R357-7-9. Criteria and Procedures for Calculating the Economic Development Impact of Each Utah Fund of Funds and the Corporation for Purposes of Incentive-Based Tax Credits

  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.