EXHIBIT 99.3
  
  BALLARD
POWER SYSTEMS INC.
  ANNUAL
INFORMATION FORM
  MARCH
15, 2010
  
  
  
  
  
  
  
  
  
  
  
  
  
  
   
  TABLE
OF CONTENTS
   CORPORATE
      STRUCTURE
                    Name,
      Address and Incorporation
                    Intercorporate
      Relationships
                    
                    OUR
      BUSINESS
                    Recent
      History
                    Siemens
      VDO Transaction
                    AFCC
      Transaction
                    Superior
      Plus Transaction
                    Ebara
      Ballard Corporation Transaction
                    Sale
      and Lease-back of Head Office
                    Dantherm
      Power Transaction
                    Strategy
                    Revenues
      from Market Segments
                    Our
      Markets and Products
                    Product
      Overview
                    Fuel
      Cell Products and Servicing
                    Motive
      Power
                    Material
      Handling
                    Heavy-Duty/Buses
                    Stationary
      Power
                    Back-up
      Power and Supplemental Power
                    Distributed
      Generation
                    Contract
      Technical Services and Manufacturing Services
                    Material
      Products
                    Impact
      of Regulations and Public Policy
                    United
      States
                    Other
      Jurisdictions
                    Research
      and Product Development
                    Intellectual
      Property
                    Manufacturing
                    Facilities
                    Human
      Resources
                    Competition
                    Fuel
      Cell Products and Servicing
                    Motive
      Power
                    Stationary
      Power
                    Material
      Products
                    Friction
      Products
                    Fuel
      Cell Products
                    SHARE
      CAPITAL AND MARKET FOR SECURITIES
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   DIVIDEND
      RECORD AND POLICY
                    
                    DIRECTORS
      AND OFFICERS
                    Board
      of Directors
                    Corporate
      Governance
                    Board
      Composition
                    Share
      Ownership Guidelines
                    Roles
      and Responsibilities
                    Board
      Orientation and Education
                    Shareholder
      Feedback and Communication
                    Board
      and Director Performance Evaluations
                    Compliance
      in Canada and the United States
                    Board
      Committees
                    Audit
      Committee
                    Management
      Development, Nominating & Compensation Committee
                    Corporate
      Governance Committee
                    Executive
      Officers
                    Shareholdings
      of Directors and Senior Officers
                    
                    TRANSFER
      AGENT AND REGISTRAR
                    
                    MATERIAL
      CONTRACTS
                    Detailed
      Description of the AFCC Transaction and Associated Material
      Contracts
                    Transfer
      of Automotive Fuel Cell Research and Development Assets
                    Employee
      Transfers
                    Termination
      of Automotive Alliance
                    Amendment
      of Articles
                    Arrangements
      with respect to AFCC
                    Treatment
      of Intellectual Property
                    Service
      Arrangements with AFCC
                    Detailed
      Description of the Superior Plus Transaction and Associated Material
      Contracts
                    Stock
      Exchange Listings
                    Security
      Certificates
                    Indemnification
      Arrangements
                    
                    RISK
      FACTORS
                    
                    ADDITIONAL
      INFORMATION
                    
                    APPENDIX
      "A" Board of Directors Mandate
                    
                    APPENDIX
      "B" Director Terms of Reference
                    
                    APPENDIX
      "C" Audit Committee Mandate
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   APPENDIX
      "D" Management Development, Nominating & Compensation Committee
      Mandate
                      
                      APPENDIX
      "E" Corporate Governance Committee Mandate
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    - iii
-
 
 This Annual
Information Form and the documents incorporated by reference herein contain
forward-looking statements that are based on the beliefs of management and
reflect our current expectations as contemplated under the safe harbor
provisions of Section 21E of the United States Securities Exchange Act of 1934,
as amended.  When used in this Annual Information Form, the words
"estimate", "project", "believe", "anticipate", "intend", "expect", "plan",
"predict", "may", "should", "will", the negatives of these words or other
variations thereof and comparable terminology are intended to identify
forward-looking statements.  Such statements reflect our current views
with respect to future events based on currently available information and are
subject to risks and uncertainties that could cause actual results to differ
materially from those contemplated in those forward-looking statements,
including, without limitation the following risks and uncertainties which are
discussed in the section of this Annual Information Form entitled "Risk
Factors": we may not be able to achieve commercialization of our products on the
timetable we anticipate, or at all; we expect our cash reserves will be reduced
due to future operating losses, and we cannot provide certainty as to how long
our cash reserves will last or that we will be able to access additional capital
when necessary; we may not be able to successfully execute our business plan;
potential fluctuations in our financial and business results makes forecasting
difficult and may restrict our access to funding for our commercialization plan;
exchange rate fluctuations are beyond our control and may have a material
adverse effect on our business, operating results, financial condition and
profitability; commodity price fluctuations are beyond our control and may have
a material adverse effect on our business, operating results, financial
condition and profitability; a mass market for our products may never develop or
may take longer to develop than we anticipate; we have limited experience
manufacturing fuel cell products on a commercial basis; we are dependent on
third party suppliers for the supply of key materials and components for our
products; we are dependent upon Original Equipment Manufacturers and System
Integrators to purchase certain of our products; global economic conditions are
beyond our control and may have an adverse impact on our business or our key
suppliers and/or customers; public policy and regulatory changes could hurt the
market for our products; we depend on our intellectual property, and our failure
to protect that intellectual property could adversely affect our future growth
and success; we may be involved in intellectual property litigation that causes
us to incur significant expenses or prevents us from selling our products; we
currently face and will continue to face significant competition; we could lose
or fail to attract the personnel necessary to run our business; we could be
liable for environmental damages resulting from our research, development or
manufacturing operations; our products use flammable fuels, which could subject
our business to product liability claims; and the other risks and uncertainties
discussed elsewhere in this Annual Information Form.
  The
forward-looking statements contained in this Annual Information Form speak only
as of the date of this Annual Information Form.  Except as required by
applicable legislation, Ballard does not undertake any obligation to release
publicly any revisions to these forward-looking statements to reflect events or
circumstances after the date of this Annual Information Form, including the
occurrence of unanticipated events.
  
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 CORPORATE
STRUCTURE
  Name,
      Address and Incorporation
  Ballard
was incorporated on November 12, 2008 under the Canada Business Corporations
Act, under the name "7076991 Canada Inc.".  Ballard changed its
name to "Ballard Power Systems Inc." on December 31, 2008.  Ballard's
head office is located at 9000 Glenlyon Parkway, Burnaby, British Columbia,
Canada V5J 5J8 and its registered office is located at Suite 1700, 666 Burrard
Street, Vancouver, British Columbia, Canada V6C 2X8.
  In this
Annual Information Form, references to "Corporation", "Ballard", "BPS", "we",
"us" and "our" refers to Ballard Power Systems Inc. and, as applicable, its
subsidiaries.  All dollar amounts are in United States dollars unless
otherwise indicated.
  Intercorporate
      Relationships
  We have
four principal subsidiaries and affiliates: Ballard Material Products Inc., a
Delaware corporation that develops and manufactures carbon fiber products for
use in the automotive and fuel cell markets; Dantherm Power, a Denmark-based
corporation jointly owned with Danfoss A/S and Dantherm A/S that develops clean
energy backup power systems across Europe; AFCC Automotive Fuel Cell Cooperation
Corp. ("AFCC"), a
British Columbia corporation that develops fuel cell products for the automotive
fuel cell market; and BDF IP Holdings Ltd. ("IP Holdings"), a Canadian
corporation that holds intellectual property assets.
  The
following chart shows these principal subsidiaries and affiliates, their
respective jurisdictions of incorporation and our percentage of share ownership
in each of them, all as of March 15, 2010:
  
 
 (1)
              The
      Corporation holds a 45.1% interest in Dantherm Power, with the remaining
      54.9% held by Dantherm A/S and Danfoss A/S.  The Corporation
      maintains a controlling interest through its control of the Dantherm Power
      board of directors.
 
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  (2)
              The
      Corporation holds a 19.9% minority interest in AFCC with 50.1% held by
      Daimler AG and 30% held by Ford Motor Company.  Ballard’s
      minority interest in AFCC is the subject of a forward-sale arrangement
      with Ford Motor Company (see the "Detailed Description of the AFCC
      Transaction - Arrangements with respect to AFCC" section of this Annual
      Information Form).
  (3)
              The
      Corporation holds all of the non-voting, participating shares of IP
      Holdings and 34% of the voting, non-participating shares of IP Holdings,
      with each of Daimler AG and Ford Motor Company holding 33% of the voting,
      non-participating shares.
 
  OUR BUSINESS
  At
Ballard, we are building a clean energy growth company.  We are
recognized as a world leader in proton exchange membrane ("PEM") fuel cell development
and commercialization.  Our principal business is the design,
development, manufacture, sale and service of fuel cell products for a variety
of applications, focusing on motive power (material handling and
heavy-duty/buses) and stationary power (back-up and supplemental power and
distributed generation) markets.  A fuel cell is an environmentally
clean electrochemical device that combines hydrogen fuel with oxygen (from the
air) to produce electricity.  The hydrogen fuel can be obtained from
natural gas, kerosene, methanol or other hydrocarbon fuels, or from water
through electrolysis.  As long as fuel is supplied, the fuel cell
produces electricity efficiently and continuously without combustion, with water
and heat as the main by-products when hydrogen is used as the fuel
source.  Ballard® fuel
cell products feature high fuel efficiency, low operating temperature, low noise
and vibration, compact size, quick response to changes in electrical demand,
modular design and environmental cleanliness.
  The
original predecessor to the Corporation was founded in 1979 under the name
"Ballard Research Inc." to conduct research and development on high-energy
lithium batteries.  In the course of investigating environmentally
clean energy systems with commercial potential, we began to develop fuel cells
and have been developing fuel cell products since 1983.
  As a
result of our successes in developing fuel cells, we entered into a number of
strategic alliances to pursue, develop and commercialize fuel cells for specific
markets with industry leaders in those markets.  This included an
alliance to develop and commercialize automotive fuel cells with Daimler AG
("Daimler") and Ford
Motor Company ("Ford"),
and an alliance to develop and commercialize residential cogeneration systems
with Ebara Corporation ("Ebara").
  Recent
      History
  Over the
past three years, we have been focusing on our core fuel cell business and on
markets with near-term commercial prospects. As a result, we sold our automotive
fuel cell systems operations to DaimlerChrysler AG and Ford on August 31,
2005.  We subsequently sold our electric drive operations to Siemens
VDO Automotive Corporation ("Siemens VDO") on February 15,
2007.  Finally, we completed our exit
  
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 from the
automotive business by selling our automotive fuel cell research and development
assets to AFCC on January 31, 2008.  Following completion of these
dispositions, we identified a way to extract value from Ballard’s tax attributes
through a restructuring transaction with Superior Plus Income Fund ("Superior Plus"), which was
completed on December 31, 2008.  On December 21, 2009, we closed
an agreement with a financial institution to monetize our rights under the
purchase agreement with Ford relating to our 19.9% equity interest in AFCC for
initial net proceeds of approximately $34 million and a further contingent
payment of $7.5 million due on or before January 31, 2013.  On January
18, 2010, we acquired a controlling interest in Dantherm Power, a Denmark-based
corporation, which develops clean energy backup power through utilization of our
hydrogen fuel cell technology.
  Siemens
VDO Transaction
  We sold
our electric drive operations, based in Dearborn, Michigan, to Siemens VDO as
the electric drive operations were not core to our fuel cell stack strategy and
had limited revenue potential and high cash consumption in the
near-term.  The sale was completed in February
2007.  Proceeds from the sale were approximately $4 million, before
purchase price adjustments.  As a result of the transaction, we
recorded a net loss of approximately $108 million, which consisted primarily of
a non-cash write-down of goodwill.  The sale reduced Ballard’s
operating cash consumption by approximately $10 million per
year.  Operating cash consumption is a non-GAAP
measure.  Please see our management’s discussion and analysis for a
description of this measure and a reconciliation of this measure to
GAAP.
  AFCC
Transaction
  As a
result of an extensive strategic review process, consistent with our focus on
our core fuel cell business and commitment to continue to improve our financial
performance in the near and medium term by focusing on near-term commercial fuel
cell markets, we sold certain of our automotive fuel cell research and
development assets to AFCC in January 2008 (the "AFCC
Transaction").
  The
purpose of the AFCC Transaction was to decrease our investment in automotive
fuel cell research and development due to its high cost, uncertainties
surrounding government mandates relating to the adoption and deployment of
automotive fuel cell powered vehicles, the lengthening timeline to automotive
fuel cell commercialization, and the negative impact of these factors on our
production volumes and revenues.  The AFCC Transaction allowed us to
focus our efforts on the development and commercialization of fuel cells for
non-automotive applications, such as material handling, back-up power and
supplemental power while limiting our fuel cell products in the automotive
market to buses.  In addition, our continuing involvement with
automotive products and services for AFCC is on a contract basis under which we
are paid on a profitable basis.
  
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 Superior
Plus Transaction
  Our Audit
Committee regularly reviews Ballard’s tax position.  As we did not
expect to be in a position to make full use of our tax attributes for the
foreseeable future, in 2005 management reviewed opportunities to extract value
from these tax attributes.  Following the AFCC Transaction, Ballard
revisited the issue of its tax attributes and engaged financial advisors to
assist in identifying and negotiating a transaction.  This process led
to the execution of an agreement on October 30, 2008 with Superior Plus, under
which Ballard's old corporate entity agreed to transfer its entire business and
operations, including all assets, liabilities, directors, management and
employees, but excluding its tax attributes, to the Corporation, and
subsequently allowed Superior Plus to use Ballard’s old corporate entity as a
vehicle to complete its conversion from an income trust to a corporation (the
"Superior Plus
Transaction").  Under the Superior Plus Transaction,
shareholders exchanged their common shares in the capital of Ballard’s old
corporate entity for common shares in the capital of the Corporation on a
one-for-one basis, and Superior Plus obtained 100% of the common shares in the
capital of Ballard’s old corporate entity.  Since the completion of
the Superior Plus Transaction, Ballard has continued to carry on its business
operations as a public entity with all of the assets (including its intellectual
property rights) as it had prior to the Superior Plus Transaction.
  We
obtained several benefits from the Superior Plus Transaction, including net cash
proceeds of $33 million and the creation of a new Canadian tax basis, which
Ballard may apply in sheltering future taxable income.
  Further
details of the Superior Plus Transaction are provided in the "Detailed
Description of the Superior Plus Transaction" section of this Annual Information
Form.
  Ebara
Ballard Corporation Transaction
  In May
2009, we decided to discontinue operations of Ebara Ballard Corporation, our
joint venture company with Ebara, as it became evident that the timeframe to
commercialization for the residential cogeneration market in Japan was longer
than anticipated, and due to an increasing investment requirement for continued
system development work.  Ebara Ballard was dissolved in October
2009.  As a result of the transaction, we recorded a one-time non-cash
gain of approximately $10.8 million (including $2.4 million of equity losses
recorded in 2009 prior to the dissolution).
  Sale
and Lease-back of Head Office
  In
December 2009, we entered into a sale-and-leaseback agreement pursuant to which
Ballard will sell its head office building located in Burnaby, British Columbia
in return for net cash proceeds of approximately $20 million.  We also
entered into an
  
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 initial
fifteen-year lease agreement for the same property.  The transaction
closed on March 9, 2010.
  Dantherm
Power Transaction
  On
January 18, 2010, we acquired a controlling interest in Denmark-based Dantherm
Power, partnering with co-investors Danfoss A/S and Dantherm A/S.  We
are investing $6 million in Dantherm Power in two tranches between 2010 and
2012.  We will also provide knowledge and intellectual property
related to our fuel cell technology.  In addition to its cash
investment, Dantherm A/S will continue to provide operational support and
collaborative sales and marketing activities through its worldwide sales
organization.  Danfoss A/S will invest cash, proprietary technology,
expertise, as well as operational and commercial assistance through its network
of 93 sites in 25 countries.  Executives from each of Danfoss A/S,
Dantherm A/S and Ballard formed a new board of directors for Dantherm
Power.
  Dantherm
Power develops clean energy backup power systems, utilizing Ballard's hydrogen
fuel cell technology, for telecom equipment suppliers, including Motorola and
Ericsson.  The joint investment is expected to result in accelerated
development of fuel cell backup power applications across Europe.
  Strategy
  We are
focused on building a clean energy fuel cell solutions company.  We
provide our customers the positive economic and environmental benefits unique to
fuel cell power.  We plan to build value for our shareholders by
developing, manufacturing, selling and servicing industry-leading fuel cell
products to meet the needs of our customers in select target
markets.  We are focused on our core competencies of PEM fuel cell
design, development, manufacture, sales and service.
  Over the
past three years, we have focused our efforts on leveraging the inherent
reliability and durability derived in our legacy automotive technology into
non-automotive markets where demand is near term.  Our initial target
markets include: motive power (material handling and buses) and the stationary
power (back-up power, supplemental power and distributed
generation).  We continue to support and supply fuel cells and
technology to AFCC, and Daimler, and Ford on a profitable
basis.  Today, varying stages of commercialization activities are
progressing in each of these markets in North America, Europe and Asia and we
are actively considering other key non-automotive markets for which our products
are well suited.  We believe these markets represent a large global
opportunity for fuel cell products.  We are also confident that there
are opportunities for our products in additional geographic markets as well as
product extension opportunities in different applications.
  
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 Revenues
from Market Segments
  In 2009,
we operated in three market segments:
  (a)
              Fuel
      Cell Products and Servicing: fuel cell products and services for motive
      power (material handling and heavy-duty/buses markets) and stationary
      power (back-up power, supplemental power and distributed generation
      markets);
  (b)
              Contract
      Automotive: contract technical and manufacturing services primarily for
      Daimler, Ford and AFCC; and
  (c)
              Material
      Products: carbon fiber products primarily for automotive transmissions and
      gas diffusion layers ("GDLs") for fuel
      cells.
  
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 The following
chart shows the percentage of total revenues derived from each segment, and the
portion of revenues from each segment which arises from sales to investees and
sales of products and services to other customers, for the years 2009 and
2008:
  2009
              2008Revenues
      from Fuel Cell Products and ServicingPercentage
      of total revenues
              51.7%
              46.4%Portion
      representing sales to investees(1)
              0.8%
              8.1%Portion
      representing sales to customers other than investees
              50.9%
              38.3%Revenues
      from Contract AutomotivePercentage
      of total revenues
              19.6%
              32.2%Portion
      representing sales to investees(2)
              13.4%
              15.7%Portion
      representing sales to customers other than investees
              6.2%
              16.6%Revenues
      from Material ProductsPercentage
      of total revenues
              28.7%
              21.3%Portion
      representing sales to investees
              Nil
              NilPortion
      representing sales to customers other than investees
              28.7%
              21.3%
 
 As a
result of completing the AFCC Transaction, we have been able to re-vector our
business and establish a sharp focus on key commercial growth opportunities with
near-term commercial prospects in our core fuel cell markets.  We also
bolstered our already strong balance sheet with $33 million in non-dilutive
financing proceeds from the Superior Plus Transaction; approximately $34 million
from monetizing our equity interest in AFCC; and approximately $20 million from
the sale-and-leaseback of our head office building.  This increase in
cash reserves is expected to allow Ballard to execute its growth plan without
any need for public market financing for the foreseeable future.  In
addition, we continue to build value for our shareholders by accelerating fuel
cell adoption as evidenced by our supply agreements with Plug Power Inc. ("Plug Power") (and its
customers, Central Grocers, Inc., Wal-Mart, Nestle, Cisco
  (1) In
relation to Power Generation revenues, “investees” means Ebara Ballard
Corporation.
 (2) In
relation to Automotive revenues, “investees” means AFCC.
 
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 and
others), BC Transit, FirstEnergy Corp., Baxi Innotech GmbH, ISE Corporation,
Daimler AG, IdaTech LLC, Heliocentris Fuel Cells AG and FutureE Fuel Cell
Solutions GmbH.
  Our
      Markets and Products
 
 Product
Overview
  Ballard's
product offering provides for a cost effective and flexible set of fuel cell
power solutions.  Ballard provided product in three distinct product
classes:
  (1)
              Fuel
      cell stacks:  Ballard provides fuel cells to OEM customers and
      system integrators (such as Plug Power) that use the stacks to produce
      power solutions.  As the stack provider, Ballard is the power
      inside the system.
  (2)
              Fuel
      cell modules:  Ballard builds the stacks into self-contained
      fuel cell modules that are plug-and-play into a larger
      system.  As a module provider, we make it easier for systems
      companies (such as ISE Corporation) to create fuel cell systems (such as a
      fuel cell bus power train).
  (3)
              Fuel
      cell solutions:  Ballard builds full systems that are designed
      to solve certain energy needs of our customer.  As a solution
      provider Ballard builds up the stacks and modules into full systems that
      bring value to our customers.  Ballard does this directly in
      distributed power (e.g., First Energy 1 megawatt system), and through
      Dantherm Power (e.g. Motorola telecommunications
  systems).
  We also
design, develop, manufacture, sell and service carbon fiber materials that can
be used in a variety of fuel cell and non-fuel cell applications.
  The
timing of commercialization of our products will largely be influenced by the
market rollout plans of our customers.  The following table lists the
key fuel cell and non-fuel cell products we currently produce, have under
development or are testing.
  
  Motive
      Power Product Family: FCvelocityTMFuel
      Cell ProductsProduct Name
              Application
              StatusFCvelocityTM-9SSL
              Material
      handling
              Sales
      to Original Equipment Manufacturers ("OEMs") and system
      integratorsFCvelocityTM-1020ACS
              Material
      handling
              Sales
      to OEMs and system integrators
  
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  Motive
      Power Product Family: FCvelocityTMFuel
      Cell ProductsProduct Name
                Application
                StatusFCvelocityTM-HD6
                Buses
                Sales
      to OEMs and system integrators
  Stationary
      Power Product Family: FCgenTMFuel
      Cell ProductsProduct Name
              Application
              StatusFCgenTM-9SSL
              Back-up
      power & supplemental power
              In
      development and testingFCgenTM-1020ACS
              Back-up
      power & supplemental power
              Sales
      to OEMs and system integratorsFCgenTM-1030
              Residential
      heat and power
              Primarily
      sales under government sponsored programsFCgenTM-1300
              Back-up
      power & supplemental power
                Distributed
      generation
              In
      pilot production
 
  Product Family: Material
      ProductsProduct Name
              Application
              StatusAvCarbTM
      gas diffusion layer fuel cell products
              Fuel
      cells
              Sales
      to fuel cell developersCarbon
      friction materials
              Mainly
      automobile automatic transmissions
              Sales
      to OEM's or their suppliers.
 
  Fuel
Cell Products and Servicing
  Motive
Power
 
 Material
Handling
 
 The material
handling market includes target industrial vehicles such as forklifts, automated
guided vehicles ("AGVs")
and ground support equipment.  Our initial focus is on Class 1, Class
2 and Class 3 battery-powered forklifts and AGVs. We believe fuel cell powered
forklift trucks can offer significant productivity gains in
high-throughput,
  
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 multi-shift
distribution centre and warehouse operations when compared to incumbent battery
technology.  Our primary product for the material handling market is
the FCvelocityTM-9SSL, which is applicable to Class 1, Class 2 and Class 3
industrial forklift truck solutions in the North American market.  We
are also developing industrial forklift solutions based on the
FCvelocityTM-1020ACS, our second-generation air-cooled fuel cell product, and are
performing evaluation trials with key end-users.
  Our
principle customer in North America is Plug Power, a specialized system
integrator working to achieve early penetration into the market by deploying its
GenDriveTMbattery pack
replacement fuel cell systems.  Plug Power has initiated or completed
field trials and commercial deliveries to a number of end-users including:
Wal-Mart Stores, Inc.; Bridgestone Firestone North America Tire, LLC; Sysco
Corporation; H.E. Butt Grocery Company; Whole Foods; Coca-Cola; Genco; Wegmans;
Nestle Waters; and Nissan North America, Inc.  Some of Plug Power’s
customers have completed the first phase of deployment of the technology and are
now moving to larger trials and commercial orders, for which we are supplying
our FCvelocityTM-9SSL fuel cell product.  For example, 220 Plug Power
GenDrive systems are deployed at a new "greenfield fuel cell only" distribution
center operated by Central Grocers, Inc. in Joliet, Illinois.
  Plug
Power has, until now, offered commercial GenDrive systems using Ballard fuel
cells for Class 1 counter balance lift trucks and for Class 3 pallet
trucks.  In 2010, Plug Power will also be selling a new GenDrive
system designed for Class 2 reach trucks, using Ballard fuel
cells.  Availability of a system for Class 2 forklift trucks will fill
out Plug Power's product portfolio and should more readily enable full facility
conversions, which will help advance market penetration.
  Plug
Power continues to make progress deploying the GenDrive solution at key end user
locations with funding from the Department of Energy.  Class 1
GenDrive units have been installed at Anheuser Busch and FedEx.  Sysco
(Houston, TX) has installed Class 3 GenDrive units in a new "greenfield"
warehouse facility and is planning deployment of Class 2 GenDrive systems later
in 2010.  In addition, Plug Power has announced orders from Wegmans,
Whole Foods and Coca-Cola for deployment in 2010.
  In order
to support market growth, we will continue to pursue cost reduction of our
FCvelocityTM-9SSL fuel cell product. In 2008, we reduced the cost of this fuel
cell product by 36% with the introduction of a new product
version.  Since 2008, we have been developing a high-performance,
low-cost membrane electrode assembly ("MEA") that we anticipate will
be integrated into the FCvelocityTM-9SSL fuel cell product for sales starting in
2010, helping to achieve further cost reduction of at least 20% from 2008
levels.
  Heavy-Duty/Buses
  
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 The
addressable market for fuel cell buses today is comprised of transit buses,
which offer several advantages over automobiles for the adoption of fuel cell
technology. Buses rely on centralized fuelling depots that simplify the hydrogen
infrastructure requirements. Transit buses are government-subsidized, enabling
the purchase of pre-commercial fleets. In addition, their design volume and
drive cycle requirements are less demanding.
  On August
3, 2007, BC Transit announced the contract award for the supply of up to 20 fuel
cell hybrid buses.  The consortium of New Flyer Industries (coach manufacturer), ISE
Corporation (hybrid drive
integrator) and Ballard (fuel cell module supplier)
built the buses.  On October 3, 2009, the first bus in BC Transit's
fleet of 20 hydrogen fuel cell buses was introduced.  Starting in
January 2010, all 20 buses were commissioned at New Flyer and sent to Victoria,
British Columbia for acceptance tests by BC Transit.  These buses
operated in revenue service in Whistler, British Columbia during the 2010
Olympic Winter Games.
  On
November 13, 2007, the City of London, England announced the contract award for
the supply of five fuel cell hybrid buses to be delivered in 2009. These buses
will begin revenue service in London in 2010. The consortium of Wrights Bus Ltd.
(coach manufacturer),
ISE Corporation (hybrid drive
integrator) and Ballard (fuel cell module supplier)
will build the buses.  Two 75kW FCvelocityTM-HD6 modules were shipped
to ISE Corporation in September and October 2008, respectively.  The
first London bus started integration in late 2008, and started commissioning and
testing in February 2009.
  On
January 11, 2010, Ballard received a sales order for five FCvelocityTM-HD6
modules from Advanced Public Transportation Systems bv ("APTS"), a specialty bus OEM in
The Netherlands, part of the VDL Group.  The 150–kilowatt power
modules will be installed and integrated by Vossloh-Kiepe with hybrid electric
drive systems in 18-metre (60 foot) articulated Phileas buses manufactured by
APTS.  Phileas is a new concept for passenger transport on high
frequency dedicated bus lanes.
  All the
power modules will be shipped to APTS by the second quarter of 2010 and the
first APTS Phileas bus incorporating a Ballard power module will be produced
this year.  Two Phileas buses powered by Ballard fuel cell modules
will be operating in Cologne, Germany and two will be operating in
Amsterdam.  APTS currently has 70 Phileas buses in operation
worldwide.
  We will
continue to seek new opportunities in other markets including electrified light
rail transit, yard-switching locomotives and marine auxiliary power, and
continue to provide service support for our existing fifth-generation bus
fleets, utilizing P5 fuel cell products.
  
 
 - 12
-
  Stationary
Power
  Back-up
Power and Supplemental Power
 
 Our focus in
the back-up power and supplemental power markets is on the telecommunications
industry, which is currently dominated by batteries and diesel generators. The
back-up power market is characterized by infrequent power demand, where outages
typically occur monthly or less frequently and last less than eight hours;
whereas the supplemental power market is characterized by often daily outages
lasting 4-8 hours or more. With increasing demand for more reliable
communications networks and longer duration back-up time, we believe fuel cell
products offer significant operating cost savings to the end user. In some
geographic regions such as the European Union and the United States, regulatory
pressure on telecommunications service providers for infrastructure back-up time
of eight hours or longer is, we believe, creating greater interest in fuel cells
as a preferred back-up power solution.  The FCgenTM-1020ACS fuel cell
product is our primary product to support the early commercialization of fuel
cell products in the back-up power market.
  In 2006, we
supplied a small number of FCgenTM-1020ACS fuel cell products to potential
customers for evaluation and testing purposes. We also entered into a funded
United States government contract to develop and demonstrate an extended
duration back-up power solution for the United States Department of
Defence’sContinuity of Operations
Project in collaboration with Plug Power.  In 2007, we entered into a
second phase of this contract to continue the development of the product in
collaboration with Plug Power, and to significantly reduce the cost of fuel cell
products for volume commercialization.  We also entered into a
two-year supply agreement with Dantherm Air Handling A/S ("Dantherm Air") to supply 646
kW of FCgenTM-1020ACS fuel cell products.
  Through our
development efforts, we expect to reduce our product costs to make the
FCgenTM-1020ACS fuel cell product competitive with current battery costs on a
capital basis. We also plan to enhance the versatility of our back-up power
products to accept fuels such as methanol, propane and natural gas, in addition
to hydrogen.
  During 2008,
over 700 fuel cell product units were shipped to back-up power customers in
various global telecom markets.  We signed two supply agreements with
IdaTech LLC ("IdaTech")
for the delivery of FCgenTM-1020ACS fuel cell products for use in IdaTech’s iGenTM
and ElectraGenTM family of products.  In addition, Dantherm Air
continued to make progress in product deployments primarily in the European
Tetra market.
  In October
2008, Ballard entered into a supply agreement with IdaTech and ACME to develop
and supply to the Indian market a 5kW natural gas fuelled supplemental power
system that is expected to be directly competitive with diesel
 
 - 13
-
 
 generators
on a life cycle basis. Subject to meeting
product design and acceptance criteria, the agreement contemplated the
development and sale of approximately 300 direct hydrogen fuelled units based on
our FCgenTM-1020ACS fuel cell, followed by the development and sale of
approximately 9,700 natural gas fuelled units based on our proposed FCgenTM-1300
fuel cell product.The 300 direct hydrogen
units were delivered during 2009.  Due to concerns with the supply
base needing to meet cost and volume targets, in November of 2009, IdaTech
announced the need to delay the launch of the natural gas product to a point in
time later than allowable under the original contract.  The supply
agreement was terminated and replaced with a more flexible distribution
agreement with ACME.  All parties continue to believe in the potential
for volume sales of fuel cell products in the Indian telecommunications market
and will continue to develop the appropriate market channels to capitalize on
the opportunity.
  Although
Ballard dissolved the Ebara joint venture company, it will continue to sell its
FCgenTM-1030v3 fuel cell product for applications such as residential
cogeneration, including supply of this product to Baxi Innotech GmbH ("Baxi Innotech") for the German
Callux Project.  On March 11, 2009, Ballard entered into a three-year
supply agreement with Baxi Innotech, the leading European developer and
manufacturer of fuel cell micro combined heat and power ("mCHP") units.  Under
the agreement, Baxi Innotech will exclusively purchase Ballard fuel cells
through to the end of Phase 2 of the German Callux Project, scheduled to
conclude in 2012.
  Distributed
Generation
  Utilization
of our PEM fuel cell products for large scale distributed generation ("DPG") is an exploratory new
market for Ballard.  We first entered into this space in 2009, with
the announcement of the supply agreement to deliver a one megawatt solution to
FirstEnergy, an Ohio based energy company, for use in a utility load management
demonstration project.  We are providing a complete turnkey power
generation solution to FirstEnergy, rather than supplying fuel cell stacks to a
systems integrator; this is a different channel strategy than our other
stationary segments, and one we feel is appropriate to seed this
market.  Delivery of this unit is targeted for the first quarter of
2010, and will serve as an important reference site for underpinning future
growth in this market.
  We
have a strategic goal in 2010 to book the first DPG project utilizing by-product
hydrogen.  Market research has shown that there is a large niche
opportunity for fuel cell solutions where two key factors exist: 1) the presence
of low cost by-product hydrogen, and 2) a feed-in-tariff program or renewable
portfolio standard legislation to underpin the demand for clean electricity
generation.    With a fuel cell system, the by-product
hydrogen can be used to produce electricity that is either sold back to the
grid, through the electric utility, or used to offset power demands on
site.  Power production through fuel cells is the highest efficiency,
most environmentally responsible way to utilize the
hydrogen.  Although it is too soon to say how large this market will
be for
  
 - 14
-
    The first
generation 1 MW DPG unit for FirstEnergy utilized our motive power fuel
cells.  The second generation, currently under development, is a
modular 1 MW unit, comprised of three independent power banks that enable high
overall uptime and power availability.  The core building block is the
FCgenTM-1300 fuel cell platform, which is used in telecom backup power
applications in India; the volume demand for this market will help to drive down
the cost of the fuel cell stack for distributed power generation.  In
addition to being the lowest cost option, this platform enables the highest
efficiency system design.
  Contract
      Technical Services and Manufacturing
Services
  We
provide AFCC with manufacturing, testing and other engineering services. The
areas of service selected were those in which a longer-term synergy of efforts
to meet both Ballard and AFCC requirements could be met.  We
manufacture for Daimler the fuel cell products required for their existing
vehicle programs. We provide manufacturing engineering services and manufacture
experimental and prototype fuel cell products for AFCC’s research and product
development requirements. We provide AFCC with both failure analysis services
and fuel cell test stand maintenance. We also provide services in the area of
engineering simulation and modeling.
  We also
provide short-term information technology and EH&S support services to
AFCC.
  We
anticipate providing AFCC with these services at least through 2010, but our
service contracts may be terminated by AFCC with six-months
notice.  AFCC’s requirement for our services is dependent on, among
other things, the continued funding of their operations by Daimler and Ford,
which is not certain, especially given current economic conditions.
  Material
      Products
  We
develop, manufacture and sell carbon-based engineered material products into a
variety of markets. These products are in the form of roll goods as either woven
carbon fiber textile fabrics or as carbon fiber papers.  A major
application for carbon fiber fabrics is the friction surface in torque
converters for light vehicle automatic transmissions.  We are a Tier 1
supplier with QS-9000 and TS-16949 quality certification.  In 2008, we
were awarded a five-year extension to our exclusive supply contract for this
product by one of our automotive manufacturing customers, valued at more than
$40 million.  However, given the recent economic conditions,
particularly in the automotive sector, the total product ordered has been less
than the amount stipulated in the contract.  On the other hand, the
use of our product is expanding at a second
  
 - 15
-
    Beyond
automatic transmissions, we supply carbon fiber friction materials for use in
wet brake systems for off-road heavy-duty construction and mining equipment and
for use in the sporting goods market.  To grow and diversify in this
market, we are working with a number of Tier 1 and Tier 2 automotive suppliers
to develop and incorporate our carbon fiber products in new drivetrain
applications, including dual clutch transmissions.
  A GDL is
a significant component at the core of the fuel cell, allowing the uniform
diffusion of hydrogen and air towards the electrocatalyst, and releasing water
as the chemical reaction is complete.  The quality of the GDL plays an
important role in the overall performance and cost of a fuel
cell.  Our AvCarbTM GDL materials are available in continuous rolls,
and are designed to enable MEAs to be manufactured using high-speed automated
assembly techniques. The first two members of this family of products are the
AvCarbTM P-50 and the AvCarbTM P-50T, which include a Teflon®
coating.  Since 2002, we have added a precision carbon coating
capability. We supply several key industry participants in the fuel cell
industry with GDLs, and we use our GDLs in several of our own fuel cell
products.  We also supply GDLs for phosphoric acid fuel cells used in
stationary power applications.
  We also
provide material supply chain management services to our customers, where we
manage several subcontractor suppliers.
  Impact
      of Regulations and Public Policy
  United
States
  In
October 2007, the Federal Communications Commission ("FCC") mandated that, over the
next 12 months, local exchange carrier and commercial mobile radio service
providers place a minimum of 24 hours of power back-up at central offices and a
minimum of eight hours of power back-up at cellular sites, remote switches, and
digital loop carrier system remote terminals.  This regulatory change
was expected to drive demand for extended duration back-up power favouring fuel
cell system solutions.
  In
December 2008, the White House Office of Management and Budget rejected the
FCC’s plan to implement the eight-hour mandate.  The final outcome of
the enforceability of this mandate is still unclear at this
stage.  However, through this process, the telecom operators in the
United States have recognized the need to upgrade the back-up power capability
at cellular sites and have created a higher demand for fuel cell
solutions.
  
 - 16
-
 
 In
October 2008, the fuel cell investment tax credit - first included in the Energy Policy Act of 2005 –
was revised and extended.  End users will now be able to deduct from
their tax liability 30% of the cost of installing a fuel cell (or $3000/kw,
whichever is
  In
February 2009, President Obama signed the American Recovery and Reinvestment
Act (the "ARRA")
into law.  In addition to facilitating more robust funding for
Department of Energy programs, the ARRA contained two provisions of particular
importance to the hydrogen and fuel cell industry.  First, the ARRA
offered the aforementioned tax credit (30% up to $3000/kW) as a
grant.  The program, titled "Grant In Lieu of Tax Credit", is
administered by the Department of Treasury.  Participants must
initiate projects by the end of 2010 to be eligible for grant, and applications
must be filed by October 1, 2011.  Second, the ARRA expanded the cap
on the tax credit available for hydrogen fuelling infrastructure.  For
hydrogen fuelling infrastructure, the tax credit (which can be claimed under the
Qualified Alternative Fuel Vehicle ("QAFV") refuelling property
credit) is now 30% up to $200,000 versus up to $30,000.  If the
expanded credit is not extended, the level will revert back to $30,000 end of
year 2010.
  At the
state level, the California Self-Generation Incentive Program, which is funded
by ratepayers and administered by utilities, provides incentives of $2500/kW for
power plants that operate on hydrogen from non-renewable resources and $4500/kW
for those that operate on hydrogen from renewable resources.  The
program is funded annually and guidelines are published in a yearly
handbook.
  Other
Jurisdictions
  As of
2009, feed-in tariff policies have been enacted in 63 jurisdictions around the
world to encourage the adoption of renewable energy sources. Under a feed-in
tariff, utilities are obligated to buy electricity from all eligible
participants at rates based on the cost of renewable energy generation, which
enables a diversity of projects to be developed at a reasonable return on
investment. The rates are typically designed to ratchet downward over time to
track technology improvements and overall cost reductions. Feed-in tariff
programs also typically offer long-term (15–25 year) guaranteed purchase
contracts for the electricity generated from such projects. Programs that
support energy generation from hydrogen sources are expected to help drive
demand for fuel cell products.
  Research
      and Product Development
  Ballard
conducts research in improving the cost, durability and fundamental
understanding of the MEA and its sub-components. In addition, greater
development focus is being placed on the capability of MEAs operating on
reformate fuels, reflecting customer needs in the non-automotive markets. As a
result of the AFCC Transaction,
  
 - 17
-
     Intellectual
Property
  In
connection with the AFCC Transaction in January 2008, we transferred to Daimler
and Ford our automotive intellectual property rights, which represented
approximately 20% of our patent portfolio.  We also transferred
approximately 485 patents and patent applications to IP Holdings, a holding
company established for the purpose of protecting Daimler and Ford’s licence
rights granted as part of the AFCC Transaction. We then entered into a licence
agreement with IP Holdings evidencing our exclusive right to use fundamental
intellectual property rights and improvements thereto for non-automotive
applications.  As of January 31, 2010, Ballard owns or controls
through IP Holdings, patents approximately as follows: 115 United States granted
patents, 70 non-United States granted patents, 35 United States published patent
applications and 140 published non-United States patent
applications.  We also hold exclusive and non-exclusive licence rights
to additional intellectual property from a number of third parties, including
licences to approximately 2,000 patents and patent applications included in the
AFCC Transaction.  These licences include royalty-free access to all
of the intellectual property rights held by NuCellSys GmbH ("NuCellSys"), an entity jointly
owned by Daimler and Ford, as well as royalty-free access to all of the
intellectual property rights relating to fuel cells developed by Daimler, Ford
and their subsidiaries (either directly or through AFCC) for so long as we
continue to be a shareholder of AFCC.  Our patents will expire between
2010 and 2026.
  Manufacturing
  Our fuel
cell manufacturing facility is located in Burnaby, British Columbia and is
designed to provide the manufacturing capacity necessary to meet expected
customer demand through the initial market introduction phase for our material
handling, heavy-duty/buses, stationary power fuel cell products, as well as to
provide contract manufacturing services to AFCC.  We expect demand for
our fuel cell products to increase and to require increased manufacturing
capacity.  We will either build that capacity to meet the increased
demand or outsource some or all of the manufacturing requirements.  In
some circumstances, we may choose to license part or all of the manufacturing
for a particular fuel cell application or customer on a royalty-bearing
basis.
  In
Burnaby, we currently have an Integrated Management System registered to ISO/TS
16949, ISO 9001, ISO 14001 and OHSAS 18001 standards.  These
registrations reflect our approach to achieving best business system practices
in the areas of quality, environment, health and safety.  We have also
developed expertise in the testing of all aspects of PEM fuel cells and
components.  We subcontract some process steps or
  
 - 18
-
 
 assemblies
to minimize investment in capital equipment, particularly in the case of
processes that will eventually be replaced by new manufacturing methods or
materials, or that relate to non-core technology.  We have developed
strategic relationships with key suppliers to ensure a timely supply of key
components.  Additionally, we have established relationships with key
material suppliers to enhance the quality and suitability of components supplied
and to assist in the development of our fuel cell products.
  Many of
the components we use to manufacture our fuel cell products are unique and may
require long lead times to order.  Certain components used in our fuel
cell products have been developed to our specifications under development and
supply agreements. These development and supply agreements provide that the
intellectual property created by the design of these components is owned
exclusively by us, jointly by us and the supplier, or solely by the supplier,
depending upon whether we have assumed any of the development
costs.
  Our
facility in Lowell, Massachusetts, where we produce our carbon fiber products,
is also ISO 9001 and QS 9000 registered.  The experience of our
operations in Lowell in continuous roll-to-roll manufacturing processes and as a
Tier 1 automotive supplier will be valuable to us as we increase commercial
production in our Burnaby manufacturing facility, and as we leverage our
established quality and manufacturing practices.
  Facilities
  We
currently have the following principal facilities: (a) a leased 116,797 square
foot (10,850 square meter) facility in Burnaby, British Columbia that houses our
corporate headquarters, and our fuel cell development and testing activities;
(b) a leased 112,000 square foot (10,398 square meter) facility in Burnaby,
British Columbia that houses our operations staff and our manufacturing
facilities; and (c) a 137,000 square foot (12,728 square meter) facility in
Lowell, Massachusetts, owned by us, that is used for the development and
manufacture of carbon fiber products.
  We leased
and licensed to AFCC an area in our owned facility in Burnaby, British Columbia
totalling approximately 40,000 square feet (3,716 square meters), comprised of
office and laboratory space.
  We also
sublet an area in our manufacturing facility in Burnaby, British Columbia
totalling 31,000 square feet (2,880 square meters), composed of office
space.  We retained the remaining 17,000 square feet (1,580 square
meters) of office space, as well as the 64,000 square feet (5,948 square meters)
manufacturing facility, for our own use.
   
 - 19
-
 
 We are
committed to developing and manufacturing products, and operating all of our
facilities, in full compliance with all applicable local, regional, national and
international environmental, health and safety regulatory
standards.  Our commitment is reflected in our corporate "Quality,
Safety and Environmental Policy and Guiding Principles", and our underlying
programs and initiatives.  We have completed
a
  Human
      Resources
  As of
December 31, 2009, we had approximately 340 employees in Canada and the United
States, representing such diverse disciplines as electrochemistry, polymer
chemistry, chemical, mechanical, electronic and electrical engineering,
manufacturing, marketing, sales, business development, legal, finance, human
resources, information technology and business management.  During
2009, the Corporation undertook two organizational restructuring activities
(March and August), resulting in the elimination of approximately 125 positions
in total.  Our employees are not represented by any labour
union.  Each employee must agree to confidentiality provisions as part
of the terms of his or her employment, and certain employees have also executed
non-competition agreements with us.
  Competition
  Competition
for our products comes from existing power technologies, improvements to
existing technologies and new alternative energy technologies.  Each
of our target markets is currently served by manufacturers that offer proven and
widely accepted technologies, and have established customers and
suppliers.  In each of our target markets, these and other competitors
are also developing alternative energy technologies.
  Fuel
Cell Products and Servicing
  Motive
Power
  Material
Handling
  Existing
Technologies.  Class 2 and Class 3 forklift trucks are
currently dominated by lead-acid battery-powered solutions, as are Class 1
forklift trucks intended for indoor applications (internal combustion engine
("ICE") power is
typically seen as the solution for forklift trucks in Classes 4, 5, 6 and 7,
generally, and in Class 1 for outdoor applications).  We believe that
fuel cell systems are superior to batteries in Class 1, Class 2 and Class 3
forklift trucks because of their ability to provide extended run time
 
 - 20
-
    Fuel
Cells.  Companies developing fuel cell systems for material
handling applications include Toyota, Hydrogenics, and Nuvera.  We
seek to gain a competitive advantage through fuel cell designs that provide
superior performance, efficiency, durability and cost.  Some of our
competitors purchase, or are considering the purchase of, fuel cell products
from us for use in some of their material handling products.
  Emerging
Technology.  Advanced battery technology continues to make
progress in the material handling market.  However, advanced battery
technology still requires significant time for recharging and, in many cases,
cannot meet desired run times without requiring spare batteries and substantial
space for battery charging and storage.  These issues are addressed by
fuel cell technology.
  Heavy-Duty/Buses
  Existing
Technologies.  Diesel-powered buses currently dominate the
market today.  Compressed natural gas ("CNG") buses have also become
popular as a lower-emission alternative to diesel buses, however, their capital
and operating costs are higher.  Electric trolley buses provide a
zero-emission alternative, however, their purchase price is high and the
overhead catenary power infrastructure is expensive to maintain and is
considered aesthetically undesirable in many urban centres.  We
believe that fuel cells are the best zero-emission alternative for transit
applications.  They offer much greater fuel efficiency than
conventional diesel buses, eliminate greenhouse gas emissions and eliminate the
need for unsightly overhead catenary wires.
  Fuel
Cells.  Companies developing fuel cell systems for transit bus
applications include United Technologies, Hydrogenics and
Nedstack.  We seek to gain a competitive advantage through fuel cell
designs that provide superior performance, efficiency, durability and
cost.  Ballard has been demonstrating fuel cells in transit bus
applications since 1991.  We are now delivering our sixth-generation
heavy-duty fuel cell product, the FCvelocityTM-HD6, in both 75kW and 150kW
configurations specifically designed for fuel cell hybrid drive transit bus
applications.  We believe that we have accumulated far more operating
hours in real transit operations than any other fuel cell
manufacturer.  This experience has enabled us to produce more reliable
and durable products than our competitors.
  Emerging
Technology.  Electric hybrid drive systems are quickly
displacing conventional mechanical drives for transit bus applications offering
better fuel economy and lower emissions.  These are primarily being
driven by diesel engines in diesel hybrid drive configurations.  Other
variations available today include gasoline hybrid
  
 - 21
-
 
 buses and
CNG hybrid buses.  Since a fuel cell system is essentially a source of
electricity it is easily adapted to a hybrid drive system to produce a bus with
even greater fuel efficiency than diesel hybrid buses and no greenhouse gas
emissions.  Recently, hydrogen internal combustion engines have been
demonstrated in transit buses with both conventional and hybrid drive
systems.  These have not been widely adopted primarily because of very
low fuel efficiency, low power and low operational reliability.
 
 Stationary Power
  Back-up Power and
Supplemental Power
  Existing
Technology.  The back-up power and supplemental power markets
are currently dominated by ICEs and batteries.    We believe
that PEM fuel cell products are superior to batteries, because of their ability
to provide extended run time without frequent or lengthy recharging, as well as
their ability to offer lower life cycle costs, given that batteries require
periodic replacement.
  Fuel
Cells.  Companies developing PEM fuel cell systems for back-up
power and supplemental power applications include Dantherm Power, Hydrogenics,
IdaTech, Plug Power, Distributed Energy Systems and ReliOn.   We
seek to gain competitive advantage through fuel cell designs that provide
superior performance, efficiency, durability and cost.  Some of our
competitors purchase, or are considering the purchase of, PEM fuel cell products
from us for use in some of their products.
  Emerging
Technology.  Advanced battery technology continues to make
modest progress in the back-up power and supplemental power generation
markets.  However, advanced battery technologies still require lengthy
recharging and, in many cases, cannot meet desired run times without requiring
substantial space.  These issues are addressed by PEM fuel cell
technology.
  Distributed
Generation
  Existing
Technology.  The distributed generation market is large and
varied.  As such, depending on the application, advanced batteries,
diesel gen sets or natural gas gen sets would be considered as current
technologies.
  Fuel
Cells.  Companies developing PEM fuel cell systems for
distributed generation market applications include Nedstack, Hydrogenics and
Hydrogenics.
  Emerging
Technology.  Hydrogen fuelled IC engines or advanced battery
technologies are emerging as competitive technologies.  Fuel cell
systems offer significant efficiency and emissions improvements over hydrogen
fuelled IC engines.  Advanced battery technologies cannot meet desired
run times without requiring
 
 - 22
-
  Material
Products
 
 Friction
Products
  Existing
Technology.The supply base for
friction materials is highly fragmented with many suppliers each supplying a
limited range of products based on their technological expertise. Ballard
competes in a niche area where the friction characteristics and durability of
carbon fabrics make them desirable for high performance applications in the
automotive industry. Competitors include the SGL Group in Germany, and Toray in
Japan.
  Emerging
Technology.  Using its unique capabilities to modify the
construction of carbon fabrics and to tailor the components of carbon-containing
composites, Ballard is working with component and system suppliers to the
automotive and other transportation industries to develop advanced carbon
friction materials for more demanding applications which improve fuel economy by
enabling a more efficient powertrain design.
  Fuel
Cell Products
  Existing
Technology.  Ballard supplies carbon fabric and carbon fiber
paper GDL materials to MEA and fuel cell stack producers.  Competitors
include SGL, Mitsubishi and Toray.
  Emerging
Technology.  To meet the ever-demanding performance
requirements, Ballard’s efforts have been aimed to maximize the fluid transport
characteristics of these materials by modifying their construction, while at the
same time developing more efficient production processes to drive the cost of
GDLs down.
  SHARE CAPITAL AND MARKET FOR
SECURITIES
  Our
authorized share capital consists of an unlimited number of common shares and an
unlimited number of preferred shares.  As of March 15, 2010, our
issued share capital consisted of 84,059,291 common shares.  Our
common shares are listed and trade on the Toronto Stock Exchange ("TSX") under the symbol "BLD"
and on the National Association of Securities Dealers Automated Quotation Global
Market ("NASDAQ") under
the symbol "BLDP".
  The
following table shows the monthly trading activity for our common shares on the
TSX and NASDAQ during 2009:
  - 23
-
  TSX
              NASDAQPrice
      Range
                (CDN$)
              Average
      DailyVolume
                (#)
              Price
      Range
                (U.S.$)
              Average
      DailyVolume
                (#)January
              $1.27-1.67
              115,166
              $1.00-$1.39
              279,972February
              $1.39-1.54
              64,208
              $1.10-1.26
              115,693March
              $1.10-2.06
              170,518
              $0.90-1.68
              227,233April
              $1.82-2.94
              185,513
              $1.40-2.45
              419,033May
              $2.04-2.39
              91,617
              $1.80-2.09
              126,866June
              $1.78-2.36
              89,375
              $1.60-2.13
              188,154July
              $1.92-2.21
              56,940
              $1.60-2.00
              107,675August
              $1.89-2.01
              50,089
              $1.70-1.90
              67,275September
              $1.83-3.25
              235,097
              $1.70-3.07
              739,267October
              $2.35-3.34
              133,220
              $2.20-3.25
              391,873November
              $2.20-2.51
              51,476
              $2.10-2.39
              122,060December
              $1.85-2.55
              250,652
              $1.70-2.45
              709,289
 
  The
holders of our common shares are entitled to one vote for each share held on all
matters to be voted on by such shareholders and, subject to the rights and
priorities of the holders of preferred shares, are entitled to receive such
dividends as may be declared by our Board out of funds legally available
therefor and, in the event of liquidation, wind-up or dissolution, to receive
our remaining property, after the satisfaction of all outstanding
liabilities.
  Our
preferred shares are issuable in series and our Board is entitled to determine
the designation, preferences, rights, conditions, restrictions, limitations and
prohibitions to be attached to each series of such shares.  Currently
there are no preferred shares outstanding.
  
 - 24
-
  DIVIDEND RECORD AND POLICY
  To date,
we have not paid any dividends on our shares and, because it is anticipated that
all available cash will be needed to implement our business plans, we have no
plans to pay dividends in the immediate future.
 DIRECTORS
AND OFFICERS
  Board
      of Directors
  The
following chart provides the following information as of March 15, 2010: the
name and province or state of residence of each of our directors; each
director’s respective positions and offices held with Ballard, their principal
occupation during the past five years; the period of time each has served as a
director; and the number of shares and deferred share units (the "DSUs") beneficially owned or
controlled by each of them.
  Name
      andProvince/Stateof Residence(1)
              Principal
      Occupation(1)
              DirectorSince
              SharesBeneficiallyOwned
      orControlled orDirected(1)(#/%
      of Class)
              DeferredShare
      UnitsOwned orControlled(2)(#/%
      of Class)Ian
      A. Bourne
                Alberta,
      Canada
              Corporate
      Director and Chair of the Board of Ballard since January
      2007.  Formerly Executive Vice President and Chief Financial
      Officer of TransAlta Corporation (electricity generation and
      marketing) from January 1998 to December 2006, and from January
      1998 to December 2005, respectively.
              2003
              26,824/0.032%
              77,707/24.58%Edwin
      J. Kilroy
                Ontario,
      Canada
              Corporate
      Director of Ballard. Chief Executive Officer of Symcor Inc. (business process outsourcing
      services) since January 2005. Formerly Chief Executive Officer of
      IBM Canada Ltd. (information technology)
              2002
              2,424/0.003%
              42,844/13.55%
   - 25
-
  Name
      andProvince/Stateof Residence(1)
                Principal
      Occupation(1)
                DirectorSince
                SharesBeneficiallyOwned
      orControlled orDirected(1)(#/%
      of Class)
                DeferredShare
      UnitsOwned orControlled(2)(#/%
      of Class)from
      April 2001 to January 2005.Dr.
      Chong Sup (C.S.) Park
                  California,
      U.S.A.
                Corporate
      Director of Ballard. Formerly Chairman of the Board and Chief Executive
      Officer of Maxtor Corporation (storage solutions and hard
      disk drives) from November 2004 to May 2006, and Managing Director,
      Investment Partner and Senior Advisor of H&Q Asia Pacific (private equity
      investment) from November 2002 to September 2004.
                2007
                17,091/0.020%
                0/0%John
      W. Sheridan
                  British
      Columbia, Canada
                Corporate
      Director and President and Chief Executive Officer of Ballard since
      October 2005.
                2001
                261,710/
                  0.311%
                57,942/18.33%Dr.
      Geraldine B. Sinclair
                  British
      Columbia, Canada
                Corporate
      Director of Ballard. Executive Director, Center for Digital Media of the
      Great Northern Way Campus since May2006.  Formerly
      Chair of the Canadian Telecommunications Policy Review Panel, and a
      Strategic Management Consultant from 2005 to 2006, and General Manager,
      MSN of Microsoft Canada (internet services) from
      September 2002 to October 2004.
                2005
                176/<0.001%
                25,355/8.02%
   - 26
-
  Name
      andProvince/Stateof Residence(1)
                Principal
      Occupation(1)
                DirectorSince
                SharesBeneficiallyOwned
      orControlled orDirected(1)(#/%
      of Class)
                DeferredShare
      UnitsOwned orControlled(2)(#/%
      of Class)David
      J. Smith
                  British
      Columbia, Canada
                Corporate
      Director of Ballard. Member, British Columbia Securities Commission since
      July 2006. Counsel with Lawson Lundell LLP (law firm) from May 2005
      to April 2006. Partner of Lawson Lundell and predecessor law firms prior
      to that.
                2006
                7,911/0.009%
                14,841/4.69%David
      B. Sutcliffe
                  British
      Columbia, Canada
                Corporate
      Director of Ballard. Formerly Chief Executive Officer and Chair of the
      Board of Sierra Wireless, Inc. (electrical and electronic
      industrial products) from May 1995 to October 2005 and from May
      2001 to April 2005, respectively.
                2005
                3,600/0.004%
                25,528/8.07%Mark
      A. Suwyn
                  Florida,
      U.S.A.
                Corporate
      Director of Ballard. Executive Chairman of the Board of NewPage
      Corporation (coated
      paper), a position he has held since March 2009. Previously Acting
      Chief Executive Officer of NewPage Corporation from March 2009 to January
      2010; and Chief Executive Officer and Chairman of the Board from April
      2006 and May 2005, respectively. Formerly President of MARSUW LLC (consulting) from
      November 2004 to April 2005, and Chief Executive Officer
    and
                2003
                7,237/0.009%
                35,019/11.08%
   - 27
-
  Name
      andProvince/Stateof Residence(1)
                Principal
      Occupation(1)
                DirectorSince
                SharesBeneficiallyOwned
      orControlled orDirected(1)(#/%
      of Class)
                DeferredShare
      UnitsOwned orControlled(2)(#/%
      of Class)Chairman
      of the Board of Louisiana-Pacific Corporation (building products) from
      January 1996 to October 2004.Douglas
      W.G. Whitehead British Columbia, Canada
                Corporate
      Director of Ballard. Chairman of Finning International Inc. (heavy equipment
      reseller). Formerly President and Chief Executive Officer of
      Finning International from 1999 to May 2008.
                1998
                4,383/0.005%
                36,916/11.68%
  Notes
  (1)
              The
      information as to place of residence, principal occupation, business or
      employment of, and shares beneficially owned, or controlled or directed,
      directly or indirectly, by a director is not within the knowledge of our
      management and has been furnished by the director.  Information
      on shares beneficially owned, or controlled or directed is accurate as at
      March 15, 2010.
  (2)
              Rounded
      to the nearest whole number.  Information is accurate as at
      March 15, 2010.  In reviewing the status of Ballard’s share
      incentive plans in connection with the recently completed transaction with
      Superior Plus Income Fund, Ballard determined that a total of 169,276 DSUs
      had been issued to directors in excess of a limitation set out in
      Ballard’s 2003 Share Distribution Plan.  Shareholders approved
      the grant of these DSUs at its annual general meeting in
      2009.  Starting in 2009, all elements of director compensation
      are paid in cash.  Ballard does not plan in the near future to
      issue further DSUs to directors as
compensation.
  Directors
are elected yearly at our annual shareholders’ meeting and serve on the Board
until the following annual shareholders’ meeting, at which time, they either
stand for re-election or resign from the Board.  If no meeting is
held, each director serves until his or her successor is elected or appointed,
unless the director resigns earlier.
  Corporate
      Governance
  Our Board
and senior management consider good corporate governance to be central to our
effective and efficient operation.  We monitor corporate governance
initiatives as they develop and benchmark industry practices to ensure that we
are in compliance with corporate governance rules and best
practices.
  Our
corporate governance practices are reflected in our "Corporate Governance
Guidelines", which provide for director qualification standards, director
 
 - 28
-
     We also
reviewed our internal control and disclosure procedures, and are satisfied that
they are sufficient to enable our Chief Executive Officer and Chief Financial
Officer to certify our interim and annual reports filed with Canadian securities
authorities, and to certify our annual reports filed with or submitted to the
United States Securities and Exchange Commission ("SEC").
 
 Board Composition
  All of
our directors are independent except for John Sheridan, our President and Chief
Executive Officer.  "Independence" is judged in accordance with the
provisions of the United States Sarbanes-Oxley Act of 2002
("Sarbanes-Oxley"), and
as determined by the Canadian securities regulatory authorities ("CSA") and the
NASDAQ.  We conduct an annual review of the other corporate boards on
which our directors sit, and have determined that currently one board interlock
exists with respect to our directors.  Mr. Sheridan is a director of
NewPage Corporation and Mr. Suwyn is the Chairman of the Board of NewPage
Corporation.  We are not affiliated or related to NewPage Corporation
in any way, do not do any business with NewPage Corporation and we operate in a
different industry than NewPage Corporation.  The Board has also
established a guideline for the maximum number of corporate boards on which a
director should sit.  This guideline has been set at five corporate
boards (not including non-profit boards).
  The Board
established director resignation guidelines, which set out the circumstances
under which a director would be compelled to offer a resignation or be asked to
resign, including a majority voting policy.  This policy requires that
any nominee for director who receives a greater number of votes "withheld" than
"for" his or her election shall tender his or her resignation to the Board
following our annual shareholders’ meeting, to take effect immediately upon
acceptance by the Board.  Upon receipt of such conditional
resignation, the Corporate Governance Committee will consider the matter and, as
soon as possible, make a recommendation to the full Board regarding whether or
not such resignation should be accepted. After considering the recommendation of
the Corporate Governance Committee, the Board will decide whether or not to
accept the tendered resignation and will, not later than 90 days after the
annual shareholders’ meeting, issue a press release which either confirms that
they have accepted the resignation or provides an explanation for why they have
refused to accept the resignation.  The director tendering his or her
resignation will not participate in any meeting of the Board or the Corporate
Governance Committee, which considers the resignation. Subject to any
restrictions or requirements contained in applicable corporate law or Ballard’s
constating documents, the Board may: (a) leave a resulting
 
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-
  meeting,
which is any meeting of shareholders where the number of nominees for director
is greater than the number of directors to be elected.
  Share
Ownership Guidelines
  We have
minimum share ownership guidelines that apply to our independent
directors.  The guidelines require each director to hold the lesser
of:
  (i)
              the
      number of our shares having a value equivalent to five times the
      director’s annual Board retainer or, in the case of the Chair of the
      Board, a value equivalent to three times the Chair’s annual retainer, in
      each case with such number of shares calculated using the then-applicable
      share price of our shares, determined on an annual basis;
    and
  (ii)
              the
      number of our shares having a value equivalent to five times the
      director’s annual Board retainer or, in the case of the Chair of the
      Board, a value equivalent to three times the Chair’s annual retainer, in
      each case with such number of shares calculated using the closing price of
      our shares on May 12, 2006.(3)
  Directors
that were members of the Board at the time the guidelines were adopted in July
2003 had until July 2008 to comply with this requirement.  Directors
elected subsequently have five years from the date that they are first elected
to the Board to comply.  The Chair of the Board has five years from
his original appointment as Chair in February 2006 to satisfy the minimum share
ownership requirements for the Chair.  Directors may apply the DSUs,
which they receive as payment for all or part of their annual retainer, towards
the minimum share ownership requirements.  Any director who fails to
comply with the share ownership requirement may not stand for
re-election.  Currently, all directors have met or are on track to
achieve these guidelines.
  Roles
and Responsibilities
  The Board
operates under a formal mandate (a copy of which is attached as Appendix "A" and
is posted on our website), which sets out its duties and responsibilities,
including matters such as corporate strategy, fiscal management and reporting,
selection of management, legal and regulatory compliance, risk management,
external communications and performance evaluation.  The Board has
also established
  (3)
                Based on the closing price of our
      shares on the TSX in cases where the retainer is paid in Canadian dollars
      (which closing price was C$8.78 on May 12, 2006) or on the NASDAQ in cases
      where the retainer is paid in United States dollars (which closing price
      was $7.98 on May 12,
2006).
 
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-
 
 terms of
reference for individual directors (a copy of which is attached as Appendix "B"
and is posted on our website), which set out the directors’ individual
responsibilities and duties.  These terms of reference serve as a code
of conduct with which each director is expected to comply, and address matters
such as conflicts of interest, the duties and standard of care of directors, the
level of availability expected of directors, requirements for maximizing the
effectiveness of Board and committee meetings, and considerations that directors
are to keep in mind in order to make effective and informed
decisions.
  The Board
has also established terms of reference for the committee chairs, our Chief
Executive Officer and our Chair of the Board.  In addition, we have a
Board-approved "Code of Ethics", which applies to all members of the Board, as
well as our officers and employees.  A copy of the Code of Ethics and
the terms of reference for the committee chairs, our Chief Executive Officer and
our Chair of the Board can be found on our website.  All of these
documents are reviewed annually, and are updated or revised as
necessary.
  The Chair
of the Board is responsible for ensuring the appropriate organization, content
and flow of information to the Board and that all concerns of the directors are
addressed.  The Chair of the Board reviews and sets the agenda for
each Board meeting.  The Chair of the Board is also responsible for
organizing and setting the frequency of Board meetings and ensuring that Board
meetings are conducted efficiently.  The Chair of the Board is an
independent director.
  Each
year, the Board identifies a list of improvement priorities for the Board during
the year.  The Corporate Governance Committee regularly monitors the
Board’s progress against these improvement priorities throughout the
year.
  Board
Orientation and Education
  We have
established a formal director orientation and ongoing education
program.  Upon joining our Board, each director receives an
orientation regarding our business.  Such orientation consists of site
visits to all of our manufacturing facilities, presentations regarding our
business, technology and products, and a manual that contains various reference
documents and information.  Continuing education is offered by way of
ongoing circulation of informative materials aimed at topical subject matters
and management presentations at Board meetings, as well as guest speakers who
are invited to speak to our Board on various topics.  In the past, we
have invited guest speakers to speak to our Board about the fuel cell industry,
government regulation, corporate governance and risk management, and internal
management representatives to speak about various issues relating to our
technology and business.  The educational presentations that are made
by internal management provide an opportunity for Board members to meet and
interact with members of our management team.
  
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-
 
 Shareholder
Feedback and Communication
  We have
set up an e-mail process for shareholders to communicate with the Board, through
the Chair of the Board.  Shareholders who wish to send a message to
the Chair of the Board can find the details of this process on our
website.   In addition, a summary of shareholder feedback that is
received by us is provided to the Board through a semi-annual
report.
  Board
and Director Performance Evaluations
  The
directors conduct an annual performance evaluation of the Board, Board
committees, and the Chair of the Board through a process overseen by the
Corporate Governance Committee.  Evaluation questionnaires are
completed and a summary report is generated for and reviewed by the Corporate
Governance Committee.  The Corporate Governance Committee works with
management to improve Board processes and to address concerns raised in the
evaluation questionnaires, and reports to the full Board on the evaluation
results and proposed action items. In addition, the directors evaluate each
other every two years and conduct individual self-evaluations in the alternate
years, the results of which are forwarded to the Chair of the Board who then
reviews the results and meets with each director to conduct an individual
director performance evaluation.  The Board also sets annual
effectiveness goals, and tracks performance against those goals.
  Compliance in Canada and the United States
  We
believe that we comply with all applicable CSA and NASDAQ corporate governance
rules and guidelines.  The CSA requires that listed corporations
subject to National Instrument
58-101 - Disclosure of Corporate Governance Practices ("NI 58-101") disclose their
policies respecting corporate governance.  We comply with NI 58-101,
which addresses matters such as the constitution and independence of corporate
boards, the functions to be performed by boards and their committees, and the
effectiveness and education of board members.  We are exempt from the
NASDAQ corporate governance rule requiring that each NASDAQ quoted company has
in place a minimum quorum requirement for shareholder meetings of 33 1/3% of the
outstanding shares of the company’s voting common stock.  Our by-laws
currently provide that a quorum is met if holders of at least five percent of
the votes eligible to be cast at a shareholders’ meeting are present or
represented by proxy at the meeting.
  The CSA’s
National Policy 58-201 –
Corporate Governance Guidelines requires that a board have a majority of
independent directors. If a director is an executive officer, general partner,
managing member, or both a director and an employee of an "affiliated entity",
that director will not be independent.  In such a case, the board of
directors should, in addition to having a majority of independent directors,
include a number of directors who do not have interests in, or relationships
with, either the company or the
  
 - 32
-
 
 affiliated
entity and should be constituted to fairly reflect the investment in the company
by shareholders other than the affiliated entity.  An "affiliated
entity" of a company is defined as, among other things, an entity that can
"control" the company, directly or indirectly, thereby determining the direction
of management and policies of the company, whether by share ownership or
otherwise.  As we are not "controlled" by another entity, none of our
directors act as representatives of an affiliated entity.
  Board
      Committees
  Our Board
has established three standing committees: the Audit Committee; the Management
Development, Nominating & Compensation Committee; and the Corporate
Governance Committee.  Each of these committees has been delegated
certain responsibilities, performs certain advisory functions, and either makes
certain decisions or makes recommendations to the full Board.  Each of
the committee chairs reports on the activities of the committee to the Board
following each committee meeting.  None of the members of these
committees are current or former officers or employees of ours, or any of our
subsidiaries.
  In July
2009, in support of the Corporation's cost reduction initiatives, the Board
decided to reduce the size of the standing committees.  This was
accomplished by providing that committee chairs no longer maintain membership on
multiple committees.
  Audit
Committee
  The Audit
Committee is constituted in accordance with SEC rules, applicable securities
laws and applicable NASDAQ rules, and assists the Board in fulfilling its
responsibilities by reviewing financial information, the systems of corporate
controls and the audit process.
  The Audit
Committee is responsible for overseeing the audit process and the preparation of
our financial statements, ensuring that our financial statements are fairly
presented in accordance with generally accepted accounting principles, approving
our quarterly financial statements, and reviewing and recommending to the Board
our year-end financial statements and all financial disclosure contained in our
public documents.  The Audit Committee meets with our financial
officers and our internal and external auditors to review matters affecting
financial reporting, the system of internal accounting and financial disclosure
controls and procedures, and the audit procedures and audit
plans.  The Audit Committee reviews our significant financial risks
and the appointment of senior financial executives, and annually reviews our
insurance coverage, tax loss carry forwards, pension and health care
liabilities, and off-balance sheet transactions.  The Audit Committee
has at least one member, Ian A. Bourne, who qualifies as an audit committee
financial expert under applicable securities regulations.
  
 - 33
-
 
 All of
the members of the Audit Committee are independent directors and are financially
literate.
  The Audit
Committee is responsible for recommending the appointment of our external
auditors (for shareholder approval at our annual general meeting), monitoring
the external auditors’ qualifications and independence, and determining the
appropriate level of remuneration for the external auditors.  The
external auditors report directly to the Audit Committee.  The Audit
Committee also approves in advance, on a case-by-case basis, any services to be
provided by the external auditors that are not related to the
audit.  The following table shows the costs incurred with KPMG in 2009
and 2008 for audit and non-audit related work, all of which were approved by the
Audit Committee:
  Type
      of Audit Fees
              2009
              2008Audit
      Fees
              $340,089
              $415,187(1)Audit-Related
      Fees
              $9,587
              $13,995Tax
      Fees
              $6,115(2)
              $37,864(2)All
      Other Fees
              Nil
              Nil
  Notes
 (1)
              The
      Audit Fees for 2008 include services as a result of the AFCC Transaction
      and the Superior Plus Transaction.
  (2)
              The
      Tax Fees for 2009 and 2008 related to tax advisory services and the filing
      of our 2008 Canadian and United States corporate tax
    returns.
  In
addition, the Audit Committee is mandated to review all financial disclosure
contained in prospectuses, annual reports, annual information forms, management
proxy circulars and other similar documents.  The Audit Committee is
also responsible for ensuring that the internal audit function is being
effectively carried out.  The Audit Committee reviews and approves, in
advance, related party transactions on a case-by-case basis.
  As of
March 15, 2010, the committee was composed of Ian A. Bourne, Edwin J. Kilroy
(Chair), Mark A. Suwyn and Douglas W.G. Whitehead, all of whom are independent
of management.  (David B. Sutcliffe also served on the committee in
2009.  Mr. Sutcliffe ceased to be a member on July 13, 2009,
consistent with the decision that committee chairs no longer maintain membership
on multiple committees.)  In addition to each committee member’s
general business experience, the education and experience of each member that is
relevant to the performance of his or her responsibilities as a member of the
Audit Committee is set forth below.
  
 - 34
-
 
 Mr.
Bourne is a Corporate Director and Chair of the Board of Ballard.  He
was TransAlta Corporation’s Executive Vice President from January 1998 to
December 2006.  From January 1998 to December 2005, Mr. Bourne was the
Chief Financial Officer of TransAlta and was responsible for all financial
policy, planning and reporting, as well as tax, treasury and risk management
planning and implementation.  He sits on the boards of SNC-Lavalin
Group, Canadian Public Accountability Board, Wajax Income Fund, Canada Pension
Plan Investment Board and Canadian Oil Sands Trust.  Mr. Bourne has
completed the Directors Education Program of the Institute of Corporate
Directors and has received his ICD.D designation.
  Mr.
Kilroy has been the Chief Executive Officer of Symcor Inc. since January
2005.  Prior to that, Mr. Kilroy was the Chief Executive Officer of
IBM Canada Ltd. from April 2001 to January 2005.  Mr. Kilroy is also a
director of Symcor and The Conference Board of Canada.
  Mr.
Sutcliffe is a Corporate Director.  He was the Chief Executive Officer
of Sierra Wireless, Inc. from May 1995 to October 2005.  From May 2001
to April 2005, he was also the Chair of the Board of Sierra Wireless,
Inc.  Mr. Sutcliffe currently sits on the board of Sierra Wireless,
Inc.  Mr. Sutcliffe’s public company chief executive officer
experience includes Canadian and United States reporting.  Mr.
Sutcliffe has previously served on the audit committee of E-Comm 911 and has
completed the Directors Education Program of the Institute of Corporate
Directors and has received his ICD.D designation.
  Mr. Suwyn
is Executive Chairman of the Board of NewPage Corporation, a position he has
held since March 2009.  Previously, he was the Acting Chief Executive
Officer of NewPage Corporation from March 2009 to January 2010; and Chairman of
the Board and the Chief Executive Officer of NewPage Corporation since May 2005
and April 2006, respectively.  Mr. Suwyn was the President of Marsuw
Investment from November 2004 to April 2005.  From January 1996 to
October 2004, Mr. Suwyn was also the Chairman of the Board and the Chief
Executive Officer of Louisiana-Pacific Corporation.  He sits on the
boards of NewPage Corporation and BlueLinx Corporation.
  Mr.
Whitehead is the Chairman of Finning International Inc., and was elected to
Finning International’s board of directors on April 23, 1999.  Mr.
Whitehead was President and Chief Executive Officer of Finning International
from 1999 to May 2008.  Mr. Whitehead is also a director of
International Forest Products Inc., INMET Mining Corporation, Belkorp Industries
Inc. and Vancouver General Hospital/University of British Columbia Hospital
Foundation.
  The Audit
Committee operates under a mandate that is approved by the Board and which
outlines the responsibilities of the Audit Committee.  A copy of the
Audit Committee’s mandate is attached as Appendix "C" and is posted on our
website.  This
  
 - 35
-
 
 mandate
is reviewed annually and the Audit Committee’s performance is assessed annually
through a process overseen by the Corporate Governance Committee.
  Management
Development, Nominating & Compensation Committee
  The
Management Development, Nominating & Compensation Committee is responsible
for considering and authorizing the terms of employment and compensation of
executive officers and providing advice on compensation structures in the
various jurisdictions in which we operate.  In addition to approving
the compensation of our executive officers, the committee also regularly reviews
and sets the minimum share ownership requirement for executive
officers.  The committee also provides advice on our organizational
structure, reviews all distributions under our equity-based compensation plans,
and reviews and approves the design and structure of, and any amendments to,
those plans.  The committee seeks out and recommends nominees for
election to the Board, annually reviews the Board succession plan and annually
reviews the composition of director talents and skills against Board
requirements to identify any gaps.
  The
committee ensures appropriate senior management succession planning,
recruitment, development, training and evaluation.  In particular, the
committee annually reviews the performance objectives of our Chief Executive
Officer and is responsible for conducting his annual performance
evaluation.  Any compensation consultants engaged by us, at the
direction of the committee, report directly to the committee, and the committee
has the authority to appoint such consultants, determine their level of
remuneration, and oversee and terminate their services.  In 2009, the
committee directly retained Towers Perrin to provide independent compensation
analysis and advice specifically related to Ballard executive compensation items
and to establish 2009 pay target levels for Ballard executives.
  As of
March 15, 2010, the committee was composed of Ian A. Bourne, Dr. C.S. Park, Dr.
Geraldine B. Sinclair and David B. Sutcliffe (Chair), all of whom are
independent of management.  (David J. Smith also served on the
committee in 2009.  Mr. Smith ceased to be a member on July 13, 2009,
consistent with the decision that committee chairs no longer maintain membership
on multiple committees.)
  A copy of
the Management Development, Nominating & Compensation Committee’s mandate is
attached as Appendix "D" and is posted on our website.  The mandate is
reviewed annually and the committee’s performance is assessed annually through a
process overseen by the Corporate Governance Committee.
  Corporate
Governance Committee
  The
Corporate Governance Committee is responsible for recommending to the Board the
size of the Board, monitoring corporate governance, including the formation
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-
 
 and
membership of committees of the Board, conducting succession planning for the
Chair of the Board and determining director compensation.  The
committee regularly reviews the level of director compensation and approves the
design and structure of, and any amendments to, our director compensation
plans.  The committee is responsible for ensuring a formal process
exists to evaluate the performance of the Board, Board committees, individual
directors, and the Chair of the Board, and ensuring that appropriate actions are
taken, based on the results of the evaluation, to improve the effectiveness of
the Board.
  The
Corporate Governance Committee ensures that the Board complies with best
corporate governance practices in Canada and the United States.  The
committee is also responsible for maintaining an ongoing education program for
Board members.
  As of
March 15, 2010, the committee was composed of Ian A. Bourne, Dr. C.S. Park, Dr.
Geraldine B. Sinclair and David J. Smith (Chair), all of whom are independent of
management.  (Edwin J. Kilroy also served on the committee in
2009.  Mr. Kilroy ceased to be a member on July 13, 2009, consistent
with the decision that committee chairs no longer maintain membership on
multiple committees.  In order to maintain an adequate quorum
following the departure of Mr. Kilroy, Dr. Park joined the Corporate Governance
Committee at that time.)  Mr. Smith has completed the Directors
Education Program of the Institute of Corporate Directors and has received the
ICD.D designation.
  A copy of
the Corporate Governance Committee’s mandate is attached as Appendix "E" and is
posted on our website.  The mandate is reviewed annually and the
committee’s performance is assessed annually through a process overseen by the
Board.
  Executive
      Officers
  As of
March 15, 2010, we had six executive officers.  The name and province
or state of residence of each executive officer, the offices held by each
officer and each officer’s principal occupation during the last five years are
as follows:
  Name
      and Province/State of Residence
              Position
              Principal
      OccupationJohn
      W. Sheridan
                British
      Columbia, Canada
              President
      and Chief Executive Officer
              Executive
      of Ballard.Bruce
      Cousins
                British
      Columbia, Canada
              Vice
      President and Chief Financial Officer
              Executive
      of Ballard.
                Formerly
      Vice President Finance and Chief Financial Officer for Xantrex Technology
      Inc. (2008) and Executive Vice President and Chief Financial Officer
      for
 
  - 37
-
  Name
      and Province/State of Residence
                Position
                Principal
      OccupationAspreva
      Pharmaceuticals Corporation (2004 to 2008).William
      T. Foulds
                  Massachusetts,
      U.S.A.
                President,
      Ballard Material Products Inc.
                Executive
      of Ballard.Paul
      Cass
                  British
      Columbia, Canada
                Vice
      President, Operations
                Executive
      of Ballard. Formerly Director, Operations of Ballard.Michael
      Goldstein
                  British
      Columbia, Canada
                Vice
      President and Chief Commercial Officer
                Executive
      of Ballard. Formerly President and Chief Executive Officer of Actuality
      Systems (2006 to 2009) and Independent Investment Banker and Consultant
      for MGA Partners (2003 to 2005).Christopher
      J. Guzy
                  British
      Columbia, Canada
                Vice
      President and Chief Technical Officer
                Executive
      of Ballard. Formerly General Manager of Global Product Company, GE
      Healthcare’s product development and supply chain operations in Hungary
      (2001 to 2005).
  Shareholdings
      of Directors and Senior Officers
  As of
March 15, 2010, our directors and executive officers, as a group, beneficially
owned, or controlled or directed, directly or indirectly, 469,049 of our common
shares, being 0.56% of our issued and outstanding common shares, and 316,152
DSUs.
  TRANSFER AGENT AND
REGISTRAR
  Our
transfer agent and registrar is Computershare Trust Company of Canada, 100
University Avenue, 9th
Floor, Toronto, Ontario, M5J 2Y1.
  MATERIAL
CONTRACTS
  Particulars
of every contract that is material to Ballard, other than a contract entered
into in the ordinary course of business that is not required to be disclosed
under the CSA’sNational
Instrument 51-102 – Continuous Disclosure Obligations, and that was
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 entered
into within the most recently completed financial year, or before the most
recently completed financial year but is still in effect, are listed
below.  As all of these material contracts have been entered into in
connection with either the AFCC Transaction or the Superior Plus Transaction,
they are described below in conjunction with the more detailed description of
the transaction to which they relate.
  Detailed
      Description of the AFCC Transaction and Associated Material
      Contracts
  The AFCC
Transaction generally provided for the transfer of certain of our automotive
fuel cell research and development assets (the "Transferred Automotive R&D
Assets") to Daimler and Ford.  The AFCC Transaction was
implemented through: (a) our transfer to AFCC of the Transferred Automotive
R&D Assets and the assumption by AFCC of our automotive fuel cell warranty
liabilities to Daimler, Ford and their affiliates in return for a 100% equity
interest in AFCC; (b) our transfer to Daimler of 50.1% of our equity
interest in AFCC, an interest in and a licence to use certain of our
intellectual property rights, and $36.2 million; (c) our transfer to Ford
of 30.0% of our equity interest in AFCC, an interest in and a licence to use
certain of our intellectual property rights,  and $21.8 million; and
(d) the transfer by Daimler and Ford of their entire direct and indirect
shareholdings in Ballard to us for cancellation.
  We valued
the shares being returned to us by Daimler and Ford at $173.9 million. The AFCC
Transaction is described more fully in the remainder of this
section.
  Transfer
of Automotive Fuel Cell Research and Development Assets
  AFCC,
which is controlled by Daimler and Ford, was created to carry on the business
involving the Transferred Automotive R&D Assets.  As an initial
step, we transferred to AFCC our automotive fuel cell test equipment, automotive
fuel cell inventory, office equipment, $2 million in cash and all automotive
fuel cell development contracts between Ballard, Daimler and Ford.  In
exchange, AFCC assumed our automotive fuel cell warranty liabilities to Daimler,
Ford and their affiliates, and issued to Ballard a 100% equity interest in
AFCC.
  Ballard
then transferred: (a) to Daimler, a 50.1% equity interest in the
outstanding shares of AFCC, an undivided half interest in our intellectual
property rights principally used for propulsion systems in cars, vans, trucks
and buses ("Automotive
Propulsion Applications") (such intellectual property rights being
referred to as "Automotive
Intellectual Property Rights"), and $36.2 million, as well as providing
Daimler with a licence to use certain of its intellectual property rights; and
(b) to
Ford, a 30.0% equity interest in the outstanding shares of AFCC, the remaining
undivided half interest in our Automotive Intellectual Property Rights, and
$21.8 million, as well as providing Ford with a licence to use certain of its
intellectual property rights.
  
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  As a
result of the foregoing, we hold a 19.9% equity interest in AFCC. In addition,
under the AFCC Transaction, we retained the right to continue to develop fuel
cell modules for large buses (other than Daimler and Ford branded large buses),
as well as shuttle buses in Canada for use by transit authorities.
  In
exchange, Daimler transferred to us 21,392,598 common shares and 50 Class A
shares in the capital of DBF Pref Shareholdings Inc. ("DBF", an entity jointly owned
by Ballard, Daimler and Ford) (collectively representing Daimler’s entire direct
and indirect equity interest in Ballard), and Ford transferred to us 12,868,700
common shares and 50 Class C shares in the capital of DBF (collectively
representing Ford’s entire direct and indirect equity interest in Ballard). We
valued the shares being returned by Daimler and Ford to us at $173.9
million.  In addition, Daimler and Ford provided initial funding to
AFCC of $118 million for engineering, development and testing work.
  Employee
Transfers
  We
transferred to AFCC 112 personnel primarily involved in our automotive fuel cell
business (the "Transferred
Employees"), representing approximately 20% of our
personnel.  In order to make the transfer of the Transferred Employees
from Ballard to AFCC as seamless as possible, we continue to honour all
equity-based, long-term compensation previously issued to such Employees by us,
for so long as the Transferred Employee remains an employee of
AFCC.  In order to honour such equity-based, long-term compensation,
Ballard’s share option plans, share distribution plans and restricted share unit
plan were amended by resolution of the Board.  In the future, however,
we will not issue further options or restricted share units (the "RSUs") to the Transferred
Employees.
  Termination
of Automotive Alliance
  Following
the AFCC Transaction, we are no longer directly involved in automotive fuel cell
research and development. As a result, we entered into a termination agreement
with Daimler and Ford dated January 31, 2008 (the "Termination Agreement") under
which we terminated the Amended and Restated Fourth Alliance Agreement between
Ballard, Daimler, Ford and DBF dated February 15, 2007 (the "Fourth Alliance
Agreement").  Under the Termination Agreement, the only aspects
of the Fourth Alliance Agreement that survived the termination are:
(a) Ballard’s non-competition obligations in favour of NuCellSys, which
continue on substantially the same terms as previously under a new agreement
between Ballard, Daimler, Ford and NuCellSys dated January 31, 2008, since
Ballard received the consideration
for this non-competition obligation from Daimler and Ford in 2005; and
(b) Ballard’s right to acquire fuel cell intellectual property rights
developed by Daimler or Ford prior to the termination of the Fourth Alliance
Agreement, which continues under the shareholders’ agreement entered into by
Ballard, Daimler, Ford and AFCC dated January 31, 2008.
  
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-
  Amendment
of Articles
  In
connection with the termination of the Fourth Alliance Agreement and the return
by Daimler and Ford to Ballard of their entire equity interest in Ballard,
Daimler and Ford lost their right to appoint nominees to the Ballard’s Board and
the right of those nominees to exercise certain special approval rights in
respect of certain fundamental matters, such as: (a) our annual business
plan; (b) any significant proposed acquisition, disposition or borrowing
not set out in our annual business plan; and (c) fundamental corporate
changes such as an amalgamation, arrangement or reorganization. In order to
terminate such rights, we amended our articles to eliminate the Class A common
shares and Class B common shares from our authorized
capital.  Ballard’s shareholders approved this change by special
resolution on January 25, 2008.
  Arrangements
with respect to AFCC
  The 19.9%
equity interest we retained in AFCC is subject to a purchase agreement with
Ford, Daimler and AFCC dated January 31, 2008 (the "Share Purchase Agreement")
under which Ballard may require Ford to purchase its equity interest in AFCC on
or after January 31, 2013 for $65 million (plus interest accruing at LIBOR
rates), provided that: (a) at our request, such purchase will occur on an
earlier date specified by us in the event of: (i) a change of control of
Daimler, Ford or AFCC; (ii) Daimler, Ford or AFCC being subject to
insolvency or bankruptcy proceedings; or (iii) AFCC being the subject of a
significant reorganization; or (b) at Ford’s request, such purchase will
occur on an earlier date specified by Ford in the event of: (i) a change of
control of Ballard; or (ii) Ballard being subject to insolvency or
bankruptcy proceedings.
  While we
can accelerate Ford’s obligation to purchase our interest in AFCC in
circumstances in which Ford becomes insolvent or bankrupt, in such circumstances
our ability to enforce this obligation would be subject to the limitations on
creditor’s rights under applicable bankruptcy and insolvency legislation and
Ford’s remaining resources, the combination of which could result our being
unable to make any recovery.
  In
addition, Ford has the right, subject to the consent of Daimler, to purchase our
equity interest in AFCC at any time to prevent another automotive manufacturer
from obtaining an ownership interest in AFCC.  Under such
circumstances, the price paid by Ford to Ballard will be the greater of the base
price set out above and a proportionate share of any higher price to be paid by
such automotive manufacturer.
   
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 is
subject to the financial institution's rights in the transaction remaining
unsubordinated. As part of the monetization agreement, Ballard pledged its
shares in AFCC and assigned its right to "put" or sell those shares to Ford for
$65 million plus interest after January 31, 2013.  The value of the
monetization of the agreement with a financial institution was determined based
on a number of variables, including Ford's cost of borrowing, expected LIBOR,
time remaining to the Share Purchase Agreement's maturity date and general
market and other conditions.  All required approvals from Daimler,
Ford and AFCC were received prior to the closing of the
transaction.  Ballard's intellectual property rights, as described
below, are unaffected by this transaction.
  Pending
completion of the purchase of our interest in AFCC under the Share Purchase
Agreement, our rights and obligations with respect to AFCC are set out in a
shareholders agreement with Daimler, Ford and AFCC dated January 31, 2008 (the
"AFCC Shareholders’
Agreement").  Under the AFCC Shareholders’ Agreement, while we
remain a shareholder of AFCC: (a) we have no obligation to fund any of
AFCC’s operating expenses; (b) we are entitled to appoint one director to
AFCC’s board of directors (provided that we hold more than 7.5% of the issued
and outstanding shares in AFCC); (c) we will not compete with Daimler, Ford
or AFCC in fuel cells or fuel cell systems for Automotive Propulsion
Applications, except for shuttle buses in Canada and large bus applications
world-wide (other than Daimler and Ford branded buses); (d) Daimler, Ford
and AFCC will not compete with us in fuel cells or fuel cell systems for
non-Automotive Propulsion Applications ("Non-Automotive Applications"),
except for auxiliary power units for use in automobiles and European Aeronautic
Defence and Space Company aircraft;(e) we will not
solicit the employees of Daimler, Ford or AFCC; and (f) Daimler, Ford and
AFCC will not solicit our employees.
  For a
period of 18 months starting from January 31, 2008, we will not hire employees
of AFCC and AFCC will not hire employees of Ballard.
  Treatment
of Intellectual Property
  In
addition to the transfer of our Automotive Intellectual Property Rights to
Daimler and Ford, we entered into a number of arrangements relating to
intellectual property in connection with the AFCC Transaction:
  (a)
              NuCellSys
      transferred to us the intellectual property, which is fundamental to both
      Automotive Propulsion Applications and Non-Automotive Applications (such
      intellectual property rights being referred to as "Fundamental Intellectual
      Property Rights") and the intellectual property used in
      Non-Automotive Applications ("Non-Automotive Intellectual
      Property Rights") that was jointly owned by us.  Pursuant
      to a licence agreement with NuCellSys dated January 31, 2008, (the "NuCellSys Licence
      Agreement") NuCellSys granted to us a
  non-
  
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 exclusive,
      worldwide, royalty-free, sublicensable licence to use all of its existing
      intellectual property for Non-Automotive
  Applications.
  (b)
              Under
      the terms of a "Master
      Licence Agreement" and a "Fundamental Master Licence
      Agreement" each between Ballard, Daimler and Ford and dated January
      31, 2008, Ballard granted to each of Daimler and Ford a non-exclusive,
      world-wide, royalty-free licence to use Ballard’s Fundamental Intellectual
      Property Rights and its Non-Automotive Intellectual Property Rights for
      Automotive Propulsion Applications and each of Daimler and Ford granted
      Ballard a non-exclusive, world-wide, royalty-free licence to use their
      Automotive Intellectual Property Rights for Non-Automotive
      Applications.
  (c)
              Under
      the terms of an "Improvements Licence
      Agreement" and a "Fundamental Improvement Licence
      Agreement" each between Ballard, Daimler and Ford and dated January
      31, 2008, Ballard granted to each of Daimler and Ford a non-exclusive,
      world-wide, royalty-free licence to use all of the intellectual property
      relating to fuel cells developed by Ballard while it is a shareholder of
      AFCC for use in Automotive Propulsion Applications and each of Daimler and
      Ford granted Ballard a non-exclusive, world-wide, royalty-free licence to
      use all of the intellectual property relating to fuel cells developed,
      directly or indirectly, by either of them while Ballard is a shareholder
      of AFCC for use in Non-Automotive
Applications.
  In the
event the bankruptcy of an owner or licensor of intellectual property rights,
there is some uncertainty as to the survival of licence rights under Canadian
bankruptcy law.  Therefore, in order to protect the licence rights of
Daimler and Ford in respect of the Fundamental Intellectual Property Rights in
the limited event of our bankruptcy or insolvency, we transferred substantially
all of our Fundamental Intellectual Property Rights, and agreed to transfer all
improvements thereto made while we are a shareholder of AFCC, to a new corporate
entity, IP Holdings.  We then entered into a licence agreement with IP
Holdings dated January 31, 2008 (the "Fundamental Licence
Agreement") evidencing our exclusive right to use such Fundamental
Intellectual Property Rights and improvements thereto for Non-Automotive
Applications. In addition, we covenanted not to enter into any joint development
arrangements with third parties, unless our interest in any improvements to the
Fundamental Intellectual Property Rights arising out of such arrangements are
either transferred to IP Holdings or, at a minimum, are licensed to IP Holdings
(with a right to sublicence to Daimler and Ford).  We provided Daimler
and Ford each with a 33% voting, non-participating interest in IP Holdings,
retained a 34% voting interest and a 100% participating interest in IP Holdings,
and entered into an unanimous shareholders’ agreement with IP Holdings dated
January 31, 2008 (the "IP
Holdings Shareholders’ Agreement") to ensure that IP Holdings will not
take any action that
  
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 would
place the licence rights of any of the parties at risk. Under the IP Holdings
Shareholders’ Agreement, IP Holdings may not take any decision or action without
the unanimous approval of its shareholders, other than holding the Fundamental
Intellectual Property Rights and any improvements thereto.  Ballard
has the sole right to protect and enforce the Fundamental Intellectual Property
Rights transferred to IP Holdings.
  Service
Arrangements with AFCC
  We
entered into a number of arrangements with AFCC in order to enable it to carry
on business: (a) we lease or license to AFCC, on a cost-recovery basis,
40,000 square feet of space in our facilities in Burnaby, British Columbia for
use by the Transferred Employees; (b) we provide AFCC with key testing and
engineering services on a profitable basis; (c) we sell products to AFCC at
prices intended to produce a positive margin; and (d) we provide AFCC with
certain administrative services on a profitable basis.  Our service
agreements may be terminated by AFCC with six-months notice.
  Detailed
Description of the Superior Plus Transaction and Associated Material
Contracts
  We
entered into an arrangement agreement dated October 30, 2008 with Superior Plus
(the "Arrangement
Agreement"), which specified the parties’ respective obligations with
respect to the Superior Plus Transaction.  That transaction was
implemented by way of a statutory plan of arrangement under section 192 of the
Canada Business Corporations
Act, whereby Ballard caused its entire business and operations, including
all assets and liabilities, to be transferred to a new corporate entity, such
that the new corporate entity now has all of the same assets, liabilities,
directors, management and employees as Ballard formerly had under its old
corporate entity, except for its tax attributes.  Under the
arrangement, Ballard shareholders exchanged their common shares in the capital
of the old corporate entity for common shares in the capital of the new
corporate entity on a one-for-one basis, and Superior Plus obtained 100% of the
common shares in the capital of Ballard’s old corporate
entity.  Ballard received a cash payment of approximately C$46.3
million (C$41 million net of expenses) in consideration for allowing Superior
Plus to use its old corporate entity as the vehicle to complete its conversion
from an income trust to a corporation.  Following completion of the
Superior Plus Transaction, Ballard continued to carry on its business operations
as a public entity, and retained all the rights it previously held to related
intellectual property.
  Subco
 
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  Subco
issuing to Ballard 100,000,000 common shares in the capital of Subco and the
assumption of all of Ballard’s liabilities, except for the repayment of the
C$46.3 million loan from Superior Plus; (d) the exchange of all common
shares in the capital of Ballard’s old corporate entity for common shares in the
capital of Ballard’s new corporate entity; (e) the adoption by Ballard’s
new corporate entity of Share Incentive Plans substantially similar to the share
incentive plans of Ballard’s old corporate entity that existed prior to the
Superior Plus Transaction; (f) the grant of new DSUs and RSUs by Ballard’s
new corporate entity to those securityholders whose previous DSUs and RSUs were
cancelled in connection with the Superior Plus Transaction; (g) the
exchange of options to purchase common shares in the capital of Ballard’s old
corporate entity for substantially similar options to purchase common shares in
the capital of Ballard’s new corporate entity;  (h) the
alteration of the authorized capital of Ballard’s old corporate entity to amend
the rights attached to its common shares such that the shares are redeemable at
the option of Ballard for shares in Subco on a one-for-one basis, and to create
a new class of ordinary common shares (the "New Superior Shares");
(i) the transfer by Superior Plus of all of its assets, including the right
to receive repayment of the C$46.3 million loan, to Ballard’s old corporate
entity in exchange for the assumption of Superior Plus’ liabilities and
88,378,194 New Superior Shares; (j) the redemption of all of Superior Plus’
outstanding trust units; (k) the redemption of all of the outstanding
shares in the capital of Ballard’s old corporate entity, with the redemption
price paid to the sole shareholder, Ballard’s new corporate entity, by the
distribution of common shares in the capital of Subco on a one-for-one basis;
(l) the cancellation of any shares in the capital of Ballard’s new
corporate entity held by dissenting shareholders; (m) the liquidation of
Subco and the distribution of all of its assets, including the proceeds of the
C$46.3 million loan to, and the assumption of all of its liabilities by
Ballard’s new corporate entity; (n) the name change of Ballard’s old
corporate entity from "Ballard Power Systems Inc." to "Superior Plus Corp.",
which will carry on business as a successor to Superior Plus; and (o) the
name change of Ballard’s new corporate entity from "7076991 Canada Inc." to
"Ballard Power Systems Inc.", which will carry on business as a successor to
Ballard.
  The
purpose of the Superior Plus Transaction was to obtain non-dilutive financing
for Ballard.  In addition to the increase in both Ballard’s cash
reserves and shareholders’ equity of approximately C$41 million, the Superior
Plus Transaction allowed Ballard to step up the Canadian tax basis in its
assets, which may be applied towards sheltering future taxable
income.
  Stock
Exchange Listings
  Following
the completion of the Superior Plus Transaction, and the satisfaction of certain
requirements of the TSX and NASDAQ, Ballard’s common shares continue to be
listed and trade on the TSX under the symbol "BLD" and on the NASDAQ under the
symbol "BLDP".
 
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  Security
Certificates
  Following
the completion of the Superior Plus Transaction, the existing certificates
representing common shares in the capital of Ballard’s old corporate entity,
options to purchase common shares in the capital of Ballard’s old corporate
entity, and DSUs and RSUs issued under the share incentive plans of Ballard’s
old corporate entity, continue to represent common shares in the capital of
Ballard’s new corporate entity, options to purchase common shares in the capital
of Ballard’s new corporate entity, and DSUs and RSUs issued under the Share
Incentive Plans of Ballard’s new corporate entity,
respectively.  Therefore, Ballard securityholders do not need to take
any action to replace their certificates for Ballard’s common shares, options to
purchase common shares, DSUs or RSUs.
  Indemnification
Arrangements
  We
entered into an indemnification agreement with Superior Plus dated December 31,
2008 (the "Indemnity
Agreement"), which specifies the parties’ respective continuing
indemnification obligations to the other.  The Indemnity Agreement
provides that we are liable to Superior Plus for all Losses (as defined in the
Indemnity Agreement) which it may suffer, sustain, pay or incur, and we will
indemnify and hold Superior Plus harmless from and against all Losses which may
be brought against or suffered by Superior Plus or which Superior Plus may
suffer, sustain, pay or incur arising out of, resulting from, attributable to or
connected with:
  (a)
              any
      debts, liabilities, commitments or obligations of any nature (whether
      matured or unmatured, accrued, fixed, contingent or otherwise) of any kind
      whatsoever resulting from any matters, actions, events, facts or
      circumstances related to the activities, affairs or business of Ballard
      which occurred prior to the Effective Time (as defined in the Indemnity
      Agreement);
  (b)
              any
      debts, liabilities, commitments or obligations of any nature (whether
      matured or unmatured, accrued, fixed, contingent or otherwise) of any kind
      whatsoever resulting from any matters, actions, events, facts or
      circumstances related to the activities, affairs or business of Ballard
      which occur on or after the date of the Indemnity Agreement;
      and
  (c)
              any
      breach (including any failure or inaccuracy) of any of the representations
      and warranties of Ballard under the Arrangement Agreement, or any failure
      of Ballard to perform or observe any covenant or agreement to be performed
      by it under the Arrangement Agreement, excluding any Losses which Superior
      Plus may suffer, sustain, pay or incur, relating to or based upon the
      existence or availability of
Superior
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 Plus’
      Tax Pools (as defined in the Indemnity Agreement), other than as a result
      of fraud or wilful
misrepresentation.
  The
Indemnity Agreement also provides that Superior Plus will be liable to the
Corporation for all Losses which the Corporation may suffer, sustain, pay or
incur and will indemnify and hold the Corporation harmless from and against all
Losses which may be brought against or suffered by the Corporation or which the
Corporation may suffer, sustain, pay or incur arising out of, resulting from,
attributable to or connected with any breach (including any failure or
inaccuracy) of any of the representations and warranties of Superior Plus under
the Arrangement Agreement, or any failure of Superior Plus to perform or observe
any covenant or agreement to be performed by it under the Arrangement
Agreement.
  The
Indemnity Agreement does not contain any limit on the amount of the claims that
can be indemnified nor is there any threshold before indemnification is
provided. In addition, the Indemnity Agreement specifically extends the
limitation period within which a party is entitled to make a claim under the
Indemnity Agreement to two years after the notice of claim with respect to such
obligation was given.  However, with the exception of certain limited
adjustments to address differences in the amount of specific Tax Pools of
Ballard, which is described below, the indemnification provisions of the
Indemnity Agreement do not provide indemnification to Superior Plus in respect
of the amount or the availability of the Tax Pools.
  The
Indemnity Agreement also provides for certain compensation payments to be made
by Ballard and Superior Plus depending on the final determination of the amount
of certain Tax Losses (as defined in the Indemnity Agreement) of Ballard to the
extent that such amounts are more or less than the amounts estimated at the time
the Arrangement Agreement was executed or to the extent that such Tax Pools are
used to reduce Ballard’s income, taxable income, or income taxes for any period
ending at any time at or before the completion of the
Arrangement.  Ballard’s obligations under the Indemnity Agreement
relating to NCL Obligations (as defined in the Indemnity Agreement) are limited
to an aggregate of C$7,350,000 with a threshold amount of C$500,000 before there
is an obligation to make a compensation payment.
  The
Indemnity Agreement provides detailed procedures for claims under the Indemnity
Agreement, which, provided Ballard acknowledges liability under the Indemnity
Agreement with respect to such matter, gives Ballard the right to elect to take
carriage and control of the dispute process relating to such
claims.
  RISK FACTORS
  An
investment in our common shares involves risk.  Investors should
carefully consider the risks described below and the other information contained
in, and incorporated into, this Annual Information Form, including "Management’s
Discussion
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-
  and
Analysis" and our financial statements for the year ended December 31,
2009.  The risks and uncertainties described below are not the only
ones we face.  Additional risks and uncertainties, including those
that we do not know about now or that we currently deem immaterial, may also
adversely affect our business.
  We
may not be able to achieve commercialization of our products on the timetable we
anticipate, or at all.
  We cannot
guarantee that we will be able to develop commercially viable fuel cell products
on the timetable we anticipate, or at all. The commercialization of our fuel
cell products requires substantial technological advances to improve the
durability, reliability, cost and performance of these products, and to develop
commercial volume manufacturing processes for these products. We cannot
guarantee that we will be able to internally develop the technology necessary
for commercialization of our fuel cell products or that we will be able to
acquire or license the required technology from third parties.  In
addition, before we release any product to market, we subject it to numerous
field tests. These field tests may encounter problems and delays for a number of
reasons, many of which are beyond our control.  If these field tests
reveal technical defects or reveal that our products do not meet performance
goals, including useful life, reliability and durability, our commercialization
schedule could be delayed, and potential purchasers may decline to purchase our
products.
  We may
become subject to product liability lawsuits, which could result in significant
expense to us, adversely affecting our resources and the development of sales of
our products, and thereby delaying the commercialization of our
products.
  The
commercialization of our fuel cell products also depends upon our ability to
significantly reduce the costs of these products, since they are currently more
expensive than products based on existing technologies, such as ICEs and
batteries.  We may not be able to sufficiently reduce the cost of
these products without reducing their performance, reliability and durability,
which would adversely affect the willingness of consumers to buy our
products.
  We
expect our cash reserves will be reduced due to future operating losses, and we
cannot provide certainty as to how long our cash reserves will last or that we
will be able to access additional capital when necessary.
  We expect
to incur continued losses over the next several years.  If we are
unable to successfully implement our business plan, our cash requirements may
increase and we may find it difficult to raise additional funding.  We
expect our cash reserves will be reduced due to future operating losses, and we
cannot provide certainty as to how long our cash reserves will last or that we
will be able to access additional capital when necessary.
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 We
may not be able to successfully execute our business plan.
  The
execution of our business plan poses many challenges and is based on a number of
assumptions.  We may not be able to successfully execute our business
plan.  In addition, we cannot guarantee that we will be able to
leverage our relationships with suppliers for the development of our
technology.  If we experience significant cost overruns on our
programs, or if our business plan is more costly than we anticipate, certain
research and development activities may be delayed or eliminated, resulting in
changes or delays to our commercialization plans, or we may be compelled to
secure additional funding (which may or may not be available) to execute our
business plan.  We cannot predict with certainty our future revenues
or results from our operations.  If the assumptions on which our
revenue or expenditure forecasts are based change, the benefits of our business
plan may change as well.  In addition, we may consider expanding our
business beyond what is currently contemplated in our business
plan.  Depending on the financing requirements of a potential
acquisition or new product opportunity, we may be required to raise additional
capital through the issuance of equity or debt.  If we are unable to
raise additional capital on acceptable terms, we may be unable to pursue a
potential acquisition or new product opportunity.
  Potential
fluctuations in our financial and business results make forecasting difficult
and may restrict our access to funding for our commercialization
plan.
  We expect
our revenues and operating results to vary significantly from quarter to
quarter.  As a result, quarter-to-quarter comparisons of our revenues
and operating results may not be meaningful.  Due to the stage of
development of our business, it is difficult to predict our future revenues or
results of operations accurately.  We are also subject to normal
operating risks such as credit risks, foreign currency risks and fluctuations in
commodity prices.  As a result, it is possible that in one or more
future quarters, our operating results may fall below the expectations of
investors and securities analysts.  Not meeting investor and security
analyst expectations may materially and adversely impact the trading price of
our common shares, and restrict our ability to secure required funding to pursue
our commercialization plans.
  Exchange
rate fluctuations are beyond our control and may have a material adverse effect
on our business, operating results, financial condition and
profitability.
  Our
revenues are affected by fluctuations in the exchange rate between the Canadian
dollar and the United States dollar.  We generate approximately 90% of
our revenues in United States dollars while approximately 60% of our operating
expenses, cost of revenues and capital expenditures are in Canadian
dollars.  As a result, any decrease in the value of the United States
dollar relative to the Canadian dollar reduces the amount of Canadian dollar
revenues we realize on sales, without a corresponding decrease in
expenses.  Exchange rate fluctuations are beyond our control, and the
United States dollar may depreciate against the Canadian dollar in the future,
which
  
 - 49
-
 would
result in lower revenues and margins.  In order to reduce the
potential negative effect of a weakening United States dollar, we have entered
into various hedging programs.  However, if the Canadian dollar
increases in value, it will negatively affect our financial results and our
competitive position compared to other fuel cell product manufacturers in
jurisdictions where operating costs are lower.
  Commodity
price fluctuations are beyond our control and may have a material adverse effect
on our business, operating results, financial condition and
profitability.
  Commodity
prices, in particular the price of platinum, affect our
costs.  Platinum is a key component of our fuel cell
products.  Platinum is a scarce natural resource and we are dependent
upon a sufficient supply of this commodity.  While we do not
anticipate significant near or long-term shortages in the supply of platinum,
such shortages could adversely affect our ability to produce commercially viable
fuel cell products or significantly raise our cost of producing such
products.  In order to reduce the impact of platinum price
fluctuations, we have entered into various hedging programs.
  A
mass market for our products may never develop or may take longer to develop
than we anticipate.
  Our fuel
cell products represent emerging markets, and we do not know whether end-users
will want to use them in commercial volumes.  The development of a
mass market for our fuel cell products may be affected by many factors, some of
which are beyond our control, including the emergence of newer, more competitive
technologies and products, the cost of fuels used by our products, regulatory
requirements, consumer perceptions of the safety of our products and related
fuels, and end-user reluctance to buy a new product.
  If a mass
market fails to develop, or develops more slowly than we anticipate, we may
never achieve profitability.  In addition, we cannot guarantee that we
will continue to develop, manufacture or market our products if sales levels do
not support the continuation of the product.
  We
have limited experience manufacturing fuel cell products on a commercial
basis.
  To date,
we have focused primarily on research and development, and have limited
experience manufacturing fuel cell products on a commercial basis.  To
meet the quality, price, engineering, design and production standards or
production volumes required to successfully mass market our products, we will
have to produce our fuel cell products through high volume automated
processes.  These large-scale, automated processes will require
significant advances in manufacturing technology.  We do not know
whether or when we will be able to develop the manufacturing technology
necessary to achieve efficient, high-volume, low-cost manufacturing capability
and
  - 50
-
 processes.  Moreover,
developing these processes will require substantial capital, and we do not know
whether we will be able to secure sufficient funding on terms acceptable to
us.  Our failure to develop such manufacturing processes and
capabilities could have a material adverse effect on our business and financial
results.
  We
are dependent on third party suppliers for the supply of key materials and
components for our products.
  We have
established relationships with third party suppliers, on whom we rely to provide
materials and components for our products.  A supplier’s failure to
supply materials or components in a timely manner, or to supply materials and
components that meet our quality, quantity or cost requirements, or our
inability to obtain substitute sources for these materials and components in a
timely manner or on terms acceptable to us, could harm our ability to
manufacture our products.  To the extent that the processes that our
suppliers use to manufacture the materials and components are proprietary, we
may be unable to obtain comparable materials or components from alternative
suppliers, which could adversely affect our ability to produce viable fuel cell
products or significantly raise our cost of producing such
products.
  We
are dependent upon Original Equipment Manufacturers and Systems Integrators to
purchase certain of our products.
  To be
commercially useful, our fuel cell products must be integrated into products
manufactured by Systems Integrators and OEMs.  We can offer no
guarantee that Systems Integrators or OEMs will manufacture appropriate products
or, if they do manufacture such products, that they will choose to use our fuel
cell products.  Any integration, design, manufacturing or marketing
problems encountered by Systems Integrators or OEMs could adversely affect the
market for our fuel cell products and our financial results.
  Global
economic conditions are beyond our control and may have an adverse impact on our
business or our key suppliers and/or customers.
  Current
global economic conditions may adversely affect the development of sales of our
products, and thereby delay the commercialization of our
products.  Customers and/or suppliers may not be able to successfully
execute their business plans; product development activities may be delayed or
eliminated; new product introduction may be delayed or eliminated; end-user
demand may decrease; and some companies may not continue to be commercially
viable.
  Public
policy and regulatory changes could hurt the market for our
products.
  Changes
in existing government regulations and the emergence of new regulations with
respect to fuel cell products may hurt the market for our
products.  Environmental laws and regulations in the United States and
other countries have
  - 51
-
 driven
interest in fuel cells.  The deregulation of the electric utility
industry in Japan and elsewhere has created market opportunities for our fuel
cell products in the power generation market.  We cannot guarantee
that these laws and policies will not change.  Changes in these laws
and other laws and policies, or the failure of these laws and policies to become
more widespread, could result in manufacturers abandoning their interest in fuel
cell products or favouring alternative technologies.  In addition, as
fuel cell products are introduced into our target markets, the United States
government and other governments may impose burdensome requirements and
restrictions on the use of fuel cell products that could reduce or eliminate
demand for some or all of our products.
  We
depend on our intellectual property, and our failure to protect that
intellectual property could adversely affect our future growth and
success.
  Failure
to protect our existing intellectual property could seriously harm our business
and prospects because we believe that developing new products that are unique to
us is critical to our success.  We rely on patent, trade secret,
trademark and copyright laws to protect our intellectual
property.  However, some of our intellectual property is not covered
by any patent or patent application, and the patents to which we currently have
rights expire between 2010 and 2026.  Our present or future-issued
patents may not protect our technological leadership, and our patent portfolio
may not continue to grow at the same rate as it has in the
past.  Moreover, our patent position is subject to complex factual and
legal issues that may give rise to uncertainty as to the validity, scope and
enforceability of a particular patent.  Accordingly, there is no
assurance that: (a) any of the patents owned by us or other patents that third
parties license to us will not be invalidated, circumvented, challenged,
rendered unenforceable or licensed to others; or (b) any of our pending or
future patent applications will be issued with the breadth of claim coverage
sought by us, if issued at all. In addition, effective patent, trade secret,
trademark and copyright protection may be unavailable, limited or not applied
for in certain countries.  We also
seek to protect our proprietary intellectual property, including intellectual
property that may not be patented or patentable, in part by confidentiality
agreements and, if applicable, inventors’ rights agreements with our strategic
partners and employees.  We can provide no assurance that these
agreements will not be breached, that we will have adequate remedies for any
breach, or that such persons or institutions will not assert rights to
intellectual property arising out of these relationships.
  Certain
of our intellectual property have been licensed to us on a non-exclusive basis
from third parties who may also license such intellectual property to others,
including our competitors.  If necessary or desirable, we may seek
further licences under the patents or other intellectual property rights of
others.  However, we may not be able to obtain such licences or the
terms of any offered licences may not be
  
 - 52
-
 acceptable
to us.  The failure to obtain a licence from a third party for
intellectual property we use could cause us to incur substantial liabilities and
to suspend the manufacture or shipment of products or our use of processes
requiring the use of such intellectual property.
  We
may be involved in intellectual property litigation that causes us to incur
significant expenses or prevents us from selling our products.
  We may
become subject to lawsuits in which it is alleged that we have infringed the
intellectual property rights of others or commence lawsuits against others who
we believe are infringing upon our rights.  Our involvement in
intellectual property litigation could result in significant expense to us,
adversely affecting the development of sales of the challenged product or
intellectual property and diverting the efforts of our technical and management
personnel, whether or not such litigation is resolved in our
favour.  In the event of an adverse outcome as a defendant in any such
litigation, we may, among other things, be required to: (a) pay substantial
damages; cease the development, manufacture, use, sale or importation of
products that infringe upon other patented intellectual property;
(b) expend significant resources to develop or acquire non-infringing
intellectual property; (c) discontinue processes incorporating infringing
technology; or (d) obtain licences to the infringing intellectual
property.
  We may
not be successful in such development or acquisition or that such licences would
be available on reasonable terms.  Any such development, acquisition
or licence could require the expenditure of substantial time and other
resources, and could have a material adverse effect on our business and
financial results.  We
currently face and will continue to face significant competition.
  As fuel
cell products have the potential to replace existing power products, competition
for our products will come from current power technologies, from improvements to
current power technologies, and from new alternative energy technologies,
including other types of fuel cells.  Each of our target markets is
currently serviced by existing manufacturers with existing customers and
suppliers.  These manufacturers use proven and widely accepted
technologies such as ICEs and batteries as well as coal, oil and nuclear powered
generators.
  Additionally,
there are competitors working on developing technologies other than PEM fuel
cells (such as other types of fuel cells and advanced batteries) in each of our
targeted markets.  Some of these technologies are as capable of
fulfilling existing and proposed regulatory requirements as the PEM fuel
cell.
  Within
the PEM fuel cell market, we also have a large number of
competitors.  Across the world, corporations, national laboratories
and universities are actively engaged in the development and manufacture of PEM
fuel cell products and
 
  - 53
-
 components.  Each
of these competitors has the potential to capture market share in each of our
target markets.
  Many of
our competitors have substantial financial resources, customer bases,
manufacturing, marketing and sales capabilities, and businesses or other
resources, which give them significant competitive advantages over
us.
  We
could lose or fail to attract the personnel necessary to run our
business.
  Our
success depends in large part on our ability to attract and retain key
management, engineering, scientific, marketing, manufacturing and operating
personnel.  As we develop additional manufacturing capabilities and
expand the scope of our operations, we will require more skilled
personnel.  Recruiting personnel for the fuel cell industry is highly
competitive.  We may not be able to continue to attract and retain
qualified executive, managerial and technical personnel needed for our
business.  Our failure to attract or retain qualified personnel could
have a material adverse effect on our business.
  We
could be liable for environmental damages resulting from our research,
development or manufacturing operations.
  Our
business exposes us to the risk of harmful substances escaping into the
environment, resulting in personal injury or loss of life, damage to or
destruction of property, and natural resource damage.  Depending on
the nature of the claim, our current insurance policies may not adequately
reimburse us for costs incurred in settling environmental damage claims, and in
some instances, we may not be reimbursed at all.  Our business is
subject to numerous laws and regulations that govern environmental protection
and human health and safety.  These laws and regulations have changed
frequently in the past and it is reasonable to expect additional and more
stringent changes in the future.  Our operations may not comply with
future laws and regulations, and we may be required to make significant
unanticipated capital and operating expenditures.  If we fail to
comply with applicable environmental laws and regulations, governmental
authorities may seek to impose fines and penalties on us, or to revoke or deny
the issuance or renewal of operating permits, and private parties may seek
damages from us.  Under those circumstances, we might be required to
curtail or cease operations, conduct site remediation or other corrective
action, or pay substantial damage claims.
  Our
products use flammable fuels, which could subject our business to product
liability claims.
  Our
business exposes us to potential product liability claims that are inherent in
hydrogen and products that use hydrogen.  Hydrogen is a flammable gas
and therefore a potentially dangerous product.  Any accidents
involving our products or other
  - 54
-
 hydrogen-based
products could materially impede widespread market acceptance and demand for our
fuel cell products.  In addition, we may be held responsible for
damages beyond the scope of our insurance coverage.  We also cannot
predict whether we will be able to maintain our insurance coverage on acceptable
terms.
  ADDITIONAL INFORMATION
  Additional
information regarding Ballard may be found on SEDAR at www.sedar.com.  In
particular, additional information regarding directors’ and officers’
remuneration and indebtedness, principal holders of our securities and
securities authorized for issuance under security compensation plans is
contained in our information circular for our most recent annual meeting of
securityholders that involved the election of directors.  Additional
financial information is provided in our financial statements and Management’s
Discussion and Analysis for the most recently completed financial
year.
  Copies of
this Annual Information Form and the documents incorporated by reference herein,
our comparative financial statements (including the auditors’ report) for the
year ended December 31, 2009, each interim financial statement issued after
December 31, 2009, our management proxy circular and our Annual Report may be
obtained upon request from our Corporate Secretary, 9000 Glenlyon Parkway,
Burnaby, British Columbia, V5J 5J8, or on our website at
www.ballard.com.
  
    
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-
  APPENDIX
"A" BOARD
OF DIRECTORS MANDATE
  Purpose
  The board
of directors (the "Board") is responsible for the overall corporate governance
of the Corporation.  It oversees and directs the management of the
Corporation’s business and affairs.  In doing so, it must act
honestly, in good faith, and in the best interests of the
Corporation.  The Board guides the Corporation’s strategic direction,
evaluates the performance of the Corporation’s executive officers, monitors the
Corporation’s financial results, and is ultimately accountable to the
Corporation’s shareholders, employees, customers, suppliers, and regulators.
Board members are kept informed of the Corporation’s operations at meetings of
the Board and its committees, and through reports and analyses by, and
discussions with, management.  The Board manages the delegation of
decision-making authority to management through Board resolutions under which
management is given authority to transact business, but only within specific
limits and restrictions.  In this Mandate, the "Corporation" means
Ballard Power Systems Inc. and a "director" means a Board member.
  
  COMPOSITION
  A)
                As
      stated in the Articles of the Corporation, the Board will be composed of
      no fewer than five and no more than fifteen
  directors.
  B)
                The
      Board will have a majority of independent
  directors.
  C)
                The
      Board will appoint its own Chair.
  
  MEETINGS
  D)
                Meetings
      of the Board will be held as required, but at least four times a
      year.
  E)
                The
      Board will appoint its own Secretary, who need not be a
      director.  The Secretary, in conjunction with the Chair of the
      Board, will draw up an agenda, which will be circulated in advance to the
      members of the Board along with the materials for the
      meeting.  The Secretary will be responsible for taking and
      keeping the Board’s meeting
minutes.
 F)
                  As
      set out in the By-laws of the Corporation, meetings will be chaired by the
      Chair of the Board, or if the Chair is absent, by a member chosen by the
      Board from among themselves.
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-
  G)
                If
      all directors consent, and proper notice has been given or waived, a
      director or directors may participate in a meeting of the Board by means
      of such telephonic, electronic or other communication facilities as permit
      all persons participating in the meeting to communicate adequately with
      each other, and a director participating in such a meeting by any such
      means is deemed to be present at that
meeting.
  H)
                The
      Board will conduct an in-camera session excluding management at the end of
      each Board meeting.
  I)
                A
      majority of directors constitute a
quorum.
  J)
                All
      decisions made by the Board may be made at a Board meeting or evidenced in
      writing and signed by all Board members, which will be fully effective as
      if it had been made or passed at a Board
  meeting.
  DUTIES
AND RESPONSIBILITIES
  K)
                Selection
      of Management
  The Board
is responsible for appointing the Chief Executive Officer ("CEO"), for
monitoring and evaluating the CEO’s performance, and approving the CEO’s
compensation.  Upon recommendation of the CEO and the Management
Development, Nominating & Compensation Committee, the Board is also
responsible for appointing  all officers.   The Board
also ensures that adequate plans are in place for management development and
succession and conducts an annual review of such plans.
  L)
                Corporate
      Strategy
  The Board
is responsible for reviewing and approving the Corporation’s corporate mission
statement and corporate strategy on a yearly basis, as well as determining the
goals and objectives to achieve and implement the corporate strategy, while
taking into account, among other things, the opportunities and risks of the
business.  Each year, the Board meets for a strategic planning session
to set the plans for the upcoming year.  In addition to the general
management of the business, the Board expects management to achieve
the corporate goals set by the Board, and the Board monitors throughout the year
the progress made against these goals.  In
addition, the Board approves key transactions, which have strategic impact to
the Corporation, such as acquisitions, key collaborations, key supply
arrangements, and strategic alliances. Through the delegation of signing
authorities, the Board is responsible for setting out the types of transactions
that require approval of the Board before completion.
 
  
 - 57
-
  M)
                Fiscal
      Management and Reporting
  The Board
monitors the financial performance of the Corporation and must ensure that the
financial results are reported: (a) to shareholders and regulators on a timely
and regular basis; and (b) fairly and in accordance with generally accepted
accounting principles.  The Board must also ensure that all material
developments of the Corporation are disclosed to the public on a timely basis in
accordance with applicable securities regulations.  In the spring of
each year, the Board reviews and approves the Annual Report, which is sent to
shareholders of the Corporation and describes the achievements and performance
of the Corporation for the preceding year.
  N)
                Legal
      Compliance
  The Board
is responsible for overseeing compliance with all relevant policies and
procedures by which the Corporation operates and ensuring that the Corporation
operates at all times in compliance with all applicable laws and regulations,
and to the highest ethical and moral standards.
  O)
                Statutory
      Requirements
  The Board
is responsible for approving all matters, which require Board approval as
prescribed by applicable statutes and regulations, such as payment of dividends
and issuances of shares.  Management ensures that such matters are
brought to the attention of the Board as they arise.
  P)
                Formal
      Board Evaluation
  The
Board, through a process led by the Corporate Governance Committee, conducts an
annual evaluation and review of the performance of the Board, Board committees,
and the Chair of the Board.  The Corporate Governance Committee
reviews the results of such evaluation and together with the Chair of the Board,
discusses potential ways to improve Board effectiveness.  The
Corporate Governance Committee discusses the results of the evaluation and the
recommended improvements with the full Board.  The Board
also sets annual effectiveness goals and tracks performance against those
goals.  In addition, each individual director’s performance is
evaluated and reviewed regularly.  Q)
                  Risk
      Management
  The Board
is responsible for identifying the Corporation’s principal risks and ensuring
the implementation of appropriate systems to manage these risks.  The
Board is also responsible for the integrity of the Corporation’s internal
controls and management information systems.
 
  
 - 58
-
   R)
                External
      Communications
  The Board
is responsible for overseeing the establishment, maintenance and annual review
of the Corporation’s external communications policies which address how the
Corporation interacts with analysts and the public and which also contain
measures for the Corporation to avoid selective disclosure.  The Board
is responsible for establishing a process for receiving shareholder
feedback.  This is achieved through a semi-annual presentation of an
investor relations report, which contains a summary of the feedback and common
enquiries received from shareholders, as well as a Board e-mail address, which
has been set up for the public to submit messages to the Board.
   
   - 59
-
  APPENDIX
"B"
 DIRECTOR
TERMS OF REFERENCE
  MANDATE
  In
carrying out his or her responsibilities as a member of the board of directors,
each director owes a fiduciary duty to Ballard and must ensure that he or
she:
  A)
                acts
      honestly and in good faith with a view to the best interests of Ballard;
      and
  B)
                exercises
      the care, diligence and skill that a reasonably prudent person would
      exercise in comparable
circumstances.
  
  DUTIES
AND RESPONSIBILITIES
  In
carrying out his or her mandate as a director, each director must:
  A)
                maintain
      confidentiality of all information which is learned in his or her capacity
      as a director;
  B)
                exercise
      good judgment and act with
integrity;
  C)
                avoid
      conflicts of interest;
  D)
                disclose
      contracts or arrangements in which the director has an
      interest;
  E)
                be
      an available resource to management and the rest of the
    board;
  F)
                ensure
      that Ballard operates according to best
  practices;
  G)
                support
      and encourage legal, ethical and credible business
    practices;
  H)
                act
      and function independently of management;
and
  I)
                be
      available for communications with the Chairman and/or CEO between
      meetings.
    To
promote the effectiveness of Board and committee meetings, each director
must:
  A)
                prepare
      for such meetings by reviewing the materials sent out in advance of the
      meeting;
 B)
                  attend
      each meeting, whenever
possible;
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  C)
                be
      in attendance for the full duration of the meeting, whenever
      possible;
  D)
                have
      acquired adequate information necessary for decision
    making;
  E)
                participate
      fully and frankly in deliberations and discussions during the
      meeting;
  F)
                encourage
      free and open discussion of the affairs of Ballard by the board members;
      and
  G)
                question
      senior management appropriately regarding strategy, operations and
      results.
  
  In
order to be able to make well-informed decisions, each director
must:
  A)
                remain
      knowledgeable about Ballard’s products and
  industry;
  B)
                develop
      a thorough understanding of Ballard’s role in the industry and the
      community;
  C)
                maintain
      an understanding of the regulatory, business, social and political
      environments in which Ballard
operates;
  D)
                maintain
      an understanding of current professional development matters affecting
      public company boards and the role of corporate
      directors  generally; and
  E)
                remain
      knowledgeable about Ballard’s facilities and visit them when
      appropriate.
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  APPENDIX
"C" AUDIT
COMMITTEE MANDATE
  Purpose
  The
purpose of the Audit Committee (the "Committee") is to assist the board of
directors in fulfilling its oversight responsibilities by reviewing the
financial information which will be provided to the shareholders and the public,
the systems of corporate controls which management and the board of directors
have established, and overseeing the audit process.  The Committee
also is mandated to review and approve all related party transactions, as
further described below under "Duties and Responsibilities", other than those
related party transactions in respect of which the board has delegated review to
a special committee of independent directors.
  In this
Mandate, the "Corporation" means Ballard Power Systems Inc. and a "director"
means a board member.
  More
specifically the purpose of the Committee is to satisfy itself
that:
  A)
                the
      Corporation’s annual financial statements are fairly presented in
      accordance with generally accepted accounting principles and to recommend
      approval of the annual financial statements to the
  board;
  B)
                the
      financial information contained in the Corporation’s quarterly financial
      statements, Annual Report to Shareholders and other financial publications
      such as Management’s Discussion and Analysis, the Annual Information Form,
      Management Proxy Circular and information contained in any prospectus is
      complete and accurate in all material respects and to recommend to the
      board approval of these materials other than the quarterly financial
      statements for which approval authority has been delegated to the
      Committee hereunder;
  C)
                the
      Corporation has appropriate systems of internal control over the
      safeguarding of assets and financial reporting to ensure compliance with
      legal and regulatory requirements and to manage financial and asset
      related risks;
  D)
                the
      external audit function has been effectively carried out and that any
      matter which the external auditors wish to bring to the attention of the
      Committee or board of directors has been addressed. The Committee is also
      responsible for recommending the appointment (for approval by the
      shareholders at the Corporation’s annual meeting of shareholders) of, and
      overseeing the external auditors, monitoring the external auditors’
      qualifications and independence, pre-approving all substantive audit
      services and non-audit services performed by the external auditors, and
      determining the appropriate level of remuneration for the external
      auditors. The external auditors will report directly to the Audit
      Committee;
     - 62
-
  E)
                management
      has established and is maintaining processes to assure compliance by the
      Corporation with all applicable laws, regulations and corporate
      policies;
  F)
                the
      internal audit function is being effectively carried out, that the
      Committee is meeting with the internal auditor (or persons responsible for
      the function) as necessary, and that any matter which the internal auditor
      wishes to bring to the attention of the Committee or board of directors
      has been addressed;
  G)
                the
      related party transactions being reviewed by the Committee are in the best
      interests of the Corporation; and
  H)
                it
      has engaged any necessary independent counsel or other advisors in
      fulfilling its duties and responsibilities, as set forth in this
      Mandate.
  
  Composition
and Eligibility
  A)
                Following
      each annual meeting of shareholders of the Corporation, the board will
      appoint from its members not less than three directors to serve on the
      Committee.  Each member of the Committee must meet the
      independence and expertise requirements for audit committees imposed by
      any listing standards of NASDAQ or requirements of the Canadian securities
      regulatory authorities under National Instrument 52-110, any applicable
      statutes, or applicable rules or regulations of the U.S. Securities
      Exchange Commission.
  B)
                Any
      member may be removed or replaced at any time by the board and will cease
      to be a member upon ceasing to be a director of the
      Corporation.  Each member will hold office until the close of
      the next annual meeting of shareholders of the Corporation or until the
      member resigns or is replaced whichever occurs
  first.
  C)
                The
      Committee will appoint the Committee
Chair.
  D)
                All
      members of the Committee must have working familiarity with basic finance
      and accounting practices, and be able to read and understand fundamental
      financial statements, including a balance sheet, income statement and cash
      flow statement at the time of their
appointment.
 E)
                  At
      least one member of the Committee must be an audit committee "financial
      expert" as defined by the applicable rules set out by the U.S. Securities
      and Exchange Commission (the "SEC") or any other regulatory
      authority.  The financial expert must have all of the following
      five attributes:
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-
  (i)
                an
      understanding of Generally Accepted Accounting Principles ("GAAP") or the
      generally accepted accounting principles used by the issuer in preparing
      its primary financial statements filed with the
  SEC;
  (ii)
                the
      ability to assess the general application of such principles in connection
      with the accounting for estimates, accruals and
  reserves;
  (iii)
                experience
      preparing, auditing, analyzing or evaluating financial statements that
      present a breadth and level of complexity of accounting issues that are
      generally comparable to the breadth and complexity of issues that can
      reasonably be expected to be raised by the Corporation’s financial
      statements, or experience actively supervising one or more person engaged
      in such activities;
  (iv)
                an
      understanding of internal controls and procedures for financial reporting;
      and
  (v)
                an
      understanding of audit committee
functions.
  The
financial expert must have acquired the requisite attributes through any one or
more of the following methods:
  (i)
                education
      and experience as a principal financial officer, principal accounting
      officer, controller, public accountant or auditor or experience in one or
      more positions that involve the performance of similar
      functions;
  (ii)
                experience
      actively supervising a principal financial officer, principal accounting
      officer, controller, public accountant, auditor or person performing
      similar functions;
  (iii)
                experience
      overseeing or assessing the performance of companies or public accountants
      with respect to the preparation, auditing or evaluation of financial
      statements; or
  (iv)
                other
      relevant experience, based on the determination by the board of directors
      as to the specific experience, which satisfies this
      requirement.
 F)
                  Any
      member of the Committee who serves on more than three public company audit
      committees must inform the Chair of the Board, so that the board may
      consider and discuss with such member any issues related to his or her
      effectiveness and time commitment.
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  Meetings
  A)
                The
      Committee will meet at least quarterly.  The meetings will be
      scheduled to permit timely review of the interim and annual financial
      statements, as well as the Corporation’s other financial disclosures and
      related party transactions.  The Chair, CEO, CFO, Controller,
      internal and external auditors or any member of the Committee may request
      additional meetings.
  B)
                The
      Committee will appoint its own Secretary, who need not be a
      director.  The Secretary in conjunction with the Chair of the
      Committee will draw up an agenda, which will be circulated, in advance to
      the members of the Committee with the materials for the
      meeting.  The Secretary will be responsible for taking and
      keeping the Committee’s meeting
minutes.
  C)
                Meetings
      will be chaired by the Chair of the Committee, or if the Chair is absent,
      by a member chosen by the Committee from among
  themselves.
  D)
                If
      all members consent, and proper notice has been given or waived, a member
      or members of the Committee may participate in a meeting of the Committee
      by means of such telephonic, electronic or other communication facilities
      as permit all persons participating in the meeting to communicate
      adequately with each other, and a member participating in such a meeting
      by any such means is deemed to be present at that
  meeting.
  E)
                All
      directors who are not Committee members will be given notice of every
      meeting of the Committee and will be allowed to attend as observers,
      unless deemed inappropriate by the Committee in cases where a potential
      conflict of interest may exist, such as discussions concerning related
      party transactions.
  F)
                The
      CEO, CFO, Controller and internal auditor shall have direct access to the
      Committee and shall receive notice of and attend all meetings of the
      Committee, except the in-camera
sessions.
 G)
                  The
      external auditors will be given notice of, and have the right to appear
      before and to be heard at, every meeting of the Committee and will appear
      before the Committee when requested to do so by the
    Committee.
  H)
                  The
      Committee is authorized to request the presence, at any meeting, of senior
      management, legal counsel or anyone else who could contribute
      substantively to the subject of the
meeting.
  I)
                  The
      Committee members will receive minutes of all meetings of the
      Corporation’s internal Disclosure
Committee.
  J)
                  A
      majority of Committee members constitute a
  quorum.
    - 65
-
  K)
                All
      decisions made by the Committee may be made at a Committee meeting or
      evidenced in writing and signed by all Committee members, which will be
      fully effective as if it had been made or passed at a Committee
      meeting.
  L)
                The
      minutes of all meetings of the Committee will be provided to the board of
      directors.  The Chair of the Committee will provide an oral
      report on the Committee’s activities to the board of directors at the next
      regularly scheduled meeting of the board following each Committee
      meeting.
  M)
                Supporting
      schedules and information reviewed by the Committee will be available for
      examination by any director upon request to the Secretary of the
      Committee.
  N)
                The
      Committee may form and delegate authority to subcommittees.  In
      particular, the Committee may delegate to one or more of its members the
      authority to pre-approve audit or permissible non-audit services, provided
      that the decisions of any member(s) to whom pre-approval authority is
      delegated will be presented to the Committee at the next Committee
      meeting.
  
  Duties
and Responsibilities
  A)
                Investigations
  The
Committee is empowered to investigate any activity of the Corporation and all
employees are to co-operate as requested by the Committee.  The
Committee may retain outside advisors having special expertise to assist it in
fulfilling its responsibilities, and determine the appropriate level of
remuneration for such outside advisors.
  B)
                  Financial
      Reporting Control Systems
  The
Committee will:
  (i)
                  review
      with management any significant changes in financial risks facing the
      Corporation;
  (ii)
                  review
      with management procedures followed with respect to disclosure controls
      and procedures;
  (iii)
                  review
      the management letter from the external auditors and the Corporation’s
      responses to suggestions made;
  (iv)
                  annually
      review specific matters affecting financial reporting, including but not
      limited to, the Corporation’s insurance coverage, the status of
      the
  - 66
-
  Corporation’s
      tax loss carry-forwards, pension and health care liabilities, and off
      balance sheet transactions;
  (v)
                review
      the appointment of the financial senior executives of the Corporation,
      prior to recommendation by the Management Development, Nominating &
      Compensation Committee ("MDNCC") to the
board;
  (vi)
                establish
      and maintain a set of procedures for the receipt, retention and treatment
      of complaints received by the Corporation concerning accounting, internal
      accounting controls or auditing matters and the confidential anonymous
      submission by employees of concerns regarding questionable accounting or
      auditing matters;
  (vii)
                discuss
      and consider policies with respect to risk assessment and risk management,
      including:
  a)
                review
      and periodic approval of management’s risk philosophy and risk management
      policies;
  b)
                review
      with management, at least annually, of reports demonstrating compliance
      with risk management policies; and
  c)
                discussing
      with management, at least annually, the Corporation’s major financial risk
      exposures and the steps management has taken to monitor and control such
      expenses including the Corporation’s risk assessment and risk management
      policies.
  (viii)
                  meet
      separately and periodically, no less than annually, with management, with
      internal auditors (or the persons responsible for the internal audit
      function) and with external
auditors.
  C)
                  Interim
      Financial Statements
  The
Committee will, prior to their release, review and approve the interim
(quarterly) financial statements and Management’s Discussion and Analysis with
the Corporation’s officers and external auditors.  This will include
significant transactions, which have occurred in the quarter.
  D)
                  Annual
      Financial Statements and Other Financial
  Information
  The
Committee will:
  (i)
                  review
      any changes in accounting policies or financial reporting requirements
      that may affect the current year’s financial
  statements;
    - 67
-
  (ii)
                obtain
      summaries of significant transactions, and other complex matters whose
      treatment in the annual financial statements merits advance
      consideration;
  (iii)
                obtain
      draft annual financial statements in advance of the Committee meeting and
      assess, on a preliminary basis, the reasonableness of the financial
      statements in light of the analyses provided by the Corporation’s
      officers;
  (iv)
                review
      a summary provided by the Corporation’s legal counsel of the status of any
      material pending or threatened litigation, claims and
      assessments;
  (v)
                review
      and approve the annual financial statements, Management’s Discussion and
      Analysis and the auditors’ report thereon, and discuss them in detail with
      the Corporation’s officers and the external
  auditors;
  (vi)
                review
      and recommend to the board of directors approval of all financial
      disclosure contained in prospectuses, annual information forms, management
      proxy circulars and other similar
documents;
  (vii)
                before
      the release of each quarterly report and the annual financial statements,
      discuss with the external auditors all matters required by SAS 61
      (including the auditors’ responsibility under GAAP, the selection of and
      changes in significant accounting policies or their application,
      management judgments and accounting estimates, significant audit
      adjustments, the external auditors’ responsibility for information other
      than financial statements, disagreements with management, consultation
      with other accountants, and difficulties encountered in performing the
      audit) and CICA Handbook section 5751 (which governs the communications
      between the external auditors and the
  Committee);
  (viii)
                  provide
      the board of directors with a recommendation for approval of the annual
      financial statements; and
  (ix)
                  discuss
      earnings press releases and earnings guidance, as well as the release of
      significant new financial
information.
  E)
                  Relationship
      with External Auditors
  The Committee will:
  (i)
                  recommend
      the appointment of the external auditors (for approval by the shareholders
      at the Corporation’s annual meeting of shareholders); if there is a plan
      to change auditors, review all issues related to the change
 
   - 68
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  and
      the steps planned for an orderly transition.  The external
      auditors will report directly to the Committee.  The Committee
      will not recommend the appointment of an external auditor who has
      previously employed the Corporation’s CEO, CFO, Controller or chief
      accounting officer and where such person participated in any capacity in
      the audit of the Corporation within the past
  year;
  (ii)
                annually
      review and approve the terms of engagement and determine the remuneration
      of the external auditors;
  (iii)
                review
      the quarterly and annual representation letters given by management to the
      external auditors;
  (iv)
                monitor
      the external auditors’ qualifications and independence through the
      activities listed in section (G) below, "Independence of External
      Auditors";
  (v)
                review
      the audit plan with the external auditors and approve all substantive
      audit services in advance;
  (vi)
                approve
      in advance any services to be provided by the external auditors which are
      not related to the audit, including the fees and terms of engagement
      relating to such non-audit services for the Corporation and its
      subsidiaries.  Specifically, the Committee must not allow the
      external auditors to provide the following
  services:
  a)
                bookkeeping
      services;
  b)
                financial
      information systems design and
implementation;
  c)
                appraisal
      or valuation services, fairness opinions or contribution-in-kind
      reports;
  d)
                actuarial
      services;
  e)
                internal
      audit services which relate to the Corporation’s internal accounting
      controls, financial systems or financial
  statements;
  f)
                investment
      banking, broker, dealer or investment advisor
  services;
  g)
                management
      and human resources services;
  h)
                legal
      services and expert services unrelated to the audit (however the external
      auditors may provide tax services);
and
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-
 
  i)
                    any
      other services that the Public Company Accounting Oversight Board or the
      Canadian Public Accountability Board determines by regulation, or the
      Corporation’s board of directors determines, to be
      impermissible.
  (vii)
                    review
      quarterly all fees paid to external
auditors;
  (viii)
                    review
      performance against audit proposal
plan;
  (ix)
                    discuss
      in private with the external auditors matters affecting the conduct of
      their audit and other corporate
matters;
  (x)
                    receive
      from the external auditors a report with respect
  to:
  a)
                    all
      critical accounting policies and
practices;
 b)
                all
      alternative treatments of financial information within GAAP that have been
      discussed with management, implications of their use and the external
      auditors’ "preferred treatment";
  c)
                any
      other material written communications between the external auditors and
      management;
  d)
                the
      internal quality-control procedures of the external
    auditors;
  e)
                any
      material issues raised by the most recent internal quality-control review
      of the external auditors’ firm, or by an inquiry or investigation by
      governmental or professional authorities, within the preceding five years,
      respecting one or more independent audits carried out by the external
      auditors’ firm, and any steps taken to deal with any such issues;
      and
  f)
                all
      relationships between the external auditors and the Corporation as
      detailed in §(i) under Section (G) below “Independence of External
      Auditors”;
  (xi)
                resolve
      all disagreements between management and the external auditors regarding
      financial reporting; and
  (xii)
                ensure
      that the audit partners representing the external auditors meet the
      rotation requirements set out by the U.S. Securities and Exchange
      Commission and by any other applicable Canadian or U.S. securities
      regulatory authority or stock
exchange.
   - 70
-
 
  F)
                    Treasury
  The
Committee will:
  (i)
                    review
      and approve the Treasury Policy;
  (ii)
                    review
      the quarterly Treasury Report;
  (iii)
                    review
      and approve the Foreign Exchange Policy;
and
  (iv)
                    review
      and approve  any  commodities hedging
      policy.
 G)
                Independence
      of External Auditors
  The
Committee will oversee the independence of the Corporation’s external auditors
by:
  (i)
                receiving
      from the external auditors, on a periodic basis, a formal written
      statement delineating all relationships between the external auditors and
      the Corporation consistent with ISBS No. 1 and CICA Handbook Section
      5751;
  (ii)
                reviewing
      and actively discussing with the board of directors, if necessary, and the
      external auditors, on a periodic basis, any relationships or services
      between the external auditors and the Corporation or any other
      relationships or services that may impact the objectivity and independence
      of the external auditors;
  (iii)
                recommending,
      if necessary, that the board of directors take action to satisfy itself,
      of the external auditors’ independence;
and
  (iv)
                ensuring
      that the Corporation does not hire as the Corporation’s CEO, CFO,
      Controller or chief accounting officer any person who was employed by the
      Corporation’s external auditors and who participated in any capacity in
      the audit of the Corporation during the one-year period preceding the
      initiation of the current audit.
  H)
                Internal
      Audit and Controls
  (i)
                The
      Committee will ensure that the Corporation has appropriate systems of
      internal control over the safeguarding of assets and financial reporting
      to ensure compliance with legal and regulatory requirements and to manage
      financial and asset related risks.
  (ii)
                The
      Committee will review quarterly the internal auditors’ report on the
      adequacy of the Corporation’s internal controls, policies and
      procedures.
    - 71
-
 
  (iii)
                    The
      Committee will annually review and approve the internal audit
      plan.
  (iv)
                    The
      Committee will regularly review progress against the approved internal
      audit plan, and adjust the plan to deal with emerging issues as
      required.
 I)
                Related
      Party Transactions
  The
Committee will review and approve all related party transactions, other than
those related party transactions in respect of which the board has delegated
review to a special committee or independent directors or those related party
transactions which are previously approved under the mandate of the MDNCC,
including, but not limited to, executive employment agreements and compensation
matters.  A related party transaction is defined as a transaction in
which the Corporation or any of its subsidiaries is to be a party, which
involves an amount exceeding U.S. $60,000 and in which any of the following
persons have a direct or indirect material interest:
  (i)
                a
      director or executive officer of the
  Corporation;
  (ii)
                any
      nominee for election as a director of the
  Corporation;
  (iii)
                any
      security holder of the Corporation known by the Corporation to own (of
      record or beneficially) more than 5% of any class of the Corporation’s
      voting securities; and
  (iv)
                any
      member of the immediate family of any of the foregoing
      persons.
  In
carrying out its responsibilities in reviewing and approving related party
transactions, the Committee will:
  (v)
                receive
      details of all related party transactions proposed by the Corporation,
      other than those related party transactions which the board has delegated
      review of to a special committee of independent
  directors;
  (vi)
                discuss
      such related party transactions with the representatives of the relevant
      parties (the "Representatives") and with the Corporation’s executive
      officers;
  (vii)
                review
      the terms and conditions of each related party
  transaction;
  (viii)
                with
      respect to the holders of common shares, consider the effect of the
      related party transaction on, and the fairness of the related party
      transaction to, such shareholders;
    - 72
-
 
  (ix)
                    recommend
      any revisions to the structure of the related party transaction that the
      Committee considers to be necessary or
  advisable;
 (x)
                if
      a valuation or fairness opinion is required by any applicable statutes or
      regulations, supervise the preparation of such valuation or fairness
      opinion;
  (xi)
                if
      approval of the board of directors is necessary, provide a recommendation
      to the board of directors with respect to the related party transaction;
      and
  (xii)
                review
      a summary of completed related party transactions to ensure that such
      transactions are consistent with the terms and conditions previously
      approved by the committee.
  As part
of its review of all related party transactions, the Committee will review all
modifications to existing loans and advances to the Corporation’s executive
officers or directors.
  J)
                Other
  The
Committee will:
  (i)
                perform
      an annual review of management’s compliance with the Corporation’s code of
      ethics and workplace guidelines
policy;
  (ii)
                perform
      an annual review of the succession plans for the Corporation’s CFO and
      Controller;
  (iii)
                perform
      an annual review of this Committee mandate, with any recommended changes
      being forwarded to the Corporate Governance Committee and ultimately the
      board for approval; and
  (iv)
                annually
      review the audit of the expense reports of the Chair of the Board of
      Directors and the CEO.
  Performance
Evaluation
  K)
                The
      Committee will perform an annual evaluation of its performance, having
      regard to the issues reviewed during the
year.
   
 - 73
-
  COMMITTEE
TIMETABLE
  The
timetable below generally outlines the Committee’s anticipated schedule of
activities during the year.
  Committee
      TimetableAgenda
      Items
                      J
                      F
                      M
                      A
                      M
                      J
                      J
                      A
                      S
                      O
                      N
                      DA)
                      Financial Reporting Control
      Systems(i)
                      Review with management any significant changes in financial
      risks facing the Corporation.
                      
                      
                      ü
                      ü
                      
                      
                      ü
                      
                      
                      ü(ii)
                      Review with management procedures followed with respect to
      disclosure controls and procedures.
                      
                      
                      ü
                      ü
                      
                      
                      ü
                      
                      
                      ü(iii)
                      Review the management letter from the external auditor and
      corporation’s responses to suggestions made.
                      
                      
                      
                      ü(iv)
                      Annually review the Committee mandate.
                      
                      
                      ü(v)
                      Review
      specific matters as required affecting financial reporting such as
      insurance coverage, the status of the Corporation’s tax loss
      carry-forwards, pension and health care liabilities, and off balance sheet
      transactions.
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      ü(vi)
                      Review the appointment of the financial senior executives of
      the Corporation.
                      
                      
                      ü
                      ü
                      
                      
                      ü
                      
                      
                      ü(vii)
                      Establish and maintain a set of procedures for the receipt,
      retention and treatment of complaints received by the Corporation
      concerning accounting, internal accounting controls or auditing matters
      and the confidential anonymous submission by employees of concerns
      regarding questionable accounting or auditing matters, and review
      submissions as received.
                      
                      
                      ü
                      ü
                      
                      
                      ü
                      
                      
                      ü(viii)
                      Discuss and consider policies with respect to risk
      assessment and risk management.
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      ü(ix)
                      Meet separately and periodically, no less than annually,
      with management, with internal auditors (or persons responsible for the
      internal audit function) and with independent auditors.
                      
                      
                      ü
                      ü
                      
                      
                      ü
                      
                      
                      üB)
                      Interim Financial
      Statements(i)
                      Review
      and approval of interim financial statements and MD&A.
                      
                      
                      
                      ü
                      
                      
                      ü
                      
                      
                      üC)
                      Annual Financial Statements
      and Other Financial Information(i)
                      Review
      any changes in accounting policies or financial
                      
                      
                      ü
                      ü
                      
                      
                      ü
                      
                      
                      ü
  - 74
-
  Committee
      TimetableAgenda
      Items
                  J
                  F
                  M
                  A
                  M
                  J
                  J
                  A
                  S
                  O
                  N
                  Dreporting
      requirements that may affect the current year's financial
      statements.(ii)
                  Obtain
      summaries of significant transactions, and other complex matters whose
      treatment in the annual financial statements merits advance
      consideration.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  ü(iii)
                  Obtain
      draft annual financial statements in advance of the Committee meeting and
      assess, on a preliminary basis, the reasonableness of the financial
      statements in light of the analyses provided by the Corporation’s
      officers.
                  
                  
                  ü(iv)
                  Review
      summary provided by the Corporation’s legal counsel of the status of any
      material pending or threatened litigation, claims and
      assessments.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  ü(v)
                  Discuss
      the annual financial statements, MD&A and the auditors’ report thereon
      in detail with the Corporation’s officers and the external
      auditors.
                  
                  
                  ü(vi)
                  Review
      and recommend to the board of directors approval of all financial
      disclosure contained in prospectuses, annual information forms, management
      proxy circulars and other similar documents.
                  
                  
                  ü(vii)
                  Before
      the release of each quarterly report and annual financial statements,
      discuss with the external auditors all matters required by SAS 61 and CICA
      Handbook section 5751.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  ü(viii)
                  Provide
      the board with a recommendation for approval of the annual financial
      statements.
                  
                  
                  ü(ix)
                  Discuss
      earnings press releases and earnings guidance as well as the release of
      significant new financial information.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  üD)
                  Relationship
      with External Auditors(i)
                  Annually
      appoint (subject to shareholder approval) external auditor.
                  
                  
                  ü(ii)
                  Annually
      review and approve terms of engagement and determine remuneration of
      external auditor.
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  ü(iii)
                  Review
      representation letters given by management to external
      auditor.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  ü(iv)
                  Monitor
      the external auditor’s qualifications and independence through the
      activities listed in Section G.
                  
                  
                  ü(v)
                  Review
      the audit plan with the external auditors and approve all substantive
      audit services in advance.
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  ü
     - 75
-
   Committee
      TimetableAgenda
      Items
                  J
                  F
                  M
                  A
                  M
                  J
                  J
                  A
                  S
                  O
                  N
                  D(vi)
                  Approve
      permissible non-audit services in advance.
                  
                  
                  ü
                  ü
                  
                  
                  ü(vii)
                  Review
      all fees paid to external auditors.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  ü(viii)
                  Review
      performance against audit proposal plan.
                  
                  
                  ü(ix)
                  Discuss
      in private with the external auditors matters affecting the conduct of
      their audit and other corporate matters.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  ü(x)
                  Receive
      a report from the external auditor with respect to:(a)all
      critical accounting policies and practices;
                  
                  
                  ü(b)all
      alternative treatments of financial information within GAAP that have been
      discussed with management, implications of their use and the external
      auditors’ "preferred treatment";
                  
                  
                  ü(c)any
      other material written communications between the auditor and
      management;
                  
                  
                  ü(d)the
      internal quality-control procedures of the external auditors;
                  
                  
                  ü(e)any
      material issues raised by the most recent internal quality-control review
      of the external auditors’ firm, or by an inquiry or investigation by
      governmental or professional authorities, within the preceding five years,
      respecting one or more independent audits carried out by such firm, and
      any steps taken to deal with any such issues; and
                  
                  
                  ü(f)all
      relationships between the external auditors and the Corporation, as
      detailed in §(i) under Section G– Independence of External
      Auditors.
                  
                  
                  ü(xi)
                  Resolve
      all disagreements between management and the external auditors regarding
      financial reporting.
                  
                  
                  
                  ü
                  
                  
                  ü
                  
                  
                  ü(xii)
                  Ensure
      that the audit partners representing the external auditors meet the
      rotation requirements set out by the U.S. Securities and Exchange
      Commission and by any other applicable Canadian or U.S. securities
      regulatory authority or stock exchange.
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  üE)
                  Treasury(i)
                  Review
      and approve the Treasury Policy.
                  
                  
                  
                  ü(ii)
                  Review
      the Quarterly Treasury Report.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  ü(iii)
                  Review
      and approve the Foreign Exchange Policy.
                  
                  
                  
                  ü
   - 76
-
   Committee
      TimetableAgenda
      Items
                  J
                  F
                  M
                  A
                  M
                  J
                  J
                  A
                  S
                  O
                  N
                  DF)
                  Independence
      of External Auditors(i)
                  Receive
      from the external auditors, on a periodic basis, a formal written
      statement delineating all relationships between the external auditors and
      the Corporation consistent with ISB No. 1.
                  
                  
                  ü(ii)
                  Review
      and actively discuss with the Board of Directors, if necessary, and the
      external auditors, on a periodic basis, any disclosed relationships or
      services between the external auditors and the Corporation or any other
      disclosed relationships or services that may impact the objectivity and
      independence of the external auditors.
                  
                  
                  ü(iii)
                  Recommend,
      if necessary, that the Board take action to satisfy itself, of the
      external auditors’ independence.
                  
                  
                  ü(iv)
                  Ensure
      that the Corporation does not hire as the Corporation’s CEO, CFO,
      Controller or chief accounting officer any person who was employed by the
      Corporation’s external auditors and who participated in any capacity in
      the audit of the Corporation during the one-year period preceding the
      initiation of the current audit.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  üG)
                  Internal
      Audit and Controls(i)
                  Ensure
      that the Corporation has appropriate systems of internal
      control.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  ü(ii)
                  Review
      quarterly the internal auditors’ report on the adequacy of the internal
      controls, policies and procedures.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  ü(iii)
                  Annually
      review and approve internal audit plan.
                  
                  
                  
                  üH)
                  Related
      Party Transactions(i)
                  Review
      and approve the Corporation’s related party transactions
      overUS$60,000.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  ü
                  
                  ü(ii)
                  Review
      a summary of the Corporation’s related party transactions to ensure that
      such transactions are consistent with the terms and conditions previously
      approved by the Committee.
                  
                  
                  ü
                  ü
                  
                  
                  ü
                  
                  
                  ü
                  
                  üI)
                  Other(i)
                  Annually
      review management’s compliance with the Corporation’s Code of Ethics &
      Workplace Guidelines Policy.
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  ü(ii)
                  Annually
      review the succession plans for the
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  ü
    - 77
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   Committee
      TimetableAgenda Items
                  J
                  F
                  M
                  A
                  M
                  J
                  J
                  A
                  S
                  O
                  N
                  DCorporation’s
      CFO and Controller.(iii)
                  Annually
      review the audit of expense reports of the Chairman of the Board of
      Directors and the CEO.
                  
                  
                  
                  üJ)
                  Performance
      Evaluation(i)
                  Review
      annual evaluation of the Committee’s performance.
                  
                  
                  ü
 
   - 78
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  APPENDIX "D" MANAGEMENT
DEVELOPMENT, NOMINATING & COMPENSATIONCOMMITTEE MANDATE
  PURPOSE
  The
purpose of the Management Development, Nominating & Compensation Committee
(the "Committee") is to review and approve the Corporation’s employee and
management compensation policies and practices, incentive compensation plans
(cash and equity-based short and long term incentive plans), the amount and form
of compensation of the executive officers of the Corporation, all appointments
of employees as executive officers, all director nominations to the board and
succession plans for directors and executive officers of the
Corporation.  In this Mandate, the "Corporation" means Ballard Power
Systems Inc. and a "director" means a board member.
  
  COMPOSITION
  A)
                There
      will be at least three members of the
Committee.
  B)
                All
      of the members of the Committee must be independent
    directors.
  C)
                Any
      member may be removed or replaced at any time by the board and will cease
      to be a member upon ceasing to be a director of the
      Corporation.  Each member will hold office until the close of
      the next annual meeting of shareholders of the Corporation or until the
      member resigns or is replaced whichever occurs
  first.
  D)
                The
      Committee Chair will be appointed by the
  Committee.
  
  MEETINGS
  A)
                The
      Committee will meet at least four times per
  year.
  B)
                The
      Committee will appoint its own Secretary, who need not be a
      director.  The Secretary in conjunction with the Chair of the
      Committee will draw up an agenda, which will be circulated, in advance to
      the members of the Committee with the materials for the
      meeting.  The Secretary will be responsible for taking and
      keeping the Committee’s meeting
minutes.
  C)
                  Meetings
      will be chaired by the Chair of the Committee, or if the Chair is absent,
      by a member chosen by the Committee from among
  themselves.
    - 79
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   D)
                If
      all members consent, and proper notice has been given or waived, a member
      or members of the Committee may participate in a meeting of the Committee
      by means of such telephonic, electronic or other communication facilities
      as permit all persons participating in the meeting to communicate
      adequately with each other, and a member participating in such a meeting
      by any such means is deemed to be present at that
  meeting.
  E)
                The
      Committee will conduct an in-camera session at the end of each Committee
      meeting without management present.
  F)
                All
      directors who are not members of the Committee will be given notice of
      every meeting of the Committee and will be allowed to attend as
      observers.
  G)
                The
      President and CEO will be given notice of all meetings and will normally
      be requested to attend, other than in cases where the Committee wishes to
      meet in-camera.  Other executives or employees of the
      Corporation will attend at the request of the
  Committee.
  H)
                A
      majority of Committee members constitute a
  quorum.
  I)
                All
      decisions made by the Committee may be made at a Committee meeting or
      evidenced in writing and signed by all Committee members, which will be
      fully effective as if it had been made or passed at a Committee
      meeting.
  J)
                The
      minutes of all meetings of the Committee will be provided to the board of
      directors.  The Chair of the Committee will provide an oral
      report on the Committee’s activities to the board of directors at the next
      regularly scheduled meeting of the board following each Committee
      meeting.
  
  DUTIES
AND RESPONSIBILITIES
  A)
                Determine
      remuneration and other benefits of the Corporation’s executive officers
      and consultants and performance bonuses and long term incentives for the
      Corporation’s employees.
  In
fulfilling this responsibility, the Committee will
  (i)
                Annually
      approve and recommend to the board of directors of the Corporation the
      corporate multiplier reflecting the Corporation's prior year
      performance,  (ii)
                  Annually review the Corporation’s performance bonus plan, approve
      performance bonus awards to the Corporation’s non-executive
      employees,
    - 80
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  and
      recommend to the board of directors of the Corporation any issuances of
      common shares of the Corporation in payment of such performance
      bonuses,
  (iii)
                Annually
      approve long term incentive awards to the Corporation’s non-executive
      employees, and recommend to the board of directors of the Corporation any
      issuances of equity based
incentives,
  (iv)
                annually
      approve the CEO’s personal performance
goals,
  (v)
                determine
      the remuneration, benefits and terms and conditions of employment of the
      CEO in light of the Corporation’s financial and non-financial performance,
      and recommend to the board of directors of the Corporation any issuances
      of equity based compensation. Where the CEO is also the Chair of the
      Board, the Committee will also receive input from the Corporate Governance
      Committee on the evaluation and performance of the Chair of the
      Board,
  (vi)
                approve
      the remuneration of the other executive officers of the Corporation, and
      recommend to the board of directors of the Corporation any issuances of
      equity based compensation,
  (vii)
                have
      the authority to appoint, determine the level of remuneration for, oversee
      and terminate services provided by, consultants.  Any
      consultants engaged by the Corporation at the direction of the Committee
      will report directly to the Committee and the Chair of the Committee is
      authorized to execute and deliver on behalf of the Corporation any
      agreements or other documents relating to the terms of such appointments,
      and
  (viii)
                set
      and review executive share ownership guidelines and monitor
      compliance.
  B)
                Recommend
      Board Nominees
  The
Committee will seek out and recommend to the board of directors the nominees for
appointment, election or re-election to the board.
 C)
                  Review
      and approve the Corporation’s equity-based incentive plans and recommend
      to the board of directors of the Corporation distributions under such
      plans
  In fulfilling this responsibility the Committee will
  (i)
                  review
      eligibility criteria and award
guidelines,
    - 81
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   (ii)
                review
      the proposals of the CEO and approve and make determinations on
      equity-based incentive plans such as share option and share distribution
      plans, including any amendments thereto,
and
  (iii)
                review
      the proposals of the CEO and approve option, share and share equivalent
      allocations, and make recommendations to the board regarding the issuance
      of such options, shares and share
equivalents.
  D)
                Succession
      Planning
  As
required, the Committee will review and approve succession plans for directors,
executive officers of the Corporation, and as deemed necessary by the Committee,
any other officers or employees of the Corporation.
  In
fulfilling this responsibility for succession plans for directors, the Committee
will:
  (i)
                develop
      and regularly review director qualification
  standards,
  (ii)
                develop
      a procedure for director selection to ensure that a broad number of skills
      are present on the board, and
  (iii)
                to
      the extent required by applicable laws or regulations, ensure that there
      is a procedure to allow individual shareholders to recommend director
      nominees to the Committee for
consideration.
  In
fulfilling this responsibility for succession plans for executive officers, the
Committee will:
  (iv)
                review
      the functions of officers of the
Corporation,
  (v)
                review
      and discuss qualifications of proposed candidates named in succession
      plans, and
  (vi)
                provide
      guidance to management with respect to the succession
    plans.
 E)
                  Review
      and approve regulatory filings
  The Committee will review and approve the disclosure to be made of director and
executive remuneration in the Management Proxy Circular.
  F)
                  Seek
      information from the Corporation or independent
  advisors
  The Committee will have the authority to seek any information that it requires
from any officer or employee of the Corporation.  The Committee is
authorized to obtain such independent advice as it considers
necessary.
    - 82
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  G)
                Other
  The
Committee will:
  (i)
                perform
      an annual review of this Committee mandate, with any recommended changes
      being forwarded to the Corporate Governance Committee and ultimately the
      board for approval;
  (ii)
                perform
      an annual evaluation of its performance, having regard to the issues
      reviewed during the year; and
  (iii)
                review
      the results arising from the Corporation’s annual employee survey, in
      years in which one is conducted.
  The
timetable set out below generally outlines the Committee’s anticipated schedule
of activities during the year.
  Committee
      TimetableAgenda
      Items
                  J
                  F
                  M
                  A
                  M
                  J
                  J
                  A
                  S
                  O
                  N
                  DA)
                  Board
      Nominees(i)
                  Board
      succession planning
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  ü(ii)
                  Review
      upcoming year’s board nominees.
                  
                  
                  ü(iii)
                  Approval
      of nominees for board to be included in management proxy
      circular(3)
                  
                  
                  üB)
                  Executive
      Nominees(i)
                  Approve
      succession plans for executive officers
                  
                  
                  
                  
                  
                  
                  
                  
                  ü(ii)
                  Approve
      compensation of new executive officers (as required)(iii)
                  Confirmation
      of executive officers(3)
                  
                  
                  
                  
                  
                  ü(iv)
                  Set
      and review executive share ownership guidelines and monitor
      compliance
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  üC)
                  The
      Corporation’s Incentive Plans(i)
                  Review
      and approval of new compensation and incentive  plans,
      as necessary
                  
                  
                  
                  
                  
                  
                  
                  
                  ü
                    (1)
                  
                  
                  ü
                    (2)(ii)
                  Review
      and approve corporate bonus goals(3)
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  ü(iii)
                  Review
      and approve corporate multiplier(3)
                  
                  
                  üD)
                  CEO
      Performance(i)
                  Review
      and approve the CEO evaluation process
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  ü(ii)
                  Evaluate
      CEO performance
                  
                  
                  ü(iii)
                  Set
      CEO’s personal performance goals
                  
                  
                  üE.
                  Compensation(i)
                  Review
      of compensation policy
                  
                  
                  
                  
                  
                  
                  
                  
                  ü
                  
                  
                  ü
  
 - 83
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  Committee
      TimetableAgenda
      Items
                      J
                      F
                      M
                      A
                      M
                      J
                      J
                      A
                      S
                      O
                      N
                      Dcompetitive
      pay position relative to market
                      
                      
                      
                      
                      
                      
                      
                      
                      (1)
                      
                      
                      (2)(ii)
                      Review
      and approval of retirement/pension plan design and application
      issues
                      
                      
                      
                      
                      
                      
                      
                      
                      ü(iii)
                      Review of executive and employee annual compensation adjustment
      budget and long term incentives funding proposal
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      ü(iv)
                      Review
      and approve proposed executive salary guidelines
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      ü(v)
                      Approval
      of CEO compensation adjustments and bonusawards
      (shares and share equivalents) for prior yearperformance,
      and long term incentive allocations(2) andapproval
      of issuance of shares, share equivalents and longterm
      incentives(3)
                      
                      
                      ü(vi)
                      Approval
      of executive and employee compensation adjustments and bonus awards (cash,
      shares and share equivalent) for prior year performance, and long termincentive allocations(2) and approval of issuance of shares,share equivalents and long term incentives(3)
                      
                      
                      üF.
                      Miscellaneous(i)
                      Approval
      of committee’s report for inclusion in managementproxy
      circular(3)
                      
                      
                      ü(ii)
                      Annually
      review Committee mandate(3)
                      
                      
                      ü(iii)
                      Annually
      review employee survey results
                      
                      
                      
                      
                      
                      
                      
                      
                      ü
 _________________________________
  (1)           Review
 (2)           Approve
 (3)           Approve
and recommend for board approval
     - 84
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  APPENDIX "E" CORPORATE
GOVERNANCE COMMITTEE MANDATE
  PURPOSE
  The
purpose of the Corporate Governance Committee (the "Committee") is to monitor
the governance of the board of directors (including the size of the board and
the profiles of the board members) and board committees, and to monitor director
compensation matters.  In this Mandate, the "Corporation" means
Ballard Power Systems Inc. and a "director" means a board member.
  
  COMPOSITION
  A)
                The
      Committee will be composed of no fewer than three
    directors.
  B)
                The
      Committee will have a majority of independent
  directors.
  C)
                Any
      member may be removed or replaced at any time by the board and will cease
      to be a member upon ceasing to be a director of the
      Corporation.  Each member will hold office until the close of
      the next annual meeting of shareholders of the Corporation or until the
      member resigns or is replaced whichever occurs
  first.
  D)
                The
      Committee will appoint its own
Chair.
  
  MEETINGS
  A)
                Meetings
      of the Committee will be held as required, but at least four times a
      year.
  B)
                The
      Committee will appoint its own Secretary, who need not be a
      director.  The Secretary, in conjunction with the Chair of the
      Committee, will draw up an agenda, which will be circulated, in advance to
      the members of the Committee along with the materials for the
      meeting.  The Secretary will be responsible for taking and
      keeping the Committee’s meeting
minutes.
  C)
                Meetings
      will be chaired by the Chair of the Committee, or in his absence by a
      member chosen by the Committee from among
  themselves.
  D)
                    If
      all members consent, and proper notice has been given or waived, a member
      or members of the Committee may participate in a meeting of the Committee
      by means of such telephonic, electronic or other communication facilities
      as permit all persons participating in the meeting to communicate
      adequately with each.
  - 85
-
 other,
      and a member participating in such a meeting by any such means is deemed
      to be present at that meeting.
 E)
                The
      Committee will conduct an in-camera session at the end of each Committee
      meeting without management present.
  F)
                All
      directors who are not Committee members will be given notice of every
      meeting of the Committee and will be allowed to attend as observers, other
      than in cases where the Committee wishes to meet
  in-camera.
  G)
                The
      President and CEO and Chair of the Board will be given notice of all
      meetings and will normally be requested to attend, other than in cases
      where the Committee wishes to meet in-camera.  Other executive
      officers or employees of the Corporation will attend at the request of the
      Committee.
  H)
                A
      majority of Committee members constitute a
  quorum.
  I)
                All
      decisions made by the Committee may be made at a Committee meeting or
      evidenced in writing and signed by all Committee members, which will be
      fully effective as if it had been made or passed at a Committee
      meeting.
  J)
                The
      minutes of all meetings of the Committee will be provided to the board of
      directors.  The Chair of the Committee will provide an oral
      report on the Committee’s activities to the board of directors at the next
      regularly scheduled meeting of the board following each Committee
      meeting.
  
  DUTIES
AND RESPONSIBILITIES
  A)
                Monitor
      corporate governance issues.
  In
fulfilling this responsibility, the Committee will:
  (i)
                advise
      the Chair of the Board and the board of directors on matters of corporate
      governance;
  (ii)
                advise
      the board on issues of conflict of interest for individual
      directors;
  (iii)
                  conduct,
      on an annual basis, an assessment of the effectiveness of the board, the
      committees of the board, and the individual directors, and report on such
      assessments to the full board;
  (iv)
                  annually
      review the mandates for the board, each board committee and board
      committee chair, and terms of reference for individual
      directors;
   - 86
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  (v)
                recommend
      to the board the approval of any required or appropriate change to any
      document referenced in (A)(iv);
  (vi)
                set
      and monitor minimum attendance guidelines for board of directors and
      committee meetings;
  (vii)
                set
      and periodically review director minimum share ownership
      requirements;
  (viii)
                develop,
      in conjunction with the Chair of the Board and the President & CEO,
      and review, annual board goals or improvement
  priorities;
  (ix)
                consider
      and approve, where appropriate, requests by individual directors to engage
      the services of outside experts and advisors at the expense of the
      Corporation, so long as the CEO is given full knowledge of such
      engagement, unless the provision of such knowledge would be inappropriate
      in the circumstances;
  (x)
                at
      the request of the board, consider any other matters which will assist the
      board to meet its responsibilities regarding corporate governance matters,
      including adherence to any governance guidelines or rules established by
      applicable regulatory authorities;
  (xi)
                develop
      guidelines for the required resignation of
  directors;
  (xii)
                annually
      review the corporate governance disclosure contained in the Corporation’s
      management proxy circular and annual information form;
  and
  (xiii)
                have
      the authority to appoint, determine the level of remuneration for, oversee
      and terminate the services provided by consultants.  Any
      consultants engaged by the Corporation at the direction of the Committee
      will report directly to the Committee and the Chair of the Committee is
      authorized to execute and deliver on behalf of the Corporation any
      agreements or other documents relating to the terms of such
      appointments.
  B)
                  Recommend
      to the board of directors the size of the board and the membership of all
      board committees.
  The
Committee will make a recommendation to the board annually on the size of the
board.  The Committee will also recommend to the board annually the
directors for appointment to the board committees.
    - 87
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  C)
                Organize,
      review and recommend continuing education programs and policies relating
      to directors
  As
required, the Committee will:
  (i)
                with
      the assistance of management, organize and provide an appropriate
      orientation and education program for new directors, provide continuing
      education materials to directors;
  (ii)
                organize
      and recommend educational presentations to be made to the board where
      appropriate; and
  (iii)
                review
      from time to time any policies with respect to term limits for length of
      service by, and mandatory retirement age of,
  directors.
  D)
                Determine
      the compensation of the directors.
  The
Committee will review the adequacy and form of compensation for directors and
ensure that such compensation realistically reflects the responsibilities and
risks involved.  The Committee will also review and approve any equity
compensation plans, including any amendments thereto, relating to the issuance
of equity compensation to directors.
  E)
                Evaluate
      the performance of the Chair of the
Board.
  The
Committee will evaluate the performance of the Chair of the Board.
  In
fulfilling this responsibility, the Committee will:
  (i)
                establish
      formal performance objectives;
  (ii)
                monitor
      the performance of the Chair of the Board;
and
  (iii)
                  provide
      formal and informal feedback on
performance.
  F)
                  Develop
      and implement succession planning strategies for the Chair of the
      Board.
  G)
                  Assess
      responsibilities of management.
  The
Committee will assess the relationship between the board and executive officers
and recommend, as necessary, limits on the authority of management where board
input is required.
  The
timetable below generally outlines the Committee’s anticipated schedule of
activities during the year.
   - 88
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  Committee
      TimetableAgenda
      Items
                    J
                    F
                    M
                    A
                    M
                    J
                    J
                    A
                    S
                    O
                    N
                    DA)
                    Corporate
      Governance(i)
                    Determine
      process for board evaluation
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    ü(ii)
                    Assess the effectiveness of the board of directors
                    
                    
                    ü(iii)
                    Review
      the mandates for the board, each board committee and board committee
      chair, and terms of reference for individual directors
                    
                    
                    ü(iv)
                    Review
      director minimum share ownership requirements
                    
                    
                    
                    
                    
                    
                    
                    
                    ü(v)
                    Review annual board goals or improvement priorities
                    
                    
                    ü
                    
                    
                    
                    
                    
                    ü(vi)
                    Review
      and approve the corporate governance disclosurecontained
      in the Corporation’s management proxy circular
                    
                    
                    ü(vii)
                    Receive
      report from management regarding submissions tothe
      Office of the Chair e-mail address
                    
                    
                    ü
                    
                    
                    ü
                    
                    
                    ü
                    
                    
                    ü(viii)
                    Review
      policies/guidelines relating to directors includingprovisions
      for resignations and term limits
                    
                    
                    
                    
                    
                    ü
                    
                    
                    
                    
                    
                    üB.
                    Size
      of Board and Board Committees(i)
                    Recommend
      to the board the size of the board
                    
                    
                    ü(ii)
                    Recommend
      to the board the directors for appointment tothe
      board committees
                    
                    
                    
                    
                    
                    üC.
                    Board
      Education(i)
                    Review
      board education plan annually
                    
                    
                    
                    
                    
                    üD.
                    Director
      Compensation(i)
                    Review
      levels of director compensation and approve anychanges
                    
                    
                    
                    
                    
                    
                    
                    
                    üE.
                    Board
      Chair Evaluation(i)
                    Review
      Chair’s performance
                    
                    
                    ü(ii)
                    Review
      succession planning
                    
                    
                    
                    
                    
                    
                    
                    
                    ü
 - 89
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