Document:

Prepared by: Michael E. Gabor, 111 North Dodge Street, Algona, IA 50511
PH: (515) 295-3565

                                 LOAN AGREEMENT

         WITNESSETH  this Loan Agreement  dated this 27th day of June,  2005, by
and between Algona Area Economic Development  Corporation,  hereinafter referred
to as "AAEDC",  and Hydrogen  Engine Center,  Inc.,  hereinafter  referred to as
"HEC".

         WHEREAS,  AAEDC desires to promote and assist  economic  growth through
the expansion of  businesses  and the creation of jobs in and around the City of
Algona, Iowa; and

         WHEREAS,  HEC has  proposed a project to  further  those  goals and has
applied  to AAEDC for  financial  assistance  for the  project  in the form of a
request for the conveyance of real estate  currently  owned by AAEDC and legally
described as:

                  Lots  Three (3),  Four (4) and Five (5) of Snap-On  Industrial
                  Park as  recorded  in the  Plat  as  Document  No.  2002-1701,
                  located in part of the West Half of the  Northwest  Fractional
                  Quarter   (W'/2NWfrl'/4)   of   Section   Six  (6),   Township
                  Ninety-five (95) North,  Range  Twenty-eight (28), West of the
                  5th P.M., City of Algona, Kossuth County, Iowa; and

         WHEREAS, HEC will construct major improvements that will become part of
the real estate; and

         WHEREAS,  AAEDC and HEC have agreed to the terms of a payment  plan for
the real estate in the case where certain performance obligations of HEC are not
accomplished; and

         WHEREAS, the real estate and  to-be-constructed  improvements and other
property  will stand and be pledged by HEC to AAEDC as security for any payments
that may be required to be made from HEC to AAEDC.

         NOW,  THEREFORE,  in  consideration  of the  foregoing  and the  mutual
covenants and conditions herein set forth, the parties agree as follows:

         1. PRINCIPAL  AMOUNT OF LOAN.  AAEDC hereby loans to HEC the sum of One
Hundred Forty-six Thousand One Hundred Twenty-four Dollars ($146,124.00).

         2.  INTEREST.  Interest  on the loan shall  accrue at the rate of eight
percent (8%) per annum. Interest shall be capitalized on a yearly basis.

         3. FORGIVABLE LOAN/PAYMENTS, IF NOT FORGIVEN.

                  A. As a ten year  forgivable  loan of One Hundred  Thirty-five
         Thousand Three Hundred Dollars  ($135,300.00)  conditioned upon the HEC
         achieving a performance target obligation of one hundred (100) new full
         time equivalent  (FTE) positions by June 1, 2015, all FTEs to be paid a

                                      -1-
<PAGE>

         minimum  wage  equal to or greater  than the  average  hourly  wage for
         workers  in  Kossuth  County,  Iowa,  as  determined  annually  by Iowa
         Workforce Development.

                  B. Provided HEC has  certified  fifty (50) new FTEs by June 1,
         2010,  and such fifty  (50) FTEs are  continuously  retained  in Algona
         until  June 1, 2015,  AAEDC  shall  forgive  Sixty-seven  Thousand  Six
         Hundred Fifty  Dollars  ($67,650.00)  of the principal  balance of this
         obligation and all associated interest.

                  C. If HEC certifies an  additional  fifty (50) FTEs by June 1,
         2015 (100 FTEs  total),  then an  additional  Sixty-seven  Thousand Six
         Hundred  Fifty  Dollars  ($67,650.00)  of  principal  balance  and  all
         associated  interest shall be forgiven and HEC's only obligation  shall
         be to pay the lump sum balance of the loan,  Ten Thousand Eight Hundred
         Twenty-four  Dollars  ($10,824.00)  to AAEDC on June 1,  2015,  without
         interest.

                  D. In the  event  the HEC  fails to  achieve  the  performance
         target  obligation  of fifty  (50) FTEs by June 1,  2010,  then the HEC
         shall  pay  to  AAEDC  One  Hundred  Forty-six   Thousand  One  Hundred
         Twenty-four   Dollars   ($146,124.00)  of  principal  plus  capitalized
         interest to said date.

                  E. In the  event  the HEC  achieves  the  initial  performance
         target  obligation on June 1, 2010, but fails to retain said jobs until
         June 1,  2015,  then HEC  shall  pay to  AAEDC  One  Hundred  Forty-six
         Thousand One Hundred  Twenty-four  Dollars  ($146,124.00)  of principal
         plus capitalized interest on June 1, 2015.

                  F. In the event HEC fails to achieve  the  second  performance
         target   obligation  on  June  1,  2015,   then  HEC  shall  pay  AAEDC
         Seventy-eight  Thousand Four Hundred  Seventy-four Dollars ($78,474.00)
         of principal  plus  capitalized  interest to said date on June 1, 2015.
         Capitalized  interest  on  said  amount  of  principal  shall  only  be
         calculated from June 1, 2010, to June 1, 2015.

         4. PURPOSE. The purpose of the loan is to assist HEC in the purchase of
the following described real estate now owned by AAEDC:

                  Lots  Three (3),  Four (4) and Five (5) of Snap-On  Industrial
                  Park as  recorded  in the  Plat  as  Document  No.  2002-1701,
                  located in part of the West Half of the  Northwest  Fractional
                  Quarter   (W'/zNWfrl'/4)   of   Section   Six  (6),   Township
                  Ninety-five (95) North,  Range  Twenty-eight (28), West of the
                  5th P.M., City of Algona, Kossuth County, Iowa.

         5.  PROMISSORY  NOTE.  HEC shall sign a standard form  Promissory  Note
incorporating the terms hereof.

         6. MORTGAGE SECURITY. As security for all sums due or which will become
due from HEC to AAEDC,  HEC  shall  execute  a  Mortgage  to AAEDC in and to the
following described real estate:

                                      -2-
<PAGE>

                  Lots  Three (3),  Four (4) and Five (5) of Snap-On  Industrial
                  Park as  recorded  in the  Plat  as  Document  No.  2002-1701,
                  located in part of the West Half of the  Northwest  Fractional
                  Quarter  (W'/zNWfrl/) of Section Six (6), Township Ninety-five
                  (95) North,  Range  Twenty-eight  (28),  West of the 5th P.M.,
                  City of Algona, Kossuth County, Iowa.

         The  mortgage  shall  include  any and all  improvements  which  may be
constructed by HEC on the above-described real estate.

         7.  EMPLOYMENT  RECORD  DOCUMENTATION  AND  RETENTION.  HEC shall  make
employment  figure  available to AAEDC on an annual  basis,  with reports due on
June 15th of each year  until the loan is  repaid.  In  addition  to the  annual
reports  to AAEDC HEC  agrees  to retain  all of its  employment  records  for a
minimum of seven (7) years beyond the date of this loan and shall allow AAEDC or
its designated  representative to examine their employment  records at any point
in time to insure that the minimum job requirements are being met.

         8. DEFAULT. In the event HEC sells,  assigns or otherwise transfers its
interest in the  above-described  real estate (excluding any mortgages HEC might
grant  upon  the  real  estate),  or  involuntarily  or  voluntarily  files  for
bankruptcy, or the conditions of this Loan Agreement are not met, then HEC shall
be  considered  in default and the total unpaid  balance  under the loan will be
immediately due and payable.

         9.  ADDITIONAL  DEFAULT.  It shall also be considered an act of default
if, in
AAEDC's  judgment,  the  greater  percentage  of  HEC's  business  operation  or
employees has moved from Algona,  Iowa, or been  outsourced  during the ten (10)
year period of this loan.

         10. REMEDIES. No remedy herein conferred upon or reserved to AAEDC is
intended to be exclusive  of any other  remedy or  remedies,  and each and every
such remedy shall be cumulative,  and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute.

         11.  JURISDICTION.  This Loan  Agreement  was  entered  into in Algona,
Kossuth  County,  Iowa,  and shall be governed by the laws of the State of Iowa.
The parties consent to the jurisdiction of the District Court of Iowa in and for
Kossuth County to resolve any and all disputes hereunder.

         12. ENTIRE AGREEMENT.  This instrument contains the entire Agreement of
the parties with respect to the subject matter hereof, any other oral or written
agreements  entered into with respect thereto are revoked and superseded by this
Agreement;  and no representations,  warranties or inducements have been made by
either  of the  parties  except as  expressly  set forth  herein.  Any  changes,
modifications, adjustments or amendments to this Agreement must be in writing.

                                      -3-
<PAGE>

         13. SEVERABILITY.  If any provision of this Agreement is declared void,
such  provision  shall be  deemed  severed  from  this  Agreement,  which  shall
otherwise remain in full force and effect.

         14. BINDING EFFECT/ASSIGNABILITY.  This Agreement shall be binding upon
the parties hereto and upon their respective  executors,  administrators,  legal
representatives,  and successors. This Loan Agreement may not be assigned by HEC
without the express written consent of AAEDC.

         15.  CONSTRUCTION.  This  Agreement  shall be governed and construed in
accordance  with  the  laws of the  State of Iowa.  Captions  are  included  for
convenient  reference only and shall not in any way affect the interpretation of
any provision hereof.

         16. NOTICES.  All notices under this Agreement must be in writing.  The
notices must be delivered personally or mailed by certified mail, return receipt
requested, to the other party or to that party's attorney.

         17. LEGAL COUNSEL. All parties affirmatively  represent and acknowledge
that they have been  represented by competent legal counsel of their choosing in
connection with this Agreement.

         18.  ATTORNEY  FEES AND COURT  COSTS.  If either  party  files  suit to
enforce
any of the terms of this  Agreement,  the prevailing  party shall be entitled to
recover court costs and reasonable attorney's fees.

         Dated this 27th day of     June, 2005.

                                    ALGONA AREA ECONOMIC
                                    DEVELOPMENT CORPORATION

                                    By: s/Bruce Jensen
                                         ------------------------------
                                           Bruce Jensen, President

                                    By: John Kern
                                         ------------------------------
                                           John Kern, Secretary

                                    HYDROGEN ENGINE CENTER, INC.

                                    By:  s/Theodore G. Hollinger
                                         ------------------------------
                                            Theodore G. Hollinger, President

                                    By:  s/Dana Sue Hollinger
                                         ------------------------------
                                            Dana Sue Hollinger, Secretary

                                      -4-EXHIBIT 10.8

--------------------------------------------------------------------------------

                               INDUSTRIAL NEW JOBS
                               TRAINING AGREEMENT

                                     between

                          Iowa Lakes Community College
                   Estherville, Iowa (the "Community College")

                                       and

                          Hydrogen Engine Center, Inc.

                           Dated as of August 23, 2005

--------------------------------------------------------------------------------

                                   Relating to

                                    $160,000

                          Iowa Lakes Community College
                                Estherville, Iowa

                    Industrial New Jobs Training Certificates

                     (Hydrogen Engine Center, Inc. Project)
                                   Series 2005

<PAGE>

                     INDUSTRIAL NEW JOBS TRAINING AGREEMENT

         This Industrial New Jobs Training  Agreement (the "Agreement") made and
entered  into as of August  23,  2005,  between  Iowa Lakes  Community  College,
Estherville, Iowa (the "Community College"), Merged Area III (the "Merged Area")
and  Hydrogen  Engine  Center,  Inc.  (the  "Employer"),   under  the  following
circumstances:

         A.  Pursuant to the Iowa Code Chapter  260E,  Code of Iowa,  as amended
(the "Act"),  the Community  College and Employer have  determined to enter into
this  Agreement  for  purposes  of  establishing  a Project to educate and train
certain persons employed by Employer in new jobs within the Merged Area.

         B. The  Community  College  and the  Employer  each have full right and
lawful  authority  to enter into this  Agreement  and to perform and observe the
provisions hereof on their respective parts to be performed and observed.

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
representations and agreements hereinafter  contained,  the parties hereto agree
as follows:

                                    ARTICLE I
                                   DEFINITIONS

         Section  1.1.   "Certificates"   mean  Iowa  Lakes  Community   College
Industrial  New  Jobs  Training  Certificates  authorized  to be  issued  by the
Resolution.

         Section  1.2.  "Debt  Service"  means  the  payment  of the  principal,
premium,  if any,  and  interest  on the  Certificates  in  accordance  with the
Resolution   adopted  by  the  Board  of  Directors  of  the  Community  College
authorizing the issuance of the Certificates.

         Section 1.3. "Program Costs" mean all necessary and incidental costs of
providing  Program  Services for the Project  including  the  deferred  costs of
Certificate  issuance  and Debt  Service.  Attached  hereto as  Exhibit  "B" and
incorporated  herein by this reference is a copy of the tentative  budget of the
Community College and the Employer relating to the Project.

         Section 1.4. "Program  Services" for the Project are as tentatively set
forth on Exhibit "C" attached hereto and incorporated  herein by this reference.
Exhibit  "C" sets  forth the  number  of new jobs to be  trained,  the  expected
beginning  and ending date of the  training to be  provided,  the length of time
each new job  category  will be provided  training,  the  estimated  costs,  the
training that will be provided and expected date by which the number of new jobs
will be filled.  Only such Program Services as are defined in Section 260E.2(14)
of the Act may be  provided  by the  Community  College  and paid for as Program
Costs.

                                      -2-
<PAGE>

         Section 1.5. The "Project" shall consist of this Agreement entered into
between the Community  College and the Employer to provide Program  Services for
persons to be employed  in new jobs at the  Project  Site in the City of Algona,
Kossuth County, Iowa.

         Section  1.6.  "Project  Fund"  means a special  fund of the  Community
College into which the proceeds  from the issuance and sale of the  Certificates
shall be deposited and which shall be used to pay Program Costs and for no other
purpose.

         Section  1.7.   "Project   Site"  means  the  real  estate   (including
improvements constructed or to be constructed thereon) described in Exhibit "A",
attached hereto and incorporated herein by reference, where Employer's facility,
where new jobs will be created, is located.

         Section 1.8. "Resolution" means the Resolution authorizing the issuance
of  Industrial  New Jobs  Training  Certificates  to be adopted by the Community
College in connection with the Project.

         Section 1.9.  "Revenue  Fund" means the special tax fund created in the
Resolution in order to pay the principal of and interest on Certificates  issued
in connection with the Project.

         Other terms used in this  Agreement  shall have the meanings set out in
Chapter 260E, Code of Iowa, as amended.

                                   ARTICLE II
                            PROJECT; PROGRAM SERVICES

         Section  2.1.  The  Community  College  agrees to provide  the  Program
Services to the extent of funds  available for that purpose in the Project Fund.
It is  understood  and agreed that the Employer and the  Community  College will
cooperate in the coordination  and programming of the specific  expenditures and
operation of the Project  within the  guidelines  set out in this  Agreement and
Exhibits B and C. The Community College may, in its discretion, subcontract with
other entities or persons to provide all or part of the Program Services.  It is
understood  and  agreed  that the  Program  Services  set forth in Exhibit C are
tentative and are subject to change, within the budget for the Project, upon the
mutual  agreement  of the  Community  College,  acting  through its  appropriate
officials,  and the  Employer.  This initial  budget may be modified in the sole
discretion  of the  Community  College and upon mutual  agreement  in the manner
provided  in Section  6.5 hereof to revise  program  services  or to provide for
additional  Program Services if interest rates upon sale of the Certificates are
significantly  higher  or  lower  than  expected  or  through  the  issuance  of
additional  Certificates to the extent additional funds may be available through
the creation of additional new jobs at the Project Site.

         Section  2.2.  The  Community  College  and  Employer  agree  that  all
necessary  and  incidental  costs,  including  deferred  costs,  of the Project,
including  but  not  limited  to  Program  Services  and  training,   legal  and
underwriting fees, on-the-job training,  Community College administrative costs,
related  costs and Debt  Service  may be paid from one or a  combination  of the
following  sources:  (a) new jobs credit from withholding as provided in Section
260E.5 of the Act; and (b) tuition,  student fees,  or special  charges fixed by
the Board of Directors of the Community College to defray Program Costs in whole

                                      -3-
<PAGE>

or in part.  Withholding  shall be placed in the Revenue Fund established in the
Resolution and used  exclusively for purposes of the Project.  Tuition,  student
fees or special  charges,  if any,  shall be placed in the Project Fund and used
exclusively for purposes of the Project.

         Section 2.3. The Community College and Employer agree that the receipts
from  the  new  jobs  credit  from  withholding  and  the  Revenue  Fund  may be
irrevocably  pledged by the  Community  College for the payment of the principal
of,  premium,  if any,  and  interest  on the  Certificates  to be issued by the
Community College to finance or refinance the Project.

         Section 2.4. The term of the Agreement  shall not exceed ten (10) years
from the date of this  Agreement and shall coincide with the period of time over
which the Certificates mature and the Project costs are deferred.

         Section  2.5.  The  Community  College may revise or expand the Program
Services  from time to time with the consent of the  Employer,  provided that no
revision  shall be made which would  change the  Project to purposes  other than
purposes  permitted by Chapter 260E of the Act and provided  further,  that this
Agreement shall not terminate until any  Certificates  issued in connection with
the Project shall have been paid in full.

         Section 2.6. The Certificates will be issued pursuant to the Resolution
adopted by the Board of  Directors  of the  Community  College in the  aggregate
principal amount,  bearing interest,  maturing and being redeemable as set forth
in the  Resolution.  Upon  final  determination  of the  interest  rates for the
Certificates  a final  payment  schedule  shall be prepared and become a part of
this Agreement.

         The  proceeds  from the sale of the  Certificates  shall be paid to the
Community College and deposited in the Project Fund established by the Community
College.  The  Project  Fund  shall be used only for  purposes  of the  Project.
Pending  disbursement  for Program  Services and Program Costs,  the proceeds so
deposited in the Project Fund,  together with any investment  earnings  thereon,
shall be  subject  to a lien in  favor of the  holders  of the  Certificates  as
provided in the Resolution authorizing the Certificates.

         Section  2.7. In the event there are  insufficient  funds to pay all of
the cost of the Program  Services  set forth in Exhibit  "C",  the  Employer may
request all Program Services set forth in Exhibit "C" be provided to Employer by
the Community  College upon payment by the Employer to the Community  College of
such  additional  amount as is necessary to pay for all of the Program  Services
set forth in Exhibit "C". If the Employer  should pay any portion of such costs,
it shall  not be  entitled  to any  reimbursement  therefor  from the  Community
College;  nor shall it be entitled to any abatement,  diminution or postponement
of payments under this Agreement,  provided  however,  that the Employer will be
entitled  to  reimbursement  without  interest of its own funds from the Project
Fund or the  Revenue  Fund  when a  surplus  exists  and the  Community  College
determines  that such surplus is not needed to satisfy  other  Program Costs and
the Certificates  have been paid in full both as to principal and interest.  Any
such payments  received or to be received from Employer under this Section shall
not be pledged to payment of the Certificates under the Resolution.

                                      -4-
<PAGE>

         Section 2.8. In the event  Certificates are not issued by the Community
College,  the Employer agrees to pay to the Community College a sum equal to the
necessary and incidental costs actually  incurred by the Community College which
would have been paid from the funds  available  from the  sources  described  in
Section  2.2 of this  Agreement  if the  Certificates  had  been  issued  by the
Community College.

         Section 2.9.  Investment earnings on the funds deposited in the Project
Fund shall be used, to the extent that the  Community  College  determines  that
investment  earnings  are  available  and not  needed  for Debt  Service  on the
Certificates,  to provide  program  services in addition  (in amount or kind) to
those Program Services set forth in Exhibit "C" or to reimburse the Employer for
the cost of  program  services  which are  otherwise  non-reimbursed  under this
Agreement.

         Section 2.10. The Employer  certifies that Employer's  "base employment
level" as that term is  defined  in Section  422.33(6)  of the Code of Iowa,  as
amended, is zero as of May 17, 2005, the date of the Preliminary  Industrial New
Jobs Training Agreement.

                                   ARTICLE III
                               PAYMENTS; SECURITY

         Section  3.1.  The Employer  shall  cooperate in causing the  necessary
payments  from the  sources set forth in Section 2.2 to be made into the Revenue
Fund and the Project Fund of the Community College.

         Section 3.2. The Community  College  agrees that the Revenue Fund shall
be pledged for the payment of the principal of and premium, if any, and interest
on the Certificates. To the extent provided in Section 260E.3(5) of the Act, the
payments  required  to be made by the  Employer  hereunder  are a lien  upon the
Employer's  business  property  where  new jobs are  created  as a result of the
Project until paid and have equal  precedence  with ordinary taxes and shall not
be divested by a judicial  sale.  Property  subject to this lien may be sold for
sums due and delinquent at a tax sale, with the same forfeitures,  penalties and
consequences as for the nonpayment of ordinary taxes.  The purchaser at any such
tax sale shall obtain the property subject to the remaining payments.

         Section  3.3.  The  Employer  and  Community  College  agree  that this
Agreement is entered into upon the expectation  that  sufficient  funds from new
jobs credit from withholding will be generated to pay the principal of, premium,
if any, and interest on the  Certificates.  Employer and the  Community  College
have designed the Project to fit within the funds  expected to be available from
the sources of payment set forth in Section, 2.2 of this Agreement.

         Section  3.4.  If for any reason the funds in the  Project  Fund or the
Revenue Fund are not  sufficient  to satisfy the Program  Costs  including  Debt
Service,  the Employer,  upon at least twenty (20) days written  notice that the
funds  in the  Project  Fund  or the  Revenue  Fund  are not  sufficient,  will,
nonetheless,  advance to the Community College such amounts as may, from time to
time,  be required to satisfy the Program  Costs.  If  theEmployer  advances any
amount under this Section, it shall not be entitled to any abatement, diminution
or postponement of other payments  required;  provided,  however,  to the extent

                                      -5-
<PAGE>

permitted by law, the Employer will be entitled to payment of amounts  advanced,
without  interest,  from the Project Fund or the Revenue Fund when the Community
College  determines  that a surplus  exists,  that such surplus is not needed to
satisfy other Program Costs and the Certificates  have been paid in full both as
to principal  and interest.  Any such  payments  received or to be received from
Employer under this Section shall not be pledged to payment of the  Certificates
under the Resolution.  The notice  required  hereunder shall specify the date by
which the Employer is to make the necessary advance;  provided,  however, in the
absence of such date  specified in the notice,  the advance  shall be due within
twenty  (20) days of the date of the  notice.  The  obligation  of the  Employer
hereunder  shall be primary and the  Community  College may proceed  against the
Employer  without  proceeding  against or exhausting any other remedies which it
may have and  without  resorting  to any other  security  held by the  Community
College.

                                   ARTICLE IV
                                 REPRESENTATIONS

         Section 4.1.  Representations of the Community  College.  The Community
College  represents  and covenants  that:  (a) it is duly  organized and validly
existing  under the laws of the State of Iowa;  (b) it is not in violation of or
conflict with any provisions of the laws of the State of Iowa which would impair
its ability to carry out its obligations hereunder; (c) it is empowered to enter
into the  transactions  contemplated by this  Agreement;  and (d) it will do all
things in its power  required of it in order to maintain its existence or assure
the assumption of its obligations hereunder by any successor public body.

         Section  4.2.  Representations  and  Covenants  of  the  Employer.  The
Employer represents and covenants that:

                  a. It is a corporation  organized  under the laws of the State
          of Iowa and is authorized to do business in the State of Iowa.

                  b. It has full power and  authority  to  execute,  deliver and
          perform this Agreement and all other instruments given by the Employer
          to  secure  its  performance  and to  enter  into  and  carry  out the
          transactions   contemplated  herein.  Such  execution,   delivery  and
          performance are not in contravention of law or Employer's  articles of
          incorporation,  bylaws or any indenture,  agreement,  mortgage, lease,
          undertaking  or any other  restriction,  obligation  or  irstrument to
          which the Employer is a party or by which it is bound.  This Agreement
          has by proper action been duly  authorized,  executed and delivered by
          the Employer  and all steps  necessary  have been taken to  constitute
          this Agreement a valid and binding obligation of the Employer.

                  c. There is no  litigation or  proceeding  pending,  or to the
          knowledge  of the  Employer  threatened,  against the  Employer or any
          other  person  affecting  in any  manner  whatsoever  the right of the
          Employer  to execute the  Agreement  or to  otherwise  comply with its
          obligations contained in the Agreement.

                                      -6-
<PAGE>

                  d. The employees to be trained under this  Agreement  have not
          commenced work for the Employer  prior to the date of the  Preliminary
          Agreement  entered into between the Community College and the Employer
          dated May 17, 2005,  and those  employees will be employed in new jobs
          in connection with the expansion of the Employer's business operations
          in the Merged Area.

                  e. The  Employer  is an  industry,  as that term is defined in
          Section  260E.2(9)  of the  Act  and in the  regulations  of the  Iowa
          Department  of  Economic  Development,  and is  engaged  in  providing
          products and/or  services  (other than retail,  health or professional
          services) in interstate commerce.

                  f. Each of the jobs  covered by this  Agreement is a "new job"
          as that term is defined in  Section  260E.2(l0)  of the Act and in the
          regulations of the Iowa Department of Economic Development.

                  g. Employer  represents it knowingly  assumes the  obligations
          under  Sections 2.8 and 3.4 hereof in the event the sources of payment
          described  in Section  2.2 are not  sufficient  to satisfy the Program
          Costs in full.

                                    ARTICLE V
                                EVENTS OF DEFAULT

         Section  5.1.  Events of  Default.  Each of the  following  shall be an
"event of default":

                  a. The Employer shall cease operation of its facilities at the
          Project Site.

                  b.  The  Employer  shall  fail to pay or  advance  any  amount
          required  to be made by the  Employer on or prior to the date on which
          such  payment-is due and payable and continuing for more than five (5)
          business days thereafter.

                  c. The  Employer  shall fail to observe  and perform any other
          agreement,  term or  condition  contained in this  Agreement,  if such
          failure  continues  for a period of thirty  (30) days after  notice of
          such failure is given to the Employer by the Community College, or for
          such longer period as the  Community  College may agree to in writing;
          provided,  that if the  failure is other than the payment of money and
          is of such nature that it cannot be  corrected  within the  applicable
          period,  such failure shall not constitute an event of default so long
          as the  Employer  institutes  curative  action  within the  applicable
          period and diligently pursues such action to completion.

                  d. The Employer  shall:  (i) admit in writing its inability to
          pay its debts  generally  as they become  due;  (ii) have an order for
          relief  entered  in any case  commenced  by or  against  it under  the
          federal bankruptcy laws, as now or hereafter in effect; (iii) commence
          a proceeding under any other federal or state bankruptcy,  insolvency,
          reorganization  or  other  similar  law,  or  have  such a  proceeding
          commenced  against  it and  either  have an  order  of  insolvency  or
          reorganization  entered  against  it or  have  the  proceeding  remain
          undismissed and unstayed for ninety (90) days; (iv) make an assignment

                                      -7-
<PAGE>

          for the  benefit  of  creditors;  or (v) have a  receiver  or  trustee
          appointed  for it or for  the  whole  or any  substantial  part of its
          property.

                  e. Any  representation or warranty made by the Employer herein
          or any statement in any report,  certificate,  financial  statement or
          other  instrument  furnished in connection with this Agreement or with
          the sale of the  Certificates  shall at any  time  prove to have  been
          false or misleading in any material respect when made or given.

         The declaration of an event of default under  Subsection (d) above, and
the  exercise  of  remedies  upon any such  declaration  shall be subject to any
applicable  limitations of federal  bankruptcy law affecting or precluding  such
declaration  or exercise  during the pendency of or  immediately  following  any
bankruptcy, liquidation or reorganization proceedings.

         Section 5.2.  Whenever an event of default  shall have  happened and be
subsisting,  the Community  College may take whatever action at law or in equity
may appear necessary or desirable to collect the payments and other amounts then
due and  thereafter to become due, or to enforce  performance  and observance of
any  other  obligation  or  agreement  of the  Employer  under  this  Agreement.
Notwithstanding  the foregoing,  the Community College shall not be obligated to
take any step  which in its  opinion  will or might  cause it to expend  time or
money or otherwise  incur  liability  unless and until a satisfactory  indemnity
bond has been  furnished to the  Community  College at no cost or expense to the
Community  College.  Any amounts collected as payments or applicable to payments
and any other  amounts  which would be  applicable  to payment of principal  of,
premium,  if any, and interest on the Certificates  collected pursuant to action
taken under this Section  shall be paid to the holders of the  Certificates  for
application to such payment.

         Section  5.3. No remedy  conferred  upon or  reserved to the  Community
College by this  Agreement is intended to be  exclusive  of any other  available
remedy or remedies, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy now or hereafter existing at law, in equity
or by statute. No delay or omission to exercise any right or power accruing upon
any default  shall  impair any such right or power or shall be construed to be a
waiver thereof,  but any such right and power may be exercised from time to time
and as often as may be  deemed  expedient.  In order to  entitle  the  Community
College to exercise any remedy  reserved to it in this Article,  it shall not be
necessary  to give any  notice,  other  than  such  notice  as may be  expressly
required herein.

         Section 5.4. In the event any  agreement  contained  in this  Agreement
should be breached by either  party and  thereafter  waived by the other  party,
such waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach hereunder.

         Section 5.5. If the Community  College fails to observe and perform any
obligation, term or condition contained in this Agreement for a period of thirty
(30) days after notice of such failure is given by Employer,  or for such longer
period as  Employer  may agree to in writing,  such  action or omission  will be
considered a default and Employer may take whatever action, at law or in equity,
may appear necessary or desirable,  to enforce performance and the observance of
any obligation or term of this Agreement; provided, however, the foregoing shall
not be construed as a waiver of any defense  available to the Community  College

                                      -8-
<PAGE>

nor shall the  foregoing  be construed  as an  agreement  or  concession  by the
Community  College  to take  any  action  or  refrain  from  taking  any  action
inconsistent  with Iowa law  governing  this  Agreement or the  operation of the
Community College.

                                   ARTICLE VI
                                  MISCELLANEOUS

         Section  6.1.  This   Agreement  may  be  executed  in  any  number  of
counterparts,  each of which shall be  regarded as an original  and all of which
shall constitute but one and the same instrument.

         Section 6.2. If any  provisions  of this  Agreement,  or any  covenant,
stipulation,  obligation,  agreement,  act or  action,  or  part  thereof  made,
assumed, entered into or taken thereunder or any application thereof, is for any
reason held to be illegal or invalid,  such  illegality or invalidity  shall not
affect  any other  provision  or any other  covenant,  stipulation,  obligation,
agreement, act or action or part thereof, made, assumed, entered into, or taken,
each of which shall be  construed  and  enforced  as if such  illegal or invalid
portion were not contained  herein.  Nor shall such  illegality or invalidity of
any application thereof affect any legal and valid application thereof, and each
such provision, covenant, stipulation,  obligation, agreement, act or action, or
part shall be deemed to be effective,  operative, made, entered into or taken in
the manner and to the full extent permitted by law.

         Section 6.3. The provisions of this Agreement and the provisions of the
Resolution  are to be  construed  wherever  possible so that they will not be in
conflict. In the event such construction is not possible,  the provisions of the
Resolution shall prevail.

         Section  6.4.  This  Agreement  shall be  governed  exclusively  by and
construed in accordance with the laws of the State of Iowa.

         Section 6.5. All notices,  requests or other  communications  hereunder
shall be in writing and shall be deemed to be sufficiently  given when mailed by
registered or certified  mail,  postage  prepaid,  addressed to the  appropriate
Notice Address as follows:

                  Iowa Lakes Community College
                  19 South 7th Street
                  Estherville, Iowa 51334

                  Hydrogen Engine Center, Inc.
                  602 East Fair Street
                  Algona, Iowa 50511

         Employer and the  Community  College  shall each  designate  authorized
representatives  to conduct this Agreement.  Employer and the Community  College
may, by notice given hereunder,  designate any further or different addresses to
which subsequent notices, requests or other communications shall be sent.

                                      -9-
<PAGE>

         Revisions  in the  Program  Services  set  forth  in  Exhibit  "C"  and
resulting adjustments in Program Costs shall be permitted in the sole discretion
of the  Community  College  and  must  be  approved  in  writing  by  the  above
representatives  of  the  Community  College  and  Employer,   their  respective
successors or such other  individuals  as either party  designates in the manner
set forth herein.

         Section 6.6. All covenants, stipulations, obligations and agreements of
the  Community  College  contained in this  Agreement  shall be effective to the
extent   authorized   and  permitted  by  applicable   law.  No  such  covenant,
stipulation,  obligation  or  agreement  shall  be  deemed  to  be  a  covenant,
stipulation,  obligation or agreement of any present or future member,  officer,
agent or employee of the Community  College or the Board of Directors other than
in his official capacity,  and neither the members of the Board of Directors nor
any  official  executing  the  Certificates  shall be liable  personally  on the
Certificates or be subject to any personal liability or accountability by reason
of the issuance thereof or by reason of the covenants, stipulations, obligations
or agreements of the Community College contained in this Agreement.

         Section 6.7. This Agreement  shall inure to the benefit of and shall be
binding in accordance  with its terms upon the Community  College,  the Employer
and  their  respective  permitted  successors  and  assigns  provided  that this
Agreement  may not be assigned  by the  Employer  without  the  express  written
consent  of the  Community  College  and may not be  assigned  by the  Community
College except as may otherwise be necessary to enforce or secure payment of the
principal of, premium, if any, and interest on the Certificates.

         Section  6.8.  Employer  covenants  and  agrees to keep the  facilities
continuously  insured  against  loss or damage by fire,  lightning,  such  other
perils as are covered by standard "extended  coverage"  endorsements,  vandalism
and malicious mischief and containing customary loss deductible provisions.

         Section 6.9. The  Community  College  agrees to use its best efforts to
sell and  issue  the  Certificates  and the  Employer  will  cooperate  with the
Community College to provide necessary financial  information in connection with
the sale of the Certificates. The Community College and the Employer shall agree
upon a schedule of  principal  and  interest  payments  prior to the issuance of
Certificates.  It is understood  and greed that should the  Certificates  not be
marketed or  marketable  within a  reasonable  time that this  Agreement  may be
terminated and the Project terminated;  provided, however, the obligation of the
Employer under Section 2.8 hereof shall continue following any such termination.

         Section 6.10.  Disbursement to the Employer for Program  Services under
this  Agreement  shall be made by the  Treasurer of the  Community  College upon
receipt of vouchers approved by the Board of Directors of the Community College.
Employer  agrees that payments  received  shall only be used for purposes of the
Project.

         Section  6.11.  Except as provided in Section  6.12  herein,  no monies
disbursed to the Employer  from the  proceeds of the  Certificates  will be used
directly or indirectly to finance land,  facilities or depreciable  property (or
an interest therein) of the Employer or other private person.

                                      -10-
<PAGE>

         Section 6.12. No monies  disbursed to the Employer from the proceeds of
the Certificates  will be used directly or indirectly for the acquisition of any
property  (or an  interest  therein)  unless the first use of such  property  is
pursuant to such  acquisition and such property is used exclusively for Training
or the cost of  acquisition is  proportionally  allocated to Training based upon
actual usage for Training.

         Section 6.13. No monies  disbursed to the Employer from the proceeds of
the  Certificates  will be used  directly or indirectly to provide any airplane,
skybox or other private  luxury box,  health club facility,  facility  primarily
used  for  gambling  or store  the  principal  business  of which is the sale of
alcoholic beverages for consumption off premises.

         Section 6.14.  Employer  agrees that it shall  provide all  information
requested by the College,  the Iowa  Department of Economic  Development  or the
Iowa  Department  of Education  for purposes of  establishing  a consistent  and
meaningful database to track aggregate wages of employees over time and evaluate
the effectiveness of job training  programs.  Such information shall include the
Social Security numbers of all individual employees for which withholding credit
is claimed as a part of the Project. Such information shall be provided directly
to the College.

                                   ARTICLE VII
                  SUPPLEMENTAL NEW JOBS CREDIT FROM WITHHOLDING

         Certain jobs  included in the Project are  eligible for a  supplemental
new jobs credit from  withholding in an amount equal to one and one-half percent
of the gross wages paid by the Employer pursuant to Chapter 15A.7, Code of Iowa.
The  Community . College and the Employer  agree that the  Supplemental  Program
shall be  administered  in the same manner as the  remainder  of the Project and
that all  terms and  conditions  of this  Agreement  shall  apply to the  entire
Project including the Supplemental Program.

         Section 7.1. Terms used in this Article shall have the meanings set out
in Article I or this  Section 7.1.  Other terms used in this Article  shall have
the meanings set out in Chapters 15A or 260E, Code of Iowa, as amended.

         o    "Average  Wage" means the average  county wage in the county where
              the  Project  Site  is  located  or  the  average  regional  wage,
              whichever is lower, as compiled annually by the Iowa Department of
              Economic   Development  for  the  Community  Economic   Betterment
              Program.

         o    "Starting  Wages" or  "Wages"  means the wage  being paid or to be
              paid by the Employer  under the terms of this  Agreement and which
              has been  determined by the  Community  College to equal or exceed
              the Average Wage based upon criteria established in Section 15A.7,
              Code of  Iowa,  as  amended,  and  rules  promulgated  by the Iowa
              Department of Economic Development.

                                      -11-
<PAGE>

         o    "Supplemental Program" means that portion of the Project including
              Program  Services and Program  Costs  eligible to be funded from a
              supplemental  new jobs credit from  withholding  from jobs created
              under  this  Agreement  because  the  Employer  has  agreed to pay
              Starting Wages as defined in this Agreement.

         Section 7.2.  The Employer  agrees that it shall pay Wages for the jobs
included in the  Supplemental  Program (and for which the  supplemental new jobs
credit from withholding is collected) at least equal to the Average Wage. In the
event  the  Employer  fails  to pay such  Wages  for the  jobs  included  in the
Supplemental Program, such failure may constitute an event of default under this
Agreement.

         Section 7.3. The supplemental new jobs credit from withholding shall be
collected, accounted for and may be pledged by the Community College in the same
manner as described in Section 2.2 of this  Agreement and Section  260E.5 of the
Act.

         Section 7.4. The number of jobs  included in the  Supplemental  Program
are  separately  identified on Exhibit C. The specific jobs are as identified in
writing by the Employer.  The Community College hereby determines eligibility of
the Supplemental  Program and Starting Wages for those jobs described on Exhibit
C as included in the Supplemental Program.

         Section  7.5.  To  provide  funds for the  payment  of the costs of the
Supplemental  Program the  Community  College may borrow  money,  issue and sell
Certificates  and secure the payment of the  Certificates  in the same manner as
described in Article II of this  Agreement and Section  260E.6 of the Act. It is
the intent of the  parties  that the  Supplemental  Program  shall be funded and
administered  in such a manner  as to  maintain  any tax  exempt  status  of the
interest on Certificates issued to fund the Program Services under Chapter 260E.

         Section 7.6. The  Supplemental  Program and the  supplemental  new jobs
credit from withholding provided for in this Article VII shall be in addition to
and not in lieu of the  program  and  credit  authorized  in  Article II of this
Agreement  and  Section  260E.5 of the Act.  The Program  Services  set forth on
Exhibits B and C, including the tentative payment  schedule,  and the Employer's
projections  of  wages  to  be  paid  in  those  new  jobs  qualifying  for  the
supplemental new jobs credit from withholding includes the Supplemental Program.

                                      -12-
<PAGE>

         IN WITNESS WHEREOF,  the Community College and the Employer have caused
this Agreement to be duly executed all as of the date hereinabove written.

                                       IOWA LAKES COMMUNITY COLLEGE

                                       By: /s/ Jack Tolman
                                           -----------------------------------
ATTEST:
/s/ Clark Marshall
-------------------------------

                                       HYDROGEN ENGINE CENTER, INC.

                                       By: s/Theodore G. Hollinger, President

ATTEST:

/s/Jill Geelan
-------------------------------

STATE OF IOWA                       )
                                    ) SS:
COUNTY OF EMMET                     )

         On this 23rd day of August, 2005, before me, a Notary Public in and for
the State of Iowa,  personally  appeared Jack Tatman and Clark  Marshall,  to me
personally  known,  who,  being  by me duly  sworn,  did say  that  they are the
President of the Board of Directors  and the  Secretary,  respectively,  of Iowa
Lakes Community  College  Estherville,  Iowa, that the foregoing  Industrial New
Jobs Training  Agreement was signed by authority of the Board of Directors;  and
Jack Tatman and Clark Marshall, as such officers,  acknowledged the execution of
said  instrument  to be the  voluntary act and deed of said College by it and by
them voluntarily executed.

         Given under my hand and seal of office, this 23rd day of August, 2005.

                                          /s/ Cindy L. Oviatt
                                          --------------------------------------
                                          Notary Public

                                          [seal]

STATE OF IOWA                       )
                                    ) SS:
COUNTY OF KOSSUTH                   )

         On this 31st day of August, 2005, before me; a Notary Public in and for
the   State  of  Iowa,   personally   appeared   Theodore   G.   Hollinger   and
________________,  to me personally  known,  who being by me duly sworn, did say

                                      -13-
<PAGE>

that they are the President and the _________________, respectively, of Hydrogen
Engine  Center,  Inc.,  an Iowa  corporation;  no seal has been  procured by the
corporation;  that the  foregoing  Industrial  New Jobs  Training  Agreement was
signed on behalf of said corporation by authority of its Board of Directors; and
Theodore G. Hollinger and___________________, as such officers, acknowledged the
execution  of  said  instrument  to be  the  voluntary  act  and  deed  of  said
corporation by it and by them voluntarily executed.

         Given under my hand and seal of office, this 31st day of August, 2005.

                                                  /s/ Sandra C. Wiener
                                                  ------------------------------
                                                  Notary Public

                                                  [seal]

                                      -14-

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