Turkey - Second Livestock Development Project : Credit 0330 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 330 TU Project Agreement (Second Livestock Development Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL BANK OF THE TURKISH REPUBLIC DATED SEPTEMBER 28, 1972 CONFORMED COPY CREDIT NUMBER 330 TU Project Agreement (Second Livestock Development Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL BANK OF THE TURKISH REPUBLIC DATED SEPTEMBER 28, 1972 PROJECT AGREEMENT AGREEMENT, dated September 28, 1972, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and AGRICULTURAL BANK OF THE TURKISH REPUBLIC (hereinafter called ABT). WHEREAS by a development credit agreement of even date herewith between Republic of Turkey (hereinafter called the Borrower) and the Association (hereinafter referred to as the Development Credit Agreement), the Association has agreed to make available to the Borrower an amount in various currencies equivalent to sixteen million dollars ($16,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition, inter alia, that ABT agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and ABT, part of the aggregate proceeds of the credit provided for under the Development Credit Agreement will be made available to ABT on the terms and conditions therein set forth; and WHEREAS ABT, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) ABT shall (i) carry out Parts A and B of the Project with due diligence and efficiency and in conformity with sound administrative, financial, 4 economic and agricultural practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose, and (ii) acquire, maintain and renew all rights, powers, privileges and franchises as shall be, from time to time, necessary or useful in the conduct of its business and the carrying out of the Project. (b) In the carrying out of Parts A and B of the Project, ABT undertakes that, unless the Association shall otherwise agree, it shall at all times follow lending and operating policies and procedures satisfactory to the Association and including those set forth in the Schedule to this Agreement, as such Schedule may be modified from time to time by agreement between the Borrower, the Association and ABT. (c) ABT undertakes that it shall not finance any investments in livestock development proposed by an investor eligible for a Village Sub-loan or Fattening Sub-loan, on terms and conditions more favorable than those applicable to Village Sub-loans or Fattening Sub-loans. Section 2.02. Except as the Association shall otherwise agree, the goods and services required for Parts A and B of the Project and to be financed out of the proceeds of the Credit shall be procured pursuant to the provisions set forth or referred to in Section 2.03 of the Development Credit Agreement. Section 2.03. (a) ABT undertakes to insure, or cause to be insured, the imported goods to be financed out of the proceeds of any Village Sub-loan or Fattening Sub-loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by ABT to replace or repair such goods. (b) Except as the Association may otherwise agree, ABT shall cause all goods and services financed out of the proceeds of any Village Sub-loan or Fattening Sub-loan to be used exclusively for carrying out the livestock development plan for which such sub-loan was granted. Section 2.04. (a) ABT shall furnish to the Association promptly upon their preparation, the plans, reports, specifications, contract documents and work and procurement schedules for Parts A and B of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) ABT: (i) shall maintain records adequate to record the progress of Parts A and B of the Project (including the cost thereof) and to identify the goods 5 and services financed out of the proceeds of Village Sub-loans and Fattening Sub-loans, and to disclose the use thereof in the Project; (ii) shall enable the Association's representatives to see the goods financed under the Project and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning Parts A and B of the Project, the expenditure of the proceeds of Village Sub-loans and Fattening Sub-loans and the goods and services financed out of such proceeds. (c) Without limitation upon its obligations contained in paragraph (b) of this Section, ABT shall establish and maintain separate accounts in respect of Parts A and B of the Project, and in respect of each Village Sub-loan and Fattening Sub-loan, and shall send to the Association, in the English language, (i) quarterly statements of such accounts, authenticated by the Secretary General of ABT within six weeks after the end of each quarter and (ii) promptly upon their preparation but not later than five months after the end of the period covered thereby, annual statements of such accounts, authenticated by the Secretary General of ABT and certified by auditors acceptable to the Association. Section 2.05. ABT (i) shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, ABT shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof; (ii) apply all funds received by ABT pursuant to the Subsidiary Loan Agreement to the carrying out of Parts A and B of the Project; and (iii) exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower, the Association and ABT. ARTICLE III Management and Operations of ABT Section 3.01. ABT shall designate not less than two members of the senior staff of its Project Loans Department to serve on the Project Coordinating Committee established pursuant to Section 3.06 of the Development Credit Agreement. ARTICLE IV Financial Covenants Section 4.01. ABT shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition. 6 Section 4.02. ABT shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than five months after the end of each such year, (A) certified copies in the English language of its provisional financial statements for such year as so audited and (B) the report of such audit by said auditors in the English language and, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the provisional accounts and financial statements of ABT and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. ABT shall establish and maintain a Special Operational Fund to be utilized, unless the Borrower, ABT, and the Association shall otherwise agree, for the sole purpose of supplementing the funds provided for the operating expenses of the VSD and FSD within the Directorate. Such Fund shall be established by ABT by setting aside out of each payment to ABT of interest on Village Sub-loans and Fattening Sub-loans under Parts A and B of the Project, amounts calculated in the same manner and on the same principal amount as such interest, but at the rate of one per cent (1%) per annum. Expenditures out of such Fund shall be authorized by the General Director of the Directorate only, or any other person duly designated by him for such purpose. ARTICLE V Consultation and Information Section 5.01. The Association and ABT shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and ABT shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Project Agreement, the administration, operations and financial condition of ABT and other matters relating to the purpose of the Credit, Village Sub-loans and Fattening Sub-loans. Section 5.02. The Association and ABT shall promptly inform each other of any condition which interferes with, or threatens to interfere with (i) the accomplishment of the purposes of the Credit, the Village Sub-loans, or the Fattening Sub-loans; (ii) the performance by either of them of its obligations under 7 this Project Agreement; or (iii) the performance by the Borrower and ABT of their respective obligations under the Subsidiary Loan Agreement. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 6.02. (a) This Agreement and all obligations of the Association and of ABT thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms, or (ii) a date twenty years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify ABT of this event and, upon the giving of such notice, this Agreement and all obligations of the parties thereunder shall forthwith terminate. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: 8 For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Indevas Washington, D.C. For ABT: T.C. Ziraat Bankasi Genel Mudurlugu Bankalar Caddesi Ankara, Turkey Cable address: Zerbank Ankara Section 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Project Agreement on behalf of ABT or by ABT on behalf of the Borrower under Section 2.09 of the Development Credit Agreement, may be taken or executed by the Secretary General of ABT or such other person or persons as ABT shall designate in writing. Section 7.03. ABT shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of ABT, take any action or execute any documents required or permitted to be taken or executed by ABT pursuant to Section 7.02 of this Agreement. Section 7.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed 9 in their respective names and delivered in the District of Columbia, United States of America, as cf the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Simon Aldewereld Vice President AGRICULTURAL BANK OF THE TURKISH REPUBLIC By /s / Ahmet Tufan Gul Authorized Representative 11 SCHEDULE Procedures; Operating and Lending Policies of ABT in respect of Parts A and B of the Project Request for and approvals of Village Sub-loans and Fattening Sub-loans 1.1 ABT shall grant Village Sub-loans and Fattening Sub-loans only to eligible borrowers and only following the procedures and approvals stipulated below. 1.2 Sub-loan applications shall be submitted to the nearest branch of the ABT or to the local technician assigned to the VSD or the FSD, as the case may be, after which an initial credit evaluation of the applicant will be made by the local branch of the ABT. 1.3 If the applicant's creditworthiness is found to be satisfactory to ABT, the local technician assigned to the VSD or FSD, as the case may be, shall prepare a livestock development plan with the applicant, which plan shall include detailed technical and financial projections and the amount of the proposed sub-loan, and shall form the basis for any sub-loan by ABT financed out of the proceeds of the Credit. The livestock development plan shall be prepared in such format and include such information as may be required by the manager of the VSD or FSD, who shall have given due consideration to any advice given by the Consultants. 1.4 Copies of the livestock development plan as approved by the technician shall be submitted to the local ABT branch and: (i) in the case of a plan for a Fattening Sub-loan, to the manager of the FSD at Ankara or his authorized representative in Ankara; and (ii) in the case of a plan for a Village Sub-loan, to the manager of the VSD in Ankara, the regional manager of the VSD at Erzerum or the provincial office managers of the VSD at Kars or Agri, as the case may be. 1.5 Except as the Association shall otherwise agree, each livestock development plan shall, in order to qualify for a Village Sub-loan or Fattening Sub-loan, have endorsed thereon the recommendation for approval of the local technician who has prepared the plan, and of the manager of the VSD or of the FSD at Ankara, or their authorized representatives in Ankara. The Staff of the 12 VSD and FSD at Ankara will be assisted in the appraisal and review of livestock development plans by the Consultants, and due regard will be given to their advice. 1.6 The approval or rejection of a livestock development plan by the ABT, will be based solely on the creditworthiness of the applicant. 1.7 It is intended that as the local staff of the VSD, the FSD and the ABT gains experience, the Association will agree that final approval of livestock development plans for Village Sub-loans and Fattening Sub-loans may be made at the provincial office level of the VSD and the FSD, and that final approval of Village Sub-loans and Fattening Sub-loans may be made by ABT at the provincial or branch level. The decentralizing of approvals of livestock development plans and of Village Sub-loans and Fattening Sub-loans to the provincial or local office level of the VSD and FSD and to the provincial or branch level of the ABT will be the responsibility of the Project Coordinating Committee, established pursuant to Section 3.06 of the Development Credit Agreement. Eligibility of Borrowers 2.1 In order to qualify for the granting of a Village Sub-loan or a Fattening Sub-loan, each applicant shall: (i) have proven competence and experience in the area for which the sub-loan is to be made; (ii) in the case of a Village Sub-loan, carry out the livestock development plan in the Village Sub-project Area; and (iii) meet all other creditworthiness criteria as shall be reasonably established from time to time by ABT, including the provision of a registered mortgage over the applicants' land or, in its absence, other satisfactory security; ABT giving due regard to the viability of each development plan. Terms and Conditions of Sub-loans 3.1 (a) The total amount of any Village Sub-loan or Fattening Sub-loan shall be, on the average, the amount or percentage of the estimated cost of the livestock development plan to be financed therewith specified below: (i) in the case of Village Sub-loans to individual farmers for farm development, to groups for irrigation development, for 13 development of common meadow lands, to pur.bred bull stud groups: the amount of all cash requirements for the plan (estimated at about 90% of the total cost of the plan) and the amount of complementary short-term capital required to cover increased operating costs during the disbursement period; (ii) in the case of Village Sub-loans to contract groups: 80% of the cost of machinery; (iii) in the case of Fattening Sub-loans: 70% of (a) the cost of fixed investments, and (b) the cost of animals and feed required to utilize the fixed investments over an average fattening cycle and the costs of additional animals and feed purchased and held to ensure continuity of operations. Sub-borrowers will contribute the remaining 30% of these costs and will finance or obtain financing for any additional operating costs. (b) The estimated cost of a livestock development plan for the purposes of a sub-loan shall include the fair value of the sub-borrowers' labor to be contributed in carrying out the plan. 3.2 Loan terms, grace periods, interest and repayment periods for sub-borrowers under Village Sub-loans or Fattening Sub-loans shall, unless the Borrower and the Association otherwise agree, be as specified in the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, interest shall be paid during the grace period, and the repayment period for the principal shall be determined in accordance with the projected net income from the development. 3.3 The standard Village Sub-loan Agreement and Fattening Sub-loan Agreement of ABT shall include such terms and conditions as shall be satisfactory to the Association, including, inter alia, the obligation of the sub-borrower to keep records with regard to all improvements financed out of the proceeds of a Village Sub-loan or a Fattening Sub-loan, good husbandry and residence covenants on the part of the sub-borrower, disclosure and information covenants (according to paragraphs 5.1 and 5.2 of this Schedule) on the part of ABT, and adequate rights for supervision, suspension of disbursements and foreclosure and other enforcement of security in favor of ABT. Such agreements shall provide, inter alia, that interest shall be payable only on the outstanding principal amounts from the dates of withdrawal of such amounts; that a Village Sub-loan or Fattening Sub-loan shall not be subject to any commission, fee or charge in addition to the stipulated interest payable thereon; and that any part or all of the principal amount of a Village Sub-loan or Fattening Sub-loan may be repaid to ABT by the sub-borrower in advance of maturity without premium or penalty. 14 Approval by the Association 4.1 ABT shall not grant any Village Sub-loans or Fattening Sub-loans to any single investor if the amount thereof, together with the amount of any other sub-loans granted to the same investor and not repaid, shall exceed the equivalent of $50,000, unless the livestock development plan or plans of such investor and the terms and conditions of the proposed sub-loan, having been approved as provided in paragraph 1.5 of this Schedule, shall also have been approved by the Association. Disbursements and Records 5.1 ABT shall promptly inform its borrowers of the amounts charged to their respective Village Sub-loan or Fattening Sub-loan accounts on account of goods or services procured, and financed under such Sub-loans, such information to be supported with copies of the receipts for such goods or services in the amounts so charged. 5.2 ABT shall furnish semi-annual statements to each borrower, showing the amounts drawn on the borrower's sub-loan account, including interest, payments made and the outstanding balance of the respective sub-loan. Supervision 6.1 ABT shall ensure that amounts drawn on sub-loan accounts are applied exclusively to expenditures on the livestock development plan for which such sub-loan was granted. 6.2 VSD, FSD and ABT staff shall regularly visit the locations where livestock development plans financed with Village Sub-loans or Fattening Sub-loans are being carried out, to ensure that borrowers are effectively and punctually carrying out such plans and complying with the provisions of their respective sub-loan agreements with ABT.