<PAGE>   1
                                                                    EXHIBIT 10.6


               CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED
                  BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT

                   OMITTED PORTIONS HAVE BEEN SEPARATELY FILED
                   WITH THE SECURITIES AND EXCHANGE COMMISSION









                             COLLABORATION AGREEMENT



                                     between


                           BALLARD POWER SYSTEMS INC.


                                       and


                            UCAR CARBON COMPANY INC.







<PAGE>   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 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:

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                                     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 means, collectively, BPS Arising IPR and UCAR Arising IPR
         arising pursuant to the Collaboration,

         BACKGROUND IPR means, collectively, BPS Background IPR and UCAR
         Background IPR,

         BPS ARISING IPR means all IPR arising pursuant to the Collaboration
         concerning any of the following:

                  (a) PEM Fuel Cells and PEM Fuel Cell components and
                  assemblies, including electrically conductive fuel cell
                  separator plates, the design, composition, manufacturing
                  techniques and methodology respecting any of the foregoing,
                  and applications thereof; and

                  (b) the use of any of the Materials in electrically conductive
                  fuel cell separator plates and manufacturing techniques and
                  methodology for fabrication of such plates incorporating the
                  Materials,

         BPS BACKGROUND IPR means all IPR concerning any of the following:

                  (a) PEM Fuel Cells and PEM Fuel Cell components and
                  assemblies, including electrically conductive fuel cell
                  separator plates, the design composition, manufacturing
                  techniques and methodology respecting any of the foregoing,
                  and applications thereof, owned or controlled by BPS before
                  the Effective Date; and

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                  (b) the use of any of the Materials, in electrically
                  conductive fuel cell separator plates, owned or controlled by
                  BPS before the Effective Date,

         BUSINESS DAY means a day that is not a Saturday or a Sunday or a
         British Columbia 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
         Section2.1 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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                  (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 means any one or more of treated graphite flakes, expanded
         graphite flakes and flexible graphite (commonly referred to as graphite
         sheet or foil) [TEXT DELETED] or other [TEXT DELETED] developed
         pursuant to the Collaboration, as well as such materials developed by
         UCAR CARBON before the Effective Date, including, but not limited to
         the materials listed in Schedule B,

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

         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,



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         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 means all IPR arising pursuant to the Collaboration
         concerning

                  (a) any of the Materials,

                  (b) articles made from the Materials, other than electrically
                  conductive fuel cell separator plates,

                  (c) compositions which include one or more of the Materials
                  for use in applications other than in electrically conductive
                  fuel cell separator plates,

                  (d) methodology relating to, or relating to the use of, any of
                  the foregoing other than methodology relating to, or relating
                  to the use of any of the foregoing in, electrically conductive
                  fuel cell separator plates,

         but excludes IPR concerning electrically conductive fuel cell separator
         plates as well as everything comprising the BPS Arising IPR, and

         UCAR BACKGROUND IPR means all IPR concerning any of the following:

                  (a) treated graphite flakes, expanded graphite flakes and
                  flexible graphite [TEXT DELETED] or [TEXT DELETED] by UCAR
                  CARBON, its Affiliates or subcontractors with [TEXT DELETED]
                  and other [TEXT DELETED] and [TEXT DELETED], compositions
                  which include one or more of the foregoing, and articles made
                  therefrom and methodology relating thereto, and methodology
                  relating to the use of any of the foregoing, which were owned
                  or controlled by UCAR CARBON before the Effective Date; and

                  (b) the materials described in Schedule B, but excludes
                  everything comprising the BPS Background IPR.

         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

                                       5
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             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 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

2.2 The Collaboration will be for the purposes of research and development only,
will include the
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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 The term of the Collaboration (the "Collaboration Period") will be three
years commencing on the date set forth on page 1 of this Agreement (the
"Effective Date") subject to extension or earlier termination as provided in
this Agreement or as may be mutually agreed to by the parties.

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 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

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         (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.

PRODUCT DEVELOPMENT LEAD TIME

2.8      During the Collaboration Period,

         (a) UCAR CARBON will not, and it will ensure that its Affiliates will
         not, directly or indirectly,

         (i) be involved with any Person other than BPS in any development of
         electrically conductive fuel cell separator plates or enter into any
         negotiations with any Person regarding the same, or

         (ii) develop or manufacture fuel cells or electrically conductive fuel
         cell separator plates or market, or offer for sale or sell fuel cells
         or electrically conductive fuel cell separator plates, whether for
         development, testing or other purposes, except for and on behalf of and
         at the request of BPS, and

    (b)  BPS will not, and it will ensure that its Affiliates will not,
         directly or indirectly,

         (i) be involved with any Person other than UCAR CARBON in any
         development of the Materials



                                       8
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    for use in electrically conductive fuel cell separator plates or enter into
    any negotiations with any Person regarding the same, or

         (ii) except as specifically permitted under Section 2.9 and Part 7,
         develop or manufacture the Materials for use in electrically conductive
         fuel cell separator plates or market, or offer for sale or sell the
         same, whether for development, testing or other purposes.

LICENSE BY UCAR

2.9 Subject to Section 7.2(d) and the confidentiality obligations under Part 4,
UCAR hereby grants to BPS, for the period (the "Exclusive Period") commencing
the Effective Date and ending six years after the end of the Collaboration
Period, which period shall automatically continue for 1 year periods thereafter
unless written notice is given by one party to the other 60 days prior to the
end of the current period, an exclusive (even as to UCAR), worldwide,
royalty-free and paid-up right and license, sublicensable by BPS, to exploit the
UCAR Arising IPR and the UCAR Background IPR, solely to enable BPS to make, have
made, use or sell the Materials only in connection with the development,
manufacture, use or sale of electrically conductive fuel cell separator plates
and for no other purpose.

SUBLICENSE BY BPS

2.10 Subject to the confidentiality obligations under Part 4, BPS hereby grants
to UCAR, for the Exclusive Period, a non-exclusive, worldwide, royalty-free and
paid-up right and license, by way of sublicense, solely to use the UCAR Arising
IPR and the UCAR Background IPR to produce the Materials exclusively for and on
behalf of BPS, and where requested by BPS, BPS's Affiliates and licensees. So
long as UCAR CARBON is not subject to an Event of Default, BPS will not grant
any other sublicense of UCAR CARBON's license to BPS under Section 2.9.

2.11 From and after the expiration of the Exclusive Period, as defined in
Section 2.9 above, BPS covenants not to sue UCAR CARBON on account of any sale
by UCAR CARBON of Materials included in Arising IPR for use in PEM Fuel Cells
and electrically conductive fuel cell separator plates and BPS further covenants
not to sue any purchaser from UCAR CARBON of such Materials on account of such
use.

                                     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

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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 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
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belonging to either party, it will promptly notify the other party.

                                     PART 4

                                 CONFIDENTIALITY

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 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


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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.

                                     PART 5

                                     SUPPLY

SUPPLY

5.1 UCAR CARBON will manufacture and supply to BPS, and BPS will purchase from
UCAR

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CARBON, all of BPS's requirements of the Materials during the Collaboration
Period; provided that BPS may acquire the Materials from sources other than UCAR
CARBON for electrically conductive fuel cell separator plates during that
period, but solely for benchmarking. The parties will negotiate in good faith
and use all commercially reasonable best efforts to conclude, within 90 days
after the Effective Date or such other date as may be agreed to by the parties
in writing (the "Supply Agreement Deadline Date"), an agreement governing the
supply of the Materials, both during and beyond the Collaboration Period, by
UCAR CARBON to BPS and, where required by BPS, to BPS's Affiliates and
licensees.

                                     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.

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

                                       13
<PAGE>   15
-5-

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) without cause, upon 90 days' written notice to the other to that effect,
        or

    (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

                                       14
<PAGE>   16

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) Section2.10 will cease to apply, and

        (ii) subject to the confidentiality obligations under Part 4, BPS will
        have, and UCAR CARBON will be deemed to have granted to BPS, a
        perpetual, irrevocable, worldwide, non-exclusive, royalty-free and
        paid-up right and license, sublicensable by BPS, to exploit the UCAR
        Arising IPR and, to the extent reasonably necessary, the UCAR Background
        IPR, to enable BPS to make, have made, use or sell the Materials, in
        connection with the development, manufacture, use or sale of
        electrically conductive fuel cell separator plates. The grant of the
        license under this Section7.2(a)(ii) will be without prejudice and in
        addition to the license granted underSection2.9 and includes the right
        by BPS to disclose UCAR CARBON's Confidential Information to BPS's
        sublicensees in connection with the production, use or sale of the
        Materials. UCAR CARBON will promptly, upon request, transfer to and
        provide BPS with all relevant technology, information, training and
        technical assistance as may be necessary for such purpose at a fee that
        reflects no more than the reasonable cost of effecting such technology
        transfer, training and technical assistance,

    (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) Section2.9 and Section2.10 will cease to apply, and

        (ii) subject to the confidentiality obligations under Part 4, BPS will
        provide UCAR CARBON with such irrevocable consents as may be necessary
        to permit UCAR CARBON to make, have made and sell the Materials,

    (c) if the supply agreement contemplated in Section5.1 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 Section6.4, mutatis mutandis,

    (d) Section7.2(a) and (b), Section2.8, Section2.9 and Section2.10 will be
    suspended if the agreement for the supply of the Materials by UCAR CARBON to
    BPS, as contemplated in Section5.1 has not been concluded on or before the
    Supply Agreement Deadline Date; provided that

        (i) subject to Section7.2(d)(ii), such provisions will reapply
        immediately following the execution of any such agreement at any time
        after such date, and

                                       15
<PAGE>   17
        (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, Section7.2(a) and Section7.2(b) will not apply if
    the Collaboration is terminated pursuant to Section7.1(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

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 Section8.4, Section8.5 and Section8.6, 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


                             16
<PAGE>   18
        Burnaby, British Columbia
        Canada V5J 5J9
        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

        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

                                       17
<PAGE>   19
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
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

                                       18
<PAGE>   20
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 first above written.

BALLARD POWER SYSTEMS INC.


By: /s/ Noordon S.K. Nanji
    ---------------------------------

Its: Vice President and General Counsel

UCAR CARBON COMPANY INC.


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

Its: Vice President


                                       19

<PAGE>   21
                                   Schedule A

                                Statement of Work

Project Plan For Materials and Target Products Development

BACKGROUND

The development of Materials for electrically conductive fuel cell separator
plates has taken several years and demonstrates that BPS and, where applicable,
one or more of its Affiliates (collectively "Ballard") and UCAR CARBON can work
together successfully. Because of the past success of the co-operative effort
and the technical aspects of the material we now need to enter into a closer
relationship and to focus our efforts on taking this product into high volume
production. To this end we have entered into a Collaboration Agreement and in
support of that agreement a detailed Development Plan has been constructed. This
plan has been developed in a series of meetings with UCAR CARBON, BPS and
Ballard Power Systems GmbH ("Ballard Germany"). This plan is intended to guide
the development and outline the resources needed to achieve our goals.

THE DEVELOPMENT PLAN

The work over the next few years has been divided into 5 programs. For each
program a "champion" has been selected at both Ballard and UCAR CARBON. Each of
these programs has interactions with the others and it will be a significant
challenge to co-ordinate the activities at the three work locations. Monthly
telephone meetings will be held by the team to discuss progress.

The plan will be guided by the Committee which will set goals and priorities.
The Committee will consist of a manager and one of the technical team leaders
from each of Ballard and UCAR CARBON. The Committee will meet twice annually to
evaluate progress and set or adjust the goals. The individual teams will be
responsible for detailed scheduling and planning.

Each of the programs discussed below (with the exception of the production
preparation study) has an iterative nature. Each program also has associated
technical risks. It is expected that each iteration will produce an improvement
than can be integrated with the results of other programs and used in the
continued development of the fuel cell. A second series of programs will then be
planned and executed to make further improvements. For this reason specific
deliverables have been identified for 1999 but not for future years. The
Committee should set these based on the progress made in 1999.

1.    Material [TEXT DELETED] for [TEXT DELETED]

Goal: To improve the ability of a Material to [TEXT DELETED].
      To improve the ability of the [TEXT DELETED]

Ballard Champion  David Brown
UCAR Champion     Jeff Gough
<PAGE>   22
Methodology:

The most important variable in the time it takes to [TEXT DELETED] the parts has
been shown to be the grade of Materials. Because the process time has a strong
effect on the process costs it is important to reduce it by identifying the
difference between grades of Materials that cause the effect. This study will be
undertaken to try to improve the Materials either by [TEXT DELETED], [TEXT
DELETED] or [TEXT DELETED], so that they can be [TEXT deleted] more easily. The
Materials inhibit the [TEXT DELETED] of [TEXT DELETED]. The reason for this
effect is unknown and significant [TEXT deleted] could be realized with a less
severe [TEXT DELETED]. For this work interaction with the [TEXT DELETED]
supplier is needed. UCAR CARBON will produce various test grades of Materials
and Ballard will perform [TEXT DELETED] studies on them. Leading Materials will
be qualified for use in Target Products in fuel cell stacks at Ballard.

Deliverables:

1.    UCAR CARBON will supply Ballard with different grades of Materials to
      enhance [TEXT DELETED] by 15 Jan 1999

2.    Ballard will finish evaluation by 12 march 1999

3.    Preliminary specification for new grade Materials with enhanced [TEXT
      DELETED] will be issued by the team before 10 May 1999. This specification
      will then be integrated in to other projects.

2.    Expanded Supply Base and Cost Reduction

Goal:  To reduce the cost of Materials by expanding the supply base and
reducing the chemical treatment costs.

Ballard Champion: Mike Sexsmith
UCAR Champion     Jeff Gough

Methodology:

The cost of the Materials depends on the [TEXT DELETED], [TEXT DELETED] and
[TEXT DELETED]. Each of these parameters interact with the final properties of
the Materials. New grades which meet the overall technical requirements must be
developed based on a broader supply base as well as less costly treatment
processes. As each of these variables will impact the chemistry of the
Materials, the new grades must be tested in fuel cells to determine if the [TEXT
DELETED] the fuel cells. UCAR CARBON will produce series of test grades of
Materials and screen them using leach tests. Ballard will then check the leading
Materials for performance in Target Products. From the initial matrix of grades
the most promising grades will integrated into the other programs. The aim will
be to qualify multiple grades from UCAR CARBON's existing sources.

Deliverables

1.    UCAR CARBON will supply Ballard with [TEXT DELETED] of Materials from
      [TEXT DELETED] and [TEXT DELETED] by Feb 18 1999.

2.    Ballard and UCAR CARBON will evaluate these grades of Materials Ex Situ by
      April 15, 1999.


                                       2
<PAGE>   23
3.    UCAR CARBON will deliver a new grade of Material [TEXT DELETED] and lower
      cost grades by July 5th 1999.

3.    Continuous Processing Study for [TEXT DELETED] of Target Products

Goal:  To develop a [TEXT DELETED] process to [TEXT DELETED] and [TEXT
DELETED] the Materials into Target Products.

Ballard Champion: Clemens Schwab
UCAR Champion     Jeff Gough

Methodology:

[TEXT DELETED] has been demonstrated to be an effective method for [TEXT
DELETED] electrically conductive fuel cell separator plates. It is now necessary
to study the process and optimize the process parameters to give the highest
rate with the best plate properties. The primary variables to study are [TEXT
DELETED], [TEXT DELETED], [TEXT DELETED] and [TEXT DELETED]. The primary output
parameters are [TEXT DELETED], [TEXT DELETED], [TEXT DELETED], [TEXT DELETED]
and quality of [TEXT DELETED]. A set of tools will be commissioned and used to
test a matrix of starting Materials. As new grades are developed in the other
studies they will be integrated into this program. This is the expected process
for Mk9O2 parts electrically conductive fuel cell separator plates.

Deliverables

1.    UCAR CARBON will deliver first [TEXT DELETED] samples of the [TEXT
      DELETED] Material to Ballard Germany by Nov 30 1998. Second [TEXT DELETED]
      of [TEXT DELETED] to be delivered by the end of March 1999.

2.    Ballard will demonstrate the feasibility of [TEXT DELETED] and [TEXT
      DELETED] the Materials [TEXT DELETED] to [TEXT DELETED] Target Products by
      April 12 1999.

4.    Advanced Material Development

Goal:  To develop a [TEXT DELETED] Material based on expanded graphite which
can be formed [TEXT DELETED] into a Target Product.

Ballard Champion: Andreas Gaulhofer
UCAR Champion:    Michael Wardrupp

Methodology:

A [TEXT DELETED] Material grade has been demonstrated to meet many of our
requirements. Further work is needed to define the actual composition of the new
Material. As the composition is refined, [TEXT DELETED] trials will be carried
out to determine the processing characteristics. Initially this will be done
with [TEXT DELETED] and when the Material is more developed [TEXT DELETED] will
be made to [TEXT DELETED] the Material into Target Products. As work progresses
in developing lower cost grades of Materials and [TEXT DELETED], these concepts
will be integrated


                                       3
<PAGE>   24
into this program.

1.    UCAR CARBON will deliver to Ballard 4 [TEXT DELETED] of [TEXT DELETED]
      Materials in 1999.

2.    UCAR CARBON will demonstrate a [TEXT DELETED] at a laboratory scale on
      July 30 1999.

3.    Ballard will examine each set of [TEXT DELETED] Material and report on its
      suitability for use in Target Products within 2 months after the delivery
      date.

4.    UCAR CARBON and Ballard will issue a preliminary specification for the
      [TEXT DELETED] to be incorporated in the Material on July 30 1999.

5.    Target Product Production Preparation Study

Goal: To determine what infrastructure will be needed for high volume production
of Target Products. The process logistics and cost structure will be determined
based on the different technology options.

Ballard Champion: David Brown (Peter Hedrich)
UCAR Champion:    Walter Burroughs

Methodology:

As the production volumes of Target Products begin to rise, the [TEXT deleted]
and [TEXT DELETED] will no longer meet our needs. The study must identify all of
the [TEXT DELETED] ([TEXT DELETED], [TEXT DELETED], [TEXT DELETED] etc.) needed
to build such Target Product production line and to determine what the most
[TEXT DELETED] is for the [TEXT DELETED] of work. The study should form the
basis of an [TEXT DELETED] for the [TEXT DELETED] Ballard commercial production
line.

Deliverables

1.    Ballard and UCAR CARBON will issue preliminary [TEXT DELETED] of an [TEXT
      DELETED], which define the basic process from [TEXT DELETED] to Materials
      to Target Products by June 30 1999.

2.    Ballard and UCAR CARBON to define milestones and critical dates by Dec
      1999 for implementation activities to meet commercial production goals.

3.    Ballard and UCAR CARBON to define the possible [TEXT DELETED] of [TEXT
      DELETED] and [TEXT DELETED] for all [TEXT DELETED] and [TEXT DELETED]
      needed for the [TEXT DELETED] by [TEXT DELETED].


                                       4
<PAGE>   25
                                   Schedule B

                                List of Materials

<TABLE>
<CAPTION>
Grade                 Date Sent       Description
<S>                   <C>             <C>
[TEXT DELETED]         9/6/96         Qualified for use in [TEXT DELETED]
[TEXT DELETED]         1/31/97        [TEXT DELETED]
[TEXT DELETED]         10/1/98        Qualified for use in [TEXT DELETED]
[TEXT DELETED]         8/26/98        [TEXT DELETED]
[TEXT DELETED]         3/17/97        [TEXT DELETED]
[TEXT DELETED]         2/3/99         [TEXT DELETED] with [TEXT DELETED]
[TEXT DELETED]         10/3/97        [TEXT DELETED]
[TEXT DELETED]         10/3/97        [TEXT DELETED]
[TEXT DELETED]         4/23/98        [TEXT DELETED]
[TEXT DELETED]         12/16/98       [TEXT DELETED] materials
[TEXT DELETED]         12/16/98       [TEXT DELETED] materials
[TEXT DELETED]         12/16/98       [TEXT DELETED] materials
[TEXT DELETED]         12/16/98       [TEXT DELETED] materials
[TEXT DELETED]         12/16/98       [TEXT DELETED] materials
[TEXT DELETED]         12/16/98       [TEXT DELETED] materials
[TEXT DELETED]         2/3/99         [TEXT DELETED] graphite
[TEXT DELETED]         2/3/99         [TEXT DELETED] graphite
[TEXT DELETED]         2/3/99         [TEXT DELETED] graphite
[TEXT DELETED]         2/3/99         [TEXT DELETED] graphite with [TEXT DELETED]
</TABLE>
<PAGE>   26
                                   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 06817 (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 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
<PAGE>   27
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

      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
<PAGE>   28
governed by substantive laws of the state of Connecticut, U.S.A., without
recourse to its conflict of laws, rules or principles.

      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  21 Jun 96                           Date  July 2, 1996
      ---------                                 ------------
<PAGE>   29
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
PART 1 DEFINITIONS AND INTERPRETATIONS..................................     2

DEFINITIONS.............................................................     2

INTERPRETATION..........................................................     5

SCHEDULES...............................................................     6

PART 2 COLLABORATION....................................................     6

COLLABORATION...........................................................     6

LIMITED PURPOSE.........................................................     7

COLLABORATION TERM......................................................     7

STEERING COMMITTEE......................................................     7

DUTIES OF COMMITTEE.....................................................     7

WORK AND COSTS..........................................................     8

PROJECT MANAGER.........................................................     8

PRODUCT DEVELOPMENT LEAD TIME...........................................     8

LICENSE BY UCAR.........................................................     9

SUBLICENSE BY BPS.......................................................     9

PART 3 INTELLECTUAL PROPERTY............................................    10

DISCLOSURE OF IPR FOR THE COLLABORATION.................................    10

BPS'S LICENSE TO UCAR CARBON FOR COLLABORATION..........................    10

UCAR CARBON'S LICENSE TO BPS FOR COLLABORATION..........................    10

OWNERSHIP OF ARISING IPR................................................    10

PATENTS.................................................................    10

CONSENT TO USE OF CONFIDENTIAL INFORMATION..............................    11

INFRINGEMENT CLAIM......................................................    11

PART 4  CONFIDENTIALITY.................................................    11

CONFIDENTIALITY OBLIGATIONS.............................................    11

EXCEPTIONS FOR CONFIDENTIALITY..........................................    11

EMPLOYMENT RELATIONS....................................................    12

REASONABLE RESTRICTION..................................................    12

NON-DISCLOSURE OF COLLABORATION.........................................    12
</TABLE>


                                      -i-
<PAGE>   30
                               TABLE OF CONTENTS
                                   (Continued)

<TABLE>
                                                                           Page
                                                                          -----
<S>                                                                      <C>
MUTUAL SECRECY AGREEMENT................................................    12

ADDITIONAL CONFIDENTIALITY OBLIGATION OF UCAR CARBON....................    13

PART 5 SUPPLY...........................................................    13

SUPPLY..................................................................    13

PART 6  DISPUTE RESOLUTION..............................................    13

INITIATION OF PROCESS...................................................    13

REFERRAL TO COMMITTEE...................................................    13

REFERRAL TO CHIEF EXECUTIVE OFFICERS....................................    13

SUBMISSION TO ARBITRATION...............................................    14

ACCEPTANCE AND IMPLEMENTATION...........................................    14

PLACE OF ARBITRATION....................................................    14

LEGAL PROCEEDINGS.......................................................    14

EXCLUSIONS..............................................................    14

PART 7  TERMINATION.....................................................    14

TERMINATION.............................................................    14

RIGHTS AND OBLIGATIONS OF THE PARTIES AFTER TERMINATION.................    15

RETURN OF CONFIDENTIAL INFORMATION......................................    16

PART 8  GENERAL.........................................................    16

MODIFICATIONS, APPROVALS AND CONSENTS...................................    16

FURTHER ASSURANCES......................................................    17

ENTIRE AGREEMENT........................................................    17

NOTICES.................................................................    17

DEEMED RECEIPT..........................................................    18

CHANGE OF ADDRESS.......................................................    18

ENUREMENT...............................................................    18

APPLICABLE LAW..........................................................    18

ATTORNMENT..............................................................    18

FORCE MAJEURE...........................................................    18

SEVERABILITY............................................................    19

COUNTERPARTS............................................................    19
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