Performance standards that are applicable for this investment include: - PS1: Social and Environmental Assessment and Management System - PS2: Labor and Working Conditions - PS3: Pollution Prevention and Abatement

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because it may create a limited number of specific environmental and social impacts that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria. Operation of Arabesque’s warehousing and distribution centers generate small quantities of solid waste in the form of packaging materials, wooden pallets, etc. and sanitary effluents, all of which are adequately managed in compliance with Romanian regulatory requirements. Operation of these warehousing and distribution centers creates jobs and other opportunities for local communities, and has no adverse environmental or social impacts.

Arabesque has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - host country laws and regulations and IFC Performance Standards. The information about how these potential impacts will be addressed by Arabesque is summarized in the paragraphs that follow. - Social and Environmental Assessment and Management Systems: Arabesque has a management system with elements to manage Environmental, Health and Safety (EH&S) performance of the company. For quality assurance of its services, Arabesque is ISO 9001 certified which ensures a management structure. EH&S issues are managed at the warehouse level and coordinated with the central office in compliance with local laws and regulations. Arabesque is working toward bringing its policies and procedures to be consistent with requirements of the EU for employment, social and environmental issues. Arabesque also plans on achieving ISO 14001 and OHAS certification in the near term. Consistent with its operations in Romania, Arabesque intends to expand its management system to provide oversight of EH&S issues for existing and future operations in other countries where Arabesque is planning to expand its business. Arabesque’s management program includes operational policies and procedures that are implemented at the facilities level by the warehouse / distribution center manager. Policies and procedures are consistent with applicable Romanian regulations for operation of these facilities. Environmental and social assessment is managed at the facilities level and coordinated with the office of the Director for Labor Safety, Environmental Protection, Emergency Situations and Mechanical Maintenance in compliance with host country laws and regulations. Arabesque’s operation of warehousing and distribution facilities have minimal or no adverse impacts and do not typically require further assessment beyond their identification as such for purposes of regulatory compliance. Environmental health and safety issues are managed at the corporate level by a director who has oversight of Labor Safety, Environmental Protection, Emergency Situations and Mechanical Maintenance for Arabesque’s operations in Romania. The director’s oversight of Arabesque’s operations will be expanded to include existing and future operations in other countries. Every warehouse has a dedicated person that has similar responsibilities and reports to the central office. The central office monitors and implements regulatory compliance with Romanian regulations. Various staff within the organization has oversight of elements associated with EH&S and report to the manager of each facility who in turn is accountable to the Director at the corporate level. Human resources are managed effectively at the corporate level and has oversight of all Arabesque facilities. Training of staff is done on a routine basis in compliance with Romanian workplace regulations and is summarized in training manuals available to the staff. Facilities managers are responsible to ensure that employees are adequately trained to perform their work safely. Contract workers are contractually obliged to have adequately trained workers. Arabesque has a monitoring program for EH&S issues that are managed at the facilities level in compliance with Romanian laws and regulations. Facility managers monitor that EH&S standards are met in every warehouse and any reportable incident is reported and investigated by the central office. Reporting requirements are consistent with national laws and regulations, and are used for continual improvement of training programs especially in health and safety. Internal audits are conducted periodically with oversight of senior management. As required by Romanian regulations, Arabesque provides external status reports such as those for environmental and health and safety performance to the relevant government authorities, who, in turn, disseminate information to the public, as necessary. - Labor and Working Conditions: Labor practices and working conditions, including occupational health and safety, at Arabesque’s operations comply with Romanian regulatory requirements. Arabesque has a Human Resources policy that is consistent with Romanian laws. The Company’s human resource policy is included in employment contracts, and addresses working conditions, terms of employment, and wages and benefits. This information is also provided in the form of an employee handbook at the time of induction into the company. Employment relationships recognize the principals of non-discrimination and equal opportunity. All employees have individual labor contracts and a collective labor contract is signed between the company and the employees’ representatives. The Romanian workforce is unionized and subject to a collective labor agreement (#7616/20 July 2006) which is registered with DNSS Galati. Labor contracts cover issues related to the laying off of workers consistent with Romanian regulatory requirements. Arabesque does not expect to have any retrenchments in their expanding business. The minimum employment age at Arabesque is 18 years. Subcontractors are expected to comply with all Arabesque labor requirements specified in contractual arrangements. There is a plan for prevention and worker safety consistent with Romanian regulatory requirements. All employees in the company have to undergo a full training program at induction and subsequently on worker health and safety relevant to their job activity. Health and safety performance of the company is consistent with good international industry practice for the sector. - Pollution Prevention and Abatement: Every warehouse has a contract with a licensed sewage disposal company for the collection and disposal of effluents (domestic sewage and some storm water). Wastewater is either discharged directly to sewer or transported to treatment facilities by authorized operators. Disposal of effluents complies with Romanian regulatory requirements. Solid waste from Arabesque facilities primarily comprise of discarded packaging materials including cardboard, pallets, out of spec construction material, etc. Waste management is coordinated with the central office and reports are sent to the Environment Protection Agency (EPA) periodically. Air emissions from fuel consumption is also monitored and reported to the EPA periodically. While major maintenance of Arabesque’s fleet vehicles is performed at dealer locations, minor maintenance and associated activity produces limited quantities of hazardous waste which include used batteries, motor oils etc. These wastes are disposed by licensed waste disposal companies in a manner consistent with Romanian regulatory requirements. Electricity is bought from the local electricity distribution grid or natural gas (when available) from local distribution companies. Resource utilization for the largest format warehouse is about 30,000 kWH per month of electricity, 21,000 cubic meters per month for natural gas in winter time, and 95 cubic meters of water per month. Water is either purchased from the local water & sewage company or extracted from groundwater wells. Other facilities use lesser energy and water for their operations. Plans for emergency preparedness and response are included in the health and safety plans for the individual facilities. All facilities are equipped with fire fighting and suppression systems. Facilities are audited annually by Romanian regulatory authorities for compliance with life and fire safety at the facilities.

Arabesque has good neighborly relations with the communities in which they operate. No local communities are significantly affected by environmental risks or impacts from Arabesque's operations as a supplier for construction materials. Arabesque’s operations create jobs and other opportunities for local communities, and have no adverse social impacts. As a result, no formal information dissemination activities have been undertaken. Notwithstanding, as part of its ESMS program, Arabesque will establish methods for communicating environmental and social aspects to external interested parties and maintain procedures for receiving, documenting and responding to concerns from any external interested parties relating to the project. For more information see the company’s website: http://www.arabesque.ro, or contact: Max Danilov, Financial Manager Telephone: +40 314 056 536 Mobile: 40 740 306 394 E-mail: Max.Danilov@arabesque.ro