Argentina - Capital Market Development Project : Loan 3709 - Loan Agreement - Conformed

LOAN NUMBER 3709 AR Loan Agreement (Capital Market Development Project) between ARGENTINE REPUBLIC and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated F , 1994 LOAN NUMBER 3709 AR LOAN AGREEMENT AGREEMENT, dated 'I wetA . A 9 , 1994, between ARGENTINE REPUBLIC (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; (B) the Project will be carried out by Backstop Fund Sociedad An6nima (the Fund) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Fund the proceeds of the Loan as provided in this Agreement; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Bank and the Fund (the Project Agreement); NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements for Single Currency Loans" of the Bank, dated February 9, 1993 (the General Conditions), constitute an integral part of this Agreement, except that the portion of Section 6.03 thereof starting with the words "(e) the Bank" up to end of such Section is deleted and replaced by the following: "(e) after the date seven years after the date of the Loan Agreement, any amount of the Loan shall have not been committed under a Backstop Commitment (as such term is defined in the Loan Agreement), the Bank may, by notice to the Borrower and the Fund (as such term is defined in the Loan Agreement), terminate the right of the Borrower to make withdrawals with respect to such amount. Upon the giving of such notice, such amount of the Loan shall be cancelled." -2- Section 1.02. 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) "Administration Agreement" means the agreement referred to in Section 2.01 (b)(i) of the Project Agreement; (b) "Appraisal Manual" means Manual de Calificaci6n de Entidades Financieras, BICE's manual approved on September 16, 1993, which contains norms and procedures to appraise financial entities; (c) "Backstop Commitment" means any commitment issued by the Fund to a Participating Bank, under Part A of the Project, to purchase FONs pursuant to the Facility Agreement with such Participating Bank; (d) "Backstop Facility" means the facility referred to in Part A of the Project; (e) "BCRA" means Banco Central de la Rep6blica Argentina, the Borrower's central bank; (f) "BICE" means Banco de Inversi6n y Comercio Exterior, the Borrower's Investment and Foreign Trade Bank; (g) "BON" means "Backstopped Obligaci6n Negociable," i.e., a dollar-denominated security issued by a Participating Bank under the terms and conditions set forth in a Facility Agreement; (h) "Charter" means the Fund's charter (estatuto) approved by its shareholders on November +*, 1994; (i) "CNV" means Comisi6n Nacional de Valores, the Borrower's Securities Commission; (j) "Facility Agreement" means any of the agreements referred to in Section 2.01 (b)(ii) of the Project Agreement; (k) "Financial Management Agreement" means the agreement referred to in Section 3.02 (a)(ii) of this Agreement; (1) "Financial MaLager" means the Fund's financial manager referred to in Section 3.02 (a) (ii) of this Agreement; -3 - (M) "First Project Review" means the Project Review to be held during the 30-day period following the date referred to in Section 3.03 (a) (i) of this Agreement; (n) "First Special Account" means the account to be opened and maintained pursuant to Section 2.02 (b) of, and Section I of Schedule 4 to, this Agreement; (0) "FON" means "Fund-purchased Obligaci6n Negociable," i.e., a dollar-denominated security issued by a Participating Bank and purchased by the Fund, to re-finance a BON, on the terms and conditions set forth in a Facility Agreement; (p) "Origination Period" means the period after the issuance of a Backstop Commitment during which the Participating Bank must make TELs under such Backstop Commitment; (q) "Participating Bank" means any bank, in Argentina, selected by BICE pursuant to paragraph (p) of Schedule 1 to the Project Agreement as eligible to enter into a Facility Agreement; (r) "Program" means the program of actions, objectives and policies designed to achieve structural adjustment of the financial sector of the Borrower's economy, described in the Borrower's letter to the Bank dated December 8, 1992; (s) "Project Reviews" means the First and Second Project Reviews; (t) "Provincial Bank" means any bank owned by a Province of the Borrower; (u) "Resolution No. 1-134" means BCRA's Resolution No. 1- 134, dated October 21, 1993 (Circular de Contabilidad y Auditoria - CONAU 1-134), as amended by BCRA's Communique "A" 2152 of October 31, 1993; (v) "Second Project Review" means the Project Review to be held during the 30-day period following the date referred to in Section 3.03 (a)(ii) of this Agreement; (x) "Second Special Account" means the account to be opened and maintained pursuant to Section 2.02 (b) of, and Section II of Schedule 4 to, this Agreement; -4- (y) "SEF" means Superintendencia de Entidades Financieras, the Borrower's superintendency of financial institutions, within BCRA; (z) "SITC" means the Standard International Trade Classification, Revision 3 (SITC, Rev. 3), published by the United Nations in Statistical Papers, Series M, No. 34/Rev. 3 (1986); (aa) "Subsidiary Loan Agreement" means the agreement referred to in Section 3.01 (b) of this Agreement; and (ab) "TEL" means "Term Eligible Loan," i.e., any of the investment loans made by Participating Banks that comply with the requirements of paragraph (j) of Schedule 2 to the Project Agreement. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, various currencies that shall have an aggregate value equivalent to the amcunt of five hundred million dollars ($500,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for: (i) amounts to be disbursed by the Fund, under Part A of the Project, to purchase FONs pursuant to Backstop Commitments; and (ii) expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for Part B of the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars two special deposit accounts (the First Special Account and the Second Special Account) in a commercial bank on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the First Special Account and the Second Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. -5- Section 2.03. The Closing Date shall be June 30, 2006 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. (b) The Borrower shall pay to the Bank a usage charge at the rate of three-twentieths of one percent (3/20 of 1%) per annum on the amount of any Backstop Commitment entered into by the Fund, such charge to accrue from the date of the issuance of such Backstop Commitment to the date on which (i) the amount of the Loan required to finance the purchase of FONs under such Backstop Commitment shall be withdrawn by the Borrower from the Loan Account or shall be cancelled, or (ii) such Backstop Commitment shall be terminated without purchase of FONs. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to Single Currency LIBOR, plus one-half of one percent (1/2 of 1%), plus or minus the Average Margin as provided in paragraph (b) (iv) below. (b) For the purposes of this Section: (i) "Interest Period" means the initial period from and including the date of this Agreement to but not including the first Interest Payment Date and thereafter the period from and including any Interest Payment Date to but not including the next Interest Payment Date. (ii) "Interest Payment Date" means any date specified in Section 2.06 of this Agreement. (iii) "Single Currency LIBOR" means the London interbank offered rate for dollars, expressed as a percentage per annum, reasonably determined by the Bank in accordance with Schedule 7 to this Agreement for the January 15 or July 15 on which an Interest Period commences (or, for the initial Interest Period, the January 15 or July 15 -6- preceding the date of this Agreement or on which such Interest Period commences). (iv) "Average Margin" means, for any Interest Period, the weighted average margin, for the Semester preceding the relevant January 15 or July 15, between: (A) the cost of the outstanding borrowings of the Bank or portions thereof allocated to the funding of single currency loans in all currencies, and (B) the specific London interbank offered rates or other such reference rates attributable to such borrowings in each such currency, all as reasonably determined by the Bank and expressed as a percentage per annum. For any Interest Period in which (A) exceeds (B), the Average Margin shall be added under paragraph (a) above. For any Interest Period in which (B) exceeds (A), the Average Margin shall be subtracted under paragraph (a) above. (v) "Semester" means the first six months or second six months of a calendar year. (c) After the Bank shall have determined the Single Currency LIBOR and the Average Margin for any Interest Period, the Bank shall promptly notify the Borrower of such determination. Section 2.06. Interest and other charges shall be payable semiannually on January 15 and July 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement, provided, however, that, if as of July 15, 2001 the Borrower has not withdrawn the total amount of the Loan, the Borrower shall repay to the Bank: (a) the amount withdrawn from the Loan as of such date in level repayments of principal, in accordance with a revised amortization schedule to be furnished to the Borrower by the Bank; and (b) the amounts to be withdrawn during each year subsequent to such date in level repayments of principal, in accordance with revised amortization schedules to be furnished to the Borrower by the Bank. In no event shall the final repayment date set forth in any revised amortization schedule mentioned above be later than the final repayment date set forth in the amortization schedule set forth in Schedule 3 to the Loan Agreement. -7 - Section 2.08. The president of the Fund, or any other person designated by him/her for the purpose, is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, without any limitation or restriction upon any of its other obligations under this Agreement, shall cause the Fund to perform in accordance with the provisions of the Project Agreement all the obligations of the Fund therein set forth, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable the Fund to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Loan to the Fund under an agreement (the Subsidiary Loan Agreement) to be entered into between the Borrower and the Fund, under terms and conditions satisfactory to the Bank. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan. Section 3.02. (a) The Borrower shall cause BICE: (i) to enter into the Administration Agreement; and (ii) to enter into an agreement (the Financial Management Agreement) with an internationally recognized financial institution acceptable to the Bank (the Financial Manager), whereby BICE shall delegate the financial management of the Backstop Facility to the Financial Manager, such agreement to contain terms and conditions satisfactory to the Bank, including (except as - 8 - -8- the Bank shall otherwise agree) those set forth in Schedule 5 to this Agreement. (b) The Borrower shall cause BICE to exercise its rights and to comply with its obligations under the Administration Agreement and the Financial Management Agreement in such manner as to protect the interests of the Borrower, the Bank, the Fund and BICE and to accomplish the purposes of the Loan. Section 3.03. (a) The Borrower shall cause the Fund to cease issuing Backstop Commitments: (i) on the date falling 18 months after the Effective Date or when Backstop Commitments issued by the Fund shall have reached the aggregate amount of $150,000,000, whichever occurs first; and again (ii) on the date falling three years after the Effective Date or when Backstop Commitments issued by the Fund shall have reached the aggregate amount of $300,000,000, whichever occurs first. (b) The Borrower and the Bank, during the 30-day period immediately following each of the dates referred to in paragraph (a) (i) and (ii) above, shall, jointly with BICE and the Fund, undertake a review (the Project Reviews) of the progress in the fulfillment of the conditions specified in Schedule 6 to this Agreement. (c) If, after a Project Review, the Bank is satisfied, based on evidence satisfactory to the Bank, that the conditions specified in Schedule 6 to this Agreement (as applicable) have been fulfilled, then the Bank shall, by notice to the Borrower and the Fund, authorize the Fund to resume the issuance of Backstop Commitments. (d) If, after either of the Project Reviews, the Bank shall have given notice to the Borrower and the Fund that any of the conditions specified in Schedule 6 to this Agreement (as applicable) has not been fulfilled to the satisfaction of the Bank, and, within 90 days after such notice, any such condition has still not been fulfilled to the satisfaction of the Bank, then the Bank may, by further notice to the Borrower and the Fund, cancel the unwithdrawn amount of the Loan which shall exceed the aggregate amount of Backstop Commitments issued by the Fund until the 3ate of such Project Review. Section 3.04. Except as the Bank shall otherwise agree, procurement of the goods and consultants' services required for Part B of the Project and to be financed out of the proceeds of the Loan -9- shall be governed by the provisions of Schedule 3 to the Project Agreement. Section 3.05. The Borrower and its agencies shall be the only shareholders of the Fund. The Borrower shall not require or permit the Fund to declare any dividends or make any similar distributions to any of its shareholders. If the Fund is required by law to declare dividends to its shareholders, the Borrower shall reinvest all amounts so distributed as equity contributions to the Fund. ARTICLE IV Financial Covenants Section 4.01. The Borrower shall: (i) have the records and accounts for the First Special Account and the Second Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. Section 4.02. (a) The Borrower shall cause BICE to maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) The Borrower shall cause BICE to: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with - 10 - appropriate auditing principles consistently applied, by independent and qualified auditors; (ii) furnish to the Bank as soon as available, but in any case not later than four 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; and (iii) furnish to the Bank such other information concerning such records, accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (1) of the General Conditions, the following additional events are specified: (a) the Fund shall have failed to perform any of its obligations under the Project Agreement; (b) as a result of events which have occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that the Fund will be able to perform its obligations under the Project Agreement; (c) any provision of the Administration Agreement, the Financial Management Agreement, the Subsidiary Loan Agreement, the Charter, or a Facility Agreement shall have been assigned, amended, suspended, abrogated, terminated or waived without the written consent of the Bank, except that any termination of the Management Agreement by BICE, pursuant to the terms thereof, shall not require the written consent of the Bank and shall only be considered as an event of suspension under this paragraph if the Bank shall have determined that such termination was not reasonably justified under the circumstances; (d) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Fund or for the suspension of its operations; - 11 - (e) BICE shall have not complied with any of its obligations under the Administration Agreement or the Financial Management Agreement; (f) the Financial Manager shall have not complied with any of its obligations under the Financial Management Agreement; (g) BICE shall have ceased to operate exclusively as a second tier financial institution; (h) the Borrower's macroeconomic policy framework is inconsistent with the objectives of the Program, or, after the expiration of the Program, the Borrower's primary operational surplus exceeds the interest obligations of the Borrower's non- financial public sector; (i) the Borrower's budgetary funds, included in any budget approved for any year after 1993, shall have been supporting any interest rate subsidy program to commercial borrowers which would adversely affect the development of the Borrower's capital market; or (j) interest rates charged by Participating Banks shall have ceased to be market determined. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower; and (b) any of the events specified in paragraphs (c), (d), (e), (f), (g), (h), (i) or (j) of Section 5.01 of this Agreement shall occur. - 12 - ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the Administration Agreement, the Financial Management Agreement and the Subsidiary Loan Agreement have been executed and delivered on behalf of the respective parties thereto; (b) a model Facility Agreement, satisfactory to the Bank, has been delivered to the Bank; and (c) all action has been taken by the Borrower and the Fund in order to permit that the procurement of goods and consultants' services for Part B of the Project to be financed out of the proceeds of the Loan be undertaken in accordance with the provisions set forth or referred to in this Agreement. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Project Agreement has been duly authorized or ratified by the Fund, and is legally binding upon the Fund in accordance with its terms; (b) that the Administration Agreement, the Financial Management Agreement and the Subsidiary Loan Agreement have been duly authorized or ratified by the respective parties thereto, and are legally binding upon the respective parties thereto in accordance with their respective terms; (c) that the Facility Agreements, when executed and delivered by the respective parties thereto based on the model referred to in Section 6.01 (b) of this Agreement, will be legally valid and binding upon the respective parties thereto in accordance with their respective terms; and (d) that the action referred to in Section 6.01 (c) of this Agreement has been taken and no other action on behalf of the Borrower or the Fund is required for the procurement of goods and - 13 - consultants' services for Part B of the Project in accordance with the provisions of this Agreement. Section 6.03. The date '44 A c/4 05o is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. Except as provided in Section 2.09 of this Agreement, the Minister of Economy and Public Works and Services of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministerio de Economia y Obras y Servicios Pdblicos Hip6lito Yrigoyen 250 Buenos Aires Argentina Cable address: Telex: MINISTERIO ECONOMIA 121942-AR Baires For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America - 14 - Cable address: Telex: INTBAFRAD 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in Buenos Aires, Argentina, as of the day and year first above written. ARGENTINE REPUBLIC By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By VRegional Vice President Latin America and the Caribbean - 15 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Goods and consultants' 3,000,000 100% services for Part B of the Project (2) FONs 497,000,000 100% of the pur- chase price TOTAL 500,000,000 2. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures: (a) prior to the date of this Agreement; and (b) under Category (1) of the table in paragraph I of this Schedule, after the date three and a half years after the Effective Date. 3. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for expenditures under contracts for goods under Part B of the Project not exceeding $50,000 equivalent each contract, under such terms and conditions as the Bank shall specify by notice to the Borrower. - 16 - SCHEDULE 2 Description of the Project The objectives of the Project are to promote the development of an orderly and efficient market for debt securities of commercial banks in the territories of the Borrower and to support longer term lending by such banks for productive purposes. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objective: Part A: Backstop Facility Establishment and operation by the Fund of a facility (the Backstop Facility) to provide commitments (the Backstop Commitments) to Participating Banks to purchase FONs under the terms of the Facility Agreements. Part B: Initial Operation of the Fund Assistance in the initial operation of the Fund. The Project is expected to be completed by June 30, 2006. - 17 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (Expressed in dollars)* On each June 15 and July 15 beginning July 15, 2001 through January 15, 2009 31,250,000 * The figures in this column represent the amount in dollars to be repaid, except as provided in Section 4.04 (d) of the General Conditions. - 18 - SCHEDULE 4 First Special Account and Second Special Account Section I: First Special Account 1. For the purposes of this Section: (a) the term "eligible Category" means Category (1) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for Part B of the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Category in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means the amount of $300,000 to be withdrawn from the Loan Account and deposited into the First Special Account pursuant to paragraph 3 (a) of this Section. 2. Payments out of the First Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Section. 3. After the Bank has received evidence satisfactory to it that the First Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the First Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit in the First Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the First Special Account, the Borrower shall furnish to the Bank requests for deposits into the First Special Account at such intervals as the Bank shall specify. - 19 - (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to para- graph 4 of this Section for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the First Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the First Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the eligible Category, and in the equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the First Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Section, the Bank shall not be required to make further deposits into the First Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Loan allocated to the eligible Category, less the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to Part B of the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Category shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and - 20 - to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the First Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the First Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Section; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the First Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the First Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in the First Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the First Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Section shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. Section II: Second Special Account 1. For the purposes of this Section: (a) the term "eligible Category" means Category (2) set forth in the table in paragraph I of Schedule I to this Agreement; and (b) the term "eligible expenditures" means expenditures for the purchase of FONs under Part A of the Project and to be financed - 21 - out of the proceeds of the Loan allocated from time to time to the eligible Category in accordance with the provisions of Schedule 1 to this Agreement. 2. Payments out of the Second Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Section. 3. After the Bank has received evidence satisfactory to it that the Second Special Account has been duly opened, withdrawals of amounts for deposit in the Second Special Account shall be made as follows: (a) The Borrower, through the Fund, shall notify the Bank, no later than 35 days before any date on which the Fund may be required to purchase FONs pursuant to a Backstop Commitment, of the principal amount of FONs (if any) that the Fund expects to purchase pursuant to such Backstop Commitment. (b) The Borrower, through the Fund, shall furnish to the Bank, no later than 14 days before the date scheduled for each purchase of FONs, a request for a deposit which does not exceed the lesser of: (i) the Backstop Commitment pursuant to which such request is being made; and (ii) the amount required for such purchase of FONs. On the basis of such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit in the Second Special Account such amount as the Borrower, through the Fund, shall have requested. 4. For each payment made by the Borrower, through the Fund, out of the Second Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Section, the Bank shall not be required to make further deposits into the Second Special Account, if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Category - 22 - shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Second Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Second Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Section; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) refund to the Bank an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Second Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in the Second Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Second Special Account. (d) The Borrower shall refund to the Bank any amount deposited in the Second Special Account which shall have not been disbursed within 30 days after the date of the corresponding deposit, such refund to be made on the first working day immediately subsequent to such 30-day period. (e) Refunds to the Bank made pursuant to paragraphs 6 (a), (b), (c) and (d) of this Section shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. - 23 - SCHEDULE 5 Financial Management Agreement Except as the Bank shall otherwise agree, the Financial Management Agreement shall provide, in a manner satisfactory to the Bank, that the Financial Manager shall have, inter alia, the following duties and responsibilities: (a) to determine the fee chargeable by the Fund with respect to Backstop Commitments; (b) to determine the amount of Backstop Commitments available to be offered at any time; (c) to determine the interest rate and purchase price for FONs; (d) to invest available funds of the Fund in specified permitted investments; (e) to determine the timing and price of any sale of FONs by the Fund; (f) to appoint and supervise a custodian for funds of, and all other amounts due to, the Fund; (g) to confirm to BICE all amounts received, and to review invoices for all amounts payable by the Fund; (h) during the term of its service under the Financial Management Agreement, not to engage in the commercial banking business in Argentina or in any business with respect to the purchase or sale of BONs or FONs, such restriction to apply also after the term of service of the Financial Manager to BONs or FONs relating to any Backstop Commitment issued during the term of service of the Financial Manager; (i) to consider procedures which would promote the creation and liquidity of a secondary market in Argentina for bonds issued by Participating Banks, and where any such procedure would involve a payment obligation of the Fund to obtain the approval of the Bank prior to its implementation; -24 - (j) to keep itself informed about the development of the market for the Participating Banks' bonds and, from time to time, to exchange views on the operation of the Backstop Facility with representatives of CNV, Participating Banks, underwriters of Participating Banks' securities and other interested groups; and (k) to recommend amendments to improve the Backstop Facility (including to expand the nature, term or type of permissible BONs and FONs, or to adjust pricing or maturity parameters) or to create new facilities within the Fund, which will promote the development of a liquid market for Participating Banks' bonds and/or the availability of TELS. - 25 - SCHEDULE 6 Conditions Referred to in Section 3.03 (b) of this Agreement Section I. Conditions to be fulfilled at the time of each Project Review: 1. The Borrower's macroeconomic policy framework is consistent with the objectives of the Program or, after the expiration of the Program, the Borrower's primary operational surplus exceeds the interest obligations of the Borrower's non-financial public sector. 2. No interest rate subsidy programs to commercial borrowers which would adversely affect the development of the Borrower's capital market are being supported with the Borrower's budgetary funds. 3. Interest rates charged by the Participating Banks are market determined. 4. General Resolution No. 227, dated January 21, 1993, issued by CNV, is being enforced in accordance with its terms. 5. CNV's organizational review and development program, described in the letter, dated December 28, 1993, from CNV to the Bank, is being implemented in a manner satisfactory to the Bank. 6. No taxes are being imposed by the Borrower in its territories on financial and capital market transactions. 7. Regulations, satisfactory to the Bank, which enable the development of mutual funds in the Borrower's territories are in full force and effect. 8. BICE's appraisal of banks for purposes of their selection as Participating Banks is being made as provided in the Appraisal Manual. 9. Interest rates charged by BICE are market determined. 10. The Borrower shall have confirmed that at least 97% of the banks operating in the Borrower's territories shall have: (i) been inspected by SEF; or (ii) received from an external auditor acceptable to SEF an opinion on their financial statements - 26 - consistent with the provisions set forth in Resolution No. 1-134, such inspection or opinion to have been made or issued during the fifteen-month period immediately preceding the month in which the Project Review in question has been undertaken. 11. The SEF shall have initiated proceedings for the application of remedies against all the banks which are not in compliance with the BCRA's regulations, including but not limited to those relating to minimum capital and provisioning requirements. 12. The SEF is in compliance with the provisions set forth in Resolution No. 1-134 in connection with the carrying out of its operations. 13. The Borrower shall have confirmed that no rediscounts have been provided by the BCRA to Provincial Banks other than to cover the liquidity needs of such banks. Section II. Additional condition to be fulfilled at the time of the First Project Review: CNV has adopted net liquid capital adequacy rules with risk- weighing formulae, satisfactory to the Bank, to be applicable to stock brokers, and has initiated the use of systems and methods, satisfactory to the Bank, to supervise capital adequacy of stock brokers. Section III. Additional condition to be fulfilled at the time of the Second Project Review: The rules, systems and methods referred to in Section II of this Schedule are being applied in a manner satisfactory to the Bank. - 27 - SCHEDULE 7 Single Currency LIBOR Determination 1. Single Currency LIBOR for any Single Currency for any Interest Period shall be the offered rate for deposits in dollars for a period of six months which appears on the display designated as page "3750" on the Telerate monitor (or such other page or service as may replace it for the purpose of displaying London interbank offered rates of major banks for dollar deposits), as of 11.00 a.m. (London time) on the second day on which banks and foreign exchange markets are open for business in London prior to the relevant January 15 or July 15 (the Interest Determination Date). 2. If such rate does not appear on the Telerate monitor or on such service as may replace it, the Bank shall request the London offices of four major banks to provide the Bank with the rate at which deposits in dollars are offered by such banks on the Interest Determination Date to leading banks in the London interbank market for a period of six months ending on the last day of such Interest Period. Single Currency LIBOR for such Interest Period shall be the arithmetic mean (rounded upwards if necessary to the fifth decimal place) of such offered quotations as determined by the Bank. 3. If not more than one major bank provides the Bank with such quotations under paragraph 2 above, Single Currency LIBOR shall be the arithmetic mean (rounded upwards if necessary to the fifth decimal place) determined by the Bank of the rates quoted by at least two major banks in New York City selected by the Bank on the Interest Determination Date for loans in dollars to leading European banks for a period of six months ending on the last day of such Interest Period. If fewer than two of the banks so selected are quoting such rates, Single Currency LIBOR shall be the Single Currency LIBOR in effect for the last preceding Interest Period. 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 International Bank for Reconstruction and Development. 1OR SECREtARY