iBc^icitu ^iitioiuü ^ivihvratj (íompitutj.
AGREEMENT OF OCTOBER 15, 1886,
BETWEEN ■ '
MATHESON & CO. OF LONDON
AND
WILLIAM J. PALMER,
As RATIFIED BY THE PARTUCS NAJIED IN ARTICLE NINETEENTH.
^Xunxovituiîaim of made this
fifteenth day of October, 1886, by and between Messrs.
Matheson & Company, of No. 3 Lombard street, London,
England, representing certain holders of First Mortgage
six per cent, gold bonds of the Mexican National Eailway
Company under an agreement dated the 7tb day of June,
1886, parties of the first part, and General William J.
Palmer, of the City of New York, representing the Mexi¬
can National Eailway Company, the Mexican National
Construction Company and certain of the holders of said
First Mortgage six per cent, gold bonds, as party of the
-second part.
Whereas, The Mexican National Eailway Company has
made default in the payment of the coupons for interest of
its First Mortgage six per cent, gold bonds and the ^onstrac-
tion and completion of its railroad cannot be proceeded
with, and all the parties interested in the said company are
desirous of arranging so that the funds required to com¬
plete said railroad may he obtained and that a sound and
permanent reorganisation of the undertaking can be ac¬
complished.
Now, therefore, it is agreed by and between the parties
hereto that the following plan shall he carried out.
First,—A proceeding or proceedings to foreclose the ex¬
isting First Mortgage or to enforcethe rights of the holders
of existing First Mortgage bonds shall be commenced and
prosecuted with the consent, as far as practicable, of all
parties in interest, and a sale in foreclosure he had of the
railroad and property as speedily as may be, to carry out
this plan. Pending such proceedings the present Company
shall continue in possession and operate the property until
sale, and the appointment of a Eeceiver shall be avoided.
H E 2L Z Z 0
M45
1 ZZ6 ^
2
Current monthly reports of the business shall be fur¬
nished the parties hereto, showing earnings and expenses.
Second.—At any sale of said railroad and property un¬
der such" proceedings the same shall be purchased, under
suitable limitations as to terms, by a Committee of three
persons, to be nominated as follows ; Each of the parties
hereto shall nominate one member, and the parties hereto
shall mutually agree on the third member, and the party
of the first part accordingly nominates Eckstein Norton, of
New York, as one member of such Committee ; and the
party of the second part nominates Joseph D. Potts, of
Philadelphia, as another member of such Committee, and
the parties mutually agree upon Albert Fink, of New
York, as the third member, and the chairman of such
Committee, In case either of said three persons shall be
unwilling to act, or resign, or be unable for any reason to
serve, his successor shall be named by the party who nomi¬
nated him as aforesaid, or by the parties mutually agreeing
to his nomination, as the case may be, according to the
foregoing principles, and such new selections, if any, shall
be made of gentlemen of like high character and fitness,
and not personally obje'ctionable to either of the parties
hereto.
This Committee shall organize the new Eailway Com¬
pany as hereinafter provided and do whatever is necessary
to convey to the respective parties entitled thereto as here- '
in provided, concurrently, whatever property the Commit¬
tee shall acquire by purchase as above provided, and gen¬
erally shall do whatever may properly devolve upon it to
carry out the provisions of this agreement.
Third.—A new Railway Company shall be organized
under the laws of Colorado to take over that part of the
railway and property, rights and interests which it is con¬
templated shall become its property under the article here¬
inafter contained relating to segregation, and to carry out
the other provisions of this agreement pertaining to it:
and the Mexican National .Construction. Company shaU
3
"take over the part designed for it. Such new Eailway
Company shall he vested with all the rights and powers to
construct,- maintain and operate that part of the railway
and property, &c., taken over by it, whether such rights
and powers have been heretofore owned and exercised by
the Mexican National Railway Company or by the Mexican
National Construction Company.
Fourth.—The constructed part of the so-called Inter-
oceanic line extending from the City of Mexico via Acam-
baro to Patzcuaro, about two hundred and seventy-four
(274) miles, together with the constructed parts of the El
Salto line and the constructed and un constructed parts of
the Cintura line, the constructed parts of such two lines
aggregating together about fifty-four and one-half (54^)
miles, including also the tramway in the City of Mexico from
Colonia station to its terminus; also the Santiago station
lands, being about sixty-five acres, in the City of Mexico,
and the Colonia and Cindadela station lands, being .about
thirty acres, in said city; also the constructed and un-
constructed parts of the so-called International line, viz.,
extending from Acamharo to New Laredo, and a connec¬
tion with the Texas Mexican Railway, about six hundred
and ninety (090) miles, three hundred and eighteen of
which are constructed; also the so-called Sabinas Coal
Road, being about seventy-five (75) miles unconstructed,
and all rights pertaining thereto, except the subsidy, which
is otherwise hereinafter pledged, including any of its
branches or extensions, and also the constructed and un¬
constructed parts of the Matamoras-Monterey line, about
two hundred and eleven (211) miles, whereof over seventy-
five (76) miles have been constructed, shall be segregated
from the other lines covered by or embraced within the
concessions granted by the Mexican Government, and such
■constructed and unconstructed lines so segregated with all
rights thereto pertaining, except as to subsidy, which
is herein otherwise pledged, including the rights to
• construct the above named unconstructed parts thereof;
■and also including telegraph lines and franchises construct-
4
ed or to be constructed along the foregoing described
routes, shall become the property of the new Railway
Company, unencumbered and free from all liens "or claims
of the Construction Company, except so far as it is or
shall become the holder of securities entitled to a'lien or
claim thereon, or be itself entitled to any equitable inter¬
est in the unearned subsidy which is to be pledged as pro¬
vided in this agreement; and the remaining railroads, prop¬
erties and rights shall become and be the property of the
Construction Company, unencumbered, free and clear of
all liens created by the old or new Company and claims on
the part of the old or new Railway Companies.
And aviiereas. The Mexican National Raihvay Company
by lease holds and operates the Texas Mexican Railway
and branches, and owns 24,537^ shares of the capital
stock of the Texas Mexican Railway Company, the total
issue whereof is 25,000 shares, and 1,190 of the said Railway
Company's bonds of a total issue of 1,380 and also has an
interest in 248 bonds of the Corpus Christi, San Diego and
Rio Grande NarroAV Gauge Road, secured by an underly¬
ing lien on said Texas Mexican Railway, of a total issue
of 960, and said leasehold rights and the said stock and
bonds or interests of the Mexican National Railway Com¬
pany therein are subject to its existing mortgage, the said
new Railway Company shall own and acquire by such
foreclosure, and by transfer from the Mexican National
Railway Company such leasehold rights as well as all its
interests in said bonds and stock, and by virtue thereof wiU
hold and control the Texas Mexican Railway extending
from a connection with the International line in Mexico to
Corpus Christi, comprising, Avith spurs and branches, about
165 miles of railway.
The new Railway Company Avill thus have, when the
International line and the coal road are finished, an ag¬
gregate of 1,334 miles of Rathvay, which includes all pres¬
ent constructed railroad, except 28 miles at Manzanillo
and about 18 miles at Zacatecas and about 15 miles at
Galveston. It will also have the right to build the railway
and telegraph lines for,the gap in- the International line
5
and the coal road, and all extensions and branches thereof,
and to complete the Matambras and Cintura lines.
The parties agree to co-operate to obtain the consent of
the Mexican Government to such segregation and thé
transfer of rights and franchises; and the Companies in¬
terested shall interchangeably execute all and any proper
instruments to carry the provisions of this agreement fully
into effect. . '
The present Railway Company is to be wound up and
dissolved as soon as practicable after the new Company
shall have come into possession of its properties.
Fifth. - There shall he created a first and iiaramount
lien or mortgage covering all the new Railway Company's
pj'operties, rights and interests to he acquired hereunder,
including therein all the rolli)ig stock and equipment
which it is tö acquire as hereinafter stated; and the afore¬
said leasehold interests and said 1,19G bonds and 2i,537i
shares of the capital stock of the Texas Mexican Railway
Company, and interests in said 248 bonds of the Corpus
Christi, San Diego and Rio Grande Narrow Gauge Rail¬
way Company, to secure $12,500,000 par value of principal
of the bonds of the new Company, liereinafter denomi¬
nated new First Mortgage bonds, due in forty years from
their date, bearing six pèr cent, interest, payable semi-an¬
nually, principal and interest payable in gold coin of the
United States of or equal to the present standard of weight
and fineness. This mortgage shall also cover all addi tional
lines or branches constructed out of the proceeds of the
bonds secured thereby, hut shall not cover any of the un-
constructed fiarts of the routes acquired by the new Rail¬
way Company and rights pertaining to such unconstructed
parts, except the gap in the International Line and seventy-
five (75) miles (being the subsidized portion) of the Sahinas
Coal Road and the gap in the Cintura Road, and excepting
also such further extent of new railroad as shall be built
with proceeds of the new First Mortgage bonds.
In addition to the security of this first lien upon the new
Railway Company's properties, rights and interests, these
t)
bonds shall have the security of i??,000,000 subsidy, which
is to be derived, pledged and deposited as hereinafter pro¬
vided.
Tlie new Railway Company shall have the power to pay
off and to cancel all or any jiart of these new First Älort-
gage bonds, at par and interest, on any daté when any
coupon matures, having given six months' previous no¬
tice; and the Construction Company shall have the same
I'ight as the Railway Company to pay off and cancel these
bonds, and the bonds so i)aid off shall be canceled. If the
payment be only of a part of such bonds the bonds so to
be paid off shall be selected* by drawings.
The JMortgage or Trust Deed and the pledge of subsidy
to be made to secure these bonds shall contain proper pro¬
visions so as to insure speedy and effectual remedies in
case of default, by any and all available legal methods,
without irksome restrictions or unusual provisions; and
such further provisions as shall .secure the application of
the net proceeds, as hereinafter defined, of the subsidy
collected, as follows: "
1st. To meet any deficiency of interest on such new
First JMortgage bonds, after applying net earnings of the
railroad to the payment of such interest, and exhausting
any other moneys available therefor.
2d. To the payment at par, by drawings, of such new
first mortgage bonds and cancellation thereof as and when
subsidy may be collected and available therefor.
These new first mortgage bonds shall be apifiied :
$2,000,000 to the Construction Company in consideration
of its transfer as hereinafter provided to the
new Railway Company of all equipment cer¬
tificates and all title to rolling stock and
equipment (except rolling stock, equipment
and material for equipment on the JManzanillo
and Zacatecas Divisions, not exceeding in
amount at, original value, $125,000), the in¬
tention being that the new Railway Company
shall acquire and own all rolling stock and
í
equipment now on the road or acquired for
use thereon whether actually in use or not set
up, excepting that which is on the two divis¬
ions above named, and it being represented
and understood that the original cost of such
rolling stock exceeded $2,000,000 cash.
$!t,500,000, or- about that amount of bonds to he sold at not
less than eighty per cent, net New York, and
to be applied to furnish money needed to
complete and equip the International line, in¬
cluding expenses* incident thereto; to con¬
struct and equip the Sabinas Goal Road; to
provide an interest reserve of $650,000, or so
much thei-eof as may be needed to pay in¬
terest on any new first mortgage bonds until
such interest shall be earned (any portion of
such $650,000 not required for this purpose
shall be added to the Cai)ital Reserve); and
for the following purposes : out of the pro¬
ceeds of these bonds there shall be paid the
expenses of foreclosure and reorganization,
including the expenses in connection there¬
with already or hereafter incurred by the
parties hereto: and a sum not exceeding
$217,000 to he applied to liquidate the indebt¬
edness of the'existing Railway Company; a
sum now estimated at $200,000 to be paid in
liquidating and extinguishing the underlying-
lien on the El Salto branch; and finally, a
sum not exceeding $700,000 to he paid to the
Construction Company to enable it to dis-
* charge all its outstanding indebtedness, but
for such payment the Construction Company
shall sell and deliver to the new Railway Com¬
pany existing first mortgage bonds or their
equivalent in new securities into which the
same may have been converted as hereinafter
provided, to an amount equaling $2,500 in ox-
8
istiug fii'st mortgage bonds or their equivalent
in new securities for every §700 in money
paid. Tlie bonds so acquired by the new
• Railway Company, or their equivalent in
now securities, to constitute a betterment
fund, applicable for betterments only, on and
upon that property covered or to be covered
by the raorigages herein provided for; but in¬
asmuch as the Construction Company hereto¬
fore pledged 200 existing flret moitgage
bonds as security to keep indemnified certain
sureties on the transportation bonds given on
behalf of the present Railway Company to
the United States Government, it shall have
the n'ght on transferring its residuary interest
in said 200 bonds or their equivalent in new
securities to have the same counted as part of
the bonds sold or delivered under this pro--
vision, and if it exercises this right, the 200
bonds or their equivalent in new securities
issued in lieu thereof shall remain subject to
the said pledge and not become a part of the
betterment fund "until released from such
pledge. In case any of said $9,500,000 in
new first mortgage bonds or of the proceeds
thereof shall not be required for the above
pui-poses or any thereof, such surplus bonds
or proceeds shall be added to the Capital Re¬
serve next named.
$1,000,000, or about that amount of the new firet mortgage
bonds to remain in the treasury of the new
Railway Company as a Capital Reserve, but-
which may, if necessary, be applied to meet
defldeucy of interest on the new first mort¬
gage bonds that cannot he currently met out
of the earnings of the Railroad or from the
net . proceeds of subsidy collected as herein
before previded. Bonds in the Capital Enerve
9
shair not draw interest while they remain in
. the treasury of the new Company.
It is however expressly agreed that the amount of this
new first mortgage and of the bonds to be issued there¬
under may be increased to thirteen million five hundred
thousand dollars,'provided the holders of a. majority in
amount of the new "A" and "B " bonds and of the in¬
come bonds hereinafter provided for and the Construction
Company' shall severally consent and agree thereto in
writing duly acknowledged or proven, such increased
amount of one million dollars to be added to the capital
reserve above provided for. But in case of issue of all or
any part of such additional one million first mortgage
bonds, an equal amount of new "A " and " B " bonds shall
likewise be issued and deposited with the $7,924,000 bonds
provided for in article sixth to he used therewith only to
retire or replace at par a like amount of such new first
mortgage bonds, dollar for dollar.
Sixth.—To represent the existing First Mortgage bonds
there shall be created and issued Second Mortgage bonds
which shall rank next after the new First Mortgage bonds
in priority of lien upon all the Eailway Company's pi'op-
erties, rights and interests, including the said rolling stock
and equipment, bonds and stock that are or may be
covered by the First Mortgage, but shall not have any
lien on the $7,000,000 subsidy or the net proceeds thereof
pledged to the payment of the new First Mortgage
bonds and the interest thereon.
The aggregate amount of these new Second Mortgage
bonds shall not exceed $25,000 per mile on the basis of
1,334 miles, say $33,350,000, except in case of and to pro¬
vide for the eventual retirement of any part of the addi¬
tional million new First Mortgage bonds referred to in
Article Fifth, in which contingency an additional amount
of "A" and "B" bonds shall be issued and deposited
dollar for dollar, to provide for such retirement. And all
of said new Second Mortgage bonds shall be divided into
10
two classes, half of the total being in " A " lx)nds which
will bear six per cent, iuteitjst from January 1, 1S87,
accumulative, payable in cosh as and when earned out of
any not earnings of any year remaining after interest
on new Fiist Moitgage bonds outstanding shall have been
paid for such year, and if in any year the net earnings so
remaining available for payment of the*inteiest upon said
"A" bonds, shall not be sufficient to pay in full the interest
thereon at six per cent, per annum, there shall be paid
any part thereof earned ami available; and any deficiency
shall not ho waived, but shall be 'paid to the holders of
such "A" bonds out of the net earnings of any subsequent
year or years, as and when there shall be any net earnings
available for such purpose: the intention being that said
■"A'' bonds outstanding shall be entitled to and shall receive
full interest in ca.sh at the rata of six par cent, per annum,
as and when, and whenever there shall be any net earn¬
ings available therefor before the outstanding " B " bonds
hereafter named shall receive interest. For greater
convenience of payment, said " A " bonds shall bear half-
yearly interest coupons, but no distribution of net earn¬
ings by way of partial payments upon such interest
■coupons shall be obligatory on the company at any time,
unless the amount available shall, at that time, be equal
to one per cent, upon the outstanding "A" bonds.
The i-eroaiuinghalf shall be in " B " bonds which shall bear
•six per cent, interest from January 1, 1887, non-accumula¬
tive, payable in cash out of any net earning of any one
year, remaining after all interest then due on " A " bonds
shall have been fully paid; and if, in any year, the amount
of such net earnings shall not be sufficient for the full
payment of such interest on said " B " bonds there shall be
paid any part thereof earned and available, and any
deficiency, whether partial or total, shall be waived and
relinquished.
The principal of the "A" and " B " bonds shall be pay¬
able thirty year's after their date, and principal and interest
shall be payable in gold coin of the United States of or
equal to the present standard of weight and fineness.
11
Bonds of either class may he in denominations of $1,000
or $500, as may be convenient.
Of the above total amount at the rate of $25,000 per
mile there should be reserved $9,020,000 in bonds, whereof
$7,921,000 are to be issued only to retire or replace at par
a like amount of new First Mortgage bonds, dollar for
dollar; $896,000 are to be issued only to retire or replace a
like amount of bonds now existing on the Texas-Mexican
Eailway; $200,000 shall be issued and added to the better¬
ment fund, but only after the lien now existing on, the
El Salto branch shall have been paid off.
Proper provisions shall be made in the Trust Deed or
mortgage given to secure the ''A" and "B "bonds to
prevent foreclosure thereof by reason of any default on
said "'A" and " B " bonds while the railroad and property
shall be in the control of the bondholders as hereinafter
provided; but there shall be an adequate power to foreclose
and sufficient remedies if the property should revert to
the control of the stockholders and if default shall follow
and control not be restored to the bondholders, as here¬
inafter provided; said mortgage to be in form satisfactory
to Charles 0. Beaman, of New York, or other counsel of
Matheson & Company.
The "A "and " B " bonds shall be issued as hereunder:
"A" Bonds.
$12,165,000 to the holders of existing First Mortgage
bonds.
3,902,000 only to be issued with same amount of "B"
bonds after the new First Mortgage honds
shall have been paid or in exchange there¬
for dollar for dollar-.
448,000 only to be issued with same amount of "B"
bonds to replace or retire a like total of
Texas-Mexican bonds.
100,000 only to be issued with same amount of " B"
bonds and added to the betterment fund
when the El Salto lien shall have been paid
off.
$16,675,000 total, equal to $12,500 per mile on 1,334 miles.
12
" Bonds.
$12,165,000 to the holders of existing Fiist' Mortgage
bonds.
* 8,962,000 only to be issued with same amount of "A"
bonds after the new First Mortgage bonds
shall have been paid, or to retire a similar
total of new First Mortgage bonds.
448,000 only to be issued with same amount of "A"
bonds to replace or retiré a like amount of
Toxas-Mexirain bonds.
100,000 only to bé'i^ued with same amount of "A"
Ixjnds and added to the bettermmt fund
when the El Salto lien shall have been paid
off.
$16,073,000 total, equal to $12,500 per mile on 1,334 miles.
"A" ánd " B " bonds reserved to replace, retire or pay off
new first mortgage bonds, or bonds secured by a lien on
the Texas Mexican Eailway, or the lien on the El Salto
branch, or reserved as a betterment fund, shall not draw
. interest until actually issued, provided that whœi they oi-
any of them shall be sold or used for any of such pur¬
poses they shall have the same and ño other position in
respect of interest accrued and unpaid as outstendiog-
bonds of the same description have at that time. Holdere
of present bonds assenting to this plan and performing its
conditions shall receive, at the rate of $500 in " A " bonds
together with $500, in " B bonds for every $1,000 of
principal in present bonds with all over due coupons at¬
tached, and such assenting present bondholders shall have
the preferred right to subscribe pro rata upon the most
favorable terms, to the new first mortgage bonds to te-
created and subscribed for as hereinafter provided; but
such preferred right shall not be held, to predudé the pay¬
ment of a" commission to a syndicate to guarantee and
ai^ure the subscription to said new first mortgage bonds if
such be necessary or advisable.
18
Seventh.—The capital stock of the new railway com¬
pany shall be S33,350,0C0, whereof $25,876,000, shall be
issued to stockholders of present railway company dollar
for dollar; $46,250 shall be reserved to be issued only in
exchange for an equal amount of Texas-Mexican stock
now in the hands of third parties; and the balance of
$7,428,750 shall be issued to the Construction Company as
hereinafter provided.
The stock shall be issued only subject to the conditions-
hereinafter contained.
Eighth.—The Mexican National Construction Company
shall—
1st. Assign to the new Eailway Company all rolling
stodk and equipment now upon the lines, whether in oper¬
ation or not set up, except that now on the Zacatecas and
Colima Divisions, by assigning all equipment certificates
and all other title therein, so that the Railway Company
shall be vested with the sole title to said rolling stock or
equipment whether actually in use or not set up¡ and be
enabled.to include the same as security under its mort¬
gages, free of all other incumbrance.
2d. Transfer to the new Railway Company all materials
and supplies at points on the line in Texas from Corpus
Christi to I.aredo and anywhere in Mexico, excepting
construction material on the.railroada mnning to or from
Manzanillo and Zacatecas; the materials and supplies so
transferred shall belong to the new Railway Company.
8d. Pledge $7,000,000, of subsidy earned and to be
earned, of which three million is earned and four million
to be earned by completing the International Road and
Coal Road. Said pledge to be free from any other lien ex¬
cept the cha^^ hereinafter created. . ,
This subsidy so pledged is to constitute a fund for the
I-i
íidditional security and retirement of the new first mort¬
gage bonds as before stated.
The pledge of this subsidy shall be to the trustees of the
new first mortgage, and by the terms of said pledge and
mortgage the said subsidy shall be available and used for
the payment and security of said new first mortgage bonds
before the other property mortgaged to secure the same,
but all equities in the subsidy so pledged shall belong to
and be the absolute property of said Construction Com¬
pany after the said bonds have been paid and cancelled.
4tb. Against the payment of not to exceed $700,000 cash
■out of the proceeds of new first mortgage bonds the Con¬
struction Company shall deliver to the new Eailway Com¬
pany first mortgage bonds of the old Eailway Company or
securities into which such bonds shall be converted to an
iimount equaling $2,500 in such" present bonds for every
$700 cash paid.
The Construction Company shall receive $7,040,000 in
income bonds secured by lien on all the new Eailway Com¬
pany's properties, subject to the liens securing the new
first mortgage bonds and the said new second mortgage "A" .
and " B " bonds, and this mortgage shall cover the same
property as said second mortgage.
These income bonds shall be entitled to receive interest
up to six per cent, per annum in United States gold coin
of or equal to the present standard of weight and fineness
if and when earned, but not accumulative, after payment
in full of all interest on the new first mortgage bonds , and
the "A" and "B" bonds, as previously stated herein.-
Uo further income bonds shall be issued, and the trust
•deed or mortgage securing the same shall be in such form
and of such tenor and effect consistent with the provisions
hereof and the prior ]-ights of the new first mortgage and
"A" and " B '' bonds as the Construction Company or its
counsel shall require.
The Construction Company shall also receive capital
■stock of the Eailway Company to an amount equal to the
15
liifference between $26,000 in stock per mile on 1,334
miles $33,350,000 00
And the amount already-
issued ' $25,875,000 00
To which must be added
stock of the Texas-Mexi¬
can Eailway Company
held by third parties 46,250 00
Total.. $25,921,250 00
Balance, to wit... $7,428,750 00
All contracts between the Construction Company and
the Railway Company relating to building the Mataraoras
Line to be cancelled and the Construction Company saved
against its obligations by reason thereof. And the new
Railway Company is to assume all obligations to the Mexi¬
can Government connected with said line and is to be en¬
titled to receive the subsidy pertaining to all extensions
thereof. It being the intention that Second Mortgage "A"
and "B " Bonds shall eventually be a first lien on the prop¬
erty at arate of $25,000 per mile on the basis of 1,334 miles,
any of said "A" and " B " Boiids reserved for the purpose
■of taking up or replacing an equal amount of new First
Mortgage Bonds which shall not be used for such pur¬
poses because of the application of the subsidy, shall, upon
payment of all the new First Mortgage Bonds in full, be
■delivered to the Construction Company as its property,
and so likewise shall any part of the $7,000,000 subsidy,
which may remain after the new First Mortgage Bonds
shall have all been paid, be turned over to the Construc¬
tion Company.
But if said new First Mortgage Bonds should be paid off
'by the RailwayCompany out of its own funds or assets, then
and in such case and to the extent to which such pay¬
ments shall have been made by it and from sources other
■than the subsidy and the reserved new Second Mortgage
16
"A" and "B " Bonds, the Constraction. Company shidl not b©
entitled to claim the delivery to it of reserved Second
Mortgage " A " and " B " Bonds or subsidy, unless it re¬
imburse the new Railway Company to the extent of such
payments.
The Construction Company is to be protected a^inst
any claims of third parties upon all current tie, lumber,
fuel and other supply contracts for the operation and main¬
tenance of the railways in Mexico that become the prop¬
erty of the new Railway Company,
The Construction Company shall have the right to have
the "A" and " B " Bonds reserved for the payment of the
new First Mortgage Bonds applied to that purpose in
accoi-dance with the provisions hereof.
The present Second Mortgage Debentures shall be cut
off by foredosure, or the debentures surrendered and can¬
celled, and the Deed Trust or Mortgage given to secure
them shall be satisfied.
Ninth.—All the stock of the new Railway Company,
except enough to qualify directoi's, shall be lodged in a
Voting Trust and representative certificates issued there-
against so as to insure control of the railroad to the new
Fii*st Mortgage and new Second Mortage "A" and " B "
bondholders, to be exercised as hereinafter provided; the
new Krst Mortgage Bonds to have twice as many votes-
as "A'î and " B " Bonds in respect of equal amounts.
Such control sliall continue until the full interest at six
per cent, per annum has been duly and regularly earned
and paid for two consecutive years upon all outstanding
new First Mortgage Bonds, and upon all outstanding
new Second Mortgage "A" and "B" Bonds, when the stock
shall be released against surrender of the representative
certificates, and in the event that at any time subsequent
to such release there shall be any failure in any half year-
to pay such full interest upon.said new Second Mortgage
"A" and "B" Bonds, the lien thereof may be foreclosed unless-
the stockholders shall within four months after default,
lodge in the Voting Trust not 1m than 180,000 shares out
J7
of 333,500 shares, or a like proportion, if at any time said
capital stock be increased, to be again controlled by the
bondholders as hereinbefore provided; but no increase of
capital stock shall he made while the stock is in the Vot¬
ing Tmst.
The Board of Directors shall consist of not exceeding
thirteen members, five of whom are, by the concession, re¬
quired to be residents of Mexico, two of which five must be
nominees of the Mexican Government- The holders of new
First Mortgage and Second Mortgage "A" and " B " Bonds
shall have the right to nominate six of the Directors resi¬
dent in the United States and two of the Directora i-esident
in Mexico; and the holders of certificates evidencing the
deposit of shares in the Voting Trust shall have the right
to nominate two of the Directors resident in the United
States and one of the Directors resident in Mexico.
It shall he the duty of the voting Trustees to vote for a
Board composed of the representatives so nominated. Va¬
cancies happening in any Board so elected shall be filled in
accordance with the foregoing principles by the election of
the nominees of the party whose representative in the
Board shall have ceased to be a Director.
As it will be necessary to organize the new Railway
Company to take over the property before the Voting Trust
can be established, the said Purchasing Committee shall
nominate the Board of Directors to be named in the articles
incorporating the new Railway Company, and in nomi¬
nating such Board of Directors the said committee shaU
be governed as nearly as practicable by the principles of
representation of bondholders and stockholders laid down
in this article. If the" new First Mortgage Bonds shall
then be wholly or partly subscribed, or taken and paid for
in part, the said committee shall accord lepresentation on
the basis provided for in said article to such subscribers,
as if they had paid their subscriptions in full and become
bondholders, and shall adopt suitable methods to ascertain
the wishes of the parties so entitled to nominate Directors
as herein provided. The Board thus selected shall be a
Provisional Boai"d, n.nd as soon as the Voting Trust can be
IS
established a formal eleution shall be held according to the
provisions thereof to select a legular Board of Directors to
take the place of the Provisioiial Board and manage the
property as herein provided.
Tkntii.—Net earnings wherever mentioned herein,shall be
so much of the earnings of said properties during any one
calendar year (January 1st to December 31st). as shall re¬
main after deducting all general and operating expenses
and all exj^enses for repairs, renewals and replacements,
taxes, if any, and insurance during the same period.
Eleventh.—The Construction Company shall have the
right at its own expense to api)oint and employ an engineer
and an accountant, who shall directlj'or through their rep¬
resentatives have access to all books, papers and accounts,
and otber sources of information relating to the Eailway
Company and its affairs, all the details and statistics of
trafhc, and of all earnings and expenses, receipts and out-
Jays.
Twelfth.—The 82,500,000 subsidy heretofore pledged for
the85,000,000 First Mortgage bonds issued in London and
known as Matheson bonds, to the extent that the same has
not been applied already, shall remain applicable to the new
Second Mortgage "A" and "B" bonds which are to be issued
against the bonds of that issue, and be applied to redemp¬
tion of such ' 'A" and ' 'B " bonds precisely, as originally pro¬
vided in a certain Trust Indenture, dated 1st Jul}', 1882,
made by the Construction Company to Smith and Mac-
donald.
A further Trust Indenture to be executed by the Con-
•struction Company to adjust and confirm the above pledge
and also the guarantee of £10,000 per annum as in the
-original Trust Deed provided, with power in the Trustees
to collect such subsidy.
Thirteenth.—The Trustees with whom the $7,000,000
subsidy shall be deposited shall, if necessary, advance out
19
the proceeds of such subsidy collected, not to esceed
■0,000 United States currency, or £10,000 (pounds) per
mum, as required by said Matheson Subsidy Trust In-
■nture of July 1st, 1882, said Trustees to be reimbursed
r such advances out of subsequent collections as in said
ust Indenture provided.
And in order to enable the Construction Company to
aintain its corporate organization and comply with its
■ligations to the Mexican Government, there shall be paid
it by such Trustees a sum equal to thirty-five thousand
35,000) dollars per annum. United States currency, for the
riod of five years only and no more (commencing Janu-
y 1st, 1887) out of the proceeds of subsidy deposited
ider this plan, the above payments to be made out of
■ y subsidy collections before there shall be any net pro-
■?ds of subsidy applied to any other purpose. The exist-
g order of subsidy collections shall be maintained, and
I subsidy earned as well as that to be earned by the
spective parties shall be collectible in the order earned.
Foueteenth.—As soon as practicable after this plan shall
ratified, as hereinafter provided, a subscription shall be
rmed to take not less than §8,500,000 of the new First
jrtgage Bonds at a price netting not less than eight
mdred dollars ($800) cash in New York for every thou-
nd dollars in such bonds.
Money raised by the sale of new First Mortgage Bonds
all be deposited in a Trust Company in the City of New
)rk, only to be expended for the purposes herein men-
■ned, under proper checks.
Fifteenth.—The parties hereto agree to depo.sit all
■esent First Mortgage Bonds owned, held or controlled by
em respectively, subject to the order of the purchasing
mmittee, with a Trust Company of New York to be
lected by the parties hereto against its negotiable re-
ipts therefor in form hereafter to be agreed upon and
endeavor to obtain the concurrence of all bondholders
the speedy deposit of their bonds in like manner in
20
order to secure the early execution of this plan. Such
Committee to have, in respect of the bonds so deposited,
full power to purchase the mortgaged premises at the
foredosui-e sale, and to apply the said bonds in payment
of the purchase price thereof, and to raise money by the
pledge of said deposited bonds to pay to non-assenting
bondholders their distributive share of said purchase price.
The Committee, if they shall deem it proper, in order to
provide for expenses, may raise such sums as may be ne¬
cessary by the hypothecation of the bonds and coupons
deposited, to be borne by the assenting bondholders pro
rata. In case any of the present first mortgage bond¬
holders shall not assent to this plan, and the Committee'
hereby appointed are required to pay to them their dis¬
tributive sharc of tlie purchase price at said foreclosure
sale of said mortgaged premises, then the "A" and "B""
bonds whicb would be given in exchange for the bonds of
said non-assenting bondholders, if they had assented here¬
to, shall be issued and sold by the said Committee to the
extent to whicli it may be necessary to repay to said Com¬
mittee whatever they shall have paid to said non-assenting
Irandholders, and any of said "A" and "B" bonds not re¬
quired for such purpose shall be added to the betterment-
fund provided for in Arricié 5th.
Sixteenth.—It is understood and agreed that the ratifi¬
cation of this agreement herein provided for, and any.
assent thereto by bondholders is also given to such modifi¬
cations or changes thercin within tbo general scope and
purpose thereof, as may be found desirable and agreed to-
in writing by the parties hereto.
Seventeenth.—^Slessrs. Charles C. Seaman and Lyman
K. Bass are hereby agreed upon as the attorneys and counsel
to have charge and direction of the legal proceedings and the-
preparation of the requisite papers and instruments in the-
United States to carry this agreement into effect, and.
Messre. Luis Mandez and EmiUo Velasco, of the City of
Mexico, slmll, under direction of said Messrs. Beaman and
21
Bass, have charge and direction of the legal proceedings hi
Mexico, and of the preparation of the requisite papers and
instruments there.
Eighteekth.—It is further agreed that the new Railway
Company shall assume all the ohligations to the Mexican
Government of the present Railway Company which per¬
tain to the parts of the railway property and lines to he
acquired by it, and which are imposed by the concessions or
the laws, and the new Company shall conform, in all re¬
spects, to the concessions and laws which aro impostó in
that regard as the condition of its acquiring and operating
said lines. .
, îfiXETEEKTH.—It is uiideistood that the execution of
this agreement by Messrs. Matheson & Company is
subject to ratification by certificate holders, as provided
in said agreement dated the 7th day of June, 1880, and
that the execution of this agreement by 6en«ól WilUam
J. Palmer is subject to ratification by said Railway and
Construction Companies and by the Committee. of
Bondholders at New York, of which Spencer Tixisk is
chairman, which represents bonds deposittó in. the
Central Trust Company under an agreement dated
July 19th, 1886, and the parties hereto promise and
agrtó to earnestly endeavor to obtain the ratification
thereof by the parties they respectively represent, and
agree to co-operate faithfully together to carey out the
foregoing plan, and in the faith that such ratification will
be speedily had, the parties will at once proceed to insti¬
tute the foreclosure proceedings herein contemplated.
Matheson & Co.
By H. W. Smithers,
Tlieir Agent and Attorney under poimr
dated IMh July, 1886.
WM. J. PAmEB.
22
State of New York, ) .
City and County of New York, ) " "
I, Hekuy Wintiiroi'Hardon, a Notary Public duly com¬
missioned and sworn, appointed to reside and residing in
tlie County of Kings, Avith a certificate duly filed in the
office of the Clerk of the City and County of New York, do
hereby certify that on the fifteenth day of October, in the
year one thousand eight hundred and eighty-six, before
me personally api^eared Henry W. Smithers, to me known
and known by me to be the individual who executed the
foregoing agreement as the agent and attorney of
Matheson & Co., and that the said Henry W. Smithers
having been by me duly sworn, did depose and say: That
he was the agent and attorney of said Matheson & Co., of
London, in England, and that he executed the foregoing
agreement in their name as and for their act and deed,
and was thereunto duly authorized by an instrument
dated July 13th, 1S8G.
In avitness avhereof, T have hereunto set mj'
hand and affixed my official seal this fifteenth
day of October, 1S8C.
Henry Winthrop Hardon,
; : Notary Public,
; Notarial : Kings Co.
..i Cert, in N. Y. Co.
23
State op New York, ' V
City and Countj of New York, ) ■
I, the undersigned, Theodore H. Friend, a Notary Pub¬
lic duly commissioned and sworn, residing in the City and
County of New York, do hereby certify that on this
twenty-ninth day of October, 1886, before me, personally,
at said city, came the said William J. Palmer, who is
known to me to be one of the parties to the foregoing in¬
strument, and who executed the same, and acknowledged
to me the execution thereof, for the uses and purposes
therein named.
In witness whereof, I have hereunto set my
hand and affixed my notarial seal the day
and year last aforesaid.
Theo. II. Friend,
Notary Public,
N. Y. City and Co.
Notarial
Seal.
This agreement has been ratified by all the parties
named in Article Nineteenth.
New York, November "ICth, 1880.