Philippines - Textile Sector Restructuring Project : Loan 2127 - Loan Agreement - Conformed

LOAN NUMBER 2127 PB DOCUMENTS] Loan Agreement (Textile Sector Restructuring Project) between REPUBLIC OF THE PHILIPPINES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated v , 1982 LOAN NUMBER 2127 PH LOAN AGREEMENT AGREEMENT, dated 30 , 1982, between REPUBLIC OF THE PHILIPPINES (herein fter called the Borrower) and INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) the Borrower and the Development Bank of the Philippines, a public development bank established and operating under the laws of the Borrower (hereinafter called DBP) have contracted from other sources of finance (hereinafter called the Other Lenders) loans and credits (hereinafter called the Other Loans and Credits) in an aggregate principal amount equivalent to three hundred fifty million dollars ($350,000,000) to assist in financing Part B (1) of the Project on the terms and conditions set forth in agreements (hereinafter called the Other Lenders' Agreements) entered into among the Borrower, DBP and the Other Lenders; (C) Part B of the Project will be carried out by DBP with the Borrowe:'s assistance and, as part of such assistance, the Borrower will make available to DBP part of the proceeds of the Loan as hereinafter provided; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in the Project Agreement of even date herewith between the Bank and DBP; 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, (said General Conditions Applicable to Loan and Guarantee -2- Agreements of the Bank, 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) "Project Agreement" means the agreement between the Bank and DBP of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplem-ntal to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and DBP pursuant to Section 3.01 (c) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement, and "Subsidiary Loan" means the loan to be made available by the Borrower to DBP pursuant to the Subsidiary Loan Agreement; (c) "Sub-loan" means a loan made or proposed to be made by DBP out of the proceeds of the Subsidiary Loan to a Textile Enterprise for a Textile Project and "free-limit Sub-loan" means a Sub-loan, as so defined, which qualifies as a free-limit Sub- loan pursuant to the provisions of paragraph 2 (b) of Schedule 1 to this Agreement; (d) "Textile Enterprise" means a textile enterprise to which DBP proposes to make or has made a Sub-loan; (e) "Textile Project" means a specific textile project provided for under Part B (1) of the Project and which is to be carried out by a Textile Enterprise utilizing the proceeds of a Sub-loan; (f) "Textile Sector Policy Statement" means the statement of the Borrower's objectives, scope and implementation and policy framework of its program for the restructuring of its textile sector, dated March 19, 1982; -3- (g) "Textile Restructuring Program" means the Borrower's program for the restructuring of its textile sector in accordance with its Textile Sector Policy Statement; (h) "BOI" means the Board of Investments within the Ministry of Trade and Industry of the Borrower; (i) "Joint Evaluation Unit" means the Joint Evaluation Unit established between BOI and DBP for the purpose of providing for joint BOI/DBP evaluation of Sub-loan applications by Textile Enterprises for Textile Projects; (j) "Charter" means the charter of DBP as provided in the Borrower's RA 2081, dated June 14, 1958, as amended to the date of this Agreement; (k) "Operating Policies and Procedures" means the statement of lending policies and procedures of DBP approved by the Board of Governors of DBP on November 6, 1974, as amended to the date of this Agreement; (1) "Statement of Reserves Policy" means the statement of DBP's reserves policy approved by the Board of Governors of DBP on January 21, 1976, as amended to the date of this Agreement; (m) "Subsidiary" means any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by DBP or by any one or more subsidiaries of DBP or by DBP and one or more of its subsi- diaries; (n) "peso" means the currency of the Borrower; and (o) "foreign currency" means any currency other than the currency of the Borrower. 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-seven million four hundred thousand dollars ($157,400,000). -4- Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank. Section 2.03. Except as the Bank shall otherwise agree, the Borrower shall ensure that the procurement of the goods required for the Textile Projects and to be financed out of the proceeds of the Loan relent to DBP by the Borrower shall be governed by the provisions of the Schedule to the Project Agreement. Section 2.04. The Closing Date shall be December 31, 1988 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and DBP of such later date. Section 2.05. Not later than the Effective Date, the Borrower shall pay to the Bank a fee equivalent to two million three hundred twenty-six thousand one hundred eight dollars ($2,326,108). The fee shall be payable in such currency or currencies as the Bank shall specify. In the event that the Bank shall not have received full payment of the fee by the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount required for the full payment of the fee in the currency or currencies specified for the purpose. Section 2.06. 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 2.07. The Borrower shall pay interest at the rate of eleven and three-fifths per cent (11-3/5%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.08. Interest and other charges shall be payable semiannually on May 15 and November 15 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. Section 2.10. With respect to Part B (1) of the Project, the Chairman of DBP, or such other person or persons as DBP shall -5- designate in writing, is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out Part A of the Project through BOI with due diligence and efficiency and in conformity with appropriate administrative, financial, economic and technical practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall cause DBP to perform i.n accordance with the provisions of the Project Agreement all the obligations of DBP therein set forth, shall take or cause to be taken all action, including the provi- sion of funds, facilities, services and other resources, neces- sary or appropriate to enable DBP to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (c) The Borrower shall relend out of the proceeds of the Loan the equivalent of the amounts withdrawn from the Loan Account by DBP on behalf of the Borrower pursuant to the pro- visions of paragraph 2 (a) of Schedule 1 to this Agreement to DBP under a subsidiary loan agreement to be entered into between the Borrower and DBP, under terms and conditions which shall have been approved by the Bank, including those set forth in Schedule 4 to this Agreement. (d) The Borrower shall exercise its rights under the Subsidiary Loan Agreement 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 the Subsidiary Loan Agreement or any provision thereof. Section 3.02. In order to assist the Borrower in carrying out Part A of the Project and in the preparation .of the report referred to in Section 3.05 (d) of this Agreement, the Borrower -6- shall employ consultants whose composition, selection, qualifica- tions, experience and terms and conditions of employment shall be satisfactory to the Bank in accordance with the principles and procedures described in the "Guidelines for the Use of Consul- tants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Section 3.03. Except as the Borrower and the Bank may otherwise agree, the Borrower shall take all measures required on its part to: (a) maintain the Joint Evaluation Unit with organization, staff and terms of reference acceptable to the Bank; and (b) cause and enable said Unit to ca.ry out the functions included under Part A (1) of the Project. Section 3.04. The Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the purposes of the Project. Section 3.05. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, reports, studies and training schedules for Part A of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of Part A of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in said Part of the Project; (ii) shall enable the Bank's representatives to visit the facilities used in carrying out said Part of the Project and to examine any relevant records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning said Part of the Project, its cost and, where appropriate, the bene- fits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Upon the award of any contract for goods or services to be financed out of the proceeds of the Loan, the Bank may publish -7- a description thereof, the name and nationality of the party to, whom the contract was awarded and the contract price. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare, with the cooperation of DBP pursuant to Section 2.08 of the Project Agreement, 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 Project, its cost and the benefits derived and to be derived from it, including the execution and initial opera- tion of the Textile Projects, their costs and the benefits derived from them, the performance by the Borrower, the Bank and DBP of their respactive obligations under the Loan Agreement and the Project Agreement and the accomplishment of the purposes of the Loan. ARTICLE IV Other Covenants Section 4.01. (a) It is the mutual intention of the Borrower and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on governmental assets. (b) To that end the Borrower: (i) represents that at the date of this Agreement no lien exists on any government assets as security for any external debt except as otherwise disclosed in writing by the Borrower to the Bank; and (ii) undertakes that, except as the Bank shall otherwise agree, if any such lien shall be created, it will ipso facto, equally and ratably, and at no cost to the Bank, secure the payment of the principal of, and interest and other charges on, the Loan and in the creation of any such lien express provision will be made to that effect. The Borrower shall promptly inform the Bank.of the creation of any such lien. (c) The foregoing representation and undertaking shall not apply to: (i) any lien created on property, at the time of pur- chase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. -8- (d) As used in this Section, the term "government assets" means assets of the Borrower or of any agency of the Borrower including the Central Bank of the Philippines or any institution performing the functions of a central bank for the Borrower. (e) The Borrower further undertakes that, within the limits of the laws in force in its territories, it will make the fore- going undertaking effective with respect to liens on the assets of its political subdivision and their agencies, and to the extent that the Borrower is uaable within the limits of the laws in force in its territories to make this undertaking effective, the Borrower will give to the Bank an equivalent lien satis- factory to the Bank. Section 4.02. The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with con- sistently maintained sound accounting practices the operations, resources and expenditures, in respect of Part A of the Project, of the departments or agencies of the Borrower responsible for carrying out said Part of the Project. Section 4.03. The Borrower and the Bank shall from time to time, at the request of either party, exchange views on the progress achieved in carrying out the Borrower's Textile Sector Policy Statement and, on the basis of such exchange of views, the Borrower shall take all such further action, mutually satis- factory to the Borrower and the Bank, as shall be necessary or appropriate to carry out the same. Section 4.04. Except as the Bank may otherwise agree, the Borrower shall: (a) open and thereafter maintain a special account at the Central Bank of the Philippines and shall, upon receipt of each repayment from DBP of principal, interest and other charges pursuant to the Subsidiary Loan Agreement, deposit the same in the said special account in accordance with its usual financial procedures. All amounts so deposited in said special account shall be used by the Borrower, to the extent they are not yet required to meet the Borrower's repayment obligations to the Bank pursuant to the Loan Agreement, exclusively to finance the development of the Borrower's industrial sector; and (b) prepare and furnish to the Bank quarterly reports, in scope and form satisfactory to the Bank, on the status of said special account and the utilization of the funds deposited therein in accordance with paragraph (a) of this Section. -9- 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 pursuant to paragraph (k) thereof: (a) DBP shall have failed to perform any of its obligations under the Project Agreement. (b) As a result of events which have occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that DBP will be able to perform its obligations under the Project Agreement. (c) The Charter shall have been amended so as to affect materially and adversely the operations or financial condition of DBP. (d) DBP shall have become unabl6 to pay its debts as they mature or any action or proceeding shall have been undertaken by DBP or by others whereby any of the property of DBP shall or may be distributed among its creditors. (e) Any part of the principal of any loan to DBP having an original maturity of one year or more shall, in accordance with its terms, have become due and payable in advance of maturity, as provided in the relative contractual instruments, or any security for any such loan shall have become enforceable. (f) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of DBP or for the suspension of its operations. (g) A Subsidiary or any other entity shall have been created or acquired or taken over by DBP, if su.h creation, acquisition or taking over would adversely affect the conduct of DBP's business, its financial situation, the efficiency of its management and personnel or the carrying out of Part B of the Project. (h) (i) Subject to subparagraph (ii) of this paragraph: (AN The right of the Borrower or DBP, as the case may be, to withdraw the proceeds of any of the Other Loans and Credits made for the financing of Part B (1) of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the Other Lenders' Agreement providing therefor, or (B) any such Other Loan or Credit shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower or DBP, as the case may be, estab- lishes to the satisfaction of the Bank that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower or DBP to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to DBP from other sources on terms and conditions consistent with the obligations of the Borrower under this Agree- ment and of DBP under the Project Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) any event specified in paragraphs (a) and (g) of Section 5.01 of this Agreement 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 DBP; (b) any event specified in paragraphs (c) through (f) of Section 5.01 of this Agreement shall occur; and (c) the event specified in paragraph (h) (i) (B) of Section 5.01 of this Agreement shall occur, subject to the proviso of subparagraph (ii) of that paragraph. - 11 - ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Condi- tions: (a) that the execution and delivery of the Project Agree- ment on behalf of DBP have been duly authorized or ratified by all necessary governmental and corporate action; and (b) that the execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and DBP, respectively, have been duly authorized or ratified by all necessary governmental and corporate action. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, DBP and is legally binding upon DBP in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and DBP in accordance with its term. Section 6.03. The date A0/9fs*, is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representatives of the Borrower; Addresses Section 7.C'. Except as provided in Section 2.10 of this Agreement, the Minister of Fin&nce of the B>rrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. - 12 - Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance Manila Republic of Philippines Cable address: Telex: MINFIN 7550 CBP-PH Manila 40268 CB-CONF For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF THE PHILIPPINES By $4 s i By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ByS jX /iWa4 , .4' Regional Vice President East Asia and Pacific - 13 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan (1) With respect to Part A of the Project and subject to the provisions of paragraphs (3) and (4) of this Schedule, the Bor- rower may withdraw from the Loan Account up to an aggregate equi- valent of $5,073,892, unless the Borrower and the Bank shall otherwise agree, for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of consul- tants' services and training under said Part of the Project. (2) (a) With respect to Part B (1) of the Project and subject to the provisions hereinafter set forth in this paragraph and in paragraphs (3) and (4) of this Schedule, DBP, on behalf of the Borrower pursuant to Section 2.10 of this Agreement, may with- draw from the Loan Account up to an aggregate equivalent of $150,000,000, unless the Borrower, the Bank and DBP shall other- wise agree, against amounts paid (or, if the Bank shall so agree, to be paid) by DBP on account of- withdrawals made by Textile Enterprises under Sub-loans to meet the reasonable cost of imported goods and services required for Textile Projects and in respect of which the withdrawals, are requested; provided, how- ever, that no amount shall be withdrawn from the Loan Account in respect of a Textile Project unless (i) the Sub-loan for such Textile Project shall have been approved by the Bank, or (ii) the Sub-loan shall be a free-limit Sub-loan for which the Bank shall have authorized withdrawals from the Loan Account. (b) For the purposes of this paragraph, a free-limit Sub- loan shall be a Sub-loan for a Textile Project in an amount to be financed out of the proceeds of the Subsidiary Loan which shall not exceed the equivalent of $4,000,000 when added to any other outstanding amounts financed or proposed to be financed out of such proceeds, the foregoing amount being subject to change from time to time as determined by the Bank; provided, however, that the said free-limit shall not apply-with respect to the first three Sub-loans for Textile Projects in amounts to be financed out of the proceeds of the Subsidiary Loan which shall exceed the equivalent of $2,000,000 each. (c) Except as the Bank may otherwise agree, no withdrawals shall be made on account of expenditures made in respect of (i) a Sub-loan subject to the Bank's approval more than ninety days - 14 - prior to the date on which the Bank shall have received the application and information required under Section 2.05 (b) of the Project Agreement, or (ii) a free-limit Sub-loan more than ninety days prior to the date on which the Bank shall have received the request and information required by Section 2.05 (c) of the Project Agreement. (3) Notwithstanding the provisions of paragraphs (1) and (2) above, no withdrawals from the Loan Account shall be made in respect of: (a) expenditures in the currency of the Borrower or for goods and services supplied from the territory of the Borrower; (b) payments for expenditures made prior to the date of this Agreement; (c) payments for taxes levied by, or in the territory of, the Borrower on goods and services, or on the importation, manu- facture, procurement or supply thereof; and (d) except as the Bank may otherwise agree, expenditures made in respect of a Sub-loan for a Textile Project in an amount to be financed out of the proceeds of the Subsidiary Loan which shall exceed the equivalent of $8,000,000 when added to any other outstanding amounts financed or proposed to be financed out of such proceeds. (4) If the Bank shall have reasonably determined that the procurement of any item is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such. item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrowr, with respect to Part A of the Project, or the Borrower and DBP, with respect to Part B (1) of the Project, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 15 - SCHEDULE 2 Description of the Project The Project is to assist the Borrower in carrying out its Textile Restructuring Program in accordance with its Textile Sector Policy Statement and consists of the following Parts: Part A: (1) Development and implementation of appropriate policies and procedures for the proper planning and execution of the Textile Restructuring Program, including the formulation and application, by the Joint Evaluation Unit, of suitable criteria for the eval- uation of the financial viability of enterprises operating within the Borrower's textile sector, including the Textile Enterprises, and the technical, managerial, financial and economic feasibility of projects within that sector, including the Textile Projects, and the supervision and monitoring- of the carrying out of said projects thereafter. (2) Development and implementation of an information system to assess, on a regular basis, the status of the textile and garment industries in the Borrower's territory, monitor their development and evaluate the impact of the Textile Restructuring Program. (3) Formulation and carrying out of a training program to develop the technical skills of the staff of the Borrower's departments and agencies involved in the planning and supervision of the Textile Restructuring Program. (4) (a) Evaluation of the manpower requirements of the textile industry in the Borrower's territory, and (b) on the basis on such evaluation, formulation and carrying out of suitable train- ing programs to develop the skills of managers, supervisors, technicians and operators within said industry. (5) Carrying out of studies, as agreed between the Borrower and the Bank, to identify and recommend suitable measures for improv- ing the operations of the textile industry in the Borrower's territory. - 16 - Part B: (1) The financing of improvements in the structure and perfor- mance of the textile industry in the Borrower's territory through the provision of finance, including Sub-loans, by DBP to enter- prises within that industry, including the Textile Enterprises, for textile development projects, including the Textile Projects, and involving the (a) rehabilitation, modernization and expansion of facilities and equipment, and (b) training of management and staff and the provision of technical assistance to improve operations and reduce costs. (2) Strengthening the capabilities of DBP staff to ensure the proper evaluation and supervision of textile development pro- jects, including the Textile Projects, through (a) the develop- ment and introduction of suitable improvements in the methodology applied by DBP staff in appraising the financial and economic feasibility of such projects, and (b) the carrying out of a training program, satisfactory to the Bank, to upgrade the skills of DBP's staff involved in carrying out Part B (1) of the Project. The Project is expected to be completed by June 30, 1988. - 17 - SCHEDULE 3 Amortization Schedule Payment of Principal Date of Payment Due (Expressed in dollars)* On each May 15 and November 15 beginning November 15, 1987 through November 15, 2001 5,245,000 On May 15, 2002 5,295,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditions, Section 3.04. - 18 - 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 1.75% More than three years but not more than six years before maturity 3.50% More than six years but not more than eleven years before maturity 6.40% More than eleven years but not more than sixteen years before maturity 9.30% More than sixteen years but not more than eighteen years before maturity 10.45% More than eighteen years before maturity 11.60% - 19 - SCHEDULE 4 Principal terms of the Subsidiary Loan Agreement A. From the Borrower to DBP: (1) Interest, inclusive of any service charge, on the principal amount of the Subsidiary Loan withdrawn and outstanding from time to time, shall be calculated and charged at the pre- vailing rate of interest, inclusive of any service charge, charged by the financial institutions within the Borrower's territory on loans for similar purposes as the Sub-loans, less a margIn equivalent to not less than 2.50% but not more than 4.50%; provided, however, that such interest rate shall not be less than the rate specified in Section 2.07 of this Agreement. (21' A commitment charge shall be paid on the principal amount of the Subsidiary Loan not withdrawn from time to time at the rate of 0.75% per annum. (3) A fee equivalent to 1-1/2% of the amount of the Subsi- diary Loan shall be paid. (4) The amortization schedule applicable to the Subsidiary Loan shall conform in relevant part substantially to the aggre- gate of the amortization schedules applicable to Sub-loans. (5) The foreign exchange risk shall be passed on to the Textile Enterprises. B. From DBP to Textile Enterprises: (1) Interest shall be paid on the principal amount of each Sub-loan withdrawn and outstanding from time to time at a rate of not more than 4.50% percentage points above the interest rate and service charge, if any, paid by DBP to the Borrower on that por- tion of the Subsidiary Loan withdrawn by.DBP on account of such Sub-loan. (2) A commitment charge shall be paid on the principal amount of each Sub-loan not withdrawn from time to time at the rate of 0.75% per annum. (3) A fee equivalent to 1-1/2% of the amount of the Sub- loan shall be paid. - 20 - (4) The amortization schedule applicable to each Sub-loan shall not extend beyond 15 years, including an appropriate period of grace. (5) The foreign exchange risk shall be borne by the Textile Enterprises. C. Review and Revision of Applicable Interest Rates: Subject to the proviso in paragraph A (1) of this Schedule, interest rates applicable to the proceeds of the Subsidiary Loan shall be reviewed by the Borrower every six months and in the event of any change in the prevailing rate of interest charged by the financial institutions within the Borrower's territory on loans for similar purposes as the Sub-loans, the interest rates referred to in said paragraph A (1) shall be revised accordingly and be made applicable to the remaining uncommitted portion of the Subsidiary Loan. 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 OnAA , 198 . FOR SECRETARY