Conformed Copy - L3047 - Industrial Restructuring Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3047 ME (Industrial Restructuring Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and NACIONAL FINANCIERA, S.N.C. Dated September 25, 1989 LOAN NUMBER 3047 ME LOAN 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 Borrower when NACIONAL FINANCIERA, S.N.C. is acting in such capacity). WHEREAS (A) the UNITED MEXICAN STATES (the Guarantor) and the Borrower, having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, have requested the Bank to assist in the financing of the Project; (B) by an agreement (the Guarantee Agreement) of even date herewith between the Guarantor and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrower in respect of the Loan and to undertake such other obligations as set forth in the Guarantee Agreement; (C) by an agreement (the BANCOMEXT Project Agreement) of Page 2 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; (D) by an agreement (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 Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; 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 last sentence of Section 3.02 deleted, 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 this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Special Account" means the account referred to in Sec- tion 2.02 (b) of this Agreement; (b) "peso" means the currency unit of the Guarantor; (c) "Executing Agencies" means collectively the Borrower, BANCOMEXT and the Trustee (as hereinafter defined), and "Executing Agency" means any one of such Agencies; (d) "Financial Intermediary" means a development or commercial bank regulated by the Guarantor's Ley Reglamentaria del Servicio Publico de Banca y Credito of January 14, 1985, or any other financial intermediary acceptable to the Bank; (e) "Industrial Enterprise" means an enterprise engaged in manufacturing activities or in associated services, including the development of industrial parks, established under the laws of the Guarantor; (f) "Category A Industrial Enterprise" means an Industrial Enterprise within a subsector for which the Bank has received a satisfactory Subsector Restructuring Program; (g) "Category B Industrial Enterprise" means an Industrial Enterprise, other than a Category A Industrial Enterprise, which is undergoing a process of modernization and which is not subject to quantitative import restrictions, official reference prices, or export prohibitions; (h) "FONEI" means Industrial Equipment Fund, Fondo de Equipamiento Industrial, entrusted by the Guarantor to the Trustee pursuant to the Trust Agreement (as hereinafter defined); and such term includes the technical and administrative organization, resources, staff and facilities used or to be used by the Trustee to operate FONEI; (i) "Trust Agreement" means the Contrato de Fideicomiso, dated October 29, 1971, between the Guarantor and the Trustee, whereby FONEI has been entrusted to BANCO DE MEXICO and the Page 3 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.; (j) "FONEI Operating Regulations" means the Reglas Generales de Operacion as approved by FONEI's Comite Tecnico on June 10, 1987; (k) "BANCOMEXT" means BANCO NACIONAL DE COMERCIO EXTERIOR, S.N.C., established by the Guarantor's Ley Organica del BANCO NACIONAL DE COMERCIO EXTERIOR, S.N.C., dated December 19, 1985; (l) "SECOFI" means the Secretariat of Commerce and Industrial Development, Secretaria de Comercio y Fomento Industrial, of the Guarantor; (m) "Coordinating Committee" means the committee established by the Guarantor through Oficio dated October 16, 1984 from the Secretaria de Hacienda y Credito Publico of the Guarantor, and referred to in Section 3.06 (a) of the Guarantee Agreement; (n) "BANCOMEXT Project Agreement" means the agreement between the Bank and BANCOMEXT of even date herewith, as such agreement may be amended from time to time and such term includes all agreements supplemental to the BANCOMEXT Project Agreement; (o) "FONEI Project Agreement" means the agreement between the Bank and the Trustee of even date herewith, as such agreement may be amended from time to time, and such term includes all agreements supplemental to the FONEI Project Agreement; (p) "BANCOMEXT Subsidiary Loan Agreement" means the agree- ment to be entered into between the Borrower and BANCOMEXT pur- suant to Section 3.03 (a) (i) of this Agreement and Section 2.03 (a) of the BANCOMEXT Project Agreement, as the same may be amended from time to time; (q) "FONEI Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and the Trustee pursuant to Section 3.03 (a) (i) of this Agreement and Section 2.03 (a) of the FONEI Project Agreement, as the same may be amended from time to time; (r) "Subsidiary Loan Agreements" means the BANCOMEXT Subsi- diary Loan Agreement and the FONEI Subsidiary Loan Agreement; (s) "Subsidiary Loan" means any of the loans made or proposed to be made by the Borrower out of the proceeds of the Loan to BANCOMEXT and the Trustee under the BANCOMEXT Subsidiary Loan Agreement and the FONEI Subsidiary Loan Agreement, respectively; (t) "General Operating Agreement" means any of the general operating agreements (Convenios Generales de Transferencia de Fondos), entered into between each Executing Agency and Financial Intermediaries, which set forth the general terms, conditions and procedures for on-lending funds, including the Reglas de Operacion (as hereinafter defined); (u) "Reglas de Operacion" means the specific regulations amplifying a General Operating Agreement, to be issued by each Executing Agency pursuant to Section 3.02 of this Agreement and Section 2.02 of each of the BANCOMEXT Project Agreements and the FONEI Project Agreement, setting forth the specific terms, conditions and procedures for on-lending the proceeds of the Loan to Financial Intermediaries; (v) "Intermediary Loan" means a loan made or proposed to be made by an Executing Agency out of the proceeds of the Loan to a Financial Intermediary under its respective General Operating Agreement; Page 4 (w) "Investment Subloan" means a loan made or proposed to be made by an Executing Agency or a Financial Intermediary out of the proceeds of the Loan to a Subborrower (as hereinafter defined) for purposes of financing an Investment Subproject; (x) "Working Capital Subloan" means a loan made or proposed to be made by an Executing Agency or a Financial Intermediary out of the proceeds of the Loan to a Subborrower (as hereinafter defined) for purposes of financing a Working Capital Subproject (as hereinafter defined); (y) "Consultants' Services Subloan" means a loan made or proposed to be made by an Executing Agency or a Financial Intermediary out of the proceeds of the Loan to a Subborrower (as hereinafter defined) for purposes of financing a Consultants' Services Subproject (as hereinafter defined); (z) "Industry-level Subloan" means a loan made or proposed to be made by an Executing Agency or a Financial Intermediary out of the proceeds of the Loan to a Subborrower (as hereinafter defined) for purposes of financing an Industry-level Subproject (as hereinafter defined); (aa) "Subloan" means an Investment Subloan, a Working Capital Subloan, a Consultant Services Subloan, or an Industry-level Subloan, as the case may be; (bb) "Subborrower", when used in reference to: (i) an Investment Subloan, means an Industrial Enterprise or an Equity Subborrower (as hereinafter defined); (ii) a Working Capital Subloan or a Consultants' Services Subloan, means an Industrial Enterprise; and (iii) an Industry-level Subloan, means an entity having the legal capacity to contract and provide services, including the development of industrial parks, to several Category A Industrial Enterprises; (cc) "Equity Subborrower" means a person or an entity with a legal capacity to contract, other than an Executing Agency or a Financial Intermediary, receiving a Subloan for purposes of financing an investment subproject to be carried out by an Industrial Enterprise, as a loan, or as an equity investment in such Industrial Enterprise; (dd) "Direct Investment" means an investment, other than a Subloan, made or proposed to be made by an Executing Agency or a Financial Intermediary from the proceeds of the Loan for purposes of financing an Investment Subproject; (ee) "Subloan Agreement" means any of the agreements to be entered into between the Executing Agencies and Subborrowers as well as between the Financial Intermediaries and Subborrowers pursuant to Section 3.03 (a)(iii) of this Agreement, Section 2.03 (b)(ii) of the BANCOMEXT Project Agreement and Section 2.03 (b)(ii) of the FONEI Project Agreement; (ff) "Direct Investment Agreement" means an agreement to be entered into between an Executing Agency and an Industrial Enterprise or between a Financial Intermediary and an Industrial Enterprise, pursuant to Section 3.04 (a) of this Agreement and Section 2.04 (a) of each of the BANCOMEXT Project Agreement and FONEI Project Agreement; (gg) "Investment Subproject" means a specific development project, excluding land acquisition consisting of: (i) the development of industrial parks for use by Industrial Enterprises; (ii) an investment in physical plant of an Industrial Enterprise, including plant construction, relocation, expansion, improvement, or acquisition of production equipment or machinery, and may include expenditures for technology improvement, Marketing Expenses (as hereinafter defined), Worker Retraining and Relocation Expenses (as hereinafter defined), and Working Capital Page 5 (as hereinafter defined) associated with such investment; or (iii) a Polution Control Investment Subproject as (hereinafter defined); (hh) "Pollution Control Investment Subproject" means an investment in pollution control equipment, associated with an investment in physical plant of an Industrial Enterprise under paragraph (gg), subparagraph (ii) of this Section; (ii) "Working Capital Subproject" means a specific develop- ment project consisting of the increase of Working Capital (as hereinafter defined); (jj) "Industry-level Subproject" means a specific development project for purposes of providing goods and services for Category A Industrial Enterprises under Part C of the Project; (kk) "Consultants' Services Subproject" means a specific development project consisting of consultants' services for the preparation and implementation of plans for restructuring and improving the competitiveness of such Industrial Enterprise; (ll) "Subproject" means an Investment Subproject, a Pollution Control Investment Subproject, a Working Capital Subproject, a Consultants' Services Subproject, or an Industry-level Subproject; (mm) "Marketing Expenses" means expenses for marketing and distributing products of an Industrial Enterprise; (nn) "Worker Retraining and Relocation Expenses" means the expenses of retraining and relocating workers employed by an Industrial Enterprise; (oo) "Working Capital" means the financing requirements resulting from increased use of raw materials, spare parts and other physical inputs required to expand inventories and receivables and raise production levels of an Industrial Enterprise; (pp) "Free-limit Subloan" means a Subloan in an amount not in excess of seven million dollars ($7,000,000) equivalent, which qualifies as a free-limit Subloan pursuant to Section I, paragraph 1 (b) of Schedule 7 to this Agreement; (qq) "Free-limit Direct Investment" means a Direct Investment in an amount not in excess of seven million dollars ($7,000,000) equivalent, which qualifies as a free-limit Direct Investment pursuant to of Section I, paragraph 1 (b), of Schedule 7 to this Agreement; (rr) "General Interest Rate Agreement" means the General Agreement on Interest Rates Applicable to Credit Operations of Fondos de Fomento financed by the International Bank for Recons- truction and Development, between the Guarantor and the Bank, dated August 7, 1984, as amended; (ss) "PVP" means the Sistema de Pagos Variables al Valor Presente, a repayment system which permits the partial capitalization of interest in order to maintain the present value of combined repayments of principal and interest of a Subloan; (tt) "Subsector Restructuring Program" means a long-term readjustment program, satisfactory to the Bank, for an industrial subsector consisting of technical, trade, financial, marketing, fiscal and industrial measures aimed at improving the competitiveness and export capacity of Industial Enterprises within such Subsector; (uu) "Reference Rate" means the Reference Rate, as so defined in the General Interest Rate Agreement; and (vv) "LIBOR" means the average rate per annum at which term Page 6 deposits in dollars maturing in 30 days are offered in the London interbank market at 11:00 a.m. (London time) two business days before the date the rate of interest of the respective Subsidiary Loan, Intermediary Loan or Subloan is adjusted, inclusive of all commissions, taxes and any charges thereon. For this purpose, "business day" means a day on which dealings in dollar deposits between banks may be carried on in London, England, and on which banks are open in Mexico City, Mexico. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount in various currencies equivalent to two hundred fifty million dollars ($250,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Sched- ule 1 to this Agreement, as such schedule may be amended from time to time by agreement between the Bank and the Borrower, for expen- ditures 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 described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a Special Account on terms and condi- tions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1994, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one- half of one percent (1/2 of 1%) per annum above the Cost of Quali- fied Borrowings for the last Semester ending prior to the commen- cement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Guarantor and the Borrower of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six month period commencing on each date specified in Section 2.06 of this Agreement, including the Interest Period in which this Agreement is signed; (ii) "Cost of Qualified Borrowings" means the cost of the outstanding borrowings of the Bank drawn down after June 30, 1982, expressed as a percentage per annum, as reasonably determined by the Bank; and (iii) "Semester" means the first six months or the second six months of a calendar year. Section 2.06. Interest and other charges shall be payable semiannually on February 15 and August 15 in each year. Section 2.07. The Borrower shall repay the principal amount Page 7 of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project; Transfer of Loan Proceeds Section 3.01. The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Loan Agreement, and to this end, shall carry out the Project, with the assistance of the Guarantor and the Executing Agencies and conduct its operations and affairs with due diligence and efficiency and in accordance with sound financial, administrative, and industrial and engineering practices. Section 3.02. The Borrower 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 this Agreement. Section 3.03. (a) The Borrower shall lend a portion of the proceeds of the Loan, on a first-come, first-served basis and within the limits established in Schedule 1 to this Agreement: (i) to BANCOMEXT and the Trustee for purposes of carrying out the Project, except Parts D (i) and D (iii) thereof, under Subsidiary Loan Agreements, satisfactory to the Bank, to be entered into between the Borrower and BANCOMEXT, and the Borrower and the Trustee, which shall include, inter alia, the terms and conditions set forth in Schedule 6 to this Agreement; (ii) to Financial Intermediaries for purposes of carrying out Parts A, B and C of the Project, under its General Operating Agreement; and (iii) 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 entered into between the Borrower and each Subborrower, and which shall include, inter alia, the terms and conditions for Subloans set forth in Schedule 7 to this Agreement. (b) The Borrower shall enter into contractual arrangements, satisfactory to the Bank, with the Guarantor for purposes of transfering the portion of the proceeds of the Loan required by the Guarantor to carry out Part D (iii) of the Project. (c) The Borrower shall exercise its rights under each Subsidiary Loan Agreement, the General Operating Agreement, and each Subloan Agreement to which it is a party, and under the contractual arrangements referred to in paragraph (b) of this Section, in such manner as to protect the interest of the Guarantor, the Bank and the Borrower and to accomplish the purposes of the Loan, and, except as the Bank may otherwise agree, the Borrower shall not change or fail to enforce any Subsidiary Loan Agreement, the Reglas de Operacion of its General Operating Agreement, any Subloan Agreement, such contractual arrangements, or any provision thereof. Section 3.04. (a) The Borrower 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 Borrower and each Industrial Enterprise, in accordance with the terms and conditions set forth in Schedule 7 to this Agreement. (b) The Borrower shall exercise its rights under each such Direct Investment Agreement in such manner as to protect the interests of the Guarantor, the Bank and the Borrower and to Page 8 accomplish the purposes of the Loan, and, except as the Bank may otherwise agree, the Borrower shall not change or fail to enforce any Direct Investment Agreement or any provision thereof. Section 3.05. The Borrower shall exercise its rights in relation to each Subproject in such manner as to: (i) protect the interests of the Bank and the Borrower; (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of the Loan. Section 3.06. Except as the Bank shall otherwise agree, procurement 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 this Agreement. Section 3.07. The Bank and the Borrower 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) in respect of the Project shall be carried out by the Borrower in respect of the Project activities executed by it, and by the Guarantor in respect of Part D (iii) of the Project pursuant to Section 3.03 of the Guarantee Agreement, and by BANCOMEXT and the Trustee in respect of the Project activities each executes pursuant, respectively, to Section 2.07 of each of the BANCOMEXT Project Agreement and the FONEI Project Agreement. Section 3.08. (a) The Borrower shall: (i) retain, through completion of the Project, a Project manager, with qualifications and responsibilities acceptable to the Bank, for purposes of supervising the implementation of the Project; and (ii) employ consultants, with qualifications and terms of reference acceptable to the Bank, as may be appropriate to provide assistance to such Project manager. (b) The Borrower shall ensure that a program, satisfactory to the Bank, to promote industrial restructuring and regional implementation of the Project shall be carried out in accordance with its terms. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain, or cause to be maintained, separate records and accounts, adequate to reflect, in accordance with sound accounting practices, the resources and expenditures in respect of the Project. (b) The Borrower shall: (i) have such separate records and accounts, including the Special Account, for each fiscal year audited in accordance with generally accepted auditing standards and practices consistently applied, by independent and qualified auditors; (ii) furnish to the Bank as soon as available, but in any case not later than six (6) 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; (iii) furnish to the Bank each month certified statements of the Special Account; and (iv) furnish to the Bank such other information concern- ing the Special Account, and the audit thereof, and Page 9 said records 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 Borrower 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 (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. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified: (a) BANCOMEXT or the Trustee, shall have failed to perform any of their respective obligations under the BANCOMEXT Project Agreement or the FONEI Project Agreement; (b) as a result of events which have occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that BANCOMEXT or the Trustee, will be able to perform their respective obligations under the BANCOMEXT Project Agreement or the FONEI Project Agreement; (c) a change shall have been made in the Trust Agreement, or in the FONEI Operating Regulations, which shall materially and adversely affect the carrying out of the parts of the Project to be carried out by the Trustee on behalf of FONEI; and (d) a situation has arisen which shall make it improbable that a Subsector Restructuring Program, or a significant part thereof, will be carried out. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified, namely that any event specified in paragraphs (a) or (c) of Section 5.01 of this Agreement shall occur and shall continue for a period of thirty days after notice thereof shall have been given by the Bank to the Borrower. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement Page 10 within the meaning of Section 12.01 (c) of the General Conditions: (a) that the BANCOMEXT Subsidiary Loan Agreement shall have been executed by the Borrower and BANCOMEXT; (b) that the FONEI Subsidiary Loan Agreement shall have been executed by the Borrower and the Trustee; and (c) that the Borrower shall have provided to the Bank the promotion program referred to in Section 3.08 (b) of this Agreement. Section 6.02. The following are specified as additional matters, 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: (a) that the BANCOMEXT Project Agreement has been executed and duly authorized and is legally binding upon BANCOMEXT in accordance with its terms; (b) that the FONEI Project Agreement has been executed and duly authorized and is legally binding upon the Trustee in accordance with its terms; (c) that the BANCOMEXT Subsidiary Loan Agreement has been executed and duly authorized and is legally binding upon the parties thereto in accordance with its terms; and (d) that the FONEI Subsidiary Loan Agreement has been executed and duly authorized and is legally binding upon the parties thereto in accordance with its terms. Section 6.03. The date of December 27, 1989 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Director Internacional of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: 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 Borrower: Direccion Internacional Nacional Financiera, S.N.C. Plaza NAFINSA, Insurgentes Sur 1971 11