Document:

exv10w10

 

Exhibit 10.10

PHOTOWATT TECHNOLOGIES INC.

DIRECTORS’ DEFERRED STOCK UNIT PLAN

As
amended on December 5, 2006 with effect as of November 8, 2006

 

 

Section 1 Interpretation

1.1 Purpose

	 	 	The purposes of the Plan are:

	 	(a)	 	to promote a greater alignment of interests between directors of the Company
and the shareholders of the Company; and
	 
	 	(b)	 	to provide a compensation system for directors that, together with the other
director compensation mechanisms of the Company, is reflective of the responsibility,
commitment and risk accompanying Board membership and the performance of the duties
required of the various committees of the Board.

1.2 Definitions

	 	 	As used in the Plan, the following terms have the following meanings:

	 	(a)	 	“Account” has the meaning ascribed thereto in Section 2.5;
	 
	 	(b)	 	“Affiliate” means an affiliate of the Company, as applicable, as the term
“affiliate” is defined in paragraph 8 of the Canada Revenue Agency’s interpretation
bulletin IT-337R4, Retiring Allowances;
	 
	 	(c)	 	“Annual Remuneration” means all amounts payable to an Eligible Director by the
Company in respect of the services provided by the Eligible Director to the Company in
connection with such Eligible Director’s service on the Board in a fiscal year,
including without limitation (i) the annual base retainer fee for serving as a
director, (ii) the annual retainer fee for serving as a member of a Board committee;
and (iii) the annual retainer fee for chairing a Board committee but, for greater
certainty, excluding any meeting fees payable in respect of attendance at individual
meetings or any amounts received by an Eligible Director as a reimbursement for
expenses incurred in attending meetings, which amounts shall, unless otherwise
determined by the Board or the Committee, be payable Quarterly in arrears;
	 
	 	(d)	 	“Beneficiary” means an individual who, on the date of an Eligible Director’s
death, is the person who has been designated in accordance with Section 4.7 and the
laws applying to the Plan, or where no such individual has been validly designated by
the Eligible Director, or where the individual does not survive the Eligible Director,
the Eligible Director’s legal representative;
	 
	 	(e)	 	“Board” means those individuals who serve from time to time as the directors of
the Company;
	 
	 	(f)	 	“Code” means the United States Internal Revenue Code of 1986, as amended;

 

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	 	(g)	 	“Committee” means the Compensation, Corporate Governance and Nominating
Committee of the Board, or such other persons designated by the Board;
	 
	 	(h)	 	“Common Share” means a common share of the Company;
	 
	 	(i)	 	“Company” means Photowatt Technologies Inc. and
includes any successor corporation thereof, and any reference in the
Plan to action by the Company means action by or under the authority
of the Board or the Committee;
	 
	 	(j)	 	“Conversion Date” means the date used to determine the Fair Market Value of a
Deferred Stock Unit for purposes of determining the number of Deferred Stock Units to
be credited to an Eligible Director under Section 2.3.1, which date shall, subject to
variation as determined by the Board or Committee taking into account the trading
blackout period applicable to the Company’s directors as specified in the Company’s
insider trading policy, be the date of the sixth trading day on the Toronto Stock
Exchange following the announcement and release of the Company’s financial results for
each Quarter and, in any event, shall not be earlier than the first business day of the
year in respect of which the Deferred Stock Units are being provided;
	 
	 	(k)	 	“Corporate Transaction” means a Sale Transaction resulting in a Change of Control (as defined below). A “Change of Control” shall
occur in the event of either (i) an acquisition of voting securities
of the Company to which are attached in excess of 50% of the votes attaching to all outstanding voting
securities of the Company or (ii) if the Company is not the surviving
corporation following completion of a Corporate Transaction, a
transaction whereby the shareholders of the Company immediately
before the transaction hold less than 50% of the shares of the
surviving corporate entity or purchaser;
	 
	 	(l)	 	“Deferred Stock Unit” or “DSU” means a unit credited by the Company to an
Eligible Director by way of a bookkeeping entry in the books of the Company, as
determined by the Board, pursuant to the Plan, the value of which at any particular
date shall be the Fair Market Value at that date;
	 
	 	(m)	 	“Election Notice” means the written election in the form of Schedule A hereto;
	 
	 	(n)	 	“Eligible Director” means any director of the
Company who is not a full-time
employee of the Company or any Affiliate
	 
	 	(o)	 	“Entitlement Date” has the meaning ascribed thereto in Section 3.1 or Section
3.2, as applicable;
	 
	 	(p)	 	“Fair Market Value” means, with respect to any particular date, the simple
average closing price of the Common Shares as traded on the stock exchange on
which the highest aggregate volume of Common Shares have traded on each of the five
trading days immediately preceding the particular date. In the event that the Common
Shares are not listed and posted for trading on any stock exchange, the Fair Market
Value shall be the fair market value of the Common Shares as

 

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	 	 	 	determined by the Company in its sole discretion, acting reasonably and in good
faith;
	 
	 	(q)	 	“Liquid Securities” means securities of an issuer
that are listed for trading on one or more of the Toronto Stock
Exchange, the Nasdaq Global Market, the New York Stock Exchange or a
stock exchange or quotation system of similar stature, that have a
market capitalization of at least $200 million, and that are not
subject to any restriction on sale, pursuant to applicable laws;
	 
	 	(r)	 	“Plan” means this Photowatt Technologies Inc. Directors’ Deferred Stock Unit
Plan, as amended from time to time;
	 
	 	(s)	 	“Quarter” means a fiscal quarter of the Company, which, until changed by the
Company, shall be the three month period ending June 30, September 30, December 31 or
March 31 in any year and “Quarterly” means each “Quarter”;
	 
	 	(t)	 	“Redemption Amount” means the amount calculated by multiplying the number of
Deferred Stock Units in an Eligible Director’s Account by the Fair Market Value as of
the Redemption Date;
	 
	 	(u)	 	“Redemption Date” means the date which is the sixth trading day on the Toronto
Stock Exchange following the announcement and release by the Company of its financial
results for the Quarter in which the Termination Date occurred or, if the Common Shares
are then no longer listed on the Toronto Stock Exchange, the Redemption Date shall be
deemed to the Termination Date;
	 
	 	(v)	 	“Sale Transaction” means any merger, amalgamation
or plan of arrangement involving the Company, acquisition or
take-over bid for the Common Shares of the Company, or similar
transaction, or series of transactions, or the sale of all or
substantially all of the assets of the Company excluding any asset
sale transaction in connection with which all holders of Common
Shares are not entitled to receive cash or Liquid Securities in
consideration of their Common Shares, provided that a Sale
Transaction shall exclude: (i) any share transfer, reorganization,
asset transfer, or similar transaction to which the parties are
limited to the Company and/or any of its present or future
Affiliates; (ii) the completion of a treasury offering of securities
of the Company or an Affiliate of the Company; or (iii) the public
offering or the dividend or other distribution by ATS or one of its
Affiliates of shares in the capital of the Company;
	 
	 	(w)	 	“Termination Date” means the date of (i) the voluntary resignation or
retirement of an Eligible Director from the Board; (ii) the death of an Eligible
Director; (iii) removal of an Eligible Director from the Board whether by shareholder
resolution or failure to achieve re-election, provided that the Eligible Director is
not then an employee of the Company or an employee or director of an Affiliate and
provided further that in the case of an Eligible Director who is a U.S. Taxpayer, the
Termination Date shall not be prior to the date the Eligible Director terminates
employment for purposes of section 409A of the Code;
	 
	 	(x)	 	“U.S. Taxpayer” means a citizen or resident of the United States for United
States federal income tax purposes.

1.3 Effective Date

     The Plan shall be effective as of November 8, 2006.

1.4 Eligibility

     If an Eligible Director should become an employee of the Company while remaining as a
director, his eligibility for the Plan shall be suspended effective the date of the commencement of
his employment and shall resume upon termination of such employment provided he continues as a
director of the Company. During the period of such ineligibility, such individual shall not be
entitled to receive or be credited with any Deferred Stock Units under the Plan, other than
dividend allocations under Section 2.4.

 

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1.5 Construction

     In this Plan, all references to the masculine include the feminine; references to the singular
shall include the plural and vice versa, as the context shall require. If any provision of the
Plan or part hereof is determined to be void or unenforceable in whole or in part, such
determination shall not affect the validity or enforcement of any other provision or part thereof.
Headings wherever used herein are for reference purposes only and do not limit or extend the
meaning of the provisions contained herein. References to “Section” or “Sections” mean a section
or sections contained in the Plan unless expressly stated otherwise.
All amounts referred to in this Plan are stated in Canadian dollars
unless otherwise indicated.

1.6 Administration

     The Committee shall, in its sole and absolute discretion: (i) interpret and administer the
Plan; (ii) establish, amend and rescind any rules and regulations relating to the Plan; (iii) have
the power to delegate, on such terms as the Committee deems appropriate, any or all of its powers
hereunder to the Chief Financial Officer or Secretary of the Company; and (iv) make any other
determinations that the Committee deems necessary or desirable for the administration of the Plan.
The Committee may correct any defect or supply any omission or reconcile any inconsistency in the
Plan in the manner and to the extent the Committee deems, in its sole and absolute discretion,
necessary or desirable. Any decision of the Committee with respect to the administration and
interpretation of the Plan shall be conclusive and binding on the Eligible Director and any other
person claiming an entitlement or benefit through the Eligible Director. All expenses of
administration of the Plan shall be borne by the Company as determined by the Committee.

1.7 Governing Law

     The Plan shall be governed by and construed in accordance with the laws of the Province of
Ontario and the federal laws of Canada applicable therein.

Section 2  Election Under the Plan

2.1 Payment of Annual Remuneration

     Subject to Section 2.2 and such rules, regulations, approvals and conditions as the Committee
may impose, an Eligible Director may elect to receive his Annual Remuneration in the form of
Deferred Stock Units or cash or any combination thereof.

2.2 Method of Electing

	 	(a)	 	To elect a form or forms of payment of Annual Remuneration for the Company’s
fiscal year commencing April 1, 2007 and each fiscal year thereafter, an Eligible
Director shall complete and deliver to the Secretary of the Company an initial Election
Notice by no later than March 31st,  2007, which shall apply to the Eligible
Director’s Annual Remuneration payable after the effective date of such election,
subject to the provisions of this Section 2.2(a).

 

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	 	 	 	An Eligible Director may change the form or forms of payment of his Annual
Remuneration for a subsequent fiscal year by completing and delivering to the
Secretary of the Company a new Election Notice no later than the last day of the
Company’s preceding fiscal year. For greater certainty, the Committee may prescribe
election forms for use by Eligible Directors who are residents of a jurisdiction
other than Canada that differ from the election forms it prescribes for use by
Canadian resident Eligible Directors where the Committee determines it is necessary
or desirable to do so to obtain comparable treatment for the Plan, the Eligible
Directors or the Company under the laws or regulatory policies of such other
jurisdiction as is provided under the laws and regulatory policies of Canada and its
Provinces, provided that no election form prescribed for use by a non-resident of
Canada shall contain terms that would cause the Plan to cease to meet the
requirements of paragraph 6801(d) of the regulations under the Income Tax Act
(Canada) and any successor to such provisions.
	 
	 	(b)	 	An individual who becomes an Eligible Director during a year may elect the form
or forms of payment of Annual Remuneration earned in Quarters that commence after the
date the election is made by completing and delivering to the Secretary of the Company
and Election Notice. An Election Notice shall not be effective to require that Annual
Remuneration earned in the year in which the individual becomes an Eligible Director be
provided in the form of Deferred Stock Units if (i) such Election Notice is not
completed and delivered to the Secretary of the Company within 30 days after the
individual becomes an Eligible Director; or (ii) the individual previously participated
in this Plan or any other plan that is required to be aggregated with this Plan for
purposes of Section 409A of the Code.

2.3 Deferred Stock Units

2.3.1 Deferred Stock Units elected by an Eligible Director pursuant to the Plan shall be credited
to the Eligible Director’s Account as of the applicable Conversion Date. The number of Deferred
Stock Units (including fractional Deferred Stock Units) to be credited to an Eligible Director’s
Account as of a particular Conversion Date pursuant to this Section 2.3.1 shall be determined by
dividing the portion of that Eligible Director’s Annual Remuneration for the applicable period to
be satisfied by Deferred Stock Units by the Fair Market Value on the particular Conversion Date.

2.3.2 In addition to Deferred Stock Units granted pursuant to Section 2.3.1, the Board may, at
their complete discretion, award such number of Deferred Stock Units to an Eligible Director as the
Board deems advisable to provide the Eligible Director with appropriate equity-based compensation
for the services he or she renders to the Company. The Board shall determine the date on which
such Deferred Stock Units may be granted and the date as of which such Deferred Stock Units shall
be credited to an Eligible Director’s Account.

2.3.3 Deferred Stock Units granted under Section 2.3.1 or Section 2.3.2, together with any
additional Deferred Stock Units granted in respect thereof under Section 2.4, will be fully vested

 

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upon being credited to an Eligible Director’s Account and the Eligible Director’s entitlement to
payment of such Deferred Stock Units at his Termination Date shall not thereafter be subject to
satisfaction of any requirements as to any minimum period of membership on the Board..

2.4 Dividends

     On any payment date for dividends paid on Common Shares, an Eligible Director shall be
credited with dividend equivalents in respect of Deferred Stock Units credited to the Eligible
Director’s Account as of the record date for payment of dividends. Such dividend equivalents shall
be converted into additional Deferred Stock Units (including fractional Deferred Stock Units) based
on the Fair Market Value as of the date such additional Deferred Stock Units are credited.

2.5 Eligible Director’s Account

     The Company shall maintain in its books an account for each Eligible Director (an “Account”)
recording at all times the number of Deferred Stock Units standing to the credit of an Eligible
Director. Upon payment in satisfaction of Deferred Stock Units credited to an Eligible Director in
the manner described herein, such Deferred Stock Units shall be cancelled. A written confirmation
of the balance in each Eligible Director’s Account shall be provided by the Company to the Eligible
Director at least annually.

2.6 Adjustments and Reorganizations

     In the event of any stock split, stock consolidation, combination or exchange of Common
Shares, Corporate Transaction, spin-off, dividend or other distribution of the Company’s assets to
shareholders, or any other change in the capital of the Company affecting Common Shares, such
proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to
reflect such change, shall be made with respect to the number of Deferred Stock Units outstanding
under the Plan.

Section 3  Redemptions

3.1 Redemption of Deferred Stock Units

     Subject to Sections 3.2 and 3.4 , an Eligible Director may elect up to two separate dates as
of which either a portion (specified in whole percentages or number of Deferred Stock Units on any
one date) or all of the Deferred Stock Units credited to the Eligible Director’s Account shall be
redeemed (each such date being an “Entitlement Date”) by filing one or two irrevocable written
redemption elections with the Secretary of the Company. No Entitlement Date elected by an Eligible
Director pursuant to this Section 3.1 shall be before the Eligible Director’s Termination Date or
later than December 15 of the calendar year commencing immediately after the Eligible Director’s
Termination Date. Where an Eligible Director does not elect a particular date or dates within the
permissible period set out above as his Entitlement Date or Entitlement Dates, as the case may be,
there shall be a single Entitlement Date for such Eligible Director which shall be the date,
subject to Sections 3.2 and 3.4, which is six months after the Eligible Director’s Termination
Date.

 

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3.2 Redemption of Deferred Stock Units – U.S. Taxpayers

     Notwithstanding Section 3.1, in the case of an Eligible Director who is a U.S. Taxpayer,
subject to Section 3.4, his Entitlement Date shall be the date that is six months after his
Termination Date and all Deferred Stock Units Credited to such Eligible Director’s Account shall be
redeemed as of such date.

3.3 Payment of Deferred Stock Units

     The value of the Deferred Stock Units redeemed by or in respect of an Eligible Director as of
an Entitlement Date shall, after deduction of any applicable taxes and other source deductions
required to be withheld by the Company, be paid to the Eligible Director or the Eligible Director’s
Beneficiary, as applicable as soon as practicable following such Entitlement Date.

3.4 Extended Entitlement Date

     In the event that the Committee is unable, by an Eligible Director’s Entitlement Date, to
compute the final value of the Deferred Stock Units recorded in such Eligible Director’s Account by
reason of the fact that any data required in order to compute the market value of a Share has not
been made available to the Committee and such delay is not caused by the Eligible Director, then
the Entitlement Date shall be the next following trading day on which such data is made available
to the Committee.

3.5 Limitation on Extension of Entitlement Date

     Notwithstanding any other provision of the Plan, all amounts payable to, or in respect of, an
Eligible Director hereunder shall be paid on or before December 31 of the calendar year commencing
immediately after the Eligible Director’s Termination Date.

Section 4  General

4.1 Unfunded Plan

     Unless otherwise determined by the Committee, the Plan shall be unfunded. To the extent any
individual holds any rights by virtue of an election under the Plan, such rights (unless otherwise
determined by the Committee) shall be no greater than the rights of an unsecured general creditor
of the Company.

4.2 Successors and Assigns

     The Plan shall be binding on all successors and permitted assigns of the Company and an
Eligible Director, including without limitation, the estate of such Eligible Director and the legal
representative of such estate, or any receiver or trustee in bankruptcy or representative of the
Company’s or the Eligible Director’s creditors.

 

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4.3 Plan Amendment

4.3.1 The Board may amend the Plan as it deems necessary or appropriate, but no such amendment
shall, without the consent of the Eligible Director or unless required by law, adversely affect the
rights of an Eligible Director with respect to any amount of Annual Remuneration in respect of
which an Eligible Director has then elected to receive Deferred Stock Units or Deferred Stock Units
to which the Eligible Director has then been granted under the Plan.

4.3.2 Notwithstanding section 4.3.1, any amendment of the Plan shall be such that the Plan
continuously meets the requirements of paragraph 6801(d) of the regulations under the Income Tax
Act (Canada) or any successor to such provision, and the requirements of Section 409A of the Code
as may apply to Eligible Directors who are U.S. Taxpayers. For avoidance of doubt, and
notwithstanding section 4.3.1, if any provision of the Plan contravenes any regulations or Treasury
guidance promulgated under Section 409A of the Code or would cause the Share Units to be subject to
the interest and penalties under Section 409A of the Code such provision of the Plan shall, to the
extent that it applies to US Taxpayers, be modified, without the consent of any Eligible Director,
to maintain, to the maximum extent practicable, the original intent of the applicable provision
without violating the provisions of Section 409A of the Code.

4.4 Plan Termination

     The Board may terminate the Plan at any time, including in the event of a Corporate
Transaction, but no such termination shall, without the consent of the Eligible Director or unless
required by law, adversely affect the rights of an Eligible Director with respect to any amount of
Annual Remuneration in respect of which an Eligible Director has then elected to receive Deferred
Stock Units or Deferred Stock Units which the Eligible Director has then been granted under the
Plan. Notwithstanding the foregoing, any termination of the Plan shall be such that the Plan
continuously meets the requirements of paragraph 6801(d) of the regulations under the Income Tax
Act (Canada) or any successor to such provision, and the requirements of Section 409A of the Code
as may apply to Eligible Directors who are U.S. Taxpayers.

4.5 Applicable Trading Policies and Reporting Requirements

     The Committee and each Eligible Director will ensure that all actions taken and decisions made
by the Committee or an Eligible Director, as the case may be, pursuant to the Plan, comply with
applicable securities regulations and policies of the Company relating to the insider trading and
“black out” periods. All Deferred Stock Units shall be considered a “security” of the Company
solely for the reporting purposes of the insider trading policy of the Company.

4.6 Currency

     All payments and benefits under the Plan shall be determined and paid in the lawful currency
of Canada.

 

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4.7 Designation of Beneficiary

     Subject to the requirements of applicable laws, an Eligible Director shall designate in
writing a person who is a dependant or relation of the Eligible Director as a beneficiary to
receive any benefits that are payable under the Plan upon the death of such Eligible Director. The
Eligible Director may, subject to applicable laws, change such designation from time to time. Such
designation or change shall be in the form of Schedule B. The initial designation of each Eligible
Director shall be executed and filed with the Secretary of the Company within sixty (60) days
following the Effective Date of the Plan. Changes to such designation may be filed from time to
time thereafter.

4.8 Death of Participant

     In the event of an Eligible Director’s death, any and all Deferred Stock Units then credited
to the Eligible Director’s Account shall become payable to the Eligible Director’s Beneficiary in
accordance with Section 3 and the date of death shall be deemed to be the Termination Date.

4.9 Rights of Participants

	 4.9.1  Except as specifically set out in the Plan, no Eligible Director, or any other person shall
have any claim or right to any benefit in respect of Deferred Stock Units granted or Annual
Remuneration payable pursuant to the Plan.
	 
	4.9.2  Rights of Eligible Directors respecting Deferred Stock Units and other benefits under the
Plan shall not be transferable or assignable other than by will or the laws of descent and
distribution.
	 
	4.9.3  The Plan shall not be construed as granting an Eligible Director a right to be retained as a
member of the Board or a claim or right to any future grants of Deferred Stock Units, future Annual
Remuneration or other benefits under the Plan.
	 
	4.9.4  Under no circumstances shall Deferred Stock Units be considered Common Shares nor shall they
entitle any Eligible Director or other person to exercise voting rights or any other rights
attaching to the ownership of Common Shares, nor shall any Eligible Director or other person be
considered the owner of Common Shares or any interest therein by virtue of this Plan.

4.10 Compliance with Law

     Any obligation of the Company pursuant to the terms of the Plan is subject to compliance with
all applicable laws. The Eligible Directors shall comply with all applicable laws and furnish the
Company with any and all information and undertakings as may be required to ensure compliance
therewith.

 

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4.11 Withholding

     The Company shall be entitled to deduct any amount of withholding taxes and other withholdings
from any amount paid or credited hereunder.

 

 

SCHEDULE A

Photowatt Technologies Inc. Directors’ Deferred Stock Unit Plan (the “Plan”)

ELECTION NOTICE

I. Election:

	 	 	Subject to Part II of this Notice, for the period April 1,   to March 31, 
, I hereby elect to receive the following percentage of Annual Remuneration by way
of Deferred Stock Units (“DSUs”):

	 	 	 	 	 	 	 	 	 
	 	 	Amount	 	Percentage in DSUs	 	Percentage in Cash*
	Annual Retainer Fee

	 	$	 		 	___%
	 	___%
	Annual                     

Committee Fees

	 	$	 		 	___%
	 	___%

 

*cash payments will be made Quarterly in arrears

II. Acknowledgement

     I confirm and acknowledge that:

	 	1.	 	I have received and reviewed a copy of the terms of the Plan and agree to be
bound by them.
	 
	 	2.	 	I will not be able to cause the Company or any Affiliate thereof to redeem DSUs
granted under the Plan until my Termination Date.
	 
	 	3.	 	When DSUs credited to my account pursuant to this election are redeemed in
accordance with the terms of the Plan after my Termination Date, income tax and other
withholdings as required will arise at that time. Upon redemption of the DSUs, the
Company will make all appropriate withholdings as required by law at that time.
	 
	 	4.	 	The value of DSUs are based on the value of the Common Shares of the Company
and therefore are not guaranteed.

 

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	 	5.	 	No funds will be set aside to guarantee the payment of DSUs. Future payment of
DSUs will remain an unfunded and unsecured liability recorded on the books of the
Company.
	 
	 	6.	 	This election is irrevocable.
	 
	 	7.	 	The foregoing is only a brief outline of certain key provisions of the Plan.
In the event of any discrepancy between the terms of the Plan and the terms of this
Election Notice, the terms of the Plan shall prevail. All capitalized expressions used
herein shall have the same meaning as in the Plan unless otherwise defined herein.

	 	 	 
	 

	 	 
	Date

	 	(Name of Eligible Director)
	 
	 	 
	 

	 	 
	 

	 	(Signature of Eligible Director)

 

 

SCHEDULE B

BENEFICIARY DESIGNATION

To: Photowatt Technologies Inc.

I,                                         , being a participant in the Photowatt Technologies Inc. Directors’ Deferred Stock Unit Plan
(the “Plan”) hereby designate the following person as my Beneficiary for purposes of the Plan:

	 	 	 	 	 
	Name of Beneficiary:	 	 	 	 
	 
	 	 

	 	 
	 	 	 	 	 
	Address of Beneficiary:	 	 	 	 
	 
	 	 

	 	 
	 	 	 	 	 
	 
	 	 

	 	 

     This designation revokes any previous beneficiary designation made by me under the Plan. Under the
terms of the Plan, I reserve the right to revoke this designation and to designate another person
as my Beneficiary.

	 	 	 	 	 
	Date:	 	 	 	 
	 
	 	 

	 	 
	 	 	 	 	 
	Name:
	 	 	  (please print)
	 
	 	 	 	 
	 	 	 	 	 
	Signature:exv10w11

 

Exhibit 10.11

PHOTOWATT TECHNOLOGIES INC.

 

EXECUTIVE PERFORMANCE SHARE UNIT PLAN

 

As
amended on December 5, 2006 with effect as of November 8, 2006

 

 

	 	 	 	 	 	 	 
	1.
	 	PURPOSE	 	 	1	 
	2.
	 	PLAN DEFINITIONS AND INTERPRETATIONS	 	 	1	 
	3.
	 	GRANT OF SHARE UNITS AND TERMS	 	 	4	 
	4.
	 	ACCOUNTS AND STATEMENTS	 	 	5	 
	5.
	 	VESTING	 	 	6	 
	6.
	 	REDEMPTION OF SHARE UNITS	 	 	6	 
	7.
	 	MAXIMUM NUMBER OF SHARES TO BE ISSUED UNDER THE PLAN	 	 	7	 
	8.
	 	DEATH, TERMINATION OF EMPLOYMENT AND FORFEITURES	 	 	7	 
	9.
	 	CHANGES IN SHARE CAPITAL	 	 		 
	10.
	 	NOTICES	 	 	10	 
	11.
	 	GENERAL	 	 	10	 

 

 

PHOTOWATT TECHNOLOGIES

INC.

EXECUTIVE PERFORMANCE SHARE UNIT PLAN

	1.	 	PURPOSE
	 
	1.1	 	This Executive Performance Share Unit Plan has been established by the Company to provide
medium term incentives to certain of its executives to contribute to the success of the
Company and to build and maintain a strong spirit of performance and entrepreneurship.

	2.	 	PLAN DEFINITIONS AND INTERPRETATIONS
	 
	2.1	 	In this Plan, the following terms have the following meanings:

	 	(a)	 	“Account” has the meaning ascribed thereto in section 4.2;
	 
	 	(b)	 	“Affiliate” has the meaning ascribed to that term in the Securities Act
(Ontario);
	 
	 	(c)	 	“Associate” has the meaning ascribed to that term in the Securities Act
(Ontario);
	 
	 	(d)	 	“Applicable Law” means any applicable provision of law, domestic or foreign,
including, without limitation, applicable securities legislation, together with all
regulations, rules, policy statements, rulings, notices, orders or other instruments
promulgated thereunder and Stock Exchange Rules;
	 
	 	(e)	 	“ATS” means ATS Automation Tooling Systems Inc.;
	 
	 	(f)	 	“Beneficiary” means any person designated by the Participant by written
instrument filed with the Company to receive any amount, securities or property payable
under the Plan in the event of a Participant’s death or, failing any such effective
designation, the Participant’s estate;
	 
	 	(g)	 	“Board” means the board of directors of the Company;
	 
	 	(h)	 	“Business Day” means any day other than a Saturday, a Sunday or a statutory
holiday observed in the Province of Ontario;
	 
	 	(i)	 	“Code” means the United States Internal Revenue
Code of 1986, as amended;
	 
	 	(j)	 	“Committee” means a committee, if any, created by the Board to exercise
authority under the Plan pursuant to the provisions contained herein;
	 
	 	(k)	 	“Company” means Photowatt Technologies Inc., and
includes any successor corporation thereof, and any reference in
the Plan to action by the Company means action by or under the authority of the Board
or the Committee or any person that has been designated for that purpose by the Board
or Committee in accordance with Section 11.5;

 

- 2 -

	 	(l)	 	“Continuous Service” means that the provision of
services to the Company or an Affiliate of the Company in any
capacity of employee, director, officer or Service Provider is not interrupted or terminated,
whether by resignation, removal, discharge, termination of engagement or otherwise. In
the case of an employee whose employment is terminated by the Company
or an Affiliate of the Company, Continuous
Service shall be terminated on the date of notice of termination is given to the
employee. Continuous Service shall not be considered interrupted in the case of (i)
any approved leave of absence, (ii) transfers between locations
of the Company or an Affiliate of the Company or among
the Company and any of its Affiliates or any successor, in any capacity of employee,
director, officer or Service Provider, or (iii) any change in status as long as the
individual remains in the service of the Company or an Affiliate of
the Company in any capacity of
employee, director, officer or Service Provider (except as otherwise provided in a written
agreement between the Company and the Participant). An approved leave of absence shall
include sick leave, military leave, or any other authorized personal leave.
	 
	 	(m)	 	“Corporate Transaction” means a Sale Transaction resulting in a Change of
Control (as defined below). A “Change of Control” shall occur in the event of either
(A) an acquisition of voting securities of the Company to which are
attached in excess of 50% of the votes attaching to all outstanding voting securities
of the Company or (B) if the Company is not the surviving corporation
following completion of a Corporate Transaction, a transaction whereby the shareholders
of the Company immediately before the transaction hold less than 50% of
the shares of the surviving corporate entity or purchaser.
	 
	 	(n)	 	“Date of Grant” of a Share Unit means the date a Share Unit is granted to a
Participant under the Plan;
	 
	 	(o)	 	“Effective Date” means the 8th day of November, 2006;
	 
	 	(p)	 	“Expiry Date” means, in respect of a Share Unit, the latest date, as set out
in the applicable Grant Agreement, on which the Share Unit may be
redeemed, which date shall be no later than the date that is seven
years after the Date of Grant, provided
that if at any time the date should be determined to occur either during a period in
which the Participant is restricted from trading in securities of the Company under its insider trading policy or other policy or within ten
Business Days following such a period, such date shall be deemed to be the date that is
the tenth Business Day following the date of expiry of such period;
	 
	 	(q)	 	“Fair Market Value” as at any date means the closing price for a Share on the
day immediately prior to such date on the stock exchange on which the highest aggregate
volume of Shares have traded on such date. In the event that the Shares are not listed
and posted for trading on any stock exchange, the Fair Market Value shall be the fair
market value of a Share as determined by the Board in its sole discretion, acting
reasonably and in good faith;
	 
	 	(r)	 	“Grant Agreement” means an agreement between the Company and a Participant
under which a Share Unit is granted, together with such amendments, deletions or
changes thereto as are permitted under the Plan;
	 
	 	(s)	 	“including” means including without limitation;

 

- 3 -

	 	(t)	 	“Insider” means: (i) an insider as defined in the Securities Act (Ontario),
other than a person who falls within that definition solely by virtue of being a
director or senior officer of a subsidiary of the Company; and (ii) an
Associate of any person who is an insider by virtue of (i), above;
	 
	 	(u)	 	“Liquid Securities” means securities of an issuer that are listed for trading
on one or more of the TSX, the Nasdaq Global Market, the New York Stock Exchange or a
stock exchange or quotation system of similar stature, that have a market
capitalization of at least $200 million, and that are not subject to any restriction on
sale, pursuant to Applicable Law or otherwise;
	 
	 	(v)	 	“Non-Executive Director” means any director of the Company who is not an
employee or officer of the Company or any Affiliate of the Company;
	 
	 	(w)	 	“Outstanding Issue” means the aggregate number of Shares that are outstanding
immediately prior to the Share issuance in question, excluding Shares which have been
issued pursuant to Share Compensation Arrangements within the preceding one year
period;
	 
	 	(x)	 	“Participant” means any director, officer or
employee of the Company or an Affiliate of the Company, or any other
Service Provider, who has been
designated by the Company for participation in the Plan and who has agreed to
participate in the Plan on such terms as the Company may specify;
	 
	 	(y)	 	“Plan” means this Executive Performance Share Unit Plan, as amended and
restated from time to time;
	 
	 	(z)	 	“Qualified IPO” means an underwritten public offering of Shares in which
immediately following the closing, the Shares are listed for trading on one or more of
the TSX, the Nasdaq Global Market, the New York Stock Exchange or a stock exchange or
quotation system of similar stature and have a market capitalization of at least $200
million;
	 
	 	(aa)	 	“Sale Transaction” means any merger, amalgamation or plan of arrangement
involving the Company, acquisition or take-over bid for the Shares of
the Company, or similar transaction, or series of transactions, or the
sale of all or substantially all of the assets of the Company
excluding any asset sale transaction in connection with which all holders of Shares
are not entitled to receive cash or Liquid Securities in consideration of their Shares,
provided that a Sale Transaction shall exclude: (i) any share transfer, reorganization,
asset transfer, or similar transaction to which the parties are
limited to the Company and/or any of its present or future Affiliates;
(ii) the completion of a treasury offering of securities of the
Company or an Affiliate of the Company; or (iii) the public offering or the
dividend or other distribution by ATS or one of its Affiliates of shares in the capital
of the Company;
	 
	 	(bb)	 	“Service Provider” means: (i) an employee or Insider
of the Company or an Affiliate of the Company; or (ii) any other
person or company engaged by the Company or an Affiliate of the
Company to provide services for an initial, renewable or extended
period of 12 months or more;
	 
	 	(cc)	 	“Shares” means common shares of the Company, and include any
shares of the Company into which such shares may be converted,
reclassified,

 

- 4 -

	 	 	 	subdivided, consolidated, exchanged or otherwise changed, whether pursuant to a
reorganization, amalgamation, merger, arrangement or other form of reorganization;
	 
	 	(dd)	 	“Share Compensation Arrangement” means the Plan, a stock option, stock option
plan, stock purchase plan where the issuer provides financial assistance or matches the
whole or a portion of the purchase price of the securities being purchased, stock
appreciation rights involving the issuance of securities from treasury, or any other
compensation or incentive mechanism involving the issuance or potential issuance of
securities to one or more of an employee, Insider or Service Provider of the Company or any
Affiliate of the Company, including a share purchase from treasury which is financially assisted by
the Company by way of a loan, guaranty or otherwise;
	 
	 	(ee)	 	“Share Unit” means a unit credited by means of an entry on books of the Company
to a Participant pursuant to the Plan, representing the right to receive for each
Vested Share Unit one Share or cash payment equal to the Fair Market Value thereof, at
the time, in the manner, and subject to the terms, set forth in the Plan and the
applicable Grant Agreement;
	 
	 	(ff)	 	“Stock Exchange Rules” means the applicable rules of any stock exchange or
quotation system upon which shares of the Company are listed or quoted,
as applicable;
	 
	 	(gg)	 	“TSX” means the Toronto Stock Exchange;
	 
	 	(hh)	 	“U.S. Taxpayer” means a citizen or resident of the
United States for United States federal income tax purposes;
	 
	 	(ii)	 	“Vested Share Units” means Share Units which have vested in accordance with
section 5 and the terms of the applicable Grant Agreement;
	 
	 	(jj)	 	“Vesting Date” has the meaning ascribed thereto in section 5; and
	 
	 	(kk)	 	“Vesting Rights” refers to the terms on which the Share Unit may be redeemed.

	2.2	 	In this Plan, unless the context requires otherwise, references to the male gender include
the female gender, words importing the singular number may be construed to extend to and
include the plural number, and words importing the plural number may be construed to extend to
and include the singular number. All amounts referred to in this Plan
are stated in Canadian dollars unless otherwise indicated.
	 
	3.	 	GRANT OF SHARE UNITS AND TERMS
	 
	3.1	 	The Board or the Committee may grant Share Units to such Participant or Participants in such
number and at such times as the Company may, in its sole discretion, determine, as a bonus or
similar payment.
	 
	3.2	 	Each Share Unit will give the Participant the right to receive, with respect to each such
Share Unit which has become a Vested Share Unit pursuant to the provisions of the Plan and in
accordance with the terms of the Grant Agreement relating to such Share Unit, one Share or
where the applicable Grant Agreement so provides, the Fair Market Value.
	 
	3.3	 	Subject to the terms of the Plan, the Company may determine other terms or conditions of any
Share Units, including:

 

- 5 -

	 	(a)	 	any additional conditions to be met to establish Vesting Rights attaching to
Share Units, which may include:

	 	(i)	 	the market price of the Shares;
	 
	 	(ii)	 	the return to holders of Shares, with or without reference to
other comparable companies;
	 
	 	(iii)	 	the financial performance or results of the Company, an
Affiliate of the Company or
business unit of the Company or an Affiliate of the Company;
	 
	 	(iv)	 	other performance criteria relating to the Company, an
Affiliate of the Company or business
unit of the Company or an Affiliate of the Company;
	 
	 	(v)	 	ownership of Shares by a Participant; and
	 
	 	(vi)	 	any other terms and conditions the Company may in its
discretion determine with respect to vesting;

	 	(b)	 	restrictions on the resale of Shares including escrow arrangements; and
	 
	 	(c)	 	any other terms and conditions the Company may in its discretion determine;

	 	 	which shall be set out in the Grant Agreement.
	 
	 	 	The conditions may relate to all or a portion of the Share Units in a grant and may be
graduated such that different percentages (which may be greater or lesser than 100%) of the
Share Units in a grant will become vested depending on the extent of satisfaction of one or
more such conditions.
	 
	 	 	The Company may, in its discretion, subsequent to the Date of Grant of a Share Unit, waive
any such term or condition or determine that it has been satisfied.
	 
	3.4	 	Each grant of a Share Unit will be set forth in a Grant Agreement containing terms and
conditions required under the Plan and such other terms and conditions not inconsistent
herewith as the Company may, in its sole discretion, deem appropriate.
	 
	3.5	 	No certificates shall be issued with respect to Share Units.
	 
	3.6	 	Participation in the Plan shall be entirely voluntary and any decision not to participate
shall not affect the employment or engagement of any person with the Company.
	 
	4.	 	ACCOUNTS AND STATEMENTS
	 
	4.1	 	The Company shall keep or cause to be kept such records and accounts as may be necessary or
appropriate in connection with the administration of the Plan and the discharge of its duties,
which records shall, absent manifest error, be considered conclusively determinative of all
information contained therein. At such times as the Company shall determine, the Company
shall furnish the Participant with a statement setting forth the details of his or her Share
Units including the Date of Grant and the Vested Share Units and unvested Share Units held by each
Participant. Such statement shall be deemed to have been accepted by the Participant as
correct unless written notice to the contrary is given to the Company within 30 days after
such statement is provided to the Participant. For greater certainty, in the event of any
discrepancy between the records of the

 

- 6 -

	 	 	Company and any statement provided to a Participant pursuant to this section 4.1, the
records of the Company shall govern and the rights and obligations of the Company and the
Participant shall be determined on the basis of such records.
	 
	4.2	 	The Company shall maintain an account for each Participant
(an “Account”) to record Share Units granted to
such Participant hereunder.
	 
	4.3	 	On the Date of Grant, the Account will be credited with the Share Units granted to a
Participant on that date.
	 
	4.4	 	A Participant’s Account shall, unless otherwise determined by the Company, from time to time
until the Vesting Date, be credited with additional Share Units, the number of which shall be
the quotient determined by dividing: one hundred per cent (100%) of the dividends declared and
that would have been paid to the Participant if the Share Units in his or her Account on the
relevant record date for dividends on the Shares had been Shares (excluding stock dividends
but including dividends which may be paid in cash or shares at the option of the shareholder)
by the Fair Market Value on the dividend payment date, with fractions computed to three
decimal places.
	 
	5.	 	VESTING 
	 
	5.1	 	Subject to sections 8.1 and 8.2, Share Units shall vest in accordance with the terms of the
applicable Grant Agreement and this section 5, and each date on which Share Units shall vest
shall be referred to as the “Vesting Date” in respect of such Share Units.
	 
	5.2	 	Except as otherwise set out in any applicable
Grant Agreement or any other written agreement between a Participant
and the Company in respect of a Share Unit, and notwithstanding any
other provision of this Plan, in the event of a Corporate
Transaction, each Share Unit will be deemed terminated immediately prior to the specified
effective date of the Corporate Transaction, unless either the Share Unit is assumed by the
successor corporation or parent thereof in connection with the Corporate Transaction or the
Board determines otherwise. Upon Board approval of a Sale Transaction, the Company may give
notice to each Participant which will set forth requirements in respect of outstanding Share
Units or any Shares acquired through the redemption of Share Units following the date of such
notice that must be complied with as a condition to each Participant’s participation in the
Sale Transaction.
	 
	5.3	 	The Board or the Committee, as the case may be, may, in its sole discretion and subject to
such conditions as the Board or Committee considers appropriate, at any time after the Date of
Grant of a Share Unit, determine the acceleration, if any, of the vesting provisions for any
Share Units, in which event all such unvested Share Units then outstanding and granted to a
Participant shall be deemed to be Vested Share Units and shall be immediately redeemable in
accordance with Section 6.
	 
	6.	 	REDEMPTION OF SHARE UNITS
	 
	6.1	 	The Participant shall be entitled to receive, and the Company shall issue to the Participant,
one Share for each Vested Share Unit then credited to the Participant. Any such Shares shall
be issued to the Participant as soon as practicable following the applicable Vesting Date.
	 
	6.2	 	Notwithstanding section 6.1, the Company may in its sole discretion provide in a Grant
Agreement or, subject only to section 11.1(a), amend a Grant Agreement to provide that upon
redemption of Vested Share Units a Participant shall receive a cash payment equal to the Fair

 

- 7 -

	 	 	Market Value on the Vesting Date multiplied by the number of Vested Share Units then
credited to the Participant, less any applicable tax withholdings, in full satisfaction of
such Participant’s rights with respect to such Vested Share Units.
	 
	7.	 	MAXIMUM NUMBER OF SHARES TO BE ISSUED UNDER THE PLAN
	 
	7.1	 	The maximum number of Shares that may be issued by the Company to Participants pursuant to
Share Units granted and outstanding under this Plan and other Share Compensation Arrangements
is, prior to a Qualified IPO, 4,000,000, and after a Qualified IPO, a
number equal to 10% of the number of the Outstanding Issue immediately following
completion of the Qualified IPO.
	 
	7.2	 	Following completion of a Qualified IPO, no Share Unit shall be granted to any Participant if
the total number of Shares issuable to such Participant under this Plan, together with any
Shares reserved for issuance to such Participant under options for services or any other stock
option plans, would exceed 5% of the issued and outstanding Shares.
	 
	7.3	 	Notwithstanding any of the other provisions of this Plan, following completion of a Qualified
IPO, no Share Units shall be granted to any Participant if such grant could result, at any
time, in:

	 	(i)	 	the aggregate number of Shares issuable to Insiders at any time
and issued to Insiders within the one-year period prior to such time pursuant
to Share Units or other Share Compensation Arrangements exceeding 10% of the
issued and outstanding Shares;
	 
	 	(ii)	 	the aggregate number of Shares reserved for issuance pursuant
to Share Units granted under this Plan or any stock option plan to
Non-Executive Directors exceeding 0.5% of the issued and outstanding Shares;
and
	 
	 	(iii)	 	the issuance to any one Insider and such Insider’s Associates,
within a one-year period, pursuant to Share Units or other Share Compensation
Arrangements of an aggregate number of Shares exceeding 5% of the issued and
outstanding Shares.

	 	7.4	 	If any Share Unit is terminated, cancelled or has expired without being fully redeemed, any
unissued Shares which have been reserved to be issued upon the redemption of the Share Unit
shall become available to be issued upon the redemption of Share Units subsequently granted
under the Plan, provided that any such termination or cancellation of Share Units shall be
conducted in accordance with the applicable rules of any stock exchange upon which the Shares
of the Company are listed.
	 
	 	8.	 	DEATH, TERMINATION OF EMPLOYMENT AND FORFEITURES
	 
	 	8.1	 	If a Participant should die and the circumstances specified in Section 8.2 had not occurred
in relation to such Participant and such Participant, at the time of his or her death, held
Share Units in respect of which the Expiry Date had not then occurred:

	 	(i)	 	in the case of Vested Share Units so held by the deceased
Participant which had not yet been redeemed pursuant to Section 6 as at the
date of the death of the deceased Participant, the Company shall provide to the
Participant’s Beneficiary the Shares or payment to which the Participant was
entitled in accordance with Section 6 and the applicable Grant
Agreement; and

 

- 8 -

	 	(ii)	 	in the case of Share Units so held by the deceased Participant
which were not Vested Share Units as of the date of death of the deceased
Participant, such Share Units may, at the Company’s sole and arbitrary
discretion, be redeemed in such number as the Company may determine. Where the
Company elects to redeem unvested Share Units held by a deceased Participant
the Company shall provide to the Participant’s Beneficiary the Shares or
payment to which the Participant would have been entitled in accordance with
Section 6 and the applicable Grant Agreement if the Share Units that the
Company elects to redeem had become Vested Share Units on the date of death of
deceased Participant.

	 	8.2	 	(a) Except as otherwise provided in Section 8.1 or subsection 8.2(b) or in a written
agreement with the Company and approved by the Board, if a Participant’s Continuous Service
shall terminate then (A) any Share Unit granted to such Participant under the Plan that has
not vested shall in all respects terminate and be of no further force or effect immediately
after such termination of Continuous Service (and without the requirement for any further act
or formality including, without limitation, the giving of any notices) and (B) as soon as
practicable after the date of the occurrence of any such resignation, discharge, removal or
termination other than by reason of death as contemplated in Section 8.1 and prior to the
Expiry Date the Company shall, in accordance with Section 6 and the applicable Grant
Agreement, redeem any Share Units which are Vested Share Units on such date.
	 
	 	(b)	 	Except as otherwise provided in a written agreement with the Company, and
approved by the Board, if a Participant:

	 	(i)	 	is discharged or terminated as an employee or officer of the
Company  or an Affiliate of the Company for cause; or
	 
	 	(ii)	 	is removed as a director of the Company by action of the Board
or the shareholders of the Company; or
	 
	 	(iii)	 	is removed as a director of an Affiliate of the Company by
action of the board
of directors of the Affiliate or the shareholders of the Affiliate; or
	 
	 	(iv)	 	was engaged as a Service Provider and is not an employee or director
or officer of the Company or an Affiliate of the Company, and the
engagement is terminated by the Company or an Affiliate of the Company for
cause or breach of duty,

	 	 	 	immediately upon the occurrence of any such discharge, removal or termination other
than by reason of death as contemplated in Section 8.1 (and without the requirement
of any further act or formality including, without limitation, the giving of any
notices) each and every Share Unit granted to such Participant under the Plan, which
had not been redeemed prior to such occurrence, shall in all respects immediately
terminate and be of no further force or effect as to Shares in respect of such Share
Units, regardless of whether or not such Share Unit had vested with respect to such
Shares.

	 	 	For greater certainty, the Company shall in its sole and absolute discretion determine
whether “cause” or a “breach of duty” exists with respect to a discharge or termination.
	 
	8.3	 	Subject to the requirements of Applicable Law, a Participant may designate in writing a
Beneficiary to receive any benefits that are payable under the Plan upon the death of such
Participant. The Participant may, subject to Applicable Law, change such designation from
time

 

- 9 -

	 	 	to time. Such designation or change shall be in such form and executed and filed in such
manner as the Company may from time to time determine.
	 
	8.4	 	No cash or other compensation shall at any time be paid in respect of any Share Units which
have been forfeited or terminated under this Plan or on account of damages relating to any
Share Units which have been forfeited or terminated under this Plan.
	 
	8.5	 	Notwithstanding any other provision of the Plan or a Grant Agreement, Share Units granted
hereunder shall terminate, if not redeemed or previously terminated and forfeited in
accordance with the Plan, and be of no further force and effect after the Expiry Date.
	 
	8.6	 	The Company shall have no obligation at any time after the delivery of a Grant Agreement to
the Participant to notify the Participant of the Expiry Date of any Share Unit granted
pursuant to such Grant Agreement.
	 
	9.	 	ANTI-DILUTION
	 
	9.1	 	In the event that the Shares are at any time changed or affected as a result of the
declaration of a stock dividend or other distribution thereon or their subdivision or
consolidation, the number of Shares reserved for issuance under this Plan shall be adjusted
accordingly by the Board or the Committee to such extent as they deem proper in their
discretion. In such event, the number of Shares that are then subject to Share Unit grants
and the Fair Market Value may also be adjusted by the Board or the Committee to such extent,
if any, as they deem proper in their discretion.
	 
	 	 	Subject to Section 5.2 if at any time after the grant of Share Units and prior to the
earlier of the redemption of such Share Units pursuant to Section 6 and their Expiry Date,
the Shares shall be reclassified, reorganized or otherwise changed, otherwise than as
specified in the preceding paragraph, or the Company shall merge, combine, enter into a plan
of arrangement or amalgamate with or into another corporation (the corporation resulting or
continuing from such merger, combination, plan of arrangement or amalgamation being herein
called the “Successor Corporation”), the Participant shall be entitled to receive upon the
subsequent redemption of his or her Share Units in accordance with the terms hereof and
shall accept in lieu of the number of Shares to which he or she was theretofore entitled
upon such redemption the aggregate number of shares of the appropriate class and/or other
securities of the Company or the Successor Corporation (as the case may be) and/or other
consideration from the Company or the Successor Corporation (as the case may be) that the
Participant would have been entitled to receive as a result of such reclassification,
reorganization or other change or, of such merger, combination, arrangement or amalgamation,
if on the record date or effective date (as the case may be) of such reclassification,
reorganization or other change or such merger, combination, plan of arrangement or
amalgamation (as the case may be) he or she had been the registered holder of the number of
Shares to which he or she was theretofore entitled upon such redemption.
	 
	9.2	 	The Company shall not be required to issue fractional shares in satisfaction of its
obligations hereunder. Any fractional interest in a Share that would, except for the
provisions of this Section 9.2, be deliverable upon the redemption of any Share Unit shall be
cancelled and not be deliverable by the Company.

 

- 10 -

	10.	 	NOTICES
	 
	10.1	 	Any payment, notice, statement, certificate or other instrument required or permitted to be
given to a Participant or any person claiming or deriving any rights through him or her shall
be given by:

	 	(a)	 	delivering it personally to the Participant or to the person claiming or
deriving rights through him or her, as the case may be; or
	 
	 	(b)	 	mailing it postage paid (provided that the postal service is then in operation)
or delivering it to the address which is maintained for the Participant in the
Company’s records.

	10.2	 	Any payment, notice, statement, certificate or other instrument required or permitted to be
given to the Company shall be given by mailing it postage prepaid (provided that the postal
service is then in operation), or delivering it to the Company at the following address:

Photowatt Technologies Inc.

25 Reuter Drive

Cambridge, Ontario N3E 1A9

Attention: President and Chief Executive Officer

Fax No.: (519) 650-6535

	10.3	 	Any payment, notice, statement, certificate or other instrument referred to in section 10.1
or 10.2 hereof, if delivered, shall be deemed to have been given or delivered on the date on
which it was delivered, or if mailed (provided that the postal service is then in operation),
shall be deemed to have been given or delivered on the second Business Day following the date
on which it was mailed.
	 
	11.	 	GENERAL
	 
	11.1	 	The Company shall have the power to, at any time and from time to time either prospectively
or retrospectively, amend, suspend or terminate the Plan or any Share Unit granted under the
Plan (or the Grant Agreement in respect thereof), provided, however, that:

	 	(a)	 	any such amendment, suspension or termination is subject to any approvals
required under Applicable Law;
	 
	 	(b)	 	no such amendment, suspension or termination shall be made at any time to the
extent such action would materially adversely affect the existing rights of a
Participant with respect to any then outstanding Share Unit, as determined by the Board
acting in good faith, without his or her consent in writing, except to the extent
required by Applicable Law and subject to section 11.1(d); and
	 
	 	(c)	 	following completion of a Qualified IPO, any such amendment in respect of the
following shall become effective only upon shareholder approval thereof:

	 	(i)	 	any amendment to the maximum number of Shares specified in
section 7.1 in respect of which Share Units may be granted under this Plan
(other than pursuant to Article 9);

 

- 11 -

	 	(ii)	 	any amendment that would increase any of the percentage limits
in sections 7.2 and 7.3;
	 
	 	(iii)	 	any amendment to the reference in the definition of Expiry
Date in section 2.1(q) to “the date that is seven years after the Date of
Grant”;
	 
	 	(iv)	 	any amendment that would extend the term of any outstanding
Share Unit granted to an Insider to a date beyond the Expiry Date;
	 
	 	(v)	 	any amendment that would permit assignments to persons not
currently permitted under the Plan; and
	 
	 	(vi)	 	any amendment to the definition of “Participant” or any defined
term used therein that would expand the scope of the term “Participant”.

	 	(d)	 	If any provision of the Plan contravenes any regulations or Treasury guidance
promulgated under Section 409A of the Code or would cause the Share Units to be subject
to the interest and penalties under Section 409A of the Code such provision of the Plan
shall, to the extent that it applies to U.S. Taxpayers, be modified, without the consent
of any Participant, to maintain, to the maximum extent practicable, the original intent
of the applicable provision without violating the provisions of Section 409A of the
Code.

	11.2	 	Upon the termination of the Plan, in whole or in part, the Company may, in its discretion,
determine whether the outstanding Share Units (including Vested Share
Units and unvested Share Units) or a
portion thereof credited to a Participant affected by the termination shall be automatically
redeemed and paid out in a lump sum cash payment net of any applicable withholdings or held
for the credit of the Participant and redeemed and paid out at a later date in accordance with
the terms of the Plan in effect immediately prior to the termination of the Plan.

	11.3	 	The Plan shall be administered by the Company in accordance with its provisions. All costs
and expenses of administering the Plan will be paid by the Company. The Company shall have
the power to make such rules and regulations for the administration of this Plan, and to
interpret the provisions hereof and of such rules and regulations, as it shall in its sole
discretion determine to be appropriate.

	11.4	 	The determination by the Company of any question which may arise as to the interpretation or
implementation of the Plan or any of the Share Units granted hereunder shall be final and
binding on all Participants and other persons claiming or deriving rights through any of them.

	11.5	 	The Board or Committee may from time to time delegate all or any of its powers under the Plan
to one or more directors or officers of the Company who shall thereupon exercise such of the
powers herein given to the Board or the Committee as may be delegated by it in accordance with
any express directions of the Board or Committee from time to time. The Company may also
appoint or engage a trustee, custodian or administrator to administer or implement the Plan.

	11.6	 	The Plan shall enure to the benefit of and be binding upon the Company, its successors and
assigns. The interest of any Participant under the Plan or in any Share Unit shall not be
transferable or alienable by him or her either by pledge, assignment or in any other manner
whatsoever and, during his lifetime, shall be vested only in him or her, but shall thereafter
enure

 

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	 	 	     to the benefit of and be binding upon the legal personal representatives of the Participant
in accordance with the terms hereof.

	11.7	 	The Company’s obligation to issue Shares in accordance with the terms of this Plan and the
grant, and any right of redemption of any Share Unit hereunder, are subject to compliance with
all Applicable Laws and to receipt of any applicable approval under Applicable Laws in respect
of the grant or right of exercise or any securities filing that discloses the grant or right
of exercise. The Company’s issuance of any Share Units or its obligation to make any
payments or to provide any Shares hereunder is subject to compliance with all Applicable Laws.
As a condition of participating in the Plan, each Participant agrees (for such period as the
Participant holds any Share Unit, including any period subsequent to termination of Continuous
Service of the Participant), in connection with the redemption of all Share Units held and the
sale of any Shares acquired upon the redemption of such Share Units, to comply with all
Applicable Laws as well as the restrictions respecting disclosure of information or trading in
securities of the Company established in the Company’s insider
trading policy or such other
policies as are established from time to time, and to furnish to the Company all information
and undertakings as may be required to permit compliance with Applicable Laws.

	11.8	 	Each Participant is subject to all applicable tax laws in connection with the ownership and
redemption of Share Units and the acquisition and disposition of Shares underlying any Share
Units, and no representation or warranty is made by the Company respecting any tax deduction,
credit or other favourable tax treatment in connection therewith.

	11.9	 	The Company and its Affiliates may withhold from any amount payable to a Participant, either under this Plan, or
otherwise, such amount as may be necessary so as to ensure that the
Company and its Affiliates will be able to
comply with the applicable provisions of any federal, provincial, state or local law relating
to the withholding of tax or other required deductions, including on the amount, if any,
includable in the income of a Participant.

	11.10	 	No Participant shall have any rights as a shareholder in respect of Shares subject to Share
Units until such Share Units have been redeemed for Shares and such Shares issued.

	11.11	 	Neither designation of an employee as a Participant nor the grant of any Share Units to any
Participant entitles any Participant to the grant, or any additional grant, as the case may
be, of any Share Units under the Plan. Neither the Plan nor any action taken thereunder shall
interfere with the right of an employer of a Participant to terminate a Participant’s
employment at any time. Neither any period of notice nor any payment in lieu thereof upon
termination of employment, shall be considered as extending the period of employment for the
purposes of the Plan.

	11.12	 	The Plan shall be an unfunded obligation of the Company. Neither the establishment of the
Plan nor the grant of any Share Units or the setting aside of any funds or assets (including
Shares) by the Company (if, in its sole discretion, it chooses to do so) shall be deemed to
create a trust. Legal and equitable title to any funds set aside for the purposes of the Plan
shall remain in the Company and no Participant shall have any security or other interest in
such funds. Any funds so set aside shall remain subject to the claims of creditors of the
Company present or future. Amounts payable to any Participant under the Plan shall be a
general, unsecured obligation of the Company. The right of the Participant to receive payment
pursuant to the Plan shall be no greater than the right of other unsecured creditors of the
Company.

 

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	11.13	 	The Board or Committee shall be entitled to make such rules, regulations and determinations
as it deems appropriate under the Plan in respect of any leave of absence or disability of any
Participant.

	11.14	 	All payments and benefits under the Plan shall be determined and paid in the lawful currency
of Canada.

	11.15	 	This Plan and any Share Units granted hereunder shall be governed by and construed in
accordance with the laws of the Province of Ontario and the federal laws of Canada applicable
therein.

	11.16	 	This Plan is hereby instituted and in effect as of the Effective Date.

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