Conformed Copy - L3346 - Private Investment Credit Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3346 TU (Private Investment Credit Project) among INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and TURKIYE SINAI KALKINMA BANKASI and SINAI YATIRIM VE KREDI BANKASI Dated June 28, 1991 LOAN NUMBER 3346 TU PROJECT AGREEMENT AGREEMENT, dated June 28, 1991, among INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and TURKIYE SINAI KALKINMA BANKASI (TSKB) and SINAI YATIRIM VE KREDI BANKASI (SYKB). WHEREAS (A) by the Loan Agreement of even date herewith between the Republic of Turkey (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to two hundred million dollars ($200,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that TSKB and SYKB agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by subsidiary loan agreements to be entered into between the Borrower and TSKB and SYKB, a portion of the proceeds of the loan provided for under the Loan Agreement will be made available to TSKB and SYKB on the terms and conditions set forth in said Subsidiary Loan Agreements; and Page 2 WHEREAS TSKB and SYKB, in consideration of the Bank's entering into the Loan Agreement with the Borrower, have agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of Part A of the Project Management and Operations of TSKB and SYKB Section 2.01. (a) TSKB and SYKB declare their commitment to the objectives of the Project as set forth in Schedule 1 to the Loan Agreement, and, to this end, shall carry out their activities under Part A of the Project and conduct their operations and affairs, in accordance with sound financial standards and practices, with qualified and experienced management and in accordance with their Charters and Statements of Policy and Corporate Strategy. (b) TSKB and SYKB shall each, for the purposes of Sub-loans to be made by them under Part A of the Project, open and maintain in dollars a special deposit account in a commercial bank or in TSKB or SYKB itself, as the case may be, on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, such Special Accounts shall be made in accordance with the provisions of the Schedule to this Agreement. Section 2.02. (a) TSKB and SYKB undertake that, unless the Bank shall otherwise agree, their Sub-loans will be made in accordance with the procedures and on the terms and conditions set forth or referred to in Schedule 5 to the Loan Agreement. (b) TSKB and SYKB shall exercise their rights in relation to each Investment Project financed by them in such manner as to: (i) protect the interests of the Bank and TSKB and SYKB; (ii) comply with their obligations under this Agreement and the Subsidiary Loan Agreements; and (iii) achieve the purposes of Part A of the Project. Section 2.03. TSKB and SYKB shall duly perform all their obligations under the Subsidiary Loan Agreements. Except as the Bank shall otherwise agree, TSKB and SYKB shall not take or concur in any action which would have the effect of assigning, amending, abrogat- ing or waiving the Subsidiary Loan Agreements or any provisions thereof. Section 2.04. (a) TSKB and SYKB shall, at the request of the Bank, exchange views with the Bank with regard to the progress of their activities under Part A of the Project, the performance of their obligations under this Agreement and under the Subsidiary Loan Agreements, and other matters relating to the purposes of the Loan. (b) TSKB and SYKB shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of their activities under Part A of the Project, or the performance by TSKB and SYKB of their obligations under this Agreement and under the Subsidiary Loan Agreements. Section 2.05. TSKB and SYKB shall furnish to the Borrower and the Bank quarterly reports, prepared on the basis of a format satisfactory to the Bank, on the status of TSKB's and SYKB's operation and finance, including a projection of their financial Page 3 situation, a description of their operational targets and efforts to diversify their operations and resources, and an assessment of their progress in utilizing the proceeds of the Loan. ARTICLE III Financial Covenants Section 3.01. TSKB and SYKB shall maintain procedures and records adequate to monitor and record the progress of their activities under Part A of the Project and of each Investment Project financed by them (including the costs and the benefits to be derived from it) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of TSKB and SYKB. Section 3.02. TSKB and SYKB shall: (i) have the records referred to in Section 3.01 of this Agreement, their accounts and financial statements (balance sheets, statements of income and expenses and related statements) and records and accounts for their Special Accounts 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 as soon as available, but in any case not later than five (5) months after the end of each such year: (A) certified copies of said financial statements for such year as so audited; and (B) the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested, including a separate opinion by said auditors as to whether or not TSKB and SYKB have met the loan loss provisioning and loan concentration standards specified pursuant to the Banking Law, to the extent applicable to TSKB and SYKB, or other such standards satisfactory to the Bank, and maintained the debt equity, debt service coverage and collection ratios referred to in Sections 3.05, 3.06 and 3.08, respectively, of this Agreement; and (iii) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 3.03. TSKB and SYKB shall take such steps satisfactory to the Bank as shall be necessary to protect themselves against risk of loss resulting from changes in the rates of exchange between the currencies used in their operations. Section 3.04. Except as the Bank shall otherwise agree, TSKB and SYKB shall: (i) conduct their operations and affairs in such manner as shall be necessary to maintain, at all times, their debt/equity ratios and debt service coverage ratios within the limits referred to in Sections 3.05 and 3.06 of this Agreement, respectively; and (ii) if any such ratios shall, for reasons beyond TSKB's and SYKB's control, be exceeded, promptly take all such reasonable action as shall be necessary or advisable to bring such ratios within such limits. Section 3.05. (a) Except as the Bank shall otherwise agree, TSKB and SYKB shall not incur or permit any Subsidiary to incur any debt, if after the incurring of such debt, the consolidated debt of TSKB or SYKB, as the case may be, and all its Subsidiaries then incurred and outstanding would exceed ten times the consolidated capital and surplus of TSKB or SYKB, as the case may be, and all its Subsidiaries. Page 4 (b) For purposes of this Section: (i) the term "debt" means any debt incurred by TSKB or SYKB, as the case may be, or any Subsidiary maturing more than one year after the date on which it is originally incurred, including debt assumed or guaranteed by TSKB or SYKB, as the case may be, or by a Subsidiary; (ii) debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment, on the date, and to the extent, the amount of such debt has become out- standing pursuant to such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt is outstanding; (iii) the term "consolidated debt of TSKB or SYKB, as the case may be, and all its Subsidiaries" means the total amount of debt of TSKB or SYKB, as the case may be, and all its Subsidiaries, including any debt owed by TSKB or SYKB, as the case may be, to its shareholders, but excluding any debt owed by TSKB or SYKB, as the case may be, to any Subsidiary or by any Subsidiary to TSKB or SYKB, as the case may be, or to any other Subsidiary; (iv) the term "consolidated capital and surplus of TSKB or SYKB, as the case may be, and all its Subsi- diaries" means the aggregate of the total unimpaired paid-up capital, surplus and free reserves (including the revaluation fund, if any) of and subordinated loans to TSKB or SYKB, as the case may be, and all its Subsidiaries after excluding therefrom such amounts as shall represent equity interests of TSKB or SYKB, as the case may be, in any Subsidiary, or any such Subsidiary in TSKB or SYKB, as the case may be, or in any other Subsidiary. For the purposes of this definition, such term shall include the amounts provided by the Borrower to TSKB or SYKB, as the case may be, under the Quasi-Equity Loan Agreements; (v) the term "subordinated loan" means any debt to mature after the maturity of any debt outstanding from time to time from creditors other than shareholers of TSKB or SYKB, as the case may be, and its Subsidiaries, such debt to be repaid in accordance with its terms only after claims from such creditors have been satisfied; (vi) whenever for the purposes of this Section it shall be necessary to value in terms of Turkish Lira debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Bank; and (vii) amounts payable to TSKB or SYKB, as the case may be, under any foreign exchange risk coverage scheme of the Borrower or under currency swap arrangements shall be deducted in calculating the amount of TSKB's or SYKB's debt, as the case may be. Page 5 Section 3.06. (a) Except as the Bank shall otherwise agree, TSKB and SYKB shall ensure that the net income of TSKB or SYKB, as the case may be, for each fiscal year, when added to provision for losses and loan collection and interest and other charges on debt, adjusted for income taxes, for such year, shall be at least 1.10 times the maximum debt service requirements of TSKB or SYKB, as the case may be, for such year on all debt of TSKB or SYKB, as the case may be. (b) For the purposes of this Section: (i) The term "debt" means any indebtedness of TSKB or SYKB, as the case may be, maturing by its terms more than one year after the date on which it is originally incurred. (ii) Debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment on the date of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into. (iii) The term "net income" means the difference between: (A) the income of TSKB or SYKB, as the case may be, from all sources; and (B) the sum of all expenses of TSKB or SYKB, as the case may be, including those relating to administration, income taxes and payments in lieu of income taxes, provision for losses and loan collection and interest and other charges on debt. (iv) The term "debt service requirements" means the aggregate amount of repayments of, and interest and other charges, adjusted for income taxes, on, debt of TSKB or SYKB, as the case may be. (v) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Bank. Section 3.07. Except as the Bank shall otherwise agree, TSKB and SYKB shall not make any repayment in advance of maturity in respect of any of their debt which, in the judgment of the Bank, would materially affect TSKB's and SYKB's ability to meet their financial obligations. Section 3.08. Except as the Bank shall otherwise agree, TSKB and SYKB shall each at all times maintain a collection ratio of not less than 85%. Such ratio shall be calculated as a percentage of all amounts recoverable during a given fiscal year except amounts which are the subject of pending legal action or write-offs. ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect Page 6 on the date upon which the Loan Agreement becomes effective. Section 4.02. This Agreement and all obligations of the Bank and of TSKB and SYKB thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify TSKB and SYKB thereof. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE V Miscellaneous Provisions Section 5.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement among the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) For TSKB: Turkiye Sinai Kalkinma Bankasi P.O. Box 17 Karakoy 8002 Istanbul, Turkey Cable address: Telex: KALKINMABANK 24344 TSKB TR Istanbul For SYKB: Sinai Yatirim Ve Kredi Bankasi Barbaros Bulvari, Akdogan Sokak 41-43 Besiktas, Istanbul, 80690 Turkey Cable address: Telex: YATIRIMBANK 26263 SYKB TR Istanbul Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of TSKB or SYKB, may be taken or executed by its General Manager or such other person or persons as he shall designate in writing, and he shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Page 7 Section 5.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ M. H. Wiehen Acting Regional Vice President Europe, Middle East and North Africa TURKIYE SINAI KALKINMA BANKASI SINAI YATIRIM VE KREDI BANKASI By /s/ F. Selekler Authorized Representative SCHEDULE Special Accounts 1. For the purposes of this Schedule: (a) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for Investment Projects and to be financed out of the proceeds of the Loan in accordance with the provisions of Section 2.02 (a) of the Loan Agreement, provided, however, that notwithstanding the provisions of paragraph 4 (b) of Schedule 5 to the Loan Agreement, payments for expenditures to be financed out of the proceeds of free-limit Sub-loans may be made out of a Special Account before the Bank shall have authorized withdrawals from the Loan Account in respect thereof. Such expenditures, however, shall qualify as eligible expenditures only if the Bank shall subsequently authorize such withdrawals; and (b) the term "Authorized Allocation" means, in respect of TSKB, an amount equivalent to $5,000,000 to be withdrawn from the Loan Account and deposited into the TSKB Special Account; and in respect of SYKB, an amount equivalent to $5,000,000 to be withdrawn from the Loan Account and deposited into the SYKB Special Account, all pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Accounts shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that a Special Account has been duly opened, withdrawals of the relevant Authorized Allocation and subsequent withdrawals to replenish such Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, TSKB or SYKB, as the case may be, shall furnish to the Bank a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of TSKB or SYKB, as the case may be, withdraw from the Loan Account and deposit in the Special Page 8 Account such amount or amounts as TSKB or SYKB, as the case may be, shall have requested. (b) (i) For replenishment of the Special Account, TSKB or SYKB, as the case may be, shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, TSKB or SYKB, as the case may be, shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of TSKB or SYKB, as the case may be, withdraw from the Loan Account and deposit into the Special Account such amount as TSKB or SYKB, as the case may be, shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by TSKB or SYKB, as the case may be, out of a Special Account, TSKB or SYKB, as the case may be, shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into a Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by TSKB or SYKB, as the case may be, directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of the Loan Agreement; or (b) once the total unwithdrawn amount of the Loan allocated to the Investment Projects for which TSKB or SYKB, as the case may be, is responsible less the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to such Investment Projects, shall equal the equivalent of twice the amount of the relevant Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to such Investment Projects shall follow such procedures as the Bank shall specify by notice to TSKB or SYKB, as the case may be. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in such Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of a Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, TSKB or SYKB, as the case may be, shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until TSKB or SYKB, as Page 9 the case may be, has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in a Special Account will not be required to cover further payments for eligible expenditures, TSKB or SYKB, as the case may be, shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) TSKB or SYKB, as the case may be, may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in a Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of the Loan Agreement, including the General Conditions.