SUPPLY AGREEMENT

 

       This SUPPLY AGREEMENT****(the "Agreement") made and entered into by and among theLaboratory of Electrotechnology Ltd., a Russian Limited Liability Company("Supplier"), Integrated Environmental Technologies Ltd. (formerlyNaturol, Inc.), a Nevada corporation ("Purchaser"), andElectro-Chemical Technologies Ltd. a Nevada corporation****("Licensor"),hereinafter sometimes referred to collectively as the "parties".

 

RECITALS

 

       WHEREAS, Suppliermanufactures Licensed Products and distributes Licensed Products throughLicensor in the United States of America (the "United States");

 

       WHEREAS, Purchaser is aparty to a License Agreement (the "License Agreement") dated of evendate herewith among Licensor, Supplier and Purchaser (Licensee), pursuant towhich Purchaser has been granted an exclusive license for use by Purchaser inthe purchase, manufacture/assembly (with the exception of FEMs), marketing,leasing, selling, distributing, and servicing,****ECA devices for theLicensed Applications in the Territory that utilize or incorporate the ECAtechnology of Licensor and Supplier;

 

       WHEREAS, Licensor is theowner everywhere in the United States of the right, title and interest in and tocertain new and useful inventions and improvements relating to anelectrochemical cell known as a Flow-through Electrolytic Module or FEM, asdefined more fully in the Patents, and related Electro-Chemical Activation("ECA") technology all of which are referred to collectively as the"ECA technology"; and

 

       WHEREAS, Purchaserdesires, pursuant to the License Agreement, to purchase from Supplier throughLicensor, and Supplier desires to sell to Purchaser through Licensor, LicensedProducts for resale and/or sublicensing by Purchaser for use in themanufacture/assembly (with the exception of FEMs), marketing, selling anddistributing ECA devices in the Territory on the terms and conditions set forthbelow;

 

       NOW, THEREFORE, inconsideration of the mutual promises and undertakings hereinafter set forth, aswell as other good and valuable consideration, the receipt and sufficiency ofwhich is hereby acknowledged by all the parties, it is agreed as follows:

 

       1. DEFINITIONS
Whenever used in thisAgreement, the following terms shall have the following meanings:

 

 

       1.1 "ECA Devices"shall mean Electro-Chemical Activation ("ECA") devices purchased byLicensee from Licensor and/or assembled, marketed, leased, sold, distributed,serviced and/or otherwise used by Purchaser in the Licensed Applicationsemploying the ECA technology.

 

       1.2****"FEM"shall mean the Flow-through Electrolytic Module, as defined more fully in thePatent.

 

       1.3 "LicensedApplications" shall mean Licensed Products utilizing the ECA technologyin the following water purification applications: (a) recreational waterpurification units producing small volumes per hour of potable water; (b)residential water purification units; and (c) water purification units for useby small businesses such as offices, motels and restaurants, and state and localgovernment facilities, not including municipal water systems; provided, however,that other applications may, in Licensor's sole discretion, be considered on acase-by- case basis for inclusion in this Agreement on terms and conditions tobe mutually agreed upon by Licensor and Licensee.

 

       1.4 "LicensedProducts" shall mean ECA Devices, FEMs and component parts intended foruse in the Licensed Applications, the purchase, manufacture/assembly (with theexception of FEMs), marketing, lease, sale, distribution and servicing of whichby Licensee utilizes any element of the Patents and Technical Information whichis not patented under the Patents.

 

       1.5 "Patents"shall mean U.S. Patent Nos: 
-  5,628,888 [ApparatusFor Electrochemical Treatment of Water And/Or Water Solutions (Case #2)], datedMay 13, 1997;5,635,040[Electrochemical Cell (FEM-3)], dated June 3, 1997;5,783,052[Electrochemical Cell (FEM-3) (Case #1A)], dated July 21, 1998;5,871,623 [Apparatusfor Electrochemical Treatment of Water And/Or Water Solutions (Case #2A)], datedFebruary 16, 1999;5,985,110 [Apparatusfor Electro-Chemical Treatment of Water And/Or Solutions (Case#2B)], datedNovember 16, 1999;6,004,439 [Apparatusfor Obtaining Products by Anode Oxidation of Dissolved Chlorides Of Alkaline orAlkaline-Earth Metals (Case #3)], dated December 21, 1999;
        and any and allcontinuations, continuations-in-part, divisions and reissues based upon suchPatents.

 

       1.7 "TechnicalInformation" shall mean all or any part of Supplier's or Licensor'ssystems, methods, information, know-how, trade secrets, and other technicalinformation, experimental data and experience from prior design, developmentengineering, 

 

 

or manufacture relating toFEMs and/or ECA Devices produced by Supplier in Moscow, Russia, including alldrawings, writings and models relating thereto and also including suchinformation as is disclosed in the Patents.

 

       1.8****"Territory"shall mean the United States of America.

 

       2 SUPPLY OF LICENSEDPRODUCTS
 

       2.1 Supplier agrees tomanufacture Licensed Products in quantities and quality****sufficient tosupply all of Purchaser's requirements for Licensed Products and to sell suchLicensed Products to Purchaser through Licensor on an exclusive basis for use inthe Licensed Applications in the Territory. Purchaser agrees to purchase all ofits requirements for Licensed Products from Supplier through Licensor.

 

       2.2 Licensor and Supplieragree not to distribute or sell either directly or indirectly through thirdparties any Licensed Products to any person or entity other than Purchaser if itknows or has reason to know that such person or entity intends to distribute orsell such Licensed Products for use in the Territory.

 

       3. TERMS OF SALE
 

       3.1 The prices, terms andcondtions of sale for the Licensed Products shall be mutually agreed to by theparties in advance of sale and in writing from time to time; provided, however,that the prices, terms and conditions of sale per Licensed Product for the firstyear of Purchaser's operations shall be as set forth in **Exhibits A and B**.

 

       3.2 Supplier shall shipLicensed Products to Purchaser as directed by Purchaser's purchase order(s) toLicensor. Supplier shall use its best efforts to ensure that all shipments areprocessed and shipped as directed by Purchaser within thirty (30) days ofreceipt of Purchaser's purchase order(s) by Licensor. Supplier also shall useits best efforts to ship Product in less than thirty (30) days if such Producthas been ordered on a rush basis and so identified in writing by Purchaser tofulfill****an urgent Purchaser need. Purchaser shall pay all additionalcosts and expenses incurred by Supplier in expediting such orders; provided,however, that such additional costs and expenses shall be agreed upon by theparties in writing prior to the acceptance of any such orders.

 

       3.3 Licensor shallseparately invoice Purchaser for each order shipped to Purchaser, and paymentwill be due thereon in full at the time each order is placed.

 

       3.4 Purchaser agrees: (a)not to reverse engineer the Licensed Products****during the term of thisAgreement and the License Agreement and any sublicense agreements, and (b) toinclude in its sublicense agreements with sublicensees a prohibition againstsublicensees reverse engineering the Licensed Products during the terms of thisAgreement and the License Agreement.

 

 

       3.5 Purchaser agrees notto sell or distribute ECA Devices or Licensed Products outside the Territory,during the term of this Agreement.

 

       4. CONFIDENTIALINFORMATION

 

       4.1 Except for the properexercise of any license granted and rights reserved under the provisions of thisAgreement, Purchaser agrees that Purchaser will not publish or otherwise divulgeconfidential information, including without limitation the TechnicalInformation, furnished to it by****Supplier or Licensor without firstobtaining the prior written approval of Supplier or Licensor in each instance.The foregoing obligation shall not be imposed on Purchaser with respect to anyinformation which Purchaser can demonstrate: (i) is necessary to be disclosed bythe sale of Licensed Products to customers in the ordinary course of business;(ii) was at the time of disclosure to Purchaser (or thereafter becomes, prior toits publication, divulgence or use for the benefit of Purchaser, through nofault of Purchaser****a part of the public domain by publication orotherwise; (iii) was already properly and lawfully in Purchaser's possession atthe time it was received from Supplier or Licensor; (iv) was lawfully receivedfrom a third party who was under no obligation of confidentiality to Supplier orLicensor with respect thereto; (v) is required by law to be disclosed (but onlyto the extent of such required disclosure); or (vi) was generated by theLicensee as part of demonstration trials, and does not include TechnicalInformation furnished by Supplier or Licensor.

 

       4.2 Purchaser has or willrequire all of its employees and consultants and the employees and consultantsof Licensee who have access to any of the Technical Information to executeagreements similar in content to Article 4.1 and will exercise its best effortsto obtain compliance therewith.

 

       4.3 Purchaser shallpromptly notify Supplier and Licensor, in writing, if Purchaser becomes aware ofany unauthorized use, disclosure or theft of the confidential information, andshall identify Purchaser's actions to contain and prevent further unauthorizeduse, disclosure or theft of such confidential information. Purchaseracknowledges that in the event Purchaser breaches its nondisclosure obligationshereunder, Supplier and Licensor will not have an adequate remedy at law and,therefore, Supplier and Licensor shall be entitled to obtain an injunctionagainst such breach from any court of competent jurisdiction, immediately uponrequest, provided that the scope of such injunctive relief shall be governed byapplicable law and this provision is not intended to increase or expand thescope of such remedy. The right to obtain such injunctive relief shall not limitSupplier's and/or Licensor's right to seek other remedies.
 

       5. INDEMNIFICATION ANDINSURANCE, PRODUCT LIABILITY
 

       5.1 Purchaser shalldefend, indemnify and hold Supplier and Licensor and their officers, anddirectors, and their respective successors, heirs and assigns (the"Supplier Indemnitees")****harmless from any and all demands,claims, actions, suits, judgments, decrees, proceedings, liabilities, costs,losses, damages and expenses (including, without limitation, court costsand 

 

 

attorneys' fees) at anytime suffered, sustained or incurred by any of them, as a result of or inconnection with (a) any breach by Purchaser of this Agreement or (b) any claimbased on representations or warranties made by Purchaser with respect to theefficacy of the Licensed Products unless such representations or warrantiesshall have been previously approved by Supplier and Licensor.

 

       5.2 Licensor and Suppliershall defend, indemnify and hold Purchaser and its officers, and directors, andtheir respective successors, heirs and assigns (the "Purchaser Indemnitees")****harmless from any and all demands, claims, actions, suits, judgments,decrees, proceedings, liabilities, costs, losses, damages and expenses(including, without limitation, court costs and attorneys' fees) at any timesuffered, sustained or incurred by any of them, as a result of or in connectionwith any claim based on the use defective FEMs.

 

       5.3 Purchaser shall obtainand carry in full force and effect commercial general liability insurance,including product liability and errors and omissions insurance which shallprotect Licensor Indemnitees with respect to events covered by Article 5.1**.**Such insurance (i) shall be issued by an insurer licensed to practice in theUnited States or an insurer pre-approved by Licensor, such approval not to beunreasonably withheld, (ii) shall be endorsed to include product liabilitycoverage, and (iii) shall require thirty (30) days written notice to be given toLicensor prior to any cancellation or material change thereof. The limits ofsuch insurance shall be not less than One Million Dollars ($1,000,000) peroccurrence with an aggregate of Three Million Dollars ($3,000,000) for bodilyinjury including death; One Million Dollars per occurrence with an aggregate ofThree Million Dollars for property damage; and One Million Dollars peroccurrence with an aggregate of Three Million Dollars ($3,000,000) for errorsand omissions. In the alternative, Purchaser may self-insure subject to theprior approval of Supplier and Licensor. Purchaser shall provide Supplier andLicensor with Certificates of Insurance evidencing compliance with this Section.Purchaser shall continue to maintain such insurance or self-insurance after theexpiration or termination of this Agreement during any period in which Purchaseror any sublicensee continues to market, distribute, use lease, sell and/orservice a product that was a Licensed Product under this Agreement, andthereafter for a period of five (5) years.

 

       5.4 In no event shall anyparty to this Agreement be liable to any other party for any incidental,consequential, special or punitive damages of any kind or nature arising out ofthis Agreement or the sale of Licensed Products, whether such liability isasserted on the basis of contract, tort (including the possibility of negligenceor strict liability) or otherwise, even if such party has been warned of thepossibility of any such loss or damage, and even if any of the limited remediesin this Agreement fail of their essential purpose.

 

       6. TERM AND TERMINATION
 

       6.1 Unless earlierterminated as provided in this Agreement, this Agreement shall commence on theExecution Date of the License Agreement, and shall continue in full force andeffect for the term of the License Agreement.

 

 

       6.2 Supplier may terminatethis Agreement upon the occurrence of any of the following events:

 

       (a)     If Purchaser isadjudged a bankrupt, or is insolvent or enters into a composition with or makesan assignment for the benefit of Purchaser's creditors, or if a receiver isappointed for Purchaser, then Purchaser shall promptly notify Supplier andLicensor of such event and Licensor and Supplier shall have the right toterminate this Agreement by sending to Purchaser a notice of Supplier's andLicensor's intention to terminate, after which this Agreement shall become nulland void without prejudice to any remedy of Supplier and Licensor with respectto any antecedent breach of this Agreement and without prejudice to any otherright of Supplier and Licensor hereunder; or

 

       (b)     If Purchaser violatesSections 3.3, 3.4, 3.5, 5.1, or 7.

 

       6.3 Purchaser mayterminate this Agreement upon the occurrence of any of the following events:

 

       (a)     If Supplier and/orLicensor is adjudged bankrupt, or is insolvent or enters into a composition withor makes an assignment for the benefit of its creditors, or if a receiver isappointed for it, then it shall promptly notify Purchaser of such event andPurchaser shall have the right to terminate this Agreement by sending to it anotice of Purchaser's intention to terminate, after which this Agreement shallbecome null and void without prejudice to any remedy of Purchaser with respectto any antecedent breach of this Agreement and without prejudice to any otherright of Purchaser hereunder.
** **
       (b)     If Supplier and/orLicensor violate Sections 2.1 or 2.2.
** **
       6.4 *Force Majeure*.Either party that asserts the occurrence of *force majeure* shall giveimmediate notice thereof to the other party and within ten (10) days thereaftershall give a supplemental notice of the period of time such impossibility ofperformance is expected to last. During the existence of such impossibility ofperformance, the duties and obligations of the parties under this Agreementshall be suspended, and the parties shall take all reasonable action to assureresumption of normal performance under this Agreement as soon as possible;provided, however, that, should such impossibility of performance on the part ofSupplier last for a period exceeding ninety (90) days, Purchaser shall for aslong as such impossibility of performance exists have the right to secure FEMsfrom one or more alternative sources.****The occurrence of *force majeure*,however, shall not relieve either Supplier, Licensor or Purchaser from anyobligation or liability incurred by such party prior to said occurrence andshall not limit or affect the right of either party to terminate this Agreementin case of an event specified in Article**s** 6.2 or 6.3 unless such an eventis caused by the impossibility of performance of the party against whomtermination is sought.

 

       6.5 "*Force majeure*"shall mean a supervening event beyond the control of the parties (including butnot limited to fire, flood, tornado, earthquake, war, port congestion, terroristacts, riot, insurrection, strike, lockout or any act, including the enactment ofany law, rule or regulation, of any government or government authority havingjurisdiction over such party) which results in 

 

 

impossibility ofperformance of a party's duties and obligations under this Agreement.

 

       6.6 The warranties andindemnities contained in this Agreement shall survive any termination hereof, asshall the confidentiality obligations of the parties pursuant to Article 4.Otherwise, upon termination of this Agreement as provided in this Article 6,except as expressly provided herein, the parties shall have no furtherliabilities, duties or obligations under this Agreement, except for anyliabilities, duties and obligations which may have arisen prior to suchtermination.

 

       7. ASSIGNABILITY
 

       Purchaser shall have theright at any time to assign its rights and interests in this Agreement, otherthan to a competitor of Supplier or Licensor, in connection with its merger orconsolidation with a third party or with the sale of substantially all of itsassets utilized in the business to which this Agreement relates, without thenecessity of obtaining the consent of Licensor or Supplier, provided that theassignee expressly assumes and agrees to perform all of the obligations of theassigning party, in which case Purchaser shall be released from furtherliability. In assigning such interest, Purchaser hereby expressly agrees that itwill in so doing specifically reserve for Supplier and Licensor all of therights and privileges herein provided. In the event of the assignment hereof,Purchaser shall notify Supplier and Licensor within fifteen (15) days of suchassignment. Except as otherwise permitted by the provisions of this Section 7,Supplier shall not have the right to assign its interests in this LicenseAgreement without the prior written consent of the other party.

 

       8. NOTICES
 

       8.1     Any notice, claim,demand, request or other communication required or permitted under thisAgreement shall be valid and effective only if given by written instrument whichis personally delivered, sent by facsimile, courier or registered or certifiedairmail, postage prepaid, to the addressee as follows:

 

       If to Supplier:                            Laboratoryof Electrotechnology, Ltd

                                                        3 Kasatkina Street

                                                        Moscow 129301 Russia

                                                        Attention: Prof. Vitold M.Bakhir

                                                        Fax: 095 187 3727

 

       If to Purchaser:                         Integrated Environmental Technologies Ltd.

                                                        201 E. Elizabeth Street

                                                        Elizabeth City, NC 27909

                                                        Attention: William E.Prince President

                                                        Fax No. (252) 333-1377

                                                        e-mail: w.e.prince@earthlink.net

 

       If to Licensor:                           Electro-Chemical Technologies Ltd.

                                                        340 East Warm Springs Road - Suite 1A

                                                        Las Vegas, Nevada 89119

                                                        Attention: John HenryBrebbia

                                                        Fax: (702) 260-9044

 

       8.2     Any notice, claim,demand, request or other communication given as provided in this Article 8, ifgiven personally, shall be effective upon delivery; if given otherwise, shall beeffective when actually received or refused by the addressee.

 

       8.3     Each party shall beentitled from time to time by written notice to the other parties to change itsaddress to any other address other than to a post office box.

 

       9. CONTROLLING LAW
 

       This Agreement shall be****construed and governed according to the laws****of the United States.

 

       10. ARBITRATION
 

       10.1     Any dispute,controversy, claim or difference arising out of or in connection with orresulting from this Agreement which cannot be settled amicably by the partiesshall be resolved definitively and exclusively by arbitration under the Rules ofProcedure of the American Arbitration Association (the "Rules") thenprevailing and in accordance with the laws of the State of Nevada, whicharbitration shall be held in Las Vegas, Nevada to be mutually agreed upon by theparties. Arbitration shall be by a single arbitrator to be chosen jointly by theparties, provided that, should the parties be unable to agree upon their choiceof arbitrator within thirty (30) days after the demand for arbitration, thearbitrator shall be chosen in accordance with the Rules. The decision of thearbitrator shall be final and binding upon the parties and judgment on any awardmade by the arbitrator may be entered in any court having jurisdiction thereof.The arbitrator's discretion and power shall include an appropriate award forcosts, including an apportionment thereof, in the absence of which the costs ofarbitration shall be borne equally by the parties.

 

       10.2     Although theprocedures specified in this Article are the sole and exclusive procedures forthe resolution of disputes arising out of or relating to this Agreement, anyparty may seek a preliminary injunction or other provisional equitable reliefif, in its reasonable judgment, such action is necessary to avoid irreparableharm to itself or to preserve its rights under this Agreement.

 

       11. INDEPENDENTCONTRACTORS
 

       Nothing herein containedshall be construed to place the parties in the relationship of partners, jointventurers, principal and agent, or employer and employee, and neither partyshall have the power to obligate or bind the other party in any mannerwhatsoever. Each party shall be responsible for the acts, negligence andomissions of its employees, agents, servants and subcontractors.

 

 

       12. ENTIRE AGREEMENT
 

       The terms and provisionsherein contained and in the License Agreement****constitute the entireagreement between the parties with respect to the subject matter hereof; andthere are no representations, warranties, covenants, or agreements, express orimplied, with respect to the subject matter hereof, other than those expresslyset forth herein with the exception of the Confidentiality Agreements betweenLicensor and Licensee and Supplier and Purchaser, dated August 27, 2003, whichshall survive the termination of this Agreement and which shall remain in fullforce and effect as provided for herein. No modification or amendment of theprovisions of this Agreement shall be binding upon any party hereto unless inwriting and signed by duly authorized officers of the respective parties.

 

       13. SEVERABILITY
 

       If any provision of thisAgreement or portion thereof, or the application thereof to any person orcircumstance, shall be held to any extent invalid or unenforceable by a court orother tribunal****of competent jurisdiction, the remainder of this Agreement(or of such provision) and the application thereof in such circumstances shallremain in full force and effect.

 

       14. WAIVERS
 

       No waiver, forbearance orfailure by any party of its right to enforce any provision of this Agreementshall constitute a waiver or estoppel of such party's right to enforce suchprovision in the future.

 

       15. CAPTIONS
 

       The captions to theSections of this Agreement are for convenience only and are not a part of thisAgreement and shall not be deemed of any force or effect whatsoever inconstruing this Agreement. The references to a numbered or lettered Sectionrefer to the Section bearing the number or letter in or attached to thisAgreement, unless otherwise stated.

 

       16. RECITALS
 

       The Recitals set forthherein are true and correct and are incorporated herein.

 

       17. SUCCESSORS ANDASSIGNS
 

       This Agreement shall bebinding upon and shall inure to the benefit of the successors and assigns of theparties hereto; but nothing herein contained shall be deemed to permit anyassignment by any party except as permitted by Section 7.

 

 

       18. COUNTERPARTS
 

       This Agreement may beexecuted in any number of counterparts, each of which shall be deemed anoriginal but all of which together shall constitute one and the same instrument.

 

       19. FACSIMILESIGNATURES
 

       The parties agree that,for purposes of executing this Agreement, facsimile signatures shall have thesame purpose and effect as original signatures.

 

       20. GENERAL PROVISIONS
 

       20.1     Nothing contained inthis Agreement and no action taken by any party to this Agreement shall bedeemed to constitute any party or any of such party's employees, agents orrepresentatives to be an employee, agent or representative of any other party orshall be deemed to create any partnership, association or syndicate between oramong the parties, or shall be deemed to confer on any party any express orimplied right, power or authority to enter into any agreement or commitment,express or implied, or to incur any obligation or liability on behalf of anyother party.

 

       IN WITNESS WHEREOF, theparties have caused this Agreement to be executed as a sealed instrument bytheir duly authorized representatives, all as of the latest date and yearwritten.

 

Laboratory of****Electrotechnology,Ltd

 

 

By:/S/Prof. Vitold M.Bakhir                        
Title: Director
Dated: September 19, 2003

Integrated EnvironmentalTechnologies Ltd.

 

By: /S/Willeam E.Prince                            

Title: President
Dated: September 10, 2003

Electro-ChemicalTechnologies International Ltd.

 

By:/S/JohnBrebbia                                    
Title: President
 

Dated: September 4, 2003