Peru - Second Industrial Credit Project : Loan 1968 - Loan Agreement - Conformed

X LOAN NUMBER 1968 PE Loan Agreement (Second Industrial Credit Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and CORPORACION FINANCIERA DE DESARROLLO, S.A. - COFIDE Dated , 1981 LOAN NUMBER 1968 PE LOAN AGREEMENT AGREEMENT, dated ' 76/, 1981, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and CORPORACION FINANCIERA DE DESARROLLO, S.A. - COFIDE (hereinafter called the Borrower), a development finance corpora- tion established and operating under the laws of the Republic of Peru'. ARTICLE I General Conditions; Definitions 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 October 27, 1980, 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) "Sub-loan" means a loan made or proposed to be made, by the Borrower or by a Financial Intermediary, out of the proceeds of the Loan to an Investment Enterprise for an Investment Project 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. (b) "Financial Intermediary" means any financial institu- tion, which has been established in, and is operating under the laws of, the Republic of Peru, which, in accordance with such laws, may normally undertake medium and long-term operations, which is eligible in accordance with the applicable provisions of the Statement of Policy, and with which the Borrower has entered into contractual arrangements satisfactory to the Bank whereunder one or more loans have been made or are proposed to be made for the sole purpose of financing one or more Sub-loans made or proposed to be made by the applicable financial institution. -2- (c) "Investment Enterprise" means an industrial, construc- tion, mining or tourism enterprise to which the Borrower or a Financial Intermediary proposes to make or has made a Sub-loan. (d) "Investment Project" means a specific development project, financially and economically viable, to be carried out by an Investment Enterprise utilizing the proceeds of a Sub-loan. (e) "Local currency" and "Sol" mean the currency of the Guarantor, and "local currency cost" means expenditures in local currency made in respect of goods procured in, or services sup- plied from within, the Guarantor's territories. (f) "Foreign currency" means any currency other than the currency of the Guarantor, and "foreign currency cost" means, subject to Section 5.01 of the General Conditions, expenditures in foreign currency made in respect of goods procured in, or services supplied from, a country other than the Guarantor's. (g) "Charter" means the charter of the Borrower approved by the Guarantor's Legislative Decree No. 206, published in El Peruano on June 15, 1981, as amended to the date of this Agree- ment, and "Estatutos" means the public deed incorporating the Borrower as approved by the Guarantor's Supreme Decree No. dated August , 1981, as amended to the date of this Agreement. (h) "Statement of Policy" means the statement of lending and investments policy approved by the Board of Directors of the Borrower on August 13, 1975, as amended up to October 31, 1980 and for purposes of Section 6.01 (b) of this Agreement, and as it may be further amended, from time to time. (i) "Subsidiary" means any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by the Borrower or by an Invest- ment Enterprise or by a Financial Intermediary, and the term includes any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by any one or more Subsidiaries of the Borrower or of an Investment Enterprise or a Financial Intermediary, or by the Borrower or an Investment Enterprise or a Financial Intermediary and one or more of its respective Subsidiaries, and "Financial Subsidiarv" means any Subsidiary which, in the judgement of the Bank, is engaged in promotional, financial or technical activities similar or complementary to the operations of the Borrower. (j) "Related company" means any legal entity which owns or effectively controls a majority of the outstanding voting stock or other proprietary interest of an Investment Enterprise (such related company hereinafter called "Parent Company") or any legal entity other than such Investment Enterprise which is so owned or effectively controlled by such Parent Company. (k) "Subsidiary Loan Contract" means any one set of one or more contractual arrangements entered into between the Borrower and a Financial Intermediary pursuant to Section 3.04 (a) of this Agreement whereunder such Financial Intermediary shall borrow from the Borrower such amounts in dollars, to be financed out of the proceeds of the Loan, as shall be required for the financing of one or more Sub-loans made or proposed to be made by such Finan- cial Intermediary. (1) "Exchange Loss Provision Contract" means the contract to be entered between the Guarantor and the Borrower pursuant to Section 2.02 (c) of the Guarantee Agreement and 3.02 (c) of this Agreement and "Provision" means the account for purposes of the creation of an exchange-loss provision, to be opened pursuant to Section 3.02 (a) of this Agreement. (m) "Reorganization Legislation" means the Guarantor's Law No. 23230, published in El Peruano on December 16, 1980, and all action pursuant thereto taken or to be taken by the Guarantor and the Borrower, including but not limited to the Law or Legislative Decree or Decrees required by Section 6.01 (c) of this Agreement, in order to enable the Borrower to transfer to the Guarantor, or any agency thereof other than a Subsidiary of the Borrower, the shares of capital stock of the Corporations held by the Borrower as of December 31, 1980, and to enter with the Guarantcr, or such agency, as the case may be, into the contractual arrangements referred to in Section 4.10 (b) of this Agreement; and the term "Corporations" means the corporations listed in the letter of even date herewith addressed by the Guarantor and the Borrower to the Bank. -4- 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 sixty million dollars ($60,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account for amounts paid (or, if the Bank shall so agree, for amounts to be paid) by the Borrower on account of withdawals made by an Investment Enterprise under a Sub-loan made by the Borrower or by a Financial Intermediary to finance the lower of: (A) the amount of the Sub-loan in question; or (B) (i) the reasonable foreign currency cost of goods and services for the Investment Project financed under the Sub-loan in respect of which the withdrawal from the Loan Account is requested, (ii) the equivalent of seventy per cent (70%) (representing the estimated foreign exchange cost) of the reasonable off-the-shelf price of imported goods locally procured for the Investment Project financed under the Sub-loan in respect of which the withdrawal from the Loan Account is requested, (iii) the equivalent of fifty per cent (50%) (representing the estimated foreign exchange component) of the reasonable ex-factory price of locally manu- factured goods for the Investment Project financed under the Sub-loan in respect of which the withdrawal from the Loan Account is requested, and (iv) the equivalent of thirty-five per cent (35%) (representing the estimated foreign exchange component) of the reasonable local currency cost of civil works for the Invest- ment Project financed under the Sub-loan in respect of which the withdrawal from the Loan Account is requested; provided, however, that no withdrawal shall be made in respect of a Sub-loan unless (1) the Sub-loan has been approved by the Bank, or (2) the Sub-loan shall be a Free-limit Sub-loan for which the Bank has authorized withdrawals from the Loan Account. (b) 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, when added to any other outstanding amounts financed or proposed to be financed out of the proceeds of the Loan for such Investment Project, shall not exceed the sum of: (i) $500,000 equivalent, if such Sub-loan has been made by a Financial Intermediary, or (ii) $1,000,000 equivalent, if such Sub-loan has been made by the Borrower. The foregoing amounts are subject to -5- change from time to time as determined by the Bank, provided, however, that the amount determined from time to time for sub- paragraph (i) of this paragraph shall not be higher than the amount then determined for sub-paragraph (ii) of this paragraph. (c) 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 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 the application and informa- tion required by Section 2.03 (a) of this Agreement or, in respect of a Free-limit Sub-loan, if the expenditures shall have been made more than ninety days prior to the date on which the Bank shall have received in respect of such Free-limit Sub-loan the request and information required by Section 2.03 (b) of this Agreement, or (iii) any Sub-loan, if the amount of such Sub-loan, when added to the amount of all other Sub-loans made or proposed to be made to the Investment Enterprise in question or to its Related Company or Companies, shall exceed the equivalent of five million dollars ($5,000,000), or (iv) any Sub-loan made by a Financial Inter- mediary, if such Financial Intermediary has not entered with the Borrower into a Subsidiary Loan Contract satisfactory to the Bank under which such Sub-loan could be financed out of the proceeds of the Loan in a manner satisfactory to the Bank. (d) The ninety-day periods set forth in paragraph (c) (ii) of this Section shall apply to Sub-loans, including Free-limit Sub-loans, made or proposed to be made by the Borrower. In the case of Sub-loans, including Free-limit Sub-loans, made or pro- posed to be made by a Financial Intermediary such periods shall be considered extended to one hundred and eighty days. Section 2.03. (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, when applicable, the economic rate of return of such Investment Project as required by Section 3.07 of this Agreement and, in all cases, 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 therefor; (iii) a statement as to whether the Sub-loan will be -6- made directly by the Borrower or by a Financial Intermediary, and in the latter case, a copy of the applicable Subsidiary Loan Contract; and (iv) 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 Invest- ment Enterprise and the Investment Project, including, when applicable, the economic rate of return of such Investment Project as required by Section 3.07 of this Agreement and, in all cases, a description of the expenditures proposed to be financed out of the proceeds of the Loan; (ii) a statement as to whether the Sub-loan will be made directly by the Borrower or by a Financial Inter- mediary, and in the latter case, a copy of the applicable Sub- sidiary Loan Contract; and (iii) the terms and conditions of the Sub-loan, including the schedule of amortization therefor. (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 June 30, 1984. Section 2.04. The Closing Date shall be June 30, 1985 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 nine and three-fifths per cent (9-3/5%) 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 semi-annually on January 1 and July 1 in each year. Section 2.08. (a) The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 1 to this Agreement as such Schedule shall be amended from time to time by the Bank to the extent required -7- to: (i) conform in relevant part substantially to the aggregate of the amortization schedules applicable to Sub-loans which have been approved or authorized for withdrawals from the Loan Account under Section 2.02 of this Agreement; and (ii) take into account any cancellation pursuant to Article VI of the General Conditions and any repayments made by the Borrower under Section 2.09 of this Agreement; provided that repayments due hereunder shall be made on January 1 and July 1 in each year. Such amendments of said Schedule 1 shall include amendments to the table of premiums on prepayment, if necessary. (b) The amortization schedule applicable to each Sub-loan shall provide for an appropriate period of grace, which shall not exceed three years and, unless the Bank and the Borrower shall otherwise agree (i) shall not extend beyond 15 years from the date of approval by the Bank of such Sub-loan or July 1, 1998, which- ever is earlier, or in the case of a Free-limit Sub-loan, the date of authorization by the Bank to make withdrawals from the Loan Account in respect thereof or July 1, 1998, whichever is earlier, and (ii) shall provide for approximately equal semiannual, or more frequent, aggregate payments of principal and interest or approxi- mately equal semi-annual, or more frequent, payments of principal. (c) The Borrower shall transmit to the Bank, for its prior approval, any substantial changes proposed to be made by the Borrower in respect of the repayment provisions of any Sub-loan. Section 2.09. Unless the Bank and the Borrower shall other- wise agree: (a) If (i) a Sub-loan or any part thereof shall be repaid to the Borrower in advance of maturity or if a Sub-loan or any part thereof shall be sold, transferred, assigned or otherwise disposed of for value by the Borrower, 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 or in any amendment thereof under Section 2.08 (a) of this Agreement, the amount withdrawn from the Loan Account in respect of such Sub-loan or part thereof and not theretofore repaid to the Bank, or (ii) a Sub-loan or any part thereof shall be repaid to the applicable Financial Intermediary in advance of maturity or if a Sub-loan or any part thereof shall be sold, transferred, assigned or otherwise disposed of for value by such Financial Intermediary, and, in both cases, to the extent -8- such Financial Intermediary has repaid to the Borrower, as required in Part C of Schedule 3 to this Agreement, the amount of the loan, or part thereof, made by the Borrower to such Finan- cial Intermediary for purposes of financing the Sub-loan, or part thereof, so repaid or disposed of, 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 or in any amendment thereof under Section 2.08 (a) of this Agreement, the amount withdrawn from the Loan Account in respect of such Sub-loan or part thereof and not theretofore repaid to the Bank. (b) Any amount so repaid by the Borrower shall be applied by the Bank to the maturity or maturities of the Loan in amounts corresponding to the outstanding amounts of the maturity or maturities of the Sub-loan or part thereof so repaid or disposed of. (c) Paragraph (b) of Section 3.04 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 Peru' as will contribute to the economic and social deve- lopment of the country. The Project consists in the financing of specific development projects through loans to Investments Enter- prises in Peru", made directly by the Borrower or through Finan- cial Intermediaries which, in that case, shall assume the credit risk of the loans in question, all in furtherance of the corporate purposes of the Borrower. (b) The Borrower shall carry out the Project and conduct its operations and affairs in accordance with sound financial standards and practices, with qualified management and personnel, and in accordance with the Charter and Statement of Policy. (c) The terms and conditions of Sub-loans made by the Borrower, Sub-loans made by Financial Intermediaries and loans made by the Borrower to a Financial Intermediary with the sole -9- purpose of financing Sub-loans made by such Financial Inter- mediary, shall be satisfactory to the Bank and the Borrower and shall include those set forth in Schedule 3 to this Agreement. Section 3.02. The Borrower shall: (a) Make provision for any foreign exchange-losses incurred by reason of this Agreement including the losses described in paragraph (b) of Section 2.02 of the Guarantee Agreement by opening in its books and maintaining thereafter, until the Loan has been repaid and interest thereon has been fully paid, a reserve account into which the Borrower shall pay on each of the dates referred to in Section 2.07 of this Agreement, an amount equivalent to 1.5% per annum, or such other percentage as shall be determined from time to time pursuant to paragraph (b) of this Section, on the aggregate amount of Sub-loans outstanding from time to time, and shall make good any such losses to the extent they are realized losses, out of the funds in such reserve account. (b) From time to time, review together with the Guarantor and the Bank the percentage set forth in paragraph (a) of this Section in order to determine whether a different percentage is warranted in light of the circumstances prevailing at the time of such review; provided, however, that no such different percentage shall be adopted without the consent of the Bank. (c) Enter with the Guarantor into the Exchange-Loss Pro- vision Contract, and shall exercise all of its rights and fulfill all of its obligations in respect thereof in such manner as to protect the interests of the Guarantor, the Bank and the Borrower, and shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Exchange- Loss Provision Contract or any of the provisions thereof. Section 3.03. (a) The Borrower undertakes that, unless the Bank shall otherwise agree, any Sub-loan will be made on terms whereby the Borrower shall obtain, by written contract with the Investment Enterprise or by other appropriate legal means, rights adequate to protect the interests of the Bank and the Borrower, including the right of the Borrower to: (i) 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; (ii) require that: (A) the goods and services to - 10 - 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 services, 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 (B) such goods and shall be used exclusively in the carrying out of the Investment Project; (iii) inspect, by itself or jointly with representatives of 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; (iv) require that: (A) 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 practices; and (B) 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; (v) obtain all such information as the Bank or the Borrower 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 (vi) 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 Borrower and, in appropriate cases, the right to premature the Sub-loan. (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 3.04. (a) In order for a financial institution to become a Financial Intermediary and therefore eligible to receive loans from the Borrower, out of the proceeds of the Loan, to finance Sub-loans made by such Financial Intermediary, the Borrower shall enter with such financial institution into one or more contractual arrangements on terms and conditions satisfactory to the Bank (each such set of contractual arrangements with any one Financial Intermediary hereinafter called Subsidiary Loan Contract). - 11 - (b) The Borrower shall exercise its rights in relation to each Subsidiary Loan Contract in such manner as to protect the interests of the Bank and the Borrower and shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving such Subsidiary Loan Contract or any provision thereof. (c) The Borrower shall cause each Financial Intermediary, by means of the applicable Subsidiary Loan Contract, to: (i) undertake that, unless the Bank shall otherwise agree, any Sub- loan will be made on t(rms, in addition to those set forth in Schedule 3 to this Agreement, 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 and the Borrower, including, mutatis mutandis, the rights described in respect of the Borrower in Section 3.03 of this Agreement; and (ii) exercise its rights in relation to each Investment Project in such a manner as to: (A) protect the interests of the Bank, the Borrower and the Financial Intermediary; (B) comply with its obligations under the applicable Subsidiary Loan Contract; and (C) achieve the purposes of the Project. Section 3.05. (a) The Borrower shall furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan, the Project, the Financial Intermediaries, the Invest- ment Enterprises, the Investment Projects, the Provision, the Sub-loans and, where appropriate, the benefits to be derived from the foregoing. (b) The Borrower shall inform the Bank promptly of any change in the Statement of Policy. (c) Within six months following the last withdrawal from the Loan Account, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reason- ably request, on the execution and initial operation of the Investment Projects, their costs and the benefits derived and to be derived from them, the performance by the Borrower and the Bank of their respective obligations under this Agreement, the perform- ance by the Borrower and each Financial Intermediary of their respective obligations under the applicable Subsidiary Loan Contract, the operation of the Provision, and the accomplish- ment of the purposes of the Loan. - 12 - Section 3.06. The Borrower shall duly perform all its obli- gations under agreements under which funds have been lent or otherwise put at the disposal of the Borrower by the Guarantor or its agencies or others for relending, investment or management. The Borrower shall promptly inform the Bank. of any action which would have the effect of assigning, or of amending, abrogating or waiving any material provision of, any such agreement. Section 3.07. The Borrower shall, as part of the appraisal of each Investment Project for which financing out of the proceeds of the Loan in an amount equivalent to $250,000 or more is being sought, calculate, or cause the Financial Intermediary in question to calculate, the economic rate of return thereof; such calcula- tion to be made in accordance with economic evaluation methods satisfactory to the Bank and the Borrower. Section 3.08. The Borrower shall (a) assist Financial Inter- mediaries concerned with appraisal of Investment Projects in matters related to that activities; and (b) put into effect, in form and substance satisfactory to the Bank, (i) not later than Deceber 31, 1981, a management information, control and per- formance evaluation system, such system to be applied by the Borrower's Financial Administration Division to all relevant aspects of the Borrower's operation, and (ii) not later than December 31, 1981, a systematic policy for decreasing, on a consistent basis, the book value of the Borrower's investment portfolio when it is subject to possible losses. Section 3.09. The Borrower shall cause each of its Subsi- diaries to observe and perform the obligations of the Borrower hereunder to the extent to which such obligations shall or can be applicable thereto, as though such obligations were binding upon such Subsidiary. ARTICLE IV Financial Covenants Section 4.01. The Borrower shall maintain and cause each Financial Intermediary, in respect of Sub-loans financed by such Financial Intermediary, to maintain, procedures and records adequate to monitor and record the progress 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. - 13 - Section 4.02. The Borrower shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) including the Provision and the accounts and financial statements of its Subsidiaries, for each fiscal year audited in accordance with sound auditing prin- ciples consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank, as soon as available but in any case not later than six months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of the Borrower and its Subsidiaries and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets or the assets of its Financial Subsidiaries as security for any debt. (b) The Borrower undertakes that, except as the Bank shall otherwise agree: (i) if any lien shall be created on any assets of the Borrower or any Financial Subsidiary as security for any debt, such lien will equally and ratably secure the payment of the principal of, and interest and other charges on the Loan and that in the creation of any such lien express provision will be made to that effect at no cost to the Bank; and (ii) if any statutory lien shall be created on any assets of the Borrower or of any Financial Subsidiary as security for any debt, the Borrower shall grant, at no cost to the Bank, an equivalent lien satis- factory to the Bank to secure the payment of the principal of, and interest and other charges on the Loan; provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 4.04. Except as the Bank shall otherwise agree, the Borrower shall: (i) conduct its operatons and affairs in such manner as shall be necessary to maintain, at all times, its debt/equity ratio within the limit referred to in Section 4.06 of - 14 - this Agreement; and (ii) if such ratio shall, for reasons beyond the Borrower's control, be exceeded, promptly take all such reasonable action as shall be necessary or advisable to bring such ratio within such limit. Section 4.05. The Borrower shall not make any repayment in advance of maturity in respect of any outstanding debt of the Borrower which, in the judgment of the Bank, would materially affect the Borrower's ability to meet its financial obligations. Section 4.06. Except as shall be otherwise agreed between the Bank and the Borrower, the Borrower shall not incur or permit any Financial Subsidiary to incur any debt if, after the incurring of such debt, the consolidated debt of the Borrower and all its Financial Subsidiaries then incurred and outstanding would be greater than five times the consolidated capital and surplus of the Borrower and all its Financial Subsidiaries. For the purposes of this Section: (a) "debt" means any debt incurred by the Borrower or any of its Financial Subsidiaries maturing more than one year after the date on which it is originally incurred; (b) debt shall be deemed to be incurred: (i) under a loan contract or agreement (including the Loan Agreement and any outstanding loan agreement bewteen the Bank and the Borrower dated before the date of this Agreement) on the date and to the extent the amount of the loan is drawn down and outstanding pursuant to such loan contract or agreement; and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt is outstanding; (c) whenever in connection with this Section it shall be necessary to value in terms of soles debt payable in foreign currency, such valuation shall be made at the prevailing lawful rate of exchange at which such foreign currency is, at the time of such valuation, obtainable by the Borrower for the purposes of servicing such debt; (d) "consolidated debt of the Borrower and all its Finan- cial Subsidaries" means the total amount of debt of the Borrower and its Financial Subsidiaries, excluding any debt owed by the Borrower to any Financial Subsidiary or by any Financial Subsidiary to the Borrower or to any other Financial Subsidiary; and - 15 - (e) "consolidated capital and surplus of the Borrower and its Financial Subsidiaries" means the aggregate of the unimpaired paid-up capital, surplus and free reserves of the Borrower and its Financial Subsidiaries after excluding there- from such amounts as shall represent equity interests of the Borrower in any Financial Subsidiary or of any Financial Sub- sidiary in the Borrower or any other Financial Subsidiary. Section 4.07. The Borrower shall take such steps satisfactory to the Bank, additional to those to be taken pursuant to Section 3.02 of this Agreement, as shall be necessary to protect itself against risk of loss resulting from changes in the rates of exchange between the currencies (including soles) used in its operations. Section 4.08. 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 administration, opera- tions and financial condition of the Borrower, its Subsidiaries and the Provision, including the rate of interest and other charges on Sub-loans, and the Borrower shall furnish to the Bank All such information as the Bank shall reasonably request concerning the administration, operations, and financial condition of the Borrower, its Subsidiaries, and the Provision. Section 4.09. The Borrower shall enable the Bank's repre- sentatives to inspect the records referred to in Section 4.01 of this Agreement and any relevant documents. Section 4.10. (a) The Borrower shall take all action necessary on its part to put into effect the Reorganization Legislation, and to dispose for value, not later than December 31, 1981, of all of the Borrower's shares of capital stock of the Corporations. (b) For purposes of paragraph (a) of this Section, the Borrower shall, inter alia, enter into such contractual arrange- ments as shall be necessary to transfer to the Guarantor or any agency thereof, other than a subsidiary of the Borrower, on terms and conditions satisfactory to the Bank, all of the Borrower's shares of capital stock of the Corporations. 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: - 16 - (a) any part of the principal amount of any loan to the Borrower 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 shall have become enforceable; (b) a change shall have been made in the Charter or the Estatutos which would materially and adversely affect the opera- tions or the financial condition of the Borrower; (c) a material change, other than changes required under Section 6.01 (b) of this Agreement, shall have been made in the Statement of Policy without the Bank's consent; (d) a resolution shall have been passed for the dissolution or liquidation of the Borrower; (e) the Reorganization Legislation shall have been amended or revoked or waived; (f) a Subsidiary or any other entity shall have been created or acquired or taken over by the Borrower, if such creation, acquisition or taking over would adversely affect the conduct of the Borrower's business or the Borrower's financial condition or the efficiency of the Borrower's management and personnel or the carrying out of the Project. Section 5.02. For the purposes of Section 7.01 of the General Conditions the following additional events are specified: (a) the event specified in paragraph (a) or paragraph (b) or paragraph (c) or paragraph (d) or paragraph (e) of Section 5.01 shall occur; and (b) the event specified in paragraph (f) of Section 5.01 shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower. ARTICLE VI Effective Date; Termination; Miscellaneous Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: - 17 - (a) that the Exchange-Loss Provision Contract has been executed and delivered; (b) that the Statement of Policy has been amended so as to cover, in a manner satisfactory to the Bank, financial intermediation in development financing which the Borrower is encouraging; (c) that a Law or a Legislative Decree or Decrees have been enacted enabling the Borrower to comply with its obligations under Section 4.10 of this Agreement; (d) that this Agreement and the Guarantee Agreement have been duly registered by Direcci6n General de Credito P5blico of the Guarantor's Ministry of Economy, Finance and Commerce; and (e) that the Estatutos have been duly registered with the Guarantor's Registro Mercantil de los Registros PGblicos de Lima and that the execution and delivery of the Loan Agreement and supplemental letters thereto have been ratified by an extra- ordinary meeting of the Borrower's Shareholders within 90 days following such registration. Section 6.02. The following are specified as additional matters, 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: (a) that the Law or Legislative Decree or Decrees referred to in Section 6.01 (c) of this Agreement permit the lawful disposal for value by the Borrower of all of its shares of capital stock of the Corporations and that the method of payment of the value of such shares, if set forth in such Law or Legislative Decree or Decrees, is legally binding upon the Guarantor or its applicable agency, in accordance with the terms of such Law or Legislative Decree or Decrees; and (b) that this Agreement and the Guarantee Agreement have been duly registered by Direcci6n General de Cr6dito P5blico of the Guarantor's Ministry of Economy, Finance and Commerce. (c) that the Borrower has been duly established as a cor- poration (sociedad an6nima) under the laws of the Guarantor, that the Estatutos have been duly registered with the Guarantor's Registro Mercantil de los Registros Pfiblicos de Lima and that - 18 - the meeting of shareholders referred to in Section 6.01 (e) of this Agreement has been legally held and has legally ratified the execution and delivery of the Loan Agreement and the supplemental letters thereto. Section 6.03. The date of i&~44 c/1/404 is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.04. 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: Corporaci6n Financiera de Desarrollo, S.A. - COFIDE Avenida Inca Garcilaso de la Vega 1456 Casilla Postal 10377 Lima Perd Cable address: Telex: COFIDE 20162 PE Lima, Per,6 25356 PE IN WITNESS WHEREOF the parties hereto, acting through their representatives thereanto duly authorized, have caused this - 19 - Agreement to be signed in their respective names in the city of Lima, Peri, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Senior Vice President, Operations CORPORACION FINANCIERA DE DESARROLLO, S.A.- COFIDE By Authorized Representative By Authorized Representative - 20 - SCHEDULE 1 Amortization Schedule* Payment of Principal Date Payment Due (expressed in dollars)** On each January 1 and July 1 beginning on January 1, 1986 through January 1, 1998 2,310,000 On July 1, 1998 2,250,000 * The Amortization Schedule is subject to amendment pursuant to the provisions of Section 2.08 of the Loan Agreement. ** To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.04), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. - 21 - 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 3.04 (b) of the General Conditions or to Section 2.09 (a) of the Loan Agreement: Time of Prepayment Premium Not more than three years 1.70% before maturity More than three years but 3.40% not more than six years before maturity More than six years but not 6.20% more than eleven years before maturity More than eleven years but 8.50% not more than fifteen years before maturity More than fifteen years before maturity 9.60% - 22 - 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 following subparagraph (d) is added to Section 3.04: "(d) The Bank and the Borrower may from time to time agree upon arrangements for prepayment of the Loan and the application of such prepayment in addition to, or in substitution for, those set forth in paragraph (b) of Section 3.04." (2) The words "Investment Projects" are substituted for the words "the Project" at the end of Section 5.03. (3) Section 6.03 is deleted and replaced by the following new Section: "Section 6.03. Cancellation by the Bank. If (a) the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of thirty days, or (b) by the date specified in paragraph (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 shill have received notice from the Guarantor pursuant to Se.-ion 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." - 23 - SCHEDULE 3 Terms and Conditions Applicable to Sub-loans and to loans to Financial Intermediaries A. Sub-loans 1. Repayment of each of the Sub-loans, including grace period, will be subject to paragraph (b) of Section 2.08 of this Agreement, but the final maturity will not be scheduled, except if the Bank and the Borrower will otherwise agree for specific Sub-loans, before a date four years after the date of the contract providing for the Sub-loan in question. 2. Sub-loans will be denominated and repayable in dollars. 3. Interest on Sub-loans will be paid in dollars and will be calculated on the principal outstanding from time to time at an annual rate of (i) in the case of Sub-loans made by COFIDE not less than three and not more than four percentage points, and (ii) in the case of Sub-loans made by a Financial Intermediary of not more than four percentage points, in both cases above the sum of the rate set forth in Section 2.06 of this Agreement plus the rate determined, from time to time for purposes of Section 3.02 (a) of this Agreement (such sum hereinafter called the Base Rate). 4. If the Base Rate is modified pursuant to changes in the rate set forth in paragraph (a) of Section 3.02 of this Agreement made in accordance with paragraph (b) of such Section, such modification will not apply to Sub-loans which have already been made at the time the Base Rate is so modified. 5. Sub-loans made by Financial Intermediaries will be subject to prior approval of the Borrower except as otherwise agreed, in respect of specific Financial Intermediaries, between the Bank and the Borrower. B. Loans made to a Financial Intermediary for the sole purpose of financing Sub-loans made by such Financial Intermediary. 1. Each of these loans will be denominated and repayable in dollars and will finance 100% of the corresponding Sub-loan. 2. Dates for payments of principal and interest under these loans will coincide with dates for payment of principal and interest under the corresponding Sub-Loan. - 24 - 3. Interest on these loans will be paid in dollars on the principal thereof outstanding from time to time, at an annual rate of one percentage point above the Base Rate. 4. Commitment fee will be paid in dollars at an annual rate of not less than 1% on principal outstanding amoint of the applicable Sub-loan or Sub-loans not withdrawn from time to time. C. Conditions applicable to each Sub-loan and to each loan financing such Sub-loan. 1. Each Financial Intermediary will assume the risk of non-payment and consequently will be under the obligation of repaying any loan made to it by the Borrower regardless of whether the Investment Enterprise in question repays the corresponding Sub-loan. 2. Each Financial Intermediary will establish and maintain separate accounts to be used exclusively for the Project and will record in such accounts all receipts and payments for, or in connection with, each Sub-loan made by such Financial Intermediary and the loan financing such Sub-loan, all in accordance with sound accounting principles. 3. If a Sub-loan or any installment thereof will be paid to a Financial Intermediary in advance of maturity or if, unless otherwise agreed between the Bank and the Borrower, a Sub-loan or any installment thereof shall be sold, transferred, assigned or otherwise disposed of for value by a Financial Intermediary, the Financial Intermediary in question will notify and repay to the Borrower, on the next following principal payment date under the applicable Subsidiary Loan Contract, the amount disbursed in respect of the Sub-loan in question (or any installment thereof) and not theretofore repaid to the Borrower. 4. Sub-loans proposed to be made to Investment Enterprises ordinarily engaged in construction activities will be restricted to the financing of the equipping of such Investment Enterprises and will be made only if there are reasonable assurances that the equipment in question will not be used solely in connection with a single construction project. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this /44 LLday of4At- 198 L. FR ECETARY