THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO ESSENTIAL INNOVATIONS TECHNOLOGY
CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.

                                SECURED TERM NOTE

         FOR VALUE RECEIVED, Essential Innovations Technology Corp., a Nevada
corporation (the "Borrower"), hereby promises to pay to LAURUS MASTER FUND,
LTD., c/o M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South
Church Street, George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the
"Holder") or its registered assigns or successors in interest, on order, the sum
of Two Million Dollars in lawful money of the United States (USD$2,000,000),
together with any accrued and unpaid interest hereon, on March 2, 2009 (the
"Maturity Date") if not sooner paid.

         Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that certain Security and Purchase Agreement
dated as of the date hereof between the Borrower and the Holder (as amended,
modified or supplemented from time to time, the "Security and Purchase
Agreement").

         The following terms shall apply to this Note:

                                    ARTICLE I
                             INTEREST & AMORTIZATION

         1.1 Availability. The Borrower hereby acknowledges and agrees that the
advance and availability of the loan of US$2,000,000 by the Holder to the
Borrower (the "Loan") shall not be made available by the Holder to the Borrower
until all conditions precedent in Section 3.1 have been met to the satisfaction
of the Holder in its sole discretion.

         1.2 Interest Rate. Subject to Section 5.7 hereof, interest payable on
this Note shall accrue at a rate per annum (the "Interest Rate") equal to the
"prime rate" published in The Wall Street Journal from time to time, plus three
percent (3%). The prime rate shall be increased or decreased as the case may be
for each increase or decrease in the prime rate in an amount equal to such
increase or decrease in the prime rate; each change to be effective as of the
day of the change in such rate. The Interest Rate shall not at any time be less
than eight percent (8.0%). Interest shall be (i) calculated daily on the basis
of a 360 day year, and (ii) payable monthly, in arrears, commencing one (1)
calendar month from the First Advance Date (defined below) and on the first
business day of each consecutive calendar month thereafter until the Maturity
Date (and on the Maturity Date), whether by acceleration or otherwise (each, a
"Repayment Date").

         1.3 Minimum Monthly Principal Payments. Amortizing payments of the
aggregate principal amount outstanding under this Note at any time (the
"Principal Amount") shall begin three calendar months from the First Advance
Date and shall recur on the first business day of each succeeding month
thereafter until the Maturity Date (each, an "Amortization Date"). Subject to
Article 3 below, beginning on the first Amortization Date, the Borrower shall
make monthly payments to the Holder on each Repayment Date equal to that portion
of the Principal Amount set forth in the amortization schedule annexed hereto
(the "Monthly Amount"), together with any accrued but unpaid interest thereon to

<PAGE>

such Repayment Date and any and all other unpaid amounts then due, accrued,
payable or owing under this Note, the Security and Purchase Agreement or any
Related Agreement (as defined in the Security and Purchase Agreement). Any
Principal Amount that remains outstanding on the Maturity Date shall be due and
payable on the Maturity Date.

         1.4 Currency. All principal, interest and other amounts owing under
this Note, the Security and Purchase Agreement or any Related Agreement that, in
accordance with their terms, are paid in cash shall be paid in US dollars. All
amounts denominated in other currencies shall be converted in the US dollar
equivalent amount in accordance with the Exchange Rate on the date of
calculation. "Exchange Rate" means, in relation to any amount of currency to be
converted into US dollars pursuant to this Note, the US dollar exchange rate as
published in the Wall Street Journal on the relevant date of calculation.

         1.5      Taxes.

         (a)      Any and all payments by the Borrower hereunder, including any
                  amounts received on redemption of the Note and any amounts on
                  account of interest or deemed interest, shall be made free and
                  clear of and without deduction for any and all present or
                  future taxes, levies, imposts, deductions, charges or
                  withholdings, and all liabilities with respect thereto,
                  excluding taxes imposed on net income or franchise taxes of
                  the Holder by the jurisdiction in which such person is
                  organized or has its principal office (all such non-excluded
                  taxes, levies, imposts, deductions, charges withholdings and
                  liabilities, collectively or individually, "Taxes"). If the
                  Borrower shall be required to deduct any Taxes from or in
                  respect of any sum payable hereunder to the Holder, (i) the
                  sum payable shall be increased by the amount (an "additional
                  amount") necessary so that after making all required
                  deductions (including deductions applicable to additional sums
                  payable under this Section 1.4) the Holder shall receive an
                  amount equal to the sum it would have received had no such
                  deductions been made, (ii) the Borrower shall make such
                  deductions and (iii) the Borrower shall pay the full amount
                  deducted to the relevant governmental authority in accordance
                  with applicable law.

         (b)      In addition, Borrower agrees to pay to the relevant
                  governmental authority in accordance with applicable law any
                  present or future stamp or documentary taxes or any other
                  excise or property taxes, charges or similar levies that arise
                  from any payment made hereunder or from the execution,
                  delivery or registration of, or otherwise with respect to,
                  this Note ("Other Taxes"). The Borrower shall deliver to the
                  Holder official receipts, if any, in respect of any Taxes or
                  Other Taxes payable hereunder promptly after payment of such
                  Taxes or Other Taxes or other evidence of payment reasonably
                  acceptable to the Holder.

         (c)      The obligations of the Borrower under this Section 1.4 shall
                  survive the termination of this Note and the payment of the
                  Note and all other amounts payable hereunder.

                                   ARTICLE II
                                    REPAYMENT

         2.1 Optional Redemption in Cash. The Borrower will have the option of
prepaying this Note ("Optional Redemption") by paying to the Holder the
Prepayment Premium (as hereinafter defined) together with accrued but unpaid
interest thereon to the Redemption Payment Date (as hereinafter defined) and any
and all other unpaid amounts then due, accrued, payable or owing to the Holder
under this Note, the Security and Purchase Agreement or any Ancillary Agreement
(the "Redemption Amount"). The "Prepayment Premium" for the period commencing on
the date hereof up to and including the Maturity Date, shall be equal to one
hundred and thirty percent (130%) of the Principal Amount. The Borrower shall
deliver to the Holder a written notice of redemption (the "Notice of

                                       2
<PAGE>

Redemption") specifying the date for such Optional Redemption (the "Redemption
Payment Date"), which date shall be ten (10) business days after the date of the
Notice of Redemption (the "Redemption Period"). On the Redemption Payment Date,
the Redemption Amount must be paid in good funds to the Holder. In the event the
Borrower fails to pay the Redemption Amount on the Redemption Payment Date as
set forth herein, then such Redemption Notice will be null and void.

         2.2 Maturity; Surrender, Etc. In the case of a repayment of this Note
pursuant to this Article II, the Principal Amount of this Note to be repaid
shall mature and become due and payable on the applicable Redemption Payment
Date together with interest on such Principal Amount accrued to such date and
any other amount due and payable under this Note, the Purchase Agreement or any
Ancillary Agreement to the extent that such amounts are outstanding as of the
applicable Redemption Payment Date. From and after such date, unless the
Borrower shall fail to pay such Principal Amount when so due and payable
together with the interest and other amounts as aforesaid, interest on such
Principal Amount shall cease to accrue. The Holder shall make the appropriate
reduction to the Principal Amount, accrued interest and other amounts due,
accrued, payable or owing as entered in its records and shall provide written
notice thereof to the Borrower within one (1) Business Day of the applicable
Payment Date. If this Note is paid in full, it shall be surrendered to the
Borrower and cancelled and shall not be reissued and no note shall be issued in
lieu of any paid Principal Amount of this Note.

                                   ARTICLE III
                              CONDITIONS PRECEDENT

         3.1 Conditions Precedent. The following conditions precedent shall be
satisfied by the Borrower prior to the date upon which the Loan shall be
advanced by the Holder to the Borrower (the "First Advance Date"):

         (a)      The Borrower shall obtain the Holder's prior consent to the
                  advance of the Loan;

         (b)      The Borrower shall obtain the Holder's prior consent to the
                  First Acquisition (as defined below);

         (c)      The Holder shall have received in form and substance
                  satisfactory to the Holder, confirmation that the Borrower has
                  completed the acquisition of Pacific Geo Exchange Inc.
                  ("Pacific") and the indirect acquisition of its wholly-owned
                  subsidiary Earth Source Energy Inc. ("Earth Source")
                  (together, the "First Acquisition", and such date of
                  completion of the First Acquisition herein referred to as the
                  "First Acquisition Closing Date");

         (d)      The Holder shall have received in form and substance
                  satisfactory to the Holder, confirmation that the Holder has a
                  first priority security interest over all of the personal
                  property and assets of the Borrower, Essential Innovations
                  Corp. ("Essential"), Pacific and Earth Source in respect of
                  which the Holder shall take a security interest pursuant to
                  the Master Security Agreement in favour of the Holder dated as
                  of the date hereof granted by the Borrower and Essential (the
                  "Master Security Agreement") and supplemented by the Joinder
                  and Confirmation of Security Agreement granted by Pacific and
                  Earth Source dated as of the date hereof (the "Joinder and
                  Confirmation of Security Agreement");

         (e)      All Ancillary Agreements (as such term is defined in the
                  Security and Purchase Agreement) shall have been executed and
                  delivered by the Borrower and Essential to the Holder dated as
                  of the date hereof;

                                       3
<PAGE>

         (f)      The Joinder and Confirmation of Security Agreement shall have
                  been executed and delivered by Pacific and Earth Source to the
                  Holder whereby Pacific and Earth Source are added as parties
                  to the Ancillary Agreements including, without limitation, (i)
                  the Subsidiary Guaranty (ii) the Security and Purchase
                  Agreement, (iii) the Master Security Agreement, and (iv) the
                  Share Pledge Agreement;

         (g)      The Holder shall have received in form and substance
                  satisfactory to the Holder, confirmation that there has been
                  no Material Adverse Effect (as defined in the Security and
                  Purchase Agreement) in respect of the Borrower, Essential,
                  Pacific and Earth Source as of March 2, 2006; and

         (h)      The Holder shall have received in form and substance
                  satisfactory to the Holder, confirmation that any other
                  conditions of advance set forth in the Security and Purchase
                  Agreement have been satisfied by the Borrower, Essential,
                  Pacific and Earth Source,

and upon delivery or confirmation thereof, as the case may be, the Holder shall
make the Loan available to the Borrower and shall instruct the Escrow Agent to
advance the Loan to the Borrower.

                                   ARTICLE IV
                EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS

         4.1 Events of Default. The occurrence of an Event of Default under the
Security and Purchase Agreement shall constitute an event of default ("Event of
Default") hereunder.

         4.2 Default Interest. Following the occurrence and during the
continuance of an Event of Default, the Borrower shall, jointly and severally,
pay additional interest on the outstanding principal balance of this Note in an
amount equal to two percent (2%) per month, and all outstanding Obligations,
including unpaid interest, shall continue to accrue interest at such additional
interest rate from the date of such Event of Default until the date such Event
of Default is cured or waived.

         4.3 Default Payment. Following the occurrence and during the
continuance of an Event of Default, the Holder, at its option, may elect, acting
reasonably and in good faith, in addition to all rights and remedies of the
Holder under the Security and Purchase Agreement and the other Ancillary
Agreements and all obligations and liabilities of the Borrower under the
Security and Purchase Agreement and the other Ancillary Agreements, to require
the Borrower to make a Default Payment ("Default Payment"). The Default Payment
shall be one hundred thirty percent (130%) of the outstanding principal amount
of the Note, plus accrued but unpaid interest, all other fees then remaining
unpaid, and all other amounts payable hereunder. The Default Payment shall be
applied first to any fees due and payable to the Holder pursuant to the Notes,
the Security and Purchase Agreement and/or the Ancillary Agreements, then to
accrued and unpaid interest due on the Notes and then to the outstanding
principal balance of the Notes. The Default Payment shall be due and payable
immediately on the date that the Holder has exercised its rights pursuant to
this Section 4.3.

                                    ARTICLE V
                                  MISCELLANEOUS

         5.1 Failure or Indulgence Not Waiver. No failure or delay on the part
of the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

                                       4
<PAGE>

         5.2 Notices. Any notice herein required or permitted to be given shall
be in writing and shall be deemed effectively received: (a) upon personal
delivery to the party notified, (b) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day or (c) one day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt. All
communications shall be sent to the Borrower at the address provided in the
Security and Purchase Agreement executed in connection herewith, and to the
Holder at the address provided in the Security and Purchase Agreement for such
Holder, with a copy to John E. Tucker, Esq., 825 Third Avenue, 14th Floor, New
York, New York 10022, facsimile number (212) 541-4434, or at such other address
as the Borrower or the Holder may designate by ten days advance written notice
to the other parties hereto.

         5.3 Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument issued pursuant to Section 5.4
hereof, as it may be amended or supplemented.

         5.4 Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Security and Purchase Agreement. This Note shall not be
assigned by the Borrower without the consent of the Holder.

         5.5 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the State of
New York and waive trial by jury. Both parties and the individual signing this
Note on behalf of the Borrower agree to submit to the jurisdiction of such
courts. The prevailing party shall be entitled to recover from the other party
its reasonable attorney's fees and costs. In the event that any provision of
this Note is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Borrower
in any other jurisdiction to collect on the Borrower's obligations to the
Holder, to realize on any collateral or any other security for such obligations,
or to enforce a judgment or other court ruling in favour of the Holder. The
Borrower acknowledges that legal counsel participated in the preparation of this
Note and, therefore, stipulates that the rules of construction that ambiguities
are to be resolved against the drafting party shall not be applied in the
interpretation of this Note to favour any party against the other party.

         5.6      Judgment Currency.

         (a)      If for the purpose of obtaining or enforcing judgment against
                  the Borrower in any court in any jurisdiction it becomes
                  necessary to convert into any other currency (such other
                  currency being hereinafter in this Section 5.6 referred to as
                  the "Judgment Currency") an amount due in US dollars under
                  this Note, the conversion shall be made at the Exchange Rate
                  prevailing on the business day immediately preceding:

                  (i)      the date actual payment of the amount due, in the
                           case of any proceeding in the courts of New York or
                           in the courts of any other jurisdiction that will
                           give effect to such conversion being made on such
                           date: or

                                       5
<PAGE>

                  (ii)     the date on which the foreign court determines, in
                           the case of any proceeding in the courts of any other
                           jurisdiction (the date as of which such conversion is
                           made pursuant to this paragraph 5.6(a)(ii) being
                           hereinafter referred to as the "Judgment Conversion
                           Date")

         (b)      If in the case of any proceeding in the court of any
                  jurisdiction referred to in paragraph 5.6(a)(ii) above, there
                  is a change in the Exchange Rate prevailing between the
                  Judgment Conversion Date and the date of actual payment of the
                  amount due, the applicable party shall pay such adjusted
                  amount as may be necessary to ensure that the amount paid in
                  the Judgment Currency, when converted at the Exchange Rate
                  prevailing on the date of payment, will produce the amount of
                  US dollars which could have been purchased with the amount of
                  Judgment Currency stipulated in the judgment or judicial order
                  at the Exchange Rate prevailing on the Judgment Conversion
                  Date.

         (c)      Any amount due from the Borrower under this provision shall be
                  due as a separate debt and shall not be affected by judgment
                  being obtained for any other amounts due under or in respect
                  of this Note.

         5.7 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.

         5.8 Security Interest and Guarantee. The Holder has been granted a
security interest (i) in all assets of the Borrower and its Subsidiaries as more
fully described in the Security and Purchase Agreement dated as of the date
hereof and (ii) the Share Pledge Agreement dated as of the date hereof. The
obligations of the Borrower under this Note are guaranteed by certain
Subsidiaries of the Borrower pursuant to the Subsidiary Guaranty as of the date
hereof.

         5.9 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.

         5.10 Cost of Collection. If default is made in the payment of this
Note, the Borrower shall pay to Holder reasonable costs of collection, including
reasonable legal fees.

         IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in
its name effective as of this 2nd day of March, 2006.


                                        ESSENTIAL INNOVATIONS TECHNOLOGY CORP.
                                        By: /s/ Jason McDiarmid
                                        Name Jason McDiarmid
                                        Title President/CEO

                                       6
<PAGE>
                              AMORTIZATION SCHEDULE

   Months                     Monthly Amortization             Total for Year
   ------                     --------------------             --------------
   0 to 4                           US$0                             N/A
    to 36                        US$62,500                       US$2,000,000