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Frequently asked questions regarding royalties
Q: How "assured" is the agreement of the royalty issuer?

A: It is a contractual agreement made by the company making the assurance to the investor. The level of priority, possible securing of the obligation and other means of providing comfort to the investor are subject to negotiation with the royalty issuer.


Q: What happens if the assured amount is not received by the end of the agreed period?

A: That depends on the terms of the agreement as negotiated between the royalty issuer and the investor.

Q: What terms can be changed in the REX-RIAR calculator to understand the impact of the terms assuming the projected revenues remain constant?

A: The following can be modified: the amount paid for the royalty, the royalty rate paid in the selected years and the number of years in which the royalty issuer’s assured amount is to be paid.

Q: Is it possible for the assurance of the royalty issuing company to be guaranteed by an independent party?

A: Yes it is possible but the amount assured will be considerably less as the risk has been dramatically reduced. Also the royalty issuer will have to compensate the guarantor of the obligation as the primary risk taker.

Q: If the royalty investor sells the royalty does the assurance transfer to the new owner?

A: Yes, the obligation of the royalty issuer remains constant. However, the obligation will be reduced by the amount of royalties already paid by the issuer to the investor.

Q: Will all royalty issuers be prepared to offer an assured return?

A: No, as many, if not most, will feel the upside potential based upon their projected revenues is sufficient to attract investment.

Q: Why did you bother to create REX-RIAR if only a few issuers will be willing to make the assurance?

A: Because, the approach has merit and we seek to provide calculation and analytical tools, which facilitate negotiation and understanding of impact of the terms. The basic investment principle of greater returns requiring greater risk and business owner benefit of non-equity dilutive financing will allow for fair and reasonable transactions with both parties winning.
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