174*1 CONFORMED COPY LOAN NUMBER 1328 KO LOAN AGREEMENT (Second Agricultural Credit Project) between REPUBLIC OF KOREA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated October 12, 1976 LOAN AGREEMENT AGREEMENT, dated October 12, 1976, between REPUBLIC OF KOREA (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (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 Agree- ment by making the Loan as hereinafter provided; (B) the Project will be carried out by the National Agri- cultural Cooperative Federation (hereinafter called NACF) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to NACF the proceeds of the Loan as hereinafter provided; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in a project agree- ment of even date herewith between the Bank and NACF; NOW THEREFORE the parties hereto hereby agree as follows: -2- 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 Guar- antee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). 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 respective meanings therein set forth and the following additional terms have the following meanings: (a) "NACF" means the National Agricultural Cooperative Federa- tion established and operating pursuant to the Agricultural Coop- erative Law of the Borrower, dated July 29, 1961 as amended, or any successor thereto; (b) "Project Agreement" means the agreement between the Bank and NACF of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement; (c) "Subsidiary Loan" means the loan made by the Borrower to NACF pursuant to Section 3.01 (c) of this Agreement; -3- (d) "Government Loan" means the loan made by the Borrower to NACF pursuant to Section 3.01 (d) of this Agreement; (e) "First Agricultural Credit Project" means the project described in Schedule 2 to the Development Credit Agreement; (f) "Development Credit Agreement" means the agreement dated September 29, 1972 as the same may be amended from time to time, entered into between the Borrower and the Association in connec- tion with the First Agricultural Credit Project; (g) "Gun Cooperative" means a cooperative established pursuant to the provisions of Chapter III of the Agricultural Cooperative Law of July 29, 1961, as amended; (h) "Participating Gun Cooperative" means a cooperative which meets the eligibility criteria set forth in Schedule 1 to the Proj- ect Agreement and which has entered into the arrangements with NACF set forth in Section 2.02 (a) of the Project Agreement; (i) "Beneficiary" means any farmer or group of farmers to which a Participating Gun Cooperative has made a Sub-Loan; (j) "Sub-Loan" means a loan or credit made or proposed to be made by a Participating Gun Cooperative to a Beneficiary out of the proceeds of that part of the Subsidiary Loan and the Govern- ment Loan relent to it by NACF in accordance with Section 2.02 (a) of the Project Agreement; (k) "Special Fund" means the account to be established and maintained by NACF in accordance with the provisions of Section 3.01 (b) and Schedule 5 of this Agreement; and (1) "Won" means the currency of the Borrower. 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 re- ferred to, an amount in various currencies equivalent to twenty million dollars ($20,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for disburse- ments made under Sub-Loans included in the Project and to be fi- nanced out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, goods financed under Sub-Loans shall be procured in accordance with the provisions of Section 2.03 of the Project Agreement. Section 2.04. The Closing Date shall be June 30, 1981 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment 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. -6- Section 2.06. The Borrower shall pay interest at the rate of eight and ninety hundredths per cent (8.90%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semi-annually on February 1 and August 1 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. 97 ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall cause NACF to perform in accordance with the provisions of the Project Agreement all the obligations therein set forth, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable NACF to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall cause NACF to establish and maintain the Special Fund in accordance with the provislons set forth in Schedule 5 to this Agreement. (c) The Borrower shall, under arrangements and on teims and conditions satisfactory to the Bnk (including, inter alia, those set forth in Schedules 4 and 5 to this Agreement, as such Schedules may be amended from time to time by agreement between the Bank, the Borrower and NACF), lend to NACF and deposit in the Special 'Fund the equivalent in terms of currency of the Borrower of the proceeds of the Loan withdran from time to time by the Borrower. (d) Without any limitation or restriction upon the generality of the provisions of Section 3.01 (a) of this Agreement, the Bor- rover shall, under arrangements and conditions satisfactory to the -8- Bank (including, inter alia, those set forth in Schedules 4 and 5 to this Agreement), lend to NACF, not later than January 1, 1980 or such other date as shall be agreed with the Bank, an amount of not less than 4,300 million Won. To this end, the Borrower shall deposit in the Special Fund (i) not later than April 1, 1977 or such other date as shall be agreed with the Bank, an initial amount of not less than 700 million Won and (ii) thereafter at the begin- ing of each quarter such amounts as shall be required during such quarter by NACF to fulfill its obligations with respect to the implementation of the Project. Section 3.02. In order to ensure efficient cooperation of its agencies and departments with NACF in the implementation of the Project, the Borrower shall maintain the Project Coordination Committee referred to in Section 3.04 and Schedule 6 as amended, of the Development Credit Agreement. Section 3.03. The Borrower undertakes that whenever it shall cause NACF to perform any services on behalf of the Borrower, the Borrower shall provide sufficient funds to NACF to cover the costs incurred by NACF on account of such services. -9- ARTICLE IV Other Covenants Section 4.01. (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 for- eign 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, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, jpso 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 per- mitting 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 admini- strative 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 satisfac- tory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely -10- as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking trans- actions 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 subdi- vision thereof and of any entity owned or controlled by, or oper- ating for the account or benefit of, the Borrower or any such subdivision, including gold and other foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. - 11 - ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) NACF shall have failed to perform any of its obligations under the Project Agreement or under the arrangements referred to in Section 3.01 (c) and (d) of this Agreement. (b) An extraordinary situation shall have arisen which shall make it improbable that NACF will be able to perform its obliga- tions under the Project Agreement. (c) The Agricultural Cooperative Law of July 29, 1961, as amended, or NACF's by-laws shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of NACF to carry out its obligations under the Project Agreement. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of NACF or for the suspension of its operations. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: -12- (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower and NACF; and (b) any event specified in paragraph (c) or (d) of Section 5.01 of this Agreement jhall occur. -13- ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the execution of the Project Agreement on behalf of NACF has been duly authorized or ratified by all necessary corpo- rate and governmental action; and (b) the arrangements referred to in Section 3.01 (c) and (d) of this Agreement have been agreed upon between the Borrower and NACF. Section 6.02. The following are specified as additional mat- ters, within the meaning of Section 12.02 (c) of the General Con- ditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Project Agreement has been duly authorized or ratified by NACF, and is legally binding upon NACF in accordance with its terms; and (b) that the arrangements referred to in Section 3.01 (c) and (d) have been duly authorized or ratified by the Borrower and NACF, respectively, and are legally binding upon the Borrower and NACF in accordance with their terms. Section 6.03. The date January 10, 1977, is hereby specified for the purposes of Section 12.04 of the General Conditions. - 15 - ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of the Economic Planning Board of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Minister, Economic Planning Board Republic of Korea Seoul, Korea Cable address: EPB Seoul For the Bank: 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. -' 16- IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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 KOREA By /s/ Yoon Sae Yang Authorized RepresentatAve INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S.S. Kirmani Acting Regional Vice President East Asia and Pacific SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of ex- penditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Apple orchard devel- 3,600,000 70% of Sub-Loan opment (Part A of disbursements the Project) made by Partici- pating Gun Coop- eratives (2) Silkworm rearing 4,000,000 70% of Sub-Loan houses (Part B of disbursements the Project) made by Partici- pating Gun Coop- eratives (3) Sprinkler irriga- 2,200,000 70% of Sub-Loan tion for orchards disbursements (Part C of the made by Partici- Project) pating Gun Coop- eratives (4) Greenhouses for 3,800,000 70% of Sub-Loan vegetable produc- disbursements tion (Part D of made by Partici- the Project) pating Gun Coop- eratives -18 0 Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (5) On-farm storage for 2,200,000 70% of Sub-Loan fruits (Part E of disbursements the Project) made by Partici- pating Gun Coop- eratives (6) Unallocated 4?,00,000 TOTAL 20,000,000 - 19 - 2. The disbursement percentages have been calculated in compli- ance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 3. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. 4. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then appli- cable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. -20 0 5. If the Bank shall have reasonably determined that the pro- curement 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 Bank may, without in any way restricting or lim- iting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 21 - SCHEDULE 2 Description of the Project The Project shall be a continuation and expansion of the agricultural development program financed under the First Agri- cultural Credit Project. The Project consists in the provision of medium and long-term Sub-Loans, over a period of three years, through Participating Kun Cooperatives, to about 7,900 farmers for the following parts: Part A: Apple orchard development, including land preparation and provision of improved planting materials using approximately equal proportions of standard and dwarf rootstocks, fertilizers, pesticides and tools, together with the provision of inputs required for the initial production of peanuts, soybeans or other vegetables intercropped in the newly established orchards. Part B: Construction and equipping of improved silkworm rearing houses, including improvement of existing mulberry plantings. Part C: Sprinkler irrigation for apple, pear and orange orchards. Part D: Construction and equipping of improved greenhouses for vegetable production, together with the provision of farm inputs requiied for the initial production of vege- tables. Part E: Construction of storage facilities and provision of wooden packing boxes and ventilating fans for on-farm storage of fruits. * * P The Proj ect is expected to be completed by June 30, 1980. -23- SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 1 and August 1 beginning August 1, 1980 740,ooo through February 1, 1993 On August 1, 1993 760,000 To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equiva- lents determined as for purposes of withdrawal. 124- Premiums on Prepayment The following percentages are specified as the premiums pay- able on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.55% More than three years but not more than six neIrs before maturity 3.15% More than six years but not more than eleven years before maturity 5.75% More than eleven years but not more than fifteen years before maturity 7.85% More than fifteen years before maturity 8.90% - 25 - SCHEDULE 4 Lending Terms and Conditions Applicable to the Subsidiary Loan and the Government Loan 1. NACF shall pay interest at a rate identical to the rate speci- fied in Section 2.06 of this Agreement on the principal amounts of the Subsidiary Loan withdrawn and outstanding from time to time. 2. NACF shall pay interest at a rate of 5.7% per annum on the principal amounts of the Government Loan withdrawn and outstanding from time to time. 3. The repayment period of the Subsidiary and the Government Loans shall be 17 years, including a grace period of 3.5 years. 4. The Borrower shall bear the foreign exchange risk of the Subsidiary Loan. -26- SCHEDULE 5 Establishment and Operation of the Special Fund 1. For the purposes of implementing the Project, NACF shall establish an account called the Special Fund and shall maintain such Fund for a period of not less than 17 years from the Effective Date of this Agreement. 2. The Special Fund shall be credited from time to time with: (a) the equivalent in terms of currency of the Borrower of the proceeds of the Loan withdrawn from time to time by the Borrower; (b) the amounts lent by the Borrower to NACF under the Government Loan; and (c) the repayment monies received from the Beneficiaries of Sub-Loans. 3. Monies standing to the credit of the Special Fund shall be uset by NACF for relending to Participating Gun Cooperatives in accordance with Section 2.02 of the Project Agreement.