MEMORANDUM OF UNDERSTANDING WITH RESPECT TO A DEFINITIVE PUBLIC
PRIVATE PARTNERSHIP AGREEMENT BETWEEN WATCO ALABAMA PORT SERVICES,
L.L.C. AND THE BIRMINGHAM-JEFFERSON COUNTY PORT AUTHORITY
This memorandum of understanding (this “MOU”) takes precedence over any existing
agreements between theBirmingham-Jefferson County Port Authority (“BJCPA” or the
“Authority”) and Watco Alabama Port Services, L.L.C. (“WAPS”). The BJCPA and WAPS shall
collectively be referred to herein as the “Parties” and each individually as a “Party”. This MOU
replaces all previous agreemetns between the parties, all of which agreements shall be deemed
void upon execution of this MOU.

RECITALS

WHEREAS, the Authority is a nonprofit public corporation formed pursuant to the provisions of
Sections 11-94-1, et seq., Code of Alabama (1975); and
WHEREAS, one of the missions of the Authority is to drive benefits to the City of Birmingham,
Alabama (the “City”) and the surrounding region by creating jobs, increasing the tax base,
growing commerce, improving inland waterway utilization, and reducing congestion and
pollution; and
WHEREAS, in furtherance of its mission and purpose, the Authority seeks to improve and
maintain railways lines and infrastructure within its jurisdiction; and
WHEREAS, WAPS and/or its affiliate, currently owns and operates Port Birmingham Terminal
(“Port Birmingham”), the former US Steel Birmingport, which is located inside the corporate
limits of the City and Jefferson County, Alabama (the “County”) and consists of approximately
one hundred eighty-two (182) acres directly accessible to the Black Warrior River system; and
WHEREAS, WAPS and/or its affiliate, also owns and operates a short-line railroad, located
inside corporate limits of the City and Jefferson County; and
WHEREAS, the Parties have identified five (5) mutually beneficial objectives enumerated in this
MOU they wish to pursue as part of a public-private partnership between them.
NOW, THERFORE, in consideration of the premises and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the
Parties hereby covenant and agree as follows:
SECTION 1

Primary Project Goals and Strategies

Section 1.1: Shared Goals of the Parties. The Parties have identified several goals to
advance their strategic-level commercial and governmental objectives. These goals include, but
are not limited to:

 Creating jobs within the City and Jefferson County;
 Increasing the tax base within the City and Jefferson County;
 The completion of key capital projects, including the construction of sufficient
warehouse infrastructure to accomplish the two above objectives;
 Increasing commodity diversification at Port Birmingham to increase resiliency in
times of challenging market conditions; and
 The development of an executable plan for the re-development of brownfield
sites along existing rail right of ways and at Port Birmingham.

Section 1.2: Marketing of Port Birmingham. The Parties agree to cooperate with one another
and use commercially reasonable efforts to work together to identify and conduct certain
marketing activities during the term of this MOU.
Section 1.3: Linking Port Birmingham to Port Mobile. The Parties agree to cooperate with one
another and use commercially reasonable efforts to identify, develop, and implement strategies
for enhancing the economic value of Port Birmingham to the City and the County.
Section 1.4: Diversifying the Commodity/Manufacturing Base for Port Birmingham. The
Parties agree to cooperate with one another and use commercially reasonable efforts to identify,
develop, and implement strategies for enhancing the value of Port Birmingham to the City and
the County by diversifying and growing the commodity base for Port Birmingham.
Section 1.5: The BJCPA agrees to work with WAPS on developing the land that
surrounds their rail infrastructure. WAPS is the exclusive owner of the rail infrastructure on the
Ensley Works Site and the BJCPA will agree to work with WAPS on developing the surrounding
land as an effort increase activity at Birmingport.
ARTICLE II

Property Transfer, Construction, and Lease Agreement

The Parties desire, in this MOU, to outline the steps related to the transfer of certain real
property within Port Birmingham and the subsequent development and operation thereon of the
Warehouse (as defined below).
Target Completion Date of the Warehouse: The tentative completion date for the Warehouse
is no later than August 1, 2020.
Term: Within forty-five (45) days of the execution of this MOU, the Parties shall enter into a
lease agreement (the “Master Lease Agreement”) for an initial term of fifty (50) years with two

(2) extension options that would extend the term to an aggregate term not to exceed ninety-nine
(99) years.
Termination: Within forty-five (45) days of the execution of this MOU, the Parties shall also
enter into a public-private partnership and project agreement (the “P3 Agreement”) related to
the construction of the Warehouse. The P3 Agreement shall include a provision that it may be
terminated by either Party at any time with one hundred and eighty (180) prior written notice.
Both the P3 agreeement and the Master Lease Agreement shall include a purchase option
provision, excercisable in the event of dissolution of the Authority, such that WAPS could
purchase the demised premises, including all tangible and personal property, including, but not
limited to the Warehouse, for a price equal to the amount actually expended by the Authority for
the benefit of the Warehouse project less the aggregate lease payments made during the first
five (5) lease years under the Master Lease Agreement.
Property – Purchase: Withing ten (10) business days of the completion of all closing conditions
indentified in the P3 Agreement, including receipt, review and approval of all required
environmental due diligence (including a Phase I Environmental Site Assessment and any and
all subsequent environmental studies as are deemeded necessary or appropriate by the
Authority), the Authority shall purchase, at price equal to fair market value, the real property
more particularly described in Exhibit A hereto (the “Subject Property”). The Parties agree that
the fair market value of the Subject Property is $3,515. At closing, WAPS (or its affiliate) shall
execute a statutory warranty deed, subject to all existing recorded lines, recorded restrictions,
recorded easements, recorded encroachments, recorded rights-of-ways, and any other
conditions which a current and accurate survey might show, and such other documents as are
customary for a transaction of this nature, including, but not limited to, an environmental
indemnification agreement and a non-foreign person affidavit. Except for the Authority’s legal
fees, WAPS shall be responsible for the payment of all closing costs, including costs associated
with the Phase I Environmental Site Assessment, related to the sale of the Subject Property.
Watco is willing to sell, at fair market value the existing 12,000 square foot warehouse at Part
Birmingham to the Birmingham – Jefferson County Port Authority;
At the time of the close, Watco will begin an operating lease for the warehouse structure and
lease. The initial term will be 10 years. There will be no renewal options at the end of the
agreement.
Watco can facilitate this sell through a quitclaim deed in an expeditious manner.
As part of the partnership, Watco would like the Port Authority to attempt to reallocate ADECA
grant funding to support this purchase and refurbishment of the warehouse;
In addition to that Watco will assist in the identification of necessary improvements of the
warehouse.
Watco will pay the Port Authority $1000 per month as well as a share of 25% of  storage
revenue generated by the warehouse after the transaction and improvements are complete;
Watco requires that any property transfer/operating lease has a clawback mechanism that
allows Watco to assume ownership of the property upon the dissolution of the Birmingham –
Jefferson County Port Authority;

As part of the clawback Watco will have the right of first refusal to reclaim the warehouse at no
cost to Watco if the Birmingham – Jefferson County Port Authority is insolvent (receives no
funding from the city or county).
The clawback mechanism would also be in place if either party would not wish to extend the
lease past 10 years.
In addition to that Watco would like to develop a Public-Private Partnership document that
expands the scope of responsibility of the Port Authority to include the development of the
Ensley works site with buy-in from key local elected officials. This is vitally important to Watco
and can be executed in the MOU format that has been drafted numerous times.

Warehouse – Construction: Pursuant to the terms of the P3 Agreement and the Master Lease
Agreement, the Authority shall construct a 20,000 square foot warehouse building (the
“Warehouse”) on the Subject Property. The Authority shall be responsible for facilitating any
required public bid process in connection with the construction of the Warehouse. WAPS agrees
to provide project management and other reasonable support throughout the entire buildout,
consistent with the terms of the P3 Agreement and the Master Lease Agreement. Each party
shall be responsible for funding the costs of acquiring, constructing, developing and equipping
the Warehouse as indicated below:
a) Authority Funding: The Authority will contribute up to $150,000 to the construction of the
Warehouse;
b) WAPS Funding: WAPS shall make one or more contributions in an aggregate amount equal
to $450,000 (the “Guaranteed Contribution”), and shall be responsible to fund the first seventy-
five percent (75%) of any cost overruns related to the construction of the Warehouse. WAPS
shall be responsible for one hundred percent (100%) of the costs associated with equipping the
Warehouse.
WAPS shall deliver $[●] to the Authority by check or wire transfer of immediately available funds
upon execution of this MOU (which amount shall be credited to the Guaranteed Contribution)
and shall deliver the balance of the Guaranteed Contribution to the Authority no later than fifteen
(15) days after the award of a construction contract related to the construction of the
Warehouse.
Property Access: Notwithstanding the conveyance of the Subject Property, WAPS shall have
the ability to access such property in order to conduct routine business at Port Birmingham.
Lease Payment Structure: Upon substantial completion of the Warehouse, WAPS agrees to
pay the Authority a monthly lease payment. During the first five (5) lease years, the monthly
payment shall be fixed at $2,500 per month. The first of such payments shall be due and
payable to the Authority twelve (12) months after the date the Warehouse is placed in service.
Prior to end of the fifth lease year, the Parties shall convene to determine whether any
amendments to the monthly lease payment or the general terms of the Master Lease
Agreement are appropriate and shall endeavor to devise a lease payment based on the tonnage
housed in the Warehouse. It is currently anticipated that the amended payment structure,
beginning in the sixth lease year, would be be between $1,500 to $3,500 per month (assuming
a rental rate of $.80 per ton). Throughout the term of the Master Lease Agreement, WAPS will

provide the Authority with monthly bills of lading. Any payment past due 30 days or more will
incur a 1.5% interest charge.
Triple Net Lease Structure: The Master Lease Agreement shall be structured as a “triple net”
lease in customary form and content for a transaction of this nature with WAPS assuming
responsibility for maintenance, insurance, associated taxes, and utilities.
Exclusive Operating / Marketing Services: WAPS will provide the Authority with sufficient
material handling and storage services for the Warehouse. Specifically, for all property
transferred to the Authority from WAPS (or any affiliate thereof), WAPS shall be the exclusive
operator and marketer for such property. For property subsequently acquired by the Authority
and serviceable by WAPS (or any affiliate thereof) existing short-line railroad, WAPS shall be
the exclusive operator and marketer for such property.
Right of First Refusal: In the event that the Authority should dissolve, become party to any
agreement, arrangement or transaction pertaining to the sale, proposed sale, transfer of
ownership or lease of the Subject Property, WAPS shall have a right of first refusal to purchase
or lease, as applicable, the Subject Property. All property transferred as part of the initial
warehouse buildout will not be transferred for more than $3,515 plus the sum of the amount
actually expended by the Authority for the benefit of the Warehouse project less the aggregate
lease payments made during the first five (5) lease years under the Master Lease Agreement.
Authority Funding: As part of its commitment under this MOU, the Authority shall in good faith
pursue a multi-year budgetary agreement from the governing bodies of the City and the County,
respectively. The purpose of any such multi-year commitment is intended to facilitate confidence
in the customer base and support anticipated economic development opportunities locating at
Port Birmingham in the future.
Indemnity: The P3 Agreement and the Master Lease Agreement shall such contain mutual
indemnities, limited by the provisions of applicable law, as are customary for a transaction of
this nature. Specifically, each of the Parties shall agree to assume full responsibility and liability
for the conduct and actions of any of its representatives, employees, agents and subcontractors
and agree to indemnify and hold the other Party harmless against any and all loss, liability,
claims, damages, injuries and expenses (but excluding consequential damages) (i) to the
person or property of any persons arising out of, caused by or resulting from the negligent or
intentional acts, omission, or fault of the Party’s representatives, employees, agents and
subcontractors, in connection with this agreement or (ii) arising from the failure of the BCJPA or
WAPS to comply with any applicable laws, statutes, ordinances or regulations in connection
with the applicable agreement, or (iii) a breach of the appliclable agreement.
Insurance: The P3 Agreement and the Master Lease Agreement shall contain provisions
obligating each of the Parties to be responsible for maintaining appropriate insurance for their
respective interests which shall be consistent with customary coverages for each such interests.
Upon request from time-to-time, the BJCPA and WAPS shall supply the other with evidence of
such coverage.
If the duration of, the scope of or any business activity covered by any provision of this MOU is
in excess of what is determined to be valid under applicable law, such provision shall be
construed to cover only that duration, scope or activity that is determined to be valid. The parties
hereby acknowledge that this MOU shall be given the construction that renders its provisions
valid to the maximum extent, not exceeding its express terms, possible under applicable law.

Accepted and Agreed to by:
Watco Alabama Port Services, L.L.C. Birmingham-Jefferson County Port Authority
By: ______________________________ By: ______________________________
Name: ______________________________ Name: ___________________________
Title: ______________________________ Title: _____________________________
Date: ______________________________ Date: _____________________________