LOAN AGREEMENT. (Morava Region Development Project: Water Supply, Severage and Water Resources) between

Transcription

1 Public Disclosure Authorized CONFORMED COPY LOAN NUMBER 1262 YU Public Disclosure Authorized Public Disclosure Authorized LOAN AGREEMENT (Morava Region Development Project: Water Supply, Severage and Water Resources) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and REPUBLICKI FOND VODA (Republic Water Fund) Public Disclosure Authorized Dated June 14, 1976

2 LOAN AGREEMENT AGREEMENT, dated June 14, 1976, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and REPUBLICKI FOND VODA (Republic Water Fund) (hereinafter called the Borrower). WHEREAS (A) The Borrower is an organization established by the Socialist Republic of Serbia (hereinafter called the Republic) pursuant to the Law of the Republic promulgated by Decree dated December 24,'1965, published in the Official Gazette (Sluzbeni Glasnik SRS) of the Republic, No , dated December 25, (B) The Borrower has requested the Bank to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (C) Part E of the Project will be carried out by Komunalno Preduzece "Bioktos" - Titovo Uzice (Communal Enterprise "Bioktos"- Titovo Uzice) (hereinafter called Bioktos), an Organization of Associated Labor established and operating under the Laws of the Socialist Federal Republic of Yugoslavia, with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Bioktos a portion of the proceeds of the Loan as hereinafter provided; (D) Part F of the Project will be carried out by Komunalna Organizacija Udruienog Rada za Vodovod i Kanalizaciju "Vodovod" Cacak (Communal Organization of Associated Labor for Water Supply

3 -2- and Sewerage Systems "Vodovod"-Cacak) (hereinafter called Vodovod), an Organization of Associated Labor established and operating under the Laws of the Socialist Federal Republic of Yugoslavia, with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Vodovod portions of the proceeds of the Loan as hereinafter provided; (E) Part D of the Project will be carried out by Republicki Fond za Potsticanje Razvoja Nedovoljno Razvijenih Podrucja (Republic Fund for the promtion of Development of Underdeveloped Regions) (hereinafter called RFPRNRP) an organization established and operating pursuant to the Republic's Laws, published in the Official Gazette (Sluzbeni Glasnik SRS) of the Republic, No , 15-78, 12-73, 18-74, 41-74, with the Borrower's assistance and, as part of such assistance, the Borrower will make available to RFPRNRP a portion of the proceeds of the Loan as hereinafter provided; (F) Parts B and C of the Project will be carried out, respectively, by (i) Zemljoradnicka Zadruga "Milosevac"-Milosevac (Milosevac Farmers' Cooperative) (hereinafter called Milosevac) an Organization of Associated Labor established and operating under the Laws of the Socialist Federal Republic of Yugoslavia and (ii) Poljoprivredno-Industrijski Kombinet Aleksinac (Agro-industrial Kombinat Aleksinac) (hereinafter called Aleksinac), an Organization of Associated Labor established and operating under the Laws of the Socialist Federal Republic of Yugoslavia with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Milosevac and Aleksinac a portion of the proceeds of the Loan as hereinafter provided;

4 -3- (G) Bioktos has represented to the Bank that it proposes to make arrangements to receive financing during the construction period of Part E of the Project in addition to internal cash generation and the proceeds of the Loan on-lent to Bioktos, as hereinafter provided, as follows: (i) a loan from Beogradska Banka, Belgrade in an amount of 8,000,000 Dinars (about $444,444 equivalent at current exchange rates); (ii) a loan or loans from other sources in an aggregate amount of not less than 18,000,000 Dinars (about $1,000,000 equivalent at current exchange rates); and (iii) an agreement with Beogradska Banka, Beograd providing for Beogradska Banka, Beograd whenever there is reasonable cause to believe that the funds available to Bioktos will be inadequate to meet the expenditures required to carry out Part E of the Project, to provide or cause Bioktos to be provided, with such funds as are required to meet such expenditures, all on terms and conditions satisfactory to the Bank. (H) Skupstina Opstine Titovo Uzice (The City Assembly of Titovo Uzice) (hereinafter called Titovo Uzice) has represented to the Bank (i) that it has passed a resolution on October 17, 1975 whereunder Bioktos will be provided during the construction period of Part E of the Project, in addition to the sources of financing referred to in Recital (G) hereof, with funds in an aggregate amount of not less than 198,600,000 Dinars (about $11,033,333 equivalent at current exchange rates), and (ii) that it will make arrangements with the Borrower to provide the Borrower with not less than 51,500,000 Dinars (about $2,861,111 equivalent at cur.rent exchange rates) as a contribution for the construction of the facilities under Part A (2) of the Project;

5 (I) Vodovod has represented to the Bank that it proposes to enter into an agreement with Beogradska Banka, Beograd to obtain financing during the construction period of the Project, in addition to internal cash generation and the proceeds of the Loan onlent to Vodovod, whereby Beogradska Banka, Beograd will provide or cause Vodovod to be provided, with such funds as are required to meet expenditures required to carry out Part F of the Project, all on terms and conditions satisfactory to the Bank whenever there is reasonable cause to believe that the funds available to Vodovod will be inadequate to meet such expenditures. (J) Skupstina Opitine Cacak (The City Assembly of Cacak) (hereinafter called Cacak) has represented to the Bank that it proposes to pass a resolution whereunder Vodovod will be provided during the construction period of Part F of the Project, in addition to the funds referred to in Recital (I) hereof, with funds in an aggregate amount of not less than 137,800,000 Dinars (about $7,655,556 equivalent at current exchange rates). (K) The Republic proposes to undertake an obligation to provide to the Borrower, or cause the Borrower to be provided with such funds as are required to meet the expenditures required to carry out Parts A and D of the Project, on terms and conditions satisfactory to the Bank, whenever there is reasonable cause to believe that the funds available to the Borrower will be inadequage to meet such expenditures; (L) The Republic proposes to undertake an obligation to provide Milosevac and Aleksinac, respectively, or cause Milo,.evac and Aleksinac, respectively, to be provided with funds to assist in the carrying out of Parts B and C of the Project, respectively, as follows: (i) all funds, in addition to the proceeds of the Loan

6 -5- allocated for the carrying out of Parts B and C of the Project, required for the carrying out of Parts B and C of the Project; (ii) working capital to cover operation and maintenance pending receipt of crop sales revenues; and (iii) agricultural credit sufficient to cover the capital outlay of farmers to convert to other crops; (M) The Republic proposes to make appropriate arrangements to monitor, analyze and evaluate the results of Parts B and C of the Project during a period of five years starting on January 1, 1977, and to distribute the information therefrom to appropriate agricultural interests in the Republic, in accordance with guidelines acceptable to the Bank; (N) The Bank is willing to make the Loan available upon the terms and conditions set forth hereinafter and in the project agreements of even date herewith between (i) the Bank on the one hand and Titovo Uzice and Bioktos on the other hand, (ii) between the Bank on the one hand and Cacak and Vodovod on the other hand, (iii) between the Bank on the one hand and Milosevac on the other hand, and (iv) between the Bank on the one hand and Aleksinac on the other hand; and (0) By an agreement of even date herewith between the Socialist Federal Republic of Yugoslavia (hereinafter called the Guarantor) and the Bank (hereinafter called the Guarantee Agreement), the Guarantor has agreed to guarantee the Loan as to payment of principal, interest and other charges. NOW THEREFORE the parties hereto hereby agree as follows:

7 -6- ARTICLE I General Conditions; Definitions Section The parties to this Agreement accept all the provisions of the General ConditIons Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section Wherever used in this Agreement, 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) "Titovo Uzice" means Skupstina Opstine Titovo Uzice (the City Assembly of Titovo Uzice) within the Republic governed by a statute adopted by the City Assembly of Titovo Uzice on March 4, 1974; (b) "Cacak" means Skupstina Opstine eacak (the City Assembly of Cacak) within the Republic governed by a statute adopted by the City Assembly of Cacak on March 4, 1974; (c) "Bioktos Project Agreement" means the agreement between the Bank on the one hand and Titovo Uzice and Bioktos on the other hand of even date herewith, as the same may be amended from time

8 to time, and such term includes all schedules to the Bioktos Project Agreement and all agreements supplemental to the Bioktos Project Agreement; (d) "Bioktos Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower on the one hand and Bioktos on the other hand pursuant to Section 3.02 of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Bioktos Subsidiary Loan Agreement; (e) "Vodovod Project Agreement" means the agreement to be entered into between the Bank on the one hand and Cacak and Vodovod on the other hand of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Vodovod Project Agreement and all agreements supplemental to the Project Agreement; (f) "Vodovod Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower on the one hand and Vodovod on the other hand pursuant to Section 3.02 of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Vodovod Subsidiary Loan Agreement; (g) "Milosevac Project Agreement" means the agreement between the Bank on the one hand and Milosevac on the other hand of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Milosevac Project Agreement and all agreements supplemental to the Milosevac Project Agreement;

9 -8- (h) "Aleksinac Project Agreement" means the agreement to be entered into between the Bank on the one hand and and Aleksinac on the other hand of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Aleksinac Project Agreement and all agreements supplemental to the Aleksinac Project Agreement; (i) "Social Accounting Service" means Sluzba Drustvenol Knjigovodstva referred to in Article 77 and in paragraph (5) of Article 281 of the Guarantor's Constitution; (j) "Dinar" means the currency of the Guarantor; (k) "The Borrower's Statutes" means the statutes of the Borrower as adopted by the Administrative Committee of the Borrower on March 21, 1966 and approved by the National Assembly of the Socialist Republic of Serbia. (1) "The Vodovod Statutes" means the statutes of Vodovod as approved by its Workers' Council on May 28, 1973; (m) "The Bioktos Statutes" means the statutes of Bioktos, dated June 20, 1973, as approved by its Workers' Council on June 20, 1973; (n) "The Milosevac Statutes" means the statutes of Milosevac as approved by its Assembly on April 12, 1975;

10 -9- (o) "The Aleksinac Articles of Association" means the articles of association of Aleksinac adopted by its Workers' Council on May 8, 1973; (p) "The Aleksinac Statutes" means the statutes of Aleksinac as approved by its Workers' Council on December 28, 1973; and (q) "Morava" means the Morava Region Water Community of Interest to be established pursuant to the provisions of the Republic's Law on Water Management which has been promulgated by Decree dated July 21, 1975 and published in the Official Gazette (Sluzbeni List) of the Republic on July 28, 1975.

11 -10- ARTICLE II The Loan Section The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to twenty million dollars ($20,000,000). Section (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Bank and the Borrower, for expcnditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan and in respect of interest and other charges on the Loan. (b) On or before each of the semi-annual interest payment dates specified in Section 2.07 of this Agreement, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amounts required to pay, on such date, interest and other charges on the Loan accrued and payable on or before the date set forth, and up to the amounts allocated, in Schedule 1 to this Agreement, as such schedule may be amended from time to time. Section Except as the Bank shall otherwise agree, the goods, works and services for the Project shall be procured in accordance with the provisions of Schedule 4 to this Agreement.

12 * Section The Closing Date shall be December 31, 1980 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section The Borrower shall pay interest at the rate of eight and one-half per cent (8-1/2%) per amum on the principal anyaunt of the Loan withdrawn and outstanding from time to time. Section Interest and other charges shall be payable semiannually on My 1 and November 1 in each year. Section The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. Section The Direktor of the Borrower, or such other person as he may designate in writing, is designated as representative of the Borrower for the purpose of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions.

13 -12- ARTICLE III Execution of the Project Section (a) The Borrower shall carry out Parts A (1) (i), A (1) (ii) and A (2) of the Project and shall carry out or cause RFPRNRP and Morava, respectively, to carry out, under arrangements acceptable to the Bank, Parts D and A (1) (iii), respectively, of the Project, all with due diligence and efficiency and in conformity with appropriate engineering, financial and administrative practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall cause Bioktos, Vodovod, Milosevac and Aleksinac to perform in accordance with the provisions of the Bioktos Project Agreement, the Vodovod Project Agreement, the Milosevac Project Agreement and the Aleksinac Project Agreement, respectively, and shall cause Bioktos and Vodovod to perform, in accordance with the Bioktos Subsidiary Loan Agreement and the Vodovod Subsidiary Loan Agreement, respectively, all the obligations therein set forth and, shall take or cause to be taken all action including the provision of funds, facilities, services and other resources, necessary or appropriate to enable Bioktos, Vodovod, Milosevac and Aleksinac, respectively, to perform such obligations, and shall not take or permit to be taken any acti which would prevent or interfere with such performance.

14 -13- Section (a) The Borrower shall relend under subsidiary loan agreements to be entered into between the Borrower and Bioktos and Vodovod, respectively, under terms and conditions which shall have been approved by the Bank: (i) to Bioktos, that portion of the proceeds of the Loan required for the carrying out of Part E of the Project and provided for under Category (1), of the Allocation of the Proceeds of the Loan set forth in paragraph 1 of Schedule 1 to the Loan Agreement, as such Schedule may be modified from time to time by agreement between the Bank and the Borrower; (ii) to Vodovod, that portion of the proceeds of the Loan required for the carrying out of Part F of the Project and provided for under Category (2) of the Allocation of the Proceeds of the Loan set forth in paragraph 1 of Schedule 1 to the Loan Agreement, as such Schedule may be modified from time to time by agreement between the Bank and the Borrower. (b) The Bioktos Subsidiary Loan Agreement and the Vodovod Subsidiary Loan Agreement shall provide, inter alia, for relending of the proceeds of the Loan as provided in paragraph (a) of this Section 3.02 of this Agreement for a term of twenty years including

15 -14 four and one half years of grace, at an annual rate of interest of eight and one-half per cent on the principal amount withdran and outstanding from time to time. (c) The Borrower shall exercise its rights under the Bioktos Subsidiary Loan Agreement and under the Vodovod Subsidiary Loan Agreement, respectively, 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 assiga, nor amend, abrogate or waive the Bioktos Subsidiary Loan Agreement and the Vodovod Subsidiary Loan Agreement, respectively, or any provision thereof. Section The Borrower shall, under arrangements in and substance satisfactory to the Bank, make available to: form (a) RFPRNRP, that portion of the proceeds of the Loan required for the carrying out of Part D of the Project and provided for under Sub-category (g) of Category (3) of the Allocation of the Proceeds of the Loan set forth in paragraph 1 of Schedule 1 to the Loan Agreement, as such Schedule may be modified from time to time by Agreement between the Bank and the Borrower. (b) Milosevac and Aleksinac, respectively, that portion of the proceeds of the Loan required to carry out Parts B and C of the Project, respectively, and provided for under Sub-categories (b) and (c) of Category (3) and Sub-categories (e) and (f) of Category (3), respectively, of the Allocation of the Proceeds of the Loan set forth in paragraph 1 of Schedule 1 to the Loan Agreement, as such Schedule may be modified from time to time by agreement between the Bank and the Borrower.

16 (c) Morava, that portion of the procee ds of the Loan required to carry out Part A (1) (iii) of the Project and provided for under Sub-category (h) of Category (3) of the Allocation of the Proceeds of the Loan set forth in paragraph 1 of Schedule 1 to the Loan Agreement, as such schedule may be modified from time to time by agreement between the Bank and the Borrower. Section The Borrower shall, or shall make appropriate arrangements with Morava whereunder Morava shall undertake to, complete a program for the training of the staff of Morava and submit such program to the Bank for its review, no later than June 1, 1977, or such other date as the Bank may agree; thereafter the Borrower shall, or shall make appropriate arrangements with Morava whereunder Morava shall undertake to, implement such program for the training of Morava, including such changes as the Bank shall reasonably request. Section (a) In order to assist the Borrower in the carrying out of Parts A (1) (i) and A (1) (ii) of the Project, the Borrower shall employ no later than June 30, 1976, or such other date as the Bank may agree, consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. (b) In order to assist the Borrower in the carrying out of Part A (2) of the Project, the Borrower shall employ no later than June 30, 1976, or such other date as the Bank may agree, consultants for procurement and construction supervision whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank.

17 (c) In order to assist the Borrower in resolving technical questions arising during the construction and initial operation of the facilities to be constructed under Part A (2) of the Project, the Borrower shall employ no later than June 30, 1976, or such other date as the Bank may agree, a board of engineering consultants whose qualifications, experience and terms of employment shall be satisfactory to the Bank. (d) In order to assist RFPRNRP in carrying out Part D of the Project, the Borrower shall cause RFPRNRP, to employ no later than September 1, 1976, or such other date as the Bank may agree, consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Section (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for Part A

18 -17 - of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower shall, and shall make appropriate arrangements to cause RFPRNRP to: (i) maintain records adequate to record the progress of Parts A and D of the Project, respectively, (including the cost thereof) and to identify the goods, works and services financed out of the proceeds of the Loan, and to disclose the use thereof in Parts A and D, respectively, of the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Bank's representatives to visit the facilities and construction sites included in Parts A and D, respectively, of the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; (iii) shall furnish to the Bank within forty-five calendar days after each calendar quarter a report, of such scope and in such detail as the Bank shall reasonably request on the progress of Parts A and D, respectively, of the Project, during such quarter; and (iv) shall furnish to the Bank all such information as the Bank shall reasonably request concerning Parts A and D, respectively, of the Project, the expenditure of the proceeds of the Loan and the goods, works and services financed out of such proceeds. (c) The Borrower shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of the Borrower and any relevant records and documents, as the Bank shall reasonably request.

19 Section (a) The Borrower shall take all such action as shall be necessary to acquire as and when needed all such land, and rights in respect of land as shall be required for the construction (and operation) of the facilities included in Part A (2) of the Project and shall furnish to the Bank, promptly after such acquisition, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to Part A (2) of the Project. (b) Without limitation or restriction to the provisions of paragraph (a) of Section 3.08 of this Agreement the Borrower shall make appropriate arrangements to relocate in a timely manner residents located on the land referred to in the said paragraph (a) of this Section 3.08.

20 -19- ARTICLE IV Management and Operations of the Borrower Section (a) The Borrower shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with sound business, financial and administrative practices and under the supervision of experienced and competent management assisted by adequate, experienced and competent staff. (b) The Borrower shall at all times operate, maintain, renew and repair its facilities, including but without limitation the Vrutci dam and reservoir to be constructed under Part A (2) of the Project, plants, equipment, machinery and property, and promptly make all necessary repairs and renewals thereof, in accordance with sound engineering and public utility practices. (c) The Borrower shall take all action within its power to maintain its existence and right to carry on its operations and shall take all steps necessary to acquire, maintain and renew all rights, privileges and franchises which are necessary or useful in the conduct of its business. (d) Except as the Bank shall otherwise agree, the Borrower shall obtain title to all goods financed out of the proceeds of the Loan free and clear of all encumbrances. (e) The Borrower shall not, without the prior approval of the Bank, sell, lease, transfer or otherwise dispose of any of its

21 -20- property or assets which shall be required for the efficient operation of its business and undertaking. (f) Withuit limiting the generality of the provisions of the preceding paragraph (b) of this Section, and of Section 4.04 of this Agreement, the Borrower shall under arrangements satisfactory to the Bank cause the dams, waterways, earthworks and reservoir banks constructed under Part A (2) of the Project to be periodically inspected, at intervals of not less than three years and in accordance with appropriate engineering practice, in order to determine whether there are any deficiencies in the condition of such structures and earthworks, or in the quality and adequacy of maintenance or methods of operation of such structures and earthworks which may endanger the safety of such structures and earthworks, the first of such inspections to start no later than December 31, 1979, or such other date as the Bank may agree. Section The Borrower shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section On or before December 31, 1978, or such other date as the Bank may agree, the Borrower shall establish appropriate operating rules for the Vrutci reservoir to be constructed under Part A (2) of the Project, on terms and conditions acceptable to the Bank and Bioktos; such operating rules shall provide, inter alia, for optimal filling and operating procedures of such reservoir, for releasing adequate supplies of water for treatment and distribution in Titovo Uzice, for releasing adequate supplies of

22 -21- water downstream of such reservoir into the Djetinja River for downstream abstractions by industries, for storing of flood flows and for increase of low flows for enhancement of the Djetinja River water quality. Section 4.o. (a) In order to assist the Bcrrower in preparing an action program for monitoring possible causes of flooding of the area downstream of the Vrutci reservoir to be constructed under Part A (2) of the Project and for putting into effect an appropriate warning system in the event of such potential flooding, the Borrower shall employ no later than January 1, 1977, or such other date as the Bank may agree, engineering consultants whose qualifications, experience and terms of employment shall be satisfactory to the Bank. (b) On the basis of the recommendations of the consultants referred to in paragraph (a) of Section 4.04 of this Agreement the Borrower shall complete no later than December 31, 1977, or such other date as the Bank may agree, an action program acceptable to the Bank, as described in said paragraph (a) above. Section After the study to be undertaken under Part F (4) of the Project has been completed, and before undertaking or executing any major project or development intended to supply water to Cacak other than Part F (1) of the Project, the Borrower shall afford the Bank a reasonable opportunity to exchange views with the Borrower on the recommendations of said study.

23 ARTICLE V Financial Covenants Section (a) The Borrower shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition; such records shall include, inter alia, senarate accounts adequate to identify separately the flow of the proceeds of the Loan and each of the components of the Project to be carried out by the Borrower, including but not limited to Part A (2) of the Project. (b) The Borrower shall make anpropriate arrangements to cause RFPRNRP to maintain separate records adequate to reflect in accordance with consistently maintained accounting practices, its operations and financial condition in respect of the carrying out of Part D of the Project. Section The Borrower shall, and shall make appropriate arrangements to cause RFPRNRP to: (i) have their accounts and financial statements (balance sheets, statements of income and expenses and relate(z statements), including but without limitation the accounts referred to in Section 5.01 of this Agreement for each fiscal year audited, in accordance with sound auditing principles consistently anplied, by the Social Accounting Service or another competent and experienced independent auditing organization 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, (A) certified copies of their financial statements for such year as so audited and (B) the report

24 -23 - of such audit by said auditors, of such scone and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of the Borrower and of RFPRNRP and the audit thereof as the Bank shall from time to time reasonably request. Section The Borrower shall no later than December 31, 1978 or such other date as the Bank may agree, enter into arrangements in form and substance satisfactory to the Bank, with Bioktos, providing for annual payment to the Borrower by Bioktos of an appropriate share of the cost of the operation and maintenance of, and of an appropriate share of the amortization of the capital cost of, the dam and the reservoir to be constructed under Part A (2) of the Project and shall thereafter take all such action as may be required to collect as and when due, from Bioktos, any amounts to be paid by Bioktos, pursuant to such arrangements. Section (a) Except as the Bank shall otherwise agree, if the Borrower shall prepay part, or all, of the principal amount outstanding of any debt of the Borrower, the Borrower shall prepay a proportionate part, or all, as the case may be, of the Loan. (b) All provisions of the General Conditions relating to repayment as redemption in advance of maturity shall be anplicable to any prepayment by the Borrower of the Loan under this Section. Section If the completion of Parts A and D of the Project is hindered or delayed, or is threatened with hindrance or delay, because the funds available to the Borrower are inadequate to insure its completion, the Borrower shall promptly

25 -24- demand that the Republic provide the Borrower, or cause the Borrover to be provided, with the necessary funds on terms and conditions satisfactory to the Bank as and when required. Section (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt except as otherwise currently reported to the Bank or stated in writing. (b) The Borrower undertakes that, except as the Bank shall otherwise agree: (i) if the Borrower shall create any lien on any of its assets as security for any debt, such lien will equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan, and in the creation of any such lien express provision will be made to that effect, at no cost to the Bank; and (ii) if any statutory lien shall be created on any assets of the Borrower as security for any debt, the Borrower shall grant, at no cost to the Bank, an equivalent lien satisfactory to the Bank to secure the payment of the principal of, and interest and other charges on, th Loan; provided, however, that the foregoing provisions of this paragrarh shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred.

26 -25- ARTICLE VI Remedies of the Bank Section For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) Bioktos or Titovo Uzice shall have failed to perform any of their respective covenants, agreements or obligations of Bioktos or Titovo Uzice, respectively, under the Bioktos Project Agreement, or under the Bioktos Subsidiary Loan Agreement. (b) Vodovod or Cacak shall have failed to perform any of their respective covenants, agreements or obligations of Vodovod or of Cacak, respectively under the Vodovod Project Agreement or under the Vodovod Subsidiary Loan Agreement. (c) Milosevac, or Aleksinac shall have failed to perform any of their respective covenants, agreements or obligations of Milosevac, or of Aleksinac, respectively, under the Milosevac Project Agreement and under the Aleksinac Project Agreement, respectively. (d) an extraordinary situation shall have arisen which shall make it improbable that Bioktos or Titovo Uzice will be able to perform any of their respective obligations under the Bioktos Project Agreement or under the Bioktos Subsidiary Loan Agreement.

27 -26- (e) an extraordinary situation shall have arisen which shall make it improbable that Vodovod or Cacak will be able to perform any of their respective obligations under the Vodovod Project Agreement or under the Vodovod Subsidiary Loan Agreement. (f) an extraordinary situation shall have arisen which shall make it improbable that Milosevac, or Aleksinac will be able to perform any of their respective obligations under the Milosevac Project Agreement and the Aleksinac Project Agreement, respectively. (g) a default materially and adversely affecting the carrying out of the Project shall occur in the performance of any party of any obligation, covenant, agreement, resolution, decisions or other assurances under any of the obligations, covenants, agreements, resolutions, decisions or other assurances referred to in Recitals (G), (H), (I), (J), (K), (L) and (M) to this Agreement and referred to in paragraphs (g) and (h) of Section 7.01 of this Agreement or under the Aleksinac Articles of Association. (h) (A) any provisions of any of the obligations, covenants, agreements, resolutions, decisions or other assurances referred to in Recitals (G), (H), (I), (J), (K), (L), end (M) to this Agreement and in paragraphs (g) and (h) of Section 7.01 of this Agreemeat or (B) any provisions of the Borrower's Statutes, or of the Bioktos Statutes, or of the Vodovod Statutes, or of the Milosevac Statutes, or of the Aleksinac Articles of Association, or of the Aleksinac Statutes, as may in any way affect (i) Bioktos', Vodovod's,

28 -27- Milosevac's or Aleksinac's ability to carry out any of their respective obligations under this Agreement, under the Bioktos Project Agreement, under the Vodovod Project Agreement, under the Milosevac Project Agreement, or under the Aleksinac Project Agreement, respectively, or (ii) the Borrower's, Bioktos', Milosevac's, or Aleksinac's existence as an independent enterprise, shall have been amended, abrogated or terminated without the prior approval of the Bank. (i) any other loan or credit to Bioktos, Vodovod, Milosevac or Aleksinac including any of the loans referred to in Recitals (G), (H), (I) and (J) of the Preamble to this Agreement, shall have become due and payable prior to its agreed maturity pursuant to the terms thereof. (j) RFPRNRP has failed to perform any of its undertakings under the arrangements referred to in paragraph (b) of Section 5.01 and in Section 5.02 of this Loan Agreement. (k) Bioktos or Vodovod have been unable to withdraw any amount of the loans or of the amounts provided under the agreements referred to in Recitals (G) and (I), respectively, as and when such amounts are due in accordance with the provisions of such loans and agreements. (1) Titovo Uzice has failed to make available, as and when needed, to Bioktos the funds it has resolved to make available to Bioktos, pursuant to the resolution referred to in paragraph (i) of Recital (H) to this Agreement, and other arrangements satisfactory to the Bank to provide such funds have not been made.

29 -28- (m) The Republic has failed to provide the Borrower with the funds required for the completion of Parts A and D of the Project as and when such funds have been demanded by the Borrower pursuant to Section 5.05 of the Loan Agreement, and other arrangements satisfactory to the Bank to provide such funds have not been made. (n) The Republic has failed to provide Milosevac or Aleksinac with the funds referred to in Recital (L) to this Agreement as and when such funds have been demanded by Milosevac and Aleksinac, respectively, pursuant to Sections 4.03 of the Milosevac Project Agreement and the Aleksinac Project Agreement, and other arrangements satisfactory to the Bank to provide such funds have not been made. (o) Any action resulting, directly or indirectly, in the dissolution of, or in the disestablishment of, or in the suspension of the operations of, or in a modification of the functions, powers and responsibilities of, the Borrower, has been taken, or any action resulting, directly or indirectly, in a modification of the right of the Borrower to carry on its operations or to control its assets has been taken, unless the Bank has been satisfied: (i) that the rights and obligations of the Borrower under the Loan Agreement have been transferred or are to be transferred to an entity which has been duly established and registered under the laws of the Guarantor and of the Republic with full authority, powers and responsibility to assume the obligations of the Borrower under the provisions of the Loan Agreement; (ii) that such entity has assumed the obligations of the Borrower under the provisions of the Loan Agreement; (iii) that such entity will be able to fulfill its obligations under the Loan Agreement; (iv)

30 ) that such entity has access to adequate financial resources to meet the obligations of the Borrower under the provisions of the Loan Agreement; and (v) that a manager and staff, all with the necessary qualifications and experience, have been appointed. Section For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) any event specified in paragraphs (a), (b), (c), (h), (j), (k), (1), (m) and (n) of Section 6.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower; and (b) any events specified in paragraphs (g), (i) and (o) of Section 6.01 of this Agreement shall occur. Section The Borrower: (i) represents that all obligations of the Borrower under the Loan Agreement and under the Bioktos Subsidiary Loan Agreement and the Vodovod Subsidiary Loan Agreement, respectively, which shall or may require for its performance the approval, cooperation or financial assistance of any governmental authorities having jurisdiction, are undertaken with the consent and full support of such authorities; and (ii) agrees that no action or failure to act by such authorities shall excuse the performance of such obligation by the Borrower or limit the remedies of the Bank under this Article in respect of any default in the performance of such obligations. 01

31 ARTICLE VII Effective Date; Termination Section The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01(c) of the General Conditions: (a) The execution and delivery of the Bioktos Project Agreement on behalf of Bioktos and Titovo Uzice, respectively, have been duly authorized or ratified by all necessary corporate and governmental action; (b) The execution and delivery of the Vodovod Project Agreement on behalf of Vodovod and Cacak, respectively, have been duly authorized or ratified by all necessary cornorate and governmental action; (c) The execution and delivery of the Milosevac Project Agreement on behalf of Milosevac have been duly authorized or ratified by all necessary corporate and governmental action; (d) The execution and delivery of the Aleksinac Project Agreement on behalf of Aleksinac have been duly authorized or ratified by all necessary corporate and governmental action; (e) The execution and delivery of the Bioktos Subsidiary Loan Agreement on behalf of the Borrower and Bioktos, respectively, have been duly authorized or ratified by all necessary corporate and governmental action;

32 (f) The execution and delivery of the Vodovod Subsidiary Loan Agreement on behalf of the Borrower and Vodovod, respectively, have been duly authorized or ratified by all necessary corporate and governmental action; (g) The Republic has adopted decisions, or given other appropriate assurances in form and substance satisfactory to the Bank, by which the Republic shall undertake the obligations referred to in Recitals (K), (L) and (M) of this Agreement. (h) All agreements, arrangements, resolutions, obligations, or other assurances referred to in Recitals (G), (H), (I) and (J) all in form and substance satisfactory to the Bank, shall have been duly executed and authorized or ratified by all necessary governmental or corporate action. Section The following are specified as additional matters, within the meaning of Section 12.02(c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) That the Bioktos Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of Bioktos and Titovo Uzice, respectively, and is legally binding upon Bioktos and Titovo Uzice, respectively, in accordance with its terms; (b) That the Vodovod Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, Vodovod and Cacak, respectively, and is legally binding upon Vodovod and Cacak, respectively, in accordance with its terms;

33 (c) That the Milosevac Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of Milosevac, and is legally binding upon Milosevac in accordance with its terms; (d) That the Aleksinac Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of Aleksinac and is legally binding upon Aleksinac in accordance with its terms; (e) That the Bioktos Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and Bioktos, respectively, and is legally binding upon the Borrower and Bioktos, respectively, in accordance with its terms; (f) That the Vodovod Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and Vodovod, respectively, and is legally binding upon the Borrower and Vodovod, respectively, in accordance with its terms; (g) That the decisions or other assurances referred to in paragraph (g) of Section 7.01 of this Loan Agreement have been duly taken or given by the Republic and are in full force and effect; (h) That all agreements, arrangements, obligations, resolutions or other assurances referred to in Section 7.01 (h) of this

34 * Agreement: (i) have been duly taken and executed and authorized or ratified by all necessary governmental and/or corporate action; (ii) constitute valid and binding obligations of the parties thereto in accordance with their terms, and (iii) are in full force and effect; and (i) That the Borrower is fully entitled to own the properties and to operate the business which it proposes to own and operate for the purposes of the Project; that all acts, licenses, consents or other rights or privileges necessary therefor have been duly and validly performed or given; and that all the land, leases or rights-of-way necessary therefor have been duly and validly obtained. Section The date October 29, 1976 is hereby specified for the purposes of Section of the General Conditions.

35 -34- ARTICLE VIII Addresses Section The following addresses are specified for the purposes of Section of the General CoAditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C United States of America Cable address: For the Borrower: INTBAFRAD Washington, D.C. 1/ Republicki Fond Voda Nemanjina Belgrade, Yugoslavia Cable address: Republicki Fond Voda Nemanjina Belgrade

36 -35 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Willi A. Wapenhans Regional Vice President Europe, Middle East and North Africa REPUBLICKI FOND VODA By /s/ Naum Ackovski Authorized Representative

37 -36- 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 Allocated % of (Expressed in Expenditures Category Dollar Ecuivalent) to be Financed (1) Bioktos Expenditures (a) Civil works and 4,700, % of foreign Equipment for expenditures or Part E of the 35% Project (b) Consulting ser- 150, % of foreign vices for Part E expenditures or of the Project 35% (c) Interest and 1,013,000 Amounts due other charges on the Loan withdrawn under Category (1), accrued on or before October 31, 1979 (d) Unallocated 1,400,000 SUBTOTAL 7,263,000

38 * -37- Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (2) Vodovod Expenditures (a) Civil works and 3,600, % of foreign Equipment for expenditures or Part F of the Project 35% (b) Consulting ser- 100, % of foreign vices for Part F expenditures or of the Project 35% (c) Interest and 851,000 Amounts due other charges on the Loan withdrawn under Category (2), accrued on or before October 31, 1979 (d) Unallocated 1,000,000 SUBTOTAL 5,551,000 (3) Borrower Expenditures (a) Civil works and 3,900, % of foreign Equipment for expenditures or Part A(2) of 35% the Project (b) Equipment and 249, % of foreign Civil Works for expenditures or Part B of the 35% Project

39 Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (c) Equipment and 169, % of foreign Civil Works for expenditures or Part C of the 35% Project (d) Consulting ser- 300, % of foreign vices for Part A expenditures or of the Project 35% (e) Consulti ng ser- 11, % of foreign vices for Part expenditures or B of the Project 35% (f) Consulting ser- 7, % of foreign vices for Part C expenditures or of the Project 35% (g) Consulting ser- 162, % of foreign vices for Part D expenditures or of the Project 35% (h) Training for 30, % of foreign Part A(l)(iii) expenditures of the Project (i) Interest and 958,000 Amounts due other charges on the Loan withdrawn under Category (3), accrued on or before October 31, 1979 (j) Unallocated 1,400,000 SU1TOTAL 7,186,000 TOTAL 20.,000,000

40 * For the purposes of this Schedule the term "foreign expenditures" means expenditures in the currency of a country other than the Guarantor and for goods or services supplied from the territory of any country other than the Guarantor. 3. The disbursement percentages have been calculated in compliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Guarantor on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the 3F Bank. 4. 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 $1,000,000, may be made in respect of Sub-categories (a) and (b) within Categories (1) and (2) and Sub-category (d) within Category (3) on account of payments made for such expenditures before that date but after January 1, Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the