90-3-523. Seed capital project loan agreement -- specific requirements -- payback. (1) Except as provided in 90-3-519, in addition to the loan agreement provisions required in 90-3-522, a seed capital project loan must be structured as contracted debt that includes but is not limited to the following terms:
     (a) an interest rate set at the level that provides a return to the board, from paybacks by all of its portfolio companies, in an amount at least equal to the principal amount of the loans and that provides for a market rate of return when considering the overall benefit to the state derived from the projects;
     (b) a provision in the note that may defer debt service until maturity of the note, the term of which may not exceed 8 years;
     (c) a loan amount that may not exceed $350,000 in any one round of financing. Successive rounds of financing in which the board participates for any one company may not occur within a 9-month period unless the board determines that there is an overriding financial benefit to the board's portfolio. The total amount that may be loaned to any one company may not exceed 10% of the seed capital funds managed by the board.
     (d) a provision that the note becomes due in full upon dissolution or liquidation of the company.
     (2) (a) In addition to the provisions in 90-3-522 and subsection (1) of this section, a seed capital project loan agreement may provide for any of the following:
     (i) a convertible debenture;
     (ii) a warrant held by the board; or
     (iii) a warrant held by a third party for the benefit of the board.
     (b) The board itself may not convert the convertible debenture, exercise the warrant, or hold stock acquired upon any conversion or exercise.

     History: En. Sec. 12, Ch. 316, L. 1989; amd. Sec. 4, Ch. 566, L. 1991; amd. Sec. 6, Ch. 331, L. 1993.