Revenue Participation Contracts

Revenue participation contracts or royalties are contracts between parties requiring the payment of a negotiated percentage of revenues for an agreed period of time. In some jurisdictions, pure royalties are not considered securities as they neither have corporate ownership nor voting power. Royalties are likely to be considered securities if they have convertible or redemption features.

Royalties can be transferred subsequent to original sale and purchase, either on an exchange, through Over-The-Counter (OTC) dealings or in transactions negotiated directly between parties, which may include the services of a broker. We expect that ultimately royalties will be quoted and traded internationally on authorized exchanges with bids, offerings and trading prices displayed on a 24/7 basis. The greater the liquidity the better for both investors and royalty Issuers.

Royalties issued by companies having increasing revenues will produce extraordinary returns for investors. Therefore, we believe established members of the international financial community, including members of both stock and commodity exchanges, will be motivated to offer revenue participation related services to both investors and companies interested in issuing royalties.

The underwriters, fund managers and/or financiers will identify companies seeking increased funding which anticipate increased revenues and negotiate the following  elements of a transaction:

1. The number of US$10,000 Revenue Participation Contract (RPC) units to be purchased from the royalty issuing company.
2. The percentage of revenues to be paid, usually between 1% and 5% of revenues.
3. The period of time during which the royalties will be paid (royalty payment period), usually between ten and fifty years.
4. The "critical assets" of the company which will be used to secure the payment of the agreed royalties. Upon completion of the royalty Issuer's obligation to the royalty owners, the critical assets of the company will be returned to the company. During the royalty payment period, while in contractual compliance, the company will have a continued exclusive free use of the critical assets. An independent trustee may be used to hold the critical assets securing the royalty Issuer's obligations.
5. The banks or other entities into which all of the company's revenue deposits will be made. The deposit accepting entity will also accepted irrevocable instructions, by the royalty Issuer, to deduct and remit the agreed amounts the benefit of the royalty owners.

The entire royalty purchase and issuance process described above is included in the U.S. patent. Companies and projects issuing royalties and using the process will be required to pay an annual license fee.