Current through Register Vol. 42, No. 11, August 30, 2024
An applicant that has not previously been certified by the ADO as
a Certified Capital Company must file an application to become certified as a
CAPCO in the form prescribed by the ADO, as that form may be amended from time to
time by the ADO. The ADO may certify for participation in program two any
previously certified CAPCO that has remained in compliance with the requirements
of the Act upon the submission of an application for recertification and
participation in program two in the form prescribed by the ADO, as that form may
be amended from time to time by the ADO. An application for recertification and
participation in program two shall be considered a separate certification from a
prior certification under this section and investments in and by such CAPCO shall
be considered separately.
(1)
Applications may be submitted by hand or by certified mail to the ADO, Alabama
Center for Commerce, 401 Adams Avenue, Suite 670 Montgomery, Alabama 36104,
Attention F. Neal Wade, Director. Applications with respect to program one may be
submitted no earlier than 9:00 am (Montgomery, Alabama time) on October 1, 2003.
Applications for certification as a CAPCO with respect to program two and for
recertification and participation in program two may be submitted no earlier than
9:00 a.m. (Montgomery, Alabama time) on December 10, 2007.
(3) An application shall be considered received
by the ADO when the ADO receives three (3) original applications, each of which
is complete in all material respects, along with the nonrefundable application
fee set forth below. The ADO shall stamp applications received by the ADO with
the date and time of receipt by the ADO. The following applications shall be
considered as not having been filed with the ADO and will be returned by the ADO
to the applicant by mail in which case the ADO shall have no further obligation
to provide additional notices to the applicant:
(a) Applications submitted prior to the stated
time; and
(b) Applications determined
by the ADO to be materially incomplete.
(4) A completed application to become certified
as a CAPCO shall include the following:
(a) A
nonrefundable application fee in the amount of $7,500 in the form of a cashier's
check, certified check or company check made payable to "Alabama Development
Office" which the ADO shall use to offset the administrative costs related to the
CAPCO program;
(b) A nonrefundable
program administration fee in the amount of $17,500 in the form of a cashier's
check, certified check or company check made payable to "Alabama Development
Office" which the ADO shall use to offset the administrative costs related to the
CAPCO program;
(c) A completed
disclosure statement identifying all persons who may financially benefit from the
applicant's designation as a CAPCO. Such statement must be submitted in the form
prescribed by the ADO, as that statement may be amended from time to time by the
ADO;
(d) A notarized and sworn
affidavit from all of the managers of the applicant stating that each of the
managers (or providing details and an explanation as to why such manager cannot
state that he or she):
1. Has read the Act and
these regulations;
2. Fully
understands the requirements of the Act and these regulations;
3. Is not, and will not become during tenure as
manager of the applicant or the CAPCO, as the case may be, affiliated with an
employee of the ADO;
4. Is not, and
will not become during tenure as manager of the applicant or the CAPCO, as the
case may be, affiliated with a certified investor of the applicant or CAPCO, as
the case may be;
5. Has not been
convicted of and is not currently under indictment or prosecution for securities
fraud or other criminal acts, other than minor traffic offenses. As used in this
subsection, "MINOR TRAFFIC OFFENSES" means all traffic offenses other than
serious traffic offenses as set forth in Chapter 5A of Title 32 of the
Code of Ala. 1975, as amended;
6. Has not filed for bankruptcy within the past
seven (7) years; and
7. Has not been
ordered to pay and is not currently involved in legal action with the State of
Alabama or any agency or department thereof for the payment of funds owed to the
State of Alabama or other parties that the State of Alabama represents.
(e) A notarized and sworn affidavit
from all of the managers of the applicant stating that:
1. The primary business activity of the
applicant is, and will remain, the investment of cash in qualified technology
businesses;
2. The key employees have
at least four (4) years of experience making venture capital investments in small
businesses on behalf of or as an institutional or accredited investor;
and
3. The key employees will work in
the office established by the applicant as its headquarters for at least 1,400
hours per year and will reside in the State of Alabama, as determined for
purposes of Alabama income taxation.
(f) A detailed description of the following
signed by the key employees and the managers of the applicant:
1. The key employees' connection and commitment
to the State of Alabama; and
2. The
key employees' experience with the Alabama economic landscape, especially with
regard to making venture capital investments in qualified technology
businesses.
(g)
Appropriate documentation regarding the due authorization of the
application.
(h) A certification from
the chief executive officer or its equivalent of the applicant that the managers
named in the application are a complete and accurate listing of all managers of
the applicant and any affiliates of the applicant involved in the management of
the applicant and that persons affiliated with a certified investor of the
applicant are not, and will not, control the direction of investments of the
applicant.
(i) The complete
organizational documents of the applicant reflecting appropriate filing with
appropriate state agencies, if any is required. In addition, if the applicant is
to be managed by a management or similar company, the complete organizational
documents of the management company.
(j) The names and complete contact information
of the key employees of the applicant.
(k) Any assumed or "doing business as" names
that the applicant conducts business under and any required assumed or "doing
business as" filings with an agency of the State of Alabama, if applicable. If
the applicant is to be managed by a management or similar company, any assumed or
"doing business as" names that the management company conducts business under and
any required assumed or "doing business as" filing with an agency of the State of
Alabama, if applicable.
(l) If the
applicant is to be managed by a management or similar company, a copy of the
fully-executed contract pursuant to which the management company will manage the
applicant and a copy of any other agreements between the management company and
the applicant. The management contract must fully describe the nature of the
relationship between the management company and the applicant and any actions
that the management company may take on behalf of the applicant.
(m) The names and full contact information of
all members of the applicant's governing body of the applicant, including a
description of the level of control over the applicant.
(n) The names and full contact information of
contacts at the applicant's existing office locations.
(o) Financial statements audited in accordance
with generally accepted auditing standards, including an income statement,
balance sheet and statement of cash flows. The financial statements must be
accompanied by an original, executed and unqualified opinion of an independent
certified public accountant stating that the applicant has an equity
capitalization of at least $500,000. The opinion of the independent certified
public accountant shall:
1. Be dated no earlier
than thirty-five (35) days before the application is submitted to the ADO;
and
2. Be printed on the letterhead
of the independent certified public accountant, containing complete contact
information for the independent certified public accountant.
(p) The following information relating to the
key employees:
1. A detailed description and
supporting documentation of how each of the key employees qualifies as having at
least four (4) years of experience making venture capital investments in small
businesses on behalf of or as an institutional or accredited investor. Such
description and supporting documents shall include, but not be limited to the
following, and shall be certified as accurate by each key employee:
(i) A detailed resume with a listing of
references including full contact information for each reference;
(ii) A description of the success of the key
employee in performing his/her function;
(iii) The attainment of investment return
goals; The number of enterprises funded;
(iv) The annual dollar amount of money for
which he/she had primary responsibility; and
(v) Any other information reasonably requested
by the ADO.
2. A listing
of all applicable licenses and degrees that each key employee holds (or has held
within the last ten (10) years). Such listing shall indicate the following and
shall be certified as accurate by each key employee:
(i) Whether the license is active and in good
standing;
(ii) The date on which it
will expire or did expire;
(iii)
Whether any license has been revoked and the date of revocation and an
explanation surrounding such revocation;
(iv) Whether any disciplinary action has ever
been imposed upon the applicant and/or the key employees with regards to such
license;
(v) The date of such
disciplinary action and a description surrounding such disciplinary action;
and
(vi) Whether any investigation
has ever been carried out on the applicant and/or the key employees with regards
to such license and the date of investigation and a description surrounding such
investigation.
3. The
applicant's overall investment strategy and the applicant's three (3) year
business plan, including an organizational chart, that has been prepared by the
key employees, as applicable, and which demonstrates the key employee's ability
to make investments of cash in qualified technology businesses; and
4. An instrument authorizing the ADO to conduct
a background and credit investigation of the applicant and the key
employees.
(q) A statement
signed by the chief executive officer or its equivalent of the applicant stating
that:
1. Neither the applicant nor any of its
investors have violated or will violate the provisions of the Act or these
regulations;
2. The information
submitted in connection with the application is complete, accurate and true;
and
3. The information submitted as
part of the application will endure and continue to be legally binding if an
applicant is certified as a CAPCO by the ADO. This statement shall state that the
applicant understands that the ADO shall continue to rely on original
applications.
(r) A
listing of all persons that have an ownership interest in the applicant,
including voting and non-voting ownership interests. This listing must include
the percentage ownership interest of each and a description of the ownership
interest. Provided, however, that where the applicant is an entity that is
registered with the U.S. Securities and Exchange Commission under Section 12(g)
or Section 15(d) of the Securities Exchange Act of 1934, the applicant must
include only those persons having beneficial ownership of equity securities of
the applicant of more than five percent (5%).
(s) In the event that the listing provided in
response to (q) above contains the name of a corporation, general or limited
partnership, trust, limited liability company or other entity that is not a
natural person, a listing of all persons that have an ownership interest in such
entity, including voting and non-voting ownership interests.
(t) A sample of offering materials used or to
be used in investor solicitations.
(u) A covenant and agreement of the managers
and the applicant to the State of Alabama and its people that:
1. The applicant will not use the CAPCO program
as a pretext for any transaction that will subvert the purpose of the
Act;
2. The applicant will act in the
best interests of the State of Alabama and its people, recognizing that the
reason for the Act is the welfare and prosperity of the State of Alabama and its
people;
3. The managers and the
applicant will comply with any and all requirements of the Act and these
regulations; and
4. The applicant
will submit to the State of Alabama a ten percent (10%) share of any
distributions (other than qualified distributions, the principal and interest
portions of any payments made with respect to a qualified debt instrument, and
the return of the initial $500,000 equity contribution and any other equity
contributions) from the applicant to its equity holders.
Covenant (iv) shall be effective separately and independently
from the Act and these regulations, and shall continue to be binding after the
applicant has made qualified investments in an amount cumulatively equal to one
hundred percent (100%) of the certified capital.
(5) A completed application for
recertification and participation in program two shall include the following:
(a) A nonrefundable application fee in the
amount of $7,500 in the form of a cashier's check, certified check or company
check made payable to "Alabama Development Office" which the ADO shall use to
offset the administrative costs related to the CAPCO program;
(b) A nonrefundable program administration fee
in the amount of $17,500 in the form of a cashier's check, certified check or
company check made payable to "Alabama Development Office" which the ADO shall
use to offset the administrative costs related to the CAPCO program;
(c) Appropriate documentation regarding the due
authorization of the application for recertification and participation in program
two.
(d) An original executed report
of an independent certified public accountant stating that the applicant has at
least $500,000 in net worth and at least $500,000 in liquid assets. The report of
the independent certified public accountant shall:
1. Be dated no earlier than thirty-five (35)
days before the application for recertification and participation in program two
is submitted to the ADO; and
2. Be
printed on the letterhead of the independent certified public accountant,
containing complete contact information for the independent certified public
accountant.
(e) A
statement signed by the chief executive officer or its equivalent of the
applicant stating that:
1. Neither the applicant
nor any of its managers, key employees, governing body, or investors have
violated or will violate the provisions of the Act or these
regulations;
2. The information
submitted in connection with the application for recertification and
participation in program two is complete, accurate and true; and
3. The information submitted as part of the
application for recertification and participation in program two will endure and
continue to be legally binding with respect to certification under any program.
This statement shall state that the applicant understands that the ADO shall
continue to rely on original applications.
(f) A sample of offering materials used or to
be used in investor solicitations in program two.
(g) A sworn statement in an affidavit from its
chief executive officer that all of the information contained within the original
application is true and correct as of the date of the application for
recertification and participation in program two except as specifically set forth
in an attachment to such affidavit. Any information being updated and appended to
the affidavit shall reference the section of the original application for
certification as a CAPCO being updated.
(6) The ADO shall not recognize applications or
will not certify an applicant as a CAPCO with respect to either program one or
program two if there has been an exchange of money or other consideration for
purposes of attempting to gain from the ADO a favorable review of an application
for certification. If an applicant or affiliate of an applicant has purchased the
assets or otherwise taken control of another CAPCO for the purpose of gaining
certification, such CAPCO shall be immediately be decertified. Further, the ADO
shall not certify an applicant as a CAPCO if the applicant is directly or
indirectly owned or operated by or is otherwise associated with:
(a) public employee;
(b) public official;
(c) family member of the public employee,
or
(d) family member of the public
official.
Notwithstanding the foregoing, the ADO may, in its discretion,
certify an applicant as a CAPCO that would otherwise meet the requirements for
certification but for the application of the immediately preceding sentence, if
and only if (i) the disqualifying relationship is one of a public employee and
not a public official and (ii) such relationship cannot reasonably be deemed to
be potentially harmful to the economic interest of the state.
(7) Any false, inaccurate, or
misleading information provided in an application submitted to the ADO may be
grounds for rejection of the application and denial of further consideration, as
well as decertification of the CAPCO and each of its investment pools, if such
information discovered at a subsequent date would have resulted in the denial of
such certification.
(8) Whenever any
material information that an applicant supplied in its application has become
inaccurate or obsolete, the applicant shall file an amended application,
including originally executed signature pages. Such amended applications must be
submitted within five (5) business days of the information becoming inaccurate or
obsolete during the application process. Such amended applications shall be filed
in the same manner as the application; provided, however, that, based on the
extent of the revisions that need to be made by the applicant and then reviewed
by the ADO, the ADO shall determine if a new application fee or portion thereof
will be charged. The review period for the application shall begin upon the
filing of the amended application.
(9) The applicant shall, as soon as possible or
within five (5) business days, notify the ADO in writing:
(a) When the applicant is unable to continue as
a viable going concern;
(b) When the
applicant is subject to litigation which may affect its viability as a going
concern; and/or
(c) If a merger or
acquisition of the applicant or by the applicant has occurred. In the case of a
merger or acquisition, the ADO shall request additional information as needed to
determine if the requirements of the Act and these regulations continue to be
met.
(10) The ADO reserves
the right to determine what information is material regarding the completion,
execution and filing of an application, an amended application or a notification
required under this section. The ADO may request any such additional information
from the applicant as the ADO deems necessary to appropriately review an
application, amended application or notification.
(11) In the event that an incomplete
application is submitted that is not considered materially complete by the ADO or
additional information is requested by the ADO, the ADO shall notify the
applicant within fifteen (15) days of receipt of the application. If an
incomplete application is completed or incomplete information is supplied within
five (5) business days of the applicant's receipt of such notice from the ADO,
the application will be considered filed with the ADO on the date it was first
received by the ADO. If an incomplete application is not completed or the
additional information is not supplied within five (5) business days of the
applicant's receipt of the notice thereof, then the ADO may, in its discretion,
deem the application to not have been filed with the ADO and return the
application to the applicant by mail in which case the ADO shall have no further
obligation to provide additional notices to the applicant.
(12) Any manager of a CAPCO that has not
submitted the affidavits, certifications and statements provided in this section
as part of the application process shall submit such affidavits, certifications
and statements prior to participating in the management of the CAPCO.
F. Neal Wade
