CONFORMED COPY 0 LOAN NUMBER 1060 YU Subsidiary Loan Agreement (Port of Bar Project) BETWEEN PREDUZECE "LUKA BAR" - BAR (Port of Bar .Enterprise) AND ZELEZNICKO TRANSPORTNO PREDUZECE BEOGRAD (Belgrade Railway Transport Enterprise) DATED DECEMBER 11, 1974 CONFORMED COPY LOAN NUMBER 1060 YU Subsidiary Loan Agreement (Port of Bar Project) BETWEEN PREDUZECE "LUKA BAR" - BAR (Port of Bar Enterprise) AND ZELEZNICKO TRANSPORTNO PREDUZECE BEOGRAD (Belgrade Railway Transport Enterprise) DATED DECEMBER 11, 1974 SUBSIDIARY LOAN AGREEMENT AGREEMENT, dated December 11, 1974, between PREDUZECE "LUKA BAR" - BAR (Port of Bar Enterprise) (hereinafter called the Port of Bar) and ZELEZNICKO TRANSPORTNO PREDUZECE BEOGRAD (Belgrade Railway Transport Enterprise) (hereinafter called RTE Belgrade). WHEREAS by a loan agreement of even date herewith (hereinafter called the Loan Agreement) between the International Bank for Reconstruction and Development (hereinafter called the Bank) and the Port of Bar, the Bank has agreed to make available to the Port of Bar a loan in an amount in various currencies equivalent to forty-four million United States dollars ($44,000,000) (hereinafter called the Loan) under the terms and conditions and for the purposes set forth therein; WHEREAS a copy of the Loan Agreement has been furnished to RTE Belgrade which accepts all its provisions insofar as they may concern it; WHEREAS under the terms of said Loan Agreement the Port of Bar shall relend to RTE Belgrade a part of the proceeds of the Loan under a Subsidiary Loan Agreement satisfactory to the Bank; and WHEREAS the parties hereto have agreed to enter into this Agreement, which is the Subsidiary Loan Agreement referred to in Section 3.05 of the Loan Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the Loan Agreement (including the Recitals thereto) and in the General Conditions (as so defined) shall have the respective meanings therein set forth, except for the terms already defined in the Preamble to this Agreement. ARTICLE II The Subsidiary Loan Section 2.01. The Port of Bar shall relend to RTE Belgrade, out of the proceeds of the Loan, the amounts from time to time withdrawn from the Loan 4 Account under Category 2 of the allocation of the proceeds of the Loan referred to under paragraph 1 of Schedule 1 to the Loan Agreement (said amounts so relent being hereinafter called the Subsidiary Loan), on the terms and conditions in this Subsidiary Loan Agreement set forth or referred to. Section 2.02. (a) Upon request of RTE Belgrade, the Port of Bar shall promptly make application for withdrawal from the Loan Account of amounts which the Port of Bar is entitled to withdraw therefrom for expenditures by RTE Belgrade for Part G of the Project. (b) RTE Belgrade shall furnish to the Port of Bar, with a view to submission to the Bank, all such documents as are required by the Loan Agreement or as shall be requested by the Bank in order to enable the Port of Bar to make the withdrawals from the Loan Account requested by RTE Belgrade. Section 2.03. The Port of Bar shall open a Subsidiary Loan Account on its books in the name of RTE Belgrade and shall credit to such account the amount of the Loan allocated to RTE Belgrade pursuant to Schedule I to the Loan Agreement. The Subsidiary Loan shall be deemed to be withdrawn from such account on the date and in the amount and currencies of each withdrawal by the Port of Bar from the Loan Account with the Bank under said Category 2 of the allocation of the proceeds of the Loan. Section 2.04. (a) RTE Belgrade shall pay to the Port of Bar a commitment charge in dollars at the rate of 3/4 of 1% per annum on the amount credited to the Subsidiary Loan Account in accordance with Section 2.03 of this Agreement and not withdrawn therefrom. Upon full withdrawal or cancellation of the Loan, appropriate adjustment shall be made in such commitment charge on the basis of the actual amount of the Subsidiary Loan standing to the credit of RTE Belgrade from time to time. Commitment charges in respect of the Subsidiary Loan shall accrue from the same dates and on the same basis as commitment charges shall accrue on the Loan. (b) RTE Belgrade shall also pay to the Port of Bar in dollars any additional charges payable by the Port of Bar to the Bank under the Loan Agreement on account of any special commitments entered into by the Bank, in accordance with Section 5.02 of the General Conditions referred to in said Loan Agreement, at the request of the Port of Bar for expenditures by RTE Belgrade. The Port of Bar shall promptly request the Bank to enter into such special commitments upon written application of RTE Belgrade and upon such terms and conditions as shall be agreed between the Bank and the Port of Bar. .9 5 Section 2.05. RTE Belgrade shall pay interest to the Port of Bar at the rate of 8% on the principal amount of the Subsidiary Loan withdrawn and outstanding from time to time. Interest on any portion of the Subsidiary Loan so withdrawn shall be payable in the currency in which the principal of such portion is repayable. Section 2.06. Interest and commitment charges shall be paid by RTE Belgrade to the Port of Bar semi-annually on April 1 and October I in each year. Interest payments on the Subsidiary Loan and commitment charges shall be capitalized on the same basis and to the same extent as interest is capitalized on the corresponding portion of the Loan. Section 2.07. The principal amount of the Subsidiary Loan withdrawn by RTE Belgrade in accordance with Section 2.03 of this Agreement shall be repaid by RTE Belgrade to the Port of Bar on the dates and pro rata to the amounts of the maturities of the Loan set forth in Schedule 3 to the Loan Agreement, in such currencies, required by the Port of Bar to repay to the Bank said maturities of the Loan, as the Port of Bar shall specify prior to each maturity date; provided, however, that, in no event shall the aggregate amount of the Subsidiary Loan so repaid by RTE Belgrade in any currency exceed the portion of the Loan withdrawn by the Port of Bar from the Loan Account with the Bank in respect of expenditures by RTE Belgrade and interest on such amounts so withdrawn and repayable by the Port of Bar to the Bank in such currency. Section 2.08. (a) Upon at least 45 days' notice to the Por, of Bar, RTE Belgrade may on any maturity date prepay the amount of one or more maturities of the Subsidiary Loan, together with all accrued interest and any premium that may be payable by the Port of Bar to the Bank upon prepayment of the corresponding amount of the Loan, and any such prepayment shall be applied to the outstanding maturities of th Subsidiary Loan in reverse chronological order. (b) The Port of Bar shall apply any prepayment received in respect of the Subsidiary Loan to the prepayment of a corresponding amount of the Loan. ARTICLE IH[ The Project Section 3.01. (a) RTE Belgrade shall carry out Part G of the Project, with due diligence and efficiency and in accordance with appropriate financial, engineering and railroad management practices. and in ciose cooperation with the Port of Bar. 6 (b) RTE Belgrade shall give its full cooperation to the Port of Bar in carrying out those portions of the Project which aie of common interest to the RTE Belgrade and the Port of Bar. Section 3.02. RTE Belgrade shall comply with all the provisions of the Loan Agreement relating to withdrawals from the Loan Account and the use of the proceeds of the Loan and procurement of goods and services so financed, insofar as they concern expenditures by, or for the account of RTE Belgrade, as if such provisions were fully set forth in this Agreement. Section 3.03. (a) Without limitation or restriction upon any of its other obligations set forth herein, RTE Belgrade shall: (i) take all appropriate steps to obtain from Serbia the proceeds of the Grant of Serbia in accordance with the Grant of Serbia Law; and (ii) promptly transfer to the Port of Bar, through Investiciona Banka Titograd, on a grant basis, the proceeds of the Grant of Serbia, as and when such proceeds are made available to RTE Belgrade under the Grant of Serbia Law. (b) Except as the Bank shall otherwise agree, RTE Belgrade shall: (i) contribute out of its own resources, towards the financing of Part G of the Project (in addition to the Grant of Serbia, which is not to be applied to any expenditures for Part G of the Project), an amount of not less than 67,500,000 Dinars; and (ii) provide, or cause to be provided, all such additional funds, over and above the proceeds of the Subsidiary Loan and over and above said amount of 67,500,000 Dinars, as arc required to complete Part C of the Project in accordance with the established timetable for completion of the Project. Section 3.04. RTE Belgrade and the Port of Bar shall take all appropriate steps to ensure proper coordination (i) in the carrying out of the portions of the Project to be carried out respectively by RTE Belgrade and the Port of Bar, (ii) between rail and port operations with the port area, and (iii) in the evaluation of future traffic projections. Section 3.05. RTE Belgrade shall: 7 carry out Part G of the Project by contractors acceptable to the Bank under contracts satisfactory to the Bank; (ii) insure, or make adequate provisions for the insurance of, the imported goods to be financed out of the proceeds of the Subsidiary Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by RTE Belgrade to replace or repair such goods; (iii) furnish to the Bank, promptly upon their preparation, the plans, specifications, contract documents and work and procurement schedules for Part G of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request; (iv) maintain records adequate to record the progress of Part G of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Subsidiary Loan and to disclose the use thereof in the Project; (v) enable the representatives of the Bank and the Port of Bar to visit the facilities and construction sites included in Part G of the Project and to examine the goods financed out of the proceeds of the Subsidiary Loan and any relevant records and documents; (vi) furnish to the Bank all such information as the Bank shall reasonably request concerning Part G of the Project, the expenditure of the proceeds of the Subsidiary Loan, and the goods and services financed out of such proceeds; and (vii) take all such action as shall be necessary to acquire as and when needed all such land, and rights in respect of land as shall be required for the construction and operation of the facilities included in Part G of the Project, and shall furnish to the Bank, as requested from time to time, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. Section 3.06. Except as the Bank shall otherwise agree, RTE Belgrade shall acquire the goods to be financed out of the proceeds of the Subsidiary Loan free of any encumbrances. 8 ARTICLE IV Management and Operation of RTE Belgrade Section 4.01. RTE Belgrade shall at all times conduct its operations, manage its affairs, plan its investments and maintain its financial position in accordance with appropriate financial, engineering and railway management principles and practices under the supervision of qualified and experienced management assisted by qualified and competent staff. Section 4.02. RTE Belgrade shall take out and maintain with responsible insurers, or make adequate provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate railway practice. Section 4.03. RTE Belgrade shall take all steps necessary to maintain or renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business. Section 4.04. RTE Belgrade shall at all times operate and maintain its railway network, equipment and installations and make all necessary renewals or repairs in accordance with appropriate engineering and railway management practices. Section 4.05. Except as the Bank shall otherwise agree, RTE Belgrade shall not sell, lease, transfer or otherwise dispose of any of its property or assets which shall be required for the efficient operation of its business. ARTICLE V Financial Covenants Section 5.01. RTE Belgrade shall maintain records adequate to reflect, in accordance with consistently maintained appropriate accounting practices, its operations and financial condition. Section 5.02. RTE Belgrade shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited in accordance with appropriate auditing principles consistently applied, by the Social Accounting Service or another competent and experienced independent auditing organization; (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, (A) certified copies of its financial statements for such 9 year as so audited and (B) 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 the accounts and financial statements of RTE Belgrade and the audit thereof as the Bank shall from time to time reasonably request. Section 5.03. (a) RTE Belgrade represents that at the date of this Agreement no lien exists on any of its assets as security for any debt. (b) RTE Belgrade undertakes that, except as the Bank shall otherwise agree: (i) if RTE Belgrade shall create any lien on any of its assets as security for any debt, such lien will equally and ratably secure the payment of the principal of, and interest and other charges on, the Subsidiary Loan and that in the creation of any such lien express provision will be made to that effect at no cost to the Port of Bar or the Bank and (ii) if any statutory lien shall be created on any assets of RTE Belgrade as security for any debt, RTE Belgrade shall grant, at no cost to the Port of Bar or the Bank, an equivalent lien satisfactory to the Port of Bar and the Bank to secure the payment of the principal of, and interest and other charges on the Subsidiary Loan; provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. (c) The Port of Bar and RTE Belgrade agree that the provisions of paragraphs (a) and (b) of this Section 5.03 are intended for the benefit of the Bank, and that any security granted for the Subsidiary Loan shall be held by the Port of Bar as security for the repayment of the Loan, to the extent of the amount of the Subsidiary Loan. ARTICLE VI Consultation and Information Section 6.01. RTE Belgrade shall cooperate fully with the Port of Bar and with the Bank to ensure that the purposes of the Loan will be accomplished. To that end, the Port of Bar and RTE Belgrade shall from time to time, at the request of either party or of the Bank:. (a) exchange views through their representatives with regard to the performance of their respective obligations under this Subsidiary Loan Agreement, 10 the administration, operations and financial condition of the Port of Bar and RTE Belgrade, and any other matters relating to the purposes of the Loan; (b) furnish to the other party and the Bank all such information as it shall reasonably request concerning the progress of the Project and the general status of the Loan and the Subsidiary Loan. Section 6.02. RTE Belgrade shall furnish to the Bank all such information concerning the administration, operation and financial condition of RTE Belgrade as the Bank shall from time to time reasonably request. Section 6.03. The Port of Bar and RTE Belgrade shall promptly inform each other and the Bank of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Loan, the maintenance of the service thereof or the performance by either of them of its obligations inder this Agreement. Section 6.04. RTE Belgrade shall enable the representatives of the Port of Bar and the Bank to inspect the records referred to in Section 5.01 of this Agreement and any relevant documents. ARTICLE VII Remedies Section 7.01. (a) If (i) a default shall have occurred in the payment of any amount payable by the RTE Belgrade to the Port of Bar under this Agreement, or (ii) a default shall have occurred in the performance of any other obligation on the part of the RTE Belgrade under this Agreement, then the Bank may by notice to the RTE Belgrade suspend in whole or in part the right of RTE Belgrade to request the Port of Bar to withdraw from the Loan Account the amount of the Loan to be relent to RTE Belgrade and such right shall continue to be suspended in whole or in part, as the case may be, until the event or events which gave rise to such suspension shall have ceased to exist or until the Bank shall have notified the RTE Belgrade that such right has been restored whichever is the earlier. (b) If the right of the Port of Bar under the Loan Agreement to make withdrawals from the Loan Account shall have been suspended or terminated with respect to any amount in the Loan Account to be relent to RTE Belgrade, regardless of the reason therefor, then the right of RTE Belgrade to make withdrawals from the Subsidiary Loan Account provided in this Agreement shall likewise and simultaneously be suspended or terminated, as the case may be. 11 Section 7.02. If (i) the event described in Section 7.0 1(a)(i) of this Agreement shall have occurred and shall continue for a period of thirty days after notice thereof shall have been given by the Bank to RTE Belgrade; or (ii) the event described in Section 7.01(a)(ii) of this Agreement shall have occurred and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to RTE Belgrade; or (iii) if the Bank shall have declared the principal amount of the Loan to be due and payable immediately for reasons not attributable solely to the Port of Bar, then the Bank, at its option, may declare the principal amount of the Subsidiary Loan then outstanding to be due and payable immediately to the Port of Bar for repayment to the Bank, and upon such declaration such principal amount together with interest and other charges thereon shall become due and payable immediately, anything in this Agreement to the contrary notwithstanding. ARTICLE VIII Miscellaneous Section 8.01. This Agreement shall enter into force and effect simultaneously with the Loan Agreement. Section 8.02. When the entire principal amount of the Subsidiary Loan withdrawn by RTE Belgrade and all interest and other charges accrued thereon shall have been paid, or upon termination of the Loan Agreement prior to its effectiveness, this Agreement and all the obligations hereunder shall forthwith terminate. Section 8.03. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given or made when it shall be delivered: (a) for the Port of Bar: Preduzece "Luka Bar" - Bar 81350 Bar Yugoslavia (b) for the Enterprise: V V Zeleznicko transportno preduzede Beograd Nemanjina 6 11000 Beograd, Yugoslavia 12 Section 8.04. This Agreement may be executed in several counterparts, each of which shall be an original and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Subsidiary Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first written. PREDUZECE "LUKA BAR" - BAR By /s / Naum Ackovski Authorized Representative V 1 ZELEZNICKO TRANSPORTNO PREDUZECE BEOGRAD By /s/ Josip Kulisic Authorized Representative