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HomeMy WebLinkAbout12778 RESOLUTION NO. 12778 A RESOLUTION APPROVING AN EMPLOYMENT AGREEMENT BETWEEN PUEBLO, A MUNICIPAL CORPORATION, AND THE WALTER BREWING COMPANY – WALTER’S BEER, LLC RELATING TO A JOB CREATING CAPITAL IMPROVEMENT PROJECT AND AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAID AGREEMENT BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. The City Council finds and determines that the expenditure of $150,000 for the job creating capital improvement project with The Walter Brewing Company – Walter’s Beer, LLC (“Walter’s Beer”), a Colorado limited liability company, described in the attached Agreement, meets and complies with the criteria and standards established by Section 14-4-85 of the Pueblo Municipal Code and will create employment opportunities justifying the expenditure of public funds. SECTION 2. The Agreement dated September 9, 2013 between Pueblo, a Municipal Corporation and Walter’s Beer, relating to a job creating capital improvement project, a copy of which is attached hereto ("Agreement"), 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 the aggregate amount of $150,000 are hereby authorized to be transferred, expended and made available out of the 1992 – 2016 Sales and Use Tax Capital Improvement Projects Fund for the sole purpose of the job creating capital improvement project authorized herein and in the manner described in the Agreement. The funds hereby authorized shall be paid by the Director of Finance to Walter’s Beer. SECTION 4. The officers and staff of the City are directed and authorized to perform any and all acts consistent with the intent of this Resolution and attached Agreement which are necessary to effectuate the transactions described therein. SECTION 5. This Resolution shall become effective upon passage and approval. INTRODUCED: September 9, 2013 BY: Eva Montoya Background Paper for Proposed RESOLUTION DATE: SEPTEMBER 9, 2013 AGENDA ITEM # M-3 DEPARTMENT: Law Department Daniel C. Kogovsek, City Attorney TITLE A RESOLUTION APPROVING AN EMPLOYMENT AGREEMENT BETWEEN PUEBLO, A MUNICIPAL CORPORATION, AND THE WALTER BREWING COMPANY – WALTER’S BEER, LLC RELATING TO A JOB CREATING CAPITAL IMPROVEMENT PROJECT AND AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAID AGREEMENT ISSUE Should the City enter into an Employment Agreement with The Walter Brewing Company – Walter’s Beer, LLC (“Walter’s Beer”) and transfer funds in the amount of $150,000 from 1992-2016 Sales and Use Tax Capital Improvement Project Fund to Walter’s Beer for the acquisition of manufacturing equipment? RECOMMENDATION PEDCO recommends approval of this Resolution. BACKGROUND Walter’s Beer is a Colorado limited liability company which is interested in opening a beer manufacturing facility in the City of Pueblo. The Agreement authorizes the expenditure of $150,000 from 1992-2016 Sales and Use Tax Capital Improvement Project Fund to Walter’s Beer as an employment incentive for eleven (11) full-time employees whose annual compensation shall average at least $40,600. The funds will be used to compensate the company for the acquisition of manufacturing equipment. In compliance with the criteria ordinance, the majority of the company’s product will be marketed and sold outside of Pueblo County. As security for the employment commitment, the City will take a first security interest in Walter’s Beer’s manufacturing equipment and the owners of the company will sign personal guarantees. FINANCIAL IMPACT $150,000 from 1992-2016 Sales and Use Tax Capital Improvement Project Fund. AGREEMENT THIS AGREEMENT ( "Agreement ") is entered into as of September 9, 2013 between Pueblo, a Municipal Corporation (the "City ") and The Walter Brewing Company — Walter's Beer, LLC, a Colorado limited liability company (the "Company "). WHEREAS, Company has expressed a willingness to locate a manufacturing facility within the City of Pueblo, and in furtherance thereof has, through the Pueblo Economic Development Corporation, made application for funds and other economic incentives to the City, and WHEREAS, Company's business plan is centered on manufacturing beer for distribution outside of Pueblo County, with some level of sales in Pueblo County while establishing its distribution market ( "Company's Business "), and WHEREAS, the City has determined that Company's Business will create primary jobs and will not materially and substantially compete with any existing activity or business within the City, and WHEREAS, in connection with its application, Company has committed to invest not less than U.S. $500,000 in fixed assets in a manufacturing facility it will locate within the City of Pueblo, and to provide the employment described in section 4 of this Agreement; and WHEREAS, the City has approved such application and will make certain funds and other economic incentives available to Company subject to and upon the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the foregoing and the 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: "Company's Business" means a business plan with projected sales of manufactured product as follows: Year % Sold Outside of Pueblo County % Sold Within Pueblo County 2014 55 45 2015 and later 70 30 "Effective Date" means the date of approval of this Agreement by City Council of City. "Employment Commitment Date" means January 1, 2014. 2346011.3 "Equipment" means the manufacturing equipment, including brewery equipment and other related machinery to be acquired, installed and maintained and used by Company in the Facility and listed on Exhibit A attached hereto and incorporated by reference. "Facility" means the manufacturing facility located at 126 S. Oneida Street, Pueblo CO 81003, wherein Company will conduct its manufacturing operations for production of goods for distribution and sale outside of Pueblo County, Colorado. "Full -Time Employee" means a person who actually performs work at the Facility for not less than thirty -five (35) 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 employees performing work at the Facility who are employees of an independent contractor acting as an agency to provide Full -Time Employees for 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 on each business day of a Quarter, divided by the sum of the aggregate business days in such Quarter. "Salary" means direct compensation payable to an employee including vacation pay, bonuses, overtime compensation and the amount of any pretax benefits paid by the employee under flexible spending or other qualified plans. The term does not include employer paid payroll taxes nor benefits such as employer paid health insurance. "Security Agreement" has the meaning set forth in Section 6 of this Agreement. 2. If Company is not in default hereunder, City will, after the Effective Date, disburse, for the benefit of Company, funds in an amount not to exceed U.S. $150,000 ( "City Funds "); subject to and contingent upon the following conditions and covenants which Company agrees to perform and comply with: (a) City Funds will be disbursed by City to Company solely for reimbursement for the acquisition of Equipment by Company at fair market value from a reputable vendor in an arms- length transaction. If, for purposes of timing, equipment is purchased through an intermediary, the Company shall provide documentation acceptable to the City showing that there was no mark -up from the original purchase price including required transportation and installation. 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, together with Company's certificate of good standing issued by the governmental jurisdiction of Company's formation, (ii) certified copy of the resolution of the governing board of Company approving this Agreement and authorizing its 2 officers to execute and deliver this Agreement and related documents in the name of Company, (iii) this Agreement executed by authorized officers of Company, and (iv) evidence reasonably satisfactory to City that Company will 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(a) shall be referred to herein as "Closing ". If either the Effective Date or Closing does not occur on or before October 1, 2013, or such later date as Company and City shall mutually agree, 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 purchase of manufacturing equipment, (i) Company shall file with the City Clerk the documents described in subsection (a) above, and (ii) Company shall file with the City's Director of Finance periodic written 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 cost of manufacturing equipment, identifying the specific equipment for which payment is sought, including paid invoices therefore and certificates of delivery and installation in the Facility. Company shall not submit requests for payment which exceed in the aggregate U.S. $150,000.. 3. City and Company stipulate and agree that the total economic incentives provided by City to Company under this Agreement shall not exceed U.S. $150,000 (the "Total Economic Incentives "). 4. (a) 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 additional jobs within the City. Therefore, Company represents, covenants, and agrees that Company will from the third anniversary of the Employment Commitment Date to the thirteenth (13`") anniversary of the Employment Commitment Date, continuously conduct its business operations at the Facility and employ not less than eleven (11) Full -Time Employees at the Facility whose annual salary shall average at least U.S. $40,600 (collectively, the "Employment Commitment "). (b) Company will use good faith efforts in accordance with its sound business practices to (i) employ residents of the City of Pueblo or (ii) 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, 5. Notwithstanding anything contained in this Agreement to the contrary, if Company shall for any reason default in 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 employed by Company at the Facility (the "Repayment Obligation "), as follows: (a) During the ten (10) year period starting on the third anniversary of the Employment Commitment Date and ending one - hundred - twenty (120) months thereafter (the "Repayment Period "), Company shall pay to City an amount for each Quarter equal to the Quarterly Employees less than the number of Full -Time Employees required for such period under the Employment Commitment employed at the Facility by Company multiplied by the 3 Adjusted Quarterly Repayment Capitation (the "Company's Quarterly Payments "). The Adjusted Quarterly Repayment Capitation as of the date of this Agreement shall be U.S. $340.91. The Adjusted Quarterly Repayment Capitation shall be adjusted on February 1 each year beginning February 1, 2015 (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 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. $345.25, and such Quarterly Employees are 9, the amount payable by Company to City on or before the fifteenth (15th) day of the next calendar month would be (11 - 9) x U.S. $345.25 = U.S. $690.50. (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 such other person or location as the City may designate. All past due Company's Quarterly Payments shall bear interest at the rate of two percent (2 %) 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 Company to be true and correct. For purposes of verifying Company's employment and salary, for a period of three (3) years after receipt of a Quarterly Statement from the Company, City shall have access to and the right to audit Company's records relating to Company's employees employed at the Facility. (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 11 times the then applicable Adjusted Quarterly Repayment Capitation, multiplied by the remaining Quarters of the Repayment Period, plus the amount of Company's unpaid Quarterly Payments, if any, but in no event more than the amount of the Total Economic Incentives actually provided by City to Company, plus Default Interest from the date due until paid. 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. 4 6. 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 obligations under this Agreement including its Repayment Obligation shall be secured by a Continuing Guarantee (a copy of which, marked as Exhibit B, is attached hereto and is incorporated herein by reference) executed by Andrew L. Sanchez, Afton Volk and Richard Bailey. Company's obligations under this Agreement including its Repayment Obligation shall also be secured by a perfected first security interest in the Equipment, which Equipment shall have a fair market value of not less than the amount of the City Funds requested for reimbursement for Equipment at the time placed in the Facility. By way of example, if a request for reimbursement for Equipment placed at the facility is made in the amount of U.S. $150,000, then at that time the value of the Equipment placed at the facility for which no previous reimbursement request has been submitted shall have a value of at least U.S. $150,000. Prior to any disbursement of funds by City for Equipment, 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 Attorney (the "Security Agreement "). Company may be permitted from time to time to substitute items of replacement Equipment for items of Equipment removed from the Facility, provided that an amended Security Agreement meeting the requirements of this section is executed and delivered identifying the substitute items of Equipment and deleting the item of Equipment being replaced. 7. (a) Prior to instituting any proceeding to enforce Company's Repayment Obligation, 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 of City ( "City Council ") at which meeting 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 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. In the event of any litigation arising under this Agreement, the court shall award to the prevailing party its costs and reasonable attorney fees. Exclusive venue for any such litigation shall be Pueblo County, Colorado. All such litigation shall be filed in the District Court 5 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. 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 any 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. 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. Any notices hereunder shall be sufficiently given if given in writing personally or mailed by first class, registered, or certified mail, postage prepaid, addressed: (a) if to City, City Manager, City of Pueblo, 200 S. Main Street, Pueblo, CO, 81003 with a copy to City Attorney, 503 N. Main Street, Suite 203, Pueblo, CO 81003; (b) if to Company, Andrew L. Sanchez, Member, The Walter Brewing Company- Walter's Beer, LLC, 126 S. Oneida Street, Pueblo, CO 81003, 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. 12. 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 shall not be unreasonably withheld. Any assignment or attempted assignment of this Agreement by Company without such consent shall be null and void. No such assignment nor City's consent thereto shall release or discharge Company from any obligation or liability under this Agreement. 13. The persons signing this Agreement in the name of and on behalf of Company and City each represent and warrant that they have the requisite power and authority on behalf of their respective entity to enter into, execute, and deliver this Agreement, and that this Agreement is a valid legally binding obligation of Company and City enforceable in accordance with its terms. 14. (a) 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 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 6 other remuneration, and /or to seek such other remedies legally available to City, which remedies shall be cumulative. (b) Company agrees to indemnify, defend and hold City, its officers, agents and employees harmless from and against all claims and actions arising from the purchase, installation or use of the Equipment at the Facility. 15. 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. Except for the City's disbursement of City Funds for the benefit of Company as provided in Paragraph 2 above, 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. 16. 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. 17. None of the parties shall be, or hold itself out as, agent of any other party or as a partner or joint venturer under this Agreement. 18. 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. 19. Pursuant to P.M.C. Sec. 14- 4- 85.3(b)(5), Company agrees that it will not alter Company's Business so as to materially and substantially compete with an existing business within the City. Company further agrees that, during the term of its employment commitment, as scheduled in Section 4(a) of this Agreement, except for beer tastings at its manufacturing facility and as allowed by the State of Colorado manufacturing and wholesale licenses, Company will not directly sell alcoholic beverages, on a retail basis, to the public. In addition, Company agrees that, during the term of its employment commitment, as scheduled in Section 4(a) of this Agreement, Company will not apply for nor obtain a Brew Pub License pursuant to C.R.S 12 -47- 415. If Company violates this Section 19 of this Agreement, the entire balance of Company's Repayment Obligation shall become immediately due and payable and the City may pursue the remedies outlined in Section 5(d) of this Agreement. This prohibition applies to businesses in existence within the City as of the date of this Agreement. 20. Pursuant to P.M.C. Sec. 14 -4- 85.1(7), Company agrees that, in accord with Company's Business, it will manufacture and distribute products which will primarily or ultimately be sold, consumed or used outside of the City and County of Pueblo. If Company violates this Section 20 of this Agreement, the entire balance of Company's Repayment 7 Obligation shall become immediately due and payable and the City may pursue the remedies outlined in Section 5(d) of this Agreement. 21. 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. 22. 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. [S E A L] Attest: Pueb t , a icipa ..i ration City Jerk President of the City Council [S E A L] The Walter Brewing Company — Walter's Beer, LLC, a Colorado limited liability company Attest: d a c e - • *i 1 �/ - li r By Name: V' 67S, Name: A w ,. 'F?` z ' Title: ► �: �i�� 1 Title: Member 8 STATE OF COLORADO UNIFORM COMMERCIAL CODE — SECURITY AGREEMENT Debtor: Name: The Walter Brewing Company - Walter's Beer, LLC, a Colorado limited liability company (Exact Legal Name Required) Address: Residence: No. Street City State Business: 126 S. Oneida Street Pueblo CO No. Street City State Secured Party: Name: City of Pueblo, Colorado, a Colorado municipal corporation Address: 1 City Hall Place Pueblo CO No. Street City State Debtor, for consideration, hereby grants to Secured Party a security interest in the following property and any and all additions, accessions and substitutions thereto or therefor (hereinafter called the "COLLATERAL "): The Collateral is described in Exhibit A which is attached hereto and is incorporated herein by reference. To secure payment of the indebtedness evidenced by a certain promissory note of even date herewith, payable to the Secured Party, or order, as follows: Debtor and Secured Party entered into an Agreement dated September 9, 2013 (the "Agreement ") whereby Debtor agreed to pay Secured Party the principal sum in an amount not to exceed $150,000.00 (the "Indebtedness ") and to perform certain other obligations described in the Agreement. Debtor is desirous of securing payment of the Indebtedness and performance of the Agreement on Debtor's part to be performed. Whenever the words "promissory note" or "note" are used herein, they shall mean the Agreement. DEBTOR EXPRESSLY WARRANTS AND COVENANTS: 1. That except for the security interest granted hereby Debtor is, or to the extent that this agreement states that the Collateral is to be acquired after the date hereof, will be, the owner of the Collateral free from any adverse lien, security inter- est or encumbrances; and that Debtor will defend the Collateral against all claims and demands of all persons at anytime claiming the same or any interest therein. 2. The Collateral is used or bought primarily for: ❑ Personal, family or household purposes; ❑ Use in farming operations; It Use in business. 3. That Debtor's residence, state of organization or chief executive office is as stated herein, and the Collateral will be kept at 126 S. Oneida Street Pueblo Pueblo CO No. and Street City County State 4. If any of the Collateral is oil, gas, or minerals to be extracted or timber to be cut, or goods which are or are to become fixtures, said Collateral concerns the following described real estate situate in the County of and State of Colorado, to wit: No. eUCC 1205. Rev. 8 -01. UNIFORM COMMERCIAL CODE — SECURITY AGREEMENT (Page 1 of 2) Bradford Publishing, 1743 Wazee St., Denver, CO 80202 — (303) 292 -2500 — www.bradfordpublishing.com — eForm 5. Promptly to notify Secured Party of any change in the location of the Collateral. 6. To pay all taxes and assessments of every nature which may be levied or assessed against the Collateral. 7. Not to permit or allow any adverse lien, security interest or encumbrance whatsoever upon the Collateral and not to permit the same to be attached or replevined. 8. That the Collateral is in good condition, and that Debtor will, at Debtor's own expense, keep the same in good condition and from time to time, forthwith, replace and repair all such parts of the Collateral as may be broken, worn out, or damaged without allowing any lien to be created upon the Collateral on account of such replacement or repairs, and that the Secured Party may examine and inspect the Collateral at any time, wherever located. 9. That Debtor will not use the Collateral in violation of any applicable statutes, regulations or ordinances. 10. The Debtor will keep the Collateral at all times insured against risks of loss or damage by fire (including so- called extended coverage), theft and such other casualties as the Secured Party may reasonably require, including collision in the case of any motor vehicle, all in such amounts, under such forms of policies, upon such terms, for such periods, and written by such companies or underwriters as the Secured Party may approve, losses in all cases to be payable to the Secured Party and the Debtor as their interest may appear. All policies of insurance shall provide for at least ten days' prior written notice of cancel- lation to the Secured Party; and the Debtor shall furnish the Secured Party with certificates of such insurance or other evidence satisfactory to the Secured Party as to compliance with the provisions of this paragraph. The Secured Party may act as attor- ney for the Debtor in making, adjusting and settling claims under or cancelling such insurance and endorsing the Debtor's name on any drafts drawn by insurers of the Collateral. UNTIL DEFAULT Debtor may have possession of the Collateral and use it in any lawful manner, and upon default Secured Party shall have the immediate right to the possession of the Collateral. DEBTOR SHALL BE IN DEFAULT under this agreement upon the happening of any of the following events or con- ditions: (a) default in the payment or performance of any obligation, covenant or liability contained or referred to herein or in any note evidencing the same; (b) the making or furnishing of any warranty, representation or statement to Secured Party by or on behalf of Debtor which proves to have been false in any material respect when made or furnished; (c) loss, theft, damage, destruction, sale or encumbrance to or of any of the Collateral, or the making of any levy seizure or attachment thereof or thereon; (d) death, dissolution, termination of existence, insolvency, business failure, appointment of a receiver of any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency laws of, by or against Debtor or any guarantor or surety for Debtor. UPON SUCH DEFAULT and at any time thereafter, or if it deems itself insecure, Secured Party may declare all Obligations secured hereby immediately due and payable and shall have the remedies of a secured party under Article 9 of the Colorado Uniform Commercial Code. Secured Party may require Debtor to assemble the Collateral and deliver or make it available to Secured Party at a place to be designated by Secured Party which is reasonably convenient to both parties. Expenses of retaking, holding, preparing for sale, selling or the like shall include Secured Party's reasonable attorney's fees and legal expenses ( iincluding the allocated fees and expenses of in -house counsel) and such portion of the Secured Party's overhead as it may in its reasonable judgment deem allocable to and includable in such expenses. No waiver by Secured Party of any default shall operate as a waiver of any other default or of the same default on a future occasion. The taking of this Security Agreement shall not waive or impair any other security Secured Party may have or hereafter acquire for the payment of the above indebtedness, nor shall the taking of any such additional security waive or impair this Security Agreement; but Secured Party may resort to any security it may have in the order it may deem proper, and notwithstanding any collateral security, Secured Party shall retain its rights of set-off against Debtor. All rights of Secured Party hereunder shall inure to the benefit of its successors and assigns; and all promises and duties of Debtor shall bind Debtor's heirs, executors or administrators or Debtor's successors or assigns. If there be more than one Debtor, their liabilities hereunder shall be joint and several. Dated: September 9. 2013 Debtor: 'The W-4 fer grew ∎nCcm.an1- yJ31f-€r ,LL C. Colorado Debtor's state of organization, or if not a registered organization, chief executive officer ige), 20041213614 An d reo,t . s n c _ 9 t 1�l k vh 2 "� Debtor's State Identification No. No. eUCC 1205. (Page 2 of 2 ) Exhibit A, for: State of Colorado Uniform Commercial Code — Security Agreement Debtor: The Walter Brewing Company — Walter's Beer, LLC, a Colorado limited liability company 126 S. Oneida Street, Pueblo CO Secured Party: City of Pueblo, Colorado, a Colorado municipal corporation 1 City Hall Place, Pueblo CO "Debtor, for consideration, hereby grants to Secured Party a security interest in the following property and any and all additions, accessions and substitutions thereto or thereafter (hereinafter called the "COLLATERAL "): 10 bbl Brewhouse (Fischer, S/N A- 2483 -1535) including: Hot Liquor tank, mash ton, kettle, direct fire burner, valves, process pump, and drain hose; Grain Mill - -Roppi /Leeson (S /N C184C17FB12A) with Flex Auger and motor; Five (5) Fermenters (20 bbl Uni Tank Fermentors including PRVs, Valves, RTD Temperature probes and cooling control valve (Premier S/N HGM - PSS1074-3, Premier S/N HGM- PSS1074 -6, Premier S/N HGM- PSS1074 -7, Premier S/N HGM - PSS1074-9, and Stromburg S/N KA38 -40; One (1) Premier Stainless 3 station Semi- automatic Keg Washer (S /N KGW- SA- 3V2- CS- 1074 -DEL); One (1) Control Panel (S /N ESCK FV 1354111) which includes : enclosure and twenty two (22) PID Programmable Controllers; Eighty (80) 1/2 bbl Keg Stainless Steel Shells, One (1) Amtekco Stainless Two Compartment Sink (S /N 3486933); One (1) Chiller and hoses to fermentation vessels Fathom /WPI (S /N 1913C33232); and One (1) Filter 40cm x 40cm Letina Plate and Frame Filter (S /N VF -420S, 405/07/04) Includes: 20 plates, valves and sight glasses. UCC Financing Statement Colorado Secretary of State Date and Time: 09/17/2013 17:06:13 PM Master ID: 20132081634 Validation Number: 20132081634 Amount: $8.00 Debtor: (Organization) Name: THE WALTER BREWING COMPANY - WALTER'S BEER LLC Addressl : PO BOX 565 Address2: City: Pueblo State: CO ZIP /Postal Code: 81002 Province: Country: United States Secured Party: (Organization) Name: City of Pueblo c/o City Attorney Addressl : 1 City Hall Place Address2: Third Floor City: Pueblo State: CO ZIP /Postal Code: 81003 Province: Country: United States Collateral Description: See attached Security Agreement Page 1 of 5 Attachment #: 1 Security Agreement File name: Walter Beer - Security Agreement.pdf Uploaded: 09/17/2013 17:02:35 PM UCC Financing Statement - 20132081634 - Colorado Secretary of State - Page 2 of 5 STATE OF COLORADO UNIFORM COMMERCIAL CODE — SECURITY AGREEMENT Debtor: Name: The Walter Brewjnq_Coi pa - Walter's B - er LLC a Colorado limited liability. Qmg ony (Exact Legal Name Required) Address: Residence: No. Street City State Business: 126 S. Oneida Street Pueblo CO No. Street City State Secured Party: Name: City of Pueblo. Colorado, a Colorado municipal corporation Address: 1 City Hall Place Pueblo CO No. Street City State Debtor, for consideration, hereby grants to Secured Party a security interest in the following property and any and all additions, accessions and substitutions thereto or therefor (hereinafter called the "COLLATERAL "): The Collateral is described in Exhibit A which is attached hereto and is incorporated herein by reference. To secure payment of the indebtedness evidenced by a certain promissory note of even date herewith, payable to the Secured Party, or order, as follows: Debtor and Secured Party entered into an Agreement dated September 9, 2013 (the "Agreement ") whereby Debtor agreed to pay Secured Party the principal sum in an amount not to exceed $150,000.00 (the "Indebtedness ") and to perform certain other obligations described in the Agreement. Debtor is desirous of securing payment of the Indebtedness and performance of the Agreement on Debtor's part to be performed. Whenever the words "promissory note" or "note" are used herein, they shall mean the Agreement. DEBTOR EXPRESSLY WARRANTS AND COVENANTS: 1. That except for the security interest granted hereby Debtor is, or to the extent that this agreement states that the Collateral is to be acquired after the date hereof, will be, the owner of the Collateral free from any adverse lien, security inter- est or encumbrances; and that Debtor will defend the Collateral against all claims and demands of all persons at anytime claiming the same or any interest therein. 2. The Collateral is used or bought primarily for: ❑ Personal, family or household purposes; ❑ Use in farming operations; ® Use in business. 3. That Debtor's residence, state of organization or chief executive office is as stated herein, and the Collateral will be kept at 126 S. Oneida Street Pueblo Pueblo CO No. and Street City County State 4. If any of the Collateral is oil, gas, or minerals to be extracted or timber to be cut, or goods which are or are to become fixtures, said Collateral concerns the following described real estate situate in the County of, and State of Colorado, to wit: No. cUCC 1205. Rev. 5 - 01. UNIFORM COMMERCIAL CODE—SECURITY AGREEMENT (Page 1 of 2) \7 Bradford Publishing, 1743 R'azee St., Denver, CO 80202 — (303) 292 -2500 — www.bradfoidpublishing.com — eForm UCC Financing Statement - 20132081634 - Colorado Secretary of State - Page 3 of 5 5. Promptly to notify Secured Party of any change in the location of the Collateral. 6. To pay all taxes and assessments of every nature which may be levied or assessed against the Collateral. 7. Not to permit or allow any adverse lien, security interest or encumbrance whatsoever upon the Collateral and not to permit the same to be attached or replevined. 8. That the Collateral is in good condition, and that Debtor will, at Debtor's own expense, keep the same in good condition and from time to time, forthwith, replace and repair all such parts of the Collateral as may be broken, worn out, or damaged without allowing any lien to be created upon the Collateral on account of such replacement or repairs, and that the Secured Party may examine and inspect the Collateral at any time, wherever located. 9. That Debtor will not use the Collateral in violation of any applicable statutes, regulations or ordinances. 10. The Debtor will keep the Collateral at all times insured against risks of loss or damage by fire (including so- called extended coverage), theft and such other casualties as the Secured Party may reasonably require, including collision in the case of any motor vehicle, all in such amounts, unifier such forms of policies, upon such terms, for such periods, and written by such companies or underwriters as the Secured Party may approve, losses in all cases to be payable to the Secured Party and the Debtor as their interest may appear All policies of insurance shall provide for at least ten days' prior written notice of cancel- lation to the Secured Party; and the Debtor shall furnish the Secured Party with certificates of such insurance or other evidence satisfactory to the Secured Party as to compliance with the provisions of this paragraph. The Secured Party may act as attor- ney for the Debtor in making, adjusting and settling claims under or cancelling such insurance and endorsing the Debtor's name on any drafts drawn by insurers of the Collateral. UNTIL DEFAULT Debtor may have possession of the Collateral and use it in any lawful manner, and upon default Secured Party shall have the immediate right to the possession of the Collateral. DEBTOR SHALL BE IN DEFAULT under this agreement upon the happening of any of the following events or con- ditions: (a) default in the payment or performance of any obligation, covenant or liability contained or referred to herein or in any note evidencing the same; (b) the making or furnishing of any warranty, representation or statement to Secured Party by or on behalf of Debtor which proves to have been false in any material respect when made or furnished; (c) Ioss, theft, damage, destruction, sale or encumbrance to or of any of the Collateral, or the making of any levy seizure or attachment thereof or thereon; (d) death, dissolution, termination of existence, insolvency, business failure, appointment of a receiver of any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency taws of, by or against Debtor or any guarantor or surety for Debtor. UPON SUCH DEFAULT and at any time thereafter, or if it deems itself insecure, Secured Party may declare all Obligations secured hereby immediately due and payable and shall have the remedies of a secured party under Article 9 of the Colorado Uniform Commercial Code. Secured Party may require Debtor to assemble the Collateral and deliver or make it available to Secured Party at a place to be designated by Secured Party which is reasonably convenient to both parties. Expenses of retaking, holding, preparing for sale, selling or the like shall include Secured Party's reasonable attorney's fees and legal expenses (including the allocated fees and expenses of in -house counsel) and such portion of the Secured Party's overhead as it may in its reasonable judgment deem allocable to and includable in such expenses. No waiver by Secured Party of any default shall operate as a waiver of any other default or of the same default on a future occasion. The taking of this Security Agreement shall not waive or impair any other security Secured Party may have or hereafter acquire for the payment of the above indebtedness, nor shall the taking of any such additional security waive or impair this Security Agreement; but Secured Party may resort to any security it may have in the order it may deem proper, and notwithstanding any collateral security, Secured Party shall retain its rights of set -off against Debtor. All rights of Secured Party hereunder shall inure to the benefit of its successors and assigns; and all promises and duties of Debtor shall bind Debtor's heirs, executors or administrators or Debtor's successors or assigns. If there be more than one Debtor, their liabilities hereunder shall be joint and several. Dated: September 9. 2013 Debtor: - rile Via l.fet- Brew', Co:,, r,i - alai t Bur t Colorado .._. Debtor's state of organization, or if not a registered organization, chief executive officer c2 20041213614 L , -S a nc t F Z M t? . - 6,2 Debtor's State Identification No. No. et)CC 1205. (Page 2 or 2) UCC Financing Statement - 20132081634 - Colorado Secretary of State - Page 4 of 5 Exhibit A, for: State of Colorado Uniform Commercial Code — Security Agreement Debtor: The Walter Brewing Company - Walter's Beer, LLC, a Colorado limited liability company 126 S. Oneida Street, Pueblo CO Secured Party: City of Pueblo, Colorado, a Colorado municipal corporation 1 City Hall Place, Pueblo CO "Debtor, for consideration, hereby grants to Secured Party a security interest in the following property and any and all additions, accessions and substitutions thereto or thereafter (hereinafter called the "COLLATERAL "): 10 bbl Brewhouse (Fischer, S/N A- 2483 -1535) including: Hot Liquor tank, mash ton, kettle, direct fire burner, valves, process pump, and drain hose; Grain Mill- -Roppi /Leeson (S /N C184C17FB12A) with Flex Auger and motor; Five (5) Fermenters (20 bbl Uni Tank Fermentors including PRVs, Valves, RTD Temperature probes and cooling control valve (Premier S/N HGM - PSS1074-3, Premier S/N HGM- PSS1074 -6, Premier S/N HGM- PSS1074 -7, Premier S/N HGM - PSS1074-9, and Stromburg S/N KA38 -40; One (1) Premier Stainless 3 station Semi - automatic Keg Washer (S /N KGW- SA- 3V2 -CS- 1074 -DEL); One (1) Control Panel (S /N E5CK FV 1354111) which includes : enclosure and twenty two (22) PID Programmable Controllers; Eighty (80) 1/2 bbl Keg Stainless Steel Shells, One (1) Amtekco Stainless Two Compartment Sink (S /N 3486933); One (1) Chiller and hoses to fermentation vessels Fathom /WPI (S /N 1913C33232); and One (1) Filter 40cm x 40cm Letina Plate and Frame Filter (S /N VF -420S, 405/07/04) Includes: 20 plates, valves and sight glasses. UCC Financing Statement - 20132081634 - Colorado Secretary of State - Page 5 of 5 CONTINUING GUARANTY FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, and as inducement to the City of Pueblo, a municipal corporation (the "City ") to enter into the attached Agreement dated as of September 9, 2013 between City and The Walter Brewing Company — Walter's Beer, LLC, a Colorado limited liability company (the "Company ") (the "Agreement ") and to advance to or for the benefit of Company up to $150,000 pursuant to the terms and covenants of the Agreement, the undersigned Andrew L. Sanchez, Afton Volk and Richard Bailey, jointly and severally, (individually "Guarantor ") unconditionally guarantees and promises to pay to City, or order, on demand, in lawful money of the United States, the full amount of Company's Repayment Obligation described in and in accordance with the terms and provisions of Paragraphs 5 and 6 of the Agreement (the "Indebtedness "). The liability of each Guarantor under this Guaranty is for the principal sum not to exceed $150,000 plus interest, fees and costs as provided in the Agreement, and not just each Guarantor's pro rata share thereof. This is a continuing irrevocable guaranty relating to the Indebtedness, including successive transactions which shall either continue the Indebtedness or from time to time modify or renew it. Any payment by a particular Guarantor shall reduce the maximum obligation hereunder. The obligations of each Guarantor hereunder are independent of the obligations of Company and independent of the obligations of each other individual Guarantor, and a separate action or actions may be brought and prosecuted against each individual Guarantor, whether action is brought against Company or other Guarantors or whether Company or other Guarantors be joined in any such action or actions. Each Guarantor acknowledges that the payment of the Indebtedness may extend beyond twelve (12) years from the date of this Agreement. Each Guarantor hereby waives any defense to the enforcement of this Guaranty based upon laches or any statutory or other period of limitation, provided, however, that any such action to enforce this Guaranty shall be commenced on or before December 31, 2028. Each Guarantor authorizes the City, without notice or demand and without affecting his liability hereunder, from time to time to (a) renew, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change or modify the terms of the Indebtedness or any part thereof; (b) take and hold security for the payment of this Guaranty or the Indebtedness guaranteed, and exchange, enforce, waive and release any such security; (c) apply such security and direct the order or manner of sale thereof as City in its sole discretion may determine; and (d) release or substitute any one or more of the Guarantors. City may without notice assign this Guaranty in whole or in part. Each individual Guarantor waives any right to require City to (a) proceed against Company; (b) proceed against another Guarantor; (c) proceed against or exhaust any security held from Company; or (d) pursue any other remedy in City's power whatsoever. Each Guarantor waives any defense arising by reason of any disability or other defense of Company or by reason of the cessation from any cause whatsoever of the liability of Company. Until the Indebtedness of Company to City shall have been paid in full, each Guarantor shall have no right of subrogation, and waives any right to enforce any remedy which City now has or may hereafter have against A Company, and waives any benefit of, and any right to participate in any security now or hereafter held by City. Each Guarantor waives all presentments, demands for performance, notices of non- performance, protests, notices of protest, notice of dishonor, and notices of acceptance of this Guaranty. Any debts or other financial obligations of Company now or hereafter held by each Guarantor are hereby subordinated to the Indebtedness of Company to City and such debts or other financial obligations of Company to each Guarantor, if City so requests, shall be collected, enforced and received by each Guarantor as trustee for City and be paid over to City on account of the Indebtedness of Company to City but without reducing or affecting in any manner the liability of each Guarantor under the other provisions of this Guaranty. Each Guarantor agrees that it is not necessary for City to inquire into the powers of Company or the officers, directors, or agents acting or purporting to act on its behalf, and the Indebtedness made or created in reliance upon the professed exercise of such powers is guaranteed hereunder. Each Guarantor agrees to pay a reasonable attorneys' fee and all other costs and expenses which may be incurred by City in the enforcement of this Guaranty. Each Guarantor agrees that this Guaranty is a contract entered into in Pueblo County, Colorado. The District Court for the County of Pueblo, State of Colorado shall have jurisdiction over any suit or action which involves this Guaranty and venue in Pueblo County, Colorado shall be proper. Each Guarantor consents to the personal jurisdiction of that Court and agrees that service of process may be made upon each Guarantor either within or without the State of Colorado. To the extent allowed by law, each Guarantor waives his right to a jury trial. Any notice hereunder shall be sufficiently given if given personally or mailed by certified mail, postage prepaid, addressed: (a) if to City, City Manager, City of Pueblo, 200 South Main Street, Pueblo, CO, 81003, with a copy to City Attorney, 503 N. Main Street, Suite 203, Pueblo, CO 81003 or (b) if to each Guarantor, at the addresses shown after his respective signature hereon, or to such other addresses as any party hereto shall specify in written notice to the other parties. Time is of the essence hereof. This Guaranty shall be binding upon and inure to the benefit of City and each Guarantor and their respective heirs, personal representatives, successors and assigns. IN WITNESS WHEREOF the each undersigned Guarantor has executed this Guaranty in Pueblo, Colorado this 9th day of September, 2013. Name: Andrew L. Sanchez Signature: - Address: 2 Z S iv. C ,G,r S' PIJE6 te Go >- /o0 3 Name: Afton Volk // Signature: �'�mY o Address: ; r . b 04 , 1 AMMO, cP/OO Name: Richard Bailey Al Signature: ''''' ; ■! " .i�4 /_ ....,./../ O A i� Address: ,.23? 70 STATE OF COLORADO ) ) ss COUNTY OF PUEBLO ) The foregoing instrument was acknowledged before me this 9 711/ day of se f ; , 2013 by Andrew L. Sanchez; Afton Volk and Richard Bailey. My commission expires: ,- � 1D1.5� . / / [SEAL] .4111'. Z i.. Notary Pu. -.`c —3—