Turkey - Fifth Livestock Development Project : Loan 1862 - Project Agreement - Conformed

LOAN NUMBER TU Project Agreement (Fifth Livestock Developmant Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and TURKIYE CUMHURIYETI ZIRAAT BANKASI Dated , 1980 LOAN NUMBER 1/2-TU PROJECT AGREEMENT AGREEMENT, dated -SuneC, 1980, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and TURKIYE CUMHURIYETI ZIRAAT BANKASI (hereinafter called TCZB). WHEREAS (A) by the Loan Agreement of even date herewith between the Republic of Turkey (hereinafter called the Borrower or Turkey) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to fifty-one million dollars ($51,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that TCZB agree to undertake such obligations toward the Bank as are hereinafter set forth; (B) by a subsidiary loan agreement between the Borrower and TCZB, part of the aggregate proceeds of the loan provided for under the Loan Agreement will be made available to TCZB on the terms and conditions therein set forth; and WHEREAS TCZB, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, the General Conditions (as so defined) and in the Preamble hereof have the respective meanings therein set forth. ARTICLE II Execution uf the Project Section 2.01. (a) TCZB shall: (i) carry out Part A of the Project described in Schedule 2 to the Loan Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, economic and agricultural practices and in accordance with the provisions set out in such Schedule, - 2 - and provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose; and (ii) acquire, maintain and renew all rights, powers, privileges and franchises as shall be, from time to time, neces- sary or useful in the conduct of its business in the carrying out of Part A of the Project; it is further specified that the funds to be made available by TCZB from its own resources for the purpose of Part A of the Project shall not be less than $22,600,000 equivalent in the aggregate. (b) In carrying out Part A of the Project, TCZB undertakes that it shall at all times follow lending and operating policies and procedures satisfactory to the Bank including those set forth in the Schedule to this Agreement, as such Schedule may be modified from time to time by agreement among the Borrower, the Bank and TCZB. (c) TCZB undertakes that it shall not finance any invest- ments in farm development proposed by an investor eligible for a Sub-loan, on terms more favorable than the terms and conditions applicable to Sub-loans. (d) TCZB shall enter into arrangements, satisfactory to the Bank, with the Borrower, through LDP, to define in detail the responsibilities, functions and administrative procedures of TCZB and LDP for the carrying out of Part A of the Project. Section 2.02. At such time as the Borrower, the Bank and TCZB may request, in any event at intervals not exceeding 2 years after effectiveness of this Agreement, the appropriateness of interest rates and other applicable Sub-loan terms and conditions will be reviewed by TCZB with the Borrower and the Bank in the light of the conditions prevailing at the time of such review and any resulting changes shall be made applicable to Sub-loan contracts entered into thereafter. Section 2.03. Except as the Bank shall otherwise agree, contracts 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 the Loan Agreement. Section 2.04. Except as the Bank shall otherwise agree, TCZB shall cause all goods and services financed out of the proceeds - 3 - of any Sub-loan to be used exclusively in carrying out the Farm Development Plan and Financing Plan for which such Sub-loan was made. Section 2.05. TCZB undertakes to insure or cause to be insured the imported goods to be financed out of the proceeds of any Sub-loan against marine, transit and other hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation. Section 2.06. (a) TCZB: (i) shall, in cooperation with the Borrower, maintain records and procedures adequate to record and monitor the progress of Part A of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan relent to it by the Borrower and to disclose thereof in Part A of the Project; (ii) shall enable the Bank's accredited representatives to visit the facilities and construction sites included in Part A of the Project and to see the goods financed out of the proceeds of the Loan relent to it by the Borrower and any relevant records and documents; and (iii) shall, in cooperation with the Borrower, furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning Part A of the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan relent to it by the Borrower and the goods and sei ices financed out of such proceeds. (b) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between TCZB and the Bank, TCZB shall, in cooperation with the Borrower, prepare and furnish to the Bank a completion report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of Part A of the Project, its cost and the benefits derived and to be derived from it, the performance by TCZB and the Bank of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Loan. Section 2.07. TCZB shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, TCZB shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. -4- Section 2.08. (a) TCZB shall, at the request of the Bank, exchange views with the Bank with regard to tne progress of Part A of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) TCZB shall promptly inform the Bank of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by TCZB of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of TCZB Section 3.01. TCZB shall, with respect to Part A of the Project, at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with appropriate business, financial and agri- cultural practices and under the supervision of qualified and experienced management assisted by qualified and experienced staff in adequate numbers. ARTICLE IV Financial Covenants Section 4.01. TCZB shall through EDLD: (a) establish and maintain separate accounts on its records to be used exclusively for Part A of the Project; (b) register in such accounts all its receipts and payments for or in connection with its lending operations under Part A of the Project, in accordance with appropriate accounting princi- ples consistently applied, including the following: (i) amounts received from and payments made to the Borrower under the Subsid- iary Loan; (ii) amounts disbursed to and received from each farmer under a Sub-loan; and (iii) amounts provided by the Borrower or TCZB from their own resources to finance Sub-loans; (c) retain, until one year after the Closing Date, all records (orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals - 5 - are requested from the Loan Account on the basis of certificates of expenditure, and shall enable the Bank's accredited representa- tives to see such records; (d) submit to the Bank, on a semestral basis, a summary of such accounts, such summary to be submitted to the Bank within a two-month period after the end of the semester concerned; and (e) (i) have the accounts referred to in paragraph (a) hereof and related statements and its records supporting cer- tificates of expenditures referred to in Section 4.01 (c) hereof for each fiscal year audited, in accordance 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 TCZB's fiscal year, (A) certified copies of such related 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 including a separate opinion by said auditors in respect of such certificates of expenditure showing whether the proceeds of the Loan withdrawn from the Loan Account on the basis of certificates of expenditure have be;n used for the purpose for which they were provided; and (iii) furnish to the Bank such other informa- tion concerning such accounts and related statements of TCZB and the audit thereof as the Bank shall from time to time reasonably request. Section 4.02. TCZB shall deposit in a Special Operational Fund, on the Borrower's behalf and out of the interest payments to the Borrower on the proceeds of the Loan relent under Part A of the Project to TCZB and on-lent by TCZB to Beneficiaries, an amount calculated on the basis of a rate of interest of one half of one percent (1/2 of 1%) per annum on the total outstanding amount of TCZB Sub-loans. Deposits in the Special Operational Fund shall be made semi-annually on February 1 and August I in each year. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effec- tive. - 6 - Section 5.02. This Agreement and all obligations of the Bank and of TCZB thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions or the Loan Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address herein- after specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: 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 TCZB: T. C. Ziraat Bankasi Genel Mudurlugu Bankalar Caddesi Ankara, Turkey -7- Cable address: Telex: ZERBANK 42 333 ZBA TR Ankara Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of TCZB or by TCZB on behalf of the Borrower under Section 2.09 of the Loan Agreement, may be taken or executed by the Director General or such other person or persons as he shall designate in writing. Section 6.03. TCZB shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of TCZB, take any action or execute any documents required or permitted to be taken or executed by TCZB pursuant to any of the provisions of this Agreement or Section 2.09 of the Loan Agreement. Section 6.04. This Agreement may be executed in several coun- terparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement 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///\ Regional Vice President Europe, Middle East and North Africa TURKIYE CUMHURIYETI ZIRAAT BANKASI By ASu toizer P re na Authorized Representative - 8- SCHEDULE Lending and Operating Policies and Procedures for Part A of the Project Request for and Approvals of Sub-loans 1.1 TCZB will make Sub-loans only to Beneficiaries meeting the eligibility tests specified hereunder in the Project area and only following the procedures and approvals stipulated below. 1.2 Sub-loan applications will be submitted to the nearest branch of either TCZB or LDP, after which an initial credit evaluation of the applicant will be made by TCZB. 1.3 If the applicant's creditworthiness is found to be satisfac- tory by TCZB, the local technician of LDP in case of applicants under Part A.1 of the Project, and the staff of CTSS in case of applicants under Part A.2 of the Project will prepare a Farm Development Plan or Financing Plan with the applicant, which plan will include detailed technical and financial projections and the amount of the proposed Sub-loan, and will form the basis for any Sub-loan by TCZB financed out of the proceeds of the Loan. The Farm Development Plan will be prepared in such format and include such information as may be required by LPD's Project Manager. 1.4 Copies of the Farm Development Plan as approved by the local technician of LPD or CTSS, as appropriate, will be submitted to the local TCZB branch and to LDP's Project Manager. 1.5 Except as the Bank shall otherwise agree, each Farm Develop- ment Plan and Financing Plan will, in order to qualify for a Sub-loan, have endorsed thereon the recommendation for approval of the local technician who has prepared the plan, and of the Project Manager, or his authorized representative. Final approval of Sub-loans will be in accordance with normal procedures of TCZB. 1.6 The approval or rejection of a Sub-loan by TCZB will be based solely on the creditworthiness of the applicant. Eligibility of Beneficiaries/Procedures 2.1 In order to qualify for the granting of a Sub-loan under Part A.1 of the Project, each applicant will: -9- (a) own livestock and have previous experience in livestock production; (b) have use of adequate tillable land suitable to produce the incremental feedingstuffs necessary to implement the Farm Development Plans; (c) meet all creditworthiness criteria as will be reasonably established from time to time by TCZB; and (d) for Small farmers only, have to be known to LDP staff as bona fide farmeii of good character and of recognized farming competence. 2.2 In order to qualify for the approval of a Sub-loan under Part A.2 of the Project, the first 20 individual applicants in any one region will meet all creditworthiness criteria as will be reasonably established from time to time by TCZB. TCZB can disburse up to two-thirds of the Sub-loan approved for each individual applicant, with the remaining one-third to be disbursed after the individual has demonstrated to TCZB evidence of his membership in a Farmer Association, established under the Project to implement and operate a regional processing center. 2.3 Additional individual applicants in any one region above and beyond the initial 20 individual applicants referred to in paragraph 2.2 above, will meet all creditworthiness criteria as will be reasonably established from time to time by TCZB and, prior to the approval of their individual applications by TCZB, will demonstrate to TCZB evidence of membership in a Farmer Association established under the Project to implement and operate a regional processing center, it being understood that these individual applicants will be eligible for full disbursement of their individual Sub-loans in accordance with TCZB's regulations. 2.4 In order to qualify for the approval of a Sub-loan under Part A.2 of the Project for the financing of a regional process- ing center, Farmer Association applicants will demonstrate to TCZB that a legal association has been formed, the membership of which consists of at least 20 individuals who have submitted applica- tions under Part A.2 and who satIsfy the eligibility criteria established under paragraph 2.2 of this schedule. 2.5 It is intended that ownership and management of the paren' and grandparent stock farms and the premix feed plant under - 10 - Part A.2 of the Project will ultimately be vested in the regional processing centers to be established under Part A.2. It is under- stood, however, that TCZB may approve, in consultation with LDP and the Bank, Financing Plans submitted by other parties for these facilities. In such circumstances, it will be a condition of eligibility for a Sub-loan that the other parties agree that the assets created and obligations assumed by such other parties will be transferred to the Farmer Associations at the appraised market value at the time of transfer and as soon as the financial via- bility of the regional processing centers is demonstrated to the satisfaction of TCZB, LDP and the Bank. 2.6 -TCZB will accept security in accordance with the Agricultural Credit Guidelines, provided, however, that TCZB shall not change, amend or waive such Guidelines with respect to security provisions related to Sub-loans under the Project without the Bank's prior approval. 3.1 (a) Except as the Bank shall otherwise agree, under Part A.1 of the Project TCZB will not make to any single Beneficiary any Sub-loan which by itself, or aggregated with any other Sub-loan to any such Beneficiary, exceeds the equivalent of $140,000. (b) Except as the Bank shall otherwise agree, under Part A.2 of the Project TCZB will not make any Sub-loan exceeding the equivalent of $225,000. 3.2 TCZB will not make Sub-loans under Part A.1 of the Project to cover incremental costs of labor, forage cropping and purchase of concentrates and other supplementary feeds unless specifically recommended in writing by the local technician who prepared the Farm Development Plan and with the written approval of LPD's Project Manager. In special cases where financing of purchase of concentrates and other supplementary feeds has been recommended as provided above, the amount allocated for such financing will not exceed the cost incurred for concentrates and feeds during the first year of the Farm Development Plan. Terms and Conditions to be included in Sub-loan Contracts 4.1 Sub-loan contracts will include, inter alia, the following terms and conditions: (a) Sub-loans will be made and be repayable in liras; - 11 - (b) interest on the outstanding principal of each Sub-loar will be payable at rates not less than those specified in the Annex to this Schedule but exclusive of any other charges, or at such other rates as shall be agreed among the Borrower, the Bank and TCZB; (c) the repayment periods and repayment schedules will reflect the capacity of the Beneficiary to repay and the cash flow position described in the Farm Development Plan and will be between ten and twelve years, including two to four years of grace; (d) the amount of an individual Sub-loan will not exceed the equivalent of approximately the percentage of Lhe estimated total cost of the Farm Development or Financing Plans as set forth in the Agricultural Credit. Guidelines, provided, however, that TCZB shall not change, amend or waive such Guidelines relative to the limits of individual Sub-Loans under the Project without the Bank's prior consent. (e) the goods and services financed out of the proceeds of the Sub-loan will be used exclusively for the purposes approved by TCZB; (f) the Bank and TCZB will have the right to see the prem- ises, the improvement of which is financed by the Sub-loan, any equipment, materials or inputs financed by the Sub-loan, the business of the Beneficiary, the operation thereof, and any relevant records and documents; (g) the Bank and TCZB will have the right to obtain all such information as they may reasonably request relating to the foregoing and to the operations and financial condition of the Beneficiary; Ch) TCZB will have the right to deny the use of the proceeds of the Sub-loan for goods produced in, or services supplied from, any country which is not a member of the Bank (other than Switzer- land); (i) the goods to be financed out of the proceeds of the Sub- loan will be procured in accordance with the provisions of Sched- ule 4 to the Loan Agreement; - 12 - (j) the Beneficiary will carry out his Farm Development or Financing Plan, as approved, and will carry on his business, with due diligence and efficiency and in accordance with appropriate technical, agricultural, commercial and financial practices and standards, and will maintain adequate records; and (k) TCZB will have the right to suspend or terminate access by the Beneficiary to the use of the proceeds of the Sub-loan upon failure by him to perform his obligations under the Sub-loan contract and, in appropriate cases, to premature the Sub-loan. Disbursements and Records 5.1 TCZB will promptly inform the Beneficiaries of the amounts charged to their respective Sub-loan accounts on account of goods and services procured and financed under Sub-loans, such informi- tion to be supported with copies of the receipts for such goods and services in the amounts so charged. 5.2 TCZB will furnish semiannual statements to each Beneficiary showing the amounts drawn on the Beneficiary's Sub-loan account, including interest, payments made and the outstanding balance of the respective Sub-loan. Supervision 6.1 TCZB will ensure that amounts drawn on Sub-loan accounts are applied exclusively to expenditures on the Farm Develop- ment Plan for which such Sub-loan was granted. 6.2 The staff of LDP, CTSS and TCZB will regularly visit the farms and poultry units where Farm Development and Financing Plans financed with Sub-loans are being carried out, to ensure that Beneficiaries are effectively and punctually carrying out such plans and complying with the provisions of their respective Sub-loan contracts with TCZB. -13 - ANNEX TURKEY Interest Rates Applicable to Sub-loans Under Part A of the Project Interest Rate per Annum (%) Coopera- tives, Associa- tions, I. Agricultural Purposes: Individuals Groups Corporations (a) Sub-loans under 18.0 18.0 18.0 + tax* = 22.5 Part A.1 (b) Sub-loans under Part A.2 - village broiler 18.0 18.0 houses - parent stock 18.0 18.0 18.0 + tax* = 22.5 farms - grandparent stock farms 18.0 18.0 18.0 + tax* = 22.5 II. Agroindustrial Purposes: Sub-loans under Part A.2 - regionol processing 22.0 + 22.0 + tax* = 27.5 center tax 27.5 - premix feed plant 22.0 + 22.0 + tax* = 27.5 tax 27.5 * Transactions tax on interest. 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 fL day of 4 , 198 . FOR SECRETARY