SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT

 

 

SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT

 

 

This Agreement of (20) pages was signed on 19th day of July 2005.

 

BETWEEN:

 

ESSENTIAL INNOVATIONS CORPORATION: Incorporated under the Canada Business

Corporations Act

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(Hereinafter referred to as "Essential Innovations" or "EIC")

 

AND:

 

Global Business Exchange CORPORATION: Incorporated in the Province of British

Columbia

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(Hereinafter referred to as "GBX")

 

WHEREAS Essential Innovations Corporation has developed the EI Elemental line of

innovative Geoexchange products. EIC is now focused on manufacturing and

distribution strategies for it's proprietary EI Elemental Family of Products,

which exclusively utilizes geoexchange technology, R410A refrigerant and

specialized artificial intelligence controls. EIC is now actively seeking

execution of product licensing and distribution agreements for its EI Elemental

Heat Energy System throughout the World.

 

AND WHEREAS Essential Innovations is to be introduced to associates, affiliates,

colleagues, branches, subsidiaries or other contacts of GBX in the Territory (as

hereinafter defined).

 

AND WHEREAS GBX wishes to enter into a sole exclusive distribution and agency

agreement with Essential Innovations whereby GBX would take on sole

responsibility for the distribution, marketing and sale of the Product (as

hereinafter defined) throughout the Territory (as hereinafter defined). GBX

through its associates, affiliates, colleagues, branches, or subsidiaries wishes

to undertake responsibilities for the evaluating, distribution, marketing and

sale of the Product(s) (as hereinafter defined) on a sole exclusive basis

throughout the Territory (as hereinafter defined) on the terms and conditions

contained herein;

 

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     NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual

     covenants in this Agreement, the Parties agree as follows:

 

1.        DEFINITIONS

 

         Definitions

 

         As used in this Agreement, the following words and phrases shall have

         the following meanings:

 

         "Term" means the term of this Agreement as provided in subsection 3(a)

         including any renewal provided hereunder.

 

         "Trade-Mark" means the trademark or trademarks of all products

         manufactured by Essential Innovations and its affiliates.

 

         1.        "Territory" means MEXICO ONLY

 

         "Future Territory" means Central Americas ONLY

 

         "Product" means EI Elemental Geothermal Heat Pumps manufactured by

         Essential Innovations Corporation

 

         "Parties," means Essential Innovations Corporation and Global Business

         Exchange Corporation

 

         "Unit or Units," means any one individual EI Elemental Geothermal Heat

         Pump (of any size)

 

2.        APPOINTMENT AND TERRITORY

 

         (a)       Appointment

 

         Essential Innovations hereby grants GBX sole exclusive rights to

         market, distribute and sell the Product(s) within the Territory and

         hereby appoints GBX as its sole distributor in the Territory for this

         purpose subject to the terms and conditions herein.

 

         (b)       Territory

 

         GBX shall be granted Sole Exclusive Rights to market, distribute and

         sell the Product(s) exclusively in the "Territory".

 

         (c)       Sub-Distribution

 

         GBX shall have the right to appoint sub-distributors, provided that, as

         a condition of such appointment such sub-distributor shall be entitled

         to distribute and promote the Product(s) only within the Territory and

         subject to and in accordance with the terms of this Agreement,

 

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         including the requirement that the sub-distributor must undergo and

         take part in a training program to be provided in conjunction with

         Essential Innovations and GBX at the sole cost of GBX.

 

         (d)       First Right of Refusal

 

         It is hereby agreed under the terms of this Agreement that at such

         future date when Exclusivity is to be granted for the "Future

         Territory" as defined herewith, then GBX shall have the "First Right of

         Refusal" to obtain such Exclusive Distribution should they wish to

         exercise such right subject to similar terms and conditions as set

         forth in this Agreement for the Exclusive Distribution Rights to the

          Territory.

 

         (e)       Restriction on Sales of the Product

 

         Subject to the terms of this Agreement, during the Term, Essential

         Innovations shall not, directly or indirectly, sell, assign or grant to

         any other person, entity, firm or organization, the right to, market,

         sell or distribute the Product within the Territory unless with written

         approval from GBX.

 

         (f)       Referrals

 

         Essential Innovations agrees to refer to GBX all inquiries, orders or

         requests for all Products originating from or intended for delivery

         within the Territory.

 

3.        TERMS AND RENEWAL

 

         (a)       Term

 

         This Agreement shall become effective upon its execution by both EIC

          and GBX hereto and shall remain in effect for a period of one (1) year

         from the date of such execution (the "Initial Term") subject to the

         terms and conditions herein.

 

         (b)       Renewal

 

         After the Initial Term period, this Agreement will be automatically

         extended to a further three (3) year consecutive period, under the same

         conditions and terms within this Agreement, providing that GBX has

         complied with all the terms of this Agreement up to and including the

         time of renewal (except for applicable annual increases in the purchase

         quotas and volume requirements).

 

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4.        PURCHASE ORDER ACKNOWLEDGMENT

 

         Essential will acknowledge orders in writing within ten (10) working

         days after receipt of an accurate and complete order. Order is not

         considered received until all information provided by GBX for the

         product, billing, and shipping data is complete and accurate. Order

         acknowledgments will be sent to the GBX "bill to" address, unless

         otherwise requested by the GBX. The acknowledgment shall include

         field/purchase order number, ship to address, items ordered, contract

         pricing, and ship date. Essential shall send only one order

         acknowledgment per order (unless subsequent changes need to be

         acknowledged), which shall be a consistent form recognized by their

         customers, and checked for accuracy prior to mailing. Essential may

         refuse to accept telephone orders due to the possibility of errors,

         however shall have capability to receive fax orders.

 

         Alternate or additional terms and conditions accompanied with a

          purchase order acknowledgment are unacceptable; the terms and

         conditions incorporated herein prevail.

 

5.        ORDER CANCELLATION & CHANGE ORDERS

 

         GBX may cancel or change orders for standard contract items without

         penalty within 15 working days from postmark date of order

         acknowledgment. After this period, Essential may impose a 10% penalty

         of the item(s) being cancelled and/or changed.

 

         If a customer cancels an order for custom designed items, Essential may

         impose up to a 100% penalty of the item(s) being cancelled.

 

6.        PACKAGING

 

         Specifications: Unless otherwise specified, goods are to be shipped in

         new and undamaged condition and packaged in accordance with mutually

         agreed upon standards between Essential and GBX. Goods shipped in other

         than mutually agreed upon standards, as requested by the GBX, shall be

         at an additional cost to the GBX.

 

7.        PRICE

 

         (a)       Sale Price

 

                   (i)       Essential Innovations shall, from time to time,

                           provide GBX with price-lists with respect to the

                           Product quoted FOB (Surrey, Canada), or quoted FOB

                           (Fort Wayne, Indiana).

 

                  (ii)      Essential Innovations shall send a written notice to

                           GBX, 60 days in advance, of any changes in the price

                           list. Prices shall remain unchanged for at least 180

                           days after the effective date of the contract.

                           Adjustments in contract pricing will be allowed on a

                           pass-through basis only. Essential shall provide

 

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                           adequate documentation to justify said increases.

                           Approved price adjustments shall remain unchanged for

                           at least 180 days thereafter.

 

                   (iii)     Once Essential Innovations has quoted GBX with a

                           price for the Product, the price shall be valid until

                           completion of the deal (order) and may not vary until

                           such time that the order is completed, provided the

                           order is completed within the quoted period and under

                           the quoted terms. This does not, however, relate to a

                           "new order" that may be placed during the same time

                           period and may be subject to different pricing should

                           the price list have been amended during the specific

                           ordering period.

 

         (b)       Payment

 

                  (i)       Standard payment terms are Net 30 no interest from

                           the date of receipt of the purchase order from GBX to

                           EIC. With an industry standard interest charged for

                            payment within 60 and 90 days.

 

                  (iii)     For special circumstances, should GBX initiate in

                           writing any direct sales between Essential

                           Innovations and buyers in the Territory, Essential

                           Innovations will invoice the buyer through GBX. In

                           that case a wire transfer or money order shall be

                           used to make payment directly to Essential

                            Innovations.

 

         (c)       Price List

 

                  GBX shall have the right to establish its own pricelist for

                  the Product(s) within the Territory.

 

         (d)       Sales and Marketing

 

                  The determination of sales and marketing strategies and

                  selling prices for the Product(s) within the Territory shall

                  be the sole responsibility of GBX.

 

         (e)       Registration of the Product

 

                  Should the Product(s) need to be registered, the official fees

                  for the registration (if any) of the Product within the

                  Territory shall be borne by EIC should it be necessary.

 

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8.        TERMS AND CONDITIONS

 

         The Parties agree that during the term of this Agreement Essential

Innovations shall:

 

                  a)        Provide GBX with all requested information presently

                           available in order to assist GBX in the preparation

                           of sales promotional material relating to the

                           Product(s) and in order to facilitate advertising and

                           sale of the Product(s);

                  b)        Replace, at its own cost, any Product(s) delivered by

                           Essential Innovations to GBX / GBX's buyer in a

                           defective or un-merchantable state due to improper

                           shipping;

                   c)        Properly maintain the registration of the Trade-Mark;

                  d)        Essential Innovations shall not deal directly with

                           any person, entity, firm or organization in the

                            Territory and shall go through GBX unless with the

                           knowledge and a written consent from GBX.

                  e)        Bear all liabilities for matters arising out of the

                           manufacture and quality of the Product(s) in

                           accordance with the standard manufacturer warranty

                           and/or the manufacturer extended warranty, if

                           applicable;

                  f)        Permit GBX to hold itself out as an authorized sole

                           distributor of the Product(s) within the specified

                           Territory;

                  g)        Package and label the Product in accordance with

                           applicable standards and in compliance with the law

                           of the jurisdiction of the ultimate sale. Such

                           standards shall be identified by GBX and communicated

                           to Essential Innovations in Writing

 

9.        WARRANTIES AND REPRESENTATIONS

 

         (a)       Representations and Warranties of EIC. EIC represents and

                  warrants to GBX that the statements made in this Agreement are

                  true and correct in all material respects and do not contain

                  any untrue statement of a material fact or omit to state a

                  material fact required to be stated therein or necessary to

                  make the statements therein, in light of the circumstances

                  under which they were made, not misleading. EIC further agrees

                  that at the Start Date to this Agreement, the representations

                  and warranties of EIC set forth in this Agreement will be

                   deemed to have been remade as of the Start Date and shall

                  survive the End Date for the applicable period of limitations.

 

         EIC warrants and represents to GBX as follows:

 

                  (i)       EIC is a corporation duly incorporated, validly

                           existing and in good standing under the Federal laws

                           of the Country of Canada, and has all requisite

                           corporate power and authority to carry on its

                            business in all material respects.

 

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                  (ii)      EIC has all requisite corporate power and authority

                           to enter into and deliver this Agreement and any

                           other agreement or document necessary to perform this

                           Agreement and to perform its obligations hereunder.

                           The execution of this Agreement and such other

                            agreements and instruments by EIC, and the

                           performance of their terms by EIC, have been duly and

                           validly authorized by appropriate members of the

                           Board of Directors of Essential Innovations

                           Technology Corp. ("EITC"), parent Company to EIC, and

                           no further corporate action or authorization on

                           behalf of EIC is required.

 

                  (iii)     This Agreement is legal, valid and binding upon and

                           enforceable against EIC in accordance with its terms

                           (except as the enforceability thereof may be limited

                           by any applicable bankruptcy, reorganization,

                           insolvency or other laws affecting creditors' rights

                           generally or by general principles of equity,

                           regardless of whether such enforceability is

                           considered in equity or at law).

 

                  (iv)      EIC has developed the EI Elemental Geothermal Heat

                           Pump Technology and owns, possesses and has title to

                           such and all documentation, designs, flow sheets and

                           related materials free and clear of all liens,

                           charges and encumbrances;

 

                  (v)       EIC has not granted or agreed to grant any license or

                            right or entered into any other agreement whereby EIC

                           is obliged to give any other person, firm or

                           corporation any rights to utilize or sell the EI

                           Elemental Geothermal Heat Pump Technology in the

                           Territory; and

 

                  (vi)      To EIC's knowledge: (1) EIC has complied in all

                           material respects with all laws and regulations of

                            Governmental Bodies applicable to the business and

                           operations of EIC and has filed with the proper

                           authorities all material statements and reports

                           required by all applicable laws and regulations; and

                           (2) EIC has not received notice of any violation of

                           any laws and regulations applicable to the business

                           or operations of EIC.

 

          (b)       Representations and Warranties of GBX. This Agreement requires

                  information, representations and warranties to enable EIC to

                  determine whether to accept GBX as the Sole Exclusive

                  Distributor in the Territory. GBX therefore represents and

                  warrants as follows: GBX's information, representations and

                  warranties set forth herein are true and complete and may be

                  relied upon by EIC.

 

                   GBX warrants and represents to EIC as follows:

 

                  (i)       If, before the Start Date, there is any material

                           change with respect to GBX's affairs that would

 

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                            affect GBX's information, representations or

                           warranties set forth herein, GBX will promptly notify

                           EIC of that change.

 

                  (ii)      GBX is a company duly incorporated under the laws of

                           British Columbia in good standing in accordance with

                           the laws of such jurisdiction and shall remain so

                           during the term of this Agreement.

 

                   (iii)     It shall use its best and reasonable efforts to

                           utilize and exploit the EI Elemental Geothermal Heat

                           Pump Technology in accordance with the terms and

                           conditions of this Agreement.

 

                  (iv)      It shall comply with all applicable laws, orders