1
EXHIBIT 10.12
October 1, 1994
EXPORT-IMPORT BANK OF THE UNITED STATES
WORKING CAPITAL GUARANTEE PROGRAM
BORROWER AGREEMENT
THIS BORROWER AGREEMENT (this "Agreement") is made and entered into by the
entity identified as the Borrower on the signature page hereof (the "Borrower")
and is acknowledged by the institution identified as the Lender on the
signature page hereof (the "Lender").
RECITALS
A. The Lender shall make a loan (the "Loan") to the Borrower for
the purpose of providing the Borrower with pre-export working capital to
finance the manufacture or purchase and subsequent export sale of the Items (as
hereinafter defined).
B. The Loan shall be in a principal amount (the "Loan Amount")
not to exceed at any time outstanding the amount specified in item (5)(A) of
the Loan Authorization Agreement between the Lender and the Export-Import Bank
of the United States ("Eximbank") (or Loan Authorization Notice provided to
Eximbank by the Lender in the case of a Loan under Delegated Authority) which
is attached hereto as Annex A and incorporated herein.
C. The Loan shall be evidenced by a valid and enforceable
promissory note payable by the Borrower to the order of the Lender (the "Note")
and shall be made pursuant to a written agreement related solely thereto between
the Borrower and the Lender (the "Loan Agreement").
D. A condition precedent to the making of the Loan by the Lender
is that Eximbank guarantee the payment of ninety percent (90%) of the Loan
Amount and all interest accrued thereon, subject to the terms and conditions of
a master guarantee agreement (the "Master Guarantee Agreement") between
Eximbank and the Lender.
E. In consideration for and as a condition precedent to the
Lender's making the Loan and Eximbank's entering into the Master Guarantee
Agreement, the Borrower shall execute this Agreement for the benefit of the
Lender and Eximbank.
NOW, THEREFORE, the Borrower hereby agrees as follows:
2
ARTICLE I
DEFINITIONS
"Accounts Receivable" shall mean those trade accounts from the sale of the
Items due and payable to the Borrower in the United States and any notes,
drafts, letters of credit or insurance proceeds supporting payment thereof.
"Availability Date" shall mean the date set forth in item (10) of the Loan
Authorization Agreement or, if such date is not a Business Day, the next
Business Day thereafter.
"Borrowing Base" shall mean the Collateral Value as discounted by the
applicable Disbursement Rate(s).
"Borrowing Base Certificate" shall mean the certificate in form provided by
the Lender and executed by the Borrower setting forth the Borrowing Base
supporting one or more Disbursements.
"Business Day" shall mean any day on which the Federal Reserve Bank of New
York is open for business.
"Buyer" shall mean an entity which has entered into one or more Export
Orders with the Borrower.
"Closing Date" shall mean the date on which the Loan Documents are
executed by the Borrower.
"Collateral" shall mean the property of the Borrower in which the Borrower
has granted to the Lender a valid and enforceable security interest as security
for the payment of all principal and interest due under the Loan, and which is
identified in item (6) of the Loan Authorization Agreement, including all
proceeds (cash and non-cash) thereof.
"Collateral Value" shall mean at any given time the value of all
Collateral against which Disbursements may be made as set forth in item (5)(C)
of the Loan Authorization Agreement, valued according to Generally Accepted
Accounting Principles.
"Country Limitation Schedule" shall mean the schedule published by Eximbank
and attached to this Agreement as Annex C which sets forth on a country by
country basis whether and under what conditions Eximbank will provide coverage
for the financing of export transactions to countries listed therein.
"Disbursed Amount" shall mean the aggregate outstanding amount of the
Disbursements.
2
3
"Disbursement" shall mean an advance of the Loan from the Lender to the
Borrower under the Loan Agreement.
"Disbursement Rate" shall mean the rate specified in item (5)(C) of the
Loan Authorization Agreement for each category of Collateral.
"Dollars" or "$" shall mean the lawful money of the United States of
America.
"Export Certificate" shall mean the certificate in the form of Annex B to
this Agreement executed by the Borrower.
"Export Order" shall mean a written export order or contract for the
purchase by the Buyer from the Borrower of any of the Items.
"Generally Accepted Accounting Principles" shall mean the accounting
principles issued by the American Institute of Certified Public Accountants.
"Guarantors" shall mean those persons or entities, if any, identified in
item (3) of the Loan Authorization Agreement who shall jointly and severally
guarantee the Borrower's obligation to repay all amounts outstanding under the
Note.
"Inventory" shall mean the raw materials, work-in-process and finished
goods purchased or manufactured by the Borrower for resale.
"Items" shall mean the finished goods or services which are intended for
export, as specified in item (4)(A) of the Loan Authorization Agreement.
"Letter of Credit" shall mean an irrevocable letter of credit subject to
UCP 500, payable in the United States or at the issuing bank and issued for the
benefit of the Borrower on behalf of a Buyer in connection with the purchase of
the Items.
"Loan Documents" shall mean the Note, the Loan Agreement, this Agreement
and any other instrument, agreement or document previously, simultaneously or
hereafter executed by the Borrower or any Guarantors evidencing, securing,
guaranteeing or in connection with the Loan.
"Revolving Loan" shall mean a Loan under which amounts disbursed and
repaid may be disbursed again until the Availability Date.
"Transaction Specific Loan" shall mean a Loan under which amounts
disbursed and repaid may not be disbursed again.
3
4
"U.S." or "United States" shall mean the United States of America and
its territorial possessions.
"U.S. Content" shall mean with respect to any Item all the labor,
materials and services which are of U.S. origin or manufacture, and which are
incorporated into an Item in the United States.
ARTICLE II
OBLIGATIONS OF THE BORROWER
Until payment in full of the Loan, the Borrower agrees to the
following:
Section 2.1 Use of Disbursements. The Borrower shall use
Disbursements only for the purpose of enabling the Borrower to finance the cost
of manufacturing, purchasing or selling the Items. The Borrower may not use
Disbursements for the purpose of: (a) servicing any of the Borrower's
pre-existing or future indebtedness unrelated to the Loan; (b) acquiring fixed
assets or capital goods for use in the Borrower's business; (c) acquiring,
equipping or renting commercial space outside of the United States; or (d)
paying the salaries of non-U.S. citizens or non-U.S. permanent residents who
are located in offices outside the United States.
In addition, Disbursements may not be used to finance the
manufacture, purchase or sale of any of the following:
(a) Items to be sold to a Buyer located in a country in which
Eximbank is legally prohibited from doing business as designated in the Country
Limitation Schedule;
(b) that part of the cost of the Items which is not U.S. Content
unless such part is not greater than fifty percent (50%) of the cost of the
Items and is incorporated into the Items in the United States;
(c) defense articles or defense services; or
(d) without Eximbank's prior written consent, any Items to be
used in the construction, alteration, operation or maintenance of nuclear
power, enrichment, reprocessing, research or heavy water production facilities.
Section 2.2 Certificates. In order to receive a Disbursement under a
Transaction Specific Loan, the Borrower shall deliver to the Lender a Borrowing
Base Certificate current within the past five (5) calendar days. In order to
receive a Disbursement under a Revolving Loan, the Borrower shall have
delivered to the Lender a Borrowing Base Certificate current within the past
thirty (30) calendar days. Additionally, in order to receive the first
Disbursement related to any particular
4
5
Export Order, the Borrower shall deliver to the Lender an Export Certificate
covering the Items described in such Export Order.
Section 2.3 Exclusions from the Borrowing Base. In determining the
amount of a requested Disbursement, the Borrower shall exclude from the
Borrowing Base the following:
(a) any Inventory which is not located in the United States;
(b) any demonstration Inventory or Inventory sold on consignment;
(c) any Inventory consisting of proprietary software;
(d) any Inventory which is damaged, obsolete, returned, defective,
recalled or unfit for further processing;
(e) any Inventory which has been previously exported from the
United States;
(f) any Inventory which constitutes defense articles or defense
services or any Accounts Receivable generated by sales of such Inventory;
(g) any Inventory which is to be incorporated into Items destined
for shipment to, and any Account Receivable in the name of a Buyer located in, a
country in which Eximbank is legally prohibited from doing business as
designated in the Country Limitation Schedule;
(h) any Inventory which is to be incorporated into Items destined
for shipment to, and any Account Receivable in the name of a Buyer located in,
a country in which Eximbank coverage is not available for commercial reasons as
designated in the Country Limitation Schedule, unless and only to the extent
that such Items are to be sold to such country terms of a Letter of Credit
confirmed by a bank acceptable to Eximbank;
(i) any Inventory which is to be incorporated into Items whose
sale would result in an ineligible Account Receivable;
(j) any Account Receivable with a term in excess of net one
hundred eighty (180) days;
(k) any Account Receivable which is more than sixty (60) calendar
days past the original due date, unless it is insured through Eximbank export
credit insurance for comprehensive commercial and political risk, or through
Eximbank approved private insurers for comparable coverage, in which case
ninety (90) calendar days shall apply;
5
6
(l) any intra-company Account Receivable or any Account
Receivable from a subsidiary of the Borrower, from a person or entity with a
controlling interest in the Borrower or from an entity which shares common
controlling ownership with the Borrower;
(m) any Account Receivable evidenced by a Letter of Credit, until
the date of shipment of the Items covered by the subject Letter of Credit;
(n) any Account Receivable which the Lender or Eximbank, in its
reasonable judgment, deems uncollectible for any reason;
(o) any Account Receivable payable in a currency other than
Dollars; and
(p) any Account Receivable from a military Buyer, except as may be
approved by Eximbank.
Section 2.4 Schedules, Reports and Other Statements. The Borrower
shall submit to the Lender in writing each month (a) an Inventory schedule for
the preceding month and (b) an Accounts Receivable aging report for the
preceding month detailing the terms of the amounts due from each Buyer. The
Borrower shall also furnish to the Lender promptly upon request such
information, reports, contracts, invoices and other data concerning the
Collateral as the Lender may from time to time specify.
Section 2.5 Additional Security or Payment. The Borrower shall at
all times ensure that the Borrowing Base exceeds the Disbursed Amount. If
informed by the Lender or if the Borrower otherwise has actual knowledge that
the Borrowing Base is at any time less than the Disbursed Amount, the Borrower
shall, within five (5) Business Days, either (a) furnish additional security to
the Lender, in form and amount satisfactory to the Lender and Eximbank, or (b)
pay to the Lender an amount equal to the difference between the Disbursed
Amount and the Borrowing Base.
Section 2.6 Continued Security Interest. The Borrower shall notify
the Lender in writing within five (5) Business Days if (a) the Borrower changes
its name or identity in any manner, (b) the Borrower changes the location of
its principal place of business, (c) the nature of any of the Collateral is
changed or any of the Collateral is transferred to another location or (d) any
of the books or records related to the Collateral are transferred to another
location. The Borrower shall execute such additional financing statements or
other documents as the Lender may reasonably request in order to maintain its
perfected security interest in the Collateral.
Section 2.7 Inspection of Collateral. The Borrower shall permit the
representatives of the Lender and Eximbank to make at any time during normal
business hours reasonable inspections of the Collateral and of the Borrower's
facilities, activities, and books and records, and shall cause its officers and
employees to give full cooperation and assistance in connection therewith.
6
7
Section 2.8 Notice of Debtor's Relief, Dissolution and Litigation.
The Borrower shall notify the Lender in writing within five (5) Business Days
of the occurrence of any of the following:
(a) a proceeding in bankruptcy or an action for debtor's
relief is filed by, against, or on behalf of the Borrower;
(b) the Borrower fails to obtain the dismissal or
termination within thirty (30) calendar days of the commencement of any
proceeding or action referred to in (a) above;
(c) the Borrower begins any procedure for its dissolution
or liquidation, or a procedure therefore has been commenced against it; or
(d) any material litigation is filed against the Borrower.
Section 2.9 Insurance. The Borrower shall maintain insurance
coverage in the manner and to the extent customary in businesses of similar
character.
Section 2.10 Merger or Consolidation. Without the prior written
consent of Eximbank and the Lender, the Borrower shall not (a) merge or
consolidate with any other entity, (b) sell, lease, transfer or otherwise
dispose of any substantial part of its assets, or any part of its assets which
are essential to the conduct of its business or operations, (c) make any
material change in its organizational structure or identity, or (d) enter into
any agreement to do any of the foregoing.
Section 2.11 Repayment Term and Reborrowings. The Borrower shall pay
in full the outstanding Loan Amount and all accrued and unpaid interest thereon
no later than the first Business Day after the Availability Date. If the Loan
is a Revolving Loan, provided that the Borrower is not in default under any of
the Loan Documents, the Borrower may borrow, repay and reborrow amounts under
the Loan until the close of business on the Availability Date. If the Loan is
a Transaction Specific Loan, the Borrower shall, within two (2) Business Days
of the receipt thereof, pay to the Lender (for application against the
outstanding Loan Amount and accrued and unpaid interest thereon) all checks,
drafts, cash and other remittances it may receive in payment or on account of
the Accounts Receivable or any other Collateral, in precisely the form received
(except for the endorsement of the Borrower where necessary). Pending such
deposit, the Borrower shall not commingle any such items of payment with any of
its other funds or property, but will hold them separate and apart.
Section 2.12 Cross Default. The Borrower shall be deemed in default
under the Loan if the Borrower fails to pay when due any amount payable to the
Lender under any loan to the Borrower not guaranteed by Eximbank.
7
8
Section 2.13 Financial Statements. The Borrower shall provide
quarterly financial statements to the Lender no later than ninety (90) days
after the end of each quarter. This is in addition to any other financial
statements that may be required by the Lender under the Loan Agreement.
Section 2.14 Taxes, Judgments and Liens. The Borrower shall remain
current on all of its Federal, state and local tax obligations. In addition,
the Borrower shall notify the Lender in the event of (i) any judgment against
the Borrower, or (ii) any lien is filed against any of the assets of the
Borrower.
ARTICLE III
RIGHTS AND REMEDIES
Section 3.1 Indemnification. Upon Eximbank's payment of a claim to
the Lender in connection with the Loan pursuant to the Master Guarantee
Agreement, Eximbank shall assume all rights and remedies of the Lender under
the Loan Documents and may enforce any such rights or remedies against the
Borrower, the Collateral and any Guarantors. Additionally, the Borrower shall
hold Eximbank and the Lender harmless from and indemnify them against any and
all liabilities, damages, claims, costs and losses incurred or suffered by
either of them resulting from (a) any materially incorrect certification or
statement knowingly made by the Borrower or its agent to Eximbank or the Lender
in connection with the Loan, this Agreement or any of the other Loan Documents
or (b) any material breach by the Borrower of the terms and conditions of this
Agreement or any of the other Loan Documents.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Governing Law. This Agreement is made under the laws of
the State of New York, United States of America, and for all purposes shall be
governed by and construed in accordance with such laws without giving effect to
the conflict of law principles thereof.
Section 4.2 Notification. All notifications required by this
Agreement shall be given in the manner provided in the Loan Agreement.
Section 4.3 Partial Invalidity. If at any time any of the provisions
of this Agreement becomes illegal, invalid or unenforceable in any respect
under the law of any jurisdiction, neither the legality, the validity nor the
enforceability of the remaining provisions hereof shall in any way be affected
or impaired.
8
9
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly
executed as of the 10th day of February, 1995.
Megatest Corporation
- - -----------------------------
(Name of Borrower)
By /s/ Mel Flanigan
---------------------------
(Signature)
Name Mel Flanigan
-------------------------
(Print or Type)
Title Corp. Controller
------------------------
ACKNOWLEDGED:
Bank of the West
- - -----------------------------
(Name of lender)
By /s/ Daniel Corry
---------------------------
(Signature)
Name Daniel Corry
-------------------------
(Print or Type)
Title Vice President
------------------------
Guaranteed Loan No. AP068442XX
ANNEXES:
A - Loan Authorization Agreement
B - Export Certificate
C - Country Limitation Schedule
9
10
ANNEX A
LOAN AUTHORIZATION AGREEMENT
THIS LOAN AUTHORIZATION AGREEMENT (this "Agreement") is made and entered
into by and between the institution identified as the Lender on the signature
page hereof (the "Lender") and the Export-Import Bank of the United States
("Eximbank") . This Agreement sets forth the specific terms and conditions of
the Loan known as Guaranteed Loan No. AP068442XX which is guaranteed by
Eximbank pursuant to the Master Guarantee Agreement dated January 19, 1995,
between Eximbank and the Lender. The capitalized terms used herein shall have
the meanings set forth in the Master Guarantee Agreement.
(1) Lender's Name and Address:
Bank of the West
50 W. San Fernando Street
San Jose, CA 95113
Contact Person: Mr. Daniel Corry
Telephone Number: (408) 998-7913
Telefax Number: (408) 947-5117
(2) Borrower's Name and Address:
Megatest Corporation
1321 Ridder Park Drive
San Jose, CA 95131
Contact Person: Mr. Melvin L. Flanagan
Telephone Number: (408) 437-9700
Telefax Number: (408) 451-3202
(3) Guarantor's Name and Address: The guarantee shall be valid and
enforceable, and shall be guarantee of payment and not of collection;
if more than one guarantor, their obligations shall be joint and
several.
None
(4) The Items to be financed:
A. The Items: Semiconductor Testing Equipment
B. Are Performance Guarantees (e.g. bid bonds, performance bonds,
surety bonds, stand-by letters of credit) to be issued to
foreign Buyers? Yes: ; No: X
----- -----
(5) Loan Amount, Disbursement Terms and Conditions, and
Disbursement Rates:
A. Loan Amount: $5,000,000.00
11
B. Disbursement Terms and Conditions: (1) As specified herein, up to
20% of the Loan Amount may be in the form of Disbursements that
are made without a related firm Export Order, however, prior to any
such Disbursement the Borrower shall deliver to the Lender a written
statement, with a supporting breakdown of costs, to the effect that
Disbursements are only for documented U.S. costs associated with
export sales.
(2) Except for (1) above, each Disbursement may be made only
against firm written export purchase orders which are delivered to
the Lender prior to each Disbursement.
C. Disbursement Rates by Categories of Collateral:
(1) Inventory: 70 percent of the value of the Borrower's Export-related
Inventory; and
(2) Accounts Receivable: 90 percent of the value of the Borrower's
eligible export-related Accounts Receivable.
D. The Loan is a Revolving Loan.
(6): Security Interests in the Collateral: Valid and enforceable, perfected
first priority security interests in all export-related Accounts
Receivable and all Export-related Inventory, and the proceeds thereof.
To the extent applicable, "Export-related Inventory" shall mean all
of the Borrower's inventory which is intended to be sold pursuant to
Export Orders. Unless the Export-related Inventory can be
effectively segregated, for purposes of claim recoveries under the
Master Guarantee Agreement, the Export-related Inventory will be
determined on a pro-rata basis comparing, as of the date of
default, the amount outstanding under the Loan and the aggregate
amount outstanding under all other short-term Inventory financing,
of the Borrower.
(7): Terms of Sale: Export sales financed under the Loan shall be on one of
the following terms: (i) Letters of Credit; (ii) open account terms for
creditworthy Buyers which have been preapproved in writing by Eximbank
and the Lender.
(8) Lender's Interest Rate: Prime plus .5 percent.
(9) Facility Fee: The Lender shall pay the Facility Fee equal to $37,500.00
(0.75% of the Loan Amount) due the earlier of five (5) Business Days of
the Closing Date or February 28, 1995.
(10) Availability Date: July 31, 1995.
(11) Special Conditions: (See attached.)
(12) Country-Limitations: (Effective November 13, 1994, see attached.)
12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, in duplicate, as of the 10th day of February 1995.
Bank of the West EXPORT-IMPORT BANK OF THE
- - ------------------------------------ UNITED STATES
(Name of Lender)
By /s/ Daniel Corry By /s/ James W. Crist
- - ------------------------------------ ------------------------------------
(Signature) (Signature)
Name Daniel Corry Name James W. Crist
- - ------------------------------------ ------------------------------------
(Print) (Print)
Title Vice President Title Vice President
- - ------------------------------------ ------------------------------------
Guaranteed Loan No. AP068442XX
13
SPECIAL CONDITIONS AP068442XX
I. NEGATIVE COVENANTS:
Loans to Stockholders and Affiliates. Without Eximbank's prior written
consent, the Borrower shall not make any loans to any stockholder or
entity affiliated with the Borrower. With respect to this Special
Condition, the term "loan" does not include salary, rent paid to an
affiliated entity owned by the stockholders, or to other expenses
incurred in the ordinary course of business.
II. WARRANTIES, REPRESENTATIONS AND OTHER COVENANTS: The Borrower
warrants, represents, covenants and agrees that:
Export Credit Insurance Policy ("Policy"). It shall obtain a Policy
acceptable to Eximbank for comprehensive commercial and political risks,
(in the event that open account terms of sales are indicated in Item 7 of
the Loan Authorization Agreement) and shall assign such policy to the
Lender. Coverage under such Policy shall be in full force and effect as
of the date of each Disbursement under the Loan and until all amounts
outstanding have been repaid. The proceeds of such Policy paid to the
Lender pursuant to the assignment shall be applied first toward reducing
any amount then outstanding under the Loan.
14
ANNEX B
EXPORT CERTIFICATE
Date:_____________________
[NAME OF LENDER]
[ADDRESS OF LENDER]
Re: $_______________ [Revolving][Transaction Specific] Loan (the
"Loan") from __________________________________________ (the "Lender")
to ____________________________ (the "Borrower") guaranteed by the
Export-Import Bank of the United States ("Eximbank") under Master
Guarantee Number______________. Guaranteed Loan No._________________.
Ladies and Gentlemen:
We hereby certify for the benefit of the Lender and Eximbank with respect
to the items described in Export Order ___________________________________
[insert number and/or date, as applicable] (the "Items") as follows:
1 . U.S. Content. Check the applicable box:
/ / The U.S. Content of the Items is equal to or greater than fifty percent
(50%) of the cost of the Items.
/ / The U.S. Content of the Items is less than fifty percent (50%) of the cost
of the Items. If so, indicate below what percentage of the cost of the
Items constitutes U.S. Content:
Item Percentage of U.S. Content
15
2. Munitions List. Only the following Items are articles, services,
or related technical data that are listed on the United States Munitions List
(part 121 of title 22 of the Code of Federal Regulations):
Item Invoice Amount
(If none, the word "NONE" must be inserted in order for this Certificate to be
considered complete.)
3. Defense Articles. The Buyer is not a military entity and the
Items are not defense articles or defense services.
4. Country Limitation Schedule. (a) The Items are not being
exported to a country in which Eximbank is legally prohibited from doing
business as designated in the Country Limitation Schedule.
(b) The Items are to be exported to the following countries in which
Eximbank coverage is not available for commercial reasons as designated in the
Country Limitation Schedule, the sale of such Items must be on terms of a
Letter of Credit issued or confirmed by a bank acceptable to Eximbank.
(If none, the word "NONE" must be inserted in order for this Certificate to be
considered complete.)
5. Nuclear Exports. The Items do not consist of technology, fuel,
equipment, materials or goods and services to be used in the construction,
alteration, operation or maintenance of nuclear power, enrichment,
reprocessing, research or heavy water production facilities, unless the prior
consent of Eximbank has been obtained.
We have attached hereto a copy of the Export Order referenced above.
With knowledge that the Lender and Eximbank will rely on the certifications
and representations made in this certificate, we agree to be liable for any
damages suffered by the Lender's and/or Eximbank's reliance on such
certifications and representations. We further understand that this
certification is subject to the penalties provided in Article 18 U.S.C.
Section 1001.
All capitalized terms not defined in this Certificate shall have the
meanings set forth in the Borrower Agreement executed in connection with the
Loan.
2
16
_______________________
(NAME OF BORROWER)
By:_________________________
(Signature)
Name:________________________
(Print orType)
Title:________________________
(Print or Type)
Enclosures
3
17
Page 1 of 11
ANNEX C
EXPORT-IMPORT BANK OF THE UNITED STATES
COUNTRY LIMITATION SCHEDULE
Special Conditions Pertaining to
Ex-Im Bank Loan & Guarantee Programs
and Export Credit Insurance
EFFECTIVE November 13, 1994
It is agreed that pursuant to the provisions of Ex-Im Bank loans and
guarantees and Ex-Im Bank export credit insurance policies, the country
limitation schedule has been amended effective November 13, 1994. This
revision supersedes the August 1, 1994 country limitation schedule and any
amendments thereto.
Insureds, and brokers will be notified of any amendments to this country
limitation schedule in writing. A full revision is generally completed every
six months to one year. All special conditions should be reviewed as many
have been amended.
GENERAL CONDITIONS
Exceptions to any condition or limitation contained herein must be obtained in
writing from Ex-Im Bank.
Ex-Im Bank reserves the right to set additional conditions for any particular
buyer or issuing bank including the right to set a different percentage
of coverage. Ex-Im Bank also reserves the right to reject any particular
application.
The sector where the risk lies (public or private) and the country of the
obligor, or guarantor if there is one, will generally be used for determining
appropriate country limitations and exposure fee.
The following insurance policies are affected by this country limitation
schedule:
SHORT-TERM COMPREHENSIVE: CS, EBD, ELC, ENB, ENV, ESC, ESM(ST), ESS, ETM(ST),
FB, FB-E, FV, MSC(ST), MSC-E(ST).
SHORT-TERM POLITICAL RISKS ONLY: ESP, ESSP, FP, MCP(ST).
MEDIUM-TERM: All medium-term and lease-policy types, ESM(MT), ETM(MT), MCP(MT),
MRP, MSC(MT), MSC-E(MT), MTR, MTR-E.
Effective Date of
this Endorsement November 13, 1994 No. CLS-11/94
12:01 A.M. E.S.T.
18
Page 2 of 11
EXPORT-IMPORT BANK OF THE U.S.
COUNTRY LIMITATION SCHEDULE
EFFECTIVE November 13, 1994
PUBLIC SECTOR RISK PRIVATE SECTOR RISK
COUNTRY ST MT LT ST MT LT NOTES
Afghanistan X X X X X X
Albania X X X X X X
Algeria X X X X X #1, #2
Angola X X X X X X
Anguilla #2
Antigua & Barbuda X X X #2
Argentina #7b
Armenia X X X X X X
Aruba #2, #10
Australia
Austria
Azerbaijan X X X X X X
Bahamas
Bahrain
Bangladesh X X X #2
Barbados #2
Belarus X X X X X X
Belgium
Belize #7a
Benin X X X X #2, #5
Bermuda
Bhutan #2, #5
Bolivia X #2, #6
Botswana
Bosnia-Hercegovina X X X X X X
Brazil X X X
British Virgin Is.
Brunei
Bulgaria X X X #2, #6
Burkina Faso X X X X X X
Burundi X X X X X X
Cambodia X X X X X X #8
Cameroon X X X X X X
Canada
Cape Verde Is. X X X X X X
Cayman Is.
ST = SHORT-TERM, MT = MEDIUM-TERM, LT = LONG-TERM, X = SUPPORT NOT AVAILABLE
19
Page 3 of 11
EXPORT-IMPORT BANK OF THE U.S.
COUNTRY LIMITATION SCHEDULE
EFFECTIVE November 13, 1994
PUBLIC SECTOR RISK PRIVATE SECTOR RISK
COUNTRY ST MT LT ST MT LT NOTES
Central African Rep. X X X X X X
Chad X X X X X X
Chile
China, People's Rep. X X X #3
Colombia
Comoros X X X X X X
Congo X X X X X X
Cook Islands X #2, #5
Costa Rica X #7b
Cote d'Ivoire X X X X X X
Croatia X X X X X X
Cuba X X X X X X #8
Cyprus
Czech Republic #2, #5
Denmark
Djibouti X X X X X X
Dominica #2
Dominican Rep. X #6, #7a
Ecuador X #6, #7a
Egypt #2
El Salvador
Equatorial Guinea X X X X X X
Eritrea X X X X X X
Estonia X #2, #5, #6
Ethiopia X X X X X X
Fiji #2
Finland
France
Gabon X X X #7a
Gambia X X X X X X
Georgia X X X X X X
Germany
Ghana #6, #7a
Greece
Grenada #2
Guatemala #7b
ST = SHORT-TERM, MT = MEDIUM-TERM, LT = LONG-TERM, X = SUPPORT NOT AVAILABLE
20
Page 4 of 11
EXPORT-IMPORT BANK OF THE U.S.
COUNTRY LIMITATION SCHEDULE
EFFECTIVE November 13, 1994
PUBLIC SECTOR RISK PRIVATE SECTOR RISK
COUNTRY ST MT LT ST MT LT NOTES
Guinea X X X X X X
Guinea-Bissau X X X X X X
Guyana X X X #2, #5
Haiti X X X X X X
Honduras X X X X #2, #5
Hong Kong
Hungary #2, #5
Iceland
India
Indonesia
Iran X X X X X X #8
Iraq X X X X X X #8
Ireland
Israel
Italy
Jamaica X #7a
Japan
Jordan #2, #5
Kazakhstan X X X #2, #6
Kenya X X X X X X
Kiribati #2
Korea, North X X X X X X #8
Korea, South
Kuwait
Kyrgyzstan X X X X X X
Laos X X X X X X #8
Latvia X #2,#5,#6
Lebanon X #2,#5,#6
Lesotho #7b
Liberia X X X X X X
Libya X X X X X X #8
Liechtenstein
Lithuania X #2,#5,#6
Luxembourg
Macao #2
Macedonia X X X X X X
ST = SHORT-TERM, MT = MEDIUM-TERM, LT = LONG-TERM, X = SUPPORT NOT AVAILABLE
21
Page 5 of 11
EXPORT-IMPORT BANK OF THE U.S.
COUNTRY LIMITATION SCHEDULE
EFFECTIVE November 13,1994
PUBLIC SECTOR RISK PRIVATE SECTOR RISK
COUNTRY ST MT LT ST MT LT NOTES
Madagascar X X X X X X
Malawi X X X X X X
Malaysia
Maldive Islands #2
Mali X X X X X X
Malta
Marshall Islands X X #2, #5
Mauritania X X X X X X
Mauritius
Mexico
Micronesia #2
Moldova X X X X X X
Monaco
Mongolia X X X X #2, #6
Montserrat #2
Morocco #7b
Mozambique X X X X X X
Myanmar X X X X X X #8
Namibia #2
Nauru #2
Nepal X #2
Netherlands
Neth Antilles
New Zealand
Nicaragua X X X X X X
Niger X X X X X X
Nigeria X X X X X X #8
Norway
Oman
Pakistan #7b
Palau X X X X #2, #6
Panama #7b
Papua New Guinea #2
Paraguay #7a
Peru X #2, #5
Philippines #4
ST = SHORT-TERM, MT = MEDIUM-TERM, LT = LONG-TERM, X = SUPPORT NOT AVAILABLE
22
Page 6 of 11
EXPORT-IMPORT BANK OF THE U.S.
COUNTRY LIMITATION SCHEDULE
EFFECTIVE November 13, 1994
PUBLIC SECTOR RISK PRIVATE SECTOR RISK
COUNTRY ST MT LT ST MT LT NOTES
Poland #2, #5
Portugal
Qatar
Romania X X X #2, #6
Russia X X X X #2, #6
Rwanda X X X X X X
St. Kitts-Nevis #2
St. Lucia #2
St. Vincent-Gren. #2
Sao Tome & Principe X X X X X X
Saudi Arabia
Senegal X X X X X X
Serbia X X X X X X #8
Seychelles #7b
Sierra Leone X X X X X X
Singapore
Slovakia #2, #5
Slovenia X X #2, #5
Solomon Islands #2
Somalia X X X X X X
South Africa #2
Spain
Sri Lanka #2, #5
Sudan X X X X X X #8
Suriname X X X X X X
Swaziland
Sweden
Switzerland
Syria X X X X X X #8
Taiwan
Tajikistan X X X X X X
Tanzania X X X X X X
Thailand
Togo X X X X X X
Tonga #2
Trinidad & Tobago #7a
ST = SHORT-TERM, MT = MEDIUM-TERM, LT = LONG-TERM, X = SUPPORT NOT AVAILABLE
23
Page 7 of 11
EXPORT-IMPORT BANK OF THE U.S.
COUNTRY LIMITATION SCHEDULE
EFFECTIVE November 13, 1994
PUBLIC SECTOR RISK PRIVATE SECTOR RISK
COUNTRY ST MT LT ST MT LT NOTES
Trinidad & Tobago #7a
Tunisia
Turkey
Turkmenistan X X X X #2, #6
Turks & Caicos Is. #2
Uganda X X #2, #5
Ukraine X X X X X X
United Arab Emirates #9
United Kingdom
Uruguay #7b
Uzbekistan X X X X #2, #6
Vanuatu #2
Vatican City
Venezuela X X X #2
Vietnam X X X X X X #8
Western Samoa #2
Yemen X X X X X X
Zaire X X X X X X
Zambia X X X X X X
Zimbabwe #7b
ST = SHORT-TERM, MT = MEDIUM-TERM, LT = LONG-TERM, X = SUPPORT NOT AVAILABLE
24
Page 8 of 11
Notes:
#1. Short-term cover is limited to government-owned banks and SONATRACH.
#2. Discretionary credit limits are withdrawn. Cover not available unless
specified in a special buyer credit limit or issuing bank credit limit
endorsement. Cover not available under short-term political risks only
policies unless specified in a country limit of liability endorsement.
#3. Bank of China, China International Trust and Investment Corporation,or
People's Construction Bank of China as obligor or guarantor. Ex-Im Bank
will consider other financial institutions.
#4. Except for selected transactions with the Development Bank of the
Philippines, the guarantee of the Department of Finance is required for
public sector medium- and long-term transactions. Before taking action
on private or public sector medium- or long-term cases, Ex-Im Bank will
obtain the advice of the Department of Finance to the status of internal
Philippine approvals. For public sector medium- and long-term
transactions Ex-Im Bank will also obtain a statement of the willingness
of the Department of Finance to serve as guarantor.
#5. Ex-Im Bank cover/support for private sector transactions is limited to
transactions with a commercial bank as obligor or guarantor unless
otherwise specified by Ex-Im Bank.
#6. Ex-Im Bank cover/support public sector transactions is limited to
transactions which commit the full faith and credit of the government
unless otherwise specified by Ex-Im Bank.
#7. Discretionary credit limits and coverage under short-term political risks
only policies shall be the lesser of the limits authorized in the policy
or:
a. $ 50,000
b. $100,000
Higher limits will be considered upon application for a special buyer
credit limit, issuing bank credit limit, or country limit of liability.
#8. Support legally prohibited.
#9. Transactions in Sharjah, Fujairah, Ras Al-Khaimah, Umm Al-Qaywayn, and
Ajman require the guarantee of the federal government.
#10. Longer than short-term public sector transactions require the government
of Aruba as the borrower.
25
PAGE 9 OF 11
INFORMATION SUPPLEMENT ON
MEDIUM- AND LONG-TERM PROGRAMS
"OPEN FOR COVER" versus "OFF-COVER". The attached Country Limitation Schedule
indicates where Ex-Im Bank is "open for cover" and where Ex-Im Bank is "off-
cover". The Schedule is organized along three dimensions: the country where
the risk lies, sector (public sector or private sector), and term of total
exposure (including both disbursement period and repayment term). Ex-Im
Bank defines "public sector" as including those obligors or guarantors which
are at least 50% owned, directly or indirectly, by the government. Where the
CLS presents an X mark, Ex-Im Bank is "off-cover", and is therefore not
willing to consider approval of routine transactions. These "off-cover"
determinations are due to economic and/or political risks associated with the
country.
WHERE EX-IM BANK IS OPEN FOR COVER. The "open for cover" designation refers to
the possibility, rather than the certainty, of Ex-Im Bank support in
particular cases. Proposed obligors, guarantors, and transaction structures
under medium- and long-term programs are all subject to case-by-case Bank
approval. Approval depends on the case-by-case application of Bank policies,
particularly the Bank's determination of reasonable assurance of repayment.
The following paragraphs provide very general guidance to the application of
policies in markets where Ex-Im Bank is on-cover.
- - - IDENTIFICATION OF OBLIGOR OR GUARANTOR. Ex-Im Bank will approve a final
commitment, a preliminary commitment (PC), or a medium-term insurance policy
or commitment (MTIP or MTIC), only if a specific obligor or guarantor has
been identified. Ex-Im Bank may approve an indicative letter of interest
(LI) for a proposed transaction, subject to the condition that an obligor or
guarantor is identified at the time the LI is converted to a final
commitment. PC, MTIP, or MTIC; and Ex-Im Bank can accept the credit risk of
the proposed obligor or guarantor.
- - - INFORMATION REQUIREMENTS REGARDING OBLIGORS OR GUARANTORS. Ex-Im Bank
requires that obligors or guarantors offer "reasonable assurance of
repayment." To process applications for final commitments, PCs. MTIPS, and
MTICs, Ex-Im Bank will first require information on proposed obligors and
guarantors. Such information includes financial statements and credit
references. Engineering data is required for long-term transactions.
Generally, Ex-Im Bank will require more detailed information regarding
obligors or guarantors when processing relatively large transactions, or
transactions with obligors or guarantors with which Ex-Im Bank has had no
favorable direct credit experience. Ex-Im Bank's application form and
program literature specify the Bank's standard information requirements.
- - - SOVEREIGN GUARANTEES FOR PUBLIC SECTOR BUYERS OR OBLIGORS. For most cases
involving proposed public sector buyers or obligors, Ex-Im Bank will
routinely require a sovereign guarantee. This is particularly true when the
public sector obligor is dependent on government budget support or otherwise
lacks financial and operating independence.
- - - PRIOR HOST GOVERNMENT REVIEW OF SOVERIGN CASES IN SOME COUNTRIES. In some
countries, Ex-Im Bank requires prior review of proposed public sector cases
by government authorities responsible for providing the sovereign guarantee,
before Ex-Im Bank will begin processing action.
- - - TEMPORARY SUSPENSION OF COVER. In countries where the CLS indicates that
Ex-Im Bank is "open for cover", Ex-Im Bank may, under certain circumstances,
temporarily suspend cover. This is most likely to be the case for public
sector obligors and guarantors only, but may involve all obligors and
guarantors. In such an event, Ex-Im Bank will advise applicants as quickly
as possible.
- - - LARGE TRANSACTIONS IN SMALLER MARKETS. Relatively large transactions in
smaller economies, even when sovereign guaranteed, will be subject to
special Ex-Im Bank review. Ex-Im Bank will review the potential
26
PAGE 10 OF 11
macroeconomic impacts of the transaction, in terms of higher debt burden and
improved debt repayment capacity.
- - - PRIVATE COMPANIES. Ex-Im Bank will accept the direct credit risks of
private buyers, if available information suggests that these buyers offer a
"reasonable assurance of repayment." For closely-held companies, Ex-Im Bank
may require financial information from owners. For holding companies, Ex-Im
Bank may require financial information on operating components, and may
require their counter-guarantee.
- - - COMMERCIAL BANK GUARANTEES. Ex-Im Bank may require the guarantees of
acceptable commercial banks in the event that information available to Ex-Im
Bank on proposed private buyers suggests that these buyers by themselves do
not offer a "reasonable assurance of repayment."
- - - LIMITED RECOURSE PROJECTS. Ex-Im Bank will consider limited-recourse
project finance structures (those without full recourse to an acceptable,
established obligor or guarantor), but only after a comprehensive review of
project features. These features shall include the financial commitment of
the project's equity shareholders over the life of the proposed Ex-Im Bank
commitment, the experience and capacity of project participants, including
suppliers and offtakers; project cash flow coverage of foreign currency debt
service; and security structures, including hard currency external payments
arrangements. Ex-Im Bank will review only well-developed proposals, and
will require project sponsors to fund review of project proposals by
consultants retained by the Bank. Significant changes to proposed
structures may be required.
- - - POLITICAL-ONLY COVER. Ex-Im Bank's standard guarantee and insurance cover
is "comprehensive", under which Ex-Im Bank will pay claims resulting from
both commercial and political perils. Ex-Im Bank also offers a narrower
form of coverage, under "political-only" cover. Ex-Im Bank's guarantee
agreements and insurance policies describe in detail and or define the
specific risks which are subject to this form of coverage.
The following is intended as a summary: For long-term transactions, Ex-Im
Bank covers default arising from three "core" perils: transfer risk,
expropriation, and political violence. Transfer risk involves borrowers'
inability to acquire foreign exchange through legal foreign exchange
markets. Expropriation involves the government's confiscation of assets or
ownership, or arbitrary or discriminatory intervention in business
operations. Political violence involves war, revolution, insurrection, and
other such acts. Under medium-term insurance policies, Ex-Im Bank also
covers defaults arising from other defined risks.
Suppliers and/or lenders choosing political-only cover must be prepared to
assume broad commercial risks associated with the borrower's capacity.
Ex-Im Bank's political-only cover does not cover defaults arising from the
borrower's capacity to withstand domestic or international commercial market
disruptions, or currency devaluation or depreciation. If suppliers and/or
lenders are unable to assume these and other commercial risks, then Ex-Im
Bank comprehensive cover would be a more appropriate form of coverage.
Political-only cover is offered only for private buyers or borrowers, those
which are not subject to the administration of government authorities, and
for which it is possible to distinguish between commercial perils and
political- risk perils. Political-only cover is the only form of coverage
27
Page 11 of 11
available from Ex-Im Bank for borrowers which are effectively controlled by
suppliers and/or lenders participating in transactions. Political-only
cover is available only in those countries where Ex-Im Bank is "open for
cover" for private sector risk.
WHERE EX-IM BANK IS OFF COVER FOR COUNTRY CREDIT REASONS. Ex-Im Bank will not
consider routine transactions in countries and sectors (public or private)
where the country limitation schedule indicates that the Bank is off-cover
(where there is an X). However, three special categories of transactions may
be eligible for Ex-Im Bank support, under restrictive conditions, subject to
additional special review:
- - - BORROWERS ON INTERNATIONAL CAPITAL MARKETS. Individual borrowers (either
public sector or private sector) with a strong record of independent access
to private international capital markets, absent external (including
sovereign) guarantees. The fee grade assigned, and the extent of Ex-Im Bank
support, will take into account information related to the borrower's
capital market financings and ratings. For Ex-Im Bank to consider such
borrowers, information on the borrower's internationally-traded securities,
including their credit ratings, face values and coupons, recent market
values, and recent yields, must accompany the application.
- - - INSULATED PROJECT FINANCE STRUCTURES. Ex-Im Bank's approval in "off-cover"
markets/sectors of limited-recourse structures depends on the establishment
of structures which do not require the financial or operating commitments of
host government agencies and which are effectively insulated from government
involvement. Furthermore, these structures must involve the channeling of
project foreign exchange earnings through offshore payments and escrow
mechanisms. In some country environments, the only acceptable limited-
recourse structures may be "enclave" projects which are almost completely
insulated from the broader country environment. The fee grade assigned, and
the extent of Ex-Im Bank support, will take into account project structure
and other conditions.
- - - SECURED LONG-RANGE AIRCRAFT LEASES. Ex-Im Bank approval of asset-secured
long-range aircraft lease transactions requires that the airline's country
of registry become a signatory to international conventions protecting
aircraft property rights. Ex-Im Bank approval for aircraft transactions in
off-cover markets is more likely for privately-owned airlines with
established operating records. Depending on the nature of transaction
participants and structures, Ex-Im Bank may also require offshore payments
and escrow mechanisms, or may provide a reduced percentage of cover.
Aircraft transactions are subject to special fees and covenants.
Because these transactions are subject to individual special review, Ex-Im
Bank will not approve letters of interest (LIs) for them. It should be noted
that these exceptions do not apply in countries where Ex-Im Bank is legally
prohibited from operating.