Turkey - Second Agricultural Credit Project : Loan 2318 - Loan Agreement - Conformed

0OFF1ICIA L ILOAN NUMBER 2318 TU Loan Agreement (Second Agricultural Credit Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and TURKIYE CUMHURIYETI ZIRAAT BANKASI Dated , 1983 LOAN NUMBER 2318 TU LOAN AGREEMENT AGREEMENT, dated , 1983, between INTERNAT:ONAL BANK FOR RECONS UCTION AND DEVELOPMENT (herein- after called the Bank) and TURKIYE CUMHURIYETI ZIRAAT BANKASI (hereinafter called the Borrower). 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 Guarantee Agreements of the Bank, dated October 27, 1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agree-, ments of the Bank being hereinafter called the General Coni- tions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "MAF" means the Ministry of Agriculture and Forestry of the Guarantor; (b) "sub-loan" means a loan made or proposed to be made by the Borrower from the proceeds of the Loan and from its own funds in accordance with the procedures described in Annex 2 to Sched- ule 2 to this Agreement; (c) "Beneficiary" means the recipient of a sub-loan; (d) "liras" means the currency of the Guarantor; (e) "Credit Guidelines" means the administrative directive of the Borrower set forth in the Annex to Circular No. 4770 dated September 24, 1979, as such directive may be amended, and the "Rules and Regulations of the Borrower on Agricultural Credits", promulgated in the Official Gazette No. 16674, dated June 22, 1979; (f) "Farm Development Plan" means the farm development plan, in a form satisfactory to the Bank, to be prepared by a -2- Beneficiary applying for a medium-term sub-loan pursuant to the procedures described in Annex 2 to Schedule 2 to this Agreement; (g) "Production Plan" means the production plan, in a form satisfactory to the Bank, to be prepared by a Beneficiary apply- ing for a short-term sub-loan pursuant to the procedures described in Annex 2 to Schedule 2 to this Agreement; (h) "GDAA" means the General Directorate of Agricultural Affairs of MAF; (i) "Subsidiary Agreement" means the agreement to be entered into between the Borrower and the Guarantor pursuant to Section 3.02 (a) of this Agreement; and (j) "Loan Number 1130" means the loan provided by the Bank to the Guarantor under the Loan Agreement for the Corum-Cankiri Rural Development Project, dated June 23, 1975. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Loan Agreement, an amount in various currencies equivalent to one hundred fifty million four hundred thousand dollars ($150,400,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the prowisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expenditures made (or, if the Bank shall so agree, to be made) in respect 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, procurement of the goods required under Part B (3) of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1987 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. -.3 - Section 2.05. (a) The Borrower shall pay to the Bank a fee equivalent to three hundred seventy-five thousand sixty-two dollars ($375,062). (b) On or promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount of the said fee in such currency or currencies as the Bank shall determine. Section 2.06. The Borrower 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. Section 2.07. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one half per cent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower and the Guarantor of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period com- mencing on each date specified in Section 2.08 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost" of Qualified Borrowings means the cost, expressed as a percentage per annum, as reaionably determined by the Bank, provided that the amount of $8,520.5 million referred to in (iii) (B) hereunder shall be reckoned at a cost of 10.93% per annum. (iii) "Qualified Borrowings" means: (A) outstanding bor- rowings of the Bank drawn down after June 30, 1982; and (B) until July 1, 1985, the amount of $8,520.5 million (representing borrowings of the Bank between July 1, 1981 and June 30, 1982) less any part thereof repaid earlier than July 1, 1985. -J (iv) "Semester" means the first six months or the second six months of a calendar year. Section 2.08. Interest and other charges shall be payable semiannually on June 1 and December 1 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out the Project with due diligence and efficiency and in conformity with appro- priate administrative, financial and agricultural practices and shall provide, promptly as needed, the funds, facilities, ser- vices and other resources required for the purpose. (b) Except as the Bank and the Borrower may otherwise agree, the Borrower shall follow in the carrying out of Part A of the Project, lending policies and procedures satisfactory to the Bank, including those stated in Annex 2 to Schedule 2 to this Agreement. (c) The Borrower shall conclude a protocol with MAF, on terms and conditions satisfactory to the Bank, setting forth their respective responsibilities and administrative procedures under Part A of the Project and providing for the coordination thereof. Section 3.02. (a) The Borrower shall enter into a subsidiary agreement with the Guarantor which shall include provisions whereby: (i) the Guarantor will bear all losses and receive all gains due to the fluctuations in value in lira of the amounts of the Loan withdrawn from Category 1 (for Part A of the Project) and repaid by the Borrower in accordance with this Agreement, and (ii) the Borrower will pay to the Guarantor, from time to time, not more than the amount by which the interest payable on sub-loans under Part A of the Project exceeds the amount which would have been payable had such interest been charged at a rate three and one half percent above the interest rate payable on the loan under Section 2.07 (a) of this Agreement. -5- (b) The Borrower shall exercise its rights under the Sub- sidiary Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, a-.- except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Agree- ment or any provision thereof. Section 3.03. (a) The Borrower shall ensure that the branches of the Borrower responsible for the approval and super- vision of sub-loans under Part A of the Project will be staffed, at all times during the implementation of said Part of the Project, with qualified staff in adequate numbers. (b) The Borrower shall furnish to the Bank, not later than March 31 of each year, its annue . lending program for that year showing, inter alia, the alloca-on of funds for Part A of the Project. Section 3.04. The Borrower shall: (a) implement the action plan referred to in Part B (1) of the Project in accordance with a time schedule satisfactory to the Bank; (b) prepare and provide to the Bank for its comments, beginning October 15, 1983, and on each April 15 and October 15 thereafter, semiannual reports on the progress achieved in such implementation; and (c) take all action required, on the basis of such reports and the Bank's comments thereon, to improve such implementation. Section 3.05. In order to facilitate appropriate disposition of the crops to be produced in the areas of implementing Part A (2) and (3) of the Project, the Borrower shall make available to qualified borrowers in such areas adequate credit facilities for financing the purchase of harvesting, drying and processing equipment. Section 3.06. (a) The Borrower shall carry out the studies provided under Part B.1 (a) and (b) under terms of reference satisfactory to the Bank and shall employ, not later than June 30, 1984 or such other date as may be agreed with the Bank, consultants to assist in carrying out such studies; and (b) such consultants, and any other consultants as may be agreed between the Borr-wer and the Bank to be financed under the Loan to assist the Borrower in carrying out Part B of the Project, shall have qualifications, experience and terms and conditions of employment satisfactory to the Bank and shall be -6- selected in accordance with principles and procedures satisfac- tory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Section 3.07. The Borrower undertakes to insure, or make adequate provision for the insurance of, the importcd goods to be financed out of the proceeds of the Loan under Part B (3) of the Project against hazards incident to the acquisition, transporta- tion and aelivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a cur- rency freely usable by the Borrower to replace or repair such goods. Section 3.08. The Borrower shall: (a) monitor the progress in implementing Part A (1) and (4) of the Project in accordance with indicators satisfactory to the Bank; (b) assist GDAA in monitoring the progress in implementing Part A (2), (3), and (5) of the Project; (c) prepare, in cooperation with GDAA, semiannual reports on the findings of such monitoring and furnish each such report to the Bank within two months from the end of the period covered by it; and (d) prepare, in cooperation with GDAA and on the basis of methodologies satisfactory to the Bank, annual evaluation reports for Part A of the Project and furnish each such report to the Bank within two months from the end of the period covered by it. Section 3.09. (a) Upon the award by the Borrower of any contract for goods or services to be financed out of the proceeds of the Loan under Part B (3) of the Project, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (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 the Borrower and the Bank, the Borrower shall prepare, in cooperation with MAF, and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Bank of their respective obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. - 7 - Section 3.10. The Borrower shall carry out the training provided for under Part B (2) of the Project in accordance with arrangements satisfactory to the Bank. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall m-intain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition, including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure. (b) The Borrower shall retain, until one year after the Closing Date, all records (contracts, 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 statements of expenditure, and shall enable the Bank's representatives to examine such records. Section 4.02. The Borrower shall: (a) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (b) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year: (i) certified copies of its financial statements for such year as so audited; (ii) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested, including, without limitation to the foregoing, separate opinions by said auditors in respect of the expenditures and records referred to in Section 4.01 (b) of this Agreement, as to whether the proceeds of the Loan withdrawn from the Loan Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and (c) furnish to the Bank such other information concerning said accounts, financial statements, records and expenditures, as -8- well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.03. The Borrower shall deposit in a revolving fund 50% of all amounts received by the Borrower on account of repay- ment of sub-loans under Part A of the Project, except for amounts required by the Borrower for servicing the Loan, and shall use the amounts so deposited for the provision of sub-loans for purposes of Part A of the Project. Section 4.04. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt. (b) The Borrower undertakes that, except as the Bank shall otherwise agree: (i) if the Borrower shall create any lien on any of its assets 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 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 Borrower shall grant, at no cost to the Bank, an equivalent lien satisfac- tory 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 as security for the payment of debt incurred for the purpose of financing the purchase of suL, roperty; or (B) any lien arising in the ordinary course of banking transac- tions and securing a debt maturing not more than one year after the date on which it is originally incurred. ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) any legal provision governing or applicable to the organization or operation of the Borrower shall have been amended, suspended or abrogated so as to materially and adversely - 9 - affect the ability of the Borrower to perform any of its obligations under this Agreement; and (b) the Credit Guidelines shall have been, without the prior consen+ of the Bank, amended, suspended or abrogated so as to materiall ind adversely affect the ability of the Borrower to perform its obligations under this Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof, namely, that any of the events specified in Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Condi- tions: (a) the protocol referred to in Section 3.01 (c) of this Agreement has been executed on behalf of the Borrower and MAF; and (b) the Subsidiary Agreement has been executed on behalf of the Borrower and the Guarantor. Section 6.02. The following is specified as an additional matter, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank, namely, that the Subsidiary Agreement has been duly authorized or ratified by the Borrower and the Guarantor and is legally binding upon the Borrower and the Guarantor in accordance with its terms. Section 6.03. The date , is hereby specified for the purpose of USection 12.04 of the General Conditions. - 10 - ARTICLE VII Addresses Section 7.01. 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: INTBAFRAD 440098 (ITT), Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Borrower: T.C. Ziraat Bankasi Genel Mudurlugu Bankalar Caddesi Ankara, Turkey Cable address: Telex: ZERBANK 42 703 ZBA TR Ankara 43 249 ZBA TR - 11 - 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 Colu,bia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Re lonal Vice President Europe, Mi dle East and North Africa TURKIYE CUMHURIYETI ZIRAAT BANKASI Authoriz d Representative - 12 - 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 expenditures 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) Sub-loans under Part A of the Project (a) Medium-term 50% of amounts sub-loans disbursed (i) Under 60,424,938 Part A (1) (ii) Under 10,000,000 Part A (3) (b) Short-term sub-loans (i) Part A (1) 17,000,000 ) 50% of amounts ) disbursed until (ii) Part A (2) 24,000,000 ) December 31, ) 1983 and 50% of (iii) Part A (3) 16,500,000 ) the incremental ) amounts dis- (iv) Part A (4) 4,600,000 ) bursed sub- sequently - 13 - Amount of the Loan Allocated % of (Expressed in Expenditures Ca'.!gory Dollar Equivalent to be Financed (v) Part A (5) 12,000,000 50% of the incremental amount dis- bursed (2) Equipment under 4,700,000 100% of foreign Part B (3) of expenditures, the Project 100% of local expenditures (ex-factory cost), and 60% of local ex- penditures for other items procured locally (3) Consultants 400,000 100% under Part B (1) of the Project (4) Training under 400,000 100% of foreign Part B (2) of expenditures the Project (5) Fee 375,062 Amount due under Section 2.05 of this Agreement TOTAL 150,400,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Guarantor for goods and services supplied from the territory of any country other than that of the Guarantor; - 14 - (b) the term "local expenditures" means expenditures in the currency of the Guarantor or for goods and services supplied from the territory of the Guarantor; and (c) the term "incremental amounts disbursed" means the excess of the amount disbursed by the Borrower in any calendar year over the maximum amount disbursed for the same purposes in any prior calendar year and claimed for withdrawal from the proceeds of the Loan or from Loan Number 1130. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Guarantor on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of expenditures made prior to the date of this Agreement. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Cate- gory, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disburse- ment percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the pro- curement of any item under Category (2) is inconsistent with the procedures set forth or referred to in this Agreement, no expen- ditures for such item shall be financed out of the proceeds - 15 - of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 16 - SCHEDULE 2 Description of the Project The main objectives of the Project are to increase agricul- tural productivity through the financing of productive invest- ments at the farm level and to improve the capabilities of the principal agricultural credit institution in Turkey. The Project consists of: Part A: Agricultural Credit 1. On-Farm Development: Provision to farmers, in the provinces shown in Annex 1 to this Schedule, of (a) about 6,500 medium-term sub-loans for financing investments in farm mechanization, cattle and sheep fattening, orchard establishment, broiler and egg pro- duction and (b) about 70,000 short-term sub-loans for financing the purchase of seeds, fertilizers, animal feed and other sea- sonal expenditures relating to crop and livestock production. 2. Second Crop Scheme: Provision to farmers in the provinces shown in Annex 1 to this Schedule participating in the Second Crop Scheme provided for under the Guarantor's Decree No. B/4535, dated May 2, 1982, of about 60,000 short-term sub-loans for financing the purchase of seeds, fertilizers and other seasonal expenditures related to participation in said Scheme. 3. Fallow Reduction Scheme: Provision to farmers participating in the Fallow Reduction Scheme in the provinces shown in Annex 1 to this Schedule of about 50,000 short-term sub-loans for financ- ing the purchase of seeds, fertilizers and other seasonal expen- ditures relating to crops under the Scheme. 4. IAEE Irrigation Project: Provision to about 25,000 farmers whose farms benefit from the Guarantor's improved irrigation programs in the vicinities of the towns of Igdu, Aksu, Eregli, and Ercis of: (a) medium-term sub-loans for financing the pur- chase of farm machinery, establishment of orchards and construc- tion of greenhouses, and (b) short-term sub-loans for financing the purchase of farm inputs and other seasonal expenditures relating to crop production. 5. Corum-Cankiri Project: Provision to farmers in the areas of Corum and Cankiri Provinces in the Guarantor's integrated rural - 17 - development project of about 60,000 short-term sub-loans for financing the purchase of farm inputs and other seasonal expenditures relating to crop and livestock production. Part B: Institutional Development 1. Implementation of the Action Plan for strengthening the organization and improving the operating procedtres of the Borrower, as approved by the Borrower's Board of Directors on April 20, 1983, including in particular: (a) a study of the Borrower's operational systems and procedures; and (b) a study of the Borrower's accounting systems. 2. Provision of training abroad for the Borrower's managerial, administrative and technical staff. 3. Provision of about 80 vehicles and other equipment for the Borrower. The Project is expected to be completed by June 30, 1987. - 18 - ANNEX 1 TO SCHEDULE 2 Provinces for the Provision of Sub-Loans under Parts A (1), (2) and (3) of the Pj.ject Except as the Borrower and the Bank may otherwise agree, sub-loans shall be provided in the provinces of the Guarantor, as follows: 1. Sub-loans under Part A (1) of the Project shall be made in the provinces of: Ankara, Afyon, Balikesir, Burdur, Denizli, Diyarbakir, Isparta, Kutahya, Mardin and Urfa; provided, however, that sub-loans for livestock production or fattening: (a) shall not be provided in any province while funds are available to the Borrower for the same purposes in that province under the Project Agreements between the Bank and the Borrower entered into for the Third Livestock Development Project (dated May 26, 1976), the Fourth Livestock Development Project (dated June 5, 1978) or the Fifth Livestock Development Project (dated June 6, 1980), as these agreements may be amended from time to time; and (b) shall be provided in any province where funds were previously available for the same purposes under such Project Agreements only in accordance with paragraphs 1.2, 1.3, 1.4, 1.5, 1.6 and 2.1 of the Schedule to the Project Agreement for the Fifth Livestock Development Project (dated June 6, 1980) and with the relevant provisions of this Agreement. 2. Sub-loans under Part A (2) of the Project shall be made in the provinces of Adan, Antalya, Aydin, Balikesir, Denizli, Diyarbakir, Gazianter, Hatay, Icel, Izmir, Manisa, Maras, Mardin, Mugla and Urfa. 3. Sub-loans under Part A (3) of the Project shall be made in the provinces of Afyon, Amasya, Burdur, Diyarbakir, Gazianted, Isparta, Kutahya, Mardin, Tokat, Urfa, Usak and Yozgat. ANNEX 2 TO SCHEDULE 2 Lending and Operating Policies and Procedures for Part A of the Project Except as the Borrower and the Bank may otherwise agree, the Borrower shall cause its concerned branches and offices to follow the following procedures for the approval, administration and supervision of sub-loans under Part A of the Project: A. Application for and Approval of Sub-loans 1. Applications for sub-loans under Part A.1 and A.4 will be submitted directly to the Borrower's branch nearest to the applicant or, in respect of sub-loans under Part A.2, A.3 and A.5, to such branch through the nearest extension office of MAF. 2. Applications for medium-term sub-loans will include a Farm Development Plan, to be prepared by the appli-cant with the assis- tance of the Borrower's or MAF's technical staff, and which will demonstrate the technical feasibility and financial viability of the proposed investment. Applications for short-term sub-loans will include a Production Plan showing the type of crop to be planted or livestock activities to be undertaken and the inputs for which the sub-loans are required. 3. Applications for sub-loans will be reviewed and approved by the concerned branches of the Borrower on the basis of the eligi- bility and creditworthiness criteria contained in the Credit Guidelines. In addition, any application for sub-loans under Part A.2 "Second Crops Scheme", A.3 "Fallow Reduction Scheme", and A.5 "Corum Cankiri Project", will include a certificate from the concerned extension office of MAF indicating that the applicant is a participant in a MAF organized scheme. 4. Sub-loans under Part A.2 and A.3 shall be provided for crops and areas to be agreed among the Guarantor, the Borrower and the Bank on the basis of the annual reviews referred to in Section 3.02 (a) (iii) of the Guarantee Agreement. 5. Except as the Bank shall otherwise agree, the Borrower shall not make a sub-loan to any Beneficiary if said sub-loan, by itself or aggregated with any other sub-loan to the same Benefi- ciary, exceeds the equivalent of $150,000. - 20 - B. Terms and Conditions to be included in the Sub-loans Contract Sub-loans will be made and' be repayable in lir.s, on the following terms: 1. Amount: not exceeding 90% of the estimated investment or production cost shown in the Farm Development Flan or the Production Plan, respectively. 2. Interest at the preferential agricultural interest rates set in accordance with paragraphs (a) (i) and (a) (ii) of Section 3.04 of the Guarantee Agreement on short-term sub-loans and on medium-term sub-loans. 3. Repayment terms shall be determined from the projected cash flow of the project financed by the sub-loan, and shall be: not more than one year for short-term sub-loans, and 6 to 12 years, including a grace period of 2 to 5 years, for medium-term sub- loans. 4. Security: Security shall be required for all sub-loans as provided for project credits in the Credit Guidelines. 5. The Borrower shall retain the right to: (a) require the Beneficiary to carry out the Farm Development Plan or the Production Plan in accordance with appropriate agricultural and financial practices; (b) examine, by itself or jointly with representatives of the Bank if the Bank shall so request, the goods and construction or farming sites included in the Farm Development Plan or the Production Plan; (c) require that the goods and services financed out of the proceeds of the sub-loans be used exclusively for the purposes approved in the sub-loan application; and (d) suspend or terminate the right of the Beneficiary to the use of the proceeds of the sub-loan upon failure by such Beneficiary to perform its obligations under its contract with the Borrower. C. Disbursement and Records and Supervision 1. The Borrower will inform the concerned office of MAF of the approval of sub-loans; such information to be provided on a monthly basis in respect of short-term sub-loans and on a quarterly basis in respect of medium-term sub-loans. - 21 - 2. The Borrower shall furnish semiannual statements to each Beneficiary showing all entries on the sub-loan account. 3. The Borrower will supervise, through regular field visits, the implementation of all Farm Development Plans. Production Plans will be supervised through sample visits to ensure the appropriate use of the proceeds of the sub-loans and to identify any common problems affecting Beneficiaries. - 22 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each June 1 and December 1 beginning December 1, 1987 through December 1, 1999 5,785,000 On June 1, 2000 5,775,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawals; see General Conditions, Section 3.04. - 23 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions: Time of Prepayment Premium The interest rate (ex- pressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years .18 before maturity More than three years but .35 not more than six years before maturity More than six years but .65 not more than eleven years before maturity More than eleven years but .88 not more than fifteen years before maturity More than fifteen years 1.00 before maturity - 24 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. The vehicles referred to in Part B (3) of the Project shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For such vehicles to be procured on the basis of interna- tional competitive bidding, and in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank as soon as possjble, and in any event not later than 60 days prior to the date of availability to the public of the first tender documents relating thereto, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the vehicles in question. The Borrower shall provide the necessary information to update such notice annually so long as any such vehicles remain to be procured on the basis of inter- national competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of the vehicles to be procured on the basis of inter- national competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported vehicles, or the ex-factory price or off-the-shelf price of other vehicles offered in such bid; (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the vehicles shall not be taken into account in the evaluation of the bids; and (iii) the cost of inland freight and other expenditures incidental to the delivery of the vehicles to the place of their use or installation shall be included. B. Preference for Domestic Manufacturers In the procurement of vehicles in accordance with the proce- dures described in Part A of this Schedule, vehicles manufactured - 25 - in Turkey may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of vehicles shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering vehicles manufactured in Turkey if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such vehicles 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 domestic bids. (3) Group C: bids offering any other vehicles. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the vehicles. 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. 4. If, as a result of the comparison under paragraph 3 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 evaluated bid price of the imported vehicles offered in each group C bid, for the purpose of this further. comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the vehicles offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such vehicles 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 - 26 - selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evalu- ated bid shall be selected. C. Other Procurement Procedures Equipment, other than vehicles, required under Part B (3) of the Project may be procured by the Borrower on the basis of (a) the Borrower's normal procedures or (b) limited international bidding procedures whereby contracts shall be awarded on the basis of evaluation and comparison of quotations solicited from at least three qualified suppliers eligible under the Guidelines. D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for the purchase of vehicles under Part B (3) of the Project: (a) Before bids are invited, the Borrower 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 docu- ments 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 Borrower 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 on the evaluation and comparison of the bids received, and such other information as the Bank shall reasonably request. The Bank shall, if it deter- mines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification was invited. - 27 - (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. 2. With respect to each contract not governed by the preceding paragraph (except for contracts on account of which withdrawals are allowed from the Loan Account on the basis of statements of expenditures), the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, or price quotations, as the case may be, 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 Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 20% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. 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. 2 . day of TMm,, 1983 FOR SECRETARY