Document:

Exhibit 10.2

                             DISTRIBUTION AGREEMENT

      THIS  DISTRIBUTION  AGREEMENT  (this  "Agreement") is made between Ovation
Products  Corporation,  a Delaware  corporation  ("Ovation"),  and S. J. Electro
Systems, Inc., a Minnesota corporation ("SJE" ).

                                    RECITALS

      A.  Ovation  is engaged in the  design  and  development  of  distillation
technology  for use in  wastewater  treatment,  water  purification  and related
processes.

      B. SJE is engaged in the design, development, manufacture, marketing, sale
and  distribution  of liquid  level  control  devices  for the  water,  sump and
wastewater markets.

      C. The  parties  desire to work  together  to  develop,  market,  sell and
distribute septic appliances which incorporate Ovation's distiller technology.

      D. The parties are entering into  contemporaneously  with and  conditional
upon this  Agreement  that  certain  Strategic  Alliance  Agreement as well as a
Series  A  Preferred  Stock  Purchase  Agreement,   First  Refusal  and  Co-Sale
Agreement,  Investor  Rights  Agreement,   Promissory  Note,  Pledge  Agreement,
Confidentiality Agreement and Intellectual Property Agreement.

                                    AGREEMENT

      NOW, THEREFORE,  the parties,  intending to be legally bound, hereby agree
as follows:

1. APPOINTMENT

      1.1  APPOINTMENT.  Ovation  appoints SJE as its authorized  distributor of
Ovation distiller products used in Septic Appliances (as such term is defined in
the Strategic Alliance  Agreement)  ("Products")  within Canada,  Mexico and the
United  States of America  ("Territory")  upon the terms and  conditions of this
Agreement.

      This  appointment is exclusive  within the Territory  during the Exclusive
Term.  Exclusive  means that Ovation will not  directly or  indirectly  sell the
Products in the Territory or authorize  anyone other than SJE to distribute  the
Products in the Territory.

      This appointment is non-exclusive for a period of five years following the
termination of the Exclusive Term (the "Non-Exclusive Term").

      At all times while SJE is an authorized  distributor in the Territory,  it
shall also have the  non-exclusive  right to distribute and sell the Products in
any  geographical  area  outside  the  Territory  for which  Ovation has not yet
granted  exclusive  distribution  rights to a third  party with  respect to such
area.

                                       1
<PAGE>

      1.2 INDEPENDENT RELATIONSHIP; NO AGENCY. SJE's status under this Agreement
is that of an independent contractor. Nothing in this Agreement shall constitute
either  party as the agent or legal  representative  of the other  party for any
purpose,  and no officer,  representative  or employee of either  party shall be
considered as having employee status with Ovation.  Neither party is granted the
right or  authority  to assume or to create any  obligation  or  responsibility,
express or implied, in the name of or on behalf of the other party except as may
be  specifically   authorized  in  writing.  Each  party  shall  have  the  sole
responsibility  for the satisfaction of any and all claims made by third parties
on account of its conduct or that of its employees or agents in the  performance
of this Agreement.

      1.3  STRATEGIC  ALLIANCE  AGREEMENT.   This  Agreement  and  that  certain
Strategic Alliance Agreement have been entered into concurrently by the parties.
Capitalized  terms not otherwise defined in this Agreement shall be provided the
meanings afforded to them in the Strategic Alliance Agreement.

2. TERM

      2.1 EXCLUSIVE TERM.  Except as otherwise  provided  herein,  the Exclusive
Term, as used in this  Agreement,  begins on the date that both parties agree in
writing  that sales in  commercial  quantities  of Products  are first made (the
"Commencement  Date," which shall be mutually agreed and recording in writing as
close to the date agreed upon as practicable)  and ends on the later of: (a) the
seventh (7th)  anniversary of the Commencement Date or (b) the date on which SJE
has received  $50,000,000 in Profit Sharing Payments,  provided that in no event
shall the  Exclusive  Term extend  beyond the tenth  (10th)  anniversary  of the
Commencement Date.

      2.2 AGREEMENT  TERM.  The term of this  Agreement  shall begin on the date
both parties has signed this Agreement  ("Effective  Date") and terminate on the
earlier  of  the  end of the  Non-Exclusive  Term  or  upon  termination  of the
Strategic  Alliance  Agreement.  This  Agreement  will be renewed  only upon the
written mutual agreement of the parties.

3. PRICES, PAYMENTS AND TERMS AND CONDITIONS OF SALE

      3.1 ORDERS.  SJE shall submit purchase orders to Ovation for such Products
as SJE may require.  Each purchase order will include: (a) Products ordered; (b)
quantity requested; (c) shipment dates requested; and (d) shipping instructions.

      3.2 DETERMINATION OF PRICES TO CUSTOMERS DURING THE EXCLUSIVE TERM. During
the Exclusive  Term,  SJE shall  recommend the prices for Products to be sold by
SJE to its  customers.  Such  recommended  prices  shall be subject to Ovation's
approval (which shall not be unreasonably withheld).

      3.3 PRICES DURING  NON-EXCLUSIVE  TERM. During the Non-Exclusive Term, the
price  to be paid by SJE  for the  Products  shall  be  according  to  Ovation's
standard price lists in effect at the time an order is filled provided that such
prices shall not exceed the lower of:

            (a) Prices available in the best price package (based on quantities,
payment terms,  delivery requirements and other terms) offered by Ovation to any
of its other customers; or

                                       2
<PAGE>

            (b) The best price  offered by  Ovation to any other  party  selling
Septic  Appliances  in each  geographical  area where SJE has the  non-exclusive
right to distribute and sell the Products.

4. WARRANTY

      4.1 APPLICABLE WARRANTY.  The Products are subject to the Ovation warranty
and limitation of warranty set forth in Exhibit 4.1 attached hereto.

5. TERMINATION PRIOR TO EXPIRATION OF NONEXCLUSIVE TERM

      5.1 IMMEDIATE TERMINATION UPON CERTAIN EVENTS OF BANKRUPTCY.  Either party
may at its option  terminate this Agreement  immediately  upon written notice to
the other in the event that the other party makes an assignment  for the benefit
of  creditors;  admits in writing its  inability to pay its debts as they become
due; files a voluntary petition in bankruptcy;  is adjudicated to be bankrupt or
insolvent; files a petition seeking for itself any reorganization,  arrangement,
composition, readjustment, liquidation, dissolution or similar arrangement under
any present or future  statute,  law or  regulation,  files an answer or similar
pleading  admitting the material  allegations  of a petition filed against it in
any such proceeding;  or consents to or acquiesces in the appointment of, or has
its  business  placed  in the  hands  of,  a  trustee,  receiver,  assignee,  or
liquidator of it or any substantial part of its business,  assets or properties,
whether by voluntary act or otherwise (a "Bankruptcy  Event"). In the event of a
Bankruptcy  Event of SJE,  Ovation  shall  have the  option  to  terminate  this
Agreement  as  well as the  Strategic  Alliance  Agreement.  In the  event  of a
Bankruptcy  Event of  Ovation,  SJE shall  have the option of  terminating  this
Agreement and the Strategic Alliance Agreement.

      5.2  DUTIES  OF  PARTIES  UPON  TERMINATION.   Upon  termination  of  this
Agreement,  each party  shall  perform  all  obligations  incurred  prior to the
effective date of such  termination  and all  indebtedness  of each party to the
other shall become immediately payable, and any rights and obligations regarding
confidentiality,  intellectual  property and indemnification for events prior to
termination shall survive termination of this Agreement.

      5.3  TERMINATION  FOR  MATERIAL  BREACH.   Either  party  may  immediately
terminate  this  Agreement  in the event  that the other  party  does not cure a
material breach of this Agreement within 30 days of receiving  written notice of
such breach.

      5.4 LICENSE  AGREEMENT.  So long as this  Agreement  and the  Distribution
Agreement  have not been  terminated:  (a) SJE  shall  have no right  under  the
License Agreement attached as Exhibit 5.4 to the Distribution  Agreement to: (i)
manufacture  Products or (ii) utilize  intellectual  property of Ovation for any
purposes other than those  contemplated  in the  Distribution  Agreement and the
Strategic  Alliance  Agreement;  and (b) SJE shall not be  obligated to make the
payments under the License Agreement.

6. SETTLEMENT OF DISPUTES

      6.1 BASIC DISPUTE RESOLUTION  PROCEDURES.  Any dispute between the parties
either with respect to the  interpretation of any provision of this Agreement or
with respect to the

                                       3
<PAGE>

performance  of either  party will be resolved as specified in Article 10 of the
Strategic Alliance Agreement.

7. GENERAL PROVISIONS

      7.1 AMENDMENT.  Amendment of this Agreement shall only be binding upon the
parties if made in writing and duly signed by both parties.

      7.2  WAIVER.  Failure by either  party to enforce  any  provision  of this
Agreement  shall not be construed to be a waiver of such  provision or its right
thereafter to enforce such provision or any other provision.

      7.3 ENTIRE  AGREEMENT.  This  Agreement as well as the Strategic  Alliance
Agreement,  the Series A Preferred Stock Purchase  Agreement,  the First Refusal
and Co-Sale Agreement,  the Investor Rights Agreement,  the Promissory Note, the
Pledge Agreement,  the Confidentiality  Agreement and the Intellectual  Property
Agreement  constitute the entire agreement between the parties and supersede all
previous understandings,  representations,  proposals, and discussions,  whether
oral or written, between the parties.

      7.4 GOVERNING  LAW;  DISPUTES.  This Agreement  shall be  interpreted  and
enforced  pursuant to the laws of the State of Minnesota.  Any disputes  arising
under this Agreement shall be resolved by arbitration  according to the rules of
the American  Arbitration  Association  following  the  procedures  set forth in
Section 6 above.

      7.5 NOTICES.  All notices and other  communications  required or permitted
under this  Agreement  shall be in writing and shall be considered  given on the
day sent when given in one of the following ways with simultaneous  transmission
by e-mail to the e-mail address shown:

            (a)   delivered personally,

            (b)   sent by facsimile, telegram, telex or cable; or

            (c)   by registered or certified mail, return receipt requested;

to the parties at the  following  addresses (or at such other address as a party
may specify by written notice to the other):

            If to Ovation:              Ovation Products Corporation
                                        Attention: Mr. Allen Becker 395
                                        Dunstable Road
                                        Nashua, NH 03062
                                        Email: a_becker@ovationproducts.com

                                       4
<PAGE>

            If to SJE:                  S.J. Electro Systems, Inc.
                                        Attention: Mr. Nathan Fetting
                                        22650 County Highway 6
                                        P.O. Box 1708
                                        Detroit Lakes, MN 56502
                                        Email: nathanf@sjerhombus.com

      7.6 ASSIGNMENT.  Neither party hereto shall assign,  transfer or otherwise
dispose  of this  Agreement,  in  whole  or in part,  to any  individual,  firm,
corporation,  association or other entity  without the prior written  consent of
the other party.

      IN WITNESS WHEREOF,  the parties have caused this Agreement to be executed
on the day and year first above written.

OVATION PRODUCTS CORPORATION                    S.J. ELECTRO SYSTEMS, INC.

By: /s/ Allen E. Becker                         By:
    ----------------------------                    ----------------------------
    Its: CEO                                        Its:

                                       5
<PAGE>

            If to SJE:                  S.J. Electro Systems, Inc.
                                        Attention: Mr. Nathan Fetting
                                        22650 County Highway 6
                                        P.O. Box 1708
                                        Detroit Lakes, MN 56502
                                        Email: nathanf@sjerhombus.com

      7.6 ASSIGNMENT.  Neither party hereto shall assign,  transfer or otherwise
dispose  of this  Agreement,  in  whole  or in part,  to any  individual,  firm,
corporation,  association or other entity  without the prior written  consent of
the other party.

      IN WITNESS WHEREOF,  the parties have caused this Agreement to be executed
on the day and year first above written.

OVATION PRODUCTS CORPORATION                    S.J. ELECTRO SYSTEMS, INC.

By:                                             By: /s/ Laurie Lewandowski
    ----------------------------                    ----------------------------
    Its: CEO                                        Its: CEO

                                       5
<PAGE>

                                  EXHIBIT 4.1

                                OVATION WARRANTY

NO EXPRESS OR IMPLIED WARRANTY OF FITNESS FOR PARTICULAR PURPOSE OR
MERCHANTABILITY, OR EXPRESS OR IMPLIED WARRANTY OF ANY OTHER NATURE IS GRANTED
HEREIN. NO ONE IS AUTHORIZED TO ASSUME FOR OVATION ANY LIABILITY IN CONNECTION
WITH THE SALE OF THIS PRODUCT.

OVATION'S OBLIGATIONS UNDER THIS WARRANTY SHALL BE LIMITED TO THE REPAIR OR
REPLACEMENT OF THE PRODUCT, AT OVATION'S SOLE DISCRETION, DURING THE TWO (2)
YEAR PERIOD FROM THE DATE ON WHICH THIS PRODUCT WAS INSTALLED IN YOUR SYSTEM.

YOUR RIGHTS UNDER THIS WARRANTY ARE YOUR EXCLUSIVE REMEDIES FOR ANY FAILURE TO
OVATION TO COMPLY WITH ANY EXPRESS OR IMPLIED WARRANTY. OVATION SHALL NOT BE
LIABLE IN EITHER TORT OR CONTRACT FOR ANY LOSS OR DAMAGE, WHETHER DIRECT,
CONSEQUENTIAL, OR INCIDENTAL, ARISING UNDER THE USE OR INABILITY TO USE THIS
PRODUCT OR ANY BREACH BY OVATION OF ANY EXPRESS OR IMPLIED WARRANTY. SOME STATES
DO NOT ALLOW FOR LIMITATIONS ON HOW LONG ANY IMPLIED WARRANTY LASTS, SO THE
ABOVE LIMITATION MAY NOT APPLY TO YOU. SOME STATES DO NOT ALLOW THE EXCLUSION OR
LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES SO THE ABOVE LIMITATION OR
EXCLUSION MAY NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS,
AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE.

<PAGE>

                                   EXHIBIT 5.4

                                LICENSE AGREEMENT

                                   (SEE TAB 9)Exhibit 10.3

                          STRATEGIC ALLIANCE AGREEMENT

      THIS STRATEGIC  ALLIANCE AGREEMENT (this  "Agreement"),  entered into this
29th day of December,  2000, is by and between Ovation Products  Corporation,  a
Delaware corporation  ("Ovation"),  and S. J. Electro Systems, Inc., a Minnesota
corporation ("SJE").

                                    RECITALS

      A.  Ovation  is engaged in the  design  and  development  of  distillation
technology  for use in  wastewater  treatment,  water  purification  and related
processes.

      B. SJE is engaged in the design, development, manufacture, marketing, sale
and  distribution  of liquid  level  control  devices  for the  water,  sump and
wastewater markets.

      C. The  parties  desire to work  together  to  develop,  market,  sell and
distribute septic appliances which incorporate Ovation's distiller technology.

      D. The parties are entering into  contemporaneously  with and  conditional
upon this  Agreement that certain  Distribution  Agreement as well as a Series A
Preferred  Stock  Purchase  Agreement,  First  Refusal  and  Co-Sale  Agreement,
Investor Rights Agreement,  Promissory Note,  Pledge Agreement,  Confidentiality
Agreement and Intellectual Property Agreement.

                                    AGREEMENT

      NOW, THEREFORE,  the parties,  intending to be legally bound, hereby agree
as follows:

                                    ARTICLE 1

                                   DEFINITIONS

      Whenever  used in this  Agreement,  each of the  terms  set  forth in this
Article 1 shall have the meaning indicated:

      1.1  "Alliance  Expenditure"  means  any  expenditure  incurred  by either
Ovation  or SJE  which  is  properly  incurred  by such  party  to  perform  its
responsibilities relating to the Alliance and which is approved by the Committee
including,  but not limited to, the detailed  itemization of proper expenditures
as set forth in Exhibit 1.1 attached hereto.

      1.2 "Alliance Revenues" means all revenues generated by the sale of Septic
Appliances.  Alliance  Revenues  does not include  revenues from the sale of SJE
Options.

      1.3 "Commencement Date" means the date of this Agreement.

      1.4  "Net  Profit"   means  the  net  Alliance   Revenues   less  Alliance
Expenditures.

      1.5 "Profit  Sharing  Payment"  means a payment of Net Profit  pursuant to
Section 5.1 (c) of this Agreement.

                                       1
<PAGE>

      1.6 "Septic  Appliance"  means a wastewater  treatment  product,  designed
primarily for residential  use, that is installed  between a settling tank and a
water disposal system,  and uses Ovation technology to distill the effluent from
the tank prior to disposal.  A wastewater  treatment  product  which meets these
criteria but is installed in a commercial  or  industrial  application  shall be
considered  a  Septic  Appliance.  The  Septic  Appliance  includes  the  pickup
apparatus for filtering effluent before it enters the distiller and the controls
required for normal operation, monitoring and maintenance.

      1.7 "SJE Option" means any product that can be used in conjunction  with a
Septic Appliance but is not a part of a Septic Appliance.

                                    ARTICLE 2

                                  THE ALLIANCE

      2.1  FORMATION:   PURPOSE.   Ovation  and  SJE  hereby  form  an  alliance
("Alliance" or "Project") on the  Commencement  Date through which they agree to
work  together to develop,  market and sell  Septic  Appliances  pursuant to the
terms of this Agreement.

      2.2  RESPONSIBILITIES OF OVATION.  Ovation will be responsible for design,
engineering and testing of the  distillation  technology  which is to be used in
the Septic Appliance. Ovation will also be primarily responsible for development
of the remaining components of the Septic Appliance.

      2.3  RESPONSIBILITIES OF SJE. SJE will be responsible for external testing
of the Septic Appliances,  development and sale of standard control panel(s) for
the Septic  Appliance,  and  developing a  marketing,  sales,  distribution  and
service network for the Septic Appliances.

      2.4 INDEPENDENT RELATIONSHIP;  NO AGENCY. Each party's relationship to the
other under this  Agreement is that of an independent  contractor.  Although the
parties will work closely  together and coordinate their  activities,  each will
perform its role and conduct its activities  independently of the other. Subject
to specific  obligations set forth in this or other written  agreements  between
Ovation and SJE, each party will determine,  in its sole discretion,  the manner
and means by which it will perform its  responsibilities  under this  Agreement.
Nothing in this Agreement  shall  constitute  either party as the agent or legal
representative   of  the  other   party  for  any   purpose,   and  no  officer,
representative  or  employee  of  either  party  shall be  considered  as having
employee status with the other.  Neither party is granted the right or authority
to assume or to cease any obligation or responsibility,  express or implied,  in
the  name  or on  behalf  of the  other  party  except  as  may be  specifically
authorized  in writing.  Each party shall have the sole  responsibility  for the
satisfaction  of any and all  claims  made by third  parties  on  account of its
conduct or that of its employees or agents in the performance of this Agreement.

                                       2
<PAGE>

                                    ARTICLE 3

                                    COMMITTEE

      3.1 ALLIANCE COMMITTEE.  A committee ("Alliance Committee" or "Committee")
shall be formed to meet on a regular  basis and to oversee the project.  Each of
the parties shall appoint two  representatives  to the Committee.  The Committee
will work  together  on a regular  basis  and meet not less than  quarterly,  to
review progress and status,  to review the work done by each of the parties,  to
prepare annual and long range plans, with budgets,  for cooperation  between the
parties, and to serve as the first line of dispute resolution.

      3.2 COMMITTEE'S  POWERS. The Committee shall generally have a non-decision
making coordinating  function but shall have decision making powers with respect
to  matters  specifically  authorized  by this  Agreement  or by  other  written
agreements of Ovation and SJE. The unanimous  agreement of the Committee members
is required  for any  decisions  of the  Committee.  Duly made  decisions of the
Committee shall be binding on Ovation and SJE.

      3.3 COMMITTEE RECORDS.  The Committee shall kept minutes and other records
summarizing the activities of the Committee.  For each meeting of the Committee,
a Committee  member shall be appointed as secretary who shall record  minutes of
the meeting and distribute the minutes promptly after the meeting.

      3.4 ANNUAL BUSINESS PLAN.  Approximately  three months prior to the end of
each calendar year, the Committee  shall finalize an annual business plan of the
Alliance  ("Annual  Business Plan") for the following  calendar year. The Annual
Business Plan shall include, but not be limited to:

            (a) Targeted geographic markets for the Septic Appliances;

            (b) Product development activities and goals;

            (c) Sales objectives;

            (d) Planned distribution;

            (e) Pricing policies;

            (f)  Expense  budget  reflecting  expenses  of each  party  that are
      properly shared by the Alliance;

            (g) Planned financial statements for the Alliance including budgets,
      and statements of profit and loss; and

            (h) Critical issues and strategies.

The initial  Annual  Business Plan shall be developed by the parties and reduced
to writing no later than February 1, 2001.

                                       3
<PAGE>

      3.5 THREE-YEAR PLAN.  Approximately  three months prior to the end of each
fiscal year, the Committee  shall finalize a three-year  plan for the three-year
period  commencing  with  the  next  calendar  year  ("Three-Year   Plan").  The
Three-Year  Plan shall be prepared to include each item specified for the Annual
Business Plan for the next three  calendar  years of the  Alliance.  The initial
Three-Year  Plan shall be  developed  by the  parties  and reduced to writing no
later than February 1, 2001.

                                    ARTICLE 4

                                BOOKS AND RECORDS

      The parties agree on the following operating policies for the Alliance:

      4.1 BOOKS AND  RECORDS.  Each  party  will keep  full,  true and  accurate
records showing all revenues and expenditures made relating to its participation
in the  Alliance.  Each item shall be entered  in its books in  accordance  with
generally accepted accounting principles, consistently applied.

      4.2 ALLIANCE  BOOKS AND RECORDS.  A separate set of books of account shall
be kept which includes all items of revenue and expenditures which are allocable
to the Alliance under the terms of this Agreement. These books shall be kept for
the purpose of determining profitability of the Alliance, the amount of Alliance
Expenditures  of each  party  which  are  properly  reimbursable  from  Alliance
Revenues, and to assist the parties in planning the activities of the Alliance.

      4.3 ACCESS TO BOOKS AND RECORDS. Each party, at its own expense,  shall be
given full and  complete  access,  through an  accountant  or other agent of its
choice, to the books,  records and facilities of the other party relating to any
revenue, expenditure or activity of the Alliance, said access to be given during
normal business hours for the purpose of inspection,  making copies or any other
purpose.

      4.4 PERIODIC  REPORTS.  So that the parties  continuously  can be informed
about the progress of the  Alliance,  monthly  reports  setting  forth  Alliance
Revenues,  itemizing  Alliance  Expenditures  and showing the computation of Net
Profit shall be prepared by the Committee and furnished to each party.

                                    ARTICLE 5

                          ACCOUNTING AND PROFIT SHARING

      5.1  REIMBURSEMENT  OF ALLIANCE  EXPENDITURES.  Each party  shall  receive
reimbursement for all Alliance Expenditures which are incurred by it as follows:

            (a) No  expenditure of a party incurred prior to the signing of this
      Agreement shall be reimbursed from Alliance Revenues.

            (b) During the period from the signing of this  Agreement  until the
      end of the  quarter  which is  immediately  prior to the first  quarter in
      which the  Alliance  realizes  a Net

                                       4
<PAGE>

      Profit,  each party shall bear all  Alliance  Expenditures  incurred by it
      except that the Alliance  Expenditures  incurred by it shall be reimbursed
      by  a  proportion  of  Alliance  Revenues  equal  to  the  total  Alliance
      Expenditures  incurred  by it divided by the total  Alliance  Expenditures
      incurred by both parties.

            (c) For each quarter  beginning with the first  calendar  quarter in
      which Alliance Revenues exceed Alliance Expenditures,  each party shall be
      paid 50% of the Net Profit for such quarter.

            (d) All  expenditures and revenues of the Alliance shall be credited
      on an accrual basis. Cash received with respect to Alliance Revenues shall
      be paid on a monthly basis to a party in proportion that the amount of its
      credited but unpaid reimbursement  entitlement bears to the total credited
      but unpaid  reimbursement  entitlement of both parties.  SJE shall compute
      the  amounts  to be paid  within  fifteen  (15) days after the end of each
      month and pay Ovation the amount it is  entitled to be  reimbursed  within
      twenty  (20)  days  after  the  end of  each  month.  Any  errors  made in
      determining  or paying  amounts due in a given month shall be corrected in
      the next succeeding monthly computations and payments.

                                    ARTICLE 6

                     GRANT OF EXCLUSIVE DISTRIBUTION RIGHTS

      Ovation  agrees to grant to SJE the  exclusive  right to market,  sell and
distribute  Septic  Appliances and certain other products  pursuant to the terms
and conditions of the Distribution Agreement attached hereto as Exhibit 6.

                                    ARTICLE 7

                                     SECRECY

      Each  party  agrees  to  comply  with  the  terms  of the  Confidentiality
Agreement attached hereto as Exhibit 7.

                                    ARTICLE 8

                              INTELLECTUAL PROPERTY

      Each party agrees to comply with and be bound by the terms and  conditions
relating to intellectual property attached hereto as Exhibit 8.

                                    ARTICLE 9

                                TERM; TERMINATION

      9.1 TERM.  Unless earlier  terminated in accordance with the terms of this
Agreement, this Agreement will terminate upon the earlier of: (a) the expiration
of the Exclusive  Term as defined in Section 2.1 of the  Distribution  Agreement
entered into between the parties of even

                                       5
<PAGE>

date  herewith  or (b)  the  termination  of the  Distribution  Agreement.  This
Agreement will be renewed only upon the written mutual agreement of the parties.

      9.2 EFFECT.  Any  termination of this  Agreement  shall not relieve either
party from any  obligations  accrued  prior to  termination  (including  but not
limited to the  obligations set forth in Article 9 of this Agreement) or relieve
a party in default from liability for any breach of this Agreement.

      9.3 DEFAULT. This Agreement may be terminated by either party in the event
of a material  breach or default by the other party under this  Agreement or the
Distribution  Agreement,  or a payment  default under the Promissory Note on the
part of SJE.

      9.4  CHANGE IN  CONTROL.  In the  event  that  through  one or a series of
transactions a person who, prior to the first such transaction owned one percent
(1%) or less of the voting stock of SJE,  acquires more than fifty percent (50%)
of such voting stock  ("Change in Control")  during the term of this  Agreement,
Ovation shall have the right to terminate  this  Agreement with the new owner of
SJE in the event that sales of Products  in each  semi-annual  period  beginning
immediately  after the  Change in Control  do not equal at least  fifty  percent
(50%) of the sales of the Products during the six-month period immediately prior
to the  Change in  Control;  provided,  however,  that if the  Change in Control
occurs  before at least one full year of Product  sales,  and if  Product  sales
during the initial one year period  after the Change in Control are not equal to
at least fifty percent  (50%) of the Product sales  projected for that period in
the current Three-Year Plan, then Ovation shall have the right to terminate this
Agreement with the new owners of SJE.

      9.5 LICENSE  AGREEMENT.  So long as this  Agreement  and the  Distribution
Agreement  have not been  terminated:  (a) SJE  shall  have no right  under  the
License Agreement attached as Exhibit 5.4 to the Distribution  Agreement to: (i)
manufacture  Products or (ii) utilize  intellectual  property of Ovation for any
purposes other than those  contemplated  in the  Distribution  Agreement and the
Strategic  Alliance  Agreement;  and (b) SJE shall not be  obligated to make the
payments under the License Agreement.

                                   ARTICLE 10

                             SETTLEMENT OF DISPUTES

      10.1 BASIC DISPUTE RESOLUTION PROCEDURES.  Any dispute between the parties
either with respect to the  interpretation of any provision of this Agreement or
with respect to the performance of either party will be resolved as specified in
this Article 10.

            (a) Upon the written  request of either  party,  each of the parties
      will appoint a designated representative who does not devote substantially
      all of his or her time to performance under this Agreement,  whose task it
      will be to meet for the purpose of endeavoring to resolve such dispute.

            (b) The designated  representatives  will meet as often as necessary
      during a fifteen  (15) day period (or such other time as the  parties  may
      agree) to gather and furnish

                                       6
<PAGE>

      to the other all information  with respect to the matter in issue which is
      appropriate and germane in connection with its resolution.

            (c) Such  representatives  will discuss the problem and negotiate in
      good faith in an effort to resolve the dispute  without the  necessity  of
      any formal proceeding relating thereto.

            (d) During the course of such negotiation,  all reasonable  requests
      made by one party to the other for  nonprivileged  information  reasonably
      related  to this  Agreement,  will be  honored  in order  that each of the
      parties may be fully advised of the other's position.

            (e) The  specific  format for such  discussions  will be left to the
      discretion  of  the  designated  representatives,   but  may  include  the
      preparation  of agreed upon  statements  of fact or written  statements of
      position furnished to the other party.

      10.2  ARBITRATION.  If the designated  representatives  cannot resolve the
dispute,  then the  dispute  will be  resolved  by  arbitration,  provided  that
resolution of  disagreements on business issues shall be beyond the scope of the
arbitrator's authority. Formal arbitration proceedings for the resolution of any
arbitrable dispute may be commenced upon the earlier of:

            (a) The  designated  representatives  concluding  in good faith that
      amicable  resolution through continued  negotiation of the matter in issue
      does not appear likely; or

            (b) Sixty (60) days after the  initial  request  to  negotiate  such
      dispute (unless  preliminary or temporary relief of an emergency nature is
      sought by one of the parties).

      10.3 ARBITRATION  PROCEDURES.  Any arbitrable disputes between the parties
will be settled by arbitration under the then-prevailing  Commercial Arbitration
Rules of the  American  Arbitration  Association,  to be  conducted  in Chicago,
Illinois.  There will be one (1)  arbitrator  chosen by mutual  agreement of the
parties or, in the event the parties  cannot agree within  thirty (30)  calendar
days of issuance of a written  demand for  arbitration  by either party,  by the
American  Arbitration  Association.  All  proceedings by the arbitrator  will be
conducted in accordance with the rules of the American Arbitration  Association,
except to the extent the provisions of such rules are modified by this Agreement
or the mutual  agreement  of the  parties.  Either  party will have the right to
discovery of  evidence,  but by the  following  methods  only:  (a) requests for
production  of  documents  and  (b)  depositions  of  no  more  than  three  (3)
individuals.  The arbitrator will supervise discovery and may, at the request of
either party, award expenses of discovery (including reasonable attorneys' fees)
to the requesting  party for good cause shown.  All discovery will be completed,
and the  arbitration  hearing will commence,  within  forty-five (45) days after
appointment of the  arbitrator.  The  arbitration  hearing will conclude  within
thirty (30) days after it commences.  The award rendered in arbitration  will be
in writing  and will be final and  binding,  and may be enforced in any court of
competent jurisdiction.  The fees and expenses of the arbitrator will be paid by
the non-prevailing party.

                                       7
<PAGE>

                                   ARTICLE 11

                                  MISCELLANEOUS

      11.1 ASSIGNMENT. This Agreement, and all rights and obligations hereunder,
are  personal  as to the parties  hereto and shall not be  assigned  without the
prior  written  consent  by the other  party  except as  otherwise  specifically
permitted hereunder.

      11.2 NOTICES. All notices and other  communications  required or permitted
under this  Agreement  shall be in writing and shall be considered  given on the
day sent when given in one of the following ways with simultaneous  transmission
by e-mail to the e-mail address shown:

            (a) delivered personally;

            (b) sent by facsimile, telegram, telex or cable; or

            (c) by registered or certified mail, return receipt requested;

to the parties at the  following  addresses (or at such other address as a party
may specify by written notice to the other):

            If to Ovation:              Mr. Allen Becker
                                        Ovation Products Corporation 395
                                        Dunstable Road Nashua, NH 03062
                                        Email: a_ becker@ovationproducts.com

            If to SJE:                  Mr. Nathan Felting
                                        S. J. Electro Systems, Inc.
                                        22650 County Highway 6
                                        P.O. Box 1708
                                        Detroit Lakes, MN 56502
                                        Email: nathanf@sjerhombus.com

      11.3 SURVIVAL OF OBLIGATIONS.  Termination of this Agreement for any cause
shall not release  either party hereto from any  liability  which at the time of
termination  has already  accrued to the other party hereto or which  thereafter
may accrue in  respect  of any act or  omissions  prior to such  termination  or
expiration, nor shall any such termination hereof affect in any way the survival
of any right,  duty or obligation of the party hereto which is expressly  stated
elsewhere in this Agreement to survive termination or expiration hereof.

      11.4 AMENDMENTS.  Amendments to this Agreement must be made in writing and
signed by both parties hereto.

      11.5 ENTIRE  AGREEMENT.  This Agreement  (including its Exhibits as of the
date  hereof),  the  agreements  contemplated  by this  Agreement as well as the
Distribution  Agreement,  the Series A Preferred Stock Purchase  Agreement,  the
First  Refusal  and  Co-Sale  Agreement,  the  Investor  Rights  Agreement,  the
Promissory Note, the Pledge  Agreement,  the  Confidentiality

                                       8
<PAGE>

Agreement and the Intellectual  Property Agreement  (collectively,  the "Related
Agreements"),  constitute  the entire  agreement and  understanding  between the
parties with respect to the subject  matter and all other  previous or currently
existing  agreements and  understandings or other  arrangements of any kind with
respect to the said subject matter shall be canceled and  superseded  completely
by the Related Agreements.

      11.6  HEADINGS.  The headings in this  Agreement  are for  convenience  of
reference  only and  shall  not limit or  otherwise  affect  any of the terms or
provisions of this Agreement.

      11.7 GOVERNING  LAW. This Agreement  shall be governed by and construed in
accordance with the laws of the State of Minnesota (without regard to principles
of conflicts of laws).

      IN WITNESS WHEREOF,  the parties have caused this Agreement to be executed
on the day and year first above written.

                                        OVATION PRODUCTS CORPORATION

                                        By: /s/ Allen E. Becker
                                            ------------------------------------
                                            Its: CEO

                                        S.J. ELECTRO SYSTEMS, INC.

                                        By: /s/ Laurie Lewandowski
                                            ------------------------------------
                                            Its: CEO

                                       9
<PAGE>

                                   EXHIBIT 1.1

                              ALLIANCE EXPENDITURES

<PAGE>

<TABLE>
<CAPTION>
                                     2001              2002              2003              2004              2005             2006
<S>                          <C>               <C>               <C>               <C>               <C>              <C>
1     Septic Appliance
      Statement
2.    Unit Sales-SJE's
      Estimate                         50               500             1,400             4,500             9,000           17,000
3.    Unit Sales-Ovation
      Estimate with SJE               100             1,500             3,000             8,000            15,000           25,000
4.    Unit Sales-Ovation
      Estimate with other              25               300             3,000             6,000            16,000           30,000
5.
6.    Unit Selling Price     $      2,764      $      3,200      $      3,200      $      3,200      $      3,000     $      3,000
7.
8.    Unit Cost (per
      Ovation)               $      1,864      $        925      $      1,275      $      1,083      $        811     $        710
9.    Additional unit
      cost adder             $        450      $      1,075      $        600      $        600      $        600     $        600
10.   Panel costing          $        250      $        250      $        240      $        230      $        220     $        210
11.   Shipping/handling
      cost                   $        200      $        200      $        190      $        180      $        170     $        160
12.   Total septic
      alliance cost          $      2,764      $      2,450      $      2,305      $      2,093      $      1,801     $      1,680
13.
14.   Septic Appliance
      Sales                  $    276,400      $  4,800,000      $  9,600,000      $ 25,600,000      $ 45,000,000     $ 75,000,000
15.   Septic Appl Cost of
      Goods Sold             $    276,400      $  3,675,000      $  6,915,000      $ 16,744,000      $ 27,015,000     $ 42,000,000
16.
17.   Septic Gross Profit    $         --      $  1,125,000      $  2,685,000      $  8,856,000      $ 17,985,000     $ 33,000,000
18.   GP%                                                23%               28%               35%               40%               44%
19.
20.   SJE Operating
      Expenses
21.   Marketing - 8%         $     40,000      $    250,000      $    768,000      $  2,048,000      $  3,600,000     $  6,000,000
22.   Engineering - 1%       $    130,000      $    200,000      $     96,000      $    256,000      $    450,000     $    750,000
23.   Admin - 4%             $    130,000      $    250,000      $    384,000      $  1,024,000      $  1,800,000     $  3,000,000

<CAPTION>
                                     2007              2008
<S>                          <C>               <C>
1     Septic Appliance
      Statement
2.    Unit Sales-SJE's
      Estimate                     25,000            37,500
3.    Unit Sales-Ovation
      Estimate with SJE            35,000            45,000
4.    Unit Sales-Ovation
      Estimate with other          45,000            55,000
5.
6.    Unit Selling Price     $      3,000      $      2,750
7.
8.    Unit Cost (per
      Ovation)               $        625      $        574
9.    Additional unit
      cost adder             $        600      $        600
10.   Panel costing          $        200      $        190
11.   Shipping/handling
      cost                   $        150      $        140
12.   Total septic
      alliance cost          $      1,575      $      1,504
13.
14.   Septic Appliance
      Sales                  $105,000,000      $123,750,000
15.   Septic Appl Cost of
      Goods Sold             $ 55,125,000      $ 67,680,000
16.
17.   Septic Gross Profit    $ 49,875,000      $ 56,070,000
18.   GP%                              48%               45%
19.
20.   SJE Operating
      Expenses
21.   Marketing - 8%         $  8,400,000      $  9,900,000
22.   Engineering - 1%       $  1,050,000      $  1,237,500
23.   Admin - 4%             $  4,200,000      $  4,950,000
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                     2001              2002              2003              2004              2005             2006
<S>                          <C>               <C>               <C>               <C>               <C>              <C>
24.     Total Operating
        SJE                  $    300,000      $    700,000      $  1,248,000      $  3,328,000      $  5,850,000     $  9,750,000
25.                                                      15%               13%               13%               13%              13%
26.   All Ovation
      Operating Expenses
27.   Warranty accrual       $     39,000      $    333,000      $    765,000      $    909,000      $  1,508,000     $  2,344,000
28.   Engineering            $    936,000      $  1,123,000      $  1,530,000      $  3,031,000      $  5,028,000     $  7,812,000
29.   Sales and Marketing    $     13,000      $     95,000      $    945,000      $  1,665,000      $  3,600,000     $  5,400,000
30.   G&A Overhead           $    482,000      $    723,000      $  1,530,000      $  3,031,000      $  5,028,000     $  7,812,000
31.     Total Operating
        Ovation              $  1,470,000      $  2,274,000      $  4,770,000      $  8,636,000      $ 15,164,000     $ 23,368,000
32.
33.   Allocated Ovation
      Operating Expenses
34.   Warranty accrual -
      1.4%                   $     39,000      $    277,500      $    382,500      $    519,429      $    729,677     $  1,065,455
35.   Engineering - 4.7%     $    936,000      $    935,833      $    765,000      $  1,732,000      $  2,432,903     $  3,550,909
36.   Sales and Marketing    $         --      $         --      $         --      $         --      $         --     $         --
37.   G&A Overhead - 4%      $    482,000      $    602,500      $    765,000      $  1,732,000      $  2,432,903     $  3,550,909
38.     Total Operating
        Ovation              $  1,457,000      $  1,815,833      $  1,912,500      $  3,983,429      $  5,595,484     $  8,167,273
39.                                                      38%               20%               16%               12%              11%
40.
41.
42.   Septic Appl Net
      Income (Loss)          $ (1,757,000)     $ (1,390,833)     $   (475,500)     $  1,544,571      $  6,539,516     $ 15,082,727
43.     % to Sales                                     -29%               -5%                 6%               15%              20%
44.     Accum Net (Loss)
        Income               $ (1,757,000)     $ (3,147,833)     $ (3,623,333)     $ (2,078,762)     $  4,460,754     $ 19,543,481
45.     Split of Net
        Income (Loss)        $   (878,500)     $   (695,417)     $   (237,750)     $    772,286      $  3,269,758     $  7,541,364

<CAPTION>
                                     2007              2008
<S>                          <C>               <C>
24.     Total Operating
        SJE                  $ 13,650,000      $ 16,087,500
25.                                    13%               13%
26.   All Ovation
      Operating Expenses
27.   Warranty accrual       $         --      $         --
28.   Engineering            $         --      $         --
29.   Sales and Marketing    $         --      $         --
30.   G&A Overhead           $         --      $         --
31.     Total Operating
        Ovation              $         --      $         --
32.
33.   Allocated Ovation
      Operating Expenses
34.   Warranty accrual -
      1.4%                   $  1,470,000      $  1,732,500
35.   Engineering - 4.7%     $  4,935,000      $  5,816,250
36.   Sales and Marketing    $         --      $         --
37.   G&A Overhead - 4%      $  4,200,000      $  4,950,000
38.     Total Operating
        Ovation              $ 10,605,000      $ 12,498,750
39.                                    19%               10%
40.
41.
42.   Septic Appl Net
      Income (Loss)          $ 25,620,000      $ 27,483,750
43.     % to Sales                     24%               22%
44.     Accum Net (Loss)
        Income               $ 45,163,481      $ 72,647,231
45.     Split of Net
        Income (Loss)        $ 12,810,000      $ 13,741,875
</TABLE>

<PAGE>

Assumptions Made

<TABLE>
<CAPTION>
Line
<S>  <C>                                     <C>
2    Unit sales- SJE's estimate              SJE's projections of the septic appliance used for comparison purposes only
3    Unit sales-Ovation Estimate with SJE    Ovation estimate of unit sales with SJE used for computing total sales and COGS
4    Unit sales-Ovation estimate with other  Ovation estimate of unit sales with others used in computing allocation of total
                                             Ovation operating expenses
6    Unit selling price                      Year 2001 used the cost of the product to show no gross profit made on first units
                                             Years 2002 - 20011 used SJE's projected selling price
8    Unit cost                               Based on Ovation's projections of all units divided into COGS
9    Additional unit cost adder              Additional cost added to unit cost to be able to meet 500 gallons/day and cost
                                             conservative adder
10   Panel costing                           Based on SJE's estimate of $250 declining $10 per year
11   Shipping/handling cost                  Used $200 per unit decreasing annually by $10 - averages between 4-6% of selling price
                                             Compared to SJE manufacturing of 10.6% of sales
12   Total septic cost                       Addition of unit cost, unit cost adder, panel cost and shipping/handling
14   Septic Appliance Sales                  Multiplied unit sales-ovation estimate with SJE times unit selling price
15   Septic Appl Cost of Goods Sold          Multiplied unit sales-ovation estimate with SJE times total septic cost
17   Septic Gross Profit                     Septic appliance sales less septic appl cost of goods sold
18   GP %                                    Septic appliance gross profit divided by septic appliance sales
21   Marketing - 8%                          SJE's Marketing expenses projected at 8% of sales for years 2003-2011, planned for 2001
                                             and 2002
22   Engineering - 1%                        SJE's Engineering expenses projected at 1% of sales for years 2003-2011, planned for
                                             2001 and 2002
23   Admin - 4%                              SJE's Admin expenses projected at 4% of sales for years 2003-2011, planned for 2001 and
                                             2003
24       Total Operating SJE                 Total marketing, engineering and admin expenses for SJE
26   All Ovation Operating Expenses          Section for all Ovations forecasted operating expenses for years 2001-2006
27   Warranty accrual                        Ovation projected total warranty expense for years 2001-2006
28   Engineering                             Ovation projected total engineering expense for years 2001-2006
29   Sales and Marketing                     Ovation projected total sales and marketing expenses for years 2001-2006
30   G&A Overhead                            Ovation projected total G&A overhead expense for years 2001-2006
31       Total Operating Ovation             Total Ovation warranty, engineering, sales & marketing, and G&A overhead for years
                                             2001-2006
33   Allocated Ovation Operating Expense     Section for allocated Ovation forecasted operating expenses
34   Warranty accrual - 1.4%                 Allocated warranty expenses based on unit sales to SJE to total Ovation unit sales for
                                             years 2001-2006, years 2007-2011 is computed at 1.4%
35   Engineering - 4.7%                      Allocated engineering expense based on unit sales to SJE to total Ovation unit sales
                                             for years 2001-2006, years 2007-2011 is computed at 4.7%
36   Sales and Marketing                     No sales and marketing expenses allocated as these costs for Ovation are a result of
                                             other sales
37   G&A Overhead - 4%                       Allocated G&A expenses based on unit sales to SJE to total Ovation unit sales for years
                                             2001-2006, years 2007-2011 is computed at 4% to sale
38       Total Operating Ovation             Total allocated Ovation warranty, engineering, and G&A expenses
42   Septic Appl Net Income (Loss)           Septic Gross Profit less SJE's operating expenses - Ovations allocated operating
                                             expense
43       % to Sales                          Septic appl net income divided by septic appliance sales
44       Accum Net (Loss) Income             Accumulated net (loss) income
47       Split of Net Income (Loss)          Split of Septic appliance net income (loss)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                             2001              2002              2003              2004             2005             2006
<S>                  <C>               <C>               <C>               <C>              <C>              <C>
Septic Appliance
Statement
Unit Sales-SJE's
Estimate                       50               500             1,400             4,500            9,000           17,000
Unit
Sales-Ovation
Estimate with SJE             100             1,500             3,000             8,000           15,000           25,000
Unit
Sales-Ovation
Estimate with
other                          25               300             3,000             6,000           16,000           30,000

Unit Selling
Price                                  $      3,200      $      3,200      $      3,200     $      3,000     $      3,000

Unit Cost            $      1,864      $      1,500      $      1,275      $      1,083     $        811     $        710

Septic Appliance
Sales                                  $  4,800,000      $  9,600,000      $ 25,600,000     $ 45,000,000     $ 75,000,000
Septic Appl Cost
of Goods Sold        $    128,200      $  3,300,000      $  5,925,000      $ 14,264,000     $ 22,665,000     $ 35,250,000

Septic Gross
Profit               $   (128,200)     $  1,500,000      $  3,675,000      $ 11,336,000     $ 22,335,000     $ 39,750,000
GP%                                              31%               38%               44%              50%              53%

SJE Operating
Expenses
Marketing - 8%       $     40,000      $    250,000      $    768,000      $  2,048,000     $  3,600,000     $  6,000,000
Engineering - 1%     $    130,000      $    200,000      $     96,000      $    256,000     $    450,000     $    750,000
Admin - 4%           $    130,000      $    250,000      $    384,000      $  1,024,000     $  1,800,000     $  3,000,000
  Total
  Operating SJE      $    300,000      $    700,000      $  1,248,000      $  3,328,000     $  5,850,000     $  9,750,000
                                                 15%               13%               13%              13%              13%
All Ovation
Operating
Expenses
Warranty accrual     $     39,000      $    333,000      $    765,000      $    909,000     $  1,508,000     $  2,344,000
Engineering          $    936,000      $  1,123,000      $  1,530,000      $  3,031,000     $  5,028,000     $  7,812,000
Sales and
Marketing            $     13,000      $     95,000      $    945,000      $  1,665,000     $  3,600,000     $  5,400,000
G&A Overhead         $    482,000      $    723,000      $  1,530,000      $  3,031,000     $  5,028,000     $  7,812,000
  Total
  Operating
  Ovation            $  1,470,000      $  2,274,000      $  4,770,000      $  8,636,000     $ 15,164,000     $ 23,368,000

<CAPTION>
                             2007              2008              2009              2010             2011
<S>                  <C>               <C>               <C>               <C>              <C>
Septic Appliance
Statement
Unit Sales-SJE's
Estimate                   25,000            37,500            50,000            62,500           75,000
Unit
Sales-Ovation
Estimate with SJE          35,000            45,000            55,000            65,000           75,000
Unit
Sales-Ovation
Estimate with
other                      45,000            55,000            65,000            75,000           85,000

Unit Selling
Price                $      3,000      $      2,750      $      2,600      $      2,600     $      2,600

Unit Cost            $        625      $        574      $        550      $        525     $        500

Septic Appliance
Sales                $105,000,000      $123,750,000      $143,000,000      $169,000,000     $195,000,000
Septic Appl Cost
of Goods Sold        $ 46,375,000      $ 57,330,000      $ 68,750,000      $ 79,625,000     $ 90,000,000

Septic Gross
Profit               $ 58,625,000      $ 66,420,000      $ 74,250,000      $ 89,375,000     $105,000,000
GP%                            56%               54%               52%               53%              54%

SJE Operating
Expenses
Marketing - 8%       $  8,400,000      $  9,900,000      $ 11,440,000      $ 13,520,000     $ 15,600,000
Engineering - 1%     $  1,050,000      $  1,237,500      $  1,430,000      $  1,690,000     $  1,950,000
Admin - 4%           $  4,200,000      $  4,950,000      $  5,720,000      $  6,760,000     $  7,800,000
  Total
  Operating SJE      $ 13,650,000      $ 16,087,500      $ 18,590,000      $ 21,970,000     $ 23,350,000
                               13%               13%               13%               13%              13%
All Ovation
Operating
Expenses
Warranty accrual     $         --      $         --      $         --      $         --     $         --
Engineering          $         --      $         --      $         --      $         --     $         --
Sales and
Marketing            $         --      $         --      $         --      $         --     $         --
G&A Overhead         $         --      $         --      $         --      $         --     $         --
  Total
  Operating
  Ovation            $         --      $         --      $         --      $         --     $         --
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                             2001              2002              2003              2004             2005             2006
<S>                  <C>               <C>               <C>               <C>              <C>              <C>
Allocated
Ovation
Operating
Expenses
Warranty accrual
- 1.4%               $     39,000      $    277,500      $    382,500      $    519,429     $    729,677     $  1,065,455
Engineering -
4.7%                 $    936,000      $    935,833      $    765,000      $  1,732,000     $  2,432,903     $  3,550,909
Sales and
Marketing            $         --      $         --      $         --      $         --     $         --     $         --
G&A Overhead - 4%    $    482,000      $    602,500      $    765,000      $  1,732,000     $  2,432,903     $  3,550,909
  Total
  Operating
  Ovation            $  1,457,000      $  1,815,833      $  1,912,500      $  3,983,429     $  5,595,484     $  8,167,273
                                                 38%               20%               16%              12%              11%

Septic Appl Net
Income (Loss)        $ (1,885,200)     $ (1,015,833)     $    514,500      $  4,024,571     $ 10,889,516     $ 21,832,727
  % to Sales                                    -21%                5%               16%              24%              29%
  Accum Net
  (Loss) Income      $ (1,885,200)     $ (2,901,033)     $ (2,386,533)     $  1,638,038     $ 12,527,554     $ 34,360,281
Split of Net
Income (Loss)        $   (942,600)     $   (507,917)     $    257,250      $  2,012,286     $  5,444,758     $ 10,916,364

<CAPTION>
                             2007              2008              2009              2010             2011
<S>                   <C>              <C>               <C>               <C>              <C>
Allocated
Ovation
Operating
Expenses
Warranty accrual
- 1.4%               $  1,470,000      $  1,732,500      $  2,002,000      $  2,366,000     $  2,730,000
Engineering -
4.7%                 $  4,935,000      $  5,816,250      $  6,721,000      $  7,943,000     $  9,165,000
Sales and
Marketing            $         --      $         --      $         --      $         --     $         --
G&A Overhead - 4     $  4,200,000      $  4,950,000      $  5,720,000      $  6,760,000     $  7,800,000
  Total
  Operating
  Ovation            $ 10,605,000      $ 12,498,750      $ 14,443,000      $ 17,069,000     $ 19,695,000
                               10%               10%               10%               10%              10%

Septic Appl Net
Income (Loss)        $ 34,370,000      $ 37,833,750      $ 41,217,000      $ 50,336,000     $ 59,955,000
  % to Sales                   33%               31%               29%               30%              31%
  Accum Net
  (Loss) Income      $ 68,730,281      $106,564,031      $147,781,031      $198,117,031     $258,072,031
Split of Net
Income (Loss)        $ 17,185,000      $ 18,916,875      $ 20,608,500      $ 25,168,000     $ 29,977,500
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                            2001            2002            2003            2004            2005            2006            2007
<S>                  <C>             <C>             <C>             <C>             <C>             <C>             <C>
--------------------------------------------------------------------------------------------------------------------------------
SJE Products
Statement
SJE Product Sales    $24,143,000     $27,609,000     $32,074,000     $35,252,000     $38,283,000     $41,728,470     $45,066,748
Cost of Goods
Sold                 $15,285,000     $17,620,002     $20,533,872     $22,855,007     $23,985,792     $27,540,790     $29,744,053

SJE GP               $ 8,858,000     $ 9,988,998     $11,540,128     $12,396,993     $14,297,208     $14,187,680     $15,322,694
                            36.7%           36.2%           36.0%           35.2%           37.3%           34.0%             34%

Operating
Expenses             $ 7,058,000     $ 7,541,660     $ 7,876,721     $ 9,237,312     $10,400,287     $10,432,118     $11,266,687
                                              27%             25%             26%             27%             25%             25%

SJE Net Income       $ 1,800,000     $ 2,447,338     $ 3,663,407     $ 3,159,681     $ 3,896,921     $ 3,755,562     $ 4,056,007
Net Income % to
Sales                          7%              9%             11%              9%             10%              9%              9%
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
Septic Appliance
Statement
Septic Appliance                             500           1,400           4,500           9,000          17,000          25,000
Sales
Unit Selling
Price                               $   3,200.00    $   3,200.00    $   3,200.00    $   3,000.00    $   3,000.00    $   3,000.00
Septic Appliance
Sales                               $  1,600,000    $  4,480,000    $ 14,400,000    $ 27,000,000    $ 51,000,000    $ 75,000,000
Septic Appl Cost
of Goods Sold                       $  1,200,000    $  3,360,000    $ 10,800,000    $ 21,600,000    $ 40,800,000    $ 59,375,000

Septic Gross
Profit                              $    400,000    $  1,120,000    $  3,600,000    $  5,400,000    $ 10,200,000    $ 15,625,000
GP%                                           25%             25%             25%             20%             20%             21%
--------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
                            2008            2009              2010             2011
 <S>                <C>            <C>              <C>                <C>
-----------------------------------------------------------------------------------
SJE Products
Statement
SJE Product Sales     48,672,087    $ 52,079,134     55,724,672.87     $ 59,068,153
Cost of Goods
Sold                $ 32,123,578    $ 34,372,228    $   36,778,284     $ 38,984,981

SJE GP              $ 16,548,510    $ 17,706,905    $   18,946,389     $ 20,083,172
                              34%             34%               34%              34%

Operating
Expenses            $ 12,168,022    $ 13,019,883    $   13,931,168     $ 14,767,038
                              25%             25%               25%              25%

SJE Net Income      $  4,380,488    $  4,687,122    $    5,015,221     $  5,316,134
Net Income % to
Sales                          9%              9%                9%               9%
-----------------------------------------------------------------------------------

-----------------------------------------------------------------------------------
Septic Appliance
Statement
Septic Appliance          37,500          50,000            62,500           75,000
Sales
Unit Selling
Price               $   2,750.00    $   2,600.00    $     2,600.00     $   2,600.00
Septic Appliance
Sales               $103,125,000    $130,000,000    $  162,500,000     $195,000,000
Septic Appl Cost
of Goods Sold       $ 80,625,000    $100,000,000    $  121,875,000     $142,500,000

Septic Gross
Profit              $ 22,500,000    $ 30,000,000    $   40,625,000     $ 52,500,000
GP%                           22%             23%               25%              27%
-----------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                 <C>               <C>               <C>              <C>              <C>              <C>
-----------------------------------------------------------------------------------------------------------------------
Septic Operating
Expenses
Marketing           $     40,000      $    250,000      $    450,000     $  1,152,000     $  2,160,000     $  4,080,000
Engineering         $    130,000      $    200,000      $    200,000     $    200,000     $    270,000     $    510,000
Admin               $     10,000      $     20,000      $    179,200     $    576,000     $  1,080,000     $  3,060,000
  Total
  Operating
  Ovation           $    180,000      $    470,000      $    829,200     $  1,928,000     $  3,510,000     $  7,650,000
                                                                                   13%              13%              15%
Septic Appl Net
Income (Loss)       $   (180,000)     $    (70,000)     $    290,800     $  1,672,000     $  1,890,000     $  2,550,000
% to Sales                                                         6%              12%               7%               5%
Accum Net (Loss)
Income              $   (180,000)     $   (250,000)     $     40,800     $  1,712,800     $  3,602,800     $  6,152,800
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
Combined
Statement
Sales               $ 24,143,000      $ 29,209,000      $ 36,554,000     $ 49,652,000     $ 65,283,000     $ 92,728,470
Cost of Goods
Sold                $ 15,285,000      $ 18,820,002      $ 23,893,872     $ 33,655,007     $ 45,585,792     $ 68,340,790

Gross Profit        $  8,858,000      $ 10,388,998      $ 12,660,128     $ 15,996,993     $ 19,697,208     $ 24,387,680
GP%                           37%               36%               35%              32%              30%              26%

Operating
Expenses            $  7,238,000      $  8,011,660      $  8,705,921     $ 11,165,312     $ 13,910,287     $ 18,082,118
% to Sales                    30%               27%               24%              22%              21%              20%

Operating Income    $  1,620,000      $  2,377,338      $  3,954,207     $  4,831,681     $  5,786,921     $  6,305,562
  % to Sales                   7%                8%               11%              10%               9%               7%
-----------------------------------------------------------------------------------------------------------------------
                                                                                                  0.31             0.42

<CAPTION>
<S>                 <C>               <C>               <C>              <C>              <C>
------------------------------------------------------------------------------------------------------
Septic Operating
Expenses
Marketing           $  6,000,000      $  8,250,000      $ 10,400,000     $ 13,000,000     $ 15,600,000
Engineering         $    750,000      $  1,031,250      $  1,300,000     $  1,625,000     $  1,950,000
Admin               $  4,500,000      $  6,187,500      $  7,800,000     $  9,750,000     $ 11,700,000
  Total
  Operating
  Ovation           $ 11,250,000      $ 15,468,750      $ 19,500,000     $ 24,375,000     $ 29,250,000
                              15%               15%               15%              15%              15%
Septic Appl Net
Income (Loss)       $  4,375,000      $  7,031,250      $ 10,500,000     $ 16,250,000     $ 23,250,000
% to Sales                     6%                7%                8%              10%              12%
Accum Net (Loss)
Income              $ 10,527,800      $ 17,559,050      $ 28,059,050     $ 44,309,050     $ 67,559,050
------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------
Combined
Statement
Sales               $120,066,748      $151,797,087      $182,079,134     $218,224,673     $254,068,153
Cost of Goods
Sold                $ 89,119,053      $112,748,578      $134,372,228     $158,653,284     $181,484,981

Gross Profit        $ 30,947,694      $ 39,048,510      $ 47,706,905     $ 59,571,389     $ 72,583,172
GP%                           26%               26%               26%              27%              29%

Operating
Expenses            $ 22,516,687      $ 27,636,772      $ 32,519,783     $ 38,306,168     $ 44,017,038
% to Sales                    19%               18%               18%              18%              17%

Operating Income    $  8,431,007      $ 11,411,738      $ 15,187,122     $ 21,265,221     $ 28,566,134
  % to Sales                   7%                8%                8%              10%              11%
------------------------------------------------------------------------------------------------------
                              29%             0.26              0.20             0.20             0.16
</TABLE>

<PAGE>

                                    EXHIBIT 6

                             DISTRIBUTION AGREEMENT

                                   (SEE TAB 8)

<PAGE>

                                    EXHIBIT 7

                            CONFIDENTIALITY AGREEMENT

<PAGE>

                    MUTUAL CONFIDENTIAL DISCLOSURE AGREEMENT

Agreement  between  Ovation  Products   Corporation   ("Ovation"),   a  Delaware
Corporation,  and SJE-Rhombus  ("SJE"), a Minnesota  Corporation,  regarding the
provision or exchange of confidential information:

1.    The  Parties   recognize  that  they  will  exchange  a  wide  variety  of
      information   during  the  strategic   alliance  (the  "Project")  in  the
      development,  marketing  and sale of  wastewater  treatment  systems.  The
      Parties  recognize  that,  during the lifetime of the  Project,  it may be
      beneficial  for one or the  other  of the  Parties  to  disclose  business
      information to third parties or for general public notification.

2.    Confidential Information includes the following, by way of example but not
      exclusively:

      2.1   Technology information

      2.2   Test data and test reports

      2.3   Market forecasts or estimates

      2.4   Financial information,  including such information as costs of good,
            revenues, margins, warranty allowances, or transfer prices

      2.5   Plans or  intentions  regarding  the  release or pricing of upcoming
            products or product enhancements

      2.6   Patentable ideas

      2.7   The existence and terms of the Strategic Alliance Agreement

3.    Receiving  Party  agrees  to take  all  reasonable  steps  to  assure  the
      continued confidentiality of the Confidential Information,  and to protect
      this  Confidential  Information  at least as well as it  protects  its own
      confidential  information.  Either party may reproduce,  copy or otherwise
      record Confidential Information as necessary in the ordinary course of its
      business, taking reasonable steps to assure its continued confidentiality.

4.    Each party agrees to keep confidential any trade secrets developed jointly
      or solely by each party.

5.    Either party may disclose the following  types of information to financial
      institutions  (or similar  institutions)  which have an industry  ethic of
      confidentiality:

      5.1   Financial information

      5.2   Market forecasts or estimates

      5.3   The existence and/or terms or the Strategic Alliance Agreement

<PAGE>

6.    Ovation  is  free  to  disclose   technology   information  without  prior
      consultation with SJE.

7.    SJE is free to  disclose  plans or  intentions  regarding  the release and
      pricing  of  upcoming  products  or  product  enhancements  without  prior
      consultation  with Ovation.  The disclosure of trade  secrets,  patentable
      ideas,  test data and test reports require mutual  agreement  between both
      parties.

8.    The  Parties  agree  to a mutual  public  disclosure  to the  press of the
      existence of the Project at a mutually-agreed time and manner.

9.    The obligations  provided for in Sections 2 through 6 above shall continue
      for the longest of:

      9.1   period of three years from the date the Strategic Alliance Agreement
            is fully executed

      9.2   a period of three years from the cancellation the Strategic Alliance
            Agreement

10.   The  obligations  provided  for  above  shall  not  apply to  Confidential
      Information which:

      10.1  was, at the time of disclosure,  in the public domain by publication
            or otherwise; or

      10.2  enters the public domain through no fault of receiving  Party or its
            agents after receipt from disclosing Party; or

      10.3  is  ordered  disclosed  pursuant  to  a  judicial  or  other  lawful
            government  action,  but only to the extent required by such action,
            and only after giving disclosing Party a minimum of five days' prior
            written notice of its intent to disclose such information.

11.   Nothing in this Agreement  shall be construed to grant to receiving  Party
      any license or other right except for limited rights specifically provided
      for in this  Agreement;  and nothing herein shall be construed to limit or
      in any other way  restrict  any  patent,  copyright,  trademark,  or other
      intellectual  property right which  disclosing Party may have with respect
      to the Confidential Information.

12.   This  Agreement  shall  be  governed  by the  same  general  terms  as the
      Strategic  Alliance  Agreement.  In the case of  conflict,  the  Strategic
      Alliance Agreement shall govern.

13.   This Agreement  represents the complete  agreement  between the Parties on
      the  subject  matter  hereof,  and  supersedes  all  prior  agreements  of
      understandings  between the Parties relating  thereto.  This Agreement may
      not be  altered  or amended  except by a  document  in  writing  signed by
      authorized representatives of both Parties.

<PAGE>

                                    EXHIBIT 8

                         INTELLECTUAL PROPERTY AGREEMENT

<PAGE>

                          OVATION PRODUCTS CORPORATION

                              INTELLECTUAL PROPERTY

Intellectual  Property  Agreement (the  "Agreement")  between  Ovation  Products
Corporation ("Ovation"), a Delaware corporation,  and S.J. Electro Systems, Inc.
("SJE"), a Minnesota corporation, regarding intellectual property rights:

PATENTABLE INVENTIONS

An invention developed solely by one party is the property of that party and may
be patented by that party. Jointly developed  patentable  inventions will be the
property of Ovation if the invention  relates to the operation of the Distiller.
Jointly  developed  inventions  relating  to the system that are not an integral
part of the  distiller are the property of SJE. Each party will notify the other
of patentable inventions. If the party entitled to a given invention chooses not
to secure  patent  protection,  the other party shall have the right to file for
patent protection.

Patent rights from jointly developed patentable inventions include:

      1.    Ovation  has a  royalty-free  license to use the  jointly  developed
            patents   owned  by  SJE,   including   the   right  to   sublicense
            subcontractors,  transfer  to  successors,  etc.,  for  use  in  any
            distiller-base  products.  Ovation has no license to use the jointly
            developed patents owned by SJE for non-distiller-based products.

      2.    SJE has a royalty-free license to use the joint IP owned by Ovation,
            including  the  right  to  sublicense  subcontractors,  transfer  to
            successors,  etc.,  for  use in any  on-site  products.  SJE  has no
            license  to  use  the  joint  IP  owned  by  Ovation  for  distiller
            applications other than on-site applications.

      3.    The  owner  of the  patents  has  the  exclusive  right  to  license
            unrelated third parties

      4.    In the case of  infringement,  the party who owns the patent has the
            exclusive right to go after  infringers,  and keeps any profits from
            the  prosecution.  The other party agrees to always give  reasonable
            efforts to support the case.

TRADEMARKS

Ovation has the right to develop and use  trademarks  to identify the  distiller
and/or  components  of the  distiller.  SJE  has the  right  to  create  and use
trademarks that identify other parts of the System or the Systems as a whole.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00077-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00077-of-00352.parquet"}]]