Nidus Center for Scientific Enterprise Admissions

Overview

The Candidate company must:

• meet the definition of a "technology-based company in the plant science/life science industry"
• be a for-profit entity as a corporation, limited liability company, partnership or sole proprietorship
• demonstrate a need for incubator services
• provide nominal 4% ownership

Clients are selected on a case-by-case basis. Evaluation criteria include but are not limited to the following:

• merit of the business proposal
• background, attitude and experience of the principals
• financial viability
• status of the business plan, market research and growth potential, intellectual property position and financial proformas
• applicants commitment - both financial and personal time to the venture
• business references
• adequacy of the management team
• potential for interaction with Nidus Center partners.

(note: client diversity in terms of race, religion and sex is encouraged)

The review process involves:

• a written application, including a business plan
• review and prescreening of the application by Nidus Center staff
• interview with the Admissions Committee
• negotiation of the Interaction Agreement and lease.

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Definitions

The terms listed below have the following meanings:

"Associate" means a company admitted to, and residing on the premises of, Nidus Center.

"Affiliate" means a company admitted to, but residing off the premises of, Nidus Center.

"Graduate" means a company graduated from Nidus Center.

"Graduation" means the completion of the exit and graduation criteria outlined below by a company admitted to Nidus Center so that the company is a successful, independent business.

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Company's Responsibilities

Participation in the incubator program is strictly voluntary. The Nidus Center staff and volunteers function solely as advisors to portfolio companies. Entrepreneurs are free to accept or reject the advice given.

In return, Nidus Center requires its companies to:

• Operate their business in a legal and ethical manner, including establishing necessary legal actions including company formation and protection of intellectual property via patents, trade secrets, copyrights, trademarks or otherwise.
• Establish an appropriate accounting and bookkeeping system and report financial data to the Nidus Center quarterly
• Pay invoices promptly
• Provide the Nidus Center with quarterly data on sales and number of employees
• Establish in addition to its original business plan a written 3-year (minimum) operating plan to be updated at least annually. This operating plan will include a detailed budget with product/service financial objectives (P&L, cash flow, and balance sheet) and will address the following areas:
• Normal operating issues
• Management team and work force
• Product/service development and life cycle
• Marketing plan
• Sales
• Financing needs, potential sources and strategy
• Participate in Nidus programs:
• Advisory Board
• Management Team Building
• CEO Meeting
• Management Training
• Seminars
• Provide monthly progress reporting via submission of:
• Critical Factors Report
• Growth Strategies Stage Progress Check List

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Policies and Procedures

Nidus Center for Scientific Enterprise makes a substantial investment of time and resources in its entrepreneurial companies. As an organization that solicits and spends private funds, the Nidus Center must be conscientious in the due diligence and process before admitting a company into the program. In addition, limited resources mean that only a limited number of spaces are available in the incubator program.

Nidus Center's policy is to select those companies that are most likely to help achieve its vision and mission. Nidus Center is an equal opportunity service organization. Within the context of its mission and the guidelines of its entrance criteria, Nidus Center will provide equal access to the program for all entrepreneurs.

Nidus Center staff analyzes a company's technology, available resources, entrepreneurial experience and need for Nidus Center services, in order to determine its growth potential and probability of success. Staff then forwards its recommendations to a committee of volunteer business leaders that makes the final admission decision which may involve a personal interview with the entrepreneur.

Possible admission decisions include: 1) rejection of the application, 2) acceptance for immediate admission to the program, or 3) conditional acceptance. Companies accepted conditionally are placed on a waiting list for the next available space in the program. When a space opens up, all waiting-list companies still interested in the program are re-evaluated to properly consider changes in their situation since the initial acceptance. The committee then selects the best qualified company.

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A. Admission Criteria

To be considered for admission to Nidus Center, an applicant must be a technology based company in the plant science/life science industry with a novel product or manufacturing process. Consulting or wholesale businesses will not be considered for admission. Selection will be based on the ability of the candidate business to meet certain standards. The application process is two-fold. First, an applicant must submit a document addressing the following criteria. This will help ensure a good fit between candidate companies and the overall mission of Nidus Center.

• Product Sophistication: What is the sophistication level of your technology?
• Growth in Employment: Does your company have the potential for substantial growth and job creation within the St. Louis Region?
• Research and Development Intensity: How much R&D is required to bring your technology to fruition?
• Occupational Mix of Management Team: What is the occupational mix of pertinent technical personnel in your company?
• Technology Intensity: What is the technology that is embodied in your company's products?
• Company Grouping/Cluster: Does your company fit into one of the clusters identified as successful industries in the St. Louis Region?
• Plant Sciences
• Life Sciences
• Client Expectation: What do you expect from Nidus Center?

Next, Nidus Center will evaluate potential clients with an emphasis on the following three areas. Therefore, a business plan addressing these issues is strongly recommended.

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I. Technical:

• Is there a technical or proprietary competitive advantage for the product or process?
• Has the technology been proven to be feasible?
• How many months until the first delivery of a product or process?
• With what human or capital resources?

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II. Business/Market:

• What is the life cycle stage of the industry? Of the company?
• What is the buyer concentration of the market (i.e. few large companies vs. general consumers)?
• Is there evidence of a clear market opportunity or niche?
• What are the current competitive conditions?
• What are the expected barriers to entry?
• Can the company attain a dominant position with high gross margins within that niche?
• Is there growth potential for the company?
• What is the projected market share in the 5th year?
• What is the expected size of the market in the 5th year?
• What is the current growth rate of the market?
• Are the financial proformas available and realistic?
• Are there sufficient financial resources to survive or a high potential to acquire these resources?
• What is the overall quality of the business plan?

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III. Management:

• How complete is the founding team? (i.e. how many key positions are filled?)
• What is the joint experience of the management team?
• Are the management team's business and technical backgrounds relevant to this business?
• Is the management team committed and realistic in its expectation?
• Will the team listen to advice?

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B. Admission Process (see diagram)

• Determination of eligibility based on preliminary application.
• Submission of complete application package including:
• copy of the company's business plan
• company's tax returns for prior two years
• details of company's structure, bylaws, ownership, etc.
• Due diligence by the Nidus Center staff (including background and credit check of company owners)
• Decision by admissions committee

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C. Orientation (first three months in the program)

1) Perform a strategic diagnosis of the company to:

• jointly set short term objectives for company performance with staff and advisory board
• develop a written company action work plan
• set up the company's financial management systems

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D. Semi-Annual Review

Two formal performance reviews of each portfolio company are required each year. Staff and advisory board gauge the progress of a company against its objectives, and evaluate the quality and impact of the business assistance.

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E. Termination of Participation in the Program

Nidus Center reserves the right to rescind a company's right to participate in the program. For conduct deemed illegal or detrimental to the program as a whole, termination is effective immediately. For unsatisfactory performance or nonpayment of Nidus Center invoices, a company will receive written notice of an intent to terminate, including potential probationary periods and remediation. Decisions to terminate may be appealed to the Nidus Center Board of Directors as the final arbitrator.

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F. Exit and Graduation Criteria

Nidus Center provides temporary assistance and space to new and developing high technology businesses. After an Associate or Affiliate company has become a successful independent business that no longer needs the assistance of Nidus Center, the company will graduate from Associate or Affiliate to Graduate status. Nidus Center has the right to modify the occupancy period and determine exit and graduation criteria for admitted companies. Companies admitted to the incubator must use their best efforts to meet these exit and graduation criteria. This document outlines the guidelines, exit criteria, and graduation criteria for companies admitted to Nidus Center. A separate document entitled Nidus Center Company Milestone Events and Schedule should be updated consistently by admitted Nidus Center companies to illustrate the company's progress toward graduation.

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I. Exit Criteria

Nidus Center has the following rights to determine Successful and Unsuccessful Exit criteria for Nidus Center Associate companies.

Nidus Center has the right to:

1. Require Associate companies to vacate the premises and terminate all ties with Nidus Center at any time. (Unsuccessful Exit).

2. Reserve final approval for Successful Exit from the premises of Nidus Center and for change from Associate to Affiliate or Graduate status.

3. Periodically review Associate companies and modify occupancy period based on the following Successful Exit guidelines:

• Company's past compliance with terms of this Agreement and a separate lease.
• Company's future performance potential in terms of employment generation and general success.
• Company's preparation and presentation of an operating plan and cash flow projection to chart future objectives and performance targets.
• Demand for space and the Company's potential compared to competing demands and availability.
• Company's need for and use of services provided by Nidus Center.
• Company's ability to stand on its own in a commercial facility.
• Company's relationship with other businesses located in the incubator.

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II. Graduation Criteria

In addition to meeting the exit criteria outlined above, companies admitted to Nidus Center will use their best efforts to meet graduation criteria established by the company management and the Nidus Center CEO. Whether an on-site Associate company or an off-site Affiliate company, Nidus Center graduation criteria are outlined below.

Periodically each company will be reviewed by the company management and the CEO, Nidus Center. The intent of this review is to analyze the company's past performance and predict the company's future needs and growth potential in terms of the following characteristics:

• A balanced and experienced management team.
• Funding to carry company through 6-12 months of operations and financial stability as demonstrated vis-a-vis a significant outside investment or a long term investor commitment to the company.
• Significant product sales and backlog indicating a customer need.
• Need for and use of the services provided by Nidus Center.
• A well thought out operating plan.

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III. Length of Program

The length of stay in the incubator program can vary depending on a company's specific situation. Extensions will be considered on a case-by-case basis.

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