Sole Exclusive Rights And Distribution Agreement

ESSENTIAL INNOVATIONS CORPORATION & ENERFLO GEOTHERMAL TECHNOLOGIES LTD.
SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT - --------------------------------------------------------------------------------


This Agreement of (18) pages was signed: on 30th day of June, 2005.


BETWEEN:


ESSENTIAL INNOVATIONS CORPORATION: Incorporated under the Canada Business Corporations Act - -------------------------------------------------------------------------------- (Hereinafter referred to as "Essential Innovations" or "EIC")


AND:


ENERFLO GEOTHERMAL TECHNOLOGIES LTD: An Alberta Corporation - ----------------------------------------------------------- (Hereinafter referred to as "EGT")


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 EGT in the Territory (as hereinafter defined) by EGT.


AND WHEREAS EGT wishes to enter into a sole exclusive distribution and agency agreement with Essential Innovations whereby EGT would take on sole responsibility for the distribution, marketing and sale of the Product (as hereinafter defined) throughout the Territory (as hereinafter defined). EGT 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;


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:


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ESSENTIAL INNOVATIONS CORPORATION & ENERFLO GEOTHERMAL TECHNOLOGIES LTD.
SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT - --------------------------------------------------------------------------------


"Term" means the term of this Agreement as provided in subsection 3(1) 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 the Provinces of "Alberta, Saskatchewan, Manitoba,
and the Yukon Territory" ONLY


"Future Territory" means the Provinces of "Ontario, Quebec, Nova Scotia, New Brunswick, Prince Edward Island, Nunivat and the Northwest Territories" ONLY


"Product" means EI Elemental Geothermal Heat Pumps manufactured by Essential Innovations Corporation


"Parties," means Essential Innovations Corporation and Enerflo Geothermal Technologies Ltd..


"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 EGT sole exclusive rights to
market, distribute and sell the Product(s) within the Territory and
hereby appoints EGT as its sole distributor in the Territory for this
purpose subject to the terms and conditions herein.


(b) Territory


EGT shall be granted Sole Exclusive Rights to market, distribute and
sell the Product(s) exclusively in the "Territory".


(c) Sub-Distribution


EGT 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,
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 EGT at the sole cost of EGT.


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ESSENTIAL INNOVATIONS CORPORATION & ENERFLO GEOTHERMAL TECHNOLOGIES LTD.
SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT - --------------------------------------------------------------------------------


(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 EGT 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 EGT.


(f) Referrals


Essential Innovations agrees to refer to EGT 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 EGT 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 EGT 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).


4. PRICE


(a) Sale Price


(i) Essential Innovations shall, from time to time, provide EGT
with price-lists with respect to the Product quoted FOB
(Vancouver, Canada).


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ESSENTIAL INNOVATIONS CORPORATION & ENERFLO GEOTHERMAL TECHNOLOGIES LTD.
SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT - --------------------------------------------------------------------------------


(ii) Essential Innovations shall send a written notice to EGT, one
month in advance, of any changes in the price list.


(iii) Once Essential Innovations has quoted EGT 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 Net 45 days from shipment date in
accordance with the terms and conditions of The Canadian
Construction "Standard Construction Document CCDC 2 progress
payment terms.


(ii) For special circumstances, should EGT initiate in writing any
direct sales between Essential Innovations and buyers in the
Territory, Essential Innovations will invoice the buyer
through EGT. In that case a wire transfer or money order shall
be used to make payment directly to Essential Innovations.


(c) Price List


EGT 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 EGT.


(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.


5. TERMS AND CONDITIONS


The Parties agree that during the term of this Agreement Essential Innovations shall:


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a) Provide EGT with all requested information presently
available in order to assist EGT 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 EGT / EGT'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 EGT unless with the knowledge and a
written consent from EGT.
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 EGT 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 EGT and communicated to Essential
Innovations in Writing


6. WARRANTIES AND REPRESENTATIONS


(a) Representations and Warranties of EIC. EIC represents and
warrants to EGT 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 EGT 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.


(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 the Board of Directors of
Essential Innovations Technology Corporation
("EITC"), parent Company to EIC, and no further
corporate action or authorization on behalf of EIC is
required.


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ESSENTIAL INNOVATIONS CORPORATION & ENERFLO GEOTHERMAL TECHNOLOGIES LTD.
SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT - --------------------------------------------------------------------------------


(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 EGT. This Agreement requires
information, representations and warranties to enable EIC to
determine whether to accept EGT as the Sole Exclusive
Distributor in the Territory. EGT therefore represents and
warrants as follows: EGT's information, representations and
warranties set forth herein are true and complete and may be
relied upon by EIC.


EGT warrants and represents to EIC as follows:


(i) If, before the Start Date, there is any material
change with respect to EGT's affairs that would
affect EGT's information, representations or
warranties set forth herein, EGT will promptly notify
EIC of that change.


(ii) EGT is a company duly incorporated under the laws of
Alberta in good standing in accordance with the laws
of such jurisdiction and shall remain so during the ...