Yugoslavia - Kosovo Agricultural Development Project : Loan 1993 - Loan Agreement - Conformed

LOAN NUMBER 1993 YU Loan Agreement (Kosovo Agricultural Development Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and UDRUZENA KOSOVSKA BANKA PRISTINA Dated , 1981 LOAN NUMBER 1993 YU LOAN AGREEMENT AGREEMENT, dated I L , 1981, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and UDRUZENA KOSOVSKA BANKA PRISTINA (herein- after called the Borrower), acting pursuant to its self-management agreement a.id statutes both on its own behalf and on behalf of its Basic Panks (as this term is hereinafter defined). 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) the Socialist Federal Republic of Yugoslavia (herein- after called the Guarantor), in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to guarantee the Loan as to payment of principal, interest and other charges; (C) the Borrower, the Composite Organization of Associated Labor Agro-industrial Kombinat Agrokosova (hereinafter called Agrokosova), the Social Sector Sub-borrowers (as this term is hereinafter defined) carrying out Investment Projects (as this term is hereinafter defined) included in Part A (a), b (i) and (c) of the Project and the farmers' cooperatives at(d social sector organizations concerned with the carrying out of Part A (b) (ii), (c) and (d) of the Project, inter alia, will enter into a self- management agreement known as the Self-Management Agreement on Mutual Rights, Obligations and Responsibilities for the Imple- mentation of the Kosovo Agricultural Development Project, for the purpose of defining their responsibilities and relationships under Part A of the Project; (D) Part B of the Project will be carried out by the Bor- rower in cooperation with the Self-Managed Community of Interest for Water Economy, Prigtina (hereinafter called SIZ) and, as part of such cooperation, the Borrower will make available to SIZ a portion of the proceeds of the Loan as hereinafter -provided; and 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; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE 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, subject, however, to the following modification thereof (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, being hereinafter called the General Conditions), namely that the following sub-paragraph (d) is added to Section 3.04 of the General Conditions: "(d) The Bank and the Borrower may from time to time agree upon arrangements for prepayment of the Loan and the application of such prepayment in addition to, or in substitution for, those set forth in paragraph (b) of Section 3.04." 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) "Self-Management Agreement of the Borrower" means the Self-Management Agreement of the Borrower dated January 31, 1978, as may be amended from time to time. (b) "Statutes of the Borrower" means the statutes of the Borrower dated May 28, 1973, as may be amended from time to time. (c) "Sub-loan" means a loan made or proposed to be made by the Borrower out of its own funds and out of the proceeds of the Loan in accordance with Section 3.03 (a) of this Agreement. (d) "Sub-borrower"' means a beneficiary of a Sub-loan who may be either: (i) an Individual Sub-borrower who is an individual farmer sub-borrowing through his own farmers' cooperative or through a social sector organization or an individual farmer directly sub-borrowing; or (ii) a Social Sector Sub-borrower which may be any form of social sector organization. - 3 - (e) "Investment Project" means a specific investment project to be carried out by a Sub-borrower utilizing the proceeds of a Sub-loan. (f) "Statement of Operations and Policies for Part A of the Project" means the statement of lending and investment operations and policies for Part A of the Project set forth in Schedule 5 to this Agreement, as such statement may be amended from time to time with the prior approval of the Bank. (g) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and SIZ 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 such Subsidiary Loan Agreement and all agreements supplemental to such Subsidiary Loan Agreement. (h) "Dinars" and the letters "Din" mean the currency of the Guarantor. (i) "Social Accounting Service" means the Slutba Dru9tvenog Knjigovodstva referred to in paragraph (5) of Article 281 of the Guarantor's Constitution. (j) "Basic Bank" means any bank which is, or shall become, a party to the Self-Management Agreement of the Borrower, pursuant to the pertinent provisions thereof. ARTICLE II The Loan Section 2.01. 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 ninety million dollars ($90,000,000). 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, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank: (i) for amounts disbursed (or, if the Bank shall so agree, for dis- bursements required to be made) by the Borrower under Sub-loans in respect of the reasonable cost of works, goods and services required for Part A of the Project and to be financed under the -4- Loan Agreement pursuant to the provisions of Schedule 5 hereto; and (ii) for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of other works, 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 each of the semiannual 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 amount allocated, in Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1987, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.05. 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 2.06. 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 May 15 and November 15 in each year. Section 2.08. (a) The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement as such Schedule shall be amended from time to time by the Bank to the extent required to: (i) conform in relevant part substantially to the aggregate of the respective amortization schedules applicable to the Sub-loans which have been approved or authorized for withdrawals from the -5- Loan Account under Section 2.02 of this Agreement; and (ii) take into account any cancellation pursuant to Article VI of the General Conditions and any repayments made by the Borrower under Section 2.09 of this Agreement; provided that repayments due hereunder shall be made on May 15 and November 15 in each year. Such amendments of said Schedule 3 shall includq amendments to the table of premiums on prepayment, if necessary. (b) The amortization schedule applicable to each Sub-loan shall provide for an appropriate period of grace and, unless the Bank and the Borrower shall otherwise agree: (i) shall not extend beyond fifteen years from the date hereof; and (ii) shall provide for approximately equal semiannual, or more frequent, aggregate payments of principal and interest or approximately equal semi- annual, or more frequent, payments of principal. (c) The Borrower shall transmit to the Bank, for its prior approval, any substantial changes proposed to be made by the Borrower in respect of the repayment provisions of any Sub-loan. Section 2.09. Unless the Bank and the Borrower shall other- wise agree: (a) If a Sub-loan or any part thereof shall be repaid to the Borrower in advance of maturity or if a Sub-loan or any part thereof shall be sold, transferred, assigned or otherwise disposed of for value by the Borrower, the Borrower shall promptly notify the Bank and shall repay to the Bank on the next following interest payment date, together with the premiums specified in Schedule 3 to this Agreement or in any amendment thereof under Section 2.08 (a) of this Agreement, the amount withdrawn from the Loan Account in respect of such Sub-loan or part thereof and not theretofore repaid to the Bank. (b) Any amount so repaid by the Borrower shall be applied by the Bank to the maturity or maturities of the Loan in amounts corresponding to the outstanding amounts of the maturity or maturities of the Sub-loan so repaid or disposed of. (c) Paragraph (b) of Section 3.04 of the General Conditions shall not apply to any repayment made under paragraph (a) of this Section. -6- ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out Part A of the Project in cooperation with Agrokosova and Part B of the Pro- ject in cooperation with SIZ, all with due diligence and effi- ciency, in conformity with appropriate agricultural, technical, administrative and financial policies and practices, and shall provide or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Furthermore, the Borrower shall carry out Part A of the Project in accordance with the Statement of Operations and Policies for Part A of the Project. (b) For the purpose of carrying out the studies included in Part B of the Project, the Borrower shall relend the proceeds of the Loan allocated under Category (3) of the table set out in paragraph 1 of Schedule 1 to this Agreement to SIZ, under a Subsidiary Loan Agreement to be entered into between the Borrower and SIZ under terms and conditions which shall have been approved by the Bank. (c) The Borrower shall exercise its rights under the Subsi- diary Loan Agreement in such manner as to protect the interests of the Bank and the Borrower 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 or any provision thereof. Section 3.02 (a) In order to assist the Borrower in super- vising the procurement procedures referred to in Schedule 4 to this Agreement, the Borrower shall continue to employ a pro- curement specialist whose experience and qualifications shall be satisfactory to the Bank and the Borrower. (b) In order to strengthen the agricultural credit depart- ment of the Borrower, the Borrower shall: (i) not later than November 30, 1981, or such other date as the Bank may agree, employ an agro-industries specialist whose experience and quali- fications shall be satisfactory to the Bank and the Borrower, and employ and assign to said specialist and the procurement spe- cialist referred to in paragraph (a) above, experienced and qualified support staff in adequate numbers; and (ii) as and when required, employ consultants, whose experience and qualifications -7- and terms and conditions of employment shall be satisfactory to the Bank and the Borrower, who shall assist the Borrower, inter alia, in supervising international procuremert procedures and staff training. Section 3.03. (a) The Borrower undertakes that, unless the Bank shall otherwise agree, any Sub-loan by the Borrower will be made on financial terms and conditions consistent with the State- ment of Operations and Policies for Part A of the Project and on the following terms and conditions, which are in addition to those referred t' above, whereby the Borrower shall obtain, by written contract with the Sub-borrower or by other appropriate legal means, rights adequate to protect the interests of the Bank and the Borrower, including, in the case of any such Sub-loan, the right of the Borrower to: (i) require the Sub-borrower to carry out its Invest- ment Project with due diligence and efficiency and in accordance with appropriate agricultural, technical, administrative and financial policies and practices and to maintain adequate records; (ii) require that: (1) the works and goods to be financed out of the proceeds of the Loan shall be procured in accordance with Schedule 4 to this Agreement; and (2) such works and goods shall be used exclusively in the carrying out of an Invest- ment Project; (iii) inspect, by itself or jointly with representatives of the Bank if the Bank shall so request, such goods and the sites, works, buildings, property, equipment and construction included in any Invest- ment Project, the operation thereof, and any relevant records and documents; (iv) require that: (1) the Sub-borrower shall take out and maintain with responsible insurers such in- surance, against such risks and in such amounts, as shall be consistent with appropriate business practice; and (2) without any limitation upon the foregoing, such insurance shall cover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Loan to the place of use or installation, any -8- indemnity thereunder to be made payable in a currency free:y usable by the Sub-borrower to replace or repair such goods; (v) obtain all such information as the Bank or the Borrower shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Sub-borrower; (vi) suspend or terminate the right of the Sub-borrower to the use of the proceeds of the Loan upon failure by such Sub-borrower to perform its obligations under its contract with the Borrower and, in appro- priate cases, to premature the Sub-loan; and (vii) require any of the Social Sector Sub-borrowers: (1) to have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited in accordance with appropriate accounting principles consistently applied by the Social Accounting Service or another competent and experi- enced independent accounting organization; (2) to furnish to the Borrower as soon as available, but in any case not later than six months after the end of each such year, certified copies of its financ- ial statements for each such year as so audited and the report of such audit; and (3) to furnish to the Borrower such other information concerning its accounts and financial statements as the Borrower shall from time to time reasonably request. (b) The Borrower shall exercise its rights, in relation to each Investment Project, in such manner as to: (i) protect the interests of the Bank and the Borrower; (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of Part A of the Project. Section 3.04. (a) In order to assist the Borrower and SIZ in the carrying out of the studies included in Part B of the Project, the Borrower shall cause SIZ to employ appropriate consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. (b) During the carrying out of the studies included in Part B of the Project, the Borrower shall: (i) make available to the -9- Bank copies of the documents prepared by the consultants, includ- ing reports and drafts thereof, plans, designs, specifications, work schedules and estimates of costs and benef:,ts; (ii) from time to time, together with SIZ, exchange views with the Bank on the recommendations and (ther conclusions contained in said documents; (iii) not later than December 31, 1983, or such other date as the Bank may agree, ensure that all said studies be completed; and (iv) promptly thereafter, together with SIZ, exchange views with the Bank on the findings of said studies and on the measures pr)posed to be taken with respect to further development of groundwater irrigation in Kosovo. Section 3.05. The Borrower shall: (a) maintain records and procedures adequate to record and monitor the progress of the Project and of each Investment Project (including the cost there- of, the amount of financing provided by the Borrower, disburse- ments, repayments, interest and other charges on such financing, including the Sub-loan therefor); and (b) furnish to the Bank, in cooperation with Agrokosova and SIZ, as appropriate, quarterly reports on the implementation of all aspects of the Project (including any pertinent general information on agriculture and economic policy measures affecting the implementation of the Project, the issues arising from such policy measures and the possible remedial actions required therefor), in such detail as the Bank shall reasonably request and within 45 days of the close of the quarter concerned. Section 3.06. (a) The Borrower shall furnish to the Bank all such information as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan, the Project, its procedures, operations and records, the Investment Projects and the Sub-loans. (b) Until the completion of the Project, the Borrower shall, with the assistance of Agrokosova and SIZ, as appropriate, and, to the extent necessary, with the assistance of qualified and experienced consultants, under terms of reference satisfactory to the Bank, evaluate the benefits derived from Part A and Part B of the Project, in accordance with monitoring and evaluation proce- dures acceptable to the Bank, and furnish to the Bank by April 30 of each year, an evaluation report of such benefits according to a format acceptable to the Bank, the first of such reports to be furnished to the Bank by April 30, 1983, or such other date as the Bank may agree. - 10 - (c) Upon approval of the award by the Borrower of any contract for works, goods 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. (d) Promptly after completion of the Project, but in any event 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, in cooperation with Agrokosova and SIZ, as appropriate, prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Bank of their respective obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. ARTICLE IV Management and Operations of the Borrower Section 4.01. The Borrower shall at all times continue to conduct its operations and affairs, including the Project, in accordance with appropriate administrative and financial- policies and practices, with qualified and experienced management and staff, and in accordance with its Self-Management Agreement and Statutes. ARTICLE V Financial Covenants Section 5.01. The Borrower unconditionally undertakes, whenever there is reasonable cause to believe that the funds available to any of the Sub-borrowers will be inadequate to meet the estimated expenditures required for the carrying out of any of the Investment Projects, to make arrangements satisfactory to the Bank, promptly to provide, or cause to be provided, any such Sub-borrower with such funds in foreign or local currencies as needed to meet such expenditures. Section 5.02. The Borrower shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. - 11 - Section 5.03. (a) The Borrower shall establish and maintain separate accounts for the Project and shall record in such accounts all amounts disbursed or received for or in connection with the Project. (b) The Borrower shall retain, until one year after the Closing Date, all records (orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account with respect to Categories (1) and (2) of the table set out in paragraph 1 of Schedule 1 hereto on the basis of certificates of expenditures, and shall enable the Bank's accredited representatives to examine such records. Section 5.04. The Borrower shall: (a) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) and its records supporting certificates of expenditures referred to in Section 5.03 (b) hereof for each fiscal year audited, in accordance with appro- priate auditing principles consistently applied, by the Social Accounting Service or another competent and experienced inde- pendent auditing organization acceptable to the Bank; (b) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, (i) certified copies of its financial statements for such year as so audited and (ii) the report of such audit by said auditors (including an analysis of the quality of the Borrower's portfolio), of such scope and in such detail as the Bank shall have reasonably requested, including a separate opinion by said auditors in respect of such certifi- cates of expenditures showing whether the proceeds of the Loan withdrawn from the Loan Account with respect to Categories (1) and (2) of the table set out in paragraph 1 of Schedule 1 hereto on the basis of such certificates, have been used for the purpose for which they were provided; and (c) furnish to the Bank such other information concerning its accounts and financial statements and the audit thereof, as the Bank shall from time to time reason- ably request. Section 5.05. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt. (b) The Borrower undertakes that, except as the Bank shall otherwise agree: (i) if any lien shall be created on any assets of the Borrower, as security for any debt, such lien will equally - 12 - and ratably secure the payment of the principal of, and interest and other charges on., the Loan and that 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 satisfac- tory to the Bank to secure the payment of the principal of, and interest and other charges on, the Loan; provided, however, that the foregoing provisions of this paragraph 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. Section 5.06. The Borrower shall maintain arrangements satisfactory to the Bank to protect itself against the risk of losses resulting from changes in the rates of exchange between the currencies (including Dinars) used in its lending and borrowing operations for the purpose of carrying out Part A of the Project and servicing the Loan, such arrangements to provide, in parti- cular, adequate protection for the Borrower against the foreign exchange risks on Sub-loan repayments accruing earlier than the amortization payments of the Loan. ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) Any part of the principal amount of any loan to the Borrower having an original maturity of one year or more shall, in accordance with its terms, have become due and payable in advance of maturity as provided in the relative contractual instruments, or any security for any such loan shall have become enforceable. (b) A change shall have been made in the Self-Management Agreement or Statutes of the Borrower which would materially and adversely affect the financial condition or operations of the Borrower or the carrying out of the Project. - 13 - (c) The Self-Management Agreement referred to in Preamble (C) to this Agreement shall have been amended, repealed, waived or suspended in such a way as to affect materially and adversely the carrying out of the Project. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof, -amely, that any event specified in paragraphs (a), (b) or (d) of Section 6.01 of this Agreement shall occur. ARTICLE VII Effective Date; Termination Section 7.01. 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 Self-Management Agreement referred to in Recital (C) of the Preamble to this Agreement has been entered into by all parties concerned in form and substance sati,factory to the Bank and is in effect. Section 7.02. The date /< i9&i, is hereby speci- fied for the purpose of Section 12.04 of the General Conditions. ARTICLE VIII Addresses Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: 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) - 14 - For the Borrower: UdruZena Kosovska Banka Prigtina Margala Tita 4 38000 Prigtina Yugoslavia Cable address: Telex: BANKKOS 18149 YU BANKKOS Pri9tina Yugoslavia 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 Regional Vice President Europe, Middle East and North Africa UDRUZENA KOSOVSKA BANKA PRISTINA By Au t \o c ev Authorized Representative - 15 - SCHEDULE 1 Withdrawal of the Proceds of the Loan 1. The table below sets forth the Categories of items to be financed ont nf the proceeds of the Loan, the allocation of the amounts oi tne 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) Sub-loans for 57,000,000 ( 100% of for- Part A (a) of ( eign expendi- the Project ( tures and 45% ( of amounts ( disbursed by (2) Sub-loans for 20,500,000 ( the Borrower Part A (b), (c) ( on account and (d) of ( of local ex- the Project ( penditures, ( in both ( instances ( subject to ( a maximum of ( 35% of the ( total esti- ( mated cost of ( the Invest- ( ment Project ( concerned (3) Studies under 2,000,000 100% Part B of the Project (4) Consultants' 500,000 100% services under Section 3.02 (b) (ii) of the Loan Agreement - 16 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (5) Interest and other 10,000,000 Amounts due charges on the Loan accrued on or before November 14, 1986 TOTAL 90)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 Guarantor and for goods or services supplied from the territory of any country other than the Guarantor; and (b) the term "local expenditures" means expenditures in the currency of the Guarantor or for goods or services supplied from the territory of 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 Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement; and - 17 - (b) payments made for expenditures in respect of Category (3) until the Subsidiary Loan Agreement shall have been executed by the Borrower and SIZ and the Bank shall have been furnished with a legal opinion showing that such Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and SIZ and is legally binding upon such parties in accordance with its terms. 5. 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 Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures 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 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 shortfall, 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. 6. If the Bank shall have reasonably determined that the piocurement of any item in any 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 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. - 18 - SCHEDULE 2 Description of the Project The Project is designed to increase productivity and income in the rural areas of the Socialist Autonomous Province of Kosovo and its main objectives are: (a) to increase food and primary agricultural production; (b) to improve agricultural market opportunities; (c) to open additional opportunities for coopera- tive membership among individual farmers; (d) to accelerate planning for small-scale farm irrigation from groundwater sources; and (e) to strengthen the Borrower's capacity for appraisal and supervision of investments in the agricultural sector. The Project consists of the following Parts: Part A: Sub-loans This Part consists of a program of Sub-loans to finance investments in the following sectors: (a) Agro-industries Sub-loans to about 12 Social Sector Sub-borrowers for the design, construction or reconstruction of buildings, supply and installation of equipment, tech- nical assistance, staff training, permanent working capital requirements and start-up operations for plants consisting of food-processing facilities for pasta, meat, fruits and vegetables, fruit juice, potatoes, biscuits and maize grits, a turkey-breeding farm, a bakery, sugar processing and packing facilities, a livestock feed mill and cold stores or other facili- ties determine. in agreement between the Bank and the Borrower. (b) Vineyard, Orchard and Berry Plantations (i) Sub-loans to about 10 Social Sector Sub-borrowers for the establishment of vineyard, orchard and berry plantations covering about 2,000 ha. (ii) Sub-loans to about 800 Individual Sub-borrowers for the establishment of vineyard and hazelnut plantations covering about 650 ha. - 19 - (c) Goat Farm Development A Sub-loan to a Social Sector Sub-borrower for the establishment and operation of a goat farm with a capacity for about 1,200 goats, including the purchase of breeding stock, feed production (on an area of about 260 ha) and the provision of extension and veterinary services to relevant individual farmers and assistance to said farmers for acquiring breeding stock, feed and production inputs and collecting and marketing their outputs (surplus milk, kids, goats, etc.), through a program to be carried out by said Sub-borrower in co- operation with the Livestock Institute in Pri9tina. (d) Dairy Livestock Development Sub-loans to about 300 Individual Sub-borrowers for the expansion of dairy farms through the purchase of dairy breeding stock and the construction or improvement of sheds, barns, silage and manure pits. Part B: Groundwater Irrigation Development Studies Carrying out a series of studies, acceptable to the Bank, for groundwater irrigation development in selected locations in Kosovo, including: technical investigations of existing ground- water resources; identification of well irrigation systems suit- able for rapid construction and operation under existing farm conditions; assessment of agricultural, economic and financial impact to 'be derived from selected irrigation systems; preliminary recommendations for allocation of groundwater resources among agricultural, industrial and domestic purposes and for scheduling prospective investments so as to achieve the fastest rate of agricultural development; planning and preliminary designs for selected well irrigation systems; and pilot installation of well irrigation systems and monitoring of the costs and impact thereof on agricultural production. The Project is expected to be completed by December 31, 1986. - 20 - SCHEDULE 3 Amortization Schedule* Payment of Principal Date Payment Due (expressed in dollars)** November 15, 1984 300,000 May 15, 1985 650,000 November 15, 1985 1,400,000 May 15, 1986 2,220,000 November 15, 1986 3,070,000 May 15, 1987 3,960,000 November 15, 1987 4,470,000 May 15, 1988 4,580,000 November 15, 1988 4,580,000 May 15, 1989 4,580,000 'ovember 15, 1989 4,580,000 May 15, 1990 4,580,000 November 15, 1990 4,580,000 May 15, 1991 4,580,000 November 15, 1991 4,580,000 May 15, 1992 4,580,000 November 15, 1992 4,580,000 May 15, 1993 4,580,000 November 15, 1993 4,580,000 May 15, 1994 4,580,000 November 15, 1994 4,310,000 May 15, 1995 4,040,000 November 15, 1995 3,360,000 May 15, 1996 2,680,000 * The Amortization Schedule is subject to amendment pursuant to the provisions of Section 2.08 of the Loan Agreement. ** 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 equiva- lents determined as for purposes of withdrawal. - 21 - 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 or to Section 2.09 of the Loan Agreement: Time of Prepayment Premium Not more than three years 1.90% before maturity More than three years but not 3.85% more than six years before maturity More than six years but not 7.05% more than eleven years before maturity More than eleven years but not 8.30% more than thirteen years before maturity More than thirteen years 9.60% before maturity - 22 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part C of this Schedule, goods and civil works shall be procured under contracts awarded in accor- dance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Cre- dits" 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, and in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall 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 documents relating thereto, a general procure- ment notice, in such form and detail and containing such informa- tion 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 opportunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of interna- tional competitive bidding. 3. Except as provided in Part C hereof, the plants included in Part A (a) of.the Project shall be procured on a "turnkey contract" basis. 4. In the event that registration in Yugoslavia shall be neces- sary after a foreign contractor or supplier has been notified that he will be awarded a contract, the Borrower shall facilitate the registration. 5. Contracts -for civil works and goods shall include a provision allowing non-Yugoslav contractors and suppliers to convert into foreign exchange and to repatriate a reasonable portion of contract payments, and to import equipment and specialized manpower as required to carry out their services. - 23 - 6. 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, 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 Yugoslavia 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 Yugoslavia if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Yugoslavia 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 evalu- ated bids shall then be compared with each other, and if, as a - 24 - result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 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 the c.i.f. bid 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. Civil works for plants included in Part A (a) of the Project consisting of facilities for processing fruits and vegetables and fruit juice, a turkey-breeding farm, sugar pro- cessing and packing facilities, a livestock feed mill and cold stores shall be procured on the basis of competitive bidding advertised locally and in accordance with procedures acceptable to the Bank. 2. Goods and works included in Part A (b) (i) and (c) and Part B of the Project shall be procured: (a) on the basis of com- petitive bidding advertised locally and in accordance with pro- cedures acceptable to the Bank, if a contract is estimated to cost the equivalent of $150,000 or more; and (b) through nego- tiated purchases, if a contract is estimated to cost less than the equivalent of $150,000. 3. Goods and works included in Part A (b) (ii) and (d) of the Project shall be procured in accordance with local pro- curement procedures. D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: - 25 - With respect to all contracts referred to in Part A.3 hereof and all contracts for goods included in Part A (a) of the Project and not covered by the aforementioned contracts: (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding cuments, together with a description of the advertising proc(aures to be followed for the bidding, and shall make 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 shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish 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 and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished 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. 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall 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 con- tract, together with the analysis of the respective bids, recom- mendations 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 and state the reasons for such determination. - 26 - 3. 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 20% of the original price, the Borrower shall 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 and state the reasons for its determination. - 27 - SCHEDULE 5 Statement of Operations and Policies for Part A of the Project 1. Sub-loan Processing (A) Registration Each Investment Project shall be registered with the Borrower upon receipt of the application therefor made by a Sub-borrower to the Borrower. (B) Appraisal and Eligibility (i) Sub-loans to Social Sector Sub-borrowers The Borrower shall prepare an appraisal report for each Investment Project, taking into account, unless the Bank shall otherwise agree, the following: (a) the technical feasibility, financial viabi- lity, commercial soundness, economic justi- fication and availability of markets; (b) the generation of sufficient cash flow to cover debt service, legal claims, legally required allocations to the enterprise's depreciation, reserve and reinvestment needs, and the need to achieve financial and economic rates of return of at least 12%; if the financial or the economic rate of return is calculated to be less than 12%, additional justification acceptable to the Bank will be required; (c) the creditworthiness of the Sub-borrower; (d) appropriate consideration given to the choice of technology, with preference accorded to more labor-intensive methods as opposed to capital-intensive and automated technology and to the consequences of such a choice on the investment cost of Investment Projects; - 28 - (e) for Sub-loans for Part A (a) of the Project, availability of raw material supply; and (f) for the Sub-loan for Part A (c) of the Pro- ject, the provision of extension and veteri- nary services to relevant individual farmers and assistance to said farmers for acquiring breeding stock, feed and production inputs and collecting and marketing their outputs (sur- plus milk, kids, goats, etc.), through a program to be carried out by the Sub-borrower in cooperation with the Livestock Institute in Pristina. (ii) Sub-loans to Individual Sub-borrowers The Borrower shall prepare a brief appraisal report for each Investment Project, taking into account the following: (a) technical feasibility, financial viability, commercial soundness, economic justification and availability of adequate and continuing technical assistance and of suitable market outlets at fair and reasonable prices; (b) the generation of sufficient cash flow to cover debt service, legal claims and reinvest- ment needs, and the need to achieve financial and economic rates of return of at least 12%; if the financial or economic rate of return is calculated to be less than 12%, additional justification will be required; (c) the creditworthiness of the Sub-borrower; (d) adequacy of the mutual agreements between individual farmers and their own cooperatives or social sector organizations; and (e) adequacy of the arrangements for the provision of extension services to individual farmers and the recovery of service charges. - 29 - (C) Review of Investment Projects and Approval of Sub-loans On the basis of the appraisal referred to above in paragraph B (i) and (ii), Investment Projects shall be reviewed and the proposed. Sub-loans therefor shall be approved as follows: (i) with respect to the Investment Project for goat farm development included in Part A (c) of the Project and any Investment Project under Part A (a) of the Project consisting of facilities to be determined in agreement between the Bank and the Borrower, the Borrower shall not approve a Sub-loan before the Bank has reviewed the Investment Project and the appraisal report pertaining thereto and has given its approval to it; (ii) with respect to the Investment Project for potato processing included in Part A (a) of the Project, the Borrower shall not approve the Sub-loan before the Bank has reviewed the financial, manage- ment and technical position of the Sub-borrower and has given its approval to it; (iii) with respect to other Investment Projects, the Borrower shall review each Investment Project submitted to it and shall have the right to give or withhold its approval for a Sub-loan to be made, provided that the Borrower shall, in the case of Investment Projects under Part A (a) of the Project, obtain the prior approval of the Bank before approving the Sub-loan in cases where: (1) the investment costs (including price and physical contingencies), as updated at the time of such Sub-loan final review by the Borrower, shall exceed by more than 20% the investment costs (including price and physical contingencies) estimated during appraisal of the Investment Project; or (2) a major change in the design of the Investment Project shall occur; and (iv) as part of the review of an Investment Project and prior to approving any Sub-loan, the Borrower shall ensure that: - 30 - (a) contributions to Sub-loans are available as set forth in paragraph 2 (A) hereunder as and when required to enable the Sub-borrower to carry out its Investment Project in a timely manner; (b) seasonal credits are made available to Sub- borrowers in amounts sufficient to enable them to realize the poLential of the investments included in their Investment Projects; and (c) the requirements (as and when applicable) set out in Section 3.03 (a) (i), (ii), (iv) and (vii) of the Loan Agreement are fulfilled. (D) Notification (i) With respect to any Sub-loan included in the above sub-paragraph (C) (iii), the Borrower shall promptly inform the Bank of its approval thereof and shall, only upon its request, submit to the Bank the appraisal report of the Investment Project to be prepared according to a format acceptable to the Bank. (ii) With respect to any Sub-loan, the Borrower shall, upon approval of such Sub-loan, promptly inform the Bank of the number assigned to such Sub-loan for the purpose of registration under paragraph 1 (A) above. 2. Terms of Sub-loans (A) Contribution to Cost of Investment Projects (i) Unless the Borrower shall otherwise determine on rhe basis of the financial situation of the Sub- borrowers, Sub-borrowers shall be .required to contribute not less than 20% of the cost of each Investment Project (including, in the case of Individual Sub-borrowers, their own labor or building materials). The Borrower shall be required to contribute, or shall cause to be contributed, the remainder uf such cost. - 31 - (ii) The amount of the proceeds of the Loan used for a given Investment Project shall not exceed 35% of the estimated costs thereof. (B) Rate of Interest Unless otherwise agreed by the Bank, Sub-loans shall carry interest on the principal amount outstanding from time to time: (i) on the portion of a Sub-loan financed out of the proceeds of the Loan, at an annual rate of not less than 11%; and (ii) on the portion of a Sub-loan financed out of resources other than the resources provided by the Federal Fund for Accelerating the Development of the Less Developed Republics and SAP Kosovo or the proceeds of the Loan, at an annual rate of not less than 10%. (C) Repayment For the purpose of Section 2.08 (b) of the Loan Agree- ment, the grace and amortization periods for the repay- ment of principal of the portion of Sub-loans financed out of the proceeds of the Loan shall be determined from the pro- jected cash flow of the Investment Project financed. Unless otherwise agreed with the Bank, such grace and amortization periods shall not exceed the following: Maximum Maximum Amortization Grace Period Period (including the Type of Sub-loan in Years grace period) in Years A. Sub-loans to 3 15 Social Sector Sub-borrowers B. Sub-loans to 5 15 Individual Sub-borrowers - 32 - 3. Supervision The Borrower shall supervise the application of its Sub-loans in accordance with appropriate banking, financial, technical and agricultural practices. Such supervision shall include inter alia periodic visits (at least at six-month intervals) to the Invest- ment Projects to ensure that the proceeds of the Sub-loans are properly used and that satisfactory progress is made in the carrying out of the Investment Projects. After each visit the Borrower shall prepare and make available to the Bank, if re- quested by the Bank, a supervision report in a format acceptable to the Bank for each Investment Project. 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 157tday of L, 198 1 FOR SECRETARY