Bolivia - Urban Development Project : Loan 1489 - Project Agreement - 2 - Conformed

CONFORMED COPY LOAN NUMBER 1489 BO Project Agreement (Urban Development Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO INDUSTRIAL S.A. Dated November 30, 1977 LOAN NUMBER 1489 BO PROJECT AGREEMENT AGREEMENT, dated November 30, 1977, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and BANCO INDUSTRIAL S.A. (hereinafter called BISA), a development bank established and operating under the laws of the Republic of Bolivia. WHEREAS (A) by the Loan Agreement of even date herewith between the Republic of Bolivia (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Bor- rower an amount in various currencies equivalent to seventeen million dollars ($17,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that inter alia BISA agree to undertake such obligations toward the Bank as hereinafter set forth; (B) by a subsidiary loan agreement between the Borrower and BISA, part of the proceeds of the loan provided for under the Loan Agreement will be made available to BISA on the terms and conditions therein set forth; and WHEREAS BISA, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Statutes" means the Estatutos of BISA dated Feb- ruary 10, 1977, as amended to the date of this Agreement; (b) "Statement of Policy" means the statement of lending and investment policy approved by the Directors of BISA on June 1, 1976 as amended to the date of this Agreement; -2- (c) "subsidiary" means any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by BISA or by any one or more subsidiaries of BISA or by BISA and one or more of its subsidi- aries; (d) "Acci6n Comunal" means the department of the Munici- pality of La Paz in charge of community development; (e) "Juntas Vecinales" means neighborhood committees established in the city of La Paz; and (f) "Bolivian Peso" and "b $" means the currency of the Borrower. ARTICLE II Execution of Parts D and E.3 of the Project Section 2.01. (a) BISA shall: (i) carry out Parts D and E.3 of the Project described in Schedule 2 to the Loan Agreement and Schedule 1 to this Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and banking practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose; and (ii) acquire, maintain and renew all rights, powers, privileges and franchises as shall be, from time to time, necessary or useful in the conduct of its business and the carrying out of Parts D and E.3 of the Project. (b) For carrying out Part D of the Project, BISA shall borrow from the Borrower in Pesos the equivalent of $2,555,000 of the proceeds of the Loan required therefor, under terms and conditions set forth in a subsidiary loan agreement with the Borrower satisfactory to the Bank, and in the carrying out of Part D of the Project, BISA undertakes that it shall at all times follow lending policies and procedures satisfactory to the Bank including those set forth in Schedule 2 to this Agreement, as such Schedule may be modified from time to time by agreement among the Borrower, the Bank and BISA. (c) Without limitation upon the generality of the provisions of paragraph (a) of this Section, BISA shall provide out of its own resources the equivalent of $500,000 in Pesos for the purposes of Part D of the Project. - 3 - Section 2.02. In order to assist BISA in the carrying out of Part E.3 of the Project, BISA shall employ a management consultant whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Section 2.03. BISA shall duly perform all its obligations under the BISA Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, BISA shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the BISA Subsidiary Loan Agreement or any provision thereof. Section 2.04. (a) BISA shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Parts D and E.3 of the Project, the performance of its obligations under this Agreement and under the BISA Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) BISA shall promptly inform the Bank of any condition which interferes or threatens to interfere with, the progress of Parts D and E.3 of the Project, the accomplishment of the purposes of the Loan, or the performance by BISA of its obligations under this Agreement and under the BISA Subsidiary Loan Agreement. Section 2.05. BISA shall utilize all funds repaid by artisans and small-scale enterprises who have received loans under Part D of the Project, which are not immediately needed to make payments of principal, interest and other charges on the funds received from the Borrower out of the proceeds of the Loan, exclusively for additional loans under Part D of the Project. ARTICLE III Management and Operations of BISA Section 3.01. BISA shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with appropriate banking and financial practices, under the supervision of quali- fied and experienced management and assisted by qualified and experienced staff in adequate numbers, and in accordance with its Statutes and Statement of Policy. Section 3.02. BISA shall duly perform all its obligations under agreements under which funds have been lent or otherwise put -4- at the disposal of BISA by the Borrower or its agencies or others for relending, investment or management. BISA shall promptly inform the Bank of any action which would have the effect of assigning, or of amending, abrogating or waiving any material provision of, any such agreement. Section 3.03. If BISA establishes or acquires any subsidiary, BISA shall cause such subsidiary to observe and perform the obligations of BISA hereunder to the extent to which such obliga- tions shall or can be applicable thereto, as though such obliga- tions were binding upon such subsidiary. ARTICLE IV Financial Covenants Section 4.01. BISA shall maintain records adequate to re- flect, in accordance with consistently maintained appropriate accounting practices, its operations and financial condition, including without limitation its loan operations under Part D of the Project. Section 4.02. BISA shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of BISA and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. Except as the Bank shall otherwise agree, BISA shall: (i) conduct its operations and affairs in such manner as shall be necessary to maintain, at all times, its debt/equity ratio within the limit provided in Section 4.05 of this Agreement; and (ii) if such ratio shall, for reasons beyond BISA's control, be exceeded, promptly take all such reasonable action as shall be necessary or advisable to bring such ratio within such limit. - 5 - Section 4.04. BISA shall not make any repayment in advance of maturity in respect of any outstanding debt of BISA which, in the judgment of the Bank, would materially affect BISA's ability to meet its financial obligations. Section 4.05. Except as shall be otherwise agreed between the Bank and BISA, BISA shall not incur or permit any subsidiary to incur: (i) any Category I debt if, after the incurring of such debt, the consolidated Category I debt of BISA and all its subsid- iaries then incurred and outstanding would be greater than the consolidated capital and surplus of BISA and all its subsidiaries; or (ii) any Category II debt if, after the incurring of such debt, the consolidated Category II debt of BISA and all its subsidiaries then incurred and outstanding would be greater than six times the consolidated capital and surplus of BISA and all its subsidiaries. For the purposes of this Section: (a) "Category I debt" means any debt incurred by BISA or any subsidiary by the issuance, in the capital market of Bolivia, of certificates of indebtedness with a maturity of not less than one year; and "Category II debt" means any debt other than a Category I debt incurred by BISA or any subsidiary. (b) Debt shall be deemed to be incurred: (i) under a loan contract or agreement (including the Subsidiary Loan Agreement) on the date and to the extent the amount of the loan is drawn down and outstanding pursuant to such loan or agreement, and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt is outstanding. (c) Whenever in connection with this Section it shall be necessary to value in terms of Bolivian Pesos debt payable in foreign currency, such valuation shall be made at the prevailing lawful rate of exchange at which such foreign currency is, at the time of such valuation, obtainable by BISA for the purposes of servicing such debt. (d) "consolidated Category I debt of BISA and all its subsidiaries" and "consolidated Category II debt of BISA and all its subsidiaries" mean the total amount of debt of BISA and subsidiaries, excluding any debt owed by BISA to any subsidiary or by any subsidiary to BISA or to any other subsidiary in regard of, respectively, Category I debt and Category II debt. -6- (e) "consolidated capital and surplus of BISA and subsidiar- ies" means the aggregate of (i) the unimpaired paid-up capital, surplus and free reserves of BISA and subsidiaries after excluding therefrom such amounts as shall represent (1) equity interests of BISA in any subsidiary or of any subsidiary in BISA or any other subsidiary and (2) unless the Bank shall otherwise agree, asset revaluations and intangibles, and (ii) any loan to BISA or its subsidiaries which the Bank shall deem to be included in such consolidated capital and surplus for the purposes of this Section. Section 4.06. BISA shall take such steps satisfactory to the Bank as shall be necessary to protect itself against risk of loss resulting from changes in the rates of exchange between the currencies (including Bolivian Pesos) used in its operations. Section 4.07. The Bank and BISA shall from time to time, at the request of either party, exchange views through their representatives with regard to the administration, operations and financial condition of BISA and its subsidiaries, and BISA shall furnish to the Bank all such information as the Bank shall rea- sonably request concerning the administration, operations and financial condition of BISA and subsidiaries. Section 4.08. BISA shall enable the Bank's representatives to inspect the records referred to in Section 4.01 of this Agree- ment and any relevant documents. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and BISA thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Loan Agreement. - 7 - ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address herein- after specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United State of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For BISA: Banco Industrial S.A. P.O. Box 1290 La Paz Bolivia Cable address: Telex: BISA BX5279 La Paz Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of BISA may be taken or executed by its General Manager or such other person or persons as he shall designate in writing. -8- Section 6.03. BISA shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of BISA, take any action or execute any documents required or permitted to be taken or executed by BISA pursuant to any of the provisions of this Agreement. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Is/ Suitbertus M. L. van der Meer Acting Regional Vice President Latin America and the Caribbean BANCO INDUSTRIAL S.AC By /s/ Miguel Zalles Denegri Authorized Representative -9- SCHEDULE 1 Description of Parts D and E.3 of the Project The purpose of Part D of the Project is to create additional economic opportunities for low-income groups in La Paz, primarily those living in the areas to be serviced and upgraded under Parts A and B of the Project. Part D of the Project consists of making loans available to artisans and small-scale enterprises for the following purposes: (i) to promote new and established artisans from among residents in the areas to be upgraded under Part B of the Project; (ii) to establish artisans moving in the sites to be serviced under Part A of the Project as dwellings therein are completed; (iii) to transfer existing small-scale enterprises from areas with limited expansion possibilities to plots provided in the El Alto area of La Paz pursuant to Part A of the Project; and (iv) to establish new labor-intensive small-scale enterprises on plots provided in the El Alto area of La Paz pursuant to Part A of the Project. The provision of appropriate technical assistance pursuant to Part E.3 of the Project will complement the granting of loans to ensure the success of Part D of the Project. - 10 - SCHEDULE 2 Lending and Operating Policies and Procedures A. Loans to Artisans 1. Definition. For purposes of this Schedule, the term "artisan" means the proprietor of a business employing up to five persons. 2. Loan Type. Loans will be granted to artisans to finance: (i) acquisition of fixed assets (hereinafter called fixed assets loans); and (ii) working capital (herein- after called working capital loans). 3. Beneficiaries. Loans will be granted to artisans living in the areas to be upgraded and serviced under Parts A and B of the Project. The local Juntas Vecinales assisted by representatives from Acci6n Comunal and BISA will preselect the artisans worthy of receiving loans. Artisans' loan applications will be first pro- cessed by the respective Junta Vecinal, screened by Acci6n Comunal for their technical soundness and then reviewed for approval by a special appraisal unit of BISA. 4. Amount. An individual loan may finance up to 90% of the funds required or the equivalent of $5,000, whichever shall be the lesser. An applicant's equity contribution may be in cash or in kind (or in both), such contribution to be reasonably evaluated by BISA. The total amount of principal owed by an artis: , to BISA will not exceed the equivalent of $5,000 at ay one time. 5. Terms. Loans will be granted for minimum and maximum terms, respectively, of: (i) 5 years to 8 years for fixed assets loans (1 year to 3 years of grace); and (ii) 1 year to 3 years for working capital loans. 6. Interest Rate. An interest rate of 12% per annum will be charged on the balance outstanding of a loan. - 11 - B. Loans to Small-Scale Enterprises 1. Definition. For the purposes of this Schedule, the term "small-scale enterprise" means a business with a paid-in capital of less than the equivalent of $20,000. 2. Loan Types. Loans will be granted to small-scale enter- prises to finance: (i) acquisition of fixed assets (hereinafter called fixed assets loans); and (ii) work- ing capital (hereinafter called working capital loans). 3. Beneficiaries. Loans will be granted to small-scale enterprises situated primarily in the areas to be upgraded and serviced under Parts A and B of the Proj- ect. The selection of suitable beneficiaries and the processing of their loan applications will be made by a special appraisal unit to be established within BISA's Operations Department. 4. Amount. An individual loan may finance the lesser of: (i) up to 70% of the funds required or the equivalent of $20,000; and (ii) up to 70% of the funds required or the equivalent of $40,000 for small-scale enterprises relocating to plots provided under Part A of the Proj- ect. Loans of more than the equivalent of $20,000 made to small-scale enterprises relocating to plots provided under Part A of the Project will not exceed in the aggregate the equivalent of $800,000. The total amount of principal owed by a small-scale enterprise to BISA will not exceed the equivalent of $20,000 at any one time; provided, however, that this limitation will not apply to loans made to small-scale enterprises for purposes of relocation to plots provided under Part A of the Project. 5. Terms. Loans will be made for minimum and maximum terms, respectively, of: (i) 5 years to 8 years for fixed assets loans (up to 2 years of grace); and (ii) 1 year to 3 years for working capital loans. 6. Interest Rate. An interest rate of between 12% and 18% per annum will be charged on the balance of a loan. - 12 - C. Provision for Bad Debts BISA will establish a special provision account for bad debts under the loan program included in Part D of the Project. BISA will periodically allocate to such account from interest payments received an amount equivalent to 3-1/2% per annum of the amount of each loan until the ratio of the provision for bad debts to the total outstanding amount of loans under such loan program reaches 1:10; thereafter, BISA will maintain the ratio at such level.