Conformed Copy - L4301 - Early Childhood Development Project - Amendment 1

Page 1 March 29, 2001 His Excellency Jose Isidro Camacho Secretary Department of Finance DoF Building, Roxas Blvd. Manila, Philippines Excellency: Re: Loan 4301- PH (Early Childhood Development Project) Amendments to the Loan Agreement I refer to the Loan Agreement dated April 8, 1998, between the Republic of the Philippines (the Borrower) and the International Bank for Reconstruction and Development (the Bank) for the Early Childhood Development Project, as amended, and to the letter dated March 14, 2001, from Assistant Secretary Roberto B. Tan, Department of Finance, requesting the establishment of a second Special Account under the Loan Agreement. I am pleased to inform you that, after due consideration, the Bank has agreed to your request to amend the Loan Agreement, as set forth below. 1. Section 1.02 (q) of the Loan Agreement is amended to read: "(q) 'Special Accounts' means the accounts referred to in Section 2.02 (b) of this Agreement." 2. Section 2.02 (b) of the Loan Agreement is amended to read: "(b) The Borrower may, for the purposes of Parts A.1, A.2 (as it relates to Category (4) (b) of Schedule 1 to the Loan Agreement), B and C of the Project and for purposes of Part A.2 of the Project (except for Category (4) (b) of Schedule 1 to the Loan Agreement), open and maintain in dollars a separate special deposit account in a commercial bank, specifically authorized for this purpose by Bangko Sentral ng Pilipinas, on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure and attachment. Deposits into, and payments out of, each Special Account shall be made in accordance with the provisions of Schedule 6 to this Agreement." 3. Schedule 6 to the Loan Agreement is amended to read: "SCHEDULE 6 Special Accounts 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (2)(a), 3(a), 4 and 5 set forth in the table in paragraph 1 of Schedule 1 to this Agreement in respect of Parts A.1, A.2, B and C of the Project and Categories 1, 2(b) and 3(b) set forth in said table in respect of Part A.2 of the Project; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $1,000,000 in respect of the Special Account for Parts A.1, A.2 (as it relates Page 2 to Category (4) (b) of Schedule 1 to the Loan Agreement), B and C of the Project and an amount equivalent to $500,000 in respect of the Special Account for Part A.2 of the Project (except Category (4) (b)), to be withdrawn from the Loan Account and deposited into the Special Accounts pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Bank shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to $600,000 in respect of the Special Account for Parts A.1, B and C of the Project and an amount equivalent to $300,000 in respect of the Special Account for Part A.2 thereof, until (i) in respect of the Special Account for Parts A.1, A.2 (as it relates to Category (4) (b)), B and C of the Project, the aggregate amount of withdrawals from the Loan Account allocated to Categories (2)(a), 3(a), 4 and 5 plus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions for Parts A.1, A.2, B and C of the Project shall be equal to or exceed the equivalent of $4,000,000, and (ii) in respect of the Special Account for Part A.2 of the Project (except Category (4) (b)), the aggregate amount of withdrawals from the Loan Account allocated to Categories 1, 2(b) and 3(b) plus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions for Part A.2 of the Project (except Category (4) (b)) shall be equal to or exceed the equivalent of $2,000,000. 2. Payments out of the respective Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the respective Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the respective Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for deposit into the respective Special Account of an amount or amounts which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the respective Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the respective Special Account, the Borrower shall furnish to the Bank requests for deposits into the respective Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to para-graph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the respective Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the respective Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the respective Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into any Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in Page 3 accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; (b) if the Borrower shall have failed to furnish to the Bank, within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Bank pursuant to said Section in respect of the audit of the records and accounts for the Special Accounts; (c) if, at any time, the Bank shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account pursuant to the provisions of Section 6.02 of the General Conditions; or (d) once the total unwithdrawn amount of the Loan allocated to the eligible Categories for the respective Special Account, minus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the respective Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of any Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the respective Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into any Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in any Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Accounts. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions." Except as specifically amended hereby, all other provisions of the Loan Agreement remain in full force and effect. Please confirm your agreement to the foregoing amendments by signing and dating the enclosed duplicate of this letter in the space provided, and by returning it to us. The above amendments will become effective as of the date of confirmation. Sincerely, By /s/ Vinay Bhargava Page 4 Country Director Philippines East Asia and the Pacific CONFIRMED: REPUBLIC OF THE PHILIPPINES By /s/ Juanita D. Amatong Authorized Representative Date: April 20, 2001