HomeMy WebLinkAbout09707ORDINANCE NO. 9707
AN ORDINANCE APPROVING A SECOND EMPLOYMENT
AGREEMENT BETWEEN THE CITY OF PUEBLO, A COLORADO
MUNICIPAL CORPORATION AND CR MINERALS COMPANY,
LLC, A DELAWARE LIMITED LIABILITY COMPANY, RELATING
TO A JOB CREATING CAPITAL IMPROVEMENT PROJECT,
AUTHORIZING THE MAYOR TO EXECUTE SAID AGREEMENT
AND TRANSFERRING ONE HUNDRED SIXTY THOUSAND
DOLLARS ($160,000) FROM THE 1992-2021 SALES AND USE
TAX CAPITAL IMPROVEMENT PROJECTS FUND
BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO, that:
SECTION 1.
The City Council finds and determines that the expenditure of $160,000 for a job creating
capital improvement project with CR Holdings Company, LLC, a Delaware limited liability
company, (“Company”) described in the attached Second Employment Agreement is for a public
purpose and in furtherance of a municipal function and will create employment opportunities
justifying the expenditure of public funds. The City Council further finds the incentives granted to
the Company hereby meet the standards established by Section 14-4-85 of the Pueblo Municipal
Code.
SECTION 2.
The Second Employment Agreement, dated May 26, 2020, between the City and the
Company, a copy of which is attached hereto and incorporated herein by this reference, having
been approved as to form by the City Attorney, is hereby approved. The Mayor is authorized to
execute and deliver said 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 $160,000 are hereby authorized to be transferred,
expended and made available out of the 1992-2021 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 attached agreement. The funds hereby authorized to
be transferred and expended shall be released, disbursed and paid by the City’s Director of
Finance as specified in the attached agreement.
SECTION 4.
The officers and staff of the City are directed and authorized to perform any and all acts
consistent with this Ordinance and the attached agreement which are necessary or desirable to
implement the transactions described therein.
SECTION 5.
This Ordinance shall become effective on the date of final action by the Mayor and City
Council.
Action by City Council:
Introduced and initial adoption of Ordinance by City Council on May 11, 2020 .
Final adoption of Ordinance by City Council on May 26, 2020 .
President of City Council
Action by the Mayor:
☒ Approved on May 27, 2020 .
☐ Disapproved on based on the following objections:
Mayor
Action by City Council After Disapproval by the Mayor:
☐ Council did not act to override the Mayor's veto.
☐ Ordinance re-adopted on a vote of , on
☐ Council action on __________________failed to override the Mayor’s veto.
President of City Council
ATTEST
City Clerk
City Clerk’s Office Item # R-1
Background Paper for Proposed
Ordinance
COUNCIL MEETING DATE: May 11, 2020
TO: President Dennis E. Flores and Members of City Council
CC: Mayor Nicholas A. Gradisar
VIA: Brenda Armijo, City Clerk
FROM: Daniel C. Kogovsek, City Attorney
SUBJECT: AN ORDINANCE APPROVING A SECOND EMPLOYMENT AGREEMENT
BETWEEN THE CITY OF PUEBLO, A COLORADO MUNICIPAL CORPORATION
AND CR MINERALS COMPANY, LLC, A DELAWARE LIMITED LIABILITY
COMPANY, RELATING TO A JOB CREATING CAPITAL IMPROVEMENT
PROJECT, AUTHORIZING THE MAYOR TO EXECUTE SAID AGREEMENT
AND TRANSFERRING ONE HUNDRED SIXTY THOUSAND DOLLARS
($160,000) FROM THE 1992-2021 SALES AND USE TAX CAPITAL
IMPROVEMENT PROJECTS FUND
SUMMARY:
Attached is an Ordinance approving and authorizing the Mayor to sign a Second Employment
Agreement between the City of Pueblo and CR Holdings Company, a Delaware limited liability
company (the “Company”).
PREVIOUS COUNCIL ACTION:
On May 8, 2017, by Resolution No. 13680, the City Council approved an Employment Agreement
(“First Agreement”) with the Company which provided that in exchange for an economic incentive
payment of $250,000 from the City, the Company, after a three-year “ramp up” period, would hire
seventeen (17) new full-time employees whose annual compensation would average at least
$36,850, not including benefits. The Company has fully complied with the First Agreement and
has invested more than $15 million in its manufacturing plant located in the City’s St. Charles
Industrial Park.
BACKGROUND:
The Company has developed a process which mixes fly ash (from the Xcel Comanche generating
station) with a form of pumice to create a pozzolan product which strengthens and causes cement
to last longer. The Company’s product is successfully being sold to customers outside of Pueblo
County and across the country.
The Company has informed the Pueblo Economic Development Corporation (“PEDCO”) that if
the City would be willing to provide the Company with additional economic development funds,
the Company would enlarge its manufacturing facility and agree to hire additional new full-time
employees.
The Company has through PEDCO made application for a second round of economic
development funds from the City and in connection with its application, the Company has
committed that (i) it shall invest an additional $10 million in fixed assets and other investments in
its manufacturing facility located within the City of Pueblo and (ii) the Company shall hire eight (8)
additional employees.
FINANCIAL IMPLICATIONS:
The attached proposed Ordinance approves the payment to the Company of $160,000.00 for
expansion of the Company’s manufacturing plant. The proposed Second Employment Agreement
provides that after a three-year “ramp up” the Company will hire eight (8) additional full-time
employees whose annual compensation shall average at least $40,000, not including benefits.
The City’s payment of economic incentives is secured by an Irrevocable Letter of Credit in the
amount of $160,000.00.
BOARD/COMMISSION RECOMMENDATION:
Not applicable to this Ordinance.
STAKEHOLDER PROCESS:
Not applicable to this Ordinance.
ALTERNATIVES:
If this Ordinance is not approved, the Company will not expand its manufacturing facility in the
City and the City will lose the opportunity to create eight (8) new jobs.
RECOMMENDATION:
PEDCO recommends approval of this Ordinance.
Attachments: Proposed Ordinance and proposed Second Employment Agreement
SECOND EMPLOYMENT AGREEMENT
THIS SECOND EMPLOYMENT AGREEMENT ("Second Agreement") entered
into as of May 26,2020 between the City of Pueblo,a Colorado municipal corporation(the"City")
and CR Minerals Company, LLC, a Delaware limited liability company (the "Company"). The
City and Company may be individually referred to herein as "Party"or collectively referred to as
"Parties."
WHEREAS, the Company has developed a process which mixes fly ash (from the Xcel
Comanche generating station) with a form of pumice to create a pozzolan product which
strengthens and causes cement last longer. The Company's product is successfully being sold to
customers outside of Pueblo County and across the country; and
WHEREAS, On May 8, 2017, by Resolution No. 13680, the City Council approved an
Employment Agreement ("First Agreement")with the Company which provided that in exchange
for an economic incentive payment of$250,000 from the City, the Company, after a three-year
"ramp up"period,would hire seventeen(17)new full-time employees whose annual compensation
would average at least $36,850,not including benefits; and
WHEREAS, the Company has fully complied with the First Agreement and has invested
more than$15 million in its manufacturing plant located in the City's St. Charles Industrial Park;
and
WHEREAS, the Company has informed the Pueblo Economic Development Corporation
("PEDCO") that if the City would be willing to provide the Company with additional economic
development funds, the Company would enlarge its manufacturing facility and agree to hire
additional new full-time employees; and
WHEREAS, the Company has through PEDCO made application for a second round of
economic development funds from the City and in connection with its application, the Company
has committed that(i)it shall invest an additional$10 million in fixed assets and other investments
in its manufacturing facility located within the City of Pueblo and (ii) the Company shall hire
additional employees as described in Section 4 of this Second Agreement ; and
WHEREAS,the City has approved such application and will make economic development
funds available to Company subject to and upon the terms and conditions of this Second
Agreement.
NOW, THEREFORE, in consideration of the foregoing and mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, City and Company agree as follows:
1. The following terms as used in this Second Agreement shall have the following
meaning unless the context clearly indicates otherwise:
"Effective Date"means the date of approval of this Second Agreement by City Council of
City.
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"Employment Commitment Date" means July 1, 2023.
"Facility" means the manufacturing facility located on the Facility Land.
"Facility Land" means the parcel of land on which the Facility has been constructed. The
legal description of the Facility Land is Lot 1, St. Charles Industrial Park, Filing No. 2, County of
Pueblo, State of 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.
"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 number of 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.
2. If Company is not in default under this Second Agreement, City will advance to or
for the benefit of Company funds in the amount of One Hundred Sixty Thousand Dollars
($160,000.00) (the "City Funds") subject to and contingent upon the following conditions and
covenants which Company agrees to perform and comply with:
(a) Letter of Credit. Upon execution of this Second Agreement, Company shall
deliver to City a Letter of Credit in the principal amount of One Hundred Sixty Thousand Dollars
($160,000.00). Said Letter of Credit shall have a ten (10) year term. During the seven (7) year
period starting on the Employment Commitment Date and ending eighty-four (84) months
thereafter(the "Repayment Period"),the principal balance of the Letter of Credit will be decreased
on a quarterly basis consistent with the Company's compliance with its Employment Commitment
as set forth in Section 3 of this Second Agreement. At the conclusion of the Repayment Period,
subject to Section 3 of this Second Agreement, the entire principal balance of the Letter of Credit
shall be due and payable by the Company to the City. The Parties anticipate that the Company will
fully comply with its Employment Commitment as specified in Section 3 of this Second
Agreement and that at the end of the Repayment Period, the principal balance of the Letter of
Credit shall be zero. The issuer and format of the Irrevocable Letter of Credit shall require the
consent of the City, which consent shall not be arbitrarily withheld, conditioned or delayed.
(b) Company shall file in the office of the City Clerk copies of the following:
(i) a certificate or other evidence of authority to transact business in the State of Colorado issued
by the Colorado Secretary of State, together with a certificate of good standing issued by the
governmental jurisdiction of Company's formation; (ii) certified copies of the resolutions of the
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governing board of Company approving this Second Agreement and authorizing its officers or
managers to execute and deliver said documents in the name of Company and (iii)this Second
Agreement executed by authorized officers of Company. The date of the last to occur of the filings
required under(i), (ii) and (iii) of this Section 2(b) shall be referred to herein as "Closing." If the
Closing does not occur on or before October 1,2020, or such later date as Company and City shall
mutually agree, the Company and the City, each, at its sole option, may terminate this Second
Agreement and City and Company shall thereafter be released and discharged from all obligations
hereunder.
3. Company acknowledges and agrees that the primary purpose of City in entering into this
Second Agreement and the sole benefit to the City for making City Funds available hereunder is
the creation of jobs. Therefore, Company represents, covenants,and agrees that Company will on
and after the Employment Commitment Date and continuously for the duration of the Repayment
Period conduct its business operations at the Facility and employ not less than eight(8) new Full-
Time Employees at the Facility whose annual compensation shall average at least$40,000 in pre-
benefit salaries. Company agrees that this Second Employment Commitment is in addition to the
Employment Commitment agreed to in the First Agreement. Company will use good faith efforts
in accordance with sound business practices to employ residents of the City of Pueblo as Full-
Time Employees including, without limitation, engaging in reasonable programs and posting of
employment openings in the City of Pueblo (collectively the "Employment Commitment").
4. Notwithstanding anything contained in this Second Agreement to the contrary,if Company
shall for any reason default in its Second Employment Commitment set forth in Paragraph 3 for
any Quarter, Company shall repay to City a pro-rata share of the City Funds advanced by City
under paragraph 2 hereof based upon the number of Full-Time Employees employed by Company
at the Facility(the "Repayment Obligation") during such Quarter, as follows:
(a) During the Repayment Period, Company shall pay to City an amount for
any such Quarter equal to the number of Quarterly Employees less than eight (8) Full-Time
Employees employed at the Facility by Company multiplied by $714.29 (the "Company's
Quarterly Payments"). For example, if for the second Quarter of the third year after the
Employment Commitment Date such new Quarterly Employees is 5, the amount payable by
Company to City on or before the fifteenth(15th) day of the next calendar month would be(8 - 5)
x $714.29= $2,142.87.
(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 after the end
of each Quarter during the Repayment Period and for one month thereafter at the office of the
Director of Finance of City, 1 City Hall Place, rd Floor, Pueblo, CO 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 eight percent(8%)per annum ("Default Interest")until paid.
(c) Within fifteen(15)days after the end of each Quarter after the Employment
Commitment Date and for one calendar month after the Repayment Period, Company will submit
to City's Director of Finance Company's statements showing the Quarterly Employees for the
preceding Quarter and their annual Salary, together with the basis upon which Quarterly
Employees and Company's Quarterly Payment, if any, were computed certified by an officer of
the Company to be true and correct. For purposes of verifying Company's employment and
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salaries, City shall have access to Company's records relating to Company's employees employed
at the Facility.
(d) Notwithstanding anything contained in this Paragraph 4 to the contrary, if
Company defaults in its Employment Commitment and Company's Repayment Obligation, and
such default is not cured within sixty (60)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 8 times $816.33 multiplied by the remaining
Quarters of the Repayment Period from and after the default date plus the amount of Company's
unpaid Quarterly Payments, if any, but in no event more than $160,000 plus Default Interest as
herein provided. Except as may be agreed by the Mayor and City Council in their sole discretion
(as contemplated under paragraph 6(b)hereof), 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 Second Agreement shall be
deemed to be a debt of Company payable to City until Company performs and discharges its
obligations hereunder including its Employment Commitment contained in Paragraph 3 and its
Repayment Obligation contained in Paragraph 4. Company's obligations under this Second
Agreement, including its Employment Commitment and Repayment Obligation, shall be secured
by the Irrevocable Letter of Credit in the amount of One Hundred Sixty Thousand Dollars
($160,000.00) with a ten (10) year term, as referenced in Paragraph 2(a), above. The issuer and
format of the Irrevocable Letter of Credit shall require the consent of the City,which consent shall
not be arbitrarily withheld, conditioned or delayed.
6. (a) Prior to instituting any proceeding to enforce Company's Repayment
Obligation under Paragraph 4, City shall notify Company in writing of its intention to institute
such proceedings. Company may request relief from its Repayment Obligation by delivering to
City within twenty (20) days after date of City's notice, Company's written request for relief
specifying the grounds upon which such relief is sought together with documents supporting said
grounds. Within ninety (90)days after receipt of Company's request,City will schedule a meeting
with the Mayor and City Council at which Company must 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 Mayor and City Council shall
entitle City to immediately institute proceedings to enforce Company's Repayment Obligation.
(b) The Mayor and City Council may or may not, in their sole and absolute
discretion, relieve Company, in whole or in part, from Company's Repayment Obligation. Any
action taken by the Mayor and City Council relating to a request for relief shall be final and binding
on Company, and not subject to judicial review. Any such action by City Council is, and shall
constitute,a legislative measure. Nothing contained in this paragraph 6 shall grant or be construed
to grant to Company any right or claim to relief from its Repayment Obligation or a hearing with
respect thereto.
(c) No delay by the City in scheduling a meeting, or failure by City to exercise
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its right to enforce this Second Agreement, including Company's Repayment Obligation, and no
partial or single exercise of that right, shall constitute a waiver of that right.
7. In the event of any litigation arising under this Second 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,
County of Pueblo, State of Colorado and each party submits to the personal and subject matter
jurisdiction of such District Court. To the full extent allowed by law, each party hereby waives its
right to a jury trial.
8. This Second 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 Second Agreement and may not be amended or modified
except in writing signed by City and Company. Any waiver of any provision of this Second
Agreement must be in writing and signed by the party whose rights are being waived. No waiver
of any breach of any provision of this Second Agreement shall be or be deemed to be a waiver of
any preceding or subsequent breach of the same or any other provision of this Second Agreement.
The failure of either party to enforce or seek enforcement of the terms of this Second Agreement
following any breach shall not be construed as a waiver of such breach.
9. This Second Agreement shall be construed in accordance with and be governed by
the laws of the State of Colorado without regard to conflict of law principles.
10. Any notices hereunder shall be sufficiently given if given in writing personally or
overnight delivery by a recognized overnight courier or mailed by first class,registered,or certified
mail,postage prepaid, addressed:
(a) if to City, Mayor, City of Pueblo, 1 City Hall Place, 2nd Floor, Pueblo,
Colorado, 81003, with copy to City Attorney, 1 City Hall Place, 3rd Floor,
Pueblo, Colorado, 81003, or
(b) if to the Company, 14014 Quail Ridge Drive, Broomfield, CO 80020
attention Ed Dvorak.
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. Notice shall be effective (i) upon receipt if
delivered personally, or (ii) the next business day if delivered by overnight courier or three (3)
business days after deposit in the mails, if mailed.
11. Time is of the essence hereof. This Second Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and assigns. Company may not
assign this Second Agreement or any interest herein(except for assignments to entities controlling,
controlled by or under common control of the Company, which the Company can do solely upon
providing written notice to the City)without the express written consent of the City,which consent
may be arbitrarily withheld, conditioned or delayed. Any assignment or attempted assignment of
this Second Agreement by Company without such consent shall be null and void. However, if
Company proposed to assign this Second Agreement (a) to a purchaser of its business; (b) the
transaction is an arms-length transaction; and (c) the purchaser assumes and agrees to perform
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Company's obligations under this Second Agreement, then in such event, the assignment may be
made with the express consent of the City, which consent may not be unreasonably withheld,
conditioned or delayed. The City shall have the right to determine that said proposed purchaser is
creditworthy, has sufficient business experience in the manufacturing sector, and is capable of
performing Company's obligations under this Second Agreement.
12. The persons signing this Second Agreement in the name of and on behalf of
Company represent and warrant that they and Company have the requisite power and authority to
enter into, execute, and deliver this Second Agreement and that this Second Agreement is a valid
legally binding obligation of Company enforceable in accordance with its terms.
13. Company represents and warrants that no person, entity, or organization has been
employed or retained or will receive or be paid,directly or indirectly,any commission,percentage,
contingent fee or any other remuneration,payment or receipt of which is contingent upon approval
of this Second Agreement or City's advancement of City Funds hereunder. For breach or violation
of this warranty, City shall have the right to terminate this Second 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.
14. In no event shall City, its officers, agents or employees be liable to Company for
damages, including without limitation, compensatory, punitive, indirect, special or consequential
damages, resulting from or arising out of or related to this Second 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 said Second Agreement on the City's part to be performed. In consideration of
City entering into this Second Agreement, Company hereby waives and discharges City, its
officers, agents and employees from all claims for any and all such damages. No breach, default,
delay or failure of City under this Second Agreement shall be or be construed to be a waiver,
discharge or release of Company's Repayment Obligation under paragraph 4 of this Second
Agreement with respect to the amount of City Funds actually advanced or paid by City to or for
the benefit of Company pursuant to paragraph 2 of this Second Agreement. Notwithstanding the
above, in the event of breach of this Second Agreement by the City, Company shall have the right
to request specific performance of this Second Agreement by the City,but not damages.
15. If any provision of this Second Agreement is declared by a court of competent
jurisdiction to be invalid or unenforceable, such determination shall not affect the other provisions
of this Second Agreement which shall remain in full force and effect.
16. Neither party shall be, or hold itself out as, agent of the other or as joint venturers
or partners under this Second Agreement.
17. Each party acknowledges that this Second Agreement was fully negotiated by the
parties and,therefore,no provision of this Second Agreement shall be interpreted against any party
because such party or its legal representative drafted such provision.
18. The provisions of this Second 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 Second Agreement.
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19. This Second Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed for all purposes to be an original and all such counterparts shall
together constitute but one and the same original.
20. The First Agreement is in all respects hereby ratified and confirmed. All of the
rights,remedies,terms, conditions, covenants and agreements of the First Agreement shall remain
in full force and effect. This Second Agreement does not and shall not be construed to modify the
First Agreement in any respect.
Executed at Pueblo, Colorado,the day and year first above written.
[ SEAL ] City of Pueblo, a Colorado Municipal
Corporation
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ity Clerk Mayor
[ SEAL ]
CR Minerals Company, LLC
a Delawa li d 1' b'lity company
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The foregoing instrument was acknowledged before me on this (Oil day of
<J��e_ , 2020,by �J e Wo Wi1AdLit, as
of CR Minerals Company, LLC,a lJ4dlae limited liability company.
Witness my official hand and seal.
My Commission Expires: t O. 211. 2 0 2 2
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