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Mullen PortJervis(OrangeCounty)KolmarWorkingCapitalandKolmarCity byCityCapital EmpireStateEconomicDevelopmentFundandUpstate CitybyCity GeneralDevelopmentFinancing(WorkingCapital and Capital Grant) FindingsandDeterminationsPursuanttoSections16m and10(g)ofthe ActAuthorizationtoAdopttheProposedGeneralProjectPlan AuthorizationtoMakeaGrantandtoTakeRelatedActions
REQUESTFOR:
GeneralProjectPlan I. ProjectSummary KolmarLaboratories,Inc.(KolmarortheCompany) A $2,000,000EmpireStateEconomicDevelopmentFundWorkingCapital Grantanda$2,500,000UpstateCitybyCity CapitalGranttobeusedfora portionofthecostofthepurchaseandinstallationofmachineryand equipmentandtomakeotherinvestmentstosupportandretainitsPort Jervisbasedmanufacturingoperationofpharmaceuticalsandcosmetics. * TheNewYork StateUrbanDevelopmentCorporationdoingbusinessasthe EmpireStateDevelopmentCorporation(ESDortheCorporation) ProjectLocation: NYSEmpireZone (orequivalent): 20WestKingStreet,PortJervis,OrangeCounty
Grantee: ESD*Investment:
NewburghStewartEmpireZone
ProposedProject:
NumberofEmployeesatProjectLocation: InitialemploymentattimeofESDIncentiveOffer*: Currentemploymentlevel: Minimumemploymentthrough January1,2016: *AsofrevisedoffersentApril16,2010 GranteeContact: RichPolifroni,VicePresident,Finance 20WestKingStreet PortJervis,NewYork12771 Phone:(845)8565311
EmpireStateEconomicDevelopmentFund(W331)andUpstateCityby City (W756) W331,W756 Origination ProjectManagement AffirmativeAction Finance Environmental PaulTaxter GregoryE.Fitzgerald DeniseRoss RossFreeman SooKang
ESDProjectNos.: ProjectTeam:
II.
ProjectCostandFinancingSources Amount $5,000,000 18,000,000 $23,000,000 Amount $2,500,000 2,000,000 250,000 250,000 250,000 2 Percent 11% 9% 1% 1% 1%
FinancingUses M&E,R&MandR&Dinvestments WorkingCapital TotalProjectCosts FinancingSources ESD CapitalGrant(W756) ESD WorkingCapitalGrant(W331) NYSAssemblyGrant* NYSSenateGrant* OrangeCountyIDA*
1% 4% 72% 100%
A. Background In1921,KolmarwasfoundedinMilwaukee,Wisconsin,byLessingL.KoleandFrederickMarsek. KolmaristhelargestcontractmanufacturerinNorthAmericaoffinecolorcosmetics,personalcare products,andoverthecounterpharmaceuticals. TheCompanyhasbroadbasedcapabilitiesand produceslotions,powdersandpressedpowders(makeupandfoundation),eyemakeup(mascara), fragrancesandlipsticks(includinglipbalms,etc.),andvariousoverthecounterproducts,including sunscreens,nasalspraysandacnepreparations. TheCompanyhasdevelopednobrandsofitsown, butinsteadmanufactureshighlyrecognizableproductsforNeutrogena(adivisionofJohnsonand Johnson),Mary KayCosmetics,andProcter&Gambleamongothers. TheCompanysprincipal competitorsincludeAccessBusinessGroup,AccraPac,CCareLLC,andChicagoAerosol. Additionally,Kolmarprovidesbroaderservicesthansimplyfillingconsumerpackages,andasa resultowns75%oftheintellectualproperty(formulas,etc.),creatingbarrierstothetransferof existingproductsbeingmanufacturedtocompetitors. Kolmarcanprovideafullrangeofservices including:newproductdevelopment formulationprocessdesignpurchasingandsourcing manufacturing distributionandinventorymanagement,planningandscheduling. In2008,after over65yearsofoperation andseriesofrecentownershipchanges,Kolmarannounced thatitwasconsideringclosingitsPortJervisfacility,whereitemploysapproximately500people. TheCompanyconsideredrelocatingitsfacilitytoTexas,NewJersey orLouisiana,whichofferedto fullysubsidizeitsrelocation andtheconstructionofanewstateoftheartfacility. Kolmar approachedESDforfinancialassistance,andESDoffereda$1,000,000 capitalgrantonJuly18, 2008, toinducetheCompanytoremaininPortJervis. In2010,KolmarreachedouttoESDpriorto finalizingitscontractforrelocationtoLouisiana theCompany,whichwasalreadystrugglingdue tolackofinvestmentoverthelast15yearsbyvariousowners,hadsufferedsignificantlyduringthe economicdownturn.Ithadbeenforcedtolayoffalmost100employeesandwasnowfacinga majorfundinggapforitsworkingcapitalneeds.Withseveral originally anticipatedfinancing sourcesunabletocommitfunding,Kolmarfacedthepossibility ofclosingdownitsPortJervis facility. BecauseKolmarisavitalemployerinthedistressedPortJervisarea,ESD madearevised offerinApril2010for$4,500,000in capitalandworkingcapitalgrants. AdditionalnonESD grantsareanticipatedfromtheNewYorkStateAssembly,NewYorkStateSenate,OrangeCounty IDA,theOfficeof CommunityRenewal,andtheNewYorkPowerAuthority. Thesegrantswill ensurethatKolmarremainsinPortJervis,willprovideneededworkingcapital,andwillallowthe Companytopurchasenewmachineryandequipmentandmakeothernecessaryinvestmentsinthe business
Afinancial analysiswasconductedbyESDstaff,andtheCompany receivedapoorrating. However,KolmarisamajoreconomicgeneratorinPortJervis.IftheCompanydecidedtorelocate thisfacility,itwouldhavedevastatingconsequencestoPortJerviseconomy andwouldbeamajor joblossfortheregion. Theprojectwillresultintheretentionof400jobs. WithoutESDsgrant assistance,thisfacility wouldlikelyhavebeenrelocatedtoLouisiana. B. TheProject Theprojectincludesthepurchaseandinstallationof machineryandequipment,capitalexpenditures andinvestmentsinthedevelopmentofnewprojectsandimprovementsofexistingproductsandthe maintenanceofplantbuildingsandequipmentattheCompanysPortJervis,OrangeCounty facility.SinceKolmarisacontractmanufacturer,itspurchaseofmachineryandequipmentis drivenbythemarketingplansofitscustomers.TheEDF Workingcapital grantwillbeusedtofund accountsreceivableandinventory financing.Kolmarisworkingdirectlywithitscustomersto determineitsspecificmachinery,equipmentandinventoryneedsoverthenextseveralyearstokeep thePortJervisfacilityoperational. Allpurchasesareexpectedtobecompletebymid2013. TheCompanycurrently has404employeesattheProjectLocation. C. 1. FinancialTermsandConditions Uponexecutionofthegrantdisbursementagreement,theCompanyshallreimburseESD foralloutofpocketexpensesincurredinconnectionwiththeproject. TheCompany willdemonstratenomaterialadversechangeinitsfinancialconditionprior todisbursement. TheCompanywillberequiredtocontributeaminimumof10%ofthetotalprojectcostin theformofequitycontributedaftertheCompanysacceptanceofESDsoffer.Equityis definedascashinjectedintotheprojectbytheCompanyorbyinvestors,andshouldbe auditablethroughCompanyfinancialstatementsorCompanyaccounts,ifsorequestedby ESD. Equitycannotbeborrowedmoneysecuredbytheassetsin theproject. Priortodisbursement,theCompanymustemployatleastthenumberofFulltime PermanentEmployeessetforthastheBaselineEmploymentinthetablebelow.AFull timePermanentEmployeeshallmean(a)afulltime,permanent,privatesector employee ontheGranteespayroll,whohasworkedattheProjectLocationforaminimumofthirty fivehoursperweekfornotlessthanfourconsecutiveweeksandwhoisentitledtoreceive theusualandcustomaryfringebenefitsextendedbyGranteetootheremployeeswith comparablerankanddutiesor(b)twoparttime,permanent,privatesectoremployeeson Granteespayroll,whohaveworkedattheProjectLocationforacombinedminimumof thirtyfivehoursperweekfornotlessthanfourconsecutiveweeksandwhoareentitledto receivetheusualandcustomaryfringebenefitsextendedbyGranteetootheremployees withcomparablerankandduties.
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Upto$4,500,000willbedisbursedaccordingtothetermsoutlinedbelowforthetwo grants. EDFWorkingCapitalGrant(W331) Upto$2,000,000 willbedisbursedtotheGranteein twoinstallmentsasfollows: a)anInitialDisbursementofanamountequalto50%ofthegrant($1,000,000)willbe disbursedupondocumentationof theinvestmentof $1millionin cashfromoperations* (equity),theestablishmentofarevolvinglineofcreditwithamaximumborrowing capacityofnolessthan$15million,documentationoftheemploymentofatleast400 FulltimePermanentEmployeesattheProjectLocation,andthedrawdownof$2 millionfromtheCompanys$15millionrevolvinglineofcreditforaccountsreceivable andinventoryexpenses,assumingthatallprojectapprovalshavebeencompletedand fundsareavailable b)aSecondDisbursementofanamountequalto50%of thegrant($1,000,000), willbe disbursednosoonerthan12monthsafterthedatetheInitialDisbursementwasmade, upondocumentationoftheinvestmentofanadditional$2millionincashfrom operations*(equity),theinvestmentof$2.5million inmachineryandequipment (M&E)and/oreligiblecapitalexpendituresandinvestmentsin thedevelopmentof newproductsand/orimprovementofexistingproducts(R&D)and/or the maintenanceofplantbuildingsandequipment(R&M),thecontinuingavailabilityof arevolvinglineofcreditwithamaximumborrowingcapacityofnolessthan $15 million,thedocumentationoftheemploymentofatleast400FulltimePermanent EmployeesattheProjectLocation,andthedrawdownofanadditional$2millionfrom theCompanys$15millionrevolvinglineofcreditforaccountsreceivedandinventory expenses,providedGranteeisotherwiseincompliancewithprogramrequirements.
UpstateCitybyCityCapitalGrant(W756) Upto$2,500,000 willbedisbursedtotheGranteein twoinstallmentsasfollows: a)anInitialDisbursementofanamountequalto50%ofthegrant($1,250,000)willbe disbursedupondocumentationof thepurchaseof $2.5millionin eligiblemachineryand equipmentand/oreligiblecapitalexpendituresandinvestmentsinR&MandR&D,the investmentof$1millionincashfromoperations*(equity),theestablishmentofa revolvinglineofcreditwithamaximumborrowingcapacityofnolessthan$15million anddocumentationoftheemploymentofatleast400FulltimePermanentEmployees attheProjectLocation,assumingthatallprojectapprovalshavebeencompletedand fundsareavailable b)aSecondDisbursementof50%ofanamountequaltothegrant($1,250,000)willbe disbursednosoonerthan 12monthsafterthedatetheInitialDisbursementwasmade, upondocumentationoftheinvestmentofanadditional$2million ($3milliontotal)in cashfromoperations*(equity),thepurchaseof anadditional $2.5million ($5million total)inmachinery andequipmentand/oreligiblecapitalexpendituresandinvestments inR&MandR&D,thecontinuingavailabilityofarevolvinglineofcreditwitha maximumborrowingcapacityofnolessthan$15million,andupon documentationof theemploymentofatleast400FulltimePermanentEmployeesattheProjectLocation, providedGranteeisotherwiseincompliancewithprogramrequirements. 5
PaymentswillbemadeuponpresentationtoESDCofaninvoiceandsuchother documentationasESDCmayreasonablyrequire. Expensesmustbeincurredonorafter April19,2010 tobeconsideredeligibleprojectcosts. Alldisbursementsmustbe requestedbyApril1,2014. TheCompanymaysubmitrequestsforandreceivedisbursementssimultaneouslyfromthe EDFWorkingCapital GrantandtheUpstateCitybyCityCapitalGrant.Expenses incurredtowardthetotalprojectcostmaybecountedtowardthedisbursement requirementsofbothgrants. *DefinitionofCashfromOperations:EBITDAlesscapitalexpendituresasrepresentedby andprovidedintheCompanysquarterlyfinancialstatementscertifiedbytheChief FinancialOfficerand/orannualauditedfinancialstatementsandreinvestedin operationsattheProjectLocation. 6. ESDmayreallocatetheprojectfundstoanotherformof assistance,atanamountno greaterthan $4,500,000,forthisprojectifESDdeterminesthatthereallocationofthe assistancewouldbetterservetheneedsoftheCompanyandtheStateofNewYork.Inno eventshallthetotalamountofanyassistancetobesoreallocatedexceedthetotalamount ofassistanceapprovedbytheDirectors. InconsiderationforthemakingoftheGrant,Granteewill achievetheEmploymentGoals setforthinColumnBofthetablebelow. IftheFulltimePermanentEmployeeCountfor theyearpriortothereportingdatesetforthinColumnAofthetablebelowislessthan eightyfivepercent(85%) of theEmploymentGoal setforthinColumnB(an EmploymentShortfall),thenupondemandbyESD,Granteeshallbeobligatedtorepay toESDaportionofeachdisbursementoftheGrant,asfollows: TheRecaptureAmountisbasedonthetimethathaslapsedbetweenwhentheGrantfunds weredisbursedandwhentheEmploymentShortfalloccurred.TheRecaptureAmount shallbecalculatedbyaggregatingtheRecaptureAmountforeachdisbursementofthe Grant,whichineachinstanceshallbeequalto: (i) 100%ofthedisbursedamountiftheEmploymentShortfalloccurredinthecalendar yearthatthedisbursementwasmade,orinthefirstfullcalendaryearafterthe disbursementwasmade 80%ofthedisbursedamountiftheEmploymentShortfalloccurredinthesecondfull calendaryearafterthedisbursementwasmade 60%ofthedisbursedamountiftheEmploymentShortfalloccurredinthethirdfull calendaryearafterthedisbursementwasmade 40%ofthedisbursedamountiftheEmploymentShortfalloccurredinthefourthfull calendaryearafterthedisbursementwasmade 20%ofthedisbursedamountiftheEmploymentShortfalloccurredinthefifthfull calendaryearafterthedisbursementwasmade.
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TheGranteesnumberofFulltimePermanentEmployeesshallbedeemedtobethe 6
greaterofthenumberasofthelastpayrolldateinthemonthofDecemberforsuchyearor theaverageemploymentforthe12monthperiodcomputedbyquarter.
BaselineEmployment A Date February1,2012 February1,2013 February1,2014 February1,2015 February1,2016 B EmploymentGoals 400 400 400 400 400
400
IV.
StatutoryBasis
EmpireStateEconomicDevelopmentFund: 1. The proposed project would promote the economic health of New York State by facilitating the creation or retention of jobs or would increase activity within a municipality or region of the state or would enhance or help to maintain the economic viabilityoffamilyfarms. Asaresultofthisproject,theCompanywill retain400jobswhichwereatriskof relocatingtoLouisiana. 2. TheproposedprojectwouldbeunlikelytotakeplaceinNewYorkStatewithoutthe requestedassistance. TheCompanyconsideredrelocatingitsoperationstoLouisiana,TexasorNewJersey. ESDsassistancehelpedtoreducecostsandmaketheprojectfeasibleinNewYork. Theprojectisreasonablylikelytoaccomplishitsstatedobjectivesandthelikelybenefits oftheprojectexceedcosts. Evaluatedoverasevenyearperiod,thefollowingareanticipatedprojectimpacts(dollar valuesarepresentvalue): FiscalbenefitstoNYSgovernmentfromtheprojectareestimatedat$11,014,878 FiscalcosttoNYSgovernmentisestimatedat$4,750,000 ProjectcosttoNYSgovernmentperdirectjobis$25,789 ProjectcosttoNYSgovernmentperjob(directplusindirect)isestimatedat$9,722 RatioofprojectfiscalbenefitstocoststoNYSgovernmentis2.32:1 Fiscalbenefitstoallgovernments(stateandlocal)areestimatedat$19,584,652 Fiscalcosttoallgovernmentsis$4,750,000 Allgovernmentcostperdirectjobis$25,789 Allgovernmentcostpertotaljobis$9,722 Thefiscalbenefittocostratioforallgovernmentsis4.12:1 7
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September14,2010 Port Jervis (Orange County) Kolmar Working Capital and Kolmar CitybyCity Capital Empire State Economic Development Fund and Upstate CitybyCity GeneralDevelopmentFinancing(WorkingCapitalandCapitalGrants)Findingsand Determinations Pursuant to Sections 16m and 10 (g) of the Act Authorization to AdopttheProposedGeneralProjectPlanAuthorizationtoMakeaGrantandtoTake RelatedActions
RESOLVED,thatonthebasisofthe materialspresentedtothis meeting,acopyofwhich is hereby ordered filed with the records of the Corporation, relating to the Kolmar Working Capital and Kolmar CitybyCity Capital Empire State Economic Development Fund and UpstateCitybyCityRetentionProjectsGeneralDevelopmentFinancing(Working Capital and Capital Grants) (the Project), the Corporation hereby determines pursuant to Sections 16m and 10 (g) of the New York State Urban Development Corporation Act of 1968, as amended(theAct),that 1. The proposed project would promote the economic health of New York State by facilitating the creation or retention of jobs or would increase activity within a municipality or region of the stateor would enhance or help to maintain the economic viabilityoffamilyfarms The project would be unlikely to take place in New York State without the requested assistance The project is reasonably likely to accomplish its stated objectives and that the likely benefitsoftheprojectexceedcosts There are no families or individuals to be displaced from the project area and be it further
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RESOLVED,thatthe Corporation does hereby adopt, subjecttothe requirements of Section 16(2)ofthe Act,theproposedGeneralProjectPlan(the Plan) fortheProjectsubmittedto thismeeting,togetherwithsuchchangesthereinastheChairmanandChiefExecutiveOfficer of the Corporation or his designee(s) may deem appropriate, a copy of which Plan, together withsuchchanges,isherebyorderedfiledwiththerecordsoftheCorporationandbeitfurther RESOLVED, that upon written finding of the Chairman and Chief Executive Officer of the Corporation or his designee(s) that no substantive negative testimony or comment has been receivedatthepublichearingheldonthePlan,suchPlanshallbeeffectiveattheconclusionof such hearing, and that upon such written finding being made, the Chairman and Chief Executive Officer of the Corporation or his designee(s) be, and each of them hereby is, authorizedtomaketoKolmarLaboratories,Inc.agrantforatotalamountnottoexceedTwo MillionFiveHundredThousandDollars($2,500,000), fromUpstateCitybyCityand notto exceed Two Million Dollars ($2,000,000) from the Empire State Economic Development 9
Fund,forthepurposes,andsubstantiallyonthetermsandconditions,setforthinthematerials presentedtothismeeting,withsuchchangesastheChairmanandChiefExecutiveOfficerof theCorporationorhisdesignee(s) may deemappropriate,subjecttotheavailabilityof funds andtheapprovaloftheStateDivisionoftheBudgetandbeitfurther RESOLVED, that the Chairman and Chief Executive Officer of the Corporation or his designee(s)be,subsequenttothemakingofthegrant,andeachofthemherebyis,authorized totakesuchactionsand makesuch modificationstothetermsofthegrantas heorshe may deemnecessaryorappropriateintheadministrationofthegrantandbeitfurther RESOLVED,thattheprovisionofESDfinancialassistanceisexpresslycontingentupon:(1) theapprovalofthePublicAuthoritiesControlBoard,ifapplicable,and(2)receiptofallother necessaryapprovalsandbeitfurther RESOLVED, that the Chairman and Chief Executive Officer of the Corporation or his designee(s) be, and each of them hereby is, authorized in the name and on behalf of the Corporationtoexecuteanddeliveranyandalldocumentsandtotakeallactionsasheorshe mayinhisorhersolediscretionconsidertobenecessaryorpropertoeffectuatetheforegoing resolutions. ***