Pricesmart, Inc. (Exact Name of Registrant As Specified in Its Charter)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 29, 2020 OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to

COMMISSION FILE NUMBER 0-22793 PriceSmart, Inc. (Exact name of registrant as specified in its charter)

Delaware 33-0628530 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)

9740 Scranton Road, San Diego, CA 92121 (Address of principal executive offices) (Zip Code)

(858) 404-8800 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: Title of each class Trading Symbol Name of each exchange on which registered Common Stock, $0.0001 par value PSMT NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller Reporting Company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The registrant had 30,601,301 shares of its common stock, par value $0.0001 per share, outstanding at March 31, 2020.

PRICESMART, INC.

INDEX TO FORM 10-Q

Page PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 1 CONSOLIDATED BALANCE SHEETS AS OF FEBRUARY 29, 2020 (UNAUDITED) AND AUGUST 31, 2019 2 CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 29, 2020 AND FEBRUARY 28, 2019 - UNAUDITED 4 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 29, 2020 AND FEBRUARY 28, 2019 - UNAUDITED 5 CONSOLIDATED STATEMENTS OF EQUITY FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 29, 2020 AND FEBRUARY 28, 2019 - UNAUDITED 6 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2020 AND FEBRUARY 28, 2019 - UNAUDITED 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED 9 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 36 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 58 ITEM 4. CONTROLS AND PROCEDURES 59 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 60 ITEM 1A. RISK FACTORS 60 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 61 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 62 ITEM 4. MINE SAFETY DISCLOSURES 62 ITEM 5. OTHER INFORMATION 62 ITEM 6. EXHIBITS 63

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PriceSmart, Inc.’s (“PriceSmart,” “we” or the “Company”) unaudited consolidated balance sheet as of February 29, 2020 and the consolidated balance sheet as of August 31, 2019, the unaudited consolidated statements of income for the three and six months ended February 29, 2020 and February 28, 2019, the unaudited consolidated statements of comprehensive income for the three and six months ended February 29, 2020 and February 28, 2019, the unaudited consolidated statements of equity for the three and six months ended February 29, 2020 and February 28, 2019, and the unaudited consolidated statements of cash flows for the six months ended February 29, 2020 and February 28, 2019 are included herein. Also included herein are the notes to the unaudited consolidated financial statements.

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PRICESMART, INC. CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

February 29, 2020 August 31, (Unaudited) 2019 ASSETS Current Assets: Cash and cash equivalents $ 132,845 $ 102,653 Short-term restricted cash 93 54 Short-term investments 30,448 17,045 Receivables, net of allowance for doubtful accounts of $125 as of February 29, 2020 and $144 as of August 31, 2019, respectively 10,905 9,872 Merchandise inventories 323,022 331,273 Prepaid expenses and other current assets (includes $0 and $2,736 as of February 29, 2020 and August 31, 2019, respectively, for the fair value of derivative instruments) 28,242 30,999 Total current assets 525,555 491,896 Long-term restricted cash 3,831 3,529 Property and equipment, net 706,848 671,151 Operating lease right-of-use assets, net 123,231 — Goodwill 45,413 46,101 Other intangibles, net 11,378 12,576 Deferred tax assets 18,823 15,474 Other non-current assets (includes $241 and $0 as of February 29, 2020 and August 31, 2019, respectively, for the fair value of derivative instruments) 52,578 44,987 Investment in unconsolidated affiliates 10,635 10,697 Total Assets $ 1,498,292 $ 1,296,411 LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings $ 3,579 $ 7,540 Accounts payable 281,098 286,219 Accrued salaries and benefits 25,118 25,401 Deferred income 27,084 25,340 Income taxes payable 7,773 4,637 Other accrued expenses and other current liabilities (includes $45 and $0 as of February 29, 2020 and August 31, 2019, respectively, for the fair value of derivative instruments 41,824 32,442 Operating lease liabilities, current portion 8,402 — Dividends payable 10,719 — Long-term debt, current portion 16,247 25,875 Total current liabilities 421,844 407,454 Deferred tax liability 1,718 2,015 Long-term portion of deferred rent — 11,198 Long-term income taxes payable, net of current portion 4,784 5,069 Long-term operating lease liabilities 127,042 — Long-term debt, net of current portion 113,879 63,711 Other long-term liabilities (includes $3,920 and $2,910 for the fair value of derivative instruments and $5,828 and $5,421 for post-employment plans as of February 29, 2020 and August 31, 2019, respectively) 10,158 8,685 Total Liabilities 679,425 498,132

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Stockholders' Equity: Common stock $0.0001 par value, 45,000,000 shares authorized; 31,450,817 and 31,461,359 shares issued and 30,599,058 and 30,538,788 shares outstanding (net of treasury shares) as of February 29, 2020 and August 31, 2019, respectively 3 3 Additional paid-in capital 441,372 443,084 Tax benefit from stock-based compensation 11,486 11,486 Accumulated other comprehensive loss (152,573) (144,339) Retained earnings 549,703 525,804 Less: treasury stock at cost, 851,759 shares as of February 29, 2020 and 924,332 shares as of August 31, 2019 (32,098) (38,687) Total stockholders' equity attributable to PriceSmart, Inc. stockholders 817,893 797,351 Noncontrolling interest in consolidated subsidiaries 974 928 Total stockholders' equity 818,867 798,279 Total Liabilities and Equity $ 1,498,292 $ 1,296,411

See accompanying notes.

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PRICESMART, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED—AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

Three Months Ended Six Months Ended February 29, February 28, February 29, February 28, 2020 2019 2020 2019 Revenues: Net merchandise sales $ 871,726 $ 820,290 $ 1,650,454 $ 1,567,733 Export sales 8,434 6,844 16,708 15,033 Membership income 14,093 12,845 27,839 25,585 Other revenue and income 12,482 14,446 23,675 25,711 Total revenues 906,735 854,425 1,718,676 1,634,062 Operating expenses: Cost of goods sold: Net merchandise sales 743,434 705,546 1,406,158 1,346,701 Export sales 8,078 6,486 16,049 14,264 Non-merchandise 4,662 4,826 8,913 9,073 Selling, general and administrative: Warehouse club and other operations 84,022 75,708 163,395 149,930 General and administrative 27,618 24,968 53,502 52,303 Pre-opening expenses 44 97 997 112 Loss on disposal of assets 68 258 139 473 Total operating expenses 867,926 817,889 1,649,153 1,572,856 Operating income 38,809 36,536 69,523 61,206 Other income (expense): Interest income 586 423 879 814 Interest expense (1,690) (1,001) (2,552) (2,034) Other income (expense), net 723 (372) (262) (2,191) Total other expense (381) (950) (1,935) (3,411) Income before provision for income taxes and

loss of unconsolidated affiliates 38,428 35,586 67,588 57,795 Provision for income taxes (12,702) (11,703) (22,105) (19,243) Loss of unconsolidated affiliates (15) (20) (63) (44) Net income 25,711 23,863 45,420 38,508 Less: net income attributable to noncontrolling interest (111) (53) (92) (86) Net income attributable to PriceSmart, Inc. $ 25,600 $ 23,810 $ 45,328 $ 38,422 Net income attributable to PriceSmart, Inc. per share available for distribution: Basic $ 0.85 $ 0.79 $ 1.49 $ 1.27 Diluted $ 0.85 $ 0.79 $ 1.49 $ 1.27 Shares used in per share computations: Basic 30,255 30,206 30,266 30,189 Diluted 30,258 30,211 30,271 30,200 Dividends per share $ 0.70 $ 0.70 $ 0.70 $ 0.70

See accompanying notes.

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PRICESMART, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED—AMOUNTS IN THOUSANDS)

Three Months Ended Six Months Ended February 29, February 28, February 29, February 28, 2020 2019 2020 2019 Net income $ 25,711 $ 23,863 $ 45,420 $ 38,508 Less: net (income) loss attributable to noncontrolling interest (111) (53) (92) (86) Net income attributable to PriceSmart, Inc. $ 25,600 $ 23,810 $ 45,328 $ 38,422

Other Comprehensive Income, net of tax: Foreign currency translation adjustments (1) (3,384) 5,121 (7,107) (8,276) Defined benefit pension plan: Net gain arising during period 6 4 13 13 Amortization of prior service cost and actuarial gains included in net periodic pensions cost 19 18 37 37 Total defined benefit pension plan 25 22 50 50 Derivative instruments: (2) Unrealized gains (losses) on change in derivative obligations 1,691 236 1,263 (70) Unrealized losses on change in fair value of interest rate swaps (6,128) (1,027) (5,191) (598) Amounts reclassified from accumulated other comprehensive income (loss) to other expense, net for settlement of derivatives 2,747 — 2,751 — Total derivative instruments (1,690) (791) (1,177) (668) Other comprehensive income (loss) (5,049) 4,352 (8,234) (8,894) Comprehensive income 20,551 28,162 37,094 29,528 Less: comprehensive income attributable to noncontrolling interest 21 22 55 21 Comprehensive income attributable to PriceSmart, Inc. to stockholders $ 20,530 $ 28,140 $ 37,039 $ 29,507

(1) Translation adjustments arising in translating the financial statements of a foreign entity have no effect on the income taxes of that foreign entity. They may, however, affect: (a) the amount, measured in the parent entity's reporting currency, of withholding taxes assessed on dividends paid to the parent entity and (b) the amount of taxes assessed on the parent entity by the government of its country. The Company has determined that the reinvestment of earnings of its foreign subsidiaries are indefinite because of the long-term nature of the Company's foreign investment plans. Therefore, deferred taxes are not provided for on translation adjustments related to non-remitted earnings of the Company's foreign subsidiaries. (2) See Note 8 - Derivative Instruments and Hedging Activities.

See accompanying notes.

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PRICESMART, INC. CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED—AMOUNTS IN THOUSANDS)

Three Months Ended Total Tax Benefit Accumulated Stockholders' Additional From Other Equity Attributable Common Stock Paid-in Stock Based Comprehensive Retained Treasury Stock to Noncontrolling Total PriceSmart, Shares Amount Capital Compensation Loss Earnings Shares Amount Inc. Interest Equity Balance at November 30, 2018 31,405 $ 3 $ 438,928 $ 11,486 $ (134,462) $ 488,566 912 $ (39,107) $ 765,414 $ 668 $ 766,082 Purchase of treasury stock — — — — — — 39 (2,417) (2,417) — (2,417) Issuance of restricted stock award 44 — — — — — — — — — — Forfeiture of restricted stock awards (2) — — — — — — — — — — Stock-based compensation — — 3,345 — — — — — 3,345 — 3,345 Dividend paid to stockholders — — — — — (10,672) — — (10,672) (313) (10,985) Dividend payable to stockholders — — — — — (10,672) — — (10,672) — (10,672) Net income — — — — — 23,810 — — 23,810 53 23,863 Other comprehensive income (loss) — — — — 4,352 — — — 4,352 22 4,374 Balance at February 28, 2019 31,447 $ 3 $ 442,273 $ 11,486 $ (130,110) $ 491,032 951 $ (41,524) $ 773,160 $ 430 $ 773,590

Balance at November 30, 2019 31,475 $ 3 $ 440,756 $ 11,486 $ (147,524) $ 545,532 862 $ (33,424) $ 816,829 $ 943 $ 817,772 Purchase of treasury stock — — — — — — 15 (920) (920) — (920) Issuance of treasury stock (25) — (2,246) — — — (25) 2,246 — — — Issuance of restricted stock award 24 — — — — — — — — — — Forfeiture of restricted stock awards (23) — — — — — — — — — — Stock-based compensation — — 2,862 — — — — — 2,862 — 2,862 Dividend paid to stockholders — — — — — (10,710) — — (10,710) (101) (10,811) Dividend payable to stockholders — — — — — (10,719) — — (10,719) — (10,719) Net income — — — — — 25,600 — — 25,600 111 25,711 Other comprehensive income (loss) — — — — (5,049) — — — (5,049) 21 (5,028) Balance at February 29, 2020 31,451 $ 3 $ 441,372 $ 11,486 $ (152,573) $ 549,703 852 $ (32,098) $ 817,893 $ 974 $ 818,867

See accompanying notes.

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PRICESMART, INC. CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED—AMOUNTS IN THOUSANDS)

Six Months Ended Total Tax Benefit Accumulated Stockholders' Additional From Other Equity Common Stock Paid-in Stock Based Comprehensive Retained Treasury Stock Attributable to Noncontrolling Total PriceSmart, Shares Amount Capital Compensation Income (Loss) Earnings Shares Amount Inc. Interest Equity Balance at August 31, 2018 31,373 $ 3 $ 432,882 $ 11,486 $ (121,216) $ 473,954 912 $ (39,107) $ 758,002 $ 636 $ 758,638 Purchase of treasury stock — — — — — — 39 (2,417) (2,417) — (2,417) Issuance of restricted stock award 76 — — — — — — — — — — Forfeiture of restricted stock awards (2) — — — — — — — — — — Stock-based compensation — — 9,391 — — — — — 9,391 — 9,391 Dividend paid to stockholders — — — — — (10,672) — — (10,672) (313) (10,985) Dividend payable to stockholders — — — — — (10,672) — — (10,672) — (10,672) Net income — — — — — 38,422 — — 38,422 86 38,508 Other comprehensive income (loss) — — — — (8,894) — — — (8,894) 21 (8,873) Balance at February 28, 2019 31,447 $ 3 $ 442,273 $ 11,486 $ (130,110) $ 491,032 951 $ (41,524) $ 773,160 $ 430 $ 773,590

Balance at August 31,2019 31,461 $ 3 $ 443,084 $ 11,486 $ (144,339) $ 525,804 924 $ (38,687) $ 797,351 $ 928 $ 798,279 Purchase of treasury stock — — — — — — 22 (1,381) (1,381) — (1,381) Issuance of treasury stock (94) — (7,970) — — — (94) 7,970 — — — Issuance of restricted stock award 109 — — — — — — — — — — Forfeiture of restricted stock awards (25) — — — — — — — — — — Stock-based compensation — — 6,258 — — — — — 6,258 — 6,258 Dividend paid to stockholders — — — — — (10,710) — — (10,710) (101) (10,811) Dividend payable to stockholders — — — — — (10,719) — — (10,719) — (10,719) Net income — — — — — 45,328 — — 45,328 92 45,420 Other comprehensive income (loss) — — — — (8,234) — — — (8,234) 55 (8,179) Balance at February 29, 2020 31,451 $ 3 $ 441,372 $ 11,486 $ (152,573) $ 549,703 852 $ (32,098) $ 817,893 $ 974 $ 818,867

See accompanying notes.

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PRICESMART, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED—AMOUNTS IN THOUSANDS)

Six Months Ended February 29, February 28, 2020 2019 Operating Activities: Net income $ 45,420 $ 38,508 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 29,988 27,829 Allowance for doubtful accounts (19) 23 Loss on sale of property and equipment 139 473 Deferred income taxes (4,063) (916) Equity in losses of unconsolidated affiliates 63 44 Stock-based compensation 6,258 9,391 Change in operating assets and liabilities: Receivables, prepaid expenses and other current assets, non-current assets, accrued salaries and benefits, deferred membership income and other accruals 4,711 (417) Merchandise inventories 8,251 (13,874) Accounts payable (1,683) 15,239 Net cash provided by operating activities 89,065 76,300 Investing Activities: Additions to property and equipment (70,818) (62,655) Purchases of short-term investments (20,507) (9,142) Proceeds from settlements of short-term investments 7,059 17,876 Purchases of long-term investments (1,478) — Proceeds from disposal of property and equipment 23 104 Net cash used in investing activities (85,721) (53,817) Financing Activities: Proceeds from long-term bank borrowings 45,820 — Repayment of long-term bank borrowings (5,308) (6,345) Proceeds from short-term bank borrowings 90,019 — Repayment of short-term bank borrowings (93,825) — Cash dividend payments (10,811) (10,985) Purchase of treasury stock for tax withholding on stock compensation (1,381) (2,417) Other financing activities (92) (86) Net cash provided by (used in) financing activities 24,422 (19,833) Effect of exchange rate changes on cash and cash equivalents and restricted cash 2,767 (1,487) Net increase in cash, cash equivalents 30,533 1,163 Cash, cash equivalents and restricted cash at beginning of period 106,236 96,914 Cash, cash equivalents and restricted cash at end of period $ 136,769 $ 98,077

Supplemental disclosure of noncash investing activities: Capital expenditures accrued, but not yet paid $ 10,357 $ 4,815 Dividends declared but not yet paid 10,719 10,672

The following table provides a breakdown of cash and cash equivalents, and restricted cash reported within the statement of cash flows:

Six Months Ended February 29, February 28, 2020 2019 Cash and cash equivalents $ 132,845 $ 90,261 Short-term restricted cash 93 4,464 Long-term restricted cash $ 3,831 $ 3,352 Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 136,769 $ 98,077

See accompanying notes.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) February 29, 2020

NOTE 1 – COMPANY OVERVIEW AND BASIS OF PRESENTATION

PriceSmart, Inc.’s (“PriceSmart,” the “Company,” or "we") business consists primarily of international membership shopping warehouse clubs similar to, but smaller in size than, warehouse clubs in the United States. As of February 29, 2020, the Company had 45 warehouse clubs in operation in 12 countries and one U.S. territory (seven each in Colombia, Costa Rica, and Panama; five in the Dominican Republic, four each in Trinidad and Guatemala; three in Honduras; two each in El Salvador and Nicaragua; and one each in Aruba, Barbados, Jamaica and the United States Virgin Islands), of which the Company owns 100% of the corresponding legal entities (see Note 2 - Summary of Significant Accounting Policies). Due to the uncertainty created from the outbreak of the novel coronavirus (COVID-19) and the potential social and economic impacts in the markets where we operate and any resulting impacts on the Company’s results of operations and cash flows, we have reevaluated the timing of our capital investments and warehouse club openings. While we have decided to proceed with the construction of an additional warehouse club in Liberia, Costa Rica, which is currently scheduled to finalize in May 2020, we have decided to postpone the opening of that club. Additionally, with respect to our previously announced future warehouse club openings on land we have acquired in Bogota and Bucaramanga, Colombia and in Jamaica, we have decided, temporarily, to halt or not to initiate construction and opening of those clubs at this time.

PriceSmart is investing in technology to increase efficiencies and to enable omni-channel capabilities, including e-commerce, to enhance the member experience. PriceSmart also operates a legacy (casillero and marketplace) Aeropost business in 38 countries in Latin America and the Caribbean, many of which overlap with markets where we operate warehouse clubs.

Basis of Presentation – The interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

Effective September 1, 2019, we adopted the requirements of Accounting Standards Update (ASU) 2016-02, "Leases (Topic 842)" (ASC 842) using the modified retrospective approach, under which financial results reported in prior periods were not restated. As a result, the consolidated balance sheet as of February 29, 2020 is not comparable, in this respect, with that as of August 31, 2019.

These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2019 (the “2019 Form 10-K”). The interim consolidated financial statements include the accounts of PriceSmart, Inc., a Delaware corporation, and its subsidiaries. Inter-company transactions between the Company and its subsidiaries have been eliminated in consolidation.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation – The interim consolidated financial statements of the Company included herein include the assets, liabilities and results of operations of the Company’s wholly owned subsidiaries, subsidiaries in which it has a controlling interest, and the Company’s joint ventures for which the Company has determined that it is the primary beneficiary. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. The Company’s net income excludes income attributable to its noncontrolling interests. Additionally, the consolidated financial statements also include the Company's investment in, and the Company's share of the income (loss) of, joint ventures recorded under the equity method. All significant inter-company accounts and transactions have been eliminated in consolidation. The interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the SEC and reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows for the periods presented. The results for interim periods are not necessarily indicative of the results for the year.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company determines whether any of the joint ventures in which it has made investments is a Variable Interest Entity (“VIE”) at the start of each new venture and if a reconsideration event has occurred. At this time, the Company also considers whether it must consolidate a VIE and/or disclose information about its involvement in a VIE. A reporting entity must consolidate a VIE if that reporting entity has a variable interest (or combination of variable interests) that will absorb a majority of the VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. A reporting entity must consider the rights and obligations conveyed by its variable interests and the relationship of its variable interests with variable interests held by other parties to determine whether its variable interests will absorb a majority of a VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. If the Company determines that it is not the primary beneficiary of the VIE, then the Company records its investment in, and the Company's share of the income (loss) of, joint ventures recorded under the equity method. Due to the nature of the joint ventures that the Company participates in and the continued commitments for additional financing, the Company determined these joint ventures are VIEs.

The Company has determined that for its ownership interest in store-front joint ventures within its marketplace and casillero business, the Company has the power to direct the activities that most significantly impact the economic performance of these VIEs. Therefore, the Company has determined that it is the primary beneficiary of these VIEs and has consolidated these entities within its consolidated financial statements. The Company's ownership interest in store-front joint ventures for which the Company has consolidated their financial statements as of February 29, 2020 are listed below:

Basis of

Marketplace and Casillero Store-front Joint Ventures Countries Ownership ‎Presentation Guatemala Guatemala 60.0 % Consolidated Tortola British Virgin Islands 50.0 % Consolidated Trinidad Trinidad 50.0 % Consolidated

In the case of the Company's ownership interest in real estate development joint ventures, both parties to each joint venture share all rights, obligations and the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. As a result, the Company has determined that it is not the primary beneficiary of the VIEs and, therefore, has accounted for these entities under the equity method. Under the equity method, the Company's investments in unconsolidated affiliates are initially recorded as an investment in the stock of an investee at cost and are adjusted for the carrying amount of the investment to recognize the investor's share of the earnings or losses of the investee after the date of the initial investment. The Company's ownership interest in real estate development joint ventures the Company has recorded under the equity method as of February 29, 2020 are listed below:

Basis of

Real Estate Development Joint Ventures Countries Ownership ‎Presentation GolfPark Plaza, S.A. Panama 50.0 % Equity(1) Price Plaza Alajuela PPA, S.A. Costa Rica 50.0 % Equity(1)

(1) Joint venture interests are recorded as investment in unconsolidated affiliates on the consolidated balance sheets.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the interim consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents – The Company considers as cash and cash equivalents all cash on deposit, highly liquid investments with a maturity of three months or less at the date of purchase, and proceeds due from credit and debit card transactions in the process of settlement.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restricted Cash – The changes in restricted cash are disclosed within the consolidated statement of cash flows based on the nature of the restriction. The following table summarizes the restricted cash reported by the Company (in thousands):

February 29, August 31, 2020 2019 Short-term restricted cash: Restricted cash for land purchase option agreements $ 50 $ 50 Other short-term restricted cash 43 4 Total short-term restricted cash $ 93 $ 54

Long-term restricted cash: (1) Other long-term restricted cash $ 3,831 $ 3,529 Total long-term restricted cash $ 3,831 $ 3,529 Total restricted cash $ 3,924 $ 3,583

(1) Other long-term restricted cash consists mainly of cash deposits held within banking institutions in compliance with federal regulatory requirements in Costa Rica and Panama.

Short-Term Investments –The Company considers as short-term investments certificates of deposit and similar time-based deposits with financial institutions with maturities over three months and up to one year.

Long-Term Investments –The Company considers as long-term investments certificates of deposit and similar time-based deposits with financial institutions with maturities over one year.

Goodwill and Other Intangibles, net – Goodwill and other intangibles totaled $56.8 million as of February 29, 2020 and $58.7 million as of August 31, 2019. The Company reviews reported goodwill and other intangibles at the cash-generating unit level for impairment. The Company tests goodwill for impairment at least annually or when events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

Tax Receivables – The Company pays Value Added Tax (“VAT”) or similar taxes (“input VAT”), income taxes, and other taxes within the normal course of the Company’s business in most of the countries in which the Company operates related to the procurement of merchandise and/or services it acquires and/or on sales and taxable income. The Company also collects VAT or similar taxes on behalf of the government (“output VAT”) for merchandise and/or services it sells. If the output VAT exceeds the input VAT, then the difference is remitted to the government, usually on a monthly basis. If the input VAT exceeds the output VAT, this creates a VAT receivable. In most countries where the Company operates, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a portion of sales processed via credit card directly to the government as advance payments of VAT and/or income tax. In the case of VAT, these procedures alter the natural offset of input and output VAT and generally leave us with a net VAT receivable, forcing us to process significant refund claims on a recurring basis. With respect to income taxes paid, if the estimated income taxes paid or withheld exceed the actual income tax due, this creates an income tax receivable. The Company either requests a refund of these tax receivables or applies the balance to expected future tax payments. These refund or offset processes can take anywhere from several months to several years to complete.

In most countries where the Company operates, there are defined and structured processes to recover VAT receivables via refunds or offsets. However, in one country without a clearly defined refund process, the Company is actively engaged with the local government to recover VAT receivables totaling $6.1 million and $5.1 million as of February 29, 2020 and August 31, 2019, respectively. In two other countries, minimum income tax rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $9.7 million and $7.8 million and deferred tax assets of $2.9 million and $2.7 million as of February 29, 2020 and August 31, 2019, respectively, in these countries. While the rules related to refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of these tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests.

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The Company’s policy for classification and presentation of VAT receivables, income tax receivables and other tax receivables is as follows:

 Short-term VAT and Income tax receivables, recorded as Other current assets: This classification is used for any countries where the Company’s subsidiary has generally demonstrated the ability to recover the VAT or income tax receivable within one year. The Company also classifies as short- term any approved refunds or credit notes to the extent that the Company expects to receive the refund or use the credit notes within one year.

 Long-term VAT and Income tax receivables, recorded as Other non-current assets: This classification is used for amounts not approved for refund or credit in countries where the Company’s subsidiary has not demonstrated the ability to obtain refunds within one year and/or for amounts which are subject to outstanding disputes. An allowance is provided against VAT and income tax receivable balances in dispute when the Company does not expect to eventually prevail in its recovery. The Company does not currently have any allowances provided against VAT and income tax receivables.

The following table summarizes the VAT receivables reported by the Company (in thousands):

February 29, August 31, 2020 2019 Prepaid expenses and other current assets $ 1,443 $ 1,639 Other non-current assets 25,247 22,691 Total amount of VAT receivables reported $ 26,690 $ 24,330

The following table summarizes the Income tax receivables reported by the Company (in thousands):

February 29, August 31, 2020 2019 Prepaid expenses and other current assets $ 6,801 $ 9,009 Other non-current assets 19,439 16,381 Total amount of Income tax receivables reported $ 26,240 $ 25,390

Lease Accounting – The Company’s leases are operating leases for warehouse clubs and non-warehouse club facilities such as corporate headquarters, regional offices, and regional distribution centers. The Company does not have finance leases. The Company determines if an arrangement is a lease and classifies it as either a finance or operating lease at lease inception. Operating leases are included in Operating lease right-of-use assets, net; Operating lease liabilities, current portion; and Long-term operating lease liabilities on the consolidated balance sheets.

Operating lease liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term. The Company’s leases generally do not have a readily determinable implicit rate; therefore, the Company uses a collateralized incremental borrowing rate at the commencement date in determining the present value of future payments. The incremental borrowing rate is based on a yield curve derived from publicly traded bond offerings for companies with similar credit characteristics that approximate the Company's market risk profile. In addition, we adjust the incremental borrowing rate for jurisdictional risk derived from quoted interest rates from financial institutions to reflect the cost of borrowing in the Company’s local markets. The Company’s lease terms may include options to purchase, extend or terminate the lease, which are recognized when it is reasonably certain that the Company will exercise that option. The Company does not combine lease and non-lease components.

The Company measures Right-of-use (“ROU”) assets based on the corresponding lease liabilities, adjusted for any initial direct costs and prepaid lease payments made to the lessor before or at the commencement date (net of lease incentives). The lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are

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not included in the calculation of the ROU asset and the related lease liability and are recognized as this lease expense is incurred. The Company’s variable lease payments generally relate to amounts the Company pays for additional contingent rent based on a contractually stipulated percentage of sales.

Merchandise Inventories – Merchandise inventories, which include merchandise for resale, are valued at the lower of cost (average cost) or net realizable value. The Company provides for estimated inventory losses and obsolescence between physical inventory counts on the basis of a percentage of sales. The provision is adjusted periodically to reflect the trend of actual physical inventory count results, with physical inventories occurring primarily in the second and fourth fiscal quarters. In addition, the Company may be required to take markdowns below the carrying cost of certain inventory to expedite the sale of such merchandise.

Stock Based Compensation – The Company utilizes three types of equity awards: restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and performance based restricted stock units (“PSUs”). Compensation related to RSAs, RSUs and PSUs is based on the fair market value at the time of grant. The Company recognizes the compensation cost related to RSAs and RSUs over the requisite service period as determined by the grant, amortized ratably or on a straight-line basis over the life of the grant. The Company also recognizes compensation cost for PSUs over the performance period. The Company assesses the probability of vesting for awards with performance conditions and adjusts compensation cost based on the probability that performance metrics will be achieved. If the Company determines that an award is unlikely to vest, any previously recorded expense is then reversed.

The Company accounts for actual forfeitures as they occur. The Company records the tax savings resulting from tax deductions in excess of expense for stock-based compensation and the tax deficiency resulting from stock-based compensation in excess of the related tax deduction as income tax expense or benefit. In addition, the Company reflects the tax savings (deficiency) resulting from the taxation of stock-based compensation as an operating cash flow in its consolidated statement of cash flows.

RSAs are outstanding shares of common stock and have the same cash dividend and voting rights as other shares of common stock. Shares of common stock subject to RSUs are not issued nor outstanding until vested, and RSUs do not have the same dividend and voting rights as common stock. However, all outstanding RSUs have accompanying dividend equivalents, requiring payment to the employees and directors with unvested RSUs of amounts equal to the dividend they would have received had the shares of common stock underlying the RSUs been actually issued and outstanding. Payments of dividend equivalents to employees are recorded as compensation expense.

PSUs, similar to RSUs, are awarded with dividend equivalents, provided that such amounts become payable only if the performance metric is achieved. At the time the Compensation Committee confirms the performance metric has been achieved, the accrued dividend equivalents are paid on the PSUs.

Treasury Stock – Shares of common stock repurchased by the Company are recorded at cost as treasury stock and result in the reduction of stockholders’ equity in the Company’s consolidated balance sheets. The Company may reissue these treasury shares as part of its stock-based compensation programs. When treasury shares are reissued, the Company uses the first in/first out (“FIFO”) cost method for determining cost of the reissued shares. If the issuance price is higher than the cost, the excess of the issuance price over the cost is credited to additional paid-in capital (“APIC”). If the issuance price is lower than the cost, the difference is first charged against any credit balance in APIC from treasury stock and the balance is charged to retained earnings. During the six months ended February 29, 2020, the Company reissued approximately 94,000 treasury shares.

Fair Value Measurements – The Company measures the fair value for all financial and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring or nonrecurring basis. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated, knowledgeable and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to settle the liability with the creditor.

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The Company has established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring and revaluing fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company was not required to revalue any assets or liabilities utilizing Level 1 or Level 3 inputs at the balance sheet dates. The Company's Level 2 assets and liabilities revalued at the balance sheet dates, on a recurring basis, consisted of cash flow hedges (interest rate swaps and cross-currency interest rate swaps) and forward foreign exchange contracts. In addition, the Company utilizes Level 2 inputs in determining the fair value of long-term debt. The Company did not make any significant transfers in and out of Level 1 and Level 2 fair value tiers during the periods reported on herein.

Non-financial assets and liabilities are revalued and recognized at fair value subsequent to initial recognition when there is evidence of impairment. For the periods reported, no impairment of such non-financial assets was recorded.

The Company’s current and long-term financial assets and liabilities have fair values that approximate their carrying values. The Company’s long-term financial liabilities consist of long-term debt, which is recorded on the balance sheet at issuance price and adjusted for any applicable unamortized discounts or premiums and debt issuance costs. There have been no significant changes in fair market value of the Company’s current and long-term financial assets, and there have been no material changes to the valuation techniques utilized in the fair value measurement of assets and liabilities disclosed in the Company’s 2019 Annual Report on Form 10-K.

Derivatives Instruments and Hedging Activities – The Company uses derivative financial instruments for hedging and non-trading purposes to manage its exposure to changes in interest and currency exchange rates. In using derivative financial instruments for the purpose of hedging the Company’s exposure to interest and currency exchange rate risks, the contractual terms of a hedged instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. Contracts that are effective at meeting the risk reduction and correlation criteria (effective hedge) are recorded using hedge accounting. If a derivative financial instrument is an effective hedge, changes in the fair value of the instrument will be reported in accumulated other comprehensive loss until the hedged item completes its contractual term. Instruments that do not meet the criteria for hedge accounting, or contracts for which the Company has not elected hedge accounting, are valued at fair value with unrealized gains or losses reported in earnings during the period of the change. The Company did not change valuation techniques utilized in the fair value measurement of assets and liabilities presented on the Company’s consolidated balance sheets from previous practice during the reporting period. The Company seeks to manage counterparty risk associated with these contracts by limiting transactions to counterparties with which the Company has an established banking relationship. There can be no assurance, however, that this practice effectively mitigates counterparty risk.

Cash Flow Instruments. The Company is a party to receive floating interest rate, pay fixed-rate interest rate swaps to hedge the interest rate risk of certain U.S. dollar denominated debt within its international subsidiaries. The swaps are designated as cash flow hedges of interest expense risk. These instruments are considered effective hedges and are recorded using hedge accounting. The Company is also a party to receive variable interest rate, pay fixed interest rate cross- currency interest rate swaps to hedge the interest rate and currency exposure associated with the expected payments of principal and interest of U.S. denominated debt within its international subsidiaries whose functional currency is other than the U.S. dollar. The swaps are designated as cash flow hedges of the currency risk and interest-rate risk related to payments on the U.S. denominated debt. These instruments are also considered to be effective hedges and are recorded using hedge accounting. Under cash flow hedging, the entire gain or loss of the derivative, calculated as the net present value of the future cash flows, is reported on the consolidated balance sheets in accumulated other comprehensive loss. Amounts recorded in accumulated other comprehensive loss are released to earnings in the same period that the hedged transaction impacts consolidated earnings. See Note 8 - Derivative Instruments and Hedging Activities for information on the fair value of interest rate swaps and cross-currency interest rate swaps as of February 29, 2020 and August 31, 2019.

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Fair Value Instruments. The Company is exposed to foreign currency exchange rate fluctuations in the normal course of business. This includes exposure to foreign currency exchange rate fluctuations on U.S. dollar denominated liabilities within the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. The Company manages these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts that are intended to offset changes in cash flows attributable to currency exchange movements. The contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. Currently, these contracts are treated for accounting purposes as fair value instruments and do not qualify for derivative hedge accounting, and as such the Company does not apply derivative hedge accounting to record these transactions. As a result, these contracts are valued at fair value with unrealized gains or losses reported in earnings during the period of the change. The Company seeks to mitigate foreign currency exchange-rate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features and are limited to less than one year in duration.

Other Instruments. Other derivatives not designated as hedging instruments consist primarily of written call options in which the Company receives a premium that it uses to reduce the costs associated with its hedging activities. For derivative instruments not designated as hedging instruments, the Company recognizes changes in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Other expense, net in the consolidated statements of income in the period of change.

Revenue Recognition – The accounting policies and other disclosures such as the disclosure of disaggregated revenues are described in Note 3 – Revenue Recognition.

Insurance Reimbursements – Receipts from insurance reimbursements up to the amount of the losses recognized are considered recoveries. These recoveries are accounted for when they are probable of receipt. Insurance recoveries are not recognized prior to the recognition of the related cost. Anticipated proceeds in excess of the amount of loss recognized are considered gains and are subject to gain contingency guidance. Anticipated proceeds in excess of a loss recognized in the financial statements are not recognized until all contingencies related to the insurance claim are resolved.

Self-Insurance – The Company changed health insurance providers and is no longer self-insured as of October 1, 2019. The remaining accrued liability for potential health care claims is immaterial as of February 29, 2020.

Cost of Goods Sold – The Company includes the cost of merchandise, food service and bakery raw materials in cost of goods sold, net merchandise sales. The Company also includes in cost of goods sold: net merchandise sales the external and internal distribution and handling costs for supplying merchandise, raw materials and supplies to the warehouse clubs. External costs include inbound freight, duties, drayage, fees, insurance, and non-recoverable value-added tax related to inventory shrink, spoilage and damage. Internal costs include payroll and related costs, utilities, consumable supplies, repair and maintenance, rent expense and building and equipment depreciation at the Company's distribution facilities and payroll and other direct costs for in-store demonstrations.

For export sales, the Company includes the cost of merchandise and external and internal distribution and handling costs for supplying merchandise in cost of goods sold, exports.

For the marketplace and casillero operations, the Company includes the costs of external and internal shipping, handling and other direct costs incurred to provide delivery, insurance and customs processing services in cost of goods sold, non-merchandise.

Vendor consideration consists primarily of volume rebates, time-limited product promotions, slotting fees, demonstration reimbursements and prompt payment discounts. Volume rebates that are not threshold based are incorporated into the unit cost of merchandise reducing the inventory cost and cost of goods sold. Volume rebates that are threshold based are recorded as a reduction to cost of goods sold when the Company achieves established purchase levels that are confirmed by the vendor in writing or upon receipt of funds. On a quarterly basis, the Company calculates the amount of rebates recorded in cost of goods sold that relates to inventory on hand and this amount is reclassified as a reduction to inventory, if significant. Slotting fees are related to consideration received by the Company from vendors for preferential "end cap" placement of the vendor's

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products within the warehouse club. Demonstration reimbursements are related to consideration received by the Company from vendors for the in-store promotion of the vendors' products. The Company records the reduction in cost of goods sold on a transactional basis for these programs. Prompt payment discounts are taken in substantially all cases and therefore are applied directly to reduce the acquisition cost of the related inventory, with the resulting effect recorded to cost of goods sold when the inventory is sold.

Selling, General and Administrative – Selling, general and administrative costs are comprised primarily of expenses associated with operating warehouse clubs and freight forwarding operations. These operations include the operating costs of the Company’s warehouse clubs and freight forwarding activities, including payroll and related costs, utilities, consumable supplies, repair and maintenance, rent expense, building and equipment depreciation, bank, credit card processing fees, and amortization of intangibles. Also included in selling, general and administrative expenses are the payroll and related costs for the Company’s U.S. and regional management and purchasing centers.

Pre-Opening Costs – The Company expenses pre-opening costs (the costs of start-up activities, including organization costs and rent) for new warehouse clubs as incurred.

Contingencies and Litigation – The Company records and reserves for loss contingencies if (a) information available prior to issuance of the consolidated financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the consolidated financial statements and (b) the amount of loss can be reasonably estimated. If one or both criteria for accrual are not met, but there is at least a reasonable possibility that a material loss will occur, the Company does not record and reserve for a loss contingency but describes the contingency within a note and provides detail, when possible, of the estimated potential loss or range of loss. If an estimate cannot be made, a statement to that effect is made.

Foreign Currency Translation – The assets and liabilities of the Company’s foreign operations are translated to U.S. dollars when the functional currency in the Company’s international subsidiaries is the local currency and not U.S. dollars. Assets and liabilities of these foreign subsidiaries are translated to U.S. dollars at the exchange rate on the balance sheet date, and revenue, costs and expenses are translated at average rates of exchange in effect during the period. The corresponding translation gains and losses are recorded as a component of accumulated other comprehensive income or loss. These adjustments will affect net income upon the sale or liquidation of the underlying investment.

The following table discloses the net effect of translation into the reporting currency on other comprehensive loss for these local currency denominated accounts for the three and six months ended February 29, 2020 and February 28, 2019:

Three Months Ended Six Months Ended February 29, February 28, February 29, February 28, 2020 2019 2020 2019 Effect on other comprehensive (loss) income due to foreign currency translation $ (3,384) $ 5,121 $ (7,107) $ (8,276)

Monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity (primarily U.S. dollars) are revalued to the functional currency using the exchange rate on the balance sheet date. These foreign exchange transaction gains (losses), including transactions recorded involving these monetary assets and liabilities, are recorded as Other income (expense) in the consolidated statements of income.

Three Months Ended Six Months Ended February 29, February 28, February 29, February 28, 2020 2019 2020 2019 Currency gain (loss) $ 755 $ (368) $ (902) $ (2,123)

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Recent Accounting Pronouncements – Not Yet Adopted

FASB ASC 740 ASU 2019-12—Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. ASU No. 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The ASU is effective for annual periods beginning after December 15, 2020. Early adoption is permitted. The Company expects to adopt ASU No. 2019-12 on September 1, 2021, the first quarter of fiscal year 2022. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

FASB ASC 810 ASU 2018-15 – Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As such, the amendment in this ASU requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in subtopic 350-40 in order to determine which implementation costs to capitalize as an asset and which costs to expense.

Additionally, the amendments in this ASU require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments in this ASU are effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. Early adoption is permitted. The Company expects to adopt ASU No. 2018-15 on September 1, 2020, the first quarter of fiscal year 2021. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

FASB ASC 715 ASU 2018-14 – Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement benefits (Topic 715-20). The standard amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. This ASU is effective for fiscal years ending after December 15, 2020 and must be applied on a retrospective basis. The Company expects to adopt ASU No. 2018-14 on September 1, 2021, the first quarter of fiscal year 2022. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

FASB ASC 820 ASU 2018-13 – Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). The standard eliminates such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. ASU No. 2018-13 adds new disclosure requirements for Level 3 measurements. The amendments in this ASU are effective for annual periods beginning after December 15, 2019. Early adoption is permitted. The Company expects to adopt ASU No. 2018-13 on September 1, 2020, the first quarter of fiscal year 2021. The Company is evaluating this new standard, but does not expect it to have a significant impact on its financial statement disclosures.

FASB ASC 350 ASU 2017-04 – Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under the amendments in this ASU, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize

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an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Additionally, ASU No. 2017-04 requires any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. The amendments in this ASU are effective for annual periods beginning after December 15, 2019. Early adoption is permitted. The Company expects to adopt ASU No. 2017-04 on September 1, 2020, the first quarter of fiscal year 2021. While the Company is still in the process of determining the impact that adoption of this guidance will have on its consolidated financial statements, it does not anticipate that the new guidance will have a material impact on its consolidated financial statements.

FASB ASC 326 ASU 2016-13 – Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which amends the FASB’s guidance on the impairment of financial instruments. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments to clarify and address certain items related to the amendments in ASU 2016-13. These amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company expects to adopt the amendments on September 1, 2020, the first quarter of fiscal year 2021. While the Company is still in the process of determining the impact that adoption of this guidance will have on its consolidated financial statements, it does not anticipate that the new guidance will have a material impact on its consolidated financial statements given the materiality and nature of the financial assets currently held.

Recent Accounting Pronouncements Adopted

FASB ASC 815 ASU 2018-16 – Derivatives and Hedging — Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes

In October 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-16, Derivatives and Hedging —Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which expands the list of United States benchmark interest rates permitted in the application of hedge accounting. The amendments in this ASU allow use of the Overnight Index Swap (OIS) rate based on the Secured Overnight Financing Rate (SOFR) as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, Derivatives and Hedging. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

FASB ASC 718 ASU 2018-07 - Compensation—Stock Compensation (Topic 718) — Improvements to Nonemployee Share-Based Payment Accounting

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope to include share-based payment transactions for acquiring goods and services from non-employees. The amendments in this ASU apply to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in the grantor’s own operations by issuing share-based payment awards. The amendments in this ASU are effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

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FASB ASC 842 ASU 2016-02 -Leases (Topic 842): Amendments to the FASB Accounting Standards Codification

In February 2016, the FASB issued guidance codified in ASC 842, Leases, which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments.

The Company adopted ASU 2016-02 using the modified retrospective transition method in the first quarter of fiscal year 2020. In accordance with ASC 842, the Company did not restate comparative periods in transition to ASC 842 and instead reported comparative periods under ASC 840. Adoption of the standard resulted in the initial recognition of $120.6 million of operating lease right-of-use (“ROU”) assets and $132.1 million of short-term and long-term operating lease liabilities as of September 1, 2019. The difference between the assets and liabilities primarily represents the deferred rent recorded as of August 31, 2019, which was eliminated upon adoption. No cumulative-effect adjustments were recorded to retained earnings, and there was no material impact to the Company’s interim consolidated statements of income, consolidated statements of comprehensive income, or consolidated statements of cash flows. However, several of the Company’s leases are denominated in a currency that is not the functional currency of the Company’s local subsidiary. The resulting monetary liability is revalued to the functional currency at each balance sheet date, with the resulting gain or loss being recorded in Other income (expense). The monetary lease liability subject to revaluation as of February 29, 2020 was $34.0 million. Due to the mix of foreign currency exchange rate fluctuations during the second quarter of fiscal year 2020, the impact to the interim consolidated statements of income of revaluing this liability was immaterial.

The Company elected the transition package of practical expedients permitted within the new standard which, among other things, allowed it to carry- forward the historical lease classification. The Company also elected the practical expedient to carry forward the accounting treatment for land easements and the practical expedient allowing the Company not to apply the recognition requirements of ASC 842 to short-term leases. However, the Company did not elect to combine lease and non-lease components. Please refer to Note 10 – Leases for further discussion on the Company's leases.

There were no other new accounting standards that had a material impact on the Company’s consolidated financial statements during the three and six month periods ended February 29, 2020, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of February 29, 2020 that the Company expects to have a material impact on its consolidated financial statements.

NOTE 3 – REVENUE RECOGNITION

Performance Obligations

The Company identifies each distinct performance obligation to transfer goods (or bundle of goods) or services. The Company recognizes revenue when (or as) it satisfies a performance obligation by transferring control of the goods or services to the customer.

Merchandise Sales. The Company recognizes merchandise sales revenue, net of sales taxes, on transactions where the Company has determined that it is the principal in the sale of merchandise. These transactions may include shipping commitments and/or shipping revenue if the transaction involves delivery to the customer.

Non-merchandise Sales. The Company recognizes non-merchandise revenue, net of sales taxes, on transactions where the Company has determined that it is the agent in the transaction. These transactions primarily consist of contracts the Company enters into with its customers to provide delivery, insurance and customs processing services for products its customers purchase online in the United States either directly from other vendors utilizing the vendor’s website or through the Company’s marketplace site. Revenue is recognized when the Company’s performance obligations have been completed (that is when delivery of the items have been made to the destination point) and is recorded in “non-merchandise revenue” on the Consolidated Statements of Income. Prepayment for orders for which the Company has not fulfilled its performance obligation are recorded as deferred income. Additionally, the Company records revenue at the net amounts retained, i.e., the amount paid by the customer less amounts remitted to the respective merchandise vendors, as the Company is acting as an agent and is not the principal in the sale of those goods being purchased from the vendors by the Company’s customers.

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Membership Fee Revenue. Membership income represents annual membership fees paid by the Company’s warehouse club members, which are recognized ratably over the 12-month term of the membership. Membership refunds are prorated over the remaining term of the membership; accordingly, no refund reserve is required to be established for the periods presented. Membership fee revenue is included in membership income in the Company's consolidated statements of income. The deferred membership fee is included in deferred income in the Company's consolidated balance sheets.

Platinum Points Reward Programs. The Company currently offers Platinum memberships in ten of its thirteen countries. The annual fee for a Platinum membership is approximately $75. The Platinum membership provides members with a 2% rebate on most items, up to an annual maximum of $500. The rebate is issued annually to Platinum members on March 1 and expires August 31. Platinum members can apply this rebate to future purchases at the warehouse club during the redemption period. The Company records this 2% rebate as a reduction of revenue at the time of the sales transaction. Accordingly, the Company has reduced warehouse sales and has accrued a liability within other accrued expenses and other current liabilities, platinum rewards. The Company has determined that breakage revenue is 5% of the awards issued; therefore, it records 95% of the Platinum membership liability at the time of sale. Annually, the Company reviews for expired unused rebates outstanding, and the expired unused rebates are recognized as “Other revenue and income” on the consolidated statements of income.

Co-branded Credit Card Points Reward Programs. Most of the Company’s subsidiaries have points reward programs related to Co-branded Credit Cards. These points reward programs provide incremental points that can be used at a future time to acquire merchandise within the Company’s warehouse clubs. This results in two performance obligations, the first performance obligation being the initial sale of the merchandise or services purchased with the co- branded credit card and the second performance obligation being the future use of the points rewards to purchase merchandise or services. As a result, upon the initial sale, the Company allocates the transaction price to each performance obligation with the amount allocated to the future use points rewards recorded as a contract liability within other accrued expenses and other current liabilities on the consolidated balance sheet. The portion of the selling price allocated to the reward points is recognized as Net merchandise sales when the points are used or when the points expire. The Company reviews on an annual basis expired points rewards outstanding, and the expired rewards are recognized as Net merchandise sales on the consolidated statements of income within markets where the co- branded credit card agreement allows for such treatment.

Gift Cards. Members’ purchases of gift cards to be utilized at the Company's warehouse clubs are not recognized as sales until the card is redeemed and the customer purchases merchandise using the gift card. The outstanding gift cards are reflected as other accrued expenses and other current liabilities in the consolidated balance sheets. These gift cards generally have a one-year stated expiration date from the date of issuance and are generally redeemed prior to expiration. However, the absence of a large volume of transactions for gift cards impairs the Company's ability to make a reasonable estimate of the redemption levels for gift certificates; therefore, the Company assumes a 100% redemption rate prior to expiration of the gift certificate. The Company periodically reviews unredeemed outstanding gift certificates, and the gift certificates that have expired are recognized as “Other revenue and income” on the consolidated statements of income.

Co-branded Credit Card Revenue Sharing Agreements. As part of the co-branded credit card agreements that the Company has entered into with financial institutions within its markets, the Company often enters into revenue sharing agreements. As part of these agreements, in some countries, the Company receives a portion of the interest income generated from the average outstanding balances on the co-branded credit cards from these financial institutions (“interest generating portfolio” or “IGP”). The Company recognizes its portion of interest received as revenue during the period it is earned. As a result of the adoption of ASC 606, the Company has determined that this revenue should be recognized as “Other revenue and income” on the consolidated statements of income.

Contract Performance Liabilities

Contract performance liabilities as a result of transactions with customers primarily consist of deferred membership income, other deferred income, deferred gift card revenue, Platinum points programs, and liabilities related to co-branded credit card points rewards programs which are included in deferred income and other accrued expenses and other current liabilities in the Company’s consolidated balance sheets. The following table provides these contract balances from transactions with customers as of the dates listed (in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Contract Liabilities February 29, August 31, 2020 2019 Deferred membership income $ 26,440 $ 24,901 Other contract performance liabilities $ 8,862 $ 4,048

Disaggregated Revenues

In the following table, net merchandise sales are disaggregated by merchandise category (in thousands):

Three Months Ended Six Months Ended February 28, February 29, February 28, February 29, 2020 ‎2019 ‎2020 2019 Foods & Sundries $ 438,345 $ 412,857 $ 831,150 $ 789,185 Fresh Foods 241,317 220,499 456,555 421,205 Hardlines 100,419 98,947 191,422 191,101 Softlines 49,904 47,975 90,263 88,364 Other Business 41,741 40,012 81,064 77,878 Net Merchandise Sales $ 871,726 $ 820,290 $ 1,650,454 $ 1,567,733

NOTE 4 – EARNINGS PER SHARE

The Company presents basic net income per share using the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders and that determines basic net income per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings that would have been available to common stockholders. A participating security is defined as a security that may participate in undistributed earnings with common stock. The Company’s capital structure includes securities that participate with common stock on a one-for-one basis for distribution of dividends. These are the restricted stock awards and restricted stock units issued pursuant to the 2013 Equity Incentive Award Plan. The Company determines the diluted net income per share by using the more dilutive of the two class-method or the treasury stock method and by including the basic weighted average of outstanding performance stock units in the calculation of diluted net income per share under the two-class method and including all potential common shares assumed issued in the calculation of diluted net income per share under the treasury stock method.

The following table sets forth the computation of net income per share for the three and six months ended February 29, 2020 and February 28, 2019 (in thousands, except per share amounts):

Three Months Ended Six Months Ended February 29, February 28, February 29, February 28, 2020 2019 2020 2019 Net income attributable to PriceSmart, Inc. $ 25,600 $ 23,810 $ 45,328 $ 38,422 Less: Allocation of income to unvested stockholders (64) (27) (339) (219) Net income attributable to PriceSmart, Inc. per share available for distribution $ 25,536 $ 23,783 $ 44,989 $ 38,203 Basic weighted average shares outstanding 30,255 30,206 30,266 30,189 Add dilutive effect of performance stock units (two-class method) 3 5 5 11 Diluted average shares outstanding 30,258 30,211 30,271 30,200 Basic net income per share $ 0.85 $ 0.79 $ 1.49 $ 1.27 Diluted net income per share $ 0.85 $ 0.79 $ 1.49 $ 1.27

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 5 – STOCKHOLDERS’ EQUITY

Dividends

The following table summarizes the dividends declared and paid during fiscal year 2020 and 2019 (amounts are per share).

First Payment Second Payment Record Date Date Record Date Date

Declared Amount Date ‎Paid ‎Payable Amount ‎Date ‎Paid ‎Payable Amount 2/6/2020 $ 0.70 2/15/2020 2/28/2020 N/A $ 0.35 8/15/2020 N/A 8/31/2020 $ 0.35 1/30/2019 $ 0.70 2/15/2019 2/28/2019 N/A $ 0.35 8/15/2019 8/30/2019 N/A $ 0.35

The Company anticipates the ongoing payment of semi-annual dividends in subsequent periods, although the actual declaration of future dividends, the amount of such dividends, and the establishment of record and payment dates is subject to final determination by the Board of Directors at its discretion after its review of the Company’s financial performance and anticipated capital requirements.

Comprehensive Income and Accumulated Other Comprehensive Loss

The following tables disclose the effects of each component of other comprehensive income (loss), net of tax (in thousands):

Attributable to Noncontrolling PriceSmart Interests Total Beginning balance, September 1, 2019 $ (144,339) $ 20 $ (144,319) Foreign currency translation adjustments (7,107) 55 (7,052) Defined benefit pension plans 50 — 50 Derivative instruments (1) (1,177) — (1,177) Ending balance, February 29, 2020 $ (152,573) $ 75 $ (152,498)

Attributable to Noncontrolling PriceSmart Interests Total Beginning balance, September 1, 2018 $ (121,216) $ (1) $ (121,217) Foreign currency translation adjustments (8,276) 21 (8,255) Defined benefit pension plans 50 — 50 Derivative Instruments (1) (668) — (668) Ending balance, February 28, 2019 $ (130,110) $ 20 $ (130,090)

Attributable to Noncontrolling PriceSmart Interests Total Beginning balance, September 1, 2018 $ (121,216) $ (1) $ (121,217) Foreign currency translation adjustments (19,717) 21 (19,696) Defined benefit pension plans (112) — (112) Derivative Instruments (1) (3,369) — (3,369) Amounts reclassified from accumulated other comprehensive income (loss) (2) 75 — 75 Ending balance, August 31, 2019 $ (144,339) $ 20 $ (144,319)

(1) See Note 8 - Derivative Instruments and Hedging Activities. (2) Amounts reclassified from accumulated other comprehensive loss related to the minimum pension liability are included in warehouse club and other operations in the Company's consolidated statements of income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Retained Earnings Not Available for Distribution

The following table summarizes retained earnings designated as legal reserves of various subsidiaries which cannot be distributed as dividends to PriceSmart, Inc. according to applicable statutory regulations (in thousands):

February 29, August 31, 2020 2019 Retained earnings not available for distribution $ 8,250 $ 7,843

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company and its subsidiaries are subject to legal proceedings, claims and litigation arising in the ordinary course of business related to the Company’s operations and property ownership. The Company evaluates such matters on a case by case basis, and vigorously contests any such legal proceedings or claims which the Company believes are without merit. The Company believes that the final disposition of these matters will not have a material adverse effect on its financial position, results of operations or liquidity. It is possible, however, that the Company's results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to such matters.

The Company establishes an accrual for legal proceedings if and when those matters reach a stage where they present loss contingencies that are both probable and reasonably estimable. In such cases, there may be a possible exposure to loss in excess of any amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss and the accrued amount, if any, thereof, and adjusts the amount as appropriate. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but will continue to monitor the matter for developments that will make the loss contingency both probable and reasonably estimable. If it is at least a reasonable possibility that a material loss will occur, the Company will provide disclosure regarding the contingency.

On May 22, 2019, a class action complaint was filed against PriceSmart, Inc., as well as certain former and current officers in the United States District Court for the Southern District of California. On October 7, 2019, the Court granted Public Employees Retirement Association of New Mexico’s (PERA’s) Motion for Appointment as Lead Plaintiff. On January 3, 2020, PERA filed a consolidated class action complaint, which alleges violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Company intends to vigorously defend itself against any obligations or liability to the plaintiffs with respect to such claims. The Company believes the claims are without merit. Per a briefing schedule adopted by the Court, the Company filed a Motion to Dismiss the Plaintiff's Consolidated Amended Complaint in its entirety on March 3, 2020.

Taxes

Income Taxes – For interim reporting, the Company uses an estimated annual effective tax rate (AETR), pursuant to ASC 740-279, to calculate income tax expense. Income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. The Company is subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income tax expense. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating its ability to recover deferred tax assets in the jurisdictions from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, the Company begins with historical results adjusted for the results of discontinued operations and incorporates assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, the Company considers three years of cumulative operating income (loss).

The Company is required to file federal and state tax returns in the United States and various other tax returns in foreign jurisdictions. The preparation of these tax returns requires the Company to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by the Company. The Company, in consultation with its tax advisors, bases its tax returns on interpretations that are believed to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various taxing authorities in the jurisdictions in which the Company files its returns. As part of these reviews, a taxing authority may disagree with the interpretations the Company used to calculate its tax liability and therefore require the Company to pay additional taxes.

The Company accrues an amount for its estimate of probable additional income tax liability. In certain cases, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than 50% likelihood of being sustained. There were no significant changes in the Company's uncertain income tax positions since August 31, 2019.

In evaluating the exposure associated with various non-income tax filing positions, the Company accrues for probable and estimable exposures for non- income tax related tax contingencies. As of February 29, 2020 and August 31, 2019, the Company has recorded within other accrued expenses and other current liabilities a total of $3.1 million and $3.2 million, respectively, for various non-income tax related tax contingencies.

While the Company believes the recorded liabilities are adequate, there are inherent limitations in projecting the outcome of litigation, in estimating probable additional income tax liability taking into account uncertain tax positions and in evaluating the probable additional tax associated with various non- income tax filing positions. As such, the Company is unable to make a reasonable estimate of the sensitivity to change of estimates affecting its recorded liabilities. As additional information becomes available, the Company assesses the potential liability and revises its estimates as appropriate.

In two other countries where the Company operates, minimum income tax rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $9.7 million and $7.8 million and deferred tax assets of $2.9 million and $2.7 million as of February 29, 2020 and August 31, 2019, respectively, in these countries. While the rules related to refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of these tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests.

Other Commitments

In January 2017, the Company purchased a distribution center in Medley, Miami-Dade County, Florida. The Company transferred its Miami dry distribution center activities that were previously in the leased facility to the new facility during the third quarter of fiscal year 2017. As of February 29, 2020, all of the vacated space has been subleased (and/or returned to the landlord). As part of the subleases, the Company provided the landlord of the leased facility a letter of credit (“LOC”) for the initial amount of $500,000 which entitled the landlord to draw on the LOC based on a decreasing scale over four years if certain conditions were to occur related to nonpayment by the new tenant. The balance of this LOC decreases at an annual rate of $125,000 starting in August 2018. As of February 29, 2020, the remaining balance of the LOC was $250,000. Although this agreement is considered a guarantee, in measuring the fair value, the Company considers the risk and probability of default by the third party tenant as not likely nor probable based on the Company’s review of the third party tenant’s financial position as well as the third party’s considerable capital investment into the leased facility. Therefore, the Company has not recorded a liability for this guarantee.

The Company is also committed to non-cancelable construction service obligations for various warehouse club developments and expansions. As of February 29, 2020 and August 31, 2019, the Company had approximately $10.8 million and $14.9 million, respectively, in contractual obligations for construction services not yet rendered.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

From time to time, the Company has entered into general land purchase and land purchase option agreements. The Company’s land purchase agreements are typically subject to various conditions, including, but not limited to, the ability to obtain necessary governmental permits or approvals. A deposit under an agreement is typically returned to the Company if all permits or approvals are not obtained. Generally, the Company has the right to cancel any of our agreements to purchase land without cause by forfeiture of some or all of the deposits we have made pursuant to the agreement. As of February 29, 2020, the Company had entered into a land purchase option agreement that, if completed, would have resulted in the use of approximately $4.3 million in cash. However, subsequent to this date, the Company decided not to execute this land purchase option agreement, as a result of the uncertainties surrounding the economic implications from the COVID-19 outbreak.

The table below summarizes the Company’s interest in real estate joint ventures, commitments to additional future investments and the Company’s maximum exposure to loss as a result of its involvement in these joint venture as of February 29, 2020 (in thousands):

Company's

Company’s Commitment ‎Maximum

‎Variable ‎to Future ‎Exposure

% Initial Additional Net Income ‎Interest ‎Additional ‎to Loss in Inception to Entity ‎Ownership ‎Investment ‎Investments Date ‎in Entity ‎Investments(1) ‎Entity(2) GolfPark Plaza, S.A. 50 % $ 4,616 $ 2,402 $ 114 $ 7,132 $ 99 $ 7,231 Price Plaza Alajuela PPA, S.A. 50 % 2,193 1,236 74 3,503 785 4,288 Total $ 6,809 $ 3,638 $ 188 $ 10,635 $ 884 $ 11,519

(1) The parties intend to seek alternate financing for the project, which could reduce the amount of investments each party would be required to provide. The parties may mutually agree on changes to the project, which could increase or decrease the amount of contributions each party is required to provide. (2) The maximum exposure is determined by adding the Company’s variable interest in the entity and any explicit or implicit arrangements that could require the Company to provide additional financial support.

NOTE 7 – DEBT

Short-term borrowings consist of unsecured lines of credit. The following table summarizes the balances of total facilities, facilities used and facilities available (in thousands):

Facilities Used Total Amount Short-term Letters of Facilities Weighted average of Facilities Borrowings Credit Available interest rate February 29, 2020 $ 76,200 $ 3,579 $ 638 $ 71,983 4.3 % August 31, 2019 $ 69,000 $ 7,540 $ 486 $ 60,974 6.1 %

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of February 29, 2020 and August 31, 2019, the Company had approximately $40.0 million of short-term facilities in the U.S. that require compliance with certain quarterly financial covenants. As of February 29, 2020 and August 31, 2019, the Company was in compliance with respect to these covenants. Each of the facilities expires annually except for the U.S. facility, which expires bi-annually. The facilities are normally renewed.

The following table provides the changes in long-term debt for the six-months ended February 29, 2020:

Current Long-term ‎portion of ‎debt (net of current (Amounts in thousands) ‎long-term debt portion) Total Balances as of August 31, 2019 $ 25,875 $ 63,711 $ 89,586 (1) Proceeds from long-term debt incurred during the period: Colombia subsidiary — 25,000 25,000 Guatemala subsidiary — 20,820 20,820 Regularly scheduled loan payments (1,268) (4,040) (5,308) Reclassifications of short-term debt (8,421) 8,421 — Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar (2) 61 (33) 28 Balances as of February 29, 2020 $ 16,247 $ 113,879 $ 130,126 (3)

(1) The carrying amount of non-cash assets assigned as collateral for these loans was $111.3 million. No cash assets were assigned as collateral for these loans. (2) These foreign currency translation adjustments are recorded within Other comprehensive income. (3) The carrying amount of non-cash assets assigned as collateral for these loans was $156.7 million. No cash assets were assigned as collateral for these loans.

As of February 29, 2020, the Company had approximately $104.1 million of long-term loans in several foreign subsidiaries that require these subsidiaries to comply with certain annual or quarterly financial covenants, which include debt service and leverage ratios. As of February 29, 2020, the Company was in compliance with all covenants or amended covenants.

As of August 31, 2019, the Company had approximately $83.1 million of long-term loans in several foreign subsidiaries that require these subsidiaries to comply with certain annual or quarterly financial covenants.

Annual maturities of long-term debt are as follows (in thousands):

Twelve Months Ended February 28, Amount 2021 $ 16,247 2022 11,470 2023 19,057 2024 16,489 2025 26,136 Thereafter 40,727 Total $ 130,126

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 8 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to interest rate risk relating to its ongoing business operations. To manage interest rate exposure, the Company enters into hedge transactions (interest rate swaps) using derivative financial instruments. The objective of entering into interest rate swaps is to eliminate the variability of cash flows in the LIBOR interest payments associated with variable-rate loans over the life of the loans. As changes in interest rates impact the future cash flow of interest payments, the hedges provide a synthetic offset to interest rate movements.

In addition, the Company is exposed to foreign currency and interest rate cash flow exposure related to non-functional currency long-term debt of three of its wholly owned subsidiaries. To manage this foreign currency and interest rate cash flow exposure, the Company’s subsidiaries entered into cross-currency interest rate swaps that convert their U.S. dollar denominated floating interest payments to functional currency fixed interest payments during the life of the hedging instrument. As changes in foreign exchange and interest rates impact the future cash flow of interest payments, the hedges are intended to offset changes in cash flows attributable to interest rate and foreign exchange movements.

These derivative instruments (cash flow hedging instruments) are designated and qualify as cash flow hedges, with the entire gain or loss on the derivative reported as a component of other comprehensive loss. Amounts are deferred in other comprehensive loss and reclassified into earnings in the same income statement line item that is used to present earnings effect of the hedged item when the hedged item affects earnings.

The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business, including foreign-currency exchange-rate fluctuations on U.S. dollar denominated liabilities within its international subsidiaries whose functional currency is other than the U.S. dollar. The Company manages these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts (NDFs) that are intended to offset changes in cash flow attributable to currency exchange movements. These contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. Currently, these contracts do not qualify for derivative hedge accounting. The Company seeks to mitigate foreign-currency exchange-rate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features.

The Company uses other derivatives not designated as hedging instruments that consist primarily of written call options in which the Company receives a premium from the holder. This premium lowers the cost of the Company’s hedging activities. The Company recognizes changes in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Other expense, net in the consolidated statements of income in the period of change.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash Flow Hedges

As of February 29, 2020, all of the Company’s interest rate swap and cross-currency interest rate swap derivative financial instruments are designated and qualify as cash flow hedges. The Company formally documents the hedging relationships for its derivative instruments that qualify for hedge accounting.

The following table summarizes agreements for which the Company has recorded cash flow hedge accounting for the six months ended February 29, 2020:

Bank Derivative Initial ‎US$ Date Financial Derivative US$ ‎loan Floating Leg Fixed Rate Entered ‎Counter- Financial ‎Notional ‎Held ‎(swap ‎for PSMT Settlement Effective

Subsidiary into ‎party ‎Instruments ‎Amount with ‎counter-party) ‎Subsidiary ‎Dates Period of swap Colombia 3-Dec-19 Citibank, N.A. Cross currency interest $ 7,875,000 Citibank, N.A. Variable rate 3- 7.87% 3rd day of each December, December 3, 2019 - ("Citi") rate swap month Libor plus March, June, and December 3, 2024 2.45% September, beginning on March 3, 2020 Colombia 27-Nov-19 Citibank, N.A. Cross currency interest $ 25,000,000 Citibank, N.A. Variable rate 3- 7.93% 27th day of each November 27, 2019 - ("Citi") rate swap month Libor plus November, February, May November 27, 2024 2.45% and August beginning February 27, 2020 Colombia 24-Sep-19 Citibank, N.A. Cross currency interest $ 12,500,000 PriceSmart, Inc. Variable rate 3- 7.09% 24th day of each September 24, 2019 - ("Citi") rate swap month Libor plus December, March, June September 26, 2022 2.50% and September beginning December 24, 2019 Panama 25-Jun-18 Bank of Nova Scotia Interest rate swap $ 14,625,000 Bank of Nova Variable rate 3- 5.99% 23rd day of each month June 25, 2018 - ("Scotiabank") Scotia month Libor plus beginning on July 23, 2018 March 23, 2023 3.0% Honduras 26-Feb-18 Citibank, N.A. Cross currency interest $ 13,500,000 Citibank, N.A. Variable rate 3- 9.75% 29th day of May, August, February 26, 2018 - ("Citi") rate swap month Libor plus November and February February 24, 2024 3.00% beginning May 29, 2018 PriceSmart, Inc 7-Nov-16 MUFG Union Bank, Interest rate swap $ 35,700,000 Union Bank Variable rate 1- 3.65% 1st day of each month March 1, 2017 - March 1, N.A. ("Union Bank") month Libor plus beginning on April 1, 2017 2027 1.7% Costa Rica 28-Aug-15 Citibank, N.A. Cross currency interest $ 7,500,000 Citibank, N.A. Variable rate 3- 7.65% 28th day of August, August 28, 2015 - ("Citi") rate swap month Libor plus November, February, and August 28, 2020 2.50% May beginning on November 30, 2015

For the three and six months ended February 29, 2020 and February 28, 2019, the Company included the gain or loss on the hedged items (that is, variable-rate borrowings) in the same line item—interest expense—as the offsetting gain or loss on the related interest rate swaps as follows (in thousands):

Interest

‎expense on Cost of

Income Statement Classification ‎borrowings(1) ‎swaps (2) Total Interest expense for the three months ended February 29, 2020 $ 1,206 $ 596 $ 1,802 Interest expense for the three months ended February 28, 2019 $ 1,210 $ 102 $ 1,312 Interest expense for the six months ended February 29, 2020 $ 2,219 $ 857 $ 3,076 Interest expense for the six months ended February 28, 2019 $ 2,403 $ 269 $ 2,672

(1) This amount is representative of the interest expense recognized on the underlying hedged transactions. (2) This amount is representative of the interest expense recognized on the cross-currency interest rate swaps designated as cash flow hedging instruments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The total notional balance of the Company’s pay-fixed/receive-variable interest rate swaps and cross-currency interest rate swaps was as follows (in thousands):

Notional Amount as of

February 29, August 31, Floating Rate Payer (Swap Counterparty) 2020 2019 Union Bank $ 34,531 $ 35,169 Citibank N.A. 52,425 24,225 Scotiabank 17,125 18,375 Total $ 104,081 $ 77,769

Derivatives listed on the table below were designated as cash flow hedging instruments. The table summarizes the effect of the fair value of interest rate swap and cross-currency interest rate swap derivative instruments that qualify for derivative hedge accounting and its associated tax effect on accumulated other comprehensive (income)/loss (in thousands):

February 29, 2020 August 31, 2019 Fair Net Tax Net Fair Net Tax Net Derivatives designated as cash flow hedging Balance Sheet instruments Classification ‎Value ‎Effect ‎OCI ‎Value ‎Effect ‎OCI Other non-current Cross-currency interest rate swaps assets $ 241 $ (75) $ 166 $ — $ — $ — Cross-currency interest rate swaps Other current assets — — — 2,736 (903) 1,833 Other long-term Interest rate swaps liabilities (2,714) 638 (2,076) (2,178) 517 (1,661) Other long-term Cross-currency interest rate swaps liabilities (1,206) 367 (839) (732) 220 (512) Cross-currency interest rate swaps Other current liabilities (45) 14 (31) — — — Net fair value of derivatives designated as hedging instruments $ (3,724) $ 944 $ (2,780) $ (174) $ (166) $ (340)

Fair Value Instruments

From time to time the Company enters into non-deliverable forward foreign-exchange contracts. These contracts are treated for accounting purposes as fair value contracts and do not qualify for derivative hedge accounting. The use of non-deliverable forward foreign-exchange contracts is intended to offset changes in cash flow attributable to currency exchange movements. These contracts are intended primarily to economically hedge exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. As of February 29, 2020, the Company did not have any material non-deliverable forward foreign-exchange contracts.

Other Instruments

Other derivatives not designated as hedging instruments consist primarily of written call options in which the Company receives a premium that it uses to reduce the costs associated with its hedging activities. As of February 29, 2020, the Company has settled its outstanding call options and does not have any other contracts not designated as hedging instruments.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the three and six months ended February 29, 2020, the Company included in its consolidated statements of income the loss of its other non-designated derivative contracts as follows (in thousands):

Three Months Ended Six Months Ended February 29, February 28, February 29, February 28, Income Statement Classification 2020 2019 2020 2019 Other income (expense), net $ 358 $ — $ (912) $ —

NOTE 9 – SEGMENTS

The Company and its subsidiaries are principally engaged in the international operation of membership shopping in 45 warehouse clubs located in 12 countries and one U.S. territory that are located in Central America, the Caribbean and Colombia. In addition, the Company operates distribution centers and corporate offices in the United States. The Company has aggregated its warehouse clubs, distribution centers and corporate offices into reportable segments. The Company’s reportable segments are based on management’s organization of these locations into operating segments by general geographic location, used by management and the Company's chief operating decision maker in setting up management lines of responsibility, providing support services, and making operational decisions and assessments of financial performance. Segment amounts are presented after converting to U.S. dollars and consolidating eliminations. Certain revenues, operating costs and inter-company charges included in the United States segment are not allocated to the segments within this presentation, as it is impractical to do so, and they appear as reconciling items to reflect the amount eliminated on consolidation of intersegment transactions. From time to time, the Company revises the measurement of each segment's operating income and net income, including certain corporate overhead allocations, and other measures as determined by the information regularly reviewed by the Company's chief operating decision maker. When the Company does so, the previous period amounts and balances are reclassified to conform to the current period's presentation.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables summarize by segment certain revenues, operating costs and balance sheet items (in thousands):

United Central

‎States ‎American Caribbean Reconciling Colombia ‎Operations ‎Operations ‎Operations(1) Operations ‎Items(2) Total Three Months Ended February 29, 2020 Revenue from external customers $ 18,848 $ 522,607 $ 261,683 $ 103,597 — $ 906,735 Intersegment revenues 287,362 3,909 860 547 (292,678) — Depreciation, Property and equipment 1,338 7,568 3,826 1,844 — 14,576 Amortization, Intangibles 599 — — — — 599 Operating income (loss) 1,928 37,667 15,079 5,400 (21,265) 38,809 Net income (loss) attributable to PriceSmart, Inc. (841) 30,339 13,810 3,666 (21,374) 25,600 Capital expenditures, net 3,489 18,128 7,230 4,465 — 33,312

Six Months Ended February 29, 2020 Revenue from external customers $ 36,187 $ 989,409 $ 496,700 $ 196,380 $ — $ 1,718,676 Intersegment revenues 637,312 7,954 2,079 1,083 (648,428) — Depreciation, Property and equipment 2,687 14,450 7,792 3,861 — 28,790 Amortization, Intangibles 1,198 — — — — 1,198 Operating income 4,516 69,367 26,889 9,924 (41,173) 69,523 Net income (loss) attributable to PriceSmart, Inc. (1,564) 57,091 24,129 6,937 (41,265) 45,328 Long-lived assets (other than deferred tax assets) (3) 86,306 477,195 187,641 145,981 — 897,123 Intangibles, net 11,378 — — — — 11,378 Goodwill 10,695 24,522 10,196 — — 45,413 Total assets 157,116 723,673 390,000 227,503 — 1,498,292 Capital expenditures, net 4,118 33,371 11,750 25,299 — 74,538

Three Months Ended February 28, 2019 Revenue from external customers $ 16,821 $ 484,994 $ 249,360 $ 103,250 $ — $ 854,425 Intersegment revenues 289,699 3,783 1,249 397 (295,128) — Depreciation, Property and equipment 1,950 6,003 3,439 2,121 — 13,513 Amortiazation, Intangibles 593 — — — — 593 Operating income (loss) 4,477 35,574 15,024 3,617 (22,156) 36,536 Net income (loss) attributable to PriceSmart, Inc. 1,596 28,099 13,037 3,289 (22,211) 23,810 Capital expenditures, net 1,930 20,602 5,766 1,351 — 29,649

Six Months Ended February 28, 2019 Revenue from external customers $ 34,160 $ 924,800 $ 474,369 $ 200,733 $ — $ 1,634,062 Intersegment revenues 640,418 4,220 2,342 675 (647,655) — Depreciation, Property and equipment 3,910 11,873 6,630 4,224 — 26,637 Amortization, Intangibles 1,192 — — — — 1,192 Operating income 3,427 64,366 27,051 7,033 (40,671) 61,206 Net income (loss) attributable to PriceSmart, Inc. (2,229) 52,284 23,022 6,104 (40,759) 38,422 Long-lived assets (other than deferred tax assets) 89,594 331,289 151,729 114,258 — 686,870 Intangibles, net 13,788 — — — — 13,788 Goodwill 11,315 24,670 10,278 — — 46,263 Total assets 149,192 592,121 329,049 187,868 — 1,258,230 Capital expenditures, net 3,616 43,373 16,261 2,738 — 65,988

As of August 31, 2019 Long-lived assets (other than deferred tax assets) $ 65,278 $ 383,665 $ 165,584 $ 115,838 $ — $ 730,365 Intangibles, net 12,576 — — — — 12,576 Goodwill 11,315 24,593 10,193 — — 46,101 Total assets 161,583 614,579 340,216 180,033 — 1,296,411

(1) Management considers its club in the U.S. Virgin Islands to be part of its Caribbean operations. (2) The reconciling items reflect the amount eliminated on consolidation of intersegment transactions. (3) Effective September 1, 2019, we adopted the requirements of Accounting Standards Update (ASU) 2016-02, "Leases (Topic 842)" (ASC 842) using the modified retrospective approach, under which financial results reported in prior periods were not restated. As a result, the Long-lived assets (other than deferred tax assets) as of February 29, 2020 is not comparable with that as of February 28, 2019 and August 31, 2019.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 10 – LEASES

The Company adopted ASC 842 as of September 1, 2019, using the modified retrospective method and applying transitional relief allowing entities to initially apply the requirements at the adoption date by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, results and disclosures for the reporting periods beginning September 1, 2019 are reported and presented under ASC 842, while prior period amounts and disclosures are not adjusted and continue to be reported and presented under ASC 840.

As part of the adoption, the Company elected the following practical expedients:

 A package of practical expedients allowing the Company to: a) carry forward its historical lease classification; b) avoid reassessing whether any expired or existing contracts are or contain leases; and c) avoid reassessing initial direct costs for any existing lease.

 A practical expedient related to land easements, allowing the Company to carry forward the accounting treatment for land easements on existing agreements and eliminating the need to reassess existing lease contracts to determine if land easements are separate leases under ASC 842.

 A practical expedient allowing the Company not to apply the recognition requirements of ASC 842 to short-term leases (12 months or less).

The Company did not elect the following practical expedients:

 A practical expedient that would allow the Company to use hindsight in determining the lease term and to assess impairment of the entity’s right-of use (“ROU”) assets, since election of this expedient could make adoption more complex given that reevaluation of the lease term.

 A practical expedient allowing the Company to not separate lease components from nonlease components (e.g., common area maintenance costs), since the Company does not combine lease and nonlease components for any of its real estate leases.

In accordance with ASC 842, the Company determines if an arrangement is a lease at inception or modification of a contract and classifies each lease as either operating or finance lease at commencement. The Company only reassesses lease classification subsequent to commencement upon a change to the expected lease term or the contract being modified. As of February 29, 2020, the Company only has operating leases for its clubs, distribution centers, office space, and land. Operating leases, net of accumulated amortization, are included in operating lease ROU assets, and current and non-current operating lease liabilities, on the Company’s consolidated balance sheets. Lease expense for operating leases is included in selling, general and administrative expense on the Company’s consolidated statements of income. Leases with an initial term of twelve months or less are not recorded on the Company’s consolidated balance sheet.

The Company is generally obligated for the cost of property taxes, insurance, and maintenance relating to its leases, which are often variable lease payments. Such costs are included in selling, general and administrative expense on the interim unaudited consolidated statements of income.

Certain of the Company's lease agreements provide for lease payments based on future sales volumes at the leased location, or include rental payments adjusted periodically for inflation or based on an index, which are not measurable at the inception of the lease. The Company expenses such variable amounts in the period incurred, which is the period in which it becomes probable that the specified target that triggers the variable lease payments will be achieved. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the reasonably certain lease term. The operating lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option or if an economic penalty may be incurred if the option is not exercised. The initial lease term of the Company’s operating leases range from two to 30 years.

Where the Company's leases do not provide an implicit rate, a collateralized incremental borrowing rate ("IBR") is used to determine the present value of lease payments. The IBR is based on a yield curve derived by publicly traded bond offerings for companies with similar credit characteristics that approximate the Company's market risk profile. In addition, we adjust the IBR for jurisdictional risk derived from quoted interest rates from financial institutions to reflect the cost of borrowing in the Company’s local markets.

Adoption of the standard resulted in the initial recognition of $120.6 million of operating lease ROU assets and $132.1 million of short-term and long- term operating lease liabilities as of September 1, 2019. The difference between the newly recorded assets and liabilities is $11.5 million, which was recorded against our deferred rent balance of $11.2 million as of August 31, 2019. The difference of $0.3 million was expensed in the first quarter of fiscal year 2020. No cumulative-effect adjustments were recorded to retained earnings, and there was no material impact to the Company’s interim consolidated statements of income, consolidated statements of comprehensive income, or consolidated statements of cash flows.

The following table is a summary of the Company’s components of total lease costs for the three and six months of fiscal year 2020 (in thousands):

Three Months Ended Six Months Ended February 29, February 29, 2020 2020 Operating lease cost $ 4,272 $ 8,493 Short-term lease cost 29 82 Variable lease cost 1,046 2,127 Sublease income (282) (571) Total lease costs $ 5,065 $ 10,131

The weighted average remaining lease term and weighted average discount rate for operating leases as of February 29, 2020 were as follows:

Operating leases Weighted average remaining lease term in years 18.34 Weighted average discount rate percentage 6.4%

Supplemental cash flow information related to leases under which the Company is the lessee was as follows (amounts in thousands):

Three Months Ended Six Months Ended February 29, February 29, 2020 2020 Operating cash flows paid for operating leases $ 3,848 $ 7,653

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company is committed under non-cancelable operating leases for the rental of facilities and land. Future minimum lease commitments for facilities under these leases with an initial term in excess of one year are as follows (in thousands):

Leased Years Ended February 28, Locations(1) 2021 $ 14,569 2022 14,714 2023 14,599 2024 14,448 2025 13,739 Thereafter 175,252 Total future lease payments 247,321 Less imputed interest (111,877) Total operating lease liabilities $ 135,444 (2)

(1) Operating lease obligations have been reduced by approximately $1.7 million to reflect expected sub-lease income. Certain obligations under leasing arrangements are collateralized by the underlying asset being leased. (2) Future minimum lease payments include $1.2 million of lease payment obligations for the prior leased Miami distribution center. For purposes of calculating the minimum lease payments, a reduction is reflected for the actual sub-lease income the Company expects to receive during the remaining lease term. This sub-lease income was also considered for the purposes of calculating the exit obligation, which was immaterial as of February 29, 2020.

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PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 11 – SUBSEQUENT EVENTS

The Company has evaluated all events subsequent to the balance sheet date of February 29, 2020 through the date of issuance of these consolidated financial statements and has determined that, except as set forth below, there are no subsequent events that require disclosure.

In March 2020, the World Health Organization recognized the novel strain of coronavirus, COVID-19, as a pandemic. This coronavirus outbreak has severely restricted the level of economic activity in our markets. In response to this coronavirus outbreak, the governments of certain countries in which the Company operates have taken preventative or protective actions, such as imposing restrictions on travel and business operations and advising or requiring individuals to limit or forego their time outside of their homes. In some of the countries, temporary closures of non-essential businesses have been ordered. Further, individuals' ability to travel has been curtailed through mandated travel restrictions and may be further limited through additional voluntary or mandated closures of travel-related businesses.

In countries where social distancing is required or recommended, the Company is restricting the traffic in its warehouse clubs to enhance safety. To promote convenience for members, we have established an online catalog that enables our members to see, almost real-time, the availability of products for all clubs, and for certain warehouse clubs, we have launched curbside pickup and home delivery by us or in coordination with third-party delivery services. We also are launching online ordering and pick-up at club, which we refer to as “Click and Go.” Where we have experienced the most significant limitations, we have offered a “drive-through” alternative with a limited offering of basic goods. We continue to believe that PriceSmart represents an essential business in our markets because of our offerings of fresh food and a variety of essential goods and services. However, it is difficult to predict how traffic will be affected in the near term and for how long.

Due to this uncertainty, the Company has reevaluated its needs for liquidity given the potential social and economic impacts in the markets where we operate and any resulting impacts on our results of operations and cash flow. Sales for the month of March 2020 increased by 17.1% to $306.1 million from $261.5 million in March of 2019, in part because of consumers’ reaction to health warnings associated with this pandemic. However, toward the end of March, there was a noticeable reduction of traffic due to restrictive government mandates and consumer concerns about potential exposure. Many markets have imposed limitations on access to the Company’s clubs and on the Company’s club operations, including temporary club closures, limits on the number of days during the week and hours per day the Company’s clubs can be open, restrictions on segments of the population permitted to shop on particular days, and limits on the number of people that can be in a club. These restrictions change day-to-day and market-by-market. In addition, the governments of some of the countries in which we operate have expressed a preference in favor of imports of essential items over discretionary goods. The ultimate impact of the pandemic and secondary social and economic effects on the Company's results of operations, financial position, liquidity or capital resources cannot be reasonably estimated at this time. Therefore, as a precautionary measure, we have accessed $63.2 million of funding available in several of our lines of credit to increase available cash on-hand and have delayed strategic capital expenditures.

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PRICESMART, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements concerning PriceSmart, Inc.'s ("PriceSmart", the "Company" or "we") anticipated future revenues and earnings, adequacy of future cash flows, proposed warehouse club openings, the Company's performance relative to competitors and related matters. These forward-looking statements include, but are not limited to, statements containing the words “expect,” “believe,” “will,” “may,” “should,” “project,” “estimate,” “anticipated,” “scheduled,” and like expressions, and the negative thereof. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, but not limited to: adverse changes in economic conditions in the Company's markets, natural disasters, compliance risks, volatility in currency exchange rates, competition, consumer and small business spending patterns, political instability, increased costs associated with the integration of online commerce with our traditional business, whether the Company can successfully execute strategic initiatives, breaches of security or privacy of member or business information, cost increases from product and service providers, interruption of supply chains, epidemic, pandemic or other public health issues, exposure to product liability claims and product recalls, recoverability of moneys owed to PriceSmart from governments, and other important factors discussed under the captions "Item 1A. Risk Factors" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended August 31, 2019 filed with the United States Securities and Exchange Commission ("SEC") on October 29, 2019. Forward-looking statements speak only as of the date that they are made, and the Company does not undertake to update them, except as required by law.

The following discussion and analysis compares the results of operations for the three and six months ended February 29, 2020 and February 28, 2019 and should be read in conjunction with the consolidated financial statements and the accompanying notes included therein.

Overview

PriceSmart began operations in 1996 in San Diego, California. We own and operate U.S. style membership shopping warehouse clubs in Central America, the Caribbean and Colombia. We also function as a wholesale supplier to a retailer in the Philippines. We sell high quality brand name and private label consumer products and provide services at low prices to individuals and businesses. Historically, our typical no-frills standard warehouse buildings have ranged in sales floor size from approximately 40,000 to 60,000 square feet and are located primarily in and around the major cities in our markets to take advantage of dense populations and relatively higher levels of disposable income. However, starting in fiscal year 2019, we also began opening smaller format clubs, with sales floors ranging from approximately 30,000 to 40,000 square feet. These smaller format clubs are intended to serve markets where the population is likely to support a smaller club or densely populated urban areas where it is challenging to secure sufficient real estate at a reasonable cost for a larger club. This smaller format has the potential to expand our geographic reach in existing markets and provide more convenience for our members.

As warehouse club operators, we believe that our business success depends on our ability to be the lowest cost operators in our markets and, in turn, to offer the lowest prices on high quality products and services in our markets. We believe that lower prices on products and services should drive sales volume, which increases the Company’s buying leverage, which in turn leads to better pricing that can be offered to our members, validating the membership investment that our customers make.

Our warehouse clubs operate in emerging markets that historically have had higher growth rates and lower warehouse club market penetration than the U.S. market. In the countries in which we operate, we do not currently face direct competition from U.S. membership warehouse club operators. However, we do face competition from various retail formats such as hypermarkets, supermarkets, cash and carry, home improvement centers, electronic retailers, specialty stores, convenience stores, traditional wholesale distribution and growing online sales.

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The numbers of warehouse clubs in operation as of February 29, 2020 for each country or territory were as follows:

Number of Number of Warehouse Clubs Warehouse Clubs in Operation as of in Operation as of Country/Territory February 28, 2019 February 29, 2020 Colombia 7 7 Costa Rica 7 7 Panama 5 7 Dominican Republic 4 5 Trinidad 4 4 Guatemala 3 4 Honduras 3 3 El Salvador 2 2 Nicaragua 2 2 Aruba 1 1 Barbados 1 1 U.S. Virgin Islands 1 1 Jamaica 1 1 Totals 41 45

Our warehouse clubs and local distribution centers are located in Latin America and the Caribbean, and our corporate headquarters, U.S. buying operations and regional distribution centers are located primarily in the United States. Our operating segments are the United States, Central America, the Caribbean and Colombia.

Due to the uncertainty created from the outbreak of the novel coronavirus (COVID-19) and the uncertainty of the potential social and economic impacts in the markets where we operate and any resulting impacts on our results of operations and cash flow, we have reevaluated the timing of our capital investments and warehouse club openings. While we have decided to proceed with the construction of an additional warehouse club in Liberia, Costa Rica, which is currently scheduled to finalize in May of 2020, we have decided to postpone the opening of that club. Additionally, with respect to our previously announced future warehouse club openings on land we have acquired in Bogota and Bucaramanga, Colombia and in Jamaica, we have decided, temporarily, to halt or not initiate construction of those clubs at this time. We are considering and planning for additional cost savings measures in the U.S. and in the markets where we operate.

We continue to invest in technology to increase efficiencies and to enable our omni-channel capabilities, including e-commerce, to enhance the member experience.

We also operate a legacy (casillero and marketplace) Aeropost business in 38 countries in Latin America and the Caribbean, many of which overlap with markets where we operate warehouse clubs.

Factors Affecting Our Business

Our sales and profits vary from market to market depending on general economic factors, including GDP growth; consumer spending patterns; foreign currency exchange rates; political policies and social conditions; local demographic characteristics (such as population growth); the number of years we have operated in a particular market; and the level of retail and wholesale competition in that market.

Currency fluctuations can be one of the largest variables affecting our overall sales and profitability because many of our markets are susceptible to foreign currency exchange rate volatility. During the first six months of fiscal year 2020 and fiscal year 2019, approximately 78% of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 52% were comprised of sales of products we purchased in U.S. dollars.

A devaluation of local currency versus the U.S. dollar reduces the value of sales and membership income that is generated in that country when translated to U.S. dollars for our consolidated results. In addition, when a local currency experiences devaluation, we may elect to increase the local currency price of imported merchandise to maintain our target margins, which could impact demand for the merchandise affected by the price increase. We may also modify the mix of imported versus local merchandise and/or the source of imported merchandise to mitigate the impact of currency fluctuations. Information

Table of Contents about the effect of local currency devaluations is discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net Merchandise Sales and Comparable Sales.”

From time to time, one or more markets in which we operate may experience economic slowdowns, which can negatively impact our business. Although we continue to experience adverse market conditions in our Central America segment, some of the countries in this region have begun to stabilize from recent political unrest. However, slowing global economy activity and trade, decreasing levels of public investment and fiscal reform continue to be significant challenges for our countries in this region.

Our capture of total retail and wholesale sales can vary from market to market due to competition and the availability of other shopping options for our members. Our business in the U.S. Virgin Islands, where Hurricanes Irma and Maria had a severe impact on the infrastructure of the island in September 2017 and October 2017, initially benefitted from the difficulty other retailers had in becoming fully operational, but those same retailers have rebuilt, thereby restoring competition in that market. Additionally, in more developed countries, such as Costa Rica, Dominican Republic, Guatemala, Panama and Colombia, customers may have more alternatives available to them to satisfy their shopping needs, compared to smaller countries, such as Jamaica and Nicaragua, where consumers have a limited number of shopping options.

Demographic characteristics within each of our markets can also affect both the overall level of sales and also future sales growth opportunities. Island countries such as Aruba, Barbados and the U.S. Virgin Islands offer us limited upside for sales growth given their overall market size. Countries with a smaller upper and middle class consumer population, such as Honduras, El Salvador, Jamaica and Nicaragua, offer growth potential but they may have a more limited market opportunity for sales growth as compared to more developed countries with larger upper and middle class consumer populations.

Political and other factors in each of our markets may have significant effects on our business. U.S. foreign policy can also have an impact on social and economic stability in the countries where we operate. For example, the U.S. State Department has announced varying strategies regarding if, when and how it would authorize disbursement of foreign aid that had been previously approved by the U.S. Congress to Guatemala, Honduras and El Salvador. Changes in U.S. policies regarding financial assistance could cause political or financial instability in the countries we serve.

In the past, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products, increasing our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar. We continued to experience this situation in Trinidad during the start of fiscal year 2020. We are working with our banks in Trinidad to source tradeable currencies (including Euros, British Pounds, and Canadian dollars), but until the central bank in Trinidad makes more U.S. dollars available, this illiquidity condition is likely to continue. As of February 29, 2020, our Trinidad subsidiary had a net Trinidad dollar denominated asset position measured in U.S dollars of approximately $62.4 million, an increase of $37.5 million from August 31, 2019 when it had a net Trinidad dollar denominated asset position of approximately $24.9 million. We are carefully monitoring the situation, which may require us to limit future shipments from the U.S. to Trinidad in line with our ability to exchange Trinidad dollars for tradeable currencies to manage our exposure to any potential devaluation.

Additionally, we are monitoring the impact of the novel coronavirus (COVID-19) outbreak on our business and implementing plans to take appropriate actions to adapt to changing circumstances arising from this outbreak. Specifically, we are adapting to its effects on our ability to serve our members effectively, our vendors and the global supply chain, our operating hours and processes, and the types of products our members favor. This includes, but is not limited to, seeking alternative sources of products in cases where supply cannot keep up with demand and we continue to review and update our plans as circumstances evolve. To facilitate social distancing and convenience for members, we have established an online catalog that enables our members to see, almost real-time, the availability of products for all clubs, and for certain warehouse clubs we have launched curbside pickup and home delivery by us or in coordination with third- party delivery services. Additionally, we have established a special management task force response team comprised of various executives spanning all parts of the Company that closely monitors and is able to quickly respond to the varied and dynamic issues and challenges arising from the outbreak. Further, we have established a Cash Management Committee comprised of members of our Board of Directors and management that provides enhanced oversight and monitoring of cash flow to maintain appropriate liquidity in all of our markets.

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Although we have recently incurred significant disruptions in certain of our markets due to the outbreak, and expect the impact of the pandemic and the related varied restrictions on our operations to adversely affect traffic and sales over the next few months, we are unable to accurately quantify the impact that COVID-19 will have due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities and other unintended consequences. In addition, there could be weakening demand for items that are not basic goods, and our supply chain could be further disrupted as a result of the outbreak, either of which could have a materially adverse impact on our operating results. Please refer to Part II Item 1A for updated risk factors related to the COVID-19 outbreak.

Mission and Business Strategy

Our mission is to improve the quality of life for our end-consumer and business members. To do this, we make available a wide range of high quality, curated merchandise sourced from around the world at value prices. The annual membership fee enables us to operate our business with lower margins than traditional retail stores. Through the use of technology and the development of an omni-channel platform, we are pursuing opportunities to satisfy our members’ shopping expectations, create additional efficiencies in the supply chain and increase our significance in our members’ lives. We are working to create a shopping experience that blends the attributes and appeal of our brick and mortar business with the conveniences associated with technology-supported transactions, services and online shopping.

Growth

We measure our growth primarily by the amount of the period-over-period activity in our net merchandise sales, our comparable store net merchandise sales and our membership income. Our investments are focused on the long-term growth of the Company. These investments can impact near-term results, such as when we incur fixed costs in advance of achieving full projected sales, negatively impacting near-term operating profit and net income. When we open a new warehouse club in an existing market, which may reduce reported comparable net merchandise sales due to the transfer of sales from existing warehouse clubs, we do so to protect the member experience, grow membership and support long-term sales growth and profitability.

Current and Future Management Actions

Logistics and distribution efficiencies are fundamental to delivering high quality merchandise at low prices to our members. We continue to explore ways to improve efficiency, reduce costs and ensure a flow of high quality, curated merchandise to our warehouse clubs. As we continue to refine our logistics and distribution infrastructure, we explore ways to improve our supply chain effectiveness through regional distribution centers that place our merchandise closer to our members.

Purchasing land and constructing warehouse clubs is generally our largest ongoing capital investment. Securing land for warehouse club locations is challenging in several of our markets because suitable sites at economically feasible prices are difficult to find. We believe real estate ownership provides a number of advantages as compared to leasing, including lower operating expenses, flexibility to expand or otherwise enhance our buildings, long-term control over the use of the property and the residual value that the real estate may have in future years. While our preference is to own rather than lease real estate, we have entered into real estate leases in certain cases and will likely do so in the future.

We are investing in technology to increase efficiencies and to enable omni-channel capabilities, including e-commerce, to enhance the member experience.

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Financial highlights for the three months ended February 29, 2020 included:

 Total revenues increased 6.1% over the comparable prior year period. The extra day from leap year, Saturday, February 29, 2020 had a favorable impact on total revenue compared to the comparable prior year period.  Net merchandise sales increased 6.3% over the comparable prior year period. We ended the quarter with 45 warehouse clubs compared to 41 warehouse clubs at the end of the second quarter of fiscal year 2019. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by 0.3% versus the same three-month period in the prior year.  Comparable net merchandise sales (that is, sales in the 41 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 13 weeks ended March 1, 2020 increased 0.4%. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by 0.4%.  Membership income increased 9.7% to $14.1 million over the comparable prior-year period primarily driven by new member sign-ups for the four club openings in Panama, Dominican Republic, and Guatemala in calendar year 2019.  Merchandise gross profits (net merchandise sales less associated cost of goods sold) increased 11.8% over the comparable prior year period and warehouse gross profits as a percent of net merchandise club sales were 14.7%, an increase of 70 basis points (0.7%) from the same period last year.  Operating income was $38.8 million, an increase of 6.2%, or $2.3 million, compared to the second quarter of fiscal year 2019.  We recorded a $755,000 net currency gain from currency transactions in the current quarter compared to a $368,000 net loss in the same period last year.  The effective tax rate for the second quarter of fiscal year 2020 was 33.1%, as compared to the effective tax rate for the second quarter of fiscal year 2019 of 32.9%.  Net income attributable to PriceSmart, Inc. for the second quarter of fiscal year 2020 was $25.6 million, or $0.85 per diluted share, compared to $23.8 million, or $0.79 per diluted share, in the comparable prior year period.

Financial highlights for the six months ended February 29, 2020 included:

 Total revenues increased 5.2% over the comparable prior year period. The extra day from leap year, Saturday, February 29, 2020 had a favorable impact on total revenue compared to the comparable prior year period.  Net merchandise sales increased 5.3% over the comparable prior year period. We ended the quarter with 45 warehouse clubs compared to 41 warehouse clubs at the end of the second quarter of fiscal year 2019. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by 0.9%.  Comparable net merchandise sales (that is, sales in the 41 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 26 weeks ended March 1, 2020 increased 0.7%. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by 0.9%.  Membership income increased 8.8% to $27.8 million membership over the comparable prior-year period primarily driven by new member sign-ups for the four club openings in Panama, Dominican Republic, and Guatemala in calendar year 2019.  Merchandise gross profits (net merchandise sales less associated cost of goods sold) increased 10.5% over the comparable prior year period and warehouse gross profits as a percent of net merchandise club sales were 14.8%, an increase of 70 basis points (0.7%) from the same period last year.  Operating income was $69.5 million, an increase of 13.6%, or $8.3 million, compared to the first six months fiscal year 2019.  We recorded a $902,000 net currency loss from currency transactions in the current six-month period compared to a $2.1 million net loss in the same period last year.  The effective tax rate for the first six months of fiscal year 2020 was 32.7%, as compared to the effective tax rate for the first six months of fiscal year 2019 of 33.3%.  Net income attributable to PriceSmart, Inc. for the first six months of fiscal year 2020 was $45.3 million, or $1.49 per diluted share, compared to $38.4 million, or $1.27 per diluted share, in the comparable prior year period.

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COMPARISON OF THE THREE AND SIX MONTHS ENDED FEBRUARY 29, 2020 AND FEBRUARY 28, 2019

The following discussion and analysis compares the results of operations for the three-month and six-month periods ended on February 29, 2020 with the three-month and six-month periods ended on February 28, 2019 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report. Unless otherwise noted, all tables on the following pages present U.S. dollar amounts in thousands. Certain percentages presented are calculated using actual results prior to rounding.

Net Merchandise Sales

The following tables indicate the net merchandise club sales in the segments in which we operate and the percentage growth in net merchandise sales by segment during the three and six-months ended February 29, 2020 and February 28, 2019.

Three Months Ended February 29, 2020 February 28, 2019 Increase/

‎(decrease)

% of net ‎from % of net

Amount ‎sales ‎prior year Change Amount ‎sales Central America $ 512,452 58.7 % $ 39,291 8.3 % $ 473,161 57.7 % Caribbean 257,687 29.6 11,959 4.9 245,728 30.0 Colombia 101,587 11.7 186 0.2 101,401 12.3 Net merchandise sales $ 871,726 100.0 % $ 51,436 6.3 % $ 820,290 100.0 %

Six Months Ended February 29, 2020 February 28, 2019 Increase/

‎(decrease)

% of net ‎from % of net

Amount ‎sales ‎prior year Change Amount ‎sales Central America $ 969,203 58.7 % $ 65,658 7.3 % $ 903,545 57.6 % Caribbean 488,838 29.6 21,615 4.6 467,223 29.8 Colombia 192,413 11.7 (4,552) (2.3) 196,965 12.6 Net merchandise sales $ 1,650,454 100.0 % $ 82,721 5.3 % $ 1,567,733 100.0 %

Comparison of Three and Six Months Ended February 29, 2020 and February 28, 2019

Overall, total net merchandise sales grew 6.3% for the second quarter and 5.3% for the six-month period ended February 29, 2020. The second quarter increase resulted from a 5.9% increase in transactions and a 0.3% increase in average ticket. For the six-month period, the increase resulted from a 4.9% increase in transactions and a 0.4% increase in average ticket. Transactions represent the number of visits our members make to our warehouse clubs and average ticket represents the amount our members spend on each visit.

Net merchandise sales in our Central America segment increased 8.3% and 7.3% for the second quarter and the six-months ended February 29, 2020, respectively, when compared to the same period last year. These increases had a 480 basis point (4.8%) and 420 basis point (4.2%) positive impact on total net merchandise sales growth, respectively. All markets within this segment showed increased net merchandise sales year-on-year. We added three new clubs to the segment when compared to the period ended February 28, 2019. In Panama, we opened our sixth club in May 2019 and seventh club in October 2019, and in Guatemala, we opened our fourth club in November 2019.

Net merchandise sales in our Caribbean segment grew 4.9% and 4.6% for the second quarter and the six-months ended February 29, 2020, respectively, when compared to the same period last year. These increases had a 150 basis point (1.5%) and 140 basis point (1.4%) positive impact on total net merchandise sales growth, respectively. Our Dominican Republic and Jamaica markets led the way in this segment with 17.4% and 10.5% growth for the second quarter ended February 29, 2020, and 16.1% and 11.3% growth for the six-months ended February 29, 2020, respectively. In the Dominican Republic, we launched our fifth club in June 2019, while in Jamaica, strong comparable sales growth was the primary driver of growth for the second quarter and the six-months ended February 29, 2020.

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Net merchandise sales in our Colombia segment increased 0.2% and decreased 2.3% for the second quarter and the six-months ended February 29, 2020, respectively, when compared to the same period last year. Net merchandise sales in our Colombia segment had no material impact on total net merchandise sales growth for the second quarter ended February 29, 2020. The decrease for the six-month period had a 30 basis point (0.3%) negative impact on total net merchandise sales growth. The minimal growth and decline for the second quarter and the six-months ended February 29, 2020, is primarily due to unfavorable foreign currency devaluation during the current period.

Comparison of Three and Six Months Ended February 29, 2020 and February 28, 2019 in Constant Currency

In discussing our operating results, the term “currency exchange rates” refers to the currency exchange rates we use to convert the operating results for all countries where the functional currency is not the U.S. dollar into U.S. dollars. We calculate the effect of changes in currency exchange rates as the difference between current period activities translated using the current period's currency exchange rates and the comparable prior year period's currency exchange rates. The disclosure of constant currency amounts or results permits investors to better understand our underlying performance without the effects of currency exchange rate fluctuations. The following table indicates the impact that currency exchange rates had on our net merchandise sales in dollars and the percentage change from the three and six-month periods ended February 29, 2020.

Currency exchange rate fluctuations for the Three Months Ended February 29, 2020 Amount % change Central America $ 8,397 1.6 % Caribbean (5,067) (2.0) Colombia (6,215) (6.1) Net merchandise sales $ (2,885) (0.3)%

Currency exchange rate fluctuations for the Six Months Ended February 29, 2020 Amount % change Central America $ 9,993 1.0 % Caribbean (9,810) (2.0) Colombia (15,244) (7.9) Net merchandise sales $ (15,061) (0.9)%

Overall, the effects of currency fluctuations within our markets had an approximately $2.9 million and $15.1 million, or 30 basis point (0.3%) and 90 basis point (0.9%), negative constant currency impact on net merchandise sales for the quarter and six-months ended February 29, 2020, respectively.

Currency fluctuations had an $8.4 million and $10.0 million, or 160 basis point (1.6%) and 100 basis point (1.0%), positive constant currency impact on net merchandise sales in our Central America segment for the quarter and six months ended February 29, 2020, respectively. The currency fluctuations contributed approximately 80 basis points (0.8%) and 60 basis points (0.6%) of the total positive impact on total net merchandise sales, respectively. The Costa Rica Colón appreciated significantly against the dollar as compared to the same three and six-month period a year ago, and was a significant factor in the contribution to the favorably of currency exchange rate fluctuations in this segment.

Currency devaluations had a $5.1 million and $9.8 million, or 200 basis point (2.0%) in both cases, negative constant currency impact on reported net merchandise sales in our Caribbean segment for the quarter and six months ended February 29, 2020, respectively. The currency devaluations contributed approximately 50 basis points (0.5%) and 60 basis points (0.6%) of the total negative impact on total net merchandise sales for the quarter and six months ended February 29, 2020, respectively. Jamaica and the Dominican Republic markets both experienced currency devaluation when compared to the same periods last year.

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Currency devaluations had a $6.2 million and $15.2 million, or 610 basis point (6.1%) and 790 basis point (7.9%), negative constant currency impact on net merchandise sales in our Colombia segment for the quarter and six-months ended February 29, 2020, respectively. The currency devaluations contributed approximately 60 basis points (0.6%) and 90 basis points (0.9%) of the total negative impact on total net merchandise sales, respectively.

Comparable Merchandise Sales

We report comparable net merchandise sales on a “same week” basis with 13 weeks in each quarter beginning on a Monday and ending on a Sunday. The periods are established at the beginning of the fiscal year to provide as close of a match as possible to the calendar month and quarter that is used for financial reporting purposes. This approach equalizes the number of weekend days and weekdays in each period for improved sales comparison, as we experience higher merchandise club sales on the weekends. Each of the warehouse clubs used in the calculations was open for at least 13 ½ calendar months before its results for the current period were compared with its results for the prior period. As a result, sales related to our four warehouse clubs opened during calendar year 2019 will not be used in the calculation of comparable sales until they have been open for at least the 13 ½ months. Therefore, comparable net merchandise sales includes only 41 warehouse clubs for the thirteen and twenty-six week periods ended March 1, 2020.

The following tables indicate the comparable net merchandise sales in the reportable segments in which we operate and the percentage growth in net merchandise sales by segment during the thirteen week and twenty-six week periods ended March 1, 2020 and March 3, 2019.

Thirteen Weeks Ended March 1, 2020 March 3, 2019 % Increase/(decrease) % Increase/(decrease) in comparable in comparable net merchandise sales net merchandise sales Central America 0.1 % (2.5)% Caribbean 1.3 1.7 Colombia (0.6) 1.1 Consolidated segments 0.4 % (0.9)%

Twenty-Six Weeks Ended March 1, 2020 March 3, 2019

% Increase/(decrease) % Increase/(decrease) in comparable in comparable net merchandise sales net merchandise sales Central America 0.9 % (3.5)% Caribbean 1.6 0.8 Colombia (2.9) 3.1 Consolidated segments 0.7 % (1.4)%

Comparison of Thirteen and Twenty-Six Week Periods Ended March 1, 2020 and March 3, 2019

Comparable net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the thirteen week period ended March 1, 2020 increased 0.4%. Comparable net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the twenty- six week period ended on March 1, 2020 increased 0.7%.

Comparable net merchandise sales in our Central America segment increased 0.1% and 0.9% for the thirteen week and twenty-six week periods ended March 1, 2020. These increases contributed approximately 10 basis points (0.1%) and 50 basis points (0.5%) of the increase in total comparable merchandise sales, respectively.

For the thirteen weeks ended March 1, 2020, significant foreign currency appreciation within our Costa Rica market as well as strong performances in our Honduras, El Salvador and Nicaragua markets, contributed approximately 240 basis points (2.4%) of the increase, which was offset by a 230 basis point (2.3%) decrease in Guatemala and Panama. The decreases in Guatemala and Panama are primarily due to cannibalization by the Company’s recent club openings, with two in Panama and one in Guatemala. For the twenty-six week period ended March 1, 2020, comparable net merchandise sales experienced growth of 10.6% in El Salvador and 13.6% in Nicaragua, this growth as well as foreign currency appreciation in our Costa Rica market

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Comparable net merchandise sales in our Caribbean segment increased 1.3% for the thirteen week period ended March 1, 2020. This increase contributed approximately 40 basis points (0.4%) of positive impact in total comparable merchandise sales. For the twenty-six week period ended March 1, 2020, comparable net merchandise sales in our Caribbean segment increased 1.6%, which contributed approximately 50 basis points (0.5%) of positive impact in total comparable merchandise sales.

For the thirteen and twenty-six week periods ended March 1, 2020, all markets in our Caribbean segment, with the exception of the U.S. Virgin Islands, showed strong growth compared to the same period in the prior year. Notably, investments we made in our Jamaica market resulted in 9.6% and 10.6% growth in comparable net merchandise sales for the thirteen and twenty-six week periods ended March 1, 2020. In our U.S. Virgin Islands market, comparable net merchandise sales experienced a decline when compared to the same period in prior year. Hurricanes Irma and Maria had a severe impact on the infrastructure of the islands in the fall of calendar year 2017. From that time until the end the first quarter of fiscal year 2020, the Company benefitted from the difficulty other retailers had in becoming fully operational, but those same retailers have rebuilt, contributing to increased competition in that market.

Comparable net merchandise sales in our Colombia segment decreased 0.6% and 2.9% for the thirteen and twenty-six week periods ended March 1, 2020. These decreases contributed approximately 10 basis points (0.1%) and 30 basis points (0.3%) of negative impact in total comparable sales for the respective period. These declines were largely due to the devaluation of the Colombian peso relative to the U.S. dollar.

The following tables illustrate the impact that changes in foreign currency exchange rates had on our comparable merchandise sales in dollars and the percentage change from the thirteen and twenty-six week periods ended March 1, 2020.

Currency Exchange Rate Fluctuations for the Thirteen Weeks Ended March 1, 2020

Amount % change Central America $ 8,151 1.7 % Caribbean (4,952) (2.0) Colombia (6,474) (6.4) Comparable merchandise sales $ (3,275) (0.4)%

Currency Exchange Rate Fluctuations for the Twenty-Six Weeks Ended March 1, 2020

Amount % change Central America $ 9,967 1.1 % Caribbean (9,319) (2.0) Colombia (15,237) (7.9) Comparable merchandise sales $ (14,589) (0.9)%

Overall, the mix of currency fluctuations within our markets had an approximate $3.3 million and $14.6 million, or 40 basis points (0.4%) and 90 basis points (0.9%), of negative constant currency impact on comparable net merchandise sales for the thirteen and twenty-six week periods ended March 1, 2020.

Currency fluctuations within our Central America segment accounted for approximately 40 basis points (0.4%) and 60 basis points (0.6%) of positive impact in total comparable merchandise sales for the thirteen and twenty-six week periods. This is reflective of the offsetting devaluation and appreciation of the mix of currencies within the markets in this segment when compared to the same periods a year ago.

Currency devaluations within our Caribbean segment accounted for approximately 60 basis points (0.6%) of negative impact of currency devaluations on total comparable merchandise sales for the thirteen and twenty-six week periods, respectively. Our Dominican Republic and Jamaica markets experienced currency devaluation when compared to the same period last year.

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Currency devaluations within our Colombia segment accounted for approximately 80 basis points (0.8%) and 90 basis points (0.9%) of negative impact in total comparable merchandise sales for the thirteen and twenty-six week periods ended March 1, 2020. This reflects the devaluation of the Colombian peso when compared to the same period a year ago.

Membership Income

Membership income is recognized ratably over the one-year life of the membership. The increase in membership income primarily reflects a growth in membership accounts. The table below represents the change in membership income by segment and as a percentage of net merchandise club sales of each segment:

Three Months Ended February 29, February 28, 2020 2019 Membership

Increase ‎ income % to

‎from ‎net merchandise

Amount ‎prior year % Change ‎club sales Amount Membership income - Central America $ 8,447 $ 743 9.6 % 1.6 % $ 7,704 Membership income - Caribbean 3,768 341 9.9 1.5 3,427 Membership income - Colombia 1,878 164 9.6 1.8 1,714 Membership income - Total $ 14,093 $ 1,248 9.7 % 1.6 % $ 12,845

Six Months Ended February 29, February 28, 2020 2019 Increase/ Membership

‎(decrease) ‎income % to

‎ from ‎net merchandise

Amount ‎prior year % Change ‎club sales Amount Membership income - Central America $ 16,744 $ 1,371 8.9 % 1.7 % $ 15,373 Membership income - Caribbean 7,446 687 10.2 1.5 6,759 Membership income - Colombia 3,649 196 5.7 1.9 3,453 Membership income - Total $ 27,839 $ 2,254 8.8 % 1.7 % $ 25,585

Number of accounts - Central America 881,019 37,906 4.5 % 843,113 Number of accounts - Caribbean 439,785 14,783 3.5 425,002 Number of accounts - Colombia 335,071 (4,977) (1.5) 340,048 Number of accounts - Total 1,655,875 47,712 3.0 % 1,608,163

Comparison of Three and Six Months Ended February 29, 2020 and February 28, 2019

The number of member accounts during the first six months of fiscal year 2020 was 3.0% higher than the year before. Membership income increased 8.8% over the same period.

The growth in membership accounts and income during fiscal year 2020 in our Central America segment is primarily the result of the opening of three new warehouse clubs – Santiago de Veraguas and Metropark in Panama and San Cristobal in Guatemala. In our Caribbean market, membership account and income growth was primarily attributable to the opening of the new Bolivar warehouse club in the Dominican Republic in June 2019. In Colombia, we increased the Diamond membership fee from 75,000 (COP) to 90,000 (COP) (including VAT) beginning in April 2019, providing a converted membership price of approximately $26, which has contributed to the increase in membership income as a percentage of merchandise sales during the second quarter of fiscal year 2020 compared to the same prior year period. We continued expanding our Platinum membership program during the six months ended February 29, 2020, and we intend to expand our Platinum membership program to additional markets this year. The annual fee for a Platinum membership in most markets is approximately $75, which is also contributing to the increase in membership income as a percentage of merchandise club sales in our Central America segment where our penetration is the greatest. The Platinum membership provides members with a 2% rebate on most items, up to an annual maximum of $500. We record the 2% rebate as a reduction on net merchandise sales at the time of the sales transaction.

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Lastly, our trailing twelve-month renewal rate was 86.0% and 85.0% for the periods ended February 29, 2020 and February 28, 2019, respectively. Growth in membership accounts and income as well as high renewal rates, demonstrate that our members recognize the value we bring and is a key indicator of membership satisfaction and loyalty.

Other Revenue

Other revenue primarily consists of non-merchandise revenue from freight and handling fees generated from our marketplace and casillero operations; miscellaneous income, comprised primarily of revenue from an interest generating portfolio (“IGP”) from our co-branded credit cards; and rental income from operating leases where the Company is the lessor.

Three Months Ended February 29, 2020 February 28, 2019 Increase (decrease) from

Amount ‎prior year % Change Amount Non-merchandise revenue $ 10,101 $ 201 2.0 % $ 9,900 Miscellaneous income 1,619 (2,081) (56.2) 3,700 Rental income 762 (84) (9.9) 846 Other revenue $ 12,482 $ (1,964) (13.6)% $ 14,446

Six Months Ended February 29, 2020 February 28, 2019 Decrease from

Amount ‎prior year % Change Amount Non-merchandise revenue $ 18,946 $ (73) (0.4)% $ 19,019 Miscellaneous income 3,228 (1,836) (36.3) 5,064 Rental income 1,501 (127) (7.8) 1,628 Other revenue $ 23,675 $ (2,036) (7.9)% $ 25,711

Comparison of Three and Six Months Ended February 29, 2020 and February 28, 2019

Other revenue decreased for the quarter by $2.0 million, primarily as a result of miscellaneous income decreasing by $2.1 million because of a prior year $2.2 million payment we received in the second quarter of fiscal year 2019 from the underpayment of income earned on our co-branded credit card interest generating portfolios balance over several years. Non-merchandise revenue from our marketplace and casillero operations increased primarily due to favorable traffic attributable to Cyber Monday promotions that occurred in December 2019 this year compared to November in the prior year. Additionally, the extra day from leap year, Saturday February 29, impacted non-merchandise revenue favorably versus the same period in the prior year.

For the six months ended on February 29, 2020, miscellaneous income decreased by $1.8 million, primarily as a result of the $2.2 million reimbursement we received in fiscal year 2019 described above.

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Results of Operations

Three Months Ended Results of Operations Consolidated February 29, 2020 February 28, 2019 Increase (Amounts in thousands, except percentages and number of warehouse clubs) Net merchandise sales Net merchandise sales $ 871,726 $ 820,290 $ 51,436 Merchandise sales gross margin $ 128,292 $ 114,744 $ 13,548 Merchandise sales gross margin percentage 14.7 % 14.0 % 0.7 %

Revenues Total revenues $ 906,735 $ 854,425 $ 52,310 Percentage change from prior period 6.1 %

Comparable merchandise sales Total comparable merchandise sales increase (decrease) 0.4 % (0.9)% 1.3 %

Gross margin Total gross margin $ 150,561 $ 137,567 $ 12,994 Gross margin percentage to total revenues 16.6 % 16.1 % 0.5 %

Selling, general and administrative Selling, general and administrative $ 111,752 $ 101,031 $ 10,721 Selling, general and administrative percentage of total revenues 12.3 % 11.8 % 0.5 %

Three Months Ended February 29, % of February 28, % of Results of Operations Consolidated 2020 Total Revenue 2019 Total Revenue Operating income- by segment Central America $ 37,667 4.2 % $ 35,574 4.2 % Caribbean 15,079 1.7 15,024 1.8 Colombia 5,400 0.6 3,617 0.4 United States 1,928 0.2 4,477 0.5 Reconciling Items (1) (21,265) (2.3) (22,156) (2.6) Operating income - Total $ 38,809 4.3 % $ 36,536 4.3 %

(1) The reconciling items reflect the amount eliminated upon consolidation of intersegment transactions.

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Six Months Ended Results of Operations Consolidated February 29, 2020 February 28, 2019 Increase (Amounts in thousands, except percentages and number of warehouse clubs) Net merchandise sales Net merchandise sales $ 1,650,454 $ 1,567,733 $ 82,721 Merchandise sales gross margin $ 244,296 $ 221,032 $ 23,264 Merchandise sales gross margin percentage 14.8 % 14.1 % 0.7 %

Revenues Total revenues $ 1,718,676 $ 1,634,062 $ 84,614 Percentage change from comparable period 5.2 %

Comparable merchandise sales Total calendar comparable merchandise sales increase (decrease) 0.7 % (1.4)% 2.1 %

Gross margin Total gross margin $ 287,556 $ 264,024 $ 23,532 Gross margin percentage to total revenues 16.7 % 16.2 % 0.5 %

Selling, general and administrative Selling, general and administrative $ 218,033 $ 202,818 $ 15,215 Selling, general and administrative percentage of total revenues 12.7 % 12.4 % 0.3 %

Six Months Ended February 29, % of February 28, % of Results of Operations Consolidated 2020 Total Revenue 2019 Total Revenue Operating income- by segment Central America $ 69,367 4.0 % $ 64,366 3.9 % Caribbean 26,889 1.6 27,051 1.7 Colombia 9,924 0.6 7,033 0.4 United States 4,516 0.3 3,427 0.2 Reconciling Items (1) (41,173) (2.4) (40,671) (2.5) Operating income - Total $ 69,523 4.0 % $ 61,206 3.7 %

Warehouse clubs Warehouse clubs at period end 45 41 4 Warehouse club sales square feet at period end 2,232 2,085 147

(1) The reconciling items reflect the amount eliminated on consolidation of intersegment transactions.

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The following table summarizes the selling, general and administrative expense for the periods disclosed.

Three Months Ended February 29, % of February 28, % of 2020 Total Revenue 2019 Total Revenue Warehouse club and other operations $ 84,022 9.3 % $ 75,708 8.9 % General and administrative 27,618 3.0 24,968 2.9 Pre-opening expenses 44 — 97 — Loss on disposal of assets 68 — 258 — Total Selling, General and Administrative $ 111,752 12.3 % $ 101,031 11.8 %

Six Months Ended February 29, % of February 28, % of 2020 Total Revenue 2019 Total Revenue Warehouse club and other operations $ 163,395 9.5 % $ 149,930 9.2 % General and administrative 53,502 3.1 52,303 3.2 Pre-opening expenses 997 0.1 112 — Loss on disposal of assets 139 — 473 — Total Selling, general and administrative $ 218,033 12.7 % $ 202,818 12.4 %

Comparison of Three and Six Months Ended February 29, 2020 and February 28, 2019

On a consolidated basis, net merchandise sales gross margin for the second quarter of fiscal year 2020 as a percentage of total net merchandise sales was 14.7%, 70 basis points (0.7%) higher than the second quarter of fiscal year 2019. Net merchandise margins increased across all segments with the Central America segment contributing 40 basis points (0.4%), the Caribbean segment contributing 20 basis points (0.2%), and the Colombia segment contributing 10 basis points (0.1%) to the overall increase.

For the six-month period, consolidated net merchandise sales gross margin as a percentage of total net merchandise sales was 14.8%, 70 basis points (0.7%) higher than the same period of fiscal year 2019. Net merchandise margins increased across all segments with the Central America segment contributing 40 basis points (0.4%), the Caribbean segment contributing 20 basis points (0.2%), and the Colombia segment contributing 10 basis points (0.1%) to the overall increase.

Total gross margin to total revenues increased 50 basis points (0.5%) for the three and six-month periods, which is the result of the increase in total net merchandise sales gross margin explained previously. Gross margin during the three and six months ended February 29, 2020 increased primarily due to improved product margins, attributable to more focused merchandising strategies and inventory management.

Selling, general, and administrative expenses consist of warehouse club and other operations, general and administrative expenses, pre-opening expenses, and loss/(gain) on disposal of assets. In total, selling, general and administrative expenses increased $10.7 million to 12.3% of total revenues compared to 11.8% of total revenues in the second quarter of fiscal year 2019.

Warehouse club and other operations expense increased to 9.3% of total revenues compared to 8.9% for the second quarter of fiscal year 2020. This increase was primarily attributable to operating an additional four warehouse clubs compared to the prior year period. These four new clubs had not reached sales maturity as of February 29, 2020, thus increasing operational expenses by 40 basis points (0.4%) as a percentage of total revenues.

General and administrative expenses increased to 3.0% compared to 2.9% of total revenues for the second quarter of fiscal year 2020. This ten basis points increase (0.1%) as a percentage of total revenues was primarily the result of investments in talent acquisition, development of our employees, and technology spend.

Selling, general and administrative expenses increased $15.2 million to 12.7% of total revenues for the six-month period ended February 29, 2020, compared to 12.4% of total revenues in the same prior year period.

Warehouse club and other operations expense increased to 9.5% of total revenues compared to 9.2% for the six-month period ended fiscal year 2019. This increase was primarily attributable to operating an additional four warehouse clubs compared

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General and administrative expenses decreased to 3.1% of total revenues compared to 3.2% of total revenues for the six-months ended February 29, 2020 when compared to the same prior year period. In the prior six-months ended February 28, 2019, two non-recurring transactions increased general and administrative expenses. First, was the $3.8 million, or a 20 basis points (0.2%) decrease, recorded in the first quarter of fiscal year 2019 for separation and other related termination benefits for our former Chief Executive Officer and President who resigned in October 2018 by mutual agreement with the Board of Directors. These costs, net of tax, negatively impacted earnings per share for the six months ended February 28, 2019, by $0.13 per share. An additional decrease of approximately $1.5 million, or 10 basis points (0.10%), was due to the expiration of the amortization of post-combination compensation expense related to the Aeropost business we acquired in March 2018. These decreases were offset by increases of $6.5 million, or 40 basis points (0.4%), in general and administrative expenses primarily due to additions to headcount to support technology development and implementation and other administrative functions made during the six- month period ended February 29, 2020.

Pre-opening expenses remained stable in the second quarter ended February 29, 2020 compared to the same prior year period. For the six-months ended February 29, 2020, pre-opening expense increased to $953,000 or 0.1% of total revenues compared to the prior year period. This increase is attributable to costs incurred to open our 44th and 45th warehouse clubs and for the four additional warehouse clubs in our real estate pipeline.

Operating income in the second quarter of fiscal year 2020 increased to $38.8 million (4.3% of total revenue) compared to $36.5 million (4.3% of total revenue) for the same period last year. This reflects the increase in gross margins from net merchandise sales, offset by higher selling, general and administrative expenses year-on-year related to investments in talent acquisition, development of our employees and technology spend.

Operating income for the six months ended February 29, 2020 increased to $69.5 million (4.0% of total revenue) compared to $61.2 million (3.7% of total revenue) for the same period last year. As described above, higher merchandise margins as a percent of sales, offset by incrementally higher general and administrative expenses were the primary factors for the overall 30 basis point (0.3%) increase in operating income.

Interest Expense

Three Months Ended

February 29, February 28, 2020 2019 Amount Increase Amount Interest expense on loans $ 1,781 $ 382 $ 1,399 Interest expense related to hedging activity 596 494 102 Capitalized interest (687) (187) (500) Net interest expense $ 1,690 $ 689 $ 1,001

Six Months Ended

February 29, February 28, 2020 2019 Amount Increase Amount Interest expense on loans $ 3,046 $ 244 $ 2,802 Interest expense related to hedging activity 857 587 270 Less: Capitalized interest (1,351) (313) (1,038) Net interest expense $ 2,552 $ 518 $ 2,034

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Comparison of Three and Six Months Ended February 29, 2020 and February 28, 2019

Net interest expense reflects borrowings by PriceSmart, Inc. and our wholly owned foreign subsidiaries to finance new land acquisition and construction for new warehouse clubs, warehouse club expansions and distribution centers, the capital requirements of warehouse club and other operations and ongoing working capital requirements.

Net interest expense increased for the three and six month periods ended February 29, 2020 primarily due to higher average loan balances. Interest expense related to hedging activity increased due to an increase in hedging activity as we seek to mitigate our exposure to interest rate risk on our recently executed loan agreements to finance our anticipated warehouse club openings in fiscal year 2020 and 2021. A greater portion of our total interest was capitalized for the three and six month periods ended February 29, 2020 due to higher levels of construction activities during the period.

Other income (expense), net

Other income (expense), net consists of currency gains or losses, as well as net benefit costs related to our defined benefit plans and the one time settlement of a business combination escrow account.

Three Months Ended February 29, February 28, 2020 2019 Increase

‎from

Amount ‎prior year % Change Amount Other income (expense), net $ 723 $ 1,095 294.4 % $ (372)

Six Months Ended February 29, February 28, 2020 2019 Increase

‎from

Amount ‎prior year % Change Amount Other expense, net $ (262) $ 1,929 88.0 % $ (2,191)

Monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity (primarily U.S. dollars) are revalued to the functional currency using the exchange rate on the balance sheet date. These foreign exchange transaction gains (losses) are recorded as currency gains or losses. Additionally, gains or losses from transactions denominated in currencies other that the functional currency of the respective entity also generate currency gains or losses.

Comparison of Three and Six Months Ended February 29, 2020 and February 28, 2019

For the three and six months ended February 29, 2020 Other income (expense), net included $755,000 of net gain and $902,000 of net expense, respectively, associated with foreign currency transactions and the revaluation of monetary assets and liabilities. These gains and losses resulted from the revaluation of net U.S. dollar assets and liabilities in markets where the local functional currency revalued or devalued against the U.S. dollar, and from exchange transactions, net of any exchange reserve movements.

For the three-month period, the net gain is attributable primarily to foreign currency transactions. For the six months ended February 29, 2020, the primary driver for the net expense was $902,000 of net expense associated with foreign currency transactions, offset by a $705,000 gain resulting from the settlement of outstanding claims related to the acquisition of the business that we purchased in March of 2018.

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Provision for Income Taxes

Three Months Ended February 29, February 28, 2020 2019 Increase from Amount prior year Amount Provision for income taxes $ 12,702 $ 999 $ 11,703 Effective tax rate 33.1 % 32.9 %

Six Months Ended February 29, February 28, 2020 2019 Increase

‎ from

Amount ‎prior year Amount Provision for income taxes $ 22,105 $ 2,862 $ 19,243 Effective tax rate 32.7 % 33.3 %

Comparison of Three and Six Months Ended February 29, 2020 and February 28, 2019

For the three months ended February 29, 2020, the effective tax rate was 33.1%. The increase in the effective tax rate versus the prior year was primarily attributable to the following factors:

 A comparably unfavorable net impact of 3.6% in the current period resulting from the loss of benefit of foreign tax credits, which are no longer recoverable as a result of U.S. Tax Reform; and

 A comparably favorable impact of 2.7% resulting from changes in income tax liabilities for uncertain tax positions.

For the six months ended February 29, 2020, the effective tax rate was 32.7%. The decrease in the effective tax rate versus the prior year was primarily attributable to the following factors:

 A comparably unfavorable net impact of 3.3% in the current period resulting from the loss of benefit of foreign tax credits, which are no longer recoverable as a result of U.S. Tax Reform;

 The comparably favorable impact of 1.4% resulting from non-deductible separation costs, in the prior period, associated with the departure of our former CEO;

 A comparably favorable impact of 0.8% resulting from changes in income tax liabilities for uncertain tax positions; and

 The comparably favorable impact of 0.7% in the current period from the effect of changes in foreign currency value.

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Other Comprehensive Loss

Three Months Ended February 29, February 28, 2020 2019 (Decrease)

‎from

Amount ‎prior year % Change Amount Other comprehensive income (loss) $ (5,049) $ (9,401) 216.0 % $ 4,352

Six Months Ended February 29, February 28, 2020 2019 Increase from Amount prior year % Change Amount Other comprehensive loss $ (8,234) $ 660 (7.4) % $ (8,894)

Comparison of Three and Six Months Ended February 29, 2020 and February 28, 2019

Our other comprehensive loss of approximately $5.0 million for the second quarter of fiscal year 2020 resulted primarily from the comprehensive loss of approximately $3.4 million from foreign currency translation adjustments related to assets and liabilities and the translation of revenue, costs and expenses on the statements of income of our subsidiaries whose functional currency is not the U.S. dollar, with additional losses of approximately $1.7 million related to unrealized losses on changes in derivative obligations.

LIQUIDITY AND CAPITAL RESOURCES

Financial Position and Cash Flow

Our operations have historically supplied us with a significant source of liquidity. Our cash flows provided by operating activities, supplemented with our long-term debt and short-term borrowings, have generally been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations and to pay dividends on our common stock. We evaluate our funding requirements on a regular basis to cover any shortfall in our ability to generate sufficient cash from operations to meet our capital requirements. We may consider funding alternatives to provide additional liquidity when necessary. There is some uncertainty surrounding the potential impact of the novel coronavirus outbreak (COVID-19) on our results of operations and cash flows. As a result, we are proactively taking steps to increase cash available on-hand, including, but not limited to, drawing funds on our short-term facilities and delaying strategic capital expenditures. Refer to the Notes to Consolidated Financial Statements – Note 11 – Subsequent Events for additional information regarding our drawdown on our short-term facilities subsequent to the reporting period ended February 29, 2020. We also are considering and planning for additional cost savings measures in the U.S. and in the markets where we operate.

Repatriation of cash and cash equivalents held by foreign subsidiaries may require us to accrue and pay taxes. We have no plans at this time to repatriate cash through the payment of cash dividends by our foreign subsidiaries to our domestic operations and, therefore, have not accrued taxes that would be due from repatriation.

The following table summarizes the cash and cash equivalents, including restricted cash, held by our foreign subsidiaries and domestically (in thousands).

February 29, August 31, 2020 2019 Amounts held by foreign subsidiaries $ 134,101 $ 98,964 Amounts held domestically 2,668 7,272 Total cash and cash equivalents, including restricted cash $ 136,769 $ 106,236

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The following table summarizes the short-term investments held by our foreign subsidiaries and domestically (in thousands).

February 29, August 31, 2020 2019 Amounts held by foreign subsidiaries $ 30,448 $ 17,045 Amounts held domestically — — Total short-term investments $ 30,448 $ 17,045

As of February 29, 2020, certificates of deposits with a maturity of over a year held by our foreign subsidiaries and domestically were $1.5 million. There were no certificates of deposits with a maturity of over a year held by our foreign subsidiaries or domestically as of August 31, 2019.

From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products. Since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradeable currencies in Trinidad. We are working with our banks in Trinidad to source tradeable currencies. We expect the illiquid market conditions in Trinidad to continue. See Item 2 “Management’s Discussion & Analysis – Factors Affecting Our Business” for our quantitative analysis and discussion.

Our cash flows are summarized as follows (in thousands):

Six Months Ended February 29, February 28, Increase/ 2020 2019 (Decrease) Net cash provided by operating activities $ 89,065 $ 76,300 $ 12,765 Net cash (used in) investing activities (85,721) (53,817) (31,904) Net cash provided by (used in) financing activities 24,422 (19,833) 44,255 Effect of exchange rates 2,767 (1,487) 4,254 Net increase in cash and cash equivalents $ 30,533 $ 1,163 $ 29,370

Net cash provided by operating activities totaled $89.1 million and $76.3 million for the six months ended February 29, 2020 and February 28, 2019, respectively. Our cash flow provided by operations is primarily derived from net merchandise sales and membership fees. Cash flows used in operations generally consist of payments to our merchandise vendors, warehouse operating costs (including payroll, employee benefits and utilities), as well as payments for income taxes. The $12.8 million increase in net cash provided by operating activities was primarily due to an increase of net income of $6.9 million and a net increase of $5.2 million due to net working capital improvements. The $5.2 million net working capital improvement is the result of a $22.1 million reduction in merchandise inventory offset by $16.9 million more cash used in the payment of merchandise payables over the comparable six-months ended February 29, 2020 and February 28, 2019.

Net cash used in investing activities totaled $85.7 million and $53.8 million for the six months ended February 29, 2020 and February 28, 2019, respectively. Our cash used in investing activities is primarily for the construction of and improvements to our warehouse clubs. The $31.9 million increase in cash used in investing activities is primarily the result of a net $23.7 million increase in short-term and long-term certificate of deposit purchases and fewer settlements compared to the same six-month period a year-ago. We also had $8.2 million of additional construction expenditures made for our future warehouse club openings versus the same six-month period a year ago.

Net cash provided by financing activities totaled $24.4 million and net cash used in financing activities were $19.8 million for the six months ended February 29, 2020 and February 28, 2019, respectively. Our cash flows provided or used for financing activities are used primarily to fund our working capital needs and our warehouse club expansions and investments. The $44.3 million increase in cash provided by financing activities is primarily the result of a net increase of proceeds from long-term borrowings of $45.8 million compared to a year ago, as we did not have any additional long-term borrowings in fiscal year 2019. This cash provided by long-term borrowings was offset by a net $3.8 million change of cash used in the borrowing and repayment of short-term borrowings, compared to the same six-month period a year-ago.

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The following table summarizes the dividends declared and paid during fiscal year 2020 and 2019 (amounts are per share).

First Payment Second Payment Record Date Date Record Date Date

We anticipate the ongoing payment of semi-annual dividends in subsequent periods, although the actual declaration of future dividends, the amount of such dividends, and the establishment of record and payment dates is subject to final determination by the Board of Directors at its discretion after its review of the Company’s financial performance and anticipated capital requirements.

Short-Term Borrowings and Long-Term Debt

Our financing strategy is to ensure liquidity and access to capital markets while minimizing our borrowing costs. The proceeds of these borrowings were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, acquisitions, and repayment of existing debt. Please see Note 7 – Debt for further discussion.

Derivatives

Please see Note 8 – Derivative Instruments and Hedging Activities for further discussion.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have had, or are reasonably likely to have, a material current or future effect on its financial condition or consolidated financial statements.

Repurchase of Equity Securities and Reissuance of Treasury Shares

At the vesting dates for restricted stock awards to our employees, we repurchase a portion of the shares that have vested at the prior day's closing price per share and apply the proceeds to pay the employees' minimum statutory tax withholding requirements related to the vesting of restricted stock awards. The Company expects to continue this practice going forward. We do not currently have a stock repurchase program.

Shares of common stock repurchased by us are recorded at cost as treasury stock and result in the reduction of stockholders’ equity in our consolidated balance sheets. We may reissue these treasury shares in the future.

We have reissued treasury shares as part of our stock-based compensation programs. During the six months ended February 29, 2020 the Company reissued 94,000 treasury shares.

Critical Accounting Estimates

The preparation of our consolidated financial statements requires that management make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of our accounting policies require management to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Management continues to review its accounting policies and evaluate its estimates, including those related to business acquisitions, contingencies and litigation, income taxes, value added taxes, and long-lived assets. We base our estimates on historical experience and on other assumptions that management believes to be reasonable under the present circumstances. Using different estimates could have a material impact on our financial condition and results of operations.

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Income Taxes

For interim reporting, we estimate an annual effective tax rate (AETR) pursuant to ASC 740-279, to calculate income tax expense. Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income tax expense. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss).

We are required to file federal and state income tax returns in the United States and various other tax returns in foreign jurisdictions. The preparation of these tax returns requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax we pay. We, in consultation with our tax advisors, base our tax returns on interpretations that we believe to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various taxing authorities in the jurisdictions in which we file our tax returns. As part of these reviews, a taxing authority may disagree with respect to the interpretations we used to calculate our tax liability and, therefore, require us to pay additional taxes.

We accrue an amount for our estimate of probable additional income tax liability. In certain cases, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than 50% likelihood of being sustained. This requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. When facts and circumstances change, we reassess these probabilities and record any changes in the consolidated financial statements as appropriate. There were no material changes in our uncertain income tax positions as of February 29, 2020 and August 31, 2019.

Tax Receivables

We pay a Value Added Tax (“VAT”) or similar taxes (“input VAT”), income taxes, and other taxes within the normal course of our business in most of the countries in which we operate related to the procurement of merchandise and/or services we acquire and/or on sales and taxable income. We also collect VAT or similar taxes on behalf of the government (“output VAT”) for merchandise and/or services we sell. If the output VAT exceeds the input VAT, then the difference is remitted to the government, usually on a monthly basis. If the input VAT exceeds the output VAT, this creates a VAT receivable. In most countries where we operate, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a portion of sales processed via credit card directly to the government as advance payments of VAT and/or income tax. In the case of VAT, these procedures alter the natural offset of input and output VAT and generally leave us with a net VAT receivable, forcing us to process significant refund claims on a recurring basis. With respect to income taxes paid, if the estimated income taxes paid or withheld exceed the actual income tax due this creates an income tax receivable. We either request a refund of these tax receivables or apply the balance to expected future tax payments. These refund or offset processes can take anywhere from several months to several years to complete.

In most countries where the Company operates, there are defined and structured processes to recover VAT receivables via regular refunds or offsets. However, in one country without a clearly defined refund process, the Company is actively engaged with the local government to recover VAT receivables totaling $6.1 million and $5.1 million as of February 29, 2020 and August 31, 2019, respectively. In two other countries, minimum income tax rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $9.7 million and $7.8 million and deferred tax assets of $2.9 million and $2.7 million as of February 29, 2020 and August 31, 2019, respectively, in these countries. While the rules related to refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of these tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests.

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Our policy for classification and presentation of VAT receivables, income tax receivables and other tax receivables is as follows:

 Short-term VAT and Income tax receivables, recorded as Other current assets: This classification is used for any countries where our subsidiary has generally demonstrated the ability to recover the VAT or income tax receivable within one year. We also classify as short-term any approved refunds or credit notes to the extent that we expect to receive the refund or use the credit notes within one year.

 Long-term VAT and Income tax receivables, recorded as Other non-current assets: This classification is used for amounts not approved for refund or credit in countries where our subsidiary has not demonstrated the ability to obtain refunds within one year and/or for amounts which are subject to outstanding disputes. An allowance is provided against VAT and income tax receivable balances in dispute when we do not expect to eventually prevail in its recovery of such balances. We do not currently have any allowances provided against VAT and income tax receivables.

Long-lived Assets

We evaluate quarterly our long-lived assets for indicators of impairment. Indicators that an asset may be impaired are:

 the asset's inability to continue to generate income from operations and positive cash flow in future periods;  loss of legal ownership or title to the asset;  significant changes in its strategic business objectives and utilization of the asset(s); and  the impact of significant negative industry or economic trends.

Management's judgments are based on market and operational conditions at the time of the evaluation and can include management's best estimate of future business activity, which in turn drives estimates of future cash flows from these assets. These periodic evaluations could cause management to conclude that impairment factors exist, requiring an adjustment of these assets to their then-current fair market value. Loss/(gain) on disposal of assets recorded during the years reported resulted from improvements to operations and normal preventive maintenance.

Goodwill and Other Indefinite-Lived Intangibles

Goodwill and other indefinite-lived acquired intangible assets are not amortized, but are evaluated for impairment annually or whenever events or changes in circumstances indicate that the value of a certain asset may be impaired. Generally, this evaluation begins with a qualitative assessment to determine whether a quantitative impairment test is necessary. If we determine, after performing an assessment based on the qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, or that a fair value of the reporting unit substantially in excess of the carrying amount cannot be assured, then a quantitative impairment test would be performed. The quantitative test for impairment requires management to make judgments relating to future cash flows, growth rates and economic and market conditions. These evaluations are based on determining the fair value of a reporting unit or asset using a valuation method such as discounted cash flow or a relative, market-based approach. Historically, our reporting units and other indefinite-lived acquired intangible assets have generated sufficient returns to recover the cost of goodwill and other indefinite-lived acquired intangible assets. Because of the nature of the factors used in these tests, if different conditions occur in future periods, future operating results could be materially impacted. For approximately $45.4 million of certain acquired indefinite-lived intangible assets, the fair value approximated the carrying value; any deterioration in the fair value may result in an impairment charge.

Seasonality

Historically, our merchandising businesses have experienced holiday retail seasonality in their markets. In addition to seasonal fluctuations, our operating results fluctuate quarter-to-quarter as a result of economic and political events in markets that we serve, the timing of holidays, weather, the timing of shipments, product mix, and currency effects on the cost of U.S.-sourced products which may make these products more or less expensive in local currencies and therefore more or less affordable. Because of such fluctuations, the results of operations of any quarter are not indicative of the results that may be achieved for a full fiscal year or any future quarter. In addition, there can be no assurance that our future results will be consistent with past results or the projections of securities analysts.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to our operations result primarily from changes in interest rates and changes in currency exchange rates. As part of the adoption of the new leasing standard, we recorded several monetary liabilities on the consolidated balance sheet that are exposed to foreign exchange movements. These monetary liabilities arise from leases denominated in a currency that is not the functional currency of the Company’s local subsidiary. The monetary liability for these leases as of February 29, 2020 was $34.0 million. Due to the mix of foreign currency exchange rate fluctuations during the second quarter of fiscal year 2020, the impact to the interim consolidated statements of income and comprehensive income from these monetary liabilities was immaterial.

The following table discloses the net effect on other expense, net for U.S. dollar-denominated and other foreign-denominated accounts relative to hypothetical simultaneous currency devaluation based on balances as of February 29, 2020 (in thousands) including the new lease-related monetary liabilities described above:

Gains based on change in U.S. dollar denominated and other Overall weighted foreign denominated cash, cash Losses based on change in U.S. Losses based on change in U.S. negative currency equivalents and restricted cash dollar denominated inter- dollar denominated other movement balances company balances asset/liability balances Net loss(1) 5% $ 1,238 $ (1,063) $ (1,818) $ (1,643) 10% $ 2,476 $ (2,127) $ (3,637) $ (3,288) 20% $ 4,952 $ (4,254) $ (7,274) $ (6,576)

(1) Amounts are before consideration of income taxes.

Information about the financial impact of foreign currency exchange rate fluctuations for the three and six-month period ended February 29, 2020 is disclosed in Item 2 “Management’s Discussion and Analysis – Other Expense, net”.

Information about the change in the fair value of our hedges and the financial impact thereof for the three and six-month period ended February 29, 2020 is disclosed in the Notes to Consolidated Financial Statements – Note 8 – Derivative Instruments and Hedging Activities.

Information about the movements in currency exchange rates and the related impact on the translation of the balance sheets of our subsidiaries whose functional currency is not the U.S. dollar for the three and six-month period ended February 29, 2020 is disclosed in Item 2 “Management’s Discussion and Analysis – Other Comprehensive Loss”.

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ITEM 4. CONTROLS AND PROCEDURES

Limitations on Effectiveness of Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the timelines specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decision regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, we have investments in certain unconsolidated entities. Because we do not control or manage those entities, our control procedures with respect to those entities were substantially more limited than those we maintain with respect to our consolidated subsidiaries.

Evaluation of Disclosure Controls and Procedures

As required by SEC Rules 13a-15(e) or 15d-15(e), we carried out an evaluation as of the end of the period covered by this Quarterly Report on Form 10- Q, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

In the ordinary course of business, we review our system of internal control over financial reporting and make changes to our systems and processes to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems and automating manual processes. There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibit 31.1 and 31.2 to this report.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are often involved in claims arising in the ordinary course of business seeking monetary damages and other relief. Based upon information currently available to us, none of these claims is expected to have a material adverse effect on our business, financial condition or results of operations.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended August 31, 2019. Other than the risk factors set forth below, there have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2019.

External Factors that Could Adversely Affect Us

Our operations could be adversely affected by the recent outbreak of the novel coronavirus (COVID-19).

Public health epidemics or outbreaks could adversely impact our business. In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to several other countries and infections have been reported globally. The extent to which the coronavirus impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. While the impact on the Company’s business is unknown at this time and difficult to predict, nearly all aspects of the Company’s business could be adversely affected.

Our business depends heavily on the uninterrupted operation of our distribution facilities located in Miami, Florida and San Jose, Costa Rica, our warehouse clubs located in Colombia, Central America and the Caribbean, and our headquarters and buying operations in San Diego, California. The operation of all of our facilities is critically dependent on our employees who staff these locations, and the coronavirus could directly threaten the health of our employees. In addition, governments in many of the countries in which we operate have imposed or are experimenting with policies and restrictions affecting the retail sectors of our markets. Many of these policies and restrictions have resulted in limiting access for our members and have adversely impacted our club operations, including temporary club closures, limits on the number of days during the week and hours per day our clubs can be open, restrictions on segments of the population permitted to shop on particular days, and limits on the number of people that can be in a club. Additionally, in an effort to improve social distancing, we have temporarily switched substantially all of our work force at our San Diego headquarters, our management and administrative personnel in Miami, and office support personnel in the countries where we operate to remote work. Finally, we may seek alternative distribution channels in the case of closure of one or more of our distribution facilities. Events such as these complicate and/or threaten the way we execute and the performance of our business and could have a material adverse effect or our business and operating results.

In addition, as a result of COVID-19 and the measures designed to contain the spread of the virus in China and elsewhere, we have faced and may continue to face delays or difficulty sourcing products, which could negatively affect our business and financial results. Certain of our suppliers have had their manufacturing operations disrupted by the coronavirus outbreak, and even where goods have been completed, they have been subject to weeks-long shipping delays. If our third-party suppliers’ operations continue to be curtailed, or transportation systems continue to be disrupted, we may need to seek alternate sources of supply, which may be more expensive. The duration of the production and supply chain disruption, and related financial impact, cannot be estimated at this time. Should the production and distribution closures continue for an extended period of time, the impact on our supply chain in China and globally could have a material adverse effect on our results of operations and cash flows.

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Negative economic conditions created or exacerbated by the recent outbreak of the novel coronavirus (COVID-19) could adversely impact our business in various respects.

A slowdown in the economies of one or more of the countries in which we operate or adverse changes in economic conditions affecting discretionary consumer spending could adversely affect consumer demand for the products we sell, change the mix of products we sell to a mix with a lower average gross margin, cause a slowdown in discretionary purchases of goods, adversely affect our net sales and result in slower inventory turnover and greater markdowns of inventory, or otherwise materially adversely affect our operating results. Any prolonged outbreak of the coronavirus could result in the imposition of quarantines or closures of retailer locations, office spaces, manufacturing facilities, travel and transportation restrictions and/or import and export restrictions, any of which could contribute to a general slowdown in the global economy and the economies of the markets in which we operate. A significant decline in the economies of the countries in which our warehouse clubs are located may lead to decreased sales and profitability, increased governmental ownership or regulation of the economy, higher interest rates and increased barriers to entry such as higher tariffs and taxes. The economic factors that affect our operations also may adversely affect the operations of our suppliers, which can result in an increase in the cost to us of the goods we sell to our customers or, in more extreme cases, in certain suppliers not producing goods in the volume typically available for sale to us.

Employment laws and regulations in the countries in which we operate may limit our ability to effect a reduction in force to reduce our labor expenses in line with declining revenues. In some of the countries in which we operate, before we could effect a reduction in force, we would need to negotiate with labor unions, demonstrate evidence of hardship or force majeure or obtain prior government approval, which may not be given in a timely manner or at all.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) None.

(b) None.

Upon vesting of restricted stock awarded by the Company to employees, the Company repurchases shares and withholds the amount of the repurchase payment to cover employees’ tax withholding obligations. As set forth in the table below, during the quarter ended February 29, 2020, the Company repurchased 14,468 shares in the indicated months. These were the only repurchases of equity securities made by the Company during the second quarter of fiscal year 2020. The Company does not have a stock repurchase program.

‎Total Number ‎Maximum

‎of Shares ‎Number of

‎Purchased ‎Shares That

‎as Part of ‎May Yet Be

(a) ‎Publicly ‎Purchased

‎Total Number (b) ‎Announced ‎Under the

‎of Shares ‎Average Price ‎Plans or ‎Plans or

Period ‎Purchased ‎Paid Per Share ‎Programs ‎Programs December 1, 2019 - December 31, 2019 — $ — — N/A January 1, 2020 - January 31, 2020 14,468 $ 63.59 — N/A February 1, 2020 - February 29, 2020 — $ — — N/A Total 14,468 $ 63.59 — —

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

Table of Contents

ITEM 6. EXHIBITS

(a) Exhibits:

3.1(1) Amended and Restated Certificate of Incorporation of the Company. 3.2(2) Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company. 3.3(3) Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company. 3.4(4) Amended and Restated Bylaws of the Company. 10.1(5)* Employment Agreement dated December 10, 2019, between Michael McCleary and the Company. 10.2 Credit Agreement between PriceSmart Colombia S.A.S. and Citibank, N.A., dated December 2, 2019. 10.3 Credit Agreement between PriceSmart Colombia S.A.S. and Citibank, N.A. dated November 25, 2019. 10.4 Loan Agreement between PriceSmart Guatemala, Sociedad Anonima and Banco Industrial, Sociedad Anonima, dated November 20, 2019. 31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2** Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* Identifies management contract or compensatory plan or arrangement.

** These certifications are being furnished solely to accompany this Report pursuant to 18 U.S.C. 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of PriceSmart, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

(1) Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 1997 filed with the Commission on November 26, 1997. (2) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2004 filed with the Commission on April 14, 2004. (3) Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2004 filed with the Commission on November 24, 2004. (4) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on July 17, 2015. (5) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 10, 2019.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PRICESMART, INC.

Date: April 8, 2020 By: /s/ SHERRY S. BAHRAMBEYGUI Sherry S. Bahrambeygui Chief Executive Officer (Principal Executive Officer)

Date: April 8, 2020 By: /s/ MICHAEL L. MCCLEARY Michael L. McCleary Executive Vice President and Chief Financial Officer Principal Financial Officer and Principal Accounting Officer

64 Exhibit 10.2

U.S.$7,875,000.00

CREDIT AGREEMENT

Dated as of December 02, 2019

Between

PRICESMART COLOMBIA S.A.S

as Borrower

and

CITIBANK, N.A., acting through its international banking facility as Lender

Table of Contents

Page

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.0 I. Cetiain Defined Terms I SECTION 1.02. Computation of Time Periods 12 SECTION 1.03. Accounting Terms 12 SECTION 1.04. Tertns Generally 12 SECTION 1.05. Currency Equivalents Generally 12

ARTICLE II AMOUNTS AND TERMS OF THE ADVANCE

SECTION 2.01. The Advance 13 SECTION 2.02. Making the Advance 13 SECTION 2.03. Termination or Reduction of the Commitments 13 SECTION 2.04. Repay1nent 13 SECTION 2.05. Interest 14 SECTION 2.06. Interest Rate Determination 14 SECTION 2.07. Prepayments 15 SECTION 2.08. Increased Costs and Increased Capital 15 SECTION 2.9. Illegality 16 SECTION 2.10. Payments and Computations 16 SECTION 2.11. Taxes 17 SECTION 2.12. Mitigation Obligations 18 SECTION 2.13. Use of Proceeds 18 SECTION 2.14. Notes 18

ARTICLE III

CONDITIONS TO EFFECTIVENESS AND LENDING

SECTION19 3.01. Conditions Precedent to Effectiveness of Section 2.01 19 SECTION 3.02. Conditions Precedent to the Borrowing 20

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.01. Representations and Warranties of the Borrower 21

ii Page ARTICLE V

COVENANTS OF THE BORROWER

SECTION19 5.01. Affirmative Covenants 25 SECTION 5.02. Negative Covenants 27

ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.01. Events of Default 29

ARTICLE VII

MISCELLANEOUS

SECTION19 7.01. Amendments, Etc 31 SECTION 7.02. Notices, Etc 31 SECTION 7.03. No Waiver; Remedies 32 SECTION 7.04. Costs and Expenses; Indemnification 32 SECTION 7.05. Right of Set-off 33 SECTION 7.06. Binding Effect 34 SECTION 7.06. Assignments and Participations 34 SECTION 7.08. Governing Law 36 SECTION 7.09. Execution in Counterparts 36 SECTION 7.10. Jurisdiction; Waiver of Immunities 36 SECTION 7.11. Judgment Currency 37 SECTION 7.12. Confidentiality 37 SECTION 7.13. Patriot Act Notice 38 SECTION 7.14. Acknowledgement and Consent to Bail-In of EEA Financial Institutions 38 SECTION 7.15. Waiver of Jury Trial 39 SECTION 7.16. Severability 39 SECTION 7.17. Acknowledgements of the Borrower 39

Schedules

Schedule I - Commitments Schedule 4.0l(z) 5.02(a)-Existing Liens Schedule 4.0l(aa) - Existing Debt

Exhibits

Exhibit A-1 - Form of New York Law Promissory Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Assignment and Acceptance

CREDIT AGREEMENT

Dated as of December 02, 2019

PRICESMART COLOMBIA S.A.S., a Simplified Stock Corporation (Sociedad por Acciones Simplificada,) organized and existing under the laws of the Republic of Colombia (the "Local Country") (the "Borrower") and Citibank, N.A. ("Citibank"), acting through its international banking facility, as Lender (as hereinafter defined), agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

"Advance" means an advance by the Lender to the Borrower pursuant to Article II

"Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 5% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise.

"Agreement" means this Credit Agreement, as modified, supplemented, amended, restated (including any amendment and restatement hereof), extended or renewed from time to time.

"Agreement Value" means, for each Hedge Agreement, on any date of determination, an amount determined by the Lender equal to the amount, if any, that would be payable by the Borrower or any of its Subsidiaries to its counterparty to such Hedge Agreement in accordance with its terms as if (i) such Hedge Agreement was being terminated early on such date of determination, (ii) the Borrower or such Subsidiary was the sole "affected party" and (iii) the Lender was the sole party determining such payment amount.

"Anti-Corruption Laws" means all laws, rules, regulations and requirements of any jurisdiction (including the U.S., the Local Country and The Republic of Colombia), in each case, as amended from time to time, concerning or relating to bribery or corruption, including, without limitation, the FCPA, the U.K. Bribery Act of 2010 and any conduct that falls within the scope of Laws 1474 of 2011 and 1778 of 2016 and Decree 124 of 2016 of Colombia (Colombian Anticorruption Statute) and all other applicable anti bribery and corruption laws. "Applicable Accounting Rules" has the meaning specified in Section 1.03.

"Applicable Law" means, with respect to any Person, collectively, all international , foreign, federal, national state, provincial and local laws, statutes, treaties, rules, guidelines, regulations, orders, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all administrative orders,

directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case applicable to such Person.

"Applicable Margin" means 2.45% per annum with respect to an Advance bearing interest at the Eurodollar Rate.

"Approved Fund" means any Fund that is administered or managed by (i) the Lender, (ii) an Affiliate of the Lender or (iii) an entity or an Affiliate of an entity that administers or manages the Lender.

"Asset Sale" means any sale, conveyance, lease, assignment, transfer, licensing or other disposition of, or the grant of any option or other right to purchase, lease or otherwise acquire, any property, business or assets of the Borrower other than those sale of current assets sales in the ordinary course of its business.

"Assignee" has the meaning specified in Section 7.06(a).

"Assignment and Acceptance" means an assignment and acceptance entered into by the Lender and an Assignee of the Lender in substantially the form of Exhibit C hereto.

"Assignor" has the meaning specified in Section 7.06(a).

"Bail-In Action" means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

"Bail-In Legislation" means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

"Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of:

(a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate;

(b) 1/2 of one percent per annum above the Federal Funds Rate; and

(c) the Eurodollar Rate plus 1.00%; provided that, notwithstanding anything herein to the contrary, the Base Rate shall at no time be less than 1.00% per annum.

"Base Rate Advance" means an Advance that bears interest at the Base Rate.

"Borrowing" means a borrowing consisting of an Advance made by the Lender.

"Business Day" means a day of the year on which banks are not required or authorized by law to close in New York City and the Local Country and, if the applicable Business Day relates to an Interest Period or determination of the Eurodollar Rate, on which dealings are carr ied on in the London, England interbank market.

"Capitalized Leases" means all leases that have been or should be, in accordance with Applicable Accounting Rules, recorded as capitalized leases.

"Change in Law" means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith, (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel C01mnittee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulat01y authorities, in each case pursuant to Basel III and (z) the CRD IV and any law or regulation which implements CRD IV in any jurisdiction, shall in each case be deemed to be a "Change in Law'\ regardless of the date enacted, adopted or issued.

"Change of Control" means any of the following: (a) the Equity Investors shall cease to own directly or indirectly 51% of the Voting Stock in the Borrower or shall cease to have the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Borrower; or (b) any Person or two or more Persons acting in concert other than the Equity Investors shall have acquired beneficial ownership (within the meaning of Rule 13d of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of the Borrower (or other securities convertible into such Voting Stock) representing 51% or more of the combined voting power of all Voting Stock of the Borrower; or (c) any Person or two or more Persons acting in concert other than the Equity Investors shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Borrower, or control over Voting Stock of the Borrower (or other securities convertible into such Voting Stock) representing 50% or more of the combined voting power of all Voting Stock of the Borrower.

"Citigroup" means Citigroup, Inc. and each subsidiary and affiliate thereof (including, without limitation, Citibank, N.A. and each of its branches wherever located) and Banco Nacional de Mexico, S.A., integrante del Grupo Financiero Citibanamex and each subsidiary and affiliate thereofand Banco de Chile and each subsidiary and affiliate thereof.

"Colombian Central Bank" means the Central Bank of Colombia (Banco de la Repi1blica de Colombia) or any other Governmental Authority charged with the responsibility of issuing, managing and controlling legal currency in Colombia and determining foreign exchange policy."Code" means the Internal Revenue Code of 1986 of the United States of America.

"Commitment" has the meaning specified in Section 2.01.

"Confidential Information" means information relating to the Borrower or any of its Subsidiaries or any of their respective businesses that the Borrower or any of its Subsidiaries furnishes to the Lender, other than any such information that is or becomes generally available to the public or that is or becomes available to the Lender on a non-confidential basis prior to disclosure by the Borrower or any of its Subsidiaries; provided that, in the case of information

received from the Borrower or any of its Subsidiaries after the date hereof, such information is clearly identified at the time of delivery as confidential.

"Connection Income Taxes" means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

"Consolidated' refers to the consolidation of accounts in accordance with Applicable Accounting Rules.

"Constituent Documents" means with respect to any Person (i) if such other Person is a corporation, its estatutos or certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to such Person's jurisdiction of organization), (ii) if such other Person is a limited liability company, the certificate of formation or articles of formation or organization and operating agreement, and (iii) if such other Person is a partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable governmental authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such Person.

"CRD IV'' means (a) Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 and (b) Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC.

"Debt" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue by more than 60 days incurred in the ordinary course of such Person's business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under Capitalized Leases, (f) all obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit or similar extensions of credit, (g) all obligations of such Person in respect of Hedge Agreements (which with respect to each Hedge Agreement shall be deemed to be equal to the Agreement Value of each such Hedge Agreement), (h) all Debt of others refe1Ted to in clauses (a) through (g) above or clause (i) below and other payment obligations (collectively, "Guaranteed Debt") guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (I) to pay or purchase such Guaranteed Debt or to advance or supply funds for the payment or purchase of such Guaranteed Debt, (2) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Guaranteed Debt or to assure the holder of such Guaranteed Debt against loss, (3) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (4) otherwise to assure a creditor against loss, and (i) all Debt referred to in clauses (a) through (h) above (including Guaranteed Debt) secured by (or for which the holder of

such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt.

"Debtor Relief Laws" means the Bankruptcy Code of the United States of America, Law 1116 of 2006 as amended and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the U.S., any state or territory thereof, the District of Columbia, the Local Country or any other applicable jurisdictions..

"Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

"EEA Financial Institution" means (a) any credit institution or investment finn established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clause (a) or (b) of this definition and is subject to consolidated supervision with its parent;

"EEA Member Country" means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

"EEA Resolution Authority" means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

"Effective Date" has the meaning specified in Section 3.01.

"Equity Interests" means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

"Equity Investors" means Pricesmart Inc, its affiliates to the extend any such affiliate is controlled by Pricesmart Inc For purposes of this definition, "control" of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether by ownership of Equity Interests, contract or otherwise.

"EU Bail-In Legislation Schedule" means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

"Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D.

"Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate Advance, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upward to the nearest whole multiple of 1/16 of 1% per annum) appearing on Reuters Screen LIBOR01 Page (or any successor page) as the London interbank offered rate for deposits in U.S. Dollars at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. If the Reuters Screen LIBORO1 Page (or any successor page) is unavailable, the Eurodollar Rate for any Interest Period for each Eurodollar Rate Advance shall be as reasonably determined by the Lender, subject, however, to the provisions of Section 2.07. If the Lender determines, in its sole discretion, that the Eurodollar Rate cannot be determined pursuant to this definition, the term "Eurodollar Rate" shall refer to a comparable successor rate, as agreed to between the Borrower and the Lender. Notwithstanding anything herein to the contrary, the Eurodollar Rate shall at no time be less than 0.00% per annum.

"Eurodollar Rate Advance" means an Advance that bears interest at the Eurodollar Rate.

"Eurodollar Rate Reserve Percentage" for any Interest Period means the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the U.S. Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the U.S. Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on the Eurodollar Rate Advance is determined) having a term equal to such Interest Period.

"Events of Default" has the meaning specified in Section 6.01.

"Excluded Taxes" means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) any U.S. federal withholding Taxes imposed under FATCA, (c) Taxes attributable to such Recipient's failure to comply with Section 2.12(t) and (d) The Republic of Colombia withholding Taxes at a rate in excess of the greater of (i) lowest applicable withholding tax rate in The Republic of Colombia or (ii) if any Republic of Colombia withholding Tax is imposed at a rate higher than the rate stated in (i) as a result of a Change in Law, such higher rate..

"Existing Debt" has the meaning specified in Section 5.02(b)(i)(F).

"Existing Liens" means the Liens existing on the Effective Date and described on Schedule 4.0l(z) 5.02(a) hereto.

interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code.

"FCPA" means the U.S. Foreign Corrupt Practices Act of l 977, as amended from time to time.

"Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Lender from three Federal funds brokers of recognized standing selected by it in its sole discretion.

"Fund” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course of its activities.

"Governmental Authority" means any nation or government, any state, province, city, municipal entity or other political subdivision thereof, and any governmental, executive, legislative, judicial, administrative or regulatory agency, department, authority, instrumentality, commission, board, bureau, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, whether federal, state, provincial, territorial, local or foreign, including any supra-national bodies, such as the European Union or the European Central Bank, and any public international organizations, such as the World Bank and the IMF.

"Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos- containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

"Hedge Agreements" means any of the following: (i) a rate swap transaction, swap option, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option, credit protection transaction, credit swap, credit default swap, credit default option, total return swap, credit spread transaction, repurchase transaction, reverse repurchase transaction, buy/sell- back transaction, securities lending transaction, weather index transaction or forward purchase or sale of a security, commodity or other financial instrument or interest (including any option with respect to any of

these transactions) or (ii) a transaction which is a type of transaction that is similar to any transaction referred to in clause (i) above that is currently, or in the future becomes, recurrently entered into in the financial markets (including terms and conditions incorporated by reference in such agreement) and which is a forward, swap, future, option or other derivative on one or more rates, currencies, commodities, equity securities or other equity instruments, debt securities or other debt instruments, economic indices or measures of economic risk or value, or other benchmarks against which payments or deliveries are to be made.

"Indemnified Taxes" means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.

"Interest Period” means the period commencing on the date of any Advance and ending on the corresponding date of the third month thereafter and, thereafter, each subsequent third month period commencing on the last day of the immediately preceding Interest Period; provided, however, that:

(i) if a scheduled repayment of principal would otherwise occur during an Interest Period, such Interest Period shall end on the date of such scheduled repayment;

(ii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the immediately preceding Business Day; and

(iii) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. "Internal Revenue Code" means Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto.

"Lender" means Citibank or any Person that shall become a party hereto pursuant to Section 7.06, for so long as Citibank or such Person shall be a party to this Agreement.

"Lending Office" means, with respect to the initial Lender, the office of the initial Lender specified as its "Lending Office" opposite its name on the signature pages below, and with respect to any other Lender, the office of such Lender specified as its "Lending Office" in the Assignment and Acceptance pursuant to which such Lender became a Lender, or such other office of the Lender as the Lender may from time to time specify to the Borrower. "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property.

"Loan Documents" means (a) this Agreement, and (b) each Note, in each case as amended from time to time.

"Material Adverse Change" means any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole.

"Material Adverse Effect" means a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower or any other Person to consummate the transactions contemplated hereby to occur on the date of the disbursement of any Advance hereunder; (c) the rights and remedies of the Lender under any Loan Document or (d) the ability of the Borrower to perform its obligations under any Loan Document to which it is a party.

"Maturity Date" means December 03, 2024.

"Net Cash Proceeds" means, with respect to any Asset Sale by the Borrower or any of its Subsidiaries, the excess, if any, of (a) cash proceeds received in connection with such transaction (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when received), including insurance proceeds (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings) and awards of compensation received with respect to the destruction or condemnation of all or part of such property over (b) the sum of (i) the principal amount of any Debt that is secured by the applicable asset and that is required to be repaid in connection with such transaction (other than Debt under the Loan Documents), (ii) the reasonable and customary out-of-pocket expenses incurred by the Borrower or such Subsidiary in connection with such transaction and (iii) taxes paid or payable as a result of such Asset Sale (after taking into account any available tax credit or deductions and any tax sharing arrangements, as determined by the management of the Borrower acting in good faith); provided that, if the amount of any estimated taxes pursuant to subclause (iii) above exceeds the amount of taxes actually required to be paid in cash in respect of such Asset Sale, the aggregate amount of such excess shall constitute Net Cash Proceeds.

"Note" means a promissory note of the Borrower payable to the Lender, in substantially the form of Exhibit A hereto, evidencing the indebtedness of the Borrower to such Lender resulting from an Advance made by the Lender

"Notice of Borrowing" has the meaning specified in Section 2.02(a).

"OFAC' means the Office of Foreign Assets Control of the U.S. Department of the Treasury.

"Other Connection Taxes" means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Advance or Loan Document).

"Other Taxes" means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are

Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.13).

"Participant" has the meaning specified in Section 7.06(d).

"Participant Register" has the meaning specified in Section 7.06(d).

"Patriot Act' means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Te1rnrism Act of 2001, Pub. L. 107-56, signed into law October 26, 2001, as amended from time to time.

"Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.0l(b) hereof; (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 30 days; (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations; and (d) easements, rights of way and other encumbrances on title to real prope1iy that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use of such property for its present purposes.

"Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof, or any other entity.

"Process Agent" has the meaning specified in Section 7.10(b).

"Recipient" means the Lender.

"Regulation D" means Regulation D of the Board of Governors of the U.S. Federal Reserve System, as in effect from time to time.

"Related Parties" means, with respect to any Person, such Person's Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person's Affiliates.

"Risk Transfer" has the meaning specified in Section 7.06(e).

"Sanctioned Jurisdiction" means, at any time, a country or territory that is, or whose government is, the subject of Sanctions.

"Sanctioned Person" means, at any time, (a) any Person listed in any Sanctions-related list maintained by any Sanctions Authority, (b) any Person located, organized, or resident in a Sanctioned Jurisdiction, or (c) any other subject of Sanctions, including, without limitation, any Person controlled or 50 percent or more owned in the aggregate, directly or indirectly, by, or acting on behalf of, or at the direction of, any such Person or Persons described in the foregoing clauses (a) or (b).

"Sanctions" means economic, trade, or financial sanctions, requirements, or embargoes imposed, administered, or enforced from time to time by any Sanctions Authority.

"Sanctions Authority" means the United States (including, without limitation, OFAC and the U.S. Department of State), the United Kingdom (including, without limitation, Her Majesty's Treasury), the European Union and any EU member state, the United Nations Security Council, and any other relevant sanctions authority.

"Solvent" means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature, and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

"Taxes" means all present or future taxes, levies, imposts, duties, deductions, withholdings (including, without limitation, backup withholding and value-added tax), assessments, fees or other charges imposed by any Governmental Authority, irrespective of the manner in which they are collected or assessed, including any interest, additions to tax or penalties applicable thereto.

"Termination Date" means the earlier of December 03, 2019 and the date of terminatio n of the Commitment pursuant to Section 6.01.

"United States" or "U.S." means the United States of America.

"U.S. Dollars", "U.S. $"and"$" mean the lawful currency of the United States.

"Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

"Withholding Agent" means the Borrower and the Lender.

"Write-Down and Conversion Powers" means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to

time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

SECTION 1.02. Computation of Time Periods. In this Agreement and the other Loan Documents, unless otherwise specified herein or in such other Loan Document, in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including," the words "to" and "until" each mean "to but excluding" and the word "through" means "to and including."

SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with consistent with those applied in the preparation of the financial statements refeITed to in Section 4.01(e) ("Applicable Accounting Rules"); provided that (a) if there is any change in Applicable Accounting Rules from such principles applied in the preparation of the financial statements refeITed to in Section 4.01(e), the Borrower shall give prompt notice of such change to the Lender, (b) if the Borrower notifies the Lender that the Borrower requests an amendment of any provision hereof to eliminate the effect of any change in Applicable Accounting Rules (or the application thereof) (or if the Lender requests an amendment of any provision hereof for such purpose), regardless of whether such notice is given before or after such change in Applicable Accounting Rules (or the application thereof), then such provision shall be applied on the basis of Applicable Accounting Rules as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision is amended in accordance herewith.

SECTION 1.04. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The word "will" shall be construed to have the same meaning and effect as the word "shall." Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein," "hereof' and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (f) the words "asset' and ''property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

SECTION 1.05. Currency Equivalents Generally. Any amount specified in this Agreement (other than in Articles II and V) or any of the other Loan Documents to be in U.S. Dollars shall also include the equivalent of such amount in any currency other than U.S. Dollars, such equivalent amount to be determined at the rate of exchange quoted by Citibank, N.A. in New York, New York at the close of business on the Business Day immediately preceding any date of determination thereof, to prime banks in New York, New York for the spot purchase in the New York foreign exchange market of such amount in U.S. Dollars with such other currency.

ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCE

SECTION 2.01. The Advance. The Lender agrees, on the terms and conditions hereinafter set forth, to make a single advance ( an "Advance") to the Borrower on any Business Day during the period from the Effective Date until the Termination Date in an amount not to exceed U.S. $7,875,000.00 (the Lender's "Commitment"). Amounts borrowed under this Section 2.01 and repaid or prepaid may not be reborrowed.

SECTION 2.02. Making the Advance. (a) The Borrowing shall be made on notice, given not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Borrowing, by the Borrower to the Lender. The notice of borrowing (a "Notice of Borrowing") shall be by telephone, confirmed immediately in writing, or telecopier or electronic communication, in substantially the form of Exhibit B hereto, specifying therein the requested date of such Borrowing. Upon fulfillment of the applicable conditions set forth in A1ticle III, the Lender will make the funds available to the Borrower at the bank account specified on the Notice of Borrowing. The Lender may make the Advance through its Affiliates.

(b) The Notice of Borrowing shall be irrevocable and binding on the Borrower. The Borrower shall indemnify the Lender against any loss, cost or expense incurred by the Lender as a result of any failure to fulfill on or before the date specified in the Notice of Borrowing the applicable conditions set forth in Article III, including, , cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Lender to fund the Advance when such Advance, as a result of such failure, is not made on such date.

SECTION 2.03. Termination or Reduction of the Commitments.

(a) Mandatory.

(i) The Lender's Commitment shall be automatically and permanently terminated on the Termination Date.

(ii) If (x) the B01rnwer shall fail to perform or observe any term, covenant or agreement contained in Section 5.0l(a)(ii) or 5.02 G)(ii), or (y) any representation or warranty made by the B01rnwer (or any of its officers) in Section 4.0l(w), (x) or (y) shall prove to have been incorrect in any material respect when made or deemed made; then, in each case, the Lender may elect thereafter in its sole discretion, to terminate its Commitment upon the giving of written notice thereof to the Borrower, and upon delivery of such notice, the Borrower shall within five (5) Business Days, prepay the full the outstanding principal amount of the Advance then outstanding, together with any other amounts payable under the Loan Documents, together with accrued interest to the date of such prepayment on the principal amount prepaid.

SECTION 2.04. Repayment. The Borrower shall repay to the Lender the aggregate principal amount of the Advance on the following dates in the amounts indicated below; provided, however, that the Borrower shall in any case repay to the Lender on the Maturity Date an amount sufficient to repay the outstanding principal amount of the Advance then outstanding:

Period Date Payment Notional 0 3-0ec-19 $ - $ 7,875,000.00 1 3-Mar-20 $ 207,237 $ 7,667,763.00 2 3-Jun-20 $ 207,237 $ 7,460,526.00 3 3-Sep-20 $ 207,237 $ 7,253,289.00 4 3-0ec-20 $ 207,237 $ 7,046,052.00 5 3-Mar-21 $ 207,237 $ 6,838,815.00 6 3-Jun-21 $ 207,237 $ 6,631,578.00 7 3-Sep-21 $ 207,237 $ 6,424,341.00 8 3-0ec-21 $ 207,237 $ 6,217,104.00 9 3-Mar-22 $ 207,237 $ 6,009,867.00 10 3-Jun-22 $ 207,237 $ 5,802,630.00 11 6-Sep-22 $ 207,237 $ 5,595,393.00 12 5-0ec-22 $ 207,237 $ 5,388,156.00 13 3-Mar-23 $ 207,237 $ 5,180,919.00 14 5-Jun-23 $ 207,237 $ 4,973,682.00 15 5-Sep-23 $ 207,237 $ 4,766,445.00 16 4-0ec-23 $ 207,237 $ 4,559,208.00 17 4-Mar-24 $ 207,237 $ 4,351,971.00 18 4-Jun-24 $ 207,237 $ 4,144,734.00 19 3-Sep-24 $ 207,237 $ 3,937,497.00 20 3-0ec-24 $3,937,497 $ -

SECTION 2.05. Interest. (a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of the Advance owing to the Lender from the date of such Advance until such principal amount shall be paid in full, at a rate per annum equal at all times during each Interest Period to the sum of (x) the Eurodollar Rate for such Interest Period plus (y) the Applicable Margin, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Advance shall be paid in full.

(b) Default Interest. If any principal amount or interest on the outstanding amount of the Advance is not paid when due , the Lender may require the Borrower to pay interest ("Default Interest") on (i) the unpaid principal amount of the Advance owing to the Lender, payable in arrears on the dates referred to in clause (a) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable under this Agreement or any other Loan Document that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on the Advance pursuant to clause (a) above; provided, however, that following acceleration of the Advance pursuant to Section 6.01, Default Interest shall accrue and be payable hereunder whether or not previously required by the Lender.

SECTION 2.06. Interest Rate Determination. (a) If, on or prior to the first day of the Interest Period:

1. the Lender determines (which determination shall be conclusive and binding on the Borrower absent manifest error) that, by reason of circumstances affecting the London interbank Eurodollar market, the Eurodollar Rate cannot be determined pursuant to the definition thereof, or

ii. the Lender determines that for any reason in connection with any request for a Eurodollar Rate Advance or a continuation thereof that Dollar deposits are not being offered to banks in the London interbank Eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Advance 1,or (B) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Advance does not adequately and fairly reflect the cost to such Lender of funding such Advance,

the Lender will promptly so notify the Borrower. Thereafter, the obligation of the Lender to make or maintain Eurodollar Rate Advances shall be suspended until the Lender revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a borrowing of, or continuation of Eurodollar Rate Advances.

(b) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advance in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Borrower will be deemed to have elected an Interest Period with a duration equal to the Interest Period then ending.

SECTION 2.07. Prepayments. (a) Optional. The Borrower may, upon at least five Business Days' irrevocable notice to the Lender stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding principal amount of the Advance in whole or in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of at least U.S. $500.000,00 or an integral multiple of U.S. $100.000,00 in excess thereof, (y) each prepayment of the Advance shall be applied in direct order of maturity to the remaining scheduled installments of principal and (z) the Borrower shall be obligated to reimburse the Lender in respect thereof pursuant to section 7.04 (c). SECTION 2.08. Increased Costs and Increased Capital. (a) Increased Costs Generally. If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, the Lender (except any reserve requirement reflected in the Eurodollar Rate);

(ii) subject the Lender to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) or (c) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

requirements, has or would have the effect of reducing the rate of return on the Lender's capital or on the capital of the Lender's holding company, if any, as a consequence of this Agreement, or the Commitment of the Lender or the Advance made by the Lender to a level below that which the Lender or the Lender's holding company could have achieved but for such Change in Law (taking into consideration the Lender's policies and the policies of the Lender's holding company with respect to capital adequacy), then the Borrower will from time to time, upon request by the Lender, pay to the Lender such additional amount or amounts as will compensate the Lender or the Lender's holding company for any such reduction suffered.

(b) Certificates for Reimbursement. A certificate of the Lender setting forth the amount or amounts necessary to compensate the Lender or its holding company as specified in paragraph (a) of this Section and delivered to the Borrower, shall be conclusive and binding for all purposes, absent manifest error; provided however that if the Lender receives any amount exceeding the necessary amount to compensate the Lender, such amount in excess shall be returned to the Borrower within three (3) Business Days. The Borrower shall pay the Lender the amount shown as due on any such certificate within ten (10) Business Days after receipt thereof.

(c) Delay in Requests. Failure or delay on the part of the Lender to demand compensation pursuant to this Section shall not constitute a waiver of the Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate the Lender pursuant to this Section for any increased costs incurred or reductions suffered more than three (3) months prior to the date that the Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions, and of the Lender's intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof).

SECTION 2.09. Illegality. Notwithstanding any other provision of this Agreement, if the Lender determines that a Change in Law makes it unlawful, a Governmental Authority asserts that it is unlawful, for the Lender to perform its obligations hereunder to make the Advance or to fund or maintain the Advance hereunder, or any Governmental Authority has imposed material restrictions on the authority of the Lender to purchase or sell, or to take deposits of, Dollars in the London interbank Eurodollar market, then the Lender shall promptly notify the Borrower thereof, following which (a) until the Lender notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligation of the Lender to make the Advance shall be suspended and (b) if the Lender shall so request in such notice or if such Change in Law or such restrictions shall so mandate, the Borrower shall prepay in full the then outstanding principal amount of the Advance, together with accrued interest thereon and all other amounts payable by the Borrower under this Agreement, on or before such date as shall be mandated by such Change in Law or such restrictions. If it is lawful for the Lender to maintain its Advance through the last day of the Interest Period then applicable to such Advance, such prepayment shall be due on such last day. Notwithstanding the foregoing, in the event that the Lender has notified the Borrower that it is not unlawful for such Lender to maintain Advance accruing interest at a rate determined by reference to the Base Rate, (i) each Eurodollar Rate Advance held by the Lender will automatically, upon such election, convert into a Base Rate Advance and (ii) the obligation of the Lender to make or maintain Eurodollar Rate Advance shall be suspended, in each case until the Lender shall notify the Borrower that the Lender has determined that the circumstances causing such suspension no longer exist.

Lender maintains with Citibank, N.A., 388 Greenwich Street, New York, NY 10013, United States of America, ABA No. 021000089, Account Name: CITIBANK IBF, Reference[•] in same day funds.

(b) The Borrower hereby authorizes the Lender and each of its Affiliates, if and to the extent payment owed to the Lender is not made when due hereunder or under any Note held by the Lender, to charge from time to time against any or all of the Borrower's accounts with the Lender or such Affiliate any amount so due.

(c) All computations of interest shall be made by the Lender on the basis of a year of 360 days in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or commitment fees are payable. Each determination by the Lender of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.

(d) Whenever any payment or amount due under this Agreement, any Note or any other Loan Document shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest; provided, however, that, if such extension would cause payment of interest on or principal of the Advance to be made in the next following calendar month, such payment shall be made on the immediately preceding Business Day .

SECTION 2.11. Taxes. (a) Defined Terms. For purposes of this Section 2.12, the term "applicable law" or ''Applicable Law" includes FATCA.

(b) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower under any Loan Document shall be made free and clear of and without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the Borrower shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(c) Payment of Other Taxes by the Borrower. The Borrower shall timely pay to the relevant Governmental Authority in accordance with Applicable Law or at the option of the Lender timely reimburse it for the payment of, any Other Taxes

(d) Indemnification by the Borrower. The Borrower shall indemnify the Lender, within ten (30) days after written demand therefor, for the full amount of any Indemnified Taxes (including Inde1m1ified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by the Lender or required to be withheld or deducted from a payment to the Lender and any reasonable expenses arising therefrom or with respect thereto, whether or not such Inde1Mified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by the Lender shall be conclusive absent manifest error.

(e) Evidence of Payments. As soon as practicable after any payment of Taxes by the Borrower to a Governmental Authority pursuant to this Section 2.11, the Borrower shall deliver to the Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender. In the case of any payment hereunder by or on behalf of the Borrower through an account or branch outside the United States or by or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines in its good faith interpretation of applicable law that no Taxes or Other Taxes are payable in respect thereof, or if Lender and the Borrower do not agree on a determination of the Taxes or Other Taxes payable in respect thereof, the Borrower shall, at the Lender's request, furnish, or shall cause such payor to furnish, to the Lender an opinion of counsel acceptable to the Lender supporting the Borrower's position, in any case notwithstanding the Borrower's obligations in respect of Taxes or Other Taxes as set forth in this Section 2.11. For purposes of this Section 2.11, the terms "United States" and "United States person" shall have the meanings specified in Section 770 I of the Internal Revenue Code.

(t) Status of Lender. If the Lender is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document it shall upon written reasonable request of the Borrower (but only if the Lender is lawfully able to do so) use commercially reasonable efforts to provide within a reasonable time the Borrower with such forms, documents or other certifications, appropriately completed and executed, as will permit such payments to be made without withholding or at a reduced rate of withholding. Notwithstanding anything to the contrary in the preceding sentence, the completion, execution and submission of such documentation shall not be required if in the Lender's reasonable judgment such completion, execution or submission would subject the Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of the Lender.

Survival. Each patty's obligations under this Section 2.11 shall survive any assignment of rights by the Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

SECTION 2.12. Mitigation Obligations. If the Lender requests compensation under Section 2.08, or requires the Borrower to pay any Indemnified Taxes or additional amounts to the Lender or any Governmental Authority for the account of the Lender pursuant to Section 2.11, then the Lender shall (at the request of the Borrower) use reasonable efforts to designate a different Lending Office for funding or booking its Advance hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of the Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.08 or 2.11, as the case may be, in the future, and (ii) would not subject the Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to the Lender. The Borrower hereby agrees to pay all costs and expenses incurred by any Lender in connection with any such designation or assignment.

SECTION 2.13. Use of Proceeds. The proceeds of the Advance shall be available (and the Borrower agrees that it shall use such proceeds) to refinance existing debt borrowed from the Lender.

SECTION 2.14. Notes. (a) The Advance shall be evidenced by a Note. Each Note shall (1) be issued by the Borrower, (2) be payable to the Lender and be dated the Closing Date, (3) be in a stated principal amount equal to the Advance made on the Closing Date, (4) provide the amortization schedule for the relevant Advances, (5) bear interest as provided in this Agreement, and (6) be in English. The date and amount of each payment of principal and interest made on the Advances shall be recorded by the Lender on its books, which recordations shall, in the absence of manifest error, be conclusive as to such matters; provided, that the failure of the Lender to make any such recordation or any error therein shall not limit or

otherwise affect the obligations of the Borrower hereunder or under any Note. Upon the request of the Lender, the borrower shall, no later than (5) Business Days following the date of any such request, issue one or more new Notes to reflect any change in the interest rate applicable to the Advance or any assignment of the Lender's commitment. Each new Note shall be executed before a notary public in the Local Country. The issuance, execution and delivery of any Note pursuant to this Agreement shall not be, or be construed as, a novation with respect to this Agreement or any other agreement between the Lender and the B01rnwer and shall not limit, reduce or otherwise affect the obligations or rights of the Borrower under this Agreement, and the rights and claims of the Lender under any Note shall not replace or supersede the rights and claims of the Lender under this Agreement.

(b) Notwithstanding discharge in full of any Note, if the amount (including, without limitation, Default Interest and additional amounts with respect to Taxes due pursuant to Section 2.11 of this Agreement and others in connection therewith) paid or payable to the Lender under such Note (whether arising from the enforcement thereof in the Local Country or otherwise) is less than the aggregate of amounts and payments due and payable to the Lender in accordance with this Agreement with respect to the Advance, or portion thereof, evidenced by such Note, the Borrower agrees, to the fullest extent it may effectively do so, to pay to the Lender upon demand such difference in accordance with Section 2.10 hereunder and as otherwise specified in this Agreement.

ARTICLE III

CONDITIONS TO EFFECTIVENESS AND LENDING

SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01. Section 2.01 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied:

(a) There shall have occurred no Material Adverse Change since September 30, 2019 or any material adverse change in the political, economic of financial condition of the Local Country. (b) There shall exist no action, suit, investigation, litigation or proceeding affecting the Borrower or any of its Subsidiaries pending or threatened before any Governmental Authority or arbitrator that (i) could be reasonably likely to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of any Loan Document or the consummation of the transactions contemplated hereby or thereby.

(c) All governmental and third party consents and approvals necessary in connection with the transactions contemplated hereby (including, without limitation, exchange control approvals and any other consents required or advisable from the central bank of the Local Country) shall have been obtained (without the imposition of any conditions that are not acceptable to the Lender) and shall remain in effect, and no law or regulation shall be applicable in the reasonable judgment of the Lender that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated hereby or thereby. The Borrower shall make all necessary registrations and filings with the Colombian Central Bank no later than the Advance date.

(d) The Borrower shall have notified the Lender in writing as to the proposed Effective Date.

(e) The Borrower shall have paid all accrued fees and expenses of the Lender (including the accrued fees and expenses of counsel to the Lender).

(f) On the Effective Date, the following statements shall be true and the Lender shall have received a certificate signed by a duly authorized officer of the B01rnwer, dated the Effective Date, stating that:

(i) The representations and warranties contained in Section 4.01 and in each other Loan Document are true and correct in all material respects on and as of the Effective Date, and

(ii) No event has occurred and is continuing that constitutes a Default.

(g) The Lender shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Lender:

(i) This Agreement, duly executed by the Borrower and the Lender.

(ii) Ce11ified copies of the (A), a certificate of existence and legal representation ("certificado de existencia y representaci6n legal';( the "Certificate") of the Borrower issued by the Chamber of Commerce of Bogota; and (B) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to each Loan Document, and a ce11ificate of the Secretary or an Assistant Secretary of the B01rnwer certifying the absence of any change or amendment to the Constituent Documents of the Borrower since the date the Certificate was issued.

(iii) A ce11ificate of the Secretary or an Assistant Secretary or ad hoc Secretary of the B01rnwer certifying the names and true signatures of the officers of the Borrower included as legal representatives in the Ce11ificate and therefore authorized to sign each Loan Document to which it is or is to become a party and the other documents to be delivered hereunder and thereunder.

(iv) A letter from the Process Agent indicating its acceptance of the appointment by the Borrower pursuant to Section 7.l O.

(h) All documentation and other information required by bank regulatory authorities under applicable "know your customer" and anti-money laundering rules and regulations, including the Patriot Act, requested (at least three (3) Business Days prior to the Effective Date) by the Lender shall have been received by the Lender.

SECTION 3.02. Conditions Precedent to the Borrowing.

The obligation of the Lender to make the Advance on the occasion of the Borrowing shall be subject to the conditions precedent that:

(i) the Effective Date shall have occurred;

(ii) the Lender shall have received a Notice of Borrowing as required by Section 2.02(a);

(iii) the Lender shall have received at the Closing Date the Note evidencing such Advance (iv) the representations and warranties contained in Section 4.01 and in each other Loan Document are correct in all material respect on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date;

(v) no event has occurred and is continuing, or would result from such B01rnwing or from the application of the proceeds therefrom, that constitutes a Default;

(vi) there shall have occurred no Material Adverse Change since September 30, 2019 since the Effective Date; and

(vii) the Lender shall have received such other approvals, opinions or documents as the Lender may reasonably request.

The delivery of a Notice of Borrowing and the acceptance by the Borrower of the proceeds of the Advance shall constitute a representation and warranty by the Borrower that on the date of such Advance (both i1mnediately before and immediately after giving effect to such Advance) the conditions contained in this Article III have been satisfied or waived.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a Simplified Stock Corporation duly organized, validly existing under the laws of the Local Country and has all requisite corporate power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own, lease and operate its prope11ies and to carry on its business as now conducted and as proposed to be conducted.

(b) The execution, delivery and performance by the B01rnwer of this Agreement and each other Loan Document, and the consummation of the transactions contemplated hereby, are within the Borrower's organizational powers, have been duly authorized by all necessary organizational action, and do not (i) contravene the Borrower's Constituent Documents, (ii) violate any applicable law, rule, regulation (including, without limitation, Regulation X of the Boards of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of any contractual restriction binding on or affecting the Borrower or any of its prope11ies, or (iv) result in the creation or imposition of any Lien on any assets of the Borrower.

(c) Except for the registration of this Agreement with the Colombian Central Bank, no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or any other third party is required for (i) the due execution, delivery and performance by the Borrower of any Loan Document to which it is or is to be a party or (ii) the exercise by the Lender of its rights under any Loan Document.

(d) This Agreement has been, and each other Loan Document when delivered hereunder has been or will have been, duly executed and delivered by the Borrower. This Agreement is, and each

other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with their respective terms.

(e) (i) The Consolidated balance sheet of the Borrower as at December 31, 2018,and the related Consolidated statements of income and cash flows of the Borrower for the fiscal year then ended, accompanied by an opinion of Ernst & Young Audit S.A.S. independent public accountants, and included in the latest report filed by the Borrower and the Consolidated balance sheet of the Borrower as at August 31, 2018, and the related statements of income and cash flows of the Borrower for the nine months then ended, duly certified by the chief financial officer of the Borrower, copies of which have been furnished to the Lender, fairly present, subject, in the case of said balance sheet as at August 31, 2018, and said statements of income and cash flows for the nine months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower as at such dates and the Consolidated results of the operations of the Borrower for the periods ended on such dates, all in accordance with Applicable Accounting Rules consistently applied. The Borrower has no liabilities, obligations or commitments of a type required to be reflected on a balance sheet prepared in accordance with Applicable Accounting Rules except: (i) those which are adequately reflected or reserved against in the Consolidated balance sheet as at December 31, 2018 and (ii) those which have been incurred in the ordinary course of business since December 31, 2018 and which are not material in amount.

(ii) Since September 30, 2019, there has been no Material Adverse Change.

(f) There is no pending or threatened action, suit, investigation, litigation or proceeding, including, without limitation, any Environmental Action, affecting the Borrower before any Governmental Authority or arbitrator that (i) could be reasonably likely to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby.

(g) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the U.S. Federal Reserve System), and no proceeds of the Advance will be used for any purpose which violates or is inconsistent with the provisions of Regulation U or Regulation X of the Board of Governors of the Federal Reserve System or to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock or to refinance or refund Debt originally incurred for such purpose.

(h) The Borrower has filed, has caused to be filed or has been included in all Tax returns (national, departmental, local, municipal and foreign) required to be filed and has paid all Taxes due with respect to the years covered by such returns. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of Taxes or other governmental charges are adequate in accordance with Applicable Accounting Rules.

(i) The Borrower is in compliance with all Applicable Laws and requirements of all Governmental Authorities (including, without limitation, all governmental licenses, certificates, permits, franchises and other governmental authorizations and approvals necessary to the ownership of its properties or to the conduct of its business, Environmental Laws, and laws with respect to social security and pension fund obligations) , in each case except to the extent that failure to comply therewith could not reasonably be expected to have a Material Adverse Effect. (i) (i) The Borrower have good and sufficient legal title to all its assets and properties that are material to its businesses, except for minor defects in title that do not interfere with their

ability to conduct their respective businesses as currently conducted or to utilize such properties for their intended purposes, and, to the best of its knowledge, none of such assets or properties is subject to any Liens, except those listed on Schedule 4.0l(z) and as otherwise permitted by Section 5.02(a).

(ii) The properties of the Borrower are insured with financially sound and reputable insurance companies (not being Affiliates thereof), in such amounts, with such deductibles and covering such risks as are customarily maintained by Persons engaged in a similar business, owning similar proper ties and operating in similar localities where the Borrower and its Subsidiaries maintain their principal places of operations.

(k) The Borrower own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights that are reasonably necessary for the operation of their respective businesses, without conflict in any material respects with the rights of any other Person. No slogan or other advertising device, product, process, method, substance, pat1 or other material now employed, or now contemplated to be employed, by any of the Borrower or its Subsidiaries infringes upon any rights held by any other Person. No claim or litigation regarding any of the foregoing is pending or, to the knowledge of the Borrower, threatened.

(l) No income, stamp or other taxes (other than taxes on, or measured by, net income or net profits) or levies, imposts, deductions, charges, compulsory loans or withholdings whatsoever are or will be, under applicable law in the Local Country, imposed, assessed, levied or collected by the Local Country or any political subdivision or taxing authority thereof or therein either (i) on or by virtue of the execution or delivery of any Loan Document or (ii) on any payment to be made by the Borrower pursuant to any Loan Document.

(m) Each Loan Document is in proper legal form under the law of the Local Country for the enforcement thereof against the Borrower under the law of the Local Country; provided that, in the event of enforcement in the courts of the Local Country, any public document issued outside of the Local Country must be notarized and apostilled and a translation of this Agreement into Spanish, prepared by an official translator, shall be required. To ensure the legality, validity, enforceability or admissibility in evidence of any Loan Document in the Local Country (except for the official translation into Spanish of any such document by an official translator, if executed in a foreign language), it is not necessary that this Agreement or any other Loan Document or any other document be filed or recorded with any com1 or other authority in the Local Country or that any stamp or similar tax be paid on or in respect of this Agreement or any other Loan Document, in addition to those requirements set forth by Colombian Central Bank and the applicable Colombian foreign exchange regulation. The submission to jurisdiction, appointment of the Process Agent, consents and waivers by the Borrower in Section 7.10 of the Agreement are valid and irrevocable. It is not necessary in order for the Lender to enforce any rights or remedies under the Loan Documents or solely by reason of the execution, delivery and performance by the Borrower of the Loan Documents that the Lender be licensed or qualified with any Governmental Authority in the Local Country, or be entitled to carry on business in any of the foregoing.

(n) The Borrower is not subject to regulation under any other law, treaty, rule or regulation or determination of an arbitrator or court or other Governmental Authority that limits its ability to incur any indebtedness under this Agreement or any Note.

governmental acts Oure imperii acts). None the Borrower or any its respective properties has any immunity from jurisdiction of any court or from set-off or any legal process (whether through service or notice, attachement prior to judgment, attachement in aid of execution, execution or otherwise) under the laws of the Unites States, the Local Country or any other relevant jurisdiction in respect of its obligations under the Loan Documents.

(p) The Borrower's obligations under this Agreement and each Note constitute direct, unconditional, unsubordinated and unsecured obligations of the Borrower and do rank and will rank pari passu in priority of payment and in all other respects with all other unsecured and unsubordinated Debt of the Borrower.

(q) The obligations of the Borrower under the Loan Documents are not subject to any defense, set-off or counterclaim by the Borrower or any circumstance whatsoever which might constitute a legal or equitable discharge from its obligations thereunder.

(r) The Borrower, a nonbank entity located outside the United States, understands that it is the policy of the Board of Governors of the U.S. Federal Reserve System that extensions of credit by international banking facilities (as defined in Section 204.8(a) of Regulation D) may be used only to finance the non-U.S. operations of a customer (or its foreign affiliates) located outside the United States as provided in Section 204.8(a)(3)(vi) of Regulation D. Therefore, the Borrower acknowledges that the proceeds of the Advance by the International Banking Facility of the Lender will be used solely to finance the Borrower's operations outside the United States or that of the Borrower's foreign affiliates.

(s) The Borrower is not required to register as an "investment company", as such term is defined in the Investment Company Act of 1940, as amended.

(t) No information, exhibit or report furnished by or on behalf of the Borrower to the Lender in connection with the negotiation of the Loan Documents or pursuant to the terms of any Loan Document contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading.

(u) The Borrower is Solvent.

(v) The Borrower, and to the knowledge of the Borrower after due inquiry, its parents are conducting its business in compliance with Anti-Corruption Laws. The Borrower and its directors, officers and employees and, to the knowledge of the Borrower after due inquiry, its parents, affiliates, agents and other Persons acting for the benefit of the Borrower, are in compliance with all applicable Anti-Corruption Laws and are not under investigation for or being charged with any violation of any applicable Anti-Corruption Laws, in each case, except as disclosed to the Lender by the Borrower in writing. The Borrower and its respective directors, officers and employees after due inquiry, its parents, Affiliates and agents are in compliance with all applicable Sanctions. The Borrower has implemented and maintains in effect policies and procedures to ensure compliance by the Borrower, and its directors, officers, employees, Affiliates and agents with Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions.

(w) None of the Borrower s or any of is respective directors, officers, or employees or, to the knowledge of the Borrower after due inquiry or its parents or agents are a Sanctioned Person, or located, organized or resident in a Sanctioned Jurisdiction.

(x) The operations of the Borrower, and to the knowledge of the Borrower after due inquiry, its parents are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements, as amended, the applicable money laundering statutes of all jurisdictions where the Borrower and its parents conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental or regulatory agency (collectively, the "Anti- Money Laundering Laws"), and no action, suit or proceeding by or before any court or Governmental Authority or body or any arbitrator involving the Borro wer or any of its Subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Borrower after due inquiry, threatened.

(y) Set forth on Schedule 4.0l(z) hereto is a complete and accurate list of all Liens on the property or assets of the Borrower and each of its Subsidiaries, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of the Borrower or such Subsidiary subject thereto.

(z) Set forth on Schedule 4.0l(aa) hereto is a complete and accurate list of all Existing Debt of the Borrower and each of its Subsidiaries, showing as of the date hereof the obligor, the creditor and the principal amount outstanding thereunder. Neither the Borrower nor any of its Subsidiaries is in default in any manner under any provision of the Existing Debt, where such default could reasonably be expected to result in a Material Adverse Effect.

(aa)Under current laws and regulations of the Local Country and each political subdivision thereof, all interest, principal, premium, if any, and other payments due or to be made on the Advance or otherwise pursuant to the Loan Documents may be freely transferred out of the Local Country and may be paid in, or freely conve1ied into, U.S. Dollars, subject to compliance with foreign exchange regulations in the Local Country.

(bb) To its knowledge, no payments or other consideration provided to the Lender in satisfaction of or on account of the Borrower's obligations under this Agreement, any Note or any other Loan Document were derived from criminal or other illegal activity.

(cc) No Default or Event of Default has occurred and is continuing.

ARTICLE V

COVENANTS OF THE BORROWER

SECTION 5.01. Affirmative Covenants. So long as the Advance shall remain unpaid, any obligation of the Borrower under any Loan Document shall remain outstanding or the Lender shall have any Commitment hereunder, the Borrower will: (a) Compliance with Laws, Etc. (i) Comply, (A) with all applicable Anti-Corruption Laws, (B) with all Sanctions and (C) in all material respects, with all other Applicable Laws, such compliance to include, without limitation, compliance with Environmental Laws; and (ii) implement, maintain and continue to maintain in effect, and enforce, policies and procedures to ensure compliance by the Borrower, and its respective directors, officers, employees, Affiliates and agents with Anti Corruption Laws, Anti-Money Laundering Laws and all applicable Sanctions. (b) Payment of Taxes. Etc. Pay and discharge, before the same shall become delinquent, (i) all Taxes and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that the Borrower shall not be required to pay or discharge any such Tax or claim

that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors. (c) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Bo1Tower operates. (d) Preservation of Organizational Existence, Etc. Preserve and maintain, , its organizational existence, rights (charter and statutory), permits, approvals, licenses, privileges and franchises; provided, however, that the Borrower and its Subsidiaries may consummate any merger or consolidation permitted under Section 5.02(c); provided, further, that the Borrower shall not be required to preserve any right or franchise if the Board of Directors of the Borrower shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower, such Subsidiary or the Lender. (e) Visitation Rights. At any reasonable time and from time to time but no more than once per quarter, permit the Lender or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the prope1iies of, the Borrower, and to discuss the affairs, finances and accounts of the Borrower with any of their officers or directors and with their independent certified public accountants.

(f) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in accordance with Applicable Accounting Rules in effect from time to time. (g) Maintenance of Properties, Etc. Maintain and preserve, all of its prope1iies that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (h) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under this Agreement with any of their Affiliates on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate.

(i) Repotiing Requirements. Furnish to the Lender:

(i) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the end of such quarter and Consolidated and consolidating statements of income and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, duly certified (subject to year-end audit adjustments) by the chief financial officer of the Borrower as having been prepared in accordance with Applicable Accounting Rules.

(ii) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the annual audit report for such year for the

Borrower and its Subsidiaries, containing Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the end of such fiscal year and Consolidated and consolidating statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal year, in each case accompanied by an opinion acceptable to the Lender by Ernst & Young Audit S.A.S. or other independent public accountants acceptable to the Lender (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit). as soon as available and in any event no later than 90 days after the end of each fiscal year of the Borrower, forecasts prepared by management of the Borrower, in form satisfactory to the Lender, of balance sheets, income statements and cash flow statements on a monthly basis for the fiscal year following such fiscal year then ended and on an annual basis for each fiscal year thereafter until the Maturity Date;

(iii) as soon as possible and in any event within five (5) Business Days after the occurrence of each Default continuing on the date of such statement, a statement of the chief financial officer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto;

(iv) promptly after the commencement thereof, notice of all actions and proceedings before any Governmental Authority or arbitrator affecting the Borrower or any of its Subsidiaries of the type described in Section 4.0l(t);

(v) such other information respecting the Borrower or any of its Subsidiaries as the Lender may from time to time reasonably request;

SECTION 5.02. Negative Covenants. So long as the Advance shall remain unpaid, any obligation of the Borrower under any Loan Document shall remain outstanding or the Lender shall have any Commitment hereunder, the Borrower will not:

(a) Liens, Etc. Create or suffer to exist, or permit any of its Subsidiaries to create or suffer to exist, any Lien on or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any right to receive income, other than:

(i) Permitted Liens,

(ii) purchase money Liens upon or in any real property or equipment acquired or held by the Borrower or any Subsidiary in the ordinary course of business to secure the purchase price of such property or equipment or to secure Debt incurred solely for the purpose of financing the acquisition of such property or equipment, or Liens existing on such property or equipment at the time of its acquisition (other than any such Liens created in contemplation of such acquisition that were not incurred to finance the acquisition of such property) or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided, however, that no such Lien shall extend to or cover any properties of any character other than the real property or equipment being acquired, and no such extension, renewal or replacement shall extend to or cover any properties not theretofore subject to the Lien being extended, renewed or replaced, provided, further, that the aggregate principal amount of the indebtedness secured by the Liens referred to in this clause (ii) shall not exceed the amount specified therefor in Section 5.02(d)(iii) at any time outstanding,

(iii) the Liens existing on the Effective Date and described on Schedule 5.02(a) hereto,

(iv) other Liens securing Debt in an aggregate principal amount not to exceed U.S. $500,000.00 (or its equivalent in other currencies) at any time outstanding, and

(v) the replacement, extension or renewal of any Lien permitted by clause (iii) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Debt secured thereby.

(b) Mergers, Etc. Merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to, any Person, except that the Borrower may merge with any other Person so long as the Borrower is the surviving corporation; provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom.

(d) Sales, Etc. of Assets. Consummate any Asset Sale, except (i) sales of inventory in the ordinary course of its business, (ii) in a transaction authorized by subsection (c) of this Section and (iii) sales of assets for fair value in an aggregate amount not to exceed U.S.$25,000,000.00 (or the equivalent in other currencies) in any year, provided that in the case of the sale of any asset in a single transaction or a series of related transactions in an aggregate amount exceeding U.S.$12,500,000.00 (or the equivalent in other currencies), the fair value of such asset shall have been determined in good faith by the General Shareholders Assembly of the Borrower and (iv) sales of assets for fair value in an aggregate amount exceeding $25,000,001,00 (or the equivalent in other currencies) in any year, subject to the previous approval of the Lender.

(e) Change in Nature of Business. Make, or permit any of its Subsidiaries to make, any material change in the nature of its business as carried on at the date hereof.

(t) Change in nature of business. Make, or permit any of its Subsidiaries to make, any material change in the nature of its business as carried on at the date hereof. (g) Amendment of Constituent Documents. Amend its Constituent Documents in any respect which would reasonably be expected to have a Material Adverse Effect.

(h) Use of Proceeds.

(i) Use the proceeds of the Advance except in accordance with Section 2.13.

proceeds, in each case, (A) to fund or facilitate any activities or business of or with any Person that, at the time of such funding or facilitation, is a Sanctioned Person, (B) to fund or facilitate any activities or business of or in any Sanctioned Jurisdiction, (C) in any manner that would result in a violation by any Person of Sanctions, or (D) in violation of applicable law, including, without limitation, Anti-Corruption Laws. (iii) Use the proceeds of the Advance other than to finance the non-U.S. operations of the Borrower or the Borrower's Affiliates located outside the United States.

ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing:

(a) the Borrower shall fail to pay (i) when and as required to be paid herein, any principal of the Advance when the same becomes due and payable, or (ii) any interest on the Advance or shall fail to make any other payment of fees or other amounts under any Loan Document, in each case under this clause (ii), within three days after when the same becomes due and payable; or

(b) any representation or warranty made by the Borrower (or any of its officers) herein or under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or

(c) (i) the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.0l(a)(ii), (d), (e) or G)(iv), or 5.02, or (ii) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 or more days after the earlier of the date on which (A) any officer of the Borrower becomes aware of such failure or (B) written notice thereof shall have been given to the Borrower by the Lender; or

the Borrower or any of its Subsidiaries shall fail to pay any principal of, premium of, interest on, or any other amount payable in respect of, any Debt that is outstanding in a principal or notional amount of at least U.S. $2,000,000.00 (or its equivalent in other currencies) in the aggregate (but excluding Debt outstanding hereunder) of the Borrower, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt, or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or otherwise to cause, or to permit the holder thereof to cause such Debt to mature; or any such Debt shall be declared to be due and payable, or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof, or the Borrower shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the B01rnwer seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any Debtor Relief Law, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial pmi of its property and, in the case of any such proceeding instituted against it (but not

instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 30 or more days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the B01rnwer or any of its Subsidiaries shall take any corporate action to authorize any of the actions set fo1th above in this subsection (e);

(d) or

(e) judgments or orders for the payment of money in excess of U.S. $2,000,000.00 (or its equivalent in other currencies) in the aggregate shall be rendered against the Borrower and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 or more consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(f) any non-monetary judgment or order shall be rendered against the Borrower that could be reasonably expected to have a Material Adverse Effect, and there shall be any period of 30 or more consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(g) the obligations of the Borrower under any Loan Document shall fail to rank at least pari passu with all other unsecured and unsubordinated Debt of the Borrower; or

(h) any provision of any Loan Document shall cease to be valid and binding on or enforceable against the B01rnwer, or the Borrower shall so assert or state in writing, or the obligations of the Borrower under any Loan Document shall in any way become illegal; or

(i) either (i) any authority asse1ting or exercising governmental or police powers in the Local Country shall take any action, including a general moratorium, canceling, suspending or deferring the obligation of the Borrower to pay any amount of principal or interest or other amount payable under any Loan Document or preventing or hindering the fulfillment by the Borrower of its obligations under any Loan Document or having any effect on the currency in which the Borrower may pay its obligations under any Loan Document or on the availability of foreign currencies in exchange for the lawful currency of the Local Country (including any requirement for the approval to exchange foreign currencies for the lawful currency of the Local Country) or otherwise or (ii) the Borrower shall, voluntarily or involuntarily, participate or take any action to participate in any facility or exercise involving the rescheduling of Borrower's debts or the restructuring of the currency in which the Borrower may pay its obligations; or

(j) any authority asserting or exercising governmental or police powers in the Local Country or any Person acting or purporting to act under such authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial portion of the property of the Borrower; or

(k) a Change of Control shall have occurred; or Pricesmart Inc, a Delaware Corporation, ceases to beneficially own, directly or indirectly, at least sixty percent (60%) of the outstanding.

declare the Advance, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be immediately due and payable, whereupon the Advance, all such interest and all such amounts shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under clause (e) above, (A) the obligation of the Lender to make the Advance shall automatically be terminated and (B) the Advance, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.

ARTICLE VII

MISCELLANEOUS

SECTION 7.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, nor consent to any depa1ture by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

SECTION 7.02. Notices, Etc. (a) Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices and other communications provided for hereunder shall be in writing and shall be delivered by hand or overnight courier service (including international courier), mailed by certified or registered mail or sent by facsimile, if to the Borrower, at its address at Cra 9A No. 99-02 Piso 3, Bogota Colombia, Attention: Jose Alejandro Duenas Betancourt; and if to the initial Lender, at its Lending Office specified opposite its name on the signature pages below; if to any other Lender, at its Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; or, as to the Borrower or the Lender, at such other address as shall be designated by such patty in a written notice to the other party. Delivery by telecopier or other electronic c01mnunication of an executed counterpart of any amendment or waiver of any provision of this Agreement, any other Loan Document or any Exhibit hereto or thereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof.

Notices sent by hand or overnight courier service, or mailed by ce1tified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications, to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

(b) Electronic Communications. Notices and other communications to the Lender hereunder may be delivered or furnished by electronic c01mnunication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Lender. The Lender or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. Unless the Lender otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgement from the intended recipient (such as by the "return receipt requested” function, as available, return e-mail or other written acknowledgement) and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended

recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, e-mail or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient.

SECTION 7.03. No Waiver; Remedies. No failure on the part of the Lender to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

SECTION 7.04. Costs and Expenses; Indemnification. (a) The Borrower agrees to pay on demand all reasonable costs and expenses of the Lender in connection with the preparation, execution, delivery, administration, modification, waiver or amendment of any Loan Documents or any other documents to be delivered hereunder or thereunder (whether or not the transactions contemplated hereby or thereby shall be consummated), including, without limitation, (A) all due diligence, transportation, computer, duplication, appraisal, consultant, and audit expenses and (B) the reasonable and documented fees, charges, disbursements and expenses of counsel for the Lender (including, without limitation, all fees and time charges and disbursements for attorneys who may be employees of the Lender) with respect thereto and with respect to advising the Lender as to its rights and responsibilities under the Loan Documents. The Borrower further agrees to pay on demand all reasonable costs and expenses of the Lender, if any (including, without limitation, counsel fees and expenses, including all fees and time charges and disbursements for attorneys who may be employees of the Lender), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of any Loan Document and the other documents to be delivered hereunder or thereunder, including, without limitation, reasonable fees and expenses of counsel for the Lender in connection with the enforcement of rights under this Section 7.04(a) and in connection with any workout, restructuring or negotiation in respect of the Advance requested by the Borrower.

(b) The Borrower agrees to indemnify and hold harmless the Lender and each of its Related Parties (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation reasonable, fees, charges, disbursements and expenses of counsel (including all fees and time charges and disbursements for attorneys who may be employees of an Indemnified Party)) incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any actual or potential investigation, litigation or proceeding or preparation of a defense in connection therewith, whether based on contract, tort or any other theory) (i) any Loan Document, any of the transactions contemplated herein or therein or the actual or proposed use of the proceeds of the Advance or (ii) the actual or alleged presence of Hazardous Materials on any property of the Borrower or any of its Subsidiaries or any Environmental Action relating in any way to the Borrower, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a com1 of competent jurisdiction to have resulted primarily from such Indemnified Party's fraud, gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 7.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, equity holders or creditors or an Indemnified Party or any other Person, whether or not any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Borrower also agrees not to assert any claim for special, indirect, consequential or punitive damages against the Lender or any of its Related Parties, on any theory of liability arising out of or otherwise relating to any Loan Document, any of the transactions contemplated herein or therein or the actual or proposed use of the

proceeds of the Advance. No Indemnified Party referred to in this paragraph shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

(c) If any payment of principal of any Advance is made by the Borrower to or for the account of the Lender other than on the last day of an Interest Period for such Advance, as a result of a mandatory termination of the Lender's Commitment pursuant to Section 2.03(b)(ii), payment pursuant to Section 2.07 or 2.08, acceleration of the maturity of any Note pursuant to Section 6.0 I or for any other reason, or if the Borrower fails to make any payment hereunder for which a notice of prepayment has been given or that is otherwise required to be made, or if the Borrower fails to borrow on the date or in the amount notified by the Borrower in any Notice of Borrowing, the Borrower shall, upon demand by the Lender, pay to the Lender any amounts required to compensate the Lender for any additional losses, costs or expenses that it may incur as a result of such payment or such failure to pay, prepay or borrow, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired (or which could have been acquired) by the Lender to fund or maintain such Advance. A certificate submitted by the Lender to the Borrower as to the amount of such compensation shall be conclusive and binding for all purposes, absent manifest error. For purposes of calculating amounts payable by the Borrower to the Lender under this Section 7.04(c), the Lender shall be deemed to have funded each Advance bearing interest at the Eurodollar Rate made by it at the Eurodollar Rate for such Advance by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Advance was in fact so funded.

(d) Without prejudice to the survival of any other agreement of the Borrower hereunder or under any other Loan Document, the agreements and obligations of the Borrower contained in Sections 2.09, 2.12, 7.04 and 7.08 shall survive the termination of the Loan Documents and the payment in full of principal, interest and all other amounts payable under the Loan Documents.

SECTION 7.05. Right of Set-off. (a) To the extent permitted under the Applicable Law, upon the occurrence and during the continuance of any Event of Default, the Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness or obligations at any time owing by the Lender or such Affiliate to or for the credit or the account of the Borrower or its Affiliates against any and all of the obligations of the Borrower or its Affiliates now or hereafter existing under any Loan Document, whether or not the Lender shall have made any demand under any Loan Document and although such obligations may be unmatured. The Lender agrees promptly to notify the Borrower or its Affiliates, as applicable, after any such set-off and application; provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Lender and its Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that the Lender and its Affiliates may have.

(b) The Borrower hereby authorizes the Lender and any of its Affiliates, if and to the extent payment is not made when due hereunder, to charge from time to time against any or all of the Borrower's accounts with the Lender or any of its Affiliates for any amount so due even if such charge causes any such accounts to be overdrawn. So long as any amount under any Loan Document shall remain unpaid, the Borrower shall, unless the Lender otherwise consents in writing, maintain its current account numbers 36930322 with the Lender. The Lender is hereby authorized to deliver a copy of this Agreement to any of its Affiliates for the purposes described in this Section 7.05(b).

(c) The amount of any deposit or indebtedness that shall be set-off and applied against any and all obligations of the Borrower hereunder or that may be charged against any or all of the Borrower's accounts with the Lender or any of its Affiliates that in each case is not denominated in U.S. Dollars shall be that which, in accordance with normal banking procedures, will be necessary to purchase with such other currency, in New York City, NY, U.S.A., the amount of U.S. Dollars that the Borrower has so failed to pay when due.

SECTION 7.07. Assignments and Participations.(a) The Lender may assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advance owing to it and the Note or Notes held by it) (each such Person an "Assignee" and the Lender from which the Assignee receives the rights and obligations, the "Assignor"); provided that (i) in the case of any partial assignment to an additional bank or financial institution, the principal amount of the portion of the Advance so assigned is not less than U.S.$5,000,000 (or if less, the Lender's then outstanding principal amount of the Advance and determined as of the date of the Assignment and Acceptance with respect to when such assignment is delivered to the Lender or, if "Trade Date" is specified in the Assignment and Acceptance, as of the Trade Date), (iii) no such assignment shall be made to the Borrower or any of the Borrower's Affiliates, (iv) no such assignment shall be made to a natural Person (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person), and (v) the parties to each such assignment shall execute and deliver an Assignment and Acceptance, together with any Note subject to such assignment. Upon such execution and delivery, from and after the effective date specified in each Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have such rights and obligations of the Assignor hereunder and (y) the Assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish such rights (other than its rights under Sections 2.08, 2.11 and 7.04 to the extent any claim thereunder relates to an event arising prior to such assignment) and be released from such obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of the Assignor's rights and obligations under this Agreement, such Assignor shall cease to be a party hereto). If the Lender transfers or assigns any pmtion or all of its rights under the Loan Documents to any other financial institution, any reference to the Lender in each Loan Document shall thereafter refer to such Lender and to such other financial institution to the extent of their respective interests, as if such other financial institution had been a party to this Agreement as of the date hereof up to and including the date of such transfer or assignment. (b) By executing and delivering an Assignment and Acceptance, the Assignor thereunder and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument or document furnished pursuant hereto; (ii) such Assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Loan Documents or any other instrument or document

furnished pursuant hereto or thereto; (iii) such Assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referr ed to in Section 4.0 I (e) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such Assignee will, independently and without reliance upon such Assignor and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; and (v) such Assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as the Lender.

(c) Within five Business Days after its receipt of notice of an assignment hereunder and any Note or Notes subject to such assignment, the Borrower, at its own expense, shall execute and deliver to the Assignee in exchange for each surrendered Note a new Note payable to such assignee in an amount equal to the outstanding amount of the Note assumed by it pursuant to such Assignment and Acceptance and, if the Assignor has retained a portion of any Advance, a new Note payable to the Assignor in an amount equal to its pot1ion of such Advance. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit C hereto.

(d) The Lender may sell participations at any time, without the consent of, or notice, to the Borrower, to one or more banks or other entities (other than the Borrow er or any of its Affiliates) (each a "Participant”) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advance owing to it and the Note or Notes held by it); provided, however, that (i) the Lender's obligations under this Agreement (including, without limitation, its Commitment to the Borrower hereunder) shall remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower shall continue to deal solely and directly with the Lender in connection with the Lender's rights and obligations under the Loan Documents and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any other amounts payable hereunder, in each case to the extent subject to such participation. The Borrower agrees that each Participant shall be entitled to the benefits of Section 2.08, Section 7.04(c) and Section 2.11 (subject to the requirements and limitations therein, including the requirements under Section 2.1 l(f) (it being understood that the documentation required under Section 2.11(f) shall be delivered to the pat1icipating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant shall not be entitled to receive any greater payment under Section 2.08 or 2.11, with respect to any participation, than its pat1icipating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 7.05 as though it were a Lender. Each Lender that sells a pat1icipation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant's interest in the Advances or other obligations under the Loan Documents (the "Participant Register"); provided that the Lender shall not have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant's interest in any commitments, loans or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan

or other obligation is in registered form under Section 5f.103-l(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

(e) The Lender may at any time, without the consent of, or notice, to the Borrowers, enter into one or more hedging, risk participation, derivative or similar transactions (howsoever described or documented) (a "Risk Transfer") related to its rights or obligations under this Agreement, any Note or any Loan Document.

(f) The Lender may, in connection with any assignment or participation or Risk Transfer or proposed assignment or participation or Risk Transfer pursuant to this Section 7.07, disclose to the assignee or participant or party to a Risk Transfer or proposed assignee or participant or party to a Risk Transfer, any information relating to the Borrower furnished to the Lender by or on behalf of the Borrower.

(g) Notwithstanding any other provision set forth in this Agreement, the Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advance owing to it and any Note held by it) to secure obligations of the Lender, including any pledge or assignment to secure obligations to any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the U.S. Federal Reserve System or any other central bank.

SECTION 7.08. Governing Law. This Agreement, and the other Loan Documents and any claims, controversy, dispute or cause of action (whether in contract or tott or otherwise) based upon, arising out of or relating to this Agreement, any Note or any other Loan Document and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the laws of the State of New York, United States of America.

SECTION 7.09. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other electronic (i.e., ''pdf' or "ttf') format shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 7.10. Jurisdiction; Waiver of Immunities. (a) Each of patties hereto hereby irrevocably and unconditionally, to the fullest extent permitted by law, agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or in equity, whether in contract or in tort or otherwise, against the Lender or any of its affiliates in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by Applicable Law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its prope1ties in the courts of any jurisdiction, including, without limitation, the courts sitting in the Local Country.

(b) The Borrower hereby irrevocably appoints CT Corporation System (the "Process Agent"), with an office on the date hereof at 28 Liberty Street, New York, New York 10005, United States, as its agent to receive on behalf of the Borrower and its property service of copies of the summons and complaint and any other process which may be served in any such action or proceeding. Such service may be made by mailing or delivering a copy of such process to the Borrower in care of the Process Agent at the Process Agent's above address, and the Borrower hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. As an alternative method of service, the Borrower also irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to the Borrower at its address specified in Section 7.02. If the Process Agent shall cease to serve as agent for the Borrower to receive service of process hereunder, the Borrower, as applicable, shall promptly appoint a successor agent satisfactory to the Lender.

(c) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any New York State or federal com1. Each of the patties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such com1.

(d) To the extent that the Borrower has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Borrower hereby irrevocably and unconditionally waives such immunity in respect of its obligations under this Agreement and the other Loan Documents and, without limiting the generality of the foregoing, agrees that the waivers set forth in this subsection (d) shall have the fullest scope permitted under the Foreign Sovereign Immunities Act of 1976 of the United States and are intended to be irrevocable for purposes of such Act.

SECTION 7.11. Judgment Currency. (a) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or under any other Loan Document in U.S. Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the Lender could purchase U.S. Dollars with such other currency in New York City on the Business Day preceding that on which final, non-appealable judgment is given.

(b) The obligations of the Borrower in respect of any sum due to the Lender hereunder or under any other Loan Document shall, notwithstanding any judgment in a currency other than U.S. Dollars, be discharged only to the extent that following receipt by the Lender of any sum adjudged to be so due in such other currency, the Lender may, in accordance with normal, reasonable banking procedures, purchase U.S. Dollars with such other currency. If the amount of U.S. Dollars so purchased is less than the sum originally due to the Lender, in U.S. Dollars, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify the Lender against such loss.

connection with any litigation to which the Lender is a patty, or in connection with the exercise of any remedy hereunder or under any other Loan Document, (v) to the Lender's legal counsel and independent auditors and accountants, (vi) to the Lender's branches, subsidiaries, representative offices, affiliates, Citigroup and its affiliates, and agents and third parties selected by any of the foregoing entities, wherever situated, for confidential use (including in connection with the provision of any service and for data processing, statistical and risk analysis purposes),or (vii) subject to provisions substantially similar to those contained in this Section 7.12, to any actual or proposed Participant or Assignee or party to a Risk Transfer or (viii) on a confidential basis to any rating agency in connection with rating the Borrower or its Subsidiaries or the facilities provided pursuant to this Agreement. Any Person required to maintain the confidentiality of information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such information as such Person would accord to its own confidential information.

SECTION 7.13. Patriot Act Notice. The Borrower hereby acknowledges that pursuant to applicable regulatory requirements, including but not limited to those under the Patriot Act, the Lender is required to obtain, verify and record information that identifies the B01rnwer, which information includes the name and address of the Borrower and other information that will allow the Lender to identify the Borrower. The Borrower shall, and shall cause each of its Subsidiaries to, provide such information and take such actions as are reasonably requested by the Lender in order to assist the Lender in maintaining compliance with such applicable requirements.

SECTION 7.14. Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

(b) the effects of any Bail-in Action on any such liability, including, if applicable:

(i) a reduction in full or in part or cancellation of any such liability;

(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

(iii) the variation of the terms of such liability in connection with the exercise of the write- down and conversion powers of any EEA Resolution Authority.

SECTION 7.15. Waiver of Jury Trial. EACH OF THE BORROWER AND THE LENDER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTIONS OF THE LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. EACH OF THE BORROWER AND THE LENDER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 7.16. Severability. If any provision of this Agreement is found by a court to be invalid or unenforceable, to the fullest extent permitted by applicable law, each of the parties hereto hereby agrees that such invalidity or unenforceability will not impair the validity or enforceability of any other provision hereof.

SECTION 7.17. Acknowledgements of the Borrower. The Borrower acknowledges that:

(a) it has made its own independent decisions to enter into this Agreement and the other Loan Documents and as to whether the transactions contemplated by this Agreement and the other Loan Documents are appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary;

(b) it is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of entry into this Agreement and the other Loan Documents and the transactions contemplated thereby;

(c) it is not relying on any communication (written or oral) of the Lender as investment advice or as a recommendation to enter into this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby; and

(d) it has had the opportunity to take all relevant independent advice it may have required with respect to its entry into this Agreement and the other Loan Documents and the transactions contemplated thereby, including without limitation legal advice in respect of New York and Colombian law.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

(execution pages follow)

PRlCESMART COLOMBIA SAS, as Borrower

By Jhon Heriberto Guerrero Carvajal Title: Alternate Legal Representative

BoJTower signature page. Crl:'dit Agreement Citibank N.A. - PriceSmart Colombia S.AS.

Lender:

Lending Office CITIBANK, N.A., acting through its international banking facility 388 Greenwich Street By New York, NY 10013 United States of America Title:

lA'nds:-r sigmtun.;' pag ', Credit Agrcetn<.:'nt Ciiit>ank N.A. - Pricdmart Colombi.:1 S.A•.S.

NEW YORK LAW PROMISSORY NOTE U.S.$7,875,000.00 Dated: December 02, 2019

FOR VALUE RECEIVED, the undersigned, PRICESMART COLOMBIA S.A.S. a Simplified Stock Corporation (Sociedad por Acciones Simpl(ficada) organized and existing under the laws of Colombia (the "Borrower"), HEREBY PROMISES TO PAY to CITIBANK, N.A., (the "Lender") for the account of its Lending Office (as defined in the Credit Agreement referred to below) the principal amount of the Advance (as defined in the Credit Agreement referred to below) owing to the Lender by the Borrower pursuant to the Credit Agreement dated as of December 02, 2019 between the Borrower and the Lender (as amended or modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined) outstanding on the dates and in the amounts specified in the Credit Agreement.

The Borrower promises to pay interest on the unpaid principal amount of the Advance from the date of such Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement.

Both principal and interest are payable in lawful money of the United States to the Lender, at account number 10980495, aba 021000089, account name CITIBANK IBF ,in same day funds.

This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Advance by the Lender to the Borrower in an aggregate amount not to exceed at any time outstanding the U.S. Dollar amount first above mentioned, the indebtedness of the Borrower resulting from such Advance being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified.

PRICESMART COLOMBIA S.A.S.

By Jhon Heriberto Guerrero Carvajal Title: Alternate Legal Representative

EXHIBIT B - FORM OF NOTICE OF BORROWING

Citibank, N.A., acting through its international banking facility, as Lender under the Credit Agreement referred to below 388 Greenwich Street New York, NY 10013 December 02, 2019

Attention: Jose Alejandro Duenas Betancourt

Ladies and Gentlemen:

The undersigned, PRICESMART COLOMBIA S.A.S., refers to the Credit Agreement, dated as of[], 2019] (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), between the undersigned and the Lender, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement:

(i) The Business Day of the Proposed Borrowing is December 03, 2019.

(ii) The aggregate amount of the Proposed Borrowing is $7,875,000.00.

(iii) The Proposed Borrowing shall consist of a Term Advance.

(iv) Each Advance to be made pursuant to the Proposed Borrowing shall be initially maintained as a Eurodollar Rate Advance.

(v) The proceeds of this Loan should be credited to the following account 36930322 at Citibank NY, ABA 021000089, in the name of Pricesmart Colombia S.A.S..

(vi) The initial Interest Period for each Eurodollar Rate Advance made as part of the Proposed Borrowing is 3 months.

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing:

(A) the representations and warranties contained in Section 4.01 of the Credit Agreement and in each other Loan Document are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and

(B) no event has occurred and is continuing or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes a Default.

No Material Adverse Change has occurred since September 30, 2019.

Very truly yours,

PRICESMART COLOMBIA S.A.

By Jhon Heriberto Guerrero Carvajal Title: Alternate Legal Representative

EXHIBIT C - FORM OF ASSIGNMENT AND ACCEPTANCE

ASSIGNMENT AND ACCEPTANCE

Reference is made to the Credit Agreement dated as of December 02, 2019 (as amended or modified from time to time, the "Credit Agreement") between Pricesmart Colombia S.A.S., a Simplified Stock Corporation organized and existing under the laws of Colombia (the "Borrower") and the Lender. Terms defined in the Credit Agreement are used herein with the same meaning.

The "Assignor" and the "Assignee" referred to on Schedule 1 hereto agree as follows:

1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement as of the date hereof equal to the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement. After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the Advances owing to the Assignee will be as set forth on Schedule I hereto.

2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Loan Documents or any other instrument or document furnished pursuant thereto; and (iv) attaches each Note held by the Assignor and requests that the Borrower exchange such Notes for a new Note payable to the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto and a new Note payable to the Assignor in an amount equal to the Commitment retained by the Assignor under the Credit Agreement, respectively, as specified on Schedule I hereto.

3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.0l(e) thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Assignor and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is a sophisticated investor which has the ability to evaluate the merits and risks of an investment in the Credit Agreement, including, without limitation, the financial and political conditions in Colombia as of the date hereof, and the ability to assume the economic risks involved in such an investment; and (iv) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as the Lender.

4. Following the execution of this Assignment and Acceptance, it will be delivered to the Borrower. The effective date for this Assignment and Acceptance (the "Effective Date")

shall be the date of delivery hereof to the Borrower, unless otherwise specified on Schedule I hereto.

5. Upon such delivery to the Borrower, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of the Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents (other than its rights and obligations under the Loan Documents that are specified thereunder to survive the payment in full of the obligations of the Borrower under the Loan Documents to the extent any claim thereunder relates to an event arising prior to the Effective Date of this Assignment and Assumption).

6. Upon such delivery to the Borrower, from and after the Effective Date, the Borrower shall make all payments under the Credit Agreement and the other Loan Documents in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the other Loan Documents for periods prior to the Effective Date directly between themselves.

7. This Assignment and Acceptance and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Assignment and Acceptance and the transactions contemplated hereby shall be governed by, and construed in accordance with, the laws of the State of New York, United States of America.

8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of Schedule I to this Assignment and Acceptance by telecopier or other electronic communication shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance.

IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule l to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon.

Exhibit 10.3

U.S.$25,000,000.00

CREDIT AGREEMENT

Dated as of November 25, 2019

Between

PRICESMART COLOMBIA S.A.S

as Borrower

and

CITIBANK, N.A., acting through its international banking facility as Lender

Table of Contents

Page

ARTICLE [

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.0 I. Certain Defined Terms I SECTfON1.02. Computation of Time Periods 12 SECTION 1.03. Accounting Terms 12 SECTION 1.04. Tertns Generally 12 SECTION 1.05. Currency Equivalents Generally 12

ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCE

SECTION 2.01. The Advance 13 SECTION 2.02. Making the Advance 13 SECTION 2.03. Termination or Reduction of the Commitments 13 SECTION 2.04. Repay1nent 14 SECTION 2.05. Interest 14 SECTION 2.06. Interest Rate Determination 15 SECTION 2.07. Prepayments 15 SECTION 2.08. Increased Costs and Increased Capital 15 SECTION 2.9. Illegality 16 SECTION 2.10. Payments and Computations 17 SECTION 2.11. Taxes 17 SECTION 2.12. Mitigation Obligations 18 SECTION 2.13. Use of Proceeds 19 SECTION 2.14. Notes 19

ARTICLE III

CONDITIONS TO EFFECTIVENESS AND LENDING

SECTION19 3.01. Conditions Precedent to Effectiveness of Section 2.01 19 SECTION 3.02. Conditions Precedent to the Borrowing 21

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.01. Representations and Warranties of the Borrower 21

ii Page

ARTICLE V COVENANTS OF THE BORROWER

SECTION19 5.01. Affirmative Covenants 26 SECTION 5.02. Negative Covenants 28

ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.01. Events of Default 29

ARTICLE VII

MISCELLANEOUS

SECTION19 7.01. Amendments, Etc 32 SECTION 7.02. Notices, Etc 32 SECTION 7.03. No Waiver; Remedies 33 SECTION 7.04. Costs and Expenses; Indemnification 33 SECTION 7.05. Right of Set-off 35 SECTION 7.06. Binding Effect 35 SECTION 7.07. Assignments and Participations 35 SECTION 7.08. Governing Law 37 SECTION 7.09. Execution in Counterparts 37 SECTION 7.10. Jurisdiction; Waiver of Immunities 38 SECTION 7.11. Judgment Currency 38 SECTION 7.12. Confidentiality 39 SECTION 7.13. Patriot Act Notice 39 SECTION 7.14. Acknowledgement and Consent to Bail-In of EEA Financial Institutions 39 SECTION 7.15. Waiver of Jury Trial 40 SECTION 7.16. Severability 49 SECTION 7.17. Acknowledgements of the Borrower 40

Schedules

Schedule 1 - Commitments Schedule 4.0l(z) 5.02(a)-Existing Liens Schedule 4.0l(aa)- Existing Debt

Exhibits

Exhibit A-I - Form of New York Law Promissory Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Assignment and Acceptance

CREDIT AGREEMENT

Dated as of November 25, 2019

PRICESMART COLOMBIA S.A.S., a Simplified Stock Corporation (Sociedad par Acciones Simplificada,) organized and existing under the laws of the Republic of Colombia (the "Local Counfl:F") (the "Borrower") and Citibank, N.A. ("Citibank"), acting through its international banking facility, as Lender (as hereinafter defined), agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.0 l. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Advance" means an advance by the Lender to the Borrower pursuant to Article II

"Agreement" means this Credit Agreement, as modified, supplemented, amended, restated (including any amendment and restatement hereof), extended or renewed from time to time.

and Decree 124 of 2016 of Colombia (Colombian Anticorruption Statute) and all other applicable anti bribery and corruption laws. "Applicable Accounting Rules" has the meaning specified in Section 1.03.

"Applicable Margin" means 2.45% per annum with respect to an Advance bearing interest at the Eurodollar Rate.

"Approved Fumd” means any Fund that is administered or managed by (i) the Lender, (ii) an Affiliate of the Lender or (iii) an entity or an Affiliate of an entity that administers or manages the Lender.

["Asset Sale" means any sale, conveyance, lease, assignment, transfer, licensing or other disposition of, or the grant of any option or other right to purchase, lease or otherwise acquire, any property, business or assets of the Borrower other than those sale of current assets sales in the ordinary course of its business.]

"Assignee" has the meaning specified in Section 7.07(a).

"Assignment and Acceptance" means an assignment and acceptance entered into by the Lender and an Assignee of the Lender in substantially the form of Exhibit C hereto.

"Assignor" has the meaning specified in Section 7.07(a).

"Bail-In Action" means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

"Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of:

(a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate;

(b) I /2 of one percent per annum above the Federal Funds Rate; and

provided that, notwithstanding anything herein to the contrary, the Base Rate shall at no time be less than 1.00% per annum.

"Base Rate Advance" means an Advance that bears interest at the Base Rate.

"Borrowing" means a borrowing consisting of an Advance made by the Lender.

"Capitalized Leases" means all leases that have been or should be, in accordance with Applicable Accounting Rules, recorded as capitalized leases.

"Change in Law" means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith, (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III and (z) the CRD IV and any law or regulation which implements CRD IV in any jurisdiction, shall in each case be deemed to be a "Change in Law", regardless of the date enacted, adopted or issued.

"Change o,f Control" means any of the following: (a) the Equity Investors shall cease to own directly or indirectly 51% of the Voting Stock in the Borrower or shall cease to have the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Borrower; or (b) any Person or two or more Persons acting in concert other than the Equity Investors shall have acquired beneficial ownership (within the meaning of Rule 13d of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of the Borrower (or other securities convertible into such Voting Stock) representing 51% or more of the combined voting power of all Voting Stock of the Borrower; or (c) any Person or two or more Persons acting in concert other than the Equity Investors shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Borrower, or control over Voting Stock of the Borrower (or other securities convertible into such Voting Stock) representing [50]% or more of the combined voting power of all Voting Stock of the Borrower . "Citigroup" means Citigroup, Inc. and each subsidiary and affiliate thereof (including, without limitation, Citibank, N.A. and each of its branches wherever located) and Banco Nacional de Mexico, S.A., integrante del Grupo Financiero Citibanamex and each subsidiary and affiliate thereofand Banco de Chile and each subsidiary and affiliate thereof.

"Colombian Central Bank" means the Central Bank of Colombia (Banco de la Republica de Colombia) or any other Governmental Authority charged with the responsibility of issuing, managing and controlling legal currency in Colombia and determining foreign exchange policy."Code" means the Internal Revenue Code of 1986 of the United States of America.

"Commitment" has the meaning specified in Section 2.01.

"Connection Income Taxes" means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

"Consolidated” refers to the consolidation of accounts in accordance with Applicable Accounting Rules.

"Constituent Documents" means with respect to any Person (i) if such other Person is a corporation, its estatutos or certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to such Person's jurisdiction of organization), (ii) if such other Person is a limited liability company, the certificate of formation or articles of for111ation or organization and operating agreement, and (iii) if such other Person is a partnership, joint venture, trust or other for111 of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable governmental authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such Person.

"CRD IV" 111eans (a) Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 and (b) Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC.

payment or purchase of such Guaranteed Debt, (2) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Guaranteed Debt or to assure the holder of such Guaranteed Debt against loss, (3) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (4) otherwise to assure a creditor against loss, and (i) all Debt referred to in clauses (a) through (h) above (including Guaranteed Debt) secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt.

"Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

"EEA Financial Institution" means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clause (a) or (b) of this definition and is subject to consolidated supervision with its parent;

"EEA Member Country'" means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

"Effective Date" has the meaning specified in Section 3.01.

"Effective Interests" means, with respect to any Person, shares of capital stock of (or other mvnership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

"EU Bail-In Legislation Schedule" means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

"Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D.

"Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate Advance, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum (rounded upward to the nearest whole multiple of 1/16 of I% per annum) appearing on Reuters Screen LIBOR0I Page (or any successor page) as the London interbank offered rate for deposits in U.S. Dollars at approximately 11 :00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period by (b) a percentage equal to I 00% minus the Eurodollar Rate Reserve Percentage for such Interest Period. If the Reuters Screen LIBORO I Page (or any successor page) is unavailable, the Eurodollar Rate for any Interest Period for each Eurodollar Rate Advance shall be as reasonably determined by the Lender, subject, however, to the provisions of Section 2.07. If the Lender determines, in its sole discretion, that the Eurodollar Rate cannot be determined pursuant to this definition, the term "Eurodollar Rate" shall refer to a comparable successor rate, as agreed to between the Borrower and the Lender. Notwithstanding anything herein to the contrary, the Eurodollar Rate shall at no time be less than 0.00% per annum.

"Eurodollar Rate Advance" means an Advance that bears interest at the Eurodollar Rate.

"Events of Default" has the meaning specified in Section 6.0 I.

"Excluded Taxes" means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) any U.S. federal withholding Taxes imposed under FATCA, (c) Taxes attributable to such Recipient's failure to comply with Section 2.12(f) and (d) The Republic of Colombia withholding Taxes at a rate in excess of the greater of (i) lowest applicable withholding tax rate in The Republic of Colombia or (ii) if any Republic of Colombia withholding Tax is imposed at a rate higher than the rate stated in (i) as a result of a Change in Law, such higher rate..

"Existing Debt" has the meaning specified in Section 5.02(b)(i)(F).

"Existing Liens" means the Liens existing on the Effective Date and described on Schedule 4.0 I (z) 5.02(a) hereto.

"FATCA" means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(6)(1) of the Code. "FCPA" means the U.S. Foreign Corrupt Practices Act of 1977, as amended from time to time.

"Funded Debt" of any Person means Debt in respect of the Advance, in the case of the Borrower, and all other Debt of such Person that by its terms matures more than one year after the date of its creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year after such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year after such date, including, without limitation, all amounts of Funded Debt of such Person required to be paid or prepaid within one year after the date of its creation. "Governmental Authority" means any nation or government, any state, province, city, municipal entity or other political subdivision thereof, and any governmental, executive, legislative, judicial, administrative or regulatory agency, department, authority, instrumentality, commission, board, bureau, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, whether federal, state, provincial, territorial, local or foreign, including any supra-national bodies, such as the European Union or the European Central Bank, and any public international organizations, such as the World Bank and the IMF.

exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross- currency rate swap transaction, currency option, credit protection transaction, credit swap, credit default swap, credit default option, total return swap, credit spread transaction, repurchase transaction, reverse repurchase transaction, buy/sell-back transaction, securities lending transaction, weather index transaction or forward purchase or sale of a security, commodity or other financial instrument or interest (including any option with respect to any of these transactions) or (ii) a transaction which is a type of transaction that is similar to any transaction referred to in clause (i) above that is currently, or in the future becomes, recurrently entered into in the financial markets (including terms and conditions incorporated by reference in such agreement) and which is a forward, swap, future, option or other derivative on one or more rates, currencies, commodities, equity securities or other equity instruments, debt securities or other debt instruments, economic indices or measures of economic risk or value, or other benchmarks against which payments or deliveries are to be made.

"Interest Period” means [the period commencing on the date of any Advance and ending on the corresponding date of the third month thereafter and, thereafter, each subsequent third month period commencing on the last day of the immediately preceding Interest Period; provided, however, that:

(i) if a scheduled repayment of principal would otherwise occur during an Interest Period, such Interest Period shall end on the date of such scheduled repayment;

"Internal Revenue Code" means Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto.

"Lender" means Citibank or any Person that shall become a party hereto pursuant to Section 7.07, for so long as Citibank or such Person shall be a party to this Agreement.

"Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property.

"Loan Documents" means (a) this Agreement, and (b) each Note, in each case as amended from time to time.

"Material Adverse Effect" means a material adverse effect on (a) the business, condition (financial or otherwise), operations, pe1formance, properties or prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower or any other Person to consummate the transactions contemplated hereby to occur on the date of the disbursement of any Advance hereunder; (c) the rights and remedies of the Lender under any Loan Document or (d) the ability of the Borrower to perform its obligations under any Loan Document to which it is a party.

"Maturity Date" means November 27, 2024.

"Notice of Borrowing" has the meaning specified in Section 2.02(a).

"OFAC' means the Office of Foreign Assets Control of the U.S. Department of the Treasury.

a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Advance or Loan Document).

"Participant" has the meaning specified in Section 7.07(d).

"Participant Register" has the meaning specified in Section 7.07(d).

"Patriot Act" means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. I 07-56, signed into law October 26, 200 I, as amended from time to time.

"Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(b) hereof; (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 30 days; (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations; and (d) easements, rights of way and other encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use of such prope1ty for its present purposes.

"Person" means an individual, pa1tnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof, or any other entity.

"Process Agent" has the meaning specified in Section 7.10(b).

"Recipient" means the Lender.

"Regulation D" means Regulation D of the Board of Governors of the U.S. Federal Reserve System, as in effect from time to time.

"Risk Transfer" has the meaning specified in Section 7.07(e).

"Sanctioned Jurisdiction" means, at any time, a country or territory that is, or whose government is, the subject of Sanctions.

"Sanctions" means economic, trade, or financial sanctions, requirements, or embargoes imposed, administered, or enforced from time to time by any Sanctions Authority.

"Solvent" means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature, and (cl) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

"Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate, or other business entity of which (or in which) more than 50% of (a) the issued and outstanding Voting Stock to elect a majority of the Board of Directors or other governing body of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate, or other business entity is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Taxes" means all present or future taxes, levies, imposts, duties, deductions, withholdings (including, without limitation, backup withholding and value-added tax), assessments, fees or other charges imposed by any Governmental Authority, irrespective of the manner in which they are collected or assessed, including any interest, additions to tax or penalties applicable thereto.

"Termination Date" means the earlier of October 15, 2019 and the elate of termination of the Commitment pursuant to Section 6.0 I.

"United States" or "U.S." means the United States of America.

"U.S. Dollars", "U.S. $"and"$" mean the lawful currency of the United States.

"Withholding Agent" means the Borrower and the Lender.

"Write-Down and Conversion Powers" means, with respect to any EEA Resolution Authority, the write- down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail- In Legislation Schedule.

SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with consistent with those applied in the preparation of the financial statements referred to in Section 4.0 I (e) ("Applicable Accounting Rules"); provided that (a) if there is any change in Applicable Accounting Rules from such principles applied in the preparation of the financial statements referred to in Section 4.0l(e), the Borrower shall give prompt notice of such change to the Lender, (b) if the Borrower notifies the Lender that the Borrower requests an amendment of any provision hereof to eliminate the effect of any change in Applicable Accounting Rules (or the application thereof) (or if the Lender requests an amendment of any provision hereof for such purpose), regardless of whether such notice is given before or after such change in Applicable Accounting Rules (or the application thereof), then such provision shall be applied on the basis of Applicable Accounting Rules as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision is amended in accordance herewith.

SECTION 1.04. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The word "will" shall be construed to have the same meaning and effect as the word "shall." Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein," "hereof' and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any paiiicular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (f) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and prope11ies, including cash, securities, accounts and contract rights.

SECTION 1.05. Currency Equivalents Generally. Any amount specified in this Agreement (other than in Articles 11 and V) or any of the other Loan Documents to be in U.S. Dollars shall also include the equivalent of such amount in any currency other than U.S. Dollars, such equivalent amount to be

determined at the rate of exchange quoted by Citibank, N.A. in New York, New York at the close of business on the Business Day immediately preceding any date of determination thereof, to prime banks in New York, New York for the spot purchase in the New York foreign exchange market of such amount in U.S. Dollars with such other currency.

ARTICLE Il

AMOUNTS AND TERMS OF THE ADVANCE

SECTION 2.01. The Advance. The Lender agrees, on the terms and conditions hereinafter set forth, to make a single advance ( an "Advance") to the Borrower on any Business Day during the period from the Effective Date until the Termination Date in an amount not to exceed U.S. $25,000,000.00 (the Lender's "Commitment"). Amounts borrowed under this Section 2.0 I and repaid or prepaid may not be reborrowed.

SECTION 2.02. Making the Advance. (a) The Borrowing shall be made on notice, given not later than 11 :00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Borrowing, by the Borrower to the Lender. The notice of borrowing (a "Notice of Borrowing") shall be by telephone, confirmed immediately in writing, or telecopier or electronic communication, in substantially the form of Exhibit B hereto, specifying therein the requested date of such Borrowing. Upon fulfillment of the applicable conditions set forth in Article III, the Lender will make the funds available to the Borrower at the bank account specified on the Notice of Borrowing. The Lender may make the Advance through its Affiliates.

(b) The Notice of Borrowing shall be irrevocable and binding on the Borrower. The Borrower shall indemnify the Lender against any loss, cost or expense incurred by the Lender as a result of any failure to fulfill on or before the elate specified in the Notice of Borrowing the applicable conditions set forth in Article III, including, , cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Lender to fund the Advance when such Advance, as a result of such failure, is not made on such date.

SECTION 2.03. Termination or Reduction of the Commitments.

(a) Mandatory.

(i) The Lender's Commitment shall be automatically and permanently terminated on the Termination Date.

(ii) If (x) the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.0 l(a)[(ii) or 5.02 U)(ii)], or (y) any representation or warranty made by the Borrower (or any of its officers) in Section 4.0l(w), (x) or (y) shall prove to have been incorrect in any material respect when made or cleemec! made; then, in each case, the Lender may elect thereafter in its sole discretion, to terminate its Commitment upon the giving of written notice thereof to the Borrower, and upon delivery of such notice, the Borrower shall within five (5) Business Days, prepay the full the outstanding principal amount of the Advance then outstanding,

together with any other amounts payable under the Loan Documents, together with accrued interest to the elate of such prepayment on the principal amount prepaid.

Period Date Payment Notional 0 27-Nov-19 $ 25,000,000 1 27-Feb-20 $ - $ 25,000,000 2 27-May-20 $ - $ 25,000,000 3 27-Aug-20 $ - $ 25,000,000 4 27-Nov-20 $ - $ 25,000,000 5 01-Mar-21 $ 625,000 $ 24,375,000 6 27-May-21 $ 625,000 $ 23,750,000 7 27-Aug-21 $ 625,000 $ 23,125,000 8 29-Nov-21 $ 625,000 $ 22,500,000 9 28-Feb-22 $ 625,000 $ 21,875,000 10 27-May-22 $ 625,000 $ 21,250,000 11 29-Aug-22 $ 625,000 $ 20,625,000 12 28-Nov-22 $ 625,000 $ 20,000,000 13 27-Feb-23 $ 625,000 $ 19,375,000 14 29-May-23 $ 625,000 $ 18,750,000 15 28-Aug-23 $ 625,000 $ 18,125,000 16 27-Nov-23 $ 625,000 $ 17,500,000 17 27-Feb-24 $ 625,000 $ 16,875,000 18 27-May-24 $ 625,000 $ 16,250,000 19 27-Aug-24 $ 625,000 $ 15,625,000 20 27-Nov-24 $ 15,625,000 $ -

SECTION 2.05. Interest. (a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of the Advance owing to the Lender from the elate of such Advance until such principal amount shall be paid in full, at a rate per annum equal at all times during each Interest Period to the sum of (x) the Eurodollar Rate for such Interest Period plus (y) the Applicable Margin, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Advance shall be paid in full.

clause (a) above; provided, however, that following acceleration of the Advance pursuant to Section 6.01, Default Interest shall accrue and be payable hereunder whether or not previously required by the Lender.

SECTION 2.06. Interest Rate Determination. (a) If, on or prior to the first clay of the Interest Period:

ii. the Lender determines that for any reason in connection with any request for a Eurodollar Rate Advance or a continuation thereof that Dollar deposits are not being offered to banks in the London interbank Eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Advance1 ,or (B) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Advance does not adequately and fairly reflect the cost to such Lender of funding such Advance,

SECTION 2.07. Prepayments. (a) Optional. The Borrower may, upon at least five Business Days' irrevocable notice to the Lender stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding principal amount of the Advance in whole or in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of at least U.S. $500.000,00 or an integral multiple of U.S. $ I 00.000,00 in excess thereof, (y) each prepayment of the Advance shall be applied in direct order of maturity to the remaining scheduled installments of principal and (z) the Borrower shall be obligated to reimburse the Lender in respect thereof pursuant to section 7.04 (c).

SECTION 2.08. Increased Costs and Increased Capital. (a) Increased Costs Generally. If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets oi deposits with or for the account of, or credit extended or participated in by, the Lender (except any reserve requirement reflected in the Eurodollar Rate);

(ii) subject the Lender to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) or (c) through (cl) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii) impose on the Lender or the London interbank market any other condition, cost or expense (other than taxes) affecting this Agreement or Advance made by the Lender or participation therein; and the result of any of the foregoing shall be to increase the cost to the Lender of making, converting to, continuing or maintaining the Advance or of maintaining its obligation to make any such Advance, or to reduce the amount of any sum received or receivable by the Lender hereunder (whether of principal, interest or any other amount), then the Borrower will from time to time, upon request by the Lender, pay to the Lender such additional amount or amounts as will compensate the Lender for such additional costs incurred or reduction suffered.(b) Capital Adequacy. If the Lender determines that any Change in Law affecting the Lender or any lending office of the Lender or the Lender's holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on the Lender's capital or on the capital of the Lender's holding company, if any, as a consequence of this Agreement, or the Commitment of the Lender or the Advance made by the Lender to a level below that which the Lender or the Lender's holding company could have achieved but for such Change in Law (taking into consideration the Lender's policies and the policies of the Lender's holding company with respect to capital adequacy), then the Borrower will from time to time, upon request by the Lender, pay to the Lender such additional amount or amounts as will compensate the Lender or the Lender's holding company for any such reduction suffered.

(c) Delay in Requests. Failure or delay on the pa11 of the Lender to demand compensation pursuant to this Section shall not constitute a waiver of the Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate the Lender pursuant to this Section for any increased costs incurred or reductions suffered more than three (3) months prior to the date that the Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions, and of the Lender's intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof).

the foregoing, in the event that the Lender has notified the Borrower that it is not unlawful for such Lender to maintain Advance accruing interest at a rate determined by reference to the Base Rate, (i) each Eurodollar Rate Advance held by the Lender will automatically, upon such election, convert into a Base Rate Advance and (ii) the obligation of the Lender to make or maintain Eurodollar Rate Advance shall be suspended, in each case until the Lender shall notify the Borrower that the Lender has determined that the circumstances causing such suspension no longer exist.

SECTION 2.10. Payments and Computations. (a) The Borrower shall make each payment or amount due under this Agreement, each Note and the other Loan Documents, without giving effect to any right of counterclaim or set-off, not later than 11:00 A.M. (New York City time) on the day when due in freely transferable lawful money of the United States to the Lender at its Account No. 10980495, which the Lender maintains with Citibank, N.A., 388 Greenwich Street, New York, NY 10013, United States of America, ABA No. 021000089, Account Name: CITIBANK IBF, Reference [•] in same day funds.

SECTION 2.11. Taxes. (a) Defined Terms. For purposes of this Section 2.12, the term "applicable law" or "Applicable Law" includes FATCA.

(d) Indemnification by the Borrower. The Borrower shall indemnify the Lender, within ten (30) days after written demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by the Lender or required to be withheld or deducted from a payment to the Lender and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by the Lender shall be conclusive absent manifest error.

(e) Evidence of Payments. As soon as practicable after any payment of Taxes by the Borrower to a Governmental Authority pursuant to this Section 2.11, the Borrower shall deliver to the Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender. In the case of any payment hereunder by or on behalf of the Borrower through an account or branch outside the United States or by or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines in its good faith interpretation of applicable law that no Taxes or Other Taxes are payable in respect thereof, or if Lender and the Borrower do not agree on a determination of the Taxes or Other Taxes payable in respect thereof, the Borrower shall, at the Lender's request, furnish, or shall cause such payor to furnish, to the Lender an opinion of counsel acceptable to the Lender suppo1ting the Borrower's position, in any case notwithstanding the Borrower's obligations in respect of Taxes or Other Taxes as set forth in this Section 2.11. For purposes of this Section 2.11, the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code.

(f) Status of Lender. If the Lender is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document it shall upon written reasonable request of the Borrower (but only if the Lender is lawfully able to do so) use commercially reasonable effo1ts to provide within a reasonable time the Borrower with such forms, documents or other certifications, appropriately completed and executed, as will permit such payments to be made without withholding or at a reduced rate of withholding. Notwithstanding anything to the contrary in the preceding sentence, the completion, execution and submission of such documentation shall not be required ifin the Lender's reasonable judgment such completion, execution or submission would subject the Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of the Lender. Survival. Each pa1ty's obligations under this Section 2.11 shall survive any assignment of rights by the Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

SECTION 2.13. (Use of Proceeds. The proceeds of the Advance shall be available (and the Borrower agrees that it shall use such proceeds) to make certain capital expenditures in connection with the construction of new facilities and for working capital purposes of the Borrower in Colombia.

SECTION 2.14. Notes. (a) The Advance shall be evidenced by a Note. Each Note shall (I) be issued by the Borrower, (2) be payable to the Lender and be dated the Closing Date, (3) be in a stated principal amount equal to the Advance made on the Closing Date, (4) provide the amortization schedule for the relevant Advances, (5) bear interest as provided in this Agreement, and (6) be in English. The date and amount of each payment of principal and interest made on the Advances shall be recorded by the Lender on its books, which recordations shall, in the absence of manifest error, be conclusive as to such matters; provided, that the failure of the Lender to make any such recordation or any error therein shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Note. Upon the request of the Lender, the borrower shall, no later than (5) Business Days following the date of any such request, issue one or more new Notes to reflect any change in the interest rate applicable to the Advance or any assignment of the Lender's commitment. Each new Note shall be executed before a notary public in the Local Country. The issuance, execution and delivery of any Note pursuant to this Agreement shall not be, or be construed as, a novation with respect to this Agreement or any other agreement between the Lender and the Borrower and shall not limit, reduce or otherwise affect the obligations or rights of the Borrower under this Agreement, and the rights and claims of the Lender under any Note shall not replace or supersede the rights and claims of the Lender under this Agreement.

(b) Notwithstanding discharge in full of any Note, if the amount (including, without limitation, Default Interest and additional amounts with respect to Taxes due pursuant to Section 2.1 I of this Agreement and others in connection therewith) paid or payable to the Lender under such Note (whether arising from the enforcement thereof in the Local Country or otherwise) is less than the aggregate of amounts and payments due and payable to the Lender in accordance with this Agreement with respect to the Advance, or portion thereof, evidenced by such Note, the Borrower agrees, to the fullest extent it may effectively do so, to pay to the Lender upon demand such difference in accordance with Section 2.1O hereunder and as otherwise specified in this Agreement.

ARTICLE III

CONDITIONS TO EFFECTIVENESS AND LENDING

(d) The Borrower shall have notified the Lender in writing as to the proposed Effective Date.

(e) The Borrower shall have paid all accrued fees and expenses of the Lender (including the accrued fees and expenses of counsel to the Lender).

(t) On the Effective Date, the following statements shall be true and the Lender shall have received a certificate signed by a duly authorized officer of the Borrower, dated the Effective Date, stating that:

(i) The representations and warranties contained in Section 4.0 I and in each other Loan Document are true and correct in all material respects on and as of the Effective Date, and

(ii) No event has occurred and is continuing that constitutes a Default.

(g) The Lender shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Lender:

(i) This Agreement, duly executed by the Borrower and the Lender.

(ii) Certified copies of the (A), a certificate of existence and legal representation ("certificado de existencia y representaci6n legal")( the "Certificate") of the Borrower issued by the Chamber of Commerce of Bogota; and (B) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to each Loan Document, and a certificate of the Secretary or an Assistant Secretary of the Borrower certifying the absence of any change or amendment to the Constituent Documents of the Borrower since the date the Certificate was issued.

(iii) A certificate of the Secretary or an Assistant Secretary or ad hoc Secretary of the Borrower ce1tifying the names and true signatures of the officers of the Borrower included as legal representatives in the Ce1tificate and therefore authorized to sign each Loan Document to which it is or is to become a party and the other documents to be delivered hereunder and thereunder.

(iv) A letter from the Process Agent indicating its acceptance of the appointment by the Borrower pursuant to Section 7.10.

SECTION 3.02. Conditions Precedent to the Borrowing.

The obligation of the Lender to make the Advance on the occasion of the Borrowing shall be subject to the conditions precedent that:

(i) the Effective Date shall have occurred;

(ii) the Lender shall have received a Notice of Borrowing as required by Section 2.02(a);

(iii) the Lender shall have received at the Closing Date the Note evidencing such Advance

(iv) the representations and warranties contained in Section 4.0 I and in each other Loan Document are correct in all material respect on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date;

(v) no event has occurred and is continuing, or would result from such Borrowing or from the application of the proceeds therefrom, that constitutes a Default;

(vi) there shall have occurred no Material Adverse Change since September 30, 2019 since the Effective Date; and

(vii) the Lender shall have received such other approvals, opinions or documents as the Lender may reasonably request.

The delivery of a Notice of Borrowing and the acceptance by the Borrower of the proceeds of the Advance shall constitute a representation and warranty by the Borrower that on the date of such Advance (both immediately before and immediately after giving effect to such Advance) the conditions contained in this Article III have been satisfied or waived.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:

(a) The Borrower is a Simplified Stock Corporation duly organized, validly existing under the laws of the Local Country and has all requisite corporate power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own, lease and operate its properties and to carry on its business as now conducted and as proposed to be condi1cted.

(b) The execution, delivery and performance by the Borrower of this Agreement and each other Loan Document, and the consummation of the transactions contemplated hereby, are within the Borrower's organizational powers, have been duly authorized by all necessary organizational action, and do not (i) contravene the Borrower's Constituent Documents, (ii) violate any applicable law, rule, regulation (including, without limitation, Regulation X of the Boards of Governors of the Federal Reserve System) , order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of any contractual restriction binding on or affecting the Borrower or any of its properties, or (iv) result in the creation or imposition of any Lien on any assets of the Borrower.

(d) This Agreement has been, and each other Loan Document when delivered hereunder has been or will have been, duly executed and delivered by the Borrower. This Agreement is, and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with their respective terms.

(e) (i) The Consolidated balance sheet of the Borrower as at December 31, 2018,and the related Consolidated statements of income and cash flows of the Borrower for the fiscal year then ended, accompanied by an opinion of Ernst & Young Audit S.A.S. independent public accountants, and included in the latest report filed by the Borrower and the Consolidated balance sheet of the Borrower as at August 31, 2018, and the related statements of income and cash flows of the Borrower for the nine months then ended, duly certified by the chief financial officer of the Borrower, copies of which have been furnished to the Lender, fairly present, subject, in the case of said balance sheet as at August 31, 2018, and said statements of income and cash flows for the nine months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower as at such elates and the Consolidated results of the operations of the Borrower for the periods ended on such elates, all in accordance with Applicable Accounting Rules consistently applied. The Borrower has no liabilities, obligations or commitments of a type required to be reflected on a balance sheet prepared in accordance with Applicable Accounting Rules except: (i) those which are adequately reflected or reserved against in the Consolidated balance sheet as at December 3 l, 2018 and (ii) those which have been incurred in the ordinary course of business since December 31, 2018 and which are not material in amount.

(ii) Since September 30, 2019, there has been no Material Adverse Change.

(g) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the U.S. Federal Reserve System), and no proceeds of the Advance will be used for any purpose which violates or is inconsistent with the provisions of Regulation lJ or Regulation X of the Board of Governors of the Federal Reserve System or to purchase or carry any margin stock or to

extend credit to others for the purpose of purchasing or carrying any margin stock or to refinance or refund Debt originally incurred for such purpose.

U) (i) The Borrower have good and sufficient legal title to all its assets and properties that are material to its businesses, except for minor defects in title that do not interfere with their ability to conduct their respective businesses as currently conducted or to utilize such properties for their intended purposes, and, to the best of its knowledge, none of such assets or properties is subject to any Liens, except those listed on [Schedule 4.0l(z) and as otherwise permitted by Section 5.02(a)].

(ii) The properties of the Borrower are insured with financially sound and reputable insurance companies (not being Affiliates thereof), in such amounts, with such deductibles and covering such risks as are customarily maintained by Persons engaged in a similar business, owning similar properties and operating in similar localities where the Borrower and its Subsidiaries maintain their principal places of operations.

(k) The Borrower own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights that arc reasonably necessary for the operation of their respective businesses, without conflict in any material respects with the rights of any other Person. No slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by any of the Borrower or its Subsidiaries infringes upon any rights held by any other Person. No claim or litigation regarding any of the foregoing is pending or, to the knowledge of the Borrower, threatened.

(I) No income, stamp or other taxes (other than taxes on, or measured by, net income or net profits) or levies, imposts, deductions, charges, compulsory loans or withholdings whatsoever are or will be, under applicable law in the Local Country, imposed, assessed, levied or collected by the Local Country or any political subdivision or taxing authority thereof or therein either (i) on or by virtue of the execution or delivery of any Loan Document or (ii) on any payment to be made by the Borrower pursuant to any Loan Document.

language), it is not necessary that this Agreement or any other Loan Document or any other document be filed or recorded with any court or other authority in the Local Country or that any stamp or similar tax be paid on or in respect of this Agreement or any other Loan Document, in addition to those requirements set forth by Colombian Central Bank and the applicable Colombian foreign exchange regulation. The submission to jurisdiction, appointment of the Process Agent, consents and waivers by the Borrower in Section 7.10 of the Agreement are valid and irrevocable. It is not necessary in order for the Lender to enforce any rights or remedies under the Loan Documents or solely by reason of the execution, delivery and performance by the Borrower of the Loan Documents that the Lender be licensed or qualified with any Governmental Authority in the Local Country, or be entitled to carry on business in any of the foregoing.

(o) The Borrower is subject to civil and commercial law with respect to its obligations under the Loan Documents, and the execution, delivery and performance by the Borrower of the Loan Documents constitute private and commercial acts (jure gestionis acts)rather than public or governmental acts Ourm imperf; acts). None the Borrower or any its respective properties has any immunity from jurisdiction of any court or from set-off or any legal process (whether through service or notice, attachement prior to judgment, attachement in aid of execution, execution or otherwise) under the laws of the Unites States, the Local Country or any other relevant jurisdiction in respect of its obligations under the Loan Documents.

(s) The Borrower is not required to register as an "investment company", as such term is defined in the Investment Company Act of 1940, as amended.

(u) The Borrower is Solvent.

(w) None of the Borrowers or any of is respective directors, officers, or employees or, to the knowledge of the Borrower after due inquiry or its parents or agents are a Sanctioned Person, or located, organized or resident in a Sanctioned Jurisdiction.

(x) The operations of the Borrower, and to the knowledge of the Borrower after due inquiry, its parents are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements, as amended, the applicable money laundering statutes of all jurisdictions where the Borrower and its parents conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental or regulatory agency (collectively, the "Anti-Money Laundering Laws"), and no action, suit or proceeding by or before any court or Governmental Authority or body or any arbitrator involving the Borrower or any of its Subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Borrower after due inquiry, threatened.

(y) [Set forth on Schedule 4.0l(z) hereto is a complete and accurate list of all Liens on the property or assets of the Borrower and each of its Subsidiaries, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of the Borrower or such Subsidiary subject thereto.

(z) Set forth on Schedule 4.01 (aa) hereto is a complete and accurate list of all Existing Debt of the Borrower and each of its Subsidiaries, showing as of the date hereof the obligor, the creditor and the principal amount outstanding thereunder. Neither the Borrower nor any of its Subsidiaries is in default in any manner under any provision of the Existing Debt, where such default could reasonably be expected to result in a Material Adverse Effect.

(aa) Under current laws and regulations of the Local Country and each political subdivision thereof, all interest, principal, premium, if any, and other payments due or to be made on the Advance or otherwise pursuant to the Loan Documents may be freely transferred out of the Local Country and may be paid in, or freely converted into, U.S. Dollars, subject to compliance with foreign exchange regulations in the Local Country.

(cc) No Default or Event of Default has occurred and is continuing.

ARTICLE V

COVENANTS OF THE BORROWER

SECTION 5.0 I. Affirmative Covenants. So long as the Advance shall remain unpaid, any obligation of the Borrower under any Loan Document shall remain outstanding or the Lender shall have any Commitment hereunder, the Borrower will:

(a) Compliance with Laws, Etc. (i) Comply, (A) with all applicable Anti-Corruption Laws, (8) with all Sanctions and (C) in all material respects, with all other Applicable Laws, such compliance to include, without limitation, compliance with Environmental Laws; and (ii) implement, maintain and continue to maintain in effect, and enforce, policies and procedures to ensure compliance by the Borrower, and its respective directors, officers, employees, Affiliates and agents with Anti Corruption Laws, Anti-Money Laundering Laws and all applicable Sanctions.

(b) Payment of Taxes, Etc. Pay and discharge, before the same shall become delinquent, (i) all Taxes and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that the Borrower shall not be required to pay or discharge any such Tax or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its prope1ty and becomes enforceable against its other creditors.

(c) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar prope1ties in the same general areas in which the Borrower operates.

(d) Preservation of Organizational Existence, Etc. Preserve and maintain, , its organizational existence, rights (charter and statutory), permits, approvals, licenses, privileges and franchises; provided, however, that the Borrower and its Subsidiaries may consummate any merger or consolidation permitted under Section 5.02(c); provided, further, that the Borrower shall not be required to preserve any right or franchise if the Board of Directors of the Borrower shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower, such Subsidiary or the Lender.

(e) Visitation Rights. At any reasonable time and from time to time but no more than once per quarter, permit the Lender or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower, and to discuss the affairs, finances and accounts of the Borrower with any of their officers or directors and with their independent certified public accountants.

(g) Maintenance of Properties, Etc. Maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted.

(h) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under this Agreement with any of their Affiliates on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate.

(i) Reporting Requirements. Furnish to the Lender:

(i) [as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the end of such quarter and Consolidated and consolidating statements of income and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, duly certified (subject to year-end audit adjustments) by the chief financial officer of the Borrower as having been prepared in accordance with Applicable Accounting Rules.

(ii) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the annual audit report for such year for the Borrower and its Subsidiaries, containing Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the end of such fiscal year and Consolidated and consolidating statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal year, in each case accompanied by an opinion acceptable to the Lender by Ernst & Young Audit S.A.S. or other independent public accountants acceptable to the Lender (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit). as soon as available and in any event no later than 90 days after the end of each fiscal year of the Borrower, forecasts prepared by management of the Borrower, in form satisfactory to the Lender, of balance sheets, income statements and cash flow statements on a monthly basis for the fiscal year following such fiscal year then ended and on an annual basis for each fiscal year thereafter until the Maturity Date;

(iii) as soon as possible and in any event within five (5) Business Days after the occurrence of each Default continuing on the date of such statement, a statement of the chief financial officer of the Borrower setting faith details of such Default and the action that the Borrower has taken and proposes to take with respect thereto;

(v) such other information respecting the Borrower or any of its Subsidiaries as the Lender may from time to time reasonably request;

(i) Permitted Liens,

(ii) purchase money Liens upon or in any real property or equipment acquired or held by the Borrower or any Subsidiary in the ordinary course of business to secure the purchase price of such property or equipment or to secure Debt incurred solely for the purpose of financing the acquisition of such property or equipment, or Liens existing on such property or equipment at the time of its acquisition (other than any such Liens created in contemplation of such acquisition that were not incurred to finance the acquisition of such property) or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided, hoi,vever, that no such Lien shall extend to or cover any properties of any character other than the real prope1ty or equipment being acquired, and no such extension, renewal or replacement shall extend to or cover any properties not theretofore subject to the Lien being extended, renewed or replaced, provided, further, that the aggregate principal amount of the indebtedness secured by the Liens referred to in this clause (ii) shall not exceed the amount specified therefor in Section 5.02(d) (iii) at any time outstanding,

(iii) the Liens existing on the Effective Date and described on Schedule 5.02(a) hereto,

(iv) other Liens securing Debt in an aggregate principal amount not to exceed U.S. $500,000.00 (or its equivalent in other currencies) at any time outstanding, and

(c) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as required by Applicable Accounting Rules. (d) [Sales, Etc. of Assets. Consummate any Asset Sale, except (i) sales of inventory in the ordinary course of its business, (ii) in a transaction authorized by subsection (c) of this Section and (iii) sales of assets for fair value in an aggregate amount not to exceed U.S.$25,000,000.00 (or the equivalent in other currencies) in any year, provided that in the case of the sale of any asset in a single

transaction or a series of related transactions in an aggregate amount exceeding U.S.$12,500,000.00 (or the equivalent in other currencies), the fair value of such asset shall have been determined in good faith by the General Shareholders Assembly of the Borrower and (iv) sales of assets for fair value in an aggregate amount exceeding $25,000,001,00 (or the equivalent in other currencies) in any year, subject to the previous approval of the Lender.

(e) Change in Nature of Business. Make, or permit any of its Subsidiaries to make, any material change in the nature of its business as carried on at the date hereof

(f) Change in nature of business. Make, or permit any of its Subsidiaries to make, any material change in the nature of its business as carried on at the elate hereof.

(g) Amendment of Constituent Documents. Amend its Constituent Documents in any respect which would reasonably be expected to have a Material Adverse Effect.

(h) Use of Proceeds.

(i) Use the proceeds of the Advance except in accordance with Section 2.13.

(ii) Directly or indirectly, use any part of any proceeds of the Advance or lend, contribute, or otherwise make available such proceeds, or shall permit any of its parents or Subsidiaries, or any of its or their respective directors, officers, or employees, or to the knowledge of the Borrower after clue inquiry, the Affiliates or agents of the Borrower or any of its or their respective Subsidiaries, directly or indirectly, to use any part of any proceeds of the Advance or lend, contribute, or otherwise make avai!able such proceeds, in each case, (A) to fund or facilitate any activities or business of or with any Person that, at the time of such funding or facilitation, is a Sanctioned Person, (B) to fund or facilitate any activities or business of or in any Sanctioned Jurisdiction, (C) in any manner that would result in a violation by any Person of Sanctions, or (D) in violation of applicable law, including, without limitation, Anti-Corruption Laws. (iii) Use the proceeds of the Advance other than to finance the non- U.S. operations of the Borrower or the Borrower's Affiliates located outside the United States.

ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing:

(a) the Borrower shall fail to pay (i) when and as required to be paid herein, any principal of the Advance when the same becomes clue and payable, or (ii) any interest on the Advance or shall fail to make any other payment of fees or other amounts under any Loan Document, in each case under this clause (ii), within three days after when the same becomes clue and payable; or

(c) (i) the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.0l(a)(ii), (d), (e) or U)(iv), or 5.02 or [5.03], or (ii) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 or more days after the earlier of the date on which (A) any officer of the Borrower becomes aware of such failure or (B) written notice thereof shall have been given to the Borrower by the Lender; or the Borrower or any of its Subsidiaries shall fail to pay any principal of, premium of, interest on, or any other amount payable in respect of, any Debt that is outstanding in a principal or notional amount of at least [U.S. $2,000,000.00] (or its equivalent in other currencies) in the aggregate (but excluding Debt outstanding hereunder) of the Borrower, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt, or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or otherwise to cause, or to permit the holder thereof to cause such Debt to mature; or any such Debt shall be declared to be due and payable, or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or clefeased, or an offer to prepay, redeem, purchase or clefease such Debt shall be required to be made, in each case prior to thestatecl maturity thereof, or the Borrower shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any Debtor Relief Law, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain unclismissecl or unstayecl for a period of 30 or more days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Borrower or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e);

(cl) or

(e) judgments or orders for the payment of money in excess of U.S. [$2,000,000.00] (or its equivalent in other currencies) in the aggregate shall be rendered against the Borrower and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 or more consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(i) any non-monetary judgment or order shall be rendered against the Borrower that could be reasonably expected to have a Material Adverse Effect, and there shall be any period of 30 or more consecutive clays during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(g) the obligations of the Borrower under any Loan Document shall fail to rank at least pari passu with all other unsecured and unsubordinated Debt of the Borrower; or

(h) any provision of any Loan Document shall cease to be valid and binding on or enforceable against the Borrower, or the Borrower shall so assert or state in writing, or the obligations of the Borrower under any Loan Document shall in any way become illegal; or

(i) either (i) any authority asserting or exercising governmental or police powers in the Local Country shall take any action, including a general moratorium, canceling, suspending or deferring the obligation of the Borrower to pay any amount of principal or interest or other amount payable under any Loan Document or preventing or hindering the fulfillment by the Borrower of its obligations under any Loan Document or having any effect on the currency in which the Borrower may pay its obligations under any Loan Document or on the availability of foreign currencies in exchange for the lawful currency of the Local Country (including any requirement for the approval to exchange foreign currencies for the lawful currency of the Local Country) or otherwise or (ii) the Borrower shall, voluntarily or involuntarily, participate or take any action to participate in any facility or exercise involving the rescheduling of Borrower's debts or the restructuring of the currency in which the Borrower may pay its obligations; or

U) any authority asserting or exercising governmental or police powers in the Local Country or any Person acting or purporting to act under such authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial portion of the property of the Borrower; or

(k) a Change of Control shall have occurred; or Pricesmart Inc, a Delaware Corporation, ceases to beneficially own, directly or indirectly, at least sixty percent (60%) of the outstanding.

(I) a Material Adverse Change shall have occurred and be continuing; then, and in any such event, the Lender (i) may, by notice to the Borrower, declare its obligation to make the Advance to be terminated, whereupon the same shall immediately terminate, and (ii) may, by notice to the Borrower, declare the Advance, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be immediately due and payable, whereupon the Advance, all such interest and all such amounts shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under clause (e) above, (A) the obligation of the Lender to make the Advance shall automatically be terminated and (B) the Advance, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.

ARTICLE VII

MISCELLANEOUS

SECTION 7.0 I. Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

SECTION 7.02. Notices, Etc. (a) Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices and other communications provided for hereunder shall be in writing and shall be delivered by hand or overnight courier service (including international courier), mailed by certified or registered mail or sent by facsimile, if to the Borrower, at its address at Cra 9A No. 99-02 Piso 3, Bogota Colombia, Attention: Jose Alejandro Duenas Betancourt; and if to the initial Lender, at its Lending Office specified opposite its name on the signature pages below; if to any other Lender, at its Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; or, as to the Borrower or the Lender, at such other address as shall be designated by such party in a written notice to the other party. Delivery by telecopier or other electronic communication of an executed counterpa11 of any amendment or waiver of any provision of this Agreement, any other Loan Document or any Exhibit hereto or thereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications, to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

(b) Electronic Communications. Notices and other communications to the Lender hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Lender. The Lender or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. Unless the Lender otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgement from the intended recipient (such as by the "return receipt requested” function, as available, return e-mail or other written acknowledgement) and (ii) notices or communications posted to

an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, e-mail or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient.

SECTION 7.04. Costs and Expenses; Indemnification. (a) The Borrower agrees to pay on demand all reasonable costs and expenses of the Lender in connection with the preparation, execution, delivery, administration, modification, waiver or amendment of any Loan Documents or any other documents to be delivered hereunder or thereunder (whether or not the transactions contemplated hereby or thereby shall be consummated), including, without limitation, (A) all due diligence, transportation, computer, duplication, appraisal, consultant, and audit expenses and (8) the reasonable and documented fees, charges, disbursements and expenses of counsel for the Lender (including, without limitation, all fees and time charges and disbursements for attorneys who may be employees of the Lender) with respect thereto and with respect to advising the Lender as to its rights and responsibilities under the Loan Documents. The Borrower further agrees to pay on demand all reasonable costs and expenses of the Lender, if any (including, without limitation, counsel fees and expenses, including all fees and time charges and disbursements for attorneys who may be employees of the Lender), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of any Loan Document and the other documents to be delivered hereunder or thereunder, including, without limitation, reasonable fees and expenses of counsel for the Lender in connection with the enforcement of rights under this Section 7.04(a) and in connection with any workout, restructuring or negotiation in respect of the Advance requested by the Borrower.

the transactions contemplated herein or therein or the actual or proposed use of the proceeds of the Advance or (ii) the actual or alleged presence of Hazardous Materials on any property of the Borrower or any or its Subsidiaries or any Environmental Action relating in any way to the Borrower, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted primarily from such Indemnified Party's fraud, gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 7.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, equityholders or creditors or an Indemnified Party or any other Person, whether or not any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Borrower also agrees not to assert any claim for special, indirect, consequential or punitive damages against the Lender or any of its Related Parties, on any theory of liability arising out of or otherwise relating to any Loan Document, any of the transactions contemplated herein or therein or the actual or proposed use of the proceeds of the Advance. No Indemnified Party referred to in this paragraph shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

(c) If any payment of principal of any Advance is made by the Borrower to or for the account of the Lender other than [on the last day of an Interest Period for such Advance, as a result of a mandatory termination of the Lender's Commitment pursuant to Section 2.03(b)(ii), payment pursuant to Section 2.07 or 2.08, acceleration of the maturity of any Note pursuant to Section 6.0 I or for any other reason, or if the Borrower fails to make any payment hereunder for which a notice of prepayment has been given or that is otherwise required to be made, or if the Borrower fails to borrow on the date or in the amount notified by the Borrower in any Notice of Borrowing, the Borrower shall, upon demand by the Lender, pay to the Lender any amounts required to compensate the Lender for any additional losses, costs or expenses that it may incur as a result of such payment or such failure to pay, prepay or borrow, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired (or which could have been acquired) by the Lender to fund or maintain such Advance. A certificate submitted by the Lender to the Borrower as to the amount of such compensation shall be conclusive and binding for all purposes, absent manifest error. For purposes of calculating amounts payable by the Borrower to the Lender under this Section 7.04(c), the Lender shall be deemed to have funded each Advance bearing interest at the Eurodollar Rate made by it at the Eurodollar Rate for such Advance by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Advance was in fact so funded.

(cl) Without prejudice to the survival of any other agreement of the Borrower hereunder or under any other Loan Document, the agreements and obligations of the Borrower contained in Sections 2.09, 2.12, 7.04 and 7.08 shall survive the termination of the Loan Documents and the payment in full of principal, interest and all other amounts payable under the Loan Documents.

SECTION 7.05. Right of Set-off (a) To the extent permitted under the Applicable Law, upon the occurrence and during the continuance of any Event of Default, the Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness or obligations at any time owing by the Lender or such Affiliate to or for the credit or the account of the Borrower or its Affiliates against any and all of the obligations of the Borrower or its Affiliates now or hereafter existing under any Loan Document, whether or not the Lender shall have made any demand under any Loan Document and although such obligations may be unmatured. The Lender agrees promptly to notify the Borrower or its Affiliates, as applicable, after any such set-off and application; provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Lender and its Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that the Lender and its Affiliates may have.

SECTION 7.06. Binding Effect. This Agreement shall become effective (other than Section 2.01, which shall only become effective upon satisfaction of the conditions precedent set forth in Section 3.01) when it shall have been executed by the Borrower and the Lender, and thereafter shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender.Assignments and Participations. (a) The Lender may assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advance owing to it and the Note or Notes held by it) (each such Person an "Assignee" and the Lender from which the Assignee receives the rights and obligations, the "Assignor"); provided that (i) in the case of any partial assignment to an additional bank or financial institution, the principal amount of the portion of the Advance so assigned is not less than U.S.$5,000,000 (or if less, the Lender's then outstanding principal amount of the Advance and determined as of the elate of the Assignment and Acceptance with respect to when such assignment is delivered to the Lender or, if "Trade Date" is specified in the Assignment and Acceptance, as of the Tracie Dale), (iii) no such assignment shall be made to the Borrower or any of the Borrower's Affiliates, (iv) no such assignment shall be made to a natural Person (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person), and (v) the parties to each such assignment shall execute and deliver an Assignment and Acceptance, together with any Note subject to such assignment. Upon such execution and delivery, from and after the effective date specified in each Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have such rights and obligations of the Assignor hereunder and (y) the Assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and

Acceptance, relinquish such rights (other than its rights under Sections 2.08, 2.11 and 7.04 to the extent any claim thereunder relates to an event arising prior to such assignment) and be released from such obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of the Assignor's rights and obligations under this Agreement, such Assignor shall cease to be a party hereto). If the Lender transfers or assigns any portion or all of its rights under the Loan Documents to any other financial institution, any reference to the Lender in each Loan Document shall thereafter refer to such Lender and to such other financial institution to the extent of their respective interests, as if such other financial institution had been a party to this Agreement as of the date hereof up to and including the date of such transfer or assignment.

(b) By executing and delivering an Assignment and Acceptance, the Assignor thereunder and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument or document furnished pursuant hereto; (ii) such Assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such Assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 (e) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such Assignee will, independently and without reliance upon such Assignor and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; and (v) such Assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as the Lender.

(c) Within five Business Days after its receipt of notice of an assignment hereunder and any Note or Notes subject to such assignment, the Borrower, at its own expense, shall execute and deliver to the Assignee in exchange for each surrendered Note a new Note payable to such assignee in an amount equal to the outstanding amount of the Note assumed by it pursuant to such Assignment and Acceptance and, if the Assignor has retained a portion of any Advance, a new Note payable to the Assignor in an amount equal to its portion of such Advance. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be elated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit C hereto.

(cl) The Lender may sell participations at any time, without the consent of, or notice, to the Borrower, to one or more banks or other entities (other than the Borrower or any of its Affiliates) (each a "Participant") in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advance owing to it and the Note or Notes held by it); provided, however, that (i) the Lender's obligations under this Agreement (including, without limitation, its Commitment to the Borrower hereunder) shall remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower shall continue to deal solely and directly with the Lender in connection with the Lender's rights and obligations under the Loan Documents and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal o( or interest on, the Notes or any other amounts payable hereunder, in each case to

the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any other amounts payable hereunder, in each case to the extent subject to such participation. The Borrower agrees that each Participant shall be entitled to the benefits of Section 2.08, Section 7.04(c) and Section 2.11 (subject to the requirements and limitations therein, including the requirements under Section 2. 11(f) (it being understood that the documentation required under Section 2.11 (f) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant shall not be entitled to receive any greater payment under Section 2.08 or 2.11, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 7.05 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant's interest in the Advance[s] or other obligations under the Loan Documents (the "Participant Register"); provided that the Lender shall not have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant's interest in any commitments, loans or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan or other obligation is in registered form under Section Sf. 103-1 (c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

SECTION 7.08. Governing Law. This Agreement, and the other Loan Documents and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement , any Note or any other Loan Document and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the laws of the State of New York, United States of America.

executed counterpart of a signature page to this Agreement by facsimile or other electronic (i.e., "pc(f' or "t(f') format shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 7. I 0. Jurisdiction; Waiver of Immunities. (a) Each of parties hereto hereby irrevocably and unconditionally, to the fullest extent permitted by law, agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or in equity, whether in contract or in tort or otherwise, against the Lender or any of its affiliates in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by Applicable Law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction, including, without limitation, the courts sitting in the Local Country.

(c) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(cl) To the extent that the Borrower has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Borrower hereby irrevocably and unconditionally waives such immunity in respect of its obligations under this Agreement and the other Loan Documents and, without limiting the generality of the foregoing, agrees that the waivers set forth in this subsection (cl) shall have the fullest scope permitted under the Foreign Sovereign Immunities Act of 1976 of the United States and are intended to be irrevocable for purposes of such Act.

SECTION 7.11. Judgment Currency. (a) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum clue hereunder or under any other Loan Document in U.S. Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used

shall be that at which, in accordance with normal banking procedures, the Lender could purchase U.S. Dollars with such other currency in New York City on the Business Day preceding that on which final, non-appeal able judgment is given.

SECTION 7.12. Confidentiality. The Lender shall not disclose any Confidential Information to any Person without the consent of the Borrower; provided that nothing herein shall prevent the Lender from disclosing and/or transferring such Confidential Information (i) upon the order of any court or administrative agency or otherwise to the extent required by statute, rule, regulation, judicial process, subpoena or similar process of other Applicable Laws, (ii) to bank examiners or upon the request or demand of any other regulatory or self-regulatory agency or authority, (iii) which had been publicly disclosed other than as a result of a disclosure by the Lender prohibited by this Agreement, (iv) in connection with any litigation to which the Lender is a party, or in connection with the exercise of any remedy hereunder or under any other Loan Document, (v) to the Lender's legal counsel and independent auditors and accountants, (vi) to the Lender's branches, subsidiaries, representative offices, affiliates, Citigroup and its affiliates, and agents and third parties selected by any of the foregoing entities, wherever situated, for confidential use (including in connection with the provision of any service and for data processing, statistical and risk analysis purposes),or (vii) subject to provisions substantially similar to those contained in this Section 7.12, to any actual or proposed Participant or Assignee or party to a Risk Transfer or (viii) on a confidential basis to any rating agency in connection with rating the Borrower or its Subsidiaries or the facilities provided pursuant to this Agreement. Any Person required to maintain the confidentiality of information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such information as such Person would accord to its own confidential information.

SECTION 7.13. Patriot Act Notice. The Borrower hereby acknowledges that pursuant to applicable regulatory requirements, including but not limited to those under the Patriot Act, the Lender is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow the Lender to identify the Borrower. The Borrower shall, and shall cause each of its Subsidiaries to, provide such information and take such actions as are reasonably requested by the Lender in order to assist the Lender in maintaining compliance with such applicable requirements.

(b) the effects of any Bail-in Action on any such liability, including, if applicable:

(i) a reduction in full or in part or cancellation of any such liability;

(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent unde1taking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

(iii) the variation of the terms of such liability in connection with the exercise of the write- down and conversion powers of any EEA Resolution Authority.

SECTION 7.17. Acknowledgements of the Borrower. The Borrower acknowledges that:

(d) it has had the opp01tunity to take all relevant independent advice it may have required with respect to its entry into this Agreement and the other Loan Documents and the transactions contemplated thereby, including without limitation legal advice in respect of New York and Colombian law.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

PRICESMART COLOMBIA SAS, as Borrower

C By Jhon Heriberto Guerrero Carvajal Title: Alternate Legal Representative

Lender:

Lending Office CITIBANK, N.A., acting through its international banking facility 388 Greenwich Street New York, NY 10013 By United States of America Title:

NEW YORK LAW PROMISSORY NOTE

U.S.$25,000,000.00 Dated: November 25, 2019

FOR VALUE RECEIVED, the undersigned, PRICESMART COLOMBIA S.A.S. a Simplified Stock Corporation (Sociedad par Acciones Simplificada) organized and existing under the laws of Colombia (the "Borrower"), HEREBY PROMISES TO PAY to CITIBANK, N.A., (the "Lender") for the account of its Lending Office (as defined in the Credit Agreement referred to below) the principal amount of the Advance (as defined in the Credit Agreement referred to below) owing to the Lender by the Borrower pursuant to the Credit Agreement dated as of November 25, 2019 between the Borrower and the Lender (as amended or modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined) outstanding on the dates and in the amounts specified in the Credit Agreement.

The Borrower promises to pay interest on the unpaid principal amount of the Advance from the elate of such Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement.

Both principal and interest are payable in lawful money of the United States to the Lender, at account number: 10980495, aba number 021000089, account name: CITIBANK IBF, in same day funds.

This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of the Advance by the Lender to the Borrower in an aggregate amount not to exceed at any time outstanding the U.S. Dollar amount first above mentioned, the indebtedness of the Borrower resulting from such Advance being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of ce11ain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified.

PRICESMART COLOMBIA S.A.S.

C By: .Thon Heriberto Guerrero Carvajal Title: Alternate Legal Representative

NOTICE OF BORROWING

Citibank, N.A., acting through its international banking facility, as Lender under the Credit Agreement referred to below 388 Greenwich Street New York, NY 10013 November 25, 2019

Attention: Jose Alejandro Duenas

Ladies and Gentlemen:

The undersigned, PRICESMART COLOMBIA S.A.S., refers to the Credit Agreement, dated as of November 25, 2019 (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), between the undersigned and the Lender, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement:

(i) The Business Day of the Proposed Borrowing is November 27, 2019.

(ii) The aggregate amount of the Proposed Borrowing is $25,000,000.00.

(iii) The Proposed Borrowing shall consist of a Term Advance

(iv) Each Advance to be made pursuant to the Proposed Borrowing shall be initially maintained as a Eurodollar Rate Advance.

(v) The proceeds of this Loan should be credited to the following account number 36930322 at_ Citibank NY, in the name of PriceSmart Colombia S.A.S.

(vi) The initial Interest Period for each Eurodollar Rate Advance made as pat1 of the Proposed Borrowing is 3 months.

The undersigned hereby ce11ifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing:

(A) the representations and warranties contained in Section 4.01 of the Credit Agreement and in each other Loan Document are correct, in all material respect, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and

(B) no event has occurred and is continuing or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes a Default.

Very truly yours,

PRICESMART COLOMBIA S.A.S

By: Jhon Heriberto Guerrero Carvajal Title: Alternate Legal Representative

EXHIBIT C - FORM OF ASSIGNMENT AND ACCEPTANCE

ASSIGNMENT AND ACCEPTANCE

Reference is made to the Credit Agreement dated as of[•] (as amended or modified from time to time, the "Credit Agreement") between Pricesmart Colombia S.A.S., a Simplified Stock Corporation organized and existing under the laws of Colombia (the "Borrower") and the Lender. Terms defined in the Credit Agreement are used herein with the same meaning.

The "Assignor" and the "Assignee" referred to on Schedule l hereto agree as follows:

I. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement as of the date hereof equal to the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement. After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the Advance[s] owing to the Assignee will be as set forth on Schedule 1 hereto.

4. Following the execution of this Assignment and Acceptance, it will be delivered to the Borrower. The effective date for this Assignment and Acceptance (the "Effective Date")

shall be the date of delivery hereof to the Borrower, unless otherwise specified on Schedule l hereto.

IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon.

Exhibit 10.4 Exhibit 10.4

000951 NUMBER: TWO HUNDRED AND SIXTY-NINE (269). BANK CREDIT. In the city of Guatemala, on December six, nineteen hundred and nineteen (12/06/2019), before me: LUIS AUGUSTO ZELAYA ESTRADE, Notary, appear: On the one hand, Engineer LUIS ROLANDO LARA GROJEC, who declares that he is years old, , Guatemalan, Mechanical Engineer, of this domicile, a person of my previous acquaintance, and who appears in his capacity as MANGER AND EX OFFICIO REPRESENTATIVE of BANCO INDUSTRIAL, SOCIEDAD ANÓNIMA, capacity he certifies with the Notarial deed containing his appointment, dated April twenty-nine, nineteen hundred and ninety-eight, authorized in this city by the Notary Anabella Mansilla Arévalo, who is registered in the General Registry of Commerce of the Republic, under registration number one hundred and thirty-nine thousand, eight hundred and thirty- two (139832), folio: one hundred and sixty (160), of book seventy-four (74) of Commercial Auxiliaries, and that in the course of this instrument may be simply referred to as “Bank” or “The Creditor”. And, on the other hand, Mr. SERGIO ENRIQUE CUEVAS PENEDO, who declares to be years old, , Guatemalan, Industrial Mechanical Engineer, of this domicile, who, given that he is not a person of my previous acquaintance, identifies himself with Personal Identification Document –DPI for its initials in Spanish—single identification code ( ), issued by the National Registry of Individuals (RENAP for its initials in Spanish), Republic of Guatemala, Central America, appearing in his capacity as SPECIAL LEGAL REPRESENTATIVE WITH AUTHORIZATION of the entity known as PRICESMART (GUATEMALA), SOCIEDAD ANONIMA, capacity which he certifies with the first certified copy of public deed number one hundred and forty-seven (147), authorized in this city, on October five, two thousand and sixteen (10/05/2016), by the Notary Liliana Yolanda Sánchez Mack, which is duly registered in the Electronic Registry of Powers of Attorney of the General Office of Notarial Records, registration number one of power of attorney number three hundred and eighty- three thousand, five hundred and eighty-six dash E (383586-E), dated October ten, two thousand and sixteen (10/10/2016), and registered in the General Registry of Commerce of the Republic under registration number six hundred and sixty-seven thousand, three hundred and ninety-seven (667397), folio: five hundred and six (506) of book: ninety-two (92) of Mandates, dated October fourteen, two thousand and sixteen (10/14/2016) and, in addition to the powers expressed in the special power of attorney with representation pertaining to Sergio Enrique Cuevas Penedo, he is duly authorized by the corporation that he represents to sign this agreement, as certified with the notarial deed authorized in this city, dated November twenty-nine, two thousand and nineteen (11/29/2019) by the Notary Liliana Yolanda Sánchez Mack, which is literally transcribed un the single point of deed number eighty (80), contained in folio zero zero eighteen (0018), of the book of minutes of the meetings of the Board of Directors, documented in the Board Meeting of the commercial entity known as PRICESMART (GUATEMALA), SOCIEDAD ANONIMA, dated November twenty-nine, two thousand and nineteen, in which he was authorized and approved to enter into this agreement and sign the documents required by the Bank, entity that throughout the course of this instrument may be simply and indistinctly referred to as “THE DEBTOR” and/or “The Owner”, as applicable. I attest: To be acquainted with the first of the appearing parties and not with the other appearing party who identifies himself with the before mentioned identification number, to have had at sight all the identified documents, especially those certifying the representations to be exercised, which broadly suffice according to Law and in my opinion, to enter into this agreement; that the appearing parties assure me to be of the personal data provided, to be free to exercise their

civil rights; and that they hereby, and according to the resolution of the BOARD OF DIRECTORS of the Bank, grant the BANK LOAN AGREEMENT contained in the following clauses: FIRST: (REGARDING THE LOAN). The Debtor, represented as stated above, declares that BANK INDUSTRIAL, SOCIEDAD ANONIMA, according to the resolution identified at the end of this agreement, has granted it a Bank Loan for the amount of ONE HUNDRED AND SIXTY MILLION QUETZALS (official currency of the Republic of Guatemala) (Q160,000,000.00), amount of which is hereby, and as of this moment, it acknowledges to be the outright and unconditional debtor of and which shall be delivered as determined by the Bank Management, crediting such in the account it holds with the Bank, depending on the conditions of liquidity and any other conditions applicable to the Bank at the time of the disbursement, and as long as after the signing of this instrument, no cause arises which in the opinion of the Bank may endanger the insurability or recoverability of this loan, after submitting: a) the first certified copy of this deed, duly registered by the respective Property Registry, verifying the registration of the mortgage established further on in this same instrument; certifying that the encumbered property has no other lien, annotation, limitation or partitioning that can affect the rights of the Bank; b)Certificate issued by the respective Property Registry certifying the place that the mortgage occupies; and c) In the event of informal or formal construction on the property, an insurance policy for the encumbered property that is satisfactory for the BANK. Except in the event that the Bank decides, in writing, to disburse prior to the submission of the before mentioned. The loan shall be destined to: Debt Consolidation. SECOND: (REGARDING THE TERM AND METHOD OF PAYMENT). I. The term of this agreement is TEN (10) YEARS, starting as of the date of this agreement. II- The amount of the loan shall be repaid to the Bank as follows: A grace period of Two (2) years and then through ninety-five (95) monthly consecutive installments of: ONE MILLION SIX HUNDRED AND SEVENTY THOUSAND QUETZALS (Q1,670,000.00) each, and a final payment for the amount of ONE MILLION THREE HUNDRED AND FIFTY QUETZALS (q1,350,000.00) on the month following the before stated final installment. III. “The Debtor” promises to make the first payment or installment on the twenty-fifth month, starting as of today. V- Every payment shall be made to the Cash department of the Bank, place which is fully known of by the Debtor, without any need for collection, nor any request for payment whatsoever in Quetzales, the official legal currency of Guatemala; lack of payment of any single one of such installments shall give the Bank the right to call in the loan and demand require the payment of the outstanding balance. THIRD: (REGARDING INTERESTS). The parties freely, voluntarily and expressly agree that, with regard to the outstanding balance of the loan capital which has been referred to herein, the Debtor acknowledges and is bound to pay interests during the first five years at a fixed rate of seven percent (7%) a year and subsequently as of the sixth year, the Debtor acknowledges and is bound to pay interests at a variable rate, set from time to time by the Bank and that shall originally be of seven percent (7%) a year. The interest rate in effect in this operation shall precisely correspond to the previously agreed on nominal interest rate, as long as the capital repayments and interest payments are made precisely in the manner and time set out in this document. The Debtor is expressly bound to resort to the offices of the Bank during the last five (5) days of each calendar month to be informed on the interest rate in effect for such month, as per that previously accepted. Not doing this in such way will not constitute an excuse for the nonpayment of interests, given that in such case the Debtor accepts that it is because it has obtained the information at another time or another manner and to possess such information. The interests earned must be paid on a monthly basis and upon the expiration of the term of the loan. The Debtor accepts to pay a surcharge for default interests at the

rate set by the Bank in such case. The Debtor accepts that in the event of nonpayment of interests on the days, in the manner and method established for such effect, the Bank may call the loan in advance and enforce the collection of the total balance due including the default interests. FOURTH: (ACCEPTANCE AND OBLIGATIONS OF THE DEBTOR). The Debtor expressly accepts and is bound to the following: a) That the Bank may charge the commissions and expenses for the services actually provided in the delivery, account management, expenses and modifications; b) That the Bank charge the capital, interests, surcharges, commissions and expenses, as a full or partial payment of this loan to any open account it may have with such Bank; and, in the event of the nonpayment of that owed, in the already indicated manner, it hereby expressly, without any coercion, freely and irrevocably, authorizes the Bank to freely take and/or debit the amounts that are necessary to cover such payments and continue to attend to the loan, from that available in any account held in its favor with Banco Industrial, Sociedad Anónima or in the companies that are part of Grupo Financiero Corporación BI, for which purpose it hereby holds such, as well as its legal representatives, leaders, staff members and other employees harmless for the above indicated actions; c) That should it have a number of obligations or guarantees for one or several obligations in favor of the Bank or the companies that are part of Grupo Financiero Corporación BI, it expressly waives any right to charge for payments and irrevocably authorizes the Bank to apply any payment made for the concept of capital, interests, surcharges for collection and/or commissions or expenses of this loan to the release of the obligation or lien that the Bank considers convenient; allocation that the Bank may make in its favor and/or in favor of any of the companies that are part of Grupo Financiero Corporación BI, regardless or the reason or number of the loan or obligation consigned on the payment receipt issued to the creditor, in which case the Bank or the company of Grupo Financiero Corporación BI must send the record of the manner in which payments were ultimately applied, to the Debtor. Additionally, the parties understand that in the event of any doubt, the principle that the obligation or lien offering the most guarantees to the satisfaction of the Bank, will be the last to be released; d) That the taxes originating from this instrument, fees and expenses incurred in by the Bank as a result of this business, shall be borne by the Debtor, including those for out-of-court recovery, authorizing the Bank to pay or cover such, and charge them to its account; e) This loan may be assigned or negotiated in any way, without prior or subsequent notice or notification to “The Debtor”; f) That the Bank provide information on this loan to legally authorized persons or entities; g) That the Bank may freely and without limitations from “The Debtor” carry out inspections at the site of the loan investment or of its accounting or non- accounting records; h) To annually submit, during the one hundred and twenty (120) days following the end of each fiscal year and when the Bank so requires: financial statements or asset statements, as applicable to the last closing of accounts. The non-timely submittal of the before mentioned documents or if those submitted are unsatisfactory to the Bank in order to continue to grade the debtors as subjects of credit, the Bank may call in the loan in advance or require the payment of all the debit balances even by way of enforcement procedure; i) To grant the explanatory or amendment deeds that are necessary and promises to incorporate those obligations that are necessary to ensure the correct handling of this loan to such and in those cases in which due to an amendment to the laws or regulations relating to the banking industry in Guatemala it is necessary to incorporate such amendments to this loan; j) The Debtor shall carry out all bank operations derived from this loan through the services provided by Banco Industrial Sociedad Anónima and shall maintain a checking account with reasonable balances; k) The Debtor shall provide the Bank, upon its request, with a detailed report regarding

the condition of the encumbered property and shall immediately inform on any alteration it may suffer with regard to its conservation, insurance and other circumstances that may affect the rights of the Bank, and accepts that the Bank may check the encumbered property, as many times as it considers convenient, during working hours, by means of its inspectors and at the expense of the Debtor; l) The Debtor is required to inform the Bank, in writing and in advance, of the following: the decision to introduce modifications to its Articles of Incorporation or its by-laws that can affect the strength of the company and is prohibited, except with prior and written authorization from the Bank, to reduce its capital or issue bonds or any other debenture representing the creation of privileged obligations, and any change to its shareholding structure that implies a change of control, according to the provisions regarding quorum or majority, in the shareholders meetings and/or board of directors, in the understanding that if this should occur, the Bank may call in the loan and require the immediate payment of such; and m) The encumbered property may not be sold, transferred in any way, newly encumbered or licensed for use, usufruct, lease or fragmented without written and authentic authorization from the Bank, and the violation of any of such prohibitions shall immediately result in the expiration of the term of the loan. FIFTH: (REGARDING THE GUARANTEE) A) To ensure the payment of FIFTY-EIGHT MILLION ONE HUNDRED AND SIXTY-NINE THOUSAND, SIX HUNDRED AND EIGHTY-FIVE POINT EIGHTY-NINE QUETZALS (Q.58,169,685.89) in capital, plus interests and costs, should such arise, “the Owner”, represented as stated, establishes a SECOND MORTAGE in favor of the Bank on the property which it legitimately and solely owns located at: Kilómetro veinte punto cinco, Carretera CA guión uno a El Savador, Municipio de Fraijanes, Departamento de Guatemala, with an area measuring twenty seven thousand nine hundred and forty-nine point five hundred and fifty-one square meters (27,949.551 m2), which measures, area, boundaries and adjacencies are registered in its effective domain registration. Such property is registered in the General Property Registry under NUMBER: FIVE THOUSAND EIGHT HUNDRED AND FORTY-SIX (5846), FOLIO: THREE HUNDRED AND FORTY-SIX (346), OF BOOK: THREE HUNDRED AND FIFTY-TWO E (352E) OF GUATEMALA. With regard to the real property, warned by the undersigned Notary in the event of any misrepresentation of the truth, the Owner, represented as previously stated, declares: a) To be the sole and legitimate owner of the previously identified real property; b) That the real property bears an easement, as stated in its respective registration of ownership: c) That the real property currently has five leases in favor of the entities Payless Shoesource De Guatemala Limitada; Industria De Hamburguesas, Sociedad Anónima; Oriental Town, Sociedad Anónima, Farmacias Europeas, Sociedad Anónima; and Banco de América Central, Sociedad Anónima, which the Bank knows of; and d) That the real property has a mortgage lien which is in First Place in favor of Banco Industrial, Sociedad Anónima , which shall continue in force. The Owner continues to state that except for that previously indicated, the real property provided as collateral, as well as the fruits of such, are free of any other lien, annotation, embargo, usufruct, use or any other limitation, that there is no legal or administrative claim against it or against the real property, and requests that the General Property Registrar that upon registering the herein established mortgage it state the place that such lien occupies; that all that pertaining to the mortgaged real property in fact and by law be included in such mortgage. As stated, in the event of formal or informal construction on the property, the Debtor is required to insure the encumbered property to the satisfaction of the Bank and with and endorsement in its favor, and must keep this insurance in force until the full payment of the loan, by means of the successive renewals of such insurance policy, which must be taken out at least one (1) month prior

to the expiration of the previous policy, whereby the Debtor accepts that in the event that this obligation has not been fulfilled fifteen (15) days prior to the expiration of the policy, that the Bank pay the premium and charge the amount to the capital of this obligation, and may charge this immediately. The Owner credits the ownership of the real property with a certificate issued by the General Property Registry, document that the undersigned Notary has at sight at this time. B) To ensure the payment of: ONE HUNDRED AND ONE MILLION, EIGHT HUNDRED AND THIRTY THOUSAND THREE HUNDRED AND FOURTEEN POINT ELEVEN QUETZALS (q101,830,314.11) in capital, interests and costs, should they arise, that are not guaranteed with the mortgage, “The Debtor” shall personally respond for the collection of such amount or balances of such, for which purpose the Bank may require such through summary proceedings for collection, whether prior to, simultaneously or after exercising the foreclosure proceedings, and may embargo other properties that it owns. Every foreclosure of personal property shall be carried out if the Bank so requests this on the basis of the first bid that is presented, the appraisal of property or the amount of the loan. SIXTH: (PRECAUTIONARY ENTRY). The grantors of this agreement hereby request, in accordance with article one thousand one hundred and forty-nine (1149), number five (5) of the Civil Code, Decree-law one hundred and six (106), and article six (6), paragraph three, of Government Agreement thirty dash two thousand and five (30-2005), Rules and Regulations of the Property Registry to the Registrar of the General Property Registry, that in the event of any circumstance or error making the respective final registration of this public deed not possible, but remediable in a term of thirty days, that a PRECAUTIONARY ENTRY be granted in accordance to that set out in the law; in the understanding that upon the final registration, the effects of such be effective as of the date of the precautionary entry, in accordance to law. SEVENTH: (EARLY EXPIRATION OF THE TERM OF THE AGREEMENT). The Bank may call for the expiration of the term of the agreement or the eventual extensions of such and require payment of the loan balance, in any of the following events: A) Due to the nonpayment of the expiration of a single interest payment, installment of capital and/or expenses, fees and/or commissions set out in the agreement or its modifications. B) If the Debtor should fail to punctually fulfill the obligations it has contractually accepted in this instrument or its modifications, especially, but not limited to, the annual reporting, to the satisfaction of the Bank, during the last month of each contractual or calendar year, and when the audited asset statements or financial statements, as may be the case, to the last closing of accounts are required by the Bank; C) If the Debtor breaches the provisions and modifications set by the Creditor and which it has accepted in this instrument, as well as those corresponding in law, especially, but not limited to: I. Investing the loan in a form or manner other than that agreed on. II. If the properties or businesses owned by the Debtor are object of annotation, embargo, intervention or any other limitation that, in the opinion of the Bank, could affect the fulfillment of this obligation, as well as if such properties undergo deterioration, depreciation or risk, in the opinion of the Bank. III. Has sold, assigned, transferred, contributed, disposed of or in any way transferred, without prior authorization or consent from the Bank, its fixed assets, except in the event that the sale is carried out to replace the deteriorated assets or those that need to be replaced due to age or depreciation and such replacement is recorded in the financial statements. And IV. That the Debtor has refused to collaborate with the Bank in allowing for the physical inspection of its encumbered properties and/or the site where it should have invested the loan, or that the result of such inspections, in the opinion of the Bank, leads to the inference that the properties are not in good conditions, placing the Bank’s guarantee at risk; D) Enforcement brought against the Debtor and/or the Owner of the

property provided as collateral for this loan; E) if the Creditor should have any news, report, communication or in any other way should learn that the Debtor has become insolvent in regards to payment to its vendors or other creditors, or that in the opinion of the Bank its financial situation places the payment of the loan at risk; and F) If according to the “Credit Risk Rules and Regulations” approved by the Monetary Board of any other provision approved by the Monetary Board in the future, the Bank is required to place the Debtor in any class that is not “A”. EIGHTH: (ENFORCEMENT) In the event of enforcement, the Debtor accepts and is compelled by the following terms: a) That those notices, citations, arraignments, communications and court and out of court proceedings made or addressed to the Debtor at the following address: Veintuna avenida siete guión noventa, zona once, Municipio de Guatemala, Departamento de Guatemala, place where it has established its special domicile for the effects of this agreement, be held as legally valid and delivered, except if the Bank is notified of any change and the copy of the notice with acknowledgment of receipt by the Bank is held by the Debtor; proof of having given such notice shall be borne by the Debtor accepting, in the event of not providing notice, as valid any notice made to the herein indicated address; b) The Debtor hereby accepts all accounts that the Bank creates with regards to this business as correct and precise and the balance required by the bank as immediately due and enforceable; c) The Parties acknowledge that the first certified copy of this document is a sufficient enforceable document; d) The Debtor waives the right to its respective domicile and submits to the jurisdiction of the courts of the Republic of Guatemala set out by the Bank; e) The Debtor accepts that loan balance amount serve as the basis of the auctions; f) Any escrow agent or receiver appointed by the Bank shall not be forced to provide any guarantee whatsoever, which the Debtor fully and expressly accepts, nor will the Bank be responsible for their performance; g) In the judicial collection of loan capital, the parties submit to the procedural system set in the Law of Banks and Financial Groups or the Civil and Commercial Procedural Code, at the Bank’s election, and may in any of case invoke the implementation of the other Law; and h) The Debtor relieves the Bank from the obligation to provide bonds in all corresponding cases, as well as the escrow agents and auditors appointed in the event of embargo or receivership. NINTH (ACCEPTANCE). The grantors, in the capacity in which they act, accept the terms of this deed and the Bank especially accepts the mortgage established herein, in its favor. I, the Notary, attest: To have had at sight the Certificate issued by the General Property Registry, document certifying the ownership of the real property provided as collateral and b) the Resolution of the Board of Directors, number six hundred and nine dash two thousand and nineteen (609-2019), dated November twenty, two thousand and nineteen (11/20/2019), authorizing the loan object of this agreement. At the request of the appearing parties, I read the written, informed such of their object, the legal effects of this agreement, the obligation to register such and, well aware of its content, object, validity and legal effects, they state that in the capacities in which they act, they ratify and sign along with the undersigned Notary, ALL OF WHICH I ATTEST. ------(Two illegible signatures). Before me (Illegible signature).------FIRST CERTIFIED COPY OF PUBLIC DEED NUMBER: TWO HUNDRED AND SIXTY-NINE (269), authorized in this city on December six, two thousand and nineteen (12/06/2019) by the undersigned Notary, which for delivery to BANCO INDUSTRIAL, SOCIEDAD ANÓNIMA, I provide on six sheets, the first five of which are photocopies taken from their originals in my presents on this day, taxed on both sides, and the sixth, which is this one, containing this certificate; this agreement is exempt from the “Tax

Stamp”, according to number: sixteen (16) of Article eleven (11) under Decree number: thirty seven dash ninety-two (37-92) of Congress. In witness whereof, I issue, number, sign and seal this FIRST CERTIFIED COPY, at the same place where and on the same date that it was granted. I ATTEST. ----- (Illegible signature).------

GENERAL PROPERTY REGISTRY. GUATEMALA, CENTRAL AMERICA. CERTIFICATE. ------Verifier Code: 9L09B70715C32.------The registrations have been recorded and state the following:------Registration reference number: 19S100717531------Mortgages. Registration number: 3. Property 5846. Folio 346. Book 352E of Guatemala. PRICESMART (GUATEMALA), SOCIEDAD ANÓNIMA acknowledges that it is the debtor of BANCO INDUSTRIAL, SOCIEDAD ANÓNIMA, for the amount of Q.160,000,000.00, amount to be paid in a term of 10 years, starting as of December 6, 2019. Interests have been freely and voluntarily agreed to on the capital balance owed during the first five years at a fixed rate of 7% per year and subsequently, as of the sixth year, at 7% a year. As a guarantee of the loan, which is assignable and without notification, the Debtor mortgages this property, which guarantees the payment of Q58,169,685.89 of capital, plus interests and costs, should such arise, and to guarantee the payment of Q101,830,314.11 of capital, interests and costs, should such arise, that are not guaranteed with the mortgage, the Debtor shall be personally liable for the collection of such amount. This mortgage occupies the Second Place. Deed number 269 authorized on December 6, 2019 by Notary LUIS AUGUSTO ZELAYA ESTRADÉ. Document(s) presented on December 2019 at 3:31:45 pm, which was (were) entered, along with its electronic copy(ies) under number 19R100321011. Fees: Q87,450.00. Guatemala, December 11, 2019. Operator: 148 Mariela Morales. (The seal of the Republic of Guatemala, signature of the person in charge of the General Property Registry and the stamp of the General Property Registry dated December 16, 2019, appear below.------End of the entries.------Total amount of fees: Q87,450.00. Certification provided on 1 sheet. Guatemala City, December 13, 2019.------This registration does not validate legal actions or contracts that are void according to law. Article 1146 Decree-law 106, Civil Code. (Signature of person in charge of the General Property Registry and seal of the Republic of Guatemala). ------(Bar code). NOTE: The content of this certificate can be verified through any of the following options: a) By requesting a certificate before the General Property Registry, b) By obtaining a simple copy at the General Property Registry, or c) By visiting the webpage www.rgp.org.gt under the option “Validar razones de testimonio”. ------Document No. 19R100321011. Page 1 of 1.------

Exhibit 31.1 Exhibit 31.1

Certification I, Sherry S. Bahrambeygui, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of PriceSmart, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 8, 2020 /s/ SHERRY S. BAHRAMBEYGUI Sherry S. Bahrambeygui Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2 Exhibit 31.2

Certification I, Michael L. McCleary, certify that:

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 8, 2020 /s/ MICHAEL L. MCCLEARY Michael L. McCleary Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Exhibit 32.1 Exhibit 32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of PriceSmart, Inc. (the “Company”) hereby certifies, to such officer's knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended February 29, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 8, 2020 /s/ SHERRY S. BAHRAMBEYGUI Sherry S. Bahrambeygui Chief Executive Officer (Principal Executive Officer) The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2 Exhibit 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of PriceSmart, Inc. (the “Company”) hereby certifies, to such officer's knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period February 29, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 8, 2020 /s/ MICHAEL L. MCCLEARY Michael L. McCleary Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.