Conformed Copy - C1855 - Irrigation IV Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1855 SE Development Credit Agreement (Irrigation IV Project) between REPUBLIC OF SENEGAL and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated May 5, 1988 CREDIT NUMBER 1855 SE DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated May 5, 1988, between REPUBLIC OF SENEGAL (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). 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 Association to assist in the financing of the Project; (B) the Project will be carried out by Societe Nationale d'Amenagement et d'Exploitation des Terres du Delta du Fleuve Senegal et des Vallees du Fleuve Senegal et de la Faleme (SAED) and Caisse Nationale de Credit Agricole du Senegal (CNCAS) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to SAED and CNCAS the proceeds of the Credit as provided in this Agreement; and (C) the Borrower intends to contract from the Federal Republic of Germany (Kreditanstalt fUr Wiederaufbau, KfW), Banque Arabe de Developpement Economique en Afrique (BADEA), the Ministry of Cooperation of the French Republic (MC) and Caisse Centrale de Cooperation Economique (CCCE) loans and grants in a total amount equivalent to approximately twenty-seven million dollars to assist in financing the Page 2 Project on the terms and conditions set forth in the respective loan and grant agreements (the Financing Agreements) to be entered into between the Borrower and each of the aforementioned entities. 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 and in the Project Agreement of even date herewith between the Association and SAED and CNCAS; 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 last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this 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) "Project Agreement" means the agreement among the Association, SAED and CNCAS of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (b) "Grant Agreement" means the agreement to be entered into between the Borrower and SAED pursuant to Section 3.01 (c) (i) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Grant Agreement; (c) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and CNCAS pursuant to Section 3.01 (c) (ii) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (d) "Special Accounts" means the accounts referred to in Section 2.02 (b) of this Agreement; (e) "SAED" means Societe Nationale d'Amenagement et d'Exploitation des Terres du Delta du Fleuve Senegal et des Vallees du Fleuve Senegal et de la Faleme, a "Societe nationale" of the Borrower established pursuant to Law No. 81-57, dated July 10, 1981; (f) Lettre de Mission" means the contract between the Borrower and SAED defining SAED's objectives and policy for the period July 1, 1987 - June 30, 1990, as well as the Borrower's obligations towards SAED in pursuit to these objectives; (g) "ISRA" means the Institut Senegalais de Recherches Agricoles, an Etablissement public a caractere industriel et commercial of the Borrower established pursuant to the Borrower's Law No. 74-53, dated November 4, 1974; (h) "CNCAS" means the Caisse Nationale de Credit Agricole du Senegal, a Societe d'Economie Mixte of the Borrower established pursuant to Law No. 77-89, dated Page 3 August 10, 1977; (i) "Protocol" means the agreement referred to in Section 2.05 of the Project Agreement; (j) "Project Area" means the Senegal River Delta area in the territory of the Borrower; (k) "CFAF" means the currency of the Borrower and other members of the West African Monetary Union; (l) "DCSR" means Direction de la Conservation des Sols et du Reboisement, a directorate within the Borrower's Ministry of Protection of Nature; (m) "CNAPTI" means Centre National d'Application et de Perfectionnement aux Techniques de l'Irrigation, a division of SAED; (n) "DPD" means Direction de la Production et du Developpement, a division of SAED; (o) "MEU" means Monitoring and Evaluation Unit referred to in Section 3.07 of this Agreement; (p) "DPA" means Direction de la Planification et des Amenagements, a division of SAED; (q) "CREDO-SAHEL" means Centre de Recherche et de Documentation sur le Sahel, a non-governmental organization, established pursuant to its by-laws of October 1, 1984; (r) "Subsidiary Grant Agreement" means the agreement to be entered into between SAED and CREDO-SAHEL pursuant to Section 2.01 (b) of the Project Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Grant Agreement; (s) "GIE" means Groupement d'Interet Economique, a farmers' association established to provide agricultural inputs and services to their individual members; (t) "Fiscal Year" means the Borrower's fiscal year which runs from July I to June 30; and (u) "Investment Criteria" means the criteria detailed in the Investment Guide referred to in Section 3.06 of this Agreement. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, an amount in various currencies equivalent to twenty-six million two hundred thousand Special Drawing Rights (SDR 26,200,000). 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 and to be financed out of the proceeds of the Credit. (b) The Borrower shall open and maintain in CFAF in a commercial bank on terms and conditions satisfactory to the Association two special accounts: the first account to be in the name of SAED and for the purposes of Parts Page 4 A, B, D, E, F, G, H and I of the Project (the SAED Special Account) and the second account to be in the name of CNCAS and for the purposes of Part C of the Project (the CNCAS Special Account). Deposits into, and payments out of, any of the Special Accounts shall be made in accordance with the provisions of Schedule 3 to this Agreement. Section 2.03. The Closing Date shall be June 30, 1994 or such later date as the Association shall establish. The Association shall promptly notify the Borrower, SAED and CNCAS of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge at the rate of one-half of one percent (1/2 of 1%) per annum on the principal amount of the Credit not withdrawn from time to time. The commitment charge shall accrue from a date sixty days after the date of the Development Credit Agreement to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or shall be cancelled. (b) The commitment charge shall be paid: (I) at such places as the Association shall reasonably request; (11) 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 percent (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 March I and September 1 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 March 1 and September 1 commencing March 1, 1998, and ending September 1, 2027. Each installment to and including the installment payable on September 1, 2007, 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 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 Page 5 Association, such revision shall not change the grant element obtained under the abovementioned 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, without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, shall cause SAED and CNCAS to perform in accordance with the provisions of the Project Agreement all their respective obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable SAED and CNCAS to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) Without any limitation to the provisions of paragraph (a) above, the Borrower shall, during each Fiscal Year the Project is executed: (i) make sufficient budgetary allocations on the basis of the Lettre de Mission to cover the cost of public service activities carried out by SAED; and (ii) provide SAED, on a regular basis, with the necessary funds required for such activities. (c) The Borrower shall: (i) make the proceeds of the Credit, which may from time to time be allocated to Categories (1) through (4) of the table set forth in Schedule I to this Agreement, available to SAED under a Grant Agreement to be entered into between the Borrower and SAED, under terms and conditions which shall have been approved by the Association; and (ii) relend the proceeds of the Credit, which may from time to time be allocated to Category (5) of the table mentioned above, to CNCAS under a Subsidiary Loan Agreement to be entered into between the Borrower and CNCAS, under terms and conditions which shall have been approved by the Association and shall include: an interest rate of two percent (2%) per annum; a 30-year repayment period and the Borrower shall bear the foreign exchange risk on such on-lending. (d) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association Page 6 and to accomplish the purposes of the Credit and, except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. (e) The Borrower shall take all steps necessary to cause ISRA and DCSR to cooperate with SAED in carrying out Parts G and H of the Project. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works 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 1 to the Project Agreement. Section 3.03. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) shall be carried out by SAED and CNCAS pursuant to Section 2.03 of the Project Agreement. Section 3.04. The Borrower shall: (a) promptly implement the action plan for the disengagement of SAED from production-related activities as provided in the Lettre de Mission; (b) not later than September 30, 1988, furnish to the Association, for its review and comment, a report of progress achieved in the implementation of the disengagement plan referred to in paragraph (a) of this Section; and (c) not later than September 30, 1990, furnish to the Association, a report of progress achieved in the implementation of the Project. Section 3.05. For the purposes of assisting in coordinating the implementation of the Project by SAED and CNCAS, the Borrower shall cause SAED to maintain at all times a Project Chief with qualifications and experience acceptable to the Association. Section 3.06. The Borrower shall: (a) by March 31, 1989, or any other date agreed upon with the Association, publish an Investment Guide, consistent with the principles set forth in the Borrower's Letter of Development Policy, dated April 16, 1987, for appraising and implementing new irrigation investment proposals in the Senegal River region; and (b) ensure that SAED undertakes only irrigation projects which are technically, economically and financially justified in accordance with the provisions of the Investment Guide referred to in paragraph (a) above. Section 3.07. For the purposes of Part E.2 of the Project, the Borrower shall cause SAED to maintain MEU at all times with facilities, staff and other resources needed to discharge its responsibilities under the Project. Section 3.08. The Borrower shall take all measures required on its part to enable SAED and CNCAS to implement the recommendations resulting from the reviews referred to in Sections 2.10 and 2.11 (c), respectively, of the Project Agreement. Page 7 ARTICLE IV Remedies of the Association Section 4.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) SAED and CNCAS shall have failed to perform any of their obligations under the Project Agreement; (b) as a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situation shall have arisen which shall make It improbable that SAED and CNCAS will be able to perform their obligations under the Project Agreement; (c) Law No. 81-57 of July 10, 1981, and Law No. 77- 89 of August 10, 1977, of the Borrower shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of SAED and CNCAS to perform any of their obligations under the Project Agreement; (d) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of SAED and CNCAS or for the suspension of their operations; (e) (i) subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any grant or loan 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 respective Financing 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 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; (f) the Borrower or SAED, as the case may be, shall have failed to perform any of their respective obligations under the Lettre de Mission; and (g) the Lettre de Mission shall have been amended without prior consultation with the Association. Section 4.02. Pursuant to Section 7.01 (d) of the Page 8 General Conditions, the following additional events are specified: (a) the events specified in paragraphs (a) or (f) or (g) of Section 4.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower; (b) the events specified in paragraphs (c), or (d) of Section 4.01 of this Agreement shall occur; and (c) any events specified in paragraph (e)(i) B of Section 4.01 of this Agreement shall occur, subject to the proviso of paragraph (e)(ii) of that Section. ARTICLE V Effective Date; Termination Section 5.01. 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 Grant Agreement has been executed on behalf of the Borrower and SAED; (b) the Subsidiary Grant Agreement referred to in Section 2.01 (b) of the Project Agreement between SAED and CREDO-SAHEL has been executed on behalf of the parties thereto; (c) the Subsidiary Loan Agreement has been executed on behalf of the Borrower and CNCAS; (d) the Lettre de Mission has been duly signed by the parties thereto; (e) SAED shall have selected the Project Chief referred to in Section 3.05 of this Agreement; (f) a standard contract among SAED, GIEs and village sections for the services to be provided by SAED in return for maintenance of infrastructure by such GIEs and village sections has been prepared; and (g) all conditions precedent to initial disbursement under the respective Financing Agreements, except for the KfW Financing Agreement and save for the effectiveness of this Agreement, have been fulfilled. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by SAED and CNCAS and is legally binding upon SAED and CNCAS in accordance with Its terms; (b) that the Grant Agreement has been duly authorized or ratified by the Borrower and SAED and is legally binding upon the Borrower and SAED in accordance with its terms; and (c) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and CNCAS and is legally binding upon the Borrower and CNCAS in accordance with its terms. Page 9 Section 5.03. 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 Representatives of the Borrower; Addresses Section 6.01. The Minister of the Borrower responsible for Finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. 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 SENEGAL By /s/ Falilou Kane Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Edward V. K. Jaycox 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 Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Civil works (a) Boundoum 5,400,000 44% perimeter (b) Dagana A and B 4,700,000 60% perimeter (2) Equipment and 700,000 100% spare parts (3) Operating Costs 3,600,000 45% of SAED (4) Consultants and 1,400,000 100% Studies (5) (a) Short-term7,000,00085% Credit Page 10 (b) Operating 400,000 85% costs of CNCAS (6) Unallocated 3,000,000 TOTAL 26,200,000 2. For the purposes of this Schedule, the term "Operating Costs" includes local staff salaries for posts approved by the Association, operating and maintenance costs for vehicles, equipment, irrigation infrastructure, buildings, office supplies and training materials. 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; (b) Categories (2) and (3), for the execution of Parts H and I of the Project, until the Association has received evidence satisfactory to it that: (i) SAED and DCSR have signed an agreement acceptable to the Association defining their respective responsibilities in carrying out Part H of the Project; and (ii) SAED and CREDO-SAHEL have signed an agreement acceptable to the Association defining their respective responsibilities in carrying out Part I of the Project; (c) Category (1) (a), until the Association has received evidence satisfactory to it that the KfW Financing Agreement has become effective; and (d) Category (5), after July 31 of each year, until the Association has received evidence satisfactory to it that the recommendations of the review referred to in Section 2.11 (c) of the Project Agreement have been fully implemented. SCHEDULE 2 Description of the Project The objective of the Project is to promote sustainable irrigation development in the Project Area. 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: Modernization of Irrigation Infrastructure Civil works in the Boundoum, Thiagar and Dagana A and B perimeters in the Project Area for: 1. the modernization and construction of main irrigation canals, drains and related primary and access roads; and 2. the renovation of pumping stations for irrigation and drainage systems. Part B: Training 1. Strengthening CNAPTI and DPD's organization and management capabilities. 2. Training of: Page 11 (a) CNAPTI's trainers in management, organization and field literacy techniques; (b) DPD staff in the delivery of extension services; and (c) SAED staff in management and accounting techniques. 3. Provision of extension services to farmers and private enterprises in the Project Area. Part C: Credit Provision of short-term credit to farmers in the Project Area for the purchase of agricultural inputs and services. Part D: Equipment and Spare Parts Acquisition of equipment and spare parts for large and small pumping stations to be supplied to GlEs. Part E: Strengthening of SAED's Operational Structures 1. Strengthening SAED'S: (a) planning and programming departments; (b) water management unit; (c) financial department; (d) computer department; and (e) training service (CNAPTI) and DPA. 2. Establishment of MEU. Part F: Studies Carrying out studies on: (a) marketing and diversification of cropping patterns and conditions for new forms of irrigation farming; and (b) basic infrastructure for the development of new perimeters, including main irrigation and drainage canals in the Project Area. Part G: Research Implementation of applied research programs on double-cropping, crop diversification, seed production, modernization of agricultural machinery, livestock development and organic fertilization. Part H: Reforestation Establishment of tree plantations in uncultivated soils or along drains within the irrigated perimeters. Part I: Health 1. Disease control and reduction through development of a health indicator system, research on and implementation of preventive health measures, and logistical support to local health institutions. 2. Promotion of pesticide safety techniques to prevent health hazards. Page 12 * * * The Project is expected to be completed by December 31, 1993. SCHEDULE 3 Special Accounts 1. For the purposes of this Schedule:: (a) the term "Eligible Categories" means: (i) in respect of the SAED Special Account, Categories (1) through (4) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; and (ii) in respect of the CNCAS Special Account, Category (5) set forth in said table; (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 I to this Agreement; and (c) the term "Authorized Allocation" means an amount to be withdrawn from the Credit Account and deposited in each of the Special Accounts pursuant to paragraph 3 (a) of this Schedule, equivalent in the case of the SAED Special Account to CFAF 1,000,000,000; and in the case of the CNCAS Special Account to CFAF 350,000,000. 2. Except as the Association shall otherwise agree, payments out of any Special Account shall be made exclusively for Eligible Expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that a Special Account has been duly opened, withdrawal of the corresponding Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation concerned, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into such Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of such Special Account at such intervals as the Association shall specify. on the basis of such requests, the Association shall withdraw from the Credit Account and deposit into such Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made 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 the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of any Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, Page 13 prior to or at the time of such request, such documents and other evidence as the Association shall reasonably request, showing that such payment was made for Eligible Expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into any Special Account shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals should be made directly by the Borrower 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; or (ii) the total unwithdrawn amount of the Credit allocated to the Eligible Categories, minus 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 be equal to the equivalent of twice the amount of the respective Authorized Allocation. (b) 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 oily after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in any Special Account as of the date of such notice will be utilized in making payments for Eligible Expenditures. 6. (a) If the Association shall have determined at any time that any payment out of a Special Account: (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association, deposit into said 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. No further deposit by the Association into any of the Special Accounts shall be made until the Borrower has made such deposit or refund. (b) If the Association shall have determined at any time that any amount outstanding in a 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 for crediting to the Credit Account.