HomeMy WebLinkAboutPR 14883: INCENTIVE AGREEMENT BETWEEN ENGLOBAL SYSTEMS, INC. AND THE CITY OF PORT ARTHURP. R. No. 14883
08/22/08 mts
RESOLUTION NO.
A RESOLUTION APPROVING AN ECONOMIC
INCENTIVE AGREEMENT BETWEEN ENGLOBAL
SYSTEMS, INC. AND THE CITY OF PORT ARTHUR
SECTION 4A ECONOMIC DEVELOPMENT
CORPORATION, LEASE WITH OPTION TO PURCHASE
AND LEASE, LEASE GUARANTY AND APPROVAL OF
THE ISSUANCE OF SALES T.AX REVENUE BONDS NOT
TO EXCEED $6,000,000, AS WELL AS ENGAGING THE
SERVICES PER THE AGREEMENT WITH VINSON &
ELKINS AS BOND COUNSEL AND PER THE FINANCIAL
ADVISORY AGREEMENT WITH THE FIRST
SOUTHWEST COMPANY
WHEREAS, the City Council deems it in the public interest to authorize the City of Port
Arthur Section 4A Economic Development Corporation ("PAEDC") to enter into an Economic
Incentive Agreement with ENGlobal Systems, Inc. (the "Agreement") in substantially the same
form attached hereto as Exhibit "A"; and
WHEREAS, Germer Gertz, L.L.P. has indicated this as a Section 4A project; and
WHEREAS, ENGlobal Systems, Inc. ("ENGlobal") has reviewed and approved the
Agreement in substantially the same form as attachhed hereto as Exhibit "A"; and
WHEREAS, the Agreement would provide for the PAEDC to construct an office and
fabrication/assembly building and related facilities as more fully described in the Agreement (the
"Facility"); and
WHEREAS, PAEDC shall finance the cast of construction and related costs associated
with the Facility by the issuance of its PAEDC Sales Tax Revenue Bonds in an amoumt not t:o
exceed $6,000,000 (the "Bonds"); and
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WHEREAS, PAEDC shall pay certain additional costs of issuance of the Bonds and any
cost associated with the Reserve Fund for the Bonds from other PAEDC funds; and
WHEREAS, for the issuance and sale of its Bonds, PAEDC proposes to engage the
services of Vinson & Elkins as bond counsel to the PAEDC in accordance with the engagement
letter attached hereto as Exhibit "B" and proposes to engage First Southwest Cornpany as
financial advisors to the PAEDC in accordance with the Financial Advisory Services Agreement
attached hereto as Exhibit "C" and made a part hereof for all purposes; and
WHEREAS, the PAEDC has proposed an economic incentive aggregating but not to
exceed $3,000,000 to ENGlobal for locating business operations in the Facility in the PAEDC
Business Park; and
WHEREAS, the Agreement provides, for an economic incentive to include
approximately 11 acres of land within the Polrt Arthur Business Park valued at '$467,500
($42,500 per acre) with interest savings of approximately $90,000 and approximately $2,243,000
in payments by the PAEDC towards the debt service (principal and interest) on the Bonds; and
WHEREAS, ENGlobal has agreed to lease the Facility constructed by the PAEDC in the
Business Park and to pay as leased all debt service on the Bonds not committed for payment by
the PAEDC under the terms of the Agreement; and
WHEREAS, ENGlobal has agreed to execute a Lease with Option to Purchase, and its
affiliated business entity, ENGlobal Corporation, :has agreed to guaranty the Lease in accordance
with the Lease Guaranty as such Lease with Option to Purchase and Lease Guaranty are more
fully described and attached to and made a part of the Agreement; and
WHEREAS, the PAEDC requests approval for issuance of the Bonds to construct the
Facility in the Business Park to be leased and subject to option to purchase by ENGlobal; and
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WHEREAS, the PAEDC requests the authorization of the City Council to approve the
Agreement together with the Lease with Option to Purchase and Lease Guaranty specified in the
Agreement and to approve issuance of Sales Tax Revenue Bonds for a fifteen (15) year term ar~d
the engagement of Vinson & Elkins and First Southwest Company to assist with the issuance ar~d
sale of the Bonds; and
WHEREAS, the PAEDC further requests authorization from the City to proceed with the
final negotiations of the Agreement, Lease with Option to Purchase, Lease (Juaranty,
Construction Contract for construction of the Facility as final documentation required by or Ito
complete the Agreement as approved by counsel for the PAEDC and the City; and
WHEREAS, the PAEDC further requests that the City waive building permit fees, tap
fees and other costs associated payable in regards to construction of the Facility except .for actual
costs of the City associated with such fees or permits.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF PORT ARTHUR:
Section 1. That the facts and opinions in tlhe preamble are true and correct.
Section 2. That the City of Port Arthur Section 4A Economic Development Corporation
is hereby authorized to enter into an Economic ]Incentive Agreement with ENGlobal Systems,
Inc., and the President and Secretary of the City of Port Arthur Section 4A F;conomic
Development Corporation are authorized to sign the Agreement in substantially the same form as
attached hereto with Exhibits "A", "B", "C", "D", "E", "F", "G", "H" and "I".
Section 3. That the City of Port Arthur Sf;ction 4A Economic Development Corporation
is hereby authorized to proceed with the issualnce of the City of Port Arthur Section 4.A
Economic Development Corporation Sales Tax Revenue Bonds in an amount not to exceed
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$6,000,000 to undertake obligations as set forth under the Agreement and is authorized. to direct
its bond counsel and financial advisor to prepare all bond orders, certificates, resolutions and
other documents as may be necessary for the marketing, issuance, sale and delivery of t:he Bonds
and that the PAEDC can reimburse itself for all costs associated with the issuance of said Bon<ls
and any and all advances made for costs associated with the Agreement or construction of the
Facility prior to issuance of the Bonds from PAEL)C funds.
Section 4. That the City of Port Arthur Section 4A Economic Development Corporation
is authorized to execute an engagement letter with Vinson & Elkins and a Financial Advisory
Services Agreement as set forth in Exhibits "B" and "C", and the President and Secretary of the
City of Port Arthur Section 4A Economic Development Corporation are authorized to sign such
engagement letters substantially in the forms attached hereto as Exhibits "B" and "C".
Section 5. That the City of Port Arthur Section 4A Economic Development Corporation
is hereby authorized to proceed with negotiating; the construction contract for the Facility as
described in the Agreement with ENGlobal to pay any costs of construction which exceed the
proceeds from the sale of the Bonds.
Section 6. That the City Council authorize the City Manager to waive building permit
fees, tap fees and other building fees except for actual costs incurred by the City for extension of
City services to the Facility.
Section 7. That the City Council approve the incentive commitments set forth in the
Agreement in consideration of the job creation, payroll and cumulative payroll, and credit for
acquisition of equipment and material from Port Arthur businesses as committed by ENGlobal
under the Agreement.
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Section 8. That a copy of this Resolution shall be spread upon the Minutes of the City
Council.
READ, ADOPTED AND APPROVED on this day of
A. D., 2008,
at a Meeting of the City Council of the City of Port Arthur, Texas, by the following vote:
AYES: Mayor
Councilmembers
NOES:
DELORIS "BOBBIE" PRINCE, MAYOR
ATTEST:
TERRY HANKS, ACTING CITY SECRETARY
APPROVED:
FLOYD BATISTE, EDC CEO
APPROVED AS TO FORM:
SEE CONFIDENTIAL MEMO
MARK T. SOKOLOW, CITY ATTORNEY
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EXHIBIT "A"
TO THE RESOLUTION
ECONOMIC INCENTIVE .AGREEMENT BETWEEN
THE CITY OF PORT ARTHUR SECTION 4A
ECONOMIC DEVELOPMENT CORPORATION
ANfD
ENGLOBAL SYSTEMS, INC. ("INCENTIVE RECIPIENT")
INTRODUCTION
The Incentive Recipient is a Texas corporation doing business in Port Arthur, Texas. The
Incentive Recipient intends to undertake the hollowing business: engineering services and
industrial fabrication and assembly. Current market demands are such that Incentive ]Recipient
plans to initiate and/or expand the above-referenced business operations in Port Arthur. The City
of Port Arthur Section 4A Economic Development Corporation ("PAEDC") will assist :Incentive
Recipient in this business endeavor by providing the hereinafter described economic incentives in
exchange for the promise by Incentive Recipient of creation of fulltime permanent jobs and the
purchase of equipment and materials from Port Arthur, Texas businesses.
AGREEMENT TERM
EFFECTIVE DATE
1. This Economic Incentive Agreement ("Agreement") is entered into with an effective
date of 2008; but PAEDC and Incentive Recipient accept and acknowledge that
certain obligations shall arise in accordance with dates as specified in the Lease Agreement with
Option to Purchase (the "Lease Agreement"), by and between the PAEDC and :Incentive
Recipient.
TERMINATION DATE
2. This Agreement terminates on the earlier of final payment of obligations by the
PAEDC under its City of Port Arthur Section 4A. Economic Development Corporation Sales Tax
Revenue Bonds, Series 2008 (the "Bonds") or thirty (30) days after ENGlobal Systems, Inc. as
Incentive Recipient either performs fully or breaches this Agreement, subject to earlier
termination or extension, voluntary or involuntary, as provided herein. The period 'from the
effective date of this Agreement through and including the expiration date of this Agreement as
provided in the previous sentence hereof, is sometimes -referred to in this Agreement as the
"Term" of this Agreement. Term of this Agreement and obligations hereunder may differ from
the Term as specified in the Lease Agreement.
PARTIES
3. City of Port Arthur Section 4A Economic Development Corporation ("PAEDC"},
located at 4173 39`~ Street, Port Arthur, Texas, 77642, is a corporation. It is duly authorized to
do business in the State of Texas under Section 4.A, Article 5190.6 V.T.C.A. (the "Development
Corporation Act of 1979") and duly authorized bey Resolution of the City Council of the City of
Port Arthur to enter into this Agreement. As so authorized and as provided by the PAEDC
bylaws, the President and Secretary of the PAEDC Board have the authority to execute this
Agreement.
4. ENGlobal Systems, Inc. ("Incentive: Recipient") is a Texas corporation. The
registered agent in Texas for the Incentive Recipient is Capitol Corporate Services, Inc:, at 80()
Brazos, Suite 400, Austin, Texas 78701.
5. ENGlobal Corporation ("Guarantor") is a Nevada corporation having its principal
business address as 654 North Sam Houston Parkway E., Suite 400, Houston, Texas 770ti0-5914..
PROMISED PERFORMANCE
6. The parties agree to perform as follow.;.
(a) PEitFORMANCE sY PAEDC
PAEDC has agreed to initiate at its sole cost and expense the issuanc:e of the
Bonds, said Bonds to have a term of fifteen (15) years;
ii. PAEDC has committed to utilize the proceeds of the Bonds to pay cost of issuance
of the Bonds and to apply the balance of said proceeds to the construction of a _
square foot office and fabricatio~ri/assembly building and related facilities (the
"Facility") on the real property more fully described on Exhibit "A" attached to
this Agreement and as said property is specified as Exhibit "A" to the Lease
Agreement (the "Property").
iii. PAEDC will enter into a contract for construction of the Facility with the
Contractor (as herein defined) using plans and specifications (the "Plans") prepared
by the Incentive Recipient or its affiliated businesses including but not limited to
ENGlobal Automation Group, Inc. (the "Construction Contract") attached hereto
as Exhibit "B" .
iv. PAEDC will use its best efforts to construct the Facility within _ (__) days from
the Effective Date of this Agreement.
v. PAEDC will assist the Contractor and the Incentive Recipient for approval of the
Plans, issuance of permits, for construction of the Facility.
vi. PAEDC will undertake all obligations with regard to bring utilities to the property
described in Exhibit "A" (the "Premises") and to provide utility services to the
Premises including the payment of any utility tap fees assessed by the City of Port
Arthur.
vii. On satisfaction of the payment obligations under the Bonds for its fifteen (IS} year
term and subject to the completion of performance by Incentive Recipient, PAEDC
agrees to convey title to the Property to the Incentive Recipient resulting in a
$3,000,000 economic incentive provided by the PAEDC to the Incentive Recipient
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as more fully set forth in the incentive proposal (the "Incentive Proposal") attached
hereto as Exhibit "C".
(b} PERFORMANCE BY INCENTIVE RECIPIENT
(i) Incentive Recipient or its related business interests including ENGlobal Automation
Group, Inc. agrees to prepare the Plans for construction of the Facility in such a
form for PAEDC to secure building permits from the City of Port Arthur, Texas
(the "City"} and any and all other regulatory authorities.
(ii) Incentive Recipient and/or its affiliated interests including ENGlobal Automation
Group, Inc. agrees to provide constriction management services during the period
of construction of the Facility to ensure construction of the Facility in accordance
with the Plans.
(iii) Incentive Recipient and/or its affiliiated interests including ENGlobal Automation
Group, Inc. shall provide to the :PAEDC a disbursement schedule for inclusion
within the Construction Contract attached hereto as Exhibit "D" providing for the
disbursement of proceeds by the PAEDC either through its economic development
funds or through the proceeds of th.e Bonds during the period of construction of the
Facility.
(iv) Incentive Recipient and/or its affilliated interests including ENGlobal Automation
Group, Inc. agrees to assist in construction management to provide for the issuance
of a certificate of occupancy for the Facility on or about the day of ,
2009.
(v) Incentive Recipient shall execute and undertake all of the obligations of Lessee
under that Lease Agreement as set forth in Exhibit "E" attached hereto.
(vi) Incentive Recipient will ensure the execution of the Guaranty Agreement by the
Guarantor as set forth in Exhibit "F" attached hereto to insure perforniance by
Incentive Recipient as Lessee under the Lease Agreement.
(C} CREDITS -SUBSTITUTE PERFORMANCE
Incentive Recipient may earn credits ;according to the following terms, to insure the
receipt of an economic incentive agl;regating up to but not to exceed $3,000,000
(including the initial incentives provided by the PAEDC for the value of the Property
or interest saving achieved by the issuance of the Bonds all as set forth in the :[ncentive
Proposal attached as Exhibit "C" proviiding a net remaining grant credit of $2,143,510
which shall reduce the payment obligations of Incentive Recipient pursuant to the terms
of the Lease Agreement.
Incentive Recipient shall be provided an opportunity to receive incentive credits
through both the establishment of permanent jobs with designated payroll together with
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credit for purchases made during the: years or specified in the Payroll Projections
Schedule and Credits attached hereto as Exlibit "G".
(1) The incentive for payroll credits (th.e "Payroll Credits"} and material and equipment
purchase credits (the "Purchase Credits") shall be as specified in the ][ncentive
Schedule attached as Exhibit ~°G".
(2) Total Payroll and Purchase Credits cannot exceed $2,143,510.
(3) Incentive Recipient will forfeit an`~ credits it earned during a period for which a
report is scheduled but Incentive Recipient fails to issue the report.
(4) Once Incentive Recipient has earnf;d the credits of $2,143,510 through Payroll or
Purchase Credits, this Agreement shall terminate; however, the termination of the
obligations hereunder shall not eliminate, reduce or modify the obligations of
Incentive Recipient to PAEDC pursuant to the Lease Agreement in Exhibit. "E" nor
to eliminate obligations under the IJuaranty Agreement in Exlibit "F" which each
shall remain in full force. and effect until the Bonds are paid in full.
PERFORMANCE MILESTONE SCHEDULE
7. Although failure to achieve a perfornnance milestone is not a breach of contract, a
failure is grounds for PAEDC to modify rent due and payable under the Lease Agreement and/or
demand reasonable assurances` from Incentive Recipient that it can and will fully perform its
contractual obligations. Failure to provide such reasonable assurances following demand of
PAEDC is a breach of contract.
8. Incentive Recipient's performance milestones are contained in the following table.
PERFORMANCE MILESTONE SCHEDULE
eadh' M' estone
(a) 3/30/09 Issue a status report to PAI?DC's Chief Executive Officer ("CEO") and
h3~ard of Directors for the period from the effective date of this Agreement ~
to March 31, 2009 on the construction of building.
(b) 6/30/09 Issue a status report to PAIsDC's Cluef Executive Officer ("CEO") and
h3~ard of Directors for the period from Aprih 1, 2009 to June 30, 2009 on
the construction ofbuildinp;.
(c) ' 12/31/2009 Issue a status report to PAEDC's Chief Executive Officer ("CEO") and
Board of Directors for the ;period from Juhy 1, 2009 to December 30, 2009
on the construction of building.
~ Examples of reasonable assurances would be verification of additional employment of Incentive Recipient designated
staffing and/or confirmation through contract purchase order:; or sales receipts from City of Port Arthur vendors.
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(d) ' 2/28/2010 Achieve performance of 50 full-time, permanent employees for year ending
December 31, 2009; with a average wage of $ 5,251 and Anniuali;ied payroll
of $262,550.25
(e) 1/31/2011 ~ Issue a Status report for January 1, 2010 to December 31, 2010.
(f) 2/28/2011 Achieve performance of 156 full-time, permanent employees for year egg
December 31, 2010; with a average wage of $ 75,224 and ,Annualized ~
payroll of $ 11,734,894.74
(g) i 1/31/2012 Issue a Status report for January 1, 2011 to December 31, 2011.
i
(h} ~ 2/28/2012 Achieve performance of 1~!9 full-time, permanent employees for year ending ~
~ December 31, 2011; with a average wage of $82,321 and ,Annualized
gayroll of $ 10,619,402.8b~
(i} 1/31/2013 Issue a Status report for Jao~uary 1, 2012 to December 31, 2012.
(j) 2/28/2013 Achieve performance of 91D full-time, permanent employees for year ending
December 31, 2012; with a average wage of $ 81,117 and Annualizes
payroll of $ 7,300,500.00
(k) I/31/2014 Issue a Status report for January 1, 2013 to December 31, 2013.
(1) 2/28/2014 Achieve performance of 9;5 full-time, permanent employees for year ending
December 31, 2013; with a average wage of $ 78,371 and ~P~nnualiz~
payroll of $ 7,445,268.75
(m) l 3/30/2014 Issue a final report to the PAEDC Board and Executive Director detailing
actual performa~e versus promised performance, so the PAEDC Board can
~ take action at its regularly scheduled Board meeting. If ENG1oba1
Automation fully performs the Board will deem tlris contract complete.
PAEDC'S CONDITIONAL OBLIGATIONS AND LIlVIITED LIABILITY
9. It is expressly understood and agreed by the parties hereto that the PAEDC obligations
herein are contingent upon the actual sale of the Bonds and the receipt by the PAEDiC of the
proceeds there from. If proceeds from the Bonds and/or other funds of the PAEDC: are not
available to carry out the obligations of the PAEDC under this Agreement, the PAEDC shall
notify Incentive Recipient in writing within a reasonable time after such fact is reasonably
determined by the PAEDC Board of Directors. The PAEDC, at its sole option, may then
terminate this Agreement without further liability and shall not be liable to Incentive Recipient ar
to any third parties for failure to undertake or complete any obligations under the terms and
conditions of this Agreement.
10. The PAEDC shall not be liable, iui Agreement or otherwise, to Incentive Recipient, ar
to any person or entity claiming by or through Incentive Recipient, for any expense, expenditure
or cyst incurred by or on behalf of Incentive Recipient related to the project made the basis of this
11642702 Page ti
Agreement. The PAEDC's sole liability/obligations, if any, to Incentive Recipient shall be as
detailed in Section 6(a) of this Agreement.
LIQUIDATED DAMAGES FOR BREACH OF AGREEMENT
11. In the event Incentive Recipient fails to perform its obligations under this Agreement,
Guarantor has agreed to assume all obligations of Incentive Recipient under paragraph 6(b) of this
Agreement and under the terms of the Lease Agreement; however, any assumption by Guarantor
does not relieve Incentive Recipient of financial responsibilities to PAEDC. Further, the PAEDC
shall be entitled to recover its reasonable and customary attorney's fees and court costs incurred
in any satisfaction of actions to undertake performance by Incentive Recipient of any obligation
under this Agreement and to exercise any remedies as may be provided at law or in equity to
PAEDC.
12. It is expressly understood and agreed lby the parties that any right or remedy shall not
preclude the exercise of any other right or remedy under this Agreement except as may have been
agreed upon pursuant to the terms of the Lease Agreement or the Guaranty Agreement. The
parties hereto acknowledge that if there is any conflict in terms or conditions in this Agreement,
Lease Agreement or the Guaranty Agreement, that the terms of the Lease Agreement shall
prevail, and no term or condition of this Agreement shall mitigate any obligation of [ncentive
Recipient or Guarantor under either the Lease Agreement or the Guaranty Agreement. Failure to
exercise any right or remedy hereunder shall not constitute a waiver of the right to exercise that
or any other right or remedy at any time.
RECORDS /INSPECTION /PAEDC AUDIT
13. Incentive Recipient must establish a:nd maintain sufficient records, as reasonably
determined by the PAEDC, to account for the payroll credits or equipment and material purchase
credits provided far in paragraph 6(c) of this Agre:ernent.
14. Upon ten-day {10-day) advance notice, Incentive Recipient shall give the PAEDC, or
any of its duly authorized representatives, access to and right to examine all books, accounts,
records, reports, files and other documents of Incentive Recipient relative to the peri~ormance
requirements under paragraph 6(b) of this Agreement. Such rights to access shall co~atinue as
long as the records are maintained by Incentive Recipient. Incentive Recipient agrees to maintain
such records in an accessible location. All information obtained by the PAEDC, or its duly
authorized representatives, shall be regarded as ttie confidential business information of :[ncentive
Recipient and the PAEDC shall take reasonablle measures to protect such information from
disclosure to third parties; however, PAEDC is subject to the requirements of the Te~;as Open
Meetings Act and Open Records Act (Tex. Gov. Code, SS1 & 552}. Incentive Recipient agrees
that disclosures to the public required by the Texas Open Meetings Act, Texas Open Records Act,
or any other legal requirement will not expose PAEDC (or any party acting by, through or under
PAEDC) to any claim, liability or action by Incentive Recipient {or any party by, through or
under Incentive Recipient).
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15. All records pertinent to this Agreement; shall be retained by Incentive Recipient at least
three years following the date of termination of this Agreement, whether said termination is a
result of default or whether said termination is a result of final submission of a close out report by
Incentive Recipient detailing its compliance with its obligations provided herein. Further, in the
event any litigation, claim or audit arising out of or related to this Agreement is i.nstitute:d before
the expiration of the three (3) year period and extends beyond the three year period, the: records
will be maintained until all litigation, claims or audit findings involving this Agreement; and the
records made the basis of same have been resolved. Further, records relating to real property
acquisition, including any long-term lease, shall bye retained for a period equal to the useful life of
any asset purchased with PAEDC funds.
16. Incentive Recipient shall provide PAEDC with all reports necessary for PAEDC
compliance with the Development Corporation Act.
17. It is expressly understood and agreed by the parties hereto that if Incentive Recipient
fails to submit to PAEDC in a timely and satisfactory manner any report required by this
Agreement, PAEDC may, at its sole discretion, demand assurances that Incentive Recipient can
and will fully perform its contractual obligations. If Incentive Recipient fails to provide adequate
assurances then PAEDC may pursue its rights und'~er the Guaranty Agreement.
18. The PAEDC reserves the right, from time to time, to carry out field inspections/audits
to ensure compliance with the requirements of this Agreement. After completion of any such
audit, the PAEDC may provide Incentive Recipient with a written report of the audit findings. If
the audit report details deficiencies in its performance under the terms and conditions of this
Agreement, the PAEDC may establish requirements for the timely correction of any such
deficiencies by Incentive Recipient.
HOLD H[~~]I~MLF.SS
19. INCENTIVE RECIPIENT AGREES TO HOLD HARMLESS THE PAEDC AND
THE CITY OF PORT ARTHUR, TEXAS FROM ANY AND ALL CLAIMS, DEMANDS,
AND CAUSES OF ACTION OF ANY KI:[VD OR CHARACTER WHICH MAY BE
ASSERTED BY ANY THIRD PARTY OCCUREtING, ARISING OUT OF OR IN ANfY WAY
RELATED TO THIS AGREEMENT OR TH]E PROJECT MADE THE BASIS OF THIS
AGREEMENT, PROVIDED THAT SUCH CLAIM, DEMAND OR CAUSE OF ,ACTION
DOES NOT ARISE FROM ANY FRAUD OR MISCONDUCT ON THE PART OF THE
PAEDC OR THE CITY OF PORT ARTHUR, OR ANY AGENT, EMPLOYEE OR
REPRESENTATIVE OF EITHER.
SUBCONTRACTS
20. Incentive Recipient may not subcontract far performance credits described in this
Agreement without obtaining PAEDC's written approval, which may be withheld for an;y reason.
Incentive Recipient shall only subcontract for performance credits described in this Agreement
after Incentive Recipient has submitted a Subcontractor Eligibility Request, as specified by
PAEDC, for each proposed subcontract, and Incentive Recipient has obtained PAEDfC's prior
A642702 Page 7
written approval. Incentive Recipient, in subcontracting for any performances described in this
Agreement, expressly understands that in entering into such subcontracts, PAEDC is iri no way
liable to Incentive Recipient's subcontractors}.
21. In no event shall PAEDC's prior written approval of a subcontractor's eligibility, be
construed as relieving Incentive Recipient of the responsibility for ensuring that the performances
rendered under all subcontracts are rendered so a:> to comply with all terms of this Agree:ment, as
if such performances rendered were rendered by Incentive Recipient. PAEDC's approval does
not constitute adoption, ratification, or acceptance of Incentive Recipient's or subcontractor's
performance hereunder. PAEDC maintains the right to insist upon Incentive Recipient's full
compliance with the terms of this Agreement, and by the act of subcontractor approval, PAEDC
does not waive any right of action which may exist or which may subsequently accrue to PAEDC
under this Agreement.
22. Incentive Recipient together with any affiliated business interests, shall comply with all
applicable federal, state, and local laws, regulations, and ordinances as to its peri~ormance
obligations under this Agreement.
CONFLICT OF INTEREST /DISCLOSURE OBLIGATION
23. Conflict of Interest: No employee, agent, officer or elected or appointed official of the
Ciry of Port Arthur or the PAEDC who has participated in a decision making process related to
this Agreement (without recusing him/herself artd executing a conflict affidavit) may obtain a
personal or financial interest or benefit from an :PAEDC assisted activity, or have an interest in
any contract, subcontract, or agreement (or proceeds thereof) with respect to an PAEDC: assisted
activity, during their tenure or for one (1) year thereafter. Insofar as relates to the conduct
hereunder of Incentive Recipient, its agents, employees or representatives, Incentive ]Zecipient
shall ensure compliance with applicable provisions under Article 5190.6 V.T.C.A. and Chapter
171 Local Government Code V.T.C.A.
24. Disclosure: In conjunction with execution of this Agreement, Incentive Recipient has
fully disclosed to PAEDC all known and potential owners of interests in Incentive Recipient
(whether shareholder, partner, limited partner, manager, member or otherwise}. In the event of
any change in ownership or control of Incentive Recipient of five percent (5 %) or greater,
Incentive Recipient shall notify PAEDC in writing. Further, Incentive Recipient shall be
obligated to notify in writing the PAEDC in the event any time prior to, during or one (1) year
after the term of this Agreement, any City or PAEDC employee or representative or any third
party with a conflict of interest obtains or proposes to obtain a financial benefit, direct or indirect,
from Incentive Recipient. Failure to provide said notice immediately or no later than five (5)
business days after receipt of information shall constitute a default herein.
NONDISCRIlVIINATION /EMPLOYMENT /REPORTING
25. Incentive Recipient shall ensure that no person shall on the grounds of race, color,
religion, sex, handicap, or national origin be excluded from participation in, be denied the
benefits of, or be subjected to discrimination under any program or activity funded in whole or in
k642702 Page 8
part with funds provided under this Agreement. Additionally, funds shall be used in accordance
with the following requirements:
(a) To the greatest extent feasible, opportunities for training and employment arising in
connection with the planning and carrying out of any project assisted with PAEDC
funds provided under this Agreement bye given to Port Arthur residents; and
(b) To the greatest extent feasible, Agreements for work to be performed in connection
with any such project be awarded to Dort Arthur residents and businesses, including,
but not limited to, individuals or firms doing business in the field of planning,
consulting, design, architecture, buildiing construction, rehabilitation, maintenance, or
repair, which are located in or owned in substantial part by persons residing in the City
of Port Arthur, Texas.
{c) If Incentive Recipient advertises for employment then it shall among any other
advertising that it chooses to undertake covenants that it will advertise in the Port
Arthur News. Incentive Recipient acknowledges that PAEDC does not intend to
restrain any advertising in additional publications or media nor direct any others than
that stated.
LEGAL AUTHORITY
2b. Incentive Recipient assures and guarantees it possesses legal and/or corporate authority
(i) to enter into this Agreement, receive funds authorized by this Agreement, and (ii) to perform
the obligations hereunder. Incentive Recipient has provided, or shall provide, as requested by the
PAEDC, such resolutions or other required authorizations necessary to evidence this authority.
27. The person or persons signing and e:~ecuting this Agreement on behalf of [ncentive
Recipient, or representing themselves as signing and executing this Agreement on behalf of
Incentive Recipient, do hereby warrant and guarantee that he, she, or they have been duly
authorized by Incentive Recipient to execute this Agreement on behalf of Incentive Recipient and
to validly and legally bind Incentive Recipient to all terms, performances, and provisions herein
set forth.
NOTICE OF LEGAL OR REGULATORY CLAIMS
28. Incentive Recipient shall give PAEDC' immediate notice in writing of 1} any legal or
regulatory action, including any proceeding before an administrative agency filed against
Incentive Recipient, directly or indirectly; and 2) any material claim against Incentive Fecipient,
which may impact continued operations. For :purposes herein, "material" claims shall mean
claims in excess of $5,000. Except as otherwisE; directed by PAEDC, Incentive Recipient shall
furnish immediately to PAEDC copies of all pertinent documentation of any kind received by
Incentive Recipient with respect to such action or claim.
8642702 Page 9
CHANGES AND AMENDMENTS
29. Except as specifically provided otherwise in this Agreement, any alterations, additions,
or deletions to the terms of this Agreement shall be by amendment in writing and executed by all
parties to this Agreement. Such amendments must be approved by the PAEDC l3oard of
Directors and, in many cases, by the City Council for City of Port Arthur.
30. It is understood and agreed by the parties hereto that performances under this
Agreement must be rendered in accordance with the regulations promulgated under the
Development Corporation Act, the assurances and certifications made to PAEDC by :[ncentive
Recipient, and the assurances and certifications made to the City of Port Arthur with regard to the
operation of the PAEDC's Projects. Based on these considerations, and in order to ensure the
Legal and effective performance of this Agreemennt by all parties, it is agreed by the parties hereto
that the performances under this Agreement are by the provisions of the PAEDC Program and
any amendments thereto and may further be amended in the following manner: PAEDC may
from time to time during the period of performance of this Agreement issue policy directives
which serve to interpret, or clarify performance requirements under this Agreement. Such policy
directives shall be promulgated by the PAEDC: Board of Directors in the form of PAEDC
issuances, shall be approved by the City Council and shall have the effect of qualifying the terms
of this Agreement and shall be binding upon Incer.~tive Recipient, as if written herein.
31. Any alterations, additions, or deletions to the terms of this Agreement which are
required by changes in Federal, state law or local law are automatically incorporated into this
Agreement without written amendment hereto, acid shall become effective on the date designated
by such law ar regulation.
DEFAULT / TERNIINATION
32. In the event of default of any of the obligations of Incentive Recipient detailed herein
or in the event of breach of any of the representations of or warranties of Incentive Recipient
either detailed herein or in its application to the PAEDC, and following any notice and
opportunity to cure provided for in this Agreement, the PAEDC may, at its sole option, exercise
any of the rights and obligations specified in either the Lease Agreement and/or the iJuaranty
Agreement.
COMPLIANCE AUDITS
33. If directed by PAEDC Board, Incentive Recipient shall arrange for the performance of
a compliance audit, by a certified public accountant, of funds received and performances rendered
under this Agreement.
34. Incentive Recipient understands and agrees that it shall be liable to reimburse
immediately PAEDC for any costs disallowed pursuant to financial and compliance audit(s) of
funds received under this Agreement and it may be required to submit formal audits at its
expense.
#642702 Page 10
3S. Incentive Recipient shall take all necessary actions to facilitate the performance of any
and all such audits, whether annual, mandatory or~ otherwise requested under this Agreement.
36. Subject to financial privacy requirements of Incentive Recipient and properly
designated requests for non-disclosure due to proprietary reasons, all approved audit reports may
be made available for public inspection.
37. PAEDC shall not release any funds for costs incurred by Incentive Recipient under this
Agreement until PAEDC has received certification from Incentive Recipient that its fiscal control
and fund accounting procedures are adequate to assure proper disbursal of and accounting for
funds provided under this Agreement. PAEDC shall specify the content and form of such
certification.
ENVIRONMENTAL REQUIREMENTS
38. Incentive Recipient understands and agrees that by execution of this Agreement,
Incentive Recipient shall be responsible for providing to PAEDC all information, concerning this
PAEDC funded project, required for PAEDC to meet its responsibilities for environmental
review, decision making, and other action which ;applies to PAEDC in accordance with and to the
extent specified in Federal, State and Local Lavv. Incentive Recipient further understands and
agrees that Incentive Recipient shall make all reasonable efforts to assist PAEDC in handling
inquiries and complaints from persons and agencies seeking redress in relation to environmental
reviews covered by approved certifications.
ORAL AND WRITTEN AGREEMBNTS /PRIOR AGREEMENT5
39. All oral and written contracts between the parties to this Agreement relating to the
subject matter of this Agreement that were made; prior to the execution of this Agreement have
been reduced to writing and are contained in this Agreement.
40. The documents required below are hereby made a part of this Agreement, and
constitute promised performances by Incentive Recipient in accordance with this Agreement:
R uired
Exhibit "A" Property Description
Exhibit "B" Construction Contract
Exhibit "C" Incentive Proposal
Exhibit "D" Disbursement Schedule
Exhibit "E" Lease Agreement
Exhibit "F" Guaranty Agreement
Exhibit "G" Incentive Schedule (Payroll and Purchase Credits)
Exhibit "H" Certification Regarding Lobbying
Exhibit "I" Compliance Statement
N6427D2 Page ll
VENUE
41. For purposes of litigation that may accrue under this Agreement, venue shall lie in
Jefferson County, Texas, where substantially all the performance will occur.
ADDRESS OF NOTICE AND COMMLTNICATI[ONS
City of Port Arthur Section 4A Economic Development Corporation
4173 39`'' Street
Port Arthur, Texas 77642
ATTN: Floyd Batiste, Chief Executive OfficE;r
Incentive Recipient
ENGlobal Systems, Inc.
8901 Market Street
Houston, Texas 77029-3421
Attn:
CAPTIONS
42. This Agreement has been supplied with captions to serve only as a guide to the
contents. The caption does not control the meaning of any paragraph or in any way determine its
interpretation or application.
COMPLIANCE WITH FEDERAL. STATE ANI) LOCAL LAWS
43. Incentive Recipient shall comply wilh all Federal, State and local laws, statutes,
ordinances, resolutions, rules, regulations, orders and decrees of any court or administrative body
or tribunal, including those related to the activities and performances of Incentive Recipi~:nt under
this Agreement. Upon request by PAEDC and by the City, Incentive Recipient shall furzush
satisfactory proof of its compliance herewith.
CONDITIONS PRECEDENT
44. This agreement has no legal consequences, and neither party shall rely on the
agreement, unless and until both the PAEDC Board and the Port Arthur City Council approve the
Agreement in its final executed form.
a6az~oz
Page 12
ATTORNEY APPROVALS
APPROVED AS TO FORM:
VERIFIED BY
CITY COUNCIL RESOLUTION:
AGREEMENT EXECUTION
Guy CJoodson, General Counsel far PAEDC
Resolution Number:
Mark T. Sokolow, City Attorney
CITY OF PORT ARTHUR SECTION 4A ECONOMIC DEVELOPMENT CORPOR~-TION
SIGNED AND AGREED TO on the _ day of , 2fl0
By:
President
EDC Representative
By:
Secretary
EDC Representative
ENGLOBAL SS'STEMS, INC.
SIGNED AND AGREED TO on the __ day of __ _ , 2008.
ENGlobal Systems, Inc., a Texas corporation
By:
lts:
ATTEST:
k642702 Page E3
EXHIBIT "A"
TO THE EDC
INCENTIVE AGREEMENT
TO BE PREP>ENTED AT
THE COUNCIL MEETING
EXHIBIT "B"
TO THE EDC
INCENTIVE AGREEMENT
TO BE PREP>ENTED AT
THE COUNCIL MEETING
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TO THE EDC INCENTIVE AGREEMENT
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TO THE EDC
INCENTIVE AGREEMENT
TO BE PRE~~ENTED AT
THE COUNCIL MEETING
EXI~IIBIT ~E"
TO THE EDC INCENTIVE AGREEMENT
LEASE WITH OPTION TO PURCHASE
This Lease with Option to Purchase (the "Agreement"), dated the day of _ ,
2008, is made between City of Port Arthur Se<;tion 4A Economic Development Corporation,
4173 39`E' Street, P.O. Box 3934, Port Arthur„ Texas 77642 (the "Lessor"), and ENGlobal
Systems, Inc., a Texas corporation whose corporate business address is 8901 Market Street,
Houston, Texas 77029-3421 (the "Lessee").
RECITALS
A. Lessee provides engineering and system fabrication assembly for the
petrochemical industry.
B. It is recognized that the economy„ including the work force of Jefferson County,
Texas, including Ciry of Port Arthur, Texas (the "City") would benefit from the location by
Lessee of its business in Jefferson County which will provide employment to residents and
citizens of Southeast Texas, including the potential for increased sales tax, utility revenues,
improved quality of life, and accelerated economic development in the City.
C. The Lessee intends to operate an engineering services office and manufacturing
and assembly facility on the property hereinaftet• defined in this Agreement (the "Premises ") in
a building with site improvements on the Premises (collectively referred to as the "Facility").
D. The Facility for an engineering
facility of Lessee in Port Arthur will also pr
including possible additional expansions wig
furtherance of the public purposes of Article
"Economic Development Act").
service office and manufacturing and a:>sembly
smote commercial development and expansion
t-in the Business Park of Lessor, all is in
5190.6 Vernon's Texas Code Annotal:ed (the
E. Lessor owns the Premises in fee simple absolute and intends to be bound by all
terms and provisions of this Agreement. Lessor has the power and authority to enter into this
Agreement subject to approval by the City.
F. ENGlobal Systems, Inc. as LessE;e has full and complete legal authority acting
by and through its designated corporate representatives to execute and fulfill covenants,
conditions and agreements in this Agreement.
NOW THEREFORE, CITY OF PO:E2T ARTHUR SECTION 4A ECONOMIC
DEVELOPMENT CORPORATION AS LESS{)R AND ENGLOBALS SYSTEMS, INC. AS
LESSEE AGREE TO THE FOLLOWING:
ARTICLE 1 - DESCRIPTIOaV OF LEASED PREMISES
Lessor hereby leases to the Lessee the land within the Business Park of Les~~or (the
"Business Park") more fully described in Exhibit "A" attached hereto and made hereof, and
the immovable property, including improvements to be constructed thereon as hereinafter
provided (the "Premises"). By executing this Agreement, Lessor, and Lessee agree that the
fair market value of the land described in Exhibit "A" is Four Hundred Sixty Seven Thousand
Five Hundred and 00/100 Dollars ($467,500.00). Lessor shall construct a building on the
Premises to be used for an engineering services office and manufacturing and assembly
building (the "Facility"). The Facility as more :fully described on Extubit "B" attachedl hereto
and made a part hereof to be constructed in accordance with the construction plains and
specifications as prepared by ENG1obal Automal:ion Group, Inc. (the "Plans"}. The Facility to
be constructed in accordance with the Plans and all other structures and improvement;s to be
constructed on the Premises are referred to as the "Improvements".
ARTICLE 2 - TE',RM OF LEASE
The term of this Agreement (hereinafter called the "Term" or "Primary Term") shall
be for a period of fifteen (15) years commencing on 20(?8 {the
"Commencement Date") and shall terminate at 11:59 p.m. on 20:?_ (the
"Termination Date"} unless sooner terminated as herein provided.
ARTICLE 3 -RENTAL
3.1 The total annual rental payable by Lessee to Lessor for the Term of this
Agreement shall be $606,$13.39 (the "Annual F:ent") which shall be payable in equal rnonthly
installments of $50,567.78 (the "Monthly Rentaa") subject to reduction in the Annual Rent and
the Monthly Rent in consideration of the credits by Lessor to Lessee as specified in Sections
3.3 and 3.4 of this Agreement. If the Commencement Date is a date other than the first: day of
a calendar month, then Lessee shall pay Lessor on the Commencement a prorated rent on a per
diem basis for the number of days from the Commencement Date to the first date of the first
calendar month following the Commencement Date.
3.2 Rent hereunder shall be payable 'to Lessor at 4173 39~' Street, P.O. Bo:~ 3934,
Port Arthur, Texas 77642 or at such other address as Lessor shall hereafter designate by
written notice to Lessee.
3.3 In consideration of the job creaticn, payroll and cumulative payroll reprf;senting
the workforce of Lessee on the Premises in the Facility, Lessee may be entitled to receive from
Lessor credits of $ as evidenced by the Incentive Credit Schedule attached hereto as
Exhibit "C" (the "Incentive Schedule"). Durvig the Term, if Lessee meets the job creation
payroll and cumulative payrolls as set forth in the Incentive Schedule, Lessee shall be entitled
to receive a reduction in the Annual Rent of $149,522.95 (the "Grant Incentive") which shall
be credited on a monthly basis in an amount not to exceed $12,460.25 (the "Monthlyy Grant
Credit"). If Lessee achieves the job creation, payroll and cumulative payroll specified in the
//642422 Page 2
Incentive Schedule during the Term, the net rental for the Facility shall be $457,290.44 (the
"Net Rental After Grant") with a monthly payment by Lessor to Lessee of $38,107.54 (the
"Net Monthly Rental After Grant").
3.4 In addition to the job creation and payroll incentive as specified in the Incentive
Schedule, Lessee may also receive additional credits in addition to the monthly credit by the
acquisition of equipment and material from PorC Arthur businesses. The additional equipment
and material credits which are duly supported by sales orders, purchase receipts and payment
vouchers or checks from Port Arthur vendors is specified in the Incentive Schedule; however,
the accumulated job creation, payroll, cumulative payroll and equipment and material purchase
credits may not exceed in the aggregate of $
ARTICLE 4 -LEASE CONTINGENCIES
The obligations undertaken in this Agreement are contingent upon the following
conditions being met:
1} Lessor shall provide title search or title documentation as to the Premises vvhich is
satisfactory to Lessee.
2) Lessor shall provide any existing soil. tests, environmental assessments, surveys and
other investigations of the Premises for Lessee or an afftliated business to :prepare
the Plans and contract documents for the construction of the Improvements
including but not limited to a construction contract for execution by Lessor and the
contractor.
~3) Lessor shall have obtained all approvals of the Plans including but not limited to
building permits necessary to construct the Improvements.
4) Lessee's acknowledgement that the Pllans conform to the Covenants and Restrictions
for the Business Park and meet such other building codes and requirements as
necessary and enforced by the City.
5) Lessor proceeds with the issuance of its $5,500,000 City of Port Arthur Section 4A
Economic Development Corporation Sales Tax Revenue Bonds, Series 2008 (the
"Bonds"}, the proceeds of which shall be used to pay the cost of issuance: of the
Bonds and construction of the Improvements.
6) Cost of the Improvements to be paid by Lessor shall not exceed the proceeds of the
Bonds.
7) If the cost of Improvements exceeds the proceeds of the Bonds as finally designed in
the Plans, Lessee shall provide Lessor with an irrevocable letter of credit. issued
under terms and conditions agreed upon between Lessor and Lessee for costs to be
paid under the Construction Contract in excess of the Bond proceeds with said letter
of credit to be on terms and conditions as approved by both Lessor and Lessee.
8) Lessee shall provide to Lessor the schedule of construction payments required by
the contractor.
The Lessor may use existing funds for certain assts of construction Improvements prior to the
issuance of the Bonds which shall not exceed the sum of $2 million for advances to be made on
H642422
Page 3
or before November 1, 2008, the anticipated elate of sale and delivery by the Lessor of the
Bonds to the bond purchaser.
If the conditions set forth above are not met by , 2008, then Lessee
may terminate this Agreement upon written notice to Lessor within thirty (30) days the
conditions should have been satisfied, whereupon this Agreement shall terminate and, e:ccept as
hereinafter provided, the parties shall be released from all further liability hereunder.
ARTICLE S -CONSTRUCTION OF IMPROVEMENTS
5.1 Within (_) days from the date of this Agreement, Lessor will execute
a contract for construction (the "Construction Contract") with u (the
"Contractor") as contractor to construct the Improvements on the Premises for the liability.
Within (~ days from the date of this Agreement, Contractor shall prepare and deliver
to Lessor the Plans approved by Contractor and the proposed construction documents
(including construction timetables) for the Improvements including but not limited to the
Facility, parking lots, utilities and ancillary facilities with such Plans to comply with all
existing construction codes and standards of the City and all other statutory requirements.
5.2 Lessor shall cause the Improvements, subject to necessary written approvals by
Lessee, to be constructed on the Premises in accordance with the Plans and contract with the
Contractor and related construction documents as approved by Lessor and Lessee. The Plans
are the sole property of Lessee, and Lessor agrees not to knowingly permit or allow any
person or entity to utilize the Plans for any purpose other than the construction of the
Improvements. At all times prior to the Conunencement Date, Lessee and its employees,
agents, and its design engineers shall have the right to enter onto the Premises fox the purpose
of conducting tests, making inspections and related activities for construction of the
Improvements.
5.3 Within (_} days after the Plans and construction documents have been
approved, Lessor with approval of the City shall execute its contract with Contractor for the
construction and completion of the Improvemer.-ts. If the projected cost of the Improvements
exceeds the Bond proceeds net of issuance costs, then Lessee will either (1) revise th.e Plans
within thirty (30) days so as to reduce the construction costs or {2) pay the additional costs of
the Improvements, or (3) elect to terminate this Agreement. In the event Lessee elects to
terminate this Agreement, Lessor and Lessee will be released from all further liability and
obligations under this Agreement
5.4 Lessor shall pay for the cost of the Improvements as specified in the
Construction Contract in Eahihit "C" from the proceeds of the Bonds and funds provided by
Lessee. Within (_) days after completion of the Improvements in accordance with the
Construction Contract, Lessor will request a final and unconditional Certificate of Occupancy
to be issued by the City providing the right oaf full occupation of all Improvements for all
intended purposes of Lessee, and the date of such issuance will be the "Commencement Date."
1/642422 Page 4
ARTICLE 6 -REPRESENTATIONS AND WARRANTIES
6.1 Utilities. Lessor represents and warrants that City water and sewer facilities are
adjacent to the Premises which can be utilized to service the Improvements.
6.2 Zoning and Premises Use. Lessor confirms and represents to the Lessee (i) that
the Premises are zoned by the City for the use of the Premises and the Improvements thereon
for the Facility, {ii) that on the Commencement Date, building permits are issued for the
Improvements and its intended uses, and (iii) that no land use, land development or zoning
requirements, variances or deed restrictions are required for operation of the Facility.
Accordingly, in the event that Lessor constructs the Improvements in accordance with the
permits issued by the City, Lessor will be entitled to secure on its on account or for the
account of Lessee a Certificate of Occupancy for the Improvements.
6.3 Flood Plain. Lessor represents th.e Facility and all surrounding roadways is
within Zone ,Elevation
6.4 Lessor's Reuresentations and Warranties. Lessor represents, warrants and
covenants to Lessee as to the following matters, and shall be deemed to remake all. of the
following representations, warranties and covenants as of the date of this Agreement and the
Commencement Date. The truth and accuracy of alI of the following representations,
warranties and covenants shall be conditions pre+~edent to Lessee's obligation to dose under this
Agreement.
(a) No Public Authorization Reauire:d. All required authorizations, consents and
approvals of public bodies and authorities including the authority to execute this
Agreement and undertake the obligations hereof under this Agreement including the
required approval of the City as to the terms and conditions set forth in this Agreement
have been obtained prior to the date of this Agreement.
(b) Compliance with Laws. To the best of Lessor's knowledge, the use and
operation of the Premises now is, and at the time of the Commencement Date will be,
in full compliance with all, and not in violation of any, building codes, environmental,
zoning and land use laws and other local, state and federal laws and regulations
applicable to the Premises. No notice of violation of any applicable federal, state or
local statute, law, ordinance, rule, regulation or order, or of any covenant, condition,
restriction or easement affecting the Premises, or with respect to the use or occupancy
of the Premises, has been given by any governmental authority or by any other person
entitled to enforce the same. Except as disclosed to Lessee in writing, Lessor does not
have knowledge of any zoning or othher Iand use regulation proceedings, either
instituted, or planned to be instituted, which would detrimentally affect the Ltse and
operation of the Premises for its current purpose or the value of the Premises, nor has
Lessor received notice of any special assessment proceedings affecting the Premises.
No notice from any governmental bod;y has been served upon Lessor clairriing or
requiring, or calling attention to the need for, any work, repairs, construction,
H642422
Page 5
alterations or installation on or in connection with the Premises which has not been
complied with.
6.5 Title to Premises. Lessor has good record and marketable, indefeasible, fee
simple title to the Premises, free and clear of all defects, security interests, liens,
encumbrances, easements, covenants, restrictions, reservations, conditions, encroaclunents,
assessments (general or special) with respect to streets, utilities or other public improvements
or any other matters whatsoever, except as otherwise disclosed or to he disclosed to Lessor.
6.6 Compliance with Private Restrictions. To the best of Lessor's knowledge, all
covenants, conditions, restrictions, easements and similar matters affecting the Premises have
been complied with.
6.7 Leal Requirements. To the best of Lessor's knowledge, the continued
compliance with all legal requirements relating to the Premises is not now, and will not in the
future be, dependent on property not located on the Premises; and compliance by any aidjacent
property with any legal requirements applicable to such adjacent property is not now, aind will
not in the future be, dependent on the Premises.
6.8 Condemnation. Lessor has no knowledge of any pending or contemplated
eminent domain, condemnation or other goverrunental or quasi- governmental taking of any
part or all of the Premises.
6.9 Assessments. Lessor has no knowledge of any public improvements which have
been ordered to be made and/or which have not heretofore been assessed, and Lessor has no
knowledge of any special, general or other assessments pending, threatened against, affecting
or to affect the Premises.
6. i0 No Further Encumbrances. No part of the Premises will be alienated,
encumbered or transferred in favor of or to any party whatsoever. There are no purchase
contracts, options or any other agreements of any kind, oral or written, formal or informal,
Choate or inchoate, recorded or unrecorded, whereby any person or entity other than Lessor
will have acquired or will have any basis to assert any right, title or interest in, or aright to
possession, use, enjoyment ar proceeds of, any part or all of the Premises.
6.11 Violations of Law. In the event, ]Lessor receives notice of any violation of any.
law, ordinance, code, order, or requirement of any governmental or quasi-governmental.
authority which would affect Lessee's ability to operate the Facility, Lessor shall advise Lessee
thereof and promptly commence and diligently prosecute to completion such steps as are
necessary or appropriate to cure such violations at Lessor's, sole expense.
6.12 Environmental.
(a} Lessor has not used, generated, manufactured, produced, stored, released,
discharged, or disposed of on, under or about the Premises or transported to or from
#642422 Page 6
the Premises any Hazardous Substance (as hereinafter defined) or allowed any other
person or entity to do so.
(b) Lessor has kept and maintained 1:he Premises in compliance with, and :has not
caused or permitted the Premises to be: in violation of any Environmental L.aw (as
hereinafter defined).
(c) Lessor has not received notice of ~a.ny of the following:
(i) any proceeding or inquiry by any governmental authority with respect to
the presence of any Hazardous Substance on the Premises or the migration
thereof from or to other property;
(ii) any claims made or threatened by any third party (including any
governmental agency) against Lessor or the Premises relating to any loss or
injury resulting from any Hazardous Substance.
(d) Lessor is not aware of any occurrence or condition on any real property
adjoining or in the vicinity of the Premises that could cause the Premises or any
part thereof to be subject to an.y restrictions on the ownership, occupancy,
transferability or use of the Premises under any Environmental Law or any
regulation adopted in accordance therewith, or to be otherwise subject to any
restrictians on the ownership, occupancy, transferability or use of the Premises
under any Environmental Law.
"Environmental Laws" shall mean any fi~deral, state or local law, statute, ordinance or
regulation pertaining to health, industrial hygiene or environmental conditions on,
under or about the Premises, including without limitation the Comprehensive
Environmental Response Compensation and Liability Act of 1980 ("CERCL.A") as
amended, 42 U.S.C. Sections 9601 et seq., and the Resource Conservation and
Recovery Act of 1976 ("RCRA"), 42 U.;S.C. Sections 6901 et seq.
The term "Hazardous Substance" shall include without limitation:
Those substances included within the definitions of "hazardous substances," "hazardous
materials," "toxic substances," or "solid waste" in CERCLA, RCRA, and the
Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq., anti in the
regulations promulgated pursuant to said laws;
Those substances defined as "hazardous wastes" in any Texas Statute and in the
regulations promulgated pursuant to any 'Texas Statute;
Those substances listed in the United States Department of Transportation Table (49
CFR 172.101 and amendments thereto) or by the Environmental Protection Agency (or
any successor agency) as hazardous subbstances (40 CFR Part 302 and amendments
thereto);
g6G2422 Page 7
Such other substances, materials and wastes which are regulated under applicable local,
state or federal law, or which are classii:ied as hazardous or toxic under federal, state,
or local laws or regulations; and
Any material, waste or substance vrhich is (i) petroleum, (ii) asbestos, (iii)
polychlorinated biphenyls, (iv) designated as a "hazardous substance" pursuant to
Section 3I1 of the Clean Water Act, 33 U.S.C. 1251 et seq. or listed pursuant to
Section 3071 of the Clean Water Act, (v} flammable explosive, or (vi) radioactive
materials.
ARTICLE 7 - QUIET ENJOYMENT
Lessor covenants that if, and as long as, Lessee pays the rental as specified in Article 3
and performs the covenants and agreements oi' this Agreement, Lessee shall peaceably and
quietly have, hold and enjoy the Premises for tl:~e Term of this Agreement subject to e<~ch and
every and all of the covenants and provisions of this Agreement.
ARTICLE 8 -OBLIGATIONS OF LESSEE
8.1 During the Term of this Agreement, the Lessee shall be responsible :For and
shall pay for all repairs required for the maintenance of the walls, foundation, roof and the
internal components and exterior Improvements of the Facility, which are not covered by
separate warranty. Also, during the term of this Agreement, the Lessee shall mainxain and
regair the air-conditioning and heating systems 1:o the extent such maintenance and repairs are
not covered by the existing warranties on the systems.
8.2 Lessee shall pay all utilities related to its occupancy of the Facility including but
not limited to electricity, gas, water, telephone and any other items necessary for the conduct
of its business.
8.3 Lessee shall keep the Facility and parking lot cleaned.
8.4 Lessee shall make its books and records concerning employment at the Premises
available at reasonable times during business hours to Lessor or its designees and assignees,
including but not limited to agents and employees of the State of Texas Department of
Development.
ARTICLE 9 -- CONVEYANCE OF TITLE
9.1 Definitions.
"Total Employee Payroll" shall be equal to the total compensation and benefits paid to
Lessee employees while working to provide engineering and/or manufacturing
fabrication services and related administrative services at the Facility.
/F642422
Page 8
"Minimum Employee Payroll Goal" shall[ be equal to a minimum full time equivalent of
525 employees for five (5) years and a Ciumulative Employee Payroll at $93,060.,000.
.,.
"Earned Job Credits" shall be equal to;.the credit .for. new payroll and specified m; the
Incentive Schedule which shall equate to $2,073,775'of payroll credits and additionally
payroll'credts of $926,225. as additional .[ncentive Credits for payroll estimated :for Port
Arthur "residents aggregating a nnaximurn credit of $926,225. The Incentive Credits
plus the additional 'incentives of credits' for payroll to Port Arthur residents_ shall not
exceed $3 million as specified in the Incentive Credit Schedule.
_.
,. _..,,
9.2 During the'.Term of this Agreement or any extension granted, Lessee shall, pay
the Monthly Rental after grant. At the end of each twelve (12) month period during the Term
of the Agreement, Lessor may submit a requirement "for an additional payment of rent should
Lessee have failed to earn. all credits under the proposed giant, and .Lessee agrees that within
thirty. (30) days after receipt of said notice of additional payment due to make payment of an
amount 'up to the Monthly Rental faze the Annual .Rent if Jobe,creat~on and payroll is not
achieved as specified ~n the Incentive Schedule.:
.---_
9.3 At any time after the end of the 'Term of the Agreement, if all grant incentives
under the Incentive Schedule have been earned all Agreement payments made by Lessee,
Lessor will convey title to the Premises to Lessee at which time a date of closing for transfer of
title to the Premises shall be set. At the end of the Term of the Agreement, if all earned job
credits have not been earned, but all other Agreement payments have been made, Lessee
agrees to pay in full any rent due for any Annual Rent not heretofore paid during the Term of
the Agreement at which time Lessor shall conve~~ title to the Premises to Lessee with a time for
closing to be set.
9.4 The Lessor shall convey title subject only to liens or other encumbrances arising
between the date hereof and the date of the delivery of the deed which results from this
Agreement or other matters consented to by Lessee.
9.5 The closing will take place within thirty (30) days after notice of exercise from
Lessee, but no aaer than the expiration of the Term of this Agreement.
ARTICLE 10 -INSURANCE
Lessee agrees to maintain in full force a~ld effect and to pay the premiums for ai policy
of commercial general liability insurance on the: standard Texas Owner, Landlord and Tenant
form, with a minimum combined single limit for bodily injury and property damage of not less
than $1,000,000, and further, shall cause Lessor to be named as an additional insured under
such policy. Lessee further agrees to maintain in full force and effect and to pay the premiums
on a policy of fire and casualty insurance for the benefit of Lessor in an amount of not less
than $5,500,000 and adjusted from time to time to reflect increases in value of the
Improvements. Lessee's insurance responsibilitiies begin at Commencement Date. The Lessee
J1642422 Page 9
shall furnish to the Lessor written proof of such insurance upon occupancy of the buik[ing and
upon request not more often than annually thereafter.
ARTICLE 11 -WAIVER OF SUBROGATION
Lessor and Lessee each hereby waive;, for themselves and any insurer, all claims,
including all rights to subrogation, for damage to its property resulting from fire or other
casualty normally covered by a policy of fire and extended coverage hazard insurance with
endorsements customary in the area for properties of the type of the Facility.
ARTICLE i2 - DAMAC7E OR DESTRUCTION
In case of any damage to or destruction of the Premises or any part thereof However
caused, during the Term of this Agreement, rental as to such damaged or destroyed property
shall be abated as of the date of such calamity on an equitable basis, until the premises shall
have been fully repaired and restored to substantially their condition prior to such occurrence
by Lessor from the insurance proceeds.
ARTICLE 13 -ALTERATIONS, AE)DITIONS AND IMPROVEMENTS
The Lessee may make future alterations, additions and improvements to the Facility
after construction, except that no structural alteration of any building shall be done without the
prior written consent of the Lessor, which shall not be unreasonably withheld.
ARTICLE 14 -GENERAL DEFAULT
If either parry hereto fails to perform any of its obligations or agreements hereunder, it
shall be in default hereof, and the other party may, at its option, terminate this Agreement
and/or exercise any other xight available to it at law or equity. Provided, however, that before
terminating this Agreement, the parry which deems the other to be in default shall give the
defaulting party written notice by registered mail, or in the case of Lessee by personal delivery
to its Chief Executive Officer, of such defaultt and of the cause or causes thereof, and the
defaulting parry shall have sixty (60) days after delivery of such notice to cure such default. If
the defaulting parry is proceeding at the end ~of said sixty {60) day period with reasonable
diligence to cure the default, it shall have a reasonable amount of time thereafter within which
to cure the same and to prevent the termination of this Agreement.
ARTICLE 15 -CONDEMNATION
If the whole of the Premises, or such portion thereof as will make the Premises
unsuitable for the purposes leased, is condemned for any public use or purpose by any legally
constituted authority, then in either of such events this Agreement shall cease from the time
when possession is taken by such public authority and rental shall be accounted for between the
Lessor and the Lessee as of the date of the surrender of possession. Such termination shall be
without prejudice to the right of either the Lessor or the Lessee to recover compensation from
M642422 Page 10
the condemning authority for any loss or damage caused by such condemnation. Neither the
Lessor nor the Lessee shall have any rights in or to any award made to the other by the
condemning authority.
ARTICLE 16 -GOVERNING LAW
This Agreement shall be construed under and governed by the laws of the State of
Texas without regard to the principles of conflict of laws thereof.
ARTICLE 17 -NOTICES
All notices given pursuant to this Agreement shall be in writing and shall be deemed
given when personally delivered or when deposited in the mails and sent by registered or
certified mail, postage prepaid, return receipt requested, to the parties at the fallowing
addresses or at such other address as either party may designate to the other by like notice:
If to ENGlobal Systems, Inc.:
If to City of Port Arthur Section 4A Economic Development Corporation:
City of Port Arthur EDC
Attn: Executive Director
4173 39`~ Street
P.O. Box 3934
Port Arthur, Texas 77642
ARTICLE 18 -- HEADINGS
The headings of this Agreement are solely for convenience of reference and shall be
given no effect in the construction or interpretation of this Agreement.
ARTICLE 19 -COUNTERPARTS
This Agreement may be executed in several counterparts, each of which shall be
deemed an original, but all of which together shall constitute one agreement.
ARTICLE 20 -DUE AUTHORIZATION
Each parry hereby represents and warrants to the other that all requisite action on the
part of such party in connection with entering into this Agreement has been taken„ Such
#642422 Page 11
execution and the performance by such party hereunder have been duly authorized by all
requisite action of such party and all provisions of this Agreement are and shall be fully
binding and enforceable according to their respective terms.
ARTICLE 2I -DELAYS
If Lessox is delayed at any time by any act, omission or neglect of any governmental
body or agency, or by any event of force majeure, then the time periods under this Agreement
shall be extended for a period of time by which :Lessor is actually delayed.
ARTICLE 22 -ATTORNEYS FEES; VENUE
In connection with any litigation concerning the interpretation or enforcement of this
Agreement, the prevailing party shall be entitled to recover its costs and reasonable attorney's
fees from the other party at all trial and appellate levels. Venue of any litigation concerning
the interpretation or enforcement of this Agreement shall be in Jefferson County, Texas, and
each party waives the right to insist on venue in any other location.
ARTICLE 23 -ENTIRE AGREEMENT
This Agreement constitutes the entire contract between the parties hereto and
supersedes all prior understandings, if any, there being no other oral or written promises,
conditions, representations, understandings or terms of any kind as conditions or inducements
to the execution hereof and none have been relied upon by the parties. Any subsequent
conditions, representations, warranties, or agreements shall not be valid and binding upon die
parties unless in writing and signed by all of the parties. No amendment or modification
hereof shall be binding unless duly executed by all parties.
ARTICLE 24 - NO PARTNERSHIP
Any intention to create a joint venture, partnership, or agency relation between the parties
hereto is hereby expressly disclaimed.
ARTICLE 25 -• FORCE MAJEURE
The time within which any of the parties hereto shall be required to perform any act or
acts under this Agreement shall be extended to the extent that the performance of such act or
acts shall be delayed by acts of God, fire, windstorm, flood, explosion, collapse of structures,
riot, war, labor disputes, delays or restrictions by governmental bodies, inability to obtain or
use necessary materials, or any cause beyond the reasonable control of such party, other than
lack of monies or inability to procure monies to fulfill its commitments or obligations under
this Agreement, any such delay being called an "unavoidable delay" in this Agreement;
provided, however, that the parry entitled to such extension hereunder shall give prompt notice
to the other party of the occurrence causing the unavoidable delay. The provisions of this
Article 25 shall not operate to excuse Lessee from prompt payment of rent.
N642422
Page 12
ARTICLE 26 -ASSIGNABILITY; BINDING EFFECT
This Agreement, and all of the rights or privileges conferred upon Lessor or Lessee
may be assigned by Lessor or Lessee with the: consent of the other parties but such consent
shall not unreasonably be withheld. This Agreement shall inure to the benefit of and shall be
binding upon the parties hereto and their respective heirs, personal representatives, successors
and assigns.
ARTICLE 27 -COUNTERPARTS; FACSIMILE SIGNATURES
This Agreement may be executed by the parties in multiple counterparts„ which
together shall have the full force and effect of a fully executed agreement between the parties.
Copies of executed agreements and other instruments transmitted by facsimile may b~e relied
upon by the parties hereto as originals.
l~b42422 Page 13
EXHIBIT ~F"
TO TIME EDC INCENTIVE AGREEMENT
LEASE GUARANTY
This Lease Guaranty (this "Guaranty") is f;xecuted this day of 2.008, by
ENGlobal Corporation, a Nevada corporation having its principal business address as 654 North Sam
Houston Parkway E., Suite 400, Houston, Texas 77060-5914 ("Guarantor"), for the benefit of, and
accepted by, the City of Port Arthur Section 4A Economic Development Corporation, located at 4173 -
39~' Street, Port Arthur, Texas 77642, an economic development corporation authorized to do business
in Texas under Section 4A, Article 5190.6 V.T.C.A. (the "Development Corporation Act of 1979")
and pursuant to due authority provided by the City of Port Arthur, Texas ("PAEDC").
RECITALS
A. ENGlobal Systems, Inc., a Texas corporation having a business address of 8109 Market
Street, Houston, Texas 77029-3421 (hereinafter referred to as "Lessee") has submitted a economic
incentive application dated June 30, 2008, to the PAEDC advising of plans to man and operate an
engineering services and system fabrication assembly facility in Port Arthur, Texas .
B. PAEDC with the consent and approval of the City of Port Arthur, Texas has authorized
an incentive agreement with ENGlobal Systems, Inc„ which includes the commitment by the PAEDC to
construct on behalf of ENGlobal Systems, Inc. as ]Lessee a building for the engineering services and
system fabrication assembly facility (the "Facility") for ENGlobal Systems, Inc. as the Lessee.
C. ENGlobal Services, Inc. as Lessee has undertaken financial obligations including the
payment of rent for lease of the Facility pursuant to a Lease with Option to Purchase (hereinafter
referred to as the "Lease" or "Lease Agreement") with said Lease payments to be applied to principal
and interest payments on certain bond indebtedness incurred annually by the PAEDC from the issuance
of its City of Port Arthur Section 4A Economic Development Corporation Sales Tax Revenue Bonds,
Series 2008 (the "Bonds").
D. Pursuant to the Incentive Agreement between the PAEDC and ENGlobal Systems, Inc.,
ENGlobal Systems, Inc. shall receive certain Lease incentives more fully described in an Incentive
Schedule attached to the Lease Agreement which mitigate certain financial obligations of ENGlobal
Systems, Inc. to the PAEDC; however, notwithstanding such Incentive Credits pursuant: to the
Incentive Credit Schedule, ENGlobal Systems, Inc. is duly bound by the Lease Agreement for fifteen
(15) years to pay Lease payments whether or not credits are earned pursuant to the Incentive Credit
Schedule.
E. In order to induce PAEDC to issues its Bond to construct the Facility and to provide the
incentive to ENGlobal Systems, Inc., ENGlobal Corporation, as Guarantor has agreed to guaranty the
payment by ENGlobal Systems, Inc. and any successor and assigns for the fifteen (15} year period of
the Bonds, the payment obligations under the Lease: Agreement as each of such obligations is defined
in, payable under or described within the Lease Agreement subject to any credits thereof as may be
provided for under the Lease Agreement and in accordance with the Incentive Credit Schedule.
NOW, THEREFORE, as an inducement to PAEDC for entering into the Lease, Guarantor and
PAEDC hereby agree as follows:
1. Guaranty of Guaranteed Obligations. Guarantor hereby unconditionally and irrevocably
guarantees to PAEDC:
(a) the full and punctual payment when due of all Fifteen (15) Year Period Rent due and
owing or to become due and owing (subject to any offsets, credits and/or abatements
thereof as may be provided for under the Lease) to the PAEDC, as Lessor under the; Lease,
by Lessee, and by any successor lessee permitted under the Lease; and
(b} the payment by Lessee of premiums for casualty insurance with respect to the
improvements comprising the Facility, in coverage amounts as required pursuant toy Article
10 of the Lease {the obligations of Lessee described in paragraph (a), above, ~md this
paragraph (b) are herein referred to as the "Guaranteed Obligations").
2. Scope and Extent of Guaranty. Guarantor shall be primarily liable, jointly and severally,
with Lessee and any other guarantor of Lessee's obligations in respect to the payment of the Guaranteed
Obligations. Guarantor's agreement to guarantee the Guaranteed Obligations is expressly subject to the
right of Guarantor to assert any defenses (whether substantive or procedural), set offs and
counterclaims that Lessee could itself assert against PAEDC under the Lease with the same force and
effect as if Guarantor had executed the Lease directly, which right is hereby reserved by Guarantor
(except as expressly set forth to the contrary in Section 4 below). Guarantor hereby waives all notices
of protest, dishonor, and notices of acceptance of this Guaranty, and waives all notices of existence,
creation, or incurring of new or additional obligations from Lessee to the PAEDC, as Lessor under the
Lease; provided, however, that the foregoing provisions of this sentence do not waive, and Guarantor
shall instead be expressly entitled to, receipt of any and all notices of any default or event of default
which may be delivered by PAEDC to Lessee pursuant to the Lease ("Default Notice"), and PAEDC
does, by its acceptance of this Guaranty, hereby agree to deliver to Guarantor a true, correct and
complete copy of any Default Notice to Guarantor at. Guarantor's address as set forth below (or at such
other address as may be provided by Guarantor to PAEDC in writing from time to time) and at the
same time and in the same manner as notice to Lessee is required or provided to be given under the
Lease, and PAEDC shall afford Guarantor the same, amount of time as such Lessee is provided under
the Lease to cure any such default or event of default or to cause the same to be cured (and PAEDC
agrees to accept any such cure by or on behalf of Guarantor as though such cure has been effected
directly by Lessee). Notwithstanding the foregoing, if PAEDC fails to deliver a Default Notice to
Guarantor contemporaneously with PAEDC's delivery of such Default Notice to Lessee, such failure
shall not waive, bar PAEDC's exercise of, or otherwise modify or reduce PAEDC's rights and
remedies against Guarantor under this Guaranty; provided, however, in the event of such failure by
PAEDC, PAEDC may not exercise its rights or remedies against Guarantor under this Guara~ity until
PAEDC delivers such a true, correct and complete copy of the applicable Default Notice to Guarantor,
and Guarantor is afforded the same amount of time, commencing as of the date on which PAEDC
delivers such Default Notice to Guarantor, as Lessee is provided under the Lease to cure any such
default or event of default or to cause the same to be cured. Guarantor aclrnowledges that, under the
terms of the Lease, PAEDC may ternvnate the Lease or Lessee's right of possession thereunder as a
result of an "Event of Default" under the Lease and, upon any such termination, Guarantor or a third
party designated by Guarantor shall automatically become the "Lessee" under the Lease or a substitute
lease agreement (the "New Lease"). Guarantor agrees that this Guaranty is intended to continue in full
force and effect following the termination of the: Lease or the termination of Lessee's :right of
possession thereunder as a result of a Lessee "Event of Default" under the Lease, and that Guarantor
shall (except as may be otherwise agreed in writing by PAEDC) continue to guarantee the Guaranteed
Obligations as contemplated hereunder if Guarantor or any other third party becomes "Lessee" under
1!642596 Page 2
the Lease or a New Lease, as applicable, as a result of an Event of Default under the Lease by Lessee.
In any such event, Guarantor shall execute any such documentation ratifying or confirming Guazantor's
obligations hereunder, including a new guaranty in the same form as this Guaranty, as PAEI]C may
reasonably require.
3. Period of Guaranty. Subject to the following sentence, the obligations of Guarantor as to
the Guaranteed Obligations shall continue in full force and effect against Guarantor in accordance with
the terms hereof until the expiration of the Term (as defined in the Lease) of the Lease, whereupon this
Guaranty shall terminate and Guarantor shall have no further liability hereunder; provided, further, that
Guarantor shall have no further liability to pay rent under paragraph (a) of Section 1, above, if the
Lease is terminated puxsuant to the terms of the Lease for any reason other than a default or event of
default by Lessee thereunder. This Guaranty covers any and all of the Guaranteed Obligations, whether
presently outstanding or arising subsequent to the date hereof. This Guaranty is irrevocably binding
upon and enforceable against Guarantor and the successors of Guarantor in accordance with the terms
hereof, and shall inure to the benefit of the PAEDC,. as Lessor under the Lease, and its successors and
assigns.
4. Primazy Liability of Guarantor. This is a primary and continuing guaranty of payment of
the Guaranteed Obligations, independent of Lessee's obligations under the Lease. Guarantor waives any
right or claim to require PAEDC (a) to proceed against any person or entity {including Lessee or its
successors) to look for payment of the Guaranteed Obligations, or join any such person or entity in any
suit under this Guaranty {provided, however, that PAEDC agrees that Guarantor shall be an initial
party-defendant in any legal proceeding asserted by PAEDC against the Lessee that may result in any
liability of Guarantor under this Guaranty, but PAEL}C may enforce the provisions of this Guaranty and
assert claims against Guarantor hereunder without first pursuing any right or remedy against Lessee),
(b) to proceed or exhaust any security given to secure Lessee's obligations under the Lease, or (c) to
pursue or exhaust any othex remedy within the PAEDC's power. Guarantor agrees not to assert any
claim that Guarantor may have against PAEDC by virtue of PAEDC's failure to exercise any rights
against Lessee. Guarantor waives any right or clavn to force PAEDC to proceed first against Lessee
and agrees that no delay or refusal of PAEDC to exercise any right or privilege PAEDC has or may
have against Lessee shall operate to impair the liability of Guarantor hereunder. Guarantor agrees that
neither bankruptcy, insolvency, other disability, cessation of existence or dissolution of Lessee shall in
any manner impair, affect, or release the liability of Guarantor hereunder, and Guarantor shall be and
remain fully liable hereunder in accordance with. the terms hereof. Guarantor understands and
acknowledges that, by virtue of this Guaranty, Guar~u~tor has specifically assumed any and all risks of a
bankruptcy or reorganization case or proceeding with respect to Lessee or its successors. Guarantor
waives any right to participate in any security now or hereafter held by Lessor. The PAEDC may,
without notice or demand and without affecting Guarantor's liability hereunder, from time to time,
compromise, extend or otherwise modify any or all of the terms of the Lease; provided, however, that
no such compromise, extension or other modification of the terms of the Lease that would increase or
accelerate the monetary obligations of Guarantor under this Guaranty shall be germitted or undertaken
by PAEDC without Guarantor's prior written consent with respect thereto, and Guarantor shall not be
bound by any such compromise, extension or modification which results in an increase or acceleration
of any such monetary obligations of Guarantor under this Guaranty without such consent. Guarantor
further waives all defenses afforded guazantors based on suretyship or impairment of collateral under
applicable law, other than payment and performance in full of the Guaranteed Obligations. Until all of
Lessee's obligations to the PAEDC with respect to the Guaranteed Obligations have been discharged in
full, any and all rights of subrogation which Guarantor may have or be entitled to against Lessee shah
be and are hereby subordinated to the rights of the PAEDC against Lessee with respect thereto.
p642596 Page 3
5. Place of Performance. All payments to be made hereunder shall be payable in Jefferson
County, Texas.
6. Applicable Law. This Guazanty shall be governed by and construed in accordance with the
laws of the United States of America and the State of Texas, and is intended to be performed in
accordance with and as permitted by such laws. Wherever possible each provision of this Guaranty
shall be interpreted in such a manner as to be effective and valid under applicable law, but if any
provision of this Guaranty or application thereof shall be prohibited by or be invalid under such law,
such provision or application (as the case may be) shall be ineffective to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or other applications or the remaining
provisions of this Guaranty.
7. No Third Party Beneficiaries. There shall be no third party beneficiaries of this Guaranty.
8. Notices. Any notices given to Guarantor or PAEDC hereunder shall be given in the manner
set forth in Article 17 of the Lease, but to the respective addresses set forth beneath the parties'
signatures below or at such other addresses as the parties may hereafter designate in writing from time
to time.
9. Multiple Counterparts. This Guaranty may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall constitute but one instrument.
hereto.
10. Modifications. This Guaranty may not be; modified except by a writing signed by the parties
[The remainder of this page is intentionally left blank.]
1/642596 Page 4
This Guaxanty has been executed and delivered as of the date first written above.
CTTY OF PORT ARTHUR SECTION 4A
ECONOMIC DEVELOPMENT CORPORATION
SIGNED AND AGREED TO on the `_ day of , 2008.
President
Witness
Secretary
Witness
8642546 Page 5
ENGlobal Corporation
SIGNED AND AGREED TO on the __ day of , 2008.
ENGlobal Corporation, a Nevada corporation
By: ENGlobal Systems, Inc.,
a Texas corporation
Witness
#642596 Page 6
EXHIBIT "G"
TO THE EDC
INCENTIVE AGREEMENT
TO BE PRESENTED AT
THE COUNCIL MEETING
EXHIBIT "H"
EXHIBIT "H"
CERTIFICATION REGARDING LOBBYING
For Contracts, Grants, Loans, and Cooperative Agreements
The undersigned certifies, to the best of his knowledge and belief, that:
1. No funds have been paid or will be paid, by or on behalf of the undersigned, to
any person for influencing or attempting to influence an officer or employee of
any agency, a member of the City ox of the PAEDC in connection with the
awarding of any contract, the making of any grant, the making of any loan, the
entering into of any cooperative agreement, or modification of any contract,
grant, loan, or cooperative agreement.
2 The undersigned shall require that the language of this certification be included
in the award documents for all sub-awards at all tiers (including subcontracts,
sub-grants, and contracts under grants, loans, and cooperative agreements), and
that all Subs shall certify and disclose accordingly.
This certification is material representation o:F fact which reliance was placed when this
transaction was made or entered into. Submission of this certification is a prerequisite for
making or entering into this transaction.
By:
Signature
Its:
Title
#642702 Exhibit " "
EXHIBIT "I"
EXHIBIT "I"
COMPLIANCE STATEMENT
hereby certifies that it has fully
complied with Local Government Code § 176.006, effective June 18, 2005, which
mandates the disclosure requirements for pexsons who contract or seek to
contract with a local governmental entity .
a
By:_
Signatuz'e
Title
!1642702 Exhibit " "
EXHIBIT "B"
TO THE RESOLUTION
FINANCIAL ADVISORY AGREEMENT
This Financial Advisory Agreement (the "Agreement") is made and entered into by and between
Port Arthur Economic Development Corporation ("Issuer") and First Southwest Company ("FSC")
effective as of the date executed by the Issuer as set forth on the signature page hereof.
WITNESSETH:
WHEREAS, the Issuer will have under consideration from time to time the authorization and
issuance of indebtedness in amounts and forms which cannot presently be determined and, in connection
with the authorization, sale, issuance and delivery of such indebtedness, Issuer desires to retain an
independent financial advisor; and
WHEREAS, the Issuer desires to obtain the professional services of FSC to advise the Issuer
regarding the issuance and sale of certain evidences of indebtedness or debt obligations that may be
authorized and issued or otherwise created or assumed by the Issuer (hereinafter referred to collectively as
the "Debt Instruments") from time to time during the period in which this Agreement shall be effective;.
and
WHEREAS, FSC is willing to provide its professional services and its facilities as financial advisor
in connection with all programs of financing as may be considered and authorized by Issuer during the
period in which this Agreement shall be effective.
NOW, THEREFORE, the Issuer and FSC, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, do hereby agree as follows:
SECTION I
DESCRIPTION OF SERVICES
Upon the request of an authorized representative of the Issuer, FSC agrees to perform the financial
advisory services stated in the following provisions of this Section I; and for having rendered such
services, the Issuer agrees to pay to FSC the compensation as provided in Section V hereof.
A. Financial Planning. At the direction of Issuer, FSC shall:
1. Survey and Analysis. Conduct a survey of the financial resources of the Issuer to
determine the extent of its capacity to authorize, issue and service any Debt Instruments
1
contemplated. This survey will include an analysis of any existing debt structure as
compared with the existing and projected sources of revenues which may be pledged to
secure payment of debt service and, where appropriate, will include a study of the trend of the
assessed valuation, taxing power and present and future taxing requirements of the Issuer. In
the event revenues of existing or projected facilities operated by the Issuer are to be pledged
to repayment of the Debt Instruments then under consideration, the survey will take into
account any outstanding indebtedness payable from the revenues thereof additional revenues
to be available from any proposed rate increases and additional revenues, as projected by
consulting engineers employed by the Issuer, resulting from improvements to be financed by
the Debt Instruments under consideration.
2. Future Financines. Consider and analyze future financing needs as projected by the
Issuer's staff and consulting engineers or other experts, if any, employed by the Issuer.
3. Recommendations for Debt Instruments. On the basis of the information developed by
the survey described above, and other information and experience available, submit to the
Issuer recommendations regarding the Debt Instruments under consideration, including such.
elements as the date of issue, interest payment dates, schedule of principal maturities, options
of prior payment, security provisions, and such other provisions as may be appropriate in
order to make the issue attractive to investors while achieving the objectives of the Issuer.
All recommendations will be consistent with the goal of designing the Debt Instruments to be
sold on terms which are advantageous to the Issuer, including the lowest interest cost
consistent with all other considerations.
4. Market Information. Advise the Issuer of ow interpretation of current bond market
conditions, other related forthcoming bond issues and general information, with economic
data, which might normally be expected to influence interest rates or bidding conditions so
that the date of sale of the Debt Instruments may be set at a favorable time.
5. Elections. In the event it is necessary to hold an election to authorize the Debt
Instruments then under consideration, FSC; will assist in coordinating the assembly of such
data as may be required for the preparation of necessary petitions, orders, resolutions,
ordinances, notices and certificates in connection with the election, including assistance in the
transmission of such data to a firm of municipal bond attorneys ("Bond Counsel") retained by
the Issuer.
B. Debt Management and Financial Implementation. At the direction of Issuer, FSC shal I:
2
1. Method of Sale. Evaluate the particular financing being contemplated, giving
consideration to the complexity, market acceptance, rating, size and structure in order to
make a recommendation as to an appropriate method of sale, and:
a. If the Debt Instruments are to be sold by an advertised competitive sale, FSC will:
(1) Supervise the sale of the L)ebt Instruments, reserving the right, alone or in
conjunction with others, to submit a bid for any Debt Instruments issued under this
Agreement which the Issuer advertises for competitive bids; however, in keeping
with the provisions of Rule G-23 of the Municipal Securities Rulemaking Board,
FSC will request and obtain written consent to bid prior to submitting a bid, in any
instance wherein FSC elects to bid, for any installment of such Debt Instruments;
(2) Disseminate information to prospective bidders, organize such informational
meetings as may be necessary, and facilitate prospective bidders' efforts in making
timely submission of proper bids;
(3) Assist the staff of the Issuer in coordinating the receipt of bids, the safekeeping
of good faith checks and the tabulation and comparison of submitted bids; and
(4) Advise the Issuer regarding the best bid and provide advice regarding
acceptance or rejection of the bids.
b. If the Debt Instruments are to be sold by negotiated sale, FSC will:
(1) Recommend for Issuer's final approval and acceptance one or more investment
banking firms as managers af' an underwriting syndicate for the purpose of
negotiating the purchase of the Debt Instruments.
(2) Cooperate with and assist any selected managing underwriter and their
counsel in connection with their efforts to prepare any Official Staterrient or
Offering Memorandum. FSC will cooperate with and assist the underwriters in the
preparation of a bond purchase contract, an underwriters agreement and other
related documents. The costs incurred in such efforts, including the printing of the
documents, will be paid in accordance with the terms of the Issuer's agreement
with the underwriters, but shall. not be or become an obligation of FSC, except to
3
the extent specifically provided otherwise in this Agreement or assumed in writing
by FSC.
(3) Assist the staff of the Issuer in the safekeeping of any good faith checks, to
the extent there are any such, and provide a cost comparison, for both expenses and
interest which are suggested by the underwriters, to the then current market.
(4) Advise the Issuer as to the fairness of the price offered by the underwriters.
2. Offerine Documents. Coordinate the preparation of the notice of sale and bidding
instructions, official statement, official hid form and such other documents as may be
required and submit all such documents to the Issuer for examination, approval and
certification. After such examination, approval and certification, FSC shall provide the Issuer
with a supply of all such documents sufficient to its needs and distribute by mail or, where
appropriate, by electronic delivery, sets of the same to prospective purchasers of the Debt
Instruments. Also, FSC shall provide copies of the final Official Statement to the purchaser of
the Debt Instruments in accordance with the Notice of Sale and Bidding Instructions.
3. Credit Ratines. Make recommendations to the Issuer as to the advisability of obtaining
a credit rating, or ratings, for the Debt Instruments and, when directed by the Issuer,
coordinate the preparation of such information as may be appropriate for submission to the
rating agency, or agencies. In those cases where the advisability of personal presentation of
information to the rating agency, or agencies, may be indicated, FSC will arrange for such
personal presentations, utilizing such composition of representatives from the Issuer as may
be finally approved or directed by the Issuer.
4. Trustee, Paving Agent, Registrar. Upon request, counsel with the Issuer in the selection.
of a Trustee and/or Paying Agent/Registrar for the Debt Instruments, and assist in the
negotiation of agreements pertinent to these services and the fees incident thereto.
5. Financial Publications. When appropriate, advise financial publications of the
forthcoming sale of the Debt Instruments and provide them with all pertinent information.
6. Consultants. After consulting with a.nd receiving directions from the Issuer, arrange for
such reports and opinions of recognized independent consultants as may be appropriate for
the successful marketing of the Debt Instruments.
4
7. Auditors. In the event formal verification by an independent auditor of any calculations
incident to the Debt Instruments is required, make arrangements for such services.
8. Issuer Meetines. Attend meetings of the governing body of the Issuer, its staff,
representatives or committees as requested at all times when FSC may be of assistance or
service and the subject of financing is to be discussed.
9. Printins. To the extent authorized by the Issuer, coordinate all work incident to printing
of the offering documents and the Debt Instruments.
10. Bond Counsel. Maintain liaison with Bond Counsel in the preparation of all legal
documents pertaining to the authorization, sale and issuance of the Debt Instruments.
11. Changes in Laws. Provide to the Issuer copies of proposed or enacted changes in
federal and state laws, rules and regulations having, or expected to have, a significant effect
on the municipal bond market of which FSC becomes aware in the ordinary course of its
business, it being understood that FSC does not and may not act as an attorney for, or provide
legal advice or services to, the Issuer.
12. Deliverv of Debt Instruments. As soon as a bid for the Debt Instruments is accepted by
the Issuer, coordinate the efforts of all concerned to the end that the Debt Instruments may be
delivered and paid for as expeditiously as possible and assist the Issuer in the preparation or
verification of final closing figures incident. to the delivery of the Debt Instruments.
13. Debt Service Schedule: Authorizing Resolution. After the closing of the sale and.
delivery of the Debt Instruments, deliver to the Issuer a schedule of annual debt service
requirements for the Debt Instruments and, in coordination with Bond Counsel, assure that
the paying agenbregistrar and/or trustee has been provided with a copy of the authorizing
ordinance, order or resolution.
SECTION II
OTHER AVAILABLE SERVICES
In addition to the services set forth and described in Section I herein above, FSC agrees to make
available to Issuer the following services, when so requested by the Issuer and subject to the agreement by
Issuer and FSC regarding the compensation, if any, to be paid for such services, it being understood and
agreed that the services set forth in this Section II shall require further agreement as to the compensation
5
to be received by FSC for such services:
1. Investment of Funds. From time to time, as an incident to the other services provided hereunder as
financial advisor, FSC may purchase such investments as may be directed and authorized by Issuer to be
purchased, it being understood that FSC will be compensated in the normal and customary manner for
each such transaction. In any instance wherein FSC' may become entitled to receive fees or other
compensation in any form from a third party with respect to these investment activities on behalf of
Issuer, we will disclose to Issuer the nature and, to the extent such is known, the amount of any such
compensation so that Issuer may consider the information in making its investment decision. It is
understood and agreed that FSC is a duly licensed brokeridealer and is affiliated with First Southwest
Asset Management, Inc. ("FSAMI"), a duly registered investment advisor. Issuer may, from time to time,
utilize the broker/dealer services of FSC and/or the investment advisory services of FSAMI with respect
to matters which do not involve or affect the financial advisory services referenced in this Agreement.
The terms and conditions of the engagement of FSC: and/or FSAMI to provide such services shall be
determined by mutual agreement at the time such services are requested.
2. Exercising Calls and Refunding. Provide advice and assistance with regard to exercising any call
and/or refunding of any outstanding Debt Instruments.
3. Capital Improvements Pro rams. Provide advice and assistance in the development of any capital
improvements programs of the Issuer.
4. Long Range Planni~. Provide advice and assistance in the development of other long-range
financing plans of the Issuer.
5. Post-Sale Services. Subsequent to the sale and delivery of Debt Instruments, review the transaction
and transaction documentation with legal counsel for th.e Issuer, Bond Counsel, auditors and other experts
and consultants retained by the Issuer and assist in developing appropriate responses to legal processes,
audit procedures, inquiries, internal reviews and similar matters.
SECTION III
TERM OF AGREEMENT
This Agreement shall become effective as of the date executed by the Issuer as set forth on the
signature page hereof and, unless terminated by either party pursuant to Section IV of this Agreement,
shall remain in effect thereafter for a period of two (2) years from such date.
6
SECTION IV
TERMINATION
This Agreement may be terminated with or without cause by the Issuer or FSC upon the giving of
at least thirty (30) days' prior written notice to the other party of its intention to terminate, specifying in
such notice the effective date of such termination. In the event of such termination, it is understood and
agreed that only the amounts due FSC for services provided and expenses incurred to the date of
termination will be due and payable. No penalty will be assessed for termination of this Agreement.
SECTION V
COMPENSATION AND EXPENSE REIMBURSEMENT
The fees due to FSC for the services set forth and described in Section 1 of this Agreement with
respect to each issuance of Debt Instruments during the term of this Agreement shall be calculated in.
accordance with the schedule set forth on Appendix A attached hereto. Unless specifically provided
otherwise on Appendix A or in a separate written agreement between Issuer and FSC, such fees, together
with any other fees as may have been mutually agreed upon and all expenses for which FSC is entitled to
reimbursement, shall become due and payable concurrently with the delivery of the Debt Instruments to
the purchaser.
SECTION VI
MISCELLANEOUS
1. Choice of Law. This Agreement shall be construed and given effect in accordance with the laws of
the State of Texas.
2. Bindine Effect; Assi nment. This Agreement shall be binding upon and inure to the benefit of the
Issuer and FSC, their respective successors and assigns; provided however, neither party hereto may
assign or transfer any of its rights or obligations hereunder without the prior written consent of the other
party.
3. Entire Agreement. This instrument contains the entire agreement between the parties relating to
the rights herein granted and obligations herein assumed. Any oral or written representations or
modifications concerning this Agreement shall be of no force or effect except for a subsequent
modification in writing signed by all parties hereto.
FIRST SOUTHWEST COMPANY
7
By:
Hill A. Feinberg, Chairman and
Chief Executive Officer
By:
Joseph W. Morrow
Vice President
PORT ARTHUR ECONOMIC
DEVELOPMENT CORPORATION
BY ~~~~.rtiR~i~E~.wf--
Title: uyj ~~N't~
Date: I'~ft.t~ ~ 3 2pv
APPENDIX A
The fees due FSC will not exceed those contained in our customary fee schedule as listed below.
$11,250 for the first $ 1,000,000 of bonds issued
plus $ 5.00 per $1,000 for the next $ 4,000,000 of bonds issued
plus $ 2.50 per $1,000 for the next $ 5,000,000 of bonds issued
plus $ 1.25 per $1,000 for the next $ 40,000,000 of bonds issued
plus $ .9375 per $1,000 thereafter
The charges for ancillary services, including computer structuring and official statement printing, shall be
levied only for those services which are reasonably necessary in completing the transaction and which are
reasonable in amount, unless such charges were incurred at the specific direction of the Issuer.
The payment of charges for financial advisory services described in Section 1 of the foregoing Agreement
shall fie contingent upon the delivery of bonds and shall be due at the time that bonds are delivered. The
payment of charges for services described in Section II of the foregoing Agreement shall be due and
payable in accordance with the mutual agreement therefor between FSC and Issuer.
The Issuer shall be responsible for the following expenses, if and when applicable, whether they are
charged to the Issuer directly as expenses or charged to the Issuer by FSC as reimbursable expenses:
Bond counsel
Bond printing
Bond ratings
Computer structuring
Credit enhancement
CPA fees for refunding
Official statement preparation and printing
Paying agent/registrar/trustee
Travel expenses
Underwriter and underwriters counsel
Miscellaneous, including copy, delivery, and phone charges
The payment of reimbursable expenses that FSC has assumed on behalf of the Issuer shall NOT he
contingent upon the delivery of bonds and shall be due' at the time that services are rendered and payable
upon receipt of an invoice therefor submitted by FSC.
EXHIBIT "C"
TO THE RESOLUTION
Thomas A. Sage tsage@velaw.com
Tel 713.758.2159 Fax 713.675.5728
May 6, 2008
City of Port Arthur Section 4A
Economic Development Corporation
444 Fourth Street
Port Arthur, Texas 77640
Re: Engagement Letter
Ladies and Gentlemen:
This letter, when accepted by you, will constitute an agreement between this firm and
the City of Port Arthur Section 4A Economic Development Corporation (the "Corporation")
for our services as bond counsel in connection with the authorization, issuance, sale and
delivery of sales tax revenue bonds (the "Bonds") to be issued by the Corporation for the
construction of a facility to house the corporate headquarters of EnGlobal, Inc.
We agree that our services as bond counsel. will include the following:
1. Attendance at all meetings of the Board of Directors of the Corporation or the
City Council of the City of Port Arthur as required or requested in connection
with the planning and authorization of such issue, including consultation on
federal income tax matters;
2. Preparation of the order of the Board of Directors authorizing issuance of the
Bonds, together with all other legal documents comprising the transcript of
proceedings for authorization and issuance of the Bonds;
3. Consultation with represe-ntatives of the City, the Corporation and the
Corporation's financial advisor regarding information to be included in the
Official Statement for the Bonds, limited solely to the description of the
Bonds and the status of tYte Bonds and the interest thereon under federal
income tax law;
4. Preparation of and submission to the Attorney General of Texas of a transcript
of proceedings for the Borids to obtain the approval of the Attorney General
and registration by the Comptroller of Public Accounts of Texas;
Vinson 8 Elkins LLP Attorneys at Law
Abu Dhabi Austin Beijing Dallas Dubai Hong Kong Houston
London Moscow New York Shanghai Tokyo Washington
First City Tower, 1001 Fannin Street, Suite 2500
Houston, TX 77002-6760
Tel 713.758.2222 Fax 713.758.2346 www.velaw.com
u„~~~r~~ 1R71l7R7v ~
May 14, 2008 Page 2
5. Preparation and filing of legal documents required under federal income tax
law for the Bonds, and the :preparation of and delivery to the Corporation of a
letter explaining the federal income tax treatment of bond proceeds;
6. Supervision of the printing Hof the Bonds and their delivery to the purchasers;
7. Representation of the Corporation at the closing of the sale of Bonds,
including preparation of closing documents; and
8. If appropriate, the deliver: at closing of our approving opinion as to the
validity of the Bonds under Texas law and the exclusion of interest on the
Bonds from gross income of bondholders under federal income tax law.
For the services outlined above, our fc;e would be $40,000, with such fee to be paid from
bond proceeds, and contingent on delivery of the Bonds. If no bonds are issued, no fee
would be due.
The Corporation would also reimburse us for certain charges incurred in connection
with the bond issue, including travel, long distance telephone charges, and photocopy and
document delivery charges. All such charl;es will be subject to approval by the Corporation.
The services outlined above do not include such matters as services as disclosure
counsel in connection with bond issues, work on post-closing federal tax or disclosure issues,
obtaining IRS rulings or clarifications of federal tax law, presentations to rating agencies or
bond insurers, or "blue sky" or securities registration services. We will be pleased to provide
legal services in connection with any matters not included in paragraphs 1 through 8 above,
provided that such additional services are performed on mutually agreeable terms, to be set
forth in a separate letter of engagement.
The firm represents the City of Port Arthur, Texas and, from time to time, a number
of financial institutions, including instituti~~ns that act as financial advisors or underwriters in
connection with the issuance of municipal bonds. This means that we may have represented,
may currently represent, or in the future may represent financial institutions that have
interests opposing your interests in connection with the Bonds. Moreover, we presently
represent and in the past have represented First Southwest Company. This will not in any
way affect the diligence or vigor with which we represent your interests in connection with
the issuance of the Bonds. If this is a concern to you, please let us know and we will check
on the particular financial institutions iYivolved in the issuance and underwriting of the
Bonds.
Annctnn 'iF71 flR7v 1
May 14, 2008 Page 3
This agreement shall remain in force and effect until the Bonds have been sold and
delivered; provided, however, that this agreement maybe terminated by either party on thirty
days written notice. This agreement inc~~rporates the Standard Terms of Engagement for
Legal Services, a copy of which is attached.
Nnnctnn Z~~1l1Rw 1
May 14, 2008 Page 4
If the arrangement set out above meets with your approval, please execute this
agreement in the space provided below anti return one executed copy to the undersigned.
Very truly yours,
Thomas A. Sage
1628:2150
Attachment
ACCEPTED:
CITY OF PORT ARTHUR SECTION 4A
ECONOMIC DEVELOPMENT CORPORATION
By
Name:
Title:
T-Troictnn ~F.~ 1(lRw 1
VINSON & EL,KINS L.L.P.
Standard Terms ~~f Engagement
for Legal ,Services
This statement sets forth certain standard germs of our engagement as your lawyers and is
intended as a supplement to the engagement letter that we have with you as our client. Unless
modified in writing by mutual agreement, these irerms will be an integral part of our agreement
with you as reflected in the engagement letter. Therefore, we ask that you review this statement
carefully and contact us promptly if you have any questions. We suggest that you retain this
statement in your file with the engagement letter.
The Scope of Our Work
You should have a clear understanding of the legal services we will provide. Any
questions that you have should be dealt with prorr~ptly.
We will at all times act on your behalf to the best of our ability. Any expressions on our
part concerning the outcome of your legal matters are expressions of our best professional
judgment, but are not guarantees. Such opinions are necessarily limited by our knowledge of the
facts and are based on the state of the law at the time they are expressed.
It is our policy that the person or entity ghat we represent is the person or entity that is
identified in our engagement letter, and absent an express agreement to the contrary does not
include any affiliates of such person or entity (e.g., if you are a corporation or partnership, any
parents, subsidiaries, employees, officers, directors, shareholders or partners of the corporation
or partnership, or commonly owned corporatians or partnerships; or, if you are a trade
association, any members of the trade association). If you believe this engagement includes
additional entities or persons as our clients you should inform us immediately.
It is also our policy that the attorney-client relationship will be considered terminated
upon our completion of any services that you have retained us to perform. If you later retain us
to perform further or additional services, our attorney-client relationship will be revived subject
to the terms of engagement that we agree on at th<~t time.
This engagement shall be subject to t:he Texas Disciplinary Rules of Professional
Conduct.
Who Will Provide t:he Legal Services
Customarily, each client of the Firm is served by a principal attorney contact. The
principal attorney should be someone in whom }you have confidence and with whom you enjoy
working. You are free to request a change of :principal attorney at any time. Subject to the
supervisory role of the principal attorney, your work or parts of it may be performed by other
lawyers and non-lawyers in the Firm. Such delegation may be for the purpose of involving
lawyers or non-lawyers with special expertise in a given area or for the purpose of providing
Houston 3401566v.1
services on the most efficient and timely basis. Whenever practicable, we will advise you of the
names of those attorneys and non-lawyers who work on your matters.
How Our Fees Will Be Set
Generally, our fees are based on the time spent by the lawyers and non-lawyers who work
on the matter. We will charge for all time spent in representing your interests, including, by way
of illustration, telephone and office conferences with you and your representatives, consultants
(if any), opposing counsel, and others; conferences among our legal and non-lawyer personnel;
factual investigation; legal research; responding too your requests for us to provide information to
your auditors in connection with reviews or audits of financial statements; drafting letters and
other documents; and travel. We will keep accurate records of the time we devote to your work
in units of quarters of an hour.
The hourly rates of our lawyers and non-lawyers are, from time to time, reviewed and
adjusted and may be changed with or without notice to reflect current levels of legal experience,
changes in overhead costs, and other factors. London rates are set in UK pounds sterling and are
converted to dollars using the official exchange rate established by the UK government at the
beginning of the calendar quarter in which the time was worked.
Although we may from time to time, at the client's request, furnish estimates of legal fees
and other charges that we anticipate will be incurred, these estimates are by their nature inexact
(due to unforeseeable circumstances) and, therefore, the actual fees and charges ultimately billed
may vary from such estimates.
With your advance agreement, the fees ultimately charged may be based upon a number
of factors, such as:
- The time and effort required, the novelty and complexity of the issues presented,
and the skill required to perform the legal services promptly;
- The fees customarily charged in th.e community for similar services and the value
of the services to you;
- The amount of money or value of property involved and the results obtained;
- The time constraints imposed by you as our client and other circumstances, such
as an emergency closing, the needl for injunctive relief from court, or substantial
disruption of other office business;
- The nature and longevity of our pr~~fessional relationship with you;
- The experience, reputation and expertise of the lawyers performing the services;
- The extent to which office procedures and systems have produced ahigh-quality
product efficiently.
Houston 3401566v.1
For certain well-defined services (for example, a simple business incorporation), we will
(if requested) quote a flat fee. It is our policy riot to accept representation on a flat-fee basis
except in such defined-service areas or pursuant to a special arrangement tailored to the needs of
a particular client. In all such situations, the flat fee arrangement will be expressed in a letter,
setting forth both the amount of the fee and the sa~pe of the services to be provided.
We also will, in appropriate circumstances, provide legal services on a contingent fee
basis. Any contingent fee representation mu;;t be the subject of a separate and specific
engagement letter.
Additional Charges
In addition to our fees, there will be other charges for items incident to the performance
of our legal services, such as reprographics, c:ouriers, travel expenses, some long distance
telephone calls, facsimile transmissions, postage:, overtime for secretaries and other non-legal
staff, specialized computer applications such as computerized legal research, media services and
practice support, records retrieval, and filing fef;s. The cunrent basis for these charges in the
Firm's U.S. offices is set forth below. Charges for similar services in the Firm's foreign offices
may vary from those shown below. The Firm will review this schedule of charges periodically
and adjust them to take into account changes in the Firm's costs and other factors.
Ret~ro>;ranhics and Production Services
The Firm charges $.15 per page for non-color duplicating and scanning, including
printing electronic and scanned images, and printing for duplication purposes.
Additional charges apply for color and oversized (over 11 x 17 inches) documents.
There are special charges for other production services, which are available on
request.
Courier Services
Charges, which may vary based on the service provider used and the service
provided, are billed at the Firm's actual cost.
Computer Aided Legal Research (CALR
Charges for services are billed at the Firm's actual cost.
Telefax
The Firm charges $0.25 per page for outgoing telefaxes, which includes all
telephone costs. There is no charge for incoming faxes.
Telephone
The Firm does not charge for loc~il or domestic long distance calls originating in
the Firm's U.S. offices. Other long distance calls, including international long
Houston 3401566v.1
distance calls, audio conferencing services, and calling card calls are charged at
the Firm's actual cost for the call o~r conference.
Travel-Related Expenses
Airfare, hotel, meals, ground transportation and other travel related costs are
billed at the Firm's actual costs, including negotiated discounts.
All Other Costs
The Firm charges actual disbursements for third-party services such as court
reporters, expert witnesses, etc., acid may recoup expenses reasonably incurred in
connection with services performed in-house, such as postage, non-legal staff
overtime, file retrieval, media services and practice support, etc. A current
schedule of these charges is available on request.
Unless special arrangements are otherwise made, fees and expenses of others (such as
experts, investigators, consultants and court reporters) will be the responsibility of, and billed
directly to, the client. Further, all invoices in ex~~ess of $500 will be forwarded to the client for
direct payment.
Billing Arrangements and Terms
Our billing rates are based on the assumption of prompt payment. Consequently, unless
other arrangements are made, fees for services and other charges will be billed monthly and are
payable within thirty days of receipt.
By engaging us, you acknowledge and agc•ee that you are responsible for payment of fees,
expenses and disbursements. In appropriate matters as an accommodation to you, we may agree
to direct our bills to third-party payors (e.g., an insurer), but you agree that you will remain fully
responsible for timely payment of our bills if for any reason the third party does not timely pay
such bills. Likewise, we agree that we owe our professional obligations to you, even when a
third party pays our bills.
Advances
Clients of the Firm are sometimes asked to deposit funds as an advance payment with the
Firm. The advance payment will be applied first to payment of charges for such items as
photocopying, messengers, travel, etc., as more; fully described above, and then to fees for
services. The advance will be deposited in our client advance account and we will charge such
other charges and our fees against the advance and credit them on our billing statements. In the
event such other charges and our fees for service:; exceed the advance deposited with us, we will
bill you for the excess monthly or may request additional advances. Any unused portion of
amounts advanced will be refundable at the conchusion of our representation.
Houston 3401566v.1
Confidentiality
We will preserve the confidentiality of information you provide us consistent with
applicable law including the rules of professional conduct governing lawyers. This confirms
your agreement that, with respect to firm brochures or other material or information regarding
the firm and its practice, we may indicate the general nature of our representation of you and
your identity as a firm client.
Client and Firin Documents
We will maintain any documents that you furnish to us in our client file (or files) for this
matter. At your request, we will return your documents to you at the conclusion of the matter (or
earlier, if appropriate). It is your obligation to tell us which, if any, of the documents that you
furnish us that you want returned. We will retLUn those documents to you promptly after our
receipt of payment for outstanding fees and charges. Our own files pertaining to this matter,
including the work performed by our attorneys, will be retained by the Firm. Any documents
retained by the firm will be kept for a certain period of time, and ultimately we will destroy them
in accordance with our record retention program schedule then in effect.
Third Party Contractors
Like many law firms and other organizations, our Firm from time to time uses or deals with third
parties in connection with certain areas of our practice or operations. For instance, these third
parties may include vendors, consultants, advisers, or other service providers in areas such as
litigation support, storage, document management, hardware and software systems, law firm
practice management, information technology, accounting and financial matters, and the like.
Additionally, the Firm may use temporary lawyers and non-lawyers in certain matters. In
performing their services, these parties may have some access to confidential client information,
and the Firm accordingly has appropriate confidentiality arrangements with them obligating
them to preserve the confidentiality of any such information. You consent to the Firm allowing
non-employee contractors access to such information as described. We take our confidentiality
obligations very seriously; do not hesitate to contact us with any questions.
Houston 3401566v. ]