El Salvador - Rio Lempa Hydroelectric Project : Loan 0022 - Loan Agreement - Conformed

LOAN NUMBER 22 ES Loan Agreement (Rio Lempa Hydroelectric Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND COMISION EJECUTIVA HIDROELECTRICA DEL RIO LEMPA DATED DECEMBER 14, 1949 Press of Byron S. Adams TABLE OF CONTENTS LOA AGREIMENT Article Number Title Page I Definitions................................. 1 II The Loan .................................. 3 III Use of Proceeds of the Loan.................. 6 IV Withdrawal of Proceeds of the Loan.......... 7 V B onds..................................... 14 VI Redemption of Bonds........................ 20 VII Particular Covenants of the Borrower ........ 22 VIII Remedies of the Bank on Default............ 27 IX Interpretation of Agreement; Arbitration..... 29 X Miscellaneous Provisions .................. 30 XI Effective Date........................... 31 80HEDUIM8 Schedule Number Title Page 1 Description of Project....................... 34 2 Table of Amortization ..................... 37 3 Estimated Cost of the Project.............. 39 4-A Form of Dollar Bond Payable to Order ....... 40 9 4-B Form of Coupon Bond Payable in Dollars..... 44 5 Local Currency Financing Plan for the Project 49 1oan greemnent AGREEMENT, dated December 14, 1949, between INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, party of the first part, and ComisI6N EJECUTIVA HIDRO- ELECTRICA DEL Rio LEMPA, party of the second part. ARTICLE I Definitions Wherever used in this Agreement or in any Schedule to this Agreement, unless the context shall otherwise re- quire, the following terms shall have the respective meanings hereinafter in this Article set forth: (1) The term Bank means International Bank for Re- construction and Development, the party of the first part hereto. (2) The term Borrower means Comisi6n Ejecutiva Hidro- electrica del Rio Lempa, an Agency of the Republic of El Salvador, the party of the second part hereto. (3) The term Guarantor means the Republic of El Salvador. (4) The term Loan means the loan provided for in this Agreement. (5) The term Loan Account means the loan account to be opened as provided in Section 1 of Article IV of this Agreement. (6) The term United States means the United States of America. (7) The term dollars and the sign $ mean dollars in such coin or currency of the United States as at the time referred to shall be legal tender for the payment of public and private debts in the United States. 2 (8) The term Bond means a bond executed and delivered in accordance with Article V of this Agreement. (9) The term local currency bond means a bond payable in currency of the Guarantor to be executed and delivered in accordance with Schedule 5 to this Agreement. (10) The term Goods means equipment, supplies and services which are required for the purposes specified in Article III of this Agreement, and wherever reference is made in this Agreement to the cost of any Goods such cost shall be deemed to include the cost of importing such Goods into the territories of the Guarantor, but only to the extent that such cost shall be paid in currency other than currency of the Guarantor, and interest and commit- ment charge on the Loan until the Project shall have been carried out and completed or until the Closing Date, which- ever shall be the earlier, but only to the extent that the same may properly be capitalized under sound accounting practices. (11) The term external debt means any debt payable in any currency other than currency of the Guarantor, whether such debt is payable absolutely or at the option of the creditor in such other currency. (12) The term Closing Date means July 1, 1953, or such other date as shall be agreed upon in writing between the Bank and the Borrower as the Closing Date. (13) The term Effective Date means the date on which this Agreement shall come into force and effect as pro- vided in Article XI[ of this Agreement. (14) The term Guarantee Agreement means the agree- ment of even date herewith between the Bank and the Guarantor whereby the Guarantor agrees to guarantee the Loan and the obligations of the Borrower under this Agreement. (15) The term Project means the project described in Schedule 1 to this Agreement, as such Schedule shall be 3 amended from time to time by agreement in writing be- tween the Bank and the Borrower. (16) The term Agency shall mean any agency or instru- mentality of the Guarantor or of any political subdivision of the Guarantor and shall include any institution or or- ganization which is owned or controlled directly or indi- rectly by the Guarantor or by any political subdivision of the Guarantor or the operations of which are conducted primarily in the interest of or for account of the Guarantor or any political subdivision of the Guarantor. (17) The term this Agreement includes the respective Schedules which are referred to herein and all of which are iereby incorporated herein and are herein referred to by their respective letters and numbers. ARTICLE II The Loan SECTION 1. The Bank agrees to lend to the Borrower, on the termis and conditions in this Agreenient set forth, the *unm of twelve million, five hundred and forty-five thousand Jollars ($12,545,000), or the equivalent thereof in cur- encies other than dollars as hereinafter provided. S.cnrioN 2. The amount of the Loan may be withdrawn by the Borrower as provided in Article IV of this Agree- ment. On any amount of the Loan not so withdrawn, the Borrower shall pay to the Bank a conimitment charge which shall accrue and be payable at the following rates and for the folowing periods: (a) From the Effective Date or from March 15, 1950, whichever shall be the earlier, to the respective dates on which the respective amounts shall be so withdrawn or shall be cancelled pursuant to Article IV of this Agree- ment, whichever shall be the earlier: (i) For the period to and including the 180th day after the Effective Date or after March 15, 1950, which- 4 ever shall be the earlier, at the rate of one and one- half per cent (11%o) per annum; (ii) Thereafter, at the rate of three and one-quarter per cent (31/4%) per annum less a credit computed as follows: For each three-month period beginning January 1, April 1, July 1, or October 1, or for any part of such period, such credit shall be computed at the approximate rate of annual discount on the issue of 90, 91 or 92-day United States Treasury Bills last sold by the United States immediately preceding the beginning of such period on the basis of the average price for the sale of such issue, all as announced by the United States Treasury De- partment; provided, however, that the rate at which such credit shall be computed for any such period, or part thereof, shall in no event exceed one and three-quarters per cent (1%%) per annum. (b) If the Bank shall at the request of the Borrower enter into an irrevocable commitment in writing to pay an amount to the Borrower or others in respect of the cost of Goods, then for the period from the date of such comnmitment to the date on which such amount shall be withdrawn from the Loan Account or on which such com- mitment shall be terminated (and written notice thereof shall be received by the Bank), whichever shall be the earlier, the rate of commitment charge payable under the provisions of the foregoing subsection (a) in respect of such amount shall be increased by one per cent (17) per annum. (c) Such commitment charge shall be payable in dollars semi-annually on January 15 and July 15 in each year. SECTION 3. The Borrower shall pay interest at the rate of four and one-quarter per cent (41/4%) per annum on the principal amount of the Loan outstanding and unpaid from the respective dates on which the respective amounts et the Loan shall be withdrawn by the Borrower from the Loan Account. Sucb interest shall be payable in dollars semi-annually on January 15 and July 15 in each year, except that inerest on any part of the Loan which shall be repayable in any currency other than dollars shall be payable in such other currency. SECTION 4. In all cases in which it shall be necessary to compute the amount of commitment charge or interest or of the service charge provided for in Section 7 of Article V of this Agreement which shall have accrued under this Agreement for periods of less than six months, such com- mnitment charge, interest or service charge shall be com- puted on a daily basis using a 365-day factor. For even periods of six months such commitment charge, interest and service charge shall be computed on an annual basis. SECTION 5. The Borrower shall repay the principal of the Loan in accordance with the table of amortization set forth in Schedule 2 to this Agreement. SECTION 6. The principal of and interest on the Loan and the Bonds, the commitment clarge and service charge -n the Loan, and the premium on the redemption of Bonds shall be paid at the office of the Bank in The City of New York, State of New York, United States, or at such other place or places as the Bank shall from time to time request in writing, or as shall be specified in the Bonds. SECTION 7. As soon as practicable, but in no case later than thirty days after the Effective Date, the Borrower shall notify the Bank or cause the Bank to be notified of each, of the countries other than the United States in which orders for Goods have been placed or are intended to be placed, which notice shall include for each such country a list of the Goods for which orders have been placed or are intended to be placed and the estimated cost of such Goods. The Borrower shall from time to time promptly 6 otify the Bank of any changes in such countries or in such lists or in such estimated costs. If any Goods shall ne purchased in any country other than the United States, the Borrower shall make reasonable efforts to pay or pro- vide for the payment of the cost of such Goods in the currency of such other country. To the extent that the cost of any Goods shall be payable in any currency other than do"irs, the Bank may, at its option, advance such other currency in lieu of dollars as part of the Loan. If and to the extent that the Bank shall acquire in exchange for dollars any such other currency which it shall so ad- vance, the part of the Loan so advanced shall be repayable in dollars and the equivalent in dollars of the part of the Loan so advanced shall be the amount of dollars paid by the Bank in exchange for such other currency. If and to the extent that the Bank shall advance any such other currency which it shall not have acquired in exchange for dollars the part of the Loan so advanced shall be repay- able in such other currency. SECTION 8. The parties to this Agreement accept and afgree to the provisions of Loan Regulations No. 2 of the Bank, dated April 28, 1948, a copy of which has been fur- il:hed to the Borrower, with the same force and effect as if they were fully set forth herein, anything in this Agreement or the Bonds to the contrary notwithstanding. ARTICLE III Use of Proceeds of the Loan SECTION 1. The Borrower covenants that the proceeds of the Loan will be applied exclusively to the cost of pur- chasing and importing into the territories of the Guarantor Goods which will be required for the carrying out of the Project. The specific Goods to be purchased out of the pro- ceeds of the Loan for use in the Project shall be determined by agreement in writing between the Bank and the Bor- 7 rower, and -he lisi of such Goods may be modified from time to time by agreement in writing between them. SECTION 2. The Borrower covenants that all Goods pur- chased in whole or in part with the proceeds of the Loan will be imported into the territories of the Guarantor and will there be used by the Borrower exclusively in the carry- ing out of the Project. ARTICLE IV Withdrawal of Proceeds of the Loan SECTION 1. The Bank shall open an account on its books in the name of the Borrower and shall credit to said ac- count the amount of the Loan. The Borrower shall be en- titled from time to time to withdraw from the Loan Ac- count such amounts as shall be required by the Borrower in order to reimburse it for amounts paid or provided by it subsequent to the Effective Date (except as shall be other- wise specifically provided by agreement in writing between the Bank and the Borrower) for the purpose of paying the reasonable cost of Goods purchased in accordance with Ar- ticle III of this Agreement. The Borrower shall also be entitled from time to time to withdraw from the Loan Ac- count such amounts as shall from time to time be approved in writing by the Bank and as shall be required by the Bor- rower in order to enable it to pay or provide for the pay- ment of the reasonable cost of such Goods not theretofore paid. Notwithstanding the foregoing provisions, the Bor- rower shall not be entitled to withdraw from the Loan Ac- count until (a) an access road from Ilobasco to the site of the Project suitable for transportation of the Goods shall have been completed; (b) local currency bonds in an aggre- gate principal amount of thirteen million, one hundred thousand colones (013,100,000) in currency of the Guaran- tor shall have been purchased; and (c) clear unencumbered title to the land to be overflowed by the reservoir shall be held by the Borrower without any liability arising out of the acquisition of such title. 8 SUTION 2. (a) Whenever the Borrower shall desire to withdraw any amount from the Loan Account, the Borrower shall deliver to the Bank an application in writing setting forth: (1) The amount which the Borrower so desires to with- draw from the Loan Account; (2) A statement that said amount is required to reim- burse the Borrower for, or to enable the Borrower to meet, payments made or provided or to be made or provided for the purpose of paying the cost of Goods therein set forth, which statement shall show, in such reasonable detail as the Bank shall request, the cost of such Goods, the dates on which such Goods were ordered and the dates on which payment for such Goods was made or will be due, the names and addresses of the suppliers of such Goods, the date of arrival or estimated date of arrival of such Goods in the territories of the Guarantor, and the known or intended destination and end-use of such Goods in the Project; (3) A statement that the Borrower has not theretofore withdrawn from the Loan Account, or applied for the withdrawal from the Loan Account of, any amounts for the purpose of reimbursing the Bor- rower for or meeting such payments, and that the Borrower has not obtained or will not obtain funds for such purpose out of the proceeds of any other loan, credit or grant available to it, other than a short-term loan or credit established in anticipation of the withdrawal applied for and to be repaid pro tanto with the funds to be withdrawn, which loan or credit shall be described in the application; (4) A statement that such payments were or will be made for the purposes specified in Article III of this Agreement; that the Goods purchased or to be pur- 9 chased by means of such payments are appropriate for such purposes; and that the cost and terms of purchase thereof are reasonable; and (5) A statement that at the date of the application there is no existing default in the performance of any of the obligations of the Borrower under this Agree- ment or of the Guarantor under the Guarantee Agreement. (b) If such, application shall be to withdraw from the Loan Account any amount for the purpose of enabling the Borrower to meet the cost of Goods not theretofore paid, it shall also set forth: (6) A statement of the arrangements under which such arnount will be applied to the payment of the cost of such Goods; and (7) An agreement by the Borrower that it will apply such aiount or cause such amount to be applied only to the paymnent when and as due of the cost of such Goods and that, as promfnptly as possible thereafter, the Borrower will furnish or cause to be furnished to the Bank proof satisfactory to the Bank that sucl amount has been so applied. (c) If such application shall be the first application for withdrawal heround(er, it shall also set forth: (8) A statement that between the date of this Agree- ment and the Effective Date none of the events speci- fned in paragraph (g) of Section 7 of this Article has occurred. (d) If such application shall request the Bank to enter iinlo an irrevocable commiitment to pay an amount to the Borrower or otlers in respect of the cost of Goods, such application shall contain such other and additional state- ients and agreements as the Bank shall reasonably re- qu ire. 10 SECTION 3. (a) Each application under this Article shall be in writing in the English language and shall be signed on behalf of the Borrower by its representative or repre- sentatives duly authorized for the purpose. Each such ap- plication shall be executed and delivered to the Bank in triplicate as the Bank shall from time to time direct. Ex- cept as otherwise agreed in writing between the Bank and the Borrower, each such application (except the final appli- cation for any currency) shall be for an amount of not less than $50,000, or the equivalent thereof in any one cur- rency. Such applications shall be serially numbered. (b) The Borrower shall furnish or cause to be furnished to the Bank, upon request, original or duplicate receipted bills or invoices or other documents sufficient to show that the payments covered by the application have been made for the Goods specified therein. (c) If the expenditures to be reimbursed or paid by the withdrawal applied for were or are to be made in any currency other than dollars, the application shall so state and shall also state the amount of such expenditures in such other currency. SECTION 4. Each application and the accompanying doc- uments must be sufficient to satisfy the Bank that the amount to be withdrawn from the Loan Account is to be used only for the purposes specified in Article III of this Aigreement. The Borrower shall furnish or cause to be furnished to the Bank any and all such further documents and other evidence in support of the application as the Bank shall at any time or from time to time reasonably request and whether before or after the Bank shall permit any withdrawal requested in the application. All appli- cations and other documents delivered to the Bank under this Article shall be in form and substance satisfactory to the Bank. 11 SECTION 5. If the Bank is satisfied that the application fully complies with the provisions of this Agreement and that the Borrower is entitled under this Agreement to withdraw from the Loan Account the amount applied for, the Bank shall promptly pay such amount to or on the order of the Borrower. SECTION 6. The Borrower may at its option by written notice to the Bank cancel all or any part of the Loan which the Borrower shall not have withdrawn prior to such notice. If the Borrower shall not on or before the Closing Date have withdrawn from the Loan Account the full amount of the Loan, the amount of the Loan not so withdrawn shall be cancelled. Except as otherwise agreed in writing between the Bank and the Borrower, any cancellation pur- suant to this Section or to Section 8 of this Article shall be applied to the respective maturities of the instalments of the principal amount of the Loan as set forth in Schedule 2 to this Agreement in the inverse order of such maturi- ties, beginning with the latest maturity, except to the ex- tent that Bonds of such maturities shall have theretofore been executed and delivered pursuant to Article V of this Agreement. Notwithstanding the foregoing provision of this Section, no such cancellation shall, unless the Bank and the Borrower shall otherwise agree in writing, be effective with respect to any part of the Loan as to which the Bank shall have incurred an obligation pursuant to an application under paragraph (d) of Section 2 of this Article or by approval of a commitment pursuant to Sec- tion 9 of this Article. SECTION 7. If any of the events hereinafter described shall have happened and be continuing, the Bank may, at its option, suspend the right of the Borrower to make with- drawals from the Loan Account, to wit: (a) An Event of Defhult shall have happened and be existing under this Agreement. 12 (b) An extraordinary situation shall exist which shall make it improbable that the Borrower will be able to perform its obligations under this Agreement or that the Guarantor will be able to perform its obli- gations under the Guarantee Agreement. (c) The Guarantor shall have ceased to be a member of the International Monetary Fund or shall have be- come or been declared ineligible under Section 6 of Article IV, Section 5 of Article V, Section 1 of Article VI or Section 2(a) of Article XV of the Articles of Agreement of the International Monetary Fund to use the resources of said Fund. (d) The Guarantor shall have been suspended from membership in or shall have ceased to be a member of the Bank. (e) The Bank shall have suspended operations either temporarily or permanently as provided in Section 5 of Article VI of its Articles of Agreement. (f) Any condition shall arise which shall make it prob- able that the estimated cost of the Project will materially exceed the estimated cost set forth in Schedule 3 to this Agreement, and the Borrower, after having been accorded a reasonable opportu- nity for consultation with the Bank, shall be unable to show that it can provide or obtain, promptly and upon reasonable terms, the additional funds re- quired to cover such increase. (g) After the date of this Agreement and prior to the Effective Date, the Guarantor or the Borrower shall have taken any action which would have constituted a violation of any covenant contained in Sections 6 and 7 of Article VII of this Agreement, or in Sections 3 and 4 of Article III of the Guarantee Agreement, had this Agreement and the Guarantee 13 Agreement been in full force and effect on the date such action was taken. The Bank may exercise its option to suspend such right to make withdrawals by notice to the Borrower of its elec- tion to exercise such option. Upon the giving of such notice the right of the Borrower to make withdrawals from the Loan Account, except as otherwise provided in Section 9 of this Article, shall forthwith be suspended and shall continue to be suspended until the event which gave rise to such suspension shall have ceased to exist or until the Bank shall have notified the Borrower that the Bank has lifted such suspension, whichever is the earlier. SECTION 8. Except as otherwise provided in Section 9 of this Article, if any of the events described in Section 7 of this Article shall have happened to be continuing, the Bank may at any time by notice to the Borrower ter- minate any and all obligations of the Bank to permit the Borrower to make withdrawals from the Loan Account, and upon the giving of such notice the amount of the Loan not theretofore withdrawn shall be cancelled. SECTION 9. If the right of the Borrower to make withdrawals from the Loan Account shall be suspended pursuant to Section 7 of this Article or if the amount of the Loan not theretofore withdrawn shall be cancelled pur- suant to Section 8 of this Article and if prior to the date of such suspension or cancellation, as the case may be, the Borrower shall have entered into any binding commitment for the purchase of Goods which shall have been approved in writing by the Bank either before or after the making thereof, then the Bank shall permit the Borrower to with- draw from the Loan Account such amounts as shall be necessary in order to enable the Borrower to satisfy its ob- ligations under such commitment. The right of the Bor- rower to make withdrawals from the Loan Account pul.- 14 suant to this Section shall be subject to the provisions of Sections 2 (except subparagraphs 5 and 8 thereof), 3, 4 and 5 of this Article. SECTION 10. Notwithstanding any cancellation pursuant to Section 6 or Section 8 of this Article or any suspension pursuant to Section 7 of this Article, all the provisions of this Agreement shall continue in full force and effect, ex- cept as in this Article specifically provided. ARTICLE V Bonds SECTION 1. The Borrower shall, as hereinafter in this Article provided, execute and deliver Bonds. From and after the delivery of any such Bonds, they shall represent a principal amount of the Loan equal to the principal amount of such Bonds, and payment of the principal of any such Bonds shall pro tanto discharge the obligation of the Borrower to repay the principal of the Loan as provided in Section 5 of Article II of this Agreement. SECTION 2. Except as the Bank shall otherwise request, the Borrower shall, against payment by the Bank of any amount to be withdrawn from the Loan Account pursuant to Article IV of this Agreement, execute and deliver to or on the order of the Bank Bonds in the aggregate prin- cipal amount so paid. If and when the Bank shall so re- quest, the Borrower shall, as soon as practicable and within 30 days after the date of the request, execute and deliver to or on the order of the Bank Bonds in the aggre- gate principal amount specified in such request, not ex- ceeding, however, the aggregate principal amount of the Loan which shall have been withdrawn and shall be out- standing and unpaid at the date of such request and for which Bonds shall not theretofore have been executed and delivered. 3 15 ei u,espective maturities of the Bonds which shall be so executed and delivered shall correspond to the maturities of instalments of the principal of the Loan as specified in the table of amortization set forth in Schedule 2 to this Agreement; provided, however, that, ex-- cept as the Bank and the Borrower shall otherwise agree in writing, any Bonds so executed and delivered prior to the Closing Date shall have the earliest maturity dates so specified for the corresponding instalments of the prin- cipal of the Loan for which Bonds shall not theretofore have been so exec4ted and delivered. SEGTION 4. The Bonds shall be bonds payable to the order of the Bank or to such other payee or payees as the Bank shall specify (hereiiafter sometimes called order Bonds) or shall be bonds payable to the bearer thereof with coupons for semi-annual interest attached (herein- after called coupon Bonds), as the Bank shall from time to time request. Order Bonds payable in dollars shall be sub- stantially in the form set forth in Schedule 4-A to this Agreement. Coupon Bonds payable in dollars and the cou- pons attached thereto shall be substantially in the forms set forth in Schedule 4-B to this Agreement. SECTION 5. If any part of the Loan shall be repayable in any currency other than dollars, the Bonds represent- ing the amount so repayable shall be payable as to princi- pal, interest and the premium, if any, on the redemption thereof in such other currency and the aggregate princi- pal amount of such Bonds shall be equal to the aggregate amount of such currency advanced on account of such part of the Loan and not theretofore repaid. Bonds payable in any currency other than dollars shall be substantially in the form set forth in Schedule 4-A or in Schedule 4-B to this Agreement, as the case may be, except that they shall provide for payment of principal, interest and redemption premium in such other currency, shall provide for such 16 olace or places of payment as the Bank shall specify, and shall contain such other modifications as the Bank shall reasonably request in order to conform to the laws or to the financial usage of the place where they are payable. SEcTION 6. Except as the Bank and the Borrower shall otherwise agree in writing, all Bonds shall be fully en- graved, or printed or lithographed on engraved backs; provided, however, that if the Borrower shall have exe- cuted and delivered to or on the order of the Bank printed or lithographed Bonds, the Borrower shall, as soon as rea- sonably possible after the Bank shall so request, execute and deliver to or on the order of the Bank, without expense to the Bank, in exchange for and against surrender of such printed or lithographed Bonds, fully engraved Bonds. SECTION 7. The Bonds shall bear interest at such rate or rates not in excess of four and one-quarter per cent (414%) per annum as the Bank shall specify. If any Bond, whether held by the Bank or by others than the Bank, shall bear interest at a rate less than four and one- quarter per cent (41/1%) per annum, the Borrower shall pay to the Bank a service charge on the principal amount of the Loan from time to time outstanding and unpaid and represented by such Bond at an annual rate equal to the difference between four and one-quarter per cent (41/4%) per annum and the rate of interest of such Bond. Such service charge shall be payable semi-annually on January 15 and July 15 in each year in the currency in which such Bond is payable. The payment of interest at the rate specified in such Bond, and the payment of service charge on the principal amount of the Loan repre- sented by such Bond as in this Section provided, shall pro tanto discharge the obligation of the Borrower to pay in- terest on the Loan as provided in Section 3 of Article II of this Agreement. 17 SECTION 8. Each order Bond shall be dated (a) if exe- cuted and delivered on any January 15 or July 15, then the date of execution and delivery thereof, or (b), if exe- cuted and delivered on any other date, then the January 15 or July 15, as the case may be, next preceding the date of execution and delivery thereof. Each coupon Bond shall be dated July 15, 1950, and shall have attached all coupons which shall not have matured on or before the date on which such Bond shall be executed and delivered. Upon any delivery of Bonds appropriate adjustment shall be made so that there shall be no loss to the Bank or to the Borrower in respect of interest, service charge and com- mitment charge on the principal amount of the Loan rep- resented by such Bonds. SECTION 9. Bonds shall be in such denominations as the Bank shall request. SECTION 10. At any time or from time to time the Bor- rower shall, within 60 days after the Bank shall so request, execute and deliver to or on the order of the Bank, in exchange for Bonds theretofore executed and delivered to it, new Bonds in accordance with the following pro- visions: (a) Bonds payable to the order of a named payee or named payees may be exchanged for Bonds payable to the order of another payee or other payees spec- ified in the request, or for coupon Bonds, and coupon Bonds may be exchanged for Bonds payable to the order of a payee or payees specified in the request. (b) Bonds of any denominations may be exchanged for Bonds of any other denominations. (c) Bonds bearing interest at one rate may be exchanged for Bonds bearing interest at any other rate not in excess of four and one-quarter per cent (41/47) per annum. 18 (d) Coupon Bonds surrendered, or executed and deliv- ered on any such exchange shall have all unmatured coupons attached. (e) Order Bonds surrendered on any such exchange shall, unless payable to the order of the Bank and not further endorsed, be appropriately endorsed or be accompanied by appropriate instruments of as- signment. (f) All Bonds surrendered on any such exchange shall be cancelled forthwith. (g) The new Bonds so executed and delivered shall be of the same aggregate principal amount and, except as hereinbefore provided, shall be of the same tenor and effect as the Bonds surrendered for exchange. (h) Except as shall be otherwise agreed in writing be- tween the Bank and the Borrower, the Bank shall reimburse the Borrower for the reasonable cost of preparation of the new Bonds and of effecting the exchange. The provisions of paragraphs (d), (e), (f) and (g) of this Section shall also apply to exchanges of Bonds pur- suant to Section 6 of this Article. SECTION 11. All Bonds shall have the guarantee of the Guarantor endorsed thereon as provided in the Guaran- tee Agreement. SECTION 12. The Bonds shall be signed in the name and on behalf of the Borrower by its authorized representative or representatives. The signature of any such representa- tive may be a facsimile signature, if the Bonds shall also be countersigned manually by an authorized representa- tive of the Borrower. Coupons attached to coupon Bonds shall be authenticated by the facsimile signature of an authorized representative or authorized representatives of 19 the Borrower. If any authorized representative of the Borrower whose manual or facsimile signature shall be affixed to any Bond or coupon shall thereafter cease to be such authorized representative, such Bond or coupon may nevertheless be delivered under this Agreement and it shall be valid and binding on the Borrower as though the person whose manual or facsimile signature shall have been affixed to such Bond or coupon had not ceased to be such author- ized representative. SECTION 13. Except as shall be otherwise provided in this Agreement or in the Bonds, no holder of any Bond other than the Bank shall by virtue of being the holder thereof be entitled to any of the rights or benefits con- ferred, or be subject to any of the conditions or obligations imposed, upon the Bank under this Agreement. SECTION 14. At any time or from time to time, upon the request of the Bank, the Borrower shall at its own expense do any and all such things as the Bank shall rea- sonably request in order to comply with any laws or regu- lations of any nation or state or any political subdivision thereof, or of any securities exchange therein, in order to enable the Bank to sell or offer for sale any of the Bonds, by public sale or otherwise, in any country or to list any of the Bonds for trading on any securities exchange. To that end the Borrower shall execute and deliver all regis- tration statements, applications and other documents, and furnish to the Bank all information which shall be re- quired in order so to comply with any such law or regula- tion, and the Borrower shall pay all registration and filing fees required by any such law or regulation. The Bor- rower shall comply with any such request within such reasonable period, not less than 60 days, as the Bank shall specify in such request. SECTION 15. If the Bank shall at any time sell any of the Bonds and shall then or thereafter guarantee the payment 20 in whole or in part of the principal thereof, the interest thereon, or the premium, if any, on the redemption there- of, the Borrower shall indemnify the Bank against and hold it harmless from liability arising out of such guar- antee. ARTICLE VI Redemption of Bonds SECTION 1. The Borrower may, at its election, at any time or from time to time after the date of the Bonds, pay and redeem all or any of the Bonds, as hereinafter pro- vided, at a redemption price for each Bond equal to the principal amount thereof, plus the interest accrued and unpaid thereon to the date fixed for the redemption there- of, plus as a premium the following respective percentages of such principal amount: / of 1%0, if redeemed not more than five years prior to the date of maturity specified in such Bond; 1%, if redeemed more than five years and not more than ten years prior to said date; 11/2%, if redeemed more than ten years and not more than fifteen years prior to said date; 2%0, if redeemed more than fifteen years and not more than twenty years prior to said date; and 21/2%o, if redeemed more than twenty years prior to said date. SECTION 2. If the Borrower shall so elect to redeem less than all the Bonds at the time outstanding and unpaid, the Bonds so to be redeemed shall be designated by lot, or in such other manner, as the Bank and the Borrower shall agree upon in writing. SECTION 3. The Borrower 's election to redeem the Bonds or any thereof shall be exercised by giving notice as in this Section provided, stating such election, desig- nating the Bond or Bonds to be redeemed, stating the re- demption price or prices thereof determined as in Section 1 of this Article provided, and stating the date (some- times referred to in this Article as the date fixed for re- 3 21 demption) on which such Bonds are to be redeemed. Sueb notice shall be given to the Bank not less than 90 days prior to the date fixed for redemption and, if any of the Bonds to be redeemed are coupon Bonds, the Borrower shall also publish such notice at least once a week for three successive weeks, the first publication to be at least 45 days prior to the date fixed for redemption (i) as to dollar Bonds, in two daily newspapers printed in the English language and published and of general circulation in the Borough of Manhattan in The City of New York, State of New York, United States, and (ii) as to Bonds payable in any currency other than dollars, in two daily newspapers printed in the official language, or one of the official lan- guages, of the country in whose currency such Bonds are so payable, and published and of general circulation in the city in which such Bonds are so payable. SECTION 4. If notice of election to redeem shall have been given as above provided, the Bonds to be redeemed shall on the date fixed for redemption become due and pay- able at their respective redemption prices determined as in Section 1 of this Article provided. From and after the date fixed for redemption (unless the Borrower shall fail to make payment of the redemption price or prices of such Bonds) interest on such Bonds and the service charge, if any, on the principal amount of the Loan represented by such Bonds shall cease to accrue and, upon presentation of such Bonds for payment and redemption in accordance with said notice, such Bonds shall be paid by the Borrower at the redemption price or prices aforesaid. If any of such Bonds shall not be so paid upon presentation thereof, they shall continue to bear interest as therein specified, and the service charge on the principal amount of the Loan repre- sented by such Bonds shall continue to accrue, until such Bonds shall have been so paid. Upon the date fixed for redemption, the Borrower shall pay to the Bank the amount of the service charge, if any, accrued and unpaid on the part of the Loan represented by the Bonds to be redeemed. 22 ARTICLE VII Particular Covenants of the Borrower The Borrower hereby covenants as follows: SECTION 1. The Borrower will carry out and complete the Project with due diligence and efficiency and in con- formity with sound engineering practice. SECTION 2. The Borrower will, immediately upon the preparation thereof, furnish to the Bank the plans and specifications for the Project in such form and detail as the Bank shall reasonably request. Any modifications or changes in such plans and specifications will be promptly furnished to the Bank. SECTION 3. The Borrower will maintain or cause to be maintained books, accounts and records adequate to iden- tify the Goods purchased in whole or in part with the pro- ceeds of the Loan, to disclose the end-use thereof in the Project and the progress of the Project; and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of the Bor- rower. SECTION 4. The Borrower will enable accredited repre- sentatives of the Bank to inspect any and all Goods pur- chased in whole or in part out of the proceeds of the Loan and any of the properties owned and operated by the Borrower and to inpect, audit and make copies of, any books, accounts, records, contracts, orders, invoices, engi- neering studies and reports, and other documents relating to the Goods purchased in whole or in part out of the pro- ceeds of the Loan, and the use thereof in the Project, or to the progress of the Project, or otherwise to the opera- tions and financial condition of the Borrower. 23 SECTION 5. The Borrower will furnish to the Bank all such information, at such times, in such form and in such detail, as the Bank shall reasonably request, relating to the expenditure of the proceeds of the Loan, the up of the Goods purchased in whole or in part therewith, the progress of the Project and the operations and financial condition of the Borrower. SECTION 6. Except as the Bank shall otherwise agree in writing, if any privilege or priority (including any mort- gage, pledge or charge) shall be created on any property, assets, revenues or receipts of the Borrower or of any cor- poration or company all or a majority of the capital stock of which shall be owned by the Borrower, as security for the payment of any debt, then by the creation thereof such privilege or priority will equally and ratably secure the payment of the principal of, and the interest and other charges on the Loan and the Bonds, and in the creation of any such privilege or priority express provision will be made by the Borrower to that effect; provided, however, that this Section shall not apply to any privilege or priority created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property. SECTION 7. (a) Each party to this Agreement shall from time to time, as the other party hereto shall reasonably request, afford such other party all reasonable opportunity for exchanges of views between their respective accredited representatives in regard to any and all matters relating to the Loan and the purposes for which it was granted. The suggestions and observations made by either party pursuant to any provisions of this Section shall be received by the other party in a spirit of mutual cooperation and shall be given due consideration. (b) The Borrower will not, without the prior written approval of the Bank, incur, assume or guarantee any debt, 24 or substantially modify the terms of payment of any exist- ing debt incurred, assumed or guaranteed by it; provided, however, that the foregoing provisions shall not apply to either ot*the following: (i) the incurring of debt not ex- ceeding an aggregate principal amount of thirteen million, one hundred thousand colones (013,100,000) in currency of the Guarantor, pursuant to arrangements satisfactory to the Bank substantially as set forth in Schedule 5 to this Agreement, to provide currency of the Guarantor required for carrying out and completing the Project; or (ii) the incurring of an obligation to repay a subsidy granted by the Guarantor to the Borrower for meeting the necessary administrative, operating and maintenance expenses of the Project by the Borrower; or (iii) the incurring by the Bor- rower in the ordinary course of its business of any indebt- edness maturing not more than one year after its date. For the purposes of this Section, the term "obligation to repay a subsidy" shall be deemed to mean a non-interest bearing obligation without a fixed date or dates for payment, and to be paid from surplus funds available to the Borrower only after meeting all other obligations of the Borrower, including the obligations arising from the carrying out and completion of the Project, the operation, maintenance and enlargement of the plants, equipment and property of the Borrower, the building up of an adequate reserve fund, and the maintenance of service on, and repayment of the Loan and of any debt incurred pursuant to paragraph b(i) of this Section. (c) The Borrower will promptly inform the Bank of any condition which shall arise that shall prevent, obstruct or interfere with, or threaten to prevent, obstruct or interfere with, the accomplishment of the purposes of the Loan or the maintenance of the service of the Loan or shall increase or threaten to increase the estimated cost of the Project materially over the estimated cost set forth in Schedule 3 to this Agreement. 25 (d) Whenever there is reasonable cause to believe that the amount of currency of the Guarantor available to the Borrower will be inadequate to meet the estimated expen- ditures payable in such currency and required for carrying out and completing the Project and for operating and maintaining the plants, equipment and property of the Bor- rower, the Borrower will forthwith notify the Guarantor and the Bank of such fact and of the anticipated deficit. (e) The Borrower will promptly take all action on its part to be performed in order to carry out the local cur- rency financing plan for the Project set forth in Schedule 5 to this Agreement. (f) Unless the Bank shall otherwise agree in writing, the Borrower will not retire any local currency bonds if thereby the aggregate principal amount of such local cur- rency bonds retired by the Borrower shall exceed 40o of the aggregate principal amount of Bonds theretofore re- tired by the Borrower. The word "retire" as used in this paragraph refers to retirement by the Borrower, directly or indirectly, prior to maturity, whether by redemption, purchase or other acquisition for a consideration. For the purposes of the computations provided for in this para- graph, colones shall be converted into dollars at the rate of $1 = 21/2 colones. SECTION 8. The Borrower will pay or cause to be paid any and all taxes, duties, imposts and fees that shall be imposed upon this Agreement, the Bonds or the Guarantee Agreement, or the execution, delivery or registration there- of, or the payment of principal, interest or other charges thereunder. Such principal, interest and other charges will be paid without deduction for and free of any and all such taxes, duties, imposts and fees imposed by the Guar- antor or any taxing authority thereof or therein. This Section shall not apply to taxation of payments made under the provisions of any Bond to a holder thereof other than 26 the Bank when such Bond is beneficially owned by an in- dividual or corporate resident of the Guarantor. SFCTIoN 9. (a) The Borrower will at all times main- tain its existence and right to carry on operations and will, except as the Bank shall otherwise agree in writing, main- tain and renew all rights, powers, privileges and franchises owned by it and necessary or useful in the operation of its business. (b) The Borrower will operate and maintain its plants, equipment and property, and from time to time make all necessary renewals and repairs thereof, all in accordance with sound engineering standards. (c) The Borrower will not, without the written consent of the Bank, sell or otherwise dispose of all or substantially all of its property and assets or all or substantially all the property included in the Project or any plant included therein, unless the Borrower shall fist redeem and pay, or make adequate provision satisfactory to the Bank for redemption or payment of, all of the Loan which shall then be outstanding and unpaid. (d) The Borrower will use all of the Goods purchased or paid for in whole or in part out of the proceeds of the Loan in accordance with Section 2 of Article III of this Agreement and will not, without the prior written consent of the Bank, sell or otherwise dispose of any of such Goods. SECTION 10. Except as shall be otherwise agreed in writ- ing between the Bank and the Borrower, the Borrower will insure or cause to be insured with responsible insurers all Goods purchased in whole or in part with the proceeds of the Loan. Such insurance shall cover such marine, transit and other hazards incident to delivery of the Goods into the territories of the Guarantor, and shall be for such amounts, as shall be consistent with sound commercial prac- tice. Each contract of insurance shall be payable in dollars 27 or in the currency in which the cost of the Goods insured thereunder shall be payable. SECTION 11. The Borrower will complete the acquisition of real property required for the receiving substations at San Salvador and San Miguel and of the rights-of-way for the transmissi.rn lines from the site of the Project to San Salvador and San Miguel by January 1, 1951, and shall then hold clear and unencumbered title to such real prop- erty and rights in rem without any liability arising out of the acquisition of such title. ARTIOLE VIII Remedies of the Bank on Default SECTIoN 1. If any of the following events (herein called Events of Default) shall happen, that is to say: (a) if default shall be made in the payment of any in- stalment of interest on the Loan or on any of the Bonds or any instalment of service charge or com- mitment charge on the Loan when and as the same shall become payable; or (b) if default shall be made in the payment of the prin- cipal of the Loan or of the principal or redemption price of any of the Bonds, whether upon the date of maturity of such Bonds or upon call for redemption or by declaration or otherwise as provided in this Agreement or the Bonds; or (c) if default shall be made in the performance of any other covenant or agreement on the part of the Bor- rower or of the Guarantor in the Bonds or in this Agreement or in the Guarantee Agreement set forth; or (d) if the Borrower shall take or permit to be taken any action or proceeding whereby any of its property shall or may be assigned or in any manner trans- 28 ferred or delivered to any receiver, assignee or other person, whether appointed by the Borrower or by a court or by the Guarantor or by authority of any law, whereby such property shall or may be dis- tributed among the creditors of the Borrower; or (e) if any proceedings for the surrender of the charter or for the liquidation of the Borrower shall be in- stituted by it or by the Guarantor or by any govern- mental authority having jurisdiction; or (f) if by action of the Guarantor or of any governmental authority the ownership, possession or control of all or substantially all of the properties which are in- cluded in the Project, or of any plant included there- in, or of any property necessary for the operation thereof, shall be taken from the Borrower; then and in each such case during the continuance of such Event of Default (but in the case of an Event of Default specified in clause (a) of this Section only if such default shall continue for a period of thirty days; and in the case of an Event of Default specified in clause (c) of this Sec- tion only if such default shall continue for sixty days after notice thereof shall have been given by the Bank to the Borrower) the Bank, at its option, may declare the prin- cipal of the Loan and of all the Bonds then outstanding (if not already due) to be due and payable immediately, and upon any such declaration such principal shall become and shall be due and payable immediately, anything in this Agreement or in the Bonds contained to the contrary not- withstanding. SECTION 2. No delay by the Bank in exercising, or omis- sion of the Bank to exercise, any right or power accruing to it under this Agreement upon any Event of Default shall impair any such right or power or be construed to be a waiver of any such Event of Default or acquiescence 29 therein; nor shall the action of the Bank in respect of any default, or in respect of the waiver of any default, affect or impair any right or power of the Bank in respect of any other or subsequent default; and every right, power and remedy given hereunder to the Bank may be exercised by it from time to time and as often as it may deem expedient. ARTICLE IX Interpretation of Agreement; Arbitration SECTION 1. The respective rights and obligations of the parties hereto under this Agreement and the Bonds shall be valid and enforceable in accordance with their terms anything in any statute, law or regulation of any nation or state or political subdivision thereof to the contrary not- withstanding. Neither party shall be entitled in any pro- ceeding under this Article to assert any claim that any provision of this Agreement or of the Bonds is invalid or unenforceable because of any provision of the Articles of Agreement of the Bank or for any other reason. SECTION 2. The provisions of this Agreement and of the Bonds shall be interpreted in accordance with the law of the State of New York, United States, as at the time in effect. SECTION 3. Any controversy between the parties to this Agreement and any claim by either party to this Agree- ment against the other party thereto arising under this Agreement or the Bonds which shall not be determined by agreement of such parties shall be submitted to and deter- mined by arbitration by an Arbitral Tribunal in accordance with the provisions of Loan Regulations No. 1 of the Bank dated May 9, 1947, a copy of which has been furnished to the Borrower. The parties to this Agreement accept and agree to the provisions of said Loan Regulations No. 1 with the same force and effect as if they were fully set forth herein. 80 ARTICLE I Miscellaneous Provisions SECTION 1. Any notice, request or demand required or permitted to be given or made under this Agreement shall be in writing and shall be deemed to have been duly given or made when it shall be delivered in writing or by tele- gram, cable or radiogram to the party to which such notice, request or demand is required or permitted to be given or made at its address hereinafter specified, or at such other address as such party shall have designated by notice in writing to the party giving or making such notice, request or demand. The addresses so specified are: (a) For the Bank: International Bank for Reconstruction and Development, 1818 H Street, N. W., Washington 25, District of Columbia, United States of America. (b) For the Borrower: Comisi6n Eecutiva Hidroelectrica del Rio Lempa, 9a. Calle Oriente No. 39, San Salvador, El Salvador, Central America. SECTION 2. The Borrower shall furnish to the Bank suf- ficient evidence of the authority of the person or persons who will sign the applications provided for in Article IV of this Agreement and the Bonds or who will, on behalf of the Borrower, take any other action or execute any other documents required or permitted to be taken or executed by the Borrower pursuant to any of the provisions of this Agreement, and shall furnish to the Bank the authenticated specimen signature of each such person. SECTION 3. If and when the entire principal amount of the Loan shall have been paid or caused to be paid by the 31 Borrower (or shall have been cancelled), together with the redemption premium, if any, on the redemption of all Bonds which shall have been called for redemption and all interest and other charges which shall have accrued on the Loan and the Bonds, this Agreement and all rights and obliga- tions of the parties hereto shall forthwith terminate. SECTION 4. This Agreement may be executed in several counterparts, each of which shall be an original and all collectively but one instrument. ARTICLE XI Effective Date SECTION 1. This Agreement is subject to the condition that before it shall become effective the following events shall have occurred: (a) The execution and delivery on behalf of the Guar- antor of the Guarantee Agreement shall have been duly authorized or ratified by all necessary governmental action including due authorization or ratification by an elected Constituent or Legislative Assembly of the Guarantor duly empowered thereunto; and (b) The execution and delivery of this Agreement on behalf of the Borrower shall have been duly authorized or ratified by all necessary action of the Borrower and any governmental authority having jurisdiction; and (c) The Borrower shall have been provided with, or arrangements satisfactory to the Bank shall have been made with the approval of the Guarantor for provision of thirteen million, one hundred thousand colones (013,100,- 000) in currency of the Guarantor, as set forth in Schedule 5 to this Agreement; and (d) The Borrower shall hold clear unencumbered title to the real property required for the dam site and the sur- rounding area required for construction work without any 32 liability arising out of the acquisition of such title and shall have made arrangements satisfactory to the Bank for the acquisition of the land to be overflowed by the reservoir without incurring liability therefor. SECTION 2. The Borrower shall promptly furnish to the Bank evidence satisfactory to the Bank that all acts re- quired to be performed pursuant to Section 1 of this Ar- ticle have been performed. As part of such evidence the Borrower shall furnish to the Bank an opinion or opinions satisfactory to the Bank of legal counsel acceptable to the Bank showing: (a) that this Agreement has been duly authorized by and executed and delivered on behalf of the Borrower, and that the Guarantee Agreement has been duly authorized by and executed and delivered on behalf of the Guarantor and authorized or ratified by an elected Constituent or Legislative Assembly of the Guarantor duly empowered thereunto; and (b) that said Agreements constitute valid and binding obligations of the Borrower and the Guarantor, re- spectively, in accordance with their terms; and (c) that the Bonds when signed and delivered as pro- vided in this Agreement and the Guarantee Agree- ment will constitute valid and binding obligations of the Borrower in accordance with t)c r terms and the guarantee of the Guarantor thereon endorsed will constitute the valid and binding obligation of the Guarantor in accordance with its terms; and (d) that all arrangements necessary to provide the Bor- rower, in accordance with Schedule 5 to ihis Agree- ment, with thirteen million, one hundred chousand colones (013,100,000) in currency of the Guarantor have been duly and validly made; and (e) that the Borrower holds clear unencumbered title to the real property required for the dam site and the 33 surrounding area required for construction work without any liability arising out of the acquisition of such title and that arrangements necessary for the acquisition of the land to be overflowed by the reservoir without incurring any liability therefor have been duly and validly made. Except as shall be otherwise agreed in writing between the Bank and the Borrower, this Agreement shall come into force and effect on the date when the Bank notifies the Bor- rower and the Guarantor of its acceptance of such evidence. SECTION 3. If all acts required to be performed pursuant to Section 1 of this Article shall not have been performed and satisfactory evidence thereof as in Section 2 of this Article provided shall not have been furnished to the Bank within 90 days after the date of this Agreement, the Bank may at its option by notice to the Borrower and the Guar- antor terminate this Agreement, and upon the giving of such notice of termination this Agreement and all obliga- tions of the parties hereunder shall forthwith cease and determine. IN AYITNESS WTHEREOF the parties hereto have caused this Agreement to be signed in their respective names by their representatives thereunto duly authorized as of the day and year first above written. INTERNATIONAL BANK-FOR RECONSTRUCTION AND DEVELOPMENT by EUGENE R. BLACK President Com(IsIQN EJECUTIVA HIDROELCTRICA DEL Rio LEMPA. by L. E. CuELLAR Authorized Representative 34 SCHEDULE 1 Description of the Project The Guayabo hydroelectric power Project will be located on the Lempa River about 58 kilometers in a straight line northeast of the capital city of San Salvador. At this point the river flows nearly eastward. The land to be overflowed by the reservoir covers a total area of about 20 square kilometers or 7.7 square miles, and the reservoir will store about 177,000,000 cubic meters or 144,000 acre feet in the upper 13 meters of depth. This will be sufficient for a regulated flow of 42 cubic meters per second during the dryest season and 46 cubic meters per second in an average year. The carrying out and completion of the Project and the initial operation of the plant will be supervised by one or more engineering firms satisfactory to the Bank. A. DAM, SPILLWAYS AND HEADWORKS The dam will be a concrete gravity structure about 64 meters high and nearly 500 meters long with a spill- way in the highest portion, at the main river channel, controlled by seven large steel gates each 12 meters high by 12.5 meters wide. A very extreme flood will also over- flow through a valley to the northward where an earth fill "fuse plug" is provided. To the right or south of the spillway will be a concrete gravity wing dam extending to high ground, and on the left or north of the spillway will be the intake structure forming a part of the dam. This structure will contain trash screens and steel gates which shut off or admit water, as required, to vertical shafts with steel liners leading downward to the hydraulic turbines. B. POWER STATION AND EQUIPMENT There will be a power station of underground type occu- pying a chamber excavated in the rock directly below the 35 intakes. It will be equipped initially with two horizontal shaft hydraulic turbines driving two horizontal generators and with extra floor space for erection and dismantling, switchgear and operating room. The turbines will be rated each at 21,000 horsepower at a head of 160 feet or 49 me- ters. The generators will be rated at about 16,700 kva at 90o power factor, 200 r.p.m. 60 cycle three phase. The Guayabo station will generate, with the initial two units, a normal capacity of 30,000 kw decreasing to about 26,000 kw when drawn down to lowest elevation for useful stor- age. The two turbines will discharge through horizontal conical draft tubes into a joint tail tunnel about 280 meters long followed by open cut for about 70 meters. The head will vary from about 54 meters or 177 feet at full reservoir and full-load flow down to about 44 meters or 144 feet at low reservoir elevation. Access to powerhouse will be through elevator or inclined tunnel. C. SUBSTATION AT DA AND TRANsmssIoN SYSTEM A step-up substation will be located just downstream of the intake and directly over the powerhouse, fed by low tension cables from the generators below. It will contain transformers and switchgear for feeding one 115,000 volt transmission line to be constructed to San Salvador and one to San Miguel of approximate lengths of 65 kilometers and 85 kilometers respectively. At both points receiving and distributing substations will be built. D. ROAD An access road suitable for moving all materials and equipment required for the Project will be constructed by the Guarantor and will not form a part of the works to be financed from the proceeds of the Loan. This road will connect at Ilobasco and will run for a length of about 29 kilometers to the site of the Project. This road is to be completed by April 1, 1950. 36 E. REAL PROPERTY REQUIREMENTS The real property and rights in rem required for the carrying out and completion of the Project include: (1) Dam The dam site and the surrounding area required for construction work. (2) Reservoir The land to be overflowed by the reservoir cover- ing a total area of approximately 20 square kilo- meters. (3) Receiving substations The land required for the receiving substations at San Salvador and San Miguel. (4) Transmission lines The rights-of-way for the transmission lines from the site of the Project to San Salvador and San Miguel. F. CONSTaUCTION SCHEDULE The estimated construction schedule for the Project an- ticipates starting work on July 1, 1950, and completing all items by July 1, 1952. Estimated starting and completion dates broken down by principal items are as follows: Starting Completion Item Date Date Dam and Spillway July 1, 1950 July 1, 1952 Auxiliary Spillway and Dike Jan. 1, 1952 Apr. 1, 1952 Tunnels and Penstocks Oct. 1, 1950 June 1, 1952 Power Station Oct. 1, 1950 July 1, 1952 Power Station Equipment July 1, 1951 July 1, 1952 Substation at Dam Oct. 1, 1951 July 1, 1952 Roads and Buildings July 1, 1950 Apr. 1, 1952 Construction Bridge July 1, 1950 Nov. 1, 1950 Transmission System Jan. 1, 1951 July 1, 1952 37 SCHEDULE 2 Table of Amortization The following table shows the dates on which the instal- ments of the principal of the Loan shall be repaid and the respective amounts of such instahents. Except as shall be otherwise agreed in writing between the Bank and the Borrower, if any part of the principal of the Loan shall be repayable in any currency other than dollars, such part shall be repayable in instalments on the same dates and at the same rates as are shown in said table, adjusted to ex- clude instalments of the principal of the Loan cancelled pursuant to Article IV or represented by Bonds which shall have been delivered pursuant to Section 2 of Article V: Payment Principal Out- of standug After Date Principal Each Payment Jan. 15, 1954 ...... $12,545,000 July 15, 1954 $ 97,500 12,447,500 Jan. 15, 1955 97,500 12,350,000 July 15, 1955 125,000 12,225,000 Jan. 15, 1956 125,000 12,100,000 July 15, 1956 150,000 11,950,000 Jan. 15, 1957 150,000 11,800,000 July 15, 1957 175,000 11,625,000 Jan. 15, 1958 175,000 11,450,000 July 15, 1958 200,000 11,250,000 Jan. 15, 1959 200,000 11,050,000 July 15, 1959 225,000 10,825,000 Jan. 15, 1960 225,000 10,600,000 July 15, 1.960 256,000 10,344,000 Jan. 15, 1961 262,000 10,082,000 July 15, 1961 267,000 9,815,000 Jan. 15, 1962 273,000 9,542,000 July 15, 1962 279,000 9,263,00 Jan. 15, 1963 284,000 8,979,000 July 15, 1963 291,000 8,688,000 Jan. 15, 1964 297,000 8,391,000 July 15, 1964 303,000 8,088,000 38 Payment Principal Out- of standing After Date Principal Each Payment Jan. 15, 1965 310,000 7,778,000 July 15, 1965 316,OO 7,462,000 Jan. 15, 1966 323,000 7,139,000 July 15, 1966 329,000 6,810,000 Jan. 15, 1967 337,000 6,473,000 July 15, 1967 344,000 6,129,000 Jan. 15, 1968 351,000 5,778,000 July 15, 1968 359,000 5,419,000 Jan. 15, 1969 366,000 5,053,000 July 15, 1969 374,000 4,679,000 Jan. 15, 1970 382,000 4,297,000 July 15, 1970 391,000 3,906,000 Jan. 15, 1971 398,000 3,508,000 July 15, 1971 407,000 3,101,000 Jan. 15, 1972 415,000 2,686,000 July 15, 1972 425,000 2,261,000 Jan. 15, 1973 433,000 1,828,000 July 15, 1973 443,000 1,385,000 Jan. 15, 1974 452,000 933,000 July 15, 1974 462,000 471,000 Jan. 15, 1975 471,000 ...... 39 SCHEDULE 3 Estimated Cost of the Project Foreign Local Currency Currency Total Description Cost Cost Cost (in thousands of dollars) 1. Dam and Spillway 4,329 1,763 6,092 2. Auxiliary Spillway and Dike 101 73 174 3. Tunnels and Penstocks 728 596 1,324 4. Power Station 454 480 934 5. Power Station Equipment 1,526 112 1,638 6. Substation at Dam 409 31 440 7. Roads and Buildings 47 54 101 8. Construction Bridge 86 15 101 9. Transmission System 2,365 515 2,880 10. Contractors' Fees 800 .... 800 11. Engineering and Supervision Fees 700 300 1,000 12. Land, Flowage and Water Rights .... 100 100 13. General Property .... 200 200 14. Working Capital 400 400 15. Interest and Commit- ment Charge on the Loan during Con- struction 1,000 600 1,600 Total $12,545 $5,239 $17,784 06 1 0 40 SCHEDULE 4-A Form of Dollar Bond Payable to Order $ 000 $ 000 No. 000 No. 000 CoMIs'6N EJECUTIVA 11IDROELECTRICA DEL RIo LEMPA GUARANTEED SERIAL BOND DUE CoMIsI6N EJECUTIVA HIDROELECTRICA DEL Rio LEMPA (hereinafter called the Borrower), an official agency of the Republic of El Salvador, for value received, hereby promises to pay to, or on the order of................... on the ...........day of .........., 19..., at the office or agency of INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) in the Borough of Manhattan in The City of New York, State of New York, United States of America, the sum of............... ..... . Dollars in such coin or currency of the United States of America as at the time of payment thereof shall be legal tender for the payment of public and Private debts, and to pay interest thereon from the date -ereof at said office or agency in like coin or currency at the rate of ..........per cent (... %) per annum, payable semi-annually on January 15 and July 15 in each year until payment of the said sum has been made or duly provided for. This Bond is one of an authorized issue of bonds of the aggregate principal amount of $............... or the equivalent thereof payable in other currencies), known as the Guaranteed Serial Bonds of Comisi6n Ejecutiva Hidro- el6ctrica del Rio Lempa (hereinafter called the Bonds), all issued or to be issued under a Loan Agreement dated ............, 19..., between the Bank and the Borrower and guaranteed by the Republic of El Salvador in accord- ance with the terms of a Guarantee Agreement dated 41 ..........., 19 .., between the Republic of El Salvador and the Bank. No reference herein to said Agreements shall impair the obligation of the Borrower, which is abso- lute and unconditional, to pay the principal of and interest on this Bond at the times and place and in the amounts and in the currency herein prescribed. The Bonds are subject to redemption at the election of the Borrower, as a whole at any time or in part (desig- nated by lot, or in such other manner as may be agreed upon by the Bank and the Borrower) from time to time upon at least 90 days' notice to the Bank at its principal office in the City of Washington, District of Columbia, United States of America (and, in addition, if any of the Bonds to be redeemed are coupon Bonds, upon notice pub- lished at least once a week for three successive weeks, the first publication to be at least 45 days prior to the date fixed for redemption (i) as to Bonds payable in United States dollars, in two daily newspapers printed in the English language and published and of general circulation in said Borough of Manhattan, and (ii) as to Bonds pay- able in any currency other than United States dollars, in two daily newspapers printed in the official language, or one of the official languages, of the country in whose cur- rency such Bonds are so payable, and published and of general circulation in the city in which such Bonds are so payable), at a redemption price for each Bond equal to the principal amount thereof and interest accrued thereon to the date fixed for such redemption, plus as a premium the following respective percentages of such principal amount: 1/2 of 1%, if redeemed not more than five years prior to the date of maturity specified in such Bond; 1%, if redeemed more than five years and not more than ten years prior to said date; 11/%, if redeemed more than ten years and not more than fifteen years prior to said date; 2%, if redeemed more than fifteen years and not more than twenty years prior to said date; and 21,,%, if redeemed more than twenty years prior to said date. 42 After the redemption date specified in said notice, interest on the Bonds so called for redemption shall cease to accrue and, upon presentation and surrender of such Bonds for payment and redemption in accordance with said notice, such Bonds shall be paid by the Borrower at the office or agency of the Bank in The City of New York afore- said and at the redemption price or prices aforesaid. If any of such Bonds shall not be so paid upon presentation thereof, they shall continue to bear interest as therein specified until paid. In case an Event of Default as defined in said Loan Agreement shall happen and shall continue for the period, if any, provided in said Loan Agreement, then and in each such case during the continuance of such Event of Default the Bank, at its option, may declare the principal of all the Bonds then outstanding (if not already due) to be due and payable immediately, and upon any such declaration such principal shall become and shall be due and payable immediately. The principal of the Bonds, the interest accruing thereon and the premium, if any, on the redemption thereof shall be paid without deduction for and free from any taxes, imposts, levies or duties of any nature now or at any time hereafter imposed by the Republic of El Salvador or by any taxing authority thereof or therein and shall be paid free from all restrictions of the Republic of El Salvador, its political subdivisions or its agencies; provided, however, that the provisions of this paragraph shall *not apply to the taxation of payments made under the provisions of any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of the Republic of El Salvador. 43 IN WITNESS WHEREOF the Borrower has caused this Bond to be signed in its name by its ................thereunto duly authorized. Dated ............. CoMIsI6N EJECUTIVA HIDROELECTRICA DEL Rio LEMPA by Authorized Representative FORM OF GUARANTEE REPUBLIC OF EL SALVADOR, for value received, as a pri- mary obligor and not as surety merely, hereby absolutely and unconditionally guarantees to the holder of this Bond, and pledges its full faith and credit for, the due and punc- tual payment of the principal and redemption price of said Bond and the interest thereon. D ated.............. REPUBLIC OF EL SALVADOR by Authorized Representative 44 SCHEDULE 4-B Form of Coupon Bond Payable in Dollars $ 000 $ 000 No. 000 No. 000 CoIIs6 E JECUTIVA HIDROEL'CTRICA DEL Rio LEMPA GUARANTEED SERIAL BOND DUE Comisi6N EJECUTIVA HIDROELECTRICA DEL Rio LEMPA (hereinafter called the Borrower), an official agency of the Republic of El Salvador, for value received, hereby prom- ises to pay to the bearer on the .........day of ........, 19..., at the office or agency of INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) in the Borough of Manhattan in The City of New York, State of New York, United States of America, the sum of .............. Dollars in such coin or currency of the United States of America as at the time of payment thereof shall be legal tender for the payment of public and private debts, and to pay interest thereon from the date hereof at said office or agency in like coin or currency at the rate of ............ per cent ( ... o) per annum pay- able semi-annually on January 15 and July 15 in each year until payment of the said sum has been made or duly provided for, but until the maturity of this Bond only upon presentation and surrender of the coupons annexed hereto as they severally mature. This Bond is one of an authorized issue of bonds of the aggregate principal amount of $.......... (or the equiva- lent thereof payable in other currencies), known as the Guaranteed Serial Bonds of Comisi6n Ejecutiva Hidro- electrica del Rio Lempa (hereinafter called the Bonds), all issued or to be issued under a Loan Agreement dated ............, 19..., between the Bank and the Borrower and guaranteed by the Republic of El Salvador in accord- ance with the terms of a Guarantee Agreement dated 45 ........., 19. ., between the Republic of El Salvador and the Bank. No reference herein to said Agreements shall impair the obligation of the Borrower, which is abso- lute and unconditional, to pay the principal of and interest on this Bond at the times and place and in the amounts and in the currency herein prescribed. The Bonds are subject to redemption at the election of the Borrower, as a whole at any time or in part (desig- nated by lot, or in such other manner as may be agreed upon by the Bank and the Borrower) from time to time upon at least 90 days' notice to the Bank at its principal office in the City of Washington, District of Columbia, United States of America (and, in addition, if any of the Bonds to be redeemed are coupon Bonds, upon notice pub- lished at least once a week for three successive weeks, the first publication to be at least 45 days prior to the date fixed for redemption (i) as to Bonds payable in United States dollars, in two daily newspapers printed in the English language and published and of general circulation in said Borough of Manhattan, and (ii) as to Bonds pay- able in any currency other than United States dollars, in two daily newspapers printed in the official language, or one of the official languages, of the country in whose cur- rency such Bonds are so payable, and published and of general circulation in the city in which such Bonds are so payable), at a redemption price for each Bond equal to the principal amount thereof and interest accrued thereon to the date fixed for such redemption, plus as a premium the following respective percentages of such principal amount: 1/2 of 1%, if redeemed not more than five years prior to the date of maturity specified in such Bond; 1%, if redeemed more than five years and not more than ten years prior to said date; 1%7c, if redeemed more than ten years and not more than fifteen years prior to said date; 2%, if redeemed more than fifteen years and not more than twenty years prior to said date; and 2 %, if redeemed more than twenty years prior to said date. 46 After the redemption date specified in said notice, in- terest on the Bonds so called for redemption shall cease to accrue and the coupons for interest accruing after said date shall be void and, upon presentation and surrender of such Bonds for payment and redemption in accordance with said notice with all unmatured coupons thereto apper- taining, such Bonds shall be paid by the Borrower at the office or agency of the Bank in The City of New York aforesaid and at the redemption price or prices aforesaid. If any of such Bonds shall not be so paid upon presenta- tion thereof, they shall continue to bear interest as therein specified until paid, and the coupons for interest accruing after the date fixed for redemption shall be in full force and effect. In case an Event of Default as defined in said Loan Agreement shall happen and shall continue for the period, if any, provided in said Loan Agreement, then and in each such case during the continuance of such Event of Default the Bank, at its option, may declare the principal of all the Bonds then outstanding (if not already due) to be due and payable immediately, and upon any such declaration such principal shall become and shall be due and payable immediately. The principal of the Bonds, the interest accruing thereon and the premium, if any, on the redemption thereof shall be paid without deduction for and free from any taxes, imposts, levies or duties of any nature now or at any time hereafter imposed by the Republic of El Salvador or by any taxing authority thereof or therein and shall be paid free from all restrictions of the Republic of El Salvador, its political subdivisions or its agencies; pro- vided, however, that the provisions of this paragraph shall not apply to the taxation of payments made under the pro- visions of any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of the Republic of El Salvador. 47 IN WITNESS WHEREOF the Borrower has caused this Bond to be signed in its name by its ................thereunto duly authorized and the coupons for said interest bearing the facsimile signature of its ................., to be attached hereto. Dated ............. COMISI6 EJECUTIVA HIDROELACTBICA DEL Rio LEMPA by Authorized Representative a 48 FORM OF GUARANTEE REPUBLIC OF EL SALVADOR, for value received, as a pri- mary obligor and not as surety merely, hereby absolutely and unconditionally guarantees to the holder of this Bond, and pledges its full faith and credit for, the due and punc- tual payment of the principal and redemption price of said Bond and the interest thereon. Dated........... REPUBLIC OF EL SALVADOR by Authorized Representative Form of Interest Coupon No............. On the .......... day of ............., 19...., unless the Bond hereinafter mentioned shall have been called for previous redemption and payment duly provided therefor, Comisi6n Ejecutiva Hidroelectrica del Rio Lempa will pay to bearer, upon surrender of this coupon, at the office or agency of International Bank for Reconstruction and De- velopment in the Borough of Manhattan in The City of New York, .....................Dollars ($ ........ ) in such coin or currency of the United States of America as at the time of payment thereof shall be legal tender for the payment of public and private debts, being six months' interest then due on its Guaranteed Serial Bond, due ............ , 19...., No.............. Comisi6N EJECUTIVA HIDROEL'CTRICA DEL RIo LEMPA by Authorized Representative 49 SHEDULE 5 Local Currency Financing Plan for the Project 1. The Borrower shall create an issue of local currency bonds payable in currency of the Guarantor and fully guaranteed by the Guarantor, in an aggregate principal amount of thirteen million, one hundred thousand colones (013,100,000) in currency of the Guarantor and shall offer the local currency bonds to the public at a subscription price satisfactory to the Bank. The interest rate, terms and conditions of the local currency bonds and the guar- antee thereof shall be satisfactory to the Bank and such issue of local currency bonds shall be payable as to prin- cipal at the same amortization rate as the Bonds. 2. At the expiration of four months after the initial public offering of the local currency bonds, the Guarantor shall purchase from the Borrower at the said subscrip- tion price all local currency bonds which shall not there- tofore have been purchased and paid for by the public at the said subscription price. 3. Payment of the subscription price of local currency bonds shall be made in cash except that payments by the Guarantor or by Banco Central de Reserva de El Salvador of the subscription price of local currency bonds subscribed by either of them may be made in unconditional demand obligations of the Guarantor or said Banco Central in the same aggregate principal amount and beariing interest at the same rate as such local currency bonds.