Conformed Copy - L3585 - Institution Building Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3585 AM Loan Agreement (Institution Building Project) between REPUBLIC OF ARMENIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated April 7, 1993 LOAN NUMBER 3585 AM LOAN AGREEMENT AGREEMENT, dated April 7, 1993, between REPUBLIC OF ARMENIA (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS: (A) 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; (B) to assist in the financing of the Project, the Borrower intends to obtain: (i) grant funds in an amount equivalent to $3,700,000 from the United States Agency for International Development (USAID); and (ii) a grant in an amount equivalent to $1,000,000 from the European Community (EC) (USAID and EC hereinafter referred to collectively as the Cofinanciers) on the terms and conditions set forth in agreements to be entered into between the Borrower and the Cofinanciers; 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: Page 2 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: (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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "PIU" means Project Implementation Unit established within the Borrower's Ministry of the Economy, Department of Foreign Economic Relations; (b) "Project Agencies" means, collectively, the Borrower's ministries and other governmental agencies referred to in the Annex to Schedule 2 to this Agreement; (c) "Employment Offices" means, collectively, the local agencies providing employment services and subordinated to the Borrower's Ministry of Labor and Social Protection; (d) "Project Preparation Advance" means the project preparation advance granted by the Bank to the Borrower pursuant to an exchange of letters dated December 2, 1992 and December 4, 1992 between the Borrower and the Bank; and (e) "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 twelve million dollars ($12,000,000), 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 US dollars a special deposit account in a commercial 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 5 to this Agreement. (c) Promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount required to repay the principal amount of the Project Preparation Advance withdrawn and outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advance shall thereupon be cancelled. Section 2.03. The Closing Date shall be November 30, 1996, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Page 3 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. (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 March 15 and September 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 or cause the Project to be carried out, through the respective Project Agencies in accordance with the provisions of the Annex to Schedule 2 to this Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and technical practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. Page 4 Section 3.02. For the purpose of overall administration of the activities to be carried out under the Project and the procurement of goods and services required thereof, the Borrower shall maintain within the Ministry of the Economy the PIU to be headed by a full-time project manager, whose experience and qualifications shall be acceptable to the Bank, and who shall be assisted by competent staff in adequate numbers and having appropriate skills. Section 3.03. Not later than April 30, 1994, the Borrower shall submit for the Bank approval a plan referred to in Part A (3,(c)) of Schedule 2 to this Agreement. Section 3.04. Except as the Bank shall otherwise agree, procurement of the goods 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. (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. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02(1) of the General Conditions, the following additional events are specified: Page 5 (a) The USAID grant funds shall have failed to become available to ensure the carrying out on a timely basis of the activities described in Parts A(1) and D of Schedule 2, provided, however, that the provisions of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement; (b) The EC grant funds shall have failed to become available by April 30, 1994, to ensure the carrying out of the activities described in Part C (2) and (4) of Schedule 2, or such later date as the Bank may agree, provided, however, that the provision of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that adequate funds for the Project are available to the Borrower from other sources on the terms and conditions consistent with the obligations of the Borrower under this Agreement; (c) (i) Subject to subparagraph (ii) of this paragraph the right of the Borrower to withdraw the proceeds of any grant made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor; (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that: (A) such suspension, cancellation or termination is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. ARTICLE VI Effective Date; Termination Section 6.01. 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 shall have appointed a project manager for the PIU in accordance with the provisions of Section 3.02 of this Agreement. Section 6.02. 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 VII Representative of the Borrower; Addresses Section 7.01. The Minister of the Economy 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: Ministry of the Economy Government House Republic Square, 375010 Yerevan, Armenia Fax: Telex: (7885) 252-4332 243331 LADA SU 215-1069 215-1036 For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 Page 6 United States of America Cable address: Telex: INTBAFRAD 248423 (RCA) 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. REPUBLIC OF ARMENIA By /s/ Rouben Shugarian Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Basil Kavalsky Acting Regional Vice President Europe and Central Asia 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) Consultants' 5,330,000 100% services, fellowships, and training (2) Computers, 3,670,000 100% of foreign equipment, other expenditures, materials 100% of local expenditures (ex-factory cost) and 75% of local expenditures for other items procured locally (3) Unallocated 2,000,000 (4) Refunding of 1,000,000 Amounts due Project pursuant to Preparation Section 2.02 (c) Advance of this Agreement TOTAL 12,000,000 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 exceeding the equivalent of $1,000,000, may be made in respect of Category (1) on account of payments made for expenditures before that date but after January 1, 1993. SCHEDULE 2 Description of the Project The objectives of the Project are to strengthen the Borrower's institutional capacity to design and implement economic reform; to help accelerate the reform process; and to help the restructuring of the economy by hastening the pace at which rehabilitation and investment operations can take place. 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: Part A: Economic Management (1) Economic Policy Formulation/Aid Coordination: (a) The design and development of a program for strengthening of the Ministry of the Economy capacity for macroeconomic and sectoral policy analysis and formulation and supporting its aid coordination capacity; (b) Carrying out of a study to clarify the relative roles and functions of the Ministry of Finance and the Ministry of the Economy; (c) The establishment of the debt reporting mechanism in the Ministry of Finance; and (d) Strengthening of the Statistical Department through provision of the equipment. (2) Legal Reform: The design and establishment of a legal and institutional framework for the private sector through the provision of legal advisory services, legal training and equipment necessary for the foregoing. (3) Social Safety Net/Employment Issues: (a) The design and implementation of plans to improve the capacity of employment service and to computerize the activities of the Employment Offices; (b) The development of a system for determining the poverty line and analysis of options for social assistance strategies; and (c) The design and implementation of a plan for building capacity for providing relevant training and retraining for unemployed people. Part B: Resource Mobilization (1) Tax Administration: The provision of advisory services, training and computerization plans to improve the capacity of the Tax Inspectorate to design tax policies and administer the tax program. (2) Customs Administration/Trade Facilitation: The establishment of a customs administration in line with the transformation to a private, market economy and on the basis of international standards through: (a) modernizing customs laws and regulations; Page 8 (b) reviewing the organization and procedures of customs operations; (c) providing essential training in various customs functions, such as classification and evaluation; (d) computerizing customs clearance procedures, accounts and statistics; and (e) promoting private sector development through the pilot establishment of a business service center or trade point. Part C: Enterprise Reform: Carrying out of a program of enterprise privatization and restructuring by provision of: (1) consulting services in undertaking an industrial sector study to review policy options and appropriate targeting of restructuring and privatization efforts; (2) advisory and experts services to the State Privatization Commission and Privatization Board on strategy and methodology in preparing and implementing privatization transactions; (3) consulting services to market a limited number of large enterprises; (4) assistance to worker/management-initiated privatization and implementation of mass privatization; (5) in-service and external training and study tours; (6) financing of voucher printing costs; and (7) consulting services in developing and implementing actions to improve management and financial performance for enterprises remaining in the state sector. Part D: Financial Reform: The establishment of the infrastructure for financial sector reform through provision of expert assistance, training and equipment in the following areas: (1) banking supervision; (2) introduction of international standard accounting and auditing standards for commercial banks and enterprises; (3) training in commercial banking skills; and (4) financial sector strategic planning and services. * * * The Project is expected to be completed by April 30, 1996. ANNEX TO SCHEDULE 2 Project Agencies Responsible for Execution of the Project Part of the Project Agency Part A (1) Ministry of the Economy Ministry of Finance Statistical Department Part A (2) Department of Economic Reform Ministry of Justice Part A (3) Ministry of Labor and Social Protection Part A (3,b) Department of Economic Reform Page 9 Part B (1) Tax Inspectorate Part B (2) Customs Administration Part C State Privatization Commission Privatization Board Ministry of the Economy Part D National Bank of Armenia Ministry of Finance Ministry of the Economy SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* September 15, 1998 225,000.00 March 15, 1999 235,000.00 September 15, 1999 240,000.00 March 15, 2000 250,000.00 September 15, 2000 260,000.00 March 15, 2001 270,000.00 September 15, 2001 280,000.00 March 15, 2002 290,000.00 September 15,2002 300,000.00 March 15, 2003 310,000.00 September 15, 2003 325,000.00 March 15, 2004 335,000.00 September 15, 2004 350,000.00 March 15, 2005 360,000.00 September 15, 2005 375,000.00 March 15, 2006 390,000.00 September 15, 2006 400,000.00 March 15, 2007 415,000.00 September 15, 2007 435,000.00 March 15, 2008 450,000.00 September 15, 2008 465,000.00 March 15, 2009 485,000.00 September 15, 2009 500,000.00 March 15, 2010 520,000.00 September 15, 2010 540,000.00 March 15, 2011 560,000.00 September 15, 2011 580,000.00 March 15, 2012 600,000.00 September 15, 2012 625,000.00 March 15, 2013 630,000.00 ____________________________ * 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 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 Page 10 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 and Works Part A: International Competitive Bidding 1. Except as provided in Part C hereof, goods 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 shall be grouped into bid packages estimated to cost the equivalent of $300,000 or more. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in the Republic of Armenia 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 1. Items for Part C(6) of the Project may be procured under contracts awarded through limited international bidding procedure on the basis of evaluation and comparison of bids invited from a list of potential qualified suppliers broad enough to ensure competitive prices (at least three) eligible under the Guidelines and in accordance with the procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof). 2. Items or groups of items estimated to cost the equivalent of more than $50,000 but less than $300,000 per contract, up to an aggregate amount equivalent to $1,200,000, may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers from at least three different countries eligible under the Guidelines, in accordance with procedures acceptable to the Bank. 3. Items or groups of items estimated to cost the equivalent of less than $50,000 per contract, up to an aggregate amount equivalent to $200,000, 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. 4. Contracts for goods which are of proprietary nature or which require Page 11 standardization with existing equipment may be awarded after direct negotiations with suppliers, in accordance with procedures acceptable to the Bank. Part D: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract procured under International Competitive Bidding set forth in part A of Section 1 of this Schedule 4 and the first two contracts procured under international shopping and direct contracting procedures set forth in part C(2) and (4) of Section 1 of this Schedule 4, 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 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) and (2) 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 provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $1,000,000 to be withdrawn from the Loan Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for eligible Page 12 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 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 Page 13 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.