8.0 Model Contract — Third Party Investments/Venture Capital Funds for Small Business

• 8.1.  In any instance where the Contractor or its Eligible Party is not placing an investment directly with a Canadian recipient, and is utilizing a third party to manage such investments, the method of crediting such investments will be as detailed in this Clause. Any organization which manages investments such as, but not limited to Banks, Trust Companies, Venture Capital Funds, and Investment Companies, will not be an Eligible Party to the Contract, but will be deemed a third party. A portion of a Contractor's investment may come from the placement of funds into a Venture Capital Fund (VCF) directed at assisting the growth of Canadian small businesses through their development and exploitation of new technologies. The multiplied IRB credit related to these investments shall not exceed 5 percent of the IRB Commitment Value. Contributions in support of Canadian small business are permitted within the following parameters:
• 8.1.1.  Timing:
• 8.1.1.1.  IRB credit can be claimed when:
• 8.1.1.1.1.  the Contractor makes a financial contribution to a qualifying VCF. Only the face value of the contribution, measured in Canadian dollars, can be sought as an IRB at this time; and,
• 8.1.1.1.2.  the VCF Manager invests funds with a Canadian small business and the funds remain placed with the Canadian recipient for a minimum of three (3) years, starting from the date the funds are placed. Failure to do so will result in the immediate clawback of all IRB credits claimed or approved for the IRB Transaction by the IRB Authority.
• 8.1.1.2.  All VCF related IRB credits claimed by the Contractor are subject to verification and approval by the IRB Authority before IRB credits are accepted.
• 8.1.2.  Scope:
• 8.1.2.1.  (Privately held) small business recipients of the VCF investment shall have 50 employees or less (service based industries) or 100 employees or less (manufacturing based industries) at the commencement of the investment.
• 8.1.2.2.  Initial investments by the VCF Manager, including co-investments, in eligible small businesses cannot exceed $1M.
• 8.1.2.3.  Small business recipients will generally be involved in the development, manufacture or commercialization of a technologically advanced product or service in one of the following sectors:
• 8.1.2.3.1.  Life sciences (biotechnology, medical devices and pharmaceuticals)
• 8.1.2.3.2.  Health
• 8.1.2.3.3.  Advanced materials
• 8.1.2.3.4.  Advanced manufacturing
• 8.1.2.3.5.  Environment
• 8.1.2.3.6.  Information and communications technologies, and
• 8.1.2.3.7.  Aerospace and defence
• 8.1.2.4.  Only Canadian registered and managed VCFs (or Third Parties) which support the above industrial sectors will be acceptable. The Contractor will have to provide evidence that a high percentage of a chosen fund's investment activity is with companies that are in the above sectors.
• 8.1.3.  Multiplier for IRB Credit purposes:
• 8.1.3.1.  The multiplier for IRB credit purposes is 5:1. The IRB credit will be given for the initial contribution at the time of the deposit to the VCF by the Contractor. The IRB credit that makes up the remaining multiples will be offered when the VCF Manager or Third Party Investment Manager assigns the funds to a Canadian small business and the funds remain placed with the Canadian recipient for a minimum of three (3) years, starting from the date the funds are placed. The maximum multiplied IRB credit for the Project is 5 percent of the IRB Commitment Value.
• 8.1.4.  Limitation to Third Party Investments/Venture Capital Funds for Small Business
• 8.1.4.1.  Once a small business reaches the Initial Public Offering stage, no further IRB credit will be granted by the IRB Authority for further VCF investment to the Canadian small business.
• 8.1.5.  Performance Guarantees
• 8.1.5.1.  IRB Transaction sheets related to qualifying VCF transactions are stated in the multiplied value of the proposed contributions to the VCF. This multiplied value is part of the Contractor's total IRB commitment, and as such is subject to the performance guarantees stipulated in this Contract.
• 8.1.5.2.  If the Contractor fails to achieve an approved IRB Transaction involving a VCF, the full "multiplied" value of its IRB Commitment shall be made up with other IRB activities that meet the IRB Eligibility Criteria. Substitute transactions will not be subject to the multiplier.