<PAGE>   1
                                                                   Exhibit 10.12


                             COLLABORATION AGREEMENT


                                     between

                           BALLARD POWER SYSTEMS INC.

                                       and

                            UCAR CARBON COMPANY INC.
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                                      -2-




                             COLLABORATION AGREEMENT



THIS AGREEMENT is made May 3, 1999


BETWEEN:


                   BALLARD POWER SYSTEMS INC., a Canadian corporation having an
                   office at 9000 Glenlyon Parkway, Burnaby, British Columbia,
                   Canada, V5J 5J9

                   ("BPS")

AND:


                   UCAR CARBON COMPANY INC., a Delaware corporation having an
                   office at 3102 West End Avenue, Suite 1100, Nashville,
                   Tennessee 37203, USA

                   ("UCAR CARBON")


WHEREAS:

(A) BPS has developed, is in the possession of and is the beneficial owner of,
substantial and valuable expertise, know-how and certain intellectual property
rights relating to the field of PEM Fuel Cells and the design, manufacture and
marketing of PEM Fuel Cells and components therefor for the generation of
electrical power for a variety of applications;

(B) BPS wishes to enhance its PEM Fuel Cell technology through the development
of improved fuel cell components;

(C) UCAR CARBON has developed, is in the possession of and is the beneficial
owner of, substantial and valuable expertise, know-how and certain intellectual
property rights relating to the field of flexible graphite and treated natural
graphite and sells such materials and articles made therefrom having mechanical,
physical, chemical and electrical properties suitable for a wide variety of
industrial uses;

(D) BPS and UCAR CARBON wish to co-operate in the research and development of
the Target Products for use in PEM Fuel Cells and derivatives thereof and have
entered into this Agreement for the purposes of the Collaboration;

(E) BPS intends to procure its supply of the Materials from UCAR CARBON for
itself and possibly also for certain of its Affiliates and licensees if the
development of the Target
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Products pursuant to the collaboration under this Agreement is successful;

(F) UCAR and BPS are parties to the Mutual Secrecy Agreement;

NOW THEREFORE this Agreement witnesses that the parties mutually covenant and
agree as follows:



                                     PART 1

                         DEFINITIONS AND INTERPRETATIONS

DEFINITIONS

1.1 In this Agreement, including the recitals, except as otherwise expressly
provided or unless the context otherwise requires,

          AFFILIATE, in relation to a specified Person, means a Person that
          directly or indirectly controls, is under common control with, or is
          controlled by the specified Person, and for the purposes hereof, a
          Person will be deemed to control a corporation if

                   (a) securities of the corporation to which are attached more
                   than 50% of the votes that may be cast to elect directors of
                   the specified corporation or other rights to elect a majority
                   of the directors are held, other than by way of security
                   only, by or for the benefit of the Person, and

                   (b) the votes attached to those securities are sufficient, if
                   exercised, to elect a majority of the directors of the
                   corporation,

          ARISING IPR               [REDACTED]

          BACKGROUND IPR            [REDACTED]

          BPS ARISING IPR           [REDACTED]

          BPS BACKGROUND IPR        [REDACTED]



         BUSINESS DAY means a day that is not a Saturday or a Sunday or a
         British Columbia


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                                      -4-


         provincial, Canadian federal, a United States national or Tennessee
         state, holiday,

         CHIEF EXECUTIVE OFFICER means, in the case of BPS, BPS's Chief
         Operating Officer and in the case of UCAR CARBON, UCAR CARBON's
         President,

         COLLABORATION means the collaboration between the parties described in
         Section 2.1 and includes the collaborative activities of the parties
         set forth in the SOW which occur from and after the Effective Date,

         COLLABORATION PERIOD has the meaning ascribed to it in Section 2.3,

         COMMITTEE has the meaning ascribed to it in Section 2.4,

         CONFIDENTIAL INFORMATION means, in relation to a Person, information
         known or used by such Person in connection with its business and
         technology, including, but not limited to, such Person's Intellectual
         Property, customer information, financial information, marketing
         information, and information as to business opportunities and research
         and development,

         DISPUTE NOTICE has the meaning ascribed to it in Section 6.1,

         EFFECTIVE DATE has the meaning ascribed to it in Section 2.3,

         EVENT OF DEFAULT in relation to a party means an event of default
         arising as a result of a party being subject to one or more of the
         following circumstances:

                  (a)      an order is made or a resolution is passed or a
                           petition is filed by such party for the liquidation,
                           dissolution or winding-up of such party,

                  (b)      such party is in material breach of its obligations
                           under Part 4,

                  (c)      such party commits a material default in observing or
                           performing any other material covenant, agreement or
                           condition of this Agreement on its part to be
                           observed or performed and, where such default is
                           curable, such party does not rectify or cure such
                           default within 30 days after receipt of written
                           notice from the other party to this Agreement
                           specifying such default;

                  (d)      an execution, sequestration or any other process of
                           any court becomes enforceable against such party or
                           any distress or analogous process is levied upon any
                           material part of the property, assets and undertaking
                           of such party and any such process or distress is not
                           stayed or otherwise suspended by a court of competent
                           jurisdiction within 30 days and has, or could have, a
                           material adverse effect on the business or condition,
                           financial or otherwise, of such party;
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                                      -5-


                  (e)      such party applies to be put in bankruptcy, takes any
                           action that would permit its creditors to make an
                           application to put such party in bankruptcy, is
                           adjudged or declared bankrupt or makes an assignment
                           for the benefit of creditors, consents to a proposal
                           or similar action under any bankruptcy or insolvency
                           legislation applicable to it, or commences any other
                           proceedings relating to it under any reorganization,
                           arrangement, readjustment of debt, dissolution or
                           liquidation law or statute of any jurisdiction
                           whether now or hereafter in effect, or consents to
                           any such proceeding;

                  (f)      a custodian, liquidator, receiver, receiver and
                           manager, receiver-manager, trustee or any other
                           person with similar powers is appointed for such
                           party or in respect of any material property or
                           assets or material part of the property or assets of
                           such party and not discharged within 30 days after
                           its appointment and before any action is taken by it
                           in respect of such property or assets which will
                           materially affect the rights of the parties to this
                           Agreement thereto; or

                  (g)      a final, non-appealable, decision of any judicial,
                           administrative, governmental or other authority or
                           arbitrator is made which enjoins or restrains, or
                           renders illegal or unenforceable, the performance or
                           observance by such party of any material term of this
                           Agreement,

         EXCLUSIVE PERIOD has the meaning ascribed to it in Section 2.9,

          INTELLECTUAL PROPERTY means in relation to a Person, each patent,
          patent application, industrial design, invention, design, trade
          secret, idea, work, methodology, technology, innovation, creation,
          concept, moral right, development drawing, research, analysis,
          know-how, experiment, copyright, data, formula, method, procedure,
          process, system or technique of such Person but does not include
          trademarks or tradenames,

          IPR means Intellectual Property rights,

          MATERIALS                  [REDACTED]

          MUTUAL SECRECY AGREEMENT means the secrecy agreement made effective
          May 17, 1996, a copy of which is annexed hereto as Schedule C,
<PAGE>   6
                                      -6-


          NOTICE has the meaning ascribed to it in Section 8.4,

          PEM FUEL CELL means a solid polymer fuel cell and includes a direct
          oxidation fuel cell,

          PERSON means an individual, corporation, body corporate, firm, limited
          liability company, partnership, syndicate, joint venture, society,
          association, trust or unincorporated organization or trustee or other
          such legal representative,

          PROJECT MANAGER has the meaning ascribed to it in Section 2.7,

          SOW means the Statement of Work annexed hereto as Schedule A,

          SUPPLY AGREEMENT DEADLINE DATE has the meaning ascribed to it in
          Section 5.1,

          TARGET PRODUCT means an electrically conductive fuel cell separator
          plate developed pursuant to the Collaboration utilizing any of the
          Materials,

          UCAR ARISING IPR          [REDACTED]

          UCAR BACKGROUND IPR       [REDACTED]



INTERPRETATION

1.2 In this Agreement, except as otherwise expressly provided or unless the
context otherwise requires,

          (a) "this Agreement" means this Collaboration Agreement as from time
          to time supplemented or amended by one or more agreements entered into
          pursuant to the applicable provisions hereof,

          (b) the headings in this Agreement are inserted for convenience only
          and do not form a part of this Agreement and are not intended to
          interpret, define or limit the scope, extent or intent of this
          Agreement or any provision hereof,

          (c) the word "including", when following any general statement or
          term, is not to be construed as limiting the general statement or term
          to the specific items or matters set forth or to similar items or
          matters, but rather as permitting the general statement or

<PAGE>   7
                                      -7-


          term to refer to all other items or matters that could reasonably fall
          within its broadest possible scope,

          (d) except where otherwise specified, all references to currency mean
          currency of the United States of America,

          (e) a reference to a statute includes all regulations made thereunder,
          all amendments to the statute or regulations in force from time to
          time, and any statute or regulation that supplements or supersedes
          such statute or regulations,

          (f) a reference to an entity includes any successor to that entity,

          (g) words importing the masculine gender include the feminine or
          neuter, words in the singular include the plural, words importing a
          corporate entity include individuals, and vice versa,

          (h) a reference to "approval", "authorization" or "consent" means
          written approval, authorization or consent,

          (i) a reference to a Part is to a Part of this Agreement and the
          symbol Section followed by a number or some combination of numbers and
          letters refers to the section, paragraph, subparagraph, clause or
          subclause of this Agreement so designated.

SCHEDULES

1.3 The following schedules are incorporated in to this Agreement by reference
and form a part hereof:

                   Schedule A - Statement of Work
                   Schedule B - List of Materials
                   Schedule C - Mutual Secrecy Agreement


                                     PART 2

                                  COLLABORATION

COLLABORATION

2.1 BPS and UCAR CARBON will work jointly and individually at their respective
facilities and will co-operate in their research and development activities as
may be required or expedient to produce or create commercially viable versions
of the Target Products primarily for use in PEM Fuel Cells.

LIMITED PURPOSE
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2.2 The Collaboration will be for the purposes of research and development only,
will include the activities described in the SOW, and will encompass all
research, design, development, improvement and other experimentation and
performance testing of the Target Products during the Collaboration Period and
the provision of reports and advice by the parties to one another with respect
to the development of such products and techniques and methods of their
manufacture and exploitation.

COLLABORATION TERM

2.3   [REDACTED]

STEERING COMMITTEE

2.4 The parties will establish a steering committee (the "Committee") comprising
two representatives of each party. Each party may replace, from time to time,
any member appointed by it on the Committee by giving written notice thereof to
the other party. The Committee will meet regularly but not less than twice per
year and meetings of the Committee may be held by telephone conference. The
decisions of the Committee will be made unanimously by all of its members. All
proceedings and decisions of the Committee will be recorded in minutes which
will be signed by at least one member of the Committee appointed by each party.

DUTIES OF COMMITTEE

2.5 The Committee will, among other things,

          (a) monitor the progress and review the performance of each of the
          parties,

          (b) oversee all work to be performed by each of the parties pursuant
          to the Collaboration (including, but not limited to, the work for
          which each party is responsible as may be described in any work-plan
          pertaining to the Collaboration),

          (c) review patent-related and other intellectual property issues and
          define the parties' general strategy concerning the same,

          (d) promptly resolve problems and disputes submitted to the Committee
          by either party,

          (e) evaluate the results of each phase of the Collaboration and
          discuss all technical


<PAGE>   9
                                      -9-


issues arising with regard to the Collaboration,

          (f) determine the ownership of Arising IPR which may result pursuant
          to the Collaboration but only to the extent the same is not provided
          for in this Agreement,

          (g) modify the SOW as and when deemed necessary,

          (h) review, on a regular basis, the cost of developing and producing
          the Materials and the projected date of commercialization of PEM Fuel
          Cells containing Target Products and make recommendations to the
          parties regarding the same, and

          (i) review, and where appropriate approve the written summaries
          prepared by the Project Managers pursuant to Section 2.7(d).

WORK AND COSTS

2.6 Each party will use all reasonable efforts to successfully, diligently and
on a timely basis, carry out the portion of the work for which it is responsible
as set forth in the SOW for the achievement of the objectives of the
Collaboration. Unless otherwise agreed, each party will bear all its own costs
and expenditures in connection with its activities pursuant to the Collaboration
except that jointly incurred costs will be borne by the parties equally.

PROJECT MANAGER

2.7 Each of the parties will appoint and maintain, until the expiry of the
Collaboration Period, a project manager ("Project Manager") and may from time to
time change its Project Manager, upon prior written notice to the other party.
Each party's Project Manager will be responsible for that party's performance
under this Agreement and will coordinate and cooperate with the Committee
concerning the management, coordination and administration of the activities of
such party under this Agreement. Specifically, the Project Managers will

          (a) exchange results and all other relevant information arising
          pursuant to the Collaboration,

          (b) specify detailed objectives of the Collaboration, the work to be
          performed by each party and relevant specifications and appropriate
          targets, to the extent deemed necessary for the success of the
          Collaboration,

          (c) maintain books and written records of the dates on which
          technology is disclosed by one party to the other pursuant to the
          Collaboration, and

          (d) jointly prepare a written summary for the Committee every six
          months on the results and progress of the Collaboration.
<PAGE>   10
                                      -10-


PRODUCT DEVELOPMENT LEAD TIME

2.8    [REDACTED]

LICENSE BY UCAR

2.9    [REDACTED]

SUBLICENSE BY BPS

2.10   [REDACTED]

2.11   [REDACTED]



                                     PART 3

                              INTELLECTUAL PROPERTY

DISCLOSURE OF IPR FOR THE COLLABORATION

3.1 Each party will disclose to the other its Background IPR but only to the
extent strictly necessary for the Collaboration.

BPS'S LICENSE TO UCAR CARBON FOR COLLABORATION

3.2 BPS hereby grants to UCAR CARBON a non-exclusive, non-transferable,
royalty-free, right (without the right to sub-license) to use, subject to
Section 3.1, the BPS Background IPR and the BPS Arising IPR (in each case
subject to the confidentiality obligations contained in Part 4) until the end of
the Collaboration Period for the sole purpose of carrying out the work under the
Collaboration. For greater certainty the license granted by BPS to UCAR CARBON
under this Section 3.2 does not include any right to manufacture, sell or
distribute products using, or to otherwise exploit, the BPS Background IPR or
the BPS Arising IPR for any other purpose.

UCAR CARBON'S LICENSE TO BPS FOR COLLABORATION

3.3 UCAR CARBON hereby grants to BPS a non-exclusive, non-transferable,
royalty-free, right (without the right to sub-license) to use, subject to
Section 3.1, the UCAR


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                                      -11-


Background IPR and the UCAR Arising IPR (in each case subject to the
confidentiality obligations contained in Part 4) until the end of the
Collaboration Period for the sole purpose of carrying out the work under the
Collaboration. For greater certainty, except as otherwise set forth in
Section 2.9 and Part 7, the license granted by UCAR CARBON to BPS under this
Section 3.3 does not include any right to manufacture, sell or distribute
products using, or to otherwise exploit, the UCAR Background IPR or the UCAR
Arising IPR for any other purpose.

OWNERSHIP OF ARISING IPR

3.4 Where pursuant to the Collaboration any Intellectual Property which
specifically relates to the Materials or the Target Products is invented,
discovered, improved or otherwise developed or made by one party, such party
will disclose the same to the other. Regardless of inventorship, ownership of
all Intellectual Property in any such invention, discovery, improvement or
development will vest immediately and is hereby assigned in accordance with the
definitions of BPS Arising IPR and UCAR Arising IPR. To this end the parties
will execute or cause to be executed such deeds, documents, instruments,
assignments and moral rights waivers as may be necessary to effect the intent of
this Section 3.4.

PATENTS

3.5 Each party that is entitled to ownership of any Intellectual Property
created pursuant to the Collaboration as described in Section 3.4 will, at its
option, prosecute patents with respect to the same. Each party will execute all
such documents, execute or obtain such assignments and waivers, including
waivers of moral rights, and do all such other things as are reasonably
requested by the owner of such Intellectual Property in connection with any
application or prosecution of patents in respect of the same and will assist the
owner in all respects necessary to enable filing and prosecution of any such
application. The owner will be responsible for filing, prosecuting and
maintaining patent applications it files.

CONSENT TO USE OF CONFIDENTIAL INFORMATION

3.6 Neither party's patent applications may include any Background IPR, Arising
IPR or Confidential Information of the other without the express written consent
of the other party.

INFRINGEMENT CLAIM

3.7 If during the Collaboration Period either party discovers any third party
infringement of IPR belonging to either party, it will promptly notify the other
party.



                                     PART 4

                                 CONFIDENTIALITY
<PAGE>   12
                                      -12-


CONFIDENTIALITY OBLIGATIONS

4.1 Each party (for purposes of this Part 4, the "Recipient"), at all times
during the Collaboration Period and for a period of ten years after the expiry
thereof,

          (a) will, and will ensure that each of its directors, officers,
          employees, Affiliates, licensees, including sublicensees
          (collectively, the "Recipient's Agents") will, hold in confidence and
          keep confidential the Confidential Information of a party (the
          "Disclosing Party") disclosed to it by the Disclosing Party,

          (b) will not, and will ensure that the Recipient's Agents will not,
          directly or indirectly, use or disclose any such Confidential
          Information except to the extent that it is strictly necessary for the
          Collaboration,

          (c) will cause the Recipient's Agents that are recipients of or
          exposed to such Confidential Information, to execute confidentiality
          agreements to protect the same,

          (d) will not, and will ensure that the Recipient's Agents will not,
          except to the extent necessary for the Collaboration, make copies of
          or otherwise reproduce such Confidential Information, and

          (e) will, and will ensure that each of the Recipient's Agents will,
          use commercially reasonable best efforts to maintain all such
          Confidential Information in a manner so as to protect the same against
          wrongful disclosure, misuse, espionage and theft.

EXCEPTIONS FOR CONFIDENTIALITY

4.2 Nothing in this Agreement will prevent the Recipient or the Recipient's
Agents from making use of or disclosing any Confidential Information disclosed
to them by the Disclosing Party

          (a) which is or becomes generally available to the public through no
          breach of this Agreement or any other obligation of the Recipient or
          the Recipient's Agents to the Disclosing Party,

          (b) of which the Recipient or the Recipient's Agents had knowledge
          before the date of this Agreement, as evidenced by competent proof,
          unless the same was disclosed to the Recipient or the Recipient's
          Agents by the Disclosing Party,

          (c) of which the Recipient or the Recipient's Agents obtained
          knowledge from a third party, as evidenced by competent proof, unless
          such third party obtained such Confidential Information in violation
          of any duty of confidence owed to the Disclosing Party, or

          (d) which is required to be disclosed pursuant to law or a rule,
          regulation, policy or
<PAGE>   13
                                      -13-


          order of a governmental authority having jurisdiction or pursuant to a
          final order or judgment of a court of competent jurisdiction and in
          such case the parties will cooperate with one another to obtain an
          appropriate protective order or other reliable assurance that
          confidential treatment will be afforded to such Confidential
          Information.

EMPLOYMENT RELATIONS

4.3 Neither party will, during the Collaboration Period and for a period of two
years next after the expiry thereof, solicit for employment any individual who
is, at the time of such solicitation, employed by the other party or its
Affiliates nor will such party, directly or indirectly, induce any such
individual to leave his or her employment. Nothing herein will prevent a party
from employing any such employee so long as no solicitation or inducement has
been made to such employee by or on behalf of such party.

REASONABLE RESTRICTION

4.4 Each party agrees that the restrictions contained in this Part 4 are
reasonable for the protection of the respective legitimate business interests of
the parties.

NON-DISCLOSURE OF COLLABORATION

4.5 Except as may be required by law or applicable securities regulatory
authorities, neither party will make public the existence of this Agreement or
the Collaboration hereunder or the negotiations leading to or pursuant to this
Agreement, without the written consent of the other party. Notwithstanding the
foregoing, as soon as reasonably practicable after the execution by the parties
of an agreement governing the supply of the Materials by UCAR CARBON to BPS as
contemplated in Section 5.1, each party will be entitled to make public the
existence of such agreement provided that the form and substance of any such
publicity is first approved by the other party.

MUTUAL SECRECY AGREEMENT

4.6 The provisions of the Mutual Secrecy Agreement (and not Section 4.1 and
Section 4.2 hereof) will apply to all "Proprietary Information" (as defined in
such agreement) disclosed by the parties to one another before the Effective
Date notwithstanding that such Proprietary Information may be disclosed again as
Confidential Information under this Agreement.

ADDITIONAL CONFIDENTIALITY OBLIGATION OF UCAR CARBON

4.7 During the Exclusive Period, UCAR CARBON will not use or disclose, or permit
the use or disclosure of, any IPR that are the subject matter of the license
granted by UCAR to BPS under Section 2.9 other than for the purposes specified
in Section 2.9 and Section 2.10.
<PAGE>   14
                                      -14-


                                     PART 5

                                     SUPPLY

SUPPLY

5.1                                [REDACTED]



                                     PART 6

                               DISPUTE RESOLUTION

INITIATION OF PROCESS

6.1 If at any time a dispute between the parties with respect to any matter
relating to this Agreement arises, a party that wishes that the issue be
considered further may give written notice (the "Dispute Notice") to the other
and to the Committee requiring that such issue or dispute be decided pursuant to
this Part 6.

REFERRAL TO COMMITTEE

6.2 If a Dispute Notice is given, either party may, in the first instance, ask
the Committee to initiate discussions with a view to settling the issue or
matter. A decision reached by the Committee and communicated by it in writing to
the parties will be binding on the parties and will be implemented.

REFERRAL TO CHIEF EXECUTIVE OFFICERS

6.3 If no decision is communicated by the Committee within 30 days after such
issue or dispute is referred to it, either party may at any time before a
decision thereon is so communicated, ask the Chief Executive Officers of each of
the parties to initiate discussions with a view to settling the issue or matter.
Once the issue or dispute is referred to the Chief Executive Officers, the
Committee will no longer have jurisdiction to decide on the issue. A decision
reached by such Chief Executive Officers and communicated by them in writing to
the parties will be binding on the parties and will be implemented.


<PAGE>   15
                                      -15-


SUBMISSION TO ARBITRATION

6.4 If no decision is communicated by the Chief Executive Officers within 30
days after such issue or dispute is referred to them, either party may at any
time before a decision thereon is so communicated and less than 120 days after
delivery of the Dispute Notice, by further notice given to the other, submit the
issue or dispute for determination by a three member arbitration panel in
accordance with the rules of arbitration of the International Chamber of
Commerce.

ACCEPTANCE AND IMPLEMENTATION

6.5 Each of the parties will accept and proceed in good faith diligently to
implement the award or decision of the arbitrators on an arbitration pursuant to
Section 6.4.

PLACE OF ARBITRATION

6.6 All arbitration proceedings will be conducted in San Francisco, California
or in such other place as the parties may agree.

LEGAL PROCEEDINGS

6.7 A legal proceeding commenced by a party to this Agreement in respect of an
issue or dispute that may be arbitrated under this Agreement will be stayed
until the time during which arbitration may be initiated has expired or, if
arbitration is initiated, a decision on the arbitration is delivered or the
arbitration process has otherwise ended.

EXCLUSIONS

6.8 This Part 6 will not apply to the grant of provisional remedies, including
injunctions, restraining orders and specific performance, and each party
reserves its right to commence such action or seek such remedies from a court of
competent jurisdiction.



                                     PART 7

                                   TERMINATION

TERMINATION

7.1 Subject to earlier termination as provided in this Section 7.1, the
Collaboration hereunder will end as provided in Section 2.3. Thereafter the
Collaboration may be renewed year-to-year by mutual agreement. Notwithstanding
the foregoing, the Collaboration hereunder may be terminated by either party,

          (a)                              [REDACTED]


<PAGE>   16
                                      -16-


          (b) by written notice to the other, if the other becomes the subject
          to an Event of Default, or

          (c) by written notice to the other, if no agreement for the supply of
          the Materials by UCAR CARBON to BPS has been concluded by the Supply
          Agreement Deadline Date, or

          (d) by written notice to the other, if the parties

                    (i) have completed the work required of them under the SOW
                    before the end of the Collaboration Period, and

                    (ii) cannot agree on additional work to be done or the
                    milestones or other deliverables to be met, during the
                    balance of the Collaboration Period.

RIGHTS AND OBLIGATIONS OF THE PARTIES AFTER TERMINATION

7.2 Notwithstanding the foregoing, all rights and obligations of the parties
accruing before the effective date of the termination of the Collaboration
herein and all rights and obligations expressly stated to continue after or
accrue as a result of, the termination of the Collaboration, will survive the
effective date of such termination and will continue in full force and effect,
provided that

          (a) if UCAR CARBON terminates the Collaboration herein without cause,
          or BPS terminates the Collaboration as a result of UCAR CARBON being
          the subject of an Event of Default,

                  (i)  [REDACTED]

                  (ii)  [REDACTED]

          (b) if BPS terminates the Collaboration herein without cause, or UCAR
          CARBON terminates the Collaboration as a result of BPS being the
          subject of an Event of Default,

                   (i)  [REDACTED]

<PAGE>   17
                                      -17-


                  (ii) [REDACTED]

          (c) if the supply agreement contemplated in Section 5.1 is not
          concluded on or before the Supply Agreement Deadline Date, UCAR will,
          if so requested by BPS, continue supplying the Materials to BPS on
          commercially reasonable terms, at commercially reasonable prices for a
          period not exceeding 6 months. If the parties fail to agree on such
          terms or prices within 60 days after the Supply Agreement Deadline
          Date, the matter will be determined by arbitration pursuant to
          Section 6.4, mutatis mutandis,

          (d) Section 7.2(a) and (b), Section 2.8, Section 2.9 and Section 2.10
          will be suspended if the agreement for the supply of the Materials by
          UCAR CARBON to BPS, as contemplated in Section 5.1 has not been
          concluded on or before the Supply Agreement Deadline Date; provided
          that

                   (i) subject to Section 7.2(d)(ii), such provisions will
                   reapply immediately following the execution of any such
                   agreement at any time after such date, and

                   (ii) such provisions will be deemed cancelled if such an
                   agreement has not been concluded within 9 months after the
                   Supply Agreement Deadline Date, and

          (e) for greater certainty, Section 7.2(a) and Section 7.2(b) will not
          apply if the Collaboration is terminated pursuant to Section 7.1(d).



RETURN OF CONFIDENTIAL INFORMATION

7.3 Except as may be required for the purposes of effectively utilizing any
licensing rights arising upon or continuing after the end of the Collaboration,
forthwith upon termination of the Collaboration, each party will, upon request,
return or cause to be returned to the other all Confidential Information of the
other in its possession or under its control, regardless of form, including all
known and existing copies and reproductions thereof.



                                     PART 8

                                     GENERAL
<PAGE>   18
                                      -18-


MODIFICATIONS, APPROVALS AND CONSENTS

8.1 No amendment, modification, supplement, termination or waiver of any
provision of this Agreement will be effective unless in writing signed by the
appropriate party and then only in the specific instance and for the specific
purpose given.

FURTHER ASSURANCES

8.2 The parties will execute such further assurances and other documents and
instruments and do such further and other things as may be necessary to
implement and carry out the intent of this Agreement.

ENTIRE AGREEMENT

8.3 The provisions in this Agreement constitute the entire agreement between the
parties hereto and supersede all previous expectations, understandings,
communications, representations and agreements whether verbal or written between
the parties.

NOTICES

8.4 Every notice, request, demand, direction or other communication (each, for
the purposes of Section 8.4, Section 8.5 and Section 8.6, a "Notice") required
or permitted to be given pursuant to this Agreement will be deemed to be well
and sufficiently given if in writing and delivered by hand (including recognized
overnight courier service) or transmitted by facsimile, in each case addressed
as follows:

          (a)      if to BPS at:

                   9000 Glenlyon Parkway
                   Burnaby, British Columbia
                   Canada V5J 539
                   Attention:    Chief Operating Officer
                   Facsimile:    (604) 412-3131

                   with a copy to BPS's Vice-President and General Counsel at
                   the same address and facsimile number; and

          (b)      if to UCAR CARBON at:

                   3102 West End Avenue,
                   Suite 1100
                   Nashville, Tennessee
                   USA 37203
                   Attention:    The President
                   Facsimile:    (615) 760-7797
<PAGE>   19
                                      -19-


                   with a copy to UCAR CARBON's Vice-President and General
                   Counsel at the same address and facsimile number;

or to such other address or transmission receiving station as is specified by
the particular party by Notice to the others.

DEEMED RECEIPT

8.5 Any Notice delivered or sent as aforesaid will be deemed conclusively to
have been effectively given and received on the day Notice was delivered or sent
as aforesaid if it was delivered or sent on a day that was a Business Day or on
the next day that is a Business Day if it was delivered or sent on a day that
was not a Business Day.

CHANGE OF ADDRESS

8.6 A party may at any time, by Notice to the others, change its address to some
no less convenient address and will so change its address whenever its address
ceases to be suitable for delivery by hand.

ENUREMENT

8.7 This Agreement will enure to the benefit of and be binding upon the parties
and their respective successors and permitted assigns.

APPLICABLE LAW

8.8 This Agreement will be deemed to have been made in British Columbia, Canada
and the construction, validity and performance of this Agreement will be
governed in all respects by the laws of British Columbia and applicable laws of
Canada. The application of the provisions of the United Nations Convention on
Contracts for the International Sale of Goods are hereby excluded.

ATTORNMENT

8.9 Each party irrevocably attorns to the exclusive jurisdiction of the courts
of British Columbia, Canada and all courts having appellate jurisdiction
thereover in respect of any proceeding arising out of or relating to this
Agreement.

FORCE MAJEURE

8.10 Neither party will be liable to the other for default or delay in the
performance of its obligations under this Agreement if such default or delay is
caused by fire, strike, riot, war, act of God, delay of carriers, governmental
orders or regulation, complete or partial shutdown of plant by reason of
inability to obtain sufficient raw material or power, or any other occurrence
beyond the reasonable control of such party. The party whose performance is
<PAGE>   20
                                      -20-


prevented by any such occurrence will notify the other party of the same in
writing as soon as is reasonably possible after the commencement thereof, will
provide the other with full written particulars of such occurrence and attempts
made to remedy the same, will use commercially reasonable best efforts to remedy
such occurrence with all reasonable dispatch and, upon cessation of the
occurrence, will give prompt written notice to the other party of the same.

SEVERABILITY

8.11 If any provision contained in this Agreement is found by any court or
arbitrator for any reason, to be invalid, illegal or unenforceable in any
respect in any jurisdiction,

          (a) the validity, legality and enforceability of such provision will
          not in any way be affected or impaired thereby in any other
          jurisdiction and the validity, legality and enforceability of the
          remaining provisions contained herein will not in any way be affected
          or impaired thereby, unless in either case as a result of such
          determination this Agreement would fail in its essential purpose, and

          (b) the parties will use their best efforts to substitute for any
          provision that is invalid, illegal or unenforceable in any
          jurisdiction a valid and enforceable provision which achieves to the
          greatest extent possible the economic, legal and commercial objectives
          of such invalid, illegal or unenforceable provision and of this
          Agreement and, failing the agreement of the parties on such a
          substitution within 30 days after the finding of the court or
          arbitrator, either party may refer the matter for dispute resolution
          under Part 6.

COUNTERPARTS

8.12 This Agreement may be executed in counterparts or by facsimile, each of
which will together, for all purposes, constitute one and the same instrument,
binding on the parties, and each of which will together be deemed to be an
original, notwithstanding that both parties are not signatories to the same
counterpart or facsimile.







ASSIGNMENT

8.13 Neither party may assign any right, benefit or interest in this Agreement
without the written consent of the other party, and any purported assignment
without such consent will be void.

IN WITNESS WHEREOF the parties have executed this Agreement as of the day and
year
<PAGE>   21
                                      -21-


first above written.

BALLARD POWER SYSTEMS INC.



By:      /s/
         ---

Its:     Vice President and General Counsel
         ----------------------------------



UCAR CARBON COMPANY INC.



By:      /s/ Peter B. Mancino
         --------------------

Its:     Vice President
         --------------
<PAGE>   22
                                      -22-



                                   Schedule A

                                Statement of Work


                                   [REDACTED]

<PAGE>   23
                                      -23-



                                   Schedule B

                                List of Materials





                                   [REDACTED]


<PAGE>   24
                                      -24-

                                   Schedule C

                            MUTUAL SECRECY AGREEMENT


           This AGREEMENT effective as of the 17th day of May, 1996, is between
UCAR CARBON COMPANY INC., a Delaware corporation, having offices at 39 Old
Ridgebury Road, Danbury, Connecticut O68l7 (hereinafter referred to as "UCAR
CARBON"); and BALLARD POWER SYSTEMS INC., having an office at 9000 Glenlyon
Parkway, Burnaby, B.C. Canada V5J 5J9 (hereinafter referred to as "BALLARD").

           WHEREAS, UCAR CARBON possesses certain proprietary information
(hereinafter UCAR CARBON Proprietary Information) relating to the manufacture of
flexible graphite for use in fuel cells:

           WHEREAS, BALLARD possesses certain proprietary information
(hereinafter BALLARD Proprietary Information) relating to fuel cells and
components for fuel cells.

           WHEREAS, UCAR CARBON and BALLARD desire to exchange such proprietary
information (hereinafter individually and collectively referred to as
"Proprietary Information") for the purpose of UCAR CARBON supplying flexible
graphite produced employing UCAR CARBON Proprietary Information to BALLARD under
a separate purchase order.

           WHEREAS, each party is willing to disclose to the other
<PAGE>   25
                                      -25-


party its Proprietary Information for the specific purposes of this Agreement
under the following conditions:

           1. During the term of this Agreement, the receiving party agrees to
hold in confidence and not disclose to any person or persons, other than its
employees with a need to know, or use except for the purpose of this agreement,
for a period of fifteen (15) years from the date of each disclosure, any and all
Proprietary Information disclosed in writing and identified as Proprietary
Information by the disclosing party. If Proprietary Information is disclosed
orally or in other than written form, it must be identified as Proprietary
Information at the time of disclosure and summarized in writing and identified
as Proprietary Information by the disclosing party within thirty (30) days from
the date of the disclosure. It is understood that the foregoing obligation of
confidentiality does not apply to:

      a)   information which at the time of disclosure is in the public domain;

      b)   information which is published or otherwise becomes part of the
           public domain through no fault of the receiving party after the
           disclosure hereunder;

      c)   information which the receiving party can demonstrate by reasonably
           convincing evidence is already known or in the possession of the
           receiving party at the time of disclosure hereunder;

      d)   information that the receiving party can show was received by it
           after the time of the disclosure hereunder from a third party on a
           non-confidential basis who did not acquire such information directly
           or indirectly from the disclosing party under an obligation of
           confidence; or
<PAGE>   26
                                      -26-


      e)   information that is developed by an employee of the receiving party
           independent of any such disclosure under this Agreement.


           2. The receiving party agrees to use at least the same degree of care
in maintaining the other party's Proprietary Information confidential as it does
for maintaining the confidentiality of its own Proprietary Information of a
similar nature.


           3. The receiving party agrees not to copy any Proprietary Information
without the written permission of the disclosing party, and shall return such
Proprietary Information and any copies when requested to do so by the disclosing
party during the term of this Agreement


           4. No license, express or implied, is granted by either party to the
other party under any patent, trade secret or copyright now or hereafter owned
by either party under this Agreement.


           5. This Agreement shall be construed and interpreted, and its
performance shall be governed by substantive laws of the state of Connecticut,
U.S.A., without recourse to its conflict of laws, rules or principles.
<PAGE>   27
                                      -27-


           6. Either party upon thirty (30) days notice given in writing to the
other party may terminate this Agreement. However, termination of the Agreement
will not affect the confidentiality and non-use obligations of either party.


AGREED:

BALLARD POWER SYSTEMS INC.                  UCAR CARBON COMPANY INC.



By /s/ Keith B. Prater                      By/s/ R.M. Flowers
   -------------------                        ----------------

Name Keith B. Prater                        Name R.M. Flowers
     ---------------                             ------------

Title Vice President                        Title Dir.-Worldwide Tech.
      --------------                              --------------------

Date 21Jun96                                Date July 2, 1996
     -------                                     ------------
<PAGE>   28
                                      -28-


                                     PART 1
                         DEFINITIONS AND INTERPRETATIONS

Definitions                                                               2
Interpretation                                                            6
Schedules                                                                 7


                                     PART 2
                                  COLLABORATION

Collaboration                                                             7
Limited Purpose                                                           7
Collaboration Term                                                        8
Steering Committee                                                        8
Duties of Committee                                                       8
Work and Costs                                                            9
Project Manager                                                           9
Product Development Lead Time                                             9
License by Ucar                                                          10
Sublicense by BPS                                                        10


                                     PART 3
                              INTELLECTUAL PROPERTY

Disclosure Of IPR for the Collaboration                                  11
BPS's License to UCAR CARBON for Collaboration                           11
UCAR CARBON's License to BPS for Collaboration                           11
Ownership of Arising IPR                                                 11
Patents                                                                  12
Consent to Use of Confidential Information                               12
Infringement Claim                                                       12


                                     PART 4
                                 CONFIDENTIALITY

Confidentiality Obligations                                              12
Exceptions for Confidentiality                                           13
Employment Relations                                                     13
Reasonable Restriction                                                   14
Non-Disclosure of Collaboration                                          14
Mutual Secrecy Agreement                                                 14
Additional Confidentiality Obligation of UCAR CARBON                     14
<PAGE>   29
                                      -29-


                                     PART 5
                                     SUPPLY
Supply                                                                   14


                                     PART 6
                               DISPUTE RESOLUTION

Initiation of Process                                                    15
Referral to Committee                                                    15
Referral to Chief Executive Officers                                     15
Submission to Arbitration                                                15
Acceptance and Implementation                                            16
Place of Arbitration                                                     16
Legal Proceedings                                                        16
Exclusions                                                               16


                                     PART 7
                                   TERMINATION

Termination                                                              16
Rights and obligations of the Parties After Termination                  17
Return of Confidential Information                                       18


                                     PART 8
                                     GENERAL

Modifications, Approvals and Consents                                    19
Further Assurances                                                       19
Entire Agreement                                                         19
Notices                                                                  19
Deemed Receipt                                                           20
Change of Address                                                        20
Enurement                                                                20
Applicable Law                                                           20
Attornment                                                               20
Force Majeure                                                            21
Severability                                                             21
Counterparts                                                             21
Assignment                                                               22





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