OFFICIAL DOCUMENTS LOAN NUMBER 8719-BW Loan Agreement (Emergency Water Security and Efficiency Project) between REPUBLIC OF BOTSWANA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated ,2017 LOAN NUMBER 8719-BW LOAN AGREEMENT AGREEMENT dated May 17 , 2017, between REPUBLIC OF BOTSWANA ("Borrower") and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ("Bank"). The Borrower and the Bank hereby agree as follows: ARTICLE I - GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to this Agreement) constitute an integral part of this Agreement. 1.02. Unless the context requires 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 lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, the amount of one hundred forty-five million five hundred thousand United States Dollars ($145,500,000), as such amount may 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 1 to this Agreement ("Project"). 2.02. The Borrower may withdraw the proceeds of the Loan in accordance with Section IV of Schedule 2 to this Agreement. 2.03. The Front-end Fee payable by the Borrower shall be equal to one quarter of one percent (0.25%) of the Loan amount. The Borrower shall pay the Front-end Fee not later than sixty days after the Effective Date. 2.04. The Commitment Charge 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 Reference 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 interest payable by the Borrower during the Conversion Period on such amount shall be 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 Notwithstanding the foregoing, if any amount of the Withdrawn Loan Balance remains unpaid when due and such non- payment continues for a period of thirty days, then the interest payable by the -2- Borrower shall instead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 February 15 and August 15 in each year. 2.07. The principal amount of the Loan shall be repaid in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. 2.08. (a) The Borrower 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 change of the Loan Currency of all or any portion of the principal amount of the Loan, withdrawn or unwithdrawn, to an Approved Currency; and (ii) a change of the interest rate basis applicable to: (A) all or any portion of the principal amount of the Loan withdrawn and outstanding from a Variable Rate to a Fixed Rate, or vice versa; or (B) all or any portion of the principal amount of the Loan withdrawn and outstanding from a Variable Rate based on a Reference Rate and the Variable Spread to a Variable Rate based on a Fixed Reference Rate and the Variable Spread, or vice versa; or (C) all of the principal amount of the Loan withdrawn and outstanding from a Variable Rate based on a Variable Spread to a Variable Rate based on a Fixed Spread. (b) Any conversion 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 of Article IV of the General Conditions and of the Conversion Guidelines. ARTICLE III - PROJECT 3.01. The Borrower declares its commitment to the objectives of the Project. To this end, the Borrower shall carry out the Project through its MLWS in accordance with the provisions of Article V of the General Conditions, and cause Parts A, B, and C.2(b), C.3(b) and C.4(b) of the Project to be carried out by WUC in accordance with the provisions of Article V of the General Conditions. 3.02. Without limitation upon the provisions of Section 3.01 of this Agreement, and except as the Borrower and the Bank shall otherwise agree, the Borrower shall ensure that the Project is carried out in accordance with the provisions of Schedule 2 to this Agreement. -3- ARTICLE IV - REMEDIES OF THE BANK 4.01. The Additional Events of Suspension consist of the following: (a) WUC's Legislation has been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of WUC to perform any of its obligations under the Subsidiary Agreement. (b) WUC shall have failed to comply with any of its obligations under the Subsidiary Agreement. (c) As a result of events which have occurred after the date of this Agreement, an extraordinary situation shall have arisen which shall make it improbable that WUC will be able to perform any of its obligations under the Subsidiary Agreement. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of WUC or for the suspension of its operations. 4.02. The Additional Event of Acceleration consists of the following: (a) Any event specified in paragraphs (a) through (c) of Section 4.01 of this Agreement occurs and is continuing for a period of 60 days after notice of the event has been given by the Bank to the Borrower. (b) The event specified in paragraph (d) of Section 4.01 of this Agreement occurs. ARTICLE V - EFFECTIVENESS; TERMINATION 5.01. The Additional Condition of Effectiveness consists of the following, namely, that the Subsidiary Agreement has been executed on behalf of the Borrower and WUC in accordance with Section I.B of Schedule 2 to this Agreement. 5.02. The Additional Legal Matter consists of the following, namely, that the Subsidiary Agreement has been duly authorized or ratified by the Borrower and WUC and is legally binding upon the Borrower and WUC in accordance with its terms. 5.03. Without limitation upon the provisions of Section 9.01 of the General Conditions, this Agreement shall not become effective (and therefore legally binding on the Borrower) until evidence satisfactory to the Bank has been furnished to the Bank that the execution and delivery of this Agreement on behalf of the Borrower has been duly authorized or ratified by all necessary governmental action, including -4- that it has been concluded in accordance with the provisions of the Borrower's Public Finance Management Act. 5.04. The Effectiveness Deadline is the date ninety (90) days after the date of this Agreement. ARTICLE VI - REPRESENTATIVE; ADDRESSES 6.01. The Borrower's Representative is its minister at the time responsible for finance and economic development. 6.02. The Borrower's Address is: Ministry of Finance and Economic Development Private Bag 008 Gaborone Botswana Facsimile: 2673956082 6.03. The Bank's Address is: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Telex: Facsimile: 248423(MCI) or 64145(MCI) 1-202-477-6391 -5- AGREED at Gaborone Botswana , as of the day and year first above written. REPUBLIC OF BOTSWANA By Authorized Representative Name: Hon. Kenneth Matambo Title: Minister of Finance and Economic Development INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By uthorized Representative Name: Makhtar Diop Title: Regional Vice President -6- SCHEDULE 1 Project Description The objective of the Project is to improve availability of water supply in drought vulnerable areas, increase the efficiency of WUC, and strengthen wastewater management in selected systems. The Project consists of the following parts: Part A: Improve Availability of Water Supply and Efficiency of Services Support for immediate and medium term investments and measures to mitigate the impact of the drought by improving availability of water in settlements experiencing extended periods of rationing and/or been forced to rely on water bowsers, including: (i) water source management, optimization and development, including interlinking of existing surface and ground water sources, as well as of supply schemes to ensure backup supply and more sustainable production; (ii) expansion of water supply systems to reach underserved or drought affected communities; and, (iii) measures to improve operational efficiency, including reducing technical losses along transmission lines. Part B: Improve Wastewater and Sludge Management Support for: (i) strategic investments in refurbishment/rehabilitation of wastewater treatment facilities to protect surface and groundwater sources and enable scaling up of wastewater reclamation and reuse in the wastewater treatment facilities of Francistown and Lobatse, which require urgent attention to prevent environmental contamination caused by discharge of inadequately treated wastewater into nearby water courses (including those feeding the Dikgatlhong dam); and (ii) rehabilitation and expansion of sludge management facilities in Letlhakane. Part C:Sector Reform and Institutional Strengthening Support for strengthening the institutional, policy, and legal framework of the sector to improve long-term water security and increased efficiency of services by improving allocative efficiency, enhancing technological developments, strengthening service delivery, and improving water resources stewardship and water demand management, and strengthening capacity for implementation for timely and efficient response to the drought, through: 1. Sector Reform: Support to MLWS to improve long term water security, operational efficiency; and resilience to increasing scarcity and water shocks through support for the development or roll out of sector policies, legislation and institutions in support of reforms initiated in 2009, in particular, in the areas of enabling -7- regulation of water and wastewater services; monitoring and management of water resources, and improving service delivery efficiency, and further development and implementation of integrated water resources management strategies and policies. 2. Institutional Strengthening and Capacity Building: (a) support to MLWS (DWA) to strengthen the capacity to implement sector policies and strategies, improve water resource planning and monitoring, groundwater development, monitoring, and regulation; and (b) support to WUC for measures to strengthen capacity to implement sector policies and strategies, including in relation to business strategy development, efficiency improvements (e.g. through demand management, cost recovery, energy reduction, non-revenue water, and innovative ICT use); and refinement of utility water supply and waste water supply guidelines, policies, regulations and procedures, targeting underperforming MCs. 3. Forward Planning - Technical Assistance and Studies: (a) Support to MLWS for technical studies required to develop a pipeline of priority investments aimed at improving long term water security, analyses and studies for the development of options for improving water conservation and reuse; and (b) support to WUC for master plans; feasibility studies; detailed designs; environmental and social impact assessments, transaction design for PPPs, and expert panels. 4. Project Management. Support for Project implementation capacity to: (a) the MLWS PMO; and (b) the WUC PMO, for Project management and implementation, including, inter alia, for provision of Training and Operating Costs. -8- SCHEDULE 2 Project Execution Section I. Implementation Arrangements A. Institutional Arrangements 1. MLWSPMO (a) The Borrower shall maintain at all times until completion of the Project, the Programme Management Office within the MLWS with terms of reference and resources satisfactory to the Bank ("MLWS PMO") with overall responsibility for coordination of Project activities, and consolidation of monitoring, and reporting for the Project, including: (i) compiling each proposed Annual Work Plan and Budget for the Project with inputs from WUC, and consolidating all reports and plans required for the Project; (ii) carrying out Project procurement activities under Part C.1, C.2(a), C.3(a), and C.4(a) of the Project for DWA activities and maintaining a comprehensive procurement filing system for said Part of the Project; and (iii) monitoring and evaluating the Project. (b) Without limitation upon the provisions of paragraph (a) above of this Section I.A.1, the Borrower shall: (i) ensure that the MLWS PMO shall at all times be comprised of qualified and experienced personnel in adequate numbers; and (ii) to this end, except as otherwise agreed with the Bank, no later than two (2) months after the Effective Date contract additional expertise in areas such as monitoring and evaluation, financial management and procurement, all with qualifications and terms of reference acceptable to the Bank. (c) The Borrower shall take all measures necessary to ensure that, at all times until completion of the Project, the MLWS PMO will work closely with the DWA and WUC to ensure adequate capacity is in place for implementation of activities under the Project. 2. WUCPMO (a) For purposes of Parts A, B, and C.2(b), C.3(b), C.4(b) of the Project, the Borrower shall maintain at all times until completion of the Project, the Project Management Office within the WUC with terms of reference and resources satisfactory to the Bank ("WUC PMO") with overall responsibility for: (i) management of WUC implemented Project activities, including full responsibility for the implementation of all sub- -9- projects under Parts A and B of the Project largely involving rehabilitation and augmentation of existing water and wastewater systems currently managed by WUC; (ii) coordination and facilitation of implementation of sub-projects through WUC's existing structures and staff; and (iii) carrying out Project procurement activities under Parts A, B, and C.2(b), C.3(b), and C.4(b) of the Project and maintaining a comprehensive procurement filing system for said Parts of the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section I.A.2, the Borrower shall: (a) ensure that the WUC PMO shall at all times be comprised of qualified and experienced personnel in adequate numbers; and (b) to this end, except as otherwise agreed with the Bank, the Borrower shall ensure that no later than two (2) months after the Effective Date, WUC PMO shall contract additional expertise in areas such as financial management, procurement, contract management, environmental and social safeguards, monitoring and evaluation, engineering, and project coordination, all with qualifications and terms of reference acceptable to the Bank. B. Subsidiary Agreement 1 . In order to achieve the objectives of Parts A, B and C.2(b), C.3(b), C.4(b) of the Project, the Borrower shall make part of the proceeds of the Loan available to WUC under a subsidiary agreement between the Borrower and WUC, under terms and conditions acceptable to the Bank ("Subsidiary Agreement"), which shall include, without limitation, the following: (a) Part of the proceeds of the Loan shall be made available to WUC on non- reimbursable grant terms. (b) The Borrower shall require WUC to: (i) maintain within its structure the WUC PMO with composition, terms of reference and resources satisfactory to the Borrower and the Bank which shall be comprised of qualified and experienced personnel in adequate numbers, including, inter alia, in the areas of financial management, procurement, engineering, contract management, monitoring and evaluation, and environmental and social safeguards; and, (ii) except as otherwise agreed with the Borrower and the Bank, no later than two (2) months after the Effective Date, recruit the additional staff required to manage Bank financed activities with qualifications and terms of reference acceptable to the Bank; (iii) require the WUC PMO to be responsible for day-to-day coordination, implementation and supervision of Parts A, B, and C.2(b), C.3(b), C.4(b) of the Project, including, inter alia: (A) preparing proposed annual work plans of activities for Parts A, B and C.2(b), C.3(b), C.4(b) for inclusion -10- in the Project, updating the procurement plan and related budgets, consolidating Project Reports for said Parts of the Project; (B) carrying out Project financial management and procurement activities for said Parts of the Project; (C) ensuring compliance with the Safeguards Instruments; (D) monitoring and evaluating Parts A, B, and C.2(b), C.3(b), C.4(b) of the Project; and (E) submitting all plans, budgets and reports required under (A), (B), (C), and (D) above of this paragraph 1(b) to MLWS PMO for overall consolidation under the Project. (c) The Borrower shall obtain rights adequate to protect its interests and those of the Bank, including the requirement that WUC: (i) carry out its activities under the Project with due diligence and efficiency and in accordance with sound technical, economic, financial, managerial, environmental and social standards and practices satisfactory to the Bank, including, without limitation to the generality of the foregoing, in accordance with the provisions of the Anti-Corruption Guidelines applicable to recipients of Loan proceeds other than the Borrower, the Project Operations Manual, and the Safeguards Instruments; (ii) maintain policies and procedures, adequate to enable WUC to monitor and evaluate in accordance with indicators acceptable to the Bank, the progress of the activities carried out under the Project and the achievement of its objectives; (iii) (A) 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 the operations, resources and expenditures related to the activities carried out by WUC under the Project and (B) 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 furnish promptly to the Borrower and the Bank the financial statements as so audited; and (iv) enable the Borrower and the ]Bank to inspect the activities carried out by WUC under the Project, their operation and any relevant records and documents; and 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. -11- 2. The Borrower shall exercise its rights and carry out its obligations under the Subsidiary Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan. 3. Except as the Bank shall otherwise agree, the Borrower and WUC shall not assign, amend, abrogate or waive the Subsidiary Agreement or any of its provisions. 4. In the event of any conflict between the Subsidiary Agreement and the Loan Agreement, the Loan Agreement shall prevail. C. Anti-Corruption The Borrower shall ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines. D. Project Operations Manual 1. No later than two (2) months after the Effective Date, the Borrower shall, and shall cause WUC to, adopt the Project Operations Manual (POM) in form and substance satisfactory to the Bank, and thereafter, carry out the Project, and cause WUC to carry out its respective Parts of the Project, in accordance with the POM, which shall include a financial management manual, monitoring and evaluation manual, procurement manual, and shall contain detailed arrangements and procedures for: (a) institutional coordination and day-to-day execution of the Project; (b) Project budgeting, disbursement and financial management; (c) procurement; (d) monitoring, evaluation, reporting and communication; and (e) such other administrative, financial, technical and organizational arrangements and procedures as shall be required for the Project as the same may be further updated from time to time with the prior written agreement of the Bank. 2. Except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate, or waive the POM, or any provision thereof. 3. In the event of any conflict between the provisions of the POM and those of this Agreement, the provisions of this Agreement shall prevail. E. Annual Work Plans and Budgets 1. Not later than November 30 in each calendar year (or one month after the Effective Date for the first year of Project implementation), the Borrower shall prepare or cause to be prepared for the purpose of forwarding to the Bank, a draft annual work plan and budget for the Project (including Training and Operating Costs) for the subsequent calendar year of Project implementation, of such scope and detail as the Bank shall have reasonably requested. -12- 2. The Borrower shall afford the Bank a reasonable opportunity to review such draft annual work plan and budget, and thereafter shall carry out (or cause to be carried out) such annual work plan and budget during such subsequent calendar year as shall have been approved by the Bank ("Annual Work Plan and Budget"). Only those activities that are included in an Annual Work Plan and Budget shall be eligible for financing out of the proceeds of the Loan. 3. Any Training proposed to be included in an Annual Work Plan and Budget, shall include, inter alia: (a) particulars of the Training envisaged; (b) the criteria for selection of the personnel to be trained, and such personnel if known; (c) the selection method of the institution or individuals conducting such Training; (d) the institution conducting such Training if identified; (e) the purpose and justification for such Training; (f) the location and duration of the proposed training; and (g) the estimate of the cost of such Training. 4. Annual Work Plans and Budgets may be revised as needed during Project implementation subject to the Bank's prior written approval. F. Safeguards 1 . The Borrower shall implement (and cause WUC to implement) the Project in accordance with the Safeguards Action Plan (SAP) and the relevant Safeguards Instruments, and shall, to that end, if any activity under the Project would require the adoption of a Supplemental Safeguards Instrument: (a) (i) prepare (or cause WUC to prepare) such Supplemental Safeguards Instrument in accordance with the applicable Resettlement Policy Framework (RPF), Vulnerable Communities Plan (VCP), and Dam Safety Action Plan (DSAP); (ii) furnish such Supplemental Safeguards Instrument to the Bank for review and approval; and (iii) thereafter adopt such Supplemental Safeguards Instrument prior to implementation of the activity; and (b) thereafter take such measures as shall be necessary or appropriate to ensure full compliance with the requirements of such Supplemental Safeguards Instrument. 2. Without limitation upon the provisions of paragraph I above, the Borrower shall: (a) no later than two (2) months after the Effective Date: (i) prepare in accordance with terms of reference and process acceptable to the Bank, the RPF in form and substance satisfactory to the Bank; (ii) furnish said RPF to the Bank for its review and approval; and (iii) adopt and disclose the RPF in the Borrower's territory; and -13- (b) thereafter, implement (or cause WUC to implement) the Project in accordance with the RPF. 3. The Borrower, prior to initiating the carrying out of any civil works for any subproject, shall: (a) (i) prepare (or cause WUC to prepare) in accordance with terms of reference and process acceptable to the Bank, any Resettlement Action Plan (RAP) required for such subproject under the RPF and furnish said RAP to the Bank for its review and approval; and (ii) adopt and disclose such RAP in the Borrower's territory; (b) if any activity under the Project would involve Affected Persons, ensure that: (i) no displacement (including restriction of access to legally designated parks and protected areas) shall occur before resettlement measures under the applicable RAP, including, in the case of displacement, full payment to Affected Persons of compensation and of other assistance required for relocation, have been taken; and (ii) provide from its own resources, any financing required for any measures under subparagraph (i) above including any costs associated with land acquisition required for the Project; and (c) thereafter implement (or cause WUC to implement) the Project in accordance with such RAP. 4. The Borrower shall: (a) prior to commencement of bidding for civil works for any subproject: (i) prepare (or cause WUC to prepare) in accordance with terms of reference and process acceptable to the Bank, the Environmental and Social Impact Assessment (ESIA) required for the subproject under the SAP in form and substance satisfactory to the Bank; (ii) furnish said ESIA to the Bank for its review and approval; and (iii) adopt and disclose the ESIA in the Borrower's territory; and (b) thereafter, implement (or cause WJC to implement) the Project in accordance with such ESIA. 5. The Borrower shall: (a) prior to commencement of bidding for civil works for any subproject: (i) prepare (or cause WUC to prepare) in accordance with terms of reference and process acceptable to the Bank, the Environmental and Social Management Plan (ESMP) required for the subproject under an -14- ESIA, in form and substance satisfactory to the Bank; (ii) furnish said ESMP to the Bank for its review and approval; (iii) adopt and disclose said ESMP in the Borrower's territory; and (iv) incorporate said ESMP in the bidding documents; and (b) thereafter, implement (or cause WUC to implement) the Project in accordance with such ESMP. 6. The Borrower shall, if a Vulnerable Communities Plan (VCP) shall be required for any Project activity on the basis of the SAP: (i) prepare (or cause WUC to prepare) said VCP in accordance with the requirements of the SAP with terms of reference and process acceptable to the Bank and in form and substance satisfactory to the Bank; (ii) furnish said VCP to the Bank for its review and approval; (iii) adopt and disclose the VCP in the Borrower's territory; and (iv) ensure that no works under said activity shall commence until all measures required to be taken under such VCP prior to the initiation of said works shall have been taken. 7. The Borrower shall no later than two (2) months after the Effective Date: (a) (i) prepare (or cause WUC to prepare) in accordance with terms of reference and process acceptable to the Bank, a Dam Safety Action Plan (DSAP) for the Project, in form and substance satisfactory to the Bank; (ii) furnish said DSAP to the Bank for its review and approval; and (iii) adopt and disclose said DSAP in the Borrower's territory; and (b) thereafter, implement (or cause WUC to implement) the Project in accordance with the DSAP. 8. Without limitation upon its other reporting obligations under this Agreement, the Borrower shall, for each applicable Safeguards Instrument, regularly collect, compile and furnish to the Bank reports in form and substance satisfactory to the Bank, on the status of compliance with each applicable Safeguards Instrument, as part of the Project Reports, giving details of: (a) measures taken in furtherance of such Safeguards Instrument; (b) conditions, if any, which interfere or threaten to interfere with the smooth implementation of such Safeguards Instrument; and (c) remedial measures taken or required to be taken to address such conditions. 9. In the event that any provision of the Safeguards Instruments shall conflict with any provision under this Agreement, the provisions of this Agreement shall prevail. -15- 10. The Borrower shall ensure that: (a) all studies and technical assistance to be carried out under the Project are undertaken pursuant to terms of reference reviewed and found satisfactory by the Bank, and that such terms of reference shall be designed to ensure that said studies and technical assistance are consistent with the Bank's environmental and social safeguard policies; and (b) in any Project activity that may support the drafting of regulatory instruments for the purpose of the Project, due attention will be given to said policies. Section II. Project Monitoring Reporting and Evaluation A. Project Reports The Borrower shall (and shall cause WUC to) monitor and evaluate the progress of the Project and prepare 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 Project Report shall cover the period of one calendar semester, and shall be furnished to the Bank not later than forty-five (45) days after the end of the period covered by such report. B. Financial Management, Financial Reports and Audits 1 . The Borrower shall maintain or cause to be maintained a financial management system in accordance with the provisions of Section 5.09 of the General Conditions. 2. Without limitation on the provisions of Part A of this Section, the Borrower shall prepare and furnish to the Bank not later than forty-five (45) days after the end of each calendar quarter, interim unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the Bank. 3. The Borrower shall have its Financial Statements audited in accordance with the provisions of Section 5.09(b) of the General Conditions. Each audit of the Financial Statements shall cover the period of one fiscal year of the Borrower. 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. -16- Section III. Procurement All goods, works, non-consulting services and consulting services required for the Project and to be financed out of the proceeds of the Loan shall be procured in accordance with the requirements set forth or referred to in the Procurement Regulations and the provisions of the Procurement Plan. Section IV. Withdrawal 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 Disbursement 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 Loan to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category. Percentage of Amount of the Loan Expenditures to be Allocated financed Category (expressed in USD) (exclusive of Taxes) (1) Goods, works, non- 145,500,000 100% consulting services, consulting services, Training and Operating Costs under the Project TOTAL AMOUNT 145,500,000 B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made: -17- (a) from the Loan Account until the Bank has received payment in full of the Front-end Fee. (b) For payments made prior to the date of this Agreement, except that withdrawals up to an aggregate amount not to exceed two million USD ($2,000,000) may be made for payments made prior to this date but on or after July 1, 2016, for Eligible Expenditures under Category (1). 2. The Closing Date is May 31, 2021. -18- SCHEDULE 3 Amortization Schedule 1. The following table sets forth the Principal Payment Dates of the Loan and the percentage of the total principal amount of the Loan payable on each Principal Payment Date ("Installment Share"). If the proceeds of the Loan have been fully withdrawn as of the first Principal Payment Date, the principal amount of the Loan repayable by the Borrower on each Principal Payment Date shall be determined by the Bank by multiplying: (a) Withdrawn Loan Balance as of the first Principal Payment Date; by (b) the Installment Share for each Principal Payment Date, such repayable amount to be adjusted, as necessary. to deduct any amounts referred to in paragraph 4 of this Schedule, to which a Currency Conversion applies. Principal Payment Date Installment Share (Expressed as a Percentage) On each February 15 and August 15 3.23% Beginning August 15, 2021 through February 15, 2036 On August 15, 2036 3.1% 2. If the proceeds of the Loan have not been fully withdrawn as of the first Principal Payment Date, the principal amount of the Loan repayable by the Borrower on each Principal Payment Date shall be determined as follows: (a) To the extent that any proceeds of the Loan have been withdrawn as of the first Principal Payment Date, the Borrower shall repay the Withdrawn Loan Balance as of such date in accordance with paragraph I of this Schedule. (b) Any amount withdrawn after the first Principal Payment Date shall be repaid on each Principal Payment Date falling after the date of such withdrawal in amounts determined by the Bank by multiplying the amount of each such withdrawal by a fraction, the numerator of which is the original Installment Share specified in the table in paragraph I of this Schedule for said Principal Payment Date ("Original Installment Share") and the denominator of which is the sum of all remaining Original Installment Shares for Principal Payment Dates falling on or after such date, such amounts repayable to be adjusted, as necessary, to deduct any amounts referred to in paragraph 4 of this Schedule, to which a Currency Conversion applies. -19- 3. (a) Amounts of the Loan withdrawn within two calendar months prior to any Principal Payment Date shall, for the purposes solely of calculating the principal amounts payable on any Principal Payment Date, be treated as withdrawn and outstanding on the second Principal Payment Date following the date of withdrawal and shall be repayable on each Principal Payment Date commencing with the second Principal Payment Date following the date of withdrawal. (b) Notwithstanding the provisions of sub-paragraph (a) of this paragraph, if at any time the Bank adopts a due date billing system under which invoices are issued on or after the respective Principal Payment Date, the provisions of such sub-paragraph shall no longer apply to any withdrawals made after the adoption of such billing system. 4. Notwithstanding the provisions of paragraphs 1 and 2 of this Schedule, upon a Currency Conversion of all or any portion of the Withdrawn Loan Balance to an Approved Currency, the amount so converted in the Approved Currency that is repayable on any Principal Payment Date occurring during the Conversion Period, shall be determined by the Bank by multiplying such amount in its currency of denomination immediately prior to the Conversion by either: (i) the exchange rate that reflects the amounts of principal in the Approved Currency payable by the Bank under the Currency Hedge Transaction relating to the Conversion; or (ii) if the Bank so determines in accordance with the Conversion Guidelines, the exchange rate component of the Screen Rate. -20- APPENDIX Section I. Definitions 1. "Affected Person" means a person who as a result of: (i) the involuntary taking of land under the Project is affected in any of the following ways: (A) relocation or loss of shelter; (B) loss of assets or access to assets; or (C) loss of income sources or means of livelihood, whether or not the affected person must move to another location; or (ii) the involuntary restriction of access to legally designated parks and protected areas suffers adverse impacts on his or her livelihood; and "Affected Person" means any of the Affected Persons. 2. "Annual Work Plan and Budget" means the annual work plan and budget as prepared by the MLWS PMO and WUC PMO approved by the Bank in accordance with the provisions of Section I.A.1 of Schedule 2 to this Agreement. 3. "Anti-Corruption Guidelines" means the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011 and as of July 1, 2016. 4. "Category" means a category set forth in the table in Section IV of Schedule 2 to this Agreement. 5. "Dam Safety Action Plan" or "DSAP" means the plan to be prepared by the Borrower in accordance with the SAP and Section I.F.7 of Schedule 2 to this Agreement, setting forth remedial or safety-related measures to upgrade the Ntimbale dam and/or the Letsibogo dam to an acceptable standard of safety, as the same may be amended from time to time with the agreement of the Bank, and such term includes any schedules or annexes to such Plan. 6. "Dikgatlhong" means the water supply dam in the Borrower's territory. 7. "DWA" means the Borrower's Department of Water Affairs or any successor thereto. 8. "Environmental and Social Impact Assessment" or "ESIA" means an assessment to be carried out by the Borrower for the Project in form and substance satisfactory to the Bank, to evaluate the Project's potential environmental and social risks and impacts in its area of influence, including impact on physical cultural resources; examine alternatives and identify ways of mitigating and managing adverse environmental and social impact throughout Project implementation, as the same may be amended from time to time with the agreement of the Bank and such term includes any schedules or annexes to the assessment. -21- 9. "Environmental and Social Management Plan" or "ESMP" means a plan to be prepared by the Borrower for an activity under the Project proposing appropriate mitigation, monitoring and institutional measures designed to mitigate potential adverse environmental and social impacts, offset them, reduce them to acceptable levels or enhance positive impacts, as the same may be amended from time to time with the agreement of the Bank, and such term includes any schedules or annexes to the plan. 10. "Francistown", "Lobatse", and "Letlhakane", each means respectively, a city, a town, and a village in the Borrower's territory. 11. "General Conditions" means the "International Bank for Reconstruction and Development General Conditions for Loans"', dated March 12, 2012, with the modifications set forth in Section II of this Appendix. 12. "ICT" means information, communications, technology. 13. "Letsibogo dam" means the water supply dam in the Borrower's territory. 14. "Management Centers" or "MCs" means WUC regional offices charged with responsibility of managing activities within their area. 15. "MLWS" means the Borrower's ministry responsible for land management, water and sanitation services or any successor thereto. 16. "MLWS PMO" means the Programme Management Office to be maintained within the MLWS in accordance with the provisions of Section I.A. 1 of Schedule 2 to this Agreement. 17. "Ntimbale dam" means the water supply dam in the Borrower's territory. 18. "Operating Costs" means incremental recurrent expenditures incurred on account of Project implementation, including: local contractual support staff salaries; travel expenditures and other travel-related allowances; equipment rental and maintenance; office rental and maintenance; materials and supplies; and utilities, media information campaigns and communications' expenses, bank charges, insurance, and vehicle operation and maintenance, and such other expenses as shall be agreed with the Bank, but excluding the salaries of officials and public servants of the Borrower's civil service and parastatals. 19. "PAD" means the Project Appraisal Document for the Project. 20. "PPP" means Public-Private Partnership. -22- 21. "Procurement Plan" means the Borrower's procurement plan for the Project, dated October 6, 2016, and provided for under Section IV of the Procurement Regulations, as the same may be updated from time to time in agreement with the Bank. 22. "Procurement Regulations" means the "World Bank Procurement Regulations for Borrowers under Investment Project Financing", dated July 1, 2016. 23. "Project Operations Manual" or "POM" means the manual for the Project, to be adopted by the Borrower and WUC in accordance with the provisions of Section I.D of Schedule 2 to this Agreement. 24. "Public Finance Management Act" means the Public Finance Management Act No. 17 of 2011 of the Borrower. 25. "Resettlement Action Plan" or "RAP" means a plan to be prepared by the Borrower pursuant to the terms of the RPF in form and substance satisfactory to the Bank outlining the mitigation measures for addressing any resettlement risks associated with an activity under the Project, as the said document may be amended and/or supplemented from time to time with the prior written concurrence of the Bank and subject to the initial consultation and disclosure requirements carried out on the RAP, and such term includes any schedules or annexes to the plan. 26. "Resettlement Policy Framework" or "RPF" means the framework to be prepared and adopted by the Borrower outlining the policies and procedures to be implemented in the event that specific activities implemented under the Project have potentially negative impacts on the livelihoods, assets and land of the affected population, as the said framework may be amended and/or supplemented from time to time with the prior written consent of the Bank, and such term includes any schedules to such framework. 27. "Safeguards Action Plan" or "SAP" means the action plan set forth in the PAD outlining environmental and social implementation procedures, mitigation measures and monitoring procedures for the Project. 28. "Safeguards Instruments" means, collectively, the VCP, the RPF, the DSAP, and any Supplemental Safeguards Instrument. 29. "Subsidiary Agreement" means the agreement referred to in Section I.B of Schedule 2 to this Agreement pursuant to which the Borrower shall make part of the proceeds of the Loan available to WUC. 30. "Supplemental Safeguards Instrument" means collectively, any ESIA, ESMP, RAP, or any other instrument required under the terms of the SAP, RPF, and -23- DSAP, to be prepared by the Borrower and approved by the Bank for the Project, proposing appropriate mitigation, monitoring and institutional measures designed to mitigate potential adverse environmental and social impacts, offset them, reduce them to acceptable levels or enhance positive impacts, as the said instrument may be amended and/or supplemented from time to time with the prior written concurrence of the Bank. 31. "Vulnerable Communities Plan" or "VCP" means a social assessment and vulnerable communities plan to be prepared in accordance with the SAP and Section I.F.6 of Schedule 2 to this Agreement for any Project activity for which vulnerable communities are present or have a collective attachment to the area of the proposed activity. 32. "Training" means the training of persons under the Project, including through seminars, workshops, knowledge sharing activities and study tours, and covers the following costs associated with such activity: travel and subsistence costs for training participants, costs associated with securing the services of trainers, rental of training facilities, preparation and reproduction of training materials, and other costs directly related to training preparation and implementation. 33. "Water Utilities Corporation" or "WUC" means the Borrower's water utilities corporation established and operating pursuant to WUC's Legislation. 34. "WUC's Legislation" means the Water Utilities Corporation Act No. 24 of the Borrower dated June 30, 1970, as amended. 35. "WUC PMO" means the Project Management Office to be maintained within the WUC in accordance with the provisions of Section I.A.2 of Schedule 2 to this Agreement. Section II. Modifications to the General Conditions The General Conditions are hereby modified as follows: 1. In the Table of Contents, the references to Sections, Section names and Section numbers are modified to reflect the modifications set forth in the paragraphs below. 2. Section 3.01. (Front-end Fee) is modified to read as follows: "Section 3.01. Front-end Fee; Commitment Charge (a) The Borrower shall pay the Bank a front-end fee on the Loan amount at the rate specified in the Loan Agreement (the "Front-end Fee"). -24- (b) The Borrower shall pay the Bank a commitment charge on the Unwithdrawn Loan Balance at the rate specified in the Loan Agreement (the "Commitment Charge"). The Commitment Charge shall accrue from a date sixty days after the date of the Loan Agreement to the respective dates on which amounts are withdrawn by the Borrower from the Loan Account or cancelled. The Commitment Charge shall be payable semi- annually in arrears on each Payment Date." 3. In the Appendix, Definitions, all relevant references to Section numbers and paragraphs are modified, as necessary, to reflect the modification set forth in paragraph 2 above. 4. The Appendix is modified by inserting a new paragraph 19 with the following definition of "Commitment Charge", and renumbering the subsequent paragraphs accordingly: "19. "Commitment Charge" means the commitment charge specified in the Loan Agreement for the purpose of Section 3.01(b)."