Page 1 CONFORMED COPY LOAN NUMBER 4679-MOR Loan Agreement Alpha Maroc Project between KINGDOM OF MOROCCO and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated February 7, 2003 Page 2 LOAN NUMBER 4679-MOR LOAN AGREEMENT AGREEMENT, dated February 7, 2003, between the KINGDOM OF MOROCCO (the Borrower) and the INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the project described in Schedule 2 to this Agreement (the Project), has requested the Bank to assist in the financing of the Project; and WHEREAS the Bank has agreed, on the basis, inter alia , of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The “General Conditions Applicable to Loan and Guarantee Agreements for Single Currency Loans” of the Bank, dated May 30, 1995 (as amended through October 6, 1999) (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) “Dirhams” and “MAD” mean the lawful currency of the Kingdom of Morocco; (b) “DLCA” means the unit of the SEANF, as hereinafter defined responsible for adult literacy programs and policies or any successor thereto; (c) “Fiscal Year” and “FY” mean the fiscal year of the Borrower, starting January 1 and ending December 31 of each calendar year; Page 3 - 2 - (d) “Financial Monitoring Report” means each report prepared in accordance with Section 4.02 of this Agreement; (e) “MFP” means the Ministry of Finance and Privatization of the Borrower, or any successor thereto; (f) “Plan” means the Borrower’s plan, agreed with the Bank, for the implementation of the Project; (g) “Providers” means NGOs, public operators and the private sector offering adult literacy services; (h) “SEANF” means Office of the Secretary of State for Literacy and Non- Formal Education under the Borrower’s Ministry of National Education and Youth, or any successor thereto; and (i) “Special Account” means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount equal to four million two hundred thousand Euros ( 4,200,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of works, goods and services required for the Project and to be financed out of the proceeds of the Loan. (b) The Borrower may, for the purposes of the Project, open and maintain in Dirhams a special deposit account in its general treasury (trésorerie générale du Royaume ) on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 6 to this Agreement. Section 2.03. The Closing Date shall be June 30, 2006 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a fee in an amount equal to one percent (1%) of the amount of the Loan. On or promptly after the Effective Date, the Page 4 - 3 - Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount of said fee. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to LIBOR Base Rate plus LIBOR Total Spread. (b) For the purposes of this Section: (i) “Interest Period” means the initial period from and including the date of this Agreement to, but excluding, the first Interest Payment Date occurring thereafter, and after the initial period, each period from and including an Interest Payment Date to, but excluding the next following Interest Payment Date. (ii) “Interest Payment Date” means any date specified in Section 2.07 of this Agreement. (iii) “LIBOR Base Rate” means, for each Interest Period, the London interbank offered rate for six-month deposits in euros for value the first day of such Interest Period (or, in the case of the initial Interest Period, for value the Interest Payment Date occurring on or next preceding the first day of such Interest Period), as reasonably determined by the Bank and expressed as a percentage per annum. (iv) “LIBOR Total Spread” means, for each Interest Period: (A) three-fourths of one percent (3/4 of 1%); (B) minus (or plus) the weighted average margin, for such Interest Period, below (or above) the London interbank offered rates, or other reference rates, for six-month deposits, in respect of the Bank’s outstanding borrowings or portions thereof allocated by the Bank to fund single currency loans or portions thereof made by it that include the Loan; as reasonably determined by the Bank and expressed as a percentage per annum. (c) The Bank shall notify the Borrower of LIBOR Base Rate and LIBOR Total Spread for each Interest Period, promptly upon the determination thereof. (d) Whenever, in light of changes in market practice affecting the determination of the interest rates referred to in this Section 2.06, the Bank determines Page 5 - 4 - that it is in the interest of its borrowers as a whole and of the Bank to apply a basis for determining the interest rates applicable to the Loan other than as provided in said Section, the Bank may modify the basis for determining the interest rates applicable to the Loan upon not less than six (6) months’ notice to the Borrower of the new basis. The new basis shall become effective on the expiry of the notice period unless the Borrower notifies the Bank during said period of its objection thereto, in which case said modification shall not apply to the Loan. Section 2.07. Interest and other charges shall be payable semiannually on February 15 and August 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate educational, literacy and institutional 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 Bank shall otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 5 to this Agreement. Section 3.02. Except as the Bank shall otherwise agree, procurement of goods, works and consultants’ services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section 3.03. For the purposes of Section 9.08 of the General Conditions and without limitation thereto, the Borrower shall: (a) prepare, on the basis of guidelines acceptable to the Bank, and furnish to the Bank 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 Bank, a plan for the continued achievement of the objectives of the Project; and (b) afford the Bank a reasonable opportunity to exchange views with the Borrower on said plan. Page 6 - 5 - ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain a financial management system, including records and accounts, and prepare financial statements in a format acceptable to the Bank, adequate to reflect the operations, resources and expenditures related to the Project. (b) The Borrower shall: (i) have the records, accounts and financial statements referred to in paragraph (a) of this Section and the records and accounts for the Special Account for each fiscal year audited, in accordance with auditing standards acceptable to the Bank, consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months (6) after the end of each such year, (A) the financial statements referred to in paragraph (a) of this Section as audited for such year and certified by such auditors, and (B) an opinion on such statements, records and accounts and report of such audit, by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning such records and accounts, and the audit thereof, and concerning said auditors, as the Bank may from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and separate accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank’s representatives to examine such records; and Page 7 - 6 - (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 control involved in their preparation, can be relied upon to support the related withdrawals. Section 4.02. (a) Without limitation upon the provisions of Section 4.01 of this Agreement, the Borrower shall carry out a time-bound Action Plan acceptable to the Bank for the strengthening of its financial management system for the Project in order to enable the Borrower, not later than nine (9) months after the effectiveness of this agreement, or such later date as the Bank shall agree, to prepare semi-annually a Financial Monitoring Report, acceptable to the Bank, each of which: (i) (A) sets forth actual sources and applications of funds for the Project, both cumulatively and for the period covered by said report, and projected sources and applications of funds for the Project for the six-month period following the period covered by said report, and (B) shows separately expenditures financed out of the proceeds of the Loan during the period covered by said report and expenditures proposed to be financed out of the proceeds of the Loan during the six-month period following the period covered by said report; (ii) (A) describes physical progress in Project implementation, both cumulatively and for the period covered by said report, and (B) explains variances between the actual and previously forecast implementation targets; and (iii) sets forth the status of procurement under the Project and expenditures under contracts financed out of the proceeds of the Loan, as at the end of the period covered by said report. (b) Upon the completion of the action plan referred to in paragraph (a) of this Section, the Borrower shall prepare, in accordance with guidelines acceptable to the Bank, and furnish to the Bank not later than forty-five (45) days after the end of each six (6) months period a Financial Monitoring Report for such period. Page 8 - 7 - ARTICLE V Termination Section 5.01. The date one hundred and twenty (120) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of Finance and Privatization of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Minister of Finance and Privatization Avenue Mohamed V Rabat Kingdom of Morocco Cable address: Telex Facsimile: MINFIN 36715 037761072 037762397 For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: Facsimile: INTBAFRAD 248423 (MCI) or (202) 477-6391 Washington, D.C. 64145 (MCI) Page 9 - 8 - IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in Rabat, Morocco, as of the day and year first above written. KINGDOM OF MOROCCO By /s/ Fathallah Oualalou Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Ferid Belhaj Country Manager Middle East and North Africa Region Page 10 - 9 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Euros Equivalent ) To be Financed (1) Consultants’ Services 2,000,000 75% for foreign and Training and 70% for local consultants’ Services and training (2) Goods 1,700,000 100% of foreign expenditures; and 90% of items procured locally (3) Fee 42,000 Amount due under Section 2.04 of this Agreement (4) Unallocated 458,000 ___________ TOTAL 4,200,000 ========== 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; and (b) the term “local expenditures” means expenditures in the currency of the Borrower for goods or services supplied from the territory of the Borrower. Page 11 - 10 - 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding 420,000, may be made in respect of Categories 1 and 2 set forth in the table in paragraph 1 of this Schedule on account of payments made for expenditures before that date but after January 30, 2002. 4. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure under contracts not exceeding 300,000 equivalent for goods, 100,000 equivalent for consulting firms and 50,000 equivalent for individual consultants, all under such terms and conditions as the Bank shall specify by notice to the Borrower. Page 12 - 11 - SCHEDULE 2 Description of the Project The objective of the Project is to test new approaches to teaching quality and literacy program management that will enable the Borrower to implement nation-wide programs that result in lasting literacy outcomes. Part A : Modernization of textbooks and teaching material (i) Provision of textbooks and other teaching materials adapted to the needs of adult learners. (ii) Redesign, printing and publication of textbooks and an accompanying teacher’s guide. (iii) Establishment and equipment of an adult literacy information center. Part B : Strengthening of Providers’ teaching capabilities (i) Provision of training to teacher trainers employed by Providers, covering theory and practice in areas such as adult learning, group communication, textbook content, course management, lesson plan development, teacher assessment and teacher support. (ii) Provision of training to senior trainers, from the DLCA and SEANF decentralized services, covering the latest development in adult literacy learning and teaching and involving seminars in the Borrower’s country and study tours overseas. (iii) Publication and distribution of a newsletter aimed at informing teaching staff and Providers of the latest news and events in adult literacy. Part C : Strengthening management capabilities (i) Technical assistance to DLCA for the development and implementation of a plan to delegate its local monitoring and assessment functions to SEANF decentralized services. (ii) Technical assistance to improve capacity in managing different literacy programs, including (a) development of a training plan; and (b) delivery of training to management staff, from the DLCA, SEANF decentralized services and Providers. Page 13 - 12 - (iii) Technical assistance for training management staff, in monitoring and assessment of adult literacy programs and projects. Part D : Strengthening of local activities (i) Technical assistance for training management staff from the DLCA, SEANF decentralized services and Providers, in the skills and knowledge required to undertake surveys of the literacy levels of target groups. (ii) Organization of a seminar for stakeholders to formulate post-literacy strategies and establishment of an annual award of two literacy prizes. (iii) Development of activities that explore new proposals identified in the course of project execution and that aim to improve the effectiveness of a literacy teaching and learning. Part E: Evaluation and analysis (i) Technical assistance for ongoing Project evaluation of outputs and, where possible, outcomes throughout implementation. (ii) Studies and other analytic work in respect of different aspects of the Government’s adult literacy programs with a view to expanding successful innovations. * * * The Project is expected to be completed by December 31, 2005 Page 14 - 13 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (Expressed in Euro) * February 15, 2008 105,000 August 15,2008 105,000 February 15, 2009 110,000 August 15, 2009 110,000 February 15, 2010 110,000 August 15, 2010 115,000 February 15, 2011 115,000 August 15, 2011 120,000 February 15, 2012 120,000 August 15, 2012 125,000 February 15, 2013 125,000 August 15, 2013 130,000 February 15, 2014 130,000 August 15, 2014 135,000 February 15, 2015 135,000 August 15, 2015 140,000 February 15, 2016 140,000 August 15, 2016 145,000 February 15, 2017 150,000 August 15 2017 150,000 February 15, 2018 155,000 August 15, 2018 155,000 February 15, 2019 160,000 August 15, 2019 165,000 February 15, 2020 165,000 August 15, 2020 170,000 February 15, 2021 175,000 August 15, 2021 175,000 February 15, 2022 180,000 August 15, 2022 185,000 TOTAL 4,200,000 _____________________________ * The figures in this column represent the amount in Euro to be repaid, except as provided in Section 4.04 (d) of the General Conditions. Page 15 - 14 - SCHEDULE 4 Procurement Section I. Procurement of Goods Part A : General Goods shall be procured in accordance with the provisions of Section I of the “Guidelines for Procurement under IBRD Loans and IDA Credits” published by the Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999 (the Guidelines) and the following provisions of Section I of this Schedule. Part B : International Competitive Bidding Except as otherwise provided in Part C of this Section, goods shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto. To the extent practicable, contracts for goods shall be grouped in bid packages estimated to cost $300,000 equivalent or more each. Part C : Other Procurement Procedures 1. National Competitive Bidding (a) Except in the cases provided for below, goods and works shall be procured under contracts awarded on the basis of paragraphs 3.3 and 3.4 of the guidelines and paragraphs (b), (c), and (d) below. (b) Any prospective bidder from a country eligible under the guidelines who propose to provide goods produced in or supplied from any such country shall be eligible to bid for such contracts. The same shall be applied for goods and works required for the carrying out of civil works under the Project. Prospective bidders shall be allowed to submit two envelopes provided the two envelopes are opened at the same time. (c) Prospective bidders shall be allowed a minimum of 30 days from the date of the invitation to bid to submit bids and the invitation to bid shall so specify. (d) The contract shall be awarded to the bidder having submitted the lowest evaluated responsive bid. Page 16 - 15 - 2. International and National Shopping Goods estimated to cost less than $30,000 equivalent per contract, up to an aggregate amount not to exceed $250,000 equivalent, may be procured under contracts awarded on the basis of shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. Part D : Review by the Bank of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Bank in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods shall be undertaken in accordance with such procurement plan as shall have been agreed with the Bank, and with the provisions of said paragraph 1. 2. Prior Review With respect to each contract for goods estimated to cost the equivalent of $300,000 or more, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. Section II . Employment of Consultants Part A : General Consultants’ services shall be procured in accordance with the provisions of Sections I and IV of the “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” published by the Bank in January 1997 and revised in September 1997, January 1999 and May 2002 (the Consultant Guidelines), paragraph 1 of Appendix 1 thereto, Appendix 2 thereto, and the following provisions of this Section. Part B : Quality- and Cost-based Selection Except as otherwise provided in Part C of this Section, consultants’ services shall be procured under contracts awarded in accordance with the provisions of Section II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to quality- and cost- based selection of consultants. Page 17 - 16 - Part C : Other Procedures for the Selection of Consultants 1. Individual Consultants Services for technical assistance and training for the Project may be procured under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines. 2. Selection Based on Consultants’ Qualifications Services for technical assistance and estimated to cost less than $50,000 may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.7 of the Consultant Guidelines. 3. Single Source Selection Services for technical assistance may, with the Bank’s prior agreement, be procured in accordance with the provisions of paragraphs 3.8 through 3.11 of the Consultant Guidelines. Part D : Review by the Bank of the Selection of Consultants 1. Selection Planning A plan for the selection of consultants, which shall include contract cost estimates, contract packaging, and applicable selection criteria and procedures, shall be furnished to the Bank, for its review in accordance with paragraph 1 of Schedule 1 of the Guidelines, prior to the issuance to consultants of any requests for proposals. Selection of all consultants’ services shall be undertaken in accordance with such selection plan as shall have been agreed with by the Bank. 2. Prior Review (a) With respect to the first two (2) contracts and, thereafter, each contract for the employment of consulting firms estimated to cost the equivalent of $100,000 or more, the procedures set forth in paragraphs 2, 3 and 5 of Appendix 1 to the Consultant Guidelines shall apply. (b) With respect to each contract for the employment of individual consultants estimated to cost the equivalent of $50,000 or more, the report on the comparison of the qualifications and experience of candidates and the terms of reference and terms of employment of the consultants shall be furnished to the Bank for its prior review and approval. The contract shall be awarded only after the said approval shall have been given. The provisions of paragraph 3 of Appendix 1 to the Consultant Guidelines shall also apply to such contracts. Page 18 - 17 - 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shall apply. Page 19 - 18 - SCHEDULE 5 Implementation Program A. Project Implementation and Coordination 1. Responsibility for overall Project implementation, coordination and progress monitoring will be entrusted with the DLCA. The Borrower shall appoint a Project coordinator under conditions and terms of reference agreed with the Bank. The Project coordinator shall be responsible for (i) coordinating project activities in accordance with the Plan, and (ii) monitoring procurement activities and disbursement operations. 2. Part D (ii) of the Project: The Borrower shall develop by June 30, 2003 and submit to the Bank for advice, eligibility criteria for award of literacy prizes financed under Part D (ii) of the Project. 3. Part D (iii) of the Project: The Borrower shall develop, by September 30 of each year during Project implementation, a list of activities in accordance with the objectives of the project and acceptable to the Bank, for financing in the following Fiscal Year under Part D (iii) of the Project. 4. Part E (i) of the Project: The Borrower shall, not later than June 30, 2003, enter into an agreement with an independent consultant to undertake an ongoing evaluation of the results, and where possible, the impact of the Project, to be financed under Part E (i) of the Project. The Borrower shall submit for prior review the terms of reference of this consultancy. B. Mid-Term Review The Borrower shall: (a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators agreed with the Bank, the carrying out of the Project and the achievement of the objectives thereof; (b) prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank on or about June 30, 2004, a Project mid-term report integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section, on the progress achieved in the carrying out of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the Page 20 - 19 - efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; and (c) review with the Bank, by September 30, 2004, or such later date as the Bank shall request, the report referred to in paragraph (b) of this Section, and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Bank’s views on the matter. Page 21 - 20 - SCHEDULE 6 Special Account 1. For the purposes of this Schedule: (a) the term “eligible Categories” means Categories (1), (2), and (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 Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term “Authorized Allocation” means an amount equivalent to MAD 4,000,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 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 Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for deposit into the Special Account of an amount or amounts which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit 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 Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for Page 22 - 21 - eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; (b) if the Borrower shall have failed to furnish to the Bank, 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 Bank pursuant to said Section in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Bank 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 Loan Account pursuant to the provisions of Section 6.02 of the General Conditions; or (d) once the total unwithdrawn amount of the Loan allocated to the eligible Categories, minus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such Page 23 - 22 - payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. Page 24 - 23 - 156650 P:\MOROCCO\HD\75808\NEG\NEGS_Aug02\P075808_LA_en_Aug02.doc 2/19/2003 3:51 PM