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JANUARY 31, 1997 SCHERTZ DEVELOPMENT FOUNDATION BOARD OF DIRECTORS' MEETING MINUTES January 31, 1997 - 8:00 a.m. Denny's Restaurant Item #1 Call to Order: The meeting of the Schertz Development Foundation Board of Directors was called to order at 8:00 a.m. by Chairperson Jackie Jones. Those present: Jackie Jones Lew Borgfe1d Kerry Sweatt Ed Harris Patricia Pyka Mark Marquez' Earleen Ehlers - Pyka Design Representative - Executive Director - Recording Secretary Item #2 Approval of Minutes: Spelling correction under those present, first name from Jone to Jones. Page 3, Paragraph #1, motion made "by" instead of "my" Mr. Ed Harris and seconded by Mr. Borgfeld instead of Mr. Sweatt. Motion made to approved the minutes as amended by Mr. Sweatt, seconded by Mr. Harris with unanimous approval. Item #3 Discussion quorum due Discussion/Action on Sale of Lots #18 & further down in mintues. Action on hold to abstention by Mr. Borgfe1d and Mr. Harris. #19 : until Item #4 Action to Approve Payment of Fulbright & Jaworski Resolution Attached: The initial invoice had several items that did not relate to the Foundation. After Invoice #9651260 was corrected the amount due was changed to $619.18. Ms. Jones asked if there were any questions, Mr. Borgfe1d interjected that the amount of the bill was high because when you deal with the caliber of attorney as Fulbright & Jaworski you can expect the bills to run high. Ms. Jones added that the Foundation pays them $4.13 per minute, or approximately $247.80 per hour. Mr. Sweatt said that when a routine transaction takes place there may be a better way to handle it. Mr. Borgfe1d said that when doing real estate transactions the Foundation needs someone experienced. Ms. Jones asked if the title company could do the earnest money contracts. Mr. Borgfe1d said that there are some conditions that we would probably want an attorney to deal with that is experienced. Usually its not a problem, but I think you would want an attorney who is familiar with the Foundation and how we do things. The question is what level of experience do you want. Mr. Sweatt said that Fulbright and Jaworski has all the resources needed to do this type of transaction. There may be a partnership who might be able to do the routine things. Rester does tax work for us. Mr. Marquez asked if he should search for a real estate attorney who would be willing to -2- handle it. Mr. Borgfeld said that he could give Mr. Marquez some names. There are a couple that the bank uses. Mr. Marquez said to give any recommendations to Earleen and we will look into it. Ms. Jones suggested that the Board should approve calls prior to making them. In other words, we discuss it at the meeting and say who will call the attorney. Mr. Borgfeld said that when they have a transaction they have to call. Mr. Marquez said that we do not act upon transactions until we get approval on them. The Board would always have a heads up on these things. Motion to approve to amount of $619.18 was Harris. Vote carried pay the Fulbright & Jaworski bill in made by Mr. Borgfeld and seconded by unanimously. the Mr. Mr. Borgfeld explained to the Board the different reasons that attorneys had been contacted, i.e., buy back. Mr. Sweatt added that it may be impossible to get prior approval. As an alternative, maybe using a less expensive attorney might be better. Ms. Jones asked if the Board could ask the buyer to pay for the attorney fees. Mr. Borgfeld said that in some cases that might make someone go elsewhere. Ms. Jones added that she meant buyers who do not agree with the covenants. Item #3 Discussion of Sale of Lots #18 and #19: No action to be taken, however, Mr. Sweatt asked if the Board would let Ms. Pyka go ahead with her presentation. A phone conference with Mr. Jeffreys could bring him up to date (prior to action), so that Ms. Pyka's time would not be wasted. Mr. Harris made proposal regarding 120 Commercial Place stating that the property is owned by Pat pyka properties. The business is called Fiber Art. At this time, Fiber Art is expanding to the back of the lot for ease of access, just nine months after going into business in Schertz. Looking down the road, they would like a way to expand in the future. Since there is a building next to them, they are looking at lots 18 and 19. The restrictive convenants have a clause that you have to build within two years and I think what we are trying to put on the table is that we don't know if we will build in two years, but we can't be land locked either. What we are looking at is a waiver for the land across the street. We are operating across the street and will have two buildings built there. Ms. Pyka added that they cannot predict what will happen in the next two years. She could see they may be building in two years, but needs more time. Mr. Marquez asked their immediate plans for the two lots. Mr. Harris answered grass. The way it is tied is to the loan for the new construction. The longer we wait to do something about the land, the longer it takes before we will know about proceeding to build on lot #10. -3- Ms. pyka said that parking is a consideration when yu have a building. Initially we thought the building would be big enough. This is a brand new business, we have subcontracted alot of the work but now have decided to do it ourselves. There is alot of potential. If we get into production we will need a bigger building. Mr. Marquez said that the growth is good news. Mr. Borgfeld said that basically the purchase is not so it could be sold for a profit. He asked if there would be a possibility of waiving the requirement since there will be a 9,000 square foot building. Or, rather than waiving them, granting some type of variances on them as accepting this for the requirements for three lots. Mr. Sweatt said that his biggest concern is that we are in a situation where we are facing some other pieces of property down there that we cannot let slide for somebody else. Could we enter into a side bar agreement that says we agree that the building proposed will meet the requirement? Ms. pyka added that she is not buying the property as an investment. Mr. Harris said that he and Ms. Pyka had talked about it and the whole purpose is for expansion, not for resale. Any type of side bar that ties those two lots to the facilities across the street is fine. Mr. Sweatt added that we would need first right of refusal at the sale price. Ms. pyka said that she did not have a problem with that. Ms. Jones said that the Foundation could look at it at the end of the two year period. She said she would not like to set a precedent. Mr. Borgfeld said that if the Foundation is not in it in two years there might be a problem. Ms. Pyka said that there is some expensive equipment in the building. Mr. Harris said that as long as they are operating across the street that is what ties the two parcels of land for a continuation of whatever years there is. After two years we might not be here. I would much rather have it so that we don't have to think about it in one or two years. Mr. Fiber do. Marquez said there are some distinctions between SAC Art. Fiber Art has done everything they said they There may be some room in there to work with. and would Mr. Harris said there is nothing in the contract so the buyer can use this land for future expansion. Mr. Borgfeld said that if they decide to sell at some future time, first right of repurchase goes back to the Foundation. Ms. Jones asked what happens if we give them a year extention and two years down the road they want to get out of the land? Would the new buyer still have a year extent ion? Are we extending the length of time for a new purchaser? Mr. Borgfeld said they would have to get with the Foundation. Mr. Harris said the Foundation would have the first right of refusal. After two years if you don't want to buy the property, the owner can do whatever he wants to do with it. We are just asking that the time frame be extended. Ms. Pyka said they just wanted to be up front with -4- everything. Mr. Sweatt said the Foundation may want to buy it back. Mr. Harris said down the road it would still cost $0.40 a square foot. What we are asking is that it be waived as long as the business is operating across the street. The Board still has the right of first refusal. We are not going to put a storage yard right across the street. Mr. Sweatt said that Fiber Art is requesting this for lots 18 and 19 across the street from lot 10 where they presently do business. Mr. Harris agreed. Mr. Sweatt addressed the Board saying that we must feel good about some sort of distinctions. The attorney was quick to point out that these are our covenants and how we waive them is complicated. It is not as easy as if just a rule. I am not opposed, I just don't know how to get there. As long as the right of first refusal is in place, I don't have a problem with it. Ms. Jones said that we will get with Don Jeffreys and see how he feels about it. Mr. Marquez said we will move quickly. Mr. Sweatt added that the Foundation is glad that Fiber Art's business is doing good. Mr. Marquez asked Ms. Pyka and Mr. Harris if they would split the cost of the survey with the Foundation. They agreed as long as Mr. Harris is able to choose the surveyor, which would be Mr. Robert opitz. Mr. Marquez said that he would give instructions to the title company that the cost would be split at closing. Mr. Sweatt excused himself from the meeting, because of prior committments. Item #5 Board Member Comments: Mr. Borgfeld suggested a tour of Fiber Art. Mr. Marquez agreed that the next meeting might be held there with a tour to follow. Ms. pyka said that one of the reasons they would like to build out back of their existing building is to have some meeting rooms. There was discussion of Lots 23 and 24. Mr. Borgfeld said that he had contacted Mr. Dollahan who was not at liberty to discuss the details of the problems SAC is having. He said he then visited with Mr. Stan Boyle, the owner of SAC, who said that the first four lots he purchased was prior to the Foundation. He said that he does not own lot 25. Mr. Borgfeld felt that lot had been purchased from the RTC. Mr. Marquez said a check of that would be made. Our concern is with lots 23 and 24. He said Mr. Boyle bought the two lots and the two year time period has expired. We have 180 days to offer to repurchase. Mr. Boyle said he specializes in the erection of metal buildings regionally. He does all the Sam's, all the Walmarts and major schools, major metal erection contractors and subcontractors in the area. He is the distributor for the Butler Buildings. Apparently he has been in the area for quite some time in Converse. He starting doing some work with some factoring companies. According to him, -5- about a year or so ago, the factoring company paying for receivables gave him a bad check. Most of the companies that dealt with them did not survive. He filed suit against them and they filed bankruptcy. He has formed a new company, but because SAC is involved in all these suits, liens, etc., everything is tied up. The bankruptcy court controls everything, we are at their discretion. His new business is called ASC. SAC land is in litigation and tied up by bankruptcy court. We need to notify them of our intent. They are using attorneys Thompson-Smith, a Mr. Jimmy McDonna. Ms. Jones expressed that she wished Mr. Boyle had told the Foundation up front what problems he was having. Mr. Borgfeld said that he is willing to visit with the Foundation at any time. Mr. Marquez thought that would be a good idea. Mr. Borgfeld said that Mr. Boyle has an 18,000 square foot building, he just hates to put it up under SAC. Ms. Jones asked if he wanted the Foundation to repurchase. Mr. Borgfeld said he has clear plans to build, but can't do it under SAC. Mr. Marquez said we understand he can't do anything until the litigation is settled. Mr. Borgfeld said he had never dealt with bankruptcy courts before where it has been easy. Ms. Jones suggested the Foundation talk with Mr. Boyle. Mr. Marquez said he would try to get him to come to the next Foundation meeting and that just clearing the air would make everyone feel better. Mr. Borgfeld said that RCS called Monday and they have located an existing building. At this point, everything is on hold. Ms. Jones Marquez said the property. asked about news from CountrySide Ceramics. that there may be a possibility for CSC to Mr. sell Item #6 Staff Comments: Mr. Marquez said that the Foundation has $50,000+, sale would add another $16 to $17,000. Repurchase is only going to require $34,000 if there is no problem with buying it back. Item #7 Sweatt, together Chairperson's Comments: Ms. Jones said Mr. Marquez and Mr. Jeffreys would try Monday or Tuesday to discuss lots 18 & 19. she, to Mr. get Item #8 Set Next Meeting Date: No date was set. Item #9 Adjourn: Meeting adjourned at 9:02 a.m. Earleen Ehlers Recording Secretary Jackie Jones Chairperson