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Dartmouth College Policy on Acceptance of Equity

In Academic-Industry Collaborations

Preamble

Dartmouth College recognizes the importance of encouraging the practical application of College-based research and educational activities for the public benefit. In order to accomplish this aspect of its mission, the College enters into a variety of relationships with business enterprises. These relationships include research agreements, licensing of College-owned inventions and works of authorship, (See Dartmouth College Patent Policy and Dartmouth College Copyright Policy) collaborative ventures to conduct educational activities or produce educational materials, and pre-incubation or incubation services to nascent companies.

In forming such relationships, it may be desirable for the College to receive equity in a venture as partial or full consideration for the College's contribution. Equity ownership, however, has the potential for creating conflicts of interest because equity holders are part owners of the company. The possibility that the College may profit if the company is successful creates a risk that College officials may take actions and make decisions that favor the interests of the company over academic goals. Accordingly, this policy permits equity participation but sets forth rules intended to:

  1. Manage or eliminate actual or perceived institutional conflicts of interest;
  2. Safeguard against stock price manipulation or speculation; and
  3. Avoid any adverse effect on the reputation of the College and its faculty, staff, and students.

This policy governs the College's receipt of equity in commercial ventures that are owned in whole or in part by third parties. It is not intended to address the receipt of equity in wholly-owned College ventures; such situations will be handled on a case-by-case basis. Nor is this policy intended to address the acquisition of equity solely for passive investment of the endowment.

As noted above, this policy addresses conflicts of interest relating to institutional ownership of equity. Individual faculty or staff members' ownership of equity — like other financial relationships between individual members of the College and business organizations — is subject to the College Conflict of Interest Policy. Faculty and staff members should periodically review that policy to be sure that they are in compliance with it.

Definitions

  • 2.1 "Agreement" shall mean an agreement described in the Preamble, pursuant to which Equity is received by the College and/or Creator(s) as partial or full consideration, whether in the form of a license, right of first refusal, or other form of agreement.

  • 2.2 "College Equity" shall mean any Equity received by Dartmouth College from the Equity Pool after distribution or allocation of the Creator Equity.

  • 2.3 "Commercial Venture" shall mean a business, regardless of form or organizational structure, that has entered into an Agreement with the College that involves the receipt by the College of Equity. It does not include a wholly-owned College business or a business in which the College holds an interest solely for passive investment purposes.

  • 2.4 "Creator(s)" shall mean (a) the inventor(s) or author(s) of intellectual property or know-how licensed to the Commercial Venture; or (b) other faculty members, staff, or students designated by the College as persons who are to receive Equity from the Equity Pool.

  • 2.5 "Creator Equity" shall mean that portion of the Equity Pool distributed or allocated to Creator(s) pursuant to Paragraph 3.3 below.

  • 2.6 "Equity" shall mean shares of common or preferred stock or securities of any kind, warrants, options, convertible instruments, partnership interests, units of a limited partnership, membership in a limited liability company, partnership or corporation, or any other instrument conveying an ownership interest in a Commercial Venture.

  • 2.7 "Equity Pool" shall mean the total amount of Equity allocated to the College as partial or full consideration for the Agreement. It does not include such additional Equity, if any, as Creator(s) may receive directly from the Commercial Venture as founder's Equity or the like.

Rules

  • 3.1 Authorized College Representative. In all negotiations with Commercial Ventures involving the receipt of Equity, the College shall be represented by the Office of the General Counsel in conjunction with the following School(s) or administrative unit(s):
    • In transactions where the College is to receive Equity in consideration for the license of College-owned intellectual property: the Technology Transfer Office together with the responsible School or administrative unit.
    • In transactions where the College is to receive Equity in consideration for business incubation or pre-incubation services furnished by the Dartmouth Entrepreneurial Network: the Dartmouth Entrepreneurial Network.
    • In Research Agreements: the Office of Sponsored Projects and the responsible School or administrative unit.
    • In other transactions: the administrative officer (Dean, Vice President, or other senior officer) with responsibility for the College activity involved in the transaction, or his or her designee.
  • 3.2 Final College Approval. Acceptance of Equity under this policy requires the prior written approval of the Provost and the Vice President and Treasurer. Schools and administrative units that are planning to enter into transactions involving the acceptance of Equity under this policy should notify the Office of the General Counsel as soon as possible, so that that office can familiarize itself with the transaction and advise the Provost and the Vice President and Treasurer.
  • 3.3 Distribution of Equity Pool.
    • Except as provided in subparagraph (b) below, Equity shall be distributed as follows:

      Para. 3.1(a) transactions As provided in the Dartmouth College Patent and Copyright Policies
      Para. 3.1(b) transactions To the Provost
      Para. 3.1(c) transactions In accordance with the procedure for allocation of indirect costs on federal Sponsored Projects
      Para. 3.1(d) transactions As determined by the Provost upon the recommendation of the administrative officer   (Dean, Vice President or other senior officer) of the unit conducting the transaction
      If the Provost determines that the transaction does not fall within any of the categories set forth above, or that it falls within more than one category, then s/he shall establish a distribution that fairly allocates the Equity Pool, given the nature of the transaction and the contributions of the various Schools, administrative units and individuals involved. The Provost's decision in allocating the Equity Pool shall be made in his or her sole discretion and shall be final.
    • Cases may arise where the proceeds of Equity received by a School or administrative unit under subparagraph (a) are so great as to significantly exceed its current and reasonably anticipated programmatic needs. In such cases, the Provost, after consultation with the Vice President and Treasurer, will consult with the Dean or director of the involved School or administrative unit with a view to making a portion of such proceeds available for other institutional needs. As in other cases, if the Provost and the involved School or unit are unable to agree, final authority to determine the appropriate allocation rests with the President and the Board of Trustees.
  • 3.4 College Equity.
    • All College Equity shall be taken in the name of "Trustees of Dartmouth College" and shall be held in a "blind trust" where, at the sole discretion of the manager of the trust, it may be sold or held based on sound business judgment and publicly available information.
    • The College will not act as a principal investor or syndicating agent for a Commercial Venture under this policy. Except with the prior approval of the Provost and the Vice President and Treasurer, a Commercial Venture may not use the names, insignias, or other indicia of Dartmouth College or its components in any advertising, promotional material, or material prepared for investors.
    • Except with the prior approval of the Provost and the Vice President and Treasurer, College Equity shall not exceed ten percent (10%) of all of the ownership of the Commercial Venture.
  • 3.5 Creator Equity. Creator Equity shall be offered to Creator(s) to the extent required under Paragraph 3.3 above, and, if accepted, shall be issued directly to the Creator(s) at the time the Equity is issued, subject to such restrictions as may be imposed under the conflict of interest policy or other policies of Dartmouth College. Creator(s) shall be responsible for retaining their own business advisors, legal counsel and tax counsel and shall be responsible for all financial, tax and legal consequences related to the Equity they receive. (Transactions involving Equity have complex tax and securities law considerations. The College strongly recommends that Creator(s) seek separate counsel from an attorney or accountant familiar with tax and business law issues.)
  • 3.6 Board Participation by College. Except with the prior approval of the Provost and the General Counsel, the College will not accept a position on the Board of Directors of the Commercial Venture, but may accept and exercise observer rights on such Board.
  • 3.7 Investment by College. The College shall not invest in the formation of the Commercial Venture and shall not invest in later rounds of private financing for the Commercial Venture unless the investment is part of the College's routine investment activities (e.g., participation in a venture capital fund) and decisions are made by personnel insulated from the conduct of research or other academic activities that could have an effect on the Commercial Venture.
  • 3.8 Pipelining. The College does not "pipeline" future inventions or other intellectual property to Commercial Ventures in which the College or Creator(s) hold Equity. Consideration for future licenses or other business relationships will be given to Commercial Ventures on the same basis as other potential licensees or co-venturers.

Interpretation; Resolution of Disputes

  • 4.1 Except as otherwise provided, all questions concerning the interpretation of this policy, and all disputes arising hereunder, shall be referred to the Committee on Equity and Entrepreneurial Activities. Any person wishing to appeal the Committee's decision may do so by submitting a letter to the Provost, within thirty (30) days of the Committee's decision, stating the basis for the appeal. The decision of the Provost on the appeal shall be final.

Last Updated: 10/28/09