MINUTES
Kansas Bioscience Authority
Executive Committee of the
Board of Directors
Friday, October 23, 2009
4:00 – 4:16 p.m.
Call to Order: A quorum being present, a meeting of the Executive Committee of the Board of Directors of the Kansas Bioscience Authority was called to order at 4:01 p.m. by Chairman John Carlin. Additional members of the Committee and Staff participating by phone were Bill Sanford, Dr. Ray Smilor, Sandra Lawrence, Ed McKechnie, and Jan Katterhenry. KBA staff in attendance included Tom Thornton and Lisa Kay. Katie Logan and Jeff Ellis, legal counsel from Lathrop & Gage, were also on the call.
Gov. Carlin noted that there would not be an executive session during the meeting. There will be a separate Executive Committee meeting scheduled next week for a presentation with Buck Consultants.
Minutes of the August 14, 2009 Executive Committee Meeting: Dr. Smilor moved to approve the minutes of the August 14, 2009 Executive Committee meeting. Mr. McKechnie seconded the motion. The motion passed unanimously.
Proposed Financing Option for the Kansas Bioscience Venture Accelerator: Ms. Katterhenry reviewed the options which had been reviewed by staff for financing the development of the Kansas Bioscience Venture Accelerator facility and summarized the recommended resolution behind Tab 3 in the binder which was circulated to the Committee for review prior to the meeting. The recommendation is to move forward with industrial revenue bond (IRB) financing for the Venture Accelerator through the City of Olathe, a financing option which will allow contractors to purchase materials sales tax-exempt. Further, it is recommended that the KBA move forward with UMB Bank as the purchaser of the bonds on the terms they offered; i.e., a principal loan amount not to exceed $20 million with a maturity of up to 10 years and an amortization period of up to 20 years. The remaining specific terms are outlined in the proposed resolution.
Governor Carlin clarified that the approval of the resolution today authorizes Ms. Katterhenry to proceed toward finalizing the loan on the basis proposed, but final documentation for the bond financing would be subject to approval by the Board at a future board meeting. Ms. Katterhenry noted that the action requested of the Committee at this meeting is to allow the KBA to move forward with the City so that it can begin its approval process and start the development of the bond documents.
In response to a question from Mr. Sanford, Ms. Katterhenry confirmed that to the $20 million loan would be sufficient to cover the all costs associated with the construction and related financing.
Motion: Mr. McKechnie moved to adopt the following resolution:
RESOLUTION OF THE EXECUTIVE COMMITTEE OF
THE BOARD OF DIRECTORS OF
THE KANSAS BIOSCIENCE AUTHORITY
WHEREAS, the Kansas Bioscience Authority (the “Authority”) has received a proposal from UMB Bank to finance the construction of an approximately 39,000 square foot commercial office/incubator building to be located in the City of Olathe, Kansas, at 10900 South Roundtree Street, Olathe, Kansas, in the Kansas Bioscience Park (the “Project’); and
WHEREAS, in order to obtain an exemption from sales tax on labor and materials to be used in the construction of the Project, the Authority has determined that it is in the best interests of the Authority to accomplish the financing through the issuance of Industrial Revenue Bonds to be issued by the City of Olathe, Kansas, and to be purchased by UMB Bank; and
WHEREAS, the Executive Committee of the Board of Directors of the Association (the “Executive Committee”) has determined that financing the Project through the issuance of Industrial Revenue Bonds to be issued by the City of Olathe and to be purchased by UMB Bank, and acceptance of the terms of Industrial Revenue Bond financing proposed by UMB Bank, are necessary and desirable and in the best interest of the Association;
NOW, THEREFORE, be it resolved by the Executive Committee of the Board of Directors of the Kansas Bioscience Authority, as follows:
1. The Association accepts the commitment from UMB Bank to make a construction loan and an end loan to the Authority (collectively the “Loan”), to be evidenced by Industrial Revenue Bonds to be issued by the City of Olathe, Kansas, and purchased by UMB Bank, in order to finance the Project, upon the following terms:
a. Principal amount of the Loan not to exceed $20,000,000.
b. Loan to be evidenced in whole or in part by Industrial Revenue Bonds to be issued by the City of Olathe, Kansas, and purchased by UMB Bank.
c. All or a portion of the Loan to be secured by the Project.
d. A portion of the Loan may be secured by marketable securities of the Association.
e. Interest on all or a portion of the Loan may be exempt from federal income taxes.
f. The terms relating to interest, amortization of payments, and maturity may vary, but the outside parameters approved for such terms are as follows:
During 24-month construction period, interest at floating rate not to exceed UMB Prime Rate less ½%.
During the end loan period, interest rate may be fixed or floating. If fixed, interest rate will be based on 3- or 5-year US Treasury Bond Yield, and will not exceed 250 bps spread over the corresponding US Treasury Bond Yield. If floating, rate may be tied to UMB Prime Rate or US Treasury Bond Yield.
If tied to UMB Prime Rate, floating rate not to exceed UMB Bank Prime Rate less 1/2%. If tied to US Treasury Bond Yield, floating rate not to exceed 250 bps over the corresponding 3- or 5-year US Treasury Bond Yield.
Interest rate floors will apply. If not tax-exempt, lowest floor(s) are:
○ Construction loan period: lowest floor non-tax-exempt 2.25%; tax-exempt floor based on tax equivalent rate 1.85%
○ 3-year note – Three-year Treasury bond; lowest floor non-tax-exempt 5.0%; tax-exempt floor to be determined.
○ 5-year note – Five-year Treasury bond; lowest floor non-tax-exempt 5.5%; tax-exempt floor to be determined.
Maturity of up to 10 years.
Amortization period of up to 20 years.
g. Loan is prepayable without penalty.
2. The officers of the Association are authorized to pursue the issuance of Industrial Revenue Bonds by the City of Olathe, Kansas, to be purchased by the UMB Bank in connection with the Loan.
3. The officers of the Association are authorized to negotiate with UMB Bank in order to determine the lowest and best interest rates and the most appropriate payment terms and maturities, and final principal amount consistent with the parameters approved herein, all of said final terms to be set forth in final documents and agreements among UMB Bank, the City of Olathe, and the Association and subject to the final approval by the Executive Committee or by the Board of Directors of the Association.
4. The officers of the Authority and each of them are hereby authorized, empowered, and directed to do all such acts and things and to execute, acknowledge, and deliver all such documents and to pay all such fees and expenses as may in their discretion be deemed necessary or desirable in order to carry out and comply with the terms and provisions of this Resolution, and all of the acts and doings of each officer of the Association which are in conformity with the intent and purposes of this Resolution, whether heretofore or hereafter taken or done, shall be and the same are hereby in all respects ratified, confirmed, and approved.
5. These resolutions shall take effect and be in full force immediately after their adoption by the Executive Committee of the Board of Directors.
Dr. Smilor seconded the motion which passed unanimously.
Dr. Smilor noted that UMB Bank would also like for the Authority to move its business to it in the future. This would be a topic of discussion at another time.
Ms. Katterhenry next referred the Committee to the second Resolution behind Tab 3 which, if approved, would allow the Authority to reimburse itself from bond funds to the extent permitted by law for certain capital expenditures related to the Venture Accelerator made prior to the date of these resolutions and final approval of the bond financing.
Motion: Governor Carlin asked for motion to approve the Resolution for Reimbursement. Ms. Lawrence moved to approve the following resolution:
RESOLUTION OF THE EXECUTIVE COMMITTEE OF
THE BOARD OF DIRECTORS OF
THE KANSAS BIOSCIENCE AUTHORITY
DETERMINING ITS INTENT TO REIMBURSE ITSELF
FOR CERTAIN CAPITAL EXPENDITURES
WHEREAS, the Kansas Bioscience Authority, a body politic and corporate and independent instrumentality of the State of Kansas (the “Authority”), has made certain capital expenditures in connection with an approximately 39,000 square foot commercial office/incubator building to be located in the City of Olathe, Kansas, at 10900 South Roundtree Street in the Kansas Bioscience Park (the “Project’), prior to the date of this Resolution, and the Authority expects to make additional capital expenditures for the Project in the future.
RESOLVED, that the Authority intends to reimburse itself for all or a portion of such expenditures, to the extent permitted by law, with the proceeds of (i) bonds or other obligations to be issued by a political subdivision or other governmental entity for the benefit of the Authority (the “Bonds”), or (ii) an obligation in the form of a promissory note to be issued by the Authority to a lender (the “Note”).
FURTHER RESOLVED, that the maximum principal amount of Bonds or the Note expected to be issued for the Project is $20,000,000.
These resolutions shall take effect and be in full force immediately after their adoption by the Executive Committee of the Board of Directors.
Dr. Smilor seconded the motion which carried unanimously.
Renewal of Ennis Knupp’s Agreement as a Financial Advisor: Ms. Katterhenry stated that the contract agreement with EnnisKnupp ended on September 30, 2009. She reviewed the recommendation to renew and extend the agreement for another two years at the rate of $112,000 per year.
Motion: Ms. Lawrence moved to renew the agreement with EnnisKnupp. Mr. McKechnie seconded the motion. The motion passed unanimously.
Resolution for Adoption of a Pre-Tax Premium Plan – Section 125: Ms. Katterhenry reviewed the plan pursuant to section 125 of the Internal Revenue Code. The plan is offered through United Healthcare that would allow employees to pay premiums with pre-tax dollars. The request is to approve the plan and to authorize the Authority to be named as the Plan Sponsor and Plan Administrator.
Motion: Dr. Smilor moved to adopt the following resolution:
RESOLUTION OF THE EXECUTIVE COMMITTEE OF
THE BOARD OF DIRECTORS OF
THE KANSAS BIOSCIENCE AUTHORITY
AUTHORIZING ADOPTION OF A PRE-TAX PREMIUM PLAN
PURSUANT TO SECTION 125 OF THE INTERNAL REVENUE CODE
WHEREAS, the Kansas Bioscience Authority, a body politic and corporate and independent instrumentality of the State of Kansas (the “Authority”), offers health care benefits to the employees.
RESOLVED, that the Authority does hereby adopt a pre-tax premium plan, which qualifies under the provisions of Section 125 of the Internal Revenue Code of 1986, as amended, in the form of the Pre-Tax Premium Plan Document (the “Plan”) presented to this meeting to permit employees of the Authority to participate in the tax-favored benefits provide under the Plan.
FURTHER RESOLVED, that the Authority is named as the Plan Sponsor and Plan Administrator of the Pre-Tax Premium Plan.
FURTHER RESOLVED, that the President of the Authority or any Officer is hereby authorized to execute the Plan on behalf of the Authority as well as to execute and to approve any other documents necessary, in the opinion of such President or Officer, to implement the provisions of the Plan.
These resolutions shall take effect and be in full force immediately after their adoption by the Executive Committee of the Board of Directors.
Mr. Sanford seconded the motion which was approved unanimously.
Review November Board Meeting Agendas: Governor Carlin asked if the Committee had any questions or comments about the proposed agenda for the November Board meeting found at Tab 8 of the Committee booklet. There being none, the agenda was accepted.
The Committee discussed the schedule for the next Executive Committee meeting. Ms. Katterhenry offered the times Buck Consultants were available. It was determined that Friday, October 30th, in the morning would work. Ms. Katterhenry will confirm with the Committee by email the time.
Adjournment: There being no further business to come before the meeting, Mr. Sanford moved to adjourn the meeting, Dr. Smilor seconded. The meeting adjourned at 4:16 p.m.