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HomeMy WebLinkAbout10838RESOLUTION NO. 10838 A RESOLUTION APPROVING A RESTATED AGREEMENT BETWEEN THE CITY OF PUEBLO AND VERCUITY SOLUTIONS, INC. RELATING TO A JOB CREATING CAPITAL IMPROVEMENT PROJECT, AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAME AND AUTHORIZING THE TRANSFER OF $500,000.00 FROM THE 1992 -2006 SALES AND USE TAX CAPITAL IMPROVEMENT PROJECT FUND THEREFOR WHEREAS, Pueblo Economic Development Corporation ( "PEDCO ") has presented to City Council a proposed job creating capital improvement project whereby Vercuity Solutions, Inc. will expand its business within the City of Pueblo and employ between 90 and 120 full -time employees during the period from October 1, 2006 to October 1, 2007 and 120 full -time employees during a six year period starting October 1, 2007 ( "Project "); and WHEREAS, the Project and financial details thereof, were negotiated and approved by PEDCO, and WHEREAS, PEDCO has recommended to the City Council that the City Council approve the Project, Agreement and financial details relating thereto, and WHEREAS, based upon PEDCO's recommendation and representations made to the City by representatives of PEDCO with respect to the Project, City Council is willing to approve the Project, NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO. that: SECTION 1 The City Council finds and determines that the job creating capital improvement project with Vercuity Solutions, Inc. described herein and in the attached Restated Agreement meets and complies with the criteria and standards established by Ordinance No. 6381 ( "Ordinance ") and will create employment opportunities justifying the expenditure of public funds. SECTION 2 The Restated Agreement dated as of September 30, 2006 between the City of Pueblo and Vercuity Solutions, Inc., a copy of which is attached hereto, having been approved as to form by the City Attorney, is hereby approved. The President of the City Council is authorized to execute and deliver the Restated Agreement and all related required documents in the name of the City and the City Clerk is directed to affix the seal of the City to the Restated Agreement and attest same. SECTION 3 Funds in an amount of $500,000.00 are hereby authorized to be transferred, expended and made available to Vercuity Solutions, Inc. out of the 1992 -2006 Sales and Use Tax Capital Improvement Projects Fund for the sole purpose of the job creating capital improvement project and in the manner described in the attached Restated Agreement. The funds hereby authorized to be transferred and expended shall be released and paid by the Director of Finance to or for the benefit of Vercuity Solutions, Inc. after receipt by the City Clerk of the documents required to be filed pursuant to paragraph 2(c) of the Restated Agreement and (ii) by the Director of Finance of written requests for payment required by paragraph 2(d) of the Agreement. SECTION 4 The officers of the City are directed and authorized to perform any and all acts consistent with the intent of this Resolution and attached Restated Agreement to effectuate the transactions described therein. SECTION 5 This Resolution shall become effective upon final approval and passage. INTRODUCED October 10, 2006 BY Barbara Vidmar Councilperson APPROVED: President of City Council ATTESTED BY: CITY CLERK D t� Background Paper for Proposed RESOLUTION AGENDA ITEM # A(7 DATE: October 10, 2006 DEPARTMENT: Law Department TITLE A RESOLUTION APPROVING A RESTATED AGREEMENT BETWEEN THE CITY OF PUEBLO AND VERCUITY SOLUTIONS, INC. RELATING TO A JOB CREAT- ING CAPITAL IMPROVEMENT PROJECT, AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAME AND AUTHORIZING THE TRANSFER OF $500,000.00 FROM THE 1992 -2006 SALES AND USE TAX CAPITAL IMPROVEMENT PROJECT FUND THEREFOR ISSUE Should City Council approve the job creating capital improvement project with Vercuity Solutions, Inc.? RECOMMENDATION PEDCO recommends that the City Council approve the project. BACKGROUND City and MSS Group, Inc. ( "MSS Group ") entered into a modified job creating capital improvement agreement on April 22, 2003 whereby City advanced $301,191 out of $400,000 to MSS Group for equipment purchases and MSS Group committed to employ 120 full -time employees for 5 years starting January 1, 2005. MSS Group failed to meet its employment commitment and has either through the number of employees employed or payments to the City repaid $185,715, leaving a balance of $115,476 outstanding and unpaid. Vercuity Solutions, Inc. ( "Vercuity ") acquired MSS Group and intends to consolidate some operations in the City of Pueblo. Vercuity has applied for funds in the amount of $500,000 and committed to employ the following numbers of employees at its facility within the City, starting October 1, 2006: 90 by the end of the 15' Quarter, 100 by the end of the 2n Quarter, 110 by the end of the 3r Quarter, 120 by the end of the 4`" Quarter, and 120 each Quarter thereafter through September 30, 2013. City funds will be used to purchase equipment and Vercuity has agreed to give to City a first perfected security interest in the equipment to secure its performance under the employment committed agreement. If Vercuity defaults in its employment commitment, Vercuity will repay City on a Quarterly basis $260.00 for each employee actually employed less than the stated number of employees each Quarter. The $260.00 for each employee less than committed per Quarter is based upon a repayment obligation of $876,000 which is $258,124 greater than MSS Group's $115,476 balance and the additional $500,000 to be advanced to Vercuity. The $260.00 will be increased each Quarter by 1.5 %. FINANCIAL IMPACT See Background. -2- RESTATED AGREEMENT THIS RESTATED AGREEMENT (the "Agreement ") entered into as of September 30, 2006 between Pueblo, a municipal corporation (the "City ") and Vercuity Solutions, Inc., a Delaware corporation formerly MSS Group, Inc., a Colorado corporation (the "Company "). Recitals A. City and MSS Group, Inc. entered into a Modified Agreement dated as of April 22, 2003 (the "Modified Agreement'), B. Company represents and warrants to City that Company is the successor to MSS Group, Inc., and C. City and Company desire to redo and restate the Modification Agreement. Agreement NOW, THEREFORE, in consideration of the foregoing Recitals and mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, City and Company agree as follows: 1. The following terms as used in this Agreement shall have the following meaning unless the context clearly indicates otherwise: "Employment Commitment Date" means October 1, 2006. "Equipment" means new business personal property purchased by Company after the date of this Agreement from an unrelated third -party vendor in an arms- length transaction, having an exhaustible useful life of not less than three (3) years as determined pursuant to the Internal Revenue Service Class Life Tables with reasonable accuracy and all substitute and replacement equipment therefor. "Equipment' does not mean intangible property, including but not limited to, computer software and/or computer software development costs. "Computer software" includes but is not limited to all computer data base, programs, routines, source codes, and documentation. "Facility" means the University Center Office Building, Pueblo, Colorado, wherein Company conducts its business operations. "Full -Time Employee" means a person who actually performs work at the Facility for not less than thirty -two (32) hours per week whether employed by Company or by an outside entity acting as an agency to provide Full -Time Employees for Company. The term "Full -Time Employee" does not include independent contractors nor employees of independent contractors except (i) employees of an independent contractor acting as an agency to provide Full -Time Employees for Company who actually perform work at the Facility, and (ii) independent contractors engaged by Company to perform the same or similar work at the Facility as Company's Full -Time Employees. "Quarter" means three consecutive calendar months commencing January 1, April 1, July 1 and October 1 of each calendar year. "Quarterly Employees" means the sum of the aggregate number of Full -Time Employees on each business day of a Quarter, divided by the total number of business days in such Quarter. 2. Pursuant to the Modification Agreement, City advanced to MSS Group, Inc. $301,191 of which $115,476 is outstanding and unpaid. City will advance to or for the benefit of Company additional funds in an amount not to exceed $500,000.00 (the "City Funds "), subject to and contingent upon the following conditions and covenants which Company agrees to perform and comply with: (a) Company shall use City Funds solely for the purchase of Equipment. (b) Company shall install, maintain and use the Equipment in the Facility. (c) Company shall file in the office of the City Clerk copies of the following: (i) Company's certificate or other evidence of authority to transact business in the State of Colorado issued by the Colorado Secretary of State, (ii) certified copy of the resolution of the governing board of Company approving this Agreement and Security Agreement, and authorizing its officers to execute and deliver this Agreement and Security Agreement in the name of Company, (iii) Security Agreement and UCC Financing Statement granting City a prior perfected first security interest in the Equipment and all substitute, replacement and after acquired equipment and proceeds thereof, and (iv) Lease for the Facility giving Company possession and use of the Facility for at least seven (7) years. The date of the last to occur of the filings required under (i), (ii) and (iii) of this Paragraph (c) shall be referred to herein as "Closing." If Closing does not occur on or before December 31, 2006, or such later date as Company and City shall mutually agree, City may terminate this Agreement and City and Company shall be released and discharged from all obligations hereunder. (d) Company shall file with City's Director of Finance written request for payment of City Funds certified to be true and correct by an officer of Company that the amounts included in the request for payment have not been included in any prior request for payment and are for the actual purchase price of Equipment, identifying the items of Equipment for which payment is sought, including invoices therefor, and further certifying that such Equipment has been installed in the Facility and has an exhaustible useful life of not less than three (3) years as determined pursuant to the Internal Revenue Service Class Life Tables. All City Funds received by Company shall be deposited in a separate account and held in trust by Company for the sole and only purpose of paying the purchase price for the Equipment in which City has a security interest until Company makes payment for the Equipment. 3. Company acknowledges and agrees that the primary purpose of City in entering into this Agreement and the sole benefit to the City for making City Funds available to Company hereunder is the creation of jobs within the City of Pueblo, Colorado. Therefore, Company represents, covenants, and agrees that it will employ not less than one hundred twenty (120) Full - Time Employees at the Facility during the Repayment Period defined in Paragraph 4 hereof (the "Employment Commitment")- 4. Notwithstanding anything contained in this Agreement to the contrary, if Company shall for any reason default in its Employment Commitment set forth in Paragraph 3 hereof, Company shall pay to City the amounts determined in accordance with the provisions of subparagraph (a) and (d) hereof (the "Repayment Obligation "), as follows: (a) During the first four (4) Quarters following the Employment Commitment Date, Company shall employ the following number of Full -Time Employees at the Facility: by the end of the I st Quarter - 90; by the end of the 2 nd Quarter - 100; by the end of the 3` Quarter - 110; and, by the end of the 4 th Quarter - 120. If the number of Full -Time Employees for any of the first four (4) Quarters following the Employment Commitment Date is less than that specified above, the calculations in that paragraph shall be used to compute Company's Quarterly Repayment for such Quarter. During the six (6) year period starting one (1) year following the Employment Commitment Date and ending seventy -two (72) months thereafter (the "Repayment Period ") Company shall pay to City an amount each Quarter equal to the Quarterly Employees less than one hundred twenty (120) Full -Time Employees employed at the Facility by Company multiplied by $260.00 (the "Company's Quarterly Payments "). The $260.00 used herein shall be increased each Quarter during the Repayment Period by one and one -half percent (1.5 %). For example, if for the Quarter ending September 30, 2008 (8 Quarters after the Employment Commitment Date) such Quarterly Employees is 100, the amount payable by Company to City on or before the fifteenth (15 day of October 2008 would be (120 -100) x [260 x (0.015 x 8 + 1] _ $5,824.00. (b) Company's Quarterly Payments, if any, shall be paid to the City without notice, demand, deduction or setoff on or before the last day of the calendar month after the end of each Quarter during the Repayment Period and for one month thereafter at the office of the Director of Finance of City, 1 City Hall Place, Pueblo, Colorado, 81003, or such other location as the City may designate. All past due Company's Quarterly Payments shall bear interest at the rate of six (6) percent per annum until paid. (c) Within thirty (30) days after the end of each Quarter after the Employment Commitment Date and for one calendar month after the Repayment Period, Company will submit to City's Director of Finance Company's statements which shall be public records showing the Quarterly Employees for the preceding Quarter and the basis upon which Quarterly Employees and Company's Quarterly Payment, if any, were computed certified by an officer of the Company to be true and correct. For purposes of verifying such employment, City shall have access to Company's records relating to Company's employees employed at the Facility. Except in the event of any action filed by City to enforce this Agreement or pursuant to court order or subpoenas, City shall treat Employees' Records other than the number of employees as confidential and shall not disclose such information to any party other than those City employees who have a need to know such information. (d) If Company defaults in its Repayment Obligation, and such default is not cured within thirty (30) days after written notice specifying the default is given by City to Company, then in such event, City may declare the entire balance of Company's Repayment Obligation due and owing together with interest thereon at the rate of six (6) percent per annum, and for such purpose, the entire balance of Company's Repayment Obligation shall be an amount equal to 120 times $260.00 increased by one and one -half percent (1.5 %) for each Quarter of the Repayment Period which has then expired, multiplied by the Remaining Quarters of the Repayment Period, plus the amount of Company's unpaid Quarterly Payments, if any. Company's Repayment Obligation is absolute and unconditional and shall not be abated, reduced, diminished, modified, withheld or otherwise offset for any cause or reason whatsoever. 5. The Repayment Obligation set forth in Paragraph 4 hereof shall be deemed to be a debt of Company payable to City until Company performs and discharges its obligations hereunder including its Repayment Obligation. Company's obligations hereunder including the Repayment Obligation shall be secured by a prior perfected first security interest in the Equipment, and all substitute, replacement and after acquired equipment and proceeds thereof. Company shall execute and deliver all required Security Agreements and UCC Financing Statement in form and content approved by City's legal counsel to effect such security interest prior to the disbursement of City Funds to Company. 6. (a) Prior to instituting any proceeding to enforce Company's Repayment Obligation under Paragraph 4, City shall notify Company in writing of its intention to institute such proceedings. Company may request relief from its Repayment Obligation by delivering to City within twenty (20) days after date of City's notice, Company's written request for relief specifying the grounds upon which such relief is sought together with documents supporting said grounds. Within ninety (90) days after receipt of Company's request, City will schedule a meeting with the City Council at which Company may appear. City will notify Company of the time and place of the meeting. Failure of Company to timely deliver its complete written request for relief or to appear at the scheduled meeting with the City Council shall entitle City to immediately institute proceedings to enforce Company's Repayment Obligation. (b) City Council may or may not, in its sole and absolute discretion, relieve Company, in whole or in part, from Company's Repayment Obligation. Any action taken by the City Council relating to a request for relief shall be final and binding on Company, and not subject to judicial review. Any such action by City Council is, and shall constitute, a legislative measure. Nothing contained in this Paragraph 6 shall grant or be construed to grant to Company any right or claim to relief from its Repayment Obligation or hearing with respect thereto. (c) No delay by the City in scheduling a meeting, or failure by City to exercise its right to enforce this Agreement, including Company's Repayment Obligation, and no partial or single exercise of that right, shall constitute a waiver of that right. 7. In the event of any litigation arising out of this Agreement, the court shall award to the prevailing party its costs and expenses, including reasonable attorney fees. Venue for any such litigation shall be in Pueblo County, Colorado. All such litigation shall be filed in the District Court, County of Pueblo, State of Colorado and each party submits to the jurisdiction of such District Court. To the extent allowed by law, each party waives its right to a jury trial. 8. This Agreement expresses the entire understanding of the parties and supersedes and abrogates any and all prior dealings and commitments, whether oral or written, with respect to the subject matter of this Agreement and may not be amended or modified except in writing signed by City and Company. Any waiver of any provision of this Agreement must be in writing and signed by the party whose rights are being waived. No waiver of any breach of any provision hereof shall be or be deemed to be a waiver of any preceding or subsequent breach of the same or any other provision of this Agreement. The failure of either party to enforce or seek enforcement of the terms of this Agreement following any breach shall not be construed as a waiver of such breach. 9. This Agreement shall be construed in accordance with and be governed by the laws of the State of Colorado without regard to conflict of law principles. 10. Any notices hereunder shall be sufficiently given if given in writing personally or mailed by first class, registered, or certified mail, postage prepaid, or transmitted by hand delivery, or delivered by a nationally recognized overnight courier, addressed as follows: (a) if to City, City Manager, City of Pueblo, I City Hall Place, Pueblo, Colorado, 81003, with copy to Thomas E. Jagger, City Attorney, 503 N. Main Street, Suite 127, Pueblo, Colorado, 81003, or (b) if to the Company, Vercuity Solutions, Inc., 5889 S. Greenwood Village Boulevard, Suite 300, Greenwood Village, Colorado, 80111, or to such other address as either party shall specify in written notice given to the other party pursuant to the provisions of this Paragraph 10. 11. Time is of the essence hereof. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, provided Company may not assign this Agreement or any interest herein without the express written consent of the City Council of City by Resolution, which consent may not be arbitrarily withheld, conditioned or delayed. Any assignment or attempted assignment of this Agreement by Company without such consent shall be null and void. 12. The persons signing this Agreement in the name of and on behalf of Company represent and warrant that they and Company have the requisite power and authority to enter into, execute, and deliver this Agreement, and that this Agreement is a valid and legally binding obligation of Company enforceable against Company in accordance with its terms. 13. Company represents and warrants that no person, entity, or organization has been employed or retained or will receive or be paid, directly or indirectly, any commission, percentage, contingent fee or any other remuneration payment or receipt of which is contingent upon approval of this Agreement or City's advancement of City Funds to Company hereunder. For breach or violation of this warranty, City shall have the right to terminate this Agreement, or recover the full amount of such commission, percentage, contingent fee or other remuneration, or to seek such other remedies legally available to City, which remedies shall be cumulative. 14. In no event shall City, its officers, agents or employees be liable to Company for damages, including without limitation, compensatory, punitive, indirect, special or consequential damages, resulting from or arising out of or related to this Agreement or the performance or breach thereof by City or the failure or delay of City in the performance of any covenant or provision under this Agreement on its part to be performed. In consideration of City entering into this Agreement, Company hereby waives and discharges City, its officers, agents and employees from all claims for any and all such damages. No breach, default, delay or failure of City under this Agreement shall be or be construed to be a waiver, discharge or release of Company's Repayment Obligation under Paragraph 4 hereof. 15. If any provision of this Agreement is declared by a court of competent jurisdiction to be invalid or unenforceable, such determination shall not affect the other provisions of this Agreement which shall remain in full force and effect. 16. Neither party shall be, or hold itself out as, agent of the other or as joint ventures under this Agreement. 17. Each party acknowledges that this Agreement was fully negotiated by the parties and, therefore, no provision of this Agreement shall be interpreted against any party because such party or its legal representative drafted such provision. 18. The provisions of this Agreement are for the exclusive benefit of the parties hereto and their successors and permitted assigns, and no third party shall be a beneficiary, or have any rights by virtue of, this Agreement. 19. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed for all purposes to be an original, and all such counterparts shall together constitute but one and the same original. 20. The Modification Agreement is hereby cancelled and superseded by this Agreement except that (i) MSS Group, Inc.'s representations and warranties set forth in Paragraphs 2(e) and 13 of the Modified Agreement, and (ii) MSS Group, Inc. Is Security Agreement and UCC Financing Statement filed as Instrument No. 20032046593M on May 1, 2003 in the office of The Colorado Secretary of State to secure payment of City Funds advanced to MSS Group, Inc. under the Modified Agreement shall continue in full force and effect and be binding upon and inure to the benefit of City and Company. Executed at Pueblo, Colorado, the day and year first above written. [SEAL] t1 Attest: v. Cit Jerk [SEAL] corporation Pu,erb � unicipal Corporation ,p President of the City Council Verc 'ty Solutions Inc., a Delaware By Name:- b: 1/ p 'C LtcNl. Title: (c u p r CFO [SEAL]