Peru - Petroleum Production Enhancement Project : Loan 2195 - Guarantee Agreement - Conformed

LOAN NUMBER 2195 PE DOCMENTS Guarantee Agreement (Petroleum Production Enhancement Project) between REPUBLIC OF PERU and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated A , , 1982 LOAN NUMBER 2195 PE GUARANTEE AGREEMENT AGREEMENT, dated , 1982, between REPUBLIC OF PERU (hereinafter called the Guarantor) and INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS by the Loan Agreement of even date herewith between the Bank and Petroleos del Peru, PETROPERU S.A. (hereinafter called the Borrower) the Bank has agreed to make to the Borrower a loan in various currencies equivalent to eighty-one million two hundred thousand dollars ($81,200,000), 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 TdEREFORE 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 Preamble to this Agreement, and in the Preamble to, and in Section 1.02 of, the Loan Agreement have the respective meanings therein set forth. 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 - 2 - 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, all as set forth in the Loan Agreement. Section 2.02. 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 inade- quate 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. Section 2.03. Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guarantor shall take all action necessary to permit the Borrower to comply with its obligations under Section 5.04 of the Loan Agrement. 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. (b) It is the policy of the Guarantor not to grant, in normal circumstances, specific security to its lenders or to the lenders of the subdivisions or entities referred to in paragraph (e) of this Section. (c) If, notwithstanding the aforesaid, 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, 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 -3- 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. (d) 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 purposes 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. (e) 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 stabilization fund, or similar functions, for the Guarantor. Section 3.02. The Guarantor shall collect, or cause to be collected from the Borrower, the fee or fees referred to in Section 2.08 of the Loan Agreement. Section 3.03. Notwithstanding the Borrower's obligations under Section 5.05 of the Loan Agreement, if the Borrower shall have not maintained for any of the Borrower's Fiscal Years speci- fied in paragraph (b) of such Section the debt service coverage ratio set forth in such paragraph for such Fiscal Year, the Gua- rantor shall, not later than 120 days after the end of the Fiscal Year in question, take all action as shall be necessary to bring the debt service coverage ratio to the limit required for the Fiscal Year in question and to enable the Borrower to meet in the next following Fiscal Year the required ratio. Section 3.04. With the purpose of assisting in the strength- ening of the capital structure of the Borrower, the Guarantor -4- undertakes, on each occasion a cash dividend is declared by the Borrower, to make one or more contributions to the Borrower's equity in amounts equivalent to the amount of such dividend, each such contribution to be made by way of compensation of any right the Guarantor, or any agency thereof, may have for collecting the amount of the cash dividend in question; provided, however, that the provisions of this Section shall apply only to the extent the amount of the cash dividend in question shall be required to en- able the Borrower to carry out the revised five-year program referred to in Section 5.04 of the Loan Agreement in effect at the time such cash dividend has been declared. ARTICLE IV Representative of the Guarantor; Addresses Section 4.01. The Guarantor's Minister of Economy, Finance and Commerce and the Director General de Cr6dito PU'blico are severally designated as representatives 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: Ministerio de Economfa y Finanzas Avda. Abancay 5ta Cuadra Lima, Peru Cable address: Telex: MINDEF 20187 Lima PU MINDEF With copies to: Ministro de Energfa y Minas Ministerio de Energfa y Minas Lima, Peru Cable address: Telex: MEM 25731 Lima PU MEM -5- 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) 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 Ameri*a, as of the day and year first above written. REPULIC OF PERU By Authorized Representative INTEFNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President Lrtin America and the Caribbean 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 vitness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this 14 day of ' , 198 FOR SPCRETARY