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Haslam INCITE entrepreneurial capital-access
program moves stepwise toward launch
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Bill Hagerty Commissioner, ECD

Update 28 December 2011 4:14 p.m.: ECD release the investor application form and program guidelines today here.

Gov. Bill Haslam's $29.7MM INCITE entrepreneurial co-investment program seems to be advancing toward its debut.

Economic & Community Development (ECD) Commissioner Bill Hagerty said this morning that he believes "we are very close to launching what I hope will be a great magnet" for attracting jobs to Tennessee, and that he now expects to make public the final application for would-be "approved investors" as early as next Tuesday, Dec. 27.

Hagerty acknowledged, as he has previously, that grant requirements and a desire to put INCITE funds to work in the Tennessee economy have led the Haslam Administration to adopt "an aggressive timeline" for launching the program.

Nonetheless, he said, the co-investment program is certain to prove to be "the highest and best use" of funds made available for such purposes by U.S. Treasury. More on INCITE here.

Based on the current draft guidelines for the ECD program, the guidelines, as well as the template for approved investors' use in seeking approval of qualified investments are likely to be available by Jan. 19. An investment may be administratively approved as early as Jan. 27, 2012, according to the draft.

With deadline pressure heightened during the holidays, none of that can be considered definite at this writing, but this morning all hands seemed to be on-board and rowing in the same direction.

Leslie Wisner-Lynch

This morning, the executive committee of Tennessee Technology Development Corporation (TTDC) gave CEO Leslie Wisner Lynch authority to use her discretion, subject to further refinement of documents governing the INCITE initiative and support thereof, to ensure that any contract TTDC enters into with State Economic & Community Development (ECD) to provide administrative services for the INCITE program reflects the TTDC board's guidance and is otherwise prudent from TTDC's standpoint.

The committee made its decision after Wisner-Lynch told the group that all parties to the process had had "a very open and frank discussion" that has left her confident that the level of diligence by all involved with be consistent with the expectations of the TTDC board, the investment community and the public. "The level of engagement of the TTDC board has really been tremendous," she said.

TTDC and ECD staff had worked daily on addressing ideas and concerns that had arisen during a TTDC board meeting earlier this month and which had been submitted during the public comment period of the past month. During the full board's meeting earlier this month, some members expressed concern that the program not become controversial, with clear references to disputes that have at times hung over the state's innovative TNInvestco capital-formation program.

Others wondered aloud whether the process wasn't overly "robotic" and whether TTDC and its board should be more involved, but that notion has not resurfaced publicly. Since then, issues small and large have bubbled-up, some touching on the handling of proceeds from liquidity events, and some questions about convertible debt, for example.

Miller & Martin attorney Lance Bridgesmith, representing TTDC in this morning executive committee meeting, reviewed a number of issues that had previously arisen, some related to the degree of "discretion" that TTDC might be expected to employ as administrator. Ultimately, the discussants seemed to agree that the program's detailed guidelines and conventional standards and principles related to exercise of business judgment should serve to mitigate risk of litigation on grounds of error or miscarriage.

Hagerty emphasized the role of ECD and TTDC staff in ensuring the program is executed "in compliance" with its guidelines.

Wisner-Lynch made clear that the issue of TTDC risk-management has been a very substantial topic of her discussions with ECD regarding the contract that has yet to be formed between the two organizations, and she is at this point satisfied that TTDC will be able to manage its risks under the prospective contract.

In a message transmitting INCITE drafts to her board, Wisner-Lynch said, in part, "There has been significant discussion and deliberation to ensure that the INCITE Co-Investment Fund will be administered with a level of diligence that is consistent with that which I believe the board would expect.  While there are still outstanding deliverables, including the Qualified Investment Application, the Investor Funding Agreement, the Standard Operating Procedures for the program and a contract for funding our role as Administrator of the INCITE Co-Investment Fund, we are working with ECD to complete those within the next 3 weeks (in advance of releasing any further program related materials or opening the next application phase)."

Commissioner Hagerty, who is now also chairman of TTDC, attended the conference-call meeting, but soon recused himself from convening the group or deliberating, instead asking his predecessor, CEO Bill Evans of St. Jude Children's Research Hospital, to assume that duty.

Hagerty explained that, while he cannot know the disposition of his assets now held in a blind trust during his government service, the fact that he has an interest in several early-stage investment firms or funds and has invested in bank stocks are among the reasons he felt is appropriate to recuse himself. Hagerty's dual roles as commissioner of the contracting agency, ECD, and chairman of prospective contractor TTDC were not cited as factors.

Members attending this morning's committee calle, in addition to Hagerty, Evans and Wisner-Lynch, were Bruce Doeg (Baker Donelson Bearman Caldwell & Berkowitz), Ted Nelson (ThermaMasters), and Jim Phillips (Pinnacle Enterprises). Member Tom Ballard was absent. VNC

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Tags: Bill Hagerty, Bruce Doeg, economic development, Gov. Bill Haslam, Jim Phillips, Lance Bridgesmith, Leslie Wisner-Lynch, Miller & Martin, Ted Nelson, Tennessee Technology Development Corporation, Tom Ballard, TTDC

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