Contingent Payout Note

A Contingent Payout Note (“Note”) is a debt contract between investors and the issuer. Like typical debt contracts, the issuer offers the Note to investors in order to raise capital, typically for some business purpose (like developing novel tokenization products); investors may wish to provide that capital in exchange for what they perceive as the potential for a more valuable payout down the road.

The Note was developed by RepublicX to provide investors with a unique value proposition: prospective upside in exciting private companies.The Note is designed to factor in a “reference price” of a private company’s common stock (the initial price at the time of an offering), and any prospective payout that investors may receive accounts for the difference between that reference price and the price at the time of redemption.

The Notes provide investors with a contractual right to receive a redemption payout from the issuer at the first of any qualifying redemption event. Redemption events include an IPO, acquisition or dissolution of the reference company, the dissolution or bankruptcy or the issuer, and the maturity date. If no other redemption event occurs prior to the maturity date, then the Note will automatically redeem at that time. There is no guarantee there will be a liquiditation event.

The Notes are contractual debt obligations of the issuer (which may or may not, depending on the issuer, be guaranteed or otherwise protected by such issuer’s corporate parent). Contingent Payout Notes are not shares or financial interests in any company, including either the issuer or the reference company. The Notes do not provide any voting, information, or other shareholder rights to any investor. The Notes do not have any association with the reference company; the reference company has not reviewed, approved, authorized, endorsed, sponsored, or consented to any aspect of the Note, or any token, marketing material, or transaction structure related with the Note.

Your return depends on your investment amount, the reference company’s common share price at the time of redemption, and the terms of the specific Note. Investing in private companies is risky–unlike public companies, private companies do not need to provide the same level of disclosures or public communications. Many private companies never go public. Investors accept these risks when purchasing Notes.

As part of their investment in Contingent Payout Notes, investors will have the option of receiving blockchain tokens (“Mirror Tokens”) into their registered Republic Wallets. These Mirror Tokens act as 1:1 representations of investors’ Note interests. Republic intends to make Mirror Tokens available for listing on one or more qualifying trading platforms so that Mirror Tokens can be tradeable after any applicable regulatory lockup periods expire. There is no guarantee, however, that there will be a liquid market for any Mirror Token.

For a detailed analysis on the Contingent Payout Notes please review the respective offering documents. Note, this is a novel financial instrument. Consult your attorney and accountant, and do not invest more than you can afford to lose.