El Salvador - Guajoyo Hydroelectric Project : Loan 0263 - Guarantee Agreement - Conformed

LOAN NUMBER 263 ES Guarantee Agreement (Guajoyo Hydroelectric Project) BETWEEN REPUBLIC OF EL SALVADOR AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED JULY 29, 1960 LOAN NUMBER 263 ES Guarantee Agreement (Guajoyo Hydroelectric Project) BETWEEN REPUBLIC OF EL SALVADOR AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED JULY 29, 1960 (muaratlr Agrattentt AGREEMENT, dated July 29, 1960, between REPUBLIC OF EL SALVADOR (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOP- MENT (hereinafter called the Bank). WHIE'REAS by an agreement of even (late herewith be- tween the Bank and Comisi6n Ejecutiva Hidroelectrica del Rio Lempa (hereinafter called the Borrower), which agree- ment and the schedules therein referred to are hereinafter called the Loan Agreement, the Bank has agreed to make to the Borrower a loan in various curreneies equivalent to three mil-lion eight hun(dred an (1orty thousaild doll11a-s ($3,840,000), on the terms and conditions set fortli in the ILoan A greenen t, but oily on condition that the (I'icaniitolr agree to guarantee the obligations of the Borrowei in respect of such loan as heieillafter plrovided; n(11d A IYEREAS tie GuruHtor, in consideration of the Bank's eiitering into the Loan Agreeient with the Borrower, has agree(d so to guarantee such obligations of the Borrower; Now T ilHEFO1{E the parties hereto hereby agree as fol- lows: ARTICLE I SECTiON 1.01. The parties to this Guarantee Agreement accept all the provisions of Loan Regulations No. 4 of the IBank dated June 15, 1956, subject, however, to the modifi- cations thereof set forth in Schedule 3 to the Loan Agree- neit (said Loan Regulations No. 4 as so modified being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein. ARTICLE II SECTIOx 2.01. Without limitation or restriction upon any of the other ccvenants on its part in this Agreement 4 contained, the Guarantor he-reby unconditionally guaran- tees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and the interest and other charges on, the Loan, the principal of and inter- est on the Bonds, the premium, if any, on the prepayment of the Loan or the redemption of the Bonds, and the punctual performance of all the covenants and agreements of the Borrower, all as set forth in the Loan Agreement and in the Bonds. SECTION 2.02. Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guar- antor specifically undertakes, whenever there is reason- able cause to believe that the funds available to the Borrower will be inadequate to meet the estimated expendi- tures required for carrying out the Project, to make ar- rangements, satisfactory to the Bank, promptly to pro- vide the Borrower or cause the Borrower to be provided with such funds as are needed to meet such expenditures. ARTICLE III SECTION 3.01. It is the mutual intention of the Guar- antor and the Bank that no other external debt hereafter created shall enjoy any priority over the Loan by way of a lien on governmental assets. To that end, the Guarantor undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any assets of the Guarantor as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan and the Bonds, and that in the creation of any such lien express provision will be made to that effect; provided, however, that the foregoing provisions of this Section shall not apply to (i) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; (ii) any lien on com- mercial goods to secure a debt maturing not more than 5 one year after the date on which it is originally incurred and to be paid out of the proceeds of sale of such commer- cial goods; or (iii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. The term "assets of the Guarantor" as used in this Section includes assets of the Guarantor or of any of its political subdivisions or of any agency of the Guarantor or of any such political subdivision, including assets of the Banco Central de Reserva de El Salvador. SECTION 3.02. (a) The Guarantor and the Bank shall cooperate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall fur- nish to the other all such information as it shall reasonably request with regard to the general status of the Loan. On the part of the Guarantor, such information shall in- clude information with respect to financial and economic conditions in the territories of the Guarantor and the in- tornational balance of payments position of the Guarantor. (b) The Guarantor and the Bank shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Loan and the maintenance of the service thereof. The Guarantor shall promptly inform the Bank of any condition which inter- feres with, or threatens to interfere with, the accomplish- ment of the purposes of the Loan or the maintenance of the service thereof. (c) The Guarantor shall afford all reasonable oppor- tunity for accredited representatives of the Bank to visit any part of the territories of the Guarantor for purposes related to the Loan. SECTION 3.03. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid without deduction for, and free from, any taxes or fees imposed 6 under the laws of the Guarantor or laws in effect in its territories; provided, howevor, that the provisions of this Section shall not apply to taxation of, or fees upon, pay- ments under any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an indi- vidual or corporate resident of the Guarantor. SECTION 3.04. This Agreement, the Loan Agreement and the Bonds shall be free from any taxes or fees that shall be imposed under the laws of the Guarantor or laws in effect in its territories on or in connection with the execu- tion. issue, delivery or registration thereof. SECTION 3.05. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid free from all restrictions imposed under the laws of the Guar- antor or laws in effect in its territories. SECTION 3.06. The Guarantor, in accordance with the principles presently set forth in the law creating the Bor- rower, covenants that it will permit the Borrower to earn revenues sufficient: (a) to cover operating expenses, in- cluding taxes, if any, adequate maintenance, depreciation and interest; (b) to meet repayments on long-term in- debtedness but only to the extent that such repayments shall exceed provision for depreciation; and (c) to create a, surplus for financing a reasonable portion of plainned expansion. ARTICLE IV SECTION 4.01. The Guarantor shall endorse, in accord- ance with the provisions of the Loan Regulations, its guar- antee on the Bonds to be executed and delivered by the Borrower. The Ministro de Hacienda of the Guarantor and such person or persons as he shall designate in writing are designated as the authorized representatives of the Guar- antor for the purposes of Section 6.12(b) of the Loan Regulations. 7 ARTICLE V SECTION 5.01. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Guarantor: Ministro de Hacienda Palacio Nacional San Salvador, El Salvador Alternative address for cablegrans and radiograms: Ministro Hacienda Sai Salvador For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington 25, D. C. ITnited States of America Ailternaive address for cablegranis and radiograms: Intbafrad Washington, 1) ( . SECTION 5.02. The Ministro (le iacenda of the Guar- antor is designated for the purposes of Section 8.03 of the Loan Regulations. IN WITNESS WIIEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Guarantee Agreieet to be signed in their 8 respective names ad delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF EL SALVADOR By /s/ HECTOR DAVID CASTRO Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ J. BURKE KNAPP Vice President