Exhibit 10.12
-------------


TITLE
-----
250 kW Hydrogen-fuelled Generator Set for Wind Energy Integration

PRIORITY OF DOCUMENTS
The documents listed below form part of and are incorporated  into the Contract.
If there is any discrepancy  between the wording of one document and the wording
of any other  document  which  appears on the list,  the wording of the document
which first  appears on the list shall  prevail over the wording of any document
which subsequently appears on the list:

1.       these articles of agreement;
2.       the  general  conditions  9624  (2005-12-16),   "General  Conditions  -
         Research and Development";
3.       the standard  instructions  and conditions  9403-5,  "Professional  and
         Research and Development Services";
4.       Annex "A" - Statement of Work;
5.       Annex "B" - Schedule of Milestones
6.       the Contractor's  Technical Proposal referenced under the "Statement of
         Work" clause hereafter.

STATEMENT OF WORK
The  Contractor  shall  perform the Work as outlined  in the  Statement  of Work
attached hereto as Annex "A" and in accordance with the  Contractor's  Technical
Proposal entitled " Proposal for the Supply of a 250 kW Hydrogen-fuelled  Genset
to Natural  Resources  Canada",  dated January 17, 2006 and forming part of this
Contract.

DELIVERY
Deliverables  under this Contract  must be received by the  Technical  Authority
identified herein, at the time specified in the Schedule of Milestones  attached
hereto as Annex "B".

STANDARD INSTRUCTIONS, CLAUSES AND CONDITIONS
---------------------------------------------

Standard Acquisition Clauses and Conditions Manual
All instructions,  clauses and conditions identified herein by title, number and
date are set out in the  Standard  Acquisition  Clauses  and  Conditions  (SACC)
Manual issued by Public Works and Government Services Canada (PWGSC).

The Manual is available on the PWGSC Website:

Terms and conditions of the Contract
Pursuant to the  Department  of Public Works and  Government  Services Act, S.C.
1996, c.16, the clauses and conditions  identified  herein by title,  number and
date,  and the  Conditions  set out in Part B of the standard  instructions  and
conditions  9403-5  (2004-12-10),  "Professional  and Research  and  Development
Services",  are  hereby  incorporated  by  reference  into and form part of this
Contract as though expressly set out herein.

GENERAL CONDITIONS
------------------
The general  conditions 9624  (2005-06-10),  "General  Conditions - Research and
Development", shall apply to and form part of this Contract.

<PAGE>


CONTRACTING AUTHORITY
---------------------
Sara McClacherty
Supply Intern Officer
Science and Professional Services Procurement Directorate
Services and Technology Acquisition Management Sector
Acquisitions Branch
Public Works and Government Services Canada
Place du Portage, Phase III, 11C1
11 Laurier Street
Gatineau, Quebec                                     Telephone:  (819) 956-1684
K1A 0S5                                              Facsimile:   (819) 956-5054

The  Contracting  Authority is responsible  for the management of this Contract.
Any changes to the Contract  must be  authorized  in writing by the  Contracting
Authority.  The  Contractor  is not to perform  work in excess of or outside the
scope of this Contract based on verbal or written requests or instructions  from
any government personnel other than the Contracting Authority.

TECHNICAL AUTHORITY
-------------------
Morel Oprisan
Manager
Renewable Energy Technologies
Sustainable Buildings and Communities, CETC
Natural Resources Canada, Government of Canada
580 Booth Street, 13th Floor, Room A6-1
Ottawa, Ontario                                      Telephone: (613) 947-7059
K1A 0E4                                              Facsimile:  (613) 996-9416

The Technical  Authority is responsible for all matters concerning the technical
content of the Work under this  Contract.  Any proposed  changes to the scope of
the Work are to be discussed  with the  Technical  Authority,  but any resultant
changes can only be authorized by a contract amendment issued by the Contracting
Authority.

CONTRACTOR'S REPRESENTATIVE
---------------------------
Matthew Fairlie
Hydrogen Engine Center Canada Inc.
3351 boul des Forges,
CP 500,
Trois-Rivieres , QC                                  Telephone: (416) 806-8486
G9A 5H7                                              Facsimile:  (905) 830-0416

BASIS OF PAYMENT - FIRM PRICE
-----------------------------
In  consideration  of  the  Contractor  satisfactorily  completing  all  of  its
obligations  under this Contract,  the  Contractor  will be paid a firm price of
$179,000.00,  customs duty included if applicable,  Goods and Services Tax (GST)
extra, if applicable.

No  increase  in the  total  liability  of  Canada  or in the  price of the Work
resulting  from any design  changes,  modifications  or  interpretations  of the
Specifications  will be authorized or paid to the Contractor  unless such design
changes, modifications or interpretations have been approved, in writing, by the
Contracting Authority prior to their incorporation into the Work.

                                       -2-
<PAGE>



GOODS AND SERVICES TAX/HARMONIZED SALES TAX
-------------------------------------------
All prices and amounts of money in the Contract  are  exclusive of the Goods and
Services  Tax  (GST) or  Harmonized  Sales  Tax  (HST),  as  applicable,  unless
otherwise  indicated.  The GST or HST, whichever is applicable,  is extra to the
price herein and will be paid by Canada.

The estimated GST  ($12,530.00) is included in the total estimated cost shown on
page 1 hereof. GST or HST, to the extent  applicable,  will be incorporated into
all  invoices  and  progress  claims  and will be shown  as a  separate  item on
invoices and progress claims. All items that are zero-rated,  exempt or to which
the GST or HST does not apply,  are to be identified as such on all invoices and
claims.  The Contractor  agrees to remit to Canada Revenue Agency any amounts of
GST and HST paid or due.

METHOD OF PAYMENT - MILESTONE PAYMENTS
--------------------------------------
1.       Milestone  payments  shall be made in  accordance  with the Schedule of
         Milestones  attached  hereto as Annex "B", upon the following terms and
         conditions:

         (a)  invoices  shall be  submitted  to  Canada in  accordance  with the
              instructions specified herein;
         (b)  the invoice is approved by the Technical Authority; and
         (c)  all the Work required for the milestone  claimed has been received
              and accepted by the Technical Authority.

2.       The balance of the amount payable shall be paid following:

         (a)  delivery and acceptance of the Work; and
         (b)  the approval of the final invoice by the Technical Authority.

3. Payment by Canada to the Contractor for the Work shall be made:

         (a)  in the case of a milestone  payment other than the final  payment,
              within  thirty  (30)  days  following  the date of  receipt  of an
              invoice; or
         (b)  in the case of a final payment,  within thirty (30) days following
              the date of receipt of a final invoice, or within thirty (30) days
              following the date on which the Work is completed,  whichever date
              is the later.

4.        If Canada has any objection to the form of the invoice, within fifteen
          (15) days of its receipt,  Canada shall notify the  Contractor  of the
          nature of the objection.  "Form of the invoice" means an invoice which
          contains or is accompanied  by such  substantiating  documentation  as
          Canada  requires.  Failure by Canada to act within  fifteen  (15) days
          will only result in the date  specified in subsection 3 of this clause
          applying  for the sole  purpose  of  calculating  interest  on overdue
          accounts.

INVOICING INSTRUCTIONS
----------------------
Payment  will  only be made  upon  submission  of a  satisfactory  invoice  duly
supported by documents called for under this Contract.

The invoice  shall be submitted on the  Contractor's  own invoice form and shall
include:

(a)      the amount invoiced (exclusive of GST or HST, as appropriate);
(b)      the deduction for holdback, if applicable;
(c)      the amount of GST or HST, as appropriate;
(d)      the date;
(e)      the name and address of the client department;
(f)      quantity and description (if applicable);
(g)      the PWGSC File Number and  Contract Number  as  shown on page 1 of this
         Contract;
(h)      the financial codes as shown on page 1 of this Contract;
(i)      the Client Reference Number (CRN);

                                       -3-
<PAGE>

(j)      the Procurement Business Number; and
(k)      the name and  telephone  number of the person who can be  contacted  to
         obtain additional information regarding the invoice.

The  original  and two (2)  copies of each  invoice  shall be  forwarded  to the
Technical  Authority for  certification  and payment.  The Contractor shall also
forward one (1) copy of each invoice to the Contracting Authority.

T1204  - INFORMATION REPORTING BY CONTRACTOR
--------------------------------------------

1.       Pursuant to paragraph  221 (1)(d) of the Income Tax Act,  payments made
         by departments and agencies to contractors  under  applicable  services
         contracts  (including  contracts involving a mix of goods and services)
         must be reported on a T1204, Government Service Contract Payments slip.

2.       To enable departments and agencies to comply with this requirement, the
         Contractor  shall  provide  the  following  information,  as  and  when
         requested by the client department:

         (a)  the legal name of the business entity or sole  proprietorship,  as
              applicable,  i.e.  the legal  name  associated  with the  Business
              Number (BN) or the Social  Insurance  Number (SIN), as well as the
              address and the postal code;
         (b)  the  type  of  entity,   i.e.   corporation,   partnership,   sole
              proprietorship,  or joint  venture;
         (c)  the BN if the entity is a corporation or  partnership;  the SIN if
              the  entity is a sole  proprietorship:
              i.   (i) If the  entity is a  partnership  and does not have a BN,
                   then the partner who has signed the contract must provide his
                   (her) SIN;
             ii.   (ii) if the  entity  is a joint  venture,  then the BN of all
                   contractors  comprising  the joint  venture that will receive
                   payment (SIN for applicable contractor(s) without a BN);
         (d)  the  following  certification  signed  by  the  Contractor  or  an
              authorized officer:
                  "I certify that I have  examined the  information  provided in
                  (a), (b) and (c) above,  and that it is correct and  complete,
                  and fully discloses the identification of this Contractor."

3.       These requests may take the form of a general  call-letter to suppliers
         or individual contact,  in writing or by telephone.  Where the required
         information  includes a SIN,  the  information  should be provided in a
         separate envelope marked "PROTECTED".

DISCRETIONARY AUDIT - C0705C (2004-12-10)
-----------------------------------------

COST SUBMISSION
---------------

1.       On completion of the Contractor's  obligations under this Contract, the
         Contractor shall, if requested, prepare and submit a cost submission to
         the  Contracting  Authority  specified  in  this  Contract.   The  cost
         submission   shall  be  a  statement  of  the  costs  incurred  by  the
         Contractor,  in  accordance  with the  Basis of  Payment,  for the Work
         performed under the terms of this Contract.

2.       The cost submission  shall be signed and certified by the  Contractor's
         Senior  Financial  Officer and shall  contain a breakdown  of each cost
         element.

3.       Supporting  information for each element of cost shall be available and
         shall be in  sufficient  detail that an  in-depth  audit can be carried
         out.
                                      -4-
<PAGE>

CERTIFICATIONS
--------------
Compliance with the certifications  provided by the Contractor is a condition of
this Contract and is subject to  verification by Canada during the entire period
of the  Contract.  In the event that the  Contractor  does not  comply  with any
certification  or that  it is  determined  that  any  certification  made by the
Contractor in its proposal is untrue, whether made knowingly or unknowingly, the
Minister  shall  have the  right,  pursuant  to the  default  provisions  of the
Contract, to terminate the Contract for default.

WORK FORCE REDUCTION PROGRAMS
-----------------------------
1.       It is a term of this Contract:
         (a)  that the  Contractor  has  declared to the  Contracting  Authority
              whether  the  Contractor  has  received  a lump sum  payment  made
              pursuant to any work force  reduction  program,  including but not
              limited  to  the  Work  Force  Adjustment  Directive,   the  Early
              Departure Incentive (EDI) Program,  the Early Retirement Incentive
              (ERI)  Program,  the Forces  Reduction  Program  or the  Executive
              Employment  Transition  Program,  which  has been  implemented  to
              reduce the public service;
         (b)  that the Contractor has informed the Contracting  Authority of the
              terms  and  conditions  of  that  work  force  reduction  program,
              pursuant  to which  the  Contractor  was made a lump sum  payment,
              including the termination date, the amount of the lump sum payment
              and the rate of pay on which the lump sum payment was based; and
         (c)  that the Contractor has informed the Contracting  Authority of any
              exemption  in respect of the  abatement of a contract fee received
              by the  Contractor  under the Early  Departure  Incentive  Program
              Order or paragraph 4 of Policy Notice 1995-8, of July 28, 1995.

2.       The Contractor  represents and warrants that the information  submitted
         with its proposal is accurate and complete. The Contractor acknowledges
         that the  Minister  has relied upon such  representation  to enter into
         this Contract.  Such  representation  may be verified in such manner as
         the Minister may reasonably require.

3.       The  Contractor  acknowledges  that in the  event of a  breach  of such
         covenant, the Minister shall have the right to rescind the Contract.

4.       Nothing in this clause shall be  interpreted as limiting the rights and
         remedies which Canada or the Minister may otherwise have in relation to
         or pursuant to this Contract.

INTERNATIONAL SANCTIONS
-----------------------
1.       Persons  in Canada,  and  Canadians  outside  of  Canada,  are bound by
         economic  sanctions imposed by Canada.  As a result,  the Government of
         Canada  cannot  accept  delivery of goods or services  that  originate,
         either directly or indirectly, from the countries or persons subject to
         economic sanctions. Details on existing sanctions can be found at:

2.       It is a condition of this  Contract that the  Contractor  not supply to
         the  Government  of Canada any goods or  services  which are subject to
         economic sanctions.

3.       By law,  the  Contractor  must comply with  changes to the  regulations
         imposed during the life of the Contract.  During the performance of the
         Contract,  should  the  imposition  of  sanctions  against a country or
         person or the  addition of a good or service to the list of  sanctioned
         goods  or  services  cause  an  impossibility  of  performance  for the
         Contractor,  the  situation  will be treated by the  Parties as a force
         majeure. The Contractor shall forthwith inform Canada of the situation;
         the procedures applicable to force majeure shall then apply.

                                      -5-
<PAGE>

LICENSING
---------
The Contractor must obtain and maintain all permits,  licenses and  certificates
of approval required for the Work to be performed under any applicable  federal,
provincial or municipal legislation. The Contractor shall be responsible for any
charges imposed by such legislation or regulations. Upon request, the Contractor
shall provide a copy of any such permit, license or certificate to Canada.

CONTRACTOR'S RESPONSIBILITY - INSURANCE
---------------------------------------
It shall be the sole  responsibility  of the Contractor to decide whether or not
any  insurance  coverage is necessary  for its own  protection or to fulfill its
obligations under this Contract, and to ensure compliance with required federal,
provincial or municipal law. Any such insurance shall be provided and maintained
by the Contractor at its own expense.

Any insurance  secured is to the benefit and  protection of the  Contractor  and
shall not be deemed to release or diminish its liability in any manner including
as may be referenced elsewhere by the provisions of this Contract.

APPLICABLE LAWS
---------------
This Contract shall be interpreted and governed,  and the relations  between the
Parties determined, by the laws in force in the Province of Ontario, Canada.

                                      -6-
<PAGE>

                                    ANNEX "A"

                                STATEMENT OF WORK

TITLE
-----
250 kW Hydrogen-Fuelled Generator Set (4+1)

OBJECTIVE
---------
To supply a 250 kW  hydrogen  generator  and  controller  system for  stationary
application, including a one year (or 6000 hours, whichever comes first) on-site
warranty.  The genset will  consist of five 62.5 kW  engines,  out of which four
engines will provide  continuous  power while the fifth will be used for back-up
power during outages and maintenance shut-downs.

BACKGROUND
----------
NRCan is working on a project to add hydrogen  technologies  to the Ramea Island
wind-diesel  demonstration project in Newfoundland.  Six 65 kW wind turbines and
three 925 kW diesel generator sets (gensets)  provide all the energy required by
the local  community.  In line with its mandate to promote the use of  renewable
energy in Canada,  NRCan's  project  aims at  increasing  the  renewable  energy
penetration  on Ramea Island.  Hydrogen is a clean,  high  efficiency  medium to
store  energy,  and can  attenuate the energy  fluctuations  resulting  from the
intermittency of wind power.

In order to achieve increased wind energy penetration,  a 250 kW hydrogen genset
for  stationary  use will be connected to the Ramea local grid in parallel  with
the  current  diesel  gensets and the wind  turbines.  Initially,  the  supplied
hydrogen  genset will be installed at NRCan's  testing  facilities for tests and
evaluation.

SCOPE
-----
The work  required to perform this  Contract is  restricted to the supply of the
fully  functional 250 kW hydrogen  genset.  NRCan will undertake its integration
into the  Ramea  project  in  Newfoundland.  The  fully  functional  genset  and
controller system must be received no later than October 31, 2006.

TECHNICAL SPECIFICATIONS
------------------------
One  hydrogen  fuelled  genset to  deliver  250 KW,  consisting  of five 62.5 kW
gensets,  four of which will run  continuously and the fifth will provide backup
and maintenance  cycling.  The hydrogen genset must be applicable for generating
electricity  for  housing  and  buildings  via grid  connection  and must,  at a
minimum, meet the following specifications:

Three Phase Power                   250kW
Continuous Operation (duty)
Voltage                             480 V
Frequency                           60Hz
Operating Temperature               -40 to +40 degrees Celsius
Fuel Specification                  Hydrogen Gas
Displacement                        4.9 L (305 CID)
Emissions                           Near-zero emissions with Hydrogen fuel

The control system for the genset must meet the following specifications:
o It must have 3 operational modes
         - off: the genset does not work
         - automatic: the genset starts and  stops at  predetermined/programmed
           moments
         - manual: the genset starts and stops manually
o It must have an emergency stop and adequate protection mechanisms  (overspeed,
  overcrank, etc.)

                                      -7-
<PAGE>

o It must  permit the genset to run on 4 engines,  1 left for back up (4+1).  In
  the case of an engine failure,  the back-up engine  must automatically turn on
  to replace the engine that has failed
o It must have a digital display that:
         - shows the genset mode (off/auto/manual)
         - shows the genset electrical parameters (voltage,  frequency, current,
           power)
         - shows the genset mechanical parameters (oil pressure,  coolant
           temperature)
         - shows the genset  operational  parameters  (running time
           hours)

Engines
The engines must have low friction and high robustness,  with specially modified
fuel  delivery,  and should have  inter-cooled  turbocharger  and  controls,  if
necessary, to allow long-term reliable operation at 3,600 RPM synchronous speed.

Emissions
Since  the fuel is pure  hydrogen,  the  system  provided  must  have  near zero
emissions.

Fuel Delivery
The fuel delivery  system must use closed loop control methods to guarantee that
proper fuel mixture is maintained.

Cooling System
The cooling system must provide reliable operation at up to 40 deg. C.

Generator
Each of the  five  engines  must be  coupled  to a class  H, 2 pole,  brushless,
self-regulating  alternator  with winding pitch  designed to reduce the harmonic
content  of  the  output  waveform.  The  regulator  must  maintain  1%  voltage
regulation and will include  under-speed and overload  protection.  Construction
must be compliant with Canadian (CSA) directives.

Control Panel
The panel must include  typical NFPA 110 type controls and displays,  as well as
provisions for manual and automatic operating modes. Operation with an automatic
transfer  switch must be supported in the auto mode with a switch  closure input
for remote start.

Construction
The standard package must be skid-mounted  with base supports that have integral
vibration  isolators  for the  engine,  radiators,  and  generators  to minimize
vibration transmission.

Placement
The standard  package must be suitable for  placement  indoors or outdoors.  For
indoor  operation,  provisions  will be made by the user for the appropriate air
intake and exhaust.  As well,  all  applicable  codes for indoor use of hydrogen
will be respected by the user.

Quality and Warranty

Every  production  unit must be factory tested at rated load.  Testing  includes
operational data at various load levels and block load application.  The gensets
must  include  a one  year (or  6000  hours,  whichever  comes  first),  on-site
warranty.

Grid-Tie Interface

To be supplied by local utility.

                                      -8-
<PAGE>


<PAGE>


TRAVEL
------
Following the FOB delivery of the genset to NRCan's facilities in Ottawa (by May
31, 2006) and as part of the  completion of the control  system,  the Contractor
must  retrofit  the control  system to the genset at  Newfoundland  and Labrador
Hydro's facility in St. John's(by  October 31, 2006). Any travel required by the
Contractor for this purpose will be at the Contractor's expense.


DELIVERABLES
------------
o        Preliminary  drawings of the 250 kW hydrogen genset  including  package
         dimension,   size  of  major  components  and   identification  of  all
         components  and  progress  report  on the work  that has  already  been
         performed  and  forthcoming  work related to the supply of the hydrogen
         genset (March 31, 2006)
o        Final  drawings  of  the  250  kW  hydrogen  genset  including  package
         dimension,   size  of  major  components  and   identification  of  all
         components  and  progress  report  on the work  that has  already  been
         performed  and  forthcoming  work related to the supply of the hydrogen
         genset (April 21, 2006)
o        Delivery of the 250 kW hydrogen  genset,  FOB to NRCan's  Bell's Corner
         facilities in Ottawa,  without the control  system,  in accordance with
         the technical specifications (May 31, 2006)
o        Provision of one to two days of training, as needed, to NRCan's on-site
         local  maintenance  personnel for the operation of the complete  genset
         within three weeks of its delivery (no later than June 21, 2006).
o        Delivery of the  control  system and  retrofitting  it to the genset at
         Newfoundland  and Labrador  Hydro's facility in St. John's (October 31,
         2006)


                                      -9-
<PAGE>


                                    ANNEX "B"
                             SCHEDULE OF MILESTONES


Firm milestone payments shall be made to the Contractor as follows:
<TABLE>
<CAPTION>

====================================================================================================================
MILESTONE             DELIVERABLE                               DELIVERY DATE            FIRM AMOUNT
--------------------- ----------------------------------------- ------------------------ ---------------------------
<S>                   <C>                                       <C>                      <C>
         1            Preliminary drawings and progress report  March 31, 2006                   $60,000.00
--------------------- ----------------------------------------- ------------------------ ---------------------------

         2            Final drawings and progress report        April 21, 2006                   $60,000.00
--------------------- ----------------------------------------- ------------------------ ---------------------------
         3            Delivery of the complete genset           May 31, 2006

                                                                                         $39,000.00, following the
--------------------- ----------------------------------------- ------------------------  delivery of the complete
         4            Commissioning,  and one to two days       No later than June 21,    genset and the training
                      training, as needed, of local             2006
                      maintenance personnel.
--------------------- ----------------------------------------- ------------------------ ---------------------------
         5            Delivery and installation of the          October 31, 2006                 $20,000.00
                      controller system
====================================================================================================================
</TABLE>

         TOTAL FIRM PRICE (GST/HST EXTRA): $ 179,000.00


                                      -10-