- Applicant must have a relationship with the University of Missouri in the form of:
- a license, or in negotiations for a license, to university owned intellectual property, or
- rights to intellectual property developed at the university, but which is not owned by the university, that is being or will be commercialized by the applicant company.
Preference or additional consideration may be given to applicant companies that:
- secure funding from additional sources (co-investments); and/or
- operate out of, or make a commitment to operate out of, a university incubator or research park; and/or
- have previously granted the university an equity interest in the company; and/or
- make a commitment to employ, or procure through contract, the services of the university, its faculty, staff, or students.
OUTLINE OF TERMS
The Curators of the University of Missouri, a public corporation of the State of Missouri (“University”), through its Enterprise Investment Program (“Program”), may provide funds to private companies in the form of convertible debt investments. This outline is intended to summarize the basic business and legal terms that will expected for such investments, which will be in addition to any general criteria and other requirements of the Program. This is a summary only, and complete and definitive documents would be negotiated for any investment on a case-by-case basis; however, the terms outlined below are anticipated to be standard in most cases, not merely a starting point for negotiations with applicants, unless special circumstances exist with respect to a particular applicant or application.
The University, in administering the Program, posting this outline, discussing any application or the potential terms of any proposed investment, or otherwise, does not make any commitment or have any obligation to any applicant or other person or entity to consider any such application or make any such investment, and it reserves the right to terminate all discussions with any applicant and any consideration of any application or investment at any time, in its sole and absolute discretion, and with or without cause, reason, or explanation.
General: Subject to the Preliminary Note above, if the University approves your application then it may consider making a loan to your company. If the negotiations are successful, then the University and your company will sign definitive agreements, which will contain the terms outlined below or other terms as mutually agreed.
Terms: In most cases, the loan will have the following terms:
- Installments. The loan will be advanced to your company as a series of installments over a three-year funding period, unless accelerated. The number of installments and the amount and timing of each will be based on measurable performance milestones and criteria, all of which will be negotiated.
- Interest. The outstanding loan balance will bear interest at a rate within the range of 6-10% per year, compounded monthly, but this interest will only accrue and need not be paid during the funding period.
- Maturity. The entire loan amount, including all accrued interest, will be due and payable at the end of the funding period; however, the parties may extend this due date for an additional three-year period by mutual agreement.
- Acceleration and Default. The loan may be due earlier if your company defaults under the definitive agreements; if it fails to achieve a milestone; if it goes bankrupt, becomes insolvent, or dissolves; or if it undergoes a change in control. The loan will not be personally guaranteed or secured, but otherwise will have typical default rights and remedies.
- Prepayment. The loan may be prepaid at any time, with prior notice, but subject to the conversion and adjustment rights described below.
Conditions: The first installment will be advanced when the definitive agreements are signed (or shortly thereafter). Future installments will only be advanced if the following conditions are met:
- your company must be in compliance with the definitive agreements, and it must disclose if its representations and warranties in the definitive agreements continue to be accurate (or, if not, then it must disclose why not);
- your company must have achieved the relevant milestone and must still satisfy the minimum eligibility requirements of the Program;
- it must not be in default of any other loans or bankrupt, insolvent, or dissolved;
- it must be in compliance with all laws; and
- there cannot have been any other change affecting your company that the University reasonably expects would have a material adverse effect on its business or operations.
In most cases, the University will determine whether these conditions have been met based on your certification and with minimal or no independent confirmation. If any condition is not met, then that and future installments may be withheld or re-negotiated, or the loan may be accelerated.
Conversion: The loan may convert into shares or units of equity in the company as follows:
- The University must convert into equity upon a minimum additional investment, from one or more new and unrelated third parties, in shares or units of equity in the company (a “Series A Round”).
- Upon a Series A Round, the University will convert its loan into the same shares or units that are issued to other investors, but it will convert at a price per unit equal to 60-80% of the price per unit paid by the other investors. At the closing, the company will have the option to repurchase this equity from the University at full price, i.e., based on the price paid by the other investors.
- If the company repays the loan and then closes a Series A Round within the following 12 months, it will owe an adjustment to the University equal to the difference between its repayment and what would have been due if the repayment had been converted into equity and then repurchased in the Series A Round.
Liquidity: If the loan is converted into equity, then the University will receive the same liquidity rights as other investors in the Series A Round.
Information: Your company must also commit to deliver periodic financial statements and grant observation rights for meetings of the board and of shareholders or members.
Other: In the definitive agreements, you will represent and warrant as follows: (i) your application and responses to any requests for information submitted during the application process are true, correct, and complete to the best of your knowledge and in all material respects; (ii) the financial statements submitted fairly present the financial condition and results of operations of the company in all materials respects, and there has been no subsequent event or circumstance which would reasonably be expected to have a material adverse effect; and (iii) the company has the requisite organizational power and authority, is in compliance with laws and University conflict of interest policies, and satisfies other customary requirements. If your company breaches these representations and warranties, it will indemnify the University for any losses.