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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. 1 "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 2 i>/f1J‘) 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 3 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 4 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 5 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. 6 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 M £LA4/U4O 10 ByAttes � t'tC'.�0 . /`/C ity Clerk Mayor [ SEAL ] CR Minerals Company, LLC a Delawa li d 1' b'lity company 4 By: fName: J 1-kel1 (itifribiXX Title: t' ?x(51 STATE OF TC CGis ) ) SS. COUNTY OF ik>rw;ytt ) 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 • Notary Public ' P MP \""ilr'Pii, A AZIZ MOHAMED 7 4i, ... . =r°°;;. �=Notary Public, State of Texas • --.......,,,,iii-- . ,- Comm. Expires 10-24-2022 ''t .`3,,* Notary ID 130004564