Turkey - Third Livestock Development Project : Loan 1265 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1265 TU LOAN AGREEMENT (Third Livestock Development Project) between REPUBLIC OF TURKEY and INTERNATIONAL BANK FOR RECONSTRUCTION A DEVELOPMENT Dated May 26, 1976 LOAN AGREEMENT AGREEMENT, dated May 26, 1976, between REPUBLIC OF TURKEY (hereinafter called the Borrower) 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) By an agreement of even date herewith between the Bank and the Turkiye Cumhuriyeti Ziraat Bankasi (hereinafter referred to as TCZB), certain obligations in respect of the carrying out of Part A of the Project have been undertaken by TCZB; (C) The Borrower is willing to make part of the proceeds of the Loan available to TCZB for the carrying out of Part A of the Project, as hereinafter set forth; and (D) The Bank is willing to make the Loan available upon the terms and conditions set forth hereinafter and in a project agree- ment of even date herewith between the Bank and TCZB; 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 Guar- antee 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 ad- ditional terms have the following meanings: (a) "Project Agreement" means the agreement of even date herewith between the Bank and TCZB, as such agreement may be amended from time to time, and such term includes the Schedules to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and TCZB pursuant to Section 3.02 (a) of this Agreement, as the same may be amended from time to time, and such term includes all agreements supplemental to, and all schedules to, such agreement; (c) "Subsidiary Loan" means the loan made by the Borrower to TCZB under the Subsidiary Loan Agreement; (d) "LDP" means the General Directorate for Livestock Develop- ment Projects of the Ministry of Food, Agriculture and Livestock of the Borrower; (e) "IDPD" means the Intensive Dairy Production Division of LDP; (f) "DVS" means the General Directorate for Veterinary Ser- vices of the Ministry of Food, Agriculture and Livestock of the Borrower; (g) "Project Areas" means: (i) Istanbul region comprising Istanbul, Bolu, Bursa, Edirne, Kirklareli, Kocaeli, Sakarya and Tekirdag; (ii) Izmir region comprising Izmir, Aydin, Balikesir, Denizli and Manisa; (iii) Adana region comprising Adana, Hatay and Icel; (iv) Ankara region comprising Ankara, Cankiri, Corum, Eskisehir, Kastsmonu, Kirsehir and Zonguldak; (v) Konya region comprising Konya and Afyon; (vi) Kayseri region comprising Kayseri and Yozgat; (vii) Malatya region comprising Malatya and Adiyaman and such other provinces as may be agreed upon hereafter between the Borrower and the Bank; -4- (h) "Sub-loan" means a loan made by TCZB in accordance with the procedures and the lending and operating policies provided for in the Schedule to the Project Agreement and utilizing funds pro- vided to TCZB under the 6ubsidiary Loan Agreement; (i) "Sub-loan Contract" means the contract for any Sub-loan; (j) "Dairy-farm Development Plan" means a specific development plan for investment in forage production, farm buildings, livestock, farm machinery and equipment, tractors and other related items, or any combination thereof, requiring foreign exchange, of an investor qualifying for a 6ub-loan; (k) "Beneficiary" means the recipient of a Sub-loan; (1) "liras" and the letters "LT" mean the currency of the borrower; (m) "Project Manager" means the person employed as head of IDPD; and (n) "Special Operational Fund" means the fund established pursuant to the provisions of the subsidiary loan agreement of May 16, 1971 between the Borrower and TCZB entered into under the Development Credit Agreement of February 22, 1971 between the borrower and the International Development Association. -5- 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 re- ferred to, an amount in various currencies equivalent to twenty- one million five-hundred thousand dollars ($21,500,000). 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 expendi- tures 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 and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, con- tracts for the purchase of goods required for the Project to be financed out of the proceeds of the Loan, shall be procured in accordance with the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be March 31, 1982 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment 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. -6- Section 2.06. The Borrower shall pay interest at the rate of eight and one-half per cent (8-1/2%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semi-annually on May 15 and November 15 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. The Borrower hereby designates TCZB for the purposes of taking any action required or permitted to be taken in respect of Part A of the Project under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. -7- ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out, substantially in accordance with an implementation schedule satisfactory to the Bank, Parts B and C of the Project and cause TCZB to carry out Part A of the Project with due diligence and efficiency and in conformity with sound administrative, financial, economic and agri- cultural practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other re- sources required for the purpose. (b) For the purpose of carrying out the Project, the Borrower shall employ on a full-time basis: (i) a qualified and experienced Project Manager; and (ii) not less than three internationally recruited technical specialists, whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, to assist the Project Manager; it being understood that all the contracts for the employment of such technical specialists shall be entered into on or before November 30, 1976 and that such technical specialists shall effectively begin to assume all their duties and responsibilities not later than January 1., 1977. (c) For the purpose of carrying out the Project, the Borrower shall employ within IDPD on a full-time basis in the Borrower's fiscal year 1976, about eighteen additional professional and middle- level technicians recruited locally and, in the Borrower's fiscal year 1977, about sixteen additional personnel of the same quali- fications. -8- (d) For the purpose of carrying out the Project, the Borrower shall cause LDP to maintain, in each of the Project Areas, a regional or branch office and to establish, as and when needed, additional such offices in the Project Areas. (e) The Borrower shall cause DVS to provide promptly the vet- erinary assistance required for the carrying out of the Project. Section 3.02. (a) The Borrower shall relend the equivalent of the proceeds of the Loan withdrawn on account of expenditures under Part A of the Project to TCZB under a Subsidiary Loan Agree- ment to be entered into between the Borrower and TCZB, under terms and conditions satisfactory to the Bank. (b) The Borrower shall exercise its rights and fulfill its obligations under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Bank and to ac- complish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrover shall not assign, nor amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. (c) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall: (i) cause TCZB to perform in accordance with the provi- sions of the Project Agreement and the Subsidiary Loan Agreement all the obligations therein set forth; -9- (ii) take and cause all its agencies to take all action which shall be necessary or appropriate on their part to enable TCZB to perform all such obligations and shall not take or permit to be taken any action which would prevent or interfere with such perform- ance; and (iii) cause TCZB promptly to make available from its own resources, on a basis acceptable to the Bank, in addition to the equivalent of the proceeds of the Loan relent to it under Section 3.02 (a), all such funds in liras, as shall be necessary to enable TCZB to disburse the full amounts of Sub-loans; it being understood that the aggregate amount of such funds shall not be less than $6,900,000 equivalent. Section 3.03. The lending and operating policies and pro- cedures for carrying out Part A of the Project shall be as set forth in the Schedule to the Project Agreement, as the same may be amended from time to time by agreement among the Borrower, the Bank and TCZB. Section 3.04. Except as the Borrower and the bank shall otherwise agree, the Borrower shall maintain in LDP the Special Operational Fund to be utilized for the purpose of supplementing the funds otherwise available for the Project. Such Fund shall be credited with the amounts made available by TCZB to LDP in accor- dance with Section 4.02 of the Project Agreement. Expenditures out of such Fund shall be authorized only by the General Director of LDP, or any other person duly designated by him for such purpose. - 10 - Section 3.05. (a) The Borrower shall insure or cause to be insured, or make or cause to be made adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transpor- tation and delivery thereof to the place of use or installation. (b) Except as the ±6ank 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. Section 3.06. (a) The Borrower shall, with respect to the Project, furnish or cause to be furnished to the Bank, promptly upon their preparation, the plans, programs and reports of LDP, IDPD and TCZB, and any material modifications thereof or addi- tions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the pro- ceeds of the Loan, and to disclose the use thereof in the Project; (ii) shall enable the Bank's accredited representatives to visit the faciliti'i 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 furnish to the Bank all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. - 11 - (c) vithout limiting the generality of the provisions in paragraph (b) above and in order to monitor and evaluate the progress of the Project including comparing such progress vis- a-vis the implementation schedule of the Project referred to in Section 3.01 (a) of this Agreement, and for evaluating the ef- fects of the Project, the Borrower shall cause IDPD to: (i) pre- pare each quarter, with the assistance of TCZB, progress and evaluation reports, including in the fourth quarter report a summary of the progress and evaluation for each year; and (ii) submit, within two months after the end of each quarter, the reports in (i) hereof to the Bank. Section 3.07. (a) The Borrower shall cause IDPD to: (i) prepare annual plans for the carrying out of Part C (technical studies) of the Project; and (ii) submit each annual plan to the Bank for comments not later than the third quarter of the year prior to that of its implementation. (b) For the carrying out of Part C (training) of the Proj- ect, the Borrower shall cause IDPD to prepare and submit to the Bank for comments, within six months from the Effective Date, or such later date as shall be agreed with the Bank, a proposed training program. - 12 - 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 external debt shall have priority over its loans in the allocation, realization or distribution of for- eign 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 per- mitting 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 admini- strative 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 satisfac- tory 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; - 13 - and (ii) any lien arising in the ordinary course of banking trans- actions 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 subdi- vision thereof and of any entity owned or controlled by, or oper- ating for the account or benefit of, the Borrower or any such subdivision, including assets held by the T.C. Merkes Bankasi or any other institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Bor- rover. Section 4.02. The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with con- sistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carry- ing out the Project or any part thereof. Section 4.03. Without limitation upon its obligations con- tained in Section 4.02 above, the Borrower shall: (a) cause LDP to establish and maintain separate accounts on its records to be used exclusively for Parts B and C of the Project and for the Special Operational Fund and to register in such accounts all its receipts and payments for or in connection with such Parts of the Project and such fund, in accordance with appropriate accounting principles consistently applied; and (b) cause LDP to: (i) have the accounts referred to in (a) hereof and related statements for each fiscal year audited, in ac- cordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank, in the English language, as soon as available, but in any case not later than seven months after the end of LDP's fiscal year, (A) certified copies of such accounts and related statements for such year as so audited and (B) the report of such audit by said audi- tors, of such scope and in such detail as the Bank shall have rea- sonably requested; and (iii) furnish to the Bank such other infor- mation concerning such accounts and related statements of such agency and the audit thereof as the Bank shall from time to time reasonably request. Section 4.04. The Borrower shall ensure that the entry into the Borrower's territory of such livestock is handled expeditiously at the border stations. Section 4.05. The Borrower shall issue, as and when needed, any import and other licevaes including, without limitation, any foreign exchange authorizations required for the timely importa- tion and procurement of goods or the supply of services to be fi- nanced out of the proceeds of the Loan or for the replacement or the repair of such goods, as the case may be. - 15 - 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) TCZB shall have failed to perform any of its obligations under the Project Agreement or under the Subsidiary Loan Agreement; (b) an extraordinary situation shall have arisen which shall make it improbable that TCZB will be able to perform any of its obligations under the Project Agreement or under the Subsidiary Loan Agreement; (c) any legal provision governing or applicable to the or- ganization or operations of TCZB shall have been amended, suspended or abrogated so as to threaten the ability of TCZB to carry out any of its obligations under the Project Agreement or the effi- ciency of its operations; (d) TCZB shall be unable to pay its debts as they mature or any action or proceeding shall have been taken by TCZB or by others whereby any of the property of TCZB shall or may be distributed among its creditors; and (e) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of TCZB or for the suspension of TCZB's operations. - 16 - 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, any of the events 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 or any event specified in paragraphs (c), (d) or (e) of such Section shall occur. - 17 - ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Loan Agreement with- in the meaning of Section 12.01 (c) of the General Conditions: (a) the execution and delivery of the Project Agreement on behalf of TCZB have been duly authorized or ratified by all neces- sary administrative and governmental action; (b) the execution and delivery of the Subsidiary Loan Agree- ment on behalf of the Borrower and TCZB, respectively, have been duly authorized or ratified by all necessary administrative and governmental action; and (c) the arrangements referred to in Section 2.01 (d) of the Project Agreement have been entered into to the satisfaction of the Bank. Section 6.02. The following are specified as additional mat- ters, within the meaning of Section 12.02 (c) of the General Con- ditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, TCZB, and is legally binding upon TCZB in accordance with its terms; - 18 - (b) that the Subsidiary Loan Agreement has been duly au- thorized or ratified by, and executed and delivered on behalf of, the Borrower and TCZB, respectively, and is legally binding upon the Borrower and TCZB in accordance with its terms; and (c) that the arrangements referred to in Section 2.01 (d) of the Project Agreement have been duly entered into on behalf of TCZB and IDPD, respectively, and are legally binding upon TCZB and IDPD as entered into between same parties. Section 6.03. The date September 27, 1976, is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. - 19 - 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 Mudurlugu ve Milletlerarasi Iktisadi Isbirligi Teskilati Genel Seketerligi Ankara, Turkey Cable address: Telex: MALIYE 821-42285 (MLYE-TR) or Hazine 821-42689 (MLYE-TR) Ankara 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 h40098 (ITT) Washington, D.C. 248423 (RCA) or 6414 5 (WUI) - 20 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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 /s/ Muazmer Akinci Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s / W. A. Wapenhans Regional Vice President Europe, Middle East and North Africa - 21 - 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 ex- penditures 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) Livestock 13,800,000 100% of foreign expenditures (2) Farm Machinery 4,700,000 100% of foreign and Equipment expenditures or (including 100% of the ex- tractors) factory cost of domestically manufactured goods (3) Technical 500,000 100% of foreign Specialists' expenditures Services (4) Training 300,000 100% of foreign expenditures (5) Unallocated 2,200,000 TOTAL 21,500,000 - 22 - 2. For the purposes of this Schedule, the term "foreign expendi- tures" 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. 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 with- drawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. 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 - 23 - expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then appli- cable 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 expen- ditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or lim- iting any other right, power 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. SCHEDULE 2 Description of the Project The Project is part of a program of the Borrower in the Project Areas to upgrade the milking quality of dairy herds by importation of improved milk animals; increase the production of feed-stuffs, dairy livestock, and milk; and encourage related on-farm development, by means of a combination of credit faci- lities and technical services. The Project also includes a pilot effort to introduce the above-mentioned benefits to very small farmers. The Project consists of the following parts: Part A: Lending Program The provision through TCZB of Sub-loans to an estimated 750 farmers for the financing of Dairy-farm Development Plans in the Project Areas, prepared and implemented with assistance as provided for under Part B hereof. Part B: Technical Services The provision, through LDP with the assistance of IDPD and DVS, of technical services to farmers benefiting from Part A of the Project, including assistance to farmers and cooperation with TCZB in: -25 - (1) promotion of the Project among farmers; initial selection of farmers applying for Sub-loans; (3) preparation and approval of Dairy-farm Development Plans; (4) procurement of goods and services required to carry out such Plans; (5) supervision and execution of such Plans; and (6) maintenance of records for the Project. Part C: Training and Studies (1) Training of farmers benefiting from Part A of the Project; (2) Training on the job and abroad of staff engaged in services related to the carrying out of the Project; (3) Studies on dairy production and marketing in the Borrower's territory, the list and scope of such studies to be determined by agreement between the Borrower and the Bank; and (4) Studies for preparation of a future intensive dairy development project in additional provinces - 26 - to be selected following preliminary review of the following provinces: Amasya, Antalya, Bilecik, Bingol, Bitlis, Burdur, Canakkale, Diyarbakir, Erzincan, Isparta, Kutahya, Mugla, Mus, Nevsehir, Nigde, Siirt, Sivas, Tokat, Tunceli, Urfa and Usak. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* November 15, 1981 530,000 May 15, 1982 555,000 November 15, 1982 580,000 May 15, 1983 605,000 November 15, 1983 630,000 May 15, 1984 655,000 November 15, 1984 680,000 May 15, 1985 715,000 November 15, 1985 740,000 May 15, 1986 775,000 November 15, 1986 810,000 May 15, 1987 840,000 November 15, 1987 880,000 May 15, 1988 915,000 November 15, 1988 955,000 May 15, 1989 995,000 November 15, 1989 1,040,000 May 15, 1990 1,080,000 November 15, 1990 1,125,000 May 15, 1991 1,175,000 November 15, 1991 1,225,000 May 15, 1992 1,275,000 November 15, 1992 1,330,000 May 15, 1993 1,390,000 * 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. -28- Premiums on Prepayment The following percentages are specified as the premiums pay- able on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions: Time of Prepayment Premium Not more than three years 1-1/2% before maturity Mbre than three years but not 2-3/4% more than six years before maturity More than six years but not 5-3/4% more than eleven years before maturity More than eleven years but not 7% more than fifteen years befbre maturity More than fifteen years 8-1/2% befbre maturity - 29 - SCHEDULE 4 Procurement A. Procurement Procedures 1. Livestock Purchases by farmers of livestock required to carry out Dairy- farm Development Plans and to be financed by Sub-loans will be handled by the Project Manager in a manner satisfactory to the Bank on the basis of: (i) individual orders collected from such farmers by the regional managers of IDPD; (ii) not less than three price quotations based on invitations from at least two different coun- tries; (iii) the recommendations of the technical specialists referred to in Section 3.01 (b) of this Agreement as regards qual- ity and source; and (iv) the recommendations of the Director Gen- eral of DVS, as regards animal health standards. (a) Cattle imported for the Project will be: (i) of Holstein or Brown Swiss breeds in a ratio of approximately 70:30; (ii) in good general health; (iii) free of tuberculosis, brucellosis, leptospirosis, trichomoniasis and vibriosis; and (iv) vaccinated against foot and mouth disease (Types A and C). - 30 (b) Imported Holstein and Brown Swiss heifers for the Project will be: (i) registered in the national pedigree herd book of the country of origin; (ii) out of dams with a certified average milk produc- tion record of at least 5,000 kg/year for Holstein or 4,000 kg/year for Brown Swiss; (iii) mated to registered sire3 (or sons of registered sires) of the same breed whose progeny have a positive rating (above average) in the milk produc- tion testing programe of the country of origin; and (iv) certified in-calf. (c) Imported Holstein and Brown Swiss bulls for the Project will be: (i) registered in the national pedigree herd book of the country of origin; (ii) out of dams which have a certified average milk production record of at least 6,000 kg/year for Holstein or 5,000 kg/year for Brown Swiss; (iii) aged 12 - 24 months; and - 31 - (iv) sired by bulls whose progeny have a positive rating (above average) in the milk production testing programme of the country of origin. Contracts with suppliers for the purchase of livestock will contain provisions regarding the reception and delivery of live- stock satisfactory to the Project Manager and will provide that title to such livestock will pass to the farmer only upon de- livery at his farm. The Borrower will take all necessary action to expedite live- stock purchases and veterinary clearances and to assure prompt and adequate deliveries of such livestock to purchasers thereof. 2. Farm Equipment and Machinery (including tractors) The procurement of farm equipment and machinery (including tractors) required for the carrying out by farmers of Dairy-farm Development Plans and to be financed by Sub-loans will be handled by LDP, in a manner satisfactory to the Bank, on the basis of (i) individual orders collected from such farmers by the regional managers of IDPD and (ii) international competitive bidding in accordance with procedures consistent with those set forth in Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines). Invitations to bid will specify that suppliers will be required to provide in each of the Project Areas efficient servicing facil- ities and sufficient spare parts. - 32 - Farm equipment and machinery (including tractors) will be purchased oy the Beneficiaries on the terms and conditions of the awarded contract. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex- factory price for domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and sim- ilar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expen- ditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in the Borrower's territory may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the infor- mation required to establish the eligibility of a bid for such preference and the following methods and stages that will be fol- lowed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: - 33 - (1) Group A: bids offering goods manufactured in the Borrower's territory if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in the Borrower's territory equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in the Borrower's territory. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evalu- ated bid of each group. 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. (d) If, as a result of the comparison under paragraph (c) 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 c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this fur- ther comparison only, an amount equal to (i) the amount of cus- toms duties and other import taxes which a non-exempt importer would 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 furth4er 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 (c) is the lowest evaluated bid shall be selected. C. Review of Procurement Decisions by Bank 1. With respect to all contracts included in Part A.2 of this Schedule: (a) Before bids are invited, the Borrower 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 docu- ments 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, the Bor- rower 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 prepared by or in consultation with the technical specialists referred to in Section 3.01 (b) of this Agreement, on the evaluation and comparison of the bids received, - 35 - together with the recommendations for award, and such other infor- mation 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 the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, with- out the Bank's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract to be financed out of the pro- ceeds of the Loan and not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execu- tion and prior to the submission to the Bank of the first appli- cation for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with any information that the Bank may reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly in- form the Borrower and state the reasons for such determination.