Turkey - Ports Rehabilitation Project : Loan 1741 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1741 TU Loan Agreement (Ports Rehabilitation Project) between REPUBLIC OF TURKEY and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated July 2, 1979 LOAN NUMBER 1741 TU LOAN AGREEMENT AGREEMENT, dated July 2, 1979, between REPUBLIC OF TURKEY (hereinafter called the Borrower or Turkey) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) Denizcilik Bankasi (hereinafter called DB) and Turkiye Cumhuriyeti Devlet Demiryollari (hereinafter called TCDD) will carry out sub-parts of the Project described and specified in Schedules 2 and 4 hereto with the Borrower's assistance and, as part of such assistance, the Borrower will make available to DB and TCDD a portion of the proceeds of the Loan as hereinafter provided; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in a project agreement of even date herewith between, on the one hand, the Bank and, on the other hand, DB and TCDD; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: -2- (a) "Project Agreement" means the agreement between, on the one hand, the Bank and, on the other hand, DB and TCDD of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement. (b) "DB Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and DB pursuant to Section 3.01 (c) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the DB Subsidiary Loan Agreement. (c) "TCDD Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and TCDD pursuant to Section 3.01 (c) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the TCDD Subsidi- ary Loan Agreement. (d) "TCA" means the Transport Coordination Agency estab- lished and operating within the Borrower's ministry responsible for transportation. (e) "LI" means the General Directorate of Harbor Construc- tion of the Borrower's ministry responsible for public works or any successor thereto responsible for ports. (f) "Project Coordinating Committee" or "PCC" means the committee to be established within the Borrower's ministry respon- sible for transportation, as provided in Part I.A. of Schedule 4 hereto. (g) "TCDD Ports" and "DB Ports" mean Turkey's public ports respectively administered by TCDD and DB or any substitute there- for or successor thereto, respectively, and include all port property, equipment and materials thereof. (h) "Ports" refers collectively to the TCDD and DB Ports. (i) "TCDD Project Ports" and "DB Project Ports" mean the TCDD Ports and DB Ports, respectively, which are referred to in the preamble to Schedule 2 hereto. (j) "Project Ports" refers collectively to the TCDD and DB Project Ports. -3- (k) "TCDD Law" and "DB Law" mean the respective laws and/or decrees or regulations pursuant to which TCDD and DB have been established and operate, as amended from time to time. (1) "New Ports Institution" means either a new national ports authority or any regional ports authorities or any other viable institution to be the successor to DB, TCDD or any other public port authority currently owning, administering and managing public ports in Turkey, such institution to own, administer and manage such port or ports. (m) "SPO" means the Borrower's State Planning Organization. (n) "ad valorem dock duty" means the dock duty collected pursuant to the Borrower's Law No. 827, as amended from time to time. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to seventy-five million dollars ($75,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, pro- curement of the goods required for Part A (e) and (f) of the Project and to be financed out of the Proceeds of the Loan, shall be governed by the provisions of Schedule 4 hereto and those of Schedule 1 to the Project Agreement. Section 2.04. The Closing Date shall be June 30, 1983 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. -4- Section 2.05. The Borrower shall pay to the Bank a commit- ment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrower shall pay interest at the rate of seven and nine-tenths per cent (7.90%) per annum on the prin- cipal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. Section 2.09. DB and TCDD are designated as representatives of the Borrower for the purposes of taking any action required or permitted to be taken in respect of sub-Categories (1) (a) and (2) (a) and (d) and sub-Categories (1) (b) and (c) and (2) (b), respectively, of paragraph 1 of Schedule 1 hereto under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out the sub-parts of the Project described in Schedule -2 hereto, for which it is responsible, with due diligence and efficiency and in conformity with appropriate administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required therefor; it being specified that the Project shall be implemented by the Borrower, DB and TCDD in accordance r-ith the provisions of Schedule 4 hereto, as such Schedule may be amended from time to time by agreement among the Borrower, the Bank, DB and TCDD. (b) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall cause DB and TCDD to perform in accordance with the provisions of the Project Agreement all the obligations therein set forth, shall take or cause to be taken all action, including the provision of -5- all funds, facilities, services and other resources, necessary or appropriate to enable DB and TCDD to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance; in particular it is specified that the Borrov -r shall take all appropriate action to enable DB to take delivery from a foreign supplier, on or before December 31, 1980 (or such other date as the Bank may agree), of about ten tugboat engines of about 2,500 HP each. (c) The Borrower shall relend to DB and TCDD, respectively, such portion of the proceeds of the Loan as shall be allocated from time to time to the financing of the goods and works included in the Project and pertaining to their respective Ports and the sub-parts of the Project for which they are respectively respon- sible (as specified in Section 2.09 hereof and Schedules 2 and 4 hereto), under separate subsidiary loan agreements to be entered into between, on the one hand, the Borrower and, on the other hand, DB and TCDD, respectively, and on terms and conditions satisfactory to the Borrower and the Bank. (d) The Borrower shall exercise its rights under the DB and TCDD Subsidiary Loan Agreements in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive either such agreement or any provision thereof. Section 3.02. (a) In order to assist the Borrower, DB and TCDD in the procurement of goods required for the Project, the Borrower shall, not later than June 30, 1979 (or such other date as the Borrower and the Bank may agree), employ, or cause to be employed, a procurement specialist whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Borrower and the Bank. (b) In order to assist the Borrower in carrying out Part D (a) and (b) of the Project, the Borrower shall, according to a timetable acceptable to the Bank, employ, or cause to be employed, consultants whose qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Borrower and the Bank; it being specified that the employment of the consultants for Part D (b) of the Project shall require the cooperation of the Borrower, DB and TCDD. -6- (c) The Borrower shall, on or before January 1, 1980 (or such other date as the Bank may agree), take all steps necessary to ensure that arrangements satisfactory to the Bank be completed for carrying out the training programs included in Part C of the Project and, thereafter, cause such training programs to be carried out according to a timetable satisfactory to the Borrower and the Bank. Section 3.03. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan for Part A (e) and (f) of the Project against hazards incident to the acquisition, transpor- tation and delivery thereof to the place of use or installation. (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. (c) The Borrower shall issue, as and when needed, any import or other licenses including any foreign exchange authorization required for the importation of goods or the supply of services to be financed out of the proceeds of the Loan or for the replacement or repair of such goods. Section 3.04. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the contract documents for Parts C and D of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall, in cooperation with DB and TCDD, maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) shall enable the Bank's accredited representatives to visi.t the facilities and construction sites included in the Project and to see the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall, in cooperation with DB and TCDD, furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the Project (including, without limitation, quarterly progress reports on equipment procurement and the status of civil works, training and technical assistance and all pertinent information on port traffic statistics, -7- financial statements, disbursement schedules, efficiency indi- cators and critical path programs related to the Ports), its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower, the Bank, DB and TCDD, the Borrower shall, in cooperation with DB and TCDD, prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower, the Bank, DB and TCDD, of their respective obligations under the Loan and Project Agreements and the accomplishment of the purposes of the Loan. Section 3.05. The Borrower (i) shall take or cause to be taken all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for carrying out the Project, (ii) shall, promptly after such acquisition, inform the Bank thereof, and (iii) shall, if specifically requested by the Bank, furnish to the Bank, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. Section 3.06. (a) The Borrower shall (i) before March 31, 1980 (or such other date as the Borrower and the Bank may agree), furnish to the Bank for exchange of views, through its ministry responsible for transportation, detailed draft proposals for the establishment of the New Ports Institution, together with drafts of the legal instruments needed for the establishment of such institution, and (ii) shall, upon such exchange of views thereon, take promptly all appropriate steps, within its powers, for the finalization of such instruments. (b) The Borrower shall cause the New Ports Institution to become fully operational within 36 months (or such other time period as the Borrower and the Bank may agree) after the finali- zation of such instruments and, for that purpose, the Borrower undertakes to prepare, within 18 months after the finalization of such instruments and following an exchange of views with the Bank thereon, an appropriate, detailed administrative, financial and legal implementation plan. -8- (c) The Borrower shall ensure that inter alia the following organizational reforms, to be satisfactory to the Bank, be imple- mented: (i) prior to January 1, 1981 (or such other date as the Borrower and the Bank may agree) procedures for standardization of new port equipment and pooling of spare parts by TCDD and DB; ,(ii) continuation of common training programs for the Ports covering training of port labor and management and, prior to January 1, 1982 (or such other date as the Borrower and the Bank may agree), completion of overseas training in advanced pro- grams in harbour design of at least two port engineers from DLH; (iii) prior to January 1, 1982 (or such other date as the Borrower and the Bank may agree) provision of sufficient staff to TCA to update the plan included in Phases I and II of Part D (a) of the Project on a continuing basis; and (iv) prior to January 1, 1981 (or such other date as the Borrower and the Bank may agree), arrangements satisfactory to the Bank for coordinating DB and TCDD cargo-handling operations and utilization of related facilities in the ports of Haydarpasa and Salipazari. (d) The Borrower shall ensure that DB and TCDD transfer to the New Ports Institution, promptly after the New Ports Institu- tion shall have become operational and for purposes of the Loan under arrangements satisfactory to the Bank, the properties, equipment and materials of the Ports, all assets and liabilities relating thereto, and the respective rights and obligations of DB and TCDD under the Project Agreement and the DB and TCDD Subsidiary Loan Agreements, subject to such modifications or amplifications of the Loan and Project Agreements as the Bank may reasonably request for the achievement of the purposes of the Loan. Section 3.07. (a) Except as the Borrower and the Bank may otherwise agree, the Borrower shall not undertake in any calendar year, directly or indirectly, any major investment for a project -9- in the public port sector (other than those already referred to in the Borrower's fourth Five-Year Plan) until it shall have reviewed with the Bank the findings emanating from Phase II of the study included in Part D (a) of the Project. (b) For the purpose of this Section "major investment" means any such project whose aggregate estimated investment cost in 1979 prices shall exceed the equivalent of ten million dollars. Section 3.08. The Borrower shall take all appropriate steps to enable DB and TCDD (i) to revalue the assets of the Ports, and more specifically the properties, equipment and materials thereof, pursuant to the findings emanating from the study included in Part D (b) (i) of the Project, (ii) to reflect, as from the end of the calendar year 1981, such revised values, at least on a pro forma basis, in the financial statements pertaining to the Ports, and (iii) thereafter, to revalue such assets at least every three years on the basis of replacement cost. Section 3.09. Except as the Bank m-y otherwise agree, the Borrower shall take all appropriate steps to enable DB and TCDD or the New Ports Institution, as the case may be, to put into operation, on or before January 1, 1982, a cost-related tariff structure applicable to the Ports to be established pursuant to the findings emanating from the study included in Part D (b) (ii) of the Project; it being understood that, after such date, the Borrower shall ensure that such tariffs be, at all times, applied and set at such levels as shall be required to yield revenues from the Ports' operations, sufficient to cover in any given year: (i) all Ports' operating expenses (including administrative expenses and adequate maintenance but excluding depreciation); (ii) the interest on, and the amortization of, the debts related to the Ports; and (iii) a reasonable annual portion of future capital expenditures for the Ports, such annual portion to be not less than 35% of the average annual cost of investments (including provisions for replacement of assets) to be made in the Ports by TCDD, DB and/or the Borrower during the following five-year period; it being understood that, if such revenues prove to be insufficient to fully cover the items (i), (ii) and (iii) above, then such revenues may be complemented by a portion of the ad valorem dock duty which, from time to time, may be allocated for use in the Ports. Section 3.10. The Borrower shall, on or before September 30, 1979 (or such other date as the Bank may agree) establish within TCA and, thereafter, maintain in operation a port stati.tics unit - 10 - for the purpose of compiling and analyzing port statistics on a national basis, it being understood that such unit shall commence its activities not later than January 1, 1980 (or such other date as the Bank may agree). ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other ex-. ernal debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative subdivision thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and other foreign exchange - 11 - assets held by T.C. Merkez Bankasi or any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. The Borrower shall maintain or cause to be maintained records adequate to reflect in aczordance with consis- tently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. Section 4.03. The Borrower shall, as and when needed, provide DB and TCDD or New Ports Institution, as the case may be, with all foreign exchange funds required for the procurement of the spare parts necessary for the maintenance of the Ports and issue any import or other licenses including any foreign exchange authorization required for the importation of such spare parts. Section 4.04. (a) Until the tariff structure referred to in Section 3.09 hereof shall have been put into operation and the New Ports Institution shall have taken over the operations of the Ports, the Borrower shall take all appropriate steps to ensure that (i) TCDD and DB shall maintain separate accounts and prepare separate financial statements, as provided in Section 4.02 (b) of the Project Agreement, and (ii) TCDD and DB or the New Ports Institution shall set aside and retain in such accounts for the needs of the TCDD and DB Ports, respectively, such amount of the ad valorem dock duty collected in the Ports as shall be sufficient, together with other revenues from TCDD and DB Ports' operations, respectively, to cover in any given year for TCDD and DB Ports, respectively, (A) all operating expenses (including administrative expenses and adequate maintenance but excluding depreciation), (B) the interest on, and the amortization of, the debts related thereto, and (C) a reasonable annual portion of future capital expenditures, it being specified that the level of such annual portion shall not be less, on an annual aggregate basis, than $1,000,000 equivalent until the tariff structure referred to in Section 3.09 hereof shall have been put into operation and, thereafter, shall not be less than the level specified in paragraph (iii) of Section 3.09 hereof. (b) If the amount of said duty, together with such revenues, is insufficient and/or is not available at any given time for this purpose, the Borrower shall ensure that the Ports' tariffs be promptly adjusted so that the expenses described under (A), (B) and (C) above are fully covered. - 12 - ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) DB or Tia"DD shall have failed to perform any covenant, agreement or obligation of DB or TCDD under the Project Agreement or the DB or TCDD Subsidiary Loan Agreements, as the case may be. (b) An extraordinary situation shall have arisen which shall make it improbable that DB or TCDD will be able to perform its obligations under the Project Agreement or the DB or TCDD Subsidi- ary Loan Agreements, as the case may be. (c) DB Law or TCDD Law shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of DB or TCDD to carry out the covenants, agreements and obligations set forth in the Project Agreement or the DB or TCDD Subsidiary Loan Agreements, as the case may be. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of DB or TCDD, as the case may be, or for the suspension of their respective operations. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof, namely, that any event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower, DB and TCDD or any event specified in paragraphs (c) or (d) of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an addi- tional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, - 13 - namely, that, the DB and TCDD Subsidiary Loan Agreements have been executed on behalf of, on the one hand, the Borrower and, on the other hand, DB and TCDD. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank, namely, that: (a) the Project Agreement has been duly authorized or ratified by DB and TCDD, and is legally binding upon DB and TCDD in accordance with its terms; and (b) the DB and TCDD Subsidiary Loan Agreements have been duly authorized or ratified by, on the one hand, the Borrower and, on the other hand, DB and TCDD and are legally binding upon, on the one hand, the Borrower and, on the other hand, DB and TCDD, respectively, in accordance with their terms. Section 6.03. The date November 5, 1979, is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Maliye Bakanligi Hazine Genel MUdUrlUgii ve Milletlerarasi Iktisadi Isbirligi Teskilati Genel Sekreterligi Ankara, Turkey Cable address: Telex: MALIYE 821-42689 Hazine 821-42285 Ankara MLYETR - 14 - For the Bank: International Bank for Reconstructioni and Development 1818 H Street, N,. Washington, D.C. 2C433 United States of .merica Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF TURKEY By Is/ Alaeddin Yoruk Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Is! Munir P. Benjenk Regional Vice President Europe, Middle East and North Africa - 15 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works: (a) for DB Ports 3,400,000 ) ) 32% (b) for TCDD Ports 2,800,000 ) (excluding the slipway included in Part B (a) (ii) of the Project) (c) for the slipway in- 2,600,000 100% of foreign cluded in Part B (a) zxpenditures (ii) of the Project (2) Equipment: (a) for DB Ports under 14,800,000 ) Part A (b) of the ) Project ) ) 100% of foreign (b) for TCDD Ports 28,550,000 ) expenditures and under Part A (a) ) 100% of local of the Project ) expenditures ) ex-factory for (c) for LI under Part A 250,000 ) goods manufac- (e) of the Project ) tured locally ) and 60% of local ) expenditures for (d) Propulsion, navi- 13,100,000 ) goods purchased gational and aux- ) from local sup- iliary equipment ) pliers for floating craft ) under Part A (c), ) (d) and (f) of ) the Project) - 16 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (3) Facilities and Con- 1,850,000 80% sulting services for Parts C and D (4) Fellowships and 150,000 100% of foreign ancillary expendi- expenditures tures (5) Unallocated 7,500,000 TOTAL 75,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or servic .s supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expendi- tures prior to the date of this Agreement, except that withdrawals - 17 - may be made in respect of sub-Categories (2) (a) and (2) (b) on account of expenditures incurred after April 1, 1979, such expen- ditures not to exceed an aggregate amount of $500,000 equivalent. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expendi- tures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, Dower or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 18 - SCHEDULE 2 Description of the Project The main objectives of the Project are (i) to improve the efficiency of port operations in Turkey's ten main public ports for general use enumerated below, through the replacement and modernization of old and obsolete cargo-handling equipment and floating craft, as well as through the improvement of storage and cargo-handling areas, (ii) to promote the introduction and use of modern cargo-handling methods and port management techniques, through inter alia the provision of modern equipment and training of port operational and managerial personnel, (iii) to assist the Borrower in carrying out port sub-sector planning and developing procedures for making optimal future investments in that sub- sector, and (iv) to assist the Borrower in establishing a new institutional frauawork to manage its ports. The ten public ports in the Project include: - the TCDD Ports of Haydarpasa, Derince, Samsun, Mersin, Iskenderun and Bandirma, aministered by TCDD; and - the DB Ports of Antalya, Salipazari, Izmir and Trabzon, administered by DB. The Project consists of the following Parts: Part A: Provision of equipment consisting of the following: (a) For TCDD Project Ports: About 29 shore cranes, 53 mobile cranes, 44 forklifts, 10 tractors and 20 trailers; 2 tractors with dozer, ship-to-shore communications equipment; spare parts for the above to cover the first 3 years of operations and for rehabilitation of existing cargo handling equipment (including some minor workshop equipment) and other miscellaneous equipment. (b) For DB Project Ports: About 8 shore cranes, 40 mobile cranes, 66 forklifts, 11 tractors, 22 trailers a.d 4 generators; ship-to-shore communications equipment; spare parts for the above to - 19 - cover the first 3 years of operations and for rehabili- tation of existing cargo handling equipment (including some minor workshop equipment) and other miscellaneous equipment. (c) For TCDD Project Ports: Floating craft (including one about 2,500 hp tugboat, two about 1,500 hp tugboats, three about 1,250 hp tugboats and three about 1,000 hp tugboats, all fitted with firefighting equipment, and about 15 service boats); spare parts for the above to cover the first 3 years of operations. (d) For TCDD: one floating crane of about 200-ton lifting capacity for general use in the ports. (e) For LI: hydrographic measurement and other miscellaneous equipment. (f) For LI: four about 350 hp tugboats. Part B: Improvement, general rehabilitation and/or construction of works consisting of the following: (a) For TCDD Project Ports: (i) Total paving and surfacing of about 400,000 m2 of open storage areas and general rehabilitation in the ports of Samsun, Haydarpasa, Derince, Mersin and Iskenderun, including total dredging of about 450,000 m3 in the ports of Samsun, Derince, Mersin and Iskenderun. (ii) Construction of a slipway of about 300-ton lifting capacity in Iskenderun (including all related mechanical equipment for repair and maintenance of harbor craft). (b) For DB Project Ports: (i) Total paving and surfacing of about 270,000 m2 of open storage areas, construction of about 19,000 m2 of storage sheds, and general rehabilitation in the ports of Trabzon, Salipazari and Izmir, including - 20 - total dredging of about 100,000 m3 in the port of Trabzon. (ii) Construction of a slipway of about 100-ton lifting capacity in Antalya (including all related mechani- cal equipment for repair and maintenance of harbor craft). Part C: Provision of technical assistance for the carrying out of common training programs for port management, port engineers, port labor and other port operating staff, through the provision of instructors, facilities and fellowships for training abroad. Part D: Provision of consulting services to carry out the following: (a) Port-sub-sector planning study to be carried out in three Phases (I, II and III), with the assistance of about 120 man-months of consulting services, as follows: Phase (I). A national ports study to assess future port capacity requirements throughout Turkey until about the year 2000. Phase (II). A national port master plan to deter- mine port investment priorities on a regional basis until the year 2000, including a special study of the Istanbul/Marmara region which is designed to determine the need, size and location of a new port taking into account Istanbul's longer term urban development needs and strategy. Phase (III). Preliminary design and engineering of the new Marmara regional port at an appropriate site, or any other higher priority port investment agreed with the Bank, to be selected on the basis of the study described under (II) above. (b) Studies for (i) revaluation of Ports' assets, (ii) establishment of a cost-related tariff structure - 21 - applicable to the Ports, and (iii) assisting the Bor- rower in making the New Ports Institution operational, all with the assistance of about 40 man-months of consulting services. The Project is expected to be completed by December 31, 1982. - 22 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each May 1 and November 1 beginning November 1, 1983 through November 1, 1995 2,885,000 On May 1, 1996 2,875,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equiva- lents determined as for purposes of withdrawal. - 23 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (1-) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.40% More than three years but not more than six years before maturity 2.80% More than six years but not more than eleven years before maturity 5.10% More than eleven years but not more than fifteen years before maturity 6.95% More than fifteen years before maturity 7.90% - 24 - SCHEDULE 4 Project Implementation Part I: General Implementation of the Project A. For the purpose of ensuring the overall coordination of the timely execution of the Project, the Borrower shall, on or before June 30, 1979 (or such other date as the Bank may agree), establish within the Borrower's ministry responsible for transportation and, thereafter, maintain in operation a project coordination committee to be chaired by the undersecretary or deputy undersecretary of such ministry and to comprise, inter alia, at least one senior representative (at the level of deputy general director) of each of TCDD, DB, TCA and LI; such committee shall be convened whenever critical matters affecting Project implementation require high level attention and, in any event, on a quarterly basis and, without prejudice to the discharge of its responsibilities related to the Project, PCC shall also be responsible for ensuring, within the framework of all appropriate legislation, the removal of cargo from the Ports by TCDD and DB within a reasonable time period: (i) in order to facilitate the monitoring by PCC of the progress made in removing said cargo, each of TCDD and DB shall, not later than June 30, 1979, prepare for the TCDD Ports and DB Ports, respectively, lists indicating the quantity and type of cargo which, at such date, have been in the Ports for more than six months (such lists to include time- tables for the removal of such cargo) and, shall, on a quarterly basis thereafter, report to PCC on the progress made in meeting the targets set in such timetables and the problems encountered in so doing; and (ii) PCC shall review such reports and make, if needed and on the basis of such reports, all appropriate recom- mendations for corrective action and, then, keep the Bank informed of the progress made in the implementation of such recommenda- tions. B. For the purpose of assisting PCC in discharging its respon- sibilities, and in particular in coordinating and monitoring Project activities on a continuous basis, the Borrower shall, on or before August 31, 1979 (or such other date as the Bank may agree), establish within TCA and, thereafter, maintain in opera- tion a secretariat which shall be staffed, at all times after the establishment of such secretariat, with a training coordinator, a ports engineer and all appropriate support personnel, it being understood (a) that such training coordinator and engineer shall - 25 - have qualifications and experience satisfactory to the Borrower and the Bank and (b) that TCA's representative on PCC shall act as head of such secretariat and be responsible for bringing critical matters to the attention of PCC. C. Without any limitation upon the generality of the foregoing paragraph (B) and for the purpose of overseeing (i) the procure- ment of equipment under Part A of the Project, (ii) the design and construction of civil works under Part B of the Project, and (iii) the training and studies under Parts C and D (b) of the Project, the Borrower shall on or before June 30, 1979 (or such other date as the Bank may agree) establish and, thereafter, maintain in operation three working groups which shall comprise staff from the Borrower's departments and agencies concerned with the Project and other experts as needed and whose work shall be coordinated by the secretariat referred to above. Part II: Specific Implementation of the Project A. Responsibility for implementation of Parts A and B of the Project shall be carried out on the following basis: (a) TCDD shall: (i) procure part of the equipment for Part A of the Project in accordance with the provisions of Schedule 2 to the Project Agreement, it being understood that common specifi- cations shall be agreed upon with DB and the Bank and that such part of the equipment so procured shall consist of shore cranes, slipway equipment, mobile cranes, tractors, trailers, forklifts, spare parts related to such foregoing equipment and spare parts for other miscellaneous equipment already in use in TCDD Ports, (ii) promptly after procurement, transfer to DB all equipment (including spare parts) to be used in DB Project Ports; and (iii) carry out, or cause to be carried out (with the assistance of LI, as needed), all civil works included in Part B (a) (i) of the Project and (with the assistance of DB and LI, as needec) all civil works included in Part B (a) (ii) of the Project. (b) DB shall: (i) procure part of the equipment for Part A of the Project in accordance with the provisions of Schedule 1 to the Project Agreement, it being understood that common specifi- cations shall be agreed upon with TCDD and the Bank and that such part of the equipment so procured shall consist of propulsion, navigational and auxiliary equipment for the floating craft included in Part A (c), (d) and (f) of the Project, generators, spare parts related to such foregoing equipment, spare parts for - 26 - other miscellaneous equipment already in use in DB Ports and the equipment included in Part A (e) of the Project, (ii) promptly after procurement, transfer to TCDD all equipment (including spare parts) to be used in TCDD Project Ports or to LI all equipment (including spare parts) to be used by LI, as the case may be, and (iii) carry out, or cause to be carried out (with the assistance of LI as needed), all civil works referred to in Part B (b) of the Project. B. The Borrower shall have general responsibility for carrying out Part C of the Project and shall cause DB and TCDD to set up and operate common training programs, under arrangements satisfac- tory to the Bank and with the assistance of consulting services, all to be coordinated by the Borrower's ministry responsible for transportation. C. Part D of the Project shall be carried out as follows: (a) Phases (I) and (II) of Part D (a) of the Project shall be implemented by TCA with the assistance of consulting services to be provided under arrangements satisfactory to the Borrower and the Bank, such Phases (I) and (II) to be completed on or before July 31, 1980 and July 31, 1981,(or such other date as the Bank may agree), respectively. (b) Phase (III) of Part D (a) of the Project shall be implemented by the Borrower with the assistance of consulting services to be provided, under arrangements satisfactory to the Borrower and the Bank, such Phase III to be started not later than four months after the completion of Phase II (or such other time period as the Bank may agree). (c) For the purpose of (1) coordinating the supply of information to the Borrower's agency or department concerned with the implementation of any or all of the above Phases of Part D (a) of the Project and (2) reviewing comments on the draft reports of the study and (3) providing such agency or department with general guidance for the study and its updating, the Borrower shall, on or before August 31, 1979 (or such other date as the Bank may agree) establish and, thereafter, maintain in operation an inter-ministerial steering committee for port sector planning, such committee to comprise representatives of the ministries responsible for communications and public works, SPO, the Istanbul Master Plan Bureau, the Istanbul Municipality, DB, TCDD and the other Borrower's departments or agencies concerned with port development in Turkey. - 27 - (d) The Borrower shall have general responsibility for carrying out Part D (b) of the Project, it being understood that the Borrower shall cause DB and TCDD with respect to DB and TCDD Ports, respectively, to carry out Part D (b) (i) and (ii) of the Project under the coordination of the Borrower's ministry respon- sible for transportation, pursuant to, arrangements satisfactory to the Bank and with the assistance of consulting services, such Part D (b) (i) and (ii) of the Project to be completed on or before October 31, 1980 (or such other date as the Bank may agree). (e) The Borrower, TCDD and/or DB, as the case may be, shall provide the Bank with copies of the studies to be carried out under Part D of the Project, promptly upon their completion, and shall consult with the Bank on the action proposed to be taken by the Borrower, TCDD and/or DB, as the case may be, as a follow- up of such studies.