TNAG-0207-FCO40-243-Construction-of-a-cross-harbour-tunnel--under-Hong-Kong-harb-1969 — Page 68

THE CROSS-ILARBOUR TUNNEL CO., LTD.

The British Trade Commissioner.

3.

29th March, 1969.

Reserve Fund:

Engineering Fees:

The Cross-Harbour Tunnel Co. Ltd. will establish in London a Reserve Fund to be held by an acceptable trustee. During the first three years after the Tunnel has commenced to operate, an amount equal to 5% of the revenue of the Company after payment of taxes, royalties, operating expenses, loan and interest payments to Lloyds Bank, will be paid into this fund subject to a minimumpayment in each year of £100,000. If in any one year the surplus revenue, as defined, fails to reach £100,000, the amount to be paid into the fund must equal the total surplus revenue.

In the 4th and 5th years after the Tunnel has commenced to operate, payments into the fund would be equal to 25% of the surplus revenue, as defined, subject to a minimum payment in each of these years of £100,000. In the 6th year after commencement the proportion would revert to 5% of the surplus revenue still with a minimum of £100,000 and would continue at this rate until such time as the amount held by the trustee reaches the equivalent of the then outstanding debt. Payments into the fund would thereupon cease and the fund could subsequently be drawn upon by the Tunnel Company either to meet instalments of the debt as these fall due or have immediate discharge of the balance of debt then outstanding.

During the contract period, it is anticipated that an amount of £325,000 will be paid for resident site staff and other engineering supervisory and consulting services (in addition to an amount over £600,000 already spent) and a substantial percentage of fees payable will be spent in the United Kingdom and the rest in Hong Kong. The appointment of Engineers is essential to the contract and, subject to the documentation being to the satisfaction of those concerned, the agreement covering the appointment and remuneration of the Engineers would be included as an item in the main contract.

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We have endeavoured to propose terms which we believe will be acceptable to E.C.G.D. and we would ask for their early reply to this offer as both Richard Costain (Civil Engineering) Ltd. and ourselves consider that this Company and E.C.G.D. should reach agreement in principle on the finance terms prior to the commencement of major contractual negotiations.