Public Disclosure Authorized CONFORMED COPY LOAN NUMBER 3442 BR Public Disclosure Authorized Loan Agreement (Water Sector Modernization Project) between FEDERATIVE REPUBLIC OF BRAZIL Public Disclosure Authorized and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated December 9, 1992 LOAN NUMBER 3442 BR LOAN AGREEMENT Public Disclosure Authorized AGREEMENT, dated December 9, 1992, between FEDERATIVE REPUBLIC OF BRAZIL (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS: (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; (B) Part B of the Project will be carried out in the States of Bahia, Mato Grosso do Sul and Santa Catarina (hereinafter collectively referred to as "the States") by the State Water Companies of the States (the Companies) with the Borrower s assistance and, as part of such assistance, the Borrower will make available to the Companies part of the proceeds of the Loan as provided in this Agreement; (C) by agreements of even date herewith (the Project Agreements) between the Bank and each of the Companies, each of the Companies has agreed to undertake certain obligations with respect to the carrying out of Part B of the Project and to undertake such other obligations as set forth in the respective Project Agreement;
(D) by agreements of even date herewith (the Shareholder Agreements) between the Bank and each of the States, each State has agreed to undertake certain obligations with regard to the execution of Part B of the Project and the performance by the Company operating in its territories under the respective Project Agreement; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth below (the General Conditions) constitute an integral part of this Agreement: (a) The last sentence of Section 3.02 is deleted. (b) In Section 6.02, subparagraph (k) is relettered as subparagraph (l) and a new subparagraph (k) is added to read: "(k) An extraordinary situation shall have arisen under which any further withdrawals under the Loan would be inconsistent with the provisions of Article III, Section 3 of the Bank s Articles of Agreement." Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Additional Amounts" means the amounts of the Loan made available to a Company over and above its Initial Allocation pursuant to Schedule 5 to this Agreement; (b) Borrower; "Bahia" means the State of Bahia, a political sub-division of the (c) "CASAN" means Companhia Catarinense de aguas e Saneamento, Santa Catarina s State Water Company; (d) "Central Bank" means the Central Bank of Brazil, Banco Central do Brasil, established by Lei No. 4.595, dated December 31, 1964; (e) "Cruzeiro" means a unit of the currency of the Borrower; (f) "Company" means either of CASAN, EMBASA and SANESUL, and "Companies" means two or more of them referred to collectively; (g) "DTN" means Secretaria do Tesouro Nacional, of the Ministry of Finance, Ministerio da Fazenda, of the Borrower; (h) "Eligible Company" means a Company that meets the eligibility criteria set forth in Schedule 6 to this Agreement; (i) "Eligible Subproject" means a Subproject which has been approved by the Bank after reviewing the information to be provided by the Borrower on such Subproject pursuant to Section 3.07 (a) of this Agreement or a free-limit Subproject for which the Bank has authorized withdrawals from the Loan Account on the basis of the information provided by the Borrower (through the PMU) pursuant to Section 3.07 (b) of this Agreement; (j) "EMBASA" means Empresa Baiana de aguas e Saneamento S.A., Bahia s State Water Company;
(k) "free-limit Subproject" means a Subproject with an estimated total cost which shall not exceed the sum of $3,000,000 equivalent, which fully meets the eligibility criteria set forth in Schedule 6 to this Agreement, has been approved by the PMU and which shall be subject to review and approval by the Bank on an ex post basis; (l) "Financial Intermediary" means a financial institution operating in Brazil, acceptable to the Bank, selected by the Borrower to participate in the execution of the Project; (m) "FSRMM" means Adicional ao Frete Para a Renovacao da Marinha Mercante - AFRMM, the Borrower s Freight Surcharge for the Renewal of the Merchant Marine established by Decree Law 1,142 of December 30, 1970, as amended to December 31, 1987, or any other tax, levy or charge that, in the reasonable opinion of the Bank, may substitute it, in whole or part, after January 1, 1988; (n) "Initial Allocation" means the initial allocation of parts of the proceeds of the Loan to the Companies as set forth in paragraph (5) of Schedule 5 to this Agreement; (o) "Letter of Agreement" means Carta Compromisso, the agreement between each of the States, the respective Company and the Borrower through SNS (referred to in Section 6.01 (c) of, and paragraph 3 (b) (i) of Schedule 1 to, this Agreement), which sets forth the Company s rolling six year investment program and the respective financial and technical obligations of the State and the Company in the carrying out of such investment program, as such agreement may be amended from time to time in agreement with the Bank; (p) "MAS" means Ministerio do Bem-Estar Social, the Borrower s Ministry of Social Welfare; (q) "Mato Grosso do Sul" means the State of Mato Grosso do Sul, a political subdivision of the Borrower; (r) "Management Services Contract" means the agreement referred to in Section 3.03 (c) of this Agreement; (s) "PMU" means Project Management Unit, the technical unit established by Article 4 of the Borrower s Portaria Interministerial No. 794 of December 30, 1991, published in the Diario Oficial of the Borrower on January 3, 1992, and to be maintained by the Borrower pursuant to Section 3.03 of this Agreement; (t) "Project Agreements" means the agreements between the Bank and each of the Companies of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreements, and "Project Agreement" means one of the Project Agreements; (u) "RIMA" means Relaterio de Impacto sobre o Meio Ambiente; (v) "SANESUL" means Empresa de Saneamento de Mato Grosso do Sul, Mato Grosso s State Water Company; (w) "Santa Catarina" means the State of Santa Catarina, a political subdivision of the Borrower; (x) "SNS" means Secretaria de Saneamento, the Secretariat for Water and Sanitation of MAS; (y) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (z) "Subproject" means a specific water supply or sewerage investment or institutional development project to be carried out by an Eligible Company consisting of one or more of the following: (i) construction, expansion, rehabilitation, or reinforcement of water supply or sewerage; (ii) construction of sewerage treatment
plants in selected areas; (iii) construction of water and sewerage house connections and acquisition and installation of water meters; (iv) installation of production metering equipment and execution of leak detection programs; (v) acquisition and utilization of operational equipment; (vi) designing of water supply or sewerage systems, including provision of required engineering and consulting services; and (vii) provision of technical assistance and/or training programs (including auditing services and acquisition and utilization of office equipment and software) to carry out programs to improve the operational and managerial capabilities of a Company; (aa) "Subsidiary Loan Agreements" means the agreements to be entered into between the Borrower and each of the Companies pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreements; "Subsidiary Loan Agreement" means one of the Subsidiary Loan Agreements; and "Subsidiary Loan" means a loan provided for in a Subsidiary Loan Agreement; (bb) "Tariff Law" means Law No. 6,528 of the Borrower, dated May 11, 1978, published in Diario Oficial of May 12, 1978, as amended to the date of this Agreement; (cc) "Technical Agency Agreement" means any of the agreements between the Borrower and the Technical Agents; and (dd) "Technical Agents" means each of the teams of consultants to be employed by the Borrower pursuant to Section 3.04 of this Agreement. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, various currencies that shall have an aggregate value equivalent to the amount of two hundred and fifty million dollars ($250,000,000), being the sum of withdrawals of the proceeds of the Loan, with each withdrawal valued by the Bank as of the date of such withdrawal. Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special deposit account in a commercial bank on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provision of Schedule 7 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1997 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a 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 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such
Semester. (c) For the purposes of this Section: (i) "Interest Period" means a six-month period ending on the date immediately preceding each date specified in Section 2.06 of this Agreement, beginning with the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, as reasonably determined by the Bank and expressed as a percentage per annum, of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings or portions thereof as the Bank has allocated to fund: (A) the Bank s investments; and (B) loans which may be made by the Bank after July 1, 1989 bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. a calendar (iii) "Semester" means the first six months or the second six months of year. (d) On such date as the Bank may specify by no less than six months notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: "(a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Quarter equal to the Cost of Qualified Borrowings determined in respect of the preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period." "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Quarter." "(c) (iii) Quarter means a three-month period commencing on January 1, April 1, July 1 or October 1 in a calendar year." Section 2.06. Interest and other charges shall be payable semiannually on April 1 and October 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall: (i) carry out Part A of the Project with due diligence and efficiency and in conformity with appropriate administrative and financial practices and shall provide, promptly as needed, the funds, facilities, services and other resources required for such Part of the Project; and (ii) without limitation or restriction upon any of its other obligations under the Loan Agreement, cause, through the Subsidiary Loan Agreements, the States and the Companies to perform all its obligations set forth in the Shareholder and Project Agreements, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable the States and the Companies to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance.
(b) The Borrower shall relend a portion of the proceeds of the Loan to each of the Companies under a subsidiary loan agreement to be entered into between the Borrower and such Company and the respective State, under terms and conditions which shall have been approved by the Bank, including those set forth in Schedule 5 to this Agreement. (c) After two years from the date of this Agreement, the Borrower shall reallocate among the Companies the undisbursed and uncommitted amount of the Loan reasonably determined by the Bank as available for purposes of the Project (including the deposits in the Special Account but excluding amounts subject to special commitments pursuant to Section 5.02 of the General Conditions) as provided in Schedule 5 to this Agreement. (d) The Borrower shall make available to the Companies, promptly as needed, advances against the Subsidiary Loans, on terms and conditions satisfactory to the Bank, to ensure that sufficient funds are available to the Companies for purposes of carrying out their activities under the Project on an effective and timely manner. (e) The Borrower shall exercise its rights under the Subsidiary Loan Agreements in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive any of the Subsidiary Loan Agreements or any provision thereof. Section 3.02. (a) Except as the Bank shall otherwise agree, procurement of the goods, works and consultants services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. (b) Standard bidding documents satisfactory to the Bank shall be utilized in the procurement of goods, works and services required for the Project and to be financed out of the proceeds of the Loan. Section 3.03. The Borrower shall: (a) maintain, at least until the completion of the Project, the Project Management Unit (the PMU), with staffing, responsibilities and functions (including the qualifications and experience of its manager), satisfactory to the Bank; (b) provide, promptly as needed, all the funds, facilities, staff and resources required by the PMU to carry out its functions and responsibilities in a timely and efficient manner; (c) enter into contractual arrangements (the Management Services Contract), satisfactory to the Bank, with an agent or agents acceptable to the Bank, for handling the contracting of consultants, the procurement of goods and arranging for training activities, under Part A of the Project; and (d) exercise its rights under the Management Services Contract in such a manner as to protect the interest of the Borrower and the Bank and to accomplish the purposes of the Loan and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Management Services Contract or any provision thereof. Section 3.04. (a) Not later than three months after the date of this Agreement, the Borrower shall employ a team of consultants with staffing, qualifications, experience and terms of reference satisfactory to the Bank for each State (the Technical Agents), to act as independent supervisors of the Project activities in each State and to report to SNS through the PMU. (b) The Borrower shall retain such teams of Technical Agents until the completion of Project activities in the respective State and cause the Technical Agents to report, periodically through the PMU to SNS and the Bank, on the progress of the Project, recommending specific corrective actions where required.
Section 3.05. Without limitation to the provisions of Section 9.01 of the General Conditions, the Borrower through the PMU shall prepare and furnish to the Bank, not later than January 15, April 15, July 15 and October 15 of each year, a report of such scope and in such detail as the Bank reasonably requests (including monitoring indicators related to the targets referred to in each of the Project Agreements) on the execution of the Project, the operation of each of the Companies and the compliance of the Borrower of its obligations under this Agreement, and of the Companies and the States under the Project and Shareholder Agreements. Section 3.06. The Borrower, through SNS, shall: (a) carry out, or cause to be carried out, the studies included in Part A of the Project under terms of reference satisfactory to the Bank, which shall include, where appropriate, the preparation of draft plans of action or programs to meet the objectives of the Project; (b) promptly upon the completion of each such study, furnish to the Bank a copy of its findings and recommendations, including any programs or plans of action to put them into effect; (c) afford the Bank a reasonable opportunity to comment on such findings, recommendations and programs or plans of action; (d) taking into account the Bank s comments thereon, prepare programs or plans of action, based on such recommendations, and carry out such programs or plans of action as required to meet the objectives of the Project as set forth in Schedule 2 of this Agreement. Section 3.07. (a) When presenting a Subproject (other than a free-limit Subproject) to the Bank for approval, the Borrower, through SNS, shall furnish to the Bank an application, in form and substance satisfactory to the Bank, together with: (i) an appraisal of the Subproject (including the economic evaluation referred to in Schedule 6 to this Agreement), and a description of the expenditures proposed to be financed out of the proceeds of the Loan; (ii) a detailed description of how the respective Company and such Subproject meet the Eligibility Criteria set forth in Schedule 6 to this Agreement; and (iii) such other information as the Bank shall reasonably request in respect of the Company and such Subproject. (b) Each request by the Borrower for authorization to make withdrawals from the Loan Account in respect of a free-limit Subproject shall contain: (i) a summary description of the Sub-project, including an evaluation of the Company and the Subproject according to criteria set forth in Schedule 6 to this Agreement and a description of the expenditures proposed to be financed out of the proceeds of the Loan; and (ii) such other information as the Bank shall reasonably request in respect of the Company and such Subproject. Section 3.08. The Borrower shall take any action required on its part pursuant to the Borrower s legislation to enable the Companies to meet the operational and financial performance set forth or referred to in the respective Project Agreements. Section 3.09. (a) Without limitation to the provisions of Section 9.01 of the General Conditions, and not later than June 30, 1994, the Borrower shall, through SNS, PMU and DTN, exchange views with the Bank, the States and the Companies with regard to the progress of the execution of the Project, the performance of their respective obligations under the Letters of Agreement, this Agreement, the Shareholder and Project Agreements and the Subsidiary Loan Agreements and on the achievement of the objectives of the Project. (b) At least 30 days prior to the exchange of views referred to in paragraph (a) of this Section, the Borrower, through SNS, shall prepare and furnish to the Bank a report, of such scope and detail as the Bank shall reasonably request, describing the Borrower s, States and Companies actions with respect to the execution of the Project and the status thereof and of their obligations under the Loan, Project and Shareholder Agreements, respectively. Section 3.10. In the carrying out of Part A of the Project, the Borrower, through SNS and PMU, shall provide out of the proceeds of the Loan financial and technical assistance (under terms of reference and conditions satisfactory to the Bank): (a) to the Companies and other state and municipal water and sewerage companies for the identification and preparation of water demand management and water and sewerage systems rehabilitation projects; and (b) to the environmental agencies of
Bahia and Mato Grosso do Sul in charge of the RIMAs and environmental supervision of water and sewerage projects and services, for institutional strengthening and staff training. Section 3.11. The Borrower shall: (a) carry out its obligations under the Letters of Agreement with due diligence and efficiency; (b) take all action required on its part to assist the Companies in updating annually the investment program and other obligations therein contained in terms satisfactory to the Bank; and (c) unless the Bank shall otherwise agree, not amend or concur in any action that would have the effect of amending or abrogating the Letter of Agreement or any provision thereof. Section 3.12. The Bank and the Borrower hereby agree that the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Eligible Subprojects shall be carried out by each of the respective Companies pursuant to Section 2.03 of each of the Project Agreements, provided, however, that the report referred to in Section 9.07 (c) of the General Conditions shall be prepared and furnished to the Bank by the Borrower through SNS. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and separate accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of the Companies and departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section and the records and accounts for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) and to time reasonably furnish to the Bank such other information concerning said records accounts and the audit thereof as the Bank shall from time request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (a) of this (i) maintain or cause to be maintained, in accordance with paragraph Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank s representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors
as to whether the statements of year, together with the procedures their preparation, can be relied upon to withdrawals. expenditure submitted during such fiscal and internal controls involved in support the related ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (l) of the General Conditions, the following additional events are specified, provided, however, that if the events specified in paragraph (a) or paragraph (b) or paragraph (d) or paragraph (e) hereof, shall have occurred or be continuing, the suspension by the Bank of the Borrower s right to make withdrawals from the Loan Account in respect of Project expenditures may be limited by the Bank to withdrawals related to the relevant Company or Companies: (a) Any of the Companies or the States shall have failed to perform any of its obligations under a Project Agreement or a Shareholder Agreement. (b) As a result of events which have occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that any of the Companies or the States will be able to perform its obligations under the Project Agreement or the Shareholder Agreement. (c) The Tariff Law shall have been amended, suspended, abrogated, repealed or waived so as to affect, in the reasonable opinion of the Bank, materially and adversely the ability of the Companies to perform any of their obligations under the Project Agreements. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of a Company or for the suspension of its operations. (e) Any of the Technical Agents shall have failed to perform any of its obligations under the respective Technical Agency Agreements and the Borrower shall have failed to replace such Technical Agents or take any other remedial measures satisfactory to the Bank within a period of 30 days after notice thereof shall have been given by the Bank to the Borrower. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified: (a) any event specified in paragraph (a) or (d) or (e) of Section 5.01 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) shall occur. the event specified in paragraph (c) of Section 5.01 of this Agreement ARTICLE VI Effective Date; Termination Section 6.01. 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) that the Borrower has entered into Subsidiary Loan Agreements, satisfactory to the Bank, with at least two Companies and States; (b) that the Loan Agreement has been duly registered by the Central Bank; and (c) that Letters of Agreement between the Borrower and the States and Companies referred to in paragraph (a) of this Section shall have been executed in terms satisfactory to the Bank.
Section 6.02. 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) from each Company, that the Project Agreement with the respective Company referred to in Section 6.01 (a) of this Agreement has been duly authorized or ratified by such Company, and is legally binding upon the Company in accordance with its terms; (b) from each State, that the Shareholders Agreement related to each of the Companies referred to in paragraph (a) of Section 6.01 of this Agreement has been duly authorized or ratified by the respective State and is legally binding upon such State in accordance with its terms; (c) from the Borrower and the respective State and Company, that the Subsidiary Loan Agreement for each of the Companies and States referred to in paragraph (a) of Section 6.01 of this Agreement has been duly authorized or ratified by the Borrower and such Company and State and is legally binding upon the Borrower and the Company and State in accordance with its terms; (d) from the Borrower, that the Loan Agreement has been duly registered by the Central Bank; and (e) from the Borrower and the respective States and Companies, that the Letters of Agreement referred to in paragraph (c) of Section 6.01 of this Agreement have been duly executed and are legally binding upon the parties thereto. Section 6.03. The date March 9, 1993 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministerio da Fazenda Esplanada dos Ministerios, Bloco "P" - 5o andar 70048 Brasalia, D.F. Brazil Cable address: MEFP Brasilia, Brazil Telex: 61-1506 MFAZ BR With copies to: (i) Procuradoria Geral da Fazenda Nacional Esplanada dos Ministerios, Bloco "P" - 8o andar 70048 Brasilia, D.F. Brazil Telex: 61-1506 MFAZ BR (ii) Secretaria do Tesouro Nacional Ministerio da Fazenda
Esplanada dos Ministerios, Bloco "P" Anexo-1o andar 70048 Brasilia, D.F. Brazil Telex: 61-1008 (iii) Secretaria de Assuntos Internacionais Secretaria de Planejamento, Orcamento e Coordenacao da Presidencia da Republica Esplanada dos Ministerios, Bloco "K" - 5o andar 70063 Brasilia, D.F. Brazil Telex: 61-2207 (iv) Ministerio do Bem-Estar Social Esplanada dos Ministerios, Bloco "A" - 7o andar 70054 Brasilia, D.F. Brazil For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. Telex: 197688 (TRT), 248423 (RCA) 64145 (WUI) or 82987 (FTCC) 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 America, as of the day and year first above written. FEDERATIVE REPUBLIC OF BRAZIL By /s/ Tercio Sampaio Ferraz Jr. Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Yoshiaki Abe Acting Regional Vice President Latin America and the Caribbean 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 Equivalent) to be Financed (1) Civil Works 100,000,000 100% of foreign included in expenditures and an Eligible 47% of local Subproject expenditures (2) Goods included 99,000,000 100% of foreign in an Eligible expenditures and Subproject 47% of local expenditures (3) Consultants 18,000,000 47% of local Services and expenditures for Training services of consultants domiciled within the territory of the Borrower and 100% of foreign expenditures for services of other consultants (4) Goods under 1,000,000 100% of foreign Part A of expenditures, the Project 100% of local expenditures (ex-factory cost) and 85% of local expenditures for other items procured locally (5) Consultants 7,000,000 100% Services and Training under Part A of the Project (6) Unallocated 25,000,000 TOTAL 250,000,000 =========== 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 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, except that withdrawals, in an aggregate amount not to exceed $10,000,000, may be made on account of payments made for expenditures before that date but after January 1, 1992; (b) payments made for expenditures of a Company other than those referred to in paragraph (a) of Section 6.01 of this Agreement, unless: (i) the Bank shall have received duly certified copies of the Subsidiary Loan Agreement and Letter of Agreement entered into by such Company; and (ii) an opinion or opinions satisfactory to the Bank, of counsel acceptable to the Bank showing, on behalf of each of the parties to the agreements below, that such Subsidiary Loan Agreement and Letter of Agreement together with the Project Agreement executed by such Company and the Bank and the applicable Shareholder Agreement between the State and the Bank, have all been duly authorized or ratified by all parties thereto (other than the Bank) and are legally binding upon such parties in accordance with their respective terms, provided, however, that no withdrawals shall be made in respect of expenditures by any Company unless such Company is an Eligible Company which meets the eligibility criteria set forth in Schedule 6 to this Agreement. 4. Unless the Bank shall otherwise agree, withdrawal applications shall be consolidated so as to apply for withdrawal of aggregate amounts of not less than $500,000 equivalent. SCHEDULE 2 Description of the Project The objectives of the Project are: (i) to strengthen the water and sewerage sector s institutional capabilities by laying the foundations of a modern and efficient legal and regulatory frame-work, and upgrading the efficiency and competence of the sector financial model; (ii) to help CASAN, EMBASA, and SANESUL to operate on a commercial basis, with financial self-sufficiency including independence from earmarked funds, corporate autonomy and accountability for its actions, through the financing of institutional improvement plans and a time-slice of their six-year investment programs; and (iii) to improve environmental and health conditions in urban areas, through the expansion of water supply and sewerage services. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: Part A: Institutional Development A technical assistance and training program, including the acquisition and utilization of equipment, to assist the Borrower in: (i) the formulation of a proposal for setting up a new regulatory model for Brazil s water and wastes sector, including a detailed plan of action for institutional reformulation, drafts of proposed legislation and regulations, and definition of functions and mechanisms at the federal and state levels; (ii) the evaluation and reformulation of the sector investment programming and financing model at the federal and local levels, aiming at upgrading its efficiency and ensuring an improvement in the self-financing of sector companies; (iii) improving the institutional capabilities of SNS and other federal, state and local sector entities to carry out their responsibilities under the Project and under the institutional arrangements and sector policies to be proposed; (iv) improving sector management in planning, marketing, and operational techniques--including cost reduction; and (v) the preparation and design of water demand management and system rehabilitation projects. Part B: Subprojects Execution of Eligible Subprojects by the Companies. * * * The Project is expected to be completed by June 30, 1997. SCHEDULE 3
Amortization Schedule Date Payment Due Payment of Principal (Expressed in dollars)* On each April 1 and October 1 Beginning October 1, 1997 through April 1, 2007 12,500,000