Turkey - Balikesir Newsprint Project : Loan 1258 - Guarantee Agreement - 2 - Conformed

LOAN NUMBER 1 L TU GUARANTEE AGREEMENT (Balikesir Newsprint Project) between REPUBLIC OF TURKEY and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 1976 GUARANTEE AGREEMENT AGREEMENT, dated %, 1976, between REPUBLIC OF TURKEY (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS by Loan Agreement of even date herewith between the Bank, party of the first part and Turkiye Seluloz ve Kagit Fabrikalari Isletmesi (hereinafter sometimes called SEKA), and SEKA Balikesir Muessesesi (hereinafter sometimes called the Establishment), parties of the second part (either such party of the second part hereinafter sometimes individually called a Bor- rower and both such parties of the second part hereinafter some- times collectively called the Borrowers), the Bank has agreed to make to the Borrowers a loan in various currencies equivalent to seventy million dollars ($70,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrowers in respect of such loan as hereinafter provided; and WHEREAS the Guarantor, in consideration of the Bank's enter- ing into the Loan Agreement with the Borrowers, has agreed so to guarantee such obligations of the Borrowers; NOW THEREFORE the parties hereto hereby agree as follows: -2- 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 modifications thereof set forth in Section 1.01 of the Loan Agreement (said General Conditions Applicable to Loan and Guarantee Agreements, as so modified, being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unl ;s the context otherwise requires,. the several tems defined in the Gen- eral Conditions, in the Loan Agreement and in the Preamble hereof have the respective meanings therein set forth. ARTICLE II Guarantee; Provision of Funds Section 2.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan and the punctual performance of all the other obligations of each of the Borrowers, all as set forth in the Loan Agreement. Section 2.02. Without limitation or restriction upon the pro- visions of Section 2.01 of this Agreement, the Guarantor speci- fically undertakes, whenever there is reasonable cause to believe that the funds available to the Borrowers will be inadequate to meet the estimated expenditures required for.the carrying out of the Project, to make arrangements, satisfactory to the Bank, prompt- ly to provide the Borrowers or cause the Borrowers to be provided with such funds as are needed to meet such expenditures. ARTICLE III Other Covenants Section 3.01. (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 foreign 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 exter- nal debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realiza- tion 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 Guarantor, in creating or permitting the creation of such lien, shall make express pro- vision to that effect; provided, however, that, if for any con- stitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Guarantor 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 satisfactory 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; and (ii) any lien arising in the ordinary course of banking transac- tions 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 Guarantor, of any political or administrative sub- division thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Guarantor or any such subdivision, including assets held by T.C. Merkez Bankasi or any other institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Guarantor. Section 3.02. Without limitation or restriction on the gen- erality of the provisions of Section 2.01 of this Guarantee Agree- ment, the Guarantor specifically undertakes to: (a) take all action as may be required to cause TEK to com- plete in accordance with a timetable acceptable to the Bank by no later than July 1, 1978, or such other date as the Bank may agree, the construction of a power transmission line, including without limitation the construction and installation of the related ancil- lary facilities, connecting TEK's main power transmission lines to the site where the facilities to be constructed under the Project are to be located, and thereafter to connect the facilities con- structed under the Project with such transmission lines, to maintain such transmission lines in accordance with appropriate technical, engineering and public utility practices and to provide the Estab- lishment with adequate supplies of power in order to enable the Establishment to operate its facilities efficiently, all under -6- arrangements satisfactory to the Bank and provide TEK or cause TEK to be provided promptly as needed with, the funds, facilities, ser- vices and other resources required for the purpose; (b) take all action as may be required, including but not limited to the introduction of modern forest management techniques satisfactory to the Bank, to cause GDF to supply, at all times, the Establishment with an adequate supply of wood in order to enable the Establishment to operate its facilities efficiently and provide to GDF or cause GDF to be provided with, promptly as needed, the funds, facilities, services and other resources required for the purpose; (c) cause GDF to amend in form and substance satisfactory to the Bank by not later than December 31, 1976, or such other date as the Bank may agree, its wood supply protocol with SEKA, referred to in Recital C of the Loan Agreement, and thereafter cause GDF to duly perform all its obligations and exercise all its rights under the said protocol, as so amended, and, except as the Bank shall otherwise agree, cause GDF not to 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; (d) provide SEKA, through the Guarantor's annual investment and financial programs, for transfer to the Establishment suffi- cient equity capital, as is needed from time to time to ensure that during the period of construction of the Project prior to the Com- pletion Date, the Establishment maintains a debt/equity ratio, calculated in accordance with the definitions set forth in Section 5.04 of the Loan Agreement, of not more than 60:40; (e) promptly provide to SEKA for transfer to the Establish- ment, or cause the Establishment to be promptly provided, as and when required and under terms and conditions satisfactory to the Bank, with any funds, in addition to those referred to in Recital B of the Loan Agreement and paragraph (d) of Section 3.02 of this Agreement and those available from the Loan, which are needed to: (i) complete the Project (including the preoperating expenses of the Establishment and interest during construction); (ii) enable SEKA to comply, at the Completion Date, with its obligations un- der Section 5.06 (ii) of the Loan Agreement: and (iii) enable SEKA to comply, after the Completion Date, with its obligations under Section 5.05 (b) of the Loan Agreement; and (f) issue, as and when needed, any import and other licenses including any foreign exchange authorizations required for the importation of goods or the supply of services to be financed out of the proceeds of the Loan or for the replacement or repair of such goods. Section 3.03. The Guarantor undertakes that in consideration of the services being provided to the Borrowers by the Guarantor and in relation to the Loan, it shall enter into an agreement with the Borrowers satisfactory to the Bank, whereby the Borrowers undertake jointly and severally to pay the Guarantor an annual fee of 1-1/2% of the principal amount bf the Loan withdrawn on account of expenditures for goods and services required for the Project and outstanding from time to time. - 8- ARTICLE IV Representative of the Guarantor; Addresses Section 4.01. The-Minister of Finance of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 4.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Maliye Bakanligi Hazine Genel Mudurlugu ve Milletlerarasi Iktisadi Isbirligi Teskilati Genel Sekreterligi Ankara, Turkey Cable address: Maliye Hazine 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 addresses: INTBAFRAD 64145 (wU) Washington, D.C. 440098 (ITT) 248423 (RCA) -9- 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 Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By //L;~ '\ Regional Vice President Europe, Middle East and North Africa e INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this day o f/, 197 L Fpl\ ECRETARY