Turkey - Second Fruit And Vegetable Project : Loan 1967 - Project Agreement - Conformed

LOAN NUMBER 1967 TU Project Agreement (Second Fruit and Vegetable Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and TURKIYE CUMHURIYETI ZIRAAT BANKASI Dated 4 , 1981 LOAN NUMBER 1967 TU PROJECT AGREEMENT AGREEMENT, dated * , 1981, between INTERNATIONAL BANK FOR RECONSTRUCTION DEVELOPMENT (hereinafter called the Bank) and TURKIYE CUMHURIYETI ZIRAAT BANKASI (hereinafter called TCZB). WHEREAS (A) by the Loan Agreement of even date herewith between Republic of Turkey (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to forty million dollars ($40,000,000), 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 to be entered into between the Borrower and TCZB, part of the 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 Preamble to this Agreement and the General Conditions (as so deiined) have the respective meanings therein set forth. ARTICLE II Execution of 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, engineering and agricultural practices, and shall provide, or cause to be provided, promptly as needed, -2- the funds, currently estimated at not less than $25,000,000 equivalent in addition to the amount of the Subsidiary Loan, facilities, services and other resources required for the purpose; and (ii) acquire, maintain and renew all rights, powers, privi- leges and franchises as shall be, from time to time, necessary or useful in the conduct of its business and the carrying out of the Project. (b) In the carrying out of Part A of the Project, TCZB undertakes that, unless the Bank, the Borrower and TCZB shall otherwise agree, it shall at all times follow lending and oper- ating procedures satisfactory to the Bank and including those set forth in the Schedule to this Agreement, as such Schedule may be modified from time to time by agreement among the Bank, the Borrower and TCZB. (c) TCZB shall enter into arrangements, satisfactory to the Bank, with the Borrower, Lhrough MEYSEB and TOPRAKSU, to define in detail the responsibilities, functions and administra- tive procedures of TCZB and MEYSEB and TOPRAKSU for the carrying out of Part A.1 and 2 of the Project. Section 2.02. TCZB shall review with the Borrower and the Bank, in accordance with the provisions of Section 4.04 of the Loan Agreement, the interest rates to be applied by TCZB to its lending operations. Section 2.03. Except as the Bank shall otherwise agree, TCZB shall ensure that Sub-loans will be used exclusively in carrying out the Farm Development or Financing Plans for which such Sub-loans were made. Section 2.04. Except as the Bank shall otherwise agree, TCZB shall cause all goods and services financed out of the proceeds of any Sub-loan to be used exclusively in carrying out the Farm Development or 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. -3- Section 2.06. (a) TCZB: (i) shall, in cooperation with the Borrower, maintain, in a manner satisfactory to the Bank, 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 their use 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 reason- ably 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 services financed out of such proceeds. (b) TCZB shall take all action required on its part, in connection with Part A of the Project, in order to ensure the timely preparation and furnishing to the Bank of the Project completion report referred to in Section 3.11 (e) of the Loan Agreement. 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. Section 2.08. (a) TCZB shall, at the request of the Bank, exchange views with the Bank with regard to the 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 at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with appropriate financial and agricultural 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, in a manner satisfactory to the Bank, 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 Beneficiary 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 are requested from the Loan Account on the basis of certificates of expenditure, and enable the Bank's accredited representatives 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 t) in paragraph (c) hereof - 5 - 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 been 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 on behalf of the Borrower out of the amount of interest due to the Borrower on account of the Subsidiary Loan into the Special Operational Fund an annual amount equivalent to 1% of the total outstanding amount of Sub- loans under Part A.1 and 2 of the Project. Amounts so deposited shall be utilized by MEYSEB for financing expenditures on account of technical services to farmers under the Project. Section 4.03. TCZB shall deposit in a revolving fund all amounts received by TCZB on account of repayment of Sub-loans under Part A of the Project, except for amounts required by TCZB for the purpose of servicing the Subsidiary Loan, and shall use the amounts so deposited for the provision of Sub-loans under said Part A of the Project. 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. 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. - 6 - 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 Cable address: Telex: ZERBANK 42 333 ZBA TR Ankara -7- 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 counterparts, each of which shall be an original, and all col- lectively 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 B // fRegional Vice President Europe, Middle East and North Africa TURRIYE CUMHURIYETI ZIRAAT BANKASI By /T VA I/ C/ 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 and only following the procedures and approvals stipulated below. 1.2 Sub-loan applications will be submitted to the nearest branch of TCZB or MEYSEB, after which an initial credit evaluation of the applicant will be made by TCZB. 1.3 With respect to applications for Sub-loans under Part A.1 and 2 of the Project, If the applicant's creditworthiness is found to be satisfactory by TCZB, the local technician of MEYSEB or the designated technician of GDAA will prepare a Farm Development Plan with the applicant, which plan will include detailed technical and financial projections and the proposed amount of a Sub-loan. The Farm Development Plan will be prepared in such format and include such information as may be required by TCZB. 1.4 A Sub-loan application with respect to Part A.3 of the Project shall inter alia include a Financing Plan demonstrating in detail the working capital requirements, cumulative monthly debt projections, utilization of funds and a draft schedule for repay- ment. 1.5 TCZB shall provide the Bank for its approval with the first Financing Plan approved by TCZB and proposed for its financing under Part A.3 of the Project. 1.6 Copies of the approved Farm Development Plan as approved by MEYSEB, will be submitted to the local TCZB branch. 1.7 Final approval of Sub-loans will be in accordance with the normal procedures of TCZB, and will be based on the creditworthi- ness of the applicant and the probability of success of the Farm Development Plan or Financing Plan. -9- Eligibility Criteria and Sub-Loans Procedures 2.1 In order to qualify for the granting of a Sub-loan under Part A.1 and 2 of the Project, each applicant will: (a) have proven competence in general farming practice; (b) have use of properly irrigated, leveled and drained land, with soil suitable for orchard and vineyard development; (c) meet all creditworthiness criteria as will be reasonably established from time to time by TCZB; and (d) be known to staff of TCZB, MEYSEB or TZ of GDAA as bona fide farmers of good character and of recognized farming competence. 2.2 TCZB will accept security in accordance with the Agricultural Credit Guidelines. Except as the Bank may otherwise agree, TCZB shall not change, amend or waive such Guidelines with respect to the provision and administration of Sub-loans under the Project. 2.3 TCZB will not make a Sub-loan under Part A.1 and 2 to any single Beneficiary for development of nurseries or establishment of greenhouses over an area exceeding half a hectare unless the Bank has approved the provision of such Sub-loan after review of the application and evaluation relating thereto. Terms and Conditions to be included in Sub-loan Contracts 3.1 Sub-loan contracts will include, inter alia, the following terms and conditions: (a) Sub-loans will be made and be repayable in liras; (b) Except as the Borrower, the Bank and TCZB may otherwise agree and without restriction on the provisions of Section 4.04 of the Loan Agreement, TCZB will charge Beneficiaries, in addition to applicable taxes and charges, interest on the principal amount of Sub-loans withdrawn and outstanding at the annual rate of not less than 22% for short-term Sub-loans under Part A.2 of the Project, not less than 31% for short-term Sub-loans under Part A.3 of the Project and not less than 24% for medium- and long-term Sub-loans under Part A.1 of the Project. - 10 - (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 six and twelve years, including one to five years of grace for Sub-loans under Part A.1 of the Project and not more than one year for Sub-loans under Part A.2 and 3 of the Project. (d) the amount of an individual Sub-loan will not exceed the equivalent of approximately the percentage of the estimated total cost of the Farm Development Plan as set forth in the Agricultural Credit Guidelines, provided, however, that except as the Bank may otherwise agree, TCZB shall not change, amend or waive such Guidelines relative to the limits of individual Sub- loans under the Project; (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; (h) 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) TCZB shall require the Beneficiary to procure the goods to be financed from the proceeds of Sub-loans in accordance with the following procedures: (1) greenhouses and ancillary equipment under Part A.1 of the Project shall be procured pursuant to standard design and specifications satisfactory to the Bank through international shopping on the basis of at least three price quotations obtained from suppliers from member countries of the Bank (and Switzerland); and - 11 - (2) vehicles under Part A.1 of the Project, materials and equipment and civil works under Part A.1 and 2 and materials under Part A.3 shall be procured through normal commercial channels. (j) the Beneficiary will carry out his Farm Development 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 the right of the Beneficiary to disburse the proceeds of the Sub-loan or, in appropriate cases, to declare the amount disbursed due and payable, upon failure by him to perform his obligations under the Sub-loan contract. Disbursements and Records 4.1 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 informa- tion to be supported with copies of the receipts for such goods and services in the amounts so charged. 4.2 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 5.1 TCZB will ensure that amounts drawn on Sub-loan accounts are applied exclusively to expenditures on the Farm Development Plan or the Financing Plan for the carrying out of which such Sub-loan was granted. 5.2 The staff of MEYSEB and TCZB will regularly visit the farm and agro-industry Sites where Farm Development or 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. 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 4 day of 198 . FOR SECRETARY