Conformed Copy - C2882 - Privatization and Private Sector Technical Assistance Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2882 CM DEVELOPMENT CREDIT AGREEMENT (Privatization and Private Sector Technical Assistance Project) between REPUBLIC OF CAMEROON and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated July 23, 1996 Credit Number 2882 CM DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated July 23, 1996, between REPUBLIC OF CAMEROON (the "Borrower") and INTERNATIONAL DEVELOPMENT ASSOCIATION (the "Association"). WHEREAS: (A) the Association has received a letter, dated February 6, 1996, from the Borrower describing a program of actions, objectives and policies designed to achieve structural adjustment of the Borrower's economy, including a privatization program (hereinafter called the "Privatization Program"), and declaring the Borrower's commitment to the execution of the Privatization Program; (B) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (C) by agreement, dated August, 13, 1993 (the "EU Grant Agreement") the European Union ("EU") has agreed to make a grant (the "EU Grant") to the Borrower in an aggregate principal amount equivalent to CFAF 5,993,000,000, to assist in financing part of the Project on the terms and conditions set forth in the EC Grant Agreement; and (D) by an agreement, dated May, 3 1994, (the "CFD Loan Agreement") the Caisse Francaise de Developpement ("CFD") has agreed to make a loan (the "CFD Loan") in an amount equivalent to CFAF 2,500,000,000, to assist in financing part of the Project on the terms and conditions set forth in Page 2 the CFD Loan Agreement; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit 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 Development Credit Agreements" of the Association, 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) The second sentence of Section 5.01 is modified to read: "Except as the Association and the Borrower shall otherwise agree, no withdrawals shall be made: (a) on account of expenditures in the territories of any country which is not a member of the Bank or for goods produced in, or services supplied from, such territories; or (b) for the purpose of any payment to persons or entities, or for any import of goods, if such payment or import, to the knowledge of the Association, is prohibited by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations." 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) "CFA Franc" or "CFAF" means Franc de la Communaute Financiere de l'Afrique Centrale, the currency of the Borrower; (b) "MINEFI" means the Borrower's Ministry of Economy and Finance; (c) "MINJUSTICE" means the Borrower's Ministry of Justice; (d) "PE" means any enterprise in which the Borrower has directly or indirectly (through any of its subdivisions or through any other enterprise) a financial participation equivalent to 20% or more of the equity of such enterprise; (e) "Project Implementation Manual" means the manual referred to in paragraph 1 of Schedule 4 to this Agreement, to be adopted in accordance with Section 6.01 (b) of this Agreement; (f) "Project Preparation Advance" means, collectively, the project preparation advances granted by the Association to the Borrower pursuant to the exchanges of letters, dated December 8, 1994 and November 2, 1995, between the Borrower and the Association; (g) "PTU" means the Privatization Technical Unit (Commission Technique de Privatisation) established by the Borrower's decree No. 96/014, dated January 23, 1996; (h) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; and (i) "SRC" means Societe de Recouvrement des Creances du Cameroun, a financial public corporation established by the Borrower's decrees No. 89/1283, dated August 18, 1989, and No. 91/066, dated January 23, 1991. ARTICLE II Page 3 The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to eight million eight hundred thousand Special Drawing Rights (SDR 8,800,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Association 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 Credit. (b) The Borrower may, for the purposes of the Project, open and maintain in CFAF a special deposit account in a commercial bank on terms and conditions satisfactory to the Association, 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 Association shall, on behalf of the Borrower, withdraw from the Credit 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 canceled. Section 2.03. The Closing Date shall be December 31, 1999 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from the date sixty (60) days after the date of this Agreement (the "Accrual Date") to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or canceled; and (ii) at the rate set as of the June 30 immediately preceding the Accrual Date or at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next payment date in that year specified in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on May 15 and November 15 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each May 15 and November 15, commencing November 15, 2006 and ending May 15, 2036. Each installment to and including the installment payable on May 15, 2016 shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (b) Whenever (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 Dollars for five consecutive years, and (ii) the Bank shall consider the Borrower creditworthy for Page 4 Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consideration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.08. The currency of the French Republic is hereby specified for the purposes of Section 4.02 of the General Conditions. 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 Part A of the Project through PTU, Parts B and C of the Project through MINEFI and Part D of the Project through MINJUSTICE, with due diligence and efficiency and in conformity with appropriate administrative, financial, banking and legal practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for such Parts of the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Association shall otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 4 to this Agreement. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. For the purposes of Section 9.07 of the General Conditions and without limitation thereto, the Borrower shall: (a) prepare, on the basis of guidelines acceptable to the Association, and furnish to the Association not later than six (6) months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, a plan for the future operation of the Project; and (b) afford the Association a reasonable opportunity to exchange views with the Borrower on said plan. 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 Page 5 Section, including those for the Special Account and for the sub-accounts referred to in Schedule 4 to this Agreement, for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association, as soon as available, but in any case not later than six (6) months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit 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 Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account or payment out of the Special Account or its sub-accounts was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association'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 Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) a situation has arisen which shall make it improbable that the Privatization Program, or a significant part thereof, will be carried out. (b) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any loan or grant made to the Borrower for the financing of the Project shall have been suspended, canceled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor; or (B) any such loan shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform Page 6 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. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional event is specified, namely that the event specified in paragraph (b) (i) (B) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (b) (ii) of that Section. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the Borrower has employed, in accordance with the provisions of Section II of Schedule 3 to this Agreement, an accounting firm acceptable to the Association for the purposes of Section 4.01 (b) of this Agreement; and (b) the Borrower has adopted the Project Implementation Manual satisfactory to the Association. 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 Representatives of the Borrower; Addresses Section 7.01. The Minister at the time responsible for economy and finance 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 Economy and Finance Yaounde Republic of Cameroon Cable address: Telex: MINEFI 8260 KN Yaounde With copy to: Caisse Autonome d'Amortissement Yaounde Republic of Cameroon For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: Page 7 INDEVAS 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 CAMEROON By /s/ Pierre Nzengue Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Callisto E. Madavo Regional Vice President Africa SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit % of Allocated Expenditures (Expressed in to be Category SDR Equivalent) Financed (1) Consultants 100% and training under: (a) Part A of 4,160,000 the Project (b) Part B of 470,000 the Project (c) Part C of 1,180,000 the Project (d) Part D of 210,000 the Project (e) Project audits 100,000 (2) Goods under: 90% (a) Part A of 150,000 the Project (b) Part C of 140,000 the Project Page 8 (c) Part D of 80,000 the Project (3) Publication 310,000 90% services under Part D of the Project (4) Incremental 250,000 90% operating costs under Part A of the Project: (5) Refunding of 1,380,000 Amounts due Project pursuant to Preparation Section 2.02 (c) Advance of this Agreement (6) Unallocated 370,000 _________ TOTAL 8,800,000 ========= 2. For the purposes of this Schedule, the term "incremental operating costs" means expenditures incurred by PTU for staff travel and associated subsistence, office rental, office supplies and communication, and fuel and maintenance for vehicles. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement; and (b) payments under Category 3 of paragraph 1 above, until the Borrower has submitted an action plan satisfactory to the Association for resumption of the publication of the Official Gazette. 4. The Association may require withdrawals from the Credit Account to be made on the basis of statements of expenditure for expenditures for goods and services under contracts costing less than $50,000 equivalent, under such terms and conditions as the Association shall specify by notice to the Borrower. SCHEDULE 2 Description of the Project The objectives of the Project are to: (i) assist in the implementation of the Privatization Program and improve the institutional framework therefor; (ii) improve the enabling environment for private sector development in areas complementary to the Privatization Program; (iii) support the reform of the financial sector; and (iv) strengthen the functioning of the judicial system. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Privatization 1. Defining and implementing privatization procedures under the Privatization Program. 2. Carrying out the privatization or liquidation of PEs already identified under the Privatization Program or to be identified in accordance with the procedures under paragraph 1 of this Part. 3. Carrying out a public relations campaign aimed at: (a) presenting the objectives of the Privatization Program to increase public awareness; (b) describing investment opportunities arising out of the Privatization Program to attract foreign investors; and (c) ensuring information on Page 9 specific divestiture operations. 4. Strengthening of PTU's capacity to prepare and execute privatizations through staff training, provision of technical advisory services and the acquisition of equipment. Part B: Private Sector Development 1. Preparation of draft legislation on competition, mining and energy and other areas related to the development of the private sector. 2. Provision of technical advisory services to improve the regulation of the private sector and the system of investment incentives. Part C: Financial Sector 1. Supporting the reorganization of SRC and its operations to increase the recovery of bad loans through computerization and the provision of technical advisory services. 2. Supporting the restructuring/privatization of two major financial institutions through the provision of financial and legal technical advisory services. Part D: Judicial System Strengthening MINJUSTICE through: (a) staff training, provision of technical advisory services and the acquisition of equipment for the Inspection Office; (b) resumption of the publication of the Official Gazette; (c) contributing to the publication of the judgments of the Supreme Court and of the Courts of Appeals; and (d) acquiring law books and periodicals for the libraries of courts and tribunals and contributing to the publication of a commercial law review. * * * The Project is expected to be completed by June 30, 1999. SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods Part A: General Goods shall be procured in accordance with the provisions of Section I of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995 and revised in January 1996 (the "Guidelines") and the following provisions of this Section, as applicable. Part B: International Competitive Bidding 1. Except as otherwise provided in Part C of this Section, goods and works shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto. 2. The following provisions shall apply to goods and works to be procured under contracts awarded in accordance with the provisions of paragraph 1 of this Part. Preference for domestically manufactured goods and domestic contractors The provisions of paragraphs 2.55 and 2.56 of the Guidelines and Appendix 2 thereto shall apply to goods manufactured in the territory of the Borrower and works Page 10 to be carried out by domestic contractors. Part C: Other Procurement Procedures National Competitive Bidding Goods estimated to cost less than $100,000 equivalent per contract, up to an aggregate amount not to exceed $210,000 equivalent, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. Part D: Review by the Association of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to prequalify for bidding or to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Association for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods shall be undertaken in accordance with such procurement plan as shall have been approved by the Association, and with the provisions of said paragraph 1. 2. Prior Review With respect to each contract for the procurement of goods estimated to cost the equivalent of $50,000 or more, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. Section II. Employment of Consultants 1. Consultants' services shall be procured under contracts awarded in accordance with the provisions 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 "Consultants' Guidelines"). For complex, time-based assignments, such contracts shall be based on the standard form of contract for consultants' services issued by the Bank, with such modifications as shall have been agreed by the Association. Where no relevant standard contract documents have been issued by the Bank, other standard forms acceptable to the Association shall be used. 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultants' Guidelines requiring prior Association review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts shall not apply to (a) contracts for the employment of consulting firms estimated to cost less than $20,000 equivalent each, or (b) contracts for the employment of individuals estimated to cost less than $5,000 equivalent each. However, said exceptions to prior Association review shall not apply to (a) the terms of reference for such contracts, (b) single-source selection of consulting firms, (c) assignments of a critical nature, as reasonably determined by the Association, (d) amendments to contracts for the employment of consulting firms raising the contract value to $20,000 equivalent or above, or (e) amendments to contracts for the employment of individual consultants raising the contract value to $5,000 equivalent or above. SCHEDULE 4 Implementation Program 1. The Borrower shall carry out the Project in conformity with a Project Implementation Manual which shall contain, inter alia, the procurement, disbursement, accounting, financial management and other implementation arrangements for the Project, including standard bidding documents for consultants, the list of consultants' services, the terms of reference of the main studies and support services to be arried out, and estimated costs thereof. Page 11 2. The Borrower shall: (a) ensure that all its departments and agencies responsible for carrying out the Project or any part thereof shall comply with the procedures included in the Project Implementation Manual; and (b) not amend or waive the Project Implementation Manual without the Association's prior written approval. 3. The Borrower shall: (a) set out in the Project Implementation Manual and thereafter maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory to the Association, the carrying out of the Privatization Program, the Project and the achievement of the objectives thereof; (b) prepare, under terms of reference satisfactory to the Association, and furnish to the Association, on or about September 30, 1997, a report integrating the results of the monitoring and evaluation activities performed pursuant to sub-paragraph (a) above, on the progress achieved in the carrying out of the Privatization Program and the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Privatization Program, the Project and the achievement of the objectives thereof during the period following such date; and (c) review with the Association, by November 30, 1997, or such later date as shall be agreed with the Association, the report referred to in sub-paragraph (b) above and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of said report and the Association's views on the matter. 4. The Borrower shall maintain PTU for the duration of the Project: (a) with staffing satisfactory to the Association; and (b) with responsibilities which shall not be modified in a manner not satisfactory to the Association. 5. For the purposes of the Project, the Borrower shall maintain in the names respectively of PTU, MINEFI and MINJUSTICE three sub-accounts under terms and conditions acceptable to the Association. Replenishments of the sub-accounts for eligible expenditures to be financed under the Project shall be made from the Special Account in accordance with the provisions of Schedule 5 to this Agreement. SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "Eligible Categories" means Categories (1) to (4) 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 Credit 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 CFAF 250,000,000 to be withdrawn from the Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Association shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to CFAF125,000,000 until the aggregate amount of withdrawals shall be equal to or exceed the equivalent of SDR1,500,000. 2. Payments out of the Special Account shall be made exclusively for Eligible Expenditures in accordance with the provisions of this Schedule. Page 12 3. After the Association 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 Association 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 Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into 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 Association requests for deposits into the Special Account at such intervals as the Association shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association 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 Association shall, on behalf of the Borrower, withdraw from the Credit 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 Association from the Credit 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 Association shall reasonably request, furnish to the Association 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 Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; (b) if the Borrower shall have failed to furnish to the Association, within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Association pursuant to said Section in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Association shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Credit Account pursuant to the provisions of Section 6.02 of the General Conditions; or (d) once the total unwithdrawn amount of the Credit allocated to the Eligible Categories, less the amount of any outstanding special commitment entered into by the Association 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 Credit Account of the remaining unwithdrawn amount of the Credit allocated to the Eligible Categories shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association 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. Page 13 6. (a) If the Association 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 Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Association shall otherwise agree, no further deposit by the Association into the Spaecial 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 Association 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 Association, refund to the Association such outstanding amount. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.