891.77 Ulen & Company/16

The Minister in Persia (Kornfeld) to the Secretary of State

No. 476

Sir: Referring to the Legation’s telegram No. 35 of this date,22 I have the honor to enclose herewith copy of the memorandum of agreement between the Persian Government and Ulen & Company for the submission and consideration of the proposal for the investigation, planning, and construction of railroads or motor roads in Persia.

I have [etc.]

Joseph S. Kornfeld
[Enclosure]

Memorandum of Agreement between the Persian Government and Ulen & Company of New York, Signed at Teheran, April 27, 1924

Memorandum of agreement between the Government of Persia, hereinafter called the Government, and the firm of Ulen & Company of New York, U. S. A., hereinafter called the Company, for the submission and consideration of a proposal for the investigation, planning and construction of certain railroads or motor roads or both, as the Government may decide as follows:

A railroad and motor road, from Bender-Jaz passing through Teheran to Mohammerah to start from either of the two points or both simultaneously. Also the Company will prepare a separate proposal at any time for a metalled road from Kazvin to Tabriz approximately three hundred miles in length. If motor roads are constructed the roads may be so designed and built that they can be easily converted and transformed into railroads at any time the Government may desire.

  • Article I. The Company will agree to begin the construction of either one railroad or motor road or two railroads or motor roads simultaneously and starting at such points on the Caspian Sea and the Persian Gulf as the Government may indicate to the Company always provided there is a navigable deep water port where transportation facilities are afforded for the loading and unloading of the contractor’s tools and equipment and necessary materials indispensable for the proper carrying out of the work. If one of the railways starts at Bender-Jaz on the Caspian Sea, then the Government will arrange the matter of transportation wherever it may be necessary through any foreign state, for the tools, equipment and materials required to be imported for construction purposes.
  • Article II. The Company in accordance with the conditions hereinafter stipulated, agrees to submit to the Government within three months from the date of the acceptance of the proposal, a proposal to investigate, plan and construct the aforesaid railroads or motor roads referred to in Article I.
  • Article III. The Government agrees herewith to immediately consider the said proposal and with all possible despatch and promptness to arrive at a decision in the matter. The Government further agrees not to negotiate with anyone else for the same work until the proposal of the Company is disposed of by being approved or rejected.
  • Article IV.

    The proposal to be submitted shall state that the Company will accept as partial payment for its services and expenses incidental to the carrying out of the contract, external bonds of the Government of Persia in an amount not to exceed $10,000,000 face value. The acceptance of said bonds as partial payment shall be conditioned upon the Government supplying for the work each month funds equivalent to one half of the face value of the bonds accepted by the Company. The said bonds shall be a direct obligation of the state and shall be secured by specific and well established revenues equal to at least twice the annual service charge of the loan and shall be duly guaranteed as to principal and interest to the satisfaction of the bankers.

    Note: It is understood by the Company that the Government will be in a position in the near future to supply another $5,000,000 for construction of railways or roads. Therefore it is anticipated that the Government will be willing to enter into a contract with Ulen & Company for say $15,000,000, one third of which or $5,000,000 the Government will supply in cash from its other sources and two thirds or $10,000,000 in bonds shall be subscribed by Ulen & Company.

    That is to say that for every bond of $1000 which is subscribed by Ulen & Company, the Government will subscribe $500 in cash.

  • Article V. The proposal shall further state that the Company shall make the investigations, prepare the plans and do all the work in connection with the proposed railroads or motor roads. As compensation for its services the Company shall receive from the Government a fixed fee based upon a reasonable percentage of the cost of the work and shall also receive reimbursement for all costs and expenses incurred by it in the performance of the contract.
  • Article VI. The method of reimbursement to the Company for the costs and expenses incurred in the performance of the contract and the payment of the Company’s fixed fee for its services, as well as the general conditions of the bond issue (which shall be in accordance with the requirements of the bankers) shall be freely set [Page 563] forth in the proposal. The final details of the bonds, the trust agreement, etc., shall be stipulated in the final contract to be signed.
  • Article VII. The proposal shall also state for a period of thirty days after the ratification of the contract, the Government shall have the right to sell the bonds to other parties and in that case to pay the Company in cash instead of bonds.
  • Article VIII.

    It is understood that iron and coal mines exist in places through which the proposed railroads should pass and the Persian Government desires to utilize these mines for the construction of the railroads. The Company is prepared to undertake investigations of any known iron or coal mines in the proximity of the railroads, said investigations to be undertaken for account of the Government. The Company will organize a Commission of Experts in the United States with the cooperation and approval of the Persian Minister in Washington. The Experts will be competent high class specialists who will study the matter of mines thoroughly and impartially with a view to their use in supplying materials for the construction and operation of the railroads. The construction of the railroads and motor roads and the investigation of the mines by a Commission of Experts may proceed simultaneously as the two works are not inconsistent with each other.

    The Commission of Experts will at the earliest possible date submit their report to the Persian Government which will include a wide scope of study such as the probable extent of the mineral deposits, their quality and availability for practical use in connection with the proposed railroads, the estimated cost of developing and exploiting the mines and manufacturing iron and steel for railroad purposes, the approximate capital required and every other important aspect of this problem which will enable the Persian Government to arrive at an intelligent understanding and decision about this important matter. The Persian Government will then decide whether or not to proceed with the exploitation of the mines. If the report of the Expert shows that mines exist and it is practical and economical to work them and manufacture iron and steel materials in Persia, then the Government can proceed and may count always upon the loyal cooperation of the Company to assist in every practical manner within its power.

  • Article IX. The Company declares itself entirely in sympathy with the commendable desire of the Government to develop the natural resources of Persia and use in the construction of the railroads as many products of Persian origin as possible. The Company binds itself to use in the construction of the railroads, any and all kinds of suitable materials which can be procured in Persia and delivered onto the work for practical use as cheap or cheaper than foreign materials.
  • Article X. Upon acceptance by the Government of the proposal to be submitted a definite contract shall be prepared and signed by the legally authorized representatives of the contracting parties and shall be duly approved and guaranteed by the National Madjliss in accordance with the laws of Persia.
  • Article XI. Should it appear that the contract falls within the provisions or scope of any previous agreement, option, or preferential right which affects any other person, company or entity, the Government of Persia will take the proper steps to arrange the matter.
  • Article XII. Inasmuch as the bankers of the United States uniformly decline to undertake any foreign loans until the same shall have been submitted to the Government at Washington, the obligation of the Company to submit a definite proposal is contingent upon that Government raising no objection thereto.
  • Article XIII. In case the parties do not arrive at a final agreement and do not sign a definite contract, there will be no obligation on the part of the Government to reimburse the Company for expenses incurred by the Company on account of the negotiations.
For the Government of Persia:
Reza

President of the Council of Ministers
For Ulen & Company:
L. E. Bennett

Vice-President
  1. Not printed.