File No. 893.51/1741

Loan agreement between the Chinese Government and Lee, Higginson and Company

[Left at the Department by the Counselor of the Chinese Legation]

This agreement, made this 7th day of April, 1916, between the Government of the Republic of China, represented by His Excellency Doctor V. K. Wellington Koo, Chinese Minister to the United States, acting in the name and on behalf of the Minister of Finance of the Republic of China by special authorization, and Lee, Higginson and Company, of Boston, Massachusetts, New York City, New York, and Chicago, Illinois.

Whereas the Chinese Government has heretofore appointed Messrs. Lee, Higginson and Company its fiscal agents in the United States of America; and

Whereas the Chinese Government now desires its said fiscal agents, Messrs, Lee, Higginson and Company, to offer for sale five million [Page 129] dollars ($5,000,000) principal amount of six per cent three-year Treasury gold notes, dated April 1, 1916, payable April 1, 1919, bearing interest at the rate of six per cent (6%) per annum payable semi-annually on October 1st and April 1st in each year;

Now, therefore, the parties hereto do agree as follows:

1. The Chinese Government authorizes Lee, Higginson and Company to act as its fiscal agents for the purpose of offering for sale five million dollars ($5,000,000) principal amount six per cent three-year Treasury gold notes of the Republic of China. Said notes are to be direct and binding obligations of the Republic of China, are to be signed in the name of the Chinese Government by His Excellency Doctor V. K. Wellington Koo, Minister of the Republic of China to the United States of America, at Washington, D. C., and shall also bear the official seal of the Chinese Legation at Washington, D. C., and are to be countersigned by Lee, Higginson and Company, its fiscal agents. The notes are to be dated April 1, 1916, and are to be payable April 1, 1919; they are to be in coupon form registrable as to principal only in the denomination of one thousand dollars ($1,000) each and to bear interest at the rate of six per cent (6%) per annum payable semi-annually on October 1st and April 1st in each year, and are to be paid principal and interest in gold coin of the United States of America of the present standard of weight and fineness at the office of Lee, Higginson and Company, New York City. Upon the request of Lee, Higginson and Company, the Chinese Government will issue coupon notes in denominations of one hundred dollars ($100), or of five hundred dollars ($500), or of five thousand dollars ($5,000), or will issue registered notes without coupons in denominations of one thousand dollars ($1,000) or any multiple thereof. If coupon notes of denominations other than one thousand dollars ($1,000) or registered notes without coupons shall be issued, they shall be issued and may be interchangeable with any other notes of such issue under such scheme or plan as may be necessary or desirable to conform to the rules of any stock exchange.

The notes of this issue are to be subject to redemption at par and accrued interest upon October 1, 1917, and upon any interest day thereafter before maturity by operation of a sinking fund on thirty (30) days’ published notice. On the first day of August, 1917, and on the first day of February, 1918, and on the first day of August, 1918, the Chinese Government will deposit with Lee, Higginson and Company the sum of one million two hundred and fifty thousand dollars ($1,250,000) or such lesser sum as shall equal one-quarter of the principal amount of the notes which have at any time been issued, for the purchase or redemption of said notes. Each such sinking fund instalment if reasonably practicable shall be applied by Lee, Higginson and Company within twenty (20) days after the receipt thereof to the purchase of notes at a price not exceeding par and accrued interest. In case the cost of any such notes so purchased shall, because of the inclusion in such cost of accrued interest, exceed the par value of the notes so purchased, Lee, Higginson and Company will pay the difference between par and the cost of said notes out of any monies on deposit with Lee, Higginson and Company, other than [Page 130] sinking fund monies, after notifying the Chinese Minister at Washington; if there are no monies on deposit other than sinking fund monies at the time or if the amount on deposit, other than sinking fund monies, is not sufficient to pay the said difference then Lee, Higginson and Company will advance and loan to the Chinese Government such amount as may be necessary to make up the deficit. Any monies so advanced by Lee, Higginson and Company shall be repaid with interest at six per cent (6%) per annum by the Chinese Government. All notes so purchased shall cease to bear interest and shall be immediately cancelled and delivered by Lee, Higginson and Company to the Chinese Legation at Washington.

In case prior to the twentieth day of August, or the twentieth day of February, after the receipt of any such sinking fund payment, Lee, Higginson and Company shall fail to purchase notes to an amount sufficient to exhaust the monies in the sinking fund, Lee, Higginson and Company within five (5) days thereafter shall draw by lot notes to be redeemed on the first day of October or the first day of April to such amount as shall be sufficient at par to exhaust the monies in the sinking fund available for such purposes. Lee, Higginson and Company shall give to the Chinese Minister at Washington at least two (2) days’ notice of such drawing, stating the amount of notes purchased with the monies in the sinking fund and the amount of notes to be redeemed, unless such notice shall be waived by the Chinese Minister. Upon the completion of such drawing, Lee, Higginson and Company, at the expense of the Chinese Government, will publish notice of redemption of the notes so drawn at least once a week for three consecutive weeks in two daily newspapers of general circulation published in the City of New York, the first publication of such notice to be at least thirty (30) days prior to the date therein appointed for redemption. Such notice shall contain the numbers of the notes so drawn and the date appointed for their redemption, which shall be the date of the next interest payment, with an announcement that on and after that date, on presentation and delivery at the office of Lee, Higginson and Company in the City of New York of said notes and all coupons pertaining thereto and maturing on said date of redemption and on subsequent dates, the notes so drawn will be paid at par and interest accrued to the date of redemption. Outstanding notes so drawn will cease to bear interest on and after the date appointed for redemption in said notice, notwithstanding anything stated to the contrary in said notes or coupons pertaining thereto. All notes redeemed by operation of the sinking fund shall be immediately cancelled by Lee, Higginson and Company and be delivered to the Chinese Legation at Washington. At the completion any redemption, Lee, Higginson and Company will render an account to the Chinese Minister at Washington of the notes purchased and redeemed and the numbers thereof and the total cost of such purchase and redemption.

The notes are to be substantially in the form hereto annexed, and the Chinese Government agrees to make provision for their payment, principal and interest, in accordance with their terms. These notes are to be used for industrial, municipal, educational and other similar purposes, as provided in the Government budget of 1916.

[Page 131]

At least ten (10) days before any instalment of interest of said notes shall become due, the Chinese Government shall deposit with Lee, Higginson and Company, New York City, a sum sufficient to pay the same in full, including the interest upon any notes called for redemption, and shall pay to Lee, Higginson and Company the amount of any advances made by Lee, Higginson and Company with interest thereon as hereinbefore provided, and within ten (10) days before the date of the maturity of the notes the Republic of China shall deposit a sum sufficient to pay at such maturity the principal and interest of all said notes then outstanding.

Until definitive engraved notes are ready, temporary notes may be issued, either printed or lithographed in denominations of one thousand dollars ($1,000) or any multiple thereof, as Lee, Higginson and Company may desire. Such temporary notes will be of the same force and effect as the definitive engraved notes until exchanged for the latter. The Chinese Government will cause definitive engraved notes in form satisfactory to Lee, Higginson and Company, to be prepared promptly and to be delivered without charge or expense to Lee, Higginson and Company, to be by them exchanged for the outstanding temporary notes.

Provision may be made for listing such notes on the New York or Boston Stock Exchange if in the judgment of Lee, Higginson and Company such listing is desirable and is agreed to by the Chinese Government through its Minister at Washington.

2. If a public offering of any of the notes is made, the price for such offering shall be not less than ninety-seven per cent (97%) of the par value plus accrued interest, but Lee, Higginson and Company, as fiscal agents, from time to time may fix the price at which said notes may be privately offered for sale subject to the provisions of Paragraph 4. They may issue interim receipts to the purchasers of the notes.

All expenses in connection with the printing, engraving, and execution of said notes and interim receipts, and all expenses incidental to their preparation, shall be paid by the Chinese Government, which expenses shall not be reckoned in determining the net amount which the Chinese Government shall receive, but Lee, Higginson and Company shall bear all expenses in connection with the advertising and sale of said notes.

3. On behalf of the Chinese Government, the Chinese Minister will, as promptly as possible, but not necessarily prior to the offering of the notes for sale deliver to Lee, Higginson and Company a document to be signed by the Minister of Finance of the Chinese Government, stating that the issue of said six per cent three-year Treasury gold notes has been duly authorized and is in accordance with the Constitution and laws of the Republic of China.

4. The compensation of Lee, Higginson and Company for their services in this connection shall be a commission which shall equal the difference between the price at which the notes may be sold, exclusive of accrued interest, and ninety-three per cent (93%) of the par value, but not exceeding four per cent (4%) of the par value. The Chinese Government shall receive net not less than ninety-three per cent (93%) of the par value of the notes sold with accrued interest, subject, however, to the provisions of Paragraph 2 hereof. [Page 132] The proceeds of the notes shall be deposited with Lee, Higginson and Company, and out of such proceeds there shall first be applied an amount sufficient to pay the principal and interest on the advance of one million dollars ($1,000,000) made by Lee, Higginson and Company to the Chinese Government on April 3, 1916, and the remainder shall be credited to the account of the Chinese Government to be drawn upon from time to time by order of the Chinese Government signed by its Minister at Washington, until and unless otherwise instructed in writing by the Chinese Government. All monies remaining on deposit at any time with Lee, Higginson and Company will be allowed interest at such rates as is customarily allowed on deposits of similar character, which shall be agreed upon with the Chinese Minister at Washington and which, until modified, shall be at the rate of two per cent (2%) per annum.

5. Lee, Higginson and Company, for themselves, their associates and agents, agree to use their best efforts to accomplish the sale of said notes at the price and upon the conditions aforesaid, and agree to advise promptly from time to time the Chinese Minister at Washington, D. C., of the amounts of the proceeds of said notes, less commissions and expenses aforesaid, which have been placed from time to time to the credit of the Chinese Government.

6. The offering of said notes shall be made on or before April 15, 1916, with the proviso that Lee, Higginson and Company, acting solely in the interests of the success of the loan, may, if the market conditions with respect to these notes make it wise or necessary, postpone this offering to a date not exceeding seven days from April 15. If Lee, Higginson and Company should deem it desirable to postpone the offering beyond such or any extended period, and the Chinese Government by its Minister at Washington shall not agree to such extension, then this agreement shall be null and void except as to any notes theretofore issued and sold.

Lee, Higginson and Company, if they so desire, may associate with themselves as principals in this undertaking, other banking firms, banks or trust companies, provided, however, that such banking firms, banks or trust companies shall be first approved by the Chinese Minister at Washington. Lee, Higginson and Company may employ such other banking firms, banks or trust companies as they may desire in order to assist the sale or disposition of said notes. Independently of their fiscal agency, Lee, Higginson and Company shall have the right to purchase said notes on their own account, at a price which, subject to the terms of this agreement, shall net the Chinese Government not less than ninety-three per cent (93%) of the face value of the notes and accrued interest.

All notices required to be given hereunder shall be in writing and shall be mailed either to Lee, Higginson and Company at No. 43 Exchange Place, New York City, or to the Chinese Legation at Washington, D. C., as the case may be.

7. This contract will bind and inure to the benefit of the partnership of Lee, Higginson and Company as now or hereafter organized, and also to any successor firm.

In witness whereof, His Excellency, Doctor V. K. Wellington Koo, Chinese Minister at Washington, acting in the name of the Government of the Republic of China and on behalf of the Minister of Finance, under special authorization as above, has hereunto signed [Page 133] his name and caused the seal of the Chinese Legation at Washington, D. C., to be affixed, and said Lee, Higginson and Company by Frederic W. Allen, a partner, has hereunto signed its firm name this 7th day of April, 1916.

Lee, Higginson & Co.