DISTRIBUTION AND OPERATION SERVICES AGREEMENT

 

                  DISTRIBUTION AND OPERATION SERVICES AGREEMENT

 

      THIS DISTRIBUTION AND OPERATION SERVICES AGREEMENT, ("Agreement") is made

as of June 21, 2005 (the "Effective Date"), by and among VitroTech Corporation,

a Nevadt 6 0 a corporation ("VitroTech"), VitroCo Incorporated, a Nevada

corporation and wholly-owned subsidiary of VitroTech ("VitroCo") and VitroTech

Product Distributor LLC, a Delaware limited liability company ("Distributor").

 

                                R E C I T A L S:

 

       WHEREAS, VitroTech and VitroCo are engaged in the mining, processing and

sale of a family of proprietary amorphous aluminosilicate based products (the

"Products") designed to improve performance and quality of a broad array of

manufacturing applications;

 

      WHEREAS, VitroTech and VitroCo lack the financial resources to fully

exploit the business opportunities relating to the Products and VitroTech is

presently seeking additional financing to fund those operations; and

 

      WHEREAS, VitroTech and VitroCo desire to contract certain operations to

Distributor and Distributor is willing to perform such operations on the terms

set forth herein.

 

      NOW, THEREFORE, in consideration of the premises and the covenants and

obligations of the parties herein contained, the parties hereto hereby agree as

follows:

 

      1. Grant of Exclusive Rights. VitroTech and VitroCo hereby grant to the

Distributor, during the Term (as defined below) hereof, the exclusive,

royalty-free right to buy, mine, process, sell and distribute the Products on a

worldwide basis, and assume all of VitroTech's and VitroCo's customer accounts

and distributor agreements, including, but not limited to, the right to contact

and solicit any present, former or future customers of VitroTech or VitroCo, all

subject to the existing rights of third parties to distribute Products, as

follows:

 

            (a) The rights of the Distributor hereunder may not be assigned,

      transferred or sublicensed to any other person, other than to an affiliate

       of the Distributor, without the prior written consent of the other

      parties, which shall not be unreasonably withheld;

 

            (b) The Distributor is an independent contractor and is not a legal

      representative or agent of VitroTech or VitroCo for any purposes

      whatsoever. The Distributor is not authorized to, and agrees that it will

      not, make any warranties or representations, or assume or create any other

      obligation on behalf of VitroTech or VitroCo except as expressly

      authorized by such party in writing;

 

            (c) Distributor agrees that it will not sell Product in

      contravention to any agreement between VitroTech or VitroCo and any other

      party effective as of the Effective Date.

 

<PAGE>

 

             (d) VitroTech and VitroCo each hereby grant a royalty-free license

      to the Distributor to utilize any and all of its respective trademarks,

      service marks or trade names ("Trademarks"), whether or not registered, in

      connection with promotion, sale and distribution of the Products; and

 

            (e) Subject to the prior rights and security interests of the

      VitroTech Secured Creditors (as defined below), VitroTech and VitroCo each

      agree to sell, assign, transfer and convey all of the Inventory (defined

      as any mined Product held by or for the benefit of VitroTech or VitroCo

      and set forth on Exhibit A) to the Distributor, and Distributor agrees to

      pay VitroTech and VitroCo the direct cost of their respective Inventory,

      as set forth on Exhibit A, not later than five days following the receipt

      of payment by Distributor from the sale to third party of such Inventory.

      Notwithstanding the foregoing, if on the fifth anniversary of the

      Effective Date any items of Inventory have not been sold and for which

      payment to VitroCo has not been made hereunder, the Distributor shall, on

      that date pay to VitroCo the direct cost of such Inventory items or, at

      the Distributor's sole option, return the same to VitroCo. As of the date

      hereof, Distributor agrees to assume all of the costs and expenses of

      storage, warehousing, shipping and handling such Inventory, which arises

      on or after the date hereof.

 

      2. Mining and Processing of Products. It is the intention of the parties

to structure this transaction so that the ISO9001 Certificate of Registration

(the "ISO Registration") issued to VitroCo shall be maintained through out the

Term. If the ISO Registration can be transferred to another entity, upon the

Distributor's request, VitroCo agrees to transfer the ISO Registration to the

Distributor or any other entity designated by the Distributor, and VitroCo and

VitroTech covenant and to take any and all reasonable actions to facilitate such

transfer. VitroTech and VitroCo each hereby grant to the Distributor, during the

Term of this Agreement, the right to perform all mining, processing services,

quality control and warranting of Products as shall be reasonably necessary to

mine, process and deliver the Products in their final salable form, and to the

extent the ISO Registration does not permit such mining, processing services,

quality control and warranting of Products ("Restricted Activities") to be

performed by Distributor, but such Restricted Activities can be performed by

VitroTech, then VitroTech shall perform such Restricted Activities to the

maximum amount permitted pursuant to the ISO Registration and to the extent that

the ISO Registration does not permit such Restricted Activities to be performed

by VitroTech, such Restricted Activities shall be performed by VitroCo,

provided, however, VitroTech and VitroCo hereby agree that they shall provide

Distributor with any and all quality control services, warranting of Products

and any other services necessary to preserve the ISO Registration and to ensure

that the Distributor obtains the Products in the format required by the

Distributor. Distributor shall pay all of its own costs generated by mining,

processing services, quality control and warranting of Products and to the

extent VitroCo or VitroTech is performing any Restricted Activities, Distributor

shall reimburse VitroCo or VitroTech, as applicable, for all direct costs of

such Restricted Activities and preserving the ISO Registration, in a manner

consistent with the standards of the ISO Registration.

 

      VitroTech and VitroCo each hereby grant a royalty-free license to the

Distributor to utilize any and all of its respective proprietary rights,

including any patented procedures or products, intellectual property, techniques

or other trade secrets (the "Proprietary Rights"), whether or not patented,

relating to the mining, processing and use of the Products.

 

 

                                       2

<PAGE>

 

      3. Rights Regarding VitroTech and VitroCo Employees. In conjunction with

the undertakings of the Distributor to assume the responsibility and associated

costs of sales activities relating to the Products of VitroTech and VitroCo, and

to facilitate those undertakings, the parties agree as follows regarding the

employees of VitroTech and VitroCo:

 

            (a) The Distributor shall have the unlimited right to solicit and

      hire any and all employees of VitroTech and VitroCo ("Employees", and any

      Employees actually hired by the Distributor are referred to herein as

      "Transferred Employees"). VitroTech and VitroCo will enter into a mutual

      release which shall forever release such Transferred Employees from any

      and all covenants, promises, agreements, obligations or liabilities which

      relate in any way to the Transferred Employees' employment with

      Distributor, which release shall be substantially in the form of Exhibit B

      attached hereto. Upon executing the mutual release, the Distributor shall

      pay such Transferred Employee all amounts owing for back wages, salary and

      benefits by VitroTech and VitroCo, provided, however, that Distributor's

      obligation hereunder will be decreased by any compromise reached between

      Distributor and any Transferred Employees.

 

            (b) Management of the Distributor and VitroTech will, not later than

      ten calendar days following the date hereof (the "Employee Review Date"),

      review the existing personnel of VitroTech and VitroCo ("Employees"): (i)

      to facilitate Distributor's determination as to which Employees it wishes

      to solicit pursuant to paragraph 3(a) above, (ii) to determine which

      Employees will be reasonably required to carry on the business of

      VitroTech (the "Retained VitroTech Employees"), (iii) to determine which

      Employees will be reasonably required to carry on the business VitroCo

      (the "Retained VitroCo Employees") and (iv) to determine which Employees,

       if any, are not required to support the future operations of the

      Distributor, VitroTech or VitroCo (the "Undesignated Employees"). For

      purposes of this Agreement former employees set forth on Exhibit C shall

      be deemed to be Undesignated Employees. In conjunction therewith,

      representatives of both VitroTech and the Distributor will meet with all

      Employees and evaluate their status, including amounts owing to those

      Employees, on a case-by-case basis and in accordance with applicable

      California law. The parties will negotiate in good faith to determine

      which Employees shall be Retained VitroTech Employees, Retained VitroCo

      Employees and Undesignated Employees.

 

            (c) Within ten calendar days following the Employee Review Date, the

      Distributor shall (i) pay on behalf of all Employees all employment

      related taxes to the extent due and owing and not previously paid by

      VitroTech and VitroCo to the appropriate governmental authorities and (ii)

      pay all back salary, wages, unreimbursed expenses and other amounts due

      and owing and not previously paid by VitroTech to Retained VitroTech

      Employees; provided, however, that Distributor's obligation hereunder will

      be decreased by any compromise reached between Distributor and any

      Retained VitroTech Employees. In addition, as part of the Basic Overhead

      Costs (as defined below), commencing as of the Effective Date until such

      time as VitroTech is capable of paying the Basic Overhead Costs without

      being Insolvent (as defined below), the Distributor shall reimburse

      VitroTech, for the salary, wages, expenses and other amounts incurred by

      VitroTech for the Retained VitroTech Employees; provided, however, that

      Distributor's obligation hereunder will be decreased by any compromise

      reached between Distributor and any Retained VitroTech Employees (the

      "Current VitroTech Employee Costs"). The reimbursement of such Current

      VitroTech Employee Costs for the Retained VitroTech Employees shall be

      paid as the same become due. For purposes of this Agreement "Insolvent"

      means with respect to VitroTech or VitroCo, as the case may be, that it is

      not capable of paying its bills as they become due in the ordinary course

      of business.

 

 

                                       3

<PAGE>

 

            (d) Within ten calendar days of the entering into a definitive and

      binding Mine Transfer Agreement (as defined below)(the "Mine Transfer

      Date"), the Distributor shall pay all back salary, wages, unreimbursed

      expenses and other amounts to the extent due and owing and not previously

      paid by VitroCo to Retained VitroCo Employees and Undesignated Employees

       through the Mine Transfer Date; provided, however, that Distributor's

      obligation hereunder will be decreased by any compromise reached between

      Distributor and any Retained VitroCo Employees. In addition, as part of

      the Basic Overhead Costs, commencing as of the Mine Transfer Date until

      such time as VitroCo is capable of paying the Basic Overhead Costs without

      being Insolvent, the Distributor shall reimburse VitroCo, for the salary,

      wages, expenses and other amounts incurred by VitroCo for the Retained

      VitroCo Employees (the "Post Mine Transfer Date VitroCo Employee Costs").

      The reimbursement of such Post Mine Transfer Date VitroCo Employee Costs

      for the Retained VitroCo Employees shall be paid as the same become due

      after the Mine Transfer Date. To the extent that there is a disagreement

      between the Distributor, on the one hand, and VitroTech and VitroCo, on

      the other hand, as to whether an Employee shall be a Retained VitroCo

      Employee or an Undesignated Employee, such Employee shall be deemed to be

      an Undesignated Employee for purposes of this Agreement, and the

      Distributor shall only have the obligation to pay or reimburse VitroCo as

      if that Employee is a Undesignated Employee and under no circumstances

      shall costs associated with the ongoing employment of such Employee be

      included within Basic Overhead Costs.

 

      4. Cooperation Regarding VitroTech and VitroCo Debt. VitroTech, VitroCo

and the Distributor agree to cooperate and use commercially reasonable efforts

to settle, restructure or convert into equity the current indebtedness of

VitroTech and VitroCo and, to that end, agree as follows:

 

            (a) Management of VitroTech, VitroCo and the Distributor will

      jointly meet and negotiate with existing creditors (including, but not

      limited to, all trade debt, all Employees, all notes bearing contingent

      interest ("Contingent Interest"), all secured debt and all convertible

       debt) of VitroTech and VitroCo ("VitroTech Creditors") in an effort to

      renegotiate the existing indebtedness;

 

            (b) Subject to applicable limitations of securities laws, for a

      period of six months following the Effective Date (the "Offering Period"),

      the Distributor will make available to all VitroTech Creditors, pro rata,

      the right to invest in the Distributor on terms substantially identical to

      the terms on which the Distributor offers securities to Third Party

       Investors. For purposes hereof, "Third Party Investors" means all persons

      to whom the Distributor offers any of its securities during the six months

      following the Effective Date, other than (i) the members of the

      Distributor as of the Effective Date, and (ii) the VitroTech Secured

      Creditors. In the event that the Distributor offers an ownership interest

      to Third Parties during the Offering Period at varying prices, the terms

      on which the VitroTech Creditors will be permitted to invest in the

      Distributor will be the lowest price of any such offers. Notwithstanding

      the foregoing however, the Distributor may offer the Secured Creditors of

      VitroTech or VitroCo the opportunity to invest in the Distributor on terms

      that are more favorable than the terms being offered to the unsecured

      VitroTech Creditors, and the unsecured VitroTech Creditors shall have no

      right to participate in such opportunity to the extent that they are not

      Secured Creditors of VitroTech or VitroCo;

 

 

                                       4

<PAGE>

 

            (c) All settlements or other agreements with VitroTech Creditors

      pursuant to this paragraph 4 shall be subject to the joint approval of

      VitroTech and the Distributor;

 

      5. Cooperation Regarding Mines and Hi-Tech. VitroTech, VitroCo and the

Distributor agree to cooperate and use commercially reasonable efforts to

negotiate with representatives of Enviro Investment Group, LLC ("EIG"), Red Rock

Canyon Mineral, LLC ("Red Rock"), Valley Springs Mineral, LLC ("Valley

Springs")(collectively, EIG, Red Rock and Valley Springs are referred to as the

"Mines") and Hi-Tech Environmental Products, LLC ("Hi-Tech") with a view to

obtaining an equitable transfer of the mining properties held by the Mines to

VitroTech or VitroCo and entering into a definitive and binding agreement (the

"Mine Transfer Agreement"), satisfactory to the Distributor, within the

Distributor's sole and absolute discretion, and the adjustment of payment

obligations of VitroTech and VitroCo to the Mines and Hi-Tech.

 

      6. Other Obligations of Distributor. The Distributor shall:

 

            (a) Devote its commercially reasonable efforts to the promotion and

      sale of the Products consistent with good business practices and in a

      manner that it reasonably believes will reflect favorably on the Products

      and the goodwill and reputation of VitroTech and VitroCo;

 

            (b) Comply, in all material respects, with the provisions of all

      applicable laws and the rules and regulations thereunder, and refrain from

      engaging in any illegal business practices whatsoever with respect to the

      promotion and sale of the Products;

 

            (c) Hold itself out as an independent contractor with respect to

      VitroTech and VitroCo and not present itself as an agent, representative

      or employee of any other party, and prominently display in any advertising

      or signage related to the Products that it is an Authorized Master

      Distributor of VitroTech and VitroCo;

 

            (d) Not make any warranties, express or implied, by operation of law

      or otherwise, concerning the Products which are in addition to any written

      warranties made by VitroTech and VitroCo;

 

            (e) Advise VitroTech and VitroCo of complaints relating to the

      Products received in writing;

 

            (f) Pay for all the Distributor's costs associated with the

      promotion and advertising of the Products;

 

 

                                        5

<PAGE>

 

            (g) Obtain and pay for such licenses, permits and authorizations as

      may be necessary in connection with the Distributor's promotion and sale

      of the Products.

 

      7. Payment and Funding Obligations. As consideration for the rights

granted to the Distributor hereunder, the parties agree as follows:

 

            (a) Direct Costs and Basic Overhead Costs.

 

                  (i) The Distributor shall pay the known fixed Direct Costs (as

             defined below) as the same shall become due and payable.

 

                  (ii) Until such time as VitroTech and VitroCo can pay their

            own Basic Overhead Costs (as defined below) without being Insolvent,

            the Distributor shall pay the Basic Overhead on a monthly basis on

            the first day of each month.

 

                  (iii) The Distributor, in its sole and absolute discretion,

            may pay any Direct Costs or Basic Overhead Costs to third parties

             directly on behalf of VitroCo or VitroTech, as applicable, and the

            Distributor shall provide evidence of such payment to VitroCo or

            VitroTech, as applicable.

 

                  (iv) Set forth on Exhibit D, is the current quarterly budget

            (the "Current Quarter Budget"). During the Term, thirty days prior

            to the beginning of each calendar quarter, VitroCo and VitroTech

            shall cause to be prepared and delivered to Distributor a quarterly

            budget (each, including the Current Quarter Budget, a "Budget") for

            the succeeding quarter. The Distributor shall have fifteen days to

            review the Budget. If the Distributor disputes any items set forth

            in the Budget, the Distributor shall notify VitroCo and VitroTech,

            and the parties shall negotiate in good faith as to whether and what

            amount of such disputed items should be incurred. The final

            determination with respect to disputed items shall be made by the

            Distributor in its sole and absolute discretion. Notwithstanding

            anything to the contrary set forth herein, the Distributor shall

            have no obligation to pay VitroTech or VitroCo any amount in excess

            of the amount set forth in the Budget for such line item unless the

            Distributor consents, which consent shall be in the Distributor's

            sole and absolute discretion, to make such payment.

 

                  (v) The parties acknowledge and agree that it is the intent of

            the parties to reduce the Direct Costs and Basic Overhead Costs as

            much as reasonably possible without materially adversely affecting

            VitroTech and VitroCo. To the extent that the Distributor can

            reasonably arrange for any Direct Costs or Basic Overhead Costs to

            be obtained at a lower price, VitroCo and/or VitroTech shall utilize

            such arrangement (and Budget shall be amended to reflect such lower

            cost), so long as the operations of VitroCo and VitroTech are not

            materially harmed by such arrangements.

 

                  (vi) For purposes hereof, "Direct Costs" means costs incurred

            by VitroCo or VitroTech relating to the mining, processing, sale or

            transfer of Products to or for the benefit of the Distributor,

            including but not limited to the mining costs, processing costs,

            freight charges, storage charges, warehouse charges, handling

            charges, payments to the Mines measured based on sales (but no

            greater than 10%), payments to Hi-Tech measured by sales (but no

            greater than 5%), and payments Contingent Interest (measured by

            sales of Product) incurred by VitroTech or VitroCo; provided

            however, to the extent that any Contingent Interest obligation is

            decreased for any reason, then the Distributor is only obligated to

            pay such reduced amount of Contingent Interest.

 

 

                                       6

<PAGE>

 

                  (vii) For purposes hereof, "Basic Overhead Costs" means costs

            incurred by VitroTech to support its essential operations as a

            public reporting company, including, lease payments, utilities,

            taxes (other than taxes based on the income of VitroTech and

            VitroCo), insurance, directors fees, filing fees accounting fees and

            legal fees related to public company reporting, the Current

            VitroTech Employee Costs and Post Mine Transfer Date VitroCo

            Employee Costs, provided, however, that Basic Overhead Costs shall

            not: (i) cumulatively exceed $600,000 in any 12-month period

            ("Overhead Cap"), or (ii) include any Processing Oversight and ISO

            Costs (as defined below) and Trade Debt (as defined below).

            Notwithstanding anything to the contrary set forth herein, the

            Distributor shall have no obligation to pay VitroTech or VitroCo any

            amount in excess of the Overhead Cap, unless the Distributor

            consents, which consent shall be in the Distributor's sole and

            absolute discretion, to make such payment.

 

            (b) Product Royalty Payment. The Distributor shall pay to VitroCo an

      amount (the "Product Royalty") equal to five percent (5%) of the gross

      sales price of all Products sold by the Distributor, as follows:

 

                  (i) Product Royalty payments will be due and payable on or

            before the fifteenth day of each month based on gross amou