Morocco - Third Water Supply Project : Loan 2006 - Loan Agreement - Conformed

Ec AL LOAN NUMBER 2006 NOR Loan Agreement (Third Water Supply Project) between KINGDOM OF MOROCCO and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 1981 LOAN NUMBER 2006 MOR LOAN AGREEMENT AGREEMENT, dated v L , 1981, between KINGDOM OF MOROCCO (hereinafter called the Borrower) and INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) a portion of Part A of the Project, Parts B, C, D, F and G (a) and (c) of the Project will be carried out by Office National de l'Eau Potable (hereinafter called ONEP) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to ONEP a portion of the proceeds of the Loan as hereinafter provided; and (C) Part A of the Project (other than the portion thereof to be carried out by ONEP) will be carried out with the Borrower's assistance by R6gie Autonome Intercommunale de Distribution d'Eau et d'Electricite de Casablanca (hereinafter sometimes called RAD), RAgie Autonome de Distribution d'Eau et d'Electricitf de Fes (hereinafter sometimes called RADEEF), R4gie Autonome de Distribution d'Eau et d'Electricite de Marrakech (hereinafter sometimes called RADEEMA), R&gie Autonome de Distribution 1'Eau et d'Electricitg de Meknes (hereinafter sometimes called RADEEM), R6gie Autonome Intercommunale de Distribution d'Eau et d'Electricit6 de Tetouan (hereinafter sometimes called RDE), R6gie Autonome Intercommunale de Distribution d'Eau et d'Electricit6 de Safi (hereinafter sometimes called RADEES), R6gie Autonome de Distribution d'Eau et d'Electricite d'Oujda (hereinafter sometimes called RADEEO), R&gie Autonome Inter- communale de Distribution d'Eau et d'Electricitg de la Province de Tanger (hereinafter sometimes called RAID), Rfgie Autonome Intercommunale de Distribution d'Eau et d'Electricit4 de Rabat- Salf (hereinafter sometimes called RED), Rgie Autonome de Dis- tribution d'Eau et d'Electricitg de Taza (hereinafter sometimes called RADEETA) and R6gie Autonome Intercommunale de Distribution d'Eau et d'Electriciti de K&nitra (hereinafter sometimes called RAK), as well as such other R6gie or RCgies in charge of water distribution which may be selected from time to time by agreement between the Borrower and the Bank, all said entities hereinafter sometimes individually called a R4gie and collectively called the Rggies; and, as part of the Borrower's assistance, the -2- Borrower will make available to the R6gies portions of the proceeds of the Loan as hereinafter provided; WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in the Project Agreement of even date herewith between the Bank and ONEP; NOW THEREFORE the parties hereto hereby agree as follows: ARTTCLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated October 27, 1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agree- ments of the Bank being hereinafter called the General Condi- tions). Section 1.02. 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) "Project Agreement" means the agreement between the Bank and ONEP of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and ONEP pursuant to Section 3.01 (c) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (c) "Convention de Pret" means any of the agreements to be entered into between the Borrower on the one hand, and a R&gie on the other hand, pursuant to Section 3.01 (d) (i) of this Agreement, as the same may be amended from time to time, and -3- such term includes all schedules to any of the Conventions de Pr9t; (d) "FEC" means the Fonds d'Equipement Communal established within the Borrower's Caisse de D6p8t et de Gestion; (e) "FEC Lending Agreement" means any of the lending agreements to be entered into between FEC on the one hand, and a R6gie on the other hand, pursuant to Section 3.01 (d) (ii) of this Agreement; (f) "ONEP Project" means such parts of Part A of the Project which fall within the areas of ONEP's jurisdiction, Parts B, C, D, F and G (a) and (c) of the Project; and (g) "Dirham" or "DH" means the currency of the Borrower. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and -!onditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to eighty-seven million dollars ($87,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Sched- ule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, 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 and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and works to be,financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 5 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1986, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. -4- Section 2.05. The Borrower shall pay to the Bank a commit- ment 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 2.06. The Borrower shall pay interest at the rate of nine and three-fifths per cent (9-3/5%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07, Interest and other charges shall be payable semiannually on April 15 and October 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out Part E of the Project through its Direction de l'Hydraulique within the Ministry of Equipment and National Promotion and Part G (b) of the Project through its appropriate departments, with due dili- gence and efficiency and in conformity with appropriate adminis- trative, financial, engineering and public utility practices and shall provide, 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 the other Parts of the Project to be carried out as follows: (i) ONEP shall carry out the ONEP Project; and (ii) each Regie shall carry out such part of Part A of the Project which falls within the respective area of its jurisdiction; each of such entities shall perform, in accordance with the provisions of the Project Agreement in the case of ONEP and of the respective Conventions de Pret in the case of the Regies, all the obligations therein set forth or referred to. Furthermore, the Borrower shall take or cause to be taken all action, including -5- the provision of funds, facilities, services and other resources, necessary or appropriate to enable ONEP and the Regies to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (c) The Borrower shall enter into a Subsidiary Loan Agree- ment with ONEP, under terms and conditions which shall be satis- factory to the Bank, providing inter alia for relending to ONEP the portion of the proceeds of the Loan allocated to ONEP for carrying out the ONEP Project. (d) For the purpose of carrying out Part A of the Project: (i) the Borrower shall enter into a Convention de Pr8t with each Rggie, under terms and conditions which shall be satisfactory to the Bank, providing inter alia for: (1) an undertaking by the Borrower to relend to each such R6gie, the portion of the proceeds of the Loan allocated to such R6gie to carry out such part of Part A of the Project which falls within the area of its jurisdic- tion; and (2) an undertaking by each such R6gie to carry out such part of Part A of the Project which falls within the area of its jurisdiction in accordance with terms and conditions consis- tent with those set forth in the Statement of Operations and Policies for Part A of the Project specified in Schedule 4 to this Agreement; and (ii) the Borrower shall cause FEC to make available to the Rfgies the local funds as listed hereafter, under the FEC Lending Agreements to be entered into between FEC on the one hand, and each Rgie on the other hand, under terms and conditions which shall be satisfactory to the Borrower, FEC and the Bank; -6- to RAD: DH 23,650,000 of which DH 18,400,000 for materials and equipment; to RADEEF: DH 11,000,000 of which DH 8,600,000 for materials and equipment; to RADEEMA: DH 7,800,000 of which DH 6,100,000 for materials and equipment; to RADEEM: DH 3,950,000 of which DH 3,100,000 for materials and equipment; to RDE: DH 5,000,000 of which DH 3,850,000 for materials and equipment; to RADEES: DH 4,200,000 of which DH 3,250,000 for materials and equipment; to RADEEO: DH 4,100,000 of which DH 3,200,000 for materials and equipment; to RAID: DH 3,600,000 of which DH 2,800,000 for materials and equipment; to RED: DH 2,600,000 of which DH 2,150,000 for materials and equipment; to RADEETA: DH 1,000,000 of which DH 800,000 for materials and equipment; to RAK: DH 750,000 of which DH 600,000 for materials and equipment; and to such other R6gie or R&gies in charge of water distribution which may be selected from time to time by agreement between the Borrower and the Bank and to any of the Rfgies listed above: DH 17,650,000 of which DH 13,750,000 for materials and equipment; any portion of said amount or amounts shall be made available to any such Rfgie in proportion to the amount of the proceeds of the Loan allocated or reallocated under Sub-Categories of Categories (6) and (7) of the table set forth in paragraph 1 of Schedule 1 to this Agreement. -7- Section 3.02. (a) Without any limitation or restriction upon the provisions of Section 3.01 of this Agreement, whenever there is reasonable cause to believe that the funds available to ONEP, the Direction de l'Hydraulique and the Borrower's appro- priate departments responsible for carrying out Part G (b) of the Project, will be inadequate to meet the estimated expenditures required for the carrying out of the ONEP Project and Parts E and G (b) of the Project, the Borrower shall make arrangements satis- factory to the Bank, promptly to provide ONEP, said Direction and said appropriate departments or cause ONEP, said Direction and said appropriate departments to be provided, with such funds as are needed to meet such expenditures. (b) The Borrower shall exercise its rights under the Subsidiary Loan Agreement and the Conventions de Pret 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 the Subsidiary Loan Agreement, the Conventions de Pr9t, or any provision thereof. Section 3.03.(a) In order to assist the Borrower in carrying out the study included in Part G (b) of the Project, the Borrower shall, not later than December 31, 1981, or such other date as the Bank may agree, employ consultants whose qualifications, experi- ence and terms and conditions of employment shall be satis- factory to the Borrower and the Bank. (b) Upon the completion of the study included in Part G (a) of the Project, the Borrower shall exchange views and consult with the Bank and ONEP on the findings of said study, and after having received the Bank's comments thereon, initiate not later than June 30, 1983, or such other date as the Borrower and the Bank may agree, the implementation of those recommendations included therein that the Borrower shall have accepted. Section 3.04. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods required for Part E of the Project and 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 in- stallation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. -8- (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services required for Parts E and G (b) of the Project and financed out of the proceeds of the Loan to be used exclusively for the Project. Section 3.05. (a) The Borrower: (i) shall maintain or cause to be maintained records and procedures adequate to record and monitor the progress of Parts A, E and G (b) of the Project (including the cost thereof and the benefits to be derived therefrom), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) shall enable the Bank's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank, on a quarterly basis, all such information as the Bank shall reasonably request, concerning Parts A, E and G (b) of the Project, their cost and, where appropriate, the benefits to be derived therefrom, the expenditures of the proceeds of the Loan and the goods and services financed out of such proceeds. (b) Upon the award of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (c) Promptly after completion of the Project, but in any case not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reason- ably request, on the execution and initial operation of Parts A, E and G (b) of the Project, their cost and the benefits derived and to be derived therefrom, the performance by the Borrower, the Rfgies and the Bank of their respective obligations under the Loan Agreement and the Conventions de PrOt and the accomplishment of the purposes of the Loan. Section 3.06. The Borrower shall take or cause to be taken 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 Parts B, C and E 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 the Project. -9- Section 3.07. The Borrower shall cause ONEP to enter, not later than December 31, 1982, or such other date as the Bank may agree, into the agreements referred to in Section 2.04 of the Project Agreement. Section 3.08. The Borrower shall provide ONEP, or cause ONEP to be provided, with funds as are needed to meet the expenditures for the expansion or improvement of water production and transmis- sion facilities referred to in Section 2.10 of the Project Agree- ment. ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority 3ver its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. - 10 - (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative sub-division thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by Banque du Maroc or any institution performing the functions of a central bank or exchange stabilization fund, or similar func- tions, for the Borrower. Section 4.02. The Borrower shall take, promptly as required, all measures necessary to enable ONEP to establish, maintain and collect charges for its water services in order to maintain the ratio specified in Section 4.04 of the Project Agreement. Section 4.03. The Borrower shall maintain in full force and effect all measures necessary to enable ONEP to retain in full the water charges collected by ONEP from distribution age-cies and shall continue not to require ONEP to make any payments to the Water Equalization Fund. Section 4.04. The Borrower shall maintain in full force and effect all measures necessary 'o enable water distribution agencies (including ONEP) to receive, within 120 days, payments due to them by the Borrower's departments, municipalities and public utility agencies. Section 4.05. Except as the Borrower and the Bank shall otherwise agree, the Borrower shall continue to permit ONEP to use surplus revenues to finance a part of the cost of any development program that may be undertaken by ONEP, with the approval of the Borrower, to satisfy future demand for potable water in areas supplied by ONEP. Section 4.06. (a) The Borrower shall continue to establish and maintain water tariffs for the water supply sector as a whole to ensure that water revenues will be sufficient to recover, at an appropriate discounted rate, all operating, maintenance and administrative expenses, as well as the cost of investments required for the renewal and/or expansion of water production and distribution systems, over the economic life of said investments. (b) Without any limitation or restriction to the provisions of paragraph (a) of this Section, the Borrower shall continue to maintain water tariffs for the water supply sector as a whole that provide for a concessionary rate for water volumes supplied and required to meet basic domestic needs. - 11 - ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) the Borrower's Dahir No. 1-72-103 of April 3, 1972, or any decree or regulation enacted thereunder, shall have been amended, suspended, abrogated, repealed or waived in such a way as to affect materially and adversely the ability of ONEP to carry out the covenants, agreements and obligations set forth in the Project Agreement; (b) ONEP, or any of the R6gies, or FEC, shall have failed to perform any of its respective covenants, agreements or obliga- tions under the Project Agreement, or the Subsidiary Loan Agree- ment, or the Conventions de Prat, or the FEC Lending Agreements; (c) an extraordinary situation shall have arisen which shall make it improbable that ONEP, or any of the Rfgies, or FEC, shall be able to perform its obligations under the Project Agreement, the Subsidiary Loan Agreement, the Conventions de PrOt, or the FEC Lending Agreements; and (d) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of ONEP or any of the R6gies, or for the suspension of their respective operations. Section 5.02. 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 paragraph (b) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower and ONEP; and (b) any event specified in paragraph (a) or (d) of Section 5.01 of this Agreement shall occur. - 12 - ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an addi- tional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the Subsidiary Loan Agreement has been executed on behalf of the Borrower and ONEP. 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) that the Project Agreement has been duly authorized or ratified by ONEP and is legally binding upon ONEP in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and ONEP and is legally binding upon the Borrower and ONEP in accordance with its terms. Section 6.03. The date ( K, / 9( , is hereby specified for the purposes oCSection 12.04 of the General Condi- tions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of the Borrower at the time responsible for finance is designated as representative of the Borroer for the purposes of Section 11.03 of the General Condi- tions. section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Minist4re des Finances Rabat Morocco - 13 - Cable address: Telex: MINISTERE FINANCES 31936 M Rabat, Morocco For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 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. KINGDOM OF MOROCCO By / P Y) Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President Europe, Middle East and North Africa - 14 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works and 20,320,000 36% supply and installa- tion of pipelines for Parts B and C of the Project (2) Equipment (including 5,350,000 54% supply and installa- tion) for Parts B and C of the Project (3) Equipment and mate- 1,690,000 100% of foreign rials for Part D expenditures of the Project and 54% of local expendi- tures (4) Consultants' and 3,180,000 100% of foreign experts' services expenditures and training and 50% of local expendi- tures (5) Expenditures 2,630,000 45% for Part E of the Project (6) Works carried out 65% of net under force account financing for Part A of the Project: - 15 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (a) ONEP 4,420,000 (b) RAD 3,450,000 (c) RADEEF 1,590,000 (d) RADEEMA 1,140,000 (e) RADEEM 600,000 (f) RDE 710,000 (g) RADEES 600,000 (h) RADEEO 570,000 (i) RAID 490,000 (j) RED 430,000 (k) RADEETA 140,000 (1) RAK 110,000 (7) Equipment and 100% of materials for foreign Part A of the expenditures Project: and 48% of local expen- ditures (a) ONEP 9,250,000 (b) RAD 7,000,000 (c) RADEEF 3,310,000 (d) RADEEMA 2,360,000 (e) RADEEM 1,150,000 - 16 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (f) RDE 1,490,000 (g) RADEES 1,250,000 (h) RADEEO 1,230,000 (i) RAID 1,060,000 (j) RED 820,000 (k) RADEETA 310,000 (1) RAK 240,000 (8) Unallocated (a) in respect of 2,010,000 Categories (1) through (5) (b) in respect of 8,100,000 Categories (6) and (7) TOTAL 87,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than 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. - 17 - 3. The disbursement percentages have been calculated in com- pliance with the policy of the Bank that no proceeds of the Loa,i shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower 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 Bank. 4. For the purpose of Category (6), the disbursement percen- tage "65% of net financing" means for any given period the equivalent of 65% of the aggregate amount lent for house con- nections minus the amount produced during such given period as described in paragraph 1(k) (iii) of Schedule 4 of this Agree- ment; provided, however, that: (i) the amount withdrawn from the Loan Account in respect of such given period under any Sub- Category of Category (6) shall not exceed the amount so determined minus the amount withdrawn under any corresponding Sub-Category of Category (7) to the extent that it has not yet been so deducted for the purpose of determining earlier withdrawals under Category (6); and (ii) the cumulative amounts withdrawn from the Loan Account under any Sub-Category of Category (6) shall not exceed one half of the cumulative amounts withdrawn under any corres- ponding Sub-Category of Category (7). 5. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (i) payments made for expenditures prior to the date of this Agreement; and (ii) payments made for expenditures in respect of any Sub- Category of Categories (6) and (7) (other than Sub-Categories (6)(a) and (7)(a)) by any Rggie, until the Convention de Prft and the FEC Lending Agreement for such R6gie shall have been executed by the parties thereto and the Bank shall have been furnished with an opinion or opinions showing that such Conven- tion de Pret and FEC Lending Agreement have been duly authorized or ratified in accordance with their respective terms. 6. With respect to Categories (1) through (5) and Sub-Category (8)(a), notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in para- graph 1 above, if the Bank has reasonably estimated that the - 18 - amount of the Loan then allocated to any such Category will be insufficient to finance the agreed percentage of all expen- ditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category or Sub-Category (8)(a) and which in the opinion of the Bank are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated short- fall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 7. With respect to Categories (6) and (7) and Sub-Category (8)(b), notwithstanding the allocation of an amount of the Loan set forth in the table in paragraph 1 above: (i) upon selection from time to time by agreement between the Borrower and the Bank, of a Rfgie other than one of those listed under Sub-Categories of Categories (6) and (7), the Bank shall add corresponding Sub-Categories listing such R6gie under Categories (6) and (7) and, by notice to the Borrower, allocate from Category 8(b) to said corresponding Sub-Categories amounts required by such Regie to finance expenditures for house con- nections; and (ii) if the Borrower and the Bank have determined that the amount of the Loan then allocated to any Sub-Category of Categories (6) and (7) will have to be increased to finance expenditures under such Sub-Category for additional house connections, the Bank may, by notice to the Borrower, reallocate from Sub-Category (8)(b) to Sub-Categories of Categories (6) and (7) and from Sub-Categories of Category (6) to corresponding Sub- Categories of Category (7), to the extent required, the amount of the proceeds of the Loan then allocated to said Sub-Categories to meet expenditures for such additional house connections. 8. If the Bank shall have reasonably determined that the procurement of any item in any Category or Sub-Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way - 19 - restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 20 - SCHEDULE 2 Description of the Project The main objectives of the Project are: (i) to increase the access to safe water supply through individual house connec- tions for the low-income populations in large and small urban areas; (ii) to assist ONEP in further strengthening its opera- tional and organizational capabilities, including ONEP's capacity for the planning, evaluation, execution, operations and mainte- nance of smaller water distribution and production systems and for the provision of adequate water quality control; and (iii) to assist in improving and coordinating the investment decision process in the water supply sector. The Project consists of the following Parts: Part A: House Connections to Water Distribution Systems Provision of credit facilities to the low-income populations, for the installation of house connections, including the provision of equipment and materials, about 110,000 by the Rfgies and 37,000 by ONEP, to the respective water distribution systems of the Rggies and ONEP, through the establishment and/or expan- sion of a revolving fund, within each R6gie and ONEP, for the financing of said connections and of related contribution for the extension of the water distribution systems payable at the time of connecting to such systems. Part B: Expansion and Improvement of Water Production and Distribution Systems Expansion and improvement of water production, transmission and primary distribution systems in about 32 centers, in accor- dance with the criteria and procedures specified in the Schedule to the Project Agreement. Part C: Regional Water Systems (a) Errachidia-Erfoud-Rissani Regional Water Supply System Construction of a system serving an area about 100 km long in the Ziz valley between the towns of Errachidia and Erfoud and the Tafilalet plain around the town of Rissani, including inter alia three boreholes to be equipped with pumps and related equipment, chlorination - 21 - and storage facilities and pumping stations, supply and installation of a transmission main about 100 km long providing about 330 liters/s of groundwater to distribution points, of distribution networks, of power transmission lines and telecommunication facilities, and construction of housing for operating staff. (b) Karia Ba Mohamed Regional Water Supply System Construction of a system serving the town of Karia Ba Mohamed and dwellings between said town and the Sebou river, including inter alia a raw water intake, lifting stations, a treatment plant with a capacity of about 20 liters/s, storage facilities, supply and installation of a primary distribution network, of power transmission lines and telecommunications facilities, and construc- tion of housing for operating staff. Part D: Miscellaneous Equipment Provision of laboratory and related equipment for ONEP's regional laboratories, water meters including calibrated test meters and equipment for leak detection, surveys and maintenance. Part E: Water Resource Development Construction and equipment of boreholes and wells with infiltration galleries in about 24 centers, as listed in the Annex to this Schedule. Part F: Technical Assistance and Training A program of technical assistance to ONEP for setting up and operating a management information and cost accounting system, for strengthening its planning, design and operations divisions and for completing the inventory of its assets, and training of ONEP's staff. Part G: Studies Carrying out of the following studies: (a) a study on the organization of the structure of the water supply sector, including the updating of the tariffs study in such sector; - 22 - (b) a study related to the identification, selection, design, operation and maintenance of water supply systems in rural communes; and (c) a study for updating and enlarging the existing master plan up for the Mid-Atlantic coast area between Casa- blanca and Kgnitra, for meeting the water demand in the area between Safi and Kfnitra up to the year 2010, and for the preparation of final design and bidding documents for the first phase of the construction program in connection thereto. The Project is expected to be completed by June 30, 1986. - 23 - ANNEX TO SCHEDULE 2 Water Resource Development - List of Centers Unless otherwise determined in agreement between the Borrower and the Bank, Part E of the Project shall be carried out in the centers listed hereunder: Province Center Agadir Taroudant Ouled Taima Ouarzazate Kelaa Mgouna Tinghir Taznakht Zagora Marrakech Imin Tanout El Jadida Sidi Bennour Azilal Demnate Azilal Beni-Mellal Fkih Ben Salah Khouribga Oued Zem K6nitra Mechra Bel Ksiri Souk El Arbaa Ouazzane FAs Imouzer Kandar Oujda Ahfir Taourirt Meknes El Hajeb Khenifra Khenifra Midelt Errachidia Goulmima Rich - 24 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each April 15 and October 15 beginning October i5, 1985 through October 1.5, 1997 3,345,000 On April 15, 1998 3,375,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.04), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. - 25 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions: Time of Prepayment Premium Not more than three years 1.70% before maturity More than three years but not 3.40% more than six years before maturity More than six years but not 6.20% more than eleven years before maturity More than eleven years but not 8.50% more than fifteen years before maturity More than fifteen years 9.60% before maturity - 26 - SCHEDULE 4 Statement of Operations and Policies for Part A of the Project 1. Pursuant to Section 3.01 (d) (i) (2), the Conventions de Pret shall include a statement of operations and policies pursuant to which the Borrower shall require each R6gie: (a) to carry out the part of Part A of the Project which falls within its area of jurisdiction with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices; (b) to install the house connections included in Part A of the Project under force account and, prior to such installation, to procure materials and equipment related thereto in accordance with the provisions of Schedule 5 to this Agreement; (c) to cause such works and goods financed out of the proceeds of the Loan relent to it by the Borrower to be used exclusively for Part A of the Project; (d) to enable the Bank's representatives to examine all installations, sites, works, buildings, equipment and materials of the R6gie related to Part A of the Project and any relevant records and documents; (e) to operate and maintain all facilities and works in- cluded in those parts of Part A of the Project which fall within its area of jurisdiction in accordance with appropriate financial, engineering and public utility practices and to make, or cause to be made, all necessary safety inspections, renewals and repairs thereof; (f) to take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with appropriate business practice; such insurance shall cover inter alia hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Loan relent to it to the place of installation, any indem- nity thereunder to be made payable in a currency freely usable by the Rfgie to replace or repair such goods; - 27 - (g) to maintain separate records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations with respect to Part A of the Project, and more specifically to retain, until one year after the Closing Date, all records (orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which with- drawals are requested from the Loan Account with respect to any Sub-Category of Category (6) of the table set out in paragraph 1 of Schedule 1 to the Loan Agreement on the basis of certificates of expenditures, and to enable the Bank's accredited representa- tives to examine such records; (h) to have the R&gie's records supporting certificates of expenditures referred to in paragraph (f) above for each fiscal year certified by its Contr8leur Financier, acting aL Commis- saire aux Comptes, to show whether the proceeds of the Loan withdrawn from the Loan Account on the basis of such certificates have been used for the purpose for which they were provided; (i) to apply the following criteria for the installation of the house connections included in Part A of the Project: (i) evidence that the monthly family income is less than DH 1,500 in 1980 prices*; (ii) there is no important commercial activity on the premises; (iii) the location is in a zone classified as either densely populated area or low-income housing area; (iv) the type of construction is either economic or traditional or collectif; (v) the diameter of the water meter does not in prin- ciple exceed 20 mm; and (vi) evidence of owner's occupancy or, in the case -of tenants' occupancy, appropriate documents to be obtained; (j) to obtain by any appropriate legal means from the beneficiaries of house connections that credit facilities granted to said beneficiaries shall be repaid by quarterly installments over a period not exceeding five years and a half; and * This ceiling amount shall be reviewed annually by the Borrower and the Bank and may be revised by -agreement between the Borrower and the Bank. - 28 - (k) to use exclusively the proceeds of repayments made by the beneficiaries of house connections financed out of the proceeds of the Loan, in the following order for: (i) payment of interest and other charges on the proceeds of the Loan relent to it by the Borrower and on the amounts lent to it by FEC; (ii) repayment of the principal amount of the proceeds of the Loan relent to it by the Borrower and of the amounts lent to it by FEC; and (iii) financing additional house connections in accordance with the criteria set forth in paragraph (i) above. 2. The Borrower may suspend or terminate the right of a R4gie to the use of the proceeds of the Loan relent to it upon failure by such Rfgie to perform its obligations under its Convention de Pret with the Borrower and, in appropriate cases, to premature the Convention de Pret. - 29 - SCHEDULE 5 Procurement A. International Competitive Bidding 1. Except as provided in Parts C and E hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA .Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall cause ONEP and each of the R6gies concerned to prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the oppor- tunity to bid for the goods and works in question. The Borrower shall cause ONEP and each of the Rfgies concerned to provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of inter- national competitive bidding. 3. (i) Bidders for the works included in Part C of the Project shall be prequalified as described in paragraph 1.3 of Part A of the Guidelines; and (ii) contracts for goods and works for each part of Part A which falls within ONEP's and the Rfgies' respective jurisdiction and for Parts B, C and D-of the Project shall be grouped to the extent possi- ble. 4. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, - 30 - or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in Morocco may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Morrocco if the bidder shall have established to the satisfaction of the Borrower, ONEP or the R&gies, as appropriate, and the Bank that the manufacturing cost of such goods includes a value added in Morocco equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. - 31 - 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of such price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures 1. Contracts for works, installation and supply of pipe- lines and construction of distribution networks for Parts B, C and E of the Project estimated to cost less than the equivalent of $1,000,000 each may be awarded on the basis of competitive bideing advertised locally and in accordance with procedures acceptable to the Bank, provided that the aggregate amount of such contracts does not exceed the equivalent of $12,000,000. 2. Contracts for the supply, with or without installation, of equipment for Parts B, C, D and E of the Project estimated to cost less than the equivalent of $250,000 each may be awarded on the basis of competitive bidding advertised locally and in accordance with procedures acceptable to the Bank, provided that the aggregate amount of such contracts does not exceed the equi- valent of $2,500,000. 3. Contracts for equipment and materials for those parts of Part A of the Project which fall within the areas of ONEP's or the Rfgies' respective jurisdiction estimated to cost less than the equivalent of $250,000 each may be awarded, prior to the instal- lation of house connections, on the basis of competitive bidding advertised locally and in accordance with procedures acceptable to the Bank, provided that the aggregate amount of such contracts does not exceed the equivalent of $1,500,000 in the case of ONEP, RAD, RADEEF and RADEEMA, respectively. - 32 - D. Review of Procurement Decisions by the Bank 1. Review of prequalification. The Borrower shall cause ONEP, before qualification is invited, to inform the Bank in detail of the procedure to be followed, and to introduce such modifications in said procedure as the Bank shall reasonably request. The Borrower shall cause ONEP to furnish to the Bank for its comments the list of prequalified bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant for prequalification before the applicants are notified of ONEP's decision, and the Borrower shall cause ONEP to make such additions to, deletions from, or modifications in, the said list as the Bank shall reasonably request. 2. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for works and goods estimated to cost the equivalent of $1,000,000 and $250,000 or more, res- pectively: (a) Before bids are invited, the Borrower, through its Direction de l'Hydraulique, shall furnish, and cause ONEP and each of the R6gies concerned to furnish, to the Bank, for its com- ments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make or cause to be made, such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders, (b) After bids have been received and evaluated, the Bor- rower, through its Direction de 1'Hydraulique, shall inform the Bank, and cause ONEP and each of the R6gies concerned to inform the Bank, before a final decision on the award is made, of the name of the bidder to which it intends to award the contract and shall furnish or cause to be furnished to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the borrower's Direction de l'Hydraulique, ONEP or each of the Rfgies concerned, as appropriate, and state the reasons for such determination. - 33 - (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 3. With respect to each contract not governed by the preceding paragraph, the Borrower, through its Direction de 1'Hydraulique, shall furnish to the Bank, and shall cause ONEP and each of the R6gies concerned to furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower's Direction de 1'Hydraulique, ONEP, or any of the R6gies concerned, as appropriate, and state the reasons for such determination. 4. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, the Borrower, through its Direc- tion de 1'Hydraulique, shall inform the Bank, and shall cause ONEP and any of the R&gies concerned to inform the Bank, of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower's Direction de 1'Hydraulique, ONEP, or any of the R6gies concerned, and state the reasons for its determination. E. Procurement Without Contracting Works for installation of house connections for those parts of Part A of the Project which fall within the areas of ONEP's or the Rfgies' respective jurisdiction shall be carried out by ONEP and any of the Rfgies concerned under force account. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this APX dayof *0 , 198 / FOR SECRETARY