CONFORMED COPY

LOAN NUMBER 1505 TUN

Loan Agreement(Industrial Finance Project - Pilot SSE Scheme)

between

REPUBLIC OF TUNISIA

and

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

Dated January 25, 1978

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LOAN NUMBER 1505 TUN

LOAN AGREEMENT

AGREEMENT, dated January 25, 1978, between REPUBLIC OFTUNISIA (hereinafter called the Borrower) and INTERNATIONALBANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called theBank).

WHEREAS (A) the Borrower has requested the Bank to assist inthe financing of the Project described in Section 3.01 (a) of thisAgreement under the FOPRODI Scheme, as set forth in Schedule 2 tothis Agreement; and

(B) by a loan agreement of even date herewith (hereinaftercalled the BDET Loan Agreement) between the Bank and Banque deDeveloppement Economique de Tunisie (BDET), the Bank has grantedto BDET a loan, a portion of which (hereinafter called Portion Bof BDET Loan) is to assist in the financing of the expansion ofestablished small-scale industrial enterprises in Tunisia (inorder to complement the activities of the FOPRODI Scheme); and

WHEREAS the Bank has agreed, on the basis, inter alia, of theforegoing, to make the Loan to the Borrower upon the terms andconditions hereinafter set forth;

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept allthe provisions of the General Conditions Applicable to Loanand Guarantee Agreements of the Bank dated March 15, 1974, withthe same force and effect as if they were fully set forth herein,subject, however, to the modifications thereof set forth inSchedule 3 to this Agreement (said General Conditions Applicableto 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 thecontext otherwise requires, the several terms defined in theGeneral Conditions and in the Preamble to this Agreement have therespective meanings therein set forth, and the following addi-tional terms have the following meanings:

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(a) "SSE" means a small-scale industrial enterprise estab-

lished after the date of this Agreement to which 4ny of the

Participating Banks on behalf of the Borrower proposes to make aSSE sub-loan.

(b) "SSE sub-loan" means a loan made or proposed to be madeby any of the Participating Banks on behalf of the Borrower

through the FOPRODI Scheme out of the proceeds of the Loan to aSSE for a SSE Investment Project.

(c) "SSE Project" means a specific development project in

the small-scale industry sector to be carried out by a SSE util-izing the proceeds of a SSE sub-loan.

(d) "Dinars" and "D" mean the currency of Tunisia.

(e) "Foreign currency" means any currency other than the

currency of Tunisia.

(f) "FOPRODI" means the Fonds e Promotion et de D6centrali-

sation Industrielle, a fund financed out of the Borrower's budget

established and operated under the Borrower's Law No. 73-82 datedDecember 31, 1973 and Decree No. 74-793 dated August 16, 1974, asamended by Decree No. 77-855 dated October 20, 1977.

(g) "FOPRODI Agreement" means the agreement respectivelyentered or to be entered into between the Borrower's Ministre desFinances and the Participating Banks, for the management of

FOPRODI, and to be amended pursuant to Section 3.01 (b) (ii) of

this Agreement.

(h) "Participating Banks" mean th4 following banking insti-

tutions established and operating under the laws of the Republic

of Tunisia: Soci6tf Tunisienne de Banque (STB), Union Interna-

tionale de Banque (UIB), Banque Nationale de Tunisie (BNT), Banque

du Sud (BS) and BDET, and any other financial institution whichwould accede to the FOPRODI Agreement.

(i) "FOPRODI Scheme" means the on-lending and administrative

rrangements for the Project, set forth in Schedule 2 to this

Agreement.

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(j) "API" means Agence de Promotion des Investissements,a Borrower's agency within the Ministry of National Economy of theBorrower.

(k) "Project Account" means the account to be opened by theBorrower with the Central Bank of Tunisia as provided in Section3.01 (b) (iii) of this Agreement for purpose of making availablethe proceeds of the Loan to the Participating Banks for SSEsub-loans.

ARTICLE II

The Loar

Section 2.01. The Bank agrees to lend to the Borrower,on the terms and conditions in the Loan Agreement set forthor referred to, an amount in various currencies equivalent tofive million dollars ($5,000,000).

Section 2.02. (a) The amount of the Loan may be withdrawnfrom the Loan Account in accordance with the provisions of Sched-ule 2 to this Agreement (and, if applicable, with the provisionsof Section 3.06 of this Agreement), as such Schedule (and saidSection) may be amended from time to time, for amounts disbursedunder a sub-loan or investment for the reasonable cost of goodsand services for a SSE Project for which the Bank shall haveauthorized withdrawals from the Loan Account; provided, however,that for each SSE Project, withdrawals from the Loan Account shallnot exceed fifty per cent (50%) of the estimated total cost of theSSE Project.

(b) Except as the Borrower and the Bank shall otherwiseagree, no withdrawals shall be made on account of (i) expendituresbefore the date of this Agreement or (ii) expenditures by anSSE in respect of a sub-loan if such expenditures shall have beenmade more than ninety days prior to the date on which the Bankshall have received in respect of such sub-loan the request andinformation required by Section 2.03 (a) of this Agreement.

Section 2.03. (a) Each request by BDET on behalf of theBorrower for authorization to make withdrawals from the LoanAccount in respect of a SSE sub-loan shall contain the informationdescribed in paragraph 4 of Schedule 2 to this Agreement and suchother information as the Bank shall reasonably request.

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(b) Except as the Borrower and the Bank shall otherwiseagree, requests made pursuant to the provisions of paragraph (a)of this Section shall be presented to the Bank on or beforeDecember 31, 1979.

Section 2.04. The Closing Date shall be December 31, 1981or such later date as the Bank shall establish. The Bank shallpromptly notify the Borrower of such later date.

Section 2.05. The Borrower shall pay to the Bank a commitmentcharge 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 fromtime to time.

Section 2.06. The Borrower shall pay interest at the rateof seven and nine-tenths per cent (7.90%) per annum on the prin-cipal amount of the Loan withdrawn and outstanding from time totime.

Section 2.07. Interest and other charges shall be payablesemi-annually on March 15 and September 15 in each year.

Section 2.08. The Borrower shall repay the principal amountof the Loan in accordance with the amortization schedule set forth

in Schedule 1 to this Agreement.

ARTICLE III

The Project

Section 3.01. (a) The purpose of the Project is to assistthe Borrower in the financing of a prograra designed to promote and

expand such productive facilities and resources in Tunisia, aswill contribute to the development of small-scale enterprisesin the country. The Project consists of the financing of specificdevelopment projects through loans to private enterprises inTunisia under the FOPRODI Scheme.

(b) The Borrower shall undertake and cause the ParticipatingBanks to carry out the Project with due diligence and effi-ciency, in conformity with appropriate banking, administrative and

financial policies and in accordance with the provisions ofSchedule 2 to this Agreement, .d to that end, the Borrowershall:

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(i) enter into a FOPRODI Agreement with BDET to includeit as a Participating Bank;

(ii) amend the FOPRODI Agreements with each of theParticipating Banks, respectively, in order thatthese agreements conform with the provisions ofSchedule 2 to this Agreement; and

(iii) open an account with Banque Centrale de Tunisiefor the purpose of making available the proceeds ofthe Loan to the Participating Banks for SSE sub-loans.

Section 3.02. (a) The Borrower undertakes that, unlessthe Bank shall otherwise agree, any SSE sub-loan by any of theParticipating Banks will be made on financial terms and conditionsconsistent with the provisions of Schedule 2 to this Agreement andon additional terms whereby the Participating Bank shall obtain,by written contract with the SSE or by other appropriate legalmeans, rights adequate to protect the interests of the Bank, theBorrower and the Participating Bank, including the right of theBorrower and the Participating Bank to: (i) require the SSE tocarry out and operate the SSE Project with due diligence andefficiency and in accordance with sound technical, financial andmanagerial standards and to maintain adequate records and forthose purposes, the Borrower and the Participating Bank mayrequire the SSE to use the assistance of API; (ii) require that:(1) the goods and services to be financed out of the proceeds ofthe Loan shall be purchased at a reasonable price, account beingtaken also of other relevant factors such as time of delivery andefficiency and reliability of the goods and availability ofmaintenance facilities and spare parts therefor, and, in the caseof services, of their quality and the competence of the partiesrendering them; and (2) such goods and services shall be usedexclusively in the carrying out of the SSE Project; (iii) inspect,by itself or jointly with representatives of the Bank if the Bankshall so request, such goods and the sites, works, plants andconstruction included in the SSE Project, the operation thereof,and any relevant records and documents; (iv) require that: (1) theSSE shall take out and maintain with responsible insurers suchinsurance, against such risks and in such amounts, as shall beconsistent with sound business practice; and (2) without anylimitation upon the foregoing, such insurance shall cover hazardsincident to the acquisition, transportation and delivery of goodsfinanced out of the proceeds of the Loan to the place of use or

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installation, any indemnity thereunder to be made payable in a

currency freely usable by the SSE to replace or repair such goods;(v) obtain all such information as the Bank or the Borrower or anyof the Participating Banks shall reasonably request relating tothe foregoing and to the administration, operations and financialcondition of the SSE and to the benefits to be derived fromthe SSE Project; and (vi) suspend or terminate the right of theSSE to the use of the proceeds of the Loan upon failure by suchSSE to perform its obligations under its contract with the Parti-cipating Bank.

(b) The Borrower shall exercise its rights, directly or

through the Participating Bank, in relation to each SSE Project insuch manner as to (i) protect the interests of the Borrower, theBank and the Participating Banks, (ii) comply with its obligationsunder this Agreement, and (iii) achieve the purposes of theProject.

Section 3.03. The Borrower shall arrange for BDET: (i)to maintain separate records adequate to record the progress of

the Project and of each SSE Project (including the cost thereof,the amount of financing provided by the Borrower through FOPRODIand by any of the Participating Banks, disbursements, repayments,interest and other charges on such financing, including the

SSE sub-loan therefor); and (ii) to furnish to the Bank semi-annual reports thereon, in such detail as the Bank shall reason-ably request.

Section 3.04. (a) The Borrower shall furnish or cause to befurnished to the Bank at regular intervals all such information as

the Bank shall reasonably request concerning the expenditure ofthe proceeds of the Loan, the Project, the SSE Projects, the SSEsub-loans, technical assistance services provided to small-scale

enterprises by API and the Borrower's various agencies and, where

appropriate, the benefits to be derived from the foregoing.

(b) Within six months following the last withdrawal from the

Loan Account in respect of the SSE sub-loans or by such later date

at the Bank shall request, the Borrower shall prepare and furnish

or cause to be prepared and furnished to the Bank a report, ofsuch scope and in such detail as the Bank shall reasonably re-

quest, on the execution and initial operations of the SSE Proj-

ects, their costs and the benefits derived and to be derived fromthem, the performance by the Borrower and the Bank of their

respective obligations under the Loan Agreement and the accom-plishment of the purposes of the loan.

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Section 3.05. The Borrower shall duly perform all its obliga-tions in agreements under which funds, within the framework of aSSE Project, have been lent or put at the disposal of the Partici-

pating Banks by the Borrower for relending, investment or manage-ment. The Borrower shall promptly inform the Bank of any actionwhich would have the effect Lf assigning, or of amending, abro-gating or waiving any material provision of, any such agreement.

Section 3.06. Unless the Borrower and the Bank shall other-wise agree:

(a) The Borrower shall make necessary arrangements for thefinancing on or before July 1, 1978 of the local and foreigncurrency costs of the scheme for the provision of techricalassistance services to SSEs to be carried out by API in accordancewith the plan of action and the timetable relating therefor whichhave been presented to the Bank and are outlined in paragraph 13of Schedule 2 to this Agreement; provided, however, that, shouldthe foreign currency financing of said scheme not be obtained infull or in part by July 1, 1978, (i) an amount equivalent to threehundred thousand dollars ($300,000) from the Loan proceeds is

allocated to the foreign currency cost of said scheme; (ii)withdrawals of such amount may be made from the Loan proceeds onaccount of the foreign currency cost of technical assistanceservices rendered under said program; and (iii) in such case, theBorrower shall employ experts whose qualifications, experience andterms and conditions of employment shall be satisfactory to theBank.

(b) The Borrower shall take all necessary steps to put intoeffect the plan of action referred in above paragr.ph (a) ofthis Section and shall review its contents, as often as needed, inconsultation with the Bank.

(c) For the purposes of paragraph () (i) of this Section,"allocated", in relation to proceeds of the Loan, means that theproceeds so allocated may be withdrawn only for the purposes forwhich they are allocated unless the Borrower and the Bank shallotherwiqe agree.

ARTICLE IV

Other Covenants

Section 4.01. (a) It is the policy of the Bank, in makingloans to, or with the guarantee of, its members not to seek, in

normal circumstances, specific security from the member concernedbut to ensure that no other external debt shall have priority overits loans in the allocation, realization or distribution offoreign exchange held under the control or for the benefit of suchmember. To that end, if any lien shall be created on any publicassets (as hereinafter defined), as security for any externaldebt, which will or might result in a priority for the benefit ofthe creditor of such external debt in the allocation, realizationor distribution of foreign exchange, such lien shall, unless theBank shall otherwise agi.ee, ipso facto, and at no cost to IheBank, equally and ratably secure the principal of, and interestand other charges on, the Loan, and the Borrower, in creating orpermitting the creation of such lien, shall make express provisionto that effect; provided, however, that, if for any constitutionalor other legal reason such provision cannot be made with respectto any lien created on assets of any of its political or adminis-trative subdivisions, the Borrower shall promptly and at nocost to the Bank secure the principal of, and interest and othercharges on, the Loan by an equivalent lien on other public assetssatisfactory to the Bank.

(b) The foregoing undertaking shall not apply to: (i)any lien created on property, at the time of purchase thereof,solely as security for payment of the purchase price of suchproperty; and (ii) any lien arising in the ordinary course ofbanking transactions and securing a debt maturing not morethan one year after its date.

(c) As used in this Scction, the term "public assets"means assets of the Borrower, of any political or administrativesubdivision thereof and of any entity owned or controlled by,or operating for the account or benefit of, the Borrower or anysuch subdivision., including gold and other foreign exchangeassets held by any institution performing the functions of acentral bank or exchange stabilization fund, or similar functions,for the Borrower.

Section 4.02. The Borrower shall maintain or cause to bemaintained procedures and records adequate to monitor and recordthe progress of the Project and of each SSE Project (including itscost and the benefits to be derived from it).

Section 4.03. The Borrower and the Bank shall from timeto time, at the request of either party, exchange views andinformation through their representatives with regard to the

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administration, operations and financial condition of FOPRODI andthe Project Account.

Section 4.04. The Borrower shall, directly or indirectlyenable the Bank's representatives to iaspect the records referredto in Section 4.02 of this Agreement and any relevant documents.

ARTICLE V

Remedies of the Bank

Section 5.01. For the purposes of Section 6.02 of the GeneralConditions the following additional events are specified:

(a) a change shall have been made in the FOPRODI Agreements,as amended pursuant to Section 3.01 (b) (ii) of this Agreement,which would materially and adversely affect the carrying out ofthe Project;

(b) a resolution shall have been passed for the dissolutionor liquidation of FOPRODI;

(c) a resolution shall have been passed for the dissolutionor liquidation of any of the Participating Banks, which would as aconsequence materially and adversely affect the carrying out ofthe Project;

(d) an extraordinary situation shall have arisen whichshall make it improbable that the Participating Banks willbe able to perform their obligations under the FOPRODI Agreements;

(e) any of the Participating Banks shall have failed toperform any covenant, agreement or obligation of said Partici-pating Bank under any of the FOPRODI Agreements to which saidParticipating Bank is a party, and such failure would materiallyand adversely affect the carrying out of the Project;

(f) a default shall occur under the BDET Loan Agreement,other than in respect of the payment of principal, or interest,charges or any other charge required thereunder.

Section 5.02. For the purposes of Section 7.01 of the GeneralConditions the following additional events are specified:

(a) the event specified in paragraph (b) of Section 5.01shall occur; and

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(b) the event specified in paragraph (a) or paragraph(c) or paragraph (d) or paragraph (e) or paragraph (f) of Section5.01 shall occur and shall continue for a period of sixty daysafter notice thereof shall have been given by the Bank to theBorrower.

ARTICLE VI

Effective Date; Termination

Section 6.01. The following events are specified as addi-tional conditions to the effectiveness of the Loan Agreementwithin the meaning of Section 12.01 (c) of the General Conditions:

(a) the FOPRODI Agreement between the Borrower and BDET,respectively, has been duly authorized and ratified by all neces-sary corporate and governmental action;

(b) the FOPRODI Agreements between the Borrower and each ofthe Participating Banks, respectively, have been amended pursuantto Section 3.01 (b) (ii) of this Agreement;

(c) the account with Banque Centrale de Tunisie referred toin Section 3.01 (b) (iii) of this Agreement has been opened;and

(d) all conditions precedent to the effectiveness of theBDET Loan Agreement have been fulfilled subject only to theeffectiveness of this Agreement.

Section U.02. The following are specified as additionalmatters, within the meaning of Section 12.02 (c) of the GeneralConditions, to be included in the opinion or opinions to befurnished to the Bank:

(a) that the FOPRODI Agreements, as amended, have beenduly authorized or ratified by the Borrower and each of theParticipating Banks, respectively, and are legally binding uponthe Borrower and the Participating Banks in accordance with theirterms; and

(b) that the action described in paragraph (c) of thepreceding Section 6.01 has been taken in accordance with the lawsof the Borrower.

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Section 6.03. The date April 25, 1978, is hereby specifiedfor the purposes of Section 12.04 of the General Conditions.

ARTICLE VII

Representative of the Borrower;Addresses

Section 7.01. The Ministre Dflgguf aupras du Premier MinistreCharg6 du Plan of Tunisia, is designated as representativeof Tunisia for the purposes of Section 11.03 of the GeneralConditions.

Section 7.02. The following addresses are specified forthe purposes of Section 11.01 of the General Conditions:

For Tunisia:

MinistZre du Plan1, rue de B6jaTunis, Tunisia

Cable address: Telex:

MINISTERE DU PLAN MIPLAN 12117Tunis TN

For the Bank:

International Bank forReconstruction and Development

1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address: Telex:

INTBAFRAD 440098 (ITT)Washington, D.C. 248423 (RCA) or

64145 (WUI)

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IN WITNESS WHEREOF, the parties hereto, acting throughtheir representatives thereunto duly authorized, have caused thisAgreement to be signed in their respective names in the Districtof Columbia, United States of America, as of the day and yearfirst above written.

REPUBLIC OF TUNISIA

By Is/ Ali HeddaAuthorized Representative

INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

By /s/ Maurice P. BartActing Regional Vice President

Europe, Middle East and North Africa

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SCHEDULE 1

Amortization Schedule

Payment of PrincipalDate Payment Due (expressed in dollars)*

On each March 15 and September 15

beginning September 15, 1982through September 15, 1990 280,000

On March 15, 1991 240,000

* To the extent that any portion of the Loan is repayablein a currency other than dollars (see General Conditions,Section 4.02), the figures in this column represent dollarequivalents determined as for purposes of withdrawal.

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Premiums on Prepayment

The following percentages are specified as the premiums

payable on repayment in advance of maturity of any portion of

the principal amount of the Loan pursuant to Section 3.05 (b)

of the General Conditions:

Time of Prepayment Premium

Not more than three yearsbefore maturity 1.80%

More than three years butnot more than five yearsbefore maturity 3.05%

More than five years butnot more than nine yearsbefore maturity 5.45%

More than nine years butnot more than eleven years

before maturity 6.70%

More than eleven yearsbefore maturity 7.90%

oo

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SCHEDULE 2

FOPRODI Scheme

The main objective of the Project is to contribute to thestrengthening and coordination of activities aiming at the estab-lishment of small-scale enterprises in the industrial sector byproviding financial and technical assistance according to thefollowing statement of operations and policies.

Establishment of a new FOPRODI credit facility

1. Decree No. 74-793 of August 16, 1974, as amended by DecreeNo. 77-855 dated October 20, 1977, concerning the organization andthe functioning of FOPRODI, has established two concessionarycredit facilities to be financed out of the FOPRODI in favor ofTunisian entrepreneurs with the required qualifications but withlimited means and willing to assume personally and full-time theresponsibility of the project, as follows:

(a) a credit facility aimed at the promotion of entrepren-eurship in the form of a loan to a promoter to enable him toacquire a majority ownership in the capital of a small-scaleenterprise to be created. Said loan may be extended only in thecase of new projects costing up to D500,000, including workingcapital. Said loan is extended to a promoter pursuant to thefollowing scheme:

(i) For projects costing less than D250,000, includingworking capital, the amount of the loan cannotexceed 70% of equity, the promoter's personalcontribution being not less than 10%; and

(ii) For projects costing between D250,000 and D500,000,including working capital, the amount of the loancannot exceed 45% of equity, the promoter's per-sonal contribution being not less than 20%.

(b) a credit facility aimed at supporting small-scaleenterprise development, in the form of a medium- or long-term loanto a small-scale enterprise. This facility is only for newprojects for small-scale enterprises costing up to D75,000,including working capital, or expansion projects for small-scaleenterprises costing up to D45,000, excluding working capital, andcannot exceed 70% of total project cost.

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2. Pursuant to Article 3 of the abovementioned Decree as

amended, the administration of the above-described FOPRODI creditfacilities has been entrusted to the Participating Banks under

procedures detailed in the FOPRODI Agreements.

Eligibility criteria

3. In addition to meeting the eligibility criteria for theFOPRODI credit facility under paragraph 1 (a) above, the followingcriteria shall be used in making SSE sub-loans:

(a) the total investment cost of the new SSE Project,including working capital, shall not exceed D200,000 in 1976

prices;

(b) except as the Bank shall otherwise agree, the investment

cost per job created or maintained shall not exceed D4,600 in 1976

prices; and

(c) the promoter has agreed to make use of the available

technical assistance deemed necessary by the Participating Bank

sponsoring the SSE Project or by API.

Operational arrangements

4. Identification, initial screening and appraisal of eligibleSSE Projects shall be the responsibility of the ParticipatingBanks with the assistance of API as provided in paragraph 13 ofthis Schedule. Sub-loan applications shall be prepared in several

copies so that the Ministry of Finance (FOPRODI) and API shall be

informed at the same time. The Participating Banks shall preparean appraisal report for each SSE Project under a simplified

procedure acceptable to the Borrower and the Bank. Such appraisal

report shall specify, inter alia:

(a) the name of the SSE, the industrial sub-sector to whichthe SSE Project belongs, its location, as well as appropriate

information concerning the promoter;

(b) the number of jobs to be created;

(c) the total estimated cost of the SSE Project, includingworking capital requirements;

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(d) a summary list of goods and services to be procured forthe SSE Project including in particular expenditures proposedto be financed out of the proceeds of the Loan;

(e) the amount, terms and conditions (including the amorti-zation schedule) of the SSE sub-loan and of the other sources offinancing; and

(f) the technical assistance needs, if any, of the SSEProject and the most appropriate ways to meet them.

5. The financing plan for a SSE Project shall follow the fol-lowing proportions in percentage of estimated total invest-ment cost, including working capital:

(a) equity (part of which may be financed out of theFOPRODI credit facility under paragraph 1 (a) of this Schedule)shall not be less than 30%;

(b) the SSE sub-loan shall not exceed 50%; and

(c) the remaining balance shall be financed by a term loanextended by the Participating Bank sponsoring the SSE Project outof its own resources.

6. The appraisal report referred to in paragraph 4 of thisSchedule shall be sent by the Participating Bank sponsoring theSSE Project to API for its review. Once API has approved the SSEProject and the Participating Bank has specified its intent toparticipate in the financing of said Project, the appraisal reportshall be sent to BDET which shall perform the following functions:

(a) verify on behalf of the Bank that the SSE Projectcomplies with the eligibility criteria detLled in paragraph 3above;

(b) forward to the Bank, on behalf of the Borrower, (i)requests for authorization to make withdrawals from the LoanAccount in respect of a SSE sub-loan and (ii) disbursement appli-cations from the Loan Account accompanied by a statement certi-fying that BDET has verified, on the basis of documentation sentto it by the Participating Bank, that the expenditures againstwhich withdrawal of Bank funds is sought, have been actuallyincurred by the SSE; and

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(c) maintain the necessary documentation, particularly asregards disbursements, available for inspection by Bank super-

vision missions.

7. Disbursements in respect ef SSE sub-loans for which authori-

zation to make withdrawals has been given shall be made by theParticipating Banks from the Project Account. Such Account

shall be credited, from time to time, with proceeds from the Loan

Account, pursuant to withdrawals made by BDET.

Conditions of SSE sub-loans

8. SSE sub-loans shall carry interest on the principal outstand-

ing from time to time at an annual rate equal to the averageinterest rate charged by Tunisian commercial banks on medium-termloans to industrial enterprises at the time of sub-loan signing.

9. The amortization schedule for each SSE sub-loan shall provide

for an appropriate grace period and shall be set forth such as to

take into account the economic life of the investment as well as

the projected capacity of the SSE to reimburse the SSE sub-loan.

Repayment and risk-sharing arrangements

10. The SSE repayment obligations for the SSE sub-loans shall

be toward the Borrower but the responsibility of loan collectionshall remain with the Participating Bank sponsoring the SSEProject. Participating Banks shall ensure that SSE sub-loan

repayments are made upon maturity and shall immediately thereafter

forward such repayments to the Project Account.

11. Losses on both SSE sub-loan, and term loan made by the

Participating Bank sponsoring a SSE Project out of its own re-sources shall be shared evenly between the Borrower and the

Participating Bank.

Remuneration of the Participating Banks

12. The Borrower shall remunerate the Participating Banks for

their services in managing the new FOPRODI credit facility fi-nanced out of the Loan proceeds with a commission or commissions

providing an incentive to use the funds of the new FOPRODI creditfacility and related inter alia to the amounts of the SSE sub-

loans which have been disbursed and the amounts recovered each

year in respect of the principal and interests of said sub-loans.

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The incentive resulting from this commission or these commissionsshall not be less than the one resulting from the arrangements forthe remuneration of the Participating Banks under the existingFOPRODI credit facilities.

Technical Assistance

13. As provided in Section 3.06 of this Agreement, the Borrowershall put into effect the plan of action, in accordance withthe timetable agreed with the Bank, for the establishment of ascheme to provide technical assistance to small-scale enterprisesin general, including small-scale enterprises not receiving SSEsub-loans. To the extent possible such scheme shall be decen-tralized. In addition to a central core of experts in small-scaleenterprises at API's headquarters in Tunis, it shall make useof API's existing network of regional branches, which is expectedto be expanded according to the aforementioned timetable. Ini-tially, API's technical assistance staff shall concentrate onassisting the Participating Banks in identifying SSE projectseligible for Bank-financed sub-loans, and on assisting sponsors inpreparing their projects, obtaining the financing, and properlyimplementing the projects. Later such staff shall also providefollow-up assistance, especially in the areas of financial manage-ment, marketing and improvement of productivity.

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SCHEDULE 3

Modifications of the General Conditions

For the purposes of the Loan Agreement, the provisions

of the General Conditions are modified as follows:

(1) The following subparagraph (d) is added to Section

3.05:

"(d) The Bank and the Borrower may from time to time

agree upon arrangements for prepayment of the Loan and

the application of such prepayment in addition to, or in

substitution for, those set forth in paragraph (b) of

Section 3.05."

(2) The words "SSE Projects" are substituted for the words

"the Project" at the end of Section 5.03.

(3) Section 6.03 is deleted and replaced by the following

new Section:

"Section 6.03. Cancellation by the Bank. If (a) the

right of the Borrower to make withdrawals from the Loan

Account shall have been suspended with respect to any amount

of the Loan for a continuous period of thirty days, or (b) by

the date specified in paragraph (b) of Section 2.03 of the

Loan Agreement requests permitted under paragraph (a) of such

Section shall have been received by the Bank in respect of

any portion of the Loan, or having been so received, shall

have been denied, or (c) after the Closing Date an amount of

the Loan shall remain unwithdrawn from the Loan Account,

the Bank may by notice to the Borrower terminate the right of

the Borrower to submit such requests or to make withdrawals

from the Loan Account, as the case may be, with respect to

such amount or portion of the Loan. Upon the giving of such

notice such amount or portion of the Loan shall be can-

celled."