Mexico - Second Fertilizer Project - Lazaro Cardenas : Loan 1686 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1686 ME Loan Agreement (Second Fertilizer Project-Lazaro Cardenas) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and NACIONAL FINANCIERA, S.A. and FERTILIZANTES MEXICANOS, S.A. Dated May 18, 1979 LOAN NUMBER 1686 ME LOAN AGREEMENT AGREEMENT, dated May 18, 1979, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and NACIONAL FINANCIERA, S.A. and FERTILIZANTES MEXICANOS, S.A. (hereinafter called the Borrowers). WHEREAS Nacional Financiera, S.A. (hereinafter called NAFIN) and Fertilizantes Mexicanos, S.A. (hereinafter called FERTIMEX) have requested the Bank to assist in financing the project described in Schedule 2 to this Agreement (hereinafter called the Project) that FERTIMEX will carry out; WHEREAS NAFIN and FERTIMEX are to obtain long-term loans from other than the Bank in an aggregate amount not less than the equivalent of one hundred million dollars ($100,000,000) for purposes of assisting in financing the Project; and WHEREAS the Bank is willing to make the loan jointly to NAFIN and FERTIMEX upon the terms and conditions set forth herein- after and in a Guarantee Agreement of even date herewith between United Mexican States and the Bank; 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 provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein, subject, however, to the following modification thereof (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, being hereinafter called the General Conditions): Section 2.01, paragraph 6: "The term 'Borrower' means the Borrowers, except that as used in paragraphs (a), (c), (d), (e), (g) and (i) of Section 6.02, paragraphs (c), (e), (f) and (g) of Section 7.01 and Sections 10.01 and 10.02, such term means the Borrowers or either of them." Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the -2- General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the term "First Loan Agreement" means the Loan Agreement (Fertilizer Project) (Loan Number 1112 ME) dated May 22, 1975, between the Bank and the Borrowers. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrowers, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to eighty million dollars ($80,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Sched- tile 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrowers and the Bank, for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan and in respect of interest and other charges on the Loan. (b) Except as the Borrowers may otherwise request, on or before each of the semiannual interest payment dates specified in Section 2.07 of this Agreement, the Bank shall, on behalf of the Borrowers, withdraw from the Loan Account and pay to itself the amounts required to pay, on such date, interest and other charges on the Loan accrued and payable on or before the date set forth, and up to the amount allocated, in Schedule 1 to this Agreement as such Schedule may be amended from time to time by agreement between the Borrowers and the Bank. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods to be financed out of the proceeds of the Loan, shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be October 31, 1982 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrowers of such later date. Section 2.05. The Borrowers shall pay to the Bank a commit- ment charge at the rate of three-fourths of one per cent (3/4 of -3- 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrowers shall pay interest at the rate of seven per cent (7.00%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semiannually on April 1 and October 1 in each year. Section 2.08. The Borrowers shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. Section 2.09. All obligations of the Borrowers under the Loan Agreement, unless such obligations shall have been expressly undertaken by one of the Borrowers, shall be joint and several and the obligations of either of them to comply with any provision of the Loan Agreement is not subject to any prior notice to, demand upon or action against the other. No extension of time or forbear- ance given to either of the Borrowers in respect of the perfor- mance of any of its obligations under the Loan Agreement, and no failure of the Bank to give any notice or to make any demand or protest whatsoever to either of the Borrowers, or strictly to assert any right or pursue any remedy against either of them in respect of the Loan Agreement, and no failure by either of the Borrowers to comply with any requirements of any law, regulation or order, shall in any way affect or impair any obligation of either of the Borrowers under the Loan Agreement. ARTICLE III Execution of the Project by FERTIMEX Section 3.01. FERTIMEX shall carry out the Project with due diligence and efficiency and in conformity with appropriate engineering, financial and administrative practices. Section 3.02. In order to assist FERTIMEX in carrying out the design, engineering, procurement, and start-up and initial operation of the units included in the Project, FERTIMEX shall employ qualified and experienced engineering consultants accept- able to the Bank, upon satisfactory terms and conditions. Section 3.03. (a) FERTIMEX undertakes to insure, or make adequate provision for the insurance of, the imported goods to -4- be financed out of the proceeds of the Loan r-ainst hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by FERTIMEX to replace or repair such goods. (b) Except as the Bank shall otherwise agree, FERTIMEX shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section 3.04. (a) FERTIMEX shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably reauest. (b) FERTIMEX: (i) shall maintain records adequate to monitor the progress of the Project (including its cost), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) shall enable the Bank's accredited representatives to visit the facil- ities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any related records and documents; and (iii) shall furnish to the Bank all such information as the Bank shall reasonably request concerning the Project, its cost and the expenditure of the proceeds of the Loan and the goods, works and services financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between FERTIMEX and the Bank, FERTIMEX shall prepare and furnish to the Bank a report, on the execution and initial operation of the Project, its cost and benefits and on the accomplishment of the purposes of the Loan. Section 3.05. FERTIMEX shall cuse the units included in the Project to be designed, engineered and erected so as to ensure that the levels of ecologically harmful discharges will not exceed generally accepted standards. -5- ARTICLE IV Management and Operations of FERTIMEX Section 4.01. (a) FERTIMEX shall continue at all times to manage its affairs, carry on its operations, plan the development of its business and undertaking, and maintain its financial position, all in accordance with sound industrial, financial and administrative practices, and under the supervision of experienced and competent management. (b) Without limitation or restriction upon the provisions of paragraph (a) hercof, FERTIMEX shall: (i) continue to operate and maintain its plant, equipment, properties and facilities, and shall, from time to time promptly as needed, make all necessary renewals and repairs thereof, all in accordance with sound engineering practices; and (ii) not sell, lease, transfer or otherwise dispose of any of its properties or assets required for the efficient carrying out of its business and undertaking, including the carrying out of the Project, except in the normal course of its business or with the prior concurrence of the Bank. Section 4.02. FERTIMEX shall at all times take all steps necessary: (i) to maintain its right to carry on its operations, including the Project; and (ii) to acquire and to retain such land, properties, and interests thereon, and to acquire, maintain and renew such licenses, consents, franchises or other rights, as may be necessary or useful for the construction and operation of the Project and the conduct of its business and undertaking. Section 4.03. FERTIMEX shall continue to take out and main- tain with responsible insurers, insurance against such risks and in such amounts as shall be consistent with sound industrial insurance practice. Section 4.04. FERTIMEX shall monitor the levels of ecologi- cally harmful discharges from the units included in the Project and shall take all reasonable measures to ensure that they are operated safely and conform with generally accepted ecological and environmental standards. Section 4.05. (a) By August 31, 1980 or such later date as may be agreeable to FERTIMEX and the Bank, FERTIMEX shall prepare a study of its fertilizer distribution system, including its transportation needs. -6- (b) Promptly thereafter FERTIMEX shall carry out the appropriate recommendations of such study. Section 4.06. (a) By December 31, 1979 or such later date as may be agreeable to FERTIMEX and the Bank, FERTIMEX shall revise its operations staff training program for Project implemen- tation purposes. (b) Promptly thereafter FERTIMEX shall carry out such program as revised. Section 4.07. FERTIMEX shall, from time to time, carry out studies on the costs and benefits to farmers of the use of fertilizers and inform the Bank of the results thereof. ARTICLE V Financial Covenants Section 5.01. FERTIMEX shall: (i) continue to maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition; and (ii) separately, maintain records adequate to reflect the operations of the units included in the Pro act. Section 5.02. Except as the Bank may otherwise agree, FERTIMEX shall: (i) have an annual audit, satisfactory to the Bank, made of its financial statements (balance sheets, statements of income and expenses, and related statements) for each fiscal year, in accordance with appropriate auditing principles consis- tently applied, by independent and qualified auditors; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, (A) certi- fied copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning its accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request. Section 5.03. (a) The Borrowers represent that at the date of this Agreement no lien exists on any of their assets as secu- rity for any external debt of NAFIN and any debt of FERTIMEX, except as otherwise disclosed by FERTIME. to the Bank. -7- (b) Each of the Borrowers undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any of its respective assets as security as to NAFIN for any external debt and as to FERTIMEX 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 in the creation of any such lien express provision will be made to that effect, at no cost to the Bank; provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) 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 (B) any lien arising in the ordinary course of banking trans- actions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 5.04. Except as the Bank may otherwise agree, FERTIMEX shall furnish to the Bank: (a) every three months, and not later than 60 days after the end of each quarter, quarterly financial reports reg4rding its operations; and (b) every year, not later than 90 days after the commencement of each fiscal year, reports on production and sales of its main products, and projections of production, income, and cash flow for the current fiscal year. Section 5.05. FERTIMEX may make expenditures or commit- ments for expenditures for fixed or capital assets (including investments in or loans to other business entities) only to the extent that such expenditures or commitments for expenditures will not impair the ability of FERTIMEX to carry out and operate the Project and to meet its other obligations under this Agreement. Section 5.06. Except as the Bank may otherwise agree, FERTIMEX shall: (a) not incur any debt if after the incurrence thereof the debt/equity ratio of FERTIMEX would exceed 60:40; (b) after December 31, 1980, not incur any debt in excess of $10,000,000 equivalent in any fiscal year unless a reasonable forecast of the FERTIMEX's revenues and expenditures shows that the projected net revenues of FERTIMEX for each fiscal year during the term of the debt to be incurred shall be at least 1.4 times the projected debt service requirements in such year on all debt of FERTIMEX, including payments in respect of the debt to be incurred. For purposes of this paragraph, "a reasonable -8 - forecast" means a forecast prepared by FERTIMEX in the fiscal year in which the debt in question is proposed to be incurred and reviewed by the Bank which both FERTIMEX and the Bank accept as reasonable and as to which the Bank has notified FERTIMEX of its acceptability, provided no event has occurred since the Bank's acceptance of such forecast which would have a material adverse effect on the financial condition or future operating results of FERTIMEX; (c) on December 31, 1979 and at all times thereafter maintain a current ratio of at least 1.3:1.0; and (d) not pay dividends (other than in shares of FERTIMEX's capital) or make other cash distributions or financial commitment not related to FERTIMEX's own internal corporate operations, or prepay other loans other than the Loan, if after any such payment or commitment FERTIMEX's current ratio would be less than 1.5:1.0; provided, however, that the provisions of this paragraph shall not apply to any prepayment of a loan if such prepayment is part of the refinancing of such loan by another loan on terms and condi- tions more favorable to FERTIMEX than the loan to be prepaid, and the new loan is to be withdrawn substantially at the same time said prepayment is made. For purposes of this Section: (i) "debt" means any debt incurred by FERTIMEX matur- ing more than one year after the date on which it is originally incurred; (ii) debt shall be deemed to be incurred (A) under a loan contract or agreement, on the date and to the extent that it is drawn down pursuant to such loan contract or agreement, and (B) under a guarantee agreement, on the date the agreement providing for such guarantee is entered into but only to the extent that the guaranteed debt is outstanding; (iii) "equity" means the sum of FERTIMEX's unimpaired paid-in share capital, surplus and reserves not allocated to cover specific liabilities; (iv) "net revenue" means gross revenue from all sources less all operating and administrative expenses, -9- and amounts paid on account of taxes; provided that the operating and administrative expenses shall not include interest and other charges on debt, provision for income taxes, and provision for depreciation of assets; (v) "current assets" includes cash, accounts receivable due within twelve months less the reserve for bad debts, inventories, pre-paid expenses and all other assets which could, in the ordinary course of business, be converted within twelve months into cash; (vi) "current liabilities" includes accounts payable within twelve months, customer advances, income taxes, dividends, bonuses and all other liabilities due and payable, or which could be called for payment, within twelve months; (vii) "current ratio" means the ratio of current assets to current liabilities; and (viii) whenever it shall be necessary to value in terms of the currency of the Guarantor debt payments in another currency, such valuation shall be made at the prevailing official rate of exchange as determined by the relevant authorities of the Guarantor. Section 5.07. (a) NAFIN shall charge FERTIMEX and collect from it, and FERTIMEX shall pay to NAFIN, a fee of three per cent (3.00%) per annum on the principal amount of the Loan with- drawn and outstanding from time to time. (b) NAFIN and FERTIMEX her .y undertake to make contractual arrangements for the purpose of charging and paying, respectively, the fee referred to in paragraph (a) hereof. Section 5.08. FERTIMEX shall revalue its fixed assets in service at the end of each fiscal year in accordance with generally accepted revaluation and accounting principles and procedures. Section 5.09. The Borrowers shall obtain long-term loans for purposes of assisting FERTIMEX in financing the Project in an aggregate amount of not less than the equivalent of one hundred - 10 - million dollars (US$100,000,000) upon terms and conditions satis- factory to the Bank and the Borrowers and, except as the Bank may otherwise agree, in accordance with the following schedule: not less than the equivalent of thirty million dollars (US$30,000,000) by September 1, 1979; not less than the equivalent of forty-five million dollars (US$45,000,000) by March 1, 1980; and not less than the equivalent of twenty-five million dollars (US$25,000,000) by March 1, 1981. ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (k) thereof, namely, a change shall have been made in the Estatutos of FERTIMEX which, in the Bank's judgement, shall materially and adversely affect the carrying out of the Project or the conduct of FERTIMEX's operations or its financial condition. For purposes of this Section, "Estatutos" means those set forth in the Escritura 13,457 executed in the presence of Notary Manuel Borja Soriano on July 17, 1943, as amended to the date of this Agreement. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof, namely, the event specified in Section 6.01 of this Agreement shall occur. ARTICLE VII Amendment of First Loan Agreement Section 7.01. Section 5.06 of the First Loan Agreement is deleted and Section 5.06 of this Agreement is substituted therefore. ARTICLE VIII Effective Date; Termination Section 8.01. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank, namely, that all necessary acts, consents - 11 - and approvals to be performed or given by the Guarantor, its political subdivisions or agencies or by any agency of any poli- tical subdivision or by FERTIMEX or otherwise to be performed or given in order to authorize the carrying out of the Project and to enable the Guarantor and the Borrowers to perform all of the respective covenants, agreements and obligations of the Guarantor, and the Borrowers in the Guarantee Agreement and the Loan Agree- ment contained, together with all necessary powers and rights in connection therewith, have been duly and validly performed or given and no other such acts, consents and approvals are required to be performed or given for said purpose. Section 8.02. The date August 20, 1979, is hereby speci- fied for the purpose of Section 12.04 of the General Conditions. ARTICLE IX Addresses Section 9.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bak: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Borrowers: Nacional Financiera, S.A. Isabel la Cat6lica 51 Mexico 1, D.F. Cable address: Telex: NAFIN 383-1775765 Mexico City - 12 - Fertilizantes Mexicanos, S.A. Morena 804 Mexico 12, D.F. Telex: 383-1771292 383-1771136 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Is/ S. M. L. van der Meer Acting Regional Vice President Latin America and the Caribbean NACIONAL FINANCIERA, S.A. By /s/ Jorge Espinosa de los Reyes Authorized Representative FERTILIZANTES MEXICANOS, S.A. By /s/ David Gustavo Gutierrez Ruiz Authorized Reprosentative - 13 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Engineering, licenses, 7,700,000 100% of for- supervision and eiLn expendi- start-up assistance tures (2) Equipment and mate- 33,500,000 rials procured under Part A of Schedule 4 to this Agreement: (a) imported 100% of for- eign expendi- tures (b) locally manu- 100% of ex- factured factory cost (3) Imported proprietary, 26,000,000 100% of for- critical and small eign expendi- items tures (4) Interest and other 12,200,000 Amounts due charges on the Loan accrued on or before April 1, 1982 (5) Unallocated 600,000 TOTAL 80,000,000 - 14- 2. For the purposes of this Schedule, the term "foreign expen- ditures" means expenditures in the currency of any country other than the Guarantor and for goods or services supplied from the territory of any country other than the Guarantor. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Guarantor on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrowers, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals in an aggregate amount not exceeding the equivalent of $8,600,000 may be made in respect of Categories (1), (2) and (3) on account of payments made before that date but after October 1, 1978. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in para- graph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insuffi- cient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrowers: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall, after consulting with the Borrowers have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without - 15 - in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrowers, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 16 - SCHEDULE 2 Description of the Project The Project consists of: Part A: the design, engineering and construction of the follow- ing units at Lazaro Cardenas: 1. a diammonium phosphate unit with a production capacity of about 275,000 tons per year; 2. a compound fertilizer unit with a production capacity of about 250,000 tons per year; 3. a solid ammonium nitrate unit with a production capa- city of about 270,000 tons per year; 4. a sulfuric acid unit with a production capacity of about 660,000 tons per year; 5. a phosphoric 2cid unit with a production capacity of about 198,000 tons per year; and 6. a nitric acid unit with a production capacity of about 215,000 tons per year; all such units to include facilities adequate to protect the environment from potentially harmful effects of their operation. Part B: Construction of the necessary infrastructure for the adequate operation of the units included in Part A above, including construction of road and rail exten- sions to the site of such units and of a berth at the port of Lazaro Cardenas. The Project is expected to be completed by April 1, 1982, and will be deemed to be completed only when the units listed above have been in satisfactory operation for not less than 90 consecutive days at a production rate of not less than 80% of rated capacity. - 17 - SCHEDULE 3 Amortization Schedule Payment of Principal DaLe Payment Due (expressed in dollars)* On each April 1 and October 1 beginning October 1, 1983 through October 1, 1993 3,635,000 On April, 1, 1994 3,665,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. - 18 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.40% More than three years but not more than six years before maturity 2.80% More than six years but not more than eleven years before maturity 5.15% More than eleven years but not more than thirteen years before maturity 6.05% More than thirteen years before maturity 7.00% - 19 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part C of this Schedule, goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, and in addition to the requirements of paragraph 1.2 of the Guidelines, FERTIMEX shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. FERTIMEX shall provide the necessary information to update such notice annually so long as any goods or works remain to t- procured on the basis of international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically supplied goods, shall be excluded; and (iii) the cost to FERTIMEX of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 4. Account will be taken of the availability of maintenance facilities and spare parts in the territory of the Guarantor for imported goods. - 20 - B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in Mexico may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Mexico if the bidder shall have established to the satisfaction of FERTIMEX and the Bank that the manufacturing cost of such goods includes a value added in Mexico equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Mexico. (3) Group C: bids offering any other goods. 3. All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to 'e imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, -nd if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% - 21 - of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures Contracts (a) for small items costing each less than $100,000 equivalent; and (b) for proprietary, or critical items, may be procured through prudent international shopping, provided, however, that the aggregate cost of small items so procured does not exceed $16,000,000 equivalent and the aggregate cost of proprietary and critical items so procured does not exceed $10,000,000 equivalent. D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiva- lent of $300,000 or more: (a) Before bids are invited, FERTIMEX shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request in consultation with FERTIMEX. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) Bids shall be opened publicly and FERTIMEX shall, promptly after bid opening, inform the Bank of the names of the bidders and the amount of each bid. (c) After bids have been received and evaluated, FERTIMEX shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the reasons for the intended award and such other information as the Bank shall reasonably - 22 - request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform FERTIMEX and state the reasons for such deter- mination. (d) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. (e) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the sub- mission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract to be financed out of the proceeds of the Loan and not governed by the preceding paragraph, FERTIMEX shall furnish to the Bank, promptly after its execution and prior to the delivery to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform FERTIMEX and state the reasons for such determination.