Conformed Copy - L3077 - Agroindustry Project - Project Agreement 1

Page 1 CONFORMED COPY LOAN NUMBER 3077 TU Project Agreement (Agroindustry Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and TURKIYE SINAI KALKINMA BANKASI Dated as of December 30, 1992 LOAN NUMBER 3077 TU PROJECT AGREEMENT AGREEMENT, dated as of December 30, 1992, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and TURKIYE SINAI KALKINMA BANKASI (TSKB). WHEREAS (A) by a loan agreement, dated June 28, 1989, as amended as of the date of this Agreement (the Loan Agreement), between the Republic of Turkey (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to one hundred fifty million dollars ($150,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that TSKB agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and TSKB, part of the proceeds of the loan provided for under the Loan Agreement will be made available to TSKB on the terms and conditions set forth in said subsidiary loan agreement; and WHEREAS TSKB, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the Page 2 obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, 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 Part A of the Project; Management and Operations of TSKB Section 2.01. TSKB declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall carry out its respective activities under Part A of the Project and conduct its operations and affairs, in accordance with sound financial standards and practices, with qualified and experienced management and in accordance with its Statutes and Statement of Policy. Section 2.02. (a) TSKB undertakes that, unless the Borrower and the Bank shall otherwise agree, Sub-loans will be made in accordance with the procedures and on the terms and conditions set forth or referred to in Schedule 4 to the Loan Agreement. (b) TSKB shall exercise its right in relation to the Investment Projects in such manner as to: (i) protect the interests of the Bank and of TSKB; (ii) comply with its obligations under this Agreement and its respective Subsidiary Loan Agreement; and (iii) achieve the purposes of the Project. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods required for Part A of the Project and to be financed from the proceeds of the Loan, shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. TSKB shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports) in respect of this Agreement. Section 2.05. TSKB shall duly perform all its obligations under its respective Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, TSKB shall not take or concur in any action which would have the effect of assigning, amending, abrogating or waiving said Subsidiary Loan Agreement or any provision thereof. Section 2.06. (a) TSKB shall, at the request of the Bank, exchange views with the Bank with regard to progress of Part A the Project, the performance of its obligations under this Agreement and under its respective Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) TSKB shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Part A of the Project, the accomplishment of the purposes of Loan, or the performance by TSKB of its obligations under this Agreement and under its respective Subsidiary Loan Agreement. ARTICLE III Financial Covenants Section 3.01. (a) TSKB shall maintain procedures and records adequate to monitor and record the progress of its lending operations under Part A of the Project and of each Investment Page 3 Project financed by it (including its cost and the benefits to be derived from it) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of TSKB. (b) TSKB shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year 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, but in any case not later than nine 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, including a separate opinion by said auditors as to whether TSKB is in satisfactory compliance with the requirements specified in Sections 3.02 through 3.05 of this Agreement; and (iii) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof as the Bank shall from time to time reasonably request. Section 3.02. (a) Except as the Bank shall otherwise agree, TSKB shall not incur or permit any Subsidiary to incur any debt if, after the incurring of such debt, the consolidated debt of TSKB and all its Subsidiaries then incurred and outstanding would exceed ten times the consolidated capital and surplus of TSKB and all its Subsidiaries. (b)For the purposes of this Section: (i) the term "debt" means any debt incurred by TSKB or any Subsidiary maturing more than one year after the date on which it is originally incurred, including debt assumed or guaranteed by TSKB or by a Subsidiary; (ii) debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment, on the date, and to the extent, the amount of such debt has become outstanding pursuant to such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent the guaranteed debt is outstanding; (iii) the term "consolidated debt of TSKB and all its Subsidiaries" means the total amount of debt of TSKB and all its Subsidiaries, including any debt owed by TSKB to its shareholders, but excluding any debt owed by TSKB to any Subsidiary or by any Subsidiary to TSKB or to any other Subsidiary; (iv) the term "consolidated capital and surplus of TSKB and all its Subsidiaries" means the aggregate of the total unimpaired paid-in- capital, surplus and free reserves (including the revaluation fund, if any) of and subordinated loans to TSKB and all its Subsidiaries after excluding therefrom such amounts as shall Page 4 represent equity interests of TSKB in any Subsidiary, or of any such Subsidiary in TSKB or in any other Subsidiary; (v) the term "subordinated loan" means any debt to mature after the maturity of any debt outstanding from time to time from creditors other than shareholders of TSKB and its Subsidiaries, such debt to be repaid in accordance with its terms only after all claims from such creditors have been satisfied; (vi) whenever for purposes of this Section it shall be necessary to value in terms of Turkish Lira debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Bank; and (vii) amounts payable to TSKB under any foreign exchange risk coverage scheme of the Borrower or under currency swap arrangements shall be deducted in calculating the amount of TSKB's debt. Section 3.03. Except as the Bank shall otherwise agree, TSKB shall maintain a debt service coverage ratio of not less than 1.1. Such ratio shall be calculated by dividing the sum of TSKB net income after tax, interest payments adjusted for taxes, provisions for losses and loan collections by the sum of its repayments of debt and payments of interest, adjusted for taxes. Section 3.04. Except as the Bank shall otherwise agree, TSKB shall make, at the end of each fiscal year, beginning with fiscal year 1994, adequate provision for bad loans as prescribed under Decree No. 88/12937, dated May 4, 1988, issued under the Borrower's Banking Law. Section 3.05. (a) TSKB shall achieve and thereafter maintain, a minimum cash collection ratio of 75% of the medium- and long-term loans made by it. (b) For the purposes of this Section: (i) the term "medium-term loans" means loans maturing more than one year but not more than five years after the date on which they were originally incurred; and (ii) the term "long-term loans" means loans maturing more than five years after the date on which they were originally incurred. ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect upon receipt and acceptance by the Bank of evidence and legal opinion showing that this Agreement has been duly authorized or ratified by, and executed and delivered on behalf of TSKB, and is legally binding upon TSKB in accordance with its terms. Section 4.02. This Agreement and all obligations of the Bank and of TSKB thereunder shall terminate on the date on which the Loan Agreement shall terminate. Section 4.03. All the provisions of this Agreement shall Page 5 continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE V Miscellaneous Provisions Section 5.01. 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, telefax 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 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) For TSKB: Tcrkiye Sinai Kalkinma Bankasi A.S. Meclisi Mebusan Caddesi No. 137 80040 Findikli Istanbul, Turkey Cable address: Telex: Kalkinmabank 24 344 Istanbul P.O. Box 17 80002 Karakcy Istanbul Telephone: 251 27 92-251 28 00 Fax: 243 29 75 Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of TSKB, may be taken or executed by its General Manager or by such other person or persons as General Manager shall designate in writing, and TSKB shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. 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 duly authorized representatives, 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. Page 6 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Fred D. Levy Acting Director Country Department I Europe and Central Asia Region TURKIYE SINAI KALKINMA BANKASI By /s/ Metin Tokpinar General Manager By /s/ Ahmet Demirel Assistant General Manager SCHEDULE Procurement under Part A of the Project 1. Items of goods and services estimated to cost the equivalent of not more than $3,000,000 per contract shall be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three suppliers from countries eligible under the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1992 (the Guidelines), in accordance with procedures acceptable to the Bank. 2. Items of goods and services estimated to cost the equivalent of more than $3,000,000 per contract shall be procured under limited international bidding procedures, consistent with those set forth or referred to in Section 3.02 of the Guidelines. 3. Records shall be maintained by TSKB in a form satisfactory to the Bank showing the methods of procurement approved, the summaries of quotations or bids received and awards made under each Sub-loan.