Ballard Power Systems Inc. Notice of Annual Meeting, Management Proxy Circular and 2008 Annual Report TABLE OF CONTENTS 2008 ANNUAL REPORT LETTER FROM IAN A. BOURNE, CHAIR OF THE BOARD............................................................................................ 1 LETTER FROM JOHN W. SHERIDAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER .......................................... 3 SUSTAINABILITY REPORT................................................................................................................................................ 8 BALLARD EMPLOYEE AWARDS OF EXCELLENCE FOR 2008 ................................................................................... 9 NOTICE OF ANNUAL MEETING............................................................................................................................................... 10 MANAGEMENT PROXY CIRCULAR ........................................................................................................................................ 11 DEFINED TERMS ............................................................................................................................................................... 11 MATTERS TO BE VOTED UPON...................................................................................................................................... 11 ELECTION OF DIRECTORS .............................................................................................................................................. 12 APPOINTMENT OF AUDITORS........................................................................................................................................ 15 EQUITY BASED COMPENSATION MATTERS............................................................................................................... 16 Overgrant of Deferred Share Units ................................................................................................................................. 16 Consolidation of Current Equity-Based Compensation Plans......................................................................................... 17 Change in Number of Shares Issuable under the Consolidated Equity-Based Compensation Plans............................... 19 VOTING ............................................................................................................................................................................... 20 Solicitation Of Proxies.................................................................................................................................................... 20 How To Vote .................................................................................................................................................................. 20 Execution And Revocation Of Proxies ........................................................................................................................... 20 Voting Of Shares And Exercise Of Discretion By Proxies ............................................................................................. 21 Voting Shares And Principal Shareholders..................................................................................................................... 21 Interest Of Certain Persons Or Companies In Matters To Be Acted Upon ..................................................................... 21 BOARD AND COMMITTEES ............................................................................................................................................ 21 Board Composition And Nomination Process ................................................................................................................ 21 Majority Voting Policy ................................................................................................................................................... 22 Board Meetings............................................................................................................................................................... 22 Committees Of The Board .............................................................................................................................................. 22 Audit Committee ...................................................................................................................................................... 23 Management Development, Nominating & Compensation Committee.................................................................... 23 Corporate Governance Committee ........................................................................................................................... 23 CORPORATE GOVERNANCE........................................................................................................................................... 23 COMPENSATION................................................................................................................................................................ 24 Compensation Discussion And Analysis ........................................................................................................................ 24 Objectives of Our Executive Compensation Program .............................................................................................. 24 Philosophy and Objectives........................................................................................................................................ 24 How Executive Compensation is Determined .......................................................................................................... 24 Executive Pay Mix and the Emphasis on "At Risk" Pay........................................................................................... 25 The Use of Benchmarking ........................................................................................................................................ 25 Current Executive Compensation Elements.............................................................................................................. 26 Annual Salary ........................................................................................................................................................... 26 Annual Bonus for Executive Officers....................................................................................................................... 26 Long Term Incentives............................................................................................................................................... 28 Chief Executive Officer Compensation .................................................................................................................... 30 Termination and Change of Control Benefits ........................................................................................................... 31 Perquisites................................................................................................................................................................. 31 Retirement Benefits .................................................................................................................................................. 32 Total Executive Officer Compensation..................................................................................................................... 32 Minimum Share Ownership Guidelines.................................................................................................................... 32 Performance Graph ......................................................................................................................................................... 33 Executive Compensation................................................................................................................................................. 34 Incentive Plan Awards .................................................................................................................................................... 36 Pension Plan Benefits...................................................................................................................................................... 38 Termination And Change Of Control Benefits ............................................................................................................... 38 Employment Contracts ............................................................................................................................................. 38 Equity-Based Compensation Plans........................................................................................................................... 39 Director Compensation ................................................................................................................................................... 40 Incentive Plan Awards .................................................................................................................................................... 43 Securities Authorized for Issuance under Equity Compensation Plans........................................................................... 43 SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT ............................................................ 44 INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS .................................................................... 44 INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS................................................................................44