Conformed Copy - L3047 - Industrial Restructuring Project - Project Agreement 1

Page 1 CONFORMED COPY LOAN NUMBER 3047 ME (Industrial Restructuring Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and NACIONAL FINANCIERA, S.N.C. as trustee for FONDO DE EQUIPAMIENTO INDUSTRIAL Dated September 25, 1989 LOAN NUMBER 3047 ME FONEI PROJECT AGREEMENT AGREEMENT, dated September 25, 1989, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and NACIONAL FINANCIERA, S.N.C. (hereinafter referred to as the Trustee when NACIONAL FINANCIERA, S.N.C. is acting in such capacity). WHEREAS by Contrato de Fideicomiso between the UNITED MEXICAN STATES (the Guarantor) and BANCO DE MEXICO, dated October 29, 1971 the Guarantor has entrusted a special fund (Fondo de Equipamiento Industrial, hereinafter referred to as FONEI) to BANCO DE MEXICO as a trustee and by Contrato de Fideicomiso, dated June 30, 1989, between the UNITED MEXICAN STATES, BANCO DE MEXICO and NACIONAL FINANCIERA, S.N.C., whereby the trusteeship of FONEI was transferred to NACIONAL FINANCIERA, S.N.C. (hereinafter referred to collectively as the "Trust Agreement") for the purpose of promoting and financing the development of industrial and service enterprises designed to increase exports and efficiently replace imports; Page 2 WHEREAS (A) by an agreement (the Loan Agreement) of even date herewith between NACIONAL FINANCIERA, S.N.C. (hereinafter referred to as the Borrower when NACIONAL FINANCIERA, S.N.C. is acting in such capacity) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to two hundred fifty million dollars ($250,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that, inter alia, the Trustee agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by an agreement (the Guarantee Agreement) entered into between the Guarantor and the Bank of even date herewith, a guarantee of the Loan provided for under the Loan Agreement has been extended to the Bank on the terms and conditions set forth in the Guarantee Agreement; (C) by a subsidiary loan agreement (the FONEI Subsidiary Loan Agreement) to be entered into between the Borrower and the Trustee, a portion of the proceeds of the loan provided for under the Loan Agreement will be made available to FONEI on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS the Trustee, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. The Trustee declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement and, to this end, shall on behalf of FONEI, assist the Borrower in carrying out the Project, (except Parts D (i) and D (iii) of the Project), with due diligence and efficiency and in conformity with appropriate and sound financial, administrative, industrial and engineering practices and the FONEI Operating Regulations, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 2.02. The Trustee shall issue Reglas de Operacion, satisfactory to the Bank, and which shall include, inter alia, the terms and conditions set forth in Schedule 6 to the Loan Agreement. Section 2.03. (a) The Trustee shall enter into, and duly perform, all its obligations under the FONEI Subsidiary Loan Agreement. (b) The Trustee shall lend a portion of the proceeds of the Loan required for making Subloans: (i) to Financial Intermediaries for purposes of carrying out Parts A, B and C of the Project, under its General Operating Agreement; and (ii) in order, as Executing Agency, to make Subloans under Parts A, B and C of the Project, under Subloan Agreements, satisfactory to the Bank, to be Page 3 entered into between the Trustee and each Subborrower, and which shall include, inter alia, the terms and conditions set forth in Schedule 7 to the Loan Agreement. (c) The Trustee shall exercise its rights under the FONEI Subsidiary Loan Agreement, the General Operating Agreement and each Subloan Agreement to which it is a party, in such manner as to protect the interests of the Guarantor, the Bank, the Borrower and the Trustee and to accomplish the purposes of the Loan, and, except as the Bank may otherwise agree, the Trustee shall not change or fail to enforce the FONEI Subsidiary Loan Agreement, the Reglas de Operacion of its General Operating Agreement, any Subloan Agreement, or any provision thereof. Section 2.04. (a) The Trustee shall carry out Direct Investments in Industrial Enterprises under Parts A, B and C of the Project pursuant to Direct Investment Agreements, satisfactory to the Bank, to be entered into between the Trustee and each Industrial Enterprise, in accordance with the terms and conditions set forth in Schedule 7 to the Loan Agreement. (b) The Trustee shall exercise its rights under each such Direct Investment Agreement in such manner as to protect the interests of the Guarantor, the Bank, the Borrower and the Trustee and to accomplish the purposes of the Loan, and, except as the Bank may otherwise agree, the Trustee shall not change or fail to enforce any Direct Investment Agreement or any provision thereof. Section 2.05. The Trustee shall exercise its rights in relation to each Subproject in such manner as to: (i) protect the interests of the Bank, the Borrower and the Trustee; (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of the Loan. Section 2.06. Except as the Bank shall otherwise agree, pro- curement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to the Loan Agreement. Section 2.07. The Trustee shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) in respect of the Project activities executed by the Trustee. Section 2.08. (a) The Trustee shall, at the request of the Bank, exchange views with the Bank with regard to the progress of the Project, the performance of its obligations under this Agreement, and other matters relating to the purposes of the Loan. (b) The Trustee shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by the Trustee of its obligations under this Agreement, the FONEI Subsidiary Loan Agreement, its General Operating Agreement, Subloan Agreements or the Direct Investment Agreements. ARTICLE III Management and Operations of FONEI Section 3.01. The Trustee shall carry on the operations of FONEI and conduct its affairs in accordance with sound administrative, financial, engineering and industrial practices and the FONEI Operating Regulations and under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Page 4 Section 3.02. The Trustee shall furnish to the Bank all such information as the Bank shall reasonably request concerning the administration and operations of FONEI. ARTICLE IV Financial Covenants Section 4.01. (a) The Trustee shall maintain, or cause to be maintained, records and accounts adequate to reflect in accordance with sound accounting practices the operations and financial condition of FONEI, including separate records and accounts reflecting the resources and expenditures in respect of the portions of the Project carried out by the Trustee. (b) The Trustee shall: (i) have the records and accounts referred to in (a) above and FONEI's financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently 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) certified copies of such 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 said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals are requested from the Loan Account on the basis of statements of expenditures, the Trustee shall: (i) maintain, or cause to be maintained, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, or cause to be retained, until one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (including contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such separate accounts are included in the annual audits referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 4.02. The Trustee shall, upon request by the Bank, enable representatives of the Bank to inspect the records and accounts referred to in Section 4.01 of this Agreement and any relevant documents. ARTICLE V Page 5 Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of the Trustee thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Loan Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. 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, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have desig- nated by notice to the party giving such notice or making such request. The addresses so specified are: 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 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Trustee: Direccion Internacional Nacional Financiera, S.N.C. Plaza NAFINSA, Insurgentes Sur 1971 11o Piso Torre Sur CP 01020, Mexico, D.F. Mexico Cable address: Telex: NAFIN NAFIME Mexico 1775765; 1775629 Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of the Trustee may be taken or executed by its Director Internacional or such other person or persons as the Director Internacional shall designate in writing, and the Trustee shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their Page 6 duly authorized representatives, 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 /s/ Shahid Husain Regional Vice President Latin America and the Caribbean NACIONAL FINANCIERA, S.N.C. (as TRUSTEE for FONDO DE EQUIPAMIENTO INDUSTRIAL) By /s/ Juan Jose Paramo Authorized Representative