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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 r' ,, �� „ . 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 3 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 rd 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, 2 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. 7 i [SE,,A,,L] Attest: Pueblo, a Municipal Corporation B 4rdedt o e City Council [SEAL] PEWAG, TRA TION CHAIN INC. By "�� Name: «itiae L A/ r��r c�r•'r Title: Prell?eo L