Page 1 CONFORMED COPY LOAN NUMBER 3215 POL (Energy Resource Development Project) between REPUBLIC OF POLAND and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated July 2, 1990 LOAN NUMBER 3215 POL GUARANTEE AGREEMENT AGREEMENT, dated July 2, 1990, between REPUBLIC OF POLAND (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Guarantor and the Polish Oil and Gas Company (the Borrower), having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to the Loan Agreement, have requested the Bank to assist in the financing of the Project; and (B) by the Loan Agreement of even date herewith between the Bank and the Borrower, the Bank has agreed to extend to the Borrower a loan in various currencies equivalent to two hundred fifty million United States dollars ($250,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan and to undertake such other obligations as Page 2 provided in this Agreement; 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 General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth in the Loan Agreement (the General Condi- tions), constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions, in the Preamble to and in Section 1.02 of the Loan Agreement have the respective meanings therein set forth. ARTICLE II Guarantee; Provision of Funds Section 2.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan, and the punctual performance of all the other obligations of the Borrower, all as set forth in the Loan Agreement. Section 2.02. Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guarantor specifically undertakes, whenever there is reasonable cause to believe that the funds available to the Borrower will be inadequate to meet the estimated expenditures required for the carrying out of the Project, to make arrangements, satisfactory to the Bank, promptly to provide the Borrower or cause the Borrower to be provided with such funds as are needed to meet such expenditures. ARTICLE III Other Covenants Section 3.01. In accordance with its policy to rationalize domestic energy prices and to minimize distortions in consumer choices among available energy resources, the Guarantor shall: (a) gradually adjust, on the basis of a schedule satis- factory to the Bank, the level of prices paid by domestic industrial consumers for natural, coke-oven and manufactured gases distributed through the gas networks so as to ensure that, by December 31, 1992, such prices are at all times set at levels equivalent to the average price level, as calculated in accordance with a methodology satisfactory to the Bank, paid by industrial consumers for natural gas in such member countries of the European Community as are selected by agreement between the Guarantor and the Bank; (b) gradually adjust, on the basis of a schedule satis- factory to the Bank, the level of prices paid by domestic household consumers for natural, coke-oven and manufactured gases distributed through the gas networks so as to ensure that (i) by December 31, 1991, such prices are set at levels not less than those paid by domestic industrial consumers, and (ii) by December 31, 1995, such prices are set at levels exceeding those paid by domestic industrial consumers by such a margin as shall be sufficient to recover fully all additional costs associated with the delivery of such gases to domestic household consumers; and Page 3 (c) before May 31 and November 30 of each year, beginning with November 30, 1990, review with the Bank the measures required to meet the requirements set forth in paragraphs (a) and (b) of this Section and thereafter take all necessary actions, in consultation with the Bank, in order to meet such requirements. Section 3.02. The Guarantor shall: (a) carry out or cause to be carried out, under terms of reference satisfactory to the Bank, studies to assess the per- formance and future prospects, and to develop suitable strategies for the restructuring, of the Guarantor's hard coal, oil and gas, lignite and power and district heating subsectors, and furnish to the Bank a copy of each of said study promptly upon its completion, but in any case not later than December 31, 1990; (b) afford the Bank a reasonable opportunity to review with the Borrower the conclusions and recommendations of each of the said studies, and take into consideration the Bank's views thereon in finalizing the strategy to be developed thereunder; and (c) initiate the implementation, by June 30, 1991, of the strategy developed under each said study, and thereafter implement the same in accordance with a time schedule satisfactory to the Bank. ARTICLE IV Representative of the Guarantor; Addresses Section 4.01. The Minister of Finance of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 4.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Ministry of Finance 00-901, Warszawa ul. Swietokrzyska 12 Republic of Poland Cable address: Telex: MINF 814386 PL Poland For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in Warsaw, Republic of Poland, as of the day and year first above written. Page 4 REPUBLIC OF POLAND By /s/ Marek Dabrowski Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION ANDDEVELOPMENT By /s/ Willi A. Wapenhans Regional Vice President Europe, Middle East and North Africa