Philippines - Industrial Finance Project : Loan 1984 - Loan Agreement - Conformed

DOCUMENTS LOAN NUMBER 1984 PH Loan Agreement (Industrial Finance Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and CENTRAL BANK OF THE PHILIPPINES Dated ,1981 LOAN NUMBER 1984 PH LOAN AGREEMENT AGREEMENT, dated %Ln , 1981, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and CENTRAL BANK OF THE PHILIPPINES (hereinafter called the Borrower). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Section 3.01 (a) of this Agreement by extending the Loan as hereinafter provided; (B) the Borrower intends to contract from financial institu- tions an amount in foreign currency equivalent to $100,000,000 to be made available to the Apex Development Finance Unit for its operations on the terms and conditions set forth in agreements (hereinafter called the Commercial Loan Agreements) to be entered into by the Borrower with respective financial institutions; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to extend the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank dated October 27, 1980, with the same force and effect as if they were fully set forth herein, subject, however, to the modifications thereof set forth in Schedule 3 to this Agreement (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, 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 have the respective meanings therein set forth, and the following addi- tional terms have the following meanings: (a) "ADFU" means the Apex Development Finance Unit of the Borrower established pursuant to Resolution No. 1490 dated August 15, 1980 of the Monetary Board of the Borrower; - 2 - (b) "Participating Financial Institutions" meanr such financial institutions as may be accredited by the Borrower with the concurrence of the Bank for participation in the Project; (c) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and each Participating Financial Institution pursuant to Section 3.02 of this Agreement, .s the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (d) "Subsidiary Loan" means the amount made available by the Borrower to a Participating Financial Institution under the pro- visions of a Subsidiary Loan Agreement; (e) "Sub-loan" means a loan made or proposed to be made by a Participating Financial Institution out of the proceeds of the Subsidiary Loan to an Investment Enterprise for an Investment Project; (f) "Free-limit Sub-loan" means a sub-loan, as so defined, which qualifies as a free-limit sub-loan pursuant to the pro- visions of Section 2.02 (b) of this Agreement; (g) "Investment" means an investment, other than a sub-loan made or proposed to be made by a Participating Financial Institu- tion out of the proceeds of the Subsidiary Loan in an Investment Enterprise for an Investment Project; (h) "Investment Enterprise" means an enterprise to which a Participating Financing Institution proposes to make or has made a sub-loan or in which it proposes to make or has made an invest- ment; (i) "Investment Project" means a specific development project to be carried out by an Investment Enterprise utilizing the proceeds of a sub-loan or investment; (j) "Foreign currency" means any currency other than the currency of the Guarantor; (k) "Operating Policy Guidelines" means the guidelines for the operation of ADFU established pursuant to Resolution No. 1290 dated July 18, 1980 of the Monetary Board of the Borrower, as said Guidelines may be amended from time to time with the concurrence of the Bank; and -3- (1) "Subsidiary" means any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by the Borrower or by any one or more subsidiaries of the Borrower or by the Borrower and one or more of its subsidiaries. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to one hundred fifty million dollars ($150,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in respect of the reasonable cost of goods, civil works or services required for the Investment Project in respect of which the withdrawal is requested: (i) such amounts as shall have been expended (or if the Bank shall so agree, shall be required to meet expenditures to be made) in a foreign currency for goods procured, or services supplied from, outside the territories of the Guarantor; (ii) 70% of the cost of imported goods procured locally; (iii) the equivalent of 50% of such amounts as shall have been expended for goods produced in the territories of the Guarantor, which percentage represents the estimated foreign exchange component of such goods; and (iv) the equivalent of 45% of such amounts as shall have been expended for civil works, which percentage represents the estimated foreign exchange component of such works; provided, however, that no withdrawal shall be made in respect of an Investment Project unless (A) the sub-loan or investment for such Investment Project shall have been approved by the Bank, or (B) the sub-loan for such Investment Project shall be a free-limit sub-loan. (b) a free-limit sub-loan shall be a sub-loan for an Invest- ment Project in an amount to be financed out of the proceeds of the Subsidiary Loan which shall not exceed the sum of $4,000,000 equivalent, when added to any other outstanding amounts financed or proposed to be financed out of the proceeds of the Loan and of the borrowing under the Commercial Loan Agreements provided, however, that said free-limit shall be applicable from such date as the Bank shall have established and notified the Borrower for the purposes of this Agreement and, until the Bank has established such date, such amounts as the Borrower shall have specified as the free-limit in respect of each Participating Financial Institution in the respective Subsidiary Loan Agreement with each Participating Financial Institution. (c) Except as the Bank and the Borrower shall otherwise agree, no withdrawals shall be made on account of (i) expenditures before the date of this Agreement, (ii) expenditures by an Invest- ment Enterprise in respect of a sub-loan subject to the Bank's approval or in respect of an investment if such expenditures shall have been made more than 120 days prior to the date on which the Bank shall have received in respect of such sub-loan or investment the application and information required by Section 2.03 (a) of this Agreement, (iii) in respect of a free-limit sub-loan, more than ninety days prior to the date on which ADFU shall have received from the Participating Financial Institution in respect of such free-limit sub-loan (A) a summary description of the Investment Enterprise and the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan, and (B) the terms and conditions of the sub-loan including the schedule of amortization therefor or (iv) expenditures by an Investment Enterprise in respect of a sub-loan exceeding the equivalent of $6,000,000 when added to any other outstanding amounts financed or proposed to be financed out of the proceeds of the Loan and of the borrowing under the Commercial Loan Agreements. (d) Notwithstanding the foregoing provision of this Section, no withdrawal shall be made on account of expenditures by an Investment Enterprise in respect of a sub-loan or an investment unless the sponsoring Participating Financial Institution has entered into a Subsidiary Loan Agreement with the Borrower pur- suant to Section 3.02 (a) of this Agreement and the Borrower has furnished to the Bank a certificate stating that said Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and such Participating Financial Institution and is legally binding upon the parties thereto. Section 2.03. (a) When presenting a sub-loan (other than a free-limit sub-loan) or an investment to the Bank for approval, the Borrower shall furnish or cause to be furnished to the Bank an application, in form satisfactory to the Bank, together with (i) a description of the Investment Enterprise and an appraisal of the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the-Loan and methods and procedures to be used for the procurement of goods, works and services required for the Investment Project, (ii) the proposed terms and conditions of the sub-loan or investment, including the schedule of amortization of the sub-loan or of repayment to the Borrower of the amount of the Loan to be used for the investment, and (iii) such other information as the Bank shall reasonably request. (b) Each request by the Borrower for making initial with- drawals from the Loan Account in respect of a free-limit sub-loan shall contain (i) a summary description of the Investment Enter- prise and the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan, and (ii) the terms and conditions of the sub-loan, including the schedule of amortization therefor. (c) Except as the Bank and the Borrower shall otherwise agree, applications and requests made pursuant to the provisions of paragraph (a) of this Section shall be presented to the Bank on or before June 30, 1983. Section 2.04. The Closing Date shall be June 30, 1985 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrower shall pay interest at the rate of nine and three-fifths per cent (9-3/5%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. - 6 - Section 2.07. Interest and other charges shall be payable semi-annually on February 15 and August 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 1 to this Agreement. ARTICLE III The Project; Management and Operations of the Borrower Section 3.01. (a) The purpose of the Project is to assist the Borrower in financing, through Participating Financial Insti- tutions, such productive facilities and resources in the Republic of the Philippines as will contribute to the economic and social development of the country. The Project consists in the financing of specific development projects through loans to and investments in industrial enterprises in the Republic of the Philippines in furtherance of the corporate purposes of the Participating Financial Institutions. (b) The Borrower shall carry out the Project and conduct the operations and affairs of ADFU in accordance with sound financial and investment standards and practices, with qualified management and personnel, and in accordance with the Operating Policy Guidelines. Section 3.02. (a) The Borrower shall relend the proceeds of the Loan and of the borrowing under the Commercial Loan Agreements to the Participating Financial Insitutions under Subsidiary Loan Agreements to be entered into between the Borrower and each Participating Financial Institution under such terms and condi- tions as shall have been approved by the Bank, which shall, except as the Bank may otherwise agree, include inter alia, those set forth in Schedule 2 to this Agreement. (b) The Borrower shall exercise its rights under each of the Subsidiary Loan Agreements in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive any of the Subsidiary Loan Agreements or any provision thereof. Section 3.03. (a) The Borrower undertakes that, unless the Bank shall otherwise agree, any sub-loan or investment will be - 7 - made on terms whereby the Participating Financial Institutions shall obtain, by written contract with the Investment Enterprise or by other appropriate legal means, rights adequate to protect the interests of the Bank and the Borrower, including, in the case of any sub-loan and to the extent that it shall be appropriate in the case of any investment, the right of the Participating Finan- cial Institutions to: (i) require the Investment Enterprise to carry out and operate the Investment Project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (ii) require that: (1) the goods and services to be financed out of the proceeds of the Loan shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and avail- ability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them and (2) such goods and services shall be used exclusively in the carrying out of the Investment Project; (iii) inspect, by itself or jointly with representatives of the Borrower, and if the Bank shall so request, with the Bank, such goods and the sites, works, plants and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (iv) require that: (1) the Investment Enterprise shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice; and (2) without any limitation upon the foregoing, such insurance shall cover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Loan to the place of use or installation, any indemnity thereunder to be. made payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (v) obtain all such information as the Bank or the Borrower shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Investment Enterprise and to the benefits to be derived from the Investment Project; and (vi) suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the Loan upon failure by such Investment Enterprise to perform its obligations under its contract with the Participating Financial Institutions. (b) The Borrower shall cause the Participating Financial Institutions to exercise their rights in relation to each Invest- ment Project in such manner as to: (i) protect the interests of the Bank and the Borrower; (ii) comply with their obligations - 8 - under their respective Subsidiary Loan Agreement; and (iii) achieve the purposes of the Project. Section 3.04. (a) The Borrower shall furnish or cause to be furnished to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan, the Project, the Participating Financial Institutions, the Investment Enterprises, the Investment Projects, the Sub-loans and Investments and, where appropriate, the benefits to be derived from the foregoing. (b) Within six months, or such other date as the Bank may agree, following the last withdrawal from the Loan Account, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Investment Projects, their costs and the benefits derived and to be derived from them, the performance by the Borrower and the Bank of their respective obligations under this Agreement and the accomplishment of the purposes of the Loan. Section 3.05. The Borrower shall take all such action and exercise all such recourse available to it under the Subsidiary Loan Agreements with the Participating Financial Institutions as the Bank may request in order to ensure the prompt and full performance of each Participating Financial Institution of its obligations under its respective Subsidiary Loan Agreement. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall cause to be maintained procedures and records adequate to monitor and record the progress of the Project and of each Investment Project (including its cost and the benefits to be derived from it) and to reflect in accordance with consistently maintained sound accounting practices the operations and resources of ADFU and of the Participating Financial Institutions, including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of certificates of expenditure. (b) The Borrower shall retain, until one year after the Closing Date, all records (orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which -9- withdrawals are requested from the Loan Account on the basis of certificates of expenditure and shall enable the Bank's accredited representatives to examine such records. (c) The Borrower shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) related to ADFU for each fiscal year audited in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank, as soon as available but in any case not later than four months after the end of each such year, (A) certified copies of the financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested, including, without limitation to the foregoing, a separate opinion by said auditors in respect of the expenditures and records referred to in paragraph (b) above of this Section 4.01 as to whether the proceeds of the Loan withdrawn from the Loan Account on the basis of certificates of expenditure have been used for the purpose for which they were provided; and (iii) furnish to the Bank such other information concerning the accounts and financial statements related to ADFU and the audit thereof as the Bank shall from time to time reasonably request. Section 4.02. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt. (b) The Borrower undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any assets of the Borrower or any subsidiary as security for any debt, such lien will equally and ratably secure the payment of the principal of, and interest and other charges on the Loan and that in the creation of any such lien express provision will be made to that effect at no cost to the Bank; provided, however, that the fore- going provisions of this Secton 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; or (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 4.03. The Bank and the Borrower shall from time to time, at the request of either party, exchange views through their representatives with regard to the administration, operations and - 10 - resources of ADFU and of the Participating Financial Institutions, and the Borrower shall furnish to the Bank all such information as the Bank shall reasonably request concerning the administration, operations and resources of ADFU and of the Participating Financial Institutions. Section 4.04. (a) The Borrower shall, by July 31, 1981, contract the Commercial Loan Agreements referred to in Recital (B) of this Agreement, or make other arrangements satisfactory to the Bank to make available to ADFU an amount in foreign currency equivalent to $100,000,000. (b) The Borrower undertakes that the provisions of Sections 2.02 and 2.03 of this Agreement shall apply mutatis mutandis to any loan to be made to an Investment Enterprise out of the proceeds of the Commercial Loan Agreements. ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified: (a) a change shall have been made in the Operating Policy Guidelines without the Bank's consent; (b) the Borrower shall have taken any action for disestab- listment of ADFU; and (c) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any loan made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the Commercial Loan Agreements; or (B) any loan made to the Borrower under the Commercial Loan Agreements shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of - 11 - the Bank that such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreements. Section 5.02. For the purposes of Section 7.01 of the General Conditions the following additional events are specified: (a) any event specified in paragraphs (a) or (b) of Section 5.01 shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower; and (b) the event specified in paragraph (c) (i) (B) of Section 5.01 shall occur. ARTICLE VI Miscellaneous Section 6.01. The date of A l, is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. For the Borrower: Central Bank of the Philippines Manila Philippines - 12 - Cable address: PHILCENBANK Manila IN WITNESS WHEREOF the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President East Asia and Pacific CENTRAL BANK OF THE PHILIPPINES By Authorized Representative - 13 - SCHEDULE 1 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 15 and August 15 beginning August 15, 1986 5,000,000 through February 15, 2001 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.04), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. - 14 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.45% More than three years but not more than six years before maturity 2.90% More than six years but not more than eleven years before maturity 5.30% More than eleven years but not more than sixteen years before maturity 7.70% More than sixteen years but not more than eighteen years before maturity 8.65% More than eighteen years before maturity 9.60% - 15 - SCHEDULE 2 Relending Terms A. From the Borrower to the Participating Financial Insti- tutions: 1. Interest rate (a) on funds withdrawn from the Loan Account, equal to the rate specified in Section 2.06 of this Agreement plus a service charge of not less than three fourths of one per cent (0.75%) per annum, and (b) on funds withdrawn from Commercial Loan Agreements, equal to the rate specified in the respective Commercial Loan Agreements plus a service charge of not less than one-eighth of one per cent per annum. 2. Commitment charge of not less than three-fourths of one per cent (0.75%) per annum on the principal amount of the Loan not withdrawn from time to time and, in respect of Commercial Loan Agreements, commitment charge, if any, as specified in the respective Commercial Loan Agreements. 3. Repayment to conform in relevant part substantially to the aggregate of the amortization schedules applicable to sub- loans and the schedules of repayment in respect of investments. 4. Subject to the provisions of paragraph 1 above, interest rates shall be reviewed by the Borrower every six months and in the event of any change, the revised rate shall be applicable on new loans/commitments. 5. Foreign exchange risk to be passed on to the Investment Enterprises. B. From Participating Financial Institutions to Investment Enterprises: 1. Interest rate inclusive of service charge of not more than 4.50% per annum above the interest rate inclusive of service charge at which funds received from the Borrower. 2. Repayment over a period not exceeding 15 years including an appropriate period of grace. 3. Foreign exchange risk to be borne by the Investment Enterprise. 4. An appropriate commitment charge. - 16 - SCHEDULE 3 Modifications of the General Conditions For the purposes of the Loan Agreement, the provisions of the General Conditions are modified as follows: (1) The following subparagraph (d) is added to Section 3.04: "(d) The Bank and the Borrower may from time to time agree upon arrangements for prepayment of the Loan and the application of such prepayment in addition to, or in substitution for, those set forth in paragraph (b) of Sec- tion 3.04." (2) The words "Investment Projects" are substituted for the words "the Project" at the end of Section 5.03. (3) Section 6.03 is deleted and replaced by the following new Section: "Section 6.03. Cancellation by the Bank. If (a) the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of thirty days, or (b) by the date specified in paragraph (c) of Section 2.03 of the Loan Agreement no applications or requests permitted under paragraph (a) of such Section shall have been received by the Bank in respect of any portion of the Loan, or having been so received, shall have been denied, or (c) after the Closing Date an amount of the Loan shall remain unwithdrawn from the Loan Account, or (d) the Bank shall have received notice from the Guarantor pursuant to Section 6.07 with respect to an amount of the Loan, the Bank may by notice to the Borrower terminate the right of the Borrower to submit such applica- tions or requests or to make withdrawals from the Loan Account, as the case may be, with respect to such amount or portion of the Loan. Upon the giving of such notice such amount or portion of the Loan shall be cancelled." INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this day of 1981. FOR SECRETARY