Turkey - Agricultural Extension And Applied Research Project : Loan 2405 - Loan Agreement - Conformed

OFFICIAL LOAN NUMBER 2405 TU DOCUMENTS Loan Agreement (Agricultural Extension and Applied Research Project) between REPUBLIC OF TURKEY and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 1984 LOAN NUMBER 2405 TU LOAN AGREEMENT AGREEMENT, dated 1984, between REPUBLIC OF TURKEY (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT BANK (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Loan as hereinafter provided; (B) the Borrower has applied to the International Fund for Agricultural Development (hereinafter called the Fund) for a loan (hereinafter called the Fund Loan), in an amount equivalent to nine million seven hundred thousand Special Drawing Rights (SDR 9,700,000), to assist in financing the Project on the terms and conditions set forth in an agreement (hereinafter called the Fund Loan Agreement) between the Borrower and the Fund; (C) the Fund intends to appoint the Bank as Cooperating Institution to administer the Fund Loan and the Bank is prepared to accept such appointment; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to extend the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: 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 Condi- tions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the - 2 - respective meanings therein set forth and the following addi- tional terms have the following meanings: (a) "Fund Loan Account" means the 1, .n account established under the Fund Loan Agreement; (b) "MPWR" means the Borrower's Ministry of Public Works and Resettlement; (c) "MAFRA" means the Borrower's Ministry of Agriculture, Forestry and Rural Affairs; (d) "GDAA" means the General Directorate of Agricultural Affairs of MAFRA; (e) "TZ extension service" and "TZ" mean Teknik Ziraat, the field extension service within GDAA; (f) "TURDOK" means the Borrower's National Documentation Center; (g) "FRT" means the Film, Radio and Television Center within the Ministry of Education; (h) "TRT" means the Borrower's Radio and Television Service; (i) "TCZB" means Turkiye Cumhuriyeti Ziraat Bankasi, the Borrower's Agricultural Bank; (j) "Bank Special Account" and "Fund Special Account" mean the accounts to be opened and maintained pursuant to Section 3.02 (b) of this Agreement; (k) "Project Area" means the area covered by sixteen of the Borrower's provinces, which provinces may be grouped into four zones as follows: (1) Izmir, Manisa, Balikesir, Canakkale, Bursa and Denizli; (2) Eskisehir, Kutahya, Afyon, Isparta and Burdur; (3) Ankara and Konya; and (4) Diyarbakir, Urfa and Mardin (Southeast Anatolia); (1) "EIC" means the Extension Information Center referred to in Part A.2 of the Project; (m) "Annual Work Program" means the programs riferred to in Section 4.08 of this Agreement; and -3- (n) "fiscal year" means the period January 1 to Decem- ber 31. 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-two million two hundred thousand dollars ($72,200,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Article III of this Agreement. Section 2.03. The Closing Date shall be December 31, 1990 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Bank a fee equivalent to one hundred eighty thousand and fifty dollars ($180,050). (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 2.05. 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 2.06. (a) The Borrower shall pay interest on the principal amount of the L3an 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 Bor- rowings 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 of the Cost of Qualified Bor- rowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.07 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 reasonably 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 borrowings of the Bank drawn down after June 30, 1.982; 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. (iv) "Semester" means the first six months or the second six months of a calendar year. Section 2.07. Interest and other charges shall be payable semiannually on February 15 and August 15 in each year. Section 2.08. 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 Allocation and Withdrawal of Proceeds of Loan and Fund Loan Section 3.01. Subject to the rights of suspension and cancellation set forth in the Loan Agreement and the Fund Loan Agreement, the amount of the Loan and the amount of the Fund Loan may be withdrawn from the Loan Account and the Fund Loan Account, respectively, in accordance with the provisions of this Agreement and with the allocation of the proceeds of the Loan and the Fund Loan set forth in Schedule 1 to this Agreement, as such alloca- tion may be modified from time to time pursuant to the provisions of such Schedule or by further agreement between the Borrower, the Bank and the Fund. -5- Section 3.02. (a) The Borrower shall be entitled to make withdrawals from the Loan Account and from the Fund Loan Account for expenditures made (or, if the Bank and the Fund 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 and the Fund Loan. (b) The Borrower shall, for purposes of civil works, office furniture and incremental operating costs to be financed under the Project, open and thereafter maintain at the T.C. Merkez Bankasi a Bank Special Account and a Fund Special Account on terms and conditions satisfactory to the Bank and the Fund, respectively. Deposits into, and payments out of, the Bank Special Account and the Fund Special Account shall be made in accordance with the provisions of Schedules 6 and 7 to this Agreement, respectively. Section 3.03. (a) When the Borrower shall desire to withdraw any amount of the Loan or the Fund Loan, the Borrower shall deliver to the Bank a written application in such form and containing such statements and agreements as the Bank or the Fund shall reasonably request. Applications for withdrawal, with the necessary documentation as hereinafter provided, shall, except as the Borrower, the Bank and the Fund shall otherwise agree, be made promptly in relation to expenditures for the Project. (b) The Borrower shall furnish to the bank such documents and other evidence in support of the appliation as the Bank or the Fund shall reasonably request, whether before or after the Bank shall have approved any withdrawal requested in the applica- tion. (c) Each application and the accompanying documents and other evidence must be sufficient in form and substance to satisfy the Bank or the Fund that the Borrower is entitled to withdraw from the Loan Account or the Fund Loan Account the amount applied for and that such amount is to be used only for the purposes of the Project. Section 3.04. Each such application by the Borrower for withdrawal shall be deemed to be a request to withdraw funds from the Loan Account and from the Fund Loan Account and the funds to be withdrawn pursuant to such application shall be apportioned by the Bank, as nearly as practicable in the circumstances, between the Loan and the Fund Loan in the ratio of 88:12, or such other - 6 - ratio as shall be agreed between the Bank and the Fund; provided, however, that, in respect of Categories (1) (a) and 1 (b) set forth in the table in paragraph 1 of Schedule 1 to this Agree- ment, or in any other case where an application shall be made in respect of expenditures to be financed out of the proceeds of the Loan only or the Fund Loan only, such application shall be deemed to be a request to withdraw funds from the Loan Account or the Fund Loan Account only, as the case may be. Section 3.05. When the Bank shall have approved an applica- tion by the Borrower for withdrawal, the Bank shall: (a) pay the amount, if any, which the Borrower is entitled to withdraw from the Loan Account to or on the order of the Borrower in accordance with the provisions of the Loan Agreement; and/or (b) promptly notify the Fund that it has received an application for withdrawal from the Fund Loan Account in the aggregate amount specified in such notice, that it has approved payment of the portion, if any, to be withdrawn from the Loan Account in the amount set forth in such notice, and that the portion to be withdrawn from the Fund Loan Account in the amount set forth in such notice is eligible for payment by the Fund. Section 3.06. If at any time the amount of the Loan or the Fund Loan shall have been fully withdrawn or cancelled, applica- tions by the Borrower for further withdrawals in respect of Categories (2), (4) and (6) shall be deemed to be requested for withdrawal of the full amount applied for from the Fund Loan Account or the Loan Account only, and the provisions of this Article III except for Section 3.04 hereof shall continue to apply mutatis mutandis until the full amount credited or to be credited to such Account shall have been withdrawn or cancelled. Section 3.07. Upon the Borrower's request, and upon such terms as shall be agreed between the Borrower and the Bank, the Bank may, on behalf and for the account of the Fund, enter into special commitments to pay amounts, out of the proceeds of the Fund Loan, to the Borrower or to others in respect of the cost of goods required by the Project, subject to the provisions of this Agreement concerning the allocation and apportionment of the proceeds of the Fund Loan. The Fund has advised the Bank that any such special commitment shall, once it has been notified to the Fund, constitute an obligation on the part of the Fund to pay, - 7 - notwithstanding any subsequent suspension or cancellation of the Fui.d Loan, the amount to be disbursed out of the proceeds of the Fund Loan in fulfillment of such special commitment. Section 3.08. Except as the Bank and the Fund shall other- wise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Loan or the Fund Loan shall be governed by the provisions of Schedule 4 to this Agreement. ARTICLE IV Execution of the Project Section 4.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project through GDAA with assistance from MPWR, or other agency acceptable to the Bank, for civil works construction under the Project, with due diligence and efficiency and in conformity with appropriate administrative, financial, economic and agricultural practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Without limitation to the foregoing, the Borrower shall establish and thereafter maintain for the purposes of the Project: (i) administrative entities acceptable to the Bank, including a Central Coordination Committee, a Central Executive Committee, four Regional Committees and a Project Administration Unit, each of which shall at all times have powers and functions sufficient to carry out their respective responsibilities under the Project; and (ii) recruit and assign additional staff for the Project in accordance with a schedule satisfactory to the Bank. Section 4.02. The Borrower shall, through GDAA, enter into, and thereafter maintain, protocols on terms and conditions satis- factory to the Bank: (1) with the agricultural faculties at the Universities of Ankara, Izmir and Adana to assist in training of TZ staff under the Project; and (2) with TURDOK, FRT and TRT to assist in staff training and operations at EIC. Section 4.03. The Borrower shall: (a) not later than September 30, 1984, or such other date as the Bank shall agree, employ an organization for administration of the training program under Part D.2 of the Project; and (b) employment consultants in -8- accordance with a timetable and staffing schedule acceptable to the Bank for consultancy services under the Project, all of whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, and all of which shall be selected in accordance with the principles and proce- dures described in 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 4.04. For purposes of the reorganization of the TZ extension service to be carried out under Part A.1 of the Project and for improving the links between research and extension, the Borrower shall, not later than September 30, 1984, issue revised job descriptions for all TZ staff in the Project Area and for selected GDAA research staff which shall reflect an extension organizational structure and operational methods agreed between the Borrower and the Bank. Section 4.05. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan or the Fund Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such in- surance any indemnity shall be payable in a currency freely us- able by the Borrower to replace or repair such goods. (b) The Borrower shall cause all goods and services finan- ced out of the proceeds of the Loan or the Fund Loan to be used exclusively for the purposes of the Project. Section 4.06. (a) The Borrower shall furnish to tho Bank promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower shall, through GDAA: (i) maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and, where appropriate, the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan or the Fund Loan, and to disclose their use in the Project; (ii) enable the Bank's and the Fund's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed -9- out of the proceeds of the Loan or the Fund Loan and any relevant records and documents; (iii) prepare, for each semester during the Project, progress and evaluation reports for the Project; (iv) furnish to the Bank and the Fund, at regular intervals during Project execution, all such information as the Bank shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the Fund Loan and the goods and services financed out of such proceeds, including, without limitation to the foregoing, within two months from the end of each semester, the progress and evaluaticn reports referred to in paragraph (b) (iii) of this Section; (v) prior to the end of the second year of Project execution, furnish to the Bank and the Fund for their review and comment, terms of reference for a mid- term review of the Project; and (vi) during the third year of Project execution, and in any event not later than March 31, 1987, carry out a mid-term review of the Project, in consultation with the Bank and the Fund, and thereafter consult with the Bank and the Fund on adjustments, if necessary, in the organization and operation of the Project as may be appropriate following the conclusions of such review. (c) Upon the award by the Borrower of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may be publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) 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 and furnish to the Bank and the Fund 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 and the Fund Loan. Section 4.07. The Borrower shall take or cause to be taken all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for carrying out the Project and shall provide to the Bank, on request, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. - 10 - Section 4.08. The Borrower shall: (a) not later than Septem- ber 15 of each year during Project execution, furnish to the Bank and the Fund, for their review and comment, a draft Annual Work Program for the following year; each such draft Annual Work Program shall include the information set forth in Schedule 5 to this Agreement and shall be accompanied by any supporting docu- mentation and information as the Bank may reasonably r4quest; and (b) thereafter, revise said draft Annual Work Program, taking into account the comments of the Bank and the Fund and, prior to the beginning of the fiscal year for which said Annual Work Program was drawn up, inform the Bank and the Fund of the budgetary allocations (including separate identification of investments, salaries and other operating expenses) for the Project for such fiscal year and the corresponding revised Annual Work Program. Section 4.09. The Borrower shall: (a) establish, under terms of reference acceptable to the Bank, and thereafter main- tain until completion of their functions under said terms of reference, ministerial working groups to develop, inter alia, medium-term plans for the reorganization and consolidation of the Borrower's agricultural research and extension services and for meeting the medium-term manpower and training requirements for research and extension; and (b) not later than June 30, 1986, discuss with the Bank the findings and recommendations of said ministerial working groups, together with a proposed action plan for carrying out said recommendations. ARTICLE V Other Covenants Section 5.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, - 11 - realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property or as security for the payment of debt incurred for the purpose of financing the purchase of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative sub- division thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by the T.C. Merkez Bankasi or any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 5.02. (a) The Borrower shall maintain or cause to be maintained separate accounts and records adequate to reflect in accordance with consistently maintained appropriate accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof and submit to the Bank within two months after the end of each semester detailed statements of such expenditures for said semester. (b) Without limitation to the foregoing, the Borrower shall: (i) maintain or cause to be maintained separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account or the Fund Loan Account on the basis of statements of expenditure; (ii) retain, until one year - 12 - 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 or the Fund Loan Account on the basis of statements of expenditure; and (iii) enable the Bank and the Fund's representa- tives to examine such records. (c) The Borrower shall: (i) have the separate accounts referred to in paragraph (a) of this Section 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 and the Fund, in the English language, as soon as available, but in any case not later than nine months after the end of each such year, a certified copy of the report of such audit by such auditors, of such scope and in such detail as the Bank shall have reasonably requested, includ- ing, without limitation to the foregoing, a separate opinion by said auditors in respect of the expenditures and records referred to in paragraph (b) of this Section as to whether the proceeds of the Loan withdrawn from the Loan Account and the proceeds of the Fund Loan withdrawn from the Fund Loan Account, on the basis of statements of expenditure, have been used for the purpose for which they were provided; and (iii) furnish to the Bank such other information concerning said separate accounts, records and expenditures and the audit thereof as the Bank shall from time to time reasonably request. Section 5.03. The Borrower shall: (a) at all times cause the buildings, equipment and machinery included in the Project to be adequately maintained and cause all necessary renewals and repairs thereof to be made promptly as required; and (b) unless the Bank shall otherwise agree, for at least ten years following completion of the Project, maintain in the Project Aree the extension and research systems introduced under the Project, all in accordance with appropriate agricultural and management practices, and shall provide or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for these purposes. Section 5.04. Without limitation to the provisions of para- graph (a) of Section 4.01 of this Agreement, the Borrower shall take all measures necessary to ensure availability to farmers in the Project Area of (a) credit facilities, through TCZB or other appropriate entity, and (b) agricultural inputs, both in amounts - 13 - sufficient to enable said farmers to benefit effectively from the expanded extension services made available under the Project. ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof: (a) Subject to subparagraph (b) of this paragraph: (i) the right of the Borrower to withdraw the pro- ceeds of any loan (including the Fund Loan) made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or (ii) any such loan shall have become due and payable prior to the agreed maturity thereof. (b) Subparagraph (a) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that: (i) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (ii) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof, namely, that the event speci- fied in paragraph (a) (ii) of Section 6.01 of this Agreement shall occur, subject to the provision of subparagraph (b) of that paragraph. ARTICLE VII Effective Date; Termination Section 7.01. The following events are specified as addi- tional conditions to the effectiveness of the Loan Agreement - 14 - within the meaning of Section 12.01 (c) of the General Condi- tions: (a) the execution and delivery on behalf of the Borrower of the Fund Loan Agreement has been duly authorized or ratified by all necessary governmental action and all other conditions precedent to the effectiveness of the Fund Loan pursuant to the Fund Loan Agreement (other than the effectiveness of this Agreement) have been duly fuifilled; and the Fund has appointed the Bank as Cooperating Institution to administer the Fund Loan on terms and conditions acceptable to the Bank; (b) the opening of the Bank Special Account and the Fund Special Account referred to in Section 3.02 (b) of this Agreement in accordance with the provisions thereof; (c) the establishment of the administrative entities referred to in Section 4.01 (b) of this Agreement and the designation of a Project Coordinator; (d) the signature of the protocols referred to in Section 4.02 of this Agreement; and (e) the establishment of the ministerial working groups referred to in Section 4.09 of this Agreement. Section 7.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be fur- nished to the Bank: (a) the Central Coordination Committee, the Central Executive Committee, the four Regional Committees and the Project Administation Unit referred to in Section 4.01 (b) of this Agreement have been duly established as administrative entities; and (b) the protocols referred to in Section 4.02 of this Agreement have been duly signed and delivered and duly authorized or ratified by all necessary administrative and governmental action. Section 7.03. The date- is hereby specified for the purposes of Section 12.0 of the General Conditions. 15 - Section 7.04. If (i) the Fund Loan Agreement shall have come into force and effect and the Loan Agreement shall have failed to come into force and effect by the date specified in Section 7.03 of this Agreement or a later date established by the Bank for the purposes of Section 12.04 of the General Conditions, or (ii) the entire principal amount of the Loan withdrawn from the Loan Account and all charges which shall have accrued on the Loan shall have been paid before the Fund Loan Agreement shall have terminated, then, notwithstanding the provisions of Section 12.04 and 12.05 of the General Conditions, the Loan Agreement shall be deemed to be, or to remain, in force and effect but only to the extent required for the purpose of implementing the Fund Loan Agreement and of orderly settlement of matters of mutual interest to the parties thereunder, subject to such modifications of the Loan Agreement as shall be agreed between the Borrower, the Bank and the Fund for such purposes. Section 7.05. If (i) the Fund Loan Agreement shall terminate in accordance with its terms before the Loan Agreement shall have terminated, or (ii) the Bank shall notify the Borrower that its appointment as Cooperating Institution under the Fund Loan Agree- ment has terminated, the provisions of this Agreement shall, to the extent that they relate to the Fund Loan, forthwith termi- nate; provided, however, that in the case described in the foregoing clause (ii) such termination shall apply only to the responsibilities of the Bank as such Cooperating Institution. ARTICLE VIII Representatives of the Borrower; Addresses Section 8.01. The Undersecretariat of the Treasury and Foreign Trade of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 8.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Basbakanlik Hazine Ve Dis Ticaret Mustesarligi Mithatpasa Caddesi No. 18 Yenisehir - Ankara Turkey - 16 - Cable address: Telex: 14ALIYE 821-42285 (MLYE-TR) or HAZINE 821-42689 (ANK-TR) Ankara For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT), Washington, D.C. 248423 (RCA) or 64145 (WUI) 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. REPUBLIC OF TURKEY By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President Europe, Middle East and North Africa - 17 - SCHEDULE 1 Withdraval of the Proceeds of the Loan and the Fund Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan and the Fund Loan, the allocation of the amounts of the Loan and the Fund Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Amount of the Loan Allocated Fund Loan % of (Expressed Allocated Expenditures in Dollar (Expressed in to be Category Equivalent) SDR Equivalent) Financed (1) Civil works and furniture (a) for TZ in - 2,130,000 20% of local Southeast expenditures Anatolia (b) others 11,700,000 - 20% of local expenditures (2) Vehicles 11,440,000 1,510,000 100% of for- eign expen- ditures and 100% of local expenditures (ex-factory) (3) Equipment, 4,900,00 - 100% of for- books and eign expendi- periodicals tures, 100% of local ex- penditures (ex-factory) and 80% of local expen- ditures for items procured through local shopping - 18 - Amount of the Amount of the Loan Allocated Fund Loan % of (Expressed Allocated Expenditures in Dollar (Expressed in to be Category Equivalent) SDR Equivalent) Financed (4) Overseas 10,120,000 1,340,000 100% training (5) Consultants' 1,470,000 - 100% of for- services eign expendi- tures for con- sultants domi- ciled outside Turkey and 90% for other consultants (6) Incremental 17,820,000 2,360,000 50% up to an operating aggregate costs amount of $17 million; 30% thereafter up to an aggre- gate amount of $25 million; and 10% there- after (7) Initial 4,400,000 580,000 deposits in the Bank Special Account and the Fund Special Account to prefinance items under Categories (1) (b) and (6), and Categories (1) (a) and (6) respectively - 19 - Amount of the Amount of the Loan Allocated Fund Loan % of (Expressed Allocated Expenditures in Dollar (Expressed in to be Category Equivalent) SDR Equivalent) Financed (8) Fee 180,050 - Amount due under Section 2.04 of this Agreement (9) Unallocated 10,169,950 1,780,000 TOTAL 72,200,000 9,700,000 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 Borrower and for goods or services supplied from the territory of any country other than that of the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; and (c) the term "incremental operating costs" means the amount per annum by which operating costs of Project activities exceed the operating costs expended by the Borrower on equivalent activities in the Project Area in Fiscal Year 1983; "operating costs" includes salaries and allowances for GDAA local personnel, expenditures for the operation and maintenance of buildings, offices, vehicles, and inputs and materials for agricultural ex- tension and research. 3. The disbursement percentages have been calculated in com- pliance with the policies of the Bank and the Fund that no proceeds of the Loan or the Fund Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manu- facture, 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 or the Fund Loan - 20 - decreases or increases, the Bare 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 policies of the Bank and the Fund. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures: (i) under Categories 1 (b) and (2) through (6) prior to the date of this Agreement; and (ii) under Category 1 (a) prior to the date of the Fund Loan Agreement, except that withdrawals in an aggregate amount not exceeding the equivalent of SDR 485,000 may be made on account of payments made for expenditures eligible under said Category before the date of said Agreement, but after May 1, 1984. 5. Notwithstanding the allocation of an amount of the Loan or the Fund Loan or the disbursement percentages set forth in the table in paragraph 1 above, and without limitation upon the pro- visions of Section 3.04 of this Agreement, if the Bank has rea- sonably estimated that the amount of the Loan or the Fund Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower and the Fund: (i) corres- pondingly reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan or the Fund Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expendi- tures, provided, however, that no such reallocation of proceeds of the Fund Loan shall be made to Categories (1) (b), (3) and (5); and (ii) if such reallocation cannot fully meet the esti- mated shortfall, reduce the disbursement percentage then appli- cable to such expenditures in order that further withdrawals under such Category may continue until all expenditures there- under shall have been made. 6. If the Bank shall have reasonably determined that the procurement of any item in any Category 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 of the Loan and the Fund 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 or of the Fund under the Fund Loan Agreement, by notice to the Borrower, cancel such amount of the Loan and/or the Fund Loan as, in the Bank's reasonable opinion, - 21 - represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan and/or the Fund Loan. - 22 - SCHEDULE 2 Description of the Project The objectives of the Project are: (1) to strengthen and reorganize the Borrower's TZ extension service in the Project Area by introducing a system whereby village-level extension agents carry out intensive programs of regularly scheduled farm visits under the close supervision of, and training by, subject- matter specialists and by expanding the use of audiovisual aids and mass media; (2) to improve applied and adaptive research on agricultural commodities and farming systems at six of the Borrower's research institutes; (3) to establish strong opera- tional links between TZ staff and said research institutes to ensure the transfer to village-level extension agents of techno- logy for improving crop and livestock production; (4) to build up a local expertise in agricultural extension and applied research through in-service and overseas training; and (5) to test and refine the extension methods developed under the Project before extending said methods throughout the Borrower's territory. The Project consists of the following Parts: Part A: Agricultural Extension 1. Reorganization and expansion of the Borrower's TZ extension service in the Project Area through: (a) employment of additional village-level extension agents to work on a full-time basis in providing technical advice to farmers on a broad range of farming activities; (b) establishment and operation of county-based teams of subject-matter specialists to supervise said extension agents and to provide fortnightly training sessions in specific areas of expertise; (c) establishment and operation of provincial teams of subject-matter specialists to assist the deputy director respons- ible for extension in each provincial TZ office and to coordinate activities with other agencies of the Borrower providing comple- mentary services to the Project; (d) establishment and operation of centralized teams of subject-matter specialists within GDAA's Extension Department to develop a technical strategy for each agro-ecological zone in the Project Area and to supervise and provide technical support to the provincial teams of subject- matter specialists; (e) monthly training workshops for subject- matter specialists to improve the transfer of farming technology; and (f) assignment of separate staff in TZ specifically to handle administrative matters. - 23 - 2. Establishment and operation of an extension information center (EIC) in Ankara, under the responsibility of GDAA; the collection and dissemination by EIC of extension information through: (a) building up a library of information of interest to extension agents in the Project Area and dissemination of infor- mation to such agents; (b) preparation and production of audio- visual aids to be used by village-level extension agents and subject-matter specialists in the Project Area in their extension activities; and (c) coordination and dissemination of information in the Project Area through mass communication methods. 3. Improvement of communications between research and extension staff through placement in each of the six research institutes referred to in Part B.1 of the Project of extension coordinators from EIC and the TZ extension service; said extension coordi- nators shall, inter alia, assist in the running of monthly training workshops for subject-matter specialists and of the field trials referred to in Part B.2 of the Project. 4. Recruitment of agricultural engineers, agricultural tech- cians, staff for the EIC and adequate support staff, the con- struction of housing units and offices for TZ and EIC, and provision of vehicles and equipment for Part A.1 through A.3 of the Project. Part B: Applied Research 1. Strengthening of the capacity of six research institutes serving the Project Area (Middle Anatolia, Eskisehir, Aegean, Southeast Anatolia, Mediterranean and Grassland and Animal Husbandry) to carry out applied and adaptive research on commodi- ties and farming systems for the development of improved techno- logy packages for farmers in said Area through (a) recruitment of additional staff, including, inter alia, agronomist and animal husbandry specialists, and (b) integration of economists and farm mangement specialists in the research teams for commodities. 2. Carrying out by such research institutes, with the assist- ance of extension coordinators, of an expanded program of field trials so as to test recommended technological packages and run- ning monthly training workshops for subject-matter specialists. 3. Recruitment of additional professional and support staff for research institutes, construction at the research institutes of research facilities, housing and facilities required for the - 24 - conduct of workshops for subject-matter specialists and equipping of said facilities; provision of, inter alia, farm equipment and machinery, laboratory and audiovisual equipment, research and training materials, and vehicles. 4. Coordination of research work and field trials, definition of research programs and priorities, and dissemination of find- ings by research coordinators appointed to all research centers serving the Project Area. Part C: Monitoring and Evaluation 1. Establishment and initial operation by TZ of a management information service within the Project Area to be responsible for internal monitoring and evaluation, and to report to the Project Coordinator, including provision of vehicles and office equip- ment. 2. Strengthening of the external monitoring and evaluation unit within GDAA's Department of Technical Cooperation to carry out studies on the development and improvement of the extension methods introduced under the Project. Part D: Training; Studies 1. In-service training, including orientation sessions for all Project staff, and refresher training courses to complement fort- nightly training sessions for village-level extension agents and monthly workshops for subject-matter specialists. 2. Carrying out of aa overseas training program acceptable to the Bank for selected staff involved in extension, monitoring and evaluation and research activities under Parts A, B and C of the Project. 3. Provision of assistance to the Borrower's ministerial working groups on the organization of agricultural research and extension. 4. Preparation of proposals for extending beyond the Project Area the extension methods introduced under the Project. The Project is expected to be completed by March 31, 1990. - 25 - SCHEDULE 3 Amortization Schedule Payment of Principal Date of Payment Due (Expressed in dollars)* On each February 15 and August 15 beginning August 15, 1988 through August 15, 2000 2,775,000 On February 15, 2001 2,825,000 * The figures in this column represent dollar equivalent determined as of the respective dates of withdrawal; see General Conditions, Section 3.04. - 26 - 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 0.18 before maturity More than three years but 0.35 not more than six years before maturity More than six years but 0.65 not more than 11 years before maturity More than 11 years but not 0.88 more than 15 years before maturity More than 15 years before 1.00 maturity - 27 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods and civil works for the Middle Anatolia Research Institute 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 goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the pub- lic 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 goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. Invitations to bid shall require bidders to guarantee adequate servicing and spare parts for equipment and machinery. 4. To the extent practicable, vehicles, equipment and machinery shall be grouped so as to permit bulk procurement in accordance with appropriate technical and procurement practices. 5. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international com- petitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, 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, - 28 - pursuant to the bid, of the goods 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 goods to the place of their use or installation shall be included. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured 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 goods 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 goods manufactured in Turkey if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods 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 goods. 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 goods. 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 - 29 - shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods 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 goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods 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 selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures 1. Contracts for civil works, other than the Middle Anatolia Research Institute, may be procured through local competitive bidding in accordance with procedures acceptable to the Bank. Civil works contracts for TZ staff housing and offices shall be made up into packages by county. 2. Contracts for laboratory equipment and seeds, livestock and semen for the research program may be awarded through limited international bidding procedures on the basis of evaluation and comparison of bids invited from a list of at least three quali- fied suppliers eligible under the Guidelines and in accordance with procedures set forth in paragraph A.5 of this Schedule and in Part A of the Guidelines (excluding paragraphs 1.2 and 3.9 thereof). 3. Off-the-shelf items of equipment and consumable materials with values of less than $10,000 equivalent for each contract may be purchased on the basis of solicitation of at least three price quotations from local suppliers; provided, however, that the aggregate expenditure for items so purchased shall not exceed $300,000 equivalent. 4. Contracts for furniture shall be packaged as appropriate and awarded on the basis of at least these price quotations from local suppliers; provided, however, that the aggregate expendi- ture for items so purchased shall not exceed $1,500,000 equiva- lent. 5. Books and periodicals may be purchased directly from the publishers or authorized distributors on the basis of negotiated prices. - 30 - 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 goods estimated to cost in excess of $200,000 equivalent, and for civil works estimated to cost in excess of $750,000 equivalent: (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 bid- ders. (b) After bids have been received and evaluated, the Bor- rower 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 determines 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. (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 or the Fund Loan Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, 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 - 31 - or the Fund Loan Account in respect of such contract, two con- formed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other infor- mation 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 Bor- rower 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. - 32 - SCHEDULE 5 Annual Work Program 1. For each year during Project execution, the Borrower shall prepare and submit to the Bank and the Fund, for review and comment, a draft Annual Work Program which shall include the following: (a) a detailed description of the work to be performed during the forthcoming fiscal year commencing each January 1, including detailed plans and schedules for activities under the various components of the Project, housing and office construc- tion, training, recruitment and deployment of staff, vehicles and equipment requirements; (b) the budgetary proposal from the Ministry of Agricul- ture, Forestry and Rural Affairs for the corresponding period setting forth for each Project component: (i) proposed capital expenditures; (ii) for the TZ extension service, the EIC, the six research institutes and the monitoring and evalua- tion groups, all proposed recurrent expenditures such as salaries, travel allowances, fuel, repairs and maintenance, agricultural inputs, together with a breakdown of pre-development and incre- mental expenditures; (iii) a comparison of the proposed investment and recurrent budgets with the budget of the previous year; and (iv) a list of proposed expenditures for technical assistance, studies and training; (c) a financing plan with detailed projections for each semester indicating funds required from the Borrower for each Project component; (d) the proposed procurement program and procedures to be applied thereto; and (e) a detailed Project implementation schedule for the forthcoming year. - 33 - 2. Each draft Annual Work Program shall be supported by the following information: (a) a detailed staffing analysis, including a report on staff recruitment by GDAA, pre-service training and expected assignments for the project; (b) details on the proposed training program; (c) detailed schedule of activities for civil works, including land acquisition, final designs, bidding and construc- tion; (d) details on specific extension activities to be under- taken in the various provinces and counties in the Project Area and on specific research programs which will be initiated or continued at each research institute supported by the Project; and (e) details on various extension approaches to be tested in specific locations (e.g., mass media campaigns, variations in staff densities, in methods for selecting contact farmers and in the village approach to provision of extension services). 3. Each draft Annual Work Program shall contain a detailed review of items related to Project implementation, in particular, agricultural inputs and credit in the Project Area required to support the operations of the extension service, as well as any other constraints beyond GDAA's control (provisioa of marketing facilities, infrastructure). - 34 - SCHEDULE 6 Bank Special Account 1. For the purposes of this Schedule: (a) the term "Category" means a category of items to be financed out of the proceeds of the Loan as set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of civil works and office furni- ture for TZ in the Project Area (excluding Southeast Anatolia) and of incremental operating costs required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to Categories (1) (b) and (6) in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "initial deposit" means an amount in foreign currency equivalent to the amount allocated to Category (7) and to be withdrawn from the Loan Account and deposited in the Bank Special Account pursuant to the first sentence of paragraph 3 to this Schedule. 2. Payments out of the Bank Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. The Bank shall, at the request of the Borrower, withdraw on behalf of the Borrower from the Loan Account and deposit into the Bank Special Account the initial deposit. Thereafter, and on the basis of requests by the Borrower furnished to the Bank at such intervals as the Bank shall specify, the Bank shall further so withdraw from the Loan Account and deposit into the Bank Special Account such amounts as shall be required to replenish the Bank Special Account with amounts equal to payments made out of the Bank Special Account for eligible expenditures, but only to the extent that the amount of any such deposit, together with any amount remaining on deposit in the Bank Special Account as of the date of such request, shall not exceed in the aggregate the equivalent of the initial deDosit. Except as the Bank may other- wise agree, each such deposit after the initial deposit shall be withdrawn by the Bank from the Loan Account under the respective Categories (1) (b) and (6), and in the respective equivalent amounts, as shall have been justified by the evidence supporting - 35 - the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. Prior to or at the time of each request by the Borrower for a deposit by the Bank into the Bank Special Account after the initial deposit, the Borrower shall furnish to the Bank in respect of each payment made by the Borrower out of the Bank Special Account such documents and other evidence as the Bank shall reasonably request, showing that such payment was made for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Sched- ule, no further deposit into the Bank Special Account shall be made by the Bank (a) when the Bank shall have determined at any time that all further withdrawals can be made directly by the Borrower from the Loan Account in accordance with the provisions of paragraph (a) of Section 3.02 of this Agreement, or (b) unless otherwise agreed by the Bank, when the total unwithdrawn amount of the Loan allocated to Categories 1 (b) and (6) for civil works, office furniture and incremental operating costs under the Project, minus the amount of any qualified agreement to reimburse made by the Bank and of any special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the initial deposit, whichever shall be sooner. Withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to Categories (1) (b) and (6) for the Project shall follow such procedures as the Bank shall specify by notice to the Borrower and shall, except as the Bank shall otherwise agree, be made only after and to the extent the Bank shall have been satisfied that all such amounts remaining on deposit in the Bank Special Account as of the date of such notice have been or will be utilized in making payments for eligible expenditures. 6. If the Bank shall have determined at any time that: (a) any payment out of the Bank Special Account (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Bank and, unless otherwise agreed by the Bank, prior to any further deposit into the Bank Special Account by the Bank, deposit into the Bank Special Account or, if the Bank shall so request, refund to the - 36 - Bank an amount equal to the amount of such payment or the portion thereof not so eligible or justified; or (b) any amount outstanding in the Bank Special Account will not be required to cover further payments for eligible expendi- tures, the Borrower shall, promptly upon notice from the Bank, and unless otherwise agreed by the Bank, refund to the Bank such amount then outstanding in the Bank Special Account. - 37 - SCHEDULE 7 Fund Special Account 1. For the purposes of this Schedule: (a) the term "Category" means a category of items to be financed out of the proceeds of the Fund Loan as set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of civil works and furniture for TZ in Southeast Anatolia and of incremental operating costs required for the Project and to be financed out of the proceeds of the Fund Loan allocated from time to time to Categories (1) (a) and (6) in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "initial deposit" means an amount in foreign currency equivalent to the amount allocated to Category (7) and to be withdrawn from the Fund Loan Account and deposited in the Fund Special Account pursuant to the first sentence of paragraph 3 to this Schedule. 2. Payments out of the Fund Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. The Bank shall, at the request of the Borrower, promptly notify the Fund pursuant to Section 3.05 (b) of this Agreement to withdraw on behalf of the Borrower from the Fund Loan Account and deposit into the Fund Special Account the initial deposit. There- after, and on the basis of requests by the Borrower furnished to the Bank at such intervals as the Bank shall specify, the Bank shall further so notify the Fund to withdraw from the Fund Loan Account and deposit into the Fund Special Account such amounts as shall be required to replenish the Fund Special Account with amounts equal to payments made out of the Fund Special Account for eligible expenditures, but only to the extent that the amount of any such deposit, together with any amount remaining on de- posit in the Fund Special Account as of the date of such request, shall not exceed in the aggregate the equivalent of the initial deposit. Except as the Fund may otherwise agree, each such de- posit after the initial deposit shall be withdrawn from the - 38 - Fund Loan Account under the respective Categories (1) (a) and (6) and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. Prior to or at the time of each request by the Borrower for a deposit into the Fund Special Account after the initial deposit, the Borrower shall furnish to the Bank in -respect of each payment made by the Borrower out of the Fund Special Account such documents and other evidence as the Bank, on behalf of the Fund, shall reasonably request, showing that such payment was made for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Sched- ule, no further deposit into the Fund Special Account shall be made (a) when the Bank, on behalf of the Fund, shall have deter- mined at any time that all further withdrawals can be made directly by the Borrower from the Fund Loan Account in accordance with the provisions of paragraph (a) of Section 3.02 of this Agreement, or (b) when the total unwithdrawn amount of the Fund Loan allocated to Categories (1) (a) and (6) of the Project, minus the amount of any special commitment entered into by the Bank, on behalf and for the account of the Fund, pursuant to Section 3.07 of this Agreement with respect to the Project, shall be equal to the equivalent of twice the amount of the initial deposit, whichever shall be sooner. Withdrawal from the Fund Loan Account of the remaining unwithdrawn amount of the Fund Loan allocated to Categories (1) (a) and (6) for the Project shall follow such procedures as the Bank, on behalf of the Fund, shall specify by notice to the Borrower and shall, except as otherwise agreed, be made only after and to the extent the Bank, on behalf of the Fund, shall have been satisfied that all such amounts remaining on deposit in the Fund Special Account as of the date of such notice have been or will be utilized in making payments for eligible expenditures. 6. If the Bank, on behalf of the Fund, shall have determined at any time that: (a) any payment out of the Fund Special Account (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice and unless otherwise agreed, prior to any further deposit into the Fund Special Account, - 39 - deposit into the Fund Special Account or, if the Bank, on behalf of the Fund, shall so request, refund to the Fund an amount equal to the amount of such payment or the portion thereof not so eligible or justified; or (b) any amount outstanding in the Fund Special Account will not be required to cover further payments for eligible expendi- tures, the Borrower shall, promptly upon notice and unless otherwise agreed, refund to the Fund such amount then outstanding in the Fund Special Account. 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 affix d the Seal of the Bank thereunto this < day of / , 1984. FOR SECRETARY