Committee Minutes
MINUTES
Growth Fund Committee Meeting
Office of Urban Development Conference Room
1405 1st Avenue North
Grand Forks, ND 58203
Wednesday, April 25, 2007
1. Roll Call
Chair Doug Christensen called the meeting to order at 4:05 pm. Present were Terry Smith, Jon Ramsey, and Bob Brooks. Also present were Greg Hoover, Hal Gershman, Keith Lund, Klaus Thiessen, Meredith Richards, Peggy Kurtz, Bruce Gjovig, Duaine Espegard, Tu-Uyen Tran, Chris Wolf, Don Roepke, and Pam Evenson. Absent was Eliot Glassheim.
2. Approval of Minutes
Moved and seconded to approve minutes from the previous meeting of January 16th, 2007. All present voted AYE. MOTION CARRIED.
3. Monthly Report – January-March 2007
No discussion. Report accepted.
4. Growth Fund Applications—Datacom & Canad Inns
Keith Lund, Vice-President of the Economic Development Corporation (EDC) introduced Don Roepke, CEO of Datacom International, Inc. Mr. Lund informed the Committee Members that Datacom is a 7-year old privately held Minnesota corporation based out of the Twin Cities that develops web-based enterprise software. Datacom is proposing a launch in Grand Forks as well as Cooperstown, ND. Datacom’s forecast this year is to employee 14 people in the dataSIGN division, 7 in Grand Forks and 7 in Cooperstown. If Datacom gets to the $1.6 million level of funding they are seeking, it would accelerate dataFAB and employ 5 people in that division in Grand Forks at the end of this year, for a total of 19 people. Divisional positions will include sales and marketing, customer support implementations, product development, and administrative. Each division is projected to have 40 to 50 jobs with an average salary of $55,000 to $60,000 a year.
Mr. Roepke gave an overview of Datacom. In 2005, Datacom completed a nearly $6 million development and field testing of dataSTOR, a web-based software suite. From dataSTOR came two derivatives, dataSIGN for the sign manufacturing industry, and dataFAB for the metal fabrication manufacturing industry. Their financial plan makes them profitable in mid 2008 and debt free with $4 million of cash by the end of 2009 and highly profitable in 2011 at $47 million. Their employment plan for dataSIGN is to have the support people in Grand Forks, and sales and marketing in Cooperstown. The average salary will be $55,000 plus benefits. Once they launch dataFAB, Datacom projects to move dataSIGN to Cooperstown and have dataFAB in Grand Forks.
Discussion followed.
Mr. Roepke explained Datacom’s current financial status. He said that they are selling less than 10% of the stock. There are 35 shareholders in the company that own the balance, most of whom are directors, officers, or employees and very few outside the company. Until the common shares that are being sold now, those 35 people had 100% of the stock. He said the banks’ security for the $400,000 being asked of them would be 2nd position in assets, with the first position being held by Venture Bank, their bank in Minneapolis. Mr. Roepke said they would not have to sign guarantees with these banks but have done so with Venture Bank. He said that the Growth Fund loan of $150,000 be paid off by 2009 going with their financial plan to be debt-free in 2009 with about $4 million in cash. This includes paying off all loans, the $150,000 Growth Fund loan and including redemption of preferred shares that would be coming from the Bank of North Dakota and the North Dakota Development Fund. Datacom has presumed in their forecast that their shares would be redeemed at a preferred share appreciation rate of 8%. In their cash forecast, they have projected that in the 2nd quarter of 2009, Datacom would redeem those shares as debt along with 8% depreciation.
Moved by Jon Ramsey, seconded by Terry Smith to provide a $150,000 convertible loan to Datacom for a term of 5 years at 4% interest with quarterly interest only payments for 24 months, 3 years amortization with monthly payments for final 36 months. The Growth Fund may, at its discretion, convert any unpaid loan balance to common stock shares of Datacom International, Inc. at a price of $1.00 per share. The Growth Fund agrees to subordinate its collateral position for a maximum of $400,000 additional bank debt from Grand Forks and Cooperstown area lenders. All present voted AYE. MOTION CARRIED.
Greg Hoover announced that Canad Inns has requested their application for a PACE loan be tabled at this time.
5. Change of Lead Lender: Larimore Sunflower, Inc. & North Central Management Group (Block 1 Properties, LLP) & Brown Corporation
Larimore Sunflower, Inc. and Block 1 Properties, LLP and Brown Corporation have requested the Grand Forks Growth Fund’s concurrence to a change in the lead lender to their Bank of North Dakota PACE loans. The Bank of North Dakota has accepted the change in lead lender in both loans, subject to the Growth Fund’s concurrence.
Chris Wolf, Chief Financial Officer of Brown Corporations, spoke on the company’s behalf. Jon Ramsey recused himself from the vote due to Brown Corporation.
Moved and seconded to approve an extension for the Brown Corporation. All present voted AYE. MOTION CARRIED.
Moved and seconded for approval of change of lead lender. All present voted AYE. MOTION CARRIED.
6. Loan Write-Off Approval—Cheyenne Valve & Machine of ND, Vector Training Systems, Inc. & WebSmart Teleservices Group, Inc.
Discussion was held referencing the memo sent out by Greg Hoover stating the City’s Finance Department has asked the Growth Fund Committee to authorize that a total of $615,101.23 for these loans be written off effective December 31, 2006. The Growth Fund had discussed this issue in the past and is now making it official.
Moved and seconded to write off the loans. All present voted AYE. MOTION CARRIED.
7. Project Update
None.
8. Other Business
None
9. Adjournment
Moved and seconded to adjourn. All present voted AYE. MOTION CARRIED. Meeting adjourned at 5:25 pm.
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Pamela Evenson Doug Christensen
Office of Urban Development Chairman