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HomeMy WebLinkAboutPR 18229: EDC ECONOMIC INCENTIVE CONTRACT AND LOAN AGREEMENT WITH KT HOLDINGS, INC. CITY OF PORT ARTHUR Port Arthur Economic Development Corporation Interoffice MEMORANDUM To: City Attorney's Office From: Floyd Batiste, CEO Date: March 4, 2014 Subject: P. R. No.18229; Council Meeting on March 18, 2014 A RESOLUTION AUTHORIZING THE CITY OF PORT ARTHUR SECTION 4A ECONOMIC DEVELOPMENT CORPORATION TO ENTER INTO AN INCENTIVE CONTRACT & LOAN AGREEMENT WITH KT HOLDINGS, INC. Cc: City Council Members City Manager FB /pr P.R. No. 18229 3/4/2014 pr RESOLUTION NO. A RESOLUTION AUTHORIZING THE CITY OF PORT ARTHUR SECTION 4A ECONOMIC DEVELOPMENT CORPORATION TO ENTER INTO AN ECONOMIC INCENTIVE CONTRACT AND LOAN AGREEMENT WITH KT HOLDINGS, INC. WHEREAS, KT Holdings, Inc. ( "Incentive Recipient ") is a New York Corporation which was incorporated in 2013 and imports and produces specialty food products in its manufacturing facility in Port Arthur, Texas; and WHEREAS, Incentive Recipient plans to expand its current business operations in Port Arthur, Texas by adding two additional packaging lines; and WHEREAS, Incentive Recipient proposes to utilize funds acquired through the City of Port Arthur Section 4A Economic Development Corporation ( "PAEDC ") to acquire additional equipment in order to implement two additional packaging lines; and WHEREAS, on March 3, 2014, the PAEDC Board of Directors approved the Economic Incentive Contract and Loan Agreement (the "Agreement ") attached hereto as Exhibit "A "; and WHEREAS, the Agreement provides that PAEDC shall assist Incentive Recipient in its business expansion by providing a conditional grant /loan in the amount of $139,194.00 in exchange for certain agreements by Incentive Recipient for the creation of additional full -time and part-time permanent employment at the Port Arthur manufacturing facility and designated levels of payroll as provided in the Performance Milestone schedule set forth in Exhibit "A "; and WHEREAS, Incentive Recipient has reviewed and approved the Agreement. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PORT ARTHUR, TEXAS: Section 1. That the facts and opinions in the preamble are true and correct. Section 2. That the PAEDC is herein authorized to enter into the Agreement with KT Holdings, Inc. which is attached hereto as Exhibit "A ". Section 3. That a copy of the caption of this Resolution be spread upon the Minutes of the City Council. READ, ADOPTED AND APPROVED on this day of A.D., 2014, at a Meeting of the City Council of the City of Port Arthur, Texas, by the following vote: AYES: Mayor Councilmembers • NOES: Deloris "Bobbie" Prince, Mayor ATTEST: Sherri Bellard, City Secretary APPROVED: Floyd Batiste, PAEDC CEO APPR AS TO FORM:, C.A Cr Guy N. Goodson, PAEDC Attorney #1061486 Page 2 A APPROVED AS TO FORM: Valecia R. Tizeno, City Attorney #1061486 Page3 EXHIBIT "A" ECONOMIC INCENTIVE CONTRACT& LOAN AGREEMENT BETWEEN THE CITY OF PORT ARTHUR SECTION 4A ECONOMIC DEVELOPMENT CORPORATION KT HOLDINGS, INC. Executive Summary KT Holdings, Inc. ( "Incentive Recipient ") is a New York Corporation which was incorporated in 2013 and imports and produces specialty food products in its manufacturing facility in Port Arthur, Texas. Incentive Recipient imports olives and pickled products, repackages the olives and pickled products into retail size containers, and distributes the repackaged product to retailers throughout the United States. Incentive Recipient also takes olives and adds value to them by stuffing them with specialty ingredients. Incentive Recipient plans to expand its current business operations by the addition of two packaging lines. Incentive Recipient proposes to utilize incentive funds acquired through the City of Port Arthur Section 4A Economic Development Corporation (the "PAEDC ") to acquire additional equipment in order to implement two additional packaging lines. Incentive Recipient's business operations are located at 1500 Sabine Drive, Port Arthur, Texas 77642. PAEDC shall assist Incentive Recipient in this business expansion by providing certain agreement with incentives which shall include a conditional grant/loan in exchange for certain agreements by Incentive Recipient for creation of additional full -time and part-time permanent employment at the Project and designated levels of payroll. Incentive Recipient will be provided a credit against payroll paid to full -time and part- time employees who are residents of Port Arthur as outlined in the Performance Milestone Schedule. Incentive Recipient has been advised that as a condition for the Economic Incentive by PAEDC, Incentive Recipient must continue conducting its business operations in Port Arthur, Texas during the term of the Incentive Contract. PAEDC has agreed as a consideration for the promise and performance of Incentive Recipient to reimburse Incentive Recipient in accordance with the Agreement for the acquisition by Incentive Recipient of the heretofore stated equipment to be incorporated into the Project. PAEDC and Incentive Recipient have agreed that the incentive credit shall be for an amount not to exceed $139,194.00, and Incentive Recipient shall have the period outlined in the Performance Milestone Schedule attached to the Agreement to meet its promised performance under the Agreement, and to provide all reports and other affirmative commitments as outlined in the Agreement. The Economic Incentive Contract & Loan Agreement (the "Agreement ") shall be for a period from its Effective Date through December 31, 2017. Incentive Recipient has further agreed to execute the First Source Referral Agreement and to utilize the services of the PAEDC on a non - exclusive basis to find qualified applicants for employment at the Project. ECONOMIC INCENTIVE CONTRACT& LOAN AGREEMENT BETWEEN THE CITY OF PORT ARTHUR SECTION 4A ECONOMIC DEVELOPMENT CORPORATION KT HOLDINGS, INC. INTRODUCTION 1 AGREEMENT TERM 1 PARTIES 1 PROMISED PERFORMANCE 2 (A) PERFORMANCE BY PAEDC 2 (B) PERFORMANCE BY INCENTIVE RECIPIENT 2 (C) CREDITS — SUBSTITUTE PERFORMANCE 3 (D) FIRST SOURCE REFERRAL AGREEMENT 4 PERFORMANCE MILESTONE SCHEDULE 4 CONDITIONAL OBLIGATIONS AND LIMITED LIABILITY OF PAEDC 5 LIQUIDATED DAMAGES FOR BREACH OF AGREEMENT 5 RECORDS / INSPECTION / PAEDC AUDIT 6- HOLD HARMLESS 7 SUBCONTRACTS 7 CONFLICT OF INTEREST / DISCLOSURE OBLIGATION 8 NONDISCRIMINATION / EMPLOYMENT / REPORTING 8 LEGAL AUTHORITY 9 NOTICE OF LEGAL OR REGULATORY CLAIMS 9 CHANGES AND AMENDMENTS 10 DEFAULT / TERMINATION 10 COMPLIANCE AUDITS 11 SUPPLEMENTAL COVENANT 12 ENVIRONMENTAL REQUIREMENTS 12 ORAL AND WRITTEN AGREEMENTS / PRIOR AGREEMENTS 13 VENUE 13 ADDRESS OF NOTICE AND COMMUNICATIONS 13 CAPTIONS 13 COMPLIANCE WITH FEDERAL, STATE AND LOCAL LAWS 14 CONDITIONS PRECEDENT 14 ATTORNEY APPROVALS 14 AGREEMENT EXECUTION 16 Exhibit "A" Commercial Promissory Note for Conditional Grant Exhibit "B" Equipment List Exhibit "C" Commercial Security Agreement Exhibit "D" UCC -1 Financing Statement Exhibit "E" First Source Referral Agreement Exhibit "F" Certification Regarding Lobbying Exhibit "G" Compliance Statement ECONOMIC INCENTIVE CONTRACT & LOAN AGREEMENT BETWEEN THE CITY OF PORT ARTHUR SECTION 4A ECONOMIC DEVELOPMENT CORPORATION AND KT HOLDINGS, INC. ( "INCENTIVE RECIPIENT ") INTRODUCTION The Incentive Recipient is a New York corporation having its principal business operations at 1500 Sabine Drive, Port Arthur, Texas 77642. The Incentive Recipient intends to undertake the following business expansion: Incentive Recipient imports olives and pickled products and repackages them in retail size jars to distribute to retailers throughout the United States. Incentive Recipient also imports olives and adds value to them by creating more specialized products, i.e. — stuffing the olives with blue cheese, jalapenos, etc.— repackaging the specialized product in retail size jars, and distributing the product throughout the United States. Incentive Recipient plans to acquire new equipment in order to repackage the olives and pickled products in vacuum sealed packages and small deli cups. As a result, Incentive Recipient plans to expand its current business operations by the addition of two additional packaging lines. Incentive Recipient proposes to utilize incentive funds acquired through the City of Port Arthur Section 4A Economic Development Corporation (the "PAEDC ") to acquire new equipment for its expansion project (the "Project "). Current market demands are such that Incentive Recipient plans to expand the above - referenced business operations at its facility in Port Arthur. PAEDC will assist Incentive Recipient in this business endeavor by providing the hereinafter described conditional grant and /or loan or other incentives in exchange for the promise by Incentive Recipient to meet the Performance Milestone Schedule. AGREEMENT TERM EFFECTIVE DATE 1. This Economic Incentive Contract and Loan Agreement ( "Agreement ") is entered into with an Effective Date as of the approval of the Agreement by the City Council for the City of Port Arthur, Texas (the "City "). TERMINATION DATE 2. This Agreement expires the earlier of December 31, 2017, or 30 days after Incentive Recipient either performs fully or breaches the Agreement, subject to earlier termination or extension, voluntary or involuntary, as provided herein. The period from the effective date of this Agreement through and including the expiration date of this Agreement as provided in the previous sentence hereof, is sometimes referred to in this Agreement as the "Term" of this Agreement. PARTIES 3. City of Port Arthur Section 4A Economic Development Corporation ( "PAEDC "), located at 4173 -39 Street, Port Arthur, Texas, 77642, is a corporation. It is duly authorized to do business in the State of Texas under Chapter 504, Local Government Code (the "Development Corporation Act of 1979 ") and duly authorized by Resolution of the City Council 1 Incentive Recipient's principal office is 860 Fifth Avenue, PH H, New York, New York 10065. of the City of Port Arthur to enter into this Agreement. As so authorized and as provided by the PAEDC bylaws, the President and Secretary of the PAEDC Board have the authority to execute this Agreement. 4. KT Holdings, Inc. is a New York corporation authorized to do business in the state of Texas. The registered agent in Texas for the Incentive Recipient is Jeffrey B. Roth at 1520 Sabine Avenue, Port Arthur, Texas 77642. PROMISED PERFORMANCE 5. The parties agree to perform as follows. (a) PERFORMANCE BY PAEDC (1) PAEDC shall conditionally grant Incentive Recipient an amount equal to the lessor of (a) the amount paid by Incentive Recipient for the Equipment or (b) $139,194.00, subject to the conditions and limitations herein, which Incentive Recipient shall not be required to repay unless Incentive Recipient breaches this Agreement. If Incentive Recipient breaches this Incentive Agreement, then the grant will become a loan as provided in the Conditional Commercial Promissory Note (the "Note ") attached hereto as Exhibit "A ". • PAEDC will use its best efforts to reimburse Incentive Recipient within forty -five 45) days of receipt for the capital outlays (the "Equipment ") listed in Exhibit 0 1" OK HO ' EVER, PAEDC WILL ONLY RELEASE FUNDS IN AN AMOUNT EQUAL TO HE AMOUNT PAID FOR THE EQUIPMENT FOR WHICH PAEDC HAS vali ■ first lien SECURITY INTEREST. PAEDC WILL ONLY RELEASE FUNDS 1\1)-51 UP ON RECEIPT OF REQUIRED DOCUMENTATION OF THE PURCHASE, BY V CENTIVE RECIPIENT OF SUCH EQUIPMENT FREE OF ANY LIEN OR NCUMBRANCE. REQUIRED DOCUMENTATION INCLUDED BUT IS NOT LIMITED TO AN INVOICE EVIDENCING THE PURCHASE OF THE EQUIPMENT. These payments are PAEDC's only obligations. (b) PERFORMANCE BY INCENTIVE RECIPIENT By f th Amet tm, Recipient promises to employ equivalent the end of o three e f time n and er fifteen paIncentive rt -time ec employees at an annual total 4. 0, 601 ‘. payroll of $288,730.00 as measured by Internal Revenue Service (IRS) forms W- 2 and W -3. Ck (2) Incentive Recipient promises that one hundred percent (100 %) of its full time and part time employees will be Port Arthur residents. Incentive Recipient shall receive credit only for payroll paid to Port Arthur residents. I � (3) Incentive Recipient will utilize the incentive to acquire the Equipment valued at not less than $139,194.00 as outlined in Exhibit "B ". (4) Incentive Recipient shall secure the conditional grant executing the Commercial Security Agreement attached hereto as Exhibit "C" which shall be evidenced by the filing of record with the Secretary of State for the State of Texas by a Uniform l I Commercial Code filing as set forth in Exhibit "D ". Incentive Recipient prior to n1`� the filing by PAEDC of the Uniform Commercial Code Financing Statement shall 1 " 1� advise of any changes in the Equipment to be acquired. (5) Incentive Recipient will be required to meet the conditions and agreements set forth in the First Source Referral Agreement attached hereto as Exhibit "E" and made a part hereof for all purposes. (6) PAEDC shall only be required to reimburse Incentive Recipient for Equipment purchased by Incentive Recipient that is substantially similar to the items described on the 2 attached Exhibit `B ". With each invoice or request for reimbursement sent to PAEDC, Incentive Recipient will provide a listing of the specific Equipment, requested for reimbursement and covenant that such request for reimbursement is being made for the specific Equipment and that all such Equipment has been acquired by the Incentive Recipient free of any lien or encumbrance. (7) Incentive Recipient. acknowledges and agrees that the Economic Incentive proposed under this Agreement is only being provided as to the retention and /or expansion of the business of Incentive Recipient in Port Arthur, Texas. If Incentive Recipient at any time during the term of this Agreement discontinues and /or moves its business operations, including the Equipment identified in Exhibit "B ", from the City of Port Arthur, Texas, Incentive Recipient shall be immediately in default under the terms of this Agreement, and all amounts less any credits given as set forth in Paragraph 5(C)shall become a loan for a period not to exceed the remaining period for the Incentive as set forth herein. (8) On demand by PAEDC and in response to Incentive Recipient's failure to achieve a performance milestone, Incentive Recipient shall provide PAEDC with reasonable assurances, proposed by Incentive Recipient and reasonably acceptable to PAEDC, that it has both the intention and the capabilities to perform fully its contractual obligations. (C) CREDITS — SUBSTITUTE PERFORMANCE 2 "Materially different" is defined as a change in the type of asset that changes the overall business plan in place at the time that this contract was executed. Incentive Recipient may earn credits according to the following terms, to either reduce the duration of this Agreement or reduce the amount of liquidated damages in the event Incentive Recipient breaches the Agreement. (1) Starting on the effective date of the Agreement and for as long as Incentive Recipient performs as specified in Section 5(b)(1) of this Agreement, Incentive Recipient will receive a $1.00 credit for each $6.22 of payroll paid to residents of Port Arthur. PAYROLL TO NON - RESIDENTS CANNOT BE CREDITED. (2) Total credit cannot exceed $139,194.00. (3) Incentive Recipient will forfeit any credits it earned during a period for which a report is scheduled, but for which Incentive Recipient failed to issue the report pursuant to the Performance Milestone Schedule within 10 days after receipt of written notice from PAEDC that such report is past due. (4) Once Incentive Recipient has earned credits equal to $139,194.00, the conditional grant /loan and all obligations to PAEDC shall terminate. (d) FIRST SOURCE REFERRAL AGREEMENT PAEDC has adopted policies and procedures to assist Incentive Recipient in locating a qualified workforce within the City. The First Source Referral Agreement is incorporated into this Agreement in Exhibit "E" ( "First Source "). Incentive Recipient has agreed to the policies and procedures within First Source as a non- exclusive resource and referral for all appropriate new job openings of Incentive, Recipient. PERFORMANCE MILESTONE SCHEDULE 6. Although failure to achieve a performance milestone is not a breach of contract, a failure is grounds for PAEDC to withhold further payments to Incentive Recipient and /or demand reasonable assurances from Incentive Recipient that it can and will fully perform its contractual obligations. Failure to provide such reasonable assurances following demand of PAEDC is a breach of contract. 7. Incentive Recipient's performance milestones are contained in the following table. 3 Examples of reasonable assurances are copies of pending contracts and customer commitment letters. PERFORMANCE MILESTONE SCHEDULE Deadline Milestone (a) May 1, 2014 KT Holdings, Inc. Issue a status report to PAEDC CEO on expansion of the facility (b) September 30, 2014 PAEDC CEO Issue a status report on business expansion and installation of new equipment and estimated completion date of expansion by KT Holdings, Inc. (c) May 1, 2015 Achieve employment of one (1) Port Arthur resident Admin/Mgmt, two (2) Port Arthur Resident Warehouse Worker and fifteen (15) part-time Port Arthur Residents Packing Line Worker with an accumulative payroll of $288,730 for Port Arthur resident (d) September 30, 2015 Issue a business operational report to PAEDC CEO for the period May, 2014 to May 31, 2015 (e) May 1, 2016 Maintain employment of one (1) Port Arthur resident Admin /Mgmt, two (2) Port Arthur Resident Warehouse Worker and fifteen (15) part-time Port Arthur Residents Packing Line Worker with an accumulative payroll of $288,730 for Port Arthur residents. KT Holdings, Inc accumulative payroll for year 1 and 2 Equal $577,460 (f) September 30, 2016 Issue a business operational report to PAEDC CEO for the period May, 2015 to May 31, 2016 (g) May 1, 2017 Maintain employment of one (1) Port Arthur resident Admin /Mgmt, two (2) Port Arthur Resident Warehouse Worker and fifteen (15) part-time Port Arthur Residents Packing Line Worker with an accumulative annual payroll of $288,730 For Port Arthur residents. KT Holdings, Inc accumulative payroll for year 1 , 2 and 3 equal $866,190 (h) September 30, 2017 Issue a business operational report to PAEDC CEO for the period May, 2016 to May 31, 2017 (i) December 31, 2017 KT Holdings, Inc meets all PAEDC contractual performance as Verified by the PAEDC CEO — Closed Agreement. PAEDC'S CONDITIONAL OBLIGATIONS AND LIMITED LIABILITY 8. It is expressly understood and agreed by the parties hereto that the PAEDC funding obligations herein are contingent upon the actual receipt of adequate sales tax revenue funds to meet the PAEDC's liabilities under this Agreement. If adequate funds are not available to make payments under this Agreement, the PAEDC shall notify Incentive Recipient in writing within a reasonable time after such fact is reasonably determined by the PAEDC Board of Directors. Should PAEDC fail to fully fund its obligations hereunder, this Agreement shall terminate and both parties shall be relieve of any further liability hereunder. In the event of such termination, the PAEDC may, at its sole option, immediately cease all further funding, if any, required by this Agreement and the PAEDC shall not be liable to Incentive Recipient or to any third parties for failure to make payments to Incentive Recipient under the terms and conditions of this Agreement. 9. The PAEDC shall not be liable, in Agreement or otherwise, to Incentive Recipient, or to any person or entity claiming by or through Incentive Recipient, for any expense, expenditure or cost incurred by or on behalf of Incentive Recipient related to the project made the basis of this Agreement. The PAEDC's sole liability /obligations, if any, shall be to Incentive Recipient and shall be limited to the obligations detailed in Section 5(a) of this Agreement. Incentive Recipient shall not use the funds herein for any purpose(s) other than that specifically disclosed herein and as further disclosed within that certain application made by or on behalf of Incentive Recipient, which application is incorporated herein for all purposes To the extent Incentive Recipient has advanced funds to pay for equipment it will be deemed to satisfy this requirement. LIQUIDATED DAMAGES FOR BREACH OF AGREEMENT 12. In the event Incentive Recipient fails to perform its obligations under this Agreement, following notice thereof from PAEDC and thirty -day (30 -day) opportunity to cure the same, the PAEDC grant, minus any credits earned pursuant to section 5(c) of this Agreement, will automatically convert to a loan (liquidated damages), effective on the day of breach, as agreed by Incentive Recipient in the executed Note attached as Exhibit "A." Following such conversion to a loan as aforesaid, the PAEDC, at its sole option, may terminate its remaining funding obligations, if any, detailed in Section 5 herein. Further, the PAEDC shall be entitled to recover its reasonable and customary attorney's fees and court costs incurred in collection of said obligation and such remedies as are provided at law or in equity. 13. It is expressly understood and agreed by the parties that any right or remedy shall not preclude the exercise of any other right or remedy under this Agreement or under any provision of law, nor shall any action taken in the exercise of any right or remedy be deemed a waiver of any other rights or remedies. Failure to exercise any right or remedy hereunder shall not constitute a waiver of the right to exercise that or any other right or remedy at any time. RECORDS / INSPECTION / PAEDC AUDIT 14. Incentive Recipient must establish and maintain reasonably sufficient records, as reasonably determined by the PAEDC, to account for the expenditure and utilization of funds received by Incentive Recipient from PAEDC under the terms and conditions of this Agreement. Incentive Recipient shall maintain employment records as necessary to allow the PAEDC to audit and verify proper utilization of First Source and to verify any and all other covenants, representations and warranties contained herein and in Incentive Recipient's Application. 15. Incentive Recipient shall maintain records of the receipt and disposition of all funds provided hereunder as necessary to allow the PAEDC to audit and verify proper utilization of said funds in compliance with this Agreement and the representations and warranties contained herein and in Incentive Recipient's application. Incentive Recipient shall provide reports of utilization of said funds, as reasonably requested by the PAEDC, and upon termination of this Agreement. 16. Upon ten -day (10 -day) advance written notice given not later than the 90 day after the end of the calendar year in which such transactions being audited occured, Incentive Recipient shall give the PAEDC, or any of its duly authorized representatives, access to and right to examine all books, accounts, records, reports, files and other papers, things or property belonging to or in use by Incentive Recipient so that PAEDC can ensure the Incentive Recipient is meeting the Performance Milestone Schedule. Incentive Recipient agrees to maintain such records in an accessible location. All information obtained by the PAEDC, or its duly authorized representatives, shall be regarded as the confidential business information of Incentive Recipient and the PAEDC shall take reasonable measures to protect such information from disclosure to third parties; however, PAEDC is subject to the requirements of the Texas Open Meetings Act and Open Records Act (Tex.Gov.Code, 551 & 552). Incentive Recipient agrees that disclosures to the public required by the Texas Open Meetings Act, Texas Open Records Act, or any other legal requirement will not expose PAEDC (or any party acting by, through or under PAEDC) to any claim, liability or action by Incentive Recipient (or any party working by, through or under). 17. All records pertinent to this Agreement shall be retained by Incentive Recipient at least one year following the date of termination of this Agreement, whether said termination is a result of default or whether said termination is a result of final submission of a close out report by Incentive Recipient detailing its compliance with its obligations provided herein. Further, in the event any litigation, claim or audit arising out of or related to this Agreement is instituted before the expiration of the three (3) year period and extends beyond the three year period, the records will be maintained until all litigation, claims or audit findings involving this Agreement and the records made the basis of same have been resolved. Further, records relating to real property acquisition, including any long -term lease, shall be retained for a period equal to the useful life of any asset purchased with PAEDC funds. 18. Incentive Recipient shall provide PAEDC with all reports reasonably necessary for PAEDC compliance with the Development Corporation Act. 19. It is expressly understood and agreed by the parties hereto that if Incentive Recipient fails to submit to PAEDC in a timely and reasonably satisfactory manner any report reasonably required by this Agreement, PAEDC may, at its sole discretion, withhold further payments to Incentive Recipient and /or demand assurances that Incentive Recipient can and will fully perform its contractual obligations. If Incentive Recipient fails ,to provide adequate assurances then Incentive Recipient is in breach, and any monies advanced by PAEDC automatically become a loan. If PAEDC withholds such payments, it shall notify Incentive Recipient in writing of its decision and the reasons therefore. Payments withheld pursuant to this paragraph may be held by PAEDC until such time as the delinquent obligations for which funds are withheld are fulfilled by Incentive Recipient. 20. The PAEDC reserves the right, from time to time, prior to the termination of this agreement to carry out field inspections /audits to ensure compliance with the requirements of this Agreement. After completion of any such audit, the PAEDC may provide Incentive Recipient with a written report of the audit findings. If the audit report details deficiencies in its performance under the terms and conditions of this Agreement, the PAEDC may establish requirements for the timely correction of any such deficiencies by Incentive Recipient. HOLD HARMLESS 21. INCENTIVE RECIPIENT AGREES TO HOLD HARMLESS THE PAEDC AND THE CITY OF PORT ARTHUR FROM ANY AND ALL CLAIMS, DEMANDS, AND CAUSES OF ACTION OF ANY KIND OR CHARACTER WHICH MAY BE ASSERTED BY ANY THIRD PARTY OCCURRING, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, THE PROJECT MADE THE BASIS OF THIS AGREEMENT, AND THE UTILIZATION OF FUNDS PROVIDED BY THIS AGREEMENT, PROVIDED THAT SUCH CLAIM, DEMAND OR CAUSE OF ACTION DOES NOT ARISE FROM ANY FRAUD OR MISCONDUCT ON THE PART OF THE PAEDC OR THE CITY OF PORT ARTHUR, OR ANY AGENT, EMPLOYEE OR REPRESENTATIVE OF EITHER. SUBCONTRACTS 22. Incentive Recipient may not subcontract for performance credits described in this Agreement without obtaining PAEDC's written approval, such approval not to be unreasonably withheld. Incentive Recipient shall only subcontract for performance credits described in this Agreement after Incentive Recipient has submitted a Subcontractor Eligibility Request, as specified by PAEDC, for each proposed subcontract, and Incentive Recipient has obtained PAEDC's prior written approval. Incentive Recipient, in subcontracting for any performances described in this Agreement, expressly understands that in entering into such subcontracts, PAEDC is in no way liable to Incentive Recipient's subcontractor(s). 23. In no event shall PAEDC's prior written approval of a subcontractor's eligibility, be construed as relieving Incentive Recipient of the responsibility for ensuring that the performances rendered under all subcontracts are rendered so as to comply with all terms of this Agreement, as if such performances rendered were rendered by Incentive Recipient. PAEDC's approval does not constitute adoption, ratification, or acceptance of Incentive Recipient's or subcontractor's performance hereunder. PAEDC maintains the right to insist upon Incentive Recipient's full compliance with the terms of this Agreement, and by the act of subcontractor approval, PAEDC does not waive any right of action which may exist or which may subsequently accrue to PAEDC under this Agreement. 24. Incentive Recipient, as well as all of its approved subcontractors, shall comply with all applicable federal, state, and local laws, regulations, and ordinances for making procurement under this Agreement. CONFLICT OF INTEREST / DISCLOSURE OBLIGATION 25. Conflict of Interest: No employee, agent, officer or elected or appointed official of the City of Port Arthur or the PAEDC who has participated in a decision making process related to this Agreement (without recusing him/herself and executing a conflict affidavit) may obtain a personal or financial interest or benefit from an PAEDC assisted activity, or have an interest in any contract, subcontract, or agreement (or proceeds thereof) with respect to an PAEDC assisted activity, during their tenure or for one (1) year thereafter. Insofar as relates to the conduct • hereunder of Incentive Recipient, its agents, employees or representatives, Incentive Recipient shall ensure compliance with applicable provisions under Chapter 504, Local Government Code and Chapter 171 Local Government Code. 26. Disclosure: In conjunction with execution of this Agreement, Incentive Recipient has fully disclosed to PAEDC all known and potential owners of interests in Incentive Recipient (whether shareholder, partner, limited partner, manager, member or otherwise). In the event of any change in ownership or control of Incentive Recipient of five percent 5 %) or greater, Incentive Recipient shall notify PAEDC in writing. Further, Incentive Recipient shall be obligated to notify in writing the PAEDC in the event any time prior to, during or one (1) year after the term of this Agreement, any City or PAEDC employee or representative or any third party with a conflict of interest obtains or proposes to obtain a financial benefit, direct or indirect, from Incentive Recipient. Failure to provide said notice immediately or no later than five (5) business days after receipt of information shall constitute a default herein. NONDISCRIMINATION / EMPLOYMENT / REPORTING 27. Incentive Recipient shall ensure that no person shall on the grounds of race, color, religion, sex, handicap, or national origin be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity funded in whole or in part with funds provided under this Agreement. Additionally, funds shall be used in accordance with the following requirements: (a) To the greatest extent feasibleopportunities for training and employment arising in connection with the planning and carrying out of any project assisted with PAEDC funds provided under this Agreement be given to Port Arthur residents; and (b) To the greatest extent feasible, agreements for work to be performed in connection with any such project be awarded to Port Arthur residents and businesses, including, but not limited to, individuals or firms doing business in the field of planning, consulting, design, architecture, building construction, rehabilitation, maintenance, or repair, which are located in or owned in substantial part by persons residing in the City of Port Arthur, Texas. (c) LEGAL AUTHORITY 28. Incentive Recipient assures and guarantees it possesses legal and /or corporate authority (i) to enter into this Agreement, receive funds authorized by this Agreement, and (ii) to perform the obligations hereunder. Incentive Recipient has provided, or shall provide, as requested by the PAEDC, such resolutions or other required authorizations necessary to evidence this authority. 29. The person or persons signing and executing this Agreement on behalf of Incentive Recipient, or representing themselves as signing and executing this Agreement on behalf of Incentive Recipient, do hereby warrant and guarantee that he, she, or they have been duly authorized by Incentive Recipient to execute this Agreement on behalf of Incentive Recipient and to validly and legally bind Incentive Recipient to all terms, performances, and provisions herein set forth. NOTICE OF LEGAL OR REGULATORY CLAIMS 30. Incentive Recipient shall give PAEDC immediate notice in writing of 1) any legal or regulatory action, including any proceeding before an administrative agency filed against Incentive Recipient, directly or indirectly; and 2) any material claim against Incentive Recipient, which may impact continued operations. For purposes herein, "material" claims shall mean claims in excess of $50,000. Except as otherwise directed by PAEDC, Incentive Recipient shall furnish immediately to PAEDC copies of all pertinent documentation of any kind received by Incentive Recipient with respect to such action or claim. CHANGES AND AMENDMENTS 31. Except as specifically provided otherwise in this Agreement, any alterations, additions, or deletions to the terms of this Agreement shall be by amendment in writing and executed by all parties to this Agreement. Such amendments must be approved by the PAEDC Board of Directors and, in many cases, by the City Council for City of Port Arthur. 32. It is understood and agreed by the parties hereto that performances under this Agreement must be rendered in accordance with the regulations promulgated under the Development Corporation Act, the assurances and certifications made to PAEDC by Incentive Recipient, and the assurances and certifications made to the City of Port Arthur with regard to the operation of the PAEDC's Projects. Based on these considerations, and in order to ensure the legal and effective performance of this Agreement by all parties, it is agreed by the parties hereto that the performances under this Agreement are by the provisions of the PAEDC Program and any amendments thereto and may further be amended in the following manner: PAEDC may from time to time during the period of performance of this Agreement issue policy directives which serve to interpret, or clarify performance requirements under this Agreement. Such policy directives shall be promulgated by the PAEDC Board of Directors in the form of PAEDC issuances, shall be approved by the City Council and shall have the effect of qualifying the terms of this Agreement and shall be binding upon Incentive Recipient, as if written herein. 33. Any alterations, additions, or deletions to the terms of this Agreement which are required by changes in Federal, state law or local law are automatically incorporated into this Agreement without written amendment hereto, and shall become effective on the date designated by such law or regulation. DEFAULT / TERMINATION 34. In the event of a material default of any of the material obligations of Incentive Recipient detailed herein or in the event of a material breach of any of the representations of or warranties of Incentive Recipient either detailed herein or in its application to the PAEDC, and following any notice and opportunity to cure provided for in this Agreement, the PAEDC may, at its sole option, terminate this Agreement, in whole or in part. In the event of such teiuiination, the PAEDC may, at its sole option, utilize one or more of the following actions to resolve or otherwise remedy said default: (a) Declare the Commercial Promissory Note executed in conjunction with this Agreement immediately effective. If Incentive Recipient defaults on the note, then the PAEDC may exercise its default remedies provided under collateral documentation executed in conjunction with said Note and this Agreement (b) Exercise any remedies provided herein and/or within the Collateral Security Documents; (c) Withhold, whether temporarily or otherwise, disbursement of grant proceeds pending correction of the deficiency(s) by Incentive Recipient; (d) Disallow all or a part of the incentives which are not in compliance with the terms and conditions of this Agreement or in compliance with the representations and warranties contained within this Agreement and Incentive Recipient's application to the PAEDC; (e) Withhold and/or disallow further PAEDC incentives to Incentive Recipient; and (f) Exercise any and all other remedies that may be legally available to the PAEDC, under the laws of the State of Texas and as authorized by the terms and conditions of this Agreement. 35. In addition to the foregoing, the parties agree that this Agreement may be terminated at any time when both parties agree, in writing, to the terms and conditions of any such voluntary termination. COMPLIANCE AUDITS 36. If directed by PAEDC Board not more than once each 12 month period, Incentive Recipient shall arrange for the performance of a compliance audit performed by a certified public accountant, of funds received and performances rendered under this Agreement, subject to the following conditions and limitations: (a) Incentive Recipient shall have a compliance audit which may be limited to use of funds received from the PAEDC, made for any of its fiscal years included within the Term of this Agreement in which Incentive Recipient receives more than $50,000 in PAEDC financial assistance provided by PAEDC in the form of grants, contracts, loans, loan guarantees, property, cooperative agreements, interest subsidies, or direct appropriations. Backup documentation regarding actual expenditures shall be provided by Incentive Recipient. Said audit must be received and accepted by the Chief Executive Officer of PAEDC and /or the PAEDC Board. (b) At the option of Incentive Recipient, each audit required by this section may cover either its entire operations or each department, agency, or establishment of Incentive Recipient which received, expended, or otherwise administered PAEDC funds; (c) Unless otherwise specifically authorized by PAEDC in writing, Incentive Recipient shall submit the report of such audit to PAEDC within thirty (30) days after completion of the audit, but no later than one hundred twenty (120) days after the end of each fiscal period included within the Term of this Agreement. (d) As a part of its audit, Incentive Recipient shall verify that the expenditures were exclusively for the assets listed in Exhibit "B ". Any discrepancies in excess of $5000 shall be specifically documented in writing. 37. Incentive Recipient understands and agrees that it shall be liable to reimburse immediately PAEDC for any costs disallowed pursuant to financial and compliance audit(s) of funds received under this Agreement and it may be required to submit formal audits at its expense. 38. Incentive Recipient shall take all necessary actions to facilitate the performance of any and all such audits, whether annual, mandatory or otherwise requested under this Agreement. 39. Subject to financial privacy requirements of Incentive Recipient and properly designated requests for non - disclosure due to proprietary reasons, all approved audit reports may be made available for public inspection. 40. PAEDC shall not release any funds for costs incurred by Incentive Recipient under this Agreement until PAEDC has received certification from Incentive Recipient that its fiscal control and fund accounting procedures are adequate to assure proper disbursal of and accounting for funds provided under this Agreement. PAEDC shall specify the content and form of such certification. SUPPLEMENTAL COVENANT 41. INCENTIVE RECIPIENT AND ANY BRANCH, DIVISION OR DEPARTMENT OF INCENTIVE RECIPIENT CERTIFIES THAT THEY HAVE NOT AND WILL NOT KNOWINGLY EMPLOY AN "UNDOCUMENTED WORKER" WHICH MEANS "AN INDIVIDUAL WHO, AT THE TIME OF EMPLOYMENT, IS NOT LAWFULLY ADMITTED FOR PERMANENT RESIDENCE TO THE UNITED STATES OR AUTHORIZED UNDER LAW TO BE EMPLOYED IN THAT MANNER IN THE UNITED STATES." 42. Incentive Recipient acknowledges that it has reviewed Chapter 2264, Texas Government Code and hereby affirmatively agrees by execution of this Agreement to repay the amount of any incentive (less any credits given as set forth in Paragraph 5(C)) with interest at the rate of ten (10 %) percent per annum not later than the 120 day after the date PAEDC notifies Incentive Recipient of a violation. 43. Incentive Recipient acknowledges PAEDC may bring a civil action or cover any amounts owed under this Chapter and further acknowledges that PAEDC may recover court costs and reasonable attorneys' fees incurred in an action brought under §2264.101(a). Incentive Recipient is not liable for a violation of this Chapter by a subsidiary, affiliate or franchisee of the Incentive Recipient or by a person with whom the Incentive Recipient contracts. ENVIRONMENTAL REQUIREMENTS 44. Incentive Recipient understands and agrees that by execution of this Agreement, Incentive Recipient shall be responsible for providing to PAEDC all information, concerning this PAEDC funded project, reasonably required for PAEDC to meet its responsibilities for environmental review, decision making, and other action which applies to PAEDC in accordance with and to the extent specified in Federal, State and Local Law. Incentive Recipient further understands and agrees that Incentive Recipient shall make all reasonable efforts, but shall not be required to expend any funds in doing so, to assist PAEDC in handling inquiries and complaints from persons and agencies seeking redress in relation to environmental reviews covered by approved certifications. ORAL AND WRITTEN AGREEMENTS / PRIOR AGREEMENTS 45. All oral and written contracts between the parties to this Agreement relating to the subject matter of this Agreement that were made prior to the execution of this Agreement have been reduced to writing and are contained in this Agreement. 46. The documents required below are hereby made a part of this Agreement, and constitute promised performances by Incentive Recipient in accordance with this Agreement: Required X Exhibit "A" Commercial Promissory Note for Conditional Grant X Exhibit `B" Equipment List X Exhibit "C" Commercial Security Agreement X Exhibit "D" UCC -1 Financing Statement X Exhibit "E" First Source Referral Agreement X Exhibit "F" Certification Regarding Lobbying X Exhibit "G" Compliance Statement X Incentive Recipient Application to PAEDC VENUE 47. For purposes of litigation that may accrue under this Agreement, venue shall lie in Jefferson County, Texas, where substantially all the performance will occur. ADDRESS OF NOTICE AND COMMUNICATIONS City of Port Arthur Section 4A Economic Development Corporation 444 4th Street Port Arthur, Texas 77640 ATTN: Floyd Batiste, Chief Executive Officer Incentive Recipient 1500 Sabine Drive Port Arthur, Texas 77642 ATTN: Eric Moscahlaidis CAPTIONS 48. This Agreement has been supplied with captions to serve only as a guide to the contents. The caption does not control the meaning of any paragraph or in any way determine its interpretation or application. COMPLIANCE WITH FEDERAL, STATE AND LOCAL LAWS 49. Incentive Recipient shall comply with all Federal, State and local laws, statutes, ordinances, resolutions, rules, regulations, orders and decrees of any court or administrative body or tribunal, including those related to the activities and performances of Incentive Recipient under this Agreement. Upon request by PAEDC and by the City, Incentive Recipient shall furnish satisfactory proof of its compliance herewith. CONDITIONS PRECEDENT 50. This agreement has no legal consequences, and neither party shall rely on the agreement, unless and until a. Both the PAEDC Board and the Port Arthur City Council approve the Agreement in its final executed form. ATTORNEY APPROVALS APPROVED AS TO FORM: Guy Goodson, General Counsel for PAEDC VERIFIED BY CITY COUNCIL RESOLUTION: Resolution Number: Valecia R. Tizeno, City Attorney AGREEMENT EXECUTION CITY OF PORT ARTHUR SECTION 4A ECONOMIC DEVELOPMENT CORPORATION SIGNED AND AGREED TO on the day of , 2014. By: By: President Secretary EDC Representative EDC Representative KT HOLDINGS, INC. SIGNED AND AGREED TO on the day of , 2014. KT Holdings, Inc. By: Eric Moscahlaidis, President Acknowledgment • EXHIBIT "A" CONDITIONAL COMMERCIAL PROMISSORY NOTE Port Arthur, Texas This COMMERCIAL PROMISSORY NOTE becomes effective on the date when KT Holdings, Inc., a New York corporation (hereinafter called "Maker ") breaches that certain Economic Incentive Contract and Loan Agreement between the City of Port Arthur Section 4A Economic Development Corporation (hereinafter called "Lender ") and Maker, dated , 201_ Effective Date of Note: The Note shall be dated effective the day of 201 which is the date upon which Lender provided written notification to Maker of its default under the Economic Incentive Contract & Loan Agreement (the "Agreement ") by and between Lender and Maker dated , 201_ ( "Date of Default "). Principal Amount: Principal amount is $ , which is $ less the incentive credits earned by Maker according to Paragraph 5(C) of the Agreement. Term of the Loan: From the Date of Default, Maker shall thereafter make equal monthly installments of principal and interest (interest being calculated as hereinafter specified at the rate of 10% per annum) until December 31, 2017 (the "Final Payment Date "). Lender shall provide to Maker, a payment amortization schedule for the monthly installments due hereunder. Maker agrees that all principal and interest on this Note shall be due and payable by the Final Payment Date. FOR VALUE RECEIVED, the undersigned "Maker ", promises to pay to Lender, at its office at P.O. Box 1089, Port Arthur, Texas, 77640 -1089, or such other place or places as the holder hereof shall from time to time designate in written notice to Maker, the principal amount, in legal and lawful money of the United States of America, together with interest thereon from the date hereof until maturity at the rate of ten percent (10 %) per annum as detailed herein. All past due principal and interest shall bear interest from date of maturity until paid at the rate of fifteen percent (15 %) per annum, or to the maximum extent allowed by law (whichever is greater) as may hereafter be in effect, payable on demand after maturity. Any notices required or permitted to be given by the holder hereof to Maker pursuant to the provisions of this note shall be in writing and shall be either personally delivered or transmitted by first class United States mail, addressed to Maker at the address designated below for receipt of notice (or at such other address as Maker may, from time to time, designate in writing to the holder hereof for receipt of notices hereunder). Any such notice personally delivered shall be effective as of the date of delivery, and any notice transmitted by mail, in accordance with the foregoing provisions, shall be deemed to have been given to and received by Maker as of the date on which such notice was deposited with the United States Postal Service, properly addressed and with postage prepaid. This note is also secured by and entitled to the benefits of all other security agreements, pledges, collateral assignments, deeds of trust, guaranties, mortgages, assignments, and lien instruments, if any, of any kind executed by Maker or by any other party as security for any loans owing by Maker to the Lender. Such lien instruments shall include those executed simultaneously herewith, those heretofore executed, and those hereafter executed. If any installment or payment of principal or interest of this note is not paid when due or any drawer, acceptor, endorser, guarantor, surety, accommodation party or other person now or hereafter primarily or secondarily liable upon or for payment of all or any part of this note (each hereinafter called an "other liable parry ") shall die, or become insolvent (however such insolvency may be evidenced); or if any proceeding, procedure or remedy supplementary to or in enforcement of judgment shall be resorted to or commenced against Maker or any other liable party, or with respect to any property of any of them; or if any governmental authority or any court at the instance thereof shall take possession of any substantial part of the property of or assume control over the affairs or operations of, or a receiver shall be appointed for or take possession of the property of, or a writ or order of attachment or garnishment shall be issued or made against any of the property of Maker or any other liable party; or if any indebtedness for. which Maker or any other liable party is primarily or secondarily liable shall not be paid when due or shall become due and payable by acceleration of maturity thereof, or if any event or condition shall occur which shall permit the holder of any such indebtedness to declare it due and payable upon the lapse of time, giving of notice or otherwise; or if Maker or any other liable party (if other than a natural person) shall be dissolved, wound up, liquidated or otherwise terminated, or a party to any merger or consolidation without the written consent of Lender; or if Maker or any other liable party shall sell substantially all or an integral portion of its assets without the written consent of Lender; or if Maker or any other liable party fails to furnish financial information requested by Lender pursuant to this Agreement; or if Maker or any other liable party furnishes or has furnished any financial or other information or statements which are misleading in any respect; or if a default occurs under any instrument now or hereafter executed in connection with or as security for this note;; thereupon, at the option of Lender, the principal balance and accrued interest of this note and any and all other indebtedness of Maker to Lender shall become and be due and payable forthwith without demand, notice of default, notice of acceleration, notice of intent to accelerate the maturity hereof, notice of nonpayment, presentment, protest or notice of dishonor, all of which are hereby expressly waived by Maker and each other liable party. Lender may waive any default without waiving any prior or subsequent default. If this note is not paid at maturity whether by acceleration or otherwise, and is placed in the hands of any attorney for collection, or suit is filed hereon, or proceedings are had in probate, bankruptcy, receivership, reorganization, arrangement or other legal proceedings for collection hereof, Maker and each other liable party agree to pay Lender its collection costs, including court costs and a reasonable amount for attorney's fees. It is the intention of Maker and Lender to conform strictly to applicable usury laws. Accordingly, if the transaction contemplated hereby would be usurious under applicable law, then, in that event, notwithstanding anything to the contrary herein or in any agreement entered into in connection with or as security for this note, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under applicable law that is taken, reserved, contracted for, charged or received under this note or under any of the other aforesaid agreements or otherwise in connection with this note shall under no circumstances exceed the maximum amount of interest allowed by applicable law, and any excess shall be credited on this note by the holder hereof (or, if this note shall have been paid in full, refunded to Maker); (ii) in the event that maturity of this note is accelerated by reason of an election by the holder hereof resulting from any default hereunder or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest may never include more than the maximum amount allowed by applicable law, and excess interest, if any, provided for in this note or otherwise shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore prepaid, shall be credited on this note (or if this note shall have been paid in full, refunded to Maker); and (iii) all calculations of the rate of interest taken, reserved, contracted for, charged or received under this note or under any of the other aforesaid agreements or otherwise in connection with this note, that are made for the purpose of determining whether such rate exceeds the maximum lawful rate shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating, and spreading such interest over the entire term of the loan evidenced by this note(including all renewal and extended terms). Maker may prepay all or any part of the principal of this note before maturity without penalty. No partial prepayment shall reduce, postpone or delay the obligation of Maker to continue paying the installments herein provided on their respective due dates following any such partial prepayment until this note is fully paid. The Maker shall be directly and primarily liable for the payment of all sums called for hereunder; and, except for notices specifically required to be given by the holder hereof to Maker pursuant to the earlier provisions of this note, Maker and each other liable party hereby expressly waive demand, presentment for payment, notice of nonpayment, protest, notice of protest, notice of intention to accelerate maturity, notice of acceleration of maturity, and all other notice, filing of suit and diligence in collecting this note or enforcing or handling any of the security therefor, and do hereby agree to any substitution, exchange or release, in whole or in part, of any security here -for or the release of any other liable party, and do hereby consent to any and all renewals or extensions from time to time, of this note, or any part hereof, either before or after maturity, all without any notice thereof to any of them and without affecting or releasing the liability of any of them. Each holder hereof, in order to enforce payment of this note by any other liable party, shall be required to first institute suit or exhaust its remedies against Maker and to enforce its rights against any security therefor prior to enforcing payment of this Note by any other liable party. SIGNED AND AGREED TO on the day of , 2014. KT Holdings, Inc. By: THE STATE OF § § ACKNOWLEGEMENT COUNTY OF § BEFORE ME, THE UNDERSIGNED Notary Public, on this day personally appeared , known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he /she executed the same as the act and deed of KT Holdings, Inc. for the purposes and consideration therein expressed, and the Capacities therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the day of , 2014. Notary Public, State of MAKERS' ADDRESS FOR RECEIPT OF NOTICE: EXHIBIT "B" EQUIPMENT LIST Equipment: Serial Number: Current Value: Hobart Mixer 11- 281 -796 $7,000.00 Urschel Model RA SS 241 $19,000.00 Dicer Five McMaster Carr $5,000.00 Work Benches Filler MD201 $20,000.00 Deli Cup Briner FG -1015 $30,000.00 Olive Washing Machine 1059 $75,000.00 EXHIBIT "C" COMMERCIAL SECURITY AGREEMENT Dated , 2014 Debtor(s) Secured Party KT Holdings, Inc. City of Port Arthur Section 4A Economic Development Corporation 1500 Sabine Drive 4173 39 Street Port Arthur, Texas 77642 Port Arthur, Texas 77642 (hereinafter referred to as "Debtor" whether one or more) (hereinafter referred to as "Secured Party ") FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby acknowledged, Debtor grants to Secured Party the security interest (and the pledges and assignments as applicable) hereinafter set forth and agrees with Secured Party as follows: A. OBLIGATIONS SECURED. The first priority lien and pledges and assignments as applicable granted hereby are to secure punctual payment and performance of the following: (i) certain promissory note(s) of even date herewith in the original principal sum of $139,194.00, executed by Debtor and payable to the order of Secured Party, and any and all extensions, renewals, modifications and rearrangements thereof, (ii) certain obligations of Debtor to Secured Party under that certain Economic Incentive Contract and Loan Agreement of even date and all extensions, renewals, modifications and rearrangements thereof, and (iii) any and all other indebtedness, liabilities and obligations whatsoever and of whatever nature of Debtor to Secured Party whether direct or indirect, absolute or contingent, primary or secondary, due or to become due and whether now existing or hereafter arising and howsoever evidenced or acquired, whether joint or several, or joint and several (all of which are herein separately and collectively referred to as the "Obligations "). Debtor acknowledges that the security interest (and pledges and assignments as applicable) hereby granted shall secure all future advances as well as any and all other indebtedness, liabilities and obligations of Debtor to Secured Party whether now in existence or hereafter arising. B. USE OF COLLATERAL. Debtor represents, warrants and covenants that Collateral will be used by the Debtor primarily for business use, unless otherwise specified as follows: Personal, family or household purposes; Farming operations. C. DESCRIPTION OF COLLATERAL. Debtor hereby grants to Secured Party a first priority lien in (and hereby pledges and assigns as applicable) and agrees that Secured Party shall continue to have a security interest in (and a pledge and assignment of as applicable), the following property, to wit: (DEBTOR TO INITIAL APPROPRIATE BLANKS) Not Applicable ❑ All Accounts. A security interest in all accounts now owned or existing as well as any and all that may hereafter arise or be acquired by Debtor, and all the proceeds and products thereof, including without limitation, all notes, drafts, acceptances, instruments and chattel paper arising therefrom, and all returned or repossessed goods arising from or relating to any such accounts, or other proceeds of any sale or other disposition of inventory. Not Applicable ❑ Specific Accounts. A security interest in the supervised account at Texas State Bank, including earned interest, described by the Deposit Agreement between the Financial Institution, the Debtor and the Secured Party. Such agreement attached or which may hereafter be attached hereto. Not Applicable 0 All Inventory. A security interest in all of Debtor's inventory, including all goods, merchandise, raw materials, goods in process, finished goods and other tangible personal property, wheresoever located, now owned or hereafter acquired and held for sale or lease or furnished or to be furnished under contracts for service or used or consumed in Debtor's business and all additions and accessions thereto and contracts with respect thereto and all documents of title evidencing or representing any part thereof, and all products and proceeds thereof, including, without limitation, all of such which is now or hereafter located at the following locations: (give locations) _ Not Applicable 0 All Fixtures. A security interest in all of Debtor's fixtures and appurtenances thereto, and such other goods, chattels, fixtures, equipment and personal property affixed or in any manner attached to the real estate and/or building(s) or structure(s), including all additions and accessions thereto and replacements thereof and articles in substitution therefor, howsoever attached or affixed, located at the following locations: (give legal address) The record owner of the real estate is: _ Not Applicable ❑ All Equipment. A security interest in all equipment of every nature and description whatsoever now owned or hereafter acquired by Debtor including all appurtenances and additions thereto and substitutions therefor, wheresoever located, including all tools, parts and accessories used in connection therewith. _ Not Applicable 0 General Intangibles. A security interest in all general intangibles and other personal property now owned or hereafter acquired by Debtor other than goods, accounts, chattel paper, documents and instruments. _ Not Applicable 0 Chattel Paper. A security interest in all of Debtor's interest under chattel paper, lease agreements and other instruments or documents, whether now existing or owned by Debtor or hereafter arising or acquired by Debtor, evidencing both a debt and security interest in or lease of specific goods. _ Not Applicable 0 Farm Products. A security interest in alt of Debtor's interest in any and all crops, livestock and supplies used or produced by Debtor in farming operations wheresoever located: Debtor's residence is in the county shown at the beginning of this Agreement and Debtor agrees to notify promptly Secured Party of any change in the county of Debtor's residence; all of Debtor's crops or livestock are presently located in the following counties: (give counties) _ Not Applicable ❑ Securities. A pledge and assignment of and security interest in the securities described below, together with all instruments and general intangibles related thereto and all monies, income, proceeds and benefits attributable or accruing to said property, including, but not limited to, all stock rights, options, rights to subscribe, dividends, liquidating dividends, stock dividends, dividends paid in stock, new security or other properties or benefits to which the Debtor is or may hereafter become entitled to receive on account of said property. (give description) Not Applicable ❑ Certificates of Deposit. A pledge and assignment of and security interest in all of Debtor's interest in and to the certificates of deposit described below and instruments related thereto, and all renewals or substitutions therefor, together with all monies, income, interest, proceeds and benefits attributable or accruing to said property or to which Debtor is or may hereafter be entitled to receive on account of said property. (give description) _ Not Applicable 0 Instruments. A pledge and assignment of and security interest in all of Debtor's now owned or existing as well as hereafter acquired or arising instruments and documents. ❑ Other. A first priority lien on all of Debtor's interest, now owned or hereafter acquired, in and to the enumerated equipment as detailed in Exhibit "D" in that certain Economic Incentive Contract & Loan Agreement between Debtor and Secured Party. Equipment: Serial Number: Current Value: c Hobart Mixer 11- 281 -796 $7,000.00 °6`3.--AY Urschel Model RA SS 241 $19,000.00 a Dicer Five McMaster Carr $5,000.00 C:\416\1"9--- Work Benches Filler MD201 $20,000.00 Deli Cup Briner FG -1015 $30,000.00 Olive Washing Machine 1059 $75,000.00 Invoice(s) for the above - described equipment shall be attached by Debtor to this Commercial Security Agreement. The term "Collateral" as used in this Agreement shall mean and include, and the security interest (and pledge and assignment as applicable) shall cover, all of the foregoing property, as well as any accessions, additions and attachments thereto.and any insurance proceeds payable because of loss or damage, or other proceeds of any sale or other disposition of such D. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR. Debtor represents and warrants as follows: 1. Ownership; No Encumbrances: Except for the security interest (and pledges and assignments as applicable) granted hereby, the Debtor is, and as to any property acquired after the date hereof which is included within the Collateral, Debtor will be, the owner of all such Collateral free and clear from all charges, liens, security interests, adverse claims and encumbrances of any and every nature whatsoever. 2. No Financing Statements: There is no financing statement or similar filing now on file in any public office covering any part of the Collateral, and Debtor will not execute and there will not be on file in any public office any financing statement or similar filing except the financing statements filed or to be filed in favor of Secured Party (or filing statements which are subordinate to the Secured Party). 3. Accuracy of Information: All information furnished to Secured Party concerning Debtor, the Collateral and the Obligations, or otherwise for the purpose of obtaining or maintaining credit, is or will be at the time the same is furnished, accurate and complete in all material respects. 4. Authority: Debtor has full right and authority to execute and perform this Agreement and to create the security interest (and pledges and assignment as applicable) created by this Agreement. The making and performance by Debtor of this Agreement will not violate any articles of incorporation, bylaws or similar document respecting Debtor, any provision of law, any order of court or governmental agency, or any indenture or other agreement to which Debtor is a party, or by which Debtor or any of Debtor's property is bound, or be in conflict with, result in a breach of or constitute (with due notice and/or lapse of time) a default under any such indenture or other agreement, or result in the creation or imposition of any charge, lien, security interest, claim or encumbrance of any and every nature whatsoever upon the Collateral, except as contemplated by this Agreement. 5. Addresses: The address of Debtor designated at the beginning of this Agreement is Debtor's place of business if Debtor has only one place of business; Debtor's chief executive office if Debtor has more than one place of business; or Debtor's residence if Debtor has no place of business. Debtor agrees not to change such address without advance written notice to Secured Party. E. GENERALCOVENANTS. Debtor covenants and agrees as follows: 1. Operation of the Collateral: Debtor agrees to maintain and use the Collateral solely in the conduct of its own business, in a careful and proper manner, and in conformity with all applicable permits or licenses. Debtor shall comply in all respects with all applicable statutes, laws, ordinances and regulations. Debtor shall not use the Collateral in any unlawful manner or for any unlawful purposes, or in any manner or for any purpose that would expose the Collateral to unusual risk, or to penalty, forfeiture or capture, or that would render inoperative any insurance in connection with the Collateral. 2. Condition: Debtor shall maintain, service and repair the Collateral so as to keep it in good operating condition. With reasonable business prudence, Debtor shall replace within a reasonable time all parts that may be worn out, lost, destroyed or otherwise rendered unfit for use, with appropriate replacement parts. Debtor shall obtain and maintain in good standing at all times all applicable permits, licenses, registrations and certificates respecting the Collateral. 3. Assessments: Debtor shall promptly pay when due all taxes, assessments, license fees, registration fees, and governmental charges levied or assessed against Debtor or with respect to the Collateral or any part thereof. 4. No Encumbrances: Debtor agrees not to suffer or permit any charge, lien, security interest, adverse claim or encumbrance of any and every nature whatsoever against the Collateral or any part thereof. 5. No Removal: Except as otherwise provided in this Agreement, Debtor shall not remove the Collateral from the county or counties designated at the beginning of this Agreement without Secured Party's prior written consent. 6. No Transfer: Except as otherwise provided in this Agreement with respect to inventory, Debtor shall not, without the prior written consent of Secured Party, sell, assign, transfer, lease, charter, encumber, hypothecate or dispose of the Collateral, or any part thereof, or interest therein, or offer to do any of the foregoing. 7. Notices and Reports: Debtor shall promptly notify Secured Party in writing of any change in the name, identity or structure of Debtor, any charge, lien, security interest, claim or encumbrance asserted against the Collateral, any litigation against Debtor or the Collateral, any theft, loss, injury or similar incident involving the Collateral, and any other material matter adversely affecting Debtor or the Collateral. Debtor shall furnish such other reports, information and data regarding Debtor's financial condition and operations, the Collateral and such other matters as Secured Party may request from time to time. 8. Landlord's Waivers: Debtor shall furnish to Secured Party, if requested, a landlord's waiver of all liens with respect to any Collateral covered by this Agreement that is or may be located upon leased premises, such landlord's waivers to be in such form and upon such terms as are acceptable to Secured Party. 9. Additional Filings: Debtor agrees to execute and deliver such financing statement or statements, or amendments thereof or supplements thereto, or other documents as Secured Party may from time to time require in order to comply with the Texas Uniform Commercial Code (or other applicable state law of the jurisdiction where any of the Collateral is located) and to preserve and protect the Secured Party's rights to the Collateral. 10. Protection of Collateral: Secured Party, at its option, whether before or after default, but without any obligation whatsoever to do so, may (a) discharge taxes, claims, charges, liens, security interests, assessments or other encumbrances of any and every nature whatsoever at any time levied, placed upon or asserted against the Collateral, (b) place and pay for insurance on the Collateral, including insurance that only protects Secured Party's interest, (c) pay for the repair, improvement, testing, maintenance and preservation of the Collateral, (d) pay any filing, recording, registration, licensing or certification fees or other fees and charges related to the Collateral, or (e) take any other action to preserve and protect the Collateral and Secured Party's rights and remedies under this Agreement as Secured Party may deem necessary or appropriate. Debtor agrees that Secured Party shall have no duty or obligation whatsoever to take any of the foregoing action. Debtor agrees to promptly reimburse Secured Party upon demand for any payment made or any expense incurred by the Secured .Party pursuant to this authorization. These. payments and expenditures, together with interest thereon from date incurred until paid by Debtor at the maximum contract rate allowed under applicable laws, which Debtor agrees to pay, shall constitute additional Obligations and shall be secured by and entitled to the benefits of this Agreement. 11. Inspection: Debtor shall during business hours and with 48 hours prior notice allow Secured Party by or through any of its officers, agents, attorneys or accountants, to examine the Collateral, wherever located 12. Further Assurances: Debtor shall do, make, procure, execute and deliver all such additional and further acts, things, deeds, interests and assurances as Secured Party may require from time so time to protect, assure and enforce Secured Party's rights and remedies. 13. Insurance: Debtor shall have and maintain insurance at all times with respect to all tangible Collateral insuring against risks of fire (including so- called extended coverage), theft and other risks as Secured Party may require, containing such terms, in such form and amounts and written by such companies authorized to provide insurance in the State of Texas and having a AM Best rating of at least , all of such insurance to contain toss payable clauses in favor of Secured Party as its interest may appear. All policies of insurance shall provide for ten (10) days written minimum cancellation notice to Secured Party and at the request of Secured Party shall be delivered to and held by it. Secured Party is hereby authorized to act as attorney for Debtor in obtaining, adjusting, settling and canceling such insurance and endorsing any drafts or instruments. Debtor specifically authorizes Secured Party to disclose information from the policies of insurance to prospective insurers regarding the Collateral. 14. Additional Collateral: If Secured Party should at any time be of the opinion that the Collateral is impaired, not sufficient or has declined or may decline in value, or should Secured Party deem payment of the Obligations to be insecure, then Secured Party may call for additional security satisfactory to Secured Party, and Debtor promises to furnish such additional security forthwith. The call for additional security may be oral, by telegram, or United States mail addressed to Debtor, and shall not affect any other subsequent right of Secured Party to exercise the same. L. OTHER AGREEMENTS. 1. Savings Clause: Notwithstanding any provision to the contrary herein, or in any of the documents evidencing the Obligations or otherwise relating thereto, no such provision shall require the payment or permit the collection of interest in excess of the maximum permitted by applicable usury laws. If any such excessive interest is so provided for, then in such event (i) the provisions of this paragraph shall govern and control; (ii) neither the Debtor nor his heirs, legal representatives, successors or assigns or any other party liable for the payment thereof, shall be obligated to pay the amount of such interest to the extent that is in excess of the maximum amount permitted by law; (iii) any such excess interest that may have been collected shall be, at the option of the holder of the instrument evidencing the Obligations, either applied as a credit against the then unpaid principal amount thereof or refunded to the maker thereof; and (iv) the effective rate of interest shall be automatically reduced to the maximum lawful rate under applicable usury laws as now or hereafter construed by the courts having jurisdiction. 2. Joint and Several Responsibility: If this Security Agreement is executed by more than one Debtor, the obligations of all such Debtors shall be joint and several. 3. Waivers: Debtor and any maker, endorser, guarantor, surety or other party liable in any capacity respecting the Obligations hereby waive demand, notice of intention to accelerate, notice of acceleration, notice of non - payment, presentment, protest, notice of dishonor and any other similar notice whatsoever. 4. Severability: Any provision hereof found to be invalid by courts having jurisdiction shall be invalid only with respect to such provision (and then only to the extent necessary to avoid such invalidity). The offending provision shall be modified to the maximum extent possible to confer upon Secured Party the benefits intended thereby. Such provision as modified and the remaining provisions hereof shall be construed and enforced to the same effect as if such offending provision (or portion thereof) had not been contained herein, to the maximum extent possible. 5. Use of Copies: Any carbon, photographic or other reproduction of any financing statement signed by Debtor is sufficient as a financing statement for all purposes, including without limitation, filing in any state as may be permitted by the provisions of the Uniform Commercial Code of such state. 6. Relationship to Other Agreements: This Security Agreement and the security interests (and pledges and assignments as applicable) herein granted are in addition to (and not in substitution, novation or discharge of) any and all prior or contemporaneous security agreements, security interests, pledges, assignments, liens, rights, titles or other interests in favor of Secured Party or assigned to Secured Party by others in connection with the Obligations. All rights and remedies of Secured Party in all such agreements are cumulative, but in the event of actual conflict in terms and conditions, the terms and conditions of the latest security agreement shall govern and control. 7. Notices: Any notice or demand given by Secured Party to Debtor in connection with this Agreement, the Collateral or the Obligations, shall be deemed given and effective upon deposit in the United States mail, postage prepaid, addressed to Debtor at the address of Debtor designated at the beginning of this Agreement. Actual notice to Debtor shall always be effective no matter how given or received. 8. Headings and Gender: Paragraph headings in this Agreement are for convenience only and shall be given no meaning or significance in interpreting this Agreement. All words used herein shall be construed to be of such gender or number as the circumstances require. 9. Amendments: Neither this Agreement nor any of its provisions may be changed, amended, modified, waived or discharged orally, but only by an instrument in writing signed by the party against whom enforcement of the change, amendment, modification, waiver or discharge is sought. 10. Continuing Agreement: The security interest (and pledges and assignments as applicable) hereby granted and all of the terms and provisions in this Agreement shall be deemed a continuing agreement and shall continue in full force and effect until terminated in writing. Any such revocation or termination shall only be effective if explicitly confirmed in a signed writing issued by Secured Party to such effect and shall in no way impair or affect any transactions entered into or rights created or Obligations incurred or arising prior to such revocation or termination, as to which this Agreement shall be fully operative until same are repaid and discharged in full. Unless otherwise required by applicable law Secured Party shall be under no obligation to issue a termination statement or similar documents unless Debtor requests same in writing and, provided further, that all Obligations have been repaid and discharged in full and there are no commitments to make advances, incur any Obligations or otherwise give value. 11. Binding Effect: The provisions of this Security Agreement shall be binding upon the heirs, personal representatives, successors and assigns of Debtor and the rights, powers and remedies of Secured Party hereunder shall inure to the benefit of the successors and assigns of Secured Party. 12. Governing Law: This Security Agreement shall be governed by the law of the State of Texas and applicable federal law. EXECUTED this day of , 2014. KT Holdings, Inc. By: Eric Moscahlaidis, President EXHIBIT "D" UCC -1 J EXHIBIT "E" FIRST SOURCE REFERRAL AGREEMENT EXHIBIT "G" CERTIFICATION REGARDING LOBBYING For Contracts, Grants, Loans, and Cooperative Agreements The undersigned certifies, to the best of his knowledge and belief, that: 1. No funds have been paid or will be paid, by or on behalf of the undersigned, to any person for influencing or attempting to influence an officer or employee of any agency, a member of the City or of the PAEDC in connection with the awarding of any contract, the making of any grant, the making of any loan, the entering into of any cooperative agreement, or modification of any contract, grant, loan, or cooperative agreement. 2 The undersigned shall require that the language of this certification be included in the award documents for all sub - awards at all tiers (including subcontracts, sub - grants, and contracts under grants, loans, and cooperative agreements), and that all Subs shall certify and disclose accordingly. This certification is material representation of fact which reliance was placed when this transaction was made or entered into. Submission of this certification is a prerequisite for making or entering into this transaction. KT Holdings, Inc. Date: By: Signature Its: Title EXHIBIT "G" COMPLIANCE STATEMENT KT Holdings, Inc. hereby certifies that it has fully complied with Local Government Code § 176.006, as amended, which mandates the disclosure requirements for persons who contract or seek to contract with a local governmental entity. KT Holdings, Inc. Date: By: Signature Its: Title Entity Information Page 1 of 2 NYS Department of State Division of Corporations Entity Information The information contained in this database is current through March 10. 2014. Selected Entity Name: KT HOLDINGS INC. Selected Entity Status Information Current Entity Name: THE OLIVE PACKING COMPANY, INC. DOS ID #: 4376638 Initial DOS Filing Date: MARCH 20, 2013 County: NEW YORK Jurisdiction: NEW YORK Entity Type: DOMESTIC BUSINESS CORPORATION Current Entity Status: ACTIVE Selected Entity Address Information DOS Process (Address to which DOS will mail process if accepted on behalf of the entity) C/O ERIC MOSCAHLAIDIS 860 FIFTH AVENUE, PH H NEW YORK, NEW YORK, 10065 Registered Agent NONE This office does not record information regarding the names and addresses of officers, shareholders or directors of nonprofessional corporations except the chief executive officer, if provided, which would be listed above. Professional corporations must include the name(s) and address(es) of the initial officers, directors, and shareholders in the initial certificate of incorporation, however this information is not recorded and only available by viewing the certificate. http: / /appext20. dos. ny. gov /core public /CORPSEARCH.ENTITY INFORMATION ?p_na... 3/11/2014 Entity Information Page 2 of 2 *Stock Information # of Shares Type of Stock $ Value per Share 200 No Par Value *Stock information is applicable to domestic business corporations. Name History Filing Date Name Type Entity Name AUG 01, 2013 Actual THE OLIVE PACKING COMPANY, INC. MAR 20, 2013 Actual KT HOLDINGS INC. A Fictitious name must be used when the Actual name of a foreign entity is unavailable for use in New York State. The entity must use the fictitious name when conducting its activities or business in New York State. NOTE: New York State does not issue organizational identification numbers. Search Results New Search Services/Programs I Privacy Policy 1 Accessibility Policy 1 Disclaimer 1 Return to DOS Homepage 1 Contact Us http: / /appext20. dos. ny. gov /core public /CORPSEARCH.ENTITY INFORMATION ?p_na... 3/11/2014 Division of Corporations, State Records and Uniform Commercial Code, NYS Dept. of St... Page 1 of 1 \ �ciencies CI Search all of t�'Y goy DEPARTMENT OF STATE. DIVISION OF f ( . . 7 j / CORPORATIONS, STATE RECORDS & UCC ; _...._ -. ANDREW M. CUOMO. GOVERNOR CESAR A. PERALE9. SECRETAR" OF STATE y ^t II IF� 1+/ . How do I obtain copies of documents filed with the Division of Corporations? Copies of any documents (Certificates of Incorporation, Articles of Organization, Certificates of Amendment, etc.) filed with the Division of Corporations may be obtained by submitting a written request to the New York State Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231. The fee for a plain copy is $5, and the fee for a certified copy is $10.Copies of documents cannot be ordered through this website, by email or over the telephone. The Department of State does not provide copies of filing receipts. The Division of Corporations will accept written requests for copies of documents by fax. Fees for written requests received by fax must be paid using your credit card /debit card. To pay for a fee using your credit card /debit card, simply complete and sign the Credit Card /Debit Card Authorization Form (43.9 KB PDF Form, 1 page) and submit it to the Division of Corporations with your written request. Written requests for copies of documents may be faxed to (518) 473 -1654. The large volume of submissions and requests received each day by the Division makes it impracticable for Division staff to verify receipt of individual customer submissions. Please do not call the Division for verification of receipt after submitting a certificate or request by fax. If you do not receive correspondence from our office after a reasonable period of time has elapsed, you may contact the Division at (518) 473 -2492 for further instructions. Please note that copies will be returned by first -class mail by the United States Postal Service. We do not provide these documents by fax. You may request that your certificate be returned to you by overnight delivery service, by including your account number with the service provider, enclosing a prepaid shipping label or including a request to charge your credit card with the shipper for these charges. The Division is unable to utilize UPS. http: / /www.dos.ny.gov /corps /faq_copies.page.asp 3/11/2014