Conformed Copy - L2970 - Agricultural Credit Project II - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2970 AR (Agricultural Credit Project II) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO DE LA NACION ARGENTINA Dated Novembaer 18, 1988 LOAN NUMBER 2970 AR LOAN AGREEMENT AGREEMENT, dated November 18, 1988, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and BANCO DE LA NACION ARGENTINA (the Borrower). WHEREAS (A) The Argentine Republic (the Guarantor) and the Borrower, having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, have requested the Bank to assist in the financing of the Project; (B) the Borrower intends to contract from the Inter-American Development Bank (IDB) a Loan (the IDB Loan) in an amount equivalent to $105,000,000, to assist in the financing of Part A of the Project, on the terms and conditions set forth in an agreement (the IDB Loan Agreement) to be entered into between the Borrower and IDB; (C) by an agreement (the Guarantee Agreement) of even date herewith between the Guarantor and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrower in respect of the Loan and to undertake such other obligations as set forth in the Guarantee Agreement; and Page 2 WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth in Schedule 3 to this Agreement (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth, and the following additional terms have the following meanings: (a) "Austral" means the currency unit of the Guarantor; (b) "Regulations" means the credit regulations approved by the Board of Directors of the Borrower by Resolution dated March 17, 1988, for purposes of the Project; (c) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and the Guarantor pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and "Subsidiary Loan" means the Loan provided to the Guarantor under the Subsidiary Loan Agreement; (d) "Financial Intermediary" means the Borrower, when making Sub-loans (as such term is hereinafter defined) or any credit institution which: (i) has been approved by the Borrower and the Bank to participate in the carrying out of Part A of the Project on the basis of the criteria set forth in the Regulations; and (ii) has entered or proposes to enter into a Participation Agreement (as such term is hereinafter defined) with the Borrower on terms and conditions satisfactory to the Bank; (e) "Participation Agreement" means the Agreement to be entered into between the Borrower and each Financial Intermediary pursuant to Section 3.01 (c) of this Agreement, as such agreement may be amended from time to time; (f) "Participating Loan" means the Loan made or proposed to be made out of the proceeds of the Loan by the Borrower to a Financial Intermediary under a Participating Agreement for purposes of Part A of the Project; (g) "Investment Enterprise" means a person or a group of persons, a cooperative, a producers association or any other entity having juridical capacity under the laws of the Guarantor to enter into contractual arrangements for purposes of Part A of the Project, who are predominantly engaged in agricultural activities and to which a Financial Intermediary has made or proposes to make a Sub-loan (as such term is hereinafter defined); (h) "Investment Project" means a specific development project carried out or to be carried out by an Investment Enterprise including, acquisition and utilization of modern new agricultural machinery and equipment, livestock development, construction of on- and off-farm grain storage facilities, land improvements, permanent plantations, agro-processing facilities, and short-term inputs complementary to such investments; (i) "Sub-loan" means a loan made or proposed to be made by a Financial Intermediary out of the proceeds of the Loan to an Investment Enterprise for an Investment Project; (j) "free-limit Sub-loan" means a Sub-loan, as so defined, which qualifies as a free-limit Sub-loan pursuant to the provisions of paragraph 2 (b) of Schedule 5 to this Agreement; (k) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (l) "SAG" means Secretaria de Agricultura, Ganaderia y Pesca, the Guarantor's Page 3 Secretariat of Agriculture, Livestock and Fisheries; (m) "Apex Unit" means the unit to be maintained by the Borrower pursuant to the provisions of Section 3.02 of this Agreement; (n) "Currency Risk Fund" means the fund to be established by the Borrower pursuant to Section 4.03 (b) of this Agreement; (o) "Charter" means the Carta Organica of the Borrower, set forth in Law No. 21799, published in the Boletin Oficial of June 16, 1978, as amended to the date of this Agreement; (p) "Currency Risk Agreement" means the agreement between the Guarantor and the Borrower referred to in Section 2.02 (c) of the Guarantee Agreement and Section 4.03 (e) of this Agreement; (q) "Cost of Funds" means the average interest rate resulting from the interest rates applicable to the IDB Loan and the IBRD Loan during the first six months or the second six months of each year; and (r) "Account Bank" means the bank, satisfactory to the Bank, where the Special Account is to be maintained by the Borrower. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount in various currencies equivalent to one hundred and six million five hundred thousand dollars ($106,500,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for: (i) amounts paid (or, if the Bank shall so agree, to be paid) by the Borrower on account of withdrawals made by an Investment Enterprise under a Sub-loan to meet the reasonable cost of goods and services required for the Investment Project in respect of which the withdrawal from the Loan Account is requested; and (ii) for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for Part B of the Project and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special account on terms and conditions satisfactory to the Bank in the Account Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 7 to this Agreement. Section 2.03. The Closing Date shall be June 30, 1996 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one-half of one percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Guarantor and the Borrower of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.06 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost of the outstanding borrowings of the Bank drawn down after June 30, 1982, Page 4 expressed as a percentage per annum, as reasonably determined by the Bank. (iii) "Semester" means the first six months or the second six months of a calendar year. Section 2.06. Interest and other charges shall be payable semi-annually on June 15 and December 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project; Management and Operations of the Borrower Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and to this end, shall carry out Part A of the Project and conduct its operations and affairs in accordance with sound administrative and financial standards and practices, with qualified management and personnel, and in accordance with the Charter and the Regulations, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part A of the Project. (b) The Borrower shall relend to the Guarantor, for purposes of Part B of the Project, the amounts allocated from time to time to Category (2) in the table of paragraph 1 of Schedule 1 to this Agreement, under a Subsidiary Loan Agreement to be entered into between the Borrower and the Guarantor, through SAG, which shall have terms and conditions satisfactory to the Bank. (c) The Borrower shall enter into a Participation Agreement with each Financial Intermediary willing to participate in the execution of Part A of the Project, on terms and conditions satisfactory to the Bank, including those set forth in Schedule 5 to this Agreement. (d) The Borrower shall utilize the proceeds accrued to the Borrower from the repayment of principal of Participating Loans and Sub-loans which are not required for purposes of repayment of principal of the Loan, exclusively for making loans for the same purposes, and under similar terms and conditions as those set forth or referred to in this Agreement and the Regulations. (e) The Borrower shall duly perform all of its obligations under the Currency Risk Agreement, the Subsidiary Loan Agreement and each Participation Agreement. Except as the Bank and the Borrower shall otherwise agree, the Borrower shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Currency Risk Agreement, the Subsidiary Loan Agreement, a Participation Agreement or any provision thereof. Section 3.02. (a) The Borrower shall maintain for purposes of Part A of the Project an administrative unit (the Apex Unit) with functions, staffing and responsibilities satisfactory to the Bank. (b) The Borrower shall provide the Apex Unit with the funds, facilities, services and other resources required for the timely and efficient discharge of its functions. Section 3.03. Without limitation to the provision of Section 3.07 of this Agreement, the Borrower shall, not later than February 28 and August 31 each year, prepare and furnish to the Bank a report on the progress of the execution of Part A of the Project during the immediately preceding semester ending two months before that date, of such scope and detail as the Bank shall reasonably request, such report to include information on amounts committed and disbursed under Sub-loans, number and type of Sub-loans, repayments and arrears under Sub-loans and Participating Loans, and financial report on the Currency Risk Fund. Section 3.04. The Borrower shall: (a) review not later than April 30 and October 31 of each year the appropriateness of the interest rates on Participating Loans and Sub-loans and of the contributions to the Currency Risk Fund; (b) exchange views with the Guarantor and the Bank on the results of such review; and (c) revise such interest rates to ensure that such interest rates are, in the Bank's opinion, sufficient to cover the Borrower's cost of Loan funds and administration and are suitable to attain Page 5 the objectives of the Project. Section 3.05. (a) The Borrower undertakes that, unless the Bank shall otherwise agree, Sub-loans will be made in accordance with the procedures and on the terms and conditions set forth or referred to in Schedule 5 to this Agreement and the Regulations. (b) The Borrower shall exercise its rights in relation to each Investment Project in such manner as to: (i) protect the interests of the Bank and the Borrower; (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of the Project. Section 3.06. Except as the Bank shall otherwise agree, procurement of the goods and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 6 to this Agreement and Section 3.02 of the Guarantee Agreement. Section 3.07. (a) The Borrower, through the Apex Unit, shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of Part A of the Project. (b) Without limitation to the foregoing, the Borrower shall coordinate with SAG the preparation of the completion report referred to in paragraph (a) of Section 9.07 of the General Conditions. Section 3.08. (a) The Borrower, through the Apex Unit, shall take actions, satisfactory to the Bank, to promote the participation of Financial Intermediaries in the execution of Part A of the Project. (b) The Borrower shall include in the reports referred to in Section 3.03 of this Agreement information, of such scope and detail as the Bank shall reasonably request, on the action taken pursuant to paragraph (a) of this Section. ARTICLE IV Financial Covenants Section 4.01. The Borrower shall maintain procedures and separate records and accounts adequate to monitor and record the progress of Part A of the Project and of each Investment Project (including its cost and the benefits to be derived from it) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of the Borrower. Section 4.02. (a) The Borrower shall: (i) have the records referred to in Section 4.01 of this Agreement, its accounts and financial statements (balance sheets, statements of income and expenses and related statements) and records and accounts for the Special Account and the Currency Risk Fund for each fiscal year audited in accordance with sound 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 four months after the end of each such year: (A) certified copies of said 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 said records, accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request. (b) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain, in accordance with Section 4.01 of this Agreement, records and accounts reflecting such expenditures; Page 6 (ii) retain, or cause to be retained by the Financial Interme- diaries until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable and cause the Financial Intermediaries to enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (a) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal control involved in their preparation, can be relied upon to support the related withdrawals. Section 4.03. (a) The Borrower shall take such steps as shall be necessary to protect itself against risk of loss resulting from changes in the rates of exchange between the currencies (including the currency of the Guarantor) used in its operations. (b) As part of the foregoing, the Borrower shall establish not later than May 31, 1989, and thereafter maintain a separate fund (the Currency Risk Fund) on terms and conditions satisfactory to the Bank, with the sole purpose of providing resources to the Borrower to cover any amounts to be paid by the Borrower as a result of differences between the adjustment of principal of the Participating Loans and similar loans under the IDB Loan made by the Borrower and the amounts to be paid to the Bank and IDB under the Loan, pursuant to the provisions of Article IV of the General Conditions, and under the IDB Loan, pursuant to the IDB Loan Agreement. (c) The Borrower shall retain and deposit promptly into the Currency Risk Fund a part of the amounts collected by the Borrower as interest on Participating Loans, Sub-loans and loans made under the IDB Loan, such part to be initially equivalent to two percentage points and to be revised by the Borrower in terms satisfactory to the Bank after each revision of interest rates made pursuant to Section 3.04 of this Agreement. (d) The Borrower shall: (i) maintain separate records and accounts for the Currency Risk Fund; and (ii) manage the Currency Risk Fund in accordance with sound administrative and financial practices set forth in a Regulation satisfactory to the Guarantor and the Bank (the Currency Risk Regulation). (e) Not later than May 31, 1989, the Borrower shall enter into an agreement, (the Currency Risk Agreement) satisfactory to the Bank, with the Guarantor for purposes of Section 2.02 (b) of the Guarantee Agreement. (f) The Borrower shall: (i) issue the Currency Risk Regulation, not later than February 28, 1989; and (ii) except as the Guarantor and the Bank shall otherwise agree, not amend, abrogate or repeal the Currency Risk Regulation. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified, provided, however, that if an event specified in paragraph (b) shall have occurred and be continuing, the suspension of the Borrower's right to make withdrawals from the Loan Account may be limited by the Bank to withdrawals in respect of Project expenditures related to Financial Intermediary or Financial Intermediaries in question: (a) that the Charter or the Regulations shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the operations or the financial condition of the Borrower or its ability to carry out the Project or to perform any of its obligations under this Agreement; (b) a Financial Intermediary shall have failed to perform any of its obligations under a Participation Agreement; Page 7 (c) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of the IDB Loan shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the IDB Loan Agreement, or (B) the IDB Loans shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur; and (b) the event specified in paragraph (c) (i) (B) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (c) (ii) of that Section. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the Borrower's Board of Directors has established the Apex Unit; and (b) IDB has notified the Bank that all conditions precedent to the first disbursement of the IDB Loan have been fulfilled, subject only to the effectiveness of this Agreement. Section 6.02. The following are specified as additional matters, with the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank; namely, that the Apex Unit has been duly established in accordance to the Charter of the Borrower. Section 6.03. The date February 20, 1989 is hereby specified for purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The President of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT), Washington, D.C. 248423 (RCA) or Page 8 64145 (WUI) For the Borrower: Banco de la Nacion Argentina Bartolome Mitre 326 Buenos Aires Argentina Cable address: Telex: BANCNACION 39018141 IN WITNESS WHEREOF the parties hereto, acting through their duly authorized representatives, 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 /s/ Shahid Husain Regional Vice President Latin America and the Caribbean BANCO DE LA NACION ARGENTINA By /s/ Hernan Carlos Naveyra Authorized Representative SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Sub-loans 105,000,000 41% of the amounts disbursed under a Sub-loan (2) Goods and 1,500,000 100% Consultants' Services for Part B of the Project TOTAL 106,500,000 2. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made: (a) in respect of a Sub-loan unless the Sub-loan has been approved or authorized and made in accordance with the procedures and on the terms and conditions set forth or referred to in Schedule 5 to this Agreement; (b) in respect of payments made for expenditures prior to the date of this Page 9 Agreement; (c) in respect of a Sub-loan made by a Financial Intermediary, unless the Bank shall have received evidence, satisfactory to the Bank, that the Borrower and such Financial Intermediary have entered into a Participation Agreement, satisfactory to the Bank, which is valid and binding upon the parties thereto, in accordance with its terms; (d) in respect of Sub-loans made directly by the Borrower, as Financial Intermediary, if the aggregate amount disbursed under the Loan for Sub-loans made directly by the Borrower exceeds the equivalent of 80% of the amounts allocated to Category (1) of the table in paragraph 1 above; and (e) in respect of Category (2) of the table in paragraph 1 above, unless the Bank shall have received evidence, satisfactory to the Bank, that the Guarantor and the Borrower have entered into the Subsidiary Loan Agreement, and such agreement is valid and binding upon the parties thereto, in accordance with its terms. SCHEDULE 2 Description of the Project The objectives of the Project are: (i) to assist in financing such productive facilities and resources in Argentina as will contribute to the economic and social development of the country through modernization of the farm machinery pool, livestock development construction of grain storage facilities, establishment of small-scale agro-processing facilities, development of permanent plantations and adoption of cost effective and efficient technology consistent with growth, diversification and soil conservation; (ii) to foster increased participation by private and provincial banks in agricultural lending; and (iii) to improve the Guarantor's capabilities to monitor and evaluate agricultural lending. The Project consists of the following Parts, subject to such modifications thereof as the Bank and the Borrower may agree upon from time to time to achieve such objectives: Part A The financing of specific development projects through loans to Investment Enterprises within the agricultural sector. Part B: A program to improve the Guarantor's capabilities to monitor and evaluate, through its SAG, agricultural lending (including the Project) and its impact on the agricultural sector. * * * The Project is expected to be completed by December 31, 1995. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each June 15 and December 15 beginning December 15, 1993 through June 15, 2003 5,325,000 Page 10 __________________ * The figures in this column represent dollar equivalent determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment The following premiums are specified for the purposes of Section 3.04 (b) of the General Conditions: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years 0.20 before maturity More than three years but 0.40 not more than six years before maturity More than six years but 0.73 not more than 11 years before maturity More than 11 years but not 0.87 more than 13 years before maturity More than 13 years before 1.00 maturity SCHEDULE 4 Modifications of the General Conditions For the purposes of this Agreement, the provisions of the General Conditions are modified as follows: (1) The last sentence of Section 3.02 is deleted. (2) The words "the Bank may, by notice to the Borrower and the Guarantor, terminate the right of the Borrower to make withdrawals with respect to such amount. Upon the giving of such notice, such amount of the Loan shall be cancelled" set forth at the end of Section 6.03 are deleted and the following is substituted therefor: "or (f) by the date specified in subparagraph 3 (c) of Schedule 5 to the Loan Agreement, the Bank shall, in respect of any portion of the Loan: (i) have received no applications or requests under subparagraphs (a) or (b) of said paragraph; or (ii) have denied any such applications or requests. The Bank may, by notice to the Borrower and the Guarantor, terminate the right of the Borrower to submit such applications or 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 cancelled." SCHEDULE 5 Procedures for and Terms and Conditions Page 11 of Participating Loans and Sub-loans The procedures for and the terms and conditions for Participating Loans and Sub-loans shall be those set forth in the Regulation and shall, inter alia, include those set forth in this Schedule. 1. (a) Participating Loans shall be denominated in dollars and repayable in Australes; (b) the repayment and grace periods applicable to each Participating Loan shall be substantially those of the Sub-loan being refinanced by such Participating Loan; (c) the interest rate applicable to each Participating Loan shall be equal to the Cost of Funds plus a spread equal to not less 2 and not more than 4 percentage points, such spread to be reviewed and, if necessary, revised from time to time as provided in Section 3.04 of this Agreement; and (d) each Participating Agreement shall include provisions enabling the Borrower to carry out its obligations under this Agreement and obliging the Financial Intermediary which is a party to such Participating Agreement, inter alia: (i) to maintain and cause to be maintained procedures and separate records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures of the Financial Intermediary and each Investment Enterprise with regard to Part A of the Project and the corresponding Investment Project, respectively; and (ii) to make Sub-loans in the manner and under the terms and conditions set forth in this Schedule and the Regulations. 2. No expenditures for goods or services required for an Investment Project shall be eligible for financing out of the proceeds of the Loan unless: (a) the Sub-loan for such Investment Project shall have been approved by the Bank and the disbursements by the Financial Intermediary under the Sub-loan for such expenditures shall have been made not earlier than one hundred eighty days prior to the date on which the Bank shall have received the application and information required under paragraph 3 (a) of this Schedule in respect of such Sub-loan; or (b) the Sub-loan for such Investment Project shall have been a free-limit Sub-loan for which the Bank has authorized withdrawals from the Loan Account and the disbursements by the Financial Intermediary under the Sub-loan for such expenditures shall have been made not earlier than one hundred eighty days prior to the date on which the Bank shall have received the request and information required under paragraph 3 (b) of this Schedule in respect of such free-limit Sub-loan. For the purposes of this Agreement, a free-limit Sub-loan shall be a Sub-loan for an Investment Project in an amount to be financed out of the proceeds of the Loan which shall not exceed the sum of one million dollars equivalent, in the case of Investment Enterprises consisting of individual natural or juridical persons or two million five hundred thousand dollars equivalent in the case of Investment Enterprises consisting of cooperatives or producer associations, when added to any other outstanding amounts financed or proposed to be financed out of the proceeds of the Loan or of any other loan, provided for in any outstanding loan agreement between the Bank and the Borrower or the Guarantor entered into before the date of this Agreement, the proceeds of which have been or are being used for financing goods and services directly and materially related to such Investment Project. The foregoing amounts being subject to change from time to time as determined by the Bank by notice to the Borrower, provided, however, that the first 3 Sub-loans made by the Borrower over $100,000 equivalent and the first Sub-loan made by each Financial Intermediary other than BNA over $100,000 equivalent shall not be regarded as free-limit Sub-loans and the procedures in paragraph 3 of this Schedule shall apply. 3. (a) When presenting a Sub-loan (other than a free-limit Sub-loan) to the Bank for approval, the Borrower shall furnish to the Bank an application, in form satisfactory to the Bank, together with: (i) a description of the Investment Enterprise and an appraisal of the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan; (ii) the proposed terms and conditions of the Sub-loan, including the schedule of amortization; and (iii) such other information as the Bank shall reasonably request. (b) Each request by the Borrower for authorization to make withdrawals from the Loan Account in respect of a free-limit Sub-loan shall contain: (i) a summary description of the Investment Enterprise and the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Page 12 Loan; and (ii) the terms and conditions of the Sub-loan, including the schedule of amortization therefor. (c) Applications and requests made pursuant to the provisions of sub-paragraphs (a) and (b) of this paragraph shall be presented to the Bank on or before May 31, 1992 or such date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. 4. Sub-loans shall be made on terms whereby the Financial Intermediary shall obtain, by written contract with the Investment Enterprise or by other appropriate legal means, rights adequate to protect the interests of the Bank, the Borrower and the Financial Intermediary, including, the right to: (a) require the Investment Enterprise to carry out and operate the Investment Project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (b) require that: (i) the goods and services to be financed out of the proceeds of the Loan shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and availability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them; and (ii) such goods and services shall be used exclusively in the carrying out of the Investment Project; (c) inspect, by itself or jointly with representatives of the Borrower or the Bank if the Bank shall so request, such goods and the sites, works, plants and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (d) require that: (i) the Investment Enterprise shall take out and maintain with responsible insurers not related to Financial Intermediary such insurance, against such risks and in such amounts, as shall be consistent with sound business practice; and (ii) without any limitation upon the foregoing, such insurance shall cover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Loan to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (e) obtain all such information as the Bank, the Borrower or the Financial Intermediary shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Investment Enterprise and to the benefits to be derived from the Investment Project; and (f) suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the Loan upon failure by such Investment Enterprise to perform its obligations under its contract with the Financial Intermediary. SCHEDULE 6 Procurement of Goods Part A: International Competitive Bidding Except as provided in Part C hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in Argentina may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: 1. Goods for Part B of the Project shall be procured in accordance with procedures satisfactory to the Bank. 2. Contracts for goods, works and services for Sub-projects under Part A of the Page 13 Project estimated to cost less than $3,000,000 equivalent shall be obtained at a reasonable price, account being taken also of other factors such as time of delivery and efficiency and reliability of the goods and availability of maintenance facilities and spare parts therefor and, in the case of works and services, of their quality and the competence of the parties rendering them. Part D: 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract procured pursuant to Part A and Part C.1 hereof, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contracts are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments forsuch contract are to be made out of the Special Account, said procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to this Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.02 (b) (ii) of this Agreement and Section 4.01 (c) (ii) of the Guarantee Agreement. 2. The figure of 20% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. SCHEDULE 7 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for Investment Projects and Part B of the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement, provided, however, that notwithstanding the provisions of paragraph 2 (b) of Schedule 5 to this Agreement, payments for expenditures to be financed out of the proceeds of free-limit Sub-loans may be made out of the Special Account before the Bank shall have authorized withdrawals from the Loan Account in respect thereof. Such expenditures, however, shall qualify as eligible expenditures only if the Bank shall subsequently authorize such withdrawals; and (c) the term "Authorized Allocation" means an amount equivalent to ten million five hundred thousand dollars to be withdrawn from the Loan Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Bank shall otherwise agree, payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. Page 14 (b) The Borrower shall furnish to the Bank requests for replenishment of the Special Account at such intervals as the Bank shall specify. On the basis of such requests, the Bank shall withdraw from the Loan Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Bank, prior to or at the time of such request, such documents and other evidence as the Bank shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Bank when either of the following situations first arises: (i) the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Loan allocated to the eligible Categories, minus the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawals from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank, deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Bank into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount for crediting to the Loan Account and immediate cancellation.