Supreme Court E-Library
Information At Your Fingertips

September 23, 1966

Signed at Washington, D.C., 23 September 1966;

With Annexes; Loan Regulations No. 4, Loan Agreement between the World Bank and the Philippine National Bank, and Project Agreement between the World Bank and the Private Development Corporation of the Philippines;

Entered into force 22 December 1966.

GUARANTEE AGREEMENT (SECOND DEVELOPMENT CORPORATION PROJECT) BETWEEN THE REPUBLIC OF THE PHILIPPINES AND THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Agreement, dated September 23, 1966, between Republic of the Philippines (hereinafter called the Guarantor) and International Bank for Reconstruction and Development (hereinafter called the Bank).

WHEREAS by an agreement of even date herewith between the Bank and Philippine National Bank (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 twenty-five million dollars (($25,000,000) on the terms and conditions set forth in the Loan Agreement,^[1] but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan as hereinafter 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 follows:

ARTICLE I

Section 1.01. The parties to this Guarantee Agreement accept all the provisions of Loan Regulations No. 4 of the Bank^[2] dated February 15, 1961, subject, however, to the modifications thereof set forth in Schedule 2 to the Loan Agreement (said Loan Regulations No. 4 as so modified being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein.

Section 1.02. Wherever used in this Guarantee Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement and in the Loan Regulations (as so defined) shall have the respective meanings therein set forth.

ARTICLE II

Section 2.01. Without limitation or restriction upon any of the other covenants on its part in this Agreement contained, the Guarantor hereby unconditionally guarantees, as 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, and the premium, if any, on the prepayment of the Loan or the redemption of the Bonds, all as set forth in the Loan Agreement and in the Bonds.

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 Hen shall be created 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, or (ii) any lien arising in the 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 agency of the Guarantor, including the Central Bank of the Philippines or any other institution performing the functions of a central bank.

The Guarantor further undertakes that, within the limits of the laws in force in its territories, it will make the foregoing undertaking effective with respect to liens on the assets of its political subdivisions and their agencies, and to the extent that the Guarantor is unable within the limits of the laws in force in its territories to make this undertaking effective, the Guarantor will give to the Bank an equivalent lien satisfactory to the Bank.

Section 3.02. (a) The Guarantor and the Bank shall cooperate fully and 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 conditions in the territories of the Guarantor and the international 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 opportunity 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 imposed under the laws of the Guarantor or laws in effect in its territories; provided, however, that the provisions of this Section shall not apply to taxation of payments under any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of the Guarantor.

Section 3.04. This Agreement, the Loan Agreement, the Project Agreement^[3] and the Bonds shall be free from any taxes 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 covenants that it will not take or permit any of its political subdivisions or any of its agencies or any agency of any political subdivision to take any action which would prevent or interfere with the performance by the Borrower of any of the covenants, agreements and obligations of the Borrower in the Loan Agreement contained, or by the Corporation of any of the covenants, agreements and obligations of the Corporation in the Project Agreement contained, and will take or cause to be taken all reasonable actions which shall be necessary in order to enable the Borrower and the Corporation respectively to perform such covenants, agreements and obligations.

ARTICLE IV

Section 4.01. The Guarantor shall endorse, in accordance with the provisions of the Loan Regulations, its guarantee on the Bonds to be executed and delivered by the Borrower. The Secretary of Finance of the Guarantor and such person or persons as he 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.

ARTICLE V

Section 5.01. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations:

Section 5.02. The Governor of the Central Bank of the Philippines is designated for the purposes of Section 8.03 of the Loan Regulations.

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.

International Bank for Reconstruction and Development

LOAN REGULATIONS No. 4, DATED 15 FEBRUARY 1961

REGULATIONS APPLICABLE TO LOANS MADE BY THE BANK TO BORROWERS OTHER THAN MEMBER GOVERNMENTS

ARTICLE I

PURPOSE; APPLICATION TO LOAN AND GUARANTEE AGREEMENTS

SECTION 1.01. Purpose. The purpose of these Regulations is to set forth certain terms and conditions generally applicable to loans made by the Bank to Borrowers other than its members.

SECTION 1.02. Application of Regulations. Any loan agreement between the Bank and a borrower other than a member and any guarantee agreement between the Bank and a member may provide that the parties thereto accept the provisions of these Regulations. To the extent so provided in any such agreement, these Regulations shall apply thereto and shall govern the rights and obligations thereunder of the parties thereto with the same force and effect as if they were fully set forth therein. No revocation or amendment of these Regulations shall be effective in respect of any such agreement unless the parties thereto shall so agree.

SECTION 1.03. Inconsistency with Loan and Guarantee Agreements. If any provision of a loan agreement or guarantee agreement is inconsistent with a provision of these Regulations, the provision of the loan agreement or guarantee agreement, as the case may be, shall govern.

ARTICLE II

LOAN ACCOUNT; INTEREST AND OTHER CHARGES; REPAYMENT; PLACE OF PAYMENT

SECTION 2.01. Loan Account. The amount of the Loan shall be credited to a Loan Account which the Bank shall open on its books in the name of the Borrower. The amount of the Loan may be withdrawn from the Loan Account as provided in the Loan Agreement and in these Regulations.

SECTION 2.02. Commitment Charge. A commitment charge at the rate specified in the Loan Agreement shall be payable on the unwithdrawn amount of the Loan Agreement to the respective dates on which amounts shall be withdrawn by the Borrower from the Loan Account or shall be cancelled.

SECTION 2.03. Interest. Interest at the rate specified in the Loan Agreement shall be payable on the amount of the Loan withdrawn from the Loan Account and outstanding from time to time. Interest shall accrue from the respective dates on which amounts shall be so withdrawn.

SECTION 2.04. Computation of Interest and Other Charges. Interest and all other charges shall be computed on the basis of a 360-day year of twelve 30-day months.

SECTION 2.05. Repayment. (a) The principal amount of the Loan withdrawn from the Loan Account shall be repayable in accordance with the amortization schedule to the Loan Agreement.

(b) The Borrower shall have the right, upon payment of all accrued interest and payment of the premium specified in said amortization schedule, and upon not less than 45 day's notice to the Bank, to repay in advance of maturity (i) all of the principal amount of the Loan at the time outstanding or (ii) all of the principal amount of any one or more maturities, provided that on the date of such prepayment there shall not be outstanding any portion of the Loan maturing after the portion to be prepaid. However, if Bonds shall have been delivered pursuant to Article VI in respect of any portion of the Loan shall be those set forth in Section 6.16 and in such Bonds.

(c) It is the policy of the Bank to encourage the repayment prior to maturity of portions of its loans retained by the Bank for its own account. Accordingly, the Bank will sympathetically consider, in the light of all circumstances then existing, any request of the Borrower that the Bank waive the payment of any premium payable under paragraph (b) of this Section or under Section 6.16 on repayment of any portions of the Loan or Bonds which the Bank has not sold or agreed to sell.

SECTION 2.06. Place of Payment. The principal (including premium, if any) of and interest and other charges on, the Loan shall be paid at such places as the Bank shall reasonably request. The principal of the Bonds, the interest accruing thereon and the premium, if any, on the redemption thereof shall be paid at the places specified in the Bonds, except that payments under any Bonds held by the Bank shall be made at such places as the Bank shall reasonably request.

ARTICLE III

CURRENCY PROVISIONS

SECTION 3.01. Denomination of the Loan. Where the amount of the, Loan is expressed in either of the following manners:

then the Loan shall be deemed to be denominated in such specified currency (dollars in each of the above examples).

SECTION 3.02. Currencies in Which Withdrawals Are to Be Made. The Borrower shall use reasonable efforts to assure that the cost of goods financed out of the Loan is payable in the respective currencies of the countries from which such goods are acquired. Except as the Bank and the Borrower shall otherwise agree, withdrawals shall be made either in the respective currencies in which the cost of good has been paid or is payable or in the currency in which the Loan is denominated, as the Bank may from time to time elect.

SECTION 3.03. Currency in Which Principal and Premium Are Payable; Maturities. (a) The principal of the Loan shall be repayable in the several currencies withdrawn from the Loan Account and the amount repayable in each currency shall be the amount withdrawn in that currency. The foregoing provision is subject to one exception, namely: if withdrawal shall be made in any currency which the Bank shall have purchased with another currency for the purpose of such withdrawal, the portion of the Loan so withdrawn shall be repayable in such other currency and the amount so repayable shall be the amount paid by the Bank on such purchase.

(b) Any premium payable under Section 2.05 on prepayment o£ any portion of the Loan, or under Section 6.16 on redemption of any Bond, shall be payable in the currency in which the principal of such portion of the Loan, or of such Bond, is repayable.

(c) Except as the Bank and the Borrower shall otherwise agree, the portion of the Loan to be repaid, under the provisions of this Section, in any particular currency shall be repayable in such instalments, not inconsistent with the instalments set forth in the amortization schedule to the Loan Agreement, as the Bank shall from time to time specify.

SECTION 3.04. Currency in Which Interest Is Payable. Interest on any portion of the Loan shall be payable in the currency in which the principal of such portion of the Loan is repayable.

SECTION 3.05. Currency in Which Commitment Charge Is Payable. The commitment charge and the charge for any special commitment pursuant to Section 4.02 shall be payable in the currency in which the Loan is denominated.

SECTION 3.06. Purchase of Currencies. The Bank will, at the request of of the Borrower and on such terms and conditions as the Bank shall determine, purchase any currency needed by the Borrower for payment of principal, interest and other charges required under the Loan Agreement upon payment by the Borrower of sufficient funds therefor in a currency or currencies to be specified by the Bank from time to time. In purchasing the currencies required the Bank shall be acting as agent of the Borrower and the Borrower shall be deemed to have made any payment required under the Loan Agreement only when and to the extent that the Bank has received such payment in the Currency or currencies required.

SECTION 3.07. Valuation of Currencies. Whenever it shall be necessary for the purposes of the Loan Agreement to determine the value of one currency in terms of another, such value shall be as reasonably determined by the Bank.

SECTION 3.08. Exchange Restrictions. Any payment required under the Loan Agreement to be made to the Bank in the currency of any country shall be made in such manner, and in currency acquired in such manner, as shall be permitted under the laws of such country for the purpose of making such payment and effecting the deposit of such currency to the account of the Bank with a depository of .the Bank in such country.

ARTICLE IV

WITHDRAWAL OF PROCEEDS OF LOANS

SECTION 4.01. Withdrawal from the Loan Account. The Borrower shall be entitled to withdraw from the Loan Account (i) such amounts as shall have been paid for the reasonable cost of goods to be financed under the Loan Agreement; and (ii), if the Bank shall so agree, such amounts as shall be required to meet payments to be made for the reasonable cost of such goods. Except as shall be otherwise agreed between the Bank and the Borrower, no withdrawals shall be made on account of (a) expenditures prior to the Effective Date or (h) expenditures in the currency of the Guarantor or for goods produced in (including services supplied from) the territories of the Guarantor or (c) expenditures in the territories of any country which is not a member of the Bank (other than Switzerland) or for goods produced in (including services supplied from) such territories.

SECTION 4.02. Special Commitments by the Bank, Upon the Borrower's request and upon such terms and conditions as shall be agreed upon between the Bank and the Borrower, the Bank may enter into special commitments in writing to pay amounts to the Borrower or others in respect of the cost of goods notwithstanding any subsequent suspension or cancellation.

SECTION 4.03. Applications for Withdrawal or for Special Commitment. When the Borrower shall desire to withdraw any amount from the Loan Account or to request the Bank to enter into a special commitment pursuant to Section 4.02, the Borrower shall deliver to the Bank a written application in such form, and containing such statements and agreements, as the Bank shall reasonably request. Applications for withdrawal, with the necessary documentation as hereinafter in this Article provided, shall, except as the Bank and the Borrower shall otherwise agree, be made promptly in relation to expenditures for the Project.

SECTION 4.04. Supporting Evidence. The Borrower shall furnish to the Bank such documents and other evidence in support of the application as the Bank shall reasonably request, whether before or after the Bank shall have permitted any withdrawal requested in the application.

SECTION 4.05. Sufficiency of Applications and Documents. Each application and the accompanying documents and other evidence must be sufficient in form and substance to satisfy the Bank that the Borrower is entitled to withdraw from the Loan Account the amount applied for and that the amount to be withdrawn from the Loan Account is to be used only for the purposes specified in the Loan Agreement.

SECTION 4.06. Payment by the Bank. Payment by the Bank of amounts which the Borrwer is entitled to withdraw from the Loan Account shall be made to or on the order of the Borrower.

ARTICLE V

CANCELLATION AND SUSPENSION

SECTION 5.01. Cancellation by the Borrower. The Borrower may by notice to the Bank cancel any amount of the Loan which the Borrower shall not have withdrawn prior to the giving of such notice, except that the Borrower may not so cancel any amount of the Loan in respect of which the Bank shall have entered into a special commitment pursuant to Section 4.02.

SECTION 5:02. Suspension by the Bank. If any of the following events shall have happened and be continuing, the Bank may by notice to the Borrower suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account:

(a) A default shall have occurred in the payment of principal or interest or any other payment required under the Loan Agreement or the Bonds.

(b) A default shall have occurred in the payment of principal or interest or any other payment required under any other loan agreement between the Bank and the Borrwer or under any loan agreement or under any loan agreement or under any guarantee agreement between the Guarantor and the Bank or under any bond delivered pursuant to any such agreement.

(c) A default shall have occurred in the performance of any other covenant or agreement on the part of the Borrower or the Guarantor under the Loan Agreement, the Guarantee Agreement or the Bonds.

(d) An extraordinary situation shall have arisen which shall make it improbable that the Borrower or the Guarantor will be able to perform its obligations under the Loan Agreement or the Guarantee Agreement or the Bonds.

(e) The Borrower shall have been unable to pay its debts as they mature or any action or proceeding shall have been taken by the Borrower or by others whereby any of the property of the Borrower shall or may be distributed among its creditors.

(f) The Guarantor or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Borrower or for the suspension of its operations.

(g) The Guarantor shall have been suspended from membership in or ceased to be a member of the Bank.

(h) The Guarantor shall have ceased to be a member of the International Monetary Fund or shall have become ineligible to use the resources of said Fund under Section 6 of Article IV of the Articles of Agreement of said Fund^[4] or shall have been declared ineligible to use said resources under Section 5 of Article V, Section I of Article VI or Section 2 (a) of Article XV of the Articles of Agreement of said Fund.

(i) After the date of the Loan Agreement and prior to the Effective Date any event shall have occurred which would have entitled the Bank to suspend the Borrower's right to make withdrawals from the Loan Account if the Loan Agreement and the Guarantee Agreement had been effective on the date such event occurred.

(j) Any other event specified in the Loan Agreement for the purposes of this Section shall have occured.

The right of the Borrower to make withdrawals from the Loan Accoun shall continue to be suspended in whole or in part, as the case may be, until the event or events which gave rise to such suspension shall have ceased to exist or until the Bank shall have notified the Borrower that the right to make withdrawals has been restored, whichever is the earlier; provided, however, that in the case of any such notice of restoration, the right to make withdrawals shall be restored only to the extent and subject to the conditions specified in such notice shall affect or impair any right, power or remedy of the Bank in respect of any other or subsequent event described in this Section.

SECTION 5.03. 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 the Loan Agreement as the Closing Date an amount of the Loan shall remain unwithdrawn from the Loan Account, the Bank may by notice to the Borrower terminate the right of the Borrower to make withdrawals with respect to such amount. Upon the giving of such notice such amount of the Loan shall be cancelled.

SECTION 5.04. Amounts Subject to Special Commitment Not Affected by Cancellation or Suspension by the Bank. No cancellation or suspension by the Bank shall apply to amounts subject to any special commitment entered into by by the Bank pursuant to Section 4.02 except as expressly provided in such commitment.

SECTION 5.05. Application of Cancellation to Maturities of the Loan. Except as otherwise agreed between the Bank and the Borrower, any cancellation shall be applied pro rata to the several maturities of the principal amount of the Loan as set forth in the amortisation schedule to the Loan Agreement, except that the principal amount of any such maturity so cancelled shall not exceed the amount of such maturity remaining after deducting the principal amount of Bonds of such maturity therefore delivered or requested pursuant to Article VI and the Bonds or portions of the Loan of such maturity theretofore sold or agreed to be sold by the Bank.

SECTION 5.06. Effectiveness of Provisions after Suspension or Cancellation. Notwithstanding any cancellation or suspension, all the provisions of these Regulations, the Loan Agreement and the Guarantee Agreement shall continue in full force and effect except as in this Article specifically provided.

ARTICLE VI

BONDS

SECTION 6.01. Delivery of Bonds. The Borrower shall execute and deliver Bonds representing the principal amount of the Loan and having the guarantee of the Guarantor endorsed thereon, all as hereinafter in this Article provided.

SECTION 6.02. Payments on Bonds. The payment of the principal of any Bonds, shall pro tanto discharge the obligation of the Borrower to repay the principal of the Loan; and the payment of interest on any Bonds and of the service charge, if any, provided for in Section 6.04, shall pro tanto discharge the obligation of the Borrower to pay interest on the Loan.

SECTION 6.03. Time of Delivery of Bonds. If and as the Bank shall from time to time request, the Borrower shall, as soon as practicable and within such period not less than 60 days after the date of any request therefor as the Bank shall specify in such request, execute and deliver to or on the order of the Bank Bonds in the aggregate principal amount specified in such request, not exceeding, however, the aggregate principal amount of the Loan which shall have been withdrawn and shall be outstanding at the time of such request and for which Bonds shall not theretofore have been so delivered or requested.

SECTION 6.04. Interest on Bonds; Service Charge. The Bonds shall bearinterest at such rate or rates as the Bank shall request, not in excess, however, of the rate of interest on the Loan. If the rate of interest on any Bond shall be less than the rate of interest on the Loan, the Borrower shall, in addition to the interest payable on such Bond, pay to the Bank a service charge on the principal amount of the Loan represented by such Bond at a rate equal to the difference between the interest rate on the Loan and the interest rate on such Bond. Such service charge shall be payable on the dates on which and in the currency in which such interest is payable.

SECTION 6.05. Currency in Which Bonds Are Payable. The Bonds shall be payable as to principal and interest in the several currencies in which the Loan is repayable. Each Bond delivered pursuant to any request under Section 6.03 or under Section 6.11 shall be payable in such currency as the Bank shall specify in such request except that the aggregate principal amount of Bonds payable in any currency shall at no time exceed the outstanding amount of the Loan repayable in such currency.

SECTION 6.06. Maturities of Bonds. The maturities of the Bonds shall correspond to the maturities of instalments of the principal amount of the Loan set forth in the amortization schedule to the Loan Agreement. The Bonds delivered pursuant to any request under Section 6.03 or under Section 6.11 shall have such maturities as the Bank shall specify in such request except that the aggregate principal amount of Bonds of any maturity shall at no time exceed the corresponding instalment of the principal amount of the Loan.

SECTION 6.07. Form of Bonds and of Guarantee. The Bonds shall be fully registered bonds without coupons (hereinafter sometimes called registered Bonds) or bearer bonds with coupons for semi-annual interest attached (hereinafter sometimes called coupon Bonds). Bonds delivered to the Bank shall be registered Bonds or coupon Bonds as the Bank shall request. Registered Bonds payable in dollars shall be substantially in the form set forth in Schedule 1^[5] to these Regulations. Coupon Bonds payable in dollars and the coupons attached thereto shall be substantially in the forms set forth in Schedule 2^[6] to these Regulations. The form of guarantee to be endorsed by the Guarantor upon the Bonds shall be substantially as set forth in Schedule 3^[7] to these Regulations. Bonds payable in any currency other than dollars and the guarantee endorsed thereon shall be substantially in the forms set forth in Schedules 1 and 3 or 2 and 3 to these Regulations, as the case may be, except that they shall (a) provide for payment of principal, interest and premium on redemption, if any, in such other currency, (b) provide for such place of payment as the Bank shall specify, and (c) contain such other modifications as the Bank shall reasonably request in order to conform to the laws or to the financial usage of the place where they are payable.

SECTION 6.08. Printing or Engraving of Bonds. Except as the Bank and the Borrower shall otherwise agree and subject to the provisions of Section 6.11 (b), the Bonds shall be either (a) printed or lithographed on an engraved base having an engraved border or (b) fully engraved in conformity with the requirements of the leading securities exchange in the country in whose currency such Bonds are payable.

SECTION 6.09. Date of Bonds. Each registered Bond shall be dated the semi-annual interest payment date on which or next preceding the date on which it shall be executed and delivered. Each coupon Bond shall be dated six months prior to the first semi-annual interest payment date after the Effective Date except as the Bank and the Borrower shall otherwise agree, and shall be delivered with all unmatured coupons attached. Upon any delivery of Bonds appropriate adjustment shall be made so that there shall be no loss to the Bank or to the Borrower in respect of commitment charge or interest and service charge, if any, on the principal amount of the Loan represented by such Bonds.

SECTION 6.10. Denominations of Bonds. The Borrower shall authorize the issuance of Bonds in such denominations as the Bank shall reasonably request. The Bonds delivered pursuant to any request under Section 6.03 or under Section 6.11 shall be in such authorized denominations as the Bank shall specify in such request.

SECTION 6.11. Exchange of Bonds. The Borrower shall, as soon as practicable after the Bank shall so request, execute and deliver to or on the order of the Bank, in exchange for Bonds theretofore executed and delivered to it, new Bonds in accordance with the following provisions:

(a) Bonds bearing interest at one rate may be exchanged for Bonds bearing interest at any other rate not in excess of the rate of interest on the Loan.

(b) Bonds initially issued which are not fully engraved in accordance with the provisions of Section 6.08 (b) may be exchanged for such fully engraved Bonds.

(c) Bonds payable in one currency may, subject to the provisions of Sections 6.05 and 6.06, be exchanged for a like aggregate principal amount of Bonds payable in the same or any other currency in which the Loan is repayable.

(d) The Bank shall reimburse the Borrower for the reasonable cost of any exchange made pursuant to paragraphs (a) or (c) above. Any exchange made pursuant to paragraph (b) above or any exchange by the Bank of registered Bonds in large denominations for registered or coupon Bonds in smaller authorized denominations for purposes of sale by the Bank shall be without charge to the Bank.

The foregoing rights of exchange are in addition to any rights of exchange provided in the Bonds. Except as in this Section expressly provided, exchanges of Bonds pursuant to this Section shall be subject to all provisions of the Bonds relating to exchanges.

Section 6.12. Execution of Bonds and Guarantee, (a) The Bonds shall be signed in the name and on behalf of the Borrower by its authorized representative or representatives designated in the Loan Agreement for the purposes of this Section. The signature of any such representative may be a facsimile signature if the Bonds are also manually countersigned by an authorized representative oi the Borrower. Coupons attached to coupon Bonds shall be authenticated by the facsimile signature of an authorized representative of the Borrower. If any authorized representative of the Borrower whose manual or facsimile signature shall be affixed to any Bond or coupon shall cease to be such authorized representative, such Bond or coupon may nevertheless be delivered, and shall be valid and binding on the Borrower, as though the person whose manual or facsimile signature shall have been affixed to such Bond or coupon had not ceased to be such authorized representative.

(b) The guarantee on the Bonds shall be signed in the name and on behalf of the Guarantor by its authorized representative or representatives designated in the Guarantee Agreement for the purposes of this Section. The signature of any such representative may be a facsimile signature if such guarantee is also countersigned manually by an authorized representative of the Guarantor. If any authorized representative of the Guarantor whose manual or facsimile signature shall be affixed to any such guarantee shall cease to be such authorized representative, the Bond on which such guarantee is endorsed may nevertheless be delivered under the Loan Agreement and such guarantee shall be valid and binding on the Guarantor as though the person whose manual or facsimile signature shall have been affixed to such guarantee had not ceased to be such authorized representative.

SECTION 6.13. Registration and Transfer of Registered Bonds. The Borrower shall maintain, or cause to be maintained, books for the registration and transfer or registered Bonds.

SECTION 6.14. Qualification and Listing of Bonds. The Borrower and the Guarantor shall promptly furnish to the Bank such information and execute such applications and other documents as the Bank shall reasonably request in order to enable the Bank to sell any of the Bonds in any country, or to list any of the Bonds on any securities exchange, in compliance with applicable laws and regulations. To the extent necessary to comply with the requirements of any such exchange, the Borrower and the Guarantor shall, if the Bank shall so request, appoint and maintain an agency for authentication of such Bonds.

SECTION 6.15. Guarantee by the Bank of Payments on Bonds. If the Bank shall sell any Bond and shall guarantee any payment thereunder, the Borrower shall reimburse the Bank for any amount paid by the Bank under such guarantee by reason of any failure of the Borrower and the Guarantor to make payment in accordance with the terms of such Bond.

SECTION 6.16. Redemption of Bonds, (a) The Bonds shall be subject to redemption prior to their maturity by the Borrower in accordance with their terms, at a redemption price equal to the principal amount thereof plus the interest accrued and unpaid thereon to the date fixed for the redemption thereof plus as a premium the percentages of said principal amount specified in the amortization schedule to the Loan Agreement.

(b) If any Bond so to be redeemed shall bear interest at a rate less than the rate of interest on the Loan, the Borrower shall pay to die Bank on the date fixed for redemption the service charge provided for in Section 6.04 accrued and unpaid to such date on the principal amount of the Loan represented by such Bond.

SECTION 6.17. Rights of Holders of Bonds. No holder (other than the Bank) of any Bond shall, by virtue of being the holder thereof, be entitled to exercise any rights under the Loan Agreement or the Guarantee Agreement or be subject to any of the conditions or obligations imposed upon the Bank thereby. The provisions of this Section shall not impair or affect any rights or obligations under the terms of any Bond or of any guarantee endorsed thereon.

SECTION 6.18. Delivery of Promisory Notes in Lieu of Bonds. At the request of the Bank the Borrower shall execute and deliver to the Bank promissory notes in lieu of Bonds. Each note shall be payable to the order of such payee or payees, and at such place within the country in which the note is payable, as the Bank shall specify, and shall be dated the interest payment date next preceding the date of its delivery. Such note shall be in such customary form as the Bank and the Borrower shall mutually agree upon in order to conform to the laws or financial usage of the place where it is payable. Except as otherwise expressly provided in this Section or where the context otherwise requires, references in these Regulations and the Loan Agreement and Guarantee to Bonds shall include any promissory notes executed and delivered under this Section.

SECTION 6.19. Legal Opinions. Upon the execution and delivery of any Bonds pursuant to this Article, the Borrower shall promptly at the Bank's request furnish to the Bank an opinion or opinions of counsel acceptable to the Bank confirming as of the date of delivery of such Bonds that such Bonds constitute valid and binding obligations of the Borrower in accordance with their terms and that the guarantee endorsed thereon constitutes a valid and binding obligation of the Guarantor in accordance with its terms.

ARTICLE VII

ENFORCEABILITY OF LOAN AGREEMENT AND GUARANTEE AGREEMENT; FAILURE TO EXERCISE RIGHTS; ARBITRATION

SECTION 7.01. Enforceability. The rights and obligations of the Bank, the Borrower and the Guarantor under the Loan Agreement, the Guarantee Agreement and the Bonds shall be valid and enforceable in accordance with their terms notwithstanding the law of any state, or political subdivision thereof, to the contrary. Neither the Bank nor the Borrower nor the Guarantor shall be entitled in any proceeding under this Article to assert any claim that any provision of these Regulations or of the Loan Agreement, the Guarantee Agreement or the Bonds is invalid or unenforceable because of any provision of the Articles of Agreement of the Bank or for any other reason.

SECTION 7.02. Obligations of the Guarantor. The obligations of the Guarantor under the Guarantee Agreement shall not be discharged except by performance and then only to the extent of such performance. Such obligations shall not be subject to any prior notice to, demand upon or action against the Borrower or to any prior notice to or demand upon the Guarantor with regard to any default by the Borrower, and shall not be impaired by any of the following: any extension of time, forbearance or concession given to the Borrower; any assertion of, or failure to assert, or delay in asserting, any right, power or remedy against the Borrower or in respect of any security for the Loan; any modification or amplification of the provisions of the Loan Agreement contemplated by the terms thereof; any failure of the Borrower to comply with any requirement of any law, regulation or order of the Guarantor or of any political subdivision or agency of the Guarantor.

SECTION 7.03. Failure to Exercise Rights. No delay in exercising, or omission to exercise, any right, power or remedy accruing to any party under the Loan Agreement or Guarantee Agreement upon any default shall impair any such right, power or remedy or be construed to be a waiver thereof or an acquiescence in such default; nor shall the action of such party in respect of any default, or any acquiescence in any default, affect or impair any right, power or remedy of such party in respect of any other or subsequent default.

SECTION 7.04. Arbitration. (a) Any controversy between the parties to the Loan Agreement or the parties to the Guarantee Agreement and any claim by any such party against any other such party arising under the Loan Agreement, the Guarantee Agreement or the Bonds which shall not be determined by agreement of the parties shall be submitted to arbitration by an Arbitral Tribunal as hereinafter provided.

(b) The parties to such arbitration shall be the Bank on the one side and the Borrower and the Guarantor on the other side.

(c) The Arbitral Tribunal shall consist of three arbitrators appointed as follows: one arbitrator shall be appointed by the Bank; a second arbitrator shall be appointed by the Borrower and the Guarantor or, if they shall not agree, by the Guarantor; and the third arbitrator (hereinafter sometimes called the Umpire) shall be appointed by agreement of the parties or, if they shall not agree, by the President of the International Court of Justice or, failing appointment by him, by the Secretary-General of the United Nations. If either side shall fail to appoint an arbitrator, such arbitrator shall be appointed by the Umpire. In case any arbitrator appointed in accordance with this Section shall resign, die or become unable to act, a successor arbitrator shall be appointed in the same manner as herein prescribed for the appointment of the original arbitrator and such successor shall have all the powers and duties of such original arbitrator.

(d) An arbitration proceeding may be instituted under this Section upon notice by the party instituting such proceeding to the other parties. Such notice shall contain a statement setting forth the nature of the controversy or claim to be submitted to arbitration and the nature of the relief sought. Within 30 days after the giving of such notice, each side shall notify the other side of the arbitrator appointed by it.

(e) If within 60 days after the giving of such notice instituting the arbitration proceeding the parties shall not have agreed upon an Umpire, any party may request the appointment of an Umpire as provided in paragraph (c) of this Section.

(f) The Arbitral Tribunal shall convene at such time and place as shall be fixed by the Umpire. Thereafter, the Arbitral Tribunal shall determine where and when it shall sit.

(g) Subject to the provisions of this Section and except as the parties shall otherwise agree, the Arbitral Tribunal shall decide all questions relating to its competence and shall determine its procedure. All decisions of the Arbitral Tribunal shall be by majority vote.

(h) The Arbitral Tribunal shall afford to all parties a fair hearing and shall render its award in writing. Such award may be rendered by default. An award signed by a majority of the Arbitral Tribunal shall constitute the award of such Tribunal. A signed counterpart of the award shall be transmitted to each party. Any such award rendered in accordance with the provisions of this Section shall be final and binding upon the parties to the Loan Agreement and the Guarantee Agreement. Each party shall abide by and comply with any such award rendered by the Arbitral Tribunal in accordance with the provisions of this Section.

(i) The parties shall fix the amount of the remuneration of the arbitrators and such other persons as shall be required for the conduct of the arbitration proceedings. If the parties shall not agree on such amount before the Arbitral Tribunal shall convene, the Arbitral Tribunal shall fix such amount as shall be reasonable tinder the circumstances. The Bank, the Borrower and the Guarantor shall each defray its own expenses in the arbitration proceedings. The costs of the Arbitral Tribunal shall be divided between and borne equally by the Bank on the one side and the Borrower and Guarantor on the other. Any question concerning the division of the costs of the Arbitral Tribunal or the procedure for payment of such costs shall be determined by the Arbitral Tribunal.

(j) The provisions for arbitration set forth in this Section shall be in lieu of any other procedure for the determination of controversies between the parties to the Loan Agreement and Guarantee Agreement or any claim by any such party against any other such party arising thereunder or under the Bonds.

(k) If within 30 days after counterparts of the award shall be delivered to the parties the award shall not be complied with, any party may enter judgment upon, or institute a proceeding to enforce, the award in any court of competent jurisdiction against any other party, may enforce such judgment by execution or may pursue any other appropriate remedy against such other party for the enforcement of the award, the provisions of the Loan Agreement or the Bonds. Notwithstanding the foregoing, this Section shall not authorize any entry of judgment or enforcement of the award against the Guarantor except as such procedure may be available against the Guarantor otherwise than by reason of the provisions of this Section.

(l) Service of any notice or process in connection with any proceeding under this Section or in connection with any proceeding to enforce any award rendered pursuant to this Section may be made upon the Bank, upon the Borrower and (to the extent that such proceeding is available against the Guarantor) upon the Guarantor in the manner provided in Section 8.01. The parties to the Loan Agreement and the Guarantee Agreement waive any and all other requirements for the service of any such notice or process.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

SECTION 8.01. Notices and Requests. Any notice or request required or permitted to be given or made under the Loan Agreement or Guarantee Agreement and any agreement between any of the parties contemplated by the Loan Agreement or the Guarantee Agreement shall be in writing. Except as otherwise provided in Section 9.03, such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable or radiogram to the party to which it is required or permitted to be given or made at such party's address specified in the Loan Agreement or Guarantee Agreement, or at such other address as such party shall have designated by notice to the party giving such notice or making such request.

SECTION 8.02. Evidence of Authority. The Borrower and the Guarantor shall furnish to the Bank sufficient evidence of the authority of the person or who will sign the applications provided for in Article IV and the Bonds or who will, on behalf of the Borrower or the Guarantor, take any other action or execute any other documents required or permitted to be taken or executed by the Borrower under the Loan Agreement or by the Guarantor under the Guarantee Agreement, and the authenticated specimen signature of each such person.

SECTION 8.03. Action on Behalf of the Guarantor. Any action required or permitted to be taken, and any documents required or permitted to be executed, under the Guarantee Agreement on behalf of the Guarantor may be taken or executed by the representative of the Guarantor designated in the Guarantee Agreement for the purposes of this Section or any person thereunto authorized in writing by him. Any modification or amplification of the provisions of the Guarantee Agreement may be agreed to on behalf of the Guarantor by written instrument executed on behalf of the Guarantor by the representative so designated or any person thereunto authorized in writing by him; provided that, in the opinion of such representative, such modification or amplification is reasonable in the circumstances and will not substantially increase the obligations of the Guarantor under the Guarantee Agreement. The Bank may accept the execution by such representative or other person of any such instrument as conclusive evidence that in the opinion of such representative any modification or amplification of the provisions of the Guarantee Agreement effected by such instrument is reasonable in the circumstances and will not substantially increase the obligations of the Guarantor thereunder.

SECTION 8.04. Execution in Counterparts. The Loan Agreement and the Guarantee Agreement may each be executed in several counterparts, each of which shall be an original. All such counterparts of either Agreement shall collectively be but one instrument.

ARTICLE IX

EFFECTIVE DATE; TERMINATION

SECTION 9.01. Conditions Precedent to Effectiveness of Loan Agreement and Guarantee Agreement. The Loan Agreement and Guarantee Agreement shall not become effective until evidence satisfactory to the Bank shall have been furnished to the Bank that:

(a) the execution and delivery of the Loan Agreement on behalf of the Borrower have been duly authorized or ratified by all necessary corporate and governmental action;

(b) the execution and delivery of the Guarantee Agreement on behalf of the Guarantor have been duly authorized or ratified by all necessary governmental action; and

(c) all other events specified in the Loan Agreement as conditions to effectiveness have occurred.

SECTION 9.02. Legal Opinions. As part of the evidence to be furnished pursuant to Section 9.01, there shall be furnished to the Bank an opinion or opinions satisfactory to the Bank of counsel acceptable to the Bank showing:

(a) on behalf of the Borrower

(i) that the Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and constitutes a valid and binding obligation of the Borrower in accordance wtih its terms;

(ii) that the Bonds when executed and delivered in accordance with the Loan Agreement will constitute valid and binding obligations of the Borrower in accordance with their terms and that, except as stated in such opinion, no signatures or formalities other than those provided for in the Loan Agreement are required for that purpose;

(b) on behalf of the Guarantor

(i) that the Guarantee Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Guarantor and constitutes a valid and binding obligation of the Guarantor in accordance with its terms;

(ii) that the guarantee on the Bonds when executed and delivered in accordance with the Guarantee Agreement will constitute a valid and binding obligation of the Guarantor in accordance with its terms and that, except as stated in such opinion, no signatures or formalities other than those provided for in the Guarantee Agreement are required for that purpose; and

(c) such other matters as shall be specified in the Loan Agreement. Section 9.03. Effective Date. Except as shall be otherwise agreed by the Bank and the Borrower, the Loan Agreement and Guarantee Agreement shall come into force and effect on the date upon which the Bank dispatches to the Borrower and to the Guarantor notice of its acceptance of the evidence required by Section 9.01.

SECTION 9.04. Termination of Loan Agreement and Guarantee Agreement for Delay in Becoming Effective. If all acts required to be performed pursuant to Section 9.01 shall not have been performed before the date specified in the Loan Agreement for the purposes of this Section or such other date as shall be agreed upon by the Bank and the Borrower, the Bank may at any time thereafter at its option terminate the Loan Agreement and Guarantee Agreement by notice to the Borrower and the Guarantor. Upon the giving of such notice the Loan Agreement and the Guarantee Agreement and all obligations of the parties thereunder shall forthwith terminate.

SECTION 9.05. Termination of Loan Agreement and Guarantee Agreement on Full Payment. If and when the entire principal amount of the Loan and the Bonds and the premium, if any, on the prepayment of the Loan and on the redemption of all Bonds called for redemption (as the case may be) and all interest and other charges which shall have accrued on the Loan and the Bonds shall have been paid, the Loan Agreement and the Guarantee Agreement and all obligations of the parties thereunder shall forthwith terminate.

ARTICLE X

DEFINITIONS; HEADINGS

Section 10.01. Definitions. Except where the context otherwise requires, the following terms have the following meanings wherever used in these Regulations or any Schedule hereto or in a loan agreement or guarantee agreement to which these Regulations have been made applicable:

1. The term "Bank" means International Bank for Reconstruction and Development.

2. The term "member" means a member of the Bank.

3. The term "Loan Agreement" means the particular loan agreement to which these Regulations shall have been made applicable, as amended from time to time; and such term includes these Regulations as thus made applicable, all agreements supplemental to the Loan Agreement and all schedules to the Loan Agreement.

4. The term "Loan" means the loan provided for in the Loan Agreement.

5. The term "Guarantee Agreement" means the agreement between a member and the Bank providing for the guarantee of the Loan, as amended from time to time; and such term includes these Regulations as thus made applicable, all agreements supplemental to the Guarantee Agreement and all schedules to the Guarantee Agreement.

6. The term "Borrower" means the party to the Loan Agreement to which Loan is made; and the term "Guarantor" means the member of the Bank which is a party to the Guarantee Agreement.

7. The term "currency" means such coin or currency as at the time referred to is legal tender for the payment of public and private debts in the territories of the government referred to, whether or not such government is a member. Whenever reference is made to the currency of the Guarantor, the term "currency" includes the currencies of all colonies and territories on whose behalf at the time referred to the Guarantor has accepted membership in the Bank.

8. The term "dollars" and the sign "$" mean dollars in currency of the United States of America.

9. The term "Bonds" means bonds executed and delivered by the Borrower pursuant to the Loan Agreement; and such term includes any such bonds issued in exchange for or in transfer of, Bonds as herein defined.

10. The term "Loan Account" means the account on the books of the Bank to which the amount of the Loan is to be credited as provided in Section 2.01.

11. The term "Project" means the project or projects or program or programs for which the Loan is granted, as described in the Loan Agreement and as the description thereof shall be amended from time to time by agreement between the Bank and the Borrower.

12. The term "goods" means equipment, supplies and services which are required for the Project. Wherever reference is made to the cost of any goods, such cost shall be deemed to include the cost of importing such goods into the territories of the Guarantor.

13. The term "external debt" means any debt payable in any medium other than currency of the Guarantor, whether such debt is or may become payable absolutely or at the option of the creditor in such other medium.

14. The term "Effective Date" means the date on which the Loan Agreement and Guarantee Agreement shall come into force and effect as provided in Section 9.03.

15. The term "lien" shall include mortgages, pledges, charges, privileges and and priorities of any kind.

16. The term "assets" shall include revenues and property of any kind.

17. The terms "tax" and "taxes" shall include imposts, levies, fees and duties of any nature, whether in effect at the date of the Loan Agreement or Guarantee Agreement or thereafter imposed.

18. Wherever reference is made to the incurring of debt such reference shall include the assumption and guarantee of debt.

References in these Regulations to Articles or Sections are to Articles or Sections of these Regulations; references in a loan agreement or a guarantee agreement to Articles or Sections are to Articles or Sections of such agreement.

Section 10.02. Headings. The headings of the Articles and Sections and the Table of Contents ^[8] are inserted for convenience of reference only and are not a part of these Regulations.

SCHEDULE 1

FORM OF REGISTERED BOND WITHOUT COUPONS PAYABLE IN DOLLARS

[Name of Borrower]

GUARANTEED SERIAL BOND DUE ............................

This Bond is transferable by the registered holder hereof, or by his attorney duly authorized in writing, at said office or agency of [the Borrower] in the Borough of Manhattan, upon payment, of [the Borrower] shall so require, of a charge calculated to reimburse [the Borrower] for the cost of the transfer and upon surrender of this Bond for cancellation, duly endorsed or accompanied by a proper instrument or instruments of assignment and tranfer. Upon any such transfer a new registered Bond or Bonds, without coupons, of authorized denominations, of the same maturity, payable in the same currency, and in the same aggregate principal amount, will be issued to the transferee in exchange for this Bond.

Upon payment, if [the Borrower] shall so require, of a charge calculated to reimburse [the Borrower] for the cost of the exchange (1) bearer Bonds with interest coupons attached (hereinafter called coupon Bonds) of any maturity, together with all unmatured coupons thereto appertaining, may be exchanged upon presentation and surrender thereof at said office or agency in the Borough of Manhattan for coupon Bonds of other authorized denominations with all unmatured coupons thereto appertaining, or for fully registered Bonds without coupons (hereinafter called registered Bonds) of any authorized denominations, or both, of the same maturity, payable in the same currency, and in the same aggregate principal amount; and (2) registered Bonds of any maturity may be exchanged upon presentation and surrender at said office or agency, duly endorsed or accompanied by a proper instrument of assignment and transfer, for registered Bonds of other authorized denominations or for coupon Bonds of any authorized denominations with all unmatured coupon thereto appertaining, or both the same maturity, payable in the same currency, and in the same aggregate principal amount.

[The Borrower] shall not be required to make transfers or exchanges of any Bonds for a period of ten days next preceding any interest payment date thereof or of any Bonds called for redemption.

The Bonds are subject to redemption at the election of [the Borrwer], as hereinafter provided, at a redemption price for each Bond equal to the principal amount thereof, plus the interest accrued and unpaid thereon to the date fixed for the redemption thereof, plus as a premium the following respective percentages of such principal amount: [insert percentages set forth in the amortization schedule to the Loan Agreement] All the Bonds at the time outstanding of any one or more maturities may be so redeemed at any time, provided that, at the date fixed for the redemption of such Bonds, there shall not be outstanding any Bonds or any portion of the Loan provided for in said Loan Agreement maturing after the Bonds to be redeemed. If [the Borrower] shall elect to redeem Bonds it shall give notice of intention to redeem all the Bonds, or all the Bonds of one or more designated maturities as hereinabove provided, as the case may be. Such notice shall designate the redemption date and shall state the redemption price or prices, determined as hereinbefore provided. Such notice shall be given by publication in two daily newspapers printed in the English language and published and of general circulation in said Borough of Manhattan at least once a week for three successive weeks, the first publication to be not less than 45 nor more than 60 days prior to said redemption date. Notice of election to redeem having been given as above provided, the Bonds so called for redemption shall become due and payable on said redemption date at their redemption price or prices, and upon presentation and surrender thereof on or after such date at said office or agency in said Borough of Manhattan, together with any appurtenant coupons maturing after said redemption date, shall be paid at the redemption price or prices aforesaid. All unpaid interest instalments represented by coupons which shall have matured on or prior to said redemption date shall continue to be payable to the bearers of such coupons severally and respectively, and the redemption price payable to the holders of coupon Bonds presented for redemption shall not include such unpaid instalments of interest unless coupons representing such instalments shall accompany the Bonds presented for redemption. From and after said redemption date, if payment is made or duly provided for pursuant thereto, the Bonds so called for redemption shall cease to bear interest and any appurtenant coupons maturing after said redemption date shall be void.

In certain events provided in said Loan Agreement, the Bank, at its option, may declare the principal of all Bonds then outstanding (if not already due) to be due and payable immediately, and upon any such declaration such principal shall be due and payable immediately.

The principal of the Bonds, the interest accruing thereon and the premium, if any, on the redemption thereof shall be paid without deduction for and free from any taxes, imposts, levies, fees or duties of any nature now or at any time hereafter imposed under the laws of [name of Guarantor] or laws in effect in its territories; provided, however, that the provisions of this paragraph shall not apply to the taxation of payments made under the provisions of any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of I name of Guarantor].

[The Borrower} may deem and treat the bearer of any coupon Bond, and the bearer of any coupon for interest on any Bond, and the registered owner of any registered Bond, as the absolute owner thereof for all purposes whatsoever notwithstanding any notice to the contrary; and all payments to such bearer or to or on the order of such registered owner, as the case may be, shall be valid and effectual to discharge the liability of I the Borrower] upon such coupon Bond, such coupon or such registered Bond to the extent of the sum or sums so paid.

This Bond shall not be valid or become obligatory for any purpose until it shall have been [insert appropriate reference to authentication, signature or attestation].

IN WITNESS WHEREOF [the Borrower] has caused this Bond to be signed in its name by [here insert reference to official or officials signing Bonds, to countersignatures, attestation and seal, if used, and, if any signature is a facsimile signature, make reference thereto].

Dated ........................................

Note: Italicized provisions may be omitted if Borrower desires.

FORM OF ASSIGNMENT AND TRANSFER

the within Bond issued by [Name of Borrower] and hereby irrevocably authorize said [Borrower] to transfer said Bond on its books.

Dated ........................
Witness:

SCHEDULE 2

FORM OF COUPON BOND PAYABLE IN DOLLARS

[Name of Borrower]

GUARANTEED SERIAL BOND DUE ............................

Upon payment, if [the Borrower! shall so require, of a charge calculated to reimburse [the Borrower] for the cost of the exchange (1) bearer Bonds with interest coupons attached (hereinafter called coupon Bonds) of any maturity, together with all unmatured coupons thereto appertaining, may be exchanged upon presentation and surrender thereof at said office or agency in the Borough of Manhattan for coupon Bonds of other authorized denominations with all unmatured coupons thereto appertaining, or for fully registered Bonds without coupons (hereinafter called registered Bonds) of any authorized denominations, or both, of the same maturity, payable in the same currency, and in the same aggregate principal amount; and (2) registered Bonds of any maturity may be exchanged upon presentation and surrender at said office or agency, duly endorsed or accompanied by a proper instrument or instruments of assignment and transfer, for registered Bonds of other authorized denominations or for coupon Bonds of any authorized denominations with all unmatured coupons thereto appertaining, or both, of the same maturity, payable in the same currency, and in the same aggregate principal amount.

[The Borrower] shall not be required to make transfers or exchanges of any Bonds for a period of ten days next preceding any interest payment date thereof or of any Bonds called for redemption.

The Bonds are subject to redemption at the election of [the Borrower], as hereinafter provided, at a redemption price for each Bond equal to the principal amount thereof, plus the interest accrued and unpaid thereon to the date fixed for the redemption thereof, plus as a premium the following respective percentages set forth in the amortization schedule to the Loan Agreement]. All the Bonds at the time outstanding of any one or more maturities may be so redeemed at any time, provided that, at the date fixed for the redemption of such Bonds, there shall not be outstanding any Bonds or any portion of the Loan provided for in said Loan Agreement maturing after the Bonds to be redeemed. If [the Borrower] shall elect to redeem Bonds it shall give notice of intention to redeem all the Bonds, or all the Bonds of one or more designated maturities as hereinabove provided, as the case may be. Such notice shall designate the redemption date and shall state the redemption price or prices, determined as hereinbefore provided. Such notice shall be given by publication in two daily newspapers printed in the English language and published and of general circulation in said Borough of Manhattan at least once a week for three successive weeks, the first publication to be not less than 45 nor more than 60 days prior to said redemption date. Notice of election to redeem having been given as above provided, the Bonds so called for redemption shall become due and payable on said redemption date at their redemption price or prices, and upon presentation and surrender thereof on or after such date at said office or agency in said redemption date, shall be paid at the redemption price or prices aforesaid. All unpaid interest instalments represented by coupons which shall have matured on or prior to said redemption date shall continue to be payable to the bearers of such coupons severally and respectively, and the redemption price payable to the holders of coupon Bonds presented for redemption shall not include such unpaid instalments of interest unless coupons representing such instalments shall accompany the Bonds presented for redemption. From and after said redemption date, if payment is made or duly provided for pursuant thereto, the Bonds so called for redemption shall cease to bear interest and any appurtenant coupons maturing after said redemption date shall be void.

In certain events provided in said Loan Agreement, the Bank, at its option, may declare the principal of all the Bonds then outstanding (if not already due) to be due and payable immediately, and upon any such declaration such principal shall be due and payable immediately.

The principal of the Bonds, the interest accruing thereon and the premium, if any, on the redemption thereof shall be paid without deduction for and free from any taxes, imposts, levies, fees or duties of any nature now or at any time hereafter imposed under the laws of [name of Guarantor] or laws in effect in its territories; provided, however, that the provisions of this paragraph shall not apply to the taxation of payments made under the provisions of any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of {name of Guarantor].

[The Borrower] may deem and treat the bearer of any coupon Bond, and the hearer of any coupon for interest on any Bond, and the registered owner of any registered Bond, as the absolute owner thereof for all purposes whatsoever notwithstanding any notice to the contrary; and all payments to such bearer or to or on the order of such registered owner, as the case may he, shall be valid and effectual to discharge the liability of I the Borrower] upon such coupon Bond, such coupon or such registered Bond to the extent of the sum or sUms so paid.

This Bond shall not be valid or become obligatory for any purpose until it shall have been [insert appropriate reference to authentication, signature or attestation ].

IN WITNESS WHEREOF [the Borrower] has caused this Bond to be signed in its name by [here insert reference to official or officials signing Bonds, to countersignatures, attestation and seal,if used, and, if any signature is a facsimile signature, make reference thereto] and the coupons for said interest bearing the facsimile signature of its [insert title or name of official] to be attached hereto.

Dated ................................

Note: Italicized provisions may be omitted if Borrower desires.

SCHEDULE 3

FORM OF COUPON

[facsimile signature]

[NAME OF GRANTOR], for value received, as a primary obligor and not as a surety merely, hereby absolutely and unconditionally guarantees, and pledges its full faith and credit for, the due and punctual payment of the principal and redemption price of the within Bond and the interest thereon, free from taxes as therein provided and free from all restrictions imposed under the laws of [name of Guarantor] or laws in effect in its territories, prior notice to, demand upon or action against the obligor on said Bond or [name of Guarantor] being waived.

[NAME OF GRANTOR] hereby agrees that it will affix a similar guarantee on any Bond or Bonds which shall be duly issued in exchange or substitution for or in replacement of the within Bond.

Dated.................................

LOAN AGREEMENT

(SECOND DEVELOPMENT CORPORATION PROJECT)

AGREEMENT, dated September 23, 1966, between International Bank for Reconstruction and Development {hereinafter called the Bank) and Philippine National Bank (hereinafter called the Borrower), a company organized and existing under the laws of the Republic of the Philippines (hereinafter called the Guarantor).

WHEREAS the Private Development Corporation of the Philippines (hereinafter called the Corporation), a company organized and existing under the laws of the Guarantor, has been incorporated to assist privately controlled industrial and other productive enterprises in the Philippines by providing capital for such enterprises in the form of credits or share participations;

WHEREAS by an agreement dated February 15, 1963 between the Bank and the Borrower (hereinafter called the First Loan Agreement)^[9] the Bank made a loan to the Borrower in an amount in various currencies equivalent to $15,000,000 to be relent to the Corporation upon terms and conditions satisfactory to the Bank, such loan being guaranteed as to payments of principal, interest and other charges by the Guarantor;

WHEREAS the Bank has agreed to make to the Borrower upon the terms and conditions hereinafter set forth a further loan the proceeds of which or the equivalent thereof are to be relent to the Corporation on terms and conditions satisfactory to the Bank on condition that such loan be guaranteed as to payment of principal, interest and other charges by the Guarantor upon the terms and conditions of a guarantee agreement of even date herewith between the Guarantor and the Bank;

NOW THEREFORE, the parties hereto hereby agree as follows:

ARTICLE I

LOAN REGULATIONS; SPECIAL DEFINITIONS

Section 1.01. The parties to this Loan Agreement accept all the provisions of Loan Regulations No. 4 of the Bank dated February 15, 1961, subject, however, to the modifications thereof set forth in Schedule 2 to this Agreement (said Loan Regulations No. 4 as so modified being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein.

Section 1.02. Wherever used in this Agreement, or any Schedule thereto, the following terms shall have the following meanings unless the context otherwise requires:

(a) the term "Subsidiary Loan Agreement" shall mean the Subsidiary Loan Agreement (Second Development Corporation Project) of even date herewith, between the Borrower and the Corporation, under which the Borrower shall relend the proceeds of the Loan to the Corporation, as the same shall be amended from time to time by agreement of the parties thereto and the Bank;

(b) the term "Project Agreement" shall mean the Project Agreement (Second Development Corporation Project) of even date herewith, between the Bank and the Corporation, as the same shall be amended from time to time by agreement between the Bank and the Corporation;

(c) the term "AID Agreement" shall mean the agreement dated February 15, 1963 between the Agency for International Development, an agency of the United States of America (hereinafter called AID} and the Corporation, providing for a loan by AID to the Corporation in the aggregate principal amount of ?21,500,000;

(d) the term "credit" shall mean a credit made or proposed to be made by the Corporation out of the proceeds of the Loan to an Investment Enterprise for an Investment Project;

(e) the term "investment" shall mean an investment, other than a credit, made or proposed to be made by the Corporation out of the proceeds of the Loan in an Investment Enterprise for an Investment Project;

(f) the term "Investment Enterprise" shall mean an enterprise to which the Corporation shall propose to make or shall have made a credit, or in which it shall propose to make or shall have made an investment, in accordance with and as provided in Section 3.01 of this Agreement;

(g) the term "Investment Project" shall mean a specific investment project to be carried out by an Investment Enterprise, as submitted to the Bank for approval pursuant to Section 2.03(&) of the Project Agreement, or in respect of which a request for credit to the Loan Account shall have been made pursuant to Section 2.03(c) of the Project Agreement;

(h) the term "subsidiary" shall mean any company of which the majority of the outstanding voting stock or other proprietary interest shall be owned, or which shall be effectively controlled, by the Corporation or by any one or more subsidiaries of the Corporation or by the Corporation and one or more of its subsidiaries;

(i) the term "pesos" and the symbol "P" shall mean the currency of the Guarantor; and

(j) the term "foreign currency" shall mean any currency other than the currency of the Guarantor.

Words importing the singular number include the plural number and vice versa.

ARTICLE II

THE LOAN

Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in this Agreement set forth or referred to, an amount in various currencies equivalent to twenty-five million dollars ($25,000,000).

Section 2.02. (a) The Bank shall open a Loan Account on its books in the name of the Borrower. The amount of the Loan shall be credited to the Loan Account in installments as provided in paragraphs (b) and (c) of this Section.

(b) Except as the Bank and the Borrower shall otherwise agree, upon approval by the Bank of any Investment Project submitted to it as in Section 2.03(b) of the Project Agreement provided, there shall be credited in respect of the estimated foreign currency cost of such Investment Project, such amount of the Loan as the Bank shall have approved.

(c) (i) Upon request by the Corporation from time to time pursuant to Section 2.03 (c) of the Project Agreement there shall be credited, in respect of that amount of a credit representing the estimated foreign currency cost of any Investment Project in respect of which no application has been made pursuant to Section 2.03(b) of the Project Agreement and for which no credit has been made to the Loan Account pursuant to paragraph (b) of this Section, an amount of the Loan not exceeding, for each such Investment Project, such limit as shall from time to time be agreed between the Bank and the Corporation with respect to amounts to be credited pursuant to this paragraph {c).

(ii) The amount to be credited to the Loan Account for each Investment Project pursuant to this paragraph (c), together with any amount or amounts previously so credited for such Investment Project and not repaid shall not exceed such limit as shall from time to time be agreed between the Bank and the Corporation.

(iii) The aggregate amount of credits pursuant to this paragraph (c) shall not exceed such limit as shall from time to time be agreed between the Bank and the Corporation.

(d) The Loan Account may, by agreement between the Bank and the Corporation, be reduced by any amount credited thereto pursuant to paragraphs (b) or (c) of this Section. No such reduction shall be deemed ipso facto to be a cancellation of any amount of the Loan.

Section 2.03. Each amount credited to the Loan Account in respect of a Investment Project may be withdrawn from the Loan Account as provided in, and subject to the rights of cancellation and suspension set forth in, the Loan Agreement and shall be applied exclusively for the credit for, or the investment in, the Investment Project in respect of which such amount was credited to the Loan Account.

Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-eighths of one per cent (% of 1%) per annum on the amount of each part of the Loan standing to the credit of the Borrower from time to time in the Loan Account. Such commitment charge shall accrue from the several dates on which amounts shall be credited to the Loan Account to the respective dates on which {a) they are withdrawn from the Loan Account or are cancelled pursuant to Section 2.09 of this Agreement or Article V of the Loan Regulations or {b) the Loan Account is reduced in respect of such amounts pursuant to Section 2.02 (d) of this Agreement.

Section 2.03. The Borrower shall pay interest on the principal amount of each part of the Loan withdrawn from the Loan Account and outstanding from time to time at such rate as shall have been notified by the Bank to the Borrower and the Corporation at the time when such part of the Loan was credited to the Loan Account, or at such other time or times as shall have been agreed upon between the Bank and the Borrower, as being the rate then generally applicable to new Bank loans of the same maturity to similar borrowers. Interest shall accrue from the respective dates on which amounts shall be so withdrawn.

Section 2.06, Except as the Bank and the Corporation shall otherwise agree, the charge payable by the Borrower for special commitments entered into by the Bank at the request of the Borrower pursuant to Section 4.02 of the Loan Regulations shall be at the rate of one-half of one per cent (1/2 of 1 %) per annum on the principal amount of any such special commitments outstanding from time to time.

Section 2.07. Interest and other charges shall be payable semi-annually on January 1 and July 1 in each year.

Section 2.08. The Borrower shall repay the principal amount of the Loan withdrawn from the Loan Account in accordance with the amortization schedule set forth in Schedule 1 to this Agreement as such Schedule shall be amended from time to time as determined by the Bank and as reasonably required (i) to conform in relevant part substantially to the aggregate of the amortization schedules applicable to the credits and investments in respect of which amounts have been credited to the Loan Account pursuant to Section 2.02 of this Agreement, and (ii) to take into account any cancellations pursuant to Section 2.09 of this Agreement or Article V of the Loan Regulations and any reductions under Section 2.02 (d) of this Agreement, except that payments due hereunder shall be made on January 1 and July 1 in each year. Such amendments of said Schedule 1 shall include amendments of the premiums on prepayments and redemption if required. The amortization schedules applicable to the Investment Projects shall provide for appropriate periods of grace, and, unless the Bank and the Borrower shall otherwise agree, (i) shall not extend beyond fifteen years from the date when the corresponding amounts are credited to the Loan Account and (ii) shall provide for approximately equal aggregate semi-annual, or more frequent, payments of principal plus interest or approximately equal semi-annual, or more frequent, payments of principal.

Section 2.09. 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 Section 9.01 of this Agreement as the Closing Date any amount of the Loan shall not have been credited to the Loan Account or shall remain unwithdrawn from the Loan Account, the Bank may by notice to the Borrower and the Corporation terminate the right of the Corporation to request credits to the Loan Account and the right of the Borrower to make withdrawals from the Loan Account, as the case may be, with respect to such amount of the Loan. Upon the giving of such notice such amount of the Loan shall be cancelled.

Section 2.10. Unless the Bank and the Borrower shall otherwise agree:

(a) If a credit or any part thereof shall be repaid to the Borrower in advance of maturity or if a credit or an investment or any part thereof shall be sold, transferred, assigned or otherwise disposed of, the Borrower shall promptly notify the Bank and shall pay to the Bank on the next following interest payment date, together with the premiums specified in Schedule 1 to this Agreement, an amount of the Loan equal to: (i) in the case of a credit, the amount withdrawn from the Loan Account in respect of such credit, or the said part thereof; or (ii) in the case of an investment, the excess, if any, of the amount withdrawn from the Loan Account in respect of such investment, or the said part thereof, over the amount of the Loan theretofore repaid to the Bank in respect of such investment. The policy stated in Section 2.05{c) of the Loan Regulations with respect to premiums shall apply.

(b) Any amount repaid by the Borrower under this Section shall be applied by the Bank as follows: (i) in the case of a credit, to payment of the maturity or maturities of the principal amount of the Loan in amounts corresponding to the amounts of the maturity or maturities of the credit so repaid or disposed of, and (ii) in the case of the disposition of an investment, to the pro rata payment of the unpaid amounts of the maturity or maturities of the Loan reflecting the amount of such investment.

(c) The first sentence of Section 2.Q5(b) of the Loan Regulations shall not apply to any repayment by the Borrower in accordance with paragraph (a) of this Section.

ARTICLE III

DESCRIPTION OF THE PROJECT

Section 3.01. The Project for which the Loan is granted is a program to contribute to the economic development of the Philippines through credits for productive purposes provided by the Corporation to privately-controlled industrial and other productive enterprises in the Philippines, and through other productive investments by the Corporation in such enterprises, all for specific development projects, in accordance with the Articles of Incorporation of the Corporation, as amended from time to time, and in furtherance of the corporate purposes of the Corporation as therein set forth.

Section 3.02. The proceeds of the Loan shall be applied exclusively to the cost of goods required to carry out Investment Projects in respect of which amounts shall have been credited to the Loan Account pursuant to the provisions of Section 2.02 of this Agreement. Except as the Bank and the Borrower shall otherwise agree, no withdrawals shall be made on account of expenditures made by any Investment Enterprise for any such Investment Project more than 90 days prior to the date on which the Bank shall have received: (i) the application in accordance with Section 2.03(£) of the Project Agreement, or (ii) in the case of credits to the Loan Account pursuant to the provisions of Section 2.02 (c) of this Agreement, the request for credit to the Loan Account in accordance with Section 2.03(c) of the Project Agreement.

ARTICLE IV

BONDS

Section 4.01. The Borrower shall execute and deliver Bonds representing the principal amount of the Loan as provided in the Loan Regulations.

Section 4.02. The President of the Borrower and such person or persons as he shall appoint in writing are designated as authorized representatives of the Borrower for the purposes of Section 6.12(a) of the Loan Regulations.

ARTICLE V

PARTICULAR COVENANTS

Section 5.01. The Borrower shall relend to the Corporation all amounts withdrawn from the Loan Account as provided in the Subsidiary Loan Agreement and, except as the Bank shall otherwise agree, shall not amend, assign, abrogate or waive any provision of the Subsidiary Loan Agreement.

Section 5.02. The Borrower shall maintain, or cause to be maintained, records adequate to reflect in accordance with consistently maintained sound accounting practices all transactions between the Borrower and the Corporation and the operations and financial condition of the Borrower; shall enable, or take such steps as may be necessary to enable, the Bank's representatives to inspect any relevant records and documents; and shall furnish, or cause to be furnished, to the Bank all such information as the Bank shall reasonably request concerning transactions between the Borrower and the Corporation and the administration, operations and financial condition of the Borrower.

Section 5.03. The Bank and the Borrower shall cooperate fully to ensure that the purposes of the Loan will be accomplished. To that end the Bank and the Borrower shall from time to time exchange views through their representatives with regard to matters relating to the maintenance of the service of the Loan. The Borrower shall promptly inform the Bank of any condition which interferes with, or threatens to interfere with, the maintenance of the service of the Loan.

Section 5.04. The Borrower undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any assets of the Borrower as security for any 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 originally incurred and to be paid out of the proceeds of sale of such commercial goods; or (iii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date.

Section 5.05. Subject to such exemption as shall be conferred by the provisions of Sections 3.03 and 3.04 of the Guarantee Agreement, the Borrower shall pay or cause to be paid all taxes imposed under the laws of the Guarantor or laws in effect in the territories of the Guarantor on or in connection with the execution, issue, delivery or registration of this Agreement, the Guarantee Agreement, the Project Agreement or the Bonds, or the payment of principal, interest or other charges thereunder; provided, however, that the provisions of this Section shall not apply to taxation of payments under any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of the Guarantor.

Section 5.06. The Borrower shall pay or cause to be paid all taxes imposed under the laws of the country or countries in whose currency the Loan and the Bonds are payable or laws in effect in the territories of such country or countries on or in connection with the execution, issue, delivery or registration of this Agreement, the Guarantee Agreement, the Project Agreement or the Bonds.

ARTICLE VI

MODIFICATION OF FIRST LOAN AGREEMENT

Section 6.01. Paragraph (c) of Section 5.02 of Loan Regulations No. 4 of the Bank as applied to the First Loan Agreement is hereby amended to read as follows:

"(c) A default shall have occurred in the performance of any other covenant or agreement on the part of the Borrower or the Guarantor under the Loan Agreement, the Guarantee Agreement or the Bonds, or under any other loan agreement between the Borrower and the Bank providing for a loan to the Borrower the proceeds of which are to be relent to the Corporation, or any guarantee agreement between the Guarantor and the Bank guaranteeing a loan granted under any such loan agreement, or under any bond issued pursuant to any such agreement."

and the term "Loan Regulations" as used for the purposes of the First Loan Agreement shall mean said Loan Regulations No. 4 as modified by the First Loan Agreement and as further amended by this Article VI.

Section 6.02. Paragraph (a) of Section 6.02 of the First Loan Agreement is hereby amended to read as follows:

"(a) A default shall have occurred in the performance of any covenant or agreement on the part of the Corporation under the Project Agreement, or under any other project agreement between the Bank and the Corporation."

Section 6.03. The provisions of Section 2.10 of this Agreement with respect to repayment of a credit or any part thereof in advance of maturity, and to sale, transfer, assignment or other disposition of such credit or part thereof shall apply to repayment in advance of maturity of a credit or any part thereof made out of the proceeds of the loan provided for under the First Loan Agreement, and to sale, transfer, assignment or other disposition of such credit or part thereof, anything in the said First Loan Agreement to the contrary notwithstanding.

ARTICLE VII

REMEDIES OF THE BANK

Section 7.01. (i) If any event specified in paragraph (a), paragraph (b), paragraph (e) or paragraph (f) of Section 5.02 of the Loan Regulations or in paragraph (a) of Section 7.02 of this Agreement shall occur and shall continue for a period of thirty days, or (ii) if any event specified in paragraph (c), paragraph (d), or paragraph {e) of Section 7.02 of this Agreement shall occur, or (iii) if any event specified in paragraph c) of Section 5.02 of the Loan Regulations shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower, then at any subsequent time during the continuance thereof, the Bank, at its option, may declare the principal of the Loan and of all the Bonds then outstanding to be due and payable immediately, and upon any such declaration such principal shall become due and payable immediately, anything in this Agreement or in the Bonds to the contrary notwithstanding.

Section 7.02. The following are specified as events for the purposes of paragraph (j) of Section 5.02 of the Loan Regulations:

(a) A default shall have occurred in the performance of any covenant or agreement on the part of the Corporation under the Project Agreement or under any other project agreement between the Bank and the Corporation.

(b) The Corporation's right of withdrawal under any other loan or credit agreement has been suspended.

(c) The Corporation has been unable to pay its debts as they mature or any action or proceeding has been taken by the Corporation or by others whereby any of the property of the Corporation shall or may be distributed among its creditors.

(d) Any other loan or credit to the Corporation, having an original maturity of one year or more, shall have become due and payable prior to its agreed maturity pursuant to the terms thereof.

(e) The Guarantor or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Corporation or for the suspension of its operations.

(f) Failure by the Borrower to fulfill an obligation to make payment of principal or interest or any other payment required under the Loan Agreement or any other loan agreement between the Bank and the Borrower providing for a loan to the Borrower the proceeds of which are to be relent to the Corporation or under any bond delivered pursuant to any such agreement even though such payment has been made by other persons.

Section 8.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 9.01 (c) of the Loan Regulations:

ARTICLE VIII

EFFECTIVE DATE; TERMINATION

(a) That the execution and delivery by the Borrower and the Corporation of the Subsidiary Loan Agreement, in form and substance satisfactory to the Bank, shall have been duly authorized or ratified by all necessary corporate action.

(b) That the execution and delivery of the Project Agreement on behalf of the corporation shall have been duly authorized or ratified by all necessary corporate action.

Section 8.02. The following are specified as additional matters within the meaning of Section 9.02(c) of the Loan Regulations, to be included in the opinions to be furnished to the Bank:

(a) That the Subsidiary Loan Agreement has been duly authorized or ratified by, executed and delivered on behalf of, the respective parties thereto, that all acts, validations, consents and approvals necessary to render said Agreement valid and effective have been duly performed or given, and that said Subsidiary Loan Agreement constitutes a valid and binding obligation of the parties thereto in accordance with its terms.

(b) That the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Corporation, that all acts, validations, consents and approvals necessary to render said Agreement valid and effective have been duly performed or given, and that said Project Agreement constitutes a valid and binding obligation of the Corporation in accordance with its terms.

Section 8.03. If this Loan Agreement shall not have come into force and effect by November 30, 1966, this Loan Agreement and all obligations of the parties hereunder shall terminate, unless the Bank, after consideration of the reasons for the delay, establishes a later date for purposes of this Section. The Bank shall promptly notify the Borrower and the Guarantor of such later date.

ARTICLE IX

MISCELLANEOUS

Section 9.01. The Closing Date shall be December 31, 1969 or such other date as may from time to time be agreed between the Bank and the Borrower.

Section 9.02. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations:

IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Loan 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.

SCHEDULE 1

AMORTIZATION SCHEDULE

PREMIUMS ON PREPAYMENT AND REDEMPTION

The following percentages are specified as the premiums payable on repayment in advance of maturity of any part of the principal amount of the Loan pursuant to Section 2.05(b) of the Loan Regulations or on the redemption of any Bond prior to its maturity pursuant to Section 6.16 of the Loan Regulations:

SCHEDULE 2

MODIFICATION OF LOAN REGULATIONS NO. 4

For the purposes of this Agreement, the provisions of Loan Regulations No. 4 of the Bank dated February 15, 1961 shall be deemed to be modified as follows:

(1) By the deletion of Sections 2.01, 2.02 and 2.03.

(2) By the addition to Section 2.05 of the following new paragraph as paragraph (d):

"(d) The Bank and the Borrower may from time to time agree upon arrangements for prepayment and the application thereof in addition to, or in substitution for, those set forth in the provisions of paragraph (b) of Section 2.05 and Section 6.16 of these Regulations."

(3) By the deletion of Section 3.02.

(4) By the deletion of the second sentence of Section 4.01.

(5) By the substitution in the second sentence of Section 4.03 of the words "Investment Projects" for the words "the Project".

(6) By the substitution in Section 4.05 of the words "Project Agreement" for the words "Loan Agreement".

(7) By the deletion of the period at the end of paragraph (c) of Section 5.02 and the addition to such paragraph of the following: "or under any other loan agreement between the Borrower and the Bank providing for a loan to the Borrower the proceeds of which are to be relent to the Corporation, or any guarantee agreement the Guarantor and the Bank guaranteeing a loan granted under any such loan agreement, or under any bond delivered pursuant to any such agreement".

(8) By the deletion of Section 5.03.

(9) By the deletion of Section 5.05 and the substitution therefor of the following Section:

"Section 5.05. Application of Reduction of Loan Account and of Cancellation to Maturities. Except as otherwise agreed between the Bank and the Borrower: (i) any cancellation pursuant to Section 2.09 of the Loan Agreement or this Article of amounts credited to the Loan Account and any reduction of the Loan Account pursuant to Section 2.Q2(d) of the Loan Agreement, in respect of any part of the Loan credited to the Loan Account, shall be applied pro rata to the principal amounts of the several maturities which reflect such part of the Loan as set forth in the amortization schedule to the Loan Agreement, except that the principal amount so cancelled of any such maturity shall not exceed the amount of such maturity remaining after deducting therefrom the principal amount of Bonds of such maturity theretofore delivered or requested pursuant to Article VI and the Bonds or portions of the Loan of such maturity theretofore sold or agreed to be sold by the Bank; and (ii) any cancellation pursuant to Section 2.09 of the Loan Agreement or this Article of any amount of the Loan not credited to the Loan Account shall be applied pro rata to the principal amounts of the several maturities of the Loan as set forth m the amortization schedule to the Loan Agreement, except that the principal amount so cancelled of any maturity of the Loan shall not exceed the amount of such maturity remaining after deducting the principal amount of any part or parts of the Loan reflected in such maturity."

(10) By the deletion of Section 6.04 and the substitution therefor of the following Section:

"Section 6.04. Interest on Bonds; Service Charge. The Bonds shall bear interest at such rate as the Bank shall request, not in excess, however, of the rate of interest on the portion of the Loan represented by such Bonds. If the rate of interest on any Bond shall be less than the rate of interest on the portion of the Loan represented by such Bonds, the Borrower shall, in addition to the interest payable on such Bond, pay to the Bank a service charge on the principal amount of such portion of the Loan at a rate equal to the difference between the interest rate on such portion of the Loan and the interest rate on such Bond. Such service charge shall be payable on the dates on which and in the currency in which such interest is payable."

(11) By the deletion of paragraph (a) of Section 6.11 and the substitution therefor of the following paragraph:

"(a) Bonds representing a portion of the Loan and bearing interest at one rate may be exchanged for Bonds bearing interest at any other rate not in excess of the rate of interest on such portion of the Loan."

(12) By the deletion of paragraph (b) of Section 6.16 and the substitution therefor of the following paragraph:

"(b) If any Bond so to be redeemed shall bear interest at a rate less than the rate of interest on the portion of the Loan represented by such Bond, the Borrower shall pay to the Bank on the date fixed for redemption the service charge provided for in Section 6.04 accrued and unpaid at such date on the principal amount of such portion of the Loan represented by such Bond."

(13) By the deletion of Section 9.04 and the substitution therefor of the following Section:

"Section 9.04. Termination of Guarantee Agreement upon Termination of Loan Agreement. If, in accordance with the provisions thereof, the Loan Agreement shall termnate for failure to become effective, the Guarantee Agreement and all obligations of the parties thereunder shall also terminate. The Bank shall promptly give notice of such terminations to the Guarantor." (14) By the deletion of paragraph 4 of Section 10.01 and the substitution therefor of the following paragraph:

"The term 'Loan' means the Loan provided for in the Loan Agreement and the term 'part of the Loan' means the amount of the Loan credited to the Loan Account in respect of an Investment Project."

(15) By the deletion of paragraph 10 of Section 10.01 and the substitution therefor of the following paragraph:

"The term 'Loan Account' means the account on the books of the Bank to which the amount of each part of the Loan is to be credited as provided in the Loan Agreement."

(16) By the deletion of paragraph II of Section 10.01 and the substitution therefor of the following paragraph:

"11. The term 'Project' means the project for which the Loan is granted, as described in Section 3.01 of the Loan Agreement and as the description thereof shall, be amended from time to time by agreement between the Bank and the Borrower."

(17) By the deletion of the first sentence of paragraph 12 of Section 10.01 and the substitution therefor of the following sentence:

"The term 'goods' means equipment, supplies and services required by Investment Enterprises to carry out Investment Projects financed out of the proceeds of the Loan."

PROJECT AGREEMENT

(SECOND DEVELOPMENT CORPORATION PROJECT)

AGREEMENT, dated September 23, 1966, between International Bank for Reconstruction and Development (hereinafter called the Bank) and Private Development Corporation of the Philippines (hereinafter called the Corporation).

WHEREAS pursuant to the First Loan Agreement dated February 15, 1963, the Bank made to the Philippine National Bank (hereinafter called PNB) a loan in various currencies equivalent to fifteen million dollars ($15,000,000) for relending to the Corporation, and the Corporation, as a condition of such relending and in consideration of the Bank's entering into the First Loan Agreement did undertake certain obligations to the Bank under a project agreement of the same date;

WHEREAS by an agreement of even date herewith the Bank and PNB (which agreement, the schedules thereto and the Loan Regulations therein referred to are hereinafter called the Loan Agreement) the Bank has agreed to make to PNB a loan in various currencies equivalent to twenty-five million dollars ($25,000,000) on the terms and conditions set forth in the Loan Agreement to be relent to the Corporation, but only on condition that the Corporation agree to undertake certain obligations to the Bank as hereinafter provided; and

WHEREAS the Corporation, in consideration of the Bank's entering into the Loan Agreement with PNB, has agreed to undertake obligations as hereinafter provided:

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms in the Loan Agreement and in the Loan Regulations (as so defined) shall have the respective meanings therein set forth.

ARTICLE II

PARTICULAR COVENANTS OF THE CORPORATION

Section 2.01. The Corporation shall carry out the Project and conduct its operations and affairs in accordance with sound financial and investment standards and practices with qualified and experienced management and in accordance with its Articles of Incorporation, as amended from time to time.

Section 2.02. (a) The Corporation shall cause the proceeds of the Loan to be applied exclusively to foreign currency expenditures on Investment Projects in respect of which amountts were withdrawn from the Loan Account.

(b) Except as the Bank and the Corporation shall otherwise agree, the proceeds of the Loan shall not be applied to expenditures in the territories of any country which is not a member of the Bank (other than Switzerland) or for goods produced in (including services supplied from) such territories.

(c) Except as the Bank and the Corporation shall otherwise agree, the proceeds of the Loan shall not be applied to expenditures made by any Investment Enterprise for any Investment Project more than 90 days prior to the date on which the Bank shall have received: (i) the application in accordance with Section 2.03 (b) of this Agreement or (ii) in the case of credits to the Loan Account pursuant to the provisions of Section 2.02 (c) of the Loan Agreement, the request for credit to the Loan Account in accordance with Section 2.03 (c) of the Project Agreement.

Section 2.03. (a) Investment Projects may be submitted to the Bank cither for approval or for credit to the Loan Account.

(b) When submitting an Investment Project to the Bank for approval pursuant to paragraph (b) of 2.02 of the Loan Agreement, the Corporation shall furnish to the Bank an application, in form satisfactory to the Bank, containing a description of such Investment Project, the terms and conditions of the Corporation's credit to or investment in the Investment Enterprise, the amortization schedule proposed therefor and such other information as the Bank shall reasonably request.

(c) When submitting a request to the Bank to credit the Loan Account pursuant to paragraph (c) of Section 2.02 of the Loan Agreement in respect of an Investment Project, the Corporation shall furnish to the Bank a brief description, in form satisfactory to the Bank, of such Investment Project and of the terms and conditions of the Corporation's credit for such Investment Project, and the amortization schedule proposed therefor.

(d) Except as the Bank and the Corporation shall otherwise agree, the Corporation shall submit Investment Projects for approval pursuant to Section 2.03 (b) of this Agreement and requests for credits to the Loan Account pursuant to Section 2.03 (c) of the Agreement on or before September 30, 1968.

(e) Except as the Bank and the Corporation shall otherwise agree, the Corporation shall not make a credit for an Investment Project in respect of which the amount to be credited to the Loan Account is less than fifty thousand dollars ($50,000).

Section 2.04. The Corporation shall use reasonable efforts to assure that the cost of goods financed out of the proceeds of the Loan is payable in the respective currencies of the countries from which such goods are acquired. Except as the Bank and the Corporation shall otherwise agree, withdrawals shall be made either in the respective currencies in which the cost of goods has been paid or is payable or in the currency in which the Loan is denominated, as the Bank may from time to time elect.

Section 2.05. Any credit granted by the Corporation to an Investment Enterprise for an Investment Project to be financed wholly or partly out of the proceeds of the Loan shall be granted or made on terms whereby the Corporation shall obtain, by the written agreement of such Investment Enterprise or other appropriate legal means, rights adequate to protect the interests of the Bank, PNB and the Corporation, including the rights to require such Investment Enterprise to carry out and operate the Investment Project with due diligence and efficiency and in conformity with sound engineering and financial standards, including the maintenance of adequate records; the right to require that the proceeds of the credit shall be applied exclusively to the expenditures on such Investment Project; the right of representatives of the Bank and the Corporation to inspect the sites, works and construction included in such Investment Project, the operation thereof and any relevant records and documents; the right to require that such Investment Enterprise take out and maintain such insurance, against such risks and in such amounts, as shall be consistent with sound practice, that without any limitation upon the foregoing, such insurance shall cover marine, transit and other hazards incident to acquisition, transportation and delivery of goods financed out of the proceeds of the Loan to the place of use or installation, and that any indemnity thereunder shall be payable in a currency freely usable by such Investment Enterprise to replace or repair such goods; the right to obtain all such information as the Bank and the Corporation shall reasonably request relating to the foregoing and to the administration, operations and financial condition of such investment Enterprise; and the rights of the Corporation to suspend and terminate access by the Investment Enterprise to the proceeds of the Loan upon failure by such Enterprise to carry out the terms of such credit.

Section 2.06. The Corporation shall exercise its rights in relation to each Investment Project in such manner as to protect the interests of the Bank, PNB and the Corporation.

Section 2.07. (a) The Corporation shall furnish to the Bank all such information as the Bank shall reasonably request concerning the expenditures of the proceeds of the Loan, the Project, the Investment Enterprises, the Investment Projects and the administration, operations and financial condition of the Corporation.

(b) The Corporation shall maintain records adequate to record the progress of the Project and of each Investment Project (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the financial condition and operations of the Corporation. The Corporation shall enable the Bank's representatives to examine such records.

Section 2.08. (a) The Bank and the Corporation shall cooperate fully to ensure that the purposes of the Loan will be accomplished. To that end the Bank and the Corporation shall from time to time at the request of either party, exchange views through their representatives with regard to the progress of the Project, the performance by the financial condition of the Corporation and any other matters relating to the purposes of the Loan.

(b) The Corporation shall promptly inform the Bank of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Loan, the maintenance of the service thereof or the performance by the Corporation of its obligations under this Agreement.

Section 2.09. Except as the Bank and the Corporation shall otherwise agree, the Corporation shall not incur any indebtedness if, after the incurring of any such indebtedness, the indebtedness of the Corporation then incurred and out standing pould be greater than three times the equity of the Corporation.

For the purposes of this Section:

(a) The term "indebtedness" means all indebtedness incurred, assumed or guaranteed by the Corporation and then outstanding, that portion only of the loan from AID pursuant to the AID Agreement which shall at that time have become due for payment.

(b) Indebtedness shall be deemed to be incurred (i) under a contract or loan agreement on the date it is drawn down pursuant to such contract or loan agreement and (ii) under a guarantee agreement, on the dare the agreement providing for such guarantee shall have been entered into.

(c) The term "equity" shall mean the aggregate of (i) the unimpaired paidin capital of the Corporation, (ii) the unallocated surplus and genera! reserves of the Corporation, that is to say reserves not set apart for any specific purpose, and (iii) that amount of the loan from AID pursuant to the AID Agreement which at the time is outstanding but not yet due for payment.

(d) Whenever in connection with this Section it shall be necessary to evalue in terms of pesos debt repayable in a foreign currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at the time of such valuation.

Section 2.10. Except as the Bank and the Corporation shall otherwise agree, or as shall required pursuant to Sections 17V5, 18, 28i/2 and 44 of Act No. 1459 (Corporation Law), as amended, of the Republic of the Philippines, the Corporation shall not redeem or purchase shares of its capital stock.

Section 2.11. The Corporation shall at all times take all steps possible and necessary to maintain its corporate existence and right to carry on operations and shall, except as the Bank and the Corporation shall otherwise agree, take all steps possible and necessary to maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business.

Section 2.12. Except as the Bank and the Corporation shall otherwise agree, the Corporation shall not (i) amend its Articles of Incorporation, (ii) amend the policy statement adopted by the Board of Directors of the Corporation on March 10, 1964, (iii) substantially change the nature of its business or establish any subsidiary, or (iv) sell, transfer, lease or otherwise dispose of all or substantially all of its assets, or undertake any merger or consolidation.

Section 2.13. The Corporation shall duly perform all its obligations under the Subsidiary Loan Agreement and the AID Agreement. Except as the Bank and the Corporation shall otherwise agree, the Corporation shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving any provision of the Subsidiary Loan Agreement or the AID Agreement.

Section 2.14. Without the approval of the Bank no repayment in advance of maturity other than in accordance with Section 7.01 of the AID Agreement shall be made in respect of the loan from AID pursuant to the AID Agreement.

Section 2.15, The Corporation shall have its financial statements (balance sheet and related statement of earnings and expenses) certified annually by an independent accountant or accounting firm acceptable to the Bank and shall promptly after their preparation and not later than four months after the close of the fiscal year to which they apply transmit to the Bank certified copies of such statements and a signed copy of the accountant's or accounting firm's report.

Section 2.16. In the event that the Corporation establishes or acquires any subsidiary, the Corporation shall cause such subsidiary to observe and perform the obligations of the Corporation hereunder to the extent to which the same are or can be applied thereto, as though such obligation were binding upon such subsidiary.

ARTICLE III

MODIFICATION OF FIRT PROJECT AGREEMENT

Section 3.01, The provisions of Section 2.09 of the First Project Agreement are deleted and the provisions of Section 2.09 of this Agreement substituted therefor.

ARTICLE IV

MISCELLANEOUS PROVISIONS

Section 4.01. No holder of any Bond other than the Bank shall by virtue of being the holder thereof be entitled to exercise any of the rights conferred, or be subject to any of the conditions or obligations imposed, upon the Bank under this Agreement.

Section 4.02. No delay in exercising, or omission to exercise, any right, power or remedy accruing to either party under this Project Agreement upon any default shall impair any such right, power or remedy or be construed to be a waiver thereof or an acquiescence in such default; nor shall the action of such party in respect of any default, or any acquiescence in any default, affect or impair any right, power, or remedy of such party in respect of any other or subsequent default.

Section 4.03. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable or radiogram to the party to which it is required or permitted to be given or made at its address hereinafter specified, or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses as specified are:

Section 4.04. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of the Corporation may be taken or executed by the President of the Corporation or such person or persons as he shall designate in writing.

Section 4.05. The Corporation shall furnish to the Bank sufficient evidence of the authority of the person or persons who will, on behalf of the Corporation, take any action or execute any documents required or permitted to be taken or executed by the Corporation pursuant to any of the provisions of this Agreement and the authenticated specimen signature of each such person.

ARTICLE V

EFFECTIVE DATE

Section 5.01. This Agreement shall come into force and effect on the Effective Date. If, pursuant to Section 8.03 of the Loan Agreement, the Loan Agreement shall terminate, this Project Agreement and all the obligations of the parties hereunder shall also terminate and the Bank shall promptly notify the Corporation thereof.

Section 5.02. If and when the entire principal amount of the Loan and the Bonds and the premium, if any, on the repayment of the Loan and on the redemption of all Bonds called for redemption (as the case may be) and all interest and other charges which shall have accrued on the Loan and the Bonds shall have been paid, this Agreement and all obligations of the parties thereunder shall forthwith terminate.

In witness whereof the parties hereto have caused this Agreement to be signed in their respective names by their representatives thereunto duly authorized and delivered in the District of Columbia, United States of America, as of the day and year first above written.

^[5] See p. 235 of this volume.

^[6] See p. 238 of this volume.

^[7] See p.241 of this voume.

^[8] Not published here.

^[9] 4 PTS 647.

^[*] To the extent that any portion of the Loan is repayable in a currency other than dollars (see Loan Regulations, Section 3.03), the figures in this column represent dollar equivalents determined as for purposes of withdrawal.