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Shanghae-Nanking Railway, with the railway as first mortgage security therefor. The loan shall be in one issue, and the price agreed upon is 94 per cent. of the nominal value, subject to the other provisions of this Article as hereinafted stated. The interest on the bonds shall be at the rate of 5 per cent, per annum on their nominal value, payable half-yearly on the 1st day of June and the 1st day of December, and shall be calculated from the date of their sale to the public.
The loan shall be issued to the public as soon as possible after signing this Agreement, but if at the date of signature thereof, owing to an unfavourable state of the market rendering the issue of the loan and the payment of its proceeds to the Viceroy of Canton impossible on the terms above named, then in such case the Corporation shall thereafter, at such time as the Chinese Govern- ment may decide within a period not exceeding eight months, issue the loan and pay the proceeds thereof to the Viceroy, deducting and retaining six points from the rate at which the loan is actually issued to the public, whatever that rate may be-i.e., if the issue price be 101 the Viceroy will receive 95, and so on.
Subject to the provisions of Article 16, the duration of the loan is fixed at thirty years, commencing from the date of the signature of this Agreement, but no interest shall be paid on any bonds which may be redeemed or cancelled under the terms herein- after mentioned after the redemption or cancellation thereof.
On the face of each of these bonds shall be expressed the value thereof in the sum of 100%, or in such different amounts as the Chinese Minister in London in consultation with the Corporation may sanction.
It is understood that the Chinese Government may hereafter, in its discretion, appoint a Director-General of the railway upon whom, in such case, will devolve all the powers, functions, and responsibility herein attributed to the Viceroy of Canton (hereinafter called the Viceroy "),
Art. 2. The proceeds of the loan are to be used in the construction and equip- ment of the railway, and in paying interest on the loan during the course of construction.
The railway, being the first mortgage security for the loan, shall be built and equipped under the direction of the Viceroy, in accordance with the provisions of Article 6 hereinafter, and shall be built as economically as possible in accordance with the best modern system.
It is understood that the Viceroy will secure all the necessary land for the railway, and will give the necessary instructions to expedite and facilitate the work of construc- tion. The railway will be built in the first instance as a single line, but provision will be made, with the approval of the Viceroy, and wherever necessary to meet traffic requirements, for the eventual construction of a double line.
If during the time of construction the proceeds of the loan, together with the accrued interest thereon, payable by the Corporation, should, after the deduction of the sums necessary for the payments of interest on the loan, be insufficient to complete the construction of the railway, the amount of the deficiency shall either be provided from the Chinese Government's own resources or by a supplementary loan to be hereafter issued by the Corporation, the interest and other conditions of which supplementary loan shall be arranged when the time arrives, having due regard to the conditions of the money market.
When the railway is complete, if there is a surplus from the sale of bonds, the said surplus shall be at the disposal of the Chinese Government either to redeem the bonds in accordance with the terms of this Agreement as hereinafter stated, or to be placed on deposit with the Hong Kong and Shanghae Banking Corporation for the purpose of paying interest on the loan, or for other purposes beneficial to the railway, in regard to which the Viceroy will communicate in due course with the Corporation.
In all matters relating to the construction of the railway it is expressly agreed that particular beed shall be paid to the opinions and habits of the Chinese people, and that, when practicable, Chinese shall be employed in positions of trust and responsibility in connection with the railway.
In regard to earthwork, or such other work as Chinese are competent to perform, contracts shall be entered into for such work with Chinese, under the sanction of the head office, and the work itself shall be carried out in accordance with plans and specifications of the Engineer-in-chief and under his supervision.
Detailed plans and estimates of cost, whether of the respective sections of the railway or of any alterations of the same, are to be submitted for the approval of the Viceroy by the Engineer-in-chief through the Managing Director.
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Art. 3. The loan shall be secured by mortgage declared to be now entered into in equity by virtue of this Agreement, and shall, as soon as possible hereafter, be secured by a specific and legal first mortgage in favour of the Corporation upon all lands, materials, rolling-stock, buildings, property and premises, of every description purchased or to be purchased for the railway, and on the railway itself, as and when constructed, and on the revenue of all descriptions derivable therefrom.
The provisions of this Article in respect of the mortgage are to be construed and treated as equivalent in purport and effect to a mortgage customarily executed and delivered in England to a trustee for the purpose of securing loans and bond issues upon railway properties in foreign countries.
Art. 4. It is hereby agreed that in six months after this Agreement is signed, the Corporation shall provide the amount necessary to proceed with the detailed survey of the railway, and for preliminary construction work if necessary, whether this amount comes from the sale or hypothecation of the bonds, or from advances made, provided that bonds for the required amount shall have been executed and delivered to the Corporation. If, after expiration of eight months from the date of the ratification hereof, the work of construction shall not have been begun on the railway, this Agreement is to become null and void, but if failure to commence construction be due to any cause of force majeure, a reasonable extension of this time limit shall be arranged between the Viceroy and the Corporation.
Of the proceeds realized from the sale of the bonds, after deducting so much of them as may be required to be kept in England for the purchase of materials and the payments of contracts there, or for repayment of advances, such amounts as may be estimated and certified to by the Engineer-in-chief to the Viceroy through the Managing Director, as being actually required for the construction of any particular section of the railway, may be ordered by the Viceroy, after consideration, to be transferred to Hong Kong to be kept in the Hong Kong and Shanghac Bank, and placed to the credit of the construction account of the railway for the exclusive purpose of constructing the railway in the manner herein provided for under the supervision of the head office and the Viceroy.
On each occasion of a remittance being made to China, the amount realized in Sycee will be reported to the Viceroy, and any portion which may not be required shall be placed at interest. Similarly, the balance in England shall be placed at interest, to be allowed at the usual rate.
The accounts of the money spent from time to time in England, and of the money transferred to the credit of the construction and other accounts for use in China, are to be submitted quarterly to the head office for report to the Viceroy for the information of the Wai-wu Pu, and for his further report to the Board of Revenue, and the Board of Communications, for record therein, after such accounts have been approved and signed by him.
Art. 5. As to the form of the bond, it is to be agreed upon by the Viceroy or by the Chinese Minister in London and the Corporation, as soon as possible after the signature of this Agreement, but if hereafter the money markets in London or other countries require any modification of the form of the bond, except in anything that affects the amount of the loan and the liability of the Chinese Government, which are not to be touched at all, such slight modifications may be made to meet the views of the money markets by the Corporation in consultation with the Chinese Minister in Londor.
Any modifications are to be reported at once by the Corporation to the Viceroy for the approval of the Wai-wu Pu.
The bonds are to be engraved entirely in the English language, and shall bear the facsimile of the signature of the Viceroy and of his seal of office, in order to dispense with the necessity of signing them all in person, but the Chinese Minister in London shall, previous to the issue of any bonds, put his seal upon each hond with a facsimile of his signature, as a proof that the issue and sale of the bonds are duly authorized and binding upon the 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 hereintofore provided, are to be countersigned by the Corporation.
All expenses for the engraving, safe deposit, and sale of the bonds are to be borne by the Corporation.
Art. 6. When the work of construction is ready to begin, the Viceroy will establish a head office at Canton for the construction and management of the railway.
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