Preview | Master Supply Agreement |

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.

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