Conformed Copy - L3047 - Industrial Restructuring Project - Guarantee Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3047 ME (Industrial Restructuring Project) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated September 25, 1989 LOAN NUMBER 3047 ME GUARANTEE AGREEMENT AGREEMENT, dated September 25, 1989, between UNITED MEXICAN STATES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Guarantor and NACIONAL FINANCIERA, S.N.C. (hereinafter referred to as the Borrower when NACIONAL FINANCIERA, S.N.C. is acting in such capacity), 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; (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 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 as provided in this Agreement; Page 2 (C) by the BANCOMEXT Project Agreement of even date herewith between the Bank and BANCO NACIONAL DE COMERCIO EXTERIOR, S.N.C. (hereinafter called BANCOMEXT), BANCOMEXT has agreed to undertake the obligations set forth in the BANCOMEXT Project Agreement set forth; (D) by the FONEI Project Agreement of even date herewith between the Bank and NACIONAL FINANCIERA, S.N.C. as trustee (hereinafter referred to as the "Trustee" when NACIONAL FINANCIERA, S.N.C. is acting in such capacity) of Fondo de Equipamiento Industrial, the Trustee has agreed to undertake the obligations set forth in the FONEI Project Agreement; and WHEREAS the Guarantor, in consideration of the Bank's enter- ing into the Loan Agreement with the Borrower, the BANCOMEXT Project Agreement with BANCOMEXT and the FONEI Project Agreement with the Trustee, 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 (the General Conditions), with the modifications set forth in Section 1.01 of the Loan Agreement, constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to, and Section 1.02 of, the Loan Agreement have the respective meanings therein set forth. ARTICLE II Guarantee; Provision of Funds Section 2.01. The Guarantor declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not merely as surety, 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, BANCOMEXT and the Trustee, all as set forth in the Loan Agreement, the BANCOMEXT Project Agreement and the FONEI Project Agreement, respectively. 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 as shall be required, promptly to provide the Borrower or cause the Borrower to be provided with such funds as are needed to meet such expenditures. ARTICLE III Execution of the Project Section 3.01. Without any limitation or restriction upon any of its other obligations under this Agreement, the Guarantor shall: (i) carry out Part D (iii) of the Project with due diligence and efficiency; (ii) take all measures required to Page 3 assist BANCOMEXT and the Trustee in carrying out their obligations under the BANCOMEXT Project Agreement and FONEI Project Agreement, respectively; and (iii) not take or permit to be taken any action which would prevent or interfere with the performance by BANCOMEXT and the Trustee of their obligations under the BANCOMEXT Project Agreement or the FONEI Project Agreement, respectively. Section 3.02. The Guarantor shall enter into the contractual arrangements referred to in Section 3.03 (b) of the Loan Agreement and, except as the Bank may otherwise agree, shall not change or fail to enforce any provision of such contractual arrangements. Section 3.03. The Bank and the Guarantor agree that 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) for the Project, shall be carried out by the Borrower for the Project activities it executes pursuant to Section 3.07 of the Loan Agreement, by the Guarantor in respect of Part D (iii) of the Project, by BANCOMEXT and the Trustee for the Project activities each executes pursuant to, respectively, Section 2.07 of the BANCOMEXT Project Agreement and Section 2.07 of the FONEI Project Agreement. Section 3.04. Except as the Bank shall otherwise agree, procurement of goods, works and consultants' services required for the Project and to be financed from the proceeds of the Loan, shall be governed by the provisions of Schedule 4 to the Loan Agreement. Section 3.05. The Guarantor shall: (a) carry out, or cause to be carried out each Subsector Restructuring Program in a manner satisfactory to the Bank; and (b) exchange views with the Bank within eighteen months of the Effective Date of the Loan Agreement, and at the request of either the Guarantor or the Bank, on the progress of carrying out each Subsector Restructuring Program. Section 3.06. (a) The Guarantor shall maintain a Coordinating Committee and shall, to the satisfaction of the Bank, cause the Coordinating Committee to assist the Borrower in the overall coordination, and the Executing Agencies in the implementation of the Project. Section 3.07. For the purposes of Sections 6.02 (c) and (d) and 7.01 (e) of the General Conditions, the obligations of Mexico under the General Interest Rate Agreement are hereby incorporated as obligations of the Guarantor as if they were fully set forth herein. ARTICLE IV Financial Covenants Section 4.01. (a) The Guarantor shall maintain, or cause to be maintained, separate records and accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures in respect of Part D (iii) of the Project, of the departments or agencies of the Guarantor responsible for carrying out the Project or any part thereof. (b) The Guarantor shall: (i) have the accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with generally accepted auditing standards and procedures 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 copy of the report of Page 4 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 accounts and the audit thereof and said records as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Guarantor 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 at least 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 (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 audit referred to in paragraph (b) of this Section and that the report thereof contains, in respect of such separate accounts, 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. ARTICLE V Representative of the Guarantor; Addresses Section 5.01. Director General de Captacion de Credito Externo of Secretaria de Hacienda y Credito Publico is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 5.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Direccion General de Captacion y Credito Externo Secretaria de Hacienda y Credito Publico Palacio Nacional Primer Patio Mariano, 4o Piso 06066 Mexico, D.F. Mexico Telex: 1777313-SHDCME 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: Page 5 INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their 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. UNITED MEXICAN STATES By /s/ Pedro Aspe Armella Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Shahid Husain Regional Vice President Latin America and the Caribbean