Section 2
SEC. 2. in addition to the terms and conditions set out in the foregoing concessionary grant or contract, the Governor-General, with the approval of the Secretary of War, may incorporate any or all of the following additional terms and conditions in said concessionary grant or contract: (a) 1. For all purposes hereunder and for the determination of Bonds. the amount of first lien bonds in respect of which interest will be guaranteed as hereinafter provided, the actual total cost of construction and equipment of the railway herein referred to shall be deemed to be the actual cost, first, of all necessary land for buildings, right of way, and other railway purposes; second, of all materials and labor, including transportation of employees, tools implements, plant, and animals used in such construction and equipment, marine and lire insurance upon any such material, machinery, and so forth, used in and expended upon or in aid of the construction of the roadbeds, tracks, and bridges, and in and about the building of telegraph, telephone, and electrical transmission lines, sidings, and switches, depots, terminals, roundhouses, turntables, water stations, repair and machine shops, freight houses, docks, wharves, warehouses, waiting rooms, dining rooms, hotels, and employee boarding houses, and all other appropriate buildings and structures necessary for the construction, maintenance, and operation of the railway line, on plans approved by the Governor-General: third, of all expenses of engineering, surveying and supervising in the the Government of the being of said railroad, a acquiring of land then the Philippine Islands demand of the Govern of all expenses and on or damages done in the arising from acts of or through action of God; fifth, of all for the operation of locomotives, passenger tools, implements, expenses of engineering, surveying, and Philippine Islands, both of the grantee and of Philippine Islands, connected with the build all legal expenses connected with the or (such expenses of the Government of o be borne and paid by the grantee upon of the Philippine Islands); fourth, of all expenses and necessarily incurred by the grantee, he property of the grantee covered hereby, rebellion, ladronism, outlawry, earthquakes, the elements, or through accidents or acts equipment of even name and nature necessary the railway line covered hereby, including and freight cars, wrecking cars, and of all machinery for the construction, operation, and repair of such railway line; sixth, every other outlay and expense of whatsoever character and wheresoever made, actually incurred in and about; the construction and equipment of the line of railway herein referred to, and whether included in any of the in specific items of cost herein enumerated or not; seventh, interest, at four per centum per annum upon all sums expended for such construction and equipment, from the respective dates at which outlays are made, until the issue and delivery, in aid of such construction and equipment, of the bonds respecting which the Government of the Philippine Islands will so guarantee interest, less any net earnings arising from the operation of any portion of such line during construction : eighth, for the contractor's profit, and expenses incurred in connection with the organizing of the grantee, and such general expense outside of the Philippine Islands as it may be necessary for the grantee to incur preliminary to its organization and acceptance of this concession, there shall be added as a part of said actual total cost of construction, to be determined as above, an amount equal to fifteen and one-half per centum of such actual total actual cost: Provided, That the cost of material, supplies, and equipment shall be the actual first cost thereof to the grantee delivered on the ground where it is to be used, and that the cost of labor, superintendence, and administration shall be the actual wages, salaries, and fees paid in good faith by the grantee, and shall not include any commissions, allowances, profits, rebates, or drawbacks to any third person. All plans for work to be done hereunder shall be subject to the approval of the Governor-General, the work itself shall be subject to his inspection, and all bills and construction accounts shall be subject to the audit of the Government of the Philippine Islands. 2. Under and in accordance with the terms and conditions of section four of the Act of Congress approved February sixth, nineteen hundred and live, the Government of the Philippine Islands hereby guarantees, for a period of thirty years from the date of issue and delivery of the bonds hereinafter described, the due and puiuiual payment by the grantee of interest (and in the event of the default of the grantee it will itself pay the same upon demand) at the rate of four per centum per annum, upon first-lien bonds lo he issued by the grantee under and in conformity with this instrument and said Act of Congress, to an amount of ninety-five per centum of the actual total cost of construction and equipment of such railway and appurtenances, completed in accordance with such approved definite plans and as such actual total cost is determined in the foregoing paragraph hereof, such bonds to be delivered under the terms, conditions, and circumstances and at the times proscribed by said section four of said Act of Congress approved bniarv sixth, nineteen hundred and five. The grantee covenants and agrees duly and punctually to pay the interest upon all bonds the interest upon which may be so terest by srantee uuaranieed by ibe Government of the Philippine Islands, and as interest becomes due and payable; and in all respects duly punctiiallv to fulfill the covenants and conditions of the mortgage securing such bonds; and that all bonds in respect of the Philippine Islands shall so guarantee interest shall be secured by an absolute first lien, evidenced by sage or trust or deed of trust, upon the railroad, in respect of which bonds may be so issued, and the equipment, franchises (including tins concessionary contract or grant), and other property, real, personal, and mixed, earnings, rents, revenues, and income thereof, owned and thereafter to be acquired. Appropriate instruments, sufficient in law to secure more effectually any liens existing or arising under any provision of the said Ads of Congress and this contract, in favor of the Government of the Philippine Islands, under or by reason of the making of said guaranty and of any payment made or to be made thereunder, subject to such first-lien bonds and the mortgage securing the same, shall be duly executed and delivered to the Government of the Philippine Islands, or to any trustee by it designated. But failure to execute such instruments shall not impair or affect the liens or the remedy of foreclosure secured by said Acts of Congress, this contract or other instruments. It is expressly understood and agreed that the Government of the Philippine Islands, although obligated upon its said guaranty of interest, shall not be in any sense or to any degree-obligated for the payment of any part of the principal of any bond respecting ich it may so guarantee the payment of interest, nor upon any er bond, indebtedness, contract, liability, or obligation whatsoever the grantee, and that any such bonds shall not be deemed, any purpose whatsoever, to be the bonds or obligations of the Government of the Philippine Islands, or be deemed issued by said Government or under its authority. After the construction and equipment of the railway herein reffered to in accordance with the foregoing provisions and all others of this contract of guaranty, the grantee shall apply its gross earnings as follows: First, to the necessary operating expenses, including reasonable expenses of the corporation, and the amounts due the Government of the Philippine Islands under paragraph thirteen hereof: second, to the necessary and ordinary repairs of said railroad and its equipment; third, to such betterments and extraordinary repairs of said railroad or equipment as may be first by the Governor-General of the Philippine Islands in writing, expressly consented to; fourth, to the payment of 'the interest on the bonds, the interest on which to any extent shall have been guaranteed by Hie Government of the Philippine Islands under this concession. The form of the bonds, mortgages deeds of trust, liens, guaranties, and other instruments herein provided for, as well as the legality of the organization of the grantee herein, and its compliance with the requirements of the Acts of Congress, the laws of the Philippine Islands, and this concessionary grant, shall be approved by the Secretary of War. 3. If the grantee makes breach of any of the conditions hereof, or of any of the obligations by it assumed hereunder, in respect to the construction of said railway, and shall allow the same to continue for upward of four months, after notice in writing from the Government of the Philippine Islands to the grantee, then, in such case, at any time thereafter, the Government of the Philippine Islands, at its option and at the cost and expense of the grantee, may do and perform any and all acts and things which it may deem useful and necessary to insure the construction, equipment, and completion of the railway covered hereby or the fulfillment of such condition or obligation, as the case may be; and in said event such cost and expense shall thereupon thenceforth be and become a debt of the grantee presently payable, and a lien upon the said railway and all franchises and property relating thereto, subject only to the first mortgage securing the first lien bonds respecting which the Government of the Philippine Islands may guarantee interest as herein provided, and shall be enforceable by foreclosure in the same manner as if secured by a second mortgage. The remedy and relief given to the Government of the Philippine Islands by this paragraph shall be considered as an additional remedy and relief and shall not exclude the Government of the Philippine Islands from any remedy, relief, or right of action which said Government might otherwise have. 4. The Government of the Philippine Islands, through the auditing, engineering, and railroad Bureaus thereof, and by such other agencies as may be fixed by law, shall have the power, by monthly or other regular inspection of the books, accounts, vouchers, and other papers, or by special inspection, if in its judgment necessary, to keep itself advised of the financial conditions and operations of the grantee to enable it to exercise the powers vested in the Government of the Philippine Islands by law in respect of this franchise and concession, and especially to verify the statements in the financial reports of the railway company as to construction, maintenance, and operation, with a view to the proper enforcement and execution of the obligations of the grantee as contained in this franchise, and particularly in paragraphs one and two hereof. (b) A guaranty from the Government of the Philippine Islands of a minimum annual gross business, of an amount to be fixed by the Governor-General! by and with the approval of the Secretary of War, and not to exceed one hundred thousand pesos: Provided, however, That no guaranty of this nature shall be executed tor a period exceeding fifteen years from Ihe date of the execution or the concessionary grant or contract. (c) The right to make use of water power from the Bued and Agno Rivers, or their tributaries, on terms and conditions to be determined by the Governor-General, by and with the approval of the Secretary of War. (d) The grantee may use the Benguet Road, with all its bridges and other appurtenances, or any part thereof, for the construction of the said railway, on terms and conditions as to use of the same and the dosing of the road or any portion thereof to traffic, either temporarily or permanently, to be determined by the Governor-General, by and with the approval of the Secretary of War