance with procedures acceptable to the Association as defined in the Operational Manual. 5. Procurement of Small Works Works estimated to cost less than $150,000 equivalent per contract, may be procured under lump-sum, fixed-price contracts awarded on the basis of quotations obtained from at least three (3) 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 Association, and relevant drawings, where applicable. The award shall be made to the Page 25 - 24 - contractor who offers the lowest evaluated price quotation for the required work, and who has the experience and resources to complete the contract successfully. 6. Limited International Bidding Antiretroviral drugs estimated to cost more than $150,000 equivalent per contract may be procured in accordance with the provisions of paragraph 3.2 of the Guidelines. Part D : Review by the Association 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 Association 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 Association, and with the provisions of said paragraph 1. 2. Prior Review (a) With respect to: (i) each contract for goods and each contract for works procured in accordance with the procedures set forth in Part B of Section I of this Schedule 3; and (ii) the first contract for goods and the first contract for works procured in accordance with the procedures set forth in Part C.1 of Section I of this Schedule 3, (iii) the first contract for antiretroviral drugs, drugs for opportunistic infections or for tuberculosis procured in accordance with the procedures set forth in Parts C.2 and C.6 of Section I of this Schedule 3, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. (b) With respect to the first contract to be procured in accordance with the procedures set forth in Part C.3 of Section I of this Schedule 3, the following procedures shall apply: (i) prior to the execution of any contract procured under direct contracting procedures, the Recipient shall provide to the Association a copy of the specifications and the draft contract; and (ii) the procedures set forth in paragraphs 2(f), 2(g) and 3 of Appendix 1 to the Guidelines shall apply. Page 26 - 25 - 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 Guidelines shall apply. Section II . Employment of Consultants Part A : General Co nsultants’ 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. Part B : Quality- and Cost-based Selection 1. 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, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to quality- and cost-based selection of consultants. 2. The following provision shall apply to consultants’ services to be procured under contracts awarded in accordance with the provisions of the preceding paragraph: the short list of consultants 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 C : Other Procedures for the Selection of Consultants 1. Selection Based on Consultants’ Qualifications Services estimated to cost less than $100,000 equivalent 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. Single Source Selection Services and relevant training for information technology contracts which are estimated to cost less than $100,000 equivalent per contract, may, with the Association's Page 27 - 26 - prior agreement, be procured in accordance with the provisions of paragraphs 3.8 through 3.11 of the Consultant Guidelines. 3. Selection of Consultants for Subprojects Services required for Subprojects shall be procured in accordance with the provisions of paragraphs 3.8 and 3.9 (c) and (d) of the Guidelines and in accordance with procedures acceptable to the Association as defined in the Operational Manual. 4. Individual Consultants Services of individual consultants for : (a) tasks that meet the requirements set forth in paragraph 5.1 of the Consultant Guidelines shall be procured under contracts awarded in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines; and (b) tasks that meet the requirements set forth in paragraph 5.4 of the Consultant Guidelines may be selected on a sole-source basis in accordance with the provisions of paragraphs 5.3 and 5.4 of the Consultant Guidelines, subject to prior approval of the Association. Part D : Review by the Association of the Selection of Consultants 1. Implementation Plan for the Selection of Consultants 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 Association for its review and approval prior to the issuance to consultants of any requests for proposals. Such plan shall be updated every twelve months during the execution of the Project, and each such updating shall be furnished to the Association 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 Association. 2. Prior Review (a) With respect to each contract for the employment of consulting firms to be procured in accordance with the procedures set forth in Part B and the first contract of Part C.2 and C.3 of Section II of this Schedule 3, the procedures set forth in paragraphs 2, 3 and 5 of Appendix 1 to the Consultant Guidelines shall apply. (b) With respect to each contract for the employment of consulting firms to be procured in accordance with the procedures set forth in Part C.1 of Section II of this Page 28 - 27 - Schedule 3, the terms of reference of the consultants shall be furnished to the Association for 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 Consultant Guidelines shall also apply to such contracts. (c) With respect to each contract for the employment of individual consultants to be selected on a sole source basis, or estimated to cost the equivalent of $50,000 or more, the report on the comparison of the qualifications and experience of candidates, the qualifications, experience, terms of reference and terms of employment of the consultants shall be furnished to the Association 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 Consultant Guidelines shall also apply to such contracts. (d) With respect to each contract for the employment of individual consultants estimated to cost less than the equivalent of $50,000, the terms of reference of the consultants shall be furnished to the Association 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 Consultant 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 29 - 28 - SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term “eligible Categories means Categories 1 through 8 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 and services required for the Project and to be financed out of the proceeds of the Grant 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 $800,000 to be withdrawn from the Grant Account and deposited into the Special Account; the authorized allocation shall be limited to an amount equivalent to $400,000 until the Association 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 Association 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 Recipient shall furnish to the Association 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 Association shall, on behalf of the Recipient, withdraw from the Grant Account and deposit into the Special Account such amount or amounts as the Recipient shall have requested. (b) (i) For replenishment of the Special Account, the Recipient shall furnish to the Association requests for deposits into the Special Account at such intervals as the Association shall specify. (ii) Prior to or at the time of each such request, the Recipient shall furnish to the Association the documents and other evidence required pursuant to paragraph 4 of this Schedule for the Page 30 - 29 - payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Recipient, withdraw from the Grant Account and deposit into the Special Account such amount as the Recipient 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 Association from the Grant 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 Recipient out of the Special Account, the Recipient shall, at such time as the Association shall reasonably request, furnish to the Association 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 Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Recipient directly from the Grant 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 Recipient shall have failed to furnish to the Association, 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 Association pursuant to said Section in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Association shall have notified the Recipient of its intention to suspend in whole or in part the right of the Recipient to make withdrawals from the Grant Account pursuant to the provisions of Section 6.02 of the General Conditions; or (d) once the total unwithdrawn amount of the Grant allocated to the eligible Categories, minus the total amount of all outstanding special commitments entered into by the Association 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 Grant Account of the remaining unwithdrawn amount of the Grant allocated to the eligible Categories shall follow such procedures as the Page 31 - 30 - Association shall specify by notice to the Recipient. Such further withdrawals shall be made only after and to the extent that the Association 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 Association 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 Association, the Recipient shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Association shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Recipient has provided such evidence or made such deposit or refund, as the case may be. (b) If the Association 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 Recipient shall, promptly upon notice from the Association, refund to the Association such outstanding amount. (c) The Recipient may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Grant Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. Page 32 - 31 - SCHEDULE 5 Modifications to the General Conditions For the purpose of this Agreement, the provisions of the General Conditions are modified as follows: 1. Sections 3.02, 3.03, 3.04(a), 3.04(b), 3.05, 6.05, Article VII, are deleted in their entirety. 2. Wherever used in the General Conditions, the following terms are modified to read as follows: (a) The term “Borrower” is modified to read “Recipient”. (b) The term “Credit” is modified to read “Grant”. (c) The term “credit” is modified to read “grant”; except that where used in Sections 6.02(a)(ii) and 6.02(c)(i), as modified below, the term “credit” shall continue to read “credit”. (d) The term “Credit Account” is modified to read “Grant Account”. (e) The term “Development Credit Agreement” is modified to read “Development Grant Agreement”. 3. Article IV is modified as follows: (a) Section 4.02 (a) and the heading of Section 4.02 are modified to read as follows: “ Section 4.02. Currencies in which Commitment Charges are Payable (a) The Recipient shall pay the commitment charge on the Grant in the currency specified in the Development Grant Agreement or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to paragraph (c) or (e) of this Section.” Page 33 - 32 - (b) Wherever used in Section 4.02(c) and (e) of the General Conditions the words “principal and service charges” are modified to read “commitment charge”. (c) Section 4.03 and its heading are modified to read as follows: “ Section 4.03. Amount of the Grant The amount of the Grant withdrawn from time to time shall be the equivalent in terms of SDR (determined as of the date or respective dates of withdrawal from the Grant Account) of the value of the currency or currencies so withdrawn.” 4. Section 6.02 is modified as follows: (a) The phrase “any other development credit agreement” in Section 6.02(a)(ii) is modified to read: “any other development grant agreement or any development credit agreement or development financing agreement”. (b) The phrase “any development credit agreement” in Section 6.02(c)(i) is modified to read: “any development grant agreement, development credit agreement or development financing agreement”. 5. The words “The principal of, and any other charges on” in paragraph (a) of Section 8.01 are modified to read “The commitment charge on”. 6. Section 12.05 and its heading are modified to read as follows: “Section 12.05. Termination of Development Grant Agreement. The obligations of the Recipient under the Development Grant Agreement shall terminate on the date 20 years after the date of the Development Grant Agreement.”