Turkey - Second DYB Project : Loan 1379 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 13T9 TU LOAN AGREEMENT (Second DYB Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and DEVLET YATIRIM BANKASI Dated March 23, 1977 LOAN AGREEMENT AGREEMENT, dated March 23, 1977, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and DEVLET YATIRIM BANKASI (hereinafter called the Borrower), a State Economic Enterprise established and operating under the laws of the Republic of Turkey. 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 Schedule 2 to this Agreement (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, being herein- after called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the Gen- eral Conditions have the respective meanings therein set forth, and the following additional terms have the following meanings: (a) "Sub-loan" means a loan or credit made or proposed to be made by the Borrower out of the proceeds of the Loan to an Invest- ment Entity for an Investment Project, all in accordance with the Statement of Policies and Procedures; 8 (b) "Enterprise" means a state economic enterprise or a public economic enterprise, established and organized under the laws of the Guarantor; (c) "Establishment" means an establishment of an Enterprise, established and organized under the laws of the Guarantor; -3- (d) "Investment Entity" means an Enterprise and/or Establish- ment, which carries out and manages an Investment Project, to which the Borrower proposes to make or has made a Sub-loan; (e) "Investment Project" means a specific development proj- ect to be carried out by an Investment Entity utilizing the pro- ceeds of a Sub-loan; (f) "liras" and "TL" mean the currency of the Guarantor; (g) "Foreign currency" means any currency other than the cur- rency of the Guarantor; (h) "Statutes" means the statutes of the Borrower as defined in Law No. 441, of 1964, of the Guarantor, including the regula- tions issued pursuant to the said law by Decree No. 7/8568 of the Guarantor's Council of Ministers, dated July 9, 1974 and promulgated in the Guarantor's Official Gazette No. 14960 on July 29, 1974, as such Statutes and Regulations may be amended from time to time; (i) "Statement of Policies and Procedures" means the State- ment of Lending Policies and Procedures for the Project set forth in Schedule 3 to this Agreement, as such Schedule may be amended from time to time; CQ) "Prior Loan Agreement" means any outstanding loan agree- ment between the Bank and the Borrower dated before the date of this Agreement and "Prior Loan" means any loan provided for there- in; and -4- (k) "T. C. Merkez Bankasi" means Tirkiye Cumhuriyet Merkez Bankasi, the Central Bank of the Republic of Turkey established and operating pursuant to Law No. 1211 promulgated in the official Gazette of the Republic of Turkey No. 13409 of January 26, 1970 as amended. -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 referred to, an amount in various currencies equivalent to seventy million dollars ($70,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account for amounts expended by the Borrower for an Investment Project or, if the Bank shall so agree, for amounts to be expended by the Borrower for an Investment Project, to finance the reasonable foreign-currency cost of goods and services re- quired under a Sub-loan for the Investment Project in respect of which the withdrawal is requested; provided, however, that no withdrawal shall be made in respect of a Sub-loan (i) unless the Sub-loan shall have been approved by the Bank, or (ii) the Sub- loan shall be a free-limit sub-loan for which the Bank shall have authorized withdrawals from the Loan Account. (b) A free-limit sub-loan shall be a sub-loan for an Invest- ment Project in an amount to be financed out of the proceeds of the Loan which shall not exceed the sum of (i) $2,000,000 equivalent, when added to any other outstanding amounts financed or proposed to be financed out of the proceeds of the Loan or of any Prior Loan for such Investment Project or (ii) $14,000,000 equivalent, when added to all other free-limit sub-loans financed or proposed to be financed out of the proceeds of the Loan, the foregoing amounts being subject to change from time to time as determined by the Bank after con- sultation with the Borrower. - 6- (c) Except as the Bank and the Borrower shall otherwise agree, no withdrawals shall be made on account of (i) expenditures made by an Investment Entity in respect of a Sub-loan, subject to the Bank's approval, if such expenditures shall have been made be- fore the date of this Agreement or more than ninety days prior to the date on which the Bank shall have received in respect of such Sub-loan the application and information required by Section 2.03 (a) of this Agreement or, under a free-limit Sub-loan, more than ninety days prior to the date on which the Bank shall have received in respect of such free-limit sub-loan the request and information acquired by Section 2.03 (b); and (ii) expenditures in liras, or for goods produced in, or services supplied from, the territory of the Guarantor. Section 2.03. (a) When presenting a Sub-loan (other than a free-limit sub-loan) to the Bank for approval, the Borrower shall furnish to the Bank an application, in form satisfactory to the Bank, together with: (i) a description of the Investment Entity and an appraisal of the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan; (ii) the proposed terms and conditions of the Sub-loan, in- cluding the schedule of amortization of the Sub-loan; and (iii) such other information as the Bank shall reasonably request. (b) Each request by the Borrower for authorization to make withdrawals from the Loan Account in respect of a free-limit sub- loan shall contain (i) a summary description of the Investment Enterprise and the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan, and (ii) the terms and conditions of such free-limit sub-loan, including the schedule of amortization therefor. -7- (c) Except as the Bank and the Borrower shall otherwise agree: (i) applications and requests made pursuant to the provisions of paragraphs (a) and (b) of this Section shall be presented to the Bank on or before March 31, 1979; and (ii) not less than 12 such applications, to be made pursuant to the provisions of paragraph (a) of this Section, shall be presented to the Bank by March 31, 1979. Section 2.04. The Closing Date shall be March 31, 1981 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor 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. 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 1 and November 1 in each year. Section 2.08. (a) The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 1 to this Agreement as such Schedule shall be amended from time to time by the Bank to the extent required to: (i) conform in relevant part substantially to the aggregate of the amortization schedules applicable to Sub-loans, which have been approved or authorized for withdrawals from the Loan Account -8- undcr Section 2.02 of this Agreement; and (ii) take into account any cancellation pursuant to Article VI of the General Conditions and any repayments made by the Borrower under Section 2.09 of this Agreement; provided that repayments due hereunder shall be made on May 1 and November 1 in each year. Such amendments of said Schedule 1 shall include amendments to the table of premiums on prepayment, if necessary. (b) The amortization schedule applicable to each Sub-loan shall provide for an appropriate period of grace, and, unless the Bank and the Borrower shall otherwise agree, (i) shall not extend beyond 15 years from the date of approval by the Bank of such Sub-loan, or in the case of a free-limit sub-loan, of authoriza- tion by the Bank to make withdrawals from the Loan Account in re- spect thereof, and (ii) shall provide for approximately equal semi- annual, or mre frequent, aggregate payments of principal and interest or approximately equal semi-annual, or more frequent, payments of principal. (c) The Borrower shall transmit to the Bank, for its prior approval, any substantial changes proposed to be made in respect of the repayment provisions of any Sub-loan. Section 2.09. Unless the Bank and the Borrower shall other- wise agree: (a) If a Sub-loan or any part thereof shall be repaid to the Borrower in advance of maturity or if a Sub-loan or any part thereof shall be sold, transferred, assigned or otherwise disposed -9- of for value by the Borrower, the Borrower shall promptly notify the Bank and shall repay to the Bank on the next following interest payment date, together with the premiums specified in Schedule 1 to this Agreement or in any amendment thereof under Section 2.08 (a) of this Agreement, the amount withdrawn from the Loan Account in respect of such Sub-loan or part thereof and not theretofore repaid to the Bank. (b) Any amount so repaid by the Borrower shall be applied by the Bank, to the maturity or maturities of the Loan in amounts corresponding to the outstanding amounts of the maturity or maturi-- ties of the Sub-loan so repaid or disposed of. (c) Paragraph (b) of Section 3.05 of the General Conditions shall not apply to any repayment made under paragraph (a) of this Section. - 10 - ARTICLE III The Project; Management and Operations of the Borrower Section 3.01. (a) The purpose of the Project is to assist the Borrower in financing such productive facilities and resources in Turkey as will contribute to the economic and social developments of the country. The Project consists in the financing of specific development projects through loans to Tnvestment Entities in manu- facturing or processing industries and in non-fuel mining, in ac- cordance with the Statutes and the Statement of Policies and Pro- cedures, and in furtherance of the corporate purposes of the Bor- rover as therein set forth. (b) The Borrower shall carry out the Project and conduct its operations and affairs in accordance with appropriate financial standards and practices, with qualified management and personnel in adequate numbers and in accordance with the Statutes and State- ment of Policies and Procedures. Section 3.02. (a) The Borrower undertakes that, unless the Bank shall otherwise agree, any Sub-loan will be made on terms whereby the Borrower shall obtain, by written contract with the Investment Entity or by other appropriate legal means, rights adequate to protect the interests of the Bank and the Borrower, including, in the case of any Sub-loan the right of the Borrower to: (i) require the Investment Entity to carry out and operate the Investment Project with due diligence and efficiency and in accordance with, inter alia, appropriate technical, financial, . ......I - 11 - marketing and managerial standards and to maintain adequate records; (ii) require that (1) the goods and services to be financed out of the proceeds of the Loan shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and availability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them, and (2) such goods and services shall be used exclusively in the carrying out of the Investment Project; (iii) examine, by itself or jointly with representatives of the Bank if the Bank shall so request, such goods and the sites, works, plants and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (iv) require that (1) the Investment En- tity shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with appropriate business practice, and (2) without any limitation upon the foregoing, such insurance shall cover hazards incident to the acquisition, transportation and delivery of the goods financed out of the proceeds of the Loan to the place of their use or installation, any indemnity thereunder to be made freely usable by the Investment Entity to replace or re- pair such goods; (v) obtain all such information as the Bank or the Borrower shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Investment Entity; (vi) suspend or terminate the right of the Investmi-nt Entity to the use of the proceeds of the Loan upon fai- lure by such Investment Entity to perform its obligations under its contract with the Borrower; (vii) require the Investment Entity to furnish the Borrower as soon as available but in any case no later - 12 - than April 30 in each year, copies of its provisional financial statements to be prepared in accordance with appropriate accounting principles consistently applied, and to be in such detail as the Borrower shall have reasonably requested; and (viii) require the Investment Entity to furnish the Borrower as soon as available copies of its certified financial statements. (b) The Borrower shall exercise its rights in relation to each Investment Project in such manner as to (i) protect the in- terests of the Bank and the Borrower, (ii) comply with its obli- gations under this Agreement, and (iii) achieve the purposes of the Project. Section 3.03. The Borrower shall furnish to the Bank all such information as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan, the Project, the In- vestment Entities, the Investment Projects, and the Sub-loans. Section 3.04. The Borrower shall duly perform all its obliga- tions under the agreements under which funds have been lent or otherwise put at the disposal of the Borrower by the Guarantor or its agencies or others for relending, or management. The Bor- rower shall promptly inform the Bank of any action which would have the effect of assigning, or of amending, abrogating or waiving any material provision of, any such agreement. - 13 - ARTICLE IV Financial Covenants Section 4.01. The Borrower shall maintain records adequate to record the progress of the Project and of each Investment Proj- ect (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of the Borrower. Section 4.02. The Borrower shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank, as soon as available but in any case not later than six months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of the Borrower and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt, except as otherwise currently reported or disclosed in writing by the Borrower to the Bank. (b) The Borrower undertakes that, except as the Bank shall otherwise agree: (i) if any lien shall be created on any assets of the Borrower as security for any debt, such lien will equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan, and that in the creation of any such lien express provision will be made to that effect at no cost to the Bank; and (ii) if any statutory lien shall be created on any assets of the Borrower as security for any debt, the Bor- rover shall grant, at no cost to the Bank, an equivalent lien satisfactory to the Bank to secure the payment of the principal of, and interest and other charges on, the Loan; provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of bank- ing transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 4.04. Except as the Bank shall otherwise agree, the Borrower shall: (a) conduct its operations and affairs in such a manner as shall be necessary to maintain a ratio of at least 1.3 to 1 between (i) payments of loan principal, interest and other charges from its debtors (hereinafter called Loan Receipts) and (ii) payments of loan principal (excluding frozen deposits of T.C. Merkez Bankasi, if any), interest and other charges to its creditors (hereinafter called Debt Payments); - 15 - (b) promptly after the end of each fiscal year, calculate the ratio in paragraph (a) above on the basis of actual Loan Receipts and Debt Payments for each such fiscal year and project it for each of the two following fiscal years on the basis of scheduled Loan Receipts and Debt Payments for loans and debts outstanding as of the beginning of such following period of two fiscal years; and (c) whenever the ratio in paragraph (a) above shall fall below the limit referred to therein or whenever there is reason to believe that such ratio cannot be expected to be met over the following twelve months, promptly (i) consult with the Guarantor and the Bank on such action as shall be necessary or advisable to bring such ratio within the required limit by the end of the Borrower's current fiscal year, and (ii) implement such action. Section 4.05. The Borrower shall not make any repayment in advance of maturity in respect of any outstanding debt of the Borrower which, in the judgment of the Bank, would materially affect the Borrower's ability to meet its financial obligations. Section 4.06. The Borrower shall take such steps satisfactory to the Bank as shall be necessary to protect itself against risk of loss resulting from changes in the rates of exchange between the currencies (including liras) used in its operations. Section 4.07. The Borrower shall enable the Bank's represen- tatives to review the records referred to in Section 4.01 of this Agreement and any relevant documents. - 16 - Section 4.08. At the request of the Bank, the Borrower shall, without limitation or restriction to the generality of the pro- visions of Section 9.01 of the General Conditions, exchange views with the Bank on the appropriateness of annual rates of interest charged on Sub-loans. - 17 - ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the Gen- eral Conditions the following additional events are specified: (a) any part of the principal amount of any loan to the Borrower having an original maturity of one year or more shall, in accordance with its terms, have become due and payable in advance of maturity as provided in the relative contractual in- struments, or any security for any such loan shall have become enforceable; (b) a change shall have been made in the Statutes which will materially and adversely affect the financial condition or opera- tions of the Borrower; (c) a resolution shall have been passed for the dissolution or liquidation of the Borrower; and (d) a subsidiary or any other entity shall have been cre- ated or acquired or taken over by the Borrower, if such creation, acquisition or taking over would materially and adversely affect the conduct of the Borrower's business or the Borrower's finan- cial situation or the efficiency of the Borrower's management and personnel or the carrying out of the Project. - 18 - Section 5.02. For the purposes of Section 7.01 of the General Conditions the following additional events are specified: (a) the event specified in paragraph (a) or paragraph (b) or paragraph (c) or paragraph (d) of Section 5.01 shall occur; and (b) the event specified in paragraph (d) of Section 5.01 shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower. - 19 - ARTICLE VI Miscellaneous Section 6.01. The date of July 21, 1977, is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.02. 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: INTBAFRAD 440098 (ITT), Washington, D.C. 248423 (RCA) or 64145 (wUI) For the Borrower: Devlet Yatirim Bankasi Milli Mudafaa Caddesi No. 20 Ankara Turkey Cable address: YATIRIMBANK Ankara - 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 vritten. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Munir P. Benjenk Regional Vice President Europe, Middle East and North Africa DEVLET YATIRIM BANKASI By /s/ Asaf GrIven Authorized Representative - 21 - SCHEDULE 1 Amortization Schedule* Payment of Principal Date Payment Due (expressed in dollars)** November 1, 1980 1,350,000 May 1, 1981 1,405,000 November 1, 1981 1,465,000 May 1, 1982 1,525,000 November 1, 1982 1,590,000 May 1, 1983 1,66o,ooo November 1, 1983 1,730,000 May 1, 1984 1,805,000 November 1, 1984 1,880,000 May 1, 1985 1,960,000 November 1, 1985 2,045,000 May 1, 1986 2,130,000 November 1, 1986 2,220,000 May 1, 1987 2,315,000 November 1, 1987 2,415,000 May 1, 1988 2,515,000 November 1, 1988 2,625,000 May 1, 1989 2,735,000 November 1, 1989 2,850,000 May 1, 1990 2,970,000 November 1, 1990 3,100,000 May 1, 1991 3,230,000 November 1, 1991 3,370,000 May 1, 1992 3,510,000 November 1, 1992 3,660,000 May 1, 1993 3,815,000 November 1, 1993 3,980,000 May 1, 1994 4,145,000 * The Amortization Schedule is subject to amendment pursuant to the provisions of Section 2.08 of the Loan Agreement. ** To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Sec- tion 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. - 22 - 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 or to Section 2.09 (a) of the Loan Agreement: Time of Prepayment Premium Not more than three years before maturity 1.50% More than three years but not more than six years before maturity 3.00% More than six years but not more than eleven years before maturity 5.50% More than eleven years but not more than fifteen years before maturity 7.50% More than fifteen years before maturity 8.50% - 23 - SCHEDULE 2 Modifications of the General Conditions For the purposes of the Loan Agreement, the provisions of the General Conditions are modified as follows: (1) The following subparagraph (d) is added to Section 3.05: "(d) The Bank and the Borrower may from time to time agree upon arrangements for prepayment of the Loan and the application of such prepayment in addition to, or in sub- stitution for, those set forth in paragraph (b) of Section 3.05." (2) The words "Investment Projects" are substituted for the words "the Project" at the end of Section 5.03. (3) Section 6.03 is deleted and replaced by the following new Section: "Section 6.03 Cancellation by the Bank. If (a) the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of thirty days, or (b) by the date specified in paragraph (c) of Section 2.03 of the Loan Agreement no applications permitted under paragraph (a) of such Section shall have been received by the Bank in respect of any portion of the Loan, or having been so received, shall have been denied, or (c) after the -24 - Closing Date an amount of the Loan shall remain unwithdrawn from the Loan Account, or (d) the Bank shall have received notice from the Guarantor pursuant to Section 6.07 with respect to an amount of the Loan, the Bank may by notice to the Borrower terminate the right of the Borrower to submit such applications or to make withdrawals from the Loan Account, as the case may be, with respect to such amount or portion of the Loan. Upon the giving of such notice such amount or portion of the Loan shall be cancelled." - 25 - SCHEDULE 3 Lending Policies and Procedures for the Project Sub-loans to Investment Entities for Investment Projects shall conform to the following: A. Investment Projects will be for development proj- ects primarily in manufacturing or processing in- dustries and, to a limited extent, in non-fuel mining. B. Sub-loans for each Investment Project will normally: (i) be made directly to the Investment Entity; (ii) include a foreign currency cost component of up to $9 million equivalent; (iii) cover a foreign cur- rency cost component amounting to at least 10% of the total -osts; and (iv) be made for an Investment Project which is expected to yield reasonable economic and financial rates of return. C. For each Investment Project, the Borrower and the Investment Entity, at the time of making the Sub- loan, will, in a legally binding manner, agree: (i) on the entire amount of the financing for such Investment Project; and (ii) on the terms and con- ditions of such financing. - 26 - D. In the appraisal of each Investment Project and in the corresponding reports submitted to the Bank pursuant to Section 2.03 (a) of the Loan Agreement, the Borrower will: (a) analyse, in addition to the financial, manage- ment, marketing and technical aspects of the project, (1) the economic benefits of the project, (2) the ability of the Investment Entity (i) to manage the construction and operation of the Investment Project effectively and (ii) to provide the necessary internal financing for the carrying out of the Investment Project, and (3) where appropriate, the ecological aspects of the project; and (b) review the procurement procedures to be followed by the Investment Entity to ensure procurement of goods and services for the Investment Project in accordance with the provisions of Section 3.02 (a) (ii) of this Agreement. E. Unless otherwise agreed by the Bank, the proceeds of the Loan relent under Sub-loans will be repayable in the same currencies as the corresponding principal amount of the Loan, and will carry interest, payable in the same currencies as the principal, at an annual rate of not less than 12.5% of the principal amount outstanding. F. Each Investment Project will be subject to supervision by the Borrower until the date on which the Sub-loan agreement for the Sub-loan shall terminate.