LOAN NUMBER 8518-HR Loan Agreement (Innovation atd Entrepreneurship Venture Capital Project) between REPUBLIC OF CROATIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dai:ed , 2015 LOAN NUMBER 8518-HR LOAN AGREEMENT Agreement dated 8 ,2015, between REPUBLIC OF CROATIA ("Borrower") and INTER NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ("Bank") The Borrower and the Bank hereby agree as follows: ARTICLE I - - GENERAL CONDITIONS; DEFINITIONS 1.01. The General Condit ons (as defined in the Appendix to this Agreement) constitute an integral part of t- is Agreement. 1.02. Unless the context r quires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the General Conditions or in the Appendix to this Agreement. ARTICLE II - LOAN 2.01. The Bank agrees to end to the Borrower, on the terms and conditions set forth or referred to in this A,reement, the amount of twenty million Euros (E20,000,000), as such amount rr ay be converted from time to time through a Currency Conversion in accordance with the provisions of Section 2.08 of this Agreement ("Loan"), to assist in financing the project described in Schedule I to this Agreement ("Projec:"). 2.02. The Borrower may withdraw the proceeds of the Loan in accordance with Section IV of Schedule 2 to :his Agreement. 2.03. The Front-end Fee payable by the Borrower shall be equal to one quarter of one percent (0.25%) of 1he Loan amount. The Borrower shall pay the Front-end Fee not later than sixty (10) days after the Effective Date. 2.04. The Commitment C iarge payable by the Borrower shall be equal to one quarter of one percent (0.25%) per annum on the Unwithdrawn Loan Balance. 2.05. The interest payable by the Borrower for each Interest Period shall be at a rate equal to the Refereice Rate for the Loan Currency plus the Variable Spread; provided, that upon a Conversion of all or any portion of the principal amount of the Loan, the intere:t payable by the Borrower during the Conversion Period on such amount shall Ie determined in accordance with the relevant provisions of Article IV of the General Conditions. Notwithstanding the foregoing, if any amount of the Withdrawn Loan Balance remains unpaid when due and such non- payment continues 'or a period of thirty days, then the interest payable by the -2- Borrower shall instead be calculated as provided in Section 3.02(e) of the General Conditions. 2.06. The Payment Dates are May 15 and November 15 in each year. 2.07. The principal amont of the Loan shall be repaid in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. 2.08. (a) The Borrow er may at any time request any of the following Conversions of the terms of the Loan in order to facilitate prudent debt management: (i) a cl ange of the Loan Currency of all or any portion of the principal am.unt of the Loan, withdrawn or unwithdrawn, to an Approved Cur -ency; (ii) a change of the interest rate basis applicable to: (A) all or any pori ion of the principal amount of the Loan withdrawn and out, tanding from a Variable Rate to a Fixed Rate, or vice versa; or (B) all or any portion of the principal amount of the Loan witldrawn and outstanding from a Variable Rate based on a Ref .rence Rate and the Variable Spread to a Variable Rate based on z Fixed Reference Rate and the Variable Spread, or vice versa; or (C) all of the principal amount of the Loan withdrawn and out,tanding from a Variable Rate based on a Variable Spread to a Var able Rate based on a Fixed Spread; and (iii) the setting of limits on the Variable Rate or the Reference Rate applicable to all or any portion of the principal amount of the Loan witi drawn and outstanding by the establishment of an Interest Rati Cap or Interest Rate Collar on the Variable Rate or the Ref.rence Rate. (b) Any conver -ion requested pursuant to paragraph (a) of this Section that is accepted by the Bank shall be considered a "Conversion", as defined in the General Conditions, and shall be effected in accordance with the provisions cf Article IV of the General Conditions and of the Conversion Guidelines. ARTICLE III - PROJECT 3.01. The Borrower declai es its commitment to the objective of the Project. To this end, the Borrower shall ause the Project to be carried out by HAMAG-BICRO in accordance with the provisions of Article V of the General Conditions and the Project Agreement. -3- 3.02. Without limitation ipon the provisions of Section 3.01 of this Agreement, and except as the Borrower and the Bank shall otherwise agree, the Borrower, through MoEC, shall ensure that the Project is carried out in accordance with the provisions of Schedule 2 to thi: Agreement. ARTICLE IV - REMEDIES OF THE BANK 4.01. The Additional Eve,it of Suspension consists of the following: (a) The Project Implementing Entity's Legislation has been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely, n the opinion of the Bank, the ability of the Pro ect Implementi ig Entity to perform any of its obligations under the Proj ect Agreement. (b) The Project Implementing Entity shall have failed to comply with any of its obligatio is under the Subsidiary Agreement. 4.02. The Additional Evei it of Acceleration consists of, namely, that any event specified in Section 4.01 of this Agreement occurs and is continuing for a period of thirty (30) days after notice of the event has been given by the Bank to the Borrower. ARTICLE V - EFFECTIVENESS; TERMINATION 5.01. The Additional Con Jition of Effectiveness consists of the following: (a) The Subsidiary Agreement has been executed on behalf of the Borrower (through MoF and MoEC) and Project Implementing Entity in a manner satisfactory to the Bank; (b) HAMAG-B[CRO has established a Project Implementation Unit ("PIU") as referred :o in Section I, Part A, paragraph 2 to the Schedule of the Project Agreement; and (c) The Project Operations Manual, satisfactory to the Borrower (through MoF and MoEC) and the Bank, has been adopted by HAMAG-BICRO. 5.02. The Additional Lega:l Matters consist of the following: namely, that the Subsidiary Agreement has been duly authorized or ratified by the Borrower and HAMAG- BICRO and is leg illy binding upon the Borrower and HAMAG-BICRO in accordance with its erms. 5.03. The Effectiveness Deadline is the date ninety (90) days after the date of this Agreement. -4- ARTICLE VI - REPRESENTATIVE; ADDRESSES 6.01. The Borrower's Rerresentative is its Minister of Finance. 6.02. The Borrower's Adress is: Ministry of -inance Katan6ideve 5 10000 Zagrcb Republic of Croatia Telex: Facsimile: 862-21215 (385-1) 4922-598 862-21833 6.03. The Bank's Address is: Internationa Bank for Reconstruction and Development 1818 H Street, N.W. Washington D.C. 20433 United States of America Cable addre s: Telex: Facsimile: INTBAFRAD 248423(MCI) or 1-202-477-6391 Washington D.C. 64145(MCI) -5- AGREED at Zagreb, Repub ic of Croatia, as of the day and year first above written. RE IUBLIC OF CROATIA By Authorized Representalive Name: 3/ 0 4/o c Title: f7,' ?c-~/ Are IN1 ERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Authorized Representative Name: Title: _ __ -6- SCHEDULE 1 Project Description The objective oft] ie Project is to strengthen risk capital financing in the territory of the Borrower for innovative SMEs and Startups. The Project consi! ts of the following parts: Part A. Pilot Venture Capital Fund Establishing a Pilot Venture Capital Fund to provide financing to innovative SMEs and Startups for equity investments (PVC Investments), including PVC Management Operating Cos :s. Part B. Seed Co-Investment Fund Providing risk car,ital financing for productive purposes, through the Seed Co- Investment Fund, alongside private co-investors to innovative SMEs and Startups, through the provision of SCI Sub-fin ancing. Part C. Technical Assistf nee 1. Global Adv sory Network: Establishing a network of experts to provide advice and ;uidance for the implementation of the Pilot Venture Capital Fund and the Seed Co-Investment Fund. 2. Capacity Bilding and Networking: Developing capacity of the main actors involved in the risk capital financing industry in the territory of the Borrower ai d strengthening social capital and networks. 3. Monitoring and Evaluation: Monitoring and evaluating the use of Project funds. 4. Proiect Mar agement and Audit: Establishing the PIU, providing support for Project management and implementation, carrying out outreach activities with respect to Project activities, conducting audits required by the Project. -7- SCHEDULE 2 Project Execution Section I. Implementation Arrangements A. Institutional Arrargements 1 The Borrower, through MoEC, shall cause the Project to be carried out by HAMAG-BICRO (the "Project Implementing Entity"). 2. The Borrower, thro,igh MoEC, shall ensure that the Project Implementing Entity carries out the Project in accordance with this Agreement and the Project Operations Manual ,md shall ensure that, except as the Bank shall otherwise agree, the Project Implementing Entity shall not amend, abrogate, waive or fail to enforce any provision of he Project Operations Manual without the prior written agreement of the Bank. 3. (a) The Borrower, through MoEC, shall establish, by no later than two months after the d,,te of this Agreement, and thereafter maintain, throughout Project imp ementation, a Project Steering Committee responsible for the coordinatioi and supervision of the Project, with membership (as described ir (b) below) and terms of reference acceptable to the Bank. (b) The Projec Steering Committee shall include representatives of the Borrower's MoF, Ministry of Economy, MoEC, Ministry of Science, Education znd Sports, and Ministry of Regional Development and EU Funds. (c) The Project Steering Committee shall be chaired by a representative of the Borrower's MoEC. B. Subsidiary Agreen ent 1 . To facilitate the can ying out of the Project, the Borrower shall make the proceeds of the Loan availa!le to the Project Implementing Entity under a subsidiary agreement between the Borrower and the Project Implementing Entity ("Subsidiary Agree nent"), under terms and conditions approved by the Bank, which shall include :he following: (a) The Project Implementing Entity will not be required to repay the proceeds of the Loan received from the Borrower. (b) The obligations of the Project Implementing Entity to: -8- (i) con ply with the pertinent provisions in this Agreement, as app icable to the Project Implementing Entity; (ii) procure a private venture capital management firm to act as the mar ager of the PVC Fund, with terms of reference, experience and qualifications acceptable to the Bank ("PVC Management Firri"), in accordance with the provisions set forth in Section III of this Schedule; (iii) esta:)lish the PVC Fund with a structure, functions and resronsibilities acceptable to the Bank and in accordance with the Alternative Investment Fund Act, the Companies Act, and the Gui lelines on State Aid to Promote Risk Finance Investments; (iv) as part of the establishment of the PVC Fund, enter into an agrc ement with the shareholders referred to in Section IV, Part B, parzgraph 1(b)(v) of Schedule 2 to this Agreement (the "PVC Fun i Agreement") on terms and conditions acceptable to the Ban, including, inter alia: (A) the obligation of the Project Imp ementing Entity to, upon approval of any given PVC Inve stment, make available to the PVC Fund a portion of the Loan proceeds on terms and conditions acceptable to the Bank, as set forth in the POM, including, inter alia, compliance with the Anti- Con uption Guidelines; and (B) the obligation of the PVC Fund to, upon approval of any given PVC Investment, provide equity finaicing (the PVC Sub-financing) to the corresponding PVC Ben .ficiary for purposes of financing the PVC Investment purs iant to the pertinent agreement (the "PVC Sub-Financing Agnement") to be entered into between the PVC Fund and said PVC Beneficiary on terms and conditions, acceptable to the Bank, inch ding, inter alia, those set forth in subparagraph (vii) below. (v) ensure that the PVC Management Firm, on behalf of the PVC Fund, approves PVC Investments and the related PVC Sub- financing in accordance with the eligibility criteria and terms set fortt in the Project Operations Manual; (vi) ensu-e that the PVC Management Firm, on behalf of the PVC Fun(, maintains, throughout Project implementation, pre- scre( ning, evaluation and supervision procedures for PVC Inve ftments, acceptable to the Bank; (vii) ensu e that each PVC Sub-Financing Agreement shall include, inter alia, the following terms and conditions: -9- (1) the PVC Fund shall obtain rights adequate to protect its interests and those of the Project Implementing Entity, the Borrower, and the Bank, including the right to: (A) terminate the right of the PVC Beneficiary to use the proceeds of the PVC Sub-financing, or ob:ain a refund of all or any part of the amount of the PVC Sub-financing received, upon the PVC Beneficiary's failure to perform any of its obligations under the PVC Sub-financing Agreement; and (B) require each PVC Beneficiary to: (1) carry out its operations with due diligence and efficiency and in accordance with sound technical, economic, financial, managerial, environmental and social standards (including any EIAs, EMPs or other documents required under the Environmental Management Framework) and practices, all satisfactory to the Bank, including in accordance with the provisions of the Anti-Corruption Guidelines applicable to recipients of loan proceeds other than the Borrower; (II) provide, promptly as needed, the resources required for the purpose; (III) maintain policies and procedures adequate to enable it to monitor and evaluate its operations, in accordance with indicators acceptable to the Bank; (IV) maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Bank, both in a manner adequate to reflect its operations, resources and expenditures; -10- (V) at the Bank's or the Borrower's request, have such financial statements audited by independent auditors acceptable to the Bank, in accordance with consistently applied auditing standards acceptable to the Bank, and promptly furnish the statements as so audited to the Borrower and the Bank; (VI) enable the Borrower, the Project Implementing Entity and the Bank to inspect the Beneficiary's operation and any relevant records and documents; and (VII) prepare and furnish to the Borrower and the Bank all such information as the Borrower or the Bank shall reasonably request relating to the foregoing. (2) the PVC Management Firm, on behalf of the PVC Fund, shall exercise the rights and carry out the obligations of the PVC Fund under each PVC Sub-financing Agreerent in such manner as to protect the interests of the Pro ect Implementing Entity, the Borrower and the Bank and to accomplish the purposes of the Loan. Except as the Bank and the Borrower shall otherwise agree, the PVC Management Firm, on behalf of the PVC Fund, shall not assign, amend, terminate, abrogate, waive or fail to enforce any PVC Sub-financing Agreement or any of its provisions. (viii) mar age the Seed Co-Investment ("SCI") Fund pursuant to criteria and limitations set forth in the Project Operations Manual; (ix) dec de which investments the SCI Fund will make consistent with the -riteria set forth in the Act on the Small Business Promotion DeN elopment and the Agreement on the Merger of the Business Innivation Agency of the Republic of Croatia with the Croatian Agc ncy for SMEs and Investments; (x) ensi ire that the SCI Fund approves SCI Subprojects and the related SCI Sub-financing in accordance with the eligibility criteria and tern is set forth in the Project Operations Manual; -11- (xi) ma ntain, throughout Project implementation, pre-screening, eva[uation and supervision procedures for SCI Subprojects, acc,-ptable to the Bank; (xii) upcn approval of any given SCI Subproject, make each SCI Sub- fin ncing pursuant to the corresponding SCI sub-financing agr ement (the "SCI Sub-financing Agreement") with the respective SCI Beneficiary on terms and conditions approved by the Bank, which shall include the following: (1) the Project Implementing Entity shall obtain rights adequate to protect its interests and those of the Borrower and the Bank, including the right to: (A) suspend or terminate the right of the SCI Beneficiary to use the proceeds of the SCI Sub- financing, or obtain a refund of all or any part of the amount of the SCI Sub-financing then withdrawn, upon the SCI Beneficiary's failure to perform any of its obligations under the SCI Sub- financing Agreement; and (B) require each SCI Beneficiary to: (1) carry out its SCI Subproject with due diligence and efficiency and in accordance with sound technical, economic, financial, managerial, environmental and social standards (including any EIAs, EMPs or other documents required under the Environmental Management Framework) and practices, all satisfactory to the Bank, including in accordance with the provisions of the Anti-Corruption Guidelines applicable to recipients of loan proceeds other than the Borrower; (II) provide, promptly as needed, the resources required for the purpose; (III) procure the goods and services under the pertinent SCI Subproject to be financed out of the SCI Sub-financing in -12- accordance with the provisions of this Agreement; (IV) maintain policies and procedures adequate to enable it to monitor and evaluate the SCI Subproject in accordance with indicators acceptable to the Bank; (V) maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Bank, both in a manner adequate to reflect its operations, resources and expenditures; (VI) at the Bank's or the Borrower's request, have such financial statements audited by independent auditors acceptable to the Bank, in accordance with consistently applied auditing standards acceptable to the Bank, and promptly furnish the statements as so audited to the Borrower and the Bank; (VII) enable the Borrower, the Project Implementing Entity and the Bank to inspect the SCI Subproject, its operation and any relevant records and documents; and (VIII) prepare and furnish to the Borrower and the Bank all such information as the Borrower or the Bank shall reasonably request relating to the foregoing. (2) the Project Implementing Entity shall exercise its rights and carry out its obligations under each SCI Sub- financing Agreement in such manner as to protect :he interests of the Borrower and the Bank and to accomplish the purposes of the Loan. Except as the Bank and the Borrower shall otherwise agree, the Project Implementing Entity shall not assign, terminate, amend, abrogate, walve -13- or fail to enforce any Sub-financing Agreement or any of its provisions. 2. The Borrower shal exercise its rights and carry out its obligations under the Subsidiary Agreem.nt in such manner as to protect the interests of the Borrower and the Bank and t)> accomplish the purposes of the Loan. Except as the Bank shall otherwise agr( e, the Borrower shall not assign, terminate, amend, abrogate, waive or fail to enfc rce the Subsidiary Agreement or any of its provisions. C. Anti-Corruption The Borrower shall, and shall cause the Project Implementing Entity to, carry out the Project in accordance with the provisions of the Anti-Corruption Guidelines. D. Safeguards 1 . The Borrower, thr)ugh MoEC, shall ensure that Project is carried out in accordance with the Environmental Management Framework, and shall ensure that no provision of the EMF is amended, suspended, abrogated, repealed or waived without prior appro''al by the Bank. 2. (a) The Borrov er, through MoEC, shall ensure that prior to any PVC Sub- financing o - SCI Sub-financing, the Project Implementing Entity or the PVC Fund, is the case may be, screens potential PVC Beneficiaries or SCI Beneficiaries for environmental and social impacts to determine eligibility of a proposed Sub-financing in accordance with the Environmental Managemer t Framework. (b) For each pr iposed Sub-financing requiring an EIA or an EMP, or both an EIA and an -MP, pursuant to the provisions set forth in the Environmental Managemer t Framework, the Borrower, through MoEC, shall ensure that the Project mplementing Entity or the PVC Fund, as the case may be, is responsible for ensuring that: (i) an I IA or an EMP, or both an EIA and an EMP, is/are carried out and prepared, respectively; (ii) such EIA or EMP, or both the EIA and the EMP, comply with the pro isions of the Environmental Management Framework; (iii) mezningful consultations are conducted, and the EIA or EMP, or botlh EIA and EMP, are adequately disclosed; and -14- (iv) tha each PVC Beneficiary or SCI Beneficiary, as the case may be, car ies out its activities in compliance with such EIA or EMP or bota EIA and EMP, and in a manner acceptable to the Bank. 3. No PVC Investmert or SCI Subproject shall be eligible for Sub-financing if it involves: (a) any activit es involving the involuntary taking of land resulting in relocation or loss of shelter, loss of assets or access to assets, loss of income soUrces or means of livelihood, or involving the involuntary restriction c f access to legally designated parks and protected areas; or (b) any activitic s likely to have significant adverse environmental impacts that are sensiti- e, diverse, or unprecedented, that would be classified as 'Category A' in accordance with the Bank's applicable policies and procedures. 4. The Borrower, throt gh MoEC, shall ensure that: (a) the terms of reference for any consultancies relate I to the technical assistance under Part C of the Project shall be satisfactory to th- Bank and, to that end, such terms of reference shall require that the advice corveyed and documentation prepared through such technical assistance be consis-ent with the requirements of the EMF; (b) technical assistance activities are screet ed for environmental and social impacts and to determine eligibility in accor lance with the EMF; and (c) if applicable, the required environmental docu nentation, such as an EMP, is prepared as part of the technical assistance. Section II. Project Monitorin2 Reporting and Evaluation A. Project Reports The Borrower shall cause HAMAG-BICRO to monitor and evaluate the progress of the Project and rprepare Project Reports in accordance with the provisions of Section 5.08 of the General Conditions and on the basis of indicators acceptable to the Bank. Each Pr ject Report shall cover the period of one calendar semester, and shall be furnished to the Bank not later than one month after the end of the period covered by sich report. B. Financial Management, Financial Reports and Audits 1. The Borrower shall ,ause HAMAG-BICRO to maintain or cause to be maintained a financial managen ent system in accordance with the provisions of Section 5.09 of the General Conditions. -15- 2. Without limitation Dn the provisions of Part A of this Section, the Borrower, through MoEC, sha I cause HAMAG-BICRO to prepare and furnish to the Bank, not later than forty- ive (45) days after the end of each calendar semester, interim unaudited financial reports for the Project covering the semester, in form and substance satisfacto *y to the Bank. 3. The Borrower shal cause HAMAG-BICRO to have the Financial Statements audited in accordance with the provisions of Section 5.09(b) of the General Conditions. Each a idit of the Financial Statements shall cover the period of one fiscal year of the Bo rower. The audited Financial Statements for each such period shall be furnished to the Bank not later than six months after the end of such period. 4. The Borrower shall ensure that HAMAG-BICRO and the PVC Fund maintain financial manageme it systems and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Bank, both in a manner adequate to reflect tl e operations and financial condition of HAMAG-BICRO, and the PVC Fund sepa ately, including their operations, resources and expenditures related to the Projec;. 5. The Borrower shall have the financial statements of HAMAG-BICRO, the PVC Management Firm end the PVC Fund audited by independent auditors acceptable to the Bank, in accoi dance with consistently applied auditing standards acceptable to the Bank. Each audit of these financial statements shall cover the period of one fiscal year of HAM 4G-BICRO, the PVC Management Firm and the PVC Fund respectively, comm mcing with the fiscal year in which the first withdrawal is made for the Project. 6. The Borrower, throiugh MoEC, shall ensure that the audited financial statements of HAMAG-BICRO, the PVC Management Firm and the PVC Fund for each period are: (a) furni! hed to the Bank not later than six (6) months after the end of the period; and (b) nade publicly available in a timely fashion and in a manner acceptable to the Ba ik. Section III. Procuremeit A. General 1. Goods and Non-consulting Services. All goods and non-consulting services required for the Proj -ct and to be financed out of the proceeds of the Loan shall be procured in accordace with the requirements set forth or referred to in Section I of the Procurement Guidelines, and with the provisions of this Section. 2. Consultants' Servi ,es. All consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be procured in accordance with -16- the requirements sel forth or referred to in Sections I and IV of the Consultant Guidelines and with the provisions of this Section. 3. Definitions. The cal italized terms used below in this Section to describe particular procurement methoc s or methods of review by the Bank of particular contracts refer to the corres onding method described in Sections II and III of the Procurement Guidelines, or Sections II, Ill, IV and V of the Consultant Guidelines, as the case may be. B. Particular Method, of Procurement of Goods and Non-consulting Services 1. International Competitive Bidding. Except as otherwise provided in paragraph 2 below, goods anc non-consulting services shall be procured under contracts awarded on the basi. of International Competitive Bidding. 2. Other Methods of Procurement of Goods and Non-consulting Services. The following methods, other than International Competitive Bidding, may be used for procurement of gocds and non-consulting services for those contracts specified in the Procurement :lan: (a) National Competitive Bidding, subject to the additional procedures stipulated in the Annex to this Schedule; (b) Shopping; (c) Direct Conti acting; and (d) Well-establi ;hed Private Sector Procurement Methods or Commercial Practices wf ich have been found acceptable to the Bank. C. Particular Metho]s of Procurement of Consultants' Services 1. Quality- and Cost-')ased Selection. Except as otherwise provided in paragraph 2 below, consultant,' services shall be procured under contracts awarded on the basis of Quality and Cost-based Selection. 2. Other Methods of Procurement of Consultants' Services. The following methods, other thE n Quality and Cost-based Selection, may be used for procurement of consultants' services for those contracts which are specified in the Procurement Plan: (a) Quality-bascd Selection; (b) Selection urder a Fixed Budget; (c) Least Cost . election; (d) Selection besed on Consultants' Qualifications; (e) Single-sour< e Selection of consulting firms; -17- (f) Procedures s et forth in paragraphs 5.2 and 5.3 of the Consultant Guidelines for the Selection of Individual Consultants; and (g) Single-sourc e procedures for the Selection of Individual Consultants. D. Review by the Bank of Procurement Decisions The Procurement Plan shall set forth those contracts which shall be subject to :he Bank's Prior Review. All other contracts shall be subject to Post Review by the Bank. Section IV. Withdrawa. of Loan Proceeds A. General 1. The Borrower may withdraw the proceeds of the Loan in accordance with the provisions of Article II of the General Conditions, this Section, and such additional instructions as the Bank shall specify by notice to the Borrower (including the "World Bank Disbu 'sement Guidelines for Projects" dated May 2006, as revised from time to time by the Bank and as made applicable to this Agreement pursuant to such instructions), to finance Eligible Expenditures as set forth in the table in paragraph 2 below. 2. The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Loan ("Category"), the allocation of the amounts of the Loat to each Category, and the percentage of expenditures to be financed for Eligiblc Expenditures in each Category. Percentage of Amount of the Loan Expenditures to be Allocated financed Category (expressed in Euro) (inclusive of Taxes) (1) PVC Investments 12,000,000 100% (2) PVC Management 3,600,000 100% Operating Costs (3) SCI Subprojects 2,500,000 100% (4) Consultants' Services, 1,500,000 100% Training and Operating Costs (5) Unallocated 400,000 TOTAL AMOUNT 20,000.000 -18- B. Withdrawal Condi ions; Withdrawal Period 1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made: (a) from the Lo in Account until the Bank has received payment in full of Lhe Front-end Fie; or (b) for Contributions to the PVC Fund under Category (1) unless: (i) the PVC Management Firm has been selected and hired as pro ided in Section I, Part B, paragraphl(b)(ii) of this Schedule; (ii) the :VC Management Firm has been authorized by HANFA or has notified HANFA of its authorization by another European Union regulator; (iii) the 'VC Fund has been established as provided in Section I, Part B, p iragraph I (b)(iii) of this Schedule, with by-laws acceptable to the 3ank; (iv) the PVC Fund has been authorized by HANFA in a manner accc ptable to the Bank; (v) priv ite shareholders in the PVC Fund have committed an aggiegate of at least four million Euros (E4,000,000); (vi) the nanagement agreement between the PVC Fund and the PVC Mar agement Firm acceptable to the Bank, has been signed, and complies with the Borrower's Alternative Investment Fund Act; and (vii) a Pr vate Placement Memorandum is in place for the PVC Fund. 2. The Closing Date is September 30, 2021. Section V. Other Und rtakings 1 . If the conditions set forth in Section IV, Part B, paragraph 1(b) have not been met within two (2) year:; after the "Effective Date", the Borrower may, pursuant to Section 2.08 of the General Conditions, and provided the Bank determines that there is an estimate( shortfall to finance Eligible Expenditures under Categories (3) and/or (4), requ st the Bank to reallocate the Loan proceeds allocated under Category (1) to any )f said Categories to address the estimated shortfall. -19- 2. In the event that the ieallocation mentioned in paragraph I (above) is not requested immediately after tl e two (2) year deadline referred to in said paragraph, or if requested, the criter a mentioned therein is not met as determined by the Bank, pursuant to Section ".01 of the General Conditions, the Borrower hereby requests the Bank to immediE tely cancel the amount of the Loan allocated to Category (1). -20- ANNEX to SCHEDULE 2 Additional Provisions for National Competitive Bidding For the purposes of following National Competitive Bidding procedures in :he procurement of goods, work; and non-consulting services to be financed under the Loan, and to ensure broader consistency with the provisions of Section I of the Procurement Guidelines, the following m difications and additions shall apply: (i) Procedures The open competiti, e bidding method shall apply to all contracts. Invitations to bid shall be advertised in the Borrower's Official Gazette (Narodne Novine), in at least one widely circulated national d,.ily newspaper, or on a widely used website with free access (including the Borrower's vebsite), allowing a minimum of thirty (30) days for the preparation and submission of bids. (ii) Pre-qualification When pre-qualificat on shall be required for large or complex works, invitations to pre-qualify for bidding sh il be advertised in the Borrower's Official Gazette (Narodne Novine), in at least one wid,.ly circulated national daily newspaper, or on a widely used website with free access (inc uding the Borrower's website), allowing a minimum of thirty (30) days for the preparatior and submission of pre-qualification applications. Minimum experience and technical an I financial requirements shall be explicitly stated in the pre- qualification documents, which shall be determined by a "pass/fail" method, not through the use of a merit point syst-m. Where pre-qualification is not used, the qualifications of the bidder who is recomn ended for award of contract shall be assessed by post- qualification, applying minimum experience, technical and financial requirements which shall be explicitly stated in the bidding documents. (iii) Participation of Gov rmment-owned Enterprises Government-owned enterprises located and operating on the Borrower's territory shall be eligible to participate in bidding only if they can establish, to the Bank's satisfaction, that they are le. rally and financially autonomous, operate under commercial laws and are not a dependent agency of the Borrower. Said enterprises shall be subject to the same bid and performan e security requirements as other bidders. -21- (iv) Bidding Documents The Borrower shall use appropriate bidding documents that are acceptable to the Bank. (v) Bid Submission, Op.ning and Evaluation (1) Bids shall he submitted in a single envelope containing the bidder's qualificatior information, technical and price bids, which shall be opened simultaneou,,ly at the public bid opening. (2) Bids shall )e opened in public, immediately after the deadline for submission of bids. The name of the bidder, the total amount of each bid and any discounts offered shall be read aloud and recorded in the minutes of the public bid opening. (3) The evaluation of bids shall be done in strict adherence to the monetarily quantifiable criteria specified in the bidding documents and a merit point system shall not be used. (4) Extension o- bid validity shall be allowed once only for not more than thirty (30) d tys. No further extensions should be granted without the prior approval of he Bank. (5) Contracts shall be awarded to qualified bidders having submitted the lowest evalLated substantially responsive bid. (6) No preferen:e shall apply under National Competitive Bidding. (vi) Reiection of All Bid; All bids shall not te rejected and new bids solicited without the Bank's prior written concurrence. (vii) Price Adjustment Civil works contract3 of long duration (e.g., more than eighteen (18) months) shall contain an appropriate price adjustment clause. (viii) Securities Bid securities shall not exceed two percent (2%) of the estimated cost of the contract and performance 3ecurities not more than ten percent (10%). No advance payments shall be made to