Document:

Unassociated Document

Exhibit 10.2

 

LIMITED WAIVER AND AMENDMENT NO. 10 TO CREDIT AGREEMENT

 

This LIMITED WAIVER AND AMENDMENT NO. 10 TO CREDIT AGREEMENT (this “Amendment”) is dated as of March 29, 2013 by and among INTERNATIONAL TEXTILE GROUP, INC., a Delaware corporation (“ITG”), the other Borrowers and Credit Parties signatory hereto, GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (“GE Capital”), for itself and as Agent (“Agent”), and the other Lenders signatory hereto.  Bank of America, N.A. is acting as Syndication Agent and Merrill Lynch, Pierce, Fenner & Smith Incorporated and GE Capital Markets, Inc. are acting as Joint Lead Arrangers and Joint Book Runners in connection with this Amendment.  Unless otherwise specified herein, capitalized terms used in this Amendment shall have the meanings ascribed to them in the Credit Agreement (as hereinafter defined).

 

R E C I T A L S:

 

WHEREAS, Borrowers, the other Credit Parties, the Agent and the Lenders entered into that certain Amended and Restated Credit Agreement dated as of March 30, 2011 (as amended, supplemented, restated or otherwise modified from time to time, the “Credit Agreement”); and

 

WHEREAS, the parties to the Credit Agreement have agreed to an amendment to, and a waiver of certain provisions of, the Credit Agreement as set forth herein.

 

NOW, THEREFORE, in consideration of the premises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1              Limited Waiver.  Agent and the Lenders hereby waive any Event of Default that has occurred under Section 7.1(i) of the Credit Agreement solely to the extent any such Event of Default occurred on or prior to the Tenth Amendment Effective Date.

 

2              Consent and Tenth Amendment Effective Date Funding.  Each Lender hereby consents to the non-pro rata reduction of $5,000,000 of Revolving Loan Commitments held by General Electric Capital Corporation on the Tenth Amendment Effective Date and waives any notice requirement of the Borrowers in the Credit Agreement in connection with such reduction.  In reliance upon the representations and warranties of the Credit Parties contained herein and in the other Loan Documents, (i) Bank of America, N.A. agrees to make additional Term Loans to the Borrowers on the Tenth Amendment Effective Date in an aggregate amount equal to $1,429,232.72 and (ii) The PrivateBank and Trust Company agrees to make additional Term Loans to the Borrowers on the Tenth Amendment Effective Date in an aggregate amount equal to $2,570,767.28.

 

3              Amendments to Credit Agreement.

 

3.1           The last sentence of Section 1.1(b)(i) of the Credit Agreement is hereby amended and restated in its entirety to read as follows

 

  

  

  

 

“The “Maximum Revolving Loan Balance” from time to time will be the lesser of:

 

(A)           the “Borrowing Base” (as calculated pursuant to the Borrowing Base Certificate) in effect from time to time, or

 

(B)           the Aggregate Revolving Loan Commitment then in effect;

 

less, in either case, the sum of (x) the aggregate amount of Letter of Credit Obligations plus (y) outstanding Swing Loans.”

 

3.2           The last sentence of Section 1.8(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

“Notwithstanding the foregoing, the entire remaining principal balance of the Term Loans shall be payable on the Stated Term Loan Maturity Date.”

 

3.3            Section 7.1(i) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

“(i)           [Intentionally Omitted]; or”

 

3.4           The last sentence of Section 7.2 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

“Notwithstanding anything in any Loan Document to the contrary, including, without limitation, Section 7.2 of the Credit Agreement, from and after the Tenth Amendment Effective Date, the Agent, on behalf of itself and the Lenders, shall be entitled to full cash dominion (whether by way of delivery of Activation Notices or otherwise) over any depository, securities or commodities accounts of the Credit Parties that are subject to Control Agreements notwithstanding the occurrence or non-occurrence of a Default or an Event of Default.”

 

3.5           Section 9.1(c) of the Credit Agreement is hereby amended by deleting the occurrence of “, Revolver Block” set forth therein.

 

3.6           Section 11.1 of the Credit Agreement is hereby amended by amending and restating the pricing grid set forth in the definition of “Applicable Margin” in its entirety to read as follows:

 

	
  “Average Adjusted Availability

	 	
LIBOR Margin

	 	 	
Base Rate Margin

	 
	
≤ $20,000,000

	 	 	4.75	%	 	 	3.75	%
	
>$20,000,000 but ≤ $30,000,000

	 	 	4.50	%	 	 	3.50	%
	
>$30,000,000

	 	 	4.25	%	 	 	3.25	%”

 

  

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3.7           Section 11.1 of the Credit Agreement is hereby amended by inserting the following new defined terms in proper alphabetical order thereto:

 

““Stated Term Loan Maturity Date” means March 30, 2016.”

 

““Tenth Amendment Effective Date” has the meaning assigned to such term in that certain Limited Waiver and Amendment No. 10 to Credit Agreement dated as of March 29, 2013 among Borrowers, the other Credit Parties signatory thereto, Agent and the Lenders signatory thereto.”

 

3.8           Section 11.1 of the Credit Agreement is hereby amended by amending and restating the following defined terms in their entirety to read as follows:

 

““Aggregate Term Loan Commitment” means the combined Term Loan Commitments of the Lenders, which shall be in the amount of $13,274,770.00 as of the Tenth Amendment Effective Date and which shall be reduced as the Term Loan is repaid.”

 

““Availability” means, as of any date of determination, the amount by which (a) the “Borrowing Base” (as calculated pursuant to the Borrowing Base Certificate but excluding for purposes of the definition of Availability, any amounts included in the calculation of the “Borrowing Base” pursuant to clauses (I)(d) and (I)(e) of the definition thereof) in effect from time to time less the sum of (x) the aggregate amount of Letter of Credit Obligations plus (y) outstanding Swing Loans exceeds (b) the aggregate outstanding principal balance of Revolving Loans.”

 

““Availability Block” means, as of any date of determination $8,000,000; provided that, if following the Tenth Amendment Effective Date and on or prior to January 1, 2014, (x) Borrowers shall have made an aggregate of $1,000,000 of voluntary prepayments of the Term Loan and (y) Excess Availability after giving pro forma effect to such voluntary prepayments is greater than or equal to $19,000,000 (for the avoidance of doubt, calculated in a manner without giving effect to such reduction in the Availability Block to $7,000,000), the Availability Block shall be reduced to $7,000,000.”

 

““Borrowing Base” means, as of any date of determination by the Agent, from to time to time, an amount equal to

 

(I) the sum of:

 

(a) 85% of the US Dollar Equivalent of the book value of Eligible Accounts (other than Insured Accounts);

 

(b) the lesser of (i) 75% of the US Dollar Equivalent of the book value of Insured Accounts and (ii) $5,000,000;

 

(c) the least of (i) 65% of the book value (valued at the lower of cost or market) of Eligible Inventory, (ii) 85% of the book value (valued at the lower of cost or market) of Eligible Inventory multiplied by the then current NOLV Factor and (iii) an amount equal to 50% of the Borrowing Base (excluding for purposes of this subclause (I)(c)(iii) only, clauses (I)(d) and (I)(e) of the definition of Borrowing Base);

 

  

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(d) (i) prior to the expiration or termination of, or full draw by Agent of amounts available under, the WLR/RBS Letter of Credit, an amount equal to the greater of (x) zero and (y) $3,500,000 less the aggregate amount funded to Agent under the WLR/RBS Letter of Credit and (ii) from and after the expiration or termination of, or full draw by Agent of amounts available under, the WLR/RBS Letter of Credit, zero; and

 

(e) (i) prior to the expiration or termination of, or full draw by Agent of amounts available under, the WLR/RBS Letter of Credit II, an amount equal to the greater of (x) zero and (y) $20,000,000 less the aggregate amount funded to Agent under the WLR/RBS Letter of Credit II and (ii) from and after the expiration or termination of, or full draw by Agent of amounts available under, the WLR/RBS Letter of Credit II, zero,

 

less (II) the sum of:

 

(a) the Availability Block; and

 

(b) such Reserves as may be imposed by the Agent in accordance with the terms of this Agreement.”

 

““EBITDA” means net income (or loss) for the applicable period of measurement of Borrowers and their wholly-owned Subsidiaries on a consolidated basis determined in accordance with GAAP, but minus without duplication (a) the income (or loss) of any Person which is not a Wholly-Owned Subsidiary of a Borrower, except to the extent of the amount of dividends or other distributions actually paid to a Borrower or any of its Wholly-Owned Subsidiaries in cash by such Person during such period and the payment of dividends or similar distributions by that Person is not at the time prohibited by operation of the terms of its charter or of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Person; (b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of a Borrower or is merged into or consolidated with a Borrower or any of its Subsidiaries or that Person’s assets are acquired by a Borrower or any of its Subsidiaries; (c) the proceeds of any life insurance policy; (d) non-cash gains or losses from the sale, exchange, transfer or other disposition of Property or assets not in the Ordinary Course of Business of the Borrowers and their Subsidiaries, and related tax effects in accordance with GAAP; and (e) any other extraordinary or non-recurring gains or losses of a Borrower or its Subsidiaries (excluding for purposes of this clause (e), any extraordinary or non-recurring gains or losses related to expenses incurred, charged or paid in connection with the ITG Merger Litigation (as referenced in ITG’s public filings, the “ITG Merger Litigation”), and related tax effects in accordance with GAAP in an amount not to exceed $2,000,000 for any period of measurement ending after the Tenth Amendment Effective Date plus, without duplication, (i) all amounts deducted in calculating net income (or loss) for depreciation or amortization for such period; (ii) interest expense (less interest income) deducted in calculating net income (or loss) for such period; (iii) all accrued taxes on or measured by income to the extent deducted in calculating net income (or loss) for such period; (iv) all non-cash LIFO expenses (or minus non-cash LIFO income), non-cash restructuring charges (or minus non-cash restructuring gains) or non-cash purchase accounting adjustments for such period; (v) all non-cash losses or expenses (or minus non-cash income or gain) included or deducted in calculating net income (or loss) for such period including, without limitation, any non-cash loss or expense (or income or gain) due to the application of FASB ASC 815-10 regarding hedging activity, FASB ASC 350 regarding impairment of good will, FASB ASC 480-10 regarding accounting for financial instruments with debt and equity characteristics, non-cash foreign currency exchange losses (or minus gains)  and non-cash expenses deducted as a result of any grant of Stock or Stock Equivalents to employees, officers or directors, but excluding any non-cash loss or expense (x) that is an accrual of a reserve for a cash expenditure or payment to be made, or anticipated to be made, in a future period or (y) relating to a write-down, write off or reserve with respect to Accounts and Inventory; (vi) if positive, the net amount of (A) the sum of (x) all cash received by a Borrower for fees and other intercompany billings charged to affiliates in a prior period that were accrued but not received during such prior period plus (y) fees and other intercompany billings charged to a Borrower by one of its affiliates during such period but not paid in cash during such period less (B) the sum of (x) fees and other intercompany billings charged by a Borrower to affiliates that are accrued but not received during such period plus (y) fees and other intercompany billings charged to a Borrower by one of its affiliates in a prior period that were accrued but not paid during such prior period that are paid in cash during such period (provided that, (I) for purposes of determining EBITDA for any measurement period that includes one or more months ending after January 1, 2012 but on or prior to December 31, 2012, the aggregate amount that shall be added back to net income pursuant to this clause (vi) for each such month during such measurement period shall equal the aggregate amount of expenses incurred by ITG in connection with the “ITG Merger Litigation” during such month plus $400,000 and (II) for purposes of determining EBITDA for any measurement period ending after January 1, 2013, the aggregate amount that shall be added back to net income pursuant to this clause (vi) for each month during such measurement period shall not exceed the aggregate amount of expenses incurred by ITG in connection with the “ITG Merger Litigation” during such month); and (vii) for any measurement period that includes one or more months ending after January 1, 2012 but on or prior to December 31, 2012, expenses incurred by ITG during each such month during such measurement period in connection with the “ITG Merger Litigation”.”

 

  

-4-

  

 

““Excess Availability” means, as of any date of determination, the amount by which (a) the Borrowing Availability then in effect exceeds (b) the sum of (w) aggregate outstanding principal balance of Revolving Loans plus (x) the aggregate amount of Letter of Credit Obligations plus (y) outstanding Swing Loans.”

 

““Intercreditor Agreement” means that certain Sixth Amended and Restated Subordination and Intercreditor Agreement dated as of March 29, 2013 by and among WLR Recovery Fund IV, L.P., as collateral agent on behalf of the Subordinated Creditors (as defined therein), GE Capital, as agent for the Lenders, and ITG, as amended, amended and restated, supplemented, modified or replaced from time to time.”

 

““Revolving Termination Date” means the earlier to occur of: (a) March 30, 2016; and (b) the date on which the Aggregate Revolving Loan Commitment shall terminate in accordance with the provisions of this Agreement.”

 

  

-5-

  

 

““Support Agreement” means that certain Fifth Amended and Restated Support Agreement dated as of March 29, 2013 by and among the Investors, ITG and Agent, as amended, supplemented, modified or replaced from time to time.”

 

3.9           Section 11.1 of the Credit Agreement is hereby amended by deleting the definition “Revolver Block”.

 

3.10         Schedules 1.1(a), 1.1(b) and 1.8(a) of the Credit Agreement are hereby amended and restated in their entirety by Schedules 1.1(a), 1.1(b) and 1.8(a) attached hereto as Annex I.

 

4             Representations and Warranties.  In order to induce Agent and the Lenders to enter into this Amendment, each Borrower and each other Credit Party represents and warrants to Agent and each Lender (which representations and warranties shall survive the execution and delivery of this Amendment), that:

 

(a)           the execution, delivery and performance by each Credit Party of this Amendment has been duly authorized by all necessary corporate and partnership action and this Amendment is a legal, valid and binding obligation of such Credit Party enforceable against such Credit Party in accordance with its terms; and

 

(b)           upon the effectiveness of this Amendment, all of the representations and warranties contained in the Credit Agreement and in the other Loan Documents (other than those which speak expressly only as of an earlier date) are true and correct in all material respects on and as of the date of the effectiveness of this Amendment after giving effect to this Amendment and the transactions contemplated hereby.

 

5             Conditions to Effectiveness.  This Amendment shall be effective on the date when each of the following conditions has been satisfied (the “Tenth Amendment Effective Date”):

 

(a)           This Amendment shall have been duly executed and delivered by each Borrower, each other Credit Party party hereto, Agent and the Lenders;

 

(b)           Agent shall have received a copy of the Fifth Amended and Restated Support Agreement that has been duly executed and delivered by each of WLR Recovery Fund IV, L.P. and ITG;

 

(c)           Agent shall have received a copy of the Sixth Amended and Restated Intercreditor Agreement that has been duly executed and delivered by each of WLR Recovery Fund IV, L.P. and ITG;

 

(d)           Agent shall have received a payoff letter in form and substance reasonably satisfactory to Agent evidencing the repayment in full of all Secured Note Indebtedness (other than any such Secured Note Indebtedness held by WLR or one or more of its affiliates) (the “Clearlake Payoff”);

 

  

-6-

  

 

(e)           Agent shall have received evidence that Borrower has received not less than $5,000,000 of cash from the Banamex Facility and that such cash shall have been applied to fund at least $5,000,000 of the Clearlake Payoff;

 

(f)           Agent shall have received a copy of a waiver of all defaults and events of default in existence under the Secured Note Purchase Agreement and all other Secured Note Documents as of the Tenth Amendment Effective Date that has been duly executed and delivered by each Secured Note Purchaser (after giving effect to the Clearlake Payoff);

 

(g)           Agent shall have received a copy of (i) a duly executed and delivered Assignment Agreement between TD Bank, N.A. and General Electric Capital Corporation, (ii)  a duly executed and delivered Assignment Agreement between General Electric Capital Corporation and Bank of America, N.A. and (iii) a duly executed and delivered Assignment Agreement among General Electric Capital Corporation, The PrivateBank and Trust Company and the Borrower Representative, in each case, in substantially the form attached hereto as Annex III;

 

(h)           Agent, for the ratable benefit of the Lenders, shall have received, as consideration for execution and delivery of this Amendment, an amendment fee (the “Amendment Fee”) equal to 0.50% of the aggregate principal amount of outstanding Term Loans and Revolving Loan Commitments, in each case immediately after giving effect to this Amendment, which amendment fee shall be fully earned on the date hereof and shall be non-refundable when paid; and

 

(i)           Agent shall have received, to the extent invoiced, payment of all out-of-pocket expenses (including the legal fees and expenses of Latham & Watkins LLP, counsel to Agent).

 

6             Conditions Subsequent.  Agent shall have received all of the agreements, documents, instruments and other items set forth on the Post Effectiveness Deliverables Checklist attached hereto as Annex II within the period of time set forth therein for delivery.  Failure by Borrowers to execute and deliver any such agreements, documents, instruments and other items in accordance with the previous sentence shall constitute an immediate Event of Default under the Credit Agreement.

 

7             Miscellaneous.

 

7.1           Effect; Ratification.

 

(a)           Except as specifically set forth above, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.  Without limiting the generality of the foregoing, each Credit Party reaffirms its guaranty of the Obligations and the Liens securing those guaranties.

 

(b)           The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Agent or any Lender under the Credit Agreement or any other Loan Document, nor constitute amendment of any provision of the Credit Agreement or any other Loan Document, except as specifically set forth herein.  Upon the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby.

 

  

-7-

  

 

(c)           Each Credit Party acknowledges and agrees that the amendments set forth herein are effective solely for the purposes set forth herein and that the execution and delivery by Agent and the Lenders of this Amendment shall not be deemed (i) except as expressly provided in this Amendment, to be a consent to any amendment, waiver or modification of any term or condition of the Credit Agreement or of any other Loan Document, (ii) to create a course of dealing or otherwise obligate Agent or Lenders to forbear, waive, consent or execute similar amendments under the same or similar circumstances in the future, or (iii) to amend, prejudice, relinquish or impair any right of Agent or Lenders to receive any indemnity or similar payment from any Person or entity as a result of any matter arising from or relating to this Amendment.

 

7.2           Counterparts and Signatures by Fax.  This Amendment may be executed in any number of counterparts, each such counterpart constituting an original but all together one and the same instrument.  Any party delivering an executed counterpart of this Amendment by fax shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of this Amendment.

 

7.3           Severability.  In case any provision in or obligation under this Amendment shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

 

7.4           Loan Document.  This Amendment shall constitute a Loan Document.

 

7.5           GOVERNING LAW.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL, IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

 

[Signature Pages Follow]

 

 

 

  

-8-

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.

 

BORROWERS:

INTERNATIONAL TEXTILE GROUP, INC.

BURLINGTON INDUSTRIES LLC

CONE JACQUARDS LLC

CONE DENIM LLC

CARLISLE FINISHING LLC

SAFETY COMPONENTS FABRIC

   TECHNOLOGIES, INC.

By:      /s/Craig J. Hart                                            

Name:     Craig J. Hart

Title:       Vice President and Treasurer

NARRICOT INDUSTRIES LLC

By: International Textile Group, Inc., its sole member

By:      /s/Craig J. Hart                                            

Name:     Craig J. Hart

Title:       Vice President and Treasurer

 

 

 

  

[Signature Page to Amendment No. 10 to Amended and Restated Credit Agreement]

  

OTHER CREDIT PARTIES:

 

APPAREL FABRICS PROPERTIES, INC. 

BURLINGTON INDUSTRIES V, LLC 

CONE ADMINISTRATIVE AND SALES LLC

CONE INTERNATIONAL HOLDINGS II, INC.

INTERNATIONAL TEXTILE GROUP ACQUISITION GROUP LLC

BURLINGTON WORLDWIDE INC.

CONE DENIM WHITE OAK LLC

CONE INTERNATIONAL HOLDINGS, INC.

CONE ACQUISITION LLC

WLR CONE MILLS IP, INC.

 

By:      /s/Craig J. Hart                                            

Name:     Craig J. Hart

Title:       Vice President and Treasurer

 

VALENTEC WELLS, LLC

By: International Textile Group, Inc.,

its sole member

 

By:      /s/Craig J. Hart                                            

Name:     Craig J. Hart

Title:       Vice President and Treasurer

 

 

 

  

[Signature Page to Amendment No. 10 to Amended and Restated Credit Agreement]

  

 

 

AGENT AND LENDERS:

 

GENERAL ELECTRIC CAPITAL CORPORATION, as the Agent and a Lender

 

By:           /s/Philip F. Carfora                                  

Name:     Philip F. Carfora

Title:  Its Duly Authorized Signatory

 

 

 

  

[Signature Page to Amendment No. 10 to Amended and Restated Credit Agreement]

  

 

 

THE PRIVATEBANK AND TRUST COMPANY, as a Lender

By:      /s/Eric Haege                                               

Name:     Eric Haege

Title:       Associate Managing Director

 

 

 

 

 

  

Annex I

  

 

 

BANK OF AMERICA, N.A., as a Lender

By:      /s/John Yankauskas                                                                                         

Name:       John Yankauskas

Title:         Sr. Vice President

 

 

 

 

  

  

  

 

ANNEX I

Schedule 1.1(a)

Term Loan Commitments

	
 

 

Lender

	
 

Term Loan 

Commitments

	
 

Commitment 

Percentage

	
 

General Electric Capital Corporation

	
$5,352,001.36

	
40.32%

	
 

The PrivateBank and Trust Company

	
$2,570,767.28

	
19.37%

	
 

Bank of America, N.A.

	
$5,352,001.36

	
40.32%

	
 

Total

	
 

$13,274,770.00

	
 

100%

 

  

  

  

 

 

Schedule 1.1(b)

Revolving Loan Commitments

	
 

 

Lender

	
 

Revolving Loan 

Commitments

	
 

Commitment 

Percentage

	
 

General Electric Capital Corporation

	
$36,285,383.64

	
40.32%

	
 

The PrivateBank and Trust Company

	
$17,429,232.72

	
19.37%

	
 

Bank of America, N.A.

	
$36,285,383.64

	
40.32%

	
 

Total

	
 

$90,000,000.00

	
 

100%

 

  

Annex I

  

 

Schedule 1.8(a)

Scheduled Term Loan Payments

	
Date of Payment

	
Amount of Term Loan Payment

	
May 1, 2011

	
$500,671

	
June 1, 2011

	
$500,671

	
July 1, 2011

	
$500,671

	
August 1, 2011

	
$500,671

	
September 1, 2011

	
$500,671

	
October 1, 2011

	
$500,671

	
November 1, 2011

	
$500,671

	
December 1, 2011

	
$500,671

	
January 1, 2012

	
$500,671

	
February 1, 2012

	
$500,671

	
March 1, 2012

	
$500,671

	
April 1, 2012

	
$500,671

	
The first day of each month thereafter occurring prior to the Stated Term Loan Maturity Date

	
$250,671

	
Stated Term Loan Maturity Date

	
Entire remaining principal balance of the Term Loan

 

  

Annex I

  

 

ANNEX II

Post Effectiveness Deliverables Checklist

The Borrowers shall and shall cause each other Credit Party to within 90 days after the Tenth Amendment Effective Date (or such longer period as Agent may determine):

(A) execute, deliver and file amendments to the Mortgages in favor of Agent existing prior to the Tenth Amendment Effective Date in a form acceptable to Agent, together with such title endorsements as are reasonably required to give effect thereto in a form acceptable to Agent, together with (x) such owner’s title affidavits as may be reasonably required by the title insurer in substantially the form previously accepted by the title insurer with respect to such Mortgages, including therein any so-called “no-change” survey affidavit and (y) any documents required in connection with the recording of such mortgage amendments and issuance of such endorsements;

(B) deliver to Agent legal opinions relating to the amendments to the Mortgages described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to Agent; and

(C) deliver to Agent a completed standard “life of loan” flood hazard determination form for each property encumbered by any such Mortgage, and if the property is located in an area designated by the U.S. Federal Emergency Management Agency (or any successor agency) as having special flood or mud slide hazards, (i) a notification to the applicable Credit Party (each, a “Notice”) and (if applicable) notification to the applicable Credit Party that flood insurance coverage under the National Flood Insurance Program (“NFIP”) created by the U.S. Congress pursuant to the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973, the National Flood Insurance Reform Act of 1994 and the Flood Insurance Reform Act of 2004 is not available because the applicable community does not participate in the NFIP, (ii) documentation evidencing the applicable Credit Party’s receipt of each Notice (e.g., countersigned Notice, return receipt of certified U.S. Mail, or overnight delivery), and (iii) if a Notice is required to be given and flood insurance is available in the community in which the property is located, a copy of one of the following: the flood insurance policy, the applicable Credit Party’s application for a flood insurance policy plus proof of premium payment, a declaration page confirming that flood insurance has been issued, or such other evidence of flood insurance reasonably satisfactory to Agent.

 

  

Annex II

  

ANNEX III

Assignment Agreements

[see attached]

 

 

 

 

 

 

 

 

 

Annex IIIUnassociated Document

 

Exhibit 10.4

 

ENGLISH TRANSLATION - EXECUTED DOCUMENT IS IN SPANISH

 

--- NOTARIAL INSTRUMENT

NOTARIAL INSTRUMENT

VOLUME

PAGE

IN THE CITY OF CUERNAVACA, State of Morelos, on

---,

2013, I, HUGO SALGADO CASTAÑEDA, head notary of Notary Public No. 2 and notary of federal real estate assets of the First Notarial District of the State of Morelos, whose headquarters are located in this city, attest to:

--- The NOTARIAL INSTRUMENT that contains: The SIMPLE CREDIT AGREEMENT SECURED BY A SECOND PACKAGE MORTGAGE entered into by and among BANCO NACIONAL DE MÉXICO, SOCIEDAD ANÓNIMA, MEMBER OF GRUPO FINANCIERO BANAMEX, hereinafter referred to as "BANAMEX," represented by Messrs. EDUARDO XAVIER VILLALOBOS GAITAN and ALFONSO GARCÍA GARCÍA, party of the first part; BURLINGTON MORELOS, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, represented by its attorney-in-fact Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS, hereinafter referred to as the "CLIENT," party of the second part; the companies PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, MANUFACTURAS PARRAS CONE, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, SERVICIOS BURLMEX, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, CONE DENIM YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE and CASIMIRES BURLMEX, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, all of which are represented by their attorney-in-fact Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS, hereinafter, jointly or separately referred to as the "GUARANTOR," party of the third part; the company PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, represented by its attorney-in-fact Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS, hereinafter referred to as the "MORTGAGE GUARANTOR ON THE INDUSTRIAL UNIT,” party of the fourth part; and on his own behalf, Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS, hereinafter the "DEPOSITARY," party of the fifth part; and the company BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, represented by its attorney-in-fact Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS, hereinafter referred to as the "MORTGAGE GUARANTOR," pursuant to the following:

 

  

  

  

 

B A C K G R O U N D 

--- REGARDING THE REAL PROPERTIES LOCATED IN MORELOS.

I. FIRST ORIGINAL DEED (PARCEL A). By means of notarial instrument number 14,586, dated September 29, 1997, made before and witnessed by Ms. Patricia Mariscal Vega, Notary Public No. 5 of this First Notarial District of the state, registered with the Public Registry of Property and Commerce of the State of Morelos, which is currently the Institute of Cadastre and Registry Services of the State of Morelos, under number 124, on page 247 of book 206, volume 2, section 1, dated October 20, 1997, the company BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE purchased from the FREE AND SOVEREIGN GOVERNMENT OF THE STATE OF MORELOS for MXN$7,560,926.55 PARCEL A, which resulted from the MERGER of two lots and division into two lots of the property located at Camino a Yecapixtla-Agua Hedionda Km. 2.5, Yecapixtla, Morelos, with the TWO CORRESPONDING RIGHTS-OF-WAY, in the Municipality of Yecapixtla, Morelos, which are identified using real estate tax code 6500-00-084-007, with a total area of 1,513,585.31 m2 and the metes and bounds duly specified in such notarial instrument.

II. SECOND ORIGINAL DEED (PARCEL OF RURAL LOTS NAMED ECATEPEC, JOYA DE CAZAHUATE AND PIEDRA PARADA). By means of notarial instrument number 58,232, dated December 12, 1997, made before and witnessed by Mr. Armando Gálvez Pérez Aragón, Notary Public No. 103 of the Federal District, registered with the Public Registry of Property and Commerce of the State of Morelos, which is currently the Institute of Cadastre and Registry Services of the State of Morelos, under number 117, on page 233 of book 225, volume 2, section 1, dated April 7, 1998, the company BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE acquired from BANCO UNIÓN, SOCIEDAD ANÓNIMA, INSTITUCIÓN DE BANCA MÚLTIPLE for MXN$1,010,000.00 the PARCEL of the rural lands named ECATEPEC, JOYA DE CAZAHUATE and PIEDRA PARADA, with no number, and the BUILDINGS present on them, in YECAPIXTLA, State of MORELOS, which is identified using real estate tax code 6500-00-084-008 and has an area of 50,400 m2 and the metes and bounds duly specified in such notarial instrument.

III. MERGER OF LOTS AND DIVISION OF THE REAL PROPERTY PRODUCT OF THE MERGER. By means of notarial instrument number 32,409, dated March 26, 2003, made before and witnessed by Ms. Patricia Mariscal Vega, Notary Public No. 5 of the First Notarial District of the State of Morelos, registered with the Public Registry of Property and Commerce of the State of Morelos, which is currently the Institute of Cadastre and Registry Services of the State of Morelos, under numbers 55-57, pages 109-113, book 534, volume 1, section 1, dated May 12, 2003, which is currently digital real estate folio number 409514 1, the company BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, once given authorization by the Secretariat of Zoning and Public Works of the State of Morelos, through the Directorate General of Parcels, Condominiums and Residential Developments of the State of Morelos and in accordance with the resolution of the Committee for the Regulation of Parcels, Condominiums and Residential Developments of the State adopted on June 17, 1998, contained in official authorization number FD-XV-036/99, dated March 3, 1999, the following was notarized:

 

  

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--- The MERGER of the two properties indicated in items a) and b) of this background chapter, which are identified as PARCEL A product of the MERGER of two lots and the division into two parcels of the property located at Camino a YECAPIXTLA-AGUA HEDIONDA Km. 2.5, YECAPIXTLA, MORELOS, with the TWO CORRESPONDING RIGHTS-OF-WAY in the Municipality of Yecapixtla, Morelos, identified with real estate tax code 6500-00-084-007, and the unnumbered PARCEL of the rural lands named ECATEPEC, JOYA DE CAZAHUATE and PIEDRA PARADA and the BUILDINGS currently located on them, in YECAPIXTLA, State of MORELOS, identified using real estate tax code 6500-00-084-008, so that they form ONE SINGLE TOPOGRAPHIC UNIT with an area of 1,547,474.26 m2, and the metes and bounds specified in such notarial instrument.

--- The DIVISION of the property product of the MERGER described in the previous paragraph into TWO PARCELS identified as PARCEL A, with an area of 6,597.70 m2, and REMAINING PARCEL, with an area of 1,540,876.56 m2, and the metes and bounds specified in such notarial instrument, which are inserted herein by reference.

IV. DIVISION OF REMAINING PARCEL, WITH AN AREA OF 1,540,876.56 M2. By means of notarial instrument number 231,516, dated November 3, 2010, made before and witnessed by Mr. Hugo Manuel Salgado Bahena, then-aspiring notary acting as substitute in the notarial record of the undersigned notary, registered with the Public Registry of Property and Commerce of the State of Morelos, which is currently the Institute of Cadastre and Registry Services of the State of Morelos, under digital real estate folio number 409514 1, dated November 12, 2010, subject to prior authorization for this purpose given by the Secretariat of Zoning, Parcels and Condominiums of the Office of the Municipal Head of the Municipality of Yecapixtla, Morelos, by means of OFFICIAL AUTHORIZATION number PMY/DDUFC/0003/2010, dated October 7, 2010, in file number DUFC/2009-2012, the DIVISION of the property identified as REMAINING PARCEL product of the merger and division into two parcels of the land located at CAMINO A YECAPIXTLA-AGUA HEDIONDA, KM. 2.5, Municipality of YECAPIXTLA, State of MORELOS, identified using real estate tax code 6500-01-084-007, with an area of 1,540,876.56 m2, and the metes and bounds specified in such notarial instrument, was recorded.

 

  

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--- THREE PARCELS and the CREATION OF RIGHT-OF-WAY NUMBER 3 resulted from the aforementioned DIVISION. Such PARCELS are identified as:

--- PARCEL A. With an area of 113,834.27 m2. 

--- PARCEL B. With an area of 258,694.05 m2. 

--- REMAINING PARCEL. With an area of 1,147,862.24 m2. 

--- RIGHT-OF-WAY NUMBER 3. With an area of 20,485.98 m2, which was then divided into eight sections.

 

 

---- With the metes and bounds that are specified for each in such notarial instrument, which are inserted herein by reference.

V. DIVISION AND SALE OF THE REMAINING PARCEL THEREOF. By means of notarial instrument number 242,454, dated November 4, 2011, made before and witnessed by Mr. Hugo Manuel Salgado Bahena, then-aspiring notary acting as substitute of the undersigned notary, the following was recorded:

--- A). THE NOTARIZATION OF THE DIVISION into 2 PARCELS of the property identified as REMAINING PARCEL resulting from the division of the property identified as REMAINING PARCEL, which, in turn, resulted from the merger and division into 2 parcels of the land located at Camino a Yecapixtla-Agua Hedionda, Km 2.5, Municipality of Yecapixtla, State of Morelos, with real estate tax code number 6500-01-084-007, which I know [sic] or, at the request of the company BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, which is herein represented by Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS, in accordance with the authorization issued by the Secretariat of Zoning, Parcels and Condominiums of the Office of the Municipal Head of the Municipality of Yecapixtla, Morelos, by means of official authorization number PMY/CMFCCU/DDUFC/0144/2011, dated November 3, 2011, with the appearance and agreement of Messrs. ALFONSO GARCÍA GARCÍA and FRANCISCO RICARDO BUSTAMANTE URQUIJO, as legal representatives of BANCO NACIONAL DE MÉXICO, SOCIEDAD ANÓNIMA INTEGRANTE DEL GRUPO FINANCIERO BANAMEX, which is hereinafter referred to as "BANAMEX."

 

  

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--- B). THE PARTIAL CANCELLATION OF THE MORTGAGE CREATED IN THE SIMPLE CREDIT AGREEMENT granted by BANCO NACIONAL DE MÉXICO, SOCIEDAD ANÓNIMA, INTEGRANTE DEL GRUPO FINANCIERO BANAMEX, which is herein represented by Messrs. ALFONSO GARCÍA GARCÍA and FRANCISCO RICARDO BUSTAMANTE URQUIJO, to the company BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, only with respect to PARCEL A, which resulted from the division indicated in the previous paragraph and which has an area of 48,499.64 m2, and whose area, metes and bounds are specified in the body of this instrument.

--- C). THE PURCHASE AND SALE AGREEMENT executed by BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, as SELLER, which is herein represented by Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS, as special attorney-in-fact, on the one hand, and by MALTA TEXO DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, as PURCHASER, which is herein represented by Mr. JUAN ANTONIO PEDROZA MARTÍNEZ, as chief executive officer of the company, on the other, with respect to the property identified as PARCEL A resulting from the division of REMAINING PARCEL, which, in turn, resulted from the merger and division into 2 parcels of the land located at Camino a Yecapixtla-Agua Hedionda, Km 2.5, Municipality of Yecapixtla, State of Morelos, which has an area of 48,499.64 m2 and which has the metes and bounds herein specified.

--- D). THE CREATION OF A RIGHT-OF-WAY granted by the company MALTA TEXO DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, which is represented as specified, to the company BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, which is represented as specified.

V.1. Pursuant to the foregoing, the company BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE maintained ownership of the property identified as REMAINING PARCEL resulting from the division of REMAINING PARCEL, which, in turn, resulted from the merger and division into 2 parcels of the land located at Camino a Yecapixtla-Agua Hedionda, Km 2.5, Municipality of Yecapixtla, State of Morelos, which has an area of 1,099,362.60 m2 and the following metes and bounds: TO THE NORTH, measuring 1,311.45 m along a line divided into six stretches, bordering private property; TO THE EAST, measuring 851.87 m along a line divided into eight stretches, bordering private property, measuring 965.81 m along a line divided into two stretches, bordering the Mexican Institute of Social Security of Yecapixtla and 115.47 m, bordering Carretera Agua Hedionda-Huesca; TO THE SOUTH, measuring 806.07 m along a line divided into two stretches, bordering the nurseries of the Department of the Federal District, and 882.67 m along a line divided into nine stretches, bordering Parcel A, which has an easement through the center; and TO THE WEST, measuring 3,503.10 m along a line divided into 56 stretches, bordering private property.

 

  

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--- Individually, such property is registered with the Institute of the Public Registry of Property and Commerce of the State of Morelos under digital real estate folio number 619792-1.

VI. BUILDINGS. The representative of BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE states that his principal, using its own funds and subject to the corresponding construction licenses, constructed buildings allocated to industry and offices on the lot described in the previous paragraph, of which it is the sole legitimate owner. Hereinafter, the lot and the buildings located on it, together with their natural accretions, permits, licenses and all property a part thereof, which are described in the foregoing items, shall be jointly referred to as the "Morelos Properties."

--- REAL PROPERTIES LOCATED IN COAHUILA. 

VII. FIRST DEED. By means of notarial instrument number 358, dated October 25, 1993, made before and witnessed by Mr. Homero Gómez García, head notary of Notary Public No. 29 of Saltillo, State of Coahuila de Zaragoza, registered with the Public Registry of Property of Parras de la Fuente, State of Coahuila de Zaragoza on December 23, 1993, section I, book 31 “A”, folio 240, and under entry 4,041, PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, acquired the NORTHERN PARCEL of the RUSTIC LOT called “LOS CIPRESES”, in the municipality of Parras de la Fuente, State of Coahuila de Zaragoza, with an area of 159,175.59 m2 and the following BEARINGS, METES and BOUNDS, which I am copying from such instrument: “ . . . from point 1 to point 2, along a distance of 361.08 meters bordering property reserved by the seller Compañía Industrial de Parras, S.A. de C.V.; from point 2 to point 3, along a distance of 300 meters, bordering land property of Messrs. Leonardo Martínez and Juan Morales; from point 3 to point 4, along a distance of 83.22 meters; from point 4 to point 5, along a distance of 18.12 meters; from point 5 to point 6, along a distance of 444.40 meters, with these last points bordering the property of Mr. Felipe Madero, which has a right-of-way through the center; from point 6 to point 7, along a distance of 96.14 meters; from point 7 to point 8, along a distance of 56.99 meters; and from point 8 to point 1, closing the perimeter, along a distance of 275.03 meters and bordering Carretera Parras Paila along these last points . . . ”;

VIII. SECOND DEED. By means of notarial instrument number 30, dated March 29, 1994, made before and witnessed by Mr. Juan Carlos Lamas Urista, head notary of Notary Public No. 1 of Parras de la Fuente, State of Coahuila de Zaragoza, registered with the Public Registry of Property of Parras de la Fuente, State of Coahuila de Zaragoza on January 9, 2000, section I, book 42, folio 118, and under entry 5,838, PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL DE VARIABLE acquired AN EASTERN PORTION of the RUSTIC LAND of EX-CAMPO DE AVIACIÓN in the Municipality of Parras de la Fuente, State of Coahuila de Zaragoza, with an area of 1,650.00 m2 and the following BEARINGS, METES and BOUNDS, which I am copying from such instrument: " . . . NORTH: measuring 55 m and bordering the Federal Electricity Commission substation. SOUTH: measuring 55 m and bordering Agrícola del Rosario, S. de R.L. EAST: measuring 30 m and bordering Carretera Parras, Paila. WEST: measuring 30 m and bordering Agrícola del Rosario, S. de R.L. . . .”;

 

  

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IX. THIRD DEED. By means of notarial instrument 44, dated May 20, 1994, made before and witnessed by the aforementioned notary public and registered with the Public Registry of Property of Parras de la Fuente, State of Coahuila de Zaragoza on July 6, 1994, section I, book 32, folio 73, and under entry 4,257, PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL DE VARIABLE acquired A PORTION of the AGOSTADERO RUSTIC LAND called "ALTO DE CONEJOS," in the Municipality of Parras de la Fuente, State of Coahuila de Zaragoza, with an area of 5-04-42 ha and the following BEARINGS, METES and BOUNDS, which I am copying from such instrument: “ . . . WEST: measuring 149.976 m and bordering Compañía Industrial de Parras. NORTH: measuring 333.76 m and bordering the undersigned, Mr. Juan B. Morales Doria. SOUTH: measuring 7.03 m, bordering the undersigned, Mr. Juan B. Morales Doria. SOUTH: measuring 326.63 m bordering Mr. Fernando Martínez. EAST: measuring 152.324.00 (sic) meters, bordering Mr. Juan B. Morales Doria . . . ”; and

X. FOURTH DEED. By means of notarial instrument number 7, dated February 20, 2001, made before and witnessed by Mr. Jesús María Farías Ayala, head notary of Notary Public No. 3 of Parras de la Fuente, State of Coahuila de Zaragoza, registered with the Public Registry of Property of Parras de la Fuente, State of Coahuila de Zaragoza, on April 5, 2001, section I, book 43, folio 65, and under entry 5,986, PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL DE VARIABLE acquired TWO LOTS THAT FORM ONE SINGLE BODY located at ACERA ORIENTE of CARRETERA PARRAS-PAILA, between Hotel Rincón del Montero and Fábrica de Mezclilla Parras Cone de México, Sociedad Anónima de Capital Variable in the Municipality of Parras de la Fuente, State of Coahuila de Zaragoza, with an area of 39-97-56 ha and the following BEARINGS, METES and BOUNDS, which I am copying from such instrument: “ . . . lot facing highway, TO THE NORTH, measuring 300.00 m, with the property of Mr. and Mrs. Felipe Daniel Madero González; TO THE SOUTH measuring 302.00 m, with the property of Mr. Juan B. Morales Doria; TO THE EAST, measuring 484.00 m, with the property of Mr. and Mrs. Felipe Daniel Madero González; and TO THE WEST, measuring 450.00 m, with Carretera Parras-Paila. With a total area of 14-01-00 ha. Interior lot boundaries: bearings, metes and bounds: 0-1, N-88°00’00”-E, 300 m. 1-2, S-02°00 ́00”-E, 484 m. 2-3 S-85°42’00”-E, 231 m. 3-4, N-07°46’00”-E, 512.50 m. 4-5, N-35°33 ́00”-E, 46.90 m. 5-6, S-60°06’00”-W, 18.70 m. 6-7, N-55°17’00”-E 18.70 m. 7-8, N-17°48’00”-W, 16.80 m. 8-9, N-57°39’00”-W, 52.50 m. 9-10, N-08°18’00”-W, 33.00 m. 10-11, N-14°49’00”-W, 60.30 m. 11-12, N-31°00’00”-W, 18.50 m. 12-13, N-57°58’00”-W, 30.50 m. 13-14, S-88°00’00”-W, 612.25 m. 14-0, S-00°00’00”-W, 612.25 m. With an area of the Interior Lot of 25-96-56 ha . . . ."

 

  

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--- CURRENTLY, THE AFOREMENTIONED PROPERTIES ARE REGISTERED WITH THE PUBLIC REGISTRY OF PROPERTY OF PARRAS DE LA FUENTE, COAHUILA, UNDER ENTRY NUMBER 6,886, IN PROPERTY BOOK 69, S.C., SECTION I, DATED APRIL 15, 2011.

XI. CONSTRUCTIONS. PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE's representative hereby declares that on the lots described in background XII, XIII, IX and X, its principal, using its own funding and with the corresponding construction licenses, constructed buildings for industrial and office use, of which it is the sole and legitimate owner.

Hereinafter, the lots and the buildings located on them, together with their natural accretions, permits and licenses, and all incorporated assets described in foregoing backgrounds XII, XIII, IX and X, shall be jointly referred to as the “Coahuila Properties,” and jointly with the Morelos Properties, as the “Properties.”

XII. SIMPLE CREDIT AGREEMENT. By means of notarial instrument number 235,622, dated March 23, 2011, made before and witnessed by Mr. HUGO MANUEL SALGADO BAHENA, then-aspiring notary acting as substitute for the undersigned notary, the SIMPLE CREDIT AGREEMENT entered into by and among BANCO NACIONAL DE MÉXICO, SOCIEDAD ANÓNIMA, MEMBER OF GRUPO FINANCIERO BANAMEX, hereinafter referred to as "BANAMEX," represented by Messrs. SOLEDAD GARCIA TREJO and FRANCISCO R. BUSTAMANTE URQUIJO, who is also known as FRANCISCO RICARDO BUSTAMANTE URQUIJO, party of the first part; BURLINGTON MORELOS, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, represented by its attorney-in-fact Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS, hereinafter referred to as the "CLIENT," party of the second part; the companies PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, MANUFACTURAS PARRAS CONE, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, SERVICIOS BURLMEX, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, CONE DENIM YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE and CASIMIRES BURLMEX, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, all of which are represented by their attorney-in-fact Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS, hereinafter, jointly or separately referred to as the "GUARANTOR," party of the third part; the company PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, represented by its attorney-in-fact Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS, hereinafter referred to as the "MORTGAGE GUARANTOR ON THE INDUSTRIAL UNIT,” party of the fourth part; on their own behalf, Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS and JUAN ELADIO BAÑUELOS HERNÁNDEZ, hereinafter the "DEPOSITARY," party of the fifth part; and the company BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, represented by its attorney-in-fact Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS, hereinafter referred to as the "MORTGAGE GUARANTOR" This credit was granted for up to the amount of US$20,000,000.00, and such agreement sets forth the terms of payment, calculation of interest, the rate and the remaining obligations for which the BORROWER is responsible.

 

  

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In order to guarantee each and every obligation derived from the aforementioned agreement, a FIRST MORTGAGE was granted to BANAMEX on the property described in item V.1 of this chapter, as well as a PACKAGE MORTGAGE on the complete industrial unit making up the company PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE.

XIII. AGREEMENT FOR TERMINATING THE IRREVOCABLE GUARANTEE TRUST AGREEMENT. By means of notarial instrument number 235,813, dated March 28, 2011, made before and witnessed by Mr. HUGO MANUEL SALGADO BAHENA, then-aspiring notary acting as substitute for the undersigned notary, the AGREEMENT FOR TERMINATING IRREVOCABLE GUARANTEE TRUST NO. F-675 was recorded, as well as the resulting PROPERTY REVERSION, which is hereinafter referred to as the "Agreement," which was entered into among PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, represented by Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS (hereinafter, "Parras") and BURLINGTON MORELOS, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, represented by the aforementioned Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS (hereinafter, the "Borrower" and together with Parras, the "Settlors"); GENERAL ELECTRIC CAPITAL CORPORATION, represented by Mr. MARCOS SIQUEIROS BALLESTEROS, as "Agent" of the lenders, in accordance with a loan agreement described below (hereinafter, the "First Beneficiary" and together with the Settlors, the "Parties"); and GE CONSUMO MEXICO, SOCIEDAD ANONIMA DE CAPITAL VARIABLE, SOCIEDAD FINANCIERA DE OBJETO MULTIPLE, ENTIDAD NO REGULADA (as successor in interest due to a spin-off of Ge Money Bank, Sociedad Anónima, Institución de Banca Múltiple, Ge Capital Grupo Financiero, División Fiduciaria), represented by its chief trust officer, ELVIRA GUTIÉRREZ ESCOBAR (hereinafter, the "Trustee").

 

  

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--- The following are the current registration entries corresponding to the properties described in items VII, VIII, IX and X of this chapter due to the issuance of the aforementioned legal act: ENTRY 6,886, PROPERTY BOOK 69, S.C., SECTION I, DATED APRIL 15, 2011.

XIV. CERTIFICATES OF ENCUMBRANCES AND OF NO ENCUMBRANCES. The current legal status of the real properties subject matter of the guarantees established in this agreement is as follows:

a). Regarding the property located in the State of Morelos and indicated in item V.1 of this chapter, there is a FIRST MORTGAGE in favor of BANAMEX in the amount of US$20,000,000.00, without any other restriction on use or ownership, except for the aforementioned easements, which is hereby demonstrated with a certificate of encumbrances issued by the Institute of Cadastre and Registry Services of the State of Morelos attached to the appendix of this notarial instrument as Exhibit “A,” as well as the notarially-certified copies hereof issued.

b) Regarding the Coahuila Properties indicated in items VII, VIII, IX and X of this chapter, there is a FIRST PACKAGE MORTGAGE in favor of BANAMEX in the amount of US$20,000,000.00, without any other restriction on use or ownership, which is hereby demonstrated with certificates of encumbrances issued by the Public Registry of Property of Parras de la Fuente, State of Coahuila de Zaragoza attached to the appendix of this notarial instrument as Exhibit “B,” as well as the notarially-certified copies hereof issued.

R E C I T A L S

I. BANAMEX represents that: 

a). It is a credit institution formed and existing under the laws of the United Mexican States and is fully authorized to enter into this agreement and to assume and discharge the obligations set out herein.

b). Its representatives have sufficient capacity and authority to execute this agreement in its name.

II. The CLIENT represents that: 

a). It is a corporation formed and existing under the applicable laws of the United Mexican States and has the capacity to execute this agreement.

b). Its representatives have sufficient authority to contract in its name.

 

  

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c). There is no lawsuit or proceeding whatsoever, nor is it aware of a threat thereof, against it or that may materially affect its properties.

d). All documents and information it has provided to BANAMEX for the analysis and study to grant the financing are true and correctly reflect its current situation.

e). No event or condition has occurred on or before the date of this agreement that has or, as far as it knows, may have a material adverse affect on its business, assets, liabilities, financial condition or condition of any other nature, or its licenses, operations, projects or its ability to meet its obligations hereunder.

f). It has requested a credit from BANAMEX in the terms hereof and it is entering into this agreement on its own behalf.

g). The financial resources arising under this agreement shall be used for a lawful purpose.

III. The GUARANTOR represents that: 

a). It is a corporation formed and existing under the applicable laws of the United Mexican States and has the capacity to execute this agreement.

b). Its representatives have sufficient authority to contract in its name. 

c). There is no lawsuit or proceeding whatsoever, nor is it aware of a threat thereof, against it or that may materially affect its properties.

d). All documents and information it has provided to BANAMEX for the analysis and study to grant the financing are true and correctly reflect its current situation.

e). No event or condition has occurred on or before the date of this agreement that has or, as far as it knows, may have a material adverse affect on its business, assets, liabilities, financial condition or condition of any other nature, or its licenses, operations, projects or its ability to meet its obligations hereunder.

IV. The MORTGAGE GUARANTOR ON THE INDUSTRIAL UNIT represents that: 

a). It is a corporation formed and existing under the laws of the United Mexican States and is fully authorized in accordance with its corporate purpose to enter into this agreement and to assume and discharge the obligations herein set forth.

b). Its representative has sufficient capacity and authority to execute this agreement in its name.

c). There is no lawsuit or proceeding whatsoever, nor is it aware of a threat thereof, against it or that may materially affect the mortgage.

d). All documents and information it has provided to BANAMEX for the analysis and study to grant the financing are true and correctly reflect its current situation.

 

  

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e). No event or condition has occurred on or before the date of this agreement that has or, as far as it knows, may have a material adverse affect on its business, assets, liabilities, financial condition or condition of any other nature, or its licenses, operations, projects or its ability to meet its obligations hereunder.

V. The DEPOSITARY represents that: 

a). He is an individual with full authority to enter into this agreement and to assume and discharge the obligations herein set forth.

b). All documents and information he has provided to BANAMEX for the analysis and study to grant the financing are true and correctly reflect his current situation.

c). He agrees to appear as Depositary in accordance with the terms and conditions hereof.

VI. The MORTGAGE GUARANTOR represents that: 

a). It is the legitimate owner of the Morelos Property indicated in item V.1 of the background chapter, which is subject to an encumbrance in favor of BANAMEX, without any other restrictions on ownership, except for the existing easements, and it is current regarding the payment of all fees and taxes with respect thereto.

b). It has the minimum legal capacity and powers sufficient for granting a mortgage on the Morelos Property described in item V.1 of the background chapter.

c). There is no lawsuit or proceeding whatsoever, nor is it aware of a threat thereof, against it or that may materially affect the mortgage.

d). All documents and information it has provided to BANAMEX for the analysis and study to grant the financing are true and correctly reflect its current situation.

e). No event or condition has occurred on or before the date of this agreement that has or, as far as it knows, may have a material adverse affect on its business, assets, liabilities, financial condition or condition of any other nature, or its licenses, operations, projects or its ability to meet its obligations hereunder.

Pursuant to the foregoing, the parties agree to the following: 

C L Á U S E S 

ONE. DEFINITION OF TERMS. The terms defined below and without the need for quotation marks shall have the following meanings, which shall be equally applicable in singular and in plural:

“Total Assets” shall mean all assets with respect to one person as determined pursuant to US GAAP, excluding the following: (i) patents and patent applications, trademarks and trade names, copyrights, franchises and deferred charges; (ii) organizational, experimental, and research and development expenses and other similar intangible lines; (iii) all sums unbundled for the purpose of repurchasing shares representing capital stock; and (iv) reserves for depreciation, obsolescence and/or amortization of the assets on its books, as well as all reserves it is required to establish pursuant to US GAAP.

 

  

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"Debt" shall mean any debt for monies taken as a loan (including inter-company loans) or for deferring the payment of the price of any goods or services with respect to which a person may be liable or directly or contingently guarantees its payment, whether as obligor, guarantor or in any other way, including for these purposes financial leases in accordance with US GAAP.

"Financial Debt" shall mean any Debt that accrues interest. 

"Business Day" shall mean any day on which the offices of credit institutions must be open to the public for the execution of banking transactions in Mexico City, Federal District in the terms of the calendar published annually by the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) in the Official Gazette of the Federation, without considering for said purpose self-service store branches and those located in companies (SEC).

"Business Day in Mexico and New York" shall mean any Business Day on which, additionally, banks are not authorized or obligated to close in the city of New York, New York, United States of America.

"Dollars" shall mean the legal currency in the United States of America. 

"Net Financial Expenses" shall mean the result of (i) interest accrued on Financial Debt during the corresponding accounting period minus (ii) interest accrued on investments made during the accounting period.

"Taxes" shall mean all tax contributions, impositions or levies, including, without limitation, interest on unpaid taxes, tax penalties, enforcement costs and compensation and any other related government charge in the terms of present or future applicable tax provisions and those arising under this agreement.

"Total Liabilities" shall mean all liabilities registered on the accounting date and determined pursuant to US GAAP, including, without limitation, liabilities resulting from the discounting of negotiable instruments, contingent liabilities resulting from liabilities for which it is responsible on behalf of third parties and the reserves established for employee and worker severance pay, tax payments, bonds, other similar reserves and rents payable pursuant to any financial lease agreement.

 

  

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"CCP Rate" shall mean the latest Cost for Securing Term Liabilities denominated in Mexican pesos for full-service banks in Mexico (CCP in Spanish), expressed in percentages per annum, as published in the Official Gazette of the Federation and that the Mexican central bank deems representative as of the date on which each interest or corresponding default period commences in the terms of the "Payment of Interest" clause of this agreement.

"CETES Rate" shall mean the latest annual rate of return on the primary placement of federal treasury certificates (certificados de la Tesorería de la Federación, or CETES) over a 28-day period if the interest periods consist of 28 days or are monthly, or over the closest period if the interest periods are quarterly or biannual, as determined by the Mexican central bank as of the date on which each interest or corresponding default period commences in the terms of the "Payment of Interest" clause of this agreement.

"LIBOR Rate" shall mean the average annualized interest rate that appears on the LIBOR01 Page, (USD) column ("LIBOR01 Page") of the THOMSON REUTERS BBA LIBOR RATES U.S. Domestic Money Service, which is published on said page by the British Bankers' Association through THOMSON REUTERS monitoring systems, such as applicable rates in U.S. dollars for the corresponding interest or accounting period and that are offered on the London interbank market by various banks offering said quotes at the close of operations (11:00 AM London time), 2 (two) business days in London prior to the commencement of the corresponding interest or accounting period. The foregoing, with the understanding that it shall be considered a Business Day if deposits are made in U.S. dollars on the London interbank market, with the understanding that if no transactions are taking place on the London interbank market because it is not a business day, the rates for the preceding Business Day shall be used.

"TIIE Rate" (Commencement of Period) shall mean, with respect to each ordinary interest period, the latest equilibrium interbank interest rate (i) over 28-day periods if interest periods consist of 28 days or are monthly or (ii) over 91 days or the equivalent thereof if interest periods are quarterly (with the understanding that if no listings are provided for the corresponding period pursuant to the above, listings for the nearest period shall be used) determined and published by the Mexican central bank in the Official Gazette of the Federation at or prior to the commencement of such interest period based on the listings provided by Mexican credit institutions. With respect to each default interest period, the latest equilibrium interbank interest rate over a 28-day period or that which replaces it pursuant to the above and is published at or prior to the commencement of said interest period shall apply.

 

  

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"US GAAP" shall mean U.S. generally accepted accounting principles in effect. 

"Operating Income" shall mean, at the close of each accounting period, the result of (a) all the sales, either in full or in installments, minus (b) the sum of (i) discounts made on said sales, (ii) sales costs, (iii) sales expenses, (iv) administration expenses and (v) the depreciation and amortization expenses for said person.

TWO. OPENING OF THE LINE OF CREDIT. BANAMEX agrees to grant and make available to the CLIENT a credit for up to the amount of US$6,250,000.00 (SIX MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS 00/100, CURRENCY OF THE UNITED STATES OF AMERICA), with the understanding that the amount of said credit does not include interests, expenses, commissions or any other sums that must be paid by the CLIENT pursuant to this agreement.

The CLIENT shall allocate the amounts it draws down on the credit referred to herein to permanent working capital.

The CLIENT, within the 10 (ten) days following drawdown(s) on the credit, shall demonstrate the correct allocation of the credit to the satisfaction of BANAMEX.

THREE. DRAWDOWN ON THE CREDIT. The CLIENT may make use of the credit by means of one or more drawdowns and exclusively during a term that shall not exceed 180 (one hundred eighty) days counted as of the signature date of this agreement, provided that the day it intends to draw down on the credit is a Business Day in Mexico and in New York and that the following requirements have been met:

a). That the CLIENT has notified BANAMEX by telephone of the amount and the date on which it it is requesting to draw down on the credit. In the event BANAMEX agrees to the drawdown, it shall inform the CLIENT by telephone of: (i) the date of the drawdown, (ii) the applicable interest rate and (iii) the terms for paying principal and interest.

b). That the CLIENT has delivered to BANAMEX the original version of the document referred to in the "Verifying Documents" clause.

c). That the amounts drawn down have not exceeded the amount of the credit. 

d). That the facts set forth in this agreement have continued without any material adverse change as of the date of the drawdown and/or no cause for acceleration or event that, with the passage of time, may constitute a cause for acceleration has occurred.

e). That the preemptive notices have been filed with the Public Registry of Property and that the corresponding certificates of encumbrances have been issued by said Registry.

 

  

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The CLIENT may not request the cancellation of a drawdown once it has been requested in terms of this clause. In the event that for any reason not attributable to BANAMEX the drawdown does not take place, the CLIENT shall compensate BANAMEX for any loss or expense in which BANAMEX may incur.

BANAMEX shall deposit the amounts to be drawn down to checking account in dollars number 3208515 (three two zero eight five one five), which the CLIENT has opened at BANAMEX branch number 0023 (zero zero two three).

FOUR. VERIFYING DOCUMENTS. For the purpose of documenting the drawdown on the credit, the CLIENT shall execute and deliver to BANAMEX a promissory note that shall set forth:

a). As principal, the amount of the drawdown on the credit. 

b). As payment dates for principal and interests, the corresponding dates in accordance with the provisions contained in the "Payment of the Principal" and "Payment of Interest" clauses.

c). As the execution date, that on which the drawdown on the credit is carried out in the terms and manner satisfactory to BANAMEX.

The CLIENT acknowledges that the execution and delivery of the promissory note that records the drawdown on the credit do not constitute payment, novation, modification or extinguishment of the obligations that the CLIENT assumes toward BANAMEX in this agreement.

The promissory note indicated in this clause, as well as the accounting entries and/or account statements and/or slips and documents issued by BANAMEX with respect to credits and debits that BANAMEX makes to the corresponding checking account, shall have probative value in any proceeding related to this agreement.

FIVE. PAYMENT OF THE PRINCIPAL. The CLIENT shall pay BANAMEX, without need for requirement, notice, protest or notification of any kind, the full amount of the credit drawn down precisely on the dates established as due dates for principal in accordance with the promissory note executed pursuant to the “Verifying Documents” clause and whose dates are contained in the form of promissory note that accompanies this agreement as Exhibit “C” and is an integral part of it, provided that these do not exceed a 36 (sixty-six) month period following the date on which the drawdown on the credit takes place.

SIX. PAYMENT OF INTEREST. The CLIENT is obligated to pay BANAMEX, as of the date of the credit drawdown and when due, ordinary interest on the principal unpaid sum of the credit as follows: (i) the annual rate and (ii) the periods and dates of payment that are provided in the form of promissory note that accompanies this agreement as Exhibit “C” and that will be executed in order to demonstrate that the drawdown on the credit has taken place in accordance with the “Verifying Documents” clause.

 

  

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In the event of default on the full and timely payment of the amounts owed to BANAMEX pursuant to this agreement, the unpaid principal amount shall only accrue default interest as of the date following the date due and until the day such amount is fully paid, at an annual rate equal to:

a).For the amounts that must be paid in Dollars, the LIBOR Rate times 3 (three). The foregoing, with the understanding that : (i) if the result of multiplying the LIBOR Rate times 3 (three) is greater than adding 30 (thirty) points to the LIBOR Rate, the annual default interest rate shall be the result of adding the points set forth herein to the LIBOR Rate, and (ii) if the result of multiplying the LIBOR Rate times 3 (three) is less than adding 15 (fifteen) points to the LIBOR Rate, the annual default interest rate shall be the result of adding the points indicated herein to the LIBOR Rate.

In the event in which the LIBOR01 Page ceases to be published by the Thomson Reuters information system, a substitute rate shall calculated by taking the arithmetic average of the bank quotes that appear on the “Libo” page average line (the periods that do not appear on this page will be calculated by linear interpolation) of the US domestic money service that is transmitted through Thomson Reuters monitoring systems by various banks that offer such quotes at the close of operations (at 11:00 AM London time).

b).For the amounts that must be paid in pesos, the TIIE Rate multiplied by 2 (two) [shall be used], with the understanding that: (i) if the result of multiplying the TIIE Rate by 2 (two) is greater than adding 100 (one hundred) points to the TIIE Rate, the annual default interest rate shall be the result of adding the points set forth herein to the TIIE Rate, and (ii) if the result of multiplying the TIIE Rate by 2 (two) is less than adding 20 (twenty) points to the TIIE Rate, the annual default interest rate shall be the result of adding the aforementioned points to the TIIE.

If it is not possible to obtain this rate as indicated above, the following shall apply:

1).If the TIIE Rate ceases to be published by the Mexican central bank, default interest shall be calculated at the annual CETES Rate plus 0.40 (zero point four zero) points.

2).If, in addition to the TIIE Rate, the CETES Rate cannot be obtained, default interest shall be calculated at the annual CCP Rate plus 2.6 (two point six) points.

3).If it is not possible to determine default interest in accordance with the foregoing items, it shall be calculated at an annual rate that is the product of 3 (three) times the latest default interest rate it is possible to determine.

 

  

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The aforementioned default interest shall be payable on demand, regardless of whether BANAMEX accelerates the term provided for paying off the credit, in which case, as of the acceleration date, the default interest shall accrue on unpaid balance thereof.

The default interest rate shall vary throughout the time in which the default continues. For such purpose, the latest applicable benchmark rate published on or before the date on which each default interest rate period begins shall be used, with the understanding that: (i) the first default interest period shall begin on the day on which default commences and shall end in the following month, on the day that corresponds numerically to the day on which the unpaid amount in question became due and (ii) each subsequent default interest period shall begin on the day following the day on which the prior period would have ended and shall end in the following month, on the day that corresponds numerically to the day on which the prior period ended. In the event there is no day that corresponds numerically to the day on which default began, or on which the prior interest period ended, in the calendar month in question, the latest applicable benchmark rate published on the last Business Day of the corresponding month shall be used.

All ordinary and default interest provided for in this agreement shall be calculated based on a year consisting of 360 (three hundred sixty) days and taking into account the number of days that actually fall under the corresponding default interest period.

SEVEN. COMISSIONS. The CLIENT must pay BANAMEX a commission for opening the line of credit that is equal to 1.00% (one point zero zero percent) of the total amount of the credit, plus value added tax, which is payable when the drawdown on the credit is carried out.

EIGHT. TAXES. All of the amounts that the CLIENT must pay BANAMEX under this agreement shall be paid without any deductions or retentions and shall be paid free of any taxes. The CLIENT shall pay all Taxes and expenses related to these to ensure that BANAMEX obtains full amounts, except for the amounts that BANAMEX has to pay as income tax.

If any authority commands, charges or requires that BANAMEX pay any Tax (except for the income tax to be paid by BANAMEX) in connection with the amounts owed by the CLIENT pursuant to this agreement, BANAMEX shall notify the CLIENT of such requirement and deliver to it the related documents, and the CLIENT shall address the authority’s requirement in the terms established for such purpose, pay the corresponding Tax and deliver to BANAMEX the original receipts or other receipts that prove satisfactory payment for this within 5 (five) Business Days of the date on which such Tax becomes payable.

 

  

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The CLIENT shall reimburse BANAMEX on demand for any amount that BANAMEX must disburse for Taxes on the amounts owed by the CLIENT pursuant to this agreement and any other expense derived from any claim related to them, except for the amounts that BANAMEX has to pay as income tax.

If any amount payable by the CLIENT to BANAMEX under this agreement is subject to value added tax, the CLIENT shall pay BANAMEX both the amount in question and the corresponding value added tax.

The CLIENT shall indemnify and hold BANAMEX harmless regarding any proceeding related to Taxes arising from this agreement, except for the amounts that BANAMEX has to pay as income tax. The obligations of the CLIENT established in this clause shall subsist even after the termination of this agreement.

NINE. ADVANCE PAYMENT. The CLIENT may pay back the credit in advance in full or in part, provided: (i) that this is requested of BANAMEX at least 5 (five) Business Days in advance; (ii) that it is current regarding payments due in accordance with this agreement; (iii) that the advance payment amount is equal to or greater than a repayment; and (iv) that it pays BANAMEX for the loss, if any, the latter incurs as a result of the advanced payment of the credit (hereinafter, “Advance Payment Premium”).

BANAMEX shall notify the CLIENT of the amount of the Advance Payment Premium, which shall be determined by BANAMEX using the following formula:

Breakup Cost = MAX [0, Unpaid Balance x (Fund Rate [0] – Funding Rate [P]) x Remaining Period / 360 x Discount Factor]

Where:

	
Breakup Cost:

	
Advance Payment Premium

	
Unpaid Balance:

	
Unpaid Principal as of the Advance Payment Date

	
Fund Rate[0]:

	
Fund rate on the date of commencement of the credit / For a variable rate: fund rate at the last re-pricing or interest payment

	
Fund Rate[P]:

	
Fund rate as of the remaining period on the advance payment date

	
Remaining Period:

	
Credit maturity date – advance payment date (in days) / For variable rate: cut-off date of the next coupon – prepayment date

	
Discount Factor:

	
Multiple used to discount the value of future flow at its actual value

 

  

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TEN. PAYMENT ALLOCATION. All the amounts that are paid to BANAMEX pursuant to this agreement shall be allocated by BANAMEX in the following order:

a). To the payment of Taxes; 

b). To the payment of all costs and expenses BANAMEX incurs; 

c). To the payment of commissions; 

d). To the payment of default interest; 

e). To the payment of ordinary interest due; 

f). To the payment of the due and unpaid balance of the credit, with the understanding that if several repayments of the credit are due, it will be allocated to paying them as of the due date in reverse.

g). To the advance payment of ordinary interest accrued and not due; and 

h) To the advance payment of the unpaid balance not due. 

ELEVEN. PLACE AND TERMS OF PAYMENT. All of the amounts BANAMEX is owed shall be paid in accordance with the following:

a). When the amount to be paid is denominated in Dollars, payments must be made before 1:00 PM (New York City time) by bank deposit to BANAMEX account number 10991186 (one zero nine nine one one eight six), opened with Citibank N.A. at the branch located at 399 Park Avenue, New York, New York, United States of America, which is recognized by the parties as the place of payment. The payments herein indicated must be made precisely on their corresponding due dates in accordance with this agreement, or on the following Business Day (in Mexico and New York), without any additional cost if the due date falls on a day that is not a Business Day in Mexico and New York. When, during a calendar month in which any payment must be made, there is no day that is numerically equal to the day set as the date of payment, such payment must be made on the last Business Day in Mexico and New York of the corresponding calendar month, and the method of payment shall be deposit to checking account number 3208515 (three two zero eight five one five), branch 0023 (zero zero two three), opened with BANAMEX. For such purpose, the CLIENT expressly and irrevocably authorizes and instructs BANAMEX to charge to such account or to any of the other checking accounts, if necessary, that the CLIENT has at BANAMEX all the amounts payable in accordance with this agreement and to apply them to paying off the credit on the maturity date. This authorization does not release the CLIENT from its obligation to make payments at the place indicated in this clause until BANAMEX has received the full amounts owed to it. This authorization shall be irrevocable as long as there are unpaid amounts under the credit.

In order to avoid doubts regarding the interpretation of the foregoing paragraph, it is clarified that the provisions of such paragraph shall in no way be construed as a double payment obligation for the CLIENT in the terms of this agreement.

 

  

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b). When the amount to be paid is denominated in pesos, payments must be made by 2:00 PM (time in the city where payment is to be made) at BANAMEX branch 0023 (zero zero two three), which is recognized by the parties as the place of payment. Notwithstanding the foregoing, the CLIENT may pay at any BANAMEX branch located in the United Mexican States; this does not include self-service branches or branches located in corporate offices (SEC).

The payments herein indicated must be made precisely on their corresponding due dates in accordance with this agreement, or on the following Business Day, without any additional cost if the due date falls on a day that is not a Business Day. When, during a calendar month in which any payment must be made, there is no day that is numerically equal to the day set as the date of payment, such payment must be made on the last Business Day of the corresponding calendar month.

The parties agree that BANAMEX may modify the place or the terms of payment herein indicated, provided that the CLIENT is notified in writing at least 10 (ten) Business Days in advance of the payment date in question. The CLIENT hereby waives its right to receive any kind of remuneration or compensation from BANAMEX for such reason.

The parties agree that the CLIENT may consult all movements regarding the credit granted in this agreement on the account statement corresponding to the checking account indicated in the foregoing “Drawdown on the Credit” clause.

TWELVE. SET-OFF. BANAMEX is expressly and irrevocably authorized by the CLIENT to, without the need for notification or previous requirement, set off the due and unpaid amounts of the credit and all of the settled, due and payable debts that exist for BANAMEX in favor of the CLIENT, including, but not limited to, debts arising from deposits made by the CLIENT with BANAMEX.

Once set-off has been done, BANAMEX shall notify the CLIENT that it has done so, with the understanding that the lack of notification shall not affect the validity of the set-off.

THIRTEEN. SPECIAL OBLIGATIONS. Until all debts under this agreement are paid, the CLIENT shall:

a). Deliver to BANAMEX: 

(i) Within 90 (ninety) days of the close of each quarter of each of the CLIENT’s fiscal years, its consolidated financial statements, including, without limitation, the balance sheet and income statements for that quarter and for the period that began at the end of the prior fiscal year and that ended at the close of such quarter, prepared in accordance with US GAAP and certified by the chief financial officer of the CLIENT.

 

  

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(ii) Within 180 (one hundred eighty) days following the end of each of its fiscal years, its consolidated annual financial statements (including a list of the main balance sheet entries) prepared in accordance with US GAAP and duly audited by an independent auditor acceptable to BANAMEX, with the understanding that if the CLIENT is not obligated by applicable tax provisions to audit its financial statements, the annual financial statements delivered to BANAMEX must be certified and signed by the chief financial officer of the CLIENT, or by the CEO, as the case may be.

(iii) Within 10 (ten) Business Days of being made aware, notification of any event that constitutes or that, with the passing of time, may constitute a cause for acceleration, along with a certificate issued by the chief financial officer of the CLIENT containing the details of such event, as well as measures whose adoption is proposed with respect thereto.

(iv) Within 10 (ten) Business Days of the CLIENT and/or any of the appearing parties’ receipt of service of process or notification of any action or material proceeding brought against them or any of his businesses, operations or assets, along with a certificate issued by the chief financial officer of the CLIENT describing the nature of such action or proceeding and the measures whose adoption is proposed in this regard.

(v) Within the term reasonably set by BANAMEX for every case, but never more that 30 (thirty) calendar days, any information that is reasonably requested from it by BANAMEX.

b). Maintain in force all authorizations, licenses and concessions required in the ordinary course of business and fulfill its obligations.

c). Abstain from doing or permitting any significant change in the line or the nature of its business, considering the nature of its business as of the date of this agreement.

d). Maintain books and other accounting records that properly show its financial situation and the results of its operations, prepared in accordance with US GAAP.

e). Allow the people that BANAMEX designates to inspect its facilities and/or accounting records, to take notes on and make transcriptions of them and to perform appraisals on its assets during Business Days and hours, with at least 2 (two) Business Days’ prior notice from BANAMEX to the CLIENT.

f). Maintain at all times a short-term debt coverage ratio of no less than 1.25 (one point two five), with short-term debt coverage ratio for each quarter of each fiscal year being understood as the result of dividing, using accumulated information corresponding to the 12 (twelve) months prior to the month in which such ratio is calculated, (i) the sum of Operating Income plus depreciation and amortization by (ii) the sum of Net Financial Expenses plus the current portion of long-term debt.

 

  

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g). Maintain at all times a total debt coverage ratio of no greater than 3.5 (three point five) for the year 2013 (two thousand thirteen), no more than 3.25 (three point two five) for the year 2014 (two thousand fourteen) and no more than 3.00 (three point zero) for the remaining term of the credit, with total debt coverage ratio for each quarter of each fiscal year being understood as the result of dividing, using accumulated information corresponding to the 12 (twelve) months prior to the month in which such ratio is calculated, (i) Financial Debt by (ii) the sum of Operating Income plus depreciation and amortization.

 

 

h). Maintain at all times an interest coverage ratio of no less than 3.5 (three point five), with interest coverage ratio for each quarter of each fiscal year being understood as the result of dividing, using accumulated information corresponding to the 12 (twelve) months prior to the month in which such ratio is calculated, (i) the sum of Operating Income plus depreciation and amortization at the close of each accounting period by (ii) the sum of Net Financial Expenses.

i). Maintain at all times a liquidity ratio of no less than 1.2 (one point two), with liquidity ratio for each quarter of each fiscal year being understood as the result of dividing (i) current assets by (ii) current liabilities at the close of the accounting period. The foregoing, with the understanding that this must include all assets and all liabilities that, pursuant to US GAAP, must be accounted for as current assets and liabilities.

j). Maintain at all times a leverage ratio of no greater than 1.35 (one point three five), with the leverage ratio for each quarter of each fiscal year being understood as the result of dividing, using accumulated information corresponding to the 12 (twelve) months prior to the month in which such ratio is calculated, Total Liabilities by stockholders’ equity, and with stockholders’ equity being understood as the sum by which Total Assets exceed Total Liabilities.

k). Abstain from making, during any fiscal year, investments in fixed assets for an aggregate total amount of 1.00% (one point zero zero percent) on annual consolidated sales and/or making any investments in fixed assets while any cause for acceleration has occurred or may occur as a result of such an investment. For purposes of the foregoing, investments in fixed assets shall mean any investments made in: plants, machinery, equipment or any other fixed assets, as well as in the capital stock or assets of any other company, including renewals, improvements, replacements and leases on fixed assets that must be capitalized pursuant to US GAAP, but excluding the repairs that are necessary for their operation.

 

  

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l). Take into consideration and comply with ecological laws; the preservation, restoration and improvement of the environment; the protection of natural areas and wild and aquatic flora and fauna; the rational use of natural elements; foresight regarding air, water and soil pollution; and, in general, each and every provision of the General Law of Ecological Equilibrium and Environmental Protection (Ley General de Equilibrio Ecológico y Protección del Ambiente) and any other law applicable in this regard.

m). The CLIENT and any of the appearing parties shall not take on additional debt or bank liabilities without the prior written authorization of BANAMEX.

n). Following the drawdown on this credit, the CLIENT and/or appearing parties may not enter into any transactions that imply flows to the parent company or any affiliate that is not accredited by BANAMEX, or to any not participating in this agreement guaranteeing obligations, unless they are the result of its transactions and are carried out under market conditions.

o). The CLIENT and the appearing parties must together maintain a total stockholders’ equity of at least US$57,000,000.00.

The financial information that the CLIENT must deliver to BANAMEX must be consolidated for the companies that are group members in Mexico, in dollars, and in accordance with US GAAP. Calculations of accounting ratios shall be prepared based on the above, with the understanding that the calculation prepared at the close of any period not falling on the close of the fiscal year shall be prepared based on the financial statements certified by the chief financial officer or, as the case may be, by the chief executive officer of the CLIENT and of subsidiaries, and calculations prepared at the close of any fiscal year shall be prepared based on audited financial statements.

In addition, the parties agree that if the CLIENT fails to perform on any of the special obligations set forth in this clause, the CLIENT must irrevocably pay BANAMEX liquidated damages, which shall be set at that time, unless the CLIENT requests an exception from BANAMEX for breach and is granted this. Otherwise, BANAMEX shall at all times retain its right to accelerate the payment of the credit.

FOURTEEN. CAUSES FOR ACCELERATION. If any of the following events takes place, BANAMEX may accelerate payment of the credit, in which case the CLIENT shall pay on demand the unpaid principal sum of the credit; ordinary and default interest, if any; costs and expenses; and any other amounts payable by the CLIENT to BANAMEX without the need for protest, claim, notice, request or any other type of notification.

 

  

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a) If the CLIENT does not pay on a timely basis any of the payments of principal, interests, fees, costs or expenses or any other amounts arising under this agreement.

b) If the CLIENT cancels the checking account indicated in the “Drawdown on the Credit” clause and/or the “Place and Terms of Payment” clause and does not specify a another checking account in advance and to BANAMEX’s satisfaction.

c) If the CLIENT allocates the credit resources to purposes other than those herein provided for.

d) If any representation made or information provided by the CLIENT or any of the appearing parties to BANAMEX in connection with this agreement is false or inaccurate in any respect that, to the reasonable judgment of BANAMEX, is significant.

e) If at any time and for any reason the CLIENT and/or the appearing parties or any other person challenges the validity or enforceability of this agreement or of any other document related to it, with the understanding that, with respect to challenges by third parties, said challenge is not cured within 45 (forty five) days of the initiation thereof.

f) If the CLIENT or any appearing party initiates any administrative or judicial proceeding against BANAMEX and/or any other member of Grupo Financiero Banamex, S.A. de C.V. and/or of Citigroup, Inc.

g) If the CLIENT or any or the appearing parties breaches, or declares early termination of, any obligation in favor of BANAMEX and/or any other member of Grupo Financiero Banamex, S.A. de C.V. and/or Citigroup, Inc.

h) If the CLIENT and/or any or the appearing parties breaches: (i) the payment of any of its material debts with financial institutions and/or auxiliary credit organizations, whether national or foreign; (ii) with any other term, covenant or condition contained in the agreement or instrument pertaining to such debts, if the effect of said breach is to accelerate the maturity of said debt; or (iii) with any agreement whether civil or commercial, executed with third persons, and that is relevant and material to maintain its transactions and/or its financial condition.

i) If the CLIENT and/or any of the appearing parties violates any law, regulation, rule and/or order applicable or final material judgment, including, without limitation, the payment when due of all taxes, contributions and governmental material tax burdens levied on any of them or on their assets, except in the event a judicial or administrative appeal is filed with respect thereto and as long as said violation does not adversely affect their financial situation or the operation of their businesses.

 

  

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j) If the CLIENT admits in writing its inability to pay its debts or generally assigns its properties in benefit of creditors, or any concurso mercantil proceeding or insolvency proceeding is brought by or against the CLIENT.

k) If a strike petition or any collective labor suit is brought against the CLIENT and/or any of the appearing parties and such proceeding is not resolved within 90 (ninety) days of the initiation thereof.

l) If any authority or any person confiscates, expropriates or assumes the custody or the control of all or any significant portion of the assets of the CLIENT and/or any of the appearing parties, or displaces the management of the CLIENT, or limits in a material and relevant manner its authority to operate its business.

m) If a proceeding to dissolve or liquidate the CLIENT and/or any of the appearing parties is commenced and such proceeding is not resolved within 90 (ninety) days of the commencement thereof.

n) If the CLIENT and/or any of the appearing parties is merged and/or spun off and/or reduces its capital stock without the prior authorization of BANAMEX.

ñ) If the CLIENT and/or any of the appearing parties sells, leases, sublets, lends without charge, assigns, transfers or otherwise makes use of or transfers the possession, ownership, use or enjoyment of its fixed assets to a third party, except for the sale of fixed assets carried out to replace obsolete fixed assets that are to be renewed.

o) If the CLIENT or any appearing party establishes any mortgage, pledge or encumbrance of any kind on its assets without the prior consent of BANAMEX.

p) If the CLIENT makes a payment of dividends or any other type of payment with respect to stock or shares of its capital stock without the prior written consent of BANAMEX.

q) If International Textile Group Inc. ceases to have control (directly or indirectly) over the CLIENT’s capital stock.

r) If any event or condition occurs that has or may have a significant material adverse effect on the operation of the businesses and/or financial condition of the CLIENT and/or in the event that any judgment, requirement or order of any authority is issued against the CLIENT with the aforementioned effects and is not cured within 30 (thirty) days of the date on which it occurs.

 

  

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s) If the mortgage guarantees are not duly registered as second mortgages with the corresponding public registry of property and commerce within a period no greater than 45 (forty-five) Business Days from the signature date of this agreement.

t) If a forfeiture proceeding in the terms of the Federal Law of Forfeiture is initiated regarding the guarantees herein established in favor of BANAMEX.

u) If the CLIENT breaches any obligation arising under this agreement and/or any of the documents related hereto.--------------------------------------------------------------

FIFTEEN. BOND. In order to guarantee the timely payment of each and every amount that the CLIENT must pay to BANAMEX in accordance with this agreement, as well as each and every expense incurred by BANAMEX in demanding any of its rights in accordance herewith, the GUARANTOR is hereby designated joint GUARANTOR of the CLIENT, and in the event promissory notes are executed in order to record drawdowns on the credit, it must endorse such promissory notes.

The GUARANTOR hereby waives the right to have all remedies first exhausted against the principal, to force a creditor to sue the principal debtor first and to be liable for only its proportionate share of the debt that are established in the Federal Civil Code, and, therefore, each and every one of their legal consequences. Thus, the parties acknowledge that the expiration and prescription of the bond are not applicable if BANAMEX does not take legal action against the CLIENT for the breach of the principal obligation during the month after the term expires; if the GUARANTOR requests that BANAMEX bring an action for performance of the obligation during the one-month period and BANAMEX does not exercise its rights during such period once the principal becomes due; or if an action filed in either case is discontinued for more than three months without justified cause.

The GUARANTOR also expressly and unconditionally waives the assertion or alleging of any defense regarding the payment of the amounts that the CLIENT must pay BANAMEX and that is not merely personal to the CLIENT.

The GUARANTOR authorizes BANAMEX to grant the CLIENT any extension or grace period, without extinguishing the bond, as the case may be, as well as to keep it in effect if (i) this agreement is amended or new encumbrances or conditions are established, (ii) if the GUARANTOR cannot subrogate itself to the rights and privileges of BANAMEX due to the latter’s fault or negligence, (iii) due to the lack of perfection or release of the guarantee(s) granted in accordance with this agreement, (iv) due to any lack of validity or enforceability of this credit or of any other agreement or instrument related thereto, (v) due to any right to set-off claimed or filed for by the CLIENT and (v) in any other circumstance that in any other manner might represent a defense or release of the CLIENT.

 

  

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This Bond will remain in effect if, at any moment and for any reason, any amount that the CLIENT delivers to BANAMEX as payment for the amounts owed in the terms of this agreement and/or the expenses in which BANAMEX incurs while demanding any of its rights pursuant to this agreement must be returned by BANAMEX for any reason as if such payment had never been made.

The GUARANTOR agrees that in the event BANAMEX assigns, discounts or transfers its rights and obligations under this agreement, the bond hereby created shall remain in full force and effect and shall be binding on the GUARANTOR before any successor in interest, assignee or acquiror.

The GUARANTOR irrevocably authorizes BANAMEX to provide to the judicial and regulatory authorities and to the persons that such authorities indicate credit information on the GUARANTOR in the terms of the “Information” clause hereof. Therefore, the GUARANTOR hereby waives legal action against BANAMEX in connection with exercising this power.

The GUARANTOR irrevocably authorizes BANAMEX to set off each and every liquid and enforceable amount for which BANAMEX is responsible in favor of the GUARANTOR in the same terms as those established in the “Set-Off” clause.

The GUARANTOR must perform all obligations assumed by the CLIENT in the “Special Obligations” clause, and, additionally, BANAMEX may declare the acceleration of the credit if the GUARANTOR incurs in any of the events described in the “Causes for Acceleration” clause, with the understanding that all references to the CLIENT provided in such clauses shall be understood as if such clauses also applied to the GUARANTOR.

SIXTEEN. PACKAGE MORTGAGE. As guarantee for the performance of each and every obligation derived from this agreement, the MORTGAGE GUARANTOR ON THE INDUSTRIAL UNIT is creating a second package mortgage in favor of BANAMEX on the complete industrial unit making up the company PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, in the terms of article 67 (sixty-seven) of the Law of Credit Institutions.

The mortgage shall include, but not be limited to: (i) the corresponding concession or authorization, as the case may be; (ii) any collection right in favor of the company; (iii) any proceed or pending future or present product; (iv) natural accretions of the company; (v) the future improvements and assets that become part of the company; (vi) all material elements, real or personal property allocated to the company’s use, considered as a whole and a list of which is attached hereto as Exhibit D; and (vii) the monies in cash corresponding to ordinary use, as well as credits in favor of the company deriving from its transactions.

 

  

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The mortgage shall guarantee each and every interest accrued under the credit throughout its entire term and until its full settlement, which shall be duly registered with the corresponding public registry(ies) of property and commerce.

Each and every mortgaged property guarantees the total unpaid amount of the credit and shall not be totally or partially released until the credit is completely paid off pursuant to this agreement. The MORTGAGE GUARANTOR ON THE INDUSTRIAL UNIT waives the provisions of article 2912 (two thousand nine hundred twelve) of the Federal Civil Code and similar articles of the state (including the Federal District) where the mortgaged Coahuila Properties are located.

The MORTGAGE GUARANTOR ON THE INDUSTRIAL UNIT shall comply with the obligations assumed by the CLIENT, and, additionally, BANAMEX may accelerate the payment of the credit if the MORTGAGE GUARANTOR ON THE INDUSTRIAL UNIT incurs in any of the events described in the “Causes for Acceleration” clause, with the understanding that all references to the CLIENT made in such clause shall be understood as if also made to the MORTGAGE GUARANTOR ON THE INDUSTRIAL UNIT.

In order for the properties that make up the package mortgage herein created to be maintained, the parties hereby appoint MR. JOSÉ MANUEL GONZÁLEZ LAGUNAS DEPOSITARY of such properties (the “DEPOSITARY”). The DEPOSITARY shall be considered receiver and must maintain such properties while there are unpaid balances in favor of BANAMEX at the MORTGAGE GUARANTOR ON THE INDUSTRIAL UNIT’s domicile located at Carretera Parras Paila Km. 3.5, Col. Centro, C.P. 27980, Parras, Coahuila, and must not make use of such properties or encumber them in any way, or grant their use or enjoyment to persons other than the MORTGAGE GUARANTOR ON THE INDUSTRIAL UNIT.

The DEPOSITARY accepts the position conferred, without any right to remuneration, stating that at the signature date of this agreement he is receiving to his full satisfaction the possession of the properties subject matter of the guarantee. The DEPOSITARY shall allow BANAMEX or the persons designated by BANAMEX access at any time so that they may perform inspections on the properties subject matter of the guarantee, as well as deliver such properties to BANAMEX, whenever it requires this.

BANAMEX may remove the DEPOSITARY in the event of a breach of any obligation of the CLIENT, the DEPOSITARY or the MORTGAGE GUARANTOR ON THE INDUSTRIAL UNIT.

If removed, the DEPOSITARY shall deliver, to the place of deposit and within the 48 (forty eight) hours following his removal, all the properties and documents in his custody in connection with his position to the new DEPOSITARY designated by BANAMEX.

 

  

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SEVENTEEN. MORTGAGE. As guarantee for the performance of all the obligations derived from this agreement, the MORTGAGE GUARANTOR hereby creates a second mortgage in favor of BANAMEX on the property described in item V.1 (Roman numeral one) of the background chapter of this agreement.

The mortgage shall be extended to include the natural accretions of the property, to the improvements made by the owner to the aforementioned property, to the personal property permanently attached to the property and that cannot be separated without damaging said property or without damaging it or such personal property, to the new buildings built on the mortgaged property and to the new floors built in the mortgaged buildings, to the proceeds of the mortgaged property as long as said proceeds are generated before BANAMEX demands the payment of the owed amounts, to due and unpaid rents when the performance of the guaranteed obligations is demanded and to everything corresponding de facto and de jure to the mortgaged property, without any reservations or restrictions, in accordance with articles 2896 (two thousand eight hundred ninety-six) and 2897 (two thousand eight hundred ninety-seven) of the Federal Civil Code and similar articles of the civil code of the state where this agreement is executed.

The mortgage shall guarantee each and every interest accrued on the credit for the totality of its term and until its full settlement. This shall be duly recorded in the corresponding public registries of commerce.

The mortgaged property guarantees the full unpaid amount of the credit, which shall not be fully or partially released until the credit is completely settled pursuant to this agreement. The MORTGAGE GUARANTOR waives its rights under article 2912 (two thousand nine hundred twelve) of the Federal Civil Code and similar articles of the state (including the Federal District) where the mortgaged Morelos Property is located.

The MORTGAGE GUARANTOR shall comply with all obligations assumed by the CLIENT, and, additionally, BANAMEX may accelerate the payment of the credit if the MORTGAGE GUARANTOR becomes subject to any of the events described in the “Causes for Acceleration” clause, with the understanding that all references to the CLIENT made in such clause shall be understood as if also made to the MORTGAGE GUARANTOR.

 

  

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EIGHTEEN. INSURANCE. The CLIENT and the MORTGAGE GUARANTOR shall obtain and maintain in force the following as long as there is an unpaid amount under the credit using an insurance company acceptable to BANAMEX:

PROPERTY AND CASUALTY INSURANCE, which, in accordance with common and market standards at the place where the properties provided as guarantee for this credit are located, covers any risk that endangers the physical integrity of said properties and includes, but is not limited to: fire, lightning, explosion, hurricane and storm winds, flood and swell, hail and snow, strike and popular uprising, aircraft or objects falling from them and vehicles, smoke or soot, burst pipes or accidental pipe or water supply system leaks, accidental discharge or water spillage or vapor leak, damage due to the obstruction of downspouts, the accumulation of hail, falling trees, satellite and radio dishes of non-commercial use, earthquake, volcanic eruption and damage or loss of profit resulting from the explosion of vats, equipment or any other container that is normally subject to pressure.

The PROPERTY AND CASUALTY INSURANCE policy must be obtained with comprehensive coverage for an amount equal to the unpaid balance of the credit at the time at which the claim is notified to the insurer.

The risks covered by the insurance policies referred to in this clause shall be subject to the insurability requirements, exclusions, deductibles, co-insurance policies and conditions established by the insurance company from which they are obtained.

BANAMEX shall be designated first and irrevocable beneficiary on the PROPERTY AND CASUALTY INSURANCE policies for up to the unpaid amount of the credits at the time of the corresponding indemnity payment. Additionally, the PROPERTY AND CASUALTY INSURANCE policy shall mention the mortgages created to guarantee the credit pursuant to the terms of article 109 (one hundred nine) of the Insurance Contract Law. The insured amount for fire and additional coverage shall be adjusted on June 30th (thirtieth) and December 31st (thirty-first) of each year. In the event of a partial claim that affects the mortgaged property(ies), the CLIENT and/or the MORTGAGE GUARANTOR shall allocate the corresponding indemnity to its/their repair. The amounts received, if any, by BANAMEX from the insurance company as a result of the corresponding insurance indemnities shall be allocated to the advance payment of the credit, without any discount or penalty whatsoever.

In the event any risk covered by the aforementioned insurance policy occurs, the CLIENT and/or MORTGAGE GUARANTOR, or, as the case may be, its successors in interest, shall immediately give written notice to BANAMEX, identifying in a reliable manner the accident, the corresponding credit and the reason for the claim. The insured party shall notify the remainder of its successors in interest of the contents of this clause. In order to for the insurance policy to be valid, the interested parties shall additionally provide BANAMEX with any other document required in connection with the corresponding claim.

 

  

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In any event, cancellation of the insurance policy may only be requested from the insurance company with BANAMEX's prior written consent.

The CLIENT is severally obligated with the MORTGAGE GUARANTOR to pay the premiums amounts derived from obtaining the corresponding insurance policies.

The CLIENT shall deliver to BANAMEX the corresponding insurance policies within no more than 45 (forty-five) calendar days after the signature date of this agreement, and, as the case may be, in connection with the renewal of said policies, the 30 (thirty) days shall commence on the maturity of the corresponding policies or their renewal, depending on the case.

If the MORTGAGE GUARANTOR does not provide evidence that the insurance policy has been obtained or the corresponding premium has been paid, BANAMEX may, without being obligated to do so, obtain said insurance policy and/or pay the corresponding premium. If BANAMEX, in spite of not being obligated to do so, pays the insurance premium amounts, the CLIENT and the MORTGAGE GUARANTOR shall reimburse it for said amounts on demand.

NINETEEN. REPORTING AND RESTRICTION. In the terms of article 294 (two hundred ninety-four) of the General Law of Negotiable Instruments and Credit Transactions, BANAMEX reserves the right to at any time report this agreement and to restrict or report the period for drawdown or the amount of the credit, or both simultaneously, simply by giving written notice to the CLIENT.

The CLIENT, however, shall not be entitled to report this agreement or to restrict the amount or period for drawdown on the credit.

TWENTY. ASSIGNMENT AND DISCOUNT. The parties agree that only BANAMEX is authorized, after giving prior written notice to the CLIENT, to transfer, negotiate in any way or encumber the rights herein indicated and/or the documents referred to in the "Verifying Documents" clause and/or any other document related hereto, provided that such transfer, negotiation or encumbrance does not imply a cost or additional burden for the CLIENT.

In the event BANAMEX is bound vis-a-vis the assignee, acquiror or creditor to monitor the allocation of the credit or the performance of the obligations of the CLIENT, the CLIENT shall be obligated to provide BANAMEX with the necessary means for carrying out the above purposes.

 

  

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The parties agree that BANAMEX is authorized to transfer its obligations. 

The CLIENT waives, in the event BANAMEX transfers, negotiates in any form or encumbers the rights and/or obligations hereof, being delivered or paid the interest referred to in the second paragraph of article 299 (two hundred ninety-nine) of the General Law of Negotiable Instruments and Credit Transactions.

After giving prior written notice to the CLIENT, the CLIENT may authorize BANAMEX so that, in any case provided for in this clause, even prior to the corresponding transfer or encumbrance, it may provide all the information that the new creditor or assignee requires regarding the CLIENT.

TWENTY-ONE. INFORMATION. The CLIENT acknowledges that BANAMEX is required by law to provide judicial and administrative (including regulatory) authorities and the persons designated by them with information on operations they carry out with their clients.

Additionally, with respect to information relating hereto and other related documents, the CLIENT irrevocably authorizes BANAMEX to:

a)Process it using the data processing systems generally used by BANAMEX.

b)Disclose or provide it to its affiliates or subsidiaries and its directors, officers, employees, auditors, service providers and representatives and to the directors, officers, employees, auditors, service providers and representatives of such affiliates or subsidiaries to the extent these individuals need to know the information required in connection with the operations to be carried out pursuant to this agreement.

c)Notwithstanding the generality of foregoing item b), disclose or provide it to the companies that are members of the same financial group to which BANAMEX pertains, as well as to the foreign companies that are part of the corporate group to which BANAMEX pertains, to the extent these individuals need to know the information required in connection with operations to be carried out pursuant to this agreement. The foregoing applies both to operations carried out by these companies in direct or indirect connection herewith and to the offer of the products they market.

d)Disclose it to credit bureaus and request CLIENT information from such companies in the terms of applicable law.

TWENTY-TWO. COSTS AND EXPENSES. The CLIENT shall pay BANAMEX, on demand, after prior written notice given by BANAMEX for such purpose, all costs and expenses reasonably incurred by BANAMEX in connection herewith and with the performance hereof, and/or in connection with the documents related hereto.

 

  

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In the event of default on the payment of such costs and expenses, the CLIENT shall pay default interest, which are payable on demand, on the unpaid amount as of the date on which BANAMEX makes the corresponding demand for payment and until the day payment is made in full. Such interest shall be calculated at the default interest rate and in the terms provided in the "Payment of Interest" clause.

TWENTY-THREE. NOTICES. Except as otherwise provided herein, all notices shall be made in writing and shall be considered duly delivered if personally delivered to the addresses indicated in this contract.

The parties designate the following addresses: 

BANAMEX: Motolinía No. 1, Colonia Centro, C.P. 62000, Cuernavaca, Morelos 

CLIENT: BURLINGTON MORELOS, S.A. DE C.V. Km 2.5, Yecapixtla Agua Hedionda S/N, C.P. 62820, Yecapixtla, Morelos

GUARANTOR: PARRAS CONE DE MÉXICO, S.A. DE C.V. Carretera Parras Paila Km 3.5, Colonia Centro, C.P. 27980, Parras, Coahuila

MANUFACTURAS PARRAS CONE, S.A. DE C.V. Carretera Parras Paila Km 3.5, Col. Centro, C.P. 27980, Parras, Coahuila

BURLINGTON YECAPIXTLA, S.A. DE C.V. Km 2.5, Yecapixtla Agua Hedionda S/N, C.P. 62820, Yecapixtla, Morelos

SERVICIOS BURLMEX, S.A. DE C.V. Km 2.5 Yecapixtla Agua Hedionda S/N, C.P. 62820, Yecapixtla, Morelos

CONE DENIM YECAPIXTLA, S.A. DE C.V. Km 2.5 Yecapixtla Agua Hedionda S/N, C.P. 62820, Yecapixtla, Morelos

CASIMIRES BURLMEX, S.A. DE C.V. Km 2.5 Yecapixtla Agua Hedionda S/N, C.P. 62820, Yecapixtla, Morelos

MORTGAGE GUARANTOR ON THE INDUSTRIAL UNIT: Carretera Parras Paila Km 3.5, Col. Centro, C.P. 27980, Parras, Coahuila

MORTGAGE GUARANTOR: Km 2.5 Yecapixtla Agua Hedionda S/N, C.P. 62820, Yecapixtla, Morelos

DEPOSITARY: Km 2.5 Yecapixtla Agua Hedionda S/N, C.P. 62820, Yecapixtla, Morelos

So long as each party does not notify the others of a change of address, service of process, notices and other judicial and extrajudicial proceedings shall be notified and shall have full legal effect at the address herein specified.

 

  

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TWENTY-FOUR. APPLICABLE LAW. This contract shall be governed by and construed in accordance with the corporate laws applicable in the United Mexican States, and, in their absence, by the Federal Civil Code.

TWENTY-FIVE. JURISDICTION. For the resolution of any dispute in connection with this agreement, the parties expressly submit themselves to the jurisdiction of the courts of Mexico City, Federal District or the courts of the place where this contract is signed, at the discretion of the claimant, and specifically waive any other jurisdiction to which they may be entitled for any reason.

TWENTY-SIX. PRIVACY NOTICE. In accordance with the provisions of the Federal Law on the Protection of Personal Data in Possession of Private Parties, BANAMEX hereby informs the CLIENT that the information obtained in connection with the execution of this agreement shall be treated as confidential, using the systems provided for such purpose, and shall be used for the operation and registration of the products for which the CLIENT contracts, as well as to offer it, as the case may be, other financial or banking products of BANAMEX or of any of its affiliates, subsidiaries, parent companies, associates, agents or companies that are members of Grupo Financiero BANAMEX, as well as promotions of other goods or services related to the aforementioned banking products.

Furthermore and when appropriate, the CLIENT may limit the use or disclosure of its information or exercise its rights of access, rectification, erasure or blocking granted under the aforementioned law by means of a request delivered to the address provided in this agreement or to any BANAMEX branch. In addition, it has the right to bring a data protection proceeding with the Federal Institute for Access to Information and Data Protection (IFAI, in Spanish) within 15 (fifteen) days following the date on which it receives a reply from BANAMEX or as of the date on which the 20 (twenty) day period counted as of the date of its request concludes.

BANAMEX must notify the CLIENT of any change to the privacy notice contained in this clause by means of a written notice sent via any medium indicated in the "Notices" clause of this agreement, or it may do so using messages published at BANAMEX branches.

P E R S O N A L I T Y 

--- I. Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS hereby states under affirmation and subject to the strictest liability that his personality as legal representative of the companies PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, BURLINGTON MORELOS, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, MANUFACTURAS PARRAS CONE, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, SERVICIOS BURLMEX, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, CONE DENIM YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE and CASIMIRES BURLMEX, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE has not been revoked or modified in any manner and that he has the powers necessary for executing this legal act. The personality and legal existence of his principals are demonstrated as follows:

 

  

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a). The legal existence and representation of the company BURLINGTON MORELOS, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, by means of a notarially-certified copy of notarial instrument number ---, dated ---, made before and witnessed by Mr. ---, head notary of Notary Public No. --- of Mexico City, Federal District, which contains: THE NOTARIZATION OF THE MINUTES OF THE GENERAL ORDINARY SHAREHOLDERS MEETING of BURLINGTON MORELOS, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, which was held on --- and in which, among other resolutions, the granting of powers of attorney was recorded, for which a copy of its certificate is attached to this appendix and record of this notarial instrument under the letter "E," which corresponds to it, and a copy of which is attached to the notarially-certified copies issued.

b). The legal existence and representation of the company PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, by means of a notarially-certified copy of notarial instrument number ---, dated ---, made before and witnessed by Mr. ---, head notary of Notary Public No. --- of Mexico City, Federal District, which contains: THE NOTARIZATION OF THE MINUTES CONTAINING THE UNANIMOUS SHAREHOLDERS RESOLUTIONS of PARRAS CONE DE MÉXICO, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, which were adopted on --- and in which, among other resolutions, the granting of powers of attorney was recorded, for which a copy of its certificate is attached to this appendix and record of this notarial instrument under the letter "F," which corresponds to it, and a copy of which is attached to the notarially-certified copies issued.

c). The legal existence and representation of the company MANUFACTURAS PARRAS CONE, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, by means of a notarially-certified copy of notarial instrument number ---, dated ---, made before and witnessed by Mr. ---, head notary of Notary Public No. --- of Mexico City, Federal District, which contains: THE NOTARIZATION OF THE MINUTES CONTAINING THE UNANIMOUS SHAREHOLDERS RESOLUTIONS of MANUFACTURAS PARRAS CONE, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, which were adopted on --- and in which, among other resolutions, the granting of powers of attorney was recorded, for which a copy of its certificate is attached to this appendix and record of this notarial instrument under the letter "G," which corresponds to it, and a copy of which is attached to the notarially-certified copies issued.

 

  

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d). The legal existence and representation of the company BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, by means of a notarially-certified copy of notarial instrument number ---, dated ---, made before and witnessed by Mr. ---, head notary of Notary Public No. --- of Mexico City, Federal District, which contains: THE NOTARIZATION OF THE MINUTES OF THE UNANIMOUS RESOLUTIONS adopted out of session by the shareholders of BURLINGTON YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, which were adopted on --- and in which a SPECIAL POWER OF ATTORNEY was granted to him, for which a copy of its certificate is attached to this appendix and record of this notarial instrument under the letter "H," which corresponds to it, and a copy of which is attached to the notarially-certified copies issued.

e). The legal existence and representation of the company SERVICIOS BURLMEX, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, by means of a notarially-certified copy of notarial instrument number ---, dated ---, made before and witnessed by Mr. ---, head notary of Notary Public No. --- of Mexico City, Federal District, which contains: THE NOTARIZATION OF THE MINUTES OF THE UNANIMOUS RESOLUTIONS adopted out of session by the shareholders of SERVICIOS BURLMEX, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, which were adopted on --- and in which a SPECIAL POWER OF ATTORNEY was granted to him, for which a copy of its certificate is attached to this appendix and record of this notarial instrument under the letter "I," which corresponds to it, and a copy of which is attached to the notarially-certified copies issued.

f). The legal existence and representation of the company CONE DENIM YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, by means of a notarially-certified copy of notarial instrument number ---, dated ---, made before and witnessed by Mr. ---, head notary of Notary Public No. --- of Mexico City, Federal District, which contains: THE NOTARIZATION OF THE MINUTES OF THE UNANIMOUS RESOLUTIONS adopted out of session by the shareholders of CONE DENIM YECAPIXTLA, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, which were adopted on --- and in which a SPECIAL POWER OF ATTORNEY was granted to him, for which a copy of its certificate is attached to this appendix and record of this notarial instrument under the letter "J," which corresponds to it, and a copy of which is attached to the notarially-certified copies issued.

 

  

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g). The legal existence and representation of the company CASIMIRES BURLMEX, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, by means of a notarially-certified copy of notarial instrument number ---, dated ---, made before and witnessed by Mr. ---, head notary of Notary Public No. --- of Mexico City, Federal District, which contains: THE NOTARIZATION OF THE MINUTES OF THE UNANIMOUS RESOLUTIONS adopted out of session by the shareholders of CASIMIRES BURLMEX, SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE, which were adopted on --- and in which a SPECIAL POWER OF ATTORNEY was granted to him, for which a copy of its certificate is attached to this appendix and record of this notarial instrument under the letter "K," which corresponds to it, and a copy of which is attached to the notarially-certified copies issued.

II. Messrs. EDUARDO XAVIER VILLALOBOS GAITAN and ALFONSO GARCÍA GARCÍA hereby state under affirmation that their personality has not been revoked or modified in any way, which they hereby demonstrate with the notarial certifications to be added to the appendix and record of this notarial instrument under the letter "L," and a copy of which is attached to the notarially-certified copy or copies issued.

--- It is completed by means of the following instruments: 

I. BANCO NACIONAL DE MÉXICO, SOCIEDAD ANÓNIMA, which was formed in accordance with the laws of the United Mexican States and which changed form according to a decree published in the Official Gazette of the Federation on August 26, 1991 and to a registration entry in the Public Registry of Commerce of Mexico City, Federal District under commercial folio number 65,126, which is fully authorized in accordance with its corporate purpose to execute this instrument and to assume the obligations herein established. Its activity is regulated by the Law of Credit Institutions, which was published in the Official Gazette of the Federation on July 18, 1990, in which the appointments, powers of attorney, appointments of chief trust officers and, in general, the agencies and powers granted by the Company whose form is being changed shall remain in effect in their terms so long as they are not modified or expressly revoked.

By means of notarial instrument number 46,837, dated August 1, 2001, recorded in the notarial record of Notary Public No. 1 of Mexico City, Federal District, made before and witnessed by Mr. Roberto Núñez y Bandera, Banco Nacional de México, Sociedad Anónima became an affiliate in the terms of the Law of Credit Institutions and of the General Rules for Establishing Affiliates of Financial Institutions Abroad, and as a result, its bylaws were fully amended. Such notarial instrument was registered with the Public Registry of Commerce of Mexico City, Federal District under commercial folio number 65,126.

According to the bylaws of the company that are currently in effect, this company is named BANCO NACIONAL DE MÉXICO, SOCIEDAD ANÓNIMA, INTEGRANTE DEL GRUPO FINANCIERO BANAMEX.

 

  

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I, THE NOTARY, ATTEST: 

I. That to my judgment, the appearing parties have the minimum legal capacity necessary for the execution of this legal act.

II. That I have had before me all of the documents indicated throughout this notarial instrument and that the text of them herein inserted concurs with [that of] the corresponding original documents, to which I am referring.

III. That, after having read this instrument to the appearing parties and explained to them the value and legal scope of its contents, they stated to me their agreement herewith, signed it, and ratified it in witness whereof on the same day of the month on which it was executed; that they were made aware of the punishments imposed upon those making false statements under affirmation; and that they provided me with the following personal information:

--- Mr. EDUARDO XAVIER VILLALOBOS GAITAN is a Mexican citizen from ---, where he was born on ---; is/is a [married/single/widower]; is a bank officer; is the bearer of federal taxpayers identification number ---; is domiciled at Calle Motolinía No. 1, Colonia Centro, C.P. 60 [sic], Cuernavaca, Morelos; and is identifying himself with voter ID number ---, which was issued by the Federal Electoral Institute.---

--- Mr. ALFONSO GARCÍA GARCÍA is a Mexican citizen from Monclova, Coahuila, where he was born on January 16, 1977; is married; is a bank officer; is the bearer of federal taxpayers identification number GAGA-770116; is domiciled at Calle Motolinía No. 1, Colonia Centro, Cuernavaca, Morelos; and is identifying himself with voter ID number 0000091101355, which was issued by the Federal Electoral Institute.

--- Mr. JOSÉ MANUEL GONZÁLEZ LAGUNAS is a Mexican citizen by birth from Temixco, Morelos, where he was born on December 24, 1965; is married; is an employee; is the bearer of federal taxpayers identification number GOLM-651224; is domiciled at Calle Cuauhtémoc No. 5, Colonia Centro, Acatlipa, Temixco, Morelos, C.P. 62590; is a visitor of this city; and, as he is personally known to the notary, no identification is required of him.

IV. I am DEFINITIVELY AUTHORIZING THIS NOTARIAL INSTRUMENT in accordance with article 64 of the state Notary Act, as it does not give rise to any federal tax whatsoever.

I ATTEST. 

A. CERTIFICATES OF ENCUMBRANCES OR OF NO ENCUMBRANCES OF THE STATE OF MORELOS.

B. CERTIFICATES OF ENCUMBRANCES OR OF NO ENCUMBRANCES OF THE STATE COAHUILA DE ZARAGOZA.

 

  

39

  

 

C. FORM OF PROMISSORY NOTE. 

D. LIST OF PROPERTIES. 

E. PERSONALITY. 

F. PERSONALITY. 

G. PERSONALITY. 

H. PERSONALITY. 

I. PERSONALITY. 

J. PERSONALITY. 

K. PERSONALITY. 

L. SECOND PREEMPTIVE NOTICES. 

M. PAYMENT OF PUBLIC REGISTRY FEES. 

THIS IS A FIRST NOTARIALLY-CERTIFIED COPY, THE FIRST OF ITS KIND, WHICH HAS BEEN TAKEN FROM THE REGISTRY OF NOTARIAL INSTRUMENTS OF NOTARY PUBLIC NO. 2 OF THIS CITY; WHICH I AM ISSUING TO BANCO NACIONAL DE MÉXICO, SOCIEDAD ANÓNIMA, INTEGRANTE DEL GRUPO FINANCIERO BANAMEX; WHICH CONSISTS OF 17 PAGES THAT HAVE BEEN COMPARED, CORRECTED AND AUTHORIZED BY ME; AND WHICH BEAR MY SIGNATURE AND STAMP AS HEAD NOTARY OF SUCH NOTARY PUBLIC. Cuernavaca, Morelos on

BCL*

 

  

40

  

 

EXHIBIT "C"

 

 

 

PROMISSORY NOTE

 

BURLINGTON MORELOS S.A. DE C.V. (hereinafter, the "CLIENT") hereby unconditionally promises to pay to the order of Banco Nacional de México, S.A., Integrante del Grupo Financiero Banamex, (hereinafter, "BANAMEX") by no later than 1:00 p.m. (New York City time) by means of bank deposit to account number 10991186, which BANAMEX has opened with Citibank N.A. at the branch located at 399 Park Avenue, New York, New York, United States of America, the principal sum of US$6,250,000:00 (SIX MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS 00/100, CURRENCY OF THE UNITED STATES OF AMERICA).

 

The sum of this promissory note shall be payable by means of various repayments made on the dates and in the amounts indicated below:

 

	
No.

	
DUE DATE

	
AMOUNT

	
1

	
April 22, 2013

	
$104,166.67

	
2

	
May 22, 2013

	
$104,166.67

	
3

	
June 22, 2013

	
$104,166.67

	
4

	
July 22, 2013

	
$104,166.67

	
5

	
August 22, 2013

	
$104,166.67

	
6

	
September 22, 2013

	
$104,166.67

	
7

	
October 22, 2013

	
$104,166.67

	
8

	
November 22, 2013

	
$104,166.67

	
9

	
December 22, 2013

	
$104,166.67

	
10

	
January 22, 2014

	
$104,166.67

	
11

	
February 22, 2014

	
$104,166.67

	
12

	
March 22, 2014

	
$104,166.67

	
13

	
April 22, 2014

	
$104,166.67

	
14

	
May 22, 2014

	
$104,166.67

	
15

	
June 22, 2014

	
$104,166.67

	
16

	
July 22, 2014

	
$104,166.67

	
17

	
August 22, 2014

	
$104,166.67

	
18

	
September 22, 2014

	
$104,166.67

	
19

	
October 22, 2014

	
$104,166.67

	
20

	
November 22, 2014

	
$104,166.67

	
21

	
December 22, 2014

	
$104,166.67

	
22

	
January 22, 2015

	
$104,166.67

	
23

	
February 22, 2015

	
$104,166.67

	
24

	
March 22, 2015

	
$104,166.67

	
25

	
April 22, 2015

	
$104,166.67

	
26

	
May 22, 2015

	
$104,166.67

	
27

	
June 22, 2015

	
$104,166.67

	
28

	
July 22, 2015

	
$104,166.67

	
29

	
August 22, 2015

	
$104,166.67

	
30

	
September 22, 2015

	
$104,166.67

	
31

	
October 22, 2015

	
$104,166.67

	
32

	
November 22, 2015

	
$104,166.67

	
33

	
December 22, 2015

	
$104,166.67

 

  

41

  

 

	
34

	
January 22, 2016

	
$104,166.67

	
35

	
February 22, 2016

	
$104,166.67

	
36

	
March 22, 2016

	
$2,604,166.55

 

The CLIENT shall unconditionally pay, as of the execution date and up to the due date, ordinary interest at an annual rate calculated by adding 4.00 points to the LIBOR Rate.

 

Ordinary interest shall be payable exactly on the day on which the corresponding interest period ends, with the understanding that: (i) the first interest period shall commence on the date of this promissory note's execution and shall end on the 22nd day of the following calendar month and (ii) subsequent interest periods shall commence on the day following the last day of the previous interest period and shall end on the 22nd day of the following calendar month.

 

If a payment becomes due on a day that is not a Business Day in Mexico and New York, it shall be payable on the following Business Day in Mexico and New York, at no additional cost. When, during a calendar month in which any payment must be made, there is no day that is numerically equal to the day set as the date of payment, such payment must be made on the last Business Day in Mexico and New York of the corresponding calendar month.

 

In the event of default on the full and timely payment of the principal sum set forth in this promissory note, the unpaid amount of principal shall only accrue default interest as of the due date up to the date on which it is paid in full according to the rate specified in the credit agreement related to this promissory note.

 

All of the amounts that the CLIENT must pay BANAMEX under this promissory note shall be paid without any deductions or retentions and shall be paid free of any taxes. The CLIENT shall pay all taxes and expenses related to these to ensure that BANAMEX obtains full amounts, except for the amount that BANAMEX has to pay as income tax. The CLIENT shall reimburse BANAMEX on demand for any amount that BANAMEX disburses for taxes and any other expense arising from any claim related to them, except for the aforementioned income tax.

 

For the resolution of any dispute in connection with this promissory note, the CLIENT and the guarantors expressly submit themselves to the applicable laws and jurisdiction of the courts of Mexico City, Federal District or the courts of the place where this promissory note is signed, at the discretion of the claimant, and specifically waive any other jurisdiction to which they may be entitled for any reason.

 

The CLIENT waives all proceedings; filings; protests; and notices of the intent to accelerate the payment date, failure to pay, failure to perform and any other notice of any other kind in connection with this promissory note.

 

This promissory note is derived from a credit drawdown granted in accordance with the Simple Credit Agreement Secured by a Package Mortgage in the amount of US$6,250,000.00 (SIX MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS 00/100, CURRENCY OF THE UNITED STATES OF AMERICA), executed on March 22, 2013 between BANAMEX, as creditor, and the CLIENT, as borrower. Pursuant to the foregoing, all capitalized terms contained in this promissory note shall have the meanings assigned to them in such agreement, and all of that which is not herein provided for shall be governed by the terms and conditions thereof.

 

  

42

  

 

The CLIENT and guarantors are designating as their addresses those indicated in the agreement specified in the previous paragraph.

 

The parties to this promissory note mutually acknowledge the personality with which they are appearing at the execution hereof, and they hereby sign it on March 27, 2013 in the City of CUERNAVACA, MORELOS, and the CLIENT receives a copy of this promissory note.

 

	
CLIENT

	
/s/ Jose Manuel Gonzalez Lagunas

	
Represented by:

	
JOSE MANUEL GONZALEZ LAGUNAS

	 
	
GUARANTOR

	
GUARANTOR

	
PARRAS CONE DE MEXICO S.A. DE C.V.

	
BURLINGTON YECAPIXTLA S.A. DE C.V.

	
/s/ Jose Manuel Gonzalez Lagunas

	
/s/ Jose Manuel Gonzalez Lagunas

	
Represented by:

	
Represented by:

	
JOSE MANUEL GONZALEZ LAGUNAS

	
JOSE MANUEL GONZALEZ LAGUNAS

	 	 
	
GUARANTOR

	
GUARANTOR

	
SERVICIOS BURLMEX S.A. DE C.V.

	
MANUFACTURAS PARRAS CONE S.A. DE C.V.

	
/s/ Jose Manuel Gonzalez Lagunas

	
/s/ Jose Manuel Gonzalez Lagunas

	
Represented by:

	
Represented by:

	
JOSE MANUEL GONZALEZ LAGUNAS

	
JOSE MANUEL GONZALEZ LAGUNAS

	 	 
	
GUARANTOR

	
GUARANTOR

	
CASIMIRES BURLMEX S.A. DE C.V.

	
CONE DENIM YECAPIXTLA S.A. DE C.V.

	
/s/ Jose Manuel Gonzalez Lagunas

	
/s/ Jose Manuel Gonzalez Lagunas

	
Represented by:

	
Represented by:

	
JOSE MANUEL GONZALEZ LAGUNAS

	
JOSE MANUEL GONZALEZ LAGUNAS

 

43

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