Page 1 CONFORMED COPY LOAN NUMBER 3981 IND Loan Agreement (HIV, AIDS and STDs Prevention and Management Project) between REPUBLIC OF INDONESIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated March 29, 1996 LOAN NUMBER 3981 IND LOAN AGREEMENT AGREEMENT, dated March 29, 1996, between REPUBLIC OF INDONESIA (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). 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 Bank to assist in the financing of the Project; and WHEREAS (B) 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 (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 have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "AIDS" means the acquired immune deficiency syndrome; (b) "Grants" mean grants made or proposed to be made by Page 2 the Borrower, out of the proceeds of the Loan, to a Grantee for training, instructional materials and outreach services to be provided under Part A.4 of the Project to individuals whose behavior makes them vulnerable to STDs and AIDS, in accordance with the provisions of Schedule 6 to this Agreement; (c) "Grantee" means a non-governmental organization to which the Borrower proposes to make or has made a Grant; (d) "HIV" means the human immunodeficiency virus; (e) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; and (f) "STD" means a sexually transmitted disease. 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 this Agreement, an amount equal to twenty four million eight hundred thousand dollars ($24,800,000). 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 (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement (i) for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project (other than Part A.4 thereof) described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan, and (ii) amounts paid (or, if the Bank shall so agree, to be paid) by the Borrower on account of Grants made under Part A.4 of the Project and in respect of which the withdrawal from the Loan Account is requested. (b) The Borrower may, for the purposes of the Project, open and maintain in United States dollars a special deposit account in Bank Indonesia or in a commercial bank on terms and conditions satisfactory to the Bank, including, in the case of a commercial bank, 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 7 to this Agreement. Section 2.03. The Closing Date shall be September 30, 1999, 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 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 2.05. The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time in accordance with the provisions of Schedule 3 to this Agreement. Section 2.06. Interest and other charges shall be payable in arrears on April 15 and October 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the provisions of Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to Page 3 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 health 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 the goods 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 designed to ensure 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. 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 for each fiscal year audited, in accordance with appropriate auditing principles 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 after the end of each such year, the 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 said records and accounts and the audit thereof as the Bank shall 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 accounts reflecting such Page 4 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 (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 duringsuch fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Termination Section 5.01. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of Finance 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: Ministry of Finance c/o Directorate General of Budget Jalan Lapangan Banteng Timur 2-4 P. O. Box 1139 Jakarta 10710, Indonesia Cable address: Telex: FINMINISTRY 45799 DJMLN-IA Jakarta 44319 DEPKEU-IA 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: INTBAFRAD 248423 (MCI) Washington, D.C. 64145 (MCI) 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 Page 5 and year first above written. REPUBLIC OF INDONESIA By /s/ Arifin M. Siregar, Ambassador Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Nicholas Hope Acting Regional Vice President East Asia and Pacific 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 Dollar Equivalent) to be Financed (1) Equipment 2,200,000 100% of foreign (excluding vehicles) expenditures, 100% of local expenditures (ex-factory cost) and 65% of local expenditures for other items procured locally (2) Reagents 4,300,000 100% of foreign expenditures, 100% of local expenditures (ex-factory cost) and 65% of local expenditures for other items procured locally (3) Instructional materials 2,500,000 70% (4) Fellowships 1,200,000 100% (5) Training and workshops: (a) NGOs 5,600,000 100% (b) Other 1,400,000 30% (6) Grants 600,000 100% of Grant amount disbursed Page 6 (7) Project management 2,100,000 100% (8) Consultants' services: (a) Part A of the 400,000 100% Project (b) Part B of the 400,000 80% Project (c) Studies and research 2,400,000 100% (9) Unallocated 1,700,000 ---------- TOTAL 24,800,000 ========== 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 "Project management" means expenditures by the offices of the Project Directors and the Project Managers, Project implementation units, the Program Management Unit for HIV, AIDS and STDs Prevention and Management, and the AIDS Commissions for administrative costs, including travel, consumable materials, honoraria, and office 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 Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for expenditures for: (i) goods under contracts costing less than $200,000 equivalent; (ii) fellowships, training and workshops, Grants and Project management; and (iii) contracts for the employment of consulting firms valued at less than $100,000 equivalent each and contracts for the employment of individuals valued at less than $50,000 equivalent each, all under such terms and conditions as the Bank shall specify by notice to the Borrower. SCHEDULE 2 Description of the Project The objectives of the Project are to develop (i) institutional mechanisms and pilot interventions in the Borrower's provinces of Jakarta and Riau, and (ii) activities at the center, aimed at reducing the transmission of STDs and HIV and preparing for the extension of the pilot interventions to other provinces. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: Part A: Provincial Pilot Programs in Jakarta and Riau 1. Carrying out of a program for changing of the behavior of individuals as to AIDS and STDs related risks through: provision of training in behavioral interventions relating to HIV risks to district and local trainers, counselors and peer Page 7 group educators; carrying out of baseline surveys and needs assessments; conducting focus group discussions and other forms of message design and formative research; production and distribution of educational and informational materials; and provision of condoms. 2. Improvement of STD clinical service delivery through: training of relevant staff in STD case management; production of educational materials; upgrading of the health laboratory system in Jakarta and transfusion centers in Riau as regards STDs and HIV, including acquisition of laboratory equipment, test kits, drugs, condoms and reagents; and dissemination of infection control and waste disposal techniques. 3. Expansion of the HIV and STD surveillance and of monitoring and evaluation activities, including acquisition of equipment and reagents. 4. Provision of Grants to non-governmental organizations for the financing of training, instructional materials and outreach services to individuals at risk for STDs and AIDS. Part B: Activities at the Central Level 1. STD Service Delivery for Reduction of Incidence of STD (a) Development and testing of procedures relating to (i) the syndromic approach to STD case management at the clinical level and through ante-natal service delivery, (ii) infection control techniques, and (iii) appropriate disposal of infected blood products and other materials. (b) Preparation and production of training modules, carrying out of research, provision of fellowships, training of trainers, and provision of supplies, equipment and drugs. 2. Surveillance Improvement of the effectiveness of surveillance systems for HIV, AIDS and STDs, through: development of guidelines and manuals, training of relevant staff, carrying out of study tours and provision of fellowships, carrying out of workshops, development of a data base, and provision of equipment and supplies. 3. Laboratory System Improvement of the national system of health laboratories as regards HIV and STDs through the increase of the capability for testing and diagnosis, training, provision of educational materials, carrying out of workshops and seminars, development of standard procedures and monitoring, provision of equipment and reagents, and provision of training and quality assurance programs to private laboratories. 4. Behavior Change Improvement of the behavior change interventions through design of prototypes for needs assessments, preparation and pre-testing of health education materials, provision of fellowships and training of trainers, carrying out of research, and provision of capacity building to non-governmental organizations. 5. Preparation Areas Carrying out of needs assessments, baseline surveys, and other preparatory activities in areas designated for possible follow-up STD and HIV interventions. * * * Page 8 The Project is expected to be completed by March 31, 1999. SCHEDULE 3 Interest and Principal Repayment Provisions A. General Definitions For purposes of this Schedule, the following terms have the following meanings. (a) "Disbursed Amount" means, in respect of each Interest Period, the aggregate principal amount of the Loan withdrawn from the Loan Account in such Interest Period. (b) "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. (c) "Interest Payment Date" means any date specified in Section 2.06 of this Agreement. (d) "Rate Fixing Date" means, for each Disbursed Amount, the first day of the Interest Period next following the Interest Period in which such Disbursed Amount is withdrawn. B. Interest 1. The principal amount of the Loan shall be divided into Disbursed Amounts. Interest shall accrue on each Disbursed Amount outstanding from time to time at a rate based on a floating rate index prior to its Rate Fixing Date and at a fixed rate from its Rate Fixing Date, as described in paragraph 2 of this Part B. 2. (a) From the date of withdrawal of each amount of each Disbursed Amount withdrawn and outstanding, to but not including the Rate Fixing Date for such Disbursed Amount, interest on each such amount shall accrue, at a rate equal to the applicable: (i) LIBOR Base Rate; plus (ii) LIBOR Total Spread. (b) From the Rate Fixing Date for each Disbursed Amount until final repayment thereof, interest on such Disbursed Amount shall accrue, at a rate equal to the applicable: (i) Fixed Base Rate; plus (ii) Fixed Total Spread. 3. For purposes of paragraph 2 of this Part B, the following terms have the following meanings. (a) "LIBOR Base Rate" means, for the Interest Period in which a Disbursed Amount is withdrawn, the London interbank offered rate for six-month deposits in dollars for value the first day of such Interest Period (or, in the case of the initial Interest Period, for value the day occurring on the Interest Payment Date preceding the first day of such Interest Period), as reasonably determined by the Bank and expressed as a percentage per annum. (b) "LIBOR Total Spread" means, for the Interest Period in which each Disbursed Amount is withdrawn: (i) one half of one percent (1/2 of 1%); Page 9 (ii) 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 such Disbursed Amount for such Interest Period; as reasonably determined by the Bank and expressed as a percentage per annum. (c) "Fixed Base Rate" means, for each Disbursed Amount, the equivalent of the London interbank offered rate for six- month deposits in dollars for value on the Rate Fixing Date for such Disbursed Amount, expressed as a single fixed interest rate based on the fixed interest rates corresponding to the repayment installments of such Disbursed Amount, as reasonably determined by the Bank and expressed as a percentage per annum. (d) "Fixed Total Spread" means, for each Disbursed Amount: (i) one-half of one percent (1/2 of 1%); (ii) minus (or plus) the cost margin, applicable on the Rate Fixing Date for such Disbursed Amount, 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 to fund single currency loans or portions thereof made by it that include such Disbursed Amount; plus (iii) the Bank's risk spread applicable on the Rate Fixing Date for such Disbursed Amount; as reasonably determined by the Bank and expressed as a percentage per annum. 4. The Bank shall notify the Borrower of LIBOR Base Rate, LIBOR Total Spread, Fixed Base Rate and Fixed Total Spread applicable to each Disbursed Amount, promptly upon the determination thereof. 5. Whenever, in light of changes in market practice affecting the determination of the interest rates referred to in this Schedule, the Bank determines 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 this Schedule, the Bank may modify the basis for determining the interest rates applicable to amounts of the Loan not yet withdrawn 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. C. Repayment 1. Subject to the provisions of paragraph 2 of this Part C, the Borrower shall repay each Disbursed Amount of the Loan in semi-annual installments payable on each April 15 and October 15, the first such installment to be payable on the seventh (7th) Interest Payment Date following the Rate Fixing Date for such Disbursed Amount and the last such installment to be payable on the eighteenth (18th) Interest Payment Date following the Rate Fixing Date for such Disbursed Amount. Each installment shall be one-twelfth (1/12) of such Disbursed Page 10 Amount. 2. Notwithstanding the provisions of paragraph 1 of this Part C, if any installment of principal of each Disbursed Amount would, pursuant to the provisions of said paragraph 1, be payable after October 15, 2011, the Borrower shall also pay on said date the aggregate amount of all such installments. 3. After each Disbursed Amount shall have been withdrawn, the Bank shall promptly notify the Borrower of the amortization schedule for such Disbursed Amount. SCHEDULE 4 Procurement and Consultants' Services Section I. Procurement of Goods Part A: General Goods shall be procured in accordance with the provisions of Section I of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995 (the Guidelines) and the following provisions of this Section, as applicable. Part B: International Competitive Bidding 1. Except as otherwise provided in Part C of this Section, goods shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto. 2. Preference for domestically manufactured goods In the procurement of goods under contracts to be awarded in accordance with the provisions of paragraph 1 of this Part B, the provisions of paragraphs 2.54 and 2.55 of the Guidelines and Appendix 2 thereto shall apply to goods manufactured in the territory of the Borrower. Part C: Other Procurement Procedures 1. National Competitive Bidding Equipment estimated to cost less than $200,000 equivalent per contract up to an aggregate amount not to exceed $1,700,000 equivalent, and printing and production services for instructional materials, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. 2. National Shopping Equipment estimated to cost less than $50,000 equivalent per contract, up to an aggregate amount not to exceed $1,000,000 equivalent, and printed materials up to an aggregate amount not to exceed $1,000,000 equivalent, may be procured under contracts awarded on the basis of national 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 prequalify for bidding or to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods shall be undertaken in accordance with such procurement plan as shall Page 11 have been approved by the Bank, and with the provisions of said paragraph 1. 2. Prior Review With respect to (i) each contract for equipment and reagents estimated to cost the equivalent of $200,000 or more, and (ii) the first two contracts for goods in each of the two Project provinces estimated to cost less than the equivalent of $200,000, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. Section II. Employment of Consultants 1. Consultants' services shall be procured under contracts awarded in accordance with the provisions of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981 (the Consultant Guidelines). For complex, time-based assignments, such contracts shall be based on the standard form of contract for consultants' services issued by the Bank, with such modifications thereto as shall have been agreed by the Bank. Where no relevant standard contract documents have been issued by the Bank, other standard forms acceptable to the Bank shall be used. 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Bank 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, except the first contract for training services for each of the two Project provinces, or (b) contracts for the employment of individual consultants estimated to cost less than $50,000 equivalent each. However, said exceptions to prior Bank 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 Bank, (d) amendments to contracts for the employment of consulting firms raising the 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 5 Implementation Program 1. The Borrower shall maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory to the Bank, the carrying out of the Project and the achievement of the objectives thereof. 2. The Borrower shall cause the Province of Jakarta and the Province of Riau to each maintain until completion of the Project: (a) a provincial Project Director and district project directors, with qualifications and terms of reference acceptable to the Bank; (b) a provincial Project Manager, with qualifications and terms of reference acceptable to the Bank; and Page 12 (c) provincial and district Project implementation units with qualified staff in adequate numbers and with terms of reference acceptable to the Bank. 3. The Borrower shall maintain until completion of the Project: (a) a Project Director within its Ministry of Health with terms of reference acceptable to the Bank, who shall be the Director General of Communicable Diseases; (b) a Project Manager within the Directorate General of Communicable Diseases in the Ministry of Health, with qualifications and terms of reference acceptable to the Bank; and (c) a Program Management Unit for HIV, AIDS and STDs Prevention and Management, in the Ministry of Health, with qualified staff in adequate numbers and with terms of reference acceptable to the Bank. 4. In carrying out Part A.4 of the Project, the Borrower shall make Grants in accordance with the procedures and on the conditions set forth or referred to in Schedule 6 to this Agreement. 5. The Borrower shall, not later than December 31 in each year, commencing December 31, 1996, and until completion of the Project, furnish to the Bank for approval the annual central and provincial plans for the carrying out of training activities and workshops and the provision of fellowships. 6. The Borrower shall provide the vehicles required for the carrying out of the Project in accordance with a schedule and timetable agreed with the Bank. SCHEDULE 6 Procedures and Conditions for Grants under Part A.4 of the Project 1. Each Grant shall be made by the Borrower only: (a) to a Grantee which shall have established, to the satisfaction of the Borrower, acting through the Program Management Unit for HIV, AIDS and STDs Prevention and Management, on the basis of criteria and procedures, acceptable to the Bank, that said Grantee: (i) has the organization, management, staffing and other resources required for the efficient carrying out of the services; and (ii) has prepared an acceptable plan, including terms of reference, for the carrying out of the services; and (b) for services which are determined by the Borrower, acting through the Program Management Unit for HIV, AIDS and STDs Prevention and Management, on the basis of guidelines acceptable to the Bank: (i) to be technically feasible and cost-effective, and (ii) to have been designed in accordance with appropriate health and educational standards. 2. Grants shall be made on terms whereby the Borrower shall obtain, through a written agreement with each of the Grantees, rights adequate to protect the interests of the Borrower and the Bank, including the right, as applicable, to: (a) require the Grantee to carry out the services with due diligence and efficiency and in accordance with sound financial, health, educational and managerial standards and to maintain adequate records; (b) require that (i) the goods and services required and Page 13 to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of Schedule 4 to this Agreement, and (ii) such goods shall be used exclusively in the carrying out of the services; (c) inspect, by itself or jointly with representatives of the Bank if the Bank shall so request, such goods and any relevant records and documents; (d) obtain all such information as the Borrower and the Bank shall reasonably request relating to the foregoing and to the benefits to be derived from the services; and (e) suspend or terminate the right of the Grantee to the use of the proceeds of the Loan upon failure by such Grantee to perform its obligations under its agreement with the Borrower providing for the Grant. SCHEDULE 7 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (8) 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 $2,400,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Bank shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to $500,000 until the aggregate amount of withdrawals from the Loan Account plus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of $4,800,000. 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 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 Page 14 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 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 with respect to the Project, 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 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 Page 15 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.