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4A Wichita Falls Economic Development Minutes - 10/20/2022 • I MINUTES OF THE WICHITA FALLS ECONOMIC DEVELOPMENT CORPORATION October 20,2022 Present: Leo Lane,President § WFEDC Members David Toogood,Vice President § Phyllis Cowling, Secretary-Treasurer § Darron Leiker § Brent Hillery • § James McKechnie, Deputy City Attorney § City Administration Jessica Williams, CFO § Terry Floyd, Director of Development Svcs § Chris Horgen,Public Information Officer § Paige Lessor,Recording Secretary §, Richard Gordon, Interim President/CEO § Wichita Falls Chamber of Commerce Taylor Davis, Dir of Bus Retention&Expansion § Ryan McGowan, Director of Bus Intelligence § Karen Bivona, Office Manager § Tom Sri, Associate Director § Raytheon Technologies Ajay Kumar, General Manager § P&WC Aerospace(US)', Inc. (WF) Jay Carter, CEO § Carter Aviation D'Lyn Davison Davison Rugeley, LLP Matt Anderson Sherrill&Gibson,PLLC Lynn Walker, Writer § Times Record News 1. Call to Order Mr. Leo Lane called the meeting to order at 2:30 p.m. 2. Consent Agenda a. Approval of Minutes (September 15, 2022) Mr. Toogood moved to approve the minutes. Seconded by Mr. Leiker, the motion carried 5-0. • b. Financial Report Mr.Leiker told the Board that Mr.Menzies was not present,but CFO Jessica Williams was available for any questions. Ms. Williams said things were still tracking well. She stated that as the fiscal year closes,the WFEDC will still receive sales tax for the next 60 days, so there will still be some changes. Also, there will be year-end adjustments that the Board has already considered WFEDC Minutes 10/20/2022 Page 1 of 6 in the budget. Mr. Lane noted that this year and last year are far ahead of the previous 22 or 23 years on the report. Ms. Cowling asked when the City started collecting tax from online sales. Mr. Leiker said the City has been receiving sales tax from Amazon for quite some time because they negotiated some agreements with the State of Texas. Mr. Leiker further explained that the legislature would be debating the issue of sourcing in the near future. The comptroller's office wants to change which location receives the sales tax. The comptroller would like the destination location to receive it, rather than the source location. Where ever the order is placed is what location will get the sales tax, not from where the item is shipped. Wichita Falls will most likely see a positive change from that decision. 3. Discussion and possible action related to a forgivable loan incentive for Pratt & Whitney Components expansion project. Ms. Taylor Davis addressed the Board and introduced P&WC Aerospace (US), Inc., also known as Pratt & Whitney Canada. Ms. Davis noted that the Company has been a pillar in this community since 1997 and continues to be a center of excellence in Wichita Falls for the work they do. They have considered three other facilities, and should they consider Wichita Falls as their final location, they are planning to create a new Platinum-Aluminide OEM coating product line. They plan to invest around $10 million in capital expenditure. In addition to retaining 125 full-time employees, they will be looking to add an additional 30 FTEs for a total of 155 FTEs. Wages for the new hires will average around $50,000 per year plus benefits, which will generate an economic impact of over $2.5 million annually in new payroll. Ms. Davis introduced Tom Sri with Raytheon Technologies, the parent company of P&WC, and Ajay Kumar, General Manager of the local P&WC facility. Mr. Tom Sri addressed the Board and thanked Ms. Davis for all her work with their Company. Mr. Sri stated that the Company is celebrating 25 years in Wichita Falls and wants to grow again. Mr. Sri presented a PowerPoint presentation to the Board, explaining an overview of the Company and the proposed expansion project. Raytheon makes helicopter engines (military, commercial,and business aviation). Specifically,P&WC makes business,regional,and helicopter variants. The Company is a global market leader and a market leader in Wichita Falls. Mr. Sri further explained what the Company does in Wichita Falls. They do component repair,a process called MRO,specifically in the hot section of the engine,where a lot of the action happens. The fuel ignites and gets really hot. The main components of the engines are subject to very harsh conditions and high temperatures.Mr.Kumar and his team in Wichita Falls repair those parts to get those planes flying again. In the time that the Company has been in Wichita Falls and with the Board's help over the years, P&WC has continued to make investments to this facility to create an advanced manufacturing location. With the help of WFEDC, the Company made these advancements,which brought more jobs and allowed the Company to bring future work and grow capacity. Mr. Sri explained the expansion project further. He said that the Company is deciding where to put the center of excellence for this coating, called Platinum-Aluminide coating. It is a brand-new technology and doesn't exist anywhere else in their network. The engine parts burn so hotly to get fuel efficiency and go faster and quieter.To be able to do that,the industry needs better coatings.The Company is also going to make some other enhancements across the site so they can have the capacity to bring future programs to Wichita Falls as well. The Company's investment WFEDC Minutes 10/20/2022 Page 2 of 6 will include 30 new jobs and $10 million. Mr. Sri then handed the presentation over to Mr. Ajay Kumar. Mr. Kumar explained that the Wichita Falls facility has plenty of space for the new equipment needed to make the new coating. He displayed photos of the equipment and explained that this technology is transformational and futuristic, and the market is shifting toward this type of coating. Further, Mr. Kumar said to keep their current and future customers satisfied,.the Company must change to this coating.Mr.Kumar described how the line would look at the facility. He explained that the equipment is environmentally safe and the Wichita Falls site already produces different types of coating, so they already have the experience and knowledge in this technology. He also told the Board that the employees at the Wichita Falls site are very well respected in the network, and their product quality is well respected worldwide. Mr. Sri emphasized that they have customers who request their parts be repaired in Wichita Falls, which speaks to the quality of work,the technology,the leadership, and community support. Mr. Sri stated how grateful the Company is for the community support, so they give back to the local community, supporting veterans, local STEM, and school opportunities. He thanked the Board for their consideration and asked if there were any questions. Ms. Cowling asked,in regards to the decision between the three sites,if there are any other criteria regarding the Company's determination of which the Board should be aware. Mr. Kumar stated that the Wichita Falls site has a competitive advantage over other sites because customers love the quality of the parts from Wichita Falls.Mr. Sri stated that some training would be helpful, so the community's continued support of the collaboration with the community college and those • programs are integral. Also, support with the permitting processes would be great when the time comes. 4. Discussion ,and update from Carter Aviation regarding the status of their current operations. Ms. Davis introduced Carter Aviation regarding their extension agreement for their $3.28 Million forgivable loan awarded in 2009. The current agreement provided a five-year extension before payments would begin,which recently expired on June 12,2022. She introduced Jay Carter, President of Carter Aviation,to give an update on their project. Mr. Carter presented a video to give the Board a review of what the Company has done. Mr. Carter stated that without the funds loaned, it could not be where it is today. He said it had taken them a lot longer than they initially thought. He explained that five years ago,the Company was working on a deal with the Triumph Group, a huge aviation company. They build the 747 fuselage for Boeing and the 737 fuselage for the replacements for Southwest Airlines. And they make almost all helicopter transmissions. Carter Aviation came very close to being bought out by Triumph, but the deal fell through in a vote of three against two. Mr. Carter stated that the vice president of the Triumph Group, Martin Peryea, left Triumph and formed a new company with Carter named Jaunt, in which Carter owns 60%, and Mr. Peryea owns 20%. Another guy in the business aspect of the Company owns 20%. Since then, they have merged with a company called Airo,which is made up of six or seven aerospace companies. Airo offered Jaunt a lot of money to come on Board. More than enough money to pay all their debts and more than enough to give all their shareholders a significant return on their investment.Now five banks have come on Board to. take them public.Raymond James is the principal,and Citibank wants to be a part of it. Mr. Carter said they would go public,but he does not know when they will go public.The banks are in charge. WFEDC Minutes 10/20/2022 Page 3 of 6 It could happen this year, or it might happen next year. Once they go public, they will get a lot of money, so there will not be an issue about paying Wichita Falls back because there will be enough money. But he has no control over when it will happen but feels very confident that it will happen. Mr. Carter further explained the technology and the excitement behind it. Then he took questions from the Board. Mr. Leiker commented that he would think the military would be interested in this technology and asked if Mr. Carter had worked with them lately. Mr. Carter said that other aerospace companies played dirty tricks on his Company because his technology would make what they have obsolete. Mr. Carter stated that they had several military contracts, but they never surmounted because other aerospace companies played dirty tricks and the generals who made those decisions knew that if they voted to go with Jaunt, they would not have a job when they left the military. Ms.Cowling asked some questions regarding the business aspect and transactions of Carter Aviation. She asked Mr. Carter about the percentages of the partnership to form Jaunt. She wanted to confirm that those percentages were 60, 20, and 20. Mr. Carter stated that was correct. Then he explained that those were the initial numbers, but they had to sell some stock, diluting everyone's percentage. He said he no longer has 60%, but he has over 50% controlling interest. Ms. Cowling asked Mr. Carter who owns the additional component of Jaunt. Mr. Carter explained that Jaunt merged with Airo. Ms. Cowling then clarified that Afro is not a public company but is looking to make an initial public offering.Mr.Carter confirmed that was correct.Mr.Lane asked if the merger with Airo was complete,and Mr. Carter confirmed it was complete.Mr. Carter stated that the only way it"unwinds"is if the IPO does not occur. Ms. Cowling then asked what kind of structure or investment was made when Jaunt merged ` with Airo. Mr. Carter stated that Airo made them a fantastic deal they could not turn down. He said that once the IPO closes, they will get enough money to cover their debt and make all their shareholders wealthy. Ms. Cowling then confirmed that Airo has not yet put any money into Jaunt and then asked what happens if the IPO doesn't close and what the timeline is under contract for this to occur. Mr. Carter said if this is not going to happen,.they can stop it, but unless something terrible happens,they will go public with Raymond James or one of the other five banks. He said that if the IPO is not going to happen, they can back out, and there would be no merger and no IPO. Ms. Cowling asked Mr. Carter if the IPO did not come to fruition,how does Carter propose to pay back the loan. Mr. Carter said they would have to do something different and seek another partner. Ms. Cowling then asked where Airo is located and what else they do. Mr. Carter replied that Afro is an aerospace company. They do lots of drones and aviation glass cockpits. Ms. Cowling asked who owns Airo and where they are located. Mr. Carter stated that several companies and several people own Airo. Their CEO is an Indian billionaire that Mr. Carter refers to as C.K. Mr. Toogood asked if Airo was a US Company and Mr. Carter confirmed that. Mr. Lane asked if Carter received any money when the Jaunt partnership was formed. Mr. Lane confirmed that Carter gave up 40% of his ownership. Mr. Carter said yes, for them to quit their jobs to work for Jaunt. Mr. Lane then asked what happened to the intellectual property when the Carter Aviation and Jaunt partnership transaction took place. Mr. Carter stated that Jaunt now owns the intellectual property. Mr. Lane confirmed that Mr. Carter and the other two investors own the intellectual property. Mr. Carter confirmed that was correct. Then Mr. Lane asked when Jaunt partnered with Airo if Mr. Carter gave up another portion of the intellectual property, but Carter still owns over 50% of the intellectual property. Mr. Carter stated that was correct. Then WFEDC Minutes 10/20/2022 Page 4 of 6 • Mr. Carter said Jaunt only owns 20% of Airo. He stated that he has a contract that states as soon as the IPO closes, they will get a lot of money and then even more money spread out over three years in quarterly payments plus stock in the Company. Mr. Carter believed they would have their air taxi demonstrator flying in two to three years. Mr. Lane asked if Airo was going to manufacture that product. Mr. Carter stated that the product would be manufactured in Canada. Ms. Cowling asked by whom. Mr. Carter said it would be manufactured by Jaunt. Mr. Carter noted that Jaunt is just one of six companies in Airo. One of the reasons why they will build in Canada is because Quebec Province has said it will match dollar for dollar all the private money that is put into the Company. The Canadian government matches whatever Quebec does. Mr. Toogood asked Mr. Carter if he was requesting another extension to the repayment. Mr. Carter said he can't pay the Board today, but he feels pretty good about it. Some pretty big banks are banking on this. Ms. Cowling asked if there would be any production here in Wichita Falls. Mr. Carter stated that there is a possibility that they can do some prototyping here in Wichita Falls. Then Ms. Cowling asked if Airo or Jaunt have any production contracts. She asked Mr. Carter if she understood that he does have a partnership or some relationship with Uber but no contracts. Mr. Carter stated that Uber could buy from anyone, but other companies, in addition to Uber, will compete with Uber. So they will sell to whoever will pay the most for the aircraft. Mr. Toogood asked if Uber was just waiting for a product that is available for purchase. Mr. Carter stated that was correct. Mr. Lane asked if Mr. Carter was an in Airo. Mr. Carter stated that he was not. Mr. Lane asked if he was an officer in Jaunt. Mr. Carter said that yes, he is one of the three founders. Mr. Lane asked what Mr. Carter's'corporate position is in Jaunt. Mr. Carter stated it was probably an advisor. Mr. Lane then confirmed that Mr. Carter was not an officer in Jaunt. Mr. Carter saidhe was not an officer, but he is the biggest shareholder in Jaunt and the CEO of Carter. Ms. Cowling asked if Mr. Carter had a role at Airo. Mr. Carter stated that he did not have a role at Airo. Ms. Cowling then asked if Mr. Carter had any documents or type of memorandum of understanding from Raymond James, Citibank, or any other banks reflecting the IPO's intent. Mr. Carter said yes but that he could not share that. He stated that it is going through the Securities Exchange Commission and is very private. He can't see that, and only a few people can access it. Mr. Toogood said he understood the setbacks that Mr. Carter has been through and asked if Mr. Carter could give him a perspective on the timeframe. Mr. Carter stated that they started in 1996. And they first flew in 1999. They broke the ME 1 Barrier in 2005. Martin Pariyea became very excited and quit Bell. Mr. Toogood asked when that happened, and Mr. Carter stated it was in April 2019. Mr. Carter said Kaydon Stanzione was the third person in the Jaunt formation. Ms. Cowling then asked if Jaunt was formed in 2019. Mr. Carter confirmed. Then Ms. Cowling asked when the merger with Airo took place. Mr. Carter said it took place in August or September 2021. Mr. Leiker asked what Mr. Carter meant when he said the banks are in control. Mr. Carter stated the banks would decide when is the right time to go public. They are thinking of a possible time,maybe after the elections.But if not,it could be next year;he just doesn't know.Mr.Toogood proposed that Airo either does not have the resources or does not want to commit the resources to begin production. Mr. Carter said that is an initial $200 million investment; getting it certified is anywhere from three-quarters of$1 billion to $1.5 billion. Mr. Lane asked if any financial transaction resulted from the dilution of the intellectual property. Mr. Carter stated that no money was exchanged for intellectual property. Mr. Leiker WFEDC Minutes 10/20/2022 Page 5 of 6 asked Mr. Carter if the status of his patents had changed and if he still held the patents. Mr. Carter stated that they still own their patents. He said they had refiled new patents on the stuff they did 20 years ago. No one had any further questions. Mr. Carter thanked the Board again and said he would not be this far along without Wichita Falls' support. 5. Executive Session Mr. Lane adjourned the meeting into executive session at 3:30 p.m. pursuant to Texas Government Code §§ 551.087, 551.071,and 551.074. He announced the meeting back into regular session at 5:10 p.m. The subjects posted in the Notice of Meeting were deliberated, and no votes or further actions were taken on the items in executive session. 6. Motions Pratt & Whitney Components (P&WC Aerospace (US), Inc.) forgivable loan incentive for expansion project Mr. Leiker moved to provide a forgivable loan not to exceed and for a total maximum obligation of $2,750,000 to P&WC Aerospace (US) Inc., as presented. The loan funds will be distributed in one equal installment and will be immediately payable upon execution of the performance agreement and promissory note. The loan will be forgiven at a rate of 14.29% per year over a seven-year term based on the retention of 125 FTEs and the addition of 30 FTEs for a total of 155 FTEs. Seconded by Ms. Cowling, the motion carried 5-0. 7. Adjourned. The meeting adjourned at 5:13 p.m. Vt.-a-de-- Leo Lane, President WFEDC Minutes 10/20/2022 Page 6 of 6