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Home My WebLink AboutAgenda - 10-15-2013 - 6aORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: October 15, 2013 Action Agenda Item No. 6 -a SUBJECT: Economic Development Incentive for Morinaga America Foods, Inc. DEPARTMENT: Economic Development, Manager's Office, Attorney's Office ATTACHMENT(S): 1. Performance Agreement Between Orange County & Morinaga America Foods, Inc. 2. Resolution Authorizing a Performance -Based Inducement Grant Between Orange County & Morinaga America Foods, Inc. 3. Public Hearing Notice 4. Summary of Project Recruitment and Company Background 5. Power Point Summary 6. Aerial Site Map, Location & Proposed Infrastructure Improvements PUBLIC HEARING: (Y /N) Yes INFORMATION CONTACT: Steve Brantley Economic Development, (919) 245 -2326 Michael Talbert County Manager, (919) 245 -2308 John Roberts County Attorney, (919) 245 -2318 1 PURPOSE: To hold a public hearing on the issuance of "performance- based" economic development incentives to a private company, and to consider approval of the incentive agreement, with claw back provisions, for the recruitment of Morinaga America Foods, Inc. to Orange County. BACKGROUND: Local and state government has the goal to promote economic development by encouraging the location of new businesses and the expansion of existing businesses. This activity serves to diversify the tax base, increase employment opportunities, and introduce new technologies and job skills to a community and for the benefit of its residents. The Local Government Act, North Carolina General Statute 158 -7.1, outlines the requirements of public hearings, and the public hearing has been scheduled in compliance. The subject property, a 21 -acre site located along Ben Wilson Road and Interstates 1- 85/1 -40, is within Orange County's Buckhorn Economic Development District. The property will also be annexed into the City of Mebane before the end of 2013, thereby creating a tax base benefit to both County and City jurisdictions. Attachments include the Performance Agreement between Orange County and Morinaga America Foods, Inc., a Resolution, the Public Hearing Notice, the recruitment history of Morinaga America Foods, Inc., and company background, and an aerial 1 map of the property showing both existing and proposed infrastructure (road access and utility) improvements to the site. FINANCIAL IMPACT: Based on the Company's proposed operation and capital investment forecast of $34 million for land, building, machinery and equipment, the "Hi- Chew" candy production facility will generate approximately $291,720 in annual County property taxes. This will make the Morinaga America Foods operation one of Orange County's most significant corporate taxpayers among all other taxpayers, and thereby help to diversify the County's economy and tax base. The proposed Inducement Grant is calculated as a grant equal to 75% of that amount ($218,790) for a period of up to 5 years, or, a total potential grant of $1,093,950. In the event the Company invests as much as $48 million, the Inducement Grant will allow for an increased annual grant, but shall not exceed $1,545,000 total. The Inducement Grant contains performance -based measures for the Company to demonstrate that it has reached annual job creation and investment threshold levels, and include claw back provisions. The Company will create at least 90 new production jobs with an average annual salary of $37,979 per year, which will generate an annual payroll of $3.4 million. Other economic benefit multipliers to the County include enhanced job skills for those employees through advanced technical training to be provided by the Orange County campus of Durham Technical Community College in Hillsborough. Also, construction employment for the new 98,000 square foot facility will create many additional skilled trade jobs. RECOMMENDATION(S): The Interim Manager recommends that the Board: 1. Receive the proposal to consider the issuance of incentives to a private company for the recruitment of Morinaga America Foods, Inc. to Orange County, and to consider approval of a "performance- based" economic development incentive agreement with claw back provisions. 2. Conduct the Public Hearing and accept public and BOCC comments. 3. Close the Public Hearing. 4. Approve the "Performance- Based" economic development incentive agreement between Orange County and the Company, subject to final review by the County Attorney, and authorize the Chair to sign the agreement on behalf of the County. K Attachment 1 STATE OF NORTH CAROLINA ORANGE COUNTY PERFORMANCE AGREEMENT BETWEEN ORANGE COUNTY, NC AND MORINAGA AMERICA FOODS, INCORPORATED This Agreement made and entered into this the day of October, 2013 by and between Orange County, a body politic existing under the laws of the State of North Carolina ( "County ") and Morinaga America Foods, Inc., a North Carolina corporation, with facilities to be located in Mebane, North Carolina ( "Company "), for the purpose of incentivizing Company's investment in Orange County and Mebane. Company is a North Carolina corporation and a wholly -owned subsidiary of Morinaga & Co., Ltd., a confectionary company situated and doing business in Tokyo, Japan. Company's Mebane Facility shall manufacture confectionaries for distribution throughout the United States. Company represents it is duly authorized to conduct business in North Carolina. It is understood that the levels of performance required by this Agreement are to be met by this group (Company and Morinaga & Co, Ltd.) as a whole at its Facility in Orange County (Mebane). Accordingly, the term "Company" as used in this Agreement refers to the entire group at such Facility. WITNESSETH THAT WHEREAS, the County has offered to the Company an inducement package as hereinafter set forth; and WHEREAS, the State of North Carolina and the Town of Mebane, North Carolina have offered separate inducement packages to the Company; and WHEREAS, but for the offer of an inducement package the Company would not be locating its manufacturing Facility within Orange County; and WHEREAS, the Company has agreed to meet and continue meeting the minimum investment and employment requirements as hereinafter set forth; NOW, THEREFORE, the parties hereto in consideration of these mutual covenants and agreements passing from each to the other do hereby agree as follows: 1. DEFINITIONS. As used in this Agreement the terms below will have the following meanings: A. "Affiliate." A company that the Company controls, controls the Company, or is under common control with the Company. B. "Commencement Date. The date in which the Company begins actual production operations at the Subject Property, after having obtained applicable governmental approvals, certificates of zoning compliance, and certificates of occupancy. Unless delayed by causes beyond the control of the Company, the Commencement Date is anticipated to be no later than December 1, 2015. n C. "Company." Mormaga America Foods, Inc. and includes its affiliates, successors, and assigns. D. "Eligible Property." Includes (a) the Subject Property (as defined in Exhibit A, Legal Description of Real Property), other real property in the County, and all improvements the Company or an Affiliate of the Company constructs or installs, or causes to be constructed or installed, at the Subject Property or such other real property, including all buildings, building systems, and building improvements, and (b) all personal property (as defined in Exhibit C, Personal Property) the Company or an Affiliate of the Company purchases or leases and installs, at or relocates to, the Facility or such other real property. E. "Grant." An economic incentive grant to the County pursuant to Section 2C of this Agreement. F. "Inducement Grant." An economic development grant provided to Company for the purpose of securing the Company's location of its manufacturing facility in Orange County, North Carolina. - G. "Minimum Taxable Investment." The amount of $34,000,000 which represents eighty percent (80 %) of an aggregate Qualifying Expenditure made by the Company of approximately $42,500,000. H. "Orange County Facility" "Mebane Facility," or "Facility." The Company constructed and/or owned primary and secondary structures, utilities, and operations and service areas situated on the Subject Property in Mebane, Orange County, North Carolina in and on which Company conducts its business, manufacturing, and/or operations. L "Person." Any individual, partnership, trust, estate, association, limited liability company, corporation, custodian, nominee, governmental instrumentality or agency, body politic or any other entity in its own or any representative capacity. J. "Personal Property." All personal property the Company or an Affiliate owns or leases located at the Facility, including all (a) machinery and equipment, (b) furniture, furnishings, and fixtures, (c) property that is capitalized for federal or state income tax purposes, (d) all additions to any of the foregoing, and all replacements of any of the foregoing in excess of $100,000. K. "Qualifying Expenditure." All expenditures the Company, an Affiliate, or lessor to the Company or an Affiliate makes for Eligible Property which is subject to Tax in the County and is not subject to an exemption from Tax that the Company uses. L. "State." The State of North Carolina. M. "Subject Property." The property on which Company constructs and/or operates the Orange County Facility. 2054461.2 21896 -200 Page 2 of 12 5 N. "Tax" or "Taxes." Ad valorem property tax levied on real and personal property located in the Count y pursuant to Article 25, Chapter 105 of the North Carolina General Statutes or any successor statute relating to ad valorem property tax the County levies on property. O. "Term" or "Full Term." The duration of this Agreement meaning September , 2013 through and including January 31, 2020. P. "Total Taxable Investment." The taxable value of all Qualifying Expenditures made by Company in and to its Orange County Facility as of January 31, 2020. 2. INDUSTRIAL INVESTMENT AND EMPLOYMENT AGREEMENT A. INVESTMENT 1. The Company anticipates it shall directly invest a Minimum Taxable Investment, in accordance with the investment plan attached as Exhibit B, in addition to 2015 assessments in real and taxable business personal property as described in Exhibit C, on or before January 31, 2018. If the Company does not make the Minimum Taxable Investment by on or before January 31, 2018 (and as may be extended below), the amount of the Grants will be adjusted as provided in Subsection 2A3. 2. The Company shall achieve the Minimum Taxable Investment by January 31, 2018. If total increase of taxable investment falls below the minimum investment levels, due to failure to meet the investment goals set forth in Exhibit B or removal of equipment, as assessed by the Orange County Tax Assessor, the amount of the following annual installment will be reduced by a pro -rata percentage of the shortfall. The baseline for measuring whether the investment goals have been met (i.e. the 2015 tax assessments) shall be adjusted (1) upward, if there is an increase in the assessment of the Company's real property and (2) downward, to reflect the natural decline in the value of the Company's personal property (existing in 2015 and acquired thereafter in the course of the new investment) as measured by the depreciation of such property in accordance with generally accepted accounting principles. B. EMPLOYMENT On or before January 31, 2018, at least 90 persons will be employed in full -time positions at the Mebane Facility ( "Jobs Minimum "). The number of full -time positions shall be evidenced by one or more Quarterly Tax and Wage Reports (Form NCUI 10 1) filed with the N.C. Employment Security Commission. If 80% of the Jobs Minimum is not achieved on or before January 31, 2018 (or as extended as provided below), the amount of the Grants will be adjusted as provided in Section 6. 2. During the first year of operation after commencement of this Agreement, Company and County agree Company shall hire 18 full time employees at its Mebane Facility. During the second year of operation the Company shall hire an additional 67 full time employees at its Mebane Facility. During the third year of operation the Company shall hire at a minimum an additional 5 full time employees at its Mebane Facility. At the expiration of this Agreement, the Company, and its subsidiaries, shall employ, at its 2054461.2 21896 -200 Page 3 of 12 Mebane Facility in Orange County, at least the equivalent of 90 full time employees in accordance with "Exhibit A ". Ninety (90) new full time equivalent employees shall be hired at the Mebane Facility pursuant to the terms of this Agreement. Employees counted toward this total shall include only new employees of the Company employed and located at Company's Mebane Facility in Orange County, provided such employees are employed in Orange County on a full time basis. Employees of the Company will be eligible to participate in Company sponsored health insurance programs. For purposes of this section "90 full time equivalent employees" shall be defined as 90 actively employed individuals and shall not include vacant positions for which the Company is actively or otherwise recruiting. It is understood that vacancies occur and that when such occur the Company will immediately, or as soon as is reasonably possible thereafter, fill said vacancies. The mean wage of the 90 new full time equivalent employees shall be, as of the last day of this Agreement, at the annual rate of thirty-seven thousand nine hundred sixty -nine dollars ($37,969.00). C. DEVELOPMENT GRANT PARTICIPATION: Where applicable, the Company agrees to partner, through the commitment to create new jobs, with Orange County and other applicable agencies to apply for development grants that will improve and/or add water, sewer, road or other necessary infrastructure in order to facilitate the successful completion of this project. The Company agrees to meet with program representatives, and to participate in the grant request process as necessary to secure the required funding. D. GUARANTEED MINIMUM LEVEL OF PERFORMANCE: The Company agrees that its minimum level of performance pursuant to this Agreement shall be as set out in this Section 2. Furthermore, Company agrees that failure to meet the minimum level of new employment as reflected in Section 2B shall entitle the County to reductions in inducement installments paid to the Company in an amount of four hundred fifty dollars ($450.00) per employee not hired as reflected in Exhibit A. Company further agrees that failure to meet the minimum level of direct investment as reflected in Section 2A shall entitle County to pro rata reductions in inducement installments paid to the Company as set out in Section 3. It is agreed and understood by the parties hereto that the failure of the Company to meet the level of performance with respect to minimum level of investment or minimum level of new employment as specified herein shall not be considered a breach of this Agreement. E. STATUTORY COMPLIANCE: The Company understands that the County's participation is contingent upon authority found in North Carolina General Statute 158 -7.1 and other relevant North Carolina General Statutes and that should such statutory authority be withdrawn by the North Carolina General Assembly County may terminate this Agreement without penalty to County and without further compliance with this Agreement. 3. INDUCEMENT PACKAGE A. COUNTY INDUCEMENT GRANT: Subject to Section 2A3 the County, upon execution of this Agreement, shall provide to the Company an inducement to offset Facility development, expansion, and acquisition costs in an amount estimated at One Million Ninety -three Thousand Nine Hundred Fifty Dollars ($1,093,950) payable in five installments of approximately Two Hundred Eighteen Thousand Seven Hundred Ninety Dollars ($218,790) over a five year period. The first installment shall occur on August 1, 2015 upon receipt of proof, as described in 2054461.2 21896 -200 Page 4 of 12 7 Section 5 of this Agreement, that the minimum employment and investment numbers referenced in Section 2 of this Agreement have been met and that all outstanding local property taxes on the real and business personal property owned by the Company and located within Orange County for which a bill for such taxes have been issued to the Company, have been paid. Subsequent annual installments will occur during the month of January for the term of this Agreement with the final installment occurring in January 2019. No installment shall be required to be paid until such time as County receives proof of the payment of all outstanding property taxes and verification of employment and investment levels has been submitted to the County. Subject to Section 3C the final Inducement Grant Amount shall be determined based on the Company's Total Taxable Investment at the time of the final inducement installment and according to the formula in 3B. B. TOTAL COUNTY COMMITMENT: The amount of the Inducement Grant is based on a taxable investment by Company in an amount of Thirty -four Million Dollars ($34,000,000). Should Company make a taxable investment in an amount more than Thirty -four Million Dollars ($34,000,000) County shall adjust the Inducement Grant amount according to the following formula: Amount of investment divided by 100 multiplied by the then current ad valorem tax rate (currently $0.858 per $100 of valuation) multiplied by 0.75 (percentage of inducement) multiplied by five (number of years). Utilizing this formula a taxable investment currently estimated at Thirty-four Million Dollars ($34,000,000) would result in an Inducement Grant in the amount of One Million Ninety -three Thousand Nine Hundred Fifty Dollars ($1,093,950) payable in five installments of Two Hundred Eighteen Thousand Seven Hundred Ninety Dollars ($218,790). In the event the amount of taxable investment increases or decreases, the amount of inducement shall incease or decrease based on the formula specified herein, however the total amount of inducement shall be no more than One Million Five Hundred Forty -Five Thousand Dollars ($1,545,000.000). Further, this example assumes a static taxable investment of Thirty - four Million Dollars ($34,000,000) throughout the five -year term. The formula specified herein shall be applied to the taxable investment annually during the term to determine the actual amount of the five inducement installments. C. MAXIMUM COUNTY COMMITMENT: The Inducement Grant shall not exceed One Million Five Hundred Forty -five Thousand Dollars ($1,545,000.00), the inducement amount based on a Forty -eight Million Dollars ($48,000,000) investment by Company. 4. EXPANSION OPPORTUNITY Participation in this Agreement shall not exclude the Company from consideration for additional inducements from the County either during or upon completion of this Agreement. Future projects shall be considered on a case -by -case basis and induced at the discretion of the County based on new taxable investment and job creation in excess of the minimum levels outlined in Section 2 above. Any such agreement shall require a separate "Performance Agreement' which shall conform to all relevant North Carolina Statutes and/or Orange County Ordinances, Policies or Resolutions, shall be in writing, and shall be mutually agreed upon by the Parties. 5. PROOF AND CERTIFICATION The officials of Parties to this Agreement shall furnish the necessary reports and certificates to verify that each Party's respective goals are met. Once the Company maintains its investment 2054461.2 21896 -200 Page 5 of 12 and employment goals for the term of this Agreement it will no longer need to furnish these reports. Acceptable forms of proof for taxable investment shall be the records of the County Tax Administrator. Acceptable forms of proof of payment of taxes shall be in the form of cancelled checks, and receipts of payment from the County Tax Administrator. Acceptable forms of proof for employment numbers shall be in the form of a notarized statement from a North Carolina licensed Certified Public Accountant and shall be verified by the North Carolina Employment Security Commission. 6. REMEDY A. INDUCEMENT PACKAGE: If the County does not meet and maintain the terms set forth in the inducement package, the Company has the option to the rights set forth in Section 11A of this Agreement upon thirty (30) days written notice to the County. B. DELAY OF INDUCEMENT PACKAGE INITIATION: If the Company believes that it will not meet employment and investment goals that are to be met pursuant to this Agreement by December 31, 2018, the onset of this Agreement may be delayed one (1) year, at the option of the Company. Written notification of a request to delay onset must be received by the County no later than December 31, 2014. In that event this Agreement shall initiate no later than December 31, 2014 and shall expire no later than January 31, 2020. In the event the employment and investment goals are not met due to causes beyond the control of the Company, the period in which such employment and investment goals are to be met shall be tolled by the period of such delay caused by such causes beyond the control of the Company (for purposes of this Section 6B causes beyond the control of the Company are limited to delay in completion of public works construction such as access road, utilities, water and sewer lines). C. INVESTMENT AND EMPLOYMENT PACKAGE: If the Company does not meet and maintain either the investment or employment goals within the annual timetable set forth in this Agreement, and does not opt to delay the onset of this Agreement as described above, then the county will reduce the annual installment payment as set forth in Section 2D of this Agreement until such time as the Company once again meets both the investment and employment goals. Reduction shall be computed based on the percentage of the goal not met. In order to qualify for the full reimbursement, including recovery of any prior reductions, both investment and employment must meet or exceed the minimum standards outlined above prior to the natural termination of this Agreement. 7. SEVERABILITY If any term or provision of this Agreement is held to be illegal, invalid, or unenforceable, the legality, validity, or enforceability of the remaining terms, or provisions of this Agreement shall not be affected thereby; and in lieu of such illegal, invalid or unenforceable term or provision, there shall be added by mutually agreed upon written amendment to this Agreement, a legal, valid, or enforceable term or provision, as similar as possible to the term or provision declared illegal, invalid, or unenforceable. 2054461.2 21896 -200 Page 6 of 12 9 8. COMPLIANCE WITH THE LOCAL GOVERNMENT BUDGET AND FISCAL CONTROL ACT OF NORTH CAROLINA GENERAL STATUTES All appropriations and expenditures pursuant to this Agreement shall be subject to the provisions of the Local Government Budget and Fiscal Control Act of the North Carolina General Statutes for cities and counties and shall be listed in the annual report submitted to the Local Government Commission by the County. 9. GOVERNING LAWS & FORUM This Agreement shall be governed and construed by the Laws of the State of North Carolina. Any action brought to enforce or contest any term or provision of this Agreement shall be brought in the North Carolina General Court of Justice sitting in Orange County, North Carolina. The Parties hereto stipulate to the jurisdiction of said court. 10. INDEMNIFICATION The Company hereby agrees to indemnify, protect and save the County and its officers, directors, and employees harmless from all liability, obligations, losses, claims, damages, actions, suits, proceedings, costs and expenses, including reasonable attorneys' fees, arising out of, connected with, or resulting directly or indirectly from the business, construction, maintenance, or operations of the Company or the Company's Mebane Facility or the transactions contemplated by or relating to this Agreement, including without limitation, the possession, condition, construction or use thereof, insofar as such matters relate to events subject to the control of the Company and not the County. The County hereby agrees to indemnify, protect and save the Company and its officers, directors, and employees harmless from all liability, obligations, losses, claims, damages, actions, suits, proceedings, costs and expenses, including reasonable attorneys' fees, arising out of, connected with, or resulting directly or indirectly from the performance of this Agreement attributable to the negligence or misconduct of the County, its officers or employees. The indemnification arising under this Article shall survive the Agreement's termination. 11. TERMINATION A. COMPANY: Upon Company's meeting its Employment and Investment obligations asset out in Section 2 above and upon Company's certification to such and certification of the payment of all real and personal property taxes, as set out in Section 5 above, then upon the occurrence of any of the following events, the Company shall have the option of terminating this Agreement: Failure of the County, to provide the initial inducement installment as provided in Section 3 of this Agreement; or, under the same circumstances, failure of the County to make future inducement installments, as provided for in Section 3 of this Agreement. Should the Company exercise its option to terminate this Agreement, pursuant to this Section for failure by the County, the Company shall be entitled to retain all funds paid to or for the benefit of the Company pursuant to this Agreement. On the other hand, should the Company terminate this Agreement for any reason other than the default by the County to provide for any inducement installment to the Company, the Company shall repay to the County all funds paid to or for the benefit of the Company pursuant to this Agreement. Thereafter, the County shall have no further obligation to make inducement installments 2054461.2 21896 -200 Page 7 of 12 10 annually or otherwise. Any such termination of this Agreement by the Company shall be in writing and shall meet notice requirements as set out herein. B. COUNTY: The County shall have the option of terminating this Agreement upon any Abandonment of Operations by the Company, without penalty to the County, which option shall be executed by giving written notice to the Company. Abandonment of Operations shall be defined as a period in excess of eight (8) weeks during which the Company's level of Full Time Equivalent Employees or Direct Investment goes below thirty percent (30 %) of the guaranteed minimum levels of performance commitments for either Full Time Equivalent Employees or Direct Investment as reflected in Section 2 above. Notwithstanding the foregoing, if the aforesaid decline in the number of full time equivalent employees or the Company's failure to make the required direct investments is attributable to an overall national economic decline (as such may be recognized by the United States Bureau of Labor Statistics), this shall not be deemed an abandonment of operations entitling the County to terminate this Agreement, and the Company shall not be deemed in default. In such event, the Company's and the County's obligations shall be suspended for one year and resume thereafter. If after one year the aforesaid decline continues the County may declare an Abandonment of Operations and proceed as set forth herein. C. NATURAL: In any event, the above terms notwithstanding, this Agreement shall terminate upon the 31St day of January of the year in which the final financial inducement installment is made. 12. LIMITATION OF COUNTY'S OBLIGATION NO PROVISION OF THIS AGREEMENT SHALL BE CONSTRUED OR INTERPRETED AS CREATING A PLEDGE OF THE FAITH AND CREDIT OF THE COUNTY WITHIN THE MEANING OF ANY CONSTITUTIONAL DEBT LIMITATION. NO PROVISION OF THIS AGREEMENT SHALL BE CONSTRUED OR INTERPRETED AS DELEGATING GOVERNMENTAL POWERS NOR AS A DONATION OR A LENDING OF THE CREDIT OF THE COUNTY WITHIN THE MEANING OF THE STATE CONSTITUTION. THIS AGREEMENT SHALL NOT DIRECTLY OR INDIRECTLY OR CONTINGENTLY OBLIGATE THE COUNTY TO MAKE ANY PAYMENTS BEYOND THOSE APPROPRIATED IN THE COUNTY'S SOLE DISCRETION FOR ANY FISCAL YEAR IN WHICH THIS AGREEMENT SHALL BE IN EFFECT. NO PROVISION OF THIS AGREEMENT SHALL BE CONSTRUED TO PLEDGE OR TO CREATE A LIEN ON ANY CLASS OR SOURCE OF THE COUNTY'S MONEYS, NOR SHALL ANY PROVISION OF THE AGREEMENT RESTRICT TO ANY EXTENT PROHIBITED BY LAW, ANY ACTION OR RIGHT OF ACTION ON THE PART OF ANY FUTURE COUNTY GOVERNING BODY. TO THE EXTENT OF ANY CONFLICT BETWEEN THIS ARTICLE AND ANY OTHER PROVISION OF THIS AGREEMENT, THIS ARTICLE SHALL TAKE PRIORITY. 13. LIABILITY OF PUBLIC OFFICERS No officer, agent or employee of the County or the Company shall be subject to any personal liability or accountability by reason of the execution of this Agreement or any other documents related to the transactions contemplated hereby. Such officers, agents, or 2054461.2 21896 -200 Page 8 of 12 11 employees shall be deemed to execute such documents in their official capacities only, and not in their individual capacities. This Section shall not relieve any such officer, agent or employee from the performance of any official duty provided by law. 14. MISCELLANEOUS A. ENTIRE AGREEMENT: This Agreement, including all exhibits attached, constitutes the entire contract between the parties, and this Agreement shall not be amended except in writing signed by the Parties. B. BINDING EFFECT: Subject to the specific provisions of this Agreement, this Agreement shall be binding upon and inure to the benefit of and be enforceable by the Parties and their respective successors and assigns. C. TIME: Time is of the essence in this Agreement and each and all of its provisions. D. CONSTRUCTION: Nothing in this Agreement shall be construed to the effect that the County has any right to influence the Company's business decisions or to receive business information from the Company (except as expressly provided in Section 2B and Section 5 hereof). 15. NOTICES Any notices pursuant to and/or required by this Agreement shall be in writing and shall be delivered via United States Mail, certified, return receipt requested: If to Orange County; If to Morinaga America Foods, Inc.; County Manager c/o Morinaga America, Inc. 200 S. Cameron Street 18552 MacArthur Blvd., Suite 360 Hillsborough, NC 27278 Irvine, CA 92612 Any addressee may designate additional or different addresses for communications by notice given under this Section to the other Party. 2054461.2 21896 -200 Page 9 of 12 12 AGREEMENT REVIEWED AND ACCEPTED BY: Date Masao Hoshino President Morinaga America Foods, Inc. Barry Jacobs Chair Orange County Commissioners Attest: Date Date Attest: Donna Baker Date Clerk to the Board Orange County Commissioners This instrument has been pre- audited in the manner required by the Local Government Budget and Fiscal Control Act. Finance Director Approved as to form and legal sufficiency. Office of the County Attorney 2054461.2 21896 -200 Page 10 of 12 13 "Exhibit A" December 31 Baseline Employees New Employees Total Employees 2014 0 18 18 2015 67 85 2016 5 90 2017 2018 Total at Natural Termination of Agreement 90 90 2054461.2 21896 -200 Page 11 of 12 Comparison Details Title pdfDocs compareDocs Comparison Results Date & Time 9/11/2013 4:03:32 PM Comparison Time 1.70 seconds compareDocs version v3.4.7.15 Comparison Statistics Name Insertions Sources Deletions Original Document [ #2038152] [v1] MORINAGA AMERICA - Performance Agreement (Orange Moves County).docDMS Information Modified Document [ #2038152] [v2] MORINAGA AMERICA - ( County) Performance Agreement (Orange Formatting County).docDMS information Comparison Statistics Name Insertions 21 Deletions 11 42 0 74 Changes Moves TOTAL CHANGES Merged cells Include Headers / Footers Formatting Color only. Changed lines Mark left border. Comments color ByAuthorcolor options] Balloons False Show Track Changes Toolbar Word 14 Word Rendering Set Markup Options Name Standard Insertions Moves / Meves Inserted cells Always Deleted cells Word Word Track Changes False Merged cells Include Headers / Footers Formatting Color only. Changed lines Mark left border. Comments color ByAuthorcolor options] Balloons False compareDocs Settings Used Category Option Selected Open Comparison Report after Saving General Always Report Type Word Word Track Changes False Character Level Include Headers / Footers Word True Include Footnotes/ Endnotes Include List Numbers Include Tables Include Field Codes Word Word Word Word True True True True Include Moves Word False Show Track Changes Toolbar Word True Show Reviewing Pane Word True Update Automatic Links at Open Word False Summary Report Word End Include Change Detail Report Word Separate Document View Word Print Remove Personal Information Word False Exhibit B 15 unit: USD Year 2014 2015 2016 2017 2018 Total Land 1,000,000 1,000,000 Building 16,000,000 16,000,000 Equipment 15,000,000 3,000,000 18,000,000 Total 32,000,000 0 0 3,000,000 35,000,000 16 Exhibit C No Property Y2014 Y2015 Y2018 1 Land 1 2 Glucose Syrup Tank 4 3 Glucose Syrup Pump 1 4 Primary Vegetable Oil Tank 2 5 Primary Vegetable Oil Pump 1 6 Sugar Silo 3 7 Vacuum Cooker 8 8 Kneader 8 9 Open Cooker 1 10 Fondant Plant 1 11 Cooling Plate 24 12 Batch Roll, Sizing, Forming 4 4 13 Cut &Wrapping Machine 4 4 14 Computer Scale 1 1 15 IBagger I I 1 I 1 17 RES- 2013 -078 Attachment 2 ORANGE COUNTY BOARD OF COMMISSIONERS RESOLUTION AUTHORIZING A PERFORMANCE -BASED INDUCEMENT GRANT BETWEEN ORANGE COUNTY & MORINAGA AMERICA FOODS, INC. WHEREAS, North Carolina General Statute 158 -7.1 authorizes a county to undertake an economic development project by extending assistance to a company in order to cause the company to locate or expand its operations within the county; and WHEREAS, the Board of Commissioners of Orange County has held a public hearing to consider whether to participate in an economic development project with Morinaga America Foods, Inc., and the County has offered to the Company an inducement package as hereinafter set forth; and WHEREAS, Morinaga America Foods, Inc. will construct a facility of approximately 98,000 sq. ft. for the manufacture of the Hi -Chew candy, making an investment of at least $34 million and creating at least 90 new, permanent jobs in Orange County, and WHEREAS, this economic development project will stimulate, diversify and stabilize the local economy, promote business in the County, and result in the creation of a substantial number of jobs in the County, and WHEREAS, but for the offer of an inducement package the Company would not be locating its manufacturing facility within Orange County, and WHEREAS, the Company has agreed to meet and continue meeting the minimum investment and employment requirements as hereinafter set forth, and WHEREAS, the State of North Carolina and the City of Mebane, North Carolina have offered separate inducement packages to the Company; liK THE BOARD OF COMMISSIONERS OF ORANGE COUNTY THEREFORE RESOLVES THAT: 1. The County is authorized to expend a maximum of up to $1,545,000 of county funds for the Morinaga America Foods, Inc. project. 2. The attached Performance Agreement between the County and Morinaga America Foods, Inc. is approved. 3. The Chairman of the Board of Commissioners is authorized to execute the contract and any other documents necessary to the project on behalf of the County. Adopted this the 15th day of October, 2013 Signed: Barry Jacobs, Chair Orange County Board of Commissioners Attest: Donna Baker, Clerk Orange County Board of Commissioners Attachment #3 19 PUBLICATION INSTRUCTION: Please publish the following notice in the Special Notice Section of the Classified Advertisements on Wednesday, October 2, 2013. The County Seal should be placed above the announcement. �t �J PUBLIC HEARING Tuesday, October 15, 2013 SOUTHERN HUMAN SERVICES CENTER 2501 Homestead Road Chapel Hill, NC 27516 Notice of Public Hearing Pursuant to North Carolina General Statute 158 -7.1 (d) on the issuance of economic development incentives to a private company — The Orange County Board of Commissioners will hold a public hearing on the County's proposed conveyance of a "performance- based" economic development incentive to a private company, as required by the Local Government Act, North Carolina General Statute 158 -7.1 (d). The County Board of Commissioners intends, subject to public comment at the public hearing for which notice is hereby given, to approve conveyance of the incentive agreement, with claw back provisions, for the recruitment of Morinaga America Foods, Inc. to Orange County, N.C. The Inducement Grant is for a period of 5 years, and shall not exceed $1,545,000 which is the inducement amount based on a $48,000,000 investment by the Company. Funding for the incentive will come from fund balances on hand, and projected ad valorum taxes paid by the Company. The Company proposes to invest at least $34 million in a new production facility, and create at least 90 new jobs. The hearing will begin at 7:00 PM on Tuesday, October 15, 2013, and will be held at Southern Human Services Center, 2501 Homestead Road, Chapel Hill. Further information can be obtained by contacting Donna Baker at (919) 245 -2130. In compliance with the Americans with Disabilities Act, individuals needing special accommodations (including auxiliary communicative aids and services) during the hearing should notify Donna Baker at (919) 245 -2130 at least three days prior to the hearing that will be attended. 20 Attachment #4 e• °� o MORINAGA & CO., LTD. AWRINAGA Summary of Orange County's Recruitment of Morinaga America Foods, Inc. Presentation to the Orange County Board of Commissioners Public Hearing on an Economic Development Incentive October 15, 2013 Highlights: • Summarizes Orange County's successful recruitment of the world -class Japanese confectionary & candy maker, Morinaga & Co., Ltd., and its' USA subsidiary Morinaga America, Inc. which has selected a light manufacturing site in the Buckhorn Economic Development District for the firm's first American manufacturing operation. • Outlines the company's plans to produce their "Hi- Chew" candy product, invest $48 million in a new, construct a state -of- the -art 120,000 sq. ft. clean USDA -spec manufacturing facility, and create 90 - 120 new career opportunities with competitive salaries, health and retirement benefits for our residents. • Describes the extensive efforts made by Orange County, the City of Mebane, the State of North Carolina, and other key players, following 11 separate visits by the company and its consultant to Orange County over the previous 19 months, and how we eventually won "Project Rainbow" throughout a highly competitive, multi -state site selection process. • Identifies the specific site location, the required infrastructure to the property, the financial obligations and funding resources to fully develop the site, and local and state incentives. • Notes the transformative effect regarding the County's successful recruitment of Morinaga America Foods, Inc. and how that success story illustrates Orange County's efforts to diversify our local economy and tax base, and create more and better jobs for our residents. Shows how the Board of County Commissioners' commitment to preparing our Economic Development Zones with utilities, zoning, incentives, and thoughtful use of the quarter cent sales tax for economic development, has proven to be a winning formula for the long term. And, highlights the public's commitment to economic development via its favorable vote on the quarter cent sales tax. Company Description: • Morinaga & Co., which was founded 114 years ago in 1899 in Tokyo, Japan, is a major international confectionary & candy maker. With $1.75 billion in global sales revenue, comprised of 53% in chocolates, caramel & biscuits, 19% in ice cream & frozen foodstuffs, 16% in health products, and 12% in cocoa /cake mix foodstuffs, the firm is Asia's equivalent to a Hershey's, Mars or Nestle. 21 Attachment #4 • In Japan, which is the world's #2 overall largest candy and confectionary market (behind the USA), the Company has over 40 different product lines, where it holds the #1 Japanese domestic market -share for candy. Morinaga ranks similar to Kellogg Company in terms of retail sales. • Among Japan's top 3 competing confectionary makers, Morinaga ranks #1 for candy & caramel products, #2 for biscuits, and #3 for chocolate products. The chewy fruit flavored snack that holds the #1 spot within Japan, and which the company will produce here in Orange County, is called "HI- CHEW ". • Morinaga is aggressively marketing HI -CHEW across the United States and has successful store displays at Target, COSTCO, 7 Eleven, and Kroger, and is found locally at the Streets at South Point Mall ( "It's Sugar ", "World Market "). • Additional product lines include frozen desserts (19 %), foodstuffs (10 %), and the internationally - renowned Weider -brand health care products such as energy drinks, nutritional vitamin /mineral supplements & protein bars, & collagen -based beauty products (16% of sales). • Morinaga America, Inc., led by Mr. Masao Hoshino, was established in Los Angeles in 2008 for the purpose of introducing the company's various product lines, starting with HI -CHEW. • Overseas partners include serving as the trademark distributor, licensee or supplier for world -class confectionary companies such as Disney Japan, SUNKIST Growers, PEZ, Perfetti van Melle (Italy), Storck (Germany), Dare Foods (Canada) and Barry Callebaut AG (Switzerland). • Management's corporate philanthropy strives to be a "company that improves the lives of children worldwide". The firm partners with international NGOs in developing nations, and places a special emphasis promoting healthy nutrition, and funding for school facilities and educational supplies, especially among West African countries. • First Japanese corporation to be affiliated with the World Cocoa Foundation (WCF), which was established with the objective to foster a sustainable cocoa industry, and prevent the use of child labor in developing nations. This is achieved through the environmental protection of regions where major global chocolate corporations cultivate cocoa, and through economic and social development. Technical guidance and training support is provided to cocoa farmers through various programs that protect the natural and social environment. Competition & Initial Site Search: In early 2012, Morinaga and Portland, OR -based site selection consultant /engineering firm InSpec Group began a multi -state site search to identify a "Hi- Chew" manufacturing location. Competition for "Project Rainbow" included the following communities: • Portland, OR • Ontario, Canada • Philadelphia, PA • Richmond, VA • Atlanta, GA • North Carolina (18 total sites in 12 counties) 22 Attachment #4 Chronology of Events: The State of North Carolina's "Project Rainbow" made a total of 11 site selection visits to Orange County over the previous 19 months, prior to Morinaga's September 3rd, 2013 public announcement to select our community. • February 1, 2012 • April 5 — 6, 2012 • May 18, 2012 • July 11— 16, 2012 • August 22, 2012 • August 27, 2012 • January 11, 2013 • January 24, 2013 • January 31, 2013 • March 19 — 21, 2013 • April 14 — 15, 2013 • June 11, 2013 • July 1, 2013 • July 10 — 12, 2013 • July 20, 2013 • August 30, 2013 • September 3, 2013 • September 17, 2013 • October 7, 2013 • October 15, 2013 N.C. Department of Commerce first contacted Orange County regarding a site search called "Project Rainbow" for an unidentified company. First visit to see sites in NC & Orange County by Morinaga America & the firm's Portland, OR -based site selection consultant, InSpec Group. Morinaga America & consultant returned to see NC and Orange County sites. Morinaga America & consultant returned to Orange County. Consultant returned to Orange County. No other NC sites were visited. BOCC first met in closed session to discuss a potential incentive. Morinaga & Co.'s senior staff from Japan, Managing Director Toru Arai & Senior Managing Director Osamu Noda, travelled from Tokyo to see the two finalist sites in Orange County and Atlanta, and met with Governor McCrory & North Carolina Department of Commerce Secretary Sharon Decker. BOCC received a second closed session briefing on the project. Orange County was notified it had emerged as one of 2 finalist locations, along with a competing site near Atlanta. Morinaga America's President from Los Angeles, Masao Hoshino, visited & met with BOCC in closed session; Orange County's proposed incentive was discussed and tentatively approved. Consultant returned. Consultant returned. Mr. Toru Arai, who first visited Orange County in January 2013, was promoted to the position of President of Morinaga & Co., Ltd. in Japan. Chairman Gota Morinaga visited NC and Orange County to review our site and meet with the Governor. Morinaga & consultant returned to view additional acreage. Morinaga & consultant returned to observe the site survey. Official public announcement of Morinaga's decision to select Orange County. Consultant visit to discuss site infrastructure development. Masao Hoshino (President of Morinaga America, Inc.) & Keita Morinaga (son of Chairman Gota Morinaga, and head of the firm's New York office) attended the Public Hearing in Mebane. Masao Hoshino and Keita Morinaga attended the Orange County Public Hearing. Morinaga's Planned Investment in Orange County: On September 3, 2013 the company announced its' tentative decision to invest in Orange County, as follows: • Capital Investment: • Employment: • Average Salary: • Annual Payroll, w/ benefits: • Facility Size & Type: $34 - $48 million (over 5 years) 90 - 120 jobs $37,969 $3.4 million 98,000 sq. ft. 3 23 Attachment #4 • Type of Operation: Production of fruit flavored candy snack "Hi- Chew" • Site Size: 21.00 acres (Buckhorn Economic Development District) Although the Company has not committed to making any additional investment at this time, the property is large enough to accommodate an idential sized expansion. Company comments also support this long -term growth outlook for the Orange County site. Site Location - Buckhorn Economic Development District: • The 21.00 acre tract is part of the "W. H. Wilson Family Investment Group LLC" property, Orange County PIN # 9824459890. Located adjacent to Ben Wilson Road, south of and facing Interstate 1- 40/1 -85, and near the Orange /Alamance county line in the City of Mebane. Site is part of a cleared 57 -acre field facing the highway, and opposite the Armacell facility and Tanger Mall. • Site is located within the County's "Buckhorn Economic Development District" and was rezoned by the BOCC in 2012 to 0/1 (Office /Institutional) to promote business recruitment. Site is currently undeveloped without infrastructure. The owner is in the process of applying to the City of Mebane to have this property annexed and rezoned by the end of 2013. • The utility infrastructure and road access improvements required to the make Orange County's site competitive to attract Project Rainbow will also make adjacent properties in the Buckhorn Economic Development District more developable, attractive and competitive to appeal to future business prospects. In comparison, Morinaga's other finalist location, near Atlanta, offered the company a lower- priced and established business park with all required infrastructure and tenants already in place, thereby giving the company a greater comfort level as it evaluated advantages (incentives, business costs, logistics, etc.) between that location and Orange County's largely undeveloped site. Necessary Infrastructure Improvements to the Site: The N. C. Department of Commerce has pre - qualified Orange County and Morinaga America Foods, Inc. as eligible co- applicants to receive a grant up to $750,000 from the State of North Carolina's "Community Development Block Grant" (CDBG) industrial program. This State grant will reimburse the County for 75% of the required water & sewer extension costs, and the preliminary engineering for the access road to the site, with Orange County providing a required 25% local match for the remaining cost. The estimated total cost to extend water and sewer to the site, and design the road improvement may be approximately $700,000, but the County's portion will be only 25% of that amount with the CDBG's reimbursement assistance. • One of the criteria specific to the CDBG program is that among the total number of jobs Morinaga commits to create in the first 3 years, at least 60% of those 90 —120 total jobs must directly relate to persons who are qualified as coming from low or moderate incomes, prior to coming to work for the company. This population is typically a County resident who is either unemployed or underemployed, and who has an income level at, or below 80% of the County's median income. This is the same criteria as used by the County's affordable housing department to qualify low and moderate income residents for Section 8 housing vouchers. Morinaga's projected average salary of $37,969 will meet this requirement. 4 I Attachment #4 • The cost to extend a 12" water line a distance of 3,700 linear feet to the site is estimated at $375,000 and the cost to extend a 10" sewer line a distance of 1,500 linear feet to the site is estimated at $200,000. Estimated design and construction time is 12 months. Also, the cost to design the 2,500 foot access road, (which NCDOT has agreed to build), may cost at least $100,000. • In addition to the State's CDBG funding to reimburse Orange County for 75% of total utility and road improvements to the site, the County's "Article 46" % cent sales tax proceeds are also available, if needed. Orange County intends to contract with the firm Martin - McGill for design, engineering and environmental consulting work related to site infrastructure improvements, and for CDBG grant management services. • PSNC Energy will need to extend a natural gas line from the existing 4' line along Ben Wilson Road to the site. The cost for this line extension will be paid entirely by PSNC Energy, and at no cost to Orange County or the company. • Duke Energy will deliver all electrical power to the property, to include installing transformers and underground power lines at the site, and at no cost to Orange County or the company. • N. C. Department of Transportation has committed to extend the existing Ben Wilson service road adjacent along the highway and up to Morinaga's site, The $500,000 cost to build the 2,500 foot access road will be fully paid by the State of North Carolina and NCDOT. There is no cost to Orange County or the company. NCDOT has verbally committed to funding the access road from a combination of several State resources. Estimated design and construction time is 12 months. In future years, NCDOT anticipates a further extension of this new service road eastward toward Mattress Factory Road, which could favorably influence the State's "Transportation Improvement Plan" (TIP) prioritization to eventually make Mattress Factory Road a full interchange. This needed interchange would serve to improve traffic flow for existing and future truck and employee vehicles throughout the Buckhorn Economic Development District. Summary of Local & State Financial Incentives: • The Orange County Board of County Commissioners first met in closed session on August 27, 2012 and discussed the recommended "performance- based" grant to encourage the company's eventual selection of Orange County. • The BOCC met a second time in closed session on January 24, 2013 to discuss the project, and met a third time on March 19, 2013 (during the visit and presentation by Morinaga America's President Masao Hoshino) and voted to tentatively approve the proposed County incentive offer. The Orange County performance -based incentive is calculated as follows: up to 75% of the taxable value of the project's $48.0 million capital investment, for as long as 5 years. This recommended grant will make possible a competitive Orange County incentive of approximately $308,000 annually for 5 years, or, approximately $1.5 million total. The County's performance grant would include a "claw- back" provision in the contract with the company to ensure that the firm's annual target for capital investment and jobs creation is first verified before any County incentive would be provided over the initial 5 -year term. The Company will also be required to provide health insurance for its employees during the incentive period, just as required by the State's incentive grant. This information was outlined in the County's commitment letter, dated March 19, 2013 from Orange County Manager Frank Clifton. Orange County will hold a public hearing for the proposed incentive to Morinaga as early as October 15, 2013. 5 25 Attachment #4 • The City of Mebane, which will annex and rezone the proposed site at the landowner's request, has tentatively approved a supplemental local incentive package to the company (specific $ amount to be determined) of the project's $48 million capital investment. The City of Mebane held a public hearing on October 7, 2013 for its proposed incentive to Morinaga. The State of North Carolina has offered the company a $264,000 grant from the "One N. C. Fund" discretionary grant program. This State incentive has a required matching fund requirement from Orange County and the City of Mebane. Refer to the attached commitment letter, dated January 4, 2013 from the North Carolina Department of Commerce's Deputy Secretary Dale Carroll. Also, NCDOT has committed to provide approximately $500,000 to build a 2,500 foot road access improvement by extending the current Ben Wilson service road parallel to the interstate up to the Company's 21 -acre site. Technical training valued at $150,000 or higher, for the new employees, will be provided by the Hillsborough campus of the N. C. Community College System's Durham Technical Community College. • And finally, pre- screening of job applicants will be provided by the State's Division of Employment Security office in Chapel Hill office, to help identify Orange County residents who wish to gain employment with this company. Summary of Key Financial Incentives: State of North Carolina • "One NC Fund" Grant $264,000 • Durham Technical Comm. College training $150,000 • NCDOT Extension of Ben Wilson Road $500,000 $914,000 • Community Development Block Grant $750,000 (maximum grant cap requested by the County) (75% reimbursement of Orange County's total initial cost to extend water and sewer to site) Orange County • Performance Grant $34 million initial investment: $218,790 annual grant x 5 years = $1,093,950 total $48 million potential investment: $308,000 annual grant X 5 years = $1,545,000 total Community Development Block Grant $ to be determined (up to $250,000) (25% co -pay of Orange County's total initial cost to extend water and sewer to site, & road design) City of Mebane • Performance Grant $ to be determined (1.5% of the Company's capital investment) Recommendation to the BOCC: Local and state government has the goal to promote economic development by encouraging the location of new businesses and the expansion of existing businesses. This activity serves to diversify the tax base, increase employment opportunities, and introduce new technologies and job skills to a community and for the benefit of its residents. The Local Government Act, North Carolina General Statute 158 -7.1 outlines the requirements of public hearings, and the public hearing has been scheduled in compliance. Attachment #4 The Manager recommends that the Board: I 1. Receive the proposal to consider the issuance of incentives to a private company for the recruitment of Morinaga America Foods, Inc. to Orange County, and to consider approval of a "performance- based" economic development incentive agreement with claw back provisions. 2. Conduct the Public Hearing and accept public and BOCC comments. 3. Close the Public Hearing. 4. Approve the "Performance- Based" economic development incentive agreement between Orange County and the Company, and authorize the Chair to sign the agreement on behalf of the County. All incentives from the County will come from the County property tax revenues that Morinaga generates after it is in operation, supplemented by proceeds from the % cent sales tax. Partners in the Successful Recruitment Process: Key Participants: • State of North Carolina (Governor McCrory & Secretary of Commerce Sharon Decker) • North Carolina Department of Commerce (Business /Industry Development Division & Commerce Finance Division) • Orange County (Board of County Commissioners, Manager's Office, Economic Development, Planning & Inspections, Legal, Financial Services, Visitor's Bureau, Public Affairs) • City of Mebane (Mayor, City Council & City Manager's office) • Durham Technical Community College (Hillsborough campus) • North Carolina Community Colleges System • North Carolina Department of Transportation • InSpec Group (Site selection consultant from Portland, OR) Other Participants: • University of North Carolina at Chapel Hill (Chancellor's Office; Office for Innovation & Entrepreneurship) • Progress Duke Energy • PSNC Energy • Research Triangle Regional Partnership • Land owner Chronology of Morinaga & Co.. Ltd. : 1899: Taichiro Morinaga returns from San Francisco and establishes a candy and confectionery company with partner Hanzaburo Matsuzaki, becoming the first to introduce Western -style snacks to Japan. 1914: After years of research, Morinaga launches a caramel candy, Hi -Chew, designed to appeal to the Japanese market. 1917: Morinaga establishes a dairy operation in Japan. 1918: Morinaga becomes the first company to market chocolate bars in Japan. 7 27 Attachment #4 1920: The Company begins production of powdered baby formula. 1925: The Company installs machinery and begins mass production of candies and confectionery. 1949: The dairy operation is spun off as a separate company, Morinaga Dairy Industries. 1956: Morinaga begins production of ice cream. 1964: The Company has a new hit product with the launch of Hi -Crown Chocolate. 1983: The Company launches a nutritional foods division and begins a product development and marketing agreement with Weider, of the United States. 1995: The highly popular Weider in Jelly product line is launched. 2000: The Company launches a new corporate "power brand" strategy focusing on core brands and product lines. 2004: A new manufacturing facility is completed in Shanghai in order to supply the market in China. 2013: The Company selects a site in Orange County, NC to produce "Hi- Chew" candy, marking its' first major investment in the United States. Company History: Established in 1899 by Taichiro Morinaga, who had a pioneer spirit and the dream of "offering nutritious and good- tasting confectionery to Japanese children," Morinaga & Co. Ltd. was the first Western -style confectionery manufacturer in Japan. During the past 114 years, Morinaga has carried out its corporate operations guided by the vision, "We Offer Good Health with Delight & Taste." One of Japan's leading candy and confectionery manufacturers, Morinaga & Co. Ltd. is also credited with introducing Western -style treats to Japan at the dawn of the 20th century. After more than 114 years, Morinaga has remained at the top of the Japanese candy industry, producing a strong line of candies, chocolates, frozen desserts and snacks, and nutritional products. Entering the new century, Morinaga has developed a new "power brand" strategy emphasizing its core product lines, which include Milk Cocoa, Hotcake Mix, Amazake drinks, frozen desserts, and Weider in Jelly, a line of drinkable, gelatin -like drinks marketed under license from the United States' Weider Nutrition International Inc. The company also produces a number of other licensed candy products, including Pez and Werther's Original. Morinaga operates five manufacturing facilities in the Tokyo region; the company also has a manufacturing subsidiary in Taiwan and built a new plant in Shanghai, China. The company also operates sales subsidiaries in Europe and North America, and sells its products in more than 26 countries. Listed on the Tokyo Stock Exchange, Morinaga is led by Gota Morinaga, grandson of the company's founder. Born in Kyushu, in the north of Japan, in 1863, founder Taichiro Morinaga went to work for his uncle, a potter, in exchange for room and board after his father's death when Morinaga was just seven. Morinaga, who had no formal education, became the bookkeeper of the pottery business, and then, at the age of 18, was sent to Tokyo as the company's sales representative. Morinaga later went to work for a wholesale company, rising to become manager of a branch office in Yokohama. Yet, after extending too much credit to customers, the office went into debt. In order to repay his employer, Morinaga decided to try his luck in California. Taichiro Morinaga moved to San Francisco in 1887 and opened a hardware store, trading in high - quality, high - priced goods - -in a working class neighborhood. The business, which suffered equally from the pervasive anti - Oriental sentiment of the era, soon failed and forced Morinaga to look elsewhere for a livelihood. Yet Morinaga's stay in the United States led him to an important discovery: candy. Japan had remained closed to outside influences for more than 250 years, finally opening its borders to foreigners only in the late 19th century. If the country's elite class had access to sweets -- typically based on boiled beans - -the majority of the population I-] I Attachment #4 had limited access to confectionery products, and sugar consumption in general remained low. Milk and milk products were also absent from the Japanese diet. The opening of the country's borders stimulated interest in all things foreign, and the country's growing foreign population encouraged the import of Western -style confectionery and candy. Taichiro Morinaga recognized that the growing foreign influence in Japan, and the country's readiness to adopt attributes of Western culture, would inevitably extend to the country's eating habits. Morinaga became determined to learn the art of candy making, in order to introduce new confectionery products to the Japanese market. Despite the anti -Asian prejudice, Morinaga found a job as a janitor at a candy factory, and there learned how to make candy. By the end of the century, Morinaga was ready to return to Japan and start his own candy company. Before leaving, Morinaga performed his own bit of market research, questioning members of San Francisco's Japanese community and other Japanese visitors to the city on their candy preferences. Morinaga discovered that the sweet most preferred by the people he questioned was marshmallows, at the time also known as "angel food." The fluffy, egg white - and - sugar -based candy also resembled existing Japanese confections, making it a natural first product. Morinaga founded his business with partner Hanzaburo Matsuzaki in 1899, opening a small shop in the Akasaka neighborhood of Tokyo. The business, called Morinaga Western Candy Confectionery, developed quickly as the country eagerly greeted the new candy type. Morinaga himself acted as salesman, pushing a cart from which he sold marshmallows, and other Western - styled cakes and candies. Among these were caramels. This product represented even more of a novelty in Japan in that it contained butter - -at a time when dairy products still had not penetrated the Japanese diet. Morinaga's caramel sales were at first limited to his foreign customers, as the Japanese shied away from the strange product. In addition, the country's climate made it difficult to produce - -and to eat -- caramel, which tended to melt and become too sticky to hold in the heat and humidity. Morinaga set out to develop a new caramel recipe for the Japanese market, and by 1914 had perfected a recipe that both appealed to the Japanese palate and also offered a longer shelf life. The new product debuted in 1914, and was packaged in a pocket -sized yellow box. Known as Hi -Chew, the product became a company flagship and one of its core products into the next century. In the meantime, the company's strong marshmallow sales inspired the adoption of a logo, an angel, in 1905 - -the angel logo also fit in with Morinaga's work as a missionary. The company adopted the name Morinaga Confectionery Inc. in 1912. The success of Hi -Chew led Morinaga to seek its own source of dairy products, and in 1917 the company set up a dairy operation, which became Morinaga Dairy Industries. A year later, the company launched a new candy line, becoming the first to introduce the chocolate bar to Japan. Meanwhile, the company began extending its dairy product line, launching its first powdered baby formula in 1920. That launch marked the start of the company's involvement in the nutritional products category as well. By the 1920s, Morinaga's sales had been growing steadily. To meet the rising demand, the company installed its first production machinery -- previously, production had been by hand - -and launched mass production in 1925. Over the next decades, the company continued to add to its production capacity, opening four more plants, and adopting increasingly sophisticated, modernized production techniques. By the 1980s, the company manufacturing operations had become fully automated. Q7 I.' Attachment #4 In the meantime, the company continued developing new product lines. Among these were baby biscuits, called Morinaga Manna, which the company began producing in 1930. In 1935, Hanzaburo Matsuzaki became company president. The company took a leaf from its Western counterparts in the 1930s, promoting holidays - -such as Mother's Day starting in 1937 - -as a means of stimulating candy and confectionery sales. During World War II, Morinaga turned part of its resources toward the production of penicillin, saving a good number of lives. Following the war, the company, now led by Taihei Morinaga, decided to split up its operations, separating its dairy business into a separate company, which became known as Morinaga Dairy Industries in 1949. That company then developed into one of Japan's major dairy groups. The two companies nonetheless remained closely linked, sharing the angel logo and developing common products and marketing campaigns. The 1950s saw new expansion for the company. In 1954, its production capacity expanded with a new band oven - -the first to be brought into Japan. Two years later, Morinaga extended its dessert offerings with the production of ice cream, which quickly developed into one of the company's key product lines. Another strong seller for the company came in 1957, when it introduced its popular Hotcake Mix. That line also became one of Morinaga's flagship brands. Attempts to introduce Valentine's Day celebrations - -and linking that holiday with chocolate - -had been made since the 1930s by various Japanese companies. At the beginning of the 1960s, however, Morinaga at last succeeded, launching a "Chocolate for St. Valentine's Day" marketing campaign. The company had other hit products during the decade, such as Hi -Crown Chocolate, launched in 1964, and a new soft, milk -based caramel, Hi Soft, launched in 1969. At the beginning of the 1970s, the company added a new line of Twiggy chocolates as well. Morinaga's sales continued to rise during the 1980's, nearing the equivalent of $1 billion by the end of the decade. The company by then had opened its fifth manufacturing facility and had continued to extend its product range, launching, for example, its brand of Ottoto crackers. The company also had expanded beyond candies and confectionery to some extent, adding production of alcoholic beverages. That business, operated under the name of Fukutokucho, produced primarily sake and shochu. Closer to the group's core was its drive into the health and nutritional foods market. The company's entry into the sector began in the early 1980s, and a 1983 licensing agreement with the United States' Weider Nutrition International to develop and market Weider- branded products for the Japanese market. The company also entered the soft drinks market, launching a rice -based health drink, Amazake, which became one of its key brands. Tofu represented another fast - growing nutritional product for the company, and formed a strong part of the group's international growth. By the end of the 1980s, the company had entered some 32 countries, backed by sales and marketing subsidiaries in the United States and The Netherlands. Morinaga's product development continued through the 1990s. Among the most successful company products launched during the decade were its Sold Dazen chocolates, introduced in 1993. The following year marked the debut of a new product line, developed under Morinaga's partnership with Weider. The new snack, called Weider in Jelly, was the first in a range of drinkable, jelly -like snacks touted by the company as nutritional foods. The Weider line, fully launched in 1995, was credited with creating an entirely new product category. The first variations included Weider Energy In, which claimed to provide a sustained, quick energy boost; and Weider Vitamin In, which claimed to provide a full spectrum of vitamins provided by a balanced meal. Targeting a young male market, the Weider line grew steadily into the next decade, and by 2002 represented nearly 20 percent of the company's total sales. The sustained Japanese recession into the 2000s slowed the confectionery market as well. In response, Morinaga, now led by Gota Morinaga, developed a new "Power Brand" strategy for the new century, with a focus on a 10 30 Attachment #4 limited range of key brands. As part of that effort, the company sold off its liquor operation in 2000. The company then began stepping up development of new products, to be launched under its array of "power" brands- - including Milk Cocoa, Weider in Jelly, Hotcake Mix, and Amazake. Meanwhile, the company continued to manufacture and market a number of products under license, such as the popular Pez candies and, since 2002, European favorite Werther's Original. The company also had begun to look beyond the Japanese market, which remained its chief source of revenues. At the beginning of the 21st century, Morinaga established a manufacturing subsidiary in Taiwan, in an attempt to conquer a share of the island's market. Morinaga also targeted Hong Kong for sales. Yet its main interest lay in the huge potential of the Chinese mainland, with its consumer market of more than 1.3 billion people. The company launched construction of a manufacturing facility in Shanghai, which became operational by the end of 2004. In September 2013, the 114 -year old Company established Morinaga America Foods, Inc. as a new North Carolina - based facility to produce Hi -Chew candy. The new company, located in Mebane, Orange County, NC is a wholly - owned subsidiary of Morinaga & Co., Ltd. of Tokyo, Japan. Updated: 9/30/2013 Steve Brantley Director, Orange County Economic Development 11 Presented to :ounty Board of County Commissioners October 15, 2013 114 -yr old company; founded in 1899. HQ in Tokyo, Japan. American subsidiary based in Irvine, CA. World -class confectionary & candy maker with nearly $2 billion in annual global sales. Has over 40 product lines. Asia's equivalent to a Hershey's, Mars or Nestle; & ranks equal to Kellogg Company in sales. 11 candy company in Japan. Japan is the world's 2nd largest confectionery market. y MORINAGA Corporate philanthropy: "to be a company that improves the lives of children worldwide." Partners with international NGOs in developing nations, places a special emphasis to promote healthy nutrition, & donates funding for school facilities & educational supplies in Africa. 1st Japanese corporation to be affiliated with the World Cocoa Foundation (WCF); works to prevent use of child labor in developing nations. 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"v- rxr rwnw ru'+�� — Col Morinaga America, Inc. first began marketing its #1 fruit chewable "Hi- Chew" candy on the West Coast & is now expanding throughout the USA. Bur#on'r. STORCK RE7 �a Chups (Shanghai i Zhej iang) h F[�a rye unld��.Weider' Marinaga Southeast Asia Office Si n ga pare) (Ca lifornia Ar w Bag & Stick Varieties *04 r o/p E .r m GN Over 140 Different Flavors Project began in February 2012. Competition included Toronto, Portland OR, Philadelphia PA, Richmond VA, Atlanta GA, & 18 sites in 12 N.C. counties. 11 total visits to Orange County (including visits by Chairman Gota Morinaga & President -elect Toru Arai). Interstate visible site became a criteria during 3rd visit. 3 closed session meetings with the BOCC. 2 meetings in 2013, with Governor McCrory & Secretary Sharon Decker of the N.C. Department of Commerce. January 2013 - Orange County became 1 of 2 finalist sites. September 3, 2013 - Official public announcement by Morinaga to select Orange County. Orange County • Board of County Commissioners • Manager's Office • Economic Development, Planning & Inspections • Visitors Bureau, Public Affairs City of Mebane NC Department of Commerce NC Department of Transportation OF Lmp - -t_ Chartered in 1881 Durham Technical Community College InSpec Group Durham Technical o m m u n ter College �_ In Pec croup '*<�'b (C ave NORTH CAROLINA DEPARTMENT OF COMMERCE Capital Investment: $34 - $48 million Employment: 90 - 120 jobs Average Salary: $37,969 Annual Payroll: $3.4 million + Benefits Facility Size & Type: 98,000 sq. ft. Type of Operation: Production of "Hi- Chew" Site Size: 21 Acres (Buckhorn EDD) The Company has not committed to making any additional investment at this time. However, an expansion of equal size may eventually occur, since the site acreage is large enough to allow for the facility to double. Buckhorn Economic Development District, site is near Ben Wilson Road &facing interstate I- 40/85, &within sight of the Orange /Alamance county line. Site was part of a larger tract of land rezoned by the BOCC in 2012 to Office /Institutional to promote business recruitment. Site is currently undeveloped with no infrastructure. Landowner will soon make application to have the site rezoned and annexed into the City of Mebane. 45 m Benefits of Infrastructure to Buckhorn EDD Site: The other finalist location near Atlanta had offered Morinaga advantages regarding a lower- priced site, existing roads & utilities already in place, & other firms within an established business park. Utility lines & road access improvements necessary to make Orange County's site competitive & attract Morinaga will make adjacent properties more developable, attractive, competitive, and appealing to future business prospects considering Orange County. 7 Site and Proposed Infrastructure for Morinaga Facility (Conceptual Layout) .• Community Development Block Grant: N.C. Dept. of Commerce has pre - qualified Project Rainbow as eligible to apply for a CDBG, allowing the County to receive reimbursement of up to $750,000 for site infrastructure improvements. County has a 25% co -pay. Grant criteria — at least 60% of total jobs created in the first 3 years must directly relate to Orange County employees who are qualified as coming from low or moderate incomes (earning no more than 80% of the County's median income of $37,950), prior to coming to work for the company. Orange County's "Article 46" % Cent Sales Tax Proceeds: Also available, if needed. Orange County: 12" water line to site N $375,000 10" sewer line to site N $200,000 Service road extension N $100,000+ (Design, permitting & construction of Ben Wilson service road extension is approx. 12 months) PSNC Energy: 4" natural gas line to the site Cost will be paid entirely by PSNC Energy Progress Duke Energy• Deliver all electrical power to the property, to include installing transformers & underground power lines at the site. Cost will be paid entirely by Progress Duke. NC Department of Transportation: 21500 -ft road access N $500,000 (extension of the existing Ben Wilson service road parallel along the highway to Morinaga's site) Fully paid by the N. C. Department of Transportation Design & construction time is approximately 12 months Road improvement improves the likelihood that nearby Mattress Factory Road may one day be upgraded to become a full interchange. BOCC's Earlier Closed Session Meetings: 1St meeting on August 27, 2012 to learn about Project Rainbow & discuss the County's recommended "performance- based" grant to recruit Morinaga. 2nd meeting on January 24, 2013 for a project update. 3rd meeting on March 19, 2013 to meet with Morinaga America's President Masao Hoshino, learn more about the company and project, & give tentative approval of the proposed Orange County incentive offer to Morinaga. 52 Performance -Based Incentive is Calculated as Follows: Inducement Grant calculated at 75% of the estimated county taxable value of the project's capital investment, for up to 5 years. (For example, assuming a $48 million maximum investment, approximately $308,000 annually x 5 years = approx. $1.5 million total). Performance grant will include a "claw- back" provision in the contract to ensure that the firm's annual target for capital investment & jobs creation is first verified, before any County incentive would be provided over the initial 5 -year term. Company would be required to provide health insurance for its employees during the incentive period, as also required by the State's incentive grant. City of Mebane: Mebane has proposed a supplemental "performance - based" local incentive package (calculated as a % of the capital investment) to be discussed and voted on in a public hearing on October 7, 2013. OF M4 Chartered in 18131 54 "One North Carolina Fund" program — $264,.000 performance -based grant NC Dept. of Transportation — road access to site, at a cost of $500,000 Durham Technical Community College's Hillsborough Campus — technical training of new employees, valued at $150,000 or greater . Division of Employment Security — pre- screening of job applicants to be provided by the Chapel Hill office, which will help identify Orange County residents who wish to gain employment with Morinaga. Public Hearing on Orange County's Incentive: The Inducement Grant paid by the County will come from the County's "ad valorum" property tax revenues that Morinaga generates after it is in operation, supplemented by proceeds from the % cent sales tax. Local and state government has the goal to promote economic development by encouraging the location of new businesses and the expansion of existing businesses. The Local Government Act, North Carolina General Statute 158 -7.1 outlines the requirements of public hearings, and the public hearing has been scheduled in compliance. L.l Our Morinaga Success Storx: Highlights Orange County's efforts to diversify our local economy, tax base & employment for our opportunities. Creates more & better hi -tech jobs, with health & related employment benefits, for our residents. Demonstrates how the BOCC's commitment to prepare our Economic Development Zones with utilities, zoning, incentives, & thoughtful use of the % cent sales tax for economic development, has proven to be a winning formula for the long term. Highlights the public's commitment to economic development by way of passage of the % cent sales tax for economic development. grange Cc welcomes :)rinaga &To., Ltc r, Attachment #6 Site and Proposed Infrastructure for Morinaga Facility (Conceptual Layout) 59