Committee Minutes

MINUTES/GROWTH FUND AUTHORITY
December 18, 1995 - 7:00 p.m.

The city council of the City of Grand Forks sitting as the Growth Fund Authority, met in the council chambers in City Hall on Monday, December 18, 1995 at the hour of 7:00 p.m. with Chairman Carpenter presiding. Present at roll call were Council Members Beach, McCabe, Hoeppner, Hamerlik, Hanson, Glassheim, Carpenter, Sande, Klave, Beyer, Babinchak, Geller, Johnson, Hagness, Mayor Polovitz - 15; absent: none.

HOLD PUBLIC HEARING ON APPLICATION FOR
GROWTH FUNDS MONIES BY BIODIGESTOR
TECHNOLOGIES, INC.

An application by BioDigestor Technologies, Inc. for funding through the Growth Fund a project to build a Mobile Engineering Parameterization Station (MEPS) which will be used to conduct on-site testing and treatment of industrial and municipal waste water using advanced biological technology, with a projected cost of $500,000, which includes the purchase of equipment used in the MEPS as well as engineering and testing, a demonstration program and marketing, was presented. BDT is requesting a $250,000 equity investment by the Grand Forks Growth Fund for which the GFGF will receive 250,000 share of company stock. The additional financing is required to complete the MEPS unit as well as provide for operating capital to come in the form of equity investments from present and/or new investors.

The recommendation from the Growth Fund Committee to the Grand Forks Growth Fund is that financial assistance to BioDigestor Technologies, Inc. be declined.

Chairman Carpenter opened the public hearing on the application for Growth Fund monies from BioDigestor Technologies, Inc. and asked for comments.

Don Mathsen, CEO, BioDigestor Technologies, Inc., made a presentation of overview of their company, that they are a Grand Forks company with global markets, with international technologies and with a multi-national engineering team; that the company is prepared to operate as a virtual operating company or virtual organization, that they provide marketing, professional engineering design service, and they package their technologies to meet a particular application, and rely on sub-contractors to provide contracting services, detailed engineering, manufactured parts and vendor items. Consequently, as a company they remain small in numbers in terms of internal employment but large on impact on a community on a very distributed basis through existing companies. He stated their approach to the customer as they analyze the customer's problem, develop a technology strategy, do applied engineering on the site before design, which allows them to guarantee performance, and provide service, including operating and maintenance contracts with their client, if the client so desires. He stated he wanted to touch on some of the technologies, focusing on wastewater technologies they have acquired; that they have established technology, linkages, licensing agreements, distribution agreements for a suite of biological technologies that

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December 18, 1995 - Page 2

can address the organic waste problem internationally and nationally, with state of the art technology but with a proven commercial history; and reviewed some of the technology for wastewater treatment applications; controlled environment composting system. He stated they have suite of technologies that allow them to go into a municipality and address virtually all aspects of liquid and solid waste treatment and gaseous waste treatment using strictly biological approaches where bacteria do the work, and their job is to provide an environment for bacteria to operate most efficiently which they do through engineered systems.

Jim Sponslor, chief operating officer of BioDigestor Tech., addressed concerns expressed to them; he stated that the Growth Fund considers new jobs on the applicant's payroll; that the BDT job creation is principally with sub-contractors; that BDT projects are construction projects, jobs are real, that 65% of the revenues that flow out of BDT projects flow to the sub-contractors and vendors. He stated they are a technology assistance provider. He stated that customer identifies and defines problem and then participates in solution; that BDT provides technology. concepts, marketing, operation and maintenance; their engineering strategic partners are doing design specifications and field supervision; that Grand Forks manufacturers will fabricate, assemble and provide specialized components, and Grand Forks contractors will do the construction, installation and maintenance.

Several individuals spoke in support of the application:
Bill O'Connell, Lunseth Plumbing & Heating.
Jim West, KBM, Inc.

Mr. Sponslor addressed concern re. jobs; stated that they projected sales of $11 Million at the end of 1997, job creation is based on one employee per $125,000 of sales, in 18 months they have quoted on 56 projects, with aggregate of $90 Million, and project 5 projects to provide revenues to create jobs stated in the application (which is formula for job creation). He stated they are not in a research business, these are technologies and devices that have been in practical application in Europe for 10-20 years, that aggregate sales of the apparatus used in their projects is over $210 Million and can add engineering and installation revenues onto that; that it is engineering and marketing tool. He also stated they are not connected with the UND or EERC.
Mr. Sponslor also stated what they are offering Growth Fund is same as to private investors; they are continuing to raise capital through private investors, that in addition to the potential for significant return on investment, the community will benefit from the turn of new dollars and wealth that will be in the community as a result of this business; and growth potential is tremendous.

Ron Johnke, Brady, Martz Associates, stated they have issued set of reviewed financial statements re. financial condition of the company, are in process of performing audit on MINUTES/GROWTH FUND AUTHORITY
December 18, 1995 - Page 3

that to get qualifications and statements they need to go forward on this, to talk to other investors and for any public offering that may come up; and those statements are available.

John Erickson, First American Bank, commercial department, stated they are supporting this company with a sizeable line of credit to the company.

Mr. Mathsen stated that the request they are proposing to the Growth Fund is for an equity investment of $250,000 at a $1/per share of stock; that they have made commitment to utilize funds for the construction, fabrication, and operation of the

mobile engineering system; request the Authority's consideration of their request. He
stated they are requesting $300,000 in State Future Funds, they have approved request and are at a negotiating stage.

Abe Muscari, Simplot, stated this is best solution he has heard to the problems they are confronting with waste treatment and infrastructure, and endorses product and hope City will support the request.

Chairman Carpenter closed public hearing.

It was moved by Council Member Sande that we approve application by Bio- Technologies, Inc. for project funding. Council Member Hagness seconded the motion.

After further discussion Council Member Glassheim moved a substitute motion that we approve funding for BioDigestor Technologies, Inc. subject to terms and conditions to be worked out by the Growth Fund Committee and return to Growth Fund Authority for final approval; Council Member Hanson seconded the motion.

It was noted that terms to be worked out include jobs guarantee, composition of Board, terms and conditions.

Council Member Geller suggested either tabling the matter or that it be referred back to Growth Fund Committee.

Mr. O'Leary stated that the motion doesn't give Growth Fund much room to negotiate with the applicant in terms and conditions, whether loan or equity investment. He suggested another option is to do with convertible instrument where start with a loan, that there is advantage to the Growth Fund to do that, puts more of a commitment on the applicant to create jobs; if simply buy stock, have very little control over what happens.

Council Member Beach stated he would like to discourage passage of this motion, and

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send back to committee with no restrictions.

After further discussion Council Member Hagness called for the question. Carried 15 votes affirmative.

Upon call for the question on the substitute motion, and upon roll call vote, the following voted "aye": Council Members Polovitz, Hoeppner, Hamerlik, Hanson, Glassheim, Sande, Klave, Babinchak, Johnson, Hagness - 10; voting "no": Council Members Beach, McCabe, Carpenter, Beyer, Geller - 5. Chairman Carpenter declared the motion carried.

ADJOURN

It was moved by Council Member Hamerlik and seconded by Council Member Hoeppner that we do now adjourn. Carried 15 votes affirmative.

Respectfully submitted,



John M. Schmisek
City Auditor