SUGGESTED FORMATS FOR FOLLOW-ON FUNDING AGREEMENTS

SUGGESTED FORMATS FOR FOLLOW-ON FUNDING

COMMITMENTS

NSF FOLLOW-ON FUNDING COMMITMENT

[Venture Capital Commitment]

Purpose

Whereas (venture capital firm or investor) of ___________________ is desirous of investing in (small business firm) of _________________ contingent upon: (1) (small business firm) receiving a Phase II award from the National Science Foundation. (2) the Phase II research achieving certain mutually agreed upon technical objectives set-out in section D. (3) the planned technology not being by-passed in the marketplace during Phase II, and (4) the technology appearing to be economically viable, it is therefore agreed as set forth below:

A. TERM OF AGREEMENT

The initial term of this agreement shall be for four (4) years from the date of execution hereof and thereafter renewable one (1) year at a time unless canceled by either party on 90 days notice prior to the end of the initial or any renewable terms.

B. FOLLOW-ON FUNDING

Contingent upon meeting the specification in Section D, (investor) agrees to fund (small business firm) for the commercial development (Phase III) of the project the sum of $________ beginning no later than the completion of Phase II. The schedule of funding will be as follows: (for example: $50,000 at completion of Phase II and three additional payments of $50,000 at 6 month intervals) (Investor) may choose to accelerate the investment schedule at any time it feels such investment is justified by technical progress or market conditions.

C. TERMS OF INVESTMENT

(Investor) agrees to make $_________as equity investment available to (small business) on the following terms:__________________________________________________________________. In return for this investment (small business firm) agrees to provide (investor) with _____shares of (small business firm) common stock according to the following schedule:

a. _____shares on receipt of first investment

b. _____shares on receipt of second investment

c. _____shares on receipt of third investment

d. _____shares on receipt of fourth investment

(Or a statement that the number of shares will be determined prior to the completion of Phase II). If (small business firm) fails to meet the requirements of Section D, the parties will negotiate to see what investment may be justified in the case of partial success.

It is represented by (small business firm) that it possess (or will possess) and continue to possess commercial rights to any resulting patents to convey such exclusive (or non-exclusive) license or sub-license and that such rights do not interfere with the right of others.

If (small business) falls to meet all the specifications stated in section D, the parties will negotiate to determine what terms may be justified in the case of partial success.

D. TECHNICAL SPECIFICATION TO BE ACHIEVED IN PHASE II

The research to be carried out in Phase II shall achieve the following measurable technical objectives:

Semi-annual meetings will be held during Phase II to review the technical progress and to consider market and other conditions.

"The undersigned certify that they agree to this funding commitment and that they understand that this information will be used by NSF in evaluating the commercial potential of the company’s innovation and, therefore, that information will be a significant factor in determining whether the SBIR Phase II proposal will be funded.. They further understand that willfully making a false statement or concealing a material fact in this commitment or any other communication submitted to the NSF is a criminal offense." (U.S. Code, Title 18, Section 1001)

Authorized Officer Authorized Officer

(Investor) (Small Business Firm)

______________________________ Name Typed: ______________________________

______________________________ Signature: ______________________________

______________________________ Title: ______________________________

______________________________ Company: ______________________________

______________________________ Tel. No. ______________________________

______________________________ Date: ______________________________

NSF FOLLOW-ON FUNDING COMMITMENT

[Manufacturing Firm Commitment]

Purpose

Whereas (manufacturing firm) of (location) is desirous of obtaining access to technology being developed by (small business firm) contingent upon (1) (small business firm) receiving Phase II award from the National Science Foundation, (2) the Phase II research achieving certain mutually agreed upon technical objectives set-out in section E, (3) the research or resulting technology not being by-passed in the marketplace during Phase II and (4) the technology appearing to be economically viable, it is therefore agreed as set forth below:

A. TERM OF AGREEMENT

The initial term of this agreement shall be for four (4) years from the date of execution and thereafter renewable for one (1) year at a time unless canceled by either party on 90 days notice prior to the end of the initial or any renewable term.

B. FOLLOW-ON FUNDING

Contingent upon meeting the technical specification in Section E, (manufacturing firm) agrees to fund (small business firm) for the commercial development (Phase III) of the project the sum of $________ beginning no later than the completion of Phase II. The schedule of funding will be as follows:

(Manufacturing firm) may choose to accelerate the funding schedule at any time it feels such investment is justified by technical progress or market conditions.

C. LICENSE OR JOINT VENTURE

Should (manufacturing firm) fund this project as set forth above or on any other mutually agreed upon basis, (small business) agrees to grant (manufacturing firm) an option to acquire an exclusive (or non-exclusive) license (or enter into a joint venture agreement) to exploit the technology for the following applications:

(or purchase (number) prototypes for an amount at least equal to the proposed Phase II award).

D. ROYALTIES OR INVESTMENT

In addition to the amount provided for the development phase a royalty should be paid by (manufacturing firm) on net sales of __________________________________________in accordance with the following royalty schedule:

1. _____% on the first $_____ of sales

2. _____% on the next $_____of sales

3. _____% on the next $_____ of sales

4. _____% on all additional sales.

(or an investment of $_____ will be made by (manufacturing firm) in the joint venture).

It is represented by (small business firm) that they possess (or will possess) and continue to possess commercial rights to any resulting patents to convey such exclusive (or non-exclusive) license or sub-license and that such rights do not interfere with the rights of others.

It (small business) fails to meet all the specifications stated in E, the parties will negotiate to see what terms may be justified in the case of partial success.

If, after commercial introduction (manufacturing firm) does not produce total sales exceeding $_____ in the first two years or $_____ in the first four years after initial sales, then the license (or ownership) of the technology) shall revert to (small business) unless (manufacturing firm) elects to pay royalties as if sales had reached said amounts each year.

It is understood that (manufacturing firm) will (or will not) have the right to sublicense others for the stated applications of the technology and in so doing will be responsible for paying (small business) the same royalty fees as with its own use.

E. TECHNICAL SPECIFICATIONS TO BE ACHIEVED IN PHASE II

The research to be carried out in Phase II shall achieve the following measurable technical objectives:

Semi-annual meetings will be held during Phase II to review technical progress and to consider market and other conditions.