CONFORMED COPY LOAN NUMBER 1152 BR Loan Agreement (COSIPA Steel Expansion Project - Stage I) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND COMPANHIA SIDERURGICA PAULISTA - COSIPA DATED AUGUST 4, 1975 CONFORMED COPY LOAN NUMBER 1152 BR Loan Agreement (COSIPA Steel Expansion Project - Stage IHI) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND COMPANHIA SIDERURGICA PAULISTA - COSIPA DATED AUGUST 4, 1975 0 LOAN AGREEMENT AGREEMENT, dated August 4, 1975, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and COMPANHIA SIDERURGICA PAULISTA - COSIPA (hereinafter called the Borrower). ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "IDB" means Inter-American Development Bank. (b) "IDB loan" means the loan in an amount equivalent to $40,000,000 made by IDB to the Borrower for purposes of the Project, and "IDB loan contract" means the agreement providing for the IDB loan. (c) "Memorandum of Agreement" means the agreement to be entered into between the Bank and IDB providing, inter alia, in respect of the Project, for coordination between them with regard to procurement of goods and services, disbursement of funds from the Loan and the IDB loan, supervision procedures and exchange of information. (d) "Estatutos" means the statutes of the Borrower dated November 20, 1967, as amended to the date of this Agreement. (e) "Subsidiary" means any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by the Borrower or by any one or more subsidiaries of the Borrower or by the Borrower and one or more of its subsidiaries. 4 (f) "Completion Date of the Project" means the date following three months of continuous satisfactory operation of the Project facilities at 90% of their rated capacity. (g) "Prior COSIPA Steel Expansion Project" means the expansion project of the Borrower presently being carried out by the Borrower and the purpose of which is to increase the production capacity of the Borrower from about 1.0 million metric tons per year of raw steel to about 2.3 million metric tons per year in order to produce about 1.7 million metric tons per year of uncoated steel products. (h) "Prior Loan Agreement" means the agreement between the Bank and the Borrower dated June 14, 1972 and designated No. 828-BR for the Prior COSIPA Steel Expansion Project. (i) "CSN" means Companhia Sidenrgica Nacional - CSN. (j) "USIMINAS" means Usinas Sidert2rgicas de Minas Gerais S.A. - USIMINAS. (k) "Steel Companies" means the Borrower, CSN and USIMINAS. (1) "SIDERBRAS" means Siderurgia Brasileira S.A. - SIDERBRAS, the holding company of the Guarantor for the public steel sector, established and operating in the form of an empresa de economia mista pursuant to Lei No. 5919 dated September 17, 1973, as amended by Lei No. 6159 dated December 6, 1974, of the Guarantor. (m) "BNDE" means Banco Nacional do Desenvolvimento EconAmico (BNDE), an empresa publica of the Guarantor established and operating pursuant to Lei No. 5662 dated June 21, 1971 of the Guarantor. (n) "Project Funds Agreement" means the agreement of even date herewith between the Bank and SIDERBRAS and BNDE whereby SIDERBRAS and BNDE agree, inter alia, to undertake certain obligations in respect of the provision of funds to the Borrower. (o) "FINAME" means Agencia Especial de Financiamento Industrial (FINAME), an empresa publica of BNDE established and operating pursuant to Decreto No. 59.170 of September 2, 1966, Decreto - Lei No. 45 of November 18, 1966, and Lei No. 5662 of June 21, 1971 of the Guarantor. 5 (p) "CONSIDER" means Cbnselho de N'o-Ferrosos e de Siderurgia, the council for non-ferrous metals and steel of the Guarantor, established and operating pursuant to Decreto No. 66.759 dated June 19, 1970 as amended by Decreto No. 74.361 dated August 2, 1974, of the Guarantor. ARTICLE H The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to sixty million dollars ($60,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time, for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 tQ this Agreement and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, the goods, works and services (other than consultants' services) for the Project to be financed out of the proceeds of the Loan, shall be procured in accordance with the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1980 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrower shall pay interest at the rate of eight and one-half per cent (8-1/2%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semi-annually on June 15 and December 15 in each year. 6 Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. Section 2.09. The Borrower shall punctually pay to the Guarantor the fee referred to in the second Whereas clause of the Guarantee Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out the Project with due diligence and efficiency and in conformity with appropriate engineering, financial and administrative practices. (b) The Borrower shall make its best efforts to obtain credit to finance the cost of goods and services required for the Project and not financed under the Loan Agreement or the IDB loan contract or as required under the Project Funds Agreement, or out of the Borrower's own resources, such credit to be on terms and conditions satisfactory to the Bank. (c) The Borrower covenants that: (i) all equipment and materials required for the Project and not financed out of the proceeds of the Loan or the IDB loan shall be consistent with design criteria and other technical specifications which are appropriate to the Project; and (ii) except as the Bank shall otherwise agree, such equipment shall be acquired on the basis of international competition among suppliers eligible to utilize the credit referred to in paragraph (b) of this Section and the funds provided under the Project Funds Agreement. Section 3.02. In order to assist the Borrower in carrying out the engineering design, procurement, approval of manufacturers' drawings and specifications, inspection and expediting of delivery of the equipment, supervision of construction and erection, start-up and initial operations of the Project, the Borrower shall employ specialized firms or experts with appropriate qualifications and experience. Section 3.03. In carrying out the civil engineering, building and erection work required for the Project, the Borrower shall employ qualified and experienced contractors; provided, however, that, if at any time local contractors are unable to meet the Project execution schedule, shown in the Annex to Schedule 2 to the Loan Agreement, on reasonable terms, the Borrower shall take all steps necessary or advisable to utilize the services of contractors (including foreign 7 contractors) who shall be able to provide such services for the Project on reasonable terms and in accordance with such Schedule. Section 3.04. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section 3.05. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Loan, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Bank's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) The Borrower shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of the Borrower and any relevant records and documents. ARTICLE IV Management and Operations of the Borrower Section 4.01. (a) The Borrower shall at all times carry on its operations, manage its affairs, plan the future development of its business and undertaking, 8 and maintain its financial position all in accordance with appropriate engineering, financial and administrative practices, and under the supervision of experienced and competent management. (b) The Borrower shall inform the Bank when making any personnel changes at the senior management level (including, inter alios, Directors, General Superintendents and those Superintendents responsible for the execution of the Project). (c) The Borrower shall operate and maintain its plant, equipment, properties and facilities and make all necessary renewals and repairs thereof, all in accordance with appropriate engineering practices. Section 4.02. The Borrower shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 4.03. The Borrower shall duly perform its obligations under the IDB loan contract and shall not, without the prior consent of the Bank, take or concur in any action which would have the effect of assigning, revoking, suspending, cancelling or changing such contract, or amend or waive in whole or in part, any provision of such contract. Section 4.04. The Borrower shall not, and shall not permit any Subsidiary, without the consent of the Bank, to sell, lease, transfer, or otherwise dispose of any of its properties or assets which shall be required for the efficient carrying out of its business and undertaking, including the carrying out of the Project. Section 4.05. The Borrower shall at all times take all steps necessary to maintain its corporate existence and the right to carry on its operations, including the Project, and shall, except as the Bank shall otherwise agree, take all steps necessary to acquire and to retain such land, interests in land and properties, and to acquire, maintain and renew such licenses, consents, franchises or other rights, as may be necessary or useful for the construction and operation of the Project and the conduct of its business and undertaking. Section 4.06. Except as the Bank shall otherwise agree, the Borrower shall obtain title to all goods financed in whole or in part with the proceeds of the Loan and the IDB loan free and clear of all liens. Section 4.07. In order to ensure that the execution and operation of the Project are carried out with due regard to ecological and environmental factors, 9 the Borrower shall install adequate air, water and noise pollution controls, including suitable measurement devices, and monitor emissions to maintain them within acceptable limits. Section 4.08. In view of the need to safeguard its competitive position, the Borrower shall not, unless the Bank shall otherwise agree, consume low grade coking coal if the resulting coking coal blend will significantly lower the productivity of the Borrower's iron and steel making facilities. Section 4.09. Except as the Bank shall otherwise agree, the Borrower shall not lose control of the majority of the voting shares of stock of any Subsidiary. ARTICLE V Financial Covenants Section 5.01. The Borrower shall maintain and shall cause each of its Subsidiaries to maintain, records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 5.02. The Borrower shall, and, except as the Bank shall otherwise agree, shall cause each of its Subsidiaries to: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited, (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested, and (C) conformed copies of the said financial statements and auditors report; and (iii) furnish to the Bank such other information (including quarterly financial information within 45 days of the end of each quarter) concerning the accounts and financial statements of the Borrower and the audit thereof as the Bank shall from time to time reasonably request. Section 5.03. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt, except as disclosed in writing to the Bank. (b) The Borrower undertakes that, except as the Bank shall otherwise agree: (i) if the Borrower shall create any lien on any of its assets as security for any debt, such lien will equally and ratably secure the payment of the principal 10 of, and interest and other charges on, the Loan, and in the creation of any such lien express provision will be made to that effect, at no cost to the Bank; and (ii) if any statutory lien shall be created on any assets of the Borrower as security for any debt, the Borrower shall grant, at no cost to the Bank, an equivalent lien satisfactory to the Bank to secure the payment of the principal of, and interest and other charges on, the Loan; provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on Which it is originally incurred; or (C) any lien on commercial goods to secure a debt maturing not more than one year after the date on which it is originally incurred and to be paid out of the proceeds of sale of such commercial goods; or (D) any lien in favor of BNDE, on terms and conditions satisfactory to the Bank, the Borrower and BNDE, and by its terms expressly subordinated to the claims of the Bank hereunder, which is created to secure obligations of the Borrower to BNDE arising out of BNDE's provision of loans as required by the Project Funds Agreement. Section 5.04. Except as the Bank shall otherwise agree, if the Borrower shall directly or indirectly pay or otherwise settle for a consideration, before maturity, part or all of the IDB loan, or any other outstanding long-term debt of the Borrower, the Borrower shall prepay a proportionate part, or all, as the case may be, of the Loan. For the purposes of this Section, "long-term debt" means debt maturing by its terms more than one year after the date of its incurrence. Section 5.05. Except as the Bank shall otherwise agree, the Borrower shall not, and shall not permit any of its Subsidiaries to, incur any debt, if after the incurring of such debt: (i) the consolidated debt of the Borrower and all its Subsidiaries then incurred and outstanding would be greater than the consolidated equity of the Borrower and all its Subsidiaries; provided, however, that, until the Completion Date of the Project or December 31, 1981, whichever is the earlier, the consolidated debt of the Borrower and all its Subsidiaries may reach one and one-half times the consolidated equity of the Borrower and all its Subsidiaries; or (ii) the consolidated internal cash generation of the Borrower and all its Subsidiaries for the twelve-month period next preceding the incurrence of such debt, excluding any debt incurred as permitted uinder this Agreement and the Project Funds Agreement, would be less than twice the estimated maximum debt service requirement for any succeeding fiscal year on the consolidated debt of the Borrower and all its Subsidiaries, including the debt proposed to be incurred. For the purposes of this Section: 11 (a) "Debt" means any debt incurred by the Borrower or any of its Subsidiaries maturing more than one year after the date on which it is originally incurred. (b) Debt shall be deemed to be incurred: (i) under a loan contract or agreement on the date and to the extent it is drawn down pursuant to such loan, contract or agreement; and (ii) under a guarantee agreement on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt is outstanding. (c) "Consolidated debt of the Borrower and all its Subsidiaries" means the total amount of debt of the Borrower and all its Subsidiaries but excluding debt owed by the Borrower to any of its Subsidiaries or by any of its Subsidiaries to the Borrower or to any other Subsidiary. (d) "Consolidated equity of the Borrower and all its Subsidiaries" means the sum of the total unimpaired paid-up capital, surplus and free reserves of the Borrower and all its Subsidiaries not allocated to cover specific liabilities after excluding therefrom such items as shall represent equity interests of the Borrower in any Subsidiary or of any Subsidiary in the Borrower or in any other Subsidiary. (e) "Consolidated internal cash generation of the Borrower and all its Subsidiaries" means gross income of the Borrower and all its Subsidiaries from all sources less all operating and administrative expenses, of the Borrower and all its Subsidiaries, excluding depreciation of assets and interest and other charges on debt. (f "Debt Service" means the aggregate amount of amortization (including sinking fund payments, if any) of, and interest and other charges on, debt. (g) Whenever it shall be necessary to value in terms of Cruzeiros in currency of the Guarantor debt payment in another currency, such valuation shall be made on the basis of the prevailing rate of exchange as determined by the Banco Central do Brasil. Section 5.06. Except for expenditures and commitments for expenditures to carry out the Project and the Prior COSIPA Steel Expansion Project, the Borrower shall not make any expenditures or commitments for expenditures (including expenditures or commitments for expenditures in its Subsidiaries or other business entities) in excess of an aggregate amount of $18,000,000 equivalent in each fiscal year of the Borrower (of which only up to $4,000,000 equivalent may 12 be made by any Subsidiary in any such year) for fixed or capital assets or for any project or development of the Borrower or of any Subsidiary (including normal replacements and supplemental investments for the Prior COSIPA Steel Expansion Project), unless such expenditures or commitments for expenditures shall be made for a purpose, and in accordance with a financial plan, acceptable to the Bank. Section 5.07. Except as the Bank shall otherwise agree, the Borrower shall not, and shall not permit any of its Subsidiaries to, before January 1, 1981: (a) invest in its Subsidiaries or other business entities in excess of an aggregate total of $4,000,000 equivalent in each fiscal year; (b) lend or advance money to its Subsidiaries or other business entities in excess of an aggregate total of $4,000,000 equivalent at any one time outstanding; or (c) guarantee debt of its Subsidiaries or other business entities in excess of an aggregate total of $12,000,000 equivalent at any one time outstanding. Section 5.08. Except as the Bank shall otherwise agree, the Borrower shall not: (i) declare any dividend (other than a dividend payable in stock of the Borrower or z dividend on the preferred stock of the Borrower) or make any other distribution with respect to its share capital, unless, after such dividend has been paid or other distribution has been made, the consolidated current assets of the Borrower and all its Subsidiaries would equal or exceed 1.3 times the current liabilities of the Borrower and all its Subsidiaries; or (ii) purchase, redeem or otherwise acquire for a consideration, any shares of stock of the Borrower or of any Subsidiary. For the purposes of this Section: (a) "Current assets" shall include cash, accounts receivable due within twelve months, inventories convertible to saleable goods within twelve months, pre-paid expenses, and all other assets which could, in the ordinary course of business, be converted within twelve months into cash. (b) "Current liabilities" shall include accounts payable within twelve months, customer advances, income taxes, dividends, bonuses and all other liabilities (including long-term debt) which will be due and payable or could be called for payment, within twelve months. (c) "Consolidated current assets" and "consolidated current liabilities" mean the aggregate of current assets and current liabilities of the Borrower and all its Subsidiaries after eliminating all inter-company items and all other items which should be eliminated in accordance with sound accounting practices. Section 5.09. Except as the Bank shall otherwise agree, the Borrower shall maintain a ratio of consolidated current assets to consolidated current liabilities 13 of not less than 1.1 to 1. For purposes of this Section, the terms "consolidated current assets" and "consolidated current liabilities" have the same meanings as in Section 5.08 set forth. Section 5.10. Except as the Bank shall otherwise agree, the Borrower shall not issue new preferred shares of stock of the Borrower if as a result of such issue the total par value of outstanding preferred shares shall exceed fifty per cent (50%) of the total par value of all of the Borrower's outstanding shares of stock. Section 5.11. The Borrower shall take all such action as shall be necessary on its part to enable: (a) the Guarantor to perform all of the covenants and agreements in the Guarantee Agreement contained; and (b) SIDERBRAS and BNDE, respectively, to perform all of the covenants and agreements in the Project Funds Agreement contained. Section 5.12. For the purposes of preparing the financial statements to be furnished to the Bank pursuant to Section 5.02 of this Agreement and of making the tests necessary for determining compliance with the requirements of Sections 5.05, 5.08 and 5.09 of this Agreement and Section 4(b) of the Project Funds Agreement, the financial information furnished to the Bank shall be in such form and detail and expressed in dollars or Cruzeiros, as shall be satisfactory to the Bank. ARTICLE VI Remedies of the Bank; Amendments to Prior Loan Agreement Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) The right of the Borrower to utilize the IDB loan shall have been suspended or cancelled in whole or in part. (b) The right of the Borrower to utilize the funds provided under the Project Funds Agreement shall have been suspended or cancelled in whole or in part. (c) The right of the Borrower to utilize all or part of the credit obtained pursuant to the provisions of Section 3.01(b) of this Agreement shall have been 14 suspended or cancelled and such suspension or cancellation shall materially affect the carrying out of the Project. (d) A substantial change in the Estatutos shall have been made without the agreement of the Bank. (e) A Subsidiary or any other entity shall have been created or acquired or taken over by the Borrower without the agreement of the Bank. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) The IDB loan, the funds provided under the Project Funds Agreement, or any other indebtedness for money borrowed by the Borrower with an original maturity of one year or more shall have become due and payable before its agreed maturity in accordance with the terms thereof. (b) The event specified in paragraph (d) of Section 6.01 of this Agreement shall occur. (c) A Subsidiary or any other entity shall have been created or acquired or taken over by the Borrower, without the agreement of the Bank, and such situation shall not have been corrected within sixty days after notice thereof shall have been given by the Bank to the Borrower. Section 6.03. (a) Sections 5.05, 5.06, 5.07, 5.08, and 5.09 of this Agreement are incorporated into the Prior Loan Agreement and replace the sections bearing the same numbers therein. (b) All other sections of the Prior Loan Agreement not expressly amended by this Agreement shall remain in full force and effect. ARTICLE VH Effective Date; Termination Section 7.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01(c) of the General Conditions: (a) All necessary acts, consents and approvals to be performed or given by the Guarantor, its political subdivisions or agencies or by any agency of any 15 political subdivision or otherwise to be performed or given in order to authorize the carrying out of the Project and to enable the Borrower to perform all of the covenants, agreements and obligations of the Borrower in the Loan Agreement and the IDB loan contract contained (including the obligations thereof relating to procurement of goods and services for the Project), together with all necessary powers and rights in connection therewith, shall have been performed or given. (b) The Loan Agreement and the IDB loan contract shall have been duly registered by Banco Central do Brasil. (c) All conditions precedent to the effectiveness of the IDB loan contract shall have been fulfilled, subject only to the effectiveness of this Agreement. (d) The Memorandum of Agreement shall have been executed and delivered on behalf of the parties thereto. Section 7.02. The following are specified as additional matters, within the meaning of Section 12.02(c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) That the Borrower is duly organized and existing under the laws of Brazil and has full power and authority to construct and operate the Project, to own the properties and to carry on the business which it owns and carries on and proposes to own and carry on; that all acts, franchises, concessions, consents and approvals necessary therefor have been duly and validly performed or given; and that with such exceptions as the Bank may have approved, all easements, licenses, consents, franchises or other rights or privileges as may be necessary or requisite therefor have been duly obtained. (b) That the IDB loan contract (i) has been duly executed and authorized by all necessary corporate and governmental action; (ii) constitutes a valid and binding obligation of the respective parties thereto in accordance with its terms; and (iii) is, subject only to the effectiveness of this Agreement if such be the case, in full force and effect. (c) That all acts, consents and approvals referred to in paragraph (a) of Section 7.01 of this Agreement, together with all necessary powers and rights in connection therewith, have been duly and validly performed or given and that no other such acts, consents or approvals are required in order to authorize the carrying out of the Project and to enable the Borrower to perform all the covenants, agreements and obligations of the Borrower in the Loan Agreement and in the IDB loan contract contained (including the obligations thereof relating to procurement of goods and services for the Project). 16 (d) that the Project Funds Agreement has been duly authorized by all corporate and, governmental action and constitutes a valid and binding obligation of SIDERBRAS and BNDE, respectively, in accordance with its terms. (e) That the Loan Agreement and the IDB loan contract have been duly registered by Banco Central do Brasil. Section 7.03. The date November 4, 1975 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VHI Addresses Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: 440098 (ITT) 248423 (RCA) or INTBAFRAD 64145 (WUI) Washington, D.C. For the Borrower: Companhia Siderfirgica Paulista - COSIPA Avenida S o Joao 473 Sf'o Paulo 01035, Brazil Cable address: Telex: 021110 COSIDERPA S'To Paulo 17 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Adalbert Krieger Regional Vice President Latin America and the Caribbean COMPANHIA SIDERURGICA PAULISTA - COSIPA By /s / Mario Lopes Leio Authorized Representative By /s / Oscar Augusto de Camargo Authorized Representative 18 SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Equipment for 21,500,000 60% loading, unloading, raw material handling and raw material prepara- tion (including spare parts there- for) (2) Equipment, 25,500,000 60% material and steel struc- tures for No. 3 sinter plant, No. 2 BOF shop, and rolling facilities for plate, hot and cold strip and water distribu- tion and recircula- tion (including spare parts there- for) (3) Cranes, hoists, rail- 7,000,000 60% way and other trans- port equipment (in- cluding spare parts therefor) (4) Unallocated 6,000,000 TOTAL 60,000,000 19 2. The disbursement percentages have been calculated in compliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Guarantor on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of expenditures prior to the date of this Agreement. 4. If the Bank shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. 20 SCHEDULE 2 Description of the Project I. The purpose of the Project is the expansion of the Borrower's existing steel production facilities (in place or under construction) from about 2.3 million metric tons of raw steel per year to about 3.5 million metric tons of raw steel per year in order to produce about 2.7 million metric tons per year of flat rolled steel products. The Project includes the construction of the necessary rolling and finishing facilities. II. The Borrower's increased production will be achieved by expanding, and adding equipment to, the Cubatfo plant in the State of Sao Paulo, substantially as follows: (1) loading and unloading facilities (two 1,200 t/h unloaders, four 20 ton loading cranes, and handling equipment) (2) raw material handling facilities (stackers and reclaimers, hoppers, conveyors, pellet screening facilities) (3) sinter plant No. 3 (4 m width, 250 m2 grate area, complete) (4) BOF shop No. 2 containing two 120-ton vessels, cranes and hoists, laboratory equipment (5) two 2-strand continuous slab casting machines (Nos. I and 2) (6) oxygen plant (No. 5 oxygen plant - 13,000 Nm3/h of oxygen and additions to existing oxygen plants Nos. 3 and 4) (7) calcining plant No. 3 (lime kiln for 250 t/day including auxiliary equipment) (8) plate mill plant: auxiliary equipment including No. 2 slab reheating furnace with 130 t/h capacity, one normalizing furnace with 4,000/month capacity, additional mechanical and electrical equipment and buildings (9) hot strip mill plant: increased electric drives for finishing stands (four 5,000 HP and one 4,000 HP motors) and auxiliary equipment including No. 4 slab reheating furnace (100 tons/h), 21 No.2 68 " reversing rougher mill with attached edger, No. 3 downcoiler, additional mechanical and electrical equipment, and buildings (10) cold mill plant No.2 5-stand tandem cold mill of 48" width, 1,850m/min speed, No. 2 single stand temper mill of 48" width, 1,200m/min speed, No. 3 horizontal continuous HCL pickling line, No. 1 horizontal electrolytic cleaning line, No. 3 coil inspection line and No. 4 recoiling line, cold shear lines, 33 stack annealing furnaces with 102 bases, auxiliary mechanical and electrical equipment (11) power plant: one high pressure boiler, one low pressure boiler and one turbogenerator (12) water recirculation system: units comprising well pumps, colling tower of cross-flow type, electrics and instrumentation for No. 3 sinter plant, No. 1 blast furnace, No. 2 cold mill, and for power plant, additions to existing systems for oxygen plants and hot strip mill (13) electrical power: one substation with circuit breakers and switches and two sets of transformers (14) transportation: mobile equipment including six torpedo cars, fifteen dump cars, thirty-three flat cars, twenty ingot mold cars, fifteen double hopper cars, forty gondola cars, nine diesel electric locomotives, one track mobile, and two straddle carriers, two shovel dozers, of which one for BOF slag and one for calcining plant, and three fork lift trucks (15) communication systems for new production facilities. The Project also includes installation of all corresponding production and service facilities, and engineering and Project management all as needed to support the expanded plant capacity. The construction work is expected to be completed by the end of June of 1979 and the operation of the additional capacity is expected to commence by the end of 1979 substantially as provided in the Annex hereto. 22 ANNEX TO SCHEDULE 2 1975 1976 1977 1978 1979 Quarter Quarter Quarter Quarter Quarter Description 1234 1234 1234 1234 1234 Loading and Unloading Facilities xxxx xxxx xxxx xxxx xx Raw Material Handling Facilities xxxx xxxx xxxx xxxx x Sinter plant No. 3 xxxx xxxx xxxx xxxx xx Steelmaking Facilities including Continuous Casting xxxx xxxx xxxx xxxx xx Oxygen Plants Nos. 3/4/5 xxxx xxxx xxxx xxxx Plant Mill No. 2 xxx xxxx xxxx xxxx Hot Strip Mill xxxx xxxx xxxx xxxx Cold Strip Mill xxxx xxxx xxxx xxxx xx Power House xxx xxxx xxxx xxx Utilities xx xxxx xxxx xxx Roads and Railroads xxxx xxxx xxxx Auxiliary Buildings and Relocations xxxx xxxx xxxx 23 SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* December 15, 1979 1,590,000 June 15, 1980 1,655,000 December 15, 1980 1,725,000 June 15, 1981 1,800,000. December 15, 1981 1,875,000 June 15, 1982 1,955,000 December 15, 1982 2,040,000 June 15, 1983 2,125,000 December 15, 1983 2,215,000 June 15, 1984 2,310,000 December 15, 1984 2,410,000 June 15, 1985 2,510,000 December 15, 1985 2,620,000 June 15, 1986 2,730,000 December 15, 1986 2,845,000 June 15, 1987 2,965,000 December 15, 1987 3,095,000 June 15, 1988 3,225,000 December 15, 1988 3,360,000 June 15, 1989 3,505,000 December 15, 1989 3,655,000 June 15, 1990 3,810,000 December 15, 1990 3,980,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. 24 Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05(b) of the General Conditions: Time of Prepayment Premium Not more than three years 1-1/2% before maturity More than three years but not 2-3/4% more than six years before maturity More than six years but not 5-3/4% more than eleven years before maturity More than eleven years but not 7% more than thirteen years before maturity More than thirteen years 8-1/2% before maturity 25 SCHEDULE 4 Procurement A. General Procedures 1. Contracts shall be let under procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1972 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. Bidders shall be prequalified or postqualified as described in part 2.2 of the Guidelines. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic Man6facturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the f.o.b. (port of shipment) and c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically-manufactured goods; and (ii) customs duties and other import taxes on imported goods, including merchant fleet renewal and port improvement taxes, and sales and similar taxes on domestically-supplied goods, shall be excluded. 2. Goods manufactured in Brazil may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the infon-nation required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following groups: (1) Group A: bids offering goods manufactured in Brazil if the bidder shall have established to the satisfaction of the Borrower and the Bank that such goods contain components manufactured in Brazil equal to at least 50% of the value of the complete goods. (2) Group B: bids offering any other goods. 26 (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes (including merchant fleet renewal and port improvement taxes) on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. The lowest evaluated bid of each group shall then be compared with each other, and if, as a result of this comparison, a bid from group A is the lowest, it shall be selected for the award. (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group B, all group B bids shall be further compared with the lowest evaluated bid from group A after adding (1) to the c.i.f. bid price of goods in each group B bid an amount equal to the smaller of (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of goods offered in such group B bid, or (ii) 15% of the c.i.f. bid price of such goods; and (2) to the ex-factory bid price of goods supplied domestically offered in each group B bid an amount equal to the smaller of (i) the amount of customs duties and other import taxes which would be levied on the goods offered in such group B bid if they originated from the same foreign country as the bid included in group B which enjoys the lowest customs duties and other import taxes, or (ii) 15% of the ex-factory bid price of such goods; provided, however, that if any group B bid offers goods, which, if offered in a separate bid, would be classified as a group A bid, the Brazilian portion of the bid price attributable to such goods shall be treated as a group A bid and the foregoing increases shall not be added to said portion. If, as a result of this comparison, the bid from group A is the lowest, it shall be selected for purposes of award; if not, the lowest evaluated bid from group B, as determined above, shall be selected for purposes of award. C. Review of Procurement Decisions by Bank 1. Review of prequalification. The Borrower shall, before qualification is invited, inform the Bank in detail of the procedure to be followed and shall introduce such modifications in said procedure as the Bank shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant for prequalification shall be furnished by the Borrower to the Bank for its comments before the applicants are notified, and the Borrower shall make such additions to, deletions from, or modifications in, the said list as the Bank shall reasonably request. 2. Review of invitation to bid and of proposed awards and final contracts. With respect to all contracts for plant, equipment and construction materials and associated services estimated to cost the equivalent of $100,000 or more: 27 (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and the reasons for the intended award and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the recommendation for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, -materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 3. With respect to each contract to be financed out of the proceeds of the Loan and not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 4. The Banco Central do Brasil rates of exchange will be the rates used for bid comparison purposes.