EXHIBIT 10.6
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INVESTMENT NUMBER 10296
LOAN AGREEMENT
AMONG
PRICESMART INC.,
PSMT CARIBE INC.,
PSMT TRINIDAD/TOBAGO LIMITED,
AND
INTERNATIONAL FINANCE CORPORATION
DATED AS OF JANUARY 26, 2001
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TABLE OF CONTENTS
ARTICLE OR
SECTION ITEM PAGE NO.
ARTICLE I......................................................................1
DEFINITIONS AND INTERPRETATION.................................................1
Section 1.01. General Definitions..........................................1
Section 1.02. Financial Definitions.......................................10
Section 1.03. Financial Calculations......................................15
Section 1.04. Interpretation..............................................15
Section 1.05. Business Day Adjustment.....................................16
ARTICLE II....................................................................16
THE PROJECT, PROJECT COST AND FINANCIAL PLAN..................................16
Section 2.01. The Project.................................................16
Section 2.02. Project Cost and Financial Plan.............................16
ARTICLE III...................................................................17
THE A LOAN....................................................................17
Section 3.01. A Loan......................................................17
Section 3.02. Disbursement Procedure......................................17
Section 3.03. Interest....................................................18
Section 3.04. Default Rate Interest.......................................19
Section 3.05. Repayment...................................................20
Section 3.06. Prepayment..................................................20
Section 3.07. Fees........................................................21
Section 3.09. Currency and Place of Payments..............................22
Section 3.09. Allocation of Partial Payments..............................22
Section 3.10. Increased Costs.............................................22
Section 3.11. Unwinding Costs.............................................22
Section 3.12. Suspension or Cancellation by IFC...........................23
Section 3.13. Cancellation by Co-Borrowers................................23
Section 3.14. Taxes.......................................................24
Section 3.15. Expenses....................................................24
ARTICLE IV....................................................................26
REPRESENTATIONS AND WARRANTIES................................................26
Section 4.01. Representations and Warranties..............................26
Section 4.02. IFC Reliance................................................28
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ARTICLE OR
SECTION ITEM PAGE NO.
ARTICLE V.....................................................................29
CONDITIONS OF DISBURSEMENT....................................................29
Section 5.01. Conditions of First Disbursement............................29
Section 5.02. Conditions of All Disbursements.............................31
Section 5.03. Co-Borrowers' Certifications................................32
Section 5.04. Conditions for IFC Benefit..................................33
ARTICLE VI....................................................................33
PARTICULAR COVENANTS..........................................................33
Section 6.01. Affirmative Covenants.......................................33
Section 6.02. Negative Covenants..........................................35
Section 6.03. Reporting Requirements......................................41
Section 6.04. Insurance...................................................44
ARTICLE VII...................................................................46
EVENTS OF DEFAULT.............................................................46
Section 7.01. Acceleration after Default..................................46
Section 7.02. Events of Default...........................................46
Section 7.03. Bankruptcy..................................................49
ARTICLE VIII..................................................................49
MISCELLANEOUS.................................................................49
Section 8.01. Saving of Rights............................................49
Section 8.02. Notices.....................................................50
Section 8.03. English Language............................................51
Section 8.04. Term of Agreement...........................................51
Section 8.05. Applicable Law and Jurisdiction.............................51
Section 8.06. Disclosure of Information...................................53
Section 8.07. Successors and Assignees....................................54
Section 8.08. Joint and Several Liability.................................54
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Section 8.09. Amendments, Waivers and Consents............................54
Section 8.10. Counterparts................................................54
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ARTICLE OR
SECTION ITEM PAGE NO.
ANNEX A.......................................................................57
BORROWER/PROJECT AUTHORIZATIONS...............................................57
ANNEX B.......................................................................59
INSURANCE REQUIREMENTS........................................................59
ANNEX C.......................................................................60
ASSETS OF THE CO-BORROWERS
TO BE GRANTED AS SECURITY.....................................................60
ANNEX D.......................................................................62
LIST OF LIENS.................................................................62
SCHEDULE 1....................................................................64
FORM OF CERTIFICATE OF INCUMBENCY AND AUTHORITY...............................64
SCHEDULE 2....................................................................66
FORM OF REQUEST FOR DISBURSEMENT (A LOAN).....................................66
SCHEDULE 3....................................................................70
FORM OF LOAN DISBURSEMENT RECEIPT.............................................70
SCHEDULE 4....................................................................71
FORM OF SERVICE OF PROCESS LETTER.............................................71
SCHEDULE 5(A).................................................................73
FORM OF LOCAL COUNSEL'S LEGAL OPINION.........................................73
SCHEDULE 5(B-1)...............................................................79
FORM OF LOCAL COUNSEL'S LEGAL OPINION.........................................79
SCHEDULE 5(B-2)...............................................................85
FORM OF LOCAL COUNSEL'S LEGAL OPINION.........................................85
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ARTICLE OR
SECTION ITEM PAGE NO.
SCHEDULE 5(B-3)...............................................................91
FORM OF LOCAL COUNSEL'S LEGAL OPINION.........................................91
SCHEDULE 5(C).................................................................94
FORM OF SPECIAL COUNSEL'S LEGAL OPINION.......................................94
SCHEDULE 5(B).................................................................99
FORM OF PRICESMART SPECIAL COUNSEL'S LEGAL OPINION............................99
SCHEDULE 6...................................................................104
FORM OF LETTER TO BORROWER'S AUDITORS........................................104
SCHEDULE 7...................................................................106
FORM OF CO-BORROWER'S
CERTIFICATION ON DISTRIBUTION OF DIVIDENDS...................................106
SCHEDULE 8...................................................................108
FORM OF PROGRESS REPORT RE:
PROJECT IMPLEMENTATION.......................................................108
SCHEDULE 9...................................................................109
INFORMATION TO BE INCLUDED IN
ANNUAL REVIEW OF OPERATIONS..................................................109
SCHEDULE 10..................................................................110
FORM OF ANNUAL MONITORING REPORT.............................................110
LOAN AGREEMENT
AGREEMENT, dated as of January 26, 2001, among:
(1) PRICESMART INC., a corporation organized and existing under the
laws of the State of Delaware, U.S.A. ("PriceSmart");
(2) PSMT CARIBE, INC., a company organized and existing under the
laws of the Territory of the British Virgin Islands ("Caribe");
(3) PSMT TRINIDAD/TOBAGO LIMITED, a company organized and existing
under the laws of the Republic of Trinidad and Tobago ("PSMT
Trinidad" and PriceSmart, Caribe and PSMT Trinidad are
collectively referred to herein as the "Co-Borrowers"); and
(4) INTERNATIONAL FINANCE CORPORATION, an international organization
established by Articles of Agreement among its member countries
("IFC").
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01. GENERAL DEFINITIONS. Wherever used in this Agreement, the
following terms have the meanings opposite them:
"A Loan" the A Loan specified in Section 3.01 (THE A LOAN)
or, as the context requires, its principal amount
from time to time outstanding;
"Accounting Principles" United States Generally Accepted Accounting
Principles ("US-GAAP") promulgated by the
Financial and Accounting Standards Board, together
with its pronouncements thereon from time to time,
and applied on a consistent basis;
"Affiliate" any Person directly or indirectly controlling,
controlled by or under common control with, any
Co-Borrower (for purposes of this definition,
"control" means the power to direct the management
or policies of a Person, directly or indirectly,
whether through the ownership of shares or other
securities, by contract or otherwise, provided
that the direct or indirect ownership of fifteen
per cent
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(15%) or more of the voting share capital of a
Person is deemed to constitute control of that
Person, and "controlling" and "controlled" have
corresponding meanings);
"Assignment of
Insurance Proceeds" the agreement entitled Assignment Agreement of even
date herewith, among the Co-Borrowers and IFC,
whereby each of the Co-Borrowers assigns to IFC
all of its right, title and interest in and to all
insurance proceeds under insurance policies
insuring the IFC Security;
"Auditors" the firm that the Co-Borrowers appoint from time
to time as its auditors pursuant to Section
6.01(d) (AFFIRMATIVE COVENANTS);
"Authority" any national, supranational, regional or local
government or governmental, administrative,
fiscal, judicial, or government-owned body,
department, commission, authority, tribunal,
agency or entity, or central bank (or any Person,
whether or not government owned and howsoever
constituted or called, that exercises the
functions of a central bank);
"Authorization" any consent, registration, filing, agreement,
notarization, certificate, license, approval,
permit, authority or exemption from, by or with any
Authority, whether given by express action or
deemed given by failure to act within any specified
time period and all corporate, creditors' and
shareholders' approvals or consents;
"Authorized Representative" any natural person who is duly authorized by each
of the Co-Borrowers to act on each such
Co-Borrower's behalf for the purposes specified
in, and whose name and a specimen of whose
signature appear on, the Certificate of Incumbency
and Authority most recently delivered by the
Co-Borrowers to IFC;
"Business Day" a day when banks are open for business in New York,
New York or, solely for the purpose of determining
the Interest Rate other than pursuant to Section
3.03(d)(ii) (INTEREST), London, England ;
"C Loan" the C Loan, made by IFC to the Co-Borrowers
pursuant to the C Loan Agreement, in the principal
amount of ten million Dollars ($10,000,000);
"C Loan Agreement" the agreement of even date herewith, among the
Co-Borrowers and IFC, setting for the terms and
conditions of the C Loan;
"C Loan Disbursement" the full disbursement of the C Loan;
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"Capital Lease Obligation" of any Person as of the date of determination, the
obligations of such Person to pay rent and other
amounts under any lease of (or other arrangement
conveying the right to use) real or personal
property, or a combination thereof, which
obligations are required to be classified and
accounted for as capital leases on a balance sheet
of such person under Accounting Principles;
"Certificate of Incumbency
and Authority" the certificate provided to IFC by each of the
Co-Borrowers in the form of Schedule 1;
"Charter" with respect to each Co-Borrower, its memorandum
and articles of association or other constitutive
document;
"Country" with respect to: PriceSmart, the United States of
America; with respect to Caribe, the British Virgin
Islands; with respect to PSMT Trinidad, Trinidad
and Tobago, or, as the context may require, all of
the Countries previously mentioned;
"Derivative Transaction" any swap agreement, cap agreement, collar
agreement, futures contract, forward contract or
similar arrangement with respect to interest
rates, currencies or commoditY prices;
"Disbursement" any disbursement of the A Loan;
"Dollars" and "$" the lawful currency of the United States of
America;
"Environmental, Health
and Safety Guidelines" the IFC General Health and Safety Guidelines, dated
July 1998 and the World Bank General Environmental
Guidelines, dated July 1998, a copy of which has
been delivered to, and receipt of which has been
acknowledged by, the Co-Borrowers by letter dated
November 1, 2000 and is incorporated herein by
reference;
"Environmental
and Social Policies" the IFC Operational Policy on Environmental
Assessment (OP 4.01), dated October 1998 and the
IFC Policy Statement on Forced Labor and Harmful
Child Labor, dated March 1998, copies of which
have been delivered to, and receipt of which has
been acknowledged by, the Co-Borrowers by letter
dated November 1, 2000 and is incorporated herein
by reference;
"Escrow Account" the Dollar-denominated bank account to be opened
pursuant to the Escrow Account Agreement;
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"Escrow Account
Agreement" the agreement entitled "Escrow Account Agreement"
to be entered into among the Co-Borrowers, The Bank
of New York and IFC;
"Event of Default" any one of the events specified in Section 7.02
(EVENTS OF DEFAULT);
"Financial Plan" the proposed sources of financing for the Project
set out in Section 2.02 (b) (PROJECT COST AND
FINANCIAL PLAN);
"Financial Year" the accounting year of the Co-Borrowers commencing
each year on September 1 and ending on the
following August 31, or such other period as the
Co-Borrowers, with IFC's consent, from time to
time designate as their accounting year;
"IFC Security" the security, with a book value (a) on the date of
the disbursement of the C Loan, of no less than
one and one-half times the amount of the C Loan
and (b) on the date of the first Disbursement, of
no less than one and one-half (1.5) times the
aggregate amount of the A Loan and the C Loan,
created by or pursuant to the Security Documents
to secure all amounts owing by the Co-Borrowers to
IFC under this Agreement;
"Increased Costs" the net incremental costs of, or reduction in
return to, IFC in connection with the making or
maintaining of the A Loan and the C Loan that
result from any change in any applicable law or
regulation or directive (whether or not having
force of law) or in its interpretation or
application by any Authority charged with its
administration that, after the date of this
Agreement, imposes on IFC any condition regarding
the making or maintaining of the A Loan and the C
Loan;
"Increased Costs
Certificate" a certificate provided from time to time by IFC
certifying the amount of, and circumstances giving
rise to, the Increased Costs;
"Interest Determination
Date" except as otherwise provided in Section 3.03(d)(ii)
(INTEREST), the second Business Day before the
beginning of each Interest Period;
"Interest Payment Date" March 15 or September 15 in any year;
"Interest Period" each period of six (6) months, in each case
beginning on an Interest Payment Date and ending
on the day immediately before the next following
Interest Payment Date, except in the case of the
first
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period applicable to each Disbursement when it
means the period beginning on the date on which
that Disbursement is made and ending on the day
immediately before the next following Interest
Payment Date;
"Interest Rate" for any Interest Period, the rate at which interest
is payable on the A Loan during that Interest
Period, determined in accordance with Section 3.03
(INTEREST);
"Letter of Information" the letter of information, dated October 20, 2000,
from the Co-Borrowers to IFC providing a detailed
description of the Co-Borrowers and their
respective Subsidiaries, the Project, the
Financial Plan and the organization, status,
operations and liabilities of the Co-Borrowers,
and containing representations and warranties of
all material facts concerning the Project, in form
and substance acceptable to IFC;
"LIBOR" the British Bankers' Association ("BBA") interbank
offered rates for deposits in the Dollars which
appear on the relevant page of the Telerate
Service (currently page 3750) or, if not
available, on the relevant pages of any other
service (such as Reuters Service or Bloomberg
Financial Markets Service) that displays such BBA
rates; provided that if BBA for any reason ceases
(whether permanently or temporarily) to publish
interbank offered rates for deposits in the
Dollars, "LIBOR" shall mean the rate determined
pursuant to Section 3.03(d) (INTEREST);
"Lien" any mortgage, pledge, charge, assignment,
hypothecation, security interest, title retention,
preferential right, trust arrangement, right of
set-off, counterclaim or banker's lien, privilege
or priority of any kind having the effect of
security, any designation of loss payees or
beneficiaries or any similar arrangement under or
with respect to any insurance policy or any
preference of one creditor over another arising by
operation of law;
"Life and Fire Safety
Guidelines" IFC's Life and Fire Safety Guidelines, a copy of
which has been delivered to the Co-Borrowers by fax
letter dated January 22, 2001, and is incorporated
herein by reference;
"Loans" collectively the A Loan and the C Loan or, as the
context requires, the principal amount from time to
time outstanding under the A Loan and the C Loan;
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"Material Adverse Effect" a material adverse effect on:
(i) the Co-Borrowers, their assets or properties
taken as a whole;
(ii) the Co-Borrowers' business prospects or
financial condition taken as a whole;
(iii) the implementation of the Project, the
Financial Plan or the carrying on of the
Co-Borrowers' business or operations taken
as a whole; or
(iv) the ability of the Co-Borrowers (taken as a
whole) to comply with their obligations
under this Agreement or any other
Transaction Document;
"Official" any officer of a political party or candidate for
political office in the Country or any officer or
employee (i) of the Government (including any
legislative, judicial, executive or administrative
department, agency or instrumentality thereof) or
(ii) of a public international organization;
"OPIC" the Overseas Private Investment Corporation, a
corporation organized pursuant to the Foreign
Assistance Act of 1969 of the United States of
America;
"OPIC Loan" the loan, in the principal amount of ten million
Dollars ($10,000,000) to be made by OPIC to one or
more of the Co-Borrowers, evidenced by the OPIC
Loan Agreement or, as the context requires, its
principal amount from time to time outstanding;
"OPIC Loan Agreement" the loan agreement to be entered into between one
or more of the Co-Borrowers and OPIC;
"Person" any natural person, corporation, company,
partnership, firm, voluntary association, joint
venture, trust, unincorporated organization,
Authority or any other entity whether acting in an
individual, fiduciary or other capacity;
"Potential Event of Default" any event or circumstance which would, with notice,
lapse of time, the making of a determination or any
combination thereof, become an Event of Default;
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"PriceSmart
El Salvador" PriceSmart El Salvador, S.A. de C.V., a SOCIEDAD
ANONIMA organized and existing under the laws of El
Salvador;
"PriceSmart
Guatemala" PriceSmart (Guatemala), S.A., a SOCIEDAD ANONIMA
organized and existing under the laws of Guatemala;
"PriceSmart
Pledge Agreements" the pledge agreements, each of even date herewith
and entered into between PriceSmart and IFC,
whereby PriceSmart pledges all of the shares it
owns in each of PSMT Caribe, PSMT Trinidad and
PSMT Barbados, respectively, as security for the
Loans;
"Prohibited Payments" any offer, gift, payment, promise to pay or
authorization of the payment of any money or
anything of value, directly or indirectly, to or
for the use or benefit of any Official (including
to or for the use or benefit of any other Person
if any of the Co-Borrowers knows, or has
reasonable grounds for believing, that the other
Person would use such offer, gift, payment,
promise or authorization of payment for the
benefit of any such Official), for the purpose of
influencing any act or decision or omission of any
Official in order to obtain, retain or direct
business to, or to secure any improper benefit or
advantage for, any of the Co-Borrowers, any of
their Affiliates or any other Person; provided
that any such offer, gift, payment, promise or
authorization of payment shall not be considered a
Prohibited Payment if, in IFC's reasonable
opinion, it (i) is lawful under applicable written
laws and regulations or (ii) is made for the
purpose of expediting or securing the performance
of a routine governmental action (as such term is
construed under applicable law);
"Project" the project described in Section 2.01 (THE
PROJECT);
"Project Financial
Completion Date" the last day of the month in which the
following requirements have been fully satisfied:
(i) in respect of the most recently completed
four consecutive financial quarters after
December 31, 2005, the Consolidated Total
Debt to Equity Ratio is not in excess of
50:50, the Consolidated Current Ratio is not
less than 1.2 and the Consolidated Long-term
Debt Service Coverage Ratio is not less than
1.3.
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(ii) all Authorizations required for the normal
operation of the Project and the performance
by the Co-Borrowers of their respective
obligations under the Transaction Documents
have been obtained and remain in full force
and effect;
(iii) no Event of Default or Potential Event of
Default has occurred and is continuing;
(iv) the Co-Borrowers have delivered to IFC a
notice, together with supporting data,
signed by an Authorized Representative and
verified by a party acceptable to IFC,
certifying that the requirements set out in
paragraphs (i) through (vi) above have been
fulfilled; and
(v) IFC has notified the Co-Borrowers that the
Co-Borrower's notice is acceptable to IFC;
"PSMT Aruba" Islands Foods and Distributors N.V., a corporation
organized and existing under the laws of Aruba;
"PSMT Barbados" PSMT (Barbados) Inc., a company organized and
existing under the laws of Barbados;
"PSMT Caribe Pledge
Agreements" the pledge agreements, each of even date herewith
and entered into between PSMT Caribe and IFC,
whereby PSMT Caribe pledges all of the shares it
owns in PSMT Honduras, PriceSmart El Salvador, PSMT
Costa Rica, and PSMT Dominicana, respectively, as
security for the Loans;
"PSMT Costa Rica" Prismar de Costa Rica, S.A., a SOCIEDAD ANONIMA
organized and existing under the laws of Costa
Rica;
"PSMT Dominicana" PriceSmart Dominicana, S.A., a SOCIEDAD ANONIMA
organized and existing under the laws of the
Dominican Republic;
"PSMT Honduras" PriceSmart Honduras, S.A., a SOCIEDAD ANONIMA
organized and existing under the laws of Honduras;
"PSMT Panama" PriceCostco de Panama, S.A., a SOCIEDAD ANONIMA
organized and existing under the laws of Panama;
"PSMT Philippines" PSMT Philippines, Inc., a corporation organized and
existing under the laws of the Republic of the
Philippines;
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"Security Documents" the documents, each acceptable to IFC, providing
for the IFC Security consisting of:
(i) a first ranking mortgage over the immovable
assets and equipment of the Co-Borrowers
listed in Annex C;
(ii) a first ranking pledge over the movable
assets of the Co-Borrowers listed in Annex
C;
(iii) a first ranking security interest over the
Escrow Account;
(iv) the Assignment of Insurance Proceeds;
(v) the PriceSmart Pledge Agreements; and
(vi) the PSMT Caribe Pledge Agreements;
"Share Retention
Agreement" the agreement entitled "Share Retention Agreement"
dated the date of this Agreement among PriceSmart,
PSMT Caribe, PSMT Trinidad, PSMT Barbados, PSMT
Philippines, PSMT Aruba, PriceSmart Guatemala, PSMT
Honduras, PriceSmart El Salvador, PSMT Costa Rica,
PSMT Dominicana, PSMT Panama and IFC;
"Spread" four per cent (4%) per annum;
"Subsidiary" with respect to any Person, any entity:
(i) over 50% of whose capital is owned, directly
or indirectly, by that Person;
(ii) for which that Person may nominate or
appoint a majority of the members of the
board of directors or such other body
performing similar functions; or
(iii) which is otherwise effectively controlled by
that Person;
"Taxes" any present or future taxes, withholding
obligations, duties and other charges of whatever
nature levied by any Authority;
"Transaction Documents" (i) this Agreement;
(ii) Escrow Account Agreement;
(iii) the Security Documents;
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(iv) the Share Retention Agreement; and
(v) the C Loan Agreement;
"World Bank" the International Bank for Reconstruction and
Development, an international organization
established by Articles of Agreement among its
member countries.
Section 1.02. FINANCIAL DEFINITIONS. (a) Wherever used in this
Agreement, unless the context otherwise requires, the following terms have the
meanings opposite them:
"Back-to-Back Loans" loans or other advances to any Co-Borrower or its
Subsidiaries that are collateralized by cash or
cash-equivalent deposits of any Co-Borrower or
Subsidiary of a Co-Borrower;
"Cash Generation" for any period, the aggregate of:
(i) Consolidated Net Income after deduction of
taxes, workers and employees' participation
in profits, and provisions for losses during
the relevant period; plus
(ii) depreciation and amortization for the
relevant period; plus/minus
(iii) net working capital applications; minus
(iv) any foreign exchange gain or loss or any
other non-cash items included in such net
income after tax; plus
(v) any deferred taxes or other non-cash changes
or provisions charged against Net Income;
plus
(vi) to the extent that the PriceSmart charges
all pre-opening expenses in the year such
expenses are incurred, expenses related to
the pre-opening of particular deep-discount
membership warehouses, owned and operated by
a Co-Borrower;
"Consolidated" or
"Consolidated Basis" (with respect to any financial statements to be
provided, or any financial calculation to be made,
under or for the purposes of this Agreement and any
other Transaction Document) the method referred to
in Section 1.03(d) (FINANCIAL CALCULATIONS); and
the
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entities whose accounts are to be consolidated with
the accounts of PriceSmart include all of its
Subsidiaries;
"Current Assets" as of the relevant date of calculation,
Consolidated cash, marketable securities, trade
and other receivables realizable within one year,
inventories and prepaid expenses which are to be
charged to income within one year, but excluding
funds from any disbursement of the Loans and other
Project loans temporarily on hand pending
application to the Project;
"Current Liabilities" as of the relevant date of calculation,
Consolidated liabilities falling due on demand or
within one year (including the portion of
Long-term Debt falling due within one year), but
excluding liabilities for the Project to the
extent they are to be paid off with the proceeds
of the Loans and any other Project loans that were
excluded from the calculation of Current Assets;
"Current Ratio" the result obtained by dividing Current Assets by
Current Liabilities;
"Indebtedness for
Borrowed Money " all obligations (excluding Back-to-Back Loans) of
the Co-Borrowers to repay money (other than that
constituting trade liabilities incurred in the
ordinary course of business and payable in
accordance with customary practices, operating
lease obligations and other items commonly
considered current payables under Accounting
Principles) including, without limitation, with
respect to:
(i) borrowed money;
(ii) the outstanding principal amount of any
bonds, debentures, notes, loan stock,
commercial paper, acceptance credits, bills
or promissory notes drawn, accepted,
endorsed or issued by the Co-Borrowers;
(iii) any credit to a Co-Borrower from a supplier
of goods or services under any installment
purchase or other similar arrangement with
respect to goods or services (except trade
accounts that are payable in the ordinary
course of business and included in Current
Liabilities);
(iv) non-contingent obligations of the
Co-Borrowers to reimburse any other
Person with respect to amounts paid by that\
Person under a letter of credit or similar
instrument
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(excluding any letter of credit or similar
instrument issued for the benefit of the
Co-Borrowers with respect to trade accounts
that are payable in the ordinary course of
business and included in Current
Liabilities);
(v) amounts raised under any other transaction
having the financial effect of a borrowing
and which would be classified as a borrowing
(and not as an off-balance sheet financing)
under the Accounting Principles including,
without limitation, under leases or similar
arrangements entered into primarily as a
means of financing the acquisition of the
asset leased;
(vi) the amount of the Co-Borrowers' obligations
pursuant to Derivative Transactions which
consist of swap, collar and cap agreements
entered into in connection with other Total
Debt of the Co-Borrowers, provided that for
the avoidance of double counting and for so
long as any such swap, collar or cap
agreement is in effect, that Total Debt will
be included in Indebtedness for Borrowed
Money pursuant to the terms of the relevant
Derivative Transaction and not the terms of
the agreement providing for that Total Debt
when it was incurred; and
(vii) any premium payable on a mandatory
redemption or replacement of any of the
foregoing obligations;
"Interest Expense" as of the relevant date of calculation, all
interest (excluding interest on Back-to-Back
Loans) and charges paid or payable by the
Co-Borrowers, on the aggregate Indebtedness for
Borrowed Money during the period immediately
preceding the date of calculation;
"Long-term Debt" that part of the Consolidated Indebtedness
for Borrowed Money (excluding Back-to-Back Loans)
the final maturity of which, by its terms or the
terms of any agreement relating to it, falls due
more than one year after the date of its
incurrence;
"Long-term Debt Service
Coverage Ratio" the ratio obtained by dividing:
(i) the sum of the Cash Generation for the
Financial Year preceding the date of
calculation;
by
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(ii) the Long-term Debt Service Payments
(principal and interest) due for payment of
the Financial Year having the highest
scheduled total annual Consolidated
Long-term Debt principal payments by the
Co-Borrowers during the life of the A Loan;
"Long-term Debt
Service Payments" as of the relevant date for calculation, for the
Co-Borrowers, the aggregate of:
(i) the amount of the payments of principal of
all Long-term Debt (in accordance with the
respective terms thereof) during the period
for which the calculation is being made
(excluding the C Loan bullet principal
payment); and
(ii) the Interest Expense for such period;
"Long-term Debt
to Equity Ratio" the result obtained by dividing Long-term Debt by
Shareholders' Equity plus Long-term Debt;
"Net Fixed Assets" the aggregate amount of assets which at any time
would be reflected as Net Fixed Asssets of the
Co-Borrowers (taken as a whole) on a Consolidated
balance sheet of the Co-Borrowers prepared in
accordance with Accounting Principles;
"Net Income" as of the relevant date for calculation, the
difference between revenues generated through the
sale of goods delivered and services rendered, and
the costs incurred in the process of production and
delivery of those goods and services, during any
Financial Year. (At IFC's sole discretion,
extraordinary items, like goodwill and others, will
be excluded from the above calculation, and
reasonable expense provisioning for doubtful
collection of receivables and inventory
obsolescence will be included in the above
calculation.);
"Non-Cash Items" for any period, the net aggregate amount (which
may be a positive or negative number) of all
non-cash expenses and non-cash credits which have
been subtracted or, as the case may be, added in
calculating net income during that period,
including, without limitation, depreciation,
amortization, deferred taxes, provisions for
severance pay of staff and workers, and credits
resulting from revaluation of the assets' book
value;
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"Shareholders' Equity" the aggregate (as of the relevant date of
calculation) of:
(i) the amount paid up or credited as paid up on
the Consolidated share capital of all of the
Co-Borrowers; and
(ii) the amount standing to the credit of the
reserves of all of the Co-Borrowers
(including, without limitation, any share
premium account, capital redemption reserve
funds and any credit balance on the
accumulated profit and loss account);
after deducting from that aggregate (A) any debit
balance on the profit and loss account or
impairment of the issued share capital of all of
the Co-Borrowers (except to the extent that
deduction with respect to that debit balance or
impairment has already been made), (B) amounts set
aside for dividends or taxation (including deferred
taxation), and (C) amounts attributable to
capitalized items such as goodwill, trademarks,
deferred charges, licenses, patents and other
intangible assets;
"Short-term Debt" all Consolidated Indebtedness for Borrowed Money
(as of the relevant date of calculation) other
than Consolidated Long-term Debt;
"Total Debt" the aggregate of all obligations (whether actual
or contingent, but excluding Back-to-Back Loans)
of the Co-Borrowers to pay or repay money (other
than that constituting trade liabilities incurred
in the ordinary course of business and payable in
accordance with customary practices, operating
lease obligations and other items commonly
considered current payables under Accounting
Principles) including, without limitation:
(i) all Indebtedness for Borrowed Money;
(ii) the aggregate amount then outstanding of all
liabilities of any party to the extent any
of the Co-Borrowers guarantees them or
otherwise directly or indirectly obligates
itself to pay them;
(iii) all liabilities of the Co-Borrowers (actual
or contingent) under any conditional sale or
a transfer with recourse or obligation to
repurchase, including, without limitation,
by way of discount or factoring of book
debts or receivables;
(iv) all liabilities of the Co-Borrowers (actual
or contingent) under their respective
Charters, any resolution of their
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respective shareholders, or any agreement or
other document binding on any Co-Borrower to
redeem any of its shares; and
(v) all Capital Lease Obligations of the
Co-Borrowers; and
"Total Debt to
Equity Ratio" means the result obtained by dividing Total
Debt by Shareholders' Equity plus Total
Debt.
Section 1.03. FINANCIAL CALCULATIONS. (a) All financial calculations to
be made under, or for the purposes of, this Agreement and any other Transaction
Document shall be determined in accordance with the Accounting Principles and,
except as otherwise required to conform to any provision of this Agreement,
shall be calculated from the then most recently issued quarterly financial
statements which the Co-Borrowers are obligated to furnish to IFC under Section
6.03(a) (REPORTING REQUIREMENTS).
(b) Where quarterly financial statements are used for the purpose of
making certain financial calculations and those statements are with respect to
the last quarter of a Financial Year then, at IFC's option, those calculations
may instead be made from the audited financial statements for the relevant
Financial Year.
(c) If any material adverse change in the financial condition of any of
the Co-Borrowers has occurred after the end of the period covered by the
financial statements used to make the relevant financial calculations, that
material adverse change shall also be taken into account in calculating the
relevant figures.
(d) If a financial calculation is to be made under or for the purposes
of this Agreement or any other Transaction Document on a Consolidated Basis,
that calculation shall be made by reference to the sum of all amounts of similar
nature reported in the relevant financial statements of each of the entities
whose accounts are to be consolidated with the accounts of the Co-Borrowers plus
or minus the consolidation adjustments customarily applied to avoid double
counting of transactions among any of those entities, including the
Co-Borrowers.
Section 1.04. INTERPRETATION. In this Agreement, unless the context
otherwise requires:
(a) headings are for convenience only and do not affect the
interpretation of this Agreement;
(b) words importing the singular include the plural and vice versa;
(c) a reference to an Annex, Article, party, Schedule or Section is a
reference to that Article or Section of, or that Annex, party or Schedule to,
this Agreement;
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(d) a reference to a document includes an amendment or supplement to,
or replacement or novation of, that document but disregarding any amendment,
supplement, replacement or novation made in breach of this Agreement; and
(e) a reference to a party to any document includes that party's
successors and permitted assigns.
Section 1.05. BUSINESS DAY ADJUSTMENT. When the day on or by which a
payment is due to be made is not a Business Day, that payment shall be made on
or by the next succeeding Business Day unless, in the case of payments of
principal or interest, that next succeeding Business Day falls in a different
calendar month, in which case that payment shall be made on the immediately
preceding Business Day. Interest, fees and charges (if any) shall continue to
accrue for the period from the due date that is not a Business Day to that next
succeeding Business Day.
ARTICLE II
THE PROJECT, PROJECT COST AND FINANCIAL PLAN
Section 2.01. THE PROJECT. The project to be financed consists of the
construction, equipping and placing into operation and the provision of working
capital for thirteen (13) deep discount membership-shopping warehouses to be
located in Central America and the Caribbean, as further described in the Letter
of Information provided by the Co-Borrowers to IFC.
Section 2.02. PROJECT COST AND FINANCIAL PLAN.* (a) The total estimated
cost of the Project, including an increase of not less than the equivalent of
$13,200,000 for working capital, is the equivalent of $127,000,000, as follows:
US$
PROJECT COST MILLIONS %
------------------------------------------------ ----------- ----------
(or
equivalent)
Land 24.5 19.3
Construction 49.2 38.7
Furniture, fixtures & equipment 29.7 23.3
Pre-opening 10.5 8.3
Working capital 13.2 10.4
---- ----
TOTAL PROJECT COST 127.0 100.0
------------------------------------------------ ----------- ----------
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(b) The proposed sources of financing for the Project are as follows:
US$
Financial Plan Million %
----------------------------------- ------------- -----------
(or
equivalent)
LONG TERM LOANS
IFC A Loan $22.0 17.2%
IFC C Loan 10.0 7.9%
OPIC Loan 10.0 7.9%
Other Long-term Debt (existing) 21.5 17.0%
EQUITY
Sponsor's Equity 63.6 50.0%
TOTAL FINANCING $127.1 100.0%
----------------------------------- ------------- -----------
ARTICLE III
THE A LOAN
Section 3.01. A LOAN. Subject to the provisions of this Agreement, IFC
agrees to lend, and the Co-Borrowers agree to borrow jointly and severally, the
A Loan being twenty-two million Dollars ($22,000,000).
Section 3.02. DISBURSEMENT PROCEDURE. (a) The Co-Borrowers may request
Disbursements by delivering to IFC, at least ten (10) Business Days prior to the
proposed date of Disbursement, a Disbursement request substantially in the form
of Schedule 2 and a receipt substantially in the form of Schedule 3.
(b) Each Disbursement shall be made by IFC at a bank in New York, New
York for further credit to the Co-Borrowers' respective accounts at a bank in
the respective Countries, or any other place acceptable to IFC, all as specified
by the Co-Borrowers in the relevant Disbursement request; provided, however,
that the first disbursement shall be made, in whole or
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in part, by IFC to the credit of the Co-Borrowers' existing creditors, as the
Co-Borrowers shall specify on the Disbursement request.
(c) Each Disbursement (other than the last one) shall be made in an
amount of not less than three million Dollars ($3,000,000).
(d) Notwithstanding any provision in this Agreement, each of PSMT
Caribe and PSMT Trinidad irrevocably appoints and designates PriceSmart as its
agent for the purpose of receiving any notice or request and further authorizes
PriceSmart to make the request provided in Section 3.02(b) or any other request
permitted to be made by the Co-Borrowers under this Agreement, to receive all
disbursements to be made hereunder, to sign the receipts provided for in Section
3.02(b), and to take any other action required or permitted to be taken on its
behalf under this Agreement.
Section 3.03. INTEREST. Subject to the provisions of Section 3.05
(DEFAULT RATE INTEREST), the Co-Borrowers shall pay interest on the A Loan in
accordance with this Section 3.03:
(a) During each Interest Period, the A Loan (or, with respect to the
first Interest Period for each Disbursement, the amount of that Disbursement)
shall bear interest at the applicable Interest Rate for that Interest Period.
(b) Interest on the A Loan shall accrue from day to day, be prorated on
the basis of a 360-day year for the actual number of days in the relevant
Interest Period and be payable in arrears on the Interest Payment Date
immediately following the end of that Interest Period; provided that with
respect to any Disbursement made less than fifteen (15) days before an Interest
Payment Date, interest on that Disbursement shall be payable commencing on the
second Interest Payment Date following the date of that Disbursement.
(c) The Interest Rate for any Interest Period shall be the rate which
is the sum of:
(i) the Spread; and
(ii) LIBOR on the Interest Determination Date for that Interest
Period for six (6) months (or, in the case of the first
Interest Period for any Disbursement, for one (1) month,
two (2) months, three (3) months or six (6) months,
whichever period is closest to the duration of the
relevant Interest Period (or, if two periods are equally
close, the longer one)) rounded upward to the nearest
three decimal places.
(d) If, for any Interest Period IFC cannot determine LIBOR by reference
to the Telerate Service or any other service that displays BBA rates, IFC shall
notify the Co-Borrowers and shall instead determine LIBOR:
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(i) on the second Business Day before the beginning of the
relevant Interest Period by calculating the artimetic mean
(rounded upward to the nearest three decimal places) of
the offered rates advised to IFC on or around 11:00 a.m.,
London time, for deposits in Dollars and otherwise in
accordance with Section 3.03(c)(ii), by any four (4) major
banks active in Dollars in the London interbank market,
selected by IFC; provided that if less than four
quotations are received, IFC may rely on the quotations so
received if not less than two (2); or
(ii) if less than two (2) quotations are received from the
banks in London in accordance with subsection (i) above,
on the first day of the relevant Interest Period, by
calculating the arithmetic mean (rounded upward to the
nearest three decimal places) of the offered rates advised
to IFC on or around 11:00 a.m. New York time, for loans in
Dollars and otherwise in accordance with Section
3.03(c)(ii), by a major bank or banks in New York, New
York, selected by IFC.
(e) On each Interest Determination Date for any Interest Period, IFC
shall determine the Interest Rate applicable to that Interest Period and
promptly notify the Co-Borrowers of that rate.
(f) The determination by IFC, from time to time, of the Interest Rate
shall be final and conclusive and bind the Co-Borrowers (unless the Co-Borrowers
show to IFC's satisfaction that the determination involves manifest error).
Section 3.04. DEFAULT RATE INTEREST. (a) Without limiting the remedies
available to IFC under this Agreement or otherwise (and to the maximum extent
permitted by applicable law), if the Co-Borrowers fail to make any payment of
principal or interest (including interest payable pursuant to this Section) or
any other payment provided for in Section 3.07 (FEES) when due as specified in
this Agreement (whether at stated maturity or upon acceleration), the
Co-Borrowers shall pay interest on the amount of that payment due and unpaid at
the rate which shall be the sum of two per cent (2%) per annum and the Interest
Rate in effect from time to time;
(b) Interest at the rate referred to in Section 3.04(a) shall accrue
from the date on which payment of the relevant overdue amount became due until
the date of actual payment of that amount (as well after as before judgment),
and shall be payable on demand or, if not demanded, on each Interest Payment
Date falling after any such overdue amount became due.
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Section 3.05. REPAYMENT. (a) The Co-Borrowers shall repay the A Loan on
the following dates and in the following amounts:
DATE PAYMENT DUE PRINCIPAL AMOUNT DUE
March 15, 2003 $ 1,375,000
September 15, 2003 1,375,000
March 15, 2004 1,375,000
September 15, 2004 1,375,000
March 15, 2005 1,375,000
September 15, 2005 1,375,000
March 15, 2006 1,375,000
September 15, 2006 1,375,000
March 15, 2007 1,375,000
September 15, 2007 1,375,000
March 15, 2008 1,375,000
September 15, 2008 1,375,000
March 15, 2009 1,375,000
September 15, 2009 1,375,000
March 15, 2010 1,375,000
September 15, 2010 1,375,000
-----------
$22,000,000
===========
(b) The dates for repayment of principal of the A Loan are intended to
coincide with the Interest Payment Dates.
(c) Upon each Disbursement, the amount disbursed shall be allocated for
repayment on each of the respective dates for repayment of principal set out in
the table in Section 3.05(a) in amounts which are PRO RATA to the amounts of the
respective installments shown opposite those dates in that table (with IFC
adjusting those allocations as necessary so as to achieve whole numbers in each
case).
Section 3.06. PREPAYMENT. Subject to Section 6.04(c),
(a) the Co-Borrowers may prepay on any Interest Payment Date all or any
part of the A Loan, on not less than forty-five (45) days' prior notice to IFC,
but only if:
(i) the Co-Borrowers simultaneously pay all accrued interest
and Increased Costs (if any) on the amount of the A Loan
to be prepaid, together with the prepayment premium
specified in Section 3.06(b) and all other amounts then
due and payable under this Agreement, including the amount
payable under Section 3.11 (UNWINDING COSTS), if the
prepayment is not made on an Interest Payment Date;
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(ii) the Co-Borrowers simultaneously prepay a PRO RATA portion
of the OPIC Loan;
(iii) for a partial prepayment, that prepayment is in an amount
not less than three million Dollars ($3,000,000); and
(iv) if requested by IFC, the Co-Borrowers deliver to IFC,
prior to the date of prepayment, evidence satisfactory to
IFC that all necessary Authorizations with respect to the
prepayment have been obtained.
(b) On the date of any prepayment of the A Loan in accordance with
Section 3.06 (a), the Co-Borrowers shall pay a prepayment premium consisting of
an amount in Dollars equal to: at the Co-Borrowers' option, either: (i) one and
one-half per cent (1 1/2%) of the prepaid amount times the number of years from
the prepayment date to the scheduled final maturity date of the A Loan; or (ii)
IFC's redeployment cost pursuant to Section 3.11.
The determination by IFC of the prepayment premium shall be final and
conclusive and bind the Co-Borrowers (unless the Co-Borrowers show, to the
satisfaction of IFC, that such determination involved manifest error).
(c) Amounts of principal prepaid under this Section shall be applied by
IFC to all the respective outstanding installments of principal of the A Loan on
a PRO-RATA basis.
(d) Upon delivery of a notice in accordance with Section 3.06(a), the
Co-Borrowers shall make the prepayment in accordance with the terms of that
notice.
(e) Any principal amount of the A Loan prepaid under this Agreement may
not be re-borrowed.
Section 3.07. FEES. (a) The Co-Borrowers shall pay to IFC a commitment
fee at the rate of one-half of one per cent (1/2%) per annum on that part of the
A Loan which from time to time has not been disbursed or cancelled. The
commitment fee shall:
(i) begin to accrue on the date of this Agreement;
(ii) be PRO RATED on the basis of a 360-day year for the actual
number of days elapsed; and
(iii) be payable semi-annually, in arrears, on the Interest
Payment Dates in each year, the first such payment to be
due on March 15, 2001.
(b) The Co-Borrowers shall also pay to IFC a front-end fee of two
hundred twenty thousand Dollars ($220,000), to be paid upon the earlier of (x)
the date which is thirty (30) days after the date of this Agreement and (y) the
date immediately preceding the date of the first Disbursement.
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Section 3.08. CURRENCY AND PLACE OF PAYMENTS. (a) The Co-Borrowers shall
make all payments of principal, interest, fees, and any other amount due to IFC
under this Agreement in Dollars, in same day funds, to Citibank, N.A., 111 Wall
Street, New York, New York, U.S.A., ABA#021000089, for credit to IFC's account
number 36085579, or at such other bank or account in New York as IFC from time
to time designates. Payments must be received in IFC's designated account no
later than 1:00 p.m. New York time.
(b) The tender or payment of any amount payable under this Agreement
(whether or not by recovery under a judgment) in any currency other than Dollars
shall not novate, discharge or satisfy the obligation of the Co-Borrowers to pay
in Dollars all amounts payable under this Agreement except to the extent that
(and as of the date when) IFC actually receives funds in Dollars in the account
specified in, or pursuant to, Section 3.08(a).
(c) The Co-Borrowers shall indemnify IFC against any losses resulting
from a payment being received or an order or judgment being given under this
Agreement in any currency other than Dollars or any place other than the account
specified in, or pursuant to, Section 3.08(a). The Co-Borrowers shall, as a
separate obligation, pay such additional amount as is necessary to enable IFC to
receive, after conversion to Dollars at a market rate and transfer to that
account, the full amount due to IFC under this Agreement in Dollars and in the
account specified in, or pursuant to, Section 3.08(a).
(d) Notwithstanding the provisions of Section 3.08(a) and Section
3.08(b), IFC may require the Co-Borrowers to pay (or reimburse IFC) for any
Taxes, fees, costs, expenses and other amounts payable under Section 3.14(a)
(TAXES) and Section 3.15 (EXPENSES) in the currency in which they are payable,
if other than Dollars.
Section 3.09. ALLOCATION OF PARTIAL PAYMENTS. If at any time IFC
receives less than the full amount then due and payable to it under this
Agreement, IFC may allocate and apply the amount received in any way or manner
and for such purpose or purposes under this Agreement as IFC in its sole
discretion determines, notwithstanding any instruction that the Co-Borrowers may
give to the contrary.
Section 3.10. INCREASED COSTS. On each Interest Payment Date, the
Co-Borrowers shall pay, in addition to interest, the amount which IFC from time
to time notifies the Co-Borrowers in an Increased Costs Certificate as being the
aggregate Increased Costs of IFC accrued and unpaid prior to that Interest
Payment Date.
Section 3.11. UNWINDING COSTS. (a) If IFC incurs any cost, expense or
loss as a result of the Co-Borrowers:
(i) failing to borrow in accordance with a request for
Disbursement made pursuant to Section 3.02 (DISBURSEMENT
PROCEDURE), or to prepay in accordance with a notice of
prepayment; or
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(ii) prepaying all or any portion of the A Loan on a date other
than an Interest Payment Date;
then the Co-Borrowers shall immediately pay to IFC the amount which IFC from
time to time notifies to the Co-Borrowers as being the amount of those costs,
expenses and losses incurred.
(b) For the purposes of this Section, "costs, expenses or losses"
include any premium, penalty or expense incurred to liquidate or obtain third
party deposits or borrowings in order to make, maintain or fund all or any part
of the A Loan.
Section 3.12. SUSPENSION OR CANCELLATION BY IFC. (a) IFC may, by notice
to the Co-Borrowers, suspend the right of the Co-Borrowers to Disbursements or
cancel the undisbursed portion of the A Loan in whole or in part:
(i) if the first Disbursement has not been made by July 25,
2001, or such other date as the parties agree;
(ii) if any Event of Default has occurred and is continuing or
if the Event of Default specified in Section 7.02(f)
(EVENTS OF DEFAULT) is, in the reasonable opinion of IFC,
imminent;
(iii) if any event or condition has occurred which has or can
reasonably be expected to have a Material Adverse
Effect; or
(v) on or after January 26, 2003.
(b) Upon the giving of any such notice, the right of the Co-Borrowers
to any further Disbursement shall be suspended or cancelled, as the case may be.
The exercise by IFC of its right of suspension shall not preclude IFC from
exercising its right of cancellation, either for the same or any other reason
specified in Section 3.12(a). Upon any cancellation the Co-Borrowers shall,
subject to paragraph (d) of this Section 3.12, pay to IFC all fees and other
amounts accrued (whether or not then due and payable) under this Agreement up to
the date of that cancellation. A suspension shall not limit any other provision
of this Agreement.
(c) Any portion of the A Loan that is cancelled under this Section 3.12
may not be reborrowed.
(d) In the case of a partial cancellation of the A Loan pursuant to
paragraph (a) of this Section 3.12, or Section 3.13(a) below, interest on the
amount then outstanding of the A Loan remains payable as provided in Section
3.03 (INTEREST).
Section 3.13. CANCELLATION BY THE CO-BORROWERS. (a) The Co-Borrowers
may, by notice to IFC, irrevocably request IFC to cancel the undisbursed portion
of the A Loan on the date specified in that notice (which shall be a date not
earlier than thirty (30) days after the date of that notice).
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(b) IFC shall, by notice to the Co-Borrowers, cancel the undisbursed
portion of the A Loan effective as of that specified date if, subject to Section
3.12(d) above:
(i) IFC has received all fees and other amounts accrued
(whether or not then due and payable) under this Agreement
up to such specified date; and
(ii) if any amount of the A Loan is then outstanding, IFC is
reasonably satisfied that the Co-Borrowers have sufficient
long-term funding available, on terms satisfactory to IFC,
to cause the Project Financial Completion Date to occur as
scheduled.
(c) Any portion of the A Loan that is cancelled under this Section 3.13
may not be reborrowed.
Section 3.14. TAXES. (a) The Co-Borrowers shall pay or cause to be paid
all Taxes other than taxes, if any, payable on the overall income of IFC on or
in connection with the payment of any and all amounts due under this Agreement
that are now or in the future levied or imposed by any Authority of the Country
or by any organization of which the Country is a member or any jurisdiction
through or out of which a payment is made.
(b) All payments of principal, interest, fees and other amounts due
under this Agreement shall be made without deduction for or on account of any
Taxes.
(c) If the Co-Borrowers are prevented by operation of law or otherwise
from making or causing to be made those payments without deduction, the
principal or (as the case may be) interest, fees or other amounts due under this
Agreement shall be increased to such amount as may be necessary so that IFC
receives the full amount it would have received (taking into account any Taxes
payable on amounts payable by the Co-Borrowers under this subsection) had those
payments been made without that deduction.
(d) If Section 3.14 (c) applies and IFC so requests, the Co-Borrowers
shall deliver to IFC official tax receipts evidencing payment (or certified
copies of them) within thirty (30) days of the date of that request.
Section 3.15. EXPENSES. (a) The Co-Borrowers shall pay or, as the case
may be, reimburse IFC or its assignees any amount paid by them on account of,
all taxes (including stamp taxes), duties, fees or other charges payable on or
in connection with the execution, issue, delivery, registration or notarization
of the Transaction Documents and any other documents related to this Agreement
or any other Transaction Document.
(b) The Co-Borrowers shall pay to IFC or as IFC may direct:
(i) the reasonable fees and expenses of IFC's technical
consultants incurred in connection with the investment by
IFC provided for under this Agreement;
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(ii) the fees and expenses of IFC's counsel in each of the
Countries incurred in connection with:
(A) the preparation of the investment by IFC
provided for under this Agreement and any other
Transaction Document;
(B) the preparation and/or review, execution and,
where appropriate, translation and registration
of the Transaction Documents and any other
documents related to them;
(C) the giving of any legal opinions required by IFC
under this Agreement and any other Transaction
Document;
(D) the administration by IFC of the investment
provided for in this Agreement or otherwise in
connection with any amendment, supplement or
modification to, or waiver under, any of the
Transaction Documents;
(E) the registration (where appropriate) and the
delivery of the evidences of indebtedness
relating to the A Loan and its disbursement; and
(F) the occurrence of any Event of Default or
Potential Event of Default;
(iii) in each calendar year thereafter upon receipt of a
statement from IFC, the amount of twenty-five thousand
Dollars ($25,000) on account of IFC's expenses in carrying
out its annual supervision review of the Co-Borrowers and
the Project; and
(iv) the costs and expenses incurred by IFC in relation to
efforts to enforce or protect its rights under any
Transaction Document, or the exercise of its rights or
powers consequent upon or arising out of the occurrence of
any Event of Default or Potential Event of Default,
including legal and other professional consultants' fees
on a full indemnity basis.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. REPRESENTATIONS AND WARRANTIES. Each Co-Borrower
represents and warrants that:
(a) it is a company duly incorporated and validly existing under the
laws of its Country and has the corporate power - and has obtained all required
Authorizations - to own its assets, conduct its business as presently conducted
and to enter into, and comply with its obligations under, the Transaction
Documents to which it is a party or will, in the case of any Transaction
Document not executed as at the date of this Agreement, when that Transaction
Document is executed, have the corporate power to enter into, and comply with
its obligations under, that Transaction Document;
(b) each Transaction Document to which it is a party has been, or will
be, duly authorized and executed by it and constitutes, or will, when executed
constitute, a valid and legally binding obligation of such Co-Borrower,
enforceable in accordance with its terms;
(c) neither the making of any Transaction Document to which it is a
party nor (when all the Authorizations referred to in Section 5.01(e)
(CONDITIONS OF Disbursement) have been obtained) the compliance with its terms
will conflict with or result in a breach of any of the terms, conditions or
provisions of, or constitute a default or require any consent under, any
indenture, mortgage, material agreement or other material instrument or
arrangement to which it is a party or by which it is bound, or violate any of
the terms or provisions of its Charter or any Authorization, judgment, decree or
order or any statute, rule or regulation applicable to such Co-Borrower;
(d) to the best of its knowledge after due inquiry:
(i) the Authorizations specified in Annex A are all the
Authorizations (other than Authorizations that are of a
routine nature and are obtained in the ordinary course of
business) needed by such Co-Borrower to conduct its
business, carry out the Project and execute, and comply
with its obligations under, this Agreement and each of the
other Transaction Documents to which it is a party;
(ii) all Authorizations specified in Section (1) of Annex A
have been obtained and are in full force and effect; and
(iii) the Co-Borrowers have applied (or are making arrangements
to apply) for all Authorizations specified in Section (2)
of Annex A, and have no reason to believe that they will
not obtain those Authorizations in a timely manner;
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(e) none of the Co-Borrowers' Charters have been amended since August
29, 1997 with respect to PriceSmart, October 21, 1999 with respect to PSMT
Trinidad, and October 22, 1998 with respect to PSMT Caribe;
(f) none of the Co-Borrowers nor any of their properties enjoys any
right of immunity from set-off, suit or execution with respect to its assets or
its obligations under any Transaction Document;
(g) Since June 30, 2000, none of the Co-Borrowers:
(i) has suffered any change that has a Material Adverse
Effect or incurred any substantial loss or liability;
(ii) has undertaken or agreed to undertake any substantial
obligation outside of the ordinary course of business;
(h) the Consolidated financial statements of the Co-Borrowers for the
period ending on June 30, 2000:
(i) have been prepared in accordance with the Accounting
Principles, and present fairly the financial condition of
the Co-Borrowers as of the date as of which they were
prepared and the results of the Co-Borrowers' operations
during the period then ended;
(ii) disclose all liabilities (contingent or otherwise) of the
Co-Borrowers required by US-GAAP, and the reserves, if
any, for such liabilities and all unrealized or
anticipated liabilities and losses arising from
commitments entered into by the Co-Borrowers required by
US-GAAP (whether or not such commitments have been
disclosed in such financial statements);
(i) none of the Co-Borrowers is a party to, or committed to enter into,
any contract which would or might reasonably affect the judgment of a
prospective Long-term Debt investor;
(j) none of the Co-Borrowers has an outstanding Lien on any of its
assets other than Liens arising by operation of law, and no contracts or
arrangements, conditional or unconditional, exist for the creation by any of the
Co-Borrowers of any Lien, except for the IFC Security and the liens set forth in
Annex D;
(k) all tax returns and reports of the Co-Borrowers required by law to
be filed have been duly filed and all Taxes, obligations, fees and other
governmental charges upon the Co-Borrowers, or their respective properties, or
their respective income or assets, which are due and payable or to be withheld,
have been paid or withheld, other than those presently payable without penalty
or interest;
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(l) none of the Co-Borrowers is engaged in or, to the best of their
knowledge after due inquiry, threatened by, any litigation, arbitration or
administrative proceedings, the outcome of which could reasonably be expected to
have a Material Adverse Effect;
(m) to the best of their knowledge and belief after due inquiry, none
of the Co-Borrowers is in violation of any material statute or regulation of any
Authority;
(n) no judgment or order has been issued which has or may reasonably be
expected to have a Material Adverse Effect;
(o) to the best of its knowledge and belief, after due inquiry, the
Co-Borrowers are not in violation of any of the Environmental, Health and Safety
Guidelines or of the Environmental and Social Policies;
(p) none of the Co-Borrowers has received nor is aware of any
complaint, order, directive, claim, citation or notice from any Authority
with respect to any matter of any Co-Borrower's compliance with the relevant
environmental, health and safety laws and regulations in effect in any
Country such as, without limitation, air emissions, discharges to surface
water or ground water, noise emissions, solid or liquid waste disposal, or
the use, generation, storage, transportation or disposal of toxic or
hazardous substances or wastes;
(q) none of the Co-Borrowers, nor any of their Affiliates, nor any
Person acting on its or their behalf, has made, with respect to the Project or
any transaction contemplated by this Agreement, any Prohibited Payment; and
(r) none of the representations and warranties in this Section 4.01
omits any matter the omission of which makes any of such representations and
warranties misleading in any material respect.
Section 4.02. IFC RELIANCE. Each of the Co-Borrowers acknowledges that
it makes the representations and warranties in Section 4.01 (REPRESENTATIONS AND
WARRANTIES) with the intention of inducing IFC to enter into this Agreement and
that IFC enters into this Agreement on the basis of, and in full reliance on,
each of such representations and warranties.
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ARTICLE V
CONDITIONS OF DISBURSEMENT
Section 5.01. CONDITIONS OF FIRST DISBURSEMENT. The obligation of IFC to
make the first Disbursement is subject to the fulfillment prior to or
concurrently with the making of that first Disbursement of the following
conditions:
(a) the following agreements, each in form and substance satisfactory to
IFC, have been entered into by all parties to them and have become (or, as the
case may be, remain) unconditional and fully effective in accordance with their
respective terms (except for this Agreement having become unconditional and
fully effective, if that is a condition of any of those agreements), and IFC has
received a copy of each of those agreements to which it is not a party:
(i) each Transaction Document; and
(ii) the OPIC Loan Agreement;
(b) the Co-Borrowers have certified to IFC that no amendment has been
made to their respective Charters since August 29, 1997 with respect to
PriceSmart, October 21, 1999 with respect to PSMT Trinidad, and October 22, 1998
with respect to PSMT Caribe, or if any such amendment was made, IFC has received
a copy of each such Co-Borrower's amended Charter and determined, in its
reasonable judgment, that it is not inconsistent with the provisions of any
Transaction Document and does not have or may not reasonably be expected to have
a Material Adverse Effect;
(c) the IFC Security has been duly created and perfected/registered as
first ranking security interests in all assets and rights subject to the
Security Documents;
(d) the Co-Borrowers have obtained, and provided to IFC copies of, all
Authorizations listed in Section (1) and Section (2) of Annex A, and such other
Authorizations not listed in those Sections that may become necessary for:
(i) the Loans and the OPIC Loan;
(ii) the business of each of the Co-Borrowers as it is
contemplated to be carried on;
(iii) the Project and the implementation of the Financial
Plan;
(iv) the due execution, delivery, validity and enforceability
of, and performance by the Co-Borrowers of their
respective obligations under, this Agreement and the
other Transaction Documents, and any other
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documents necessary or desirable to the implementation
of any of those agreements or documents; and
(v) the remittance to IFC or its assigns in Dollars of all
monies payable with respect to the Transaction
Documents;
and all those Authorizations are in full force and effect;
(e) IFC has received a legal opinion to the effect set out in Schedule
5(A), from IFC's counsel in each of the Countries and concurred in by counsel
for the Co-Borrowers, and covering such other matters relating to the
transactions contemplated by this Agreement as IFC may reasonably request;
(f) IFC has received a legal opinion to the effect set out in Schedules
5(B-1), 5(B-2) and 5(B-3) from IFC's counsel in each of the Honduras, Guatemala,
Aruba, the Philippines, El Salvador, Costa Rica, Panama, and Dominican Republic,
and covering such other matters relating to the Share Retention Agreement and
the PSMT Caribe Pledge Agreements, as IFC may reasonably request;
(g) IFC has received a legal opinion to the effect set out in Schedule
5(C), from its special counsel in New York with regard to the law aspects of the
Escrow Account Agreement;
(h) IFC has received a legal opinion to the effect set out in Schedule
5(D), from PriceSmart's counsel in New York with regard to the law aspects of
this Agreement and the other Transaction Documents;
(i) IFC has received a certification from the Auditors confirming that,
as at a date not earlier than sixty (60) days prior to the date of first
Disbursement, the Co-Borrowers are in compliance with the provisions of Section
6.01(c) (AFFIRMATIVE COVENANTS) and containing a brief description of the
systems and records in place;
(j) IFC has received copies of all insurance policies required to be
obtained pursuant to Section 6.04 (INSURANCE) and Annex B prior to the date of
first Disbursement, and a certification of the Co-Borrowers' insurers or
insurance agents confirming that such policies are in full force and effect and
all premiums then due and payable under those policies have been paid;
(k) IFC has received the fees specified in Section 3.07 (FEES) required
to be paid before the date of the first Disbursement;
(l) if IFC so requires, IFC has received the reimbursement of all
invoiced fees and expenses of IFC's counsel as provided in Section 3.15(b)(ii)
(EXPENSES) or confirmation that those fees and expenses have been paid directly
to that counsel;
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(m) IFC has received a copy of the authorization to the Auditors
referred to in Section 6.01(e) (AFFIRMATIVE COVENANTS);
(n) IFC has received a Certificate of Incumbency and Authority from
PriceSmart;
(o) the Co-Borrowers have delivered to IFC evidence, substantially in
the form of Schedule 4, of appointment of an agent for service of process
pursuant to Section 8.05(d) (APPLICABLE LAW AND JURISDICTION);
(p) the C Loan has been fully disbursed;
(q) the OPIC Loan shall have been disbursed pro rata with the A Loan;
and
(r) IFC shall have received a pay-off letter, in form and substance
acceptable to IFC, from each creditor of the Co-Borrowers as reasonably agreed
between the Co-Borrowers and IFC at the time of the first Disbursement.
Section 5.02. CONDITIONS OF ALL DISBURSEMENTS. The obligation of IFC to
make any Disbursement, including the first Disbursement, is also subject to the
conditions that:
(a) no Event of Default and no Potential Event of Default has occurred
and is continuing;
(b) the proceeds of that Disbursement are, at the date of the relevant
request, needed by the Co-Borrowers for the purpose of the Project, or will be
needed for that purpose within three (3) months of that date;
(c) since the date of this Agreement nothing has occurred which has or
can reasonably be expected to have a Material Adverse Effect;
(d) since the date of this Agreement, the Co-Borrowers (taken as a
whole) have not incurred any material loss or liability (except such liabilities
as may be incurred in accordance with Section 6.02 (NEGATIVE COVENANTS ));
(e) the representations and warranties made in Article IV are true
and correct in all material respects on and as of the date of that
Disbursement with the same effect as if those representations and warranties
had been made on and as of the date of that Disbursement (but in the case of
Section 4.01(c) (REPRESENTATIONS AND WARRANTIES), without the words in
parentheses);
(f) the proceeds of that Disbursement are not in reimbursement of,
or to be used for, expenditures in the territories of any country which is
not a member of the World Bank or for goods produced in or services supplied
from any such country;
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(g) IFC has received (if it so requires) a legal opinion or opinions in
form and substance satisfactory to IFC, of IFC's counsel in the relevant
Countries, and concurred in by counsel for the Co-Borrowers, with respect to any
matters relating to that Disbursement;
(h) after giving effect to that Disbursement, none of the Co-Borrowers
would be in violation of:
(i) its Charter;
(ii) any provision contained in any document to which such
Co-Borrower is a party (including this Agreement) or by
which such Co-Borrower is bound; or
(iii) any law, rule, regulation, Authorization or agreement or
other document binding on such Co-Borrower directly or
indirectly limiting or otherwise restricting its
borrowing power or authority or its ability to borrow;
(i) (without limiting the generality of Section 5.02(h)), after taking
into account the amount of that Disbursement and any other Long-term Debt
incurred by the Co-Borrowers and of any amounts of Shareholders' Equity paid
into the Co-Borrowers after the date of the latest financial statements of the
Co-Borrowers due pursuant to Section 6.03(a) (REPORTING REQUIREMENTS), (A) the
Consolidated Current Ratio would not be less than 1.2, (B) the Consolidated
Total Debt to Equity Ratio would not exceed 45:55, and (C) the Consolidated
Long-term Debt Service Coverage Ratio would not be less than 1.3, provided that,
with respect to any Disbursement requested to be made prior to the date of the
first financial statements due pursuant to Section 6.03(a) (REPORTING
REQUIREMENTS), the calculation of the Consolidated Current Ratio, Consolidated
Total Debt to Equity Ratio and the Consolidated Long-term Debt Service Coverage
Ratio shall be made on the basis of such information as IFC may reasonably
request, verified, if IFC so requires, by the Auditors; and
(k) the Co-Borrowers shall have deposited an amount equal to two
hundred thirty-four thousand three hundred seventy-five Dollars ($234,375) into
the Escrow Account for each one million Dollars ($1,000,000) disbursed.
Section 5.03. CO-BORROWERS' CERTIFICATIONS. The Co-Borrowers shall
deliver to IFC with respect to each request for Disbursement:
(a) a certification, in the form included in Schedule 2, relating to
the conditions specified in Section 5.02 (CONDITIONS OF ALL DISBURSEMENTS)
(other than the condition in Section 5.02(g)) expressed to be effective as of
the date of that relevant Disbursement, and in the case of Section 5.02(d), also
certified by the Auditors if IFC so requires; and
(b) such evidence as IFC may reasonably request of the proposed
utilization of the proceeds of that Disbursement or the utilization of the
proceeds of any prior Disbursement.
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Section 5.04. CONDITIONS FOR IFC BENEFIT. The conditions in Section 5.01
through Section 5.03 are for the benefit of IFC and may be waived only by IFC in
its sole discretion.
ARTICLE VI
PARTICULAR COVENANTS
Section 6.01. AFFIRMATIVE COVENANTS. Unless IFC otherwise agrees, the
Co-Borrowers shall:
(a) carry out the Project and conduct its business with due diligence
and efficiency and in accordance with sound engineering, financial and business
practices;
(b) cause the financing specified in the Financial Plan to be applied
exclusively to the Project;
(c) maintain an accounting and control system, management information
system and books of account and other records, which together adequately reflect
truly and fairly the financial condition of the Co-Borrowers and the results of
their operations in conformity with the Accounting Principles;
(d) appoint and maintain at all times a firm of independent public
accountants acceptable to IFC as auditors of the Co-Borrowers;
(e) irrevocably authorize, in the form of Schedule 6, the Auditors
(whose fees and expenses shall be for the account of the Co-Borrowers) to
communicate directly with IFC at any time regarding the Co-Borrowers' accounts
and operations, and provide to IFC a copy of that authorization, and, no later
than thirty (30) days after any change in Auditors, issue a similar
authorization to the new Auditors and provide a copy thereof to IFC;
(f) upon IFC's request, such request to be made with reasonable prior
notice to the Co-Borrowers, except if an Event of Default or Potential Event of
Default is continuing or if special circumstances so require, permit
representatives of IFC, during normal office hours, to:
(i) visit the Project site and any of the premises where the
business of the Co-Borrowers is conducted;
(ii) inspect all facilities, plant and equipment comprised in
the Project;
(iii) have access to the Co-Borrowers' books of account and
records; and
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(iv) have access to those employees and agents of each of the
Co-Borrowers who have or may have knowledge of matters
with respect to which IFC seeks information;
(g) design, construct, operate, maintain and monitor all of its sites,
plant, equipment and facilities:
(i) in accordance with the Environmental and Social
Policies, the Environmental, Health and Safety
Guidelines and the Life and Fire Safety Guidelines; and
(ii) in compliance with applicable environmental,
occupational health and safety requirements, and any
child labor and forced labor laws, rules and regulations
(including any international treaty obligations, if any)
of the Government of the Country and the local
authorities;
(h) no later than thirty (30) days after the date of this Agreement but
in any event prior to the date of the C Loan disbursement:
(i) provide IFC with all information necessary to enable IFC
to update the document dated August 21, 2000 (Project ID
No. 10296) entitled Environmental Review Summary ("ERS")
by incorporating any modification or addition to that
document relating to the Project; and
(ii) display the updated ERS in appropriate public places in
the Country acceptable to IFC for public access;
and IFC shall be entitled to place a copy of that updated ERS in
the World Bank public information center known as InfoShop for
public access;
(i) obtain and maintain in force (and where appropriate, renew in a
timely manner) all Authorizations, including without limitation the
Authorizations specified in Annex A, which are necessary for the implementation
of the Project, the carrying out of the Co-Borrowers' businesses and operations
generally and the compliance by each of the Co-Borrowers with all its
obligations under the Transaction Documents and comply with all the conditions
and restrictions contained in, or imposed on the Co-Borrowers by, those
Authorizations;
(j) from time to time, execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered such further instruments as may reasonably
be requested by IFC for perfecting or maintaining in full force and effect the
IFC Security or for re-registering the IFC Security or otherwise to enable each
of the Co-Borrowers to comply with its obligations under the Transaction
Documents; and
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(k) install, to IFC's satisfaction, a wastewater treatment facility
prior to the opening of any new store in an area where local/municipal
facilities are not available or if required to do so by the government of the
relevant Country.
Section 6.02. NEGATIVE COVENANTS . Unless IFC otherwise agrees, none of
the Co-Borrowers shall:
(a) declare or pay any dividend or make any distribution on its share
capital (other than dividends or distributions payable in shares of the
Co-Borrowers or dividends or distributions payable to the minority shareholders
of PSMT Trinidad), or purchase, redeem or otherwise acquire any shares of any of
the Co-Borrowers other than PriceSmart or any option over them unless the
proposed payment or distribution is out of retained earnings and the
Co-Borrowers, no earlier than sixty (60) days nor later than thirty (30) days
prior to doing so, certify to IFC in writing, in the form attached as Schedule
7, that:
(i) no Event of Default or Potential Event of Default has
occurred and is continuing; and
(ii) after giving effect to any such action:
(A) the Consolidated Current Ratio will not be less
than 1.2;
(B) the Consolidated Total Debt to Equity Ratio will
not be in excess of 50:50; and
(C) the Consolidated Long-term Debt Service Coverage
Ratio will not be less than 1.3;
provided always that:
(A) the retained earnings out of which any of the
payments or distributions referred to in this
subsection may be made should in no event
include any amount resulting from the
revaluation of any of the Co-Borrowers' assets;
(B) the Co-Borrowers shall not make any payments or
distributions of the type referred to in this
subsection if, after giving effect to it, the
Co-Borrowers could not certify the matters
referred to in Section 6.02(a)(i) and (ii); and
(C) notwithstanding any limitation set forth in this
Section 6.02(a) or elsewhere in the Transaction
Documents, the Co-Borrowers shall at all times
be permitted to purchase, redeem or otherwise
acquire shares of any of their Subsidiaries
engaged in the same line of business as the
Co-Borrowers (including other Co-Borrowers) so
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long as such activity is in furtherance of the
Co-Borrowers' consolidation of such
Subsidiaries;
(b) incur expenditures or commitments for expenditures for fixed or
other non-current assets, other than those required for carrying out the Project
or necessary for repairs, replacements and maintenance of satisfactory operating
conditions that are essential to the Co-Borrowers' businesses or operations,
unless, after giving effect to such expenditures or commitments for
expenditures, the Co-Borrowers will be in compliance with the ratios set forth
in Section 6.02(a) above in the preceding Financial Year;
(c) incur, assume or permit to exist any Total Debt except:
(i) the Loans;
(ii) other Total Debt specified in the Financial Plan;
(iii) additional Long-term Debt which would not result in the
Consolidated Long-term Debt to Equity Ratio exceeding
50:50 and the Consolidated Long-term Debt Service Coverage
Ratio exceeding 1.3;
(iv) Short-term Debt incurred in the ordinary course of
business which, when aggregated with contingent
liabilities arising from the discounting of trade
receivables, would not result at the time it is incurred
in the Consolidated Current Ratio falling below 1.2;
(v) additional Total Debt among any of the Co-Borrowers, but
only if and to the extent that such Total Debt is
subordinated in full, in payment and liquidation, to the A
Loan and the C Loan; and
(vi) Long-term Debt or Short-term Debt obtained to replace any
existing Long-term Debt or, as the case may be, any
Short-term Debt component of then outstanding Total Debt,
but then only to the extent that such new Total Debt is on
terms and conditions (as to interest rate, other costs and
tenor) at least as favorable to the Co-Borrowers as those
of the Total Debt being replaced;
(d) enter into any Capital Lease Obligations, except Capital Lease
Obligations with respect to which the aggregate capital lease payments of all
the Co-Borrowers do not exceed the equivalent of two million Dollars
($2,000,000) in any Financial Year ("Permitted Lease Amount") and only to the
extent that, when such Permitted Lease Amount is treated as Long-term Debt, the
Co-Borrowers' Consolidated Long-term Debt to Equity Ratio would not be in excess
of 50:50 and the Consolidated Long-term Debt Service Coverage Ratio would not be
less than 1.3;
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(e) enter into any Derivative Transactions or assume the obligations of
any party to any Derivative Transaction; provided, however, that the foregoing
shall not apply to the following types of Derivative Transactions entered into
by the Co-Borrowers so long as the currency and the amounts associated with such
Derivative Transactions reasonably reflect the risk and/or exposure such
Derivative Transactions are designed to hedge:
(i) forward foreign exchange contracts (including
non-deliverable forward foreign exchange contracts);
(ii) currency swaps; and
(iii) interest-rate swaps;
(f) enter into any agreement or arrangement to guarantee or, in any way
or under any condition, assume or become obligated for all or any part of any
financial or other obligation of another Person, except guarantees by PriceSmart
in the ordinary course of business in favor of its Subsidiaries so long as after
any such guarantee the Co-Borrowers will be in compliance with the financial
ratios set forth in Section 6.02(a);
(g) create or permit to exist any Lien on any property, revenues or
other assets, present or future, of the Co-Borrowers, except for:
(i) the IFC Security;
(ii) any Liens securing other senior lenders under the
Financial Plan;
(iii) the naming of IFC as loss payee/beneficiary under all of
the Co-Borrowers' insurance policies;
(iv) any Lien arising from any tax, assessment or other
governmental charge or other Lien arising by operation
of law, in each case if the obligation underlying any
such Lien is not yet due or, if due, is being contested
in good faith by appropriate proceedings so long as:
(A) those proceedings do not involve any substantial
danger of the sale, forfeiture or loss of any part
of the Project, title thereto or any interest
therein, nor interfere in any material respect with
the use or disposition thereof or the
implementation of the Project or the carrying on of
the businesses of the Co-Borrowers; and
(B) the Co-Borrowers have set aside adequate reserves
sufficient to promptly pay in full any amounts that
the Co-Borrowers may be ordered to pay on final
determination of any such proceedings;
(v) the Liens set forth on Annex D;
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(vi) Liens with respect to Total Debt permitted under Section
6.02(c) and Capital Lease Obligations permitted under
Section 6.02(d);
(vii) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other similar Liens arising in the
ordinary course of business;
(viii) Liens related to purchase money obligations incurred in
the ordinary course of business so long as such Liens
only attach to property related to such purchase money
obligations and secure only such property; and
(ix) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business
which do not materially interfere with the ordinary
conduct of the businesses of the Co-Borrowers conducted
thereon;
(h) enter into any transaction with any Person (including Affiliates of
the Co-Borrowers) except in the ordinary course of business on the basis of
arm's-length arrangements (including, without limitation, transactions whereby
the Co-Borrowers might pay more than the ordinary commercial price for any
purchase or might receive less than the full ex-works commercial price (subject
to normal trade discounts) for its products);
(i) establish any sole and exclusive purchasing or sales agency;
(j) enter into any partnership, profit-sharing or royalty agreement or
other similar arrangement whereby the Co-Borrowers' income or profits are, or
might be, shared with any other Person; provided, however, PriceSmart may enter
into such partnerships, profit-sharing or royalty agreements or other similar
arrangements in the ordinary course of business; provided, further, that in the
event of an Event of Default or Potential Event of Default, the amounts to be
potentially paid under any such partnership, profit-sharing or royalty agreement
or other similar arrangement may accrue but shall not be paid until the Event of
Default or Potential Event of Default is cured, and such amounts shall not be
paid but shall be deferred if after making any such payments, the Co-Borrowers
would not be in compliance with the financial ratios set forth in Section
6.02(a);
(k) enter into any management contract or similar arrangement whereby
its business or operations are managed by any other Person;
(l) form or have any Subsidiary, except for:
(i) the Subsidiaries disclosed in the Letter of Information;
(ii) Subsidiaries formed for purposes of the Project; and
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(iii) Subsidiaries formed by PriceSmart in similar lines of
business as the Co-Borrowers;
(m) make or permit to exist loans or advances to, or deposits (except
commercial bank deposits in the ordinary course of business) with, other Persons
or enterprise other than:
(i) short-term marketable securities acquired solely to give
temporary employment to the Co-Borrowers' idle funds;
(ii) advances or credit facilities in the ordinary course of
business for payment of rentals of real estate leases or
acquisition of real estate or working capital;
(iii) extentions of trade credit in the ordinary course of
busines;
(iv) advances to employees in the ordinary course of business
and in connection with management incentive plans; and
(v) investments permitted under Section 6.02(b) and other
investments that are not in excess of five per cent (5%)
of the Co-Borrowers' Consolidated assets;
provided always that, that after taking into account such advances or
credit facilities the Consolidated Current Ratio shall not fall below
1.2;
(n) change its Charter in any manner which would be inconsistent with
the provisions of any Transaction Document;
(o) change its Financial Year;
(p) change the nature or scope of the Project or change the nature of
its present and/or contemplated business or operations;
(q) sell, transfer, lease or otherwise dispose of all or a substantial
part of its assets, other than inventory, whether in a single transaction or in
a series of transactions, related or otherwise other than (1) fixed assets of
the Co-Borrowers with an aggregate value of less than ten per cent (10%) of the
existing Net Fixed Assets in any Financial Year, and (2) assets that have become
worn out or obsolete and are replaced or upgraded or that are no longer required
for the purposes of carrying out the Project, in each case in the ordinary
course of business and in a manner consistent with the Transaction Documents;
(r) subject to those permitted under Section 6.02(a), undertake or
permit any merger, spin-off, consolidation or reorganization;
(s) terminate, amend or grant any waiver with respect to any
provision of:
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(i) any of the agreements listed in Section 5.01(a) (CONDITIONS OF
FIRST Disbursement); or
(ii) any document evidencing or securing any other senior
loan set forth under the Financial Plan;
(t) prepay (whether voluntarily or involuntarily) or repurchase any
Long-term Debt (other than the Long-term Debt contemplated to be paid with the
proceeds of the A Loan and the OPIC Loan) pursuant to any provision of any
agreement or note with respect to that Long-term Debt unless:
(i) that Long-term Debt is refinanced using new Long-term
Debt on terms and conditions (as to interest rate, other
costs and tenor) at least as favorable to the
Co-Borrowers as those of the Long-term Debt being
refinanced; or
(ii) the Co-Borrowers give IFC at least thirty (30) days'
advance notice of their intention to make the proposed
prepayment and, if IFC so requires, the Co-Borrowers
contemporaneously prepay a proportion of the A Loan
equivalent to the proportion of the part of the
Long-term Debt being prepaid, such prepayment to be made
in accordance with the provisions of Section 3.06
(PREPAYMENT) except that there shall be no minimum
amount, prepayment premium or advance notice period for
that prepayment;
provided that, after taking into account such prepayment for refinancing, the
Consolidated Total Debt to Equity Ratio does not exceed 50:50 and the
Consolidated Current Ratio shall not be less than 1.2;
(u) use the proceeds of any Disbursement in the territories of any
country which is not a member of the World Bank or for reimbursements of
expenditures in those territories or for goods produced in or services supplied
from any such country;
(v) terminate, waive or materially amend any license agreements or
trademarks with respect to the Project;
(w) make (and shall not authorize or permit any Affiliate or any other
Person acting on its behalf to make) with respect to the Project or any
transaction contemplated by this Agreement, any Prohibited Payment. The
Co-Borrowers further covenant that should IFC notify any Co-Borrower of its
concerns that there has been a violation of the provisions of this Section or of
Section 4.01(p) of this Agreement, each of them shall cooperate in good faith
with IFC and its representatives in determining whether such a violation has
occurred, and shall respond promptly and in reasonable detail to any notice from
IFC, and shall furnish documentary support for such response upon IFC's request;
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(x) allow the central office expenditures (before charge-backs) to
exceed nineteen million two hundred thousand Dollars ($19,200,000) or two and
one-half per cent (2.5%) of sales, whichever is greater, during the life of
the A Loan; or
(y) engage in any activities, including but not limited to those
related to future expansions and other improvements, which might directly or
indirectly result in the resettlement of individuals or businesses.
Section 6.03. REPORTING REQUIREMENTS. Unless IFC otherwise agrees,
the Co-Borrowers shall:
(a) as soon as available but in any event within sixty (60) days
after the end of each quarter of each Financial Year, deliver to IFC:
(i) two (2) copies of their respective complete financial
statements for such quarter prepared, on an
unconsolidated basis and on a Consolidated Basis, in
accordance with the Accounting Principles;
(ii) during implementation of the Project, a report, in the
form attached as Schedule 8, on the progress in
implementation of the Project, including any factors
that have or could reasonably be expected to have a
Material Adverse Effect;
(iii) after the Project Financial Completion Date has
occurred, a report on any factors that have or could
reasonably be expected to have a Material Adverse
Effect; and
(iv) a statement of all material transactions during that
quarter between each Co-Borrower and each of its
Affiliates (other than any other Co-Borrower), if any,
and a certification by an Authorized Representative that
those transactions were on the basis of arm's-length
arrangements; at IFC's request, this statement shall be
certified by the Auditors;
(b) as soon as available but in any event within ninety (90) days after
the end of each Financial Year, deliver to IFC:
(i) two (2) copies of the complete and audited financial
statements for that Financial Year which are in
agreement with its books of account and prepared, on an
unconsolidated basis and Consolidated Basis, in
accordance with the Accounting Principles, together with
the Auditors' audit report on them, all in form
satisfactory to IFC;
(ii) a management letter and such other communication from
the Auditors commenting, with respect to that Financial
Year, on, among other things,
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the adequacy of the Co-Borrowers' financial control
procedures, accounting systems and management
information system;
(iii) a report by the Auditors certifying that, on the basis
of its financial statements, each Co-Borrower was in
compliance with the covenants contained in Section 6.02
(NEGATIVE COVENANTS) as of the end of that Financial
Year or, as the case may be, detailing any
noncompliance;
(iv) a report by the Co-Borrowers on their operations during
that Financial Year, in the form of, and addressing the
topics listed in, Schedule 9; and
(v) a statement by the Co-Borrowers of all material
transactions between the Co-Borrowers and each of its
Affiliates (other than any other Co-Borrower), if any,
during that Financial Year, and a certification by an
Authorized Representative that those transactions were
on the basis of arm's-length arrangements;
(c) as soon as available but no later than sixty (60) days after the
end of the first six months of each Financial Year and after the end of each
Financial Year, provide to IFC a semi-annual report regarding Project
implementation, including a description of Cash Generation and the funds
raised from other sources of funds, invested in the Project;
(d) deliver to IFC, promptly following receipt, a copy of any
management letter or other communication sent by the Auditors (or any other
accountants retained by the Co-Borrowers) to the Co-Borrowers or their
management in relation to the Co-Borrowers' financial, accounting and other
systems, management or accounts, if not provided pursuant to Section
6.03(b)(ii);
(e) within ninety (90) days after the end of each Financial Year,
deliver to IFC an annual monitoring report in the form of Schedule 10 (which
form may be updated from time to time), confirming compliance with the
applicable national or local requirements, the Environmental and Social
Policies, the Environmental, Health and Safety Guidelines, and Section
6.01(g) and Section 6.01(h) or, as the case may be, detailing any
noncompliance together with (A) the action being taken to ensure compliance
and (B) a written report verifying the contents of that annual monitoring
report, prepared by an independent third party consultant of the
Co-Borrowers, acceptable to IFC;
(f) as soon as possible but no later than three (3) days after its
occurrence, notify IFC of any incident or accident which has or may
reasonably be expected to have a material adverse effect on the environment,
health or safety, including, without limitation, explosions, spills or
workplace accidents which result in death, serious or multiple injury or
major pollution, specifying, in each case, the nature of the incident or
accident, the on-site and off-site impacts arising or likely to arise
therefrom and the measures the Co-Borrowers are taking or plan to take to
address those impacts; and keep IFC informed of the on-going implementation
of those measures;
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(g) give a fifteen (15) day prior notice to IFC of any Co-Borrower's
notification to its shareholders, of any meeting of its shareholders, such
notice to include the agenda of the meeting; and deliver to IFC two (2) copies
of:
(i) all notices, reports and other communications of the
Co-Borrowers to their respective shareholders, whether
any such communication has been made on an individual
basis or by way of publication in a newspaper or other
communication medium, as soon as available; and
(ii) the minutes of all shareholders' meetings within 30 days
of said shareholders' meeting;
(h) promptly notify IFC of any proposed change in the nature or scope
of the Project or the business or operations of the Co-Borrowers and of any
event or condition which has or may reasonably be expected to have a Material
Adverse Effect;
(i) promptly upon becoming aware of any litigation or administrative
proceedings before any Authority or arbitral body which has or may reasonably be
expected to have a Material Adverse Effect, notify IFC by facsimile of that
event specifying the nature of that litigation or those proceedings and the
steps the Co-Borrowers are taking or propose to take with respect thereto;
(j) promptly upon the occurrence of an Event of Default or Potential
Event of Default, notify IFC by facsimile specifying the nature of that Event of
Default or Potential Event of Default and any steps the Co-Borrowers are taking
to remedy it;
(k) provide to IFC, in a timely manner, the insurance certificates and
other information referred to in Section 6.04(d) (INSURANCE);
(l) promptly provide to IFC such other information as IFC from time to
time reasonably requests about each of the Co-Borrowers, their respective assets
and the Project; and
(m) with respect to the Project, within thirty (30) days after the end
of each Financial Year, provide a report by country with a confirmation that
land acquisition has occurred on a willing seller/willing buyer basis and
confirmation that no squatters and/or small merchants will be displaced, and if
displacement occurs a description of the relevant Co-Borrower's compensation
plan for all such Persons displaced.
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Section 6.04. INSURANCE.
(a) INSURANCE REQUIREMENTS AND CO-BORROWERS' UNDERTAKINGS. Unless IFC
otherwise agrees, each of the Co-Borrowers shall:
(i) insure and keep insured, with financially sound and
reputable insurers, all its assets and business against
all insurable losses to include the insurances specified
in Annex B and any insurance required by law;
(ii) punctually pay any premium, commission and any other
amounts necessary for effecting and maintaining in force
each insurance policy;
(iii) promptly notify the relevant insurer of any claim by the
Co-Borrower under any policy written by that insurer and
diligently pursue that claim;
(iv) comply with all warranties under each policy of
insurance;
(vi) not do or omit to do, or permit to be done or not done,
anything which might prejudice the Co-Borrower's, or,
where IFC is a loss payee or an additional named
insured, IFC's right to claim or recover under any
insurance policy; and
(vii) not vary, rescind, terminate, cancel or cause a material
change to insurance policy required to be maintained
under this Agreement unless the same is replaced by
other insurance satisfying the requirements of this
Section 6.04;
provided always that if at any time and for any reason any
coverage required to be maintained under this Agreement shall not
be in full force and effect, then IFC shall thereupon or at any
time while the same is continuing be entitled (but have no such
obligation) on its own behalf to procure that insurance at the
expense of the relevant Co-Borrower and to take all such steps to
minimize hazard as IFC may consider expedient or necessary.
(b) POLICY PROVISIONS. Each insurance policy required to be obtained
pursuant to this Section shall be on terms and conditions acceptable to IFC, and
shall contain provisions to the effect that:
(i) no policy can expire nor can it be cancelled or
suspended by any Co-Borrower or the insurer for any
reason (including failure to renew the policy or to pay
the premium or any other amount) unless IFC and, in the
case of expiration or if cancellation or suspension is
initiated by the insurer, the relevant Co-Borrower
receives at least thirty (30) days' notice (or such
lesser period as IFC may agree with respect to
cancellation,
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suspension or termination in the event of war and
kindred peril) prior to the effective date of
termination, cancellation or suspension;
(ii) IFC and all contractors working at the Project site are
named as additonal named insureds on all liability
policies;
(iii) where relevant, all applicable provisions (except those
relating to limits of liability) shall operate as if
they were a separate policy covering each insured party;
and
(iv) on every insurance policy on the Co-Borrower's assets
which are the subject of the IFC Security and for
business interruption, IFC is named as loss payee for
any claim of, or any series of claims arising with
respect to the same event whose aggregate amount is, the
equivalent of five hundred thousand Dollars ($500,000)
or more;
(c) APPLICATION OF PROCEEDS.
(i) IFC may remit the proceeds of any insurance paid to it
to the relevant Co-Borrower to repair or replace the
relevant damaged assets or if in the reasonable judgment
of IFC such insurable event creates a Material Adverse
Effect then, at IFC's discretion, IFC may apply those
proceeds towards any amount payable to IFC under this
Agreement, including to repay or prepay all or any part
of the A Loan in accordance with Section 3.07
(PREPAYMENT); provided that there shall be no minimum
amount or notice period or prepayment premium for any
such prepayment.
(ii) Each of the Co-Borrowers shall use any insurance
proceeds it receives (whether from IFC or directly from
the insurers) for loss of or damage to any asset solely
to replace or repair that asset.
(d) REPORTING REQUIREMENTS. Unless IFC otherwise agrees, each of the
Co-Borrowers shall provide to IFC the following:
(i) as soon as possible after its occurrence, notice of any
event which entitles the relevant Co-Borrower to claim
for an aggregate amount exceeding the equivalent of five
hundred thousand Dollars ($500,000) under any one or
more insurance policies;
(ii) within thirty (30) days after receipt of any insurance
policy issued to any Co-Borrower, a copy of that policy
incorporating any loss payee provisions required under
Section 6.04(b)(iv) (unless that policy has already been
provided to IFC pursuant to Section 5.01(i) (CONDITIONS
OF FIRST DISBURSEMENT));
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(iii) not less than ten (10) days prior to the expiry date of
any insurance policy (or, for insurance with multiple
renewal dates, not less than ten (10) days prior to the
expiry date of the policy on the principal asset), a
certificate of renewal from the insurer, insurance
broker or agent confirming the renewal of that policy
and the renewal period, the premium, the amounts insured
for each asset or item and any changes in terms or
conditions from the policy's issue date or last renewal,
and confirmation from the insurer that provisions naming
IFC as loss payee or additional named insured, as
applicable remain in effect;
(iv) such evidence of premium payment as IFC may from time to
time reasonably request; and
(v) any other information or documents on each insurance
policy as IFC reasonably requests from time to time.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01. ACCELERATION AFTER DEFAULT. If any Event of Default occurs
and is continuing (whether it is voluntary or involuntary, or results from
operation of law or otherwise), IFC may, by notice to the Co-Borrowers, require
the Co-Borrowers to repay the A Loan or such part of the A Loan as is specified
in that notice. On receipt of any such notice, the Co-Borrowers shall
immediately repay the A Loan (or that part of the A Loan specified in that
notice) and pay all interest accrued on it, the prepayment premium specified in
Section 3.06 on the amount of the A Loan whose payment is accelerated and any
other amounts then payable under this Agreement. Each of the Co-Borrowers waives
any right it might have to further notice, presentment, demand or protest with
respect to that demand for immediate payment.
Section 7.02. EVENTS OF DEFAULT. It shall be an Event of Default if:
(a) the Co-Borrowers fail to pay when due any part of the principal of,
or interest on, the A Loan and such failure continues for a period of five (5)
days;
(b) the Co-Borrowers fail to pay when due any part of the principal of,
or interest on, the OPIC Loan and such failure continues beyond any applicable
cure period;
(c) the Co-Borrowers fail to pay when due any part of the principal of,
or interest on, any loan from IFC to the Co-Borrowers other than the A Loan and
any such failure continues for the relevant period of grace provided for in the
agreement providing for that loan;
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(d) any of the Co-Borrowers fails to comply with any of its obligations
under this Agreement or any other Transaction Document or any other agreement
between such Co-Borrower and IFC (other than for the payment of the principal
of, or interest on, the A Loan or any other loan from IFC to any of the
Co-Borrowers), and any such failure continues for a period of thirty (30) days
after the date on which IFC notifies the Co-Borrowers of that failure; provided
such 30-day cure period shall be extended up to an additional thirty (30) days
if the Co-Borrowers provide to IFC evidence, satisfactory to IFC, that they are
diligently proceeding in good faith to cure such failure;
(e) any party to a Transaction Document (other than IFC or the
Co-Borrowers) fails to observe or perform any of its obligations under that
Transaction Document, and any such failure continues for a period of thirty (30)
days after the date on which IFC notifies the Co-Borrowers of that failure;
(f) any representation or warranty made in Article IV or in connection
with the execution of, or any request (including a request for Disbursement)
under, this Agreement or any other Transaction Document is found to be incorrect
in any material respect;
(g) any Authority condemns, nationalizes, seizes, or otherwise
expropriates all or any substantial part of the property or other assets of the
Co-Borrowers or of their respective share capital, or assumes custody or control
of that property or other assets or of the businesses or operations of the
Co-Borrowers or of their respective share capital, or takes any action for the
dissolution or disestablishment of any Co-Borrower or any action that would
prevent any Co-Borrower or its officers from carrying on all or a substantial
part of its business or operations;
(h) a decree or order by a court is entered against any Co-Borrower:
(i) adjudging any such Co-Borrower bankrupt or insolvent;
(ii) approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition
of, or with respect to, such Co-Borrower under any
applicable law;
(iii) appointing a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of such
Co-Borrower or of any substantial part of its property
or other assets; or
(iv) ordering the winding up or liquidation of its affairs;
or any petition is filed seeking any of the above and is not dismissed within
thirty (30) days;
(i) any Co-Borrower:
(i) requests a moratorium or suspension of payment of debts
from any court;
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(ii) institutes proceedings or takes any form of corporate
action to be liquidated, adjudicated bankrupt or
insolvent;
(iii) consents to the institution of bankruptcy or insolvency
proceedings against it;
(iv) files a petition or answer or consent seeking
reorganization or relief under any applicable law, or
consents to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of
such Co-Borrower or of any substantial part of its
property;
(v) makes a general assignment for the benefit of creditors;
or
(vi) admits in writing its inability to pay its debts
generally as they become due or otherwise becomes
insolvent;
(j) an attachment or analogous process is levied or enforced upon or
issued against any of the assets of any Co-Borrower for an amount in excess of
the equivalent of five hundred thousand Dollars ($500,000) and is not discharged
within thirty (30) days;
(k) any other event occurs which under any applicable law would have an
effect analogous to any of those events listed in Section 7.02(h) through
Section 7.02(j);
(l) any Co-Borrower fails to pay any of its Total Debt (other than the
A Loan or any other loan from IFC to such Co-Borrower) or to perform any of its
obligations under any agreement pursuant to which there is outstanding any Total
Debt, and any such failure continues for more than any applicable period of
grace or any such Total Debt becomes prematurely due and payable or is placed on
demand;
(m) any Authorization necessary for any Co-Borrower to perform and
observe its obligations under any Transaction Document, or to carry out the
Project, is not obtained when required or is rescinded, terminated, lapses or
otherwise ceases to be in full force and effect, including with respect to the
remittance to IFC or its assignees, in the Dollars, of any amounts payable under
any Transaction Document, and is not restored or reinstated within thirty (30)
days of notice by IFC to the Co-Borrowers requiring that restoration or
reinstatement;
(n) any Security Document or any of its provisions:
(i) is revoked, terminated or ceases to be in full force and
effect or ceases to provide the security intended,
without, in each case, the prior consent of IFC;
(ii) becomes unlawful or is declared void; or
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(iii) is repudiated or its validity or enforceability is
challenged by any Person and any such repudiation or
challenge continues for a period of thirty (30) days
and, during which period such repudiation or challenge
has no effect;
(o) any Transaction Document (other than a Security Document) or any of
its provisions:
(i) is revoked, terminated or ceases to be in full force and
effect without, in each case, the prior consent of IFC,
and that event, if capable of being remedied, is not
remedied to the satisfaction of IFC within thirty (30)
days of IFC's notice to the Co-Borrowers; or
(ii) becomes unlawful or is declared void; or
(p) any Transaction Document (other than a Security Document) is
repudiated or the validity or enforceability of any of its provisions at any
time is challenged by any Person and such repudiation or challenge is not
withdrawn within thirty (30) days of IFC's notice to the Co-Borrowers requiring
that withdrawal; provided that no such notice shall be required or, as the case
may be, the notice period shall terminate if and when such repudiation or
challenge becomes effective.
Section 7.03. BANKRUPTCY. If any Co-Borrower is liquidated or declared
bankrupt, the A Loan, all interest accrued on it and any other amounts payable
under this Agreement will become immediately due and payable without any
presentment, demand, protest or notice of any kind, all of which each
Co-Borrower waives.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. SAVING OF RIGHTS. (a) The rights and remedies of IFC in
relation to any misrepresentation or breach of warranty on the part of the
Co-Borrowers shall not be prejudiced by any investigation by or on behalf of IFC
into the affairs of the Co-Borrowers, by the execution or the performance of
this Agreement or by any other act or thing which may be done by or on behalf of
IFC in connection with this Agreement and which might, apart from this Section,
prejudice such rights or remedies.
(b) No course of dealing or waiver by IFC in connection with any
condition of Disbursement of the A Loan under this Agreement shall impair any
right, power or remedy of IFC with respect to any other condition of
Disbursement, or be construed to be a waiver thereof; nor shall the action of
IFC with respect to any Disbursement affect or impair any right, power or remedy
of IFC with respect to any other Disbursement.
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(c) Unless otherwise notified to the Co-Borrowers by IFC and without
prejudice to the generality of Section 8.01(b), the right of IFC to require
compliance with any condition under this Agreement which may be waived by IFC
with respect to any Disbursement is expressly preserved for the purposes of any
subsequent Disbursement.
(d) No course of dealing and no failure or delay by IFC in exercising,
in whole or in part, any power, remedy, discretion, authority or other right
under this Agreement or any other agreement shall waive or impair, or be
construed to be a waiver of or an acquiescence in, such or any other power,
remedy, discretion, authority or right under this Agreement, or in any manner
preclude its additional or future exercise; nor shall the action of IFC with
respect to any default, or any acquiescence by it therein, affect or impair any
right, power or remedy of IFC with respect to any other default.
Section 8.02. NOTICES. Any notice, request or other communication to be
given or made under this Agreement shall be in writing. Subject to Sections
6.03(i) and (h) (REPORTING REQUIREMENTS) and Section 8.05(f) (APPLICABLE LAW AND
JURISDICTION), any such communication may be delivered by hand, airmail,
facsimile or established courier service to the party's address specified below
or at such other address as such party notifies to the other party from time to
time, and will be effective upon receipt.
For the Co-Borrowers:
PriceSmart, Inc.
4649 Morena Blvd.
San Diego, CA 92117-3650
Facsimile: (858) 581-4707
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For IFC:
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
United States of America
Facsimile: (202) 974-4390
(202) 974-4461
Attention: Director, Latin America and Caribbean Department
With a copy (in the case of communications relating to payments)
sent to the attention of the Senior Manager, Financial Operations
Unit, at:
Facsimile: 202-974-4371.
Section 8.03. ENGLISH LANGUAGE. (a) All documents to be provided or
communications to be given or made under this Agreement shall be in the English
language.
(b) To the extent that the original version of any document to be
provided, or communication to be given or made, to IFC under this Agreement or
any other Transaction Document is in a language other than English, that
document or communication shall be accompanied by an English translation
certified by an Authorized Representative to be a true and correct translation
of the original. IFC may, if it so requires, obtain an English translation of
any document or communication received in another language other than English at
the cost and expense of the Co-Borrowers. IFC may deem any such English
translation to be the governing version between the Co-Borrowers and IFC.
Section 8.04. TERM OF AGREEMENT. This Agreement shall continue in force
until all monies payable under it have been fully paid in accordance with its
provisions.
Section 8.05. APPLICABLE LAW AND JURISDICTION. (a) This Agreement is
governed by, and shall be construed in accordance with, the laws of the State of
New York, United States of America.
(b) Each Co-Borrower irrevocably agrees that any legal action, suit or
proceeding arising out of or relating to this Agreement or any other Transaction
Document to which it is a party may be brought by IFC in the courts of the
United States of America located in the Southern District of New York. By the
execution of this Agreement, each Co-Borrower irrevocably submits to the
non-exclusive jurisdiction of any such court in any such action, suit or
proceeding. Final judgment against the Co-Borrowers in any such action, suit or
proceeding shall be conclusive and may be enforced in any other jurisdiction,
including the Country, by suit on the
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judgment, a certified or exemplified copy of which shall be conclusive evidence
of the judgment, or in any other manner provided by law.
(c) Nothing in this Agreement shall affect the right of IFC to commence
legal proceedings or otherwise sue the Co-Borrowers in the Country or any other
appropriate jurisdiction, or concurrently in more than one jurisdiction, or to
serve process, pleadings and other legal papers upon the Co-Borrowers in any
manner authorized by the laws of any such jurisdiction.
(d) Each Co-Borrower hereby irrevocably designates, appoints and
empowers CT Corporation System, 111 Eighth Avenue, 13th Floor, New York, NY
10011 as its authorized agent solely to receive for and on its behalf service of
summons or other legal process in any action, suit or proceeding IFC may bring
in the State of New York.
(e) As long as this Agreement or any other Transaction Document to
which the Co-Borrowers are a party remains in force, each Co-Borrower shall
maintain a duly appointed and authorized agent to receive for and on its behalf
service of any summons, complaint or other legal process in any action, suit or
proceeding IFC may bring in New York, New York, United States of America, with
respect to this Agreement or that other Transaction Document. Each Co-Borrower
shall keep IFC advised of the identity and location of such agent.
(f) Each Co-Borrower also irrevocably consents, if for any reason the
Co-Borrower's authorized agent for service of process of summons, complaint and
other legal process in any action, suit or proceeding is not present in New
York, New York, to the service of such papers being made out of those courts by
mailing copies of the papers by registered United States air mail, postage
prepaid, to the Co-Borrowers at their addresses specified pursuant to Section
8.02 (NOTICES). In such a case, IFC shall also send by facsimile, or have sent
by facsimile, a copy of the papers to the Co-Borrowers.
(g) Service in the manner provided in this Section 8.05 in any action,
suit or proceeding will be deemed personal service, will be accepted by the
Co-Borrowers as such and will be valid and binding upon the Co-Borrowers for all
purposes of any such action, suit or proceeding.
(h) Each Co-Borrower irrevocably waives to the fullest extent permitted
by applicable law:
(i) any objection which it may have now or in the future to
the laying of the venue of any action, suit or
proceeding in any court referred to in this Section; and
(ii) any claim that any such action, suit or proceeding has
been brought in an inconvenient forum.
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(i) To the extent that any Co-Borrower may be entitled in any
jurisdiction to claim for itself or its assets immunity in respect of its
obligations under this Agreement or any other Transaction Document to which each
such Co-Borrower is a party from any suit, execution, attachment (whether
provisional or final, in aid of execution, before judgment or otherwise) or
other legal process or to the extent that in any jurisdiction that immunity
(whether or not claimed) may be attributed to it or its assets, each Co-Borrower
irrevocably agrees not to claim and irrevocably waives such immunity to the
fullest extent permitted now or in the future by the laws of such jurisdiction.
(j) Each Co-Borrower hereby acknowledges that IFC shall be entitled
under applicable law, including the provisions of the International
Organizations Immunities Act, to immunity from a trial by jury in any action,
suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby or any other Transaction Document to which each
such Co-Borrower is a party, brought against IFC in any court of the United
States of America. Each Co-Borrower hereby waives any and all rights to demand a
trial by jury in any action, suit or proceeding arising out of or relating to
this Agreement or any other Transaction Document to which each such Co-Borrower
is a party or the transactions contemplated by this Agreement or those
Transaction Documents, brought against IFC in any forum in which IFC is not
entitled to immunity from a trial by jury.
(k) To the extent that any Co-Borrower may, in any suit, action or
proceeding brought in any of the courts referred to in Section 8.05(b) or a
court of the Country or elsewhere arising out of or in connection with this
Agreement or any other Transaction Document to which each such Co-Borrower is a
party, be entitled to the benefit of any provision of law requiring IFC in such
suit, action or proceeding to post security for the costs of such Co-Borrower,
or to post a bond or to take similar action, each Co-Borrower hereby irrevocably
waives such benefit, in each case to the fullest extent now or in the future
permitted under the laws of the Country or, as the case may be, the jurisdiction
in which such court is located.
Section 8.06. DISCLOSURE OF INFORMATION. (a) IFC may disclose any
documents or records of, or information about, this Agreement or any other
Transaction Document, or the assets, business or affairs of the Co-Borrowers to:
(i) its outside counsel, auditors and rating agencies; and
(ii) any other Person as IFC may deem appropriate in
connection with any proposed sale, transfer, assignment
or other disposition of IFC's rights under this
Agreement or any Transaction Document or otherwise for
the purpose of exercising any power, remedy, right,
authority, or discretion relevant to this Agreement or
any other Transaction Document.
(b) Each Co-Borrower acknowledges and agrees that, notwithstanding the
terms of any other agreement between such Co-Borrower and IFC, a disclosure of
information by IFC in the circumstances contemplated by Section 8.06(a) does not
violate any duty owed to the Co-Borrowers under this Agreement or under any such
other agreement.
-54-
Section 8.07. SUCCESSORS AND ASSIGNEES. This Agreement binds and
benefits the respective successors and assignees of the parties. However, the
Co-Borrowers may not assign or delegate any of their rights or obligations under
this Agreement without the prior consent of IFC.
Section 8.08. JOINT AND SEVERAL LIABILITY. The liability of the
Co-Borrowers under this Agreement shall be joint and several.
Section 8.09. AMENDMENTS, WAIVERS AND CONSENTS. Any amendment or waiver
of, or any consent given under, any provision of this Agreement shall be in
writing and, in the case of an amendment, signed by the parties.
Section 8.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which is an original, but all of which together constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
in their respective names as of the date first above written.
PRICESMART INC.
By: /s/ Gilbert A. Partida
Name: Gilbert A. Partida
Title: President/CEO
PSMT CARIBE INC.
By: /s/ Allan C. Youngberg
Name: Allan C. Youngberg
Title: Treasurer/Chief Financial Officer
PSMT TRINIDAD/TOBAGO LTD.
By: /s/ Joseph Eseau
Name: Joseph Eseau
Title: Chairman
-55-
INTERNATIONAL FINANCE CORPORATION
By: /s/ Mary Ellen Iskenderian
Name: Mary Ellen Iskenderian
Title: Manager Latin America and Caribbean Department
-56-
[Intentionally left blank]
-57-
ANNEX A
Page 1 of 3
BORROWER/PROJECT AUTHORIZATIONS
(See Sections 4.01(d) and 5.01(e) of the Loan Agreement)
Section (1). AUTHORIZATIONS ALREADY OBTAINED
(a) _______________
(b) _______________
(c) _______________
Section (2). AUTHORIZATIONS TO BE OBTAINED PRIOR TO FIRST DISBURSEMENT
(d) _______________
(e) _______________
(f) _______________
(g) _______________
(h) _______________
(i) _______________
[Section (3). AUTHORIZATIONS TO BE OBTAINED NO LATER THAN [INSERT DATE]
(j) _______________
(k) _______________
(l) _______________
(m) _______________
-58-
-59-
ANNEX B
Page 1 of 1
INSURANCE REQUIREMENTS
(See Section 6.04(a) of the Loan Agreement)
Section (1). CONSTRUCTION PHASE
(a) Construction All Risks, based on full contract value and including:
(i) Riot and Strike
(ii) Debris Removal
(iii) Extra Expenses
(iv) Maintenance
(v) Third Party Liability
(b) Advance Loss of Profits
Section (2). OPERATIONAL PHASE
(a) Fire and named perils or All Risks, based on replacement
cost of assets
(b) Business Interruption
(c) Third Party Liability
Section (3). AT ALL TIMES
Such insurances as required by local legislation.
-60-
ANNEX C
Page 1 of 2
ASSETS OF THE CO-BORROWERS TO BE GRANTED AS SECURITY
COSTA RICA:
1. Immovable Assets and Equipment:
PriceSmart Escazu Land
Autopista Prospero Fernandez Building
Del Peaje 200mts. oeste mano izquierda FF&E
Escazu, Costa Rica, C.A.
2. Movable Assets: Inventory
EL SALVADOR:
1. Immovable Assets and Equipment:
PriceSmart Los Heroes Land
Urbanizaci--n Siglo XXI, Blvd. Building
Tutunichapa No. 1 FF&E
San Salvador
2. Movable Assets: Inventory
HONDURAS:
1. Immovable Assets and Equipment:
PriceSmart Tegucigalpa FF&E
Colonia Florencia
Entre Ferreteria Rene J. Handal #3
Y Multi Plaza Mall
Tegucigalpa, Honduras, C.A.
2. Movable Assets: Inventory
-61-
ANNEX C
Page 2 of 2
DOMINICAN REPUBLIC:
1. Immovable Assets and Equipment:
PriceSmart Dominicana S.A. Land
Av. Charles Summer 54 Building
Santo Domingo, Rep. Dominicana FF&E
PriceSmart EastSide. Land
Carretera Mella No. 43 Building
Km. 91/2 Urb. Dona FF&E
Idalia II, Santo Domingo, R.D.
2. Movable Assets: Inventory
TRINIDAD
Port of Spain Site.
1. Immovable Assets and Equipment Building
2. Movable Assets: FF&E
-62-
ANNEX D
Page 1 of 2
PRICESMART, INC, PSMT CARIBE, INC & PSMT TRINIDAD/TOBAGO LTD.
LIST OF LIENS
PROPERTY ADDRESS LIEN HOLDER AMOUNT EXPIRY
(000's)
COSTA RICA
PriceSmart Zapote Citibank SA. Costa Rica.
PriceSmart Costa Rica, SA Land, building and ff&e $5,254 10/04
Frente al Registro Nacional
Zapote, San Jose, Costa Rica
PriceSmart Escazu Banex SA. Costa Rica
Autopista Prospero Fernandez Land, building and ff&e $5,900 05/06
Del Peaje 200mts.
oeste mano izquierda
Escazu, Costa Rica, C.A.
PriceSmart Heredia Banco Cuscatlan, SA.
Carretera Hacia Heredia Costa Rica
De Atlas Electrica 300mts, Land, building and ff&e $3,760 06/05
norte mano derecha
San Pablo de Heredia,
Costa Rica, C.A.
EL SALVADOR
PriceSmart Santa Elena Citibank NA,
Ubicacion Madre Selva San Salvador.
Blvd. Santa Elena Sur Land, building and ff&e $4,562 12/04
Calle Cortez Blanco y
Avenida El Pepeto
Antiguo Cuscatlan, La Libertad
-63-
ANNEX D
Page 2 of 2
PROPERTY ADDRESS LIEN HOLDER AMOUNT EXPIRY
(000's)
HONDURAS
PriceSmart San Pedro Sula Citibank SA. Honduras.
Centro Comercial Mega Plaza, Banco Del Pais SA.
Edifico Blanco de Londres Honduras.
3er y 4ato piso
Boulevard Salida a La Lima, Cortes Land, building and ff&e $3,360 02/05
San Pedro Sula, Honduras
PriceSmart Tegucigalpa Banco Ficohsa.
Colonia Florencia Honduras
Entre Ferreteria Rene J. Handal #3 Inventory $2,500 06/01
Y Multi Plaza Mall
Tegucigalpa, Honduras, C.A.
DOMINICAN REPUBLIC
PriceSmart Santo Domingo Banco Del Progresso, SA.
PriceSmart Dominicana S.A. Dominican Republic.
Av. Charles Summer 54 Land, building, ff&e and $7,000 03/01
Santo Domingo, inventory $2,000 06/01
Rep. Dominicana
Bancredito, SA.
PriceSmart Dominicana S.A. Dominican Republic.
Estrella Sadhala 22 Land, building, ff&e and $3,780 02/05
Santiago de los Caballeros, inventory $2,000 07/01
Rep. Dominicana
TRINIDAD
Chaguanas Royal Bank of Trinidad
Off Endevour Flyover and Tobago. Trinidad.
Chaguanas, Land, building, ff&e and $6,000 06/07
Trinidad, W.I. inventory
-64-
SCHEDULE 1
Page 1 of 2
FORM OF CERTIFICATE OF INCUMBENCY AND AUTHORITY
(See Section 1.01 and Section 5.01(m) of the Loan Agreement)
[Borrower's Letterhead]
[Date]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
United States of America
Attention: Director, Latin America and Caribbean Department
Ladies and Gentlemen:
CERTIFICATE OF INCUMBENCY AND AUTHORITY
With reference to the Loan Agreement among PriceSmart Inc., PSMT Caribe
Inc. and PSMT Trinidad/Tobago Limited, dated as of January 26, 2001 (the "Loan
Agreement"), I, the undersigned [Chairman/Director] of PriceSmart Inc., duly
authorized to do so, hereby certify that the following are the names, offices
and true specimen signatures of the persons [each] [any two] of whom are, and
will continue to be, authorized:
(a) to sign on behalf of the Co-Borrowers the requests for the
disbursement of funds provided for in Section 3.02 of the Loan Agreement
(b) to sign the certifications provided for in Section 5.02 and Section
5.03 of the Loan Agreement; and
-65-
SCHEDULE 1
Page 2 of 2
(c) to take any other action required or permitted to be taken, done,
signed or executed under the Loan Agreement or any other agreement to which IFC
and the Co-Borrowers may be parties.
*NAME OFFICE SPECIMEN SIGNATURE
--------------------- ---------------------- ----------------
--------------------- ---------------------- ----------------
--------------------- ---------------------- ----------------
You may assume that any such person continues to be so authorized until
you receive authorized written notice from PriceSmart Inc. that they, or any of
them, is no longer so authorized.
Yours truly,
PRICESMART INC.
By ________________________
[Chairman/Director]
- ----------
* Designations may be changed by the Borrower at any time by issuing a new
Certificate of Incumbency and Authority authorized by the Board of Directors
of the Borrower where applicable.
-66-
SCHEDULE 2
Page 1 of 4
FORM OF REQUEST FOR DISBURSEMENT (A LOAN)
(See Section 3.02 and Section 5.03 of the Loan Agreement)
[Borrower's Letterhead]
[Date]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
United States of America
Attention: Director, Latin America and Caribbean Department
Ladies and Gentlemen:
Investment No. 10296
REQUEST FOR A LOAN DISBURSEMENT NO. [ ]*
1. Please refer to the Loan Agreement (the "Loan Agreement") dated as of January
26, 2001, among PriceSmart Inc., PSMT Caribe Inc. and PSMT Trinidad/Tobago
Limited (the "Co-Borrowers") and International Finance Corporation ("IFC").
Terms defined in the Loan Agreement have their defined meanings whenever used in
this request. PSMT Caribe Inc. and PSMT Trinidad Tobago Limited each have
[nominated] [appointed] PriceSmart Inc. ("PriceSmart") as its agent for purposes
of executing and delivering this Disbursement Request and the related
Disbursement Receipt on behalf of the Co-Borrowers.
[2. PriceSmart irrevocably request the disbursement on ____________, 200_ (or as
soon as practicable thereafter) of the amount of ____________ Dollars
($____________) under the A Loan (the "Disbursement") in accordance with the
provisions of Section 3.02 of the Loan Agreement. You are requested to pay such
amount to the account in New York of PriceSmart Inc., [Name of correspondent
Bank], Account No. ____________ at [Name and Address of Bank] for further credit
to Co-Borrowers as follows:
- -----------------------------------
* Each to be numbered in series.
-67-
SCHEDULE 2
Page 2 of 4
(a) $__________ to Account No. ___________ of PSMT Caribe Ltd. at [Name
and Address of Bank] in the British Virgin Islands; and
(b) $__________ to Account No. ____________ of PSMT Trinidad/Tobago
Limited at [Name and Address of Bank] in [City], Trinidad and
Tobago.(1)
[2. PriceSmart irrevocably request the disbursement on ____________, 200_ (or as
soon as practicable thereafter) of the amount of ____________ Dollars
($____________) under the A Loan (the "Disbursement") in accordance with the
provisions of Section 3.02 of the Loan Agreement. You are requested to pay such
amount to the account in New York of [CREDITOR], [Name of correspondent Bank],
Account No. ____________ at [Name and Address of Bank] .]
3. There is enclosed a signed but undated receipt for the amount of the
Disbursement. The Co-Borrowers authorize IFC to date such receipt with the date
of actual disbursement by IFC.
4. For the purpose of Section 5.02 and Section 5.03 of the Loan Agreement,
PriceSmart, as agent for each of the other Co-Borrowers, certifies as follows:
(a) PriceSmart has been appointed as agent for each of the Co-Borrowers
(other than PriceSmart) for purposes of making, on behalf of each such
Co-Borrower, the certifications set forth herein;
(b) no Event of Default and no Potential Event of Default has occurred
and is continuing;
(c) the proceeds of the Disbursement are at the date of this request
needed by the Co-Borrowers for the purpose of the Project, or will be needed for
such purpose within three (3) months of such date;
- ----------------------------------
(1) Any exchange control consents, if required (e.g. for IFC to remit to
overseas account), must be provided by the Co-Borrowers to IFC prior to
disbursement.
-68-
SCHEDULE 2
Page 3 of 4
(d) since the date of the Loan Agreement nothing has occurred which has
or could reasonably be expected to have a Material Adverse Effect;
(e) since [insert date] [the date of the Loan Agreement]** none of the
Co-Borrowers has incurred any material loss or liability (except such
liabilities as may be incurred by the Co-Borrowers in accordance with Section
6.02 of the Loan Agreement);
(f) the representations and warranties made in Article IV of the Loan
Agreement are true on the date of this request and will be true on the date of
Disbursement with the same effect as if such representations and warranties had
been made on and as of each such date (but in the case of Section 4.01(c),
without the words in parenthesis);
(g) the proceeds of the Disbursement are not in reimbursement of, or to
be used for, expenditures in the territories of any country which is not a
member of the World Bank or for goods produced in or services supplied from any
such country;
(h) after giving effect to the Disbursement, none of the Co-Borrowers
will be in violation of:
(i) its Charter;
(ii) any provision contained in any document to which it is a
party (including the Loan Agreement) or by which it is
bound; or
(iii) any law, rule, regulation, Authorization or agreement or
other document binding on it directly or indirectly,
limiting or otherwise restricting its borrowing power or
authority or its ability to borrow; and
- ----------------------------
** The date should be the same as is used in Section 4.01 (h)(i). Use the
second formulation if the Borrower is a start-up company which did not
deliver meaningful financial statements prior to the date of the Loan
Agreement.
-69-
SCHEDULE 2
Page 4 of 4
(iv) since [insert the dates of the latest version of the
respective Charters] no amendment has been made to the
Charters of any of the Co-Borrowers [.] [, except for:
(list all amendments).]
The above certifications are effective as of the date of this Request
for Disbursement and shall continue to be effective as of the date of the
Disbursement. If any of these certifications is no longer valid as of or prior
to the date of the requested Disbursement, the Co-Borrowers undertake to
immediately notify IFC.
Yours truly,
PRICESMART INC.
By ________________________
Authorized Representative
Copy to: Manager, Financial Operations Unit
International Finance Corporation
-70-
SCHEDULE 3
Page 1 of 1
FORM OF LOAN DISBURSEMENT RECEIPT
(See Section 3.02 of the Loan Agreement)
[Borrower's Letterhead]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
United States of America
Attention: Manager, Financial Operations Unit
Ladies and Gentlemen:
Investment No. 10296
DISBURSEMENT RECEIPT NO. [ ]* (A LOAN)
We, PriceSmart Inc., hereby acknowledge on behalf of PriceSmart Inc.,
PSMT Caribe Inc. and PSMT Trinidad/Tobago Limited ("the Co-Borrowers"), receipt
on the date hereof, of the sum of _________________ Dollars ($_________)
disbursed to us by International Finance Corporation ("IFC") under the A Loan in
the amount of twenty-two million Dollars ($22,000,000) provided for in the Loan
Agreement dated as of January 26, 2001 among the Co-Borrowers and International
Finance Corporation.
Yours truly,
PRICESMART INC.
By ____________________________
Authorized Representative***
- --------------------------
* To correspond with number of the Disbursement request. See Schedule 2.
*** As named in the Borrower's Certificate of Incumbency and Authority (see
Schedule I).
-71-
SCHEDULE 4
Page 1 of 2
FORM OF SERVICE OF PROCESS LETTER
[Letterhead of Agent for Service of Process]
(See Section 5.01(n) of the Loan Agreement)
[Date]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
Attention: Director, Latin America and Caribbean Department
Re: [Country/_________]
Dear Sirs:
Reference is made to Section 8.05 of the Loan Agreement dated as of
January 26, 2001 (the "LOAN AGREEMENT") and Section 2.10 of the C Loan
Agreement, among PriceSmart, Inc., PSMT Caribe Inc. and PSMT Trinidad/Tobago
Limited (collectively, the "CO-BORROWERS") and International Finance Corporation
("IFC"). Unless otherwise defined herein, capitalized terms used herein shall
have the meaning specified in the Loan Agreement.
Pursuant to Section 8.05(d) of the Loan Agreement, each of the
Co-Borrowers has irrevocably designated and appointed the undersigned, CT
Corporation System, with offices currently located at 111 Eighth Avenue, 13th
Floor, New York, New York 10011, as its authorized agent to receive for and on
its behalf service of process in any legal action or proceeding with respect to
the Loan Agreement and the other Transaction Documents to which it is a party in
the courts of the United States of America for the Southern District of New
York.
The undersigned hereby informs you that it has irrevocably accepted that
appointment as process agent as set forth in Section 8.05(d) of the Loan
Agreement from January 26, 2001 until September 15, 2010 and agrees with you
that the undersigned (i) shall inform IFC promptly in writing of any change of
its address in New York, (ii) shall perform its obligations as such process
agent in accordance with the relevant provisions of Section 8.05 of the Loan
Agreement, and (iii) shall forward promptly to the Co-Borrowers any legal
process received by the undersigned in its capacity as process agent.
-72-
SCHEDULE 4
Page 2 of 2
As process agent, the undersigned and its successor or successors agree
to discharge the above-mentioned obligations and will not refuse fulfillment of
such obligations as provided under Section 8.05 of the Loan Agreement.
Very truly yours,
[CT Corporation System]
By: ____________________
Title:
cc: PriceSmart Inc.
PSMT Caribe Inc.
PSMT Trinidad Tobago Limited
-73-
SCHEDULE 5(A)
Page 1 of 6
FORM OF LOCAL COUNSEL'S LEGAL OPINION(2)
(See Section 5.01(e) of the Loan Agreement)
[Date]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
U.S.A.
RE: PRICESMART, INC.
Dear Sirs,
We have acted as legal counsel to International Finance Corporation ("IFC") in
connection with (i) the loan to PriceSmart, Inc. ("PriceSmart"), PSMT Caribe,
Inc. ("PSMT Caribe") and PSMT Trinidad/Tobago Limited ("PSMT Trinidad" and,
collectively with PriceSmart and PSMT Caribe, the "Co-Borrowers"), as joint and
several borrowers, in the principal amount of twenty-two million Dollars
($22,000,000) pursuant to the Loan Agreement dated January 26, 2001 (the "IFC A
Loan Agreement") by and among the Co-Borrowers and IFC, and (ii) the loan to the
Co-Borrowers jointly and severally in the principal amount of ten million
Dollars ($10,000,000) pursuant to the IFC C Loan Agreement dated January 26,
2001 (the "IFC C Loan Agreement") by and among the Co-Borrowers and IFC. Unless
otherwise defined herein, capitalized terms used herein shall have the meaning
set forth in the IFC A Loan Agreement.
This opinion is furnished to you pursuant to Section 5.01(e) of the IFC A Loan
Agreement.
In connection with the opinion set out below, we have examined the following
documents:
1. the IFC A Loan Agreement;
2. the IFC C Loan Agreement;
- ------------------------
(2) FORM OF LEGAL OPINION FROM LOCAL COUNSEL IN TRINIDAD & TOBAGO AND BRITISH
VIRGIN ISLANDS.
-74-
SCHEDULE 5(A)
Page 2 of 6
3. the Share Retention Agreement;
4. the Pledge of Shares Agreement, dated January 26, 2001, by and
among PriceSmart, [PSMT Caribe][PSMT Trinidad] and IFC (the
"Share Pledge Agreement");
5. the asset pledge agreement(3), dated __________ (the "Asset Pledge
Agreement"), among _______________ and IFC;
6. the mortgage agreement(4) dated __________________ (the "Mortgage
Agreement"), among ______________ and IFC;
7. a certified copy of the minutes of the extraordinary general
meeting of ____________________held on ________, ________,
________, and ________, respectively;
8. a certificate of ______, dated ________, and ___________,
respectively, evidencing the registration of the Security
Agreements (as defined below);
9. [insert relevant corporate documents]; and
10. such other documents as we have considered relevant for the
purposes of issuing this opinion.
The Asset Pledge Agreement, the Mortgage Agreement, and the Share Pledge
Agreement, are hereinafter referred to collectively as the "Security
Agreements"; the IFC A Loan Agreement, the IFC C Loan Agreement, and the Share
Retention Agreement, and the Security Agreements are hereinafter referred to
individually as a "Document" and collectively referred to as the "Documents".
In connection with this opinion, we have examined the originals, or certified,
conformed or reproduction copies, of all records, agreements, instruments and
documents as we have deemed relevant or necessary as the basis for the opinions
hereinafter expressed. In stating our opinion, we have assumed (i) the
genuineness of all signatures on original or certified copies of all copies
submitted to us as certified or reproduction copies, and (ii) that each of the
Documents (other than the Security Agreements) are legal, valid, binding and
enforceable under the laws of the State of New York, United States of America.
Based upon the foregoing and subject to the qualifications and limitations set
forth herein, we are of the opinion that:
- ----------------------------
(3) This refers to the agreement evidencing the first ranking pledge of
movable assets in favor of IFC.
(4) This refers to the agreement evidencing the first ranking mortgage over
all the fixed assets in favor of IFC.
-75-
SCHEDULE 5(A)
Page 3 of 6
1. [PSMT Trinidad][PSMT Caribe] (the "Company") is a company duly organized
and existing under the laws [Trinidad & Tobago][British Virgin Islands] and has
full power and authority required by law to conduct its business in which it is
engaged.
2. The Articles of Association of the Company are in full compliance with
the laws and regulations of [Trinidad & Tobago][British Virgin Islands] and have
not been amended since _______________;
3. The Company has a share capital in the amount of __________ ( ),
divided into __________ shares of ________ par value each, which share
capital is duly subscribed and entirely paid-in; to the best of our knowledge
and on the basis of our review of the Company's [shareholders ledger], each
of PriceSmart and [NAME OF MINORITY SHAREHOLDER] owns _________% and ___%,
respectively, of the shares and voting rights constituting the share capital
of the Company.
4. The Company has full power and authority to enter into and perform its
obligations under each of the Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of each of such Documents.
5. The Company has duly executed and delivered each of the Documents to
which it is a party and each of such Documents constitutes its legal, valid and
binding obligations enforceable in accordance with its terms.
6. The execution, delivery and performance by the Company of any Document
to which it is a party will not violate (i) its Articles of Association or (ii)
any provisions of the laws of [Trinidad & Tobago][British Virgin Islands], or
(iii) to the best of my knowledge, after due inquiry, contravene or result in a
breach of, or constitute a default under, any mortgage, conditional sales
contract, bank loan, credit agreement or any other agreement or instrument to
which the Company is a party or by which the Company or any of its properties
may be bound.
7. Except as provided in Paragraph 8 below and except for licenses, permits
and consents which are of a routine nature and which are customarily granted in
due course after application, all governmental, corporate, creditors',
shareholders' and other necessary licenses, approvals and consents have been
obtained for:
7.1 the financing by IFC under the IFC A Loan Agreement and the IFC
C Loan Agreement;
7.2 the carrying on of the business of the Company as it is
presently carried on and is contemplated to be carried on;
-76-
SCHEDULE 5(A)
Page 4 of 6
7.3 the due execution and delivery of, and the performance under,
the Documents and any documents necessary or desirable in their
implementation; and
7.4 the remittance to IFC in Dollars of all monies payable in
respect of any of the Documents, the security created by the
Security Agreements.
8. The Security Agreements have been duly executed and delivered in
accordance with the laws of [Trinidad & Tobago][British Virgin Islands] and
confer a first ranking perfected security interest over the assets described
therein in favor of IFC; such Security Agreements have become unconditionally
and fully effective and do not violate or exceed the corporate purpose of the
Company, or contravene any provision of any applicable law or regulation
binding on the parties thereo.
9. Under the laws of [Trinidad & Tobago][British Virgin Islands],
neither the Company nor its property has any immunity from jurisdiction of
any court or from set-off or any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution or
otherwise).
10. To the best of our knowledge after due inquiry, no litigation,
investigation or proceeding of or before any Authority is pending against the
Company or its properties or revenue.
11. The choice of New York law as the governing law of the Documents
(other than the Security Agreements) is valid under the laws of
[Trinidad & Tobago][British Virgin Islands]; the submission to the
jurisdiction of the State of New York, United States of America, and the
appointment of the process agent contained in Section 8.05(d) of the IFC A
Loan Agreement and Section 2.11 of the IFC C Loan Agreement is irrevocable
binding on and enforceable against the Company. In this regard, we advice you
that an action brought against the Company in the courts of the State of New
York, in the manner contemplated by the Documents, would be considered an in
personam action under [Trinidad & Tobago][British Virgin Islands] law.
12. A judgment rendered by any New York State or Federal court sitting in
New York City against the Company in respect of the Documents, would be
enforceable against the Company in the courts of [Trinidad & Tobago]
[the British Virgin Islands], provided that the court in which enforcement is
sought determines that:
(a) such New York judgment has been rendered in an IN PERSONAM (as
opposed to an in rem) action and is strictly for the payment of
a certain sum of money;
-77-
SCHEDULE 5(A)
Page 5 of 6
(b) the obligation for which enforcement is sought does not violate
the law of [Trinidad & Tobago][the British Virgin Islands],
public policy (ordern publico) of [Trinidad & Tobago][the
British Virgin Islands], international treaties or agreements
binding upon [Trinidad & Tobago][the British Virgin Islands] or
generally accepted principles of international law;
(c) process in the New York action has been served personally on the
Company, or on the appropriate process agent;
(d) the New York judgment is a final judgment according to the laws
of the State of New York, United States of America;
(e) the New York judgment fulfills the necessary requirements to be
considered authentic by [Trinidad & Tobago][the British Virgin
Islands]'s court;
(f) the action on which the final judgment is rendered is not the
subject matter of a lawsuit among the same parties pending
before a court in [Trinidad & Tobago][British Virgin Islands];
(g) the court issuing the judgment is considered competent under
internationally accepted rules which are compatible with the
procedural laws of [Trinidad & Tobago][British Virgin Islands];
(h) the applicable procedures under the laws of [Trinidad][British
Virgin Islands] with respect to the enforcement of foreign
judgments (including the issuance of a letter rogatory by the
competent authority of such jurisdiction requesting enforcement
of such judgment and the certification of such judgment as
authentic by the corresponding authorities of such jurisdiction
in accordance with the laws thereof) is complied with; and
(i) the courts of the United States would enforce judgments from
[Trinidad & Tobago][British Virgin Islands] courts, as a matter
of reciprocity.
13. On the basis of the immunities and privileges provided in Article VI of
IFC's Articles of Agreement, all payments of principal, interest and other
amounts due under the IFC A Loan Agreement and the IFC C Loan Agreement, are
exempt from any taxes, fees or other charges of whatsoever nature now or at any
time levied or imposed by the Government of [Trinidad & Tobago][British Virgin
Islands] or by any department, agency, political subdivision or taxing authority
thereof or therein or by any organization of which [Trinidad & Tobago][British
Virgin
-78-
SCHEDULE 5(A)
Page 6 of 6
Islands] is a member; and the payments referred to herein may be made free and
clear of any deduction or withholding of whatever nature; there are no taxes,
duties (including stamp duties), fees or other charges required to be paid under
the laws of [Trinidad & Tobago][British Virgin Islands] in connection with the
execution, issuance or delivery of any Document or the performance or observance
of any of their respective terms.
The above opinion is given upon and subject to the following qualifications and
limitations:
(a) the enforcement of the Documents may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditor's rights generally;
(b) [insert other standard limitations]
This opinion is limited to questions arising under the laws of [Trinidad &
Tobago][British Virgin Islands] and we do not express any opinion as to the laws
of any jurisdiction other than those of [Trinidad & Tobago][British Virgin
Islands].
This opinion is solely for the benefit of IFC and may not be relied upon in any
manner or for any purpose by any other person.
Very truly yours,
We(5), as [Trinidad & Tobago][British Virgin Islands] counsel to the
Company concur with the opinions expressed hereinabove by [name of the law firm
of IFC's local counsel].
Very truly yours,
- ----------------------
(5) PriceSmart Counsel
-79-
SCHEDULE 5(B-1)
Page 1 of 6
FORM OF LOCAL COUNSEL'S LEGAL OPINION(6)
(See Section 5.01(f) of the Loan Agreement)
[Date]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
U.S.A.
RE: PRICESMART, INC.
Dear Sirs,
We have acted as legal counsel to International Finance Corporation ("IFC") in
connection with (i) the loan to PriceSmart, Inc. ("PriceSmart"), PSMT Caribe,
Inc. ("PSMT Caribe") and PSMT Trinidad/Tobago Limited ("PSMT Trinidad" and,
collectively with PriceSmart and PSMT Caribe, the "Co-Borrowers"), as joint and
several borrowers, in the principal amount of twenty-two million Dollars
($22,000,000) pursuant to the Loan Agreement dated January 26, 2001 (the "IFC A
Loan Agreement") by and among the Co-Borrowers and IFC, and (ii) the loan to the
Co-Borrowers jointly and severally in the principal amount of ten million
Dollars ($10,000,000) pursuant to the IFC C Loan Agreement dated January 26,
2001 (the "IFC C Loan Agreement") by and among the Co-Borrowers and IFC. Unless
otherwise defined herein, capitalized terms used herein shall have the meaning
set forth in the IFC A Loan Agreement.
This opinion is furnished to you pursuant to Section 5.01(f) of the IFC A Loan
Agreement.
In connection with the opinion set out below, we have examined the following
documents:
1. the IFC A Loan Agreement;
2. the IFC C Loan Agreement;
- ------------------------
(6) FORM OF LEGAL OPINION TO BE DELIVERED BY IFC'S COUNSEL IN EL SALVADOR,
DOMINICAN REPUBLIC, HONDURAS, AND COSTA RICA.
-80-
SCHEDULE 5(B-1)
Page 2 of 6
3. the Share Retention Agreement;
4. the Pledge of Shares Agreement, dated January 26, 2001, by and
among PSMT Caribe, [PriceSmart Dominicana][PriceSmart
Honduras][PriceSmart El Salvador][PriceSmart Costa Rica](7) and
IFC (the "Share Pledge Agreement");
5. the asset pledge agreement(8), dated __________ (the "Asset
Pledge Agreement"), among _______________ and IFC;
6. the mortgage agreement(9) dated __________________ (the
"Mortgage Agreement"), among ______________ and IFC;
7. a certified copy of the minutes of the extraordinary general
meeting of ____________________held on ________, ________,
________, and ________, respectively;
8. a certificate of ______, dated ________, and ___________,
respectively, evidencing the registration of the Security
Agreements (as defined below);
9. [insert relevant corporate documents]; and
10. such other documents as we have considered relevant for the
purposes of issuing this opinion.
The Asset Pledge Agreement, the Mortgage Agreement, and the Share Pledge
Agreement are hereinafter referred to collectively as the "Security Agreements";
the IFC A Loan Agreement, the IFC C Loan Agreement, and the Share Retention
Agreement, and the Security Agreements are hereinafter referred to individually
as a "Document" and collectively referred to as the "Documents".
In connection with this opinion, we have examined the originals, or certified,
conformed or reproduction copies, of all records, agreements, instruments and
documents as we have deemed relevant or necessary as the basis for the opinions
hereinafter expressed. In stating our opinion, we have assumed (i) the
genuineness of all signatures on original or certified copies of all copies
submitted to us as certified or reproduction copies, and (ii) that each of the
Documents (other than the Security Agreements) are legal, valid, binding and
enforceable under the laws of the State of New York, United States of America.
- ----------------------------
(7) As applicable.
(8) This refers to the agreement evidencing the first ranking pledge of the
movable assets in favor of IFC.
(9) This refers to the agreement evidencing the first ranking mortgage over all
the fixed assets in favor of IFC.
-81-
SCHEDULE 5(B-1)
Page 3 of 6
Based upon the foregoing and subject to the qualifications and limitations set
forth herein, we are of the opinion that:
1. [PriceSmart Guatemala][PriceSmart El Salvador][PriceSmart
Honduras][PriceSmart Costa Rica] ("Company") is a company duly organized
and existing under the laws of [Guatemala][El Salvador][Honduras][Costa
Rica] and has full power and authority required by law to conduct its
business in which it is engaged.
2. The Articles of Association of the Company are in full compliance with
the laws and regulations of the jurisdiction of its incorporation and have not
been amended since _______________.
3. The Company has a share capital in the amount of __________ ( ),
divided into __________ shares of ________ par value each, which share
capital is duly subscribed and entirely paid-in; to the best of our knowledge
and on the basis of our review of the Company's [shareholders ledger], each
of PSMT Caribe and [NAME OF MINORITY SHAREHOLDER] owns _________% and ___%,
respectively, of the shares and voting rights constituting the share capital
of the Company.
4. The Company has full power and authority to enter into and perform its
obligations under each of the Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of each of such Documents.
5. The Company has duly executed and delivered each of the Documents to
which it is a party and each of such Documents constitutes its legal, valid and
binding obligations enforceable in accordance with its terms.
6. The execution, delivery and performance by the Company of any Document
to which it is a party will not violate (i) its Articles of Association or (ii)
any provisions of the legislation of [Guatemala][El Salvador][Honduras][Costa
Rica], or (iii) to the best of my knowledge, after due inquiry, contravene or
result in a breach of, or constitute a default under, any mortgage, conditional
sales contract, bank loan, credit agreement or any other agreement or instrument
to which the Company is a party or by which the Company or any of its properties
may be bound.
7. Except as provided in Paragraph 8 below and except for licenses, permits
and consents which are of a routine nature and which are customarily granted in
due course after application, all governmental, corporate, creditors',
shareholders' and other necessary licenses, approvals and consents have been
obtained for:
-82-
SCHEDULE 5(B-1)
Page 4 of 6
7.5 the financing by IFC under the IFC A Loan Agreement and the IFC
C Loan Agreement;
7.6 the carrying on of the business of the Company as it is
presently carried on and is contemplated to be carried on;
7.7 the due execution and delivery of, and the performance under,
the Documents and any documents necessary or desirable in their
implementation; and
7.8 the remittance to IFC in Dollars of all monies payable in
respect of any of the Documents, the security created by the
Security Agreements.
8. The Security Agreements have been duly executed and delivered in
accordance with the laws of [INSERT NAME OF JURISDISTION] and confer a first
ranking perfected security interest over the assets described therein in favor
of IFC; such Security Agreements have become unconditionally and fully effective
and do not violate or exceed the corporate purpose of [INSERT THE NAME OF THE
SUBSIDIARY WHOSE ASSET IS BEING PLEDGED], as the case may be, or contravene any
provision of any applicable law or regulation binding on the parties thereo.
9. Under the laws of [NAME OF JURISDICTION], none of the Co-Borrowers or
[NAME OF SUBSIDIARY WHOSE ASSET IS BEING PLEDGED], nor their respective property
has any immunity from jurisdiction of any court or from set-off or any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise).
10. To the best of our knowledge after due inquiry, no litigation,
investigation or proceeding of or before any Authority is pending against the
Co-Borrowers or [INSERT THE NAME OF THE SUBSIDIARY WHOSE ASSET IS BEING PLEDGED]
or against their respective properties or revenues.
11. The choice of New York law as the governing law of the Documents (other
than the Security Agreements) is valid under the laws of [Guatemala][El
Salvador][Honduras][Costa Rica]; the submission to the jurisdiction of the State
of New York, United States of America, and the appointment of the process agent
contained in Section 8.05(d) of the IFC A Loan Agreement and Section 2.11 of the
IFC C Loan Agreement is irrevocable binding on and enforceable against the
Company or any Co-Borrower. In this regard, we advice you that an action brought
against the Company or any Co-Borrower in the courts of the State of New York,
in the manner contemplated by the Documents, would be considered an in personam
action under [Guatemala][El Salvador][Honduras][Costa Rica] law.
-83-
SCHEDULE 5(B-1)
Page 5 of 6
12. A judgment rendered by any New York State or Federal court sitting in
New York City against the Company or any Co-Borrower in respect of the
Documents, would be enforceable against the Company or any Co-Borrower in the
courts of [Guatemala][El Salvador][Honduras][Costa Rica], provided that the
court in which enforcement is sought determines that:
(a) such New York judgment has been rendered in an IN PERSONAM (as
opposed to an in rem) action and is strictly for the payment of
a certain sum of money;
(b) the obligation for which enforcement is sought does not violate
the law or public policy (ordern publico) of [Guatemala][El
Salvador][Honduras][Costa Rica], or international treaties or
agreements binding upon [Guatemala][El Salvador][Honduras][Costa
Rica] or generally accepted principles of international law;
(c) process in the New York action has been served personally on the
Company or any Co-Borrower, or on the appropriate process agent;
(d) the New York judgment is a final judgment according to the laws
of the State of New York, United States of America;
(e) the New York judgment fulfills the necessary requirements to be
considered authentic by [Guatemala][El Salvador][Honduras][Costa
Rica]'s court;
(f) the action on which the final judgment is rendered is not the
subject matter of a lawsuit among the same parties pending
before a court in [Guatemala][El Salvador][Honduras][Costa
Rica];
(g) the court issuing the judgment is considered competent under
internationally accepted rules which are compatible with the
procedural laws of [Guatemala][El Salvador][Honduras][Costa
Rica] [Trinidad] or [British Virgin Islands];
-84-
SCHEDULE 5(B-1)
Page 6 of 6
(h) the applicable procedures under the laws of [Guatemala][El
Salvador][Honduras][Costa Rica] to the enforcement of foreign
judgments (including the issuance of a letter rogatory by the
competent authority of such jurisdiction requesting enforcement
of such judgment and the certification of such judgment as
authentic by the corresponding authorities of such jurisdiction
in accordance with the laws thereof) is complied with; and
(i) the courts of the United States would enforce judgments from
[Guatemala][El Salvador][Honduras][Costa Rica] courts, as the
case may be, as a matter of reciprocity.
13. On the basis of the immunities and privileges provided in Article VI of
IFC's Articles of Agreement, all payments of principal, interest and other
amounts due under the IFC A Loan Agreement and the IFC C Loan Agreement, are
exempt from any taxes, fees or other charges of whatsoever nature now or at any
time levied or imposed by the Government of [Guatemala][El
Salvador][Honduras][Costa Rica] or by any department, agency, political
subdivision or taxing authority thereof or therein or by any organization of
which [Guatemala][El Salvador][Honduras][Costa Rica] is a member; and the
payments referred to herein may be made free and clear of any deduction or
withholding of whatever nature; there are no taxes, duties (including stamp
duties), fees or other charges required to be paid under the laws of
[Guatemala][El Salvador][Honduras][Costa Rica] in connection with the execution,
issuance or delivery of any Document or the performance or observance of any of
their respective terms.
The above opinion is given upon and subject to the following qualifications and
limitations:
(a) the enforcement of the Documents may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditor's rights generally;
(b) [insert other standard limitations]
This opinion is limited to questions arising under the laws of [Guatemala][El
Salvador][Honduras][Costa Rica] and we do not express any opinion as to the laws
of any jurisdiction other than those of [Guatemala][El Salvador][Honduras][Costa
Rica].
This opinion is solely for the benefit of IFC and may not be relied upon in any
manner or for any purpose by any other person.
Very Truly Yours,
-85-
SCHEDULE 5(B-2)
Page 1 of 6
FORM OF LOCAL COUNSEL'S LEGAL OPINION(10)
(See Section 5.01(f) of the Loan Agreement)
[Date]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
U.S.A.
RE: PRICESMART, INC.
Dear Sirs,
We have acted as legal counsel to International Finance Corporation ("IFC") in
connection with (i) the loan to PriceSmart, Inc. ("PriceSmart"), PSMT Caribe,
Inc. ("PSMT Caribe") and PSMT Trinidad/Tobago Limited ("PSMT Trinidad" and,
collectively with PriceSmart and PSMT Caribe, the "Co-Borrowers"), as joint and
several borrowers, in the principal amount of twenty-two million Dollars
($22,000,000) pursuant to the Loan Agreement dated January 26, 2001 (the "IFC A
Loan Agreement") by and among the Co-Borrowers and IFC, and (ii) the loan to the
Co-Borrowers jointly and severally in the principal amount of ten million
Dollars ($10,000,000) pursuant to the IFC C Loan Agreement dated January 26,
2001 (the "IFC C Loan Agreement") by and among the Co-Borrowers and IFC. Unless
otherwise defined herein, capitalized terms used herein shall have the meaning
set forth in the IFC A Loan Agreement.
This opinion is furnished to you pursuant to Section 5.01(f) of the IFC A Loan
Agreement.
- ---------------------
(10) FORM OF LEGAL OPINION TO BE DELIVERED BY IFC'S COUNSEL IN BARBADOS.
-86-
SCHEDULE 5(B-2)
Page 2 of 6
In connection with the opinion set out below, we have examined the following
documents:
1. the IFC A Loan Agreement;
2. the IFC C Loan Agreement;
3. the Share Retention Agreement;
4. the Pledge of Shares Agreement, dated January 26, 2001, by and
among PriceSmart, PSMT Barbados and IFC (the "Share Pledge
Agreement");
5. a certified copy of the minutes of the extraordinary general
meeting of ____________________held on ________,;
6. a certificate of ______________, evidencing the registration of
the Share Pledge Agreement;
7. [insert relevant corporate documents]; and
8. such other documents as we have considered relevant for the
purposes of issuing this opinion.
The Share Pledge Agreement, the IFC A Loan Agreement, the IFC C Loan Agreement,
and the Share Retention Agreement, are hereinafter referred to individually as a
"Document" and collectively referred to as the "Documents".
In connection with this opinion, we have examined the originals, or certified,
conformed or reproduction copies, of all records, agreements, instruments and
documents as we have deemed relevant or necessary as the basis for the opinions
hereinafter expressed. In stating our opinion, we have assumed (i) the
genuineness of all signatures on original or certified copies of all copies
submitted to us as certified or reproduction copies, and (ii) that each of the
Documents (other than the Security Agreements) are legal, valid, binding and
enforceable under the laws of the State of New York, United States of America.
Based upon the foregoing and subject to the qualifications and limitations set
forth herein, we are of the opinion that:
1. PSMT Barbados ("Company") is a company duly organized and existing under
the laws of Barbados and has full power and authority required by law to
conduct its business in which it is engaged.
-87-
SCHEDULE 5(B-2)
Page 3 of 6
2. The Articles of Association of the Company are in full compliance with
the laws and regulations of the jurisdiction of its incorporation and have not
been amended since _______________.
3. The Company has a share capital in the amount of __________ ( ),
divided into __________ shares of ________ par value each, which share
capital is duly subscribed and entirely paid-in; to the best of our knowledge
and on the basis of our review of the Company's [shareholders ledger], each
of PiceSmart and [NAME OF MINORITY SHAREHOLDER] owns _________% and ___%,
respectively, of the shares and voting rights constituting the share capital
of the Company.
4. The Company has full power and authority to enter into and perform its
obligations under each of the Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of each of such Documents.
5. The Company has duly executed and delivered each of the Documents to
which it is a party and each of such Documents constitutes its legal, valid and
binding obligations enforceable in accordance with its terms.
6. The execution, delivery and performance by the Company of any Document
to which it is a party will not violate (i) its Articles of Association or (ii)
any provisions of the legislation of Barbados, or (iii) to the best of my
knowledge, after due inquiry, contravene or result in a breach of, or constitute
a default under, any mortgage, conditional sales contract, bank loan, credit
agreement or any other agreement or instrument to which the Company is a party
or by which the Company or any of its properties may be bound.
7. Except as provided in Paragraph 8 below and except for licenses, permits
and consents which are of a routine nature and which are customarily granted in
due course after application, all governmental, corporate, creditors',
shareholders' and other necessary licenses, approvals and consents have been
obtained for:
7.9 the financing by IFC under the IFC A Loan Agreement and the IFC
C Loan Agreement;
7.10 the carrying on of the business of the Company as it is
presently carried on and is contemplated to be carried on;
7.11 the due execution and delivery of, and the performance under,
the Documents and any documents necessary or desirable in their
implementation; and
-88-
SCHEDULE 5(B-2)
Page 4 of 6
7.12 the remittance to IFC in Dollars of all monies payable in
respect of any of the Documents, the security created by the
Share Pledge Agreement.
8. The Share Pledge Agreement has been duly executed and delivered in
accordance with the laws of Barbados and confer a first ranking perfected
security interest over the shares described therein in favor of IFC; such Share
Pledge Agreement has become unconditionally and fully effective and do not
violate or exceed the corporate purpose of PSMT Barbados or contravene any
provision of any applicable law or regulation binding on the parties thereo.
9. Under the laws of Barbados, none of the Co-Borrowers or PSMT Barbados,
nor their respective properties has any immunity from jurisdiction of any court
or from set-off or any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution or otherwise).
10. To the best of our knowledge after due inquiry, no litigation,
investigation or proceeding of or before any Authority is pending against the
Co-Borrowers or PSMT Barbados or against their respective properties or
revenues.
11. The choice of New York law as the governing law of the Documents (other
than the Share Pledge Agreement) is valid under the laws of Barbados; the
submission to the jurisdiction of the State of New York, United States of
America, and the appointment of the process agent contained in Section 8.05(d)
of the IFC A Loan Agreement and Section 2.11 of the IFC C Loan Agreement is
irrevocable binding on and enforceable against the Company or any Co-Borrower.
In this regard, we advice you that an action brought against the Company or any
Co-Borrower in the courts of the State of New York, in the manner contemplated
by the Documents, would be considered an in personam action under Barbados law.
12. A judgment rendered by any New York State or Federal court sitting in
New York City against the Company or any Co-Borrower in respect of the
Documents, would be enforceable against the Company or any Co-Borrower in the
courts of Barbados, provided that the court in which enforcement is sought
determines that:
(a) such New York judgment has been rendered in an IN PERSONAM (as
opposed to an in rem) action and is strictly for the payment of
a certain sum of money;
(b) the obligation for which enforcement is sought does not violate
the law or public policy (ordern publico) of Barbados, or
international treaties or agreements binding upon Barbados or
generally accepted principles of international law;
-89-
SCHEDULE 5(B-2)
Page 5 of 6
(c) process in the New York action has been served personally on the
Company or any Co-Borrower, or on the appropriate process agent;
(d) the New York judgment is a final judgment according to the laws
of the State of New York, United States of America;
(e) the New York judgment fulfills the necessary requirements to be
considered authentic by Barbados courts;
(f) the action on which the final judgment is rendered is not the
subject matter of a lawsuit among the same parties pending
before a court in Barbados;
(g) the court issuing the judgment is considered competent under
internationally accepted rules which are compatible with the
procedural laws of Barbados;
(h) the applicable procedures under the laws of Barbados to the
enforcement of foreign judgments (including the issuance of a
letter rogatory by the competent authority of such jurisdiction
requesting enforcement of such judgment and the certification of
such judgment as authentic by the corresponding authorities of
such jurisdiction in accordance with the laws thereof) is
complied with; and
(i) the courts of the United States would enforce judgments from
Barbados courts, as the case may be, as a matter of reciprocity.
13. On the basis of the immunities and privileges provided in Article VI of
IFC's Articles of Agreement, all payments of principal, interest and other
amounts due under the IFC A Loan Agreement and the IFC C Loan Agreement, are
exempt from any taxes, fees or other charges of whatsoever nature now or at any
time levied or imposed by the Government of Barbados or by any department,
agency, political subdivision or taxing authority thereof or therein or by any
organization of which Barbados is a member; and the payments referred to herein
may be made free and clear of any deduction or withholding of whatever nature;
there are no taxes, duties (including stamp duties), fees or other charges
required to be paid under the laws of Barbados in connection with the execution,
issuance or delivery of any Document or the performance or observance of any of
their respective terms.
-90-
SCHEDULE 5(B-2)
Page 6 of 6
The above opinion is given upon and subject to the following qualifications and
limitations:
(a) the enforcement of the Documents may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditor's rights generally;
(b) [insert other standard limitations]
This opinion is limited to questions arising under the laws of Barbados and we
do not express any opinion as to the laws of any jurisdiction other than those
of Barbados.
This opinion is solely for the benefit of IFC and may not be relied upon in any
manner or for any purpose by any other person.
Very truly yours,
-91-
SCHEDULE 5(B-3)
Page 1 of 3
FORM OF LOCAL COUNSEL'S LEGAL OPINION(11)
(See Section 5.01(f) of the Loan Agreement)
[Date]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
U.S.A.
Re: PriceSmart, Inc.
Ladies and Gentlemen:
We have acted as legal counsel to International Finance Corporation ("IFC") in
connection with (i) the loan to PriceSmart, Inc. ("PriceSmart"), PSMT Caribe,
Inc. ("PSMT Caribe") and PSMT Trinidad/Tobago Limited ("PSMT Trinidad" and,
collectively with PriceSmart and PSMT Caribe, the "Co-Borrowers"), as joint and
several borrowers, in the principal amount of twenty-two million Dollars
($22,000,000) pursuant to the Loan Agreement dated January 26, 2001 (the "IFC A
Loan Agreement") by and among the Co-Borrowers and IFC, and (ii) the loan to the
Co-Borrowers jointly and severally in the principal amount of ten million
Dollars ($10,000,000) pursuant to the IFC C Loan Agreement dated January 26,
2001 (the "IFC C Loan Agreement") by and among the Co-Borrowers and IFC. Unless
otherwise defined herein, capitalized terms used herein shall have the meaning
set forth in the IFC A Loan Agreement.
This opinion is furnished to you pursuant to Section 5.01(f) of the IFC A Loan
Agreement.
In connection with the opinion set out below, we have examined the following
documents:
1. the IFC A Loan Agreement;
2. the IFC C Loan Agreement;
3. the Share Retention Agreement;
- -----------------------------
(11) TO BE USED BY IFC'S COUNSEL IN GUATEMALA, ARUBA, PANAMA AND THE
PHILIPPINES.
-92-
SCHEDULE 5(B-3)
Page 2 of 3
4. a certified/conformed copy of] [an executed copy/original of]
[LIST ALL OTHER DOCUMENTS REVIEWED, E.G ARTICLES OF
INCORPORATION, ESTATUTOS, ETC.].
In connection with this opinion, we have examined the originals, or certified,
conformed copies, of all records, agreements, instruments and documents as we
have deemed relevant or necessary as the basis for the opinions hereinafter
expressed. In stating my opinion, we have assumed (i) the genuineness of all
signatures on original or certified copies of all copies submitted to us as
certified or reproduction copies, and that the Share Retention Agreement and
each of the other Transaction Documents constitutes a legal, valid, binding and
enforceable obligation of each of the other parties thereto under the laws of
the State of New York, United States of America.
Based upon the foregoing and subject to the qualifications and limitations set
forth herein, we are of the opinion that:
1. [Philippines, Inc.][PriceSmart (Guatemala), S.A.][Islands Foods and
Distributors N.V.][PriceCosto de Panama, S.A.] (the "Company") is a
company duly incorporated, validly existing and in good standing under
the laws of [the Philippines][Aruba][Guatemala][Panama] and has full
power and authority required by law to conduct its business in which it
is engaged and to enter into the Share Retention Agreement and to
perform its obligations thereunder.
2. The Company, represented by ________________ in his capacity as Chief
Executive Officer, has full power and authority to enter into and
perform its obligations under the Share Retention Agreement and has
taken all necessary corporate action to authorize the execution,
delivery and performance by it of the Share Retention Agreement.
3. The Company has a share capital in the amount of __________ , divided
into __________ shares of ________ par value each, which share capital
is duly subscribed and entirely paid-in; to the best of our knowledge
and on the basis of our review of the Company's [shareholders ledger],
each of PriceSmart and [NAME OF MINORITY SHAREHOLDER] owns _________%
and ___%, respectively, of the shares and voting rights constituting the
share capital of the Company.
4. The Share Retention Agreement has been authorized, executed and
delivered by the Company and constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its terms.
-93-
SCHEDULE 5(B-3)
Page 3 of 3
5. The execution and delivery of the Share Retention Agreement and
performance of the obligations thereunder by the Company will not (i)
violate the charter or other organizational documents of the Company,
(ii) violate any provisions of the Company, or (iii) to the best of my
knowledge, after due inquiry, contravene or result in a breach of, or
constitute a default under, any mortgage, conditional sales contract,
bank loan, credit agreement or any other agreement or instrument to
which the Company is a party or by which the Company or any of its
properties may be bound.
6. It is not required in order to ensure the validity, effectiveness or
enforceability of any of the Share Retention Agreement that the same be
notarized or filed, registered or recorded in a public office or
elsewhere in [the Philippines][Aruba][Guatemala][Panama], or that any
other instrument, document or notice relating thereto be executed,
delivered, filed, registered, recorded or served in the Philippines.
7. No order, consent, approval, license, authorization or validation of, or
registration, recording or filing with any governmental or public body
or authority in [the Philippines][Aruba][Guatemala][Panama] is required
in connection with (i) the execution or delivery of the Share Retention
Agreement or the performance by the parties thereto of their respective
obligations thereunder or (ii) the legality, validity, binding effect or
enforceability of the Share Retention Agreement.
Very truly yours,
-94-
SCHEDULE 5(C)
Page 1 of 5
FORM OF SPECIAL COUNSEL'S LEGAL OPINION
(See Section 5.01(g) of the Loan Agreement)
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SCHEDULE 5(D)
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FORM OF PRICESMART SPECIAL COUNSEL'S LEGAL OPINION
(See Section 5.01(h) of the Loan Agreement)
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SCHEDULE 6
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FORM OF LETTER TO BORROWER'S AUDITORS
(See Section 5.01(l) and Section 6.01(e) of the Loan Agreement)
[Borrower's Letterhead]
[Date]
[NAME OF AUDITORS]
[ADDRESS]
Ladies and Gentlemen:
We hereby authorize and request you to give to International Finance
Corporation of 2121 Pennsylvania Avenue, N.W., Washington, D.C. 20433, United
States of America ("IFC"), all such information as IFC may reasonably request
with regard to the Consolidated financial statements of the Co-Borrowers (as
defined below), both audited and unaudited. We have agreed to supply that
information and those statements under the terms of a Loan Agreement among
PriceSmart Inc., PSMT Caribe Inc. and PSMT Trinidad/Tobago Limited (the
"Co-Borrowers") and IFC dated as of January 26, 2001 (the "Loan Agreement"). For
your information we enclose a copy of the Loan Agreement.
We authorize and request you to send two copies of the audited accounts
of the Co-Borrowers to IFC to enable us to satisfy our obligation to IFC under
Section 6.03(b)(i) of the Loan Agreement. When submitting the same to IFC,
please also send, at the same time, a copy of your full report on such accounts
in a form reasonably acceptable to IFC.
Please note that under Section 6.03(b)(ii) and (iii) and Section 6.03(c)
of the Loan Agreement, we are obliged to provide IFC with:
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(a) a copy of the annual and any other management letter or other
communication from you to the Co-Borrowers or their repective management
commenting on, among other things, the adequacy of the Co-Borrowers' financial
control procedures and accounting and management information system; and
(b) a report by you certifying that, based upon their audited
consolidated financial statements, the Co-Borrowers were in compliance with the
financial covenants contained in Section 6.02 of the Loan Agreement as at the
end of the relevant Financial Year or, as the case may be, detailing any
noncompliance.
Please also submit each such communication and report to IFC with the
audited accounts.
For our records, please ensure that you send to us a copy of every
letter which you receive from IFC immediately upon receipt and a copy of each
reply made by you immediately upon the issue of that reply.
Yours truly,
PRICESMART INC.
By ______________________________
Authorized Representative
Enclosure
cc: Director
Latin America and Caribbean Department
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
United States of America
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SCHEDULE 7
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FORM OF CO-BORROWER'S CERTIFICATION ON DISTRIBUTION OF DIVIDENDS
(See Section 6.02(a) of the Loan Agreement)
[Co-Borrower's Letterhead]
[Date]
International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
Attention: Director, Latin America and Caribbean Department
Re: [Country/_________]
Dear Sirs:
1. Please refer to the Loan Agreement (the "Loan Agreement") dated as of January
26, 2001, between [Name of Relevant Co-Borrower] (the "Co-Borrower"), [Names of
the other Co-Borrowers] and International Finance Corporation ("IFC"). Terms
defined in the Loan Agreement have their defined meanings whenever used in this
request.
2. This is to inform you that the Co-Borrower plans a distribution of dividends
to its shareholders in the aggregate amount of ______________ (______), such
distribution to commence on or about _________, 20__. Pursuant to Section
6.02(a) of the Loan Agreement, the Co-Borrower hereby certifies that, as at the
date hereof:
(a) the proposed distribution will be entirely out of retained
earnings and such retained earnings do not include any amount
resulting from the revaluation of the Co-Borrower's assets;
(b) no Event of Default or Potential Event of Default has occurred
and is continuing;
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(c) after giving effect to the proposed distribution:
(i) the Consolidated Current Ratio would be at least 1.2;
(ii) the Consolidated Total Debt to Equity Ratio would be
greater than 50:50; and
(iii) the Consolidated Long-term Debt Service Coverage Ratio
would not be less than 1.5.
3. The Co-Borrower undertakes not to give effect to the proposed distribution or
any part thereof if, at the time of so doing or after giving effect to it, the
Co-Borrower could not certify the matters referred to in Section 2 of this
certification.
Yours truly,
[NAME OF CO-BORROWER]
By _______________________________
Authorized Representative
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PROGRESS REPORT RE: PROJECT IMPLEMENTATION
(See Section 6.03(a)(iii) of the Loan Agreement)
The Co-Borrowers shall provide an overview of the Project and highlight the
major events for the reporting period.
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INFORMATION TO BE INCLUDED IN ANNUAL REVIEW OF OPERATIONS*
(See Section 6.03(b)(iv) of the Loan Agreement)
[(1) SHAREHOLDINGS. Information on significant changes in share
ownership of the Co-Borrowers, the reasons for such changes, and
the identity of major new shareholders.
(2) COUNTRY CONDITIONS AND GOVERNMENT POLICY. Report on any material
changes in local conditions, including government policy changes,
that directly affect the Co-Borrowers (e.g. changes in government
economic strategy, taxation, foreign exchange availability, price
controls, and other areas of regulations.)
(3) MANAGEMENT AND TECHNOLOGY. Information on significant changes in
(i) the Co-Borrowers' senior management or organizational
structure, and (ii) technology used by the Co-Borrowers,
including technical assistance arrangements.
(4) CORPORATE STRATEGY. Description of any changes to the
Co-Borrowers' corporate or operational strategy, including
changes in products, degree of integration, and business
emphasis.
(5) MARKETS. Brief analysis of changes in the Co-Borrowers' market
conditions (both domestic and export), with emphasis on changes
in market share and degree of competition.
(6) OPERATING PERFORMANCE. Discussion of major factors affecting the
year's financial results (sales by value and volume, operating
and financial costs, profit margins, capacity utilization,
capital expenditure, etc.).
(7) FINANCIAL CONDITION. Key financial ratios for previous year,
compared with ratios covenanted in the Loan Agreement.]
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* The content of this Schedule should be reviewed with the Investment Officer
to determine any revisions appropriate for a particular transaction.
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FORM OF ANNUAL MONITORING REPORT
(See Section 6.03(d) of the Loan Agreement)
[See the following pages]