Philippines - Piso Project : Loan 1555 - Project Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1555 PH Project Agreement (PISO Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and PHILIPPINE INVESTMENTS SYSTEMS ORGANIZATION Dated May 8, 1978 LOAN NUMBER 1555 PH PROJECT AGREEMENT AGREEMENT, dated May 8, 1978, between the INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and the PHILIPPINE INVESTMENTS SYSTEMS ORGANIZATION (hereinafter called PISO), established and operating under the laws of Republic of the Philippines (hereinafter called the Guarantor): WHEREAS by the Loan Agreement of even date herewith between the Bank and the Philippine National Bank (hereinafter called the Borrower), the Bank has agreed to lend to the Borrower, for relending to PISO, an amount in various currencies equivalent to fifteen million dollars ($15,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that PISO agree to undertake such obligations toward the Bank as are herein- after set forth; and WHEREAS PISO, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Def Intions Section 1.01 Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth, nnd the following additional terms have the following meanings: (a) "Charter" means the Articles of Incorporation of PISO dated February 15, 1974, as amended to the date of this Agreement; (b) "By-laws" means the by-laws of PISO dated March 21, 1974, as amended to the date of this Agreement; (c) "Statement of Policy" means the statement of lending and investments policy of PISO dated March 29, 1978; and (d) "Strategy Statement" means the statement of corporate strategy dated March 29, 1978 which enunciates general direc- tions of PISO's operations and activities. -2- ARTICLE II Execution of the Project; Management and Operations of PISO Section 2.01. (a) PISO shall carry out the Project, described in Section 3.01 of the Loan Agreement, and conduct its operations and affairs, with due diligence and efficiency and in conformity with appropriate economic, financial and investment standards and practices, with qualified and experienced management and in accordance with its Charter and Statement of Policy. (b) PISO shall cause the proceeds of the Loan to be applied exclusively to expenditures on Investment Projects in respect of which amounts have been withdrawn from the Loan Account in accor- dance with the provisions of this Agreement, the Subsidiary Loan Agreement and the Loan Agreement. Section 2.02. (a) In accordance with and subject to the provisions of the Loan Agreement, PISO shall submit Investment Projects to the Bank for approval or ' c authorization for with- drawals to be made from the Loan Account. (b) (i) When submitting a sub-loan (other than a free-limit sub-loan) or an investment to the Bank for approval, PISO shall furnish to the Bank an application, in form satisfactory to the Bank, together with a description of the Investment Enterprise and of the Investment Project to be financed thereunder (including a description of the expenditures for such Investment Project proposed to be financed by PISO and an appraisal of the Investment Project) and the proposed terms and conditions of the sub-loan or investment, including the schedule of amortization of the sub- loan, or of repayment to the Borrower of the amount to be used for the investment, and such other information as the Bank shall reasonably request; and (ii) such appraisals will include a calculation of the internal financial rate of return and an evaluation of the economic rate of return, established in accor- dance with guidelines satisfactory to the Bank. (c) Each request by PISO for authorization to make with- drawals from the Loan Account in respect of a free-limit sub-loan shall contain a summary description of the Investment Enterprise and the Investment Project (including a description of the expenditures proposed to be financed out of the proceeds of the Loan) and the terms and conditions of such free-limit sub-loan, including the schedule of amortization therefor. -3- (d) The amortization schedule applicable to each Investment Project shall provide for an appropriate period of grace, and, unless the Bank and the Borrower shall otherwise agree, (i) shall not extend beyond 15 years from the date of approval by the Bank of such Investment Project or of authorization by the Bank to make withdrawals from the Loan Account in respect of such Investment Project, and (ii) shall provide for approximately equal semi- annual, or more frequent, aggregate payments of principal and interest or approximately equal semi-annual, or more frequent, payments of principal. (e) Except as the Bank and PISO shall otherwise agree, PISO shall submit applications for approval of Investment Projects pursuant to the provisions of paragragh (b) of this Section and requests for authorizations to withdraw from the Loan Account pursuant to the provisions of paragraph (c) of this Section on or before December 31, 1980. Section 2.03. (a) PISO undertakes that unless the Bank shall otherwise agree, any sub-loan or investment will be made on terms whereby PISO shall obtain, by written agreement or other appro- priate legal means, rights adequate to protect the interests of the Bank and of PISO, including, in the case of any such sub-loan and to the extent that it shall be appropriate in the case of any such investment: (i) the right to require the Investment Enter- prise to carry out and operate the Investment Project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (ii) the right to require that the goods and services to be financed out of the proceeds of the sub-loan or investment be used exclusively in the carrying out of the Investment Project; (iii) the right of the Bank and of PISO to inspect such goods and the sites, works, plants and construction included in the Invest- ment Project, the operation thereof, and any relevant records and documents; (iv) the right to require that the Investment Enterprise take out and maintain such insurance, against such risks and in such amounts, as shall be consistent with sound business practice and that, without any limitation upon the foregoing, such insurance cover hazards incident to the acquisi- tion, transportation and delivery of the goods financed out of the proceeds of the sub-loan or investment to the place of use or installation, and that any indemnity thereunder be payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (v) the right to obtain all such information as the Bank or PISO shall reasonably request relating to the -4- foregoing and to the administration, operations and financial condition of the Investment Enterprise and (vi) the right of PISO to suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the sub-loan upon failure by such Investment Enterprise to perform its obligations under its agree- ment with PISO. (b) PISO shall exercise its rights in relation to each Investment Project in such manner as to (i) protect the interests of the Bank, the Borrower and PISO, (ii) comply with its obliga- tions under this Agreement and the Subsidiary Loan Agreement and (iii) achieve the purposes of the Project. (c) PISO shall submit to the Bank, for its prior approval, any substantial change proposed to be made in respect of the repayment provisions of any sub-loan. Section 2.04. (a) PISO shall furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the expenditure of the proceeds of the sub- loans and investments, the Project, the Investment Enterprises, the Investment Projects, the sub-loans and the investments and, where appropriate, the benefits to be derived from the foregoing. (b) Within six months following the last withdrawal from the Loan Account in respect of the sub-loans and investments or by such later date as the Bank shall request, PISO shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operations of the Investment Projects, their costs and the benefits derived and to be derived from them, the performance by PISO and the Bank of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Loan. Section 2.05. PISO shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, PISO shall not take or concur in any action which would have the effect of assigning, or amending, abrogating or waiving any provision of, the Subsidiary Loan Agreement. Section 2.06. Except as the Bank and PISO shall otherwise agree, PISO: (i) shall not sell, lease, transfer or otherwise dispose of any of its property or assets, except in the ordinary course of business and (ii) shall take all action necessary to -5- maintain its corporate existence and right to carry on operations and to acquire, maintain and renew all rights, powers, privileges and franchises necessary or useful in the conduct of its business. Section 2.07. PISO shall cause each of its Subsidiaries (if any) to observe and perform the obligations of PISO under this Agreement to the extent to which the same may be made applicable thereto as though such obligations were binding upon each of such Subsidiaries. Section 2.08. Except as the Bank and PISO may otherwise agree, PISO shall not, after the date of this Agreement, amend its Charter, by-laws, the Statement of Policy, or the Strategy State- ment. ARTICLE III Financial Covenants Section 3.01. PISO shall maintain records adequate to record the progress of the Project and of each Investment Project (including the cost thereof) and to reflect in accordance with consistently maintained appropriate accounting practices the operations and financial condition of PISO and shall enable the Bank's representatives to examine such records. Section 3.02. PISO shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of PISO and the audit thereof as the Bank shall from time to time reasonably request. Section 3.03. Except as the Bank and PISO shall otherwise agree, PISO shall not incur or permit any Subsidiary to incur: (i) any long-term debt if, after the incurring of such long-term debt, the consolidated long-term debt of PISO and all its Sub- sidiaries then incurred and outstanding would exceed four times -6- the consolidated capital and surplus of PISO and all its Sub- sidiaries; and (ii) total debt, if after the incurring of such total debt, the consolidated total debt of PISO and all its Subsidiaries then incurred and outstanding would be greater then ten times the consolidated capital and surplus of PISO and all its Subsidiaries. For the purposes of this Section: (a) The term "long-term debt" means any debt incurred by PISO or any Subsidiary maturing more than one year after the date on which it is originally incurred, including debt assumed or guaranteed by PISO or by a Subsidiary; provided, that current repayments of such long-term debt due and payable within one year shall be excluded therefrom. (b) Wherever reference is made in this Section to the incurring of debt, such reference shall include any modification of the terms of payment of such debt. Debt shall be deemed to be incurred (i) under a loan contract or agreement on the date and to the extent the loan is drawn down pursuant to such loan contract or agreement and (ii) under a guarantee agreement on the date the agreement providing for such guarantee has been entered into but only to the extent the guaranteed debt is outstanding. (c) Whenever in connection with this Section it shall be necessary to value in terms of peso debt payable in foreign currency, such valuation shall be made at the prevailing lawful rate of exchange at which such foreign currency is, at the time of such valuation, obtainable in peso for the purposes of servic- ing such debt. (d) The term "consolidated debt of PISO and all its Sub- sidiaries" means the total amount of debt of PISO and all its Subsidiaries excluding (i) debt owed by PISO to any Subsidiary or by any Subsidiary to PISO or to any other Subsidiary and (ii) debt referred to in paragraph (e) (ii) and (iii) of this Section. (e) The term "consolidated capital and surplus of PISO and all its Subsidiaries" means the aggregate of (i) the total unimpaired paid-in capital, surplus and free reserves of PISO and of all its Subsidiaries after excluding therefrom such amounts as shall represent equity interests of PISO in any Subsidiary, or of any such Subsidiary in PISO or in any other Subsidiary, (ii) the amount of the PISO loans and (iii) such amount of any other loan which the Bank may determine to be included in the con- solidated capital and surplus of PISO. -7- Section 3.04. Except as the Bank and PISO shall otherwise agree, PISO shall not make any repayment in advance of maturity in respect of any of its borrowings (other than deposits) having an original term exceeding one year. Section 3.05. PISO shall take such steps satisfactory to the Bank as shall be necessary to protect itself against risk of loss resulting from changes in the rates of exchange between the various currencies (including peso) used in its borrowing and lending operations. ARTICLE IV Consultation, Information and Inspection Section 4.01. (a) The Bank and PISO shall cooperate fully to assure that the purposes of the Loan will be accomplished. To that end, the Bank and PISO shall from time to time, at the request of either party, exchange views through their representatives with regard to the progress of the Project, the performance by PISO of its obligations under this Agreement and the Subsidiary Loan Agreement, the administration, operations and financial condition of PISO and other matters relating to the purpose of the Loan. (b) PISO shall furnish to the Bank all such information as the Bank shall reasonably request concerning the administration, operations and financial condition of PISO and its Subsidiaries, if any. Section 4.02. PISO shall promptly inform the Bank of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Loan, the maintenance of the service thereof or the performance by PISO of its obligations under this Agreement or the Subsidiary Loan Agreement. Section 4.03. PISO shall enable the Bank's representatives to inspect the records referred to in Section 3.01 of this Agreement and any relevant documents. ARTICLE V Effective Date; Termination Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. -8- Section 5.02. This Agreement and all obligations of the Bank and of PISO thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For PISO: Philippine Investments Systems Organization PISO Building, Pasay Road, Makati, Metro Manila, Republic of the Philippines Cable address: Telex: PISOPHIL PISOPN 3237 Manila Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of or by PISO may be taken or executed by its Chairman, or by such other person or persons as PISO shall designate in writing, and PISO shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Is/ S. Shahid Husain Regional Vice President East Asia and Pacific PHILIPPINE INVESTMENTS SYSTEMS ORGANIZATION By 1sf Victor Barrios Authorized Representative