Ljubljana, November 23, 2017 MATTER: LEGAL STATUS (NATURE) OF PCP TOKEN To Whom it may concern: The explanation below outlines the legal status and the nature of POPULTRADE tokens (hereinafter referred to as: Populcoin, PCP or PCP token ). POPULTRADE tokens shall be issued by POPULTRADE, which is yet to be incorporated prior to the issuance of token (hereinafter referred to as: POPULTRADE). As it will be justified herein, PCP token is a utility token with clear underlying functional features (=rights) for token holders. It is associated with the POPULTRADE platform, whereas it does not qualify as a security, nor as any other financial instrument. There will be no distribution of profits from POPULTRADE to token holders, nor will PCP token holders have any other investment interests. As it has been clearly communicated so far to all potential token holders and as it will be further outlined in the POPULTRADE General terms and conditions which will need to be accepted by the token holders in the token generations event, there is no reason to believe that PCPs will increase in value and the token holder will need to expressly agree and acknowledge this, prior to acquiring PCPs. There is no expectation of any profit gain, moreover they are expressly excluded. 1. Security and other financial instruments: PCP would not be considered as a security also in accordance with European Union legislation, specifically according to Markets and Financial Instruments Directive (Directive 2004/39/EC; hereinafter referred to as: MiFID ), which applies when considering whether or not PCP tokens qualify as a security (or another financial instrument). According to Annex I, section C of MiFID Directive supplemented by Articles 39 and 39 of the Regulation (EC) No 1287/2006 implementing Directive 2004/39/EC, which legally enumerates Financial Instruments, PCP would not qualify as a security, nor as any other financial instrument according to MiFID. Financial Instruments specified in Annex 1, section C of MiFID explicitly states what constitutes as Financial Instrument, meaning that no other instruments (not specified in that list) may be qualified as Financial Instruments. According to the cited section of MiFID, 1
Financial instruments are: transferable securities, money-market instruments, units in collective investment undertaking, options, futures, swaps, etc. 1 When considering whether or not PCP tokens may be considered as transferable securities, the definition of transferable securities need to be taken into consideration. According to article 4, point 18 of MiFID, transferable securities are classes of securities which are negotiable on the capital market, with the exception of instruments of payment, such as: (a) shares in companies and other securities equivalent to shares in companies, partnerships or other entities, and depositary receipts in respect of shares; (b) bonds or other forms of securitised debt, including depositary receipts in respect of such securities; (c) any other securities giving the right to acquire or sell any such transferable securities or giving rise to a cash settlement determined by reference to transferable securities, currencies, interest rates or yields, commodities or other indices or measures. PCPs do not represent or constitute any ownership right or stake, bonds, share or security or equivalent rights or any right to receive future revenue shares, or any other form of participation in or relating to POPULTRADE, nor shall PCP holders have any influence or rights in the development or governance of POPULTRADE. Based on the above, it is evident, that PCPs may not be classified as transferable securities or as any other Financial Instruments in accordance with applicable provisions of MiFID. PCP is a utility token (as specified below) it does not qualify as any other financial instrument under MiFID, namely as: - money-market instrument; - units in collective investment undertakings; - derivative financial instruments; - financial contracts for differences, etc. Furthermore, we would like to emphasize that Slovenian national legislation has been adopted in accordance with MiFID legislation, meaning that the national law does not consider PCP tokens as any form of security, nor does PCP token qualifies as a security in any other EU country, due to the fact that same regulation related to financial instruments apply across the EU. Financial instruments are legally enumerated in Section C of MiFID 1 Full list of Financial Instruments according to Annex 1, Section C, MiFID can be seen here: http://www.hsbcnet.com/gbm/attachments/bestexecution/mifid-annex1-sectionc-financial-instruments.pdf 2
Directive and utility tokens are not one of them, nor can PCP tokens qualify as any Instruments as described above. Based on the above and based on our opinion, it is evident, that PCP tokens also do not qualify as a security under the U.S. law, whereas considering the fact that no natural person or legal entity from the U.S. will be allowed to acquire any PCP tokens, this is not relevant in the given case. Prevention of U.S. citizens or legal persons to participate in the crowdsale will be ensured with know your customer (KYC) procedures. Since the legal entity issuing PCP tokens is planned to be incorporated in British Virgin Islands (hereinafter: BVI ), the legal nature of the PCP token shall also be analysed under the provisions of the Securities and Investment Business Act, 2010 (hereinafter: SIBA ), which is the applicable law. According to Article 2 of the SIBA, security shall mean: (i) a share of any kind, (ii) a debt obligation of any kind, (iii) an option, warrant or right to acquire a share or debt obligation, or (iv) an interest or right specified in the Public Issuers Code as a security, but excludes an interest or right that the Public Issuers Code specifies is deemed not to be a security In our opinion, PCPs do not represent or constitute any share or debt obligation. Moreover, PCPs do not represent or constitute any option, warrant or right to acquire a share or debt obligation. Based on the above, it is evident, that PCPs may also not be classified as security in accordance with applicable provisions of SIBA and Article 25 of the SIBA that provides framework and requirements for public offer of securities shall not apply for POPULTRADE token sale. In other words, PSPs do not qualify as a security according to the legal framework of (most probable) issuing entity country of incorporation. 2. Status of PCP token (utility token): POPULTRADE provides blockchain-based software solution and cryptographic token solution through its website/platform to its users. As it is described in POPULTRADE Whitepaper (see appendix), PCP is a utility token which can be used in connection with particular blockchain service/product, namely POPULTRADE platform. - PCP represents a unit of account for transactions within POPULTRADE platform; - PCP serves as a priority pass in future crowdfunding campaigns on POPULTRADE platform; - PCP provides discounts on various services within the POPULTRADE ecosystem; 3
- PCP grants exclusive access to activities within the POPULTRADE ecosystem; - PCP provides access to various facilities including creation of smart contracts; and - PCP represents a reward token for active participation within the POPULTRADE ecosystem. Therefore, PCP tokens enable the token holder to access and utilize the POPULTRADE s platform and services. As such, PCP is solely a token which provides certain functionalities to its holders and is clearly linked to the platform. Taking this into account, PCP tokens are not value tokens, which represent a certain financial value and which are not linked to a specific service or product. Furthermore, users holding tokens will not be entitled to dividends, royalties or any other amounts as share of platform s future revenues in whatever form (fiat or cryptocurrency). Holder of the PCP token will not be entitled to any investments interests such as (i) ownership or equity interest in POPULTRADE or in any other legal entity (see above under Security), (ii) status as a creditor, (iii) claim in bankruptcy as equity interest creditor and any other investment interests to which holders of securities are entitled on regular basis. However, if PCP holders will actively participate within POPULTRADE ecosystem and vitally contribute to POPULTRADE performance in the form of their own various efforts (for example they would provide marketing activities) they will be entitled to compensation and rewarded with PCP tokens. No PCP holder will at any time be entitled to receive any passive income. 3. PCP Token distribution: Since PCP is not a security under MiFID (EU), nor under SIBA (BVI) legal framework, PCP s token distribution does not qualify as a public offering of securities according to Prospectus directive (2001/34/EC). Consequently, PCPs token distribution does not fall under the securities or any prospectus regulation within the EU. 4. PCPs tokens are not investments: POPULTRADE is not an investment company whose main business is holding and managing securities for investment purposes, as PCPs are not securities to begin with. Furthermore, POPULTRADE is not holding nor managing PCP tokens (which are not securities but utility tokens) on behalf of the token holders, as at the end of token distribution, token holders will receive PCP tokens and they will personally hold and manage them based on their own discretion. Each token holder will decide how he/she wants to manage their tokens and if and when they wish to exchange them for other digital currencies. Every token holder will 4
expressly agree and acknowledge this by accessing POPULTRADE platform. Based on the above it is evident that PCP tokens are not investments, nor security and the above will also be clearly specified in POPULTRADE General terms and conditions and expressly acknowledged by the token holders. General terms and conditions will also clearly state that PCP tokens do not constitute a solicitation for investment and that POPULTRADE services, website and product do not offer, are not and shall not be construed as investment and all token holders will by the use of POPULTRADE Platform expressly acknowledge this fact. The value of PCPs is not guaranteed and POPULTRADE explicitly warns users that there is no reason to believe that PCPs will increase in value, and they might also decrease in value or lose their value entirely. In addition, as the General terms and conditions will clearly state, by holding PCP token, user will represent and warrant, that user is acquiring PCPs for his/hers own personal use and for his/her personal utility and not for investment or financial purposes. Furthermore, user will also represent and warrant that user does not consider PCPs as security and that user understands that PCPs may lose all their value and that user is not acquiring PCPs as an investment. 5. Eligible Users: The use of POPULTRADE website, platform and services will not be allowed in jurisdictions in which applicable laws prohibit users to access and use POPULTRADE website, services and platform (including acquiring PCP tokens). The use of POPULTRADE website, platform and services will only be allowed in jurisdiction in which the above specified provisions apply. Therefore, POPULTRADE s General terms and conditions, to which the user will expressly consent when acquiring PCP tokens, will restrict users from specific jurisdictions to visit POPULTRADE s webpage or to use POPULTRADE s services or products. POPULTRADE also plans to conduct KYC procedures in order to ensure that only eligible participants will participate in the crowdsale. 6. Conclusion Based on the above analysis, we believe that PCP token is designed as a utility token that is not likely to be deemed security, investment or any other financial product under applicable laws; token distribution does not qualify as public offering in any manner. Users from US and other Restricted Areas will not be allowed to use POPULTRADE Platform and acquire tokens. 5
Furthermore, it is also evident that: there will be no expectation of profits from acquiring PCP tokens (POPULTRADE will explicitly state this in its agreement with the token holders (General Terms and conditions), explicitly warn token holder that PCP tokens may decrease in value and token holders will be obliged to acknowledge this, therefore no expectation of profit will be created); any token holder will manage PCP tokens personally, freely, with no influence from POPULTRADE, meaning that any potential profit or loss deriving from such token will be created solely and personally by the token holder independent from POPULTRADE. In the event, you wish to discuss any issue further or in greater detail, please let us know and we will be happy to discuss the matter further. Best Regards, dr. Peter Merc Lemur Legal d.o.o. Appendix: - POPULTRADE Whitepaper 6