Turkey - Balikesir Newsprint Project : Loan 1258 - Loan Agreement - 1 - Conformed

CONFORMED COPY LOAN NUMBER 1258 TU LOAN AGREEMENT (Balikesir Newsprint Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and TURKIYE SELULOZ VE KAGIT FABRIKALARI ISLETMESI and SEKA BALIKESIR MUESSESESI Dated May 21, 1976 LOAN AGREEMENT AGREEMENT, dated May 21, 1976, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, party of the first part (such party of the first part hereinafter called the Bank) and TURKIYE SELULOZ VE KAGIT FABRIKALARI ISLETMESI (hereinafter sometimes called SEKA), and SEKA BALIKESIR MUESSESESI (herein- after sometimes called the Establishment), parties of the second part (either such party of the second part hereinafter sometimes individually called a Borrower and both such parties of the second part hereinafter sometimes collectively called the Borrowers). WHEREAS (A) The Borrowers have 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) The Republic of Turkey has indicated to the Bank that the DEVLET YATIRIM BANKASI, a State Economic Enterprise estab- lished and operating pursuant to the Laws of the Republic of Turkey No. 441 and 440, (hereinafter called DYB) will provide the Borrowers with a loan of at least eight hundred million Turkish Liras (TL800,000,000) to assist in the financing of the Project; (C) The General Directorate of Forestry (hereinafter called GDF) of the Ministry of Forests of the Republic of Turkey has entered into a protocol dated May 5, 1975 with SEKA for the sale of the wood required for the operation of the facilities to be constructed under the Project; -2- (D) The Republic of Turkey has informed the Bank that GDF has agreed to introduce modern forest management techniques and practices in the Republic of Turkey's Northern Aegean and Marmara forest regions; and (E) By an agreement (hereinafter called the Guarantee Agree- ment) of even date herewith between the Republic of Turkey (here- inafter called the Guarantor) and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrowers under the Loan; WHEREAS the Bank, on the basis inter alia of the foregoing, has agreed to make a loan to the Borrowers on the conditions here- inafter set forth; NOW THEREFORE, the parties hereto hereby agree as follows: I -3- 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, subject, however, to the following modification thereof (said General Con- ditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, being hereinafter called the General Conditions), namely, that Paragraph 6 of Section 2.01 is amended to read as follows: "6. The term 'Borrower' means both parties to the Loan Agreement to which the Loan is made, except that in Section 4.05, Section 5.02, Section 5.03, Sec- tion 5.07, paragraphs (a), (c), (d), (e), (g), (h) and Ci) of Section 6.02, paragraphs (c), (e), (f) and (g) of Section 7.01 and Section 10.02, such term means one or both such parties." Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the Gen- eral Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: Dt (a) "Completion Date" means the date on which the manufactur- ing facilities included in the Project have, during a period of 90 consecutive days, achieved a total production equivalent to ninety per cent of the design capacity of such facilities, which design capacity is equivalent to 105,000 cubic meters per annum of sawnwood and 100,000 metric tons per annum of newsprint, all as certified by the Borrowers' engineering consultants employed pursuant to Section 3.05 of the Loan Agreement; (b) "TEK" means "Turkiye Elektrik Kurumu" a State Economic Enterprise established and operating pursuant to the Guarantor's Law 440 and the Turkish Electricity Authority Law of the Guarantor dated July 15, 1970. -5- 'Rw ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrowers, on the terms and conditions in the Loan Agreement set forth or re- ferred to, an amount in various currencies equivalent to seventy million dollars ($70,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accor%Lance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Bank and the Borrowers, for expen- ditures made (or, if the Bank shall so agree, to be made) in re- spect 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, the goods, works and services 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 December 31, 1980 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrowers and the Guarantor of such later date. Section 2.05. The Borrowers shall pay to the Bank a commit- ment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. -6- Section 2.06. The Borrowers shall pay interest at the rate of eight and one-balf 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 April 1 and October 1 in each year. Section 2.08. The Borrowers 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. All obligations of the Borrowers under the Loan Agreement, unless such obligations shall have been expressly under- taken by each of the Borrowers separately, shall be joint and sev- eral and the obligation of either one to comply with any provision of the Loan Agreement is not subject to any prior notice to, demand upon or action against the other one. No extension of time or for- bearance given to either Borrower in respect of the performance of any of its obligations under the Loan Agreement, and no failure of the Bank to give any notice or to make any demand or protest what- soever to either Borrower, or strictly to assert any right or pur- sue any remedy against either one in respect of the Loan Agreement, and no failure by either Borrower to comply with any requirement of any law, regulation or order, shall in any way affect or impair any obligation of the other Borrower under the Loan Agreement. __ T7 ARTICLE III Execution of the Project Section 3.01. The Borrowers shall carry out the Project with due diligence and efficiency and in conformity with appropriate engineering, financial and administrative practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. (a) The Borrowers undertake to insure, or make 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, transportation and delivery thereof to the place of use or installation. (b) Except as the Bank shall otherwise agree, the Borrowers shall cause all goods and services financed out of the proceeds of the Loan to be acquired free and clear of all encumbrances and such goods shall be used exclusively for the Project. Section 3.03. (a) The Borrowers shall furnish to the Bank, promptly upon their preparation, the plans, specifications, re- ports, contract documents and work and procurement schedules for the Project, including a network schedule for the execution of the Project, and any material modifications thereof or addi- tions thereto, in such detail as the Bank shall reasonably request. -8- (b) The Borrowers: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods, works and services financed out of the proceeds of the Loan, and to disclose the use thereof in the Proj- ect; (ii) shall, without limitation upon the provisions of para- graph (c) of this Section, enable the Bank's representatives to visit the facilities and construction sites included in the Proj- ect and to see the goods financed out of the proceeds of the Loan and any relevant records and documents; (iii) shall, commenc- ing with the month ending June 30, 1976, furnish to the Bank with- in four weeks of the end of each month a report in English of such scope and in such detail as the Bank shall reasonably request on the progress of the Project, during such month; and (iv) shall furnish to the Bank all such information as the Bank shall reason- ably request concerning the Project, the expenditure of the pro- ceeds of the Loan and the goods, works and services financed out of such proceeds. (c) The Borrowers shall enable the Bank's representatives to see all plants, installations, sites, works, buildings, prop- erty and equipment of the Borrowers and any relevant records and documents, as the Bank may reasonably request. Section 3.04. The Borrowers shall take all such action as shall be necessary to acquire as and when needed all such land, and rights in respect of land as shall be required for the construction (and operation) of the facilities included in the Project and shall fur- nish to the Bank promptly upon its request, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. -9- Section 3.05. (a) The Borrowers hereby undertake that, with- out the prior consent of the Bank which shall not be unreasonably withheld, they will not assign, amend, abrogate or waive in whole or in part the contract entered into between them and the engineer- ing consultants on April 3, 1975, pursuant to which such engineering consultants have undertaken to assist the Borrowers in the engi- neering design, the supervision of, the construction of, and the start-up and initial operation of, the Project, and in the prepara- tion of a program of staff training and of management and operating assistance. (b) The Borrowers hereby undertake to implement, in a manner satisfactory to the Bank, the programs of staff training, of manage- ment assistance and of operating assistance included in the contract with the engineering consultants referred to in paragraph (a) of Section 3.05 of this Agreement, and to exchange views with the Bank, no later than July 1, 1979, or such other date as the Bank may agree, on the need for the extension of such program. To that end, the Borrowers shall assign experienced and qualified operating Turkish personnel in adequate numbers as counterparts to the operating personnel provided to the Establishment oy the engineer- ing consultants under said contract. (c) SEKA undertakes to review with the Bank, promptly upon its completion, the study financed in part by the United Nations Development Program, under its Project Document dated October 23, 1975, as such study relates to the future development for newsprint production in the Guarantor's territory. - 10 - Section 3.06. The Borrowers undertake to ensure that environ- mental and pollution controls designed to meet environmental pro- tection standards to be agreed with the Bank are installed in the manufacturing facilities included in the Project and that such controls are thereafter maintained in good condition and properly utilized. -11- ARTICLE IV Management and Operations of the Borrowers Section 4.01. Each of the Borrowers shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in conformity with appropriate engineering, financial and administrative prac- tices and under the supervision of experienced and competent personnel, who shall, if such Borrower deems it necessary, be employed on a contract basis. Section 4.02. Each of the Borrowers shall take out and main- tain with responsible insurers, or make other provisions satis- factory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 4.03. Except as Lhe Bank shall otherwise agree, each of the Borrowers shall take all steps which are necessary to ac- quire, maintain and renew all interests in land and other proper- ties and all rights, powers, privileges and franchises which are needed for the efficient operation of its business and undertak- ings, and, shall not sell, lease, transfer or otherwise dispose of any of its property or assets which are required for this purpose. Section 4.04. Except as the Bank shall otherwise agree, SEKA and the Establishment shall not amend or agree to the amendment of the Establishment's Statutes, or to any changes in its ownership or capital structure. - 12 - Section 4.05. Except as the Bank may otherwise agree, SEKA undertakes to adopt, by December 1, 1978, and thereafter to put into effect and operate a selling and distribution system for its sawnwood products substantially in accordance with the selling and distribution system for sawnwood products described in the report entitled "Sawnwood Market Study" dated May 10, 1975. Section 4.06. SEKA undertakes to amend in form and substance satisfactory to the Bank by December 31, 1976, or such other date as the Bank may agree, its wood supply protocol with GDF, refer- red to in Recital (C) of this Agreement, and shall thereafter duly perform all its obligations and exercise all its rights under the said protocol, as so amended. Except as the Bank shall otherwise agree, SEKA shall not take or concur in any action which would have the effect of assigning, amending, abrogating or waiving the said protocol, as so amended, or any provision thereof. -15 - to the Completion Date, the Establishment's debt/equity ratio above 60: 40 in any one year. (c) For the purposes of this Section: (i) "Debt" means any debt incurred by the Establishment maturing by its terms more than one year after the date on which it is originally incurred. (ii) Debt shall be deemed to be incurred: (A) under a loan contract or agreement on the date and to the extent it is drawn down pursuant to such loan or agreement; and (B) under a guarantee agreement on the date the agreement providing for such guaran- tee has been entered into but only to the extent that the guaranteed debt is outstanding. (iii) "Equity" means the sum of the total unimpaired paid-in share capital, surplus and free reserves of the Establishment not allocated to cover speci- fic liabilities. (iv) Whenever in connection with this Section it shall be necessary to value in terms of Turkish Liras debt payable in another currency, such valuation shall be made on the basis of the prevailing rate of exchange as published by the T.C. Merkez Bankasi. (v) The term "net revenues" means gross revenues from all sources, less operating and administrative -16 - M expenses, including adequate maintenance, taxes and levies, if any, or any payments in lieu thereof, and personnel remuneration, but before provision for depreciation and debt service requirements. (vi) The term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt. Section 5.05. (a) Except as the Bank may otherwise agree, the Establishment shall not make any transfer of profits to SEKA unless after such transfer the Establishment's current assets will exceed its current liabilities by at least one and three- tenths times. (b) Except as the Bank may otherwise agree, SEKA shall pro- vide the Establishment with all such funds as may be required to enable the Establishment to maintain at all times after the Com- pletion Date a ratio of current assets to current liabilities of not less than 1.1 to 1. (c) For the purposes of this Section: (i) The term "current assets" includes cash, accounts receivable due within twelve months, inventories convertible to saleable goods within twelve months, prepaid expenses, properly chargeable to operating - 17 - expenses within the next twelve months and all other assets which would, in the ordinary course of business, be converted within twelve months into cash. (ii) The term "current liabilities" includes accounts payable within twelve months, customer advances, income taxes, bonuses and all other liabilities (including long-term debt) which will be due and payable, or could be called for payment, within twelve months. Section 5.06. SEKA undertakes:(i) to make available to the Establishment an equity capital of at least one billion two hun- dred eighty million Turkish Liras (TL1,280,00C,000) and to pay this amount to the Establishment as and when it is needed to ensure that during the period of construction of the Project prior to the Completion Date, the Establishment maintains a debt/equity ratio, calculated in accordance with the definitions set forth in Section 5.04 of this Loan Agreement, of not more than 60:40; (ii) to make available to the Establishment all funds required to ensure that the Establishment, at the Completion Date, has current assets at least equal to one and one-half times its cur- rent liabilities, as defined in Section 5.05 hereof; and (iii) thereafter to pay promptly to the Establishment all funds received by it from the Guarantor in accordance with the provisions of Section 3.02 of the Guarantee Agreement. - 18 - Section 5.07. Except as the Guarantor and the Bank shall otherwise agree, SEKA and the Establishment shall take from time to time all such action as may be required to set the ex-factory price for the newsprint production of the Establish.ent at a level sufficient to enable it to earn, pursuant to paragraph A of Article 2 of the Guarantor's Law 440, a reasonable annual return in each fiscal year, starting on January 1, 1979, on the value of the Establishment's Investment, assuming production at a rate of not less than 100% of design capacity under conditions of efficient operation. Section 5.08. Each of the Borrowers shall notify the Bank prior to making any repayment in advance of maturity in respect of the loan referred to in Recital (B) of the Loan Agreement or of any other borrowings and shall not make any such repayment without the consent of the Bank unless a pro rata repayment in advance of maturity in respect of the Loan is made simultaneously with such other repayment. All the provisions of the General Conditions re- lating to repayment in advance of maturity shall be applicable to any repayment by either Borrower in accordance with this Section. Section 5.09. The Borrowers undertake that they shall pay to the Guarantor the annual fee provided for in Section 3.03 of the Guarantee Agreement, as and when each such payment shall become due. Section 5.10. Except as the Bank shall otherwise agree, the Establishment shall not, prior to the Completion Date, make ex- penditures, or commitments for expenditures, for fixed or capital -19- assets (including investments in or loans to other business en- tities) except those required for the carrying out of the Project. Section 5.11. If the completion of the Project is hindered or delayed, or is threatened with hindranice or delay, because the funds available to the Borrowers are inadequate to ensure its com- pletion, the Borrowers shall promptly request that the Guarantor provide the Borrowers, or cause the Borrowers to be provided with the necessary funds as and when required, in accordance with the provisions of the Guarantee Agreement. - 20 - ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) Subject to paragraph (b) of this Section: (i) The right of either Borrower to withdraw the proceeds of any loan made to such Borrower or to the Guarantor for the financing of the Proj- ect shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or (ii) any such loan shall have become due and. payable prior to the agreed maturity thereof. (b) Paragraph (a) of this Section shall not apply if the Borrowers or the Guarantor establish to the satisfaction of the Bank that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of either Borrower or of the Guarantor to perform any of its obligations under such agreement, and. (B) adequate funds for the Project are available to the Borrowers from other sources on terms and conditions con- sistent with the obligations of the Borrowers under this Agreement. - 21 - (c) SEKA's Statutes shall have been amended, abrogated, sus- pended or waived in such a way as to materially and adversely affect SEKA's ability to fulfill its obligations under this Agree- ment. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following events are specified pursuant to para- graph (h) thereof, namely, that any event specified in paragraphs (a) (ii) or (c) of Section 6.01 of this Agreement shall occur. - 22 - ARTICLE VII Effective Date; Termination Section 7.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) The Board of Directors of DYB has approved a loan of at least eight hundred million Turkish Liras (TL800,000,000) to be made to the Borrowers, and DYB and the Borrowers have entered into an agreement satisfactory to the Bank, to this effect, and the execution and delivery of such agreement on behalf of DYB and the Borrowers, respectively, has been duly authorized or ratified by all necessary governmental and corporate action, and such agree- ment is in full force and effect. (b) The authorized share capital of the Establishment has been increased, to the satisfaction of the Bank, to the amount of not less than one billion two hundred eighty million Turkish Liras (TL1,280,000,000). Section 7.02. The following are specified as additional mat- ters, within the meaning of Section 12.02(c) of the General Condi- tions, to be included in the opinion or opinions to be furnished to the Bank: (a) The agreement referred to in paragraph (a) of Section 7.01 of this Agreement has been duly authorized or ratified by, and executed and delivered on behalf of DYB and the Borrowers, - 23 - respectively, is legally binding upon DYB and the Borrowers, respectively, in accordance with its terms, and is in full force and effect. (b) All action to increase the authorized capital of the Establishment as provided in paragraph (b) of Section 7.01 of this Agreement has been duly taken. Section 7.03. The date September 17, 1976, is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VIII Addresses Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: 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 addresses: INTBAFRAD 64145 (wU) Washington, D.C. 440098 (ITT) 248423 (RCA) For SEKA: Turkiye Seluloz ve Kagit Fabrikalari Isletmesi Genel Mudurlugu Izmit-Kocaeli Turkey Cable address: Telex: SELULOZ 33 124 SEKATR Izmit-Kocaeli Turkey For the Establishment: Seka Balikesir Muessesesi Balikesir Turkey Cable address: SEKABAL Balikesir Turkey -25- 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. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Willi A. Wapenhans Regional Vice President Europe, Middle East and North Africa TURKIYE SELTULOZ VE KAGIT FABRIKALARI ISLETMESI By /s/ Muammer Akinci Authorized Representative SEKA BALIKESIR MUESSESESI By /s/ Muammer Akinci Authorized Representative - 26 - 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) Machinery and 55,000,000 100% of foreign equipment expenditures or 100% of ex- factory cost of locally manufac- tured equipment (2) Consulting services (a) Foreign consult- 7,700,000 100% of foreign ing firm expenditures (b) Local consulting 300,000 100% of total firm expenditures (3) Unallocated 7,000,000 TOTAL 70,000,000 -29 - SCHEDULE 2 Description of the Project 1. The Project consists of the construction and installation of an integrated pulp and paper manufacturing complex in one selected site 12 km southeast of tL town of Balikesir on the main highway to Izmir, as described under Part A below, of a townsite described under Part B of the Project and of a training and management and operating assistance program as described under Part C below. Part A: construction and putting into operation of: (1) a saw- mill to produce about 105,000 m3 per year of airdried sawnwood; (2) a wood preparation plant to produce about 86,000 m per year of wood chips; (3) a thermo- mechanical pulp mill to produce about 79,100 bone- dry tons per year of thermomechanical wood pulp; (4) a newsprint mill to produce about 100,000 tons per year of newsprint at the standard basis weight of 52 gr per 2 m ; (5) pollution abatement facilities including a sys- tem for effluent treatment and disposal consisting of primary treatment through a clarifier and two settling basins and secondary treatment through an aerated la- goon, all capable of reducing suspended solids and bio- chemical oxygen demand by at least 95%; and (6) ancil- lary facilities including a power plant for the supply of all the steam requirements and the generation of suf- ficient power to run only the newsprint mill. - 30 - Part B: construction of a townsite to house about 1,000 people and other social infrastructure. Part C: a training, management and operating assistance program to assist the Establislhment in the start-up and operation of the facilities to be constructed under Part A of the Project. * * * * * The Project is expected to be completed by June 30, 1980. - 31 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* October 1, 1980 1,985,000 April 1, 1981 2,070,000 October 1, 1981 2,160,000 April 1, 1982 2,250,000 October 1, 1982 2,345,000 April 1, 1983 2,1445,000 October 1, 1983 2,550,O0 April 1, 1984 2,655,000 October 1, 1984 2,770,000 April 1, 1985 2,890,000 October 1, 1985 3,010,000 April 1, 1986 3,140,000 October 1, 1986 3,270,000 April 1, 1987 3,410,000 October 1, 1987 3,555,000 April 1, 1988 3,705-,000 October 1, 1988 3,865,000 April 1, 1989 4,030,000 October 1, 1989 4,200,000 April 1, 1990 4,380,000 October 1, 1990 4,565,000 April 1, 1991 4,750,000 * 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 equivalents determined as for purposes of withdrawal. - 32 - 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 before maturity 1-1/2% More than three years but not more than six years before maturity 2-3/4% More than six years but not more than eleven years before maturity More than eleven years but not more than thirteen years before maturity 7% More than thirteen years before maturity 8-1/2% -33- SCHEDULE 4 Procurement A. International Competitive Bidding Except as provided in Part B hereof, the goods and works shall be procured under contracts to be awarded in accordance with pro- cedures consistent with those set forth in the "Guidslines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), on the basis of international competitive bidding. B. Other Procurement Procedures Notwithstanding the provisions of paragraph A of this Sched- ule any contract for plant equipment and spare parts estimated to cost less than the equivalent of $100,000, may be awarded on the basis of the local competitive bidding procedures of SEKA, pro- vided that the aggregate amount of all such contracts to be so awarded shall not exceed the equivalent of $1,000,000. C. 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 similar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to the Borrowers of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in Turkey may be granted a margin of pref- erence 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: (1) Group A: bids offering goods manufactured in Turkey if the bidder shall have established to the satisfaction of the Borrowers and the Bank that the manufacturing cost of such goods includes a value added in Turkey equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Turkey. (3) Group C: bids offering any other goods. -35 - (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 eval- uated 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 further comparison only, an amount equalto: (i) the amount of customs 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 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 (c) is the lowest evaluated bid shall be selected. D. Review of Procurement Decisions by Bank 1. Review of prequalification. The Borrowers shall, before qual- ification 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 pre- qualified bidders, together with a statement of their qualifications - 36 - and of the reasons for the exclusion of any applicant for prequali- fication shall be furnished by the Borrowers to the Bank for its comments before the applicants are notified, and the Borrowers shall make such additions to, deletions from, or modifications in, the said list as the Bank shall reasonably request. 2. Review of invitation to bid and of proposed awards and final contracts: .With respect to all contracts for machinery and equipment estimated to cost the equivalent of $200,000 or more: (a) Before bids are invited, the Borrowers 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, the Borrowers 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, by the consultants referred to in Sec- tion 3.05 of this Agreement, on the evaluation and comparison of the bids received, together with the recommendations for award of the said consultants and such other information as the Bank shall - 37 - reasonably request. The Bank shall, if it determines that the in- tended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrowers 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 or prequalification invited. (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. 3. With respect to each contract to be financed out of the pro- * ceeds of the Loan and not governed by the preceding paragraph, the Borrowers shall furnish to the Bank, promptly after its execu- tion and prior to the submission to the Bank of the first applica- tion for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of 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 the Borrowers and state the reasons for such determination.