Conformed Copy - L7080 - LGU Urban Water and Sanitation Project - Phase II - Guarantee Agreement

Page 1 CONFORMED COPY LOAN NUMBER 7080 PH Guarantee Agreement (LGU Urban Water and Sanitation Project - Phase II) between REPUBLIC OF THE PHILIPPINES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated November 19, 2001 LOAN NUMBER 7080 PH GUARANTEE AGREEMENT AGREEMENT, dated November 19, 2001, between REPUBLIC OF THE PHILIPPINES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Guarantor has developed a program designed to ensure access to sustainable water supply, sanitation and drainage services for the greater portion of the population in approximately two hundred fifty cities and municipalities outside of Metro Manila in the Philippines (the Program), as set forth in the letters to the Bank, dated September 28, 1998, and August 15, 2001 and is committed to the execution of said Program; (B) the Guarantor has requested that the Bank support the execution of the Program through a series of loans over a period of approximately twelve years to be utilized in the implementation of the Program; (C) the Guarantor and Development Bank of the Philippines (the Borrower), having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to the Loan Agreement, which Project forms the second phase of the Program, have requested the Bank to assist in the financing of the Project; (D) the Borrower has obtained from the Nordic Development Fund a loan in amount equivalent to five million Special Drawing Rights (SDR 5,000,000) (the NDF Loan), a portion of which is to be used to assist in the financing of Parts A(2) and B(1) and B(3) of the Project, on terms and conditions set forth in an agreement dated December 28, 1998, (the NDF Loan Agreement) between the Nordic Development Fund and the Borrower; and (E) by the Loan Agreement of even date herewith between the Bank and the Borrower, the Bank has agreed to extend to the Borrower a loan in the amount of three billion, seven hundred and seventeen million, nine hundred thousand Yen (JPY 3,717,900,000), 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 provided in this Agreement; and Page 2 WHEREAS the Guarantor, in consideration of the Bank