Current through Bulletin 2024-06, March 15, 2024
The Economic Development Impact attributable to each Utah
Fund of Funds for equity-based Private Investments that were initiated on or
after July 1, 2015 and to the Corporation shall be measured and determined in
accordance with this R357-7-9.
(1)
The Economic Development Impact attributable to each Utah Fund of Funds for
equity-based Private Investments determined in accordance with U.C.A. Section
63N-6-406(3)(d)(i)
shall be equal to the sum of all investments made by such Utah Fund of Funds
directly or indirectly in Utah-based Operating Companies plus verifiable
amounts invested in Utah-based Operating Companies and Utah-based Investment
Funds by third parties (other than amounts invested directly by a Utah Fund of
Funds or indirectly by any portfolio fund held by any Utah Fund of Funds) that
are directly facilitated by the Corporation's economic development plan and
economic development activities, calculated in accordance with sections 2, 3
and 4 of this R357-7-9, respectively.
(2) Direct Investments. A direct investment
made by a Utah Fund of Funds in a Utah-based Operating Company shall, at the
time of determination, be measured by reference to the greater of the Cost of
such investment or the Exit Value of such investment.
(a) The "Cost" of a direct investment by a
Utah Fund of Funds shall mean the sum of all amounts paid by such Utah Fund of
Funds to make debt or equity investments in such Utah-based Operating Company
as reported in the financial statements of such Utah Fund of Funds.
(b) The "Exit Value" of a direct investment
by a Utah Fund of Funds shall mean, without duplication, the sum of all amounts
received upon the sale or other disposition of any debt or equity investments
made in such Utah-based Operating Company as reported in the financial
statements of such Utah Fund of Funds plus the fair market value of all equity
investments held by such Utah Fund of Funds based on the closing sale price of
such equity investments on the expiration date of any applicable contractual
restrictions on transfer of such equity investments that are entered into by
such Utah Fund of Funds in connection with an underwritten initial public
offering of such Utah-based Operating Company.
(c) The Exit Value of a direct investment in
such Utah-based Operating Company by a Utah Fund of Funds shall apply only to
that portion of an investment that is actually sold or otherwise disposed of,
or that is held by such Utah Fund of Funds on the expiration date of any
applicable contractual restrictions on transfer of equity investments that are
entered into by such Utah Fund of Funds in connection with an underwritten
initial public offering of such Utah-based Operating Company; all other direct
investments made in a Utah-based Operating Company shall be measured by
reference to Cost.
(3)
Indirect Investments. An indirect investment made by a Utah Fund of Funds in a
Utah-based Operating Company shall, at the time of determination, be measured
by reference to the greater of the Cost of such investment or the Exit Value of
such investment, in each case as attributable to such Utah Fund of Funds.
(a) The amount of indirect investments
attributable to such Utah Fund of Funds in a Utah-based Operating Company shall
be the amount of all investments in such Utah-based Operating Company made by a
portfolio fund held by such Utah Fund of Funds multiplied by a fraction, the
numerator of which is such Utah fund of fund's capital commitment to the
applicable portfolio fund and the denominator of which is the aggregate capital
commitments of all partners, members or other category of equity investor with
similar status of such portfolio fund, each as reported in the financial
statements or other investor reports of such portfolio fund.
(b) The "Cost" of a portfolio fund's
investment shall mean the sum of all amounts paid by such portfolio fund to
make debt or equity investments in such Utah-based Operating Company, as
reported in the financial statements or other investor reports of such
portfolio fund.
(c) The "Exit
Value" of a portfolio fund's investment in such Utah-based Operating Company
shall mean, without duplication, the sum of all amounts received upon the sale
or other disposition of all debt or equity investments in such Utah-based
Operating Company and the value attributed to such investment made at the time
of the distribution in kind of such investment to the partners, members or
other category of equity investor with similar status of such portfolio fund as
reported in the financial statements or other investor reports of such
portfolio fund.
(d) The Exit Value
of a portfolio fund's investment shall only apply to that portion of the
investment that is actually sold, disposed of, or distributed in kind as of the
time of determination; all other investments made by a portfolio fund shall be
measured by reference to Cost.
(4) Investments by Third Parties Facilitated
by the Corporation. Verifiable amounts invested in Utah-based Operating
Companies (other than amounts invested directly by a Utah Fund of Funds or
indirectly by any portfolio fund held by any Utah Fund of Funds) and in
Utah-based Investment Funds that are directly facilitated by the Corporation's
economic development plan and economic development activities shall, at the
time of determination, be measured as follows:
(a) The amount invested directly by a third
party (other than a Utah Fund of Funds or a portfolio fund held by any Utah
Fund of Funds) in a Utah-based Operating Company will be included in the
Economic Development Impact attributable to the Corporation if the
Corporation's facilitation of such investment and the investment amount is
confirmed in writing to the Corporation by either such third party or such
Utah-based Operating Company in a manner consistent with section 4(c) of this
R357-7-9 and shall be measured in accordance with this section 4(a) by
reference to the greater of Cost of such investment or the Exit Value of such
investment.
(i) The "Cost" of a direct
investment by such third party in a Utah-based Operating Company shall mean the
sum of all amounts paid by such third party to make debt or equity investments
in such Utah-based Operating Company as confirmed in writing by such third
party in accordance with section 4(c) of this R357-7-9.
(ii) The "Exit Value" of a direct investment
by such third party shall mean, without duplication, the sum of all amounts
received upon the sale or other disposition of any debt or equity investments
made in such Utah-based Operating Company plus the fair market value of all
equity investments held by such third party based on the closing sale price of
such equity investments on the expiration date of any applicable contractual
restrictions on transfer of such equity investments that are entered into by
such third party in connection with an underwritten initial public offering of
such Utah-based Operating Company, in each case as confirmed in writing by such
third party in accordance with section 4(c) of this R357-7-9.
(iii) The Exit Value of a direct investment
in such Utah-based Operating Company by a Utah Fund of Funds shall apply only
to that portion of an investment that is actually sold or otherwise disposed
of, or that is held by such third party on the expiration date of any
applicable contractual restrictions on transfer of equity investments that are
entered into by such third party in connection with an underwritten initial
public offering of such Utah-based Operating Company; all other direct
investments made in a Utah-based Operating Company by such third party shall be
measured by reference to Cost.
(b) The amount invested indirectly by a third
party (other than a Utah Fund of Funds or a portfolio fund held by any Utah
Fund of Funds) in a Utah-based Operating Company through its investment in a
Utah-based Investment Fund will be included in the Economic Development Impact
attributable to the Corporation if the Corporation's facilitation of such
investment and the investment amount is confirmed in writing to the Corporation
by either such third party or such Utah-based Investment Fund in a manner
consistent with section 4(c) of this R357-7-9 and shall be measured in
accordance with this section 4(b). The Economic Development Impact of the
amount indirectly invested by such third party in a Utah-based Operating
Company through its investment in a Utah-based Investment Fund shall, at the
time of determination, be measured by reference to the greater of the Cost of
such investment or the Exit Value of such investment, in each case, as
attributable to such third party.
(i) The
amount of indirect investments attributable to such third party in a Utah-based
Operating Company shall be the amount of all investments in such Utah-based
Operating Company made by such Utah-based Investment Fund multiplied by a
fraction, the numerator of which is such third party's capital commitment to
such Utah-based Investment Fund and the denominator of which is the aggregate
capital commitments of all partners, members or other category of equity
investor with similar status of such Utah-based Investment Fund, each as
confirmed in writing by the Utah-based Investment Fund in accordance with
section 4(c) of this R357-7-9.
(ii)
The "Cost" of such Utah-based Investment Fund's investment shall mean the sum
of all amounts paid by such Utah-based Investment Fund to make debt or equity
investments in such Utah-based Operating Company, as confirmed in writing by
the Utah-based Investment Fund in accordance with section 4(c) of this
R357-7-9.
(iii) The "Exit Value" of
a such Utah-based Fund of Fund's investment in such Utah-based Operating
Company shall mean, without duplication, the sum of all amounts received upon
the sale or other disposition of all debt or equity investments in such
Utah-based Operating Company and the value attributed to such investment made
at the time of the distribution in kind of such investment to the partners,
members or other category of equity investor with similar status of third party
as confirmed in writing by the Utah-based Investment Fund in accordance with
section 4(c) of this R357-7-9.
(iv)
The Exit Value of a third party's investment shall only apply to that portion
of the investment that is actually sold, disposed of, or distributed in kind as
of the time of determination; all other investments made by such third party
shall be measured by reference to Cost.
(c) The confirmation in writing referred to
in sections 4(a) and 4(b) of this R357-7-9 shall be made by a responsible
officer or equivalent representative of the third party, the Utah-based
Operating Company or the Utah-based Investment Fund and shall include (i) the
identity of the Utah-based Operating Company or the Utah-based Investment Fund,
(ii) a statement that the Corporation was a significant factor in an investment
in such Utah-based Operating Company or Utah-based Investment Fund having been
made, (iii) the Cost of such investment made by such third party through the
date of the confirmation, (iv) the amount of commitments by such third party to
make additional investments in the future, and (v) to the extent applicable,
the Exit Value of such investment made by such third party through the date of
the confirmation. A confirmation may be provided from time to time to update
the Cost of investments made, any outstanding commitments to invest and the
Exit Value of investments, which update shall be taken into account in
determining Economic Development Impact attributable to the Corporation through
the date of the most recent confirmation. Any such written confirmation may be
contained in an email or other electronic transmission.
(d) The Economic Development Impact
attributable to the Corporation shall be measured by reference to amounts
invested as specified in sections 4(a) and 4(b) of this R357-7-9 after
enactment of the 2015 amendments to the Utah Venture Capital Enhancement
Act.
(5) Third Party
Evaluations Authorized by the Board. With approval from the Board, the
Corporation may engage an independent third party experienced in evaluating
economic development activities to evaluate a Utah Fund of Funds and determine
the Economic Development Impact of such Utah Fund of Funds and the activities
of the Corporation in accordance with U.C.A. Section
63N-6-406(3)(d)(ii)
as follows.
(a) The independent third party
shall use a nationally recognized economic development modeling tool approved
by the Board.
(b) The Economic
Development Impact of a Utah Fund of Funds shall be determined by reference to
the economic development impact of the Utah-based Operating Companies in which
such Utah Fund of Funds has directly or indirectly invested.
(c) The Economic Development Impact of the
Corporation shall be determined by reference to the result of the economic
development activities engaged in by the Corporation, including the
facilitation by the Corporation of investment in Utah-based Operating Companies
and Utah-based Investment Funds.
(d) The Corporation shall provide to the
independent third party all information and documents reasonably available to
it that the independent third party requests and determines are necessary for
the third party make its determination in accordance with this section 5.
(6) Any determination by
an independent third party conducted in accordance with section 5 of this
R357-7-9 shall adjust the Economic Development Impact attributable under
sections 2, 3 and 4 of this R357-7-9 to any Utah Fund of Funds or the
Corporation with respect to any investment in a Utah-based Operating Company or
Utah-based Investment Fund to account only for Economic Development Impact
incremental to the Economic Development Impact that has been attributed under
sections 2, 3 and 4 of this R357-7-9 in order to avoid double
counting.
(7) The Corporation's
Annual Report made in accordance with U.C.A. Section
63N-6-301(6)
shall include the following information.
(a)
The amounts invested directly or indirectly by each Utah funds of funds into
Utah-based Operating Companies and the resulting measurement of Economic
Development Impact determined in accordance with sections 2 and 3 of this
R357-7-9.
(b) The amounts invested
in Utah-based Operating Companies (other than amounts invested by portfolio
funds held by any Utah Fund of Funds) and Utah-based Investment Funds that are
facilitated by the Corporation's economic development plan and activities and
the resulting measurement of Economic Development Impact determined in
accordance with section 4 of this R357-7-9.
(c) Any independent third party's evaluations
of Economic Development Impact made in accordance with section 5 of this
R357-7-9.
(8) The
Auditor's opinion required by U.C.A. Section
63N-6-405(4)(d)
shall address the information in the Annual Report included in accordance with
section 7 of this R357-7-9. Such opinion may be based upon the performance by
the Auditor of agreed upon procedures as specified by the Board, which
procedures may include reliance upon the financial statements or other investor
reports of the portfolio funds of the Utah Fund of Funds, the certifications of
the third party investors, Utah-based Operating Companies and Utah-based
Investment Funds made in accordance with sections 2, 3 and 4 of this R357-7-9
and the most recent determinations of any independent third party made in
accordance with section 5 of this R357-7-9, in each case without the need to
verify the accuracy of such financial statements, certifications or
determinations.
(9) The Board shall
review the amount of Economic Development Impact reported by the Corporation in
accordance with section 5 of this R357-7-9 and within 45 Business Days, unless
good cause exists to extend the number of days, following receipt from the
Corporation of the report of the independent third party the Board shall either
(a) approve the amount of Economic Development Impact stated in the report, or
(b) notify the Corporation of any disagreement with such amount setting forth
the reasons for such disagreement.
(a) Upon
approval of the amount of Economic Development Impact set forth in the report,
the Board shall certify the Economic Development Impact to the
Corporation.
(b) If the Board
notifies the Corporation of its disagreement with the amount of Economic
Development Impact stated in the report, the Corporation shall respond in
writing to the Board within 15 Business Days of receipt of notice from the
Board of its disagreement. The Corporation's response shall include either an
explanation addressing the Board's reasons for disagreement or a revised
determination of the amount of Economic Development Impact and the basis
therefore.
(c) The Board shall
certify to the Corporation within 15 Business Days of receipt of such
explanation or revised determination that it agrees with such explanation or
revised determination, or shall state its reasons for disagreement and the
procedure set forth in section 9(b) of this R357-7-9, and this section 9(c)
shall continue until all such determinations have been certified by the Board.
(d) The Corporation shall provide
to the Board all information and documents reasonably available to it that the
Board requests and determines are necessary for the Board to make its
certification in accordance with this section 9.
(10) The Board shall review the amount of
Economic Development Impact reported by the Corporation in accordance with
section 7 of this R357-7-9 and within 40 Business Days following receipt of the
Corporation's Annual Report the Board shall either (a) approve the amount of
Economic Development Impact stated in the report, or (b) reduce such amount by
the amount of Economic Development Impact it determines to have been counted in
more than one category.
(a) Upon approval of
the amount of Economic Development Impact set forth in the report, the Board
shall certify the Economic Development Impact to the Corporation.
(b) If the Board determines to make a
reduction to avoid double counting, it shall notify the Corporation such
determination. The Corporation shall respond in writing to the Board within 15
Business Days of receipt of such a notice from the Board. The Corporation's
response shall include an explanation addressing the Board's reasons for
reduction or a revised determination of the amount of Economic Development
Impact and the basis therefore.
(c)
The Board shall certify to the Corporation within 15 Business Days of receipt
of such explanation or revised determination that it agrees with such
explanation or revised determination, or shall state its reasons for reduction
and the procedure set forth in section 10(b) of this R357-7-9, and this section
10(c) shall continue until all such determinations have been certified by the
Board.
(d) The Corporation shall
provide to the Board all information and documents reasonably available to it
that the Board requests and determines are necessary for the Board to make its
certification in accordance with this section 9.
(11) The total amount of Economic Development
Impact as of any Determination Date shall be the sum of the Economic
Development Impact for each year through the Determination Date, determined in
accordance with section 9 of this R357-7-9.
