Chile - Agricultural Machinery Project : Loan 0006 - Loan Agreement - Conformed

LOAN NUMBER 6 CH Loan Agreement (Agricultural Machinery Project) BETWEEN * CORPORACION DE FOMENTO DE LA PRODUCCION AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED March 25, 1948 Press of Byron S. Adams Table of Contents Loan Agreement (Agricultural Machinery Project.) Article Number Title Page I Definitions ............................... 3 II The Loan ............................... 5 III Use of Proceeds of the Loan ................. 8 IV Withdrawal of Proceeds of the Loan .......... 9 V B onds ..................................... 14 VI Redemption of Bonds ....................... 17 VII Particular Covenants of the Borrower ........ 19 VIII Remedies of the Bank on Default ............ 22 IX Interpretation of Agreement; Arbitration ..... .24 X Miscellaneous Provisions ................... 25 XI Effective Date ........................... 27 Schedules Schedule Number Subject 1 Table of Amortization .................. 30 2 Description of the Project ............... 31 3-A Form of Dollar Bonds .................. 33 3-B Form of Bonds in Other Currencies........ 36 4 Form of Guarantee Agreement ............ 39. Loan agreement AGREEMENT, dated March 25, 1948, between INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, party of the first part, and CORPORACION DE FOMENTO DE LA PRODUCCION, party of the second part. ARTICLE I Definitions Wherever used in this Agreement or in any Schedule to this Agreement, unles,s the context shall otherwise require, the following ternis shall have the respective meanings hereinafter in this Article set forth: (1) The term Bank means International Bank for Re- construction and Development, the party of the first part hereto. (2) The term Borrower means Corporaci6n de Fomento de la Producci6n, the party of the second part hereto. (3) The term Guarantor means the Republic of Chile. (4) The term Loan means the loan provided for in this Agreement. (5) The term Loan Account means the loan account to be opened as provided in Section 1 of Article IV of this Agreement. (6) The term United States means the United States of America. (7) The term dollars and the sign $ mean dollars in such coin or currency of the United States as at the time referred to shall be legal tender for the payment of public and pri- vate debts in the United States. (8) The term Bond means a bond issued in accordance with Article V of this Agreement. 4 (9) The term principal office of the Bank means its prin- cipal office in the City of Washington, District of Colum- bia, United States. If the principal office of the Bank shall be changed and the Bank shall so notify the Borrower and the Guara.ator, the term principal office of the Bank shall thereafter mean the principal office so notified to the Bor- rowe-- aud the Guarantor. (10) The term goods means equipment and supplies which are required for the purposes specified in Article III of this Agreement, and whenever reference is made in this Agreement to the cost of any goods such cost shall be deemed to include the cost of importing such goods into the territories of the Guarantor, but only to the extent that such cost shall be paid in currency other than Chilean cur- rency. (11) The term external debt means any debt payable in any currency other than Chilean currency. whether such debt is payable absolutely or at the option of the creditor in such other currency. (12) The term Closing Date means January 1, 1950, or such other date as shall be agreed upon in writing as the closing date between the Bank and the Borrower. (13) The term Effective Date means the date on which this Agreement shall come into force and effect as provided in Section 2 of Article XI of this Agreement. (14) The term Guarantee Agreement means the agree- ment which shall have been executed between the Bank and the Guarantor as provided in Section 1 of Article XI of this Agreement whereby the Guarantor shall agree to guarantee the Loan and the obligations of the Borrower under this Agreefhent. (15) The term this Agreement includes the respective Schedules which are referred to herein and all of which are hereby incorporated herein and are herein referred to by their respective letters and numbers. 5 (16) The term Project means the program prepared by the Guarantor and the Borrower for the development of the agricultural resources of Chile, as more particularly set forth in Schedule 2 to thik Agreement, as such Schedule shall be amended from time to time by agreement in writ- ing between the Bank and the Borrower. ARTICLE II The Loan SECTION 1. The Bank agrees to lend to the Borrower, on the terms and conditions in this Agreement set forth, the sum of two million five hundred thousand dollars ($2,500,000), or the equivalent thereof in currencies other than dollars as hereinafter provided. SECTION 2. The amount of the Loan may be withdrawn by the Borrower as provided in Article IV of this Agree- ment. The Borrower shall pay to the Bank a commitment charge on any amount of the Loan not so withdrawn for the period from the Effective Date, or July 1, 1948, whichever shall be the earlier, to the respective dates on which the respective amounts shall be so withdrawn or the Bank shall have incurred firm obligations to others than the Borrower to pay such amounts, whichever shall be the earlier. Such commitment charge shall be payable in dol- lars semi-annually on January 1 and July 1 in each year and shall accrue and be payable at the following rates: (a) For the period to and including the 180th day after the Effective Date, or after July 1, 1948, whichever shall be the earlier, at the rate of one and one-half per cent (11/2%) per annum; (b) Thereafter, at the rate of two and three-quarters per cent (2-%) per annum less a credit computed as follows: For each three-month period begin- ning January 1, April 1, July 1, or October 1, 6 or for any part of such period, such credit shall be computed at the approximate rate of annual discount on the issue of 91-day United States Treasury Bills last sold by the United States iminme- diately preceding the beginning of such period, on the basis of the average price for the sale of such issue, all as announced by the United States Treas- ury Department; provided, however, that the rate at which such credit shall be computed for any such period, or part thereof, shall in no event exceed one and one-quarter per cent (11/4%) per annum. SECTION 3. The Borrower shall pay interest at the rate of two and three-quarters per cent (234%) per annum on the principal amount of the Loan outstanding and unpaid from the respective dates on which the respective amounts of the Loan shall be withdrawn by the Borrower as pro- vided in Article IV of this Agreement or on which the Bank shall incur firm obligations to others than the Borrower to pay such amounts, whichever shall be the earlier. Such interest shall be payable in dollars semi-annually on January 1 and July 1 in each year, except that inter- est on any part of the Loan which shall be repayable in any currency other than dollars shall be payable in such other currency. SECTION 4. The Borrower shall also pay to the Bank a commission at the rate of one per cent (1%) per annum on the principal amount of the Loan outstanding and unpaid from the respective dates on which the respective amounts of the Loan shall be withdrawn by the Borrower as pro- vided in Article IV of this Agreement or on which the Bank shall incur firm obligations to others than the Borrower to pay such amounts, whichever shall be the earlier. Such commission shall be payable in dollars semi-annually on January 1 and July 1 in each year, except that such commission on any part of the Loan which shall be re- payable in any currency other than dollars shall be pay- able in such other currency. 7 SECTION 5. In all cases in which it shall be necessary to compute the amount of commitment charge, interest or commission which shall have accrued under this Agreement for periods of less than six months, such commitment charge, interest or commission shall be computed on a daily basis, using a 365 day factor. For even periods of six months such commitment charge, interest and commission shall be computed on an annual basis. SECTION 6. The Borrower shall repay the principal of the Loan in accordance with the amortization schedule set forth in Schedule 1 to this Agreement. SECTION 7. Except as shall be otherwise specified in this Agreement or in the Bonds, the principal of and indterest, commission and commitment charge on, the Loan and the premium on Bonds called for redemption prior to the ma- turity thereof shall be paid at the office of the Bank in the City of New York, State of New York, United States, or at such other place or places as the Bank shall from time to time request in writing. SECTION 8. If any goods shall be purchased in any coun- try other than the United States, the Borrower shall make reasonable efforts to arrange to pay all or part of the cost of such goods in the currency of such other country. To the extent that the Borrower shall so arrange to pay the cost of any goods in any currency other than dollars, the Borrower shall give the Bank a reasonable opportunity to advance such other currency in lieu of dollars as part of the Loan. To that end, whenever any part of the proceeds of the Loan is to be used to purchase goods in any country other than the United States and the Borrower shall be able to arrange to pay all or part of the cost of such goods in the currency of such other country, the Borrower shall so notify the Bank not less than 60 days (or such other period as shall be agreed upon in writing between the Bank and the Borrower) prior to the date on which it shall apply 8 for the withdrawal from the Loan Account of any amount for the purpose of paying, or reimbursing the Borrower for, the cost of such goods. If and to the extent that the Bank shall acquire in exchange for dollars any such other currency which it shall so advance, the part of the Loan so advanced shall be repayable in dollars and the equivalent in dollars of the part of the Loan so advanced shall be the amount of dollars paid by the Bank in exchange for such other currency. If and to the extent that the Bank shall advance any such other currency which it shall not have acquired in exchange for dollars the part of the Loan so advanced shall be repayable in such other currency. SECTION 9. The provisions of the Regulations dated March 25, 1948, annexed hereto as Schedule 6, shall be applicable to the determination of the equivalent in dol- lars of parts of the Loan repayable in currencies other than dollars and the determination of the amounts to be paid on account of principal of, interest, commission and com- mitment charge on, and premium on redemption of, parts of the loan advanced out of 18% currency as in said Regu- lations defined. The parties to this Agreement accept and agree to the provisions of said Regulations with the same force and effect as if they were fully set forth herein. ARTIOLE III Use of Proceeds of the Loan SECTION 1. The proceeds of the Loan shall be applied by the Borrower exclusively to the payment of the cost of pur- chasing and importing into the territories of the Guarantor goods which will be required for the carrying out of the Project. The specific goods to be purchased out of the pro- ceeds of the Loan shall be determined by agreement in writing between the Bank and the Borrower, and the list of such goods may be modified from time to time by agree- ment in writing between them. 9 SECTION 2. All goods purchased with the proceeds of the Loan shall be imported into the territories of the Guaran- tor and shall there be used by the Borrower in the carrying out of the Project. ARTICLE IV Withdrawal of Proceeds of the Loan SECTION 1. The Bank shall open an account on its books in the name of the Borrower and shall credit to said ac- count the amount of the Loan. The Borrower shall be en- titled from time to time to withdraw from the Loan Account such amounts as shall be required by the Borrower in order to reimburse it for expenditures made by it subsequent to the Effective Date (except as shall be otherwise specifically provided by agreement in writing between the Bank and the Borrower) for the purpose of paying the cost of goods pur- chased in accordance with Article III of this Agreement. The Borrower shall also be entitled from time to time to withdraw from the Loan Account such amounts as shall from time to time be approved in writing by the Bank and as shall be reasonably required by the Borrower in order to enable it to pay the cost of such goods not theretofore paid. SECTION 2. (a) Whenever the Borrower shall desire to draw on the Loan Account, the Borrower shall deliver to the Bank an application in writing setting forth: (1) The amount which the Borrower so desires to with- draw from the Loan Account; (2) A statement that said amount is required to reii- burse the Borrower for, or to enable the Borrower to meet, expenditures made or to be made by it for the purpose of paying the cost of goods as therein set forth, which statement shall show, in such reasonable detail as the Bank shall request, the cost of such goods, the date on which such goods were ordered and 10 the dates on which payment for such goods was made or will be due, the names and addresses of the sup.- pliers of such goods, the estimated date of arrival of such goods in the territories of the Guarantor, and the known or intended destination and end-use of such goods in the Project; (3) A statement that the Borrower has not theretofore withdrawn, or applied for the withdrawal, from the Loan Account of any amounts for the purpose of reimbursing the Borrower for or paying such ex- penditures, and that the Borrower has not obtained and will not obtain funds for such purpose out of the proceeds of any other external loan or credit available to the Borrower, other than a short-term loan or credit established in anticipation of the with- drawal applied for and to be repaid pro tanto with the funds to be withdrawn, which loan or credit shall be described in the application; (4) A statement that such expenditures were or will be made for the purposes specified in Article III of this Agreement; that the goods purchased or to be pur- chased by means of such expenditures are appropri- ate for such purposes; and that the cost and terms of purchase thereof are not unreasonable; and (5) A statement that at the date of the application there is no existing default in the performance of any of the obligations of the Borrower under this Agree- ment or of the Guarantor under the Guarantee Agreement. (b) If such application shall be to withdraw from the Loan Account amounts for the purpose of enabling the Borrower to meet the cost of goods not theretofore paid, it shall also set forth: 11 (6) A statement of the arrangements under which the amount to be withdrawn from the Loan Account on such application will be applied to the payment of the cost of such goods; and (7) An agreement by the Borrower that it will apply or cause to be applied the amount to be withdrawn from the Loan Account on such application only to the payment when and as due of the cost of such goods and that, as promptly as possible thereafter, the Bor- rower will furnish to the Bank proof satisfactory to the Bank that such amount has been so applied. SECTION 3. (a) Each application under this Article shall be in writing in the English language and shall be signed on behalf of the Borrower by its representative or representa- tives duly authorized for the purpose. Each such applica- tion shall be executed and delivered to the Bank in tripli- cate as the Bank shall from time to time direct. Except as otherwise agreed in writing between the Bank and the Bor- rower, each such application (except the final application for any currency) shall be for an amount of not less than $100,000, or the equivalent thereof in any one currency. Such applications shall be serially numbered. (b) The Borrower will furnish to the Bank, upon re- quest, original or duplicate receipted bills or invoices or other documents sufficient to show that the expenditures covered by the application have been made for the goodQ specified therein. (c) If the expenditures to be reimbursed or paid by the withdrawal applied for were or are to be made in any cur- rency other than dollars, the application shall so state and shall also state the amount of such expenditures in such other currency. SECTION 4. Each application and the accompanying docu- ments must be sufficient to satisfy the Bank that the amount 12 to be withdrawn from the Loan Account is to be used only for the purposes specified in Article III of this Agreement. The Borrower shall furnish to the Bank any and all such further documents and other evidence in support of the application as the Bank shall at any time or from time to time reasonably request and whether before or after the Bank shall permit any withdrawal requested in the applica- tion. All applications and other documents delivered to the Bank under this Article shall be in form and substance sat- isfactory to the Bank. SECTION 5. If the Bank is satisfied that the application fully complies with the provisions of this Agreement and that the Borrower is entitled under this Agreement to with- draw from the Loan Account the amount applied for, the Bank will promptly pay such amount to or on the order of the Borrower; provided, however, that if the expenditures to be reimbursed or paid by the withdrawal applied for were made or are to be made in any currency other than dollars, the Bank shall have the option, as provided in Sec- tion 8 of Article II of this Agreement, to make the advance applied for in such other currency. SECTION 6. The Borrower may at its option by written notice to the Bank cancel all or any part of the Loan which the Borrower shall not have withdrawn prior to such notice. If the Borrower shall not on or before the Closing Date have withdrawn from the Loan Account the full amount of the Loan, the amount of the Loan not so withdrawn shall be canceled. Upon the cancellation of any part of the Loan as provided in this Section or in Section 8 of this Article the obligation of the Borrower to pay the commitment charge provided for in Section 2 of Article II of this Agree- ment on such part of the Loan shall cease. Except as other- wise agreed in writing between the Bank and the Borrower, any such cancellation shall be applied pro rata to the re- spective maturities of the instalments of the principal of the Loan, as set forth in Schedule 1 to this Agreement. 13 SECTION 7. The obligation of the Bank to make any pay- ment to the Borrower on account of the Loan as hereinbe- fore in this Article provided shall be subject to the condi- tion that none of the events hereinafter described shall at the time when such payment would otherwise be due have occurred and be continuing, to wit: (a) An Event of Default shall have happened and be existing under this Agreement. (b) Any condition shall exist which shall make it improb- able that the Borrower will be able to perform its obligations under this Agreement or that the Guar- antor will be able to perform its obligations under the Guarantee Agreement. (c) The Guarantor shall have become or been declared ineligible under Section 6 of Article IV, Section 5 of Article V, Section 1 of Article VI or Section 2(a) of Article XV of the Articles of Agreement of the In- ternational Monetary Fund to use the resources of said Fund. (d) The Guarantor shall be suspended from membership in or cease to be a member of the Bank. (e) The Bank shall have suspended operations either temporarily or permanently as provided in Section 5 of Article VI of its Articles of Agreement. SECTION 8. If any of the events described in Section 7 of this Article shall have happened and be continuing, the Bank may at any time, at its option, by notice to the Bor- rower, terminate any and all obligations of the Bank to per- mit withdrawals by the Borrower from the Loan Account and, upon the giving of such notice, all such obligations and all rights of the Borrower to make withdrawals from the Loan Account shall forthwith cease and determine, any- thing in this Agreement to the contrary notwithstanding. If subsequent to the Effective Date and prior to the date of such termination the Borrower, with the written approval 14 of the Bank, shall have incurred any binding obligation to apply any of the proceeds of the Loan not theretofore with.. drawn by the Borrower to the purchase of goods as pro- vided in this Agreement, the Bank shall, in so far as shall not be inconsistent with any other provisions of this Agree- ment and upon receiving assurances satisfactory to the Bank that the amounts so to be withdrawn will be applied to the satisfaction of such obligation on the part of the Borrower, permit the withdrawal from the Loan Account, upon compliance with the provisions of this Agreement, of such amounts as shall be necessary in order to enable the Borrower to satisfy such obligation on its part. Upon the termination of the Bank's obligation to permit further with- drawals by the Borrower from the Loan Account as herein- before provided, the amount of the Loan not theretofore withdrawn from the Loan Account shall forthwith be can- celed and, except as otherwise herein specifically provided, all the provisions of this Agreement shall continue in full force and effect. ARTICLE V Bonds SECTION 1. Within 60 days after the Closing Date the Borrower and the Guarantor shall execute and deliver to the Bank Bonds in the aggregate principal amnount of the Loan which shall at the time of delivery of such Bonds be outstanding and unpaid, and from and after the execution and delivery of such Bonds they shall represent a principal amount of the Loan equal to the principal amount of Bonds delivered. If any part of the Loan shall be repayable in any currency other than dollars, the Bonds representing the amount so repayable shall be payable as to principal and interest in such other currency and the aggregate principal amount of such Bonds shall be equal to the aggregate amount of such currency so advanced and not theretofore repaid. The respective maturities of the Bonds which shall be delivered hereunder shall correspond 15 to the maturities specified in the amortization schedule set forth in Schedule 1 to this Agreement. Such Bonds shall be in such denominations as the Bank shall specify, shall all be dated as of the Closing Date, and shall bear interest at the rate of two and three-quarters per cent (23/4%) per annum from the date thereof; provided, however, that if the Closing Date shall not be a semi-annual interest pay- ment date, the Bonds shall be dated as of the semi-annual interest payment date next following the Closing Date. Bonds in dollars shall be substantially in the form set forth in Schedule 3-A to this Agreement. Bonds in any currency other than dollars shall be substantially in the form set forth in Schedule 3-B to this Agreement, with such places of payment as the Bank shall specify and with such other modifications as the Bank shall reasonably require in order to conform to the law of the country in whose currency such Bonds are payable. SECTION 2. At any time or from time to time the Bank shall have the right to sell, pledge or otherwise dispose of any of the Bonds. Except as the Bank shall otherwise elect and notify the Borrower and the Guarantor, or as other- wise specifically provided in this Agreement, the provisions of this Agreement and of the Guarantee Agreement shall continue in full force and effect until the entire principal amount of the Loan shall be cancelled as provided in Article IV of this Agreement or shall be repaid. No holder of any Bond other than the Bank shall by virtue of being the holder thereof be entitled to any of the rights or bene- fits conferred, or be subject to any of the conditions or obligations imposed, upon the Bank under this Agreement or the Guarantee Agreement except as shall be otherwise provided in such Bond. The Bank shall, before selling, pledging or otherwise disposing of any of the Bonds, notify the Borrower and the Guarantor of the intention of the Bank so to do and shall afford to the Borrower and the Guarantor a reasonable opportunity to express their 16 views with regard thereto. If at any time the Bank shall desire to make a public offering of all or any of the Bonds, the Bank shall so notify the Borrower and the Guarantor at least four months prior to making such public offering. In any such case the Bank shall consult with the Borrower and the Guarantor for the purpose of agreeing upon the form, terms and denominations of the Bonds so to be offered for sale and any and all other matters relating to the proposed offering and sale of such Bonds. The failure of the Bank to comply with any of the provisions of this Section shall not in anywise affect or impair the negotia- bility of the Bonds or the title or rights of any transferee of any of the Bonds. SECTION 3. At any time or from time to time, upon the request of the Bank, the Borrower will at its own expense do any and all such things as the Bank shall reasohably request in order to comply with any laws or regulations of any country, or of any state or political subdivision thereof, or of any securities exchange therein, in order to enable the Bank to sell or offer for sale any of the Bonds, by public sale or otherwise, in any country or to list any of the Bonds for trading on any securities exchange. To that end the Borrower will execute and deliver all registra- tion statements, applications and other documents, and fur- nish to the Bank all information which shall be required in order to so comply with any such law or regulation, and the Borrower will pay all registration and filing fees re- quired by any such law or regulation. The Bank will give to the Borrower not less than four months notice of any such request. SEcTioN 4. If the Bank shall at any time sell, without recourse, any of the Bonds, the commission specified in Section 4 of Article II of this Agreement shall thereupon cease to accrue in respect of the principal of the Loan represented by such Bonds. 17 ARTICLE VI Redemption of Bonds SECTION 1. The Borrower may, at its election, at any time or from time to time after the date of the Bonds, pay off and redeem all or any of the Bonds, at a redemption price for each Bond equal to the principal amount thereof, plus the interest accrued and unpaid thereon to the date fixed for the redemption thereof, plus as a premium the following respective percentages of such principal amount: 1/2 of 1%, if redeemed not more than six months prior to the date of maturity specified in such Bond; 34 of 1%, if redeemed more than six months and not more than two years and six months prior to said date; 1%, if re- deemed more than two years and six months and not more than four years and six months prior to said date; and 11/2%, if redeemed more than four years and six months prior to said date. Such premium shall be payable in the currency in which such Bond is payable. SECTION 2. If the Borrower shall so elect to redeem less than all of the Bonds at the time outstanding and unpaid, the Bonds so to be redeemed shall be designated by lot or in such other manner as the Bank and the Borrower shall agree upon in writing. SECTION 3. The Borrower's election to redeem the Bonds or any thereof shall be exercised by giving notice to the Bank stating such election, designating the Bond or Bonds to be redeemed, stating the redemption price or prices thereof determined as in Section 1 of this Article provided, and stating the date (sometimes referred to in this Article as the date fixed for redemption) on which such Bonds are to be redeemed. Such notice shall be given not less than 90 days prior to the date fixed for redemption. SEcTION 4. Notice of election to redeem having been given as above provided, the Bonds to be redeemed shall on the 18 date fixed for redemption become due and payable at their respective redemption prices determined as in Section 1 of this Article provided. From and after the date fixed for redemption (unless the Borrower shall fail to make pay- ment of the redemption price or prices of such Bonds) interest on such Bonds shall cease to accrue and, upon pre- sentation of such Bonds for payment and redemption in accordance with said notice, such Bonds shall be paid by the Borrower at the redemption price or prices aforesaid. If any of such Bonds shall not be so paid upon presentation thereof, they shall continue to bear interest as therein speci- fled until paid. Upon the date fixed for redemption, the Borrower shall pay to the Bank the amount of the commis- sion accrued and unpaid on the part of the Loan repre- sented by the Bonds to be redeemed, and from and after the date fixed for redemption (unless the Borrower shall fail to make payment of the redemption price or prices of such Bonds), the Commission on such part of the Loan shall cease to accrue. SECTION 5. It is the desire of the Bank to encourage the redemption of the Bonds prior to the dates of maturity specified therein. Accordingly, if and to the extent that the amounts to be paid by the Borrower on the redemption of Bonds at the time owned by the Bank can, and in the judgment of the Bank should, be used by it in the retire- ment of securities issued by it without the payment of a premium on the retirement thereof, or otherwise used in its operations, it is the intention of the Bank to permit the redemption of Bonds without the payment of a premium on such redemption. If the Borower shall, not less than four monihs prior to the date on which it shall desire to redeem any of the Bonds in accordance with the provisions of this Article, request the Bank to permit the Borrower to redeem such Bonds without the payment of the premium provided for in Section 1 of this Article, the Bank will as promptly as possible notify the Borrower whether or not the Bank will so permit the redemption of such Bonds. 19 ARTICLE VII Particular Covenants of the Borrower The Borrower hereby covenants as follows: SECTION 1. The Borrower will duly and punctually pay the principal of, and the interest, commission and commit- ment charge on, and the premium, if any, on redemption of, the Loan and the Bonds (when issued) when and as the same shall become due and payable as provided in this Agreement and the Bonds. SECTION 2. The Borrower will carry out and complete the Project with due diligence and efficiency. SECTION 3. The Borrower will apply the proceeds of the Loan and the goods purchased with such proceeds in accordance with the provisions of Article III of this Agreement. So long as any part of the Loan shall be out- standing and unpaid, the Borrower will maintain books, accounts and records adequate to identify the goods pur- chased with the proceeds of the Loan, to disclose the end- use thereof in the Project, and to reflect in accordance with consistgntly maintained sound accounting practices the financial condition and operations of the Borrower. The Borrower will permit accredited representatives of the Bank, including independent accountants and engineers designated by the Bank for that purpose, to inspect any and all goods purchased out of the proceeds of the Loan and any of the properties related to the Project owned or operated by the Borrower and to inspect, audit and make copies of, any books, accounts, records, contracts, orders, invoices, engineering studies and reports, and other docu- ments relating to the goods purchased out of the proceeds of the Loan, and the use thereof in the Project, or to the progress of the Project. 20 SECTION 4. So long as any part of the Loan shall be out- standing and unpaid, the Borrower will not, without the prior written consent of the Bank, cause or permit to be created any mortgage, pledge or other charge or priority on any property or assets, or any revenues or receipts, of the Borrower, or of any corporation or company all or a majority of the capital stock of which shall be owned by the Borrower, as security for any external debt of the Borrower, or of others, unless the Loan shall be secured by such mortgage, pledge or other charge or priority equally and ratably with such other external debt; pro- vided, however, that this Section shall not apply to the creation of any mortgage, pledge or other charge or priority on any property purchased, at the time of the purchase, solely as security for the payment of the pur- chase price of such property; or as security for any ex- ternal indebtedness incurred by the Borrower in the ordi- nary course of its business and maturing not more than one year after its date. SECTION 5. So long as any part of the Loan shall be out- standing and unpaid, if the Borrower shall propose to incur, assume or guarantee any external debt, or substan- tially to modify the terms of payment of any then existing external debt incurred, assumed or guaranteed by it, it will notify the Bank promptly of the particular proposal, and prior to the time for taking the proposed action, will afford to the Bank all opportunity which is reasonably practicable under the circumstances to exchange views with the Borrower with regard to such proposal. SECTION 6. If at any time so long as any part of the Loan shall be outstanding and unpaid any condition shall arise which shall prevent, obstruct or interfere with, or threaten to prevent, obstruct or interfere with, the accomplishment of the purposes of the Loan or the maintenance of the ser- vice of the Loan, the Borrower will promptly inform the 21 Bank of such condition and will afford to the Bank a reas- onable opportunity to exchange views with the Borrower with regard thereto. SECTION 7. So long as any part of the Loan shall be out- standing and unpaid, the Borrower will furnish to the Bank all such information, at such times and in such de- tail, as the Bank shall reasonably request with regard to (1) the expenditure of the proceeds of the Loan, the use of the goods purchased therewith and the progress of the Project; (2) the economic and financial condition of Chile, internal and external; and (3) the operations and financial condition of the Borrower. SECTION 8. The Borrower will pay or cause to be paid any and all taxes, duties, imposts and fees that may be imposed by the Guarantor or any taxing authority thereof or therein upon this Agreement, the Bonds and the Guar- antee Agreement, or the execution, delivery or registration thereof, or the payment of principal, interest or other charges thereunder. Such principal, interest and other charges shall be paid free of any and all such taxes, duties, imposts and fees. This section shall not be construed as applying to taxation of payments made under the provisions of any Bond when such Bond is beneficially owned by an individual or corporate resident of the Guarantor. SECTION 9. So long as any part of the Loan shall be outstanding and unpaid: (a) The Borrower will at all times maintain its corpo- rate existence and right to carry on business and will duly procure or cause to be procured all renewals and exten- sions thereof and will diligently maintain, preserve and renew, or cause to be maintained, preserved and renewed, all rights, powers, privileges and franchises owned by it and necessary or useful in the operation of its business. (b) If all or any part of the goods or properties which are included in the Project shall be seized by action of the 22 Guarantor or any of its political subdivisions or agencies, any compensation payable to the Borrower in respect of such seizure shall be applied, to the extent necessary, to the redemption of all of the Loan which shall then be out- standing and unpaid. (c) The Borrower will use all of the goods purchased or paid for in whole or in part out of the proceeds of the Loan in accordance with Section 2 of Article III of this Agree- ment and will not, without the prior written consent of the Bank, sell, pledge, mortgage or otherwise dispose of any of such goods except as specifically authorized in Schedule 2 to this Agreement. SECTION 10. The Borrower will insure or cause to be insured all goods purchased in whole or in part with the proceeds of the Loan against marine and transit hazards incident to delivery of the goods into Chile under contracts of insurance payable in dollars. ARTICLE VIII Remedies of the Bank on Default SECTION 1. If any of the following events (herein called Events of Default) shall happen, that is to say: (a) if default shall be made in the payment of any instal- ment of interest on the Loan or on any of the Bonds or any instalment of commission or commitment charge on the Loan when and as the same shall be- come payable and such default shall continue for thirty (30) days; or (b) if default shall be made in the payment of the prin- cipal of any of the Bonds, whether upon the date of maturity of such Bonds or upon call for redemption or by declaration or otherwise as provided in this Agreement or the Bonds; or (c) if default shall be made in the performance of any other covenant or agreement on the part of the Bor- 23 rower or of the Guarantor in the Bonds or in this Agreement or in the Guarantee Agreement set forth; or (d) if the Borrower shall take or permit to be taken any action or proceeding whereby any of its property shall or may be assigned or in any manner trans- ferred or delivered to any receiver, assignee or other person, whether appointed by a court or by the Bor- rower or by authority of any law, whereby such property shall or may be distributed among the creditors of the Borrower; or (e) if any proceedings for the surrender of the charter or for the liquidation of the Borrower shall be insti- tuted by it or by the Guarantor or by any govern- mental authority having jurisdiction; or (f) if by action of the Guarantor or of any governmen- tal authority having jurisdiction all or substarilally all of the goods which are included in the Project shall be taken from the Borrower; then and in each such case during the continuance of such Event of Default (but in the case of an Event of Default specified in clause (c) of this Section only if such default shall continue for a period of 60 days after written notice thereof shall have been given by the Bank to the Borrower) the Bank, at its option, may declare the principal of the Loan and of all the Bonds then outstanding (if not already due) to be due and payable immediately, and upon any such declaration such principal shall become and shall be due and payable immediately, anything in this Agreement or in the Bonds contained to the contrary notwithstanding. SECTION 2. No delay or omission of the Bank to exercise any right or power accruing to it under this Agreement upon any Event of Default shall impair any such right or power or be construed to be a waiver of any such Event of 24 Default or any acquiescence therein; nor shall the action of the Bank in respect of any default, or in respect of the waiver of any default, affect or impair any right or power of the Bank in respect of any other or subsequent default on the part of the Borrower, and every right, power and remedy given hereunder to the Bank may be exercised by it from time to time and as often as it may deem expedient. ARTICLE IX Interpretation of Agreement; Arbitration SECTION 1. The respective rights and obligations of the parties under this Agreement and the Bonds and under the Guarantee Agreement shall be valid and enforceable in ac- cordance with their terms anything in any statute, law or regulation of any nation or state or political subdivision thereof to the contrary notwithstanding. None of such par- ties shall be entitled in any proceeding under this Article to assert any claim that any provision of either of such Agreements or of the Bonds is invalid or unenforceable because of any provision of the Articles of Agreement of the Bank or for any other reason. SECTION 2. The provisions of this Agreement, of the Bonds and of the Guarantee Agreement shall be interpreted in accordance with the law of the State of New York, United States, as at the time in effect. SECTION 3. Any controversy between the parties to this Agreement or to the Guarantee Agreement and any claim by any of such parties against the other party thereto aris- ing under this Agreement, the Guarantee Agreement or the Bonds which shall not be determined by agreement of such parties shall be submitted to and determined by arbitration by an Arbitral Tribunal in accordance with the provisions of Loan Regulations No. 1 of the Bank dated May 9, 1947 (hereinafter called Regulations), a copy of which has been furnished to the Borrower and to the Guarantor. The par- 25 ties to this Agreement and to the Guarantee Agreement accept and agree to the provisions of the Regulations with the same force and effect as if they were fully set forth herein; provided, however, that the Bank shall not be en- titled to enter any judgment against the Guarantor in any court for the enforcement of any award rendered pursuant to the Regulations, or to enforce by execution against the Guarantor any judgment entered upon any such award or any judicial mandate or order made in any proceeding to enforce any such award, except as any such remedy may be available to the Bank against the Guarantor otherwise than by reason of the provisions of the Regulations. ARTICLE X Miscellaneous Provisions SECTION 1. Any notice or demand required or permitted to be given under this Agreement or the Guarantee Agree- ment shall be in writing and shall be deemed to have been duly given when it shall be delivered in writing or by tele- gram, cablp or radiogram to the party or parties to which such notice or demand is required or permitted to be given at its or their address or addresses hereinafter specified, or at such other address or addresses as such party or par- ties shall have designated by notice in writing to the party or parties giving or making such notice or demand. The addresses so specified are: (a) For the Bank: International Bank for Reconstruc- tion and Development, 1818 H Street, N. W., Wash- ington 25, District of Columbia, United States of America. (b) For the Borrower: Corporaci6n de Fomento de la Producci6n, 37 Wall Street, New York, New York, United States of America. (c) For the Guarantor: The Republic of Chile, c/o Cor- poraci6n De Fomento de la Producci6n, 37 Wall Street, New York, New York, United States of America. 26 SECTION 2. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement or the Guarantee Agreement on be- half of the Guarantor may be taken or executed by the Minister of Finance of the Guarantor or any person there- unto authorized in writing by him. Any modification or amplification of the provisions of this Agreement or the Guarantee Agreement may be agreed to on behalf of the Guarantor by written instrument executed on behalf of the Guarantor by its Minister of Finance or any person there- unto authorized in writing by him; provided that, in the opinion of such Minister of Finance, such modification or amplification is reasonable in the circumstances and will not substantially increase the obligations of the Guarantor hereunder or under the Guarantee Agreement. The Bank may accept the execution by such Minister of Finance or other person of any such instrument as conclusive evidence that, in the opinion of such Minister of Finance, any modi- fication or amplification of the provisions of this Agreement effected by such instrument is reasonable in the circum- stances and will not substantially increase the obligations of the Guarantor hereunder or under the Guarantee Agree- ment. iECTION 3. The Borrower and the Guarantor shall fur- nish to the Bank sufficient evidence of the .authority of the person or persons who will sign the applications provided for in Article IV of this Agreement and the Bonds or who will, on behalf of the Borrower or the Guarantor, take any other action or execute any other documents required or permitted to be taken or executed by the Borrower or the Guarantor pursuant to any of the provisions of this Agree- ment or of the Guarantee Agreement and the authenticated specimen signature of each such person. SECTION 4. In agreeing to make the Loan the Bank has relied on the statements and representations contained in documents furnished to the Bank by or on behalf of the 27 Borrower and the Guarantor, including, but without limi- tation on the foregoing, the statements and representations contained in Schedule 5 to this Agreement and in the respec- tive documents listed in such Schedule. The Borrower and the Guarantor represent and warrant that all such state- ments and representations are accurate. SECTION 5. This Agreement and the Guarantee Agree- ment may be executed in several counterparts, each of which shall be an original and all collectively but one in- strument. ARTICLE XI Effective Date SECTION 1. This Agreement is subject to the condition that before it shall become effective the following events shall have occurred: (a) the execution and delivery on behalf of the Guaran- tor of the Guarantee Agreement substantially in the form set forth in Schedule 4 to this Agreement shall have been duly authorized by all necessary governmental action and said Agreement shall have been duly executed and delivered on behalf of the Guarantor; (b) the execution and delivery of this Agreement on be- half of the Borrower shall have been been duly authorized or ratified by all necessary corporate action of the Bor- rower; and (c) the Borrower and the Guarantor shall have furnished to the Bank an opinion or opinions of legal counsel, accept- able to the Bank, showing: (1) that this Agreement has been duly authorized by, and executed and delivered on behalf of, the Bor- rower, and the Guarantee Agreement has been duly authorized by, and executed and delivered on behalf of, the Guarantor; 28 (2) that said Agreements constitute valid and binding obligations of the Borrower and the Guarantor, re- spectively, in accordance with their terms; and (3) that the Bonds when signed and delivered as pro- vided in this Agreement and the Guarantee Agree- ment will constitute valid and binding obligations of the Borrower in accordance with their terms, and the guarantee of the Guarantor thereon endorsed will constitute the valid and binding obligation of the Guarantor in accordance with its terms. SECTION 2. The Borrower and the Guarantor shall promptly furnish to the Bank, evidence, satisfactory to the Bank, that all acts required to be performed pursuant to Section 1 of this Article, have been performed. Except as shall be otherwise agreed in writing between the Bank and the Borrower, this Agreement and the Guarantee Agree- ment shall come into force and effect on the date when the Bank notifies the Borrower and the Guarantor of its ac- ceptance of such evidence. SECTION 3. If all acts required to be performed pursuant to Section 1 of this Article shall not have been performed and satisfactory evidence thereof shall not have been fur- nished to the Bank within 180 days after the date of this Agreement, the Bank may at its option by notice to the Bor- rower and the Guarantor terminate this Agreement, and upon the giving of such notice of termination, this Agree- ment and all obligations of the parties hereunder shall forthwith cease and determine. 29 IN WITNESS WHEREOF the parties hereto have caused this Agreement to be signed in their respective names by their representatives thereunto duly authorized as of the day and year first above written. INTERNATIONAL BANK FOR REcON- STRUCTION AND DEVELOPMENT By R. L. GARNER Vice-President CORPORACIO6N DE FOMENTO DE LA PRODUCCIO6N By R. VERGARA 30 SREDULE 1 Table of Amortization The following table shows the amounts of the semi-annual payments of amortization for the $2,500,000 principal amount of the Loan. Except as shall be otherwise agreed in writing between the Bank and the Borrower, any part of the principal of the Loan aggregating less than $2,500,000 or any part of the principal of the Loan repayable in any currency other than dollars shall be repayable at the same rate as is reflected in the following table: Principal Amount Date Payment Outstanding Payment of After Each Due Principal Payment Jan. 1, 1950 $2,500,000 July 1, 1950 $235,000 2,265,000 Jan. 1, 1951 238,000 2,027,000 July 1, 1951 241,000 1,786,000 Jan. 1, 1952 245,000 1,541,000 July 1, 1952 248,000 1,293,000 Jan. 1, 1953 252,000 1,041,000 July 1, 1953 255,000 786,000 Jan. 1, 1954 258,000 528,000 July 1, 1954 262,000 266,000 Jan. 1, 1955 266,000 31 SCHEDULE 2 Description of the Project 1. The Project is a program for the purchase by Fomento and the importation into Chile of agricultural machinery and for the utilization of such machinery in the productive development of Chilean agricultural resources, all as more fully set forth below. 2. The Project will be administered and accointed for by Fomento separately from its other activities. 3. The machinery to be so imported shall include tractors and tractor attachments, threshing machines, harvesters, seeding machines, land clearing and earth moving equip- ment, irrigation equipment, trucks and other agricultural equipment. 4. Such machinery shall be used or disposed of by Fomento under either of the following plans: (a) Sale Plan. Machinery allocated to this plan shall be sold by Fomento, either directly or through distrib- utors representing Fomento, to farmers or to others primarily engaged in agricultural pursuits, and shall not be sold, mortgaged or otherwise disposed of to others. The contracts for the sale of such machinery may provide that all or a part of the payment therefor shall be made in Chilean currency, that such payments may be amortized over periods not to exceed six years and may provide for security for such payments. (b) Service Plan. Fomento shall retain title to such machinery as may be utilized under this plan and shall not mortgage or pledge any part thereof. Such ma- chinery shall be used and operated by employees of Fomento specially trained in its handling and mainte- nance. The services of such machinery and such em- ployees shall be sold to farmers or to others engaged primarily in agricultural production. Payments for such services may be made in Chilean currency. Fomento shall be free to transfer any part of such ma- chinery from one of the above plans to the other, as in its 32 judgment may be desirable in carrying out the Project. None of such machinery shall, at any time or by any person or instrumentality, be exported from Chile. 5. The payments received by Fomento on the sale of such machinery or services will not, so long as any part of the Loan is outstanding and unpaid, be used in financing any project other than the Project herein described. 33 80HEDULE 3-A Form of Dollar Bond $ 000 $ 000 No. 000 No. 000 CORPORACION DE FOMENTO DE LA PRODUCCION GUARANTEED SERIAL BOND, SERIES B Due CORPORACI6N DE FOMENTO DE LA PRODucoI6N, organized and existing under the laws of the Republic of Chile (hereinafter called Fomento), for value received, hereby promises to pay to, or on the order of, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, an international institution established by Articles of Agreement among the respective Governments signatory thereto (hereinafter called the Bank), on the day of , 19 , at the office of the Bank in the Borough of Man- hattan in The City of New York, State of New York, United States of America, the sum of Dollars in such coin or currency of the United States of America as at the time of payment thereof shall be legal tender for the payment of public and private debts, and to pay interest thereon from 19 , at said office in like coin or currency at the rate of two and three-quarters per cent (2%%) per annum, pay- able semi-annually on January 1 and July 1 in each year. This Bond is one of an issue of bonds of the aggregate principal amount of $00,000,000 (or the equivalent thereof payable in other currencies), known as the Guaranteed Serial Bonds, Series B, of Fomento, all issued under a Loan Agreement dated , 1948, between the Bank and Fomento and guaranteed by the Republic of Chile in accordance with the terms of a Guarantee Agreement 34 dated , 1948, between the Bank and the Re- public of Chile. The Bonds are subject to redemption at the election of Fomento, as a whole at any time or in part (designated by lot or in such other manner as may be agreed upon by the Bank and Fomento) from time to time upon at least 90 days notice to the Bank at its principal office in the City of Wash- ington, District of Columbia, United States of America, at a redemption price for each Bond equal to the principal amount thereof and interest accrued thereon to the date fixed for such redemption, plus as a premium the following respective percentages of such principal amount: 1/2 of 1%, if redeemed not more than six months prior to the date of maturity specified in such Bond; % of 1%, if redeemed more than six months and not more than two years and six months prior to said date; 1%, if redeemed more than two years and six months and not more than four years and six months prior to said date; and 11/2%, if redeemed more than four years and six months prior to said date. After the redemption date specified in said notice interest on the Bonds shall cease to accrue and, upon presentation of the Bonds for payment and redemption in accordance with said notice, such Bonds shall be paid by Fomento at the redemption price or prices aforesaid. If any of such Bonds shall not be so paid upon presentation thereof, they shall continue to bear interest as therein specified until paid. In case an Event of Default as defined in said Loan Agree- ment shall happen, then and in each such case during the continuance of such Event of Default the Bank, at its op- tion, may declare the principal of all the Bonds then out- standing (if not already due) to be due and payable imme- diately, and upon any such declaration such principal shall become and shall be due and payable immediately. The principal of the Bonds, the interest accruing thereon and the premium on the redemption thereof shall be paid without deduction for and free from any taxes, imposts, levies or duties of any nature now or at any time hereafter 35 imposed by the Republic of Chile or by any taxing authority thereof or therein and shall be paid free from all restric- tions of the Republic of Chile, its political subdivisions or its agencies; provided, however, that payments made under the provisions of any Bond shall not be exempt from taxa- tion when such Bond is beneficially owned by an individual or corporate resident of the Republic of Chile. IN WITNESS WHEREOF Fomento has caused this Bond to be signed in its name by its thereunto duly authorized. CORPORACION DE FOMENTO DE LA PRODUCCION By Form of Guarantee THE REPUBLIC OF CHILE, for value received, as a primary obligor and not as surety merely, hereby absolutely and unconditionally guarantees to the holder of the within Bond, and pledges its full faith and credit for, the due and punc- tual payment of the principal and redemption price of said Bond, and the interest thereon. Dated THE REPUBLIC OF CHILE By 36 80HEDULE 3-B Form of Bond Payable in Currency Other Than Dollars * 000 000 No. 000 No. 000 CORPORACION DE FOMENTO DE LA PRODUOION GUARANTEED SERIAL BOND, SERIES B Due CoRpoici6N DE FOMENTO DE LA PRoDUooI6, organized and existing under the laws of the Republic of Chile (here- inafter called Fomento), for value received, hereby prom- ises to pay to, or on the order of, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, an international insti- tution established by Articles of Agreement among the re- spective Governments signatory thereto (hereinafter called the Bank), on the day of 19 , at the the sum of (insert amount of particular currency in which Bond is payable) in such coin or cur- rency of as at the time of payment thereof shall be legal tender for the pay- ment of public and private debts, and to pay interest there- on from , 19 , at said office in like coin or currency at the rate of two and three-quarters per cent (2% %) per annum, payable semi-annually on January 1 and July 1 in each year. This Bond is one of an issue of bonds of the aggregate principal amount of $00,000,000 (or the equivalent thereof payable in other currencies) known as the Guaranteed Serial Bonds, Series B, of Fomento, all issued under a Loan Agreement dated between the Bank and Fomento, and guaranteed by the Republic of Chile in ac- cordance with the terms of a Guarantee Agreement dated 1948, between the Bank and the Republic of Chile. *Principal amount of bond in the particular currency. 37 The Bonds are subject to redemption at the election of Fomento, as a whole at any time or in part (designated by lot or in such other manner as may be agreed upon by the Bank and Fomento) from time to time upon at least 90 days notice to the Bank at its principal office in the City of Washington, District of Columbia, United States of America, at a redemption price for each Bond equal to the principal amount thereof and interest accrued thereon to the date fixed for such redemption, plus as a premium the following respective percentages of such principal amount: '/2 of 1%, if redeemed not more than six months prior to the date of maturity specified .n such Bond; 3/4 of 1%, if re- deemed more than six months and not more than two years and six months prior to said date; 1%, if redeemed more than two years and six months and not more than four years and six months prior to said date; and 121%, if re- deemed more than four years and six months prior to said date. After the redemption date specified in said notice interest on the Bonds shall cease to accrue and, upon presentation of the Bonds for payment and redemption in accordance with said notice, such Bonds shall be paid by Fomento at the redemption price or prices aforesaid. If any of such Bonds shall not be so paid upon presentation thereof, they shall continue to bear interest as therein specified until paid. In case an Event of Default as defined in said Loan Agree- ment shall happen, then and in each such case during the continuance of such Event of Default the Bank, at its option, may declare the principal of all the Bonds then out- standing (if not already due) to be due and payable im- mediately, and upon any such declaration such principal shall become and shall be due and payable immediately. The principal of the Bonds, the interest accruing thereon and the premium on the redemption thereof shall be paid without deduction for and free from any taxes, imposts, levies or duties of any nature now or at any time hereafter imposed by the Republic of Chile or by any taxing authority 38 thereof or therein and shall be paid free from all restrictions of the Republic of Chile, its political subdivisions or its agencies; provided, however, that payments made under the provisions of any Bond shall not be exempt from taxa- tion when such Bond is beneficially owned by an individual or corporate resident of the Republic of Chile. IN WITNESS WHEREOF Fomento has caused this Bond to be signed in its name by its thereunto duly authorized. CORPORACI6N DE FOMENTO DE LA PRODUCCION By Form of Guarantee THE REPUBLIC OF CHILE, for value received, as a primary obligor and not as surety merely, hereby absolutely and unconditionally guarantees to the holder of the within Bond, and pledges its full faith and credit for, the due and punctual payment of the principal and redemption price of said Bond, and the interest thereon. Dated THE REPUBLIC OF CHILE By 39 SCHEDULE 4 Form of Guarantee Agreement Between The Republic of Chile and International Bank for Reconstruction and Development Agreement dated , between THE REPUBLIC OF CHILE (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOP- MENT (hereinafter called the Bank). WHEREAS by an agreement dated , between the Bank and Corporaci6n de Fomento de la Producci6n (hereinafter called the Borrower), which agreement and the Schedules therein referred to are hereinafter called the Loan Agreement, the Bank has agreed to make to the Bor- rower a loan in the aggregate principal amount of two mil- lion five hundred thousand dollars ($2,500,000) on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agrees to guarantee such loan and the obligations of the Borrower in respect there- of; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to guarantee such loan and the obligations of the Borrower in respect thereof; Now THEREFORE the parties hereto hereby agree as fol- lows: ARTICLE I Wherever used in this Guarantee Agreement, unless the context shall otherwise require, the respective terms which are defined in Article I of the Loan Agreement shall have the respective meanings therein set forth. ARTICLE II Without limitation or restriction upon any of the other covenants on its part in this Guarantee Agreement con- tained, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and 40 punctual payment of the principal of, and the interest, com- mitment charge and commission on, the Loan, the pre- mium, if any, on the redemption of 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. It is further agreed by the Guarantor that its obligations under any covenants and agreements on its part in this Guarantee Agreement are not subject to any prior notice to, demand upon or action against the Bor- rower or to any prior notice to or demand upon the Guar- antor with regard to any default by the Borrower in re- spect of any of its obligations set forth in the Loan Agree- ment and in the Bonds. No extension of time or forbear- ance given to the Borrower in respect of the performance of any of its obligations under the Bonds or the Loan Agreement, and no failure of the Bank or of any holder of the Bonds to give any notice or to make any demand or protest whatsoever, or strictly to assert any right or pur- sue any remedy against the Borrower in respect of the Bonds or of the Loan Agreement, and no agreement by the Bank and the Borrower to any modification of the Project and no failure of the Borrower to comply with any require- ment of any law, regulation or order of the Guarantor or any of its political subdivisions or agencies, shall in any way terminate, diminish or limit the unconditional guaran- tee of the Guarantor hereunder. ARTICLE III The Guarantor hereby further covenants as follows: Section 1. So long as any part of the Loan shall be out- standing and unpaid, the Guarantor will not, without the prior written consent of the Bank, cause or permit to be created any mortgage, pledge or other charge or priority on any property or assets, or any revenues or receipts, of the Guarantor, or any of its political subdivisions, or any of its agencies, or any agency of any of its political subdivisions, as security for any external debt of the Guarantor, or of any such political subdivision or agency, unless the Loan shall 41 be secured by such mortgage, pledge or other charge or priority equally and ratably with such other external debt; provided, however, that this Section shall not apply to either of the following: (a) the creation of any mortgage, pledge or other charge or priority on any property purchased, at the time of the purchase, solely as security for the payment of the purchase price of such property; or (b) any pledge of commercial goods to secure external debt maturing not more than one year after its date and to be paid out of the pro- ceeds of sale of such commercial goods. Section 2. So long as any part of the Loan shall be out- standing and unpaid, if the Guarantor, or any of its politi- cal subdivisions, or any of its agencies, or any agency of any of its political subdivisions,' shall propose to incur, as- sume or guarantee any external debt or substantially to modify the terms of payment of any then existing external debt incurred, assumed or guaranteed by any of them, the Guarantor will notify the Bank promptly of the particular proposal and prior to taking the proposed action will afford to the Bank all opportunity which is reasonably practicable under the circumstances to exchange views with the Guar- antor with regard to such proposal; provided, however, that the foregoing provisions shall not apply to either of the fol- lowing: .(a) the incurring of additional external debt through utilization, in accordance with the terms of any credit established prior to the date of this Agreement, of any unused amounts available under such credit; or (b) the entering into international payments or similar agreements the term of which is not more than one year and under which the transactions on each side are expected to balance over the period of the agreement. Section 3. In order that the Bank and the Guarantor may cooperate to the fullest extent in assuring that the purposes of the Loan shall be accomplished, so long as any part of the Loan shall be outstanding and unpaid, the Guarantor will afford to the Bank, from time to time as the Bank shall reasonably request: 42 (a) All reasonable opportunity for exchanges of views between accredited representatives of the Bank and officials empowered to represent the Guarantor in such exchanges of views with regard to matters relat- ing to the purposes of the Loan and the maintenance of the service thereof and other matters of mutual interest, it being understood that both the Bank and the Guarantor will receive from one another sugges- tions and observations in regard to all such matters in a spirit of mutual cooperation; and (b) All reasonable opportunity for accredited represen- tatives of the Bank to visit freely any part of the ter- ritories of the Guarantor for the purpose of perform- ing the functions set forth in Section 3 of Article VII of the Loan Agreement and for the purpose of study- ing the financial and economic conditions of the Guar- ator and all other matters relating to the purposes of the Loan. Section 4. If at any time so long as any part of the Loan shall be outstanding and unpaid any condition shall arise which shall prevent, obstruct or interfere with, or threaten to prevent, obstruct or interfere with, the accomplishment of the purposes of the Loan or the maintenarce of the ser- vice of the Loan, the Guarantor will promptly inform the Bank of such condition and will afford to the Bank a rea- sonable opportunity to exchange views with the Guarantor with regard thereto. Section 5. So long as any part of the Loan shall be out- standing and unpaid, the Guarantor will furnish to the Bank all such information, at such times and in such detail as the Bank shall reasonably request, relating to financial and economic conditions in the territories of the Guarantor and the international balance of payments position of the Guar- antor. 43 Section 6. The principal of the Loan, the interest accru- ing thereon, and the premium on the redemption thereof, as specified in the Loan Agreement and the Bonds, and the commitment chfrge and the commission specified in Article II of the Loan Agreement shall be paid without deduction for and free from any taxes, imposts, levies or duties of any nature now or at any time hereafter imposed by the Guaran- tor or by any taxing authority thereof or therein and shall be paid free from all restrictions of the Guarantor, its polit- ical subdivisions or its agencies; but this provision shall not be construed as exempting from taxation payments made under the provisions of any Bond when such Bond is bene- ficially oirned by an individual or corporate resident of the Guarantor. Section 7. This Guarantee Agreement, the Loan Agree- ment and the Bonds shall be free of any issue, stamp or other tax imposed by the Guarantor or any taxing author- ity thereof or therein. Section 8. So long as any part of the Loan shall be out- standing and unpaid, the Guarantor will not take or permit any of its political subdivisions or agencies to take any ac- tion which would prevent or interfere with the performance by the Borrower of any of the covenants, agreements and obligations of the Borrower in the Loan Agreement con- tained, and will take or cause to be taken all action neces- sary and appropriate to enable the Borrower to perform such covenants, agreements and obligations. ARTIOLE IV The Guarantor agrees to endorse its guarantee hereunder on the Bonds to be executed by the Borrower and delivered in accordance with Article V of the Loan Agreement, and on Bonds to be issued and delivered in exchange for or on transfer of any Bonds upon which such guarantee is en- dorsed. Such guarantee shall be substantially in the form prescribed in Schedules 3-A and 3-B to the Loan Agree- ment, respectively. 44 ARTICLE V Section 1. The parties hereto accept and agree to the pro- visions of Article V of the Loan Agreement with the same force and effect as though set forth herein. Section 2. At any time or from time to time, upon the request of the Bank, the Guarantor will, at its own expense, do any and all such things as the Bank shall reasonably re- quest to comply with any laws or regulations of any coun- try, or of any state or political subdivision thereof, or of any securities exchange therein, in order to enable the Bank to sell or offer for sale any of such Bonds, by public sale or otherwise, in any country or to list any of such Bonds for trading on any securities exchange. To that end the Guar- antor will execute and deliver all registration statements, applications and other documents and furnish to the Bank all information which shall be required in order so to com- ply with any such law or regulation. The Bank will give to the Guarantor not less than four months notice of any such request. ARTICLE VI The parties hereto accept and agree to the provisions of Articles IX and X of the Loan Agreement with the same force and effect as though set forth herein. This Guaran- tee Agreement shall come into force and effect as in Section 2 of Article XI of the Loan Agreement provided. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be signed in their respective names by their representatives thereunto duly authorized as of the day and year first above written. THz Rarmum or mCHL By INTERNATIONAL BANK Yo REOoN- STRUCTION AND DEVELOPMENT By