Philippines - Second Rural Finance Project Floating Rate Single Currency Loan : Loan 3940 - Guarantee Agreement - Conformed

LOAN NONBER 3940 PH Guarantee Agreement (Second Rural Finance Project Floating Rate Single Currency Loan) between REPUBLIC OF THE PHILIPPINES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated OcAfb, /o , 1995 IOAN NUMBER 3940 PH GURANTEE AGREM AGREEMENT, dated oct l) , 1995, between THE REPUBLIC OF THE PHILIPPINES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Guarantor and LAND BANK OF THE PHILIPPINES (the Borrower), having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to the Floating Rate Single Currency Loan Agreement, have requested the Bank to assist in the financing of the Project; (B) by an agreement of even date herewith between the Bank and the Borrower (the Floating Rate Single Currency Loan Agreement), the Bank has agreed to extend to the Borrower a loan in an amount equal to fifty million dollars ($50,000,000), on the terms and conditions set -forth in the Floating Rate Single Currency Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan as provided in this Agreement; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Floating Rate Single Currency Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements for Single Currency Loans of the Bank", dated May 30, 1995, with the modifications set forth in Schedule 4 to the Floating Rate Single Currency Loan Agreement (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement and in the Preamble to and Section 1.02 of the Floating Rate Single Currency Loan Agreement have the respective meanings therein set forth. -2- ARTICLE II Guarantee; Provision of Funds Section 2.01. The Guarantor declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Floating Rate Single Currency Loan Agreement, and, to this end, without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Floating Rate Single Currency Loan, and the premium, if any, on the prepayment of the Floating Rate Single Currency Loan, and the punctual performance of all the other obligations of the Borrower, all as set forth in the Floating Rate Single Currency Loan Agreement. 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 the carrying out of the Project, to make arrangements, satisfactory 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 Other Covenants Section 3.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor shall take all such actions as shall be necessary to ensure the financial viability of the Borrower in a manner satisfactory to the Bank, including: (a) the issuance of National Government Bonds to compensate landowners for their land acquired under the Guarantor' s Comprehensive Agrarian Reform Program; (b) excluding from the Borrower's risk assets, land already acquired or to be acquired under the Guarantor's Comprehensive Agrarian Reform Program and land reform mortgages; -3- (c) providing the adjustment permitted under Section 5 of Republic Act No. 7656 dated November 9, 1993, to enable the Borrower to comply with its obligations under Section,4.05 of the Loan Agreement relating to payment of dividends; and (d) timely payment to the Borrower of the financial obligations arising under the Guarantor's Comprehensive Agrarian Reform Law, in particular those relating to reimbursements on account of the Borrower's Agrarian Reform Bonds and the Guarantor's National Government Bonds. ARTICLE IV Representative of the Guarantor; Addresses Section 4.01. The Secretary of Finance of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 4.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Secretary of Finance Department of Finance Manila Republic of the Philippines Cable address: Telex: SECFIN 40268 CB-CONF Manila For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America -4- Cable address: Telex: INTBAFRAD 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President East Asia and Pacific 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 International Bank for Reconstruction and Development. FOR SECRETARY