4A Wichita Falls Economic Development Minutes - 06/17/2014 MINUTES OF THE
WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION
June 17,2014 RECEIVED IN
PRESENT: CITY CLERK'S OFFICE
Gary Shores, President § Members DATE: .12±1±—,.
p. —_
Dick Bundy, Vice President/Sec.-Treasurer § TIME: O-/-5'4H
Reno Gustafson § BY'
Darron Leiker §
Glenn Barham, Mayor § City Council
Kevin Hugman, Assistant City Manager § City Staff
Jim Dockery, Asst. City Manager/CFO §
Julia Vasquez, First Assistant City Attorney §
Linda Merrill, Recording Secretary §
Henry Florsheim, President/CEO § Chamber of Commerce& Industry
Kevin Pearson, Executive Vice President, §
Economic Development §
Michael Paris, Workforce Development §
Michael Thompson § Arrow Manufactured Products
Jay Carter § Carter Aviation
ABSENT:
Dave Lilley § Member
1. CALL TO ORDER
President Gary Shores called the meeting to order at 3:30 a.m.
2. APPROVAL OF MINUTES
Darron Leiker moved for approval of the May 22, 2014 minutes. Seconded by Dick
Bundy,the motion carried.
3. ARROW MANUFACTURED PRODUCTS DOWNHOLE TOOL EXPANSION PROJECT
Kevin Pearson said the 4A Board has a well-established relationship with Arrow
Manufactured Products (formerly Machining Solutions), having already entered into one MOU
and one Performance Agreement.
Michael Thompson said the company is located in the old Washex building, a 130,000
square foot facility. They currently have 40 employees, and anticipate entering into contracts
with certain entities to manufacture proprietary parts, at which point they will add an additional
125 employees. That could happen as early as July 1.
H.\_LEGAL\4A,4B,TIFS\4A CORP\4A MINUTES\2014\2014.6.17\2014.6.17 4A MINUTES.DOC
WFEDC—Minutes of June 17, 2014 2
The company has an NFA tax stamp to manufacture gun parts, and is also AS9100
compliant. They are working to diversify; within the next five years, they hope to have less than
30%of their sales be from the oil and gas industry.
Mr. Thompson said Arrow Manufactured has hired Michael Bernhardt to manage the
company. Mr. Bernhardt has facilities in Tulsa and Oklahoma City to
which he could move the
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work, but Mr. Thompson would prefer to provide employment opportunities to Wichita Falls.
Mr. Pearson said the performance agreement contemplates $162,250 in cash for jobs, as
well as an application to the State for a skills development training fund grant for 42 jobs. He
noted this offer is valid under August 31, 2014.
Mr. Shores thanked Mr. Thompson for his presentation, and congratulated him on his
company's growth.
4. DISCUSSION OF PROPOSAL BY CARTER AVIATION TECHNOLOGIES FOR 24-
MONTH EXTENSION, CONDITIONED ON PAYMENT TO WFEDC OF AMOUNTS
RECEIVED FROM SELECTED LICENSE FEES
Kevin Pearson noted that efforts have been made to find a way for the 4A Board to
receive some form of repayment for loans to Carter Aviation that are outstanding. The sum of
$117,187 is due this year;that amount will increase as the other six loans become due.
Jay Carter reiterated his conversation from April 10 regarding various activities in which
the aircraft has been involved. Phase 1 of the Defense Advanced Research Projects Agency
(DARPA) contract is finished; the proposal for Phase 2 has been submitted, and the bid will be
awarded in mid-July. If successful with this bid, the majority of the $20 million contract is owed
to vendors. Carter Aviation would hire 16 upper management positions and 4-5 technical
positions to build the aircraft.
Whoever wins Phase 2 wins a $100 million contract for Phase 3. Again, if Carter
Aviation is successful, a lot of that money would also go to debts owed. Mr. Pearson asked if the
aircraft would be built in Wichita Falls if Carter won Phase 3. Mr. Carter replied that it is too big
a job for his company. His business is to license the technology and build prototypes. Someone
else would manufacture the production models.
Mr. Pearson said there have been discussions regarding repayment of the loans. In return
for a 24-month extension on all loans with the 4A Board, Carter Aviation is willing to give the
4A Board 20% of the value of those license agreements (excluding DARPA). The repayments
would be up to the amount then owed, as opposed to 20%of the entire license agreement.
Mr. Carter said the company has borrowed money from shareholders. Twenty percent of
the license fee costs will go toward those shareholder loans, and another 20% to the 4A Board.
Mr. Shores asked if the shareholders would receive 20% of the net outstanding balance of that
loan, or 20%of the total loans. Mr. Carter said he has no argument against 20%of the total loans
being paid to the 4A Board, other than this is a critical time for the project. He would be left with
only 60% of the funds from any license fees; the more money he has available, the more ability
to ramp up and take on other projects. He is happy to do it either way.
WFEDC—Minutes of June 17, 2014 3
Mr. Carter also wanted the 4A Board to advance the last and final payment of$468,000.
He has to wait about two months for payment from DARPA after he has performed the work. He
needs the capital, estimating he needs about $1.25 million. Three investors will each loan him
$250,000 if he gets the contract, and that puts him about $500,000 short. If the City would go
ahead and loan Carter Aviation the $468,000, it would help out a lot. He would personally
guarantee of repayment of that loan. Mr. Leiker asked if the investors are charging an interest
rate. Mr. Carter said no, because they will get paid back in a maximum of 3 to 5 months.
Mr. Shores thanked him for his presentation. Mr. Carter expressed his appreciation to the
4A Board;the company would not have made it otherwise.
5. EXECUTIVE SESSION
Mr. Shores adjourned the meeting into executive session at 4:03 p.m. pursuant to TEXAS
GOVERNMENT CODE §§551.071, 551.072, and 551.087. He closed the executive session and
announced the meeting back into regular session at 4:50 p.m.
6. DISCUSSION
Arrow Manufactured Products
Mr. Leiker moved to approve the request as presented and as shown on the 4A
agenda. Seconded by Mr. Gustafson, the motion unanimously carried.
Carter Aviation
Dick Bundy moved to approve a 24-month extension on the loans to Carter Aviation
in return for 20% of the entire license agreement for any licensing fees he gets. Seconded
by Mr. Leiker, the motion unanimously carried. (Carter's request for the final payment of
$468,000 was not on the agenda;therefore,the 4A Board took no vote on this matter.)
Financial Statement
Kevin Hugman said the 4A Board had approved $1.145 million for the PPG reclaimed
water facilities pipeline. The City Council approved that contract today. The entire bid came in
below the estimate; PPG's share is $430,000; and the City's share is only $754,000.
Mr. Hugman also noted that sales tax revenues are 7% over the same period last year.
The projected overall change is 3.3%now.
He will be working on the 4A Board's fiscal year 2015 budget which will necessitate a
meeting in July, to allow entities to make proposals for future 4A funding.
7. ADJOURN
Dick Bundy moved for adjournment. Seconded by Darron Leiker, the meeting adjourned
at 4:55 p.m.
Gary ' ores, President