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	MINUTES/GROWTH FUND AUTHORITY Thursday, December 28, 1995 - 9:30 a.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 Thursday, December 28, 1995 at the hour of 9:30 a.m. with Chairman Carpenter presiding. Present at roll call were Council Members Beach, Hoeppner, Hamerlik, Hanson, Glassheim, Sande, Klave, Babinchak, Geller, Hagness, Carpenter - 11; absent: Council Members Beyer, Johnson, Polovitz - 3. APPROVE APPLICATION BY BIODIGESTOR TECH- NOLOGIES, INC., SUBJECT TO TERMS AND CONDITIONS Chairman Carpenter stated that the application by BioDigestor Technologies, Inc. had been referred back to the Growth Fund sub-committee, that the committee has dis- cussed and approved in sending back to the full Authority, the terms and conditions for the BioDigestor Technologies' application. He stated that the sub-committee only acted on terms and conditions, which is what they were directed by the full Authority to consider, and did not change its previous recommendation that financial assistance to BioDigestor Technologies, Inc. be declined. Proposed covenants had been provided to all members. A written response from BioDigestor Technologies, Inc. to the Growth Fund Authority had also been provided to the members. It was moved by Council Member Glassheim and seconded by Council Member Hanson that we enter into the agreement with terms and conditions as recommended by the Growth Fund Committee under date of December 22, 1995: (attachment #1). Don Mathsen, BioDigestor Technologies, Inc., reported their response to the Growth Fund recommendations of December 22 had been provided to Growth Fund Authority members and summarized their concerns: that the general differences that exist between what was proposed by the Growth Fund Committee and what has been proposed by BioDigestor as its latest offering to the City is that BioDigestor needs to maintain integrity with its current stockholders. He stated that since deliberations on 22nd did confirm with the Securities Commission Office in Bismarck that if they were to grant exemption to the stock offering such as to give City option of $0.50/share, though no regulation against that at the State level, it would be breach of good faith with respect to the share holders who have already paid $1.00/share since November, 1994 (including founders), and would have to go back and offer existing investors and founders the same option to maintain good faith with existing shareholders. He stated that the combination of no interest loan and equity, however, no interest loan doesn't offer the City any premium whether they are successful or not. He stated they cannot extend their option for 250,000 additional shares of stock if the company is only receiving $150,000 in equity, and some of those details do not work in terms of the company's policy of record, etc. He stated they have proposed providing right of first refusal agreements to existing and future sub-contractors. He stated another concern, penalties associated with BioDigestor leaving Grand Forks; agree that there should be an exit strategy should they leave town, in terms of City getting their stock back at reasonable MINUTES/GROWTH FUND AUTHORITY December 28, 1995 - Page 2 rate of return, and if a loan, no problem with repayment of funds. He stated that they also submitted proposed covenants for their application, with principal difference being that they are very consistent in asking for a straight equity deal which they feel makes for a simpler transaction, and accountability more straightforward, and their intent is to be a partner with the City of Grand Forks. John O'Leary, exec. director of Urban Development, reported that the Committee had recommended part equity and part loan, that with purely an equity deal with 250,000 shares of equity in this company, the City has no leverage if the company should leave. He stated he thought that a zero interest loan was more than fair to the company without burdening the company with a lot of new debt; the company has acknowledged the need for additional equity, and the Growth Fund agreed with that, and that counting additional debt as that equity doesn't hack it. He stated that the company needs equity and business plan stated they need $480,000 of equity, and now been dropped to $400,000, and perhaps should be looking at revised business plan. COUNCIL MEMBER McCABE REPORTED PRESENT Mr. O'Leary stated that these are kinds of issues that made it complicated for the committee, numbers and purpose of the grant, purpose of the equity position constantly changing, and makes it difficult to negotiate. He stated that virtual companies are very transitory, and want to make it painful for this company to leave Grand Forks, because if they do leave, what happens to jobs; 20% return on investment not adequate. He stated that the number of jobs created, counter-proposal not acceptable; not fair to taxpayers, need to have better handle on those jobs; and subcommittee recommendation is that we want reports. He stated they asked for personal guarantee on stockholders that owned more than 20%, all except two own less than 20%. Ron Johnke, Brady, Martz & Assoc., reported on stock price since initial offering, and stock at $1.00/share today. Don Mathsen stated that he has outlined, with concurrence of management but not formal adoption of the Board, and has gone through list of recommendations made by the Growth Fund Committee of December 22 and has put together what they feel is their bottom line or direct response to this particular document, and reviewed document: (attachment #2) After considerable discussion Council Member Geller moved a substitute motion that we approve Mr. Mathsen's modifications to the Growth Fund recommendations; the motion was seconded by Council Member Hoeppner. Mr. O'Leary spoke against several of the recommendations proposed by Mr. Mathsen, MINUTES/GROWTH FUND AUTHORITY December 28, 1995 - Page 3 and suggested that they accept the proposal as submitted by the sub-committee, with the exception that we reduce the buy-back provisions from $300,000 to $150,000 share under A-3; eliminate requirement for seat on the Board of Directors; and doesn't see anything wrong with the rest of the proposal from the Growth Fund. He stated that he would not like to see precedent to relieve applicant from personal guarantee. Moved by Council Member Hagness and seconded by Council Member Hanson to amend the motion to incorporate Mr. O'Leary's recommendations into the recom- mendation and that it be worked out between the Company and City. Council Member Hamerlik suggested that the two previous amendments be withdrawn and that the original motion with Mr. O'Leary's recommendations be considered. Council Members Hagness and Hanson withdrew their amendment to the motion; as did Council Members Geller and Hoeppner. It was then moved by Hamerlik to amend the original motion to include the statements by Mr. O'Leary; Council Member Beach seconded the motion. It was moved by Council Member Beach and Council Member Glassheim to divide the question. Carried 12 votes affirmative and the question is divided. Question No. 1 - amendment to eliminate requirement for voting seat on the Board of Directors. Glassheim spoke against the amendment. After discussion and upon roll call the following voted "aye": Council Members Hagness, Geller, Klave, Hamerlik, Hoeppner, McCabe, Beach - 7; voting "nay": Council Members Babinchak, Sande, Car- penter, Glassheim, Hanson - 5. Chairman Carpenter declared the motion defeated. Upon call for Question No. 2 - amendment to two for one stock portion of the recommendation, and upon voice vote, the motion carried 12 votes affirmative. Upon call for the question on the original motion, as amended, (attachement #3) and upon roll call vote, the following voted "aye": Council Members Beach, McCabe, Hoeppner, Hamerlik, Hanson, Glassheim, Sande, Klave, Geller, Hagness - 10; voting "nay": Council Members Babinchak, Carpenter - 2. 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 12 votes affirmative. Respectfully submitted, John M. Schmisek City Auditor