Page  1
CONFORMED COPY
CREDIT NUMBER 3203-UG
Development Credit Agreement
(Nakivubo Channel Rehabilitation Project)
between
THE REPUBLIC OF UGANDA
and
INTERNATIONAL DEVELOPMENT ASSOCIATION
Dated June 17, 1999
CREDIT NUMBER 3203-UG
DEVELOPMENT CREDIT AGREEMENT
AGREEMENT, dated June 17, 1999, between THE REPUBLIC OF UGANDA (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 Borrower has furnished to the Association the long term institutional, 
financial and operational reform of Kampala City Council (KCC) contained in KCC’s 
“Strategic Framework for Reform” of November 1997 (the Program);
(C)
the Project will be carried out by KCC with the Borrower's assistance 
and, as part of such assistance, the Borrower will make available to KCC the proceeds 
of the Credit as provided in this Agreement; and
WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, 
to extend the Credit to the Borrower upon the terms and conditions set forth in this 
Agreement and in the Project Agreement of even date herewith between the Association 
and KCC;
NOW THEREFORE the parties hereto hereby agree as follows: 
ARTICLE I 
Page  2
General Conditions; Definitions
Section 1.01. The “General Conditions Applicable to Development Credit 
Agreements” of the Association, dated January 1, 1985 (as amended through\0bDecember 2, 
1997), with the modifications set forth below (the General Conditions) constitute an 
integral part of this Agreement:
(a)
A new paragraph (12) is added to Section 2.01 to read as set forth below, 
and the existing paragraphs (12) through (14) of said Section are accordingly 
renumbered as paragraphs (13) through (15): 
'12.
"Participating Country" means any country that the Association 
determines 
meets the requirements set forth in Section 10 of Resolution No. 
183 of the Board of 
Governors of the Association, adopted on June 26, 
1996; and "Participating Countries" means, 
collectively, all such countries.'
(b)
The second sentence of Section 5.01 is modified to read:
“Except as the Borrower and the Association shall otherwise agree, no 
withdrawals 
shall be made: (a) on account of expenditures in the territories 
of any country which is not 
a Participating Country or for goods produced in, or 
services supplied from such 
territories; or (b) for the purposes of 
any payment to persons or entities, or for any 
import of goods, if such 
payment or import, to the knowledge of the Administrator, is 
prohibited by 
a decision of the United Nations Security Council taken under Chapter VII of 
the 
Charter of the United Nations.”
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)
“First Urban Project” means the project described in the Development 
Credit Agreement for Credit Number 2206 UG, entered into between the Borrower and the 
Association and dated March 12, 1991; 
(b)
“MoLG” means the Borrower’s Ministry of Local Government; 
(c)
“Project Account” means the account referred to in Section 3.04 of the 
Project Agreement; 
(d)
“Project Agreement” means the agreement between the Association and KCC 
of even date herewith, as the same may be amended from time to time, and such term 
includes all schedules and agreements supplemental to the Project Agreement; 
(e)
“Project Implementation Plan” means the Project Implementation Plan dated 
March 30, 1999, prepared by KCC and including detailed procurement and disbursement 
arrangements, performance indicators and other administrative, financial and 
organizational arrangements to be used in the course of implementation of the Project;
(f)
“Project Management Report” means each report prepared in accordance with 
Section 4.02 of the Project Agreement; 
(g)
“Special Account” means the account referred to in Section 2.02 (b) of 
this Agreement; and 
(h)
“Subsidiary Agreement” means the agreement to be entered into between the 
Borrower and  KCC pursuant to Section 3.01 (b) of this Agreement, as the same may be 
amended from time to time. 
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 
Page  3
various currencies equivalent to sixteen million five hundred thousand Special Drawing 
Rights (SDR 16,500,000). 
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 
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 3 to this Agreement. 
Section 2.03. The Closing Date shall be June 30,  2002 or such later date as the 
Association shall establish.  The Association shall promptly notify the Borrower of 
such later date. 
Section 2.04. (a) The Borrower shall pay to the Association a commitment charge 
on the principal amount of the Credit not withdrawn from time to time at a rate to be 
set by the Association as of June 30 of each year, but not to exceed the rate of 
one-half of one percent (1/2 of 1%) per annum.
(b)
The commitment charge shall accrue: (i) from the date sixty days after 
the date of this Agreement (the accrual date) to the respective dates on which amounts 
shall be withdrawn by the Borrower from the Credit Account or canceled; and (ii) at 
the rate set as of the June 30 immediately preceding the accrual date and 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 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 percent (3/4 of 1%) per annum on the principal amount of 
the Credit withdrawn and outstanding from time to time. 
Section 2.06. Commitment charges and service charges shall be payable 
semiannually on March 1 and September 1 in each year. 
Section 2.07. (a) Subject to paragraphs (b), (c) and (d) below, the Borrower 
shall repay the principal amount of the Credit in semiannual installments payable on 
each March 1 and September 1 commencing September 1, 2009, and ending March 1, 2039. 
Each installment to and including the installment payable on March 1, 2019 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 per capita gross national product (GNP), as 
determined by the Association, shall have exceeded for three consecutive years  the 
level established annually by the Association for determining eligibility to access 
the Association's resources; 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 
repayment of installments under paragraph (a) above by: (A) 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; and (B) requiring the Borrower to commence 
repayment of the principal amount of the Credit as of the first semiannual payment 
date referred to in paragraph (a) above falling six months or more after the date on 
which the Association notifies the Borrower that the events set out in this paragraph 
(b) have occurred, provided, however, that there shall be a grace period of a minimum 
Page  4
of five years on such repayment of principal.
(c)
If so requested by the Borrower, the Association may revise the 
modification referred to in paragraph (b) above 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. 
(d)
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 is hereby specified for the 
purposes of Section 4.02 of the General Conditions. 
ARTICLE III 
Execution of the Project
Section 3.01. (a) The Borrower declares its commitment to the objectives of the 
Project as set forth in Schedule 2 to this Agreement, and, to this end, without any 
limitation or restriction upon any of its other obligations under the Development 
Credit Agreement, shall cause KCC to perform in accordance with the provisions of the 
Project Agreement all the obligations of KCC therein set forth, shall take and cause 
to be taken all action, including the provision of funds, facilities, services and 
other resources, necessary or appropriate to enable KCC to perform such obligations, 
and shall not take or permit to be taken any action which would prevent or interfere 
with such performance.
(b)
The Borrower shall make the proceeds of the Credit available to KCC  as a 
grant under a subsidiary agreement to be entered into between the Borrower and KCC, 
under terms and conditions which shall have been approved by the Association.
(c)
The Borrower shall exercise its rights under the Subsidiary Agreement in 
such manner as to protect the interests of the Borrower and the Association and to 
accomplish the purposes of the Credit, and except as the Association shall otherwise 
agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary 
Agreement or any provision thereof.
Section 3.02. Except as the Association shall otherwise agree, procurement of 
the goods, works and consultants’ services required for the Project and to be financed 
out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to 
the Project Agreement.
Section 3.03. For the purposes of Section 9.07 of the General Conditions and 
without limitation thereto, the Borrower shall cause KCC to: 
(a)
prepare, on the basis of guidelines acceptable to the Association, 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 for the future operation of the Project; and 
(b)
afford the Association a reasonable opportunity to exchange views with 
the Borrower on the said plan.
Section 3.04. The Borrower and the Association hereby agree that the obligations 
set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions 
relating to insurance, use of goods and services, plans and schedules, records and 
reports, maintenance and land acquisition, respectively shall be carried out by KCC 
pursuant to Section 2.03 of the Project Agreement. 
ARTICLE IV 
Page  5
Financial Covenants
Section 4.01. (a) For all expenditures with respect to which withdrawals from 
the Credit Account were made on the basis of Project Management Reports or statements 
of expenditures, the Borrower shall: 
(i)
maintain or cause to be maintained in accordance with sound 
accounting 
practices, records and accounts reflecting such 
expenditures; 
(ii)
ensure that all records (contracts, orders, invoices, bills, 
receipts and 
other documents) evidencing such expenditures are 
retained 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 was made; and 
(iii)
enable the Association's representatives to examine such records.
(b)
The Borrower shall: 
(i)
have the records and accounts referred to in paragraph (a) (i) 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 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 the 
report of such audit by 
said auditors, of such scope and in such 
detail as the Association shall have 
reasonably requested, including a 
separate opinion by said auditors as to 
whether the 
statements of expenditures or Project Management Reports 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; and 
(iii)
furnish to the Association such other information concerning said 
records and 
accounts and the audit thereof as the Association shall from 
time to time 
reasonably request.
ARTICLE V
Remedies of the Association
Section 5.01. Pursuant to Section 6.02 (l) of the General Conditions, the 
following additional events are specified:
(a)
a situation has arisen which shall make it improbable that the Program , 
or a significant part thereof, will be carried out;
(b)
KCC shall have failed to perform any of its obligations under the Project 
Agreement; and
(c)
as a result of events which have occurred after the date of the 
Development Credit Agreement, an extraordinary situation shall have arisen which shall 
make it improbable that KCC will be able to perform its obligations under the Project 
Agreement.
Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the 
following additional events are specified: 
(a)
the event specified in paragraph (b) of Section 5.01 of this Agreement 
shall occur and shall continue for a period of sixty days after notice thereof shall 
have been given by the Association to the Borrower; and 
(b)
any event specified in paragraphs (a) or (c) of Section 5.01 of this 
Agreement shall occur. 
Page  6
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 Subsidiary Agreement has been executed on behalf of the Borrower and 
KCC; and 
(b)
KCC has furnished to the Association, 
(i)
a duly authorized property valuation list from the Borrower’s 
Chief Government 
Valuer for all staff houses owned by  KCC; and 
(ii)
KCC’s consolidated audited financial statements for its financial 
year ending 
on June 30, 1998.
Section 6.02. The following  are specified as additional matters, within the 
meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion 
or opinions to be furnished to the Association: 
(a)
that the Project Agreement has been duly authorized or ratified by KCC, 
and is legally binding upon KCC in accordance with its terms; and 
(b)
that the Subsidiary Agreement has been duly authorized or ratified by the 
Borrower and KCC and is legally binding upon the Borrower and KCC in accordance with 
its terms. 
Section 6.03. The date ninety (90) days after the date of this Agreement is 
hereby specified for the purposes of Section 12.04 of the General Conditions. 
ARTICLE VII 
Representative of the Borrower; Addresses 
Section 7.01. The Minister responsible for finance is designated as 
representative of the Borrower for the purposes of Section 11.03 of the General 
Conditions.
Section 7.02. The following addresses are specified for the purposes of Section 
11.01 of the General Conditions:
For the Borrower:
Ministry of Finance, Planning
   and Economic Development
P.O Box 8147 Kampala Uganda
Cable address:
FINSEC
Kampala
For the Association:
International Development Association
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
INDEVAS
248423 (MCI) or
Washington, D.C.
 64145 (MCI)
Page  7
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.
THE REPUBLIC OF UGANDA
By /s/ Edith Ssempala 
Authorized Representative
INTERNATIONAL DEVELOPMENT ASSOCIATION
By /s/ Callisto Madavo 
Regional Vice President 
Africa
SCHEDULE 1 
Withdrawal of the Proceeds of the Credit
1.
The table below sets forth the Categories of items to be financed out of the 
proceeds of the Credit, the allocation of the amounts of the Credit to each Category 
and the percentage of expenditures for items so to be financed in each Category:
Amount of the
Credit Allocated
   % of
(Expressed in
Expenditures
Category
SDR Equivalent)
to be Financed
(1)
Civil Works
   10,500,000
90%
(2)
Office equipment, 
      200,000
80%
vehicles, computers 
and software
(3)
Consultants’ services for:
(a) studies, and contracted     2,720,000
100%
out services
(b) training, institutional
     2,300,000
80%
    support and operating costs
(4)
Unallocated
780,000
     _________
TOTAL
    16,500,000
    ==========
2.
For the purposes of this Schedule the term “institutional support and operating 
costs” means costs associated with the Project on account of maintenance of buildings, 
vehicles, fuel, equipment, office supplies, utilities, consumables, travel and 
accommodation, and contract employees but excluding salaries, honoraria and 
allowances. 
3.
Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be 
Page  8
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 under contracts costing less 
than the equivalent of: (i) $300,000 each for goods and works; (ii) $100,000 for 
consulting firms; and (iii) $50,000 for individual consultants, all under such terms 
and conditions as the Association shall specify by notice to the Borrower.
SCHEDULE 2 
Description of the Project
The objectives of the Project are to: (i) improve the drainage and road network 
in Kampala by alleviating the frequent and increasing incidence of flooding; (ii) 
encourage and enhance KCC’s ability to plan, manage and execute complex investment 
decisions and programs; and (iii) establish the primacy of maintenance of key 
infrastructure investments.
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:
Civil Works 
1.
Main Channel Works 
The carrying out of de-silting and rehabilitation works of about 9 km of the 
Nakivubo Channel in Kampala, including: (a) lining of sides with gabions, concrete, 
stone pitching and earth; (b) widening of various existing culverts and bridges to 
accommodate new channel widths; (c) replacing existing footbridges with larger ones 
and constructing new ones at points of increased pedestrian traffic; (d) installing of 
guardrails and rubbish screens at various strategic points; and (e) realignment and 
protection of existing utility services such as water mains, sewer mains, telephone 
and electricity cables. 
2.
Auxiliary Works
Rehabilitation of the following major auxiliary drainage works close to the 
flood-prone Nakivubo Channel in Kampala and its tributaries: 
(a)
Clock Tower Roundabout  
(i)
Construction of stone pitched and concrete lined drains across the 
road width; 
(ii)
installation of large diameter culverts and box culverts; 
(iii)
construction of large diameter storm water catch-pits to replace 
existing ones; and 
(iv)
clearing of existing underground drains. 
(b)
Lugogo/Uganda Manufacturers’ Association’s Showground  
(i)
Widening and lining of about 200m of channel and drain; and 
(ii)
construction of large diameter storm-water catch-pits and access 
culverts. 
(c)
Kafumbe Road/Kisenyi Lane Junction  
(i)
Demolition and removal of existing pipe culverts and their 
replacement with box 
culverts; 
(ii)
blockage of several pipe culverts and diversion of storm water to 
an adjacent open 
drain; 
Page  9
(iii)
reconstruction and widening of an existing drain; and 
(iv)
reconstruction of Kisenyi Lane over a portion of proposed box 
culverts. 
(d)
Makerere Road/Aga Khan Secondary School 
(i)
Demolition of an existing culvert and replacing with two large 
diameter pipes; 
(ii)
trimming, shaping and stone lining 50m of channel; 
(iii)
construction of a silt trap; and 
(iv)
reconstruction of  a section of road over the proposed culvert.
3.
Priority Drainage “Black Spots” Rehabilitation Program:  Enhancement of storm 
water flow and reduction of traffic congestion in the city of Kampala through the 
rehabilitation of about twenty seven drainage spots identified within the Nakivubo 
channel catchment area, including the carrying out of desilting and rehabilitation 
works and widening of drains, channels and catch pits.
Part B:
Construction Supervision 
The provision of consultants’ services for the supervision of civil works to be 
carried out under Part A of the Project.
Part C:
Program and Policy Studies 
1.
Kampala Drainage Master Plan Study
The carrying out of a comprehensive drainage master plan study for the city of 
Kampala including: 
(i)
a survey and update of the city’s drainage systems; 
(ii)
an assessment of the environmental, social and economic status; 
and 
(iii)
an analytical report on the current situation and projections into 
a twenty-year 
horizon with preliminary designs and costs for 
the necessary improvements. 
2.
Kampala Urban Transportation Improvement Programme Study  
The carrying out of a comprehensive study for the long-term improvement of urban 
transportation in  the city of Kampala, including a status survey and future 
projections of the environmental, social, economic and physical development aspects.
Part D:
Institutional Support
Implementation of immediate and long term measures in support of the ongoing 
initiatives under KCC’s Strategic Framework for Reform Program, started under the 
First Urban Project, for a broader and long-term agenda of policy, institutional and 
operational reforms, as follows: 
1.
Kampala City Development Strategy  The carrying out of a participatory, 
replicable and sustainable approach to urban local development in Uganda that can 
maximize the potential for growth with poverty reduction. 
2.
Revenue Enhancement  
(a)
The carrying out of activities for the immediate improvement of property 
tax revenues through restructuring of the collection system and improving the 
administration and incentive structure for billing, delivery, collection and 
enhancement. 
Page  10
(b)
The building of a fiscal cadastre at two pilot sites for developing a 
data management system and mobilizing data collection systems for implementation in 
the short-term. 
(c)
The carrying out of studies to determine alternative methods for mass 
valuation for the city of Kampala to be implemented in the long-term.
(d)
The carrying out of activities to enhance other revenue sources. 
3.
Contracting out of Basic Service Delivery Functions 
Improvement of basic service delivery in KCC’s five divisions through the 
contracting out of minor works. 
4.
Institutional support 
The provision of institutional support to KCC, through a core team by way of 
technical advisory services, administrative support, training and the acquisition of 
office equipment. 
* * * 
The Project is expected to be completed by December 31, 2001.
SCHEDULE 3 
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 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 $1,500,000 
to be withdrawn from the Credit Account and deposited into 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 $750,000 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 SDR 5,000,000. 
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 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 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; 
and  
(ii)
Prior to or at the time of each such request, the Borrower shall 
Page  11
furnish to the 
Association the documents and other evidence 
required pursuant to paragraph 4 of 
this Schedule for the 
payment or payments in respect of which replenishment is 
requested.  On the basis of each such request, the Association shall, on behalf of 
the Borrower, withdraw from the Credit Account and deposit into the 
Special Account 
such amount as the Borrower shall have requested and 
as shall have been shown by 
said documents and other evidence 
to have been paid out of the Special Account for 
eligible 
expenditures.  All such deposits shall be withdrawn by the Association 
from the Credit Account under the respective eligible Categories, and in the 
respective equivalent amounts, as shall have been justified by 
said documents and 
other evidence.
4.
For each payment made by the Borrower out of the Special Account, the Borrower 
shall, at such time as the Association shall reasonably request, furnish to the 
Association such documents and other evidence showing that such payment was made 
exclusively for eligible expenditures.
5.
Notwithstanding the provisions of paragraph 3 of this Schedule, the Association 
shall not be required to make further deposits into the Special Account:
(a)
if, at any time, the Association shall have determined that all further 
withdrawals should be made by the Borrower directly from the Credit Account in 
accordance with the provisions of Article V of the General Conditions and paragraph 
(a) of Section 2.02 of this Agreement;
(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 minus the total amount of all outstanding special commitments 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.
Page  12
(d)
Refunds to the Association made pursuant to paragraph 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.