Document:

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

Date:    March 2, 2006

To Whom It May Concern:

         1. Defined Terms:

         Any reference herein to "Collateral" shall, unless the context
otherwise requires, be deemed a reference to "Collateral or any part thereof".
The term "Proceeds", whenever used herein shall, by way of example, include
trade-ins, equipment, money, bank accounts, notes, chattel paper, goods,
contracts rights, accounts and any other personal property or obligation
received when such Collateral or Proceeds are sold, exchanged, collected or
otherwise disposed of or dealt with.

         2. To secure the payment of all Obligations (as hereafter defined),
Essential Innovations Technology Corp., a Nevada corporation (the "Company") and
Essential Innovations Corp., a federal Canadian corporation, and each other
entity that is required to enter into this Master Security Agreement (each an
"Assignor" and, collectively with the Company, the "Assignors") hereby assigns
and grants to Laurus Master Fund, Ltd. ("Laurus") a continuing security interest
in all of the following property now owned or at any time hereafter acquired by
any Assignor, or in which any Assignor now has or at any time in the future may
acquire any right, title or interest (the "Collateral"): all cash, cash
equivalents, accounts, accounts receivable, deposit accounts, inventory,
equipment, goods, documents of title, instruments (including, without
limitation, promissory notes), contract rights, general intangibles (including,
without limitation, payment intangibles and an absolute right to license on
terms no less favorable than those current in effect among Assignors'
affiliates), supporting obligations, chattel paper, investment property
(including, without limitation, all equity interests owned by any Assignor),
letter of credit rights, trademarks, trademark applications, tradestyles,
patents, patent applications, copyrights, copyright applications and other
intellectual property in which any Assignor now has or hereafter may acquire any
right, title or interest, all Proceeds and products thereof (including, without
limitation, proceeds of insurance) and all additions, accessions and
substitutions thereto or therefore. In the event any Assignor wishes to finance
an acquisition in the ordinary course of business of any hereafter acquired
equipment and has obtained a commitment from a financing source to finance such
equipment from an unrelated third party, Laurus agrees to release its security
interest on such hereafter acquired equipment so financed by such third party
financing source. Except as otherwise defined herein, all capitalized terms used
herein shall have the meaning provided such terms in (i) the Security and
Purchase Agreement referred to below, or (ii), if not defined therein, the
meaning provided such terms in (a) the Uniform Commercial Code (as in effect
from time to time in the State of New York)("UCC") in the case of a U.S.
corporation, or (b) the Personal Property Security Act (British Columbia) and
any other similar provincial statute (as amended from time to time, which Act,
including amendments thereto and any Act substituted therefore and amendment
thereto, together with all regulations thereunder, are herein referred to as the
"PPSA") in the case of a Canadian corporation.

         3. The term "Obligations" as used herein shall mean and include all
debts, liabilities and obligations owing by each Assignor to Laurus arising
under, out of, or in connection with: (i) that certain Security and Purchase

<PAGE>

Agreement dated as of the date hereof by and between the Company and Laurus (the
"Security and Purchase Agreement") and (ii) the Ancillary Agreements referred to
in the Security and Purchase Agreement (the Security and Purchase Agreement and
each Ancillary Agreement, as each may be amended, modified, restated or
supplemented from time to time, are collectively referred to herein as the
"Documents") and in connection with any documents, instruments or agreements
relating to or executed in connection with the Documents or any documents,
instruments or agreements referred to therein or otherwise, and in connection
with any other indebtedness, obligations or liabilities of any Assignor to
Laurus, whether now existing or hereafter arising, direct or indirect,
liquidated or unliquidated, absolute or contingent, due or not due and whether
under, pursuant to or evidenced by a note, agreement, guaranty, instrument or
otherwise, in each case, irrespective of the genuineness, validity, regularity
or enforceability of such Obligations, or of any instrument evidencing any of
the Obligations or of any Collateral therefor or of the existence or extent of
such Collateral, and irrespective of the allowability, allowance or disallowance
of any or all of the Obligations, in any case commenced by or against any
Assignor under Title 11, United States Code, the Bankruptcy and Insolvency Act
(Canada) and the Companies' Creditors Arrangement Act, including, without
limitation, obligations or indebtedness of the Company and each Assignor for
post-petition interest, fees, costs and charges that would have accrued or been
added to the Obligations but for the commencement of such case.

         4. The Assignors acknowledge and agree that: (i) value has been given,
or will be given upon the making of payment under the Security and Purchase
Agreement by Laurus; (ii) the Assignors have rights in the Collateral; and (iii)
the Assignors and Laurus have not agreed to postpone the time for attachment of
the security interest granted hereunder which shall attach upon the execution of
this Master Security Agreement and, in the case of Collateral acquired after the
date hereof, when such Assignor has rights therein.

         5. Each Assignor hereby jointly and severally represents, warrants and
covenants to Laurus that:

                  (a) it is a corporation, partnership or limited liability
         company, as the case may be, validly existing, in good standing and
         organized under the respective laws of its jurisdiction of organization
         set forth on Schedule A, and each Assignor will provide Laurus thirty
         (30) days' prior written notice of any change in any of its respective
         jurisdiction of organization;

                  (b) its legal name is as set forth in its respective
         Certificate of Incorporation or other organizational document (as
         applicable) as amended through the date hereof and as set forth on
         Schedule A, and it will provide Laurus thirty (30) days' prior written
         notice of any change in its legal name;

                  (c) its organizational corporate identification number (if
         applicable) is as set forth on Schedule A hereto, and it will provide
         Laurus thirty (30) days' prior written notice of any change in any of
         its organizational identification number;

                  (d) it is the lawful owner of its respective Collateral and it
         has the sole right to grant a security interest therein and will defend
         the Collateral against all claims and demands of all persons and
         entities;

                  (e) it will keep its respective Collateral free and clear of
         all attachments, levies, taxes, liens, security interests and
         encumbrances of every kind and nature ("Encumbrances"), except (i)
         Encumbrances securing the Obligations (ii) to the extent said
         Encumbrance does not secure indebtedness in excess of US$50,000 and
         such Encumbrance is removed or otherwise released within ten (10) days
         of the creation thereof and (iii) Encumbrances set forth on Schedule
         4.9 of the Security and Purchase Agreement;

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<PAGE>

                  (f) it will, at its and the other Assignors' joint and several
         cost and expense keep the Collateral in good state of repair (ordinary
         wear and tear excepted) and will not waste or destroy the same or any
         part thereof other than ordinary course discarding of items no longer
         used or useful in its or such other Assignors' business;

                  (g) it will not without Laurus' prior written consent, sell,
         exchange, lease or otherwise dispose of the Collateral, whether by
         sale, lease or otherwise, except in the ordinary course of business and
         for the disposition or transfer in the ordinary course of business
         during any fiscal year of obsolete and worn-out equipment or equipment
         no longer necessary for its ongoing needs, or equipment that is
         replaced by more economical or functional equipment having an aggregate
         fair market value of not more than US$25,000 and only to the extent
         that:

                  (i)      the Proceeds of any such disposition are used to
                           acquire replacement Collateral which is subject to
                           Laurus' first priority perfected security interest,
                           or are used to repay Obligations or to pay general
                           corporate expenses; and

                  (ii)     following the occurrence of an Event of Default which
                           continues to exist the proceeds of which are remitted
                           to Laurus to be held as cash collateral for the
                           Obligations;

                  (h) it will insure or cause the Collateral to be insured
         against loss or damage by fire, theft, burglary, pilferage, loss in
         transit and such other hazards as Laurus shall specify in amounts and
         under policies by insurers acceptable to Laurus. Laurus shall either be
         named as loss payee or additional insured as its interest may appear in
         all of the Assignors' policies of insurance. Each insurance policy
         shall include an endorsement whereby the insurers agree to give Laurus
         not less than thirty (30) days notice of the cancellation of the policy
         of insurance and permit Laurus to cure any default which may exist
         under the policy. All premiums on each Assignor's insurance policies
         shall be paid by such Assignor and the policies shall be delivered to
         Laurus. If any such Assignor fails to do so, Laurus may procure such
         insurance and the cost thereof shall be promptly reimbursed by the
         Assignors, jointly and severally, and shall constitute Obligations;

                  (i) it will, acting reasonable prior to an Event of Default,
         at all reasonable times allow Laurus or Laurus' representatives free
         access to and the right of inspection of the Collateral upon 24 hours
         notice; and

                  (j) such Assignor (jointly and severally with each other
         Assignor) hereby indemnifies and saves Laurus harmless from all loss,
         costs, damage, liability and/or expense, including reasonable legal
         fees, that Laurus may sustain or incur to enforce payment, performance
         or fulfillment of any of the Obligations and/or in the enforcement of
         this Master Security Agreement or in the prosecution or defense of any
         action or proceeding either against Laurus or any Assignor concerning
         any matter growing out of or in connection with this Master Security
         Agreement, and/or any of the Obligations and/or any of the Collateral
         except to the extent caused by Laurus' own gross negligence or wilful
         misconduct (as determined by a court of competent jurisdiction in a
         final and nonappealable decision).

         6. The occurrence of any "Event of Default" under and as defined in the
Note which shall have occurred and be continuing beyond any applicable cure
period, shall constitute an Event of Default under this Master Security
Agreement.

         7. Upon the occurrence of any Event of Default which is continuing and
at any time thereafter, Laurus may declare all Obligations immediately due and
payable. To the extent applicable, both before and after the occurrence of an
Event of Default, Laurus shall have all rights and remedies of a secured party

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<PAGE>

under the PPSA, the UCC, this Master Security Agreement and other applicable
law. Upon the occurrence of any Event of Default which is continuing and at any
time thereafter, Laurus will have the right to take possession of, collect,
demand, sue on, enforce, recover and receive the Collateral and give valid and
binding receipts and discharges therefore and in respect thereof. Laurus will
also have the right to maintain possession of the Collateral on each Assignor's
premises or to remove the Collateral or any part thereof to such other premises
as Laurus may desire. Upon Laurus' request, after the occurrence of any Event of
Default which is continuing, each of the Assignors shall assemble or cause the
Collateral to be assembled and make it available to Laurus at a place designated
by Laurus. If any notification of intended disposition of any Collateral is
required by law, such notification, if mailed, shall be deemed commercially
reasonable if mailed at least ten (10) days before such disposition, postage
prepaid, addressed to any Assignor either at such Assignor's address shown
herein or at any address appearing on Laurus' records for such Assignor. Any
proceeds of any disposition of any of the Collateral shall be applied by Laurus
to the payment of all expenses in connection with the sale of the Collateral,
including operating any Assignor's accounts, preparing and enforcing this Master
Security Agreement, taking and maintaining custody of, preserving, repairing,
possessing, preparing for disposition and disposing of Collateral and in
enforcing or collecting indebtedness and all such costs, charges and expenses,
including reasonable legal fees, expenses and disbursements and any balance of
such proceeds may be applied by Laurus toward the payment of the Obligations in
such order of application as Laurus may elect, and each Assignor shall be liable
for any deficiency.

         8. Upon the occurrence of an Event of Default which is continuing and
during the continuance of any Event of Default, Laurus may appoint or reappoint
by instrument in writing, any person or persons, whether an officer or officers
or an employee or employees of Laurus or not, to be an interim receiver,
receiver or receivers (hereinafter called a "Receiver", which term when used
herein shall include a receiver and manager) of any Collateral of Essential
Innovations Corp. and any other Canadian entity that is required to enter into
this Master Security Agreement (collectively, the "Canadian Companies")
(including any interest, income or profits therefrom) and may remove any
Receiver so appointed and appoint another in his/her/its stead. Any such
Receiver shall, so far as concerns responsibility for his/her/its acts, be
deemed the agent of each Canadian Company and not Laurus, and Laurus shall not
be in any way responsible for any misconduct, negligence or non-feasance on the
part of any such Receiver or his/her/its servants, agents or employees. Subject
to the provisions of the instrument appointing him/her/it, any such Receiver
shall have power to take possession of Collateral, to preserve Collateral or its
value, to carry on or concur in carrying on all or any part of the business of
each Canadian Company and to sell, lease, license or otherwise dispose of or
concur in selling, leasing, licensing or otherwise disposing of Collateral. To
facilitate the foregoing powers, any such Receiver may, to the exclusion of all
others, including any Canadian Company, enter upon, use and occupy all premises
owned or occupied by each Canadian Company wherein Collateral may be situate,
maintain Collateral upon such premises, borrow money on a secured or unsecured
basis and use Collateral directly in carrying on each Canadian Company's
business or as security for loans or advances to enable the Receiver to carry on
each Canadian Company's business or otherwise, as such Receiver shall, in its
discretion, determine. Except as may be otherwise directed by Laurus, all money
received from time to time by such Receiver in carrying out his/her/its
appointment shall be received in trust for and be paid over to Laurus. Every
such Receiver may, in the discretion of Laurus, be vested with all or any of the
rights and powers of Laurus.

         9. Upon an Event of Default which is continuing and during the
continuance of any Event of Default, Laurus may, either directly or through its
agents or nominees, exercise any or all of the powers and rights given to a
Receiver by virtue of Section 8.

         10. Laurus shall use reasonable care with respect to the Collateral in
its possession or under its control. Laurus shall not have any other duty as to
any Collateral in its possession or control or in the possession or control of

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<PAGE>

any agent or nominee of Laurus, or any income thereon or as to the preservation
of rights against prior parties or any other rights pertaining thereto.

         11. If any Assignor defaults in the performance or fulfillment of any
of the terms, conditions, promises, covenants, provisions or warranties on such
Assignor's part to be performed or fulfilled under or pursuant to this Master
Security Agreement, Laurus may, at its option without waiving its right to
enforce this Master Security Agreement according to its terms, immediately or at
any time thereafter and without notice to any Assignor, perform or fulfill the
same or cause the performance or fulfillment of the same for each Assignor's
joint and several account and at each Assignor's joint and several cost and
expense, and the cost and expense thereof (including reasonable legal fees)
shall be added to the Obligations and shall be payable on demand with interest
thereon at the highest rate permitted by law.

         12. Each Assignor appoints Laurus, any of Laurus' officers, employees
or any other person or entity whom Laurus may designate as such Assignor's
attorney, with power to execute such documents on each of such Assignor's behalf
and to supply any omitted information and correct patent errors in any documents
executed by any Assignor or on any Assignor's behalf; to file financing
statements against such Assignor covering the Collateral (and, in connection
with the filing of any such financing statements or financing change statements,
describe the Collateral as "all assets and all personal property, whether now
owned and/or hereafter acquired" (or any substantially similar variation
thereof)); to sign such Assignor's name on public records; and to do all other
things Laurus deems necessary to carry out this Master Security Agreement. Each
Assignor hereby ratifies and approves all acts of the attorney and neither
Laurus nor the attorney will be liable for any acts of commission or omission,
nor for any error of judgment or mistake of fact or law other than gross
negligence or wilful misconduct (as determined by a court of competent
jurisdiction in a final and non-appealable decision). This power being coupled
with an interest, is irrevocable so long as any Obligations remains unpaid.

         13. No delay or failure on Laurus' part in exercising any right,
privilege or option hereunder shall operate as a waiver of such or of any other
right, privilege, remedy or option, and no waiver whatever shall be valid unless
in writing, signed by Laurus and then only to the extent therein set forth, and
no waiver by Laurus of any default shall operate as a waiver of any other
default or of the same default on a future occasion. Laurus' books and records
containing entries with respect to the Obligations shall be admissible in
evidence in any action or proceeding, shall be binding upon each Assignor for
the purpose of establishing the items therein set forth and shall constitute
prima facie proof thereof. Laurus shall have the right to enforce any one or
more of the remedies available to Laurus, successively, alternately or
concurrently. However, Laurus shall not be liable or accountable for any failure
to exercise its remedies, take possession of, collect, enforce, realize, sell,
lease, license or otherwise dispose of Collateral or to institute any proceeding
for such purposes. Each Assignor agrees to join with Laurus in executing
financing statements or other instruments to the extent required by the UCC or
the PPSA in form satisfactory to Laurus and in executing such other documents or
instruments as may be required or deemed necessary by Laurus for purposes of
affecting or continuing Laurus' security interest in the Collateral.

         14. This Master Security Agreement shall be governed by and construed
in accordance with the laws of the Province of British Columbia and the federal
laws of Canada, and cannot be terminated orally. All of the rights, remedies,
options, privileges and elections given to Laurus hereunder shall inure to the
benefit of Laurus' successors and assigns. The term "Laurus" as herein used
shall include Laurus, any parent of Laurus', any of Laurus' subsidiaries and any
co-subsidiaries of Laurus' parent, whether now existing or hereafter created or
acquired, and all of the terms, conditions, promises, covenants, provisions and
warranties of this Master Security Agreement shall inure to the benefit of each
of the foregoing, and shall bind the representatives, successors and assigns of
each Assignor. Laurus and each Assignor hereby (a) waive any and all right to
trial by jury in litigation relating to this Master Security Agreement and the
transactions contemplated hereby and each Assignor agrees not to assert any

                                      -5-
<PAGE>

counterclaim in such litigation, (b) submit to the nonexclusive jurisdiction of
any New York State court sitting in the borough of Manhattan, the city of New
York and (c) waive any objection Laurus or each Assignor may have as to the
bringing or maintaining of such action with any such court.

         15. Each Assignor hereby acknowledges receipt of a copy of this Master
Security Agreement.

         16. This Master Security Agreement may be executed in any number of
counterparts which shall, collectively and separately constitute one agreement.
Any signature delivered by a party by facsimile transmission or by sending a
scanned copy by electronic mail shall be deemed an original signature hereto.

         17. It is understood and agreed that any person or entity that desires
to become an Assignor hereunder, or is required to execute a counterpart of this
Master Security Agreement after the date hereof pursuant to the requirements of
any Document, shall become an Assignor hereunder by (x) executing a joinder
agreement in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as Laurus shall
reasonably request and (z) taking all actions as specified in this Master
Security Agreement as would have been taken by such Assignor had it been an
original party to this Master Security Agreement, in each case with all
documents required above to be delivered to Laurus and with all documents and
actions required above to be taken to the reasonable satisfaction of Laurus.

         18. All notices from Laurus to any Assignor shall be sufficiently given
if mailed or delivered to such Assignor's address set forth below.

         19. If there is any inconsistency between the provisions hereof and the
provisions of the Security and Purchase Agreement, the provisions of the
Security and Purchase Agreement shall prevail.

                                Very truly yours,
                                Essential Innovations Technology Corp. (Nevada)
                                By: /s/ Jason McDiarmid
                                Name: Jason McDiarmid
                                Title: President
                                Address       189 Warrick Street
                                              Coquitlam, B.C.
                                              V3K 6C1 Canada

                                Essential Innovations Corp. (Canada)
                                By: /s/ Steve Wuschke
                                Name: Steve Wuschke
                                Title: President
                                Address       24336 32nd
                                              Langley, BC Canada
                                              V2Z 2J4
ACKNOWLEDGED:

                                Laurus Master Fund, Ltd.
                                By: /s/ David Grin
                                Name: David Grin
                                Title: Director
                                Address:

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<PAGE>

                                   SCHEDULE A

                                        Jurisdiction of       Organization
            Entity                        Organization     Identification Number
            ------                        ------------     ---------------------

Essential Innovations Technology Corp.        Nevada               *
Essential Innovations Corp.                   Canada               *THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT 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.

     Right to Purchase up to 8,586,754 Shares of Common Stock of Essential
    Innovations Technology Corp. (subject to adjustment as provided herein)

                          COMMON STOCK PURCHASE WARRANT

No. _________________                                  Issue Date: March 2, 2006

ESSENTIAL INNOVATIONS TECHNOLOGY CORP., a corporation organized under the laws
of the State of Nevada (the "Company"), hereby certifies that, for value
received, LAURUS MASTER FUND, LTD., or assigns (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company (as defined
herein) from and after the Issue Date of this Common Stock Purchase Warrant
(this "Warrant") and at any time or from time to time before 5:00 p.m., New York
time, through the close of business March 2, 2050 (the "Expiration Date"), up to
8,586,754 fully paid and nonassessable shares of Common Stock (as hereinafter
defined), $0.001 par value per share, at the applicable Exercise Price per share
(as defined below). The number and character of such shares of Common Stock and
the applicable Exercise Price per share are subject to adjustment as provided
herein.

As used herein the following terms, unless the context otherwise requires, have
the following respective meanings:

                  (a) The term "Company" shall include Essential Innovations
         Technology Corp. and any person or entity which shall succeed, or
         assume the obligations of, Essential Innovations Technology Corp.
         hereunder.

                  (b) The term "Common Stock" includes (i) the Company's Common
         Stock, par value $0.001 per share; and (ii) any other securities into
         which or for which any of the securities described in the preceding
         clause (i) may be converted or exchanged pursuant to a plan of
         recapitalization, reorganization, merger, sale of assets or otherwise.

                  (c) The term "Other Securities" refers to any stock (other
         than Common Stock) and other securities of the Company or any other
         person (corporate or otherwise) which the holder of the Warrant at any
         time shall be entitled to receive, or shall have received, on the
         exercise of the Warrant, in lieu of or in addition to Common Stock, or
         which at any time shall be issuable or shall have been issued in
         exchange for or in replacement of Common Stock or Other Securities
         pursuant to Section 4 or otherwise.

                  (d) The "Exercise Price" applicable under this Warrant shall
         be $0.001.

         1. Exercise of Warrant.

         1.1 Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled
to receive, upon exercise of this Warrant in whole or in part, by delivery of an
original or fax copy of an exercise notice in the form attached hereto as

<PAGE>

Exhibit A (the "Exercise Notice"), shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.

         1.2 Fair Market Value. For purposes hereof, the "Fair Market Value" of
a share of Common Stock as of a particular date (the "Determination Date") shall
mean:

                  (a) If the Company's Common Stock is traded on the American
         Stock Exchange or another national exchange or is quoted on the
         National or Capital Market of The Nasdaq Stock Market, Inc. ("Nasdaq"),
         then the closing or last sale price, respectively, reported for the
         last business day immediately preceding the Determination Date.

                  (b) If the Company's Common Stock is not traded on the
         American Stock Exchange or another national exchange or on the Nasdaq
         but is traded on the NASD Over The Counter Bulletin Board, then the
         mean of the average of the closing bid and asked prices reported for
         the last business day immediately preceding the Determination Date.

                  (c) Except as provided in clause (d) below, if the Company's
         Common Stock is not publicly traded, then as the Holder and the Company
         agree or in the absence of agreement by arbitration in accordance with
         the rules then in effect of the American Arbitration Association,
         before a single arbitrator to be chosen from a panel of persons
         qualified by education and training to pass on the matter to be
         decided.

                  (d) If the Determination Date is the date of a liquidation,
         dissolution or winding up, or any event deemed to be a liquidation,
         dissolution or winding up pursuant to the Company's charter, then all
         amounts to be payable per share to holders of the Common Stock pursuant
         to the charter in the event of such liquidation, dissolution or winding
         up, plus all other amounts to be payable per share in respect of the
         Common Stock in liquidation under the charter, assuming for the
         purposes of this clause (d) that all of the shares of Common Stock then
         issuable upon exercise of the Warrant are outstanding at the
         Determination Date.

         1.3 Company Acknowledgment. The Company will, at the time of the
exercise of this Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.

         1.4 Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of this Warrant
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

         1.5 Pro-Rated Issue. The Company hereby acknowledges and agrees that in
the event that the Holder advances US$2,000,000 pursuant to the US$2,000,000
Secured Term Note, but does not make any advances pursuant to the US$4,000,000
Secured Revolving Note, in each case on or before March 31, 2006, then on March
31, 2006 the Holder shall return this Warrant to the Company and the Company
shall issue to the Holder a new warrant dated as of March 2, 2006 entitling the
Holder to purchase from the Company from and after such Issue Date and at any
time or from time to time before 5:00 p.m., New York time, through the close of
business on the Expiration Date, up to 2,919,497 fully paid and nonassessable
shares of Common Stock, $0.001 par value per share, at $0.001 per share (the
"Pro-Rated Warrant"). The Holder acknowledges and agrees that in the event that,

                                      -2-
<PAGE>

on or before March 31, 2006, the Holder does not make any advances pursuant to
either the US$2,000,000 Secured Term Note or the US$4,000,000 Secured Revolving
Note, then the Holder shall return this Warrant to the Company.

         2. Procedure for Exercise.

         2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares in accordance herewith. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.

         2.2      Exercise.

                  (a) Payment may be made either (i) in cash or by certified or
         official bank check payable to the order of the Company equal to the
         applicable aggregate Exercise Price, (ii) by delivery of this Warrant,
         or shares of Common Stock and/or Common Stock receivable upon exercise
         of this Warrant in accordance with the formula set forth in subsection
         (b) below, or (iii) by a combination of any of the foregoing methods,
         for the number of Common Shares specified in such Exercise Notice (as
         such exercise number shall be adjusted to reflect any adjustment in the
         total number of shares of Common Stock issuable to the Holder per the
         terms of this Warrant) and the Holder shall thereupon be entitled to
         receive the number of duly authorized, validly issued, fully-paid and
         non-assessable shares of Common Stock (or Other Securities) determined
         as provided herein.

                  (b) Notwithstanding any provisions herein to the contrary, if
         the Fair Market Value of one share of Common Stock is greater than the
         Exercise Price (at the date of calculation as set forth below), in lieu
         of exercising this Warrant for cash, the Holder may elect to receive
         shares equal to the value (as determined below) of this Warrant (or the
         portion thereof being exercised) by surrender of this Warrant at the
         principal office of the Company together with the properly endorsed
         Exercise Notice in which event the Company shall issue to the Holder a
         number of shares of Common Stock computed using the following formula:

         X=                         Y(A-B)
                                    ----------
                                        A

         Where X =                  the number of shares of Common Stock to be
                                    issued to the Holder

         Y =                        the number of shares of Common Stock
                                    purchasable under this Warrant or, if only a
                                    portion of this Warrant is being exercised,
                                    the portion of this Warrant being exercised
                                    (at the date of such calculation)

                                      -3-
<PAGE>

         A =                        the Fair Market Value of one share of the
                                    Company's Common Stock (at the date of such
                                    calculation)

         B =                        the Exercise Price per share (as adjusted
                                    to the date of such calculation)

         3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.

         3.1 Reorganization, Consolidation, Merger, Etc. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.

         3.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder pursuant to Section 3.1, or, if the Holder shall so
instruct the Company, to a bank or trust company specified by the Holder and
having its principal office in New York, NY as trustee for the Holder.

         3.3 Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company's
securities and property (including cash, where applicable) receivable by the
Holder will be delivered to the Holder or the Trustee as contemplated by Section
3.2.

         4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock or any preferred stock issued by
the Company, (b) subdivide its outstanding shares of Common Stock, (c) combine
its outstanding shares of the Common Stock into a smaller number of shares of
the Common Stock, then, in each such event, the Exercise Price shall,
simultaneously with the happening of such event, be adjusted by multiplying the
then Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event, and the product so obtained shall thereafter be
the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 4. The number of shares of Common Stock
that the holder shall thereafter, on the exercise hereof as provided in Section
1, be entitled to receive shall be adjusted to a number determined by

                                      -4-
<PAGE>

multiplying the number of shares of Common Stock that would otherwise (but for
the provisions of this Section 4) be issuable on such exercise by a fraction of
which (a) the numerator is the Exercise Price that would otherwise (but for the
provisions of this Section 4) be in effect, and (b) the denominator is the
Exercise Price in effect on the date of such exercise (taking into account the
provisions of this Section 4).

         5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of this Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder and any Warrant agent of the
Company (appointed pursuant to Section 11 hereof).

         6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.

         7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, a legal opinion from the Transferor's counsel (at
the Company's expense) that such transfer is exempt from the registration
requirements of applicable securities laws, the Company at its expense (but with
payment by the Transferor of any applicable transfer taxes) will issue and
deliver to or on the order of the Transferor thereof a new Warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in such
Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant so surrendered by the Transferor.

         8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

         9. Registration Rights. The Holder has been granted certain
registration rights by the Company. These registration rights are set forth in a
Registration Rights Agreement entered into by the Company and Holder dated as of
the date hereof, as the same may be amended, modified and/or supplemented from
time to time.

         10. Maximum Exercise. Notwithstanding anything herein to the contrary,
in no event shall the Holder be entitled to exercise any portion of this Warrant
in excess of that portion of this Warrant upon exercise of which the sum of (1)
the number of shares of Common Stock beneficially owned by the Holder and its
Affiliates (other than shares of Common Stock which may be deemed beneficially

                                      -5-
<PAGE>

owned through the ownership of the unexercised portion of the Warrant or the
unexercised or unconverted portion of any other security of the Holder subject
to a limitation on conversion analogous to the limitations contained herein) and
(2) the number of shares of Common Stock issuable upon the exercise of the
portion of this Warrant with respect to which the determination of this proviso
is being made, would result in beneficial ownership by the Holder and its
Affiliates of any amount greater than 4.99% of the then outstanding shares of
Common Stock (whether or not, at the time of such exercise, the Holder and its
Affiliates beneficially own more than 4.99% of the then outstanding shares of
Common Stock). For purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G
thereunder, except as otherwise provided in clause (1) of the immediately
preceding sentence. The Holder may waive the limitations set forth herein by
sixty-one (61) days written notice to the Company and such limitations shall
automatically become null and void upon an Event of Default under and as defined
in the Security and Purchase Agreement dated as of the date hereof, by and among
the Company and the Holder (as amended, restated, modified or supplemented from
time to time, the "Security and Purchase Agreement"). As used herein, the term
"Affiliate" means any person or entity that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a person or entity, as such terms are used in and construed under Rule 144
under the Securities Act.

         11. Warrant Agent. The Company may, by written notice to the each
Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock
(or Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8 or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by
such agent.

         12. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

         13. Notices, Etc. All notices and other communications from the Company
to the Holder shall be mailed by first class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company in
writing by such Holder or, until any such Holder furnishes to the Company an
address, then to, and at the address of, the last Holder who has so furnished an
address to the Company.

         14. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. THIS WARRANT 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 CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS
WARRANT SHALL BE BROUGHT ONLY IN STATE COURTS OF NEW YORK OR IN THE FEDERAL
COURTS LOCATED IN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY
CHOOSE TO WAIVE THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW
YORK. The individuals executing this Warrant on behalf of the Company agree to
submit to the jurisdiction of such courts and waive trial by jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorneys' fees and costs. In the event that any provision of this
Warrant 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 Warrant. The headings in this Warrant are for purposes of reference

                                      -6-
<PAGE>

only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision hereof. The Company
acknowledges that legal counsel participated in the preparation of this Warrant
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 Warrant to favour any party against the other party.

         15. No Shorting. Neither the Holder nor any Affiliate of the Holder
will directly engage in "short sales" of the Company's Common Stock as long as
the Notes (as defined in the Security and Purchase Agreement) are outstanding.

         IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first written above.

                                         ESSENTIAL INNOVATIONS TECHNOLOGY CORP.
WITNESS

/s/ Stephen D. Holmes                    By: /s/ Jason McDiarmid
Holmes & Company                         Name: Jason McDiarmid
1880--1066 West Hastings Street          Title: President
Vancouver, British Columbia
V6E 3X1 Canada

                                      -7-
<PAGE>

                                    EXHIBIT A

                              FORM OF SUBSCRIPTION
                   (To Be Signed Only On Exercise of Warrant)

TO: ESSENTIAL INNOVATIONS TECHNOLOGY CORP.
_________________________________________

_________________________________________

Attention:        Chief Financial Officer

The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):

________   ________ shares of the common stock covered by such Warrant; or

________   the maximum number of shares of common stock covered by such Warrant
           pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full Exercise Price for such
shares at the price per share provided for in such Warrant, which is $_________.
Such payment takes the form of (check applicable box or boxes):

________   $__________ in lawful money of the United States; and/or

________   the cancellation of such portion of the attached Warrant as is
           exercisable for a total of _______  shares of Common  Stock (using a
           Fair Market Value of $_______ per share for purposes of this
           calculation); and/or

________   the cancellation of such number of shares of Common Stock as is
           necessary, in accordance with the formula set forth in Section 2.2,
           to exercise this Warrant with respect to the maximum number of shares
           of Common Stock purchasable pursuant to the cashless exercise
           procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to _____________________________________ whose address is
______________________________________________________________________________.

The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.

Dated:__________________             _________________________________________
                                     (Signature must conform to name of holder
                                     as specified on the face of the Warrant)
                                     Address:  ___________________________
                                               ___________________________

                                      -8-
<PAGE>

                                    EXHIBIT B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To Be Signed Only On Transfer Of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto
the person(s) named below under the heading "Transferees" the right represented
by the within Warrant to purchase the percentage and number of shares of Common
Stock of Essential Innovations Technology Corp. into which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
Essential Innovations Technology Corp. with full power of substitution in the
premises.

                                               Percentage            Number
   Transferees              Address            Transferred         Transferred
   -----------              -------            -----------         -----------

Dated:   __________________________   __________________________________________
                                      (Signature must conform to name of holder
                                      as specified on the face of the Warrant)
                                      Address:  ________________________________
                                                ________________________________

                                      SIGNED IN THE PRESENCE OF:

                                      __________________________________________
                                      (Name)

ACCEPTED AND AGREED:
[TRANSFEREE]

___________________________________
(Name)

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