Document:

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                                                                   EXHIBIT 10.10

                        DEPARTMENT OF NATURAL RESOURCES

                   EFFICIENCY AND ALTERNATIVE ENERGY PROGRAM
                             CONTRIBUTION AGREEMENT

                      THIS AGREEMENT is made in duplicate

BETWEEN:
                  HER MAJESTY THE QUEEN IN RIGHT OF CANADA
                  ("CANADA"), represented by the Minister of Natural Resources,

AND:
                  HYDROGENICS CORPORATION INCORPORATED, incorporated under
                  the laws of Canada (the "PROPONENT").

                  WHEREAS Canada wishes to encourage the adoption of energy
efficiency and renewable energy technologies in all sectors of the Canadian
economy and has established the Efficiency and Alternative Energy Program for
this purpose;

                  WHEREAS Canada and the Proponent agree that for the Proponent
to develop and implement the Project as described in Schedule A, the Proponent
will require financial assistance from Canada;

                  AND WHEREAS Canada is willing to provide financial assistance
towards the total Eligible Costs of the Project in the manner and upon the terms
and conditions hereinafter set forth;

                  NOW, THEREFORE, Canada and the Proponent agree as follows:

1.       INTERPRETATION

1.1      In this Agreement:

         "AGREEMENT" means this Agreement and the attached Schedules A, B and
         C;

         "COMPLETION DATE" means the date specified in Article 3.2;

         "ELIGIBLE COSTS" means any cost incurred by the Proponent in the period
         between APRIL 1, 1997 and MARCH 31, 1998 in relation to the Project and
         which is listed in Schedule B;

         "FISCAL YEAR" means the period beginning on April 1 of any year and
         ending on March 31 in the next year;

         "INTELLECTUAL PROPERTY" means any information developed by the
         Proponent in performance of the Project including, without limitation,
         data, techniques, methods, processes, know-how, inventions, designs,
         formulae, photographs, drawings, plans, specifications, reports,
         studies, technical and procedural manuals, programs including computer
         hardware and software and source code, whether susceptible to copyright
         or not, and all patents, copyrights, trademarks, and industrial designs
         arising there from;

         "MINISTER" means the Minister of Natural Resources and includes any
         duly authorized officers or representatives;

         "PROJECT" means the Project described in Schedule A;

         "PROPOSAL" means a written proposal including at least a background,
         purpose, work description, results expected and a budget, which is
         accepted by the Minister for a specific Project; and

         "REVENUE" means all considerations received by the Proponent from any
         person or party in respect of the licensing, selling, marketing or
         commercialization of the Intellectual Property, less returns actually
         credited and any applicable sales taxes.

                                      -1-

<PAGE>   2

2.       REPRESENTATIONS AND WARRANTIES

2.1      The Proponent represents and warrants that all factual matters
         contained in the Proposal and all material submitted in support are
         true and accurate, and that all estimates, forecasts and other related
         matters involving judgement were prepared in good faith and to the best
         of its ability, skill and judgement.

3.       CONDUCT OF PROJECT

3.1      The Proponent shall carry out the Project promptly, diligently and in a
         professional manner and in accordance with the terms and conditions of
         this Agreement.

3.2      The Proponent shall complete the Project by MARCH 31, 1998.

3.3      The Proponent shall comply with all federal, provincial and municipal
         laws in relation to the Project.

4.       CONTRIBUTIONS

4.1      Notwithstanding any other provision of this Agreement, Canada's
         liability under this Agreement shall not in any circumstances exceed
         $100,000.

4.2      Subject to the terms and conditions of this Agreement, Canada shall
         make a contribution to the Proponent towards the Eligible Costs of
         the Project in accordance with Article 5 and Schedule B.

4.3      In order to be eligible to receive a full contribution as described
         herein, the Proponent must submit its final claim for payment on or
         before APRIL 10, 1998.

4.4      Canada may reduce its contribution by such an amount as the Minister
         may decide if the Proponent receives contributions or payments in
         respect of the Project covered by this Agreement in addition to, or
         from sources other than, those named in its Proposal.

5.       METHOD OF PAYMENT

5.1      Subject to Article 5.2, following receipt of a claim, acceptable to the
         Minister, for payment of Eligible Costs paid by the Proponent,
         accompanied by copies of invoices, vouchers, and any other documents
         that the Minister may require, Canada shall pay its contribution
         towards the Eligible Costs of the Project.

5.2      Canada shall withhold 10% from any payment under Article 5.1 until:

         (a)     the Project has been completed to the satisfaction of the
                 Minister;

         (b)     a final report documenting the completion of the Project has
                 been received and approved by the Minister; and

         (c)     the Minister has approved a final statement of Eligible Costs
                 paid in respect of the Project.

5.3      The Proponent shall submit claims, accompanied by quarterly progress
         reports as per Schedule C, for payment on a quarterly basis.

6.       REPAYMENT OF CONTRIBUTION

6.1      The Proponent shall pay to Canada TWO PER CENT (2%) of the Revenue
         received by the Proponent.

6.2      Notwithstanding an other provision of this Agreement, Article 6.1 shall
         remain in effect for a period of 15 YEARS or until Canada has received
         $100,000 from any Revenue received by the Proponent, whichever occurs
         first.

6.3      The Proponent shall submit Revenue reports and payments to Canada as
         described in Schedule C for the period set out in Article 6.2.

6.4      The Proponent agrees that all considerations to be received by the
         Proponent in respect of the licensing, selling, marketing or
         commercialization of the Intellectual Property shall be established
         in a bona fide arm's length transaction between parties.

                                      -2-
<PAGE>   3
7.       ACCOUNTS AND AUDIT

7.1      Prior to the Completion Date of the Project and for three years after
         the period described in Article 6.2, the Proponent shall:

        (a)  keep proper books, accounts and records of its Revenue and any
             contributions received and expenses incurred and paid in connection
             with the Project and shall keep its invoices, receipts and vouchers
             relating thereto;

        (b)  keep proper and accurate records relating to the environmental
             impact (if any) of the Project; and

        (c)  on demand, make available to the Minister such books, accounts,
             records, invoices, receipts and vouchers referred to above and
             permit the Minister to examine and audit and take copies and
             extracts from such documents.

7.2      If any discrepancy is identified between the amounts paid by Canada and
         the amounts actually payable under this Agreement, the appropriate
         adjustments shall be promptly made between the parties.  If there has
         been an overpayment by Canada, the amount of the overpayment shall
         constitute a debt due to Canada and may be so recovered.

8.       INTELLECTUAL PROPERTY

8.1      Subject to Articles 8.2, 8.3 and 12.1, title to all Intellectual
         Property shall be vested in the Proponent.

8.2      The Proponent hereby grants to Canada a non-exclusive, royalty-free
         licence in perpetuity to use or sublicense the use of any Intellectual
         Property for any purpose, which licence Canada may not exercise until
         three years after the Completion Date and then only if in the
         Minister's sole opinion the Proponent has failed to take reasonable
         steps to develop and market in Canada the products, processes or
         services to which the Intellectual Property relates.

8.3      The Proponent shall supply to Canada copies of all reports, documents
         and publications arising out of the performance of the Project; and
         the right to the copyright in all such reports, documents and
         publications shall be vested in Canada which hereby grants to the
         Proponent a non-exclusive, royalty-free licence to copy and publish the
         material provided that Canada's financial support is prominently
         acknowledged in any publication.

8.4      The Proponent shall ensure that any moral rights in the reports,
         documents and publications arising out of the performance of the
         Project are irrevocably waived in favour of Canada.

8.5      Except with the written consent of the Minister, the Proponent shall
         not license the Intellectual Property to any government other than the
         Government of Canada or to any person, corporation, partnership or
         business for the purpose of manufacturing outside Canada the products
         or processes resulting from the Project, and shall place the same
         restrictions on any authorized licensee.

8.6      If the Proponent elects not to retain ownership of or use any
         Intellectual Property, the Proponent shall notify the Minister of  this
         election and shall, if the Minister so requires, assign and transfer
         the Intellectual Property to Canada, whereupon Canada will grant the
         Proponent a non-exclusive, royalty-free licence to use the Intellectual
         Property solely for internal purposes, if so requested by the
         Proponent.

9.       INDEMNITY

9.1      The Proponent shall indemnify and save harmless Canada and its
         Ministers, officers, employees and agents from and against any and all
         claims, damages, loss, costs and expenses which they or any of them may
         at any time incur or suffer as a result of or arising out of any injury
         to persons (including injuries resulting in death) or loss of or damage
         to property which may be or be alleged to be caused by or suffered as a
         result of the carrying out of the Project or any part thereof, except
         to the extent caused by a breach of duty of Canada or its Ministers,
         officers, employees or agents.

9.2      The Proponent shall indemnify and save harmless Canada and its
         Ministers, officers, employees and agents from and against any and all
         claims, damages, loss, costs and expenses which they or any of them may
         at any time incur or suffer as a result of or arising out of any claim,
         demand or action for the infringement or alleged infringement of any
         patent, registered industrial design, copyright or other intangible
         property based upon the

                                      -3-

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       use thereof by the Proponent or upon the use of the Intellectual Property
       by Canada in accordance with the terms of this Agreement.

9.3    The Proponent shall indemnify and save harmless Canada and its Ministers,
       officers, employees and agents from and against any and all claims,
       damages, loss, costs and expenses which they or any of them may at any
       time incur or suffer as a result of or arising out of any claim, demand
       or action made by a third party against them or any of them based upon
       Canada s capacity as a provider of financial assistance under this
       Agreement, including without limitation, any claim in respect of
       materials or services provided by a third party to the Proponent or to a
       subcontractor of the Proponent.

10.    ACCESS

10.1   The Proponent shall ensure that the Minister has access during normal
       working hours to any premises or place where the Project is being carried
       out for the purposes of inspecting and assessing the progress of the
       Project and all matters pertaining thereto.

11.    REPORTS

11.1   The Proponent shall submit Project reports satisfactory to the Minister
       in accordance with the provisions of Schedule C or as otherwise requested
       by the Minister.

12.    DEFAULT

12.1   If, in the opinion of the Minister, there has been a misrepresentation or
       a breach of warranty under Article 2, or the Proponent fails to proceed
       diligently with the Project, or is otherwise in default in carrying out
       any of the terms, conditions, covenants, or obligations of this
       Agreement, or if the Proponent becomes bankrupt or insolvent, or has a
       receiving order made against it (either under the Bankruptcy and
       Insolvency Act or otherwise), or a receiver is appointed, or the
       Proponent makes an assignment for the benefit of creditors, or if an
       Order is made or a Resolution passed for the winding up of the Proponent,
       or if the Proponent takes the benefit of any statute for the time being
       in force relating to bankrupt or insolvent debtors, the Minister may, by
       giving notice in writing to the Proponent, exercise any or all of the
       following remedies:

       (a)    terminate the whole or any part of this Agreement;

       (b)    terminate the obligation on the part of Canada to pay any monies
              in respect of the Project, including monies due or accruing due;

       (c)    direct the Proponent to repay forthwith all or any part of monies
              paid by Canada pursuant to this Agreement and that amount is a
              debt due to Canada and may be so recovered;

       (d)    request the Proponent to assign all rights in the Intellectual
              Property and the Proponent shall, if so requested, do so; and

       (e)    request the Proponent to transfer to Canada title to all or any of
              the equipment and supplies purchased by the Proponent to carry out
              the Project and funded by Canada under this Agreement, and the
              Proponent shall, if so requested, do so.

12.2   In the event of a termination of this Agreement by the Minister under
       Article 12.1, Canada may, in the discretion of the Minister, pay to the
       Proponent Canada's share of the Eligible Costs of the Project completed
       to the date of termination.

13.    SALE OF PROPERTY

13.1   If, prior to the Completion Date of the Project, the Proponent sells,
       leases, or otherwise disposes of any property other than Intellectual
       Property, where the cost of the property is part of the Eligible Costs
       under the Project to which Canada has contributed under this Agreement,
       the Proponent shall immediately notify the Minister in writing of the
       disposition and, if the Minister so requires, the Proponent shall share
       with Canada the proceeds of the disposition in the same ratio as that of
       Canada's contribution to the purchase of the property, except that
       Canada's share shall not exceed its contribution under this Agreement.

                                      - 4 -
<PAGE>   5

14.    SUBCONTRACTS AND CANADIAN CONTENT

14.1   Except as provided in the Proposal, the Proponent shall not subcontract
       all or any part of the Project funded by Canada unless the Proponent has
       obtained the prior written consent of the Minister. Every subcontract
       entered into by the Proponent shall provide that the subcontractor shall
       comply with the terms and conditions of this Agreement which are
       applicable to the subcontract.

14.2   Canadian goods and services shall be used in carrying out the Project to
       the full extent to which they are procurable, competitive and allow for
       the expeditious performance of the Project.

15.    ACKNOWLEDGMENT

15.1   The Proponent will acknowledge the financial support of Canada in all
       public information produced as part of the Project.

16.    NOTICES

16.1   The claims for payment, requests, notices, and information referred to in
       this Agreement shall be sent in writing or by any method of
       telecommunication and, unless notice to the contrary is given, shall be
       addressed to the party concerned at the following address:

            TO CANADA:

                 Natural Resources Canada
                 CETC/Energy Technology Branch
                 580 Booth Street, 13th Floor
                 Ottawa, Ontario
                 K1A 0E4

                 ATTENTION:      DR. VESNA SCEPANOVIC, P.ENG.
                                 RESEARCH ADVISOR, HYDROGEN & FUEL CELLS

                 TELEPHONE:      (613) 996-6228
                 FACSIMILE:      (613) 996-9416

            TO THE PROPONENT:

                 Hydrogenics Corporation
                 180 Geary Avenue
                 Toronto, Ontario
                 M6H 2B9

                 ATTENTION:      MR. JOE CARGNELLI
                                 DIRECTOR & VICE-PRESIDENT ENGINEERING

                 TELEPHONE:      (416) 535-8657
                 FACSIMILE:      (416) 535-2147
                 E-MAIL: h2_genx@pathcom.com

16.2   Notices, requests and documents are deemed to have been received, if sent
       by registered mail, when the postal receipt is acknowledged by the other
       party; by telegram, when transmitted by the carrier; by telex or
       facsimile, when transmitted and receipt is confirmed; and by messenger or
       specialized courier agency, when delivered.

17.    LEGAL RELATIONSHIP

17.1   Nothing contained in this Agreement shall create the relationship of
       principal and agent, employer and employee, partnership or joint venture
       between the parties.

17.2   The Proponent shall not make any representation that the Proponent is an
       agent of Canada and shall ensure that the members of the Proponent do not
       make any representation that could reasonably lead any member of the
       public to believe that the Proponent or its members or contractors are
       agents of Canada.

                                      - 5 -
<PAGE>   6

18.    TIME OF ESSENCE

18.1   Time is of the essence of this Agreement.

19.    MEMBERS OF THE HOUSE OF COMMONS

19.1   No Member of the House of Commons shall be admitted to any share or part
       of this Agreement or to any benefit to arise there from.

20.    CONFLICT OF INTEREST

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

21.    FUNDS

21.1   The Proponent shall not make any direct or indirect reference to this
       Agreement for the purpose of raising funds without the prior written
       approval of the Minister.

22.    ASSIGNMENT

22.1   This Agreement shall not be assigned in whole or in part by the Proponent
       without the prior written consent of the Minister and any assignment made
       without that consent is void and of no effect.

22.2   Where an assignment of this Agreement is made pursuant to Article 22.1,
       such assignment shall not relieve the Proponent of any obligation under
       this Agreement or impose any liability upon Canada.

23.    DISPUTE RESOLUTION

23.1   The parties agree to negotiate all disputes arising from this Agreement
       in good faith after receiving written notification of the existence of a
       dispute from any party.

23.2   If a dispute arising out of this Agreement cannot be settled amicably
       through negotiation, then the parties agree that either party may submit
       the dispute to mediation as administered by the Arbitration and Mediation
       Institute of Canada Inc. upon written notice to the other party. The cost
       of mediation shall be borne equally by the parties.

24.    GOVERNING LAW

24.1   This Agreement shall be interpreted in accordance with the laws in force
       in Canada.

25.    AMENDMENTS

25.1   No amendment of this Agreement nor waiver of any of the terms and
       provisions shall be deemed valid unless effected by a written amendment
       signed by the parties.

26.    ENTIRE AGREEMENT

26.1   This Agreement constitutes the entire Agreement between the parties with
       respect to the subject matter of this Agreement and supersedes all
       previous negotiations, communications, and other agreements, whether
       written or verbal, between the parties.

27.    SUCCESSORS AND ASSIGNS

27.1   This Agreement shall enure to the benefit of and be binding on the
       parties and their respective representatives, successors and assigns.

                                     - 6 -
<PAGE>   7

        IN WITNESS WHEREOF this Agreement has been executed on behalf of HER
MAJESTY THE QUEEN IN RIGHT OF CANADA by an officer duly authorized by the
Minister of Natural Resources and on behalf of the PROPONENT, by an officer duly
authorized in that behalf,

                        HER MAJESTY THE QUEEN IN RIGHT OF CANADA

 3 July 97               /s/ N. BECK
-------------           ----------------------------------------------
   Date                 N. Beck, Acting Chief
                        Transportation Energy Technologies
                        CETC / Energy Technology Branch
                        Natural Resources Canada

                        HYDROGENICS CORPORATION INCORPORATED

June 25, 1997            /s/ BOYD JOSEPH TAYLOR
-------------           ----------------------------------------------
   Date                 Boyd Joseph Taylor, Principal and Director
                        Hydrogenics Corporation Incorporated

                                      - 7 -
<PAGE>   8

                                   SCHEDULE A

                                STATEMENT OF WORK

BACKGROUND:

Power sources are required for stationary and remote locations in Northern
Canada for communications' equipment, etc. Current power sources, such as
rechargeable batteries, must be derated because of the cold climate and they
require frequent maintenance, which is expensive in many locations in this part
of Canada.

OBJECTIVE/PURPOSE:

The main objective of this Project is to upgrade a prototype power generator,
referred to as the Hydrogen ThErmoelectric Fuel Cell (HyTEF) generator, to a
larger power output. This upscaled hybrid system of a thermoelectric and a fuel
cell generator with hydrogen as the common fuel is an essential developmental
step in reaching a commercially-ready system.

DESCRIPTION/SCOPE:

Task 1.       Design a power source suitable for off-grid Arctic applications
              of at least 200 to 500 watts, consisting of a thermoelectric
              generator and a fuel cell stack with hydrogen as the common fuel.

Task 2.       Construct a working prototype of the HyTEF power source, which
              will include the following major components:

              a)     a fuel cell stack of at least 12 Volts and having a maximum
                     current rating sufficient to achieve the power rating of at
                     least 200W;

              b)     a flameless catalytic hydrogen burner capable of sustaining
                     a temperature of at least +200(degrees)C at the surface of
                     a heat sink;

              c)     a thermoelectric generator capable of producing electricity
                     at 12 Volts and 0.5 Amperes from a temperature differential
                     of at least 200(degrees)C;

              d)     an enclosure protecting the HyTEF inner components from
                     Arctic weather conditions;

              e)     a suitable stand for the HyTEF plus enclosure.

Task 3.       Design, construct and integrate a self-contained micro-controller
              for HyTEF which will:

              a)     monitor the temperature, voltages and supply pressure for
                     the system and activate solenoids, relays or valves
                     accordingly to sustain operations in remote areas;

              b)     consume minimal parasitic power from the HyTEF

              c)     be adaptable through software changes

   3.1.       Design and construct a wireless self attended Supervisory Control
              and Data Acquisition (SCADA) connection for distance monitoring on
              the HyTEF.

   3.2.       Assess concentration of unreacted hydrogen efluents emanating from
              the HyTEF.

Task 4.       Test the HyTEF at ambient temperature prior to deployment to
              Arctic environmental conditions.

Task 5.       Test the HyTEF to at least -40(degrees)C and make modifications as
              necessary.

Task 6.       Retest HyTEF.

BENEFITS:

The Prototype HyTEF has no moving parts and uses hydrogen as the fuel.
Therefore, there will be Zero Emissions from this device. Increased reliability,
relative to rechargeable batteries and lower costs are expected benefits. The
system can easily be scaled up in principle, thereby opening other marketing
opportunities in off-grid applications. Canadian jobs will be created if the
Project is successful.

                                       -8-
<PAGE>   9

                                   SCHEDULE B

                                 ELIGIBLE COSTS

The Proponent shall be reimbursed for Eligible Costs paid following successful
completion of Project requirements. Canada shall pay an amount equal to the
lesser of the dollar or percentage amount of the Eligible Costs of the Project
as indicated below. Eligible Costs shall be approved in accordance with Treasury
Board Guidelines associated with the execution of the various Tasks as described
in Schedule A. The reimbursable Provincial Sales Tax and the Goods and Services
Tax costs must be net of any tax rebate to which the Proponent is entitled.

TOTAL ELIGIBLE COSTS                                                 $347,778.33

<TABLE>
<CAPTION>
CONTRIBUTORS:                                            $                              %
-------------

<S>                                                 <C>                                <C>
CANADA                                                 100,000                         29

PROPONENT                                           210,328.33                         60

VIKING TOOL CO.                                       6,500.00                          2

HYDROGEN RESEARCH INSTITUTE, UQTR                    30,950.00                          9
</TABLE>

ELIGIBLE COSTS:

1.     Salaries at competitive rates

2.     Materials for the Project

3.     Travel expenses provided Treasury Board Guidelines are observed, i.e., no
       first class or business class fares, etc.

4.     Other expenses related to the Project with the Minister's approval.

NON-ELIGIBLE COSTS:

1.     Property Taxes

2.     Purchase of Land

                                       -9-
<PAGE>   10

                                   SCHEDULE C

                               REPORTS & MEETINGS

1.1    TECHNICAL REPORTS

       The Proponent shall prepare Quarterly Reports on the Tasks listed in
       Schedule A. In addition, the Proponent shall prepare a Draft Final Report
       of the Project which shall be delivered to Canada ON OR BEFORE APRIL 1,
       1998. The Proponent shall make appropriate changes to the Draft Final
       Report as required and deliver the Final Report ON OR BEFORE MAY 30,
       1998. All reports shall be to the satisfaction of the Minister.

1.2    TECHNICAL MEETINGS.

       The Proponent shall hold one Technical Review Meeting to discuss the
       progress on the Project. The date for this meeting shall be chosen in
       consultation with the Minister's representative and it shall be held on
       or before January 31, 1998.

1.3    REVENUE REPORTS AND PAYMENTS

       The Proponent shall provide to the Minister not later than 30 days after
       the end of March and September in each calendar year, for the period of
       the payment obligation described in ARTICLE 6.2 of this Agreement, a
       complete and accurate report (including nil reports) of any Revenue
       received by the Proponent and shall include any payments due to Canada.
       The reports shall:

       (a)    contain a statement of the Revenue received by the Proponent;

       (b)    include a computation of any share of the Revenue, if any, due and
              payable to Canada; and

       (c)    be certified as correct by the Treasurer or some other senior
              officer of the Proponent.

                                      -10-<PAGE>   1
                                                                   EXHIBIT 10.11

                         DEPARTMENT OF NATURAL RESOURCES

                    EFFICIENCY AND ALTERNATIVE ENERGY PROGRAM
                             CONTRIBUTION AGREEMENT

                       THIS AGREEMENT is made in duplicate

BETWEEN:

             HER MAJESTY THE QUEEN IN RIGHT OF CANADA ("CANADA"), represented by
             the Minister of Natural Resources,

AND:

             HYDROGENICS CORPORATION INC., incorporated under the laws in force
             in the Province of Ontario,
             (the "PROPONENT").

             WHEREAS Canada wishes to encourage the adoption of energy
efficiency and renewable energy technologies in all sectors of the Canadian
economy and has established the Efficiency and Alternative Energy Program for
this purpose;

             WHEREAS Canada and the Proponent agree that for the Proponent to
develop and implement the Project as described in Schedule A, the Proponent will
require financial assistance from Canada;

             AND WHEREAS Canada is willing to provide financial assistance
towards the total Eligible Costs of the Project in the manner and upon the terms
and conditions hereinafter set forth;

             NOW, THEREFORE, Canada and the Proponent agree as follows:

1.    INTERPRETATION

1.1   In this Agreement:

      "AGREEMENT" means this Agreement and the attached Schedules A, B and C;

      "COMPLETION DATE" means the date specified in Article 3.2;

      "ELIGIBLE COSTS" means any cost incurred by the Proponent in the period
      between APRIL 1, 1998 and MARCH 31, 2000 in relation to the Project and
      which is listed in Schedule B;

      "FISCAL YEAR" means the period beginning on April 1 of any year and ending
      on March 31 in the next year;

      "INTELLECTUAL PROPERTY" means any information developed by the Proponent
      in performance of the Project including, without limitation, data,
      techniques, methods, processes, know-how, inventions, designs, formulae,
      photographs, drawings, plans, specifications, reports, studies, technical
      and procedural manuals, programs including computer hardware and software
      and source code, whether susceptible to copyright or not, and all patents,
      copyrights, trademarks, and industrial designs arising therefrom;

      "MINISTER" means the Minister of Natural Resources and includes any duly
      authorized officers or representatives;

      "PROJECT" means the Project described in Schedule A;

      "PROPOSAL" means a written proposal including at least a background,
      purpose, work description, results expected and a budget, which is
      accepted by the Minister for a specific Project; and

      "REVENUE" means all considerations received by the Proponent from any
      person or party in respect of the licensing, selling, marketing or
      commercialization of the Intellectual Property, less returns actually
      credited and any applicable sales taxes.

                                      -1-
<PAGE>   2

2.    REPRESENTATIONS AND WARRANTIES

2.1   The Proponent represents and warrants that all factual matters contained
      in the Proposal and all material submitted in support are true and
      accurate, and that all estimates, forecasts and other related matters
      involving judgement were prepared in good faith and to the best of its
      ability, skill and judgement.

3.    CONDUCT OF PROJECT

3.1   The Proponent shall carry out the Project promptly, diligently and in a
      professional manner and in accordance with the terms and conditions of
      this Agreement.

3.2   The Proponent shall complete the Project by MARCH 31, 2000.

3.3   The Proponent shall comply with all federal, provincial and municipal laws
      in relation to the Project.

4.    CONTRIBUTIONS

4.1   Notwithstanding any other provision of this Agreement, Canada's liability
      under this Agreement shall not in any circumstances exceed $200,000.

4.2   Subject to the terms and conditions of this Agreement, Canada shall make a
      contribution to the Proponent towards the Eligible Costs of the Project in
      accordance with Article 5 and Schedule B.

4.3   In order to be eligible to receive a full contribution as described
      herein, the Proponent must submit its final claim for payment on or before
      APRIL 10, 2000.

4.4   Canada may reduce its contribution by such an amount as the Minister may
      decide if the Proponent receives contributions or payments in respect of
      the Project covered by this Agreement in addition to, or from sources
      other than, those named in its Proposal.

5.    METHOD OF PAYMENT

5.1   Subject to Article 5.2, following receipt of a claim, acceptable to the
      Minister, for payment of Eligible Costs paid by the Proponent, accompanied
      by copies of invoices, vouchers, and any other documents that the Minister
      may require, Canada shall pay its contribution towards the Eligible Costs
      of the Project.

5.2   Canada shall withhold 10% from any payment under Article 5.1 until:

      (a)    the Project has been completed to the satisfaction of the Minister;

      (b)    a final report documenting the completion of the Project has been
             received and approved by the Minister; and

      (c)    the Minister has approved a final statement of Eligible Costs paid
             in respect of the Project.

5.3   The Proponent shall submit claims for payment at least on a quarterly
      basis and not more frequently than on a monthly basis.

6.    REPAYMENT OF CONTRIBUTION

6.1   The Proponent shall pay to Canada TWO per cent (2%) of the Revenue
      received by the Proponent.

6.2   Notwithstanding any other provision of this Agreement, Article 6.1 shall
      remain in effect for a period of 15 years or until Canada has received
      $200,000 from any Revenue received by the Proponent, whichever occurs
      first.

6.3   The Proponent shall submit Revenue reports and payments to Canada as
      described in Schedule C for the period set out in Article 6.2.

6.4   The Proponent agrees that all considerations to be received by the
      Proponent in respect of the licensing, selling, marketing or
      commercialization of the Intellectual Property shall be established in a
      bona fide arm's length transaction between parties.

                                      -2-

<PAGE>   3

7.    ACCOUNTS AND AUDIT

7.1   Prior to the Completion Date of the Project and for three years after the
      period described in Article 6.2, the Proponent shall:

      (a)    keep proper books, accounts and records of its Revenue and any
             contributions received and expenses incurred and paid in connection
             with the Project and shall keep its invoices, receipts and vouchers
             relating thereto;

      (b)    keep proper and accurate records relating to the environmental
             impact (if any) of the Project; and

      (c)    on demand, make available to the Minister such books, accounts,
             records, invoices, receipts and vouchers referred to above and
             permit the Minister to examine and audit and take copies and
             extracts from such documents.

7.2   If any discrepancy is identified between the amounts paid by Canada and
      the amounts actually payable under this Agreement, the appropriate
      adjustments shall be promptly made between the parties. If there has been
      an overpayment by Canada, the amount of the overpayment shall constitute a
      debt due to Canada and may be so recovered.

8.    INTELLECTUAL PROPERTY

8.1   Subject to Articles 8.2, 8.3 and 12.1, title to all Intellectual Property
      shall be vested in the Proponent.

8.2   The Proponent hereby grants to Canada a non-exclusive, royalty-free
      licence in perpetuity to use or sublicense the use of any Intellectual
      Property for any purpose, which licence Canada may not exercise until
      three years after the Completion Date and then only if in the Minister's
      sole opinion the Proponent has failed to take reasonable steps to develop
      and market in Canada the products, processes or services to which the
      Intellectual Property relates.

8.3   The Proponent shall supply to Canada copies of all reports; documents and
      publications arising out of the performance of the Project; and the right
      to the copyright in all such reports, documents and publications shall be
      vested in Canada which hereby grants to the Proponent a non-exclusive,
      royalty-free licence to copy and publish the material provided that
      Canada's financial support is prominently acknowledged in any publication.

8.4   The Proponent shall ensure that any moral rights in the reports, documents
      and publications arising out of the performance of the Project are
      irrevocably waived in favour of Canada.

8.5   Except with the written consent of the Minister, the Proponent shall not
      license the Intellectual Property to any government other than the
      Government of Canada or to any person, corporation, partnership or
      business for the purpose of manufacturing outside Canada the products or
      processes resulting from the Project, and shall place the same
      restrictions on any authorized licensee.

8.6   If the Proponent elects not to retain ownership of or use any Intellectual
      Property, the Proponent shall notify the Minister of this election and
      shall, if the Minister so requires, assign and transfer the Intellectual
      Property to Canada, whereupon Canada will grant the Proponent a
      non-exclusive, royalty-free licence to use the Intellectual Property
      solely for internal purposes, if so requested by the Proponent.

9.    INDEMNITY

9.1   The Proponent shall indemnify and save harmless Canada and its Ministers,
      officers, employees and agents from and against any and all claims,
      damages, loss, costs and expenses which they or any of them may at any
      time incur or suffer as a result of or arising out of any injury to
      persons (including injuries resulting in death) or loss of or damage to
      property which may be or be alleged to be caused by or suffered as a
      result of the carrying out of the Project or any part thereof, except to
      the extent caused by a breach of duty of Canada or its Ministers,
      officers, employees or agents.

9.2   The Proponent shall indemnify and save harmless Canada and its Ministers,
      officers, employees and agents from and against any and all claims,
      damages, loss, costs and expenses which they or any of them may at any
      time incur or suffer as a result of or arising

                                      -3-
<PAGE>   4

        out of any claim, demand or action for the infringement or alleged
        infringement of any patent, registered industrial design, copyright or
        other intangible property based upon the use thereof by the Proponent or
        upon the use of the Intellectual Property by Canada in accordance with
        the terms of this Agreement.

9.3     The Proponent shall indemnify and save harmless Canada and its
        Ministers, officers, employees and agents from and against any and all
        claims, damages, loss, costs and expenses which they or any of them may
        at any time incur or suffer as a result of or arising out of any claim,
        demand or action made by a third party against them or any of them based
        upon Canada s capacity as a provider of financial assistance under this
        Agreement, including without limitation, any claim in respect of
        materials or services provided by a third party to the Proponent or to a
        subcontractor of the Proponent.

10.     ACCESS

10.1    The Proponent shall ensure that the Minister has access during normal
        working hours to any premises or place where the Project is being
        carried out for the purposes of inspecting and assessing the progress of
        the Project and all matters pertaining thereto.

11.     REPORTS

11.1    The Proponent shall submit Project reports satisfactory to the Minister
        in accordance with the provisions of Schedule C or as otherwise
        requested by the Minister.

12.     DEFAULT

12.1    If, in the opinion of the Minister, there has been a misrepresentation
        or a breach of warranty under Article 2, or the Proponent fails to
        proceed diligently with the Project, or is otherwise in default in
        carrying out any of the terms, conditions, covenants, or obligations of
        this Agreement, or if the Proponent becomes bankrupt or insolvent, or
        has a receiving order made against it (either under the Bankruptcy and
        Insolvency Act or otherwise), or a receiver is appointed, or the
        Proponent makes an assignment for the benefit of creditors, or if an
        Order is made or a Resolution passed for the winding up of the
        Proponent, or if the Proponent takes the benefit of any statute for the
        time being in force relating to bankrupt or insolvent debtors, the
        Minister may, by giving notice in writing to the Proponent, exercise any
        or all of the following remedies:

        (a)     terminate the whole or any part of this Agreement;

        (b)     terminate the obligation on the part of Canada to pay any monies
                in respect of the Project, including monies due or accruing due;

        (c)     direct the Proponent to repay forthwith all or any part of
                monies paid by Canada pursuant to this Agreement and that amount
                is a debt due to Canada and may be so recovered;

        (d)     request the Proponent to assign all rights in the Intellectual
                Property and the Proponent shall, if so requested, do so; and

        (e)     request the Proponent to transfer to Canada title to all or any
                of the equipment and supplies purchased by the Proponent to
                carry out the Project and funded by Canada under this Agreement,
                and the Proponent shall, if so requested, do so.

12.2    In the event of a termination of this Agreement by the Minister under
        Article 12.1, Canada may, in the discretion of the Minister, pay to the
        Proponent Canada's share of the Eligible Costs of the Project completed
        to the date of termination.

13.     SALE OF PROPERTY

13.1    If, prior to the Completion Date of the Project, the Proponent sells,
        leases, or otherwise disposes of any property other than Intellectual
        Property, where the cost of the property is part of the Eligible Costs
        under the Project to which Canada has contributed under this Agreement,
        the Proponent shall immediately notify the Minister in writing of the
        disposition and, if the Minister so requires, the Proponent shall share
        with Canada the proceeds of the disposition in the same ratio as that of
        Canada's contribution to the purchase of the property, except that
        Canada's share shall not exceed its contribution under this Agreement.

                                     - 4 -

<PAGE>   5

14.     SUBCONTRACTS AND CANADIAN CONTENT

14.1    Except as provided in the Proposal, the Proponent shall not subcontract
        all or any part of the Project funded by Canada unless the Proponent has
        obtained the prior written consent of the Minister. Every subcontract
        entered into by the Proponent shall provide that the subcontractor shall
        comply with the terms and conditions of this Agreement which are
        applicable to the subcontract.

14.2    Canadian goods and services shall be used in carrying out the Project to
        the full extent to which they are procurable, competitive and allow for
        the expeditious performance of the Project.

15.     ACKNOWLEDGMENT

15.1    The Proponent will acknowledge the financial support of Canada in all
        public information produced as part of the Project.

16.     NOTICES

16.1    The claims for payment, requests, notices, and information referred to
        in this Agreement shall be sent in writing or by any method of
        telecommunication and, unless notice to the contrary is given, shall be
        addressed to the party concerned at the following address:

                 TO CANADA:

                        Natural Resources Canada
                        580 Booth Street, 13th Floor
                        Ottawa, Ontario
                        K1A 0E4

                        Attention:Dr. Vesna Scepanovic
                                  Research Advisor, Hydrogen & Fuel Cells

                        Telephone:(613)996-6228
                        Facsimile:(613)996-9416
                        E-mail: VScepan@NRCAN.gc.ca

                 TO THE PROPONENT:

                        Hydrogenics Corporation
                        180 Geary Avenue
                        Toronto, Ontario
                        M6H 2B9

                        Attention:Mr. Joe Cargnelli
                                 Director & Vice-President Engineering

                        Telephone:(416) 535-8657
                        Facsimile:(416) 535-2147
                        E-mail:   jcargnel@hydrogenics.com

16.2    Notices, requests and documents are deemed to have been received, if
        sent by registered mail, when the postal receipt is acknowledged by the
        other party; by telegram, when transmitted by the carrier; by telex or
        facsimile, when transmitted and receipt is confirmed; and by messenger
        or specialized courier agency, when delivered.

17.     LEGAL RELATIONSHIP

17.1    Nothing contained in this Agreement shall create the relationship of
        principal and agent, employer and employee, partnership or joint venture
        between the Parties.

17.2    The Proponent shall not make any representation that the Proponent is an
        agent of Canada and shall ensure that the members of the Proponent do
        not make any representation that could reasonably lead any member of the
        public to believe that the Proponent or its members or contractors are
        agents of Canada.

                                      -5-

<PAGE>   6

18.     TIME OF ESSENCE

18.1    Time is of the essence of this Agreement.

19.     MEMBERS OF THE HOUSE OF COMMONS

19.1    No Member of the House of Commons shall be admitted to any share or part
        of this Agreement or to any benefit to arise therefrom.

20.     CONFLICT OF INTEREST

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

21.     FUNDS

21.1    The Proponent shall not make any direct or indirect reference to this
        Agreement for the purpose of raising funds without the prior written
        approval of the Minister.

22.     ASSIGNMENT

22.1    This Agreement shall not be assigned in whole or in part by the
        Proponent without the prior written consent of the Minister and any
        assignment made without that consent is void and of no effect.

22.2    Where an assignment of this Agreement is made pursuant to Article 22.1,
        such assignment shall not relieve the Proponent of any obligation under
        this Agreement or impose any liability upon Canada.

23.     DISPUTE RESOLUTION

23.1    The parties agree to negotiate all disputes arising from this Agreement
        in good faith after receiving written notification of the existence of a
        dispute from any party.

23.2    If a dispute arising out of this Agreement cannot be settled amicably
        through negotiation, then the parties agree that either party may submit
        the dispute to mediation as administered by the Arbitration and
        Mediation Institute of Canada Inc. upon written notice to the other
        party. The cost of mediation shall be borne equally by the parties.

24.     GOVERNING LAW

24.1    This Agreement shall be interpreted in accordance with the laws in force
        in the Province of ONTARIO.

25.     AMENDMENTS

25.1    No amendment of this Agreement nor waiver of any of the terms and
        provisions shall be deemed valid unless effected by a written amendment
        signed by the parties.

26.     ENTIRE AGREEMENT

26.1    This Agreement constitutes the entire Agreement between the parties with
        respect to the subject matter of this Agreement and supersedes all
        previous negotiations, communications, and other agreements, whether
        written or verbal, between the parties.

27.     SUCCESSORS AND ASSIGNS

27.1    This Agreement shall enure to the benefit of and be binding on the
        parties and their respective representatives, successors and assigns.

                                      -6-

<PAGE>   7

        IN WITNESS WHEREOF this Agreement has been executed on behalf of HER
MAJESTY THE QUEEN IN RIGHT OF CANADA by an officer duly authorized by the
Minister of Natural Resources and on behalf of the PROPONENT, by an officer duly
authorized in that behalf.

                                        HER MAJESTY THE QUEEN IN RIGHT OF CANADA

June 9/98                               [SIG]
----------------------                  ---------------------------------------
    Date                                for N.R. Beck, Acting Chief
                                        Transportation Energy Technology
                                        CETC / Energy Technology Branch
                                        Department of Natural Resources

                                        HYDROGENICS CORPORATION INCORPORATED

June 02, 1998                           [SIG]
----------------------                  ---------------------------------------
     Date                               Boyd Joseph Taylor, Prinicipal and
                                        Director Hydrogenics Corporation
                                        Incorporated

                                      -7-
<PAGE>   8
                                   SCHEDULE A

                               STATEMENT OF WORK

BACKGROUND:

Air breathing PEM fuel cell designs are attracting increasing research interest
worldwide as a reliable and cost-effective alternative to pressurized,
recirculating fuel cell systems. Earlier work in this field has focused on
sub-kilowatt demonstrators while the fuel cells in the greater than 1 - 10 KW
power range remain unexplored.
Hydrogenics has been among the first to demonstrate a 1KW PEM stack without
forced convection.

OBJECTIVE/PURPOSE:
Design and build a 2KW field deployable prototype generator system based on
low-cost hydrogen PEM fuel cells which would operate:
- without recirculation/pressurization;
- at lower temperatures than 70 degrees C, commonly encountered in higher power
density prototypes;
- integrated with low-power peripherals (minimum number of parasitic
components);
- with integrated control system, including a self-contained Supervisory Control
and Data Acquisition (SCADA), with direct RS-232 downloadable link to a
diagnostic portable computer or remote monitoring station.

DESCRIPTION/SCOPE

By the end of the HyTEF 1998/00 program, Hydrogenics will deliver:

- Design and assembly of a 2KW advanced developmental model (ADM) of an air
breathing PEM system including:
      - a fuel cell stack that can operate without pressurization or reactant
      recirculation;
      - a protective system enclosure;
      - a controller, providing self-attended Supervisory Control and Data
      Acquisition (SCADA).

- Demonstration of the system coupled to a demonstration appliance or to a
renewable fuel supply.

MILESTONES AND DELIVERABLES

The first year of the project will be devoted to the assembly of the system,
while the second year will be devoted to demonstrating the prototype and to
operational experience. This translates into the following milestones:

1. Sourcing (July 1998)

2. Design and assembly of the stack (November 1998)

3. Design and assembly of the enclosure and integration of the stack with a
controller (June 1999)

4. Testing of assembled system (September 1999)

5. Coupling to a demonstration application or to a renewable fuel source
(January 2000)

6. Final Report (March 2000)

BENEFITS:

This advanced technology development, with world-wide export potential, will
advance the state-of-the-art in the field of strategic importance to Canada in
the 21st century, a field complimentary to the high-pressure, high-KW leadership
already established for Canada by other Canadian fuel cell manufacturers.

                                       -8-
<PAGE>   9

                                   SCHEDULE B

                                 ELIGIBLE COSTS

The Proponent shall be reimbursed for Eligible Costs paid following successful
completion of Project requirements. Canada shall pay an amount equal to the
lesser of the dollar or percentage amount of the Eligible Costs of the Project
as indicated below. Eligible Costs shall be approved in accordance with Treasury
Board Guidelines associated with the execution of the various Tasks as described
in Schedule A. The reimbursable Provincial Sales Tax and the Goods and Services
Tax costs must be net of any tax rebate to which the Proponent is entitled.

TOTAL ELIGIBLE COSTS                                        $645,000

<TABLE>
<CAPTION>
Contributors:                    $                        %

<S>                           <C>                 <C>
CANADA*                          200,000                  31

PROPONENT                        432,000                  67

VIKING TOOL CO.                   13,000                   2
</TABLE>

*CANADA'S CONTRIBUTION WILL BE $100,000 IN FY 1998/99 AND $100,000 IN FY1999/00.

ELIGIBLE COSTS:

1.     Salaries at competitive rates.

2.     Materials for the project.

3.     Travel expenses under the Treasury Board Guidelines.

4.     Other expenses related to the Project with the Minister's approval.

NON-ELIGIBLE COSTS:

1) Property Taxes

2) Purchase of Land

                                       -9-
<PAGE>   10

                                   SCHEDULE C

                                    REPORTS

1.1     TECHNICAL REPORTS

        The Proponent shall prepare Quarterly Reports on the Tasks listed in
        Schedule A. In addition, the Proponent shall prepare a Draft Final
        Report of the Project which shall be delivered to Canada ON OR
        BEFORE APRIL 1, 2000. The Proponent shall make appropriate changes
        to the Draft Final Report as required and deliver the Final Report
        ON OR BEFORE MAY 30, 2000. All reports shall be to the satisfaction
        of the Minister.

1.2     TECHNICAL MEETINGS.

        The Proponent shall hold one Technical Review Meeting to discuss the
        progress on the Project. The date for this meeting shall be chosen
        in consultation with the Minister's representative and it shall be
        held on or before January 31, 1998.

1.3     REVENUE REPORTS AND PAYMENTS

        The Proponent shall provide to the Minister not later than 30 days after
        the end of September in each calendar year, for the period of the
        payment obligation described in ARTICLE 6.2 of this Agreement, a
        complete and accurate report (including nil reports) of any Revenue
        received by the Proponent and shall include any payments due to
        Canada. The reports shall:

        (a)     contain a statement of the Revenue received by the Proponent;

        (b)     include a computation of any share of the Revenue, if any, due
                and payable to Canada; and

        (c)     be certified as correct by the Treasurer or some other senior
                officer of the Proponent.

                                      -10-

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