PRINTER'S NO. 100
No. 91 Session of 1987
INTRODUCED BY HALUSKA, F. TAYLOR, GEIST, D. R. WRIGHT, DUFFY,
LLOYD, J. L. WRIGHT, LIVENGOOD, COWELL, FEE, MORRIS, NOYE,
BUSH, NAHILL, BELFANTI, KOSINSKI, MERRY, FARGO, MARKOSEK,
JACKSON, STUBAN, PETRARCA, TIGUE, ANGSTADT, DeLUCA, PERZEL,
KUKOVICH, DALEY, COY, VAN HORNE, CAWLEY, JAROLIN, DAWIDA,
BELARDI, SEVENTY, BATTISTO, LASHINGER, KASUNIC, BOOK,
JOHNSON, TRELLO, STAIRS, WOGAN, COLAFELLA, TELEK, COHEN,
PISTELLA, FISCHER, CARN, FOX, STABACK, DOMBROWSKI, RAYMOND,
BALDWIN, SIRIANNI, CARLSON, CALTAGIRONE, VEON, PETRONE,
LEVDANSKY, MRKONIC, HERMAN, LaGROTTA, FARGO, BLACK, LUCYK,
BURD, SERAFINI, OLASZ, LANGTRY, HOWLETT, CAPPABIANCA, CLARK,
MAIALE, YANDRISEVITS, LAUGHLIN AND MICHLOVIC, FEBRUARY 3,
1987
REFERRED TO COMMITTEE ON BUSINESS AND COMMERCE,
FEBRUARY 3, 1987
AN ACT
1 Providing for the Pennsylvania Product Development Corporation;
2 and making an appropriation.
3 The General Assembly of the Commonwealth of Pennsylvania
4 hereby enacts as follows:
5 Section 1. Short title.
6 This act shall be known and may be cited as the Pennsylvania
7 Product Development Corporation Act.
8 Section 2. Product Development Corporation.
9 (a) Establishment of corporation.--There is hereby
10 established a body corporate to be known as the Pennsylvania
11 Product Development Corporation, hereinafter referred to as the
12 corporation. The corporation shall be a quasi-public
1 instrumentality and the exercise by the corporation of the
2 powers conferred shall be deemed to be the performance of a
3 public function.
4 (b) Board of directors.--The corporation shall be governed
5 by a board of seven directors to be appointed by the Governor,
6 at least five of whom shall be knowledgeable and have skill,
7 knowledge and experience in the areas of the development of
8 technological invention. The term of each director shall be
9 coterminous with the term of the Governor or until a successor
10 is chosen, whichever is later. A director shall be eligible for
11 reappointment. The Governor shall fill any vacancy for the
12 unexpired term.
13 (c) Election of officers.--The directors shall annually
14 elect one of their members as chairman and one as secretary. The
15 board may elect such other officers of the board as it deems
16 proper. Members shall receive no compensation for the
17 performance of their duties but shall be reimbursed for
18 necessary expenses.
19 (d) Structure.--The corporation shall be within the
20 Department of Commerce for administrative purposes only.
21 Section 3. Powers of board.
22 The powers of the corporation shall be vested in and
23 exercised by the board of directors. Four members of the board
24 shall constitute a quorum and the affirmative vote of a majority
25 of the members present at a meeting of the board shall be
26 necessary for any action taken by the board. No vacancy in the
27 membership of the board shall impair the right of a quorum to
28 exercise all the rights and perform all the duties of the board.
29 The board may delegate to one or more of its members or its
30 officers, agents and employees such powers and duties as it may
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1 deem proper.
2 Section 4. President.
3 The board shall appoint a president of the corporation who is
4 not a member of the board to serve at the pleasure of the board
5 and receive such compensation as shall be determined by the
6 board. The president shall be the chief administrative officer
7 of the corporation and shall direct and supervise administrative
8 affairs and general management of the corporation. The president
9 may employ such other employees as shall be designated by the
10 board of directors and shall attend all meetings of the board;
11 shall keep a record of all proceedings; and shall be custodian
12 of all records.
13 Section 5. Corporate purpose; powers.
14 The purpose of the corporation shall be to stimulate and
15 encourage the development of new products by the infusion of
16 financial aid for invention and innovation situations in which
17 such financial aid would not otherwise be reasonably available
18 from commercial sources, and for this purpose the corporation
19 shall have the following powers:
20 (1) To have perpetual succession as a body corporate and
21 to adopt bylaws, policies and procedures for the regulation
22 of its affairs.
23 (2) To enter into venture agreements for the advancement
24 of financial aid to persons doing business in Pennsylvania
25 for the development of specific products, procedures and
26 techniques, to be developed and produced in this
27 Commonwealth, and to condition such agreements upon
28 contractual assurances that the benefits of increasing or
29 maintaining employment and tax revenues shall remain in this
30 Commonwealth and shall accrue to it for a sufficient time
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1 period to justify the State's involvement.
2 (3) To receive and accept loans, aid or contributions
3 from any source of money, property, labor or other things of
4 value, subject to the conditions upon which such grants and
5 contributions may be made, including, but not limited to,
6 gifts or grants from any department or agency of the United
7 States or this Commonwealth.
8 (4) To acquire, lease, purchase, manage, hold and convey
9 real and personal property in the Commonwealth, and lease,
10 convey or enter into contracts with respect to property on
11 any terms necessary or incidental to the carrying out of
12 these purposes.
13 (5) To borrow money.
14 (6) To hold patents, copyrights, trademarks or any other
15 evidences of protection or exclusivity as to any product
16 issued by the United States or any state or nation.
17 (7) To employ personnel and engage consultants,
18 attorneys and appraisers.
19 (8) With the approval of the State Treasurer, to invest
20 any funds not needed for immediate use or disbursement,
21 including any funds held in reserve.
22 (9) To do anything necessary or convenient to the
23 issuance of bonds, but the corporation shall have no power at
24 any time to pledge the credit or taxing power of the
25 Commonwealth or any of its municipalities or political
26 subdivisions, nor shall any of its obligations be deemed to
27 be obligations of the Commonwealth or any of its political
28 subdivisions.
29 (10) To the extent permitted under its contracts with
30 other persons, to consent to any termination, modification,
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1 forgiveness or other change of any term of any contractual
2 right, payment, royalty, contract or agreement of any kind to
3 which the corporation is a party.
4 (11) To make grants or loans to business development
5 credit corporations for purposes of providing venture
6 capital.
7 (12) To do all acts necessary or convenient to carry out
8 the provisions of this act and protect the interest of the
9 corporation and the Commonwealth.
10 Section 6. Financial aid agreements.
11 (a) Amount of financial aid.--The corporation may provide
12 financial aid to cover up to 60% of an applicant's cost in
13 developing a new product.
14 (b) Terms of agreement.--The financial aid agreement shall
15 contain the following provisions or provisions substantially
16 similar to the following provisions:
17 (1) The aid shall be recovered by the corporation by the
18 applicant paying to the corporation a royalty on the sale of
19 the product for which the aid was made available as follows:
20 (i) The royalty rate shall be 5% of all sales of the
21 product for a period of not less than five years
22 commencing on the date the project begins.
23 (ii) If at the conclusion of the five-year period,
24 the corporation has been paid an amount equal to or
25 greater than two and one-half times the amount of aid
26 which it provided to the applicant, the royalty rate
27 shall be reduced to a rate of 1% of sales for a
28 subsequent five-year period.
29 (iii) If at the conclusion of the five-year period,
30 the corporation has not been paid an amount equal to or
19870H0091B0100 - 5 -
1 greater than two and one-half times the amount of aid
2 which it provided to the applicant but at the conclusion
3 of an additional two-year period, the corporation has
4 been paid an amount equal to or greater than three and
5 one-half times the amount of the aid, the royalty rate
6 shall be reduced to a rate of .75% which shall be payable
7 for an additional seven-year period.
8 (iv) If neither of the conditions of subparagraph
9 (ii) or (iii) are met, the royalty rate of 5% shall be
10 paid to the corporation until the corporation recovers
11 five times the amount of aid which it provided to the
12 applicant; and, upon the corporation recovering five
13 times the amount of the aid, the royalty rate shall be
14 reduced to .5% and shall be payable to the corporation
15 for an additional period of time equal to the number of
16 years it took the corporation to recover five times the
17 said aid.
18 (2) Upon the applicant's meeting any of the conditions
19 of subparagraph (i) and either subparagraph (ii), (iii) or
20 (iv), no additional royalty shall be paid to the corporation.
21 (c) Alternative terms.--The financial aid agreement may
22 contain alternative terms in lieu of any of the requirements of
23 subsection (b), including, but not limited to, making loans,
24 arrangements or acquisitions of equity positions by the
25 corporation, provided such alternative terms will result in an
26 agreement which, in the opinion of the board of directors, will
27 produce substantially similar results to the agreement required
28 under subsection (b).
29 Section 7. Applications for financial aid.
30 All applications for financial aid shall be forwarded,
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1 together with an application fee prescribed by the corporation,
2 to the president of the corporation. The president, after
3 preparing necessary records for the corporation, shall forward
4 each application to the staff of the corporation for an
5 investigation and report concerning the advisability of
6 approving the proposed financial aid for such company and
7 concerning any other factors deemed relevant by the corporation.
8 Such application may also be referred to any local industrial
9 development authority, community development corporation or
10 other similar organization willing to accept the responsibility
11 for such an investigation and report. The investigation and
12 report shall include, but shall not be limited to, such facts
13 about the company under consideration as its history, wage
14 standards, job opportunities, stability of employment, the
15 extent of its dependency on defense contracts, past and present
16 financial condition and structure, pro forma income statements,
17 present and future markets and prospects, and integrity of
18 management, as well as the feasibility of the proposed product
19 and invention to be granted financial aid, including the state
20 of development of such product as well as the likelihood of its
21 commercial feasibility. After receipt and consideration of the
22 report and after such other action as is deemed appropriate, the
23 board of the corporation shall determine whether the purposes of
24 this act will be accomplished by providing the financial aid
25 which is requested by the applicant. When the board shall have
26 determined the facts favorable as to any application, it is
27 authorized and empowered, having due regard to the promotion of
28 the public purposes herein declared, to grant financial
29 assistance in the manner and to the extent authorized by this
30 act. The applicant shall be promptly notified of its action by
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1 the corporation.
2 Section 8. Bonds.
3 (a) Repayment.--The principal, interest and other charges
4 payable on any bonds of the corporation shall be payable solely
5 and exclusively from:
6 (1) the income and revenues from mortgages the
7 corporation owns and holds on industrial development
8 projects; or
9 (2) its revenue generally.
10 (b) Authorization.--The bonds of the corporation shall be
11 authorized by resolution of the board, shall be of such series,
12 bear such date or dates, mature at such time or times, not
13 exceeding 20 years from their respective date, bear interest at
14 such rate or rates, payable at least semiannually, be in such
15 denominations, be in such form, either coupon or fully
16 registered without coupons, carry such registration,
17 exchangeability and interchangeability privileges, be payable in
18 medium of payment and at such place or places, be subject to
19 such terms of redemption, with or without premium, and be
20 entitled to such priorities in the revenues or receipts of the
21 corporation as such resolution or resolutions may provide. The
22 bonds shall be signed by or shall bear the facsimile signature
23 of such officers as the corporation shall determine, and coupon
24 bonds shall have attached thereto interest coupons bearing the
25 facsimile signature of the treasurer of the corporation, all as
26 may be prescribed in such resolution or resolutions. Any such
27 bonds may be issued and delivered, notwithstanding that one or
28 more of the officers signing such bonds, or the treasurer whose
29 facsimile signature shall be upon the coupon, shall have ceased
30 to be such officer or officers at the time when such bonds shall
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1 actually be delivered. The bonds may be sold at public or
2 private sale for such price or prices as the corporation shall
3 determine. Pending the preparation of the definitive bonds,
4 interim receipts may be issued to the purchaser or purchasers of
5 such bonds and may contain such terms and conditions as the
6 corporation may determine. Any bond reciting in substance that
7 it has been issued by the corporation to aid in the product
8 development projects to accomplish the public purposes of this
9 act shall be conclusively deemed, in proceedings involving the
10 validity or enforceability of such bond or security therefor, to
11 have been issued for such purpose.
12 (c) Resolutions.--Any resolution or resolutions authorizing
13 any bonds may contain provisions which shall be part of the
14 contract with the holders thereof, as to:
15 (1) Pledging the full faith and credit of the
16 corporation (but not of the Commonwealth or any political
17 subdivision thereof) for such obligations or restricting the
18 same to all or any of the revenues or receipts of the
19 corporation.
20 (2) The terms and provisions of the bonds.
21 (3) Limitations on the purposes to which the proceeds of
22 the bonds then or thereafter to be issued may be applied.
23 (4) The setting aside of reserves or sinking funds and
24 the regulation and disposition thereof.
25 (5) Limitations on the issuance of additional bonds.
26 (6) The terms and provisions of any indenture under
27 which the same may be issued.
28 (7) Any other or additional agreements with the holders
29 of the bonds.
30 (d) Agreement with banks or trust companies.--The
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1 corporation may enter into any indentures or other agreements
2 with any bank or trust company, including any Federal agency,
3 and may assign and pledge all or any of the revenues or receipts
4 of the corporation. Such indenture or other agreement may
5 contain such provisions as may be customary in such instruments
6 or as the corporation may authorize, including (without
7 limitation) provisions as to:
8 (1) The application of funds and the safeguarding of
9 funds on hand or on deposit.
10 (2) The rights and remedies of the trustee and the
11 holders of the bonds (which may include restrictions upon the
12 individual right of action of such bondholders).
13 (3) The terms and provisions of the bonds or the
14 resolutions authorizing the issuance of the same.
15 (e) Negotiable instruments.--Said bonds shall have all the
16 qualities of negotiable instruments under the law merchant and
17 Title 13 of the Pennsylvania Consolidated Statutes (relating to
18 commercial code).
19 (f) Rights and remedies.--The rights and remedies herein
20 conferred upon or granted to the bondholders shall be in
21 addition to and not in limitation of any rights and remedies
22 lawfully granted to such bondholders by the resolution or
23 resolutions providing for the issuance of bonds or by any
24 indenture or other agreement under which the same may be issued.
25 In the event that the corporation shall default in the payment
26 of principal of or interest on any of the bonds after the said
27 principal or interest shall become due, whether at maturity or
28 upon call for redemption, and such default shall continue for a
29 period of 30 days, or in the event that the corporation shall
30 fail or refuse to comply with the provisions of this act or
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1 shall default in any agreement made with the holders of the
2 bonds, the holders of 25% in aggregate principal amount of the
3 bonds then outstanding, by instrument or instruments filed in
4 the office of the recorder of deeds of Dauphin County and proved
5 or acknowledged in the same manner as a deed to be recorded, may
6 appoint a trustee to represent the bondholders for the purpose
7 herein provided. Such trustee and any trustee under any
8 indenture or other agreement may, and upon written request of
9 the holder of 25% (or such other percentage as may be specified
10 in any indenture or other agreement aforesaid) in principal
11 amount of the bonds then outstanding, shall, in his or its own
12 name:
13 (1) By mandamus or other suit, action or proceeding at
14 law or in equity, enforce all rights of the bondholders,
15 including the right to require the corporation to carry out
16 any agreement as to or pledge of the revenues or receipts of
17 the corporation and to require the corporation to carry out
18 any other agreements with or for the benefit of the
19 bondholders and to perform its and their duties under this
20 act.
21 (2) Bring suit upon the bonds.
22 (3) By action or suit in equity, require the corporation
23 to account as if it were the trustee of an express trust for
24 the bondholders.
25 (4) By action or suit in equity, enjoin any acts or
26 things which may be unlawful or in violation of the rights of
27 the bondholders.
28 (5) By notice in writing to the corporation, declare all
29 bonds due and payable and if all defaults shall be made good,
30 then with the consent of the holders of 25% (or such other
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1 percentage as may be specified in any indenture or other
2 agreement aforesaid) of the principal amount of the bonds
3 then outstanding, annul such declaration and its
4 consequences.
5 (g) Jurisdiction of court.--The Commonwealth Court shall
6 have jurisdiction of any suit, action or proceedings by the
7 trustee on behalf of the bondholders. Any trustee appointed by
8 the court or a trustee acting under an indenture or other
9 agreement, and whether or not all bonds have been declared due
10 and payable, shall be entitled as of right to the appointment of
11 a receiver, who may exercise dominion over the assets of the
12 corporation or any part thereof, the revenues or receipts from
13 which are or may be applicable to the payment of the bonds so in
14 default and collect and receive all revenues thereafter arising
15 therefrom in the same manner as the corporation or the board
16 might do and shall deposit all such moneys in a separate account
17 and apply the same in such manner as the court shall direct. In
18 any suit, action or proceeding by a trustee, the fees, counsel
19 fees and expenses of such trustee and of the receiver, if any,
20 and all costs and disbursements allowed by the court shall be a
21 first charge on any revenues and receipts by the corporation,
22 the revenues or receipts from which are or may be applicable to
23 the payment of the bonds so in default. A trustee shall, in
24 addition to the foregoing, have and possess all of the powers
25 necessary or appropriate for the exercise of any functions
26 specifically set forth herein or in any indenture or other
27 agreement or incident to the general representation of the
28 bondholders in the enforcement and protection of their rights.
29 Section 9. Product Development Corporation Fund.
30 All proceeds from the sale of bonds and all income of the
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1 corporation shall be paid into the Product Development
2 Corporation Fund to be used in carrying out the purposes of this
3 act.
4 Section 10. Annual report.
5 On September 1 of each year, the corporation shall report on
6 its operations for the preceding fiscal year to the Governor.
7 Such report shall include a summary of the activities of the
8 corporation and a complete operating and financial statement.
9 The corporation shall be subject to examination by the State
10 Treasurer. The accounts of the corporation shall be subject to
11 annual audits by the State auditors of public accounts.
12 Section 11. Tax exemption.
13 The corporation shall be and is hereby declared exempt from
14 all franchise, corporate business and income taxes levied by the
15 Commonwealth, provided nothing herein shall be construed to
16 exempt from any such taxes, or from any taxes levied in
17 connection with the manufacture or sale of any products which
18 are the subject of any agreement made by the corporation, any
19 person entering into any agreement with the corporation.
20 Section 12. Appropriation.
21 The sum of $500,000 is hereby appropriated to the
22 Pennsylvania Product Development Corporation for administrative
23 expenses.
24 Section 13. Effective date.
25 This act shall take effect in 60 days.
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