Ecuador - Second Small Scale Enterprise Credit Project : Loan 2221 - Loan Agreement - Conformed

OFFIC AL 1FOCUMENTS LOAN NUMBER 2221 EC Loan Agreement (Second Small Scale Enterprise Credit Project) between REPUBLIC OF ECUADOR and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 1983 LOAN NUMBER 2221 EC LOAN AGREEMENT AGREEMENT, dateddWv2u16" Z5-1983, between THE REPUBLIC OF ECUADOR (hereinafter called e Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Section 3.01 of this Agreement by making the Loan as hereinafter provided; (B) the Project will be carried out by Corporacion Financiera Nacional (hereinafter called CFN) in cooperation with the Borrower's Central Bank (hereinafter called Banco Central) and with the Borrower's assistance and, as part of such assis- tance, the Borrower will make available to CFN the proceeds of the Loan as are hereinafter provided; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in the Project Agreement of even date herewith between the Bank and CFN; NOW THEREFORE the parties hereto hereby agree as follows: 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 Gua- rantee 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 Sche- dule 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) "Fopinar" means Fondo para Fomento de is Pequena Industria y Artesania, the Fund for Small Scale Industry and -2- Artisan Development established by CFN pursuant to title VI of the Estatutos; (b) "Project Agreement" means the agreement of even date herewith between the Bank and CFN, and the term includes any amendments to such Agreement; (c) "Financial Intermediary" means any commercial bank or financial Institution legally established and operating in Ecuador, whLch has been accepted by the Bank for purposes of participating in the Project and has entered into a Participation Agreement with CFN satisfactory to the Bank; (d) "Participation Agreement" means the Agreement to be entered into between CFN and a Financial Intermediary as provided in Section 2.06 (a) of the Project Agreement; (e) "Subsidiary Loan Agreement" means the Agreement to be entered into by the Borrower, acting by Banco Central, with CFN in accordance with Section 3.02 of this Agreement; and the term "Subsidiary Loan" means the loan provided for in the Subsidiary Loan Agreement; (f) "Investment Enterprise" means an industrial, agro- industrial, artisan, fishery, forestry and industrial service or transport or tourism enterprise to which a Financial Intermediary proposes to make or has made a sub-loan; (g) "Small Scale Investment Enterprise" mear. -y Invest- ment Enterprise whose fixed assets, excluding land a, '-ildings, ,re less than the equivalent of $350,000 or such othe imount as .he Bank shall determine in agreement with CFN; (h) "Micro Scale Investment Enterprise" means any Invest- ment Enterprise whose fixed assets, excluding land and buildings, are less than the equivalent of $22,000. (i) "sub-loan" means a loan made or. proposed to be made by a Financial Intermediary partially financed out of the proceeds of a Fopinar Loan to an Investment Enterprise for an Investment Project and "free-limit sub-loan" means a sub-loan, as so de- fined, which qualifies as a free-limit sub-loan pursuant to the provisions of Section 2.03 (c) of this Agreement; -3- (j) "Fopinar Loan" means any loan made or to be made by CFN, out of the proceeds of the Loan and Fopinar's other re- sources, to a Financial Intermediary in accordance with Section 2.06 (b) of the Projec Agreement; (k) "Investment Project" means a specific development pro- ject to be carried out by an Investment Enterprise utilizing the proceeds of a sub-loan or a specific technical assistance program to assist an Investment Enterprise in preparing development pro- jects or in improving its technical or management capabilities to be financed utilizing the proceeds of a sub-loan. (1) "Sucres" and "S.1" mean the currency of the Borrower; (m) "Fopinar's Statement of Policy" means the statement of operating policies for Fopinar approved by the Board of Direc- tors of CFN on May 29, 1980, as amended pursuant to Section 2.01 (b) of the Project Agreement; (n) "Fopinar's Operating Procedures" means the statement of procedures for Fopinar approved by the Board of Directors of CFN on May 29, 1980, as amended pursuant to Section 2.01 (b) of the Project Agreement; (o) "Estatutos" means the Supreme Decree No. 2062 of the Borrower, dated December 20, 1977, which established CFN, as amended to the date of this Agreement; (p) "Project Account" means the project account to be main- tained by CFN in Banco Central pursuant to Section 3.02 (a) (v) of this Agreement; (q) "Special Account" means the account to be opened pur- suant to Section 2.02 (b) of this Agreement. (r) "Fopinar's Operating Unit" means the unit established by CFN's Board of Directors on May 29, 1980; (s) "Project Appraisal and Supervision Guidelines" means Fopinar's guidelines for project appraisal and supervision established in Fopinar's Operating Procedures; and (t) "Foreign Expenditures" means expenditures in the cur- rency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower. -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 forty million six hundred thousand dollars ($40,600,000). Section 2.02. (a) The ar -unt of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Sec- tion 2.03 of this Agreement, for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Section 3.01 (a) of this Agreement and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for purposes of Part A of the Pro- ject, establish and maintain a Special Account in Banco Central, in the name of CFN, on terms and conditions satisfactory to the Bank. Disbursements from the Special Account shall be made exclusively to finance sub-loans under Part A of the Project des- cribed in Section 3.01 (a) of this Agreement. (c) The Bank shall, promptly after the effectiveness of this Agreement, withdraw on behalf of the Borrower from the Loan Account and deposit in the Special Account an amount not exceed- ing the equivalent of $3,200,000. Thereafter, at the request of the Borrower, the Bank shall further so withdraw on behalf of the Borrower from the Loan Account and deposit in the Special Account such amounts as shall be required to reimburse the Borrower for payments made out of the Special Account for expenditures for Part A of the Project eligible for financing under this Agree- ment, but only to the extent that the amount of any such deposit, together with any amount remaining on deposit in the Special Account as of the date of such request, shall not exceed in the aggregate the equivalent of $3,200,000. Except as the Bank shall otherwise determine, each such deposit after the first deposit shall be withdrawn by the Bank on behalf of the Borrower from the Loan Account under Category (1) of the table set forth in Section 2.03 (a) of this Agreement, and in the same respective amounts as have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph (d) of this Section. -5- (d) Prior to or at the time of each request by the Borrower for a deposit by the Bank on behalf of the Borrower in the Spe- cial Account, the Borrower shall furnish to the Bank, in respect of each payment made out of the Special Account, such documents and other evidence as the Bank shall reasonably request, showing that the payment was made for sub-loans under Part A of the Pro- ject and to be financed out of the proceeds of the Loan. (e) Banco Central shall not disburse any amount from the Special Account for any sub-loan until it has received evidence either that the Bank has approved such sub-loan or that the Bank has authorized withdrawals from the Loan Account with respect to such sub-loan in the case of a free-limit sub-loan. (f) If the Bank shall have determined that any payment out of the Special Account (i) was made for any expenditure or in any amount not eligible for financing from the Loan Account, or (ii) was not juastified by the evidence furnished pursuant to paragraph (d) of this Section, the Borrower shall, promptly upon notice from the Bank, and unless otherwise determined by the Bank, depo- sit in the Special Acount an amount equal to the amount of such payment or the portion thereof not so eligible or justified. (g) Notwithstanding the provision of paragraph (c) of this Section, no further deposit in the Special Account shall be requested by the Borrower when the Bank shall have determined that all further withdrawals from the Loan Account for Part A of the Project may be made directly by the Borrower from the Loan Account under paragraph (a) of this Section, or when the total amount withdrawn from the Loan Account under Category (1) of the table set forth in Section 2.03 (a) of this Agreement shall have reached the equivalent of $33,400,000. Withdrawals from the Loan Account of the remaining amount of the Loan for Part A of the Project shall follow such procedures as shall be agreed between the Borrower and the Bank and shall be made only to the extent that the Bank shall be satisfied by the evidence furnished in support of the applications for such withdrawal that all payments out of the Special Account were made for sub-loans under Part A of the Project described in Section 3.02 (a) of this Agreement and to be financed out of the proceeds of the Loan in accordance with this Agreement. Section 2.03. (a) Except as the Bank shall otherwise agree, the proceeds of the Loan shall be allocated as follows: -6- Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollars Equivalent) to be Financed (1) Sub-loans 39,800,000 85% of amounts made by In- paid in Sucres vestment Enter- by the Borrower prises under Part A of the Project described in Section 3.01 (a) of this Agreement (2) Technical 200,000 100% of foreign Assistance expenditures under Part C of the Project described in Section 3.01 (a) of this Agree- ment (3) Fee 600,000 Amount due TOTAL 40,600,000 (b) Notwithstanding the provisions of Section 2.02 (a) above and except as the Bank shall otherwise agree, no withdrawal shall be made in respect of: (i) payments made for expenditures prior to the date of this Agreement, except that withdrawals in an aggregate amount not to exceed the equivalent of $4,000,000 may be made in respect of Part A of the Project on account of payments made by Fopinar for such expenditures before that date but after Sep- tember 1, 1982; -7- (ii) payment's for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; (iii) expenditures to be financed under any sub-loan: (A) unless such sub-loan shall have been approved by the Bank or (B) unless such sub-loan shall be a free-limit sub-loan for which the Bank shall have authorized withdrawals from the Loan Account; or (C) if such sub-loan is subject to the Bank's approval, if such expenditures shall have been made more than one hundred and eighty days prior to the date on which the Bank shall have received in respect of such sub-loan the application and information required by Section 2.05 (a) of the Project Agreement or, in respect of a free-limit sub-loan, more than one hundred and eighty 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 2.05 (b) of the Project Agreement; (iv) expenditures to be financed under any sub-loan: (A) unless the Bank shall have received on behalf of CFN and the applicable Financial Inter- mediary evidence satisfactory to the Bank, that CFN and such Financial Intermediary have entered into a legally binding Participation Agreement, satisfactory to the Bank; and (B) unless such sub-loan, when added to all other sub-loans made or proposed to be made to the Investment Enterprise which will carry out the Investment Project in respect of which the withdrawal is requested, shall not exceed the equivalent of three hundred thousand dollars ($300,000), the adequacy of this amount to be reviewed and, if necessary, revised from time to time by the Bank in agreement with CFN; (c) a free-limit sub-loan shall be a sub-loan for an In- vestment Project in an amount to be financed out of the proceeds of the Loan which shall not exceed the sum of $300,000 equiva- lent, when added to any other outstanding amounts financed or -8- proposed to be financed out of the proceeds of the Loan for the same Investment Enterprise, the foregoing amount being subject to change from time to time as determined by the Bank; and (d) Notwithstanding the provisions of Section 2.02 (a) and paragraph (b) of this Section, the Bank shall have the right not to approve or authorize withdrawals from the Loan Account for any sub-loan in the following events: (i) if the Bank has not been furnished with evidence satisfactory to the Bank that the Bor- rower has made the contribution referred to in Section 3.01 (d) (ii) (B) of this Agreement, if such sub-loan, when added to all other amounts withdrawn or to be withdrawn from the Loan Account in respect of sub-loans approved or authorized by the Bank, exceeds the equivalent of $20,000,000; and (ii) if the Bank has not been furnished with evidence satisfactory to the Bank that the Borrower has made the contribution referred to in Section 3.01 (d) (ii) (C) of this Agreemenc, if such sub-loan, when added to all other amounts withdrawn or to be withdrawn from the Loan Account in respect of sub-loans approved or authorized by the Bank, exceeds the equivalent of $30,000,000. Section 2.04. The Closing Date shall be June 30, 1986 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower, Banco Central and CFN of such later date. Section 2.05. Not later than the Effective Date, the Bor- rower shall pay to the Bank a fee equivalent to six hundred thou- sand dollars ($600,000). The fee shall be payable in such cur- rency or currencies as the Bank shall specify. In the event that the Bank shall not have received full payment of the fee by the Effective Date, the Bank shall, on behalf of the Borrower, with- draw from the Loan Account and pay to itself the amount required for the full payment of the fee in the currency or currencies specified for the purpose. Section 2.06. The Borrower shall pay to the Bank a commit- ment 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 2.07. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one half percent per annum above the Cost of Qualified Borrowings for -9- the last Semester ending prior to the commencement of such Inter- est Period. (b) For purposes of this Section: (i) "Interest Period" means the six-month period com- mencing on each date specified in Section 2.08 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost" of Qualified Borrowings means the cost, expressed as a percentage per annum, as reasonably determined by the Bank, provided that the amount of $8,520.5 million referred to in (iii) (B) here- under shall be reckoned at a cost of 10.93% per annum. (iii) "Qualified Borrowings" means (A) outstanding borrowings of the Bank drawn down after June 30, 1982; and (B) until July 1, .5, the amount of $8,520.5 million (representing borrowings of the Bank between July 1, 1982 and June 30, 1982) less any part thereof repaid earlier than July 1, 1985. (iv) "Semester" means the first six months or the second six months of a calendar year. (c) As soon as practicable after the end o" each Semester, the Bank shall notify the Borrower of the Cost c ' Qualified Bor- rowings for such Semester. (d) Notwithstanding paragraph (a) of this Section, the interest rate for all Interest Periods commencing in 1982 shall be 11.43% per annum. Section 2.08. Interest and other charges shall be payable semi-annually on April 1 and October 1 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 1 to this Agreement. - 10 - ARTICLE III Execution of the Project; Other Covenants Section .3.01. (a) The purpose of the Project is to assist the Borrower in financing such productive facilities, resources and techniLal assistance, in Ecuador as will contribute to the economic and social development of the country. The Project con- sists of the following.parts: Part A: The financing by CFN, through Financial Intermediaries, of specific industrial, agro-industrial, artisan, fishery, forestry, industrial services, transport and tourism development projects, and technical assistance projects through sub-loans to Small- and Micro-Scale Investment Enterprises. Part B: Execution by CFN of a technical assistance program for small-scale entrepreneurs which, inter alia, will provide assis- tance to Small- and Micro-Scale Investment Enterprises in pre- paring sub-loan applications for Investment Projects to be financed under the Project. Part C: Strengthening of the financial, management and accounting system of CFN. (b) The Borrower shall cause CFN: (i) to carry out the Project and conduct its operations and affairs with respect of the Project with due diligence and efficiency and in accordance with sound financial standards and practices, with qualified management and personnel, and in accordance with the Estatutos, Fopinar's Statement of Policy, Fopinar's Operating Procedures, the Project Agreement, the Subsidiary Loan Agreement and this Agreement. (c) The Borrower shall: (i) make with Banco Central all necessary contractual arrangements, under terms and conditions satis- factory to .the Bank, providing, inter alia, for: - 11 - (A) the withdrawal by Banco Central of the pro- ceeds of the Loan from the Loan Account in accordance with Section 2.02 of this Agree- ment, and for the disbursement of the amounts so withdrawn for purposes of the Project in accordance with the provisions of such con- tractual arrangements; (B) the relending to CFN of the proceeds of the Loan under a Subsidiary Loan Agreement, satisfactory to the Bank, which shall include the terms and conditions established in Sec- tion 3.02 of this Agreement; and (C) the organizational arrangements and provision of adequate staff, resources and facilities to be made by Finco Central for purposes of the Project; (ii) exercise its rights pursuant to such contractual arrangements in such a manner as to protect the interests of the Borrower and the Bank; and (iii) except 'as the Bank shall otherwise agree, not change such contractual arrangements or fail to enforce any provision thereof. (d) The Borrower shall: (i) assist CFN in the carrying out of the Project and provide or cause to be provided, promptly as needed, the funds, facilities, services and other resources re- quired for the timely execution of the Project; and (ii) as part of such assistance, the Borrower shall make a capital contribu- tion to CFN of not less than ten million dollars ($10,000,000) equivalent to be used excluskvely for Fopinar under terms and conditions satisfactory to the Bank, such contribution to be made in three installments as follows: (A) a first installment of not less than $5,000,000 equivalent to be made prior to the Effective Date; (B) a second installment of not less than $2,500,000 equi- valent to be made not later than six months after the Effective Date; and (C) the third installment of $2,500,000 equivalent not later than twelve months after the Effective Date. Section 3.02. (a) The Borrower, through Banco Central, shall relend to CFN the proceeds of the Loan allocated to Categories (1) and (2) of the table set forth in Section 2.03 (a) of this Agreement, under a subsidiary loan agreement to be entered - 12 - between Banco Central and CFN on terms and conditions which shall have been approved by the Bank and which shall include, inter alia, the following: (i) the Subsidiary Loan shall be made and be repayable in Sucres; (ii) the annual rate of interest on the principal amount outstanding of the Subsidiary Loan shall be 12%, such rate to be reviewed from time to time, and if necessary revised, by agreement between the Borrower, the Bank and CFN; (iii) the repayment terms of the Subsidiary Loan shall be such as are applicable to the Loan; (iv) part of the proceeds of the Loan so relent shall be used by CFN through Fopinar exclusively for carrying out Part A of the Project; (v) CFN shall maintain in Banco Central, on terms and conditions satisfactory to the Bank, a Project Account to be managed by CFN through Fopinar, and to include: (A) all existing Fopinar's resources and the Borrower's contribution referred to in paragraph (d) of Section 3.01 of this Agreement; (B) all amounts withdrawn from the Special Account; (C) repayments of, and interests and commissions earned on Fopinar Loans; and (D) any other income received by Fopinar; (vi) CFN shall deposit and withdraw from the Project Account such amounts as shall be necessary. to provide Fopinar Loans and to cover administrative costs of the Project and otherwise to manage the cash flows and resources of L, -I Project Account so as to maximize the net financial return to k'opinar; (vii) Banco Central shall act as an agent of CFN for the disbursement and collection of payments to be made by and to CFN under Fopinar Loans; (viii) a fee equivalent to one eighth of one per cent of the principal amount of each sub-loan granted under the Project, shall be pay- able by CFN to Banco Central for the disbursement and collection services performed by Banco Central on behalf of CFN under the Project; and (ix) unless the Bank shall otherwise agree, the amounts repaid to CFN under Fopinar Loans shall be reused by CFN exclusively for (A) making loans to Small Scale Enterprises in accordance with Fopinar's Statement of Policy and substantially under the same terms and conditions and for the same purposes of sub-loans; (B) financing the administrative expenses of Fopinar; and (C) repaying the Subsidiary Loan. (b) The Borrower, through Banco Central, shall exercise its rights under the Subsidiary Loan Agreement in such a manner as to protect the interests of the Borrower and the Bank and to accom- plish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, nor amend, abro- gate or waive the Subsidiary Loan Agreement or any provision thereof. - 13 - (c) The Borrower shall not, without the prior a, -ement of the Bank, suspend or terminate the right of CFN to have access to the proceeds of the Loan under the Subsidiary Loan Agreement, 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 shall have been suspended or terminated by the Bank or the Bank shall have de- clared the principal amount of the Loan relent to CFN, to be due and payable immediately, or a default shall have occured in the due and punctual payment of any monies payable by CFN to the Bor- rower and such default shall continue for thirty days after notice thereof shall have been given by the Borrower to CFN. ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created, on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make ex- press provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Lo.an. by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property or as security for the payment of debt incurred for the purpose of - 14 - financing the purchase of such property; and (ii) any lien aris- ing in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative sub- division thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Bor- rower. Section 4.02. The Borrower shall cause Banco Central to: (a) have the Special Account for each fiscal year audited in accor- dance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (b) furnish to the Bank each month certified statements of the Special Account; (c) furnish to the Bank, as soon as available but in any case not later than four months after the end of such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (d) furnish to the Bank such other information concerning the Special Account and the audit thereof as the Bank shall from time to time reasonably request. 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 speci- fied: (a) CFN shall have been unable to pay its debts as they mature or any action or proceeding shall have been taken by CFN or by others whereby any of the property of CFN shall or may be distributed among its creditors; (b) any part of the principal amount of any loan to CFN having an original maturity of one year or more shall, in accor- dance 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; - 15 - (c) a change shall have been made in the Estatutos which would materially and adversely affect the financial condition or operations of CFN; (d) a change shall have been made in Fopinar's Statement of Policy or Fopinar's Operating Procedures or in the Project Appraisal and Supervision Guidelines without the Bank's consent; (e) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of CFN or for the suspension of its operations; (f) a resolution shall have been passed for the dissolution or liquidation of CFN; and (g) an extraordinary situation shall have arisen which shall make it improbable that CFN will be able to perform its obligations under the Project Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are speci- fied: (a) the event specified in paragraph (a) or paragraph (c) or paragraph (d) or paragraph (e) or paragraph (f) of Section 5.01 shall occur; and (b) the event specified in paragraph (b) or paragraph (g) 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 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 Condi- tions: (a) that the Borrower and Banco Central have entered into the contractual arrangements referred to in Section 3.01 (c) of this Agreement; - 16 - (b) that the Subsidiary Loan Agreement has been entered into by the Borrower, acting by Banco Central, and CFN; (c) that the Borrower's contribution referred to in Section 3.01 (d) (ii) (A) of this Agreement has been made by the Borrower and has been deposited in the Project Account; and (d) that the Special Account has been established. 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 fur- nished to the Bank: (a) that the Project Agreement has been duly authorized or ratified by CFN, and is legally binding upon CFN in accordance with its terms; (b) that the contractual arrangements referred to in Sec- tion 3.01 (c) (i) of this Agreement has been duly authorized or ratified by the Borrower and Banco Central, and in legally bind- ing upon the Borrower and Banco Central in accordance with its terms; and (c) that the Subsidiary Loan Agreement has been duly autho- rized or ratified by the Borrower, through Banco Central, and CFN and is legally binding upon the Borrower, Banco Central, and CFN in accordance with its terms. Section 6.03. The date - , is hereby speci- fied for the purposes of Secti n 12.04 of the General Condi- tions. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: - 17 - 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: Ministerio de Finanzas Quito Ecuador Cable address: Telex: MINFINANZAS 2358 MINFIN-ED Quito Ecuador Banco Central 10 de Agosto, Briceno Quito Ecuador Cable Address: Telex: BANCENTRAL 2165 BANCEN-ED Quito and for the purpose of any notice or request required or per- mitted to be given or made under Article X of the General Condi- tions also: Procurador General del Estado Avenida Colombia 248 Oficina 904 Quito, Ecuador - 18 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF ECUADOR By/ Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By 416 Regional Vice President Latin America and the Caribbean - 19 - SCHEDULE 1 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each April 1 and October 1 beginning April 1, 1987 through April 1, 1999 1,560,000 On October 1, 1999 1,600,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Section 3.04. - 20 - 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: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years 0.18 before maturity More than three years but not 0.35 more than six years before maturity More than six years but not 0.65 more than eleven years before maturity More than eleven years but not 0.88 more than fifteen years before maturity More than fifteen years 1.00 before maturity - 21 - 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" 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 de- nied, or (c) after the Closing Date an amount of the Loan shall remain unwithdrawn from the Loan Account, the Bank may by notice to the Borrower terminate the right of the Bor- rower 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." 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 a5.4day of J.6, 198. FOR SECRETARY