Seed Investment Deal Terms
TEDCO Seed Investments are made in the form of a five-year, convertible note to the company. Interest will accrue on the note at a rate of 8% per annum. In the event that the company receives an aggregate outside investment of $500,000 or more prior to the maturity date of the note, or in the event of another sale of substantial assets or equity (i.e., an acquisition), TEDCO may, at its sole option, convert the principal and interest due on the note to equity on the same terms and conditions received by the most recent investors.
Some terms of the Convertible Note Purchase Agreement might vary depending on the size and nature of the investment.
Once an application is approved for investment, the Seed Investment Manager will so notify the applicant company. The applicant will then have up to ninety days to execute the Convertible Note Purchase Agreement to initiate a Closing. As part of the Closing, the applicant will be asked to provide the following list of documents:
● A certificate of good standing from the Maryland Department of Assessments and Taxation dated no more than 30 days prior to the Closing Date AND from the State in which the corporation is organized, if other than Maryland;
● A copy of its Articles of Incorporation & Bylaws (for corporations) or Articles of Organization & Operating Agreement (for LLCs), as applicable;
● The Board of Directors Resolution authorizing execution of the Convertible Note Purchase Agreement (corporations only);
● A copy of the company’s most recent financial statements;
● Evidence of Institutional Review Board (IRB) and Institutional Animal Care and Use Committee (IACUC) approvals, as applicable, for research projects involving human or animal subjects; and
● Other information needed to complete a Convertible Note Purchase Agreement and its Exhibits.
TEDCO’s Convertible Note Purchase Agreement and Exhibits will be signed at the time of the Closing. The Closing will occur at TEDCO’s offices in Columbia, Maryland at a date and time that is mutually acceptable to the parties. The Closing must occur within ninety days of the date of the notification of approval for an investment.
During the Closing, the company will be introduced to their portfolio manager, a member of the TEDCO staff who will manage the relationship with the company. The company will also receive an introduction to the TEDCO portfolio management process and be introduced to the various TEDCO resources that are available to portfolio companies as a result of an investment.
Investments will be made in two tranches. At the Closing, the applicant company will receive a check for the first tranche – 50% of the total investment. The second tranche of the investment will be made upon the company’s verification of the completion of a milestone approximately 3 to 6 months following the Closing. The milestone will be determined by the parties prior to the Closing and documented in an exhibit to the Note Purchase Agreement. Verification of the milestone will be made during an in person meeting between the company and its portfolio manager or the seed investment manager.
All investments, including tranches, are subject to the availability of funds.
As a condition of accepting an investment from TEDCO, the applicant will be required to submit periodic reports, as follows:
- Financial Reports. For as long as TEDCO holds a note or any securities in applicant’s company, the company shall provide TEDCO with quarterly financial statements, which include an Income Statement, Balance Sheet, and Cash Flows Statement.
- Annual Economic Development Reports. Beginning the first April following a Closing and until the last to occur of (i) five years following the Closing, or (ii) until TEDCO no longer holds a note or any securities in company, the company will provide to TEDCO an Annual Economic Development Report. The report will include State and federal income and payroll tax returns, an employee census reflecting the current number of full-time equivalent employees who are Maryland residents, and such other information which TEDCO may reasonably request from time to time.
- All reports provided to TEDCO will be held in confidence to the extent reasonably permitted by Title 10, Subtitle 6 of State Government Article of the Annotated Code of Maryland. Confidential reports should be designated as “Business Proprietary”.