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Venture Capital Co-Investment Program Rules

Title 19
CORPORATIONS AND BUSINESS
Part VII. Economic Development Corporation
Subpart 2. LOUISIANA VENTURE CAPITAL PROGRAM

Chapter 21. Louisiana Venture Capital Co-Investment Program

2101. Eligibility

Any venture capital fund, with five years experience in the management of investments made with the capital of other investors and having at least $7,500,000 under management is eligible to apply for certification under this program.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:2331.
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:460 (June 1989).

2103. Application for Certification

The application for certification shall contain but not be limited to the following:
1. a cover letter that states that application to the program for certification is being made and indicating reason for application for certification;
2. resume`s of the principal manager(s);
3. list of all funds managed by partner(s);
4. amount of fund(s);
5. Project preferences including:

a. role in financing
b. type of financing
c. minimum investment
d. preferred investment
e. preferred investment (LBO)

6. industry preferences;
7. five-year statement showing investments made and results of those investments;
8. experience with co-investment with any other governmental agency;
9. previous/current experience with projects within Louisiana.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:2331.
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:460 (June 1989).

2105. Procedure for Certification Review

The application will be submitted to the executive director of the Corporation no later than two weeks prior to the regular monthly meeting of the Screening Committee of the Board. He shall review and analyze the information. If the application is complete, he shall submit it and his analysis to the next meeting of the Screening Committee of the Corporation Board which shall review the application and make a recommendation to the next meeting of the full board for certification or denial. Upon certification, a certification number shall be assigned the applicant by the Corporation.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:2331.
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:460 (June 1989).

2107. Co-Investment Criteria

Certified venture capital funds may apply to the corporation for a co-investment by the corporation in a round of financing in a specific project. The project must be for a Louisiana based enterprise maintaining headquarters and production facilities in Louisiana. The corporation shall not co-invest more than 25 percent of the total venture capital investment in the proposed round of financing of the project. The Corporation investment shall not exceed $500,000 in the proposed round of financing.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:2331.
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:460 (June 1989).

2109. Application Procedures for Co-Investment

A. The summary application must contain but not be limited to:

1. Application information:

a. venture capital fund name;
b. address;
c. LEDC certification number;
d. telephone number.

2. Project firm information:
a. name of business;
b. address (postal and physical);
c. phone number;
d. year established;
e. state chartered in;
f. legal structure of business;
g. IRS tax number;
h. product or service;
i. headquarters location;
j. location of all production and research and development facilities;
k. list any pending litigation;
l. list any bankruptcy or insolvency filings.

3. Owner/manager information:
a. name;
b. address;
c. title;
d. social security number;
e. percent of ownership;
f. annual compensation;
g. list any pending litigation;
h. list any bankruptcy or insolvency filings.

4. Use of funds:
a. purpose;
b. amount.

5. Securities given in exchange for investment:
a: list types of securities to be issued in this round of financing to all investors with any terms and/or conditions attached thereto.

6. Equity information:
a. list all equity investors with numbers of shares owned, types of shares owned, dollar value of investment and date of investment;
b. total shares authorized by class;
c. total shares outstanding by class.

B. A business plan that contains but is not limited to:

1. Business goals and earnings projections and potential return to investors

2. Market analysis:
a. description of total market;
b. industry trends;
c. target market;
d. competition.

3. Products or services:
a. description of product line;
b. proprietary position: patents, copyrights and legal and technical considerations and ownership of same;
c. comparison to competitors products.

4. Manufacturing Process (if applicable):
a. materials;
b. sources of supply;
c. production methods.

5. Marketing Strategy:
a. overall strategy;
b. pricing policy;
c. sales terms;
d. method of selling, distributing and servicing products.

6. Management Plan:
a. form of business organization;
b. board of directors composition;
c. officers: organization chart and responsibilities;
d. resumes of key personnel;
e. staffing plan/number of employees;
f. facilities plan/planned capital improvements;
g. operating plan/schedule of upcoming work for next one to two years.

7. Financial Data (for existing firms):
a. financial history (five years to present) - See NOTE 1
b. three-year financial projections (first year by quarters; remaining years annually):
1. profit and loss statements;
2. balance sheets;
3. cash flow chart;
4. capital expenditure estimates;
c. explanation of projections;
d. key business ratios;
e. explanation of use and effect of new funds;
f. potential return to investors compared to competitors and industry in general.

NOTE 1: All financial statements must meet Generally Accepted Accounting Practices (GAAP)

8. Financial data for startup firms:
a. three-year financial projections (first year by quarters; remaining years annually);
1. profit and loss statements;
2. balance sheet;
3. cash flow chart;
4. capital expenditure estimates;
b. explanation of projections;
c. key business ratios;
d. explanation of use and effect of new funds;
e. potential return to investors compared to competitors and industry in general.

9. Schedule of debt:
a. to whom;
b. date opened;
c. original balance;
d. present balance;
e. payment schedule;
f. date of maturity;
g. rate;
h. collateral;
i. terms of convertibility;
j. list all liens against the project firm and related firms.

10. List of trade creditors/suppliers:
a. creditor name;
b. address;
c. date opened;
d. high credit;
e. balance;
f. terms.

11. Collateral offered:
a. type and description;
b. present market value - appraisals no more than 90 days old at time of application;
c. present balance owed;
d. total value of collateral;
e. source of repayment;
1. primary source
2. secondary source
f. federal and state tax status;
1. date of current tax status
2. date of last audit
3. deficiencies assessed/proposed

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:2331.
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:460 (June 1989).

2111. Procedure for Application Review

The application will be submitted to the executive director of the Corporation no later than two weeks prior to the regular monthly meeting of the Screening Committee of the Board. He shall review and analyze the information. If the application is complete, he shall submit it and his analysis to the next meeting of the Screening Committee of the Corporation Board which shall review the application and make a recommendation to the next meeting of the full board for approval or denial.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:2331.
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:460 (June 1989).

2112. General Policy

A. The Corporation shall not approve any co-investment if the project firm has presently pending, at the federal, state or local level, any proceeding concerning denial or revocation of any necessary license or permit.

B. The Corporation will invest in the project on the same terms and conditions as the certified venture capital fund.

C. The requirement of personal guaranty shall be negotiated by the board on a project-by-project basis.

D. Nothing contained herein shall limit the ability of the board or committee thereof to make a reasonable decision based on information submitted to it.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:2331.
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:460 (June 1989).

2115. Conditions for Disbursement of Funds

A. The secretary-treasurer and one of the following: president of the corporation, chairman or executive director shall execute all necessary legal instruments at the closing after certification by counsel that all legal requirements have been met.

B. In the case that the co-investment is to be disbursed in a phased funding, the monies provided by the corporation shall be placed in an escrow account to be disbursed at the joint written request of both the venture capital fund co-investor and the project firm at the same rate of disbursement as that of the co-investor venture capital firm. The secretary-treasurer shall have the authority to release the funds from escrow.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:2331.
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:460 (June 1989).

2117. Compliance Requirements of Project Firms

A. Each year, on the anniversary of the initial disbursement of funds, each recipient of funds shall provide the following:
1. List of all stockholders with the number of shares held by each at any time during the previous year.

2. Monthly statement of financial condition including, but not limited to, a balance sheet, profit and loss statement, changes in financial condition, capital reconciliation.

3. Current reconciliation of net worth.

4. One-year projected cash flow statement. Statement must be prepared on a month-to-month basis, accompanied with footnotes.

5. Current personal financial statement of all principals.

6. Annual (within 90 days of the end of the fiscal year) audited financial statement prepared by a certified public accountant.

7. Current insurance policies.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:2331.
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:460 (June 1989).

2119. Repayment Terms

The board of the corporation shall have the sole responsibility to set repayment terms on a project-by-project basis.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:2331.
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:460 (June 1989).

2121. Confidentiality and Conflict of Interest

A. Confidentiality. Confidential information in the files of the Program and its accounts acquired in the course of duty is to be used solely for the Program. The Program is not obliged to give credit rating or confidential information regarding applicant.

B. Conflict of Interest. No member of the corporation, employee thereof, or employee of the Department of Economic Development or members of their immediate families shall either directly or indirectly be a party to or be in any manner interested in any contract or agreement with the corporation for any matter, cause of thing whatsoever. If any contract or agreement shall be made in violation of the provisions of this Section the same shall be null and void and no action shall be maintained thereon against the corporation.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:2331.
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:460 (June 1989).

2123. Ownership of Stock and Incidents Thereto

Stock taken in co-investment shall be held by the Corporation. The board through its duly authorized designee shall vote the stock.

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:2331.
HISTORICAL NOTE: Promulgated by the Department of Economic Development, Economic Development Corporation, LR 15:460 (June 1989).