20 ILCS 3501/ Illinois Finance Authority Act.

(20 ILCS 3501/Art. 810 heading) ARTICLE 810 VENTURE INVESTMENT FUND

(20 ILCS 3501/810-5)

Sec. 810-5. Findings and Declaration of Policy. It is hereby found and declared that a continuing need exists to maintain and develop the State's economy; that assisting and encouraging economic development through private enterprise will help to create and maintain employment and governmental revenues and is an important function of the State; that the availability of seed capital and equity capital is an important inducement to enterprises to remain, locate and expand in the State; that there exists in the State gaps in the availability of capital for the development and exploitation of new technologies, products, processes and inventions and that this shortage has resulted and will continue to result in a shortfall in the development of new enterprises and employment in Illinois; that the establishment of the Illinois Venture Investment Fund and the exercise by the Authority of the powers granted in Sections 810-5 through 810-40 of this Act will promote economic development resulting in increased employment and public revenues; and that the provisions of this Act are hereby declared to be in the public interest and for the public benefit.

(Source: P.A. 93-205, eff. 1-1-04.)

(20 ILCS 3501/810-10)

Sec. 810-10. Definitions. The following terms, whenever used or referred to in this Article, shall have the following meanings ascribed to them, except where the context clearly requires otherwise:

(a) "Co-venture investment" means a venture capital or seed capital investment by the Authority in qualified securities of an enterprise that is made after or in conjunction with one or more professional investors that have or are making equity investments in that enterprise, as provided in this Act. A direct investment made by the Authority may later be treated as a co-venture upon such investment made by a professional investor.

(b) "Direct investment" means a venture capital or seed capital investment by the Authority in qualified securities of an enterprise in which no professional investor or seed capital investor is also making an equity investment.

(c) "Enterprise" means an individual, corporation, partnership, joint venture, trust, estate, or unincorporated association.

(d) "Professional investor" means any bank, bank holding company, savings institution, trust company, credit union, insurance company, investment company registered under the Federal Investment Company Act of 1940, pension or profit-sharing trust or other financial institution or institutional buyer, licensee under the Federal Small Business Investment Act of 1958, or any person, partnership, or other entity whose principal business is making venture capital investments and whose net worth exceeds $250,000.

(e) "Qualified security" means any note, stock, convertible security, treasury stock, bond, debenture, evidence of indebtedness, limited partnership interest, certificate of interest or participation in any profit-sharing agreement, pre-organization certificate or subscription, transferable share, investment contract, certificate of deposit for a security, certificate of interest or participation in a patent or application therefor, or in royalty or other payments under a patent or application, or, in general, any interest or instrument commonly known as a "security" or any certificate for, receipt for, guarantee of, or option, warrant, or right to subscribe to or purchase any of the foregoing.

(f) "Seed capital" means financing in the form of investments in qualified securities that is provided for applied research, development, testing, and initial marketing of a technology, product, process, or invention and associated working capital.

(g) "Seed capital investor" means any person, partnership, corporation, trust, or other entity making a seed capital investment.

(h) "Director" means the person designated by the Authority to manage the activities associated with the Illinois Venture Investment Fund.

(i) "Venture capital" means financing in the form of investments in qualified securities that is provided for the capital needs of a company that is developing a new technology, product, process, or invention.

(Source: P.A. 93-205, eff. 1-1-04.)

(20 ILCS 3501/810-15)

Sec. 810-15. Illinois Venture Investment Fund. There is created the Illinois Venture Investment Fund, hereafter referred to in this Article as the "Fund". The Treasurer of the Authority shall have custody of the Fund, which shall be held outside of the State treasury. The Authority is authorized to accept any and all grants, loans, including loans from State public employee pension funds, as authorized by this Act or any other statute, subsidies, matching funds, reimbursements, appropriations, transfers of appropriations, federal grant monies, income derived from investments, or other things of value from the federal or state governments or any agency of any other state or from any institution, person, firm or corporation, public or private, for deposit in the Fund. The Authority is authorized to use monies deposited in the Fund expressly for the purposes specified in and according to the procedures established by Sections 810-20 through 810-40 of this Act. The Authority may appoint a Director to manage the activities associated with the Fund. Such Director shall receive compensation as determined by the Authority.

(Source: P.A. 93-205, eff. 1-1-04.)

(20 ILCS 3501/810-20)

Sec. 810-20. Powers and Duties; Illinois Venture Investment Fund Limits. The Authority shall invest and reinvest the Fund and the income, thereof, in the following ways:

(a) To make a direct investment in qualified securities issued by enterprises and to dispose of those securities within 10 years after the date of the direct investment as determined by the Authority for the purpose of providing venture capital or seed capital, provided that the investment shall not exceed 49% of the estimated cost of development, testing, and initial production and marketing and associated working capital for the technology, product, process, or invention, or $750,000, whichever is less;

(b) To enter into written agreements or contracts (including limited partnership agreements) with one or more professional investors or one or more seed capital investors, if any, for the purpose of establishing a pool of funds to be used exclusively as venture capital or seed capital investments. The Authority shall not invest more than $2,000,000 in a single pool of funds or affiliated pools of funds. The agreement or contract shall provide for the pool of funds to be managed by a professional investor. The manager may be the general partner of a limited partnership of which the Authority is a limited partner. The agreement or contract may provide for reimbursement of expenses of, and payment of a fee to, the manager. The agreement or contract may also provide for payment to the manager of a percentage, not to exceed 40% (computed on an annual basis), of cash and other property payable to the Authority as its pro-rata share of distributions to investors in the pool of funds, provided that (i) no amount shall be received by the manager upon sale or other disposition of qualified investments in enterprises until recovery by the Authority of its investment and upon liquidation or withdrawal of the Authority from the pool of funds, the manager shall be obligated to refund any amount received by it from such percentage if necessary to allow the Authority to recover its investment or (ii) the terms of payment of cash and other property to the Authority are no less favorable to the Authority than payments to other seed capital investors (other than the manager) who are parties to the agreement or contract.

(c) To make co-venture investments by entering into agreements with one or more professional investors or one or more seed capital investors, if any, who have formally agreed to invest at least 50% as much as the Authority invests in the enterprise, for the purpose of providing venture capital or seed capital; but no more than $1,000,000 shall be invested by the Authority in the qualified securities of a single enterprise. A total of not more than $1,500,000 may be invested in the securities of a single enterprise, if the Authority shall find, after the initial investment by the Authority, that additional investments in the enterprise are necessary to protect or enhance the initial investment of the Authority. Each co-venture investment agreement shall provide that the Authority will recover its investment before or simultaneously with any distribution to participating professional investors or seed capital investors. The Authority and participating professional investors and seed capital investors shall share ratably in the profits earned in any form on the co-venture investment, but the Authority may, at its discretion, agree to pay to a participating professional investor a percentage, not to exceed 40% (computed on an annual basis), of cash and other property payable to the Authority as its pro-rata share of distributions to investors in the pool of funds, provided that (i) no amount shall be received by the participating professional investor upon sale or other disposition of qualified investments in the enterprises until recovery by the Authority of its investment and upon liquidation or withdrawal of the Authority from the pool of funds, the participating professional investor shall be obligated to refund any amount received by it from such percentage if necessary to allow the Authority to recover its investment or (ii) the terms of payment of cash and other property to the Authority are no less favorable to the Authority than payments to other seed capital investors or professional investors (other than the professional investor) who are parties to the agreement or contract;

(d) To purchase qualified securities of certified development corporations created under Section 503 of the federal Small Business Administration Act, including the Illinois Small Business Growth Corporation, for the purpose of making loans to enterprises that have the potential to create substantial employment within the State per dollar invested by the Authority, provided that the investment does not exceed 25% of the total investment in each corporation at the time the investment is approved by the Authority. Investment by the Authority in the Illinois Small Business Growth Corporation is not limited by the foregoing provision;

(e) To purchase qualified securities of small business investment companies and minority enterprise small business investment corporations certified by the federal Small Business Administration which are committed to making 60% of their investments in the State, provided that investments from the Fund do not exceed 25% of the total investment in these entities at the time the investment is approved by the Authority;

(f) To make the investments of any funds held in reserves or sinking funds, or any funds not required for immediate disbursement, as may be lawful investments for fiduciaries in the State;

(g) To facilitate and promote the acquisition and revitalization of existing manufacturing enterprises by, at the Authority's discretion, developing and maintaining a list of firms, or divisions thereof, located within the State that are available for purchase, merger, or acquisition. The list may be made available at such charges as the Authority may determine to all interested persons and institutions upon request. No firm shall appear on the list without its prior written permission. The list may contain such additional financial, technical, market and other information as may be supplied by the listed firm. The Authority shall bear no responsibility for the accuracy of the information contained on the list, and each listed firm shall hold the Authority harmless against any claim of inaccuracy. Enterprises supported by investments from the Fund may receive consideration by the Authority in the allocation of loans to be insured or loans to be made from the proceeds of bonds to be insured by the Industrial Revenue Bond Insurance Fund established under this Article, and the Authority may coordinate its activities under the 2 programs.

(Source: P.A. 97-789, eff. 7-13-12.)

(20 ILCS 3501/810-25)

Sec. 810-25. Direct and Co-venture Investments. An enterprise seeking a direct investment from the Illinois Venture Investment Fund shall file an application with the Authority along with an applicable fee to be determined by the Authority. A valid application shall contain a business plan, including a description of the enterprise and its management, a statement of the amount, timing, and projected use of the capital required, a statement concerning the feasibility of the proposed technology, product, process, or invention, its state of development and likelihood of commercial success, a statement of the potential economic impact of the enterprise on the State, including the number, location, and types of jobs expected to be created, and such other information as the Authority shall require. In addition to the foregoing, the Authority shall approve an application for a direct investment and shall approve a co-venture investment only after it has made the following findings:

(a) The enterprise has a reasonable chance of success;

(b) If the application is for a direct investment, Authority participation is necessary to the success of the enterprise because conventional, private funding is unavailable in the traditional capital markets, or because funding has been offered on terms that would substantially hinder the success of the enterprise;

(c) The technology, product, process, or invention for which the investment is being made is feasible, has the potential to achieve commercial success and the enterprise has the potential to create substantial employment within the State per dollar invested and that this employment, so far as feasible, may be expected to be for residents of areas of critical labor surplus;

(d) The entrepreneur, investors, shareholders, and other founders of the enterprise have already made or are obligated to make a substantial financial and time commitment to the enterprise;

(e) The securities to be purchased are qualified securities;

(f) The Authority determines that the possible gains on the investment are at least commensurate with the risk of loss and that there is a reasonable possibility that the Authority will recoup its investment, within 10 years after the investment or such other time period as negotiated by the Authority, through the receipt of interest payments, dividends, capital gains, or other distribution of profits, or royalties on investments made by the Authority; and

(g) Binding commitments have been made to the Authority by the enterprise for adequate reporting of financial data to the Authority and any participating professional investors or seed capital investors. The report shall include an annual audit of the books of the enterprise by an independent certified public accountant if the Authority so requires. The Authority and any participating professional investors or seed capital investors shall secure sufficient contractual rights from the enterprise as the Authority shall consider prudent to protect the investment of the Authority, including, at the discretion of the Authority and without limitation, a right of access to financial and other records of the enterprise. The Authority's interest in qualified securities from investments shall not represent more than 49% of the voting stock of any single enterprise at the time of purchase after giving effect to the conversion of all outstanding convertible securities of the enterprise. In the event of severe financial difficulty that in the judgment of the Authority threatens the investment of the Authority therein, a greater percentage of those securities may be owned or acquired by the Authority.

(Source: P.A. 93-205, eff. 1-1-04.)

(20 ILCS 3501/810-30)

Sec. 810-30. Investment in Pools of Funds. Proposals for the establishment of pools of funds under paragraph (b) of Section 810-20 of this Act shall be submitted on a form, contain the information, and be accompanied by a fee as prescribed by the Authority. The Authority shall not enter into any agreement or contract under paragraph (b) of Section 810-20 of this Act unless the agreement or contract provides that the pool of funds will be invested in an enterprise only if the manager finds all of the following:

(a) The enterprise has a reasonable chance of success.

(b) The technology, product, process, or invention for which the investment is being made is feasible and has the potential to achieve commercial success.

(c) The enterprise has the potential to create substantial employment within the State.

(d) The entrepreneur, investors, shareholders, or founders of the enterprise have made or are obligated to make a substantial commitment of time and funds to the enterprise.

(e) The possible gains in the investment are at least commensurable with the risk of loss and there is a reasonable possibility that the investors, including the Authority, will recoup their investment within 10 years after the investment, through the receipt of interest, dividends, capital gains, or other distributions of profit or royalties.

(f) The enterprise shall have made binding commitments for adequate reporting of and access to financing data of the enterprise.

(Source: P.A. 93-205, eff. 1-1-04.)

(20 ILCS 3501/810-35)

Sec. 810-35. Documentary materials concerning trade secrets; Commercial or financial information; Confidentiality. Any documentary materials or data made or received by any member, agent or employee of the Authority, to the extent that such material or data consist of trade secrets, commercial or financial information regarding the operation of any enterprise conducted by an applicant for, or recipient of, any form of assistance which the Authority is empowered to render, or regarding the competitive position of such enterprise in a particular field of endeavor, shall not be deemed public records; provided, however, that if the Authority purchases a qualified security from such enterprise, the commercial and financial information, excluding trade secrets, shall be deemed to become a public record of the Authority after the expiration of 3 years from the date of purchase of such qualified security, or, in the case of such information made or received by any member, agent or employee of the Authority after the purchase of such qualified security, 3 years from the date such information was made or received. Any discussion or consideration of such trade secrets or commercial or financial information may be held by the Authority, in executive sessions closed to the public, notwithstanding the provisions of the Open Meetings Act; provided, however, that the purpose of any such executive session shall be set forth in the official minutes of the Authority and business which is not related to such purpose shall not be transacted, nor shall any vote be taken during such executive sessions.

(Source: P.A. 93-205, eff. 1-1-04.)

(20 ILCS 3501/810-40)

Sec. 810-40. Tax Exemption. The Illinois Venture Investment Fund and all its proceeds shall be and are hereby declared exempt from all franchise and income taxes levied by the State, provided nothing herein shall be construed to exempt from any such taxes, or from any taxes levied in connection with the manufacture, production, use or sale of any technologies, products, processes or inventions which are the subject of any agreement earned by any enterprise in which the Authority has invested.

(Source: P.A. 93-205, eff. 1-1-04.)