Conformed Copy - C2713 - Fisheries Subsector Capacity Building Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2713 GH Development Credit Agreement (Fisheries Subsector Capacity Building Project) between REPUBLIC OF GHANA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated July 25, 1995 CREDIT NUMBER 2713 GH DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated July 25, 1995, between REPUBLIC OF GHANA (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 Association has received a letter dated March 2, 1995 from the Borrower describing a program of actions, objectives and policies designed to improve its fisheries resources (hereinafter called the Program); and Page 2 (C) 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 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) "DOF" means the Department of Fisheries in the Borrower's Ministry of Food and Agriculture; (b) "MCS" means the Monitoring, Control and Surveillance system for the fisheries sector to be established under the Project; (c) "MOFA" means the Borrower's Ministry of Food and Agriculture; (d) "Project Implementation Plan" means the plan referred to in Section 3.01 (b) of this Agreement and adopted pursuant to Section 6.01 (d) of this Agreement; and (e) "Special Account" means the account referred to in Section 2.02 (b) 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 the Development Credit Agreement, an amount in various currencies equivalent to six million two hundred thousand Special Drawing Rights (SDR 6,200,000). 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 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 US dollars 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. Section 2.03. The Closing Date shall be June 30, 2001 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 Page 3 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 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 January 15 and July 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 January 15 and July 15, commencing July 15, 2005 and ending January 15, 2035. Each installment to and including the installment payable on January 15, 2015 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 United States of America is hereby specified for the purposes of Section 4.02 of the Page 4 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 the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and fisheries management practices and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Association shall otherwise agree, the Borrower shall carry out the Project in accordance with: (i) the Project Implementation Plan in a manner satisfactory to the Association. The said plan shall at all times be satisfactory to the Association and shall cover all components of the Project, subject to modifications based on implementation experience and the midterm review referred to in Section 3.07 of this Agreement; and (ii) 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, 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. Without limitation upon the provisions of Article IX of the General Conditions, the Borrower shall: (a) prepare 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, of such scope and in such detail as the Association shall reasonably request, for the future operation of the Project; (b) afford the Association a reasonable opportunity to exchange views with the Borrower on said plan; and (c) thereafter carry out said plan with due diligence and efficiency and in accordance with appropriate practices, taking into account the Association's comments thereon. Section 3.04. Without limitation to its obligations under Section 3.01 of this Agreement, the Borrower shall, for the purposes of this Project: (a) open and maintain an account (the Project Account) in a commercial bank acceptable to the Association on terms and conditions satisfactory to the Association; (b) deposit into the Project Account an initial amount equivalent to $100,000; (c) prepare, not later than October 31 of each year, a budget for the succeeding fiscal year specifying by quarter the Borrower's contribution to the financing of the Project, as estimated by the Borrower in consultation with the Association, as part of the annual review referred to in paragraph 4 of Schedule 4 to this Agreement; (d) deposit into said account, promptly before each fiscal quarter, the Borrower's contribution to the financing of the Project required for such ensuing quarter; and Page 5 (e) ensure that amounts deposited into the Project Account pursuant to paragraphs (b) and (d) above shall be used only to make payments to meet expenditures made or to be made in respect of the reasonable cost of goods and services for the Project. Section 3.05. The Borrower shall: (a) not later than September 30 of each year, furnish to the Association for its review and comments the annual training program for the following calendar year; and (b) thereafter implement the training program taking into account the views of the Association. Section 3.06. The Borrower shall, not later than June 30, 1996, furnish evidence satisfactory to the Association that revised draft fisheries legislation acceptable to the Association has been presented to the Borrower's Parliament. Section 3.07. The Borrower shall: (a) carry out, jointly with the Association not later than December 31, 1997, a midterm review of the progress made in carrying out the Project and the Program. The midterm review shall cover, among other things, the effectiveness of: (i) fisheries management plans, (ii) DOF in the collection and use of fisheries statistics, (iii) management plans on the regeneration of marine demersal stocks, (iv) the pilot aquaculture program, (v) the institutional strengthening program, and (vi) the MCS system in the management of fisheries resources; (b) at least sixty days prior to the midterm review, furnish to the Association a report describing the status of items listed in paragraph (a) above and of Project and Program implementation generally; and (c) not later than two weeks after the midterm review, prepare an action program acceptable to the Association to deal with deficiencies in Project and Program implementation identified during the review and shall thereafter implement such action program. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures in respect of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account, the Project Account, and fisheries levies 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 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 Page 6 (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 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 event is specified, namely that a situation has arisen which shall make it improbable that the Program, or a significant part thereof, will be carried out. 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 furnished to the Association evidence, satisfactory to the Association, that the following professional staff for DOF with qualifications and experience, satisfactory to the Association, have been assigned, namely, (i) eleven MCS personnel, (ii) two economists, (iii) two sociologists, and (iv) at least one accountant; (b) the Borrower has established the Project Account and deposited therein the initial amount referred to in Section 3.04 (b) of this Agreement; (c) the Borrower has completed the preparation of tender documents for the procurement of vehicles and equipment and the arrangements for the rehabilitation of the research vessel in accordance with Section I of Schedule 3 to this Agreement; and Page 7 (d) the Borrower has adopted the Project Implementation Plan, 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 for 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: Minister for Finance Ministry of Finance P.O. Box M40 Accra, Ghana Cable address: Telex: ECONOMICON 2205 MIFAEP GH Accra 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) 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 GHANA By /s/ Ekwow Spio-Garbrah Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION Page 8 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) Vehicles and 870,000 100% of foreign Equipment expenditures and 90% of local expenditures (2) Civil works 1,430,000 95% (3) Consultant's 650,000 100% Services (4) Training 1,200,000 100% (5) Vessel 460,000 100% of foreign Rehabilitation expenditures and 90% of local expenditures (6) Operating Costs 1,280,000 100% for expenditures incurred up to December 31, 1998, and 70% thereafter (7) Unallocated 310,000 TOTAL 6,200,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; and (c) the term "operating costs" means the incremental costs incurred under the Project to finance utilities, fuel and other vehicle operating expenses, per diem for staff on field trips, cost of temporary hired labor, cost of publications, and costs of office and laboratory supplies. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. 4. The Association may require withdrawals from the Credit Account to be made on the basis of statements of expenditure for expenditures for civil works under contracts not exceeding $100,000 equivalent and services under contracts not exceeding Page 9 $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 objective of the Project is to establish the long-term sustainability of the fisheries sector and thereby maximize its contribution to the nation's economy. 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: Department of Fisheries 1. Strengthening the capacity of the Department of Fisheries in financial management, collection and management of fisheries levies, budget planning and management through technical assistance and training of staff in extension methods, marketing, fisheries resource management, fisheries economics, and monitoring, control and surveillance. 2. Establishment of new divisions of DOF dealing with Marine Fisheries Management and Monitoring, Control and Surveillance. 3. Construction and rehabilitation of DOF's offices. 4. Acquisition of vehicles, office equipment and supplies. Part B: Marine Fisheries Management 1. Carrying out stock assessments of various fishery resources through trawling trials, catch evaluations and acoustic surveys. 2. Improving the quality of fisheries statistics, through updating of the frame surveys, aerial census and registration of fishing vessels. 3. Preparation of fishery management plans. 4. Promotion of community-based fisheries management. 5. Rehabilitation of fisheries research vessels. 6. Acquisition of vehicles, technical and office equipment. Part C: Inland Fisheries Management 1. Supporting improved management and development of lake fisheries through carrying out stock assessments and promotion of community-based management of fisheries resources in Lake Volta and other lakes. 2. Preparation and implementation of management plans in lake fisheries. 3. Acquisition of vehicles and equipment. 4. Promotion of aquaculture through use of extension services. Part D: Monitoring, Control and Surveillance Establishment of monitoring, control and surveillance systems in both marine and lake fisheries, including the acquisition of boats, vehicles and equipment. * * * Page 10 The Project is expected to be completed by December 31, 2000. SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part C hereof, goods and the rehabilitation of the research vessel shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1992 (the Guidelines), and in accordance with the following additional procedures: (a) When contract award is delayed beyond the original bid validity period, such period may be extended once, subject to and in accordance with the provisions of paragraph 2.59 of the Guidelines, by the minimum amount of time required to complete the evaluation, obtain necessary approvals and clearances and award the contract. The bid validity period may be extended a second time only if the bidding documents or the request for extension shall provide for appropriate adjustment of the bid price to reflect changes in the cost of inputs for the contract over the period of extension. Such an increase in the bid price shall not be taken into account in the bid evaluation. With respect to each contract made subject to the Association's prior review in accordance with the provisions of Part D of this Section, the Association's prior approval will be required for: (i) a first extension of the bid validity period if the period of extension exceeds sixty (60) days, and (ii) any subsequent extension of the bid validity period. (b) In the procurement of goods and the rehabilitation of the research vessel in accordance with this Part A, the Borrower shall use the relevant standard bidding documents issued by the Bank, with such modifications thereto as the Association shall have agreed to be necessary for the purposes of the Project. Where no relevant standard bidding documents have been issued by the Bank, the Borrower shall use bidding documents based on other internationally recognized standard forms agreed with the Association. 2. To the extent practicable, contracts for goods shall be grouped into bid packages estimated to cost the equivalent of $100,000 or more. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in Ghana may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures 1. Civil works shall be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 2. Goods estimated to cost the equivalent of $40,000 or less per contract, up to an aggregate amount equivalent to $325,000, may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers eligible under the Guidelines, in accordance with Page 11 procedures acceptable to the Association, or may be procured through the Inter-Agency Procurement Services Office of the United Nations Development Program, in accordance with procedures acceptable to the Association. Part D: 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 for goods and works estimated to cost the equivalent of $100,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the 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 5 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 1. In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the 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 (the Consultant Guidelines). For complex, time-based assignments, the Borrower shall employ such consultants under contracts using 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, the Borrower shall use other standard forms agreed with the Association. 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant 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 $100,000 equivalent each, or (b) contracts for the employment of individuals estimated to cost less than $50,000 equivalent each. However, this exception 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 Page 12 contract value to $100,000 equivalent or above, or (e) amendments to contracts for the employment of individual consultants raising the contract value to $50,000 equivalent or above. SCHEDULE 4 Implementation Program 1. The Borrower's Ministry of Food and Agriculture, through the Department of Fisheries, shall have overall responsibility for Project implementation and management, as follows: (a) in carrying out Part B of the Project, the Marine Fisheries Management and Research Divisions of DOF shall: (i) carry out stock assessments, and (ii) prepare management plans for the marine fisheries; (b) in the carrying out of Part C of the Project, the Inland Fisheries Management Division of DOF shall: (i) carry out the census of fishing activities and related studies on the Volta Lake, and (ii) implement the aquaculture pilot program; (c) the Administration and Operations Division of DOF shall be responsible for collating operational plans and progress reports, keeping records of fishermen, collecting and managing the various fisheries levies and managing DOF's training program; and (d) the Monitoring, Control and Surveillance Division of DOF shall be responsible for ensuring compliance with fisheries regulations, enforcing safety-at-sea regulations and assisting in search and rescue operations. 2. In carrying out Part B of the Project, the Borrower shall take all necessary measures to ensure that: (a) all fishing trawlers in excess of 50 gross registered tonnage have stopped operating from within the 30-meter depth line by not later than June 30, 1996; (b) the registration of the canoe fishing fleet has been completed by not later than December 31, 1996; and (c) a strategy, acceptable to the Association, for implementing appropriate fisheries management plans has been adopted and furnished to the Association not later than December 31, 1996. 3. The Borrower shall: (a) ensure that levies on all vessels other than the canoe fleet have been increased to the equivalent of 1% of the gross landed value of catch by not later than June 30, 1997; (b) by June 30, 1998, review the experience with the initial increase including, inter alia, the adequacy of the levies and their impact on the industry; (c) furnish the recommendations of said review to the Association for its review and comments; and (d) implement said recommendations, taking into account the Association's comments. 4. The Borrower shall: (a) not later than October 31 of every calendar year, jointly with the Association, carry out a review of the progress of the Project for the preceding calendar year, (b) promptly thereafter furnish to the Association for review and comments an action program for Project implementation for the following year, and (c) implement said action program, taking into account the views of the Association. SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means the Categories (1) through (6) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; Page 13 (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 $300,000 to be withdrawn from the Credit Account and deposited in 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 $150,000 until the aggregate amount of withdrawals from the Credit Account plus the total amount of all outstanding special commitments entered into by the Association pursuant to Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of $2,000,000. 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 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: Page 14 (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. 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. Page 15