Conformed Copy - L3581 - Sixth Railway Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3581 CHA (Sixth Railway Project) between PEOPLE'S REPUBLIC OF CHINA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated April 15, 1993 LOAN NUMBER 3581 CHA LOAN AGREEMENT AGREEMENT, dated April 15, 1993, between PEOPLE'S REPUBLIC OF CHINA (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; 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 set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth below (the General Conditions) constitute an integral part of this Agreement: Page 2 (a) The last sentence of Section 3.02 is deleted. (b) In Section 6.02, sub-paragraph (k) is re-lettered as sub-paragraph (l) and a new sub-paragraph (k) is added to read: "(k) An extraordinary situation shall have arisen under which any further withdrawals under the Loan would be inconsistent with the provisions of Article III, Section 3 of the Bank's Articles of Agreement." Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "MOR" means the Borrower's Ministry of Railways or any successor thereto. (b) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, various currencies that shall have an aggregate value equivalent to the amount of four hundred twenty million dollars ($420,000,000), being the sum of withdrawals of the proceeds of the Loan, with each withdrawal valued by the Bank as of the date of such withdrawal. Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special deposit account in a bank on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 6 to this Agreement. Section 2.03. The Closing Date shall be June 30, 1999 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during 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 Borrowings determined in respect of such Semester. (c) For the purposes of this Section: (i) "Interest Period" means a six-month period ending on the date immediately preceding each date specified in Section 2.06 of this Agreement, beginning with the Interest Period in which this Agreement is signed. Page 3 (ii) "Cost of Qualified Borrowings" means the cost, as reasonably determined by the Bank and expressed as a percentage per annum, of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings or portions thereof as the Bank has allocated to fund: (A) the Bank's investments; and (B) loans which may be made by the Bank after July 1, 1989 bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. (iii) "Semester" means the first six months or the second six months of a calendar year. (d) On such date as the Bank may specify by no less than six months' notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: "(a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Quarter equal to the Cost of Qualified Borrowings determined in respect of the preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period." "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Quarter." "(c) (iii) `Quarter' means a three-month period commencing on January 1, April 1, July 1 or October 1 in a calendar year." Section 2.06. Interest and other charges shall be payable semiannually on May 15 and November 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower 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 MOR, with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and technical practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Bank shall otherwise agree, the Borrower shall cause MOR to carry out the Project in accordance with the Implementation Program set forth in Schedule 5 to this Agreement. Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods, technology and technical know-how contracts, and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound 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. Page 4 (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account 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 six months after the end of each such year, 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 said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account or payment out of the Special Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 4.02. (a) Except as the Bank shall otherwise agree, the Borrower shall cause MOR, from time to time to take, or cause to be taken, all such measures (including, but not limited to, adjustments of the structure or levels of its tariffs and surcharges) as shall be required to produce in 1994, and each year thereafter, funds from internal sources equivalent to 80% or more of total capital expenditures to be made in the following year. (b) For purposes of this Section: (i) The term "funds from internal sources" means the sum of (a) contributions to the Capital Construction Fund and the Railway Construction Fund, and (b) Depreciation. (ii) The term "net income" means the excess of total revenues over total expenses and financial obligations. (iii) The term "total revenues" means the sum of revenues from all sources related to railway transport operations net of business tax. (iv) The term "total expenses" means the sum of all expenses relating to operations, including maintenance, administration, and depreciation. (v) The term "financial obligations" means interest and other charges on debt, repayment of loans (including sinking fund payments, if any), all taxes or payments in lieu of taxes, allocations to special funds and other cash distributions of surplus Page 5 (including mandatory transfers to the Borrower), and any other cash outflows (other than capital expenditures) related to operations. (vi) The term "total capital expenditures" means the annual capital investment, including investment for equipment replacements. (vii) The term "Capital Construction Fund" means the fund established and maintained by the Borrower comprising funds being the difference between net income and funds deposited in the Special Fund for Health, Education and Welfare. (viii) The term "Railway Construction Fund" means the fund established and maintained by the Borrower comprising revenues generated from the surcharge levied on freight transport. (ix) The Special Fund for Health, Education and Welfare means the fund established and maintained by the Borrower into which contributions to future expenditures related to the health, education, and welfare of railway employees and their dependents are deposited. ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the Borrower's State Council has approved the Loan Agreement. Section 5.02. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance Sanlihe Beijing 100820 People's Republic of China Cable address: Telex: FINAMIN 22486 MFPRC CN Beijing 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 248423 (RCA), Page 6 Washington, D.C. 82987 (FTCC), 64145 (WUI) or 197688 (TRT) 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. PEOPLE'S REPUBLIC OF CHINA By /s/ Zhao Xixin Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Daniel Ritchie 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 expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Goods 385,800,000 100% of foreign expenditures, 100% of local expenditures (ex-factory cost), and 75% of local expend- itures for other items procured locally (2) Technology and 5,000,000 100% technical know-how contracts (3) Consultants' 9,200,000 100% services and training (4) Unallocated 20,000,000 ___________ TOTAL 420,000,000 Page 7 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 for goods or services supplied from the territory of any country other than that of the Borrower; and (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. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not to exceed $600,000, may be made in respect of Category 3 set forth in the table in paragraph 1 of this Schedule on account of payments made for expenditures before that date but after August 31, 1992. SCHEDULE 2 Description of the Project The objectives of the Project are to support the Borrower's efforts in carrying out: (i) expansion of railway capacity and modernization of railway technology on a systemwide basis; and (ii) railway policy, management and modernization initiatives. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: A. Expansion and Modernization of Railways 1. Expansion of railway capacity by: (a) electrification and modernization of (i) about six hundred and ninety-four kilometers double-track railway line between Beijing and Zhengzhou, and (ii) about eleven hundred kilometers single-track railway line between Chengdu and Kunming; and (b) upgrading of signaling and telecommunications installations, technical standards, station layouts, and maintenance facilities on both said lines to accommodate longer and heavier trains; lengthening of station sidings, works on bridges and tunnels, and modification of locomotive maintenance workshops and depots for electric locomotives. 2. Mechanization of the track maintenance and establishment of computerized monitoring systems. 3. (a) Introduction of modern machine tools for manufacturing locomotive and rolling stock parts, and (b) transfer of modern technology for designing and manufacturing airbrakes and casting equipment parts. 4. Expansion and modernization of MOR's telecommunications network, implementation of the first phase of a transport management information system, and institutional strengthening of MOR's telecommunications services. 5. Establishment of a pilot container transport system with a view to: (a) encourage MOR to shift priority from domestic cargo to international cargo; (b) upgrade the container handling equipment and container rolling stock; (c) modernize container operations by eliminating hump-yard operations and minimizing the number of stations to be served; and (d) strengthen the institutional capability in the marketing and handling of international cargo. B. Technical Assistance and Training 1. Application and refinement of the decision support system developed under the Railway Investment Study (RIS) prepared under the Fifth Railway Project (LN. 3406 CHA) to strengthen MOR's investment planning capability. Page 8 2. Carrying out of various studies regarding railway tariffs, accounting, economic contracting system and management, container transport, cost-effective technology evaluation, and environmental protection, and formulation and implementation of recommendations and actions plans pursuant thereto. 3. Provision of technical assistance and training in respect of or relating to: (a) establishment of new accounting standards; (b) corporate management and planning; (c) modernization of information technology; (d) operation of the transport management information system; (e) an investigation for the adaptation of foreign technology for steel wheel casting; (f) preparation of computerized container information systems to support pilot container operations; and (g) a program for adapting, testing, and debugging transport management information system software. * * * The Project is expected to be completed by December 31, 1998. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* November 15, 1998 7,850,000 May 15, 1999 8,145,000 November 15, 1999 8,445,000 May 15, 2000 8,760,000 November 15, 2000 9,085,000 May 15, 2001 9,425,000 November 15, 2001 9,775,000 May 15, 2002 10,135,000 November 15, 2002 10,515,000 May 15, 2003 10,905,000 November 15, 2003 11,310,000 May 15, 2004 11,730,000 November 15, 2004 12,165,000 May 15, 2005 12,615,000 November 15, 2005 13,085,000 May 15, 2006 13,570,000 November 15, 2006 14,075,000 May 15, 2007 14,600,000 November 15, 2007 15,140,000 May 15, 2008 15,705,000 November 15, 2008 16,285,000 May 15, 2009 16,890,000 November 15, 2009 17,520,000 May 15, 2010 18,170,000 November 15, 2010 18,845,000 May 15, 2011 19,545,000 November 15, 2011 20,270,000 May 15, 2012 21,025,000 November 15, 2012 21,805,000 May 15, 2013 22,610,000 _____________________________ * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment Page 9 Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on the principal amount of any maturity of the Loan to be prepaid shall be the percentage specified for the applicable time of prepayment below: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years 0.15 before maturity More than three years but 0.30 not more than six years before maturity More than six years but 0.55 not more than 11 years before maturity More than 11 years but not 0.80 more than 16 years before maturity More than 16 years but not 0.90 more than 18 years before maturity More than 18 years before 1.00 maturity SCHEDULE 4 Procurement and Consultants' Services Section I. Procurement of Goods Part A: International Competitive Bidding 1. Except as provided in Part C hereof, goods, technology and technical know-how shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1992 (the Guidelines). For fixed-price contracts, the invitation to bid referred to in paragraph 2.13 of the Guidelines shall provide that, when contract award is delayed beyond the original bid validity period, the successful bidder's bid price will be increased for each week of delay by two predisclosed correction factors acceptable to the Bank, one to be applied to all foreign currency components and the other to the local currency component of the bid price. Such an increase shall not be taken into account in the bid evaluation. 2. To the extent practicable, contracts for goods and technology and technical know-how shall each be grouped into bid packages estimated to cost the equivalent of $200,000 or more respectively. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in China may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures Page 10 1. Items or groups of items of goods, estimated to cost the equivalent of $200,000 or less per contract, up to an aggregate amount not to exceed the equivalent of $10,000,000, may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Bank. Part D: Review by the Bank of Procurement Decision 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $2,000,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, said procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 6 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals are to be made on the basis of statements of expenditure. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants 1. In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981 (the Consultant Guidelines). 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Bank review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts shall not apply to contracts estimated to cost less than $100,000 equivalent each. However, this exception to prior Bank review shall not apply to the terms of reference for such contracts nor to the employment of individuals, to single source selection of firms, to assignments of a critical nature as reasonably determined by the Bank and to amendments of contracts raising the contract value to $100,000 equivalent or above. SCHEDULE 5 Implementation Program 1. Except as the Bank may otherwise agree, the Borrower shall: (a) implement Part A of the Project in accordance with a schedule agreed to by the Bank, (b) monitor implementation of the Project and furnish periodic progress reports in respect thereof at such intervals and in such form as may be reasonably requested by the Bank, and (c) ensure that performance indicators for Part A of the Project will equal or exceed their targets agreed to by the Bank. 2. The Borrower shall carry out the technical assistance and training under Part B of the Project in accordance with programs agreed to by the Bank. Page 11 3. The Borrower declares its commitment to the Bank's policy on resettlement, and, to this end, shall: (a) carry out the land acquisition and resettlement activities under Part A of the Project pursuant to the Resettlement Action Plan, prepared by the Borrower, in a manner satisfactory to the Bank; and (b) monitor, evaluate, and furnish results of the said resettlement as reasonably requested by the Bank. 4. The Borrower shall: (a) undertake and, by October 31, 1993, complete a tariff study under terms of reference satisfactory to the Bank; (b) immediately upon completion of the said study, prepare, in consultation with the Bank, a set of recommendations and plans to rationalize railway tariffs on the basis of results of the costing and other analyses; and (c) thereafter take appropriate steps to implement the said recommendations and plans taking into account comments, if any, made by the Bank. 5. The Borrower shall: (a) undertake and, by October 31, 1993, complete a rail-based container transport study, under terms of reference satisfactory to the Bank; (b) immediately upon completion of the said study, prepare, in consultation with the Bank, a set of recommendations and plans for expanding and modernizing MOR's container transport services; and (c) thereafter take appropriate steps to implement the said recommendations and plans taking into account comments, if any, made by the Bank. 6. The Borrower shall: (a) undertake and, by October 31, 1993, complete a part of a cost-effective technology evaluation study, under terms of reference satisfactory to the Bank; (b) immediately upon completion of the said study, prepare, in consultation with the Bank, a set of recommendations and plans for implementing changes in railway technologies; and (c) thereafter take appropriate steps to implement the said recommendations and plans taking into account comments, if any, made by the Bank. 7. The Borrower shall: (a) undertake and, by March 31, 1994, complete a railway accounting study, under terms of reference satisfactory to the Bank, and develop a new set of accounting standards for railways in consultation with the Bank; and (b) thereafter take appropriate steps to implement the said standards taking into account comments, if any, made by the Bank. 8. The Borrower shall: (a) undertake and, by September 30, 1994, complete an environmental protection study, under terms of reference satisfactory to the Bank; (b) immediately upon completion of the said study, prepare, in consultation with the Bank, a set of recommendations and plans for strengthening MOR's environmental protection capability; and (c) thereafter take appropriate steps to implement the said recommendations and plans taking into account comments, if any, made by the Bank. 9. The Borrower shall: (a) undertake and, by June 30, 1995, complete an economic contracting system and management study, under terms of reference satisfactory to the Bank; (b) immediately upon completion of the said study prepare, in consultation with the Bank, a set of recommendations and plans for improving MOR's internal management and its economic contracting system; and (c) thereafter take appropriate steps to implement the said recommendations and plans taking into account comments, if any, made by the Bank. SCHEDULE 6 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories 1, 2 and 3 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 goods and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the Page 12 provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $23,000,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account 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 the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower 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 the Borrower, withdraw from the Loan Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower 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, the Borrower 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 the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower 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 under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower 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 the Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower 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 this Agreement; or (b) once the total unwithdrawn amount of the Loan allocated to the eligible Categories, 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 the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. 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 the 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 the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant Page 13 to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower 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 the Borrower 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 the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the 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 this Agreement, including the General Conditions.