Proposed Structure of Technology Commercialization and Sponsorship of Private Investment Fund. University of Alaska Anchorage Project

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Shanna Cook
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1 Prpsed Structure f Technlgy Cmmercializatin and Spnsrship f Private Investment Fund Anchrage Prject

2 Assignment f Intellectual 100 % wnership Prperty License f IP/Stck Sub General Partner Sub Investment Manager License f Stckhlder General Partner Interest (1%) Investment Management Agreement Fund Investr Start Ups Prtfli Investments Fund Alaska LP Limited Partnership Interests Fund Investr Fund Investr

3 and Subsidiaries Crprate Separatin Tp-level hlding cmpany whlly-wned by UA whlly-wns underlying subsidiaries Purpses: The IP/Stck Subsidiary will hld the intellectual prperty rights pursuant t a license frm and any stck received frm the start-up ventures The intellectual prperty rights and the stck will be hused in the same entity and accrdingly the assets wuld be available t satisfy any debts, liabilities, bligatins, and risks assciated with licensing the intellectual prperty and hlding the stck The cntractual agreements will be drafted t minimize, t the extent pssible, the expsure f the intellectual prperty assets t ptential claims r lsses Crprate separateness and frmalities must be respected and practiced n a cnsistent and thrugh basis t reduce r mitigate risk f a curt lking thrugh the structure and treating UA as the entity actually cnducting the functin, rather than a subsidiary r subsidiaries (als knwn as piercing the crprate veil ). 100 % wnership 100 % wnership Each entity shuld: have its wn gverning dcuments take its wn crprate actins keep its wn crprate bks and recrds perate within its wn defined business areas have at least sme bard members nt in cmmn with the ther bards IP/Stck Sub General Partner Sub Investment Manager

4 Unrelated Business Taxable Incme Incme t the ( UA ) is nt generally subject t federal incme tax, except fr incme generated frm unrelated trades r businesses, which is taxed at the highest crprate incme tax rates Unrelated business incme tax ( UBIT ) is impsed n grss incme received by UA frm an unrelated trade r business, less directly related expenses Incme is taxable if derived frm a trade r business the trade r business is regularly carried n the regularly carried n trade r business is nt related t UA s charitable, educatinal, scientific, literary, etc. purpses Whether an activity is an unrelated trade r business is determined based n all the facts and circumstances

5 Unrelated Business Taxable Incme (cnt.) Althugh exceptins may apply, certain types f incme are nt subject t UBIT, including dividends interest ryalties rents capital gains incme derived frm research Incme may be subject t UBIT even if it falls int ne f the abve categries in certain circumstances fr example: In certain cases if the incme is derived frm debt-financed prperty certain types f incme frm cntrlled subsidiaries if the subsidiary is able t deduct such amunts and thereby reduce its taxable incme, r if the payment wuld allw the subsidiary t take a lss that may be used against incme earned by it in subsequent years Incme derived frm research activities f a university is nt generally subject t UBIT but t qualify, such research must be cnducted by the university and may nt be cnducted thrugh a separately incrprated entity Research cnducted by a single-member limited liability cmpany that is treated as a disregarded entity and wned by a university will be treated as cnducted by the university

6 IP/Stck Sub License f Start Ups Assignment f License f Hlds Stck IP/Stck Subsidiary The IP/Stck Subsidiary hlds the intellectual prperty rights (issued patents, trade secrets, and patent applicatins) pursuant t a license frm and licenses such prperty t the varius start-up cmpanies and als hlds stck wnership interest f the start up-cmpanies in exchange fr the cntributin f such licenses The intellectual prperty rights and the stck are being held in ne crpratin in rder t ease the administrative csts and burdens The easing f the administrative csts and burdens will result in all f the crpratin s assets being subject t any claims r lsses T the extent pssible, the cntractual agreements fr the intellectual prperty will try t reduce and minimize such risks

7 General Partner and Investment Manager Subsidiaries The General Partner Subsidiary will serve as the general partner f the Private Investment Fund ( Fund ) and receive a share f the prfit frm investments ( carried interest ) The Investment Manager Subsidiary will serve as the investment manager f the Fund and receive a management fee Purpses fr frming separate entities t serve as general partner and investment manager f the Fund: General Partner Sub General Partner Interest (Carried Interest (1%)) Fund Alaska LP Investment Manager Investment Management Agreement (Management Fee ) taxatin carried interest currently categrized as capital gains (althugh there are effrts in Cngress t have carried interest treated as rdinary incme) management fees categrized as rdinary incme having different revenue streams flw t separate entities reduces risk that bth revenue streams will be treated as rdinary business incme, which wuld create a larger tax burden prtectin frm Fund-related liabilities the general partner has general liability fr the debts and bligatins f a limited partnership

8 General Partner Subsidiary Purpse and Existence The General Partner Subsidiary shuld be a single purpse vehicle dedicated slely t the Fund that wuld: wind dwn its affairs fllwing liquidatin and wind dwn f the Fund (a new General Partner Subsidiary shuld be established if a successr investment fund is established) limit the scpe f any incentive cmpensatin schemes that may be established fr UAA persnnel with respect t carried interest generated by the Fund r the sharing f carried interest with third parties (t ensure that any incentive cmpensatin r ther carried interest participants that may be terminated wuld nt have a rle with and receive similar incentive cmpensatin in respect f the successr fund)

9 Investment Manager Subsidiary Purpse and Existence The Investment Manager Subsidiary serves as investment manager f the Fund has n wnership interest whatsever in the Fund enters int an investment management agreement with the Fund under which it will prvide investment management and advisry services t the Fund receives management fees frm the Fund des nt have general liability fr the debts and bligatins f the Fund since there is n wnership interest in the Fund (unlike the General Partner Subsidiary) des nt need t wind dwn when the Fund and the General Partner Subsidiary are wund dwn, s lng as ther business pprtunities exist fr cntinued peratin may, if successful, serve as an perating business and exist beynd the life f the Fund t spnsr, raise and manage successr funds and engage in ther similar business activities as day-t-day manager f the Fund s peratins, emplys/pays the investment prfessinals and prvides the verhead necessary t run the peratins. General Partner Sub General Partner Interest (Carried Interest (1%)) Investment Manager Investment Management Agreement (Management Fee ) Fund Alaska LP

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