INVESTMENT and TAKE-OUT AGREEMENT

THIS FINANCING and TAKE-OUT AGREEMENT (the “Agreement”), made and entered into as of ____ day of ___________ 2015, by and between:

STONE OF DAVID TACTICAL EQUIPMENT COMPANY (SODTEC), a company duly organized, registered and existing under the laws of the Republic of the Philippines, with business address at Unit 900, D & E 20th

Drive Corporate Center, 20th Drive Mckinley Business Park, Fort Bonifacio Global City, Taguig City, Metro Manila, Philippines, herein represented by its Managing Director, CHRISTOPHER S. MANALUZ and herein referred to as the “FIRST PARTY”,

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FOUNTEL CORPORATION (FOUNTEL), a corporation duly organized, registered and existing under the laws of the Republic of the Philippines, with business address at #2 Biak na Bato St., Ayala Heights, Old Balara, Quezon City, Metro Manila, Philippines, herein represented by its President, JOSE XAVIER B. GONZALES and herein referred to as the “SECOND PARTY”.

Both shall be collectively known as the “PARTIES”.

WITNESSETH:

WHEREAS, the FIRST PARTY is a duly accredited supplier of the Armed Forces of the Philippines (AFP) and has been supplying various requirements of the same agency including several defense materials;

WHEREAS, the FIRST PARTY signed the “Contract Agreement” with the AFP and the corresponding Notice to Proceed which pertains to the supply and delivery of seventeen thousand seven hundred seventy five (17,775) Rounds, Cartridge, 81mm High Explosive (HE) Ammunition with the Total Contract Price of Eighty Seven Million Nine Hundred Eighty Six Thousand Two Hundred Fifty Pesos (Php87,986,250.00) and nineteen thousand two hundred seventy nine (19,279) Rounds, Cartridge, 60mm High Explosive (HE) Ammunition with the Total Contract Price of Php79,152,050.00 for the Philippine Army;

WHEREAS, the FIRST PARTY obtained loans from USSC FINANCE CORPORATION (UFC) to finance the importation and supply of the abovementioned defense materials and ammunitions as evidenced by the separate Loan Agreements dated July 10, 2014 and August 4, 2014 with corresponding Deeds of Assignments dated July 10, 2014 and August 4, 2014, respectively;

WHEREAS, the FIRST PARTY has a total existing loan amounts of EIGHTY MILLION PESOS (Php80,000,000.00), exclusive of interest, with UFC which the SECOND PARTY shall take out and pay off, subject to the terms and conditions of this Agreement;

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NOW WHEREFORE, premises considered, the PARTIES have entered into this covenant subject to the following terms and conditions, to wit:

I. Business Purpose

The PARTIES have entered into this Agreement for the purpose of taking out the existing loan of the FIRST PARTY from UFC and pursue the supply and delivery of seventeen thousand seven hundred seventy five (17,775) Rounds, Cartridge, 81mm High Explosive (HE) Ammunition with the Total Contract Price of Php87,986,250.00 and nineteen thousand two hundred seventy nine (19,279) Rounds, Cartridge, 60mm High Explosive (HE) Ammunition with the Total Contract Price of Php79,152,050.00 for the Philippine Army.

II. Expected Payment

The PARTIES expect payment by the Department of National Defense/Armed Forces of the Philippines as stipulated in the Purchase Order and Notice to Proceed through corporate check within fifteen (15) calendar days after full delivery and acceptance of all items indicated in the Order Confirmation and submission of all required documents.

III. Profit/Loss Sharing

The PARTIES hereby agree that the SECOND PARTY shall be entitled to fifty percent (50%) of the net profit from this transaction or an expected amount based on the exchange rate between the US DOLLARS and its PHILIPPINE PESO equivalent at the time of the release of the funds to the FIRST PARTY.

The PARTIES likewise agree that in case of loss, the SECOND PARTY shall bear fifty percent (50%) of the total loss arising from this transaction in an amount based on the exchange rate between the US DOLLARS and its PHILIPPINE PESO equivalent at the time of the release of the funds to the FIRST PARTY.

The sharing of profit or loss shall be divided equally (50/50 ratio) between the PARTIES after deduction of all related business costs and expenses, such as but not limited to the following:

a. Bidding document cost;

b. Bid bond/Performance bond cost;

c. Bank charges on the opening of Letter of Credit;

d. Interest expense arising from Loan Agreements with UFC;

c. Free On Board, as per current Incoterms, Cost of Goods to supply to CLIENT, which shall be based on the Philippine Peso amount on the foreign exchange receipt or document, and supported by a Telegraphic Transfer Receipt, issued by the remitting bank relative to the payment made to the supplier of the said Goods;

e. Travel, food and lodging expenses relative to the conduct of the Post Qualification, Pre-Delivery Inspection and acceptance;

f. Shipping and Handling cost from Goods’ country of origin to Manila, Philippines;

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g. Trucking, handling, fuel, and food and beverage costs relative to delivery of goods from Manila Port to the CLIENT designated warehouse;

h. Other expenses that the project may incur in accordance with the terms and conditions of the contract; and

i. All government taxes to be withheld prior to the drawing of the Letter of Credit proceeds.

IV. Securities

The PARTIES agree that the FIRST PARTY shall execute a Deed of Assignment in favour of the SECOND PARTY to assign and indorse corresponding Domestic Letters of Credit issued by United Coconut Planters Bank (UCPB) with LC No. 909-03-928-14-00424-1 and Land Bank of the Philippines with LC No. 1HO300714DLCS721 to guarantee payment for the abovementioned supplies.

V. Confidentiality

The PARTIES shall keep secret and confidential any information on the supply agreement with PITC/DND/AFP/PA or any of the provisions or stipulations in this agreement and shall not at any time (whether during lifetime of this Agreement or after its termination) use for its own or another's advantage, or disclose to any person, firm or company (except disclosure to its employees or affiliates necessary for the transactions) any trade secrets, business terms relating to this Agreement or its relationship with the Second Party so far as they shall have come to its knowledge during the term of this Agreement.

VI. Amendments

Any amendment to this Agreement shall be effective only upon mutual consent of both parties in writing, unless such is in the nature of a revision which requires a new agreement to supersede this Agreement.

VII. Warranties

The PARTIES warrant that each is legally and duly authorized by their respective government or regulatory offices to engage in the business purpose stipulated in this Agreement.

VIII. Separability

In the event that any provision of this Agreement shall be held to be invalid, the same shall not affect in any respect whatsoever the validity of the remainder of this Agreement.

IX. Integrated Agreement

This Agreement constitutes the entire understanding and agreement among the parties hereto with respect to the subject matter hereof, and there are no agreements, understandings, restrictions or warranties among the parties other than those set forth herein provided for.

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X. Headings

The headings, titles and subtitles used in this Agreement are for ease of reference only and shall not control or affect the meaning or construction of any provision hereof.

XI. Applicable Laws and Venue

This Agreement shall be construed and enforced under the laws of the Republic of the Philippines and all suits or cases shall be exclusively filed and litigated in the proper court of Makati City, Philippines.

XII. Other Instruments.

The parties hereto covenant and agree that they will execute each such other and further instruments and documents as are or may become reasonably necessary or convenient to effectuate and carry out the purposes of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

CHRISTOPHER S. MANALUZ JOSE XAVIER B. GONZALESFirst Party Second Party

Signed in the Presence of:

______________________________ ____________________________

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A C K N O W L E D G M E N T

REPUBLIC OF THE PHILIPPINES)City Of _____________________ ) SS.

BEFORE ME, a Notary Public for and in the above jurisdiction this _________________ personally appeared:

Name Passport/Driver’s License Issued on/At

Christopher S. Manaluz License # NO4-07-010518 May 12, 2014/Quezon City

Jose Xavier B. Gonzales

Known to me and to me known to be the same persons who executed the foregoing Financing and Take-Out Agreement and acknowledged to me that the same is their free and voluntary act and deed, and that of the corporations represented herein.

WITNESS MY HAND and Notarial Seal on the date and at the place first above-written.

Doc. No. ____;Book No. ____;Page No. ____;Series of 2015.

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