Public Disclosure Authorized LOAN NUMBER 1130 TU CONFORMED COPY Public Disclosure Authorized Project Agreement (Corum-Cankiri Rural Development Project) Public Disclosure Authorized BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND AGRICULTURAL BANK OF THE TURKISH REPUBLIC Public Disclosure Authorized DATED JUNE 23, 1975
CONFORMED COPY LOAN NUMBER 1130 TU Project Agreement (Corum-Cankiri Rural Development Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND AGRICULTURAL BANK OF THE TURKISH REPUBLIC DATED JUNE 23, 1975
PROJECT AGREEMENT AGREEMENT, dated June 23, 1975, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and AGRICULTURAL BANK OF THE TURKISH REPUBLIC (hereinafter called TCZB). WHEREAS by the Loan Agreement of even date herewith between Republic of Turkey (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to seventy-five million dollars ($75,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that TCZB agree to undertake such obligations toward the Bank as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and TCZB, part of the aggregate proceeds of the loan provided for under the Loan Agreement will be made available to TCZB on the tenrms and conditions therein set forth; and WHEREAS TCZB, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) TCZB shall (i) carry out Part A of the Project described in Schedule 2 to the Loan Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, economic and agricultural practices, and shall provide, or cause to be provided, promptly as needed, the funds,
4 facilities, services and other resources required for the purpose, and (ii) acquire, maintain and renew all rights, powers, privileges and franchises as shall be, from time to time necessary or useful in the conduct of its business and the carrying out of Part A of the Project. (b) In the carrying out of Part A of the Project, TCZB undertakes that it shall at all times follow lending and operating policies and procedures satisfactory to the Bank and including those set forth in the Schedule to this Agreement, as such Schedule may be modified from time to time by agreement among the Borrower, the Bank and TCZB. (c) TCZB shall utilize all funds repaid by Beneficiaries, which are not needed immediately to make payments of principal, interest and other charges under the Subsidiary loan, for making Sub-loans to Beneficiaries. (d) TCZB shall enter into arrangements, satisfactory to the Bank, with the Project Extension Service to define in detail the responsibilities, functions and administrative procedures of TCZB and the Project Extension Service for the carrying out of Part A of the Project. Section 2.02. TCZB shall: (i) review its annual lending program under the Project for each of the provinces in the Project Area with the Provincial Advisory Committee for each such province; and (ii) prepare, jointly with each such Committee, annual and semi-annual reports on such lending program. Section 2.03. Except as the Bank shall otherwise agree, the goods, works and services (other than consultants' services) for Part A of the Project to be financed out of the proceeds of the Loan, shall be procured in accordance with the applicable provisions of, Schedule 4 to the Loan Agreement. Section 2.04. Except as the Bank may otherwise agree, TCZB shall cause all goods and services financed out of the proceeds of the Loan relent to it by the Borrower to be used exclusively for the Project. Section 2.05. TCZB: (i) shall maintain records adequate to record the progress of Part A of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Loan relent to it by the Borrower, and to disclose the use thereof in the Project; (ii) shall enable the Bank's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Bank all such information as the Bank shall reasonably request concerning Part A of the Project, the expenditure
5 of the proceeds of the Loan so relent to it and the goods and services financed out of such proceeds. Section 2.06. TCZB shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, TCZB shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.07. (a) TCZB shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Part A of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) TCZB shall promptly inform the Bank of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by TCZB of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of TCZB Section 3.01. (a) TCZB shall, with respect to Part A of the Project, at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with appropriate business, financial and agricultural practices and under the supervision of experienced and competent management assisted by adequate, experienced and competent staff. (b) TCZB shall designate: (i) its highest-rank official, or his representative, to serve on the Central Advisory Committee; and (ii) its highest-rank official for each province in the Project Area, or his representative, to serve on the corresponding Provincial Advisory Committee. ARTICLE IV Financial Covenants Section 4.01. TCZB shall: (a) establish and maintain separate accounts on its records to be used exclusively for Part A of the Project; (b) register in separate short and medium-term accounts all its receipts and payments for or in connection with its short- and medium-term lending
6 operations under Part A of the Project, in accordance with appropriate accounting principles consistently applied, including the following: (i) amounts received from and payments made to the Borrower under the Subsidiary Loan; (ii) amounts disbursed to and received from each Beneficiary under a Sub-loan; and (iii) amounts provided by the Borrower or TCZB from their own resources to finance Sub-loans. (c) (i) have the accounts referred to in paragraph (a) hereof and related statements for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank, in the English language, as soon as available, but in any case not later than five months after the end of TCZB's fiscal year, (A) certified copies of such accounts and related statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning such accounts and related statements of TCZB and the audit thereof as the Bank shall from -time to time reasonably request. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of TCZB thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Loan Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted
7 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: For TCZB: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. T.C. Ziraat Bankasi Genel Mudurlugu Bankalar Caddesi Ankara, Turkey Cable address: ZERBANK Ankara Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of TCZB or by TCZB on behalf of the Borrower under Section 2.09 of the Loan Agreement, may be taken or executed by the Secretary General of TCZB or such other person or persons as TCZB shall designate in writing. Section 6.03. TCZB shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of TCZB, take any action or execute any documents required or permitted to be taken or executed by TCZB pursuant to any of the provisions of this Agreement or Section 2.09 of the Loan Agreement. Section 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument.
8 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ W. A. Wapenhans Acting Regional Vice President Europe, Middle East and North Africa AGRICULTURAL BANK OF THE TURKISH REPUBLIC By /s/ Muainmer Akinci Authorized Representative
9 A. Lending Policies SCHEDULE Lending and Operating Policies and Procedures for Part A of Project Short-term Sub-loans will be made to eligible Beneficiaries for meeting current cultivation expenses and for purchases of seeds, fertilizers and chemicals. Such Sub-loans will be made to Beneficiaries who are judged to be competent and able to effectively use the financing of the inputs to improve production and productivity of their farms. Medium-term Sub-loans will be made to eligible Beneficiaries for the financing of investments in farm machinery comprising tractors and implements and of construction of infrastructure on farms, primarily buildings for livestock. Such Sub-loans will be made only for investments which have reasonable prospects of being technically feasible, financially viable and economically sound. Short- and medium-term Sub-loans will be granted only to those Beneficiaries who are judged by TCZB, in accordance with its normal administrative procedures, as likely to be creditworthy during the periods in which the Sub-loans are outstanding. TCZB will accept as security from Beneficiaries, depending on the circumstances, not only real estate mortgages but also: (i) in the case of short-term Sub-loans, guarantees of third parties; and (ii) in the case of medium-term Sub-loans, chattel mortgages on livestock and equipment plus guarantees of third parties. In evaluating the adequacy of collateral offered to it, TCZB will take into account the estimated increased real estate values from developments to be financed from the proceeds of its Sub-loans. B. Procedures Procedures for preparing, appraising and supervising Sub-loans will be as follows: (a) Short-term Sub-loans: The Project Extension Service, in providing technical assistance to farmers in accordance with Part B(l) of the Project, will endeavour to increase coverage of farmers as rapidly as possible. The Project Extension Service will certify the suitability of such farmers to receive short-term Sub-loans. Standard guidelines for
10 financing per hectare for each crop will be established jointly by TCZB and the Project Extension Service, at the beginning of the Project and revised annually thereafter. TCZB will make short-term Sub-loans to all certified farmers in accordance with such standard guidelines. Short-term Sub-loans will be disbursed in installments, as appropriate, on prior certification by the Project Extension Service. (b) Medium-term Sub-loans: The Project Extension Service will assist prospective Beneficiaries in preparing development plans for investments requiring medium-term Sub-loans. The technical and financial appraisal of medium-term Sub-loans applications will be prepared by the Project Extension Service for submission to TCZB. Supervision of operations of Beneficiaries of medium-term Sub-loans will be the joint responsibility of TCZB and the Project Extension Service. C. Terms and Conditions of Sub-loans To enable TCZB to fulfill its obligations under the Project Agreement and to protect its interests and those of the Bank, each Sub-loan Contract will include, inter alia, the following: (a) Terms and conditions applicable to all Sub-loans (i) (ii) (iii) (iv) Sub-loans will be denominated and repayable in liras; interest on the outstanding principal of each Sub-loan will be payable in liras at the rate of not less than eleven percent (11%) per annum inclusive of all commissions, taxes and any other charges, or at such other rates as shall be agreed among the Borrower, the Bank and TCZB, provided, however, that TCZB should be allowed a spread of not less than 2-1/2%; The goods and services financed out of the proceeds of the Sub-loan will be used exclusively for the purposes approved by TCZB and the Project Extension Service; the right of TCZB and the Bank to inspect the premises, the improvement of which is financed by the Sub-loan, any equipment, materials or inputs financed by the Sub-loan, the business of the Beneficiary, the operation thereof, and any relevant records and documents;
11 (v) (vi) (vii) the right to obtain all such information as TCZB or the Bank will reasonably request relating to the foregoing and to the operations and financial condition of the Beneficiary; the right to require that the goods and services to be financed out of the proceeds of the Loan will be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability thereof, and availability of service and spare parts therefor; and the right to suspend or terminate access by the Beneficiary to the use of the proceeds of the Sub-loan upon failure by him to perform his obligations under the Sub-loan Contract and, in appropriate cases, to premature the Sub-loan. (b) Terms and conditions applicable to short-term Sub-loans (i) (ii) the repayment period will not exceed one (1) year; and the short-term Sub-loans will be in amounts not exceeding the estimated expenses, based on the established standard guidelines as indicated in paragraph B herein. (c) Terms and conditions applicable to medium-term Sub-loans (i) the right to require the Beneficiary to carry out his development plan, as approved by the Project Extension Service, and to carry on his business, with due diligence and efficiency and in accordance with appropriate technical, agricultural, commercial and financial practices and standards, and to maintain adequate records; (ii) (iii) the right to require the Beneficiaries to insure, or make adequate provision for the insurance of, any imported goods to be financed out of the proceeds of the medium-term Sub-loans against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation; the maximum permissible repayment periods, including grace, for medium-term Sub-loans will be as follows:
12 Period of Repayment Years (including 1 year of grace) For farm equipment 5 For construction of farm infrastructure 7 (iv) the amount of medium-term Sub-loans will not normally exceed the equivalent of approximately the following percentages of the estimated cost of the investments to be financed therewith: 1. 75% in the case of medium-term Sub-loans for investments in farm machinery; and D. Approvals and Limitations 2. 80% in the case of medium-term Sub-loans for investments in construction of infrastructure on farms. 1. TCZB will submit to the Bank for approval standard forms of Sub-loan Contracts to be used in respect of (a) short-term Sub-loans (b) medium-term Sub-loans for farm machinery and (c) medium-term Sub-loans for construction of farm infrastructure. TCZB will also submit to the Bank for approval standard forms, if any, to be used for Sub-loan applications. 2. The standard guidelines for short-term Sub-loans as indicated in paragraph B herein will be submitted by TCZB for the Bank's approval, at the beginning of the Project and whenever such guidelines are revised thereafter. 3. TCZB and the Project Extension Service will submit to the Bank sample standard appraisal reports to be used in the evaluation of medium-term Sub-loans, separately for farm machinery and construction of farm infrastructure. 4. Except as the Bank shall otherwise agree, TCZB will not make to any single Beneficiary any Sub-loan which by itself or aggregated with any other Sub-loan to any such Beneficiary, exceeds the equivalent of $20,000. 5. TCZB and the Project Extension Service will regularly visit the establishments of Beneficiaries to ensure that the Sub-loan amounts drawn are applied exclusively for the purposes for which they were lent.