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2003-06-05-Minutes MINUTES OF THE PARIS ECONOMIC DEVELOPMENT CORPORATION SPECIAL.MEETING JUNE 5, 2003 The Paris Economic Development Corporation met in special session on Thursday, June 5, 2003, at 12:15 Pi, M., at the Lamar County Chamber of Commerce, 1125 Bonham Street, Paris, Texas. President Don Wall called.the meeting to order with the following Directors present: Rodney Bass, Mike Dunn, Richard Severson, and Sims Norment. Also present were ex-officio Board Members Mayor Curtis Fendley and City Manager Michael E. Malone, Executive Director Gary Vest, City Attorney Larry W. Schenk, and Lisa Wright. President Wall called the meeting to order at 12:15 p.m. and immediately adjourned the public session and the Board went into closed session to consider the following Item 2: Closed session in accordance with Sec. 551.087 of the Open Meetings Act, discuss possible incentives, pending negotiations, and commercial or financial information from business prospects and potential financing for the following: A. Project Holt. President Wall opened the public session at 12:51 p.m. and called for consideration of and motion on the following resolution: Resolution No. 2003-008, approving and authorizing the execution of a loan. agreement, promissory, note, and other financing instruments associated with a line of credit of up to $2,000,000.00 to fund an incentive agreement with C-Tech, Inc. and other incentive and associated expenses was presented by City Attorney Schenk.- Director Sims Norment moved that Resolution NO. 2003-008 be approved, seconded by Director Mike Dunn. There was no further discussion. Motion carried 3-0 with Directors Rodney Bass and Richard Severson abstaining. PARIS ECONOMIC DEVELOPMENT CORPORATION RESOLUTION NO. 2003-008 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE PARIS _ ECONOMIC DEVELOPMENT CORPORATION, APPROVING AND AUTHORIZING THE EXECUTION OF A LOAN AGREEMENT, PROMISSORY NOTE, AND OTHER NECESSARY FINANCING INSTRUMENTS ASSOCIATED WITH A LINE OF CREDIT OF UP TO $2,000,000.00 TO FUND AN INCENTIVE AGREEMENT WITH C-TECH, INC. AND OTHER INCENTIVE AND ASSOCIATED EXPENSES; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the Paris Economic Development Corporation (PEDC) did heretofore, on the 5th day of June, 2003, in Resolution No. 2003-007, authorize the execution of an Incentive Agreement with C-Tech, Inc., subject to approval by the City Council of the City of Paris; and, WHEREAS, in order to fund the incentives provided under said Agreement, and to have resources available to fund other possible incentives to future prospects, the PEDC deems it to be in its best interest to borrow up to $2,000,000.00 in the form of a line of credit from a local financial institution; and, WHEREAS, said line of credit shall bear interest at varying rates and terms as stated in the financing proposal attached hereto and incorporated herein as Exhibit A, and shall be payable to Hibernia National Bank in accordance with the terms thereof; and, WHEREAS, the Board of Directors of the PEDC finds and determines that sufficient f'mancial resources are available from PEDC to adequately fund said financing; and, WHEREAS, the President of the PEDC should be authorized to execute a loan agreement and any and all documents necessary to fmalize the lending transaction and bind the PEDC thereto, with the forms of all such documents being first approved by the City Attorney; NOW, THEREFORE, BE IT RESOLVED BY THE PARIS ECONOMIC DEVELOPMENT CORPORATION: Section 1. That the findings set out in the preamble to this resolution are hereby in all things approved. Section 2. That the Paris Economic Development Corporation borrow up to $2,000,000.00 from Hibernia National Bank in the form of a line of credit to fund the incentives provided under the Incentive Agreement with C-Tech, Inc. and to have resources available to fund other possible incentives to future prospects. Section 3. That the President be, and he is hereby, authorized and directed to execute, on behalf of the PEDC, a loan agreement, promissory note, and any and all other instruments necessary to finalize the same and bind the PEDC thereto, under the terms and conditions and in the forms approved by the City Attorney, and subject to approval by the City Council of the City of Paris. Section 4. That the PEDC does hereby pledge its one-quarter (1/4) cent economic development sales tax and other available revenues to the repayment of said loan, subject to any and all prior security pledges, notes, and other prior obligations of the PEDC. Section 5. That said line of credit shall bear interest at varying rates and terms as stated in the financing proposal attached hereto and incorporated herein as Exhibit A, and shall be payable to Hibernia National Bank in accordance wi/la the terms thereof. Section 6. That this resolution shall be effective from and after its date of passage. PASSED AND ADOPTED this 5th day of June, 2003. Don Wall, President ATTEST: Richard Severson, Secretary-Treasurer APPROVED AS TO FORM: Larry W. Schenk, City Attorney Paris Economic Development Corporation June 4, 2003 Page 1 of 5 June 4,2003 Mr. Gary Vest Paris Economic Development Corporation 1125 Bonham Street Paris, TX 75460 Dear Gary: 'On behalf of Hibernia National Bank ("Lender"), I am authorized to extend a commitment to making the following loans to Paris Economic Development Corporation ("PEDC" or "Borrower"), subject to the terms and conditions set forth below. The following terms and conditions are not intended to be exhaustive, since final , documentation of the facilities will require further discussions between Lender and Borrower and approval of Lender's and Borrower's legal counsel. Borrower: Paris Economic Development Corporation Facility: 1) Revolving Line of Credit 2) 5-Year Term Out of above Line of Credit 3) Revolving Line of Credit Amount of Loan: 1) $1,000,000 2) $1,000,000 3) $1,000,000 Purpose: 1) Provide funds for project Holt 2) Term out line of credit facility for project Holt 3) Provide funds as deemed appropriate by the PEDC for working capital Interest Rate: Taxable Rate Options: 1) Floating rate. of 1-month LIBOR plus 1.44 BPS (current rate would be 2.76%). 2) Wall Street Journal Prime Rate minus 0.308 BPS to be fixed at closing (current rate would be 3.942%). 3) Same as number (1) above Paris Economic Development Corporation June 4, 2003 Page 2 of 5 Tax Free Rate Options: 1) Floating rate of 1 month LIBOR plus 0.737 BPS (current rate would be 2.057%) 2) Wall Street Journal Prime Rate minus 1.425 BPS to be fixed at closing (current rate would be 2.825%). 3) Same as number (1) above Fees: None Repayment: 1) 12 monthly interest only payments 2) 5-Year term out note with interest and principal due monthly 3) 12 monthly interest only payments 'Maturity: 1) 12 months · 2) 5-years from maturity of note #1 above 3) 12 months Collateral: The 0.25%. sales tax revenue will be pledged to Hibernia National Bank on a pari passu basis with the. existing bond .issue, unless the existing bond issue prohibits the first lien position in which case, Hibernia National Bank would assume the second lien position. Guarantors: None Financial Statements and Reports: Throughout the term of the Loan, Borrower will submit to Lender the following: Borrower's Annual Audited Financial Statements to be due not later than 6 months from fiscal year end; Borrower's Quarterly Financial Statements to be due not later than 45 days from the end of each fiscal quarter; Borrower's Annual Budget to be due not later than 60 days fro~ adoption. Financial Covenants: Minimum Fixed Charge Ratio. A minimum fixed charged ratio of 1.0X is required. Defined as: Total Income and Revenue divided by all principal and interest debt service. To be measured annually from the audited financial statements. Paris Economic Development Corporation June 4, 2003 Page 3 of 5 Conditions Precedent to Funding and General Requirements: No funding under the Loan shall be made until all conditions precedent have been met to the satisfaction of Lender, including but not limited to, the satisfaction and/or receipt by Lender of the following regarding the Loan: - Lender's receipt of a duly executed loan agreement, promissory note, security agreements, subordination agreements, and all other documentation as Lender may require. All documentation regarding the Loan must be approved by Lender's legal Counsel. - Signed copy of resolutions of shareholders and directors of Borrower, which shall certify the names of the officers of Borrower authorized to execute and deliver the Loan and Collateral documents related to the transaction shall .have been received by the Lender; - Lender shall receive organizational documents of the Borrower (Articles of Incorporation, By-Laws, Certificates of Good Standing); - An opinion, among other things, of counsel for Borrower, in form and substance satisfactory to Lender, certifying that all of the Loan documents have been duly authorized, executed and delivered, are fully enforceable in accordance with the terms and as to such other matters as Lender may reasonably request; - Lender shall have received such. additional documentation as deemed reasonably necessary by Lender's counsel; - Lender shall receive written verification from Borrowers that it is not obligated nor will continue to fund any monies to/for Turner Industries; These conditions constitute only a partial list of'conditions that may appear in the documentation, and should not be deemed to be exhaustive or all-inclusive. Lender's obligations to make the Loans described herein shall be subject to Borrower's agreeing to conditions, affirmative and negative covenants, and default provisions which are standard in loan documentation for similar loans made by Bank or which Bank, in its sole discretion, may require for purposes of the Loans. Material Adverse Change: It is a condition to funding the Loan that there shall not have occurred, in the sole, Opinion of the Lender, any material adverse change in (a) the business operation or financial condition of the Borrower, (b) the collateral and/or (c) any other facts, circumstances, or conditions upon which the Lender has relied or utilized in making its decision to commit to the Loan. Furthermore, as of the date of funding, there shall exist no event of default (or event with which notice or lapse of time or both could constitute an event or default) under any of the Loan Documents. Paris Economic Development Corporation June 4, 2003 Page 4 of 5 Closing Costs: The Borrower will pay all reasonable costs and expenses incurred at any time by Lender (including, without duplication, all reasonable attorneys' fees and disbursements in. connection with the preparation and delivery of the loan agreement and all related documents for the Loan). Tax-free bank qualified opinion (if applicable): Lender will engage the services of outside legal counsel to provide a tax-free legal opinion on this transaction with the Borrower, and the preparation. The Lender's proposed interest rate is tax,free Bank Qualified, which will require the Borrower to execute an IRS Form 8038-G, Information Return for Tax-Exempt Governmental Obligations. The fulfillment of these requirements along with the confirmation of this transaction's tax-free bank qualified opinion provides support to the pricing for this loan. Amendments or ModifiCations: All amendments or modifications to this letter must be in writing and signed by the Lender. Expiration Date: The commitment described in this letter shall expire and become null and void at the close of business on July 8, 2003, unless the executed original of this letter is received by Lender prior to the Expiration Date. Closing Date: This commitment, once accepted by Borrower, will expire 30 days after the acceptance hereof, unless, prior to that date, all of the conditions precedent to the Loan have been fully satisfied and the Loan has closed. Confidentiality: All correspondence from Lender and Borrower, including this commitment letter and all closing documents, are confidential. Governing Law: This commitment letter and the committed Term Loan transaction is governed by Texas Law. Prepayment: A prepayment penalty will not be assessed for prepayment on any of the loan facilities in this commitment letter. Paris Economic Development Corporation June 4, 2003 Page 5 of 5 If the terms and conditions of this Commitment Letter are satisfactory, please signify your acceptance by signing below in the space indicated and return the executed original of this letter. We look forward to working with you on this and future opportunities. Sincerely, HIBERNIA NATIONAL BANK City President-Paris/Pittsburg ACCEPTANCE: The foregoing Commitment is hereby accepted, and the undersigned agrees to accept the Loan described therein, as of this day of .,'2003. PARIS ECONOMIC DEVELOPMENT CORPORATION ("PEDC") Don Wall, President , Chairman , Secretary/Treasurer President. Wall called for consideration of and motion on the following resolution: Resolution No. 2003-007, approving and authorizing the execution of an incentive agreement With C-Tech, Inc. was presented by City Attorney Schenk. Director Rodney Bass moved that Resolution No. 2003-007 be approved, seconded bY Director Sims Norment. There was no further discussion. Motion carried 5-0. PARIS ECONOMIC DEVELOPMENT CORPORATION RESOLUTION NO. 2003-007 A RESOLUTION OF THE BOARD OF DIRECTORS OF TiiE PARIS ECONOMIC DEVELOPMENT CORPORATION, APPROVING AND AUTHORIZING THE EXECIYFION OF AN INCENTIVE AGREEMENT WITH C-TECH, INC.; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the Paris Economic Development Corporation is a non-profit corporation governed by the Development Corporation Act of 1979 (the Act) and was established for the purposes of promoting, assisting, and enhancing economic development; and, WHEREAS, the means and measures authorized by thc Act and the assistance provided therein with respect to financing are found to be in the public interest and serve a public purpose of thc state in promoting the welfare of the citizens of the state economically by the securing and retaining of business enterprises and the resulting maintenance of a higher level of employment, economic activity, and stability; and, WHEREAS, in keeping with the purposes for which the legislature enacted the Development Corporation Act of 1979 and the purposes for which the voters of the City of Paris established the Paris Economic Development Corporation, it is deemed appropriate that an incentive agreement be entered into with C-Tech, Inc., subject to approval by the City Council of the City of Paris; and, WHEREAS, the form of the Incentive Agreement, attached hereto as Exhibit A, should, in ail things, bc approved, and thc President should be authorized to execute the same; NOW, THEREFORE, BE IT RESOLVED BY THE PARIS ECONOMIC DEVELOPMENT. CORPORATION: Section 1. That the findings set out in the preamble to this resolution arc hereby in all things approved. Section 2. That the form of the Incentive Agreement with C-Tech, Inc., attached hereto as Exhibit A, be, and the same is hereby, approved. Section 3. That the President of the Board be, and he is hereby, authorized and directed to execute, on behalf of the Paris Economic Development Corporation, and subject to approval by the City Council of the City of Paris, the Incentive Agreement, under the terms and conditions and in the form shown in EXhibit A, attached hereto. Section 4. That this resolution shall be effective from and after its date of passage. PASSED AND ADOPTED this 5th day of June, 2003. Don Wall, President Richard Severson, Secretary-Treasurer Larry W. Schenk, City Attorney INCENTIVE AGREEMENT STATE OF TEXAS ) ) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF LAMAR ) THAT, thc PARIS ECONOMIC DEVELOPMENT CORPORATION, acting by and through its President, Don Wall, duly authorized (hereinafter called "PEDC"), and C-TECH, INC., a Minnesota corporation acting by and through its duly authorized President, Michael Meshbcsher (hereinafter called thc "Company"), do hereby contract and agree as follows (the "Agreement"): WITNESSETH: WHEREAS, PEDC, an Economic Development Corporation organized under the Texas Development Corporation Act of 1979, Article 5190.6 of Vemon's Texas Civil Statutes, exists for the purpose of encouraging and assisting qualified service and manufacturing entities in the creation of jobs in the Paris, Texas, area; and, WHEREAS, the Company plans to create and operate a new computer services business in Paris, Texas (hereinafter referred to as the "Business") and has represented to PEDC that the Company intends to ultimately employ the number of new employees to work in Paris, Texas, specified in Section B2 below, and to invest its own funds in a new building and in furniture, equipment and fixtures at the Paris location; and, WHEREAS, the Company has requested that PEDC provide (i) an incentive loan of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000.00) to the Company to be funded in two (2) advances to provide to the Company the economic assistance that it needs to open its new business in Paris, Texas and to create the new jobs; and (ii) a lot for the location of the · Company's Business in a new industrial site situated in Paris, Texas; and WHEREAS, the new jobs and the investment by the Company in Paris, Texas, will encourage economic development in the community, and PEDC is willing to make the incentive loan and to conditionally convey the lot to the Company pursuant to the terms of this Agreement for such reasons; and WHEREAS, the Board of Directors of PEDC has determined that it is in the best interest of Paris, Texas, that these incentives be offered to the Company as described in this Agreement in order to encourage the Company to locate its business in Paris, Texas, and to create the new jobs;. NOW, THEREFORE, for and in consideration of the covenants, promises, and other agreements hereinafter contained on the part of each party named herein, PEDC and the Company agree as follows: A. Obligations of PEDC. 1. PEDC will provide to the Company the incentive loan in the stated principal sum of $1,500,000.00 (hereinafter called the "Loan") described in detail in Section C, below; which shall be documented as described herein and consummated at a time mutually agreed to by the parties hereto not later than 4:00 o'clock P.M. on June 16, 2003 (the "Closing Date"). 2. Provided that the Company is not in default under this Agreement, PEDC will convey to the Company as soon as reasonably possible and at an appropriate time mutually agreed to by PEDC and the Company (in any event, to occur no later than thirty (30) days following the first anniversary date of this Agreement), a tract of land of an estimated value not to exceed $10,000.00 per acre and not to exceed five (5) acres at a mutually agreeable location situated within the new PEDC Industrial Park located in the northwest quadrant of Loop 286 in Paris, Lamar County, Texas (herein called the "Land"). Such conveyance shall be executed by PEDC and delivered to the Company simultaneously with the Company commencing construction of one or more office/warehouse buildings on the Land as the situs of its Paris, Texas business; provided, however, that the conveyance will be subject to a condition subsequent coupled with a reversionary right to PEDC if the Company should fail to complete the construction on the Land of its new building thereon by the second anniversary date of this Agreement or to conduct its Business thereon during and throughout the Term of this Agreement. 3. RIGHT OF FIRST REFUSAL: In addition to the foregoing, PEDC hereby grants to the Company for a term of five (5) years after the Effective Date of this Agreement, a preferential right to purchase up to five (5) additional acres of land to. be located contiguous to one boundary line of the Land (herein called the "Option Tract"). If the Company is not in default under this Agreement, (i) should PEDC receive an offer to purchase the Option Tract from a third party (meaning anyone who is not a party to this Agreement), or (ii) should PEDC desire to donate the Option Tract, in whole or in part, to a third party (similar to the instant situation where PEDC is agreeing to donate the Land herein to the Company), the Company shall have a preferential right to purchase the Option Tract under the following terms and provisions: 2 a. PEDC shall deliver written notice (the "Notice") to the Company of any offer to purchase the Option Tract which PEDC desires to accept that is received from a third party, which Notice shall contain the proposed purchase price and terms of the purchase. b. Similarly, if PEDC desires to donate the Optionlract, in whole or in part, to a third party, it will deliver the Notice to the Company, except that the Notice will state the purchase price and terms of sale as established by the Board of Directors of PEDC based upon an appraisal acceptable to it or as otherwise determined in the exercise of its discretion. c. The Company may exercise its right to purchase the Option Tract (herein called the "Exercise Notice"), under the same terms and provisions as are contained in the third party offer, or as set by the PEDC Board of Directors in the donation situation, at any time prior to 4:00 o'clock P.M. on the 30th day following the delivery of the Notice by PEDC, which Exercise Notice shall be in writing, signed by the Company and delivered to PEDC within the prescribed time. d. If the Company timely exercises its option to purchase the Option Tract, it shall then proceed to "Close" its purchase thereof within thirty (30) days after the date it exercises its option, by taking title to the Option Tract and paying the purchase price therefor. e. If there is not a third party offer for the Option Tract, or a donative intent by PEDC at the time, and the Company desires to purchase the Option Tract, the Company shall deliver written notice of its desire to PEDC, and the purchase price therefor and the terms of sale shall be determined by PEDC as described in subparagraph 3b. above. f. This right of first refusal hereby granted to the Company to purchase the Option Tract shall remain in full force and effect, as long as the Company is not in default under this Agreement, for five (5) years after the Effective Date of this Agreement. g. At any time that the Company sends its Exercise Notice to PEDC, it shall also remit to PEDC its check for good funds in the amount of ten percent (10%) of the purchase price for the Option Tract, to be.held by PEDC as earnest money to bind the transaction and be credited to the balance of the purchase price due from the Company at Closing. h. If an Exercise Notice is delivered by the Company to PEDC, and the purchase is not Closed by the Company within the thirty (30) day time allotted therefor (with no delay in Closing having been caused by PEDC), the preferential right to purchase hereunder shall terminate, and the earnest money paid to PEDC shall be retained by 3 PEDC as liquidated damages to PEDC for the Company's failure to Close. 4. The Company shall be eligible to receive monetary credits against the annual principal installments owing on the Note as set forth in the Loan Agreement and in Section C below, with such credits to equal $1.00 to be · applied to the principal installment becoming due each year for every $10.00 paid by the Company in salary to all new employees working for the Company in the Paris, Texas location; provided, however, ·that the maximum amount of the credit allowed in any twelve (12) month period shall not exceed the annual Loan payment amount of $100,000.00 due to PEDC from the Company, and there shall be no carry-over or accumulation of credit to be made on the Note by PEDC from one annual period under the Note to the next, notwithstanding that additional credit was earned from salaries paid out by the Company during that year. No portion of the salaries, dividends, other income and profits paid by the Company to its CEO or other principal officers in charge of the Business and/or the shareholders of the Company will be included in calculating principal credits to be contributed by PEDC to the Company toward the annual principal installments, nor will more than $60,000.00 of any compensation of any kind whatsoever paid to any individual director, officer or employee of the Company in any one year be included in calculating these principal credits to be granted on the Note by PEDC. The employment of new employees engaged to work for the Company in the Paris, Texas, area will be verified by the customary means utilizing Texas Workforce Commission reporting data, which will be provided to PEDC by the Company on a regular and continuing basis during the term of the Loan. B. Obligations of the Company to PEDC. 1. The Company will commence business operations in Paris, Texas, on or before June 16, 2003. "Commencing business" shall mean, in addition to opening its doors for the operation of the business, having in place on June 16, 2003 (a) a binding lease for the use of not less than 20,000 square feet in one or more buildings in Paris, Texas,. of suitable size to accommodate the operations of the Company for at least the first two (2) years of its business, or until the Company's new building upon the Land is completed for occupancy prior to the second anniversary of this Agreement, whichever occurs first; and (b) having sufficient personnel and employees on hand, working at the Paris, Texas leased premises, to conduct business operations and to begin the employment process of hiring new employees to work for the Company at this location. 4 2. The Company hereby agrees with PEDC to establiSh goals and to have actually employed new persons to work for it in Paris, Texas, as follows: a. On or before August 15, 2003, a goal to have employed ten (10)new people with at least five (5) of them actually employed and working for the Company; b. On or before the first anniversary date of this Agreement, a goal to have employed fifty (50) new persons with twenty (20) new persons being actually employed and working for the Company in Paris, Texas; c. On or before the second anniversary date of this Agreement, a goal to have employed one hundred and six (106) new persons with thirty (30) new persons being actually employed and working for the Company in Paris, Texas; and d. On or before the third anniversary of this Agreement, a goal to have employed two hundred (200) new persons with forty (40) new persons being actually employed and working for the Company in Paris, Texas, throughout the Term of this Agreement. For the purposes of this Agreement and the criteria just recited regarding employment goals and persons-actually employed, each person actually employed must be a full-time equivalent ("FTE") employee. This does not restrict the Company to hiring just one new person to perform a single job. Instead, a FTE employee shall be one or more persons employed by the Company in Paris, Texas, to perform a single job, either individually or between them, which job, in the aggregate, totals an average of thirty-five (35) working hours during a calendar week, as determined over a one year period of work consisting of a minimum of forty-five (45) weeks, measured from the commencement date of this Agreement until each anniversary date thereof. The Loan and the conditional conveyance of land to be granted by PEDC to the Company are based upon the representation to PEDC and the agreement of the Company to have established a business in Paris, Texas, sufficient in size to require as a goal two hundred (200) new FTE jobs in Paris, Texas, and as a minimum forty (40) actual new FTE jobs in Paris, Texas, before the end of three (3) years following the commencement date of this Agreement, and to keep such employment in existence in Pads, Texas, throughout the Term of this Agreement. All jobs must be performed by actual new. employees of the Company working in Pads, Texas, in order for the Company to receive credits against principal owing on the Note as described in paragraph A3 above. 3. The term of this Agreement (the "Term") shall be for seventeen (17) years, commencing on the effective date hereof. 4. The Company agrees with PEDC that during the Term of this Agreement, it will not reduce the employment which has been created under these provisions below the minimum employment criteria established in paragraph B2 above, and that it will not relocate its Business outside of Paris, Texas. In addition, the Company agrees that it will provide PEDC with a copy of its Texas Workforce Commission Employer's Quarterly Report within thirty -~ (30) days of the Company's filing of the same with the Texas Workforce Commission to evidence to PEDC the creation and continued existence of the new jobs hereby contemplated. In addition to the report just required during the term of the Loan, the Company agrees to provide to PEDC on or before. the fifteenth (15th) day of each month, for the previous month just passed, the certificate of an authorized executive of-fleer of the Company certifying the number of employees of the Company in Paris, Texas, the number of new employees hired for the preceding month, and the respective salaries for those employees. The first such officer's certificate shall be provided to PEDC by the Company on September 15, 2003 reporting this data for the month of August, 2003. Finally, within thirty (30) days after request from PEDC during the Term of this Agreement, the Company agrees to prepare and deliver to PEDC a financial statement for the Company duly certified to by an officer of the Company as being true and correct, showing the financial condition of the Company and employee salaries paid for the period of time specified by PEDC. If the Company prepares audited or unaudited annual financial statements, it will provide to PEDC upon request, a copy of such annual financial statements. 5. Within thirty (30) days following the date that PEDC conveys to the Company the lot within the industrial development park, the Company agrees -' to commence construction of a new building on that land containing a minimum of 25,000 square feet in size. All such construction shall be performed in accordance with the applicable building and zoning laws of the City of Pads, Texas, and in conformity with Development Standards of the Industrial Park. The construction of the new building or buildings shall be completed by the end of the second anniversary date of this Agreement, subject to delays caused by Acts of God or the failure of PEDC to convey the Land to the Company. "Acts of God," as used above, shall mean the acts of a public enemy, any natural disaster, war, riot, civil insurrection or governmental or de facto governmental action which delays or prevents the Company from performing this obligation within the time limits provided herein. Acts of God shall also include fires, explosions, accidents, floods, labor disputes and strikes, but shall exclude all delays caused by the acts, omissions or negligence of the Company. If the Company fails to commence construction within the time limits required herein, or after commencement occurs, fails to prosecute the construction to completion in a diligent manner, 6 963 or to comply with the building laws of the City of Paris or the requirements of the Development Standards of the industrial Park, then the Company shall be considered to be in default under the Loan. In case of such default, PEDC will deliver to the Company written notice of the default; and if the Company shall have failed to cure the default within sixty (60) days after the delivery of such written notice (as herein provided), then PEDC may accelerate the maturity of the Note and exercise all of its rights and remedies under this Agreement, the Deed of Trust, the Guaranty, the Security Agreements and the other loan documents, if applicable, to include, without limitation, the foreclosure of its lien upon the lot and all improvements constructed thereon, as is to be provided in the Deed of Trust discussed in Section C below. 6. During the Term of this Agreement, and as a further condition of PEDC granting the Loan and the conditional conveyance to the Company, the Company agrees to timely pay all applicable ad valorem taxes due and owing by it to the City of Paris and to all other taxing authorities having jurisdiction over any property of the Company within Lamar County, Texas; provided, however, that the Company's failure to pay taxes during any period of lawful protest of the same shall not constitute a breach of this covenant. In addition, the Company covenants with PEDC to pay all employment, income, franchise and other taxes due and owing by it to all other local, state and federal applicable taxing and governmental entities. If the Company shall fail to pay any of these taxes, and the taxes thereby become delinquent and not subject to further challenge by the Company, at that time such failure shall constitute a breach of this Agreement and a default hereunder and under the loan documents, and shall subject the Company to any and all rights and remedies available to PEDC as described in this Agreement, in the loan documents or as existing under applicable laws to be pursued against it. C. The terms and provisions of the Loan to be made by PEDC to the Company, together with the documents which are to evidence and secure such Loan (herein called the "loan documents"), are described as follows: 1. The Note: The Promissory Note (the "Note") shall be made by the Company, payable to the order of PEDC in the stated principal amount of $1,500,000.00, bearing no interest, and payable in fifteen (15) annual installments of principal only, the first of which installments shall commence on the second anniversary date of this Agreement, and the last of which shall be payable on ihe day preceding the seventeenth anniversary date of this Agreement. Commencing with the second anniversary date of the Note, principal shall be payable to PEDC by the Company in annual installments of $100,000.00 each for the remaining fifteen years; provided, however, that the Company shall receive credits against the principal payments due thereon in an mount equal to $1.00 of principal credit for every $10.00 in the salaries which the Company has paid to all new employees working for it in the Paris, Texas location, subject to the limitations that (a) the maximum in credits from PEDC contributed in any tWelve (12)month period is $100,000.00; and (b) there shall be no carry-over or accumulations of credits earned in any tWelve (12) month period to the next twelve (12) month period. No credits from PEDC shall be earned by the Company during the first one (1) year term of the Note, because no principal installment is due during the first two (2) years of its term. Credits earned for the first principal payment due on the Note on its second anniversary date shall be earned during the second year of the term of the Note. No portion of the salaries, dividends, other income and profits paid to the CEO or the principal officer in charge of the Business and/or to the shareholders of the Company will be included for the purpose of calculating principal credits to be contributed by PEDC to the Company toward the annual principal installments due on the Note, nor will more than $60,000.00 of any compensation of any kind whatsoever paid to any individual director, officer or employee of the Company in any one year be included in calculating the principal credits to be granted on the Note by PEDC. The Note will provide that it may not be prepaid in advance of its maturity without the advance written consent of PEDC. 2. Loan Agreement: Simultaneously with the execution and delivery by the Company of the Note, the Company shall enter into, execute and deliver with PEDC a Loan Agreement setting forth the relevant terms of this Agreement, which are essential to the making of advances and the administration and payment of the loan ("Loan Agreement"). The Loan Agreement will require on the date of its execution, the inclusion of a proposed budget from the Company setting forth the uses to be made by the Company of the $1,500,000 in proceeds of the Loan. The Company will agree in the Loan Agreement to utilize the loan proceeds only on inventory, equipment, costs of constructing the new building upon the Land, and salaries to new employees, in Paris, Texas, and other expenses of operating its Business in Paris, Texas. The Loan Agreement will provide that the Loan is to be funded in two installments, one of $500,000.00 commensurate with the execution and delivery of the Loan Agreement, and the other advance orS1,000,000.00 to be paid to the Company on August 15, 2003, provided that the Company is in compliance with all of its obligations under this Agreement and the Loan Agreement. The Loan Agreement will set forth the employment criteria together with the other representations, covenants and obligations of the Company set forth herein. 3. Personal Guaranty: Michael Meshbesher, Chief Executive Officer of the Company and a shareholder, will execute and deliver his unconditional personal guaranty of payment of the Loan. Mr. Meshbesher's obligations of payment under the guaranty will be enforceable upon the occurrence of a default of the Company under this Agreement or under any of the loan documents described in this Section C. Additional notice of default or right to cure will not be granted to the Guarantor as a condition to enforcement of the Guaranty. 4. Key-Man Life Insurance upon Michael Meshbesher: By the Closing Date the Company shall have caused a "Key-Man Life Insurance Policy" (hereinafter called the "Policy") from an underwriter acceptable to it and to PEDC to have been written upon the life of' Michael Meshbesher in the amount of $1,500,000.00, naming PEDC as both owner of the policy and Beneficiary. The Policy coverage shall be adjusted in amount during the term of this Agreement, from time to time, so that the insurance proceeds payable are never less than (a) the outstanding principal balance owing on the Note, plus (b) the appraised value at the time of the Land, as determined by the Lamar County appraisal District. All premiums for the insurance shall be paid by the Company. If during the Term of this Agreement, Michael Meshbesher shall cease to be CEO of the Company, then the Company shall cause the life of the succeeding CEO to be similarly insured for $1,500,000.00 (or the combined amount of(a) and (b) above, whichever is less), with the policy to be owned by PEDC and PEDC to be named as the Beneficiary. All original policies providing this Key-Man Coverage shall be delivered to and held by PEDC during the Term of this Agreement. Under the policy provisions, PEDC shall have the right to receive written notice from the underwriter of not less than sixty (60) days prior to the underwriter's cancellation of the insurance coverage, or to any lapse or other termination of the insurance policies. Upon the death of Michael Meshbesher, or of his successor, as CEO, the proceeds of the insurance policies shall be paid to PEDC, which insurance proceeds shall, in mm, be used by PEDC (a) to pay all sums of principal still owed to PEDC on the Note, and Co) to reimburse PEDC for the value of the Land within the Industrial Park contributed by it to the Company, (with such value to be determined by the then current appraisal of the Lamar County Appraisal District). At the end of the Term of this Agreement, PEDC agrees to assign any Key-Man Insurance Policies which PEDC still owns to the person or entity designated to PEDC by written instructions from the Company. If the Policy ever exceeds the values of (a) and (b) above at the time of death of the insured, the excess proceeds over (a) and Co) above shall be paid to the alternate beneficiary designated by agreement of PEDC and the Company in the Policy. 9 5. Security Agreements: The Company shall execute and deliver to PEDC one or more Security Agreements covering all of the Company's inventory, accounts receivable, other personal property, furniture, fixtures and equipment owned by the Company in Paris, Texas. In addition, to secure the Guaranty, Michael Meshbesher shall execute and deliver to the Company (i) a Security Agreement covering all of the stock of the Company owned by him, together with a stock power, endorsed in blank, to which is attached the stock certificate or certificates evidencing his stock ownership in the Company, to be held by PEDC until the Note is paid by the Company for the purpose of perfecting PEDC's security interest in the stock, and (ii) another Security Agreement to PEDC, as secured party, covering as collateral all of Michael Meshbesher's non-exempt personal and real property, wherever located (including a mortgage' or deed of trust to cover all real estate). All Security Agreements shall create in PEDC valid and enforceable security interests under the Uniform Commercial Code as adopted in the State of Texas or in any state whose law governs with respect to the collateral included therein. Financing statements will be filed in the appropriate governmental offices, as applicable, to further perfect PEDC's security interest granted under the Security Agreements. All liens and security interests granted to PEDC by the Company and by Michael Meshbesher shall be first and superior to other creditors, if possible; but if not they will be second or subordinate to any existing, preferential or prior liens or security interests only to the extent that those existing, preferential or prior liens or security interests are properly created and perfected under applicable laws. 6. Deed of Trust (with Security Agreement and Assignment of Rents and .- Leases): The Company will execute and deliver to PEDC a Deed of Trust (with Security Agreement and Assignment of Rents and Leases) describing the real property in the Industrial Park conveyed by PEDC to the Company, together with all improvements and fixtures situated thereon. The Deed of Trust shall provide that it shall be a default under the terms of the loan documents described in this Section C if the Company shall fail to pay the Note or to perform any of its covenants or obligations under this Agreement, the Loan Agreement or under the other loan documents. In addition, it shall be a default under the Note, the Deed of Trust and the Security Agreements described above if any of the representatiOns or warranties made by the Company to PEDC in this Agreement shall prove to have been or become untrue. 7. Events of Default and Remedies: Events of Default under this Agreement and all other loan documents described in this Section C, are: The Company shall: a. Fail to employ the minimum number of employees specified herein to be employed during the times required (see Section B2 above); 10 b. Fail to maintain its Business in Paris, Texas throughout the Term of this Agreement; c. Fail to pay the Note as and when due; d. Fail to commence, construct and complete its new building in the Industrial Park after the land has been timely dedicated to the Company by PEDC, subject to excused delays caused by Acts of God, as defined above; e. Fail to comply with the covenants and agreements of the Company contained in this Agreement and in the loan documents; f. Have proven to be untrue any representation or warranty made herein or in the loan documents. Remedies: Upon the occurrence of any of the above Events of Default which shall remain uncured for sixty (60) days after written notice from PEDC to the Company describing the default, PEDC shall have the right to: g. Accelerate the maturity date of the Note, declaring all sums remaining unpaid thereon to be immediately due and payable; h. Foreclose the Deeds of Trust and any or all Security Agreements; i. Proceed to collect under the Guaranty from Michael Meshbesher the unpaid balance owing to PEDC on the Note, plus the value at that time of the Land as determined by the current appraisal of the Lamar County Appraisal District; j. Sue for specific performance of any covenant or agreement breached by the Company, or to recover the damages sustained by PEDC as a result of the Company's default; or k. Seek relief by temporary restraining order or injunction from a court with respect to any conduct by the Company or its officers or directors which is in breach or contravention of any covenants, agreements, intents or purposes of this Agreement or of the loan documents. D. The Company hereby represents and warrants to PEDC that the following are tree and correct on the date hereof and will continue to be tree and correct throughout the term of the Loan: 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota, and has all corporate power and authority to carry on its business as presently conducted in the State of Texas, and has filed with and received from the Secretary of State of Texas, its Certificate of Authority to transact business in Texas as a foreign corporation. In this process of receiving a Certificate of Authority to transact business in Texas, the Company shall have designated with the Secretary of State of Texas, a registered office and a registered agent in Texas to receive service of process. 11 2. The Company warrants and represents that it has the authority to enter into and to perform this Agreement and the loan documents described herein, and that it has the intention and the goals of creating the new jobs in Paris, Texas, as described above. - 3. The Company has received at this time, or by the date'that it commences business in Paris, Texas, will have obtained all necessary rights, licenses, leases, permits and other evidences of authority to conduct and carry on its business in the State of Texas in accordance with the representations which it has made to PEDC herein. 4. The Company is aware there are statutory limitations upon PEDC in making the Loan to the Company and in committing to convey the real property to the Company, and it is also aware there are use required by law to be made by the Company of the funds loaned to it hereunder, pursuant to the provisions of Article 5190.6 of the Texas Revised Civil Statutes annotated, and the Company agrees the funds provided by PEDC hereunder shall be used only in furtherance of a Project as defined in Section 2(11)(A) of the Development Corporation Act of 1979, Tex. Civ. Stat. Art. 5190.6, as amended. The Company further acknowledges and agrees that the funds loaned to it hereunder by PEDC shall be utilized solely for the purposes authorized under the Texas Statute just cited and the terms of this Agreement. If an audit should ever determine that the funds were not utilized by the Company for these purposes, such determination shall constitute a default under the loan documents described herein, thereby entitling PEDC to exercise all of its remedies under the Deed of Trust and the Security Agreements to realize upon the collateral therein described, if the indebtedness owing on the Note is not immediately paid in full. In this regard, it is agreed by the Company that it will provide to PEDC within thirty (30) days after request from PEDC, all periodic or annual financial statements that PEDC shall require to confirm the uses of funds by the Company and to verify the terms and provisions of this Agreement. 5. The Company represents that it is not involved in any bankruptcy proceedings at this time, and that it has not filed a petition in bankruptcy, nor are any such proceedings contemplated by the Company at this time. If the Company shall become the subject of voluntary or involuntary bankruptcy proceedings during the term of the Loan, the same shall constitute an event of default under the Deed of Trust and all of the Security Agreements. In such event, any unpaid s urns owing on the Note or under the terms of the Loan Agreement shall become immediately due and payable. 12 6. The person signing this Agreement on behalf of the Company is duly authorized to do so by the Board of Directors of the Company; and the Company shall deliver to PEDC on the effective date of this Agreement, a certificate of its corporate resolution authorizing the execution, delivery and performance of this Agreement and of the loan documents by the Company, together with an incumbency certificate identifying its executive officers and the officers signing the documents. E. This Agreement sets forth the entire understanding between the parties, and any other understandings or agreements (except for the loan documents), shall be canceled and superseded by this Agreement upon the date of execution hereof. None of the terms of this Agreement shall be waived, discharged, altered or modified in any respect, except by an agreement in writing signed by both parties and specifically referring to this Agreement. This Agreement is performable in Lamar County, Texas, and shall be governed by, construed and enforced in accordance with the laws of the State of Texas. The provisions of this Agreement shall apply to, bind and inure to the benefit of the PEDC, the Company, and their respective successors, and permitted assigns, if any. F. The terms and conditions of this Agreement are binding upon the successors and assigns of all parties hereto. Neither this Agreement, nor any interest therein, shall be assigned by the Company without the prior written consent of PEDC. G. Venue for any actions arising under this Agreement or the loan documents shall lie exclusively in the courts of Lamar County, Texas, for any state court action, and in the U.S. District Court for the Eastern District of Texas for any Federal Court action. H. All representations, warranties, covenants and agreements of the parties, as well as any rights and benefits of the parties, pertaining to the transaction c.ontemplated hereby shall survive the original execution date of this Agreement. I. Any notices required to be given hereunder shall be in writing and shall be deemed to be duly delivered by (i) mailing the same postage prepaid, by certified mail, return. receipt requested, to the parties at the addresses shown beneath their signatures to this Agreement; or (ii) delivering the written notice to the other party hereto via facsimile, to the fax numbers set forth below. Addresses and fax numbers may be changed by a party only by giving written notice of such change to all other parties in accordance with this paragraph at least five (5) days in advance of delivering the notice'by mail, and at least one (1) day in advance of delivering the notice by fax. J. The intent and purpose of this Agreement on the part of PEDC, and the consideration to it for providing the $1,500,000.00 Incentive Loan and the conditional conveyance of five (5) acres to the Company, is to provide for new employment in Paris, Texas, 13 to stimulate and improve the City's economy. Accordingly, the Company agrees to and acknowledges this purpose; and in signing this Agreement hereby makes the commitment to PEDC to provide the employment herein represented by it and to maintain in Paris, Texas, these levels of employment and the presence of its Business throughout the seventeen (17) year Term of this Agreement. - EXECUTED on the ~ day of ., 2003 (herein called the "Effective Date" of this Agreement). PARIS ECONOMIC DEVELOPMENT CORPORATION ("PEDC") Don Wall, President ATTEST: Address: 1125 Bonham Street Paris, TX 75460 Fax: (903) 784-2503 Richard Severson, Secretary-Treasurer C-TECH, INC. (the "Company") By: Michael Meshbesher, President ATTEST: Address: 131 Cheshire Lane, Suite 100 Minnetonka, MN 55305 Fax: (952) 249-6554 , Secretary-Treasurer Fax: (952) 944-0415 Fax: (612) 376-4767 STATE OF TEXAS ) ) COUNTY OF LAMAR ) BEFORE ME, the undersigned authority, on this day personally appeared Don Wall, President of the Paris Economic Development Corporation, Paris, Texas, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed and in the capacity therein stated. 1.4 GIVEN UNDER MY HAND AND SEAL OF OFFICE, this __ day of , 2003. Notary Public, State of Texas STATE OF ) ) COUNTY OF ) BEFORE ME, the undersigned authority, on this day personally appeared MICHAEL MESI-IBESHER, President of C-TECH, INC., a Miuncsota corporation, known to me to be the person whose name. is subscribed to. the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, as thc act of said corporation and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this day of , 2003. Notary Public, State of Texas 15. There being no further business, the meeting was adjourned at 12:55 p.m. DON WALL, PRESIDENT ATTEST: LISA WRIGHT