H Power Corp. Subcontractor

                                  Agreement









                            SUBCONTRACTOR AGREEMENT



                                by and between



                              H POWER CORPORATION



                                as Contractor



                                      and



                          HYDROGEN BURNER TECHNOLOGY



                               as Subcontractor





                                   * * * * *



            FUEL FLEXIBLE (DIESEL) FUEL PROCESSING SUBSYSTEM PROJECT



                                   * * * * *













                          Dated as of October 9, 1998









                            SUBCONTRACTOR AGREEMENT



     SUBCONTRACTOR AGREEMENT dated as of October 9, 1998, by and between H

POWER CORPORATION ("Contractor"), having a place of business at 60 Montgomery

Street, Belleville, New Jersey 07109, and HYDROGEN BURNER TECHNOLOGY, a

corporation incorporated under the laws of the State of California

("Subcontractor"), having its principal place of business at 3925 Vernon

Street, Long Beach, California 90815.



                             W I T N E S S E T H:



     WHEREAS, Contractor has entered into a Participation Agreement dated

August 22, 1997 with the Sacramento Municipal Utility District ("SMUD"),

under which the Contractor will develop a fuel cell and fuel reformer system

(the "System") for the Multifuel Reformer/Fuel Cell Hybrid Bus Project (the

"Project"); and



     WHEREAS, Contractor desires to engage Subcontractor to design, develop

and deliver a fuel-flexible (diesel) fuel-processing subsystem (the

"Subsystem"), in accordance with the Technical Specifications attached as

Exhibit B hereto; and



     WHEREAS, Subcontractor, in fulfilling its obligations hereto, has agreed

to adhere to certain requirements of the Advanced Research Projects Agency

("ARPA"), which provided a partial funding for the Project to SMUD through a

grant, number MDA972-95-1-0010 and certain modifications thereto

(collectively, the "Grant"), attached as Exhibit I to this Agreement;



     NOW THEREFORE, in consideration of the premises and the mutual promises

and agreements of the parties herein expressed, the parties, intending to be

legally bound, hereby agree as follows:



                                   ARTICLE 1



                                  DEFINITIONS



     Certain capitalized terms used in this Agreement shall have the meanings

specified in Exhibit A hereto. The meanings specified are applicable to both

the singular and plural.





                                      -1-





                                   ARTICLE 2



        RELATIONSHIP OF CONTRACTOR, SUBCONTRACTOR AND SUB-SUBCONTRACTORS



     2.1  STATUS OF SUBCONTRACTOR.  Subcontractor shall, at all times,

perform and execute the provisions of this Agreement as an independent

contractor and shall not be an agent or employee of Contractor. All personnel

supplied by Subcontractor to work on the Project shall be employees of

Subcontractor or a Sub-subcontractor, and shall not be agents or employees of

Contractor. Subcontractor shall bear full responsibility for the actions of

employees, agents or representatives of Subcontractor or any

Sub-subcontractor taken in connection with the Work or the Project.

Contractor shall have no obligation whatsoever to pay wages or other

compensation to such employees, agents or representatives or to withhold,

deduct, pay or reserve for any income taxes, social security, unemployment

compensation or other taxes, charges or deductions due by reason of or

arising from the employment or engagement of such employees, agents or

representatives.



     2.2  SUBCONTRACTS AND SUB-SUBCONTRACTORS.  Subject to the terms and

conditions of this Agreement, Subcontractor shall have the right to have any

of the Work accomplished by Sub-subcontractors pursuant to written

subcontracts between Subcontractor and such Sub-subcontractors. In

conjunction with directions Contractor may give in regular technical reviews,

or otherwise from time to time, Contractor shall have the right to approve or

reject any vendors or Sub-subcontractors supplying Equipment or services;

provided that if Contractor rejects or withholds its approval of a reputable,

qualified and, if applicable, bonded vendor or Sub-subcontractor that submits

the lowest bid, Subcontractor shall be compensated by Contractor for any

additional direct cost it may incur by contracting with a different vendor or

Sub-subcontractor approved by Contractor. Subject to the foregoing,

Subcontractor shall be solely responsible for the engagement and management of

Sub-subcontractors in the performance of the Work. No contractual

relationship shall be deemed to exist between Contractor and any

Sub-subcontractor with respect to the Work to be performed hereunder. No

Sub-subcontractor is intended to be or shall be deemed a third-party

beneficiary of this Agreement.



                                   ARTICLE 3



                       SUBCONTRACTOR'S RESPONSIBILITIES



     3.1  PROJECT DESIGN AND CONSTRUCTION.  Notwithstanding any other

provision in this Agreement, Subcontractor shall design, engineer, procure,

construct and test the Subsystem in a manner which shall be:



                                      -2-







          (a) consistent with the description of the Project, System and

     Subsystem, and all terms and conditions of the Grant;

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