Industry Canada

                                                            PROJECT # 731-452522


                         TECHNOLOGY PARTNERSHIPS CANADA
                             CONTRIBUTION AGREEMENT
               DEVELOPMENT & DEMONSTRATION FOR COMMERCIALIZATION

This Agreement made this 29th day of July 1997


Between: HER MAJESTY THE QUEEN IN RIGHT OF CANADA
         as represented by the Minister of Industry (hereinafter referred
         to as the "Minister")

AND:     DynaMotivc Technologies Corporation, a corporation duly incorporated
         under the laws of the province of British Columbia,
         (hereinafter referred to as "DynaMotive")


INTRODUCTION

(i)  The  Minister  is  charged  with  certain  duties and  functions  which the
     Minister  is  required to carry out with the public  policy  objectives  of
     strengthening  the national  economy,  promoting  sustainable  development,
     increasing the international  competitiveness of Canadian  industry,  goods
     and services,  and encouraging  the fullest and most efficient  development
     and use of science and technology;

(ii) The Technology  Partnerships Canada Program is designed to promote economic
     growth and create  jobs in Canada,  in  knowledge-intensive  sectors of the
     economy, by strategically focussing its funding in results-oriented,  near-
     market  projects  that involve  activities  that foster  innovation,  rapid
     commercialisation and value-added production.

iii) DynaMotive has requested financial contribution from the Minister under the
     Technology  Partnerships  Canada Program to develop and  commercialize  the
     BioTherm  and BioLime  processes  for the purpose of  producing  BioOil and
     thermal  combustion  additives,  with the specific  intent of  commercially
     exploiting the Project results; and

(iv) It is in this  context of expected  results that the Minister has agreed to
     contribute to the Eligible Costs of the Project.

In consideration of their  respective  obligations  which are set out below, the
parties agree as follows:

--------------------------------------------------------------------------------
Technologies  Partnerships                      Partenariat technologique Canada
Canada 10th  floor,  300 Slater  Street,                 10th floor,  300 Slater
Street, OTTAWA, Ontario K1A 0C8                          OTTAWA, Ontario K1A 0C8

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1.0      The Agreement

1.1      Deadline for Signature

This  Agreement  must be signed by DynaMotive and received by the Minister on or
before August 15, 1997 failing which it will be null and void.

1.2      Entire Agreement

This Agreement is made pursuant to the Technology  Partnership  Canada  Program,
constitutes the entire agreement between the parties and supersedes all previous
documents, negotiations,  arrangements,  undertakings and understandings related
to its subject matter.

1.3      Definitions

For the purposes of this Agreement,

(a) "Agreement" means this agreement, including Schedule A ( Statement of Work),
Schedule B (Costing Memorandum),  Schedule C (Projected Sales and Royalties) and
Schedule D ( Project Fact Sheet for News Release).

(b) "Contribution" means  the  funding  provided  by  the  Minister  under  this
Agreement.

(c)  "Commencement  Date" means April 01,  1997,  which is the date by which the
Project must be commenced.

(d) "Commercial Production" means operation of certain Special Purpose Equipment
for purposes of producing Resulting Products on a term supply contract for three
years or longer.
(e)
"Completion  Date" means March 31, 2000,  which is the date by which the Project
must be completed.

(f) "Effective  Date" means April 1, 1997,  which is the first day of the period
during which  Eligible  Costs  incurred will be  contributed  to by the Minister
under this Agreement.

(g) "Eligible  Costs" means those costs  incurred with respect to the activities
set out in  Schedule  A  (Statement  of Work,  Appendix  B) in  accordance  with
Schedule B (Costing Memorandum).


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(h) "Fiscal Year" means the federal  government fiscal year beginning on April 1
and ending on the following March 31.

(i) "Gross Project  Revenues" means all sales,  revenues,  receipts,  monies and
considerations made or received by any person, including DynaMotive, directly or
indirectly  attributable  to the sale,  lease or other transfer of the Resulting
Products,  whether  received  in  cash,  or by way  of  benefit,  advantage,  or
concession,  without  deduction for doubtful  accounts or bad debts. A Resulting
Product will be deemed sold,  leased or transferred at the time the  transaction
is booked, in accordance with generally accepted accounting principles,  applied
on a  consistent  basis.  Transactions  with  related  persons  (as that term is
defined  in the Income  Tax Act) will be deemed  made in an amount  equal to the
highest price obtained for a similar product in the preceding calendar year.

(j)  "Interest  Rate"  means the Bank  Rate,  as  defined  in the  Interest  And
Administrative Charges Regulations, in effect on the due date plus 3% per annum,
compounded monthly.

(k)  "Intellectual  Property"  means  all  intellectual  property  rights in the
Project  Technology,  including,  without limitation,  all patents,  copyrights,
industrial  designs,  design  patents,  trade-marks,  and any  registrations  or
applications for registration of the same.

(1) "Project" means the development  and  commercialization  of the BioTherm and
BioLime  processes  for the  purpose of  producing  BioOil  and coal  combustion
additives as more fully described in the Statement of Work (Schedule "A").

(m) "Project  Technology"  means all technology  and technical  data  conceived,
produced,  developed  or  reduced  to  practice  in  carrying  out the  Project,
including,  without limitation,  all designs,  specifications,  data,  drawings,
plans, reports, patterns, models, prototypes,  practices,  inventions,  methods,
processes or other information.

(n) "Resulting Products" means

    (i) Combustion additives (BioLime (TM) and Noxolene (TM)) produced at any
        BioLime plant anywhere in the world and BioOil produced at any BioTherm
        plant anywhere in the world for uses other than the  production of
        BioLime and Noxolene(TM).
   (ii) all other commercial applications which incorporate results of the
        Project; and

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  (iii) all  other  commercial   applications   which  are  made  using  Project
        Technology, Intellectual Property or Special-Purpose Equipment.

(o) "Sharing Ratio" means the percentage set out in paragraph 3.1(a); and

(p) "Special-Purpose Equipment" means equipment (excluding jigs, tools, dies and
fixtures), including ancillary systems, instrumentation, special test equipment,
prototypes  and pilot plants to  demonstrate  the product,  service,  process or
system  to  he  commercialized,  that  is  purchased,  leased,  manufactured  or
otherwise  acquired  for the  purposes  of the  Project,  the item cost of which
exceeds  $250,000  (except for prototypes and pilot plants where no minimum cost
applies).


2.0      The Project

2.1      DynaMotive will carry out the Project in a  diligent  and  professional
         manner using qualified personnel.

2.2      Completion of Project

         DynaMotive will

(a) commence the Project on or before April 1, 1997; and

(b) complete the Project in accordance with the Statement of Work (Schedule "A")
on or before the Completion Date.

2.3      Material Changes

(a) No material changes will be made to the estimated total cost, scope, nature,
location,  financing  or timing of any element of the  Project or the  ownership
control or senior management of DynaMotive, without the prior written consent of
the Minister.

(b) DynaMotive will inform the Minister,  in a timely fashion,  of any factor or
event that it becomes  aware of that may  materially  affect the  outcome of the
Project.

2.4      Disposition of Material Assets

DynaMotive will not,  without the prior written  consent of the Minister,  sell,
transfer  or  otherwise  dispose  of, nor cease to use for the  purposes  of the
Project,  nor remove nor  relocate nor transfer to a use other than the Project,
any  material  asset  acquired  for the  Project.  the  cost of  which  has been
contributed  to by the Minister  (except in the ordinary  course of business for
replacement, refurbishment or improvement purposes, provided

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                                       -5-

that the  replacement  will be of equal or greater  quality than the  components
being replaced and will not reduce the effectiveness of the Project).

2.5      Dividend  Restriction

DynaMotive   will  not  make  any   dividend   payments  or  other   shareholder
distributions  that would prevent it from implementing the Project or that would
prevent it from making the royalty payments required in this Agreement.


3.0      The Contribution

3.1      Sharing, Ratio and Contribution Ceiling

Subject to all the other provisions of this Agreement,  the Minister will make a
repayable  Contribution  to  DynaMotive , with  respect to the  Project,  of the
lesser of:

(a) 37 % of the Eligible Costs; and

(b) $8,235,795.

3.2      Annual Contribution Distbursment Limits

Disbursement of the Contribution  will not exceed the following  amounts in each
of the following Fiscal Years:

1997 - 1998 $ 2,068,261
1998 - 1999 $ 2,411,070
1999 - 2000 $ 3,756,464

and the Minister  will have no  obligation to pay any amount in any other Fiscal
Years.  No  portions  of these  maximum  annual  amounts  can be rolled  over to
previous or subsequent  Fiscal Years,  without the prior written  consent of the
Minister, who will consider any such requests on a case-by-case basis.

3.3      Eligible Supported Cost Period

The Minister will not  contribute to any Eligible  Costs  incurred by DynaMotive
prior to the Effective Date nor after the Completion Date.

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3.4      Project Financing and Progress

The Minister  will have no  obligation  to make all or part of the  Contribution
unless the Minister remains  satisfied with the overall financing of the Project
and the progress of the Project.

3.5      Environmental  Protection  Measures

The Minister, being satisfied that any potentially adverse environmental effects
that may be caused by the Project are insignificant,  will have no obligation to
make all or part of the  Contribution  unless  DynaMotive has  incorporated  and
utilized  environmental  protection  measures in  relation  to the Project  that
satisfy the  requirements  of all  regulatory  bodies having  jurisdiction  over
DynaMotive  or the Project,  or both,  and certifies to the Minister that it has
done so.

3.6      Annual Environmental Compliance Certification

Any certification  required pursuant to subsection 3.5 must be provided together
with  the  first  claim  for  payment  under  this  Agreement,   and  subsequent
certifications must be provided annually.

3.7      Set-off  Rights of Minister

The  Minister  may  set  off  against  the  Contribution,  any  amounts  owed by
DynaMotive to Her Majesty in Right of Canada,  including amounts pursuant to any
other agreement for which the Minister is responsible,  and agreements under the
Defence Industry Productivity Program.


4.0      Claims for Payment

4.1      Claim Procedures

The Minister  will pay the  Contribution  to  DynaMotive  in respect of Eligible
Costs Incurred on the basis of itemized claims which will:

(a) be submitted in writing not more frequently than quarterly;

(b) be certified by a senior  officer of  DynaMotive;

(c) be accompanied by details of all costs being claimed,  substantiated by such
documents as may be required by the Minister,  and presented in accordance  with
the major elements identified in Schedule A (Statement of Work);

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                                       -7-

(d) be accompanied by confirmation of any Statement of Work milestones completed
during the claim  period;  and

(e) include a deduction for any Eligible Costs included in previous claims which
have not been paid.

4.2      Hold-Back  Rights

The Minister will have no  obligation  to pay more than 90% of the  Contribution
prior to the date on which the Minister has approved the final claim referred to
in subsection 4.3.

4.3      Final Claim

Within 90 days of the  Completion  Date,  the final  claim for  payment  will be
submitted by DynaMotive, accompanied by:

(a) an itemized statement of all Eligible Costs incurred and paid in performance
of the Project

(b)  certification  by a senior  officer of DynaMotive  that the Eligible  Costs
referred to in the itemized statement:

     (i) have been incurred and paid,

    (ii) are related to the activities described in the Statement of Work
         (Schedule "A"); and

   (iii) are in compliance with the requirements set out Costing Memorandum
         (Schedule "B"); and

(c) a final report of the Project in accordance with subsection 7.5.

Upon  approval by the  Minister of We final  claim,  the  Minister  will pay any
outstanding amount of the Contribution.

4.4      Audit Rights

The Minister may require  that any claim  submitted  for payment be certified by
DynaMotive auditor or by an auditor approved by the Minister.

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4.5      Overpayment by Minister

Where for any reason,

(a) DynaMotive is not entitled to the Contribution; or

(b) the Minister determines  that  the  amount  of  the  Contribution  disbursed
exceeds the amount to which DynaMotive is entitled,

DynaMotive  will repay to the Minister,  promptly and no later than 30 days from
notice from the Minister, the amount of the Contribution disbursed or the amount
of the excess,  as the case may be,  together with interest at the Interest Rate
from the date of the notice to the day of repayment to the Minister in full. Any
such amount is a debt due to Her  Majesty in Right of Canada and is  recoverable
as such.

5.0      Royalty Payments

5.1      Royalty Rate

DynaMotive  will pay to the Minister a royalty of 2% of Gross  Project  Revenues
and will terminate when cumulative repayments have reached $16,000,000.  Payment
will be made annually to the Minister 45 days after the end of the  DynaMotive's
fiscal year end, December 31. The first royalty payment will be due February 15,
2003.

5.2      Royalty Base

The royalty in subsection 5.1 is payable on Gross Project  Revenues derived from
sales after  December  31,  2001,  to  facilities  with a  nameplate  generating
capacity  over 50 MWe and sales after  December  31, 2002 to  facilities  of any
size.  Revenues derived from sales of resulting  products  produced in the pilot
and demonstration  facilities are exempt from royalty base while operating in as
a pilot or demonstration facility.

5.3      Royalty Statements and Payments

DynaMotive  will provide to the Minister a statement,  certified by DynaMotive's
senior  financial  officer of the Gross Project  Revenues  generated  during the
period beginning on the date specified in subsection 5.2, and ending on the last
day of  DynaMotive's  fiscal year.  The  statement  and royalty  payment will be
provided  to  the  Minister  no  later  than  45  days  after  the  last  day of
DynaMotive's fiscal year and annually thereafter.

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5.4      Late Payments

DynaMotive  will pay  interest  calculated  and  compounded  monthly  on overdue
royalty  payments,  at the  Interest  Rate  from the date on which  the  royalty
payment is due until payment in full. Such interest is payable without notice to
DynaMotive.  and in addition  to any  remedies  of the  Minister  for default by
DynaMotive, as set out in section 12.0 of this Agreement.

6.0      Intellectual Property and Special-Purpose Equipment

6.1      Ownership of Technology

DynaMotive will obtain and retain title to all Intellectual Property and Project
Technology.

6.2      Commitment to Exploitation in Canada

(a) DynaMotive will, within a reasonable time and  to  the  extent  that  it  is
reasonable in accordance with sound business ,judgment

    (i) produce the Resulting Products in Canada; and

   (ii) promote, distribute and sell the Resulting Products in Canada and
        elsewhere;

except in the case of the production of BioLime and BioOil at foreign facilities
owned by DynaMotive.

(b)  DynaMotive  will  perform  all   value-added   engineering,   design,   and
manufacturing;   in  Canada,   except  for  construction  and  certification  of
facilities and sourcing of locally available components,  as per Appendix "C" of
the Statement of Work.

6.3      Limitation on Transfer of Technology

(a) DynaMotive will not, without the prior written consent of the Minister,

    (i) grant  any  right  in or  transfer  title  to  the  Project  Technology,
        Intellectual  Property,  or  Special-Purpose  Equipment,  including  the
        assignment, sale, licence and lease to any person; or

   (ii) make   use   of   the   Project   Technology,   Intellectual   Property,
        Special-Purpose Equipment or any part thereof.

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for  the  purpose  of  producing  or  manufacturing  outside  Canada  any of the
Resulting  Products or any product that is substantially  the same as any of the
Resulting  Products  and  is  made  using  Project  Technology  or  Intellectual
Property,  except in the case of the production of BioLime and BioOil at foreign
facilities owned by DynaMotive.

(b) Patent Disclosures

Notwithstanding  paragraph (a),  DynaMotive  does not require the consent of the
Minister to make any disclosure of  information  required by law for the purpose
of obtaining a patent;

(c) Licence for Use Only

Notwithstanding  paragraph (a),  DynaMotive  does not require the consent of the
Minister to licence or sub-licence  for use of any of the Project  Technology or
Intellectual  Property  in  conjunction  with the  sale of any of the  Resulting
Products;

(d) Compliance by Licensees

DynaMotive will impose the restriction on transfer  outlined in paragraph (a) on
a11 licensees,  and other transferees of title to or any right to use any of the
Project Technology or Intellectual Property; and

(e) Sub-Contractors and Consultants

DynaMotive will ensure that no sub-contractor or consultant  acquires any rights
to the Project Technology,  Intellectual Property and Special-Purpose  Equipment
without the prior written consent of the Minister.

6.4 Patent  Protection

(a) DynaMotive will apply for appropriate  patent  protection for any inventions
resulting from the Project.

(b) If DynaMotive elects not to apply & appropriate patent protection in respect
of inventions resulting from the Project, DynaMotive will

    (i) so advise the Minister forthwith; and

   (ii) if so requested by the Minister, assign the invention to Her Majesty the
        Queen in Right of Canada, together with all patents, patent applications
        and rights to obtain patents therefor.

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6.5      Transfer of Special Purpose Equipment into Production in Canada

If DynaMotive  transfers Special Purpose  Equipment to commercial  production in
Canada.  DynaMotive will pay to the Minister,  the greater of an amount equal to
that of:

(a) multiplying the proceeds of disposition of the Special-Purpose Equipment by
the Sharing Ratio; and

(b) multiplying the fair market value of the Special-Purpose Equipment,  on  the
date of the transfer to commercial production by the Sharing Ratio,

but in no event will the amount  payable  exceed the amount of the  Contribution
paid by the Minister under this Agreement.  DynaMotive will make such payment by
way of conditional royalty stream as described in section 5.0. In the event that
tile  Cumulative  royalties are less than the above amount by December 31, 2011,
then DynaMotive will pay the difference to the Minister within 45 days.

6.6      Disposition of Special-Purpose Equipment

If DynaMotive  transfers to commercial  production outside of Canada,  transfers
outside of Canada,  sells,  leases or otherwise disposes of any Special- Purpose
Equipment, DynaMotive will pay to the Minister the greater of an amount equal to
that of:

(a) multiplying the proceeds of disposition of the Special-Purpose  Equipment by
the Sharing Ratio; and

(b)  multiplying the fair market value of the  Special-Purpose  Equipment on the
date of the transfer to commercial production, transfer outside of Canada, sale,
lease or other disposition by the Sharing Ratio,

but in no event will the amount  payable  exceed the amount of the  Contribution
paid by the Minister  under this  Agreement.  DynaMotive  will make such payment
within 90 days of transfer to commercial production outside of Canada,  transfer
outside of  Canada,  sale,  lease or other  disposition  of any  Special-Purpose
Equipment.

Any repayment made by DynaMotive to the Minister with regards to the disposition
of Special  Purpose  Equipment  will be credited  towards  the total  cumulative
royalty payment cap referred to in Section 5.0.

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7.0      Monitoring and Reporting

7.1      Annual Financial Statements

DynaMotive will provide the Minister with a copy of its audited annual financial
statement  within  one  hundred  and  twenty  (120)  days  of the end of each of
DynaMotive's fiscal years.

7.2      Access Accounts and Records

DynaMotive  will, at its own expense,  preserve and make available for audit and
examination  by the  Minister or his  representatives  the books,  accounts  and
records of the Project and of the information  necessary to calculate any amount
owing to the Minister under this Agreement.  The Minister will have the right to
conduct such additional audits at his expense as he may consider necessary using
the audit staff of tile  Minister.  tile Audit  Services Group of Consulting and
Audit Canada, an independent  auditing firm or DynaMotive's  external  auditors.
Any licence  agreement  for the  production of the  Resulting  Products  between
DynaMotive  and a third  party will  contain  similar  provisions  to permit the
Minister to audit the calculation of royalties payable under this Agreement.

7.3      Access to Project

DynaMotive will provide the representatives of the Minister reasonable access to
DynaMotive's  premises to inspect and assess the  progress of the Project or any
element  thereof and supply  promptly on request  such data as the  Minister may
reasonably require for statistical or project evaluation purposes.

7.4      Access to Third-PArty Information

DynaMotive  will,  to the  extent  practicable,  assist  the  Minister  with the
implementation  of this Agreement and facilitate  access by the Minister to from
third parties.

7.5      Project Progress Reports

DynaMotive  will  provide  the  Minister  with   semi-annual   progress  reports
commencing on September 30, 1997 and ending with the final report within 60 days
following the Completion Date. The reports will include:

(a) a description of the progress in performance of the Statement of Work in
comparison with the milestones contained in the Statement of Work;

(b) sufficient information to enable the Minister to assess the Project's
contribution to jobs and economic growth;

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                                      -13-

(c) an update of the Project cost estimates;

(d) an indication of any delay in completing the Project;

(e) an update of the projected market and any changes in the projected sales and
    royalties as set out in Schedule "C";

(t) a cumulative list summarizing any acquisition and Current holdings of
Special-Purpose Equipment; and

(g) an indication of any planned  transfer to  commercial  production,  transfer
outside  of  Canada,   sale,  lease  or  other  disposition  of  Special-Purpose
Equipment.

7.6      Commercial Exploitation Reports

From April 1, 1997 until the end of the royalty period, DynaMotive will continue
to provide reports to the Minister on an annual basis which will indicate:

(a) whether the Project is  achieving  its  projected  commercial  and  economic
objectives including job creation;

(h) an update of the projected market and any changes in the projected sales and
royalties as set out in Schedule "C"; and

(c) an indication of any completed or planned transfer to commercial production,
transfer outside of Canada,  sale, lease or other disposition of Special-Purpose
Equipment.

8.0      Special Conditions, Sourcing of Major Plant Componentry

8.1 The nature of the technology  being developed and the business  contemplated
by DynaMotive makes commercial  exploitation of the technology outside of Canada
a necessity.  DynaMotive shall perform all value-added engineering,  design, and
manufacturing in Canada,  except for  construction and  certification of foreign
facilities and sourcing of locally available components,  as per appendix "C" of
the Statement of Work.

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                                      -14-

9.0      Representations, Warranties and Undertakings

9.1      Power and Authority of Recipient

DynaMotive  represents  and warrants  that it is duly  incorporated  and validly
existing  and in good  standing  under the laws of Canada  and has the power and
authority  to carry on its  business,  to hold  property  and to enter into this
Agreement and undertakes to take all necessary action to maintain itself in good
standing and to preserve its legal capacity.

9.2      Authorized  Signatories
DynaMotive  represents and warrants that the  signatories to this Agreement have
been duly authorized to execute and deliver this Agreement on its behalf.

9.3      Binding Obligations

DynaMotive represents and warrants that the execution,  delivery and performance
of this Agreement  have been duly and validly  authorized and that when executed
and  delivered,  this  Agreement  will  constitute  a legal,  valid and  binding
obligation of DynaMotive enforceable in accordance with its terms.

9.4      No Pending Suits or Actions

DynaMotive  warrants that it is under no obligation  or  prohibition,  nor is it
subject to or threatened  by any actions,  suits or  proceedings  which could or
would  prevent  compliance  with the  Agreement,  and will  advise the  Minister
forthwith of any such occurrence during the term of this Agreement;

 9.5     No Gifts or Inducements

DynaMotive  represents  and warrants that it has not, nor has any person offered
or  promised  to any  official  or employee of Her Majesty the Queen in Right of
Canada, for or with a view to obtaining this Agreement, any bribe, gift or other
inducement,  and it has not nor has any person on its behalf employed any person
to solicit this Agreement for a commission, fee or any other consideration.

9.6      Compliance with Environmental Protection Requirements

DynaMotive   warrants  and  undertakes  that  it  will  maintain   environmental
protection  measures in relation to the Project that satisfy the requirements of
all regulatory  bodies having  jurisdiction  over  DynaMotive or the Project and
certify to the Minister annually its compliance with such requirements.

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                                      -15-

9.7      Incrementality of Contribution

DynaMotive  represents  and warrants  that the Project  would not be  undertaken
without the financial assistance of the Minister under this Agreement.

10.0     Other Government  Assistance

10.1     Disclosure

DynaMotive hereby  acknowledges that for the purposes of this Agreement,  except
for  scientific  research and  experimental  development  tax credits,  no other
federal,  provincial or municipal  government  assistance  has been requested or
received by DynaMotive for the Eligible Costs of this Project.

10.2     Continuing Disclosure Obligation

DynaMotive  will inform the Minister  promptly in writing of any other  federal,
provincial or municipal  government  assistance (except for scientific  research
and  experimental  development tax credits) to be received for Eligible Costs of
the  Project  and the  Minister  will have the right to reduce the  Contribution
under this Agreement to the extent of any such assistance.

11.0     Dispute Resolution

11.1     Optional Mediation or Arbitration

If a  dispute  arises  concerning  the  application  or  interpretation  of this
Agreement,  the parties  will  attempt to resolve the matter  through good faith
negotiation.  and may, if necessary and the parties consent in writing,  resolve
the matter through mediation by a mutually acceptable mediator or arbitration in
accordance with the Commercial  Arbitration  Code set out in the schedule to the
Commercial  Arbitration Act (Canada),  and all regulations made pursuant to that
Act.

12.0     Default and Recovery

12.1     Events of  default

The Minister may declare an event of default has occurred if:

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                                      -16-

(a) DynaMotive  becomes  insolvent or is adjudged or declared  bankrupt or if it
goes into  receivership or takes the benefit of any statute from time to time in
force relating to bankrupt or insolvent debtors;

(b) an order is made which is not being contested or appealed by DynaMotive or a
resolution is passed for the winding-up of DynaMotive or it is dissolved;

(c) DynaMotive has intentionally submitted false or  misleading  information  to
the Minister or made a false or misleading representation;

(d) in the opinion of  the  Minister,  acting,  reasonably, a  material  adverse
change in risk the Project has occurred;

(e) any term, condition or undertaking in this Agreement is not complied with in
any material respect; or

(f) DynaMotive neglects or fails to pay to the Minister any amount in accordance
with this Agreement;

provided  that the Minister will not declare an event of default has occurred by
reason of  paragraphs  (c),  (e) or (f) unless the  Minister has given notice to
DynaMotive of the condition or event which in the Minister's opinion constitutes
an event of default and DynaMotive has failed,  within 30 days of receipt of the
notice,  to demonstrate to the  satisfaction  of the Minister that it has either
corrected the condition or event complained of or demonstrated that it has taken
such steps as are  necessary  to correct the  condition or event and so notified
the Minister.

12.2     Remedies on Default

If the Minister declares that an event of default has occurred, the Minister may
exercise one or more of the following remedies:

(a)  suspend  any  obligation  of the  Minister  to  contribute  or  continue to
contribute to the Eligible Costs of the Project  including any obligation to pay
any amount owing prior to the date of such suspension;

(b)  terminate  any  obligation  of the  Minister to  contribute  or continue to
contribute to the Eligible Costs of the Project, including any obligation to pay
any amount owing prior to the date of such termination;

(c) require  DynaMotive to repay to the Minister all or part of the Contribution
which has been paid by the Minister to  DynaMotive,  together with interest from
the date of demand at the Interest Rate;

<PAGE>

                                      -17-

(d) require DynaMotive to pay to the Minister all or part of the  royalties  and
other amounts due under this Agreement;

(e) if an event of default has  occurred in  relation to  paragraph  12.1 (a) or
(b), or as a result of the failure of DynaMotive  to comply with the  provisions
of article 5.0 or subsections 6.1, 6.2 or 6.3, direct DynaMotive, and DynaMotive
will immediately comply, to transfer and deliver to the Minister,  at no cost to
the  Minister,  title to,  possession  of, and all rights of  DynaMotive  in the
Intellectual Property; and

(f) direct  DynaMotive and DynaMotive will immediately  comply.  to transfer and
deliver to the Minister, at no cost to the Minister, title to, possession of and
all rights of DynaMotive in the Special-Purpose  Equipment.

12.3     Remedies Cumulative

The Minister may exercise any or all of the remedies set out in subsection 12.2.
provided that in exercising any remedy in accordance  with paragraph  12,2(c) or
(d), in respect of any default  other than a breach of  paragraph  12.1(f),  the
Minister will credit  DynaMotive for any royalties  paid to the Minister  Cinder
this Agreement.

12.4     No Waiver

The fact that the Minister  refrains from  exercising a remedy he is entitled to
exercise Under this Agreement will not constitute a waiver of such right and any
partial  exercise of a right will not prevent the Minister in any way from later
exercising  any other right or remedy under this  Agreement or other  applicable
law.

12.5     Remedies Fair and Reasonable

DynaMotive  acknowledges  that in view of the public policy objectives served by
the  Minister's   agreement  to  make  the  Contribution,   the  fact  that  the
Contribution  comes from public  monies,  and that the amount of damages or loss
sustained by the Crown in the event of default is difficult to  ascertain,  that
it is fair and  reasonable  that the Minister be entitled to exercise any or all
of the  remedies  provided  for in  this  Agreement  and to do so in the  manner
provided for in this Agreement if an event of default occurs.

<PAGE>

                                      -18-

13.0     Announcements

13.1     Consent to Public Announcement

DynaMotive  hereby  consents  to a public  announcement  by or on  behalf of the
Minister  containing any of the information in the documents  attached hereto as
Schedule D (Project Fact Sheet for News Release).

13.2     Confidentiality Obligation

The Minister will inform DynaMotive of the date on which the public announcement
is to he made and  DynaMotive  will not disclose the existence of this Agreement
until such date.

14.0     Notice

l4.1     Form and Timing of Notice

Any notice,  information or document provided for under this Agreement, shall be
effectively given if delivered or sent by letter or facsimile,  postage or other
charges  prepaid.  Any notice  that is  delivered  shall have been  received  on
delivery; any notice sent by facsimile shall be deemed to have been received one
working day after having been sent,and any notice mailed shall be deemed to have
been received eight (8) calendar days after being mailed.

14.2     Change of address

DynaMotive or the Minister may change the address which they have  Stipulated in
this Agreement by notifying the other of the new address.

14.3     Addresses

Any notice to the Minister will be addressed to:

Director of Environmental Technologies
Technology Partnerships Canada
10th Floor, Journal Tower North
300 Slater Street
Ottawa, Ontario K1A OC8
Fax No: (613) 954-9117

Any notice to DynaMotive will be addressed to:

<PAGE>

                                      -19-

Rei Roth, President
3650 Westbrook Mall
Vancouver B.C. V6S 2L2
Fax No: 604-222-5545

15.0     Term of Agreement

15.1     This agreement will terminate the later of:

(a) Payment to the Minister by DynaMotive of all amounts due pursuant to this
Agreement; or

(b) December 31, 2011.


16.0     General Conditions

l6.1     Compliance with Laws

DynaMotive will comply with all federal, provincial and municipal laws governing
DynaMotive or the Project,  including hut not limited to statutes,  regulations,
by-laws and ordinances.

16.2     Members of the House of Commons and the Senate

No member of the House of Commons shall be admitted to any share or part of this
Agreement or to any benefit to arise therefrom. No person who is a member of the
Senate  shall,  directly or  indirectly,  be a party to or be  concerned in this
Agreement.

16.3     Annual Appropriations

Any payment by the Minister under this  Agreement  Agreement is subject to there
being all appropriation for the fiscal year in which the payment is to be made.

16.4     Confidentiality

Subject to Section 13.0 and to applicable laws,  including  including the Access
to Information Act shall keep  confidential  and shall not disclose the contents
of this Agreement nor the transactions  contemplated  hereby without the consent
of all parties.

16.5     No Assignment of Agreement


<PAGE>

                                      -20-

Neither this Agreement,  nor any part thereof nor any amount thereunder shall be
assigned by DynaMotive  without the prior written consent of the Minister.

16.6 Compliance with Post-Employment Provisions

DynaMotive  confirms  that  no   individual   for   whom   the   post-employment
provisions   of  the  Conflict   of   Interest    and  Post-Employment  Code for
Public   Office  Holders  or   the   Conflict  of  Interest and  Post-Employment
Code     for   the     Public    Service  apply,     will   derive    a   direct
benefit from this  Agreement  unless that  individual is in compliance  with the
applicable  post-employment  provisions.

16.7 No Partnership Created

The parties  declare  that  nothing  in this  Agreement  shall be  construed  as
creating  a  partnership,  joint  venture or agency  relationship  between   the
Minister  and DynaMotive.

16.8 Binding Agreement

This Agreement is binding on the parties and their  successors   and   permitted
assigns.

16.9 Severability

Any provision of this Agreement prohibited by law or otherwise  ineffective will
be ineffective  only to the extent of such  prohibition or  ineffectiveness  and
will be severable  without  invalidating  or otherwise  affecting  the remaining
provisions of the Agreement.

16.10 Signature in Counterparts

This Agreement may be signed in counterparts, each of which when taken together,
will constitute an original Agreement.

<PAGE>

                                      -21-


IN WITNESS  WHEREOF the parties  hereto have executed  this  Agreement as of the
date first above written.


                          HER  MAJESTY THE QUEEN IN RIGHT OF CANADA,
                          as  represented  by the  Minister of Industry

                          Per:/s/
                              -----------------------------------------
                              Technology Partnerships Canada 31/7/97


                          DYNAMOTIVE TECHNOLOGIES CORPOATION

                          Per:/s/
                              -----------------------------------------

                          Title: President & CEO
                              -----------------------------------------


<PAGE>

                                      -23-

2. KEY ACTIVITIES

To commercialize  the   BioLime   technology, DynaMotive   must  accomplish  the
following:

A.   Scale up of Production and Expand Scope of Waste Feedstock:

The primary focus will be on scaling up the BioTherm  pyrolysis process to a one
tonne per hour pilot plant  (current  bench-scale  process is 10 kg/hour) and to
diversify  the process to make bio-oil from various  organic  feedstock  such as
forest waste, agricultural waste, sewage sludge, and municipal solid waste.

The company expects to commission and performance  performance  test  the  pilot
plant by December 1998.

B.   BioLime Application Trials:

The general  objective for these trials is to identify the boiler  type(s) which
can best apply BioLime and to verify the economics of the technology. Each trial
will  examine  suitable  locations  and  methods of BioLime  injection,  conduct
performance  evaluations and investigate any long term impact on the boilers.

This activity will take place concurrently with the above task and will conclude
in March 1999.

C.   Commercial Demonstration of BioLime:

Regulated  utilities are reluctant to incorporate  process  technology which has
not been tested and proven on a commercial scale.  DynaMotive intends to Sponsor
the  Construction  and  operation of  BioLime/BioTherm  demonstration  plants to
support up to a 50 MW class coal combustor.

This  activity  will  start in July  1998 and  conclude  in  March  2000.  Major
milestone  include the  commissioning of  the  demonstration  BioTherm plant  in
November 1999 and the commissioning of the demonstration  BioLime plant December
1999.

A timeline highlighting major activities, tasks, and milestones  in attached  in
Appendix A.

3.   COST BREAKDOWN

The attached cost breakdown details project costs supported by TPC. (Appendix B)

4.   LIST OF ANY SPECIAL PURPOSE EQUIPMENT

The attached component list summarizes expected equipment costs in all stages of
the project and includes a list potential Canadian suppliers for individual
items where appropriate.  (Appendix C)

<PAGE>

                                      -24-

IMAGE OMITTED

<PAGE>

                                      -25-

IMAGE OMITTED

<PAGE>

                                      -26-

<TABLE>
<CAPTION>
                              Appendix B: Cost Breakdown 1997/98
---------------------------------------------------------------------------------------------------------------------------------
             eligibility cat.  Apr 97  May 97  Jun 97  Jul 97  Aug 97  Sep 97  Oct 97  Nov 97  Dec 97  Jan 98  Feb 98  Mar 98
---------------------------------------------------------------------------------------------------------------------------------
<S>                    <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>    <C>      <C>      <C>     <C>     <C>
Revenue - BioLime Sales           0        0       0       0       0       0       0       0       0         0       0       0
Cost of Goods Sold                0        0       0       0       0       0       0       0       0         0       0       0
Net Loss (profit)         2       0        0       0       0       0       0       0       0       0         0       0       0

Labour Costs              1   16,244  16,310  16,376  27,390  33,743  39,221  64,897  65,162  97,802    73,532  73,832  81,038
Operating/Subcontracts    1   28,115  28,161  28,208  53,828  43,784  57,760 182,730 183,032 183,335    44,147  44,220  50,700
Employee Benefits (@20%)  1    6,211   6,224   6,237   8,440   9,711  10,806  15,942  15,995  22,523    17,669  17,729  19,170
Marketing Personnel       1   14,811  14,811  14,811  14,811  14,811  14,811  14,811  14,811  14,811    14,811  14,811  14,811
Admin. Captial Exp.       1        0       0  51,171       0   6,170   8,171  17,577       0  21,983    22,086       0   2,558
Special Purpose Equipment 1   24,159  24,199  24,239  24,279       0       0 333,436 333,986 710,994   712,168 713,344 423,039
Patent Expenditures       1        0       0       0  38,947       0       0       0       0  39,270         0       0       0
Changes in Stocks         1        0       0       0       0       0       0       0       0       0         0       0       0
Materials                 1    3,116   3,122   3,127   7,566   5,552 100,113   5,571   5,580   5,589     5,598   5,608   5,617
Travel/Other              1    1,103   1,105   1,107   2,156   2,159   2,163   5,880   5,890   5,900     2,177   2,181   2,184
Indirect Overheads        2   29,175  29,237  29,300  39,647  45,615  50,761  74,884  75,132 105,797    82,996  83,278  90,047
Mktg. Travel & Promotion  2    4,007   4,013   4,020  10,693  17,366   4,040  10,713  17,386   4,060    10,733  17,407   4,080
Communications            2      590     591     592     634     667     696     814     816     967       863     865     899
Lease & Occupancy Charges 2    2,098   2,098   8,431  12,351  11,291  10,507  11,282  11,282  12,055     9,294   9,294   9,770
Amortization Pilot Plant  2   19,642  19,642  19,642  19,642  19,642  19,642  19,642  19,642  19,642    19,642  19,642  19,642
Royalties                 2        0       0       0       0  10,000       0       0       0       0         0       0       0

Eligible                  1   93,759  93,932 145,276 177,418 115,931 233,045 640,843 624,455 1,102,206 892,188 871,724 599,116
Ineligible                2   55,511  55,581  61,984  82,967 105,211  85,647 117,336 124,259   142,521 123,529 130,485 124,439
----------------------------------------------------------------------------------------------------------------------------------
Total Costs                 149,270 149,513 207,260 260,385 221,142 318,692 758,179 748,714 1,244,727 1,015,717 1,002,209 723,555
----------------------------------------------------------------------------------------------------------------------------------
TPC Supported (cat 1. @37%)  34,691  34,755  53,752  65,645  42,894  86,227 237,112 231,049   407,816   330,110   322,538 221,673
----------------------------------------------------------------------------------------------------------------------------------
TPC Contribution Rate 37%                                                       FY'97     Eligible                      5,589,893
                                                                                Totals    Ineligible                    1,209,470

                                                                                   TPC Support                          2,068,261
</TABLE>

<PAGE>

                        Appendix B: Cost Breakdown 1998/99

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------------
             eligibility cat.  Apr 98  May 98  Jun 98  Jul 98  Aug 98  Sep 98  Oct 98  Nov 98  Dec 98  Jan 99  Feb 99  Mar 99
---------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>    <C>     <C>     <C>     <C>     <C>     <C>     <C>    <C>      <C>      <C>    <C>     <C>
Revenue - BioLime Sales           0        0       0       0       0       0       0       0  31,491    31,543  31,595  31,648
Cost of Goods Sold                0        0       0       0       0       0       0       0  37,423    37,488  37,554  37,620
Net Loss (profit)         2       0        0       0       0       0       0       0       0   5,931     5,945   5,959   5,973

Labour Costs              1   81,368  81,700  92,412  92,788  93,166  59,964  60,208  86,551  65,508    88,386  95,843  95,913
Operating/Subcontracts    1   50,783  63,723 157,906 158,166 158,428 145,749 145,989 357,436 228,837   229,215 229,593 369,465
Employee Benefits (@20%)  1   19,989  19,920  22,065  22,142  23,127  16,336  17,260  22,424  20,153    26,190  27,579  27,606
Marketing Personnel       1   18,576  17,898  17,911  17,924  22,466  21,715  26,091  25,568  25,611    32,900  32,366  32,411
Admin. Captial Exp.       1    2,594       0       0       0   5,861       0   2,132       0       0     8,681       0       0
Special Purpose Equipment 1  423,738  44,863  44,937  45,011  45,085  45,160  45,234 426,857       0         0       0 542,856
Patent Expenditures       1        0       0       0  75,841       0       0       0       0  76,469         0       0       0
Changes in Stocks         1        0       0       0       0       0       0       0 226,703   2,778         0       0       0
Materials                 1    5,626  13,349  41,594  41,663  41,732  34,036  34,092  48,134  52,062    52,148  52,234  52,320
Travel/Other              1    2,188   2,192   7,840   7,853   7,866   7,879   7,892  13,596  16,469    16,496  23,498  23,525
Indirect Overheads        2   93,895  93,570 103,645 104,011 108,634  76,735  81,076 105,332  94,668   123,026 129,549 129,676
Mktg. Travel & Promotion  2    6,130   6,140   6,150  14,330  19,085   5,494   7,567   7,579   7,592    15,787  22,602   9,017
Communications            2    1,161   1,163   1,207   1,209     857     729     944   1,043   1,005     1,198   1,228   1,230
Lease   Occupancy Charges 2   15,090  15,090  16,167  16,167  16,323  13,038  13,211  15,672  14,675    13,317  13,939  13,939
Amortization Pilot Plant  2   19,642  19,642  19,642  19,642  19,642  19,642  19,642  19,642  19,642    19,642  19,642  19,642
Royalties                 2        0       0       0       0  10,000       0       0       0       0         0       0       0

Eligible                  1  604,862 243,643 384,663 451,388 397,730 330,838 338,899 338,899 487,888   454,015  461,114 1,144,097
Ineligible                2  135,918 135,605 146,812 155,359 174,541 115,638 122,440 122,440 142,521   178,915  192,919   179,476
---------------------------------------------------------------------------------------------------------------------------------
Total Costs                  740,781 379,249 531,475 616,747 572,271 446,476 461,339 1,356,536 631,400 632,930 654,033  1,323,574
---------------------------------------------------------------------------------------------------------------------------------
TPC Supported (cat 1. @37%)  223,779  90,148 142,325 170,714 147,160 122,410 125,393   446,689 180,519 167,986 170,612    423,316
---------------------------------------------------------------------------------------------------------------------------------
TPC Contribution Rate 37%                                                       FY'98     Eligible                      6,516,405
                                                                                Totals    Ineligible                    1,830,404

                                                                                   TPC Support                          2,411,070
</TABLE>


<PAGE>

                        Appendix B: Cost Breakdown 1999/2000

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------------
             eligibility cat.  Apr 99  May 99  Jun 99  Jul 99  Aug 99  Sep 99  Oct 99  Nov 99  Dec 99  Jan 2000 Feb 2000 Mar 2000
---------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>  <C>     <C>     <C>       <C>     <C>      <C>    <C>      <C>      <C>      <C>    <C>     <C>
Revenue - BioLime Sales       31,700  31,752  31,805    31,857  31,910  31,962  32,015  32,068  32,121    32,174  32,227  32,281
Cost of Goods Sold            37,686  37,752  37,819    37,885  37,952  38,018  38,085  38,152  38,219    38,286  38,354  38,421
Net Loss (profit)         2    5,986   6,000   6,014     6,028   6,042   6,056   6,070   6,084   6,098     6,112   6,126   6,141

Labour Costs              1   69,600  38,246  38,252     8,065  25,406  12,895  71,671   5,511  56,918     2,971   2,977   2,983
Operating/Subcontracts    1  154,038 433,048 154,086   433,096  14,642 154,159  14,690  14,715  14,739    14,763  14,788  14,812
Employee Benefits (@20%)  1   23,129  16,735  16,747    10,719  14,197  11,705  23,470  11,126  21,325    10,548  10,561  10,573
Marketing Personnel       1   36,317  35,685  35,714    35,743  35,773  35,802  35,832  40,252  39,822    39,859  39,897  39,935
Admin. Captial Exp.       1    2,488       0       0         0   2,168   2,682   6,092  21,128  35,523         0       0   1,462
Special Purpose Equipment 1 542,856 1,864,841 779,129 2,337,388 236,273 1,251,676    0 236,273       0         0       0       0
Patent Expenditures       1        0       0       0   110,511       0       0       0       0 111,427         0       0       0
Changes in Stocks         1        0       0       0         0       0       0  57,342       0  68,156         0       0       0
Materials                 1        0       0       0         0       0       0       0       0       0         0       0       0
Travel/Other              1   17,035  24,009  20,120    12,744   9,658   1,543   1,543       0       0         0       0       0
Indirect Overheads        2  108,645  78,613  78,665    50,351  66,689  54,982 110,247  52,264 100,174    49,546  49,607  49,668
Mktg. Travel & Promotion  2   11,116  11,134  11,153    18,803  25,756  11,909  12,630  15,462  15,488    22,446  29,405  15,564
Communications            2    1,464   1,351   1,353     1,244   1,310   1,266   1,297   1,564   1,635     1,632   1,635   1,637
Lease & Occupancy Charges 2   19,673  17,016  17,016    14,490  15,931  14,883  15,538  16,767  18,046    17,910  17,910  17,910
Amortization Pilot Plant  2   19,642  19,642  19,642    19,642  19,642  19,642  19,642  19,642  19,642    19,642  19,642  19,642
Royalties                 2        0       0       0         0  10,000       0       0       0       0         0       0       0

Eligible             1     845,464 2,412,565 1,044,049 2,948,266 338,117 1,470,461 210,640 329,005 347,910  68,141  68,222  69,766
Ineligible           2     166,526   133,756   133,843   110,558 145,369   108,738 165,424 111,783 161,083 117,289 124,325 110,562
----------------------------------------------------------------------------------------------------------------------------------
Total Costs              1,011,990 2,546,321 1,177,891 3,058,824 483,487 1,579,198 376,064 440,789 508,992 185,430 192,547 180,328
----------------------------------------------------------------------------------------------------------------------------------
TPC Supported (cat 1. @37%)312,822   892,649   386,298 1,090,858 125,103   544,071  77,937 121,732 128,727   25,212 25,242  25,813
----------------------------------------------------------------------------------------------------------------------------------
TPC Contribution Rate 37%                                                       FY'99     Eligible                     10,152,606
                                                                                Totals    Ineligible                    1,589,255

                                                                                   TPC Support                          3,756,464
</TABLE>

<PAGE>

                                      -29-

                       STATEMENT OF WORK - APPENDIX C
                              EQUIPMENT LIST

Pilot-scale Facility : 1 ton per hour.

Item                              Estimated Cost    Potential Canadian Suppliers

Feedstock Receiving and supply

Wheeled Loader                 5000
Conveyors                      60000
Screen                         15000              Megatech, Axton Mfg,
Material Storage Bins          500000             Salton
Dryer                          200000
Hoppers, feed bins             40000              Salton
Reclaimers                     included with bins Salton
Cyclones                       10000              Industra, Meltech
Airlock Feeders                28000              Megatech

Biotherm Plant
Gas Fired Burners              70000            Wardstrom Gas
Heat  Exchangers               100000           Inproheat,  Enermax  Fabricators
Hot Gas  Mixer                 4000             Megatech,  Axton  Mfg.
Pyrolyzer                      150000           Megatech,  Axton Mfg.
Cyclones                       7000             Industra,  Meltech
Pumps                          22000            Hayward Gordon,  Viking
Instruments and Controls       100000           Miltronics
Motors                         0                Lesson
Quench condenser               80000            Megatech,  Axton Mfg.
Electrostatic  Precipitator    120000           Industra
Tanks                          20000            Industra,  Meltech
Fans and  Blowers              60000            Langley  Electric
Duct  Incinerator              30000            Wardstrom  Gas
Electrical                     50000
Piping and Valves              100000

BioLime Process

BioLime  Generator and Tanks   250000           Megatech,  Axton Mfg.
Air Compressor                 7000
Instruments and controls       90000            Miltronics
Piping and Valves              100000
Pumps and Mixers               150000
Electrical                     50000

Cooling Towers                 35000
Electrical                     75000
Civil/  Structural             40000

Note: Items left blank under "Potential  Canadian Suppliers" indicate that these
items are subject to local availability.

<PAGE>

                                      -30-

Commercial Demonstration Facilities - 50MW equivalent

Item                          Estimated Cost    Potential Canadian Suppliers

Feedstock Receiving and supply

Wheeled Loader                 13195
Conveyors                      158341
Screen                         39585            Megatech, Axton MI.
Material Storage Bins          1319508          Salton
Dryer                          527803
Hoppers, feed bins             105581           Salton
Reclaimers                                      Salton
Cyclones                       26390            Industra, Meltech
Airlock heelers                73892            Megatech

Biotherm Plant
Gas Fired Burners              184731           Wardstrom Gas
Heat  Exchangers               253902           lnproheat,  Enermax  Fabricators
Hot Gas Mixer                  10556            Megatech,  Axton  Mfg.
Pyrolyzer                      395652           Megatech,  Axton Mfg.
Cyclones                       18473            Industra,  Meltech
Pumps                          58058            Hayward Gordon,  Viking
Instruments and Controls       263902           Miltronics
Motors                                          Lesson
Quench condenser               211121           Megatech,  Axton Mfg.
Electrostatic  Precipitator    316682           Industra
Tanks                          52780            Industra, Meltech
Fans and Blowers               156341           Langley  Electric
Duct  Incinerator              79170            Wardstrom  Gas
Electrical                     131951
Piping and Valves              263902

BioLime Process
BioLime Generator and Tanks    659754           Megatech (If located in Canada)
Air Compressor                 18473
Instruments and controls       237511           Miltronics
Piping and Valves              263902
Pumps and Mixers               395852
Electrical                     131951

Cooling  Towers                92386
Electrical                     197926
Civil/ Structural              106551

Note: Items left blank under "Potential Canadian Suppliers" indicate that  these
items are subject to local availability.

<PAGE>

                                      -31-

                                COSTING MEMORANDUM
                                                                  Schedule "B"
PREFACE

(a) This Costing Memorandum is intended to support the determination of Eligible
Costs and is not intended to replace or modify the elements of the  Statement of
Work or any cost breakdown included therein.

(b) In the case of any conflict of  interpretation  arising  out of this Costing
Memorandum and the Statement of Work, the contents of the Statement of Work will
prevail.

1.0 GENERAL

1.1 The total  cost of the  Project  is the sum  of the  applicable  direct  and
indirect costs which are reasonably and properly  incurred  and/or  allocated in
the performance of the Project, less any applicable credits. These costs will be
determined in accordance with the  Recipient's  cost  accounting  practices,  as
accepted by the Minister and applied consistently over time.

1.2. Costs will be eligible only if they are incurred by the  Recipient,  relate
directly to the purpose of the Agreement, are for activities in the Statement of
Work and are considered to be reasonable in the opinion of the Minister.

1.3 This Costing Memorandum applies equally to all goods or services  (including
labour)  acquired from member  companies,  related parties or associates.  These
acquisitions  will be valued at cost and will not include any markup for profit,
return on investment,  administration or overhead except as provided for in this
Agreement,  and will not exceed  fair market  value.  The  Minister  will not be
obligated to accept any of these costs as eligible  unless access is provided to
the relevant records of the related entity.

1.4 The Goods and Services Tax will be an Eligible Cost only where the amount of
tax is not refundable, in whole or in part, by Revenue Canada Excise as an Input
Tax Credit or as a Rebate.

1.5 A cost is considered reasonable if, in nature and amount, it does not exceed
that which would be incurred by an ordinary  prudent  person in the conduct of a
competitive business.

<PAGE>

                                      -32-


1.6 In determining  reasonableness of a particular cost,  consideration  will be
given to:

(a) whether the cost is of a type  generally  recognized as normal and necessary
for the conduct of the Recipient's business or performance of this Project.

(b) the restraints and requirements by such factors as generally  accepted sound
business practices, arm's length bargaining,  federal, provincial and local laws
and regulations,  nature of the Project,  and any special  conditions set out in
this Agreement;

(c) the action that a prudent business person would take in  the  circumstances,
considering  their  responsibilities  to  the  owners  of  the  business,  their
employees, customers, the Government and public at large;

(d) significant deviations from the established practices of the Recipient which
may unjustifiably  increase the Eligible Costs of the Project;  and

(e) the  specifications,  delivery  schedule and  quality  requirements  of  the
particular contract as they affect costs.

2.0 Eligible Costs

2.1 Direct Labour

(a) Eligibility

(i) The eligibility  categories of direct labour normally  consist of engineers,
scientists,  computer programmers,  technologists,  technicians,  draftspersons,
researchers,  laboratory  and  experimental  shop labour,  professional  project
managers and market analyst, as set out in the Statement of Work.

(ii) Where  approved  in the  Statement  of Work,  a direct  labour  cost may be
claimed for the work performed in an eligible  category by qualified  management
and  administrative  personnel.  The payroll rate  acceptable for such personnel
will not exceed the level of  comparable  technical  experts in the same or most
similar category or industry.

(b) Calculation of Direct Labour

(i) The Recipient may claim only  that  time  spent  directly  on  the  Project,
excluding indirect time, non-Project  related  time,  holidays,  vacation,  paid
sickness, etc.

<PAGE>

                                      -33-


(ii) The payroll rate is the actual gross pay rate  for  each  employee  (normal
periodic remuneration before deductions). The payroll rate excludes all premiums
(e.g., overtime), shift differentials and any reimbursement or benefit conferred
in lieu of salaries or wages, except as noted in the next paragraph.

(iii) Fringe benefits (CPP, EI, holidays,  vacations,  etc.) are ineligible.  An
allowance of 20% of direct labour may be claimed  instead.

2.2 Direct Materials

(a) Direct  materials,  sourced  internally or externally,  that are consumed in
carrying out the Project, including those utilized in the construction of models
or prototypes, are eligible. Materials generally considered as expendable are to
be specifically identified in the Statement of Work.

(b) All materials  purchased directly for the Project will be charged at the net
laid  down  price,  after  deducting  all trade  discounts  and  similar  items.
Materials  issued  from the  Recipient's  general  stocks will be charged to the
Project in  accordance  with the method used  consistently  by the  Recipient in
pricing material  inventories.  Excess materials will be credited to the Project
at the price originally charged.

2.3      Special Purpose Equipment

(a) be an Eligible Cost, the Special Purpose Equipment must be necessary for the
performance of the Project,  be described in sufficient  detail in the Statement
of  Work  so as to be  readily  identifiable,  and  the  cost  specified  in the
Statement of Work.

(b) If the Special  Purpose  Equipment  is to be modifled or  integrated  by the
Recipient during the Project, the costs related thereto will be eligible only if
identified in the Statement of Project.

(c) Eligible Costs for Special Purpose  Equipment will include the net laid down
cost to the Recipient,  after  deducting  trade discounts and cash discounts for
prompt payment.

(d) Periodic  payments  under a capital  lease are  Eligible  Costs to a maximum
equal to the price of the Special Purpose  Equipment if it were purchased at the
commencement  of the lease period;  all interest and carrying  charges are to be
excluded.  For operating leases,  the Eligible Cost is the actual lease payments
incurred during the performance of the Project.

(e) Labour and material costs required in the  modification or adaptation of the
Special Purpose Equipment for the purposes of the Project are eligible.

<PAGE>

                                      -34-

(f) Costs of construction or alteration of plant facilities to  accommodate  the
Special Purpose  Equipment,  unless otherwise  allowed in the Statement of Work,
and any profit,  fees,  general and  administrative  overhead  expenses  are not
eligible.

2.4 Subcontractors and Consultants

The Recipient may contract out part of  the  Project,   including   testing  and
evaluation,   to  a  subcontractor, consultant,  university,  research institute
or any other  qualified organization.  Project work to be contracted out will be
described  in the Statement of Work, or will be approved  by  the  Minister,  in
writing,  prior to being  undertaken.

2.5 Other  Eligible  Costs

Also  eligible  are other  direct  costs,  meaning  those     applicable   costs
not   falling  within   the   other    categories    of   article   2.0,     but
which can be specifically identified and measured as having been incurred in the
performance   of  the  Project,   and  which  are  so  identified  and  measured
consistently by the Recipient's costing system, as accepted by the Minister.  In
general,  these  could  include,  but are not  limited  to, the  following  cost
elements:

(a) Travel Costs

Eligible travel costs are those which are deemed necessary to the performance of
the Project.  To be eligible,  travel costs must be clearly documented as to the
purpose of each trip.  Travel  expenses,  at economy  rates,  will be charged at
actual costs, but only to the extent that they are considered  reasonable by the
Minister.  The rates to be charged will not exceed those established by Treasury
Board guidelines, a copy of, which will be provided to the Recipient on request.

(b) Communications  Costs

Where  communication costs are a direct requirement of   the Project (e.g.. data
transfer technology), these must be explicitly forecast in the estimated  costs,
must  relate only to the Project and may not be part of  an  allocated  cost  or
service.

(c) Audit of Project Costs

If expressly  approved  in writing by the Minister,  Eligible Costs may  include
the cost of professional   accountants certifying the accuracy   of   any  costs
claimed.

(d) Patent Costs

<PAGE>

                                      -35-


If stated in the  Statement of Work or  subsequently  approved in writing by the
Minister,  Eligible  Costs may include the costs  directly  related to obtaining
patent  protection,  in Canada and abroad,  for Intellectual  Property developed
under this  Agreement,  including the costs of  maintaining  the  protection and
defending against challenges by third parties.

(e) Other Direct Operating Costs

Other  direct   operating   costs   considered   necessary  for  the  successful
implementation  of the Project are eligible if  identified  in the  Statement of
Work, or  subsequently  approved in writing by the Minister.

2.6 Indirect Costs

Indirect  costs are to be claimed  using the approach  specified in the approved
Statement of Work. The costing  principles  used in determining the approach are
as follows:

(a) Indirect costs (overhead) are those costs which,  though  necessarily having
been incurred during the Project for the conduct of the Recipient's  business in
general,  cannot be  identified  and  measured  as  directly  applicable  to the
Project.

(b) Eligible indirect costs may include, but are not necessarily restricted  to,
such items as:

(i) Indirect materials  and  supplies (For  supplies   of   similar   low-value,
high-usage items the costs of which meet the above definition of direct material
costs, but for which it is economically unreasonable to account   for   in   the
manner    prescribed  for direct costs,  then they may be deemed to  be indirect
costs for purposes of the Project);

(ii) Indirect labour;

(iii) Service expenses: expenses of a general nature such as power, heat, light,
operation and maintenance of general assets and facilities;

(iv) Fixed/period charges: recurring charges such as property taxes, rentals and
reasonable provision for depreciation; and

(v) General and administrative expenses: including remuneration of executive and
corporate  officers,  office wages and salaries and expenses such as stationery,
office  supplies,  postage and other  necessary  administration  and  management
expenses.

<PAGE>

                                      -36-



(c) Indirect  costs will be  accumulated  in  appropriate  indirect  cost pools,
reflecting the Recipient's  organizational or operational lines, and these pools
subsequently  allocated to  activities  in  accordance  with the  following  two
principles:

(i) The costs  included in a  particular  indirect   cost  pool  should  have  a
similarity   of  relationship  with  each  activity  to   which   that  indirect
cost  pool is subsequently  distributed.  In addition,  the costs included in an
indirect cost   pool  should be  similar  enough in their  relationship  to each
other that the   allocation  of the total  costs in the pool  provides  a result
which  would be   similar  to  that  achieved  if each  cost  within  that  pool
were  separately distributed;  and

(ii) The  allocation  basis  for each  indirect  cost  pool  should  reflect, as
far as possible,  the causal relationship of the pooled costs to the  activities
to which these costs are distributed.


3.0 CREDITS

The  applicable  portion of any income,  rebate, allowance,  or any other credit
relating to any  applicable  direct or indirect costs, received by or   accruing
to the Recipient, will be credited to the cost of the Project.

4.0 NON-ELIGIBLE COSTS

Notwithstanding that the following costs may  have been or may be reasonably and
properly incurred by the Recipient during the   performance of the Project, they
will be considered as non-Eligible Costs unless  specifically  authorized in the
Statement of Work  (Schedule A) or otherwise in writing by the Minister:

(a) Allowance for interest on invested capital, bonds, debentures, bank or other
loans together with related bond discounts and finance charges;

(b)  Legal,   accounting  and  consulting  fees  in  connection  with  financial
reorganization,  security issues, capital stock issues and prosecution of claims
against the Minister;

(c) Losses on investments, bad debts and expenses for the collection thereof;

(d) Losses on other agreements;

(e) Federal and provincial income taxes, excess profit taxes or surtaxes and/or
special expenses in connection therewith;

<PAGE>



                                                    TPC PROJECT No. 731-452552

                       TECHNOLOGY PARTNERSHIPS CANADA

                           AMENDMENT Number 1

This amendment made this 2nd day of February 1998

Between:      HER  MAJESTY THE QUEEN IN RIGHT OF CANADA,  as  represented by the
              Minister of Industry  (hereinafter  referred to as the "Minister")



And:          DynaMotive  Technologies Corporation, a corporation duly
              incorporated under the laws of British Columbia,
              (hereinafter  referred to as  "DynaMotive").

INTRODUCTION

(i) The Minister and DynaMotive  entered into a  Contribution  Agreement   dated
the 29th day of July, 1997  under the  "Technology  Partnerships  Canada Program
(the  "Contribution Agreement");  and

(ii)  The  Minister  and DynaMotive now wish to amend the Contribution Agreement

In  consideration  of their  respective  obligations set out in the Contribution
Agreement, the parties agree to amend the Contibution Agreement as follows:

1.0 At Project #, page 1 of Agreement:

DELETE:       "731-452522"
SUBSTITUTE:   "731-452552"

--------------------------------------------------------------------------------
Technologies  Partnerships                      Partenariat technologique Canada
Canada 10th  floor,  300 Slater  Street,                 10th floor,  300 Slater
Street, OTTAWA, Ontario K1A 0C8                          OTTAWA, Ontario K1A 0C8


<PAGE>
                                       2

2.0 At 1.3(e) Completion Date, page 2 of Agreement:
DELETE:           "March 31, 2000"
SUBSTITUTE:       "March 31, 2001"

3.0 At 3.2 Annual Contribution Disbursement Limits, page 5 of Agreement:
DELETE:        Subsection 3.2 in its entirety
SUBSTITUTE:

"3.2 Annual Contribution Disbursement Limits

Unless the Minister agrees otherwise,  the disbursement of the Contribution will
not exceed the following amounts in each of the following Fiscal Years:

1997 - 1998   $ 504,073
1998 - 1999   $2,623,980
1999 - 2000   $4,075,692
2000 - 2001   $1,032,050

and the Minister  will have no  obligation to pay any amount in any other Fiscal
Years.  No  portions  of these  maximum  annual  amounts  can be rolled  over to
previous or subsequent  Fiscal Years,  without the prior written  consent of the
Minister, who will consider any such requests on a case-by-case basis."

4.0 At Statement of Work, Schedule A to Agreement:

DELETE:           pages 24, 25, 26, 27 and 28
SUBSTITUTE:       amended pages 24, 25. 26, 27, 28 and 28A (copy attached)

All other provisions of the Contribution Agreement remain unchanged.

IN WITNESS WHEREOF the parties hereto have  executed this  Agreement as  of  the
date above written.


                          HER MAJESTY THE QUEEN IN RIGHT
                          OF CANADA, as represented by the Minister of Industry.


                          Per: /s/
                              -------------------------------------------------
                              Technology Partnerships Canada


                          DynaMotive Technologies Corporation


                          Per: /s/
                              -------------------------------------------------
                          Title:
                              -------------------------------------------------

<PAGE>

                                                    TPC PROJECT No. 731-452552

                       TECHNOLOGY PARTNERSHIPS CANADA

                           AMENDMENT Number 2

This amendment made this 11th day of March 1998

Between:      HER  MAJESTY THE QUEEN IN RIGHT OF CANADA,  as  represented by the
              Minister of Industry  (hereinafter  referred to as the "Minister")



And:          DynaMotive  Technologies Corporation


INTRODUCTION

(i) The   Minister   and  DYNAMOTIVE  TECHNOLOGIES  CORPORATION  entered  into a
Contribution Agreement dated 01-Aug-97 under the Technology  Partnerships Canada
Program (the "Contribution  Agreement"),  and

(ii) The Minister and  DYNAMOTIVE TECHNOLOGIES CORPORATION now wish to amend the
Contribution Agreement.


In consideration of their respective obligations set out in the Contribution
Agreement, the parties agree to amend the Contibution Agreement as follows:


--------------------------------------------------------------------------------
Technologies  Partnerships                      Partenariat technologique Canada
Canada 10th  floor,  300 Slater  Street,                 10th floor,  300 Slater
Street, OTTAWA, Ontario K1A 0C8                          OTTAWA, Ontario K1A 0C8


<PAGE>
                                       2

1.O At the section of the Agreement governing Annual  Contribution  Disbursement
Limits,

DELETE:  The dollar amount shown for Fiscal Year 1997/1998.

SUBSTITUTE:

"Unlimited, subject to the Sharing Ratio and the Contribution Ceiling"

All other provisions of the Contribution Agreement remain unchanged.

IN WITNESS  WHEREOF the parks hereto have executed this Agreement as of the date
first above written.

                          HER MAJESTY THE QUEEN IN RIGHT
                          OF CANADA, as represented by the Minister of Industry.


                          Per: /s/
                              -------------------------------------------------
                              Technology Partnerships Canada


                          DynaMotive Technologies Corporation


                          Per: /s/
                              -------------------------------------------------
                          Title:
                              -------------------------------------------------


                                                                TPC: 731-452552

<PAGE>

Technology Partnerships Canada
An Agency of Industry Canada


Monday, February 26, 2001


Andrew Kingston
Dynamotive Technologies Corporation
105-1700 West 75th Avenue
Vancouver, British Columbia V6L 602
Canada

Re: TPC Contribution Agreement #730-452522


Dear Mr Kingston:


This letter is to inform you that the  subject  Agreement  is hereby  amended as
follows:

   at article 3.2 delete "2000 - 2001 $1,032,050"
   and substitute with "2000-2001 unlimited"

All provisions of the  Contribution  Agreement  remain in full force and effect,
except as modified by this Amendment Agreement.

Sincerely,

/s/

Michael Lenihan
A/Director, Environmental Technologies
Technology Partnerships Canada
Canada


<PAGE>


Technology Partnerships Canada
An Agency of
Industry Canada



March 29, 2001
DynaMotive Technologies Corporation
105-1700 West 75th Avenue
Vancouver, British Columbia V6L 6G2


Attn: Mr. Jonothan Rhone

Re: TPC Contribution Agreement # 730-452552 Amendment #4

Dear Mr. Rhone,

This letter is to inform you that the subject Agreement is hereby amended as
follows:

Delete 1.3(e) in its entirety and replace with the following:

1. 3(e) "Completion Date" means June 30, 2001, which is the date by which the
Project must be completed.

All provisions of the  Contribution  Agreement  remain in full Force and effect,
except as modified by this Amendment Agreement.

Sincerely,


/s/


Michael Lenihan
A/Director, Environmental Technologies
Technology Partnerships Canada

<PAGE>


Technology Partnerships Canada
An Agency of Industry Canada


                  TPC AGREEMENT NO. 730-452552 AMENDMENT NO. 05


                       TECHNOLOGY PARTNERSHIPS CANADA

BIO OIL DEMONSTRATION PROJECT AMENDMENT AGREEMENT

This Agreement made

Between: HER MAJESTY THE QUEEN IN RIGHT OF CANADA
         as represented by the Minister of industry (hereinafter referred to
         as the "Minister")

And: DYNAMOTIVE ENERGY SYSTEMS  CORPORATION  (formerly  Dynamotive  Technologies
Corporation),  a  corporation  duly  incorporated  under  the  laws  of  British
Columbia,  having  its  head  office  located  at  105-1700  West  75th  Avenue,
Vancouver,  British  Columbia  (hereinafter  referred to as the  "Proponent"  or
"Dynamotive ")


INTRODUCTION

(i) The Minister and the Proponent entered into a Contribution  Agreement  dated
the 29th  day  of July, 1997 under  the  Technology  Partnerships   Canada (TPC)
Program (tile "Contribution Agreement") as  amended  by  Amendment  No. 1  dated
February 2, 1998, Amendment No. 2 dated   March 11, 1998,  Amendment No. 3 dated
February 26, 200 I in(] Amendment No. 4 dated March 29, 2001;

(ii) The Proponent has indicated  that certain  aspects of the current  project,
namely BioLime, are producing results below target specifications, whereas other
aspects of the current project,  namely BioOil, are meeting expectations and, as
a result,  the  Proponent  wishes to refocus the remainder of the project on the
development of a scaled-up  BioOil pilot  demonstration  plant in Canada and the
testing of BioOil fuel in industrial boilers and engine applications;

(iii) In order to meet these revised objectives,  the Proponent and the Minister
agree that the scope and timing of the original project need to be significantly
revised; and

(iv)The Minister and the Proponent now wish to amend the Contribution Agreement.
Canada

<PAGE>

                                                                          Page 2

In  consideration  of their  respective  obligations set out in the Contribution
Agreement, the Parties agree to amend the Contribution Agreement as follows:

1. This Amendment must be signed by the Proponent and received by the Minister
on or before May 31st, 2002, failing which it will be null and void.

2. Article 1.3 (a) is deleted and replaced with the following:

1.3 (a)  "Agreement"  means this agreement,  including  Schedule A (Statement of
Work), Schedule B (Costing Memorandum),  Schedule C (Reporting Requirements) and
Schedule D (Project Fact Sheet for News Release).

3. Article 1.3 (e) is deleted and replaced with the following:

1.3 (e) The  Proponent  shall  ensure that the Project is completed on or before
June 30th,  2003 ("Project  Completion  Date"),  unless  otherwise  agreed to in
writing by the Minister.

4. Paragraph 1.3 (i) is deleted and replaced with the following:

1.3(i) "Gross Business Revenues" means all revenues,  receipts, monies and other
considerations of whatever nature received by the Proponent, whether in cash, or
by way of benefit,  advantage,  or  concession,  and without  deductions  of any
nature,  but net of any returns or  discounts  actually  credited and any sales,
excise,  ad valorem or similar taxes paid but without deduction for bad debts or
doubtful   accounts,   as  determined  in  accordance  with  generally  accepted
accounting principles, applied on a consistent basis.

5. Paragraph 1.3 (1) is deleted and replaced with the following:

1.3 (1) "Project" means the development and application of the BioTherm  process
for the purpose of producing BioOil, as more fully described in the Statement of
Work (Schedule "A").

6.  Paragraph 1.3 (n) is deleted and replaced with the following:

1.3 (n) "Resulting Products" means BioOil; and all other commercial applications
which incorporate results of the Project; and all other commercial  applications
which are made  using  Project  Technology,  Intellectual  Property  or  Special
Purpose Equipment.

                                                            File No.: 730-452552

<PAGE>

                                                                          Page 3

7.  Section 3.2 is deleted and  replaced  with the  following:

3.2 All payments by the Proponent Financing Minister for Eligible Costs incurred
since June 30th, 2001 are hereby  suspended until the Proponent  demonstrates to
tile Minister's satisfaction that it  has  raised at least US$4,000,000  in  new
equity, the  Minister's payment obligations shall resume only when  a  financial
arrangement satisfactory to the Minister has been achieved.  Currency conversion
to  Canadian  dollars,  if  required,  shall be set at the time the  funds  tire
accessed.

8.  Sections 5.1, 5.2 and 5.3 are deleted and replaced with the following:

5.1      Royalty Rate and Royalty Basis
The Proponent will pay to  the Minister   a  royalty of 2.5%  of  annual   Gross
Business Revenues during the Royalty Period.

5.2      Royalty Period

The Royalty  Period will begin on January 1st, 2003 and will end on the earliest
of December 31, 2011 or when a cumulative royalty royalty ceiling of $16,000,000
is reached.

5.3      Royalty Statements and Payments

The Proponent will provide to the Minister  an  annual  statement  of  the Gross
Business Revenues,  certified by the Proponent's Chief Financial Officer, within
four (4)  months of the end of each  Proponent  fiscal   year  (December  31st),
together  with the related  royalty  payment.  The first  statement  and related
royalty  payment must be provided to the Minister by April 30st, 2004 in respect
of the  fiscal  year  ending  December  3l,  2003,  and by April  30th each year
thereafter in regard to tile  previous  fiscal year.  Payments  shall be made by
cheque to the order of tile Receiver General and sent to the Minister.

9. Sections 7.5 and 7.6, Schedule C (Projected Sales and Royalties) and Schedule
C1 (Report on Sales and  Royalties)  are deleted and replaced  with the attached
Schedule C  (Reporting  Requirements). For  purposes of Section 4.1 and 4.3, all
reports  are  to  be  submitted  in  accordance   with  the  revised   reporting
requirements set out in Schedule C.

10. Section 8.1 is deleted and replaced with the following:

8.1  The  nature   of     the    technology  being  developed  and the  business
contemplated by Dynamotive makes commercial exploitation of the outside Canada a
necessity.  Dynamotive  shall perform all  value-added  engineering,  design and
manufacturing in Canada,  except for  construction and  certification of foreign
facilities and sourcing of locally available components.


                                                            File No.: 730452552

<PAGE>


                                                                         Page 4

11. Schedule A (Statement of Work) is deleted and  replaced  with  the  attached
Schedule A.

12.  All  provisions  of the  Contribution  Agreement  remain in full  force and
effect,  except as modified by this Amendment Agreement.

IN WITNESS WHEREOF the parties hereto have executed this Amendment Agreement  as
of the date first above written.

 HER  MAJESTY  THE  QUEEN IN RIGHT OF  CANADA,
 as  represented  by the
 Minister of Industry


 Per: /s/                                            16.5.02
 -----------------------------------------------     -----------
 Technology  Partnerships Canada                     Date

 John Brunet- Acting Deputy Executive Director

 DYNAMOTIVE ENERGY SYSTEMS CORPORATION


 Per: /s/
 ----------------------------------------------      -----------
                                                     Date
 Andrew Kingston - President and CEO

                                                           File No.: 730-452552
<PAGE>

                                                                         Page 5
                           SCHEDULE A - STATEMENT OF WORK

The following of Work represents  revised and/or  additional work elements to be
completed by the Proponent henceforth:

1. Project Description

This project involves the development and   demonstration  of DynaMotive's  fast
pyrolysis  technology,  hereafter  referred  to as  BioTherm,  resulting  in the
production of up to 70% BioOil and equal parts of char and no-condensable  gases
for the balance of product. The BioOil product is a liquid fuel, which has   55%
by  volume of the  energy  of  diesel  oil and 40% by  weight. It is targeted to
form a renewable fuel for turbine engines in particular and has a  well  defined
composition for various feedstocks such as wood, wood & bark or bagasse.

The  Project  industrial  level  demonstration  plant  targets  a  scale  up  of
DynaMotive's fast pyrolysis process to 200 tons per day continuous  process at a
Canadian  mill  site  in  British  Columbia  where fossill  fuel  reductions  in
industrial boilers and heat production for mill operations will take place.

The  production of BioOil  non-condensable  gases will form a closed loop system
resulting in  substantial  reduction of fossil fuel usage and  elimination  of a
serious wood waste  disposal  and  pollution  problem.  BioOil will also undergo
testing  in pulp mill  lime kiln  applications  and  other  types or  industrial
boilers and  engines  (gas  turbine  and  diesel).  The  enviromental  impact of
manufacturing  BioOil  from  organic waste to produce  electricity   results  in
100% displacement of an equal energy  equivalent of non-renewable fossil   fuels
such as coal for power generation.

As a result  of the  demonstration  project,  DynaMotive  will  demonstrate  the
continuous production of BioOil in an industrial setting and test  and  validate
of pyrolysis  products as outlined in the Statement of Work  details.

The ultimate target  market  will be for  Dynamotive  to supply  turnkey systems
for BioOil production coupled to power generation systems  driven  by  renewable
organic waste.

To be in a position to DynaMotive's  pyrolysis  technology  amongst other areas,
the following is required:

- Scaling and validating the pyrolysis technology to full characterization.
- Testing, validating and demonstrating BioOil and char applications.
- Testing, validating and demonstrating  BioOil  production  facilities  coupled
  with forestry operations, in  the  Canadian  Industrial  Pilot Program for 200
  tons per day.
- Research and  development  into higher  value  derivative  products  based on
DynaMotive pyrolysis products as a feedstock

                                                           File No.: 730-452552
<PAGE>

Technology Partnerships Canada
An Agency of Industry Canada


                                     TPC PROJECT No. 730-452552 AMENDMENT NO. 6

                         TECHNOLOGY PARTNERSHIPS CANADA
                              AMENDMENT AGREEMENT


This Agreement made


Between: HER MAJESTY THE QUEEN IN RIGHT OF CANADA,
         represented by the Minister of Industry
         (hereinafter referred to as the "Minister")


And      DYNAMOTIVE  ENERGY SYSTEMS  CORPORATION
         (formerly  Dynamotive  Technologies Corporation),  a  corporation
         duly  incorporated  under  the  laws  of  British Columbia,  having
         its  head  office  located  at  105-1700  West  75th  Avenue,
         Vancouver, British Columbia (hereinafter referred to as
         "the Proponent"),


INTRODUCTION

(i) The Minister and the Proponent entered into a Contribution Agreement dated
the 29th day of July, 1997 under the Technology Partnerships Canada Program (the
"Contribution Agreement") as amended by  Amendment No. I dated February 2, 1998,
Amendment No. 2 dated March 11, 1998, Amendment No. 3  dated  February 26, 2001,
Amendment No. 4 dated March 29, 2001 and Amendment No. 5 dated May 23, 2002;

(ii)The Minister and the Proponent now wish to amend the Contribution Agreement.


In  consideration  of their  respective  obligations set out in the Contribution
Agreement, the parties agree to amend the Contribution Agreement as follows:

1.0 AMENDMENT


<PAGE>

                                       2

1.1      The Contribution Agreement is amended as follows:

(a)      Article 1.3 (e) is deleted and replaced with the following:

1.3(e) The  Proponent  shall  ensure that the Project is  completed on or before
June 30, 2004 ("Project Completion Date"), unless otherwise agreed to in writing
by the Minister.

(b)      Article 5.2 Royalty Period is deleted and replaced with the following:

5.2      Royalty Period
The Royalty Period will begin on January 1st, 2003  and will end on the earliest
of December  31, 2012 or when a cumulative  royalty  ceiling of  $16,000,000  is
reached.

(c) Schedule A - Statement of Work Annex A, Forms A, B, C,D and E-1 to E-5 are
deleted and replaced with the ones attached.

(d) Schedule C - Reporting Requirements, Forms TPC - 1, TPC - 2, TPC-3 and
TPC - 4 are deleted and replaced with the ones attached.


                                                      TPC Project No.730-452552

<PAGE>

                                       3

All provisions of the  Contribution  Agreement  remain in full force and effect,
except as modified by this Amendment  Agreement.

IN WITNESS WHEREOF the parties hereto  have  executed  this  Amendment Agreement
through  duly   authorized representatives.

HER MAJESTY THE QUEEN IN RIGHT OF CANADA, as represented by the
Minister  of Industry

Per:
---------------------------------------------        ------------
Technology  Partnerships  Canada  (TPC)               Date

Kash  Ram,  A/Director Environmental Technologies, TPC


DYNAMOTIVE ENERGY SYSTEMS CORPORATION


 Per: /s/
 ----------------------------------------------      -----------
                                                     Date

 Andrew Kingston - President and CEO

                                                      TPC Project No,73O-452552
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                                                                         Page 6
2. Key Activities

DynaMotive  will  pursue  the  following  research,   development,  and  testing
programs.

a) Pyrolysis Process Research & Development

The  recently  commissioned  BioTherm2  pilot plant (10 tpd) and  the  BioTherm1
(2tpd)  pilot  plants form the  foundation  of our process  technology  program.
Operation and  optimization  of these plants  provide the knowledge  required to
scale up the  technology,   develop  production cost  projections and expand the
scope of feedstock types and compositions  that can be reliably and consistently
converted into BioOil.

The objectives of the pilot plant operations are:
- Validate and optimize BioOil production using various  commercially  available
feedstock types and  compositions  including  whitewood,  bark and hardwoods.
- Refine  and  validate  the  production  cost  assumptions used for  projecting
economic performance of commercial scale facilities.
- Optimize the  performance  and capacity  of  the  Biotherm2  (10 tpd) plant to
develop the maximum  baseline design for subsequent  scale ups.
- Produce BioOil and char to support application test programs.

b) BioOil and Char Characterization and Product Testing

BioOil and pyrolysis  char are new fuel by a process.  In  order to  effectively
market these products full  characterization,  detailed testing, and performance
validation for each specific  application is required and the results  necessary
to quantify potential customer benefits and develop confidence in our technology
and products.  DynaMotive has identified a number of near term  applications for
BioOil and char and designed  development and testing programs targeted at these
markets.

The objectives of the product testing programs are to:
- Test and  validate  the required to burn BioOil in  industrial  boilers  (i.e.
institutional heating, greenhouses), sawmill lumber drying  systems,  pulp  mill
lime kilns, and industrial  gas turbines.
- Develop and execute  testing  programs  with leading  industrial  partners  to
facilitate   development  of  long-term  BioOil  sales agreements.
- Test  and  validate  the use of  char  as a  feedstock  for charcoal briquette
manufacture  and facilitate  development of long term char sales  agreements.
- Test and  validate the use of char as a solid fuel for combustion applications
including use as a heat source during BioOil production.


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                                                                         Page 7
c) Derivative Product Research and Development

The complex chemistry of BioOil and the unique characteristics of pyrolysis char
make these  products  suitable as feedstock  for other  processes  and products.
DynaMotive  has  identified  many product  areas worthy of further  research and
development, with three prioritized for investigation over the short term.

Research  and  development  programs  are planned for:
- BioOil based resins for various applications including  adhesives.
- BioOil based synthesis gasses for reformation  into higher value liquid fuels.
- Char based activated  carbons for gas/liquid filtering applications.

d) Canadian Industrial Pilot Program (200 tpd)

DynaMotive  will  develop an  industrial  pilot  plant to be  collocated  with a
sawmill in western Canada.  The plant will demonstrate the feasibility of BioOil
production from typical BC forest industry waste residues while providing BioOil
and char in sufficient volume for full-scale application demonstration programs.

The objectives of the industrial pilot program are:
- Test, validate  and  optimize  the pyrolysis  technology  at the 200 tpd plant
capacity.
- Test  and  optimize  concepts  and  designs  for  full  integration  of BioOil
production with sawmill operations.
- Refine and validate the   production  cost  assumptions  used  for  projecting
economic performance of large  commercial  scale  facilities.
- Produce BioOil and char to support full-scale  application test programs.

3. Project Schedule

Refer to Annex A, Form A.

4. Milestones

Refer to Annex A, Form B.

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                                                                         Page 8
5. Cost Breakdown

Current Fiscal Year Cost Breakdown by Major Activities - Refer to Annex A,
Form C.

Cost Breakdown by Fiscal Year - Refer to Annex A, Forms D-1 and D-2.

6. Other Descriptions

Refer to Annex A, Forms E1-E5.


7. Non-eligible / Non-supported Activities

In addition to the activities  described   above,   DynaMotive   also   exploits
pyrolysis development projects in the United Kingdom.

                                                            File No.: 730-452552