As regards the actual date of issue, it is understood that the Corporation will advise the Chinese Minister in London, for the information of the Imperial Chinese Government, as to the conditions of the market with a view to obtaining the most favourable price within the time limit above stated, and will act upon the Imperial Chinese Government's instructions in due course issuing the loan and paying the proceeds thereof, subject to the provisions of Articles 1 and 6, to the credit of the Railway Administration. It is understood that, for the purposes of this Agreement, the Railway Administration will be represented by the Viceroy of Manchuria and the Governor of Fengtien, or by their duly authorized representative.
Art. 3. It is agreed that this extension shall form a part of the Imperial Railways of North China, and shall be administered and controlled in accordance with the system in force for the administration and working of the Imperial Railways of North China.
Art. 4. The proceeds of the loan shall be solely and entirely applied to the construction and equipment of the extension, to the purchase of land property required for the same, and to payment of interest on the loan during construction.
If, after completion of the extension, there should remain a balance from the proceeds of the loan to the credit of the railway construction account, such unused balance shall be transferred to the credit of the interest reserve fund, hereinafter mentioned in Article 12, as provision for payments for which the Imperial Chinese Government is responsible under this Agreement.
Art. 5. The extension shall be constructed by Messrs. Pauling and Co. (Limited), London (hereinafter known as "the contractors"), in accordance with the conditions of the contract entered into between that firm and their Excellencies the Viceroy of Manchuria and the Governor of Fengtien on the 8th November, 1907.
The period of construction is estimated not to exceed two years, and shall commence within three months after the signature of this Agreement. It has been agreed by the contractors that the line shall be built and completed to conform to the standard of construction and carrying capacity of the Imperial Railways of North China as existing on the section between Shanhaikuan and Sin Min Ting.
After completion of the contract, and during the currency of this loan, the Railway Administration undertakes to keep the extension together with the buildings, works, rolling-stock, &c., and dependencies in good order and condition, and shall increase the rolling-stock from time to time to such extent as shall be necessary for the requirements of the traffic. After completion of construction, the extension will be under the same Engineer-in-chief as the Imperial Railways of North China.
If, owing to unforeseen circumstances, the construction of the extension as above specified should not have been commenced before the expiry of three months after the signature of this Agreement, or if, owing to force majeure or other cause, the contractors should be prevented from completing the work of construction, then the Railway Administration shall take such steps as may be necessary to secure due and prompt completion of the extension under conditions to be arranged with the Corporation.
Art. 6. The Imperial Government of China being entitled to direct the Corporation to issue this loan at any time within twelve months from the date of signature of this Agreement, it is hereby agreed that pending the issue of the loan, and within two months after signature of this Agreement, the Corporation shall place at the disposal of the Railway Administration the sum of £50,000, to be held in Europe or remitted to China as the Railway Administration may direct, as a first instalment on account of the proceeds of the loan. This amount of £50,000, or whatever portion thereof is actually drawn, together with interest thereon not exceeding a charge of 6 per cent. per annum, shall be deducted from the proceeds of the first sale of the bonds.
Art. 7. The loan shall be a first charge upon the freight and earnings of the extension, and should these be insufficient to meet the payments of interest and repayments of principal as specified in the schedule hereto attached, then upon the revenue of the salt li-kin of the Province of Fengtien to the amount of 380,000 Haikuan taels per annum, which revenues are hereby declared to be free from all other loans, charges, or mortgages.
Art. 8. The proceeds of the loan, after deducting any advances made by the Corporation under the provisions of Article 6, shall be paid to the credit of the Railway Administration's construction account at the London office of the Hong Kong and Shanghae Banking Corporation, these payments to be made in amounts and on dates conforming to the conditions of the loan prospectus. Interest at the rate of 4 per cent. shall be allowed by the bank on the credit balance of this account kept in London. Interest on the funds standing to the credit of the account in China will be allowed at the bank's rates for current account or fixed deposits, as the case may be, to be arranged. Requisitions on the loan funds will be drawn in amounts to suit the progress of construction of the extension either by the Consulting Engineer's certificate of work completed by the contractors, or by orders on the Hong Kong and Shanghae Banking Corporation, London, signed by the Managing Director of the extension, or in his absence by his duly authorized representative, and accompanied by his certificates, stating the nature and cost of the work to be paid for.
Such amounts as may be required for expenditure in China will be transferred by the Managing Director, at his discretion, to Tien-tsin or Shanghai, these transfers being effected through the Hong Kong and Shanghae Banking Corporation, and the transferred funds shall remain on deposit with that Bank until required for railway purposes.
Art. 9. The Corporation is hereby authorized to issue to subscribers to the loan bonds for the total amount of the loan in pounds sterling for such amounts as may appear desirable to the Corporation. The form of the bonds shall be generally the same as those issued under the Agreement of the 10th October, 1898. They shall bear the facsimile of the signature of the Viceroy and of his seal of office, in order to dispense with the necessity of his signing them all in person, but the Chinese Minister in London shall, previous to the issue of any bonds, put his seal upon each bond with a facsimile of his signature, as a proof that the issue and sale of the bonds are duly authorized and binding upon the Imperial Chinese Government.
Such bonds are to be numbered consecutively, and as many bonds as may be needed are to be properly engraved under the supervision of the Corporation, and after they are sealed by the Chinese Minister in London, as hereinbefore provided, are to be counter-signed by the Corporation.
All expenses for the engraving, safe deposit, and sale of the bonds are to be borne by the Corporation.
Art. 10. In the event of bonds issued for this loan being lost, stolen, or destroyed, the Corporation shall immediately notify the Railway Administration and the Chinese Minister in London, who shall authorize the Corporation to insert an advertisement in the public newspapers notifying that payment of the same has been stopped, and to take such other steps as may appear advisable according to the laws and customs of Great Britain; and should such bonds not be recovered after a lapse of time to be fixed by the Corporation, the Railway Administration, or the Chinese Minister in London, shall seal and execute duplicate bonds for a like amount, and hand them to the Corporation, by whom all expenses in connection therewith shall be defrayed.
Art. 11. The accounts of the receipts and expenditure of the extension shall be kept in the same way as those of the Imperial Railways of North China, and a report thereof shall be furnished to the Head Office of the Imperial Railways of North China to be published with their Annual Report.
All receipts and earnings of the extension shall be paid into the credit of the Railway Administration account with the Hong Kong and Shanghae Banking Corporation, Tien-tsin, interest on the credit balance thereof being allowed at the Bank's usual rates.
All expenses of working and maintaining the extension shall be paid from its receipts and earnings, the remainder of which shall then be charged with the service of the loan. If, after payment of these expenses, and making due provision for payment of interest at 5 per cent. per annum on the bonds and for repayments of principal due in accordance with the schedule hereto attached, there remain surplus funds unappropriated and properly available for other purposes, such funds shall, subject to the provisions of Article 12, be at the disposal of the Imperial Chinese Government to be used in such manner as they may think fit.
Art. 12. It is agreed that during the time of construction of the extension, the interest on the bonds is to be paid from the proceeds of the loan. The accruing interest from any proceeds of the loan not used during the period of construction, and the earnings derived from the working of any sections of the extension as they are built, shall be used to make up the amount required for the payment of the said interest, and if any deficiency remains, it is to be met from the proceeds of the loan.
After completion of construction, the amounts required for the payments of interest and repayments of principal, as specified in the schedule attached to this Agreement, together with a sum of 4 per cent. on such amounts to cover commission to the Hong Kong and Shanghae Banking Corporation, who are hereby appointed agents for the service of the loan, shall be paid to the said Bank in Tien-tsin, fourteen days before the due dates, in local currency sufficient to meet such payments in sterling in London, exchange for which shall be settled with the Hong Kong and Shanghae Banking Corporation.
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