1 FACTORING AGREEMENT THIS FACTORING AGREEMENT made and executed the day of Acceptance by and between the Client and LoyalCash Corp. (the Factor ). 1. CERTAIN DEFINITIONS Advances Interest Rate shall have the meaning set forth in Section 3.2 hereof. Client means the company or the person submitting the present Agreement to LoyalCash Corp. for its Acceptance, best described in the attached Client Details schedule. Client Details means the schedule containing all the information about the Client and the due diligence submitted to LoyalCash Corp. Credit Line shall have the meaning set forth in Section 2.3 hereof. Factor's Commission shall have the meaning set forth in Section 5 hereof. Insolvency Event means the case of a Purchased Account Receivable remaining unpaid by the LoyalCash Customer. Order Approval shall have the meaning set forth in Sections 2.2 and 2.3 hereof. Over-Advances Interest Rate shall have the meaning set forth in Section 3.3 hereof. Payable Date shall have the meaning set forth in Section 3.1 hereof. LoyalCash Account means a personal account at the LoyalCash Network
2 LoyalCash Customer means a customer, member of LoyalCash Network, who purchased goods or services from the Client. LoyalCash means LoyalCash Corp. a Panamanian corporation having its legal address at IBC Tower, 9 th Floor, Manuel Espinosa Batista Ave., Panama City, Panama. LoyalCash Network means the electronic payment system network on the Internet at owned and operated by LoyalCash Corp., which is comprised of website and users interface, payment and security system, electronic documents, work flow, etc. Purchased Account Receivable shall have the meaning set forth in Section 2.1 hereof. Purchase Price shall have the meaning set forth in Section 3.1 hereof. Website means the website at including payment and security system, electronic documents, etc. Website's Member Section means the part of the Website reserved to a specific Member with access via login and password. 2. PURCHASE OF ACCOUNTS RECEIVABLE 2.1 Appointment as Factor. Sale and Purchase of Accounts Receivable. Client hereby sells and assigns to Factor, and Factor hereby purchase from Client, those of Client's accounts receivable arising from Client's sales of merchandising or rendition of services to LoyalCash Customer which the Client has designated as being sold to Factor through the LoyalCash Network and for which Order Approval as occurred (collectively Purchased Accounts Receivable and individually Purchased Account Receivable ). The sales and assignment of a Purchased Account Receivable to Factor is subjected to Order Approval as provided in the following Sections 2.2 and 2.3 and not effective until Factor is assigned in all of Client's titles, rights, guaranties, securities, liens and interests. Factor shall not be obliged to, and shall not be liable for, exercising or refusing to exercise any rights granted to Factor hereby.
3 2.2 Single Order Approval. Client shall submit to Factor the principal terms of each customers' orders for Order Approval. Factor may, in its solely discretion, approve all or a portion of Client's customers' orders either by establishing a Credit Line Order Approval limited to a specific amount for a specific customer, as provided in the following Section 2.3, or by approving all or a portion of a Purchased Account Receivable submitted by Client. No Order Approval shall be effective unless published on the Website's Member Section at the Client Details schedule and unless the goods are shipped or the services rendered within the time specified in the Order Approval approval or within 30 days after the approval is given, if no time is specified. Factor has the right to withdraw or adjust its Single Order Approval or withdraw or adjust a Credit Line at any time before delivery of merchandise or rendition of services. Factor shall not be liable to any person or in any manner for refusing to approve the credit of any customer. 2.3 Credit Line. Submission of orders provided in Section 2.2 for Factor's prior approval shall not be required with regard to a sale made by Client in compliance with a Credit Line which may from time to time be issued to Client by Factor in its sole discretion. Credit Line may from time to time increase or decrease at the sole discretion of the Factor. No Credit Line shall be effective unless published on the Website's Member Section at the Client Details schedule. Notwithstanding anything herein to the contrary, the period from compliance to maturity for any Account Receivable subject to any Credit Line shall not exceed ninety (90) days, unless otherwise approved by Factor and published on the Website's Member Section at the Client Details schedule and provided that the the goods are shipped or the services rendered prior to the date of expiration or the reduction of the Credit Line itself. Credit Line shall automatically terminate unless otherwise approved upon the occurrence of an Insolvency Event by a LoyalCash Customer exceeding twenty-five percent (25%) of the established Credit line. 2.4 Minimum Amounts. Any sales or invoices in the amount of US$ 150 or less shall be treated as to non-approved Receivable regards the event of nonpayment and Factor shall have the right to charge the amount back to Client at any time. 2.5 Invoicing. All Invoices for merchandise sold or services rendered transmitted to a LoyalCash Customer under the present Agreement, shall bear a notice that they have been assigned to, are owned by and are payable directly and
4 only to Factor through the LoyalCash Network as Factor s Agent. Each invoice shall bear the terms of sale and no change from the original terms of sale shall be made without Factor's prior written consent. A copy of the Invoice shall be provided to Factor. If Client fails to cause Factor to be provided with copies of such invoices (or the equivalent) or proof of shipment or delivery Factor shall have no credit risk with respect to such Purchased Account Receivable and all the risk. 2.6 Payment of Accounts Receivable. Factor shall credit to Client all payment by LoyalCash Network to the Client LoyalCash Account. No check or other instrument received by Factor shall constitute final payment unless and until such check or other instrument shall have been actually collected by Factor in immediately available funds. 3. PURCHASE PRICE AND ADVANCES 3.1 Purchase Price. The purchase price of each Purchased Account Receivable sold and assigned hereunder shall be the net amount of the Purchased Account Receivable itself less Factor's Commission ( Purchase Price ). The net amount shall mean the gross amount of the Purchased Account Receivable itself, less any discount made available or extended to the LoyalCash Customer, returns and allowances of any nature. Such Purchase Price, less (i) any reserves which Factor may have established, as provided in Section 3.3 hereof, (ii) any sums advanced, remitted or otherwise paid to Client or for Client's account or debited to Client's account and (iii) any other charges authorized hereunder, shall be payable by Factor to Client's LoyalCash Account five (5) business days after collection of the Receivables ( Payable Date ). However, if any of such Receivable shall not be paid by reason of the LoyalCash Customer's bankruptcy or insolvency, Factor will pay Client the Purchase Price thereof on the earlier to occur of: (a) the first business day of the second month following such customer's bankruptcy, or (b) after 120 days past the Payable Date, provided nonpayment of such Receivable is not as a result of a dispute. 3.2 Advances. Factor may, at Client's request but in Factor's sole discretion, make advance payments to Client with respect to the Purchase Price prior to the aforesaid time or times of Factor's obligation to make payment thereof in an amount up to 75% of the net amount thereof. Such advance payments, which shall be debited by Factor to Client's LoyalCash Account, shall bear interest at the
5 Advances Interest Rate provided on the Website's Member Section at the Client Details schedule from the date of such advance until the Payable Date. 3.3 Over-Advances. Client may request advances from Factor in excess of the advance formula set forth in Section 3.2 hereof ( Over-Advances ). Factor may in its sole discretion make such extra advances. Over-Advances Interest Rate are provided on the Website's Member Section at the Client Details schedule and they shall be at least at a rate of 1.0% per annum in excess of the Advances Interest Rate. All Over-Advances are discretionary by Factor, may be terminated at any time, and are payable on demand. It being understood that Factor has no restriction in adjusting Over-Advances value and interest upward or downward based upon its sole discretion. 3.4 Reserves. Factor may reserve out of the Purchase Price of all Receivables sold and assigned an amount which, in Factor's judgment, is sufficient to protect itself against possible claims, recourse, allowances and in general expenses to Client on such Receivables and against any other contingencies for which Client may be chargeable hereunder. 4. WARRANTIES AND REPRESENTATIONS 4.1 Client standing. Client warrants and represents that (i) it is validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation and agrees that it will notify Factor thirty (30) days in advance to any change of state or jurisdiction, any change in the location of the chief executive office, place(s) of business, and legal or business structure, and any change in control of the ownership of its business organization. If the thirty (30) days is not possible, for instance in the case of an unexpected change in control of the ownership, Client has to notify the above mentioned information as soon as possible, at latest five (5) days after the event being known. Moreover Client should will promptly notify Factor of any significant law suits or proceedings brought against itself. (ii) Client Client is duly qualified to do business and in good standing in each other jurisdiction where its ownership of property or the conduct of its business requires such qualification. 4.2 Receivables. Client represents and warrants that each and every Receivable now or hereafter assigned to Factor (i) represents a bona fide sale of
6 merchandise or rendition of services to LoyalCash Customers in the ordinary course of its business; (ii) represents merchandise or services which have been received and accepted by Client's customers without dispute or claim of any kind and shall be free and clear of any claims, real or claimed, including any kind of disputes as to product, price, terms, delivery, quantity, quality, liability, requirements of law or rules, etc.. (iii) Client has title and sell, assign, transfer the Receivable to Factor. (iv) All documents to be delivered to Factor in connection therewith will be genuine and be enforceable. 4.3 Liability. Client agrees to indemnify Factor against any liability, loss or expense caused by or arising out of the rejection of merchandise or services or claims or deductions of every kind and nature by LoyalCash Customers, other than those resulting from the financial inability of LoyalCash Customer itself to make payment. 4.4 Charge-backs. In the event of Client's breach of any of the mentioned representations and/or warranties, Factor shall have, in addition to all other rights under this Agreement and/or the Law, the right to immediately charge-back to Client the full amount of the Receivables affected thereby together with interest. Such charge-back shall not be deemed a reassignment, and Factor shall retain a security interest in such Receivable and in the merchandise represented thereby until such Receivable is fully paid, settled or discharged and all Client's obligations to Factor are fully satisfied. 5. COMMISSIONS AND INTEREST 5.1 Factoring Commission. For its services hereunder, Factor shall receive a Commission equal to the applicable amount provided on the Website's Member Section at the Client Details schedule. 5.2 Extended Term. The commission specified in Section 5.1 hereof is based upon maximum selling terms of one-hundred-twenty (120) days, and no more extended terms or additional dating shall be granted by Client to any customer without Factor's prior written approval. If such approval is given by Factor, Factor's commission with respect to the Receivables covered thereby shall be increased as provided case by case. 5.3 Interest Rate. (i) For Advances and Over-Advances services provided in
7 Section 2, Factor shall receive an Interest Rate equal to the applicable amount provided on the Website's Member Section at the Client Details schedule. (ii) For any other interest Client shall pay interest upon the average daily amount owed to Factor at the close of business each day at a per annum rate equal to the the Chase Rate per annum, as herein defined, plus one percent (1%) per annum. The Chase Rate is the per annum rate of interest publicly announced by JPMorgan Chase Bank (or its successor) in New York, New York from time to time as its prime rate. 5.4 Interest Balance. Factor shall credit Client's LoyalCash Account with matured interest on the last day of each month. 6. DISPUTES AND CLAIMS 6.1 Customer Disputes and Claims. Client shall immediately notify Factor in each instance of the loss of, rejection, return or damage to goods represented by any Purchased Account Receivable, of any request for extension of time to pay or request for credit or adjustment, or of any claim or dispute relating to any Receivable or to the merchandise or services covered thereby or tending in any way to diminish the sum certain payable thereon. If any such dispute or claim is not promptly settled by Client, Factor may, if it so decides, settle, compromise, adjust or otherwise enforce or dispose of by litigation or otherwise, any such dispute or claim, at Client's expense, and upon such terms and conditions as Factor in its sole discretion shall deem proper. However Factor shall have no obligation to do so. Client shall not grant any allowances, credits or adjustments to customers, nor accept any return of goods, without Factor's prior written consent in each instance. 7. TERMINATION AND DEFAULT 7.1 Term. The term of this Agreement shall begin as of the date of acceptation by Factor and continue until the last day of the twenty-fourth (24) month hereafter and thereafter shall be automatically renewed from year to year unless terminated on such last day of such month or any anniversary thereof by one Part giving the other Part at least thirty (30) days prior notice via the appropriate procedure of LoyalCash Network (the Factor providing a communication in the Client's Details schedule; the Client filling the appropriate form on its Website's Member Section). 7.2 Defaults. Notwithstanding the Section 7.1 above, Factor may terminate this Agreement without notice and all obligations shall become immediately due
8 and payable without notice or demand, unless Factor otherwise elects, upon the occurrence and during the continuance of any one or more of the following events ( Event of Default ): (i) Client defaults in the payment of any f the obligation on the due date; (ii) Client commits any breach of its warranties and/or Representations as provided in Section 4; (iii) Client breach any covenant or agreement between itself and and Factor; (iv) Client or any one of its guarantor files or have filed a petition of bankruptcy; (v) Client fails, closes, suspends or in general goes out of the business; (vi) there is a change in Client's principal shareholders or owners. 20. Effect of Termination. Upon the effective date of termination, all Obligations shall become immediately due and payable without further notice or demand irrespective of any maturity dates established prior thereto. In the event that Factor shall cease to act as factor for Client, Factor may hold any balance remaining to Client's LoyalCash Account until Client has paid the Obligations to Factor or furnished Factor with an indemnity satisfactory to cover all Obligations. 8. MISCELLANEOUS 8.1 Tax. If any tax other than income and franchising taxes is or may be imposed by any governmental authority on or as result of any transaction between Client and Factor, Client agrees to indemnify Factor in respect of such taxes repairing Factor the amount of any such taxes, which shall be charged to Client's LoyalCash Account. 8.2 Lien Perfection. Clients irrevocably grants Factor an irrevocable power of attorney to execute and deliver any activities necessary to the collection of Purchased Account Receivable and other activities provided in the present Agreement. 8.3 Beneficiary. This Agreement is intended solely for the the benefit of Factor and Client and no other person, company and party, including any guarantor, is intended to be benefited hereby. 8.4 Confidentiality. During the term of this Agreement and for a period of twenty (20) years following termination, each Party, its affiliates or any of their respective employees or agents or other representatives, shall maintain in confidence all information received from the other Party or thanks to the activities connected to this Agreement. Each party shall use confidential information of the
9 other party only for the purpose for which it was disclosed. The obligations of the parties under this Section 10 shall not apply to information that is already publicly known (through no breach of this Section 10) or is required to be disclosed by law. 8.5 Inspection. Should Factor wish to do so, at its own expenses, Client shall permit a certified auditor of Factor to examine and make extracts of all books of accounts and files, records, and correspondence at reasonable time Law and Court. This Agreement is made and accepted and shall be construed, interpreted and enforced in accordance with the laws of Panama, without regard to conflict of laws principles, and Client irrevocably consents and submits to the jurisdiction of courts of Panama City for the purpose of any suit, action or proceeding relating hereto.