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Enclosure 5 in No. 1.
Copy of Agreement.
AGREEMENT made this 23rd day of April, 1920, being the 9th year of the Republic of China 3rd day 4th moon, between the Government of the province of Kwangtung, in the Republic of China, represented by their Excellencies the Military and Civil Governors of the province of Kwangtung (hereinafter called "the Kwangtung Government") of the one part, and Major Louis Cassel (retired), of Victoria, in the colony of Hong Kong, an officer of the Most Excellent Order of the British Empire, and Sum Pak Ming, of Victoria aforesaid, gentleman, as trustees for and on behalf of a syndicate to be formed for the purpose of exploiting certain cal-bearing districts in the said province (hereinafter called the syndicate"), of the other part, whereby it is agreed by and between the parties hereto as follows :-
1. The Kwangtung Government will permit the syndicate to bore, examine and survey all such ground as the syndicate may be advised, or have reason to believe, contains coal within the following districts (abutting over or adjacent to the Canton- Hankow Railway and the Canton-Kowloon Railway), viz., Nam Hoi, Pun U, Tang Koon, Po On, Sam Sui, Fa Yuen, Ying Tak, Ching Yuen, Yeng Shan, Liu Yuen Kuk Kong, Lok Cheong, Yue Yuen, Yan Fa, Chee Hing, Nam Hung, Fat Kong, Yung Yuen, Ko Ming, Tsang Shing, Taung Fa, &c., and the Government will not after the date of the signing of the agreement grant permits to any other persons, firm or company to bure, examine, survey and mine in any of the districts above mentioned until the period set forth in clause 13 hereof shall have lapsed.
2. The Kwangtung Government shall cause this agreement to be provisionally signed and chopped, whereupon the syndicate shall take all such steps as may be necessary to obtain the official sanction and approval thereto of the Central Government of China at Peking, and upon such sauction and approval being obtained, the Kwangtung Govern- ment shall ratify this agreement, and immediately thereupon the syndicate shall deposit with the Kwangtung Government the sum of 100,000 dollars Hong Kong
currency.
3. Within a period of nine months from the ratification aforesail of this agreement the syndicate shall, in the event of the said boring, examination and survey of the ground in the districts aforesaid appearing to the syndicate to justify the syndicate so doing, float a company to be called "The Kwangtung Collieries (Limited)," with a nominal capital of 10,000,000 dollars for the purpose of working coal mines in the said districts and of dealing with the coal thereby secured, and shall transfer to such company all rights and benefits and liabilities of the syndicate under this agreement.
4. In the event of no such company being floated by the syndicate within the said period of nine months, the Kwangtung Government shall be entitled to retain the said sum of 100,000 dollars, and this agreement shall thereupon determine. But in the event of such company being floated, a further sum of 900,000 dollars (making with the said sun of 100,000 dollars a sum of altogether 1,000,000 dollars) shall be deposited within the said period of nine months by that company with the Kwangtung Govern- ment as security for the due carrying out by the company of its objects, as set out in the memorandum and articles of association.
5. The said sum of 1,000,000 dollars, when so deposited in pursuance of clause 4 hereof, shall bear interest at the rate of 6 per cent. per annum, which interest the company shall be entitled to deduct from the dividends payable to the Kwangtung Government or its nominees in pursuance of the provisions of clause 8 hereof. There shall be further deducted from its dividends so payable to the Kwangtung Government or its nominees 4 per cent. per annum on the said sum of 1,000,000 dollars for the purpose of forming an amortisation or sinking fund, which shall be exchanged in sums of not less than 10,000 dollars for the "B" shares referred to in clause 8 hereof, until the whole of the said sum of 1,000,000 dollars shall be so received by the company, If no dividend is payable, the Kwangtung Government will not receive any interest on the said sum of 1,000,000 dollars. If the dividend payable is not sufficient to pay the interest of the said sum of 1,000,000 dollars, the Kwangtung Government will not make up the deficit. The deduction from the dividend for forming the amortisation or sinking fund is similarly calculated. If the company goes into liquidation the deposited money shall be retained by the Kwangtung Government and this agreement will
determine.
6. The said capital of 10,000,000 dollars (fixed as the nominal capital of the company to be floated as aforesaid) shall be divided into 1,000,000 shares of 10 dollars
each, half of which shall be classed as "B" shares, and shall be considered as fully paid-up shares and be allotted by the directors of the company, who are of Chinese nationality, in such manner as they may decide (subject to the provisions of clause 8 hereof).
7. The articles of association of the said company to be floated as aforesaid shall provide that, out of the profits of the company there shall be first paid all working expenses, a royalty not exceeding 1 dollar per ton of all coal extracted and dealt with, all reasonable expenses to staff, sums properly payable to the Kwangtung Government, and interest at the rate of 8 per cent per annum on the capital represente l by the "A" shares to the holders thereof; and the remainder of the said profits as shall be declared available for dividend shall be paid by way of dividend to holders of A " and "B" shares equally,
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8. Upon the incorporation of the company to be floatel as aforesaid, the company shall make the following allotment of shares, namely:-
(a.) Fully-paid "B" shares to the nominal value of 1,000,000 dollars which shall be held by the company in trust for the Kwangtung Government, the dividends on which shal inter alia form the amortisation or sinking fund referred to in clause 5 hereof. As and when sums of not less than 10,000 dollars are available in the said amortisation or sinking fund. the said fully-paid "B" shares to an equivalent value shall be transferred to the Kwangtung Government.
(6.) Fully-paid "B" shares to the nominal value of 500,000 dollars to trustees to be nominated by the Kwangtung Government for the benefit of the poor people in the province of Kwangtung.
(c.) Fully-paid "B" shares to the nominal value of 500,000 dollars to trustees to be nominated by the Kwangtung Government for educational purposes in the province of Kwangtung.
In consideration of the said allotments as aforesaid, the Government will cause to be executed all such documents as may be necessary for the purpose of definitely granting to such company the right, for a period of ninety years from the date of such incorpu- ration, to bore, dig, extract, transport, export and sell, or otherwise utilise, all or any portion of the coal extracted from all or any of the areas mentioned in clause 13 hereof, except the areas conceded to other companies and worked on a commercial basis as provided in clause 18 hereof.
pay
9. The company shall to the Kwangtung Government only such duties as are for the time being imposed upon the Kailan Mining Administration.
10. At the expiration of the said period of ninety years the same may be extended or continued upon such terms and conditions as may be mutually agreed upon between the Government and the company so to be incorporated aforesaid.
11. From the date of the ratification of this agreement and during the said period of ninety years and extended period (if any), the Kwangtung Government shall use its best endeavours to protect the persons employed by the said company, and their rights of property, and the rights of property of the said company, in the mines, machinery, buildings, plant and any other goods, effects or property to which the said persons and the said company may be entitled for the time being.
12. The articles of association of the company to be floated as aforesaid shall further contain provisions to the following effect :-
(1.) That the board of directors of such company shall consist of seven persons, three of whom shall be elected by the holders of "A" shares, and shall be of European nationality, and three of whom shall be elected by the holders of "B" shares, and shall be of Chinese nationality. The remaining director shall be of British nationality, and shall be elected by the other six directors.
(2.) That the staff of the said company shall consist of a European manager and of such European engineers or supervisors as may be deemed necessary by the company, and shall als consist of two secretaries, one of whom shall be of British or other European nationality, and the other of Chinese nationality.
(8.) That the tuiner and unskilled labourers shall all be of Chinese nationality, and so far as possible be natives of the districts in which they are employed.
(4) That the existing laws and regulations of China with regard to mining shall be followed.
13. Immediately upon payment of the said sum of 100,000 dollars referred to in clause 2 hereof, the company shall have the right to demarcate within a perio
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