SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT

 

 

    ESSENTIAL INNOVATIONS CORPORATION & ENERFLO GEOTHERMAL TECHNOLOGIES LTD.

                SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT

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

 

ENERFLO GEOTHERMAL TECHNOLOGIES LTD: An Alberta Corporation

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(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

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"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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                                                  Handwritten initials SW and VL

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    ESSENTIAL INNOVATIONS CORPORATION & ENERFLO GEOTHERMAL TECHNOLOGIES LTD.

                SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT

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         (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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                                                  Handwritten initials SW and VL

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    ESSENTIAL INNOVATIONS CORPORATION & ENERFLO GEOTHERMAL TECHNOLOGIES LTD.

                SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT

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         (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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                                                  Handwritten initials SW and VL

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    ESSENTIAL INNOVATIONS CORPORATION & ENERFLO GEOTHERMAL TECHNOLOGIES LTD.

                SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT

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                  (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

                           term of this Agreement.

 

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                                                   Handwritten initials SW and VL

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    ESSENTIAL INNOVATIONS CORPORATION & ENERFLO GEOTHERMAL TECHNOLOGIES LTD.

                SOLE EXCLUSIVE RIGHTS AND DISTRIBUTION AGREEMENT

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                  (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 and

                           regulations relating to the utilization of the EI

                           Elemental Geothermal Heat Pump Technology and, where

                           required by applicable laws, become registered or

                           licensed in such jurisdiction(s) as may be necessary.

 

7.        EXCLUSIVE DISTRIBUTION

 

                  (a) Essential Innovations grants EGT sole exclusive

                  distribution rights in the Territory for the Product(s) during

                  the Term of this Agreement subject to EGT committing to the

                  following minimum annual volume and purchase quotas defined as

                  follows:

 

                  For the Territory of "Alberta, Saskatchewan, Ontario,

                  Manitoba, and Yukon Territory" in the first year of the

                  agreement.

 

                  = 150 units in Year One

 

                  (Special Note: For the 1st year of the Agreement, the start

                  date for the fulfillment of the 1st years' minimum annual unit

                  purchase commitment will begin 3 months from the date of the

                   actual execution date of this Agreement, making it initially a

                  15 month term;

 

                  On the 1st day of the 4th month, being the first day of the

                  12-month initial term, EGT agrees it will then place a

                  purchase order with EIC for a minimum of at least 5 units of

                  any product size or model at that date and no less than 5

                  units in any subsequent month during the Term of the Agreement

                   while working to achieve the 150 unit minimum annual quota.)

 

                  There will be a 25% purchase increase per annum for each year

                  of Renewal assuming the Contract is extended for an additional

                  3-year term as defined below:

 

                  Year Two:          188 units in the Territory

                  Year Three:        235 units in the Territory

                  Year Fo