Distributor Agreement 4-08

DISTRIBUTOR AGREEMENT This Agreement is entered into as of , 2008, by and between Sottera, Inc. a corporation organized and existing under the laws of the State of Nevada dba NJOY (hereinafter referred to as “Supplier”), located at 15455 N. Greenway-Hayden Loop Rd., Ste C-15, Scottsdale, AZ 85260 U.S.A., and (Company/Individual Name) located at (address) , (City) , (State) (Zip Code)

, (Business License Number/EIN/Social Security Number)

(hereinafter

referred to as “Distributor” ). WHEREAS, Supplier is the owner and developer of simulated cigarette/cigaralternative products known as NJOY (hereinafter defined with more particularity and referred to collectively as the "Products") and is engaged in the manufacture and sale of the Products; and WHEREAS, Distributor desires to sell and distribute the Products; and WHEREAS, Supplier desires to sell the Products to Distributor, and Distributor desires to purchase the Products from Supplier for resale and distribution to existing and potential customers of Distributor, upon the terms and conditions set forth in this Agreement, including, but not limited to, conditions that will insure (i) the acknowledgement by Distributor of the exclusive proprietary interest of Supplier in and to the Products and any and all information concerning the Products or Supplier now possessed, or which may hereafter come into the possession of Distributor or any other recipient of such information from, or though, Distributor; and (ii) the non-disclosure and non-use of any and all such information by Distributor or any such recipient, for any purpose, except as specifically provided herein; NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions herein contained and for the purpose of protecting Supplier from the unauthorized disclosure or use of the Confidential Information, the parties hereto agree as follows: 1.

Recitals. The foregoing Recitals are incorporated in and made a part of this Agreement.

1

2. Grant; Appointment; Territory; Corporate Sales. Supplier grants to Distributor, and Distributor accepts from Supplier, the exclusive right, license and obligation to purchase, inventory, promote, resell and distribute the Products for retail consumption through all of ______________ (the “Territory”) for the period set forth in Paragraph 14 of this Agreement (the "Term"); and Distributor appoints Supplier as its exclusive supplier of the Products for the duration of the Term and agrees not to carry, sell or distribute any product similar or related to the Products during the Term and thereafter as set forth in this Agreement. Distributor shall not, directly or indirectly, sell any of the Products outside of the Territory without the prior written consent of Supplier. All sales to corporate accounts owning or operating more than five (5) retail outlets shall be subject to review by Supplier and Distributor on an account by account basis. Any price discount deemed necessary to obtain any such account shall be borne by Distributor. 3. Products. As used in this Agreement, the term “Products” shall mean and include the Products, related service, parts and accessories heretofore or hereafter manufactured and/or sold by SUPPLIER as follows: NJOY cigarettes, cigars, pipes, hookas, cartridges, batteries, battery chargers, protector tips, literature and other accessories. 4. Listed Products; Orders. All orders shall be from the list of Products provided by Supplier to Distributor from time to time, and shall be submitted to Supplier on a purchase order form satisfactory to the parties. Each order shall contain Distributor's sales tax exemption number and purchase order number. Supplier will advise Distributor of the time frame required for delivery, but, in making the order, Distributor should anticipate lead times upward to eight (8) weeks, depending upon size of the order and availability of supply and shipping destination. All orders are subject to acceptance and confirmation by Supplier. While Supplier will use its best efforts to complete each order, it reserves the right to allot available inventories among all distributors at its discretion, and, to the extent possible, will advise Distributor in advance of any inability to make full and timely delivery of any order. All accepted orders, regardless of whether delivery dates are specified therein, shall be subject to delays or failures in manufacture or in delivery due to any cause beyond Supplier’s control, including, without limitation, fire, embargo, strike, customs or failure to secure materials from usual sources of supply.

2

5. Forecasts. In order to assist Supplier in maintaining adequate levels of stock for Distributor’s orders, Distributor shall keep Supplier advised of its inventory of the Products on a monthly basis. In addition, Distributor shall furnish Supplier at the beginning of each month with a forecast of its requirements for such month on Supplier’s “sales forecast template.” 6. Terms of Sale. All sales of Products to Distributor shall be made pursuant to this Agreement at such prices and on such terms as SUPPLIER shall establish from time to time on at least thirty (30) days notice, provided that, unless otherwise specified, a deposit of fifty percent (50%) shall be paid with each order, and the balance shall be due and payable, in full, not later than the date preceding the date scheduled for pickup or delivery of the order to the shipper. Supplier shall give Distributor at least twenty-four (24) hours’ notice of the scheduled pickup date and due date for payment of the balance of the purchase price for each order. All prices are FOB SUPPLIER's plant, and Distributor shall be responsible for any freight and other shipping costs, duties, taxes and insurance unless otherwise agreed to in advance of pickup. Whenever Supplier shall deliver to a common carrier any Products ordered by Distributor, regardless of whether such carrier shall have been designated in Distributor’s shipping or routing instructions, such carrier shall be Distributor’s agent and risk of loss due to damage, destruction or other cause shall pass to, and be borne by, Distributor. In the case of Products designated for shipment, the shipper will be selected by Supplier if not specified by Distributor. Supplier will prepare all Products for shipment in accordance with its usual and customary procedures unless otherwise agreed in writing. See Exhibit A for pricing and volume purchasing requirement. 7. Distributor as Independent Contractor; General Duties; Representations to Customers. Supplier and Distributor acknowledge that the relationship between Supplier and Distributor is that of vendor and vendee and that Distributor is an independent contractor with full control over its sales efforts and the products that Distributor elects to handle. However, Distributor agrees to use its best efforts to sell and market the Products and to provide all necessary and appropriate warranty and customer service. Such efforts shall include, without limitation: A.

Maintaining adequate inventories of the Products;

B. In connection with the sale and marketing of the Products, (i) following up on any leads to Supplier’s customers provided by Supplier from time to time; (ii) 3

researching and contacting potential outlets for the Products, including, without limitation, cafes, bars, restaurants, hotels, resorts, theme parks, colleges, universities and other institutional accounts; (iii) setting up a procedure for weekly telephone calls to customers to solicit orders and for visits to customer locations to introduce the Products and to maintain customer relations; and (iv) conducting demonstrations and providing Product samples to potential customers as and when appropriate. Distributor shall bear all costs of conducting its business, including all promotional product and other costs associated with the marketing. C. Conducting all marketing and sales efforts in conformity with marketing policies and programs established by Supplier from time to time; D. Hiring and training such sales personnel and representatives as may be necessary or appropriate to carry out its obligations under this Agreement. Such training shall be in accordance with any training manual that may be provided by Supplier from time to time, but, in any event, shall include specific instructions to the effect that (i) NJOY must be represented simply to be an alternative smoking device to cigarettes and cigars, (ii) NJOY is to be marketed and sold ONLY to adult smokers twenty one (21) years of age or older, (iii) no representation is to be made that NJOY is, in any way, a smoking cessation device or device that will reduce or eliminate a smoking habit or addiction; (v) no express or implied health claims are to be made, including any claim that NJOY is a “healthful” or “more healthful” alternative to cigarettes; and (v) no warranty or representation is to be made that exceeds the terms of the limited warranty from Supplier to the original consumer. E. In order to enable Supplier to accumulate marketing data for NJOY products, to forecast production and manufacturing requirements, and to act as a resource to field customer inquiries and for the conduct of in-store demonstrations, Distributor shall provide Supplier on a monthly basis with the contact information and orders of each NJOY customer. 8. Claim for Defects. All orders are final and all Products shall be deemed accepted by Distributor, unless a timely claim is made in accordance with the provisionsof this paragraph. Claims must be in writing, must contain a list of the allegedly defective items, and a description of the alleged defect or defects. All 4

allegedly defective items must be set aside for inspection by Supplier and returned to Supplier (at Supplier's expense) if so requested by Supplier. Supplier will be responsible only for defects in Products or packaging. In the event that any Product is established to Supplier’s satisfaction to have been defective at time of sale to Distributor, the sole responsibility of Supplier will be to replace the Product it deems to be defective. No monetary credit will be issued. In no event will Supplier be responsible for incidental or consequential damages. 9. Product Warranty Policies. Supplier shall provide to Distributor information with respect to SUPPLIER's limited warranty extended to the original consumer of the Products. Supplier makes no warranty to Distributor with respect to the Products, either express or implied, including, without limitation, any implied warranty of merchantability or fitness for a particular purpose. 10. Indemnification. Distributor hereby indemnifies and holds harmless Supplier from and against any and all loss, liability and expense, including, but not limited to, fees, fines, attorney’s fees and expenses, and loss of business and other consequential damages arising out of, or relating to (i) any unauthorized or unapproved representations or claims concerning the Products made by Distributor or any of its sales personnel, independent distributors or representatives whether referred to in paragraph 7 of this Agreement or otherwise, (ii) breach of its obligations under paragraph 12 of this Agreement and (iii) the negligence of Distributor, its sales personnel, independent distributors or representatives in the installation, use, sale or servicing of Supplier’s Products. 11. Vendor’s Lien. Supplier shall retain a lien on all Products in the possession of Distributor until such time as Distributor has satisfied all financial obligations to Supplier. Should Distributor fail to satisfy all such financial obligations within 10 days following the due date of invoice, Distributor shall not attempt to distribute, sell or otherwise dispose of the Products in its possession until such time as all such financial obligations are satisfied. Should Distributor fail to satisfy all financial obligations to Supplier within 15 days following the due date of invoice, Distributor shall return to Distributor all Products in its possession, with all return charges borne by Distributor.

5

12. Proprietary and Confidential Information and Intellectual Property of Supplier. A. The parties acknowledge and agree (i) that Supplier is providing the Products to Distributor under this Agreement solely for resale to retail customers in the ordinary course of Distributor's business, and for no other use or purpose; (ii) that Supplier is the owner of valuable proprietary and confidential information concerning the Products, including, but not limited to, pending patent applications, designs, product specifications, processes, systems, financial, pricing, point-of-sale, photographs, unique product names and other marketing information, properties, operations, know how, customer and vendor information, business opportunities and strategies, technical, artistic and other information, concepts and data, in written, oral, magnetic, photographic, digital, videographic, and/or other forms (the "Confidential Information"); (iii) that any and all variations or modifications of Products or other Confidential Information supplied by Supplier hereunder, whether or not developed at the request or in conjunction with the efforts of, Distributor shall, at all times be, and remain, the property and Confidential Information of Supplier; and (iv) that the disclosure of Confidential Information to third parties would cause irreparable harm to Supplier and to Supplier's business. B. Distributor agrees that it will not, directly or indirectly, through its officers, directors, contractors, employees, consultants, attorneys accountants, servants, agents, affiliates, or otherwise, disclose, cause or permit to be disclosed, or use, Supplier's Confidential Information for any purpose other than as expressly set forth in this Agreement. Without limiting the foregoing, Distributor shall not disclose to any third party the pricing, terms, or any other provisions of this Agreement, and shall not furnish to third parties samples of any of the Products supplied by Supplier hereunder for duplication or any other purpose, any packaging or information contained thereon, or any other information provided by Supplier to Distributor in confidence. As used herein, an “affiliate” shall be deemed to include, without limitation, (i) any individual or entity who, directly, or through one or more entities, owns twenty-five percent (25%) or more of the equity interests of Distributor, (ii) any member of the immediate family (spouse, parent or child) of Distributor, of any officer or director of Distributor, or of any individual described in (i) above, and (iii) any individual or entity controlling, controlled by, or under common control with, Distributor or any individual or entity described in (i) or (ii) above.

6

C. Distributor agrees to take all reasonable steps as may be required or appropriate to ensure the non-disclosure and non-use of the Confidential Information except and only to the extent permitted by this Agreement, and to require its officers, directors, contractors, employees, consultants, attorneys, accountants, servants, agents and affiliates who may be given access to or receive disclosure of any of the Confidential Information to maintain such Confidential Information in the strictest confidence and not to disclose or use any of such Confidential Information contrary to the requirements of this Agreement; and to be responsible in damages for the actions of any such person in contravention of the terms of this Paragraph 12. D. In the event that Distributor becomes aware of any unauthorized disclosure or use of Confidential Information, Distributor shall notify Supplier immediately and make every effort to recover the same from the unauthorized party. E. All Confidential Information provided by Supplier or its representatives to Distributor, and all copies thereof, shall be returned to Supplier at Distributor's request or upon termination of this Agreement and, except for the limited purpose and time necessary to carry out the provisions of subparagraphs B and C of paragraph 15 hereof, if applicable, shall, in all events, cease to be disclosed or used by Distributor for any purpose upon termination of this Agreement. F. Distributor understands and agrees that, due to the unique nature of the Confidential Information, the unauthorized disclosure or use thereof may allow Distributor, its affiliates, or third parties to unfairly compete with Supplier, resulting in irreparable harm to Supplier, and that monetary damages or other remedies at law will not be sufficient to preclude, or compensate for, such unauthorized use or disclosure and, therefore, consents to the issuance of an injunction and such other equitable relief as may be appropriate in addition to such remedies as may be available to Supplier at law to prevent or restrain any actual or threatened disclosure or use of Confidential Information in contravention of the provisions of this paragraph 12. G.) The provisions of this Paragraph 12 shall survive the termination of this Agreement. 13. Suggested Resale Price. Distributor recognizes that in order to compete effectively with other similar products, the resale price of the Products to retailers must be competitive with the prices to retailers of such other products. Distributor recognizes that Supplier has carefully considered the price charged to retailers for products similar to the Products, and has determined that the highest price that can be currently charged to retailers consistent with the maintenance of effective competition for the Products is 7

US $99.95 for the NJOY Cigar Starter Kit and $109.95 for the NJOY Cigarette Starter Kit, and US $24.95 per NJOY 5-pack of cartridges. The suggested resale price will be subject to review by Supplier as conditions require. 14. Term and Termination. The term of this Agreement shall be for a trial period of six (6) months], commencing on the date hereof. If the parties agree to continue this Agreement after the initial six (6) month trial period, the term of this Agreement shall be extended for a period of one (1) year commencing on the date following the expiration of the trial period, and shall be deemed automatically renewed at the end of the each one (1) year term for an additional one (1) year unless terminated by written notice by the terminating party to the other party at least sixty (60) days prior to the expiration of the applicable one (1) year period; provided that this Agreement may be terminated by Supplier at any time upon written notice to Distributor in the event that Distributor (i) fails to make payments as and when due, (ii) breaches its obligations under Paragraph 12 of this Agreement, (ii) makes an assignment or attempted assignment in contravention of the provisions of paragraph 17 of this Agreement, or (iii) intentionally fails or refuses to perform its obligations under this Agreement. Until the effective date of any termination of this Agreement, Distributor shall continue to purchase its requirements for the Products from Supplier in the usual and normal course of its business, and Supplier shall continue to fulfill Distributor's orders received prior to the end of such term. Notwithstanding the giving of notice of termination by either party, Distributor shall continue to pay all unpaid balances as and when due and perform all of its obligations under this Agreement until the effective date of such termination; provided that any balance owing to Supplier not previously paid, shall be due and payable in full in all events at the effective date of termination. No termination of this Agreement by either party shall be deemed to deprive such party of any rights it may have against the other party arising out of the breach of this Agreement by such other party. 15. Further Provisions Applicable Upon Termination. this Agreement:

Upon termination of

A. At the option of Supplier, Distributor will resell and deliver to Supplier, free and clear of liens and encumbrances, such of Suppliers Products and materials bearing

8

NJOY’s name as Supplier shall elect to repurchase, at a mutually agreed price, but not in excess of Supplier's current price to distributors for such products and materials, provided that Supplier shall not be obligated to pay Distributor for any item originally provided free of charge; B. Any Products remaining in the possession of Distributor after the application of the foregoing subparagraph A may be sold by Distributor in the ordinary course of its business; C. Except to the limited extent necessary to dispose of remaining inventory as set forth in the foregoing subparagraph B, and, in no event, later than thirty (30) days following the effective date of termination of this Agreement, Distributor will remove and not thereafter use any sign containing any trade name, logo or trademark of SUPPLIER including, but not limited to, “NJOY” and will destroy all stationery, advertising matter and other printed matter in its possession or under its control containing the name “NJOY”, or any of SUPPLIER's trademarks, trade names or logos. D. Distributor will immediately take all appropriate steps to remove and cancel its listings in telephone books, and other directories, and public records, or elsewhere that contain the NJOY name, logo or trademark. If Distributor fails to obtain such removals or cancellations promptly, SUPPLIER may make application for such removals or cancellations on behalf of Distributor at Distributor’s cost and in Distributor's name and in such event Distributor will render all assistance necessary to accomplish the removal and/or cancellations. 16. Waiver. No waiver or forbearance on the part of either party with respect to any breach of this Agreement by the other party shall operate as a waiver or forbearance with respect to any subsequent breach of the same or any other provision. 17. Assignment. No rights or obligations of Distributor under this Agreement shall be assignable without the prior written consent of Supplier, which consent may be withheld by Supplier in its absolute discretion. For purposes of this paragraph, any change in ownership interest of Distributor in excess of twenty-five percent (25%) shall be deemed to constitute an assignment by Distributor.

9

18. Notices. All notices pursuant to this Agreement shall be in writing addressed to the parties at the addresses set forth in this Agreement, except as otherwise specified by written notice, and shall be deemed given upon personal delivery, 3 days after mailing, postage prepaid, or, in the case of e-mail or Fax, upon receipt. 19. Governing Law; Legal Fees and Costs. This Agreement shall be governed by the laws of the State of Arizona, and any action arising hereunder shall brought in the superior court of Maricopa County, Arizona. In the event of any action or proceeding to enforce or interpret any of the provisions of this Agreement, the prevailing party shall be entitled to be reimbursed for the costs of such action, proceeding or appeal, including legal costs and disbursements. 20. Invalid Provisions. In the event that any provision of this Agreement is held to be illegal, invalid or unenforceable by a court of competent jurisdiction, such provision shall be reformed to the extent legally permissible to render the same enforceable, and, the remaining provisions hereof shall, in all events, remain in full force and effect and in no way be impaired or invalidated. 21. Entire Agreement; Amendments; Inurement; Survival. This Agreement embodies the entire agreement of the parties with respect to the subject matter of this Agreement, superseding any and all prior agreements, whether oral or written, shall not be amended or modified except by an instrument in writing signed by both parties, and shall inure to the benefit of, and be binding upon, the successors and permitted assigns of the respective parties. All provisions of this Agreement which, by their terms or context, are intended to be performed or applicable following the termination of this Agreement shall survive the termination of this Agreement. 22. Execution. A facsimile transmission or copy of the original of this Agreement shall be as effective and enforceable as an original. This Agreement may be executed by manual or facsimile signatures and in any number of counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one and the same instrument. 23. Authorization. Each party represents that it has full power and authority to enter into and execute this Agreement, and, in the case of any party which is an entity, that the individual signing this Agreement on its behalf is duly authorized. 10

IN WITNESS WHEREOF, the parties have executed this Agreement on and as of the date first above written. Supplier: Sottera, Inc. dba NJOY By______________________________ ______________________________ Print name and Title Notices to: Sottera, Inc. dba NJOY Attn: Jack Leadbeater, President and CEO 15455 N Greenway-Hayden Loop Rd., Suite C-15 Scottsdale, Arizona 85260 USA E-mail: [email protected] Phone: 480-305-7950 Fax: 480-305-7955

11

Distributor: Name: By: Print Name and Title Notices to: Name: Address: City: State

Zip:

Phone

Fax:

E-mail:

12