(Adjustments-Other Compensation) of the Contract and be subject to the requirements of Section 8.04 of
the Contract (Recoveries).

All monies on deposit in the ML Account are pledged under a Security Agreement dated May 30,
2002, as additional security for the payment and performance of any obligations of Conferry under the
Loan Agreement. Thus, the compensation paid to the Insured under the Claim should be reduced by the
balance in the ML Account as of the date of the Decree, which was $2,383,821.65 less agreed deductions
for the Insured’s expenses incurred from that date with respect to the Loan, which were $868,399.49.

Accordingly, the amount of compensation payable under the Claim will be reduced by $1,515,422.16.

Additionally, in its September 18 correspondence to OPIC, the Insured stated that it had made
demand in Venezuela upon the Guarantors, who also might be an additional source of other
compensation. Any payment received by the Guarantors would reduce the compensation payable by
OPIC. The Insured has indicated that it took whatever steps it deemed necessary to preserve its rights as a
creditor in furtherance of the purposes of Section 9.01(7) of the Contract as further discussed below. We
are advised that the Insured has not initiated legal proceedings and no judgment has been obtained, and
that the Guarantors do not, at present, demonstrate any inclination to make payments voluntarily under
the guaranties that would constitute an additional source of compensation to the Insured. Accordingly, no
adjustment need be made to the amount paid by OPIC on the Claim on account of the liability of the
Guarantors at this time, although, as a condition to the payment of the Claim, OPIC will require the
Insured to (i) certify as to the steps it has taken to preserve its rights against the Guarantors, (ii) to assign
all rights against the Guarantors to OPIC in consideration of the payment of the Claim (and agree to pay
any future amounts the Insured may receive from the Guarantors on account of their guarantees to OPIC),
and (iii) to cooperate with reasonable requests of OPIC in seeking to enforce any rights against the
Guarantors.

(iii) Article IX of the Contract

Article IX imposes certain duties on the Insured with respect to the Contract, including a number
which will be specifically applicable to the payment of any Claim. In particular, under Section 9.01(7) of
the Contract “[t]he Insured shall at all times take all reasonable action to preserve and enforce its rights as
a creditor.” Additionally, prior to assigning any of its rights to OPIC, “the Insured shall, in consultation
with OPIC, further take all reasonable measures to pursue available administrative and judicial remedies
and to negotiate in good faith with the foreign governing authority and other potential sources of
compensation.”

As an initial matter, OPIC must be able to ascertain what the Insured’s “rights
in order to determine whether reasonable action has been undertaken to preserve them.
following the December 17" meeting, OPIC was provided with a complete set of the Loan
documentation, including all amendments and extensions to the Forbearance Agreement, and has
consulted with its own Venezuelan counsel regarding the steps that a lender might appropriately have
taken to preserve its rights as a lender against Conferry under the documentation in light of the Decree
and related proceedings. OPIC is satisfied that none of the amendments to the Loan Documents or to the
Forbearance Agreement purport to or serve to alter or amend any of the Insured’s legal rights against
Conferry, the Guarantors or the collateral that secured the Loan.

The additional documentation provided at or immediately following the December 17" meeting
also allowed OPIC to clarify whether the Insured considered the Loan accelerated or provided a notice of
acceleration or demand for payment to Conferry or the Guarantors.


B. Insured’s Duties under Article VIII and Article IX

In order to demonstrate that losses within the scope of coverage of the Contract are compensable,
the Insured must demonstrate that all of the requirements set forth in the Contract with respect to the
Claim have been satisfied. While the Insured states in the Application that it has satisfied all of its duties
under the Contract and restated in its July 31 correspondence that it had fully complied with those duties,
a number of the items that OPIC had requested for the Application to be complete were not provided until
after the December 17" meeting, including a complete set of the Loan documentation.

OPIC must determine that the Insured has satisfied its obligations under Sections 8.01
(Application for Compensation), 8.02 (Assignment to OPIC) and 8.04 (Recoveries) of the Contract.
Additionally, OPIC must determine that the Insured has fully satisfied its duties under Article IX of the
Contract.

@ Section 8.01(Application for Compensation)

Under Section 8.01(b) of the Contract, a claim for expropriation must be filed within ninety (90)
days after the Insured has reason to believe that all requirements of Article TV have been satisfied. As
previously determined, the Insured has satisfied the requirements of Article IV of the Contract in
demonstrating that the Decree has resulted in a compensable Claim and that none of the Exclusions under
Section 4.02 of the Contract apply.

The Decree was published in the Venezuelan Official Gazette on September 30, 2011. Under
Section 4.01 of the Contract, the act or acts must continue for a period of 90 days, or until December 26,
2011. Accordingly, under Section 8.01(b) of the Contract, the Insured’s initial Application must have
been filed no later than March 26, 2012. The Insured filed its Application on March 5, 2012. Thus, the
Insured’s Application was timely filed.

(ii) Section 8.02 of the Contract (Assignment to OPIC)

Section 8.02 of the Contract requires that, as a condition to OPIC’s compensation of a Claim, the
Insured must assign all rights vis a vis Conferry or the Government of Venezuela to OPIC. Following
consultation with OPIC’s own Venezuelan counsel, OPIC has determined, that it can pay compensation.
for the Claim subject to an undertaking from the Insured assigning all residual rights of the Insured vis a
vis Conferry, the Venezuelan government (whether with respect to the CADIVI process, the
Expropriation Claim, or any other claims), against the project guarantors’ (the “Guarantors”), or
otherwise, and otherwise agrees to cooperate with OPIC in further documenting such assignments as
needed, The execution of such an agreement will satisfy the requirements of Section 8.02.

(ii) Section 8.04 of the Contract (Recoveries)

While not mentioned in the initial Application, OPIC was aware, from the prior claims, that the
Insured had additional security for the Loan in the form of a pledged account in New York (the “ML
Account’) that could constitute a source of additional compensation to the Insured under Section 5.02(2)

' Bach of Lilia Josefina Tovar Mata, Magdalena Josefina Tovar de Martinez, Antonio Martinez Bolivar, Rafael
Tovar Mata, Rodolfo José Tovar Mata, Iversiones Tovar Mata C.A. and Naviera Nueva Esparta C.A. executed a
guaranty of the Loan.


According to the Insured, the expropriation of Conferry in September 2011 was an event of
default under the Loan Documents that was not covered by the Forbearance Agreement and thus
automatically extinguished the Insured’s obligation to forbear on September 30, 2011, whereupon the
Insured had “the immediate right to enforce payment of the Indebtedness and all other amounts owing by
(Conferry] and the Guarantors under . . . the Loan Documents.” Additionally, on November 30, 2011, the
forbearance period itself expired. As a result, the Insured has concluded that it has no continuing
obligation to forbear from exercising its legal rights and the total amount of the Loan is due and payable.
The Insured is also satisfied that by signing the Forbearance Agreement, Conferry agreed that upon
expiration of the forbearance period (or earlier termination by another default) the Loan would be
immediately due and payable and the Insured would have no obligation to offer additional terms of
forbearance.

It is the Insured’s position that a notice of acceleration was not required and that the Insured’s
rights under the Loan Documents and the Forbearance Agreement are unaffected.

In the discussions attempting to clarify the Insured’s treatment of the Loan vis a vis Conferry
OPIC learned of additional factors that would mitigate the risk of any failure to _provide express notice to
Conferry of the acceleration. First, the Expropriation Claim itself contemplates that the Loan is
accelerated and, in the December 17" meeting OPIC was told that the Insured had engaged in discussions
with the new managers of Conferry in which they seemed to acknowledge the acceleration and asked
about any possibility of keeping the Loan in place. Secondly, in a September 18" email from the Insured,
OPIC was informed that in fact in April 2012 a demand letter was sent by the Insured to each of the
Guarantors of the Loan demanding payment in full of the outstanding amount of the Loan *.

Accordingly, while it is clear the Insured could have done more, OPIC is willing to compensate
the Insured with respect to the Claim under agreement that the Insured will, as required by the Contract,
cooperate in OPIC’s further efforts to notify all parties of the acceleration of the Loan and of the
Expropriation Claim.

C. Amount of Compensation

After review of the initial application, OPIC asked the Insured to clarify discrepancies between
the loan amortization schedule originally attached to the Contract and to the original copy of the Loan
Agreement and Note and the schedule referenced in the Application. After the December 17" meeting,
the Insured provided a revised amortization schedule and satisfactorily explained that delays in the
funding of the loan resulted in a revised amortization schedule that deferred the commencement of
payments under the Loan from January 2003 to April 2003, and correspondingly extended the final
maturity date of the Loan.

Accordingly, subject to the Insured making the assignments to OPIC required under Section 8.02
of the Contract and entering into a setflement agreement certifying and agreeing to certain other matters,
OPIC will make a claim payment to the Insured in a lump sum of the remaining scheduled principal and
interest payments due to the Insured under the Loan, which based on the initial Application is
$6,065,565.11, less the agreed amount of $1,515,422.16 in other compensation available to the Borrower

? OPIC has determined that the April 2012 demand notice was not an attempt to negotiate a settlement of the
compensation amount that would have compromised any future effort to enforce a claim and thus did not run afoul
of the requirement of Section 9.01(7) to consult with OPIC.

6


MEMORANDUM OF DETERMINATIONS
[Date May 31, 2013]

Expropriation Claim of Caterpillar Financial Services Corporation
Contract of Insurance No. F314

I. BACKGROUND

By letter dated September 29, 2011, Caterpillar Financial Services Corporation (the “Insured”)
notified OPIC that on or about September 28, 2011, Consolidada de Ferrys C.A. (“Conferry”), the
Insured’s borrower, had been nationalized by the Venezuelan Government. Notice of formal
expropriation procedures was issued by the Venezuelan government against Conferry on September 30,
2011 (see Exhibit 1). Over the next several months, OPIC and the Insured were in discussions by email
and telephone as the Insured gathered information regarding whether the Venezuelan government’s
actions would cause a default on Conferry’s scheduled payments to the Insured. In addition, OPIC
granted the Insured an extension of time for the Insured to gather information and prepare and submit its
expropriation claim.

Subsequently, by letter dated March 5, 2012, the Insured filed an Application for Compensation
(the “Application”) under OPIC Contract of Insurance No. F314 (see Exhibit 2) (the “Contract”) for
losses arising out of a loan agreement dated October 9, 2002, and a related Promissory Note dated
October 9, 2002 in the original principal amount of $26,805,020 (the “Loan”) made by the Insured to
Conferry.

The Application seeks compensation for certain past due payments owed under the Loan by
Conferry prior to the date of expropriation, as well as payment of the remaining balance of the scheduled
payments yet to be paid on the Loan (the “Claim”). According to the Application, past due scheduled
payments of principal and interest as of January 2012 totaled $2,962,399.72, and the total outstanding
amount of the Loan (scheduled principal and interest) was $6,065,565.11.

After an initial review of the Application, on April 26, 2012, OPIC forwarded to the Insured a list
of follow up questions related to the Application. The Insured provided its response to the questions to
OPIC on May 31, 2012. The parties scheduled a conference call on June 18, 2012, to discuss the
questions, and the Insured requested additional information regarding the factual support OPIC was
seeking to support some of the Insured’s statements in the Application. OPIC sent an annotated list of the
questions to the Insured on June 28, 2012. The Insured provided a response on July 31, 2012, but the
response again lacked some of the requested factual information. On August 28, 2012, OPIC responded
with a request for additional information and clarifications, to which the Insured responded on September
18", As part of the resulting exchange, the Insured and OPIC agreed that OPIC would prepare an initial
draft Memorandum of Determinations based on the information provided, highlighting those items where
further supplementation of the Application would be needed. OPIC circulated an initial draft of this
Memorandum of Determinations to the Insured on October 19, 2012.

In response to the initial draft Memorandum of Determinations and the Insured’s subsequent
response on November 1, 2012, an in-person meeting with the Insured was scheduled on December 17,
2012. After the meeting the Insured provided the additional information that OPIC needed to issue this
Memorandum of Determinations. As a result, OPIC has determined that the Insured has satisfied its
obligations under the Contract and, subject to the Insured making the assignments to OPIC required under
Section 8.02 of the Contract and entering into a settlement agreement certifying and agreeing to certain


through the ML Account (net of agreed expenses), OPIC will also pay interest on each such payment, as
provided in Section 5.01 of the Contract, at the average daily federal funds rate from December 6, 2011
(which is the 90" day prior to OPIC’s receipt on March 5, 2012, of the Insured’s Initial Claim
Application), through (and including) the date on which OPIC will pay such compensation.

OVERSEAS PRIVATE INVESTMENT CORPORATION

—¥ ¥
Elizabeth L. Littlefield, President & CEO


other matters, OPIC will make a claim payment to the Insured of $4,555,429.09, plus $17.17 per day from
June 1, 2013, until the date such claim payment is made.

i. THE INSURANCE CONTRACT

The Contract was issued and became effective on July 30, 2002. The Contract is based on OPIC’s
Standard Form 234 KGT 5-73 PL, Contract of Institutional Lenders Insurance Against Inconvertibility,
Expropriation and Political Violence, amended to include certain special terms and conditions. The
Contract covers 100% of the outstanding and unpaid principal and accrued and unpaid interest under the
Loan. Premiums under the Contract have been paid through October 29, 2012, and the active amount
elected by the Insured is $6,119,227.96.

Oi. CLAIMS HISTORY

Due to general economic upheaval and resulting governmental restrictions on currency exchange,
beginning in 2003 Conferry began to face delays in converting currency for servicing the Loan (as well as
a similar prior loan made to Conferry) that led the parties to enter into a forbearance agreement dated as
of September 30, 2004 (the “Forbearance Agreement”). The Forbearance Agreement was reviewed and
approved by OPIC; it does not create an actual extension of the due dates under the loans, but merely
provides that the Insured would forbear from exercising its rights and remedies under the Loan
Agreement with respect to any payment default, provided that payments were received within 180 days of
their original payment due date. This allowed time for Conferry to request authorization for the
conversion of Bolivars to Dollars from the Comision de Administracion de Divisas (“CADIVI”), the
Venezuelan entity charged with managing the currency controls that were implemented by President
Chavez’ administration in early 2003.

Notwithstanding the Forbearance Agreement, the Insured continued to face delays in receiving
payments on the Loan as a result of the CADIVI process. As a result, the Insured began preparing
inconvertibility claims applications several times, but OPIC intervened with the Venezuelan government
on the Insured’s behalf and the Insured was ultimately able to convert through the CADIVI process.
However, on May 24, 2006, the Insured filed a claim under the inconvertibility coverage provided in the
Contract with respect to missed Loan payments in 2005. OPIC found the claim to be valid and paid
compensation under the Contract in the amount of $1,342,071.70 and also paid compensation under a
related insurance contract for a similar loan in the amount of $1,302,917.36, each in exchange for an
assignment of the eligible local currency. The Memorandum of Determinations for that claim is attached
as Exhibit 3. In late 2006 the Insured initiated a second claim for inconvertibility under the Contract but
later withdrew the application when it became clear that other security for the Loan was available to bring
the Loan current. Over the intervening years, the Insured notified OPIC of occasional delays in converting
currency through the CADIVI process but ultimately received the late payments from Conferry and did
not initiate any additional inconvertibility claims.

Iv. DETERMINATIONS UNDER THE CONTRACT

This Memorandum examines three categories of issues with respect to the Claim: (a) whether the
acts alleged by the Insured satisfy the substantive requirements of, and, therefore, fall within the scope of
coverage set forth in, the Contract; (b) whether the Insured has satisfied its other duties under the
Contract; and (c) the amount of compensation, if any, payable by OPIC. These will be addressed in order:

ry


A. Requirements for Expropriation under the Contract

The Application provided a summary of the events leading up to the Insured’s claim. On
September 27, 2011, the Venezuelan government published an official notice of its intent to expropriate
Conferry and all of its assets (the “Decree”) and commenced formal expropriation procedures as of
September 30, 2011. A translation of the Decree is attached as Exhibit 4. Article No. 3 of the Decree
clearly states the government’s intent to expropriate Conferry free and clear of all encumbrances,
including the Loan, subject to the requirements of Venezuela’s expropriation law. The Insured notified its
local legal counsel and, pursuant to their advice, filed a claim with the Attorney General’s Office for the
“outstanding principal balance of US$ 5,862,342.96, plus interest at the contract rate” (the “Expropriation
Claim”, a translation of which is attached as Exhibit 5). The Expropriation Claim asserts that Caterpillar
has valid and enforceable debts against Conferry in accordance with Article 22 of the Expropriation Act
of Public and Social Use.

OPIC does not dispute that Conferry and its assets are subject to the Decree. However, the claim
determination requires an analysis of the impact that expropriation of the borrower had upon the lender,
the Insured. Given OPIC’s awareness of the CADIVI process and that two payments under the Loan were
due on April 15, 2011 and July 15, 2011 (prior to the date of the Decree), OPIC raised issues whether
those Loan payments should be included within the Expropriation Claim, given that they arose prior to
the date of expropriation, and whether the CADIVI process continued with respect to those claims.

The question is not whether such payments are compensable under the Contract, but whether such
payments should be treated as the subject of an expropriation claim or as a separate inconvertibility claim.
In the May 31 response, the Insured clarified that (a) the July 2011 payment was not delinquent as of the
expropriation date due to the forbearance arrangements, and (b) a CADIVI application was filed by
Conferry with respect to the April 2011 payment. However, as detailed in the Insured’s September 18,
2012 correspondence to OPIC (and the documents submitted therewith), Conferry’s new government
managers have confirmed with the Insured that no funds were submitted for the April 2011 CADIVI
payment and no further funds would be submitted by Conferry for any future payments. Additionally, the
Insured was advised that no application was made to CADIVI for the July 2011 payment and no further
applications would be made. Accordingly, the April 2011 and July 2011 payments cannot be made
through the CADIVI process. Finally, Conferry’s management advised the Insured explicitly that it
considered the sole source of compensation for remaining amounts due under the Loan to be through the
expropriation process administered by the Attorney General, not through the CADIVI process.
Accordingly, the Insured properly concluded that the April 2011 and July 2011 payments will not be
made through the CADIVI process and has made no further efforts to pursue payment through CADIVI.
Further, the expropriation of Conferry’s assets by the Venezuelan government has effectively prevented
Conferry from making any further scheduled payments with respect to the Loan and has deprived
Conferry of its ability to control or dispose of its assets, so essential requirements for finding an
expropriation of the Loan under Section 4.01 of the Contract have been satisfied.

After the December 17, 2012, meeting, the Insured provided the remaining information necessary
for OPIC to make its determinations with respect to the Claim and agreed to assign any residual rights the
Insured may have to recover payments on the Loan outside of the Expropriation Claim. Subject to that
qualification, OPIC otherwise accepts that the Insured has satisfied the requirements of Article IV of the
Contract in demonstrating that the Decree has resulted in a compensable Claim and that none of the
exclusions under Section 4.02 of the Contract apply.