Philippines - Geothermal Exploration Project : Loan 2203 - Guarantee Agreement - Conformed

OF C1AL LOAN NUMBER 2203 PH DDuM ENTS uarantee Agreement (Geothermal Exploration Project) between REPUBLIC OF THE PHILIPPINES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 1982 LOAN NUMBER 2203 PH GUARANTEE AGREEMENT AGREEMENT, dated o0 l-23 C& , 1982, between REPUBLIC OF THE PHILIPPINES (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS by the Loan Agreement of even date herewith between the Bank and the Philippine National Oil Company (hereinafter called the Borrower) the Bank has agreed to make to the Borrower a loan in various currencies equivalent to thirty-six million dollars ($36,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan as hereinafter provided; and WHEREAS the Guarantor, in consideration of the Bank's enter- ing into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank dated October 27, 1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Loan Agreement have the respective meanings therein set forth, and the term "Oil Industry Special Fund" means the fund established by the Guarantor pursuant to Republic Act No. 6173 of April 30, 1971, as amended to the date of this Agreement, for the purpose of financing energy related activities in the territory of the Guarantor. -2- ARTICLE II Guarantee; Provision of Funds Section 2.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan, and the punctual performance of all the other obligations of the Borrower under the Loan Agreement, and the obligations of PNOC-EDC under the Project Agreement and under the Exploration Agreements. Section 2.02. (a) Without limitation to the provisions of Sections 2.01 and 2.02 (b) of this Agreement, the Guarantor shall make available to the Borrower funds required by PNOC-EDC for expenditures under the Project under appropriate arrangements, including, inter alia, as and when needed, the allocation to the Borrower for PNOC-EDC of funds accrued to the Oil Industry Special Fund. (b) Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guarantor specifically undertakes, whenever there is reasonable cause to believe that the funds available to the Borrower will be inadequate to meet the estimated expenditures required for the carrying out of the Project, to make arrangements, satisfactory to the Bank, promptly to provide the Borrower or cause the Borrower to be provided with such funds as are needed to meet such expenditures. ARTICLE III Other Covenants Section 3.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, specific security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, - 3 - realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto, and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Guarantor, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Guarantor shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property or as security for the payment of debt incurred for the purpose of financing the purchase of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Guarantor, of any political or administrative sub- division thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Guarantor or any such subdivision, including gold and foreign exchange assets held by any institution performing the functions of a central bank or exchange stab4l'7ation fund, or similar functions, for the Guarantor. (d) The Guarantor further undertakes that, within the limits of the laws in force in its territories, it will make the foregoing undertaking effective with respect to liens on public assets, and to the extent that the Guarantor is unable within the limits of the laws in force in its territories to make this undertaking effective, the Guarantor will give to the Bank an equivalent lien satisfactory to the Bank. Section 3.02. (a) The Guarantor shall, through BED, grant to PNOC-EDC and renew such exploration rights and permits as and when required by PNOC-EDC for the purposes of carrying out the Project, under Exploration Agreements entered into or to be entered into between BED and PNOC-EDC for the Project, whose respective terms and conditions shall be acceptable to the Bank. (b) The Guarantor shall, through BED, exercise its rights and undertake its obligations under the Exploration Agreements in such manner as to protect the interests of the Guarantor and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Guarantor shall not assign, amend, abrogate or waive the Exploration Agreements or any provision thereof. Section 3.03. The Guarantor shall discuss, with the Bank and other appropriate institutions the reports undertaken under Part C of the Project when such reports are completed, with a view to implementing recommendations acceptable to the Guarantor made therein. ARTICLE IV Representative of the Guarantor; Addresses Section 4.01. The Minister of Finance of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 4.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Minister of Finance Ministry of Finance Manila Philippines Cable address: Telex: MINFIN 7550 CBP-PH Manila 40268 CB-CONF For the Bank International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America -5- Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 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. REPUBLIC OF THE PHILIPPINES By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By ' V k C Regional Vice President East Asia and Pacific INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this day of , 198 -2 FOR SECRETARY