CONFORMED COPY LOAN NUMBER 1562 BR Project Agreement (COPESUL Petrochemical Project) between STATE OF RIO GRANDE DO SUL and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated July 6, 1978 LOAN NUMBER 1562 BR PROJECT AGREEMENT AGREEMENT, dated July 6, 1978, between STATE OF RIO GRANDE DO SUL (hereinafter called the State) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS by the Loan Agreement of even date herewith between COPESUL - Companhia Petroquimica do Sul (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to eighty-five million dollars ($85,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the State agree to undertake certain obligations toward the Bank as are hereinafter set forth; WHEREAS the State warrants and represents that it is autho- rized to undertake the obligations in this Agreement contained under the laws of the State; and WHEREAS the State, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: Section 1. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. Section 2. The State covenants and warrants that the Petro- chemical Complex is of paramount importance to development plans of the State and that it will fully support the Petrochemical Complex by cooperating with the Borrower, the Shareholders and the other companies sponsoring the Petrochemical Complex in the execution of the Petrochemical Complex, and by providing, promptly as needed, the funds, facilities, services and other resources on its part required for construction of the infrastructure necessary for the operation of the Petrochemical Complex. Section 3. The State specifically undertakes to: (a) take such action as shall be required for the prompt issuance of such permits and licenses to be issued by it as shall be required for the carrying out of the Petrochemical Complex; - 2 - (b) take such action as shall be required to establish, not later than September 30, 1978, solid, liquid and air effluent emission standards in respect of the Petrochemical Complex; (c) cause the Conselho de ImplantaCio do Polo Petroquimico do Estado do Rio Grande do Sul (CONPETRO) to carry out, or cause to be carried out, the infrastructure works included in the Petrochemical Complex in accordance with a time schedule satis- factory to the Bank and permit that PETROQUISA or COPESUL assist CONPETRO in the carrying out of such works if required to complete them in accordance with such schedule; (d) whenever there is reasonable cause to believe that supplies of coal from private sources will be inadequate for the full utilization of the facilities included in the Project, take all necessary action to ensure that, as promptly as feasible, additional supplies of coal will be made available to the Borrower as required for said purpose; and (e) take all necessary action to ensure that adequate supplies of electric power will be made available to the Borrower as required for the full utilization of the facilities included in the Project. Section 4. (a) The State shall, at the request of the Bank, exchange views with the Bank with regard to the performance of its obligations under this Agreement and other matters relating to the purposes of the Loan. (b) The State shall promptly inform the Bank of any condi- tion which interferes, or threatens to interfere with, the performance by the State of its obligations under this Agreement. Section 5. The State shall not take, or cause to be taken, any action which would prevent or interfere with the execution of the Petrochemical Complex or with the performance of the Bor- rower's obligations under the Loan Agreement or with the perfor- mance of the Shareholders' obligations under the Shareholders Agreement. Section 6. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 7. This Agreement and all obligations of the Bank and of the State thereunder shall terminate when the Loan Agreement -3- shall terminate in accordance with its terms and the Bank shall notify the State thereof. Section 8. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the State: Secretaria de Coordenaqlo e Planejamento Rua 7 de Setembro 666, 70 andar 90000 Porto Alegre, R.S. Brazil Cable address: Telex: PALACIO PIRATINI 051-1123 GORS Porto Alegre 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: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) Section 9. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of the State may be taken or executed by Secretario de CoordenaClo e Plavejamento or such other person or persons as he shall designate in writing. Section 10. The State shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of the State, take any action or execute any documents required or permitted to be taken or executed by the State pursuant to any of the provisions of this Agreement. Section 11. This Agreement may be executed in several coun- terparts, each of which shall be an original, and all collectively but one instrument. 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. STATE OF RIO GRANDE DO SUL By /s/ Sinval Guazelli Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s Enrique Lerdau Acting Regional Vice President Latin America and the Caribbean