Tunisia - Electrical And Mechanical Industry Project : Loan 2113 - Loan Agreement - Conformed

OFFICIAL DOCUMENTS LOAN NUMBER 2113 TUN Loan Agreement (Electrical and Mechanical Industries Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANQUE DE DEVELOPPEMENT ECONOMIQUE DE TUNISIE Dated VA , 1982 LOAN NUMBER 2113 TUN LOAN AGREEMENT AGREEMENT, dated ,a 1 , 1982, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and BANQUE DE DEVELOPPEMENT ECONOMIQUE DE TUNISIE (hereinafter called the Borrower), a Societe Anonyme estab- lished and operating under the laws of the Republic of Tunisia (hereinafter called the Guarantor). WHEREAS the Borrower has requested the Bank to assist in the financing of the Project described in Section 3.01 of this Agreement; WHEREAS the Guarantor, in consideration of the Bank entering into this Agreement with the Borrower, has agreed to guarantee the obligations of the Borrower in respect of such loan; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereafter set forth; 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 Guarantee Agreements of the Bank, dated OcLober 27, 1980, with the same force and effect as if they were fully set forth herein, subject, however, to the modifications thereof set forth in Schedule 2 to this Agreement (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "EMI" means electrical and mechanical industries in- cluded in Categories 37 and 38 of the International Standard Industrial Classification; -2- (b) "Sub-loan" means a loan made or proposed to be made by the Borrower out of the proceeds of the Loan: (i) to an EMI Enterprise for an EMI Project; or (ii) to a Industrial Development Enterprise for an Industrial Development Project; (c) "free-limit Sub-loan" means a Sub-loan, as so defined, which qualifies as a free-limit Sub-loan pursuant to the provi- sions of Section 2.03 (c) of this Agreement; (d) "EMI Project" means a specific develop--nt project to be carried out by an EMI Enterprise utilizing the proceeds of a Sub-loan under Part A of the Project and which: (i) is undertaken in one of the Priority Sub-sectors (or in a non-priority sub- sector if the EMI Enterprise has entered into contractual agree- ment satisfactory to the Bank with a foreign party whereby such foreign party undertakes to purchase not less than 70% of the EMI Project product output); (ii) is financially sound, with an estimated financial rate of return of not less than 12% and an estimated economic rate of return of not less than 10%; (iii) has an estimated total investment cost of not more than twelve million dollars ($12,000,000) equivalent; and (iv) meets the protection and pricing requirements agreed upon pursuant to Section 3.04 (a) of the Guarantee Agreement; (e) "Priority Sub-sector" means, unless the Bank and the Borrower and Guarantor otherwise agree, a sector of industrial activity producing non-consumer electrical and mechanical products having a tariff duty protection of equal to or less than 18% of the value of imported products, or, in the case of the steel structure and platework sub-sector, a tariff duty protection of equal to or less than 21% of the value thereof at the time of approval by the Bank of an EMI Sub-loan; (f) "Industrial Development Project" means a specific development project under Part B of the Project to be carried out by an Industrial Development Enterprise utilizing the proceeds of a Sub-loan and which: (i) is in the industry sector (but exclud- ing, for this purpose, Priority Sub-sectors); and (ii) has an estimated financial rate of return of not less than 12% and an estimated economic rate of return of not less than 10%; (g) EMI Enterprise" means a private sector enterprise in which less than 50% of the equity is owned by the Guarantor, or any of its departments or agencies, to which the Borrower proposes to make a Sub-loan under Part A of the Proje-c; -3- (h) "Industrial Development Enterprise" means an enterprise to which the Borrower proposes to make a Sub-loan under Part B of the Project; (i) "Dinars" and "D" mean the currency of the Guarantor; (j) "foreign currency" means any currency other than the currency of the Guarantor; (k) "Statuts" means the Articles of Incorporation of the Borrower, as the same may be amended from time to time with the approval of the Bank; (1) "Statement of Policy" means the statement of lending and investment policy approved by the Directors of the Borrower on July 4, 1966, as the same may be amended from time to time with the approval of the Bank; (m) "Prior Loan Agreement" means any outstanding loan agreement between the Bank and the Borrower dated before the date of this Agreement and "Prior Loan" means any loan provided for therein; (n) "Commercial Code" means the Guarantor's Code de Commerce as promulgated by the Guarantor's Law No. 59-129 of October 5, 1959, as the same may be amended from time to time; (o) "Board of Directors" means the Borrower's Board of Directors referred to under Title III of the Statuts; (p) "Subsidiary Loan Agreement" means the Subsidiary Loan Agreement to be entered into between the Borrower and the Gua- rantor pursuant to Section 2.02 of this Agreement; and (q) "Technical Center" means the technical center for mechanical industries to be established under Section 3.06 of the Guarantee Agreement. 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 thirty million five hundred thousand dollars ($30,500,000). Section 2.02. The Borrower agrees to relend, out of the proceeds of the Loan, an amount equivalent to two milli,n dollars ($2,000,000) or such other amount as shall be agreed between the Bank and the Borrower, to the Guarantor for the purpose of financing the foreign currency cost of: (i) technical assistance to the technical center to be established pursuant to the provi- sions of Section 3.06 (a) of the Guarantee Agreement and the institute for standardization and quality control of industrial products to be established pursuant to the provisions of Section 3.05 of said Agreement; and (ii) the study on effective protection in manufacturing included in Part C of the Project. Such amount shall be so relent under a Subsidiary Loan Agreement to be entered into between the Borrower and the Guarantor under terms and conditions satisfactory to the Bank, including, inter alia, provisions whereby the Guarantor: (i) shall be required to repay, when due, to the Borrower the equivalent in Tunisian Dinars of the amount so relent (such equivalent to be determined as of the respective date of repayment) in equal or approximately equal semiannual installments over a period of fifteen years from the date of this Agreement, including a grace period of not more than three years; and (ii) shall be required to pay, in addition to the corresponding amount of commitment charge, if any, borne by the Borrower in connection with said amount, interest on said amount at the rate of 11-3/5% per annum. Section 2.03. (a) The amount of the Loan referred to in Section 2.02 of this Agreement may be withdrawn from the Loan Account for expenditures made (or, if the Bank shall so agree, to be made) in foreign currency in respect of the reasonable cost of services supplied from a member country of the Bank other than the Guarantor, or from Switzerland. (b) Except for the amounts to be relent by the Borrower to the Guarantor pursuant to Section 2.02 of this Agreement and the amounts required for the payment of the fee included in Section 2.06 of this Agreement, the amount of the Loan may be withdrawn from the Loan Account for amounts paid (or, if the Bank shall so agree, for amounts to be paid) by the Borrower: (i) on account of withdrawals made by an EMI Enterprise under a Sub-loan under Part A of the Project to meet the reasonable foreign currency cost of goods and services required for the EMI Project in respect of which the withdrawal from the Loan Account is requested, up to -5- an aggregate amount equivalent to fourteen million dollars ($14,000,000), unless the Bank and the Borrower shall otherwise agree; and (ii) on account of withdrawals made by an Industrial Development Enterprise under a Sub-loan under Part B of the Project to meet the reasonable foreign currency cost of goods and services required for the Industrial Development Project in respect of which the withdrawal from the Loan Account is requested, up to an aggregate amount equivalent to fourteen million dollars ($14,000,000), unless the Bank and the Borrower shall otherwise agree; provided, however, that no withdrawal shall be made in respect of a Sub-loan unless: (i) the Sub-loan has been approved by the Bank; or (ii) the Sub-loan is a free-limit Sub-loan for which the Bank has authorized withdrawals from the Loan Account. (c) A free-limit Sub-loan shall be a Sub-loan for an Industrial Development Project under Part B of the Project in an amount to be financed out of the proceeds of the Loan, which shall not exceed D500,000 equivalent when added to any other outstanding amounts financed or proposed to be financed out of the proceeds of the Loan, or of any Prior Loan the proceeds of which have been used or are being used for financing goods and services directly and materially related to such Industrial Development Project, the foregoing amount subject to change from time to time as determined by the Bank. (d) The amount of any Sub-loan for an EMI Project undet Part A of the Project shall not exceed the equivalent of $2,000,000 when added to any other outstanding amounts financed or proposed to be financed out of the proceeds of the Loan, or of any Prior Loan the proceeds of which have been used or are being used for financing goods and services directly and materially related to such EMI Project, the foregoing amount subject to change from time to time as determined by the Bank. (e) Except as the Bank and the Borrower shall otherwise agree, no withdrawals shall be made on account of: (i) expendi- tures made before the date of this Agreement; or (ii) expenditures by an EMI Enterprise or an Industrial Development Enterprise in respect of a Sub-loan subject to the Bank's approval if such expenditures shall have been made more than ninety days prior to the date on which the Bank shall have received in respect of such Sub-loan the application and information required by Section 2.04 (a) of this Agreement or, in respect of a free-limit Sub-loan, -6- more than ninety days prior to the date on which the Bank shall have received in respect of such free-limit Sub-loan the request and information required by Section 2.04 (b) of this Agreement. Section 2.04. (a) When presenting a Sub-loan (other than a free-limit Sub-loan) to the Bank for approval, the Borrower shall furnish to the Bank an application, in a form satisfactory to the Bank, together with (i) a description of the EMI Enter- prise or of the Industrial Development Enterprise and an appraisal satisfactory to the Bank of the EMI Project or of the Industrial Development Project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan and, in the case of an EMI Project, the information specified in Schedule 3 to this Agreement; (ii) the proposed terms and conditions of the Sub-loan, including the schedule of amortization of the Sub-loan; and (iii) such other information as the Bank shall reasonably request. (b) Each request by the Borrower for authorization to make withdrawals from the Loan Account in respect of a free-limit Sub-loan shall contain: (i) a summary description of the Indus- trial Development Enterprise and the Industrial Development Project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan; and (ii) the terms and conditions of the Sub-loan, including the schedule of amorti- zation therefor. (c) Except as the Bank and the Borrower shall otherwise agree, applications and requests made pursuant to the provisions of paragraphs (a) and (b) of this Section shall be presented to the Bank on or before December 31, 1984. Section 2.05. The Closing Date shall be December 31, 1987 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guaran -r of such later date. Section 2.06. Not later than the Effective Date, the Borrower shall pay to the Bank a fee equivalent to four hundred fifty thousand seven hundred thirty-nine dollars ($450,739). The fee shall be payable in such currency 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, withdraw from the Loan Account and pay to -7- itself the amount required for the full payment of the fee in the currency or currencies specified for the purpose. Section 2.07. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.08. The Borrower shall pay interest at the rate of eleven and three-fifths per cent (11-3/5%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.09. Interest and other charges shall be payable semiannually on May 15 and November 15 in each year. Section 2.10. (a) The Borrower shall repay the principal amou-t of the Loan in accordance with the amortization schedule set forth in Schedule 1 to this Agreement as such Schedule 1 shall be amended from time to time by the Bank to the extent required to: (i) conform in relevant part substantially to the aggregate of the amortization schedules applicable to Sub-loans which have been approved or authorized for withdrawals from the Loan Account under Section 2.03 of this Agreement; and (ii) take into account any cancellation pursuant to Article VI of the General Conditions and any repayments made by the Borrower under Section 2.11 of tiis Agreement; provided that any such amendments to the amortization schedule permitted hereunder shall not authorize repayments of the principal amount of the Loan beyond the latest repayment date set forth in such Schedule 1. Repayments due hereunder shall be made on May 15 and November 15 in each year. Such amendments of said Schedule 1 shall include amendments to the table of premiums on prepayment, if necessary. (b) The amortization schedule applicable to each Sub-loan shall provide for an appropriate period of grace, and, unless the Bank and the Borrower shall otherwise agree (i) shall not extend beyond 13 years from the date of approval by the Bank of such Sub-loan, or in t. case of a free-limit Sub-loan, of autho- rization by the Bank to make withdrawals from the Loan Account in respect thereof, and (ii) shall provide for approximately equal semiannual, or more frequent, aggregate payments of principal and interest or approximately equal semiaanual, or more frequent, payments of principal. -8- Section 2.11. Unless the Bank and the Borrower shall other- wise agree: (a) If a Sub-loan or any part thereof shall be repaid to the Borrower in advance of maturity or if a Sub-loan or any part thereof shall be sold, transferred, assigned or otherwise disposed of for value by the Borrower, the Borrower shall promptly notify the Bank and shall repay to the Bank on the next following interest payment date, together with the premiums specified in Schedule 1 to this Agreement, the amount withdrawn from the Loan Account in respect of such Sub-loan or any part thereof and not theretofore repaid to the Bank. (b) Any amount so repaid by the Borrower shall be applied to the maturity or maturities of the Loan in amounts corresponding to the outstanding amounts of the maturity or maturities of the Sub-loan so repaid or disposed ofe (c) Paragraph (b) of Section 3.04 of the General Conditions shall not apply to any repayment made under paragraph (a) of this Section. ARTICLE III Description of the Project; Management and Operations o- the Borrower Section 3.01. (a) The purpose of the Project is to assist the Borrower in the development of Tunisian engineering indus- tries, the improvement of their efficiency and productivity, and the increase of the supply of local capital and intermediate goods at competitive prices. The Project consists of the following: Part A: The financing through Sub-loans of EMI Projects. Part B: The financing of specific Industrial Development Projects in line with the priorities set forth in the Guarantor's Sixth Plan (1982-1986), through Sub-loans to private or public Industrial Development Enterprises in Tunisia. Part C: Through the Subsidiary Loan Agreement: (i) The carrying out of a study on effective protection in manufacturing to be undertaken by the Ali Bach Hamba Institute. -9- (ii) The provision of the services of three experts to assist the Guarantor in the establishment of the nation,. Institute for standardization and quality control referred in Section 3.05 of the Guarantee Agreement. (iii) The provision of the services of eight experts to assist the Guarantor in the establishment of the Technical Center referred in Section 3.06 of the Guarantee Agreement. (b) The Borrower shall carry out Parts A and B of the Project and conduct its operations and affairs in accordance with sound financial standards and practices, with qualified management and personnel, and in accordance with the Statuts and the State- ment of Policy. Section 3.02. (a) The Borrower undertakes that, unless the Bank shall otherwise agree, any Sub-loan under Parts A and B of the Project shall be made on terms whereby the Borrower shall obtain, by written contract with the EMI Enterprise or the Indus- trial Development Enterprise or by any other appropriate legal means, rights adequate to protect the interests of the Bank and the Borrower, including without limitation the right of the Borrower to: (i) require the EMI Enterprise or Industrial Develop- ment Enterprise to carry out and operate the EMI Project or Industrial Development Project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (ii) require that: (1) the goods and services to be financea out of the proceeds of the Loan shall be purchased at a reasonable price after obtaining at least three. quotations from reputable suppliers or manufacturers account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and avail- ability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them; and (2) such goods and services shall be used exclusively in the carrying out of the EMI Project or of the Industrial Development Project; (iii) inspect, by itself or jointly with representatives of the Bank if the Bank shall so request, such goods and the sites, works, plants and construction included in the EMI Project or Industrial Development Project, the operation thereof, and any relevant records and documents; (iv) require that: (1) the EMI Enterprise or the Industrial Development Enterprise shall take out and maintain with responsible Insurers - 10 - such insurance, against such risks and in such amounts, as shall be consistent with sound business practice; and (2) without any limitation upon the foregoing, such insurance shall cover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Loan to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the EMI Enterprise or by the Industrial Development Enterprise to replace or repair such goods; (v) obtain all such information as the Bank or the Borrower shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the EMI Enterprise or of the Industrial Development Enterprise and to the benefits to be derived from the EMI Project or from the Industrial Development Project; and (vi) suspend or terminate the right of the EMI Enterprise or of the Industrial Development Enterprise to the use of the proceeds of the Loan upon failure by such EMI Enterprise or by such Industrial Development Enterprise to perform its obliga- tions under its contract with the Borrower. (b) The Borrower shall exercise its rights in relation to each EMI Project or to each Industrial Development Project in such manner as to: (i) protect the interests of the Bank and the Borrower; (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of the Project. (c) The Borrower shall present to the Bank, for its prior approval, any substantial changes proposed to be made by the Borrower in respect of the repayment provisions of any Sub-loan. Section 3.03. Without limitation or restriction on the generality of the provisions of Section 3.02 of this Agreement, the Borrower undertakes that, unless the Bank shall otherwise agree: (a) any Sub-loan under Parts A and B of the Project (includ- ing for the purpose of this Section loans which are not made out of the proceeds of the Loan) shall be made on terms whereby the Borrower shall obtain, by written contract with the EMI Enterprise or with the Industrial Development Enterprise or by other appropriate legal means, rights adequate to: (i) require the EMI Enterprise or the Industrial Development Enterprise to furnish the Borrower as soon as available but in any case no later than March 31 in each year, copies of its provisional financial state- ments to be prepared in accordance with sound accounting prin- ciples consistently applied, and to be in such detail as the - 11 - Borrower shall have reasonably requested; and (ii) require the EMI Enterprise or the Industrial Development Enterprise to furnish the Borrower as soon as available but in any case no later than June 30 in each year, copies of its financial statements as certified in accordance with the provisions of the Commercial Code; and (b) it shall not abrogate or waive any of its rights with respect to a Sub-loan referred to under paragraph (a) of this Section. Section 3.04. (a) The Borrower shall furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan, the "roject, the EMI Enterprises or the Industrial Development Enterprises, the EMI Projects or the Industrial Development Projects, the Sub-loans and, where appropriate, the benefits to be derived from the foregoing. (b) Within six months following the last withdrawal from the Loan Account in respect of the Sub-loans or by such later date as the Bank shall request, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operations of the EMI Projects or of the Industrial Development Projects, their costs and the benefits derived and to be derived from them, the performance by the Borrower and the Bank of their respective obligations under the Loan Agreement and the accom- plishment of the purpose of the Loan. (c) Without limitation to the generality of the foregoing, and notwithstanding Section 2.04 of this Agreement, the Borrower shall provide to the Bank, for its information and comments, all appraisal reports of electrical and mechanical industries projects financed by the Borrower in Priority Sub-sectors from resources other than the proceeds of the Loan and one out of three appraisal reports of projects in EMI sub-sectors other than Priority Sub-sectors financed by the Borrower from resources other than the proceeds of the Loan. Section 3.05. The Borrower shall duly perform all its obliga- tions in agreements under which funds have been lent or otherwise put at the disposal of the Borrower by the Guarantor or its agencies or others for relending, investment or management. The - 12 - Borrower shall promptly inform the Bank of any action which would have the effect of assigning, or of amending, abrogating or waiving any material provision of, any such agreement. Section 3.06. If the Borrower establishes or acquires any subsidiary, the Borrower shall cause such subsidiary to observe and perform the obligations of the Borrower hereunder to the extent to which such obligations shall or can be applicable thereto, as though such obligations were binding upon such subsidiary. Section 3.07. The Borrower undertakes that it shall not make any loan (including any Sub-loan under Parts A and B of the Project) unless the Borrower has obtained adequate security to secure repayment of the principal of, and payment of interest and other charges on, such Sub-loan. Section 3.08. The Borrower shall, as a priority measure and to the extent possible, allocate, during the period July 1, 1982 - June 30, 1984 or such other two-year period agreed upon between the Borrower and the Bank, an amount of not less than thirty million dollars ($30,000,000) equivalent (including the proceeds of the Loan allocated under Section 2.03 (b) (i) of this Agree- ment for Part A of the Project) for electrical and mechanical industries projects, of which at least twenty million dollars ($20,000,000) equivalent shall be allocated for projects in Priority Sub-sectors. ARTICLE IV Financial Covenants Section 4.01. The Borrower shall maintain procedures and records adequate to monitor and record the progress of Parts A and B of the Project and of each EMI Project or of each Industrial Development Project (including its cost and the benefits to be derived from it) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of the Borrower. Section 4.02. (a) The Borrower shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) and separately, the records referred to in paragraph (b) of this Section, for each fiscal - 13 - year audited in accordance with sound auditinc, principles con- sistently applied by independent auditors accep. le to the Bank; (ii) furnish to the members of the Board of Directors and to the Bank, as soon as available but in any case not later than six months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of the Borrower and said records and the audit thereof as the Bank shall from time to time reason- ably request. (b) For the purposes of Part A of the Project, the Borrower shall: (i) maintain separate records of its operations concerning EMI Enterprises in such form and in such detail as the Bank shall reasonably request; and (ii) furnish such records to the Bank at its request. Section 4.03. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt, except as otherwise currently reported or disclosed in writing by the Borrower to the Bank. (b) The Borrower undertakes that, except as the Borrower and the Bank shall otherwise agree: (i) if any lien shall be created on any assets of the Borrower or any subsidiary as secu- rity for any debt, such lien will equally and ratably secure the payment of the principal of, and interest and other charges on the Loan and that in the creation of any such lien express provision will be made to that effect at no cost to the Bank; and (ii) if any statutory item shall bo created on any assets of the Borrower or of any subsidiary as security for any debt, the Borrower shall grant, at no cost to the Bank, an equivalent lien satisfac- tory to the Bank to secure the payment of the principal of, and interest and other charges on the Loan; provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 4.04. Except as the Bank shall otherwise agree, the Borrower shall: (a) conduct its operations and affairs in such - 14 - manner as shall be necessary to maintain, at all times, its debt/ equity ratio within the limit referred to in Section 4.06 of this Agreement; and (b) if such ratio shall, for reasons beyond the Borrower's control, be temporarily exceeded, promptly take all such reasonable action as shall be necessary or advisable to bring such ratio within such limit. Section 4.05. The Borrower shall not make any repayment in advance of maturity in respect of any outstanding debt of the Borrower which, in the judgment of the Bank, would materially affect the Borrower's ability to meet its financial obligations. Section 4.06. Except as shall be otherwise agreed between the Bank and the Borrower, the Borrower shall not incur or permit any subsidiary to incur any debt if, after the incurring of such debt, the consolidated debt of the Borrower and all its subsidiaries then incurred and outstanding would be greater than eight times the consolidated capital and surplus of the Borrower and all its subsidiaries. For the purposes of this Section: (a) "Subsidiary" means any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by the Borrower, or by one or more of the subsidiaries of the Borrower, or by the Borrower and one or more of its subsidiaries; (b) "debt" means any debt incurred by the Borrower or any subsidiary maturing more than one year after the date on which it is originally incurred, including the amount of any advance made to the Borrower by the Guarantor to the extent and as long as any such advances are not converted into the Borrower's equity capital; (c) debt shall be deemed to be incurred: (i) under a loan contract or agreement (including the Loan Agreement and any Prior Loan Agreement) on the date and to the extent the amount of the loan is drawn down and outstanding pursuant to such loan contract or agreement; and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt is outstanding; (d) whenever in connection with this Section it shall be necessary to value in terms of Dinars debt payable in foregoing - 15 - currency, such valuation shall be made at the prevailing lawful rate of exchange at which such foreign currency is, at the time of such valuation, obtainable by the Borrower for the purpose of servicing such debt; (e) "consolidated debt of the Borrower and all its sub- sidiaries" means the total amount of debt of the Borrower and its subsidiaries, excluding any debt owed by the Borrower to any subsidiary or by any subsidiary to the Borrower or to any other subsidiary; and (f) "consolidated capital and surplus of the Borrower and all its subsidiaries" means the aggregate of the unimpaired paid-up capital, surplus and free reserves (excluding the provi- sions for possible losses referred to under Section 4.10 of this Agreement) of the Borrower and its subsidiaries after excluding therefrom such amounts as shall represent equity interests of the Borrower in any subsidiary or of any subsidiary in the Borrower or any other subsidiary. Section 4.07. The Borrower shall take such steps satisfactory 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 Dinars) used in its operations. Section 4.08. The Bank and the Borrower shall from time to time, at the request of either party, exchange views through their representatives with regard to the administration, operations and financial condition of the Borrower and its subsidiaries, and the Borrower shall furnish to the Bank all such information as the Bank shall reasonably request concerning the administration, operations and financial condition of the Borrower and its sub- sidiaries, and the progress of the Project. Section 4.09. The Borrower shall enable the Bank's represen- tatives to inspect the records referred to in Section 4.01 of this Agreement and any relevant documents. Section 4.10. The Borrower shall make adequate provision to cover its possible losses on account of any of its operations (including, but without limitation, loans and investments), and shall maintain at all times its provisions for such possible losses at sufficient levels, all in accordance with sound finan- cial practices. - 16 - Section 4.11. Except as the Bank shall otherwise agree, the Borrower shall not make any loan (including any Sub-loan) or investment if the amount of Rny such loan or investment shall exceed 25% of the consolidated capital and surplus of the Borrower and all its subsidiaries (as those terms are defined in paragraph (e) of Section 4.06 of this Agreement). Section 4.12. The Borrower shal. closely monitor its lending operations (including, without limitation, its Sub-loans under this Agreement and under Prior Loan Agreements) which have been rescheduled and in case more than 15% of the Borrower's loan portfolio is affected by such rescheduling in any given fiscal year, the Borrower shall furnish a special report on rescheduled lending operations to the Board of Directors. Section 4.13. Except as the Bank shall otherwise agree, the Borrower shall annually review with the Guarantor its interest rate structure in the light of' its average cost of capital and administrative costs and, after having taken into consideration the general evolution of interest rates in Tunisia, shall, prompt- ly after such reviews, take all necessary measures satisfactory to the Bank (including but not limited to adjustments of its interest rates) as shall be required to achieve a reasonable profit margin permitting the establishment of sufficient reserves and a reason- able return on capital. ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified: (a) any part of the principal amount of any loan to the Borrower having an original maturity of one year or more shall, in accordance with its terms, have become due and payable in advance of maturity as provided in the relative contractual instruments, or any security for any such loan shall have become enforceable; (b) a change shall have been made in the Statuts without the Bank's consent, if such change shall materially and adversely affect the operations or financial condition of the Borrower; (c) a resolution shall have been passed for the dissolution or liquidation of the Borrower; and - 17 - (d) a subsidiary or any other entity shall have been created or acquired or taken over by the Borrower, if such creation, acquisition or taking over would materially and adversely affect the conduct of the Borrower's business or the Borrower's financial condition or the efficiency of the Borrower's management and personnel or the carrying out of the Project. Section 5.02. For the purposes of Section 7.01 of the General Conditions the following additional events are specified: (a) the event specified in paragraph (a) or paragraph (b) or paragraph (c) of Section 5.01 shall occur; and (b) the event specified in paragraph (d) 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 of effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the Guarantor's Law establishing, and the Decree organizing, the national institute for standardization of quality control referred to in Section 3.05 of the Guarantee Agreement shall have been promulgated and published; (b) the Law establishing, and the Decree organizing, the Technical Center referred to in Section 3.06 of the Guarantee Agreement shall have been promulgated and published; (c) a director for the Technical Center referred to in Section 3.06 of the Guarantee Agreement shall have been employed; and (d) the Subsidiary Loan Agreement has been duly authorized and executed by the Borrower and the Guarantor. Section 6.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General - 18 - Conditions, namely, that the Subsidiary Loan Agreement has been duly authorized and executed by the Borrower and the Guarantor, respectively, and is legally binding upon the Borrower and the Guarantor in accordance with its terms. Section 6.03. The date S4+- 13, 9 , is hereby specified for the purpose of Section 12.04 of the General Conditions. ARTICLE VII Amendments to Prior Loan Agreement Section 7.01. The parties to this Agreement hereby agree that the provisions of Sections 4.04, 4.06, 4.10, 4.11, 4.12 and 4.13 of this Agreement shall be applicable to any Prior Loan Agreement, with the same force and effect as if they were fully set forth therein. ARTICLE VIII Miscellaneous Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Borrower: Banque de Developpement Economique de Tunisie 68, Avenue Habib Bourguiba Tunis, Tunisia - 19 - Cable address: Telex: BDETUN 12382 TN Tunis 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. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Il Regional Vice President Europe, Middle East and North Africa BANQUE DE DEVELOPPEMENT ECONOMIQUE DE TUNISIE Authorized Representative - 20 - SCHEDULE 1 Amortization Schedule* Payment of Principal Date Payment Due (expressed in dollars)** On each May 15 and November 15 beginning November 15, 1985 through May 15, 1997 November 15, 1985 570,000 May 15, 1986 885,000 November 15, 1986 1,330,000 May 15, 1987 1,775,000 November 15, 1987 1,775,000 May 15, 1988 1,775,000 November 15, 1988 1,775,000 May 15, 1989 1,775,000 November 15, 1989 1,775,000 May 15, 1990 1,775,000 November 15, 1990 1,775,000 May 15, 1991 1,775,000 November 15, 1991 1,775,000 May 15, 1992 1,670,000 November 15, 1992 1,540,000 May 15, 1993 1,405,000 November 15, 1993 1,225,000 May 15, 1994 955,000 November 15, 1994 855,000 May 15, 1995 750,000 November 15, 1995 610,000 May 15, 1996 400,000 November 15, 1996 320,000 May 15, 1997 235,000 * The Amortization Schedule is subject to amendment pursuant to the provisions of Section 2.10 of the Loan Agreement. ** To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.04), the figures in this column represent dollar equiva- lents determined for purposes of withdrawal. -21- Premiums on Prepayment The following percentages are speciied 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 Not more than three years before maturity 2.30% More than three years but not more than six years before maturity 4.65% More than six years but not more than eleven years before maturity 8.50% More than eleven years but not more than thirteen years before maturity 10.05% More than thirteen years before maturity 11.60% - 22 - SCHEDULE 2 Modifications of the General Conditions For the purposes of this Loan Agreement, the provisions of the General Conditions are modified as follows: (1) The following subparagraph (d) is added to Section 3.04: "(d) The Bank and the Borrower may from time to time agree upon arrangements for prepayment of the Loan and the application of such prepayment in addition to, or in- substitution for, those set forth in paragraph (b) of Section 3.04." (2) The words "EMI Projects or Industrial Development Projects" are substituted for the words "the Project" at the end of Section 5.03. (3) Section 6.03 is deleted and replaced by the following new Section: "Section 6.03. Cancellation by the Bank. If (a) the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of thirty days, or (b) by the date specified in paragraph (d) of Section 2.03 o. the Loan Agreement no applications or requests permitted under Section 2.02 and 2.03 of the Loan Agreement shall have been received by the Bank in respect of any portion of the Loan, or having been so received, shall have been denied, or (c) after the Closing Date an amount of the Loan shall remain unwithdrawn from the Loan Account, or (d) the Bank shall have received notice from the Guarantor pursuant to Section 6.07 with respect to an amount of the Loan, the Bank may by notice to the Borrower terminate the right of the Borrower to submit such applications or requests or to make withdrawals from the Loan Account, as the case may be, with respect to such amount or portion of the Loan. Upon the giving of such notice such amount or portion of the Loan shall be cancelled." SCHEDULE 3 Information to be included in Appraisals of EMI Projects The Borrower's appraisal reports for EMI Projects under Part A of the Project shall include the following information: (a) When local integration is contemplated, a detailed list of components shall be included showing separately the components to be imported, those purchased from Tunisian manufacturers, and those manufactured by the promoter; the local cost/CIF price ratios for each component to be produced or purchased locally shall also be estimated. (b) Permanent working capital needs, either initial in thca case of a new project or additional in the case of extension of production capacity, shall be estimated and justified; these needs will be eligible for medium- term financing to be provided by the Borrower or obtained from commercial banks by the Borrower. (c) In the case of export-oriented projects in EMI Priority Sub-sectors (at least 30% of total sales) or in non- priority (at least 70% of sales) sub-sectors, prospects of markets abroad and the project's ability to export shall be analyzed and assessed. (d) A detailed description of the protection granted to the project, specifying the duties and taxes levied on imports in the case of import certificates and the quota protection (level, schedule and duration of quota) in the case of import licenses. (e) In the case of projects protected by import licensing and quotas the comparable foreign prices shall be quoted and compared to the projected prices of the project's output, and the non-confidential features of the tech- nical assistance or licensing contract signed with the foreign associate be given with a focus on the aspects related to the specifications and quality standards of the products. - 24 - (f) At the reasoned request of the Bank, a simplified compu- tation of the effective protection which the project shall enjoy (with foreign prices used only for output and tradeable inputs but not for capital or labor factors). (g) For EMI Projects in the mechanical and platework sub- sector, the technical assistance program proposed by the Technical Center (including the scope and schedule of implementation of said program) and agreed upon between the Borrower and the EMI Enterprise applying for the Sub-loan. 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 Jgned this Certifi- cate and affixed the Seal of the Bank thereunto this 4d day of A- , 198L. FOR SECRETARY