CONFORMED COPY LOAN NUMBER 7003-ME Guarantee Agreement (Bank Restructuring Facility Adjustment Loan) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated December 14, 1999 GUARANTEE AGREEMENT LOAN NUMBER 7003-ME AGREEMENT, dated December 14, 1999, between UNITED MEXICAN STATES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Bank has received from the Guarantor a letter dated November 26, 1999, describing a program of actions, objectives and policies designed to achieve adjustment of the Guarantor s banking sector (hereinafter called the Program), declaring the Guarantor s commitment to the execution of the Program, and requesting assistance from the Bank in support of the Program during the execution thereof; (B) on the basis, inter alia, of the foregoing, the Bank has decided, in support of the Program, to provide such assistance to the Guarantor by making a loan in an amount of five hundred and five million sixty thousand Dollars ($505,060,000) to NACIONAL FINANCIERA, S.N.C. (the Borrower), on the terms and conditions set forth in the Loan Agreement, of even date herewith, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan and to undertake such other obligations as provided in this Agreement; and WHEREAS the Guarantor, in consideration of the Bank s entering into the Loan Agreement with the Borrower, has agreed to guarantee such obligations of the Borrower and to undertake such other obligations as 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 for Fixed-Spread Loans of the Bank, dated September 1, 1999, with the modifications set forth below (the General Conditions), constitute an integral part of this Agreement: (a) Section 2.01, paragraph 41, is modified to read: Project means the program, referred to in the Preamble to the Loan Agreement, in support of which the Loan is made. ; (b) Section 5.01 is modified to read: The Borrower shall be entitled to withdraw the proceeds of the Loan from the Loan Account in accordance with the provisions of the Loan Agreement and of these General Conditions ; (c) The last sentence of Section 5.03 is deleted; (d) Paragraph (c) of Section 9.07 of the General Conditions is modified to read as follows: (c) Not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution of the Program referred to in the Preamble to the Loan Agreement, the performance by the Borrower, the Guarantor and the Bank of their respective obligations under the Loan Agreement and the Guarantee Agreement, and the accomplishment of the purposes of the Loan. (e) Section 9.05 is deleted and Sections 9.06, 9.07 (as modified above), 9.08 and 9.09 are renumbered, respectively, Sections 9.05, 9.06, 9.07 and 9.08. 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 and the following additional terms have the following meanings: (a) Asset Disposal Program means a program of actions for the sale, auction, administration or recovery of credits and other assets from banking institutions under IPAB's purview, to be undertaken by IPAB, pursuant to the provisions of Article 61 of the Guarantor s law (Ley de Protección al Ahorro Bancario) published in the Guarantor s Official Gazette on January 19, 1999, and in accordance with the provisions of Attachment C1 of Annex C to the Implementation Letter; (b) Budgetary Transfers means funds transferred by the Guarantor to IPAB (as hereinafter defined), as a budget item in the Federal Budget (as hereinafter defined), in accordance with the provisions of the letter referred to in the WHEREAS clause (A) of the Preamble to this Agreement; (c) Eligible Bank Resolution Transaction means the sale, merger or liquidation of any of the following banking institutions: (i) Serfín; (ii) Bancrecer; (iii) Atlántico; (iv) Promex; and (v) Inverlat; carried out in accordance with the eligibility criteria detailed in Attachments B.1, B.2, B.3, B.4 and B.5 of Annex B to the Implementation Letter; (d) Eligible Notes means notes (instrumentos de crédito) issued by IPAB and guaranteed pursuant to the provisions of Article 45 of the Guarantor s Law (Ley de Protección al Ahorro Bancario) published in the Guarantor s Official Gazette of January 19, 1999, in accordance to the conditions detailed in paragraph 4 of Annex B to the Implementation Letter; (e) Federal Budget means the Guarantor s annual budget, as approved by the Guarantor s Congress (Presupuesto de Egresos de la Federación) and enacted through a Congressional Decree issued pursuant to the Article 74 (IV) of the Guarantor s Federal Constitution in each Fiscal Year (as hereinafter defined) during the execution of the Program; (f) "Fiscal Year" means the fiscal year of the Guarantor, beginning on January 1 of each calendar year; (g) Implementation Letter means the letter of even date herewith from the Guarantor to the Bank, containing technical criteria and indicators to be used in
monitoring and evaluating the implementation of the Program; (h) Regulatory Reform Program means a series of regulatory reforms intended to improve the health and stability of the Guarantor s banking sector, approved or to be approved by SHCP, CNBV and IPAB, as the case may be, during the execution of the Program, pursuant to the provisions of the letter referred to in the WHEREAS clause (A) of the Preamble to this Agreement; and (i) SHCP means Secretaría de Hacienda y Crédito Público, the Guarantor's Secretariat of Finance and Public Credit, or any successor thereto. ARTICLE II Guarantee; Transfer of Loan Proceeds Section 2.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, 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 other obligations of the Borrower, all as set forth in the Loan Agreement. Section 2.02. (a) The Guarantor shall ratify the contractual arrangements referred to in Section 3.01 (a) of the Loan Agreement. (b) The Guarantor shall exercise its rights under the contractual arrangements referred to in paragraph (a) above in such manner as to protect the interests of the Guarantor and the Bank and to accomplish the purposes of the Loan. ARTICLE III Other Covenants Section 3.01 (a) The Guarantor and the Bank shall from time to time, at the request of either party, exchange views on the progress achieved in carrying out the Program and the actions specified in Schedule 1 to this Agreement. (b) Prior to each such exchange of views, the Guarantor shall furnish to the Bank for its review and comment a report on the progress achieved in carrying out the Program, in such detail as the Bank shall reasonably request. (c) Without limitation upon the provisions of paragraph (a) of this Section, the Guarantor shall exchange views with the Bank on any proposed action to be taken after the disbursement of the Loan which would have the effect of materially reversing the objectives of the Program or any action taken under the Program, including any action specified in Schedule 1 to this Agreement. ARTICLE IV Representative of the Guarantor; Addresses Section 4.01. The Director General de Crédito Público of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 4.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Secretaría de Hacienda y Crédito Público Dirección General de Crédito Público Insurgentes Sur 826 (piso 9) Colonia del Valle 03100 México, D.F. México
Telex: 1777313-SHOCME Facsimile: 53257097 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 248423 (MCI); or Washington, D.C. 64145 (MCI) Facsimile: (202) 477-6391 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/ Jesús Reyes Heroles Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ David de Ferranti Regional Vice President Latin America and the Caribbean SCHEDULE 1 Part A. Actions Referred to in Section 2.02 (d) of the Loan Agreement 1. IPAB has issued Eligible Notes in an aggregate amount equal to at least $5,000,000,000, in support of Eligible Bank Resolution Transactions. 2. The Regulatory Reform Program has been implemented on a consistent basis, in 3. The Asset Disposal Program has been implemented on a consistent basis, in 4. The Budgetary Transfers have been made in a timely fashion so as to allow IPAB to discharge its responsibility under the Program. Part B. Actions referred to in Section 2.02 (e) of the Loan Agreement
1. IPAB has issued additional Eligible Notes in an aggregate amount equal to at least $8,000,000,000, in support of Eligible Bank Resolution Transactions, including in such amount any Eligible Notes issued in excess of the amount referred to in Part A.1 of this Schedule. 2. The Regulatory Reform Program has been implemented on a consistent basis, in accordance with its terms, including the issuance by CNBV of regulations on loan classification and loan loss provisioning for mortgage or commercial loans, pursuant to the provisions of paragraph 4 of Annex A to the Implementation Letter. 3. The Asset Disposal Program has been implemented on a consistent basis, in 4. The Budgetary Transfers have been made in a timely fashion so as to allow IPAB to discharge its responsibility under the Program.