Loan Agreement Public Disclosure Authorized (Eleventh Highway Project)

Public Disclosure Authorized

LOAN NUMBER 1819 YU

between

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

and

REPUBLISKA SKUPNOST ZA CESTE S.R. SLOVENIJE (Republic Community for Roads of the Socialist Republic of Slovenia)

Public Disclosure Authorized SAMOUPRAVNA INTERESNA ZAJEDNICA ZA CESTE S.R. HRVATSKE (Self-Managing Community of Interest for Roads of the Socialist Republic of Croatia)

REPUBLICKA SAMOUPRAVNA INTERESNA ZAJEDNICA ZA PUTEVE BEOGRAD (Republican Self-Managing Community of Interest for Roads Belgrade)

POKRAJINSKA ZAJEDNICA ZA PUTEVE, SAP VOJVODINA, NOVISAD (Provincial Community for Roads, SAP Vojvodina, Novi Sad)

Dated ,1980 Public Disclosure Authorized LOAN NUMBER 1819 YU

LOAN AGREEMENT

AGREEMENT, dated f1V0I2> , 1980, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, party of the first part (such party of the first part hereinafter called the Bank) and REPUBLISKA SKUPNOST ZA CESTE S.R. SLOVENIJE (Republic Community for Roads of the Socialist Republic of Slovenia) (hereinafter sometimes called the Slovenian Borrower), SAMOUPRAVNA INTERESNA ZAJEDNICA ZA CESTE S.R. HRVATSKE (Self- Managing Community of Interest for Roads of the Socialist Republic of Croatia) (hereinafter sometimes called the Croatian Borrower), REPUBLICKA SAMOUPRAVNA INTERESNA ZAJEDNICA ZA PUTEVE BEOGRAD (Republican Self-Managing Community of Interest for Roads Bel- grade) (hereinafter sometimes called the Serbian Borrower), POKRAJINSKA ZAJEDNICA ZA PUTEVE, SAP VOJVODINA, NOVISAD (Provin- cial Community for Roads, SAP Vojvodina, Novi Sad) (hereinafter sometimes called the Vojvodninan Borrower), parties of the second part (any such parties of the second part hereinafter sometimes individually called a Borrower and all such parties of the second part hereinafter sometimes collectively called the Borrowers).

WHEREAS (A) the Borrowers have agreed to carry out Part I of the Project described in Schedule 2 to this Agreement, and have agreed or will take all such actions as are necessary to designate the CRO (as this term is defined hereinafter) as the representative of each of the Borrowers to carry out Parts II and III of the Project;

(B) The Socialist Republic of Slovenia (hereinafter called Slovenia), the Socialist Republic of Croatia (hereinafter called Croatia), the Socialist Republic of Serbia (hereinafter called Serbia) and the Socialist Autonomous Province of Vojvodina (hereinafter called Vojvodina) have each adopted or will each adopt or cause to be adopted all regulations necessary to autho- rize the construction of the respective road sections included under Part I of the Project, which regulations provide or will provide inter alia financial resources required for the complete execution of Parts I, II and III of the Project to be made available respectively by: (i) Slovenia to the Slovenian Borrower, for the purposes of Part I (A) of the Project; (ii) Croatia to the Croatian Borrower, for the purposes of Part I (B) of the Project; (iii) Serbia to the Serbian Borrower, for the purposes of Part I (C) of the Project; and (iv) Vojvodina to the Vojvodinan Borrower, for the purposes of Part I (D) of the Project; -2-

(C) Slovenia, Croatia, Serbia and Vojvodina have each agreed to make available or cause to be made available, on appropriate terms, any additional funds required for the carrying out of the Project over and above the funds to be made available in accordance with the: regulations referred to in Recital (B) and the Loan provided hereunder;

(D) The Borrowers have requested the Bank to assist each of them in the financing of its Individual Part of the Project (as this term is defined hereinafter), by making the Loan as provided hereinafter;

(E) The Borrowers have represented to the Bank that they intend to request through a consortium of Yugoslav banks additional loans from other lenders outside Yugoslavia in such an aggregate amount as they shall require for the financing of Part I of the Project, on terms and conditions that will enable the Borrowers to carry out the Project and their operations in accordance with sound financial practices, and Slovenia, Croatia Serbia and Vojvodina will assist the Borrowers to obtain such loans (hereinafter called the Foreign Lenders' Loans);

(F) The Borrowers have agreed to designate the CRO (as this term is defined hereinafter) as the representative of each of the Borrowers for certain other purposes under this Agreement, as is hereinafter set forth;

(G) The Guarantor, in consideration of the Bank's entering into this Agreement with the Borrowers, has agreed to guarantee the obligations of the Borrowers in respect of such Loan;

WHEREAS the Bank, on the basis inter alia of the foregoing, has agreed to make a loan to the Borrowers for such purposes in the amount and on the terms and conditions in this Agreement set forth or referred to;

NOW THEREFORE, the parties hereto hereby agree as follows:

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 -3-

Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein, subject, however, to the modifications thereof set forth in Schedule 5 to this Agreement (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, being hereinafter called the General Conditions).

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) "Individual Part of the Project", used with respect to any of the Borrowers, means that portion of Part I of the Project which is identified with the Republic or Province in which such Borrower is established;

(b) "Individual Portion of the Loan", used with respect to any of the Borrowers, means such portion of the Loan as shall have been allocated to such Borrower for the purpose of assisting in the financing of such Borrower's Individual Part of the Proj- ect, all in accordance with the provisions of this Agreement;

(c) the term "Republic" means any of the Socialist Republics of (i) Bosnia and Herzegovina, (ii) Croatia, (iii) Macedonia, (iv) Montenegro, (v) Serbia and (vi) Slovenia;

(d) the term "Province" means either of the Socialist Autonomous Provinces of (i) Kosovo and (ii) Vojvodina;

(e) the term "CRO" means the Savjet Republi6kih i Pokrajinskih Organizacija za Puteve (Council of Republic and Provincial Road Organizations), a voluntary association established by agreement of the Road Funds and Road Councils of the respective Republics and Provinces, dated June 17, 1971, including any successor thereto and chaired by one of the member organizations appointed for one or more years pursuant to Article 4 of said agreement;

(f) "Special Account" means the account referred to in paragraph 2 (a) of Schedule 7 to this Agreement; and -4-

(g) "Borrowers' Statutes" means: (i) the Temporary Statute of the Slovenian Borrower, dated November 6, 1972, as amended to the date of this Agreement; (ii) the Statutes of the Croatian Borrower, dated January 9, 1976, as amended to the date of this Agreement; (iii) the Statutes of the Serbian Borrower, dated July 20, 1978, and (iv) the Statutes of the Vojvodinan Borrower, dated May 7, 1975.

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrowers, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to one hundred twenty-five million dollars ($125,000,000).

Section 2.02. The amount of the Loan may be withdrawn from 1 the Loan Account in accordance with the provisions of Schedule to this Agreement, as such Schedule may be amended from time to time by agreement between the Bank and the Borrowers, 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 in whole or Loan; provided, however, that the Bank may suspend in part the right of the Borrowers to make further withdrawals from the Loan Account in respect of sub-Categories 1 (a), 1 (b), 1 of 1 (c), 1 (d) and 1 (e) of the table set forth in paragraph Schedule 1 to this Agreement, if the Borrowers shall not have in due course secured sufficient additional funds through Foreign Lenders' Loans, on terms and conditions satisfactory to the Bank the for the carrying out of their respective Individual Parts of Project.

Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and works required for the Project be and to be financed out of the proceeds of the Loan, shall governed by the provisions of Schedule 4 to this Agreement.

Section 2.04. The Closing Date shall be June 30, 1983 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrowers and the Guarantor of such later date. -5-

Section 2.05. The Borrowers 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 Borrowers shall pay interest at the rate of eight and twenty-five hundredths per cent (8.25%) 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 1 and October 1 in each year.

Section 2.08. The Borrowers shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement.

Section 2.09. (a) Of the amounts .n the currencies specified in Article IV of the General Conditions to be paid to the Bank by the Borrowers on each payment date pursuant to the foregoing Sections 2.05 through 2.08 of this Agreement, each of the Bor- rowers shall only be liable for, and shall pay a share equivalent to:

(i) the commitment charge accrued on the principal amount of its Individual Portion of the Loan not withdrawn or cancelled and the additional commitment charge accrued on special commitments entered into by the Bank at the request of such Borrower;

(ii) the interest accrued on the principal amount of its Individual Portion of the Loan withdrawn and outstanding; and

(iii) a portion of the amount of each maturity of the Loan proportionate to the principal amount of its Individual Portion of the Loan, provided that such portion shall not have been repaid by such Borrower in advance of maturity as provided in paragraph (b) below.

(b) Each of the Borrowers shall have the right, upon payment of all accrued interest and payment of the premium specified in Schedule 3 to this Agreement, and upon not less than 45 days' notice to the Bank, to repay in advance of maturity: -6-

(i) all of the principal amount of its Individual Portion of the Loan at the time withdrawn and outstanding; or

(ii) all of the principal amount of the Loan to be repaid by such Borrower on one or more maturity dates in accordance with paragraph (a) above, provided that on the date of such prepayment there shall not be outstanding any portion of the Loan to be repaid by such Borrower and maturing after such maturity dates.

(c) It is the policy of the Bank to encourage the repayment prior to maturity of portions of its loans retained by the Bank in its own account. Accordingly the Bank will sympathetically consider, in the light of all circumstances then existing, any request by a Borrower that the Bank waive the payment of any premium payable under paragraph (b) of this Section on prepayment of any portion of the Loan which the Bank has not sold or agreed to sell.

(d) Each of the Borrowers may by notice to the Bank cancel any amount of its Individual Portion of the Loan which such Borrower shall not have withdrawn prior to the giving of such notice, except that none of the Borrowers may so cancel any amount of its Individual Portion of the Loan in respect of which the Bank shall have entered into a special commitment pursuant to Section 5.02 of the General Conditions.

Section 2.10. Each of the Borrowers shall designate or cause the CRO to be designated as its representative for the purposes of taking any action required or permitted to be taken under the provisions set forth or referred to in Sections 2.02, 2.05, 2.06, 2.07, 2.08 and 2.09 of this Agreement, and Articles III, IV and V and Section 6.05 of the General Conditions, and for such purpose, the CRO and the Borrowers shall take such actions as are set forth in Schedule 7 to this Agreement.

Section 2.11. All obligations of the Borrowers under the Loan Agreement, unless such obligations shall have been expressly undertaken by each of the Borrowers separately, shall be joint and several and the obligation of any of them to comply with any provision of the Loan Agreement is not subject to any prior notice to, demand upon or action against any other of them. No extension of time or forbearance given to any of the Borrowers in respect of -7- the performance of any of its obligations under the Loan Agreement and no failure of the Bank to give any notice or to make any demand or protest whatsoever to any of the Borrowers, or strictly to assert any right or pursue any remedy against any of them in respect of the Loan Agreement, and no failure by any of the Borrowers to comply with any requirement of any law, regulation or order shall in any way affect or impair any obligation of any other Borrower under the Loan Agreement.

ARTICLE III

Execution of the Project

Section 3.01. Each of the Borrowers shall carry out its Individual Part of the Project (a) with due diligence and effi- ciency and in conformity with appropriate engineering, administrative, financial and highway transport practices, and (b) in cooperation with the other Borrowers and the CRO in such practical manner as shall ensure the most efficient execution of the Project as a whole, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose.

Section 3.02. In the event that the CRO shall employ consultants in order to assist in the carrying out of Parts II and III of the Project on behalf of the Borrowers, such consultants shall have qualifications, experience and terms and conditions of employ- ment satisfactory to the Bank and the CRO.

Section 3.03. Each of the Borrowers shall:

(a) construct the roads included in its Individual Part of the Project in accordance with such design standards as are set forth in Schedule 6 to this Agreement or as shall be agreed upon from time to time between the Bank and such Borrower;

(b) furnish to the Bank (through the CRO), for its approval, promptly upon their preparation, the plans, specifications, contract documents and construction schedules for its Individual Part of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall from time to time reasonably request; and

(c) acquire, promptly as needed, all such land and rights in respect of land required for the carrying out of its Individual -8-

Part of the Project and furnish to the Bank (through the CRO), promptly after such acquisition, evidence satisfactory to the Bank that such land and rights in respect of land are available for the purpose of carrying out its Individual Part of the Project.

Section 3.04. Except as the Bank shall otherwise agree, each of the Borrowers shall cause all goods and services financed out of the proceeds of its Individual Portion of the Loan to be used exclusively for its Individual Part of the Project and (to the extent of the allocation therefor) for Parts II and III of the Project.

Section 3.05. (a) Each of the Borrowers shall in respect of its Individual Part of the Project: (i) maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) enable the Bank's accredited representatives to examine the Project, the operation thereof, the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) (acting through the CRO) furnish to the Bank at regular intervals all such information as the Bank shall reasor bly request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds.

(b) The Borrowers shall cause the CRO to maintain records adequate for the purposes of Sections 2.10 and 3.05 (a) of this Agreement.

(c) 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 each of the Borrowers and the Bank, each of the Borrowers shall 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 its Individual Part of the Project, its cost and the benefits derived and to be derived from it, the performance by each such Borrower and the Bank of their respective obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. -9-

Section 3.06. Each of the Borrowers shall take or cause to be taken all such actions as are necessary in order to ensure that, if any tolls are imposed on the use of any highway included under its Individual Part of the Project: (a) such tolls shall be set at such rates as shall ensure an economic use of such highway and alternative routes or means of transportation and after taking into account as appropriate the results of the road-user charges study carried out ur4er the Eighth Highway Project (Loan No. 1377 YU); and (b) toll-booth facilities shall be established on inter- changes only if they are justified with the support of studies showing that ramp traffic will be sufficient to make the construction and operation thereof financially viable.

ARTICLE IV

Management and Operations of the Borrowers

Section 4.01. Each of the Borrowers shall exercise its powers and functions with respect to all public roads in its respective Republic (except roads falling within the jurisdiction of munici- palities), so as to ensure: (a) that such roads will be adequately maintained and repaired in accordance with sound engineering and financial practices, and that the funds, facilities, services and other resources required therefor will be provided, promptly as needed; (b) that the systematic collection and recording of such technical, economic and financial data will be continued as shall be reasonable for the proper planning or maintenance, improvements and extensions of such roads; and (c) that the dimensions and axle-loads of vehicles using such roads shall not exceed such limits as-are appropriate to the design standards for such roads.

Section 4.02. Each of the Borrowers shall at all times carry out its operations and manage its affairs in accordance with sound engineering, business, financial and administrative principles and practices, and under the supervision of experienced and competent management.

Section 4.03. Each of the Borrowers shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with sound practices.

Section 4.04. Each of the Borrowers shall operate and maintain its plants, equipment and properties, and from time to time make all necessary renewals and repairs thereof, in accordance with sound engineering and administrative practices. - 10 -

Section 4.05. Each of the Borrowers shall at all times maintain the right to carry on its operations, and take all steps necessary to acquire, maintain and renew all rights and franchises which are necessary or useful in the conduct of its business.

Section 4.06. Except as the Bank may otherwise agree, none of the Borrowers shall sell, lease, transfer, assign or otherwise the dispose of any of its rights, property or assets except in ordinary course of business.

ARTICLE V

Financial Covenants

Section 5.01. Each of the Borrowers shall maintain records adequate to reflect in accordance with consistently maintained and its appropriate accounting practices its highway pperations financial resources and expenditures related to such operations.

Section 5.02. (a) Each of the Borrowers represents that at the date of this Agreement no lien exists on any of its assets as security for any debt except as otherwise currently reported to the Bank or stated in writing.

(b) Each of the Borrowers undertakes that, except as the Bank shall otherwise agree: (i) if such Borrower shall create any lien on any of its assets as security for any debt, such lien will equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan, and in the creation of at no any such lien express provision will be made to that effect, cost to the Bank; and (ii) if any statutory lien shall be created on any assets of the Borrower as security for any debt, such Borrower shall grant, at no cost to the Bank, an equivalent lien satisfactory to the Bank to secure the payment of the principal of, and interest and other charges on, the Loan; provided, how- not ever, that the foregoing provisions of this paragraph shall 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. - 11 -

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) Slovenia, Croatia, Serbia or Vojvodina shall have failed to make available, as and when needed, the financial resources provided under the respective regulations referred to in Recital (B) of this Agreement;

(b) Slovenia, Croatia, Serbia or Vojvodina shall have failed to carry out any of its undertakings or agreements referred to in Recital (C) of this Agreement;

(c) any provision (i) of any of the regulations referred to in Recital (B) of this Agreement, or (ii) of any of the agreements referred to in Recital (C) of this Agreement, or (iii) of such Articles of the Statutes of any of the Borrowers as affect in any way whatever such Borrower's ability to carry out its Individual Part of the Project or such Borrower's existence as an independent enterprise, or (iv) of such Articles of the CRO's Statutes as affect in any way whatever the CROWs ability to carry out any of its obligations in the Loan Agreement contained, shall have been amended, suspended, abrogated or terminated without the prior approval of the Bank; and

(d) any part of the principal amount of any loan to any of the Borrowers 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.

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, namely, that any of the events specified in paragraphs (a), (b), (c) or (d) of Section 6.01 of this Agree- ment shall occur. ARTICLE VII Effective Date; Termination Section 7.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: - 12 -

(a) Slovenia, Croatia, Serbia and Vojvodina have each adopted regulations in form and substance satisfactory to the Bank, as referred to in Recital (B) of this Agreement, and such regulations are in full force and effect;

(b) Slovenia, Croatia, Serbia and Vojvodina have each given guarantees, in form and substance satisfactory to the Bank, in respect of the provision of all necessary funds required for the carrying out of the relevant Individual Part of the Project, including cost-overruns, as referred to in Recital (C) of this Agreement, and such guarantees are in full force and effect;

(c) all necessary consents and approvals have been given for the CRO to undertake the obligations referred to herein; and

(d) the Borrowers have entered into an agreement with the members of the CRO other than the Borrowers, and the CRO has taken a decision, providing for the execution by the CRO in accordance with the provisions of this Agreement of Parts II and III of the Project, and for the financing of the cost thereof.

Section 7.02. 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 regulations referred to in paragraph (a) of Section 7.01 of this Agreement have been duly adopted and are in full force and effect;

(b) that the guarantees referred to in paragraph (b) of Section 7.01 of this Agreement have been duly and validly given and are in full force and effect;

(c) that the consents and approvals referred to in paragraph (c) of Section 7.01 of this Agreement have been duly and validly given and are in full force and effect; and

(d) that the execution and delivery of the agreement referred to in paragraph (d) of Section 7.01 of this Agreement hereof have been duly authorized or ratified by all necessary governmental action.

Section 7.03. The date - TQ, is hereby specified for the purpose of Section 12.04 of the General Conditions. - 13 -

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)

For the Borrowers:

Savjet Republifkih i Pokrajinskih Organizacija za Puteve Administracija Titova 64 61000 Ljubljana Yugoslavia

IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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 - 14 -

REPUBLISKA SKUPNOST ZA CESTE S.R. SLOVENIJE (Republic Community for Roads of the Socialist Republic of Slovenia)

SAMOUPRAVNA INTERESNA ZAJEDNICA ZA CESTE S.R. HRVATSKE (Self-Managing Community of Interest for Roads of the Socialist Republic of Croatia)

REPUBLICKA SAMOUPRAVNA INTERESNA ZAJEDNICA ZA PUTEVE BEOGRAD (Republican Self-Managing Community of Interest for Roads Belgrade)

POKRAJINSKA ZAJEDNICA ZA PUTEVE, SAP VOJVODINA, NOVISAD (Provincial Community for Roads, SAP Vojvodina, Novi Sad) /I XM{ik" By Authorized Representative - 15 -

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

(a) for Part I (A) 30,900,000 16% of the Project

(b) for Part I (B) 32,500,000 16% of the Project

(d) for Part I (C) 20,000,000 14% (iii) of the Project

(e) for Part I (D) 11,600,000 16% of the Project

(2) Equipment and tech- 1,100,000 100% of foreign nical assistance expenditures under Part II of the Project

(3) Equipment, techni- 900,000 100% of foreign cal assistance and expenditures training under Part III of the Project

TOTAL 125,000,000 - 16 -

2. For the purposes of this Schedule, 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.

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 payments made for expenditures prior to the date of this Agreement.

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 or sub-Category will be insufficient to finance the agreed percentage of all expenditures in that Category or sub-Category, the Bank may, by notice to the Borrower concerned, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category or sub-Category may continue until all expenditures thereunder shall have been made.

6. If the estimate of disbursements under Category (2) or (3) shall change, the amount of the Loan then allocated to, and no longer required for, such Category (2) or (3) may be reallocated, at the request of the Borrowers, to such Category (3) or (2) or to any sub-Category under Category (1), subject to the approval of the Bank.

7. 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 restricting or limiting any other right, power or remedy of the - 17 -

Bank under the Loan Agreement, by notice to the Borrower concerned, 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 consists of the following Parts:

Part I: Highway Construction or Reconstruction

The construction or reconstruction in the Republics of Slovenia, Croatia and Serbia and in the Province of Vojvodina of the following highway sections of the Trans-Yugoslav Highway, each portion to be carried out by the respective Borrower:

(A) Slovenia Portion:

A four-lane limited access highway between Naklo and Ljubljana (about 28.8 km).

(B) Croatia Portion:

Two additional traffic lanes to, and the reconstruction of, the existing two-lane limited access highway between Lipovljani and Okucani (about 35.9 km).

(i) Two additional traffic lanes to, and the reconstruction of, the existing two-lane limited access highway between the Vojvodina border and Surcin (about 9.6 km);

(ii) Two additional traffic lanes to, and the reconstruction of, the existing two-lane limited access highway between Deligrad and Nis (about 37.1 km); and

(iii) Two additional traffic lanes to, and the reconstruction of, the existing two-lane limited access highway between Batocina and Cuprija (about 35.1 km).

(D) Vojvodina Portion:

Two additional traffic lanes to, and the reconstruction of, the existing two-lane limited access highway between Ruma and Popinci (about 17.3 km). - 19 -

Part II:

The procurement of equipment for the maintenance of the Trans-Yugoslav Highway and, in particular, the procurement of equipment for, and installation of, weigh scales to monitor the loadings of vehicles using said Highway and the arterial network serving said Highway, and the provision of technical assistance, to the extent required for the use of said equipment and for studies regarding tolls and toll-booth facilities.

Part III:

A highway safety program concerning the Trans-Yugoslav Highway, the details of which to be determined in agreement between the Bank, the Borrowers and the CRO.

The Project is expected to be completed by June 30, 1982 except for Part I (C) of the Project which is expected to be completed by December 31, 1981. - 20 -

SCHEDULE 3

Amortization Schedule

Payment of Principal Date Payment Due (expressed in dollars)*

On each April 1 and October 1

beginning October 1, 1983 through October 1, 1994 5,210,000

On April 1, 1995 5,170,000

* To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents 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 2.09 (b) of the Loan Agreement:

Time of Prepayment Premium

Not more than three years before maturity 1.65%

More than three years but not more than six years before maturity 3.30%

More than six years but not more than eleven years before maturity 6.00%

More than eleven years but not more than thirteen years before maturity 7.15%

More than thirteen years before maturity 8.25% - 22 -

SCHEDULE 4

Procurement

A. International Competitive Bidding

1. Except as provided in Part C hereof, contracts for the purchase of goods or for civil works sh all be procured 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 civil works to be procured on the basis of international competitive bidding under the Project, in addition to the requirements of paragraph 1.2 of the Guidelines, the Bor- rower concerned shall prepare and forward to the Bank (through the CRO) 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-%anity to bid for the goods in question. The Borrower concerned shall provide the necessary information to update such notice annually so long as any goods remain to be procured on the basis of international competitive bidding.

3. Conditions of bid invitation shall not require that foreign firms enter into compulsory joint ventures with Yugoslav firms.

4. (a) All bidders for civil works included under the Project shall be prequalified as described in paragraph 1.3 of Part A of the Guidelines.

(b) Bid invitations for all contracts shall be advertised also in well-known technical journals or trade publications outside Yugoslavia.

(c) Foreign contractors and suppliers shall not be required to register in Yugoslavia as a prerequisite for submitting bids. In the event that registration shall be necessary after a foreign contractor or supplier has been notified that he will be awarded a contract, the Borrowers shall facilitate the registration. - 23 -

(d) A time period of at least 60 days shall be allowed for submission of bids. (e) Bid bonds or guarantees in the amount of at least 1.5% of the bid value shall be required with the submission of bids. (f) Each civil works contract shall be on a unit-price basis and shall include: (i) a price adjustment clause as described in paragraph 2.12 of Part A of the Guidelines; (ii) a provision for retention money in the amount of at least 5% of the contractor's monthly state- ments; (iii) an obligation to provide a performance bond in the amount of 100% of the contract value or alter- natively, at the contractor's option, a bank guarantee in the amount of at least 10% of the contract value; and (iv) 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 (free of duties provided that such equipment is repatriated not later than the date of completion of the Project) and specialized manpower as required to carry out their services. 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, 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: - 24 -

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:

(a) Group A: bids offering goods manufactured in YugosIVia if the bidder shall have established to the satisfaction of the concerned 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.

(b) Grou-p B: all other domestic bids.

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.

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 prica 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. - 25 -

C. Other Procurement Procedures

Items of equipment for Part II of the Project consisting of traffic counters, traffic classification counters and weigh scales, due to compatibility with existing equipment, may be purchased from the original suppliers, provided, however, that items so purchased shall not exceed an aggregate amount of $700,000 equivalent.

D. Review of Procurement Decisions by the Bank

1. Review of prequalification. Each concerned Borrower, through the CRO, shall, before qualification is invited, inform the Bank in detail of the procedure to be followed, and shall introduce such modifications in said procedure as the Bank shall reasonably request. The list of prequalified bidders, together with a state- ment of their qualifications and of the reasons for the exclusion of any applicant for prequalification shall be furnished by said Borrower through the CRO to the Bank for its comments before the applicants are notified of the decision of said Borrower, and said Borrower shall 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 civil works and for equipment:

(a) Before bids are invited, each concerned Borrower, through the CRO, shall furnish to the Bank, for its comments, 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 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, each concerned Borrower, through the CRO, 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 - 26 - on the evaluation and comparison of the bids received 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 said Borrower through the CRO 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 or prequalification invited.

(d) Two conformed copies of the contract shall be furnished through the CRO 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.

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 contracts (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, each concerned Borrower, through the CRO, 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 said Borrower through the CRO and state the reasons for its dc armina- tion.

E. Cooperation between the Borrowers and the CRO

In taking any action required or permitted to be taken under the provisions set forth or referred to in the Guidelines or in this Schedule, the Borrowers shall proceed in cooperation with each other and with the CRO as set forth in Schedule 8 to the Loan Agreement No. 1535 for the Ninth Highway Project. - 27 -

SCHEDULE 5

Modifications of General Conditions

For the purpose of this Agreement, the provisions of the General Conditions are modified as follows:

1. Paragraph 4 of Section 2.01 is amended to read as follows:

"4. The term 'Loan' means the loan provided for in the Loan Agreement and the term 'Individual Portion of the Loan' means the portion of the Loan allocated a particular Borrower in accordance with the Loan Agree- ment."

2. Paragraph 6 of Section 2.01 is amended to read as follows:

"6. The term 'Borrower' means all the parties to the Loan Agreement to which the Loan is made, except that in Section 4.05, Section 5.02, Section 5.03, Section 5.07, paragraphs (a), (c), (d), (e), (h) and (i) of Section 6.02, paragraphs (c), (e), (f) and (g) of Section 7.01 and Section 10.02, such term means one or more such parties."

3. Section 3.05 is deleted.

4. Paragraph (b) of Section 4.02 is amended by deleting the words "Section 3.05" and by substituting the words "paragraph (b) of Section 2.09 of the Loan Agreement".

5. Section 6.01 is deleted. - 28 -

SCHEDULE 6 Highway Design Standards The Borrowers concerned shall construct the highway sections included in Part I of the Project in accordance with the design standards set out below: Deli- grad- Nis Vojvo- Bato- Naklo- Lipovl- dina cina- Ljubl- jani- Border- Cup- Ruma- Unit jana Okucani Surcin rija Popinci

Type of Ter- - Flat Flat Flat Flat Flat rain Design Speed km/h 120 120 120 120 120 Maximum Gradient % 2.5 2 2 2 2 Carriageway Width m 2x7.50 2x7.50 2x7.50 2x7.50 2x7.50 Emergency Lane Width m 2x2.50 2x2.50 2x2.50 2x2.50 2x2.50 Shoulder Width m 2x1.30 2xl.50 2x1.00 2x1.00 2x1.00 Minimum Radius Horizontal Curves m 1,000 2,000 2,000 2,000 2,000 Minimum Radius Vertical Curves Summits m 20,000 20,000 20,000 20,000 20,000 Sags m 12,000 12,000 12,000 12,000 12,000 Legal Maximum Single Axle Load ton 10 10 10 10 10

Type of Wearing - Asphal- Asphal- Asphal- Asphal- Asphal- Surface tic Con- tic Con- tic Con- tic Con- tic Con- crete crete crete crete crete

Structures designed in compliance with Yugoslav (DIN 1072) Standards. - 29 -

SCHEDULE 7

Actions to be taken by each of the Borrowers and by the CRO in accordance with the provisions set forth or referred to in Section 2.10 of the Loan Agreement:

1. (a) Upon any such Borrower's respective written request, the CRO shall promptly take the following action with respect to the Borrower's Individual Portion of the Loan:

(i) make applications for withdrawal from the Loan Account and pay to the Borrower, or on its order the amounts so withdrawn;

(ii) request the Bank to enter into any special commitments in accordance with the provisions of Section 5.02 of the General Conditions;

(iii) give the Bank notice of any repayment in advance of maturity in accordance with the provisions of paragraph (b) of Section 2.09 of the Loan Agree- ment;

(iv) request the Bank to purchase any currency needed by the Borrower for payment of principal, interest and other charges, as provided by Section 4.05 of the General Conditions;

(v) give the Bank any notice of cancellation 'in accordance with the provisions of paragraph (d) of Section 2.09 of the Loan Agreement; and

(vi) in general, take any action required or permitted to be taken by the Borrower in accordance with the provisions of the General Conditions and the Loan Agreement referred to in Section 2.10 of the Loan Agreement.

(b) Any request submitted to the CRO in accordance with the provisions of paragraph (a) above shall be in such form, and include such supporting documentation as the CRO shall determine in accordance with the provisions of the Loan Agreement.

2. All payments to be made to the Bank by any of the Borrowers shall be made through the CRO, provided that for such purpose: - 30 -

(a) the CRO shall open an account with Udrulena Beogradska Banka, Beograd to be used exclusively for making such payments (hereinafter called the Special Account), the necessary details about such Special Account to be communicated to all Borrowers;

(b) each of the Borrowers shall make any such payment into the Special Account in such currency or currencies, and not later than five working days before such date, as such payments have to be made to the Bank in accordance with the provisions of the Loan Agreement;

(c) not later than 15 working days before any payment is to be made into the Special Account in accordance with the provisions of paragraph (b) above, the CRO shall advise the respective Borrowers of the currency or currencies of payment and of the payment due date; and

(d) using the funds paid by the Borrower into the Special Account, the CRO shall promptly make to the Bank the payments to be made by such Borrower.

3. The CRO shall: (i) assign qualified and experienced staff in sufficient numbers for the carrying out of the actions to be carried out by it on behalf of the Borrowers in accordance with this Schedule 7; (ii) periodically determine its costs and expenditures incurred in carrying out such actions; and (iii) charge each of the Borrowers with such costs and expenditures in the same approximate proportion as its Individual Portion of the Loan bears to the total amount of the Loan. Each of the Borrowers shall promptly reimburse the CRO for its share of such costs and expenditures as so determined by the CRO. AND DEVELOPMENT INTERNATIONAL BANK FOR RECONSTRUCTION

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 A 4 dayof421 uL ,1980

FOR SECRETARY