construction, the balance of the Loan proceeds, with accrued interest, should not be sufficient to complete the construction and equipment of the railway lines named in Article II of this Agreement, the amount of deficiency shall be provided, in the first place, from such Chinese funds as may be available so as to permit of the uninterrupted continuance of the work of construction, and any balance then uncovered shall be supplemented by the issue by the Banks, under the terms of the present Agreement, of a second series of the present Loan, for an amount not exceeding Four Million Pounds (£4,000,000) Sterling. This second series shall be secured pari passu as an equal charge in every respect on the internal revenues specified in Article IX of this Agreement, and the time of its issue shall be left to the discretion of the Banks. Should foreign capital still be required for the completion of the Railway Lines aforesaid it shall be provided by a further loan to be issued by the Banks on terms to be arranged. If after the completion of the lines there should be a balance at the credit of the Railways Account, such unused balance will be transferred to the credit of the Interest Reserve Fund, hereinafter mentioned in Article XX, as a provision for payments for which the Imperial Chinese Government is responsible under this Agreement, or will be devoted, if necessary, to the improvement of these railways or otherwise to their advantage. ARTICLE XVI.-If before the publication of the Prospectus for the issue of the Loan any political or financial crisis should take place by which the markets and the prices of existing Chinese Government Stocks are so affected as to render, in the opinion of the Banks, the successful issue of this Loan impossible on the terms herein named, the Banks shall be granted a reasonable extension of time for the performance of their contract. If within this time limit, to be arranged, the Loan shall not have been issued, then this contract shall become null and void, and any advances made by the Banks under the provisions of Article III of this Agreement, shall be repaid by the Chinese Government with accrued interest, but without any other compensation or remuneration whatsoever. ARTICLE XVII.-The construction and control of the railway lines shall be entirely and exclusively vested in the Imperial Chinese Government. For the work of construction the Imperial Chinese Government will select for appointment a fully qualified British Engineer-in-chief for the Hupei-Hunan section of the Canton-Hankow railway line from Wuchang to Yichang-hsien, and a fully qualified German Engineer-in-chief for the Kuangshui-Ichang section of the Szechuan-Hankow railway line, with a fully qualified American Engineer-in Chief for the section of that line from Ichang to Kueichoufu at the same time informing the Banks of the selection made. If the Banks have objections to offer against the Engineers-in-chief thus selected for appointment, they shall, in stating their objections, give definite reasons therefor. The said Engineers-in-chief shall be under the orders of the Director General and the Managing Directors of the respective lines or, in their absence, of their duly authorized representatives, and will carry out all the wishes of the Ministry of Posts and Communications with regard to the plan and construction of the lines. In their general conduct. they shall pay all due respect to the Ministry of Posts and Communications, the Director General and the Managing Directors. The terms of their respective agreements will be arranged by the Ministry of Posts and Communications. Whenever appointments are to be made or functions defined of the technical members of the railway staff, as well as in the case of their dismissal, the Director General, the Managing Director or, in his absence his duly authorized representative, will act in consultation with the Engineer-in-Chief concerned, and in the case of disagreement the matter will be referred to the Ministry of Posts and Communications, whose decision shall be final. After completion of construction, and during the currency of this Loan, the Imperial Chinese Government will continue to employ Europeans and/or Americans as Engineers-in-Chief of the said railway lines, these appointments being made without reference to the Banks. ARTICLE XVIII.-For the Hupei-Hunan section of the Canton-Hankow railway line, and the Hupei section of the Szechuan-Hankow railway line respectively (a) The British & Chinese Corporation, Limited and (b) the DeutschAsiatische Bank will act as Agents of the Railway Administration during construction for the purchase of all materials, plant and goods required to be imported from abroad. From this category rails and their accessories are excepted; for the purchase of which the Ministry of Posts and Communications has memorialized the Throne recommending that they should be manufactured and supplied by the Hanyang Iron Works. Their price will be settled by the Ministry of Posts and Communications with the Hanyang Iron Works, after comparison with the current quotations for rails purchased by other lines from Europe or America. No delay will be allowed, and it is understood that if the Hanyang Iron Works are unable to supply the requirements of the lines in question in such manner as to insure uninterrupted construction, the Purchasing Agents will be instructed to procure from abroad the additional supplies required. For all important purchases of materials tenders shall be called for by the Director General or the Managing Director concerned: in the case of all tenders, indents and orders for the importation of goods and materials from abroad, the said Agents shall purchase the materials required on the terms most advantageous to the railways, and shall charge the original net cost of the same, plus a commission of five per cent (5%). It is understood that no orders for materials shall be executed or any expenditure incurred without due authorization by the Managing Director concerned. In return for payment of commission as above stated the British & Chinese Corporation, Limited, and the Deutsch-Asiatische Bank as Agents for the respective railway lines, shall be prepared to superintend the purchase of all foreign materials required for their construction and equipment, which shall be purchased in the open market at the lowest rate obtainable, it being understood that all such materials shall be of good and satisfactory quality and that the aforesaid Agents will avail themselves of the services of engineering experts to be selected by the Ministry of Posts and Communications for the inspection of such materials. The fees of these Inspectors shall be borne in equal shares by the Ministry of Posts and Communications and the Purchasing Agents. At equal rates and qualities goods of British, French, German and American manufacture shall be given impartial preference over other goods of foreign origin. The Railway Administration of the Ministry of Posts and Communications reserves ¶ See Note 3 to this document, post, p. 897. the right, while paying the above stipulated commission to the said Agents in respect of all purchases of foreign materials, to avail itself of the services of other Agents in China, or abroad, should it see fit to do so. The most favorable shipping and insurance rates are to be secured and statements thereof together with original invoices and Inspectors' certificates are to be submitted to the Director General and the Managing Director concerned: all return commissions and rebates of every description shall be credited to the railways, and all purchases made by the Agents on behalf of the railways shall be supported by manufacturers' original invoices and Inspectors' certificates. No commission shall be paid to the Agents except as above provided; but it is understood that the Railway Administration shall provide out of railway funds for the remuneration of Consulting Engineers whenever their services are engaged. With a view to the encouragement of Chinese industries, preference will be given, at equal prices and qualities, over British, French, German, American or other foreign goods to Chinese materials and goods manufactured in China, such cases being left to the decision, in consultation with the Engineers-in-Chief, of an Inspector appointed by the Ministry of Posts and Communications. No commission will be paid on purchases of such Chinese materials and goods. It is understood and agreed that, after the construction of the lines is completed, the British & Chinese Corporation, Limited, and the Deutsch-Asiatische Bank will be given the preference for Agency business for the respective lines, during the currency of the Loan, for the supply of foreign materials which the Railway Administration may require, on terms to be hereafter mutually agreed upon. ARTICLE XIX.-Should the Imperial Chinese Government itself hereafter consider it desirable to construct extensions in connection with the railway lines named in Article II of this agreement in order that the interests of the country may be better served, such extensions shall be built by the Imperial Chinese Government with funds at its disposal from Chinese sources, but if foreign capital is required, and the terms offered by the Banks are as favorable as those offered by others preference will be given to the Banks. ARTICLE XX. After payment of interest and repayment of principal of this Loan for any current year, the Railway Administration will deposit with the Banks in Shanghai or Hankow any surplus of the net revenue of the railway lines for that year up to the amount required to pay the following year's instalments of interest on the Loan, the rate of interest on the deposit being arranged with the Banks from time to time with due regard to the conditions of the market. ARTICLE XXI.-All expenses in connection with the flotation and issue of this Loan, such as underwriting, commission and brokerage, telegraph charges, advertising, postage, engraving and printing of Prospectus and bonds, stamp and legal fees, shall be borne by the Banks. ARTICLE XXII.-The Deutsch-Asiatische Bank, The Hongkong & Shanghai Banking Corporation, the Banque de l'Indo-Chine and the American Group shall take the Loan in equal shares and without responsibility for each other. ARTICLE XXIII.-The Deutsch-Asiatische Bank, the Hongkong & Shanghai Banking Corporation, the Banque de l'Indo-Chine and the American Group may, subject to all their obligations under this Agreement, transfer or delegate all or any of their rights, powers, and discretions hereunder to any German, British, French or American Company, Directors or Agents, with power of further transfer and sub-delegation; such transfer, subtransfer, delegation or sub-delegation to be subject to the approval of the Ministry of Posts and Communications. ARTICLE XXIV.-This Agreement is signed under the authority of an Imperial Edict dated the twenty-second day of the fourth month of the third year of the Emperor Hsuan T'ung, corresponding to the twentieth day of May, 1911, Western Calendar, which will be officially communicated to the Ministers of Great Britain, France, Germany and the United States of America in Peking by the Wai Wu Pu. ARTICLE XXV.-Eight sets of this Agreement are executed in English and Chinese, four sets to be retained by the Imperial Chinese Government and four sets by the Banks. In the event of any doubt arising regarding the interpretation of the contract the English text shall rule. Signed at Peking by the Contracting Parties this twenty second day of the fourth month of the third year of the Emperor Hsuan T'ung, corresponding to the twentieth day of May, One thousand nine hundred and eleven, Western Calendar. THE MINISTER OF POSTS AND COMMUNICATIONS SHENG HSUAN-HUAI [Seal of of For the DEUTSCH-ASIATISCHE BANK, H. CORDES. For the HONGKONG & SHANGHAI BANKING CORPORATION E. G. HILLIER, Agent. For the BANQUE DE L'INDO-CHINE, R. SAINT PIERRE. CASENAVE. For J. P. Morgan & Company, Kuhn, Loeb & Company, “THE AMERICAN GROUP ” WILLARD STRAIGHT, Representative. |