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14-R-29 - Amazon Development Agreement Amendment #1RESOLUTION NO. 14 -R -29 A RESOLUTION BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS AUTHORIZING AMENDMENT NO. 1 TO THE ECONOMIC DEVELOPMENT INCENTIVES AGREEMENT AMONG THE CITY OF SCHERTZ, TEXAS, THE CITY OF SCHERTZ ECONOMIC DEVELOPMENT CORPORATION, GUADALUPE COUNTY, TEXAS, AND AMAZON.COM.KYDC LLC; AUTHORIZING CERTAIN BENEFITS BY THE CITY PURSUANT THERETO; AND OTHER MATTERS IN CONNECTION THEREWITH WHEREAS, by City Ordinance No. 12 -T -15, the City of Schertz, Texas (the "City") established a program under Chapter 380, Texas Local Government Code, as amended, to promote economic development and to stimulate business and commercial activity in the City (the "380 Program "); and WHEREAS, on November 6, 2012 the City, the City of Schertz Economic Development Corporation (the "SEDC "), and Guadalupe County entered into an Economic Development Incentive Agreement with Amazon.com.kydc (the "Developer "), pursuant to the City's 380 Program; and WHEREAS, the SEDC held a meeting on February 22, 2014, and the Board of the SEDC voted to recommend approval of Amendment No. 1 to the Economic Development Incentives Agreement ( Amazon.com.kydc LLC) ( "First Amendment ") to the City Council; and WHEREAS, on March 11, 2014 the Guadalupe County Commissioners approved the First Amendment; and WHEREAS, the City Council has determined that it is in the best interest of the City to approve the First Amendment. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS: Section 1. The City Council hereby approves the First Amendment and authorizes the City Manager to execute and deliver the First Amendment with the SEDC, the County, and the Developer in substantially the form set forth on Exhibit A. Section 2. The recitals contained in the preamble hereof are hereby found to be true, and such recitals are hereby made a part of this Resolution for all purposes and are adopted as a part of the judgment and findings of the City Council. Section 3. All resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Resolution are hereby repealed to the extent of such conflict, and the provisions of this Resolution shall be and remain controlling as to the matters resolved herein. Section 4. This Resolution shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. Section 5. If any provision of this Resolution or the application thereof to any person or circumstance shall be held to be invalid, the remainder of this Resolution and the application of such provision to other persons and circumstances shall nevertheless be valid, and the City Council hereby declares that this Resolution would have been enacted without such invalid provision. Section 6. It is officially found, determined, and declared that the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by Chapter 551, Texas Government Code, as amended. Section 7. This Resolution shall be in force and effect from and after its final passage, and it is so resolved. PASSED AND ADOPTED, this--�5 day of , 2014. ATTEST: Bren a Dennis, City Secretary (CITY SEAL) 2 CITY OF SCHE TEXAS Michael Carpenter, Mayor EXHIBIT A AMENDMENT NO. 1 TO THE ECONOMIC DEVELOPMENT INCENTIVES AGREEMENT (AMAZON.COM.KYDC LLC) A -1 AMENDMENT NO. 1 TO THE ECONOMIC DEVELOPMENT INCENTIVES AGREEMENT (AMAZON.COM.KYDC LLC) This Amendment No. I to the Economic Development Incentives Agreement (Amazon.comAydc LLC) (this "Amendment ") is entered into among the City of Schertz, Texas, a Texas home -rule municipality ( "City" or "Schertz'), the City of Schertz Economic Development Corporation, a Texas non - profit industrial development corporation ( "SEDC "), Guadalupe County, Texas, a political subdivision of the State of Texas ( "County'), and Amazon.com.kydc LLC, a Delaware limited liability company ( "Developer ", and collectively with Schertz, the SEDC, and the County, the "Parties ", and each a "Party") and is dated as of the date signed by the last Party hereto to be effective as of December 31, 2013 (the "Effective Date "). RECITALS WHEREAS, this Amendment amends that certain Economic Development Incentives Agreement (Amazon.com.kydc LLC) between the Patties dated November 6, 2012 (the "Agreement'). WHEREAS, the Developer has created and employed, by December 31, 2013, at the Project on the Property three hundred and twenty (320) Full -Time Jobs, which is thirty (30) Full -Time Jobs short of the Minimum Number of Jobs required in accordance with the terms of the Agreement, which, absent this Amendment, would create a default under the Agreement (the "Potential Default "). WHEREAS, the Parties wish to amend the Agreement to modify its terms related to the satisfaction of the capital investment and job creation commitment requirements as set forth herein. WHEREAS, Section 8.9 of the Agreement provides that the Agreement may be amended by a written agreement executed by the Parties. NOW THEREFORE, in consideration of the mutual promises set forth herein, and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by each Party, the Parties hereby agree as follows: AMENDMENT 1. Definitions. The following new defined terms are hereby added to the end of Section 1.1 of the Agreement: "(ttt) "Commitments" means, with respect to every Calendar Year after Calendar Year 2014, the Job Commitment and Payroll Commitment applicable to that Calendar Year, and with respect to Calendar Year 2014, the First Commitments; each of the Commitments is referred to herein as a "Commitment'). (uuu) "Curing Calendar Year" has the meaning ascribed to it in Section 53(a)(i). (vvv) "Job Commitment" means the Minimum Number of Jobs that must be maintained at the Project on the Property during a given Calendar Year. (www) "Payroll Commitment" means the Minimum Animal Payroll that must be maintained at the Project on the Property during a given Calendar Year. (xxx) "First Commitments" has the meaning ascribed to it in Section 5.3(00). (yyy) "First Investment Commitment" has the meaning ascribed to it in Section 5.3(fl(i). (zzz) "First Job Commitment" has the meaning ascribed to it in Section 5.3(fl(i). 50741955.2 1 (aaaa) "First Payroll Commitment" has the meaning ascribed to it in Section 53(f)(i). (bbbb) "Investment Option" has the meaning ascribed to it in Section 5.3(f)(ii)(b). (cccc) "Job Option" has the meaning ascribed to it in Section 53(f)(ii)(a). (dddd) "Missed Calendar Year" has the meaning ascribed to it in Section 53(g)(iii). (eeee) "Option" has the meaning ascribed to it in Section 53(t)(ii). (ffft) "Revised Commitments" has the meaning ascribed to it in Section 53(g)(i). To the extent that Revised Commitments are in place, any references in this Agreement to Commitments shall refer to the applicable Revised Commitments. (gggg) "Revised Job Commitment" means the portion of the Revised Commitments that is the Job Commitment. (hhhh) "Revised Payroll Commitment" means the portion of the Revised Commitments that is the Payroll Commitment" 2. New Section 4.3 of the Agreement. The following Section 4.3 is hereby added to the Agreement: "43 Payment of Incentives. Notwithstanding anything in the Agreement to the contrary, no Incentive shall be payable by the City, the SEDC, or the County until the later to occur of the following: (a) forty-five (45) days after receipt by the City, the SEDC, and the County of all applicable complete and satisfactory reports required by Section 5.6; or (b) the applicable deadline for payment otherwise set forth in this Agreement" 3. Amendment and Restatement of 5.3(b) — New Full -Time Jobs/New Payroll. Section 5.3(b) is hereby amended and restated to read in its entirety as follows: "(b) New Full -Time Jobs/New Payroll. No later than December 31, 2013, the Developer shall employ at the Project on the Property a minimum of three hundred and fifty (350) Full -Time Jobs (the "Minimum Number of Jobs ") to be performed at the Project on the Property, and the minimum Annual Payroll associated with the Full -Time Jobs at the Project on the Property shall be Eleven Million and No /100 Dollars ($11,000,000.00) (the "Minimum Annual Payroll'). The fast Calendar Year for which the Minimum Annual Payroll requirement must be met shall be the 2014 Calendar Year. No later than December 31, 2013 and continuing throughout the Term of this Agreement, the Developer shall maintain at least the Minimum Number of Jobs and the Minimum Annual Payroll at the Project on the Property; provided, however, for any less than complete Calendar Year after December 31, 2013 that this Agreement is in effect, the Minimum Annual Payroll applicable to such partial Calendar Year shall be prorated based on the number of calendar days this Agreement is in effect during that partial Calendar Year divided by three hundred sixty-five (365). For each month that this Agreement is in effect and the Minimum Number of Jobs requirement applies, the number of Full - Time Jobs for the month shall be measured as of the last business day in such month or as of any other date mutually agreed to in writing by the Parties. To determine whether the Minimum Number of Jobs requirement has been satisfied for a particular Calendar Year, the Developer shall take the average of the twelve (12) Full -Time Job numbers for each month of such year (or the average of all months during any partial Calendar Year). This Agreement provides for alternate ways for the Developer to satisfy the obligations set forth in this Section 5.3(b)." 4. Addition of Section 5.3(f) — Alternate Job and Investment Commitment Requirements. The following new Section 5.3(f) is hereby added to the Agreement: "(f) Alternate Job and Investment Commitment Requirements. 50741955.2 (i) Definitions. Developer's commitment to create the Minimum Number of Jobs by no later than December 31, 2013 set forth in Section 5.3(b) of the Agreement is referred to as the "First Job Commitment ", and the Developer's commitment to pay the Minimum Annual Payroll each Calendar Year beginning with 2014 set forth in Section 5.3(b) of the Agreement is referred to, specifically with respect to the 2014 commitment, as the "First Payroll Commitment". The Developer's commitment to make, or cause to be made, Investments totaling at least One Hundred Sixty-Six Million and No /100 Dollars ($166,000,000.00) set forth in Section 5.3(c) of the Agreement is referred to as the "First Investment Commitment" (and together with the First Job Commitment and Fist Payroll Commitment, the "First Commitments "). (ii) Options to Achieve Commitment Requirements. The Parties hereby agree that if Developer fails to meet either (but not both) of the First Job Commitment or the First Investment Commitment, Developer will, nonetheless, be deemed to have satisfied the First Commitments if Developer satisfies one of the following two options (each an "Option'): (a) Option 1 — Job Option: Developer (A) employs at the Project on the Property a minimum of three hundred and eighty (380) Full-Time Jobs (having maintained that number of Full -Time Jobs for at least one month) by no later than December 31, 2014; (B) pays payroll for December of 2014 for such Full -Time Jobs in an amount such that, if annualized (by multiplying wages and salary by twelve (12) calendar months, but only counting variable compensation like bonuses one time), it would be equal to at least Twelve Million and No /100 Dollars ($12,000,000.00) in Annual Payroll; and (C) makes, or causes to be made, Investments in personal property (excluding property not subject to ad valorem taxation), the Building, and inventory subject to ad valorem taxation in an aggregate amount of no less than One Hundred Sixty-Six Million and No /100 Dollars ($166,000,000.00) (the satisfaction of items (A), (B), and (C) in this Section 5.3 ii a is referred to as the "Job Option "); or (b) Option 2 — Investment Option: Developer (A) employs at the Project on the Property a minimum of three hundred fifty (350) Full -Time Jobs (having maintained that number of Full -Time Jobs for at least one month) by no later than December 31, 2014; (B) pays payroll for December of 2014 for such Full -Time Jobs in an amount such that, if annualized (by multiplying wages and salary by twelve (12) calendar months, but only counting variable compensation like bonuses one time), it would be equal to at least Eleven Million and No /100 Dollars ($11,000,000.00) in Annual Payroll; and (C) makes, or causes to be made, Investments in personal property (excluding property not subject to ad valorem taxation), the Building, and inventory subject to ad valorem taxation in an aggregate amount of no less than One Hundred Ninety-One Million and No /100 Dollars ($191,000,000.00) (the satisfaction of items (A), (B), and (C) in this Section 5.3 ii b is referred to as the "Investment Option "). (iii) Default Regarding Commitments. Failure by the Developer to satisfy one of the following shall constitute a default under this Agreement: (A) the original First Commitments, (B) the Job Option, or (C) the Investment Option. Developer shall only be required to satisfy one of the foregoing three options. If Developer has met the requirements for both the Job Option and the Investment Option, Developer may elect, by notifying the City, the SEDC, and the County in writing within thirty (30) days of the end of the Calendar Year 2014, which Option will be considered under the Agreement. This election may only be made once and shall be effective throughout the remainder of the Term of the Agreement. (iv) Changes s to Agreement Requirements Based on Option Achieved. 50741955.2 (a) If Developer satisfies the Investment Option but not the original First Commitments, Section 5.3(d) will still apply to Developer's performance, but all references in Section 53(d) to One Hundred Sixty -Six Million and No /100 Dollars ($166,000,000.00) shall be changed to One Hundred Ninety-One Million and No /100 Dollars ($191,000,000.00). (b) If Developer satisfies the Investment Option but not the original First Commitments, all references in Section 5.3(d) and Section 5.3(e) to One Hundred Twenty-Five Million and No /100 Dollars ($125,000,000.00) shall be changed to One Hundred Forty-Four Million and No /100 Dollars ($144,000,000.00). (c) If Developer satisfies the Job Option but not the original First Commitments, the number of Full -Time Jobs that must be maintained (after the Minimum Numbers of Jobs is met under Section 5.3(b)) by Developer shall be changed to three hundred and eighty (380) Full -Time Jobs. (d) If Developer satisfies the Job Option but not the original First Commitments, all references in Section 5.3(b) to Eleven Million and No /100 Dollars ($11,000,000.00) shall be changed to Twelve Million and No /100 Dollars ($12,000,000.00)." 5. Addition of Section 5.3(e) — Performance Safe Harbor. The following new Section 5.3(g) is hereby added to the Agreement: "(g) Performance Safe Harbor. (i) Adjustment of Commitments. The Patties hereby agree that if Developer fails to satisfy the Commitments by achieving less than one hundred percent (100 %) but at least seventy -five percent (75 %) of each of the required Commitments during any Calendar Year beginning with Calendar Year 2015 and ending with the final Calendar Year of the Term and no other default or event that but for the passage of time or giving of notice or both would constitute an event of default under the Agreement exists, Developer will not be deemed to be in default or breach of the Agreement, will not forfeit any City Incentive or County Incentive payable with respect to such Calendar Year, and will be deemed to satisfy such Commitment, If and only if Developer cures such failure in the next Calendar Year (the Calendar Year during which a cure could occur is referred to as a "Curtne Calendar Year "). Developer may cure a failure of a Commitment by exceeding each of the Commitments in the Curing Calendar Year by an amount equal to two hundred percent (200 %) of the shortfall. The increased Commitments for the Curing Calendar Year (the "Revised Commitments ") shall be applicable for the Curing Calendar Year and throughout the remainder of the Term of the Agreement. (ii) Sample Calculation. For example, if Developer is obligated under the Job Commitment to maintain three hundred and eighty (380) Full -Time Jobs throughout Calendar 2015, but Developer only employs three hundred and fifty (350) Full -Time Jobs throughout Calendar Year 2015, the Developer would have missed the applicable Job Commitment by 7.89 %. Therefore, in order to avoid being considered in default or breach of the Agreement and in order to avoid forfeiting the City Incentives and the County Incentives, Developer would be required to meet the Revised Job Commitment and the Revised Payroll Commitment, which commencing with Calendar Year 2016 would be, respectively, a Minimum Number of Jobs of four hundred and forty (440) and a Minimum Annual Payroll of Thirteen Million Eight Hundred Ninety -Three Thousand Six Hundred and No /100 Dollars ($13,893,600.00). (Note that the Revised Payroll Commitment listed above was determined by: (a) calculating the amount equal to 7.89% of the Payroll Commitment for the Calendar Year in which the Commitments were not achieved, which is Nine Hundred Forty-Six Thousand Eight Hundred and No /100 Dollars ($946,800.00); (b) calculating the amount that is two hundred percent 50741955.2 (200 %) of that number, which is One Million Eight Hundred Ninety -Three Thousand Six Hundred and No /100 Dollars ($1,893,600.00); and (c) adding that amount to the amount of the Payroll Commitment for the Calendar Year in which the Commitments were not achieved.) (iii) Escrow of Incentives. If Developer fails to satisfy the Commitments in a given Calendar Year (such Calendar Year referred to herein as a "Missed Calendar Year ") by achieving less than one hundred percent (100 %) but at least seventy-five percent (75 %) of each of the required Commitments and no other default or event that but for the passage of time or giving of notice or both would constitute an event of default tinder the Agreement exists, the SEDC and /or the City will hold in escrow (and will not spend) the amount of any City Incentive (payable under Section 4.1) and the County will hold in escrow (and will not spend) the amount of any County Incentive (payable under Section 4.2) attributable to such Missed Calendar Year through the deadline for Developer's submission of the annual report for the Curing Calendar Year (and, if such annual report adequately, in accordance with the requirements of this Agreement, demonstrates that such Revised Commitments were achieved during the Curing Calendar Year, until payment of such Incentives) or through such earlier date as either: (i) Developer provides notice that Developer will not be able to achieve the Revised Commitments during the Curing Calendar Year; (ii) Developer otherwise defaults under the Agreement; or (iii) based on the number of Full -Time Jobs employed at the Property and/or the Annual Payroll being paid at the Property, it becomes obvious that Developer will not be able to achieve the Revised Commitments during the Curing Calendar Year. (iv) Payment of Incentives for Missed Calendar Year. To the extent that Developer achieves and demonstrates (as required under this Agreement, including without limitation in accordance with the requirements of Section 5.6) that Developer has achieved the Revised Commitments during the Curing Calendar Year, the Incentives from the Missed Calendar Year will be paid to the Developer in accordance with the deadlines applicable to the payment of any Incentives from the Curing Calendar Year. (v) No Interest Developer shall not be entitled under any circumstances to any interest on any funds escrowed under this Section 5.3(02" 6. Amendment of Preamble Section 5.6 of the Agreement. The preamble to Section 5.6 of the Agreement is hereby deleted in its entirety and replaced with the following: "5.6 Annual Reports. Throughout the Term of this Agreement, the Developer shall provide the City, the SEDC, and the County with annual repots, no later than April 15th of each year (for the preceding Calendar Year), commencing April 15, 2015, detailing the activities of the Project, which reports shall include, at a minimum, the following information" 7. No Defaults. Developer represents and warrants to the City, the SEDC, and the County that to the best of the Developer's actual knowledge without additional investigation or inquiry, as of the Effective Date no default, nor any event which upon notice or lapse of time or both would constitute a default, has occurred, other than the Potential Default. 8. Ratification of the Agreement. Developer represents and warrants that the Agreement, as amended by this Amendment, is in full force and effect and ratifies the same. 9. No Claims by the Developer. Developer represents and warrants to the City, the SEDC, and the County that to the best of the Developer's actual knowledge without additional investigation or inquiry, as of the Effective Date the Developer does not have any claims against the City, the SEDC, or the County with respect to the Agreement or this Amendment. 50741955.2 10. Entire Agreement, Conflict. Except as amended by this Amendment, the Agreement is and shall remain in full force and effect. This Amendment, together with the Agreement as amended by this Amendment: (a) is intended by the parties as a final, complete and exclusive expression of the terms of their agreement, and (b) supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof. If there is a conflict between the Agreement and this Amendment, the terms of the Amendment will prevail. 11. Counterparts and Facsimile Delivery. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original and all of which taken together shall be deemed to constitute one and the same document. The parties may sign and deliver this Amendment by facsimile transmission. 12. Capitalized Terms. All capitalized terns used in this Amendment and not defined in this Amendment have the meanings given to such terms in the Agreement. 13. Binding Agreement. The terms and conditions of this Amendment are binding upon the successors and permitted assigns of the Parties hereto. 14. Legal Construction. In the event any one or more of the provisions contained in this Amendment shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect other provisions, and it is the intention of the Parties to this Amendment that in lieu of each provision that is found to be illegal, invalid, or unenforceable, a provision shall be added to this Amendment which is legal, valid, and enforceable and is as similar in terms as possible to the provision found to be illegal, invalid or unenforceable to the extent that it does not deprive the Parties of the benefit of the bargain and only to the extent permissible by law. 15. Governing Law. This Amendment shall be governed by the laws of the State of Texas, and venue for any action concerning this Amendment shall be exclusively in the State District Court of Guadalupe County, Texas. The Parties agree to submit to the jurisdiction of said court. [Signature Pages Follow] 50741955.2 SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE ECONOMIC DEVELOPMENT INCENTIVES AGREEMENT (AMAZON.COM.KYDC LLC) APPROVED AS TO FORM 20 Iq Katherine 1. Tap ey, Data Senior Ass cia , Fulbright & Jaworski LLP, Legal CounW to the City and the SEDC APP VF AS TO CONTENT: D vi Gwin, S- VC Executive Director 50741955.2 Date SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE ECONOMIC DEVELOPMENT INCENTIVES AGREEMENT (AMAZON.COM.KYDC LLC) IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date(s) set forth below to be effective as of the Effective Date. The City: City of Schertz, Texas a Texas home rule municipality By: Jo n C. Kessel, City Manager zg i Date Signed THE STATE OF TEXAS COUNTY OF GUADALUPE § This instrument was acknowledged before me on the t day of D i� I 2014, by John C. Kessel, the City Manager of the City of Schertz, Texas, on behalf of said City. 1 [Seal] ��AA&kj �. CC 9999A099A00��` 1� taly Public in and for the State of Te SARAH E. GON7Jd -EZ 110t3ry Public State of a 31.2016 h1y Comm. ExP. 50741955.2 SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE ECONOMIC DEVELOPMENT INCENTIVES AGREEMENT (AMAZON.COM.KYDC LLC) IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date(s) set forth below to be effective as of the Effective Date. The SEDC: City of Schertz Economic Development Corporation, a Texas non - profit industrial development corporation By: lNuR n, President ,W a"ao�y Date Signed THE STATE OF TEXAS § COUNTY OF GUADALUPE § This instrument was acknowledged before me on theeJ4 day of 2014, by Tim Brown, the President of the City of Schertz Economic Development Corporation, a Tex s non -profit industrial development corporation, on behalf of said non -profit industria WcWlgpment cQrporati ' �1 �:u/,u /u/r/ /// nun/// rr /r /r /rrrrrmb /p /uurrruuiamu //g 1 // / / // / // / / / / / / / / / / / / / /1 /I // / / //I 50741955.2 SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE ECONOMIC DEVELOPMENT INCENTIVES AGREEMENT (AMAZON.COM.KYDC LLC) IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date(s) set forth below to be effective as of the Effective Date. The County: Guadalupe County, Texas a political subdivision of the State of Texas By: Larry e , ounty Judge AV THE STATE OF TEXAS COUNTY OF GUADALUPE This instrument was acknowledged before me on the 1-5+k bay of 2014, by Larry Jones, the Comity Judge of Guadalupe County, Texas, a political subdivision of the Stat of Texas, on behalf of said County. [ Seal ] ``��`` tIALFI/yG���G, �aO P�V..P UB�i A• Z r�� }e . 91F Of 1 :• 50741955.2 10 Notary Public in and M the Wate of Texas SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE ECONOMIC DEVELOPMENT INCENTIVES AGREEMENT (AMAZON.COM.KYDC LLC) IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date(s) set forth below to be effective as of the Effective Date. The Developer: Amazon.com.kyde LLC, a Delaware limited liability company By: � Conwell, Vice President Date Signed THE STATE OF U1 r 3,t n �iph COUNTY OF ItiNnq This instrument was acknowledged before me on the 3 day of No" 2014, by Ben Conwell, the Vice President of Amazon.com.kydc LLC, a Delaware limited liability company, on behalf of said limited liability company. [ Seal ] NOTARY PUBLIC 50741955.2 I1 Notary Public in and for the State of WA