The services are rendered for maximum of 7 years (in case of CAP EX financing), the tenor should match the purpose of the loan and the internally generated cash flows of the entity.

Lending services should be collateralized with adequate pledges. The latter is not a key factor for the financing decision but is a necessary condition. The following can be accepted as a pledge:

• Cash collateral (including term deposits)
  
• Bank guarantees
  
• Commercial or residential real estate in the territory of the Republic of Armenia
  

Other non-current assets (machinery, vehicles, etc), as well as inventory (finished goods), can be considered as additional collateral. In general, the personal guarantees of the shareholders (participants) are also required.

Loan to value for a new client can reach up to 70%. Nevertheless, the bank can set a higher ratio at its discretion.

The pledged items should be assessed by independent appraisal agencies.

Commercial services are rendered in AMD, USD and EUR. If the service is rendered in foreign currencies, all negative fluctuations in the exchange rate are borne by the client. E.g. in case AMD is depreciated with respect to USD, the client pays a larger AMD amount to redeem the loan.

Loans are extended non-cash. The loan extension day is the day when the client actually receives the money. Interest, stipulated by the agreement, is paid by the client based on the actual period of the loan.

The redemptions of the principal are performed in accordance with the schedule, set by the agreement, monthly, if no grace period is set and at the end of the tenor in case of overdrafts. The redemption schedule should match the financing purpose and the internally generated cash flows of the entity, and should be specified, taking into consideration the commercial cycle of the business.

Interest is paid on monthly basis. If the day of the payment of principal or interest is a non-working day, the redemption is done on the next working day, at the same time penalties and interests are redeemed first, and then the principal amount. Interest is daily accrued on the actual amount of the loan, on the basis of 360-days year.

(interest rate*loan balance)

Daily interest =_____________________________________________________

                                                              (360*100)

EXAMPLE:

Interest rate - 17%,

Loan closing balance - AMD 20,000,000

Days in month - 30 days

(17 * AMD 20,000,000 )

Daily interest = _____________________________= AMD 9,444

                                         (360 * 100)

Monthly interest = AMD 9,444 * 30 days = AMD 283,333

The bank has the right to review all the loan terms (including interest) at any given time, if the customer failed to maintain T&Cs of the Facility specified in the Facility (Loan) Agreement and /or loan rate deviates significantly from prevailing lending rates applied by the Bank for similar products and to change them unilaterally, having notified the client in writing one month before. The written notification is sufficient for the changed interest rate to be applied from the set date.

All expenses with respect to lending are borne by the client. These expenses include assessment of the collateral (assessment report, etc), expenses of concluding a pledge agreement, certificate of State register and unified certificate about any limitations, notary confirmation of collateral agreements, expenses of the registration of collateral rights, as well as collateral insurance if necessary.

The client is notified about all the unexpected expenses, arisen during the loan analysis, as well as the lending process.

The bank accrues daily penalties of 48% p.a. on the overdue loan or a part of it, as well as overdue interest for the first 90 days. After the first 90 days the penalties will be calculated as defiend by the law.

In case of early redemption of the term loan, the client pays a penalty in the amount of 20% of unearned interest if the loan is settled within 12 months from contract signing date, otherwise initial amount 1 month interest is paid. The Bank can also charge service fee for the final month.

If the client doesn’t meet its obligations toward the bank in due course and time, the bank can apply to the court and foreclose the collateralized property, dispose it of in the future and redeem the claim with the received money.

If the client doesn’t meet its obligations toward the bank in due course and time, the respective information will be reported to the credit register of the CBA.

In case the collateral is sold at a higher amount, than the debt, the difference is returned to the owner of the collateral, otherwise the remaining part is satisfied with any other property of the borrower.

To guarantors (upon such a requirement)

Before signing a guarantee agreement, the Bank shall provide the Guarantor with a separate document, which clearly states that the Guarantor wants to issue a guarantee and understands the consequences arising from provision of the guarantee.

The Bank will provide a copy of the guarantee agreement and the agreement of the obligation secured by the guarantee (including a copy of the repayment schedule) to the Guarantor free of charge.

The Bank shall provide information on the outstanding balance of a loan (obligation) upon the request of the Guarantor during the whole period of the guarantee agreement.

The Bank will communicate with the Guarantor in writing a) at the premises of the Bank, b) by email; c) through SMS messages.

The Bank will notify the Guarantor on the existence of the debt to be repaid at least 1 day prior to the scheduled repayment date.

The Bank will notify the Guarantor about material changes (interest rate, commission, penalty fees, terms, loan amount (only in case of additional crediting)) made in a guarantee contract and obligation agreements secured by a guarantee 7 days before these changes enter into force.

The Bank will notify the guarantor about termination of an obligation agreement secured by a guarantee within 7 business days after the date of contract termination.

The Bank is obliged to remind the Guarantor about the delay in repayment of the loan no later than one day later.

If the Bank demands from the Guarantor to fulfill its obligation, such request will provide for a period during which the Guarantor must pay the guaranteed amount; whereas, such period cannot be shorter than 7 business days.