Honduras - Interim Power Project : Loan 0226 - Guarantee Agreement - Conformed

LOAN NUMBER 226 HO Guarantee Agreement (Interim Power Project) BETWEEN REPUBLIC OF HONDURAS AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED MAY 20, 1959 LOAN NUMBER 226 HO Guarantee Agreement (Interim Power Project) BETWEEN REPUBLIC OF HONDURAS AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED MAY 20, 1959 AGREEMENT, dated May 20, 1959, between REPUBLIC OF HONDURAS (hereinafter called the Guarantor) and INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS by an agreement of even date herewith between the Bank and EMPRESA NACIONAL DE ENERGIA ELECTRICA (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 Borrower a loan in various currencies equivalent to one million four hundred fifty thousand dollars ($1,450,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan as here- inafter provided; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower; Now THEREFORE the parties hereto hereby agree as fol- lows: ARTICLE I SECTION 1.01. The parties to this Guarantee Agreement accept all the provisions of Loan Regulations No. 4 of the Bank dated June 15, 1956, subject, however, to the modifica- tions thereof set forth in Schedule 3 to the Loan Agreement (said Loan Regulations No. 4 as so modified being herein- after called the Loan Regulations), with the same force and effect as if they were fully set forth herein. ARTICLE II SECTION 2.01. Without limitation or restriction upon any of the other covenants on its part in this Agreement con- tained, the Guarantor hereby unconditionally guarantees, as 4 primary obligor and not as surety merely, the due and punctual payment of the principal of, and the interest and other charges on, the Loan, the principal of and interest on the Bonds, the premium, if any, on the prepayment of the Loan or the redemption of the Bonds, and the punctual per- formance of all the covenants and agreements of the Bor- rower, all as set forth in the Loan Agreement and in the Bonds. SECTION 2.02. Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guarantor specifically undertakes, whenever there is reasonable cause to believe that the funds available to the Borrower will be inadequate to meet the estimated expenditures required for carrying out the Project, to make arrangements, satisfac- tory to the Bank, promptly to provide the Borrower or cause the Borrower to be provided with such funds as are needed to meet such expenditures. ARTICLE III SECTION 3.01. It is the mutual intention of the Guarantor and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on governmental assets. To that end, the Guarantor undertakes that, except as the Bank shall otherwise agree, if any lien shall be cre- ated on any assets of the Guarantor as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan and the Bonds, and that in the creation of any such lien express provision will be made to that effect; provided, however, that the foregoing provisions of this Section shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; (ii) any lien on commercial goods to secure a debt maturing not more than one year after the date on which it is orig- inally incurred and to be paid out of the proceeds of sale of such commercial goods; or (iii) any lien arising in the is 5 ordinary course of banking transactions and securing a debt maturing not more than one year after its date. The term "assets of the Guarantor" as used in this Section includes assets of the Guarantor or of any of its political subdivisions or of any agency of the Guarantor or of any such political subdivision, including the Banco Cen- tral de Honduras. SECTION 3.02. (a) The Guarantor and the Bank shall cooperate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall furnish to the other all such information as it shall reasonably request with regard to the general status of the Loan. On the part of the Guarantor, such information shall include information with respect to financial and economic condi- tions in the territories of the Guarantor and the interna- tional balance of payments position of the Guarantor. (b) The Guarantor and the Bank shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Loan and the maintenance of the service thereof. The Guarantor shall promptly inform the Bank of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Loan or the maintenance of the service thereof. (c) The Guarantor shall afford all reasonable opportun- ity for accredited representatives of the Bank to visit any part of the territories of the Guarantor for purposes related to the Loan. SECTION 3.03. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid without deduction for, and free from, any taxes of fees imposed under the laws of the Guarantor or laws in effect in its ter- ritories; provided, however, that the provisions of this Section shall not apply to taxation of, or fees upon, pay- ments under any Bond to a holder thereof other than the 6 Bank when such Bond is beneficially owned by an individual or corporate resident of the Guarantor. SECTION 3.04. This Agreement, the Loan Agreement and the Bonds shall be free from any taxes or fees that shall be imposed under the laws of the Guarantor or laws in effect in its territories on or in connection with the execution, issue, delivery or registration thereof. SECTION 3.05. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid free from all restrictions imposed under the laws of the Guarantor or laws in effect in its territories. SECTION 3.06. The Guarantor shall permit the Borrower to effect from time to time such adjustments in its rates as will provide revenues sufficient: (a) to cover operating ex- penses, including adequate maintenance and depreciation, taxes, and interest; (b) to meet repayments on long-term indebtedne.;s but only to the extent that such repayments shall exceed provision for depreciation; (c) to leave a rea- sonable surplus for financing the expansion of its power facilities. For the purposes of this Section the term "long- term indebtedness" shall mean debt maturing by its terms more than one year after the date on which it is originally incurred. ARTICLE IV SECTION 4.01. The Guarantor shall endorse, in accor- dance with the provisions of the Loan Regulations, its guarantee on the Bonds to be executed and delivered by the Borrower. The Secretario de Estado en el Despacho de Economia y Hacienda and the Contralor General de la Re- publica of the Guarantor, acting jointly, and such person or persons as they, acting jointly, shall designate in writing are designated as the authorized representatives of the Guarantor for the purposes of Section 6.12 (b) of the Loan Regulations. 7 ARTICLE V SECTION 5.01. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Guarantor: Secretario de Estado en el Despacho de Economia y Hacienda Palacio de Hacienda Tegucigalpa, D.C. Honduras Alternative address for cablegrams and radiograms: Hacienda Tegucigalpa For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington 25, D.C. United States of America Alternative address for cablegrams and radiograms: Intbafrad Washington, D.C. SECTION 5.02. The Secretario de Estado en el Despacho de Economia y Hacienda of the Guarantor is designated for the purposes of Section 8.03 of Loan Regulations. 8 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Guarantee Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF HONDURAS By /s/ CELEo DAVILA Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ J. BURKE KNAPP Vice-President