LOAN NUMBER 268 ME Guarantee Agreement (Road Project) BETWEEN UNITED MEXICAN STATES AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED OCTOBER 18, 1960 I LOAN NUMBER 268 ME Guarantee Agreement (Road Project) BETWEEN UNITED MEXICAN STATES AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED OCTOBER 18, 1960 AGREEMENT, dated October 18, 1960, between UNITED MEXICAN STATES (hereinafter called the Guarantor) anld INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOP- MENT (hereinafter called the Bank). WHEREAS by an agreement of even date herewith between the Bank and Nacional Financiera, S. A., (hereinafter called the Borrower), which agreement and the schedules therein referred to are hereinafter called the Loan Agree- ment, the Bank has agreed to make to the Borrower a loan in various currencies equivalent to twenty-five million dol- lars ($25,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guaran- tor agree to enter into this Agreement; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement has agreed to enter into this Agreement; Now THEREFORE the parties hereto hereby agree as fol- lows: ARTICLE I SECTION 1.01. The parties to this Guarantee Agreement accept all the provisions of Loan Regulations No. 4 of the Bank dated June 15, 1956, subject, however, to the modi- fications thereof set forth in Schedule 2 to the Loan Agree- ment (said Loan Regulations No. 4 as so modified being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein. ARTICLE II SECTION 2.01. Without limitation or restriction upon any of the other covenants on its part in this Agreement con- tained, the Guarantor hereby unconditionally guarantees, 4 as primary obligor and not as surety merely, the due and punctual payment of the principal of, and the interest and other charges on, the Loan, the principal of and interest on the Bonds, and the premium, if any, on the prepayment of the Loan or the redemption of the Bonds, all as set forth in the Loan Agreement and in the Bonds. ARTICLE III SECTION 3.01. (a) The Guarantor shall cause the Project described in Schedule 1 to this Agreement to be carried out with due diligence and efficiency and in conformity with sound engineering and financial practices. (b) The Guarantor shall cause priority to be given to the Project in its highway construction program, and, to that end, shall, if necessary to accomplish the prompt and diligent construction of the Project, cause such revisions in the construction schedules for other parts of that pro- gram to be made as may be required. (c) The list of roads to be included in part (a) of the Project shall be determined from time to time by agree- ment between the Guarantor (acting through its Secretario de Obras Puiblicas) and the Bank, subject to modification by further agreement between them. (d) Except as the Bank shall otherwise agree, the Guar- antor shall cause the roads included in part (a) of the Proj- ect to be constructed or reconstructed by contractors satis- factory to the Guarantor and the Bank under contracts providing for construction or reconstruction of such roads. (e) The general design standards and the types of sur- facing (including pavement) to be used for the roads in- cluded in the Project shall be as determined by agreement between the Guarantor and the Bank, subject to modifica- tion by further agreement between them. (f) Upon 'request from time to time by the Bank, the Guarantor shall promptly furnish or cause to be furnished 5 to the Bank the plans, specifications and work schedules for the Project and any material modifications subsequently made therein, in such detail as the Bank shall request. (g) The Guarantor shall at all times make available promptly as needed all sums which shall be required for the carrying out of the Project. (h) The Guarantor shall maintain or cause to be main- tained records adequate to identify the goods financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (includ- ing the cost thereof) and to reflect in accordance with con- sistently maintained sound accounting practices the opera- tions and financial condition with respect to the Project of the agency or agencies of the Guarantor responsible for the carrying out of the Project or any part thereof; shall enable the Bank's representatives to inspect the Project, the goods and any relevant records and documents; and shall furnish or cause to be furnished to the Bank all such information as the Bank shall reasonably request concern- ing the expenditure of the proceeds of the Loan, the Proj- ect, and the goods, and the operations and financial condi- tion with respect to the Project of the agency or agencies of the Guarantor responsible for the carrying out of the Proj- ect or any part thereof. SECTION 3.02. Except as the Guarantor and the Bank shall otherwise agree, the Guarantor shall cause all goods financed out of the proceeds of the Loan to be used in the territories of the Guarantor exclusively in the carrying out of the Project. SECTION 3.03. It is the mutual intention of the Guaran- tor and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on governmental assets. To that end, the Guarantor undertakes that, ex- cept as the Bank shall otherwise agree, if any lien shall be created on any assets of the Guarantor as security for any 6 external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan and the Bonds, and that in the creation of any such lien express provision will be made to that effect; provided, however, that the foregoing provi- sions of this Section shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such prop- erty or (ii) any lien arising in the ordinary course of bank- ing transactions and securing a debt maturing not more than one year after its date. As used in this Section (a) the term "assets of the Guar- antor" includes assets of the Guarantor or of any of its political subdivisions or of any Agency and (b) the term "Agency" means any agency or instrumentality of the Guarantor or of any political subdivision of the Guarantor and shall include any institution or organization which is owned or controlled directly or indirectly by the Guarantor or by any political subdivision of the Guarantor or the operations of which are conducted primarily in the interest of or for account of the Guarantor or any political sub- division of the Guarantor. SECTION 3.04. (a) The Guarantor and the Bank shall cooperate fully to assure that the purposes of the Loan will bc accomplished. To that end, each of them shall furnish to the other all such information as it shall reasonably re- quest with regard to the general status of the Loan. On the part of the Guarantor, such information shall include in- formation with respect to financial and economic conditions in the territories of the Guarantor and the international balance of payments position of the Guarantor. (b) The Guarantor and the Bank shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Loan and the maintenance of the service thereof. The Guarantor shall 7 promptly inform the Bank of any condition which inter- feres with, or threatens to interfere with, the accomplish- ment of the purposes of the Loan or the maintenance of the service thereof. (c) The Guarantor shall afford all reasonable opportu- nity for accredited representatives of the Bank to visit any part of the territories of the Guarantor for purposes re- lated to the Loan. SECTION 3.05. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid without deduction for, and free from, any taxes or fees imposed under the laws of the Guarantor or laws in effect in its territories; provided, however, that the provisions of this Section shall not apply to taxation of, or fees upon, pay- ments under any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of the Guarantor. SECTION 3.06. This Agreement, the Loan Agreement and the Bonds shall be free from any taxes or fees that shall be imposed under the laws of the Guarantor or laws in effect in its territories on or in connection with the execu- tion, issue, delivery or registration thereof. SECTION 3.07. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid free from all restrictions imposed under the laws of the Guarantor or laws in effect in its territories. ARTICLE IV SECTION 4.01. The Guarantor shall endorse, in accord- ance with the provisions of the Loan Regulations, its guar- antee on the Bonds to be executed and delivered by the Borrower. Nacional Financiera, S.A. and such person or persons as it shall designate in writing are designated as 8 the authorized representatives of the Guarantor for the purposes of Section 6.12(b) of the Loan Regulations. ARTICLE V SECTION 5.01. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Guarantor: Secretario de Obras Pu'blicas Xola y Ave. Universidad Mexico 13, D.F., Mexico Alternative address for cablegrams and radiograms: Secretaria Obras Pu'blicas Mexico, D.F. For the Bank: International Bf;,nk for Reconstruction and IDevelopment 1818 H Street, N.W. Washington 25, D.C. United States of America Alternative address for cablegrams and radiograms: Intbafrad Washington, D.C. SECTION 5.02. The Secretario de Obras Pu'blicas of the Guarantor is designated for the purposes of Section 8.03 of the Loan Regulations. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have 9 caused this Guarantee Agreement to be signed in their re- spective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. UNITED MEXICAN STATES By: NACIONAL FINANCIERA, S.A. By RAUL MARTINEZ OsTos Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By EUGENE R. BLACK President 1.0 SCHEDULE 1 Description of Project 1. The Project consists of: (a) the completion of the construction of new roads and of the reconstruction of existing roads, all such roads being part of the Federal highway system of the Guarantor. The roads to be con- structed and reconstructed total about 3,200 kilo- meters. This part of the Project includes drains and bridge structures up to 15 meters span. (b) the construction or reconstruction of bridges of a span of over 15 meters. The time schedules for completion of this work will be such as will not interfere with the work to be done on the roads included in part (a) above or with the use of such roads after completion. (c) maintenance of the roads and bridges included in parts (a) and (b) above. 2. The Project will be carried out under the supervision of the Secretaria de Obras Publicas of the Guarantor.