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HomeMy WebLinkAbout13496RESOLUTION NO. 13496 A RESOLUTION APPROVING AN EMPLOYMENT AGREEMENT AND A LEASE AGREEMENT BETWEEN PUEBLO, A MUNICIPAL CORPORATION AND FRE COMPOSITES USA, INC., A DELAWARE CORPORTION RELATING TO A JOB CREATING CAPITAL IMPROVEMENT PROJECT AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAID AGREEMENTS BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. The City Council finds and determines that the Employment Agreement dated August 8, 2016 and the Lease Agreement dated August 8, 2016 (collectively the “Agreements”) between Pueblo, a municipal corporation and FRE Composites USA, Inc., a Delaware corporation (“Company”) constitute the continuation of a job creating capital improvement project and that said Agreements meet and comply with the criteria and standards established by Ordinance No. 6381 and will provide for the continuation of existing jobs and will create future employment opportunities justifying the expenditure of public funds. The Agreements, having been approved as to form by the City Attorney, are hereby approved. The President of the City Council is authorized to execute and deliver the Agreements in the name of the City and the City Clerk is directed to affix the seal of the City thereto and attest same. SECTION 2. 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 the attached Agreements to effectuate the transactions described therein. SECTION 3. This Resolution shall become effective immediately upon final passage. INTRODUCED August 8, 2016 BY: Ray Aguilera City Clerk’s Office Item # Q-4 Background Paper for Proposed Resolution COUNCIL MEETING DATE: August 8, 2016 TO: President Stephen G. Nawrocki and Members of City Council CC: Sam Azad, City Manager VIA: Gina Dutcher, City Clerk FROM: Daniel C. Kogovsek, City Attorney SUBJECT: A RESOLUTION APPROVING AN EMPLOYMENT AGREEMENT AND A LEASE AGREEMENT BETWEEN PUEBLO, A MUNICIPAL CORPORATION AND FRE COMPOSITES USA, INC., A DELAWARE CORPORTION RELATING TO A JOB CREATING CAPITAL IMPROVEMENT PROJECT AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAID AGREEMENTS SUMMARY: Attached is a proposed Resolution approving and authorizing the President of City Council to sign an Employment Agreement and a Lease Agreement with FRE Composites USA, Inc. (“Company”). PREVIOUS COUNCIL ACTION: The City and the Company entered into an Employment Agreement and a Lease Agreement on January 25, 2011. Amendment No. 1 to the Employment Agreement was agreed to by the parties on July 24, 2012. That Amendment approved an exchange of collateral whereby the City’s first security interest in the Company’s equipment located in Pueblo County was replaced by cash collateral in the amount of $240,000. Amendment No. 1 required a gradual release of cash collateral to the Company as the Company fulfilled its employment commitment over time. BACKGROUND: The Company is a Delaware corporation associated with a Canadian pipe manufacturer. Since 2011, the Company has operated a fiberglass composite pipe manufacturing facility located at 60 Greenhorn Drive, Pueblo, Colorado, 81004. In 2011, economic incentives in the amount of $1,266,800 were provided to the Company as follows:  $750,000 used for the purchase of the industrial building located at 60 Greenhorn Drive, Pueblo, Colorado, 81004;  $5,300 for an appraisal, environmental inspection and closing costs;  $1,500 to PDF for managing the renovation of 60 Greenhorn Drive;  $510,000 distributed as follows: - $240,000 for the acquisition of equipment; - a lease subsidy of $240,000 applied toward the Company’s “Triple Net” Lease; - $30,000 to remodel and renovate the building located at 60 Greenhorn Drive, Pueblo, Colorado, 81004. In exchange for the economic incentives from the City, the Company agreed to hire 30 full-time employees whose annual compensation would average at least $43,000 per employee. The Employment Commitment agreed to by the Company is from February 1, 2014 through January 31, 2021. The Employment Agreement and Lease Agreement proposed for approval (attached hereto) would make the following changes to the current contractual obligations of the Company and the City: (1) The current Lease subsidization would terminate, effective July 1, 2016. In exchange for the eventual transfer of 60 Greenhorn Drive from the City to the Company at the end of the lease term, the Company would pay $337,500.00 in future Lease payments to the City. However, the City will reimburse the Company $69,428.64 for the previously accrued but unused rent subsidy. (2) The Company will satisfy and discharge the $510,000 in economic incentives by continuing to employ 30 full-time employees (whose annual compensation shall average at least $43,000) through January 31, 2021. In the event Company defaults in its Employment Commitment, the Company will repay the remaining balance of the $510,000 in economic incentives on a pro-rata basis. (3) To secure the repayment of the $510,000 in economic incentives, if necessary, the Company will grant the City a first security interest in the Company’s manufacturing equipment situated at the Company’s manufacturing facility located at 60 Greenhorn Drive, Pueblo, CO 81004. (4) As a result of the Company giving the City a new first secured position in the Company’s equipment located in Pueblo, the City will release the remaining cash collateral by making a payment of $202,582.68 to the Company. Said sum was computed by subtracting from the current cash collateral balance of $211,439.69 the sum of $5,528.49 owed by the Company for failing to meet its employment commitment in 2014 and the sum of $3,428.52 owed by the Company for failing to meet its employment commitment in 2015. FINANCIAL IMPLICATIONS: None. No additional funds will be transferred from the 1992-2021 Sales and Use Tax Capital Improvement Project Fund. BOARD/COMMISSION RECOMMENDATION: Not applicable to this Resolution. STAKEHOLDER PROCESS: Not applicable to this Resolution. ALTERNATIVES: If this Resolution is not approved, the Company will not be able to expand its operations in the City of Pueblo. RECOMMENDATION: The Pueblo Economic Development Corporation recommends approval of this Resolution. Attachments: Proposed Resolution Proposed Employment Agreement Proposed Lease Agreement EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this 8th day of August, 2016, by and between Pueblo, a Municipal Corporation ("City") and FRE Composites USA Inc. a Delaware Corporation ("Company"). The City and Company are sometimes referred to herein collectively as the "Parties" and each individually as a "Party." WHEREAS, Company has expressed a willingness to locate a manufacturing facility within the City of Pueblo, State of Colorado, and in furtherance thereof has, through the Pueblo Economic Development Corporation, made application for funds and other economic incentives to the City, and WHEREAS, in connection with its application, Company has committed to invest not less than U.S. $600,000 in fixed assets in a manufacturing facility to be located within the City of Pueblo, and to provide the employment described in section 6 of the Original 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 the Original Agreement; and WHEREAS, City and Company have entered into an Agreement dated as of January 25, 2011 (the "Original Agreement") to provide for the development of a manufacturing facility within the City of Pueblo for Company (the "Project") and setting forth each Party's obligations; and WHEREAS, City provided Total Economic Incentives to Company under and as defined by the Original Agreement in the amount of U.S. $510,000. Pursuant to Section 4 of the Agreement, Company has a Repayment Obligation to City which is based upon the amount of the Total Economic Incentives; and WHEREAS, City disbursed to PDF, for the benefit of Company, funds in an amount not exceeding U.S. $30,000 for the actual costs and expenses of remodelling and renovating the Facility and landscaping the Facility, including the costs of design, engineering and construction services; and WHEREAS, City disbursed directly to Company, solely for reimbursement for the acquisition of Equipment by Company funds in the amount of U.S.$240,000 (collectively, the disbursement for costs of remodelling and renovation and the reimbursement for Equipment being referred to as the "City Funds"); and WHEREAS, City acquired Lots 9 and 10, Minnequa Industrial Park, First Filing, Pueblo County, Colorado, also known and numbered as 60 Greenhorn Drive, Pueblo, Colorado, 81004, at a cost of approximately U.S. $750,000 in order to make such property available to Company under the original lease ("Original Lease"); and WHEREAS, City and Company executed the Original Lease on January 25, 2011; and WHEREAS, in order to secure performance of the Agreement and payment of the Repayment Obligation and until discharge of its other obligations under the Agreement, Company was required to grant to City - 1 - a perfected first security interest in the Equipment as defined in the Original Agreement and as further identified in the Security Agreement executed by Company on May 4,2011;and WHEREAS, in the context of a corporate refinancing of the Company, the Company wanted to grant a first security in the Equipment to a creditor of the Company other than City. In order to induce City to release or terminate its security interest in the Equipment, and to provide alternate security to City to secure Company's obligations to City under the Agreement, including the Repayment Obligation, Company agreed to deposit funds in the amount of U.S.$240,000 with City to serve as alternate security for City,which funds will be held in the name of and be under the control of City;and WHEREAS, City accepted the funds as alternate security for the Equipment, provided that City may draw upon such funds as necessary to fulfill Company's Obligation and other payment due and payable to the City under the terms of the Agreement;and WHEREAS, City and Company signed Amendment No. 1 to Agreement on July 24, 2012 (the "Amendment")whereby the City authorized the alternate security;and WHEREAS, Company has transferred to City, U.S.$240,000 after the execution of Amendment;and WHEREAS, City has released a prorated amount of such alternative security funds back to Company on or after April 15, 2015 because Company has, during the preceding four (4) quarters of 2014, substantially met the Employment Commitment;and WHEREAS, for the four quarters of 2014, the City has released to Company in April 2015, U.S. $28,856.71(Total possible incentive of$34,285.20 minus penalty of$5,428,49);and WHEREAS, for the four quarters of 2015, Company has substantially met its Employment Commitment of 30 employees per quarter and estimate its total incentive from City for the said year of U.S. $30,856.68(Total possible incentive of$34,285.20 minus penalty of$3,428,52);and WHEREAS, the Creditor of the. Company agreed that City shall hold a first security interest in the Equipment and the Company agreed to grant again a first security interest as originally stated in the Agreement on Equipment;and WHEREAS, provided that the Company is not in default under the Agreement, City is willing to accept a first security interest on Equipment and to release escrow amount of U.S.$202,582.68 to Company(U.S. $211,439.69 in escrow by June 30, 2016 statement less penalties for 2014 of $5,428.49 and 2015 of $3,428,52);and WHEREAS, Parties wish to supersede the Original Agreement and the amendment No. 1 to the Original Agreement so this actual Agreement reflects their actual intent;and NOW THEREFORE, in consideration of the foregoing and the terms and conditions set forth herein, the Parties agree as follows: 1. The following terms as used in this Agreement shall have the following meaning unless the context clearly indicates otherwise: 2 "Effective Date" means the date of approval of this Agreement by the City Council of City. "Employment Commitment Date"means February 1,2014. "Equipment" means manufacturing equipment, including automated thermoset filament winding equipment and other related machinery to be acquired, installed, maintained and used by Company in the Facility,which Equipment shall have a useful economic life of not less than 120 months. "Facility' means the manufacturing and warehouse facility located on Lots 9 and 10, Minnequa Industrial Park, First Filing, County of Pueblo, State of Colorado, also known and numbered as 60 Greenhorn Drive, Pueblo, Colorado, 81004, 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 pre-tax 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 5. 2. City and Company stipulate and agree that the total economic incentives provided by City to Company under the Original Agreement and this Agreement, including both City Funds and the value of the rent subsidy (U.S. $240,000) under the Lease, is U.S. $510,000 (the "Total Economic Incentives"). 3. (a) Company acknowledges and agrees that the primary purpose for City 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, on and after the Employment Commitment Date,continuously conduct its business operations at the Facility and employnot less than thirty (30) Full-Time Employees at the Facility whose annual salary shall average at least U.S.$43,000(the"Employment Commitment"). 3 (b) Company will use good faith efforts in accordance with its sound business practices 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. 4. 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) Until January 31, 2021 ("Repayment Period"), Company will annually pay to City a penalty if for a giving quarter it does not achieve its Employment Commitment.The sum to be paid will be calculated by multiplying U.S. $285.71 by the result of 30 minus the Quarterly Employees employed by Company at the Facility during each of the preceding four(4) quarters ending March 31. (For example, the first quarter of 2015,$285.71 time 6 (30 Employment Commitment less 24 actual Quarterly Employees employed) for a total penalty of $1,714.26 for the said quarter) The amount of the annual payment under this Section 4 (a) shall not but subject to adjustment based upon changes in the CPI-U. (b) Company's Annually Payments, if any, shall be paid to the City without notice, demand, deduction or setoff on or before April 15 of each year 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 Annually Payments shall bear interest at the rate of eight percent (8%) per annum ("Default Interest") until paid. Company's Annually Payments shall be in addition to rent and other amounts payable under the Lease. (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. (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) clays 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 thirty (30)times U.S. $285.71 or the then applicable Adjusted Quarterly Repayment Capitation, whichever is greater, multiplied by the remaining Quarters of the Repayment Period plus the amount of 4 1I Company's unpaid Annually Payments, if arty, but in no event more than the amount of the Total Economic Incentives actually provided by City to Company 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. 5. 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 Obligations shall 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. 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 the form and content approved by City's Attorney("Security Agreement") in the fourteen (14) days of the execution of this Agreement. Company may be permitted from time to time to substitute items of the replacement Equipment for items of Equipment removed from Facility, provided that an amended Security Agreement meeting the requirement of this Section is executed and delivered identifying the substitute items of Equipment and deleting the item of Equipment being replaced. 6. City shall release and pay to Company escrow amount of U.S. $202,582.68 of U.S. (U.S. $211,439.69 in escrow by June 30, 2016 statement less penalties for 2014 of$5,428.49 and 2015 of$3,428,52)in the fourteen (14) days from the execution of this Agreement. 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 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 6 shall grant or be construed to grant to Company any right or claim to relief from its Repayment Obligation or hearing with respect thereto. 5 (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 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 Original Agreement and Amendment No 1, 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, 1 City Hall Place, Pueblo,Colorado,81003, or (b) if to the Company, FRE Composites USA Inc., 75 Wales Street, Saint-André-d'Argenteuil, Québec,Canada,JOV 1XO,Attention: Benoit Arsenault, (c) if to PDF, c/o Pueblo Economic Development Corporation, 301 N. Main Street, Pueblo, CO 81003,Attention:Jeff Shaw, 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 10. 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 or City's consent thereto shall release or discharge Company from any obligation or liability under this Agreement. 6 13. The persons signing this Agreement in the name of and on behalf of Company, PDF 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, PDF and City enforceable in accordance with its terms. 14. (a) Company and PDF each represent and warrant 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 other remuneration, and/or to seek such other remedies legally available to City, which remedies shall be cumulative. (b) PDF agrees to indemnify, defend and hold City, its officers, agents and employees harmless from and against all claims and actions arising from the renovation and remodelling of the Facility. 15. In no event shall City, its officers, agents or employees be liable to Company or PDF 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 and PDF each hereby waive and discharge 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. Notwithstanding the foregoing, if City defaults in any material covenant of this Agreement, Company and PDF shall have the right, without the showing or any special damages or an inadequate remedy at law,to seek specific enforcement thereof,but not for damages of any type or nature. 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 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. 7 19. 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. 20. 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. ATTEST: PUEBLO Corpor• City rk By: ATTEST: FRE Composites U . A Dela - •oration By: B noit Arsenault resident DGCdocs-10717932 v1 - 8 - LEASE AGREEMENT THIS LEASE (the "Lease") entered into this 8th day of August 2016 by and between Pueblo, a Municipal Corporation (the "Lessor") and FRE Composites USA Inc., a Delaware corporation (the "Lessee") WITNESSETH: WHEREAS the Lessor and the Lessee entered into a lease agreement as of January 25, 2011 (the "Original Lease") with respect to Lots 9 and 10, Minnequa Industrial Park, First Filing, Pueblo County, Colorado, also known and numbered as 60 Greenhorn Drive, Pueblo, Colorado, 81004 (the "Building"), consisting of approximately 5.41 acres of land together with an approximately 46,394 square foot building and other improvements (the "Leased Premises"); and WHEREAS, Lessor granted a lease subsidy of U.S. $240,000 to Lessee in exchange for an Employment Commitment where details can be found in the Employment Agreement; and WHEREAS, the Parties agreed to terminate the Lease subsidization and in exchange for the transfer to Lessee by the Lessor of the unused part of the lease subsidy of U.S. $69,428.64; and WHEREAS, at the end of the Term, the ownership of the Building will be transferred to Lessee by Lessor; and WHEREAS the parties hereto wish to terminate the Original Lease and replace it with the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the foregoing and mutual promises, covenants and conditions contained herein, Lessor and Lessee hereby agree as follows: DEFINITIONS: In this Lease: "Easements" means the Billboard, Utility and Sight Easements burdening the Leased Premises under the Easement Agreement recorded in the records of Pueblo County, Colorado, at Reception No. 1763524. "Effective Date" means the date that this agreement is executed by both the Lessor and the Lessee. "City Agreement" means that certain agreement between the Lessor and the Lessee dated January 25, 2011. "Commencement Date" means July 25, 2016. ARTICLE 1—TERMINATION OF ORIGINAL LEASE Lessor and Lessee acknowledge and agree that the Original Lease is hereby terminated. ARTICLE 2-TERM The term of this Lease shall be five (4) years and six (6) months commencing on the Commencement Date and ending on January 24, 2021 (the "Term"), unless sooner terminated as herein provided (the "Termination Date"). ARTICLE 3—RENT 3.1 Lessee shall pay to Lessor rent for the Leased Premises for the full Term of U.S. $337,500.00 payable in monthly instalments of U.S.$6,250.00 per month, in advance,without notice or demand due on the same day of each month until the full amount has been paid. All payments shall be made or mailed via United States mail to the following address: Pueblo Finance Department, Box 1427, Pueblo, CO 81002, or to such other person or address as Lessor may from time to time designate to Lessee in writing. 3.2 All monthly rent and other payments required to be made by Lessee hereunder which shall remain unpaid fifteen (15) days after their respective due dates shall bear interest at the rate of ten percent (10%) per annum until paid. 3.3 Lessee's obligation to pay rent to Lessor hereunder is absolute and unconditional and rent shall not be offset,abated, reduced or withheld for any cause or reason whatsoever. 3.4 It is the intent of the parties hereto that this Lease is a "triple net" lease with Lessor incurring no obligation, monetary or otherwise, hereunder. ARTICLE 4—USE OF THE LEASED PREMISES 4.1 The Leased Premises shall be used and occupied by Lessee solely for manufacturing purposes and office space associated with or incident to Lessee's manufacturing operations.The Lessee shall also have the right to use the storage spaces for the storage of its products (provided such storage complies with applicable subdivision covenants for same,if any). 4.2 Lessee shall have the right to use the parking spaces situated on the exterior of the Leased Premises for its officers, employees, agents, representatives, customers, suppliers, and others doing business with the Lessee. 4.3 Lessee shall use the Leased Premises in a careful,safe and proper manner in compliance with all laws and regulations applicable to the Leased Premises and Lessee's use thereof. Lessee shall not cause, maintain or permit any nuisance or waste in,on,or about the Leased Premises. 2 101 f// 4.4 Lessee shall not abandon or cease to conduct business at the Leased Premises for any period longer than ninety(90)consecutive days. ARTICLE 5—CONDITION OF LEASED PREMISES 5.1 IT IS UNDERSTOOD AND AGREED THAT THE LEASED PREMISES ARE LEASED "AS IS, WHERE IS, WITH ALL ITS FAULTS" AS OF THE COMMENCEMENT DATE AND THAT LESSOR IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY WARRANTY OR REPRESENTATION OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PREMISES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OR REPRESENTATION AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE (OTHER THAN THE COVENANT OF QUIET POSSESSION SET FORTH IN ARTICLE 14), ZONING (OTHER THAN THAT THE BUILDING IS ZONED FOR INDUSTRIAL (1-3) USE), PHYSICAL OR ENVIRONMENTAL CONDITIONS,SIZE, UTILITIES,GOVERNMENTAL APPROVALS,THE COMPLIANCE OF THE LEASED PREMISES WITH GOVERNMENTAL AND ENVIRONMENTAL LAWS AND REGULATIONS,THE TRUTH, ACCURACY OR COMPLETENESS OF ANY DOCUMENT OR OTHER INFORMATION PROVIDED TO LESSEE BY LESSOR OR ANY OTHER PERSON,OR ANY OTHER MATTER OR THING REGARDING THE LEASED PREMISES. 5.2 The taking of possession of the Leased Premises by Lessee on the Commencement Date shall be conclusive evidence that the Lessee accepts the Leased Premises in its then present condition "AS IS, WHERE IS, AND WITH ALL FAULTS" and that the Leased Premises are in good and satisfactory condition at the time such possession was taken. 5.3 Lessor has obtained an ASTM Phase I environmental report and an asbestos inspection report from All-Phase Environmental Consultants, Inc. ("All-Phase Report") which has been made available to Lessee. Lessor disclaims any representations whatsoever regarding the accuracy or reliability of the All-Phase Report and Lessee relies upon same at Lessee's sole risk. Lessee has been afforded the opportunity to conduct its own environmental investigations of the Leased Premises and has declined to do so. ARTICLE 6—ALTERATIONS AND IMPROVEMENTS 6.1 Lessee shall not make any additions, alterations or improvements in or to the Leased Premises ("Alterations")without Lessor's prior written consent which consent shall not be unreasonably withheld or unduly delayed. Lessee shall not permit or allow any lien to be filed or recorded against the Leased Premises or Lessor's or Lessee's interest therein, and Lessee shall fully cooperate with Lessor in obtaining the protections afforded Lessor under§38-22-105,C.R.S,All Alterations made in or to the Leased Premises by Lessee with Lessor's consent shall become part of the Leased Premises and be surrendered with the Leased Premises at the termination of this Lease. All other alterations shall, at the option of Lessor, be removed by Lessee at its cost and expense. 3 • 'If? 6.2 All equipment, fixtures and improvements of a detachable or temporary nature installed or placed upon the Leased Premises by Lessee, including trade fixtures, shall remain the property of Lessee, subject to Lessee's right, at its option, remove same not later than thirty (30) days after termination of this Lease. Lessee shall repair all damage to the Leased Premises caused by such removal. The failure of Lessee to remove its equipment, fixtures and detachable improvements within thirty (30) days after termination of this Lease shall, at the option of Lessor, be deemed an abandonment of such property and Lessor may dispose of such property as the Lessor,in its sole discretion, may determine. ARTICLE 7—REPAIRS AND MAINTENANCE 7.1 Lessor shall not be obligated to repair, maintain or alter the Leased Premises or any part thereof. Lessee, at its expense, shall keep and maintain the Leased Premises, including, without limitation, the Buildings and the structural components,roofs,walls,fixtures,electrical,heating,mechanical,plumbing and air conditioning systems thereof, in good working condition and repair and in a good, clean and safe condition at all times during the Term of this Lease and return same to Lessor at the Termination Date in as good condition and state of repair as same was in on the Commencement Date,except for loss occasioned • by ordinary wear and tear. 7.2 If Lessee becomes obligated to make repairs caused by an occurrence covered by the insurance described in Article 11 herein,the net proceeds of such insurance shall be made available to Lessee to offset the cost of such repairs. ARTICLE 8—RIGHT OF ENTRY Lessor or Lessor's officers, employees, agents and representatives, and property management representative, as the case may be, may enter the Leased Premises at any time during normal business hours without prior written notice to Lessee. ARTICLE 9—ASSIGNMENT Lessee shall not voluntarily or by operation of law assign all or any part of the Lease or Lessee's interest therein without the express written consent of Lessor,which consent will not be unreasonably withheld or unduly delayed. Lessor may withhold its consent if the proposed assignee's financial standing and responsibility at the time of the proposed assignment is insufficient in the Lessor's sole and absolute discretion to give assurance of performance and compliance with all terms and conditions of this Lease and the City Agreement. Upon such an assignment and consent, Lessee shall be released from all obligations arising or occurring under this Lease after the effective date of such assignment and consent, provided that such assignee shall execute, acknowledge and deliver to Lessor an assumption agreement in form and substance satisfactory to Lessor, whereby assignee agrees to observe, perform and keep all the terms, provisions, covenants and conditions required to be observed, performed and kept by Lessee hereunder and under the City Agreement. Any assignment or attempted assignment of this Lease or any interest herein by Lessee without Lessor's express written consent shall be null and void. ARTICLE 10—INSURANCE AND INDEMNIFICATION 10.1 Lessee shall indemnify and hold Lessor, its officers, employees and agents, harmless from and defend them against any and all claims or liability, including cost of defense and reasonable attorney fees, 4 for any injury or damage the Lessee or its officers, agents or employees, or to Lessee's property, or to any third person,or to the property of any third person:(a)occurring in,on or about the Leased Premises or any part thereof, by or from any cause whatsoever except injury or damage caused solely by the wrongful or intentional acts of Lessor,its officers,employees,or agents;or(b)arising out of or resulting from the Leased Premises, or any condition thereon, or from Lessee's use and occupancy of the Leased'Premises, or any equipment thereon or appurtenances thereto,or any activity conducted thereon. 10.2 Lessee shall secure and maintain in full force and effect,at its expense,during the Term of this Lease:(a) commercial general liability insurance including coverage for personal injury (including death), property damage and contractual coverage in the minimum amount of U.S. $1,000,000 combined single limit naming Lessor, its officers,employees or agents as additional insureds,and(b)Colorado Workers'Compensation insurance or other similar coverage in the statutorily mandated a mounts. Neither party shall be liable to the other party for any claim, loss or casualty covered by such insurance and each party waives any claim therefor against the other party whether by way of subrogation or otherwise. 10.3 A copy of each insurance policy, or certificate thereof, issued by an association or company authorized to issue such policy or policies under the laws of the State of Colorado containing a provision prohibiting cancellation or material modification of the insurance except after no less than ten (10) days' notice to Lessor,shall be delivered to the Lessor within thirty(30) days after the Effective Date of this Lease, and thereafter the Lessee will furnish to Lessor evidence of the continuance of the insurance coverage required herein within a reasonable time after the same has been issued. ARTICLE 11—FIRE AND EXTENDED COVERAGE INSURANCE 11.1 Lessee shall,at its expense,during the Term of this Lease,secure and maintain in full force and effect "All-Risk" casualty insurance (including, without limitation, fire, extended coverage and boiler insurance) upon the Leased Premises.Such insurance shall be in an amount not less than the full replacement value of the Building and improvements (without deduction for physical depreciation), and issued by an insurance company or association authorized to issue such policies under the laws of the State of Colorado and approved by Lessor, shall contain a deductible of not more than U.S. $25,000.00 and a standard Colorado mortgagee/landlord clause in favour of Lessor, and shall not be subject to cancellation, reduction or modification upon less than the ten (10) days' written notice to Lessor. Such insurance, by its terms or by endorsement, shall waive any right of subrogation of the insurer against Lessor, its officers, agents and employees, for any loss or damage resulting from covered perils. Lessee will furnish to Lessor evidence of such insurance and its continuance during the Term of this Lease. 11.2 Lessee shall, at its expense, secure and maintain fire and extended coverage insurance on all fixtures, equipment and improvements installed by Lessee on the Leased Premises. Such insurance, by its terms or by endorsement, shall waive any right of subrogation of the insurer against Lessor, its officers,agents and employees,for any loss or damage resulting from covered perils. ARTICLE 12—TAXES AND ASSESSMENTS 12.1 Lessee shall promptly pay and discharge, as they become due and before delinquency, any and all property taxes, assessments, charges, liens, levies or excises, whether general or special or ordinary or extraordinary, of every name, nature and kind whatsoever, including all governmental charges of whatsoever name, nature or kind, which may be levied, charged or imposed, or which may become a lien or charge on or against the Leased Premises or any part thereof, the leasehold interest of Lessor or Lessee herein, or the improvements situated on the Leased Premises prior to and during the effective period of this Lease. 5 4 •9/ 12.2 Lessee shall pay before delinquency any and all property taxes levied or charged against any of the personal property belonging to it and situated on the Leased Premises or used in connection with the operation and maintenance of the Building on the Leased Premises. 12.3 Lessee shall furnish Lessor within thirty (30) days after any amount is payable by Lessee under this Article 12, official receipts of the appropriate taxing authority or other proof satisfactory to Lessor evidencing such payments as are required under this Article. ARTICLE 13—UTILITIES Lessee shall pay, before delinquent, all charges for sewer, water, gas, electricity, telecommunications and all other utility services furnished to or used in or supplied to the Leased Premises. Lessor shall not be obligated to furnish or provide any utilities,facilities or services of any kind. ARTICLE 14—DAMAGE TO OR DESTRUCTION OF LEASED PREMISES 14.1 If, during the Term of this Lease, the Leased Premises shall be damaged to such an extent that the repair of such damage and the restoration of the Leased Premises can be accomplished, with reasonable diligence, within one hundred eighty (180) days after such damage, Lessee shall promptly repair such damage and cause the Leased Premises to be restored to their condition prior to the event causing the damage. If, during the Term of this Lease, the Leased Premises shall be destroyed or damaged to such an extent that the repair of such destruction or damage and the restoration of the Leased Premises cannot be accomplished,with reasonable diligence,within one hundred eighty(180)days after destruction or damage,then Lessee shall promptly notify Lessor in writing of such fact within forty-five (45)days after the date of such destruction or damage,and Lessee shall thereafter have the right,during a period of thirty (30) days following such notification,to terminate this Lease by written notice to the Lessor, declaring this Lease to be terminated provided, however, that, as a condition precedent to such termination, all proceeds of insurance required to be maintained by Lessee under Article 11.01 shall be paid to Lessor,or, if Lessee fails to maintain the insurance required to be maintained by Lessee under Article 11.01, an amount equal to the insurance proceeds which would have been available but for such failure shall be paid by Lessee to Lessor.Unless such notice of immediate termination shall be given within such 30-day period and proceeds of insurance are paid to Lessor, this Lease shall continue in full force and effect and Lessee shall promptly repair such destruction or damage and cause the Leased Premises to be restored to their condition prior to the event causing the destruction or damage. In the event the Leased Premises are destroyed or damaged, or partially destroyed or damaged, the monthly rent payable by Lessee shall be abated proportionately according to the floor area of the Leased Premises which is useable by Lessee.Such abatement shall continue for the period commencing with such damage or destruction and ending when Lessee completes repair work or reconstruction, provided Lessee diligently commences and expeditiously completes the repair work or reconstruction. 14.2 Lessee shall make the repairs, restoration or rebuilding as expeditiously as possible in accordance with plans and specifications submitted to and approved in writing by Lessor and in compliance with all applicable laws, regulations and codes. ARTICLE 15—EMINENT DOMAIN If the whole or substantial part of the Leased Premises shall be taken or condemned by any competent authority for any public or quasi-public use or purpose under any statute or by the right of eminent domain, or purchased under threat of such taking, then this Lease shall terminate on the date when the condemning authority takes possession of the Leased Premises or the substantial part thereof so taken. There shall be no appointment of the award for taking or condemnation,the entire award going to Lessor, provided Lessee shall have the right to recover any award which may be made for damages to or 6 011 OF condemnation of Lessee's movable trade fixtures, equipment, furniture and furnishings or payments for relocation,if any. ARTICLE 16—HOLDING OVER There shall be no holding over under this Lease.Upon termination,Lessee shall immediately vacatethe Leased Premises and immediately surrender possession thereof to Lessor. ARTICLE 17—QUIET POSSESSION Lessee may peacefully have, hold and enjoy the Leased Premises,subject to the other terms hereof,provided that Lessee performs all of Lessee's covenants and agreements contained herein. ARTICLE 18—DEFAULT 18.1 In the event of default at any time by Lessee in the payment of the monthly instalments or rent of the performance of any of its other covenants and obligations herein contained,or,in the event Lessee defaults in its Repayment Obligation as described in the City Agreement,and such default is not cured within thirty(30) days after written notice specifying the default is given by Lessor to Lessee, or in the case of non-pecuniary default incapable of being cured within 30 days,not cured within ninety(90)days of such notice,provided that the cure is commenced within thirty days and diligently pursued,then,in such event,Lessor shall have the right to either: a) Terminate this Lease and re-enter and take possession of the Leased Premises;and/or b) Pursue any remedy whatsoever provided by law;and/or c) Re-enter and take possession of the Leased Premises and use its best efforts to relet the same for and on account of Lessee for the then full remaining portion of the unexpired Term of this Lease or for any shorter period,and to collect and receive payment of rent therefor,but no such re-entry or re-letting shall be construed as a termination of this Lease or as a release of Lessee from Lessee's obligation to pay monthly rent provided for in this Lease,or from Lessee's obligation to perform any other covenant herein contained.It expressly being understood and agreed that in the event of any such re-entry or re-letting by Lessor such re-entry or re-letting shall not operate to terminate this Lease or alter the obligation of Lessee to perform its covenants and to pay monthly rent pursuant to the terms hereof unless Lessor expressly so elects pursuant to paragraph 18.1(a) above. Lessor shall in no way be responsible or liable for any failure to re-let the Leased Premises, or any part thereof, or for any failure to collect any rent due upon such re-letting. No notice from Lessor hereunder or under a forcible entry and detainer statute or similar law constitutes an election by Lessor to terminate this Lease unless such notice specifically so states. Lessor reserves the right following any such re-entry and/or reletting to exercise its right to terminate this Lease;and/or d) Cure the default on Lessee's behalf and at Lessee's expense, in which event, all costs, expenses and reasonable attorney's fees incurred by Lessor in curing the default together with interest thereon at the rate of ten (10) percent per annum shall constitute additional rent payable to Lessor by Lessee upon demand. 18.2 If Lessor does not elect to terminate this Lease but takes possession as provided for in Article 18.1(c), Lessee shall pay to Lessor the monthly rent and other charges at the times and in the mariner as herein provided which would be payable if such repossession had not occurred, less the net proceeds, if any, of any re-letting of the Leased Premises after deducting all Lessee's reasonable expenses including, 7 r without limitation,all repossession costs,brokerage commissions, legal expenses,attorneys'fees,alteration and repair costs and expenses of preparation for such re-letting. 18.3 In the event the parties hereto become involved in a dispute arising out of this Lease, or the performance or breach thereof, the Court shall award costs, expenses, and attorney fees s to the prevailing party. 18.4 If Lessee violates any of the terms and provisions of this Lease or defaults in any of its obligations hereunder other than the payment of monthly rent or other sum payable hereunder,such violation may be restrained or such obligation enforced by injunction at the instance and request of Lessor without the showing of any special damages or an inadequate remedy at Law. ARTICLE 19—WAIVER AND TIME OF ESSENCE No waiver of any breach or breaches of any provision,covenant or condition of this Lease shall be construed to be a waiver of any preceding or succeeding breach of such provision, covenant or condition, or of any other provision, covenant or condition. Acceptance of monthly rent or partial monthly rent by Lessor shall not constitute a waiver of any then existing or subsequent breach or default.Time is of the essence for each and every provision,covenant and condition herein contained and on the part of Lessee to be done and performed. • ARTICLE 20—NOTICE All notices,demands or communications of any kind which may be required or desired to be served,given or made by Lessee upon or to Lessor,under the terms of or in connection with this Lease,shall be sufficiently served,given or made (as an alternative to personal service upon Lessor) if such notice, demand or communication is sent by certified United States mail,addressed to: City Manager City of Pueblo • . 1 City Hall Place Pueblo,Colorado 81003 and to: City Attorney Pueblo Law Department 503 N. Main Street,Suite 203 Pueblo, Colorado 81003 (or to such other person or address as may hereafter from time to time be designated for this purpose by Lessor to Lessee in writing),All notices,demands or communications of any kind which may be required or desired to be served,given or made by Lessor upon or to Lessee,under the terms of or in connection with this Lease,shall be sufficiently served,given or made(as an alternative to personal service upon Lessee)if such notice,demand or communication is sent by certified United States mail,addressed to: FRE Composites USA Inc. 75 Wales Street Saint-Andre-d`Argenteuil Québec, Canada JOV 1X0 Attention:Benoit Arsenault 8 `�/ (or to such other person or address as may hereafter from time to time be designated for this purpose by Lessee to Lessor in writing). ARTICLE 21—ENVIRONMENTAL PROVISIONS 21.1 For the purpose of this Lease, "Hazardous Materials" means any hazardous or toxic substance, material or waste which is or becomes regulated by any local government authority,the State of Colorado or the United States government and shall include, but not be limited to (1) substances defined as "hazardous waste","restricted hazardous waste","hazardous substance"or"hazardous material"under any applicable federal, state or local law or regulation ("Environmental Regulations"), (2) asbestos-containing materials,(3) PCBs,(4)petroleum or petroleum based products,and(5)lead. 21.2 Lessee will comply with Environmental Regulations that are applicable to the Lessee and its use of the Leased Premises. No activity shall be undertaken by the Lessee,its employees,agents,licensees,invitees, contractors or subcontractors,on all or any portion of the Leased Premises which would cause or permit:(i)the presence, use, generation, release, discharge, storage or disposal of any Hazardous Material in, on, under, about,or from the Leased Premises or any part thereof in violation of any Environmental Regulations; (ii)any portion of the Leased Premises to become a hazardous waste treatment,storage or disposal facility without receiving proper governmental authorization,and in compliance with all Environmental Regulations;or(iii)the discharge of pollutants or effluents into any water source or system, or the discharge into the air of any emissions without receiving proper governmental authorization, and in compliance with all Environmental Regulations,including,without limitation,the Federal Water Pollution Control Act,U.S.C.Section 1251 et seq. and the Clean Air Act,42 U.S.C.Section 7401 et seq. 21.3 Lessee agrees to defend,indemnify and forever hold harmless the Leased Premises and Lessor,and its officers, employees, agents, successors, and assigns, as their interest may appear, from all claims, losses, damages, penalties, expenses and costs, including, but not limited to, attorneys' fees, characterization, remediation and clean-up costs, incurred by reason of the use, storage, generation, release, discharge maintenance,disposal or removal of Hazardous Materials on,under about,or from the Leased Premises,or any part thereof, by Lessee, its employees, agents, licensees, invitees, contractors and subcontractors. The provisions of this Article 21 and Article 10.1 shall expressly survive the expiration of the Term or other termination of this Lease. ARTICLE 22—BUY BACK OF THE LEASED PREMISES 22.1 If Lessee is not in default hereunder or under the City Agreement,and has maintained substantially its Employment Commitment under the City Agreement by employing thirty(30) Full-Time employees at the Leased Premises, Lessee shall have the right to purchase, at Termination Date,the Leased Premises upon the terms and conditions contained in this Article for a purchase price as follows: a) The purchase price shall be U.S. $1.00 if the Tenant doesn't send a notice to exercise its right before Termination Date;or b) the purchase price shall be a lump sum equal to the amount of the remaining monthly instalments of the rent through the end of the Term; by way of example, if the Lessee gives notice to exercise the option with 36 months of the lease remaining,the purchase price shall be U.S. $ 225,000.00 ($6250 times 36-$225,000.00). 22.2 Upon valid exercise of ownership transfer the terms of purchase and sale shall include the following conditions and requirements: 9 1 a) Closing and payment of the purchase price to be held and made not later than ninety (90) days following the date of Lessee's written notice to exercise the option. b) Conveyance shall be made by special warranty deed free of liens and encumbrances, except those for general property taxes and those created by acts or any default of Lessee,and subject to the Easements and easement, rights-of-way, conditions, covenants, restrictions, reservations,and limitations of record and those created by acts or any default of Lessee. c) The Leased Premises shall be conveyed and transferred in their condition at the time of sale "AS IS" and "WHERE IS" without any representation of warranty with respect to the Leased Premises, including without limitation, the quantity, quality or condition of the Leased Premises, environmentally or otherwise. Prior to closing and payment of the purchase price, Lessee may, at Lessee's expense, conduct such inspection of the Leased Premises at it deems prudent, and may rescind its exercise of the purchase option if it finds objectionable at its sole discretion any condition of the Leased Premises not caused by Lessee. ARTICLE 23—RELEASE OF SUBSIDY BALANCE The Lessor undertakes to pay the Lessee the amount of U.S. $69,428.64 within fourteen (14) days following closing as payment for the total unused amount of subsidy granted to the Lessor as per the City Agreement. ARTICLE 24—MISCELLANEOUS PROVISIONS 24.1 Colorado Law.This Lease shall be governed by the laws of the State of Colorado and shall be construed in accordance therewith without reference to such State's choice of law and/or conflict of law principles. 24.2 Writing for Waiver or Modification. No provision of this Lease may be waived or modified except by an agreement in writing signed by the waiving party.A waiver of any term or provision shall not be construed as a waiver of any other term or provision. 24.3 Binding Effect. This Lease sets forth the entire and complete understanding and agreement of the parties hereto with respect to the subject matter hereof.Lessee acknowledges and agrees that it has not relied upon any statements, representations, agreements or warranties of Lessor except such as are expressed herein.This Lease shall be binding on the parties,their successors and approved assigns. 24.4 Construction. Throughout this Lease, the singular shall include the plural; the plural shall include the singular;and the masculine and neutral shall include the feminine,wherever the context so requires. 24.5 Text to Control. The headings of sections are included solely for convenience of reference. If any conflict between any heading and the text of this Lease exists,the text shall control. 24.6 Severability. If any provision of this Lease is declared by any court of competent jurisdiction to be invalid for any reason,such invalidity shall not affect the remaining provisions.On the contrary,such remaining provisions shall be fully severable,and this Lease shall be construed and enforced as if such invalid provisions had never been inserted in the Lease. 24.7 Venue and Jury Trial. Lessor and Lessee agree that exclusive venue for all actions or causes of action relating to this Lease or the Leased Premises shall be Pueblo County,Colorado.All such actions shall be filed in 10 e1 the District Court in and for the County of Pueblo, State of Colorado and Lessor and Lessee submit to the jurisdiction of that Court.To the extent allowed by law,each party waives its right to a jury trial. 24.8 Lessee's Warranties.The persons signing this Lease on behalf of Lessee represent and warrant that such persons and Lessee have the requisite power and authority to enter into, execute and deliver this Lease and that this Lease is a valid, legally binding obligation of Lessee enforceable against Lessee in accordance with its terms. 24.9 Time of Essence. Time shall be and is of the essence as to the performance of all terms, conditions and obligations under this Lease. 24.10 Third Parties.The provisions of this Lease are and will be for the benefit of Lessor and Lessee only and not for the benefit of any third Party,and accordingly, no third Party shall have any right or remedy hereunder or the right to enforce any provision of this Lease. IN WITNESS WHEREOF, Lessor and Lessee, by their duly authorized representatives, have executed this Lease on the day and year first written above. ATTEST: PUE. • - " unicipal ,rporati. City rk By: FRE COMPOSITES USA INC. a Delaware Corpora - By: B:noit Arsenault • esident DGCdocs-10715514 v1 - 11 - UCC Financing Statement • Colorado Secretary of State Date and Time:11/18/2016 10:55:38 AM Master ID:20162104581 Validation Number:20162104581 Amount:$8.00 Debtor: (Organization) Name: FRE Composites USA Inc. Addressl: 60 Greenhorn Dr. Address2: City: Pueblo State: CO ZIP/Postal Code: 81003 Province: Country: United States Secured Party: (Organization) Name: City of Pueblo Addressl: do City Attorney Address2: 1 City Hall Place, 3rd Floor City: Pueblo State: CO ZIP/Postal Code: 81003 Province: Country: United States Collateral Description: Winder; Curing Station; Boiler; Tank; Compressor; Exhaust Fan/ Ductwork; Mandrels & Moulds and Forklifts Page 1 of 5 Attachment #: 1 Security Agreement File name: FRE - Security Agreement.pdf Uploaded: 11/18/2016 10:53:30 AM UCC Financing Statement-20162104581 -Colorado Secretary of State-Page 2 of 5 STATE OF COLORADO UNIFORM COMMERCIAL CODE—SECURITY AGREEMENT Debtor: Name: FRE Con itilS_ SA Inc. _ _._......�........ ... ........ (Exact Legal Name Requited) Addtets: Residence: No. —. Street City State Business: 60 Greenhorn Drive _.. ... _ Pueblo CO 81004 No. Street City State Secured Party: Name: City of PuOlo. Sg!!_f kiPal 00rPeni011_. Address: 1 City Hall Place Puebla CC 81003 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 equipment and other property listed in attached Exhibit A as of August 8,2016 To secure payment of the indebtedness evidenced by the Employment Agreement dated July 13,2016 between Debtor and Secured Party and the performance of Debtor's obligations under the Employment Agreement including the payment of U.S.$510,000.00 by Debtor to Secured Party 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 fanning operations; 1 l 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 60 Greenhorn Drive Pueblo Pueblo CO 81004 No.and Street City County Serle 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 _WA County of N/A and State of Colorado,to wit; No.eUCC 1205. Rev.8-01. UNICORM COMMERCIAL CODE—SECURITY AGREEMENT(Page 1 of 2) tl Bradford Publishing,1743 Wnzee St.,Denvet,CO 80202—(303)292.2500—www hradfrndpnhlishing com—eForm UCC Financing Statement-20162104581 -Colorado Secretary of State-Page 3 of 5 S. Promptly to notify Sccurcd 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 he 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 nut,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 risk,[of loss Or damage by fire(including so-called extended coverage),theft and such other casualties as the Secured Patty may xctrtrnnttbly require,ineltsditig collision in the ease of any motor vehicle,all in such amounts,under such forms of policies.upon such terms,for such perinds.and written by such companies or underwriters as the Secured Party may approve,losses in.dl cis to In payable:to the Secured Party and the Debtor as their interest may appear.All policies of insurance shall provide ire at least tett days'prior wt`tttett ntaiec of cancel- lation to the Secured Party:and the Debtor shall furnish the Seethed Party with certificate%of soeh insurance of other evidnare satisfactory to the Secured Party as to compliance with the pros stuns Of dna paragraph,The Secured Party may act as attitr- ney for the Debtor in making,adjusting and settling claims under ctr+sncelling such tn'urdwCC to.I cruirsrsiug 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; (h) 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 arty 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 Uttifsum Commercial ercial Crede.Secured Party may require Debtor to assemble the Collateral and deliver or make it available to Secured Party at a place to be zlcsigtaated 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 feces and expenses of in-house counsel)and such portion of the Secured Party's overhead as it may in its reasonable judgment deers allocable to and includable in such expenses. No waives 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 takiiag of this Security A'rrement shall ma waive or impair any other security Secured Party may have or hereafter acquire for thepayment flf 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 sh If be joint and several, Dated: Al j4t}Vt _:. Debtor: Frt USA Inc. By; it Delotyft'_ _ — I thior's mole of organization,or if nota rcgkic.at orbcnization.chief executive olt,cer Benoi Arsenault fkhlor's Sratc Idcnulicntinn No Pratt ant No.eUCC 1205. CPage z or 3 I • UCC Financing Statement-20162104581 -Colorado Secretary of State-Page 4 of 5 FRE Composites USA Inc. Exhibit A to the Security Agreement For the benefit of the City of Pueblo Description of Collateral Serial Number Winder $ 205 263.28 Curing Station $310 061.94 Boiler $ 397 349.98 Tank $ 41325.29 Compressor $ 37 840.94 Exaust fan/ductwork $ 18 680.00 Mandrels& Moulds $ 374 109.96 Forklifts $ 12 767.02 UCC Financing Statement-20162104581-Colorado Secretary of State-Page 5 of 5 STATE OF COLORADO UNIFORM COMMERCIAL CODE—SECURITY AGREEMENT Debtor: Name:,..EREcgn1PQSltes USA IrIC, (Exact Legal Name Requiied) Addiess: Residence: ......__.__._.._....—_.-- No. Street City State Business 60 Greenhorn Drive Pueblo CO 81004 No. Street City State Secured Party: Name: City of Pueblo,a nlVniciPal corporation Address: 1 City Hall Place Pueblo CO 81003____ 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 equipment and other property listed in attached Exhibit A as of August 8,2016 To secure payment of the indebtedness evidenced by the Employment Agreement dated July 13,2016 between Debtor and Secured Party and the performance of Debtor's obligations under the Employment Agreement including the payment of U.S.$510,000.00 by Debtor to Secured Party 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 60 Greenhorn Drive . Pueblo Pueblo CO 81004 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 -NSA County of N/A and State of Colorado,to wit: No.eUCC 1205. Rev.8-01. UNIFORM COMMERCIAL CODE—SECURITY AGREEMENT (Page I of 2) LL's Bradford Publishing,1743 Wane 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 rcplevined. 8. That the Collateral is in good condition,arid 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 he 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 encurrihrance 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 conunencement 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 he 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: J. o 't. 2016 Debtor: F - = . •..:n•s USA Inc. By: �� Delaware th•ht.1 r le oft m•sI,en ,1111,01110111,U:1[1,1 0011 ,aunt.Thiel executive i'liver Benoi'Arsenault ;k^nor' 1111,1c Idunnticalinr 'c Presi:ent No.eUCC 1205. (Nage 2 or 21 FRE Composites USA Inc. Exhibit A to the Security Agreement For the benefit of the City of Pueblo Description of Collateral Serial Number Winder $ 205 263.28 Curing Station $ 310 061.94 Boiler $ 397 349.98 Tank $ 41325.29 Compressor $ 37 840.94 Exaust fan/ductwork $ 18 680.00 Mandrels & Moulds $ 374 109.96 Forklifts $ 12 767.02