Turkey - Fertilizer Rationalization And Energy Saving : Loan 1985 - Project Agreement - 3 - Conformed

FOC a LOAN NUMBER 1985 TU Project Agreement (Fertilizer Rationalization and Energy Saving Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and ISTANBUL GUBRE SANAYII A.S. Dated PA, 1981 LOAN NUMBER 1985 TU PROJECT AGREEMENT AGREEMENT, dated McLI I5 , 1981, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and ISTANBUL GUBRE SANAYII A.S. (hereinafter called IGSAS). WHEREAS (A) by the Loan Agreement of even date herewith between Republic of Turkey (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to one hundred ten million dollars ($110,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that IGSAS agree to undertake such obligations toward the Bank as are hereinafter set forth; (B) by a subsidiary loan agreement to be entered into between the Borrower and IGSAS, $20,600,000 of the proceeds of the loan provided for under the Loan Agreement will be made available to IGSAS on the terms and conditions therein set forth; and WHEREAS IGSAS, in consideration of the Bank's entering into the Loan 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 Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. IGSAS shall carry out Part A.3 and B.1 and 2, as applicable, of the Project, described in Schedule 2 to the Loan Agreement, with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and industrial practices. -2- Section 2.02. Until completion of the Project, IGSAS shall maintain a project implementation unit for Part A.3 of the Project, with duly qualified and experienced staff in sufficient numbers. Section 2.03. In order to assist IGSAS in carrying out Part A.3 and B.1 and 2, as applicable, of the Project IGSAS shall employ engineering consultants whose qualifications, experience and terms and conditions of employment and selection shall be satisfactory to the Bank. Section 2.04. Except as the Bank shall otherwise agree, procurement of the goods and services to be financed out of the proceeds of the Loan shall be governed by the provisions of the Schedule to this Agreement. Section 2.05. (a) IGSAS undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan relent to it by the Borrower against hazards incident to the acquisition, transporta- tion 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 IGSAS to replace or repair such goods. (b) Except as the Bank may otherwise agree, all goods and services financed out of the proceeds of the Loan relent to IGSAS by the Borrower shall be used exclusively for the Project until its completion. Section 2.06. (a) IGSAS shall furnish Lo the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) IGSAS: (i) shall maintain records and procedures adequate to record and monitor the progress of those Parts of the Project for which it is responsible (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 relent to it, and to disclose their use in the Project; (ii) shall enable the Bank's accredited representatives to visit the facilities and construction sites included in those Parts of the Project and to examine the goods financed out of such proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the - 3 - Bank at regular intervals all such information as the Bank shall reasonably request concerning these Parts of the Project, their cost and, where appropriate, the benefits to be derived from them, the expenditure of such proceeds of the Loan and the goods and services financed out of such proceeds. (c) Upon the award by IGSAS of any contract for goods or services to be financed out of the proceeds of the Loan relent to it, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of the Project, but in any event in time to enable AZOT to fulfill its obligations under Section 2.07 (d) of the AZOT Project Agreement, IGSAS shall prepare and furnish to AZOT a report, of such scope and in such detail as AZOT shall reasonably request, on the execution and initial operation of Parts A.3 and B.2 of the Project, its cost and the benefits derived and to be derived from it, the perfor- mance by IGSAS and the Bank of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Loan. (e) IGSAS shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of IGSAS and any relevant records and documents. Section 2.07. IGSAS shall duly perform all its obligations under the IGSAS Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, IGSAS shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the IGSAS Subsidiary Loan Agreement or any provision thereof. Section 2.08. (a) IGSAS shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Parts A.3 and B.1 and 2, as applicable, of the Project, the performance of its obligations under this Agreement and under the IGSAS Subsidiary Loan Agreement and other matters relating to said Parts of the Project. (b) IGSAS shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Parts A.3 and B.1 and 2, as applicable, of the Project, the accomplishment of the purposes of the said Parts of the Project, or the performance by IGSAS of its obligations under this Agreement and under the IGSAS Subsidiary Loan Agreement. -4- ARTICLE III Management and Operations of IGSAS Section 3.01. (a) IGSAS shall conduct its operations and affairs and maintain its financial position in accordance with sound engineering, industrial, administrative and financial practices, with qualified management and assisted by qualified and competent staff in adequate numbers. (b) IGSAS shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. (c) If IGSAS establishes or acquires any subsidiary, it shall cause such subsidiary to observe and perform the obligations of IGSAS hereunder to the extent to which such obligations shall or can be applicable thereto, as though such obligations were binding upon such subsidiary. (d) IGSAS shall operate and maintain all its plants, equip- ment and properties, and from time to time make all necessary repairs, renewals and replacements thereof in accordance with sound engineering industrial and financial practices. (e) IGSAS shall maintain its corporate existence and any licenses and facilities required to enable it to carry out the Parts A.3 and B.2 of the Project and to operate the facilities constructed or improved under said Parts of the Project and shall not dispose of any of its assets without the Bank's consent, except in the normal course of business. (f) IGSAS shall maintain and operate its facilities included in ihe Project in accordance with environmental and ecological standards acceptable to the Bank. ARTICLE IV Financial Covenants Section 4.01. IGSAS shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. - 5 - Section 4.02. IGSAS shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal yeaf audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of IGSAS and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. As used in this Agreement with respect to the financial obligations of IGSAS: (a) "Current assets" means the sum of unrestricted cash available for use in current operations, marketable securities (excluding securities, whether marketable or not, acquired for purposes of control, affiliation, or other continuing business advantage), receivables collectible in the normal course of business within one year, and inventories valued at the lower of cost or market. (b) "Current liabilities" means all obligations due on demand or within one year or whose liquidation is reasonably expected to require the use of existing resources classified as current assets. Obligations shall include but not be limited to customers' advances, accrued taxes on, or measured by income, other accrued taxes and current maturities of long-term debt. (c) "Capital additions" means the aggregate of all the expenditures or costs incurred by IGSAS for the acquisition and ownership of land, buildings, machinery, equipment, furniture, fixtures and all other tangible fixed assets and investments in, or loans to, other entities. (d) "Net revenues" means gross revenues from all sources less operating and administrative expenses, including taxes, surcharges and other levies, if any, but before provision for depreciation and interest and other charges on debt. (e) "Debt service requirements" means the aggregate amount of amortization (principal payments and any mandatory sinking -6- fund payments) on long-term debt, and interest and other charges on long-term debt and other debt payable during the period concerned. (f) "Long-term debt" means any debt maturing more than one year after the date on which it is originally incurred; and (i) debt shall be deemed to be incurred: (A) under a loan contract or agreement (including the Loan Agreement) on the date of such loan contract or agreement; (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only, except in the case of a guarantee of debt of a subsidiary, to the extent that the guaranteed debt is outstanding; and (ii) whenever in connection with this Article it shall be necessary to value in terms of the currency of the Borrower debt payable in any other currency, such valuation shall be made at the prevailing lawful rate of exchange at which such other cur- rency is, at the time of such valuation, obtainable by IGSAS for the purposes of servicing such debt or in the absence of such rate of exchange, another rate acceptable to the Bank. (h) "Equity" means the aggregate of the unimpaired paid-up capital appropriately valued, surplus if it is represented by a positive number and free reserves of IGSAS. Section 4.04. (a) Except as the Bank shall otherwise agree, IGSAS shall: (i) to conduct its operations and affairs in such manner as shall be necessary to maintain, at all times, its debt/equity ratio at such level that its aggregate debt shall not be greater than 1.5 times its aggregate equity; and (ii) if such ratio shall, for reasons beyond IGSAS' control, be exceeded, take all such reasonable action as shall be necessary or advisable promptly to bring such ratio within such limit. (b) IGSAS shall not make any repayment in advance of maturity in respect of any of its outstanding debt which would materially and adversely affect its ability to meet its financial obligations. Section 4.05. Except as the Bank shall otherwise agree: -7- (a) IGSAS shall take such action as shall be necessary to maintain the aggregate current assets of IGSAS at a level of at least 1.3 times its aggregate current liabilities; (b) IGSAS shall not prepay any long-term debt or make any financial commitments to or in respect of any subsidiary if, after giving effect to such action, the aggregate current assets of IGSAS would be less than 1.2 times the aggregate current liabilities of IGSAS; (c) IGSAS shall not incur any long-term debt in any year unless a reasonable forecast of its revenues and expenditures shows that its aggregate projected net revenues for each full fiscal year during the term of the long-term debt to be incurred or for the following ten years whichever is shorter shall be at least 1.5 times the aggregate projected debt service requirement in such year on all long-term debt of IGSAS. For purposes of this paragraph, "a reasonable forecast" means a forecast prepared by IGSAS in the fiscal year in which the debt in question is proposed to be incurred and reviewed by the Bank which both IGSAS and the Bank accept as reasonable and as to which the Bank has noti- fied IGSAS of its acceptability, provided no event has occurred since the Bank's acceptance of such forecast which would have a material adverse effect on the financial condition or future operating results of IGSAS. Section 4.06. Except as the Bank may otherwise agree, IGSAS shall not, in any year prior to the completion of the Project, make expenditures or commitments for expenditures for capital additions of IGSAS exceeding $5,000,000 equivalent excepting expenditures required to carry out the Project and those for normal maintenance. Section 4.07. Except as the Bank may otherwise agree, IGSAS shall: (i) not make payments or distributions in respect of its capital except out of its accumulated adjusted net earnings; and (ii) in any event not make such payments or distribution if, after giving effect to said action, IGSAS' current assets would be less than 1.4 times its current liabilities. Section 4.08. IGSAS shall periodically revalue its assets for memorandum account on the basis of replacement cost and in accordance with sound accounting principles consistently applied. -8- ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of IGSAS thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly so notify IGSAS thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. 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: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) -9- For IGSAS: Istanbul Gubre Sanayii A.S. Tutunciftlik Izmit, Kocaeli Turkey Cable address: Telex: IGSAS 22808 IGSA TR Izmit Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of IGSAS, or by IGSAS on behalf of the Borrower under the Loan Agreement, may be taken or executed by the General Manager or such other person or persons as the General Manager shall designate in writing, and IGSAS shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. 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 in their respective names in the District of Columbia, United States of America, as of the day and year first ubove written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By/r.) rZ A. C% - Regional Vice President Europe, Middle East and North Africa ISTANBUL GUBRE SANAYII A.S. Authorized Representative - 10 - SCHEDULE Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods and services shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods to be procured on the basis of international competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, IGSAS shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order tG provide timely notification to prospective bidders of the oppor- tunity to bid for the goods in question. IGSAS shall provide the necessary information to update such notice annually so long as any goods remain to be procured on the basis of international competitive bidding. 3. To the extent possible, contracts for goods and services shall be grouped into single bids of not less than $100,000 equivalent. 4. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. - 11 - B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in Republic of Turkey may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Republic of Turkey if the bidder shall have established to the satisfaction of IGSAS and the Bank that the manufacturing cost of such goods includes a value added in Republic of Turkey equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would - 12 - have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures 1. Contracts for goods and services estimated to cost less than $100,000 equivalent shall be procured through limited international tendering on the basis of a list of goods satisfactory to the Bank, provided, however, that (i) contracts shall not be awarded unless the Bank has approved said list of goods, and (ii) con- tra.cts of goods so procured shall not in the aggregate exceed $1,000,000 of equivalent. 2. Contracts for: (i) proprietary goods (equipment and spare parts) for existing equipment may be procured on a negotiated basis pursuant to a list of goods satisfactory to the Bank and (ii) critical items (equipment and spare parts) may be procured on the basis of a list of goods satisfactory to the Bank pursuant to limited international bidding; provided, however, that con- tracts under (i) and (ii) hereof shall: (1) not be awarded unless the Bank has approved said list of goods, and (2) not, in the aggregate, exceed $6,500,000 equivalent. D. Review of Procurement Decisions by the Bank 1. Review of prequalification. IGSAS shall, before qualification is invited, inform the Bank in detail of the procedure to be followed, and shall introduce such modifications in said procedure as the Bank shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant for prequalifica- tion shall be furnished by IGSAS to the Bank for its comments before the applicants are notified of IGSAS' decision, and IGSAS shall make such additions to, deletions from, or modifications in, the said list as the Bank shall reasonably request. 2. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for goods and services esti- mated to cost the equivalent of $300,000 or more: - 13 - (a) Before bids are invited, IGSAS shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, IGSAS shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform IGSAS and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the sub- mission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 3. With respect to each contract not governed by the preceding paragraph, IGSAS shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform IGSAS and state the reasons for such determination. 4. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or - 14 - issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 10% of the original price, IGSAS shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agree- ment, shall promptly inform IGSAS and state the reasons for its determination. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this / -day of MW , 198 / FOR SECRETARY