Morocco - Second Industrial Equipment Fund Project - Fonei : Loan 1205 - Project Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1205 ME PROJECT AGREEMENT (Second Industrial Equipment Fund Project - FONEI) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO DE MEXICO, S.A. Dated April 30, 1976 PROJECT AGREEMENT AGREEMENT, dated April 30, 1976, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and BANCO 25E MEXICO, S.A. (hereinafter called the Trustee). WHEREAS by a trust agreement between the Guarantor and the Trustee dated October 29, 1971, the Guarantor has entrusted a special fund (Fondo de Equipamiento Industrial) to the Trustee for the purpose of promoting and financing the development of industrial and service enterprises designed to increase exports and/or efficiently replace imports; WHEREAS the Government of United Mexican States, the Borrower and the Trustee have requested the Bank to assist in financing such development; WHEREAS by the Loan Agreement of even date herewith between the Bank and Nacional Financiera, S.A. (hereinafter called the Borrower) and the Bank, the Bank has agreed to lend to the Bor- rower an amount in various currencies equivalent to fifty million dollars ($50,000,000), on the terms and conditions set forth in the Loan Agreement, the proceeds of which will be transferred to the Trustee, for the account of the above-mentioned special fund, but only on condition, inter alia, that the Trustee agree to undertake such obligations toward the Bank as hereinafter set forth; and -2- WHEREAS the Trustee, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree is follows: -3- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the --eral terms defined in the Loan Agreement and in the Go <ral Conditions (as so defined) have the respective meanings therein set forth. -4- ARTICLE II The Project Section 2.01. (a) The Trustee shall, by means of FONEI, carry out the Project described in the Schedule to this Agreement with due diligence and efficiency and in conformity with sound indus- trial, administrative and financial policies and practices and in accordance with the Operating Regulations, and shall, at all times, make available, promptly as needed, such funds and other resources as shall be required to meet FONEI's operating expenses. (b) Except as the Bank shall otherwise agree, and without limitation to its obligations under the preceding subsection, the Trustee shall (i) make or cause to be made available to FONEI for the Project, for a period of not less than 16 years from the date of this Agreement, and as required by FONEI, funds amounting in the aggregate to the equivalent of not less than forty million dollars ($40,000,000), on such terms and conditions and at such times as shall be required for the carrying out of the Project in accordance with subsection (a) hereof, and (ii) inform the Bank of the terms and conditions for the provision of such funds and afford the Bank a reasonable opportunity to comment thereon. (c) The Trustee shall take all such action as shall be nec- essary; (i) to able FONEI's Comite Tecnico to approve and apply Operating Regulations satisfactory to the Bank, and (ii) to cause the Operating Regulations not to be changed or amended without prior consultation with the Bank. 0 -5- Section 2.02. Except as the Bank shall otherwise agree: (a) The Trustee shall, out of FONEI's resources, make a FONEI loan to a Participating Intermediary which shall have made a sub- loan to an Investment Enterprise for an Investment Project in ac- cordance with the Operating Regulations. (b) Interest on sub-loans shall be payable in accordance with either one of the following two methods: (1) a variable rate to be adjusted, if necessary, every six months so as to make it equal to the prevailing interest rate on the month before that in which the adjustment is made; or (2) a fixed annual interest rate equal to the prevailing interest rate at the time the FONEI loan for financing the corresponding sub-loan is made. (c) The choice of the annual interest rate payable on a sub-loan in accordance with sub-section (b) above shall be made by the Investment Enterprise receiving such sub-loan on the date of the sub-loan. (d) For purposes of this Section, "prevailing interest rate" means an annual interest rate equal to 13.5% as adjusted from time to time to reflect, after November 1975, any change of at least 0.25 percentage points in the average cost of borrowed funds to the financieras operating in Mexico, as calculated monthly by the Trustee. (e) Any FONEI loan shall bear interest at an annual rate two percentage points below the interest rate borne by the sub- loan with respect to which such FONEI loan is made. -6- (f) The principal amount of any FONEI loan shall not be less than the equivalent of 3.5 million pesos and not more than the equivalent of 37.5 million pesos. (g) The agreements providing for FONEI loans shall provide that if sub-loans or any part thereof shall be repaid to Partici- pating Intermediaries in advance of maturity, or if they shall be sold, transferred, assigned or otherwise disposed of for value by the Participating Intermediaries, the Participating Intermedia- ries shall repay promptly to the Trustee, the amounts of the FONEI loans corresponding to the sub-loans or parts thereof so repaid in advance or disposed of for value. (h) The Trustee shall inform the Bank of any substantial change in the repayment provisions of any FONEI loan. Section 2.03. The Trustee undertakes that FONEI will adopt a mechanism to encourage the Participating Intermediaries to carry out appraisals of Investment Projects including, inter alia, (i) reimbursement to the Participating Intermediary for the reasonable cost of consultant services incurred by it for the appraisal there- of, or (ii) payment to the Participating Intermediaries of reason- able fees when appraisals are carried out by the staff of the Par- ticipating Intermediaries. Section 2.04. (a) When presenting a sub-loan (other than a free-limit sub-loan) to the Bank for approval, the Trustee shall furnish to the Bank an application, in form satisfactory to the Bank, together with a description of the Investment Enterprise and an appraisal of the Investment Project (including a description -7 - of the expenditures proposed to be financed out of the proceeds of the Loan) and the proposed terms and conditions of the sub-loan, and such other information as the Bank shall reasonably request. (b) Each request by the Trustee for authorization to make withdrawals from the Loan Account in respect of a free-limit sub- loan shall contain a summary description of the Investment Enter- prise and the Investment Project (including a description of the expenditures proposed to be financed out of the proceeds of the Loan) and the terms and conditions of such free-limit sub-loan, and such other information as the Bank shall reasonably request. (c) A free-limit sub-loan shall be a sub-loan for an Invest- ment Project in an amount to be financed out of the proceeds of the Loan, not exceeding the amount of $750,000 equivalent when added to any other outstanding amounts financed or proposed to be fi- nanced out of the proceeds of the Loan or of the First Loan for such Investment Project or such other amount as the Bank and the Trustee shall agree. (d) Except as the Bank shall otherwise agree, the applica- tions and requests to be furnished to the Bank pursuant to para- graph (a) hereof shall be submitted to the Bank before June 30, 1978. Section 2.05. (a) The Trustee undertakes that, unless the Bank shall otherwise agree, all sub-loans will be made on terms whereby the Participating Intermediary shall obtain, by written contract with the Investment Enterprise or by other appropriate legals means, rights adequate to protect the interests of the Trustee -8- and the Participating Intermediary including the right of the Participating Intermediary to: (i) require the Investment Enterprise to carry out and operate the Investment Project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (ii) require that (1) the goods and services to be financed out of the proceeds of the sub-loan shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and avail- ability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them and (2) such goods and services shall be used exclusively in the carrying out of the Investment Project; (iii) inspect, by itself or jointly with representatives of the Bank and the Trustee if the Bank shall so request, such goods and the sites, works, plants and construction included in the Invest- ment Project, the operation thereof, and any relevant records and documents; (iv) require that the Investment Enterprise shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice; and that such insurance cover marine, transit and other hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Loan to the place of use or installation, and that any indemnity there- under be made payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (v) obtain all such information as the Trustee or the Participating Intermediary shall reasonably request relating to the foregoing and to the adminis- tration, operations and financial condition of the Investment -9- Enterprise; and (vi) suspend or terminate the right of the Invest- ment Enterprise to the use of the proceeds of the sub-loan upon failure by such Investment Enterprise to perform any of its obli- gations under its contract with the Porticipating Intermediary. (b) The Trustee shall cause the Participating Intermediary to exercise its rights in relation to each Investment Project in such manner as to: (i) protect the interests of the Bank, Trustee and the Participating Intermediary, (ii) comply with its obligations under FONEI loans, and (iii) achieve the purposes of the Project. Section 2.06. (a) The Trustee shall furnish, or cause to be furnished to the Bank, all such information as the Bank shall reasonably request concerning the Project, the FONEI loans, the sub-loans, the Investment Enterprises, and the Investment Projects. (b) The Trustee: (i) shall maintain or cause to be maintained records adequate to record the progress and cost of the Project and of the Investment Projects, and to identify the goods and services financed out of the proceeds of the sub-loans; (ii) shall enable the Bank's representatives to visit the industries, works and other facilities of the Investment Enterprises and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish or cause to be furnished to the Bank all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. - 10- Section 2.07. (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 con- dition 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. - 11 - ARTICLE III Other Covenants Section 3.01. The Trustee shall operate FONEI in accordance with sound financial, industrial and administrative policies and practices, under the supervision of experienced and competent management. Section 3.02. The Trustee covenants that it will take such measures as shall be required for FONEI to strengthen and maintain, at all times, qualified and competent technical staff for purposes of carrying on FONEI's operations. Section 3.03. The Trustee shall maintain records adequate to reflect in accordance with consistently maintained sound accoun- ting practices the operations and financial condition of FONEI and shall cause the Participating Intermediaries to maintain such rec- ords for purposes of the Investment Project financed by them. Section 3.04. The Trustee shall: (i) have an annual audit satisfactory to the Bank made of the accounts and financial state- ments (balance sheets, statements of income and expenses and re- lated statements) of FONEI for each fiscal year, in accordance vith sound auditing principles consistently applied, by independent and qualified auditors appointed by the Guarantor; (ii) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of such financial statements for such year as so audited and (B) - 12 0 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 the accounts and financial statements of FONEI and the audit thereof as the Bank shall from time to time reasunably request. -13 - ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the Effective Date. Section 4.02. This Agreement and all obligations of the Bank and of the Trustee thereunder shall terminate on the date on which the I an Agreement shall terminate in accordance with its terms. - 14- ARTICLE V Miscellaneous Provisions Section 5.01. 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, ca- ble, 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: INTBAFRAD Washington, D.C. -15 - For the Trustee: Banco de Mexico, S.A. 5 de Mayo No. 2 M4xico 1, D.F. M4xico Cable address: BANXICO Mixico 1, D.F. Mexico Section 5.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of the Trustee may be taken or executed by its Director General or such other person or persons as he shall desig- nate in writing. Section 5.03. The Trustee shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of the Trustee, take any action or execute any documents required or permitted to be taken or executed by the Trustee pursuant to any of the provisions of this Agreement. Section 5.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. -16 0 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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/ Adalbert Krieger Regional Vice President Latin America and the Caribbean BANCO DE MEXICO, S.A. (as Trustee for Fondo de Equipamiento Industrial) By /s/ A. Lajous Authorized Representative -17 - SCHEDULE Description of the Project The Project consists of a lending program to finance fixed assets and feasibility studies for industrial enterprises in Mexico producing goods and associated services for export or efficiently replacing imports. 0