Peru - Railway Project : Loan 0190 - Loan Agreement - Conformed

LOAN NO 190 PF Loan Agreement (Railway Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND PERUVIAN CORPORATION LIMITED DATED APRIL 3, 1958 LOAN NO 190 PE Loan Agreement (Railway Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND PERUVIAN CORPORATION LIMITED DATED APRIL 3, 1958 Eaan Areement AGREEMENT, dated April 3, 1958, between INTERNA- TIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (here- inafter called the Bank) and PERUVIAN CORPORATION LIMITED (hereinafter called the Borrower). ARTICLE I Loan Regulations; Special Definitions SECTION 1.01. The parties to this Loan Agreement ac- cept all the provisions of Loan Regulations No. 4 of the Bank dated June 15, 1956, subject, however, to the modifi- cations thereof set forth in Schedule 3 to this Agreement (said Loan Regulations No. 4 as so modified being here.- inafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein. SECTION 1.02. Except where the context otherwise re- quires, the following terms have the following meanings wherever used in this Agreement or any Schedule to this Agreement: (a) The term "PTC" means Peruvian Transport Cor- poration Limited, a corporation incorporated under the laws of Canada, being the beneficial owner of the entire issued share capital of the Borrower and shall include any company which is effectively controlled by PTC other than the Borrower. (b) The term "Inter-Company Debenture" means the debenture dated March 1, 1956 evidencing the indebtedness of the Borrower to PTC in the principal sum of $10,000,000 (of which $9,230,000 is outstanding at the date hereof), and shall include any instrument supplemental thereto or substituted therefor. 4 (c) The term "Central Railway " means the railway system which connects Lima and Callao with Oroya and Huancayo (including the Morococha Branch) and includes all the properties, movable and immovable, comprised in, or necessary or habituqlly employed in, the operation of such system. (d) The term "Southern Railway" means the railway system which connects Mollendo, Arequipa, Juliaca, Puno and Cuzco and includes all the properties, movable and im- movable, comprised in, or necessary or habitually employed in, the operation of such system. (e) The term "Mortgage" means collectively any and all security instruments created pursuant to the provisions of Section 5.04 of this Agreement in favor of the Bank and of the holders from time to time of the Loan and the Notes. (f) "Representative" means the agent appointed pur- suant to Section 5.04 (a) of this Agreement, and shall include any successor agent or agents. (g) The term "Eximbank Line of Credit" means the agreement dated August 28, 1956 between Export-Import Bank of Washington (hereinafter called Eximbank) and the Borrower, whereby Eximbank granted to the Borrower a line of credit in the amount of $1,550,000 (all of which is outstanding at the date hereof). (h) The term "Subsidiary" means any company which is a subsidiary of the Borrower within the meaning of the Companies Act 1948 of the United Kingdom of Great Brit- ain and Northern Ireland (hereinafter called the United Kingdom). (i) The term "Notes" means notes executed and deliv- ered by the Borrower pursuant to the provisions of this Agreement; and such term includes any such notes issued in exchange for, or on transfer of, Notes as herein defined. 5 ARTICLE II The Loan SECTION 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in this Agreement set forth or referred to, an amount in various currencies equivalent to fifteen million dollars ($15,000,000). SECTION 2.02. The Bank shall open a Loan Account on its books in the name of the Borrower and shall crediL to such Account the amount of the Loan. The amount of the Loan may be withdrawn from the Loan Account as pro- vided in, and subject to the rights of cancellation and sus- pension set forth in, the Loan Regulations. SECTION 2.03. 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 so withdrawn from time to time. Such commit- ment charge shall accrue from a date sixty days after the date of this Agreement to the respective dates on which amounts shall be withdrawn by the Borrower from the Loan Account as provided in Article IV of the Loan Regulations or shall be cancelled pursuant to Article V of the Loan Regulations. SECTION 2.04. The Borrower shall pay interest at the rate of five and one-half per cent (51/2%) per annum on the principal amount of the Loan so withdrawn and outstand- ing from time to time. SECTION 2.05. Except as the Bank and the Borrower shall otherwise agree, the charge payable for special com- mitments entered into by the Bank at the request of the Borrower pursuant to Section 4.02 of the Loan Regulations shall be at the rate of one-half of one per cent (Y of 17) 6 per annum on the principal amount of any such special commitments outstanding from time to time. SECTION 2.06. Interest and other charges shall be pay- able semi-annually on February 15 and August 15 in each year. SECTION 2.07. The Borrower shall repay the principal of the Loan in accordance with the amortization schedule set forth in Schedule I to this Agreement. ARTICLE III Use of Proceeds of the Loan SECTION 3.01. The Borrower shall apply the proceeds of the Loan exclusively to financing the cost of goods required to carry out the ProjeCt described in Schedule 2 to this Agreement. The specific goods to be financed out of the proceeds of the Loan and the methods and procedures for procurement of such goods shall be determined by agree- ment between the Bank and the Borrower, subject to modi- fication by further agreement between them. SECTION 3.02. The Borrower shall cause all goods financed out of the proceeds of the Loan to be imported into the territories of the Guarantor and there to be used exclusively in the carrying out of the Project. ARTICLE IV Notes SECTION 4.01. The Borrower shall execute and deliver Notes representing the principal amount of the Loan as provided in the Loan Regulations. SECTION 4.02. Any one of the Directors of the Borrower, and the Secretary of the Borrower or such other person or persons (acting jointly or severally as may be specified) 7 as may he authorized for the purpose by the Directors of the Borrower, are designated as authorized representatives of the Borrower for the purposes of Section 6.12 (a) of the Loan Regulations. SECTION 4.03. The Bank and the Borrower shall be at liberty to make such arrangements as they may from time to time mutually agree as to procedure for the issue, authen- tication and delivery of the Notes and such arrangements may be in addition to or in substitution for any of the provisions of this Agreement or of the Loan Regulations. ARTICLE V Particular Covenants SECTION 5.01. (a) The Borrower shall carry out the Project with due diligence and efficiency and in conformity with sound railway, engineering and financial practices. (b) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans and specifications for the Project and any material modifications subsequently made therein, in such detail as the Bank shall from time to time request. (c) The Borrower shall maintain records adequate to identify the goods financed out of the proceeds of the Loan, to disclose the use thereof in the. Project, to record the progress of the Project (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of the Borrower; shall enable the Bank's representatives to inspect all the properties of the Borrower, the goods and any relevant records and documents; and shall furnish to the Bank all such information as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan, the Project, the goods, and the operations and finan- cial condition of the Borrower. 8 SECTION 5.02. (a) The Bank and the Borrower shall cooperate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall furnish to the other all such information as it shall reasonably request with regard to the general status of the Loan. (b) The Bank and the Borrower shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Loan and the maintenance of the service' thereof. The Borrower shall promptly inform the Bank of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Loan or the maintenance of the service thereof. SECTION 5.03. The Borrower undertakes that, except for the Mortgage and except as provided in Section 5.04(c) of this Agreement and except as the Bank shall otherwise agree, no lien shall be created on any assets of the Borrower or of any Subsidiary as security for any debt; provided, however, that the foregoing provisions of this Section shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; (ii) any lien on com- mercial goods to secure a debt maturing not more than one year after the date on which it is originally incurred and to be paid out of the proceeds of sale of such commercial goods; or (iii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. SECTION 5.04. The Borrower shall, as soon as practicable, take all such action and execute such instrument or instru- ments as shall be necessary or proper in order to constitute, in favor of the Bank and of the holders from time to time of the Loan and the Notes, a hipoteca civil y prenda mer- cantil of the first grade in accordance with the laws of Peru on the immovable and movable properties now or hereafter 9 comprised in the Central Railway and in the Southern Rail- way. The instrument or instruments constituting the Mort- gage shall be in such form and of such substance as the Bank shall reasonably require and shall in any event con- tain provisions to the following effect: (a) The Bank shall designate, and the Borrower shall join with the Bank in appointing, an agent who shall have the exclusive right, on the terms provided in the instru- ment of appointment, to represent the holders from t'ne to time of the Loan and the Notes in all matters relating to or arising out of the Mortgage or the enforcement of any rights thereunder. The terms of appointment of the Repre- sentative shall include provisions entitling the Representa- tive to take action under the Mortgage. The costs and fees of the Representative shall be paid by the Borrower. (b) Notes which shall have been executed and delivered and the portion of the Loan not evidenced by Notes shall be secured by the liens of the Mortgage equally and ratably in proportion to the aggregate amount of the Notes and of the Loan not evidenced by Notes outstanding, without prefer- ence, priority or distinction in respect of any part of the Notes or of any portion of the Loan by reason of the date of execution, delivery or maturity thereof, or otherwise. (c) The Borrower shall agree that it will not dispose of, or create any further lien upon properties or assets subject to the liens of the Mortgage without the consent of the Bank and of the Representative; provided, however, that, with- out such consent, the Borrower may: (i) execute such instrument or instruments as shall be necessary or proper in order to constitute (a) in favor of Eximbank, a hipoteca civil y prenda mer- cantil, of the same grade as that evidenced by the Mortgage and ranking pari passu in all respects therewith, to secure indebtedness under the Exim- bank Line of Credit, and (b) in favor of the Banco Industrial del Peru as representing the Guarantor, a hipoteca civil y prenda mercantil of a grade junior to 10 the Mortgage and to the lien referred to in (a) of this sub-paragraph, by way of indemnity to the Guarantor in respect of any liabilities which it may pay or dis- charge under the Guarantee Agreement; and (ii) sell or otherwise dispose of any property which shall have become worn-out or obsolete. The Borrower shall further agree that it will pay all taxes which might, if unpaid, result in liens on, or preferential claims against, any of the properties subject to the lns of the Mortgage; that it will maintain and renew such properties; and that it will keep such properties insured in such amounts, against such risks and with such com- panies as shall be satisfactory to the Bank. SECTION 5.05. The Borrower shall cause the Mortgage to be duly recorded, registered and filed in accordance with the requirements of the laws of Peru and of the United Kingdom, and shall take all such other action and execute and deliver all such other documents as the Bank or the Representative may from time to time reasonably request, or as may from time to time be necessary or proper, in order to implement the provisions of the Mortgage and to render and maintain the Mortgage fully effective in accord- ance with its terms; and shall, promptly after the taking of any such action or the execution and delivery of any such documents, furnish to the Bank and to the Repre- sentative evidence thereof satisfactory to the Bank and to the Representative. SECTION 5.06. Without prejudice to any immunity en- joyed by the Borrower, the Borrower shall pay or cause to be paid all taxes or fees, if any, imposed under the laws of the Guarantor, or laws in effect in the territories of the Guarantor on or in connection with the execution, issue, delivery or registration of this Agreement, the Guarantee Agreement, the Notes or the Mortgage, or the payment of principal, interest or other charges thereunder; provided, 11 however, that the provisions of this Section shall not apply to taxation of, or fees upon, payments under any Note to a holder thereof other than the Bank when such Note is beneicially owned by an individual or corporate resident of the Guarantor. SECTION 5.07. The Borrower shall pay or cause to be paid all taxes and fees, if any, imposed under the laws of the country or countries in whose currency the Loan and the Notes are payable or laws in effect in the territoies of such country or countries on or in connection with the execution, issue, delivery or registration of this Agree- ment, the Guarantee Agreement, the Notes or the Mortgage. SECTION 5.08. Except as shall be otherwise agreEd be- tween the Bank and the Borrower, the Borrower shall insure or cause to be insured the goods financed out of the proceeds of the Loan against risks incident to their purchase and importation into the territories of the Guarantor. Such insurance shall be consistent with sound commercial prac- tice and shall be payable in dollars or in the currency in which the cost of the goods insured thereunder shall be payable. SECTION 5.09. (a) The Borrower shall at all times take all steps necessary to maintain its corporate existence and right to carry on operations and shall, except as the Bank shall otherwise agree, take all steps necessary to maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business. (b) The Borrower shall carry on its operations and con- duct its affairs in accordance with sound business and finan- cial practices and shall operate, maintain, renew and repair its equipment and property as required in accordance with sound engineering practices. SECTION 5.10. Subject to the provisions of Section 5.04 (c) of this Agreement and except as the Bank shall 12 otherwise agree, neither the Borrower nor any Subsidiary shall, during any period of twelve months, sell, lease or otherwise dispose of any property having a value in excess of one hundred thousand dollars ($100,000), or the equiv- alent. SECTION 5.11. Except as the Bank shall otherwise agree, (a) neither the Borrower nor any Subsidiary shall incur any indebtedness except in the ordinary course of business and (b) the aggregate amount remaining outstanding of indebtedness of the Borrower and of its Subsidiaries (ex- clusive of indebtedness under this Agreement and under the Eximbank Agreement and under the Inter-Company Deben- ture and exclusive of monies owing by the Borrower to any Subsidiary or by any Subsidiary to another Subsidiary or to the Borrower) shall not at any time exceed the sum of five hundred thousand dollars ($500,000), or the equivalent. SECTION 5.12. The Borrower shall cause the Inter- Company Debenture to be amended, in manner satisfactory to the Bank, so as to provide, inter alia, as follows: (a) That, subject as hereinafter provided, payments of interest thereunder shall be. made only if and to the extent that there shall be available to the Borrower for the pur- pose (i) net earnings or (ii) accumulated net revenue sur- plus. Notwithstanding the last preceding provision (to the intent that PTC should receive, during the period ending June 30, 1960, sums aggregating one million three hundred and twenty-three thousand dollars ($1,323,000) to enable it to service its own debentures), during each of the three fiscal periods ending on June 30 during the years 1958, 1959 and 1960, payments of interest under the Inter- Company Debenture may, in rny case, be made to the extent of four hundred and forty-one thousand dollars ($441,000) (or such lesser sum as is hereinafter provided); provided, however, that if, in any one of such fiscal periods, payments of interest shall be made in an amount in excess of the sum 13 of four hundred and forty-one thousand dollars ($441,000) then, in any subsequent one of such fiscal periods, such sum shall be reduced by the amount of such excess. (b) That, except for payments of interest in accord- ance with the provisions of the Inter-Company Debenture as amended on the basis herein provided, and except as the ank shall otherwise agree, the Borrower shall make no payments of any kind to PTC except in accordance with the following provisions: (i) if and so long as net working capital shall be less than two million dollars ($2,000,000), or the equivalent, or if, as a result of such payment, net working capital would be reduced below two million dollars ($2,000,000), or the equivalent, the Borrower shall not make any payment to PTC; (ii) if and so long as accumulated net revenue surplus shall be less than one million dollars ($1,000,000), or the equivalent, the Borrower shall not make any payment to PTC; (iii) if and so long as accumulated net revenue surplus shall exceed one million dollars ($1,000,000), or the equi-,alent, the Borrower may make payments of any kind to PTC provided that no payment in excess of 50%/ of current revenue surplus may be made so long as accumulated net revenue surplus shall be less than five million dollars ($5,000,000) or if the payment of such excess would have the effect of reducing accumulated net revenue surplus below five million dollars ($5,000,000), or the equivalent; (iv) if and so long as accumulated net rev- enue surplus ,hall exceed five million dollars ($5,000,000), or the equivalent, the Borrower may make payments to PTC provided that, as a. result of any such payment, accu- mulated net revenue surplus would not be reduced below five million dollars ($5,000,000), or the equivalent. Except as the Bank and the Borrower shall otherwise agree, for the purpose of these provisions: "net earnings" shall mean net income of the Borrower (which shall be deemed to include one-fourth of the realized cash profits derived from the sales, after July 1, 1957, of any immovable properties), as determined in accordance with soul-d ac- 14 counting practices, in respect of the last preceding fiscal period, after paying or making proper provision for: (i) operating expenses, including depreciation at the rate of at least 14%o of gross revenues for the relative period; (ii) taxes, if any; (iii) interest on the Loan and the Eximbank Line of Credit and any other loans which the Borrower sall hereafter contract with the consent of the Bank (but before paying or making provision for interest pay- able in accordance with the terms of the Inter- Company Debenture); ''current revenue surplus" shall mean net earnings of the Borrower for the last preceding fiscal period after having paid or made piroper provision for the interest payable to PTC in accordance with the provisions of the Inter- Company Debenture and after deducting all other payments to PTC during such period; "accumulated net revenue sur- plus " shall mean the accumulated net earnings of the Bor- rower accruing from and after July 1, 1957, down to the end of the last preceding fiscal period after having paid or made proper provision for interest payable to PTC in accordance with the provisions of the Inter-Company De- benture and after deducting all other payments to PTC; "net working capital" shall mean the Borrower's current assets (other than investments constituting any contingency fund) less its current liabilities as at the end of the last preceding fiscal period. SECTION 5.13. Except as the Bank shall otherwise agree, the Borrower shall make no payment to PTC, or to any other shareholder, except in accordance with the conditions prescribed in the Inter-Company Debenture as amended in accordance with the provisions of the last preceding Section. SECTION 5.14. The Borrower shall cause each Subsidiary to observe and perform the obligations of the Borrower 15 hereunder to the extent that such obligations may be ap- plicable to such Subsidiary. ARTICLE VI Remedies of the Bank SECTION 6.01. (i) If any event specified in paragraph (a), paragraph (b), paragraph (e) or paragraph (f) of Section 5.02 of the Loan Regulations shall occur and shall continue for a period of thirty days, or (ii) if either of Lhe events specified in Section 6.02 of this Agreement shall occur, or (iii) if any event specified in paragraph (c) of Section 5.02 of the Loan Regulations shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower, then at any subsequent time during the continuance thereof, the Bank, at its option, may declare the principal of the Loan and of all the Notes then outstanding to be due and payable im- mediately, and upon any such declaration such principal shall become due and payable immediately, anything in this Agreement or in the Mortgage or the Notes to the contrary notwithstanding. SECTION 6.02. For the purposes of Section 5.02 (j) of the Loan Regulations, the following additional events are specified: (a) If the Inter-Company Debenture shall, without the prior agreement of the Bank, have been amended (other- wise than as provided in this Agreement) or abrogated or any waiver shall have been granted in respect thereof. (b) If there shall have occurred any event specified in the Mortgage as an event of default. ARTICLE VII Effective Date; Termination SECTION 7.01. The following events are specified as addi- tional conditions to the effectiveness of this Agreement 16 within the meaning of Section 9.01 (a) (ii) and Section 9.01 (b) (ii) of the Loan Regulations: (a) That the Mortgage shall have been duly executed and delivered and have become fully effective in accordance with its terms and with the laws of Peru and (except as the Bank may otherwise agree) shall have been registered, recorded or filed in accordance with the laws of Peru and of the United Kingdom. (b) That the Inter-Company Debenture shall have 1.een amended, to the satisfaction of the Bank, in accordance with the provisions of Section 5.12 of this Agreement and, as so amended, shall have been delivered to and accepted by PTC. (c) That the Guarantor and the Borrower shall have entered into an agreement, in form and substance satisfac- tory to the Bank, regarding railway tariffs, in terms similar to those expressed in Section 3.06 of the Guarantee Agree- ment. SECTION 7.02. The following are specified as additional matters, within the meaning of Section 9.02 (e) Gf the Loan Regulations, to be included in the opinion or opinions to be furnished to the Bank: (a) That the Borrower has an absolute and unencum- bered title under applicable Peruvian law to the immovable and movable property comprised in the Mortgage, and is the absolute proprietor, free of encumbrances, of all the assets comprised in the Central Railway and the Southern Railway. (b) That the Mortgage has been duly authorized and executed and delivered on behalf of the Borrower and con- stitutes a valid and effective security enjoying priority in accordance with its terms and that no prior or pari passu lien (other than as mentioned in Section 5.04 (c) hereof) then exists on any part of the properties comprised in the Mortgage. 17 (c) That the Inter-Company Debenture, with such amend- ments as are provided in Section 5.12 of this Agreement, has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and constitutes a valid and binding obligation of the Borrower in accordance with its terms. (d) That the agreement referred to in Section 7.01 (c) of this Agreement, has been duly authorized or ratified by, and executed and delivered on behalf of, the Guarantor Pnd the Borrower respectively and constitutes a valid and bind- ing obligation of such parties in accordance with its terms. (e) That the Borrower has full power and authority to operate its undertaking and to carry out the Project and has all necessary rights and powers in connection therewith and that all acts, consents and approvals necessary therefor have been duly and validly performed or given. SECTION 7.03. A date 90 days after the date of this Agreement is hereby specified for the purposes of Section 9.04 of the Loan Regulations. ARTICLE VIII Miscellaneous SECTION 8.01. The Closing Date shall be December 31, 1961. SECTION 8.02. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Borrower: Peruvian Corporation Limited 320 Bay Street Toronto, Ontario Canada Alternative address for cablegrams and radiograms: Impulsive Toronto. 18 For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington 25, D. C. United States of America Alternative address for cablegrams and radiograms: Intbafrad Washington, D. C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Loan Agreement to be signed in their respective names and delivered 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 J. BURKE KNAPP Vice-President PERUVIAN CORPORATION LIMITED By W. H. WHITE Authorized Representative 19 SIEDULE 1 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* February 15, 1961 $425,000 August 15, 1961 437,000 February 15, 1962 449,000 August 15, 1962 461,10 February 15, 1963 474,p0 August 15, 1963 487,000 February 15, 1964 500,000 August 15, 1964 514,000 February 15, 1965 528,000 August 15, 1965 543,000 February 15, 1966 558,000 August 15, 1966 573,000 February 15, 1967 589,000 August 15, 1967 605,000 February 15, 1968 621,000 August 15, 1968 639,000 February 15, 1969 656,000 August 15, 1969 674,000 February 15, 1970 693,000 August 15, 1970 712,000 February 15, 1971 731,000 August 15, 1971 751,000 February 15, 1972 772,000 August 15, 1972 793,000 February 15, 1973 815,000 * To the extent that any part of the Loan is repayable in a currency other than dollars (see Loan Regulations, Section 3.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. 20 Premiums on Prepayment and Redemption The following percentages are specified as the premiums payable on repayment in advance of maturity of any part of the principal amount of the Loan pursuant to Section 2.05 (b) of the Loan Regulations or on the redemption of any Bond prior to its maturity pursuant to Section 6.16 of the Loan Regulations: Time of Prepayment or Redemption Premium Not more than three years before maturity 1/2% More than three years but not more than six years before maturity. ....... .. 2% More than six years but not more than eleven years before maturity... 3/% More than eleven years but not more than thirteen years before maturity . . 41/2% More than thirteen years before maturity 5 % 21 SCHEDULE 2 Description of Project The Project consists of the acquisition and putting into use on the Central Railway and on the Southern Railway of equipment and materials for the rehabilitation, improve- ment and development of these Railways. The cost of the Project is estimated to exceed twenty million dollars ($20,000,000), or the equivalent, and the equipment and materials include diesel electric locomotives for main line and switching services, passenger and freight cars, rails and other track materials, signalling and telecommunica- tions equipment, workshop and diesel shop equipment and other ancillary items, all in accordance with a memorandum delivered to the Bank by the Borrower. It is expected that the Project will be completed by the end of 1961. 22 SCHEDULE 3 Modifications of Loan Regulations No. 4 For the purposes of this Agreement the provisions of Loan Regulations No. 4 of the Bank, dated June 15, 1956, shall be deemed to be modified as follows: (a) Wherever used in the Loan Regulations the term "Notes" shall be substituted for the term "Bonds" and the term "Note" shall be substituted for the term "Bond". (b) By the deletion of Section 2.02. (c) By the deletion of subparagraph (f) of Section 5.02 and the substitution therefor of the following subpara- graph, namely: "(f) The Guarantor or any governmental authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Borrower or for the suspension of its operations or for the acquisition or control of all or a sub- stantial part of its undertaking or assets." (d) By the addition in Section 5.03, after the word "de- scribed", of the words "or referred to". (e) By the deletion of subparagraph (a) of Section 6.12 and the substitution therefor of the following new sub- paragraph, namely: "(a) The Notes shall be under the Common Seal of the Borrower and the affixation of such Seal shall be attested by the manual signatures of its author- ized representatives designated in the Loan Agreement for the purposes of this Section. Cou- pons attached to Coupon Notes shall be authenti- cated by the facsimile signature of any one of the authorized representatives of the Borrower so designated. If any authorized representative of the Borrower whose manual or facsimile signa- 23 ture shall he affixed to any Note or Coupon shall cease to be such authorized representative, such Note or Coupon may nevertheless be delivered, and Ahall be valid and binding on the Borrower, as though the person whose manual or facsimile signature shall have been affixed to such Note or Coupon had not ceased to be such authorized representative." (f) By the deletion of Section 6.18. (g) By the addition in Section 7.01, after the words "Guarantee Agreement", where those words occur, of the words ", the Mortgage". (h) By the deletion of subparagraphs (b) to (f) inclu- sive and (i) and (j) of Section 7.04 and the substitution therefor of the following subparagraphs, namely: " (b) Except as the Bank, the Borrower and the Guar- antor shall otherwise agree, the parties to such arbitration shall be the Bank, the Borrower and the Guarantor. " (c) The Arbitral Tribunal shall consist of three arbi- trators, each to be agreed upon by the parties or, if and to the extent to which they shall not agree, to be appointed by the President of the Interna- tional Court of Justice or, failing appointment by him, by the Secretary-General of the United Na- tions. In case any arbitrator shall resign, die or become unable to act, a successor arbitrator shall be selected or appointed in the same manner as herein prescribed for the selection or appoint- ment of the original arbitrator and such successor shall have all the powers and duties of such orig- inal arbitrator. " (d) An arbitration proceeding may be instituted un- der this Section upon notice by the party institut- ing such proceeding to the other parties. Such 24 notice shall contain a statement setting forth the nature of the controversy or claim to be sub- mitted to arbitration and the nature of the relief sought. "(e) If, within 60 days after the giving of such notice instituting the arbitration proceeding, the parties shall not have agreed upon the three arbitrators, any party may request such appointment as is provided for in paragraph (c) of this Sectio: "(f) The Arbitral Tribunal shall determine where and when it shall convene and sit. "(i) The parties shall fix the amount of the remunera- tion of the arbitrators and such other persons as shall be required for the conduct of the arbi- tration proceedings. If the parties shall not agree on such amount before the Arbitral Tribunal shall convene, the Arl itral Tribunal shall fix such amount as shall be reasonable under the circum- stances. Each of the parties shall defray its own expenses in the arbitration proceedings. The costs of the Arbitral Tribunal shall be divided and borne equally between the parties. Any ques- tion concerning the division of the costs of the Arbitral Tribunal or the procedure for payment of such costs shall be determined by the Arbitral Tribunal. "(j) The provisions for arbitration set forth in this Section shall be in lieu of any other procedure for the determination of controversies between the parties arising under the Loan Agreement and Guarantee Agreement or any claim by any such party against any other such party arising thereunder; provided, however, that nothing here- in shall be deemed to preclude any of the said parties from exercising, or instituting any legal or equitable action to enforce, any right or claim 25 arising out of or pursuant to the Mortgage or the Notes, and submission to arbitration here- under shall not be deemed to be a condition prece- dent or in any way to prejudice such exercise or other enforcement of any such right or claim." (i) By the deletion of paragraph 10 of Section 10.01. (j) By the deletion of the second paragraph of each of the forms of Bond set forth respectively in Schedule 1 and Schedule 2 and the substitution therefor in each such form of the following paragraph, namely: "This Note is one of an authorized issue of notes in various currencies equivalent to an aggregate principal amount of $ known as the Guaranteed Serial Mortgage Notes of [the Borrower] (hereinafter called the Notes) issued or to be issued under a Loan Agree- ment dated 1958, between International Bank for Reconstruction and Development (herein- after called Lhe Bank) and [the Borrower] and guaran- teed by the Republic of Peru in accordance with the terms of a Guarantee Agreement dated , 1958, between the Republic of Peru and the Bank. No reference herein to said Agreements shall confer upon the holder hereof any rights thereunder or impair the obligation of [the Borrower], which is absolute and unconditional, to pay the principal and interest on this Note at the times and place and in the amounts and in the currency herein prescribed. " The Notes and the portion of the Loan not evidenced by Notes are equally and ratably secured by means of an instrument constituting a hipoteca y prenda mer- cantil created by [the Borrower] under the laws of the Republic of Peru (such instrument being herein- after called the Mortgage). Pursuant to the Mort- gage, the Bank and [the Borrower] have conferred upon as Representative the exclusive right on the terms therein provided to rep- 26 resent the Bank and the holders from time to time of the Notes in all matters relating to or arising out of the Mortgage or the enforcement of any rights there- under. In accepting this Note, the holder hereof agrees to the appointment of such Representative pursuant to the terms and conditions of the Mortgage." (k) By the addition, at the end of the seventh paragraph of the Form of Note set forth in Schedule 1 and at the end of the sixth paragraph of the Form of Note set for th in Schedule 2, of the sentence following, namely: "In certain events provided in the Mortgage, the Rep- resentative may (subject to the conditions therein pro- vided) declare the principal of all the Notes then out- standing (if not already due) to be due and payable immediately, and upon any such declaration such prin- cipal shall be due and payable immediately."