Conformed Copy - C2369 - Second Public Works and Employment Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2369 SE (Second Public Works and Employment Project) between REPUBLIC OF SENEGAL and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated July 31, 1992 CREDIT NUMBER 2369 SE DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated July 31, 1992, 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; and (B) the Borrower intends to contract from other donors in order to obtain loans or grants in an aggregate amount equivalent to $15,000,000 to assist in financing the Project; 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 Page 2 Section 1.01. The "General Conditions Applicable to Development Credit Agreements" of the Association, dated January 1, 1985, with the modifications therein set forth below (the General Conditions) constitute an integral part of this Agreement: (a) Section 9.06 (c) shall be modified to read: "(c) Promptly after completion of the Project, but in any event not later than three months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, the Borrower shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Association of their respective obligations under the Development Credit Agreement and the accomplishment of the purposes of the Credit."; and (b) the last sentence of Section 3.02 is deleted. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "AGETIP" means Agence d 'Execution des Travaux d'Interct Public contre le Sous-Emploi, an entity established under the laws of the Borrower; (b) "Beneficiary" means the municipality or public entity for whose benefit a Sub-Project is to be executed; (c) "CFA Franc" means the currency of the Borrower; (d) "Cofinancing" means financing provided by donors to cofinance the Project as described in the Preamble; (e) "Government Beneficiary" means any Beneficiary that is a ministry or other department of the Borrower's central government; (f) "Financed Beneficiary" means any Beneficiary that is a small or new municipality listed as such by AGETIP by agreement with the Borrower and the Association; (g) "Cofinancing Beneficiary" means any Beneficiary that is not a Government Beneficiary or Financed Beneficiary; (h) "Convention" means the agreement to be entered into between the Borrower and AGETIP pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes the Procedures Manual, and all other annexes, schedules and attachments thereto; (i) "Implementing Enterprise" means an engineering firm or other entity to which a contract has been awarded for the execution of a Sub-Project; (j) "Procedures Manual" means the Procedures Manual employed by AGETIP to govern its operations, which manual is annexed to the Convention; (k) "Project Preparation Advance" means the project preparation advance granted by the Association to the Borrower pursuant to an exchange of letters, dated November 22, 1991 and December 6, 1991, between the Borrower and the Association; (l)"Qualifying Beneficiary" means any municipal Beneficiary with an operating surplus listed as such by AGETIP by agreement with the Borrower, under criteria approved by the Association; Page 3 (m) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (n) "Sub-Project" means any of the public works sub-project activities described in Parts A and B.3 of the Project; and (o) "Sub-Project Agreement" means an agreement to be entered into between AGETIP and an Implementing Enterprise for the execution of a Sub-Project. 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 the Development Credit Agreement, an amount in various currencies equivalent to twenty-eight million six hundred thousand Special Drawing Rights (SDR 28,600,000). 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 shall, for the purposes of the Project, open and maintain in CFA Francs 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 4 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 cancelled. Section 2.03. The Closing Date shall be June 30, 1996 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 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 cancelled; 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 restric- tions 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. Page 4 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 April 1 and October 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 April 1 and October 1, commencing October 1, 2002 and ending April 1, 2032. Each installment to and including the installment payable on April 1, 2012 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 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 Condi- tions. 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, and without any limitation or restric- tion upon any of its obligations under this Agreement, shall: (i) cause AGETIP to execute the Project, as provided in paragraph (c) of this Section, in accordance with the provisions of the Convention; (ii) take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable AGETIP to carry out the Project; and (iii) refrain from taking or permitting to be taken any action which would prevent or interfere with such performance by AGETIP. (b) For the purpose of carrying out the Project, the Page 5 Borrower shall enter into a Convention with AGETIP on terms and conditions satisfactory to the Association which shall include those terms set forth in Schedule 5 to this Agreement. (c) The Borrower shall exercise its rights under the Convention in such manner as to cause AGETIP to execute the Project, to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit. Except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Convention or any provision thereof. 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 3 to this Agreement. Section 3.03. (a) The Borrower and the Association shall undertake a joint review of the Project every year during the third calendar quarter during which they shall exchange views on matters relating to: (i) the progress of the Project and Sub- Projects, (ii) AGETIP's management and its administrative cost structure, (iii) the performance by AGETIP and the Borrower of their respective obligations under the Convention (including compliance with procurement procedures), (iv) the performance by AGETIP and Implementing Enterprises of their respective obligations under Sub-Project Agreements, (v) implementation by AGETIP of the training programs under Part C of the Project, and (vi) other matters relating to the purposes of the Credit. (b) Not later than one month prior to each such review, the Borrower shall furnish to the Association, for its review and comments, and in such detail as the Association shall reasonably request, a report on the progress and status of the Project. (c) Following each such review, the Borrower undertakes to act promptly and diligently in order to take any corrective action deemed necessary to remedy any shortcoming noted in the implementation of the Project, or to implement such other measures as may have been agreed upon between the Borrower and the Association in furtherance of the objectives of the Project. Section 3.04. The Borrower shall: (a) complete the study of the Borrower's Public Investment Program under Part D.2 of the Project not later than April 30, 1993, (b) within six months following such completion, submit to the Association for its comments an action plan setting forth the measures that the Borrower proposes to take in order to give effect to the recommendations of such study, and (c) not later than April 30, 1994, fully implement such action plan, as modified to take into account the comments of the Association. Section 3.05. For the purpose of obtaining the Association's approval to any of the annual programs referred to in paragraph 10 of Schedule 5 to this Agreement, the Borrower shall furnish to the Association satisfactory evidence attesting that, the Borrower has (a) paid its contribution for the previous year required pursuant to paragraph 12 (a) of said Schedule 5, and (b) made budgetary provisions for its contribution for the current year required pursuant to said paragraph 12 (a). ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall, pursuant to the terms of the Convention, cause AGETIP to maintain records and accounts adequate to reflect in accordance with sound accounting practices the operations and financial condition of AGETIP. (b) The Borrower shall, pursuant to the terms of the Page 6 Convention, cause AGETIP to: (i) have the records, accounts and financial state- ments of the Project (balance sheets, statements of income and expenses and related statements), and the records and accounts for the Special Account, for each semiannual period 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 three months after the end of the semiannual periods referred to, in sub-paragraph (i) above: (A) certified copies of its financial statement for such period as so audited; and (B) 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 such records, accounts, financial statements 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, pursuant to the terms of the Convention, cause AGETIP to: (i) maintain, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until one year after the Association has received the audit for the semiannual period in which the last withdrawal from the Credit Account 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 each of the audits referred to in paragraph (b) of this Section and that the report of each such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such audit period, 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) as a result of events which have occurred after the date of this Agreement, a situation shall have arisen which shall make it improbable that AGETIP or the Borrower will be able to perform its obligations under the Convention; (b) the Statuts of AGETIP or the Procedures Manual shall have been amended, suspended, abrogated, repealed or waived without the prior consent of the Association; Page 7 (c) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of AGETIP, or for the suspension of its operations; (d) the Borrower or AGETIP shall have failed to perform any of their respective obligations under the Convention; (e) the Convention shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the Project or the performance by AGETIP of its obliga- tions under the Convention without the prior written consent of the Association; and (f) (i) subject to sub-paragraph (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, cancelled or terminated in whole or in part, pursuant to the terms thereof, or (B) any such loan shall have become due and payable prior to the agreed maturity thereof; and (ii) sub-paragraph (i) of this paragraph shall not apply if the Borrower establishes to the satis- faction 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. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified: (a) any event specified in paragraphs (b), (d) or (e) of Section 5.01 of this Agreement shall occur and shall continue for a period of thirty (30) days after notice thereof shall have been given by the Association to the Borrower; (b) any event specified in paragraph (c) of Section 5.01 of this Agreement shall occur; and (c) any event specified in paragraph (f) (i) (B) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (f) (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 Convention, in form and substance acceptable to the Association, has been duly signed by the Borrower and AGETIP; (b) AGETIP has submitted to the Association, and obtained its approval for, a program of Sub-Projects to be financed under the Credit representing an aggregate estimated cost of $17,000,000 equivalent; Page 8 (c) AGETIP has submitted to the Association an action plan for the execution of the training program under Part C.2 of the Project; (d) AGETIP has submitted to the Association, for its approval, an action plan to increase grassroots participation under Part D.4 of the Project; (e) the Statuts of AGETIP have been amended in a manner acceptable to the Association; (f) AGETIP has (i) revised its accounting system in a manner acceptable to the Association, and (ii) employed an independent auditor under terms of reference acceptable to the Association; and (g) (i) AGETIP has submitted to the Association, and obtained its approval for, a program of Sub-projects, in addition to those proposed under paragraph (b) of this Section, representing an aggregate estimated cost of $2,500,000 equivalent to be financed by the Borrower (as described in paragraph 11 of Schedule 5 to this Agreement); and (ii) the Borrower has deposited into AGETIP's account at least CFA Francs 175,000,000 to finance the execution of such Sub-Projects. Section 6.02. The following is specified as an additional matter, 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, namely, that the Convention has been duly authorized or ratified by the Borrower and AGETIP and is legally binding upon the Borrower and AGETIP in accordance with its terms. Section 6.03. 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 VII Representatives of the Borrower; Addresses Section 7.01. 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. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministcre de l'Economie et des Finances Rue Charles Laine B.P. 4017 Dakar Senegal Cable address: Telex: MINIFINANCES 3203G Dakar For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 248423 (RCA) Page 9 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 SENEGAL By /s/ Ibra Degucne Ka Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Katherine Marshall Acting 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 for Sub-Projects, including AGETIP's fee for: (a) Cofinancing 10,600,000 50% Beneficiaries under Part A.1 of the Project (b) Financed 6,600,000 90% Beneficiaries under Part A.1 of the Project (c) Qualifying 4,400,000 67% Beneficiaries under Part A.2 of the Project (2) Pilot Activities: 100% (a) Civil Works for 2,200,000 Sub-Projects under Part B.3 of the Project Amount of the Credit Allocated % of Page 10 (Expressed in Expenditures Category SDR Equivalent) to be Financed (b) Consultants' Ser- 1,100,000 vices under Part B of the Project (3) Consultants' 2,600,000 100% Services for Parts C and D of the Project (4) Refunding of 360,000 Amount due Project pursuant to Preparation Section 2.02 (c) Advance of this Agreement (5) Unallocated 740,000 __________ TOTAL 28,600,000 ========== 2. For the purposes of this Schedule, the term "pilot activities" means the activities described under Part B of the Project. 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) expenditures under Categories (1) and (2)(a) for any Sub-Project to be financed out of the proceeds of the Credit unless the Association shall have approved such Sub-Project. SCHEDULE 2 Description of the Project The objectives of the Project are: (a) to finance a program of municipal and governmental works in the area of infrastructure upgrading and rehabilitation; (b) to promote local private contractors and consulting firms in project execution; (c) to improve the skills of workers, the corporate competitiveness of firms and the public works expertise of municipalities; (d) to create substantial new employment in urban areas using the private sector; and (e) to strengthen the institutional capacity of AGETIP. 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: Public Works Program 1. Execution of public works sub-projects, to be carried out under labor-intensive schemes by local contractors, including, but not limited to, the construction and repair of urban infrastructure and public facilities. 2. Operation of a Sub-Project fund for Qualifying Beneficiaries to encourage cost-efficient municipal management. Part B: AGETIP Pilot Activities 1. Development and implementation by AGETIP of a program to identify and execute income-generating projects for municipalities and other projects to support the municipal economy. 2. Development by AGETIP of a pilot public sector procurement Page 11 program. 3. Development and implementation by AGETIP of a pilot public works program for rural areas. Part C: Training 1. Development and implementation of training programs to increase the technical and managerial capacity of small- and medium-scale contracting firms engaged in the execution of Sub- Projects, including: (a) a business administration and financial management training program for entrepreneurs; (b) a work organization training program primarily designed for foremen; and (c) various technical training courses to improve the skills of basic workers. 2. Development and implementation of a training program for Beneficiaries and engineering firms for the preparation of feasibility studies and technical project proposals for Sub- Projects. Part D: Studies and Evaluation Program 1. Development and implementation by AGETIP of a program to monitor and evaluate its operations and the other activities it finances, including financial and management audits of such operations and activities. 2. Preparation of a study of the Borrower's Public Investment Program identifying and analyzing the bottlenecks in procurement, contracting, works supervision, payments and audits that impede the program's implementation. 3. Preparation of an action program and execution of preparatory steps for the creation of a mutual guarantee financial institution to support micro and small construction public works enterprises. 4. Development and implementation in coordination with local authorities of a program to increase grassroots participation in urban infrastructure maintenance. * * * The Project is expected to be completed by December 31, 1995. SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding Except as provided in Part B hereof, works 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 1985 (the Guidelines). Part B: Other Procurement Procedures Items or groups of items for (a) works estimated to cost the equivalent of $400,000 or less per contract, and (b) goods may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures Page 12 satisfactory to the Association Part C: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract (i) for goods or works estimated to cost the equivalent of $250,000 or more, and (ii) for works for which there are less than five bidders, 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 Association pursuant to said paragraph 2 (d) shall be furnished to the Association 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, such 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 Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals from the Credit Account 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 In order to assist AGETIP in carrying out the Project, AGETIP shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association 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. SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (3) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the 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 CFA Francs 600,000,000 to be withdrawn from the Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. Page 13 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the 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 re- quests 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; or (b) 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 Catego- ries 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 Page 14 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 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 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 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. SCHEDULE 5 Terms and Conditions For Convention Required Pursuant to Section 3.01(b) The Convention shall be for a term of five years and shall include the following: 1. Provisions for the transfer of the proceeds of the Credit on a non-reimbursable basis to AGETIP for purposes of financing: (a) expenditures incurred in carrying out the Sub-Projects; (b) AGETIP's fee in connection with such Sub-Projects to be payable in installments; and (c) expenditures incurred in carrying out Parts B, C and D of the Project. 2. The obligation of AGETIP to (a) take all measures necessary to ensure that the Project is carried out with due diligence and efficiency and in accordance with appropriate administrative, technical and financial practices, (b) comply with the recordkeep- ing, auditing and reporting requirements set forth in Article 4 of the Development Credit Agreement, (c) maintain the accounting system established in accordance with Section 6.02 (f) of the Development Credit Agreement, unless the Borrower and the Association shall otherwise agree, and (d) employ an independent auditor under terms of reference acceptable to the Association. 3. The obligation of AGETIP to conduct its operations in a cost-effective manner, and to periodically review with the Borrower and the Association its administrative cost structure. 4. Attached as an annex thereto, the Procedures Manual which shall specify the obligations of AGETIP relating to: the execution of the Project, the selection of Sub-Projects, procurement, and the submission of evidence required for withdrawing proceeds of the Credit and replenishing the Special Account. These obligations shall include: Page 15 (a) the requirement that AGETIP submit to the Association for its approval a description of each Sub-Project for which it intends to obtain financing from the Credit, including a description of the activities to be financed, a listing of the cost elements, and, evidence that (i) at least 50%, in the case of any Cofinancing Beneficiary, (ii) at least 10%, in the case of any Financed Beneficiary, and (iii) at least 33%, in the case of any Qualifying Beneficiary, of the total cost of the Sub-Project shall be financed from sources other than the Association or Cofinancing; (b) the requirement that no more than 25% of the total cost of Sub-Projects to be financed from the Credit planned by AGETIP for each year be for Financed Beneficiaries; (c) the requirement that no Sub-Project Agreement shall be signed unless AGETIP shall have received from the Beneficiary the entirety of their total contribution for the Sub-Project; and (d) the requirement that at least 80% of AGETIP's profits be expended on Sub-Projects, unless the Borrower and the Association shall otherwise agree. 5. The obligation of AGETIP to keep the positions of Director General, Technical Director, and Financial Director filled, at all times, by persons having experience and qualifications acceptable to the Borrower and the Association. 6. The obligation of AGETIP to promptly inform the Borrower and the Association of any condition which interferes, or threatens to interfere, with (a) the progress of the Project or any Sub- Project, (b) the accomplishment of the purposes of the Credit, (c) the performance by AGETIP of its obligations under the Convention, or (d) the performance by AGETIP or any Implementing Enterprises of their respective obligations under any Sub-Project Agreement. 7. The obligation of AGETIP to provide to the Association and the Borrower: (a) by the fifteenth day of every other month, a report of its activities covering the preceding two calendar months of such scope and in such detail as the Borrower or the Association shall reasonably request, and (b) not later than two months after the Closing Date, a report complying with the requirements of the completion report required under Section 9.06 (c) of the General Conditions. 8. Attached thereto as an annex, a sample Sub-Project Agreement. 9. Attached thereto as an annex, a sample of the agreement to be entered into between AGETIP and a Beneficiary regarding Sub- Project execution. 10. The obligation of AGETIP to submit to the Association for its approval: (i) not later than August 31, 1993, a program of proposed Sub-Projects (in addition to those presented pursuant to Section 6.01(b) of the Development Credit Agreement) to be financed from the Credit representing an aggregate estimated cost of $16,000,000, and (ii) not later than August 31, 1994, a program of additional proposed Sub-Projects to be financed from the Credit representing an aggregate estimated cost of $16,000,000. 11. The obligation of AGETIP to execute, during the period beginning January 1, 1992 and ending December 31, 1995, a program of Sub-Projects (other than those financed directly in whole or in part by the Association or through Cofinancing) representing an aggregate cost of $7,000,000 equivalent, out of which: (a) Sub- Projects representing an aggregate cost of at least $2,300,000 equivalent shall be completed no later than December 31, 1993; and (b) Sub-Projects representing a cumulative aggregate cost of at least $4,600,000 equivalent shall be completed no later than December 31, 1994. 12. The obligation of the Borrower: (a) to make available to Page 16 AGETIP 100% of the resources needed for the execution of the Sub- Projects referred to in paragraph 11 above (without recourse to any Cofinancing or any financing provided by the Association), and (b) to deposit with AGETIP, each calendar quarter, its financial contribution as required by AGETIP to finance expenditures required during the following calendar quarter. 13. The obligation of AGETIP to refund to the Borrower any proceeds from the Credit not used for purposes of carrying out the Project, unless the Borrower and the Association shall otherwise agree.