HomeMy WebLinkAbout12481RESOLUTION NO. 12481
A RESOLUTION APPROVING THE AGREEMENT
BETWEEN PUEBLO, A MUNICIPAL CORPORATION, AND
PEWAG TRACTION CHAIN, INC. RELATING TO A JOB
CREATING CAPITAL IMPROVEMENT PROJECT,
AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL
TO EXECUTE SAID AGREEMENT, AND TRANSFERRING
$950,000 FROM THE 1992 -2016 SALES AND USE TAX
CAPITAL IMPROVEMENT PROJECTS FUND THEREFOR
BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that:
SECTION 1
The City Council finds and determines that the expenditure of $950,000 for the
job creating capital improvement project with Pewag Traction Chain, Inc. described in
the attached Agreement dated September 10, 2012, meets and complies with the
criteria and standards established by Ordinances No. 6381, 7583 and 7836 and will
create employment opportunities justifying the expenditure of public funds.
.qFr.TInN 9
The Agreement dated as of September 10, 2012 between Pueblo, a Municipal
Corporation and Pewag Traction Chain, Inc. relating to a job creating capital
improvement project, 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 Agreement in the name of the City and the City
Clerk is directed to affix the seal of the City thereto and attest same.
SECTION 3.
Funds in an amount of $950,000 are hereby authorized to be transferred,
expended and made available to Pewag Traction Chain, Inc. out of the 1992 -2016
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 Agreement.
The funds hereby authorized to be transferred and expended shall be held by the City
and released, disbursed and paid by the Director of Finance to or for the benefit of
Pewag Traction Chain, Inc. upon compliance with section 2(b) of the Agreement and
after receipt by the Director of written requests for payment in compliance with
paragraph 2(c) 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 Agreement to effectuate the
transactions described therein.
SECTION 5
This Resolution shall become effective upon final approval and passage.
ATTEST:
City lerk
INTRODUCED: September 10, 2012
BY: Sandy Daff
COUNCIL PERSON
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Background Paper for Proposed
RESOLUTION
DATE: September 10, 2012
DEPARTMENT: Law Department
Thomas J. Florczak, City Attorney
TITLE
AGENDA ITEM # Q -3
A RESOLUTION APPROVING THE AGREEMENT BETWEEN PUEBLO, A MUNICIPAL
CORPORATION, AND PEWAG TRACTION CHAIN, INC. RELATING TO A JOB - CREATING
CAPITAL IMPROVEMENT PROJECT, AUTHORIZING THE PRESIDENT OF THE CITY
COUNCIL TO EXECUTE SAID AGREEMENT, AND TRANSFERRING $950,000 FROM THE
1992 -2016 SALES AND USE TAX CAPITAL IMPROVEMENT PROJECTS FUND THEREFOR
ISSUE
Should City Council approve the Agreement between the City and Pewag Traction
Chain, Inc.?
RECOMMENDATION
Approve the Agreement.
BACKGROUND
Pewag Traction Chain, Inc., a Colorado corporation ( "Company ") intends to construct
and operate a chain manufacturing facility within the City of Pueblo. The Agreement
authorizes the expenditure of $950,000 from the 1992 -2016 Sales and Use Tax Capital
Improvement Projects Fund ( "Funds ") as an employment incentive for 55 full -time
employees whose annual compensation shall average at least $35,500. Funds will be
used for the purchase of industrial equipment for the facility. If Company defaults in its
employment commitment, Company will repay the Funds on a pro -rata basis. The
employment commitment date is four (4) years from the completion of the facility or
issuance of required permits, whichever is later, and the repayment period is 7 years
after the employment commitment date. Company's repayment obligation will be
secured by a first security interest in equipment.
FINANCIAL IMPACT
See Background.
9/7/2012
AGREEMENT
THIS AGREEMENT ( "Agreement ") is entered into as of September 10 , 2012 between
Pueblo, a Municipal Corporation (the "City ") and Pewag Traction Chain, Inc., a Colorado
corporation (the "Company ").
WHEREAS, Company has expressed a willingness to locate its manufacturing facility
within the City of Pueblo, Colorado, and in furtherance thereof has, through the Pueblo
Economic Development Corporation ( "PEDCO "), made application for funds and other
economic incentives to the City, and
WHEREAS, PEDCO has recommended to the City Council of Pueblo that City approve
such application, and
WHEREAS, based upon PEDCO's recommendation, the City Council has approved such
application and is willing to make funds available to Company subject to and upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained in this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, City and Company agree as follows:
I. Definitions The following terms as used in this Agreement shall have the
following meaning unless the context clearly indicates otherwise:
"Effective Date" means the date of approval of this Agreement by City Council of City.
"Employment Commitment Date" means the date which is exactly four years after the
date of the Certificate of Occupancy for the Facility or the issuance of required environmental
permits for the Facility, whichever is later.
"Company Investment" means the investment of funds provided by Company for
constructing and equipping its Facility, including building, fixtures and Equipment.
"Equipment" means industrial equipment to be acquired, installed, maintained and used
by Company in the Facility, all of which Equipment shall have a useful economic life of not less
than 120 months.
"Facility" means the manufacturing facility to be located on property, commonly known
as 190 Greenhorn Drive, Pueblo, Colorado, wherein Company will conduct its manufacturing
operations.
"Full -Time Employee" means a person who actually performs work at the Facility for not
less than thirty -five (35) hours per week at an average annual salary of not less than $35,500 per
year, whether employed by Company or by an outside entity acting as an employment agency to
provide Full -Time Employees for Company. The term "Full -Time Employee" does not include
independent contractors or subcontractors, or their employees, such as food, cleaning, or
janitorial service employees, nor officers or shareholders of Company.
"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
employed by Company at the Facility on each business day of a Quarter, divided by the sum of
the total number of business days in such Quarter.
"Salary" means direct base salary payable to a Full -Time Employee, including vacation
pay and benefits. The term does not include overtime compensation, bonuses, or payroll taxes.
"Security Agreement" means the security agreement and related instruments executed by
Company as provided in Section 6 of this Agreement.
2. Incentive and Conditions Precedent to Disbursement If Company is not in
default of any term or provision of this Agreement, and provided that Company's financial
condition has not significantly changed such that the City finds, in its sole discretion, that the
transaction is no longer commercially reasonable or in the best interest of the City, and further
provided that all conditions precedent to release of funds have been satisfied, City will, after the
Effective Date, undertake the following actions, subject to and contingent upon the following
conditions and covenants which Company agrees to perform and comply with:
(a) City will disburse funds in an amount not to exceed U.S. $950,000.00 to
Company solely for reimbursement for the acquisition, installation and initial calibration cost of
Equipment by Company at fair market value from a reputable vendor in an arms- length
transaction; except that Company may acquire up to 80% of the Equipment from a related
corporation or business entity for the purpose of complying with Section 6 of this Agreement.
Acquisition of equipment from any person or entity related to or a subsidiary of Company is not
an arms- length transaction. Any portion of the Equipment acquired from a related corporation or
business entity shall be supported by an independent appraisal or valuation opinion by a
qualified person or firm. Company shall grant to City a perfected first security interest in all
Equipment for which Company receives reimbursement from City by execution of a Security
Agreement which identifies the Equipment in accordance with section 6 of this Agreement.
(b) 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 the Security Agreement required by
section 6 of this Agreement, and authorizing its officers to execute and deliver this Agreement,
the Security Agreement, and related documents in the name of Company, (iii) this Agreement,
and Security Agreement executed by authorized officers of Company, and (iv) evidence
reasonably satisfactory to City that Company will locate and commence manufacturing
operations at the Facility. The date of the last to occur of the filings required under (i), (ii), (iii),
and (iv) of this section 2(b) shall be referred to herein as "Closing ". If Closing does not occur on
or before November 1, 2012, or such later date as Company and City shall mutually agree in a
signed written amendment to this Agreement, City, at its sole option, may terminate this
Agreement and City and Company shall thereafter be released and discharged from all
obligations hereunder.
(c) As conditions precedent to the disbursement of City Funds for the
acquisition of Equipment, Company shall file (i) with the City Clerk, the documents described in
subsection (b) above, and (ii) with the City's Director of Finance, a written request or requests
for payment, certified to be true and correct by an officer of Company, representing that the
amounts included in the request for payment have not been included in any prior request for
payment and are for the actual and reasonable cost of Equipment paid by Company, identifying
the Equipment for which payment is sought, including paid invoices therefor and certificates of
delivery and installation in the Facility. At the time of delivery of the Security Agreement, no
creditor of Company shall have a security interest in the Equipment; except that if any other
creditor holds a security interest in the Equipment, it shall be subordinated to the City's security
interest and the creditor shall execute such subordination instruments as the City Attorney of
City may reasonably require.
3. City and Company stipulate and agree that the total economic incentives provided
by City to Company under this Agreement is U.S. $950,000.00 (the "Total Economic
Incentives ").
4. Company acknowledges and agrees that the primary purpose of City in entering
into this Agreement and the sole benefit to the City for making the Total Economic Incentives
available to Company hereunder is the creation of jobs. Therefore, Company represents,
covenants, and agrees that Company will on and after the Employment Commitment Date
continuously conduct its business operations at the Facility and expend a minimum of
$1,950,000 in salaries annually by employing not less than fifty -five (55) Full -Time Employees
annually at the Facility. In addition, Company will use good faith efforts to (i) employ residents
of the County of Pueblo as Full -Time Employees including, without limitation, engaging in
reasonable programs and posting of employment openings in the City of Pueblo, and (ii) engage
engineers, architects, contractors and suppliers whose principle places of business are located in
Pueblo County, Colorado, in all construction work for or related to the Facility.
5. Notwithstanding anything contained in this Agreement to the contrary, if
Company shall for any reason default in or fail to meet its Employment Commitment, Company
shall repay to City a pro -rata share of the Total Economic Incentives based upon the number of
Full -Time Employees actually employed by Company at the Facility (the "Repayment
Obligation "), as follows:
(a) During the seven (7) year period starting on the Employment Commitment
Date and ending eighty -four (84) months thereafter (the "Repayment Period ") Company shall
pay to City an amount for each Quarter equal to the Quarterly Employees less than fifty -five (55)
Full -Time Employees employed at the Facility by Company multiplied by the Adjusted
Quarterly Repayment Capitation. The Adjusted Quarterly Repayment Capitation as of the date
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of this Agreement shall be U.S. $616.88. The Adjusted Quarterly Repayment Capitation shall be
adjusted on February 15 of each year beginning February 15, 2013 (and shall apply retroactively
as of the preceding January 1) by the 12 month percentage increase over the previous year of the
Consumer Price Index for "All Urban Consumers (CPI -U) All Items (1982 -1984 = 100)" for
Denver - Boulder - Greeley published by the Bureau of Labor Statistics of the United States
Department of Labor (the "Bureau "); provided that if the Bureau ceases to publish the CPI -U or
substantially and materially changes its composition, the City and Company shall agree to and
use a comparable published statistic or index to adjust the Adjusted Quarterly Repayment
Capitation to adjust for inflation. For example, if for the second Quarter of the third year after
the Employment Commitment Date the Adjusted Quarterly Repayment Capitation is U.S
$650.00, and such Quarterly Employees are 45, the amount payable by Company to City on or
before the fifteenth (15 day of the next calendar month would be (55 -45) x U.S. $650.00 =
U.S. $6,500.00.
(b) Company's Quarterly Payments, if any, shall be paid to the City without
notice, demand, deduction or setoff on or before the fifteenth (15th) day of the month following
the end of each Quarter during the Repayment Period at the office of the Director of Finance of
City, 150 Central Main Street, Pueblo, Colorado, 81003, or to such other person or location as
the City may designate. All past due Company's Quarterly Payments shall bear interest at the
rate of eight percent (8 %) per annum ( "Default Interest ") until paid.
(c) Within fifteen (15) 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 showing the Quarterly
Employees for the preceding Quarter and their annual salary, together with 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 Company's
employment and salary, City shall have access to and the right to audit Company's records
relating to Company's employees employed at the Facility, which records shall be made
available to City in Pueblo, Colorado, during reasonable business hours.
(d) If Company defaults in any of its obligations under this Agreement
including, without limitation, 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, the entire balance of Company's Repayment Obligation shall become due and
payable, without notice, notice being hereby expressly waived, together with Default Interest
from the date of default, and for such purpose, the entire balance of Company's Repayment
Obligation shall be an amount equal to 55 times $616.88 or the then applicable Adjusted
Quarterly Repayment Capitation, whichever is greater, multiplied by the remaining Quarters of
the Repayment Period plus the amount of Company's unpaid Quarterly Payments, if any, plus
Default Interest. 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.
6. Security Company's Repayment Obligation under this Agreement shall be
deemed to be a debt of Company payable to City until Company performs and discharges its
obligations hereunder including, without limitation, its Repayment Obligation. Company's
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obligations hereunder including, without limitation, its Repayment Obligation. Company's
obligations under this Agreement including its Repayment Obligation shall be secured by a
perfected first security interest in the Equipment, which Equipment (not including any costs of
installation or calibration) shall have a fair market value of not less than the amount of the Total
Economic Incentives at the time placed in service at the Facility. Contemporaneously with the
execution of this Agreement, Company shall execute and deliver to City Company's Security
Agreement, Financing Statement and other documents required to perfect a first security interest
in the Equipment all in form and content approved by City's City Attorney (the "Security
Agreement "). Company hereby authorizes City to file Financing Statements with appropriate
state offices in Colorado and Company's state of incorporation to perfect City's security interest
in the Equipment.
7. (a) Notice to Commence Enforcement Prior to instituting any judicial
proceeding to enforce Company's Repayment Obligation, City shall notify Company in writing
of its intention to institute such proceeding. 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 of City ( "City Council ") open to the public at
which meeting Company may appear. City will notify Company of the time and place of the
meeting at least ten (10) days before 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 or extend or modify
same, based upon, by way of example, occurrence of an act of God or event of force majeure
which delays or prevents timely performance by Company. 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 purely legislative
measure. Nothing contained in this section 7 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.
8. Litigation In the event of any litigation arising under this Agreement, the court
shall award to the prevailing party its costs and reasonable attorney fees. In the case of City,
City may also recover reasonable attorney fees for the time expended by attorneys in its Law
Department in connection with such litigation. Exclusive venue for any such litigation shall be
Pueblo County, Colorado. All such litigation shall be filed in the District Court in and for the
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.
9. Complete Agreement 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.
10. Controlling Law 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.
11. Notices Any notices hereunder shall be sufficiently given if given in writing
personally or mailed by first class, or certified mail, postage prepaid, or deposited with a national
overnight courier service for next business day delivery addressed:
(a) if to City, City Manager, City of Pueblo, 1 City Hall Place, Pueblo,
Colorado, 81003, with a copy to City Attorney, 503 N. Main Street, Suite 203, Pueblo, Colorado,
81003;
(b) if to the Company, Pewag Traction Chain, Inc., Attention: Michael
Uhrenbacher 600 W. Crossroads Parkway, Bolingbrook, IL 60440,
or to such other person or address as either party shall specify in written notice given to the other
party pursuant to the provisions of this section 11. Notice shall be effective (i) upon receipt if
delivered personally, or (ii) three (3) business days after deposit in the mail, if mailed, or (iii) on
the next business day if deposited with a national overnight courier service.
12. Time 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 City,
which consent will not be unreasonably withheld. Any assignment or attempted assignment of
this Agreement by Company without such consent shall be null and void. No assignment of this
Agreement or any interest herein by Company shall release or discharge Company from any of
its obligation or liability under this Agreement unless otherwise agreed by City at the time
consent to assignment is given.
15. Execution 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.
16. Anti - kickback Prohibition Company represents and warrants that no person,
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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 providing the Total
Economic Incentives hereunder, or any part thereof. 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, and /or to seek such other
remedies legally available to City, which remedies shall be cumulative.
17. No Damages 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.
18. No Agency Created PEDCO and Pueblo Development Foundation
( "Foundation ") are entities independent from the City. Neither PEDCO nor Foundation shall be
deemed agents of the City, nor shall either have the authority to modify this Agreement nor to
bind the City to any amendment. It is expressly agreed that the City shall have no liability
whatsoever for any breach of any lease or other agreement or obligation, if any, between
PEDCO, Foundation and Company or any of them.
19. Severability 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.
20. No Joint Venture Created Neither party shall be, or hold itself out as, agent of
the other or as joint venturers under this Agreement.
21. Interpretation 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.
22. No Third- Party Beneficiaries 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.
23. Counterparts 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.
Executed at Pueblo, Colorado, the day and year first above written.
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Attest:
Pueblo, a Municipal Corporation
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PEWAG, TRA TION CHAIN INC.
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