Colombia - Fourth Development Finance Companies Project : Loan 0742 - Subsidiary Loan Agreement - 5 - Conformed

CONFORMED COPY LOAN NUMBER 742 CO Subsidiary Loan Agreement (Fourth Development Finance Companies Project) BETWEEN BANCO DE LA REPUBLICA AND CORPORACION FINANCIERA DE CALDAS DATED MAY 28, 1971 CONFORMED COPY LOAN NUMBER 742 CO Subsidiary Loan Agreement (Fourth Development Finance Companies Project) BETWEEN BANCO DE LA REPUBLICA AND CORPORACION FINANCIERA DE CALDAS DATED MAY 28, 1971 fthsOiiaryj TE'vn Aqgrument AGREEMENT, dated May 28, 1971, between BANCO DE LA REPUBLICA (hereinafter called the Banco) and CoRroRA- CION FINANCIERA DE CALDAS (hereinafter called the Finan- ciera). WHEREAS by a loan agreement of even date herewith (hereinafter called the Loan Agreement) between the Inter- national Bank for Reconstruction and Development (here- inafter called the Bank) and the Banco, the Bank agreed to make available to the Banco a loan of an amount in various currencies equivalent to forty million dollars ($40,000,000) (hereinafter called the Loan) on the terms and conditions set forth therein; WHEREAS under the terms of said Loan Agreement, the Banco has agreed to relend to the Financiera, through the Fondo para Inversiones Privadas of the Banco (hereinafter called FIP), part of the proceeds of the Loan under a sub- sidiary loan agreement satisfactory to the Bank, containing, without limitation, the provisions described in Section 4.03 of the Loan Agreement; WHEREAS the parties hereto have agreed to enter into this Agreement, which is one of the Subsidiary Loan Agree- ments referred to in Section 4.02 of the Loan Agreement; Now THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions SECTION 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms de- fined in the Loan Agreement shall have the respective mean- 4 ings therein set forth and the term "Subsidiary Loan" means the loan provided for under Section 2.01 of this Agreement. ARTICLE II The Subsidiary Loan SECTION 2.01. The Banco agrees to relend to the Finan- ciera, through FIP, such amounts in various currencies out of the proceeds of the Loan as shall be allocated from time to time by the Bank to the Financiera, pursuant to Sec- tion 3.02 of the Loan Agreement, on such terms and con- ditions as are set forth or referred to in this Agreement. SECTION 2.02. (a) Upon request of the Financiera, the Banco shall forthwith (i) request the Bank to approve any Investment Project in accordance with Section 2.03(a) of the Loan Agreement; (ii) make application for withdrawal from the Loan Account of amounts which the Banco is entitled to withdraw therefrom in accordance with Sec- tion 2.02 of the Loan Agreement for Investment Projects financed by the Financiera; and (iii) pay to, or on the order of, the Financiera the amounts so withdrawn; pro- vided, however, that if the Banco shall determine, after taking into account the economic policies of the Guarantor, that any Investment Project, in respect of which a request for the Bank's approval is received from a Financiera, shall not make a significant contribution to the economic development of Colombia, the Banco may, by notice to the Bank and the Financiera setting forth the reasons for such determination, refuse to submit such request for approval and the corresponding application for withdrawal. (b) The Financiera shall furnish to the Banco the finan- cial plan proposed for each Investment Project and such documents and other evidence as are provided in para- graph (a) of Section 2.03 of the Loan Agreement. 5 SECTION 2.03. The Banco shall open a Subsidiary Loan Account on its books in the name of the Financiera and shall credit to it the amount of the Subsidiary Loan. Any amount of the Subsidiary Loan shall be deemed to be with- drawn from the Subsidiary Loan Account simultaneously with each withdrawal by the Banco from the Loan Account in accordance with Section 2.02 of this Agreement, and in the same amounts and currencies of such withdrawal. SECTION 2.04. The several portions of the principal amount of the Subsidiary Loan withdrawn from the Sub- sidiary Loan Account shall be repaid by the Financiera to the Banco in Pesos, in amounts equivalent to the amounts withdrawn by the Banco from the Loan Account for the account of the Financiera. The amounts in Pesos to be so repaid by the Financiera shall be determined, for each such portion of the Subsidiary Loan, by agreement between the Banco and the Financiera at the time of the respective withdrawal from the Subsidiary Loan Account, to be either: (a) the Peso equivalent of the amounts so withdrawn determined as of the respective date of each withdrawal; or (b) the Peso equivalent of the amounts so withdrawn determined as of the respective dates of repayment; provided, however, that the choice between paragraph (a) or paragraph (b) shall be determined by such choice as shall have been made by the Investment Enterprise, at the time the sub-loan or investment was made, in respect of such amount of the Subsidiary Loan as shall have been lent to, or invested in, the Investment Enterprise by the Financiera. SECTION 2.05. The Financiera shall pay to the Banco interest in Pesos in the following manner: (a) On portions of the Subsidiary Loan repayable in accordance with Section 2.04(a) of this Agreement, interest shall be paid at an annual rate to be determined from time 6 to time by the Banco but not exceeding a rate of interest equal to: (i) eight percentage points (or such other number of percentage points as shall be agreed between the Bank and the Banco, with the approval of the Guarantor) above the rate of interest payable by the Banco to the Bank; plus (ii) one-half of one percentage point, to cover the admin- istrative costs of the Banco; and (b) On portions of the Subsidiary Loan repayable in accordance with Section 2.04(b) of this Agreement, interest shall be paid at an annual rate equal to: (i) the rate of interest payable by the Banco to the Bank; plus (ii) one- half of one percentage point, to cover the administrative costs of the Banco. (c) Interest on each such portion of the Subsidiary Loan shall: (i) be calculated on the principal amount of the Sub- sidiary Loan outstanding at each interest payment date, provided, however, that whenever such principal amount shall be repayable in accordance with Section 2.04(b) of this Agreement, the Peso equivalent of each such portion of the Subsidiary Loan shall be determined as of the date of the interest payment to be made; (ii) accrue from the respective dates on which each such portion shall have been withdrawr ; and (iii) be computed on the basis of a 360-day year of twelve 30-day months. SECTION 2.06. (a) The Financiera shall pay in Pesos to the Banco a commitment charge, equivalent to the aggre- gate of (i) the amount of the commitment charge payable by the Banco to the Bank, pursuant to Section 2.05 of the Loan Agreement, corresponding to the portion of the Loan allocated to the Financiera under Section 3.02 (a) (i) of the Loan Agreement, plus (ii) one-fifth of the amount of such commitment charge corresponding to any portion of the Loan not so allocated, subject to such adjustments as the Banco shall from time to time reasonably determine as any such portion of the Loan not so allocated is allocated to any of the Financieras. 7 (b) At the written request of the Financiera, the Banco shall forthwith request the Bank to enter into special com- mitments in respect of the cost of imported goods required to carry out any Investment Project approved by the Bank. Such special commitments shall be upon such terms as shall be agreed upon between the Bank and the Banco, as pro- vided in the Loan Agreement, and the Financiera shall pay to the Banco the equivalent in Pesos of the amount of such commitment charge payable by the Banco to the Bank pur- suant to Section 3.02 of the General Conditions, such equiv- alent to be determined as of the respective dates on which such commitment charge is so payable. SECTION 2.07. (a) The Financiera shall repay the prin- cipal amount of each portion of the Subsidiary Loan with- drawn from the Subsidiary Loan Account in accordance with the amortization schedule applicable to the Investment Project for which such portion shall have been withdrawn, as approved by the Bank pursuant to Section 2.03(a) (ii) of the Loan Agreement. Any such amortization schedule shall provide for full repayment of funds lent or invested by the Financiera for any such Investment Project in approxi- mately equal semi-annual installments, payable on April 15 and October 15 in each year and shall conform to the provisions of Section 2.08(b) of the Loan Agreement. (b) Notwithstanding paragraph (a) of this Section, if an Investment Enterprise shall repay in advance of matu- rity all or any portion of the principal amount of any sub- loan, or if the Financiera shall sell, transfer, assign or otherwise dispose of for value of a sub-loan or an invest- ment or any part thereof the Financiera shall repay to the Banco on the next following interest payment date an amount of the Subsidiary Loan equivalent to the amount withdrawn from the Subsidiary Loan Account in respect of such sub-loan or investment or part thereof and cor- responding to the principal amount of the Loan to be repaid by the Banco to the Bank pursuant to Section 2.09 of the Loan Agreement. 8 SECTION 2.08. Interest and commitment charges shall be payable by the Financiera to the Banco semi-annually on April 15 and October 15 in each year. SECTION 2.09. Except as the Banco and the Financiera shall otherwise agree, the Financiera may repay in advance of maturity at par all or part of the principal amount of the Subsidiary Loan and any such repayment shall be applied to the several maturities thereof in inverse chrono- logical order. SECTION 2.10. Whenever it shall be necessary for the purposes of this Agreement (except Section 4.07 thereof) to determine the value in terms of Pesos of any foreign currency, such value shall be as determined by the Bank from time to time. SECTION 2.11. If the Banco shall have paid any taxes pursuant to Section 6.01 of the Loan Agreement, the Finan- ciera shall reimburse the Banco an amount equivalent to one-fifth of any such taxes. ARTICLE III The Project; Use of Proceeds of the Subsidiary Loan SECTION 3.01. This Subsidiary Loan is granted by the Banco to the Financiera exclusively for the financing of the Project described in Section 3.01 of the Loan Agree- ment and the Financiera shall apply the proceeds thereof exclusively to carry out the Investment Projects for which they were withdrawn and in accordance with, and subject to, the provisions of the Loan Agreement and of this Agree- ment. ARTICLE IV Particular Covenants of the Financiera SECTION 4.01. The Financiera shall carry out the Project and conduct its operations and affairs in accordance with 9 sound financial and investment standards and practices, under the supervision of qualified and experienced manage- ment, and in accordance with its Estatutos, its Statement of Operating Policies and Procedures and the policy guide- lines referred to in Section 6.01 (h) of this Agreement. SECTION 4.02. (a) The Financiera shall exercise its rights in relation to each of its Investment Projects financed in whole or in part out of the proceeds of the Loan in such manner as to protect the interests of the Bank, the Banco and the Financiera. (b) The Financiera undertakes that, unless the Bank shall otherwise agree, any sub-loan or investment will be made on terms whereby the Financiera shall obtain, by written contract with the Investment Enterprise or by other appropriate legal means, adequate rights protecting the interests of the Bank, the Banco and the Financiera, enabling the Banco to carry out its obligations under the Loan Agreement, and including, without limitation, in the case of any such sub-loan and, to the extent that it shall be appropriate, in the case of any such investment, the right to: (i) cause such Investment Enterprise to carry out and operate the respective Investment Project with due diligence and efficiency and in accordance with sound technical, managerTl and financial standards, including the maintenance of adequate records and documents; (ii) cause such Investment Enterprise to use the pro- ceeds of the Loan exclusively to finance the goods and services required to carry out the Investment Project in respect of which such proceeds were withdrawn and ensure that such goods and services shall be used exclusively in the carrying out of such Investment Project; (iii) ensure the Bank's and the Financiera's rights to inspect such goods and the sites, works, plants and 10 construction included in such Investment Project, the operation thereof and any relevant records and documents; (iv) require that such 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 practice and that, without any limitation upon the foregoing, such insurance shall cover marine, transit and other hazards incident to the acquisition, transportation and delivery of the goods financed out of the pro- ceeds of the Loan to the place of use or installation, and that any indemnity thereunder shall be payable in a currency freely usable by such Investment Enterprise to replace or repair such goods; (v) obtain all such information as the Bank, the Banco and the Financiera shall reasonably request relat- ing to the foregoing and to the administration, operations and financial condition of such Invest- ment Enterprise; (vi) establish and amend the amortization schedule ap- plicable to the respective sub-loan or investment in accordance with Section 2.07 of this Agreement; and (vii) suspend or terminate further access by such Invest- ment Enterprise to the use of the proceeds of the Loan upon failure by such Investment Enterprise to carry out the terms of such sub-loan or investment. SECTION 4.03. (a) The Financiera 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 Investment Enterprises and the Investment Projects that it finances and the administra- tion, operation and financial condition of the Financiera. (b) The Financiera shall maintain records adequate to record the progress of the Project and of each Investment 11 Project (including the cost thereof) and to reflect in accord- ance with consistently maintained sound accounting prac- tices the operations and financial condition of the Finan- ciera. The Financiera shall enable the Bank's representa- tives to examine such records. (c) The Financiera shall have its financial statements (balance sheet, statement of earnings and expenses and other related statements) certified annually by an inde- pendent accounting firm acceptable to the Bank, in accord- ance with generally accepted accounting principles con- sistently applied and, promptly after their preparation but not later than four months after the close of the fiscal year to which they apply, shall transmit to the Bank certi- fied copies of such statements and a signed copy of the accounting firm's report. SECTION 4.04. (a) The Financiera shall cooperate fully with the Bank to assure that the purposes of the Loan will be accomplished. To that end, the Financiera shall from time to time, at the request of the Bank exchange views with the Bank through their representatives with regard to the progress of the Project, the performance by the Financiera of its obligations under this Agreement, the administration, operations and financial condition of the Financiera and any other matters relating to the purposes of the Loan. (b) The Financiera shall promptly inform the Banco and the Bank of any condition which interferes with, or threatens to interfere with, the accomplishment of the pur- poses of the Loan, the maintenance of the service of the Subsidiary Loan or the performance by the Financiera of its other obligations under this Agreement. SECTION 4.05. The Financiera shall consult the Bank concerning any proposed amendment of its Estatutos, its Statement of Operating Policies and Procedures and the policy guidelines referred to in Section 6.01(h) of this 12 Agreement, and shall not, without the prior approval of the Bank, amend, abrogate or waive any provision thereof. SECTION 4.06. Without limitation on the obligation of the Financiera set forth in Section 2.07 (b) of this Agree- ment, if the Financiera shall sell, lease, transfer, mortgage or otherwise dispose of or encumber its property or assets except in the ordinary course of its operations as set forth in its Statement of Operating Policies and Proce- dures, the Financiera shall, unless the Banco otherwise agrees, promptly repay an amount of the Subsidiary Loan equivalent to the fair value of such property or assets or make other arrangements satisfactory to the Banco to protect or secure the interests of the Banco. SECTION 4.07. Except as the Bank shall otherwise agree, the Financiera shall not incur, or permit any of its Finan- cial Subsidiaries to incur any debt if, after the incurring of any such debt, the consolidated debt of the Financiera and all its Financial Subsidiaries then incurred and out- standing would be greater than four times the consolidated capital and surplus of the Financiera and all its Financial Subsidiaries. For the purposes of this Section: (a) The term "debt" means any debt incurred by the Financiera or any of its Financial Subsidiaries. (b) Debt shall be deemed to be incurred (i) under a loan contract or agreement, on the date and to the extent the amount of the loan is drawn down and outstanding pur- suant to such a loan contract or agreement, and (ii) under a guarantee agreement, on the date the agreement provid- ing for such guarantee has been entered into, but only to the extent that the guaranteed debt is outstanding. (e) The term "consolidated debt of the Financiera and all its Financial Subsidiaries" means the total amount of debt of the Financiera and all its Financial Subsidiaries, 13 excluding any debt owed by the Financiera to any Financial Subsidiary or by any Financial Subsidiary to the Finan- ciera or to any other Financial Subsidiary. (d) The term "consolidated capital and surplus of the Financiera and all its Financial Subsidiaries" means the aggregate of the total unimpaired paid-up capital and the unallocated surplus and free reserves of the Financiera and all its Financial Subsidiaries after excluding therefrom such amounts as shall represent equity interests of the Financiera in any Financial Subsidiary or of any Financial Subsidiary in the Financiera or any other Financial Sub- sidiary. (e) The term "Financial Subsidiary" means any sub- sidiary which, in the judgment of the Bank, is engaged in promotional, financial or technical activities similar or com- plementary to the operations of the Financiera. (f) Whenever in connection with this Section it shall be necessary to value in terms of Pesos debt payable in a foreign currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such foreign currency is, at the time of such valuation, obtainable by the Financiera or its Financial Subsidiaries for the pur- poses of servicing such debt. The provisions of this Section supersede all prior agree- ments between the Banco and the Financiera relating to the relationship between the indebtedness and the equity of the Financiera and its subsidiaries. SECTION 4.08. The Financiera shall at all times take all steps necessary to maintain its corporate existence and right to carry on operations and shall take all steps neces- sary to maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business. SECTION 4.09. The Financiera shall cause each of its sub- sidiaries (if any) to observe and perform the obligations 14 of the Financiera hereunder to the extent to which such obligations shall or can be applicable thereto, as though such obligations were binding upon each of such subsidi- aries. SECTION 4.10. In addition to other charges payable by the Financiera to the Banco in accordance with Section 2.06 of this Agreement, the Financiera shall charge each Invest- ment Enterprise to which it makes a sub-loan interest at a rate of not less than three percentage points above the rate of interest payable by the Financiera to the Banco under Section 2.05 of this Agreement, calculated in the same manner and on the same amounts provided for in such Section. SECTION 4.11. The Finantciera shall take such steps, satis- factory to the Bank, as shall be necessary to protect itself against risk of loss resulting from changes in the rates of exchange between the currencies (including Pesos) used in its lending and borrowing operations. ARTICLE V Remedies SECTION 5.01. (a) If (i) a default shall have occurred in the due and punctual payment of any amount payable by the Financiera to the Banco under this Agreement; or (ii) a default shall have occurred in the performance of any other obligation on the part of the Financiera under this Agreement; or (iii) the Bank shall have declared the principal amount of the part of the Loan relent to the Financiera pursuant to this Agreement and then outstand- ing to be due and payable immediately, then the Banco may by notice to the Financiera suspend in whole or in part the right of the Financiera to request the Banco to withdraw from the Loan Account the amount of the Loan allocated to the Financiera and such right shall continue to be suspended in whole or in part, as the case may be, 15 until the event or events which gave rise to such suspension shall have ceased to exist or until the Banco shall have notified the Financiera that such right has been restored, whichever is the earlier. (b) If the Banco's right under the Loan Agreement to make withdrawals from the Loan Account shall have been suspended or terminated with respect to any amount in the Loan Account allocated to the Financiera, regardless of the reason therefor, then the right of the Financiera to make withdrawals from the Subsidiary Loan Account as provided in this Agreement shall likewise and simultane- ously be suspended or terminated, as the case may be. SECTION 5.02. If (i) the event described in Section 5.01(a) (i) of this Agreement shall have occurred and it shall continue for a period of thirty days after notice thereof shall have been given by the Banco to the Finan- ciera; or (ii) the event described in Section 5.01(a) (ii) of this Agreement shall have occurred and it shall continue for a period of sixty days after notice thereof shall have been given by the Banco to the Financiera; or (iii) the event described in Section 5.01(a) (iii) of this Agreement shall have occurred and be continuing, then the Banco, at its option, may declare the principal amount of the Subsidiary Loan then outstanding to be due and payable immediately, and upon such declaration such principal amount together with interest and other charges thereon shall become due and payable immediately, anything in this Agreement to the contrary notwithstanding. ARTICLE VI Miscellaneous SECTION 6.01. This Agreement shall not enter into force and effect until: (a) the Loan Agreement shall have become effective in respect of the Financiera; 16 (b) the Financiera shall have furnished to the Bank cash flow projections, in form and substance satisfactory to the Bank, for the years 1971 through 1975 inclu- sive; (c) the Federacidn Nacional de Cafeteros of Colombia and the Financiera shall have 3entered into an agree- ment providing for a loan from Federacidn, Nacional de Cafeteros of Colombia to the Financiera in Pesos, in an amount equivalent to, at least, four million dollars, such agreement to be upon terms and condi- tions satisfactory to the Bank; (d) the agreement referred to in paragraph (c) of this Section shall have become effective; (e) the Financiera shall have furnished to the Bank evi- dence satisfactory to the Bank that it has complied with the provisions of Section 4.11 of this Agree- ment; (f) the subscribed capital of the Financiera shall have been increased by an amount of at least twenty mil- lion Pesos over and above the amount of such sub- scribed capital as of March 1, 1971; (g) the capital subscription referred to in paragraph (f) of this Section shall have been paid in full to the Financiera; (h) the Directors of the Financiera shall have approved such policy guidelines for the conduct of its opera- tions, supplemental to and not inconsistent with, its Statement of Policies and Procedures, as shall be satisfactory to the Bank; and (i) the Financiera shall have furnished to the Bank evi- dence satisfactory to the Bank that the administra- tive organization, the internal control of investments, 17 and the financial condition of the Financiera have been improved to an extent satisfactory to the Bank. SECTION 6.02. If and when the entire principal amount of the Subsidiary Loan withdrawn from the Subsidiary Loan Account and all interest and other charges which shall have accrued thereon shall have been paid, this Agreement and all the obligations hereunder shall forthwith terminate. SECTION 6.03. (a) Any notice, demand or request re- quired or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given or made when it shall be delivered, in the case of the Banco at its principal office in Bogota, Colombia, and in the case of the Financiera at its principal office in Apartado Aereo No. 460, Manizales, Colombia, or at such other address which the Banco or the Financiera may from time to time specify in writing to the other party. (b) Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of the Banco may be taken or executed by its General Manager or such person or persons as he shall designate in writing. (c) Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of the Financiera may be taken or executed by its President or such person or persons as he shall designate in writing. SECTION 6.04. This Agreement may be executed in sev- eral counterparts, each of which shall be an original and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Subsidiary Loan Agreement to be signed in 18 their respective names and delivered in the District of Columbia, United States of America as of the day and year first above written. BANCO DE LA REPUBLICA By /s/ ALFONSO PATIRO ROSSELLI Authorized Representative CORPORACION FINANCIERA DE CALDAS By /s/ EDUARDO ARANGO Authorized Representative