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Enclosure 2 in No. 1.
Loan Agreement respecting Imperial Railways of North China.
AGREEMENT made between his Excellency Hsu Shih Chang, Viceroy of Manchuria, and his Excellency Tang Shao-Yi, Governor of Fengtien, acting under the authority of the Imperial Chinese Government, of the one part, and the British and Chinese Corporation (Limited) (hereinafter called "the corporation") of the C other part, for the issue and regulation of a loan for the construction of an extension of the Imperial Railways of North China from Sin Min Ting, their present northern terminus, to Fakumen, a point about 50 miles to the north-east (hereinafter known as "the extension").
ARTICLE 1. The corporation shall issue on behalf of the Imperial Chinese Government a sterling loan of 500,0001. (hereinafter referred to as "the loan") on the terms and conditions as hereinafter contained. The loan shall be known as "The Imperial Railways of North China Loan of 1907"; it shall be in one issue and its price to the Imperial Chinese Government shall be the actual price at which it is issued to the public, less a flotation charge of 53 points retainable by the corporation, that is to say, a charge of 51. 10s. for every 100%. bond issued.
The interest on the bonds shall be at the rate of 5 per cent, per annum on the nominal principal, calculated from the date on which the loan is issued to the public, and shall be paid by the railway administration to the Hong Kong and Shanghae Banking Corporation for account of the bondholders, in half-yearly instalments, according to the amounts specified in the schedule attached to this agreement, and fourteen days before their due dates, Western calendar, as calculated from the date of issue of the loan.
Art. 2. The loan shall be issued to the public as soon as practicable after the signing of this agreement, and not later than twelve months after signature thereof. 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 Govern- ment, 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 authorised 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 properly. 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 men- tioned 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 day of 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 Shanhai-kuan 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 build- ings, 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
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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 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 by the corporation.
Art. 6. The Imperial Government of China being entitled to direct the corpora- tion 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 50,0001, or whatever portion thereof is actually drawn, together with interest thereon not exceeding a charge of 6 per cent. per aunum, 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 revenues of the salt li-kin of the province of Fengtien to the amount of 350,000 Haikuan taels per annum, which revenues are hereby declared to be free from all other loan 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 long Kong and Shanghae Banking Corporation, London, signed by the managing director of the extension, or, in his absence, by his duly authorised 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 Shanghae, these transfers being effected through the Hong Kong and Shanghae Banking Corporation, and the trans ferred funds shall remain on deposit with that bank until required for railway
purposes.
Art. 9. The corporation is hereby authorised 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 authorised 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 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. 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 authorise 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
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