Colombia - Seventh Development Finance Company Project : Loan 1598 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1598 CO Loan Agreement (Seventh Development Finance Companies Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO DE LA REPUBLICA Dated July 27, 1978 LOAN NUMBER 1598 CO LOAN AGREEMENT AGREEMENT, dated July 27, 1978, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and BANCO DE LA REPUBLICA (hereinafter called the Borrower). ARTICLE I General Conditions; Definitiot, Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein, subject, however, to the modifications thereof set forth in Schedule 2 to this Agreement (said General Conditions Applicable to 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 the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "DDC" means Departamento de Crfdito de Fomento of the Borrower, established by a resolution of the Junta Directiva of the Borrower, dated November 18, 1964; (b) "Group A Financiera" means any one of the following 4gvelopment finance companies: (i) Corporaci6n Financiera de Caldas; (ii) Corporaci6n Financiera Colombiana; (iii) Corporaci6n Financiera Nacional; (iv) Corporaci6n Financiera del Norte; and (v) Corporaci6n Financiera del Valle; (c) "Group B Financiera" means any one of the following development finance companies: -2- (i) Corporaci6n Financiera de Occidente; and (ii) Corporaci6n Financiera de Santander; (d) "Group C Financiera" means any one of the following development finance companies: (i) Corporaci6n Financiera Aliadas S.A.; and (ii) any development finance company not otherwise defined which is eligible to participate in the Project in accordance with the provisions of Section 3.09 of this Agreement; (e) "Financiera" means any one of the Group A Financieras, the Group B Financieras or the Group C Financieras; (f) "Estatutos" means, as the case may be: (i) the estatutos of Corporaci6n Financiera de Caldas, dated September 8, 1961, as amended as of Febru- ary 26, 1973; (ii) the estatutos of Corporaci6n Financiera Colombiana, dated September 8, 1961, as amended as of Febru- ary 26, 1973; (iii) the estatutos of Corporaci6n Financiera Nacional, dated March 31, 1959, as amended as of April 24, 1973; (iv) the estatutos of Corporaci6n Financiera del Norte, dated December 2, 1963, as amended as of June 3, 1970; (v) the estatutos of Corporaci6n Financiera del Valle, dated November 27, 1961, as amended as of March 5, 1973; (vi) the estatutos of Corporaci6n Financiera de Occi- dente, dated July 27, 1966, as amended as of February 28, 1970; (vii) the estatutos of Corporaci6n Financiera de San- tander, dated February 15, 1967, as amended as of March 9, 1973; -3- (viii) the estatutos of Corporaci6n Financiera Aliadas S.A., dated July 1, 1974; and (ix) the estatutos of the Group C Financieras, other than those of Corporaci6n Financiera Aliadas S.A., as of the day such estatutos have been found acceptable by the Bank and the Borrower in accor- dance with the provisions of Section 3.09 of this Agreement; (g) "Statement of Operating Policies and Procedures" means the statement of lending and investment policy approved by the Directors of: (i) the Borrower for the purpose of regulating its operational relations with the Financieras on December 18, 1975, as amended as of June 1, 1978; (ii) Corporaci6n Financiera de Caldas on March 16, 1966, as amended as of May29, 1978; (iii) Corporaci6n Financiera Colombiana on October 26, 1961, as amended as of May 24, 1978; (iv) Corporaci6n Financiera Nacional on February 21, 1966, as amended as of May 22, 1978; (v) Corporaci6n Financiera del Norte on February 18, 1966, as amended as of May 30, 1978; (vi) Corporaci6n Financiera del Valle on March 11, 1964, as amended as of May 29, 1978; (vii) Corporaci6n Financiera de Occidente on June 2, 1972, as amended as of May 30, 1978; (viii) Corporaci6n Financiera de Santander on March 22, 1972, as amended as of May 26, 1978; (ix) Corporaci6n Financiera Aliadas S.A. on Novem- ber 30, 1976, as amended as of May 31, 1978; and (x) the Group C Financieras, other than Corporaci6n Financiera Aliadas S.A., as of the day of the approval of the Statement of Operating Policies and -4- Procedures by the Bank and the Borrower in accor- dance with the provisions of Section 3.09 of this Agreement; (h) "Subsidiary Loan Agreement" means any one of the loan agreements between the Borrower and the Financieras to be executed pursuant to Section 3.03 of this Agreement; (i) "sub-loan" means a loan made or proposed to be made by a Financiera out of the proceeds of the Loan to an Investment Enterprise for an Investment Project or a Technology Improvement Program or a Pollution Control Program and "free-limit sub-loan" means a sub-loan, as so defined, which qualifies as a free-limit sub-loan pursuant to the provisions of Section 2.02 (b) of this Agreement; (j) "investment" means an investment, other than a sub-loan, made or proposed to be made by a Financiera out of the proceeds of the Loan in an Investment Enterprise for an Investment Project and a "free-limit investment" means an investment, as so defined, which qualifies as a free-limit investment pursuant to the provi- sions of Section 2.02 (c) of this Agreement; (k) "Investment Enterprise" means a privately controlled enterprise to which a Financiera proposes to make or has made a sub-loan or in which it proposes to make or has made an invest- ment; (1) "Investment Project" means a specific development project to be carried out by an Investment Enterprise utilizing the proceeds of a sub-loan or investment; (i) "Export Investment Project" means an Investment Project, as so defined, designed to establish new, or increase the capacity of existing facilities for the production of export commodities or for foreign tourists at such prices as shall be estimated to yield to the Investment Enterprise net foreign exchange earnings attri- butable to the Export Investment Project (aggregate foreign exchange earnings from the commodities and services attributable to the Investment Project minus foreign exchange component of initial investment and current foreign exchange costs) over a five-year period starting upon completion of the Export Investment Project; - 5 - (n) "Industrial Decentralization Investment Project" means an Investment Project, as so defined, to be carried out outside the zones of economic influence of the cities of Bogot&, Cali and Medellin determined in Circular No. 3,774 of the Borrower, as such zones may, for purposes of this Agreement, be expanded or reduced by agreement between the Bank and the Borrower; (o) "Technology Improvement Program" means a program to be cartied out by an Investment Enterprise utilizing the proceeds of a sub-loan for acquiring technology or product designs or produc- tion processes and techniques, as defined in the Borrower's Statement of Operating Policies and Procedures; (p) "Pollution Control Program" means a program to be carried out by an Investment Enterprise utilizing the proceeds of a sub-loan for acquiring and installing devices for the control of pollution caused by machinery and equipment installed on or before December 31, 1977; (q) "pesos" and "Col.$" mean the currency of the Guarantor; (r) "foreign currency" means any currency other than the currency of the Guarantor; (s) "subsidiary" means any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by any of the Financieras or any Investment Enterprise or by any one or more subsidiaries of any of the Financieras or any Investment Enterprise or by any of the Financieras or any Investment Enterprise and one or more of its subsidiaries; (t) "Prior Loan Agreements" means the loan agreements between the Bank and the Borrower, dated May 31, 1966, May 22, 1968, June 27, 1969, May 28, 1971, June 11, 1973 and March 31, 1976, respectively, and "Prior Loan" means any loan provided for therein; (u) "Prior Subsidiary Loan Agreement" means any of the subsidiary loan agreements between the Borrower and a Financiera entered into pursuant to the Prior Loan Agreements; (v) "related company" means any company which owns or effectively controls a majority of the outstanding voting stock or other proprietary interest of any Investment Enterprise (such -6- company hereinafter called "parent company"), or any company, other than the Investment Enterprise so owned or effectively controlled by the parent company; and (w) "Plan of Action" means the plan adopted by Corporaci6n Financiera de Occidente and approved by the Borrower setting forth the steps to be taken by Corporaci6n Financiera de Occidente to improve its technical staff, strengthen its financial structure and comply with its financial exposure limitations within the period of time specified in such plan. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to one hundred million dollars ($100,000,000). Section 2.02. (a) Except as the Bank shall otherwise agree, the Borrower may withdraw from the Lean Account amounts disbursed (or, if the Bank shall so agree, amounts required to meet dis- bursements to be made) by any Financiera under a sub-loan or investment to finance the cost of goods and services required under a sub-loan or investment for the Investment Project in respect of which the withdrawal is requested, to the extent set forth below: (i) 100% of foreigii expenditures for goods procured, or services supplied from, outside the territories of the Guarantor; (ii) the c.i.f. cost of imported goods purchased within the territories of the Guarantor by Investment Enterprises from suppliers doing business within the territories of the Guarantor, or 60% of expen- ditures for such goods where the c.i.f. cost of such goods cannot be ascertained (which percentage represents the estimated foreign currency component of such goods); (iii) 35% of the ex-factory price of domestically manu- factured goods for use in production and of expen- ditures for civil works, which percentage repre- sents the estimated foreign currency component of such goods and services; and -7- (iv) 75% of expenditures for technical assistance services, training and transfer of technology in connection with a Technology Improvement Program; provided, however, that no withdrawal shall be made: (A) in respect of a sub-loan or investment unless (1) the sub-loan or investment shall have been approved by the Bank, or (2) the sub-loan or investment shall be a free-limit sub-loan or a free- limit investment for which the Bank shall have authorized with- drawals from the Loan Account; (B) on account of amounts disbursed by any Group C Financiera, other than Corporacion Financiera Aliadas, S.A., under a sub-loan for the first two Investment Projects financed by such Financiera unless such sub-loan shall have been approved by the Bank; (C) on account of amounts dis- bursed by any Group A or Group B Financiera for goods and services under a sub-loan for a Technology Improvement Program or a Pollu- tion Control Program for other than eligible expenditures, as defined in the Statement of Operating Policies and Procedures of the Borrower; and (D) on account of amounts disbursed by any Financiera contrary to the provisions set forth or referred to in Section 3.04 (b).(xii) or (xiii) of this Agreement. (b) A free-limit sub-loan shall be a sub-loan for an Invest- ment Project to be financed out of the proceeds of the Loan which shall not exceed, together with any other amount or amounts financed by any one or more of the Financieras for the same Investment Project out of the proceeds of the Loan and not repaid, the equivalent of: (i) $1,500,000, if made or proposed 1:o be made by one or more of the Group A Financieras; (ii) $500,000, if made or proposed to be made by one or more of the Group B Financieras; or (iii) $250,000, if made or proposed to be made by one or more of the Group C Financieras. The foregoing amounts shall be subject to change from time to time as determined by the Bank, after notification to the Guaran- tor and the Borrower of the reasons for such change. (c) A free-limit investment shall be an investment in an Investment Enterprise for an Investment Project to be financed out of the proceeds of the Loan which shall not exceed, together with -8- any other amount or amounts invested by any one or more of the Financieras in the same Investment Enterprise for the same Invest- ment Project out of the proceeds of the Loan and not repaid, the equivalent of $500,000, the foregoing amount being subject to change from time to time as determined by the Bank, after notifi- cation to the Guarantor and the Borrower of the reasons for such change. (d) Except as the Bank shall otherwise agree, no withdrawals shall be made from the Loan Account pursuant to paragraph (a) of this Section: (i) in an amount which, when added to all amounts sub-lent to, or invested in, an Investment Enter- prise, or any subsidiary thereof, or any related company, out of the proceeds of the Loan, shall, in the aggregate, exceed the equivalent of $4,000,000; or (ii) in an amount which, when added to all amounts sub-lent to, or invested in, an Investment Enter- prise, or any subsidiary thereof, or any related company, out of the proceeds of the Loan or of any of the Prior Loans, shall, in the aggregate, exceed the equivalent of (A) $4,000,000, if the Investment Project to be so financed is an Investment Project other than an Export Investment Project or an Industrial Decentralization Investment Project, and (B) $8,000,000, if the Investment Project to be so financed is an Export Investment Project or an Industrial Decentralization Investment Project. For purposes of this paragraph, any amount so sub-lent or invested shall be computed only to the extent that it is outstanding or committed pursuant to any sub-loan or investment agreement, that is, after deducting repayments, repurchases, redemptions or cancellations of the amount originally so sub-lent or invested. (e) Except as the Bank and the Borrower shall otherwise agree, no withdrawals shall be made on account of (i) expenditures before the date of this Agreement or (ii) expenditures by an Investment Enterprise in respect of a sub-loan or an investment subject to the Bank's approval if such expenditures shall have been made more than ninety days prior to the date on which the Bank shall have received in respect of such sub-loan or investment I-- 9 - -9- the application and information required by Section 2.03 (a) of this Agreement or, in respect of a free-limit sub-loan or invest- ment, more than ninety days prior to the date on which the Bank shall have received in respect of such free-limit sub-loan or free-limit investment the request and information required by Section 2.03 (b) of this Agreement. (f) No withdrawals shall be made by the Borrower from the Loan Account unless the amount to be so withdrawn, or the peso equivalent thereof, shall have been disbursed (or, if the Bank shall have so agreed pursuant to paragraph 'a) of this Section, shall be required to meet disbursements to be made) by the Bor- rower to any Financiera, pu,-suant to and in accordance with the respective Subsidiary Loan Agreement between the Borrower and such Financiera. Section 2.03. (a) When presenting a sub-loan or investment (other than a free-limit sub-loan or free-limit investment) 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 Inve6,ment 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 or investment, including the schedule of amortization of the sub-loan or of repayment to the Bank of the amount of the Loan to be used for the investment; 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 Ac, unt in respect of a free-limit sub-loan or free-limit investmc: shall contain (i) a summary description of the Investment Enterprise and the Investment Project or the Technology Improvement Program or the Pollution Control Program, including a description of the expenditures proposed to be financed out of the proceeds of the Loan; (ii) the terms and conditions of the free-limit sub-loan, or free-limit investment, including the schedule of amortization of the sub-loan or of repayment to the Bank of the amount of the Loan to be used for the investment; and (iii) such other information as the Bank shall reasonably request. (c) Except as the Bank and the Borrower shall otherwise agree, applications and requests made pursuant to the provisions of paragraphs (a) and (b) of this Section shall be presented to the Bank on or before December 31, 1980. - 10 - Section 2.04. The Closing Date shall be December 31, 1982 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment charge 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 from time to time. Section 2.06. The Borrower shall pay interest at the rate of seven and one-half per cent (7.50%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semiannually on February 15 and August 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 1 to this Agreement. Section 2.09. Unless the Bank and the Borrower shall other- wise agree: (a) If a sub-loan or any part thereof shall be repaid to any of the Financieras in advance of maturity or if a sub-loan or an investment or any part thereof shall be sold, transferred, assigned or otherwise disposed of for value by any of the Finan- cieras, the Borrower shall promptly notify the Bank and shall repay to the Bank on the next following interest payment date, together with the premiums specified in Schedule 1 to this Agree- ment, the amount withdrawn from the Loan Account in respect of such sub-loan or investment or part thereof and not theretofore repaid to the Bank. (b) Any amount so repaid by the Borrower shall be applied by the Bank as follows: (i) in the case of a sub-loan, to the maturity or maturities of the Loan in amounts corresponding to the outstanding amounts of the maturity or maturities of the sub-loan so repaid or disposed of, and (ii) in the case of an investment, pro rata to the maturity or maturities of the Loan reflecting amounts to be repaid on account of such investment. (c) Paragraph (b) of Section 3.05 of the General Conditions shall not apply to any repayment made under paragraph (a) of this Section. - 11 - Section 2.10. Unless the Bank and the Borrower shall other- wise agree: (a) If (i) any of the Financieras shall repay to the Bor- rower in advance of maturity, in whole or in part, the amount lent to such Financiera by the Borrower under the respective Subsidiary Loan Agreement or (ii) the Borrower shall have declared the principal amount lent to any Financiera by the Borrower under the respective Subsidiary Loan Agreement and then outstanding to be due and payable immediately and such amount shall be repaid to the Borrower by such Financiera, then the Borrower shall promptly notify the Bank and shall repay to the Bank on the next following interest payment date, together with the premiums specified in Schedule 1 to this Agreement, the amount withdrawn from the Loan Account in respect of such Financiera and not theretofore repaid to the Bank. (b) Any amount so repaid by the Borrower shall be applied by the Bank pro rata to the maturity or maturities of the Loan reflecting amounts to be repaid on account of funds lent to such Financiera by the Borrower. (c) Paragraph (b) of Section 3.05 of the General Conditions shall not apply to any repayment made under paragraph (a) of this Section. ARTICLE III The Project; Management and Operations of the Borrower Section 3.01. (a) The purpose of the Project is to assist the Borrower in financing such productive facilities and resources in Colombia as will contribute to the economic and social devel- opment of the country. The Project consists in the financing by the Financieras, in accordance with their respective Estatutos and Statements of Operating Policies and Procedures and the terms of the Subsidiary Loan Agreements, of: (i) Investment Projects through sub-loans to, and investments in, Investment Enterprises; (ii) Technology Improvement Programs and Pollution Control Programs through sub-loans to Investment Enterprises; and - 12 - (iii) Industrial Decentralization Investment Projects and Export Investment Projects through minority invest- ments in Investment Enterprises, and Investment Projects through minority investments in Invest- ment Enterprises with total assets of less than Col.$150,000,000 as of December 31, 1977. (b) The Borrower shall carry out the Project and conduct the operations and affairs of DDC in accordance with sound finan- cial and investment standards and practices, under the supervision of qualified management and personnel, and in accordance with its Statement of Operating Policies and Procedures. Section 3.02. The proceeds of the Loan shall be allocated as follows: (a) an amount equivalent to $85,000,000 for making sub-loans or investments under paragraph (a) (i) of Section 3.01 of this Agreement; (b) an amount equivalent to $5,000,000 for making sub-loans under paragraph (a) (ii) of Section 3.01 of this Agreement; and (c) an amount equivalent to $10,000,000 for making invest- ments under paragraph (a) (iii) of Section 3.01 of this Agreement. The foregoing allocations shall be subject to change from time to time as agreed between the Bank and the Borrower. Section 3.03. The Borrower shall relend the proceeds of the Loan to the Financieras under Subsidiary Loan Agreements satisfac- tory to the Bank, and except as the Bank shall otherwise agree, the Borrower shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving any provision of the Subsidiary Loan Agreements. Section 3.04. Each Subsidiary Loan Agreement shall include provisions: (a) enabling the Borrower to carry out its obligations under this Agreement; and (b) obliging the Financiera which is a party to such Subsid- iary Loan Agreement to: - 13 - (i) carry out the corresponding part of the Project and conduct its operations and affairs in accor- dance with sound financial and investment standards and practices, under the supervision of qualified and experienced management and in accordance with its Estatutos and its Statement of Operating Policies and Procedures; (ii) cause the Investment Enterprises financed by it to carry out their respective Investment Projects or Technology Improvement Programs or Pollution Control Programs with due diligence and efficiency and in accordance with sound technical, managerial and financial standards, including the maintenance of adequate records and documents; (iii) make sub-loans in accordance with the terms and conditions set forth or referred to in Sections 3.06 (a) and 3.07 of this Agreement; (iv) use, and cause the Investment Enterprise financed by it to use, the proceeds of the Loan exclusively to finance the goods and services required to carry out the Investment Project or Technology Improve- ment Program or the Pollution Control Program in respect of which such proceeds were withdrawn, and ensure that such goods and services shall be used exclusively in the carrying out of such Investment Project or Technology Improvement Program or Pollution Control Program and 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 and spare parts there- for and, in the case of services, of their quality and the competence of the parties rendering them; (v) ensure the right of either the Bank, the Borrower or the Financiera to inspect the goods financed out of the proceeds of the Loan, the sites, works, plants and construction included in each Investment Project or Technology Improvement Program or Pollution Control Program financed by the Finan- ciera, the operation thereof and the operation of the Financiera and any relevant records and docu- ments; - 14 - (vi) require that the Investment Enterprise shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business prac.ice and that, without any limitation upon the forego- ing, such insurance shall cover marine, transit and other hazards incident to the acquisition, trans- portation and delivery of the goods financed out of the proceeds of the loan to the place of use or installation, and that any indemnity thereunder shall be payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (vii) not incur debts in excess of such limits as shall be agreed from time to time between the Bank, the Borrower and the Financiera; (viii) have its accounts audited by auditors acceptable to the Bank and the Borrower and furnish to the Bank and the Borrower, promptly upon their preparation, the Financiera's audited financial statements and the auditor's report thereon, of such scope and in such detail as the Bank shall have reasonably requested; (ix) make all reasonable efforts to: (A) raise on an annual basis, if the circumstances prevailing in the capital market within the territories of the Guarantor so permit, resources in such capital market in such amounts as shall be equivalent to the amounts disbursed in each year by the Financiera under the respective Subsidiary Loan Agreement and the respective Prior Subsidiary Loan Agreement less repayments under the respective Subsid- iary Loan Agreement and the respective Prior Subsidiary Loan Agreement; and (B) with a view to raising funds as provided in paragraph (A) above, cooperate with one or more other Financieras to raise or mobilize, through the sale within the territories of the Guarantor of debt securities or instruments or - 15 - through increases in the "consolidated capital and surplus of Financiera and all its Finan- cial Subsidiaries" (as defined in the respec- tive Subsidiary Loan Agreement), such amounts in pesos as shall be required to increase the total aggregate resources available for the operation of all Financieras during the period June 30, 1978 to December 31, 1979, by an amount equivalent to not less than one and one-half billion r-olombian pesos (Col.$1,500,000,000), or such other amount as shall be agreed by the Bank; and, at the time of the review of the rate of interest for sub-loans and investments referred to in paragraph (xiii) of this Section, review and analyze together with the Guarantor, the Bank and the Borrower (A) the progress made by the Finan- cieras in raising domestic resources and resolving the problems associated with their previous bond issues, and (B) the mechanisms for utilization of the funds so raised in medium- and long-term financing of productive facilities and resources; (x) ensure the right of the Bank and the Borrower to obtain all such information as the Bank shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Financiera and of the Investment Enterprises it shall finance; (xi) ensure the right of the Financiera to 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 obli- gations to the Financiera; (xii) except as the Bank shall otherwise agree, refrain from making any further commitments, out of the proceeds of the Loan relent to it by the Borrower, for financing of Investment Projects through sub-loans or investments other than sub-loans repayable in accordance with the method set forth in Section 3.06 (a) (iii) (B) of this Agreement, if, at any time during the twelve months following - 16 - the date of this Agreement, the Bank shall deter- mine that the average cost-of-living index in Colombia (as hereinafter defined) for the six consecutive calendar months period immediately preceding such determination shall have been more than 123% of the same index for the six consecutive calendar months period commencing with the same month in the preceding calendar year, until a rate of interest for sub-loans and investments referred to in Section 3.01 (a) (i) of this Agreement acceptable to the Bank has been adopted by the Borrower and the Financiera. For the purposes of this sub-paragraph, "average cost-of-living index in Colombia" shall mean, in respect of any six con- secutiVe calendar month period, the arithmetic mean of the Indices Nacionales de los Precios al ConsumiLar (Costo de Vida) - Obreros published for each Month by the Departamento Administrativo Nacional de Estadistica of the Guarantor or, in the absence of such Indice, of such other similar monthly indices as shall be determined or approved by the Bank; and (xiii) without limitation upon the generality of paragraph (xii) of this Section, and except as the Bank shall otherwise agree, refrain from making any further commitments out of the proceeds of the Loan relent to it by the Borrower, for financing of Investment Projects through sub-loans or investments other than sub-loans repayable in accordance with the method set forth in Section 3.06 (a) (iii) (B) of this Agreement at any time after twelve months from the date of this Agreement or after the Bank has approved or authorized withdrawals for sub-loans or investments repayable in accordance with the method set forth in Section 3.06 (a) (iii) (A) of this Agreement in an aggregate amount corresponding to forty per cent of the amount of the Loan, whichever occurs earlier, until the Guarantor, the Bank and the Borrower have: (A) reviewed the appropriateness of the rate of interest for sub-loans and investments referred to in Section 3.01 (a) (i) of this Agreement in the light of inflation trends - 17 - and future inflation prospects in Colombia and abroad; and (B) agreed on the rate of interest for such sub-loans and investments. Section 3.05. (a) Subject to the provisions of paragraph (c) of this Section, the Borrower shall exercise its rights in rela- tion to each Financiera, each Investment Project or Technology Improvement Program or Pollution Control Program and each Invest- ment Enterprise in such manner as to: (i) protect at all times the interests of the Bank and the Borrower; (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of the Project. (b) The Borrower shall promptly take all such action and exercise all such recourse available to it under a Subsidiary Loan Agreement with a Financiera as the Bank shall request in order to ensure the prompt and full performance by such Financiera of its obligations thereunder. (c) The Borrower shall not, without the prior agreement of the Bank, suspend or terminate the right of a Financiera to have access to the proceeds of the Loan under the Subsidiary Loan Agreement with such Financiera or declare the principal amount of the Subsidiary Loan thereunder due and payable prior to the agreed maturity unless the right of the Borrower to withdraw the proceeds of the Loan allocated to such Financiera shall have been suspended or terminated by the Bank or the Bank shall have declared the principal amount of the Loan relent to such Financiera to be due and payable immediately or a default shall have occurred in the due and punctual payment of any monies payable by such Financiera to the Borrower and such default shall continue for thirty days after notice thereof shall have been given by the Borrower to such Financiera. Section 3.06. The Borrower shall cause each Financiera to apply any amount lent to it by the Borrower from the proceeds of the Loan allocated in accordance with Section 3.02 (a) of this - 18 - Agreement exclusively to the financing of Investment Projects in accordance with the provisions of this Agreement and the respec- tive Subsidiary Loan Agreement, including, inter alia, provisions ensuring that sub-loans and loans to Financieras for the financing of investments shall, except as the Guarantor, the Bank and the Borrower shall otherwise agree, be made on the following terms and conditions: (a) Sub-loans: (i) the schedule of amortization of each sub-loan shall (A) provide for an appropriate period of grace not exceeding three years, (B) not extend beyond fifteen years from the date of the approval by the Bank of such sub-loan, or in the case of a free- limit sub-loan, from the date of authorization by the Bank to make withdrawals from the Loan Account in respect thereof and (C) provide for approximately equal semiannual, or more frequent, aggregate payments of principal and interest or approximately equal semiannual, or more frequent, payments of principal; (ii) sub-loans may finance working capital requirements of an Investment Enterprise only when the sub-loan in question finances also fixed assets for an Investment Project; (iii) any Investment Enterprise with total assets of less than Col.$150,000,000 as of December 31, 1977 or which shall carry out an Export Investment Project or an Industrial Decentralization Investment Project shall repay the principal of each sub-loan in pesos, such repayment to be made in accordance with either one of the following two methods: (A) the principal amount to be so repaid shall be the amount in pesos equivalent to the foreign currency withdrawn by the Borrower from the Loan Account for the purpose of enabling the Financiera to make the sub-loan in question, determined as of the respec- tive date of each withdrawal; or (B) the principal amount to be so repaid shall be the equivalent in pesos of the value in dollars of the amount in foreign currency withdrawn by the Borrower from the Loan Account for the purpose of enabling the - 19 - Financiera to make the sub-loan in question, determined as of the respective dates of repayment; (iv) the method of repayment in (iii) above shall be determined by agreement between the Financiera and the Investment Enterprise as of the date of approval by the Financiera of the Investment Project for which the sub-loan is made; (v) an Investment Enterprise referred to in (iii) above shall pay interest on the outstanding principal of each sub-loan at either one of the following rates: (A) where the repayment method chosen is the one provided in (iii) (A) above, at a rate of twenty- five per cent (25%) per annum; and (B) where the repayment method chosen is the one provided in (iii) (B) above, at a rate of ten and three- quarters per cent (10-3/4%) per annum; (vi) in the case of an Investment Enterprise other than those referred to in (iii) above, repayment of the principal of each sub-loan shall be made in pesos in the equivalent of the value in dollars of the amount in foreign currency withdrawn by the Bor- rower from the Loan Account for the purpose of enabling the Financiera to make the sub-loan in question, determined as of the respective dates of repayment; (vii) an Investment Enterprise referred to in (vi) above shall pay interest on the outstanding principal of each sub-loan at a rate of ten and three-quarters per cent (10-3/4%) per annum; and (viii) where the repayment method is the one provided in (iii) (B) or (vi) above, the peso equivalent of the outstanding principal on which the interest is payable shall be calculated as of the date on which each interest payment is actually made. (b) Loans to Financieras for the financing of investments: (i) loans shall be denominated and repayable in iesos in accordance with the methods of repayment set forth in paragraph (a) (iii) or (vi) of this Section; - 20 - (ii) loans shall finance up to 100% of the foreign currency cost of the investments to be financed therewith; (iii) the repayment terms shall not exceed fifteen years, including a grace period of up to three years; (iv) interest on the outstanding principal of each loan shall be payable at the rate of: (A) twenty- two per cent (22%) per annum if the loan is repay- able in accordance with the repayment method set forth in paragraph (a) (iii) (A) of this Section, with the exception of those loans used for mak- ing investments in Industrial Decentralization Investment Projects where the interest rate shall be twenty-one per cent (21%) per annum; and (B) eight per cent (8%) per annum if the loan is repayable in .accordance with the repayment method set forth in paragraph (a) (iii) (B) or (vi) of this Section; and (v) loans shall be made only on the basis of a detailed appraisal of the proposed investment, including an overall financing plan and an evaluation of the economic benefits and profitability expected to accrue from such investment. Section 3.07. The Borrower shall cause each Financiera to apply any amount lent to it by the Borrower from the pro- ceeds of the Loan allocated in accordance with Section 3.02 (b) of this Agreement exclusively to the financing of Technology Improvement Programs and Pollution Control Programs in accordance with the provisions of this Agreement and the respective Sub- sidiary Loan Agreement, including, inter alia, provisions ensuring that subloans shall, except as the Guarantor, the Bank and the Borrower shall otherwise agree, be made on the following terms and conditions: (i) sub-loans shall be denominated and repayable in pesos in accordance with the repayment method set forth in Section 3.06 (a) (iii) (A) of this Agreement; - 21 - (ii) sub-loans shall finance only eligible expenditures, as defined in the Statement of Operating Policies and Procedures of the Borrower; (iii) the schedule of amortization of each sub-loan shall (A) provide for an appropriate period of grace not exceeding two years, (B) not extend beyond (1) five years in the case of a Technology Improvement Program and (2) ten years in the case of a Pollu- tion Control Program from the date of authorization by the Bank to make withdrawals from the Loan Account in respect of such sub-loan and (C) provide for approximately equal semiannual, or more frequent, aggregate payments of principal and interest or approximately equal semiannual, or more frequent, payments of principal; (iv) the amount of any sub-loan to any single Investment Enterprise shall not exceed, in the aggregate or together with any other sub-loans for the same purpose to the same Investment Enterprise: (A) the equivalent of $250,000 in the case of Technology Improvement Programs, and (B) the equivalent of $500,000 in the case of Pollution Control Programs; and (v) interest on the outstanding principal of each sub-loan shall be payable at the rate of twenty per cent (20%) per annum. Section 3.08. (a) The Borrower shall cause each Financiera to apply any amount lent to it by the Borrower from the proceeds of the Loan allocated in accordance with Section 3.02 (c) of this Agreement exclusively to the financing of Industrial Decentrali- zation Investment Projects and Export Investment Projects through minority investments in Investment Enterprises, and of Investment Projects through minority investments in Investment Enterprises with total assets of less than Col.$150,000,000 as of December 31, 1977, in accordance with the provisions of this Agreement and the respective Subsidiary Loan Agreement. (b) Except as the Guarantor, the Bank and the Borrower shall otherwise agree, the Borrower shall lend to each Financiera amounts referred to in paragraph (a) of this Section on the following terms and conditions: - 22 - (i) loans shall be denominated and repayable in pesos in acci lance with the method of repayment set forth in bection 3.06 (a) (iii) (A) of this Agreement; (ii) loans shall finance up to 100% of the foreign currency cost of the investments to be financed therewith; (iii) loans from the proceeds of the Loan and any Prior Loan for the financing of investments in any single Investment Enterprise, its subsidiaries and related companies shall not exceed, in the aggregate, the equivalent of $2,000,000; (iv) the repayment terms shall not exceed fifteen years, including a grace period of up to five years; (v) interest on the outstanding principal of each loan shall be payable at a rate ranging from twenty per cent (20%) to twenty-two per cent (22%) per annum, the rate chosen for investments other than free- limit investments to be acceptable to the Bank; and (vi) loans shall be made only on the basis of a detailed appraisal of the proposed investment, including an overall financing plan and an evaluation of the economic benefits aU0 profitability expected to accrue from such investment. Section 3.09. A Group C Financiera, other than Corporaci6n Financiera Aliadas S.A., shall be eligible to participate in the Project only after it has been appraised, and its Estatutos and Statement of Operating Policies and Procedures have been found acceptable by the Bank and the Borrower, and the Bank has approved the findings and recommendations of the appraisal, provided, however, that only a limited appraisal shall be required for a Group C Financiera meeting certain minimum standards established by the Borrower in its Statement of Operating Policies and Procedures, to make sub-loans not exceeding the equivalent of $500,000 each, up to an aggregate amount of $2,000,000 equivalent for Investment Projects under paragraph (a) (i) of Section 3.01 of this Agreement. - 23 - ARTICLE IV Financial Covenants Section 4.01. The Borrower shall maintain records adequate to record the progress of the Project and to reflect separately from its other operations, and in accordance with consistently maintained sound accounting practices, the operations and finan- cial transactions of DDC. Section 4.02. The Borrower shall: (i) have the records referred to in Section 4.01 of this Agreement 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 such records 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 such records and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. (a) The Bank and the Borrower shall cooperate fully to ensure that the purposes of the Loan will be accom- plished. To that end, the Bank and the Borrower shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, DDC, the Financieras and their subsidiaries, and any other matters relating to the purposes of the Loan. (b) The Borrower shall furnish to the Bank all such informa- tion as the Bank shall reasonably request concerning DDC, the Financieras and their subsidiaries, the expenditure of the pro- ceeds of the Loan, the Project, the Subsidiary Loan Agreements, the Investment Enterprises, the Investment Projects, the Technol- ogy Improvement Programs, the Pollution Control Programs and the sub-loans and investments. Section 4.04. The Borrower shall enable the Bank's represen- tatives to inspect the records referred to in Section 4.01 of this Agreement and any other relevant documents. -24- Section 4.05. (a) The Borrower shall establish and maintain such policies and adopt such measures consistent therewith as shall from time to time be necessary to ensure the employment in DDC of an adequate number of qualified and experienced staff. (b) Without limitation upon the generality of paragraph (a) of this Section, the Borrower shall establish, and there- after maintain, within DDC a special unit for the supervision of Financieras with an adequate number of qualified and experienced staff. (c) The Borrower shall prepare, to the satisfaction of the Bank, additional training programs for the DDC staff, and shall carry out such programs in time and manner satisfactory to the Bank. ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified: (a) a default shall occur in the due and punctual payment of any amount payable by any Financiera to the Borrower under the respective Subsidiary Loan Agreement; (b) a default shall occur in the performance of any other obligation on the part of any Financiera under the respective Subsidiary Loan Agreement; (c) a Financiera shall have been unable to pay its debts as they mature or any action or proceeding shall have been taken by a Financiera or by others whereby any of the property of such Financiera shall or may be distributed among its creditors; (d) any part of the principal amount of any loan or credit to a Financiera having an original maturity of one year or more shall, in accordance with its terms, have become due and payable in advance of maturity as provided in the relative contractual instruments, or any security for any such loan or credit shall have become enforceable; (e) the Guarantor or any other authority having jurisdictioA shall have taken any action for the dissolution or disestablish- ment of a Financiera or for the suspension of its operations; - 25 - (f) a resolution shall have been passed for the dissolution or liquidation of a Financiera; (g) a change shall have been made in the Estatutos or the Statement of Operating Policies and Procedures of a Financiera which would materially and adversely affect the operations or the financial condition of such Financiera; (h) a change shall have been made in the Statement of Operating Policies and Procedures of the Borrower without the Bank's consent; and (i) a subsidiary or any other entity shall have been created or acquired or taken over by any of the Financieras, if such creation, acquisition or taking over would adversely affect the conduct of such Financiera's business or such Financiera's financial condition or the efficiency of such Financiera's management and personnel or the carrying out of the Project; provided, however, that if any event referred to in this Section, other than the event referred to in paragraph (h) thereof, shall have occurred and be continuing, the Bank may at its option suspend the right of the Borrower to make withdrawals from the Loan Account only in respect of amounts relent or proposed to be relent to the Financiera or Financieras, as the case may be, affected by any such event. Section 5.02. For the purposes of Section 7.01 of the General Conditions the following additional events are specified: (a) any of the events specified in paragraph (a) or para- graph (d) of Section 5.01 of this Agreement shall occur and shall continue for a period of thirty days; (b) any of the events specified in paragraph (b) or para- graph (i) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower, the Guarantor and such Financiera; and (c) any of the events specified in paragraph (c) or para- graph (e) or paragraph (f) or paragraph (g) or paragraph (h) of Section 5.01 of this Agreement shall occur. - 26 - ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of this Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and the Group A Financieras and the Group B Financieras have been duly authorized or ratified by all corporate and governmental action; (b) the Subsidiary Loan Agreements referred to in paragraph (a) above have become effective in accordance with their terms; and (c) the condition of the Financieras as represented or warranted to the Bank at the date of this Agreement has undergone no material adverse change between such date and the date agreed upon between the Bank and each Financiera for purposes of this paragraph; provided, however, that if the conditions stipulated in this Section or in Section 6.02 shall not have been fulfilled in respect of one or more Financieras, this Agreement may become effective, at the option of the Bank, only in respect of the other Financieras; and provided, further, that this Agreement shall become effective, in respect of Corporaci6n Financiera de Occidente, only after such Financiera has demonstrated, to the satisfaction of the Bank and the Borrower, sufficient progress in the execution of its Plan of Action. Section 6.02. The following is specified as an additional matter, within 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 each Subsidiary Loan Agree- ment has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and the Financiera which is a party thereto and constitutes a valid and binding obligation of the Borrower and of such Financiera in accordance with its terms. - 27 - Section 6.03. The date of November 28, 1978, is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Miscellaneous Section 7.01. 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 64145 (WUI) For the Borrower: Banco de la Repfblica Bogotg, Colombia Cable address: Telex: REDESBANCO 44559 Bogotf IN WITNESS WHEREOF the parties hereto, acting through their representatives thereunto duly authorized, have caused this - 28 - 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/ Adalbert Krieger Regional Vice President Latin America and the Caribbean BANCO DE LA REPUBLICA By /sf Antonio Jose Gutifrrez Authorized Representative - 29 - SCHEDULE 1 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* February 15, 1983 $1,750,000 August 15, 1983 2,500,000 February 15, 1984 3,500,000 August 15, 1984 4,500,000 February 15, 1985 4,750,000 August 15, 1985 5,500,000 February 15, 1986 6,000,000 August 15, 1986 6,500,000 February 15, 1987 7,000,000 August 15, 1987 7,500,000 February 15, 1988 7,250,000 August 15, 1988 6,750,000 February 15, 1989 5,500,000 August 15, 1989 5,250,000 February 15, 1990 4,750,000 August 15, 1990 3,750,000 February 15, 1991 3,000,000 August 15, 1991 2,750,000 February 15, 1992 2,500,000 August 15, 1992 2,000,000 February 15, 1993 1,750,000 August 15, 1993 1,500,000 February 15, 1994 1,250,000 August 15, 1994 1,000,000 February 15, 1995 1,000,000 August 15, 1995 500,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equiva- lents determined as for purposes of withdrawal. - 30 - 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 or to Section 2.09 (a) of the Loan Agreement: Time of Prepayment Premium Not more than three years before maturity 1.30% More than three years but not more than six years before maturity 2.65% More than six years but not more than eleven years before maturity 4.85% More than eleven years but not more than fifteen years before maturity 6.60% More than fifteen years before maturity 7.50% - 31 - SCHEDULE 2 Modifications of the General Conditions For the purposes of the Loan Agreement, the provisions of the General Conditions are modified as follows: (1) The words "Investment Projects", "Technology Improve- ment Programs" and "Pollution Control Programs" are substituted for the words "the Project" at the end of Section 5.03. (2) 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 (c) of Section 2.03 of the Loan Agreement no applications or requests permitted under paragraph (a) or paragraph (b) 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, or (d) the Bank shall have received notice from the Guarantor pursuant to Section 6.07 with respect to an amount of the Loan, the Bank may by notice to the Borrower 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." (3) Section 11.03 is amended to read as follows: "Section 11.03. Action on behalf of the Borrower or Guarantor. Any action required or permitted to be taken, and any documents required or permitted to be executed, pursuant to the Loan Agreement or the Guarantee Agree- ment, on behalf of the Borrower or the Guarantor, may be taken or executed by the representative of the Borrower or the Guarantor designated in the Loan Agreement or the Guarantee Agreement for the purposes of this Section or any person thereunto authorized in writing by him. Any modifica- tion or amplification of the provisions of the Loan Agreement - 32 - or the Guarantee Agreement may be agreed to on behalf of the Borrower or the Guarantor by written instrument executed on behalf of the Borrower or the Guarantor by the representative so designated or any person thereunto authorized in writing by him; provided that such modification or amplification is reasonable in the circumstances and will not substantially increase the obligations of the Borrower under the Loan Agreement or of the Guarantor under the Guarantee Agreement."