Document:

exv10w2

 

Exhibit
10.2

MASTER SUPPLY AGREEMENT

between

ATS AUTOMATION TOOLING SYSTEMS INC.

– and –

PHOTOWATT TECHNOLOGIES INC.

[     ], 2006

 

 

MASTER SUPPLY AGREEMENT

THIS
MASTER SUPPLY AGREEMENT (this “Agreement”) is dated
as of  [     ], 2006 (“Effective Date”) by
and between PHOTOWATT TECHNOLOGIES INC., a corporation under the laws of Canada with offices at 25
Reuter Drive, Cambridge, Ontario, N3E 1A9 (“Photowatt”), and ATS AUTOMATION TOOLING SYSTEMS INC., a
corporation under the laws of the Province of Ontario with offices at 250 Royal Oak Road,
Cambridge, Ontario N3H 4R6 (“ATS”).

RECITALS

	 	A.	 	Photowatt is undertaking an initial public offering (the “Offering”) of its
common shares pursuant to a registration statement on Form F-1 under the U.S.
Securities Act of 1933 and a prospectus filed with Canadian provincial and territorial
securities regulatory authorities.
	 
	 	B.	 	Immediately prior to the completion of the Offering, ATS and Photowatt intend
to enter into a Master Separation Agreement (the “Master Separation Agreement”),
containing the key provisions relating to the separation of ATS and Photowatt, and the
other Separation Agreements (as defined in the Master Separation Agreement) providing
for, among other things, the transfer to Photowatt of certain assets of ATS including
the Foil Presses.
	 
	 	C.	 	ATS and/or certain Affiliates of ATS are in the business of providing design,
development, fabrication and testing services (or some combination thereof) in
connection with the development of certain types of machinery or process concepts and
Photowatt and/or certain Affiliates of Photowatt may desire to engage ATS or an
Affiliate of ATS to provide same from time to time on and subject to the terms of this
Agreement.
	 
	 	D.	 	Photowatt wishes to engage ATS to house its Foil Presses and to supply Foil
Products on and subject to the terms of this Agreement.
	 
	 	E.	 	The parties intend in this Agreement and the other Separation Agreements to set
forth the principal arrangements between them regarding the Offering and their
operations thereafter.

 

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NOW, THEREFORE, in consideration of the foregoing and the mutual promises, covenants and agreements
set forth below, and for other good and valuable consideration, the receipt and sufficiency of
which the parties hereby acknowledge, the parties agree as follows:

ARTICLE 1

DEFINITIONS AND INTERPRETATION

1.1 Any capitalized term not defined in this Agreement shall have the meaning given such term in
the Master Separation Agreement. The following capitalized terms used in this Agreement shall have
the following meaning:

	 	(a)	 	“Affiliate” means with respect to any entity, any other entity directly or
indirectly controlling or controlled by, or under direct or indirect common control
with, such entity or one or more of the other Affiliates of that entity (or a
combination thereof). For purposes of this definition, an entity shall control another
entity if the first entity (i) owns, beneficially or of record, more than fifty percent
(50%) of the voting securities of the other entity, or (ii) has the ability to elect a
majority of the directors of the other entity.
	 
	 	(b)	 	“ATS Indemnified Parties” has the meaning set out in Section 4.8(a).
	 
	 	(c)	 	“Business Day” means a day other than Saturday, Sunday or other day on which
commercial banks in Toronto, Ontario are authorized or required by law to close.
	 
	 	(d)	 	“Common Shares” means the common shares in the capital of Photowatt at the date
hereof and includes any shares or securities into which such common shares may be
converted or changed or which result from a consolidation, subdivision,
reclassification, stock split, stock dividend, recapitalization or redesignation of the
common shares of Photowatt, any shares or securities of Photowatt which are received as
a stock dividend or distribution in respect of such common shares, any common shares of
Photowatt received on the exercise of any option, warrant or other similar right and
any shares or securities which may be received by the holders of common shares of
Photowatt as a result of an amalgamation, merger, arrangement or other reorganization
of or including Photowatt.
	 
	 	(e)	 	“Cost” means all manufacturing costs including, labour, materials, other direct
costs, and an allocation of indirect and overhead costs.
	 
	 	(f)	 	“Deliverables” mean the tangible documents and equipment that are to be
provided to Photowatt pursuant to the terms of a Project Agreement, which may include
without limitation, reports, designs, equipment, prototypes, computer software, and
documentation. For purposes of clarity, Deliverables exclude Foil Products.
	 
	 	(g)	 	“Foil Presses” has the meaning set out in Section 4.1.
	 
	 	(h)	 	“Foil Products” has the meaning set out in Section 4.1.

 

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	 	(i)	 	“Percentage of Outstanding Common Shares” means the percentage equivalent to
the quotient obtained when (i) the number of Common Shares directly beneficially owned
at the time of the calculation by ATS and its
Affiliates, is divided by (ii) the total number of Common Shares outstanding at the
time of calculation, all quantities being on a non-diluted basis.
	 
	 	(j)	 	“Person” is to be broadly interpreted and includes an individual, a
corporation, a partnership, a trust, an unincorporated organization, a governmental
authority, and the executors, administrators or other legal representatives of an
individual in such capacity.
	 
	 	(k)	 	“Photowatt Indemnified Parties” has the meaning set out in Section
4.8(b).
	 
	 	(l)	 	“Products” means the equipment forming part of the Deliverables with respect to
a particular Project. For purposes of clarity, Products exclude Foil Products and Foil
Presses.
	 
	 	(m)	 	“Project” has the meaning set out in Section 3.1.
	 
	 	(n)	 	“Project Agreement” has the meaning set out in Section 3.1.
	 
	 	(o)	 	“Project Services” means all the services that are to be performed by ATS
pursuant to the terms of a Project Agreement, which may include, without limitation,
general consulting services, design services, and installation services. For purposes
of clarity, Project Services exclude any services provided by ATS pursuant to
Article 4.
	 
	 	(p)	 	“Proprietary Rights” means any and all legal and equitable rights, including
all worldwide copyrights, patent rights, trade secrets, confidential and proprietary
information rights, moral rights, and all rights and title in and to the structure,
sequence, and organization of a work of authorship, and all rights in and to any code,
materials, pictures, interfaces, screen display, and audio visual display or
presentation.
	 
	 	(q)	 	“Specifications” means the design, functional and performance specifications
mutually agreed upon between the parties.

1.2 Construction. If an ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall
arise favouring or disfavouring any party because of the authorship of any provision of this
Agreement. Any reference to any federal, state, provincial, local or foreign law shall be deemed
also to refer to such law as amended and all rules and regulations promulgated thereunder, unless
the context requires otherwise. Any reference to any Contract (including schedules, exhibits and
other attachments thereto), including this Agreement, shall be deemed also to refer to such
Contract as amended, restated or otherwise modified, unless the context requires otherwise. The
words “include,” “includes” and “including” shall be deemed to be followed by “without limitation.”
Pronouns in masculine, feminine and neuter genders shall be

 

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construed to include any other gender,
and words in the singular form shall be construed to include the plural and vice versa, unless the
context requires otherwise. The words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder”
and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so limited. Where this
Agreement states that a party “will” or “shall” perform in some manner or otherwise act or omit to
act, it means that such party is legally obligated to do so in accordance with this Agreement. The
word “or” shall not be exclusive. The captions, titles and headings included in this Agreement are
for convenience only and do not affect this Agreement’s construction or interpretation. Any
reference to an Article, Section or Schedule in this Agreement shall refer to an Article or Section
of, or Schedule to, this Agreement, unless the context otherwise requires.

1.3 Conflicts With Other Separation Agreements. To the extent any portion of this Agreement
conflicts with the Master Separation Agreement, the Master Separation Agreement shall control.

ARTICLE 2

RIGHTS OF FIRST REFUSAL AND

PREFERRED SUPPLIER

2.1 Rights of First Refusal. ATS shall have the right of first refusal with respect to any offer
received from any third party or any agreement tentatively reached with any third party to supply
any equipment and related services of the type described in Schedule A hereto (“Offer”). Photowatt
shall promptly provide ATS with a copy of any such Offer. ATS shall have a period of 30 days after
delivery thereof within which to exercise its right of first refusal. The right of first refusal
may be exercised by delivery by ATS to Photowatt of a notice of acceptance. The terms and
conditions of such Offer with respect to price, equipment and services to be supplied, the
specifications thereof and delivery date shall, upon delivery of such notice of acceptance,
thereafter be binding upon ATS and Photowatt and ATS shall supply and Photowatt shall purchase the
equipment and services described in the Offer pursuant to those terms, provided that the terms of
this Agreement shall apply and be incorporated in such Offer and shall collectively constitute a
Project Agreement. If ATS does not exercise its right of first refusal, then Photowatt shall be
free to accept such Offer for the supply of such equipment and related services with the third
party provided that the terms of such Offer may not be revised without first providing the ATS with
its right of first refusal hereunder. Photowatt shall have the right
in its sole discretion to terminate this Section 2.1 and the
right of first refusal of ATS hereunder, by giving notice to ATS, if
ATS fails to perform any of its material obligations with respect to
the supply of any equipment to Photowatt pursuant to the right of
first refusal hereunder on two or more occasions and Photowatt shall
have notified ATS of such failures. In such event, all other
provisions of this Agreement shall remain in full force and effect.
ATS and Photowatt acknowledge that they may agree from time to time
to mutually waive the provisions of this Section 2.1 with
respect to any Offer, in which case Photowatt shall be free to accept
such Offer with the third party provided that the terms of such Offer
may not be revised without first providing ATS with its right of
first refusal hereunder (unless ATS agrees to waive such right).

2.2 Preferred Supplier. With respect to the supply of any equipment and related services of the
nature described in Schedule B hereto, ATS shall be Photowatt’s preferred supplier. If Photowatt
determines to purchase any equipment and related services of the nature described in Schedule B
hereto, then Photowatt shall send a written notice to ATS which shall contain a description of
Photowatt’s requirements with respect to such equipment and related services. Photowatt shall
allow ATS the opportunity to submit a bid with respect to the supply of the equipment and related
services described in such notice in accordance with this Section. If the parties reach agreement
with respect to the supply of such equipment and related services, then such agreement shall
constitute a Project Agreement for the purposes of this Agreement and the terms of this Agreement
shall apply.

 

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ARTICLE 3

PROJECT AGREEMENTS

3.1 Project Agreements

	 	(a)	 	Project Agreements. From time to time during the term of this Agreement
including pursuant to the provisions of Article 2, ATS and Photowatt may agree
in writing that ATS shall provide certain Project Services and/or Deliverables in
connection with a particular project (“Project”) which the parties intend to be
governed by this Agreement. Each such project agreement shall reference this
Agreement, shall be subject to the terms of this Agreement, and shall be referred to
herein as a “Project Agreement”. Any agreements entered into pursuant to Section
2.1 and Section 2.2 shall be deemed to be Project Agreements and shall be
subject to the terms of this Agreement. Each Project Agreement shall be deemed to
include the terms of any quotation provided by ATS unless otherwise expressly provided
for. Any terms on Photowatt’s purchase order, other than terms addressing quantity and
price, shall be void and of no force notwithstanding any delivery under such purchase
order.
	 
	 	(b)	 	Affiliates. Should an Affiliate of a party to this Agreement enter into what
would otherwise be a Project Agreement with the other party to this Agreement or an
Affiliate of such other party, and should the parties to that Project Agreement
reference this Agreement as governing such Project, then the terms of this Agreement
shall apply to the same extent as if the parties to that Project Agreement were parties
to this Agreement and the terms “Photowatt” and “ATS” herein shall be amended as
required for the purposes of such Project Agreement.

3.2 Provision Of Services and Deliverables. Upon the execution or entering into of a Project
Agreement by both parties, ATS shall provide the Services and Deliverables specified in the Project
Agreement in accordance with the terms and conditions of the Project Agreement and the terms and
conditions of this Agreement. ATS shall use commercially reasonable efforts to provide Services
and Deliverables in accordance with any schedule set forth in a Project Agreement, or if no
schedule is set forth in such Project Agreement, in accordance with the schedule otherwise agreed
upon in writing between the parties. All scheduled completion dates are best estimates based on
current projections and based on Photowatt meeting its obligations and ATS shall not be liable for
delays in completion or delivery.

3.3 Price and Payment.

	 	(a)	 	Price and Payment. Photowatt and ATS will mutually agree to pricing for each
Project in the corresponding Project Agreement. Unless otherwise provided for in a
particular Project Agreement, all payments are due within 30 days of receipt of an
invoice from ATS. Photowatt shall pay interest at the prime rate quoted from time to
time by The Bank of Nova Scotia plus 2% on any amounts invoiced by ATS which are not
paid when due.

 

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	 	(b)	 	Taxes. The prices quoted by ATS are exclusive of all applicable federal,
state/provincial or local taxes, unless otherwise stated. Photowatt shall pay the gross
amount of any present or future sales, use, excise, value added, or other similar tax
applicable to the price, sale or delivery of any Product, Project Service or
Deliverable furnished hereunder or to their use by Photowatt. Photowatt shall furnish
ATS with evidence of exemption from any such taxes acceptable to the taxing
authorities. Photowatt shall assess and remit any applicable tax to taxing authorities
not otherwise invoiced by ATS. If any tax in the nature of withholding tax is payable
on any sums invoiced under this Agreement, Photowatt shall pay ATS such amount as is
necessary to ensure that the net amount received by ATS after such withholding shall be
equal to the amount invoiced or otherwise required to be paid herein.

3.4 Design Changes. No changes to the design of a Product from that agreed upon in the Project
Agreement shall be binding unless agreed to in writing by both parties. Any such amendment to a
Project Agreement shall address the impact of such changes on costs and schedule. In the event ATS
agrees to undertake a design study for Photowatt to assess a potential design change, the schedule
for all materials or components affected by the design study shall be extended by a period of time
equal to the hold time, if any, associated with such study, whether or not the parties ultimately
agree to the proposed change.

3.5 Equipment Safety. ATS shall build the Product to comply with ATS’s interpretation of
applicable (OSHA or CSA) safety standards. ATS shall review equipment safety including guarding
designs with Photowatt at a design review meeting with the intent to maximize operator safety,
particularly with respect to all pinch points and moving parts. Photowatt shall advise ATS of any
required equipment safety or guarding changes no later than five (5) days following the date of
such design review meeting. Unless provided for in the Specifications, if Photowatt requests
deviation from ATS’s interpretation of the applicable safety standards, this shall be considered a
design change (See Section 5). ATS may decline any proposed change in the design by
Photowatt, if ATS has concerns regarding safety, reliability, performance or warranty service.

3.6 Photowatt Obligations. Unless otherwise stated in a Project Agreement, Photowatt agrees to
fulfill the following obligations in relation to each Project. Notwithstanding anything to the
contrary contained herein, if the following obligations of Photowatt are not met in a timely
manner, ATS will not be responsible for any impacts to the scope, schedule, budget, or any other
agreed terms and conditions set forth in the Project Agreement:

	 	(a)	 	Photowatt shall provide ATS in a timely manner with:

	 	(i)	 	all information necessary in order to comply
with its obligations under any Project Agreement or reasonably
requested by ATS;
	 
	 	(ii)	 	access to Photowatt’s and its Affiliates’
personnel and appropriate subject matter experts in connection with any
Project;

 

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	 	(iii)	 	all required sample parts or other specified
items required by ATS to design, manufacture, test and install the
Product; and
	 
	 	(iv)	 	clear and unobstructed access to those portions
of Photowatt’s and its Affiliates’ premises required by ATS for
installation of the Product in a condition ready to receive the
Product; and

	 	(b)	 	Any documents submitted to Photowatt for comment or approval by ATS must be
reviewed in a timely manner by Photowatt for accuracy, completeness and conformance to
this Agreement. Failure of Photowatt to advise ATS in writing of material issues
associated with such documents within 5 business days of submission or resubmission
will be considered deemed approval of such documents.

In the event of any delay resulting from Photowatt’s failure to meet these obligations, the date of
delivery or of performance as set out in the applicable Project Agreement shall be extended for a
period equal to the period of such delay. ATS shall not, in such circumstances be liable for any
failure to fulfill any obligations under any Project Agreement and Photowatt shall pay ATS
compensation for the costs actually incurred by reason of such delay, including carrying charges,
transportation charges, storage charges, travel charges, personnel charges and reasonable overhead
and profit thereon.

3.7 Factory Acceptance and Site Acceptance. The following provisions apply with respect to the
acceptance of any Products forming part of the Deliverables:

	 	(a)	 	ATS and Photowatt shall agree in writing upon a test plan (“Test Plan”) within
20 business days of completion of the final designs for the Products, setting out the
criteria to be met, and the testing process to be employed, during the FAT (as defined
below) and the SAT (as defined below).
	 
	 	(b)	 	A factory acceptance test (“FAT”) shall be performed at ATS’s facility or such
facilities of ATS’s subcontractors as may be agreed upon in writing by the parties and
shall commence within five (5) business days of notice from ATS confirming completion
of the Products or at such other time as may be agreed upon in writing by the parties.
Such testing shall be carried out in accordance with the Test Plan. The FAT shall be
deemed successful when the results of the testing are in compliance with the Test
Plan’s criteria.
	 
	 	(c)	 	A Photowatt site acceptance test (“SAT”) shall be performed at Photowatt’s
facility within five (5) business days of the completion of installation of the
Products at Photowatt’s site. Such testing shall be carried out in accordance with the
Test Plan. The SAT shall be deemed successful when the results of the testing are in
compliance with the Test Plan’s criteria.
	 
	 	(d)	 	ATS shall carry out such remedial work as is necessary to achieve a successful
FAT and SAT at no additional charge to Photowatt, provided that any changes

 

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	 	 	 	requested by Photowatt beyond those set forth in the Specifications may require
additional charges which shall be determined by mutual agreement by both parties and
reflected in a change order executed by the parties in accordance with Section
3.4. Once remedial work is complete, the Products will be re-tested and this
process shall continue until a successful FAT and SAT is achieved.

	 	(e)	 	In the event ATS and Photowatt are unable to agree upon a Test Plan within the
time period provided for in sub-section (a) above, the parties shall immediately
escalate the issue within their organizations and, failing agreement within five (5)
business days of when that escalation should have occurred, either party shall have the
right to terminate the applicable Project Agreement upon five (5) days’ notice. In the
event of such termination, Photowatt shall pay ATS for all work performed prior to the
termination, including costs and expenses already incurred and commitments made by ATS
plus reasonable amounts for overhead and profit on the foregoing.
	 
	 	(f)	 	Notwithstanding anything to the contrary, FAT and/or SAT will be deemed
successfully completed in the event that Photowatt fails to conduct the tests within
the prescribed timeframe referred to above or in the event Photowatt does not provide
the production quality sample parts or other inputs required by the Test Plan within
such timeframes.

3.8 Delivery, Title, Risk of Loss and Security. Unless otherwise specified in the applicable
Project Agreement, delivery will be made to Photowatt Ex-Works at point of manufacture, skidded for
domestic truck shipment. Any export or other special packing or special transportation charges
shall be charged to and paid by Photowatt. Except as otherwise provided herein or in the Project
Agreement, ATS shall not be responsible for freight transportation, insurance, shipping, storage,
import duty, brokerage, handling, demurrage, or similar charges. If such charges are by the terms
of sale included in the Project Agreement price, any increase in rates becoming effective after the
date of Project Agreement shall be for the account of and responsibility of Photowatt. Risks of
loss or damage shall pass to Photowatt on delivery to the carrier at ATS’s facility; however, title
to the Product will not pass to Photowatt until payment has been received in full. Without
limiting and in addition to the aforementioned retention of title, Photowatt hereby grants to ATS a
first-priority purchase-money security interest in all goods, general intangibles and other
personal property sold or otherwise supplied by ATS to Photowatt under this Agreement and any
Project Agreement, including, without limitation, the Deliverables under each Project Agreement,
together with all accessions thereto, all replacements thereof and all proceeds therefrom, to
secure payment of all amounts owing by Photowatt to ATS under this Agreement and such Project
Agreements, including the unpaid portion of the purchase price of the goods, general intangibles
and other personal property sold or otherwise supplied by ATS to Photowatt under this Agreement and
any Project Agreement from time to time. ATS shall have authority to make all filings,
registrations and notifications necessary or desirable to protect, preserve and perfect its
security interest and the intended priority thereof. Photowatt agrees that in the event of default
by it of any provision of this Agreement, ATS will have all remedies available to it contemplated
at

 

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law, including those contained in applicable personal property security legislation. This security
is granted in addition to and not in substitution for any other rights and remedies ATS may have
hereunder or otherwise.

3.9 Limited Warranty

	 	(a)	 	ATS warrants that each Product (other than equipment comprising prototypes or
proof of principle equipment) will be free from defects in workmanship and material and
shall materially conform to the Specifications for a period (the “Warranty Period”) of
twelve (12) months from the date of successful completion of SAT of the Product in
Photowatt’s plant or fifteen (15) months from the date of shipment from ATS’s
facilities, whichever occurs first.
	 
	 	(b)	 	During the term of the applicable Project Agreement, ATS warrants that it shall
perform all Project Services provided under the Project Agreement in a workmanlike
manner respecting industry standards and practices for similar services.
	 
	 	(c)	 	Upon prompt notification from Photowatt of any failure of a Product or any
Project Services to conform to these warranties during the applicable warranty period,
ATS will make repairs, adjustments, re-performance or replacements to the defective
part(s) or Project Services at ATS’s option. Where required by ATS, Photowatt agrees
to return a defective part to ATS at Photowatt’s expense. ATS will return corrected or
replacement parts to Photowatt CPT Photowatt’s plant. Photowatt acknowledges that this
sub-section sets forth Photowatt’s exclusive remedy, and ATS’s exclusive liability, for
any breach of these warranties or other duty related to the quality of the Products or
the Project Services.
	 
	 	(d)	 	ATS shall have no responsibility for, and does not warrant against, any
problems that occur as a result of improper use of any Product or failure to properly
install, maintain and operate it in accordance with ATS’s recommended procedures, or
alteration to it by any party other than ATS or those authorized by ATS to do so or any
modifications not made by ATS or problems that result from any accident, vandalism,
mischief or theft. Photowatt shall maintain accurate and complete records regarding
equipment operation and maintenance and service procedures performed on the Product.
	 
	 	(e)	 	ATS’s warranty excludes consumable items and wear parts, such as but not
limited to belts, bulbs, lamps, fuses, o-rings, filters, fiber guides, printer ribbons
or cartridges, lubricants, solvents or chemicals, which by their nature require
periodic replacement.
	 
	 	(f)	 	With respect to third party equipment integrated into the Product, warranties
for such items are limited to the warranty extended to ATS by the third party supplier.
ATS hereby assigns to Photowatt all warranties received from its

 

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	 	 	 	suppliers to the extent ATS is able to and agrees to assist Photowatt in making any
claim pursuant to the said warranties.

ATS MAKES NO OTHER WARRANTY WHATSOEVER WITH RESPECT TO ANY PRODUCTS SUPPLIED UNDER THIS AGREEMENT,
WHETHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OR CONDITION OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, ALL OF WHICH ARE DISCLAIMED BY ATS AND WAIVED BY PHOTOWATT.

3.10 Spare Parts

	 	(a)	 	Sixty (60) days prior to the shipment of any Product, ATS shall provide
Photowatt with a list of recommended parts (“Spare Parts”), subject to final
verification by ATS at the time of shipment of the Products, to be stocked by Photowatt
for maintenance of the Products set forth in the applicable Project Agreement, and all
subsequent change orders to such Project Agreements in accordance with this Agreement,
including prices (in effect at such time), lead-time, original equipment manufacturer
(OEM) and OEM part numbers for such parts.
	 
	 	(b)	 	ATS agrees that it will, for a period of five (5) years after the Warranty
Period, make available the necessary resources to service the Products and sell to
Photowatt all necessary Spare Parts, at prevailing price, delivery and payment terms,
required for maintenance and repair of the Products. The parties acknowledge that in
the event that Spare Parts consisting of or including components manufactured by a
third party supplier and not manufactured by ATS cease to be available from such third
party supplier, ATS shall be entitled to identify a suitable replacement or work-around
solution for such Spare Parts. After such five (5) year period has expired, Photowatt
may request that ATS continue to support the Products or supply Spare Parts and, if ATS
does not choose to continue to support such Products or supply such Spare Parts, ATS
agrees to provide Photowatt, upon receipt of a written request from Photowatt
therefore, with an opportunity for Photowatt to make final purchases of any Spare Parts
then in the possession of ATS and supply Photowatt with copies of all manufacturing
drawings of Spare Parts that are manufactured by ATS so that Photowatt can maintain the
Products, provided that Photowatt shall only be able to use such drawings to make or
have made Spare Parts for Products supplied by ATS and for no other purpose.

3.11 Patent Indemnity

	 	(a)	 	ATS agrees that it will, at its own expense, defend any suit instituted against
Photowatt and will indemnify Photowatt against any award of Losses and reasonable costs
made against Photowatt in a final judgment by a court of competent jurisdiction, or any
amount in settlement or compromise thereof, provided that (i) the same is based upon a
claim that any Product infringes a

 

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	 	 	 	valid patent under the laws of the United States or Canada; (ii) Photowatt gives ATS
prompt, detailed notice in writing of any such claims asserted; and (iii) Photowatt
permits ATS sole authority through its counsel to defend and/or settle the matter
and Photowatt cooperates and assists with such defense and/or settlement.
	 
	 	(b)	 	In case the Product is, or may become, the subject of any such proceeding, ATS
may, and in the event the Product is held in such suit to constitute an infringement
and its use is enjoined, ATS shall, at its expense and option, either procure for
Photowatt the right to continue to use the Product, or replace same with a
non-infringing product or part, or modify same so it becomes non-infringing, or remove
the Product and refund the purchase price of the infringing part of the Product (less
depreciation for its use on a straight line basis over a period of five (5) years from
the date of the applicable Project Agreement) and any transportation costs shall be
separately paid by Photowatt.
	 
	 	(c)	 	The indemnity obligations shall not apply to the extent a claim for
infringement of third party intellectual property rights relates to (i) any Product or
part which is manufactured to Photowatt’s design; (ii) any Product or part which is
modified by a party other than ATS (ii) any product of a third party as specified by
Photowatt incorporated in the Product; (iii) the use of any Product furnished to
Photowatt in combination with other products not furnished by ATS, unless the Product
furnished by ATS, alone and without combination, infringes the asserted rights; or (iv)
any infringement relating to Photowatt’s prescribed manufacturing processes. As to any
such excluded product or part thereof, ATS assumes no liability whatsoever for
intellectual property right infringement and Photowatt shall hold ATS harmless against
any infringement claim arising therefrom.
	 
	 	(d)	 	These express indemnity obligations shall be ATS’s sole obligation and
Photowatt’s sole remedy in respect to any third party claims of infringement of
intellectual property rights.

3.12 Limitations of Liability and Remedies

	 	(a)	 	Consequential Damages. In no event, whether as a result of breach of contract,
warranty, tort (including negligence) or otherwise, shall ATS or its suppliers or
subcontractors be liable for any special, indirect, consequential, incidental or
punitive damages including, but not limited to, loss of profit or revenues, loss of use
of any Product, any Foil Product or any associated equipment, damage to associated
equipment, cost of capital, cost of substitute products, facilities, services or
replacement equipment, down time costs or claims of Photowatt’s customers for such
damages. If Photowatt transfers title to or leases any Product to any third party,
Photowatt shall obtain from such third party a provision affording ATS and its
suppliers and subcontractors the protection of the preceding sentence.

 

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	 	(b)	 	Aggregate Liability. In no event, whether as a result of breach of contract,
warranty, tort (including negligence) or otherwise, shall ATS’s liability to any
Photowatt Indemnified Party for any Losses arising out of, or resulting from the
Products or Project Services furnished hereunder, exceed the amount actually received
by ATS for the specific Product or Project Service which gives rise to the claim.
	 
	 	(c)	 	The remedies provided either party in this Agreement are such party’s sole and
exclusive remedies.

ARTICLE 4

FOIL PRESSES AND FOIL PRODUCTS

4.1 Foil Presses. The parties acknowledge that Photowatt is the owner of two aluminium foil
presses known as the “Systems 1 Press” and the “AMD Press” (the “Foil Presses”) which are located
and installed at the premises of ATS. The AMD Press occupies 2,500 square feet of ATS’s premises
and the Systems 1 Press occupies 5,000 square feet of ATS’s premises. In consideration of ATS
allowing the Foil Presses to be located and installed and operated at ATS’s premises, Photowatt
agrees to pay a charge of $10.00 per square foot per annum occupied by the Foil Presses plus
applicable taxes, payable in advance in monthly instalments on the first day of each calendar month
during the term of this Article 4 without deduction, abatement or set-off. ATS will allow
Photowatt, its Affiliates and its and their respective employees access to ATS’s premises during
normal business hours on reasonable notice in order to be able to use and operate the Systems 1
Press for research and development purposes.

4.2 Foil Products. The parties acknowledge that Photowatt may require ATS to supply it with
aluminium foil processed by the AMD Press in order to manufacture spheral solar products. At such
time as Photowatt is ready to begin to issue firm purchase orders for such products, Photowatt
shall notify ATS. ATS agrees to supply to Photowatt such quantities of aluminium foil processed by
the AMD Press (“Foil Products”) as Photowatt may order from time to time on and subject to the
terms of this agreement and pursuant to firm purchase orders which have been accepted by ATS. The
price payable by Photowatt for Foil Products shall be equal to ATS’s Cost thereof plus 12%. Firm
purchase orders shall be on ATS’s standard form, as amended from time to time. ATS’s supply
obligations under this Section are subject to available labour, supplies, and AMD Press capacity
(any requirement to operate the AMD Press for more than eight hours per day being subject to the
mutual agreement of the parties). Photowatt shall provide ATS with a rolling forecast of aluminium
foil requirements, to be provided on the first day of each month covering the following three
months.

4.3 No Warranty. Recognizing that Photowatt owns the Foil Presses and is responsible for their
maintenance, the Foil Products supplied by ATS to Photowatt hereunder are sold on an “as is” basis
and ATS makes no warranty whatsoever, express or implied, with respect to the Foil Products,
including any warranty of quality, merchantability, fitness for a particular purpose, or conformity
with specifications all of which are disclaimed by ATS and waived by Photowatt.

 

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4.4 Terms and Conditions of Sale. Delivery of Foil Products will be made to Photowatt Ex-Works at
point of manufacture, skidded for domestic truck shipment. Any export or other special packing or
special transportation charges shall be charged to and paid by Photowatt. ATS shall not be
responsible for freight transportation, insurance, shipping, storage, import duty, brokerage,
handling, demurrage, or similar charges. Risks of loss or damage shall pass to Photowatt on
delivery to the carrier at ATS’s facility; however, title to Foil Products will not pass to
Photowatt until payment has been received in full. ATS shall not be required to ship Foil Product
during any period where past due amounts are owing under this Agreement.

4.5 Maintenance and Repair. Photowatt shall be responsible to maintain the Foil Presses in good
operating condition at its sole cost and expense and ATS shall provide Photowatt with access to its
premises during normal business hours on reasonable notice for such purpose. Photowatt assumes the
entire risk of loss, theft, destruction or damage to the Foil Presses.

4.6 Invoicing and Settlement of Costs.

	 	(a)	 	ATS shall invoice Photowatt upon shipment of Foil Products, the fees payable by
Photowatt for Foil Products ordered by Photowatt under this Article 4.
	 
	 	(b)	 	Photowatt shall pay to ATS, on or before the 10th day after the date on which
an invoice for Foil Products is delivered to the Photowatt in accordance herewith (or
the next Business Day, if such 10th day is not a Business Day) (each, a “Payment
Date”), by wire transfer of immediately available funds payable to the order of ATS,
all amounts invoiced by ATS pursuant to Section 4.6. Photowatt shall pay
interest at the prime rate as quoted from time to time of The Bank of Nova Scotia plus
2% on any amounts invoiced by ATS which are not paid when due. In the event Photowatt
fails to pay amounts owing under this Article 4 on two or more occasions, ATS
reserves the right to require all future deliveries of Foil Products to be paid C.O.D.
	 
	 	(c)	 	The prices quoted by ATS are exclusive of all applicable federal,
state/provincial or local taxes, unless otherwise stated. Photowatt shall pay the
gross amount of any present or future sales, use, excise, value added, or other similar
tax applicable to the price, sale or delivery of any Product, Foil Product, Project
Service or Deliverable furnished hereunder or to their use by Photowatt. Photowatt
shall furnish ATS with evidence of exemption from any such taxes acceptable to the
taxing authorities. Photowatt shall assess and remit any applicable tax to taxing
authorities not otherwise invoiced by ATS. If any tax in the nature of withholding tax
is payable on any sums invoiced under this Agreement, Photowatt shall pay ATS such
amount as is necessary to ensure that the net amount received by ATS after such
withholding shall be equal to the amount invoiced or otherwise required to be paid
herein.

 

- 14 -

4.7 Limitation of Liability.

	 	(a)	 	Photowatt acknowledges and agrees that (i) ATS is not in the business of
supplying Foil Products to third parties and that the AMD Press has never been used to
manufacture Foil Products on a commercial basis, (ii) ATS has agreed to supply Foil
Products as an accommodation to Photowatt and (iii) ATS makes no representations or
warranties whatsoever, whether express or implied by statute or otherwise, regarding
the Foil Products or any other matters relating to or arising out of this Agreement.
	 
	 	(b)	 	In no event, whether as a result of breach of contract or warranty, tort
(including negligence) or otherwise shall ATS have any liability to any Photowatt
Indemnified Party or any other Person for any Losses arising out of, resulting from or
relating to any Foil Products manufactured on Photowatt’s Foil Presses and supplied to
Photowatt hereunder or for any related services rendered or to be rendered hereunder by
any ATS Indemnified Party, or for their respective actions or inactions hereunder,
except for Losses resulting from the gross negligence or willful misconduct of such ATS
Indemnified Party or its representatives.
	 
	 	(c)	 	Photowatt shall in all circumstances use commercially reasonable efforts to
mitigate and otherwise minimize Losses to the Photowatt Indemnified parties,
individually and collectively, whether direct or indirect, due to, resulting from or
arising in connection with any failure by ATS to comply fully with ATS’s obligations
under this Article 4.
	 
	 	(d)	 	Notwithstanding anything in this Agreement to the contrary, in no event shall
ATS be liable to Photowatt or any other Person for, and Photowatt (on behalf of itself,
its Affiliates and other Photowatt Indemnified parties) hereby releases ATS from all
claims for, special, indirect, consequential, incidental or punitive Losses (including
lost profits or savings), even if advised of their possible existence.
	 
	 	(e)	 	In no event, whether as a result of breach of contract, warranty, tort
(including negligence) or otherwise, shall ATS’s liability for any Losses arising out
of, or resulting from this Article 4, exceed the amount actually received by
ATS for the specific Foil Product or service which gives rise to the claim.

4.8 Indemnification.

	 	(a)	 	Subject to Section 4.7, Photowatt shall indemnify and hold harmless
ATS, its Affiliates and its and their respective directors, officers, employees and
agents (the “ATS Indemnified Parties”) from and against any and all Losses relating to,
arising out of or in connection with the Foil Presses and the Foil Products including
any service rendered or to be rendered by any ATS Indemnified Person pursuant to this
Agreement, any Losses relating or attributable to the manufacture of the Foil Products
by ATS including any Losses resulting from a

 

- 15 -

	 	 	 	defect or failure in the Products, any claim for patent infringement or other
infringement of intellectual property rights relating to the Foil Presses, or any
ATS Indemnified Party’s actions or inactions in connection with any such Foil
Presses and Foil Products, except to the extent resulting from such ATS Indemnified
Party’s gross negligence or willful misconduct.

	 	(b)	 	Subject to Section 4.7, ATS shall indemnify and hold harmless
Photowatt, its Affiliates and its and their respective directors, offices, employees
and agents (the “Photowatt Indemnified Parties”) from and against any and all Losses
relating to, arising out of or in connection with the gross negligence or willful
misconduct of any ATS Indemnified Party in connection with the Foil Products supplied
to Photowatt pursuant to this Agreement.

4.9 Claim Procedure. The claim procedures set forth in Section 8.4 of the Master
Separation Agreement shall apply to indemnification claims under Article 4 of this
Agreement.

4.10 Termination of Article 4. Notwithstanding anything to the contrary in this Agreement, this
Article 4 may be terminated as follows:

	 	(a)	 	the parties may by mutual agreement terminate this Article 4 of this
Agreement, in whole or in part, in accordance with this
  Section 4.10(a);
	 
	 	(b)	 	Photowatt may terminate this Article 4 at any time if ATS shall have
failed to perform any of its material obligations under this Article 4,
Photowatt shall have notified ATS in writing of such failure and such failure shall
have continued unremedied for a period of at least 30 days after receipt by ATS of
written notice of such failure from Photowatt; and
	 
	 	(c)	 	either party shall have the right to terminate its obligations under this
Article 4 by giving at least six months notice to the other party; provided
that ATS shall not be permitted to exercise its termination right until one year from
the Effective Date.

If the term of this Agreement ends pursuant to Section 7.1(b) because the
Percentage of Outstanding Common Shares is less than 10%, then, unless earlier terminated
as provided for above, this Article 4, Article 5 and Article 6
shall continue in full force and effect notwithstanding Section 7.1 until:

	 	(i)	 	eighteen (18) months following the Effective
Date if the event described in Section 7.1(b) occurs during the first
year of the term of this Agreement; and
	 
	 	(ii)	 	six (6) months following the occurrence of the
event described in Section 7.1(b) if such event occurs after the first
year of the term of this Agreement.

 

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4.11 Effect of Termination.

	 	(a)	 	Notwithstanding any termination or expiry of this Article 4: (i)
Photowatt shall remain liable to the ATS for any fees payable under this Article
4 which are owed and payable prior to the effective date of such termination; and
(ii) the provisions of Sections 4.7, 4.8, 4.9, 4.11,
Article 5 (Confidentiality and Proprietary Rights) and Article 8
(General) shall survive any such termination.
	 
	 	(b)	 	Following termination of this Agreement, the parties agree to cooperate with
each other in providing for an orderly transition to Photowatt or to a successor
service provider as designated by Photowatt. Without limiting the foregoing, ATS
agrees to cooperate with Photowatt in developing a transition schedule with respect to
the supply of Foil Products.
	 
	 	(c)	 	Upon termination or notice of termination of this Article 4 as
applicable, Photowatt shall at Photowatt’s sole cost and expense cause the Foil Presses
to be de-installed and shall take possession of the Foil Presses and cause the Foil
Presses to be moved and relocated from ATS’s premises. Photowatt also agrees to pay
all of ATS’s costs in restoring its premises to its condition prior to the installation
of the Foil Presses including filling the holes containing the Foil Presses and
installing new flooring. Photowatt shall be permitted a period of 6 months from the
earlier of the date of termination or notice of termination to remove the Foil Presses
and allow sufficient time for remediation, provided Photowatt shall continue to pay a
pro-rata portion of the service charge provided for in Section 4.1 during such
period. Notwithstanding anything to the contrary provided for above, in the event
there are outstanding amounts owing by Photowatt to ATS at the time of termination, ATS
may, at its option, require payment of such amounts before Photowatt is entitled to
remove the Foil Presses.

ARTICLE 5

CONFIDENTIALITY AND PROPRIETARY RIGHTS

5.1 Confidentiality. The parties acknowledge that they are bound by the provisions of Article
6 of the Master Separation Agreement which governs the confidentiality and disclosure of
Information.

5.2 Proprietary Rights

	 	(a)	 	Ownership/License. ATS shall and does irrevocably grant and assign to
Photowatt the Proprietary Rights in and to any and all of the Deliverables first
developed or conceived during performance of and otherwise resulting from this
Agreement other than those that constitute ATS Proprietary Technology (as defined
below) effective upon full payment for such Deliverables. Notwithstanding any
provision, express or implied, to the contrary, and for the purposes of clarity, the
parties confirm that ATS shall retain all Proprietary Rights to any ATS Proprietary
Technology forming part of the Deliverables

 

- 17 -

	 	 	 	under the Agreement. “ATS Proprietary Technology” means any and all technology,
know-how, trade secrets, inventions, and software and other intellectual property
that: (i) was developed or conceived by ATS prior to or outside the scope of this
Agreement, or (ii) is owned by a third party and that ATS has obtained rights to
independently of this Agreement, or (iii) is developed or conceived during the
course of performance under this Agreement (“New Developments”), to the extent such
New Developments relate to mechanical and electronic devices used to automatically
convey, grip, locate, orient, connect, manipulate, alter, form, inspect, test or
sense materials or products as part of a manufacturing process. Photowatt shall
have and ATS hereby grants to Photowatt, an irrevocable, non-exclusive, world-wide,
royalty-free, perpetual right and license to use such ATS Proprietary Technology as
has been incorporated into the Deliverables solely to operate, modify, and maintain
the Deliverables provided under the Agreement.
	 
	 	(b)	 	Software. The Product may use computer software. Computer software that is
custom developed by ATS specifically for Photowatt under the terms of the Agreement
(“Custom Software”) shall be delivered to Photowatt with the Product, including source
code. All title, right and interest in the copyright to such Custom Software shall
vest in Photowatt upon full payment for the Product and form part of the Deliverables.
Computer software of third party suppliers (“Third Party Software”) may also be
integrated into the Product. To the extent possible, ATS shall assign all rights
afforded under the licenses for such Third Party Software to Photowatt and Photowatt
shall assume all obligations under any such software licenses. The Deliverables may
also include software that has been developed by ATS, at ATS’s expense, for general use
in the products ATS manufactures (“ATS Software”). ATS Software is proprietary to ATS.
Upon full payment for the Product, such ATS Software shall be licensed to Photowatt on
a non-exclusive basis for use solely to operate and maintain the Product by Photowatt.
For certainty, unless the Project Agreement specifically contemplates and identifies
software as Custom Software to be developed for and owned by Photowatt, software
developed by ATS and included in the Deliverables shall be ATS Software.

ARTICLE 6

INSURANCE

6.1 Insurance. ATS and Photowatt will maintain in effect during the term of this Agreement the
following insurance coverage:

	 	(a)	 	worker’s compensation and employer’s liability Insurance providing for the
payment of benefits to and for the account of employees employed in connection with the
performances of any obligations hereunder; and
	 
	 	(b)	 	one or more policies of comprehensive general liability agreement from a
recognized, major insurance company qualified to do business in the Province of

 

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	 	 	 	Ontario and naming the other party as an additional insured. Such policy shall
include a product liability endorsement covering personal injury and property damage
claims, suits and actions, effective for occurrences caused by accidents or other
incidents involving the products and services provided hereunder on or after the
date hereof. Such policy shall provide limits of liability per occurrence and other
terms which ATS from time to time considers satisfactory (initially, such policy
shall have a combined single limit for bodily injury and property damage of at least
$10,000,000.00. From time to time as requested by either party hereto, the other
party shall promptly deliver evidence satisfactory to the requesting party that such
insurance is in full force and effect.

ARTICLE 7

TERM AND TERMINATION

7.1 Term. Unless earlier terminated as provided for in this Agreement and subject to Section
4.10, the term of this Agreement shall commence on the Effective Date and continue thereafter until
the earlier of:

	 	(a)	 	five (5) years from the Effective Date; and
	 
	 	(b)	 	such time as the Percentage of Outstanding Common Shares is less than 10%.

7.2 Termination of Project Agreement by Photowatt for Convenience. Photowatt may terminate a
Project Agreement (other than Article 4) in whole or in part for Photowatt’s convenience
upon ten (10) days’ written notice to ATS. In the event of such termination, Photowatt shall pay
ATS upon demand for all costs and expenses already incurred or commitments made by ATS for
materials and labour, including, without limitation, design, processing, handling, fabrication,
packing, shipping, travel, supplier termination, and restocking charges, plus reasonable amounts
for overhead and profit through to the effective date of termination. ATS shall not be entitled to
anticipated profit or anticipated overhead charges for the balance of the Project.

7.3 Termination by ATS for Cause. If Photowatt becomes insolvent or bankrupt or breaches a
material provision hereof and does not commence to remedy such breach within ten (10) calendar days
of written notice by ATS, ATS may terminate the Agreement in whole or in part effective ten (10)
calendar days after said notice was given. In the event of such termination, in addition to any
other rights ATS may have hereunder or otherwise, ATS shall have the right to take possession of
any Foil Products at an ATS site, as well as the Deliverables and all materials and components
related to the Deliverables in whatever stage of design, manufacture, or installation they are at
such time, except any Deliverables which have already been delivered to and paid for in full by
Photowatt. ATS shall be under no obligation to finish the work, provide further support or
information, or provide further Deliverables. In the event of such termination, Photowatt shall
pay ATS for all work performed prior to the termination, including costs and expenses already
incurred and commitments made by ATS plus reasonable expenses incurred after termination to recover
or protect the Deliverables, plus reasonable

 

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amounts for overhead and profit on the foregoing. ATS shall not be entitled to compensation for
anticipated profit or anticipated overhead charges.

7.4 Termination by Photowatt for Cause.

	 	(a)	 	If ATS becomes bankrupt or insolvent or breaches a material provision hereof
and does not commence to remedy such breach within ten (10) calendar days of being
given written notice by Photowatt, Photowatt may terminate the Agreement in whole or in
part effective ten (10) calendar days after such notice was given. In the event of
such termination, Photowatt shall take possession of the Deliverables (in whatever
state of design or manufacture they are at such time) immediately and shall have a
right to receive a refund of all amounts paid to ATS by Photowatt hereunder, less an
amount representing payment for all work performed and deliverables provided by ATS to
the date of such termination. ATS shall not be entitled to anticipated profit or
anticipated overhead charges. Upon such payment, Photowatt shall have the right to the
continued use of the Deliverables then delivered.
	 
	 	(b)	 	THE REMEDY PROVIDED TO PHOTOWATT IN THIS ARTICLE SHALL BE PHOTOWATT’S SOLE AND
EXCLUSIVE REMEDY IN RESPECT OF ANY BANKRUPTCY OR INSOLVENCY OF ATS AND, EXCEPT AS
EXPRESSLY OTHERWISE PROVIDED IN THIS AGREEMENT, IN RESPECT OF ANY BREACH OF THIS
AGREEMENT BY ATS.

ARTICLE 8

MISCELLANEOUS

8.1 Assignment. Neither party shall assign, transfer or otherwise alienate any or all of its
rights or interest under this Agreement without the express prior written consent of the other
party, which may be granted or withheld in such other party’s sole discretion. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, and any permitted assignee shall agree to perform the obligations
of the assignor of this Agreement. Any attempted transfer, assignment or alienation in violation of
this Section 8.1 shall be invalid and ineffective ab initio.

8.2 Entire Agreement. This Agreement and the other Separation Agreements constitute the entire
agreement between the parties with respect to the subject matter hereof and thereof and supersede
(a) all prior oral or written proposals or agreements, (b) all contemporaneous oral proposals or
agreements and (c) all previous negotiations and all other communications or understandings between
the parties, in each case with respect to the subject matter hereof and thereof. No reliance is
placed on any warranty, representation, opinion, advice or assertion of fact made either prior to,
contemporaneous with, or after entering into this Agreement, or any amendment or supplement
thereto, by any party to this Agreement or its directors, officers and agents, to any other party
to this Agreement or its directors, officers and agents except to the extent that the same has been
reduced to writing and included as a term of the Separation Agreements, and none of the parties to
this Agreement has been induced to enter

 

- 20 -

into this Agreement or any amendment or supplement by reason of any such warranty, representation,
opinion, advice or assertion of fact. Accordingly, there will be no liability, either in tort
(including negligence) or in Contract, assessed in relation to any such warranty, representation,
opinion, advice or assertion of fact, except to the extent contemplated above.

8.3 Future Litigation and Other Proceedings. If any member of the Photowatt Group (or any of its
Representatives) or any member of the ATS Group (or any of its Representatives) at any time after
the Effective Date initiates or becomes subject to any Action with respect to which the parties
have no prior agreements (as to indemnification or otherwise), upon reasonable notice (a) the party
(and its Group members and its and their respective Representatives) that has not initiated and is
not subject to such Action shall comply, at the other party’s expense, with any reasonable requests
by the other party for assistance in connection with such Action (including by way of provision of
information and making available of Representatives as witnesses) and (b) each party (and its
Representatives) shall, at its own expense, coordinate with the other party its strategies and
actions with respect to such Action to the extent such coordination would not be detrimental to its
interests and shall comply, at the expense of the requesting party, with any reasonable requests of
the other party for assistance in connection therewith (including by way of provision of
information and making available of Representatives as witnesses).

8.4 Further Assurances. On and after the date of this Agreement, each party hereto shall cooperate
with the other party, and without any further consideration, but at the expense of the requesting
party, to execute and deliver, or use its commercially reasonable efforts to cause to be executed
and delivered, all instruments, including instruments of conveyance, assignment and transfer, and
to make all filings with, and to obtain all consents of, any Governmental Authority or any other
Person under any permit, license, agreement, indenture or other instrument (including any Consents
or consents, approvals, rulings or decisions of any Governmental Authority), and to take all such
other actions as such party may reasonably be requested to take by any other party hereto from time
to time, consistent with the terms of this Agreement, in order to effectuate the provisions and
purposes of this Agreement and the other transactions contemplated hereby.

8.5 Notices. Any notice, instruction, direction, demand or other communication to any party under
the terms of this Agreement shall be in writing and shall be deemed properly delivered, given and
received: (a) when delivered by hand; (b) on the day sent by facsimile provided that the sender has
received confirmation of transmission from the recipient as at or prior to 5:00 p.m. Toronto time
on such day; (c) the first Business Day after sent by facsimile (to the extent that the sender has
received confirmation of transmission from the recipient after 5:00 p.m. Toronto time on the day
sent by facsimile); or (d) the next business day after sent by registered mail (at any time other
than during a general discontinuance of postal service due to strike, lockout or otherwise) or by
courier or express delivery service, in any case to the address or facsimile telephone number set
forth beneath the name of such party below (or to such other address or facsimile telephone number
as such party shall have specified in a written notice given to the other parties hereto):

	 	(1)	 	if to ATS, to:

 

- 21 -

	 	 	 	ATS Automation Tooling Systems Inc.

250 Royal Oak Road

Cambridge, Ontario N3H 4R6

Attention: General Counsel

Fax No.:    (519) 650-6520
	 
	 	(2)	 	if to Photowatt, to:
	 
	 	 	 	Photowatt Technologies, Inc.

25 Reuter Drive

Cambridge, Ontario N3E 1A9
	 
	 	 	 	Attention: President and Chief Executive Officer

Fax No.:    (519) 650-6535

In the event of a general discontinuance of registered mail service due to strike, lock out or
otherwise, any notice, instruction, direction, demand or other communication will be delivered by
hand, courier or express delivery service or sent by facsimile and will be deemed to have been
received in accordance with this Section.

8.6 Time of Essence. Time is of the essence of this Agreement.

8.7 Governing Law. This Agreement shall be construed in accordance with and governed by the laws
of the Province of Ontario and the federal laws of Canada applicable therein.

8.8 Severability. If any term or other provision of this Agreement shall be determined by a court,
administrative agency or arbitrator in any jurisdiction to be invalid, illegal or unenforceable,
such invalidity, illegality or unenforceability shall not render the entire Agreement invalid and
shall not affect the validity, legality or enforceability of such term or other provision in any
other jurisdiction. Rather, this Agreement shall be construed as if not containing the particular
invalid, illegal or unenforceable provision, and all other provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially adverse to either party.
Upon such determination that any term or other provision is invalid, illegal or unenforceable, the
parties shall negotiate in good faith to modify this Agreement so as to effect the original intent
of the parties as closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent permitted under applicable Law.

8.9 Force Majeure. No party shall be deemed in default of this Agreement to the extent that any
delay or failure in the performance of its obligations under this Agreement results from any cause
beyond its reasonable control, such as acts of God, decrees or restraints of any Governmental
Authority, acts of civil or military authority, embargoes, epidemics, war, riots, insurrections,
fires, explosions, earthquakes, floods, unusually severe weather conditions, strikes or other
labour disturbances or unavailability of parts, or, in the case of computer

 

- 22 -

systems, any failure in electrical or air conditioning equipment, and any other cause or causes
whether similar or dissimilar to those already specified, which cannot be controlled by such party.
In the event of any such excused delay, the time for performance shall be extended for a period
equal to the time lost by reason of the delay; provided however that the party seeking to excuse
its performance shall promptly notify the other party of the cause therefor, such performance shall
be so excused during the inability of the party to perform so caused, but for no longer period, and
the cause thereof shall be remedied as far as is commercially reasonable with all reasonable
dispatch.

8.10 Specific Performance. In the event of any actual or threatened default in, or breach of, any
of the terms, conditions and provisions of this Agreement, the party or parties who are or are to
be thereby aggrieved shall have the right to specific performance and injunctive or other equitable
relief of its rights under this Agreement, in addition to any and all other rights and remedies at
law or in equity, and all such rights and remedies shall be cumulative. The parties agree that the
remedies at law for any breach or threatened breach, including monetary damages, are inadequate
compensation for any loss and that any defense in any action for specific performance that a remedy
at law would be adequate is waived. Any requirements for security or posting of any bond with such
remedy are waived.

8.11 Currency. Except as expressly provided in this Agreement, all amounts in this Agreement are
stated and will be paid in Canadian currency.

8.12 Time Periods. Unless otherwise specified, time periods within or following which any payment
is to be made or act is to be done shall be calculated by excluding the day on which the period
commences and including the day on which the period ends.

8.13 Amendment. This Agreement may only be modified, amended by, altered or supplemented by the
execution and delivery of a written agreement executed by both the parties.

8.14 Counterparts. This Agreement may be executed in separate counterparts, each of which shall be
deemed an original and all of which, when taken together, shall constitute one and the same
agreement.

8.15 Authority. Each party represents to the other party that (a) it has the corporate power and
authority to execute, deliver and perform this Agreement, (b) the execution, delivery and
performance of this Agreement by it have been duly authorized by all necessary corporate or other
actions, (c) it has duly and validly executed and delivered this Agreement and (d) this Agreement
is legal, valid and binding obligation, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and general equitable principles.

8.16 Jurisdiction. If any Dispute arises out of or in connection with this Agreement, except as
expressly contemplated by another provision of this Agreement, the parties irrevocably (and the
parties shall cause each other member of their respective Group to irrevocably) (a) consent and
submit to the exclusive jurisdiction of the Courts of the Province of

 

- 23 -

Ontario, (b) waive any objection to that choice of forum based on venue or to the effect that the
forum is not convenient, and (c) WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY AND ALL RIGHT TO
TRIAL OR ADJUDICATION BY JURY.

8.17 Dispute Resolution. Any controversy or claim, whether based on Contract, tort, Law or other
legal or equitable theory (including any claim of fraud, misrepresentation or fraudulent inducement
or any question of validity or effect of this Agreement, including this Section 8.17) (in
each such case, a “Dispute”) arising out of or related to this Agreement, or the breach or
termination thereof, shall be submitted in good faith to negotiations and, if necessary, mediation
in accordance with the terms below before any Action is commenced.

	 	(a)	 	Direct Negotiation. If either party considers that any Dispute has
arisen under or in connection with this Agreement, then such party may first deliver a
notice to the other party describing the nature and the particulars of such Dispute.
Second, within 10 Business Days following delivery of such notice to the other party,
the parties shall meet (whether by phone or in person) in a good faith attempt to
resolve the Dispute. Third, if the Dispute is still unresolved after 10 Business Days
following the commencement of such good faith attempt, then the chief financial officer
(or another designee with full authority to resolve such dispute) of each party shall
meet (whether by phone or in person) in a good faith attempt to resolve the Dispute,
such meeting to be held within 20 days of the first meeting referred to above. Fourth,
if the Dispute is still unresolved after 10 Business Days following the commencement of
such second negotiations, then such Dispute shall be submitted to mediation in
accordance with Section 8.17(b).
	 
	 	(b)	 	Mediation. If the Dispute is to be submitted to mediation in
accordance with Section 8.17(a), the mediator will be selected by mutual
agreement of the parties, which agreement shall be reached in good faith and on a
timely basis. If they are unable to agree on a mediator, each party will select one
third party representative, each of whom shall be an independent experienced
professional mediator practicing in Ontario, which two representatives shall mutually
select a mediator for such Dispute with the same qualifications referred to above (and
each party shall in good faith instruct its representative to work in good faith with
the other party’s representative to promptly select such mediator).

	 	(i)	 	Mediation Procedure. The mediation
will be conducted pursuant to the rules generally used by the mediator
in the mediator’s practice, subject to the following:

	 	(A)	 	The mediator will act as an
advocate for resolution and will use his or her best efforts
to assist the parties in reaching a mutually acceptable
settlement. The mediator may suggest ways of resolving the
Dispute, but may not impose his or her own judgment on the
issues or that of the parties. The mediator will not have the
authority to decide any issue for the parties, but will
attempt to

 

- 24 -

	 	 	 	facilitate the voluntary resolution of the Dispute by the
parties.
	 
	 	(B)	 	Each Person participating in
the mediation will have authority to settle, and all Persons
necessary to the decision to settle will be present during the
entire mediation session or sessions.
	 
	 	(C)	 	The mediation will take place
at a time and convenient location agreeable to the mediator
and the parties, as the mediator will determine, but such
mediation will take place no later than 20 Business Days after
the commencement of the second negotiations under Section
8.17(a) and will take place over two consecutive days.
	 
	 	(D)	 	Mediation sessions will be
private, and only the parties and their representatives may
attend the mediation sessions. Other Persons may attend the
mediation sessions only with the written permissions of the
parties and with the consent of the mediator.
	 
	 	(E)	 	There will be no stenographic
record of the mediation process, and no Person will tape
record any portion of the mediation sessions.
	 
	 	(F)	 	No subpoenas, summons,
complaints, citations, writs, or other process may be served
at or away from the site of any mediation session upon any
Person who then is entering, on the way to, in attendance or
leaving the session.
	 
	 	(G)	 	The parties will participate
in the mediation proceeding in good faith with the intention
to settle.
	 
	 	(H)	 	No later than five days prior
to the mediation, each party will deliver to the mediator all
information reasonably required for the mediator to understand
the issues presented and a confidential memorandum (not to
exceed five pages with normal type size and margins) setting
forth the following:

	 	i.	 	identification of the matters in dispute;
	 
	 	ii.	 	concise
statement of points (factual, legal, practical) that
such party believes enhances its chance of achieving
a favourable outcome of the Dispute; and

 

- 25 -

	 	iii.	 	history
of settlement discussions and outstanding offers of
settlement.

	 	(I)	 	The above rules may be
modified or amended with the parties’ written consent.

	 	(ii)	 	Release. The mediator will not be a
necessary or proper party in any Action relating to the mediation.
Neither the mediator, the Person employing the mediator, nor the Person
providing the mediator will be liable to any party for any acts or
omissions in connection with any mediation conducted pursuant to this
Section 8.17.
	 
	 	(iii)	 	Compromise Negotiation. The mediation
is a compromise negotiation for purposes of the applicable rules of
evidence and is an alternative dispute resolution procedure subject to
Law chosen to govern this Agreement. The entire procedure is and will
be confidential. All conduct, statements, promises, offers, views and
opinions, whether oral or written, made in the course of the mediation
by any of the parties, their agents, employees or other representatives
and by the mediator, who is the parties’ joint agent for purposes of
these compromise negotiations, are confidential and will, in addition
where appropriate, be deemed to be work product and privileged. Such
conduct, statements, promises, offers, views and opinions will not be
discoverable or admissible for any purposes, including impeachment, if
any litigation or other proceedings involve the parties and will not be
disclosed to anyone not an agent, employee, expert or other
representative for any of the parties. Evidence otherwise discoverable
or admissible is not excluded from discovery or admission as a result
of its use in the mediation. Confidential Information disclosed to the
mediator by the parties or by witnesses in the course of the mediation
will not be divulged by the mediator. All records, reports or other
documents received by the mediator while serving in that capacity will
be confidential. The mediator will not be compelled to divulge such
records or to testify with regard to the mediation in any adversary
proceeding or judicial forum.
	 
	 	(iv)	 	Costs of Mediation. The parties will
bear their respective costs incurred in connection with the mediation
described in this Section 8.17, except that the parties will
share equally the fees and expenses of the mediator, the costs of
obtaining the facility for the mediation, and the fees and expenses of
any experts employed at the mediator’s request.
	 
	 	(v)	 	Termination of Mediation. The mediation
will be terminated upon the first to occur of the following:

 

- 26 -

	 	(A)	 	by the execution of a
settlement agreement resolving the dispute by the parties;
	 
	 	(B)	 	by a written declaration of
the mediator to the effect that further efforts at mediation
are no longer worthwhile; or
	 
	 	(C)	 	after the completion of two
full days of mediation sessions, by written declaration of a
party or parties to the effect that mediation proceedings are
terminated.

	 	(c)	 	Litigation. Neither party may bring (or have brought) any Action in
any forum with respect to any Dispute arising out of or related to this Agreement, or
the breach or termination thereof, until such party has fully complied with Section
8.17(a) and (b) with respect to such Dispute.

8.18 Binding Effect and Assignment. This Agreement binds and benefits the parties and their
respective successors and permitted assigns. This Agreement is for the sole benefit of the parties
(and, solely for purposes of Section 3.11 and Section 4.8, the Persons indemnified
thereby) and nothing in this Agreement, express or implied, confers or intends to confer any rights
or remedies of any nature whatsoever in favour of any Person (including any employee or shareholder
of ATS or Photowatt) other than the parties.

8.19 Survival Beyond Completion. The rights and obligations of each party with respect to sections
entitled, “Patent Indemnity”, “Confidentiality”, “Proprietary Rights”, “Limitations of Liabilities
and Remedies”, shall survive termination of the Agreement or acceptance of the Deliverables in
accordance with their terms.

8.20 Expenses. Except as otherwise provided in this Agreement, each party shall be responsible for
its own fees, costs and expenses incurred in connection with the matters contemplated by this
Agreement.

8.21 Waiver. A provision of this Agreement may be waived only by a writing signed by the party or
parties intended to be bound by the waiver. A party is not prevented from enforcing any right,
remedy or condition in the party’s favour because of any failure or delay in exercising any right
or remedy or in requiring satisfaction of any condition, except to the extent that the party
specifically waives the same in writing. No waiver of any provision of this Agreement shall
constitute a waiver of any other provision nor shall any waiver constitute a continuing waiver
unless otherwise expressly provided. Any enumeration of a party’s rights and remedies in this
Agreement is not intended to be exclusive, and a party’s rights and remedies are intended to be
cumulative to the extent permitted by Law and include any rights and remedies authorized in Law or
in equity.

8.22 Compliance With Laws. Each party shall comply with all applicable legal requirements
(including all relevant federal, state and provincial legislation and regulatory requirements); and
without limiting the generality of the foregoing, each party shall comply with, and shall take all
necessary measures to ensure that (i) its actions (or lack of action) do not

 

- 27 -

result in non-compliance by the other party, with the provisions of the Personal Information
Protection and Electronic Documents Act (Canada) and any similar federal, state or provincial
legislation, including the provisions relating to the collection, use, retention and disclosure of
Personal Information and (ii) the transfer of any information hereunder is in compliance with
applicable export control or similar Laws.

8.23 No Agency. Nothing in this Agreement shall constitute or be deemed to constitute a
partnership or joint venture between the parties or constitute or be deemed to constitute any party
the agent or employee of the other party for any purpose whatsoever, and neither party shall have
authority or power to bind the other party or to contract in the name of, or create a liability
against, the other party in any way or for any purpose.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized
representatives.

	 	 	 	 	 	 	 	 	 	 	 
	ATS AUTOMATION TOOLING SYSTEMS INC.	 	 	 	PHOTOWATT TECHNOLOGIES INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	Date: [Month] ___, 2006	 	 	 	Date: [Month] ___, 2006	 	 

 

SCHEDULE A

LIST OF EQUIPMENT SUBJECT TO RIGHT OF FIRST REFUSAL

(SECTION 2.1)

The following Spheral Solar Equipment:

	 	1.	 	Foil Production Equipment
	 
	 	2.	 	Optical Fused Powder
	 
	 	3.	 	Front Bond
	 
	 	4.	 	Diagnostic BLP
	 
	 	5.	 	Back Bond
	 
	 	6.	 	Test/Sort
	 
	 	7.	 	Cell Cut & Test
	 
	 	8.	 	FWP weld
	 
	 	9.	 	FWP Cut
	 
	 	10.	 	Stringers
	 
	 	11.	 	Module Test
	 
	 	12.	 	General Material
Handling*
	 
	 	13.	 	New Automation Scopes

 

			
	*	 	General Material Handling includes automated wafer handling between workstations

 

SCHEDULE B

LIST OF EQUIPMENT SUBJECT TO PREFERRED SUPPLIER STATUS

(SECTION 2.2)

The following Wafer-based PV Equipment:

	 	1.	 	Screen Print
	 
	 	2.	 	Edge Isolation Laser
	 
	 	3.	 	Wafer Test
	 
	 	4.	 	Tabbing/Stringing
	 
	 	5.	 	Lamination
	 
	 	6.	 	Module Test
	 
	 	7.	 	*General Material
Handling
	 
	 	8.	 	New Automation Scopes

 

			
	*	 	General Material Handling includes automated wafer handling between workstationsexv10w9

 

Exhibit 10.9

PHOTOWATT TECHNOLOGIES INC.

STOCK OPTION PLAN

As
amended on November 8, 2006 and December 5, 2006 with effect as of September 12, 2006

1. PURPOSE OF THE PLAN

1.1 This Stock Option Plan has been established by the Company to provide long-term incentives to
attract, motivate and retain certain key employees, directors and
officers of, and service providers
providing services to, the Company.

2. DEFINITIONS

2.1 In this Plan, the following terms have the following meanings:

“Affiliate” has the meaning ascribed to that term in the Securities Act (Ontario);

“Associate” has the meaning ascribed to that term in the Securities Act (Ontario);

“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;

“ATS” means ATS Automation Tooling Systems Inc.;

“Board” means the board of directors of the Company;

“Business Day” means any day other than a Saturday, a Sunday or a statutory holiday observed in the
Province of Ontario;

“Code”
means the United States Internal Revenue Code of 1986, as amended;

“Committee” means a committee, if any, created by the Board to exercise authority under the Plan
pursuant to the provisions contained herein;

“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 10.4;

“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, 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. For
purposes of an ISO, no

 

- 2 -

 such leave may exceed 90 days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract;

“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;

“Date of Grant” of an Option means the date the Option is granted to a Participant under the Plan;

“Designated Number” has the meaning ascribed to it in Subsection 3.2(a) hereof;

“Effective Date” means the 12th day of September, 2006, when this Plan was approved by
the Board;

“Eligible
Person” means:

	(i)	 	any director, officer or employee of the Company or any
Affiliate of the Company, or any other Service Provider (an
“Eligible Individual”); or

	(ii)	 	a corporation controlled by an Eligible Individual, the
issued and outstanding voting shares of which are, and will continue
to be, beneficially owned, directly or indirectly, by such Eligible Individual
and/or the spouse, children and/or grandchildren of such Eligible
Individual (an “Employee Corporation”);

“Exercise Notice” has the meaning ascribed to it in Section 3.6 hereof;

“Exercise Notice Deadline” means the earlier of (i) 5:00 p.m. (Toronto time) on the date which is
the 180th day following the date of the death of the Participant and
(ii) the Expiry Time;

“Exercise Price” has the meaning ascribed to it in Subsection 3.2(b) hereof;

“Expiry Date” means, in respect of an Option, the latest date on which the Option may be exercised,
provided that if at any time the date should be determined to occur either during a period in which
the Optionee is restricted from trading in securities of the Company under the insider
trading policy or other policy of the Company 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;

“Expiry Time” means, in relation to an Option, 5:00 p.m. (Toronto time) on the Expiry Date;

“Fair Market Value” with respect to the Shares as at any date means the closing price for the
Shares 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 the Shares as determined by the Board in its sole discretion, acting reasonably and in good
faith;

“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;

“ISO” has the meaning ascribed to it in Section 8.1 hereof;

“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

 

- 3 -

capitalization of at least $200 million, and that are not subject to any
restriction on sale, pursuant to Applicable Law or otherwise;

“Non-Executive Director” means any director of the Company who is not an employee or officer of the
Company or an Affiliate of the Company;

“Option” means a right granted under the Plan to a Participant to purchase Shares in accordance
with the Plan;

“Optionee” means an Eligible Person to whom an Option has been granted and who continues to hold
such Option;

“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;

“Participant” means an Eligible Person who has agreed to participate in the Plan on such terms as
the Company may specify at the time he or she is designated as an Eligible Person;

“Plan” means this Stock Option Plan, as amended and restated from time to time;

“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;

“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,
undertaken in one or a series of transactions, 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;

“SAR” has the meaning ascribed to it in Section 4.3 hereof;

“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;

“Shares” means common shares of the Company, and include any shares of the Company into which such
shares may be converted, reclassified, subdivided, consolidated, exchanged or otherwise changed,
whether pursuant to a reorganization, amalgamation, merger, arrangement or other form of
reorganization;

“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;

“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;

“Successor Corporation” has the meaning ascribed to it in Section 6.1 hereof;

 

- 4 -

“TSX” means the Toronto Stock Exchange;

“US Optionee” has the meaning ascribed to it in Section 8.1 hereof; and

“Vesting Rights” refers to the terms on which the Option may be exercised.

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 OPTIONS AND TERMS

3.1
Options may be granted by the Board to any Eligible Person. If an Eligible Person executes and delivers to the Company a letter
agreement substantially in the form of Schedule “A” and thereby agrees to participate in the Plan
on the terms and conditions specified by the Company, he or she shall become a Participant in the
Plan. The Company shall have no obligation at any time after the delivery of such a letter
agreement to a Participant to notify the Participant of the Expiry Date of any Options granted
under this Plan.

3.2 The Company may, from time to time, grant an Option to a Participant to acquire Shares in
accordance with the Plan. In granting such Option, subject to the provisions hereof, the Company
shall designate,

	 	(a)	 	the maximum number (the “Designated Number”) of Shares which the Participant
may purchase under the Option;
	 
	 	(b)	 	the price (the “Exercise Price”) per Share at which the Participant may
purchase his or her Shares under the Option, which price shall be determined by the
Company in accordance with Section 3.3 hereof;
	 
	 	(c)	 	the conditions to be met to establish Vesting Rights attaching to the Option,
which may include performance conditions relating to the market price of the Shares;
the return on investment to holders of Shares, with or without reference to other
comparable companies; the financial performance or results of the Company or business
unit thereof; other performance criteria relating to the Company or business unit
thereof; ownership of Shares by a Participant; and any other terms and conditions the
Company may in its discretion determine with respect to vesting;
	 
	 	(d)	 	the Expiry Date of the Option, which shall be no later than the date that is
seven years after the Date of Grant; and
	 
	 	(e)	 	with respect to Options granted pursuant to Section 8 hereof, whether the
Option is intended to constitute an ISO.

3.3 The Exercise Price in respect of an Option shall be determined by the Company, but shall be not
less than the Fair Market Value of the Shares on the Date of Grant of the Option.

3.4 Except as otherwise set out in any written agreement between a Participant and the Company in
respect of an Option, and notwithstanding any other provision of this Plan, in the
event of a Corporate Transaction, each Option will be deemed terminated immediately prior to the
specified effective date of the Corporate Transaction, unless either the Option 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

 

- 5 -

Transaction, the Company may give notice to
each Participant which will set forth requirements in respect of outstanding Options or any Shares
acquired through the exercise of Options following the date of such notice that must be complied
with as a condition to each Participant’s participation in the Sale Transaction.

3.5 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
an Option, determine the acceleration, if any, of the vesting provisions for any Option and permit
an Optionee to exercise any or all of the unvested Options then outstanding and granted to the
Optionee under this Plan, in which event all such unvested Options then outstanding and granted to
the Optionee shall be deemed to be immediately exercisable during such period of time as may be
specified by the Board or the Committee.

3.6 If a Participant should die and the circumstances specified in Section 3.7 had not occurred in
relation to such Participant and such Participant, at the time of his or her death, held an
Option(s) in respect of which the Expiry Time had not then occurred, then in the case of each
Option so held by the deceased Participant which had vested and was exercisable with respect to
some or all of the Shares forming the subject matter thereof as at the date of the death of the
deceased Participant, the legal representatives of the deceased Participant shall be entitled to
send a notice in writing (an “Exercise Notice”) to the Company advising that they wish to exercise
such Option which notice, to be effective, must be actually received by the Company by no later
than the Exercise Notice Deadline and must specify the number of Shares in respect of which such
Option is wished to be exercised (provided that such exercise can only be in respect of up to that
number of Shares that the deceased Participant could have exercised such Option as at the date of
his or her death), accompanied by a certified cheque or other means of cash payment satisfactory to
the Company in the amount of the aggregate Exercise Price for such number of Shares. In the event
that:

	 	(a)	 	an effective Exercise Notice is actually received by the
Company by no later than the Exercise Notice Deadline, then the Company shall
issue to the estate of the deceased Participant that number of Shares as were
specified in the Exercise Notice (provided that the maximum number of Shares
which can be issued shall not exceed that number of Shares for which the
deceased Participant could have exercised such Option as at the date of his or
her death), which issuance shall occur as soon as practicable thereafter. If
the Exercise Notice so received is in respect of less than the maximum number
of Shares for which the deceased Participant could have exercised such Option
as at the date of his or her death, such Option shall in all respects terminate
and be of no further force or effect as to such of the Shares in respect of
which such Option has not been exercised pursuant to the Exercise Notice; and
	 
	 	(b)	 	an effective Exercise Notice is not actually received by the
Company by the Exercise Notice Deadline, such Option shall in all respects
terminate and be of no further force or effect.
	 
	3.7	(a)	 	 Except as otherwise provided in Section 3.6 or Subsection 3.7(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 Option 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) immediately after
the earlier of 5:00 p.m. (Toronto time) on the 30th day following the date of the occurrence
of any such resignation, discharge, removal or termination other than by reason of death as
contemplated in Section 3.6 (and without the requirement for any further act or formality
including, without limitation, the giving of any notices) and the Expiry Time, each and every
Option granted to such Participant

 

- 6 -

	 	 	 	under the Plan that has not been exercised by said time
shall in all respects immediately terminate and be of no further force or effect.
	 
	 	(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 3.6 (and without the requirement
of any further act or formality including, without limitation, the giving of any
notices), each and every Option granted to such Participant under the Plan that had
not been exercised 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
Options, regardless of whether or not such Option 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.

3.8 If the
Participant is an Employee Corporation, the references to the
Participant in Sections 3.6 and 3.7 shall be deemed to refer to the
Eligible Individual associated with the Employee Corporation.

3.9 Participation in the Plan shall be entirely voluntary and any decision not to participate shall
not affect the employment or engagement of any Eligible Person with
the Company or an Affiliate of the Company.

3.10 The Company shall in its sole discretion, subject only to the terms of this Plan, determine the
terms of all Options.

3.11 An Option is personal to the Optionee and non-assignable (whether by operation of law or
otherwise), except as provided for herein. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of an Option contrary to the provisions of the Plan, or upon the
levy of any attachment or similar process upon an Option, the Option shall, at the election of the
Company, cease and terminate and be of no further force or effect whatsoever.

3.12
Notwithstanding Sections 3.11 and 10.5, Options may be transferred or
assigned between an Eligible Individual and the related Employee
Corporation provided the assignor delivers notice to the Company
prior to the assignment and the Board or the Committee approves such
assignment.

4. EXERCISE OF PARTICIPANTS’ OPTIONS

4.1 Subject to earlier termination as provided for in Sections 3.6 and 3.7, a Participant’s Option
shall terminate and may not be exercised after the Expiry Date.

4.2 Other than as provided for in Sections 3.4, 3.6, and 3.7, the exercise of an Option under the
Plan shall be made by submitting to the Company a notice substantially similar to that attached as
Schedule “B”, specifying and subscribing for the number of Shares in respect of which the Option is
being exercised at that time and accompanied by a certified cheque or other means of cash payment
satisfactory to the Company in the amount of the aggregate Exercise Price for such number of
Shares.

4.3 At the discretion of the Company, an Option granted under the Plan may have connected
therewith, at or after the time of grant, a number of stock appreciation rights (a “SAR” or “SARs”)
equal to the Designated Number of Shares in respect of the Option. Each such SAR in respect of a
Share shall entitle the

 

- 7 -

Participant to surrender to the Company, unexercised, the right to
subscribe for such Share pursuant to the related Option and to receive from the Company cash in an
amount equal to the excess of the Fair Market Value at the time of exercise of the SAR over the
Exercise Price of the related Option. Upon exercise of a SAR in respect of a Share covered by a
related Option, that Option in respect of such Share shall immediately cease and terminate and be
of no further force or effect. Unexercised SARs shall terminate when the related Option is
exercised or the Option terminates.

4.4 Upon the exercise of any Option, the Company shall have the right to require the Participant to
remit to the Company, in addition to the Exercise Price, an amount sufficient to satisfy all
federal, provincial, state and local withholding tax requirements, if any, prior to the issuance of
the Shares. The Company shall also have the right in its discretion to satisfy any such
withholding tax liability by retaining any Shares which would otherwise be issued to a Participant
hereunder.

4.5 Upon the disposition of any Shares acquired through the exercise of an Option, the Company
shall have the right to require the Participant to remit to the Company an amount sufficient to
satisfy all federal, provincial, state and local withholding tax requirements, if any, as a
condition to the registration of the transfer of such Shares on its books.

4.6 A term of grant of each Option shall be that if the holder is requested in writing by the
Company and the lead underwriters for a proposed public offering of securities of the Company, the
holder shall not (as evidenced by such form as may be reasonably requested) sell or otherwise
dispose of or enter into a transaction providing the economic consequences of a sale in respect of
any Shares acquired or that may be acquired pursuant to the exercise of the Option without the
prior written consent of such underwriters, for a period not to exceed 180 days following the
closing of such public offering.

5. MAXIMUM NUMBER OF SHARES TO BE ISSUED UNDER THE PLAN

5.1 The maximum number of Shares that may be issued by the Company to Participants pursuant to
Options 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.

5.2 Following completion of a Qualified IPO, no Options shall be granted to any Optionee if the
total number of Shares issuable to such Optionee under this Plan, together with any Shares reserved
for issuance to such
Optionee under options for services or any other stock option plans, would exceed 5% of the issued
and outstanding Shares.

5.3 Notwithstanding any of the other provisions of this Plan, following completion of a Qualified
IPO, no Options shall be granted to any Optionee if such grant could result, at any time, in:

	 	(a)	 	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 Options or other Share
Compensation Arrangements exceeding 10% of the issued and outstanding Shares;
	 
	 	(b)	 	the aggregate number of Shares reserved for issuance pursuant to Options granted under
this Plan or any other stock option plan to Non-Executive Directors exceeding 0.5% of the
issued and outstanding Shares; and

 

- 8 -

	 	(c)	 	the issuance to any one Insider and such Insider’s Associates, within a one-year
period, pursuant to Options or other Share Compensation Arrangements of an aggregate number
of Shares exceeding 5% of the issued and outstanding Shares.

5.4 If any Option is terminated, cancelled or has expired without being fully exercised, any
unissued Shares which have been reserved to be issued upon the exercise of the Option shall become
available to be issued upon the exercise of Options subsequently granted under the Plan, provided
that any such termination or cancellation of Options shall be conducted in accordance with the
applicable rules of any stock exchange upon which the Shares of the Company are listed.

6. ANTI-DILUTION

6.1 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,
and the price payable for, any Shares that are then subject to Option 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 3.4, if at any time after the grant of an Option and prior to the
expiration of the term of such Option, 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 Optionee shall be entitled to
receive upon the subsequent exercise of his or her Option 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
exercise but for the same aggregate consideration payable therefor, 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 Optionee 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 exercise.

6.2 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 6.2, be deliverable upon the exercise of any Option shall be cancelled and not be
deliverable by the Company.

7. ACCOUNTS AND STATEMENTS

7.1 The Company shall maintain records of the details of each Option granted to each Participant
under the Plan, including the Date of Grant, the Designated Number, the Exercise Price of each
Option, the Vesting Rights, the Expiry Date, the number of Shares in respect of which the Option
has been exercised and the maximum number of Shares which the Participant may still purchase under
the Option, which records shall, absent manifest error, be considered conclusively determinative of
all information contained therein. Upon request therefor from a Participant and at such other
times as the Company shall determine, the Company shall furnish the Participant with a statement
setting forth the details of his Options. Subject to the first sentence of this Section 7.1, such
statement shall be deemed to have been accepted by the Participant as correct unless written notice
to the contrary is provided to the Company within 30 days after such statement is given to the
Participant. For greater certainty, in the event of any discrepancy
between the records of the Company and any statement provided to a
Participant pursuant to this section 7.1, 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.

 

- 9 -

8. OPTIONS GRANTED TO US RESIDENTS OR CITIZENS

8.1 Any Option granted under this Plan to a Participant who is a citizen or resident of the United
States (including its territories, possessions and all areas subject to the jurisdiction) (a “U.S.
Optionee”) may be an incentive stock option (an “ISO”) within the meaning of Section 422 of the
Code, but only if so
designated by the Company in the agreement evidencing such Option. No provision of this Plan, as it
may be applied to a US Optionee, shall be construed so as to be inconsistent with any provision of
Section 422 of the Code. Grants of Options to US Optionees which are not ISO’s may be granted
pursuant to Section 3 hereof. Notwithstanding anything in this Plan contained to the contrary, the
following provisions shall apply to ISO’s granted to each US Optionee:

	 	(a)	 	ISO’s shall only be granted to US Optionees who are employees at the time of
grant;
	 
	 	(b)	 	the aggregate Fair Market Value (determined as of the time an ISO is granted)
of the Shares subject to ISO’s exercisable for the first time by a US Optionee during
any calendar year under this Plan and all other equity plans, within the meaning of
Section 422 of the Code, of the Company shall not exceed One Hundred Thousand Dollars
in US funds (US $100,000); provided that options for Shares which exceed such aggregate
Fair Market Value shall not be void, but shall instead be options which are granted
under Section 3 hereof and are not ISOs;
	 
	 	(c)	 	the Exercise Price for Shares under each ISO granted to a US Optionee pursuant
to this Plan shall be not less than the Fair Market Value of such Shares at the time
the Option is granted;
	 
	 	(d)	 	if any US Optionee to whom an ISO is to be granted under the Plan at the time
of the grant of such ISO is the owner of shares possessing more than ten percent (10%)
of the total combined voting power of all classes of shares of the Company, then the
following special provisions shall be applicable to the ISO granted to such individual:

	 	(i)	 	the Exercise Price (per Share) subject to such ISO shall not be
less than one hundred ten percent (110%) of the Fair Market Value of one Share
at the time of grant; and
	 
	 	(ii)	 	for the purposes of this Section 8.1 only, the option exercise
period shall not exceed five (5) years from the Date of Grant; and

	 	(e)	 	no Option may be granted hereunder to a US Optionee following the expiration of
ten (10) years after the date on which this Plan is adopted by the Company or the date
on which the Plan is approved by the shareholders of the Company, whichever is earlier.

8.2 The
maximum number of ISOs that may be issued under this Plan is 200,000, subject to adjustment
in accordance with Section 6.1, mutatis mutandis.

9. NOTICES

9.1 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

 

- 10 -

	 	(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.

9.2 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

9.3 Any payment, notice, statement, certificate or other instrument referred to in Section 9.1 or
Section 9.2 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.

10. GENERAL

10.1 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 Option granted under the Plan;
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 Option, 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
	 
	 	(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
Sections 5.1 and 8.2 in respect of which Options may be granted under this
Plan (other than pursuant to Article 6);
	 
	 	(ii)	 	any amendment that would reduce the Exercise Price at which
Options may be granted below the price provided for in Section 3.3 (other
than pursuant to Article 6);
	 
	 	(iii)	 	any amendment that would increase any of the percentage
limits in Sections 5.2 and 5.3;
	 
	 	(iv)	 	any amendment to Subsection 3.2(d) having the effect of
extending the maximum term of an Option beyond the date that is seven years
after the Date of Grant;
	 
	 	(v)	 	any amendment that would extend the term of any outstanding
Option granted to an Insider to a date beyond the Expiry Date;

 

- 11 -

	 	(vi)	 	any amendment that would reduce the Exercise Price of an
outstanding Option (other than pursuant to Article 6);
	 
	 	(vii)	 	any amendment that would permit assignments to persons not
currently permitted under the Plan; and
	 
	 	(viii)	 	any amendment to the definition of “Eligible Persons” or any defined term
used therein that would expand the scope of the term “Eligible Persons”.

10.2 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.

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

10.4 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.

10.5 The Plan shall enure to the benefit of and be binding upon the Company, its successors and
assigns. Except as provided for herein, the interest of any Participant under the Plan or in any Option 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 to the benefit of and be binding upon the legal
personal representatives of the Participant in accordance with the terms hereof.

10.6 The Company’s obligation to issue Shares in accordance with the terms of this Plan and the
grant or right of exercise of any Option 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. As a
condition of participating in the Plan, each Participant agrees (for such period as the Participant
holds any Option, including any period subsequent to termination of Continuous Service of the
Participant), in connection with the exercise of all Options held and the sale of any Shares
acquired upon the exercise of such Options, 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, representations and undertakings as
may be necessary to demonstrate compliance with Applicable Laws by the Company, as determined by
the Company, acting reasonably.

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

10.8 No Participant shall have any rights as a shareholder in respect of Shares subject to an
Option until such Shares have been paid for in full and issued.

10.9 No Participant or other person shall have any claim or right to be granted Options under the
Plan. Neither the Plan nor any action taken thereunder shall interfere with the right of the
employer of a Participant to terminate that Participant’s employment at any time. Neither any
period of notice nor any payment in lieu thereof

 

- 12 -

upon termination of employment shall be considered
as extending the period of employment for the purposes of the Plan.

10.10 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.

10.11 This Plan and any Options 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.

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

* * *

 

 

SCHEDULE “A”

[LETTERHEAD OF PHOTOWATT TECHNOLOGIES INC.]

TO: [Name of Eligible Person]

          You have been designated as an Eligible Person under the Stock Option Plan of Photowatt
Technologies Inc. (the “Plan”), and assuming that you become a Participant in the Plan by signing
this letter, the details of the non-assignable Option which has been granted to you under the Plan
are as follows:

	 	 	 	 	 	 	 
	(a)

	 	Date of Grant:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	(b)

	 	Designated Number (maximum
number of Shares which you

may purchase under this Option):	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	(c)

	 	Exercise Price (price per Share):	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	(d)

	 	Expiry Date:	 	 	 	 
	 

	 	 	 	 	 	 

          Subject to the terms of the Stock Option Plan, the conditions to be met to establish Vesting
Rights attaching to the Option are as follows:

 

          If you agree to participate in the Plan and comply with its terms and conditions, please sign
one copy of this letter and return it to
         by
         20,        .

	 	 	 	 	 
	 	PHOTOWATT TECHNOLOGIES INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

          I have read the Photowatt Technologies Inc. Stock Option Plan and agree to comply with, and
agree that my participation is subject in all respects to, its terms and conditions:

                                                            

(Signature)

                                                            

(Date)

 

SCHEDULE “B”

PHOTOWATT TECHNOLOGIES INC.

STOCK OPTION PLAN

NOTICE OF INTENT TO EXERCISE OPTION

I,
                    , hereby exercise my option to purchase ___ Common Shares of Photowatt
Technologies Inc. (the “Company”) at a purchase price of $                     per Common Share.

This Notice is delivered in respect of the option to purchase
___ Common Shares of the
Company which was granted to me on the ___ day of                     , 20___.

In connection with the foregoing, I enclose a certified cheque or other means of cash payment
payable to the Company in the amount of $                     in full payment for the Common Shares to be
received by me following receipt by the Company of this Notice and such payment.

	 	 	 
	 

	 	 
	Date

	 	Signature

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