Exhibit 10.62
LOAN AGREEMENT
BANCOMER, S.A., MULTIPLE BANKING INSTITUTION,
BANCOMER FINANCIAL GROUP
(BANCOMER)
MK GAIN, S.A. DE C.V.
(BORROWER)
U.S.$3,500,000.00
Translated by
Latin American Trade Finance, Ltd.
TABLE OF CONTENTS
RECITALS 1
I. Borrower's Recitals 2
II. Bancomer's Recitals
SECTIONS 3
Section 1. Certain Definitions 3
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A. "Additional Income" 3
B. "Agreement" 3
C. "Bancomer CDs" 3
D. "Bancomer CDs Rate" 3
E. "Business Day" 3
F. "CIBC" 4
G. "Comfort Letter" 4
H. "Consolidation Date" 4
I. "Construction and Refurbishing Program" 4
J. "Cost of Funds" 4
K. "Default Rate" 4
L. "Debts" 4
M. "Disbursement Date" 4
N. "Disbursement Period" 5
O. "Dollars" and "U.S.$" 5
P. "Event of Default" 5
Q. "Exhibit" 5
R. "Eximbank Loan Agreement" 5
S. "Ferrocarriles" 5
T. "Ferrocarriles Agreement" 5
U. "Financial Ratios" 5
V. "Financial Supervisor" 5
W. "Funding Rate" 5
X. "Interest Payment Dates" 5
Y. "Interest Period" 6
Z. "Interest Rate" 6
AA. "Libor" 6
BB. "Line of Credit" 6
CC. "Loan" 6
DD. "Loan Disbursements" 6
EE. "Loan Repayment Dates" 7
FF. "Maintenance Agreement" 7
GG. "MK Rail" 7
HH. "MK Rail Debt" 7
II. "PCGA" 7
JJ. "Pesos" 7
KK. "Promissory Notes" 7
LL. "Regulatory Change 7
MM. "Reserve Fund" 8
NN. "Rights for Collection" 8
OO. "Spread" 8
PP. "Subordination Agreement" 8
QQ. "Taxes" 8
RR. "Technical Assistance Agreement" 8
SS. "Technical Committee" 8
TT. "Technical Supervisor" 8
UU. "Technical Supervisor's Certificate" 8
VV. "Trust" 8
Section 2. Amount of the Loan 9
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Section 3. Use of Proceeds 8
Section 4. Disbursement Period 9
Section 5. Loan Disbursement 9
Section 6. Promissory Notes 10
Section 7. Conditions Precedent for the First Loan Disbursement 10
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Section 8. Conditions Precedent for Subsequent Loan Disbursements 12
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Section 9. Payments of Principal 13
Section 10. Prepayment 13
Section 11. Interest 14
Section 12. Commissions 15
Section 13. Alternate Interest Rate 15
Section 14. Increased Costs and Funding Losses 17
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Section 15. Taxes 18
Section 16. Place and Form of Payment 18
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Section 17. Representations & Warranties 19
Section 18. Covenants of the Borrower 20
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Section 19. Insurance 24
Section 20. Events of Default 25
Section 21. Trust Guaranty 29
Section 22. Monetary Conversion 29
Section 23. Restriction 30
Section 24. Successors and Assigns 30
Section 25. No Waiver 30
Section 26. Amendments 30
Section 27. Notices 31
Section 28. Governing Law 32
Section 29. Jurisdiction 32
Section 30. Costs and Expenses 32
Section 31. Condition Precedent for Validity of this Agreement 33
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EXHIBIT "A" FERROCARRILES' AGREEMENT
EXHIBIT "B" COMFORT LETTER
EXHIBIT "C" FORM OF TECHNICAL SUPERVISOR'S CERTIFICATE
EXHIBIT "D" SUBORDINATION AGREEMENT
EXHIBIT "E" TRUST
EXHIBIT "F" FINANCIAL RATIOS
EXHIBIT "G" FORM OF PROMISSORY NOTE
EXHIBIT "H" CONSTRUCTION AND REFURBISHING PROGRAM EXHIBIT "I"
AMOUNT OF AMORTIZATION INSTALLMENTS
EXHIBIT "J" AMENDMENT TO THE FNM MAINTENANCE AGREEMENT
========================================================================
LOAN AGREEMENT
BANCOMER, S.A., MULTIPLE BANKING INSTITUTION,
BANCOMER FINANCIAL GROUP
(BANCOMER)
MK GAIN, S.A. DE C.V.
(BORROWER)
U.S.$3,500,000.00
========================================================================
Translated by
Latin American Trade Finance, Ltd.
Bancomer, S.A.
MK GAIN, S.A. de C.V.
US$3,500,000 Loan Agreement
LOAN AGREEMENT
-----------------------------------
Loan Agreement, dated as of December 13, 1996, by and among:
(i) Bancomer, S. A., Multiple Banking Institution, Bancomer Financial
Group, a credit institution organized and existing under the laws of the United
Mexican States (hereinafter referred to as "Bancomer"); and
(ii) MK Gain, S. A. de C. V., a corporation organized and existing
under the laws of the United Mexican States (hereinafter referred to as the
"Borrower").
RECITALS
I. Borrower's Recitals. Borrower states that:
a) It is a corporation organized under the laws of the United Mexican
States with full capacity under its by-laws to execute this Agreement and to
undertake its obligations as established hereunder, as evidenced by Public Deed
No. 23 granted on January 26, 1994, before Mr. Jose Luis Cardenas Davila, Notary
Public No. 12 in and for Sabinas, Coahuila, whose first public deed was
inscribed in the Public Property Registry of Sabinas, State of Coahuila, under
number 1,771, 10th volume, 3rd book, commercial section, on January 27, 1994,
and the Public Deed No. 22,796 granted on July 5, 1995 before Mr. Carlos A.
Duran Loera, Public Notary No. 11 of the Federal District, whose first public
deed was inscribed in the Public Registry of Commerce of Mexico City, D.F. on
page number 20,849 dated June 24, 1996.
b) Its representatives are duly empowered and have full legal capacity
to execute this Agreement on its behalf and representation, without
modification, restriction or revocation as of the date of this Agreement, as
evidenced by a copy, certified by the Secretary of the Board of Directors of the
Borrower, of the minutes dated December 11, 1996, of the resolution taken by the
Board of Directors of the Borrower to grant the necessary powers of attorney to
enter into this amending agreement.
c) That on July 6, 1995 it entered into a Loan Agreement with Bancomer
for up to US$30,000,000 (Thirty Million Dollars United States Currency) with
funds guaranteed by the Export-Import Bank of the United States (the "Eximbank
Loan Agreement").
d) Has incorporated the Trust (as such term is hereinafter defined) to
guarantee its obligations hereunder and under this Loan and the Eximbank Loan
Agreement.
e) It has requested from Bancomer the granting of an additional loan
for the financing of improvements to the Ferrocarriles shops (as such term is
hereinafter defined) in accordance with the Maintenance Agreement (as such term
is hereinafter defined).
II. Bancomer's Recitals. Bancomer states that:
a) It is a credit institution duly organized and validly existing under
the laws of the United Mexican States and is fully empowered to execute this
Agreement, as evidenced by Public Deed No. 8525 granted on October 8, 1945,
before Mr. Tomas O'Gorman, Notary Public No. 1 of the Federal District with
first testimony written under Folio No. 53, Page 310, Volume 207, Book 3 of the
Public Registry of Commerce, Federal District.
b) That its representative has the sufficient legal capacity and
authorization to enter into this Agreement on its behalf and representation,
without having been modified, restricted or revoked as of the date of execution
of this Agreement, as evidenced by (i) Public Deed No. 20,373, granted on April
21, 1994, before Mr. Rogelio Magana Luna, Notary Public No. 56 of the Federal
District, whose first deed was inscribed under number 23,900, page 12 of volume
268 of the Public Registry of Property and Commerce of the city of San Luis
Potasi, San Luis Potasi.
c) That it is negotiating with the Canadian Imperial Bank of Commerce,
New York office ("CIBC"), a line of credit for the purpose of granting to the
Borrower the requested loan in accordance with this Agreement, which can be
contracted with Bancomer with CIBC or any other financial institution at the
option of Bancomer (herein after defined as the "Line of Credit"); provided,
however, if Bancomer negotiates the Line of Credit with a financial institution
different from CIBC, then all references to CIBC in this agreement shall be
understood as referring to such other financial institution provided that such
negotiation does not alter terms and conditions as provided in this Agreement,
and subject to the provisions of Clause 31 of this Agreement.
d) That based on the Borrower's declarations, statements and
warranties, it is willing to grant the loan requested by the Borrower, under the
terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the foregoing declarations, the
parties hereto agree to the following:
SECTIONS
Section 1. Certain Definitions. As used in this Agreement, the
following terms shall have the respective meanings set forth below:
A. "Additional Income", means any and all of the Borrower's rights to
collect any kind of fees, consideration or payment for any other services
rendered to any third party in connection with the overhaul of locomotives and
maintenance of other rail equipment, different than the Rights for Collection,
and/or income for any other concept.
B. "Agreement", means this Loan Agreement entered into by Bancomer, as
lender, and the Borrower, as borrower along with its Exhibits.
C. "Bancomer CDs", means certificates of deposit issued by Bancomer,
S.A., London Branch and offered on the London market, as negotiable bearer
instruments transferable without endorsement, which conform to the Bank of
England's guidelines and the British Banker's Association market guidelines for
certificates of deposit on the London market.
D. "Bancomer CDs Rate", means, with respect to any failure to pay on
the part of the Borrower, the average rate, as determined by Bancomer, at which
Bancomer CDs with maturities of ninety (90) days are quoted in the London market
at 11:00 a.m. (London Time) two Business Days prior to the date on which the
Borrower fails to make any payment to Bancomer in accordance with this
Agreement.
E. "Business Day", means any day in which dealings for the deposit of
Dollars are carried out in the London interbank market, and on which banks are
open for business in Mexico City, Federal District, United Mexican States, the
City of New York, New York and in London, England and accept deposits in Dollars
in the London interbank market.
F. "CIBC", will have the meaning ascribed in Declaration II.C of this
Agreement.
G. "Comfort Letter", means the comfort letter dated July 6, 1995,
signed by MK Rail for the benefit of Bancomer, a copy of which is attached to
this Agreement as Exhibit "B".
H. "Consolidation Date", means July 15, 1997 or any other date agreed
by the parties with CIBC.
I. "Construction and Refurbishing Program", means the program for the
construction and refurbishing of Ferrocarriles' workshops and supply centers for
1997 in accordance with the terms and conditions of the Maintenance Agreement, a
copy of which is attached hereto as Exhibit "J".
J. "Cost of Funds", means, with respect to any failure to pay on behalf
of the Borrower, the cost of funds in Dollars to Bancomer, for amounts similar
to the amount created as a result of the failure to pay by the Borrower, for
terms of thirty (30) days, including, but not limited to, costs derived by
virtue of Bancomer's failure to comply with tax reserves for any competent
authority, calculated by Bancomer precisely from the date on which the Borrower
fails to make any payment to Bancomer.
K. "Default Rate", means, with respect to the Loan Disbursements, the
interest rate that results from the higher of: (i) the Bancomer CD's Rule
multiplied by two (2) , and (ii) the Cost of Funds multiplied by two (2). Once
the applicable Default Rate is determined, Bancomer will notify the Borrower of
such Default Rate which will, in the absence of manifest error, be final,
conclusive and obligatory for the Borrower.
L. "Debts", means, with respect to the Borrower, : (i) debts for
amounts of money in Pesos, Dollars or any other currency; (ii) all contingent
liabilities that result from discounting with recourse negotiable instruments;
and (iii) all contingent liabilities that result from any performance bond or
other similar instrument by which contingent responsibilities are assumed for
obligations to third parties.
M. "Disbursement Date", means with respect to each of the Disbursements
of the Loan, the Business Day on which Bancomer disburses the respective
Disbursement of the Loan.
N. "Disbursement Period", shall have the meaning ascribed to such term
in Clause 4 hereto.
O. "Dollars" and "U.S.$", means the legal currency in the United States
of America.
P. "Event of Default", shall have the meaning ascribed to such term in
Section 18 hereof.
Q. "Exhibit", means any writing, list, catalog, drawing, graphic and/or
other document attached to this Agreement, which when referred to by this
Agreement and attached, forms part of this Agreement as if it were inserted
completely in the place of places referenced.
R. "Eximbank Loan Agreement", has the meaning ascribed to it in
Declaration I.c. of this Agreement.
S. "Ferrocarriles", means Ferrocarriles Nacionales de Mexico.
T. "Ferrocarriles Agreement", means the document issued by
Ferrocarriles substantially in the form of the document attached to this
Agreement as Annex A, under which Ferrocarriles confirms, among other things,
its consent to assign the Rights for the Collection of Payments derived from the
Maintenance Contract.
U. "Financial Ratios", means those financial ratios established in
Exhibit "H" to this Agreement and which must be complied with by the Borrower
during the life of this Agreement.
V. "Financial Supervisor" shall have the meaning ascribed to such term
in the Trust.
W. "Funding Rate" means LIBOR plus two and eleven sixteenths percent
(2.6875%).
X. "Interest Payment Dates", means, with respect to each Loan
Disbursement, the 15th day of each of the months of February and August of every
calendar year or any other dates agreed by the parties with CIBC, commencing
from the date of the first Loan Disbursement is made; provided, however that:
(i) the first Interest Payment Date shall be with respect to Loan Disbursements
made prior to the Consolidation Date shall be the Consolidation Date; (ii) the
last Interest Payment Date shall be the last Principal Payment Date, and (iii)
if any of these dates falls on a date which is not a Business Day, then the
corresponding Interest Payment Date shall be the next succeeding Business Day.
Y. "Interest Period", means, with respect to each Disbursement of the
Loan (i) the period that begins on the respective Disbursement Date and ends on,
but does not include, the following Interest Payment Date and (ii) subsequently,
the period that begins on each Interest Payment Date and ends on, but does not
include, the following Interest Payment Date.
Z. "Interest Rate", means, with respect to each Loan Disbursement and
for each Interest Period, the Funding Rate plus the Spread. Once the Interest
Rate applicable for an Interest Period is determined, Bancomer will notify the
Borrower of such Interest Rate, which will, in the absence of manifest error, be
final, conclusive and obligatory for the Borrower.
AA. "Libor", means, (i) for any Interest Period occurring within the
period which begins on the date of signing of this Agreement and ends on the
Consolidation Date and with respect to the unpaid balance of the Loan during
such period, the arithmetic mean (rounded upward, if necessary, to the nearest
1/16 of 1%), as determined by the London CIBC office, of the rates per annum
offered by prime banks in the London interbank market of Dollar deposits for
terms equal to or similar to such Interest Period and in amounts approximately
equal or similar to the principal amount of the respective Loan Disbursement,
payable during such Interest Period at approximately 11:00 am (London time) two
Business Days before the first day of such Interest Period, and (ii) for any
Interest Period occurring from the Consolidation Date and with respect to the
unpaid balance of the Loan from such date, the fixed rate of interest which
results from a determination of the arithmetic average (rounded upward, if
necessary, to the nearest 1/16 of 1%), as determined by the London CIBC office,
of the rates per annum offered by prime banks in the London interbank market of
Dollar deposits for terms equal or similar to 39 (thirty nine) months and in
amounts approximately equal or similar to the unpaid principal balance of the
Loan at approximately 11:00 am (London time) two Business Days before the
Consolidation Date.
BB. "Line of Credit", shall have the meaning ascribed to it in
Declaration II.c) of this Agreement.
CC. "Loan", means up to the full amount of the Loan made by Bancomer to
the Borrower as established in Section 2 of this Agreement under the terms
hereof.
DD. "Loan Disbursements", means the disbursements of the Loan that the
Borrower makes in accordance with the terms of this Agreement; with the
understanding, however, that: (i) the Borrower can only make one disbursement of
the Loan for each calendar month during the Disbursement Period; (ii) the total
amount of the loan shall be disbursed in 3 (three) Loan Disbursements, and (iii)
each of the Loan Disbursements cannot be less than US$1,000,000 (One Million
Dollars).
EE. "Loan Repayment Dates", means, with respect to each Loan
Disbursement, the 15th day of the months of February and August of each calendar
year, or any other date which the parties may agree with CIBC, commencing from
the date on which the first Loan Disbursement is made; provided, however that:
(i) the first Loan Repayment Date shall be August 15, 1997; (ii) the last Loan
Repayment Date cannot fall on a date later than the fifth anniversary of the
Consolidation Date, and (iii) if any of those dates falls on a day other than a
Business Day, then the corresponding Loan Repayment Date shall be the next
succeeding Business Day.
FF. "Maintenance Agreement", means the Maintenance Agreement of
Tractive and Hauling Equipment entered into by and between the Borrower and
Ferrocarriles on March 15, 1994 and the amending agreement thereto dated August
30, 1996, copies of which are attached hereto as Exhibit E.
GG. "MK Rail", means MK Rail Corporation, a Delaware corporation,
United States of America.
HH. "MK Rail Debt", means the financing that as of the present date
equals US$16,551,000.67 (Sixteen Million Five Hundred Fifty One Thousand and One
67/100 Dollars) extended by MK Rail in favor of the Borrower and for which
payment is subordinated to the payment of the Loan and the Eximbank Loan in
accordance with the Subordination Agreement.
II. "PCGA", means the generally accepted Mexican accounting principles,
applied on a basis consistent with the individual and/or, in its case,
consolidated financial information of the Borrower.
JJ. "Pesos" and the sign "$" means the legal currency of the United
Mexican States.
KK. "Promissory Notes", means the Promissory Notes to be subscribed by
the Borrower in favor of Bancomer to evidence each Loan Disbursement in terms
substantially similar to the form of Promissory Notes attached hereto as Exhibit
"I".
LL. "Regulatory Change", shall have the meaning as defined in paragraph
C, Clause 14 of this Agreement.
MM. "Reserve Fund", means the "Fondo de Reserva" as such term is
defined in the Trust.
NN. "Rights for Collection", means the Borrower's rights to collect the
maintenance fees from Ferrocarriles pursuant to the Maintenance Agreement, as
well as any other right for collection the Borrower has from Ferrocarriles
pursuant to the Maintenance Agreement, including, without limiting to, the
rights the Borrower has to receive from Ferrocarriles any amount that
Ferrocarriles must pay the Borrower in the event of default or early termination
of the Maintenance Agreement, pursuant to the Maintenance Agreement and the
Ferrocarriles Agreement.
OO. "Spread", means three (3.00) percentage points.
PP. "Subordination Agreement", means the subordination agreement dated
July 6, 1995 between Bancomer and MK Rail, a copy of which is attached to this
Agreement as Exhibit "F", through which MK Rail agrees to subordinate the
payment of MK Rail Debt to the payment of the Loan and the Eximbank Loan.
QQ. "Taxes", means whatever taxes, tributes, contributions, charges,
deductions or retention of any nature that are imposed or made at any time by
any authority.
RR. "Technical Assistance Agreement", means the Technical Assistance
Agreement dated January 1, 1995 between the Borrower and MK Rail, and under
which MK Rail will provide technical assistance to the Borrower in order for it
to comply with the terms and conditions of the Maintenance Agreement, a copy of
which is attached to this Agreement as Exhibit D.
SS. "Technical Committee", means the "Comite Tecnico" as such term is
defined in the Trust.
TT. "Technical Supervisor", shall have the meaning ascribed in the
Trust Agreement.
UU. "Technical Supervisor's Certificate", means each of the
certificates issued by the Technical Supervisor with respect to the work and
services performed by the Borrower in accordance with the Maintenance Contract,
substantially in the form of Exhibit "C" to this Agreement.
VV. "Trust", means the administration, guaranty and payment trust dated
July 6, 1995 and amended by means of an amending agreement dated December 13,
1996, incorporated by the Borrower, copy of which is attached hereto as Exhibit
"G", under which the Borrower contributed the Rights for Collection and, when
applicable, the Additional Income in accordance with the terms of this agreement
and the Eximbank Agreement, to guarantee its payment obligations derived
hereunder and under the Eximbank Agreement.
The terms defined in accordance with this Agreement are expressed in singular as
well as plural and they refer to generic as well as all generics. The references
in this Agreement to Recitals, Sections, Paragraphs or Exhibits means the
Recitals, Sections, Paragraphs or Exhibits of or in reference to this Agreement.
Section 2. Amount of the Loan. Bancomer hereby establishes the Loan,
upon the terms and conditions set forth in this Agreement, in favor of the
Borrower in an amount of up to U.S.$3,500,000.00 (Three Million Five Hundred
00/100 Dollars), which amount does not include interest, commissions, nor
expenses derived thereof.
Section 3. Use of Proceeds. The Loan shall be applied by the Borrower
only for financing of up to 75% (seventy five percent) of cost of investments in
shops and supply centers owned by Ferrocarriles' in accordance with the
Maintenance Contract and the Construction and Refurbishing Program subsequent to
October 31, 1996, but prior to the Consolidation Date.
Section 4. Disbursement Period. The Borrower may disburse all of the
Loan, in up to three Loan Disbursements, during the period that shall begin on
the date hereof and shall end on the Consolidation (hereinafter referred to as
the "Disbursement Period").
Section 5. Loan Disbursement. During the Disbursement Period
established in Section 4 above, the Borrower shall notify Bancomer in writing
five (5) Business Days in advance, of its intention to make a Loan Disbursement,
specifying (i) the amount of such Loan Disbursement, and (ii) the date on which
the Loan Disbursement is to be made. In the event all of the conditions
precedent established in (i) Section 7 of this Agreement for the first Loan
Disbursement, and (ii) Section 8 for subsequent Loan Disbursements, have been
satisfied and that the Promissory Notes referred to in Section 6 hereof is under
terms and conditions satisfactory to Bancomer, then Bancomer will disburse to
the Borrower the Loan Disbursement on the date requested by the Borrower, by
deposit of the corresponding proceeds in the bank account indicated by the
borrower to Bancomer for such purpose in the notification mentioned in this
section.
Section 6. Promissory Notes. Simultaneously with the notice referred to
in Section 5 hereof, the Borrower shall furnish Bancomer with Promissory Notes
in order to evidence the Loan Disbursement, which: (i) shall be in an amount of
principal equal to the Loan Disbursement; (ii) shall include as interest payment
dates the Interest Payment Dates; and (iii) shall have as a maturity date the
Consolidation Date.
Similarly, and subsequent to the Consolidation Date, the Borrower shall be
obligated to document the Loan Disbursements with new Promissory Notes such that
said notes reflect the Interest Rate and Loan Repayment Dates applicable to the
Interest Periods subsequent to the Consolidation Date. The parties agree that
the documentation of the Loan Disbursements with new Promissory Notes shall in
no event be interpreted as a novation of any of the obligations of the parties
to this Agreement.
Section 7. Conditions Precedent for the First Loan Disbursement. The
obligation of Bancomer to disburse the first Loan Disbursement shall be subject
to the prior satisfaction of the following conditions precedent, or to
Bancomer's waiver in writing thereof:
A. Bancomer and CIBC have received from the Borrower the documentation
required in conformance with the policies and guidelines of CIBC for the first
disbursement of the loan and such documentation shall be satisfactory to
Bancomer and CIBC. In any case, Bancomer will inform the Borrower within ten
(10) Business Days that the Borrower has furnished Bancomer with the
documentation that is requested in accordance with the policies and guidelines
of CIBC and if such documentation complies with the policies and guidelines of
CIBC.
B. The Line of Credit is open and available in favor of Bancomer.
C. Bancomer has received from CIBC the Funds from the first Loan
Disbursement with the understanding, however, that if CIBC suspends funding for
whatever and such funding is not renewed within the Disbursement Period,
Bancomer will not be obliged to make the first Loan Disbursement without any
responsibility on the part of Bancomer, except as provided in the first
paragraph of Clause 12 of this Agreement.
D. Bancomer shall have received, to its entire satisfaction, a copy,
certified by the Secretary of the Board of Directors of the Borrower, of (i) the
current by-laws of the Borrower and, (ii) the power of attorney granted by the
Borrower to its corresponding representative in order to legally enter into this
Agreement and execute the Promissory Notes.
E. Bancomer has received from the Borrower a certificate executed by
the Corporate Secretary in which is specified the name and shows the signatures
of the person(s) authorized by the Borrower to sign this Agreement and the
Promissory Notes for the first and subsequent Loan Disbursements.
F. Bancomer shall have received to its entire satisfaction the
notification referred to in Section 5 of this Agreement and the Promissory Note
evidencing the first Loan Disbursement.
G. Bancomer has received to its entire satisfaction: (i) the Comfort
Letter duly signed by MK Rail and (ii) the Subordination Agreement.
H. Bancomer shall have received to its entire satisfaction the
certificate issued by the Technical Supervisor pursuant to the first Loan
Disbursement which certifies that the Technical Supervisor has: (i) reviewed and
inspected the works and services in question; (ii) confirmed that the works and
services in question comply with the terms and conditions of the Maintenance
Contract; and (iii) certifies the amount of the costs eligible for works to be
financed with the first Loan Disbursement.
I. The Trust and its amendments shall have been duly incorporated and
be in full force and effect to Bancomer's satisfaction.
J. The Maintenance Contract and the Ferrocarriles Agreement should be
validly existing and on terms and conditions satisfactory to Bancomer.
K. The amount of the first Loan Disbursement to be disbursed should not
exceed the maximum amount
of the Loan.
L. The representations and warranties of the Borrower contained in
Section 17 of this Agreement hereof shall continue to be true and correct as of
the date when the first Loan Disbursement shall occur, as if they were made on
such date, and the Borrower shall so certify in writing in the event Bancomer
requests the Borrower to do so.
M. No Event of Default and no event which but for the giving of notice
or the lapse of time or both would constitute an Event of Default exists or will
exist after giving effect to the Loan Disbursement.
N. Bancomer shall have received to its entire satisfaction the
documentation for the Technical Assistance Agreement and such Agreement is in
full force and effect and will continue to exist for a term at least equal to
the Maintenance Contract.
O. Bancomer has received the Program of Construction and Refurbishing
on terms satisfactory to Bancomer.
P. The Borrower has paid all commissions due to be paid before the date
of the first Loan Disbursement in accordance with Section 12 of this Agreement
as well as the costs and expenses that are referred to in Section 30 of this
Agreement.
Q. The Borrower shall have evidenced, to Bancomer's satisfaction, that
the Maintenance Agreement has a minimum duration of at least eight (8) years
from the date of its commencement, and that the Borrower shall evidence to
Bancomer's satisfaction that there is no breach caused by the Borrower or
Ferrocarriles under the Maintenance Agreement.
R. Bancomer shall have received to its entire satisfaction a copy of
the insurance policies which the Borrower must maintain in accordance with
Section 19 of this Agreement.
Section 8. Conditions Precedent for Subsequent Loan Disbursements. The
obligation of Bancomer to disburse the subsequent Loan Disbursements shall be
subject to the prior satisfaction of the following conditions precedent, or to
Bancomer's waiver in writing thereof:
A. Bancomer and CIBC have received from the Borrower whatever
documentation is required in conformance with the policies and guidelines of
CIBC for the subsequent disbursements of the loan and such documentation shall
be satisfactory to Bancomer and CIBC. In any case, Bancomer will inform the
Borrower within ten (10) Business Days that the Borrower has furnished Bancomer
with the documentation that is requested in accordance with the policies and
guidelines of CIBC and if such documentation complies with the policies and
guidelines of CIBC.
B. The Line of Credit is open and available in favor of Bancomer.
C. Bancomer has received from CIBC the Funds for the subsequent Loan
Disbursements: with the understanding, however, that if CIBC suspends funding of
the Loan for whatever reason, Bancomer will not be obliged to make the
subsequent Loan Disbursements without any responsibility on the part of
Bancomer, except as provided in the first paragraphs of Section 12 of this
Agreement.
D. Bancomer shall have received to its entire satisfaction each one of
the Promissory Note evidencing the subsequent Loan Disbursements.
E. The amount of the Loan Disbursements to be disbursed does not exceed
the maximum amount of the Loan, and that this disbursement will not create as a
consequence that the total balance of all the Loan Disbursements from the date
of the first disbursement through to the subsequent disbursements should not
exceed the maximum amount of the Loan.
F. Bancomer shall have received to its entire satisfaction, the
certificate issued by the Technical Supervisor pursuant to the subsequent Loan
Disbursements which certifies that the Technical Supervisor has: (i) reviewed
and inspected the works and services in question in accordance with the
applicable terms and condition of the Maintenance Contract; (ii) confirmed that
the works and services in question comply with the terms and conditions of the
Maintenance Contract; and (iii) certifies the amount of the costs eligible for
works to be financed with the subsequent Loan Disbursements.
G. The Borrower has paid all commissions due to be paid before the date
of the first Loan Disbursement in accordance with Section 12 of this Agreement
and which should be paid during the term of this Agreement, as well as the costs
and expensed referred to in Section 30 of this Agreement,
H. The representations and warranties of the Borrower contained in
Section 17 of this Agreement hereof shall continue to be true and correct as of
the date of the subsequent Loan Disbursements, as if they were made on such
date, and the Borrower shall so certify in writing in the event Bancomer
requests the Borrower to do so.
I. No Event of Default and no event which but for the giving of notice
or the lapse of time or both would constitute an Event of Default exists or will
exist after giving effect to the Loan Disbursement.
Section 9. Payments of Principal. The Loan shall be paid to Bancomer in
ten (10) semi-annual and successive installments of principal, payable on each
Principal Payment Date, each of such installments in the amounts set forth in
Exhibit "K" attached hereto; provided, however, that the Borrower shall pay the
total amount outstanding on the Loan on the last Principal Payment Date.
Section 10. Prepayment. The Borrower may not prepay the Loan in full or
in part without Bancomer's prior written consent. In the event the Borrower
wishes to obtain such consent, and unless Bancomer otherwise agrees in writing:
(i) the Borrower shall deliver to Bancomer in writing an irrevocable notice to
prepay the Loan, at least thirty (30) Calendar Days before the date on which it
intends to prepay the Loan; (ii) any prepayment of the Loan shall be made on an
Interest Payment Date; (iii) the Borrower shall pay all interest due and accrued
on the Loan's unpaid principal amount; (iv) the Borrower shall pay all
commissions owing and payable on the date on which the Borrower wishes to make a
prepayment; (v) any prepayment must be in an amount equal to or in any multiple
of US$100,000.00 (One Hundred Thousand 00/100 Dollars), and (vi) partial
prepayments shall be applied by Bancomer, at its sole discretion, to the payment
of installments of principal in inverse order of maturity.
At any time Bancomer agrees to receive from the Borrower a partial or
total prepayment as referred to in this Section, the Borrower shall pay to
Bancomer a commission or premium to be determined by applying to said amount,
the following percentages:
A. Two and one half percent (2.5%) in the event the prepayment is made
during the period between (i) the date on which the first Loan Disbursement is
made and, (ii) the last Calendar Day of the period ending two years from the
date of the first Loan Disbursement; or
B. Two percent (2%) in the event the prepayment is made during the
period between (i) the Calendar Day immediately succeeding the last Calendar Day
of a period of two (2) calendar years as from the date of the first Loan
Disbursement and, (ii) the last day of a calendar period of five (5) years
counted from the first Loan Disbursement date; and
C. All and each of the commissions that are charged by CIBC to Bancomer
in relation to the prepayment of the CIBC Line of Credit which Bancomer notifies
to the Borrower.
Section 11. Interest. From and after the Loan Disbursement and until
the last Principal Payment Date is made, the Borrower shall pay to Bancomer
ordinary interest on the unpaid principal amount of Loan on each Interest
Payment Date for each Interest Period, at a rate equal at all times during each
Interest Period to the Interest Rate; provided, however, that if any amount of
principal is not paid in full when due, the unpaid amount of principal shall
bear interest from the date on which payment should have been made until said
amount is paid in full, at a rate equal to the Default Rate, and shall be
payable upon demand.
Ordinary and delinquent interest rates shall be calculated based on a
year of 360 days and the actual number of days elapsed.
Section 12. Commissions. The Borrower shall be obligated under this
Agreement to pay the following commissions; provided, however, that if for any
reason CIBC shall suspend the Line of Credit, and as a result, the Borrower is
not able to make Loan Disbursements, then Bancomer shall reimburse the Borrower
the amounts which represent commissions paid to Bancomer as mentioned below on a
proportional basis to the amounts which the Borrower has effectively not
disbursed; and if no Loan Disbursements have been made, Bancomer shall reimburse
to the Borrower the commissions which have been paid:
A. An opening commission equivalent to zero point fifty percent (0.50%)
on the total amount of the Loan, payable to Bancomer on December 30, 1996.
B. A structuring commission equivalent to one percent (1.00%) on the
total amount of the Loan,
payable to Bancomer on December 30, 1996.
C. An opening commission to be charged by CIBC equal to zero point
fifty percent (0.50%) of the total amount of the Loan, payable on the dates
indicated by CIBC.
D. A commitment fee to be charged by CIBC which shall be equal to zero
point fifty percent (0.50%) per annum on the undisbursed balance of the Loan,
payable on the dates indicated by CIBC.
The commissions described in paragraphs C and D of this section shall be paid by
the Borrower only if they are charged by CIBC.
Section 13. Alternate Interest Rate.
A. If prior to the commencement of any Interest Period, Bancomer
receives notice from CIBC that (i) in CIBC's ordinary course of business there
is no London interbank market for deposits in Dollars available to CIBC in
amounts and for terms sufficient to make any Loan Disbursement; or (ii) due to
circumstances affecting the London interbank market, adequate methods do not
exist to determine Libor for the respective Interest Period; or (iii) Libor does
not reflect CIBC's actual cost for funding the Loan or disbursement or
maintenance of the respective Loan disbursement; and (iv) that for any of the
above-mentioned reasons CIBC uses the rate determined by CIBC in such notice to
substitute for Libor in determining the Funding Rate (the "Substitute Funding
Rate"), then Bancomer shall notify the Borrower of such circumstances and the
Borrower agrees to pay to Bancomer, during the entire period for which the
circumstances indicated by CIBC persist, interest on the unpaid balance of the
Loan at the Substitute Funding Rate plus the Spread.
B. If at any time during the term of this Agreement Bancomer receives
notification from CIBC that in the reasonable judgment of CIBC, it is illegal to
disburse or maintain any Loan Disbursement based upon Libor, and for this
reason, CIBC shall use the Substitute Funding Rate as set forth in such notice,
then Bancomer, accordingly, shall notify the Borrower of these circumstances,
and the Borrower agrees to pay to Bancomer, during the entire time during which
the circumstances indicated by CIBC continue, interest on the unpaid balance of
the Loan at the Substitute Funding Rate plus the Spread.
C. Within ten (10) Calendar Days after the notice referred to in the
previous Paragraph A and/or B above, the Borrower may give notice (which shall
be irrevocable) to Bancomer, of its decision to prepay the Loan, together with
the accrued and unpaid interest as of such date, which will be calculated at the
Interest Rate in effect as of the date on which the Borrower receives the notice
referred to in Paragraph A and/or B above, in which case the Borrower shall pay
the total unpaid principal amount of the Loan accrued interest thereon and other
unpaid amounts payable to Bancomer as provided hereof and as provided under the
Promissory Notes in a term that shall not exceed twenty (20) Calendar Days as
from the date of the notice.
D. In any of the events referred to in Paragraphs A and/or B above,
once the Borrower receives notice in writing from Bancomer and/or CIBC that the
circumstances referred to in said Paragraphs A and/or B have ceased to exist, at
the end of the then current Interest Period, interest on the Loan shall cease to
be calculated using the Substitute Funding Rate and shall be calculated at the
Interest Rate during the immediately succeeding Interest Period for the Loan.
E. In any of the events referred to in Paragraphs A and/or B above, the
Borrower shall substitute the Promissory Notes evidencing the Loan
Disbursements, in order to reflect the terms and conditions of interest rates
and other conditions applicable to the Loan from then on.
Section 14. Increased Costs and Funding Losses.
A. If by virtue of any Regulatory Change which (i) changes the taxable
basis of any amount under the Loan payable to Bancomer by the Borrower and/or by
Bancomer to CIBC (except for taxes charged on the total net income of Bancomer
and/or CIBC); (ii) imposes or modifies any reserves, deposits, taxes or other
conditions affecting Bancomer and/or CIBC; or (iii) imposes any other condition
which affects this Agreement or the Promissory Notes, or there is an increase in
the cost to Bancomer and/or CIBC of opening, maintaining, or disbursing the
Loan, the Borrower shall pay to Bancomer upon demand by means of prior notice
from Bancomer, reasonable and documentable additional amounts which are required
to compensate Bancomer and/or CIBC for such increase in the cost of opening,
maintaining or disbursing the Loan.
B. Notwithstanding the provisions of Paragraph A above, if CIBC at any
time notifies Bancomer that Bancomer must pay to CIBC any increase in the cost
of opening, disbursing or maintaining the Line of Credit from CIBC, which CIBC
determines under the Line of Credit, then Bancomer shall so notify the Borrower
and the Borrower agrees to reimburse Bancomer upon demand the amount which
Bancomer is obligated to pay to CIBC in accordance with this notification.
C. For the purposes of this Section, "Regulatory Change" shall mean any
change or modification to, or the introduction of, any law, regulation, circular
or other provision issued by any authority of the United States of America
and/or the United Mexican States applicable to Bancomer and/or CIBC or to any of
their respective offices charges with administering and funding the Loan.
D. Bancomer shall use its best efforts to avoid an increase in costs
due to Regulatory Changes if possible by changing the office charges with
administering the Loan and if by doing so, Bancomer does not incur any
additional cost or expense.
E. Any request for payment or reimbursement notified to the Borrower
under this Section shall be delivered together with a certificate issued by CIBC
and/or Bancomer setting forth in reasonable detail the bases for calculation of
the amounts to be paid or reimbursed, and such certificate, absent manifest
error shall be conclusive and binding upon the Borrower.
F. Any increase in the cost to Bancomer and/or CIBC of opening,
maintaining or disbursing the Loan which due to reasons attributable to Bancomer
results in the imposition by Banco de Mexico on Bancomer of any fine for the
failure of Bancomer to comply with any law or with the regulations issued by
Banco de Mexico shall not be considered an increase in cost to Bancomer.
Section 15. Taxes.
A. All amounts that the Borrower shall pay for amortization of
principal of the Loan, ordinary and default interest as the case may be,
commissions, expenses and costs, and whatever other amount to be paid by the
Borrower to Bancomer in accordance with this Agreement and the Promissory Notes
will be paid without deduction for and free of any Taxes, except for Taxes on
the Mexican income that is charged on the total net income of Bancomer and that
Bancomer must pay directly under applicable law.
B. In the case that the Borrower is obliged to make any withholding on
the payments of principal, ordinary or default interest as the case may be,
commissions, expenses and costs and any other quantity to be paid to Bancomer in
accordance with this Agreement and the Promissory Notes for reason of Taxes or
any other reason, the Borrower will pay to Bancomer the additional amounts that
are required so that Bancomer receives the amount that it would have received if
there had not been such withholding.
C. All Taxes will be paid by the Borrower for its own account and not
later than the date on which such corresponding Taxes are due and payable. The
Borrower will also furnish to Bancomer the original receipts that evidence the
payment of such Taxes within five (5) working days following the date on which
such Taxes were due and payable.
D. The Borrower will indemnify Bancomer for all charges to Bancomer
which arise because of such Taxes and will be obliged to reimburse Bancomer on
demand for any quantity that Bancomer will be obligated to pay for reason of
such Taxes caused by the transaction contemplated in this Agreement and the
Promissory Notes.
E. The obligations of the Borrower derived from this Section will
continue to exist for a period determined by the Taxes independent of whether
the Loan is totally paid prior to the term of such period.
Section 16. Place and Form of Payment.
The Loan shall be repaid by the Borrower precisely on the Loan
Repayment Dates and interest on the Loan shall be paid by the Borrower to
Bancomer on each Interest Payment Date.
All amounts of principal, ordinary interest, penalty interest,
commissions and any other amount payable by the Borrower to Bancomer hereunder
and under the Promissory Notes shall be paid exclusively in Dollars in
immediately available funds, without any deduction, retention or setoff of any
nature whatsoever by crediting the account No. 400 019042 of Bancomer, S.A., at
Chase Manhattan Bank, N.A. ABA No. 021 000 128 New York, New York, United States
of America (or in any other place that Bancomer indicates to the Borrower with
prior notice) no later than 11:00 (eleven) o'clock (New York time) on the date
on which the corresponding payment is due.
Section 17. Representations and Warranties of the Borrower. The
Borrower represents and warrants to Bancomer that:
A. The Borrower is a corporation duly organized and validly existing
under the laws of the United Mexican States.
B. The execution, delivery and performance by the Borrower of this Loan
Agreement, the Promissory Notes and the Trust and the Maintenance Contract (i)
do not and will not violate any provision of any applicable law of the United
Mexican States or of any political subdivision thereof; (ii) do not and will not
result in the breach of, or constitute a default under, or require any consent
under the charter and by-laws of the Borrower, or any indenture, bank loan or
credit agreement, mortgage, or other agreement or instrument to which the
Borrower is a party or by which the Borrower or any of its respective properties
may be bound or affected, and (iii) when duly executed and delivered by the
Borrower, will constitute the valid, binding and enforceable obligations of the
Borrower in accordance with its respective terms, except as limited by the laws
relating to insolvency or bankruptcy.
C. All authorizations, registrations and approvals of, or filings or
registrations with the United Mexican States, or of any governmental agency
thereof or therein which are necessary or advisable (i) for the execution,
delivery and performance of this Agreement and the Promissory Notes, and (ii)
the validity, binding effect and enforceability of this Agreement and the
Promissory Notes have been obtained and are binding and enforceable and in full
force and effect.
D. The Borrower is in compliance with the payment of all taxes and
legal and contract liabilities, which non-compliance would affect substantially
and adversely its financial standing.
E. There is no action, suit or proceeding at law by or before any
governmental agency or authority now pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower, or any of its respective
properties or rights, which if adversely determined would substantially impair
the right of the Borrower to carry on its business substantially as now
conducted, or would materially adversely affect the financial condition of the
Borrower.
F. The audited financial statements of the Borrower as of December 31,
1995, reflect in an accurate and complete manner, its financial standing as of
such date, were prepared in accordance with PCGA, and there has been no
important adverse change in its financial standing since the date of those
financial statements and until the date of this Agreement.
Section 18. Covenants of the Borrower. Until payment in full of the
Loan and the Promissory Notes and performance of all other obligations of the
Borrower hereunder and under the Promissory Notes, the Borrower agrees that,
unless Bancomer shall otherwise consent in writing:
A. To furnish Bancomer within sixty (60) Calendar Days following the
end of every quarter of each accounting period, quarterly financial statements
(balance sheet, statement of profits and losses and surplus) duly certified by
its Director General and/or Finance Director.
B. To furnish Bancomer within one hundred twenty (120) Calendar Days
following the end of their respective fiscal year, annual financial statements
(balance sheet, statement of profits and losses and surplus) duly audited by an
independent auditor.
C. To provide Bancomer within forty five (45) Calendar Days after the
closing of each one of its accounting period, an annual certificate granted by
its insurance agent acceptable to Bancomer, confirming that their assets are
duly insured pursuant hereof.
D. To provide Bancomer within forty-five (45) calendar days after the
end of each quarter with a comparison of the actual costs of operation and
administration of the Borrower against the budgeted costs of operation and
administration through which the Technical Committee authorized the payments
from the Trust for such matters.
E. To provide Bancomer with prompt notice, under no circumstances later
than ten (10) days after it has had itself knowledge of, of any event that
represents, or with the lapse of time may represent an Event of Default,
together with a declaration including the details of such event, and the action
proposed to be taken by the Borrower with respect thereto.
F. Maintain its accounting information and statements in accordance
with PCGA.
G. To provide Bancomer with all of the relevant information pursuant to
its business and financial standing as may be reasonably requested by Bancomer,
in the understanding that Bancomer might inspect its business, request for
balance sheets or accounting statements, data or documents, and to make or cause
to make appraisals of its assets whenever it deems it necessary to verify
compliance of the obligations of the Borrower derived hereof, the Borrower being
obligated to provide all of the facilities necessary to such effect.
H. Provide to Bancomer within forty-five (45) calendar days after the
end of each quarter, a Financial Supervisor report which indicates the manner
for calculation during the quarter of the corresponding Reserve Fund and
Financial Ratios.
I. To preserve and maintain its corporate status in full force and
effect, as well as all of its rights, licenses, permits, authorizations,
certifications, registrations and approvals required for the operation of all of
its business in each and every jurisdiction where it operate.
J. To upkeep all of the necessary assets for its business' operations
and to procure and provide said assets with all the services, maintenance,
repairs, substitutions, additions and/or upgrading deemed necessary or
convenient.
K. To obtain all of the licenses, authorizations, permits,
certifications, registrations or approvals required hereinafter to allow for the
adequate performance of its obligations derived hereunder, the Promissory Notes,
and all laws, regulations, decrees, agreements and applicable decrees issued by
any governmental authority.
L. To pay on time all of the fiscal debts of its business and the
quotas of the Mexican Social Security Institute and of the National Institute
for Workers Housing Development, except for those that are in dispute in good
faith by the Borrower, through the right procedures and by previously
establishing the corresponding reserves.
M. To duly comply with all of their respective contractual obligations
including, without being limited to, the Maintenance Agreement.
N. To furnish Bancomer with this Agreement duly ratified before a
Notary Public, within ten (10) Business Days after execution hereof.
O. To furnish Bancomer, within sixty (60) calendar days following the
end of each semester of each and every fiscal year, a letter signed by the
Director General or Director of Finance which certifies that the Borrower is not
under breach of contract pursuant to the Maintenance Agreement.
P. To provide Bancomer, within fifteen (15) calendar days after the end
of each calendar month, financial information with respect to the Trust and the
business of the Borrower, so that Bancomer may determine if the Borrower is
complying with the Financial Ratios that are referred to in Exhibit "H" hereto.
Q. To provide to Bancomer, within fifteen (15) calendar days after the
end of each quarterly financial reporting period, a report prepared by the
Technical Supervisor covering the progress of the Program of Construction and
Remodeling and the services carried out on the equipment in accordance with the
Maintenance Contract.
R. To secure the insurance policies referred to in Section 19 hereof.
S. Maintain the Financial Ratios referred to in Exhibit "H" attached
hereto, for the periods referred in said Exhibit.
T. Maintain the Reserve Fund, during the entire term of the Agreement,
at an average monthly balance equal to the greater of (i) ten percent (10%) of
the sum of the outstanding balance of principal of the Loan and the principal of
the Eximbank Loan at the time when the Reserve Fund balance is calculated, and
(ii) the sum of the amounts of interest and principal of the Loan and the and
Eximbank Loan due and payable by the Borrower to Bancomer on the Interest
Payment Date and the Principal Payment Date which falls within one hundred and
fifty (150) calendar days after the date on which the Reserve Fund balance is
calculated, multiplied by one point twenty-five (1.25) times; provided that
during the first six (6) months following the last Loan Disbursement, the
amounts of the debt service under this Agreement shall be included in the
calculation of the required levels of the Reserve Fund, and that following the
end of such six (6) month period, such amounts shall not be included in this
calculation. However, if the Borrower does not comply with the Financial Ratios
in such non-compliance is not cured within a period of thirty (30) calendar days
from the date on which Bancomer notifies the Borrower of such non-compliance,
the Borrower shall be obligated to include such debt service in the calculation
referred to above until the Borrower is able to demonstrate, to Bancomer's
satisfaction, that it is again in compliance with the Financial Ratios.
U. Commit to the Trust Additional Income within five (5) calendar days
after the date that Bancomer notifies the Borrower, in case that, at whatever
time during the term of this Agreement, the Borrower does not comply with the
financial ratios that are referred to in paragraph S of Section 18, or does not
comply with the maintenance of the Reserve Fund minimum balance referred to in
paragraph T of Section 18.
V. Comply with the obligations relating to the utilization of goods
financed under this Agreement as may be specified by CIBC and requested of the
Borrower by Bancomer.
W. To refrain from:
(i) paying dividends, without the prior written consent of
Bancomer.
(ii) making payments of whatever amount with respect to the
MK Rail Debt without the prior written consent of Bancomer.
(iii) reducing its capital stock.
(iv) modifying its corporate purpose or change its line of
business.
(v) filing for liquidation or dissolution.
(vi) performing, or refraining from any action, whenever the
consequence of it is to waive in advance the term for the
fulfillment of any of its contract liabilities.
(vii) incurring Debt for its charge for (i) an aggregate
amount greater than US$1,000,000 (One Million Dollars) or its
equivalent in any other currency, or (ii) terms greater than one
(1) year, without the prior written consent of Bancomer, except
for indebtedness mandated by law or in the normal course of
business.
(viii) agree to any amendment to or modification of, waive
any material right under, or terminate the Maintenance Agreement
and/or the Trust, without the prior written authorization of
Bancomer, which authorization shall not be unreasonably denied.
(ix) setoff in any way any amount which is owed to it under
the Maintenance Agreement; provided that (i) if Ferrocarriles
shall make a setoff against any of the Borrower's invoices for an
amount greater than ten percent (10%) of such invoice, the
Borrower shall obtain from Bancomer within thirty (30) calendar
days after the date on which such setoff has occurred, Bancomer's
approval in writing for this setoff, and (ii) if the Borrower
shall not obtain the authorization from Bancomer specified in
clause (i) above within such period, Bancomer may declare the
existence of an Event of Acceleration."
X. Maintain a commercial credit account with MK Rail, with respect to
the purchase of materials and equipment from MK Rail or any of its
subsidiaries or affiliates, with a minimum balance equal to the greater
of (i) the sum of U.S. $1,500,000.00 (One Million Five Hundred Thousand
and 00/100 Dollars), and (ii) the amount which corresponds to purchases
of material and equipment from MK Rail in the normal course of its
operation during a period of 45 (forty-five) calendar days; provided
however that if the minimum balance in this account shall be reduced
for any purpose then the Borrower shall be obligated to increase the
minimum balance in the reserve fund up to the amount equal to the sum
of amounts of principal and interest under the Loan due and payable to
the Borrower to Bancomer on the Interest Payment Dates and Principal
Payment Dates, multiplied by one point five (1.5) times; provided,
however, that the commercial credit account shall not be considered as
part of the MK Rail Debt."
Section 19. Insurance.
A. The Borrower shall evidence to Bancomer, to Bancomer's satisfaction,
within a thirty (30) Calendar Day term as from the date of this Agreement, that
the Borrower has secured the insurance policies referred to in the Maintenance
Agreement, and that such insurance policies are in full force and effect.
B. The Borrower shall evidence to the satisfaction of Bancomer the
payment of the premiums for such insurance with the corresponding receipts of
payment, within two (2) Business Days after the day it receives the
corresponding request from Bancomer.
C. Notwithstanding the provisions of Section 20 of this Agreement, in
the event that for any reason the Borrower fails to comply with any of its
obligations established under this Section, Bancomer shall be expressly
authorized to contract such insurance on behalf of the Borrower, and pay for all
of the amounts required to keep in effect said insurance, in which case the
Borrower shall pay, on demand, for the amounts spent by Bancomer for such
concepts, in the understanding that such amounts shall cause interest at the
Default Interest Rate calculated at the CPP rate multiplied by three (3), from
the date such payment is made by Bancomer and until such payment when they are
totally paid for; provided, however, that the authorization to Bancomer to
contract insurance as set forth in this Section is not an obligation and in the
case that such insurance is not contracted, Bancomer shall have no
responsibility therefore. In any case, Bancomer shall notify the Borrower as to
any contraction of insurance referred to in this Section within five (5)
Business Days after such insurance has been contracted for.
For the purposes of this Paragraph C of this Section 19, "Tasa CPP"
shall mean the last Costo Percentual Promedio de Captacion for purposes of the
rate and, in its turn, the spread of interest on the liabilities in national
currency corresponding to loans to companies and individuals, deposited for
terms (except savings), as if appropriate, bank bonds issued by the Central Bank
of Mexico that the Central Bank of Mexico publishes in the Official Diary of the
Federation with a date prior to when the Borrower fails to make its payment
obligation that is referred to in the previous paragraph; with the understanding
that if at any time the Central Bank of Mexico does not publish said Costo
Porcentual Promedio de Captacion, then the last Costo Porcentual Promedio de
Captacion published by the Central Bank of Mexico in the Official Diary of the
Mexican Federation will be used or the index which replaces it.
Section 20. Events of Default. Bancomer may declare an event of default
during the term of the payment of the Loan, its principal, ordinary interest,
commissions, costs and expenses and whatever amount is to be paid by the
Borrower to Bancomer in accordance with this Agreement and the Promissory Notes,
without demand, presentment, notice of dishonor and protest, in which case all
such amounts will be due and payable on demand if any of the following events
(identified in this Agreement as "Events of Default") shall occur and any curing
period available to the Borrower to remedy such Events of Default has
transpired:
A. Default by the Borrower in the payment, when due, of any installment
of principal or interest or any commissions whatsoever, costs or expenses in
connection with the Loan or the Promissory Notes, and such event is not remedied
within a term of five (5) calendar days as from the date any such payment is
due.
B. If the Borrower shall fail to comply with any of its respective
obligations derived hereunder, under the Agreement, Promissory Notes or under
the Trust, including those set forth in this Section or in Section 18 of this
Agreement within a term of forty-five (45) Business Days following the date on
which Bancomer notifies the Borrower of such noncompliance.
C. If any of the representation and/or warranties of, or any
information provided to Bancomer by the Borrower under the terms of this
Agreement shall prove to be untrue, incorrect or incomplete.
D. If the Loan's proceeds shall totally or partially be used for
purposes different to those established under this Agreement, or if the
Borrower's fixed assets shall be disposed in any way different to those provided
under this Agreement.
E. If fixed assets of the Borrower, with a value equal or higher to ten
percent (10%) of the total value of its respective fixed assets, shall be
condemned, seized or appropriated in full or in part by legal, administrative or
any other authorities, except for when such seizure or appropriation, in
Bancomer's sole judgment, is contrary to law, or could be contested by the
Borrower in good faith with possibilities for success through rightful
procedures.
F. If the Borrower's fixed assets are not insured as provided for in
this Agreement, or if the Borrower fails to comply with any of its obligations
under Section 19 of this Agreement.
G. If the Borrower shall fail to pay without cause any fiscal debt of
its respective business or the corresponding fees to the Mexican Social Security
Institute or the Institute for Workers National Housing Development, or if the
business of the Borrower shall be disrupted or shall present conflicts or
conditions of any sort that in Bancomer's reasonable sole judgment affect the
good performance of the business of the Borrower or put in danger its respective
economic or financial standing.
H. If any Event of Default occurs on any other loan authorized by
Bancomer for the Borrower, including the Loan authorized under the Eximbank Loan
Agreement, or if there is an Event of Default authorized by any other creditor
to the Borrower in an amount equal to or greater to US$500,000 (U.S. Dollar Five
Hundred Dollars), or its equivalent in any other currency.
I. If the Borrower shall pay dividends, make a payment with respect to
the MK Rail debt, decrease its respective capital stock, modify its respective
corporate purpose or change its respective line of business, file for
dissolution or liquidation, or merge with another corporation, without the prior
written authorization of Bancomer.
J. If there shall be instituted a judicial procedure for involuntary
bankruptcy against the Borrower or if any judicial authority shall designate a
custodian, under the applicable provisions of any bankruptcy law and such
proceeding or designation is not declared improper within the periods which are
applicable under the respective laws or judicial procedures.
K. If the Borrower begins voluntary proceedings in order to obtain a
suspension of payments, in accordance with any applicable law on such matters,
or consents to institute or proceed with the declaration of the suspension of
payments that would lead to any cessation of any substantial part of its assets
for the benefit of creditors or does not comply in a general manner with any
payment of its debts or obligations, or takes any action that would lead to any
of the above mentioned situations.
L. If the shareholders of the Borrower, which on the date hereof owning
more than fifty percent (50%) of the voting shares of the Borrower and having
the capacity to appoint the majority of the members of the Board of Directors of
the Borrower, shall change or cease to hold direct control over the majority of
the stock with right to vote and/or would cease to have the right to appoint the
majority of the members of the Board of Directors of the Borrower, except if any
of the above causes shall occur with the prior written approval of Bancomer.
M. If the Borrower shall fail to comply to maintain the Financial
Ratios and/or the balance in the Reserve Fund as provided in paragraph S of
Section 18 hereof for a term of three (3) successive calendar months or during a
term that in total sums six (6) months during any calendar year.
N. If Ferrocarriles shall early terminate or rescind the Maintenance
Agreement, in accordance with the provisions thereof.
O. If deviations with respect to the Investment Program of fifteen
percent (15%) with respect to the advancement of investments plus costs, as set
forth in the Investment Program, calculated on a quarterly basis, and if the
same are not clarified by the Borrower within a period of fifteen (15) Business
Days following a request is made by Bancomer for this purpose; provided,
however, that if Ferrocarriles shall accept these deviations for a difference
percentage then such percentage shall be accepted by Bancomer provided that it
should not be greater than fifteen percent (15%)."
P. If the Borrower shall incur in indebtedness without the prior
written consent of Bancomer for (i) an amount greater than US$1,000,000 (U.S.
Dollar One Million) in individual or in aggregate, or its equivalent in any
other currency, or (ii) terms greater than one (1) year, except for those
indebtedness generated by legal mandate or during the normal course of its
business transactions.
Q. If Ferrocarriles shall fail to make the payments corresponding to
the Right to Collection for more than two (2) consecutive occasions.
R. If the Borrower (i) shall fail to comply with its obligations to
maintain the "availability factor" in accordance with the Maintenance Agreement
or (ii) fails to comply with any other of its obligations under the Maintenance
Agreement for a term of two(2) successive months, in such a way that in the
opinion of the Technical Committee, the noncompliance could give Ferrocarriles
the right to terminate or rescind the Maintenance Agreement.
S. If the Technical Assistance Agreement is terminated for any reason.
T. If the Trust and/or Maintenance Agreement shall cease to be in full
force and effect for any reason whatsoever or if the Borrower agrees to any
amendment to or modification of, waives any material right under, or terminates
the Maintenance Agreement, without the prior written authorization of Bancomer
which consent shall not be unreasonably withheld by Bancomer.
U. If the Borrower does not comply with the Reserve Fund balance that
is referred to paragraph T of Section 18 of this Agreement.
V. If the Borrower fails to give to the Trust Additional Income within
the term established in paragraph U of Section 18, or if MK Rail does not comply
with its obligations established in the Comfort Letter within a term of five (5)
calendar days following the date on which Bancomer notifies them of its request.
W. If the Borrower does not pay on time the expenses that are referred
to in Section 30 of this Agreement.
X. Under all those other cases contemplated in this Agreement and by
the applicable laws.
Y. If CIBC requires Bancomer for any reason beyond Bancomer's control
to pay any amount with respect to any disbursement of the Loan.
Z. If the funding of the Line of Credit is suspended for any reason not
attributable to Bancomer for a period greater than sixty (60) calendar days, in
which case the provisions of the first paragraph of Section 12 of this Agreement
shall also be applicable.
AA. If the Borrower does not comply with its obligation to immediately
increase the balance in the Reserve Fund referred to in Paragraph X of Section
18 of this Agreement.
BB. If the Borrower does not comply with its obligation to obtain the
written authorization of Bancomer as provided in clause (ix) of Paragraph W of
Section 18 of this Agreement.
CC. If Ferrocarriles shall make a setoff of any amount which it is to
pay under the Maintenance Agreement against any amount owed in its favor under
any other obligation of the Borrower apart from those resulting from the
Maintenance Agreement."
Section 21. Trust Guaranty. In order to guarantee the punctual payment
when due of each and every one of the obligations of the Borrower hereunder,
under the Eximbank Loan Agreement, under the Promissory Notes and under the
Promissory Notes executed in accordance with this Agreement, the Eximbank Loan
Agreement, and especially to guarantee the punctual payment when due of the
Loan, the Eximbank Loan, its principal, both ordinary and default interest as
well as commissions, costs and expenses, and any and all other amounts payable
by the Borrower to Bancomer including court costs and expenses, if any, and all
other legal consequences and accessories thereon, the Trust is incorporated by
the Borrower in accordance with which contributes the Rights for Collection, in
order to apply such resources to the punctual payment when due of each and every
one of the obligations of the Borrower hereunder and under the Promissory Notes,
and especially to guarantee the punctual payment when due of the Loan, the
Eximbank Loan, its principal, both ordinary and default interest as well as
commissions, costs and expenses interest, and any and all other amounts payable
by the Borrower to Bancomer, court costs and expenses, if any, and all other
legal consequences and accessories thereon.
Section 22. Monetary Conversion.
A. If for the purpose of obtaining a judgment in any court it is
necessary to convert any amount of Dollars owed under this Agreement or the
Promissory Notes into any other currency, the rate of exchange to be used shall
be that which, in accordance with normal banking practices, Bancomer may acquire
Dollars with such currency on the Business Day immediately preceding the day on
which the judgment is obtained.
B. The payment obligations of the Borrower with respect to any amount
owed by the Borrower to Bancomer under the Loan in accordance with this
Agreement and the Promissory Notes will be complied with and satisfied,
notwithstanding any judgment in any other currency, only to the extent that on
the Business Day succeeding the day on which Bancomer receives any amount which
has been declared due and payable in any other currency under the respective
judgment, Bancomer may acquire Dollars with such other currency under normal
banking practices. If the amount of Dollars acquired in this manner is less than
the amount originally owed to Bancomer by the Borrower in accordance with this
Agreement and the Promissory Notes, the Borrower shall be obligated to, as a
separate obligation independent and irrespective of any judgment, indemnify
Bancomer for any loss which it may have incurred as a result of the Borrower's
obligations under this Agreement and the Promissory Notes.
Section 23. Restriction. In accordance with the provisions of article
294 of the General Law of Securities and Credit Operations of the United Mexican
States, the parties may agree, that Bancomer may be entitled to restrict the
disbursement period of the Loan and the principal amount of the Loan, or such
disbursement period of the Loan and the principal amount of the Loan at the same
time due to force majeure.
Section 24. Successors and Assigns. The Borrower cannot seed its rights
or obligations under this Agreement or the Promissory Notes.
Bancomer may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in the Loan;
provided however, that Bancomer cannot grant interest participations with
respect to the Loan (i) to any person or entity that competes in the same market
of goods or services as the Borrower, or (ii) when so prohibited by CIBC. In the
event of any such grant by Bancomer of a participating interest to a
Participant, whether or not upon notice to the Borrower, (i) Bancomer shall
remain responsible for negotiating, discounting or any other form of assigning
the Promissory Notes and will continue to act under this Agreement as holder of
the Promissory Notes; (ii) the Participant(s) will be obliged to assume the
obligations of Bancomer in writing that arise from this Agreement; (iii)
Bancomer will remain responsible for complying with its obligations under this
Agreement and the Borrower will continue to deal directly with Bancomer with
respect to the rights and obligations of Bancomer under this Agreement, and (iv)
the Borrower will continue to be obligated to give Bancomer the necessary
materials to review the investment of the Funds provided under the Loan and to
care for the authorized warranties granted by the Borrower.
Section 25. No Waiver. No failure on the part of Bancomer to exercise,
and no delay in exercising, any right hereunder or under the Promissory Notes
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder or under the Promissory Notes, preclude any other or further
exercise thereof or the exercise of any other right.
Section 26. Amendments. No amendment or waiver to any provision under
this Agreement or under the Promissory Notes, and no consent granted to the
Borrower to divert from the terms and conditions of this Agreement or of the
Promissory Notes, shall have any effect unless it is in writing and is
subscribed by Bancomer and, even in such an event, such waiver or consent shall
have effect only in the event and for the specific purpose for which it was
granted.
Section 27. Notices. For purposes of this Agreement, each of the
Parties provides as its principle headquarters for the receipt of any kind of
notice, the following:
If to Bancomer:
Bancomer, S.A.
Direccion Regional
Banca Impresarial
A.Los Torres #113
Colonia El Paseo
San Luis Potosi, San Luis Potosi
MExico
Attention: Regional Director
Fax #: (48) 18-74-05
with a copy to:
Bancomer, S.A.
Direccion
Banca Corporativa
Proyectos e Infraestructura
Bancomer, S.A.
Montes Urales 470 - 2 Piso
Lomas de Chapultepec
11000 MExico, D.F.
Attention: Director
Fax#: 226-9276
Borrower:
MK Gain, S.A. de C.V.
Av. 20 de Noviembre
No. 1200
78030 San Luis Potosi, San Luis Potosi
Attention: Director of Finance
Fax#: (48) 12-6699
All notices, requests and demands shall be given in writing and (except as
otherwise expressly specified herein) by telegram, telex, facsimile or other
similar means of communication or through certified or registered mail and must
be directed to the addresses given above. It is understood that a notice will
have been given if it has been sent by telegram, telex, facsimile or other
similar means of communication with confirmation on the date that the notice was
sent and if it is sent by certified or registered mail on the date that the
notice was received. Even if the parties do not notify in writing of a change in
address in accordance with this Section, the notices and judicial proceedings
that are sent to the addresses indicated will be in full force and effect.
Section 28. Governing Law. This Agreement is registered and will be
interpreted in accordance with the laws of the United Mexican States.
Section 29. Jurisdiction. In case of any judicial proceeding in
relation to any matter arising under this Agreement, the parties hereto
irrevocably agree that any such matter may be adjudged or determined in any
court or courts of competent jurisdiction sitting in Mexico City, Federal
District, United Mexican States, or in any court or courts of competent
jurisdiction sitting in San Luis Potosi, San Luis Potosi, United Mexican States,
and the parties hereto irrevocably submit generally and unconditionally to the
jurisdiction of such courts and of any of them in relation to such matters,
expressly waiving any other jurisdiction to which they may be entitled by reason
of present or future domicile or otherwise.
Section 30. Costs and Expenses.
A. The Borrower will pay to Bancomer without notice from Bancomer
within thirty (30) calendar days within the signing of this Agreement up to the
amount of US$20,000.00 (Twenty Thousand Dollars) in respect of legal fees and
expenses incurred by Bancomer in connection with the negotiation, preparation
and documentation of this Agreement and the Promissory Notes.
B. The Borrower will pay to Bancomer without notice from Bancomer
within thirty (30) calendar days within the signing of this Agreement up to the
amount of US$3,000.00 (Three Thousand Dollars) in respect of legal fees and
expenses incurred by Bancomer in connection with modification of the Trust.
C. The Borrower will pay to Bancomer without notice from Bancomer
within thirty (30) calendar days within the signing of this Agreement up to the
amount of US$35,000.00 (Thirty Five Thousand Dollars) in respect of expenses for
issuance of the Technical Supervisor's Certificate in accordance with the
provisions of Sections 7 and 8 of this Agreement.
The Borrower agrees that it will pay punctually for all the amounts
that are discussed and the costs and expenses that are referred in this Section
on the date when they are due and payable in accordance with the terms of this
Section, and any amounts not paid will incur default interest from the date that
they are due up to the time that they are paid in full on sight including the
default interest rate.
Section 31. Condition Precedent for Validity of this Agreement.
This Agreement shall have no effect until the Borrower shall have
received from Bancomer written notice that (i) it has contracted for the Line of
Credit under terms and conditions which do not change the terms and conditions
for the Loan, or (ii) it has contracted for an alternative line of credit which
permits Bancomer to extend the Loan in terms which are satisfactory to the
Borrower; provided, however, that (y) if Bancomer does not deliver either of
these confirmations in writing no later than December 29, 1996, or the Borrower
does not accept the confirmation mentioned in sub clause (ii) of this Section,
then this Agreement shall terminate on such date, without any requirement for
notification and with no responsibility for either of the parties, and (z) if
Bancomer confirms to Borrower that it has contracted for the Line of Credit
under terms and conditions equal to those set forth in this Agreement, then it
is agreed that this Agreement shall enter into effect automatically of the date
on which Bancomer issues such confirmation.
In witness whereof, the parties hereto have caused this Agreement to be
executed by their duly authorized officers and representatives as of the date
first written above.
Bancomer:
Bancomer, S.A., Institucion de Banca Multiple,
Grupo Financiero Bancomer
- ------------------------------------
By:
Position:
- ------------------------------------
By:
Position:
The Borrower:
MK GAIN, S.A. DE C.V.
- ------------------------------------
By:
Position:
EXHIBIT "A"
FERROCARRILES' AGREEMENT
EXHIBIT "B"
COMFORT LETTER
EXHIBIT "C"
FORM OF TECHNICAL SUPERVISOR'S CERTIFICATE
EXHIBIT "D"
SUBORDINATION AGREEMENT
EXHIBIT "E"
TRUST
EXHIBIT "F"
FINANCIAL RATIOS
EXHIBIT "G"
FORM OF PROMISSORY NOTE
EXHIBIT "H"
CONSTRUCTION AND REFURBISHING PROGRAM
EXHIBIT "I"
AMOUNT OF INSTALLMENTS
EXHIBIT "J"
AMENDMENT TO THE FNM MAINTENANCE AGREEMENT