LOAN AGREEMENT

This Agreement is dated as of November 3, 2004.

BETWEEN:

             ENVIRONMENTAL ENGINEERING & CONSULTANTS LIMITED, a Bahamas
             corporation

            (the "Lender")

AND:

             WEST LORNE BIOOIL CO-GENERATION LP, by its general partner
             DYNAMOTIVE CANADA INC., a Canada corporation

            (the "Borrower")

AND:

             DYNAMOTIVE CANADA INC., a Canada corporation

            (the "General Partner")

NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto covenant and agree as follows:


                                   PART 1

                       DEFINITIONS and Interpretation

Definitions

1.1           Where used in this Agreement, the Schedules attached hereto,
and any amendment or supplement hereto, unless there is something in the
subject matter or context necessarily inconsistent therewith:

        (a)  "Advances" mean advances of the Loan made from time to time by
        the Lender to the Borrower or at the Borrower's direction pursuant to
        the provisions hereof and "Advance" means any such advance;

        (b)  "Balance of Plant" means the Balance of Plant described in
        Schedule 1.1(r);










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                                     - 2 -

        (c)  "Business Day" means any day excluding Saturdays and Sundays
        that Royal Bank of Canada, Main Branch, Toronto and Leadenhall Bank
        & Trust, Nassau, Bahamas are open for normal business;

        (d)  "Capital Expenditures" shall mean all payments or accruals
        (including in respect of obligations related to capital leases) for
        any fixed assets or improvements or for replacements, substitutions
        or additions thereto, that have a useful life of more than one year
        and that are required to be capitalized under GAAP.

        (e)  "Commitment Fee" means the Lender's fee of $10,000;

        (f)  "Contaminant" includes, without limitation, any pollutant,
        dangerous substance, liquid waste, industrial waste, hazardous
        material, hazardous substance or contaminant including any of the
        foregoing as defined in any Environmental Law;

        (g)  "Corporate Distributions" means:
             (i)  any dividend or other distribution on issued shares or
             partnership interests;

             (ii)  the purchase, redemption, or retirement price of any
             issued shares or partnership interests redeemed or purchased;

             (iii) any payment of principal or interest on indebtedness owing
             to the affiliates or subsidiaries of the Borrower or to the
             directors, officers, associate, partners or shareholders of the
             Borrower or of its affiliates or subsidiaries;

             (iv)  any loan or advance to any of the affiliates or
             subsidiaries of the Borrower or any director, officer,
             associate, partner or shareholder of the Borrower or of its
             affiliates or subsidiaries; and

             (v)  any management fee, bonus, salary, withdrawal, or other
             payment to the affiliates or subsidiaries of the Borrower or any
             director, officer, associate, partner or shareholder of the
             Borrower or of its affiliates or subsidiaries;

        (h)  "Draw Request" means a written request of the Borrower
             irrevocably requesting an Advance and setting forth the amount
             and date of the requested Advance;

        (i)  "Environmental Activity" means any activity, event or
        circumstance in respect of a Contaminant, including, without
        limitation, its storage, use, holding, collection, purchase,
        accumulation, assessment, generation, manufacture,
        construction, processing, treatment, stabilization,
        disposition, handling or transportation, or its Release into the
        natural environment, including movement through or in the air, soil,
        surface water or groundwater;

        (j)  "Environmental Laws" means all applicable laws relating to the
        environment or occupational health and safety, or any Environmental
        Activity;

        (k)  "Event of Default" means those events described in para 9.1
        hereof;
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                                     - 3 -

        (l)"Indebtedness" means all present and future indebtedness
        and liability, direct or indirect, absolute or contingent, of
        the Borrower to the Lender, and includes in particular the Loan
        and all interest and other moneys payable by the Borrower pursuant
        to the terms hereof, the Security Documents and the Loan Documents;

        (m)"Interest Rate" means 15% per annum (calculated and compounded
        monthly) until the occurrence of an Event of Default and 18% per
        annum, (calculated and compounded monthly) thereafter;

        (n)  "Loan" means the principal amount of up to $1,000,000 advanced
        under this Agreement;

        (o)  "Loan Documents" means all documents, instruments, certificates
        or other agreements provided for hereunder or under the Security
        Documents or incidental hereto or thereto, including, without
        limitation, the Note and the Warrant;

        (p)  "Note" means the grid promissory note of the Borrower executed
        and delivered to the Lender evidencing the amount from time to time
        outstanding on the Loan;

        (q)  "Permitted Encumbrances" means, as of any particular time and in
        respect of any particular part of the undertaking, goodwill, and
        other property and assets of the Borrower of whatsoever kind and
        wherever situate, any of the following:

             (i)  liens for Taxes, assessments, or governmental charges or
              levies not at the time due and delinquent or the validity of
              which the Borrower is contesting in good faith and in respect
              of which the Borrower has set aside on its books adequate
              reserves, subject to the Lender's right to request satisfactory
              evidence of such reserves and adequate security for the same;

             (ii)  the reservations, limitations, provisos, and conditions
             expressed in any original grant from the Crown;

             (iii)  easements, rights-of-way and similar rights in lands
             granted to or reserved by other persons which do not materially
             impair the usefulness in the business of the Borrower of the
             real property subject thereto;

             (iv)  any security granted in the Power Island in favour of
             Magellan Aerospace Limited and its successors and assigns
             securing the purchase price of the Product, which shall not
             exceed the amount of indebtedness set out opposite Magellan
             Aerospace Limited in Schedule 3.1(aa);

             (v)  the Ramsay Security; provided that the indebtedness secured
             thereby is in an amount not exceeding the amount of indebtedness
             set out opposite "Ramsay Group" in Schedule 3.1(aa) and that no
             indebtedness incurred or repaid and reborrowed after the date
             hereof shall be secured by the Ramsay Security; and

             (vi)  an assignment by the Borrower to ATCO Noise Management
             Ltd. of $226,777.40 in Goods and Services Tax refunds payable to
             the Borrower;

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                                     - 4 -

        (r)  "Power Island" means the Product and Balance of Plant;

        (s)  "Product" means the Product described in Schedule 1.1(r);

        (t)  "Ramsay" means Ramsay Machine Works Ltd.;

        (u)  "Ramsay Security" means security granted by the Borrower
        pursuant to a guarantee and general security agreement dated July 7,
        2004 to secure the debts and liabilities of Dynamotive Energy Systems
        Corporation ("DESC") to Ramsay;

        (v)  "Release" includes discharge, spray, inject, inoculate, abandon,
        deposit, spill, leak, seep, pour, emit, empty, throw, dump, place and
        exhaust, and when used as a noun has a similar meaning;

        (w)  "Security Documents" means the security instruments and
        documents described in para 7.1 hereof;

        (x)  "Tax" includes all present and future income and other taxes,
        levies, imposts, deductions, charges, and withholdings whatsoever,
        whether levied, imposed, or assessed by a law, regulation, treaty,
        enactment, order, rule, official directive or request (whether or not
        having the force of law), together with any fines, additions or
        interest thereon and any penalties pertaining thereto.

Interpretation

1.2     For the purposes of this Agreement:

        (a)  "this Agreement" means this  Agreement and any schedules hereto,
        as amended or supplemented from time to time;

        (b)  the words "advance" include the provision or extension of a
        credit facility;

        (c)  the word "person" includes in its meaning any individual,
        partnership, joint venture, trust, association, firm and any body
        corporate or politic;

        (d)  the word "successor" includes without limiting its meaning any
        company resulting from the amalgamation of the Borrower with any
        other company;

        (e)  all accounting terms not otherwise defined shall have the
         meanings assigned to them in accordance with generally accepted
         accounting principles applicable in Canada and applied on a basis
         consistent with prior periods;

         (f)  a reference to a Part is to a Part of this Agreement, and the
         symbol para followed by a number refers to the section or a
         paragraph of this Agreement so designated; and

         (g)  all references to any party, whether a party to this Agreement
         or not, will be read with such changes in number or gender as the
         context or reference requires.
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                                     - 5 -

1.3      The provisions contained in the Security Documents will be construed
and may be enforced independently from and in addition to the provisions
contained herein; but the provisions of this Agreement will govern in the
case of a conflict between this Agreement and the Security Documents.

1.4      Except where otherwise indicated or provided for, all statements of
or references to dollar amounts in this Agreement mean lawful currency of
Canada.


                                   PART 2

                                   PURPOSE

2.1      The proceeds of the Loan shall be used to finance capital
expenditures of the Borrower and for the purpose of providing working capital
for the Borrower's business and operations.

                                   PART 3

                       REPRESENTATIONS AND WARRANTIES

3.1      Each of the Borrower and General Partner represents and warrants to
the Lender that:

        (a)  the Borrower is a limited partnership duly formed and validly
        existing and is duly registered or qualified to do business under the
        laws of Ontario;

        (b)  the General Partner is the sole general partner of the Borrower;

        (c)  the General Partner is a company duly incorporated pursuant to,
        and is in good standing under, the laws of Canada;

        (d)  DESC is a company duly incorporated pursuant to, and is in good
        standing under, the laws of British Columbia;

        (e)  the General Partner is duly registered and qualified to carry on
        business in the Province of Ontario;

        (f)  the limited partners of the Borrower are DESC and Magellan
        Aerospace Limited;

        (g)  the Borrower has the power and capacity to borrow the Loan,
        grant security therefor and to carry on its business as presently
        conducted;

        (h)  each of the General Partner and DESC have full corporate power,
        capacity and authority to carry on its business as presently
        conducted;

        (i)  each of the Borrower, the General Partner and DESC has the
        power, capacity and authority to enter into, execute, and deliver and
        to carry out and perform its respective obligations, covenants and
        agreements under this Agreement, the Security Documents and the Loan
        Documents to which it is a party;
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                                     - 6 -

        (j)  the execution and delivery of this Agreement by the General
        Partner and the performance of its obligations hereunder has been
        duly and validly authorized by all necessary action of the General
        Partner and when executed and delivered this Agreement will
        constitute a valid and legally binding obligation of the General
        Partner;

        (k)  the execution and delivery of the Guarantee and the Warrant by
        DESC and the performance of its obligations thereunder has been duly
        and validly authorized by all necessary action of DESC and when
        executed and delivered the Guarantee and the Warrant will constitute
        valid and legally binding obligations of DESC;

        (l)  the execution and delivery of this Agreement, the Security
        Documents and the Loan Documents to which the Borrower is a party by
        the General Partner, on behalf of the Borrower, and the performance
        by the General Partner, on behalf of the Borrower, of the Borrower's
        obligations hereunder and thereunder, has been duly and validly
        authorized by all necessary action on the part of the General
        Partner, and when executed and delivered this Agreement, the Security
        Documents and the Loan Documents to which the Borrower is a party
        will constitute valid and legally binding obligations of the
        Borrower;

        (m)  except for the licenses and permits listed in Schedule 3.1(m)
        hereto, each of the Borrower and the General Partner holds and is
        possessed of all licences, patents, trademarks, service marks,
        copyrights and permits and has effected all registrations required
        for the conduct of its business, ownership of its assets or property
        and the uses for which the Borrower's property or assets are used,
        such licences, patents, trademarks, service marks, copyrights,
        permits, and registrations are in good standing, and such conduct,
        ownership and uses are in compliance with the terms of such licences,
        patents, trademarks, service marks, copyrights and permits and with
        all laws, bylaws, rules, regulations, and ordinances applicable to
        the Borrower or any of its property, assets or businesses;

        (n)  the Borrower lawfully and beneficially owns and is lawfully and
        beneficially possessed of all of the property and assets and has good
        title thereto free from all claims, liens, charges and encumbrances
        except only the Permitted Encumbrances, and all of the Borrower's
        property and assets are presently located within Ontario;

        (o)  neither the Borrower nor the General Partner is a party to, nor
        has it issued, assumed, or granted, nor is it bound by any deed,
        indenture, debenture, real property mortgage, chattel mortgage,
        conditional sale contract, general or specific assignment of book
        debts, security under Section 427 of the Bank Act (Canada), or any
        other lien, charge, or encumbrance which charges any of the
        Borrower's property or assets except only Permitted Encumbrances;

        (p)  neither the execution and delivery of this Agreement, the
        Security Documents or the Loan Documents nor the observance and
        performance of the obligations of the Borrower thereunder will (i)
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                                     - 7 -

        result in any violation of or constitute a default under the limited
        partnership agreement and any other constating documents governing
        the Borrower, the constating documents of the General Partner or any
        deed, indenture, debenture, mortgage, agreement, instrument,
        judgement, decree, order, statute, rule, or regulation applicable to
        the Borrower or (ii) result in the acceleration of the time for
        payment of any moneys payable or for performance of any obligation to
        be performed by the Borrower;

        (q)  there are no claims, actions, suits, or proceedings pending or
        threatened against Borrower or the General Partner or DESC or any of
        their property or assets by or before any court or any governmental,
        administrative, or domestic body, tribunal, or agency which relates
        to any non-compliance with any Environmental Law or any Release from
        its lands of a contaminant into the natural environment or which if
        adversely determined would materially adversely affect the continued
        operation of the business of the Borrower or the General Partner or
        DESC as presently conducted, the prospects or financial condition of
        the Borrower or General Partner or DESC or the ability of the
        Borrower or General Partner or DESC to perform its obligations under
        this Agreement, the Security Documents or the Loan Documents, and
        there are no circumstances of which it is aware which might give rise
        to any such proceeding which it has not fully disclosed to Lender;

        (r)  all statements, reports, certificates, and representations made
        or delivered to the Lender by the Borrower or any person on behalf of
        the Borrower in connection with this Agreement, the Security
        Documents and the Loan Documents are true and correct in all
        respects, and in particular the financial information and material
        furnished to the Lender fairly and accurately represent the prospects
        and financial condition of the Borrower and since the date of such
        material or information, there has occurred no materially adverse
        change in its business or financial condition;

        (s)  except for the Ramsay Security, neither the Borrower nor the
        General Partner has guaranteed or agreed to guarantee any debt,
        liability, or obligation of any person or agreed to indemnify any
        person in respect of any debt, liability, or obligation;

        (t)  there is no unsatisfied or outstanding judgement, order,
        injunction, or decree of any court, tribunal, or governmental agency
        which materially adversely affects the Borrower's business as
        presently conducted or the prospects or financial condition of the
        Borrower;

        (u)  the General Partner has no assets and conducts no business other
        than on behalf of and for the benefit of the Borrower;

        (v)  no event has occurred which constitutes, or which, with notice,
        lapse of time, or both, would constitute, an Event of Default;

        (w)  it is in compliance in all material respects with all applicable
        laws including, without limitation, all Environmental Laws.  The
        Borrower has not caused, permitted or suffered and will not cause,
        permit, or suffer to occur any Environmental Activity in, on, under
        or about any of its locations, or the presence, use, generation,
        manufacture, installation, disposal, or storage of any Contaminant

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                                     - 8 -

        in, on, under or about any of its locations, or the transportation of
        any Contaminant to or from any of its locations, except to the extent
        the presence, use, generation, manufacture, installation, storage or
        transportation of such Contaminant is conducted in compliance with
        all Environmental Laws;

        (x)  it has filed all material tax returns which were required to be
        filed by it, paid or made provision for payment of all Taxes
        (including interest and penalties) and amounts which are due and
        payable in respect of claims which could rank prior to the security
        granted under the Security Documents, and provided adequate reserves
        for payment of any Tax, the payment of which is being contested;

        (y)  the locations of the Borrower's executive office, principal
        place of business, corporate offices, warehouses, other locations of
        its property and assets and locations where records are kept are as
        set forth in Schedule 3.1(y) and such locations have not changed
        during the preceding twelve months save and except for a change in
        the Borrower's office address in June 2004 from 105-1700 West 75th
        Avenue, Vancouver, British Columbia V6P 6G2 to its present address;

        (z)  during the prior five years, the General Partner has not been
        known as or conducted business in any other name and the Borrower has
        not been known as or conducted business in any name other than its
        former name "Erie BioOil Co-Generation LP";

        (aa)  the Borrower and the General Partner have no indebtedness
        outstanding to any single party in excess of $50,000 other than the
        indebtedness listed in Schedule 3.1(aa) hereto; and

        (bb)  (i) there is no organizing activity pending or, to the
        Borrower's knowledge, threatened by any labour union or group of
        employees, (ii) there are no representation proceedings pending or,
        to the Borrower's knowledge, threatened with any federal or
        provincial labour relations board, and (iii) no labour organization
        or group of employees of the Borrower has pending any demand for
        recognition, and the Borrower shall give to the Lender prompt written
        notice of any of the foregoing occurring.

                                     PART 4

                                    THE LOAN
Loan

4.1      Subject to the terms and conditions hereof, including, without
limitation, Section 10, and relying upon the representations and warranties
set forth in Part 3 hereof, the Lender will make available to the Borrower a
non-revolving reducing term loan in the maximum principal sum of up to
$1,000,000.

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                                     - 9 -


Use of Proceeds

4.2      The Borrower will use the proceeds of the Loan for the purposes
described in para 2.1 hereof and for no other purpose.

Advances

4.3      Subject to the other provisions hereof, the Loan will be advanced as
follows:

        (a)  provided the Borrower is not in default hereof and the Lender
        has not demanded repayment in accordance with provisions hereof, the
        Loan will be available for draw-down on a monthly basis from and
        after the date hereof;

        (b)  the Borrower may request an Advance by delivery to the Lender of
        an irrevocable Draw Request and a statement of an officer of the
        Borrower detailing both the budgeted use of the Advance and the
        application of the immediately prior Advance;

        (c)  subject to para 4.4 hereof, an Advance will be made on the date
        specified in the Draw Request provided that:

             (i)  the outstanding aggregate amount of the Loan will not
             exceed $1,000,000;

             (ii)  the date specified in a Draw Request for an Advance will
             be at least 9 Business Days after the date the Draw Request is
             received by the Lender.

4.4      Notwithstanding any other provision of this Agreement, the Borrower
acknowledges that all Advances shall be made in amounts and at times as the
Lender, in its absolute discretion, shall determine.

                                 PART 5

                                Interest
Interest

5.1      Notwithstanding the terms and conditions of the Security Documents,
the Borrower will pay interest as herein provided.
Calculation

5.2      Interest will accrue daily on the basis of the actual number of days
elapsed and a year of 365 days and be payable to Lender on amounts
outstanding under the Loan from time to time at the Interest Rate, calculated
and compounded monthly, after as well as before maturity, demand and
judgement, until the Loan has been repaid in full.

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                                     - 10 -

Payments

5.3      Interest shall be paid on the last day of each month during the term
hereof (or if such day is not a Business Day on the next Business Day)
commencing on the last day of the third month following the first Advance,
such date being November 30, 2004. Any payment of interest delivered or
made to the Lender by 2:00 p.m. Toronto time will be credited as of that day,
but if made after that time will be credited as of the next Business Day.
For greater certainty, the parties hereby acknowledge that a first Advance of
$500,000 was made by the Lender to Borrower on August 11, 2004.

Limitation

5.4      If the rate of interest, fees or costs payable by the Borrower in
respect of the Loan or in respect of this Agreement would, in the absence of
this provision, exceed the maximum rate permitted by law, then the interest
rate applicable to the Loan will be limited to the rate equal to one percent
per annum less than such maximum permitted rate.

Equivalent Yearly Rates

5.5      The annual rates of interest or fees to which the rates calculated
in accordance with this Agreement are equivalent, are the rates so calculated
multiplied by the actual number of days in the calendar year in which such
calculation is made and divided by 365.

Time and Place of Payment

5.6      Amounts payable by the Borrower hereunder shall be paid in Canadian
dollars at such account of the Lender as the Lender may advise in writing
from time to time.  Amounts due on a day other than a Business Day shall be
deemed to be due on the Business Day next following such day.  Interest and
fees payable under this agreement are payable both before and after any or
all of default, demand and judgement.

Increased Costs

5.7      The Borrower shall reimburse the Lender for any additional cost or
reduction in income arising as a result of (i) the imposition of, or increase
in, Taxes on payments due to the Lender hereunder (other than Taxes on the
overall net income of the Lender), (ii) the imposition of, or increase in,
any reserve or other similar requirement, (iii) the imposition of, or change
in, any other condition affecting the Loan imposed by any applicable law or
the interpretation thereof.

Evidence of Indebtedness

5.8      The Lender shall open and maintain at its offices records evidencing
the Advances made available to the Borrower by the Lender under this
Agreement. The Lender shall record the principal amount of each Advance, the
payment of principal and interest and all other amounts becoming due to the
Lender under this Agreement.  The Lender's records constitute, in the absence
of manifest error, prima facie evidence of the indebtedness of the Borrower
to the Lender pursuant to this Agreement.

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                                     - 11 -

Set Off

5.9      The Lender is authorized, but not obligated, at any time, to apply
any amount owing to the Borrower by the Lender,  whether or not then due, or
to which the Borrower is entitled, in or towards satisfaction of the
obligations of the Borrower due to the Lender under this Agreement.

                                    PART 6

                       Payment OF PRINCIPAL and Interest

Payment

6.1      The outstanding principal balance of the Loan, interest thereon and
other amounts payable by the Borrower pursuant to this Agreement shall be
paid in full on or before August 11, 2007.

Prepayment

6.2      The Borrower shall be entitled upon 5 Business Days prior written
notice to the Lender, to repay the whole or any part of the amount
outstanding under the Loan without penalty, upon payment of accrued interest
to the date of repayment.  Any portion of the Loan prepaid may not be
readvanced.

Manner of Payment

6.3      The Indebtedness will be repaid in the manner described herein.  All
payments to be made to the Lender hereunder will be made:

         (a)  without set-off or counterclaim, and

         (b)  free and clear of and without deduction for or on account of
         any Taxes.

Allocation

6.4      Payments made in respect of the Indebtedness and moneys realized
from any security held therefor, including moneys realized from the
enforcement of the Security Documents and Loan Documents, may be applied on
such parts of the Indebtedness as the Lender may see fit, and the Lender will
at all times have the right to change any appropriation made by the Lender
(whether or not communicated by the Lender) all notwithstanding any previous
application by whomsoever made.

<PAGE>
                                     - 12 -
                                     PART 7

                                    SECURITY
Form of Security

7.1       As general and continuing security for the Loan and all interest
and other amounts payable hereunder and the performance and observation of
all the covenants and obligations of the Borrower hereunder, the following
security documents, in form and substance satisfactory to the Lender  shall
be delivered to the Lender (the "Security Documents"):

        (a)  a general security agreement executed by the Borrower creating a
        security interest in all the Borrower's present and after acquired
        personal property, ranking in priority to any security interests
        granted by the Borrower in such personal property other than the
        Permitted Encumbrances;

        (b)  an unsecured guarantee and postponement of claim by DESC in
        favour of the Lender to guarantee the liabilities and obligations of
        the Borrower to the Lender arising in connection with the Loan; and

        (c)  the Specific Assignment.

Releases

7.2      Upon indefeasible payment in full of the Loan and the satisfaction
and performance by the Borrower of its obligations to the Lender hereunder
and under the Security Documents and the Loan Documents and termination of
this Agreement, the Lender will deliver up, release, and discharge the
Security Documents and execute and deliver all such instruments as may be
requisite for such purposes. The Borrower will, prior to such discharge, pay
to the Lender all reasonable fees, charges, and legal and other expenses in
respect thereof.

Extensions

7.3      The Lender may grant extensions, take and give up security, accept
compositions, grant releases and discharges, and otherwise make arrangements
and deal with the Borrower, and all other persons and with any security as
the Lender may see fit without affecting the liability of the Borrower to the
Lender or the Lender's right to hold, deal with, and realize on the Security
Documents.

Document Approval

7.4      The inspection or approval by the Lender of any document or matter
without an express written waiver or consent will not be construed as a
waiver or consent or affect the rights or remedies of the Lender in respect
of any breach or default hereunder.

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                                     - 13 -

Compliance

7.5      The Lender will not be obliged in any way to ensure that the
Borrower complies with the limitations, restrictions, and stipulations
provided for herein.  In the absence of an express written waiver or consent
by the Lender, no act or acquiescence by the Lender will affect the Lender's
rights, powers, and remedies and whether or not the Lender was or ought to
have been aware of any non-compliance with any limitation, restriction, or
stipulation contained herein, the Lender's rights, powers, and remedies will
remain in full force and effect.

No Merger

7.6      The Security Documents are in addition to and not in substitution
for any other security held by the Lender and will not operate to merge,
novate, or discharge any of the Indebtedness or any such other security.

Cumulative Rights

7.7      The rights, powers, and remedies of the Lender hereunder and under
the Security Documents and Loan Documents are cumulative.  The Lender may
enforce such rights, powers, and remedies or any of them in any manner and in
any order it desires, and the enforcement of any such rights, powers, and
remedies will not preclude the simultaneous or later enforcement of any other
rights, powers, or remedies.


                                    PART 8

                                  COVENANTS
Positive Covenants

8.1      At all times prior to the later of the indefeasible repayment in
full of the Indebtedness and the termination of this Agreement, the Borrower
will:

        (a)  duly and punctually pay or cause to be paid to the Lender all
        payments in respect of principal and interest and other amounts due
        under this Agreement on the dates, at the places, and in the manner
        set forth herein;

        (b)  duly and punctually observe and perform all of the covenants,
        agreements, terms, and conditions on its part to be observed or
        performed hereunder, under the Security Documents and the Loan
        Documents;

        (c)  maintain and preserve its existence in good standing;

        (d)  conduct its business in a proper and businesslike manner and
        diligently preserve all of its licences, permits, patents,
        trademarks, service marks, copyrights, registrations, rights, powers,
        privileges, and goodwill;

<PAGE>
                                     - 14 -

        (e)  duly and punctually pay all debts and obligations to labourers,
        workmen, employees, contractors, sub-contractors, and suppliers of
        material and all Taxes, rates, and assessments payable to
        governmental authorities and all other persons which, if unpaid,
        might under the laws of Canada or any Province of Canada or otherwise
        have priority over the security interests or other interests granted
        pursuant to any of the Security Documents, and will exhibit to the
        Lender when requested receipts or vouchers establishing such payment
        or performance;

        (f)  make all payments and perform each and every covenant,
        agreement, and obligation under any lease now held or hereafter
        acquired by the Borrower and any deed, indenture, debenture,
        mortgage, agreement, or instrument charging the property or assets of
        the Borrower or any part thereof as and when the same are required to
        be paid or performed, and will exhibit to the Lender when requested
        receipts, vouchers, or certificates establishing such payment or
        performance;

        (g)  fully and effectually register the security interests or other
        interests granted pursuant to the Security Documents from time to
        time in all jurisdictions and places where the Borrower carries on
        business or where registration is required or advantageous, obtain
        and effect all further licences and registrations as may be requisite
        in order to register the security interests or other interests
        granted pursuant to the Security Documents, and otherwise maintain
        and keep maintained the security interests or other interests granted
        pursuant to the Security Documents as valid and effective security;

        (h)  notify the Lender in writing of any intention to relocate its
        business, property or assets any part thereof and provide full
        particulars of such proposed relocation 15 days prior to such
        relocation; provided that such notice shall not be required where (i)
        property or assets of the Borrower are to be temporarily removed from
        the Borrower's place of business for service or modification; or (ii)
        removal of an immaterial portion of the property or assets (other
        than its books and records) to a location in the Province of Ontario
        is to be made;

        (i)  keep or cause to be kept proper books of account in accordance
        with sound accounting practice, give to the Lender any information
        which it may reasonably require relating to the business of the
        Borrower, permit any representative of the Lender to visit and
        inspect any of the properties or assets of the Borrower and examine
        the books of account, leases, records, reports, agreements, and other
        documents relating to the business of the Borrower and to make copies
        thereof, permit any representative of the Lender to discuss the
        Borrower's affairs with the auditors, counsel or other professional
        advisors of the Borrower and any person having information relating
        to any claim or claim which could arise on failure to pay and which
        ranks or is capable of ranking in priority to Lender's security or
        any claim of the Lender for repayment of the Indebtedness, permit
        such persons to release information relating thereto to the Lender
        and accurately and completely respond to all inquires made by the
        Lender as to particulars of any of the foregoing, all at such times
        and so often as may be requested by the Lender, acting reasonably;
        and

        (j)  deliver or cause to be delivered to the Lender:
<PAGE>
                                     - 15 -

            (i)  annually, within 120 days of the close of its fiscal year,
            unaudited annual financial statements of the Borrower, in each
            case, prepared by a professional accountant, which statements
            will include a balance sheet, an income statement, a statement of
            retained earnings, and a statement of changes in financial
            position;

            (ii)  quarterly, within 60 days of the end of each calendar
            quarter unaudited quarterly financial statements of the Borrower
            prepared by a professional accountant which statements shall
            include a balance sheet, an income statement, a statement of
            retained earnings, and a statement of changes in financial
            position; and

            (iii)  such additional information and material respecting the
            business and financial affairs of the Borrower and the General
            Partner as the Lender, acting reasonably, may request from time
            to time;

        (k)  provide the Lender with prompt written notice of any event which
        constitutes, or which, with notice, lapse of time, or both, would
        constitute an Event of Default;

        (l)  file all material tax returns which are to be filed by it from
        time to time, to pay or make provision for payment of all Taxes
        (including interest and penalties) and, when due, all amounts owing
        or required to be paid, where the failure to pay any such amount
        could give rise to a claim which ranks or is capable of ranking in
        priority to the Lender's security or claim for repayment hereunder,
        and to provide adequate reserves for the payment of any Tax, the
        payment of which is being contested;

        (m)  comply in all material respects with all applicable laws
        including, without limitation, all Environmental Laws;

        (n)  provide the Lender with prompt written notice of any non-
        compliance by the Borrower with any Environmental Laws or any Release
        from the land of the Borrower of a Contaminant into the natural
        environment and to indemnify and save harmless the Lender from all
        liability of loss as a result of an Environmental Activity or any
        non-compliance with any Environmental Law;

        (o)  maintain, preserve and protect all of its property and assets,
        in use or useful in the conduct of its business and keep the same in
        good repair, working order and condition (taking into consideration
        ordinary wear and tear) and from time to time make, or cause to be
        made, all necessary or appropriate repairs, replacements and
        improvements thereto consistent with industry practices, so that the
        business carried on in connection therewith may be properly and
        advantageously conducted at all times;

        (p)  within 10 days of the date hereof, deliver to the Lender
        evidence of Ramsay's receipt of payment from Borrower after the date
        hereof in an amount not less than $449,493.00;

        (q)  within 35 days of the date hereof, deliver to the Lender a
        licence in favour of the Borrower from the Ontario Energy Board to
        generate electricity;
<PAGE>
                                     - 16 -

        (r)  within 35 days of the date hereof, deliver to the Lender an
        executed copy of an interconnection agreement (the "Interconnection
        Agreement") between the Borrower and Hydro One Inc., in form and
        substance satisfactory to the Lender acting reasonably;

        (s)  within 15 days of the delivery of the Interconnection Agreement
        to the Lender, execute and deliver to the Lender a specific
        assignment of the Interconnection Agreement (the "Specific
        Assignment") in favour of the Lender, in form and substance
        satisfactory to the Lender acting reasonably; and

        (t)  within 40 days of the date hereof, deliver to the Lender a
        certificate of approval (air) (the "Certificate of Approval") in
        favour of the Borrower from the Ontario Ministry of the Environment,
        Environmental Assessment and Review Branch.

Insurance Covenants

8.2      While any portion of the Loan remains outstanding or prior to the
termination of this Agreement, Borrower shall at Borrower's sole cost and
expense, insure and keep insured for their full insurable value all the
Borrower's property and assets.  The risks so insured against shall include
loss, liability or damage by or from fire (with extended perils coverage),
explosion, tempest, lightening, floods, environmental damage or liability and
other perils usually covered in fire insurance policies and such additional
risks, property and liability insurance as the Lender may from time to time
require, and with insurers and limits of coverage reasonably satisfactory to
Lender, naming the Lender as a loss payee and mortgagee and additional
insured thereunder and containing the standard mortgage waiver clause
approved by the Insurance Bureau of Canada.  The Borrower shall, not less
than 30 days before any amendment to any policy or any policy expires or is
terminated deliver evidence of such amendment, renewal or replacement of such
insurance.

Negative Covenants

8.3      During the currency of this Agreement neither the Borrower nor the
General Partner will, without the prior written consent of the Lender:

        (a)  alter its constating documents, including, without limitation,
        the limited partnership agreement in respect of the Borrower;

        (b)  become a party to any transaction other than in the ordinary
        course of the Borrower's business whereby any part of the
        undertaking, property, or assets of the Borrower would become the
        property of any other person, firm or corporation, whether by way of
        reconstruction, joint venture, partnerships, reorganization,
        amalgamation, merger, any other form of business combination,
        transfer, sale, lease, or otherwise;

        (c)  cancel any debt owing to it, except for reasonable consideration
        and in the ordinary course of its business;

        (d)  make aggregate Capital Expenditures (other than Capital
        Expenditures incurred prior to April 1, 2005 or financed through the
        incurrence of Indebtedness) in any fiscal year in excess of $500,000;
<PAGE>
                                    - 17 -

        (e)  grant, create, assume or permit to exist any lien, mortgage,
        pledge, charge, assignment, lease, or other security or charge
        whether fixed or floating upon the whole or any part of the assets
        and property of the Borrower other than the Permitted Encumbrances;

        (f)  cause or permit any personal property of the Borrower to be
        permanently physically attached, affixed or joined to any real
        property, in each case, in such a manner, or with such intent, as to
        become a fixture or form part of such real property, other than with
        respect to the real property municipally known as 191 Jane St., West
        Lorne, Ontario but excluding the portion of such real property (the
        "Excluded Lands") legally described as fourthly and fifthly on
        Schedule 8.3(f);

        (g)  make loans to or investments in, or provide guarantees or
        indemnities or otherwise give financial assistance to, any person;

        (h)  materially change the nature of it's business or operations;

        (i)  change its (i) name, (ii) chief executive office,
        (iii) principal place of business, (iv) corporate offices, or
        (v) warehouses or other locations of property or assets or records
        related thereto without, in each instance, giving thirty (30) days
        prior written notice thereof to the Lender and taking all actions
        deemed necessary or appropriate by the Lender to continuously protect
        and perfect Lender's security upon the Borrower's property and
        assets;

        (j)  reduce its capital, change its capital structure or change the
        ownership of any limited or general partnership interests of the
        Borrower or the General Partner in any way whatsoever, other than (i)
        the issuance to DESC of additional limited partnership units of the
        Borrower or additional shares of the General Partner, (ii) the
        issuance of limited partnership units of the Borrower to Ontario
        Power Generation, or (iii) the issuance of limited partnership units
        of the Borrower to any party in connection with equity financing
        undertaken by the Borrower;

        (k)  make or declare any Corporate Distributions other than payments
        by the Borrower to its partners in fund income or capital tax of such
        partners with respect to their interests in the Borrower; or

        (l)  incur any indebtedness, except for indebtedness listed in
        Schedule 3.1(aa), in an amount in excess of $100,000 in any single
        instance.

Expenses

8.4      Whether or not the transactions contemplated hereby are consummated,
the Borrower will pay to the Lender on demand:

        (a)  all fees, cost and expenses (including without limitation the
        fees and disbursements of the Lender's solicitors) incurred in
        connection with the preparation of this Agreement, the Security
        Documents and the Loan Documents, up to a maximum aggregate amount of
        $20,000, excluding taxes, and any amendments, modifications,
        consents, approvals, or waivers hereunder or related hereto or
        related to the Loan, and supervising or attending on the occasion of
        all advances;
<PAGE>
                                     - 18 -

        (b)  all costs of enforcement of this Agreement and the Security
        Documents, the Loan Documents including, without limitation, the fees
        and disbursements of counsel on the basis of solicitor and own client
        costs; and

        (c)  the Commitment Fee, such fee being non-refundable and fully
        earned by the Lender to compensate for the time, effort and expense
        incurred by the Lender in connection herewith.

                                     PART 9

                         EVENTS OF DEFAULT AND REMEDIES

Events of Default

9.1      Any one of the following events will constitute an Event of Default
under this Agreement (whether such event is voluntary or involuntary or is
effected by operation of law or pursuant to or in compliance with any
judgement, decree, or order of any court or any order, rule, or regulation of
any administrative or governmental body):

        (a)  if the Borrower defaults in payment of any principal, interest
        or other amounts due hereunder, the Security Documents or the Loan
        Documents and such default is not cured within 10 days;

        (b)  if either the Borrower or the General Partner default in
        observing or performing any other covenant, agreement, or condition
        hereunder or under the Security Documents, or Loan documents on its
        part to be observed or performed and, if such default is capable of
        being cured, such default is not cured within 15 days;

        (c)  if DESC defaults in observing or performing any covenant,
        agreement or condition under or in connection with the Warrants or
        the Guarantee;

        (d)  if either the Borrower or the General Partner default in
        observing or performing any covenant, agreement or conditions in
        respect of any indebtedness on its part to be observed or performed;

        (e)  if the Borrower, General Partner or DESC is unable to pay its
        debts as such debts become due, or otherwise becomes bankrupt or
        insolvent or if the Borrower or General Partner or DESC or any other
        persons makes an assignment for the benefit of, a proposal to, or an
        arrangement with the Borrower's or General Partner's or DESC's
        creditors or an action is taken or a proceeding is instituted whether
        by the Borrower or General Partner or DESC, or any other person,
        whether voluntary or involuntary, whereby the Borrower or General
        Partner or DESC may be dissolved, wound up, liquidated, suspended,
        reorganized, or adjudged or declared bankrupt or insolvent;
<PAGE>
                                     - 19 -

        (f)  final judgment or judgments (after the expiration of all times
        to appeal therefrom) for the payment of money in an amount greater
        than $50,000 in the aggregate shall be rendered against the Borrower
        or General Partner, unless the same shall be (i) fully covered by
        insurance and the issuer(s) of the applicable policies shall have
        acknowledged full coverage in writing within fifteen (15) days of
        judgment, or (ii) vacated, stayed, bonded, paid or discharged within
        a period of fifteen (15) days from the date of such judgment;

        (g)  if any warranty or representation made by or on behalf of the
        Borrower or General Partner hereunder or in any document, instrument,
        or certificate delivered in connection herewith proves at any time to
        be materially incorrect as of the date made;

        (h)  if without the prior consent of the Lender there is a change in
        the ownership or control of the shares in the capital stock of the
        General Partner, the general partnership interests of the Borrower or
        the limited partnership interests of the Borrower resulting in DESC
        owning (i) less than 90% of the voting shares in the capital stock of
        the General Partner, or (ii) less than 67% of the issued and
        outstanding limited partnership units of the Borrower;

        (i)  if the Borrower or General Partner or DESC ceases or
        demonstrates an intention to cease to carry on its business;

        (j)  if a trustee, liquidator, receiver or receiver-manager or other
        official is appointed for the property or assets of the Borrower or
        General Partner or DESC or any part thereof;

        (k)  if any creditor, lienor, encumbrancer or party acting therefore
        takes possession of, forecloses, sells or other proceedings to
        enforce security over the property of the Borrower or any part
        thereof or gives notice of its intention to do any of the foregoing;

        (l)  if a shareholder of the General Partner commences an action
        against the General Partner or gives a notice of dissent in
        accordance with the provisions of the constating documents of the
        Borrower, or gives notice of its intention to do any of the
        foregoing;

        (m)  if the Borrower or General Partner engages in any business
        outside of the normal course of its business presently conducted; or

        (n)  if in the opinion of the Lender there is a material adverse
        change in the financial condition or operation of the Borrower or the
        General Partner or DESC.

Remedies

9.2  Upon the happening of any Event of Default, the obligation of the Lender
to make Advances shall immediately terminate and the Lender may at its option
declare that the Indebtedness has become immediately due and payable,
whereupon the Borrower will pay the same to the Lender forthwith, without
presentment, demand, protest, or other notice of any kind, all of which are
hereby expressly waived, and the Lender, without notice to or demand upon the
Borrower, (which are expressly waived by the Borrower), may proceed to
protect, exercise and enforce its rights and remedies under this Agreement,
<PAGE>
                                     - 20 -

the Security Documents, and the Loan Documents including making demand under
the Security Documents for payment of the Indebtedness and all other
obligations secured thereby, and such other rights and remedies as are
provided by law or by equity or by statutes.  Upon the happening of an Event
of Default the Lender not be obligated to release or discharge any of the
Security Documents unless and until the Indebtedness is indefeasibly paid in
full and this Agreement is terminated.

Waiver

9.3  The Lender may in its sole discretion waive any event of Default or any
breach of any of the provisions contained herein or in any of the Security
Documents or Loan Documents.  No waiver or consent by the Lender will extend
to or be taken to affect any other or subsequent breach or default or the
rights resulting therefrom, and no waiver or consent by the Lender will bind
the Lender unless it is in writing.

Performance by the Lender

9.4  If the Borrower fails to observe or perform any of the covenants or
obligations on its part to be observed or performed hereunder, then whether
or not specifically provided for herein the Lender may, but will not be bound
to, pay such moneys, take such action, and do such things as the Lender may
consider necessary to remedy or to partially remedy such failure, all of
which the Borrower hereby authorize the Lender to do in their name and on
their behalf, and in such event:

        (a)  the Lender will be subrogated to all of the rights and be
        entitled to all of the security, if any, of the person so paid;

        (b)  the Borrower will indemnify and save harmless the Lender from
        and against all fees, moneys, costs, charges, and expenses
        (including, without limitation, legal fees and disbursements) which
        are paid or incurred by the Lender in so remedying such failure; and

        (c)  the amount of all fees, moneys, costs, charges, and expenses so
        paid or incurred will be deemed to be advanced by the Lender and will
        form part of the Loan and  bear interest at the Interest Rate
        computed from the date paid or incurred by the Lender.

General Indemnity

9.5  The Borrower shall indemnify and hold the Lender and its employees,
counsel and agents (each, an "Indemnified Person"), harmless from and against
any claim which may be instituted or asserted against or incurred by any such
Indemnified Person as the result of credit having been extended or not
extended under this Agreement, the Security Documents and the other Loan
Documents or otherwise in connection with or arising out of the transactions
contemplated hereunder or thereunder, including any claim as a result of an
Environmental Activity or any for non-compliance with Environmental Law and
costs and legal costs and expenses of disputes between the parties to this
Agreement; provided, that Borrower shall not be liable for indemnification of
an Indemnified Person to the extent that any such claim is finally determined
by a court of competent jurisdiction to have resulted solely from such
Indemnified Person's gross negligence or willful misconduct.  Notwithstanding
<PAGE>
                                     - 21 -

any other provisions of this Agreement, the indemnity obligations of the
Borrower hereunder and under the Security Documents and Loan Documents shall
survive the termination of this Agreement and indefeasible payment in full of
the Indebtedness.

                                  PART 10

                     CONDITIONS PRECEDENT TO FUNDING
Advance

10.1  The obligation of the Lender to fund any Advance is conditional upon
fulfilment of the following conditions:

        (a)  no representation made by the Borrower or the General Partner
pursuant to this Agreement or any of the Security Documents or Loan Documents
is then untrue or incorrect in any material respect;

        (b)  no default or Event of Default has occurred or will occur after
        giving effect to such Advance;

        (c)  the execution and delivery of the Security Documents and the
        Loan Documents, provided that the Specific Assignment shall be
        executed and delivered in accordance with Section 8.1(s);

        (d)  registrations and filings as required to perfect and maintain
        the security created by the Security Documents;

        (e)  the payment of the Commitment Fee;

        (f)  the delivery by DESC, as additional consideration for entering
        into this Agreement which shall be fully earned and non-refundable on
        the date hereof, of share warrants providing for the acquisition of
        312,500 common shares in DESC, a publicly traded company listed on
        the Nasdaq OTCBB under the symbol DYMTF (the "Warrants"), which
        Warrants shall:

          (i)  have a three year term; and

          (ii)  be exercisable at a price per share equal to the lesser of:
          (y) 105% of the average closing price per share for such shares,
          calculated with reference to the ten trading days immediately prior
          to the date hereof; and (z) US$0.50 per share;

        (g)  the execution and delivery of landlord waivers or certificates,
        acknowledgements, payout letters, releases, waivers or discharges by
        the holder(s) of any existing secured debt of the Borrower including,
        without limitation, Magellan Aerospace Limited, in each case, in form
        and substance satisfactory to the Lender acting reasonably;

<PAGE>
                                     - 22 -

        (h)  subject to para 8.4(a), the payment of all fees and expenses
        incurred by the Lender from time to time in connection with the
        preparation, negotiation, and/or administration of the Security
        Documents and the Loan Documents (including legal fees and
        disbursements of counsel to the Lender);

        (i)  the completion by the Lender of all due diligence relating to
        the Borrower as the Lender deems necessary, with results satisfactory
        to the Lender;

        (j)  the delivery of a certificate of insurance evidencing the
        insurance required by this Agreement;

        (k)  delivery of an executed copy of the lease agreement dated
        February 19, 2004 between the Borrower and Erie Flooring & Wood
        Products; the partnership agreement of the Borrower;

        (l)  the Lender will have received up to date financial statements of
        DESC and projections for the Borrower, which shall be satisfactory to
        the Lender, as determined in its sole discretion;

        (m)  there will be no action, suit or proceeding pending or
        threatened against the Borrower or the General Partner or DESC which
        could, in the reasonable opinion of the Lender, have a material
        adverse effect on either of them;

        (n)  no material adverse changes in the business of, financial
        condition or outlook relating to the Borrower or DESC shall have
        occurred, as determined by the Lender in its sole discretion; and

        (o)  the Borrower will have delivered or caused to be delivered to
        Lender such other items, documents, evidences, officer's certificate
        and solicitors opinions pertaining to the Loan, this Agreement, the
        Security Documents and the Loan Documents, as may be reasonably
        requested by Lender and needed to implement the terms of the Loan.

Benefit

10.2  The conditions set forth in para 10.1 are for the sole and exclusive
benefit of the Lender and may be waived by the Lender, in its sole
discretion, in writing in whole or in any part on or before the fulfilment
thereof.

                                   PART 11

                              GENERAL PROVISIONS

Time of Essence

11.1  Time will be of the essence of this Agreement.

<PAGE>
                                     - 23 -

Governing Law

11.2  This Agreement will be construed in accordance with and governed by the
laws of the Province of Ontario and the federal laws of Canada applicable
therein.

Further Acts

11.3 Forthwith upon request by the Lender, the Borrower will execute and
deliver all such further deeds, documents, and instruments and will do all
such further acts and things as in the reasonable opinion of the Lender or
its solicitors are necessary or advisable in order to carry out, give effect
to, or perfect the provisions and intent of this Agreement, the Security
Documents, the Loan Documents, and the transactions contemplated hereby.

Severability

11.4  If any provision contained in this Agreement is for any reason held by
a Court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect, then at the option of the Lender such invalid, illegal, or
unenforceable provision will be severable from and will not affect any other
provision of this Agreement and this Agreement will he construed as if such
invalid, illegal, or unenforceable provision had never been contained herein.

Non-Merger

11.5  The taking of a judgement by the Lender will not operate as a merger of
any of the Security Documents, Loan Documents or the Indebtedness or in any
way suspend payment or affect or prejudice the rights, powers, and remedies
of the Lender in connection with the Security Documents, Loan Documents or
the Indebtedness or the Lender's right to interest in the manner described in
this Agreement.

Survival

11.6  All representations, warranties, covenants, and agreements made in this
Agreement or in any declaration, certificate, or other instrument delivered
in connection herewith are material and will conclusively be deemed to have
been relied upon by the Lender notwithstanding any prior or subsequent
investigation by the Lender, will survive advances on account of the Loan and
the fulfilment of all transactions and deliveries contemplated hereunder, and
will continue in full force and effect so long as any of the Indebtedness
remains outstanding.

Security Documents

11.7  It is understood and agreed by the parties hereto that:

        (a)  notwithstanding the terms and provisions of any of the Security
        Documents made by the Borrower, if the security thereby constituted
        shall become enforceable, the Borrower shall not be liable to pay any
        greater amount than the aggregate of all monies actually owing by the
        Borrower to the Lender hereunder and all other obligations and
        liabilities under the Security Documents and Loan Documents shall
        stand as continuing security only for the obligations constituted or
        contemplated by this Agreement;
<PAGE>
                                     - 24 -

        (b)  all of the terms and conditions contained in the Security
        Documents are incorporated and deemed to be part of this Agreement,
        whether specifically set forth herein or not, provided that if there
        is any conflict or inconsistency between the provisions of the
        Security Documents or Loan Documents and this Agreement then the
        provisions of this Agreement shall govern; and

        (c)  notwithstanding that any of the Security Documents made by the
        Borrower may be expressed to be payable on demand, the Lender shall
        not be entitled to make demand thereunder unless and until the Lender
        is entitled to forthwith declare the Indebtedness of the Borrower to
        the Lender to be forthwith due and payable pursuant to the provisions
        of this Agreement.

Deemed Representations

11.8  All statements contained in any declaration, certificate, or other
instrument delivered to the Lender or the Lender's counsel in connection with
this Agreement will be deemed to be representations and warranties by the
person making the same.

Notice

11.9  Notwithstanding anything herein contained and whether or not expressly
stipulated herein, every notice or other communication contemplated hereby or
otherwise relating hereto shall be in writing. Every notice required or
permitted to be communicated hereunder, may be:

        (a)  served personally by leaving it with the party to whom it is to
        be communicated,

        (b)  communicated by telecopy or facsimile transmission to the party
        to whom it is to be communicated, or

        (c)  mailed by pre-paid registered mail (with acknowledgement of
        receipt requested) to the party to whom it is to be communicated.

If a notice is served personally, it shall be deemed to have been validly
communicated to and received by the party to whom it was addressed on the
date on which it was delivered. If a notice is communicated by telecopy or
facsimile transmission it shall be deemed to have been validly communicated
to and received at the time of transmission by the party to whom it was
addressed if the sender possesses a confirmation of the delivery of the
telecopy. If a notice is mailed as aforesaid, it shall be deemed to have been
validly communicated to and to have been received by the addressee thereof on
the fifth day of regular postal service following the mailing thereof in
Canada.  The address of any party may be changed by written notice as
contemplated by this para 11.9, and the respective addresses of the parties
hereto for the communication of any notice shall be as follows:
<PAGE>
                                     - 25 -

as to the Borrower:

                230 - 1700 West 75th Avenue
                Vancouver, British Columbia
                V6P 6G2

                Attention:  Andrew Kingston
                Fax No:  604-267-6005

as to the Lender:

                c/o Megacity Recycling Inc.
                39 Fenmar Drive
                Toronto, Ontario
                M9B 1M1

                Attention:  Lawrence Herman
                Fax No.:  416-745-3478

Relationship

11.10  It is understood and agreed by Borrower and Lender that Lender's role
is strictly that of a Lender and not that of an equity partner or joint
venture.

Entire Agreement

11.11  This Agreement merges and supersedes all prior negotiations,
representations, and agreements, and expresses the entire agreement of the
parties hereto with respect to the transactions contemplated hereby.

Amendments

11.12  This Agreement may not be amended nor may any term or covenant hereof
be waived, discharged, or terminated except by an instrument executed by the
parties hereto.

Assigns

11.13  The rights and obligations under this Agreement (and the Security
Documents and Loan Documents) may be assigned in whole or in part by the
Lender but are not assignable by the Borrower except with the prior written
consent of the Lender.

Enurement

11.14  This Agreement shall be binding upon, and enure to the benefit of the
parties hereto and their respective successors, and permitted assigns.

[SIGNATURE PAGE FOLLOWS]


<PAGE>
                                     - 26 -

IN WITNESS WHEREOF the parties have executed this Agreement as of the day and
year first above written.

ENVIRONMENTAL ENGINEERING & CONSULTANTS LIMITED


Per: /s/                                      /s/
    ----------------------------             ----------------------------
    Name: Pilkington (Bahamas) Ltd.          Name: Ramsay (Bahamas) Ltd.
    Title: Director                          Title: Director

WEST LORNE BIOOIL CO-GENERATION LP,
by its general partner DYNAMOTIVE CANADA INC.


Per: /s/ Andrew Kingston
    ----------------------------
    Name: Andrew Kingston
    Title: President

DYNAMOTIVE CANADA INC.


Per: /s/ Andrew Kingston
    ----------------------------
    Name: Andrew Kingston
    Title: President & CEO


<PAGE>

                                 SCHEDULE 1.1(r)

                                 POWER ISLAND
                               (see attached)

Product

- OGT2500 Power Generation Module dimensions are 36 Metric Tonnes, 3 X 3 X
10.5 Meters;
- BioFuel Module 30 Metric Tonnes 3 X 3 X 12 Meters; and
- Control Module 1 Metric Tonne 2 X 3 X 8 Meters.

Balance of Plant

- Generator, metering, protection and control
- Generator synchronizer
- Generator voltage regulator
- Generator switchgear
- Generator output transformer
- Motor control centre (MCC) and line voltage power supply
- DC power supplies and battery chargers
- Gas turbine air inlet filter housing
- Gas turbine air intake silencer
- Gas turbine exhaust silencer
- Gas turbine exhaust ducting, stack and insulation external to the package
  flange
- Gas turbine engine/gearbox/generator lube oil coolers
- Enclosure ventilation fans, ducting and silencers
- Enclosure ventilation ducting motorized dampers, louvers and rain hoods
- Enclosure ventilation inlet filters for dusty environments
- Enclosure heating system for cold climates
- Interconnecting power cabling between package skids and power supply
- Interconnecting control cabling between package skids and control system
- Interconnecting piping required for the external systems beyond the
  specified flanges at the package skid enclosures
- Heat Recovery Steam Generator (HRSG)
- HRSG bypass dampers and control
- Other equipment installed that would be required to operate the unit on
  Natural Gas.


<PAGE>
                               SCHEDULE 3.1(m)

                             LICENSES AND PERMITS

1.     Certificate of Approval (Air) from the Ontario Ministry of the
       Environment, Environmental Assessment and Review Branch

2.     License from the Ontario Energy Board to generate electricity



<PAGE>

                                SCHEDULE 3.1(y)

                            LOCATION OF OPERATIONS

191 Jane Street
(other than the Excluded Lands as defined herein)
West Lorne, Ontario
N0L 2P0

230-1700 West 75th Avenue
Vancouver, British Columbia
V6P 6G2




<PAGE>

                                 SCHEDULE 3.1(aa)

                                   INDEBTEDNESS

                        West Lorne BioOil Co-Generation LP
                   Indebtedness, Suppliers owed more than C$50,000

US$  Name                     Due        Holdback        Total    Remarks

     Agri Urban                55,215                     55,215
     ATCO Noise Management    226,777                    226,777
X    Bruks Klockner           101,100      23,634        124,734
X    Harper International Ltd             105,971        105,971
     Hydro One                             75,000         75,000
     Le Groupe Simoneau        44,063      43,667         87,730
     Magellan Aerospace     3,843,383                  3,843,383
     Pyramid                  135,564      47,182        182,746
     Ramsay Group             531,407                    531,407
     UMA Engineering          382,567     277,000        659,567
     Wabi                     144,212     153,203        297,415
                           -------------------------------------
                        C$  5,464,288     725,657      6,189,945
                           -------------------------------------
Holdback to be paid in
   DynaMotive shares                      439,182        439,182
                           -------------------------------------
                        C$  5,464,288     286,475      5,750,763
                           -------------------------------------

Exchange rate (US$1 to Cdn$) = 1.230

<PAGE>
                                SCHEDULE 8.3(f)

                                 EXCLUDED LANDS

                                LEGAL DESCRIPTION

         ALL AND SINGULAR that certain parcel or tract of land and premises
situate lying and being in the Village of West Lorne in the Township of
Aldborough, in the County of Elgin, and Province of Ontario and being
composed of:

FIRSTLY: The easterly half of Lot 20 in Block "C" on the northerly side of
Main Street according to Registered Plan number 100;

SECONDLY: All that part of Isabella Street as shown in Block "C" according to
said Plan 100 which lies south of the Chessapeake and Ohio Railway formerly
the Pere Marquette Railway;

THIRDLY: The most westerly halves of Lots 1 and 2 on the easterly of Isabella
Street and in Block "D" according to the said Plan 100;

FOURTHLY: Part of Lot 98 registered plan number 199 in the Village of West
Lorne which parcel may be more particularly described as follows:

COMMENCING at a point in the northerly limit of Lot 98 being also the
southerly limit of Main Street a distance of 18.0 feet westerly from the
north west angle of Lot 99 registered plan number 199;

THENCE southerly parallel to the easterly limit of said Lot 98 a distance of
330.0 feet to the production westerly of the southerly limit of Lot 101;

THENCE westerly along the production of the southerly limit of Lot 101 a
distance of 132.0 feet more or less to a point on a line being the southerly
production of the easterly limit of Lot 96 registered plan number 199;

THENCE northerly along the said southerly production of the easterly limit of
Lot 96 and parallel to the easterly limit of Lot 98 a distance of 150. feet
to a point in the easterly limit of said Lot 96 distant 180. feet south of
the south limit of Main Street;

THENCE: easterly parallel to the south limit of Main Street a distance of 62.
feet more or less to a point;

THENCE northerly in a straight line to a point in the southerly limit of Main
Street distant 32.0 feet westerly of the north west angle of Lot 99
registered plan number 199;
<PAGE>

THENCE easterly along the southerly limit of Main Street a distance of 14.0
feet to the place of beginning;

TOGETHER with rights of way over, along and upon part of Lot 98 registered
plan number 199 and being a strip of land 18 feet in width line immediately
and adjoining the westerly limit of Lots 99 and 101 and extending from the
southerly limit of Main Street to the production westerly of the southerly
limit of Lot 101;

SUBJECT to the rights of persons entitled to use the railway spur lines
located on part of Lot 98 registered plan number 199;

FIFTHLY: Part of Lot 102 registered plan number 199 in the Village of West
Lorne and part of Lot 98 registered plan number 199 in the Village of West
Lorne which parcel may be more particularly described as follows;

COMMENCING at the north west angle of said Lot 102;

THENCE easterly along the northerly limit of said Lot 102 a distance of 132.5
feet more or less;

THENCE southerly parallel to the easterly limit of said Lot 102 a distance of
38.9 feet more or less to a point;

THENCE easterly parallel to the southerly limit of said Lot 98 a distance of
329. feet more or less to the easterly limit of said Lot 98;

THENCE southerly along the easterly limit of said Lot 98 a distance of 159.1
feet more or less to a point being the intersection of the easterly limit of
said Lot 98 and the production easterly of the northerly limits of Lots 103
and 104;

THENCE westerly along the production of Lots 103 and 104 a distance of 458.4
feet more or less to the north west angle of said Lot 103;

THENCE northerly along the westerly limit of said Lot 98 and Lot 102 a
distance 200. feet more or less to the place of commencement

SUBJECT to the rights of persons entitled to use the railway spur lines
located on part of Lot 98 registered plan number 199;

AND SUBJECT to the rights of way over, along and upon that portion of Lot 98
and the whole of Lot 102 according to said plan which may be more
particularly described as follows;

COMMENCING at the south west angle of said Lot 102;

THENCE westerly along the southerly limit of said Lot 102 to the south east
angle of said Lot 102;
<PAGE>
THENCE northerly along the easterly limit of said Lot 102 a distance of 27.1
feet;

THENCE westerly parallel to the southerly limit of said Lot 102 a distance of
65.0 feet;

THENCE northerly parallel to the easterly limit of said Lot 102 to a point in
the northerly limit of said Lot 102;

THENCE westerly along the northerly limit of said Lot 102 a distance of 132.5
feet to the north east angle of said Lot 102;

THENCE southerly 66 feet to the place of beginning;

TOGETHER with rights of way over, along and upon the following parcels of
land being one: Lot 105 registered plan number 199 and part of Lot 98
registered plan number 199 and being a strip of land along the southerly
limit and easterly limit of said Lot 98 and extending from the southerly
limit of the hereinbefore described parcel of land to the easterly limit of
said Lot 105 registered plan number 199 which said strip of land may be more
particularly described as follows;

COMMENCING at a point in the easterly limit of said Lot 98 where the same is
intersected by the production easterly of the northerly limits of Lots 104
and 103 of registered plan number 199 said point being the south easterly
angle of the lands hereinbefore described;

THENCE southerly along the easterly limit of said Lot 98 a distance of 192.2
feet more or less to the south east angle of said Lot 98;

THENCE westerly along the southerly limit of said Lot 98 a distance of 246.0
feet more or less to the intersection of southerly product of the easterly
limit of said Lot 105;

THENCE northerly along the said production of the easterly limit of said Lot
105 a distance of 32.0 feet;

THENCE easterly a distance of 28.28 feet to a point distant 12 feet northerly
from the southerly limit of said Lot 98 and 20 feet easterly from the
easterly limit of Lot 105;

THENCE easterly parallel to the southerly limit of said Lot 98 a distance of
224. feet more or less to a point 32 feet westerly from the easterly limit of
said Lot 98;

THENCE northerly a distance of 28.35 feet to a point distant 12 feet westerly
from the easterly limit of said Lot 98 and
<PAGE>
32.0 feet northerly from the southerly limit of said Lot 98 and THENCE
northerly parallel to the easterly limit of said Lot 98 a distance of 160.36
feet to the southerly limit of the hereinbefore described parcel;

THENCE easterly along the said southerly limit a distance of 12 feet to the
place of beginning.

AND

ALL AND SINGULAR those certain parcels or tracts of land and premises
situate, lying and being in the Village of West Lorne, in the County of Elgin
and being composed of:

FIRSTLY: Lot numbers 181 to 199 inclusive; 202, 203, 204; 228 to 263
inclusive; and 282 to 299 inclusive, all of the lots according to registered
plan number 75.

SECONDLY: Those parts of Anne Street, Hughes Street, Schleihauf Street,
Kinney Street and Victoria Street, as shown upon registered plan number 75
for the said Village of West Lorne, being more particularly described as
follows:

(1) that portion of Anne Street, lying between the westerly limit of the
Village and the westerly limit of Schleihauf Street.

(2) that portion of Anne Street, lying between the easterly limit of
Schleihauf Street and the westerly limit of Kinney Street.

(3) that portion of Anne Street, lying between the easterly limit of Kinney
Street and the easterly limit of lot 282, produced southerly to the southerly
limit of Anne Street.

(4) that portion of Hughes Street, lying between the westerly limit of the
Village and the westerly limit of Schleihauf Street.

(5) that portion of Hughes Street, lying between Schleihauf Street and the
easterly limit of lot 228 produced south-easterly in a straight line.

(6) that portion of Kinney Street, lying between the southerly limit of Anne
Street and the northerly limit of lot 286 produced in an easterly direction
to the easterly limit of Kinney Street.

(7) that portion of Kinney Street, lying between Anne Street and Hughes
Street.

(8) that portion of Kinney Street, lying south of Hughes Street.

(9) that portion of Schleihauf Street, lying between the northerly limit of
the right-of-way of the Canada Southern Railway and the northerly limit of
lot 293 produced in an easterly direction to the easterly limit of Schleihauf
Street.

(10) that portion of Victoria Street, lying west of the western limit of lot
number 203 produced southerly to the Canada Southern Railway