Document:

David A Gillmoure                               ROYAL BANK OF CANADA
Senior Account Manager                          Industrial Products Group
                                                Ontario Commercial Markets
                                                6880 Financial Drive, 2nd Floor
                                                Mississauga, Ontario L5N 7Y5
                                                Tel : (905) 286-7248
                                                Fax : (905) 286-7262

June 10, 2005

Private and Confidential

Pneutech Inc.
5995 Avebury Road, Suite 704
Mississauga, Ontario
L5R 3P9

Attention: Clifford M. Rhee, President and CEO

Dear Sirs/Mesdames:

We are pleased to offer the credit facilities described below (the "Credit
Facilities") , subject to the following terms and conditions.

DEFINITIONS AND SCHEDULES
The attached schedules are incorporated into this agreement by reference.
Schedule "A" contains definitions of capitalized terms used and not otherwise
defined in this agreement. Unless otherwise provided, all dollar amounts are in
Canadian currency and accounting terms are to be interpreted in accordance with
GAAP.

BORROWERS

Borrower (1)               Pneutech Inc. ("Pneutech"), Rousseau Controls Inc.
                           and Hydramen Fluid Power Limited, jointly and
                           severally

Borrower (2)               Pneutech

Borrower (3)               Rousseau Controls Inc.

Borrower (4)               Hydramen Fluid Power Limited

(Pneutech, Rousseau Controls Inc. and Hydramen Fluid Power Limited are
hereinafter individually each referred to as a "Borrower" and collectively
referred to as the "Borrowers")

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      2                  June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

The Bank is authorized and directed by the Borrowers to advance Borrowings under
Facility (1) as described in the Credit Facilities section below to or for the
account of Pneutech at any time and from time to time and the Borrowers agree
that the Borrowers shall be jointly and severally liable for all Borrowings
under Facility (1) and other obligations incurred by the Borrowers or any one of
them to the Bank under or in connection with Facility (1).

LENDER
Royal Bank of Canada                (the "Bank")

CREDIT FACILITIES
Borrower (1)

Facility (1):  $15,000,000 revolving  facility, by way of:

      (a)   RBP based loans ("RBP Loans");

      (b)   RBUSBR based loans in US currency ("RBUSBR Loans");

      (c)   Bankers' Acceptances ("BAs");

      (d)   Libor based loans in ("Libor Loans");

      (e)   Letters of Credit ("LCs");

      (f)   Letters of Guarantee ("LGs").

LEASE FACILITIES
Borrower (2)
Facility (2):     $750,000 revolving lease line of credit, by way of Leases.

Borrower (3)
Facility (3):     $750,000 revolving lease line of credit, by way of Leases.

Borrower (4)
Facility (4):     $750,000 revolving lease line of credit, by way of Leases.

The aggregate of Facilities (2), (3) and (4) shall not exceed $750,000 at any
time.

Leases will be governed by this agreement and separate agreements between the
Borrowers and the Bank. In the event of a conflict between this agreement and a
separate agreement, the terms of the separate agreement will govern.

Each use of the Credit Facilities is a "Borrowing" and all such usages
outstanding at any time are "Borrowings". Schedule "B" contains notice
provisions applicable to Borrowings that must be complied with. Schedule "C"
contains terms and conditions applicable to Borrowings made otherwise than by
way of RBP Loans or RBUSBR Loans which must be complied with.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      3                  June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

FEF CONTRACTS
At the request of Pneutech or Borrower (3), the Bank may enter into Foreign
Exchange Forward Contracts ("FEF Contracts") with such Borrower from time to
time. The Bank makes no commitment to enter into any FEF Contract and may at any
time in its sole discretion decline to enter into any FEF Contract. FEF
Contracts will be governed by the terms and conditions set forth in the FEF
Contracts Schedule attached hereto.

TERMS OF OTHER FACILITIES
The Credit Facilities and the Lease Facilities are in addition to corporate VISA
to a maximum amount of $150,000 which is governed by this agreement and separate
agreements between Pneutech and the Bank and corporate Visa to a maximum of
$100,000 which is governed by this agreement and separate agreements between
Borrower (3) and the Bank. In the event of conflict between this agreement and
any separate agreement delivered in connection with any such other facilities,
the terms of such separate agreement shall govern.

PURPOSE

Facility (1)
Initially to repay obligations of Pneutech to HSBC Bank Canada, to refinance the
obligations of Borrowers (3) and (4) to the Bank and subsequently to finance
general operating requirements.

Facilities (2), (3) and (4)
Finance the acquisition of equipment.

AVAILABILITY

Facility (1)
Pneutech may borrow, convert, repay and reborrow up to the amount of this
revolving facility, provided:

      (a)   the aggregate Borrowings outstanding under this facility (including,
            without limitation, all LCs and LGs) must not exceed at any time the
            aggregate of the following, less Potential Prior-Ranking Claims (the
            "Borrowing Limit"):

            (i)   75% of Good Domestic Accounts Receivable;

            (ii)  to a maximum of $500,000, 75% of Thomas Equipment Receivables;
                  and

            (iii) 50% of the lesser of cost or net realizable value of
                  Unencumbered Inventory;

      (b)   an Event of Default shall not have occurred and be continuing at the
            time of any Borrowing;

      (c)   the proceeds of the initial Borrowing under this facility must be
            utilized to:

            (i)   repay all obligations of Pneutech to HSBC Bank Canada;

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      4                  June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

            (ii)  repay all obligations of Borrower (3) under the credit
                  facilities described in the Rousseau Letter Agreement and all
                  obligations of Borrower (4) under the credit facilities
                  described in the Hydramen Letter Agreement and such credit
                  facilities are immediately then cancelled, provided that if
                  there are any unmatured BAs outstanding under such credit
                  facilities at the time of the initial Borrowing under this
                  facility, the amount available under this facility shall be
                  reduced by an amount equal to the face amount of all such
                  unmatured BAs and upon maturity of such BAs, a Borrowing will
                  be advanced under this facility to repay the obligations of
                  Borrower (3) and/or Borrower (4) under any such BAs.

Facility (2)
Pneutech may borrow, repay and reborrow up to the amount of this facility,
provided:

      (a)   this facility is made available at the sole discretion of the Bank
            and the Bank may cancel or restrict availability of any unutilized
            portion of this facility at any time and from time to time without
            notice or demand;

      (b)   the determination by the Bank as to whether it will enter into any
            Lease will be entirely at its sole discretion;

      (c)   the term of any Lease shall not exceed 5 years; and

      (d)   the aggregate amount of all Leases outstanding under this facility
            plus the aggregate amount of all Leases outstanding under Facilities
            (3) and (4) must not exceed the amount of this facility at any time.

Facility (3)
Borrower (3) may borrow, repay and reborrow up to the amount of this facility,
provided:

      (a)   this facility is made available at the sole discretion of the Bank
            and the Bank may cancel or restrict availability of any unutilized
            portion of this facility at any time and from time to time without
            notice or demand;

      (b)   the determination by the Bank as to whether it will enter into any
            Lease will be entirely at its sole discretion;

      (c)   the term of any Lease shall not exceed 5 years; and

      (d)   the aggregate amount of all Leases outstanding under this facility
            plus the aggregate amount of all Leases outstanding under Facilities
            (2) and (4) must not exceed the amount of this facility at any time.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      5                  June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

Facility (4)
Borrower (4) may borrow, repay and reborrow up to the amount of this facility,
provided:

      (a)   this facility is made available at the sole discretion of the Bank
            and the Bank may cancel or restrict availability of any unutilized
            portion of this facility at any time and from time to time without
            notice or demand;

      (b)   the determination by the Bank as to whether it will enter into any
            Lease will be entirely at its sole discretion;

      (c)   the term of any Lease shall not exceed 5 years; and

      (d)   the aggregate amount of all Leases outstanding under this facility
            plus the aggregate amount of all Leases outstanding under Facilities
            (2) and (3) must not exceed the amount of this facility at any time.

REPAYMENT

Facility (1)
Borrowings under this facility are expected to revolve with operating
requirements.

Borrowings under this facility shall be repayable in full on March 30, 2006.

INTEREST RATES AND FEES
Facility (1)
RBP Loans:           RBP plus .25% per annum.
RBUSBR Loans:        RBUSBR plus .25% per annum.
BAs:                 acceptance fee of 1.5% per annum.
Libor Loans:         Libor plus 1.5% per annum.
LCs:                 fee to be quoted by the Bank at the time of issue of
                     each LC.
LGs:                 fee to be quoted by the Bank at the time of issue of
                     each LG, subject to a minimum fee of $100 in the currency
                     of issue.

Arrangement Fee
An arrangement fee of $37,500 is payable by Borrower (1), $12,500 of which is
payable upon issuance of this agreement and the remaining $25,000 of which is
payable upon satisfaction of the conditions set forth in the Conditions
Precedent section herein. This fee is non-refundable and is deemed to be earned
by the Bank upon acceptance of this agreement, to compensate for time, effort
and expense incurred by the Bank in approving these facilities.

Revolvement Fee
An administration fee of $400 per month, for revolving RBP Loans and RBUSBR
Loans under Facility (1) is payable by Borrower (1) monthly in arrears on such
date as the Bank may determine.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      6                  June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

Monitoring Fee
An administration fee of $500 per month, for margining advances against accounts
receivable and inventory under Facility (1) is payable by Borrower (1) monthly
in arrears on such date as the Bank may determine.

CALCULATION AND PAYMENT OF INTEREST AND FEES

RBP Loans and RBUSBR Loans
Borrower (1) shall pay interest on each RBP Loan and RBUSBR Loan monthly in
arrears, on the 26th day of each month or such other day as may be agreed to
between Borrower (1) and the Bank. Such interest will be calculated monthly and
will accrue daily on the basis of the actual number of days elapsed and a year
of 365 days. Interest on RBUSBR Loans shall be paid in US currency.

LC Fees
Borrower (1) shall pay an LC fee on the date of any payment made by the Bank
pursuant to a drawing under any LC calculated on the amount drawn, based upon
the number of days the LC was outstanding and a year of 365 days. If the total
amount available under any LC has not been drawn prior to the expiry of such LC,
Borrower (1) shall pay an LC fee calculated on the undrawn portion of such LC on
the expiry date thereof, based upon the number of days the LC was outstanding
and a year of 365 days. Fees for LCs issued in US currency shall be paid in US
currency.

LG Fees
Borrower (1) shall pay an LG fee on the date of issuance of any LG calculated on
the face amount of the LG issued and based on the number of days in the term
thereof and a year of 365 days. Fees for LGs issued in US currency shall be paid
in US currency.

BAs
Borrower (1) shall pay an acceptance fee in advance on the date of issue of each
BA at the applicable rate provided for in this agreement. Acceptance fees shall
be calculated on the face amount of the BA issued and based upon the number of
days in the term thereof and a year of 365 days.

Libor Loans
Borrower (1) shall pay interest on each Libor Loan, on each Libor Interest Date,
calculated in arrears. Such interest will accrue daily on the basis of the
actual number of days elapsed and a year of 360 days.

Limit on Interest
Borrower (1) shall not be obligated to pay any interest, fees or costs under or
in connection with this agreement in excess of what is permitted by law.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      7                  June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

Overdue Payments
Any amount that is not paid when due hereunder shall, unless interest is
otherwise payable in respect thereof in accordance with the terms of this
agreement or the instrument or contract governing same, bear interest until paid
at the rate of RBP plus 5% per annum or, in the case of an amount in US
currency, RBUSBR plus 5% per annum.

Equivalent Yearly Rates
The annual rates of interest or fees to which the rates calculated in accordance
with this agreement are equivalent, are the rates so calculated multiplied by
the actual number of days in the calendar year in which such calculation is made
and divided by 365 or, in the case of Libor Loans, divided by 360.

Time and Place of Payment
Amounts payable by Borrower (1) hereunder shall be paid at the Branch of Account
in the applicable currency. Amounts due on a day other than a Business Day shall
be deemed to be due on the Business Day next following such day. Interest and
fees payable under this agreement are payable both before and after any or all
of default, maturity date, demand and judgement.

EXCHANGE RATE FLUCTUATIONS
If, for any reason, the amount of Borrowings outstanding under any facility,
when converted to the Equivalent Amount in Canadian currency, exceeds the amount
available under such facility, Borrower (1) shall immediately repay such excess
or shall secure such excess to the satisfaction of the Bank.

INCREASED COSTS
Borrower (1) shall reimburse the Bank for any additional cost or reduction in
income arising as a result of (i) the imposition of, or increase in, taxes on
payments due to the Bank hereunder (other than taxes on the overall net income
of the Bank), (ii) the imposition of, or increase in, any reserve or other
similar requirement, (iii) the imposition of, or change in, any other condition
affecting the Credit Facilities imposed by any Applicable Law or the
interpretation thereof.

EVIDENCE OF INDEBTEDNESS
The Bank shall open and maintain at the Branch of Account accounts and records
evidencing the Borrowings made available to Pneutech by the Bank under this
agreement. The Bank shall record the principal amount of each Borrowing, the
payment of principal and interest and all other amounts becoming due to the Bank
under this agreement.

The Bank's accounts and records constitute, in the absence of manifest error,
conclusive evidence of the indebtedness of Borrower (1) to the Bank pursuant to
this agreement.

Each of the Borrowers authorizes and directs the Bank to automatically debit, by
mechanical, electronic or manual means, any bank account of such Borrower for
all amounts payable by the Borrowers to the Bank pursuant to this agreement.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      8                  June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

GENERAL ACCOUNTS
Pneutech shall establish current accounts with the Bank in each of Canadian
currency and US currency (each a "General Account") for the conduct of
Pneutech's day to day banking business. If the balance in a General Account:

      (a)   is a credit, the Bank may apply, at any time in its discretion, the
            amount of such credit or part thereof, rounded to the nearest
            $10,000 in Canadian currency or US currency, as applicable, as a
            repayment of Borrowings outstanding by way of RBP Loans or RBUSBR
            Loans, as applicable, under Facility (1), or

      (b)   is a debit, the Bank may, subject to availability, make available a
            Borrowing by way of an RBP Loan or RBUSBR Loan, as applicable, under
            Facility (1) in an amount, rounded to the nearest $10,000 in
            Canadian currency or US currency, as applicable, as is required to
            place the General Account at not less than a zero balance.

CONDITIONS PRECEDENT
The availability of any Borrowing and/or any Leases is conditional upon the
receipt of:

      (a)   a duly executed copy of this agreement;

      (b)   the security provided for herein, in form and substance satisfactory
            to the Bank, registered as required to perfect and maintain the
            security created thereby and such certificates, authorizations,
            resolutions and legal opinions as the Bank may reasonably require;

      (c)   confirmation, satisfactory to the Bank, that Pneutech has paid or
            made arrangements to cancel and pay concurrently with the execution
            of this agreement, all outstanding indebtedness under any other
            credit facilities with HSBC Bank Canada and all security to be
            granted in favour of the Bank hereunder shall result in the Bank
            having a first ranking security interest in all present and after
            acquired personal property of Pneutech;

      (d)   company prepared consolidated financial statement for Pneutech for
            fiscal quarter ending April 30, 2005, satisfactory to the Bank; and

      (e)   such financial and other information or documents relating to the
            Borrowers or Guarantor as the Bank may reasonably require.

The availability of any Leases is further conditional upon the receipt of such
documentation as required by the Bank in respect of any Lease Facilities and any
Leases or either of them, in form and substance satisfactory to the Bank.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      9                  June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

SECURITY
Security for the Borrowings and all other obligations of the Borrowers to the
Bank, including without limitation any amounts owing under any Leases, shall
include:

      (a)   Guarantee and postponement of claim on the Bank's form 812 in the
            amount of $15,000,000 signed by Thomas Equipment, Inc., subject to
            the Interlender Agreement (defined below);

      (b)   Postponement and assignment of claim on the Bank's form 918 signed
            by Thomas Equipment, Inc. in respect of liabilities of Pneutech to
            Thomas Equipment, Inc.; and

      (c)   Postponement and assignment of claim on the Bank's form 918 signed
            by Thomas Equipment, Inc. in respect of liabilities of Borrower (3)
            to Thomas Equipment, Inc.;

      (d)   Interlender/priority agreement between the Bank and Laurus Master
            Fund, Ltd., or any other secured lender providing financing to the
            Borrowers or the Guarantor (the "Interlender Agreement");

      (e)   General security agreement on the Bank's form 924 signed by Pneutech
            constituting a first ranking security interest in all personal
            property of Pneutech, subject to the Interlender Agreement;

      (f)   General security agreement on the Bank's form 924 signed by Borrower
            (3) constituting a first ranking security interest in all personal
            property of Borrower (3), subject to the Interlender Agreement;

      (g)   General security agreement on the Bank's form 924 signed by Borrower
            (4) constituting a first ranking security interest in all personal
            property of Borrower (4), subject to the Interlender Agreement;

      (h)   Deed of movable hypothec (general) on the Bank's form 895 in the
            amount of $20,000,000 signed by Pneutech constituting a first charge
            on the universality of movable property of Pneutech, subject to the
            Interlender Agreement;

      (i)   Deed of movable hypothec (general) on the Bank's form 895 in the
            amount of $20,000,000 signed by Borrower (3) constituting a first
            charge on the universality of movable property of Borrower (3),
            subject to the Interlender Agreement; and

      (j)   Certified copy of insurance policy, evidencing fire and other perils
            coverage on all assets of the Borrowers, with loss payable to the
            Bank as its interest may appear.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      10                 June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

REPRESENTATIONS AND WARRANTIES
Each of the Borrowers represents and warrants to the Bank that:

      (a)   it is a corporation duly incorporated, validly existing and duly
            registered or qualified to carry on business in the Province of
            Ontario;

      (b)   the execution, delivery and performance by it of this agreement have
            been duly authorized by all necessary actions and do not violate its
            constating documents or any Applicable Laws or agreements to which
            it is subject or by which it is bound;

      (c)   its most recent financial statements, and in the case of Pneutech,
            its most recent consolidated financial statements, provided to the
            Bank fairly present its financial position as of the date thereof
            and its results of operations and cash flows for the fiscal period
            covered thereby, and since the date of such financial statements,
            there has occurred no material adverse change in its business or
            financial condition;

      (d)   there is no claim, action, prosecution or other proceeding of any
            kind pending or threatened against it or any of its assets or
            properties before any court or administrative agency which relates
            to any non-compliance with any Environmental Law or any Release from
            its lands of a Contaminant into the natural environment or which, if
            adversely determined, might have a material adverse effect upon its
            financial condition or operations or its ability to perform its
            obligations under this agreement or any of the Bank's security, and
            there are no circumstances of which it is aware which might give
            rise to any such proceeding which it has not fully disclosed to the
            Bank;

      (e)   it has good and marketable title to all of its properties and
            assets, free and clear of any encumbrances, other than as may be
            provided for herein;

      (f)   it is in compliance in all material respects with all Applicable
            Laws including, without limitation, all Environmental Laws;

      (g)   it possesses all licenses, patents, trade marks, service marks and
            copyrights, free from material restrictions, that are necessary for
            the ownership, maintenance and operation of its assets and
            businesses and it is not in violation of any rights of others with
            respect to any of the foregoing;

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

      (i)   it has filed all material tax returns which were required to be
            filed by it, paid or made provision for payment of all taxes and
            Potential Prior-Ranking Claims (including interest and penalties)
            which are due and payable, and provided adequate reserves for
            payment of any tax, the payment of which is being contested.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      11                 June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

REPORTING COVENANTS
Each of the Borrowers covenants and agrees with the Bank, while this agreement
is in effect, to provide the Bank with:

      (a)   monthly Borrowing Limit Certificate, substantially in the form of
            Schedule "D", signed on behalf of Pneutech, within 45 days of each
            month end and such certificate shall be deemed to be validly signed
            on behalf of, and binding upon, Pneutech;

      (b)   quarterly unaudited consolidated financial statements for Pneutech,
            with comparisons to budget, within 50 days of each fiscal quarter
            end;

      (c)   quarterly Compliance Certificate, substantially in the form of
            Schedule "E" signed by an authorized signing officer of Pneutech,
            within 50 days of each fiscal quarter end, certifying compliance
            with this agreement including the financial covenants set forth
            below;

      (d)   annual audited consolidated and unit financial statements for
            Pneutech, within 120 days of each fiscal year end;

      (e)   annual audited unit financial statements for each of Borrower (3)
            and Borrower (4), within 120 days of each fiscal year end; and

      (f)   such other financial and operating statements and reports as and
            when the Bank may reasonably require.

GENERAL COVENANTS
Each of the Borrowers covenants and agrees with the Bank, while this agreement
is in effect:

      (a)   to pay all sums of money when due by it under this agreement;

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

      (c)   to give the Bank 30 days prior written notice of any intended change
            in the ownership of its shares and not to consent to or facilitate a
            change in the ownership of its shares without the prior written
            consent of the Bank;

      (d)   to keep its assets fully insured against such perils and in such
            manner as would be customarily insured by Persons carrying on a
            similar business or owning similar assets;

      (e)   to file all material tax returns which are to be filed by it from
            time to time, to pay or make provision for payment of all taxes
            (including interest and penalties) and Potential Prior-Ranking
            Claims when due, and to provide adequate reserves for the payment of
            any tax, the payment of which is being contested;

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      12                 June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

      (f)   to comply in all material respects with all Applicable Laws
            including, without limitation, all Environmental Laws;

      (g)   not to, without the prior written consent of the Bank, grant,
            create, assume or suffer to exist any mortgage, charge, lien,
            pledge, security interest or other encumbrance affecting any of its
            properties, assets or other rights;

      (h)   not to, without the prior written consent of the Bank, sell,
            transfer, convey, lease or otherwise dispose of any of its
            properties or assets other than in the ordinary course of business
            and on commercially reasonable terms;

      (i)   not to, without the prior written consent of the Bank, guarantee or
            otherwise provide for, on a direct, indirect or contingent basis,
            the payment of any monies or performance of any obligations by any
            other Person, except as may be provided for herein;

      (j)   not to, without the prior written consent of the Bank, merge,
            amalgamate, or otherwise enter into any other form of business
            combination with any other Person;

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

      (l)   to permit the Bank or its representatives, from time to time, to
            visit and inspect its premises, properties and assets and examine
            and obtain copies of its records or other information and discuss
            its affairs with its auditors, counsel and other professional
            advisers.

FINANCIAL COVENANTS
Pneutech covenants and agrees with the Bank, while any availability exists or
any Borrowings remain outstanding under any Credit Facility, which is a term
facility or while any amounts remain outstanding under any Lease:

      (a)   to maintain on a consolidated basis, to be measured as at the end of
            each fiscal quarter:

            (i)   a ratio of Funded Debt to EBITDA, calculated on a rolling 4
                  quarters basis for the fiscal quarter then ended and the
                  immediately preceding 3 fiscal quarters, of not greater than
                  4.0:1;

            (ii)  a ratio of Total Liabilities to Tangible Net Worth of not
                  greater than 2.5:1.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      13                 June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

Nothing contained in the foregoing Covenants sections shall limit any right of
the Bank under this agreement to terminate or demand payment of, or cancel or
restrict availability of any unutilized portion of, any demand or other
discretionary facility made available under this agreement.

EVENTS OF DEFAULT
Without limiting any other rights of the Bank under this agreement, if any one
or more of the following events (herein an "Event of Default") has occurred and
is continuing:

      (a)   the Borrowers fail to pay when due any principal, interest, fees or
            other amounts due under this agreement;

      (b)   any Borrower or the Guarantor breaches any provision of this
            agreement or any security or other agreement with the Bank or any
            subsidiary or affiliate of the Bank;

      (c)   any Borrower or the Guarantor defaults in the payment of any
            indebtedness to any Person other than the Bank, or in the
            performance or observance of any agreement in respect of any such
            indebtedness where, as a result of such default, the maturity of
            such indebtedness is or may be accelerated and such default
            materially and adversely affects the business or the assets of any
            Borrower or the Guarantor, as the case may be;

      (d)   any representation or warranty made or deemed to have been made
            herein or in any certificate or security provided for herein shall
            be false or inaccurate in any materially adverse respect;

      (e)   there is, in the opinion of the Bank, a material adverse change in
            the financial condition, operation or ownership of any Borrower or
            the Guarantor;

      (f)   any Borrower or the Guarantor is unable to pay its debts as such
            debts become due, or is, or is adjudged or declared to be, or admits
            to being, bankrupt or insolvent;

      (g)   any notice of intention is filed or any voluntary or involuntary
            case or proceeding is filed or commenced for (i) the bankruptcy,
            liquidation, winding-up, dissolution or suspension of general
            operations of any Borrower or the Guarantor, or (ii) the
            composition, re-scheduling, reorganization, arrangement or
            readjustment of, or other relief from, or stay of proceedings to
            enforce, some or all of the debts of any Borrower or the Guarantor
            or (iii) the appointment of a trustee, receiver, receiver and
            manager, liquidator, administrator, custodian or other official for,
            all or any significant part of the assets of any Borrower or the
            Guarantor or (iv) the possession, foreclosure or retention, or sale
            or other disposition of, or other proceedings to enforce security
            over, all or any significant part of the assets of any Borrower or
            the Guarantor; or

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      14                 June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

      (h)   any secured creditor, encumbrancer or lienor, or any trustee,
            receiver, receiver and manager, agent, bailiff or other similar
            official appointed by or acting for any secured creditor,
            encumbrancer or lienor, takes possession of, or forecloses or
            retains, or sells or otherwise disposes of, or otherwise proceeds to
            enforce security over all or any significant part of the assets of
            any Borrower or the Guarantor or gives notice of its intention to do
            any of the foregoing,

then, in such event, the ability of Pneutech to make further Borrowings under
Facility (1) shall immediately terminate and the Bank may, by written notice to
the Borrowers, declare the Borrowings outstanding under Facility (1) to be
immediately due and payable. Upon receipt of such written notice, the Borrowers
shall immediately pay to the Bank all Borrowings outstanding under Facility (1)
and all other obligations of the Borrowers to the Bank in connection with
Facility (1) including, without limitation, an amount equal to the aggregate of
the face amounts of all BAs, LCs and LGs which are unmatured or unexpired, which
amount shall be held by the Bank as security for the Borrowers' obligations to
the Bank in respect of such instruments or contracts. The Bank may enforce its
rights to realize upon its security and retain an amount sufficient to secure
the Bank for the Borrowers' obligations to the Bank in respect of such contracts
or instruments.

Nothing contained in the foregoing Events of Default section shall limit any
right of the Bank under this agreement to terminate or demand payment of, or
cancel or restrict availability of any unutilized portion of, any demand or
other discretionary facility made available under this agreement.

SUCCESSORS AND ASSIGNS
This agreement shall be binding upon and enure to the benefit of the parties and
their respective successors and permitted assigns.

The Bank may assign all or part of its rights and obligations under this
agreement to any Person. The rights and obligations of the Borrowers under this
agreement may not be assigned without the prior written consent of the Bank.

The Bank may disclose to potential or actual assignees confidential information
regarding the Borrowers (including, any such information provided by the
Borrowers to the Bank) and shall not be liable for any such disclosure.

GENERAL

Expenses
The Borrowers agree to pay all fees (including legal fees), costs and expenses
incurred by the Bank in connection with the preparation, negotiation and
documentation of this agreement and the security provided for herein and the
operation or enforcement of this agreement and the security provided for herein.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      15                 June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

Review
The Bank may conduct periodic reviews of the affairs of the Borrowers, as and
when determined by the Bank, for the purpose of evaluating the financial
condition of the Borrowers. Each of the Borrowers shall make available to the
Bank such financial statements and other information and documentation as the
Bank may reasonably require and shall do all things reasonably necessary to
facilitate such review by the Bank.

Potential Prior-Ranking Claims
Each of the Borrowers hereby grants its consent (such grant to remain in force
as long as this agreement is in effect or any Borrowings and/or Leases are
outstanding) to any Person having information relating to any Potential
Prior-Ranking Claim arising by any law, statute, regulation or otherwise and
including, without limitation, claims by or on behalf of government to release
such information to the Bank at any time upon its written request for the
purpose of assisting the Bank to evaluate the financial condition of the
Borrowers.

Set Off
The Bank is authorized, but not obligated, at any time, to apply any credit
balance, whether or not then due, to which any Borrower is entitled on any
account in any currency at any branch or office of the Bank in or towards
satisfaction of the obligations of the Borrowers due to the Bank under this
agreement. The Bank is authorized to use any such credit balance to buy such
other currencies as may be necessary to effect such application.

Non-Merger
The provisions of this agreement shall not merge with any security provided to
the Bank, but shall continue in full force for the benefit of the parties
hereto.

Amendments and Waivers
No amendment or waiver of any provision of this agreement will be effective
unless it is in writing signed by the Borrowers and the Bank. No failure or
delay, on the part of the Bank, in exercising any right or power hereunder or
under any security document shall operate as a waiver thereof. The Guarantor
agrees that the amendment or waiver of any provision of this agreement (other
than agreements, covenants or representations expressly made by the Guarantor
herein, if any) may be made without and does not require the consent or
agreement of, or notice to, the Guarantor.

Severability
If any provision of this agreement is or becomes prohibited or unenforceable in
any jurisdiction, such prohibition or unenforceability shall not invalidate or
render unenforceable the provision concerned in any other jurisdiction nor
invalidate, affect or impair any of the remaining provisions of this agreement.

Life Insurance Options
Each of the Borrowers acknowledges that Borrowings are not insured under the
Bank's Business Loan Insurance Plan.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      16                 June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

Judgement Currency
If for the purpose of obtaining judgement in any court in any jurisdiction with
respect to this agreement, it is necessary to convert into the currency of such
jurisdiction (the "Judgement Currency") any amount due hereunder in any currency
other than the Judgement Currency, then conversion shall be made at the rate of
exchange prevailing on the Business Day before the day on which judgement is
given. For this purpose "rate of exchange" means the rate at which the Bank
would, on the relevant date, be prepared to sell a similar amount of such
currency in the Toronto foreign exchange market, against the Judgement Currency,
in accordance with normal banking procedures.

In the event that there is a change in the rate of exchange prevailing between
the Business Day before the day on which judgement is given and the date of
payment of the amount due, Borrower (1) will, on the date of payment, pay such
additional amounts as may be necessary to ensure that the amount paid on such
date is the amount in the Judgement Currency which, when converted at the rate
of exchange prevailing on the date of payment, is the amount then due under this
agreement in such other currency together with interest at RBP and expenses
(including legal fees on a solicitor and client basis). Any additional amount
due from Borrower (1) under this section will be due as a separate debt and
shall not be affected by judgement being obtained for any other sums due under
or in respect of this agreement.

Governing Law
This agreement shall be construed in accordance with and governed by the laws of
the Province of Ontario and of Canada applicable therein.

Whole Agreement
This agreement, the security and any other written agreement delivered pursuant
to or referred to in this agreement constitute the whole and entire agreement
between the parties in respect of the Credit Facilities. There are no verbal
agreements, undertakings or representations in connection with the Credit
Facilities.

Joint and Several
Where more than one Person is liable as Borrower or Guarantor for any obligation
under this agreement, then the liability of each such Person for such obligation
is joint and several with each other such Person.

Counterpart Execution
This agreement may be executed in any number of counterparts and by different
parties in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together constitute one and the same
instrument.

Time
Time shall be of the essence in all provisions of this agreement.

Acceptance
This offer is open for acceptance until June 24, 2005, after which date it will
be null and void, unless extended in writing by the Bank.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      17                 June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

Please confirm your acceptance of this agreement by signing the attached copy of
this letter in the space provided below and returning it to the undersigned.

Yours truly,

/s/ DAVID A. GILLMOURE

David A. Gillmoure
Senior Account Manager

/lg

We acknowledge and accept the foregoing terms and conditions as of June 15,
2005.

PNEUTECH INC.

By:/s/ CLIFFORD RHEE
   ---------------------------------
Name:  Clifford Rhee
Title: President and CEO

By: /s/ LUIGI LOBASSO
    --------------------------------
Name: Luigi LoBasso
Title: CFO

I/We have authority to bind the corporation.

We acknowledge and accept the foregoing terms and conditions as of June 15,
2005.

ROUSSEAU CONTROLS INC.

By:/s/ CLIFFORD RHEE
   ---------------------------------
Name:  Clifford Rhee
Title: President and CEO

By: /s/ LUIGI LOBASSO
    --------------------------------
Name: Luigi LoBasso
Title: CFO

I/We have authority to bind the corporation.

<PAGE>

Pneutech Inc., Rousseau Controls Inc. and      18                 June 10, 2005
Hydramen Fluid Power Limited
--------------------------------------------------------------------------------

We acknowledge and accept the foregoing terms and conditions as of June 15,
2005.

HYDRAMEN FLUID POWER LIMITED

By:/s/ CLIFFORD RHEE
   ---------------------------------
Name:  Clifford Rhee
Title: President and CEO

By: /s/ LUIGI LOBASSO
    --------------------------------
Name: Luigi LoBasso
Title: CFO

I/We have authority to bind the corporation.

We acknowledge and confirm our agreement with the foregoing terms and
conditions, as Guarantor, as of June 15, 2005.

THOMAS EQUIPMENT, INC.

By:/s/ CLIFFORD RHEE
   ---------------------------------
Name:  Clifford Rhee
Title: President

By: /s/ LUIGI LOBASSO
    --------------------------------
Name: Luigi LoBasso
Title: CFO

I/We have authority to bind the corporation.

<PAGE>

Schedule "A" to the agreement dated June 10, 2005, between Pneutech Inc.,
Rousseau Controls Inc. and Hydramen Fluid Power Limited, as Borrowers, and Royal
Bank of Canada, as the Bank.

                                   DEFINITIONS

For the purpose of this agreement, the following terms and phrases shall have
the following meanings:

"Applicable Laws" means, with respect to any Person, property, transaction or
event, all present or future Applicable Laws, statutes, regulations, rules,
orders, codes, treaties, conventions, judgments, awards, determinations and
decrees of any governmental, regulatory, fiscal or monetary body or court of
competent jurisdiction in any applicable jurisdiction;

"Bankers' Acceptance" or "BA" means a bill of exchange, including a depository
bill issued in accordance with the Depository Bills and Notes Act (Canada),
drawn on the Bank by, and payable to the order of, Pneutech which has been
accepted by the Bank;

"Branch of Account" means the branch of the Bank at which Pneutech's accounts
are maintained. As at the date of this agreement, the "Branch of Account" is the
Bank's branch at 6880 Financial Drive, Mississauga, Ontario;

"Business Day" means a day, excluding Saturday, Sunday and any other day which
shall be a legal holiday or a day on which banking institutions are closed in
the province of the Branch of Account and, when used in connection with a Libor
Loan, means, in addition to the foregoing, a day on which dealings in US
currency deposits by and between leading banks in the London Interbank Market
may be concluded;

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

"Domestic Countries Persons" means Persons whose chief operating activities are
located in the United States of America or Canada;

"EBITDA" means, for any fiscal period, net income from continuing operations
(excluding extraordinary gains or losses) plus, to the extent deducted in
determining net income, Interest Expense and income taxes accrued during, and
depreciation, depletion and amortization expenses deducted for, the period;

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

"Environmental Laws" means all Applicable Laws relating to the environment or
occupational health and safety, or any Environmental Activity;

<PAGE>

                                       2
--------------------------------------------------------------------------------

"Equity" means the total of share capital, (excluding preferred shares
redeemable within one year) contributed surplus and retained earnings;

"Equivalent Amount" means, with respect to an amount of any currency, the amount
of any other currency required to purchase that amount of the first mentioned
currency through the Bank in Toronto, in accordance with normal banking
procedures;

"Funded Debt" means, at any time, all obligations for borrowed money which bears
interest or to which interest is imputed plus, without duplication, all
obligations for the deferred payment of the purchase of property, all capital
lease obligations and all indebtedness secured by purchase money security
interests, but excluding Postponed Debt;

"GAAP" means, generally accepted accounting principles in effect from time to
time in Canada applied in a consistent manner from period to period;

"Good Accounts Receivable" means accounts receivable of the Borrowers excluding
(i) Thomas Equipment Receivables, (ii) the entire amount of accounts, any
portion of which is outstanding more than 90 days after billing date, provided
that the under 90 day portion may be included where the over 90 day portion is
less than 10% of the amount of accounts, or where the Bank has designated such
portion as nevertheless good, and provided that the entire amount of accounts
owing by Camoplast Inc. will be excluded where any portion of such accounts is
outstanding more than 140 days from billing date, (iii) all amounts due from any
affiliate, (iv) bad or doubtful accounts, (v) accounts subject to any security
interest or other encumbrance ranking or capable of ranking in priority to the
Bank's security, (vi) the amount of all holdbacks, contra accounts or rights of
set-off on the part of any account debtor, or (vii) any accounts which the Bank
has previously advised to be ineligible;

"Good Domestic Accounts Receivable" means Good Accounts Receivable owing by
Domestic Countries Persons;

"Guarantor" means Thomas Equipment, Inc., a Delaware corporation;

"Hydramen Letter Agreement" means a letter agreement dated April 1, 2004 between
Hydramen Fluid Power Limited as the borrower and the Bank;

"Interest Determination Date" means, with respect to a Libor Loan, the date
which is 2 Business Days before the first day of the Libor Interest Period
applicable to such Libor Loan;

"Interest Expense" means, for any fiscal period, the aggregate cost of advances
of credit outstanding during that period including, without limitation, interest
charges, capitalized interest, the interest component of capital leases, fees
payable in respect of letters of credit and letters of guarantee and discounts
incurred and fees payable in respect of bankers' acceptances;

"Lease" means an advance of credit by the Bank to any Borrower by way of an
equipment lease, a conditional sales contract, or pursuant to an Interim Funding
Agreement or an Agency Agreement, in each case issued to the Borrower by the
leasing division of the Bank;

<PAGE>

                                       3
--------------------------------------------------------------------------------

"Letter of Credit" or "LC" means a documentary credit issued by the Bank on
behalf of Pneutech for the purpose of paying suppliers of goods;

"Letter of Guarantee" or "LG" means a documentary credit issued by the Bank on
behalf of Pneutech for the purpose of providing security to a third party that
Pneutech or a person designated by Pneutech will perform a contractual
obligation owed to such third party;

"Libor" means, with respect to each Libor Interest Period applicable to a Libor
Loan, the annual rate of interest (rounded upwards, if necessary, to the nearest
whole multiple of one sixteenth of one percent (1/16th%)), at which the Bank, in
accordance with its normal practice, would be prepared to offer deposits to
leading banks in the London Interbank Market for delivery on the first day of
each of such Libor Interest Period, for a period equal to each such Libor
Interest Period, such deposits being in US currency of comparable amounts to be
outstanding during such Libor Interest Period, at or about 10:00 a.m. (Toronto
time) on the Interest Determination Date;

"Libor Interest Date" means with respect to any Libor Loan, the last day of each
Libor Interest Period and, if Pneutech selects a Libor Interest Period for a
period longer than 3 months, the Libor Interest Date shall be the date falling
every 3 months after the beginning of such Libor Interest Period as well as the
last day of such Libor Interest Period;

"Libor Interest Period" means, with respect to any Libor Loan, the initial
period (subject to availability) of approximately 1 month (or longer whole
multiples of 1 month to and including 6 months as selected by Pneutech and
notified to the Bank by written notice) or such shorter or longer period as the
Bank in its sole discretion shall make available commencing on the date on which
such Libor Loan is made or another method of Borrowing is converted to a Libor
Loan, as the case may be, and thereafter, while such Libor Loan is outstanding,
each successive period (subject to availability) of 1 month (or longer whole
multiples of 1 month to and including 6 months, as selected by Pneutech and
notified to the Bank by written notice) commencing on the last day of the
immediately preceding Libor Interest Period;

"Person" includes an individual, a partnership, a joint venture, a trust, an
unincorporated organization, a company, a corporation, an association, a
government or any department or agency thereof, and any other incorporated or
unincorporated entity;

"Postponed Debt" means indebtedness that is fully postponed and subordinated,
both as to principal and interest, on terms satisfactory to the Bank, to the
obligations owing to the Bank hereunder;

"Potential Prior-Ranking Claims" means all amounts owing or required to be paid,
where the failure to pay any such amount could give rise to a claim pursuant to
any law, statute, regulation or otherwise, which ranks or is capable of ranking
in priority to the Bank's security or otherwise in priority to any claim by the
Bank for repayment of any amounts owing under this agreement;

"RBP" and "Royal Bank Prime" each means the annual rate of interest announced by
the Bank from time to time as being a reference rate then in effect for
determining interest rates on commercial loans made in Canadian currency in
Canada;

<PAGE>

                                       4
--------------------------------------------------------------------------------

"RBUSBR" and "Royal Bank US Base Rate" each means the annual rate of interest
announced by the Bank from time to time as a reference rate then in effect for
determining interest rates on commercial loans made in US currency in Canada;

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

"Rousseau Letter Agreement" means a letter agreement dated December 10, 2004
between Rousseau Controls Inc. as the borrower and the Bank;

"Tangible Net Worth" means the total of Equity plus Postponed Debt less
intangibles, deferred charges and leasehold improvements. For the purpose
hereof, intangibles are assets lacking physical substance;

"Thomas Equipment Receivables" means accounts receivable of the Borrowers owed
by Thomas Equipment 2004 Inc. meeting normal trade terms excluding (i) the
entire amount of accounts, any portion of which is outstanding more than 90 days
after billing date, provided that the under 90 day portion may be included where
the over 90 day portion is less than 10% of the amount of accounts, (ii)
accounts subject to any security interest or other encumbrance ranking or
capable of ranking in priority to the Bank's security and (iii) the amount of
all holdbacks, contra accounts or rights of set-off on the part of Thomas
Equipment 2004 Inc.;

"Total Liabilities" means all liabilities, exclusive of deferred tax liabilities
and Postponed Debt;

"Unencumbered Inventory" means inventory of the Borrowers which is not subject
to any security interest or other encumbrance or any other right or claim which
ranks or is capable of ranking in priority to the Bank's security including,
without limitation, rights of unpaid suppliers under the Bankruptcy and
Insolvency Act, Canada, to repossess inventory within 30 days after delivery;

"US" means United States of America.

<PAGE>

Schedule "B" to the agreement dated June 10, 2005, between Pneutech Inc.,
Rousseau Controls Inc. and Hydramen Fluid Power Limited, as Borrowers, and Royal
Bank of Canada, as the Bank.

                               NOTICE REQUIREMENTS

Notice Requirements for other than Libor Loans:

<TABLE>
<CAPTION>
============================================================ =========================================================
                          Amount                                                   Prior Notice
============================================================ =========================================================
<S>                                                          <C>
Under $10,000,000, Canadian or US currency                   By 10:00 a.m. on the day of Borrowing
$10,000,000 up to but not including $25,000,000, Canadian    By 10:00 a.m. 1 Business Day prior to the day of
or US currency                                               Borrowing
$25,000,000 up to but not including $50,000,000, Canadian    By 10:00 a.m. 2 Business Days prior to the day of
or US currency                                               Borrowing
============================================================ =========================================================
</TABLE>

Notice Requirements for Libor Loans:
<TABLE>
<CAPTION>
============================================================ =========================================================
                          Amount                                                   Prior Notice
============================================================ =========================================================
<S>                                                          <C>
Under $10,000,000 in US currency and up to 1 year rollovers  by 10:00 a.m. on the Interest Determination Date
$10,000,000 up to but not including $50,000,000 in US        by 10:00 a.m. 1 Business Day prior to the Interest
currency and up to 1 year rollovers                          Determination Date

============================================================ =========================================================
</TABLE>

<PAGE>

Schedule "C" to the agreement dated June 10, 2005, between Pneutech Inc.,
Rousseau Controls Inc. and Hydramen Fluid Power Limited, as Borrowers and Royal
Bank of Canada, as the Bank.

                              BORROWING CONDITIONS

Borrowings made otherwise than by way of RBP Loans or RBUSBR Loans will be
subject to the following terms and conditions:

      BAs:

      (a)   BAs shall be issued and mature on a Business Day and shall be issued
            in minimum face amounts of $500,000 or such larger amount as is a
            whole multiple of $100,000 for terms of not less than 30 and not
            more than 180 days;

      (b)   the Bank may, in its sole discretion, refuse to accept Pneutech's
            drafts or limit the amount of any BA issue at any time;

      (c)   notwithstanding any other provision of this agreement, the Borrowers
            shall indemnify the Bank against any loss, cost or expense incurred
            by the Bank if any BA is repaid, prepaid, converted or cancelled
            other than on the maturity date of such BA;

      (d)   any BA issued under a term facility must have a maturity on or
            before the maturity date of the term facility, unless otherwise
            agreed by the Bank; and

      (e)   prior to the issue of any BA Pneutech shall execute the Bank's
            standard form of undertaking and agreement in respect of BAs. If
            there is any inconsistency at any time between the terms of this
            agreement and the terms of the Bank's standard form of undertaking
            and agreement, the terms of this agreement shall govern.

      LCs or LGs:

      (a)   each LC and LG shall expire on a Business Day and shall have a term
            of not more than 365 days;

      (b)   at least 2 Business Days prior to the issue of an LC or LG, Pneutech
            shall execute a duly authorized application with respect to such LC
            or LG and each LC and LG shall be governed by the terms and
            conditions of the relevant application for such contract;

      (c)   an LC or LG may not be revoked prior to its expiry date unless the
            consent of the beneficiary of the LC or LG has been obtained;

      (d)   any LC or LG issued under a term facility must have an expiry date
            on or before the maturity date of the term facility, unless
            otherwise agreed to by the Bank; and

      (e)   if there is any inconsistency at any time between the terms of this
            agreement and the terms of the application for LC or LG, the terms
            of the application for LC or LG shall govern.

<PAGE>

                                       2
--------------------------------------------------------------------------------

      Libor Loans:

      (a)   Libor Loans shall be issued and mature on a Business Day and shall
            be made in minimum amounts of $1,000,000 in US currency for terms of
            not less than 30 days and not more than 360 days;

      (b)   if Pneutech fails to select and to notify the Bank of the Libor
            Interest Period applicable to any Libor Loan, Pneutech shall be
            deemed to have selected a 3 month Libor Interest Period;

      (c)   if the Bank so requests Pneutech shall enter into a Hedge Contract
            to hedge the principal and interest of each Libor Loan against the
            risk of currency and exchange rate fluctuations. "Hedge Contract"
            means any rate swap, rate cap, rate floor, rate collar, currency
            exchange transaction, forward rate agreement or other exchange,
            hedging or rate protection transaction, or any combination of such
            transactions or agreements or any option with respect to any such
            transaction now existing or hereafter entered into between Pneutech
            and the Bank;

      (d)   the Borrowers shall indemnify and hold the Bank harmless against any
            loss, cost or expense (including without limitation, any loss
            incurred by the Bank in liquidating or redeploying deposits acquired
            to fund or maintain any Libor Loan) incurred by the Bank as a result
            of:

            (i)   repayments, prepayments, conversions, rollovers or
                  cancellations of a Libor Loan other than on the last day of
                  the Libor Interest Period applicable to such Libor Loan, or

            (ii)  failure to draw down a Libor Loan on the first day of the
                  Libor Interest Period selected by Pneutech; and

      (e)   if the Bank determines, which determination is final, conclusive and
            binding upon Pneutech, that:

            (i)   adequate and fair means do not exist for ascertaining the rate
                  of interest on a Libor Loan,

            (ii)  the making or the continuance of a Libor Loan has become
                  impracticable by reason of circumstances which materially and
                  adversely affect the London Interbank Market,

            (iii) deposits in US currency are not available to the Bank in the
                  London Interbank Market in sufficient amounts in the ordinary
                  course of business for the applicable Libor Interest Period to
                  make or maintain a Libor Loan during such Libor Interest
                  Period, or

            (iv)  the cost to the Bank of making or maintaining a Libor Loan
                  does not accurately reflect the effective cost to the Bank

<PAGE>

                                       3
--------------------------------------------------------------------------------

                  thereof or the costs to the Bank are increased or the income
                  receivable by the Bank is reduced in respect of a Libor Loan,

            then the Bank shall promptly notify Pneutech of such determination
            and Pneutech shall, prior to the next Interest Determination Date,
            notify the Bank as to the basis of Borrowing it has selected in
            substitution for such Libor Loan. If Pneutech does not so notify the
            Bank, such Libor Loan will automatically be converted into an RBUSBR
            Loan on the expiry of the then current Libor Interest Period.

<PAGE>

Schedule "D" to the agreement dated June 10, 2005, between Pneutech Inc.,
Rousseau Controls Inc. and Hydramen Fluid Power Limited, as Borrowers, and Royal
Bank of Canada, as the Bank.

                           BORROWING LIMIT CERTIFICATE

I, ___________________________________, the ______________________ of Pneutech
Inc. (the "Borrower") hereby certify as of month ending _____________________:

1.    I am familiar with and have examined the provisions of the letter
      agreement (the "Agreement") dated June 10, 2005, between Pneutech Inc.,
      Rousseau Controls Inc. and Hydramen Fluid Power Limited, as Borrowers, and
      Royal Bank of Canada (the "Bank"), as the Bank, and have made reasonable
      investigations of corporate records and inquiries of other officers and
      senior personnel of the Borrowers. Terms defined in the Agreement have the
      same meanings where used in this certificate.

2.    The Borrowing Limit is $______________, calculated as follows:

total accounts receivable of the Borrowers owing by Domestic Countries Persons,
excluding $ accounts owing by Thomas Equipment 2004 Inc.

<TABLE>
<CAPTION>
<S>     <C>  <C>                                                                             <C>
Less:   (a)  Domestic Countries Persons accounts, any portion of which exceeds 90 days       ($__________________)

        (b)  Camoplast Inc. accounts, any portion of which exceeds 140 days                  ($__________________)

        (c)  Domestic Countries Persons accounts due from affiliates                         ($__________________)

        (d)  "Under 90 days" Domestic Countries Persons accounts where collection is suspect ($__________________)

        (e)  Domestic Countries Persons accounts subject to prior encumbrances               ($__________________)

        (f)  Holdbacks, contra-accounts or rights of set-off                                 ($__________________)

        (g)  other ineligible Domestic Countries Persons accounts                            ($__________________)

Plus:

        (h)  Under 90 day portion where the over 90 day portion included                     ($__________________)
             in (a) above is less than 10% of the amount of accounts

Good Domestic Accounts Receivable                                                            A $ ________________

marginable Good Domestic Accounts Receivable at 75% of A                                     B $ ________________

total accounts receivable of the Borrowers owing by Thomas Equipment 2004 Inc.               $ __________________
</TABLE>

<PAGE>

                                       2
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S>          <C>      <C>                                                                      <C>
Less:        (a)      accounts, any portion of which exceeds 90 days                           ($__________________)

             (b)      accounts subject to prior encumbrances                                   ($__________________)

             (c)      holdbacks, contra-accounts or rights of set-off                          ($__________________)

Plus         (d)      Under 90 day portion where the over 90 day portion included in (a)       $ ___________________
                      above is less than 10% of the amount of accounts

Thomas Equipment Receivables                                                                   C $ _________________

marginable Thomas Equipment Receivable at 75% of C                                             D $ _________________

total inventory (valued at lesser of cost or net realizable value)                             $ ___________________

Less:        (a)      inventory subject to prior encumbrances                                  ($__________________)

             (b)      inventory subject to 30 day supplier payables                            ($__________________)

             (c)      other non-qualifying inventory                                           ($__________________)

Unencumbered Inventory                                                                         E $__________________

marginable inventory at 50% of E                                                               F $__________________

Less:        Potential Prior-Ranking Claims                        G ($__________________)

Borrowing Limit (B + D + F - G)                                                                $_____________

Less:        Facility (1) Borrowings (including LCs and LGs)       ($__________________)

Margin Surplus (Deficit)                                                                       $_____________
</TABLE>

3.    Annexed hereto are the following reports in respect of the Borrowers:

      (a)   aged list of accounts receivable,

      (b)   status of inventory,

      (c)   listing of Potential Prior-Ranking Claims,

      (d)   listing of supplier payables having 30 day repossession rights over
            inventory.

4.    The reports and information provided herewith are accurate and complete in
      all respects and all amounts certified as Potential Prior-Ranking Claims
      are current amounts owing and not in arrears.

Dated this                   day of                      , 20___.

Per: ___________________________________
Name:_________________________________
Title:__________________________________

<PAGE>

Schedule "E" to the agreement dated June 10, 2005, between Pneutech Inc.,
Rousseau Controls Inc. and Hydramen Fluid Power Limited, as Borrowers, and Royal
Bank of Canada, as the Bank.

                             COMPLIANCE CERTIFICATE

I, ___________________________________, the ____________________ of Pneutech
Inc. (the "Borrower") hereby certify as of fiscal quarter ending
_____________________:

1.    I am familiar with and have examined the provisions of the letter
      agreement (the "Agreement") dated June 10, 2005 between Pneutech Inc.,
      Rousseau Controls Inc. and Hydramen Fluid Power Limited, as Borrowers, and
      Royal Bank of Canada (the "Bank"), as the Bank, and have made reasonable
      investigations of corporate records and inquiries of other officers and
      senior personnel of the Borrowers. Terms defined in the Agreement have the
      same meanings when used in this certificate.

2.    The representations and warranties contained in the Agreement are true and
      correct.

3.    No event or circumstance has occurred which constitutes or which, with the
      giving of notice, lapse of time, or both, would constitute an Event of
      Default under the Agreement and there is no reason to believe that during
      the next fiscal quarter of the Borrowers, any such event or circumstance
      will occur.

4.    Funded Debt to EBITDA is ______:1, being not greater than the maximum
      ratio of 4.0:1.

5.    The ratio of Total Liabilities to Tangible Net Worth is ______:1 being not
      greater than the maximum ratio of 2.5:1.

6.    The detailed calculations of the foregoing ratios and covenants is set
      forth in the addendum annexed hereto and are true and correct in all
      respects.

Dated this                          day of                  , 20____.

Per: _________________________________
Name:________________________________
Title:_________________________________

<PAGE>

                             FEF CONTRACTS SCHEDULE

FEF Contract Definitions

"Foreign Exchange Forward Contract" or "FEF Contract" means a currency exchange
transaction or agreement or any option with respect to any such transaction now
existing or hereafter entered into between the Borrower and the Bank;

Conditions Applicable to FEF Contracts

At the request of any Borrower, the Bank may agree to enter into FEF Contracts
with such Borrower from time to time. The Borrowers acknowledge that the Bank
makes no formal commitment herein to enter into any FEF Contract and the Bank
may, at any time and at all times, in its sole and absolute discretion, accept
or reject any request by any Borrower to enter into a FEF Contract. If the Bank
does enter into a FEF Contract with any Borrower, it will do so subject to the
following:

      (a)   the Borrower shall promptly issue or countersign and return a
            confirmation or acknowledgement of the terms of each such FEF
            Contract as required by the Bank;

      (b)   the Borrower shall, if required by the Bank, promptly enter into a
            Foreign Exchange and Options Master Agreement or such other
            agreement in form and substance satisfactory to the Bank to govern
            the FEF Contract(s);

      (c)   in the event of demand for payment under the agreement of which this
            schedule forms a part, the Bank may terminate all or any FEF
            Contracts. If the agreement governing any FEF Contract does not
            contain provisions governing termination, any such termination shall
            be effected in accordance with customary market practice. The Bank's
            determination of amounts owing under any terminated FEF Contract
            shall be conclusive in the absence of manifest error. The Bank shall
            apply any amount owing by the Bank to the Borrower on termination of
            any FEF Contract against the Borrower's obligations to the Bank
            under the agreement and any amount owing to the Bank by the Borrower
            on such termination shall be added to the Borrower's obligations to
            the Bank under the agreement and secured by the Bank's security;

      (d)   the Borrower shall pay all required fees in connection with any FEF
            Contracts and indemnify and hold the Bank harmless against any loss,
            cost or expense incurred by the Bank in relation to any FEF
            Contract, including without limitation, the costs of terminating or
            cancelling any FEF Contract;

      (e)   any rights of the Bank herein in respect of any FEF Contract are in
            addition to and not in limitation of or substitution for any rights
            of the Bank under any agreement governing such FEF Contract. In the
            event that there is any inconsistency at any time between the terms
            hereof and any agreement governing such FEF Contract, the terms of
            such agreement shall prevail; and

<PAGE>

                                       2
--------------------------------------------------------------------------------

      (f)   in addition to any security which may be held at any time in respect
            of any FEF Contract, upon request by the Bank from time to time, the
            Borrower will deliver to the Bank such security as is acceptable to
            the Bank as continuing collateral security for the Borrower's
            obligations to the Bank in respect of FEF Contracts.GENERAL SECURITY AGREEMENT

1.    SECURITY INTEREST

      (a) For value received, the undersigned ("Debtor"), hereby grants to ROYAL
BANK OF CANADA ("RBC"), a security interest (the "Security Interest") in the
undertaking of Debtor and in all of Debtor's present and after acquired personal
property including, without limitation, in all Goods (including all parts,
accessories, attachments, special tools, additions and accessions thereto),
Chattel Paper, Documents of Title (whether negotiable or not), Instruments,
Intangibles, Money and Securities now owned or hereafter owned or acquired by or
on behalf of Debtor (including such as may be returned to or repossessed by
Debtor) and in all proceeds and renewals thereof, accretions thereto and
substitutions therefore (hereinafter collectively called "Collateral"), and
including, without limitation, all of the following now owned or hereafter owned
or acquired by or on behalf of Debtor:

            (i)   all inventory of whatever kind and wherever situate;

            (ii)  all equipment (other than Inventory) of whatever kind and
                  wherever situate, including, without limitation, all
                  machinery, tools, apparatus, plant, furniture, fixtures and
                  vehicles of whatsoever nature or kind;

            (iii) all Accounts and book debts and generally all debts, dues,
                  claims, choses in action and demands of every nature and kind
                  howsoever arising or secured including letters of credit and
                  advices of credit, which are now due, owing or accruing or
                  growing due to or owned by or which may hereafter become due,
                  owing or accruing or growing due to or owned by Debtor
                  ("Debts");

            (iv)  all lists, records and files relating to Debtor's customers,
                  clients and patients;

            (v)   all deeds, documents, writings, papers, books of account and
                  other books relating to or being records of Debts, Chattel
                  Paper or Documents of Title or by which such are or may
                  hereafter be secured, evidenced, acknowledged or made payable;

            (vi)  all contractual rights and insurance claims;

            (vii) all patents, industrial designs, trade-marks, trade secrets
                  and know-how including without limitation environmental
                  technology and biotechnology, confidential information,
                  trade-names, goodwill, copyrights, personality rights, plant
                  breeders' rights, integrated circuit topographies, software
                  and all other forms of intellectual and industrial property,
                  and any registrations and applications for registration of any
                  of the foregoing (collectively "Intellectual Property"); and

            (viii) all property described in Schedule "C" or any schedule now or
                  hereafter annexed hereto.

      (b) The Security Interest granted hereby shall not extend or apply to and
Collateral shall not include the last day of the term of any lease or agreement
therefor but upon the enforcement of the Security Interest, Debtor shall stand
possessed of such last day in trust to assign the same to any person acquiring
such term.

      (c) The terms "Goods", "Chattel Paper", "Document of Title", "Instrument",
"Intangible", "Security", "proceed", "Inventory", "accession", "Money",
"Account", "financing statement" and "financing change statement" whenever used
herein shall be interpreted pursuant to their respective meanings when used in
The Personal Property Security Act of the province referred to in Clause 14(r),
as amended from time to time, which Act, including amendments thereto and any
Act substituted therefor and amendments thereto is herein referred to as the
"P.P.S.A.". Provided always that the term "Goods" when used herein shall not
include "consumer goods" of Debtor as that term is defined in the P.P.S.A., and
the term "Inventory" when used herein shall include livestock and the young
thereof after conception and crops that become such within one year of execution
of this Security Agreement. Any reference herein to "Collateral" shall, unless
the context otherwise requires, be deemed a reference to "Collateral or any part
thereof".

2.    INDEBTEDNESS SECURED

      The Security Interest granted hereby secures payment and performance of
any and all obligations, indebtedness and liability of Debtor to RBC (including
interest thereon) present or future, direct or indirect, absolute or contingent,
matured or not, extended or renewed, wheresoever and howsoever incurred and any
ultimate unpaid balance thereof and whether the same is from time to time
reduced and thereafter increased or entirely extinguished and thereafter
incurred again and whether Debtor be bound alone or with another or others and
whether as principal, or surety (hereinafter collectively called the
"Indebtedness"). If the Security Interest in the Collateral is not sufficient,
in the event of default, to satisfy all Indebtedness of the Debtor, the Debtor
acknowledges and agrees that Debtor shall continue to be liable for any
Indebtedness remaining outstanding and RBC shall be entitled to pursue full
payment thereof.

                                  Page 1 of 12
<PAGE>

3.    REPRESENTATIONS AND WARRANTIES OF DEBTOR

      Debtor represents and warrants and so long as this Security Agreement
remains in effect shall be deemed to continuously represent and warrant that:

      (a) the Collateral is genuine and owned by Debtor free of all security
interests, mortgages, liens, claims, charges, licenses, leases, infringements by
third parties, encumbrances or other adverse claims or interests (hereinafter
collectively called "Encumbrances"), save for the Security Interest and those
Encumbrances shown on Schedule "A" or hereafter approved in writing by RBC,
prior to their creation or assumption;

      (b) all Intellectual Property applications and registrations are valid and
in good standing and Debtor is the owner of the applications and registrations;

      (c) each Debt, Chattel Paper and Instrument constituting Collateral is
enforceable in accordance with its terms against the party obligated to pay the
same (the "Account Debtor"), and the amount represented by Debtor to RBC from
time to time as owing by each Account Debtor or by all Account Debtors will be
the correct amount actually and unconditionally owing by such Account Debtor or
Account Debtors, except for normal cash discounts where applicable, and no
Account Debtor will have any defence, set off, claim or counterclaim against
Debtor which can be asserted against RBC, whether in any proceeding to enforce
Collateral or otherwise;

      (d) the locations specified in Schedule "B" as to business operations and
records are accurate and complete and with respect to Goods (including
Inventory) constituting Collateral, the locations specified in Schedule "B" are
accurate and complete save for Goods in transit to such locations and Inventory
on lease or consignment; and all fixtures or Goods about to become fixtures and
all crops and all oil, gas or other minerals to be extracted and all timber to
be cut which forms part of the Collateral will be situate at one of such
locations; and

      (e) the execution, delivery and performance of the obligations under this
Security Agreement and the creation of any security interest in or assignment
hereunder of Debtor's rights in the Collateral to RBC will not result in a
breach of any agreement to which Debtor is a party.

4.    COVENANTS OF THE DEBTOR

      So long as this Security Agreement remains in effect Debtor covenants and
agrees:

      (a) to defend the Collateral against the claims and demands of all other
parties claiming the same or an interest therein; to diligently initiate and
prosecute legal action against all infringers of Debtor's rights in Intellectual
Property; to take all reasonable action to keep the Collateral free from all
Encumbrances, except for the Security Interest, licenses which are compulsory
under federal or provincial legislation and those shown on Schedule "A" or
hereafter approved in writing by RBC, prior to their creation or assumption, and
not to sell, exchange, transfer, assign, lease, license or otherwise dispose of
Collateral or any interest therein without the prior written consent of RBC;
provided always that, until default, Debtor may, in the ordinary course of
Debtor's business, sell or lease Inventory and, subject to Clause 7 hereof, use
Money available to Debtor;

      (b) to notify RBC promptly of:

            (i)   any change in the information contained herein or in the
                  Schedules hereto relating to Debtor , Debtor's business or
                  Collateral,

            (ii)  the details of any significant acquisition of Collateral,

            (iii) the details of any claims or litigation affecting Debtor or
                  Collateral,

            (iv)  any loss or damage to Collateral,

            (v)   any default by any Account Debtor in payment or other
                  performance of its obligations with respect to Collateral, and

            (vi)  the return to or repossession by Debtor of Collateral;

      (c) to keep Collateral in good order, condition and repair and not to use
Collateral in violation of the provisions of this Security Agreement or any

                                  Page 2 of 12
<PAGE>

other agreement relating to Collateral or any policy insuring Collateral or any
applicable statute, law, by-law, rule, regulation or ordinance; to keep all
agreements, registrations and applications relating to Intellectual Property and
intellectual property used by Debtor in its business in good standing and to
renew all agreements and registrations as may be necessary or desirable to
protect Intellectual Property, unless otherwise agreed in writing by RBC; to
apply to register all existing and future copyrights, trade-marks, patents,
integrated circuit topographies and industrial designs whenever it is
commercially reasonable to do so;

      (d) to do, execute, acknowledge and deliver such financing statements,
financing change statements and further assignments, transfers, documents, acts,
matters and things (including further schedules hereto) as may be reasonably
requested by RBC of or with respect to Collateral in order to give effect to
these presents and to pay all costs for searches and filings in connection
therewith;

      (e) to pay all taxes, rates, levies, assessments and other charges of
every nature which may be lawfully levied, assessed or imposed against or in
respect of Debtor or Collateral as and when the same become due and payable;

      (f) to insure Collateral in such amounts and against such risks as would
customarily be insured by a prudent owner of similar Collateral and in such
additional amounts and against such additional risks as RBC may from time to
time direct, with loss payable to RBC and Debtor, as insureds, as their
respective interests may appear, and to pay all premiums therefor and deliver
copies of policies and evidence of renewal to RBC on request;

      (g) to prevent Collateral, save Inventory sold or leased as permitted
hereby, from being or becoming an accession to other property not covered by
this Security Agreement;

      (h) to carry on and conduct the business of Debtor in a proper and
efficient manner and so as to protect and preserve Collateral and to keep, in
accordance with generally accepted accounting principles, consistently applied,
proper books of account for Debtor's business as well as accurate and complete
records concerning Collateral, and mark any and all such records and Collateral
at RBC's request so as to indicate the Security Interest;

            (i)   to deliver to RBC from time to time promptly upon request:

            (i)   any Documents of Title, Instruments, Securities and Chattel
                  Paper constituting, representing or relating to Collateral,

            (ii)  all books of account and all records, ledgers, reports,
                  correspondence, schedules, documents, statements, lists and
                  other writings relating to Collateral for the purpose of
                  inspecting, auditing or copying the same,

            (iii) all financial statements prepared by or for Debtor regarding
                  Debtor's business,

            (iv)  all policies and certificates of insurance relating to
                  Collateral, and

            (v)   such information concerning Collateral, the Debtor and
                  Debtor's business and affairs as RBC may reasonably request.

5.    USE AND VERIFICATION OF COLLATERAL

      Subject to compliance with Debtor's covenants contained herein and Clause
7 hereof, Debtor may, until default, possess, operate, collect, use and enjoy
and deal with Collateral in the ordinary course of Debtor's business in any
manner not inconsistent with the provisions hereof; provided always that RBC
shall have the right at any time and from time to time to verify the existence
and state of the Collateral in any matter RBC may consider appropriate and
Debtor agrees to furnish all assistance and information and to perform all such
acts as RBC may reasonably request in connection therewith and for such purpose
to grant to RBC or its agents access to all places where Collateral may be
located and to all premises occupied by Debtor.

6.    SECURITIES

      If Collateral at any time includes Securities, Debtor authorizes RBC to
transfer the same or any part thereof into its own name or that of its

                                  Page 3 of 12
<PAGE>

nominee(s) so that RBC or its nominee(s) may appear of record as the sole owner
thereof; provided that, until default, RBC shall deliver promptly to Debtor all
notices or other communications received by it or its nominee(s) as such
registered owner and, upon demand and receipt of payment of any necessary
expenses thereof, shall issue to Debtor or its order a proxy to vote and take
all action with respect to such Securities. After default, Debtor waives all
rights to receive any notices or communications received by RBC or its
nominee(s) as such registered owner and agrees that no proxy issued by RBC to
Debtor or its order as aforesaid shall thereafter be effective.

7.    COLLECTION OF DEBTS

      Before or after default under this Security Agreement, RBC may notify all
or any Account Debtors of the Security Interest and may also direct such Account
Debtors to make all payments on Collateral to RBC. Debtor acknowledges that any
payments on or other proceeds of Collateral received by Debtor from Account
Debtors, whether before or after notification of this Security Interest to
Account Debtors and whether before or after default under this Security
Agreement, shall be received and held by Debtor in trust for RBC and shall be
turned over to RBC upon request.

8.    INCOME FROM AND INTEREST ON COLLATERAL

      (a) Until default, Debtor reserves the right to receive any Money
constituting income from or interest on Collateral and if RBC receives any such
Money prior to default, RBC shall either credit the same against the
Indebtedness or pay the same promptly to Debtor.

      (b) After default, Debtor will not request or receive any Money
constituting income from or interest on Collateral and if RBC receives any any
Money constituting income from or interest on Collateral and if Debtor receives
any such Money without any request by it, Debtor will pay the same promptly to
RBC.

9.    INCREASES, PROFITS, PAYMENTS OR DISTRIBUTIONS

      (a) Whether or not default has occurred, Debtor authorizes RBC:

            (i)   to receive any increase in or profits on Collateral (other
                  than Money) and to hold the same as part of Collateral. Money
                  so received shall be treated as income for the purposes of
                  Clause 8 hereof and dealt with accordingly;

            (ii)  to receive any payment or distribution upon redemption or
                  retirement or upon dissolution and liquidation of the issuer
                  of Collateral; to surrender such Collateral in exchange
                  therefor and to hold any such payment or distribution as part
                  of Collateral.

      (b) If Debtor receives any such increase or profits (other than Money) or
payments or distributions, Debtor will deliver the same promptly to RBC to be
held by RBC as herein provided.

10.   DISPOSITION OF MONEY

      Subject to any applicable requirements of the P.P.S.A., all Money
collected or received by RBC pursuant to or in exercise of any right it
possesses with respect to Collateral shall be applied on account of Indebtedness
in such manner as RBC deems best or, at the option of RBC, may be held
unappropriated in a collateral account or released to Debtor, all without
prejudice to the liability of Debtor or the rights of RBC hereunder, and any
surplus shall be accounted for as required by law.

11.   EVENTS OF DEFAULT

      The happening of any of the following events or conditions shall
constitute default hereunder which is herein referred to as "default":

      (a) the nonpayment when due, whether by acceleration or otherwise, of any
principal or interest forming part of Indebtedness or the failure of Debtor to
observe or perform any obligation, covenant, term, provision or condition
contained in this Security Agreement or any other agreement between Debtor and
RBC;

      (b) the death of or a declaration of incompetency by a court of competent
jurisdiction with respect to Debtor, if an individual;

                                  Page 4 of 12
<PAGE>

      (c) the bankruptcy or insolvency of Debtor; the filing against Debtor of a
petition in bankruptcy; the making of an assignment for the benefit of creditors
by Debtor; the appointment of a receiver or trustee for Debtor or for any assets
of Debtor or the institution by or against Debtor of any other type of
insolvency proceeding under the Bankruptcy and Insolvency Act or otherwise;

      (d) the institution by or against Debtor of any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims against
or winding up of affairs of Debtor;

      (e) if any Encumbrance affecting Collateral becomes enforceable against
Collateral;

      (f) if Debtor ceases or threatens to cease to carry on business or makes
or agrees to make a bulk sale of assets without complying with applicable law or
commits or threatens to commit an act of bankruptcy;

      (g) if any execution, sequestration, extent or other process of any court
becomes enforceable against Debtor or if distress or analogous process is levied
upon the assets of Debtor or any part thereof;

      (h) if any certificate, statement, representation, warranty or audit
report heretofore or hereafter furnished by or on behalf of Debtor pursuant to
or in connection with this Security Agreement, or otherwise (including, without
limitation, the representations and warranties contained herein) or as an
inducement to RBC to extend any credit to or to enter into this or any other
agreement with Debtor, proves to have been false in any material respect at the
time as of which the facts therein set forth were stated or certified, or proves
to have omitted any substantial contingent or unliquidated liability or claim
against Debtor; or if upon the date of execution of this Security Agreement,
there shall have been any material adverse change in any of the facts disclosed
by any such certificate, representation, statement, warranty or audit report,
which change shall not have been disclosed to RBC at or prior to the time of
such execution.

12.   ACCELERATION

      RBC, in its sole discretion, may declare all or any part of Indebtedness
which is not by its terms payable on demand to be immediately due and payable,
without demand or notice of any kind, in the event of default, or if RBC
considers itself insecure or that the Collateral is in jeopardy. The provisions
of this clause are not intended in any way to affect any rights of RBC with
respect to any Indebtedness which may now or hereafter be payable on demand.

13.   REMEDIES

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

      (b) Upon default, RBC may, either directly or through its agents or
nominees, exercise any or all of the powers and rights given to a Receiver by
virtue of the foregoing sub-clause (a).

      (c) RBC may take possession of, collect, demand, sue on, enforce, recover
and receive Collateral and give valid and binding receipts and discharges
therefor and in respect thereof and, upon default, RBC may sell, license, lease
or otherwise dispose of Collateral in such manner, at such time or times and
place or places, for such consideration and upon such terms and conditions as to
RBC may seem reasonable.

                                  Page 5 of 12
<PAGE>

      (d) In addition to those rights granted herein and in any other agreement
now or hereafter in effect between Debtor and RBC and in addition to any other
rights RBC may have at law or in equity, RBC shall have, both before and after
default, all rights and remedies of a secured party under the P.P.S.A. Provided
always, that RBC shall not be liable or accountable for any failure to exercise
its remedies, take possession of, collect, enforce, realize, sell, lease,
license or otherwise dispose of Collateral or to institute any proceedings for
such purposes. Furthermore, RBC shall have no obligation to take any steps to
preserve rights against prior parties to any Instrument or Chattel Paper whether
Collateral or proceeds and whether or not in RBC's possession and shall not be
liable or accountable for failure to do so.

      (e) Debtor acknowledges that RBC or any Receiver appointed by it may take
possession of Collateral wherever it may be located and by any method permitted
by law and Debtor agrees upon request from RBC or any such Receiver to assemble
and deliver possession of Collateral at such place or places as directed.

      (f) Debtor agrees to be liable for and to pay all costs, charges and
expenses reasonably incurred by RBC or any Receiver appointed by it, whether
directly or for services rendered (including reasonable solicitors and auditors
costs and other legal expenses and Receiver remuneration), in operating Debtor's
accounts, in preparing or enforcing this Security Agreement, taking and
maintaining custody of, preserving, repairing, processing, preparing for
disposition and disposing of Collateral and in enforcing or collecting
Indebtedness and all such costs, charges and expenses, together with any amounts
owing as a result of any borrowing by RBC or any Receiver appointed by it, as
permitted hereby, shall be a first charge on the proceeds of realization,
collection or disposition of Collateral and shall be secured hereby.

      (g) RBC will give Debtor such notice, if any, of the date, time and place
of any public sale or of the date after which any private disposition of
Collateral is to be made as may be required by the P.P.S.A..

      (h) Upon default and receiving written demand from RBC, Debtor shall take
such further action as may be necessary to evidence and effect an assignment or
licensing of Intellectual Property to whomever RBC directs, including to RBC.
Debtor appoints any officer or director or branch manager of RBC upon default to
be its attorney in accordance with applicable legislation with full power of
substitution and to do on Debtor's behalf anything that is required to assign,
license or transfer, and to record any assignment, license or transfer of the
Collateral. This power of attorney, which is coupled with an interest, is
irrevocable until the release or discharge of the Security Interest.

14.   MISCELLANEOUS

      (a) Debtor hereby authorizes RBC to file such financing statements,
financing change statements and other documents and do such acts, matters and
things (including completing and adding schedules hereto identifying Collateral
or any permitted Encumbrances affecting Collateral or identifying the locations
at which Debtor's business is carried on and Collateral and records relating
thereto are situate) as RBC may deem appropriate to perfect on an ongoing basis
and continue the Security Interest, to protect and preserve Collateral and to
realize upon the Security Interest and Debtor hereby irrevocably constitutes and
appoints the Manager or Acting Manager from time to time of the herein mentioned
branch of RBC the true and lawful attorney of Debtor, with full power of
substitution, to do any of the foregoing in the name of Debtor whenever and
wherever it may be deemed necessary or expedient.

      (b) Without limiting any other right of RBC, whenever Indebtedness is
immediately due and payable or RBC has the right to declare Indebtedness to be
immediately due and payable (whether or not it has so declared), RBC may, in its
sole discretion, set off against Indebtedness any and all amounts then owed to
Debtor by RBC in any capacity, whether or not due, and RBC shall be deemed to
have exercised such right to set off immediately at the time of making its
decision to do so even though any charge therefor is made or entered on RBC's
records subsequent thereto.

      (c) Upon Debtor's failure to perform any of its duties hereunder, RBC may,
but shall not be obligated to, perform any or all of such duties, and Debtor
shall pay to RBC, forthwith upon written demand therefor, an amount equal to the
expense incurred by RBC in so doing plus interest thereon from the date such
expense is incurred until it is paid at the rate of 15% per annum.

      (d) RBC may grant extensions of time and other indulgences, take and give
up security, accept compositions, compound, compromise, settle, grant releases
and discharges and otherwise deal with Debtor, debtors of Debtor, sureties and
others and with Collateral and other security as RBC may see fit without
prejudice to the liability of Debtor or RBC's right to hold and realize the
Security Interest. Furthermore, RBC may demand, collect and sue on Collateral in
either Debtor's or RBC's name, at RBC's option, and may endorse Debtor's name on
any and all cheques, commercial paper, and any other Instruments pertaining to
or constituting Collateral.

                                  Page 6 of 12
<PAGE>

      (e) No delay or omission by RBC in exercising any right or remedy
hereunder or with respect to any Indebtedness shall operate as a waiver thereof
or of any other right or remedy, and no single or partial exercise thereof shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy. Furthermore, RBC may remedy any default by Debtor hereunder or
with respect to any Indebtedness in any reasonable manner without waiving the
default remedied and without waiving any other prior or subsequent default by
Debtor. All rights and remedies of RBC granted or recognized herein are
cumulative and may be exercised at any time and from time to time independently
or in combination.

      (f) Debtor waives protest of any Instrument constituting Collateral at any
time held by RBC on which Debtor is in any way liable and, subject to Clause
13(g) hereof, notice of any other action taken by RBC.

      (g) This Security Agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors, administrators,
successors and assigns. In any action brought by an assignee of this Security
Agreement and the Security Interest or any part thereof to enforce any rights
hereunder, Debtor shall not assert against the assignee any claim or defence
which Debtor now has or hereafter may have against RBC. If more than one Debtor
executes this Security Agreement the obligations of such Debtors hereunder shall
be joint and several.

      (h) RBC may provide any financial and other information it has about
Debtor, the Security Interest and the Collateral to anyone acquiring or who may
acquire an interest in the Security Interest or the Collateral from RBC or
anyone acting on behalf of RBC.

      (i) Save for any schedules which may be added hereto pursuant to the
provisions hereof, no modification, variation or amendment of any provision of
this Security Agreement shall be made except by a written agreement, executed by
the parties hereto and no waiver of any provision hereof shall be effective
unless in writing.

      (j) Subject to the requirements of Clauses 13(g) and 14(j) hereof,
whenever either party hereto is required or entitled to notify or direct the
other or to make a demand or request upon the other, such notice, direction,
demand or request shall be in writing and shall be sufficiently given, in the
case of RBC, if delivered to it or sent by prepaid registered mail addressed to
it at its address herein set forth or as changed pursuant hereto, and, in the
case of Debtor, if delivered to it or if sent by prepaid registered mail
addressed to it at its last address known to RBC. Either party may notify the
other pursuant hereto of any change in such party's principal address to be used
for the purposes hereof.

      (k) This Security Agreement and the security afforded hereby is in
addition to and not in substitution for any other security now or hereafter held
by RBC and is intended to be a continuing Security Agreement and shall remain in
full force and effect until the Manager or Acting Manager from time to time of
the herein mentioned branch of RBC shall actually receive written notice of its
discontinuance; and, notwithstanding such notice, shall remain in full force and
effect thereafter until all Indebtedness contracted for or created before the
receipt of such notice by RBC, and any extensions or renewals thereof (whether
made before or after receipt of such notice) together with interest accruing
thereon after such notice, shall be paid in full.

      (l) The headings used in this Security Agreement are for convenience only
and are not be considered a part of this Security Agreement and do not in any
way limit or amplify the terms and provisions of this Security Agreement.

      (m) When the context so requires, the singular number shall be read as if
the plural were expressed and the provisions hereof shall be read with all
grammatical changes necessary dependent upon the person referred to being a
male, female, firm or corporation.

      (n) In the event any provisions of this Security Agreement, as amended
from time to time, shall be deemed invalid or void, in whole or in part, by any
Court of competent jurisdiction, the remaining terms and provisions of this
Security Agreement shall remain in full force and effect.

      (o) Nothing herein contained shall in any way obligate RBC to grant,
continue, renew, extend time for payment of or accept anything which constitutes
or would constitute Indebtedness.

      (p) The Security Interest created hereby is intended to attach when this
Security Agreement is signed by Debtor and delivered to RBC.

                                  Page 7 of 12
<PAGE>

      (q) Debtor acknowledges and agrees that in the event it amalgamates with
any other company or companies it is the intention of the parties hereto that
the term "Debtor" when used herein shall apply to each of the amalgamating
companies and to the amalgamated company, such that the Security Interest
granted hereby

            (i)   shall extend to "Collateral" (as that term is herein defined)
                  owned by each of the amalgamating companies and the
                  amalgamated company at the time of amalgamation and to any
                  "Collateral" thereafter owned or acquired by the amalgamated
                  company, and

            (ii)  shall secure the "Indebtedness" (as that term is herein
                  defined) of each of the amalgamating companies and the
                  amalgamated company to RBC at the time of amalgamation and any
                  "Indebtedness" of the amalgamated company to RBC thereafter
                  arising. The Security Interest shall attach to "Collateral"
                  owned by each company amalgamating with Debtor, and by the
                  amalgamated company, at the time of the amalgamation, and
                  shall attach to any "Collateral" thereafter owned or acquired
                  by the amalgamated company when such becomes owned or is
                  acquired.

      (r) In the event that Debtor is a body corporate, it is hereby agreed that
The Limitation of Civil Rights Act of the Province of Saskatchewan, or any
provision thereof, shall have no application to this Security Agreement or any
agreement or instrument renewing or extending or collateral to this Security
Agreement. In the event that Debtor is an agricultural corporation within the
meaning of The Saskatchewan Farm Security Act, Debtor agrees with RBC that all
of Part IV (other than Section 46) of that Act shall not apply to Debtor.

      (s) This Security Agreement and the transactions evidenced hereby shall be
governed by and construed In accordance with the laws of the province in which
the herein mentioned branch of RBC is located, as those laws may from time to
time be in effect, including where applicable, the P.P.S.A.

15.   COPY OF AGREEMENT

      (a) Debtor hereby acknowledges receipt of a copy of this Security
Agreement.

      (b) Debtor waives Debtor's right to receive a copy of any financing
statement or financing change statement registered by RBC or of any verification
statement with respect to any financing statement or financing change statement
registered by RBC. (Applies in all P.P.S.A. Provinces except Ontario).

16.   Debtor represents and warrants that the following information is accurate:

INDIVIDUAL DEBTOR

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                 <C>                            <C>
SURNAME (LAST NAME)                        FIRST NAME          SECOND NAME                    BIRTH DATE

                                                                                              YEAR MONTH DAY
----------------------------------------------------------------------------------------------------------------------------
ADDRESS OF INDIVIDUAL DEBTOR               CITY                                     PROVINCE  POSTAL CODE

----------------------------------------------------------------------------------------------------------------------------
SURNAME (LAST NAME)                        FIRST NAME          SECOND NAME                    BIRTH DATE

                                                                                              YEAR MONTH DAY
----------------------------------------------------------------------------------------------------------------------------
ADDRESS   OF   INDIVIDUAL    DEBTOR   (IF  CITY                                     PROVINCE  POSTAL CODE
DIFFERENT FROM ABOVE)

----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                  Page 8 of 12
<PAGE>

BUSINESS DEBTOR

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
<S>                                 <C>                                <C>                     <C>
NAME OF BUSINESS DEBTOR

PNEUTECH INC.
-------------------------------------------------------------------------------------------------------------
ADDRESS OF BUSINESS DEBTOR          CITY                               PROVINCE               POSTAL CODE

345 Superior Blvd., Unit #1         Mississauga                        ON                     L5T 2L6
-------------------------------------------------------------------------------------------------------------
</TABLE>

TRADE NAME (IF APPLICABLE)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                    <C>
TRADE NAME OF DEBTOR

-------------------------------------------------------------------------------------------------------------
PRINCIPAL  ADDRESS  (IF  DIFFERENT  CITY                              PROVINCE               POSTAL CODE
FROM ABOVE)

-------------------------------------------------------------------------------------------------------------
</TABLE>

IN WITNESS WHEREOF Debtor has executed this Security Agreement this___day of
_____________________, 2005.

<TABLE>
<CAPTION>
<S>                                                   <C>                                                       <C>
                                                      PNEUTECH INC.
                                                      Per:                                                      [Seal]
-----------------------------------------------                    --------------------------------------------
Witness                                               Name:        Clifford M. Rhee

                                                      Title:       President                                    [Seal]

                                                      I have authority to bind the Corporation.
-----------------------------------------------       ---------------------------------------------------------
Witness
</TABLE>

BRANCH ADDRESS

-------------------------------------------------------------------------------
Business Service Centre
3rd Flr 180 Wellington St. W.
Toronto ON
M5J 1J1
-------------------------------------------------------------------------------

                                  Page 9 of 12
<PAGE>

                                  SCHEDULE "A"

                       (ENCUMBRANCES AFFECTING COLLATERAL)

                                 Page 10 of 12
<PAGE>

                                  SCHEDULE "B"

1. Locations of Debtor's Business Operations

345 Superior Blvd., Unit #1
Mississauga ON  L5T 2L6

1475 - 32nd Avenue
Lachine, QC H8T 3J1

1200 Boul. Du Royaume
Chicoutimi, Q.C. G7H 5B1

3306 Belle Feuille
Trois Rivieres, QC G9A 3Z3

205 Enterprise Avenue
Kitimat, B.C.  V8C 2C8

445 Des Adirondacks
Beauport, QC  G1C 6S2

2. Locations of Records relating to Collateral (if different from 1. above)

1475 - 32nd Avenue
Lachine, QC  H8T 3J1

3. Locations of Collateral (if different from 1. above)

as above

                                 Page 11 of 12
<PAGE>

                                  SCHEDULE "C"

                            (DESCRIPTION OF PROPERTY)

                                 Page 12 of 12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}]]