IOWA DEPARTMENT OF ECONOMIC DEVELOPMENT
ENTERPRISE ZONE (EZ) PROGRAM AGREEMENT
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EZ AGREEMENT NUMBER: 05-EZ-37
APPLICATION APPROVAL DATE: June 28, 2005
AGREEMENT EFFECTIVE DATE: June 28, 2005
ENTERPRISE ZONE NAME: Kossuth County/Algona EZ-1
Hydrogen Engine Center
ZONE CERTIFICATION DATE: October 17, 2002
ZONE EXPIRATION DATE: October 17, 2012
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THIS ENTERPRISE ZONE ("EZ") AGREEMENT is made by and among the IOWA
DEPARTMENT OF ECONOMIC DEVELOPMENT, 200 East Grand Avenue, Des Moines, Iowa
50309 ("Department" or "IDED"), Kossuth County ("Community"), 114 West State
Street, Algona, Iowa 50511, and Hydrogen Engine Center ("Business"), 602 E. Fair
St., Algona, Iowa 50511.
WHEREAS, the purpose of the Enterprise Zone Program is to promote new
economic development in economically distressed areas; and
WHEREAS, the Community has designated and the Department has certified
the Enterprise Zone identified above; and
WHEREAS, eligible businesses locating or located in an enterprise zone
are authorized under this program to receive certain tax incentives and
assistance and Business has located, or will locate, within the certified
Enterprise Zone; and
WHEREAS, the Enterprise Zone Commission responsible for the
above-identified Zone has recommended approval and the Department has found the
Business's application to be consistent with the Act's eligibility requirements;
and
NOW THEREFORE, in consideration of the mutual promises contained in
this Agreement and other good and valuable consideration, it is agreed as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall apply:
1.1 "Act" means 2003 Iowa Code sections 15E.191 through 15E.196 as
amended by 2004 Iowa Acts, Senate File 2290.
1.2. "Agreement Effective Date" means the date this Agreement becomes
effective and the Business is authorized to receive program benefits.
1.3 "Agreement Expiration Date" means the date this Agreement ceases to
be in force and effect. This Agreement shall remain in effect while the Business
initially satisfies its job creation requirements and then for a ten (10) year
job maintenance requirement period as specified under Article 4.1.
1.4 "Application Approval Date" means the date, as identified in the
text box above, on which the Director of the IDED approved the Business's
Enterprise Zone application.
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1.5 "Annual Base Rent" means the Business' annual lease payment minus
taxes, insurance, and operating or maintenance expenses.
1.6 "Application Approval Date" means the date, as identified above, on
which the Director of the IDED approved the Business' Application for Financial
Assistance.
1.7 "Board" means the IDED Board.
1.8 "Commission" or "Enterprise Zone Commission" means the enterprise
zone commission established by the Community responsible for the designated
enterprise zone.
1.9 "Enterprise Zone" means the site within the Community certified by
the Board for the purpose of attracting private investment within economically
distressed counties or areas of cities within the state.
1.10 "Full-time Equivalent (FTE) Job" means the employment of one
person:
a) For 8 hours per day for a 5-day, 40-hour workweek for 52 weeks per
year, including paid holidays, vacations and other paid leave, or
b) For the number of hours or days per week, including paid holidays,
vacations and other paid leave, currently established by schedule, custom, or
otherwise, as constituting a week of full-time work for the kind of service an
individual performs for an employing unit
1.11 "Project" means the activity, or set of activities, described in
this Agreement and the Application for Financial Assistance approved by IDED.
1.12 "Project Completion" means (1) the first date upon which the
average annualized production of finished product for the preceding ninety-day
period at the manufacturing facility operated by the Business within the
Enterprise Zone is at least fifty percent of the initial design capacity of the
facility; or (2) for existing or non-manufacturing facilities, the date of
completion of all improvements included in the Project.
1.13 "Project Jobs" means the 41 new Full-time Equivalent (FTE) jobs
created by the location or expansion of the Business in the Enterprise Zone.
ARTICLE II
ENTERPRISE ZONE BENEFITS
2.1 Benefits Available. The following Enterprise Zone benefits are
available to the Business under this Agreement:
(a) Supplemental New Jobs Credit. As provided in Iowa Code section
15.331, the Business is eligible to claim a supplemental new jobs credit from
withholding in an amount equal to 1 1/2 percent of the gross wages paid by the
Business. The supplemental new jobs credit available under this program is in
addition to and not in lieu of the program and withholding credit of 1 1/2
percent authorized under Iowa Code chapter 260E.
Additional new jobs created by the project, beyond those that were
agreed to in Article IV, Section 4.1 of this Agreement, are eligible for the
additional 1 1/2 percent withholding credit as long as those additional jobs
meet the local Enterprise Zone wage eligibility criteria and are an integral
part or a continuation of the Project. Approval and administration of the
supplemental new jobs credit shall follow existing procedures established under
Iowa Code chapter 260E.
(b) Value-Added Property Tax Exemption. The Community has approved an
exemption from taxation all or a portion of the value added to the property upon
which the Business locates or expands in the Enterprise Zone and which is used
in the operation of the Business. The amount of the exemption is as detailed in
Attachment C, "County Board of Supervisors or City Council" Resolution
Authorizing Property Tax Exemptions for the Enterprise Zone."
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(c) Investment Tax Credit. The Business may claim an investment tax
credit as provided in Iowa Code section 15.333. An investment tax credit may be
claimed of up to a maximum of ten percent (10%) of the new investment which is
directly related to the Project Jobs created by the location or expansion of the
Business in the Enterprise Zone. The Business may not claim an investment tax
credit for capital expenditures above the amount stated in Article IV, Section
4.3 of this Agreement. The credit is to be taken in the year the qualifying
asset is placed in service. Any credit in excess of the tax liability for the
tax year may be credited to the tax liability for the following seven years or
until depleted, whichever occurs earlier.
The capital expenditures eligible for the investment tax credit are:
(i) The purchase price of real property and any existing buildings and
structures located on the real property.
(ii) The cost of improvements made to real property which is used in
operation of the Business.
(iii) The costs of manufacturing machinery and equipment and computers,
as defined in Iowa Code section 427A.1(1) "e" and "j" which are
purchased for use in the operation of the Business and which the
purchase price have been depreciated in accordance with generally
accepted accounting principles.
(iv) Ten (10) years of Annual Base Rent payments provided the
cumulative cost of these payments does not exceed the cost of the
land and the third-party developer's costs to build or renovate
the building.
(d) Additional Research Activities Credit. The Business is eligible to
claim an additional research activities credit as provided in Iowa Code section
15.335. This benefit is a tax credit for increasing research activities in this
state during the period the Business is participating in the program. For
purposes of claiming this credit, a business is considered to be "participating
in the program" for a period of ten (10) years from the date the Business'
application was approved by the Department. The credit may equal up to six and
one-half percent (6.5%) of the State's apportioned share of the qualifying
expenditures for increasing research activities and is in addition to the credit
authorized in Iowa Code sections 422.10 and 422.33(5). Any tax credit in excess
of the tax liability may be refunded to the Business with interest or, at its
election, credited to its tax liability the following year.
(e) Refund Of Sales, Service And Use Taxes Paid To Contractors Or
Subcontractors. The Business is eligible for a refund of sales, service and use
taxes paid to contractors and subcontractors as authorized in Iowa Code section
15.331A.
(i) The Business may apply for a refund of the sales and use taxes
paid under Iowa Code chapters 422 and 423 for gas, electricity,
water or sewer utility services, goods, wares, or merchandise, or
on services rendered, furnished, or performed to or for a
contractor or subcontractor and used in the fulfillment of a
written contract relating to the construction or equipping of a
facility within the Enterprise Zone.
(ii) Taxes attributable to intangible property and furniture and
furnishings shall not be refunded.
To receive a refund of the sales, service and use taxes paid to
contractors or subcontractors, the Business must, within one year after project
completion, make an application to the Iowa Department of Revenue (IDR).
2.2 Duration Of Benefits. The Enterprise Zone designation shall remain
in effect for ten years following the date of certification. Any state or local
incentives or assistance that may be conferred must be conferred before the
designation expires. However, the benefits of the incentive or assistance may
continue beyond the expiration of the Enterprise Zone designation.
2.3 Benefits Not Available. The following Enterprise Zone benefits are
not available to the Business under this agreement:
(a) Refund of Taxes Attributable to Racks, Shelving, and Conveyor
Equipment. The Business is eligible for a refund of sales and use taxes paid on
the purchase of racks, shelving, and conveyor equipment as authorized in Iowa
Code section 15.331A. The Business may apply for a refund of Iowa sales and use
taxes paid on the purchase of racks, shelving, and conveyor equipment to be used
in a warehouse or distribution center. In order to receive the refund, the
Business shall submit the required forms to IDED. IDED will review the refund
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request to ensure that the issuance of a refund would not exceed statutory
limits and then forward the refund request to the IDR for processing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUSINESS
To induce the Department and the Community to authorize Enterprise Zone
benefits referred to in this Agreement, the Business represents, covenants and
warrants that:
3.1 Authority. The Business is a corporation duly organized and validly
existing under the laws of its state of incorporation and is in good standing,
and has complied with all applicable laws of the State of Iowa. The Business is
duly authorized and empowered to execute and deliver this Agreement. All action
on the Business's part (e.g. where required, appropriate resolution of its Board
of Directors) for the execution and delivery of this Agreement, has been
effectively taken.
3.2 Business Information. All financial statements and related
materials concerning the Business and the Project provided to the Department and
the Community are true and correct in all material respects and completely and
accurately represent the subject matter thereof as of the effective date of the
statements and related materials, and no material adverse change has occurred
since that date.
3.3 Application. The contents of the application the Business submitted
to the Department for Enterprise Zone program benefits (Attachment A) is a
complete and accurate representation of the Business and the Project as of the
date of submission and there has been no material adverse change in the
organization, operation, business prospects, fixed properties or key personnel
of the Business since the date the Business submitted its application to the
Department.
3.4 Claims And Proceedings. There are no actions, lawsuits or
proceedings pending or, to the knowledge of the Business, threatened against the
Business affecting in any manner whatsoever its rights to execute this Agreement
or to otherwise comply with the obligations of the Business contained under this
Agreement. There are no actions, lawsuits or proceedings at law or in equity, or
before any governmental or administrative authority pending or, to the knowledge
of the Business, threatened against or affecting the Business' ability to
proceed with the Project.
3.5 Permits. All necessary permits have been issued or will be applied
for in a timely manner with reasonable expectation that they will be issued.
ARTICLE IV
CONDITIONS TO RECEIPT OF ENTERPRISE ZONE BENEFITS
The Enterprise Zone Benefits authorized under Article II of this
Agreement are available to the Business provided the Business, (and where
applicable, the Community) satisfies each of the following conditions:
4.1 Job Creation And Maintenance. The Business shall create forty-one
(41) full-time positions at the Project site within three (3) years of the
Effective Date of this Agreement. The Business shall maintain the Project Jobs
for a period of ten (10) years from the date the Business first meets its job
creation obligation. The Business shall develop and maintain a list of all the
Project Jobs.
4.2 Average Wage. The Business shall pay an average wage of $23.89/hr.
for the Project Jobs.
4.3 Investment. Within three (3) years of the Effective Date of this
Agreement, the Business shall make a capital investment of at least $943,316
within the Enterprise Zone.
4.4 Medical And Dental Insurance. The Business provides all full-time
employees with the option of choosing one of the following:
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(a) The Business shall pay 80 percent of both of the following:
(i) the cost of a standard medical insurance plan, and
(ii) the cost of a standard dental insurance plan or an equivalent
plan;
(b) The Business provides the employee with a monetarily equivalent
plan to the plans provided in "a".
4.5 Reserved for additional Commission standards
4.6 Business Retention. The Business shall have and maintain Project
operations contemplated by this Agreement within the Community at least through
the Agreement Expiration Date.
4.7 Records And Accounts. The Business shall maintain job data
information, books, records, documents and other evidence concerning the
Project, in sufficient detail to permit the Department and the Community to
assess compliance with the terms of this Agreement. The Business shall retain
the aforementioned records for a period of three (3) years from the Agreement
Expiration Date.
4.8 Access To Records/Inspections. The Business shall, upon prior
reasonable notice and at any time (during normal business hours), permit the
Community and its representatives and the Department, its representatives or the
State Auditor to examine, audit and/or copy
(i) any plans and work details pertaining to the Project,
(ii) all of the Business' books, records and accounts relating to the
Project, and
(iii) all other documentation or materials related to this Agreement.
The Business shall provide proper facilities for making such
examination and/or inspection. Records of the Business furnished to the
Department in connection with this Project are subject to the provisions of Iowa
Code chapter 22 and administrative rules adopted by the Department concerning
public records and requests for confidential treatment of records.
4.9 Notice Of Proceedings. The Business shall promptly notify the
Community and IDED of the initiation of any claims, lawsuits, bankruptcy
proceedings or other proceedings brought against the Business which would
adversely impact the Project.
4.10 Reports; Community Monitoring/Reporting.
(a) Authorization for Release of Confidential State Tax Information.
The Business shall execute an Authorization for Release of Confidential
State Tax Information form, to permit IDED to receive the Business'
state tax information directly from the Iowa Department of Revenue for
purposes of annually updating the Iowa Public Return on Investment
Analysis for this Project. The Business shall submit to IDED any other
information requested by IDED to update the Iowa Public Return on
Investment Analysis for this Project.
a) Compliance Report. The Business shall prepare, sign and submit the
following compliance report:
Report Due Date
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Compliance Report January 30
The Business shall, for the length of its designation as an Enterprise
Zone business, certify annually to the Community and the Department its
compliance with the requirements of the Act. Documentation of compliance with
the conditions detailed in Article IV shall be included with the annual
certification.
4.11 Notice Of Business Changes. The Business shall provide prompt
advance notice to the Community and the Department of any proposed change in the
Business ownership, structure or control which would materially and directly
affect the Project.
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ARTICLE V
DEFAULT AND REPAYMENT
5.1 Events Of Default. Enterprise Zone benefits described in Article II
are only available to the Business to the extent the Business satisfies the
conditions described in Article IV. Any of the following shall constitute an
Event of Default under this Agreement:
(a) Material Misrepresentation. If at any time any representation,
warranty or statement made or furnished to the Department or the Community by,
or on behalf of, the Business in connection with this Agreement or to induce the
Department or Community to be incorrect, false, misleading or erroneous in any
material respect when made or furnished.
(b) Breach Of Agreement. If there is a failure of the Business to
comply with any of the covenants, terms or conditions contained in this
Agreement.
(c) Relocation Or Abandonment. If there is a relocation or abandonment
of the Business or jobs created under the Project and the Business fails to
renew operation of the Business within the Enterprise Zone within 30 days. If
the relocation or abandonment is due to a natural disaster (e.g. flood,
tornado), the Business shall have 120 days to renew operations within the
Enterprise Zone.
(d) Insolvency Or Bankruptcy. If the Business becomes insolvent or
bankrupt, or admits in writing its inability to pay its debts as they mature, or
makes an assignment for the benefit of creditors, or the Business applies for or
consents to the appointment of a trustee or receiver for the Business or for the
major part of its property; or if a trustee or receiver is appointed for the
Business or for all or a substantial part of the assets of the Business and the
order of such appointment is not discharged, vacated or stayed within sixty (60)
days after such appointment; or if bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceedings or other proceedings for relief under any
bankruptcy or similar law or laws for the relief of debtors, are instituted by
or against the Business and, if instituted against the Business, is consented
to, or, if contested by the Business is not dismissed by the adverse parties or
by an order, decree or judgment within sixty (60) days after such institution.
5.2 Notice Of Default.
(a) From Department. If, through the annual certification report or
other means, the Department has reason to believe the Business is in default of
the terms of this Agreement, the Department will issue a written notice of
default to the Business, setting forth the nature of the default in reasonable
specificity, and providing therein a reasonable period of time, which shall not
be less than 30 days from the date of the notice of default, in which the
Business shall have an opportunity to cure, provided that cure is possible and
feasible. A copy of any Notice of Default will also be provided to the Community
and Department of Revenue.
(b) From Community. If, through monitoring, auditing or other means,
the Community has reason to believe the Business is in default of the terms of
this Agreement, the Community will issue a written notice of default to the
Business, setting forth the nature of the default in reasonable specificity, and
providing therein a reasonable period of time, which shall not be less than 30
days from the date of the notice of default, in which the Business shall have an
opportunity to cure, provided that cure is possible and feasible. A copy of any
Notice of Default will also be provided to the Department and Department of
Revenue.
5.3 Repayment. If the Business has received incentives or assistance
under the Act and fails to meet and maintain any one of the requirements of the
Act, the Administrative Rules or Article IV of this Agreement, the Business is
subject to repayment of all or a portion of the incentives and assistance that
it has received.
(a) Job creation shortfall. If the Business does not meet its job
creation requirement, repayment shall be calculated as follows:
(i) If the Business has met 50 percent or less of the
requirement, the Business shall repay the same percentage
in benefits as the Business failed to create in jobs.
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(ii) If the Business has met more than 50 percent, but not more
than 75 percent of the requirement, the Business shall
repay one-half of the percentage in benefits as the
Business failed to create in jobs.
(iii) If the Business has met more than 75 percent but not more
than 90 percent of the requirement, the Business shall
repay one-quarter of the percentage in benefits as the
Business failed to create in jobs.
(iv) If the Business has not met the minimum job creation
requirement of ten (10) new full-time jobs, the Business
shall repay all of the incentives and assistance that it
has received.
(b) Wages and benefits. If the Business fails to comply with the wage
or benefit requirements, the Business shall not receive Enterprise Zone benefits
for each year during which the Business is not in compliance.
(c) Capital Investment. If the Business does not meet the capital
investment requirement, repayment shall be calculated as follows:
(i) If the Business has met 50 percent or less of the
requirement, the Business shall repay the same percentage
in benefits as the Business failed to invest.
(ii) If the Business has met more than 50 percent but not more
than 75 percent of the requirement, the Business shall
repay one-half of the percentage in benefits as the
Business failed to invest.
(iii) If the Business has met more than 75 percent but not more
than 90 percent of the requirement, the Business shall
repay one-quarter of the percentage in benefits as the
Business failed to invest.
(iv) If the Business has not met the minimum investment
requirement of $500,000 the Business shall repay all of
the incentives and assistance that it has received.
(d) Department of Revenue; community recovery. Once it has been
established, through the Business' annual certification, monitoring, audit or
otherwise, that the Business is required to repay all or a portion of the
incentives received, the Department of Revenue and the Community shall collect
the amount owed. The Community has the authority, pursuant to the Act, to take
action to recover the value of taxes not collected as a result of the exemption
provided by the Community to the Business. Department of Revenue has the
authority, pursuant to the Act, to recover the value of state taxes or
incentives provided under the Act. The value of state incentives provided under
the Act includes applicable interest and penalties.
5.4 Layoffs and Facility Closures. If the Business experiences a layoff
within the State of Iowa or closes any of its Iowa facilities prior to receiving
Enterprise Zone benefits, the Department may reduce or eliminate all or a
portion of the benefits. If a business experiences a layoff within the State of
Iowa or closes any of its Iowa facilities after receiving Enterprise Zone
benefits, the Business shall be subject to repayment of all or a portion of the
incentives and assistance that it has received.
ARTICLE VI
GENERAL TERMS AND PROVISIONS
6.1 Compliance With Laws And Regulations. The Business shall comply
with all applicable State and federal laws, rules (including the administrative
rules), ordinances, regulations and orders.
6.2 Termination. This Agreement may be terminated by the Department or
the Community: (a) in the event of an unremedied material Event of Default by
the Business under Article V of this Agreement; (b) by mutual agreement of all
parties.
6.3 Survival Of Agreement. If any portion of this Agreement is held to
be invalid or unenforceable, the remainder shall be valid and enforceable.
6.4 Governing Law. This Agreement shall be interpreted in accordance
with the law of the State of Iowa, and any action relating to this Agreement
shall only be commenced in the Iowa District Court for Polk County or the United
States District Court for the Southern District of Iowa.
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6.5 Modification. This Agreement may only be modified by a written
document signed by all Parties.
6.6 Notices. Whenever this Agreement requires or permits any notice or
written request by one party to another, it shall be in writing, enclosed in an
envelope, addressed to the party to be notified at the address heretofore stated
(or at such other address as may have been designated by written notice),
properly stamped, sealed and deposited in the United States Mail. Any such
notice given hereunder shall be deemed delivered upon the earlier of actual
receipt or three (3) business days after posting. The Department may rely on the
addresses of the Business and Community set forth heretofore, as modified from
time to time, as being the addresses of the Community and Business.
6.7 Waivers. No waiver by a party of any Event of Default hereunder
shall operate as a waiver of any other Event of Default or of the same Event of
Default on any future occasion. No delay on the part of a party in exercising
any right or remedy hereunder shall operate as a waiver thereof. No single or
partial exercise of any right or remedy by a party shall preclude future
exercise thereof or the exercise of any other right or remedy.
6.8 Headings. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction and
interpretation of this Agreement.
6.9 Integration. This Agreement contains the entire understanding
between the Community, Business and the Department and any representations that
may have been made before or after the signing of this Agreement, which are not
contained herein, are nonbinding, void and of no effect. None of the parties
have relied on any such prior representation in entering into this Agreement.
6.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
6.11 Documents Incorporated By Reference. The following documents are
hereby incorporated by reference:
a. Attachment A, "Business's Application for Financial Assistance."
b. Attachment B, "Enterprise Zone Commission Resolution Approving the
Business' Enterprise Zone Application."
c. Attachment C, "County Board of Supervisors or City Council
Resolution Authorizing Property Tax Exemptions for the Enterprise
Zone."
6.12 Order Of Priority. In the event of a conflict between documents of
this Agreement, the following order of priority shall govern:
a. Articles 1 through 6 herein.
b. Attachment A, "Business's Application for Financial Assistance."
c. Attachment B, "Enterprise Zone Commission Resolution Approving the
Business's Enterprise Zone Application."
d. Attachment C, "County Board of Supervisors or City Council
Resolution Authorizing Property Tax Exemptions for the Enterprise
Zone."
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date first stated:
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FOR THE COMMUNITY: FOR IDED:
Kossuth County
/s/ Eugene Elsbecker /s/ Mary Lawyer
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Signature Mary Lawyer, Acting Director
Eugene Elsbecker, Chair
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Type or Print Name, Title
FOR THE BUSINESS:
Hydrogen Engine Center
/s/ Theodore Hollinger
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Signature
Theodore Hollinger [President]
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Type or Print Name, Title