Conformed Copy - TF021934 - Phaseout of Ozone Depleting Substances Project - Ozone Projects Trust Fund Grant Agreement

Page 1 CONFORMED COPY OTF GRANT NUMBER 021934 Ozone Projects Trust Fund Grant Agreement (Phaseout of Ozone Depleting Substances Project) between REPUBLIC OF TURKEY and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT acting as Trustee of the Ozone Projects Trust Fund Dated January 24, 1994 OTF GRANT NUMBER 021934 OZONE PROJECTS TRUST FUND GRANT AGREEMENT AGREEMENT, dated January 24, 1994, between REPUBLIC OF TURKEY (the Recipient) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, acting as Trustee of grant funds provided into the Ozone Projects Trust Fund (OTF) by Parties to the Montreal Protocol on Substances that Deplete the Ozone Layer. WHEREAS (A) the International Bank for Reconstruction and Development (the Trustee) pursuant to Resolution No. 91-5 of March 14, 1991, of the Executive Directors of the Trustee (the Resolution), established the Global Environment Facility, consisting of the OTF, the Global Environment Trust Fund (GET), and Cofinancing Arrangements with the GET, to assist in the protection of the global environment and promote thereby environmentally sound and sustainable economic development; (B) the Parties to the Montreal Protocol on Substances that Deplete the Ozone Layer to the Vienna Convention for the Protection of the Ozone Layer have established the Multilateral Fund (Fund) for the Implementation of the Montreal Protocol to operate under the authority of the said Parties to provide the financing of agreed incremental costs to enable the Parties operating under paragraph 1 of Article 5 of the Protocol to comply with control measures provided for in the Protocol; (C) the Executive Committee of the Fund and the Trustee have entered into an agreement effective on July 9, 1991, pursuant to which the Executive Committee has agreed to provide funds into the OTF to be administered by the Trustee as Trustee in accordance with the provisions of the said agreement and the Resolution; Page 2 (D) the Recipient, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested assistance from the resources of the OTF in the financing of the Project, and the Trustee has determined that such assistance would be in accordance with the provisions of the Resolution; (E) a part of the Project will be carried out by Arcelik A.S., together with its subsidiary, Turkish Electric Industry A.S., with the Recipient's assistance and, as part of such assistance, the Recipient will make available through the Technology Development Foundation (TDF) to Arcelik A.S. a part of the proceeds of the OTF Grant as provided in this Agreement; and WHEREAS the Trustee has agreed, on the basis, inter alia, of the foregoing, to extend a grant (the OTF Grant) to the Recipient upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. (a) The following provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated January 1, 1985, with the modifications set forth in paragraph (b) of this Section (the General Conditions) constitute an integral part of this Agreement: (i) Article I; (ii) Sections 2.01 (1), (2), (3), (4), (6), (8), (9), (10), (11), (15), (18) and (20), 2.02 and 2.03; (iii) Section 3.01; (iv) Section 4.01 and the first sentence of Section 4.09; (v) Article V; (vi) Sections 6.01, 6.02 (c), (d), (e), (f), (i) and (k), 6.03, 6.04 and 6.06; (vii) Section 8.01 (b); (viii)Sections 9.01 (a) and (c), 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09; (ix) Sections 10.01, 10.03 and 10.04; (x) Article XI; (xi) Section 12.03; and (xii) Section 12.04. (b) The General Conditions shall be modified as follows: (i) the term "Trustee", wherever used in the General Conditions, other than in Sections 2.01 (8) and 6.02 (f) thereof and the last use of such term in Section 5.01 thereof, means the Trustee except that in Section 6.02, the term "Trustee" shall also include the International Bank for Reconstruction and Development acting in its own capacity; (ii) the term "Borrower", wherever used in the General Conditions, means the Recipient; (iii) the term "Loan Agreement", wherever used in the General Conditions, means this Agreement; (iv) the term "Loan" and "loan" wherever used in the General Conditions, means the OTF Grant; and Page 3 (v) the term "Loan Account" wherever used in the General Conditions, means the OTF Grant Account. Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Recitals to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement of even date herewith between the Trustee and Arcelik A.S., as such agreement may be amended from time to time; (b) "TDF Grant Agreement" means the agreement between the Recipient and TDF, as such agreement may be amended from time to time; (c) "Subsidiary Agreement" means the agreement between TDF and Arcelik A.S., as such agreement may be amended from time to time; "Subsidiary Loan" means the loan from TDF to Arcelik A.S.; and "Subsidiary Grant" means the grant from TDF to Arcelik A.S.; (d) "ODSs" means Ozone Depleting Substances; (e) "CFC" means chloroflurocarbons; and (f) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE II The OTF Grant Section 2.01. The Trustee agrees to make available to the Recipient, on the terms and conditions set forth or referred to in this Agree-ment, the OTF Grant in an amount in various currencies equivalent to six million one hundred sixty-five thousand dollars ($6,165,000). Section 2.02. (a) The amount of the OTF Grant may be withdrawn from the OTF Grant Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Trustee shall so agree, to be made) in respect of the reasonable cost of goods and services required for carrying out the Project and to be financed out of the proceeds of the OTF Grant. (b) The Recipient shall, for the purposes of the Project, open and maintain in dollars a special deposit account in the Central Bank of the Recipient on terms and conditions satisfactory to the Trustee. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1996 or such later date as the Trustee shall establish. The Trustee shall promptly notify the Recipient of such later date. Section 2.04. The Trustee shall not be obligated to make any payment under this Agreement except to the extent it shall have received funds for the purposes of the Project from the Executive Committee referred to in WHEREAS Clause (C) of the Preamble to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Recipient declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, (i) shall carry out the Project through the Ministry of Environment, TDF and Arcelik A.S. with due diligence and efficiency and in conformity with appropriate administrative, engineering and financial practices and with due regard to ecological and environmental factors, and (ii) shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) The Recipient shall through TDF cause Arcelik A.S. to perform in accordance with the provisions of the Project Agreement all the obligations of Arcelik A.S. therein set forth, shall take or cause to be taken through TDF all action, including the provision of funds, facilities, services and other resources, necessary Page 4 or appropriate to enable Arcelik A.S. to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (c) The Recipient shall make a part of the proceeds of the OTF Grant available to TDF under the TDF Grant Agreement, and TDF shall relend a part of said proceeds to Arcelik A.S. as a Subsidiary Loan and shall make available a part of said proceeds to Arcelik A.S. as a Subsidiary Grant, under the Subsidiary Agreement under terms and conditions which shall have been approved by the Trustee and which shall include the terms and conditions set forth in Schedule 5 to this Agreement. (d) The Recipient shall take all measures necessary to ensure that the funds repaid to TDF by Arcelik A.S. are utilized by TDF for additional ODSs phaseout activities in accordance with the provisions of Schedule 6 to this Agreement. (e) The Recipient shall cause TDF to exercise its rights under the Subsidiary Agreement in such manner as to protect the interests of the Recipient, the Trustee and TDF and to accomplish the purposes of the OTF Grant, and, except as the Trustee shall otherwise agree, TDF shall not assign, amend, abrogate or waive the Subsidiary Agreement or any provision thereof. Section 3.02. Except as the Trustee shall otherwise agree, procurement of the goods and consultants' services required for the Project and to be financed out of the proceeds of the OTF Grant shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. The Recipient 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, maintenance and land acquisition, respectively) in respect of the Project. Section 3.04. (a) The Recipient shall, at the request of the Trustee, exchange views with the Trustee with regard to progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of OTF Grant. (b) The Recipient shall promptly inform the Trustee of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Grant, or the performance by the Recipient of its obligations under this Agreement. Section 3.05. The Recipient shall: (a) by February 28, 1994, establish the Ozone Panel referred to under Part C (1) of the Project under terms of reference satisfactory to the Trustee; (b) by September 30, 1994, develop and put into effect the comprehensive system for monitoring the consumption of ODSs referred to under Part C (2) of the Project in accordance with guidelines satisfactory to the Trustee; (c) by March 31, 1994, prepare the draft strategy for the regulation of ODSs referred to under Part C (4) of the Project; promptly thereafter, furnish to the Trustee for review and comment said draft strategy; and by June 30, 1994, put into effect said strategy as agreed with the Trustee; and (d) carry out programs to increase public awareness of the issues related to ozone depletion and the importance of conservation practices. ARTICLE IV Financial Covenants Section 4.01. (a) The Recipient shall maintain or cause TDF to maintain records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of the departments or agencies of the Recipient responsible for carrying out the Project or any part thereof. (b) The Recipient shall: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account for each fiscal Page 5 year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Trustee; (ii) furnish to the Trustee as soon as available, but in any case not later than six months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Trustee shall have reasonably requested; and (iii) furnish to the Trustee such other information con-cerning said records and accounts and the audit thereof as the Trustee shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the OTF Grant Account were made on the basis of statements of expenditure, the Recipient shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Trustee has received the audit report for the fiscal year in which the last withdrawal from the OTF Grant Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Trustee's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Remedies of the Trustee Section 5.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified: (a) The Charter or any other regulations governing the existence or the operations of TDF or Arcelik A.S. shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the operations or the financial condition of TDF or Arcelik A.S. or the ability of TDF or Arcelik A.S. to carry out the Project or to perform any of their obligations under the TDF Grant Agreement or the Subsidiary Agreement. (b) As a result of events which have occurred after the date of this Agreement, an extraordinary situation shall have arisen which shall make it improbable that the Recipient will be able to perform its obligations under this Agreement. (c) The Recipient, or any other authority having jurisdiction, shall have taken: (i) any actions which shall adversely affect the carrying out of the Project or the performance by TDF or Arcelik A.S. of any of their obligations under the TDF Grant Agreement or the Subsidiary Agreement; or (ii) any action for the dissolution or disestablishment of TDF or Arcelik A.S. or for the suspension of their operations. ARTICLE VI Effectiveness; Termination Section 6.01. The following events are specified as conditions to the effectiveness of the OTF Grant Agreement: (a) the TDF Grant Agreement between the Recipient and TDF has been executed with terms and conditions satisfactory to the Trustee; and (b) the Subsidiary Agreement between TDF and Arcelik A.S. has been executed with terms and conditions satisfactory to the Trustee. Page 6 Section 6.02. The date sixty (60) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.03. This Agreement shall continue in effect until the OTF Grant has been fully disbursed and the parties to this Agreement have fulfilled all their obligations hereunder. ARTICLE VII Representative of the Recipient; Addresses Section 7.01. The Undersecretary of the Treasury and Foreign Trade of the Recipient is designated as representative of the Recipient 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 Recipient: Basbakanlik Hazine Ve Dis Ticaret Mutesarligi Inonu Bulvari Emek - Ankara Republic of Turkey Cable address: Telex: MALIYE-HAZINE 821-42285 (MLYE-TR) or Ankara 821-42689 (ANK-TR) For the Trustee: 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) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in Washington, D.C., as of the day and year first above written. REPUBLIC OF TURKEY By /s/ M. Egilmez Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT as Trustee of the Ozone Projects Trust Fund Page 7 By /s/ M. Wiehen Director, Country Department I Europe and Central Asia Region SCHEDULE 1 Withdrawal of the Proceeds of the OTF Grant 1. The table below sets forth the Categories of items to be financed out of the proceeds of the OTF Grant, the allocation of the amounts of the OTF Grant to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the OTF Grant Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Goods: 100% of foreign expenditures, (a) for Part A of 3,920,000) 100% of local the Project ) expenditures ) (ex-factory (b) for Part B of 200,000) cost) and 80% the Project ) of local ex- ) penditures for (c) for Part C of 50,000) other items pro- the Project ) cured locally (2) Consultants' services and training: (a) for Part A of 1,445,000) the Project ) ) (b) for Part B of 300,000) 100% the Project ) ) (c) for Part C of 250,000) the Project ) TOTAL 6,165,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Recipient for goods or services supplied from the territory of any country other than that of the Recipient; and (b) the term "local expenditures" means expenditures in the currency of the Recipient or for goods or services supplied from the territory of the Recipient. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $1,870,000, may be made in respect of Category (1) on account of payments made for expenditures before that date but after Septem- ber 1, 1992. 4. If the Trustee shall have determined at any time that any payment made from the OTF Grant Account was used for any expenditure not consistent with the provisions of this Agreement, the Recipient shall, promptly upon notice from the Trustee, refund to the Trustee for deposit into the OTF Grant Account, an amount equal to the amount so used or the portion thereof as specified by the Trustee. SCHEDULE 2 Description of the Project The objective of the Project is to assist ODSs-using industries to effectively Page 8 and efficiently phase out ODSs usage through the adoption of policy, technological and monitoring measures. The Project consists of the following parts, subject to such modifications thereof as the Recipient and the Trustee may agree upon from time to time to achieve such objectives: Part A: Investment Projects and Technology Transfer for ODSs Phase Out 1. Engineering development, including acquisition of production and testing-related equipment for the design, testing and introduction of a new refrigerant (HFC-134a) to replace existing refrigerant (CFC-12) in the refrigeration loop, and a modified foam system to reduce and eliminate the use of CFC-11 in the rigid foam insulation for the refrigeration cavity. 2. Establishment of a program for the recovery and recycling of CFC-12 for domestic refrigerators through the existing network of domestic refrigerator service shops. 3. Implementation of the recovery and recycling of CFC-12 from domestic refrigerators being serviced or rebuilt at a refrigerator production plant. Part B: Preparation of Further ODSs Phaseout Projects Demonstration projects and/or related activities for (i) preparing further projects and (ii) monitoring of projects under implementation, which have a strategic significance from a technology or reduction of net incremental costs point of view and which decrease ODSs consumption. Part C: Institutional and Management Strengthening 1. Establishment of an Ozone Panel consisting of about 25 national and international experts to advise on the selection of projects for ODSs phaseout and on the effectiveness of the regulatory framework. 2. Establishment of a computerized monitoring system for the consumption of ODSs. 3. Preparation of the framework for the regulation of the future use of ODSs. 4. Carrying out of programs to increase public awareness of the issues related to ozone depletion and the importance of conservation practices. * * * The Project is expected to be completed by June 30, 1996. SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods 1. Except as provided in paragraph 2 below, goods shall be procured in accordance with established commercial practices acceptable to the Trustee. 2. Office equipment for Part C of the Project estimated to cost up to an aggregate amount not to exceed the equivalent of $20,000, may be procured under contracts awarded on the basis of comparison of price quotations solicited from at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Trustee. Section II. Employment of Consultants 1. The Recipient shall employ management and environmental consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Trustee. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Trustee on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by The World Bank as Executing Agency" published by the Bank in August 1981. For complex, time-based assignments, the Recipient shall employ such consultants under contracts using the standard form of contract for consultants' services issued by the Bank, with such modifications as shall have been agreed by the Trustee. Where no relevant standard contract documents have been issued by the Bank, the Recipient shall use other standard forms agreed with Page 9 the Trustee. 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Trustee review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts shall not apply to contracts estimated to cost less than $100,000 equivalent each. However, this exception to prior Trustee review shall not apply to the terms of reference for such contracts nor to the employment of individuals, to single source selection of firms, to assignments of a critical nature as reasonably determined by the Trustee or to amendments of contracts raising the contract value to $100,000 equivalent or above. SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) and (2) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the OTF Grant allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $600,000 to be withdrawn from the OTF Grant Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Trustee has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Recipient shall furnish to the Trustee a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Trustee shall, on behalf of the Recipient, withdraw from the OTF Grant Account and deposit in the Special Account such amount or amounts as the Recipient shall have requested. (b) (i) For replenishment of the Special Account, the Recipient shall furnish to the Trustee requests for deposits into the Special Account at such intervals as the Trustee shall specify. (ii) Prior to or at the time of each such request, the Recipient shall furnish to the Trustee the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Trustee shall, on behalf of the Recipient, withdraw from the OTF Grant Account and deposit into the Special Account such amount as the Recipient shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Trustee from the OTF Grant Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Recipient out of the Special Account, the Recipient shall, at such time as the Trustee shall reasonably request, furnish to the Trustee such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Trustee shall not be required to make further deposits into the Special Account: (a) if, at any time, the Trustee shall have determined that all further withdrawals should be made by the Recipient directly from the OTF Grant Account in Page 10 accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the OTF Grant allocated to the eligible Categories, less the amount of any outstanding special commitment entered into by the Trustee pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the OTF Grant Account of the remaining unwithdrawn amount of the OTF Grant allocated to the eligible Categories shall follow such procedures as the Trustee shall specify by notice to the Recipient. Such further withdrawals shall be made only after and to the extent that the Trustee shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Trustee shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Trustee, the Recipient shall, promptly upon notice from the Trustee: (A) provide such additional evidence as the Trustee may request; or (B) deposit into the Special Account (or, if the Trustee shall so request, refund to the Trustee) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Trustee shall otherwise agree, no further deposit by the Trustee into the Special Account shall be made until the Recipient has provided such evidence or made such deposit or refund, as the case may be. (b) If the Trustee shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Recipient shall, promptly upon notice from the Trustee, refund to the Trustee such outstanding amount. (c) The Recipient may, upon notice to the Trustee, refund to the Trustee all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Trustee made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the OTF Grant Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. SCHEDULE 5 Terms and Conditions of the Subsidiary Loan and Subsidiary Grant 1. The Recipient shall provide through TDF to Arcelik A.S. a portion of the OTF Grant in an amount equivalent to sixty-two percent (62%) of the amount of the OTF Grant allocated to Part A of the Project, as set forth in Schedule 1 to this Agreement as an interest-free, dollar denominated Subsidiary Loan repayable in seven years, including three years of grace. The Subsidiary Loan shall be used by Arcelik A.S. to cover the costs incurred in converting refrigerator manufacturing to CFC-free operations. 2. The Recipient shall provide through TDF to Arcelik A.S. a portion of the OTF Grant in an amount equivalent to thirty-eight percent (38%) of the amount of the OTF Grant allocated to Part A of the project as set forth in Schedule 1 to this Agreement as a grant. The Subsidiary Grant shall be used by Arcelik A.S. to cover the costs incurred in recovering and recycling refrigerants and the cost of research and development for achieving CFC-free operations. SCHEDULE 6 Re-use of OTF Grant for ODS Phaseout Activities 1. The funds repaid by Arcelik A.S. to TDF under the Subsidiary Loan shall be re-utilized by TDF to finance the costs of other refrigeration equipment manufacturers as well as other enterprises for activities related to the phase-out of ODSs. These funds shall normally be used to finance small projects or parts of large projects to match available funds and to ensure quick implementation. TDF shall make funds available for selected projects on a grant, loan or part grant, part loan basis. TDF shall make funds available to finance components of selected projects which provide no commercial benefit to the enterprise on a grant basis and to components which provide Page 11 a commercial benefit to the enterprise on a loan basis. The loans from TDF shall be dollar-denominated, interest-free with a maturity of four to five years, including a grace period of one to two years depending on the project implementation period. 2. TDF shall administer the re-use of the OTF Grant, including the selection of eligible projects. TDF shall obtain the prior written approval of the Executive Committee of the Fund to finance loans, grants or a combination thereof, from these funds for any project estimated to cost in excess of the equivalent of $500,000. For any project estimated to cost less than the equivalent of $500,000, TDF shall submit project proposals to the Trustee for review, including any outside technical review. TDF shall select projects for financial support based on criteria satisfactory to the Trustee such as reduction in level of ODS consumption, cost effectiveness, etc. TDF shall employ consultants as necessary or appropriate in the evaluation and selection of projects for financing. TDF shall supervise and monitor the progress of implementation of the projects financed. The costs of administration shall be covered by the fee charged by TDF for its services which is about two to three percent of the amount of financing provided. ODS phaseout activities are expected to be completed by about 2005, after which the Recipient shall use the remaining funds for environmentally beneficial activities.