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1 LOAN NO: 3/65 AGREEMENT dated 8 Rabi Al-Thani 1398 A.H., corresponding to 17th March, 1978 A.D. between.1 THE REPUBLIC OF CHINA (herein-after called the Borrower) repr-esented by His Excellency W.H. Fei, Minister of Finance. and 2 SAUDI FUND FOR DEVELOPMENT, Riyadh, Kingdom of Saudi Arabia (hereinafter called the Fund) represented by His Excellency Dr.Mahsoun B. Jalal, Vice Chairman of the Board of Directors ofthe Fund and Managing Director PREAMBLE WHEREAS the Borrower has requested the Fund to grant it a loanto assist in the financing of the Telecommunication Developme-nt Project described in Schedule (2) to this Agreement (herei-nafter called the Project.). WHEREAS the purpose of the Fund is to assist developing countri-es in developing their economies and to provide them with loansnecessary for the excution of their development projects and pr-ograms. WHEREAS the Fund is convinced of the importance of the Projectand its beneficial effects for the economic development of thefriendly people of the Republic of China; and WHEREAS the Board of Directors of the Fund has agreed, in viewof the foregoing, by its Resolution No. 6/23-25/1/1398 A.H. togrant the Borrower a loan on the terms and conditions set forthin this Agreement. NOW THEREFORE, the parties hereto hereby agree as follows:ARTICLE Ⅰ General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the prov-isions of the General Conditions Applicable to Loan Agreementsof the Fund issued by Resolution of the Board of Directors of t-he Fund No. 11/14 dated Rajab 29, 1396 A.H. Corresponding to Ju-ly 26, 1976 A.D., with the same force and effect as if they werefully set forth herein (said General Conditions Applicable to L-oan Agreements of the Fund being hereinafter called the GeneralConditions). Section 1.02. Wherever used in this Agreement, unless the conte-xt otherwise requires, the several terms defined in the GeneralConditions have the respective meanings therein set forth and t-he following additional terms have the following meanings:(a) "Directorate" means the Directorate General of Telecommunic-ations established pursuant to the Borrower's Telecommunica-tion Act 1985, as amended to date, or may successor to thatDirectorate acceptable to the Fund. (b) "Subsidiary Loan Agreement" means the Agreement to be enter-ed into between the Borrower and the Directorate pursuant tothe provisions of Section 3.01 (b) of this Agreement, as thesame may be amended from time to time. ARTICLE Ⅱ The Loan Section 2.01. The Fund agrees to lend to the Borrower on the te-rms and conditions in the Loan Agreement set forth or referredto, an amount of One hundred Five million (105,000,000) Saudi R-iyals. Section 2.02. The Borrower shall be entitled to withdraw the am-ount of the Loan from the Loan Account in accordance with the p-rovisions of Schedule (1) to this Agreement, as such Schedule m-ay be amended from time to time by agreement between the Fund a-nd the Borrower, for expenditures made (or, if the Fund shall soagree, to be made) in respect of the reasonable cost of goods a-nd services required for the Project and to be financed out ofthe proceeds of the Loan. Section 2.03. The Borrower shall apply the proceeds of the Loanexclusively to financing the reasonable cost of the goods requi-red for the carrying out of the Project. The specific goods tobe financed out of the proceeds of the Loan and the methods andprocedures for the procurement thereof, shall be determined byagreement between the Fund and the Borrower subject to modifica-tion by further agreement between them. The Borrower shall obta-in the Fund's approval before awarding the contracts to be fina-nced out of the proceeds of the Loan and before effecting any m-aterial modification thereto in the future. Section 2.04. The Closing Date shall be 30th June 1982 or suchlater date as shall be agreed between the Fund and the Borrower.Section 2.05. The Borrower shall pay a loan charge at the rateof Five per cent (5%) per annum on the principal amount of theloan withdrawn and outstanding from time to time. Section 2.06. Loan Charge and other charges shall be payable se-mi-annually on 15th March and 15th September in each year.Section 2.07. The term of the loan shall be twenty years includ-ing a five-year grace period. The Borrower shall repay the prin-cipal amount of the loan in accordance with the Amortization Sc-hedule set forth in Schedule (3) to this Agreement. ARTICLE Ⅲ Execution of the Project Section 3.01 (a) The Borrower shall carry out the Project throu-gh the Directorate with due diligence and efficiency and in con-formity with appropriate engineering, financial and administrat-ive practices and shall provide or cause the Directorate to pro-vide, promptly as needed, the funds, facilities, services and o-ther resources required for this purpose. (b) The Borrower shall relend the proceeds of the Loan to the D-irectorate under a subsidiary loan agreement to be enteredinto between the Borrower and the Directorate, under termsand conditions which shall have been approved by the Fund.The Subsidiary Loan Agreement shall provide for the executi-on by the Directorate of all the obligations and conditionswhich the Borrower undertakes by virtue of the provisions ofthis Agreement to cause the Directorate to comply with. (c) The Borrower shall exercise its rights under the SubsidiaryLoan Agreement in such manner as to protect the interests ofthe Borrower and the Fund and to accomplish the purposes ofthe Loan, and except as the Fund shall otherwise agree, theBorrower shall not assign, nor amend, abrogate, or waive theSubsidiary Loan Agreement or any provision thereof. (d) In addition to be proceeds of the Loan, the Borrower shallmake available to the Directorate, promptly as needed, allother funds which shall be required for the carrying out ofthe Project (including any funds that may be required to me-et any increase in cost beyond the estimated cost of the pr-oject at the time of signing this Agreement), all such sumsto be made available on terms and conditions acceptable tothe Fund. Section 3.02. The Borrower shall cause the Directorate to insure, or make adequate provision for the insurance of, the importedgoods to be financed out of the proceeds of the Loan against ha-zards incident to the acquisition, transportation and deliverythereof to the place of use or installation, and for such insur-ance any indemnity shall be payable in a currency freely usableby the Directorate to replace or repair such goods. Section 3.03. The Borrower shall ensure that all goods and serv-ices financed out of the proceeds of the Loan shall be used exc-lusively for the project. Section 3.04. The Borrower shall cause the Directorate to furni-sh to the Fund, promptly upon their preparation, the plans, spe-cifications, reports, contract documents and construction and p-rocurement schedules for the Project, and any modifications the-reof or additions thereto, in such detail as the Fund shall req-uest. Section 3.05. (a) The Borrower shall cause the Directorate (i)maintain records adequate to record the progress of the Project(including the cost thereof) and to identify the goods and serv-ices financed out of the proceeds of the Loan, and to disclosethe use thereof in the project; (ii) enable the Fund's accredit-ed representatives to visit the facilities and construction sit-es included in the Project and to examine the goods financed outof the proceeds of the loan and any relevant records and docume-nts; and (iii) furnish to the Fund all such information as theFund shall request concerning the Project, the expenditure of t-he proceeds of the Loan and the goods and services financed outof such proceeds. (b) The Borrower shall cause the Directorate to enable the Fund-'s representatives to examine the plants, installations, si-tes, works, buildings, property and equipment of the Direct-orate and any relevant records and documents. ARTICLE Ⅳ Particular Covenants Section 4.01. The Borrower shall cause the Directorate to haveat all times qualified and experienced management and staff.Section 4.02. The Borrower shall cause the Directorate to:(i) operate and maintain its equipments and property, and fromtime to time make all necessary renewals and repairs thereof, all in accordance with appropriate engineering standardsand telecommunication practices; (ii) take all steps necessary to maintain and renew all rights,powers privileges and franchises which are necessary or us-eful in the conduct of its business; and (iii) at all times carry on its operations and maintain its fin-ancial position in accordance with appropriate business p-ractices. Section 4.03. The Borrower shall cause the Directorate to takeout and maintain with responsible insurers, or make other provi-sion satisfactory to the Fund for insurance, against such risksand in such amounts as shall be consistent with appropriate bus-iness practices. Section 4.04. The Borrower shall cause the Directorate to maint-ain records adequate to reflect in accordance with consistentlymaintained appropriate accounting practices its operations andfinanceal condition. Section 4.05. The Borrower shall cause the Directorate to: (i)have its accounts and financial statements (balance sheets, sta-tements of income and expenses and related statements) for eachfiscal year audited, in accordance with appropriate auditing pr-iciples consistently applied, by independent auditors acceptableto the Fund; (ii) furnish to the Fund as soon as available, butin any case not later than six months after the end of each suchyear, (A) certified copies of its financial statements for suchyear as so audited and (B) the report of such audit by said aud-itors, of such scope and in such detail as the Fund shall haverequested; and (iii) furnish to the Fund such other informationconcerning the accounts and financial statements of the Directo-rate and the audit thereof as the Fund shall from time to timerequest. Section 4.06. (a) The Borrower and the Fund confirm their agreement that no o-ther external debt shall enjoy any priority over the Loan byway of a lien created on governmental assets. To that end,the Borrower undertakes that, except as the Fund shall othe-rwise agree, if any lien shall be created on any assets ofthe Borrower as security for any external debt, such lien w-ill ipso facto and at no cost to the Fund equally and ratab-ly secure the payment of the principal of the Loan, the Loancharge and other charges on the Loan and that in the creati-on of any such lien express provision will be made to thateffect. (b) The undertaking provided for in paragraph (a) of this Secti-on shall not apply to: (i) any lien created on property, at the time of purchase the-reof, solely as security for the payment of the purchase price of such property; (ii) any lien on commercial goods to secure a debt maturing n-ot more than one year after the date on which it is orig- inally incurred and to be paid out of the proceeds of the sale of such commercial goods; or (iii) any lien arising in the ordinary course of banking trans-actions and securing a debt maturing not more than one y- ear after its date. (c) As used in this Section, the term "governmental assets" mea-ns assets of the Borrower, of any political or administrati-ve subdivision thereof and of any entity owned or controlledby, or operating for the account or benefit of, the Borroweror nay such subdivision, including gold and foreign exchang-e assets held by any institution performing the functions ofa central bank or exchange stabilization fund, or similar f-unctions for the Borrower. ARTICLE Ⅴ Remedies of the Fund Section 5.01. For the purposes of Section 6.02 of the General C-onditions, the following additional event is speechified pursua-nt to paragraph (f) thereof, namely that: The Telecommunication Act of 1958 A.D. referred to in Subsection(a) of Section 1.02 of this Agreement has been amended, suspend-ed, abrogated, repealed or waived in such a way as to, material-ly and adversely affect the ability of the Directorate to carryout and operate the Project. Section 5.02. For the purposes of Section 7.01 of the General C-onditions, the following event is specified pursuant to paragra-ph (d) thereof, namely, that the event specified in Section 5.01of this Agreement shall occur. ARTICLE Ⅵ Effective Date; Termination Section 6.01. The following event is specified as an additionalcondition to the effectiveness of the Loan Agreement within themeaning of Section 12.01 (b) of the General Conditions, namely,that the execution and delivery of the Subsidiary Loan Agreementon behalf of the Borrower and the Directorate, respectively, ha-ve been duly authorised or ratified by all necessary government-al and corporate action. Section 6.02. The following is specified as an additional matte-r, within the meaning of Section 12.02 (b) of the General Condi-tions, to be included in the legal opinion or opinions to be fu-rnished to the Fund, namely, that the Subsidiary Loan Agreementhas been duly authorized or ratified by, and executed and deliv-ered on behalf of, the Borrower and the Directorate, respective-ly, and is legally binding upon the Borrower and the Directoratein accordance with its terms. Section 6.03. The date June 15,1978 is hereby specified for thepurposes of Section 12.04 of the General Conditions. ARTICLE Ⅶ Representative of the Borrower; Addresses Section 7.01. The Minister of Finance of the Borrower is design-ated as representative of the Borrower for the purposes of Sect-ion 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the pur-poses of Section 11.01 of the General Conditions: For the Fund: The Saudi Fund for Development P.O. Box 5711 Riyadh Kingdom of Saudi Arabia. Cable Address: SAUDI FUND FOR DEVELOPMENT RIYADH KINGDOM OF SAUDI ARABIA Telex: 20145 SUNDOQ SJ For the Borrower: Ministry of Finance 2Al Kuo West Road Taipei, Taiwan Republic of China Telex: 11840 TAIPEI In WITNESS WHEREOF, the parties hereto, acting through their re-presentative thereunto duly authorized, have caused this agreem-ent to be signed in their respective names in Taipei, Republicof China, as of the day and year first above written, in two cu-nterparts in the Arabic language, each of which shall be an ori-ginal. FOR THE REPUBLIC OF CHINA (Signed) W.H. FEI Minister of Finance and Authorized Representative FOR THE SAUDI FUND FOR DEVELOPMENT (Signed) MAHSOUN B. JALAL Vice Chairman and Managing Director SCHEDULE 1 Withdrawal of the Proceeds of the Loan A. The table below sets forth the Categories of items to be fin-anced out of the proceeds of the Loan, the allocation of theamounts of the Loan to each Category and the percentage of e-xpenditures for items so to be financed in each Category: ─────────────────────────────── Amount of the Loan % of AllocatedExpenditures (Expressed in Saudi Riyals)to be Category Financed ─────────────────────────────── 1. Installation of Metaconta 10C 38,220,000100% of ForeignElectronic Switching Equipme- Expenditure nt of 210,000 Lines in Taich- ung, Kaohsuing and Tainan (Under Part A of the Project) 2. Expansion of Toll and Rural 64,750,000100% of ForeignTelephone Circuits (Under Pa- Expenditure rt B of the Project) 3. Contingencies2,030,000 ─────────────────────────────── Total: 105,000,000 ─────────────────────────────── B. For the purpose of this Schedule, the term "foreign expendit-ures" means expenditures in the currency of any country otherthan the Borrower and for goods or services supplied from theterritory of any country other than the Borrower. c. Notwithstanding the provisions of paragraph A above no withd-rawal shall be made in respect of payments made for: (a) Expenditures prior to the date of this Agreement. (b) taxes levied by, or in the territory of, the Borrower ongoods or services, or on the importation, manufacture, p- rocurement or supply thereof. SCHEDULE 2 Description of the Project The Project is a part of the Directorate's 1975-81 Medium-RangeTelecommunications Development Plan, described in the Annex tothis Schedule, for expansion of local and long distance telecom-munication facilities. The project consists of the following parts: PART A: Installation of Metaconta 10C Electronic Switching Equipment of210,000 lines in: 1. Taichung 70,000 lines 2. Kaohsiung 120,000 lines 3. Tainan 20,000 lines PART B: Expansion of Toll and Rural Telephone Circuits 1. Expansion of Microwave System, 80 sets. 2. Expansion of Rural Telephone System, 40 HOPS. 3. Installation of digital coaxial cable system between Hsinchuand Kaohsiung, 8 tube system. 4. Telephone management and services system. The total cost of the project is estimated at US$ 94.78 millionequivalent to SR 331.73 million. The project is expected to be completed by December 1981. ANNEX TO SCHEDULE 2 Medium-Range Telecommunication Development Plan June 1975-June 1981 A. LOCAL TELEPHONE SERVICE Installation of 2,049,100 lines of local telephone exchange,and 2,680,000 pairs of local telephone line plant as well asan addition of 1,443,900 subscribers and 2,185,000 telephonestations. The breakdown will be as follows: ─────────────────────────────── AddedAdded Line Added Added Exchange's PlantSubscribers Telephone Area Lines(Pairs)Stations─────────────────────────────── Taipei803,3001,171,000 629,900 958,200Kaohsiung 290,000416,000 220,700 330,900Taichung211,000325,000 175,400 261,600Other 744,800768,000 417,900 634,300─────────────────────────────── Total2,049,1002,680,000 1,443,900 2,185,000─────────────────────────────── B. NATIONAL LONG-DISTANCE SERVICE Installation of 36,566 domestic toll telephone circuits and42,290 lines of toll exchange. C. INTERNATIONAL SERVICE Establishment of the third earth station for satellite commu-nication and submarine cable system, to increase 1,115 circu-its for international communications, 3,000 lines of interna-tional automatic telephone exchange and 23,500 lines of inte-rnational telex exchange. D. MISCELLANEOUS ITEMS 1. Land acquisition of 0.475km? 2. Buildings 3. Power Supply 4. Air Conditioning Equipment 5. Vehicles 6. Others SCHEDULE 3 Amortization Schedule ─────────────────────────── Allotment No.Date ofPayment of Principal Payment(Expressed in Saudi Riyals) ─────────────────────────── 1.March 15, 19833,500,000 2.September 15, 19833,500,000 3.March 15, 19843,500,000 4.September 15, 19843,500,000 5.March 15, 19853,500,000 6.September 15, 19853,500,000 7.March 15, 19863,500,000 8.September 15, 19863,500,000 9.March 15, 19873,500,000 10.September 15, 19873,500,000 11.March 15, 19883,500,000 12.September 15, 19883,500,000 13.March 15, 19893,500,000 14.September 15, 19893,500,000 15.March 15, 19903,500,000 16.September 15, 19903,500,000 17.March 15, 19913,500,000 18.September 15, 19913,500,000 19.March 15, 19923,500,000 20.September 15, 19923,500,000 21.March 15, 19933,500,000 22.September 15, 19933,500,000 23.March 15, 19943,500,000 24.September 15, 19943,500,000 25.March 15, 19953,500,000 26.September 15, 19953,500,000 27.March 15, 19963,500,000 28.September 15, 19963,500,000 29.March 15, 19973,500,000 30.September 15, 19973,500,000 ─────────────────────────── 105,000,000 ───────────────────────────