F-1/A

As filed with the Securities and Exchange Commission on February 2, 2007

Registration No. 333-137044

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 5 to

Form F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

PHOTOWATT TECHNOLOGIES INC.

(Exact name of Registrant as specified in its charter)

Canada	3674	Not Applicable
(State or other jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification No.)

Photowatt Technologies Inc.

25 Reuter Drive, Cambridge, Ontario, Canada N3E 1A9

(1-519-650-6505)

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

Photowatt Technologies USA Inc.

540-A Silver Creek NW, Albuquerque, New Mexico 87121

(1-505-833-0100)

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

With copies to:

Christopher J. Cummings	Chris Hewat	Riccardo A. Leofanti	D. Shawn McReynolds
Shearman & Sterling LLP	Blake, Cassels & Graydon LLP	Skadden, Arps, Slate, Meagher & Flom LLP	Davies Ward Phillips & Vineberg LLP
199 Bay Street, Suite 4405	199 Bay Street, Suite 2800	222 Bay Street, Suite 1750	1 First Canadian Place, 44th Floor
Toronto, ON Canada M5L 1E8	Toronto, ON Canada M5L 1A9	Toronto, ON Canada M5K 1J5	Toronto, ON Canada M5X 1B1

      Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

      If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, please check the following box.     o

      If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

      If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

      If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

      The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion. Dated February 2, 2007.

PRELIMINARY PROSPECTUS

                             Shares

PHOTOWATT TECHNOLOGIES INC.

Common Shares

        This is an initial public offering of our common shares in the United States and Canada. The           common shares are being offered by us. Prior to this offering, there has been no public market for our common shares.

      The initial public offering price of our common shares is expected to be between $          and $           per share. We have applied to list our common shares on The Nasdaq Global Market under the symbol “PHWT” and on the Toronto Stock Exchange under the symbol “PHW.” Any such listing will be subject to the approval of the relevant stock exchange, and any such approval would not be given unless all of the original listing requirements were met.

       Investing in our common shares involves a high degree of risk. Before buying any shares, you should read the discussion of material risks of investing in our common shares in “Risk Factors” beginning on page 10 of this prospectus.

       Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Per Share	Total
Initial public offering price	$	$
Underwriting commissions	$	$
Proceeds, before expenses, to us	$	$

      The underwriters may also purchase up to an additional                     common shares from our parent company, ATS Automation Tooling Systems Inc., at the public offering price, less underwriting commissions, to cover over-allotments, if any, within 30 days from the date of this prospectus.

      The underwriters are offering the common shares as set forth under “Underwriting.” Delivery of the common shares will be made on or about                     , 2007.

BMO Capital Markets UBS Investment Bank

The date of this prospectus is                     , 2007.

      You should rely only on the information contained in this prospectus or any free writing prospectus prepared by or on behalf of us. We have not, and the underwriters have not, authorized anyone to provide you with additional or different information. We are not, and the underwriters are not, offering to sell these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common shares. Our business, financial condition, results of operations and prospects may have changed since the date of this prospectus.

TABLE OF CONTENTS

PROSPECTUS SUMMARY	1
RISK FACTORS	10
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	32
USE OF PROCEEDS	33
DIVIDEND POLICY	34
CAPITALIZATION	35
DILUTION	36
SELECTED COMBINED FINANCIAL DATA	38
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	41
BUSINESS	66
OUR RELATIONSHIP WITH ATS	85
MANAGEMENT	95
RELATED PARTY TRANSACTIONS	108
PRINCIPAL AND SELLING SHAREHOLDERS	109
DESCRIPTION OF SHARE CAPITAL	110
SHARES ELIGIBLE FOR FUTURE SALE	115
TAXATION	117
UNDERWRITING	123
NOTICE TO INVESTORS	127
LEGAL MATTERS	128
EXPERTS	128
WHERE YOU CAN FIND MORE INFORMATION	129
EX-4.2
EX-10.1
EX-10.3
EX-10.4
EX-10.13
EX-10.14
EX-10.15
EX-10.16
EX-10.17
EX-10.18

      Following is a description of certain units of measure or power used in this prospectus:

“g” grams

“W” watt

“g/ W” grams per watt

“kW” kilo-watt, or one thousand watts

“mm” millimeters

“MW” mega-watt, or one million watts

“GW” giga-watt, or one billion watts

“kWh” kilo-watt hour, or the power of one kilo-watt operating for one hour

“Wp” watt peak, or the output of a solar module as measured under an industry standardized light test

      Any references in this prospectus to our production capacity assume the use of polysilicon at currently experienced levels of efficiency, in the case of Photowatt International, and assume the use of polysilicon at expected levels of efficiency, in the case of Spheral Solar.

      As used in this prospectus, “efficiency” is the percentage of incident energy that is converted into electrical energy in a solar cell. Solar cells with lower efficiencies need to be larger than solar cells with higher efficiencies to generate the same power output.

      As used in this prospectus, “silicon” refers to a variety of silicon feedstock, including polysilicon, refined metallurgical silicon and polysilicon powders and fines.

      Through and including                     , 2007 (the 25th day after the date of this prospectus), U.S. federal securities law may require all dealers that effect transactions in these securities, whether or not participating in this offering, to deliver a prospectus. This requirement is in addition to the dealers’ obligations to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

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PROSPECTUS SUMMARY

      You should read the following summary together with the more detailed information regarding our company contained in this prospectus, including the risk factors and the combined financial statements and notes thereto included elsewhere in this prospectus. Unless the context otherwise requires, any references in this prospectus to “we,” “our,” “us,” the “Company” and “Photowatt” refer to Photowatt Technologies Inc. and its subsidiaries as in effect on the closing date of this offering. Any references in this prospectus to “ATS” refer to our parent company, ATS Automation Tooling Systems Inc. and its subsidiaries, other than us.

Our Company

      We design, manufacture and sell photovoltaic products, commonly referred to as solar cells and modules. Solar cells and modules provide clean, renewable energy by converting sunlight into electricity through a process known as the photovoltaic effect. We operate through two segments, Photowatt International, our core business that is based on a wafer technology, and Spheral Solar™, a development project that is based on a spheral technology.

      Photowatt International designs, manufactures and sells solar modules and installation kits, and provides solar power system design and other value-added services, principally in Western Europe. Photowatt International also manufactures wafers and solar cells, primarily for use in manufacturing its modules and for sale to third parties on an opportunistic basis. Most of Photowatt International’s products are manufactured in our Photowatt France facility outside of Lyon, France. Photowatt USA, our facility in Albuquerque, New Mexico, performs certain module assembly operations for Photowatt International. Photowatt International, through its French and U.S. operations, sells its products under the Photowatt and Matrix brands to a network of independent solar power systems distributors and installers. Solar modules manufactured by Photowatt International are used by businesses, institutions and homeowners to generate electric power. Photowatt International has been developing and selling photovoltaic products since 1979. Photowatt International accounted for all of our combined revenue for our fiscal 2006 and for the six months ended September 30, 2006.

      Spheral Solar is a development project for a light weight, flexible crystalline solar module designed to compete with both conventional crystalline and thin film technologies. Our Spheral Solar technology incorporates thousands of tiny silicon spheres, bonded between thin, flexible aluminum foil substrates to form solar cells. We believe that our Spheral Solar technology, if successfully developed, would have advantages over conventional crystalline solar cells, including lower silicon utilization, better aesthetics and greater physical flexibility. However, as described below under “Our Spheral Solar Technology,” the technological and commercialization challenges associated with the development of spheral technology are substantial, and we may discontinue development of this technology at any time.

Our Competitive Strengths

•  Integrated manufacturing capabilities. We participate in each of the ingot, wafer, cell and module stages of the solar module production process. We believe that being an integrated manufacturer gives us several advantages relative to many of our competitors.

•  Proprietary silicon processing technologies. While all forms of silicon are in short supply, we have developed processes and technologies to make solar cells from polysilicon alternatives, including refined metallurgical silicon and polysilicon powder and fines, that we believe we can acquire more easily than polysilicon.

•  Advanced wafer sawing capabilities. We believe that our advanced wafer sawing capabilities result in lower production costs than for many of our competitors because more wafers can be produced from each silicon brick.

•  Established market positions and relationships with key distributors and installers. We have successfully sold solar products in Europe for over 20 years and enjoy established market positions in several Western European countries. We are also developing a presence in emerging growth markets for solar power in other European markets, as well as in the United States and Canada.

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Our Business Strategy

•  Expand annual integrated manufacturing capacity. In response to demand for our products, which is currently greater than our capacity to produce them, we intend to increase our annual integrated manufacturing capacity to approximately 400 MW by the end of calendar year 2011.

•  Establish reliable, long-term silicon supply. Our strategy is to establish a long-term supply of polysilicon and polysilicon alternatives from a variety of sources to support our continued growth.

•  Continue to invest in research and development to improve cell efficiency. We expect to continue to devote substantial resources to our research and development efforts, either through direct investment or collaborative activities, aimed at increasing the efficiency of our solar cells and reducing silicon usage per watt.

•  Commercialize our Spheral Solar technology. We are working on development and process engineering in an effort to commercialize our Spheral Solar technology, which we acquired in 1997.

Our Challenges

      We believe that the following are some of the major risks and uncertainties that may materially affect our business, financial condition, results of operations and prospects:

•  failure to obtain sufficient quantities of silicon of acceptable quality at reasonable prices, or at all, could constrain our revenue and production growth and decrease our gross margins;

•  the reduction or elimination of government subsidies and economic incentives for solar energy applications could cause a reduction in demand for our products and negatively impact our revenue and profitability;

•  our failure to further develop our technology and introduce new solar products could render our products uncompetitive or obsolete and reduce our sales and market share;

•  our future success substantially depends on our ability to significantly increase both our manufacturing capacity and output;

•  solar cells made using alternatives to polysilicon, such as refined metallurgical silicon, are new to the market and if they are not accepted, we could be unable to fulfill our contracts and could lose customers; and

•  we may not be able to fully develop and commercialize our Spheral Solar technology, and products using that technology may not gain market acceptance.

      A more detailed discussion of these and other risks can be found in “Risk Factors” beginning on page 10 of this prospectus.

Our Spheral Solar Technology

      If we were able to successfully develop and commercialize our Spheral Solar technology, we believe there are market opportunities for our associated solar products where aesthetics, physical flexibility and low weight are critical. However, the technological and commercialization challenges associated with the development of spheral technology are substantial, and we may discontinue development of the technology at any time. For the year ended March 31, 2006, we recognized an after-tax, non-cash asset impairment charge of $94.3 million (pre-tax $94.3 million) due to the uncertainty in resolving technological challenges associated with commercialization and resulting delays in realizing cash flows. We are currently evaluating a partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation, Japanese companies with expertise in the development and manufacture of solar products, to assist us in further developing and commercializing our Spheral Solar technology, and we have signed a non-binding letter of intent with these companies. See “Business — Key Partnerships — Clean Venture 21 Corporation and Fujipream Corporation.”

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Our Silicon Supply

      Polysilicon is the primary raw material used in the production of our solar cells and modules. Silicon is currently in short supply and its price has increased significantly over the past 18 months. We believe that we have secured or identified sources of silicon for Photowatt International’s planned capacity to the end of fiscal 2008. The majority of our fiscal 2008 silicon requirements are expected to be filled by inventory on hand and by confirmed purchase orders. We expect that the balance of our fiscal 2008 requirements will be satisfied by outstanding purchase orders with existing suppliers and by other identified sources. We are currently producing solar cells and modules using refined metallurgical silicon, and in the third quarter of fiscal 2007, produced approximately           % of our solar cells using refined metallurgical silicon. Based on contractual commitments for the supply of refined metallurgical silicon that we have entered into or expect to enter into, we believe that in excess of two thirds of our total silicon requirement during fiscal 2008 will be met with refined metallurgical silicon.

Our Industry

      Solar power systems are used for a variety of residential, commercial and industrial applications. According to Solarbuzz, between 2001 and 2005, total annual solar power system installations increased globally from 345 MW to 1,460 MW, representing a compound annual growth rate of 43%, and global installations of solar power systems are expected to grow at a compound annual growth rate of 17% from 1,460 MW in 2005 to 3,250 MW by 2010. Solarbuzz forecasts continued strong growth globally, with sales increasing from $9.8 billion in 2005 to an estimated $18.6 billion by 2010, a 14% compound annual growth rate. Another industry source, Photon Consulting, projects even more rapid growth, with production growing at a compound annual growth rate of 55% from 2,700 MW in 2006 to 15,400 MW by 2010. Despite this rapid growth, solar energy constitutes only a small fraction of the world’s energy output.

      The development and increased usage of solar power is, and for the foreseeable future will be, affected by the existence of government incentives. A growing number of countries have established attractive incentive programs for the development of solar and other renewable energy sources. In 2005, two of the three largest markets for solar products, as measured by total installations per annum, were Germany and the United States, each having significant government subsidy programs for solar power. Other countries in which we sell our products such as Spain, France and Italy also have significant government subsidy programs for solar power.

Our Relationship With ATS

      Our parent company, ATS, is a leading designer and producer of turn-key automated manufacturing and test systems, which are used primarily by multinational corporations operating in a variety of industries including: automotive, computer/electronics, healthcare, and consumer products. ATS also uses its many years of repetitive manufacturing experience and skills to produce precision components and sub-assemblies and specialized repetitive equipment. As of October 31, 2006, ATS employed approximately 3,700 people at 26 manufacturing facilities in Canada, the United States, Europe, southeast Asia and China. ATS’ shares are traded on the Toronto Stock Exchange under the symbol ATA.

      ATS currently owns, either directly or indirectly through its subsidiaries, substantially all of our assets and operations. Upon the completion of this offering, ATS will establish our business as a separate, publicly traded company. Immediately following this offering, ATS will own of record and beneficially approximately           % of our common shares. If the underwriters exercise their over-allotment option in full, immediately following this offering ATS will own of record and beneficially approximately           % of our common shares. As long as ATS continues to control more than 50% of the voting power of our common shares, ATS will be able to direct the election of all of the members of our board and exercise a controlling influence over our business and affairs. As well, provisions in our Shareholder Agreement with ATS provide ATS with certain rights for so long as ATS owns a significant percentage of our common shares.

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Corporate Information

      We are a Canadian corporation. Our principal executive offices are located at 25 Reuter Drive, Cambridge, Ontario, Canada N3E 1A9, and our telephone number is (519) 650-6505. We were incorporated on July 10, 2006.

Presentation of Financial Information

      We present our combined financial statements in United States dollars. In this prospectus, references to “$,” “U.S.$,” “dollars” or “U.S. dollars” are to United States dollars, references to “C$” are to Canadian dollars, and references to “€” are to euro. Amounts are stated in U.S. dollars unless otherwise indicated.

      On January 31, 2007, the noon buying rate in New York for cable transfers payable in Canadian dollars and euros, as certified for customs purposes by the Federal Reserve Bank of New York, was $1.00 = C$1.1792 and €1.00 = $1.2998, respectively.

      Our combined financial statements included in this prospectus have been prepared in accordance with Canadian generally accepted accounting principles, or Canadian GAAP, which conform in all material respects with United States generally accepted accounting principles, or U.S. GAAP, as applied to our combined financial statements, except as presented in note 20 to our combined annual financial statements and note 16 to our unaudited combined interim financial statements.

      Our combined financial statements present our historical financial position, results of operations, changes in net investment and cash flows on a “carve-out” basis from ATS as if we had operated as a stand-alone entity. However, the combined financial statements may not necessarily be indicative of the results that would have been attained if we had operated as a stand-alone entity, or our results for any future periods.

Statistical Data

      This prospectus contains statistical data that we obtained from government and industry publications and reports generated by Solarbuzz LLC, or Solarbuzz, a market research firm specializing in the solar industry, and Photon Consulting, another industry source. These government and industry publications and reports generally indicate that they have obtained their information from sources believed to be reliable, but do not guarantee the accuracy and completeness of their information.

      Although we believe that the publications and reports are reliable, we have not independently verified their data.

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THE OFFERING

Common shares we are offering	shares
Common shares to be held by ATS immediately after this offering (assuming no exercise of the over-allotment option)	shares
Common shares outstanding immediately after this offering	shares
Over-allotment option	ATS has granted the underwriters an over-allotment option exercisable for a period of 30 days from the date of this prospectus to purchase up to an additional                     common shares from ATS (representing 15% of the common shares offered hereby) at the initial public offering price to cover over-allotments, if any. We will not receive any of the proceeds from the shares sold pursuant to any exercise of the over-allotment option. See “Underwriting.”
Use of proceeds	We estimate that the net proceeds to be received by us from the sale of                     of our common shares in this offering will be approximately $                     million, after deducting estimated underwriting commissions and estimated offering expenses payable by us, assuming an initial public offering price of $                     per share. We intend to use the net proceeds from this offering to finance the capital expenditures associated with the first and second phases of our manufacturing capacity expansion plan at Photowatt International estimated to be approximately $113 million, to repay $                     million expected to be owed to ATS under an intercompany demand loan, and the balance for general corporate purposes, including $12 million in connection with the first phase of our prospective business partnership and cross-licensing arrangement for developing our Spheral Solar technology, the procurement of silicon supply contracts and investments that will enhance our manufacturing, silicon supply or research and development capabilities. See “Use of Proceeds.”
Risk factors	See “Risk Factors” beginning on page 10 and the other information included in this prospectus for a discussion of the risks you should carefully consider before deciding to invest in our common shares.
Nasdaq Global Market and Toronto Stock Exchange Listings	We have applied to list our common shares on The Nasdaq Global Market under the symbol “PHWT” and the Toronto Stock Exchange under the symbol “PHW.” Any such listing will be subject to the approval of the relevant stock exchange, and any such approval would not be given unless all of the original listing requirements were met.

5

      Unless otherwise indicated, the information in this prospectus, including the number of common shares outstanding after this offering noted above, is based on                     shares outstanding as of                     , 2007 and gives effect to the corporate reorganization to be completed upon the closing of this offering as described under “Our Relationship with ATS — General — ATS reorganization relating to our company.” It does not give effect to:

•  the issuance of                    common shares reserved for issuance under our stock option plan and our executive performance share unit plan, of which 1,153,280 common shares are issuable, subject to certain adjustments and subject to vesting, upon the exercise of options to be issued on or before the closing of this offering (including options granted to our chief executive officer and chief financial officer to purchase, in the aggregate, 302,860 of our common shares, subject to certain adjustments, as well as options granted to certain of our directors, officers, employees and other key personnel to purchase, in the aggregate, 850,420 of our common shares). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Stock Options Grant.”

•  the exercise by the underwriters of their option to purchase up to                     additional shares from ATS to cover over-allotments, if any.

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SUMMARY COMBINED FINANCIAL DATA

      The following summary combined statements of earnings (loss) data for the three years ended March 31, 2004, 2005 and 2006 have been derived from our audited combined annual financial statements included elsewhere in this prospectus. The following summary combined statements of earnings (loss) data for the six months ended September 30, 2005 and 2006 and the summary combined balance sheet data as of September 30, 2006 have been derived from our unaudited combined interim financial statements included elsewhere in this prospectus. Our combined financial statements have been prepared in accordance with Canadian GAAP, which conform in all material respects with U.S. GAAP as applied to our combined financial statements, except as presented in note 20 to our combined annual financial statements and note 16 to our unaudited combined interim financial statements. Amounts are stated in United States dollars. The unaudited pro forma balance sheet data below give effect to the corporate reorganization to be completed upon the closing of this offering as described under “Our Relationship with ATS — General — ATS reorganization relating to our company.” The unaudited pro forma, as adjusted balance sheet data below give further effect to our sale of                     common shares in this offering at an assumed initial public offering price of $           per share, after deducting the underwriting commissions and estimated offering expenses payable by us, and the use of the net proceeds therefrom as described in “Use of Proceeds.” Other than as discussed above, the data below does not give effect to the corporate reorganization. You should read the following summary combined financial data in conjunction with our combined financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Our combined financial statements present our historical financial position, results of operations, changes in net investment and cash flows on a “carve-out” basis from ATS as if we had operated as a stand-alone entity. However, the combined financial statements may not necessarily be indicative of the results that would have been attained if we had operated as a stand-alone entity, or our results in any future periods.

										Six Months Ended
		Fiscal Year Ended March 31,								September 30,
		2004			2005		2006			2005		2006
		(U.S. dollars in thousands, except share and per share data)
Combined Statements of Earnings (Loss) Data:
Revenue		$	65,855		$	113,019	$	120,921		$	56,878	$	65,993
Operating costs and expenses:
	Cost of revenue		52,859			89,930		88,998			42,219		46,841
	Research and development(1)		1,236			678		9,252			324		5,668
	Amortization		4,466			5,420		9,680			3,057		4,521
	Selling and administrative		4,708			5,855		9,088			3,325		7,488
	Asset impairment charge(2)		—			—		94,290			—		—
	Shared corporate costs(3)		415			589		717			248		573
			63,684			102,472		212,025			49,173		65,091
Earnings (loss) from operations			2,171			10,547		(91,104	)		7,705		902
Interest (income) expense			(64	)		3		1,666			502		1,898
Provision for income taxes			1,130			3,761		5,610			2,752		3,352
Net earnings (loss)		$	1,105		$	6,783	$	(98,380	)	$	4,451	$	(4,348	)
Pro forma net earnings (loss) per common share(4)
	Basic	$			$		$			$		$
	Diluted
Common shares used to compute pro forma net earnings (loss) per common share(4)
	Basic
	Diluted

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									Six Months Ended
		Fiscal Year Ended March 31,							September 30,
		2004		2005		2006			2005		2006
		(U.S. dollars in thousands)
Selected Segment Data:
Photowatt International:
	Revenue	$	65,855	$	113,019	$	120,921		$	56,878	$	65,993
	Research and development(1)		1,236		678		619			324		697
	Amortization		4,466		5,420		6,252			3,057		4,151
	Earnings from operations		2,586		10,948		19,780			7,872		9,857
	Capital expenditures		5,565		10,625		16,080			5,505		11,313
Spheral Solar:
	Revenue(8)		—		—		—			—		—
	Research and development(1)		—		—		8,633			—		4,971
	Amortization		—		—		3,428			—		370
	Earnings (loss) from operations(2)		—		188		(109,841	)		81		(6,421	)
	Capital expenditures		34,630		16,124		10,351			6,814		—
Corporate costs(3)			415		589		1,043			248		1,468

	As of September 30, 2006
				Pro forma,
	Actual		Pro forma	as adjusted(5)
	(U.S. dollars in thousands)
Selected Combined Balance Sheet Data:
Cash and cash equivalents	$	1,448
Total assets		121,812
Working capital(6)		33,848
Due to parent(7)		20,112
Net investment		76,705
Group equity		73,147

Selected U.S. GAAP Data:

      The following table sets forth certain information prepared in accordance with U.S. GAAP. You should read this information in conjunction with note 20 to our combined annual financial statements and note 16 to our unaudited combined interim financial statements included elsewhere in this prospectus.

											Six Months Ended
		Fiscal Year Ended March 31,									September 30,
		2004			2005			2006			2005			2006
		(U.S. dollars in thousands)
Revenue		$	65,855		$	113,019		$	120,921		$	56,878		$	65,993
Research and development(1)			7,416			18,119			20,380			11,877			5,526
Amortization			4,544			5,502			9,680			3,097			4,521
Asset impairment charge			—			—			(52,609	)		—			—
Earnings (loss) from operations			(4,087	)		(6,976	)		(59,668	)		(3,888	)		1,044
Net loss			(5,153	)		(10,740	)		(66,944	)		(7,142	)		(4,206	)
Total assets (at period end)			117,323			132,847			103,112			133,435			121,812
Net investment (at period end)			97,122			109,508			77,957			120,423			79,494
Selected U.S. GAAP Segment Data:
	Photowatt International earnings from operations		2,623			10,861			19,534			7,841			9,999
	Spheral Solar loss from operations		(6,295	)		(17,248	)		(78,485	)		(11,481	)		(6,421	)

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(1)	Net of government grants.
(2)	We incurred an after-tax, non-cash asset impairment charge in fiscal 2006 of $94.3 million (pre-tax $94.3 million) against our Spheral Solar technology deferred development costs and other long-lived assets in the fourth quarter of fiscal 2006 due to the current uncertainty in resolving technological challenges and resulting delays of realizing cash flows from the investment in our Spheral Solar technology.
(3)	Corporate costs include Photowatt corporate costs which were incurred directly by us and include legal, compliance, personnel, finance and other corporate costs not directly associated with a segment. Corporate costs also include “shared corporate costs”, which represent an estimate of costs attributable to our business for services that were provided by ATS or one of its affiliates in the past.
(4)	Based on the number of common shares to be outstanding upon completion of the corporate reorganization and the closing of this offering as described under “Our Relationship with ATS — General — ATS reorganization relating to our company.”
(5)	The pro forma, as adjusted balance sheet data are illustrative only and are subject to adjustment based on the actual initial public offering price of our common shares and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed initial public offering price per share would increase (decrease) cash and cash equivalents, total assets, working capital and group equity by approximately $           million.
(6)	Working capital represents total current assets minus total current liabilities, excluding due to parent.
(7)	Due to parent consists of debt under our intercompany loan from ATS, which was considered nil as at March 31, 2006 and $20.1 million as at September 30, 2006 for the purposes of the combined financial statements. At the time of the closing of this offering we expect to owe approximately $           million to ATS pursuant to an intercompany demand loan for investment in additional manufacturing capacity at Photowatt International, further development and process engineering associated with our Spheral Solar technology, and other general corporate purposes.
(8)	Represents revenue from third parties. Spheral Solar had inter-segment revenue with Photowatt International of $2.3 million for the six months ended September 30, 2006 from sales of silicon to Photowatt International that is eliminated in the combined financial statements.

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RISK FACTORS

      An investment in our common shares involves significant risks. You should carefully consider the risks described below and the other information elsewhere in this prospectus, including our combined financial statements and related notes, before making a decision to buy our common shares. If any of the following risks occur, our business, financial condition and results of operations could be materially harmed. In that case, the trading price of our common shares could decline and you could lose all or part of your investment in our common shares.

Risks Relating to Our Business

Failure to obtain sufficient quantities of silicon of acceptable quality at reasonable prices or at all could constrain our revenue and production growth and decrease our gross margins.

      Silicon is the most important raw material for our production of solar wafers, spheres, cells and modules. To maintain competitive manufacturing operations, we must obtain silicon in sufficient quantities and of acceptable quality, on a timely basis and at acceptable prices as there are only a limited number of suppliers. Strong growth in demand for silicon for use in solar cell and module production and for use in the semiconductor industry has led to an industry-wide shortage of silicon and to significant price increases in silicon. Increases in silicon prices have in the past increased our manufacturing costs and may impact our manufacturing costs and net income in the future. Some suppliers of silicon also supply to silicon wafer manufacturers for the semiconductor industry, which typically have greater buying power and market influence than manufacturers for the solar cell industry. As a result, increases in the demand for silicon from the semiconductor industry may in the future result in late deliveries or supply shortages with respect to the silicon that we need as raw material. This could result in reduced manufacturing output, delayed or missed shipments, damaged customer relationships and decreased revenue and gross margins. As demand for solar cells has increased, we and many of our principal competitors have announced plans to add additional manufacturing capacity. As this manufacturing capacity becomes operational, it will increase the demand for silicon and further exacerbate the current shortage and price increases. We cannot assure you that we will be able to secure a sufficient supply of polysilicon, whether conventional or fines and powder, or refined metallurgical silicon, to meet our needs. Additionally, the success of our prospective business partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation to develop and commercialize spheral technology will depend in part on obtaining adequate supplies of silicon fines and powder, which are only available from a limited number of suppliers and which we have not yet secured.

      Most of our silicon feedstock is currently purchased through spot market purchases. We are continuing to devote resources to secure additional supply to enable our operations to grow without interruption and we believe that we have developed a silicon supply strategy for our longer term needs. However, we cannot assure you that we will be able to realize on our current efforts or our supply strategy. An important element of our long term silicon supply strategy involves the negotiation of new supply arrangements, but they may not be finalized or become effective at all. Under these arrangements we would typically be required to pre-pay or pay deposits to our suppliers in order to secure silicon supply and the contracts will often be long term and not provide us with an option to cancel. If any one of our suppliers was unable to provide us with silicon, we would have difficulty finding a replacement supplier. Additionally, although we aim to enter into fixed-price, prepaid arrangements with silicon suppliers, entering into such arrangements could make us less competitive if the spot market price of silicon falls. Our inability to obtain sufficient silicon of acceptable quality at commercially reasonable prices or at all would adversely affect our ability to meet existing and future customer demand for our products, constrain our revenue and production growth and decrease our gross margins.

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The reduction or elimination of government subsidies and economic incentives for solar energy applications could cause a reduction in demand for our products and lead to a decrease in our revenue and profitability.

      Demand for solar products is driven, in part, by government incentives that make the economic cost of solar power competitive with traditional forms of electricity. The unsubsidized cost of using solar energy is currently more expensive, on a per watt basis, than the retail cost of conventional hydroelectric, nuclear or fossil fuel-generated energy sources in most industrialized regions of the world. As a result, federal, state, provincial and local governmental bodies in many countries, including Germany, France, Spain, Italy, the United States, China and Canada, have provided subsidies in the form of cost reductions, tax write-offs and other incentives to end users, distributors, systems integrators and manufacturers of solar cells and solar modules. Reduction or elimination of these government subsidies and economic incentives because of policy changes, fiscal tightening or other reasons may result in market volatility, including rapid changes in demand and pricing, as well as the diminished competitiveness of solar energy, and could materially and adversely affect the growth of these markets. For example, in 2005, Japan, one of the largest markets for solar products, eliminated its direct subsidies in favor of other incentive programs, which may not be as successful in promoting the adoption of solar energy in that market. Other jurisdictions, such as Germany, have subsidy programs that are designed to decline over time. Government subsidies and economic incentives may change depending on various factors including the particular political situation of the country providing the subsidy. The reduction or elimination of government subsidies and economic incentives for solar energy applications, especially those in our target markets, could decrease demand for our products and cause our revenue to decline.

Our failure to further refine our technology and develop and introduce new solar products could render our products uncompetitive or obsolete and reduce our sales and market share.

      The solar industry is rapidly evolving and is characterized by continually improving technology providing more efficient and higher power output, improved aesthetics and smaller size at competitive prices. We will need to invest significant financial resources in research and development to keep pace with technological advances in the solar industry and to effectively compete. However, research and development activities are inherently uncertain, we may encounter practical difficulties in commercializing our products under development, and our significant expenditures on research and development may not reap corresponding benefits. A variety of competing solar technologies that other companies may develop could prove to be more cost-effective and have better performance than our solar products. Therefore, our products may be rendered obsolete by the technological advances of others. See “— We may not be able to fully develop and commercialize our Spheral Solar technology, and products using that technology may not gain market acceptance.”

Our future success substantially depends on our ability to significantly increase both our manufacturing capacity and output. Our ability to achieve our expansion goals is subject to a number of risks and uncertainties.

      At Photowatt International, we currently have annual capacity to manufacture approximately 40 MW of solar cells and 54 MW of solar modules, whereas some of our larger competitors have claimed that they can annually produce over 400 MW of solar cells and solar modules. In addition, many of our competitors have greater financial resources and strategic access to greater amounts of silicon than we do, which could enable them to grow faster than we do. Our future success depends on our ability to significantly increase both our manufacturing capacity and output. If we are unable to do so, we may be unable to expand our business, decrease our costs per watt and maintain our competitive position. Our ability to establish additional manufacturing capacity and increase output is subject to significant risks and uncertainties, including:

•  the need to raise significant additional funds to purchase raw materials and equipment or to build additional manufacturing facilities;

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•  delays and cost overruns as a result of a number of factors, many of which may be beyond our control, such as increases in raw materials prices and problems with equipment vendors;

•  delays or denial of required approvals by relevant government authorities;

•  diversion of significant management attention and other resources;

•  shortages of equipment or skilled labor; and

•  failure to execute our business plan effectively.

      If we are unable to establish and operate additional manufacturing capacity, or increase manufacturing output, or if we encounter any of the risks described above, we may be unable to expand our business as planned. Moreover, we cannot assure you that if we do expand our manufacturing capacity and output we will be able to generate sufficient customer demand for our solar power products to support our increased production levels.

We face intense competition from other companies producing solar and other renewable energy products and conventional power generation. Because many of our competitors have greater resources than us, we may not be able to compete successfully and we may lose or be unable to gain market share which could affect our future revenue and profitability.

      The market for solar power products is intensely competitive and continually evolving. Industry participants compete with each other for supplies of silicon. As well, industry participants compete for sales primarily on the basis of their products’ design, efficiency and aesthetics, the strength of their distribution networks, branding, price, reliability and capacity. Many of our competitors have established a stronger market position than ours, and if we fail to attract and retain customers and establish successful distribution networks in our target markets for our products, we will be unable to compete. We compete with a large number of competitors in the solar market, including Sharp, Q-Cells, Kyocera, Sanyo, Mitsubishi, Schott, Suntech, Sunpower and BP Solar. We expect to compete with future entrants to the solar market that offer new technological solutions which could cause our products to become obsolete or uncompetitive. The solar power market in general also competes with other sources of renewable energy and conventional power generation.

      Many of our current and potential competitors have longer operating histories, greater brand name recognition, more established distribution networks, access to larger customer bases and substantially greater financial, distribution, technical, sales and marketing, manufacturing and other resources than we do. As a result, they may be able to respond more quickly to changing customer demands or to devote greater resources to the development, promotion and sales of their products than we can. Our business relies principally on sales of our solar modules and our competitors with more diversified product offerings may be better positioned to withstand a decline in the demand for solar modules. Our competitors’ greater size in some cases provides them with a competitive advantage with respect to manufacturing costs because of their economies of scale and their ability to purchase raw materials at lower prices. As a result, those competitors may have stronger bargaining power with suppliers and have an advantage over us in negotiating favorable pricing, as well as securing silicon at times of shortages.

If solar technology is not suitable for widespread adoption, or sufficient demand for solar products does not develop or takes longer to develop than we anticipate, our sales could decline, and we may be unable to operate profitably.

      The solar market is at a relatively early stage of development, and the extent to which solar products will be widely adopted is uncertain. Market data on the solar industry is not as readily available as is data in more established industries where trends can be assessed more reliably from data gathered over a longer period of time. If solar technology proves unsuitable for widespread adoption or if demand for solar products fails to develop sufficiently, we may not be able to grow our business or generate sufficient revenue to operate profitably. In addition, demand for solar products in our targeted markets may not develop or may

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develop to a lesser extent than we anticipated. Many factors may affect the viability of widespread adoption of solar technology and demand for solar products, including:

•  cost-effectiveness of solar products compared to conventional and other non-solar energy sources and products;

•  performance and reliability of solar products compared to conventional and other non-solar energy sources and products;

•  availability of government subsidies and incentives to support the development of the solar industry;

•  success of other alternative energy generation technologies, such as fuel cells, wind power and biomass;

•  fluctuations in economic and market conditions that affect the viability of conventional and non-solar alternative energy sources, such as increases or decreases in the prices of oil and other fossil fuels;

•  capital expenditures by end users of solar products, which tend to decrease when the economy slows down;

•  nature and rate of advances in solar technologies; and

•  deregulation of the electric power industry and broader energy industry.

Solar cells made using alternatives to polysilicon, such as refined metallurgical silicon, are new to the market and if they are not accepted, we could be unable to fulfill our contracts and could lose customers.

      We used refined metallurgical silicon to manufacture approximately           % of our solar cells in the third quarter of fiscal 2007 and, based on contractual commitments for the supply of refined metallurgical silicon that we have entered into or expect to enter into, we believe that in excess of two thirds of our total silicon requirement will be met with refined metallurgical silicon during fiscal 2008. The cells we currently manufacture using refined metallurgical silicon have lower efficiencies than solar cells we make using polysilicon and use more silicon on a grams per watt basis. Cell efficiency is important to our customers as lower cell efficiency can result in the need for larger and more expensive modules. Our customers have not used solar products made using refined metallurgical silicon in the past and we cannot be certain that they will view them as acceptable alternatives to solar products made using polysilicon. Although we charge less on a per watt basis for these products, if there is resistance to our products made using refined metallurgical silicon, we may be required to further reduce our prices, which would adversely affect our revenue and results of operations. We cannot assure you that our customers will accept products made using refined metallurgical silicon at all. If a significant number of our customers were to object to our products made using refined metallurgical silicon, we could be required to obtain polysilicon at much higher cost to us to fulfill our contracts with these customers. If we were unable to obtain polysilicon due to insufficient supply in the market or otherwise, we would not be able to fulfill our obligations to our customers, which could result in financial damages to us, loss of customers and damage to our reputation.

If we do not achieve satisfactory yields or quality in manufacturing our solar cells, our sales could decrease and our relationships with our customers and our reputation may be harmed.

      The manufacture of solar cells is a highly complex process. Minor deviations in the manufacturing process can cause substantial decreases in yield and in some cases, cause production to be suspended or yield no output. We have from time to time experienced lower than anticipated manufacturing yields. This often occurs during the production of new products or the installation and start-up of new process technologies or equipment. As we expand our manufacturing capacity and bring additional lines or facilities into production, we may experience lower yields as is typical with any new equipment or process. We also expect to achieve lower yields initially as we increase our use of refined metallurgical silicon and use increasingly thinner wafers. If we do not achieve planned yields, our sales could decrease and our relationships with our customers and our reputation may be harmed.

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We expect that we will need to obtain significant additional financing to expand our business, particularly our manufacturing facilities and developing our Spheral Solar technology, and if we are not able to secure such financing on reasonable terms or at all, our ability to expand our business could suffer.

      Our industry is highly capital intensive and our success depends to a significant degree on our ability to develop and update our facilities and technology. We expect to make significant capital expenditures related to increasing our capacity at our manufacturing facilities, and our research and development efforts, including our efforts to develop and commercialize our Spheral Solar technology, and we expect that our expenses will increase significantly as we expand our manufacturing operations, continue our research and development efforts, hire additional personnel, pay more for or make advance payments for raw materials (especially silicon), and increase our marketing and sales efforts. As a stand-alone entity, we will not be able to rely on ATS to fund our capital requirements. We expect to require significant financing in order to realize our growth plans. Our ability to obtain adequate financing depends significantly on our financial condition and results of operations, as well as the conditions of the markets for solar power products and the financial markets. We may not be able to obtain financing when we need it or on reasonable terms. Additional equity financing may result in substantial dilution to our shareholders, including purchasers of the common shares in this offering. If we raise additional funds through debt financing, we could incur significant borrowing costs and the terms of the instruments governing our indebtedness could impose restrictions on our ability to operate our business. If adequate funds are not available when we need them and on reasonable terms, our ability to fund our operations, develop and expand our manufacturing operations and distribution network, invest in key partnerships, fund our research and development or otherwise respond to competitive pressures could be significantly impaired.

We may not be able to fully develop and commercialize our Spheral Solar technology, and products using that technology may not gain market acceptance.

      We are developing our Spheral Solar technology, a light weight, flexible crystalline solar module. To successfully commercialize this technology, we must also develop new production processes that are able to achieve yield, power efficiency and manufacturing throughput for this proprietary solar product. This development and process engineering work is taking longer than originally expected, and the challenges and risks associated with achievement of our development and process engineering goals are substantial. We also face significant financial and other risk of delays in commercializing this technology from unforeseen events or other factors. Other market participants could be faster in achieving cost-effective industrial production of new solar power technologies, thereby increasing cost pressure. There is no certainty when we will be able to commercialize our Spheral Solar technology or that we will be able to commercialize it at all. We incurred an after-tax, non-cash asset impairment charge in fiscal 2006 of $94.3 million (pre-tax $94.3 million) against our Spheral Solar technology deferred development costs and other long-lived assets due to the current uncertainty in resolving technological challenges and resulting delays of realizing cash flows from the investment in our Spheral Solar technology.

      Additionally, although we have signed a non-binding letter of intent with Clean Venture 21 Corporation and Fujipream Corporation outlining the proposed terms of a business partnership and cross-licensing arrangement to assist us in further developing and commercializing our Spheral Solar technology and, subject to further due diligence, intend to enter into a definitive agreement as soon as practicable, we have not yet negotiated commercial terms and may not reach an agreement with these two companies. Furthermore, we may not be able to obtain consent from Technology Partnerships Canada (an agency of the Canadian government) if such consent is necessary, we may not be able to overcome the technological challenges associated with commercialization, we may not be able to obtain adequate supplies of silicon powder and fines necessary for the success of the business partnership and cross-licensing arrangement, or the business partnership and cross-licensing arrangement may otherwise be unsuccessful, in which case we may discontinue development of the technology at any time.

      Even if we are able to develop and commercially manufacture Spheral Solar products, we cannot be sure that the market will accept such Spheral Solar products. Our Spheral Solar products would require significant marketing and sales efforts to gain market acceptance. If we are able to commercially manufacture our

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Spheral Solar products but they are not accepted by the market, our ability to generate revenue would be adversely affected and we may not recover the significant research and development and marketing costs expended to develop the products.

Our ability to successfully commercialize our Spheral Solar technology depends in part on our ability to establish and maintain strategic relationships, particularly our proposed business partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation, and our failure to do so could have a material adverse effect on our market penetration and revenue growth.

      The commercial viability of our Spheral Solar technology has not yet been established and our current development plan depends significantly on the success of our proposed business partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation. We have not yet negotiated commercial terms or entered into a definitive agreement with Clean Venture 21 Corporation and Fujipream Corporation, and we cannot assure you that such an agreement will ever be reached, or that if reached, it would provide us with the anticipated benefits. If our Spheral Solar technology proves to be commercially viable, we also believe we would need to establish relationships with established building product manufacturers and original equipment manufacturers. In fiscal 2004, we commenced a product development relationship with Elk Corporation on a residential roofing product. We cannot assure you, however, that we will be able to maintain this relationship or establish strategic relationships with other third parties or that these relationships will be an effective method for developing or commercializing our Spheral Solar technology.

      If we are not able to establish and develop further strategic relationships, particularly our proposed business partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation, or if any or all of our existing strategic relationships terminate, our ability to generate revenue from Spheral Solar technology may be impaired and we may have to undertake product development and commercialization entirely at our own expense. Such an undertaking may:

•  limit the number of products that we are able to develop and commercialize;

•  reduce the likelihood of successful product introduction;

•  significantly increase our capital requirements;

•  divert our management’s attention and time; and

•  not be feasible from a technical or financial perspective.

We expect that our significant customer concentration will continue to expose us to potentially significant fluctuations or declines in our revenue and increased customer turnover.

      We currently sell a substantial portion of our solar modules and related solar products to a limited number of customers. In fiscal 2006, our ten and three largest customers represented approximately 79% and 46% of our revenue, respectively. Sales to our customers are typically made through non-exclusive, short-term purchase order arrangements. We cannot be certain that these customers will generate significant revenue for us in the future or that these customer relationships will continue. We anticipate that customer concentration will continue for the foreseeable future. Consequently, any one of the following events may cause material fluctuations or declines in our revenue and have a material adverse effect on our results of operations:

•  reduction, delay or cancellation of orders from one or more of our significant customers;

•  purchases by one or more of our significant customers of products competitive with ours;

•  the loss of one or more of our significant customers and our failure to identify additional or replacement customers; and

•  failure of any of our significant customers to make timely payment for our products.

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Because we operate on a purchase order basis with our largest customers, our financial results, including gross margins, may suffer if purchase orders were changed or cancelled.

      Sales to our customers are typically made through non-exclusive, short-term purchase order arrangements. Our customers may cancel or reschedule purchase orders with us on relatively short notice. Cancellations or rescheduling of customer orders could result in the delay or loss of anticipated sales without allowing us sufficient time to reduce, or delay the incurrence of, our corresponding inventory and operating expenses. In addition, changes in forecasts or the timing of orders from these or other customers expose us to the risks of inventory shortages or excess inventory. This in turn could cause our operating results to fluctuate.

We have incurred losses in recent prior periods and may not be profitable in the future.

      Our industry is characterized by long and variable delays between expenses incurred for research and development and the generation of revenue, if any, from such expenditures. We incurred a combined net loss of $98.4 million in fiscal 2006, including an after-tax, non-cash asset impairment charge of $94.3 million (pre-tax $94.3 million) against our Spheral Solar technology deferred development costs and other long-lived assets. Beginning October 1, 2005, operating losses related to developing our Spheral Solar technology were included in our combined results of operations. We expect to continue to incur losses relating to the development of our Spheral Solar technology for the foreseeable future. We cannot assure you that we will be able to achieve profitability in the future, or that, if achieved, such profitability can be sustained. Our future success in attaining profitability and growing our revenue and market share for our products will depend upon our ability to develop products that have a competitive advantage, build our brand image and reputation, attract orders and increase efficiency in our production process. If we do not achieve or sustain profitability or otherwise meet the expectations of securities analysts or investors, the market price of our common shares may decline.

We may not be able to manage our expansion of operations effectively.

      We anticipate significant continued expansion of our business to address growth in demand for our solar products and services, as well as to capture new market opportunities. We also intend to expand our business by entering into strategic alliances with third parties. To manage the potential growth of our operations, we will need to improve our operational and financial systems, procedures and controls, increase manufacturing capacity and output, and expand, train and manage our growing employee base. Furthermore, our management will be required to maintain and expand our relationships with our customers, suppliers, joint venture partners and other third parties. We cannot assure you that our current and planned operations, personnel, systems, internal procedures and controls will be adequate to support our future growth or that we have made adequate allowances for the costs and risks associated with our expansion of operations. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, execute our business strategies or respond to competitive pressures.

We expect to be exposed to risks in connection with joint ventures and strategic alliances with third parties.

      We intend to enter into joint ventures and strategic alliances with third parties. These joint ventures and strategic alliances may subject us to a number of risks, including risks associated with sharing proprietary information, access to cash flows, disputes concerning business issues, disputes concerning the ownership of intellectual property and not having 100% ownership of our operations. Moreover, joint ventures and strategic alliances may subject us to the risk of non-performance by a counterparty, which may in turn lead to monetary losses that materially and adversely affect our business.

We expect to continue to have a limited number of suppliers of our customized manufacturing equipment and a limited number of suppliers of key components of our solar products. Any significant damage to our customized manufacturing equipment, or a failure to develop or maintain our relationships with these suppliers, could cause material interruptions to our operations and could have a material adverse effect on our business, financial condition and results of operations.

      Certain of our manufacturing tools, equipment and fixtures have been designed and made specifically for us, and certain of the components that we use in manufacturing, such as certain encapsulating plastics as well

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as silicon carbide, which is used in the wafer-sawing process, are procured from a limited number of third-party suppliers. As a result, such tools, fixtures and components are not readily available from multiple vendors and would be difficult to repair or replace. We are therefore susceptible to price pressure from these suppliers, and if one of these suppliers were unable or unwilling to supply us with our customized equipment or manufacturing components, we would have difficulty finding a replacement supplier. If we fail to maintain relationships with these suppliers, we may be unable to manufacture our products and could be prevented from delivering our products to our customers in the required quantities or at competitive prices, which could result in order cancellations and loss of market share. Similarly, any significant damage to, or break down of, our customized equipment, or any inability of our suppliers to supply us with replacement equipment or to repair our equipment, could cause material interruptions to our operations, revenue loss and increased expenses and consequently could have a material adverse effect on our business, financial condition and results of operations.

Our reliance on Photowatt France’s manufacturing facility could have a material adverse impact on our business.

      Nearly all of our solar products are produced at our Photowatt France facility near Lyon, and our business therefore relies to a significant degree on the efficient and uninterrupted operation of that facility. Our Photowatt France facility is vulnerable to damage or interruption from a variety of sources. A natural disaster or other unanticipated problem that leads to disruption at our Photowatt France facility could have a material adverse effect on our business, financial condition and results of operations.

Labor disturbances could disrupt our business.

      As of July 31, 2006 we employed 711 active employees globally, including 604 in France. Certain of our non-management employees in France belong to the CFDT (the Confédération Française Démocratique du Travail), a trade union, and all of our non-management employees are covered by a collective bargaining agreement. Future industrial action, or the threat of future industrial action, by our employees in response to any future efforts by our management to reduce labor costs, restrain wage increases or modify work practices could adversely affect our business by disrupting production or constraining our ability to carry out any such efforts.

Our business depends substantially on the continuing efforts of our key officers and our ability to maintain a skilled labor force, and our business may be materially adversely affected if we lose any of our key officers or employees or if we are unable to attract, train and retain skilled personnel.

      Our business is dependent upon our ability to attract, train and retain key employees with the specialized skills we require. There is substantial competition for qualified skilled personnel, and we may not be able to attract or retain highly qualified personnel. If we are unable to attract and retain qualified employees, our business may be materially and adversely affected. Our future success also depends upon a number of key members of our senior management. The unexpected loss or departure of any of our key officers or employees could disrupt our operations and impair our ability to compete effectively.

Changes to existing regulations concerning the utility sector and the solar industry may present technical, regulatory and economic barriers to the purchase and use of solar products, which may significantly reduce demand for our products.

      The market for power generation products is heavily influenced by government regulations and policies concerning the electric utility industry, as well as the internal policies of electric utilities companies. These regulations and policies often relate to electricity pricing and technical interconnection of end user-owned power generation. In a number of countries, these regulations and policies are being modified and may continue to be modified. End users’ purchases of alternative energy sources, including solar products, could be deterred by these regulations and policies, which could result in a significant reduction in the potential demand for our solar products. For example, utility companies commonly charge fees to larger, industrial customers for disconnecting from the electricity transmission grid or for having the capacity to use power

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from the electricity transmission grid for back-up purposes. These fees could increase end users’ costs of using our solar products and make our products less desirable, thereby having an adverse effect on our business, financial condition and results of operations.

      We anticipate that our solar products and their installation will be subject to oversight and regulation in accordance with national and local ordinances relating to building codes, safety, environmental protection, utility interconnection and metering and related matters in various countries. It is also burdensome to track the requirements of individual localities and design equipment to comply with the varying standards. Any new government regulations or utility policies pertaining to our solar products may result in significant additional expenses to us, our distributors and end users and, as a result, could cause a significant reduction in demand for our solar products.

We have relied on government grants to partially fund our research and development and if we are unable to obtain grants in the future, our expenses would increase and our results of operation may be adversely affected.

      In fiscal 2004, 2005 and 2006, we received government grants to fund research and development in the amounts of $5.7 million, $12.8 million and $3.4 million, respectively. The vast majority of these grants were received from Technology Partnerships Canada, an agency of the Canadian government. The final Technology Partnerships Canada funding claims were recognized in fiscal 2006 and at this time there are no further amounts under this program to be recognized by us. These grants are subject to the satisfaction of certain requirements in connection with our research and development activities, and they are subject to governmental audits to ensure compliance. If we apply funding received under a government grant for a research and development project that is determined not to satisfy the relevant requirements, we would have to refund the grant. Under the terms of the grants, we may not be able to establish a development program with Clean Venture 21 Corporation and Fujipream Corporation without the consent of Technology Partnerships Canada, although the terms of the grants are unclear as to whether such a consent would be necessary. If such a consent is required and obtained, it may be subject to conditions that are not favorable to us. As well, technology that we develop using government funding may be subject to limitations on how we may deploy it, and certain details regarding this technology may be required to be publicly disclosed, which exposes us to the risk of loss of confidential information. We cannot be certain that grants will be available to us in the future. If we cannot obtain grants in the future, our research and development costs could be more significant and our results of operations could be adversely affected.

Our quarterly revenue and results of operations may vary from quarter to quarter, and if we fail to meet quarterly financial expectations, our stock price will likely decline.

      Our quarterly revenue and results of operations are difficult to predict and fluctuate from quarter to quarter and our results of operations in some quarters may be below market expectations. Our quarterly results of operations may be substantially affected by a number of factors, many of which are outside of our control, including:

•  the availability and pricing of raw materials, particularly silicon, and customized manufacturing tools and fixtures;

•  seasonal trends, including the annual summer shutdown of our operations in France in the second quarter as well as the possibility of our having slower sales in the winter months, when the weather may impair the ability to install our products in certain geographical areas;

•  timing, availability and changes in government subsidy and incentive programs;

•  variations in capital expenditures and unplanned additional expenses such as manufacturing failures, defects, and changes in our manufacturing costs;

•  unpredictable volume and timing of customer orders or the loss of, or a significant reduction or postponement in orders from, one or more key customers;

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•  unanticipated or varying manufacturing downtime, yields and cell efficiencies;

•  fluctuations in the selling prices of solar cells and modules;

•  foreign currency fluctuations, particularly in the relationships amongst the Canadian dollar, the euro and the U.S. dollar;

•  timing of research and development expenditures;

•  changes in the mix of selling solar modules, cells and value-added services;

•  changes in the mix of modules produced using polysilicon versus refined metallurgical silicon; and

•  the timing of new product or technology announcements or introductions by our competitors and other developments in the competitive environment.

      We base our planned operating expenses in part on our expectations of future revenue, and a significant portion of our expenses are relatively fixed in the short term. If revenue for a particular quarter is lower than we expect, we likely will be unable to proportionately reduce our operating expenses for that quarter, which will harm our results of operations for that quarter. If we fail to meet or exceed analyst or investor expectations, the price of our common shares may materially decline.

Our failure to protect our intellectual property rights may undermine our competitive position.

      Our success depends in part upon our ability to protect our intellectual property and our proprietary technology. We rely primarily on patent, trademark, trade secret, copyright law and other contractual restrictions to protect our intellectual property. Nevertheless, these afford only limited protection and the actions we take to protect our intellectual property rights may not be adequate. It is possible that:

•  some or all of our confidentiality agreements will not be honored;

•  disputes will arise with our consultants, strategic partners or others concerning the ownership of intellectual property;

•  unauthorized disclosure of our know-how, trade secrets and other confidential information will occur; or

•  third parties may copy, infringe, misappropriate or reverse engineer our proprietary technologies or other intellectual property rights.

      We generally do not require our employees (including research and development personnel) to sign confidentiality or other agreements in respect of our intellectual property, nor do we require our contractors to sign general agreements in respect of intellectual property developed for us. This could adversely affect our ability to secure, protect and/or enforce intellectual property developed by and/or for us. Any inability to adequately secure, protect and/or enforce our proprietary rights could harm our ability to compete, generate revenue and grow our business, which could have a material adverse effect on our business, financial condition and results of operations.

      Policing unauthorized use of proprietary technology can be difficult and expensive. Also, litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others. We cannot assure you that the outcome of any such potential litigation would be in our favor. Such litigation may be costly and may divert management attention away from our business as well as expend other resources. In certain situations, we may have to bring such suit in foreign jurisdictions, in which case we are subject to additional risk associated with the result of the proceedings and the amount of damage that we can recover. Certain foreign jurisdictions may not provide protection to intellectual property comparable to that in the United States and Canada. An adverse determination in any such litigation would impair our intellectual property rights and may harm our business, financial condition and results of operations.

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We may not obtain sufficient patent protection on the technology embodied in the solar products we currently manufacture and market or in our new products, which could harm our competitive position and increase our expenses.

      Our success and ability to compete is impacted by the patent protection we obtain for our proprietary technology. We hold a number of patents, primarily in connection with various aspects of our Spheral Solar technology and also in connection with our ability to convert and use silicon powder and fines, which is significant to our silicon supply strategy. The patents that we consider to be of the greatest importance to our Spheral Solar technology will expire between 2008 and 2023 and have been issued primarily in the United States, although we also have patent protection in certain jurisdictions in Europe and Asia for some of the same technology that is covered by our U.S. patents. Our patent applications may not result in issued patents, and even if they result in issued patents, the patents may not have claims of the scope we seek. In addition, any issued patents may be challenged, invalidated or declared unenforceable. In general, the term of any patents, including any patents issued from applications recently filed in the United States, would be 20 years from their filing date and if our applications are pending for a long time period, we may have a correspondingly shorter term for any patent that may be issued. Our present and future patents may provide only limited protection for our technology and may not be sufficient to provide competitive advantages to us. For example, competitors could be successful in challenging any issued patents or, alternatively, could develop similar or more advantageous technologies on their own or design around our patents. Also, patent protection in certain foreign countries may not be available or may be limited in scope and any patents obtained may not be as readily enforceable as in the United States or Canada, making it difficult for us to effectively protect our intellectual property from misuse or infringement by other companies in these countries. Our inability to obtain and enforce our intellectual property rights in some countries may harm our business. In addition, given the costs of obtaining patent protection, we may choose not to protect certain innovations that later turn out to be important.

If the effective term of our patents is decreased or if we need to refile some of our patent applications, the value of our patent portfolio and the revenue we derive from products protected by the patents may be decreased.

      The value of our patents depends in part on their duration. Shorter periods of patent protection are relatively less valuable. Because the period between the filing of a patent application to the issuance of a patent is often longer than three years, a 20-year patent term from the filing date may result in substantially shorter patent protection. In some cases, we may need to refile some of our patent applications and, in these situations, the patent term will be measured from the filing date of the earliest prior application to which benefit of earlier filing date in the applicable jurisdiction is claimed in such a patent application. This would also shorten our period of patent exclusivity. Similarly, because of the extensive time required for the development and commercialization of products based on our technologies, it is possible that, before some products can be commercialized, any related patents may expire or remain in force for only a short period following commercialization, thereby reducing any advantages of these patents and making it unlikely that we will be able to recover investments we have made to develop our technologies and products based on our technologies. A shortened period of patent exclusivity, resulting from a change in patent laws, the passage of time, or otherwise, may negatively impact our revenue protected by our patents.

We may be exposed to infringement or misappropriation claims by third parties, causing costly litigation and the loss of significant rights.

      Our success also depends largely on our ability to use and develop our technology and know-how without infringing the intellectual property rights of third parties. The validity and scope of claims relating to solar technology patents involve complex scientific, legal and factual questions and analysis and, therefore, may be highly uncertain. We may be unaware that we infringe third-party intellectual property rights, in particular process-related patents. We may become subject to litigation involving claims of patent infringement or violation of intellectual property rights of third parties. The defense and prosecution of intellectual property suits, patent opposition proceedings and related legal and administrative proceedings can

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be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel. An adverse determination in any such litigation or proceedings to which we may become a party could subject us to significant liability to third parties, divert our management’s attention and resources, require us to seek licenses from third parties, to pay ongoing royalties, or to redesign our products, or subject us to injunctions prohibiting the manufacture and sale of our products or the use of our technologies. Protracted litigation could also result in our customers or potential customers deferring or limiting their purchases or use of our products until resolution of such litigation. All these outcomes could materially damage our business. We believe that as technology develops, we may have to develop non-infringing technology, and our failure in doing so or obtaining licenses to the proprietary rights on a timely basis or on desired terms could have a material adverse effect on our business, financial condition and results of operations.

Problems with product quality or product performance, including defects, in our solar products could result in a decrease in customers and revenue, unexpected expenses and loss of market share.

      Our solar products are complex and must meet stringent quality requirements. Products as complex as ours may contain undetected errors or defects, especially when first introduced. These defects could cause us to incur significant re-engineering costs, divert the attention of our engineering personnel from product development efforts and significantly affect our customer relations and business reputation. If we deliver solar products with errors or defects, or if there is a perception that our solar products contain errors or defects, our credibility and the market acceptance and sales of our solar products could be harmed. The possibility of future product failures could cause us to incur substantial expense to repair or replace defective products. Widespread product failures may damage our market reputation and reduce our market share and cause sales to decline.

Since we cannot test our solar products for the full duration of our applicable warranty periods, we may be subject to unexpected warranty expense.

      Our standard product warranty provides for a five-year limited warranty in connection with module malfunctions and additional limited warranties in connection with modules’ loss of power over time that, depending on the product and its use, range from five to 25 years. These limited warranties apply only in the event that our materials and/or workmanship is defective, and require us at our option either to repair, replace or (except in connection with loss of power) provide a refund in respect of the products affected. We believe our warranty periods are consistent with industry practice. Due to the long warranty period and our proprietary technology, we bear the risk of extensive warranty claims long after we have shipped product and recognized revenue. Although we conduct accelerated testing of our solar products, such testing cannot simulate the full warranty period.

      As a result of these factors, we may be subject to unexpected warranty expense, which in turn would harm our financial results. Any increase in the defect rate of our products would cause us to increase the amount of warranty reserves and have a corresponding negative impact on our combined financial statements.

Product liability claims against us could result in adverse publicity and potentially significant monetary damages.

      As with other solar product manufacturers, we are exposed to risks associated with product liability claims in the event that the use of the solar products we sell results in injury. Because our products are electricity producing devices, it is possible that users could be injured or killed by our products, whether by product malfunctions, defects, improper installation or other causes. The effectiveness of the steps we take to contractually reduce the risk of product liability-related claims depends, to a significant degree, on judicial decisions and the application of ever-developing jurisprudence in each of the jurisdictions in which we operate. An alleged product defect that results in direct injury or loss may result in significant liability to us that may exceed the limits of our liability insurance. We may not have adequate resources in the event of a successful claim against us, and such a liability may have a material adverse effect on our financial condition and results of operations.

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If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential shareholders could lose confidence in our financial reporting, which could harm our business and the trading price of our common shares.

      Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. In connection with our annual report for the fiscal year ending March 31, 2008, Section 404 of the Sarbanes-Oxley Act of 2002 will require us to evaluate and report on our internal controls over financial reporting and have our independent registered public accounting firm attest to our evaluation. Under Canadian securities law requirements, commencing with the fiscal year ending March 31, 2007, our Chief Executive Officer and Chief Financial Officer will be required to certify that they have designed internal control over financial reporting and caused certain changes in internal control over financial reporting to be disclosed. In addition, under proposed Canadian securities law requirements, our Chief Executive Officer and Chief Financial Officer will be required to certify annually that they have evaluated the effectiveness of our internal controls over financial reporting commencing with the fiscal year ending March 31, 2008. We have been preparing for compliance with Section 404 and the Canadian requirements by strengthening, assessing and testing our system of internal controls to provide the basis for our report. However, the continuous process of strengthening our internal controls and complying with Section 404 and the Canadian requirements is expensive and time consuming, and requires significant management attention. This must be done at the same time as our financial reporting personnel and processes adapt to a public offering, separation from the financial oversight role of ATS and the reporting requirements associated with new circumstances such as volatile silicon prices and capacity expansion. We cannot be certain that the measures we are taking will ensure that we will maintain adequate control over our financial processes and reporting. Furthermore, as we grow our business, our internal controls will become more complex and will require significantly more resources to ensure our internal controls overall remain effective. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our results of operations or cause us to fail to meet our reporting obligations. If we or our independent registered public accounting firm discover a material weakness, the disclosure of that fact, even if quickly remedied, could reduce the market’s confidence in our combined financial statements and harm our share price. In addition, future non-compliance with Section 404 and the Canadian requirements could subject us to a variety of administrative sanctions, including the suspension or delisting of our common shares and the inability of registered broker-dealers to make a market in our common shares, which would further reduce our share price.

Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines.

      We are required to comply with all foreign, national and local laws and regulations regarding the operation of industrial facilities, pollution control, environmental protection, and health and safety. In addition, under some statutes and regulations, a government agency or other parties may seek recovery and response costs from operators of facilities where releases of hazardous substances have occurred or are ongoing, even if the operator was not responsible for such release or otherwise at fault. We use, store, generate and discharge toxic, volatile and otherwise hazardous chemicals and wastes in our research and development and manufacturing activities. Failure to comply with present or future environmental laws, rules and regulations may result in substantial fines, suspension of production or cessation of operations. In addition, if more stringent laws and regulations are adopted in the future, the costs of compliance with these new laws and regulations could be substantial or could impose significant changes in our manufacturing process. Furthermore, a 1997 environmental assessment report revealed the presence of dichloroethylene and vinyl chloride contamination in soil and groundwater at our facility in Lyon, France. No further assessment of this contamination has been undertaken. Should we choose to or be required to investigate or remediate this contamination, costs to do so could be material.

      We are not currently aware of environmental contamination at any of our other facilities that we would expect to have a material impact on our operations or results. However, should we discover contamination at

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properties that we own or operate, we could be required to conduct investigative or remedial activities that could be material to our operations or results.

Fluctuations in exchange rates could have a material adverse effect on our business, financial condition and results of operations.

      We are exposed to foreign exchange risk because a substantial portion of our sales are currently denominated in a number of foreign currencies, primarily the euro. Changes in exchange rates on the translation of the earnings of our French subsidiary into dollars is directly reflected in our combined earnings. To the extent net foreign currency cash inflows are not fully hedged, strengthening of the U.S. dollar against these foreign currencies will negatively impact our revenues stated in U.S. dollars. In addition, strengthening of the euro against other foreign currencies will make our products manufactured in France more expensive for international customers. To the extent our operations are not able to adjust to changes in exchange rates by reducing costs, or by providing more valuable products that command higher prices, revenue and earnings will be negatively impacted. We cannot predict the impact of future exchange rate fluctuations on our results of operations and may incur net foreign currency losses in the future. Therefore, fluctuations in currency exchange rates could have a material adverse effect on our business, financial condition and results of operations.

We depend on the performance of our subsidiaries and their ability to make distributions to us.

      Our principal assets are the equity interests we own in our operating subsidiaries. As a result, we are dependent upon cash dividends, distributions or other transfers we receive from our subsidiaries in order to repay any debt we may incur and to meet our other obligations. The ability of our subsidiaries to pay dividends and make payments to us will depend on their results of operations and may be restricted by, among other things, applicable corporate, tax and other laws and regulations and agreements of those subsidiaries. Our subsidiaries are separate and distinct legal entities. Any right that we have to receive any assets of or distributions from any subsidiary upon its bankruptcy, dissolution, liquidation or reorganization, or to realize proceeds from the sale of the assets of any subsidiary, will be junior to the claims of that subsidiary’s creditors, including trade creditors. In addition, we may enter into joint ventures with third parties as a means to execute our business strategy. Our ability to access our assets, including cash in these joint ventures, may be restricted by the governing documents of any such joint ventures.

Risks Relating to Our Relationship with ATS

Our historical financial information as a business segment of ATS may not be representative of our results as a stand-alone public company and, therefore, may not be reliable as an indicator of our future financial results.

      The historical financial information we have included in this prospectus has been derived from our and ATS’ historical accounting records. We believe that the assumptions underlying the combined financial statements are reasonable. However, the combined financial statements may not reflect what our financial position, results of operations or cash flows would have been had we been a stand-alone entity during the historical periods presented or what our financial position, results of operations or cash flows will be in the future.

      In particular, the historical costs and expenses reflected in our combined financial statements include an allocation for certain corporate functions historically provided by ATS. These expense allocations were based on what ATS considered to be reasonable allocations of the utilization of services provided or the benefit received by us. We currently estimate that general annual corporate expenses will increase significantly when we become a stand-alone company. We have not made adjustments to our historical financial information to reflect changes that may occur in our cost structure, financing and operations as a result of our separation from ATS, including certain tax changes resulting from the reorganization to be undertaken by ATS related to this offering. These changes potentially include increased costs associated with reduced economies of scale and being a publicly traded, stand-alone company.

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      As a public company, we will incur a significantly higher level of legal, accounting and other related expenses than we did as a division of ATS. In addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the Securities and Exchange Commission, or the SEC, The Nasdaq Global Market, the Toronto Stock Exchange and the Canadian securities regulatory authorities, have required changes in the corporate governance practices of public companies. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Following this offering, we will continue to be dependent on ATS to provide us with many key services for our business, and our ability to operate our business effectively may suffer if we are unable to cost-effectively establish our own administrative and other support functions in order to operate as a stand-alone company after the expiration of our transitional services agreement with ATS.

      Historically, ATS has performed various corporate functions on our behalf, including accounting services; tax services; employee benefits management; financial and legal services; real estate management; risk and claims management; information management and technology services; and office administration services. Prior to the completion of this offering, we will enter into agreements with ATS related to the separation of our business operations from ATS, including a Transitional Services Agreement. Under the terms of the Transitional Services Agreement, Master Supply Agreement and Lease Agreement, ATS will provide us with many key services, and ATS will have no obligation to provide any services on our behalf other than as provided in those agreements. These services include certain:

•  communications services such as phone, cell phone and wireless devices;

•  tax and merger and acquisition transaction services;

•  payroll;

•  information technology, including access to network, systems, applications and technical support;

•  human resources and employee benefits;

•  legal services;

•  insurance services;

•  accounting support and treasury; and

•  other specified services.

      We expect some of these services to be provided for longer or shorter periods than the initial term. We believe it is necessary for ATS to provide these services for us to facilitate the efficient operation of our business as we transition into a public company. We will, as a result, initially be dependent on ATS for transition services following this offering. See “Our Relationship with ATS — Agreements Between ATS and Us — Transitional Services Agreement,” “— Master Supply Agreement” and “— Lease Agreement.”

      Once the transition periods specified in the Transitional Services Agreement have expired and are not renewed, or if ATS exercises its right to terminate the provision of any service under the Transitional Services Agreement in the event the provision becomes commercially impracticable for ATS, or if ATS does not or is unable to perform its obligations under the Transitional Services Agreement, we will be required to provide these services ourselves or to obtain substitute arrangements with third parties. We may be unable to provide these services because of financial or other constraints or be unable to implement substitute arrangements on a timely basis on terms that are favorable to us, or at all. As a result we may not be able to effectively operate our business, we may experience unexpected material costs, and our profitability may be adversely affected.

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As long as ATS controls us, you will have no ability to influence the outcome of matters requiring shareholder approval.

      After the completion of this offering, ATS will own           % of our outstanding common shares, or           % if the underwriters exercise their over-allotment option in full. See “Principal and Selling Shareholders.” As long as ATS has voting control of us, ATS will have the ability to take shareholder actions irrespective of the vote of any other shareholder, including the ability to prevent any transactions that it does not believe are in ATS’ best interest. As a result, ATS will have the ability to influence or control all matters affecting us, including:

•  the composition of our board of directors and, through our board of directors, any determination with respect to our business plans and policies, including the appointment and removal of our officers;

•  any determinations with respect to acquisitions of businesses, mergers or other business combinations;

•  our acquisition or disposition of assets;

•  our capital structure, including all financing activities;

•  compensation, option programs and other human resource policy decisions;

•  changes to the transitional agreements with ATS, subject to applicable laws;

•  changes to other agreements that may adversely affect us; and

•  our payment or non-payment of dividends.

      This voting control may discourage transactions involving a change of control of us, including transactions in which you as a holder of our common shares might otherwise receive a premium for your shares over the then-current market price. As well, provisions in our Shareholder Agreement with ATS provide that, for so long as ATS, directly or indirectly, holds not less than 50% of our outstanding common shares, we shall not, and shall not permit any subsidiary entity to, without the affirmative vote of a majority of our board of directors and the prior, written consent of ATS as a shareholder:

•  enter into any merger, amalgamation, plan of arrangement, consolidation, business combination, joint venture or other material corporate transaction, including the acquisition of any business or securities of any person (other than our wholly-owned subsidiaries) or the acquisition, license, lease, exchange of assets or the assumption of any obligations, in each case with a fair market value in excess of C$50 million;

•  sell, lease, exchange, license on an exclusive basis or dispose of, in a single transaction or in a series of transactions, property or assets with a fair market value in excess of C$50 million, other than the sale or disposition of inventory in the ordinary course of business, or sell or grant an exclusive license with respect to material intellectual property;

•  adopt any plan or proposal for a complete or partial liquidation or dissolution or any reorganization or commence any case, proceeding or action seeking relief under any existing laws or future laws relating to bankruptcy or insolvency;

•  take any action that could reasonably be expected to lead to or result in a material change in the nature of our business;

•  issue any shares of our capital stock, or any rights, warrants or options to acquire our capital stock (excluding securities issued pursuant to share compensation arrangements), if the issuance exceeds 5% of our outstanding common shares;

•  take any action limiting the rights of ATS or any of its affiliates to transfer shares of our stock they own or that would limit the right of any transferee of ATS or any of its affiliates;

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•  take any action that could limit the rights of, or deny any benefit to, ATS or any of its affiliates as holders of our common shares either solely as a result of the amount of shares owned or in a manner not applicable to holders of common shares generally;

•  enter into a partnership or any arrangement for the sharing of profits, union of interests, joint venture or reciprocal concession with any person if the aggregate fair market value of the assets contributed and liabilities assumed by us (and our subsidiaries) in connection therewith either exceeds on formation or at any time in the future could reasonably be expected to exceed C$50 million; or

•  make any commitment or agreement to do any of the foregoing.

      See “Our Relationship with ATS — Agreements Between ATS and Us — Shareholder Agreement” for a description of the Shareholder Agreement.

      Furthermore, ATS generally has the right at any time to sell our common shares that it owns or to sell a controlling interest in us to a third party after the expiration of the 180-day lock-up period, without your approval and without providing for a purchase of your shares, subject to applicable securities laws. Accordingly, your shares may be less liquid and worth less than they would be if ATS did not have the ability to influence or control matters affecting us. See “Shares Eligible for Future Sales.” If ATS determines to sell our common shares that it owns and reduces its ownership interest to less than 50% of our outstanding common shares, ATS may be expected, through the voting rights attaching to the common shares it then owns, to continue to have significant influence over matters affecting us, and may, in connection with any matter requiring approval by two-thirds of the votes attaching to our common shares and represented by holders in attendance at a meeting of our shareholders in person or by proxy, have sufficient votes to preclude any such matter from proceeding.

We may have potential disputes and business conflicts of interest with ATS regarding our past and ongoing relationships, and because of ATS’ controlling ownership in us, the resolution of these conflicts may not be favorable to us.

      Conflicts of interest and disputes may arise between ATS and us in a number of areas relating to our past and ongoing relationships, including:

•  labor, tax, employee benefit, indemnification and other matters arising under the transitional and separation agreements;

•  intellectual property matters;

•  employee recruiting and retention;

•  business opportunities that may be attractive to both ATS and us;

•  equipment supply arrangements;

•  sales or distributions by ATS of all or any portion of its ownership interest in us, which could be to one of our competitors; and

•  business combinations involving us.

      We may not be able to resolve any potential conflicts, and, even if we do so, the resolution may be less favorable to us than if we were dealing with an unaffiliated party. The agreements we entered into with ATS may be amended upon agreement between the parties, subject to applicable laws. Because we are controlled by ATS, we may not have the leverage to negotiate any required amendments to these agreements on terms as favorable to us as those we would negotiate with a third party. Also, although we will agree in the Master Separation Agreement not to compete with ATS, ATS is not expected to agree not to compete with us, which may affect us adversely.

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We may have a business conflict of interest with ATS as a result of ATS’ portfolio investment in a company that may compete with us.

      Although ATS, in connection with this offering, is transferring to us its interest in the assets that are used exclusively in our business conducted by ATS and its subsidiaries, this transfer is subject to certain excluded assets, including the investment of ATS in securities of Canadian Solar Inc., or CSI, a solar module assembly company in which ATS has a less than 10% interest held as a portfolio investment. Because CSI may compete with us, ATS’ continuing portfolio investment in CSI may lead to conflicts of interest between ATS and us which may not be resolved in our favor or at all.

We are a foreign private issuer and will be a “controlled company” within the meaning of the rules of The Nasdaq Global Market, and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.

      We are a foreign private issuer. Additionally, after the completion of this offering, ATS will own more than           % of the total voting power of our common shares and we will be a “controlled company” within the meaning of the rules of The Nasdaq Global Market. As such a company, we intend to utilize certain exemptions under the rules of The Nasdaq Global Market that free us from the obligation to comply with certain corporate governance requirements, including the requirements:

•  that compensation of our chief executive officer and our other executive officers be determined, or be recommended to our board of directors for determining, either by a majority of the independent directors or a compensation committee comprised solely of independent directors; and

•  that our director nominees be selected, or recommended for the board’s selection, either by a majority of the independent directors or a nominations committee comprised solely of independent directors.

      As a result, you will not have the same protection afforded to shareholders of companies that are subject to all of the corporate governance requirements of The Nasdaq Global Market.

Under our corporate by-laws, you will not have the same rights with respect to shareholder meetings and voting that shareholders of certain U.S. corporations have.

      As a company incorporated under the Canada Business Corporations Act, our by-laws provide that a quorum for the transaction of business at any meeting of shareholders shall be persons not less than two in number and holding or representing by proxy not less than 33¹/3 percent of our issued and outstanding shares for the time being enjoying voting rights at such meeting. Additionally, our by-laws provide that any question at a meeting of shareholders shall be decided by a show of hands, unless a ballot thereon is required or demanded by the chair of the meeting. Although our minority quorum provisions satisfy the requirements applicable to Nasdaq-listed companies, some U.S. corporations have stricter quorum requirements than these. Additionally, shareholder votes of some U.S. corporations, such as corporations incorporated under the laws of the State of Delaware, must be in written form and cannot be conducted by a show of hands. Therefore, as a result of our by-laws, you will not have the benefit of the procedural protections relating to shareholder meetings and voting that shareholders of certain U.S. corporations enjoy.

Our transitional and separation agreements with ATS require us to assume the past, present and future liabilities related to our business and may be less favorable to us than if they had been negotiated with unaffiliated third parties.

      We will negotiate our separation agreements with ATS while we are a wholly-owned subsidiary of ATS and will enter into these agreements immediately prior to the completion of this offering. Had these agreements been negotiated with unaffiliated third parties, they might have been more favorable to us. Pursuant to these agreements, we will agree to indemnify ATS for, among other matters, all liabilities arising out of or related to our present or future business, operations or assets, and we have assumed these liabilities under the separation agreements. Such broad assumptions may include unknown liabilities that could be significant. The allocation of assets and liabilities between ATS and us may not reflect the allocation that

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would have been reached between two unaffiliated parties. See “Our Relationship with ATS — Agreements Between ATS and Us — Master Separation Agreement” for a description of these obligations.

ATS may enter into contracts relating to the design and manufacture of automated manufacturing and test systems with our competitors or potential competitors. Services provided by ATS under these contracts may assist those competitors in advancing their businesses.

      ATS’ principal business is the custom design, manufacture, installation, service and support of automated manufacturing and test systems. These systems are used principally by multinational companies in a broad range of industries. In the course of this business, ATS has in the past and expects in the future to enter into contracts with customers whose business is directly or indirectly competitive with ours. ATS is not expected to be subject to any non-compete provisions with respect to our business, so pursuant to services performed under these contracts, ATS may assist our competitors or potential competitors in advancing their own businesses, with the result that our competitive position may be materially adversely affected.

After this offering, we may experience increased costs resulting from a decrease in our purchasing power and we may have difficulty obtaining new customers due to our relatively small size after our separation from ATS.

      Prior to this offering, we were able to take advantage of ATS’ size and purchasing power in procuring goods, technology and services, including insurance, banking, employee benefit support and audit services. As a result of this offering and the transactions described in “Our Relationship with ATS,” we will be a smaller company, and we cannot assure you that we will have access to financial and other resources comparable to those available to us prior to the offering. As a stand-alone company, we may be unable to obtain goods, technology and services at prices or on terms as favorable as those available to us prior to our separation from ATS, which could increase our costs and reduce our profitability. In addition, as a smaller, separate, stand-alone company, we may encounter more customer concerns about our viability as a separate entity, which could harm our business, financial condition and results of operations. Our future success depends on our ability to maintain our current relationships with existing customers, and the difficult task of attracting new customers.

Our directors and executive officers who own ATS common shares or options to acquire ATS common shares or who hold positions with ATS may have potential conflicts of interest.

      Ownership of ATS common shares, options to acquire ATS common shares and other equity securities of ATS by certain of our directors and officers after this offering and the presence of ATS’ directors or officers on our board of directors could create, or appear to create, potential conflicts of interest when those directors and officers are faced with decisions that could have different implications for ATS than they do for us. See “Management” for a description of the extent of the relationship between our directors and officers and ATS.

Our prior and continuing relationship with ATS exposes us to risks attributable to the businesses of ATS.

      Although ATS will indemnify us from losses suffered by us arising out of certain circumstances or events, such indemnification may not be sufficient to protect us from all risks attributable to the businesses of ATS. Immediately following this offering, any claims made against us that are properly attributable to ATS in accordance with these arrangements would require us to exercise our rights under the separation agreements to obtain payment from ATS. If those liabilities are significant and we are ultimately held liable for them, we cannot assure you that we will be able to recover the full amount of our losses from ATS.

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Risks Relating to this Offering

Prior to this offering, no public market existed for our common shares. An active trading market may not develop for our common shares, and the price of our common shares may be subject to factors beyond our control. If our share price fluctuates after this offering, you could lose all or a significant part of your investment.

      Prior to this offering, no public market existed for our common shares. We have applied to list our common shares on The Nasdaq Global Market and the Toronto Stock Exchange. Any such listing will be subject to the approval of the relevant stock exchange, and any such approval would not be given unless all of the original listing requirements were met. An active and liquid market for the common shares may not develop following the completion of this offering, or, if developed, may not be maintained. If an active public market does not develop or is not maintained, you may have difficulty selling your common shares.

      The initial public offering price of our common shares was determined by negotiations between us, ATS and the underwriters for this offering and may not be indicative of the price at which the common shares will trade following the completion of this offering. We cannot assure you that the market price of our common shares will not materially decline below the initial public offering price.

The market price for our common shares may be volatile, and your investment could suffer a decline in value.

      The market price for our common shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including the following:

•  actual or anticipated fluctuations in our quarterly results of operations;

•  actual or anticipated changes in energy prices;

•  new products introduced by our competitors;

•  recommendations by securities research analysts;

•  changes in the economic performance or market valuations of other solar technology companies;

•  addition or departure of our executive officers and other key personnel;

•  release or expiration of lock-up or other transfer restrictions on our outstanding common shares;

•  sales or perceived sales of additional common shares;

•  significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors;

•  operating and share price performance of other companies that investors deem comparable to us; and

•  news reports relating to trends, concerns, patent litigation, technological or competitive developments, regulatory changes and other related issues in our industry or target markets.

      In addition, stock markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular listed companies. These market fluctuations may also have a material adverse effect on the market price of our common shares, regardless of our operating performance.

Investors purchasing common shares in this offering will incur substantial and immediate dilution.

      The initial public offering price of our common shares is substantially higher than the net tangible book value per outstanding common share. Purchasers of our common shares in this offering will incur immediate and substantial dilution of $           per common share in the net tangible book value of our common shares from an assumed initial public offering price of $           per common share. This means that if we were to be liquidated immediately after this offering, there might be no assets available for distribution to you after

29

satisfaction of all our obligations to creditors. For further description of the effects of dilution in the net tangible book value of our common shares, see “Dilution.”

Our share price may decline because of the ability of ATS and others to sell our common shares.

      Sales of substantial amounts of our common shares after this offering, or the possibility of those sales, could adversely affect the market price of our common shares and impede our ability to raise capital through the issuance of equity securities. See “Shares Eligible for Future Sale” for a discussion of possible future sales of our common shares.

      After this offering, ATS will own           % of our outstanding common shares (          % if the underwriters exercise their over-allotment option in full). ATS has no contractual obligation to retain any of our common shares, except that, as described under “Underwriting,” it has agreed not to sell any of our common shares without the underwriters’ consent until 180 days after the date of this prospectus. Subject to applicable securities laws, after the expiration of this 180-day lock-up period, or before with consent of the representatives of the underwriters to this offering, ATS may sell any and all of our common shares that it beneficially owns and may distribute any or all of these shares to its shareholders. The registration rights agreement we will enter into with ATS grants ATS the right to require us to register our common shares it holds in specified circumstances. See “Our Relationship with ATS — Agreements Between ATS and Us — Registration Rights Agreement.” In addition, after the expiration of the 180-day lock-up period, we could issue and sell additional common shares. Any sale by ATS or us of our common shares in the public market, or the perception that sales could occur (for example, as a result of a spin-off), could adversely affect prevailing market prices for our common shares.

Our board of directors may issue, without shareholder approval, additional common shares and preference shares that have rights and preferences in priority to the common shares, which issuance may delay or prevent a change of control.

      Our board of directors may issue an unlimited number of preference shares, issuable in one or more series, and an unlimited number of common shares, without any vote or action by our shareholders. If we were to issue any preference shares or any additional common shares, the percentage ownership of existing shareholders may be reduced and diluted. In addition, our board of directors may determine the price, rights, preferences, privileges and restrictions, including voting, dividend and conversion rights, of each series of our preference shares and determine to whom they shall be issued. Immediately after the completion of this offering, there will be no preference shares outstanding and we have no present plans to issue any preference shares. However, the rights of the holders of any series of preference shares that may be issued in the future may be senior to the rights of holders of our common shares, which could preclude holders of common shares from receiving dividends, proceeds of a liquidation or other benefits. The issuance of preference shares, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could make it more difficult for a third party to acquire control of our company, for example, by discouraging an unsolicited acquisition proposal or a proxy contest, the effect of which may be to deprive our shareholders of a control premium that might otherwise be realized in connection with an acquisition of our company.

Because we are a Canadian corporation and the majority of our directors and officers are resident in Canada, it may be difficult for investors in the United States to enforce against us certain civil liabilities and judgments based solely upon the federal securities laws of the United States.

      We are organized under the laws of Canada and our principal executive offices are located in Canada. A majority of the directors and officers and the experts named in this prospectus reside principally in Canada and all or a substantial portion of their assets and all or a substantial portion of our assets may be located outside the United States. Consequently, it may be difficult for shareholders to effect service of process within the United States upon us or our directors, officers or experts who are not residents of the United States. Furthermore, it may not be possible to enforce against us or such directors, officers or experts, in the United States, judgments obtained in U.S. courts, including judgments based upon the civil liability provisions

30

of the U.S. federal securities laws, because a substantial portion of our assets and the assets of these persons may be located outside the United States.

      In general, Canadian courts will not entertain an action for the enforcement of a foreign judgment that is the result of a penal, revenue, or other public law, nor will they enforce foreign judgments ordering the payment of taxes or penalties. Furthermore, Canadian courts also generally refuse to give effect to laws that empower foreign sovereignty, such as securities legislation, anti-trust or competition laws, trade regulations, expropriation laws and national security legislation. Therefore, investors should not assume that Canadian courts (1) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or the securities or “blue sky” laws of any state within the United States or (2) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or any such state securities or blue sky laws.

We do not anticipate paying dividends in the near future.

      Our current policy is to retain earnings. Any future determination to pay cash dividends will be at the discretion of our board of directors after taking into account such factors as our financial condition, results of operations, current and anticipated cash needs, the requirements of any future financing agreements and other factors that our board of directors may deem relevant, with a view to paying dividends whenever operational circumstances permit. Until we pay dividends our shareholders may not be able to receive a return on our common shares unless the price of our common shares appreciates and our shareholders sell them. We cannot assure you that you will receive a return on your investment when you do sell your shares or that you will not lose the entire amount of your investment.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

      This prospectus contains forward-looking statements that relate to our current expectations and views of future events. The forward-looking statements are contained principally in the sections titled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.”

      In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or the negative of these terms, or other similar expressions intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:

•  our expectations regarding our revenue, expenses and operations;

•  our anticipated cash needs and our estimates regarding our capital expenditures, capital requirements and our needs for additional financing;

•  our expectations with respect to our ability to secure, and the price and quality of, raw materials, including silicon;

•  our ability to achieve increased cell efficiencies;

•  our ability to use silicon sources other than polysilicon, such as refined metallurgical silicon, in our manufacturing process to achieve cell efficiency levels consistent with those obtained using polysilicon;

•  our plans for and timing of expanding our manufacturing capacity;

•  our plans for entering into key strategic partnership arrangements and joint ventures;

•  our plans for and timing of developing and commercializing new products, including products based on our Spheral Solar technology;

•  the acceptance by our customers of new technologies and products;

•  our ability to attract customers and develop and maintain customer and supplier relationships;

•  our expectations regarding the worldwide demand for electricity and the market for solar energy;

•  our expectations regarding governmental support for the deployment of solar energy and the adoption of solar technologies;

•  our intellectual property and our expectations with respect to advancements in our technologies;

•  our competitive position and our expectations regarding competition from other manufacturers of solar products and conventional energy suppliers; and

•  anticipated trends and challenges in our business and the markets in which we operate.

      Forward-looking statements involve a variety of known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

      The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

      You should read this prospectus and the documents to which we refer in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

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USE OF PROCEEDS

      We estimate that the net proceeds to be received by us from the sale of our common shares in this offering will be approximately $                     million, after deducting estimated underwriting commissions and estimated offering expenses payable by us, assuming an initial public offering price of $                     per share. We intend to use the net proceeds from this offering to finance the capital expenditures associated with the first and second phases of our manufacturing capacity expansion plan at Photowatt International estimated to be approximately $113 million, to repay $                     million expected to be owed to ATS under an intercompany demand loan (which had been incurred for investment in additional manufacturing capacity at Photowatt International and general corporate purposes) bearing interest at the Bank of Nova Scotia’s U.S. dollar base rate in Canada, and the balance for general corporate purposes, including $12 million in connection with the first phase of our prospective business partnership and cross-licensing arrangement for developing our Spheral Solar technology, the procurement of silicon supply contracts and investments that will enhance our manufacturing, silicon supply or research and development capabilities.

      In the event that any common shares are sold pursuant to the underwriters’ over-allotment option, they will be sold by ATS, and we will receive no proceeds from such sales. If the over-allotment option is exercised in full, ATS will receive net proceeds of approximately $                    .

      While we currently anticipate that we will use the net proceeds of this offering as described above, we may re-allocate the net proceeds from time to time depending upon the ultimate amount of net proceeds raised and upon changes in business conditions prevalent at the time. If we do not reach an agreement with Clean Venture 21 Corporation and Fujipream Corporation regarding a development program and decide not to proceed with the development of our Spheral Solar technology, we would apply the net proceeds of this offering and future capital that we would have used to develop our Spheral Solar technology to Photowatt International for capacity expansion and the other general corporate purposes described above. Pending their application in the manner described above, we intend to invest the net proceeds in short-term, interest-bearing securities such as government securities, commercial paper and other highly rated investment grade securities.

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DIVIDEND POLICY

      We have never declared or paid any dividends. We currently intend to retain any future earnings to finance the development and growth of our business and do not expect to pay any cash dividends in the foreseeable future. Any decision to pay cash dividends after this offering will be at the discretion of our board of directors after taking into account such factors as our financial condition, results of operations, current and anticipated cash needs, the requirements of any future financing agreements and other factors that our board of directors may deem relevant, with a view to paying dividends whenever operational circumstances permit.

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CAPITALIZATION

      The following table sets forth our capitalization as of September 30, 2006:

•  on an actual basis;

•  on a pro forma basis to give effect to the corporate reorganization to be completed upon the closing of this offering as described under “Our Relationship with ATS — General — ATS reorganization relating to our company”; and

•  on a pro forma, as adjusted basis to give further effect to our sale of                     common shares in this offering at an assumed initial public offering price of $           per share, after deducting underwriting commissions and the estimated offering expenses payable by us and giving effect to the use of the net proceeds from this offering as described under “Use of Proceeds.”

      You should read this table together with our combined financial statements and the notes thereto included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

			As of September 30, 2006
								Pro forma,
			Actual			Pro forma		as adjusted
			(U.S. dollars in thousands)
Due to parent(1)			$	20,112		$		$
Group equity:
Common shares(2)			$	—		$		$
Preferred shares(3)				—			—		—
Net investment				76,705
Cumulative translation adjustment				(3,558	)
	Total group equity			73,147
		Total capitalization	$	73,147		$		$

(1)	Represents the amount invested by ATS in our company during the first two quarters of fiscal 2007 for investment in additional manufacturing capacity at Photowatt International, further development and process engineering associated with our Spheral Solar technology, and other general corporate purposes. We intend to use a portion of the net proceeds from this offering to repay the amount then outstanding as of the date of closing.
(2)	Unlimited shares authorized, pro forma and pro forma, as adjusted; no shares outstanding, actual,                      shares outstanding, pro forma and                      shares outstanding, pro forma, as adjusted.
(3)	Unlimited preferred shares authorized, pro forma and pro forma, as adjusted; no shares outstanding, actual, pro forma and pro forma, as adjusted.

      The pro forma, as adjusted information above is illustrative only, and our capitalization following the completion of this offering is subject to adjustment based on the actual initial public offering price of our common shares and other terms of this offering to be determined at pricing. A $1.00 increase (decrease) in the assumed initial offering price per share would increase (decrease) each of cash and cash equivalents, total group equity and total capitalization by approximately $           million.

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DILUTION

      If you invest in our common shares, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per common share and the net tangible book value per common share upon the completion of this offering. The pro forma net tangible book value per common share below represents the book value of our total tangible assets (total assets less intangible assets) less total liabilities, divided by the total number of outstanding common shares, after giving effect to the corporate reorganization to be completed upon the closing of this offering as described under “Our Relationship with ATS — General — ATS reorganization relating to our company.” Our pro forma net tangible book value as of September 30, 2006 was approximately $           million, or $           per common share. After giving effect to the sale of common shares offered by us in this offering at an assumed initial public offering price of $           per common share, the midpoint of the estimated range of the initial public offering price set forth on the cover page of this prospectus, and after deducting underwriting commissions and estimated expenses of this offering payable by us, our pro forma, as adjusted net tangible book value as of September 30, 2006 would have equaled approximately $           million, or $           per common share. This represents an immediate increase in pro forma net tangible book value of $           per common share to our existing shareholders prior to this offering, and an immediate dilution in pro forma net tangible book value of $           per common share to new investors purchasing shares in this offering. The following table illustrates this dilution per common share.

Assumed initial public offering price	$
Pro forma net tangible book value per common share as of September 30, 2006
Increase in pro forma net tangible book value per common share attributable to this offering
Pro forma, as adjusted net tangible book value per common share after this offering
Dilution per common share to new investors	$

      The pro forma, as adjusted information discussed above is illustrative only. Our pro forma net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our common shares and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed initial public offering price of $           per common share would increase (decrease) total consideration paid by new investors, total consideration paid by all shareholders and the average price per common share paid by all shareholders by $           million, $           million and $          , respectively, and would increase (decrease) the pro forma, as adjusted net tangible book value per common share after giving effect to this offering by $           per common share and increase (decrease) dilution in pro forma, as adjusted net tangible book value per common share to new investors in this offering by $           per common share, in each case assuming no change in the number of common shares sold by us as set forth on the cover page of this prospectus and without deducting underwriting commissions and other estimated expenses of the offering payable by us. Furthermore, upon the completion of this offering, we expect that an additional                      common shares will be issuable, subject to vesting, under outstanding stock options, as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Stock Options Grant.” If all of these options were exercised immediately upon the completion of this offering, then based on the assumed initial public offering price in the table above, our pro forma net tangible book value per common share as of September 30, 2006 would be $                    , the increase in our pro forma net tangible book value per common share attributable to this offering would be $                    , our pro forma, as adjusted net tangible book value per common share after this offering would be $                    , and the dilution per common share to new investors would be $                    .

      The following table summarizes, on, a pro forma, as adjusted basis as of September 30, 2006, the differences between the existing shareholders and the new investors with respect to the number of common shares purchased from us, the total consideration paid and the average price per common share paid before deducting estimated underwriting commissions and estimated expenses of this offering payable by us, assuming an initial public offering price of $           per common share, the midpoint of the estimated range of the initial public offering price set forth on the cover page of this prospectus. The information in the

36

following table is illustrative only and the total consideration paid and the average price per common share is subject to adjustment based on the actual initial public offering price of our common shares.

	Common Shares				Total Consideration
									Average Price per
	Number	Percent			Amount	Percent			Share
Existing shareholders				%	$			%	$
New investors
Total			100	%	$		100	%	$

      If the underwriters exercise in full their over-allotment option to purchase common shares from ATS, the number of common shares held by new investors will increase to                     , or           % of the total common shares outstanding after this offering, our pro forma, as adjusted net tangible book value per common share would continue to be $          , and the dilution per common share would be $          .

      If all of the options outstanding upon the completion of this offering were exercised immediately upon the completion of this offering, the number of common shares purchased by existing shareholders and new investors would be                     , or           %, and                     , or           %, respectively; total consideration paid by existing shareholders and new investors would be $                    , or           %, and $                    , or           %, respectively; and the average price per common share paid by existing shareholders and new investors would be $                    , or           %, and $                    , or           %, respectively.

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SELECTED COMBINED FINANCIAL DATA

      The following selected combined statements of earnings (loss) data for the three years ended March 31, 2004, 2005 and 2006 and the selected combined balance sheet data as of March 31, 2005 and 2006 have been derived from our audited combined annual financial statements included elsewhere in this prospectus. The following selected combined statements of earnings (loss) data for the six months ended September 30, 2005 and 2006 and the selected combined balance sheet data as of September 30, 2006 have been derived from our unaudited combined interim financial statements included elsewhere in this prospectus. The combined balance sheet data as of March 31, 2004 have been derived from our unaudited combined financial statements. Our combined financial statements have been prepared in accordance with Canadian GAAP, which conform in all material respects with U.S. GAAP as applied to our combined financial statements, except as presented in note 20 to our combined annual financial statements and note 16 to our unaudited combined interim financial statements. Amounts are stated in U.S. dollars. The data below does not give effect to the corporate reorganization to be completed upon the closing of this offering as described under “Our Relationship with ATS — General — ATS reorganization relating to our company.” You should read the following selected combined financial data in conjunction with our combined financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Our combined financial statements present our historical financial position, results of operations, changes in net investment and cash flows on a “carve-out” basis from ATS as if we had operated as a stand-alone entity. However, the combined financial statements may not necessarily be indicative of the results that would have been attained if we had operated as a stand-alone entity, or our results in any future periods.

      We have not included selected combined financial data as of or for the fiscal years ended March 31, 2002 and 2003 because the selected combined financial data could not be produced without unreasonable effort and expense. We do not believe that the selected combined financial data for those earlier two years would be indicative of our future operating results or that the additional information would be useful for your review of our historical operating results.

										Six Months Ended
		Fiscal Year Ended March 31,								September 30,
		2004			2005		2006			2005		2006
		(U.S. dollars in thousands, except share and per share data)
Combined Statements of Earnings (Loss) Data:
Revenue		$	65,855		$	113,019	$	120,921		$	56,878	$	65,993
Operating costs and expenses:
	Cost of revenue		52,859			89,930		88,998			42,219		46,841
	Research and development(1)		1,236			678		9,252			324		5,668
	Amortization		4,466			5,420		9,680			3,057		4,521
	Selling and administrative		4,708			5,855		9,088			3,325		7,488
	Asset impairment charge(2)		—			—		94,290			—		—
	Shared corporate costs(3)		415			589		717			248		573
			63,684			102,472		212,025			49,173		65,091
Earnings (loss) from operations			2,171			10,547		(91,104	)		7,705		902
Interest (income) expense			(64	)		3		1,666			502		1,898
Provision for income taxes			1,130			3,761		5,610			2,752		3,352
Net earnings (loss)		$	1,105		$	6,783	$	(98,380	)	$	4,451	$	(4,348	)
Pro forma net earnings (loss) per common share(4)
	Basic	$			$		$			$		$
	Diluted
Common shares used to compute pro forma net earnings (loss) per common share(4)
	Basic
	Diluted

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									Six Months Ended
		Fiscal Year Ended March 31,							September 30,
		2004		2005		2006			2005		2006
		(U.S. dollars in thousands)
Selected Segment Data:
Photowatt International:
	Revenue	$	65,855	$	113,019	$	120,921		$	56,878	$	65,993
	Research and development(1)		1,236		678		619			324		697
	Amortization		4,466		5,420		6,252			3,057		4,151
	Earnings from operations		2,586		10,948		19,780			7,872		9,857
	Capital expenditures		5,565		10,625		16,080			5,505		11,313
Spheral Solar:
	Revenue(7)		—		—		—			—		—
	Research and development(1)		—		—		8,633			—		4,971
	Amortization		—		—		3,428			—		370
	Earnings (loss) from operations(2)		—		188		(109,841	)		81		(6,421	)
	Capital expenditures		34,630		16,124		10,351			6,814		—
Corporate costs(3)			415		589		1,043			248		1,468

	As of March 31,
							As of
	2004		2005		2006		September 30, 2006
	(U.S. dollars in thousands)
Selected Combined Balance Sheet Data:
Cash and cash equivalents	$	3,203	$	891	$	1,958	$	1,448
Total assets		129,613		164,567		103,257		121,812
Working capital(5)		29,295		29,098		29,188		33,848
Due to parent(6)		—		—		—		20,112
Net investment		108,352		138,261		75,310		76,705
Group equity		111,193		141,901		75,768		73,147

Selected U.S. GAAP Data:

      The following table sets forth certain information prepared in accordance with U.S. GAAP. You should read this information in conjunction with note 20 to our combined annual financial statements and note 16 to our unaudited combined interim financial statements included elsewhere in this prospectus.

											Six Months Ended
		Fiscal Year Ended March 31,									September 30,
		2004			2005			2006			2005			2006
		(U.S. dollars in thousands)
Revenue		$	65,855		$	113,019		$	120,921		$	56,878		$	65,993
Research and development(1)			7,416			18,119			20,380			11,877			5,526
Amortization			4,544			5,502			9,680			3,097			4,521
Asset impairment charge			—			—			(52,609	)		—			—
Earnings (loss) from operations			(4,087	)		(6,976	)		(59,668	)		(3,888	)		1,044
Net loss			(5,153	)		(10,740	)		(66,944	)		(7,142	)		(4,206	)
Total assets (at period end)			117,323			132,847			103,112			133,435			121,812
Net investment (at period end)			97,122			109,508			77,957			120,423			79,494
Selected U.S. GAAP Segment Data:
	Photowatt International earnings from operations		2,623			10,861			19,534			7,841			9,999
	Spheral Solar loss from operations		(6,295	)		(17,248	)		(78,485	)		(11,481	)		(6,421	)

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(1)	Net of government grants.
(2)	We incurred an after-tax, non-cash asset impairment charge in fiscal 2006 of $94.3 million (pre-tax $94.3 million) against our Spheral Solar technology deferred development costs and other long-lived assets in the fourth quarter of fiscal 2006 due to the current uncertainty in resolving technological challenges and resulting delays of realizing cash flows from the investment in our Spheral Solar technology.
(3)	Corporate costs include Photowatt corporate costs which were incurred directly by us and include legal, compliance, personnel, finance and other corporate costs not directly associated with a segment. Corporate costs also include shared corporate costs, which represent an estimate of costs attributable to our business for services that were provided by ATS or one of its affiliates in the past.
(4)	Based on the number of common shares to be outstanding upon completion of the corporate reorganization and the closing of this offering as described under “Our Relationship with ATS — General — ATS reorganization relating to our company.”
(5)	Working capital represents total current assets minus total current liabilities, excluding due to parent.
(6)	Due to parent consists of debt under our intercompany loan from ATS, which was considered nil as at March 31, 2006 and $20.1 million as at September 30, 2006 for the purposes of the combined financial statements. At the time of the closing of this offering we expect to owe approximately $      million to ATS pursuant to an intercompany demand loan for investment in additional manufacturing capacity at Photowatt International, further development and process engineering associated with our Spheral Solar technology, and other general corporate purposes.
(7)	Represents revenue from third parties. Spheral Solar had inter-segment revenue with Photowatt International of $2.3 million for the six months ended September 30, 2006 from sales of silicon to Photowatt International that is eliminated in the combined financial statements.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled “Selected Combined Financial Data” and our combined financial statements and the notes thereto included elsewhere in this prospectus. Our combined financial statements have been prepared in accordance with Canadian GAAP, which conform in all material respects with U.S. GAAP as applied to our combined financial statements, except as presented in note 20 to our combined annual financial statements and note 16 to our unaudited combined interim financial statements included in this prospectus. Amounts are stated in United States dollars unless otherwise indicated. Our fiscal year-end is March 31. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

Overview

Our business

      We design, manufacture and sell photovoltaic products, commonly referred to as solar cells and modules. Solar cells and modules provide clean, renewable energy by converting sunlight into electricity through a process known as the photovoltaic effect. We operate through two segments, Photowatt International, our core business that is based on a wafer technology, and Spheral Solar, a development project that is based on a spheral technology using thousands of tiny silicon spheres instead of silicon wafers.

      Photowatt International designs, manufactures and sells solar modules and installation kits, and provides solar power system design and other value-added services, principally in Western Europe. Photowatt International also manufactures wafers and solar cells, primarily for use in manufacturing its modules and for sale to third parties on an opportunistic basis. Most of Photowatt International’s products are manufactured in our Photowatt France facility outside of Lyon, France. Photowatt USA, our facility in Albuquerque, New Mexico, performs certain module assembly operations for Photowatt International. Solar modules manufactured by Photowatt International are used by businesses, institutions and homeowners to generate electric power. Photowatt International, through its French and U.S. operations, sells its products under the Photowatt and Matrix brands to a network of independent solar power systems distributors and installers. Photowatt International has been developing and selling photovoltaic products since 1979. Photowatt International accounted for all of our combined revenue for our fiscal 2006 and for the six months ended September 30, 2006.

Basis of presentation

      ATS currently owns, either directly or indirectly through its subsidiaries, substantially all of our assets and operations. Upon the completion of this offering, ATS will establish our business as a separate publicly-traded company. To accomplish the separation of our business from the other businesses of ATS, ATS will undertake a corporate reorganization upon the closing of this offering under which ATS will transfer our assets and operations to us. ATS shareholders approved this reorganization at a meeting of ATS shareholders held on October 27, 2006. For further information on this reorganization, see “Our Relationship with ATS — General — ATS reorganization relating to our company.” Immediately following this offering, ATS will own of record and beneficially approximately           % of our common shares. If the underwriters exercise their over-allotment option in full, immediately following this offering ATS will own of record and beneficially approximately           % of our common shares. As long as ATS continues to control more than 50% of the voting power of our common shares, ATS will be able to direct the election of all of the members of our board and exercise a controlling influence over our business and affairs. In addition, provisions of our Shareholder Agreement with ATS provide ATS with certain rights for so long as ATS owns a significant percentage of our common shares. For more information, see “Risk Factors — As long as ATS controls us, you will have no ability to influence the outcome of matters requiring shareholder approval.”

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      Our combined financial statements present our historical financial position, results of operations, changes in net investment and cash flows on a “carve-out” basis from ATS as if we had operated as a stand-alone entity. However, the combined financial statements may not necessarily be indicative of the results that would have been attained if we had operated as a stand-alone entity, or our results for any future periods.

      Our separation from ATS will affect our results of operations and financial condition in a number of ways. In particular, in the near term, we must assume certain support functions and replicate certain systems, infrastructure and support functions previously performed for or provided to us by ATS or one of its affiliates. In this regard, we have hired a number of individuals to perform these functions, and we believe we have made substantial progress in replicating the necessary systems, infrastructure and support functions utilized in our business. However, it will take significant additional management time and effort to ensure that we have successfully replicated these functions. We also must negotiate new or revised agreements with various third parties as a separate, stand-alone entity. In addition, we benefited from various economies of scale as part of ATS, including shared administrative functions. We expect that our costs in some cases will increase, including the costs of being a stand-alone publicly-traded entity and meeting the required corporate governance and reporting obligations.

Principal factors affecting our results of operations

      Our results of operations are affected by a number of factors, principally:

•  demand for our solar products, including the effects of government incentives for photovoltaic generation;

•  our production capacity and ability to produce and ship our products;

•  the availability of silicon;

•  technological developments;

•  the impact of competition on the pricing of our products; and

•  exchange rate fluctuations.

Demand for our solar products

      Growth in our business is, in part, a function of demand for solar products. Although the solar market remains at a relatively early stage of development, and the extent to which solar products will be widely adopted is uncertain, demand for solar products has grown significantly over the past decade. According to Solarbuzz, the solar market, as measured by annual photovoltaic system installations, increased from 345 MW in 2001 to 1,460 MW in 2005, representing a compound annual growth rate of 43%. Solarbuzz projects that solar industry revenue will reach $18.6 billion by 2010, representing a compound annual growth rate of 14% from $9.8 billion in 2005.

      Demand for solar products is driven, in part, by government incentives that make the economic cost of solar power competitive with traditional forms of electricity. The unsubsidized cost of using solar energy is currently more expensive, on a per watt basis, than the retail cost of conventional hydroelectric, nuclear or fossil fuel-generated energy sources in most industrialized regions of the world. To the extent that government incentives increase, decrease or otherwise change, demand for our solar products and our results of operations may be materially affected.

Our production capacity and ability to produce and ship our products

      Demand for our solar products is currently greater than our capacity to produce them. As a result, we need to increase our production capacity to continue to grow. We plan to increase our annual solar module production capacity to approximately 400 MW by the end of calendar year 2011. If we are able, through our proposed business partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation, to successfully complete the development and process engineering necessary to

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commercialize spheral technology, we expect that 140 MW of this aggregate manufacturing capacity will relate to spheral technology.

      We intend to implement our Photowatt International capacity expansion plan in three phases. In May 2006, we announced the first phase of our capacity expansion plan, which includes the expansion of Photowatt International’s annual ingot, wafer, cell and module manufacturing capacity from approximately 31 MW, 32 MW, 40 MW and 54 MW, respectively, to approximately 60 MW of integrated manufacturing capacity by March 2007. The second phase of our capacity expansion plan provides for construction of a second facility near Lyon, France on land immediately adjacent to our existing facility and for construction of a module assembly facility in Eastern Europe or another low-cost region that will increase our annual integrated manufacturing capacity to approximately 100 MW. We have begun the preliminary design of this phase of our expansion and plan to complete this phase in calendar 2008. The third phase of our expansion plan provides for an increase in our annual integrated manufacturing capacity in calendar years 2008 and 2009 by 60 MW as well as an additional 100 MW of annual integrated manufacturing capacity in calendar years 2010 and 2011 either through the expansion of existing facilities or construction of new facilities.

      If we are successful in completing the development required to commercialize our Spheral Solar technology through our proposed business partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation, we plan to invest in phase one of our development and commercialization program. Phase one will include increasing optical fused powder and spheral production capacity to support Clean Venture 21 Corporation’s cell production facilities and investing in module development for building integrated product applications. If we are successful with phase one, in our second phase, we plan to expand our optical fused powder production, spheral production and module capacity in phased increments to match the planned delivery of cells from Clean Venture 21 Corporation and Fujipream Corporation. The third phase of our Spheral Solar technology development plan will be the construction of our own cell manufacturing capacity, using Clean Venture 21 Corporation’s equipment and processes, commencing in 2009 to supplement the delivery of cells from Fujipream Corporation and/or Clean Venture 21 Corporation, to enable the manufacture of approximately 40 MW of cells in 2010 and 65 MW of cells in 2011 and to expand our total module capacity to 140 MW by the end of calendar year 2011. The second and third phases of our sphere and cell production program may be accomplished through a joint venture or similar arrangement with Clean Venture 21 Corporation.

      We plan to use proceeds from this offering to finance the first and second phases of our Photowatt International capacity expansion plan and the first phase of our prospective business partnership and cross-licensing arrangement for developing our Spheral Solar technology. We will need to raise additional capital to fund the third phase of our Photowatt International capacity expansion plan and the expansion of our Spheral Solar technology manufacturing capacity, assuming we successfully complete our development and process engineering. If we do not reach an agreement with Clean Venture 21 Corporation and Fujipream Corporation regarding a development program and decide not to proceed with the development of our Spheral Solar technology, we would apply the net proceeds of this offering and future capital we would have used to develop the Spheral Solar technology to Photowatt International for 140 MW of additional capacity expansion, the procurement of silicon supply contracts and investments that will enhance our manufacturing, silicon supply or research and development capabilities.

Availability of silicon

      Polysilicon is a specially processed form of silicon and is the primary raw material used to make crystalline solar cells. The increase in demand for solar cells has led to an industry-wide silicon shortage and to significant price increases in polysilicon that have increased our manufacturing costs in the past and are expected to impact our manufacturing costs and net income in the future. Polysilicon prices more than doubled during fiscal 2006, and we believe that supply shortages for polysilicon will continue into the first half of fiscal 2008 and possibly for some time thereafter. Photowatt France was able to partially offset the impact in fiscal 2006 of higher polysilicon costs by increasing its production efficiencies and producing thinner wafers. In general, thinner wafers result in lower production costs because more wafers can be produced from each polysilicon ingot. In addition, Photowatt France has also developed the ability to use a

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wide variety of silicon feedstock including powders and fines using optical fused powder and refined metallurgical silicon which broadens our sources of supply. However, to the extent that we employ refined metallurgical silicon in the production of our wafers without blending substantial amounts of polysilicon, we expect to experience lower operating margins.

      Access to a secure supply of all the relevant forms of silicon continues to be a critical factor that could limit the production of wafers, spheres, cells and modules and the growth of solar power business. Additionally, the success of our prospective business partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation to develop and commercialize spheral technology will depend in part on obtaining adequate supplies of silicon fines and powder, which are only available from a limited number of suppliers and which we have not yet secured. We believe that we have secured or identified sources of silicon for Photowatt International’s planned capacity to the end of fiscal 2008. The majority of our fiscal 2008 silicon requirements are expected to be filled by inventory on hand and by firm supply contracts. We expect that the balance of our fiscal 2008 requirements will be satisfied by outstanding purchase orders with existing suppliers and by other identified sources. We are continuing to devote resources to securing additional supply to enable our operations to grow without interruption. We plan to:

•  enter into long term supply agreements for refined metallurgical silicon and polysilicon, including polysilicon ingots and wafers;

•  secure a supply of polysilicon powder and fines through agreements with companies that produce these by-products, and use our optical fused powder technology to process the powder and fines into polysilicon feedstock for use in our Photowatt International operations and for the manufacturing of spheres; we also intend to explore the possibility of licensing this technology to third-parties in exchange for long-term polysilicon supply agreements; and

•  purchase silicon, including polysilicon ingots and wafers, on the spot market, to the extent available and subject to appropriate pricing.

Technological developments

      The solar industry is rapidly evolving and is characterized by continually improving technology providing more efficient and higher power output and improved aesthetics at competitive prices. These changes can positively impact demand for solar products generally, but also require us to continue to invest significant financial resources in research and development to remain competitive. Our advanced process technologies have significantly improved our productivity and increased the efficiency of our raw material usage, both of which have led to the lowering of the cost per watt of our products and improved our operating margins.

      Photowatt International. Photowatt International is engaged in the production and sale of solar modules and installation kits and provides solar power system design services. We have a long successful history of technological development at Photowatt International. We believe our strong capabilities in research and development and our vertically integrated production process are the key factors driving our ability to further develop our manufacturing process technology. Our integrated production process allows us to test different forms of silicon feedstock and make refinements to the manufacturing process and immediately determine and study the impact on solar cell and solar module efficiency. We are then able to implement changes to optimize and enhance the manufacturing process to reduce costs and improve cell quality. Specifically, the primary areas of technological improvement in Photowatt International have focused on:

•  expanding the types of silicon feedstock that we can use to manufacture solar cells;

•  developing capabilities that will allow us to reduce silicon usage per watt, such as enhancing our wire saw technology to reduce wafer thickness;

•  improving production yields; and

•  increasing cell efficiency levels.

      During the past several years we have achieved significant improvements in each of these areas. In addition, we expect to be able to mitigate in part the supply shortage and higher cost of polysilicon by

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producing commercially saleable cells from a wide variety of silicon feedstock including refined metallurgical silicon and polysilicon powder and fines. Our technological capabilities are also demonstrated by our reduction in silicon usage per watt. Silicon usage per watt decreased by 30% from 2004 to 2006 and our wafer thickness decreased during the same period from approximately 320 to 340 microns to approximately 180 to 220 microns. Photowatt International’s research and development and process improvements continue to achieve year-over-year improvements in production yields and cell efficiency levels.

      Spheral Solar. Spheral Solar is developing a technology for a light weight, flexible crystalline solar module designed to compete with both conventional crystalline and thin film technologies. Our Spheral Solar technology incorporates thousands of tiny silicon spheres, bonded between thin, flexible aluminum foil substrates to form solar cells. We believe that our Spheral Solar technology, if we are able to successfully develop it, would have advantages over conventional crystalline solar cells, including better aesthetics, greater durability, less use of silicon, lighter weight, multiple available colors, more applications and physical flexibility. Spheral Solar is committing significant resources, including the services of a third-party technical consultant, to development and process engineering in an effort to commercially manufacture products using our Spheral Solar technology at commercially acceptable manufacturing costs and yields. Our target efficiency for our Spheral Solar technology at commercialization is approximately 10%, compared with our average solar cell efficiency of 15% for conventional solar cells. The technological and commercialization challenges associated with the development of spheral technology are substantial, and we may discontinue development of this technology at any time. In December 2006, we signed a non-binding letter of intent with Clean Venture 21 Corporation and Fujipream Corporation outlining the proposed terms of a business partnership and cross-licensing arrangement to assist us in further developing and commercializing our Spheral Solar technology. See “Business — Key Partnerships — Clean Venture 21 Corporation and Fujipream Corporation.”

      Concurrent with this development and process engineering activity, we intend to continue to use proprietary production processes at Spheral Solar to convert certain forms of silicon into silicon feedstock for Photowatt International to use in its production, and to seek licensing opportunities for this technology.

Impact of competition on the pricing of our products

      The market for solar power products is intensely competitive and continually evolving. Although we experienced increased selling prices in fiscal 2005 and 2006 primarily due to strong end-market demand during those years and increases in silicon feedstock costs, we experienced price reductions for our solar products in fiscal 2004. When our competitors have historically lowered their product prices or increased them less than we otherwise would, competitive pressures have generally caused us to do the same. We expect that our results of operations will remain subject to market-driven pricing pressures of this nature, which are largely outside of our control.

Foreign exchange fluctuations

      For a discussion of the effects of foreign exchange fluctuations on our business, see “— Quantitative and Qualitative Disclosure About Market Risk — Foreign exchange risk.”

Revenue

      In fiscal 2004, 2005 and 2006, as well as the six months ended September 30, 2006, all of our revenue from third parties was generated by our Photowatt International business segment, which includes Photowatt France and Photowatt USA. Our revenue is generated primarily from sales to solar product distributors and installers. In each of fiscal 2004, 2005 and 2006, our revenue was almost entirely from the sale of solar modules and cells. In fiscal 2006, we began to sell additional components of solar power systems in the form of installation kits and inverters and to provide certain design and project management services and contracting for solar module installation services.

      Our revenue is affected by our unit volumes shipped, average selling prices per watt and product mix. We have experienced year-over-year unit volume increases in our solar power products for the past three

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years, as we have continued to increase our production. We experienced price reductions for our solar products in fiscal 2004 and increased selling prices in fiscal 2005 and 2006. Average selling prices were approximately 15% higher in fiscal 2006 as compared to those in fiscal 2004, primarily due to strong end-market demand during those years and increases in silicon feedstock costs.

      Sales to our customers are typically made through non-exclusive, short-term purchase order arrangements, and our customers generally change from year-to-year. In fiscal 2004, two customers accounted for 41% of our revenue. In fiscal 2005, two customers accounted for 55% of our revenue, and in fiscal 2006, three customers accounted for 46% of our revenue. We cannot be certain that our existing customers will generate significant revenue for us in the future or that these customer relationships will continue. For more information, see “Risk Factors — We expect that our significant customer concentration will continue to expose us to potentially significant fluctuations or declines in our revenue” and “Risk Factors — Because we operate on a purchase order basis with our largest customers, our financial results, including gross margins, may suffer if purchase orders were changed or cancelled.”

Expenses

Cost of revenue

      Our cost of revenue primarily consists of:

•  silicon feedstock of various types, including chunks, granules, powder and fines;

•  purchases of silicon ingots, wafers and solar cells from third parties as required to balance production;

•  various raw materials, including tempered glass, plastic films, tedlar, anti-reflective and aluminum coatings, metal frames, connecting systems, crucibles and aluminum foil;

•  direct labor, including salaries and benefits of personnel directly involved in manufacturing activities; and

•  factory overhead, including facility leasing, utility, maintenance of production equipment and other support expenses associated with the manufacturing of our solar products.

      We expect our total cost of revenue to increase as we bring on additional capacity and increase our production volumes. From fiscal 2004 to 2006, as a percentage of revenue on a per-watt basis, the cost of silicon feedstock has increased but remained at less than 20% of revenue, despite the increasing silicon feedstock prices, primarily as a result of increased economies of scale and improved internal operating efficiencies and increased market prices for our products. Increases in the price of silicon feedstock, wafers and cells charged by our suppliers will also contribute to higher cost of revenue going forward, and we will probably not be able to offset higher silicon costs with increased efficiency gains.

      Prior to the third quarter of fiscal 2006, the expenditures designed to advance the commercialization of our Spheral Solar technology were capitalized as deferred development, as they met the criteria for deferred development under Canadian GAAP. Beginning in the third quarter of fiscal 2006, these expenditures were no longer capitalized and began to be expensed, with these costs being charged to our combined statements of earnings (loss) (including cost of revenue, amortization, and research and development expenses), because the maximum time period during which we had determined to defer them had elapsed.

Research and development

      Research and development expenses are presented net of government grants and primarily relate to raw materials used in our research and development activities, research and development personnel costs, and prototype and equipment costs related to the design, development, testing and enhancement of our products and process technologies. Research costs are expensed as incurred. Development costs that meet the Canadian GAAP criteria for deferral are deferred and amortized over the period over which we expect to benefit from the resulting product or process.

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      Prior to the third quarter of fiscal 2006, we deferred the majority of the costs associated with our Spheral Solar technology as development costs. Beginning in the third quarter of fiscal 2006, we began to expense these costs. As at March 31, 2006, we determined that the carrying value of the Spheral Solar technology development costs was in excess of their associated estimated undiscounted future cash flows, and the associated asset was written down. For more information, see “— Results of Operations — Results of operations for fiscal year 2006 compared with fiscal year 2005 — Earnings (loss) from operations.”

Amortization

      Our amortization expense primarily relates to amortization of our manufacturing equipment, facilities and intangible assets for both Photowatt International and Spheral Solar. With the capacity that we have added over the past several years and that we plan to add, we expect the amortization expense recorded by Photowatt International to continue to increase. At the end of fiscal 2006, a significant amount of Spheral Solar’s production equipment was written down to a nominal value, and as a result, amortization costs related to Spheral Solar are expected to decrease from fiscal 2006. Further capital investments may be required, which would increase amortization. For more information, see “— Results of Operations — Results of operations for fiscal year 2006 compared with fiscal year 2005 — Earnings (loss) from operations.”

Selling and administrative

      Selling and administrative expenses consist primarily of salaries, benefits, performance incentive costs, and stock-based compensation costs related to sales, marketing, administrative, finance and human resources personnel in Canada, France and the United States; travel and living expenses; marketing, trade shows and advertising; capital taxes; allowance for doubtful accounts; fees and expenses of legal, accounting, tax and other professional services; and foreign exchange gains and losses. We expect that our selling and administrative costs will increase as we increase our sales efforts, hire additional personnel, launch new business initiatives and programs, improve our information technology infrastructure and incur other costs related to the anticipated growth of our business. Furthermore, we also expect significant increases in selling and administrative costs as a result of becoming a listed public company in the United States and Canada upon completion of this offering.

Asset impairment charge

      We regularly review the net recoverable amount of our deferred development costs and long lived assets. The asset impairment charge in fiscal 2006 relates to write-downs of these costs and assets as required as a result of these reviews. See “— Results of Operations — Results of operations for fiscal year 2006 compared with fiscal year 2005 — Earnings (loss) from operations.”

Corporate costs

      Corporate costs include “Photowatt corporate costs” which were incurred directly by us and include legal, compliance, personnel, finance and other corporate costs not directly associated with a segment. Corporate costs also include shared corporate costs which represent an estimate of costs attributable to our business for services that were provided by ATS or one of its affiliates in the past. These expenses primarily relate to an allocation of ATS corporate personnel costs to provide functions including tax, legal, compliance, finance and operational consulting. The costs are included in our combined financial statements and are based on certain assumptions that are intended to allocate estimated expenses directly attributable to us. The allocations and expenses do not necessarily represent the expenses that we would have incurred if we had operated on a stand-alone basis. Included in shared corporate costs is an allocation of amortization related to the building that Spheral Solar occupies that immediately prior to completion of this offering will be leased by us from ATS. See “Our Relationship with ATS — Agreements Between ATS and Us — Lease Agreement.”

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Interest (income) expense

      Interest expense in the periods presented primarily arose from interest payable on intercompany loans from ATS. At the time of the closing of this offering, we expect to owe approximately $        million to ATS pursuant to an intercompany demand loan to be provided by ATS that we expect to repay after the closing of this offering through the application of the net proceeds as described under “Use of Proceeds.” We expect we may incur interest expense in future periods in relation to our current credit facilities and debt we may incur to fund our manufacturing capacity expansion plans.

Provision for income taxes

      As required by Canadian GAAP for carve-out financial statements, income taxes have been recorded at statutory rates based on income taxes as reported in the combined statements of earnings (loss) as though we were a separate tax paying entity. Income taxes payable or recoverable in respect of the components of our combined operations that were not historically separate tax paying legal entities have been included in the account recording ATS’ net investment. Future income taxes have been presented in the combined balance sheets for each temporary difference between the financial reporting and tax basis of the assets and liabilities. In addition, future income tax assets have been recognized to the extent that they would have been realized as though we were a separate tax paying entity. Future income tax assets are recognized only to the extent that management determines that it is more likely than not that the future income tax assets will be realized in the foreseeable future. No future income tax assets have been recorded for the losses related to Spheral Solar, Photowatt USA and Spheral Solar Power, Inc.

      Our provision for income taxes for the fiscal years 2004, 2005 and 2006 and the six months ended September 30, 2005 and 2006 was $1.1 million, $3.8 million, $5.6 million, $2.8 million and $3.4 million, respectively. This provision for income taxes primarily reflects the income taxes payable on the net earnings of Photowatt France, as our Canadian and U.S. operations have tax losses for which future income tax assets have not been recognized.

Critical accounting policies

      The preparation of our combined financial statements requires us to make estimates and judgments that affect (i) our reported amounts of assets and liabilities, (ii) revenue and expenses in the respective fiscal periods, and (iii) the disclosure of contingent liabilities and assets at the date of the combined financial statements. We base our estimates on historical experience, knowledge and assessment of current business and other conditions and our expectations regarding the future, based on available information and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates as a result of new information, future events or otherwise.

      We believe that the following accounting policies involve the most significant judgments and estimates used in the preparation of our combined financial statements:

      Revenue recognition: Revenue is recognized when earned, which is generally at the time of shipment and when title is transferred to the customer, provided that collection is reasonably assured, the sales price is fixed and determinable, and the rights and risks of ownership have passed to the customer. As of September 30, 2006, we did not have any significant post-shipment obligations, such as installation, training or customer acceptance clauses, with any of our customers that we believe would have an impact on historical revenue recognition.

      Revenue on certain long-term design, project management and/or installation services contracts is recognized using the percentage of completion method. The degree of completion is determined based on costs incurred as a percentage of total costs anticipated for each contract. Incentive awards, claims or penalty provisions are recognized when such amounts are likely to accrue and can reasonably be estimated. Complete provision is made for losses on contracts in progress when such losses first become known. Revisions in cost and profit estimates, which can be significant, are reflected in the accounting period in which the relevant facts become known.

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      Warranty reserves: It is customary in our business and industry to warrant or guarantee the performance of traditional solar panels at certain levels of conversion efficiency for extended periods, often as long as 25 years. We provide for the estimated costs of product warranties for the products of Photowatt International at the time revenue is recognized. Our estimates of product warranty costs are based upon our historical experience and expectations of future return rates and unit warranty repair costs. To the extent our actual product failure rates and associated costs differ from our estimates, revisions to the estimated warranty liability would be required. Based on our experience, warranty costs have been de minimis, and as a result we do not have any warranty reserves. If in the future our experience changes, we will take a warranty reserve to the extent appropriate.

      Allowance for doubtful accounts: We maintain an allowance for doubtful accounts primarily based on our assessment of historical bad debts, factors surrounding the credit risk of specific customers and current economic trends. If there is a deterioration of a major customer’s creditworthiness or actual defaults are higher than our historical experience, we may be required to increase our allowance for doubtful accounts.

      Foreign currency translation: The functional currencies of Photowatt France, Spheral Solar and Photowatt USA are the euro, Canadian dollar and U.S. dollar, respectively. For the purposes of our combined financial statements, the functional currency is the Canadian dollar and the reporting currency is the U.S. dollar. As our subsidiaries are self-sustaining, the accounts of our foreign subsidiaries are translated into U.S. dollars using the current rate method under which assets and liabilities are translated at the exchange rate prevailing at the year-end and revenues and expenses at average rates during the year. Gains or losses on translation are not included in the combined statements of earnings (loss) but are deferred and included in cumulative translation adjustment, a separate component of group equity.

      Other monetary assets and liabilities, including long-term monetary assets and liabilities, which are denominated in foreign currencies, are translated into the respective functional currency of each entity at period-end exchange rates, and transactions included in earnings are translated at rates prevailing during the period. Exchange gains and losses resulting from the translation of monetary assets and liabilities are included in the combined statements of earnings (loss).

      Inventories: Raw materials are valued at the lower of cost and replacement cost. Work-in-process and finished goods inventory are stated at the lower of cost and net realizable value. Cost includes the cost of materials plus direct labor applied to the product and applicable share of manufacturing overhead. Cost is determined on a first-in, first-out basis.

      Property, plant and equipment: Property, plant and equipment are recorded at cost. Amortization is computed using the following methods and annual rates:

Asset	Basis		Rate
Buildings		Straight-line		15 years
Production equipment		Straight-line		5 to 10  years
Other equipment and furniture		Declining-balance		20%
		Straight-line		5 to 7 years

      Goodwill: Goodwill represents the excess of the cost of an acquired enterprise over the net of the fair values assigned to the assets acquired and liabilities assumed, less any subsequent impairment write-down. Goodwill is subject to an impairment test on at least an annual basis or upon the occurrence of certain events or circumstances. Goodwill impairment is assessed based on a comparison of the fair value of a reporting unit to the underlying carrying value of the reporting unit’s net assets, including goodwill. When the carrying amount of the reporting unit exceeds its fair value, the implied fair value of the reporting unit’s goodwill is compared with its carrying amount to measure the amount of impairment loss, if any. Goodwill presented in the combined financial statements relates to our purchase of Photowatt France.

      Intangible assets: Intangible assets, which are patents and licenses on technologies, are recorded at cost and amortized over their estimated economic life of 10 to 17 years.

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      Impairment of long-lived assets: We review long-lived assets such as property, plant and equipment and intangible assets with finite useful lives for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the total of the expected undiscounted cash flows is less than the carrying value of the asset, a loss, if any, is recognized for the excess of the carrying value over the fair value of the asset. During the year ended March 31, 2006, we determined that the carrying value of certain property, plant and equipment and intangible assets was in excess of their associated estimated undiscounted future cash flows, and the assets were written down to their fair value as further described in note 15 to our combined annual financial statements.

      Research and development costs: Research costs are expensed as incurred. Development costs which meet generally accepted criteria for deferral are deferred and amortized over the period over which we expect to benefit from the resulting product or process. Subject to meeting the generally accepted criteria for deferral, we capitalize both direct and indirect costs with respect to ventures which are in the development stage.

      Deferred development costs are reviewed annually for recoverability or whenever events or circumstances indicate that the carrying value may not be recoverable. When the criteria that previously justified the deferral of costs are no longer met, the unamortized balance is written off as a charge to earnings in that period. When the criteria for deferral continue to be met, but the amount of deferred development costs that can reasonably be regarded as assured through recovery of related future revenue less relevant costs is exceeded by the unamortized balance of such costs, the excess is written off as a charge to earnings in that period. During the year ended March 31, 2006, we determined that the carrying value of certain deferred development costs was in excess of their associated estimated undiscounted future cash flows and the assets were written down as further described in note 15 to our combined annual financial statements.

      Income taxes: We use the liability method of accounting for income taxes. Under the liability method of accounting for income taxes, future income tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse.

      We continue to assess, on an ongoing basis, the degree of certainty regarding the realization of future income tax assets and whether a valuation allowance is required.

      Investment tax credits and government assistance: Investment tax credits and government assistance are accounted for as a reduction in the cost of the related asset or expense when there is reasonable assurance that such credits or assistance will be realized.

      Stock-based compensation plans: For all employee stock option awards granted on or after April 1, 2003, we recognize compensation using the fair value based method of accounting for stock-based compensation.

      We have accounted for all employee stock options granted before April 1, 2003 as capital transactions with the provision of pro forma disclosure for those awards granted between April 1, 2002 and March 31, 2003. Pro forma disclosures present net earnings and earnings per share as if the compensation cost for our stock option plan had been determined and recorded based on the fair value of options awarded for the year ended March 31, 2003. No pro forma disclosure is provided for stock options awarded prior to April 1, 2002.

      The fair value of stock options is estimated at the grant date using the Black-Scholes option pricing model. Although the assumptions used reflect management’s best estimates, they involve inherent uncertainties based on market conditions generally outside of our control. If other assumptions were used, stock-based compensation expense could be significantly impacted. As stock options are exercised, the proceeds received on exercise, in addition to the previously recognized expense related to those stock options, are credited to net investment.

      For those options which can be settled in cash at the holder’s option, a liability is recognized for the cash settlement value. This liability is adjusted each reporting period with the corresponding charge to the combined statements of earnings (loss).

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Results of Operations

Results of operations for the six months ended September 30, 2006 compared with the six months ended September 30, 2005

      The following table provides a comparison of our revenue and expenses for the periods indicated:

		Six Months Ended
		September 30,
		2005		2006
		(U.S. dollars in
		thousands)
Revenue		$	56,878	$	65,993
Operating costs and expenses:
	Cost of revenue		42,219		46,841
	Research and development		324		5,668
	Amortization		3,057		4,521
	Selling and administrative		3,325		7,488
	Shared corporate costs		248		573
			49,173		65,091
Earnings from operations			7,705		902
Interest expense			502		1,898
Provision for income taxes			2,752		3,352
Net earnings (loss)		$	4,451	$	(4,348	)

      Revenue. Revenue continued to be driven by strong market demand for solar products, which is primarily a result of attractive government incentive programs in Europe. For the six months ended September 30, 2006, revenue was $66.0 million, or 16% higher than the same period of 2005. The increase in revenue was primarily due to product pricing increases, which increased revenue by approximately $5.9 million, and incremental revenue associated with new product offerings, including the sale of installation kits and inverters of $3.2 million and an additional $1.1 million in revenues related to a contract for the construction of several turnkey solar powered water pumping stations. In the six months ended September 30, 2005, sales for these types of products and services were nominal. Changes in the exchange rate between the U.S. dollar and the euro increased total revenue for the six months ended September 30, 2006 by an estimated 2% compared to the six months ended September 30, 2005.

      Revenue growth was partially offset by a longer than usual summer factory shutdown at Photowatt France in August 2006 to support the planned reorganization of existing equipment for the current capacity expansion underway as described above under “— Overview — Principal factors affecting our results of operations — Our production capacity and ability to produce and ship our products.” Management estimates that the lost revenue potential from this additional one week shutdown during the second quarter was approximately $1.5 million. Photowatt International returned to expected levels of production following the end of the shutdown period.

      During the six months ended September 30, 2006, Photowatt International diversified its revenue by putting a greater focus on penetrating geographic markets outside Germany, particularly in Spain. As a result, revenue from Spain increased to $24.5 million for the six months ended September 30, 2006, compared to $7.8 million in the six months ended September 30, 2005. This decision to target markets outside Germany (traditionally Photowatt International’s largest market) reflects increased government subsidies in Spain and the reduction of government subsidies for solar products in Germany.

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      The following table sets forth the geographic sources of our revenue:

		Six Months Ended September 30,
		2005		Percent			2006		Percent
		(U.S. dollars in thousands)
Spain		$	7,752		14	%	$	24,522		37	%
Germany			32,963		58			19,926		30
Italy			3,615		6			4,813		7
Rest of Europe			5,509		10			11,590		18
United States			5,895		10			2,564		4
Canada			55		N/M			17		N/M
Other			1,089		2			2,561		4
	Total	$	56,878		100	%	$	65,993		100	%

      Cost of revenue. For the six months ended September 30, 2006, cost of revenue, which was primarily derived from Photowatt International, was $46.8 million, representing 71% of revenue, compared to $42.2 million, or 74% of revenue, in the six months ended September 30, 2005. An approximate $3.6 million impact of silicon price increases in the six months ended September 30, 2006, compared to the six months ended September 30, 2005, was partially offset by a reduction in the number of grams used per watt manufactured, which resulted from improved production yields, efficiencies related to economies of scale and improvements in the production process leading to reduced other material costs. Photowatt International’s silicon costs are expected to continue to increase in fiscal 2007 as silicon prices continue to increase and our inventory of lower-priced silicon is consumed.

      Included in cost of revenue during the six months ended September 30, 2006 are expenses of $0.4 million incurred to prepare the manufacturing facility for the current capacity expansion underway as described above, including incremental labour and maintenance costs related to facility optimization. Cost of revenue for the six months ended September 30, 2006 also included $1.0 million related to revenue from the turnkey solar powered water pumping stations contract.

      Research and development. Research and development expenses increased from $0.3 million for the six months ended September 30, 2005 to $5.7 million for the six months ended September 30, 2006. Photowatt International’s increase in research and development expenses for the six months ended September 30, 2006 compared to the six months ended September 30, 2005 primarily related to continuing efforts to increase cell efficiency. Spheral Solar’s increase in research and development expenses for the six months ended September 30, 2006 is related to costs of the development of our Spheral Solar technology that are no longer being capitalized as deferred development costs. The following table summarizes the breakdown of research and development expenses between our segments:

	Six Months Ended September 30,
	2005					2006
			R&D as a % of					R&D as a % of
			combined					combined
	R&D		revenue			R&D		revenue
	(U.S. dollars in thousands)
Photowatt International	$	324		1	%	$	697		1	%
Spheral Solar		—		—			4,971		8
Combined	$	324		1	%	$	5,668		9	%

      Amortization. For the six months ended September 30, 2006, our amortization was $4.5 million, or 48% higher than for the six months ended September 30, 2005. Photowatt International’s amortization increase of 36% for the six months ended September 30, 2006 compared to the six months ended September 30, 2005 primarily related to capital expenditures made during fiscal 2006 to increase our

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capacity. Spheral Solar’s amortization for the six months ended September 30, 2006 relates to the processing of polysilicon powder and fines and amortization of equipment used in the development of Spheral Solar technology. The following table summarizes the breakdown of the amortization between our segments:

	Six Months Ended September 30,
	2005					2006
			Amortization					Amortization
			as a % of					as a % of
	Amortization		combined revenue			Amortization		combined revenue
	(U.S. dollars in thousands)
Photowatt International	$	3,057		5	%	$	4,151		6	%
Spheral Solar		—		—			370		1
Combined	$	3,057		5	%	$	4,521		7	%

      Selling and administrative. For the six months ended September 30, 2006, our selling and administrative expenses were $7.5 million, or 125% higher than for the six months ended September 30, 2005. Photowatt International’s selling costs increased primarily due to increased sales and marketing activities related to new product offerings including installation contracts and the sale of installation kits and inverters, an increase of $346 thousand in incentive compensation related to increased profitability at Photowatt International, and training costs related to preparation for the current capacity expansion underway as described above. Photowatt France has an incentive compensation plan under which payments are primarily based on a percentage of earnings and are paid to employees at all levels who meet certain criteria. Selling and administrative expenses at Spheral Solar of $1.7 million include wages related to senior Spheral Solar management, product development and other administrative personnel, $0.6 million of severance costs associated with the approximate 40% reduction in Spheral Solar’s staff, and legal, professional and consulting costs of approximately $0.3 million not associated with our initial public offering. Photowatt corporate costs increased due to increased expenditures related to preparation for this offering, including increased corporate infrastructure and personnel costs. The following table summarizes the breakdown of selling and administrative expenses between our segments:

	Six Months Ended September 30,
	2005						2006
				S&A as a % of					S&A as a % of
	S&A Costs			combined revenue			S&A Costs		combined revenue
	(U.S. dollars in thousands)
Photowatt International	$	3,327			6	%	$	4,880		7	%
Spheral Solar		(2	)		N/M			1,713		3
Photowatt corporate costs		—			—			895		1
Combined	$	3,325			6	%	$	7,488		11	%

      Shared corporate costs. For the six months ended September 30, 2006, our shared corporate costs were $0.6 million, or 131% higher than for the six months ended September 30, 2005. This increase was primarily due to allocated facilities costs in Cambridge, Ontario.

Earnings (loss) from operations

      For the six months ended September 30, 2006, earnings from operations were $0.9 million compared with $7.7 million of earnings from operations in the six months ended September 30, 2005. This decrease was primarily due to the inclusion of Spheral Solar’s loss from operations for the six months ended September 30, 2006 of $6.4 million and the increase in corporate costs of $1.2 million related to increased corporate infrastructure and personnel costs associated with our becoming a public company. Inter-segment eliminations represent profit that is deferred until the underlying shipments of silicon between Spheral Solar and Photowatt International are converted to third-party revenue.

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      Photowatt International’s earnings from operations for the six months ended September 30, 2006 were $9.9 million, or 25% higher than for the six months ended September 30, 2005. This increase was primarily due to product pricing increases and significant improvements in production yields, throughput gains, and manufacturing cost-reductions reflecting the benefits of capital investments. These factors more than offset the impact of higher silicon costs, costs associated with the new capacity expansion, an estimated $0.5 million of reduced operating earnings from lower production as a result of the extended shutdown period, as well as $1.1 million of higher amortization relating primarily to the fiscal 2006 purchases of production equipment.

      Spheral Solar’s loss from operations for the six months ended September 30, 2006 was $6.4 million compared with earnings from operations of $0.1 million for the six months ended September 30, 2005. The decrease in operating earnings was primarily due to costs relating to the development of Spheral Solar technology that were capitalized as deferred development costs in the six months ended September 30, 2005.

	Six Months Ended September 30,
	2005						2006
				Earnings (loss)						Earnings (loss)
	Earnings			from operations			Earnings			from operations
	(loss) from			as a % of			(loss) from			as a % of
	operations			combined revenue			operations			combined revenue
	(U.S. dollars in thousands)
Photowatt International	$	7,872			14	%	$	9,857			15	%
Spheral Solar		81			N/M			(6,421	)		(10	)
Corporate costs		(248	)		N/M			(1,468	)		(2	)
Inter-segment eliminations		—			—			(1,066	)		(2	)
Combined	$	7,705			14	%	$	902			1	%

      Interest expense. For the six months ended September 30, 2006, our interest expense was $1.9 million, compared with $0.5 million for the six months ended September 30, 2005. The increase in interest expense for the six months ended September 30, 2006 compared to the six months ended September 30, 2005 primarily related to interest charged on certain indebtedness owing to ATS.

      Provision for income taxes. For the six months ended September 30, 2006, our provision for income taxes was $3.4 million, compared with $2.8 million for the six months ended September 30, 2005. The provision has increased for the six months ended September 30, 2006 primarily due to the increased earnings before tax of Photowatt International as compared to the six months ended September 30, 2005. No future income tax benefit has been recognized related to loss carryforwards or other temporary differences in the Spheral Solar segment or Photowatt USA.

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Results of operations for fiscal year 2006 compared with fiscal year 2005

      The following table provides a comparison of our revenue and expenses for the periods indicated:

		Fiscal Year Ended
		March 31,
		2005		2006
		(U.S. dollars in
		thousands)
Revenue		$	113,019	$	120,921
Operating costs and expenses:
	Cost of revenue		89,930		88,998
	Research and development		678		9,252
	Amortization		5,420		9,680
	Selling and administrative		5,855		9,088
	Asset impairment charge		—		94,290
	Shared corporate costs		589		717
			102,472		212,025
Earnings (loss) from operations			10,547		(91,104	)
Interest expense			3		1,666
Provision for income taxes			3,761		5,610
Net earnings (loss)		$	6,783	$	(98,380	)

      Revenue. For fiscal 2006, our revenue, which was entirely derived from Photowatt International, was $120.9 million, or 7% higher than in fiscal 2005. This increase was primarily due to higher production volumes (approximately 2% higher than the prior year) and product price increases (approximately a 10% increase over the prior year). Changes in the exchange rate between the U.S. dollar and the euro decreased fiscal 2006 total revenue by an estimated 3% compared to fiscal 2005.

      The following table sets forth the geographic sources of our revenue:

		Fiscal Year Ended March 31,
				Percent					Percent
		2005		in 2005			2006		in 2006
		(U.S. dollars in thousands)
Germany		$	87,055		77	%	$	60,122		49	%
Spain			7,241		6			20,142		17
Italy			3,511		3			7,567		6
Rest of Europe			7,599		7			9,676		8
United States			5,360		5			16,504		14
Canada			150		N/M			23		N/M
Other			2,103		2			6,887		6
	Total	$	113,019		100	%	$	120,921		100	%

      Cost of revenue. For fiscal 2006, our cost of revenue, which was almost entirely derived from Photowatt International, was $89.0 million, representing 74% of revenue, compared to $89.9 million or 80% of revenue in fiscal 2005. Several factors impacted the cost of revenue as compared to the prior year. By improving production yields, realizing efficiencies relating to economies of scale, and through improvements in the production process leading to reduced other material costs, cost of revenue was reduced by 7% as a percentage of revenue. Although silicon costs were higher in fiscal 2006 compared to fiscal 2005, these cost increases were largely mitigated by a reduction in the number of grams used per watt manufactured.

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      Research and development. Research and development expenses increased from $0.7 million in fiscal 2005 to $9.3 million in fiscal 2006 as a result of research and development costs associated with Spheral Solar technology that were expensed in the third and fourth quarters of fiscal 2006 but were capitalized as deferred development costs in fiscal 2005. The following table summarizes the breakdown of research and development expenses between our segments:

	Fiscal Year Ended March 31,
	2005					2006
			R&D as a % of					R&D as a % of
			combined					combined
	R&D		revenue			R&D		revenue
	(U.S. dollars in thousands)
Photowatt International	$	678		1	%	$	619		1	%
Spheral Solar		—		—			8,633		7
Combined	$	678		1	%	$	9,252		8	%

      Amortization. For fiscal 2006, our amortization was $9.7 million, or 79% higher than in fiscal 2005. This increase was primarily due to the inclusion of Spheral Solar technology amortization for the third and fourth quarters of fiscal 2006 in the combined statements of earnings (loss) and increased amortization at Photowatt France primarily related to capital expenditures made to increase capacity in fiscal 2005 and 2006. The following table summarizes the breakdown of the amortization between our segments:

	Fiscal Year Ended March 31,
	2005					2006
			Amortization as					Amortization as
			a % of					a % of
	Amortization		combined revenue			Amortization		combined revenue
	(U.S. dollars in thousands)
Photowatt International	$	5,420		5	%	$	6,252		5	%
Spheral Solar		—		—			3,428		3
Combined	$	5,420		5	%	$	9,680		8	%

      Selling and administrative. For fiscal 2006, our selling and administrative expenses were $9.1 million, or 55% higher than in fiscal 2005. This increase was primarily due to the inclusion of the Spheral Solar selling and administrative expenses for the third and fourth quarters of fiscal 2006 in the combined statements of earnings (loss). Photowatt International selling and administrative expenses increased $1.0 million from fiscal 2005 to fiscal 2006 primarily as a result of increased incentive compensation related to increased profitability. Photowatt France has an incentive compensation plan under which payouts are primarily based on a percentage of earnings and are paid to employees at all levels who meet certain criteria. Spheral Solar fiscal 2005 selling and administrative expenses relate primarily to foreign exchange gains. The following table summarizes the breakdown of the selling and administrative costs between our segments:

	Fiscal Year Ended March 31,
	2005						2006
				S&A as a % of					S&A as a % of
				combined					combined
	S&A Costs			revenue			S&A Costs		revenue
	(U.S. dollars in thousands)
Photowatt International	$	6,258			5	%	$	7,251		6	%
Spheral Solar		(403	)		N/M			1,511		1
Photowatt corporate costs		—			—			326		N/M
Combined	$	5,855			5	%	$	9,088		7	%

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      Asset impairment charge. Due to ongoing significant technical challenges associated with the commercialization of Spheral Solar technology and due to the current uncertainty in resolving these challenges and resulting delays in realizing cash flows from the investment in Spheral Solar technology, Canadian GAAP required that we recognize an after-tax, non-cash asset impairment charge of $94.3 million (pre-tax $94.3 million) against our Spheral Solar technology deferred development costs and other long-lived assets in the fourth quarter of fiscal 2006. Deferred development costs were written down by $41.0 million, property, plant and equipment was written down by $51.9 million, and intangible assets were written down by $1.4 million for a total impairment charge of $94.3 million. Total assets recorded on our combined balance sheet related to Spheral Solar after this adjustment were approximately $11.3 million at March 31, 2006, consisting of $4.6 million of current assets, $4.2 million of long-lived assets, and $2.5 million of other assets. Total assets at March 31, 2005 related to Spheral Solar technology were $86.9 million.

      Shared corporate costs. For fiscal 2006, our shared corporate costs were $0.7 million, or 22% higher than in fiscal 2005. This increase was primarily due to allocated facilities costs in Cambridge, Ontario.

Earnings (loss) from operations

      For fiscal 2006, our loss from operations was $91.1 million, compared with $10.5 million of earnings from operations in fiscal 2005. This change was primarily due to the inclusion of Spheral Solar’s loss from operations in fiscal 2006, which was only partially offset by an increase in Photowatt International’s earnings from operations in fiscal 2006 compared with fiscal 2005. Spheral Solar’s loss from operations in fiscal 2006 was $109.8 million, compared with earnings from operations of $0.2 million in fiscal 2005. This change was primarily due to the after-tax, non-cash asset impairment charge of $94.3 million (pre-tax $94.3 million) against our Spheral Solar technology deferred development costs and other long-lived assets (see “— Asset impairment charge” above) and continuing expenditures in the third and fourth quarters designed to advance the commercialization plan for our Spheral Solar technology. Prior to the third quarter of fiscal 2006, these continuing expenditures were capitalized as deferred development costs. Photowatt International’s earnings from operations in fiscal 2006 were $19.8 million, or 81% higher than in fiscal 2005, and represented 16% of Photowatt International’s revenue, compared with 10% in fiscal 2005. This increase was primarily due to an increase in annual production, price increases and significant improvements in production yields, throughput gains, and manufacturing cost reductions reflecting the benefits of capital investments. These factors more than offset the impact of higher silicon costs in fiscal 2006 compared with fiscal 2005.

	Fiscal Year Ended March 31,
	2005						2006
				Earnings (loss)						Earnings (loss)
				from						from
				operations as						operations as
	Earnings			a % of			Earnings			a % of
	(loss) from			combined			(loss) from			combined
	operations			revenue			operations			revenue
	(U.S. dollars in thousands)
Photowatt International	$	10,948			10	%	$	19,780			16	%
Spheral Solar		188			N/M			(109,841	)		(90	)
Corporate costs		(589	)		(1	)		(1,043	)		(1	)
Combined	$	10,547			9	%	$	(91,104	)		(75	)%

      Interest expense. For fiscal 2006, our interest expense was $1.7 million, compared with $3 thousand in fiscal 2005. The fiscal 2006 interest expense related primarily to interest expense on certain indebtedness owing to ATS that was included as part of ATS’ net investment in us. During fiscal 2005, no interest expense was charged related to ATS’ net investment in us.

      Provision for income taxes. For fiscal 2006, our provision for income taxes was $5.6 million, compared with $3.8 million in fiscal 2005. The provision for income taxes relates primarily to the earnings of Photowatt International, and the increase in fiscal 2006 compared with fiscal 2005 was mainly due to the increased earnings of Photowatt International.

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Results of operations for fiscal year 2005 compared with fiscal year 2004

      The following table provides a comparison of our revenue and expenses:

		Fiscal Year Ended
		March 31,
		2004			2005
		(U.S. dollars in
		thousands)
Revenue		$	65,855		$	113,019
Operating costs and expenses:
	Cost of revenue		52,859			89,930
	Research and development		1,236			678
	Amortization		4,466			5,420
	Selling and administrative		4,708			5,855
	Shared corporate costs		415			589
			63,684			102,472
Earnings from operations			2,171			10,547
Interest (income) expense			(64	)		3
Provision for income taxes			1,130			3,761
Net earnings		$	1,105		$	6,783

      Revenue. For fiscal 2005, our revenue, which was entirely derived from Photowatt International, including its facility in the United States, was $113.0 million, or 72% higher than in fiscal 2004. The increase in revenue from 2004 to 2005 is primarily due to increased production volumes (approximately 70% higher than the prior year) related to our capacity expansion and increasing demand for solar products offset in part by lower product pricing, which decreased by approximately 1% during fiscal 2005. Changes in the exchange rate between the U.S. dollar and the euro increased fiscal 2005 total revenue by an estimated 6% compared to fiscal 2004.

      Cost of revenue. For fiscal 2005, our cost of revenue was $89.9 million, or 70% higher than in fiscal 2004, representing 80% of revenue, consistent with fiscal 2004. Overall cost of revenue increased from 2004 to 2005 primarily due to volume increases. While cost of revenue remained steady at 80% of revenue, higher silicon costs, which had increased from 11% to 19% of revenue, were partially offset by improving production yields, realizing efficiencies related to economies of scale, and through improvements in the production process leading to a reduction in other material costs and labor costs by a similar amount. In fiscal 2005 and 2004, our cost of revenue related almost entirely to Photowatt International.

      Research and development. For fiscal 2005, our research and development expenses were $0.7 million, or 45% lower than in fiscal 2004. The expenses in fiscal 2005 and 2004 were solely the research and development costs of Photowatt International, as the development costs associated with the Spheral Solar technology were capitalized as deferred development costs. The decrease in expense was primarily the result of increased levels of government assistance received in fiscal 2005 compared with fiscal 2004.

      Amortization. For fiscal 2005, our amortization was $5.4 million, or 21% higher than in fiscal 2004. In fiscal 2005 and fiscal 2004, amortization expense related solely to Photowatt International operations, and the increase over fiscal 2004 related to recent capital investments made by Photowatt International.

      Selling and administrative. For fiscal 2005, our selling and administrative expenses were $5.9 million, or 24% higher than in fiscal 2004. This increase was primarily due to increased production activity and higher revenue resulting in increased selling costs and higher employee performance incentive costs in fiscal 2005 tied to improved earnings. As a percentage of revenue, selling and administrative expenses decreased from 7% in fiscal 2004 to 5% in fiscal 2005.

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      Shared corporate costs. For fiscal 2005, our shared corporate costs were $0.6 million, or 42% higher than in fiscal 2004. This increase was primarily due to increased ATS corporate activity in conjunction with our activities.

      Earnings from operations. In both fiscal 2004 and fiscal 2005, earnings from operations was derived almost solely from Photowatt International’s operations. The costs associated with the development of Spheral Solar technology were capitalized and deferred during fiscal 2004 and 2005. For fiscal 2005, our earnings from operations were $10.5 million, or 386% higher than in fiscal 2004, and represented 9% of revenue, compared with 3% in fiscal 2004. This increase was primarily due to increased revenue, improved factory utilization, cost reduction initiatives, improved efficiencies and other factors mentioned above. A worldwide shortage of silicon feedstock resulted in higher industry prices for this primary raw material, which we more than offset with our ongoing silicon supply management efforts, strong market conditions and improvements in operating efficiency.

      Interest (income) expense. For fiscal 2005, our interest expense was $3 thousand, compared with income of $64 thousand in fiscal 2004. This expense fluctuates depending on cash balances and interest charges from operating facilities and intercompany charges. During fiscal 2005 and 2004, no interest expense was charged related to ATS’ net investment in us.

      Provision for income taxes. For fiscal 2005, our provision for income taxes was $3.8 million, or 233% higher than in fiscal 2004. The provision for income taxes relates primarily to the earnings of Photowatt International, and the increase in fiscal 2005 compared with fiscal 2004 was mainly due to our increased earnings.

Liquidity and Capital Resources

Liquidity

      Cash flows used in operations were $8.6 million for the six months ended September 30, 2006 compared to cash from operations of $7.4 million for the six months ended September 30, 2005. For the six months ended September 30, 2006, cash flows used in operations include an increased investment in non-cash working capital of $9.0 million. For the six months ended September 30, 2005, a non-cash working capital increase of $0.7 million was more than offset by the $8.1 million generated from net earnings adjusted for non-cash items.

      In fiscal 2004, 2005 and 2006, cash flows from operating activities were $9.0 million, $12.6 million and $3.5 million, respectively. In fiscal 2004, non-cash working capital decreased $2.2 million which added to the $6.8 million generated from the net earnings adjusted for non-cash items. In fiscal 2005, investment in non-cash working capital increased $3.2 million which was more than offset by the $15.8 million generated from net earnings adjusted for non-cash items. In fiscal 2006, increased non-cash working capital of $4.0 million, associated primarily with the increased silicon inventory levels at both Photowatt International and Spheral Solar, was more than offset by the $7.5 million net cash generated from net loss adjusted for non-cash items.

      Our investing activities for the six months ended September 30, 2006 of $11.9 million were comprised primarily of acquisitions of property, plant and equipment related to the current Photowatt International capacity expansion. See “ — Capital expenditures” below. For the six months ended September 30, 2005, investing activities were comprised of acquisitions of property, plant, and equipment of $12.3 million and investments in development activities of $12.0 million. Commencing in October 2005, costs pertaining to the Spheral Solar technology ceased being capitalized to deferred development and instead were expensed as operating costs.

      Our investing activities in fiscal 2004, 2005 and 2006 of $48.9 million, $41.9 million and $40.1 million, respectively, included acquisition of property, plant and equipment of $40.2 million, $26.7 million and $26.4 million, respectively, and development expenditures of $8.7 million, $15.2 million and $13.7 million, respectively, primarily related to Spheral Solar technology. See “— Capital expenditures” below.

      Our financing activities for the six months ended September 30, 2006 and September 30, 2005 were $20.0 million and $16.5 million respectively. For the six months ended September 30, 2005, we received

59

$14.2 million in contributions from ATS and $2.3 million in government funding primarily from the Technology Partnerships Canada program. For the six months ended September 30, 2006, we drew upon bank indebtedness of $3.3 million, received advances from ATS of $20.1 million that are expected to be repaid using the proceeds from the initial public offering, and used $3.5 million to fund expenditures related to the initial public offering.

      Our financing activities in fiscal 2004, 2005 and 2006 consisted of proceeds from government assistance in the amounts of $5.7 million, $12.8 million, and $3.4 million, respectively, the vast majority of which we received from Technology Partnerships Canada, and contributions by ATS of $36.3 million, $14.3 million and $34.1 million, respectively. The final Technology Partnerships Canada funding claims were recognized in fiscal 2006 and at this time there are no further amounts to be recognized by us under this program.

      We expect to generate positive cash flow from operations once the first phase of our Photowatt International capacity expansion program comes fully on stream in fiscal 2008. The growth in our capacity is expected to result in an increase in cash flow as these production facilities are completed, the effect of which we expect to be offset by our growing working capital requirements in the short to medium term. In addition, we may be faced with the need to make significant advance payments in order to secure long term supplies of silicon that will require large amounts of capital. We expect to finance these advance payments associated with our long term silicon supply agreements and our capital expenditure programs through the use of a portion of the net proceeds of this offering received by us. If we proceed with a joint venture that is currently under consideration to expand our Photowatt International capacity, we anticipate raising some amount of limited recourse debt in the joint venture.

      Including the net proceeds of the offering, we expect that we will have and will generate sufficient cash and cash equivalents to finance our operations, fund our development activities and meet our growth plan until it is necessary to raise financing for the later phases of our capacity expansion plans. Depending on the nature of the silicon supply market, we may have to raise additional capital to secure adequate silicon supply. We have entered into discussions with a number of financial institutions regarding the provision of lines of credit to provide liquidity in the event that we are unable to raise equity capital at the time that we would require funding for the later phases of our capacity expansion or development plan, but there is no assurance that we will be able to successfully negotiate these agreements or the joint venture limited recourse agreements, or that if successful, that they will be available on satisfactory terms and conditions when we would like to access them.

      As at September 30, 2006 we had two credit facilities available to Photowatt France. The first facility is in the amount of €1.0 million, under which we had drawn €0.8 million as at September 30, 2006, and it bears interest at the French four-month prime rate plus 1.05%. The second facility is in the amount of net €0.8 million, offset by cash deposits on hand at the financial institution, under which we had drawn €1.8 million as at September 30, 2006 including outstanding checks, with €0.8 million of cash on deposit offsetting the gross amount, and it bears interest at the Euro LIBOR rate plus 0.50%. Both credit facilities are unsecured and repayable on demand.

      In November 2006, the €0.8 million facility was increased to €8.0 million with the other terms of the facility unchanged. This increased facility is available until April 1, 2007, at which time it will decrease to €0.8 million.

Capital resources

      We have historically satisfied our capital and liquidity requirements through intercompany borrowings, the sale of equity to ATS and bank indebtedness. At the time of the closing of this offering we expect to owe approximately $           million to ATS pursuant to an intercompany demand loan related to the fiscal 2007 investment in additional manufacturing capacity at Photowatt International, further development and process engineering associated with our Spheral Solar technology, and other general corporate purposes. Upon completion of this offering and after application of the net proceeds therefrom, we expect to have no amounts due to parent. See “Our Relationship with ATS — General — ATS reorganization relating to our company.” We plan to use proceeds from this offering to finance the first and second phases of our Photowatt

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International capacity expansion plan and the further development and process engineering of our Spheral Solar technology. We will need to raise additional capital to fund the third phase of our Photowatt International capacity expansion plan and the expansion of our Spheral Solar technology capacity, assuming we successfully complete our development and process engineering.

Capital expenditures

      Our property, plant and equipment acquisitions for the periods indicated were as follows:

							Six Months Ended
	Fiscal Year Ended March 31,						September 30,
	2004		2005		2006		2005		2006
	(U.S. dollars in thousands)
Photowatt International	$	5,565	$	10,625	$	16,080	$	5,505	$	11,313
Spheral Solar		34,630		16,124		10,351		6,814		—
Combined	$	40,195	$	26,749	$	26,431	$	12,319	$	11,313

      The property, plant and equipment acquisitions at Photowatt International related primarily to equipment to increase the estimated annual plant capacity and to increase manufacturing efficiencies.

      Capital expenditures for fiscal 2004 to fiscal 2006 at Spheral Solar related to equipment and expenditures for the development of Spheral Solar technology and included items such as production equipment, computer equipment, software and office furniture. For the six months ended September 30, 2006, no capital purchases were made, in line with our current strategy for Spheral Solar.

      We expect that our capital expenditures will increase in the future as we expand our manufacturing capacity in line with our strategy. A portion of the net proceeds from this offering will be utilized to fund these capital expenditures.

      In May 2006, we announced the first phase of our Photowatt International capacity expansion plan, which includes the expansion of our ingot, wafer, cell and module annual integrated manufacturing capacity to 60 MW by March 2007, at an expected cost of €26.5 million, of which at September 30, 2006, we had spent €10.8 million.

Off-Balance Sheet Arrangements

      There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors, other than those discussed under “— Contractual Commitments” below.

Contractual Commitments

      The following table sets forth our contractual commitments as of March 31, 2006:

	Payment Due by Period
			Less than						More than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
			(U.S. dollars in thousands)
Operating lease obligations	$	3,208	$	771	$	1,348	$	976	$	113
Non-cancelable purchase obligations		10,723		10,723		—		—		—
Total	$	13,931	$	11,494	$	1,348	$	976	$	113

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      The following table sets forth our contractual commitments as of September 30, 2006:

	Payment Due by Period
			Less than						More than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
	(U.S. dollars in thousands)
Operating lease obligations	$	4,247	$	1,096	$	1,777	$	1,221	$	153
Non-cancelable purchase obligations		30,608		27,041		3,567		—		—
Due to parent		20,112		20,112		—		—		—
Total	$	54,967	$	48,249	$	5,344	$	1,221	$	153

      We expect to enter into a Lease Agreement with ATS that relates to our Spheral Solar manufacturing facility in Cambridge, Ontario which will become effective immediately prior to the completion of this offering and which is not reflected in the table above. Under the Lease Agreement, we will pay ATS rent at a rate of C$1 per year for two years. Thereafter, we will have the option to renew the Lease Agreement for two consecutive five-year renewal periods at the then prevailing market rates, as determined by a process outlined in the lease. We estimate that the current market rental rate for a five-year lease similar to the Cambridge facility may be in the range of C$1.0 million to C$1.2 million per year. Since we have the option to extend the Lease Agreement after its initial term of two years but are not obligated to do so, the contractual commitments table above does not include rental obligations relating to the Cambridge facility after that initial term.

      In September 2006, we entered into an agreement with the French Atomic Energy Commission and two other partners for the Photosil project whose primary objective is to develop a commercial process for the production of solar grade silicon derived from metallurgical silicon with a capacity of 200 tonnes per year. Pursuant to the agreement, our role in the Photosil project is to contribute certain expertise and non-financial resources in order to improve and enhance the silicon material developed during the Photosil development phase. Under the contract, we are to be supplied, at predetermined prices, with at least 80% of the volume of any solar grade silicon or ingots produced by the project through to April 20, 2008. After April 20, 2008, the output will be supplied to a future joint venture in which we are currently considering participating, and we will have no further entitlement to the project’s output. We expect initial shipments from the project to commence in April 2007, however given that the Photosil plant is currently under construction and production has not yet begun, there is a risk that these silicon shipments may be delayed or that none are made prior to April 20, 2008.

      In October 2006, we entered into a 10-year irrevocable commitment to purchase from Deutsche Solar AG, Freiburg approximately four million polysilicon wafers per annum commencing in the first half of calendar 2009. Advance payments are required which will be applied against the price of silicon wafers that will be received during the life of the commitment and can only be refunded in the event of the supplier’s failure to deliver polysilicon wafers in accordance with the agreement. Commencing in 2009, the price of the silicon wafers will be adjusted at the beginning of each calendar year based on an agreed upon formula.

      As consideration for C$29.5 million of funding for the development of our Spheral Solar technology from Technology Partnerships Canada, we agreed to pay royalties of 1.8% on our future revenues resulting from the sale, licensing or other transfer of Spheral Solar products and related services. These royalties commence in the first year that such future annual revenues exceed C$20.0 million and continue for a total of 10 years. If the cumulative royalties exceed C$84.5 million during this 10-year period, the royalty rate declines to 0.35% for the remaining term. If at the end of 10 years the cumulative royalties have not reached C$84.5 million, the royalty payment term is extended for the lesser of a further five years or once cumulative royalties of C$84.5 million have been reached. To date, no royalties have been accrued or paid under this obligation. For more information, see note 14 to our combined annual financial statements.

      Upon the acquisition of the Spheral Solar technology in 1997, we assumed the original license obligation from the vendor on the use of Spheral Solar technology. The license fee is 2% of certain Spheral Solar net

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revenues, calculated annually. Such revenues consist of any net sales revenue earned from the sale of products derived from the Spheral Solar technology, as well as all net sales revenue received by licensees and subsequent purchasers of the Spheral Solar technology in the event that such technology is licensed or sold to a third party. The obligation extends for a 17-year period, expiring on September 28, 2017. To date, license fees resulting from this obligation are minimal.

Quantitative and Qualitative Disclosure About Market Risk

Foreign exchange risk

      A substantial portion of our Photowatt International revenue is denominated in euros, with the remainder largely denominated in U.S. dollars. While a substantial portion of our operating costs of Photowatt International are also denominated in euros, the majority of our silicon purchases have been in U.S. dollars. Our current Spheral Solar expenditures are largely denominated in Canadian dollars with some purchases and consulting costs being in U.S. dollars. Fluctuations in currency exchange rates could have a significant impact on our financial stability due to a mismatch among various foreign currency denominated sales and operating costs. Fluctuations in exchange rates, particularly the euro, U.S. dollar and Canadian dollar affect our gross and operating profit margins and could result in foreign exchange losses and in operating losses. Our exposure to currency gains or losses resulting from timing differences between signing of the purchase contracts and settling of these contracts creates additional foreign exchange risk. Net foreign exchange gains and losses for the year ended March 31, 2006 and for the six months ended September 30, 2006 were a $0.1 million gain and a $0.2 million loss, respectively.

      For the year ended March 31, 2006 and the six months ended September 30, 2006, assuming a 10% appreciation or depreciation of the euro against the U.S. dollar, the impact of translation on our revenue would have been an estimated increase or decrease of $11.2 million and $6.4 million, respectively.

Derivative financial instruments

      We have employed derivative financial instruments, primarily forward foreign exchange rate contracts, to manage exposure to fluctuations in foreign currency exchange rates. We do not hold derivative financial instruments for trading purposes. We have in place policies and procedures with respect to the required approvals for the use of derivative financial instruments and specifically tie their use to the mitigation of foreign currency risk. When applicable, we identify relationships between our risk management objective and the strategy for undertaking a hedge transaction or derivative financial instrument.

      Although management considers the use of a derivative portfolio to be an effective risk management tool, we did not apply hedge accounting. Such derivative instruments are marked to market and are recorded in the combined balance sheets as either an asset or liability, with changes in fair value recognized in the combined statements of earnings (loss) in selling and administrative expenses. At September 30, 2006, no derivative financial instruments were outstanding.

Interest rate risk

      Our exposure to interest rate risk relates to interest expense incurred by our short-term bank borrowings and inter-company borrowings with ATS as well as interest income generated by cash or short term investments. Such interest earning instruments carry a degree of interest rate risk. We have not used any derivative financial instruments to manage our interest risk exposure. We have not been historically exposed to material risks due to changes in interest rates on any third-party debt; however, future interest expense or income may increase due to changes in market interest rates or changes in short-term bank borrowings, debt, cash or cash equivalent balances. Based on the borrowings at September 30, 2006, the increase or decrease in net earnings for each 1% change in interest rates on the due to parent and bank indebtedness balances of $23.4 million amounts to approximately $0.2 million annually.

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Stock Options Grant

      In September 2006, we approved the grant of options to our chief executive officer and our chief financial officer to purchase, in aggregate, 302,860 of our common shares at an exercise price of C$5.00 per share. The aggregate number of common shares underlying each of these options is subject to an automatic adjustment that will increase or decrease the number such that it is equal to 0.6883% of our common shares held by ATS immediately prior to the closing of the initial public offering.

      The option to purchase 160,000 common shares granted to one executive vests as to 20% on the completion of the initial public offering and 20% on each anniversary date of the completion of the initial public offering. The option to purchase 142,860 common shares granted to the second executive vests as to 20% on each anniversary date of the completion of the initial public offering.

      In addition to the above mentioned grants, the two executives are eligible to receive a cash payment upon any exercise of these options if the number of shares underlying these options exceeds 302,860 after the adjustment described above.

      In the event that a change of control occurs and the employment of the option holder is terminated or they resign, in either case within three months from the date of such change of control, the options granted to the two executive officers will accelerate and become fully vested.

      Furthermore, we have approved the grants to certain of our directors, officers, employees and other key personnel, including one of the executives referred to above, of options to purchase an aggregate of 850,420 common shares exercisable at the public offering price at the closing of the initial public offering. Included in the 850,420 above are options to purchase 287,710 common shares that vest on the achievement of specific defined performance objectives related to the development of Spheral Solar and options to purchase 562,710 common shares that vest as to 20% on each anniversary date of the completion of the initial public offering. As these options vest only upon the completion of the initial public offering, no stock compensation expense will be recognized until completion of the initial public offering. At the time of the initial public offering, we will measure the fair value of these stock options as the exercise price will be known.

Related Party Transactions

      ATS has provided strategic, operational and administrative services to us. These services have been reflected in the combined financial statements at their exchange amount. Furthermore, we purchased property, plant and equipment from ATS, primarily for the Spheral Solar segment. We also purchased development services, raw materials and other services from ATS or its affiliates, and these purchases have been reflected at their exchange amount. The majority of such exchange amounts were based on a cost-plus basis varying from 0% to 25%.

      For the six months ended September 30, 2006 and the six months ended September 30, 2005, we generated revenue of $11 thousand and $57 thousand, respectively, from EPISOL s.a.r.l., a business controlled by Mr. Eric Laborde, a consultant who serves as managing director, Europe (acting) of Photowatt France, which have been reflected at their exchange amount, which we believe approximates fair market value. In fiscal 2005 and 2006, we generated revenue of $61 thousand and $150 thousand, respectively, from sales to this business.

      As at September 30, 2006, included in accounts payable and accrued liabilities are amounts due to ATS in the amount of $1.6 million. These amounts are payable on demand and do not bear interest. As at March 31, 2006, included in accounts payable and accrued liabilities are amounts due to ATS in the amount of $0.2 million, compared to $1.3 million as at March 31, 2005. These amounts are payable on demand and do not bear interest.

      Included in our net investment are inter-company balances owed to ATS as a result of various transactions between us and ATS. There are no terms of settlement or interest charges associated with the account balance, other than that disclosed in the following table. On completion of the initial public offering, we will repay to ATS amounts funded by ATS during fiscal 2007 up to the date of closing. As at

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September 30, 2006, the amount funded by ATS during fiscal 2007 that would be repaid was $20.1 million, which is expected to be outstanding as a demand loan at the time of this offering. This amount is included as due to parent in our unaudited combined interim balance sheet at September 30, 2006. Other transactions in the table below include intercompany purchases and sales and miscellaneous other administrative expenses incurred by ATS on behalf of us. For more information, see note 17 to our combined annual financial statements and note 12 to our unaudited combined interim financial statements.

							Six Months Ended
	Fiscal Year Ended March 31,						September 30,
Transactions	2004		2005		2006		2005		2006
	(U.S. dollars in thousands)
Purchase of property, plant and equipment — ATS	$	19,128	$	18,691	$	5,725	$	3,785	$	310
Purchase of raw materials and other services — ATS		240		330		343		259		811
Development services — ATS		1,482		213		292		277		—
Initial public offering expenditures — ATS		—		—		—		—		3,451
Shared corporate costs — ATS		415		589		717		248		573
Interest expense — ATS		—		—		1,686		511		1,862
Sale of product — other related party		—		61		150		57		11

Recently Issued Accounting Standards, Not Yet Adopted

Canadian GAAP standards

      The CICA has published three new accounting standards: “Financial Instruments — Recognition and Measurement,” “Hedges” and “Comprehensive Income.” These accounting standards introduce new requirements for the recognition and measurement of financial instruments that are designed to harmonize Canadian accounting standards with U.S. standards. These accounting standards are to be applied no later than the fiscal years beginning on or after October 1, 2006. Management is currently evaluating the potential implications of these new standards on our combined financial statements.

U.S. GAAP standards

      In June 2006, the FASB issued interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement 109. The interpretation is effective for fiscal years beginning after December 15, 2006, with earlier adoption encouraged. We are currently evaluating the impact of adoption on our combined financial statements.

      In November 2004, the FASB issued Statement of Financial Standards No. 151, “Inventory Costs, and amendment of ARB No. 43, Chapter 4,” (“SFAS 151”). SFAS 151 clarifies that abnormal amounts of idle facility expense, freight and handling costs, and wasted materials should be recognized as current period charges. This standard is effective for fiscal years beginning after June 15, 2005. The adoption of this standard did not have a significant impact on the unaudited combined interim financial statements.

      In September, 2006, the FASB issued Statement of Financial Standard No. 157, “Fair Value Measurement” (“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets and liabilities. The Statement also expands disclosures about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurement on earnings. The Statement is effective for fiscal years beginning on or after January 1, 2008. We are currently evaluating the impact of the adoption on the combined financial statements.

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BUSINESS

Our Company

      We design, manufacture and sell photovoltaic products, commonly referred to as solar cells and modules. Solar cells and modules provide clean, renewable energy by converting sunlight into electricity through a process known as the photovoltaic effect. We operate through two segments, Photowatt International, our core business that is based on a wafer technology, and Spheral Solar, a development project that is based on a spheral technology using thousands of tiny silicon spheres instead of silicon wafers.

      Photowatt International designs, manufactures and sells solar modules and installation kits, and provides solar power system design and other value-added services, principally in Western Europe. Photowatt International also manufactures wafers and solar cells, primarily for use in manufacturing its modules and for sale to third parties on an opportunistic basis. Most of Photowatt International’s products are manufactured in our Photowatt France facility outside of Lyon, France. Photowatt USA, our facility in Albuquerque, New Mexico, performs certain module assembly operations for Photowatt International. Solar modules manufactured by Photowatt International are used by businesses, institutions and homeowners to generate electric power. Photowatt International, through its French and U.S. operations, sells its products under the Photowatt and Matrix brands to a network of independent solar power systems distributors and installers. Photowatt International has been developing and selling photovoltaic products since 1979. Photowatt International accounted for all of our combined revenue for fiscal 2006 and for the six months ended September 30, 2006.

Photowatt International

      Overview. Photowatt International designs, manufactures and sells solar modules and installation kits, and provides solar power system design and other value-added services, principally in Western Europe. Photowatt International also manufactures wafers and solar cells, primarily for use in manufacturing its modules and for sale to third parties on an opportunistic basis. Most of Photowatt International’s products are manufactured in our facility outside of Lyon, France. Our facility in Albuquerque, New Mexico performs certain module assembly operations for Photowatt International.

      The first step in Photowatt International’s manufacturing process is the growth of ingots from silicon using specialized furnaces. The ingots are then cut into bricks, and the bricks are sawed into wafers using an abrasive solution and specialized wire saws. Next, the wafers are processed into solar cells, which are connected in series to form a solar module. As of March 31, 2006, Photowatt International had annual ingot, wafer, cell and module production capacity of approximately 31 MW, 32 MW, 40 MW and 54 MW, respectively. As a result, Photowatt International purchases some ingots, wafers and cells from third parties, when available, in order to utilize its additional wafer, cell and module production capacity. In May 2006, Photowatt International announced the first phase of our capacity expansion plan, which includes the expansion of our ingot, wafer, cell and module manufacturing capacity to 60 MW of integrated manufacturing capacity by March 2007, at an expected cost of €26.5 million, of which at September 30, 2006, we had spent €10.8 million.

      Solar modules manufactured by Photowatt International are used by businesses, institutions and homeowners to generate electric power. Photowatt International sells its products predominantly in Western Europe under the Photowatt brand to a network of independent solar power systems distributors and installers. Photowatt International’s revenue for the fiscal year ended March 31, 2006 was $120.9 million and 49%, 17%, 6%, 14% and 14% of such revenue was generated in Germany, Spain, Italy, the United States and the rest of the world, respectively.

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      Competitive strengths. We believe that Photowatt International has the following competitive strengths:

•  Integrated manufacturing capabilities. We participate in each of the ingot, wafer, cell and module stages of the solar module production process. We believe that being an integrated manufacturer gives us several advantages relative to many of our competitors, including:

—  the ability to capture a greater portion of the profits available by participating across a significant portion of the solar value chain;

—  reduced dependence on third-party suppliers for ingots, wafers and cells;

—  enhanced research and development capabilities to increase cell efficiency levels;

—  the ability to process a wide variety of silicon feedstock; and

—  improved process development capabilities by allowing us to continually evaluate the impact of changes throughout the production process.

•  Proprietary silicon processing technologies. Polysilicon, a specially processed form of silicon, is the primary raw material used to make crystalline solar cells and currently there is not enough available to meet industry demand. The supply shortage has led to sharply higher prices for polysilicon and has adversely impacted many solar cell manufacturers’ sales growth and profitability. While all forms of silicon are in short supply, we have developed processes to make solar cells from lower grades of silicon that we believe we can acquire more easily than polysilicon, including:

—  Processing of refined metallurgical silicon. We are currently producing solar cells and modules using refined metallurgical silicon, and in the third quarter of fiscal 2007 produced approximately           % of our solar cells using refined metallurgical silicon. While all forms of silicon are in short supply, we believe we can acquire refined metallurgical silicon more easily than polysilicon. Currently, solar cells that we make using refined metallurgical silicon have lower efficiencies than solar cells we make using polysilicon and use more silicon on a grams per watt basis. However, we believe the capability to make solar cells from refined metallurgical silicon will allow us to meet customer demand and mitigate the effects on our business of the current polysilicon shortage. Based on contractual commitments for the supply of refined metallurgical silicon that we have entered into or expect to enter into, we believe that in excess of two thirds of our total silicon requirement during fiscal 2008 will be met with refined metallurgical silicon. We are also currently evaluating a further refined type of metallurgical silicon that we believe has the potential to yield solar cells that have efficiencies consistent with what we currently obtain using polysilicon. We refer to this material as enhanced metallurgical silicon.

—  Processing of polysilicon powder and fines. Polysilicon powder and fines are by-products of the polysilicon production process that many manufacturers have limited use for due to their high levels of impurities. Spheral Solar has developed a proprietary process called optical fused powder technology to convert polysilicon powder and fines into polysilicon clusters that can be used, together with conventional polysilicon, by Photowatt International to make solar cells. We purchase dry polysilicon powder and fines from polysilicon manufacturers at significantly lower prices than we purchase polysilicon on the spot market. Purchasing and converting polysilicon powder and fines is less costly for us than purchasing polysilicon in the current market environment, and using polysilicon powder and fines in combination with conventional polysilicon does not decrease the efficiency of our cells. We have begun selling solar cells that include silicon derived from polysilicon clusters made using this optical fused powder technology, although we do not expect that polysilicon clusters produced by us from powder and fines will represent a material source of silicon feedstock for fiscal 2008 unless we secure a long-term supply of powder and fines.

•  Advanced wafer sawing capabilities. Wafers used in solar cells are cut from polysilicon bricks using specialized wire saws. In general, thinner wafers result in lower production costs because more wafers can be produced from each brick. However, very thin wafers are difficult to process because they are more brittle, and substantial technical expertise is required to develop processes that ensure acceptable

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yields. Wire thickness is also important because it determines how much silicon is lost during the cutting process. Photowatt International was a pioneer of the wafer sawing process used by many wafer manufacturers today and was one of the first companies to develop saws using wire less than 200 microns thick. Today, Photowatt International produces wafers with thicknesses ranging from 180 to 220 microns using a wire 160 microns thick. Photowatt International used approximately 10 grams of polysilicon per watt of power in our solar cells in 2005, which compares to an average of approximately 12 grams for the industry in 2005 as reported by Solarbuzz. Our current usage is approximately 9 grams per watt, which we believe remains below the current industry average.

•

Established market positions and relationships with key distributors and installers. We have successfully sold solar products in Europe for over 20 years. We enjoy established market positions in several Western European countries that have well developed and growing solar markets, including Germany, which is currently the world’s largest market for solar power. We are also developing a presence in emerging growth markets for solar power in Europe, including Spain, Italy and Greece, as well as in the United States and Canada. We believe we have well-established relationships with key distributors and installers and that we are differentiated from our competitors by our timely delivery as a result of our vertical integration capabilities, our technical expertise and our reputation for quality solar modules with competitive price and efficiency levels.

Spheral Solar

      Overview. Spheral Solar is developing a technology for a light weight, flexible crystalline solar module designed to compete with both conventional crystalline and thin film technologies. We acquired certain assets used in the development of our Spheral Solar technology in 1997. We commenced further development of our Spheral Solar technology in late 2001. Our Spheral Solar technology incorporates thousands of tiny silicon spheres, bonded between thin, flexible aluminum foil substrates to form solar cells. We believe that our Spheral Solar technology, if successfully developed, would have advantages over conventional crystalline solar cells, including better aesthetics, greater durability, less use of silicon, lighter weight, multiple available colors, more applications and physical flexibility, a property historically available only in certain thin film solar cells.

      We believe that our Spheral Solar technology has potential applications in residential and commercial roofing, integrated building products and consumer/recreational products where aesthetics, physical flexibility and low weight are critical product characteristics. We believe that our Spheral Solar technology is particularly well suited for residential roofing applications where product appearance is a primary driver of purchasing decisions. Spheral Solar has a product development relationship with Elk Corporation, one of the largest North American manufacturers of roofing shingles, to develop residential solar roofing products based on our Spheral Solar technology.

      Spheral Solar continues to work to develop our Spheral Solar technology with a goal of resolving manufacturing process issues required to achieve the yield efficiencies and throughput necessary for the commercialization of our Spheral Solar technology. We still need to commit significant resources to development and process engineering in an effort to commercially manufacture products using our Spheral Solar technology. Our target efficiency for our Spheral Solar technology at commercialization is approximately 10%. The technological and commercialization challenges associated with the development of spheral technology are substantial, and we may discontinue development of this technology at any time. In December 2006, we signed a non-binding letter of intent with Clean Venture 21 Corporation and Fujipream Corporation outlining the proposed terms of a business partnership and cross-licensing arrangement to assist us in further developing and commercializing our Spheral Solar technology. See “— Key Partnerships — Clean Venture 21 Corporation and Fujipream Corporation.”

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      Competitive strengths. If we are able to successfully develop and commercialize our Spheral Solar technology, we believe that it would have the following competitive strengths relative to conventional crystalline solar products:

•  Physical flexibility and more applications. Spheral Solar technology would allow for flexible solar cells and modules that can be integrated into curved surfaces where conventional crystalline solar cells cannot be used.

•  Greater durability. We believe modules using Spheral Solar technology would be more durable than conventional, glass-based solar modules. For example, they could be rolled for shipping with less risk of damaging the product.

•  Better aesthetics. Unlike conventional crystalline solar cells, we believe that Spheral Solar modules would not require a metal frame and could be integrated directly with roofing materials to create a seamless appearance. Through our product development relationship with Elk Corporation, we are developing a solar shingle that has the general appearance of traditional asphalt roofing shingles. Spheral Solar technology cells could also be made in a wide range of dark colors to suit particular customer preferences without materially impacting their efficiency.

•  Less use of silicon. We believe that our Spheral Solar technology cells would require less polysilicon per watt of power than conventional crystalline solar cells. In addition, we expect that our Spheral Solar technology could use various forms of silicon, including granules, fines and powder, as well as silicon with higher impurity levels than can be used in conventional crystalline solar cells.

Our Business Strategy

      Our objective is to be a market leader in the development and manufacturing of solar products. We intend to achieve this objective through the following strategies:

•  Expand annual integrated manufacturing capacity to approximately 400 MW by the end of calendar year 2011. Demand for our products is currently greater than our capacity to produce them. We intend to capitalize on the demand for our products by increasing our annual integrated manufacturing capacity to approximately 400 MW by the end of calendar year 2011. If we are able to successfully complete the development and process engineering required to commercialize our Spheral Solar technology, we expect that 140 MW of this aggregate manufacturing capacity will relate to Spheral Solar technology.

We intend to implement our Photowatt International capacity expansion strategy in three phases:

—  In May 2006, we announced the first phase of our capacity expansion plan, which includes the expansion of Photowatt International’s annual ingot, wafer, cell and module manufacturing capacity from approximately 31 MW, 32 MW, 40 MW and 54 MW, respectively, to approximately 60 MW of integrated manufacturing capacity by March 2007.

—  The second phase of our capacity expansion plan provides for construction of a second facility near Lyon, France on land immediately adjacent to our existing facility and for construction of a module assembly facility in Eastern Europe or another low-cost region that will increase our annual integrated manufacturing capacity to approximately 100 MW. We have begun the preliminary design of this phase of our expansion and plan to complete this phase in calendar 2008.

—  The third phase of our expansion plan provides for an increase in our annual integrated manufacturing capacity in calendar years 2008 and 2009 by 60 MW as well as an additional 100 MW of annual integrated manufacturing capacity in calendar years 2010 and 2011 either through the expansion of existing facilities or construction of new facilities.

If we are successful in completing the development required to commercialize our Spheral Solar technology through our proposed business partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation, we plan to invest in phase one of our

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development and commercialization program. Phase one will include increasing optical fused powder and spheral production capacity to support Clean Venture 21 Corporation’s cell production facilities and investing in module development for building integrated product applications. If we are successful with phase one, in our second phase, we plan to expand our optical fused powder production, spheral production and module capacity in phased increments to match the planned delivery of cells from Clean Venture 21 Corporation and Fujipream Corporation. The third phase of our Spheral Solar technology development plan will be the construction of our own cell manufacturing capacity, using Clean Venture 21 Corporation’s equipment and processes, commencing in 2009 to supplement the delivery of cells from Fujipream Corporation and/or Clean Venture 21 Corporation, to enable the manufacture of approximately 40 MW of cells in 2010 and 65 MW of cells in 2011 and to expand our total module capacity to 140 MW by the end of calendar year 2011. The second and third phases of our sphere and cell production program may be accomplished through a joint venture or similar arrangement with Clean Venture 21 Corporation.

We plan to use proceeds from this offering to finance the first and second phases of our Photowatt International capacity expansion plan and the first phase of our prospective business partnership and cross-licensing arrangement for developing our Spheral Solar technology. We will need to raise additional capital to fund the third phase of our Photowatt International capacity expansion plan and the expansion of our Spheral Solar technology manufacturing capacity, assuming we successfully complete our development and process engineering. If we do not reach an agreement with Clean Venture 21 Corporation and Fujipream Corporation regarding a development program and decide not to proceed with the development of our Spheral Solar technology, we would apply the net proceeds of this offering and future capital we would have used to develop the Spheral Solar technology to Photowatt International for 140 MW of additional capacity expansion, the procurement of silicon supply contracts and investments that will enhance our manufacturing, silicon supply or research and development capabilities.

•  Establish reliable, long-term silicon supply. The increase in demand for solar modules has led to an industry-wide silicon shortage. Continued growth in our business requires access to polysilicon or polysilicon alternatives such as refined metallurgical silicon. Additionally, the success of our prospective business partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation to develop and commercialize spheral technology will depend in part on obtaining adequate supplies of silicon fines and powder, which are only available from a limited number of suppliers and which we have not yet secured. Our strategy is to establish a long-term supply of polysilicon and polysilicon alternatives from a variety of sources to support our continued growth. We plan to:

—  enter into long term supply agreements for refined metallurgical silicon and polysilicon, including polysilicon ingots and wafers;

—  secure a supply of polysilicon powder and fines through agreements with companies that produce these by-products, and use our optical fused powder technology to process the powder and fines into polysilicon feedstock for use in our Photowatt International operations and for the manufacturing of spheres; we also intend to explore the possibility of licensing this technology to third-parties in exchange for long-term polysilicon supply agreements; and

—  purchase silicon, including polysilicon ingots and wafers, on the spot market, to the extent available and subject to appropriate pricing.

We believe that this approach will enable us to establish a long-term silicon supply sufficient to support the planned expansion of our manufacturing capacity.

•  Continue to invest in research and development to improve cell efficiency. We expect to continue to devote substantial resources to our research and development efforts aimed at increasing the efficiency of our solar cells. We believe that higher efficiencies will enable us to produce cells that use less silicon per watt and reduce the cost of the products we manufacture and sell. In addition to our own research

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and development activities, we may engage in collaborative research and development activities focusing on increasing cell efficiency with leading industry participants and other research organizations. We expect to finance our research and development expenditures with internally generated cash flows, funding from government organizations and a portion of the proceeds from this offering.

•

Commercialize our Spheral Solar technology. We are working on development and process engineering in an effort to commercialize our Spheral Solar technology. We are currently evaluating a prospective business partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation, two Japanese companies with expertise in the development and manufacture of solar products, to assist us in further developing and commercializing our Spheral Solar technology. If we were able to successfully develop and commercialize our Spheral Solar technology, we believe there are market opportunities for our associated solar products where aesthetics, physical flexibility and low weight are critical. However, the technological and commercialization challenges associated with the development of spheral technology are substantial, and we may discontinue development of this technology at any time. See “— Key Partnerships — Clean Venture 21 Corporation and Fujipream Corporation.”

Photowatt International Products and Services

      Our principal solar products are our cells, modules and solar installation kits. We also offer solar design and other value-added services. In fiscal 2006, our cells, modules and other value added services represented 8%, 90%, and 2% of our revenue, respectively. In fiscal 2006, we began to sell additional components of solar power systems in the form of solar installation kits and to provide solar design and project management services and contracting for installation services. We expect that these products and services will account for an increasing proportion of our revenue in the future.

Solar cells

      Our Photowatt International segment manufactures high-output mono- and multi-crystalline solar cells. Mono-crystalline cells are more expensive than multi-crystalline cells but deliver approximately 10% more power over the same surface area. Mono-crystalline solar cells represented 21% of the solar cells we produced in 2006, and we expect to produce a de minimis amount of mono-crystalline solar cells in the future, depending on the availability of mono-crystalline ingots and wafers. The quality and reliability of our cells are validated at each stage of production. The cells are primarily used in our own modules, although from time to time we have sold cells when opportunities have presented themselves, and we may do so in the future. We manufacture solar cells in three configurations: 4 inch (101.25 mm by 101.25 mm), 5 inch (125.50 mm by 125.50 mm) and 6 inch (150 mm by 150 mm).

Solar modules

      A solar module is an assembly of solar cells that have been electrically interconnected and laminated in a durable and weather-proof package. Our Photowatt International segment manufactures a wide range of modules, from 12 W to 230 W outputs, using primarily multi-crystalline cells.

Solar installation kits

      Our solar installation kits are turnkey systems that include modules, frames, inverters and other components required for easy installation. We acquire the components other than modules from third-party suppliers. These systems are specifically designed to operate on pitched and flat roofs and have gained rapid acceptance due to their quality and efficiency. Our solar installation kits are available in three package sizes: 1600 Wp, 3200 Wp and 4800 Wp.

Solar power system design and other value-added services

      A solar power system consists of one or more solar modules that are physically mounted and electrically connected, with system components such as batteries and power electronics, to produce and reserve

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electricity. Solar design services is one of our relatively new offerings. There are three main applications for our solar design services: industrial stand-alone systems, community and individual stand-alone systems and grid connecting systems. Grid connecting systems enable consumers to connect and sell electricity to the electrical grid.

      We also offer project management services and contracting for solar power system installation, particularly in markets where our customers do not install our products themselves.

Photowatt International Manufacturing Process

      The raw materials required in our manufacturing process include polysilicon and other silicon feedstock, tempered glass, plastic films, anti-reflective and aluminum coatings, metal frames, connecting systems and aluminum foil. Historically, all of our silicon feedstock has been purchased through spot market purchases. The other raw materials are obtained from major materials manufacturers in the industry.

      Our production process is composed of four stages: ingot production, wafer sawing, solar cell production and solar module assembly.

Ingot production

      Our manufacturing process begins by melting silicon in a crucible at 1500 degrees Celsius and casting it into a multi-crystalline ingot. Our approach for this casting process was developed more than 10 years ago and was adapted for large block HEM (heat exchanger method) furnaces approximately eight years ago. The growth of large columnar grains in the crucible is critical for device performance, and we produce quality crystals as a result of our many years of experience.

      As the industry continues to grow, supplies of solar and semiconductor grade polysilicon have become limited. New silicon products formed by refining molten metallurgical silicon into solar quality feedstock have recently shown success in our casting process, allowing for more flexibility in feedstock selection. We have worked with samples from most of the groups developing these refining approaches and have successfully modified our crystal growth and cell processes to attempt to minimize the impact on cell performance and silicon utilization. We believe the flexibility of our wafer manufacturing process allows us to optimize the mix of feedstock based on price and performance.

Wafer sawing

      In the next stage of the production process, the ingot is cut into bricks and the slab pieces are returned to feedstock. The bricks are sliced into wafers using a specialized wire saw from which we produce wafers in various sizes of up to six inches and as thin as 180 to 220 microns. We intend to continue to reduce wafer thickness and wire diameter for improved silicon utilization.

Solar cell production

      During the production process, the wafers enter our solar cell production line. A solar cell is a device made from a silicon wafer that converts sunlight into electricity by a process known as the photovoltaic effect. Impurities are selectively incorporated into the solar cell to create regions that are negatively or positively electrically charged, forming a p-n junction. Sunlight enters the optically textured, anti-reflective coated surface of the solar cell (for minimum back reflection) and releases electrons at the charged region. The aluminum back surface field reflects back any light which makes it past the charged region, allowing for a second opportunity to generate electrons. The front of the solar cell where sunlight enters attracts these electrons and funnels them to a metal grid that collects the current and conducts it to external wires. The circuit is completed by a contact on the back of the solar cell.

      Our solar cells are electrically tested and sorted by numerous parameters for proper matching in modules, ensuring maximum module performance and reliability. Our average polysilicon solar cell efficiency of approximately 15% is competitive in the industry, and we expect our ongoing research and development effort to allow continued improvements in solar cell efficiency. When refined metallurgical silicon is used as

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an alternative feedstock to polysilicon, it results in lower solar cell efficiencies requiring larger solar modules to achieve the same performance as solar modules that use solar cells made with polysilicon. Also, more refined metallurgical silicon is required to manufacture a cell as compared with cells produced using polysilicon. However, these factors can be partially offset by the fact that we believe we can acquire refined metallurgical silicon more easily than polysilicon and that refined metallurgical silicon is less expensive than polysilicon.

Solar module assembly

      In the fourth and final process stage, the solar cells are interconnected to form solar modules. The collective voltage of these solar modules is higher than that of the individual component cells. Our trend towards producing larger wafers has allowed us to improve our product line with the addition of several large area modules in the 150 W to 230 W size range. This allows us to minimize materials and labor content in module production and system installation. We believe our high throughput automated stringing lines increase reliability of connections and improve yields. All of the solar module materials, including the plastic film back-skin and EVA (ethylene vinyl acetate) encapsulant, are obtained from major materials manufacturers in the industry. With many years of testing and field use, these materials ensure greatest environmental stability of the glass laminates throughout their life.

Key Partnerships

Collaborative research & development (LETI)

      The French Atomic Energy Commission’s Laboratory of Microelectronics and Technology for Information, or LETI, is one of the largest applied research laboratories in electronics in Europe. Its mission is to help companies strengthen their competitive position through technological innovation and transfer of its technical knowledge to industry. The French Atomic Energy Commission establishes and coordinates joint research laboratories in partnership with industry participants. We and Electricité de France are negotiating a partnership with the French Atomic Energy Commission for the establishment of a laboratory and production development facility that will collaborate closely with the French Atomic Energy Commission, pursuing research into solar technologies and focusing on the development of high efficiency solar cells.

Elk Corporation

      We continue to work to develop and commercialize our Spheral Solar technology, and our initial focus upon commercialization will be building integrated solar cells and solar modules for roofs, facades and building structures. In fiscal 2004, we began a product development relationship and commenced development work with Elk Corporation, one of the largest North American manufacturers of roofing shingles. Our Spheral Solar technology is not yet commercialized and we expect the product development cycle for building integrated photovoltaic, or BIPV, products to be longer than for other solar cells and solar modules because of regulatory approval requirements, such as building codes and other similar health-and-safety requirements, but we believe that if BIPV products are commercialized and gain market acceptance, these products will allow us to penetrate new markets and provide us with important competitive advantages.

Clean Venture 21 Corporation and Fujipream Corporation

      We are currently evaluating a prospective business partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation, two Japanese companies with expertise in the development and manufacture of solar products, to assist us in further developing and commercializing our Spheral Solar technology. In December 2006, we signed a non-binding letter of intent with Clean Venture 21 Corporation and Fujipream Corporation outlining the proposed terms of a business partnership and cross-licensing arrangement in which we and Clean Venture 21 Corporation would license certain intellectual property to each other, we would supply Clean Venture 21 Corporation with silicon spheres to be used in the production of solar cells and Clean Venture 21 Corporation would supply Fujipream Corporation with solar cells to be used in the production of solar modules. It is also contemplated that Fujipream Corporation will

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supply us with up to 50% of its output of cells or modules, at our option, which we will either sell or manufacture into building integrated photovoltaic products. Notwithstanding the supply arrangements contemplated by the letter of intent, the cross-licensing arrangement would ultimately enable Clean Venture 21 Corporation or us to manufacture products using the cross-licensed technology independent of the other parties. The letter of intent will be of no further effect if the parties do not enter into a definitive agreement by March 31, 2007.

      The development risk and technological challenges associated with our Spheral Solar technology have primarily related to the processes and equipment designed to incorporate our silicon spheres into solar cells. Our potential partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation may substantially resolve these challenges because Clean Venture 21 Corporation has demonstrated the ability to produce solar cells incorporating our silicon spheres using technology and processes that we believe may be more readily commercialized. Further technical investigation is required, but we currently believe that if our partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation is consummated, the development risk and technological challenges, while not being eliminated, will be significantly reduced.

      If we were able to successfully develop and commercialize our Spheral Solar technology, we believe there are market opportunities for our associated solar products where aesthetics, physical flexibility and low weight are critical. Although we have signed a non-binding letter of intent with Clean Venture 21 Corporation and Fujipream Corporation and, subject to further due diligence, intend to enter into a definitive agreement as soon as practicable, we have not yet negotiated commercial terms and may not reach an agreement with these two companies. Furthermore, we may not be able to obtain consent from Technology Partnerships Canada if such consent is necessary, we may not be able to overcome the technological challenges associated with commercialization that are not addressed by the partnership and cross-licensing arrangement, we may not be able to obtain adequate supplies of silicon powder and fines necessary for the success of the business partnership and cross-licensing arrangement, or the business partnership may otherwise be unsuccessful, in which case we may discontinue development of the technology at any time.

Our Silicon Supply

      Polysilicon is the primary raw material used in the production of our solar cells and modules. Silicon is currently in short supply and its price has increased significantly over the past 18 months. Without an adequate supply of polysilicon or an alternative, such as refined metallurgical silicon, which we have developed the capacity to process, we are not able to manufacture our products. Additionally, the success of our prospective business partnership and cross-licensing arrangement with Clean Venture 21 Corporation and Fujipream Corporation to develop and commercialize spheral technology will depend in part on obtaining adequate supplies of silicon fines and powder, which we have not yet secured. As of June 30, 2006, we had approximately 287 metric tonnes of polysilicon, including polysilicon fines and powder, and 23 metric tonnes of refined metallurgical silicon in inventory. At August 29, 2006, we had commitments from suppliers to deliver an additional 40 metric tonnes of polysilicon and 130 metric tonnes of refined metallurgical silicon during the remainder of fiscal 2007. At August 29, 2006, we also had commitments from suppliers to deliver 48 metric tonnes of polysilicon and 120 metric tonnes of refined metallurgical silicon during fiscal 2008. We intend to meet our future silicon requirements by utilizing polysilicon, refined metallurgical silicon and polysilicon fines and powders that we can use in connection with the spheral technology or upgrade into polysilicon clusters that can be used in combination with conventional polysilicon to make solar cells, through a combination of existing commitments, purchases on an opportunistic basis and entering into long-term supply agreements. We believe that we have secured or identified sources of silicon for Photowatt International’s planned capacity to the end of fiscal 2008.

Silicon Supply Agreements

     Photosil Project

      As part of our relationship with the French Atomic Energy Commission, we recently entered into an agreement with the French Atomic Energy Commission and two other partners for the Photosil project.

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Photosil offers another technology for further enhancing the quality of metallurgical silicon. The Photosil project’s primary objective is to develop a commercial process for the production of solar grade silicon derived from metallurgical silicon with a capacity of 200 tonnes per year. Pursuant to the agreement, our role in the Photosil project is to contribute certain expertise and non-financial resources in order to improve and enhance the silicon material developed during the Photosil development phase. Under the contract, we are to be supplied at predetermined prices with at least 80% of the volume of any solar grade silicon or ingots produced by the Photosil project through to April 20, 2008. After April 20, 2008, the output will be supplied to a future joint venture in which we are currently considering participating, and we will have no further entitlement to the project’s output. We expect initial shipments from the Photosil project to commence in April 2007, however given that the Photosil plant is currently under construction and production has not yet begun, there is a risk that these silicon shipments may be delayed or that none are made prior to April 20, 2008. This relationship is consistent with our silicon supply strategy and is expected to augment our long-term sources of silicon supply.

     Deutsche Solar AG Wafer Supply Agreement

      In October 2006, we entered into a 10-year irrevocable silicon supply contract with Deutsche Solar AG, Freiberg for the supply of solar-grade, multi-crystalline polysilicon wafers beginning in the first half of calendar 2009. Deutsche Solar is a subsidiary of SolarWorld AG. Under the agreement, Deutsche Solar is obliged to deliver, and we are obliged to accept, approximately four million polysilicon wafers per annum. These wafers will be processed into solar cells and modules by us and are estimated to support the manufacture of approximately 15 MW of solar power products per annum. Advance payments to be made under the contract will be applied against the price of silicon wafers received during the life of the commitment and can only be refunded in the event of the supplier’s failure to deliver polysilicon wafers in accordance with the agreement. Commencing in 2009, the price of the silicon wafers will be adjusted at the beginning of each calendar year based upon an agreed upon formula.

Customers, Sales and Marketing

Customers

      We primarily sell our solar cells and solar modules to solar product distributors and installers. In fiscal 2006, our 10 and three largest customers represented approximately 79% and 46% of our revenue, respectively. In fiscal 2006, sales in Germany represented approximately 49% of our total revenue. We intend to increase sales in Spain, Italy the United States and Canada to geographically diversify our sales and reduce our customer concentration levels.

Sales and marketing

      End-users buy our solar products primarily from our established network of distributors and installers in Europe. We currently work with a relatively small number of distributors and installers in Germany, Italy and Spain that have particular experience in their geographic market. We are actively working to expand our distribution channels by selectively adding distributors, and we market to distributors and installers by advertising in industry publications and participating in trade conventions and conferences. We believe that our relationships with our distributors enable us to:

•  benefit from the marketing and distribution and after-sales service capabilities of other companies;

•  explore opportunities for additional product development;

•  enter new geographic markets more easily, quickly and cost-effectively; and

•  attract additional end-users of our products.

      As well, by selling primarily to distributors and installers and not competing with them for sales to end-users in their markets, we believe we create loyalty from these distributor and installer customers. We sell to our distributor and installer customers through our team of four salespeople in Europe and intend to use the same network to sell Spheral Solar’s products to our existing and new distributor and installer customers if we are able to commercialize these products.

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      We differentiate ourselves from our competitors on the basis of our timely delivery as a result of our vertical integration capabilities, our technical expertise and our reputation for quality solar modules with competitive price and efficiency levels.

      In the United States, large distributors have not been established, so we market primarily to small installers and end-users. We sell to these installers through two salespeople at our operations in the United States.

Research and Development

      We engage in research and development to develop new products and improve our manufacturing processes, with a focus on further increasing the electrical conversion efficiency of our solar cells and on the continuous reduction of production costs. We employ 20 personnel engaged in research and development activities at our operations in France. Photowatt International has several projects underway that are dedicated to improving the cell efficiency and in process improvements that are geared at cost reduction.

      We continue to invest in our Spheral Solar technology and are working to develop it for commercial use. The initial development work on Spheral Solar technology was undertaken by Texas Instruments beginning in 1980. ATS became interested in the technology in the early 1990s when it built some of the equipment for the Texas Instruments Spheral Solar pilot line. In 1995, Texas Instruments sold the technology to a public utility company, which in 1997 negotiated the sale of the Spheral Solar technology to ATS. In 2001, with the increased interest in renewable energy, ATS began further developing the technology and established a Spheral Solar facility in Cambridge, Ontario, Canada in 2004. The principal advantages of our Spheral Solar technology, if developed and commercialized, compared with conventional crystalline solar cells, are expected to include more applications due to lower weight as well as physical flexibility, a property historically available only in thin film solar cells. As well, we expect that our Spheral Solar technology will have greater durability, better aesthetics and less use of silicon compared with conventional crystalline solar cells.

      Our research and development expenses were approximately $1.2 million, $0.7 million and $9.3 million in fiscal 2004, 2005 and 2006, respectively, with approximately nil, nil and $8.6 million, respectively, attributable to our Spheral Solar technology. Until October 1, 2005, our operating costs relating to developing our Spheral Solar technology were capitalized as deferred development costs. On March 31, 2006, we determined that the carrying value of the Spheral Solar technology development costs was in excess of the estimated undiscounted future cash flows from that technology, and the associated asset was written down. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Results of operations for fiscal year 2006 compared with fiscal year 2005 — Earnings (loss) from operations.”

Spheral Solar technology overview

      Spheral Solar is developing a technology for a light weight, flexible crystalline solar module designed to compete with both conventional crystalline and thin film technologies. Our Spheral Solar technology incorporates thousands of tiny silicon spheres, bonded between thin, flexible aluminum foil substrates to form solar cells. The manufacturing process can be broken into four main areas: sphere fabrication, sphere junction formation and finishing, cell fabrication and module assembly.

Sphere fabrication

      Our sphere fabrication process sequence accomplishes two purposes simultaneously. First, it refines the silicon, if necessary, and second, it forms spherical shapes of the proper diameter. We believe we are able to use silicon in various forms, including granules, fines and powder, and silicon with higher impurity levels than can be tolerated by conventional solar cell and solar module production methods.

Sphere junction formation and finishing

      After attaining the required purity, shape and size, the spheres go through a sequence of standard semiconductor processes designed to achieve a high-quality p-n junction.

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Cell fabrication

      The cell fabrication process is a combination of mechanical and chemical processes. Spheres are bonded to two pieces of aluminum foil. The front foil defines the size and shape of the cell and is the electrical (negative) contact to the negative layer. The back foil functions solely as the electrical (positive) contact to the positive core of the spheres.

Module assembly

      Our module assembly process is unique for crystalline silicon devices in that it requires no additional materials to interconnect the cell. Only silicon and aluminum are present in the laminate. The cell’s front and back foils provide for interconnections by being ultrasonically welded together. Aluminum straps carry current out of the laminate. This technique eliminates the need for interconnecting straps and solder, both of which add assembly complexity and potential reliability problems.

Prototype Spheral Solar products

      We are currently developing prototype Spheral Solar products, focusing first on building-integrated photovoltaic, or BIPV, products. The principal advantages of our prototype products are that they are significantly lighter than conventional solar modules and are flexible, durable and aesthetically appealing. Potential applications for Spheral Solar technology, if commercialized, include commercial roofing membranes and residential applications, such as solar shingles, as well as consumer/recreational applications, such as boating or recreational vehicles, or backpacking, where aesthetics, physical flexibility and low weight are critical product characteristics.

      In fiscal 2004, we began a product development relationship and commenced development work with Elk Corporation, one of the largest North American manufacturers of roofing shingles, on a BIPV product. We are also developing SuperFlex^tm, a lightweight, durable and flexible portable power module, large, glass-free modules and custom cells and laminates for integration into original equipment manufacturer applications.

License and Royalty Agreements

      Upon the acquisition of our Spheral Solar technology in 1997, we assumed the original license obligation from the vendor on the use of Spheral Solar technology. The license fee is 2% of certain Spheral Solar net revenues, calculated annually. Such revenues consist of any net sales revenue earned from the sale of products derived from the Spheral Solar technology, as well as all net sales revenue received by licensees and subsequent purchasers of the Spheral Solar technology in the event that such technology is licensed or sold to a third party. This obligation extends for a 17-year period, expiring on September 28, 2017. To date, license fees from this obligation are minimal.

      As consideration for C$29.5 million of funding for the development of the Spheral Solar technology from Technology Partnerships Canada, we agreed to pay royalties of 1.8% on our future revenues resulting from the sale, licensing or other transfer of Spheral Solar products and related services. These royalties commence in the first year that such future annual revenues exceed C$20.0 million and continue for a total of 10 years. If the cumulative royalties exceed C$84.5 million during this 10-year period, the royalty rate declines to 0.35% for the remaining term. If at the end of 10 years the cumulative royalties have not reached C$84.5 million, the royalty payment term is extended for the lesser of a further five years or once the cumulative royalties of C$84.5 million have been reached. To date, no royalties have been accrued or paid under this obligation.

Industry Overview

      Global electricity usage is expected to increase from 14.8 trillion kWh in 2003 to 27.1 trillion kWh by 2025, according to the U.S. Department of Energy’s Internal Energy Outlook 2005. Approximately 65.7% of

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the world’s electricity is currently produced with fossil fuels. As demand for electricity continues to increase, the electric power industry is facing several challenges:

•  Fossil fuel supply constraints. Limited supply and escalating consumption of coal, oil, and natural gas continue to drive up wholesale electricity prices, resulting in higher electricity costs for consumers.

•  Infrastructure constraints. In many parts of the world, electricity demand exceeds the capacity of existing electricity generation, transmission and distribution infrastructure.

•  Desire for energy security. As political and economic instability in key oil and natural gas producing regions has increased, governments are increasingly focused on developing reliable and secure energy sources.

•  Environmental concerns. Long-term use of fossil fuels is associated with a range of environmental issues including global warming, air pollution and water pollution, the increased prevalence of which is driving increased environmental awareness.

      Industry and governments are considering alternatives to traditional fossil fuels to address these challenges, including renewable energy sources and technologies.

Renewable energy industry

      The renewable energy industry includes solar, hydroelectric and wind power generation, and to a lesser extent biomass and geothermal power generation. As opposed to fossil fuels, which draw on finite resources, renewable energy is generally unlimited in its availability. Hydroelectric power generation, the use of flowing water to generate electricity, is currently the largest source of renewable energy as measured by electricity generation. However, the potential for additional hydroelectric capacity in the developed world is limited due to the lack of development opportunities and environmental concerns over the creation of additional large reservoirs that flood agricultural land and human and animal habitats. Wind power generation, the use of wind turbines to harness and convert kinetic energy into electricity, is one of the fastest growing sources of renewable energy. Today, large-scale wind power is becoming a cost-competitive alternative to wholesale natural gas and coal-fired power in locations with high average wind speeds and sufficient space for large wind plants. However, space constraints, wind speed availability and zoning restrictions in suburban and urban regions limit the potential of wind power systems. Additionally, peak wind availability generally does not coincide with peak seasonal or time of day electricity use.

      Due to the constraints on other sources of renewable energy, solar power has emerged as one of the fastest growing renewable energy sources. Solar power has several benefits when compared to other renewable energy technologies, including:

•  No fuel price volatility. Unlike fossil and nuclear fuels, solar energy has no fuel price volatility. Although there is variability in the amount and timing of sunlight over the day, season and year, a properly sized and configured system can be designed for high reliability while providing a long term, fixed price electricity supply.

•  High reliability. With no moving parts or regular required maintenance, solar power is one of the most reliable forms of electricity generation.

•  Environmentally benign. Solar cells generate electricity without air or water emissions, noise, vibration, habitat impact or waste generation.

•  Easily located with the end-user. Unlike other renewable resources such as hydroelectric and wind power, solar power can be utilized anywhere there is sunlight and directly where the power will be used. As a result, solar power limits the expense of and energy losses associated with transmission and distribution from large-scale electric plants to the end users.

•  Peak energy generation corresponds with peak energy consumption. Maximum sunlight hours generally correspond with peak electricity demand when prices are highest.

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•  Applicable for a wide range of power requirements. Solar power products can be sized to meet the specific needs of the end-user ranging from very small consumer applications to larger commercial applications.

Solar industry trends

      Solar power systems are used for a variety of residential, commercial and industrial applications generally described as either “on-grid” or “off-grid” in nature. The market for “on-grid” applications, where solar power is used to supplement electricity purchased from the utility network, represents the largest and fastest growing segment of the market. According to Solarbuzz, in 2005, the global on-grid segment grew by 42% to 1,262 MW, and since 2001, the on-grid segment has grown at an average annual rate of approximately 55%. We believe the majority of our products are used in on-grid applications.

      “Off-grid” markets, where access to utility networks is not physically feasible or economical, offer additional opportunities for solar technology. Off-grid industrial applications include road signs, highway call boxes, communications support along remote pipelines and telecommunications equipment, as well as rural residential applications. Off-grid consumer applications include portable recreational power modules, garden lights, marine lighting and camping equipment. As reported by Solarbuzz, the off-grid market grew at 2% in 2005, to 198 MW, and has grown at an average of 12% per annum since 2001.

      According to Solarbuzz, between 2001 and 2005, total annual solar power system installations increased globally from 345 MW to 1,460 MW, representing a compound annual growth rate of 43%, and global installations of solar power systems are expected to grow at a compound annual growth rate of 17% from 1,460 MW in 2005 to 3,250 MW by 2010. Solarbuzz forecasts continued strong growth globally, with sales increasing from $9.8 billion in 2005 to an estimated $18.6 billion by 2010, a 14% compound annual growth rate. Another industry source, Photon Consulting, projects even more rapid growth, with production growing at a compound annual growth rate of 55% from 2,700 MW in 2006 to 15,400 MW by 2010. Despite this rapid growth, solar energy constitutes only a small fraction of the world’s energy output.

      The development and increased usage of solar power is, and for the foreseeable future will be, affected by the existence of government incentives. A growing number of countries have established attractive incentive programs for the development of solar and other renewable energy sources. In 2005, two of the three largest markets for solar products, as measured by total installations per annum, were Germany and the United States, each having significant government subsidy programs for solar power. Other countries in which we sell our products such as Spain, France and Italy also have significant government subsidy programs for solar power. Certain jurisdictions, such as Germany, have subsidy programs that are designed to decline over time.

      Similar to other renewable energy sources, the solar industry currently is not cost competitive on a standalone basis and requires government incentives to be competitive with fossil based alternatives. A growing number of countries have established attractive incentive programs for the development of solar and other renewable energy sources. These programs include:

•  Net metering laws and feed-in tariffs allowing on-grid end users to sell electricity back to the grid at retail prices;

•  Direct subsidies to end users to offset costs of solar equipment and installation charges;

•  Tax incentives and low interest loans to finance solar power systems; and

•  Government standards mandating minimum usage levels of renewable energy sources.

      Germany. Since 2004, Germany has been the leading solar power market in terms of annual megawatt additions. Renewable energy laws in Germany require electricity transmission grid operators to connect various renewable energy sources to their electricity transmission grids and to purchase all electricity generated by such sources at guaranteed feed-in tariffs. Additional regulatory support measures include investment cost subsidies, low-interest loans and tax relief to end users of renewable energy. These programs have encouraged the development of Germany’s solar market, which has grown from annual installations of 79 MW in 2001 to 837 MW in 2005. Subsidy programs in Germany are designed to decline over time

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including those for systems installed after 2006, for which the tariff rate for ground mounted systems is anticipated to be reduced by 6.5% each year and the tariff rates for building facade and roof mounted arrays are anticipated to be reduced by 5% each year.

      France. France continues to generate significantly more electricity than it consumes. Today, renewable energy generates only approximately 15% of the country’s total energy supply. However, current plans call for an increase in national renewable energy use to 21% of electricity output by 2010. In April 2006, the government increased feed-in tariffs for solar power by 50%.

      Spain. The incentive program in Spain includes a national net metering program and favorable interest loans. The feed-in tariff for solar energy in Spain is fully guaranteed by the Spanish government for 25 years.

      Italy. Slow economic growth and increasing national debt has hindered development in Italy’s electrical generation infrastructure. The resulting inability to meet increasing demand resulted in rolling blackouts in the summer of 2003. In 2005, the government enacted legislation normalizing a system of regional solar generation subsidies which sets fixed feed-in tariffs to be paid over 20 years. In the program’s second quarter (October to December 2005) it received approximately 7,500 requests for a total output of 190 MW.

      United States. With annual growth rates of 20-30%, the U.S. solar market continues steady expansion. However, renewable energy sources currently contribute less than 9%, or 337 billion kWh, of the nation’s total energy consumption with solar providing only a fraction of that amount. The United States recently enacted a major energy bill that included federal tax credits, purchasing goals and other programs designed to accelerate the adoption of solar power. In addition, a number of states, including California, New Jersey and Nevada, have committed substantial resources to the development and implementation of renewable energy programs. For example, in early 2006, California announced a $2.9 billion, 10-year government incentive program to reach 3,000 MW of solar installations by 2017. The program, will subsidize one-third of the installation costs of all new systems. In California, a customer who has purchased solar energy products can receive a cash rebate from the California Energy Commission, a state tax credit and can take advantage of net metering. The customer’s cash rebate is based on the capital cost of the solar power system, currently set at $2.60 per watt.

      Canada. In March 2006, Ontario became the first Canadian province to offer subsidies to homeowners or businesses installing solar power systems under a program whereby the Ontario Power Authority will purchase electricity produced by wind, biomass, small hydroelectric or solar at a fixed price. Electricity generated through solar power systems will be purchased at a rate of C$0.42/kWh compared to the current consumer rate of approximately C$0.08/kWh charged by provincial utility providers.

      Japan. Incentive programs in Japan led to the installation of more than 100,000 residential solar power systems between 2003 and 2004. Japan is forecasting the installation of 5 GW of generation capacity by 2010. The Japanese government has implemented a series of incentive programs, including a “PV 2030” roadmap. This roadmap outlines government policies designed to generate between 50 and 200 GW of solar electricity by 2030, as well as the provision of government subsidies for research and development. The program is designed to be self-sustainable for households in 2010 and for businesses and industry in 2020 and 2030, respectively. Japan eliminated its direct subsidies in 2005.

      China. In 2005, China enacted the Renewable Energy Law in order to help reach the government target of 400 MW and 1,000 MW installed by 2010 and 2020 respectively. This law authorizes relevant authorities to set favorable prices for the purchase of surplus on-grid solar-generated electricity and provides other financial incentives for the development of renewable energy projects. In addition, the State Council of China and the Ministry of Construction have recently created directives encouraging the development and use of solar energy in both urban and rural areas. For example, in October 2005, the Shanghai municipal government endorsed the “100,000 Roof Project” which calls for 300 MW of installed capacity by 2015.

Principal challenges facing solar power market growth

      The solar power industry must overcome several challenges to achieve widespread commercialization of its products.

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      Secure silicon supply. The strong growth in demand for silicon for use in solar production (from 5,000 metric tonnes in 2001 to 17,000 metric tonnes in 2005 according to Solarbuzz) has led to an industry-wide shortage. This shortage is widely believed to be short-term in nature as significant new production capacity is forecast to come online in the next five years. Compounding this shortage is a resurgence in demand for electrical grade silicon from technology manufacturers. As competition for secure sources of supply increases, access to a secure supply of silicon continues to be a critical factor limiting the growth of the solar power industry. A limited supply of silicon may also create additional difficulties for solar companies as they adapt to the volatility and risk related to their principal supply component. Historically, solar companies have addressed constrained silicon supply through inventory build-up during reduced demand stages of the market cycle. However, with demand outpacing supply, inventory levels are forecast to remain at historical lows until new silicon production capacity is brought online. Further, solar cell and solar module producers must compete with growing demand from the semiconductor industry for which high-grade silicon is also a key input.

      Decrease cost per watt to customers. The cost of solar electricity is higher than the cost of retail electricity from the utility network, with solar power systems requiring relatively high up-front costs and relatively low ongoing operational costs. Government programs and consumer preference have accelerated the use of solar electricity, but product cost remains one of the largest impediments to growth. As solar has become a more mature technology, yields, cell efficiencies, manufacturing efficiencies and economies of scale have improved, but continued improvements still need to be made in these areas.

      Improve aesthetics. We believe that aesthetics are a barrier to wider adoption of solar cell and solar module products and systems among commercial and residential consumers. Historically, these consumers have resisted solar products in part for aesthetic reasons. Established solar products are heavy, rigid, fragile and non-modular. Solar cell and solar module manufacturers can improve aesthetics by developing products that can be more attractively integrated into building structures, and that are lighter, flexible and modular.

Competition

      The market for solar power products is intensely competitive and continually evolving. Industry participants compete with each other for supplies of silicon. As well, industry participants compete for sales primarily on the basis of their products’ design, efficiency and aesthetics, the strength of their distribution networks, branding, price, reliability and capacity. Our competitors include companies such as Sharp, Q-Cells, Kyocera, Sanyo, Mitsubishi, Schott, Suntech, Sunpower and BP Solar.

      Many of our competitors are developing or currently producing products based on new solar technologies, including amorphous silicon, ribbon, sheet and nano technologies, which they believe will ultimately cost the same as or less than crystalline technologies similar to ours on a cost per watt basis. The two ribbon technologies on the market launched commercially at about 11% efficiency with a 10 g/W silicon consumption. These technologies are currently limited to small cell areas of 100-125 cm². Our polysilicon wafer technology has a higher efficiency at the same silicon utilization and on larger cell sizes. Our Spheral Solar technology, if successfully developed, could combine 11% targeted efficiency with the flexibility of thin film technology in one module and is expected to have a lower silicon utilization than conventional crystalline devices. Most amorphous technologies use double glass construction to increase life expectations beyond ten years, and commercial launches for these technologies were on products with approximately 5% efficiency.

      Nano-technologies, which are not yet commercialized, are also expected to have close to 5% efficiency with life expectancies of several years for double glass construction. Compared to these competing technologies, we believe the majority of our products have higher efficiencies and longer lifetimes without the need for double glass construction.

      Many of our competitors also have established stronger market positions than ours and have larger resources and greater brand recognition than we have. However, many companies compete at different steps in the manufacturing process; we are one of the few integrated manufacturers that compete at all stages of the solar module manufacturing process chain. The solar power market in general also competes with other sources of renewable energy and conventional power generation. See “Risk Factors — We face intense competition from other companies producing solar and other renewable energy products.”

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Corporate Structure and Organization

      The following diagram sets forth our expected corporate structure upon the closing of this offering:

      In complying with our reporting obligations under applicable Canadian securities laws we have undertaken (i) to treat each of Photowatt International S.A.S., Photowatt Technologies USA Inc. and Spheral Solar Power, Inc. as our subsidiary for financial reporting purposes in accordance with Canadian generally accepted accounting principles and, where Canadian generally accepted accounting principles prohibit the consolidation of financial information of any such subsidiary and us, and for as long as such subsidiary (including any of its significant business interests) represents a significant asset of the Company, provide separate financial statements and related management’s discussion and analysis for such subsidiary (including information about any of its significant business interests); (ii) to take appropriate measures to require insiders of each of Photowatt International S.A.S., Photowatt Technologies USA Inc. and Spheral Solar Power, Inc. to comply with reporting requirements and prohibitions against insider trading as if such subsidiary was a reporting issuer and (iii) to certify, on an annual basis, our compliance with the above undertakings.

Legal and Regulatory Matters

      There are no pending nor, to our knowledge, threatened legal proceedings that we believe will have a material effect on our business.

Patents and Trademarks

      We rely primarily on patent, trademark, trade secret, copyright law and other contractual restrictions to protect our intellectual property. Our success and ability to compete depends to a significant degree upon obtaining patent protection for our proprietary technology. We hold a number of patents, primarily in connection with various aspects of our Spheral Solar technology and also in connection with our ability to purify polysilicon fines, which is significant to our silicon supply strategy. The patents that we consider to be of the greatest importance to our Spheral Solar technology will expire between 2008 and 2023 and have been issued primarily in the United States, although we also have patent protection in certain jurisdictions in Europe and Asia for some of the same technology that is covered by our U.S. patents. We also hold a number of patents in the United States, France and other European countries, which will expire between 2007 and 2024, relating to some of the technology used in Photowatt International. The patents relating to the technology used in Photowatt International cover a small portion of the overall end-to-end manufacturing process, the balance of the technology being either public domain technology or technology developed by us and treated as trade secrets. With respect to those patents relating to the technology used in Photowatt International that have a short remaining term, we do not believe that their expiration will have a material

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effect on our business. We intend to continue to seek patent protection as we believe appropriate to protect our competitive advantage and for licensing opportunities of new technologies relevant to our business.

      We believe that many elements of our solar products and manufacturing processes involve proprietary know-how, technology or data that are not covered by patents or patent applications, including technical processes, equipment designs, algorithms and procedures. We generally do not require our employees (including our R&D personnel) to sign confidentiality or other agreements in respect of our intellectual property, nor do we require our contractors to sign general agreements in respect of intellectual property developed for us. This could adversely affect our ability to secure, protect and/or enforce intellectual property developed by and/or for us.

      We own a number of trademarks used in association with our products and services, some of which, are registered in the United States, Canada and a number of other countries. We are working to maintain and enforce our rights in our trademark portfolio, which is important to our reputation and branding.

Facilities

      Our corporate headquarters are located in Cambridge, Ontario, Canada, where we will lease a building from ATS with approximately 193,000 square feet of space. This building also houses our Spheral Solar technology development facility. Our Photowatt International facility occupies a total of approximately 130,000 square feet of manufacturing space in a building we own near Lyon, France. Photowatt USA leases a sales and module assembly facility in Albuquerque, New Mexico. See “— Our Business Strategy” for a discussion of our expansion plans, which include the construction of new facilities.

Environmental Matters

      We are required to comply with all foreign, national and local laws and regulations regarding the operation of industrial facilities, pollution control, the protection of natural resources and the environment and human health and safety. In addition, under some statutes and regulations, a government agency or other party may seek recovery and response costs from owners or operators of facilities where releases of hazardous substances have occurred or are ongoing, even if the owner or operator was not responsible for such release or otherwise at fault. We are also required to maintain and comply with a variety of environmental permits and authorizations. Any failure by us to comply with applicable regulations could subject us to potentially significant monetary damages or fines or otherwise result in the interruption of our business operations. In addition, should environmental regulations change or become more stringent, we could be required to incur costs that could be material to our operations or results. Furthermore, a 1997 environmental assessment report revealed the presence of dichloroethylene and vinyl chloride contamination in soil and groundwater at our facility in Lyon, France. No further assessment of this contamination has been undertaken. Should we choose to or be required to investigate or remediate this contamination, costs to do so could be material. We believe that we are otherwise in compliance in all material respects with applicable environmental laws and regulations.

      In France, our manufacturing facility is a classified installation for the protection of the environment subject to authorization by the local authorities. We are responsible for compliance with applicable environmental and health and safety regulations, including technical prescriptions imposed by environmental permits. Failure to comply with these regulations and prescriptions may result in criminal and administrative fines, or suspension or termination of our activities on the site. Pursuant to the applicable French regulations, upon voluntary or mandatory termination of the activities on the site, we may be required to undertake remediation of the site which could be costly.

      In addition, the implementation in the European Union of new chemicals legislation known as the Registration, Evaluation, Authorization and Restriction of Chemicals, or REACH, may result in additional costs or restrict our access to certain chemicals that are necessary for our manufacturing process. REACH, which was adopted in December 2006 and will come into force starting June 2007, will require producers and importers of chemicals in the European Union, in quantities at or above 1 ton per year, to formally register such chemicals with the newly formed European Chemicals Agency. Registration of approximately

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30,000 chemicals is estimated to be required, and the new registration process will be phased in over 11 years depending on the risk of the chemical and the quantity produced, with the first tranche of registrations required by 2010. As part of this registration, producers and importers will be required to evaluate, at their cost, the health and safety impacts of such chemicals, and they may ultimately pass these increased costs to downstream users of chemicals such as us. Moreover, certain substances of very high concern will require explicit Agency authorization for continued production or import, and may not be granted such authorization if the Agency determines that safer alternatives exist or could be developed. Consequently, our access to certain chemicals may be restricted, and any replacement of such chemicals may not be readily available to us or as effective in our manufacturing process. REACH is in its earliest stage of implementation and its impact on our expenses and manufacturing processes will not be fully known until the registration and evaluation procedures have taken place.

Employees

      As of July 31, 2006, we had 711 active employees, of which 604 are located at Photowatt International near Lyon, France, approximately 90 are located at our Spheral Solar technology development facility in Cambridge, Ontario, Canada and 17 are located at our sales and module assembly operations in Albuquerque, New Mexico, United States. From time-to-time, we also employ independent contractors. We plan to hire additional employees as we expand. Certain of our non-management employees in France belong to the CFDT (the Confédération Française Démocratique du Travail) union, and all of our non-management employees are covered by a collective bargaining agreement with a term lasting for an indefinite period, subject to termination and renegotiation by either party on one month’s notice. We have had no work stoppages during the past five years, and we believe our relations with our employees are good.

      At the time of the offering, some of our services, including certain information technology, legal, tax, treasury and human resource services, will be provided by ATS pursuant to a Transitional Services Agreement between us and ATS as described under “Our Relationship with ATS — Agreements Between ATS and Us — Transitional Services Agreement.”

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OUR RELATIONSHIP WITH ATS

General

ATS reorganization relating to our company

      Our parent company, ATS, is a leading designer and producer of turn-key automated manufacturing and test systems, which are used primarily by multinational corporations operating in a variety of industries including: automotive, computer/ electronics, healthcare, and consumer products. ATS also uses its many years of repetitive manufacturing experience and skills to produce precision components and sub-assemblies and specialized repetitive equipment. As of October 31, 2006, ATS employed approximately 3,700 people at 26 manufacturing facilities in Canada, the United States, Europe, southeast Asia and China. ATS’ shares are traded on the Toronto Stock Exchange under the symbol ATA.

      In March 2006, ATS announced that, following a review of the strategic alternatives for its solar business, it decided to pursue an initial public offering of the solar business segment. ATS’ solar business has different suppliers, customers and industry fundamentals compared to ATS’ automation and repetitive manufacturing businesses. The solar business also requires a significant amount of new capital to execute its strategic growth plan which has been developed to competitively position the business in the growing solar industry. ATS expects that the contemplated initial public offering will allow the solar business to raise significant capital and best position it to execute its strategic growth plan.

      ATS currently owns, either directly or indirectly through its subsidiaries, substantially all of our assets and operations. Upon the completion of this offering, ATS will establish our business as a separate, publicly traded company. To accomplish the separation of our business from the other businesses of ATS, ATS will undertake a corporate reorganization upon the closing of this offering under which ATS will transfer our assets and operations to us. ATS shareholders approved this reorganization at a meeting of ATS shareholders held on October 27, 2006.

ATS as our controlling shareholder

      Immediately following this offering, ATS will own of record and beneficially approximately           % of our common shares. If the underwriters exercise their over-allotment option in full, immediately following this offering ATS will own of record and beneficially approximately           % of our common shares. As long as ATS continues to control more than 50% of the voting power of our common shares, ATS will be able to direct the election of all of the members of our board and exercise a controlling influence over our business and affairs, including any determinations with respect to mergers or other business combinations involving us, our acquisition or disposition of assets, our incurrence of indebtedness, our issuance of any additional common shares or other equity securities, and the payment of dividends with respect to our common shares. Similarly, ATS will have the power to determine matters submitted to a vote of our shareholders without the consent of our other shareholders, will have the power to prevent a change in control of our company and will have the power to take other actions that might be favorable to ATS but unfavorable to us.

      In addition, pursuant to the Shareholder Agreement, the consent of ATS will be required in connection with certain corporate actions. See “Agreements Between ATS and Us — Shareholder Agreement — ATS approval for certain matters.”

      We and ATS have planned extensively for our separation from ATS. Through that process we have discussed potential conflicts of interest, and assets and other items have been allocated to us in a manner designed to avoid conflicts of interest. We do not expect there to be significant conflicts of interest with ATS because ATS operates primarily in a different business. To the extent that conflicts do arise, our board of directors consists of nine directors, only three of whom are employed by and are nominees of ATS. Our board will act to protect our interests in a conflict situation with ATS.

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Agreements Between ATS and Us

      This section provides a summary description of agreements between ATS and us relating to this offering and our relationship with ATS after this offering. The description of the agreements is not complete and, with respect to each such agreement, is qualified by reference to the terms of the agreement, each of which will be filed as an exhibit to the registration statement of which this prospectus is a part and with the Canadian securities regulatory authorities. We encourage you to read the full text of these agreements. We will enter into these agreements with ATS immediately prior to the completion of this offering; accordingly, we will enter into these agreements with ATS in the context of our relationship as a wholly-owned subsidiary of ATS. The prices and other terms of these agreements may be less favorable to us than those we could have obtained in arm’s-length negotiations with unaffiliated third parties for similar services or under similar agreements.

Overview

      The Master Separation Agreement provides for our separation from ATS, and contemplates that immediately prior to or concurrent with the closing of this offering, we will enter into certain other separation agreements with ATS that will govern certain aspects relating to the separation and various interim and ongoing relationships between ATS and us. These other separation agreements are:

•  Shareholder Agreement;

•  Transitional Services Agreement;

•  Registration Rights Agreement;

•  Master Supply Agreement;

•  Transfer Agreements; and

•  Lease Agreement.

Master Separation Agreement

      The Master Separation Agreement will contain the key provisions related to our separation from ATS in connection with this offering. All of our covenants and agreements and those of ATS in the Master Separation Agreement will survive indefinitely, subject to applicable laws. Certain of the principal provisions of the Master Separation Agreement are discussed below.

Ownership of assets

      The Master Separation Agreement provides for the separation of our assets and assumption of liabilities from ATS through transfer agreements that we will enter into with ATS upon the closing of this offering and a lease agreement that we will enter into with ATS immediately prior to the closing of this offering. See “Our Relationship with ATS — General — ATS reorganization relating to our company” and “Our Relationship with ATS — Agreements Between ATS and Us — Transfer Agreements” and “— Lease Agreement.” After the completion of this offering, if it is discovered that ATS has title to, or an interest in, any asset, other than an asset specifically excluded, that is used exclusively or held for use exclusively in our business, as it existed at the completion of the offering, ATS will cooperate with us and use commercially reasonable efforts to transfer such asset to us. Likewise, if it is discovered that we had at the completion of this offering title to, or an interest in, any asset other than those used or held for use exclusively in our business, as it existed at the completion of this offering, we will cooperate with ATS and use commercially reasonable efforts to transfer such asset to ATS.

Indemnification and Release

      We have agreed to indemnify ATS, each of its controlled subsidiaries (other than us and our controlled subsidiaries), and our and their respective directors, officers, employees, consultants, advisers and agents,

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from all losses they may suffer arising out of certain circumstances or events, whether such losses arise or accrue prior to, on or following the closing of this offering, including:

•  any failure by us or our affiliates or any other person to pay, perform or otherwise properly discharge any of our liabilities;

•  all liabilities arising out of or related to our present or future business, operations or assets;

•  any breach by us or any of our affiliates of any separation agreement;

•  with respect to all information contained in this prospectus, the registration statement of which it is part and any other materials distributed in connection with the initial public offering or the transactions contemplated in the separation agreements, any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, other than with respect to statements or omissions relating exclusively to (i) ATS and its subsidiaries (other than us, our subsidiaries, Automation Tooling Systems Enterprises, Inc. or Matrix Solar Technologies, Inc.), and (ii) ATS’s businesses (other than ours), which (i) and (ii) are collectively referred to as the “ATS Disclosure Portions;” and

•  any liability, covenant, term and condition of ATS in, to and under the contribution agreement between ATS, us and Technology Partnerships Canada (the “Technology Partnerships Canada Contribution Agreement”) described in note 14 to our combined annual financial statements.

      ATS will indemnify us, each of our controlled subsidiaries, and our and their respective directors, officers, employees, consultants, advisers and agents, from all losses we or they may suffer arising out of certain circumstances or events, whether such losses arise or accrue prior to, on or following the closing of this offering, including:

•  the failure by ATS or its affiliates (other than us) or any other person to pay, perform or otherwise properly discharge any of ATS’ liabilities;

•  all liabilities arising out of or related to ATS businesses or operations, excluding any liability with respect to the Technology Partnerships Canada Contribution Agreement and excluding any liability arising out of our present or future business, operations or assets;

•  any breach by ATS of any separation agreement; and

•  with respect to all information contained in the ATS Disclosure Portions, any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

      We and ATS will each waive all special, collateral, indirect, consequential, incidental or punitive damages (including lost profits or savings) incurred by either of us, other than those related to a third party in connection with an indemnification obligation.

      Subject to the indemnities described above, we and ATS will also release each other and our and its respective controlled subsidiaries, and our and their respective directors, officers, employees, consultants, advisers and agents, from any and all liabilities existing or arising from any acts, events or conditions occurring or existing on or before the time immediately prior to the closing of this offering, including any acts, events or conditions in connection with implementing this offering or the transactions contemplated in the separation agreements. This release will not impair either us or ATS from enforcing the master separation agreement, any other separation agreement or any other agreement between us and ATS in force and effect immediately prior to the closing of this offering.

Non-competition and non-solicitation

      The Master Separation Agreement provides that we (and/or our affiliates) will not, for a period of three years from the date of that agreement, directly or indirectly, engage in any development, production,

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manufacture, marketing, distribution, promotion or sale of products competitive with ATS products in any country in the world in which ATS conducts its business. In addition, under the Master Separation Agreement, we and ATS have agreed, for a period of five years from the date of that agreement, not to hire, employ, retain or contract for service, or offer to hire, employ, retain or contract for service, as a director, officer, employee, partner, consultant, independent contractor or otherwise, any individual employed by the other party or any of its affiliates, or solicit for employment, solicit for hire, contract for the services of, or encourage any individual to terminate his or her employment with the other party or any of its affiliates, subject in each case to certain limited exceptions.

Technology Partnerships Canada Contribution Agreement

      We have agreed to fulfill, observe, perform and comply with all the terms and conditions of the Technology Partnerships Canada Contribution Agreement together with ATS and to assume all the obligations of ATS under the Technology Partnerships Canada Contribution Agreement. During such period of time as ATS remains a party to and bound by the Technology Partnerships Canada Contribution Agreement, we will be unable to amend or assign the Technology Partnerships Canada Contribution Agreement or to seek the consent of any other party to the Technology Partnerships Canada Contribution Agreement to the waiver of any provisions thereof, without ATS’ prior written consent. We will also be unable to terminate or breach the Technology Partnerships Canada Contribution Agreement without prior consultation with ATS, such consultation to be conducted in good faith and for a reasonable duration. We have further agreed to take all actions (or refrain from any actions) reasonably requested by ATS in connection with any further consents, assignments or releases sought by ATS with respect to the Technology Partnerships Canada Contribution Agreement.

Retained interest of ATS in us

      Following the completion of this offering, ATS has the right, but not the obligation, to effect one or more distributions of its interest in us to its common shareholders. ATS may in its discretion determine whether to effect such transactions and, if so, the date of their consummation and all of their terms. Such transactions may take place directly or indirectly, by way of a single step or a series of one or more intermediate steps, including one or more distributions of shares of one or more affiliates of ATS. We are required by the Master Separation Agreement to cooperate with ATS in order to complete any such transactions and to promptly take any and all actions necessary or desirable to effect any such transactions.

      ATS has advised us that it has made no decision with regards to a spin-off, disposal, or other distribution of all or a portion of its remaining interest in us.

Expenses

      We will be responsible for all costs incurred in connection with this offering. We and ATS generally will be responsible for our own costs incurred in connection with the matters contemplated by the separation agreements and for those relating to a spin-off (or any other divestiture transaction employed by ATS).

Disputes

      Disputes under all separation agreements will be subject to a negotiation and mediation procedure.

     Assignment

      ATS will have the right to assign its rights under the Master Separation Agreement with our consent, such consent not to be unreasonably withheld. ATS will have the right to assign its rights under the Master Separation Agreement to an affiliate of ATS without our consent. We will have the right to assign our rights under the Master Separation Agreement with ATS’ consent, such consent to be granted or withheld in ATS’ sole discretion. Any permitted assignee shall agree to perform the obligations of the assignor of the Master Separation Agreement.

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Shareholder Agreement

      The Shareholder Agreement will provide for, among other things, restrictions on the composition of our board of directors, certain matters that we shall not undertake without ATS’ prior written consent, financial reporting to ATS, and certain other governance matters. The Shareholder Agreement does not in any way limit the ability of ATS to exercise its rights attached to our common shares.

Our Board of Directors

      ATS will have certain rights in respect of our board of directors under the Shareholder Agreement. For so long as ATS holds at least 40% of our outstanding shares, ATS will be entitled to designate the number of nominees for election as directors of our board that comprise 25% of the directors of our board (rounded up to the nearest whole number, provided our board consists of at least six directors). For so long as ATS owns at least 10%, but less than 40%, of our outstanding shares, ATS is entitled to designate one nominee for election as director to our board of directors. It is expected that our board will be initially comprised of nine members. ATS will initially designate three nominees for election as directors to our board.

      The ATS nominees to our board of directors may be directors, officers or employees of ATS or its affiliates or such other individuals as ATS may designate from time to time, subject to applicable director independence rules.

Quorum

      A quorum for a meeting of our board of directors shall be a majority of the number of directors, subject to the Canadian residency requirements under the Canada Business Corporations Act, which requires that at least twenty-five percent of the directors present at the meeting are resident Canadians, and for so long as ATS holds not less than 40% of our outstanding common shares, subject to one ATS board nominee being in attendance. In the event that a quorum is not present for a meeting (an “initial directors’ meeting”), then any two directors may call a meeting of the directors by proper notice to be held on a date no earlier than the fifth business day following the initial directors’ meeting solely to address the business proposed at the initial directors’ meeting. A quorum for such further meeting shall not require one ATS board nominee to be in attendance.

Committees of our Board of Directors

      The Shareholder Agreement will provide that our board of directors establish an audit committee and a compensation and governance committee, each consisting of three to five members appointed by our board. Our board of directors may also establish such other committees as it may determine from time to time. Under applicable securities laws, all members of the audit and finance committee must be independent.

ATS approval for certain matters

      The Shareholder Agreement will provide that, for so long as ATS, directly or indirectly, holds not less than 50% of our outstanding common shares, we shall not, and shall not permit any subsidiary entity to, without the affirmative vote of a majority of our board of directors and the written consent of ATS as a shareholder:

•  enter into any merger, amalgamation, plan of arrangement, consolidation, business combination, joint venture or other material corporate transaction, including the acquisition of any business or securities of any person (other than wholly-owned subsidiaries of ours) or the acquisition, license, lease, exchange of assets or the assumption of any obligations, in each case with a fair market value in excess of C$50 million;

•  sell, lease, exchange, license on an exclusive basis or dispose of, in a single transaction or in a series of transactions, property or assets with a fair market value in excess of C$50 million, other than the sale or disposition of inventory in the ordinary course of business, or sell or grant an exclusive license with respect to material intellectual property;

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•  adopt any plan or proposal for a complete or partial liquidation or dissolution or any reorganization or commence any case, proceeding or action seeking relief under any existing laws or future laws relating to bankruptcy or insolvency;

•  take any action that could reasonably be expected to lead to or result in a material change in the nature of our business;

•  issue any shares of our capital stock, or any rights, warrants or options to acquire our capital stock (excluding securities issued pursuant to share compensation arrangements), if the issuance exceeds 5% of our outstanding common shares;

•  take any action limiting the rights of ATS or any of its affiliates to transfer shares of our stock they own or that would limit the right of any transferee of ATS or any of its affiliates;

•  take any action that would limit the rights of, or deny any benefit to, ATS or any of its affiliates as holders of our common shares either solely as a result of the amount of shares owned or in a manner not applicable to holders of common shares generally;

•  enter into a partnership or any arrangement for the sharing of profits, union of interests, joint venture or reciprocal concession with any person if the aggregate fair market value of the assets contributed and liabilities assumed by us (and our subsidiaries) in connection therewith either exceeds on formation or at any time in the future could reasonably be expected to exceed C$50 million; or

•  make any commitment or agreement to do any of the foregoing.

Financial reporting

      Under the Shareholder Agreement, we have agreed that, for so long as ATS is required to consolidate our results of operations and financial position, and for a further 12 months after the date on which ATS ceases to be required to do so, we will:

•  maintain the same fiscal year as ATS;

•  deliver certain periodic budgets and financial projections, and monthly, quarterly and annual financial reports to ATS;

•  provide to ATS an opportunity for preliminary review of any reports or other information that we send to our shareholders or file with Canadian securities regulatory authorities, the SEC or any securities exchange or quotation system, as well as any press releases regarding annual and quarterly earnings and interim financial guidance;

•  cooperate, and use commercially reasonable efforts to cause our auditors to cooperate, to the extent reasonably requested by ATS, in connection with the preparation of ATS’ financial statements and other information provided to the public, Canadian securities regulatory authorities, the SEC or any securities exchange or quotation system by ATS; and

•  unless otherwise required by law, to the extent practicable, keep our accounting policies and practices consistent with those of ATS.

      We have also agreed that, for so long as ATS is required to consolidate our results of operations and financial position, and for a further 12 months after the date on which ATS ceases to be required to do so, our annual financial statements and related information will be prepared in accordance with Canadian GAAP and, where practicable, consistent with ATS financial statement presentation. However, we will report our results in U.S. dollars and will include in the notes to our financial statements a reconciliation quantifying all material differences in our financial statements had they been prepared in accordance with United States generally accepted accounting principles.

      We have agreed that, after the expiry of 12 months after the date on which ATS ceases to be required to consolidate our results of operations and financial position, for so long as ATS is required to account for its investment in our company under the equity method of accounting, we shall provide ATS, in a timely fashion and in any event in sufficient time to allow ATS to meet its financial and legal obligations, with financial and

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other information and data with respect to us and our subsidiaries and our and our subsidiaries’ respective businesses, properties, financial positions, results of operations and prospects, and otherwise comply with the financial reporting requirements listed and described above to the extent reasonably requested by ATS.

     Assignment

      ATS will have the right to assign its rights under the Shareholder Agreement with our consent, such consent not to be unreasonably withheld, provided that if the assignee is a significant competitor of ours, we may withhold our consent in our own sole discretion. If assigned to a non-ATS affiliate, the rights of ATS referred to under “— ATS approval for certain matters” will expire on the 90th day following the date of assignment. ATS will have the right to assign its rights under the Shareholder Agreement to an affiliate of ATS without our consent. We will have the right to assign our rights under the Shareholder Agreement with ATS’ consent, such consent to be granted in ATS’ sole discretion.

Term

      The Shareholder Agreement will continue in force until the earlier of the date on which the Shareholder Agreement is terminated by written agreement of both us and ATS and such time when ATS (together with any of its affiliates) holds, directly or indirectly, less than 10% of our outstanding common shares.

Transitional Services Agreement

      The Transitional Services Agreement is designed to help us and ATS transition to being two separate public companies, each with its own administrative resources. Under the Transitional Services Agreement, ATS will provide services to us and/or to one or more of our subsidiaries, and include certain:

•  communications services such as phone, cell phone and wireless devices;

•  tax and merger and acquisition transaction services;

•  payroll;

•  information technology, including access to network, systems, applications and technical support;

•  human resources and employee benefits;

•  legal services;

•  insurance services;

•  accounting support and treasury; and

•  other specified services.

      ATS will use commercially reasonable efforts to perform these services at the same level of service as such services have been provided prior to the date of the Transitional Services Agreement. The use of such services generally will not be substantially greater than the level of use required prior to the completion of this offering.

      These services will be provided for a period of 12 months. ATS may terminate the Transitional Services Agreement if we fail to perform any of our material obligations and do not remedy the failure within 30 days after receipt of written notice of such failure from ATS. ATS may terminate the provision of any individual service under the Transitional Services Agreement on 30 days prior written notice if the provision of the service becomes commercially impracticable for ATS, including, for example, a prohibition against continued performance in any contract with a third party providing the service in question. We may terminate any individual service under the Transitional Services Agreement if ATS fails to perform any of its material obligations and does not remedy the failure within 30 days after receipt of written notice of such failure from us. We may terminate the Transitional Services Agreement or any individual service for convenience upon 30 days written notice, provided we pay all costs incurred by ATS in connection with such termination.

      The Transitional Services Agreement will provide for fixed-price billing, fixed-rate billing, and pass-through billing for services provided either directly or indirectly by ATS to us. The fixed-price portion of the fees that we will pay ATS under the Transitional Services Agreement over its 12-month term is estimated to

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be approximately $                    . The fixed prices and fixed rates will be specified in the Transitional Services Agreement. Certain of these prices will be based on ATS’s costs plus an administrative charge, and certain of these prices will be based on estimated market prices.

Registration Rights Agreement

      Prior to the consummation of this offering, we will enter into a registration rights agreement with ATS. The registration rights agreement will include rights to require us to register the offer and sale of our common shares held by ATS on up to four different occasions. ATS may also require us to file registration statements on Form F-3 once we become eligible to use that form. We will be entitled to defer the filings of these registration statements in certain circumstances for a limited period. The registration rights agreement also will include the right to require us to include our common shares held by ATS in future registration statements that we file with the SEC. The agreement also will provide ATS with comparable rights to require us to qualify our common shares held by ATS for distribution, by prospectus or otherwise, in any province or territory of Canada in which we are a reporting issuer. These rights are subject to various conditions and limitations.

      We will bear all expenses incurred in connection with these registrations, other than any underwriting discounts and commissions. Registration of our common shares upon the exercise of these registration rights would result in such shares becoming freely tradable without restriction under the Securities Act or Canadian securities laws.

Master Supply Agreement

      Under the Master Supply Agreement, ATS will have a right of first refusal to supply us with certain Spheral Solar equipment and related services.

      The right of first refusal would be triggered where we receive an offer from a third party or where any agreement is tentatively reached with any third party for the supply of certain equipment and related services. ATS would have a period of 30 days to exercise its right of first refusal and elect to supply such equipment and related services to us on the same terms and conditions of the third party’s offer with respect to price, specifications and delivery. If ATS does not exercise its right of first refusal, then we are free to accept the third party offer. However if the third party offer is subsequently revised, we must provide ATS with its right of first refusal by giving notice to ATS. If ATS fails to perform any of its material obligations with respect to any equipment supplied pursuant to the right of first refusal on two or more occasions, we may terminate the right of first refusal. The right of first refusal provisions may be waived by ATS and us in specific instances.

      In addition, ATS will be our preferred supplier with respect to certain other equipment and related services listed in a schedule to the Master Supply Agreement. If we determine to purchase certain specified equipment and related services, we must notify ATS and provide ATS with the opportunity to bid on or make a proposal to supply such equipment and services.

      ATS would provide its standard warranty that the equipment supplied would be free from defects in workmanship and material and shall materially conform to the specifications for the equipment for a period of 12 months from the date of successful site acceptance testing of the equipment in our plant or 15 months from the date of shipment, whichever occurs first.

      In addition, for an agreed charge of C$10.00 per square foot per year, ATS will agree to house at its premises two of our aluminium foil presses, known as the “Systems 1 Press” and the “AMD Press,” occupying approximately 5,000 square feet and 2,500 square feet, respectively, of ATS’ premises. ATS will allow us and our affiliates access to ATS’ premises during normal business hours upon reasonable notice in order to be able to use and operate the Systems 1 Press for research and development purposes. ATS will supply to us such quantities of aluminium foil processed by the AMD Press as we may order (subject to available labor, supplies and press capacity) at a price equal to ATS’ manufacturing costs plus 12%. This foil would be used by us in the manufacture of Spheral Solar products if and when we grant firm purchase orders for these products. The supply by ATS to us of these foil products is on an “as is” basis, recognizing that we own the AMD Press and will be responsible for its maintenance. The provisions of the Master Supply Agreement relating to our use of ATS’ premises for these aluminium foil presses may be terminated by ATS

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or us on six months notice but ATS is not permitted to exercise this termination right for a period of one year from the effective date. Upon termination or notice of termination, we would de-install and remove the foil presses from ATS’ premises at our sole cost.

      The Master Supply Agreement terminates on the earlier of (i) five years from its effective date; and (ii) once ATS holds, directly or indirectly, less than 10% of our outstanding common shares. In addition, we may terminate any individual project agreement provided we give 10 days’ written notice and compensate ATS for its costs incurred or committed. However, the provisions of the Master Supply Agreement with respect to the aluminum foil presses, described above, will continue for a period of time if the Master Supply Agreement terminates as a result of ATS’ ownership interest in Photowatt falling below 10% of outstanding common shares.

      Any liability of ATS to us, our affiliates and our and their respective directors, officers, employees and agents under the Master Supply Agreement is limited to the amount actually received by ATS for products sold to us.

ATS solar automation know-how

      Pursuant to the Master Separation Agreement, ATS will retain its solar automation know-how, which is all information known to, and intellectual property rights owned by, ATS relating to automated solar equipment. This know-how primarily relates to the design and manufacture of certain equipment that automates one or more of the steps involved in manufacturing solar products. We use some of this know-how in our business, primarily in relation to our use of ATS equipment, ATS being one of a number of equipment suppliers we utilize. Upon completion of the offering, we will obtain an irrevocable, personal, non-exclusive, worldwide, royalty-free, perpetual right and license to use the ATS solar automation know-how in our possession immediately prior to the completion of this offering, solely for our internal use in conducting our business. This license will be non-transferable and may not be sub-licensed without the express written consent of ATS, except to a wholly-owned subsidiary of ours, for so long as it remains a wholly-owned subsidiary of ours. Such license will not entitle us to use the ATS solar automation know-how for the benefit of a competitor of ATS other than with respect to the manufacturing of equipment for us. This license does not include any intellectual property rights owned by ATS solely to the extent covered by any patent or application owned by ATS, the exclusion of which we believe will not have any material effect on our business.

      ATS may indirectly compete with us to the extent that it manufactures solar equipment for competitors of ours. See “Risk Factors — ATS may enter into contracts relating to the design and manufacture of automated manufacturing and test systems with our competitors or potential competitors.”

Transfer Agreements

      The Transfer Agreements provide for the transfer of ATS’ interest in the assets that are used exclusively in our business conducted by ATS and its subsidiaries upon the completion of this offering, subject to certain excluded assets including:

•  the premises and building that are the subject of the Lease Agreement;

•  the investment of ATS in securities of Canadian Solar Inc., a solar module assembly company in which ATS has a portfolio investment;

•  ATS solar automation know-how; and

•  any tax loss carryforwards, Canadian tax credits or related valuation allowances.

      Pursuant to the Transfer Agreements, in consideration for the transfer of assets by ATS to us, we will issue common shares to ATS and we and our subsidiaries will assume all liabilities, including an inter-company demand loan from ATS, relating to the solar business conducted by ATS and its subsidiaries immediately prior to the completion of this offering.

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Lease Agreement

      The Master Separation Agreement contemplates that, immediately prior to the closing of this offering, we will enter into a lease agreement with ATS that relates to our Spheral Solar manufacturing facility at 25 Reuter Drive in Cambridge, Ontario (the “Lease Agreement”). The term of the Lease Agreement is for two years and we will pay ATS rent at a rate of C$1 per year during that period. Thereafter, we will have the option to renew the Lease Agreement for a five year period, and subsequently, for a further five year period. The rate of rent for each renewal period, respectively, will be the then prevailing market rate of rent as determined by a process outlined in the Lease Agreement.

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MANAGEMENT

Directors and Executive Officers

      The following table sets forth information regarding our directors and executive officers.

Name	Municipality of Residence	Age		Position/Title
Silvano Ghirardi	Oakville, Ontario		58	President and Chief Executive Officer and Director
David L. Adams	Beaconsfield, Quebec		50	Senior Vice President and Chief Financial Officer
Gary J. Seiter	New Dundee, Ontario		50	Senior Vice President — Operations and Technology
Jean-Louis Dubien	Ruy-Montceau, France		39	Managing Director, Photowatt France
Robert M. Franklin(2)	Willowdale, Ontario		60	Director — Chairman
Gerald R. Beard	Woolwich, Ontario		35	Director
Wayne S. Hill(1)	Toronto, Ontario		60	Director
Ronald J. Jutras(2)	Waterloo, Ontario		51	Director
Kirk Mandy(1)(2)	Ottawa, Ontario		50	Director
Stewart McCuaig	Kitchener, Ontario		44	Director
C. Ian Ross(1)	Collingwood, Ontario		64	Director
John W. Sheridan(2)	Vancouver, British Columbia		51	Director

(1)	Member of the Audit and Finance Committee
(2)	Member of the Compensation, Corporate Governance and Nominating Committee

      Mr. Silvano Ghirardi is our president and chief executive officer and director, having joined ATS in 2005, and has diverse experience in international operations, marketing and start-up business. Mr. Ghirardi became our director in August 2006. From 2002-2005, Mr. Ghirardi was the president and chief operating officer of Hoya Opthalmics North America, a division of the Hoya Corporation, a Japanese company whose shares are traded on the Tokyo Stock Exchange and which is among other things the second largest publicly traded global manufacturer of prescription spectacle lenses. From 2000-2002, Mr. Ghirardi was the president and chief executive officer of Sartorius NA, a biotechnology and scientific instruments company. From 1996-2000, Mr. Ghirardi was the president and chief executive officer of 2C Optics Inc., a start-up company funded by venture capital, Dow Chemical, PPG Industries and Rodenstock and other industry participants for the purpose of producing plastic spectacle prescriptions, on demand, utilizing proprietary technology. Before that, Mr. Ghirardi held a variety of senior management positions at Ciba Vision, a business unit of Novartis AG focused on lenses, lens care and opthalmic pharmaceuticals, joining as an early founder in 1981, until 1995-1996 as president. Mr. Ghirardi is a graduate of Harvard University, Graduate School of Business, Executive MBA (PMD) Program and attended Atkinson College, York University, Toronto (CIM/ BA Marketing). He will no longer be employed by ATS following this offering, at which time he will be employed exclusively by us.

      Mr. David L. Adams is our senior vice president and chief financial officer, having joined ATS in June 2006. From 1999 through 2005, Mr. Adams was the senior vice president and chief financial officer at SR Telecom Inc., where he was also secretary of the corporation. From 1994 to 1998, he was Vice President Finance & Administration at CAE Electronics Ltd., and Treasurer of CAE Inc., from 1988 to 1994. Mr. Adams holds a Bachelor of Commerce and Finance from the University of Toronto, is a Chartered Accountant and has completed the Stanford Executive Program. He will no longer be employed by ATS following this offering, at which time he will be employed exclusively by us.

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      Mr. Gary J. Seiter is currently the senior vice president of operations and technology, having joined ATS in May 2006. From 2005-2006, Mr. Seiter was senior director of operations and engineering at SUMCO USA. Prior to that, he held various engineering and management roles for Motorola, Inc. from 1980 until 2000-2004 as director of manufacturing operations. Mr. Seiter holds both a Bachelor of Science in Electrical Engineering and a Master of Science in Electrical Engineering from the University of Missouri — Rolla as well as an MBA from Western International University in Arizona. He will no longer be employed by ATS following this offering, at which time he will be employed exclusively by us.

      Mr. Jean-Louis Dubien is the managing director of Photowatt France, having joined Photowatt France in 1991. Throughout his 15 year tenure with Photowatt France, Mr. Dubien has held several key management positions including vice president of operations and, prior to that, manufacturing manager. Mr. Dubien has made significant contributions during this time, specifically including his improvement of our innovative wire saw technology as well as having successfully implemented measures which have directly resulted in sustained yield and throughput improvements in each of our wafer, cell, ingot and module workshops. Mr. Dubien holds a degree in Mechanical Engineering from the Ecole Nationale d’Ingénieurs de Saint-Etienne France.

      Mr. Robert M. Franklin has been our director and chairman since August 2006. He has played a leadership role in a number of public companies over the past 30 years, including serving as chairman of the board of directors of Placer Dome Inc., from 1993-2006. Currently, Mr. Franklin is a director of Barrick Gold Corporation, of Toromont Industries, of Resolve Corporation, of Great Lakes Carbon Income Fund and of First Uranium Corporation. He is also the founder and president of Signalta, a private investment firm. Mr. Franklin holds a Bachelor of Arts in Business Administration from Hillsdale College, Michigan.

      Mr. Gerald R. Beard has been our director since October 2006. He is currently the vice president and chief financial officer of ATS, which he joined in 2001. He is an honors graduate of the University of Waterloo, a Chartered Accountant and a Chartered Business Valuator, and he obtained his Certified Public Accountant designation in 2001. Prior to joining ATS, Mr. Beard was a senior manager at KPMG. Mr. Beard was appointed to our board as a nominee of ATS.

      Mr. Wayne S. Hill has been our director since August 2006. He is currently a director and the executive vice president of Toromont Industries Ltd., a company listed on the Toronto Stock Exchange, having joined as vice president, finance in 1985. Prior to joining Toromont Industries Ltd., Mr. Hill served as vice president, finance at Maclean Hunter Limited, a Canadian based communications and publishing company and spent 3 years as director, planning and finance with Massey Ferguson Limited, a heavy equipment and engine manufacturer. Mr. Hill has a Bachelor of Commerce degree from Queen’s University and is a Chartered Accountant.

      Mr. Ronald J. Jutras has been our director since July 2006. He is currently the president and chief executive officer and a director of ATS, which he joined in 1985. Prior to being promoted to president and chief executive officer, Mr. Jutras held the positions of executive vice president, chief operating officer, and chief financial officer, and has served as an ATS director since 1993. Prior to joining ATS, he was employed for seven years by KPMG Peat Marwick Thorne as an accountant and business advisor. Mr. Jutras is an Honours Business Administration graduate of Wilfrid Laurier University and a Chartered Accountant. Mr. Jutras was appointed to our board as a nominee of ATS.

      Mr. Kirk Mandy has been our director since August 2006. Since 2005, he has been the president and chief executive officer of Zarlink Semiconductor, a company listed on the Toronto Stock Exchange and the New York Stock Exchange. Mr. Mandy was the vice chairman and a director of Zarlink from 2001 until 2005. From 1984-2001, Mr. Mandy held various senior management roles in Mitel Corporation, including president and chief executive officer from 1998-2001, vice president and general manager of the Business Communications Unit from 1997-1998, vice president and general manager of the Semiconductor Division from 1992-1998, and various manufacturing, product operations and research and development roles from 1984-1992. From 1976-1984, he held various roles in GTE, Gandalf Technologies Inc. and Bymanics. Mr. Mandy is currently a member of the board of Epocal Inc., Mitel Networks Corporation and vice chairman of the Armstrong Monitoring Corporation. He has served on the board of the Strategic

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Microelectronics Corporation (SMC), the Canadian Advanced Technology Association (CATA), The Canadian Microelectronics Corp. (CMC), The Ottawa Center for Research and Innovation (OCRI), and Micronet. He is also past chairman of the Telecommunications Research Center of Ontario (TRIO), past chairman of the National Research Council’s Innovation Forum, and past co-chairman of the Ottawa Partnership. Mr. Mandy is a graduate of Algonquin College.

      Mr. Stewart McCuaig has been our director since July 2006. He is currently vice president, general counsel and corporate secretary at ATS and has been with ATS since December 2005. From 2000-2005, Mr. McCuaig was general counsel and corporate secretary at Syndesis Limited, a private venture capital backed telecommunications software company. From 1998-2000, he was general counsel and corporate secretary at Mortice Kern Systems Inc., a Toronto Stock Exchange-listed company. From 1988-1998, Mr. McCuaig was an associate/partner at the law firm of Sims Clement Eastman. Mr. McCuaig was admitted to the Bar in Ontario in 1988. Mr. McCuaig completed undergraduate courses at the University of Western Ontario and holds an LL.B. from the University of Toronto, an LL.M. from Osgoode Hall Law School, and has taken graduate business courses at Wilfrid Laurier University. Mr. McCuaig was appointed to our board as a nominee of ATS.

      Mr. C. Ian Ross has been our director since August 2006. He is currently the chairman of the board of directors of GrowthWorks Canadian Fund Ltd., of GrowthWorks Commercialization Fund Ltd., of PetValu Inc. and of World Heart Corporation and is currently a director of Ontario Power Generation, Comcare Canada Limited and eJust Systems Inc. He has in the past been a senior director, administration, at the Richard Ivey School of Business, University of Western Ontario, a trustee of the McMichael Canadian Art Collection, an executive in residence at the Richard Ivey School of Business, University of Western Ontario, and a governor of Ortech Corporation. Mr. Ross served as the president and chief executive officer of Ortech Corporation from 1998-1999, the chairman, president and chief executive officer of Provincial Papers Inc. from 1993-1997, the president and chief executive officer of Paperboard Industries Corporation from 1986-1990, and executive vice president, finance and development, of Kinburn Corporation from 1979-1986. Prior to that, he held a variety of management roles with Canada’s Export Development Corporation and with the Bank of Montreal. Mr. Ross holds a B.A. from the University of Western Ontario, an LL.B. from the University of Toronto and is a Member of the Law Society of Upper Canada.

      Mr. John W. Sheridan has been our director since August 2006. He is currently president and chief executive officer of Ballard Power Systems, a Canadian manufacturer of fuel cells, having served as the interim president and chief executive officer from 2005 until February of 2006 and having served as chairman of the board from 2004 to February of 2006. Prior to that, Mr. Sheridan held various senior management roles in the BCE family of companies from 1979, until 2001-2003 as president and chief operating officer, Bell Canada. Mr. Sheridan’s outside directorships currently include serving as a director of Ballard Power Systems and as a director of NewPage Inc., and have in the past included directorships with Bell Canada, Aliant Inc., MTS Inc., Sun Media Inc., Bell Sygma UK and Encom Ltd. Mr. Sheridan holds a B.E.S. from the University of Waterloo, a B.A. in Economics from Wilfred Laurier University and an M.A. in Economics from Queen’s University.

      The business address of our directors and executive officers is c/o 25 Reuter Drive, Cambridge, Ontario, Canada N3E 1A9.

Other Key Personnel

      Mr. Eric Laborde is a consultant who serves as managing director, Europe (acting) of Photowatt France, having joined as general manager in 2001. His consulting agreement with us has a term of one year and is renewable annually. He has extensive technology based experience that spans over 20 years. He is currently on the board of directors and councils of Swiss and Savoy Managers and Episol s.a.r.l. as well as director of various non-profit organizations such as the ODES Group and the European Photovoltaic Industry Association (EPIA). From 1998-2000, Mr. Laborde was the president of CGL Thermoformage, a French leader in tailor made thermoformed plastic packaging. From 1990-1998, Mr. Laborde held various management positions with Adidas Salomon Group. From 1985-1989, Mr. Laborde held various management positions with Ciapem,

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a division of Thomson Consumer Goods. Mr. Laborde holds a degree in Mechanical Engineering from Ecole Nationale des Techniques Avancees (ENSTA) and from Ecole Polytechnique, France.

Board of Directors

      Our board of directors consists of nine members. Our board of directors has determined that the following directors are independent within the meaning of Rule 4200(a)(15) of the Nasdaq Marketplace Rules:

•  Robert M. Franklin

•  Wayne S. Hill

•  Kirk Mandy

•  C. Ian Ross

•  John W. Sheridan

Committees of the Board of Directors

      Our board of directors has established an audit and finance committee and a compensation, corporate governance and nominating committee.

Audit and finance committee

      The primary functions of the audit and finance committee will be to oversee our accounting and financial reporting practices and the auditing of our financial statements. In addition, the audit and finance committee will assist the board of directors in fulfilling its oversight responsibilities relating to financial disclosures and internal controls over financial reporting; monitoring the system of internal controls; monitoring our compliance with legal and regulatory requirements relating to financial reporting; monitoring our compliance with the applicable requirements of the Nasdaq Global Market and the Toronto Stock Exchange; selecting the external auditors for shareholder approval; reviewing the qualifications, independence and performance of the external auditors; reviewing the qualifications, independence and performance of our financial management; and identifying, evaluating and monitoring the management of our principal risks impacting financial reporting. The committee will also assist the board of directors with the oversight of financial strategies and overall risk management.

      The audit and finance committee will be composed of Mr. Wayne S. Hill (Chair), Mr. C. Ian Ross and Mr. Kirk Mandy. The board has determined that Mr. Hill will serve as the audit committee financial expert. Every member of the audit and finance committee will be independent within the meaning of Rule 10A-3 under the Securities Exchange Act of 1934, as amended, Rule 4200(a)(15) of the Nasdaq Marketplace Rules and Multilateral Instrument 52-110 — Audit Committees of the Canadian Securities Administrators.

Compensation, corporate governance and nominating committee

      The primary functions of the compensation, corporate governance and nominating committee will be to discharge the board of directors’ duties and responsibilities relating to compensation and human resource policy, to assist the board of directors in identifying, recruiting and nominating suitable candidates to serve on the board of directors and to succeed the chief executive officer and to assist the board of directors in fulfilling its corporate governance oversight responsibilities. The committee will be responsible for determining the performance goals for the chief executive officer, evaluating the chief executive officer’s performance in light of such goals, and recommending the chief executive officer’s compensation package and employment arrangements. The committee will also be responsible for recommending the compensation packages for senior management and non-employee directors. In addition, the committee is responsible for reviewing and providing recommendations on our compensation principles, policies and plans, including our equity-based compensation plans. The compensation, corporate governance and nominating committee will evaluate the effectiveness of our board of directors as a whole, each committee of our board of directors and

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the contribution of individual directors. The committee will also review and assess management’s compliance with our Code of Business Conduct.

      The compensation, corporate governance and nominating committee will be composed of Mr. John W. Sheridan (Chair), Mr. Robert M. Franklin, Mr. Kirk Mandy and Mr. Ronald J. Jutras. After the completion of this offering, ATS will own more than           % of the total voting power of our common shares and we will be a “controlled company” within the meaning of the Nasdaq Marketplace Rules. As a controlled company, we will be exempt from the requirements that the compensation of our chief executive officer and our other executive officers be determined, or be recommended to our board of directors for determining, either by a majority of the independent directors or a compensation committee comprised solely of independent directors, that our director nominees be selected, or recommended for the board’s selection, either by a majority of the independent directors or a nominations committee comprised solely of independent directors, and that we have a written charter or board resolution addressing our director nominations process, and we intend to rely on these exemptions. See “Risk Factors — We will be a “controlled company” within the meaning of the rules of The Nasdaq Global Market, and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.”

Terms of Directors and Executive Officers

      Our officers are elected by and serve at the discretion of the board of directors. Our directors serve for one-year terms.

Employment Agreements

      We have an employment contract effective May 20, 2005 (and amended effective October 13, 2006) with Mr. Ghirardi, our president and chief executive officer. Under the contract, Mr. Ghirardi is entitled to receive an annual salary of C$357,000, may be entitled to a bonus (subject to board approval) which is currently targeted to equal 25% of his annual salary but may increase to a maximum of 50% of his annual salary, and is eligible to participate in our share compensation arrangements. In addition, he is entitled to participate in all of our regular employee benefit plans that he is qualified for, reimbursement of all reasonable out-of-pocket expenses incurred in the performance of his duties, reimbursement of relocation expenses to a maximum of US$55,000, reimbursement of temporary living accommodations and related expenses up to a maximum of C$2,000 per month until November 20, 2005 and an annual car allowance of C$10,000. In the event that Mr. Ghirardi’s employment is terminated with cause or he is unable to perform his services for a continuous period of 180 days, he is entitled to his salary and benefits until the effective termination date of his employment. If, however, Mr. Ghirardi’s employment is terminated without cause, he is entitled to be paid his monthly salary and have his regular employee benefits continued during a notice period of 24 months. In addition, Mr. Ghirardi can terminate his employment with us at any time upon 30 days’ written notice and upon receipt of such notice, we have the right to accelerate the termination date. In this event, Mr. Ghirardi is only entitled to his salary and benefits until the effective termination date. Upon a change of control of our company, Mr. Ghirardi can terminate his employment for any reason within twelve months of such change of control. A “change of control” is defined as (i) any person or persons who acting in concert, other than ATS, become the beneficial owner of over 50% of the votes attaching to our outstanding voting securities, (ii) certain changes in the composition of our board of directors, (iii) certain reorganizations affecting our company, or (iv) the sale of all or substantially all of our assets subject to certain exceptions, including the sale, by ATS or one of its affiliates, of our shares in conjunction with a public offering. In such event, Mr. Ghirardi is entitled to be paid his monthly salary and have his regular employee benefits continued for 24 months. Under the contract, Mr. Ghirardi has disclaimed any rights to all intellectual property created by him or jointly with others while employed with us. In addition, following termination of employment, Mr. Ghirardi will be subject to a one year non-competition covenant applicable worldwide and a two year non-solicitation covenant. We have agreed to review Mr. Ghirardi’s compensation package following the completion of this offering.

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      We have an employment contract effective June 7, 2006 with Mr. Adams, our senior vice president and chief financial officer. Under the contract, Mr. Adams is entitled to receive an annual salary of C$250,000, may be entitled to a bonus (subject to board approval) which is currently targeted to equal 40% of his annual salary but may increase to a maximum of 80% of his annual salary, and is eligible to participate in our share compensation arrangements. In addition, he is entitled to participate in all of our regular employee benefit plans that he is qualified for, reimbursement of all reasonable out-of-pocket expenses incurred in the performance of his duties, reimbursement of relocation expenses to a maximum of C$55,000, supplemental monthly benefit of C$2,000 until the earlier of securing permanent relocated housing and June 30, 2007 and an annual car allowance of C$9,880. In the event that Mr. Adams’ employment is terminated with cause or he is unable to perform his services for a continuous period of 180 days, he is entitled to his salary and benefits until the effective termination date of his employment. If, however, Mr. Adams’ employment is terminated without cause, he is entitled to be paid his monthly salary and have his regular employee benefits continued during a notice period of not less than 12 months and not more than 18 months, depending on his years of service with us. In addition, Mr. Adams can terminate his employment with us at any time upon 30 days’ notice and upon receipt of such notice, we have the right to accelerate the termination date. In this event, Mr. Adams is only entitled to his salary and benefits until the effective termination date. Upon a change of control of our company, either we or Mr. Adams can terminate his employment for any reason within three months of such change of control. A “change of control” is defined as (i) any person or persons who acting in concert, other than ATS, become the beneficial owner of over 50% of the votes attaching to our outstanding voting securities, (ii) certain changes in the composition of our board of directors, (iii) certain reorganizations affecting our company, or (iv) the sale of all or substantially all of our assets subject to certain exceptions. In such event, Mr. Adams is entitled to be paid his monthly salary and have his regular employee benefits continued for 18 months. Under the contract, Mr. Adams has disclaimed any rights to all intellectual property created by him or jointly with others while employed with us. In addition, following termination of employment, Mr. Adams will be subject to a one year non-competition covenant applicable worldwide and a one year non-solicitation covenant.

      We have an employment contract effective April 10, 2006 with Mr. Seiter, our senior vice president of operations and technology. Under the contract, Mr. Seiter is entitled to receive an annual salary of C$230,000, may be entitled to a bonus (subject to board approval) which is currently targeted to equal 30% of his annual salary but may increase to a maximum of 50% of his annual salary, and is eligible to participate in our share compensation arrangements. In addition, he is entitled to participate in all of our regular employee benefit plans that he is qualified for, and reimbursement of all reasonable out-of-pocket expenses incurred in the performance of his duties. In the event that Mr. Seiter’s employment is terminated with cause or he is unable to perform his duties for a continuous period of 180 days, he is entitled to his salary and benefits until the effective termination date of his employment. If, however, Mr. Seiter’s employment is terminated without cause, he is entitled to be paid his monthly salary and have his regular employee benefits continued during a notice period of not less than six months and not more than 12 months, depending on his years of service with us. In addition, Mr. Seiter can terminate his employment with us at any time upon 30 days’ notice and upon receipt of such notice, we have the right to accelerate the termination date. In this event, Mr. Seiter is only entitled to his salary and benefits until the effective termination date. Under the contract, Mr. Seiter has disclaimed any rights to all intellectual property created by him or jointly with others while employed with us. In addition, following termination of employment, Mr. Seiter will be subject to a one year non-competition covenant applicable in North America and a two year non-solicitation covenant.

      We have an employment contract effective November 13, 1991 (and amended effective July 20, 2006) with Mr. Dubien, the managing director of Photowatt France. Under the contract, Mr. Dubien is entitled to receive an annual salary of €100,000, may be entitled to a bonus (subject to board approval), and is eligible to participate in our share compensation arrangements. Additionally, in consideration of certain additional responsibilities, Mr. Dubien is entitled to a further €5,000 per year as well as the use of a company car. Mr. Dubien’s employment contract does not include provisions relating to the termination of his contract, and so if Mr. Dubien’s employment contract is terminated, French law will apply, and dismissal indemnities will have to be calculated according to the provisions of the bargaining convention of the “Ingénieurs et cadres de

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la métallurgie.” Under his contract, following termination of employment, Mr. Dubien will be subject to a one-year non-competition covenant applicable in Europe and renewable once. Should we want to enforce this covenant, Mr. Dubien will be entitled to be paid 50% of his monthly salary during the application of the covenant (or 60% in the absence of serious misconduct and as long as Mr. Dubien has not found a new position).

Compensation of Directors and Executive Officers

      We had no directors during fiscal 2006. We pay each of our current non-executive directors, other than ATS nominees (currently Messrs. Beard, Jutras and McCuaig) and our chairman, (i) an annual retainer of C$35,000; (ii) an annual retainer for each committee they are on in the amount of C$2,500; (iii) an additional C$5,000 per year for serving as the chairman of the Audit and Finance Committee, and an additional C$3,000 per year for serving as the chairman of the Compensation, Corporate Governance and Nominating Committee; (iv) meeting fees of C$1,500 per day if attending in person or C$750 if by phone (with an increase to C$1,500 if a meeting by phone lasts longer than 60 minutes); and (vi) an initial stock option grant covering 15,000 shares. Our chairman receives an annual retainer of C$150,000 and an initial stock option grant covering 64,290 shares.

      The following table sets forth all compensation received during fiscal 2006 by our executive officers and other key personnel during fiscal 2006.

	Fiscal 2006 Compensation
					Other Annual
Name	Salary		Bonus		Compensation
Silvano Ghirardi(1)	C$	296,154	C$	45,000	C$	93,697
David L. Adams(2)		—		—		—
Eric Laborde(3)		€257,250		€80,850		€11,143
Jean-Louis Dubien		€84,700		€27,373		—
Gary J. Seiter(4)		—		—		—

(1)	Mr. Ghirardi commenced employment effective June 1, 2005, and the amounts in the table reflect his compensation for the period from June 1, 2005 until March 31, 2006. Other annual compensation includes the payment of relocation costs of C$83,216, a car allowance of C$8,462 and a registered retirement savings plan match of C$2,019. In addition, Mr. Ghirardi was granted options expiring on June 6, 2012 to purchase 50,000 shares of ATS in fiscal 2006 at an exercise price of C$15.45 per share, which were surrendered effective October 13, 2006.
(2)	Mr. Adams commenced employment effective June 7, 2006. See “— Employment Agreements” for details of his current compensation arrangements.
(3)	Other annual compensation for Mr. Laborde includes a car allowance and other benefits.
(4)	Mr. Seiter commenced employment with us effective April 10, 2006. See “— Employment Agreements” for details of his current compensation arrangements.

      We have granted and intend to grant options to purchase our common shares under our Stock Option Plan to certain of our executive officers, employees and other key personnel. See “— Share Compensation Arrangements — Stock Option Plan”.

Share Ownership of Directors and Executive Officers

      As of July 31, 2006, and immediately after this offering, none of our directors or executive officers beneficially owned or is expected to beneficially own 1% or more of our common shares.

Share Compensation Arrangements

      Our board of directors has adopted the Stock Option Plan and intends to adopt the Executive Performance Share Unit Plan and the Directors’ Deferred Stock Unit Plan (collectively, the “Share Compensation Arrangements”). The Share Compensation Arrangements are designed to allow for several

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different types of equity-based compensation awards and afford our board the ability to provide incentives to employees, officers, directors and service providers to contribute to our success currently and in the future.

     Stock Option Plan

      We have adopted a Stock Option Plan (the “Option Plan”) to provide long-term incentives to attract, motivate and retain our key employees, directors, officers, and service providers.

      Under the Option Plan, we may grant options to (i) any of our, or our affiliates’, directors, officers or employees, 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 by such Eligible Individual and/or the spouse, children and/or grandchildren of such Eligible Individual (an “Employee Corporation” and collectively with Eligible Individual referred to as “Eligible Persons”). In order to participate in the Option Plan (as an “Option Plan Participant”), Eligible Persons must deliver to us a letter agreement and thereby agree to the terms and conditions of participation required under the Option Plan and such other terms and conditions as we may deem appropriate.

      We may, from time to time, grant options (“Options”) to an Option Plan Participant to acquire our common shares in accordance with the Option Plan. When granting Options, we will designate the maximum number of our common shares that may be purchased under the Options, establish the exercise price of the Options, determine the expiry date for exercise of the Options (which shall be no later than seven years after the date the Options are granted), and designate the conditions under which the Options will vest. The exercise prices for Options must not be less than the fair market value of the shares, which so long as our shares are traded on a stock exchange, is defined to be the closing price for the shares, on the day immediately prior to the date the Options were granted to the Option Plan Participant, on the stock exchange on which the highest aggregate volume of shares have traded on such day, unless the options are granted to employees who are subject to French taxation, in which case the exercise price must not be less than 80% of the average of the market value of the shares during the 20 trading days preceding the date of grant.

      If an Option Plan Participant dies, or in the case of an Employee Corporation if the Eligible Individual associated with the Employee Corporation dies, the Option Plan Participant’s legal representatives may exercise the Option Plan Participant’s outstanding vested Options upon notice to us, within 180 days of the Option Plan Participant’s death.

      Options granted to an Option Plan Participant who is a citizen or resident of the United States may be incentive stock options within the meaning of section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), if so designated by us or our affiliates at the time of grant. Only employees are eligible to be granted incentive stock options.

      At our discretion, an Option may have connected therewith, at or after the time of grant, a number of stock appreciation rights (an “SAR” or “SARs”) equal to the maximum number of shares which may be purchased under the Option. Each SAR will entitle the Option Plan Participant to surrender to us, unexercised, the right to subscribe for such share pursuant to the related Option and to receive cash from us 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 will immediately terminate and be of no further force or effect. Unexercised SARs will terminate when the related Option is exercised or the Option terminates.

      We have granted an Option to purchase 160,000 of our common shares to our president and chief executive officer, Mr. Silvano Ghirardi, and an Option to purchase 142,860 of our common shares to our senior vice president and chief financial officer, Mr. David L. Adams, under our Option Plan. These Options have an exercise price of C$5.00 per share and expire on September 12, 2013. Mr. Ghirardi’s Option will vest as to 20% of the underlying common shares on the closing of this offering and on each anniversary of the closing of this offering. Mr. Adams’ Option will vest as to 20% of the underlying common shares on each anniversary of the closing of this offering. In the event that a “change of control” as defined in each executive’s respective option agreement occurs following the closing of this offering and the executive’s

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employment with us is terminated or he resigns, in either case within three months from the date of such change of control, any unvested portion of the Option held by him will vest. The Options granted to Mr. Ghirardi and Mr. Adams are each subject to an adjustment that will increase or decrease the number of common shares underlying the Option such that the resulting aggregate number of common shares is equal to 0.6883% of our common shares held by ATS immediately prior to the closing of this offering. If the adjustment results in an increase in the number of common shares underlying an Option, within three business days of exercise of the Option and payment of the exercise price by the holder to us, the holder will receive a cash payment for anti-dilution purposes. Specifically, the cash payment per share underlying the Option would equal the product of (1) C$5 and (2) the number that is equal to (i) one minus (ii) the fraction that is equal to the original number of common shares underlying the Option divided by the adjusted number of common shares underlying the Option.

      For example, assuming that after the grant of the Option but prior to the closing of the offering, the number of outstanding common shares was multiplied by a factor of 2, the cash payment per share underlying the Option would equal the product of C$5 and (1 - (1/2)), or C$2.5. Similarly, assuming that after the grant of the Option but prior to the closing of the offering, the number of outstanding common shares was multiplied by a factor of 2.5, the cash payment per share underlying the Option would equal the product of C$5 and (1 - (1/2.5)), or C$3.

      In addition, we have approved the granting of Options to certain of our executive officers, directors, employees and other key personnel under the Option Plan as described in the following table. Such options will be granted on the date of the completion of the initial public offering at an exercise price equal to the initial public offering price and having an expiry date that is seven years from the date of the completion of the initial public offering.

	Number of
	Common Shares
Class of Optionee (number of individuals in receipt of Options)	under Option
All of our executive officers(3)		335,840
All of our directors who are not also executive officers(5)		124,290
All of our subsidiaries’ executive officers(1)		26,570
All of our other employees(12)		226,870
All of our subsidiaries’ other employees(3)		79,710
All of our consultants(1)		57,140

      Of the foregoing options in the above table, options to purchase 287,710 common shares will vest on the achievement of specific defined performance objectives related to the development of Spheral Solar and options to purchase 562,710 common shares will vest as to 20% on each anniversary date of the completion of the initial public offering.

      For further details on the Option Plan see “Stock Option Plan and Executive Performance Share Unit Plan” below.

     Executive Performance Share Unit Plan

      We intend to adopt an Executive Performance Share Unit Plan (the “RSU Plan”) to provide medium-term incentives to certain of our employees, directors, officers and service providers to contribute to our success and to build and maintain a strong spirit of performance and entrepreneurship.

      Under the RSU Plan, we may grant share units (“Share Units”) to such employees, directors, officers and service providers (“RSU Plan Participants”) in such number and at such times as we may determine, as a bonus or similar payment. Each grant of a Share Unit will be set forth in a grant agreement (a “Grant Agreement”) containing terms and conditions, including additional conditions with respect to the vesting of Share Units, the payment of cash or the provision of common shares under the RSU Plan, and may include restrictions on the resale of common shares, including escrow arrangements.

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      When vested, each Share Unit will give the RSU Plan Participant the right to receive, pursuant to the provisions of the RSU Plan and in accordance with the terms of the Grant Agreement relating to such Share Unit, one of our common shares or where the applicable Grant Agreement so provides, the fair market value of one of our common shares (less any applicable tax withholdings).

      If an RSU Plan Participant dies, the RSU Plan Participant’s beneficiary is entitled to receive cash or common shares in respect of the RSU Plan Participant’s vested Share Units. A deceased RSU Plan Participant’s unvested Share Units may only be redeemed by a beneficiary at our discretion.

      The RSU Plan is an unfunded obligation of ours.

      For further details on the RSU Plan see “Stock Option Plan and Executive Performance Share Unit Plan” below.

     Stock Option Plan and Executive Performance Share Unit Plan

      The Option Plan and RSU Plan (together, the “Plans”) contain similar provisions governing their execution and the granting of Options and Share Units (together, “Equity Awards”) to Option Plan Participants and RSU Plan Participants (together, the “Participants”).

      Equity Awards will vest according to the terms of their grant, and we generally intend to provide for vesting over a         year period. Subject to some exceptions, in the event of a merger, amalgamation or plan of arrangement involving us, acquisition or take-over bid for our common shares, or similar transaction, or series of transactions, or the sale of all or substantially all of our assets, any of which results in a change of our control (a “Corporate Transaction”), Equity Awards will be deemed to terminate immediately prior to the specified effective date of the Corporate Transaction, unless either the Equity Awards are assumed by the successor corporation or parent thereof in connection with the Corporate Transaction or our board of directors determines otherwise. Our board or committee of our board, as the case may be, may, subject to such conditions as the board or a committee considers appropriate, determine the acceleration, if any, of the vesting provisions for any Equity Award and permit a Participant to exercise or redeem unvested Equity Awards during such period of time as may be specified by our board of directors or a committee thereof.

      The maximum number of common shares which may be issued under the Plans, in aggregate, is equal to 10% of the common shares outstanding immediately following the completion of this offering. Notwithstanding any of the provisions of the Plans, the number of shares reserved for issuance to any one person, in aggregate under the Plans, will not exceed 5% of our outstanding common shares (subject to some adjustments, the “Outstanding Issue”), and the number of shares reserved for issuance pursuant to all Equity Awards granted to insiders, in aggregate, will not exceed 10% of the Outstanding Issue and in the case of non-executive directors, shall not, in aggregate, exceed 0.5% of the Outstanding Issue. In addition, the issuance of Equity Awards to any one insider and such insider’s associates, within a one-year period, may not exceed 5% of the Outstanding Issue and the issuance to all insiders, within a one-year period, may not exceed 10% of the Outstanding Issue.

      In the event that our common shares are changed or affected as a result of the declaration of a stock dividend or other distribution thereon or their subdivision or consolidation, the maximum number of shares which may be issued under the Plans, in aggregate, will be adjusted accordingly by our board, or a committee thereof, to such extent as it deems proper in its discretion. Equity Awards outstanding prior to, but exercised or redeemed after such an event will be subjected to a change in the number of shares (or cash amount) delivered upon exercise or redemption and an adjustment in the exercise price in respect of Options and the fair market value with respect to Share Units, each to such extent as our board, or a committee thereof, deems proper in its discretion.

      In the event of any reclassification, reorganization or other change of our common shares, other than as specified in the preceding paragraph, or a merger, combination, entry into a plan of arrangement or amalgamation of us with another corporation, Equity Awards outstanding prior to, but exercised or redeemed after, the applicable event will be entitled to receive, in lieu of our common shares, the number and class of shares or other securities of the corporation continuing from such event, and/or other consideration, to which

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the Participant would have been entitled if, at the effective date of the event, the holder of an Equity Award had been the registered holder of our common shares.

      Participants do not have the right to exercise any voting rights, receive any dividends or have any other rights as a shareholder in respect of any Equity Awards until the underlying shares have been issued. However, an RSU Plan Participant will, unless we determine otherwise, from time to time until the date of vesting be credited with additional Share Units in respect of non-stock dividends declared that would have been paid to the RSU Plan Participant if the Share Units credited to the RSU Plan Participant on the relevant record date for dividends had been common shares.

      Unless provided otherwise in a written agreement with us and approved by our board, if a Participant ceases to provide services to us or our affiliates in any capacity of employee, officer, director, or service provider (subject to certain exceptions), the Participant’s vested Options will remain outstanding and subject to exercise for 30 days (but in no event beyond the expiry date of the Options), vested Share Units will be redeemed by us as soon as practicable following the cessation of services, and unvested Equity Awards will immediately expire.

      Unless provided otherwise in a written agreement with us and approved by our board, if a Participant ceases to be an employee or officer by reason of termination for cause, is removed as a director by our board or shareholders, or ceases to be a service provider for cause or breach of duty, in each case with respect to us or our affiliates (and in each case, if not otherwise remaining an employee, officer or director of us or any of our affiliates), all the Participant’s Equity Awards, whether vested or unvested, will immediately expire and be of no further force or effect.

      From time to time, we may amend, suspend or terminate the Plans or any outstanding Equity Awards granted under the Plans; provided, however, that (i) any approvals required under any applicable law are obtained, (ii) except to the extent required by applicable laws, no such amendment, suspension or termination will be made to the extent that such action would materially adversely affect the existing rights of a Participant with respect to any outstanding Equity Awards, as determined by our board acting in good faith, without the Participant’s consent in writing, and (iii) certain amendments will only become effective upon shareholder approval by a majority of the votes attaching to common shares held by shareholders in attendance at a meeting of shareholders voting in person or by proxy, including (subject to some exceptions):

•  any amendment to the maximum number of common shares reserved for issuance under the Plans;

•  any amendment that would increase any of the percentage limits for holdings of Equity Awards by a Participant or Participants;

•  any amendment to the maximum allowable term to expiry for an Equity Award (seven years);

•  any amendment that would extend the term of any outstanding Equity Award granted to an insider to a date beyond the maximum allowable term to expiry for such Equity Award;

•  any amendment that would reduce the exercise price at which Options may be granted below the fair market value of our common shares on the date the Options are granted (subject to certain exceptions);

•  any amendment that would reduce the exercise price of an outstanding Option (subject to certain exceptions);

•  any amendment that would permit assignments to persons not currently permitted under the Plans; and

•  any amendment that would expand the scope of Participants.

      We may make such rules and regulations for the administration of the Plans, and interpret the provisions thereof, as we determine to be appropriate. Our board, or a committee thereof, may from time to time delegate all or any of its powers under the Plans to one or more of our directors or officers.

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     Directors’ Deferred Stock Unit Plan

      We intend to adopt a Directors’ Deferred Stock Unit Plan (the “DSU Plan”) to promote a greater alignment of interests between our outside directors (being directors who are not full-time employees of our company or any affiliate) and our shareholders, and to provide a compensation system for directors that is reflective of the responsibility, commitment and risk accompanying board membership and the performance of the duties required of the various committees of the board.

      Under the DSU Plan, outside directors of our company (“DSU Participants”) will be able to elect to receive their annual retainer fees, including annual committee fees, in the form of deferred stock units or cash or any combination thereof. A deferred stock unit is a bookkeeping entry, with a value on any date that is based on the fair market value of a common share on such date (as determined in accordance with the DSU Plan), credited to an account for a DSU Participant until he or she ceases to be a member of our board of directors (and is not otherwise an employee or officer of us or an employee, officer or director of any of our affiliates). As well, the DSU Plan permits DSU Participants to receive grants of additional deferred stock units in such amounts and at such times as our board may deem advisable to provide the DSU Participant with appropriate equity-based compensation for his or her services to us. It is contemplated that DSU Participants will receive an initial grant of deferred stock units upon appointment to our board of directors. Under the DSU Plan, DSU Participants will also generally be credited with deferred stock units in respect of any non-stock dividends declared that would have been paid to the DSU Participants if the deferred stock units credited to his or her account under the DSU Plan on the relevant record date for dividends had been common shares. Upon a DSU Participant’s ceasing to be a member of our board of directors (provided he or she is not otherwise an employee or officer of us, or an employee, officer or director of any of our affiliates), he or she will be entitled to receive, or, in the case of a deceased DSU Participant, the DSU Participant’s beneficiary will be entitled to receive, the value of the deferred stock units credited to the DSU Participant’s account in cash (less any applicable tax withholdings).

      Our board may amend or terminate the DSU Plan provided that no amendment or termination may adversely affect the rights of a DSU Participant with respect to fees that the DSU Participant has elected to receive in the form of deferred stock units or with respect to deferred stock units previously granted to the DSU Participant under the DSU Plan, unless the DSU Participant consents or unless such amendment or termination is required by applicable law. The DSU Plan is an unfunded obligation of ours.

Short Term Incentive Plan

      We have adopted a Short Term Incentive Plan (“STI Plan”) which sets out the principles to be applied when establishing annual bonuses for our executives. The STI Plan is designed to encourage the achievement by executives of quantitative and qualitative objectives. Each participating executive will have a bonus plan tailored for that executive. The STI Plan provides that individual bonus plans generally be structured such that the target bonus amount is 50% of the maximum bonus amount. The amount of bonus awarded is dependent upon the level of success in meeting stated objectives. Quantitative objectives generally account for 50-70% of the weighting when determining eligibility for bonus and may include measurements such as revenue growth, margins, operating earnings, return on net assets, and return on capital employed. Qualitative objectives, being personal objectives for individual executives, would often account for 30-50% of the weighting.

Additional Information Regarding Directors and Officers

Corporate cease trade orders or bankruptcies

      To the best of our knowledge, none of our directors or officers is, or within the last ten years prior to the date of this prospectus has been, a director or officer of any other corporation that, while that person was acting in the capacity of a director or officer of that corporation, was the subject of a cease trade order or similar order or any order that denied the corporation access to any statutory exemptions under Ontario securities law for a period of more than 30 consecutive days, was declared bankrupt or made a voluntary

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assignment in bankruptcy, instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of that director or officer.

Conflicts of interest

      To the best of our knowledge, other than as described below, there are no known existing or potential conflicts of interest among us, our directors and officers or any proposed director or officer as a result of their outside business interests. Certain of our directors serve as directors and/or officers of ATS, and therefore it is possible that a conflict may arise between their duties to us and their duties as directors or officers of ATS. See “Risk Factors — We may have potential disputes and business conflicts of interest with ATS regarding our past and ongoing relationships, and because of ATS’ controlling ownership in us, the resolution of these conflicts may not be favorable to us.”

Indebtedness of directors and officers

      As at the date of this prospectus, no amount was owed to us or any of our subsidiaries by any director or executive officer.

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RELATED PARTY TRANSACTIONS

      ATS has provided strategic, operational and administrative services to us. These services have been reflected in the combined financial statements at their exchange amount. Furthermore, we purchased property, plant and equipment from ATS, primarily for the Spheral Solar segment. We also purchased development services, raw materials and other services from ATS or its affiliates, and these purchases have been reflected at their exchange amount. The majority of such exchange amounts were based on a cost-plus basis varying from 0% to 25%.

      For the six months ended September 30, 2006 and the six months ended September 30, 2005, we generated revenue of $11 thousand and $57 thousand, respectively, from EPISOL s.a.r.l., a business controlled by Mr. Eric Laborde, a consultant who serves as managing director, Europe (acting) of Photowatt France, which have been reflected at their exchange amount, which we believe approximates fair market value. In fiscal 2005 and 2006, we generated revenue of $61 thousand and $150 thousand, respectively, from sales to this business.

      For more information regarding our related-party transactions since the beginning of our preceding three fiscal years, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Related Party Transactions,” “Our Relationship with ATS,” “Management — Employment Agreements,” note 17 to our combined annual financial statements and note 12 to our unaudited combined interim financial statements included in this prospectus.

      Collectively, our directors and officers hold an aggregate of 110,435 ATS common shares as well as options covering an additional 374,800 ATS common shares as at December 7, 2006. None of our directors or officers holds common shares or options covering common shares representing over 1% of the issued and outstanding common shares of ATS. The following table sets forth these common share and option holdings by our directors and officers.

	Common Shares		Options to purchase
Director/Officer	of ATS		common shares of ATS
Silvano Ghirardi		—		—
David L. Adams		—		—
Gary J. Seiter		—		—
Jean-Louis Dubien		—		—
Robert M. Franklin		5,000		—
Gerald R. Beard		3,503		45,200
Wayne S. Hill		—		—
Ronald J. Jutras		101,932		319,600
Kirk Mandy		—		—
Stewart McCuaig		—		10,000
C. Ian Ross		—		—
John W. Sheridan		—		—
Total		110,435		374,800

      Other than the foregoing, within the three years before the date of this prospectus, neither ATS nor any director, executive officer, or any of their associates or affiliates has had any direct or indirect material interest in any transaction or proposed transaction that has materially affected or will materially affect us.

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PRINCIPAL AND SELLING SHAREHOLDERS

      The following table sets forth information regarding the beneficial ownership of our common shares as of July 31, 2006 and immediately after this offering by:

•  each person or entity known to us to own or beneficially more than five percent of our outstanding shares; and

•  our directors and executive officers.

      Other than as set forth below, no other person or entity owned more than five percent or more of our outstanding shares or exercised control or could exercise control over us as of the date of this prospectus.

      Beneficial ownership is determined in accordance with SEC rules, which generally attribute beneficial ownership of securities to each person or entity who possesses, either solely or shares with others, the power to vote or dispose of those securities. These rules also treat as outstanding all shares that a person would receive upon exercise of stock options or warrants, or upon conversion of convertible securities, held by that person that are exercisable or convertible within 60 days of the determination date. Shares issuable pursuant to exercisable or convertible securities are deemed to be outstanding for computing the percentage ownership of the person holding such securities but are not deemed outstanding for computing the percentage ownership of any other person. ATS has granted the underwriters an over-allotment option exercisable for a period of 30 days from the date of this prospectus to purchase up to an additional               common shares from ATS (representing 15% of the common shares offered hereby) at the initial public offering price to cover over-allotments, if any. The percentage of beneficial ownership for the following table is based on one common share outstanding as of July 31, 2006 and                     common shares outstanding immediately after the completion of this offering, assuming no exercise of the underwriters’ over-allotment option. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all common shares shown as beneficially owned by them.

	Common Shares					Common Shares
	Beneficially Owned					Beneficially Owned
	Prior to This					Immediately After This
	Offering					Offering
Name and Address of Beneficial Owner	Number		%			Number		%
ATS(1)				100	%
Directors and Executive Officers		—		—			*		*

(1)  If the over-allotment option is exercised in full, ATS will beneficially own                      shares after the offering, representing           % of our outstanding shares. ATS acquired its common shares pursuant to the capitalization of its investments in us referred to in note 16 to our combined annual financial statements as well as pursuant to the transfer to us of the assets of our business referred to under “Our Relationship With ATS — Agreements Between ATS and Us — Transfer Agreements”.

*  Represents shares equal to less than 1% of our total outstanding shares.

      None of our shareholders has, or after the closing of this offering will have, different voting rights from other shareholders. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. We contemplate entering into certain separation agreements, including a shareholder agreement, with ATS immediately prior to the completion of this offering that will provide certain rights to ATS. See “Our Relationship with ATS — Agreements Between ATS and Us.”

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DESCRIPTION OF SHARE CAPITAL

      The following is a summary description of our share capital, our certificate and articles of incorporation and by-laws and are qualified by reference to our certificate and articles of incorporation and by-laws, copies of which have been filed with the SEC as exhibits to our registration statement of which this prospectus forms a part and with Canadian provincial securities regulators.

      We are a Canadian corporation and our affairs are governed by our certificate and articles of incorporation, our by-laws and the Canada Business Corporations Act.

      Under our articles of incorporation, we are authorized to issue an unlimited number of common shares and an unlimited number of preference shares, issuable in series, each without par value. Upon completion of this offering, we will have                      common shares outstanding (                     common shares if the underwriters exercise their over-allotment option in full) and no preference shares outstanding.

Common Shares

      As of the date of this prospectus, and before giving effect to this offering, all of our outstanding common shares were owned directly or indirectly by ATS.

      Holders of common shares are entitled to one vote per share on all matters to be voted on at all meetings of shareholders except meetings at which only holders of a specified class of shares are entitled to vote. The holders of common shares are not entitled to cumulative voting rights. The election of directors is based on plurality voting, which results in the election of those nominees who receive the most votes “for” election, up to the number of directors fixed for election. Under the Canada Business Corporations Act, certain significant corporate actions, such as an amendment to a corporation’s articles, amalgamation with a non-affiliated corporation, continuance, liquidation, dissolution, and sale, lease or exchange of all or substantially all of the property of a corporation other than in the ordinary course of business must be approved by not less than two thirds of the votes cast by holders of common shares present in person or represented by proxy, voting together as a single class, at a duly called meeting of shareholders, subject to any voting rights granted to holders of any preference shares.

      Holders of common shares have no pre-emptive rights and there are no redemptive or sinking fund provisions applicable to the common shares.

      Holders of common shares will share in an equal amount per share in any dividend declared by us, subject to any preferential rights of any outstanding preference shares.

      Upon liquidation, dissolution or winding up of our affairs, our creditors and any holders of preference shares with preferential rights will be paid before any distribution to holders of common shares. The holders of common shares would be entitled to receive a pro rata distribution of any of our remaining property. All outstanding common shares are, and the common shares offered in this offering when issued and paid for will be, fully paid and non-assessable.

      The rights, preferences and privileges of holders of common shares are subject to, and may be adversely affected by, the rights of holders of shares of any series of preference shares which our board of directors may designate and issue in the future.

Preference Shares

      The preference shares may at any time and from time to time be issued in one or more series. Subject to the Canada Business Corporations Act, the directors may fix the number of preference shares of each series, designation, rights, privileges, restrictions and conditions attaching to the preference shares of each series, including, without limitation, any voting rights, any right to receive dividends or the means for determining such dividends, the dates of payment, any terms and conditions of redemption or purchase, any conversion rights, and any rights on the liquidation, dissolution or winding up of our company, any sinking fund or other provisions. The preference shares of each series will rank on par with the preference shares of every other series and be entitled to preference over the common shares with respect to the payment of dividends and the

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distribution of assets in the event of liquidation, dissolution or winding up of our company. The issuance of preference shares and the terms selected by the board could decrease the amount of earnings and assets available for distribution to the holders of our common shares or adversely affect the rights and powers, including voting rights, of the holders of our common shares without any further vote or action by the common shareholders. There are currently no outstanding preference shares, and we have no present intention to issue any preference shares.

Certain Provisions of Our Articles of Incorporation, Our By-Laws and the Canada Business Corporations Act

      Provisions of our articles of incorporation and by-laws and of the Canada Business Corporations Act summarized below may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a shareholder might consider in its best interest, including those attempts that might result in a premium over the market price for the common shares held by shareholders.

      No cumulative voting. Under the Canada Business Corporations Act, the right to vote cumulatively does not exist unless the articles of incorporation specifically authorize cumulative voting. Our articles of incorporation do not grant shareholders the right to vote cumulatively.

      Authorized but unissued shares. Our authorized but unissued common shares are available for future issuance without shareholder approval. These additional common shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. Our articles of incorporation authorizes our board to issue an unlimited number of preference shares and to determine the number, rights, privileges, restrictions and conditions, including voting rights, qualifications, limitations and restrictions attaching to each series of preference shares. The existence or issuance of authorized but unissued common and preference shares could have the effect of delaying, deterring or preventing an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise, or an unsolicited acquisition proposal or of making the removal of management more difficult. Additionally, the issuance of preference shares may have the effect of decreasing the market price of our common shares.

      Meeting of shareholders. The Canada Business Corporations Act provides that meetings of our shareholders may be requisitioned or called by a shareholder or shareholders holding not less than five percent of our issued and outstanding common shares. Such a shareholder or shareholders must deliver a requisition to the directors setting out the business to be transacted at the requested meeting. The directors may refuse to call the meeting if, among other things, they determine that the shareholder or shareholders are attempting to enforce a personal claim or abusing their requisition rights to secure publicity. Unless the directors are otherwise entitled to do so, if the directors do not call a meeting of shareholders within 21 days after receiving the requisition, any shareholder who signed the requisition may call the meeting.

      Amendment to our governing documents. For so long as ATS and its subsidiaries beneficially own common shares representing at least two-thirds of the total voting power of the outstanding common shares, ATS will have enough common shares to amend our articles of incorporation, subject to certain circumstances which would permit holders of preference shares to vote as a separate class. In addition, for as long as ATS and its subsidiaries beneficially own common shares representing at least 40% of our outstanding common shares, ATS will be entitled to designate, pursuant to the Shareholder Agreement, 25% of the nominees for election to our board of directors. Our board may unilaterally amend or repeal our by-laws with the affirmative vote of a majority of the entire board. Such amendment or repeal is effective upon such board approval, but is subject to confirmation by a majority of the votes entitled to be cast by holders of our common shares present in person or represented by proxy at our next meeting.

Indemnification of Directors and Executive Officers and Limitation of Liability

      We have included in our by-laws provisions to generally eliminate the personal liability of our directors and officers to the full extent permitted by the Canada Business Corporations Act. In addition, our by-laws provide that we are required to advance moneys to pay costs, charges and expenses to our directors and officers

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as incurred in connection with proceedings against them for which they may be indemnified in advance of a final determination of their entitlement to indemnification. These provisions, however, do not eliminate or limit liability of a director or officer, and will require that a director or officer repay any advanced costs, charges or expenses, if the director or officer (i) did not act honestly and in good faith with a view to our best interest, and (ii) in the case of a criminal or administrative action or proceeding that is enforced by monetary penalty, did not have reasonable grounds for believing that his or her conduct was lawful.

      We are not currently aware of any pending or threatened litigation or proceeding involving a director, officer, employee or agent of ours in which indemnification would be required or permitted. We believe these indemnification provisions are necessary to attract and retain qualified persons as directors and officers.

      We have entered into indemnification agreements with our directors, executive officers and with certain other officers and employees (including officers and employees of our subsidiaries). The indemnification agreements generally require that we indemnify and hold an indemnitee harmless to the greatest extent permitted by law for liabilities arising out of the indemnitee’s service to us as a director, officer or employee, if the indemnitee acted honestly and in good faith and in a manner the indemnitee reasonably believed to be in or not opposed to our best interests and, with respect to criminal and administrative actions or proceedings that are enforced by monetary penalty, if the indemnitee had no reasonable grounds to believe that his or her conduct was unlawful. The indemnification agreements also provide for the advancement of defense expenses by us.

      Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under these indemnification agreements, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable as a matter of United States law.

      The foregoing is a summary of the indemnification agreements and is qualified in its entirety by reference to the full text of the indemnification agreements, a sample of which is attached as exhibits to the registration statement of which this prospectus is a part and copies of which have been filed with Canadian provincial securities regulators.

Directors’ and Officers’ Fiduciary Duties

      Under the Canada Business Corporations Act, all of our directors and officers, in exercising their powers and discharging their duties, are required to act honestly and in good faith with a view to our best interests and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Ownership and Exchange Controls

      Limitations on the ability to acquire and hold our common shares may be imposed by the Competition Act (Canada). This legislation permits the Commissioner of Competition of Canada (the “Commissioner”) to review any acquisition of control over or a significant interest in us. This legislation grants the Commissioner jurisdiction, for up to three years, to challenge this type of acquisition before the Canadian Competition Tribunal on the basis that it would, or would be likely to, substantially prevent or lessen competition in any market in Canada.

      This legislation also requires any person who intends to acquire our common shares to file a notification with the Canadian Competition Bureau if certain financial thresholds are exceeded and if that person would hold more than 20% of our common shares. If a person already owns 20% or more of our common shares, a notification must be filed when the acquisition of additional common shares would bring that person’s holdings to over 50%. Where a notification is required, the legislation prohibits completion of the acquisition until the expiration of a statutory waiting period, unless the Commissioner provides written notice that she does not intend to challenge the acquisition, or waives the obligation to submit a notification.

      There is no limitation imposed by Canadian law or our articles of incorporation on the right of non-residents to hold or vote our common shares, other than those imposed by the Investment Canada Act.

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Investment Canada Act

      Under the Investment Canada Act, a direct acquisition of control of an existing Canadian business by a “non-Canadian” as defined in the Investment Canada Act, is subject to review where the book value of the assets or the Canadian business exceeds a specified monetary threshold. A reviewable acquisition cannot be implemented unless the Minister responsible for the Investment Canada Act (the “Minister”) is satisfied that the transaction is likely to be of “net benefit to Canada” (a “Reviewable Transaction”).

      The prescribed factors of assessment to be considered by the Minister to determine whether the Reviewable Transaction is likely to be of net benefit to Canada include, among other things, the effect of the investment on the level and nature of economic activity in Canada (including the effect on employment, resource processing, utilization of Canadian products and services and exports), the degree and significance of participation by Canadians in the acquired business, the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety in Canada, the effect of industrial, economic and cultural policies (taking into consideration corresponding provincial policies), and the contribution of the investment to Canada’s ability to compete in world markets.

      Where the acquisition of control of an existing Canadian business by a non-Canadian is not a Reviewable Transaction, a notification must be filed with the Investment Review Division of Industry Canada.

      Under the Investment Canada Act the acquisition of control of us (either through the acquisition of our common shares or all or substantially all our assets) by a non-Canadian who is a World Trade Organization member country investor, including U.S. investors, would be reviewable only if the value of our assets was equal to or greater than a specified amount. The specified amount for 2007 is C$281 million. The threshold amount is subject to an annual adjustment on the basis of a prescribed formula in the Investment Canada Act to reflect changes in Canadian gross domestic product. For non-World Trade Organization member investors, the corresponding threshold is C$5 million.

      The acquisition of a majority of the voting interests of an entity is deemed to be acquisition of control of that entity. The acquisition of less than a majority but one-third or more of the voting shares of a corporation or of an equivalent undivided ownership interest in the voting shares of the corporation is presumed to be an acquisition of control of that corporation unless it can be established that, on the acquisition, the corporation is not controlled in fact by the acquiror through the ownership of voting shares. The acquisition of less than one-third of the voting shares of a corporation is deemed not to be an acquisition of control of that corporation. Certain transactions in relation to our common shares would be exempt from review from the Investment Canada Act including:

•  the acquisition of our common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities;

•  the acquisition or control of us in connection with the realization of security granted for a loan or other financial assistance and not for any purpose related to the provisions of the Investment Canada Act; and

•  the acquisition or control of us by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of us, through the ownership of voting interests, remains unchanged.

      There is no law, governmental decree or regulation in Canada that restricts the export or import of capital, or which would affect the remittance of dividends or other payments by us to non-resident holders of our common shares, other than withholding tax requirements.

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Listing

      We have applied to list our common shares on The Nasdaq Global Market and on the Toronto Stock Exchange. Any such listing will be subject to the approval of the relevant stock exchange, and any such approval would not be given unless all of the original listing requirements were met.

Transfer Agent, Registrar and Auditor

                          , located in                     , Ontario is the transfer agent and registrar for our common shares in Canada.                     , located in                     ,                     , is the transfer agent and registrar for our common shares in the United States.

      KPMG LLP, located in Waterloo, Ontario is our independent auditor.

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SHARES ELIGIBLE FOR FUTURE SALE

      Prior to this offering, there has been no public market for our common shares. The sale of a substantial amount of our common shares in the public market after this offering, or the perception that such sales may occur, could adversely affect the prevailing market price of our common shares. Furthermore, because some of our shares will not be available for sale after this offering due to the contractual and legal restrictions on resale described below, the sale of a substantial amount of common shares in the public market after these restrictions lapse could adversely affect the prevailing market price of our common shares and our ability to raise equity capital in the future.

      Upon the completion of this offering, we expect to have a total of outstanding common shares, which includes the                     common shares sold by us in this offering.

      All of the common shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act or applicable Canadian securities laws, except for shares held by persons who may be deemed our “affiliates,” as that term is defined under Rule 144 of the Securities Act. An “affiliate” is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by us or is under common control with us.

      The common shares held by ATS are deemed “restricted securities” as that term is defined in Rule 144 under the Securities Act. These restricted securities may be sold in the public market by ATS only if they are registered or if they qualify for an exemption from registration under Rule 144 or Rule 144(k) under the Securities Act. These rules are summarized below. For the reasons set forth below, we expect that the following common shares will be eligible for sale in the public market at the following times:

	Number of Shares Eligible for
Date	Sale in U.S. Public Market	Comment
On the date of this prospectus		Common shares sold in this offering
180 days after the date of this prospectus		Lock-up agreements expire

Rule 144

      In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned “restricted securities” for at least one year would be entitled to sell in the United States, within any three-month period, a number of shares that does not exceed the greater of:

•  1.0% of the number of our common shares then outstanding which will equal approximately                      common shares immediately after this offering ; and

•  the average weekly reported trading volume of our common shares on The Nasdaq Global Market during the four calendar weeks preceding the date on which a notice of the sale on Form 144 is filed with the SEC by such person.

      Sales under Rule 144 are also subject to manner-of-sale provisions, notice requirements and the availability of current public information about us. However, these shares would remain subject to lock-up arrangements and would only become eligible for sale when the lock-up period expires. Persons who are not our affiliates may be exempt from these restrictions under Rule 144(k) discussed below.

Rule 144(k)

      Under Rule 144(k), a person who is not deemed to have been our affiliate at any time during the three months preceding a sale, and who has beneficially owned the common shares proposed to be sold for at least two years from the later of the date these shares were acquired from us or from our affiliate, including the holding period of any prior owner other than an affiliate, is entitled to sell those shares in the United States immediately following this offering without complying with the manner-of-sale, public information, volume limitation or notice provisions of Rule 144. However, if these shares are subject to lock-up arrangements, such shares would only become eligible for sale when the lock-up period expires.

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Rule 701

      Generally, an employee, officer, director or consultant who purchased our common shares before the effective date of the registration statement of which this prospectus is a part, or who holds options as of that date, pursuant to a written compensatory plan or contract, may rely on the resale provisions of Rule 701 under the Securities Act. Under Rule 701, these persons who are not our affiliates may generally sell their eligible securities, commencing 90 days after the effective date of the registration statement of which this prospectus is a part, without having to comply with the public information, holding period, volume limitation or notice provisions of Rule 144.

Lock-up Agreements

      We, our directors and executive officers and ATS have entered into lock-up agreements with the underwriters. Under these agreements, we, our directors and executive officers and ATS may not, without the prior written approval of BMO Nesbitt Burns Inc. and UBS Securities LLC, subject to limited exceptions, offer, sell, contract to sell or otherwise dispose of or hedge our common shares or securities convertible into or exercisable or exchangeable for our common shares, other than any common shares that are sold by ATS in the event of exercise of the over-allotment option by the underwriters. These restrictions will be in effect for a period of 180 days after the date of this prospectus. At any time and without public notice, BMO Nesbitt Burns Inc. and UBS Securities LLC may, in their sole discretion, release all or some of the securities from these lock-up agreements.

Registration Rights

      After the completion of this offering and the expiration of the lock-up period described above, ATS will be entitled to certain rights with respect to the registration of our common shares under the Securities Act, under the terms of a registration rights agreement between us and ATS. See “Our Relationship with ATS — Agreements Between ATS and Us — Registration Rights Agreement.”

Additional Restrictions for Sales in Canada

      The sale of any of our common shares in the public market in Canada by ATS (as our controlling shareholder) will be subject to restrictions under applicable Canadian securities laws in addition to those restrictions noted above, unless the sale is qualified under a prospectus filed with Canadian securities regulatory authorities or if the following conditions are fulfilled:

•  such sale occurs only after four months have lapsed from the date of a final receipt issued by Canadian securities regulatory authorities in respect of the final Canadian prospectus relating to the offering; and

•  prior notice of the sale must be filed with Canadian securities regulatory authorities at least seven days before any sale.

      Sales under the procedure noted above are also subject to other requirements and restrictions regarding the manner of sale, payment of commissions, reporting and availability of current public information about us and compliance with applicable Canadian securities laws.

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TAXATION

Canadian Federal Tax Considerations

      The following is applicable to the holding and disposition of common shares by a holder who acquires common shares in this offering.

      This summary is based on the current provisions of the Income Tax Act (Canada) (the “Tax Act”) and the regulations thereunder, all specific proposals (the “Tax Proposals”) to amend the Tax Act and regulations publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof, the current provisions of the Canada-United States Income Tax Convention, as amended (the “Treaty”), and the administrative policies and assessing practices of the Canada Revenue Agency (“CRA”) made publicly available prior to the date hereof. While this summary assumes that the Tax Proposals will be enacted as currently proposed, no assurance can be given in this respect. Except as set forth in “Taxation of Resident Holders — Dividends” the tax summary set out below would not be materially different if the Tax Proposals were not assumed to be enacted as currently proposed. In the case of the discussion under the heading “Taxation of U.S. Holders”, this summary is also based on the current provisions of Canadian federal law in force as of the date hereof.

      This summary is not exhaustive of all possible Canadian federal income tax considerations and, except for any Tax Proposals, does not take into account or anticipate any changes in law, whether by legislative, governmental or judicial decision or action, or any changes in the Treaty or administrative practices of the CRA. Except as otherwise indicated under the heading “Taxation of U.S. Holders,” this summary does not take into account other Canadian federal tax or provincial, territorial, U.S. or other foreign income tax considerations, which may differ significantly from those discussed herein.

      This summary does not discuss all aspects of Canadian federal taxation that may be relevant to a particular holder of common shares in light of such holder’s particular circumstances. The tax consequences to any particular holder of common shares will vary according to that holder’s particular circumstances. Each holder should consult the holder’s own tax advisor with respect to the income tax consequences applicable to the holder’s own particular circumstances. This summary is not applicable to a holder that is a trader or dealer in securities, tax-exempt entity, insurer, financial institution (including those to which the mark-to-market provisions of the Tax Act apply), nor is it applicable to any holder of common shares, an interest in which is a “tax shelter investment” for the purposes of the Tax Act.

      For purposes of Canadian tax, all amounts relevant in computing a holder’s liability for tax must be computed in Canadian dollars. Amounts denominated in United States dollars including adjusted cost base, proceeds of disposition and dividends must be converted into Canadian dollars based on the prevailing exchange rate at the relevant time.

Taxation of Resident Holders

      The discussion under the heading “Taxation of Resident Holders” summarizes the material Canadian federal income tax considerations under the Tax Act generally applicable to a holder who at all relevant times for purposes of the Tax Act, is or is deemed to be resident in Canada, deals at arm’s length with and is not affiliated with us and acquires and holds the common shares as capital property (a “Resident Holder”). Generally, common shares will be considered to be capital property to a holder thereof provided that the holder does not use the common shares in the course of carrying on a business and such holder has not acquired them in one or more transactions considered to be an adventure or concern in the nature of trade. Certain Resident Holders who might not otherwise be considered to hold their common shares as capital property may, in certain circumstances, be entitled to have their common shares and all other “Canadian securities” (as defined in the Tax Act) owned by such Resident Holder, treated as capital property by making the irrevocable election permitted by subsection 39(4) of the Tax Act. Resident Holders should consult their own tax advisors for advice as to whether an election under subsection 39(4) of the Tax Act is available and/or advisable in their particular circumstances.

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Dividends

      In the case of a Resident Holder who is an individual, any dividends received or deemed to be received on the common shares will be required to be included in computing the Resident Holder’s income and will be subject to the gross-up and dividend tax credit rules normally applicable to taxable dividends received from taxable Canadian corporations. Bill C-28, which was passed in the House of Commons and received first reading in the Senate on December 11, 2006, proposes to enhance such gross-up and dividend tax credit for “eligible dividends” paid after 2005. Under Bill C-28, a dividend will be eligible for the enhanced gross-up and dividend tax credit if the dividend recipient receives written notice from the paying corporation designating the dividend as an eligible dividend. There may be limitations on the ability of a corporation to designate dividends as eligible dividends. Dividends received or deemed to be received by a Resident Holder that is a corporation will be included in income and normally will be deductible in computing such corporation’s taxable income. A Resident Holder that is a “private corporation” or a “subject corporation,” as such terms are defined in the Tax Act, may be liable under Part IV of the Tax Act to pay a refundable tax of 33¹/3% on dividends received or deemed to be received on the common shares to the extent that such dividends are deductible in computing such Resident Holder’s taxable income.

Dispositions

      A disposition, or a deemed disposition (including the deemed disposition on death), of a common share by a Resident Holder will generally give rise to a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition of the common share, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base of the common share to the Resident Holder. For this purpose, the adjusted cost base to a Resident Holder of a common share at any particular time will be determined by averaging the cost of that common share with the adjusted cost base of all of our other common shares held as capital property at that time by the Resident Holder.

      One-half of any capital gain realized by a Resident Holder will be included in computing the Resident Holder’s income as a taxable capital gain in the year of disposition or deemed disposition. One-half of any capital loss realized by a Resident Holder may generally be deducted against taxable capital gains realized in that year, in the three preceding taxation years or in any subsequent taxation year, subject to detailed rules contained in the Tax Act in this regard. A capital loss realized by certain Resident Holders may be reduced in certain circumstances by the amount of any dividends received or deemed to have been received by such holders on the common shares to the extent and in the manner provided for in the Tax Act. A Resident Holder that is a “Canadian-controlled private corporation,” as defined in the Tax Act, may be liable to pay an additional refundable tax of 6²/3% on certain investment income, including taxable capital gains. Capital gains realized by a Resident Holder that is an individual may give rise to a liability for alternative minimum tax. Resident Holders should consult their own tax advisors with respect to alternative minimum tax.

Taxation of U.S. Holders

      The discussion under the heading “Taxation of U.S. Holders” summarizes the material Canadian federal tax considerations generally applicable to a holder who at all relevant times for purposes of the Tax Act, is not resident or deemed to be resident in Canada, deals at arm’s length with and is not affiliated with us, acquires and holds the common shares as capital property and does not use or hold the common shares in the course of carrying on, or otherwise in connection with, a business in Canada and who, for purposes of the Treaty, is a resident of the United States, has never been a resident of Canada, and has not held or used (and does not hold or use) the common shares in connection with a permanent establishment or fixed base in Canada (a “U.S. Holder”). Special rules, which are not discussed in this summary, may apply to a non-resident that is a “registered non-resident insurer” for the purposes of the Tax Act.

      In general, a person is a resident of the United States for the purposes of the Treaty (and is therefore entitled to the benefits of the Treaty) if, under the laws of the United States, the person is liable to tax in the United States by reason of domicile, residence, citizenship, place of management, place of incorporation or other criteria of a similar nature, but in the case of an estate or trust, only to the extent that the income

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derived from the estate or trust is liable to tax in the United States either in its hands or in the hands of its beneficiaries.

      A limited liability company (an “LLC”) that is not liable to tax in the United States is not entitled to the benefits of the Treaty. Partnerships which are not liable to tax in the United States are not entitled to the benefits of the Treaty, but the CRA generally takes the position that they will look through to the partners of the partnership for purposes of determining whether and the extent to which the benefits of the Treaty apply to the share of the relevant income or gain attributable to the partners. CRA does not have a similar position with regard to look through for LLCs. The CRA is currently reviewing whether their position with regard to look through to partners will continue to apply to partnerships formed under the laws of Canada that are treated as corporations for United States tax purposes.

Dividends

      Dividends paid or credited or deemed to be paid or credited to a U.S. Holder by us will be subject to Canadian withholding tax at a rate of 25% unless reduced under the provisions of an applicable income tax treaty or convention. Under the Treaty, the rate of withholding tax on dividends paid or credited to a U.S. Holder is generally reduced to 15% of the gross amount of the dividends (or 5% in the case of a U.S. Holder that is a corporation beneficially owning at least 10% of our voting shares).

Dispositions

      A U.S. Holder will generally not be subject to Canadian tax in respect of any capital gain realized on the disposition or deemed disposition (including the deemed disposition on death) of the common shares unless, at the time of disposition, the common shares constitute “taxable Canadian property” of the U.S. Holder for the purposes of the Tax Act. Generally, the common shares will not constitute “taxable Canadian property” to a U.S. Holder provided that (i) the common shares are, at the time of disposition, listed on a prescribed stock exchange (which currently includes the Toronto Stock Exchange and The Nasdaq Global Market) for purposes of the Tax Act; and (ii) at no time during the 60-month period immediately preceding the disposition of the common shares did the U.S. Holder, persons with whom the U.S. Holder did not deal at arm’s length, or the U.S. Holder together with such persons, own 25% or more of the issued shares of any class or series of our capital stock.

      Pursuant to the Treaty, even if the common shares constitute “taxable Canadian property” of a particular U.S. Holder, any capital gain realized on the disposition of the common shares by the U.S. Holder generally will be exempt from Canadian federal tax, unless, at the time of disposition, the common shares derive their value principally from real property situated in Canada within the meaning of the Treaty. We are of the view that the value of the common shares is not derived principally from real property situated in Canada.

      Provided the common shares are listed on a prescribed stock exchange (which currently includes the Toronto Stock Exchange and The Nasdaq Global Market) for purposes of the Tax Act, at the time of disposition the preclearance provisions of Section 116 of the Tax Act will not apply to a disposition of common shares.

U.S. Federal Income Tax Considerations

      The following summary describes the U.S. federal income tax considerations generally applicable to U.S. Holders (as defined below) of the purchase, ownership, and disposition of common shares. This summary is based upon the Code, U.S. Treasury regulations under the Code, administrative rulings and judicial decisions, all as in effect as of the date of this document and all of which are subject to change (possibly with retroactive effect) or to differing interpretations. This summary applies only to holders of common shares that hold their common shares as capital assets within the meaning of Section 1221 of the Code. This summary does not discuss all aspects of U.S. federal income taxation that may be relevant to a

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particular holder of common shares in light of its particular circumstances or to holders of common shares subject to special treatment under the U.S. federal income tax laws, including:

•  banks, insurance companies, trusts and financial institutions;

•  tax-exempt organizations;

•  mutual funds, real estate investment trusts and regulated investment companies;

•  pass-through entities and investors in such entities;

•  persons that have a functional currency other than the U.S. dollar;

•  persons liable for the alternative minimum tax;

•  traders in securities who elect to apply a mark-to-market method of accounting;

•  brokers or dealers in securities or foreign currency;

•  holders of common shares who hold their common shares as part of a hedge, straddle, constructive sale, conversion transaction or other integrated investment; and

•  holders who own (actually or constructively) 10% or more of our common shares.

      This summary does not discuss any state, local, non-U.S. or estate and gift tax considerations applicable to holders of common shares. Prospective purchasers of common shares should consult their tax advisors regarding the U.S. federal income tax consequences applicable to their particular circumstances.

      For purposes of this summary, a U.S. Holder is a beneficial owner of common shares that is:

•  an individual who is a U.S. citizen or resident alien for U.S. federal income tax purposes;

•  a corporation, or entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

•  an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

•  a trust if (i) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) the trust has a valid election in effect to be treated as a U.S. person for U.S. federal income tax purposes.

      If a partnership holds common shares, the U.S. federal income tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. Partners of partnerships that hold common shares should consult their tax advisors regarding the U.S. federal income tax consequences to them of the purchase, ownership, and disposition of common shares.

Distributions on common shares

      Subject to the passive foreign investment company (“PFIC”) rules discussed below, the gross amount of any distribution with respect to common shares, before reduction for Canadian withholding tax, will be taxable to U.S. Holders of common shares as a dividend to the extent of our current and accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent that the amount of any cash exceeds our current and accumulated earnings and profits, as determined under U.S. federal income tax principles, such distribution will first be treated as a tax-free return of capital to the extent of your adjusted tax basis in the common shares causing a reduction in the adjusted basis of the common shares, (thereby increasing the amount of gain or decreasing the amount of loss that a U.S. Holder would recognize on a subsequent disposition of common shares). Any balance in excess of the adjusted basis will be subject to tax as capital gain.

      Subject to certain limitations, dividends paid to non-corporate U.S. Holders, including individuals, in taxable years beginning before January 1, 2009, may be eligible for a reduced rate of taxation if we are

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deemed to be a “qualified foreign corporation” for U.S. federal income tax purposes and such U.S. Holder has owned the common shares for more than 60 days in the 121-day period beginning 60 days before the date on which the common shares become ex-dividend. A qualified foreign corporation includes a non-U.S. corporation that is eligible for the benefits of a comprehensive income tax treaty with the United States that includes an exchange of information program and that the U.S. Treasury Department has determined to be satisfactory for purposes of the qualified dividend provisions of the Code. The U.S. Treasury Department has determined that the income tax treaty between the United States and Canada is satisfactory for purposes of the qualified dividend provisions of the Code. A qualified foreign corporation does not include a non-U.S. corporation that is a PFIC for the taxable year in which a dividend is paid or was a PFIC for the preceding taxable year. Distributions on the common shares will be eligible for this reduced rate of taxation as long as we are not, and was not in the preceding taxable year, a PFIC and are eligible for the benefits of the income tax treaty between the United States and Canada.

      Distributions will be includable in a U.S. Holder’s gross income on the date actually or constructively received by the U.S. Holder. These dividends will not be eligible for the dividends received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations.

      If we pay dividends on the common shares in Canadian dollars, the U.S. dollar value of such dividends will be calculated by reference to the exchange rate prevailing on the date of actual or constructive receipt of the dividend, regardless of whether the Canadian dollars are converted into U.S. dollars at that time. If Canadian dollars are converted into U.S. dollars on the date of actual or constructive receipt of such dividends, a U.S. Holder’s tax basis in such Canadian dollars will be equal to their U.S. dollar value on that date and, as a result, the U.S. Holder generally will not be required to recognize any foreign currency exchange gain or loss. Any gain or loss recognized on a subsequent conversion or other disposition of the Canadian dollars generally will be treated as ordinary income or loss from sources within the United States for U.S. foreign tax credit limitation purposes.

      A U.S. Holder may be entitled to claim a U.S. foreign tax credit for, or deduct, Canadian taxes that are withheld on dividends received by the U.S. Holder, subject to applicable limitations in the Code. For taxable years beginning on or before December 31, 2006, dividends paid on the common shares generally will constitute “passive income” and will be treated as foreign source income for U.S. foreign tax credit limitation purposes. For taxable years beginning after December 31, 2006, dividends paid on the common shares generally will be “passive category income” or “general category income” and will be treated as foreign source income for U.S. foreign tax credit limitation purposes. The amount of foreign income taxes that may be claimed as a credit in any year is subject to complex limitations and restrictions, which must be determined on an individual basis by each holder. U.S. Holders are urged to consult their tax advisors regarding the availability of the U.S. foreign tax credit in their particular circumstances.

Sale, exchange or other disposition of common shares

      Subject to the PFIC rules discussed below, upon the sale, exchange or other disposition of common shares, a U.S. Holder generally will recognize capital gain or loss equal to the difference between the amount realized upon the sale, exchange or other disposition of common shares and the U.S. Holder’s adjusted tax basis in the common shares. The capital gain or loss generally will be long-term capital gain or loss if, at the time of sale, exchange or other disposition, the U.S. Holder has held the common shares for more than one year. Net long-term capital gains of non-corporate U.S. Holders, including individuals, are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss that a U.S. Holder recognizes generally will be treated as gain or loss from sources within the United States for U.S. foreign tax credit limitation purposes.

PFIC rules

      Based on the projected composition on our income and our assets, we do not expect to be a PFIC for our taxable year ending March 31, 2007. Because this conclusion is a factual determination that is made annually, and is subject to change, there can be no assurance that we will not be a PFIC for our taxable year

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ending March 31, 2007 or any future taxable year. Special, generally adverse, U.S. federal income tax rules would apply to a U.S. Holder if we were a PFIC at any time during which a U.S. Holder held common shares. A non-U.S. corporation generally is classified as a PFIC for U.S. federal income tax purposes in any taxable year if, either (i) at least 75% of its gross income is “passive” income (the “income test”), or (ii) on average at least 50% of the gross value of its assets is attributable to assets that produce passive income or are held for the production of passive income (the “asset test”). Passive income generally includes dividends, interest, royalties, rents (other than rents and royalties derived in the active conduct of a trade or business and not derived from a related person), certain net gains from the sales of commodities, annuities and gains from assets that produce passive income. For purposes of the income test and the asset test, if a non-U.S. corporation owns directly or indirectly at least 25% (by value) of the stock of another corporation, the non-U.S. corporation will be treated as if it held its proportionate share of the assets of the latter corporation, and received directly its proportionate share of the income of the latter corporation.

      If we were a PFIC, a U.S. Holder of common shares would be taxed at ordinary income tax rates on any gain realized on the sale or exchange of the common shares and on any “excess distributions” received. Excess distributions are amounts received by a U.S. Holder with respect to its common shares in any taxable year that exceed 125% of the average distributions received by the U.S. Holder in the shorter of either the three previous years or, if shorter, the U.S. Holder’s holding period for the shares before the current taxable year. Gain and excess distributions would be allocated ratably to each day that the U.S. Holder held common shares. Amounts allocated to that taxable year and to years before we became a PFIC would be treated as ordinary income. In addition, amounts allocated to each taxable year beginning with the year we first became a PFIC would be taxed at the highest rate in effect for that year on ordinary income and the tax would be subject to an interest charge at the rate applicable to underpayments of income tax. If we were a PFIC, U.S. Holders would be required to file U.S. Internal Revenue Service Form 8621 for each year in which they held common shares.

      Under certain circumstances, a U.S. person may make certain elections to mitigate some of the tax consequences of holding shares of a PFIC (including a qualified electing fund election and a mark-to-market election). U.S. Holders are urged to consult their tax advisors regarding our possible classification as a PFIC and the adverse tax consequences that would result from such classification.

Information reporting and backup withholding

      In general, unless a U.S. Holder belongs to a category of certain exempt recipients (such as corporations), information reporting requirements will apply to dividends as well as proceeds of sales of common shares that are effected through the U.S. office of a broker or the non-U.S. office of a broker that has certain connections with the United States. Backup withholding may apply to these payments if a U.S. Holder fails to provide a correct taxpayer identification number or certification of exempt status, fails to report in full dividend and interest income or, in certain circumstances, fails to comply with applicable certification requirements. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against a U.S. Holder’s U.S. federal income tax, provided the U.S. Holder furnishes the required information to the U.S. Internal Revenue Service in a timely manner.

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UNDERWRITING

      We are offering the common shares described in this prospectus through the underwriters named below. BMO Nesbitt Burns Inc. and UBS Securities LLC are the joint book-running managers of this offering. We and ATS have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, each of the underwriters has severally agreed to purchase the number of common shares listed next to its name in the following table:

	Number of
Underwriters	Shares
BMO Nesbitt Burns Inc.
UBS Securities LLC
Total

      The underwriting agreement provides that the underwriters must buy all of the shares if they buy any of them. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ over-allotment option described below.

      Our common shares are offered subject to a number of conditions, including:

•  receipt and acceptance of our common shares by the underwriters, and

•  the underwriters’ right to reject orders in whole or in part.

      In connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses electronically.

      This offering is being made concurrently in the United States and in each of the provinces and territories of Canada. The common shares will be offered in the United States through those underwriters or their U.S. affiliates who are registered to offer the common shares for sale in the United States and such other registered dealers as may be designated by the underwriters. The common shares will be offered in each of the provinces and territories of Canada through those underwriters or their Canadian affiliates who are registered to offer the common shares for sale in such provinces and territories and such other registered dealers as may be designated by the underwriters. Subject to applicable law, the underwriters may offer the common shares outside of the United States and Canada.

Over-Allotment Option

      ATS has granted the underwriters an option to buy up to                     additional common shares. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with this offering. The underwriters have 30 days from the date of this prospectus to exercise this option. If the underwriters exercise this option, they will each purchase additional shares approximately in proportion to the amounts specified in the table above. If this option is exercised in full, ATS will receive net proceeds of $              after underwriting commissions. We will not receive any proceeds from the sale of common shares by ATS in the event that this option is exercised. This prospectus also qualifies the grant of this option and the distribution of the commons shares transferable upon the exercise of this option.

Commissions

      Shares sold by the underwriters to the public will initially be offered at the offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $           per share from the public offering price. Any of these securities dealers may resell any shares purchased from the underwriters to other brokers or dealers at a discount of up to $           per share from the public offering price. If all the shares are not sold at the public offering price, the representatives may change the offering price and the other selling terms. The public offering price for the common shares offered in the United States is payable in U.S. dollars and the public offering price for the common shares offered in Canada is payable in Canadian dollars. The Canadian dollar amount is the equivalent of the

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U.S. price of the common shares based on the prevailing U.S.-Canadian dollar exchange rate on the date of the underwriting agreement.

      The following table shows the per share and total underwriting commissions we or ATS will pay to the underwriters, assuming both no exercise and full exercise of the underwriters’ option to purchase up to  common shares:

			Over-
		Over-	Allotment
		Allotment not	Fully
		Exercised	Exercised
Per share		$	$
	Total	$	$

      We estimate that the total expenses of this offering payable by us, not including the underwriting commissions, will be approximately $          . ATS will pay the underwriting commissions applicable to the common shares that they sell if the over-allotment option is exercised.

No Sales of Similar Securities

      We, our directors and executive officers and ATS have entered into lock-up agreements with the underwriters. Under these agreements, we, our directors and executive officers and ATS may not, without the prior written approval of BMO Nesbitt Burns Inc. and UBS Securities LLC, subject to limited exceptions, offer, sell, contract to sell or otherwise dispose of or hedge our common shares or securities convertible into or exercisable or exchangeable for our common shares. These restrictions will be in effect for a period of 180 days after the date of this prospectus. At any time and without public notice, BMO Nesbitt Burns Inc. and UBS Securities LLC may, in their sole discretion, release all or some of the securities from these lock-up agreements.

Indemnification and Contribution

      We have agreed to indemnify the underwriters and their controlling persons against certain liabilities, including liabilities under the U.S. Securities Act and applicable securities laws in Canada. If we are unable to provide this indemnification, we will contribute to payments the underwriters and their controlling persons may be required to make in respect of those liabilities.

      We have applied to list our common shares on The Nasdaq Global Market under the symbol “PHWT” and on the Toronto Stock Exchange under the symbol “PHW.” Any such listing will be subject to the approval of the relevant stock exchange, and any such approval would not be given unless all of the original listing requirements were met.

Price Stabilization, Short Positions and Passive Market Making

      In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our common shares, including:

•  stabilizing transactions;

•  short sales;

•  purchases to cover positions created by short sales;

•  imposition of penalty bids;

•  syndicate covering transactions; and

•  passive market making.

      Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our common shares while this offering is in progress. These transactions may

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also include making short sales of our common shares, which involve the sale by the underwriters of a greater number of common shares than they are required to purchase in this offering. Short sales may be “covered short sales,” which are short positions in an amount not greater than the underwriters’ over-allotment option referred to above, or may be “naked short sales,” which are short positions in excess of that amount.

      The underwriters may close out any covered short position either by exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which they may purchase shares through the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common shares in the open market that could adversely affect investors who purchased in this offering.

      The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.

      As a result of these activities, the price of our common shares may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the underwriters at any time. The underwriters may carry out these transactions on The Nasdaq Global Market, the Toronto Stock Exchange, in the over-the-counter market or otherwise.

      In addition, in accordance with rules and policy statements of certain Canadian provincial securities commissions, the underwriters may not, throughout the period of distribution, bid for or purchase the common shares. Exceptions, however, exist where the bid or purchase is not made for the purpose of creating actual or apparent active trading in, or raising prices of, the common shares. These exceptions include a bid or purchase permitted under the by-laws and rules of applicable regulatory authorities, The Nasdaq Global Market and the Toronto Stock Exchange relating to market stabilization and passive market making activities and a bid or purchase made for and on behalf of a customer where the order was not solicited during the period of distribution. Subject to the foregoing and applicable laws, in connection with the offering and pursuant to the first exception mentioned above, the underwriters may overallot or effect transactions that stabilize or maintain the market price of the common shares at levels other than those which might otherwise prevail on the open market. Any of the foregoing activities may have the effect of preventing or slowing a decline in the market price of the common shares. They may also cause the price of the common shares to be higher than the price that would otherwise exist in the open market in the absence of these transactions. If the underwriters commence any of these transactions, they may discontinue them at any time. The underwriters may conduct these transactions on The Nasdaq Global Market, the Toronto Stock Exchange or in the over-the counter market, or otherwise.

Pricing of the Offering

      Prior to this offering, there was no public market for our common shares. The initial public offering price will be determined by negotiations between us, ATS and the underwriters. Among the factors considered in determining the initial public offering price will be our future prospects and future prospects of our industry in general, our sales, earnings and other financial and operating information in recent periods, and the price-earnings ratios, market prices of securities and financial and operating information of companies engaged in activities similar to ours. The estimated initial public offering price range set forth on the cover page of this prospectus is subject to change as a result of market conditions and other factors.

Directed Share Program

      At our request, the underwriters have reserved up to                     common shares, or           % of the shares offered by this prospectus, for sale under a directed share program to our and ATS’ officers, directors, employees and related parties, immediate family members and entities of which employees or family members are the sole beneficiaries. All of the persons purchasing the reserved shares must commit to

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purchase no earlier than the effective time of the registration statement on the date of this prospectus but no later than the close of business on the day following that date. The number of common shares available for sale to the general public will be reduced to the extent these persons purchase the reserved shares. Common shares committed to be purchased by directed share program participants which are not so purchased will be reallocated for sale to the general public in this offering. All sales of common shares pursuant to the directed share program will be made at the initial public offering price set forth on the cover page of this prospectus.

Affiliations

      The underwriters and their affiliates have provided and may provide certain commercial banking, financial advisory and investment banking services for us and ATS for which they receive fees, including strategic advisory services provided by BMO Nesbitt Burns Inc. to ATS in connection with its solar division, and the services provided by BMO Nesbitt Burns Inc. and UBS Securities LLC as financial co-advisors with respect to exploring strategic alternatives for ATS’s solar division.

      The underwriters and their affiliates may from time to time in the future engage in transactions with us and ATS and perform services for us and ATS in the ordinary course of their business.

Expenses Related to this Offering

      Set forth below is an itemization of the total expenses, excluding underwriting discounts and commissions, which are expected to be incurred in connection with our offer and sale of our common shares. With the exception of the SEC registration fee and the National Association of Securities Dealers, Inc. filing fee, all amounts are estimates.

SEC registration fee	$	26,750
Nasdaq Global Market and Toronto Stock Exchange listing fees
Printing and engraving expenses
Legal fees and expenses
Accounting fees and expenses
National Association of Securities Dealers, Inc. filing fee
Miscellaneous
Total	$

      The address of BMO Nesbitt Burns Inc. is 1 First Canadian Place, 4^th Floor, P.O. Box 150, Toronto, Ontario, Canada M5X 1H3. The address of UBS Securities LLC is One North Wacker Drive, Chicago, Illinois, 60606.

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NOTICE TO INVESTORS

European Economic Area

      With respect to each Member State of the European Economic Area which has implemented Prospectus Directive 2003/71/ EC, including any applicable implementing measures, from and including the date on which the Prospectus Directive is implemented in that Member State, the offering of our common shares in this offering is only being made:

      (1) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

      (2) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or

      (3) in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

United Kingdom

      Our common shares may not be offered or sold and will not be offered or sold to any persons in the United Kingdom other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses and in compliance with all applicable provisions of the FSMA with respect to anything done in relation to our common shares in, from or otherwise involving the United Kingdom. In addition, any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of our common shares may only be communicated in circumstances in which Section 21(1) of the FSMA does not apply to us. Without limitation to the other restrictions referred to herein, this offering circular is directed only at (1) persons outside the United Kingdom; (2) persons having professional experience in matters relating to investments who fall within the definition of “investment professionals” in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005; or (3) high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. Without limitation to the other restrictions referred to herein, any investment or investment activity to which this offering circular relates is available only to, and will be engaged in only with, such persons, and persons within the United Kingdom who receive this communication (other than persons who fall within (2) or (3) above) should not rely or act upon this communication.

Switzerland

      Our common shares may be offered in Switzerland only on the basis of a non-public offering. This prospectus does not constitute an issuance prospectus according to articles 652a or 1156 of the Swiss Federal Code of Obligations or a listing prospectus according to article 32 of the Listing Rules of the Swiss exchange. Our common shares may not be offered or distributed on a professional basis in or from Switzerland and neither this prospectus nor any other offering material relating to our common shares may be publicly issued in connection with any such offer or distribution. The shares have not been and will not be approved by any Swiss regulatory authority. In particular, the shares are not and will not be registered with or supervised by the Swiss Federal Banking Commission, and investors may not claim protection under the Swiss Investment Fund Act.

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LEGAL MATTERS

      The validity of the issuance and sale of the common shares will be passed upon for us by Blake, Cassels & Graydon LLP. Certain U.S. legal matters relating to this offering will be passed upon for us by Shearman & Sterling LLP. Certain legal matters relating to this offering will be passed upon for the underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, as to U.S. legal matters, and Davies Ward Phillips & Vineberg LLP, as to Canadian legal matters. The partners and associates of Blake, Cassels & Graydon LLP, collectively, beneficially own, directly and indirectly, (i) less than 1% of our outstanding common shares; and (ii) less than 1% of the outstanding common shares of ATS. The partners and associates of Davies Ward Phillips & Vineberg LLP, collectively, beneficially own, directly and indirectly, (i) less than 1% of our outstanding common shares; and (ii) less than 1% of the outstanding common shares of ATS.

EXPERTS

      Our combined financial statements as of March 31, 2006 and 2005, and for each of the three years in the period ended March 31, 2006, included in this prospectus have been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report appearing herein and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

      The offices of KPMG LLP are located at 115 King Street South, Waterloo, Ontario, Canada, N2J 5A3.

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WHERE YOU CAN FIND MORE INFORMATION

      We have filed a registration statement on Form F-1 with the SEC regarding this offering. This prospectus, which is part of the registration statement, does not contain all of the information included in the registration statement, and you should refer to the registration statement and its exhibits to read that information.

      Any statement in this prospectus about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to the registration statement, you must review the exhibits themselves for a complete description of the contract or document. You may review a copy of the registration statement, including the exhibits and schedules filed with it at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington D.C. 20549. Copies of all or a part of the registration statement may be obtained from this office after payment at prescribed rates. You may call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. You may also obtain a free copy of the registration statement, including the schedules and exhibits, from the SEC website at www.sec.gov.

      We are not currently subject to the informational requirements of the Exchange Act. As a result of this offering, we will become subject to the informational requirements of the Exchange Act and, in accordance therewith, will file reports and other information with the SEC. The registration statement, such reports and other information can be inspected and copied at the public reference facilities of the SEC described above. As a foreign private issuer, we are exempt from the U.S. rules under the Exchange Act prescribing the furnishing and content of proxy statements and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. Under the Exchange Act, as a foreign private issuer, we may not be required to publish financial statements as frequently or as promptly as United States companies.

      We will also be subject to the full informational requirements of the securities commissions in all provinces and territories of Canada. You are invited to read and copy any reports, statements or other information, other than confidential filings, that we intend to file with the Canadian securities regulatory authorities. These filings are electronically available from the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) at http://www.sedar.com, the Canadian equivalent of the SEC electronic document gathering and retrieval system.

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INDEX TO COMBINED FINANCIAL STATEMENTS

	Page
Unaudited Combined Balance Sheets at March 31, 2006 and September 30, 2006		F-2
Unaudited Combined Statements of Earnings (Loss) for the six months ended September 30, 2005 and 2006		F-3
Unaudited Combined Statements of Net Investment for the six months ended September 30, 2005 and 2006		F-4
Unaudited Combined Statements of Cash Flows for the six months ended September 30, 2005 and 2006		F-5
Notes to the Unaudited Combined Financial Statements		F-6
Report of Independent Registered Public Accounting Firm		F-17
Combined Balance Sheets at March 31, 2005 and 2006		F-18
Combined Statements of Earnings (Loss) for the years ended March 31, 2004, 2005 and 2006		F-19
Combined Statements of Net Investment for the years ended March 31, 2004, 2005 and 2006		F-20
Combined Statements of Cash Flows for the years ended March 31, 2004, 2005 and 2006		F-21
Notes to Combined Financial Statements		F-22

F-1

Photowatt Technologies Inc.

UNAUDITED COMBINED BALANCE SHEETS

		March 31, 2006		September 30, 2006
		(In United States
		thousands of dollars)
ASSETS
Current assets:
	Cash and cash equivalents	$	1,958	$	1,448
	Accounts receivable		20,253		21,262
	Inventories (note 3)		33,441		36,616
	Other current assets		441		2,279
Total current assets			56,093		61,605
Property, plant and equipment (note 4)			42,805		45,221
Goodwill			1,705		1,705
Deferred development costs (note 6)			123		—
Other assets (note 7)			2,531		13,281
Total Assets		$	103,257	$	121,812
LIABILITIES AND GROUP EQUITY
Current liabilities:
	Bank indebtedness (note 8)	$	—	$	3,325
	Accounts payable and accrued liabilities		22,809		23,338
	Due to parent (note 12)		—		20,112
	Income taxes payable		4,096		1,094
Total current liabilities			26,905		47,869
Future income taxes			584		796
Total liabilities			27,489		48,665
Group equity:
	Net investment (note 11)		75,310		76,705
	Cumulative translation adjustment		458		(3,558	)
			75,768		73,147
Total liabilities and group equity		$	103,257	$	121,812
Commitments (note 13)
Subsequent events (note 15)

See accompanying notes to unaudited combined financial statements.

F-2

Photowatt Technologies Inc.

UNAUDITED COMBINED STATEMENTS OF EARNINGS (LOSS)

		Six months ended
		September 30
		2005		2006
		(In United States
		thousands of dollars)
Revenue		$	56,878	$	65,993
Operating costs and expenses:
	Cost of revenue		42,219		46,841
	Research and development		324		5,668
	Amortization		3,057		4,521
	Selling and administrative		3,325		7,488
	Shared corporate costs (notes 2 and 12)		248		573
			49,173		65,091
Earnings from operations			7,705		902
Interest expense (note 12)			502		1,898
Earnings (loss) before provision for income taxes			7,203		(996	)
Provision for income taxes (note 10)			2,752		3,352
Net earnings (loss)		$	4,451	$	(4,348	)

See accompanying notes to unaudited combined financial statements.

F-3

Photowatt Technologies Inc.

UNAUDITED COMBINED STATEMENTS OF NET INVESTMENT

	Six months ended
	September 30
	2005		2006
	(In United States
	thousands of dollars)
Net investment, beginning of period	$	138,261	$	75,310
Net earnings (loss)		4,451		(4,348	)
Net contribution by ATS Automation Tooling Systems Inc.		18,058		5,743
Net investment, end of period (note 11)	$	160,770	$	76,705

See accompanying notes to unaudited combined financial statements.

F-4

Photowatt Technologies Inc.

UNAUDITED COMBINED STATEMENTS OF CASH FLOWS

			Six months ended
			September 30
			2005			2006
			(In United States
			thousands of dollars)
Cash flows from (used in) operating activities:
	Net earnings (loss)		$	4,451		$	(4,348	)
	Other items not involving cash:
		Future tax expense		437			212
		Amortization		3,057			4,521
		Other		162			—
	Net change in non-cash working capital			(675	)		(8,994	)
Cash flows from (used in) operating activities				7,432			(8,609	)
Cash flows used in investing activities:
	Acquisition of property, plant and equipment			(12,319	)		(11,313	)
	Deferred development expenditures			(11,987	)		(625	)
Cash flows used in investing activities				(24,306	)		(11,938	)
Cash flows from (used in) financing activities:
	Advances from bank indebtedness			—			3,325
	Advances from parent			—			20,112
	Proceeds from government assistance			2,296			79
	Deferred expenditures for initial public offering			—			(3,542	)
	Contribution by ATS Automation Tooling Systems Inc.			14,209			—
Cash flows from financing activities				16,505			19,974
Effect of exchange rate changes on cash and cash equivalents				(31	)		63
Decrease in cash and cash equivalents				(400	)		(510	)
Cash and cash equivalents, beginning of period				891			1,958
Cash and cash equivalents, end of period			$	491		$	1,448

See accompanying notes to unaudited combined financial statements.

F-5

Photowatt Technologies Inc.

NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS

(IN UNITED STATES THOUSANDS OF DOLLARS)

1. FORMATION OF PHOTOWATT TECHNOLOGIES INC.:

      Photowatt Technologies Inc. is a wholly-owned subsidiary of ATS Automation Tooling Systems Inc. References to “ATS” or the “Parent” refer to ATS Automation Tooling Systems Inc. and, where applicable, its subsidiaries. Upon the completion of the initial public offering of Photowatt Technologies Inc., ATS will transfer into Photowatt Technologies Inc. its interests in the assets and liabilities that are used in the solar business conducted by ATS and its subsidiaries, subject to certain excluded assets including the premises and building related to the Spheral Solar manufacturing facility and ATS solar automation know-how. The solar business is comprised of Spheral Solar, a division of ATS, Photowatt International S.A.S., Spheral Solar Power Inc. and the net operating assets of Matrix Solar Technologies, Inc. (“Photowatt USA”), all of which are divisions or subsidiaries of ATS (collectively with Photowatt Technologies Inc. known as the “Company”). For the convenience of the reader, the combined financial statements refer to Photowatt Technologies Inc. and use “the Company” even though the transfer has not been consummated at September 30, 2006. As the transfer is not consummated, the financial statements are referred to as combined financial statements. The Company’s principal business activity is the design, manufacture and sale of photovoltaic products.

2. BASIS OF PRESENTATION:

      These unaudited combined financial statements present the historical financial position, results of operations, changes in net investment and cash flows on a carve-out basis from ATS as if the Company had operated as a stand-alone entity subject to ATS’ control prior to this reorganization. Certain comparative balances have been reclassified on a carve-out basis.

      A portion of ATS’ corporate selling and administrative expenses have been allocated to the Company, based on management’s estimates of expenses directly attributable to the Company. Shared services provided include strategic, operational, human resources, accounting, information systems, facility, legal, taxation and treasury services.

      The Company’s surplus funds are transferred to ATS and the Company’s financing requirements are provided by ATS as reflected through ATS’ net investment account and due to parent. Related party interest expense recorded in the Combined Statements of Earnings (Loss) represents charges from ATS as historically reflected in the accounts of subsidiaries.

      Income taxes have been recorded at statutory rates based on income taxes as reported in the Combined Statements of Earnings (Loss) as though the Company was a separate tax paying group of entities. Income taxes payable or recoverable in respect of the components which were not historically separate tax paying legal entities have been included in ATS’ net investment. Future income taxes have been presented in the Combined Balance Sheets for each temporary difference between the financial reporting and tax basis of the assets and liabilities. In addition, future income tax assets have been recognized to the extent that they would have been realized as though the Company was a separate tax paying group of entities. Future income tax assets are recognized only to the extent that management determines that it is more likely than not that future income tax assets will be realized in the foreseeable future.

      As a result of the basis of presentation described above, the combined financial statements may not necessarily be indicative of the results that would have been obtained if the Company had operated as a stand-alone group of entities or indicative of the results for any future periods.

      The accompanying unaudited interim combined financial statements are prepared in accordance with accounting principles generally accepted in Canada (“GAAP”) and the accounting policies are consistent with those described in the combined financial statements for the year ended March 31, 2006 and which conforms in all material respects with United States GAAP, except as presented in note 16. The unaudited

F-6

Photowatt Technologies Inc.

NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS — (Continued)

interim combined financial statements do not contain all the disclosures required by Canadian generally accepted accounting principles for annual financial statements and should be read in conjunction with the Company’s fiscal 2006 audited combined financial statements.

      Revenue on certain long-term design, project management and/or installation services contracts is recognized using the percentage of completion method. The degree of completion is determined based on costs incurred as a percentage of total costs anticipated for each contract. Incentive awards, claims or penalty provisions are recognized when such amounts are likely to accrue and can reasonably be estimated. Complete provision is made for losses on contracts in progress when such losses first become known. Revisions in cost and profit estimates, which can be significant, are reflected in the accounting period in which the relevant facts become known.

      In the opinion of management, the unaudited interim combined financial statements reflect all of the adjustments, which consist only of normal and recurring adjustments, necessary to present fairly the financial position at September 30, 2006 and the results of operations and cash flows for the six months ended September 30, 2006 and 2005. Interim results are not necessarily indicative of annual or longer term results as the solar market served by the Company tends to be cyclical in nature. Both revenues and earnings for the Company typically decline during the Company’s second quarter as a result of Photowatt International S.A.S.’s annual summer shutdown. General economic trends, product life cycles and product changes may impact the Company’s volumes and earnings.

3. INVENTORIES:

		March 31, 2006		September 30, 2006
Inventories are summarized as follows:
	Raw materials	$	19,275	$	21,263
	Work-in-process		8,038		7,678
	Finished goods available for sale		6,128		7,675
		$	33,441	$	36,616

      Raw materials inventory includes supply inventories of $4,136 as at September 30, 2006 (March 31, 2006 — $3,201) which are consumed in the production process. The provision for excess and obsolete inventory was $1,107 at September 30, 2006 (March 31, 2006 — $606).

4. PROPERTY, PLANT AND EQUIPMENT:

			Accumulated			Net Book
At September 30, 2006	Cost		Amortization			Value
Land and land improvements	$	371	$	—		$	371
Buildings		1,728		(1,174	)		554
Production equipment		73,286		(29,967	)		43,319
Other equipment and furniture		1,529		(552	)		977
	$	76,914	$	(31,693	)	$	45,221

F-7

Photowatt Technologies Inc.

NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS — (Continued)

			Accumulated			Net Book
At March 31, 2006	Cost		Amortization			Value
Land and land improvements	$	355	$	—		$	355
Buildings		1,008		(989	)		19
Production equipment		66,047		(24,434	)		41,613
Other equipment and furniture		1,300		(482	)		818
	$	68,710	$	(25,905	)	$	42,805

5. INTANGIBLE ASSETS:

      The intangible assets were not amortized prior to October 1, 2005, when the Company was in the development stage of its Spheral Solar technology initiative. Subsequent to September 30, 2005, amortization began on the intangible assets on a straight-line basis over their estimated remaining useful lives of 10 to 17 years.

6. DEFERRED DEVELOPMENT COSTS:

	March 31,		September 30,
	2006		2006
Deferred development costs — various programs	$	123	$	—

      During the six months ended September 30, 2006, the Company deferred $62 of net development costs (September 30, 2005 — $10,878).

7. OTHER ASSETS:

	March 31,		September 30,
	2006		2006
Long term receivable	$	2,531	$	3,136
Deferred initial public offering expenditures		—		3,542
Deposits on property, plant and equipment		—		6,603
	$	2,531	$	13,281

      Long term receivable is comprised of amounts due from Technology Partnerships Canada in regards to funding contributions toward the Company’s development of a new photovoltaic energy technology.

8. BANK INDEBTEDNESS:

      As at September 30, 2006, the Company had two credit facilities available to Photowatt International S.A.S. The first facility is in the amount of Euro 1,000, under which the Company had drawn Euro 800 as at September 30, 2006, and it bears interest at the French four-month prime rate plus 1.05%. The second facility is in the amount of net Euro 800, offset by cash deposits on hand at the financial institution, under which we had drawn Euro 1,800 as at September 30, 2006, with Euro 810 of cash on deposit offsetting the gross amount, and it bears interest at the Euro LIBOR rate plus 0.50%. Both credit facilities are unsecured and repayable on demand. Subsequent to September 30, 2006, the second credit facility was increased. See note 15 to the unaudited combined interim financial statements.

F-8

Photowatt Technologies Inc.

NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS — (Continued)

9. STOCK-BASED COMPENSATION PLANS:

      Since 1997, Matrix Solar Technologies, Inc., a company whose operating assets are included in these combined financial statements, has granted stock options to certain of its employees and employees of its affiliates. The holders of 195 of these options have the right to require Matrix Solar Technologies, Inc. to settle the value of the vested portion of the shares under option in cash based on a formula linked to the net book value of Matrix Solar Technologies, Inc. A liability has been recognized for the vested portion of the cash settlement value. The amount of the recognized liability was $150, as at September 30, 2006 and $153 as at March 31, 2006. In October 2006, these options were terminated in exchange for a cash payment of $410.

      During fiscal 2006, ATS issued 50,000 stock options on its common shares to an employee of the Company. The Company recognized compensation expense based on the fair value over the vesting period of these options. Compensation expense of $23 was recorded in the six-months ended September 30, 2006 (September 30, 2005 — $13). As of September 30, 2006, there was $188 of unrecognized stock-based compensation related to unvested stock options of this grant which was expected to be expensed over the vesting period of approximately 3.68 years. These options were surrendered in October 2006.

      In September 2006, the Company approved the grant of options to two executive officers of the Company to purchase, in aggregate, 302,860 of the Company’s common shares at an exercise price of C$5.00 per share. The number of common shares underlying each of these options is subject to an automatic adjustment that will increase or decrease the number such that it is equal to 0.6883% of the common shares in the Company held by ATS immediately prior to the closing of the initial public offering. The option to purchase 160,000 common shares granted to one executive vests as to 20% on the completion of the initial public offering and 20% on each anniversary date of the completion of the initial public offering. The option to purchase 142,860 common shares granted to the second executive vests as to 20% on each anniversary date of the completion of the initial public offering. In addition to the above mentioned grants, the two executives are eligible to receive a cash payment upon any exercise of these options if the number of shares underlying these options exceeds 302,860 after the adjustment described above. In the event that a change of control occurs and the employment of the option holder is terminated or they resign within three months of such change of control, the options granted to the two executive officers will accelerate and become fully vested.

      The fair value of the above options was calculated using the Black-Scholes option pricing model with the following assumptions:

Weighted average Black-Scholes value of options		$	3.35
Assumptions:
	Risk free interest		3.9	%
	Expected life in years		7.0
	Expected dividend yield		0.0	%
	Volatility		80.0	%

      The risk free interest rate utilized during the life of the stock option is based on a Canadian government security for an equivalent period. Expected volatility is based on the expected volatility of industry peers. The maximum life of the stock option has been used for the expected term. As these options vest only upon the completion of the initial public offering, no stock compensation expense will be recognized until completion of the initial public offering. As of September 30, 2006, there was $1,015 of unrecognized stock-based compensation related to these unvested stock options.

      Furthermore, the Company has approved the grants to certain directors, officers, employees and other key personnel of the Company, including one of the executives referred to above, of options to purchase an aggregate of 844,000 common shares exercisable at the public offering price at the closing of the initial public offering. Included in the 844,000 above are options to purchase 292,000 common shares that vest on

F-9

Photowatt Technologies Inc.

NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS — (Continued)

the achievement of specific defined performance objectives related to the development of Spheral Solar and options to purchase 552,000 common shares that vest as to 20% on each anniversary date of the completion of the initial public offering. As these options vest only upon the completion of the initial public offering, no stock compensation expense will be recognized until completion of the initial public offering. At the time of the initial public offering, the Company will measure the fair value of these stock options as the exercise price will be known.

      Subsequent to September 30, 2006, the Company approved an additional option grant to purchase 15,000 common shares. The terms of this option grant are consistent with those outlined above for the options to purchase an aggregate of 844,000 common shares. In addition, of the grant of options to purchase an aggregate of 844,000 common shares, 8,580 options that were approved for grant were terminated subsequent to September 30, 2006.

10. INCOME TAXES:

      For the six months ended September 30, 2006 and 2005, income tax expense differs from the amounts which would be obtained by applying the combined Canadian basic federal and provincial income tax rate to earnings before income taxes. The Company has not recognized potential benefits related to loss carryforward amounts and other temporary differences primarily in its Spheral Solar segment and in Photowatt USA as management has not been able to conclude that it is more likely than not that such benefits will be realized in the foreseeable future.

11. NET INVESTMENT:

      The net investment account comprises:

	Photowatt			Spheral
	International			Solar			Photowatt			Spheral
	S.A.S.			Power Inc.			USA			Solar			Other			Total
Net investment, March 31, 2006	$	61,060		$	(5,369	)	$	8,266		$	11,353		$	—		$	75,310
Net earnings (loss) for the period ended September 30, 2006		6,658			—			(736	)		(7,736	)		(2,534	)		(4,348	)
Increase (reduction) of investment by ATS		(1,265	)		(6	)		(48	)		4,528			2,534			5,743
Net investment, September 30, 2006	$	66,453		$	(5,375	)	$	7,482		$	8,145		$	—		$	76,705

      Other includes costs that have been allocated to the Company in connection with the preparation of these financial statements and intersegment eliminations (note 2 and 12).

F-10

Photowatt Technologies Inc.

NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS — (Continued)

12. RELATED PARTY TRANSACTIONS:

Transactions

Six months ended September 30	2005		2006
Purchase of property, plant and equipment — ATS	$	3,785	$	310
Purchase of raw materials and other services — ATS		259		811
Development expenditures — ATS		277		—
Initial public offering expenditures — ATS		—		3,451
Shared corporate costs — ATS		248		573
Interest expense — ATS		511		1,862
Sale of product — other related party		57		11

      As noted in note 2, ATS provides strategic, operational and administrative services to the Company. Furthermore, the Company purchases property, plant and equipment, development expenditures, raw materials and other services from affiliated companies. “Sale of product” pertains to sales to a business controlled by a consultant who serves as our managing director, Europe (acting) of Photowatt International S.A.S. These transactions have been reflected at their exchange amount.

      As at September 30, 2006, included in accounts payable and accrued liabilities are amounts due to ATS in the amount of $1,609 (March 31, 2006 — $192). These amounts are payable on demand and do not bear interest, other than as noted below.

      The amount payable to ATS included in the Company’s balance sheet under net investment represents a net balance as the result of various transactions between the Company and its Parent. There are no terms of settlement or interest charges associated with the account balance other than described below. The Company’s surplus funds are transferred to ATS, and the Company’s financing requirements are funded by ATS. At September 30, 2006, two intercompany amounts were outstanding in the amounts of Euro 8,402 ($10,637), and $52,854 CDN ($47,288) on which interest of Euro LIBOR rate plus 1.25% and Canadian dollar prime rate is charged, respectively. Both amounts have been included in ATS’s net investment in the Company.

      On completion of the initial public offering, the Company will repay ATS for amounts funded by ATS during fiscal 2007 up to the date of closing. As at September 30, 2006, the amount funded by ATS during fiscal 2007 to be repaid was $20,112. This amount is included as due to parent on the Combined Balance Sheets.

      Other transactions include intercompany purchases and sales and miscellaneous other administrative expenses incurred by the Parent on behalf of the Company.

      An analysis of transactions in the intercompany account for the six months ended September 30, 2006 and September 30, 2005 follows:

	2005			2006
Balance at beginning of period	$	1,313		$	192
Net cash funded by Parent		(6,121	)		(2,139	)
Net intercompany purchases		4,321			1,121
Other administrative expenses		759			2,435
Balance at end of period	$	272		$	1,609
Average balance during the period	$	793		$	901

F-11

Photowatt Technologies Inc.

NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS — (Continued)

13. COMMITMENTS:

      As at September 30, 2006, the Company had issued purchase commitments of $16,419 for production equipment. In May 2006, the Company announced the capacity expansion plan for Photowatt International for the facility near Lyon, France at an expected cost of Euro 26,500.

      During the six months ended September 30, 2006, the Company issued purchase orders, including purchase orders to acquire approximately $8,000 of refined metallurgical silicon which will be delivered through to fiscal 2008.

      In September 2006, the Company entered into an agreement with three other partners for a project whose primary objective is to develop a commercial process for the production of solar grade silicon derived from metallurgical silicon with a capacity of 200 tonnes per year. Pursuant to the agreement, the Company’s role in the project is to contribute certain expertise and non-financial resources in order to improve and enhance the silicon material developed during the project’s development phase. Under the contract, the Company is to be supplied, at predetermined prices, with at least 80% of the volume of any solar grade silicon or ingots produced by the project through to April 20, 2008. The Company expects initial shipments from the project to commence in April 2007, however given that the plant is currently under construction and production has not yet begun, the ultimate timing of the delivery will be dependent on the start date of production.

14. SEGMENTED DISCLOSURE:

      The Company evaluates performance based on two reportable segments. The Photowatt International segment consists of Photowatt International S.A.S. in France and the module assembly business of Photowatt USA. Photowatt International designs, manufactures and sells modules and installation kits, and provides solar power design and other value-added services. The Spheral Solar segment is developing a technology for light weight, flexible crystalline solar modules.

      Intersegment revenues are accounted for at current market rates, negotiated between the segments.

	Six months ended September 30, 2006
	Photowatt		Spheral
	International		Solar			Combined
Revenue	$	65,993	$	2,298		$	68,291
Inter-segment revenue		—		(2,298	)		(2,298	)
Total Company revenue	$	65,993	$	—		$	65,993
Earnings (loss) from operations	$	9,857	$	(6,421	)	$	3,436
Inter-segment eliminations							(1,066	)
Corporate costs							(1,468	)
Total Company earnings from operations						$	902
Total Company assets	$	107,443	$	14,369		$	121,812

F-12

Photowatt Technologies Inc.

NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS — (Continued)

	Six months ended September 30, 2005
	Photowatt		Spheral
	International		Solar		Combined
Total Company revenue	$	56,878	$	—	$	56,878
Earnings from operations	$	7,872	$	81	$	7,953
Corporate costs						(248	)
Total Company earnings from operations					$	7,705
Total Company assets	$	68,092	$	110,052	$	178,144

      Total net foreign exchange losses recognized for the six months ended September 30, 2006 were $237 (September 30, 2005 — $7) and are included in selling and administrative expenses on the Combined Statements of Earnings (Loss).

15. SUBSEQUENT EVENTS:

      In August 2006, the Board of Directors approved the issuance of a preliminary prospectus in connection with the Company’s initial public offering in the United States and Canada. Upon the closing of the initial public offering, certain of ATS’ solar business interests will be transferred to the Company.

      In October 2006, the Company entered into a 10-year irrevocable commitment to purchase approximately 4,000,000 silicon wafers per annum commencing in 2009. Advance payments are required which will be applied against the price of silicon wafers that will be received during the life of the commitment and can only be refunded in the event of the supplier’s failure to deliver polysilicon wafers in accordance with the agreement. Commencing in 2009, the price of the silicon wafers will be adjusted at the beginning of each calendar year based on an agreed-upon formula.

      In November 2006, the Company increased one of its available credit facilities from Euro 800 to Euro 8,000. This increased facility is available until April 1, 2007 at which time it will decrease to Euro 800. Other terms of this credit facility have not changed from those described in note 8.

16. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES:

      The combined financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in Canada (“Canadian GAAP”) as discussed in note 2.

F-13

Photowatt Technologies Inc.

NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS — (Continued)

The Company’s accounting policies reflected in these combined financial statements do not materially differ from United States Generally Accepted Accounting Principles (“U.S. GAAP”) except for:

Combined Group Equity

		March 31,			September 30,
		2006			2006
Total accumulated comprehensive income under Canadian GAAP		$	—		$	—
Adjustments:
Foreign currency translation related to U.S. GAAP adjustments (a,b,c,d)			(2,792	)		(2,792	)
Foreign currency translation adjustment(d)			458			(3,558	)
Total accumulated comprehensive loss under U.S. GAAP		$	(2,334	)	$	(6,350	)
Total net investment under Canadian GAAP		$	75,310		$	76,705
Adjustments:
	Deferred development(a)		2,647			2,789
Total net investment under U.S. GAAP		$	77,957		$	79,494
Total group equity		$	75,623		$	73,144

Combined Statements of Earnings (Loss)

For the Six Months Ended September 30,		2005			2006
Net earnings (loss) under Canadian GAAP		$	4,451		$	(4,348	)
Adjustments:
	Deferred development(a)		(11,553	)		142
	Amortization of intangible assets(b)		(40	)		—
Net loss under U.S. GAAP		$	(7,142	)	$	(4,206	)
Other comprehensive loss:
	Foreign currency translation adjustment(d)		(3,440	)		(4,016	)
Comprehensive loss under U.S. GAAP		$	(10,582	)	$	(8,222	)

      (a) Research and development costs: Under Canadian GAAP, the Company has deferred development costs which have met generally accepted criteria for deferral. Under U.S. GAAP, Statement of Financial Standards No. 2, “Accounting for Research and Development Costs”, the Company is required to charge all development costs to expense as incurred.

      (b) Amortization of intangible assets: Under Canadian GAAP, the Company has deferred amortization of the cost of acquired patents until the technology related to such patents is put into use. Under US GAAP, the Company is required to amortize such costs from the date of acquisition. As the intangible assets were written off at March 31, 2006 for both U.S. and Canadian GAAP purposes, there is no GAAP difference in the period ended September 30, 2006.

      (c) Stock-based compensation: The Company prospectively adopted the Canadian GAAP requirements related to stock-based compensation for all options granted to employees on or after April 1, 2003.

      Under U.S. GAAP, in the first quarter of fiscal 2007, the Company was required to adopt the provisions of amended Statement of Financial Standards No. 123, “Accounting for Stock-Based Compensation”, (“SFAS 123R”). SFAS 123R requires all companies to use a fair value based method of accounting for stock-based compensation. The Company is using the modified prospective transition (“MPT”) method to record stock compensation. Stock compensation expense calculated using the MPT method is recognized on a prospective basis in the combined financial statements over the estimated service life. As a result of adoption

F-14

Photowatt Technologies Inc.

NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS — (Continued)

of SFAS 123R, the Company’s net income was $23 lower than if the Company had continued to account for share-based payments under Accounting Principles Board Opinion 25 for the six months ended September 30, 2006.

      For the six months ended September 30, 2005, the Company’s proforma net income adjusted for 50,000 stock options granted by ATS to an employee as disclosed in note 9, using the Black-Scholes option pricing model to determine fair value, resulted in pro forma stock compensation expense of $13 and pro forma net loss of $7,155.

      The fair value of options granted during the six months ended September 30, 2005 was calculated using the Black-Scholes option pricing model with the following assumptions:

Weighted average Black-Scholes value of options		$	4.10
Assumptions:
	Risk free interest		3.2	%
	Expected life in years		5.0
	Expected dividend yield		0.0	%
	Volatility		31.0	%

      The risk free interest rate utilized during the life of the stock option is based on a Canadian government security for an equivalent period. Expected volatility is based on historical volatility of ATS. Historical data is used to estimate the expected term.

      (d) Comprehensive income: Under U.S. GAAP, Statement of Financial Standards No. 130, “Reporting Comprehensive Income”, establishes standards for the reporting and display of comprehensive income and its components in general-purpose financial statements. Comprehensive income is defined as the change in net assets of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The only reportable item of comprehensive income is the translation adjustments on the conversion of self-sustaining entities included in these combined financial statements that have a functional currency other than the reporting currency of the United States dollar.

      (e) Investment tax credits: Under Canadian GAAP, investment tax credits are accounted for as a reduction in the cost of the related asset or expense. Under U.S. GAAP, Accounting Principle Board Opinion No. 2, “Accounting for the Investment Tax Credit”, permits the company to recognize the full tax credit against the tax provision in the year the credit arises. As the Company does not believe there is reasonable assurance that the credits will be realized, no benefits have been recognized under U.S. or Canadian GAAP.

      (f) Recently issued pronouncements:

Canadian GAAP Standards:

      In January 2005, the CICA approved Handbook Sections 1530, “Comprehensive Income”, 3855, “Financial Instruments — Recognition and Measurement” and 3865, “Hedges”. The new standards are intended to harmonize Canadian GAAP with U.S. GAAP. The new standards will be effective for the first quarter of fiscal 2008. The Company is currently evaluating the impact of adoption on the combined financial statements.

United States GAAP Standards:

      In June, 2006 the FASB issued Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial

F-15

Photowatt Technologies Inc.

NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS — (Continued)

statements in accordance with FASB Statement 109. The interpretation is effective for fiscal years beginning after December 15, 2006, with earlier adoption encouraged. The Company is currently evaluating the impact of adoption on the combined financial statements.

      In November 2004, the FASB issued Statement of Financial Standards No. 151, “Inventory Costs, and amendment of ARB No. 43, Chapter 4”, (“SFAS 151”). SFAS 151 clarifies that abnormal amounts of idle facility expense, freight and handling costs, and wasted materials should be recognized as current period charges. The standard is effective for fiscal years beginning after June 15, 2005. The adoption of the standard did not have a significant impact on the combined financial statements.

      In September 2006, the FASB issued Statement of Financial Standard No. 157, “Fair Value Measurement” (“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets and liabilities. The statement also expands disclosures about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurement on earnings. The Statement is effective for fiscal years beginning on or after January 1, 2008. The Company is currently evaluating the impact of adoption on the combined financial statements.

F-16

Report of Independent Registered Public Accounting Firm

The Board of Directors of Photowatt Technologies Inc. and ATS Automation Tooling Systems Inc.:

      We have audited the accompanying combined balance sheets of Photowatt Technologies Inc. (as described in note 1), as of March 31, 2006 and 2005, and the related combined statements of earnings (loss), net investment, and cash flows for each of the years in the three-year period ended March 31, 2006. These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Photowatt Technologies Inc. as of March 31, 2006 and 2005, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2006, in conformity with Canadian generally accepted accounting principles.

      Accounting principles generally accepted in Canada vary in certain significant respects from U.S. generally accepted accounting principles. Information related to the nature and effect of such differences is presented in Note 20 to the combined financial statements.

/s/ KPMG LLP

Waterloo, Canada

July 31, 2006, except as to notes 10 and 19 which are as of December 8, 2006

F-17

Photowatt Technologies Inc.

COMBINED BALANCE SHEETS

At March 31		2005		2006
		(In United States
		thousands of dollars)
ASSETS
Current assets:
	Cash and cash equivalents	$	891	$	1,958
	Accounts receivable (note 4)		24,508		20,253
	Inventories (note 5)		25,281		33,441
	Future income taxes (note 12)		952		—
	Prepaid expenses		132		441
Total current assets			51,764		56,093
Property, plant and equipment (note 6)			78,627		42,805
Goodwill			1,705		1,705
Intangible assets (note 7)			1,449		—
Deferred development costs (note 8)			31,022		123
Other assets (note 9)			—		2,531
Total assets		$	164,567	$	103,257
LIABILITIES AND GROUP EQUITY
Current liabilities:
	Accounts payable and accrued liabilities	$	22,299	$	22,809
	Income taxes payable		367		4,096
Total current liabilities			22,666		26,905
Future income taxes (note 12)			—		584
Total liabilities			22,666		27,489
Group equity:
	Net investment (note 16)		138,261		75,310
	Cumulative translation adjustment (note 11)		3,640		458
			141,901		75,768
Total liabilities and group equity		$	164,567	$	103,257
Commitments (note 13)
Subsequent event (note 19)

See accompanying notes to combined financial statements.

F-18

Photowatt Technologies Inc.

COMBINED STATEMENTS OF EARNINGS (LOSS)

Years Ended March 31		2004			2005		2006
		(In United States thousands of dollars)
Revenue		$	65,855		$	113,019	$	120,921
Operating costs and expenses:
	Cost of revenue		52,859			89,930		88,998
	Research and development		1,236			678		9,252
	Amortization		4,466			5,420		9,680
	Selling and administrative		4,708			5,855		9,088
	Asset impairment charge (note 15)		—			—		94,290
	Shared corporate costs (notes 2 and 17)		415			589		717
			63,684			102,472		212,025
Earnings (loss) from operations			2,171			10,547		(91,104	)
Interest (income) expense (note 17)			(64	)		3		1,666
Earnings (loss) before provision for income taxes			2,235			10,544		(92,770	)
Provision for income taxes (note 12)			1,130			3,761		5,610
Net earnings (loss)		$	1,105		$	6,783	$	(98,380	)

See accompanying notes to combined financial statements.

F-19

Photowatt Technologies Inc.

COMBINED STATEMENTS OF NET INVESTMENT

Years Ended March 31	2004		2005		2006
	(In United States thousands of dollars)
Net investment, beginning of year	$	65,197	$	108,352	$	138,261
Net earnings (loss)		1,105		6,783		(98,380	)
Net contribution by ATS Automation Tooling Systems Inc.		42,050		23,126		35,429
Net investment, end of year (note 16)	$	108,352	$	138,261	$	75,310

See accompanying notes to combined financial statements.

F-20

Photowatt Technologies Inc.

COMBINED STATEMENTS OF CASH FLOWS

Years Ended March 31			2004			2005			2006
			(In United States thousands of dollars)
Cash flows from operating activities:
	Net earnings (loss)		$	1,105		$	6,783		$	(98,380	)
	Other items not involving cash
		Asset impairment charge (note 15)		—			—			94,290
		Future income tax expense (note 12)		975			3,586			1,484
		Amortization		4,466			5,420			9,680
		Other		236			14			406
Change in non-cash operating working capital:
	Accounts receivable			(10,788	)		(3,437	)		738
	Inventories			2,804			(2,617	)		(9,397	)
	Prepaid expenses			18			(69	)		(334	)
	Accounts payable and accrued liabilities			9,935			2,963			1,408
	Income taxes payable			235			(60	)		3,576
Cash flows provided by operating activities				8,986			12,583			3,471
Cash flows from investing activities:
	Acquisition of property, plant and equipment			(40,195	)		(26,749	)		(26,431	)
	Proceeds from disposal of assets			27			7			—
	Deferred development expenditures			(8,685	)		(15,197	)		(13,682	)
Cash flows used in investing activities				(48,853	)		(41,939	)		(40,113	)
Cash flows from financing activities:
	Proceeds from government assistance (note 14)			5,714			12,847			3,438
	Contribution by ATS Automation Tooling Systems Inc. (note 16)			36,336			14,304			34,133
Cash flows provided by financing activities				42,050			27,151			37,571
Effect of exchange rate changes on cash and cash equivalents				(216	)		(107	)		138
Increase (decrease) in cash and cash equivalents				1,967			(2,312	)		1,067
Cash and cash equivalents, beginning of year				1,236			3,203			891
Cash and cash equivalents, end of year			$	3,203		$	891		$	1,958

See accompanying notes to combined financial statements.

F-21

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS

(IN UNITED STATES THOUSANDS OF DOLLARS)

1. FORMATION OF PHOTOWATT TECHNOLOGIES INC.:

      Photowatt Technologies Inc. is a wholly-owned subsidiary of ATS Automation Tooling Systems Inc. References to “ATS” or the “Parent” refer to ATS Automation Tooling Systems Inc. and, where applicable, its subsidiaries. Upon the completion of the initial public offering of Photowatt Technologies Inc., ATS will transfer into Photowatt Technologies Inc. its interests in the assets and liabilities that are used in the solar business conducted by ATS and its subsidiaries, subject to certain excluded assets including the premises and building related to the Spheral Solar manufacturing facility and ATS solar automation know-how. The solar business is comprised of Spheral Solar, a division of ATS, Photowatt International S.A.S., Spheral Solar Power Inc. and the net operating assets of Matrix Solar Technologies, Inc. (“Photowatt USA”), all of which are divisions or subsidiaries of ATS (collectively with Photowatt Technologies Inc. known as the “Company”). For the convenience of the reader, the combined financial statements refer to Photowatt Technologies Inc. and use “the Company” even though the transfer has not been consummated at March 31, 2006. As the transfer is not consummated, the financial statements are referred to as combined financial statements. The Company’s principal business activity is the design, manufacture and sale of photovoltaic products.

2. BASIS OF ACCOUNTING:

      These combined financial statements present the historical financial position, results of operations, changes in net investment and cash flows on a carve-out basis from ATS as if the Company had operated as a stand-alone entity subject to ATS’ control prior to this reorganization. Certain comparative balances have been reclassified on a carve-out basis.

      The combined financial statements have been prepared in accordance with Canadian generally accepted accounting principles, which conform in all material respects with United States generally accepted accounting principles, except as presented in note 20.

      A portion of ATS’ corporate selling and administrative expenses have been allocated to the Company, based on management’s estimates of expenses attributable to the Company. Shared services provided include strategic, operational, human resources, accounting, information systems, facility, legal, taxation and treasury services. Property, plant and equipment and other services purchased from ATS are recorded at the exchange amount.

      The Company’s surplus funds are transferred to ATS and the Company’s financing requirements are provided by ATS as reflected through ATS’ net investment account. Related party interest expense recorded in the Combined Statements of Earnings (Loss) represents charges from ATS as historically reflected in the accounts of subsidiaries.

      Income taxes have been recorded at statutory rates based on income taxes as reported in the Combined Statements of Earnings (Loss) as though the Company was a separate tax paying group of entities. Income taxes payable or recoverable in respect of the components which were not historically separate tax paying legal entities have been included in ATS’ net investment. Future income taxes have been presented in the Combined Balance Sheets for each temporary difference between the financial reporting and tax basis of the assets and liabilities. In addition, future income tax assets have been recognized to the extent that they would have been realized as though the Company was a separate tax paying group of entities. Future income tax assets are recognized only to the extent that management determines that it is more likely than not that future income tax assets will be realized in the foreseeable future.

      As a result of the basis of presentation described above, the combined financial statements may not necessarily be indicative of the results that would have been obtained if the Company had operated as a stand-alone group of entities or indicative of the results for any future periods.

F-22

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

3. SIGNIFICANT ACCOUNTING POLICIES:

      (a) Principles of consolidation: The combined financial statements include the accounts of the Company, as described in note 1. All significant intercompany transactions and balances between these entities have been eliminated.

      (b) Foreign currency translation: The functional currencies of Photowatt International S.A.S., Spheral Solar Power Inc. and Photowatt USA are the Euro, Canadian dollar and United States dollar respectively. The functional currency of Spheral Solar is the Canadian dollar. For the purposes of the combined financial statements, the functional currency is the Canadian dollar and the reporting currency is the United States dollar. As the subsidiaries are self-sustaining, the accounts of the Company’s foreign subsidiaries are translated into United States dollars using the current rate method under which assets and liabilities are translated at the exchange rate prevailing at the year-end and revenues and expenses at average rates during the year. Gains or losses on translation are not included in the Combined Statements of Earnings (Loss) but are deferred and included in cumulative translation adjustment, a separate component of group equity.

      Other monetary assets and liabilities, including long-term monetary assets and liabilities, which are denominated in foreign currencies, are translated into the respective functional currency of each entity at year-end exchange rates, and transactions included in earnings are translated at rates prevailing during the year. Exchange gains and losses resulting from the translation of monetary assets and liabilities are included in the Combined Statements of Earnings (Loss).

      (c) Derivative financial instruments: The Company employs derivative financial instruments, primarily forward foreign exchange rate contracts, to manage exposure to fluctuations in foreign currency exchange rates. The Company does not hold derivative financial instruments for trading purposes. The Company has in place policies and procedures with respect to the required approvals for the use of derivative financial instruments and specifically ties their use to the mitigation of foreign currency risk. When applicable, the Company identifies relationships between its risk management objective and the strategy for undertaking the hedge transaction.

      Although management considers its derivative portfolio to be an effective risk management tool, the Company does not apply hedge accounting. Such derivative instruments are marked-to-market and are recorded in the Combined Balance Sheets as either an asset or liability, with changes in fair value recognized in the Combined Statements of Earnings (Loss) in selling and administrative expenses.

      Cash flows arising in respect of hedging transactions are recognized in cash flows from operating activities.

      (d) Cash and cash equivalents: Cash and cash equivalents consist of cash and highly liquid money market instruments with maturities of three months or less at the time of acquisition.

      (e) Inventories: Raw materials are valued at the lower of cost and replacement cost. Work-in-process and finished goods inventory are stated at the lower of cost and net realizable value. Cost includes the cost of materials plus direct labor applied to the product and applicable share of manufacturing overhead. Cost is determined on a first-in, first-out basis.

F-23

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

      (f) Property, plant and equipment: Property, plant and equipment are recorded at cost. Amortization is computed using the following methods and annual rates:

Asset	Basis	Rate
Buildings	Straight-line	15 years
Production equipment	Straight-line	5 to 10 years
Other equipment and furniture	Declining-balance	20%
	Straight-line	5 to 7 years

      (g) Goodwill: Goodwill represents the excess of the cost of an acquired enterprise over the net of the fair values assigned to assets acquired and liabilities assumed, less any subsequent impairment write-down. Goodwill is subject to an impairment test on at least an annual basis or upon the occurrence of certain events or circumstances. Goodwill impairment is assessed based on a comparison of the fair value of a reporting unit to the underlying carrying value of the reporting unit’s net assets, including goodwill. When the carrying amount of the reporting unit exceeds its fair value, the implied fair value of the reporting unit’s goodwill is compared with its carrying amount to measure the amount of impairment loss, if any. Goodwill presented in the combined financial statements relates to the Company’s purchase of Photowatt International S.A.S.

      (h) Intangible assets: Intangible assets, which are patents and licences on technologies, are recorded at cost and amortized over their estimated economic life of 10 to 17 years.

      (i) Impairment of long-lived assets: The Company reviews long-lived assets such as property, plant and equipment and intangible assets with finite useful lives for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the total of the expected undiscounted cash flows is less than the carrying value of the asset, a loss, if any, is recognized for the excess of the carrying value over the fair value of the asset. During the year ended March 31, 2006, the Company determined that the carrying value of certain property, plant and equipment and intangible assets was in excess of their associated estimated undiscounted future cash flows and the assets were written-down to their fair value as further described in note 15.

      (j) Income taxes: The Company uses the liability method of accounting for income taxes. Under the liability method of accounting for income taxes, future income tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse.

      The Company continues to assess, on an ongoing basis, the degree of certainty regarding the realization of future income tax assets and whether a valuation allowance is required.

      (k) Revenue recognition: Revenue is recognized when earned, which is generally at the time of shipment and when title is transferred to the customer, provided that collection is reasonably assured, the sales price is fixed and determinable, and the rights and risks of ownership have passed to the customer.

      The Company maintains an allowance for doubtful accounts primarily based on an assessment of historical bad debts, factors surrounding the credit risk of specific customers and current economic trends. If there is a deterioration of a major customer’s creditworthiness or actual defaults are higher than our historical experience, the Company may be required to increase the allowance for doubtful accounts.

      The Company provides for the estimated costs of product warranties at the time revenue is recognized. Estimates of product warranty costs are based upon historical experience and expectations of future return rates and unit warranty repair costs. To the extent actual product failure rates and associated costs differ from our estimates, revisions to the estimated warranty liability would be required.

F-24

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

      (l) Research and development costs: Research costs are expensed as incurred. Development costs which meet generally accepted criteria for deferral are deferred and amortized over the period over which the Company expects to benefit from the resulting product or process. Subject to meeting the generally accepted criteria for deferral, the Company capitalizes both direct and indirect costs with respect to ventures which are in the development stage.

      Deferred development costs are reviewed annually for recoverability or whenever events or circumstances indicate that the carrying value may not be recoverable. When the criteria that previously justified the deferral of costs are no longer met, the unamortized balance is written-off as a charge to earnings in that period. When the criteria for deferral continue to be met, but the amount of deferred development costs that can reasonably be regarded as assured through recovery of related future revenues less relevant costs is exceeded by the unamortized balance of such costs, the excess is written-off as a charge to earnings in that period. During the year ended March 31, 2006, the Company determined that the carrying value of certain deferred development costs was in excess of their associated estimated undiscounted future cash flows and the assets were written-down as further described in note 15.

      (m) Investment tax credits and government assistance: Investment tax credits and government assistance are accounted for as a reduction in the cost of the related asset or expense when there is reasonable assurance that such credits or assistance will be realized.

      (n) Stock-based compensation plans: For all employee stock option awards granted on or after April 1, 2003, the Company recognizes compensation using the fair value based method of accounting for stock-based compensation.

      The Company has accounted for all employee stock options granted before April 1, 2003 as capital transactions with the provision of pro forma disclosure for those awards granted between April 1, 2002 and March 31, 2003. Pro forma disclosures present net earnings as if the compensation cost for the Company’s stock option plan had been determined and recorded based on the fair value of options awarded for the year ended March 31, 2003. No pro forma disclosure is provided for stock options awarded prior to April 1, 2002.

      The fair value of stock options is estimated at the grant date using the Black-Scholes option pricing model. Although the assumptions used reflect management’s best estimates, they involve inherent uncertainties based on market conditions generally outside of the control of the Company. If other assumptions were used, stock-based compensation expense could be significantly impacted. As stock options are exercised, the proceeds received on exercise, in addition to the previously recognized expense related to those stock options, are credited to net investment.

      For those options which can be settled in cash at the holder’s option, a liability is recognized for the cash settlement value. This liability is adjusted each reporting period with the corresponding charge to the Combined Statements of Earnings (Loss).

      (o) Asset retirement obligations: Liabilities related to legal obligations associated with the retirement of tangible long-lived assets are initially measured at fair value and subsequently adjusted for the passage of time and any changes in the underlying cash flows. The asset retirement cost is capitalized to the related asset and amortized into earnings over time.

      (p) Use of estimates: The preparation of these combined financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the combined financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates and assumptions are used when accounting for items such as impairment of long-lived assets, recoverability of deferred development costs, income taxes, valuation of future income tax assets, determination of estimated useful lives of intangible

F-25

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

assets and property, plant and equipment, inventory provisions, warranty reserves, revenue recognition, contingent liabilities, and allowances for doubtful accounts.

4. FINANCIAL INSTRUMENTS:

      Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. The Company provides credit terms to its customers and generally requires no collateral.

      At March 31, 2006, two customers accounted for approximately 30.7% of the combined balance of accounts receivable (2005 — 41.1%). The allowance for doubtful accounts balance at March 31, 2006 was $183 (March 31, 2005 — $146). The provision for bad debt expense for the year ended March 31, 2006 was $29 (2005  — $63, 2004 — $8).

      The carrying amounts reported in the Combined Balance Sheets for cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities approximate their fair values, due to the short-term nature of those instruments.

      Total net foreign exchange gains (losses) recognized in the year ended March 31, 2006 were $91 (2005 — $613, 2004 — ($140)) and are included in selling and administrative expenses on the Combined Statements of Earnings (Loss).

5. INVENTORIES:

At March 31		2005		2006
Inventories are summarized as follows:
	Raw materials	$	14,699	$	19,275
	Work-in-process		6,204		8,038
	Finished goods available for sale		4,378		6,128
		$	25,281	$	33,441

      Raw materials inventory includes supply inventories of $3,201 (2005 — $1,654) which are consumed in the production process. The provision for excess and obsolete inventory was $606 at March 31, 2006 (2005 — $509).

6. PROPERTY, PLANT AND EQUIPMENT:

			Accumulated			Net Book
At March 31, 2006	Cost		Amortization			Value
Land and land improvements	$	355	$	—		$	355
Buildings		1,008		(989	)		19
Production equipment		66,047		(24,434	)		41,613
Other equipment and furniture		1,300		(482	)		818
	$	68,710	$	(25,905	)	$	42,805

F-26

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

			Accumulated			Net Book
At March 31, 2005	Cost		Amortization			Value
Land and land improvements	$	378	$	—		$	378
Buildings		1,054		(974	)		80
Production equipment		101,332		(25,432	)		75,900
Other equipment and furniture		2,643		(374	)		2,269
	$	105,407	$	(26,780	)	$	78,627

      During the year ended March 31, 2006, the Company recorded an impairment charge on property, plant and equipment of $51,881 (note 15).

      At March 31, 2005, $47,060 of property, plant and equipment was not amortized as it was not in service. During the year ended March 31, 2006, the Company recorded amortization of property, plant and equipment of $9,472 (2005 — $5,293, 2004 — $4,415).

7. INTANGIBLE ASSETS:

      During the year ended March 31, 2006, the Company recorded a full impairment charge on intangible assets of $1,432 (note 15).

      The intangible assets were not amortized prior to October 1, 2005, when the Company was in the development stage of its Spheral Solar initiative. Subsequent to September 30, 2005, amortization began on the intangible assets on a straight-line basis over their estimated remaining useful lives. Amortization recorded on these assets was $76 in fiscal 2006.

8. DEFERRED DEVELOPMENT COSTS:

At March 31	2005		2006
Deferred development costs — Spheral Solar Power	$	31,001	$	—
Deferred development costs — other programs		21		123
	$	31,022	$	123

      During the year ended March 31, 2006, the Company deferred $10,671 of net development costs (2005 — $17,657, 2004 — $6,242). Amortization of deferred development costs was $132 (2005 — $127, 2004 — $51).

      During the year ended March 31, 2006, the Company recorded an impairment charge on deferred development costs of $40,977 (note 15).

9. OTHER ASSETS:

      Other assets are comprised of a $2,531 Technology Partnerships Canada holdback receivable in regards to funding contributions toward the Company’s development of a new photovoltaic energy technology.

10. STOCK-BASED COMPENSATION PLANS:

      Since 1997, Matrix Solar Technologies, Inc., a company whose operating assets are included in these combined financial statements, has granted stock options to certain of its employees and employees of its affiliates. The holders of 195 of these options have the right to require Matrix Solar Technologies, Inc. to settle the value of the vested portion of the shares under option in cash based on a formula linked to the net book value of Matrix Solar Technologies, Inc. A liability has been recognized for the vested portion of the

F-27

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

cash settlement value. The amount of the recognized liability of March 31, 2006 was $153 (2005 — $153, 2004 — $126). The changes in this liability have been charged to compensation expense. In October 2006, these options were terminated in exchange for a cash payment of $410.

      During 2006, ATS issued 50,000 stock options on its common shares to an employee of the Company. The Company recognized compensation expense based on the fair value over the vesting period of these options. Compensation expense of $35 was recorded in 2006 (2005 — nil, 2004 — nil). These options were surrendered for cancellation in October 2006.

      The fair value of options granted during the year was calculated using the Black-Scholes option pricing model with the following assumptions related to underlying ATS shares:

		2006
Weighted average Black-Scholes value of options		$	4.10
Assumptions:
	Risk free interest rate		3.2	%
	Expected life in years		5.0
	Expected dividend yield		0.0	%
	Volatility		31.0	%

11. CUMULATIVE TRANSLATION ADJUSTMENT:

      The cumulative translation adjustment balance reflects unrealized translation adjustments arising on the translation of foreign currency denominated assets and liabilities of self-sustaining foreign operations. These translation adjustments are realized in earnings when there is a reduction in the Company’s investment in the respective foreign operation. The decrease in the cumulative translation adjustment during the current year resulted primarily from the weakening of the Euro against the United States dollar.

F-28

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

12. INCOME TAXES

      (i) Reconciliation of income taxes: Income tax expense differs from the amounts which would be obtained by applying the combined Canadian basic federal and provincial income tax rate to earnings (loss) before income taxes. These differences result from the following items:

Years Ended March 31			2004			2005			2006
Earnings (loss) before provision for income taxes
		Canadian	$	(415	)	$	(401	)	$	(111,522	)
		Foreign		2,650			10,945			18,752
Earnings (loss) before provision for income taxes			$	2,235		$	10,544		$	(92,770	)
Combined Canadian basic federal and provincial income tax rate				36.50	%		36.12	%		36.12	%
Income taxes based on combined Canadian basic federal and provincial income tax rate			$	816		$	3,808		$	(33,509	)
Increase (decrease) in income taxes resulting from:
Increase in valuation allowance				86			122			38,652
Manufacturing and processing allowance				14			11			896
Income of foreign subsidiaries taxed at different rates				(126	)		(324	)		(477	)
Other items				340			144			48
			$	1,130		$	3,761		$	5,610
Provision for income taxes:
	Current
		Canadian	$	138		$	128		$	6
		Foreign		17			47			4,120
	Future
		Canadian		—			—			—
		Foreign		975			3,586			1,484
			$	1,130		$	3,761		$	5,610

F-29

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

      (ii) Components of future income tax assets and liabilities: Future income taxes are provided for temporary differences. Future income tax assets and liabilities are comprised of the following:

Years Ended March 31		2005		2006
Future income tax assets:
	Loss carryforwards	$	12,255	$	23,017
	Property, plant and equipment		—		11,498
	Expenditures not yet deducted for tax		3,371		5,065
	Other		150		—
			15,776		39,580
Less valuation allowance			928		39,580
Future income tax assets, net		$	14,848	$	—
Future income tax liabilities:
	Property, plant and equipment	$	4,611	$	—
	Deferred development costs		9,257		—
	Other		28		584
Future income tax liabilities		$	13,896	$	584
Net future income tax asset (liability)		$	952	$	(584	)

      The Company determined that it was not more likely than not that it will realize on its future income tax assets relating to Spheral Solar, Photowatt USA and Spheral Solar Power Inc. Accordingly, a valuation allowance of $39,580 as at March 31, 2006 (2005 — $928) was established.

      (iii) Loss carryforwards: As at March 31, 2006, the Company has the following net operating loss carryforwards which are not recognized for accounting purposes and are scheduled to expire in the following years:

	Non-Canadian		Canadian
2010	$	—	$	22
2011		—		6,104
2015		—		26,069
2017		201		—
2019		93		—
2021		1,418		—
2022		53		—
2023		430		—
2024		154		—
2025		228		—
2026		265		29,250
	$	2,842	$	61,445

      (iv) Investment Tax Credits: At March 31, 2006, the Company had Canadian and provincial investment tax credits of $4,898 (2005 — $3,260), which expire in 2010 through 2026. The Company has determined that it does not have reasonable assurance of realization in respect to these investment tax credits. Accordingly no asset has been recognized.

F-30

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

      (v) Completion of Arrangement: Following the completion of the proposed transaction described in notes 1 and 19, none of the benefit of Canadian and United States tax loss carryforwards, Canadian tax credits or related valuation allowance will remain with the Company or any of its successors.

      (vi) Other: Cash paid for income taxes was $183 for the year ended March 31, 2006 (2005 — $154, 2004 — $90) and cash paid relating to interest charges was $683 for the year ended March 31, 2006 (2005 — $125, 2004 — $67).

13. COMMITMENTS:

      The minimum operating lease payments related primarily to facilities and equipment in each of the next five years are as follows:

Year	Amount
2007	$	771
2008		749
2009		599
2010		450
2011		526

      During the year ended March 31, 2006, the Company incurred rental expense of $620 (2005 — $523, 2004 — $401). As at March 31, 2006, the Company had issued purchase commitments of $9,163 for production equipment and services.

      Subsequent to year-end, the Company issued purchase orders to acquire approximately $8,000 of refined metallurgical silicon which will be delivered through to fiscal 2008. In May 2006, the Company announced the capacity expansion plan for Photowatt International for the facility near Lyon, France, at an expected cost of €26,500.

14. GOVERNMENT ASSISTANCE:

      During the year ended March 31, 2003, the Company entered into an agreement with Technology Partnerships Canada which provides funding of up to $25,257 (C$29,500) as a contribution towards the Company’s development of a new photovoltaic energy technology, Spheral Solar technology. As at March 31, 2006, total Technology Partnerships Canada funding of $25,257 (2005 — $24,142) has been applied to reduce the deferred development expenses and capital expenditures incurred related to Spheral Solar technology, of which $2,997 remains receivable (2005 — $4,814) including the current portion of $466 which is included in accounts receivable. Cumulative funding of $8,803 and $16,454 has been applied to deferred development expenditures and property, plant and equipment, respectively.

      As consideration for the Technology Partnerships Canada funding, the Company is required to pay royalties of 1.8% on our future revenues resulting from the sale, licensing or other transfer of Spheral Solar products and related services. These royalties commence in the first year that such future annual revenues exceed $17,100 (C$20,000) and continue for a total of 10 years. If the cumulative royalties exceed $72,340 (C$84,493) during this 10-year period, the royalty rate declines to 0.35% for the remaining term. If at the end of 10 years the cumulative royalties have not reached $72,340 (C$84,493), the royalty payment term is extended for the lesser of a further five years or once cumulative royalties of $72,340 (C$84,493) have been reached. The Company has not recorded any liability amounts with respect to the Technology Partnerships Canada funding since the conditions for royalty payments have not yet been met.

F-31

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

      During the year ended March 31, 2006 the Company applied $1,311 of other sources of government funding against deferred development expenses and research and development expenses (2005 — $830, 2004 — $515) with respect to Photowatt International S.A.S. of which $873 remains receivable at March 31, 2006 (2005 — $791).

15. ASSET IMPAIRMENT CHARGE:

      The Company regularly reviews the net recoverable amount of its deferred development costs and long-lived assets. As a result of this review, in the year ended March 31, 2006, deferred development costs in the Spheral Solar segment were written-down by $40,977, property, plant and equipment was written-down by $51,881, and intangible assets were written-down by $1,432, for a total impairment expense of $94,290. The impairment resulted due to uncertainty and delays in realizing cash flows from the investment in the Spheral Solar technology. Fair value was determined based on estimated discounted cash flows.

16. NET INVESTMENT:

      The net investment account comprises:

	Photowatt			Spheral
	International			Solar			Photowatt			Spheral
	S.A.S.			Power Inc.			USA			Solar			Other			Total
Share capital		19,066			—			—			—			—			19,066
ATS net investment		35,454			31			5,052			13,950			—			54,487
Retained earnings		(7,201	)		—			(1,155	)		—			—			(8,356	)
Net investment, April 1, 2003		47,319			31			3,897			13,950			—			65,197
Net earnings (loss) for the year ended March 31, 2004		2,245			(56	)		(669	)		—			(415	)		1,105
Additional investment by ATS		2,746			(31	)		(150	)		39,070			415			42,050
Net investment, March 31, 2004		52,310			(56	)		3,078			53,020			—			108,352
Net earnings (loss) for the year ended March 31, 2005		7,415			(24	)		(294	)		275			(589	)		6,783
Additional investment by ATS		(2,915	)		(90	)		1,928			23,614			589			23,126
Net investment, March 31, 2005		56,810			(170	)		4,712			76,909			—			138,261
Net earnings (loss) for the year ended March 31, 2006		10,859			(5,289	)		(148	)		(103,085	)		(717	)		(98,380	)
Additional investment by ATS		(6,609	)		90			3,702			37,529			717			35,429
Net investment, March 31, 2006		61,060			(5,369	)		8,266			11,353			—			75,310

      Other includes a portion of ATS’ shared selling and administrative expenses that have been allocated to the Company (note 2 and 17).

F-32

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

17. RELATED PARTY TRANSACTIONS:

	2004		2005		2006
Transactions
Purchase of property, plant and equipment — ATS	$	19,128	$	18,691	$	5,725
Purchase of raw materials and other services — ATS		240		330		343
Development services — ATS		1,482		213		292
Shared corporate costs — ATS		415		589		717
Interest expense — ATS		—		—		1,686
Sale of product — other related party		—		61		150

      As noted in note 2, ATS provides strategic, operational and administrative services to the Company. Furthermore, the Company purchases property, plant and equipment, development services, raw materials and other services from affiliated companies. “Sale of product” pertains to sales to EPISOL s.a.r.l., a company controlled by a consultant who serves as our managing director, Europe (acting) of Photowatt International S.A.S. These transactions have been reflected at their exchange amount.

      As at March 31, 2006, included in accounts payable and accrued liabilities are amounts due to ATS in the amount of $192 (2005 — $1,313). These amounts are payable on demand and do not bear interest, other than as noted below.

      The amount payable to ATS included in the Company’s Combined Balance Sheets under net investment represents a net balance as the result of various transactions between the Company and its Parent. There are no terms of settlement or interest charges associated with the account balance other than described below. The Company’s surplus funds are transferred to ATS, and the Company’s financing requirements are funded by ATS. At March 31, 2006, two intercompany amounts were outstanding in the amounts of Euro 25,043 ($30,381 USD), and C$45,975 ($39,362 USD) on which interest of Euro LIBOR rate plus 1.25% and Canadian dollar prime rate is charged, respectively. Both amounts have been included in ATS’ net investment in the Company. Other transactions include intercompany purchases and sales and miscellaneous other administrative expenses incurred by the Parent on behalf of the Company.

      An analysis of transactions in the intercompany account for each of the three years in the period ended March 31, 2006 follows:

	2004			2005			2006
Balance at beginning of year	$	384		$	2,230		$	1,313
Net cash funded by Parent		(19,419	)		(20,740	)		(9,884	)
Net intercompany purchases		20,850			19,234			6,360
Other administrative expenses		415			589			2,403
Balance at end of year	$	2,230		$	1,313		$	192
Average balance during the year	$	1,307		$	1,772		$	753

18. SEGMENTED DISCLOSURE:

      The Company evaluates performance based on two reportable segments. The Photowatt International segment consists of Photowatt International S.A.S. in France and the module assembly business of Photowatt USA, Photowatt International, our core business that is based on a wafer technology, designs, manufactures and sells solar modules and installation kits, and provides solar power design and other value-added services. The Spheral Solar segment is a development project that is based on a spheral technology using thousands of tiny silicon spheres instead of silicon wafers.

F-33

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

	2006
	Photowatt		Spheral
	International		Solar			Combined
Total Company revenue	$	120,921	$	—		$	120,921
Earnings (loss) from operations	$	19,780	$	(109,841	)	$	(90,061	)
Corporate costs						$	(1,043	)
Total Company loss from operations						$	(91,104	)
Total Company assets	$	91,929	$	11,328		$	103,257
Total Company goodwill	$	1,705	$	—		$	1,705
Total Company acquisition of property, plant and equipment	$	16,080	$	10,351		$	26,431
Total Company amortization from operations	$	6,252	$	3,428		$	9,680

	2005
	Photowatt		Spheral
	International		Solar		Combined
Total Company revenue	$	113,019	$	—	$	113,019
Earnings from operations	$	10,948	$	188	$	11,136
Corporate costs					$	(589	)
Total Company earnings from operations					$	10,547
Total Company assets	$	77,691	$	86,876	$	164,567
Total Company goodwill	$	1,705	$	—	$	1,705
Total Company acquisition of property, plant and equipment	$	10,625	$	16,124	$	26,749
Total Company amortization from operations	$	5,420	$	—	$	5,420

	2004
	Photowatt		Spheral
	International		Solar		Combined
Total Company revenue	$	65,855	$	—	$	65,855
Earnings from operations	$	2,586	$	—	$	2,586
Corporate costs						(415	)
Total Company earnings from operations					$	2,171
Total Company acquisition of property, plant and equipment	$	5,565	$	34,630	$	40,195
Total Company amortization from operations	$	4,466	$	—	$	4,466

F-34

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

	2004		2005				2006
					Total Long-				Total Long-
	Revenue		Revenue		Lived Assets		Revenue		Lived Assets
Europe	$	59,807	$	105,406	$	30,088	$	97,507	$	38,222
United States		4,415		5,360		2,409		16,504		2,121
Canada		750		150		49,284		23		4,167
Other		883		2,103		—		6,887		—
Total Company	$	65,855	$	113,019	$	81,781	$	120,921	$	44,510

      Geographic segmentation of revenue is determined based on the customer’s installation site. Long-lived assets represent property, plant and equipment, goodwill and intangible assets that are attributable to individual geographic segments, based on location of the respective operations.

      During the year ended March 31, 2006, the Photowatt International segment had revenue from three customers which amounted to 17.8%, 16.5% and 11.2% of Company revenue (2005 — two customers comprised 30.1% and 24.7%, 2004 — two customers comprised 23.6% and 17.6%).

19. SUBSEQUENT EVENT:

      In August 2006, the Board of Directors approved the issuance of a preliminary prospectus in connection with the Company’s initial public offering in the United States and Canada. Upon the closing of the initial public offering, certain of ATS’ solar business interests will be transferred to the Company.

      In September 2006, the Company approved the grant of options to two executive officers of the Company to purchase, in aggregate, 302,860 of the Company’s common shares at an exercise price of C$5.00 per share. The aggregate number of common shares underlying each of these options is subject to an automatic adjustment that will increase or decrease the number such that it is equal to 0.6883% of the common shares in the Company held by ATS immediately prior to the closing of the initial public offering.

      The option to purchase 160,000 common shares granted to one executive vests as to 20% on the completion of the initial public offering and 20% on each anniversary date of the completion of the initial public offering. The option to purchase 142,860 common shares granted to the second executive vests as to 20% on each anniversary date of the completion of the initial public offering.

      In addition to the above mentioned grants, the two executives are eligible to receive a cash payment upon any exercise of these options if the number of shares underlying these options exceeds 302,860 after the adjustment described above.

      In the event that a change of control occurs and the employment of the option holder is terminated or they resign, in either case within three months from the date of such change of control, the options granted to the two executive officers will accelerate and become fully vested.

      Furthermore, the Company has approved the grants to certain directors, officers, employees and other key personnel of the Company, including one of the executives referred to above, of options to purchase an aggregate of 850,420 common shares exercisable at the public offering price at the closing of the initial public offering. Included in the 850,420 above are options to purchase 287,710 common shares that vest on the achievement of specific defined performance objectives related to the development of Spheral Solar and options to purchase 562,710 common shares that vest as to 20% on each anniversary date of the completion of the initial public offering. As these options vest only upon the completion of the initial public offering, no stock compensation expense will be recognized until completion of the initial public offering. At the time of the initial public offering, the Company will measure the fair value of these stock options as the exercise price will be known.

F-35

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

      In September 2006, the Company entered into an agreement with three other partners for a project whose primary objective is to develop a commercial process for the production of solar grade silicon derived from metallurgical silicon with a capacity of 200 tonnes per year. Pursuant to the agreement, the Company’s role in the project is to contribute certain expertise and non-financial resources in order to improve and enhance the silicon material developed during the project’s development phase. Under the contract, the Company is to be supplied, at predetermined prices, with at least 80% of the volume of any solar grade silicon or ingots produced by the project through to April 20, 2008.

      In October 2006, the Company entered into a 10-year irrevocable commitment to purchase approximately 4,000,000 polysilicon wafers per annum commencing in calendar 2009. Advance payments are required which will be applied against the price of polysilicon wafers that will be received during the life of the commitment and can only be refunded in the event of the supplier’s failure to deliver silicon wafers in accordance with the agreement. Commencing in 2009, the price of the polysilicon wafers will be adjusted at the beginning of each calendar year based on the agreed upon formula.

      Subsequent to March 31, 2006, the Company drew upon its available credit facilities of Euro 1,000 and Euro 8,000. These credit facilities bear interest at the French four month prime rate plus 1.05% and the Euro LIBOR rate plus 0.50%, respectively. Effective April 1, 2007, the Euro 8,000 facility will decrease to Euro 800.

20. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

      The Combined Financial Statements of the Company have been prepared in accordance with the accounting principles generally accepted in Canada (“Canadian GAAP”). The Company’s accounting policies reflected in these Combined Financial Statements do not materially differ from United States generally accepted accounting principles (“U.S. GAAP”) except for:

Combined Group Equity

		2004			2005			2006
Total accumulated comprehensive income under Canadian GAAP		$	—		$	—		$	—
Adjustments:
Foreign currency translation related to U.S. GAAP adjustments(a),(b),(d)			(1,060	)		(2,967	)		(2,792	)
Foreign currency translation adjustment(d)			2,841			3,640			458
Total accumulated comprehensive income (loss) under U.S. GAAP		$	1,781		$	673		$	(2,334	)
Total net investment under Canadian GAAP		$	108,352		$	138,261		$	75,310
Adjustments:
	Deferred development(a)		(10,671	)		(28,062	)		2,647
	Amortization of intangible assets(b)		(559	)		(691	)		—
Total net investment under U.S. GAAP		$	97,122		$	109,508		$	77,957
Total group equity		$	98,903		$	110,181		$	75,623

F-36

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

Combined Statements of Earnings (Loss)

		2004			2005			2006
Net earnings (loss) under Canadian GAAP		$	1,105		$	6,783		$	(98,380	)
Adjustments:
	Deferred development(a)		(6,180	)		(17,441	)		30,697
	Amortization of intangible assets(b)		(78	)		(82	)		—
	Intangible asset impairment charge(b)		—			—			704
	Stock-based compensation(c)		—			—			35
Net loss under U.S. GAAP			(5,153	)		(10,740	)		(66,944	)
Other comprehensive income (loss):
	Foreign currency translation adjustment(d)		1,532			(1,108	)		(3,007	)
Comprehensive income under U.S. GAAP		$	(3,621	)	$	(11,848	)	$	(69,951	)

      (a) Research and development costs: Under Canadian GAAP, the Company has deferred development costs which have met generally accepted criteria for deferral. Under U.S. GAAP, Statement of Financial Standards No. 2, “Accounting for Research and Development Costs,” the Company is required to charge all development costs to expense as incurred.

      (b) Amortization of intangible assets and intangible asset impairment charge: Under Canadian GAAP, the Company has deferred amortization of the cost of acquired patents until the technology related to such patents is put into use. Under U.S. GAAP, the Company is required to amortize such costs from the date of acquisition, which reduced the carrying value of the asset subject to the asset impairment charge at March 31, 2006.

      (c) Stock-based compensation: The Company prospectively adopted the Canadian GAAP requirements related to stock-based compensation for all options granted to employees on or after April 1, 2003.

      Under U.S. GAAP, Accounting Principle Board Opinion No. 25, “Accounting for Stock Issued to Employees,” for any stock option with an exercise price that is less than the market price on the date of grant, the difference between the exercise price and the market price on the date of grant is recorded as compensation expense (“intrinsic value based method”). The Company grants stock options at the fair market value of the shares, consequently no compensation expense is recognized under U.S. GAAP.

      Statement of Financial Standards No. 123, “Accounting for Stock-Based Compensation,” requires pro forma disclosures of net income as if the fair value based method as opposed to the intrinsic value based method of accounting for stock options had been applied. The disclosures in the following table show the Company’s net income on a pro forma basis using the fair value method as determined by using the Black-Scholes option pricing model:

Years Ended March 31	2004			2005			2006
Net loss under U.S. GAAP	$	(5,153	)	$	(10,740	)	$	(66,944	)
Estimated stock-based compensation costs		—			—			(35	)
Pro forma net loss under U.S. GAAP	$	(5,153	)	$	(10,740	)	$	(66,979	)

F-37

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

      The fair value of options granted during year was calculated using the Black-Scholes option pricing model with the following assumptions:

		2006
Weighted average Black-Scholes value of options		$	4.10
Assumptions:
	Risk free interest rate		3.2	%
	Expected life in years		5.0
	Expected dividend yield		0.0	%
	Volatility		31.0	%

      (d) Comprehensive income: Under U.S. GAAP, Statement of Financial Standards No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in general-purpose financial statements. Comprehensive income is defined as the change in net assets of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The reportable item of comprehensive income is the translation adjustments on the conversion of self-sustaining entities included in these combined financial statements that have a functional currency other than the reporting currency of the United States dollar.

      (e) Investment tax credits: Under Canadian GAAP, investment tax credits are accounted for as a reduction in the cost of the related asset or expense. Under U.S. GAAP, Accounting Principle Board Opinion No. 2, “Accounting for the Investment Tax Credit,” permits the company to recognize the full tax credit against the tax provision in the year the credit arises. As the Company does not believe there is reasonable assurance that the credits will be realized, no benefits have been recognized.

      (f) Recently issued pronouncements:

Canadian GAAP Standards:

      In January 2005, the CICA approved Handbook Sections 1530, “Comprehensive Income,” 3855, “Financial Instruments — Recognition and Measurement” and 3865, “Hedges.” The new standards are intended to harmonize Canadian GAAP with U.S. GAAP. The new standards will be effective for the first quarter of fiscal 2008.

United States GAAP Standards:

      In December 2004, the FASB issued amended Statement of Financial Standards No. 123, “Accounting for Stock-Based Compensation,” (“SFAS 123R”). SFAS 123R requires our companies to use the fair value based method of accounting for stock-based compensation and is in effect for all interim reporting periods beginning in fiscal 2007. Stock compensation expense would be recognized on a prospective basis in the financial statements over the estimated service life. The Company is currently evaluating the impact of adoption on the combined financial statements.

      In June, 2006 the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement 109. The interpretation is effective for fiscal years beginning after December 15, 2006, with earlier adoption encouraged. The Company is currently evaluating the impact of adoption on the combined financial statements.

      In November 2004, the FASB issued Statement of Financial Standards No. 151, “Inventory Costs, and amendment of ARB No. 43, Chapter 4,” (“SFAS 151”). SFAS 151 clarifies that abnormal amounts of idle

F-38

Photowatt Technologies Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

facility expense, freight and handling costs, and wasted materials should be recognized as current period charges. The standard is effective for fiscal years beginning after June 15, 2005.

      In September, 2006, the FASB issued Statement of Financial Standard No. 157, “Fair Value Measurement” (“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets and liabilities. The Statement also expands disclosures about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurement on earnings. The Statement is effective for fiscal years beginning on or after January 1, 2008. The Company is currently evaluating the impact of adoption on the combined financial statements.

F-39

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 6. Indemnification of Directors and Officers

      We have included in our by-laws provisions to generally eliminate the personal liability of our directors and officers to the full extent permitted by the Canada Business Corporations Act. In addition, our by-laws provide that we are required to advance moneys to pay costs, charges and expenses to our directors and officers as incurred in connection with proceedings against them for which they may be indemnified in advance of a final determination of their entitlement to indemnification. These provisions, however, do not eliminate or limit liability of a director or officer, and will require that a director or officer repay any advanced costs, charges or expenses, if the director or officer (i) did not act honestly and in good faith with a view to our best interest, and (ii) in the case of a criminal or administrative action or proceeding that is enforced by monetary penalty, did not have reasonable grounds for believing that his or her conduct was lawful.

      Currently, there is no pending litigation or proceeding where a current or past director, officer or employee is seeking indemnification, nor are we aware of any threatened litigation that may result in claims for indemnification. We have purchased a liability insurance policy covering our directors and officers and the directors and officers of our subsidiaries against liability incurred by, arising from, or against them for certain of their acts, errors or omissions.

      The form of underwriting agreement to be filed herewith as Exhibit 1.1 is expected to contain provisions by which the underwriters agree to indemnify us, each person who controls us within the meaning of the U.S. Securities Act of 1933, as amended, and each of our officers and directors, with respect to information furnished by the underwriters for use in this Registration Statement.

      Reference is made to Item 9 for the undertakings of the Registrant with respect to indemnification for liabilities arising under the U.S. Securities Act of 1933.

Item 7. Recent Sales of Unregistered Securities

      The Registrant was incorporated on July 10, 2006 under the Canada Business Corporations Act. In connection with its formation, the Registrant issued one common share for C$1 to ATS Automation Tooling Systems Inc., pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933.

II-1

Item 8. Exhibits and Financial Statement Schedules

(a) Exhibits

1	.1*	Form of Underwriting Agreement
3	.1**	Form of Articles of Incorporation of the Registrant to be adopted prior to the completion of this offering
3	.2**	Form of by-laws of the Registrant to be adopted prior to the completion of this offering
4	.1**	Specimen certificate for common shares of the Registrant
4	.2	Form of Shareholder Agreement
5	.1*	Opinion of Blake, Cassels & Graydon LLP as to the validity of the securities being offered
10	.1	Form of Master Separation Agreement
10	.2**	Form of Master Supply Agreement
10	.3	Form of Transitional Services Agreement
10	.4	Form of Registration Rights Agreement
10	.5**	Employment Agreement of Silvano Ghirardi
10	.6**	Employment Agreement of David L. Adams
10	.7**	Employment Agreement of Gary J. Seiter
10	.8**	Employment Agreement of Jean-Louis Dubien
10	.9**	Stock Option Plan
10	.10**	Directors’ Deferred Stock Unit Plan
10	.11**	Executive Performance Share Unit Plan
10	.12**	Short-term Incentive Plan
10	.13	Form of Share Transfer Agreement No. 1
10	.14	Form of Share Transfer Agreement No. 2
10	.15	Form of Share Transfer Agreement No. 3
10	.16	Form of Share Transfer Agreement No. 4
10	.17	Form of Asset Transfer Agreement
10	.18	Form of Lease Agreement
10	.19**	Form of Indemnification Agreement
10	.20**	Amendment to Employment Agreement of Silvano Ghirardi
21	.1*	Subsidiaries of the Registrant
23	.1*	Consent of Blake, Cassels & Graydon LLP (included in Exhibit 5.1 hereto)
23	.2**	Consent of KPMG LLP
24	.1**	Powers of Attorney

*  To be filed by amendment to the registration statement.

**  Previously filed.

(b) Financial Statement Schedules

None

Item 9. Undertakings

      The undersigned registrant hereby undertakes that:

      (1) For purposes of determining any liability under the U.S. Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon

II-2

Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the U.S. Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.

      (2) For the purpose of determining any liability under the U.S. Securities Act of 1933, each post effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

      (3) It will provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

      (4) For the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of this registration statement, other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided, however, that no statement made in the registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

      (5) For the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)	Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424 of this chapter);
(ii)	Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii)	The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)	Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

      (6) Insofar as indemnification for liabilities arising under the U.S. Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the U.S. Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the U.S. Securities Act of 1933 and will be governed by the final adjudication of such issue.

II-3

SIGNATURES

      Pursuant to the requirements of the U.S. Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this amendment no. 5 to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cambridge, Province of Ontario, on February 2, 2007.

PHOTOWATT TECHNOLOGIES INC.

By:	/s/ SILVANO GHIRARDI
	Name:	Silvano Ghirardi
	Title:	President and Chief Executive Officer and Director

II-4

      Pursuant to the requirements of the U.S. Securities Act of 1933, this amendment no. 5 to the registration statement has been signed by the following persons on February 2, 2007 in the capacities indicated.

	Name	Title
By:	* Silvano Ghirardi	President and Chief Executive Officer (principal executive officer) and Director
By:	* David L. Adams	Senior Vice President and Chief Financial Officer (principal financial and accounting officer)
By:	* Robert M. Franklin	Director — Chairman
By:	/s/ GERALD R. BEARD Gerald R. Beard	Director
By:	* Ronald J. Jutras	Director
By:	* Kirk Mandy	Director
By:	* Stewart McCuaig	Director
By:	* C. Ian Ross	Director
By:	* John W. Sheridan	Director
By:	* Wayne S. Hill	Director
*By:	/s/ STEWART McCUAIG Stewart McCuaig Attorney-in-Fact

II-5

AUTHORIZED REPRESENTATIVE

      Pursuant to the requirements of Section 6(a) of the U.S. Securities Act of 1933, the undersigned has caused this amendment no. 5 to the registration statement to be signed solely in the capacity as the duly authorized representative of Photowatt Technologies Inc. in the United States, in the City of Cambridge, Province of Ontario on February 2, 2007.

Photowatt Technologies USA Inc.
(Authorized U.S. Representative)
By:	/s/ GERALD R. BEARD
	Name:	Gerald R. Beard
	Title:	Chief Financial Officer

II-6

EXHIBIT INDEX

1	.1*	Form of Underwriting Agreement
3	.1**	Form of Articles of Incorporation of the Registrant to be adopted prior to the completion of this offering
3	.2**	Form of by-laws of the Registrant to be adopted prior to the completion of this offering
4	.1**	Specimen certificate for common shares of the Registrant
4	.2	Form of Shareholder Agreement
5	.1*	Opinion of Blake, Cassels & Graydon LLP as to the validity of the securities being offered
10	.1	Form of Master Separation Agreement
10	.2**	Form of Master Supply Agreement
10	.3	Form of Transitional Services Agreement
10	.4	Form of Registration Rights Agreement
10	.5**	Employment Agreement of Silvano Ghirardi
10	.6**	Employment Agreement of David L. Adams
10	.7**	Employment Agreement of Gary J. Seiter
10	.8**	Employment Agreement of Jean-Louis Dubien
10	.9**	Stock Option Plan
10	.10**	Directors’ Deferred Stock Unit Plan
10	.11**	Executive Performance Share Unit Plan
10	.12**	Short-term Incentive Plan
10	.13	Form of Share Transfer Agreement No. 1
10	.14	Form of Share Transfer Agreement No. 2
10	.15	Form of Share Transfer Agreement No. 3
10	.16	Form of Share Transfer Agreement No. 4
10	.17	Form of Asset Transfer Agreement
10	.18	Form of Lease Agreement
10	.19**	Form of Indemnification Agreement
10	.20**	Amendment to Employment Agreement of Silvano Ghirardi
21	.1*	Subsidiaries of the Registrant
23	.1*	Consent of Blake, Cassels & Graydon LLP (included in Exhibit 5.1 hereto)
23	.2**	Consent of KPMG LLP
24	.1**	Powers of Attorney

*  To be filed by amendment to the registration statement.

**  Previously filed.

II-7 EX-4.2 2 o34516exv4w2.htm EX-4.2

Exhibit 4.2

SHAREHOLDER AGREEMENT

between

ATS AUTOMATION TOOLING SYSTEMS INC.

– and –

PHOTOWATT TECHNOLOGIES INC.

[     ], 2007

ARTICLE 1 INTERPRETATION		1
1.1	Definitions	1
1.2	Construction	7
1.3	Conflicts With Other Separation Agreements	7
ARTICLE 2 GOVERNANCE		8
2.1	Board of Directors	8
2.2	Committees of the Board	9
2.3	Quorum	9
2.4	Decisions of Directors	9
2.5	Meetings of Shareholders	10
2.6	Casting Vote	10
2.7	Business and Affairs of Photowatt	10
2.8	Transactions with ATS	10
2.9	Certain Matters Requiring Approval of ATS	10
ARTICLE 3 FINANCIAL REPORTING AND DISCLOSURE COVENANTS		12
3.1	Financial and Other Information	12
3.2	Auditors and Accounting	18
3.3	Future Financial Reporting and Disclosure	20
ARTICLE 4 GENERAL PROVISIONS		21
4.1	Assignment	21
4.2	Entire Agreement	21
4.3	Directors and Officers’ Indemnities and Insurance	21
4.4	Term	22
4.5	Termination Not to Affect Rights or Obligations	23
4.6	Future Litigation and Other Proceedings	23
4.7	Further Assurances	23
4.8	Notices	23
4.9	Time of Essence	24
4.10	Governing Law	24
4.11	Severability	24
4.12	Force Majeure	25
4.13	Specific Performance	25
4.14	Currency	25
4.15	Time Periods	26
4.16	Amendment	26
4.17	Counterparts	26
4.18	Authority	26
4.19	Jurisdiction	26
4.20	Binding Effect	26
4.21	Expenses	27

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4.22	Waiver	27
4.23	Compliance With Laws	27

SHAREHOLDER AGREEMENT

     THIS AGREEMENT is made as of the [     ] day of [     ], 2007

BETWEEN:

ATS AUTOMATION TOOLING SYSTEMS INC., a corporation incorporated under the laws of Ontario

(“ATS”)

– and –

PHOTOWATT TECHNOLOGIES INC., a corporation incorporated under the laws of Canada

(“Photowatt”)

     WHEREAS the Parties wish to enter into this Agreement to provide for the conduct of the business and affairs of Photowatt and to govern the relationship between Photowatt and ATS as a shareholder of the Photowatt.

     NOW THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties), the parties hereto agree as follows:

ARTICLE 1

INTERPRETATION

1.1	Definitions
	In this Agreement:
	“Act” means the Canada Business Corporations Act, as the same may be amended from time to time and any successor legislation thereto;

“Action” means any suit, arbitration, inquiry, proceeding or investigation by or before any court, Governmental Authority or any arbitration tribunal asserted by a Person;

- 2 -

“Affiliate” of any specified Person means any other Person directly or indirectly “controlling,” “controlled by” or “under common control with” (within the meaning of the Ontario Securities Act), such specified Person; provided, however, that for purposes of this Agreement, except to the extent expressly provided otherwise, the determination of whether a Person is an Affiliate of another Person shall be made assuming that no member of the ATS Group is an Affiliate of any member of the Photowatt Group and vice versa;

“Agreement” means this agreement and all schedules, if any, attached to this agreement, in each case as they may be supplemented or amended from time to time, and the expressions “hereof”, “herein”, “hereto”, “hereunder”, “hereby” and similar expressions refer to this agreement, and unless otherwise indicated, references to Articles and Sections are to the specified Articles and Sections in this agreement;

“Assets” means assets, properties and rights (including goodwill and rights arising under Contracts), wherever located (including in the possession of vendors, other Persons or elsewhere), whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person;

“ATS Annual Financial Statements” means consolidated financial statements of ATS for a fiscal year, setting forth in each case in comparative form the consolidated figures (and notes thereto) for the previous fiscal year and all in reasonable detail and prepared in accordance with Canadian GAAP and all applicable Laws, as well as a discussion and analysis by management of ATS’ financial condition and results of operation for such year;

“ATS Auditors” has the meaning ascribed thereto in Section 3.2(a);

“ATS Financial Statements” means ATS Quarterly Financial Statements and ATS Annual Financial Statements;

“ATS Group” means ATS and each Person that ATS directly or indirectly controls (within the meaning of the Ontario Securities Act), other than any member of the Photowatt Group;

“ATS Public Filings” has the meaning ascribed thereto in Section 3.1(l);

“ATS Quarterly Financial Statements” means consolidated financial statements of ATS for a fiscal quarter and the period from the beginning of the then-current fiscal year to the end of the fiscal quarter, setting forth in each case in comparative form for each such fiscal quarter and period of ATS, the consolidated figures (and notes thereto) for the corresponding quarter and period of the previous fiscal year and all in reasonable detail and prepared in accordance with Canadian GAAP and all applicable Laws, as well as a discussion and analysis by management of ATS’ financial condition and results of operation for such fiscal period;

- 3 -

“Audit Package” means all materials prepared for and deliver to Photowatt’s audit committee relating to the approval of Photowatt Financial Statements;

“Board of Directors” or “Board” means the board of directors of Photowatt;

“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;

“Canadian GAAP” means those accounting principles which are recognized as being generally accepted in Canada from time to time as set out in the Handbook published by the Canadian Institute of Chartered Accountants, applied on a consistent basis;

“Canadian Securities Laws” means securities legislation established in each Province and Territory of Canada, and all regulations, rules, blanket orders and policies established thereunder or issued by Canadian Securities Regulatory Authorities;

“Canadian Securities Regulatory Authorities” means the securities regulatory authorities in each of the Provinces and Territories of Canada;

“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;

“Consents” means the consents of Persons referred to in the disclosure letter of even date delivered by ATS to Photowatt and initialed by the Parties;

“Contract” means any contract, agreement, lease, license, sales order, purchase order, instrument or other commitment that is binding on any Person or any part of its property under applicable Law;

“Convertible Security” means any security that is convertible into, exchangeable for, or exercisable to acquire Common Shares;

“Effective Date” means the date hereof;

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended;

“Governmental Authority” means any federal, provincial, state, local or foreign government, supranational, governmental, regulatory or administrative authority,

- 4 -

instrumentality, agency or commission, political subdivision, self-regulatory organization or any court, tribunal or judicial or arbitral body or other governmental authority;

“Independent” means independent as determined pursuant to National Policy 58-201 — Corporate Governance Guidelines of the Canadian Securities Administrators, as amended from time to time;

“initial directors meeting” has the meaning ascribed thereto in Section 2.3;

“Law” means any law (statutory, common or otherwise), constitution, ordinance, code, rule, regulation, guideline, executive order or other similar authority enacted, adopted, promulgated or applied by any Governmental Authority, each as amended;

“Lease Agreement” means the Lease Agreement dated as of the date hereof between Photowatt and ATS;

“Master Separation Agreement” means the Master Separation Agreement dated as of the date hereof between Photowatt and ATS;

“Master Supply Agreement” means the Master Supply Agreement dated as of the date hereof between Photowatt and ATS;

“Material Intellectual Property Assets” means intellectual property rights, including any patents of the Photowatt Group, comprising Assets of the Photowatt Group that are material to the Photowatt Group or the Photowatt Business;

“Meeting Schedule” means the schedule of quarterly and annual meetings of the Board and audit committee of the Board for each of Photowatt and ATS during calendar 2007, 2008 and 2009 which has been agreed to by both Photowatt and ATS prior to the Effective Date;

“Obligations” means all obligations, contractual or otherwise, including all liabilities and indebtedness, whether known or unknown, asserted or unasserted, absolute or contingent, matured or unmatured, conditional or unconditional, latent or patent, accrued or unaccrued, liquidated or unliquidated, or due or to become due;

“Offering” means an initial public offering by Photowatt, consummated promptly following the execution of this Agreement;

“Ontario Securities Act” means the Securities Act (Ontario);

“OSC” means the Ontario Securities Commission;

“Parties” means ATS and Photowatt and their respective successors and permitted assigns, and “Party” means any one of them;

- 5 -

“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;

“Person” means any individual, partnership, limited partnership, limited or unlimited liability company, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, unincorporated syndicate, unincorporated organization, trust, trustee, executor, administrator or other legal personal representative or Governmental Authority however designated or constituted;

“Photowatt Annual Financial Statements” means (i) the consolidated annual financial statements of the Photowatt Group (and notes thereto), including in comparative form the consolidated figures (and notes thereto) for the previous fiscal year, all in reasonable detail and prepared in accordance with Regulation S-X, Canadian Securities Laws, Canadian GAAP and all other applicable Laws and in accordance with any similar or successor rule or Laws, and (ii) a discussion and analysis by management of the Photowatt Group’s financial condition and results of operations for such year, including an explanation of any material period-to-period change and any off-balance sheet transactions, all in reasonable detail and prepared in accordance with Item 303(a) of Regulation S-K and Canadian Securities Laws and in accordance with any similar or successor rule or laws;

“Photowatt Auditors” has the meaning ascribed thereto in Section 3.2(a);

“Photowatt Business” means the businesses undertaken by Photowatt, including, but not limited to the design, manufacture and sale of photovoltaic products and related products and services;

“Photowatt Financial Statements” means Photowatt Quarterly Financial Statements and Photowatt Annual Financial Statements;

“Photowatt Group” means Photowatt and each Person that Photowatt directly or indirectly controls (within the meaning of the Ontario Securities Act);

“Photowatt Public Documents” has the meaning ascribed thereto in Section 3.1(h)(i);

“Photowatt Quarterly Financial Statements” means (i) the consolidated quarterly financial statements of the Photowatt Group (and notes thereto), including in comparative form the consolidated figures (and notes thereto) for the corresponding quarter and periods of the previous fiscal year, all in reasonable detail and prepared in accordance with Article 10 of Regulation S-X, Canadian Securities Laws, Canadian GAAP and all other applicable Laws and in accordance with any similar or successor rule or laws, and (ii) a discussion and analysis by management of the Photowatt Group’s financial condition and results of operations for such fiscal period, including an explanation of any

- 6 -

material period-to-period change and any off-balance sheet transactions, all in reasonable detail and prepared in accordance with Item 303(b) of Regulation S-K and Canadian Securities Laws and in accordance with any similar or successor rule or laws;

“Prospectus” means the final prospectus filed with the SEC and deemed to be part of the Registration Statement and filed with the Canadian Securities Regulatory Authorities pursuant to Canadian Securities Laws;

“Registration Rights Agreement” means the Registration Rights Agreement dated as of the date hereof between Photowatt and ATS;

“Registration Statement” means the registration statement on Form F-1 (SEC File No. 333-137044) as filed by Photowatt with the SEC in connection with the Offering, together with all amendments and supplements thereto;

“Regulation S-K” means Regulation S-K of the General Rules and Regulations promulgated by the SEC pursuant to the U.S. Securities Act;

“Regulation S-X” means Regulation S-X of the General Rules and Regulations promulgated by the SEC pursuant to the U.S. Securities Act;

“Representatives” means, with respect to any Person, any of such Person’s directors, officers, employees, consultants, advisers and agents;

“SEC” means the United States Securities and Exchange Commission or any successor agency;

“Securities Regulator” means a Canadian Securities Regulatory Authority, the SEC or any stock exchange or quotation;

“Separation Agreements” means this Agreement, the Master Separation Agreement, the Transfer Agreements, the Lease Agreement, the Registration Rights Agreement, the Master Supply Agreement and the Transitional Services Agreement;

“Shareholder” means each of ATS and such other Persons as may become a holder of Common Shares from time to time in accordance with the provisions hereof;

“Standard Financial Report” means a consolidated balance sheet, income statement and statement of cash flows, and other management information, detailed in a form consistent with the reporting template currently used by ATS for such financial information;

“subsequent directors meeting” has the meaning ascribed thereto in Section 2.3;

“Subsidiary” has the meaning ascribed thereto in the Ontario Securities Act;

- 7 -

“Transfer” includes any sale, exchange, assignment, gift, bequest, disposition, mortgage, charge, pledge, encumbrance, grant of security interest or other arrangement by which possession, legal title or beneficial ownership passes from one Person to another, or to the same Person in a different capacity, whether or not voluntary and whether or not for value, and any agreement to effect any of the foregoing; and the words “Transferred”, “Transferring” and similar words have corresponding meanings;

“Transfer Agreements” means the Transfer Agreements dated as of the date hereof between Photowatt and ATS;

“Transitional Services Agreement” means the Transitional Services Agreement dated as of the date hereof between Photowatt and ATS; and

“U.S. Securities Act” means the U.S. Securities Act of 1933, as amended.

1.2 Construction

     The Parties have participated jointly in the negotiation and drafting of this Agreement. 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 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.

- 8 -

ARTICLE 2

GOVERNANCE

2.1 Board of Directors

     The Board will be comprised of three to fifteen members, initially being comprised of nine members, not less than 25% of whom shall be “resident Canadian” as defined in the Act. ATS shall initially elect three members of the Board.

     Following the date of this Agreement, ATS shall have the following rights of nomination:

(a)

as long as the Percentage of Outstanding Common Shares is not less than 40%, ATS shall have the right to nominate for election to the Board a number of directors of the Board representing 25% of the directors of the Board rounded down to the nearest whole number, provided that, if the Board is to consist of at least six directors, the number of ATS nominees shall be rounded up to the nearest whole number; and

(b)

as long as the Percentage of Outstanding Common Shares is 10% or more, but less than 40%, ATS shall have the right to designate one nominee for election as a director of the Board.

     Photowatt shall nominate for election to the Board the balance of the number of directors to be elected after establishing the number of directors ATS determines to nominate in accordance with the foregoing. Photowatt shall solicit proxies in favour of the election of ATS’ nominees and exercise such proxies and otherwise use its commercial reasonable efforts to secure the election of ATS’ nominees as members of the Board.

     Upon the Percentage of Outstanding Common Shares falling below 40% but not less than 10%, all of the nominees of ATS to the Board except for one shall resign within 90 days or at such earlier date as a meeting of the Shareholders is convened by Photowatt to elect directors. Upon the Percentage of Outstanding Common Shares falling below 10%, the nominee of ATS to the Board shall resign within 90 days or at such earlier date as a meeting of the Shareholders is convened by Photowatt to elect directors.

     ATS will be entitled at any time and in its sole discretion, subject to applicable Law and this section, by direction in writing to remove any one or more of its nominees and, so long as it and/or its Affiliates hold the requisite Percentage of Outstanding Common Shares, nominate a successor who will, promptly upon the resignation of the existing director, be appointed by the Board as a director to replace the individual previously nominated. If a director nominated by ATS ceases to be a director for any reason (other than ATS and its Affiliates ceasing to hold the requisite Percentage of Outstanding Common Shares), ATS will nominate a successor to fill the resulting vacancy as soon as practicable thereafter (so long as ATS and/or its Affiliates continue to hold the requisite Percentage of Outstanding Common Shares). If ATS fails for any reason to nominate a successor to fill a vacancy within 30 days after the vacancy arises, the Board will appoint an individual to fill the vacancy, who shall undertake to Photowatt and ATS to serve as a

- 9 -

director until a successor is nominated by ATS, at which point such individual shall resign and the nominee of ATS shall be appointed by the Board as a director.

     In the event of the proposed removal of any director nominated by ATS other than a removal proposed by ATS in accordance with the provisions of this Agreement, Photowatt agrees to solicit proxies against the removal of such ATS nominee and exercise such proxies and otherwise use its commercial reasonable efforts to defeat such proposed removal.

     The provisions of this Agreement shall not limit the right attaching to the Common Shares beneficially owned or controlled by ATS or any of its Affiliates or the exercise thereof.

2.2 Committees of the Board

     The Board will have (a) an audit committee; (b) a compensation and governance committee; and (c) such other committees, if any, as determined from time to time by the Board. Each committee will consist of three to five members. Initially the audit committee will consist of three members and the compensation and governance committee will consist of four members.

     Each director is entitled to receive notice of each Board committee meeting, concurrent with that received by the members of such committees; to attend and fully participate but not to vote at each Board committee meeting; to receive all information delivered to Board committee members, concurrent with the delivery thereof to such members; and to receive, upon request to Photowatt, all information to which any Board committee member, is entitled.

2.3 Quorum

     A quorum for a meeting of the Board shall require:

(a)	a majority of the number of directors, subject to the Canadian residency requirements of the Act; and
(b)	so long as the Percentage of Outstanding Common Shares is not less than 40%, at least one of the nominees of ATS.

     In the event that a quorum is not achieved or maintained for a meeting of the Board (an “initial directors meeting”), any two directors may call a meeting of the Board by proper notice to be held on a date no earlier than the fifth Business Day following the initial directors meeting solely to address the business proposed at the initial directors meeting. A quorum for such further meeting of the Board (a “subsequent directors meeting”) shall exclude the requirements of Section 2.3(b) of this Agreement.

     A quorum for a meeting of any committee of the Board shall require a majority of the committee members, subject to the Canadian residency requirements of the Act.

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2.4 Decisions of Directors

     In order to be effective, a decision of the Board must be approved either by a resolution passed by the affirmative vote of a majority of the directors present and entitled to vote thereon at a meeting of directors duly called and at which a quorum of directors are present, or by an instrument signed by all the directors.

2.5 Meetings of Shareholders

     A meeting of Shareholders shall be called by Photowatt upon written request by any two directors of the Board within 30 days of receipt of any such request.

2.6 Casting Vote

     The chair of any meeting of the Board, committee of the Board or Shareholders will not have a casting vote.

2.7 Business and Affairs of Photowatt

     Each of the Parties to this Agreement will do everything in its power to cause such meetings to be held, votes to be cast, resolutions to be passed, by-laws to be made and confirmed, documents to be executed and all other things and acts to be done to ensure that, at all times, to the extent permitted by Law, the composition and operation of the Board and the operation of the business and affairs of Photowatt comply with the terms of this Article 2 and with the entirety of this Agreement.

2.8 Transactions with ATS

     Any material commercial transaction that Photowatt proposes to enter into after the Effective Date with ATS or any of its Affiliates that is not contemplated by the Separation Agreements must be considered and approved by the Independent directors of Photowatt who are not nominees of ATS.

2.9 Certain Matters Requiring Approval of ATS

     For so long as the Percentage of Outstanding Common Shares is not less than 50%, Photowatt shall not, and shall not permit any member of the Photowatt Group to, without the affirmative vote of a majority of the Board and the written consent of ATS as a Shareholder (which ATS may withhold in its sole and absolute discretion):

(a) enter into any merger, amalgamation, plan of arrangement, consolidation, business combination, joint venture or other material corporate transaction, including the acquisition of any business or securities of any other Person (other than a wholly-owned Subsidiary of Photowatt) or acquisition, license, lease, exchange of Assets (other than inventory items acquired in the ordinary course of business in connection with the Photowatt Business) or assume any Obligations of any Person, in each case with an aggregate fair market value in excess of $50 million;

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(b)	sell, lease, exchange, license on an exclusive basis or otherwise dispose of, whether pursuant to a single transaction or a series of transactions, Assets of the Photowatt Group with an aggregate fair market value in excess of $50 million (other than the sale or disposition of inventory in the ordinary course of business in connection with the Photowatt Business) and/or any Material Intellectual Property Assets;
(c)	adopt any plan or proposal for a complete or partial liquidation or dissolution or any reorganization or commence any case, proceeding or action seeking relief under any existing laws or future laws relating to bankruptcy or insolvency;
(d)	take any action that could reasonably be expected to lead to or result in a material change in the nature of the Photowatt Business, including directly or indirectly participate in any business other than the Photowatt Business;
(e)	other than pursuant to share compensation arrangements in respect of employees, officers, consultants, or directors of Photowatt or any member of the Photowatt Group approved by the Board and Shareholders, enter into any agreement or make any offer or grant any right capable of becoming an agreement to allot or issue a number of Common Shares or Convertible Securities where the aggregate number of Common Shares to be issued or allotted exceeds 5% of the total number of Common Shares then outstanding on a non-diluted basis;
(f)	take, or cause to be taken, directly or indirectly, any action (including the making or failing to make any election under a Law) that has the effect, directly or indirectly, of restricting or limiting the ability of ATS or any of its Affiliates to freely Transfer Common Shares or would restrict or limit the rights of any transferee of ATS or any of its Affiliates as a holder of Common Shares and, without limiting the generality of the foregoing, Photowatt shall not take any action, or recommend to its shareholders any action, which would limit the legal rights of, or deny any benefit to, ATS or any of its Affiliates as a holder of Common Shares either (i) solely as a result of the amount of Common Shares owned by ATS or any of its Affiliates or (ii) in a manner not applicable to holders of Common Shares generally;
(g)	enter into a partnership or any arrangement for the sharing of profits, union of interests, joint venture or reciprocal concession with any Person if the aggregate fair market value of the assets contributed and liabilities assumed by the Photowatt Group in connection therewith either exceeds on formation or at any time in the future could reasonably be expected to exceed $50 million; or
(h)	make any commitment or agreement to do any of the foregoing.

      Each of the above matters must be presented to the Board of Directors for decision, and may not be delegated to any committee of the Board of Directors or to the management of Photowatt or any Subsidiary.

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ARTICLE 3

FINANCIAL REPORTING AND DISCLOSURE COVENANTS

3.1 Financial and Other Information

     Photowatt agrees that, for so long as ATS is required to consolidate the results of operations and financial position of any member of the Photowatt Group (determined in accordance with Canadian GAAP and applicable Laws, and consistent with Canadian Securities Regulatory Authorities and SEC reporting requirements), and for a further 12 months after the date on which ATS ceases to be required to do so:

(a) Financial Controls

      Photowatt shall (and shall cause each other member of the Photowatt Group to) maintain effective disclosure controls and procedures and internal control over financial reporting as defined in Exchange Act Rule 13a-15 promulgated under the Exchange Act and in any similar or successor rule, and as required under Canadian Securities Laws or other applicable securities Laws.

      Photowatt shall cause each of its principal executive and principal financial officers to (i) sign and deliver certifications to its periodic reports and shall include the certifications in its periodic reports, as and when required pursuant to Exchange Act Rule 13a-14 and Item 601 of Regulation S-K and in any similar or successor rule, and as required under Canadian Securities Laws and other applicable securities Laws and (ii) sign and deliver to ATS certification and representation documents, and orally discuss related matters, with respect to its periodic reports, in a manner substantially similar to the Parties’ practice in the periods prior to the Effective Date.

      Photowatt shall cause its management to evaluate its disclosure controls and procedures and internal control over financial reporting (including any change in internal control over financial reporting) as and when required pursuant to Exchange Act Rule 13a-15 and in any similar or successor rule, and as required under Canadian Securities Laws and other applicable securities Laws.

      Photowatt shall disclose in its periodic reports filed with the SEC and Canadian Securities Regulatory Authorities information concerning its management’s responsibilities for and evaluation of its disclosure controls and procedures and internal control over financial reporting (including the annual management report and attestation report of its independent auditors relating to internal control over financial reporting) as and when required under Items 307 and 308 of Regulation S-K and other applicable SEC rules, and as required under Canadian Securities Laws and other applicable securities Laws.

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     Without limiting the general application of the foregoing, Photowatt shall (and shall cause each other member of the Photowatt Group to) maintain internal systems and procedures which provide reasonable assurance that (1) the Photowatt Financial Statements are reliable and timely prepared in accordance with Canadian GAAP and applicable Law, (2) all transactions of members of the Photowatt Group are recorded as necessary to permit the preparation of the Photowatt Financial Statements, (3) the receipts and expenditures of members of the Photowatt Group are authorized at the appropriate level within Photowatt, and (4) unauthorized use or disposition of the assets of any member of the Photowatt Group that could have material effect on the Photowatt Financial Statements is prevented or detected in a timely manner.

(b) Fiscal Year

     Photowatt shall (and shall cause each member of the Photowatt Group to) maintain a fiscal year that commences and ends on the same calendar days as the fiscal year of ATS commences and ends, and to maintain monthly account periods that commence and end on the same calendar days as the monthly account periods of ATS commence and end.

(c) Monthly Financial Reports

     No later than ten Business Days after the end of each of Photowatt’s monthly accounting periods following the Effective Date, Photowatt shall deliver to ATS a Standard Financial Report for Photowatt for such period and for each of its Affiliates that is included in the consolidated Photowatt Financial Statements, as the case may be, and any adjusting journal entries, in such format and details as ATS may reasonably request.

(d) Quarterly Financial Reports

     In connection with each meeting of the Board and audit committee of the Board indicated on the Meeting Schedule, Photowatt will provide ATS with (i) drafts of Photowatt’s Audit Package relating to Photowatt Quarterly Financial Statements as reasonably requested by ATS, (ii) Photowatt’s Audit Package relating to Photowatt Quarterly Financial Statements when such package is delivered to Photowatt’s audit committee, and (iii) the version of the Photowatt Quarterly Financial Statements that are approved by Photowatt’s audit committee; provided, however, that Photowatt may continue to revise such Photowatt Quarterly Financial Statements prior to the filing thereof in order to make corrections and non-substantive changes, which corrections and changes shall be delivered by Photowatt to ATS as soon as practicable, and in any event within eight hours thereafter; provided further, that ATS and Photowatt financial Representatives shall actively consult with each other regarding any changes (whether or not substantive) that Photowatt may consider making to Photowatt Quarterly Financial Statements and related disclosure during the two calendar days immediately prior to any anticipated filing with the Securities Regulator, with particular focus on any changes that would have an effect upon the financial statements or related disclosure of ATS.

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     In addition to the foregoing and subject to applicable Law, no Photowatt Quarterly Financial Statement or any other document that refers to or contains information not previously publicly disclosed in respect of ATS, including, but not limited to the ownership of Photowatt by ATS, the Separation Agreements, or the separation of Photowatt and ATS, shall be filed with the Securities Regulator under applicable securities Laws or otherwise made public by any Photowatt Group member without the prior written consent of ATS. Notwithstanding anything to the contrary herein, Photowatt shall file Photowatt Quarterly Financial Statements with the Securities Regulator on the same date that ATS files ATS Quarterly Financial Statements with the Securities Regulator.

(e) Annual Financial Reports

     In connection with each meeting of the Board and audit committee of the Board indicated on the Meeting Schedule, Photowatt will provide ATS with (i) drafts of Photowatt’s Audit Package relating to Photowatt Annual Financial Statements as reasonably requested by ATS, (ii) Photowatt’s Audit Package relating to Photowatt Annual Financial Statements when such package is delivered to Photowatt’s audit committee, and (iii) the version of the Photowatt Annual Financial Statements that are approved by Photowatt’s audit committee; provided, however, that Photowatt may continue to revise such Photowatt Annual Financial Statements prior to the filing thereof in order to make corrections and non-substantive changes, which corrections and changes shall be delivered by Photowatt to ATS as soon as practicable, and in any event within eight hours thereafter; provided further, that ATS and Photowatt financial Representatives shall actively consult with each other regarding any changes (whether or not substantive) that Photowatt may consider making to Photowatt Annual Financial Statements and related disclosure during the three calendar days immediately prior to any anticipated filing with the Securities Regulator, with particular focus on any changes that would have an effect upon the financial statements or related disclosure of ATS.

     In addition to the foregoing and subject to applicable Law, no Photowatt Annual Financial Statement or any other document that refers to or contains information not previously publicly disclosed in respect of ATS, including, but not limited to the ownership of Photowatt by ATS, the Separation Agreements, or the separation of Photowatt and ATS, shall be filed with the Securities Regulator under applicable securities Laws or otherwise made public by any Photowatt Group member without the prior written consent of ATS. Notwithstanding anything to the contrary herein, Photowatt shall file Photowatt Annual Financial Statements with the Securities Regulator on the same date that ATS files ATS Annual Financial Statements with the Securities Regulator.

(f) Affiliate Financial Reports

     Photowatt shall deliver to ATS all quarterly and annual financial statements of each Affiliate of Photowatt that is itself required to file financial statements with any Securities Regulator under applicable securities Laws or otherwise make such financial

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statements publicly available, with such financial statements to be provided in the same manner, detail and timeliness as those financial statements of Photowatt required to be delivered to ATS pursuant to this Agreement.

(g) Conformance with ATS’ Financial Presentation

     All financial information to be provided by any Photowatt Group member to ATS pursuant to this Agreement shall be prepared in accordance with Canadian GAAP, and where practicable, consistent in terms of format and detail and otherwise with the policies of ATS with respect to the application of Canadian GAAP and practices with respect to the provisions of such financial information by such Photowatt Group member to ATS (and, where appropriate, as presently presented in financial reports to ATS’ board of directors), with such changes therein as may be requested by ATS from time to time consistent with changes in such accounting policies, principles and practices; provided, however, that the Parties acknowledge that Photowatt shall report its results in U.S. dollars and shall include in the notes to its financial statements a reconciliation quantifying all material differences between its financial statements as presented and its financial statements as they would be presented if they had been prepared in accordance with United States generally accepted accounting principles.

     All financial information to be filed with the Securities Regulator by any Photowatt Group member shall, to the extent prepared in accordance with generally accepted accounting principles other than Canadian GAAP, be prepared on the same basis and in the same form as the financial information as set forth in the preceding paragraph with such modifications as necessary to the extent of any differences between such generally accepted accounting principles and Canadian GAAP, any such modifications to be reviewed by the Photowatt Group member with ATS and approved by ATS not later than the required time of delivery of such financial information to ATS in accordance with this Agreement.

(h) Photowatt Reports Generally

     Each Photowatt Group member that files information with a Securities Regulator shall deliver to ATS:

(i)

preliminary and substantially final drafts, as soon as the same are prepared, of (x) all reports, notices and proxy and information statements to be sent or made available by such Photowatt Group member to its respective securityholders, (y) all other reports, whether regular, periodic or otherwise, to be filed or furnished to the Securities Regulator under applicable securities Laws ((x) and (y) collectively, the “Photowatt Public Documents”); and

(ii)

as soon as practicable, but in no event later than four Business Days (other than with respect to material change reports) prior to the earliest of the dates on which the same are printed, sent or filed, current drafts of all

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such Photowatt Public Documents and, with respect to material change reports, as soon as practicable but in no event later than two Business Days prior to the earliest of the dates on which the same are printed, sent or filed in the case of planned material change reports and as soon as practicable, but in no event less than four hours (or, for material change reports to filed before noon, in no event later than 5 p.m. Toronto time on the previous Business Day) in the case of unplanned material change reports;

provided, however, that Photowatt may continue to revise such Photowatt Public Documents prior to the filing thereof in order to make corrections and non-substantive change, which corrections and changes shall be delivered by Photowatt to ATS as soon as practicable, and in any event within eight hours thereafter; provided further, that ATS and Photowatt financial and/or legal Representatives shall actively consult with each other regarding changes (whether or not substantive) Photowatt may consider making to any of its Photowatt Public Documents and related disclosures prior to any anticipated filing with the Securities Regulator, with particular focus on any changes that would have an effect upon the financial statements or related disclosures of ATS. In additional to the foregoing and subject to applicable Law, no Photowatt Public Documents or any other document that refers to or contains information not previously publicly disclosed in respect of ATS, including, but not limited to the ownership of Photowatt by ATS, the Separation Agreements, or the separation of Photowatt and ATS, shall be filed with the Securities Regulator or otherwise made public by any Photowatt Group member without the prior written consent of ATS.

(i) Budgets and Financial Projections

     Photowatt shall, as promptly as practicable, deliver to ATS copies of all annual and monthly budgets, and two- and three-year annual budgets and financial projections (consistent in terms of detail and as otherwise reasonably required by ATS) relating to Photowatt on a consolidated basis and shall provide ATS an opportunity to meet with management of Photowatt to discuss such budgets and projections.

(j) Other Information

     With reasonable promptness, Photowatt shall deliver to ATS such additional financial and other information and data with respect to the members of the Photowatt Group and their respective business, properties, financial positions, results of operations and prospects as from time to time may be reasonably requested by ATS.

(k) Press Releases and Similar Information

     Photowatt shall release its annual and quarterly earnings releases on the same day or the following day after such release is reviewed by the Board according to the Meeting Schedule and shall give ATS the opportunity to review the information therein relating to the Photowatt Group and to comment thereon. Photowatt and ATS shall consult each

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other as to the timing of any financial guidance for a current or future period and shall give each other the opportunity to review the information therein relating to the Photowatt Group and to comment thereon. Photowatt shall issue its annual and quarterly earnings releases prior to ATS issuing its respective annual and quarterly earnings releases. No later than eight hours prior to the time and date (or, if the same will be published before noon, no later than 5 p.m. Toronto, Ontario, time on the previous Business Day) at which Photowatt intends to publish its regular annual or quarterly earnings release or any financial guidance for a current or future period, Photowatt shall deliver to ATS copies of substantially final drafts of all press releases and other statements to be made available by any Affiliate of Photowatt to employees of any Affiliate of Photowatt or to the public concerning any matters that could be reasonably likely to have a material financial impact on the earnings, results of operations, financial condition or prospects of any Photowatt Group member. In addition, prior to the issuance of any such press release or public statement that meets the criteria set forth in the preceding sentences, Photowatt shall consult with ATS regarding changes (other than typographical or other similar minor changes) to such substantially final drafts. Immediately following the issuance thereof, Photowatt shall deliver to ATS copies of final drafts of all press releases and other public statements.

(l) Cooperation on ATS’ Filings

     Photowatt shall cooperate fully, and shall use commercially reasonable efforts to cause Photowatt’s auditors to cooperate fully, with ATS to the extent reasonably requested by ATS in the preparation of any filings made by ATS with a Securities Regulator pursuant to applicable securities Laws, or otherwise made publicly available by or on behalf of ATS (collectively, the “ATS Public Filings”).

     Photowatt shall provide to ATS all information ATS reasonably requests in connection with any ATS Public Filings or that, in the judgment of legal advisors to ATS, is required to be disclosed or incorporated by reference therein under applicable Law. Photowatt shall provide such information in a timely manner on the dates requested by ATS to enable ATS to prepare, print and release all ATS Public Filings on dates as ATS shall determine but in no event later than is required by applicable Law. Photowatt shall use commercially reasonable efforts to cause its auditors to consent to any reference to them as experts in any ATS Public Filings if required under applicable Law.

     If and to the extent requested by ATS, Photowatt shall diligently and promptly review all drafts of such ATS Public Filings and prepare in a diligent and timely fashion any portion of such ATS Public Filings pertaining to Photowatt.

     Prior to any printing or public release of any ATS Public Filings, an appropriate executive officer of Photowatt shall, if requested by ATS, certify that the information relating to any Photowatt Group member or the Photowatt Business in such ATS Public Filings is accurate, true, complete and correct in all material respects.

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     Unless required by Law, Photowatt shall not publicly release any financial or other information that conflicts with the information with respect to any Photowatt Group member or the Photowatt Business that is included in any ATS Public Filings without ATS’ prior written consent. Prior to the release or filing thereof, ATS shall provide Photowatt with a draft portion of any ATS Public Filing containing information relating to the Photowatt Group and shall give Photowatt an opportunity to review such information and comment thereon; provided, however, that ATS shall determine in its sole and absolute discretion the final form and content of all ATS Public Filings.

3.2 Auditors and Accounting

     Photowatt agrees that, for so long as ATS is required to consolidate the results of operations and financial position of any member of the Photowatt Group (determined in accordance with Canadian GAAP and applicable Laws, and consistent with Canadian Securities Regulatory Authorities and SEC reporting requirements), and for a further 12 months after the date on which ATS ceases to be required to do so:

(a) Audit Timing

     Photowatt shall use commercially reasonable efforts to enable its (and its Affiliates’) independent auditors (the “Photowatt Auditors”) to complete their audit such that they may date their opinion on Photowatt Annual Financial Statements on the same date that ATS’ independent auditors (the “ATS Auditors”) date their opinion on ATS Annual Financial Statements, and to enable ATS to meet its timetable for the printing, filing and public dissemination of ATS Annual Financial Statements, all in accordance with this Agreement and as required by applicable Law. Photowatt shall request that the Photowatt Auditors date their opinion on Photowatt Annual Financial Statements on the same date that the ATS Auditors date their opinion on ATS Annual Financial Statements.

(b) Information Needed by ATS

     Photowatt shall provide to ATS on a timely basis all information ATS reasonably requires to meet its schedule for the preparation, printing, filing and public dissemination of ATS Annual Financial Statements in accordance with this Agreement and as required by applicable Law. Without limiting the generality of the foregoing, Photowatt shall provide all required financial information with respect to the Photowatt Group to the Photowatt Auditors in a sufficient and reasonable time and in sufficient detail to permit

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the Photowatt Auditors to take all steps and perform all reviews necessary to provide sufficient assistance to the ATS Auditors with respect to information to be included or contained in ATS Annual Financial Statements.

(c) Access to Photowatt Auditors

     Photowatt shall authorize the Photowatt Auditors to make available to the ATS Auditors both the personnel who performed, or are performing, the annual audit of Photowatt and work papers related to the annual audit of Photowatt, in all cases within a reasonable time prior to the opinion date for the Photowatt Auditors, so that the ATS Auditors are able to perform the procedures they consider necessary to take responsibility for the work of the Photowatt Auditors as it relates to the report of the ATS Auditors on ATS Financial Statements, all within sufficient time to enable ATS to meet the timetable for the printing, filing and public dissemination of ATS Annual Financial Statements.

(d) Access to Records

     If ATS determines in good faith that there may be an inaccuracy in a Photowatt Group member’s financial statements or deficiency in a Photowatt Group member’s internal accounting controls or operation that could materially impact ATS Financial Statements, at the request of ATS, Photowatt shall provide to ATS’ internal auditors access to the Photowatt Group member’s books and records so that ATS may conduct reasonable audits relating to the financial statements provided by Photowatt under this Agreement as well as to the internal accounting controls and operations of the Photowatt Group.

(e) Notice of Changes

     Subject to sections above under the heading “Auditors and Accounting”, Photowatt shall give ATS as much prior notice as reasonably practicable of any proposed determination of, or significant changes in, Photowatt’s accounting estimates or accounting principles, policies or practices from those in effect on the date of the audited financial statements included in the Prospectus. Photowatt shall consult with ATS and, if requested by ATS, Photowatt (and the Photowatt Auditors, if requested) shall consult with the ATS Auditors with respect to any such proposed determination or change. Unless otherwise required by applicable Law, Photowatt shall not make any such determination or changes without prior written consent of ATS if such determination or change would be sufficiently material to be required to be disclosed in financial statements or other disclosure documents filed by Photowatt or ATS with a Securities Regulator.

(f) Accounting Changes Requested by ATS

     Notwithstanding the section entitled “Notice of Changes” above, unless prohibited by applicable Law, Photowatt shall make any changes in its accounting

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estimates or accounting policies or practices that are practicable in order for Photowatt’s accounting policies or practices to be consistent with those of ATS.

(g) Special Reports of Deficiencies or Violations

     Photowatt shall report in reasonable detail to ATS any of the following events or circumstances promptly after any executive officer of Photowatt or any member of the Board of Directors becomes aware of such matter:

(i)	any significant deficiency or material weakness in the design or operation of internal control over financial reporting that is reasonably likely to adversely affect Photowatt’s ability to record, process, summarize and report financial information;
(ii)	any fraud, whether or not material, that involves management or other employees who have a significant role in the internal control over financial reporting to Photowatt;
(iii)	any illegal act within the meaning of Section 10A(b) and (f) of the Exchange Act; and
(iv)	any report of a material violation of Law that an attorney representing any Photowatt Group member has formally made to any officers or directors of Photowatt pursuant to the SEC’s attorney conduct rules (17 C.F.R. Part 205).

3.3 Future Financial Reporting and Disclosure

     Subject to Sections 3.1 and 3.2, Photowatt agrees that for so long as ATS is required to account for its investment in Photowatt under the equity method of accounting (determined in accordance with Canadian GAAP and applicable Laws, and consistent with Canadian Securities Regulatory Authorities and SEC reporting requirements), Photowatt shall provide ATS, in a timely fashion and in any event in sufficient time to allow ATS to meet its financial and legal obligations (including, but not limited to, any obligations relating to disclosure control or internal control over financial reporting that ATS deems necessary), with financial and other information and data with respect to the members of the Photowatt Group and their respective business, properties, financial positions, results of operations and prospects, and otherwise comply with the requirements of Section 3.1(a) through (l) and Section 3.2(a) through (g) to the extent reasonably requested by ATS, having regard to ATS’ financial and legal obligations, the minimization of efforts by ATS that are duplicative with those of Photowatt’s and resulting additional expense to ATS in fulfilling those obligations, and any other considerations relevant in the circumstances.

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ARTICLE 4

GENERAL PROVISIONS

4.1 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 in the case of the consent of ATS, may be granted or withheld in ATS’ sole discretion, and in the case of the consent of Photowatt, shall not be unreasonably withheld or delayed unless the proposed assignee is a Person that is directly or indirectly engaged in any development, production, manufacture, marketing, distribution, promotion or sale of products competitive with the products of the Photowatt Group in any country in the world in which any member of the Photowatt Group conducts its business and the sale of such competitive products exceeds 20% of Photowatt’s consolidated revenues in its most recently completed financial year preceding the proposed date of assignment, transfer or alienation, as the case may be, in which case the consent of Photowatt may be granted or withheld in Photowatt’s sole discretion; provided, however, ATS may assign any or all of its rights or interest under this Agreement to any Affiliate of ATS without the consent of Photowatt. This Agreement shall be binding upon and inure to the benefit of the parties hereto and thereto, respectively, and their respective successors and permitted assigns, and any permitted assignee shall agree to perform the obligations of the assignor of this Agreement. In the event that the rights of ATS referred to under Section 2.9 are transferred, assigned or alienated to a non-ATS affiliate, such rights shall expire on the 90^th day following the date of such transfer, assignment or alienation. Any attempted transfer, assignment or alienation in violation of this Section 4.1 shall be invalid and ineffective ab initio.

4.2 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 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.

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4.3 Directors and Officers’ Indemnities and Insurance

     To the fullest extent permitted by law, Photowatt will indemnify all directors, officers, former directors and former officers of Photowatt, ATS (to the extent that ATS exercises the rights, powers, duties and liabilities of directors of Photowatt), and their heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with Photowatt, if such individual

(a)	acted honestly and in good faith with a view to the best interests of Photowatt; and
(b)	in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that the individual’s conduct was lawful.

     Photowatt will advance moneys to an individual referred to in this Section 4.3 for the costs, charges and expenses of a proceeding referred to in this Section 4.3. The individual will repay the moneys if the individual does not fulfil the conditions of this Section 4.3.

     The intention of this Section 4.3 is that all persons referred to in this Section 4.3 will have all benefits provided under the indemnification provisions of the Act to the fullest extent permitted by law, and Photowatt will forthwith pass all resolutions and take such other steps as may be required to give full effect to this Section 4.3.

     For a period of seven years from the date ATS ceases to have the right to nominate any member of the Board, this Agreement and the articles and by-laws of Photowatt (and its successors) will not be modified or amended to diminish any current or past nominee’s right to indemnification and exculpation as is currently provided. Furthermore, so long as ATS is entitled to nominate a member of the Board and thereafter so long as any past or present ATS nominee may be subject to any possible civil, criminal, administrative, investigative or other action or proceeding to which he or she would be made a party by reason of being a director of Photowatt, Photowatt will use commercially reasonable efforts to maintain in full force and effect, for directors and officers of Photowatt, one or more policies of directors and officers’ insurance issued by a reputable insurer or insurers having a policy limits and a retention equal to or better than the amounts of Photowatt’s policy now in force (to the extent commercially available and at rates not substantially in excess of current rates). Furthermore, Photowatt agrees that each ATS nominee will be covered under such insurance policy in a manner as to provide him or her with the same rights and benefits as are accorded Photowatt’s directors most favourably insured by the policy.

4.4 Term

     This Agreement will continue in force until the earlier of:

(a) the date on which this Agreement is terminated by the written agreement of the Parties; and

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     (b) such time as the Percentage of Outstanding Common Shares is less than 10%.

4.5 Termination Not to Affect Rights or Obligations

     Termination of this Agreement will not affect or prejudice any rights or obligations which have accrued or arisen under this Agreement prior to the time of termination and such rights and obligations, including any indemnities, will survive the termination of this Agreement. For greater certainty, no termination of this Agreement will affect the rights of any Person under Section 4.3.

4.6 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).

4.7 Further Assurances

     On and after the Effective Date, 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.

4.8 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

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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):

(a) if to ATS, to:

ATS Automation Tooling Systems Inc.
250 Royal Oak Road
Cambridge, Ontario N3H 4R6

Attention:     General Counsel
Fax No.:       (519) 650-6520

(b) 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.

4.9 Time of Essence

     Time is of the essence of this Agreement.

4.10 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.

4.11 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

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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.

4.12 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 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.

4.13 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.

4.14 Currency

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

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4.15 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.

4.16 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.

4.17 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.

4.18 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.

4.19 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 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.

4.20 Binding Effect

     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 4.3, 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.

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4.21 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.

4.22 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.

4.23 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 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.

[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]

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     IN WITNESS WHEREOF, the parties have executed this Agreement.

ATS AUTOMATION TOOLING SYSTEMS INC.

Per:

Name:

Title:

Per:

Name:

Title:

PHOTOWATT TECHNOLOGIES INC.

Per:

Name:

Title:

EX-4.2

Photowatt

EX-10.1

Exhibit 10.1

MASTER SEPARATION AGREEMENT

between

ATS AUTOMATION TOOLING SYSTEMS INC.

– and –

PHOTOWATT TECHNOLOGIES INC.

[     ], 2007

TABLE OF CONTENTS

			Page
ARTICLE 1		DEFINITIONS		1
	1.1	Defined Terms		1
	1.2	Construction		9
	1.3	Conflicts With Other Separation Agreements		10
ARTICLE 2		PHOTOWATT ASSETS AND LIABILITIES		10
	2.1	Transfer of Photowatt Assets		10
	2.2	Non-Transferred Assets		10
	2.3	No Representations or Warranties		11
	2.4	Assumption of Photowatt Liabilities		11
ARTICLE 3		THE OFFERING		11
	3.1	Proceeds of the Offering		11
ARTICLE 4		MATTERS RELATING TO A SPIN-OFF		11
	4.1	Spin-Off		11
	4.2	Actions Prior to a Spin-Off		12
	4.3	Stockholder-Related Matters Regarding a Spin-Off		13
ARTICLE 5		EMPLOYEE MATTERS AND NON-COMPETITION		14
	5.1	Employee Matters		14
	5.2	Non-Competition		15
ARTICLE 6		ACCESS TO AND DISCLOSURE OF INFORMATION		15
	6.1	Restrictions on Disclosure of Information		15
	6.2	Legally Required Disclosure of Information		17
	6.3	Access to Information		17
	6.4	Record Retention		18
	6.5	Production of Witnesses		18
	6.6	Reimbursement		18
	6.7	Other Agreements Regarding Access to Information		19
	6.8	Acquisition of Photowatt by Another Person		19
ARTICLE 7		ADDITIONAL COVENANTS		19
	7.1	Further Assurances		19

- i -

TABLE OF CONTENTS
(continued)

			Page
	7.2	Performance		20
	7.3	ATS Guarantees		20
	7.4	TPC Contribution Agreement		20
	7.5	Original Corporate Records		21
	7.6	License of ATS Solar Automation Know-How		21
	7.7	Legal and Regulatory Matters		23
ARTICLE 8		MUTUAL RELEASES; INDEMNIFICATION		24
	8.1	Release of Pre-Closing Claims		24
	8.2	Indemnification by Photowatt		25
	8.3	Indemnification by ATS		26
	8.4	Claim Procedure		26
	8.5	Survival; Limitations		28
	8.6	Production of Witnesses and Documents		30
ARTICLE 9		MISCELLANEOUS		31
	9.1	Assignment		31
	9.2	Entire Agreement		31
	9.3	No Agency		31
	9.4	Future Litigation and Other Proceedings		32
	9.5	Further Assurances		32
	9.6	Notices		32
	9.7	Time of Essence		33
	9.8	Governing Law		33
	9.9	Severability		33
	9.10	Force Majeure		33
	9.11	Publicity		34
	9.12	Specific Performance		34
	9.13	Currency		34
	9.14	Time Periods		34
	9.15	Amendment		34
	9.16	Counterparts		34

- ii -

TABLE OF CONTENTS
(continued)

		Page
9.17	Authority		34
9.18	Jurisdiction		34
9.19	Dispute Resolution		35
9.20	Binding Effect		38
9.21	Expenses		38
9.22	Waiver		38
9.23	Compliance With Laws		38

- iii -

MASTER SEPARATION AGREEMENT

     This Master Separation Agreement (this “Agreement”) is made and entered into as of [     ], 2007, by and between ATS Automation Tooling Systems Inc., a corporation governed by the laws of Ontario (“ATS”), and Photowatt Technologies Inc., a corporation governed by the laws of Canada (“Photowatt”). ATS and Photowatt are sometimes referred to herein separately as a “Party” and together as the “Parties.”

RECITALS

A. [ATS owns, directly or indirectly, 100% of the issued and outstanding common shares of Photowatt.]

B. 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 Securities Regulatory Authorities (as defined below).

C. 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).

D. Immediately following completion of the Offering, ATS will own, directly or indirectly approximately [     ]% of the outstanding Photowatt Common Shares (as defined below).

E.	ATS and Photowatt desire to maintain the ability of ATS (if so determined by the ATS board of directors) to distribute to holders of ATS Common Shares (as defined below) all or a portion of the outstanding Photowatt common shares then owned by ATS (a “Spin-Off”).
F.	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.

AGREEMENT

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties hereby agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings:

“ATS” is defined in the preamble to this Agreement.

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“ATS Assets” means any and all Assets of the ATS Group or Photowatt Group as of the Separation Time other than the Photowatt Assets.

“ATS Business” means the businesses or operations of the ATS Group excluding the Existing Photowatt Business.

“ATS Common Shares” means the common shares in the capital of ATS.

“ATS Disclosure Portions” means all material set forth in the Registration Statement, the Prospectus and the final Preliminary Prospectus to the extent relating exclusively to (i) the ATS Group, excluding Automation Tooling Systems Enterprises, Inc. and Matrix Solar Technologies, Inc. to the extent that the material relates to the Existing Photowatt Business or (ii) the ATS Business.

“ATS Group” means ATS and each Person that ATS directly or indirectly controls (within the meaning of the Ontario Securities Act), other than any member of the Photowatt Group.

“ATS Indemnified Persons” means each member of the ATS Group and its respective Representatives.

“ATS Liabilities” means the Liabilities of the ATS Group (but excludes all Photowatt Liabilities).

“ATS Products” means all products of the ATS Business.

“ATS Solar Automation Know-How” means all information, whether written or unwritten, existing as of execution of this Agreement, relating to the Field of Use, that is: (i) known to ATS; or (ii) intellectual property rights owned by ATS, but excluding any intellectual property rights owned by ATS solely to the extent covered by any patent or application therefor owned by ATS as at the Separation Time.

“Action” means any suit, arbitration, inquiry, proceeding or investigation by or before any court, Governmental Authority or any arbitration tribunal asserted by a Person.

“Affiliate” of any specified Person means any other Person directly or indirectly “controlling,” “controlled by” or “under common control with” (within the meaning of the Ontario Securities Act), such specified Person; provided, however, that for purposes of the Separation Agreements, except to the extent expressly provided otherwise, the determination of whether a Person is an Affiliate of another Person shall be made assuming that no member of the ATS Group is an Affiliate of any member of the Photowatt Group and vice versa.

“Agreement” is defined in the preamble to this Agreement.

“Amalco” is defined in Section 4.1(a).

“Annual Financial Statements” means (i) the consolidated annual financial statements of the Photowatt Group (and notes thereto), including in comparative form the consolidated figures (and notes thereto) for the previous fiscal year, all in reasonable detail and prepared in

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accordance with Regulation S-X, Canadian Securities Laws, Canadian GAAP and all other applicable Laws and in accordance with any similar or successor rule or Laws, and (ii) a discussion and analysis by management of the Photowatt Group’s financial condition and results of operations for such year, including an explanation of any material period-to-period change and any off-balance sheet transactions, all in reasonable detail and prepared in accordance with Item 303(a) of Regulation S-K and Canadian Securities Laws and in accordance with any similar or successor rule or laws.

“Assets” means assets, properties and rights (including goodwill and rights arising under Contracts), wherever located (including in the possession of vendors, other Persons or elsewhere), whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person.

“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.

“Business Guarantees” is defined in Section 7.3.

“Canadian GAAP” means those accounting principles which are recognized as being generally accepted in Canada from time to time as set out in the Handbook published by the Canadian Institute of Chartered Accountants, applied on a consistent basis.

“Canadian Securities Laws” means securities legislation established in each Province and Territory of Canada, and all regulations, rules, blanket orders and policies established thereunder or issued by Canadian Securities Regulatory Authorities.

“Canadian Securities Regulatory Authorities” is defined in Section 4.1(a).

“Claimed Amount” is defined in Section 8.4(a).

“Claim Notice” is defined in Section 8.4(a).

“Consents” means the consents of Persons referred to in the disclosure letter of even date delivered by ATS to Photowatt and initialed by the Parties.

“Contract” means any contract, agreement, lease, license, sales order, purchase order, instrument or other commitment that is binding on any Person or any part of its property under applicable Law.

“Controlling Party” is defined in Section 8.4(d)(ii).

“Designated Purposes” means the purpose or purposes for which any confidential Information or Personal Information may be used by any Group member pursuant to this Agreement or any other Separation Agreement and otherwise in accordance with any directions given by one Party to the other Party in performance of services under the Transitional Services Agreement.

“Dispute” is defined in Section 9.19.

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“Distribution Agent” is defined in Section 4.3(a).

“Environmental Conditions” means the presence in the environment, including the soil, subsurface strata, groundwater, surface water or ambient air, of any Hazardous Material at a level which exceeds any applicable standard or threshold under any Environmental Law or otherwise requires investigation or remediation (including investigation, study, health or risk assessment, monitoring, removal, treatment or transport) under any applicable Environmental Laws.

“Environmental Laws” means all Laws of any Governmental Authority with jurisdiction that relate to the protection of the environment (including ambient air, surface water, ground water, land surface or subsurface strata) including laws and regulations relating to a Hazardous Materials Release, or otherwise relating to the import, storage, distribution, labelling, sale, use, treatment, disposal, transport or handling of Hazardous Materials, or to the exposure of any individual to a Hazardous Materials Release.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“Excluded Assets” means the Assets referred to in Exhibit A.

“Existing Photowatt Business” means the solar and related businesses and operations conducted by ATS prior to the Separation Time through its subsidiaries Photowatt International S.A.S., Automation Tooling Systems Enterprises, Inc., Matrix Solar Technologies, Inc., Photowatt Technologies USA Inc. and Spheral Solar Power, Inc., as well as the Spheral Solar Division of ATS, and including such businesses and operations of the Photowatt Group as described in the Prospectus.

“Field of Use” means the automation of one or more steps in the manufacturing of solar products, including the design and manufacture of equipment used to automatically convey, grip, locate, orient, connect, manipulate, alter, form, inspect, test or sense materials or products as part of a manufacturing process and all processes embodied in such equipment or relating to the manufacturing of solar products or the automation thereof.

“Financial Statements” means the Annual Financial Statements and Quarterly Financial Statements collectively.

“Governmental Authority” means any federal, provincial, state, local or foreign government, supranational, governmental, regulatory or administrative authority, instrumentality, agency or commission, political subdivision, self-regulatory organization or any court, tribunal or judicial or arbitral body or other governmental authority.

“Group” means either the ATS Group or the Photowatt Group, as the context requires.

“Hazardous Materials” means chemicals, pollutants, contaminants, hazardous substances, dangerous substance, noxious substance, toxic substance, radioactive and biological materials, petroleum and petroleum products or any fraction thereof, hazardous waste, flammable or explosive material, radio-active material, urea formaldehyde foam insulation, asbestos, polychlorinated biphenyls, polychlorinated biphenal waste, polychlorinated biphenal related

- 4 -

waste or any other substance or material now or hereafter declared, defined or deemed to be regulated or controlled in or pursuant to Environmental Laws.

“Hazardous Materials Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including the movement of Hazardous Materials through ambient air, soil, surface water, groundwater, wetlands, land or subsurface strata.

“Included Liabilities” means the Liabilities referred to in Exhibit B.

“Indemnified Party” is defined in Section 8.4(a).

“Indemnified Person” means, as applicable, a Photowatt Indemnified Person or an ATS Indemnified Person.

“Indemnifying Party” is defined in Section 8.4(a).

“Information” means information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, that may be stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memoranda and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data.

“Law” means any law (statutory, common or otherwise), constitution, ordinance, code, rule, regulation, guideline, executive order or other similar authority enacted, adopted, promulgated or applied by any Governmental Authority, each as amended.

“Lease Agreement” means the Lease Agreement in the form set out in Exhibit D.

“Liability” means any liability, obligation, cost or expense, whether known or unknown, asserted or unasserted, fixed, absolute or contingent, matured or unmatured, conditional or unconditional, latent or patent, accrued or unaccrued, liquidated or unliquidated or due or to become due, wherever or however arising (including whether arising out of any Law, Contract or tort based on negligence or strict liability), including but not limited to, any tax liability.

“Losses” means all damages, losses, Liabilities, payments, amounts paid in settlement, obligations, fines, penalties, costs of burdens associated with performing injunctive relief and other costs (including reasonable fees and expenses of outside attorneys, accountants and other professional advisors, and of expert witnesses and other costs (excluding the allocable portion of the relevant Person’s internal costs) of investigation, preparation and litigation in connection with any action, appeal, petition, plea, charge, complaint, claim, suit, demand, litigation, arbitration, mediation, hearing, inquiry, investigation or similar matter or proceeding) of any kind or nature whatsoever, whether known or unknown, contingent or vested, or matured or unmatured.

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“Master Supply Agreement” means the Master Supply Agreement in the form set out in Exhibit E.

“Non-Controlling Party” is defined in Section 8.4(d)(ii).

“Non-Transferred Asset” is defined in Section 2.2(a).

“Offering” is defined in the recitals to this Agreement.

“Ontario Securities Act” means the Securities Act (Ontario).

“Owning Party” is defined in Section 6.2.

“Person” means any individual, partnership, limited partnership, limited or unlimited liability company, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, unincorporated syndicate, unincorporated organization, trust, trustee, executor, administrator or other legal personal representative or Governmental Authority however designated or constituted.

“Personal Information” means any information about an identifiable individual that is provided to or obtained by any Group member on behalf of the other Party or any of its respective Group members.

“Photowatt” is defined in the preamble to this Agreement.

“Photowatt Assets” means any and all Assets that are used exclusively or held for use exclusively in the Existing Photowatt Business excluding the Excluded Assets.

“Photowatt Business” means the businesses and operations conducted by the Photowatt Group at the relevant time.

“Photowatt Common Shares” means the common shares in the capital of Photowatt, and include (i) any shares of Photowatt 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, and (ii) any securities of Photowatt convertible into, exchangeable for or otherwise exercisable to acquire such shares.

“Photowatt Facilities” means the facilities located at each of 25 Reuter Drive, Cambridge, Ontario, N3E 1A9; 33, rue Saint-Honore, Z.1 Champfleuri 38300 Bourgoin-Jallieu, France; 540 Silver Creek Road N.W., Suite A, Albuquerque, New Mexico; and such other facilities, offices and locations from which the business or operations of the Photowatt Business are conducted.

“Photowatt Group” means Photowatt and each Person that Photowatt directly or indirectly controls (within the meaning of the Ontario Securities Act).

“Photowatt Indemnified Persons” means each member of the Photowatt Group and its respective Representatives.

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“Photowatt Liabilities” means the following:

(i) any and all Liabilities to the extent arising out of or relating to the Existing Photowatt Business, the Photowatt Business or the Photowatt Assets, in each case whether such Liabilities arise or accrue prior to, on or after the Separation Time including:

(A)	any and all Liabilities of any member of the Photowatt Group owed to the ATS Group pursuant to valid intercompany accounts as of the Separation Time and/or reflected in the financial statements contained in the Prospectus or in any Annual Financial Statements or Quarterly Financial Statements prepared after the Separation Time;
(B)	any and all Liabilities arising from or related to Environmental Conditions (x) existing on, under, about or in the vicinity of any of the Photowatt Facilities whether prior to or after the Separation Time, or (y) arising out of operations occurring at any time prior to or after the Separation Time of the Existing Photowatt Business, the Photowatt Business or the Photowatt Assets, or at any of the Photowatt Facilities;
(C)	any and all employment-related Liabilities related to past or present employees of the Existing Photowatt Business and the Photowatt Business;
(D)	any and all Liabilities relating to, arising out of or resulting from any act or failure to act by any Representative of any member of the ATS Group, including Photowatt (whether or not such act or failure to act is or was within such Person’s authority); and
(E)	any and all tax Liabilities relating to, arising out of or resulting from the Existing Photowatt Business and the Photowatt Business;

(ii)	any and all Liabilities to the extent arising out of or relating to the operation of any business conducted by any member of the Photowatt Group at any time after the Separation Time;
(iii)	any and all Liabilities that are expressly listed, scheduled or otherwise clearly described in any other Separation Agreement as Liabilities for which Photowatt or any member of the Photowatt Group is to be responsible, including but not limited to, any Liabilities set out in Exhibit B as “Included Liabilities”;
(iv)	any and all Business Guarantees that are not replaced with Substitute Guarantees, or with respect to which ATS or any member of the ATS Group has any liability or obligation after the Closing Date; and
(v)	any and all obligations of the Photowatt Group under or pursuant to this Agreement, any Separation Agreement or any other instrument entered into in connection herewith or therewith.

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“Photowatt Transfer Agent” means the transfer agent and registrar for the Photowatt Common Shares.

“Possessor” is defined in Section 6.3.

“Preliminary Prospectus” means any preliminary prospectus filed with the SEC and deemed to be part of the Registration Statement and filed with Canadian Securities Regulatory Authorities pursuant to Canadian Securities Laws.

“Prospectus” means the final prospectus filed with the SEC and deemed to be part of the Registration Statement and filed with Canadian Securities Regulatory Authorities pursuant to Canadian Securities Laws.

“Quarterly Financial Statements” means (i) the consolidated quarterly financial statements of the Photowatt Group (and notes thereto), including in comparative form the consolidated figures (and notes thereto) for the corresponding quarter and periods of the previous fiscal year, all in reasonable detail and prepared in accordance with Article 10 of Regulation S-X, Canadian Securities Laws, Canadian GAAP and all other applicable Laws and in accordance with any similar or successor rule or laws, and (ii) a discussion and analysis by management of the Photowatt Group’s financial condition and results of operations for such fiscal period, including an explanation of any material period-to-period change and any off-balance sheet transactions, all in reasonable detail and prepared in accordance with Item 303(b) of Regulation S-K and Canadian Securities Laws and in accordance with any similar or successor rule or laws.

“Record Date” means the close of business on the date to be determined by ATS board of directors as the record date for determining the shareholders of ATS entitled to receive Photowatt Common Shares pursuant to a Spin-Off.

“Registration Rights Agreement” means the Registration Rights Agreement in the form set out in Exhibit F.

“Registration Statement” means the registration statement on Form F-1 (SEC File No. 333-137044) as filed by Photowatt with the SEC in connection with the Offering, together with all amendments and supplements thereto.

“Regulation S-K” means Regulation S-K of the General Rules and Regulations promulgated by the SEC pursuant to the U.S. Securities Act.

“Regulation S-X” means Regulation S-X of the General Rules and Regulations promulgated by the SEC pursuant to the U.S. Securities Act.

“Representatives” means, with respect to any Person, any of such Person’s directors, officers, employees, consultants, advisers and agents.

“Requestor” is defined in Section 6.3.

“Retention Period” is defined in Section 6.4.

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“SEC” means the United States Securities and Exchange Commission or any successor agency.

“Separation Agreements” means this Agreement, the Transfer Agreements, the Lease Agreement, the Registration Rights Agreement, the Shareholder Agreement, the Master Supply Agreement and the Transitional Services Agreement.

“Separation Time” means the time concurrent with the time of closing of the Offering and following the delivery by ATS to Photowatt of a certificate of two officers of Photowatt that all conditions precedent to completion of the Offering, other than the completion of the transactions contemplated by the Separation Agreements to be completed on or prior to the Separation Time, have been satisfied or waived.

“Shareholder Agreement” means the Shareholder Agreement in the form set out in Exhibit G.

“Substitute Guarantees” is defined in Section 7.3.

“Spin-Off” is defined in the recitals to this Agreement.

“Spin-Off Date” means the date, if any, on which a Spin-Off in respect of all Photowatt Common Shares then held by ATS occurs or ATS is otherwise no longer required to consolidate, or account on an equity basis for, the results of operations and financial position of Photowatt or any other member of the Photowatt Group (determined in accordance with GAAP and consistent with SEC reporting requirements and Canadian Securities Laws).

“Tax Benefit” means any deduction, amortization, exclusion from income or other allowance that actually reduces in cash the amount of tax Photowatt or its respective Affiliates (as applicable) would have been required to pay (or actually increases in cash the amount of tax refund to which Photowatt or its respective Affiliates (as applicable) would have been entitled) in the absence of the item giving rise to the indemnity claim.

“Third Party Claim” is defined in Section 8.4(d)(i).

“TPC Contribution Agreement” means TPC Agreement No. 731-477798 dated March 28, 2002, as amended by an amendment agreement dated September 17, 2004, each between Her Majesty The Queen In Right Of Canada, as represented by the Minister of Industry, and ATS.

“Transfer Agreements” means the Transfer Agreements in the form set out in Exhibit H.

“Transitional Services Agreement” means the Transitional Services Agreement in the form set out in Exhibit I.

“U.S. Securities Act” means the U.S. Securities Act of 1933, as amended.

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

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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 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 any other Separation Agreement, this Agreement shall control.

ARTICLE 2
PHOTOWATT ASSETS AND LIABILITIES

2.1 Transfer of Photowatt Assets. In order to effect the transfer of the Photowatt Assets by the ATS Group to the Photowatt Group on the terms contemplated by the Separation Agreements, which transfers are to occur prior to or concurrent with completion of the Offering as contemplated by the Separation Agreements, each Party will enter into the Separation Agreements other than this Agreement at the Separation Time.

2.2 Non-Transferred Assets.

(a)

If any Party discovers after the Separation Time that a member of the ATS Group has title to, or an interest in, a Photowatt Asset or a member of the Photowatt Group has title to, or an interest in, an ATS Asset (in either case, a “Non-Transferred Asset”), each Party shall (and shall cause the applicable member(s) of its Group to) cooperate and use commercially reasonable efforts to promptly transfer such title or interest to the appropriate Party (or another member of its Group designated by it), including obtaining any necessary consents or approvals or taking any other actions necessary to effect such transfers.

(b)

If an attempted assignment of a Non-Transferred Asset would be ineffective or would impair the rights of the Party entitled to such asset with respect to such Non-Transferred Asset so that such Party (or its applicable Group Member) would not receive all such rights, then the Parties shall use commercially reasonable efforts to provide to, or cause to be provided to, such Party (or its applicable Group Member), to the extent permitted by Law, rights related to such Non-Transferred Asset and take such other actions as may reasonably be requested by such Party in order to place it, insofar as reasonably possible, in the

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same position as if such Non-Transferred Asset had been transferred as contemplated hereby. In connection therewith, (i) the Party with title to or an interest in such asset (or its applicable Group Member) shall promptly pass along to the Party entitled to such asset (or its applicable Group Member) when received all benefits derived with respect to any such Non-Transferred Asset, and (ii) the Party entitled to such asset (or its applicable Group Member) shall pay, perform and discharge on behalf of the other Party (or its applicable Group Member) all of the obligations with respect to any such Non-Transferred Asset in a timely manner and in accordance with the terms thereof. If and when such transfer may be effected without impairing the rights of the Party entitled to such asset, the Parties shall take appropriate steps to effect transfer of such Non-Transferred Asset.

2.3 No Representations or Warranties. Photowatt (on behalf of itself and each member of the Photowatt Group) acknowledges and agrees that, except as expressly set forth in the Separation Agreements, (a) no member of the ATS Group is making any representations or warranties, express or implied, as to the condition, quality, merchantability or fitness of any Photowatt Asset, whether a Non-Transferred Asset or otherwise, (b) any Non-Transferred Asset shall be transferred on an “as is,” “where is” basis, and (c) the applicable member of the Photowatt Group shall bear the economic and legal risks that any conveyance shall prove to be insufficient to vest in such Person good and marketable title to any Non-Transferred Asset.

2.4 Assumption of Photowatt Liabilities. In furtherance of the transfer of the Photowatt Assets by the ATS Group to the Photowatt Group as contemplated in Section 2.1, the Photowatt Group hereby fully and unconditionally assumes and, to the extent they become due and payable, covenants to pay or otherwise perform or discharge when done, the Photowatt Liabilities, to the complete exoneration of the ATS Group, which assumptions are to occur prior to or concurrent with completion of the Offering as contemplated by the Separation Agreements.

ARTICLE 3
THE OFFERING

3.1 Proceeds of the Offering. The Offering shall consist of a primary offering of Photowatt Common Shares, with a secondary offering of Photowatt Common Shares by ATS to the extent that the over-allotment option to be granted by ATS to the underwriters of the Offering is exercised. The net proceeds of the Offering to Photowatt shall be used as described in the Prospectus in the section entitled “Use of Proceeds.”

ARTICLE 4
MATTERS RELATING TO A SPIN-OFF

4.1 Spin-Off.

(a) ATS has the right, but not the obligation, following the consummation of the Offering, to effect one or more Spin-Offs. ATS shall (in its sole and absolute discretion) determine whether to effect a Spin-Off and, if so, the date of its consummation and all of its terms, including (a) the form, structure and terms of

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any transactions(s) and/or offerings(s) to effect the Spin-Off; (b) the timing of and conditions to the consummation of the Spin-Off; (c) the selection of any investment banker(s) and manager(s); and (d) the selection of any financial printer, solicitation and/or exchange agent and financial, legal, accounting and other advisors. In addition, ATS may, at any time and from time to time until the completion of a Spin-Off, modify or change the terms of such a Spin-Off, including by accelerating or delaying the timing of the consummation of all or part of such a Spin-Off. At the request of ATS, Photowatt shall cooperate with ATS in all respects to accomplish a Spin-Off and shall, at the direction of ATS, promptly take any and all actions necessary or desirable to effect a Spin-Off, including, to the extent necessary: (i) all actions required to be undertaken by Photowatt in connection with an amalgamation of Photowatt with either an Affiliate of ATS or a corporation whose shareholders and shareholdings are the same as the shareholders and shareholdings of ATS (in either case, an “Amalco”), that does not result in an adverse “material change” (as defined under Canadian Securities Laws) to the Photowatt Group, including preparing and delivering a notice of a meeting of holders of Photowatt Shares and soliciting votes in favour of any such amalgamation, which may be specified by ATS, on terms to be specified by ATS (acting reasonably); and (ii) the registration under the U.S. Securities Act and the Exchange Act of the Photowatt Common Shares distributed by ATS on an appropriate registration form or forms, the filing of all required documents with the securities regulatory authorities in each of the Provinces and Territories of Canada (the “Canadian Securities Regulatory Authorities”) and the SEC, including a prospectus prepared in accordance with Canadian Securities Laws and the U.S. Securities Act and an application for relief from the Canadian Securities Regulatory Authorities and the SEC in respect of prospectus or registration requirements otherwise applicable, in any case to ensure that the Photowatt Common Shares are not subject to resale restrictions under Canadian Securities Laws (except those restrictions which may be applicable to control block holders) and the U.S. Securities Act. Nothing in this Agreement shall prohibit Photowatt from engaging (at its own expense) its own financial, legal, accounting and other advisors in connection with a Spin-Off.

(b) ATS will not effect a Spin-Off involving an amalgamation of Photowatt with an Amalco unless ATS has obtained an advance tax ruling from the Canada Revenue Agency reasonably acceptable to the board of directors of ATS, to the effect that any dividend received by the Amalco will not be deemed under 55(2) of the Income Tax Act (Canada) not to be a dividend received by the Amalco.

4.2 Actions Prior to a Spin-Off. In connection with a Spin-Off, the Parties shall take one or more of the applicable actions set forth in this Section 4.2.

(a) ATS and Photowatt shall prepare and mail, prior to the effective date of the Spin-Off, to the holders of ATS Common Shares, such information concerning Photowatt and the Spin-Off and such other matters as ATS reasonably determines and as may be required by Law. The Parties shall prepare, and Photowatt shall, to the extent required by applicable Law, file with the SEC and Canadian Securities

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Regulatory Authorities any such documentation that ATS determines is necessary or desirable to effect the Spin-Off, and each Party shall use commercially reasonable efforts to obtain all necessary approvals from the SEC and Canadian Securities Regulatory Authorities with respect thereto as soon as practicable.

(b)	Photowatt shall use commercially reasonable efforts to take all such action as may be necessary or desirable under applicable state securities and blue sky Laws of the United States (and any comparable Laws under any foreign jurisdiction) in connection with the Spin-Off.
(c)	Photowatt shall prepare, file and use commercially reasonable efforts to seek to make effective, an application for listing of the Photowatt Common Shares to be distributed in the Spin-Off on The Nasdaq Global Market and the Toronto Stock Exchange, subject in each case to official notice of issuance.
(d)	Photowatt shall use commercially reasonable efforts to take all such other actions (or refrain from any actions) reasonably requested by ATS in connection with the Spin-Off.

4.3 Stockholder-Related Matters Regarding a Spin-Off. With respect to a Spin-Off and subject to Section 4.3(d):

(a)

Distribution. For the purpose of this Section 4.3, the contemplated distribution of Photowatt Common Shares owned by ATS to record holders of ATS Common Shares entitled to receive Photowatt Common Shares in connection with the Spin-Off may take place directly or indirectly, by way of a single step or a series of one or more intermediate steps, including one or more distributions of shares of one or more Affiliates of ATS.

(b)

Distribution Agent. On or prior to the effective date of the Spin-Off, ATS shall deliver to a distribution agent to be appointed by ATS (the “Distribution Agent”) for the benefit of holders of record of ATS Common Shares on the Record Date, documentation reasonably required by the Photowatt Transfer Agent, representing all of the outstanding Photowatt Common Shares then owned by ATS to be distributed pursuant to the Spin-Off and ATS shall instruct the Distribution Agent to deliver to the Photowatt Transfer Agent true, correct and complete copies of the share and transfer records reflecting the record holders of ATS Common Shares entitled to receive Photowatt Common Shares in connection with the Spin-Off. ATS shall cause its transfer agent to instruct the Distribution Agent to distribute on the effective date of the Spin-Off or as soon as reasonably practicable thereafter, directly or indirectly, by way of a single step or a series of one or more intermediate steps, the appropriate number of Photowatt Common Shares to each such record holder or designated transferee(s) of such record holder. ATS shall (and shall instruct the Distribution Agent to) cooperate with Photowatt and the Photowatt Transfer Agent, and Photowatt shall (and shall instruct the Photowatt Transfer Agent to) cooperate with ATS and the Distribution Agent, in connection with all aspects of the Spin-Off and all other matters relating to the issuance and

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	delivery or certificates representing, or other evidence of ownership of, the Photowatt Common Shares to be distributed to the holders of ATS Common Shares in connection with the Spin-Off.
(c)	Number of Spin-Off Shares. Each record holder of ATS Common Shares on the Record Date (or such record holder’s designated transferee(s)) shall be entitled to receive in the Spin-Off, directly or indirectly, by way of a single step or a series of one or more intermediate steps, a number of Photowatt Common Shares equal to the number of ATS Common Shares held by such record holder on the Record Date, multiplied by a fraction, (i) the numerator of which is the number of Photowatt Common Shares to be distributed by ATS pursuant to Section 4.3(a) and (ii) the denominator of which is the number of ATS Common Shares outstanding on the Record Date. If the Spin-Off consists of more than one class of Photowatt Common Shares, each record holder of ATS Common Shares shall receive Photowatt Common Shares of each class, calculated as provided above, except that the calculation shall be performed separately for each such class.
(d)	Rights of Holders of Spin-Off Shares. After the Spin-Off, until such Photowatt Common Shares are duly registered in the names of the record holders of ATS Common Shares entitled to receive Photowatt Common Shares in connection with the Spin-Off, in accordance with applicable Law, Photowatt shall regard the Persons entitled to receive such Photowatt Common Shares as record holders of Photowatt Common Shares in accordance with the terms of the Spin-Off without requiring any action on the part of such Persons. Photowatt agrees that, subject to any transfers of such Photowatt Common Shares, (i) each such record holder shall be entitled to receive all dividends payable on, and exercise voting rights and all other rights and privileges with respect to, the Photowatt Common Shares then held by such record holder, and (ii) each such record holder shall be entitled, without any action on the part of such record holder, to receive one or more certificates representing, or other evidence of ownership of, the Photowatt Common Shares then held by such record holder.
(e)	Other Transactions. If ATS determines (in its sole discretion) to effect the separation or other disposition of the Photowatt Common Shares held by it through a transaction other than a Spin-Off (whether by means of a plan of arrangement, split off, a share exchange or otherwise), Photowatt shall use commercially reasonable efforts to take all actions (or refrain from any actions) reasonably requested by ATS in connection therewith.

ARTICLE 5
EMPLOYEE MATTERS AND NON-COMPETITION

5.1 Employee Matters

(a) Without the prior written consent of ATS, Photowatt shall not (and shall cause its Affiliates not to) for a period of five years from the date hereof, directly or indirectly, either for itself or another Person, (i) hire, employ, retain or Contract

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for service, or offer to hire, employ, retain or Contract for service, as a director, officer, employee, partner, consultant, independent contractor or otherwise, any individual employed by ATS or any of its Affiliates including any such individual seconded by any member of the ATS Group to any member of the Photowatt Group, or (ii) solicit for employment, solicit for hire, Contract for the services of, or encourage any individual to terminate his or her employment with ATS or any of its Affiliates, other than in publications of a general nature and not specifically directed at any employee or employees of ATS or any of its Affiliates, unless in either case, (A) ATS (and/or its applicable Affiliate) has terminated the employment of such individual or (B) at least two years have elapsed since such individual has voluntarily terminated his or her employment with ATS (and/or its applicable Affiliate).

(b)

Without the prior written consent of Photowatt, ATS shall not (and shall cause its Affiliates not to) for a period of five years from the date hereof, directly or indirectly, either for itself or another Person, (i) hire, employ, retain or Contract for service, or offer to hire, employ, retain or Contract for service, as a director, officer, employee, partner, consultant, independent contractor or otherwise, any individual employed by Photowatt or any of its Affiliates including any such individual seconded by any member of the Photowatt Group to any member of the ATS Group, or (ii) solicit for employment, solicit for hire, Contract for the services of, or encourage any individual to terminate his or her employment with Photowatt or any of its Affiliates, other than in publications of a general nature and not specifically directed at any employee or employees of Photowatt or any of its Affiliates, unless in either case, (A) Photowatt (and/or its applicable Affiliate) has terminated the employment of such individual or (B) at least two years have elapsed since such individual has voluntarily terminated his or her employment with Photowatt (and/or its applicable Affiliate).

5.2 Non-Competition. For a period of three years from the date hereof, Photowatt shall not, and shall cause the members of the Photowatt Group not to, directly or indirectly, engage in any development, production, manufacture, marketing, distribution, promotion or sale of products competitive with ATS Products in any country in the world in which ATS conducts its business.

ARTICLE 6
ACCESS TO AND DISCLOSURE OF INFORMATION

6.1 Restrictions on Disclosure of Information.

(a) Generally. Without limiting any rights or obligations under any other existing or future agreement between the Parties and/or any other members of their respective Group relating to confidentiality, each Party shall, and each Party shall cause its respective Group members and its Representatives to, hold in strict confidence, with at least the same degree of care that applies to ATS confidential and proprietary Information pursuant to policies in effect as of the Separation Time, and use only for the Designated Purposes, all confidential and proprietary

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	Information concerning the other Group that is either in its possession as of the Separation Time or furnished by the other Group or its respective Representatives at any time pursuant to this Agreement, any other Separation Agreement or the transactions contemplated hereby or thereby (including Information relating to employee benefit or compensation plans, proprietary software and computer programs, and business records). Notwithstanding the foregoing, each Party, its respective Group members and each of their respective Representatives may disclose such Information to the extent that such Person can demonstrate that such Information is or was (i) in the public domain other than by the breach of this Agreement or by breach of any other agreement between or among the Parties and/or any of their respective Group members relating to confidentiality, or (ii) lawfully acquired from a third Person on a non-confidential basis or independently developed by, or on behalf of, such Person by Persons who do not have use of any such Information. Each Party shall maintain, and shall cause its respective Group members and Representatives to maintain, policies and procedures, and develop such further policies and procedures as shall from time to time become necessary or appropriate, to ensure compliance with this Section 6.1.
(b)	Non-Disclosure of Third Person Information by Photowatt. Photowatt acknowledges that it and other members of the Photowatt Group may have in its or their possession confidential or proprietary Information of third Persons that was received under a confidentiality or non-disclosure agreement between a member of the ATS Group and such third Person prior to the Separation Time. Photowatt shall (and shall cause its respective Group members and Representatives to) hold in strict confidence and restrict the use of the confidential and proprietary Information of third Persons to which any member of the Photowatt Group has access, in accordance with the terms of any agreements entered into prior to the Separation Time between members of the ATS Group (whether acting through, on behalf of, or in connection with, the Photowatt Business or otherwise) and such third Persons.
(c)	Non-Disclosure of Third Person Information by ATS. ATS acknowledges that it and other members of the ATS Group may have in its or their possession confidential or proprietary Information of third Persons that was received under a confidentiality or non-disclosure agreement between a member of the Photowatt Group and such third Person prior to the Separation Time. ATS shall (and shall cause its respective Group members and Representatives to) hold in strict confidence and restrict the use of the confidential and proprietary Information of third Persons to which any member of the ATS Group has access, in accordance with the terms of any agreements entered into prior to the Separation Time between members of the Photowatt Group and such third Persons.
(d)	Disclosure of Confidential Information with a Group. Once confidential Information has been disclosed to a Group, the members of such Group may disclose it to their individual employees who are engaged directly in the Designated Purposes. Such Group members may also disclose such confidential Information to its Representatives. Such Group members shall advise each

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recipient of the confidential nature of such confidential Information, and shall instruct each such recipient to comply with the confidentiality obligations contained herein; and the Party responsible for such Group member shall be responsible for the failure of any such recipient to do so. Upon a Party’s request, the Party receiving confidential Information shall require its recipients of such Information to sign an agreement of confidentiality and nondisclosure satisfactory to the requesting Party. The obligations of the receiving Party with respect to such recipient apply regardless of whether such recipient is an employee of such Party.

6.2 Legally Required Disclosure of Information. If either Party or any of its respective Group members or Representatives becomes legally required to disclose any Information (the “Disclosing Party”) that it is otherwise obligated to hold in strict confidence pursuant to Section 6.1, such Party shall promptly notify the Person that owns or has a duty not to disclose the Information (the “Owning Party”) and shall use all commercially reasonable efforts to cooperate with the Owning Party so that the Owning Party may seek a protective order or other appropriate remedy and/or waive compliance with this Section 6.2. All expenses reasonably incurred by the Disclosing Party in seeking a protective order or other remedy shall be borne by the Owning Party. If such protective order or other remedy is not obtained, or if the Owning Party waives compliance with this Section 6.2, the Disclosing Party shall (a) disclose only that portion of the Information that its legal counsel advises it is compelled to disclose or otherwise stand liable for contempt or suffer other similar significant corporate censure or penalty, (b) use all commercially reasonable efforts to obtain reliable assurance requested by the Owning Party that confidential treatment shall be accorded such Information, and (c) promptly provide the Owning Party with a copy of the Information so disclosed, in the same form and format so disclosed, together with a list of all Persons to whom such Information was disclosed.

6.3 Access to Information. During the Retention Period, each Party shall (and shall cause its respective Group members and Representatives to) cooperate with and afford to the other Party reasonable access upon reasonable advance written request to all Information (other than Information that is (a) protected from disclosure by the attorney-client privilege or work product doctrine, (b) business sensitive from the perspective of any aspect of the Photowatt Business that is competitive in a material respect with one or more aspects of the ATS Business, (c) the subject of a confidentiality agreement between such Party and a third Person that prohibits disclosure to the other Party, or (d) prohibited from disclosure under applicable Law) owned by such Party or one of its Group members or within such Party’s or any of its respective Group member’s or Representative’s possession that is created prior to the Spin-Off Date and that relates to the business, assets or liabilities of the requesting Party (the “Requestor”), and such access is reasonably required by the Requestor (i) to comply with requirements imposed on the Requestor by any Governmental Authority, (ii) for use in any proceeding (except for a litigation matter between the Parties or any of their respective Group members), (iii) to satisfy audit, accounting, Tax or similar requirements, (iv) to obtain insurance, or (v) to comply with the Requestor’s obligations under this Agreement or any other Separation Agreement. As used in this Agreement, “access” shall mean the obligation of a Party in possession of Information (the “Possessor”) requested by the Requestor to exert its commercially reasonable efforts to locate all requested Information that is owned and/or possessed by Possessor or any of its respective Group members or Representatives. The Possessor, at its own expense, shall conduct a diligent search designed to identify all requested Information and shall collect all such Information for

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inspection by the Requestor during normal business hours at the Possessor’s place of business. Subject to such confidentiality and/or security obligations as the Possessor may reasonably deem necessary, the Requestor may have all requested Information duplicated at Requestor’s expense. Alternatively, the Possessor may choose to deliver, at the Requestor’s expense, all requested Information to the Requestor in the form requested by the Requestor. The Possessor shall notify the Requestor in writing at the time of delivery if such Information is to be returned to the Possessor. In such case, the Requestor shall return such Information when no longer needed to the Possessor at the Possessor’s expense. In connection with providing Information pursuant to this Section 6.3, each Party shall, upon the request of the other Party and upon reasonable advance notice, make available during normal business hours its respective employees (and those employees of its respective Group members and Representatives, as applicable) to the extent that they are reasonably necessary to discuss and explain all requested Information with and to the Requestor.

6.4 Record Retention. Photowatt shall (and shall cause each of its other Group members to) adopt and comply with a prudent record retention policy with respect to Information owned by or in the possession of the Photowatt Group and created prior to the Spin-Off Date that is no less stringent than the ATS record retention policy in effect as of the Separation Time or as ATS may modify such policy between the Separation Time and the Spin-Off Date, provided that ATS notifies Photowatt of any such modifications. In any event, such record retention policy will require Photowatt to retain Information owned by or in the possession of the Photowatt Group and created prior to the Spin-Off Date for a period of not less than seven years. Each Party shall, at its sole cost and expense, preserve and retain all Information in its respective possession or control that the other Party has the right to access pursuant to Section 6.3 or that it is required to preserve and retain in accordance with such record retention policy or for any longer period as may be required by (a) any Governmental Authority, (b) any litigation matter, (c) applicable Law, or (d) any Separation Agreement (as applicable, the “Retention Period”). If either Party wishes to dispose of any Information that it is obligated to retain under this Section 6.4 prior to the expiration of the Retention Period, then that Party shall first provide 45 days’ written notice to the other Party, and the other Party shall have the right, at its option but at the expense of the Party that desires to dispose of such Information, upon prior written notice within such 45-day period, to take possession of such Information within 90 days after the date of the notice provided pursuant to this Section 6.4. Written notice of intent to dispose of such Information shall include a description of the Information in detail sufficient to allow the other Party to reasonably assess its potential need to retain such materials.

6.5 Production of Witnesses. For seven years after the Separation Time, each Party shall (and shall cause each of its respective Group members to) use commercially reasonable efforts to make available to each other, upon written request, its past and present Representatives as witnesses to the extent that any such Representatives may reasonably be required (giving consideration to the business demands upon such Representatives) in connection with any legal, administrative or other proceedings in which the requesting Party may from time to time be involved.

6.6 Reimbursement. Unless otherwise provided in this Article 6, each Party providing access to Information or witnesses to the other Party pursuant to Sections 6.3, 6.4 or 6.5 shall be entitled to receive from the receiving Party, upon the presentation of invoices

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therefor, payment for all reasonable, out-of-pocket costs and expenses (excluding allocated compensation, salary and overhead expenses) as may be reasonably incurred in providing such Information or witnesses.

6.7 Other Agreements Regarding Access to Information. The rights and obligations of the Parties under this Article 6 are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of Information set forth in this Agreement or any other Separation Agreement.

6.8 Acquisition of Photowatt by Another Person. If Photowatt enters into an agreement with a third Person to directly or indirectly sell all or any portion of the Photowatt Business (other than in the ordinary course of business consistent with past practice), together with the Information related thereto, whether pursuant to a share or asset sale, merger or otherwise, ATS shall have the right to duplicate any Information held by Photowatt that relates to (a) the Photowatt Business as conducted through the Spin-Off Date (or the date of the disposition to such third Person if a Spin-Off has not occurred), (b) the transactions contemplated by this Agreement and the other Separation Agreements, and (c) the Financial Statements and any Information relating thereto included in financial statements of ATS. Photowatt shall, in connection with any such disposition (x) provide ATS not less than 20 days’ written notice prior to the consummation of such disposition, and (y) not disclose any Information of ATS or relating to the ATS Business to such third Person without the express written consent of ATS (which may be withheld in its absolute and sole discretion). In addition, ATS shall have the right, in its sole discretion, to require Photowatt to destroy or return to ATS all or any portion of such Information of or relating to the ATS Business prior to such disposition. If ATS enters into an agreement with a third Person to sell all or any portion of the ATS Business, ATS shall not in connection with any such disposition disclose any Information of Photowatt or relating to the Photowatt Business to such third Person without the express written consent of Photowatt (which may be withheld in its absolute and sole discretion).

ARTICLE 7
ADDITIONAL COVENANTS

7.1 Further Assurances. The Parties shall (or shall cause their appropriate Group members or Representatives, as appropriate, to) execute and deliver such other agreements, instruments and documents as may be necessary or desirable in order to effect the transactions contemplated by this Agreement and the other Separation Agreements. At the request of Photowatt, ATS shall (and shall cause applicable members of the ATS Group to) execute and deliver to Photowatt and/or applicable members of the Photowatt Group such other instruments of transfer, conveyance, assignment, substitution and confirmation and take such other actions as Photowatt may reasonably deem necessary or desirable in order (a) to transfer, convey and assign to Photowatt and the other members of the Photowatt Group, as applicable, the Photowatt Assets, (b) to put Photowatt and the other members of the Photowatt Group, as applicable, in actual possession and operating control thereof, and (c) to permit Photowatt and the other members of the Photowatt Group, as applicable, to exercise all rights with respect thereto. At the request of ATS, Photowatt shall (and shall cause applicable members of the Photowatt Group to) execute and deliver to ATS and/or applicable members of the ATS Group all instruments, assumptions, novations, undertakings, substitutions or other documents and take such other

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action as ATS may reasonably deem necessary or desirable in order to ensure that Photowatt and the other members of the Photowatt Group fully and unconditionally assume and discharge the Photowatt Liabilities as contemplated under this Agreement, the other Separation Agreements or any document in connection herewith or therewith, and relieve the ATS Group of any Liability with respect thereto and evidence the same to third Persons. Except as otherwise expressly provided in this Agreement or any other Separation Agreement, no member of the ATS Group shall be obligated to incur any out-of-pocket costs, expenses and fees in connection with its obligations under this Section 7.1, including any attorneys’ fees, recording, assignment or other similar fees.

7.2 Performance. ATS shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Separation Agreement to be performed by any member of the ATS Group. Photowatt shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Separation Agreement to be performed by any member of the Photowatt Group. Each Party further agrees that it shall cause its other Group members not to take any action or fail to take any action inconsistent with such Party’s obligations under this Agreement, any other Separation Agreement or the transactions contemplated hereby or thereby.

7.3 ATS Guarantees. Photowatt acknowledges that members of the ATS Group have entered into various arrangements in which one or more members of the ATS Group issued or made available guarantees, sureties, bonds, letters of credit or similar instruments or are the primary obligors on other agreements, in any such case to support or facilitate the Existing Photowatt Business or the Photowatt Business (the “Business Guarantees”). It is understood that none of such Business Guarantees shall continue after the Separation Time. On or as promptly as practicable following the date hereof, but in no event later than the Separation Time, Photowatt shall obtain replacements for such Business Guarantees or will either terminate the business transactions or programs of the member of the Photowatt Group supported or facilitated by such Business Guarantees or arrange for itself or one of its Affiliates to be substituted as the primary obligor thereto (collectively, the “Substitute Guarantees”).

7.4 TPC Contribution Agreement.

(a)

Assumption. Photowatt covenants and agrees to observe, perform and fulfill each and every Liability, covenant, term and condition of ATS in, to and under the TPC Contribution Agreement from and including the date of assignment of the TPC Contribution Agreement to Photowatt, to the same extent as if Photowatt had been originally named as a party to the TPC Contribution Agreement together with ATS, collectively as “the Proponent” as such term is used in the TPC Contribution Agreement.

(b)

No Amendment, Termination or Waiver. During such period of time as ATS remains a party to and bound by the TPC Contribution Agreement, Photowatt covenants and agrees: (i) not to amend or assign the TPC Contribution Agreement, or to seek the consent of any other party to the TPC Contribution Agreement to the waiver of any provisions thereof, without ATS’ prior written

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consent and (ii) not to terminate or breach the TPC Contribution Agreement or, for greater clarity, effect a material change in the total scope or nature of any element of the “Project” as such term is used in the TPC Contribution Agreement, without prior consultation with ATS, such consultation to be conducted in good faith and for a reasonable duration.

(c)

Further Assurances. For greater clarity, if ATS determines (in its sole discretion) to seek any further consent or consents with respect to the assignment of the TPC Contribution Agreement, the assignment of Assets subject to the TPC Contribution Agreement, or the release of ATS from any or all Liabilities, covenants, terms or conditions under TPC Contribution Agreement, Photowatt covenants and agrees to take all actions (or refrain from any actions) reasonably requested by ATS in connection therewith.

7.5 Original Corporate Records.

(a)	If any member of the ATS Group has possession of original corporate records of the Photowatt Group, ATS will cause such member to promptly deliver such original corporate records to the Photowatt Group upon request.
(b)	If any member of the Photowatt Group has possession of original corporate records of the ATS Group, Photowatt will cause such member to promptly deliver such original corporate records to the ATS Group upon request.

7.6 License of ATS Automation Solar Know-How.

(a)	License. Subject to the terms and conditions of this Agreement, including Section 5.2, ATS hereby grants to Photowatt an irrevocable, personal, non-exclusive, worldwide, royalty-free, perpetual right and license to use the ATS Solar Automation Know-How now in Photowatt’s possession, solely for Photowatt’s internal use in conducting Photowatt’s business including the right to make, have made, and use, but excluding the right to market and sell manufacturing equipment embodying such ATS Solar Automation Know-How.
(b)	Sub-Licensing. The license granted in Section 7.6(a) is personal and non-transferable and may not be sub-licensed without the express written consent of ATS, except to a wholly-owned Subsidiary of Photowatt and then only so long as it remains a wholly-owned Subsidiary of Photowatt.
(c)	Restrictions. For greater certainty, nothing in the license granted in Section 7.6(a):

(i) entitles Photowatt to use the ATS Solar Automation Know-How for the benefit of a competitor of ATS other than may be incidental to the manufacturing of equipment for Photowatt;

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(ii)	grants Photowatt any rights in respect of any patent or application therefor, trade-mark or copyright owned by the ATS Group or any intellectual property rights owned by any third party;
(iii)	grants Photowatt any rights in respect of know-how arising after the date of execution of this agreement;
(iv)	prevents any member of the ATS Group from continuing to manufacture equipment or offering services in respect of the Field of Use for the solar industry or using the ATS Solar Automation Know-How in any way; nor
(v)	prevents either Party from using know-how, technology or information generally known within the applicable industry.

(d)	Acknowledgment. Photowatt acknowledges that the purpose of this Agreement is to facilitate Photowatt in continuing to conduct its business by providing for the continued use of ATS Solar Automation Know-How now in its possession. Photowatt also acknowledges that, as of the execution of this Agreement, it is in possession of all ATS Solar Automation Know-How licensed hereunder and that ATS has no affirmative obligation hereunder to actively disclose, transmit or deliver to Photowatt in any manner any ATS Solar Automation Know-How.
(e)	No Ongoing Assistance. ATS shall have no ongoing obligation to provide further information or assistance to Photowatt, to provide technical advice, to send personnel to Photowatt’s facilities or to train Photowatt’s personnel, except as ATS and Photowatt may specifically agree.
(f)	No Rights to Improvements. ATS shall have no obligation to provide Photowatt with updates or improvements to the ATS Solar Automation Know-How or to know-how developed after the date of execution of this Agreement and neither Party shall have any obligation to disclose to the other improvements to the ATS Solar Automation Know-How developed or acquired by that Party.
(g)	No Warranties. ATS does not warrant the quality, utility, merchantability, or any other characteristic of the ATS Solar Automation Know-How or of any product made, used or sold under the license granted in Section 7.6(a). ATS shall not be liable or responsible in any way (including incidental or consequential damages) for any use which Photowatt or any customer of Photowatt makes of any product manufactured, used or sold which incorporates the ATS Solar Automation Know-How licensed under this Agreement. Nothing herein shall be construed as a representation or warranty by ATS (i) as to the results to be attained by the utilization of the rights granted under this agreement; or (ii) that there is any warranty other than as expressly described herein.
(h)	Confidentiality. The Parties acknowledge that the ATS Solar Automation Know-How, whether written or unwritten, is considered secret, confidential and proprietary to ATS and as such, shall be deemed to be confidential whether or not such information, in written form or not, is so identified by ATS as being

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confidential. Specific ATS Solar Automation Know-How disclosed by ATS to Photowatt shall not be deemed to be in the public domain merely because it is addressed in a general manner as part of information in the public domain, provided that the specific information is not public. Photowatt shall not disclose, for a period of ten years from the date first written above, any and all such confidential ATS Solar Automation Know-How, provided, however, that such obligations of secrecy shall not include information that:

(i)	is at the time of disclosure generally available to the public, or
(ii)	becomes after disclosure generally available to the public through no fault of the Photowatt, or
(iii)	is received by Photowatt from third parties and such third party is not prohibited from disclosing the information to Photowatt.

	During such period, Photowatt shall ensure that no such part of the ATS Solar Automation Know-How that is confidential shall be disclosed except to responsible Representatives who require such information during the course of their duties, and then only in accordance with Section 7.6(j).
(i)	Further Covenants. Photowatt shall not use, disclose or allow access to the ATS Solar Automation Know-How for any purpose other than the purposes permitted by the license granted to it in Section 7.6(a) and in any event in any way that is, directly or indirectly, detrimental to ATS or its Affiliates. Photowatt shall keep the ATS Solar Automation Know-How strictly confidential and treat the ATS Solar Automation Know-How as proprietary to ATS. Photowatt shall not divulge to, or cause or permit to be divulged to, any third party other than Representatives, in any manner whatsoever, the ATS Solar Automation Know-How.
(j)	Disclosure to Representatives. Photowatt may disclose ATS Solar Automation Know-How to only those of its Representatives as is necessary for the purposes permitted by the license granted to it in Section 7.6(a). Photowatt shall inform such Representatives of the confidential nature of the ATS Solar Automation Know-How and cause such Representatives to agree to treat such ATS Solar Automation Know-How confidentially in accordance with this Agreement and not to use, disclose or allow access to such ATS Solar Automation Know-How except as permitted herein. Photowatt shall be responsible for any breach of this Agreement by any of its Representatives. Photowatt shall take all reasonable measures, including court proceedings, at Photowatt’s sole expense, to restrain its Representatives from making unauthorized use or disclosure of the ATS Solar Automation Know-How.

7.7 Legal and Regulatory Matters. Until ATS and its Affiliates cease to hold in aggregate less than 50% of the outstanding Photowatt Common Shares, Photowatt shall not adopt policies or directives relating to legal or regulatory compliance that are inconsistent in any material respect with the policies and directives identified by ATS as critical to legal and

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regulatory compliance; provided, however, that nothing contained herein shall prevent adoption of policies or directives that, in the opinion of counsel to Photowatt, are necessary or desirable to comply with then applicable Law.

ARTICLE 8
MUTUAL RELEASES; INDEMNIFICATION

8.1 Release of Pre-Closing Claims.

(a)	Photowatt Release. Except as provided in Section 8.1(d) to this Agreement, effective as of the Separation Time, Photowatt does hereby, for itself and as agent for each member of the Photowatt Group, remise, release and forever discharge the ATS Indemnified Persons from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Separation Time, including in connection with the transactions and all other activities to implement any of the Offering or the transactions contemplated by this Agreement or any of the Separation Agreements.
(b)	ATS Release. Except as provided in Section 8.1(d), effective as of the Separation Time, ATS does hereby, for itself and as agent for each member of the ATS Group, remise, release and forever discharge the Photowatt Indemnified Persons from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Separation Time, including in connection with the transactions and all other activities to implement any of the Offering or the transactions contemplated in this Agreement or any of the Separation Agreements.
(c)	Release and Waiver of Unknown Claims. Photowatt, for itself and as agent for each member of the Photowatt Group, and ATS, for itself and as agent for each member of the ATS Group, do hereby agree, represent, and warrant that the matters released herein are not limited to matters which are known or disclosed. Photowatt, for itself and as agent for each member of the Photowatt Group, and ATS, for itself and as agent for each member of the ATS Group, may hereafter discover facts in addition to or different from those which it now knows or believes to be true with respect to the subject matter of this release, but each shall be deemed to have, finally, and forever settled and released any and all claims, known or unknown, suspected or unsuspected, contingent or non-contingent, whether or not concealed or hidden, which now exist, or heretofore have existed upon any theory of law or equity now existing or coming into existence in the future, including but not limited to, conduct which is negligent, intentional, with or without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or existence of such different or additional facts.

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(d)	No Impairment. Nothing contained in Section 8.1(a), Section 8.1(b) or Section 8.1(c) shall impair any right of any Person to enforce this Agreement or any other Separation Agreement or other agreement in force and effect between Photowatt and ATS as of the Separation Time, in each case in accordance with its terms, including the provisions of Section 8.2, Section 8.3 and Section 8.4.
(e)	No Actions as to Released Claims. Photowatt agrees, for itself and as agent for each member of the Photowatt Group, not to make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against ATS or any member of the ATS Group, or any other Person released pursuant to Section 8.1(a), with respect to any Liabilities released pursuant to Section 8.1(a). ATS agrees, for itself and as agent for each member of the ATS Group, not to make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Photowatt or any member of the Photowatt Group, or any other Person released pursuant to Section 8.1(b), with respect to any Liabilities released pursuant to Section 8.1(b).
(f)	Further Instruments. At any time, at the request of the other Party, each Party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions hereof and such other documents as are necessary to effect the purposes hereof.

8.2 Indemnification by Photowatt. Subject to Section 8.5, Photowatt shall indemnify and hold harmless each ATS Indemnified Person from and against any and all Losses relating to, arising out of or in connection with the following, whether such Losses arise or accrue prior to, on or following the Separation Time:

(a)	The failure of Photowatt or any other member of the Photowatt Group or any other Person to pay, perform or otherwise properly discharge any of the Photowatt Liabilities in accordance with their respective terms;
(b)	The Existing Photowatt Business, the Photowatt Business or any Photowatt Liability (including any Photowatt Liability guaranteed by a member of the ATS Group);
(c)	Any breach by Photowatt or any member of the Photowatt Group of this Agreement or any Separation Agreement;
(d)	With respect to all information contained in the Registration Statement, the Prospectus, the Preliminary Prospectus or any other materials (excluding in the case of such other materials any other materials distributed solely by or on behalf of ATS) distributed in connection with the Offering or the transactions contemplated in the Separation Agreements, any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements

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	therein not misleading, other than with respect to the ATS Disclosure Portions; and
(e)	Any Liability, covenant, term and condition of ATS in, to and under the TPC Contribution Agreement.

8.3 Indemnification by ATS. Subject to Section 8.5, ATS shall indemnify and hold harmless each Photowatt Indemnified Person from and against any and all Losses incurred by such Photowatt Indemnified Person arising out of or in connection with the following, whether such Losses arise or accrue prior to, on or following the Separation Time:

(a)	The failure of ATS or any other member of the ATS Group or any other Person to pay, perform or otherwise properly discharge any of the ATS Liabilities in accordance with their respective terms;
(b)	The ATS Business or any ATS Liability, excluding any ATS Liability with respect to the TPC Contribution Agreement;
(c)	Any breach by ATS or any member of the ATS Group of this Agreement or any Separation Agreement; and
(d)	With respect to all information contained in the ATS Disclosure Portions, any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

8.4 Claim Procedure.

(a)

Claim Notice. A Party that seeks indemnity under this Article 8 or under any other Separation Agreement (an “Indemnified Party”) shall give written notice (a “Claim Notice”) to the Party from whom indemnification is sought (an “Indemnifying Party”) in respect of Losses arising from any matter other than Third Party Claims. The Claim Notice must contain (i) a description and, if known, estimated amount (the “Claimed Amount”) of any Losses incurred or reasonably expected to be incurred by the Indemnified Party, (ii) a reasonable explanation of the basis for the Claim Notice to the extent of facts then known by the Indemnified Party, and (iii) a demand for payment of those Losses. No failure or delay or deficiency on the part of the Indemnified Party to so notify the Indemnifying Party shall relieve the Indemnifying Party of any Liability or obligation hereunder except to the extent of any Losses caused by or arising out of such failure, delay or deficiency.

(b)

Response to Notice of Claim. Within 30 days after delivery of a Claim Notice, the Indemnifying Party shall deliver to the Indemnified Party a written response in which the Indemnifying Party shall either: (i) agree that the Indemnified Party is entitled to receive all of the Claimed Amount and, in which case, the Indemnifying Party shall pay the Claimed Amount using a payment method

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	reasonably acceptable to the Indemnified Party; or (ii) dispute that the Indemnified Party is entitled to receive all or any portion of the Claimed Amount, in which case, the Parties shall resort to the dispute resolution procedures set forth in Section 9.19.
(c)	Contested Claims. If the Indemnifying Party disputes that the Indemnified Party is entitled to receive all or any portion of the Claimed Amount, as soon as practicable but in no event later than 10 Business Days after the receipt of the notice referenced in Section 8.4(b), the Parties shall begin the process to resolve the matter in accordance with the dispute resolution provisions of Section 9.19 hereof. Upon ultimate resolution thereof, the Parties shall take such actions as are reasonably necessary to comply with such resolution.
(d)	Third Party Claims.

(i)

If the Indemnified Party receives notice or otherwise learns of the assertion by a Person who is not a member of either Group of any claim or the commencement of any Action (in each case, a “Third Party Claim”) with respect to which the Indemnifying Party may be obligated to provide indemnification under this Article 8, the Indemnified Party shall give written notification to the Indemnifying Party of the Third Party Claim. Such notification shall be given within five Business Days after receipt by the Indemnified Party of notice of such Third Party Claim, shall be accompanied by reasonable supporting documentation submitted by such third party (to the extent then in the possession of the Indemnified Party) and shall describe in reasonable detail (to the extent known by the Indemnified Party) the facts constituting the basis for such Third Party Claim and the amount of the claimed Losses; provided, however, that no delay or deficiency on the part of the Indemnified Party in so notifying the Indemnifying Party shall relieve the Indemnifying Party of any Liability or obligation hereunder except to the extent of any Losses caused by or arising out of such failure. Within 20 days after delivery of such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such Third Party Claim with counsel reasonably satisfactory to the Indemnified Party. During any period in which the Indemnifying Party has not so assumed control of such defense, the Indemnified Party shall control such defense.

(ii)

The Party not controlling such defense (the “Non-Controlling Party”) may participate therein at its own expense; provided, however, that if the Indemnifying Party assumes control of such defense and the Indemnified Party concludes, upon the written opinion of counsel, that the Indemnifying Party and the Indemnified Party have conflicting interests or different defenses available with respect to such Third Party Claim, the reasonable fees and expenses of separate counsel to the Indemnified Party shall be considered “Losses” for purposes of this Agreement;

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provided, further, that the Indemnifying Party shall not be responsible for the fees or expenses of more than one legal firm in any single jurisdiction for all of the Indemnified Parties; provided, however, that in the event that such legal firm is conflicted amongst the Indemnified Parties, then the Indemnifying Party shall be responsible for the fees or expenses of up to two legal firms in any single jurisdiction for all of the Indemnified Parties. The Party controlling such defense (the “Controlling Party”) shall keep the Non-Controlling Party reasonably advised of the status of such Third Party Claim and the defense thereof and shall consider in good faith recommendations made by the Non-Controlling Party with respect thereto. The Non-Controlling Party shall furnish the Controlling Party with such Information as it may have with respect to such Third Party Claim (including copies of any summons, complaint or other pleading that may have been served on such Party and any written claim, demand, invoice, billing or other document evidencing or asserting the same) and shall otherwise cooperate with and assist the Controlling Party in the defense of such Third Party Claim.

(iii)

The Indemnifying Party shall not agree to any settlement of, or the entry of any judgment arising from, any such Third Party Claim without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed; provided, however, that the consent of the Indemnified Party shall not be required if (A) the Indemnifying Party agrees in writing to pay any amounts payable pursuant to such settlement or judgment, (B) such settlement or judgment includes a full, complete and unconditional release of the Indemnified Party from further Liability and (C) such settlement does not create any financial or other obligation on the part of the Indemnified Party. The Indemnified Party shall not agree to any settlement of, or the entry of any judgment arising from, any such Third Party Claim without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed.

8.5 Survival; Limitations.

(a) Except to the extent expressly set forth in this Agreement or any other Separation Agreement, all covenants and agreements of the Parties contained in the Separation Agreements shall survive each of the Offering and a Spin-Off. The limitation period applicable to any proceeding in respect of such covenants and agreements shall be as prescribed by applicable Law. To the extent the limitation period applicable to any proceeding in respect of such covenants and agreements is governed by the Laws of the Province of Ontario, the limitation period shall be solely as prescribed in sections 15-17 of the Limitations Act, 2002 and any other limitation period in respect of such proceeding (including that provided for in section 4 of the Limitations Act, 2002) is extended accordingly. The rights and obligations of ATS, Photowatt and each of their respective Indemnified Persons

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	under this Agreement shall survive the direct or indirect sale, assignment or other transfer by any Party of any Assets or Liabilities.
(b)	The amount of any Losses for which indemnification is provided under this Agreement shall be net of any Tax Benefit and any amounts actually recovered by the Indemnified Party from any third Person (including amounts actually recovered under insurance policies) with respect to such Losses. Any Indemnifying Party hereunder shall be subrogated to the rights of the Indemnified Party upon payment in full of the amount of the relevant indemnifiable Losses. An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provision hereof, have any subrogation rights with respect thereto. If any Indemnified Party recovers an amount from a third Person in respect of Losses for which indemnification is provided in this Agreement after the full amount of such indemnifiable Losses has been paid by an Indemnifying Party or after an Indemnifying Party has made a partial payment of such indemnifiable Losses and the amount received from the third Person exceeds the remaining unpaid balance of such indemnifiable Losses, then the Indemnified Party shall promptly remit to the Indemnifying Party the excess, if any, of (X) the sum of the amount theretofore paid by such Indemnifying Party in respect of such indemnifiable Losses plus the amount received from the third Person in respect thereof, over (Y) the full amount of such indemnifiable Losses.
(c)	Notwithstanding anything to the contrary in this Article 8, the initial presumption shall be that there is no insurance coverage for any such Losses, and the Indemnifying Party shall, upon request by the Indemnified Party, fully indemnify and hold harmless the Indemnified Party from and against any and all such Losses. Once the Indemnifying Party has discharged this obligation to the Indemnified Party, the Indemnifying Party may request that the Indemnified Party pursue insurance coverage from one or more insurers in connection with such Losses. If so requested, the Indemnified Party shall pursue insurance coverage, including, if necessary, the filing of coverage litigation, all of which shall be at the Indemnifying Party’s sole cost and expense. The Indemnifying Party shall pay directly or promptly reimburse the Indemnified Party for all such costs and expenses, as directed by the Indemnified Party. The Indemnified Party shall retain full and exclusive control of all such matters (including the settlement of underlying covered claims and/or coverage claims against insurers), and the Indemnified Party shall have the right to select counsel with the concurrence of Indemnifying Party, which concurrence shall not be withheld unreasonably. The net proceeds of any insurance recovery (after deducting any costs and expenses that have not yet been paid or reimbursed by the Indemnifying Party) shall be paid to the Indemnifying Party. At all times, the Indemnifying Party shall cooperate with the Indemnified Party’s insurers and/or with the Indemnified Party in the pursuit of insurance coverage, as and when reasonably requested to do so by the Indemnified Party. It is not the intent of this Section 8.5(c) to absolve the Indemnifying Party of any responsibility to the Indemnified Party for those Losses in connection with which the Indemnified Party actually secures insurance

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	coverage, but to allocate the costs of pursuing such coverage to the Indemnifying Party and to provide the Indemnified Party with a full, interim indemnity from the Indemnifying Party until such time as the extent of insurance coverage is determined and is obtained. Notwithstanding anything to the contrary in this Section 8.5(c), if the Indemnified Party (in its absolute and sole discretion) determines that it is necessary to do so, the Indemnified Party may pursue insurance coverage for the benefit of the Indemnified Party before the Indemnifying Party has fully discharged its obligations to the Indemnified Party under this Agreement. In such event, the Indemnified Party may unilaterally take any steps it determines are necessary to preserve such insurance coverage, including tendering the defense of any claim or suit to an insurer or insurers of the Indemnified Party if the Indemnified Party concludes that such action may be required by the relevant insurance policy or policies. Any such actions by the Indemnified Party shall not relieve the Indemnifying Party of any of its obligations to the Indemnified Party under this Agreement, including the Indemnifying Party’s obligation to pay directly or reimburse the Indemnified Party for costs and expenses.
(d)	Any indemnification payment made under this Agreement shall be characterized for Tax purposes as a contribution or distribution or payment of an assumed or retained liability, as applicable.
(e)	ATS’ and Photowatt’s indemnity obligations under Sections 8.2 and 8.3 shall be reduced to reflect any Tax Benefit realized, in the year in which the indemnity payment is required to be made or in any prior year, by the Indemnified Party or any of its Affiliates. To the extent that the claim with respect to which an indemnity obligation arises has not given rise to a Tax Benefit in prior year or in the year in which the indemnity payment is to be made, but gives rise to a Tax Benefit in a later year, the Indemnified Party shall pay to the Indemnifying Party the amount of such Tax Benefit. For purposes of determining the amount of any payment due to an Indemnified Party pursuant to this Section 8.5(e), ATS and Photowatt and their respective Affiliates shall be deemed to use all other deductions, amortizations, exclusions from income or other allowances (to the extent that such deductions, amortizations, exclusions from income or other allowances are entitled to be used under applicable tax law) prior to the use of any Tax Benefits in respect of which the Indemnifying Party is obligated to pay the Indemnified Party hereunder.
(f)	Notwithstanding anything in this Agreement or any other Separation Agreement to the contrary, in no event shall any Party or any of its Group members be liable to the other Party or any other Person under this Agreement or any other Separation Agreement for, and each Party (on behalf of itself, its Affiliates and other Indemnified Persons) hereby releases the other Party from all claims for, special, collateral, indirect, consequential, incidental or punitive damages (including lost profits or savings), however caused and on any theory of liability (including negligence), even if advised of their possible existence; provided, however, that the foregoing limitations

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shall not limit either Party’s indemnification obligations as set forth in Article 8 hereof in respect of any Third Party Claim.

8.6 Production of Witnesses and Documents. If an Indemnifying Party chooses to defend or to seek to compromise or settle any Third-Party Claim, the other Party shall use its commercially reasonable efforts to make available to such Indemnifying Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be, and shall otherwise cooperate in such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be.

ARTICLE 9
MISCELLANEOUS

9.1 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 in the case of the consent of ATS, may be granted or withheld in ATS’ sole discretion, and in the case of the consent of Photowatt, shall not be unreasonably withheld or delayed; provided, however, that notwithstanding the foregoing, ATS may assign any or all of its rights or interest under this Agreement to any Affiliate of ATS without the consent of Photowatt. This Agreement shall be binding upon and inure to the benefit of the parties hereto and thereto, respectively, 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 9.1 shall be invalid and ineffective ab initio.

9.2 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 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.

9.3 No Agency. Nothing in this Agreement or any other Separation Agreement shall constitute or be deemed to constitute a partnership or joint venture between the Parties or, except

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to the extent provided in Section 4.02 of the Transitional Services Agreement, 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.

9.4 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 Separation Time 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).

9.5 Further Assurances. On and after the Separation Time, 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 and the Separation Agreements, in order to effectuate the provisions and purposes of this Agreement and the Separation Agreements and the other transactions contemplated hereby and thereby.

9.6 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):

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(a) if to ATS, to:

ATS Automation Tooling Systems Inc.
250 Royal Oak Road
Cambridge, Ontario N3H 4R6

Attention: General Counsel
Fax No.: (519) 650-6520

(b) 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.

9.7 Time of Essence. Time is of the essence of this Agreement and the other Separation Agreements.

9.8 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.

9.9 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.

9.10 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,

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insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, strikes or other labour disturbances or unavailability of parts, or, in the case of computer 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.

9.11 Publicity. Prior to the Separation Time, each of the Parties shall consult with each other prior to issuing any press releases or otherwise making public statements with respect to the Offering or any of the other transactions contemplated hereby and prior to making any filings with any Governmental Authority with respect thereto.

9.12 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 or any other Separation 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 or such Separation 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.

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

9.14 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.

9.15 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.

9.16 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.

9.17 Authority. Each Party represents to the other Party that (a) it has the corporate power and authority to execute, deliver and perform this Agreement and the other Separation Agreements, (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 the other Separation Agreements and (d) this Agreement and each of the Separation Agreements is legal, valid and binding obligation, enforceable against it in

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accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equitable principles.

9.18 Jurisdiction. If any Dispute arises out of or in connection with this Agreement or any other Separation Agreement, except as expressly contemplated by another provision of this Agreement or any Separation 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 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.

9.19 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 or any other Separation Agreement, including this Section 9.19) (in each such case, a “Dispute”) arising out of or related to this Agreement or any other Separation 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, or the expiry of the time for delivery of response to the Claim Notice under Section 8.4(b) hereof, whichever occurs first, 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 9.19(b).

(b)

Mediation. If the Dispute is to be submitted to mediation in accordance with Section 9.19(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).

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(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 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 9.19(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;

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ii.	concise statement of points (factual, legal, practical) that such Party believes enhances its chance of achieving a favourable outcome of the Dispute; and
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 9.19.
(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 9.19, 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:

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(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 any other Separation Agreement, or the breach or termination thereof, until such Party has fully complied with Sections 9.19(a) and (b) with respect to such Dispute.

9.20 Binding Effect. This Agreement and each other Separation 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 8, ATS Indemnified Persons and Photowatt Indemnified Persons) 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.

9.21 Expenses. Except as otherwise provided in this Agreement or a Separation Agreement, each Party shall be responsible for its own fees, costs and expenses incurred in connection with the matters contemplated by this Agreement and the Separation Agreement; provided, however Photowatt shall be responsible for the payment of all costs, fees and expenses relating to the Offering and each Party shall be responsible for the payment of all of its costs, fees and expenses relating to a Spin-Off (or any other divestiture transaction employed by ATS).

9.22 Waiver. A provision of this Agreement or any other Separation 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 or any other Separation 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.

9.23 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 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

- 38 -

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.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, the Parties have caused this Master Separation Agreement to be signed by their duly authorized representatives.

AUTOMATION TOOLING SYSTEMS INC.
By:
	Name:
	Title:

By:
	Name:
	Title:

PHOTOWATT TECHNOLOGIES INC.
By:
	Name:
	Title:

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EXHIBIT A

Excluded Assets

1.	the premises and building that are the subject of the Lease Agreement.
2.	the investment of ATS in securities of Canadian Solar Inc.
3.	the ATS Solar Automation Know-How.
4.	any tax loss carryforwards, Canadian tax credits or related valuation allowances.
5.	any and all Assets of Matrix Solar Technologies, Inc. not sold, transferred, assigned or conveyed to Photowatt Technologies USA Inc. pursuant to an asset transfer agreement as between Matrix Solar Technologies, Inc. and Photowatt Technologies USA Inc. effected prior to the Separation Time.

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EXHIBIT B

Included Liabilities

1.	tax liabilities of Matrix Solar Technologies, Inc. in relation to transfer of common shares in the capital stock of Spheral Solar Power, Inc.
2.	product warranty obligations related to the Existing Photowatt Business or the Photowatt Business, including warranties related to solar cells and solar modules.

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EX-10.3

Exhibit 10.3

TRANSITIONAL SERVICES AGREEMENT

between

ATS AUTOMATION TOOLING SYSTEMS INC.

– and –

PHOTOWATT TECHNOLOGIES INC.

[     ], 2007

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS AND INTERPRETATION
Section 1.01	Definitions		1
Section 1.02	Construction		3
Section 1.03	Conflicts With Other Separation Agreements		3
ARTICLE II SERVICES
Section 2.01	Services		3
ARTICLE III SERVICE COSTS; OTHER CHARGES
Section 3.01	Service Costs Generally		4
Section 3.02	Fixed-Price Billing		4
Section 3.03	Fixed-Rate Billing		4
Section 3.04	Pass-Through Billing		4
Section 3.05	Benefit Billing		5
Section 3.06	Invoicing and Settlement of Costs		5
ARTICLE IV STANDARD OF PERFORMANCE AND INDEMNIFICATION
Section 4.01	General Standard of Service		6
Section 4.02	Delegation		6
Section 4.03	Limitation of Liability		7
Section 4.04	Indemnification		7
Section 4.05	Claim Procedure		8
ARTICLE V TERM AND TERMINATION
Section 5.01	Term		8
Section 5.02	Termination		8
Section 5.03	Effect of Termination		9
Section 5.04	Turnover		9
ARTICLE VI INSURANCE MATTERS
Section 6.01	Photowatt Insurance Coverage During Insurance Transition Period		10

-i-

TABLE OF CONTENTS
(continued)

		Page
Section 6.02	Cooperation; Payment of Insurance Proceeds to Photowatt; Agreement Not to Release Carriers		10
Section 6.03	Photowatt Insurance Coverage After the Insurance Transition Period		11
Section 6.04	Deductibles and Self-Insured Obligations		11
Section 6.05	Procedures with Respect to Insured Photowatt Liabilities		11
Section 6.06	Insufficient Limits of Liability for ATS Liabilities and Photowatt Liabilities		11
Section 6.07	Cooperation		12
Section 6.08	No Assignment or Waiver		12
Section 6.09	No Liability		12
Section 6.10	Additional or Alternate Insurance		12
Section 6.11	Forbearance and Prior Insurance Coverage		12
Section 6.12	Further Agreements		13
ARTICLE VII MISCELLANEOUS
Section 7.01	Assignment		13
Section 7.02	No Agency		13
Section 7.03	Subcontractors		13
Section 7.04	Entire Agreement		13
Section 7.05	Future Litigation and Other Proceedings		14
Section 7.06	Further Assurances		14
Section 7.07	Notices		14
Section 7.08	Time of Essence		15
Section 7.09	Governing Law		15
Section 7.10	Severability		15
Section 7.11	Force Majeure		15
Section 7.12	Specific Performance		16
Section 7.13	Currency		16
Section 7.14	Time Periods		16
Section 7.15	Amendment		16
Section 7.16	Counterparts		16

-ii-

TABLE OF CONTENTS
(continued)

		Page
Section 7.17	Authority		16
Section 7.18	Jurisdiction		17
Section 7.19	Dispute Resolution		17
Section 7.20	Binding Effect		20
Section 7.21	Expenses		20
Section 7.22	Waiver		20
Section 7.23	Audits		20
Section 7.24	Compliance With Laws		20

-iii-

TRANSITIONAL SERVICES AGREEMENT

     This Transitional Services Agreement is dated as of [     ], 2007 by and between ATS AUTOMATION TOOLING SYSTEMS INC. (“ATS”) and PHOTOWATT TECHNOLOGIES INC. (“Photowatt”).

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).
C.	Pursuant to Separation Agreements, the ATS Group has transferred to the Photowatt Group the Photowatt Assets on the terms contemplated by the Separation Agreements.
D.	Beginning on the Effective Date, Photowatt will carry on the Photowatt Business.
E.	Following completion of the Offering, ATS has agreed to provide the Services to Photowatt on and subject to the terms and conditions of this Agreement.
F.	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.

          For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby covenant and agree as follows:

ARTICLE I
DEFINITIONS AND INTERPRETATION

     Section 1.01 Definitions.

     (a) Any capitalized term used in this Agreement but not defined in this Agreement shall have the definition given such term in the Master Separation Agreement.

     (b) In this Agreement:

     “Agreement” means this Transitional Services Agreement, together with the Schedules attached hereto.

     “Applicable Insurance” has the meaning set out in Section 6.11(a).

     “ATS Insurance Policies” has the meaning set out in Section 6.01(a).

     “ATS Plans” has the meaning set out in Section 3.05.

     “Benefit Services” means Services relating to the administration of employee plans and benefit arrangements.

     “Effective Date” means •, 2007.

     “Employee Welfare Plans” has the meaning set out in Section 4.02.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     “Fixed-Price Billing” has the meaning set out in Section 3.02.

     “Fixed-Rate Billing” has the meaning set out in Section 3.03.

     “Force Majeure” means an event beyond the control of the Party claiming Force Majeure that by its nature could not have been foreseen by such Party, or, if it could have been foreseen, was unavoidable, including acts of God, storms, floods, riots, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) and failure of energy sources.

     “Insurance Policies” means insurance policies pursuant to which a Person makes a true risk transfer to an insurer.

     “Insurance Proceeds” means those monies (a) received by an insured from an insurance carrier, or (b) paid by an insurance carrier on behalf of the insured.

     “Insurance Transition Period” has the meaning set out in Section 6.01(a).

     “Insured Photowatt Liability” means any Photowatt Liability to the extent it is covered under the terms of the ATS Insurance Policies in effect prior to the end of the Insurance Transition Period.

     “Master Separation Agreement” has the meaning set out in the recitals of this Agreement.

     “Offering” has the meaning set out in the recitals of this Agreement.

     “Party” means a party to this Agreement and its successors and permitted assigns and “Parties” means every Party.

     “Pass-Through Billing” has the meaning set out in Section 3.04.

     “Payment Date” has the meaning set out in Section 3.06(b).

2

     “Photowatt Covered Parties” has the meaning set out in Section 6.01(a).

     “Prime Rate” means the rate of interest per annum quoted by Bank of Nova Scotia from time to time as its reference rate for Canadian Dollar demand loans made to its commercial customers in Canada and which it refers to as its “prime rate”, as such rate may be changed by it from time to time.

     “Receiving Party” has the meaning set out in Section 3.02.

     “Service Costs” means the amounts to be paid by Photowatt to ATS for Services under this Agreement. For clarity, Service Costs shall not include the amounts paid to employees of the Photowatt Group for payroll.

     “Services” means the services to be provided by ATS or its agents or subcontractors under this Agreement, as more fully described in Schedule I attached hereto.

     Section 1.02 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 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.

     Section 1.03 Conflicts With Other Separation Agreements. To the extent any portion of this Agreement conflicts with the Master Separation Agreement, the Master Agreement shall control.

ARTICLE II
SERVICES

     Section 2.01 Services.

     (a) Subject to the terms and conditions of this Agreement, ATS agrees to provide (or cause to be provided) the Services to the Photowatt Group. Unless otherwise specifically set

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forth in Schedule I or agreed in writing by the Parties, the Services provided shall be substantially similar in scope, quality and nature to those customarily provided by ATS prior to the Effective Date. Unless otherwise specifically set forth in Schedule I or agreed in writing by the Parties, it is the intention of the Parties that the use by the Photowatt Group of the Services shall not be substantially greater than the level of use by the Photowatt Business prior to the Effective Date.

     (b) To the extent requested by Photowatt, any Services to be provided hereunder shall be provided directly to any member of the Photowatt Group. ATS may satisfy its obligation to provide any of the Services hereunder by causing one or more members of the ATS Group to provide such Service; provided; however, that the foregoing shall not relieve ATS of its obligations to provide Services hereunder, nor shall it relieve Photowatt of its obligation to pay ATS for such Services hereunder.

     (c) In addition to the Services described in Schedules I, if requested by Photowatt, and to the extent the Parties mutually agree, ATS shall provide (or cause to be provided) additional services to Photowatt. The scope of any such additional services, as well as the costs and other terms and conditions applicable to such services, shall be as mutually agreed by the Parties, and the Parties shall amend Schedule I appropriately in connection therewith.

ARTICLE III
SERVICE COSTS; OTHER CHARGES

     Section 3.01 Service Costs Generally. The Schedules hereto indicate the methods by which Service Costs to be charged for specific Services are to be determined. Photowatt shall pay to ATS the Service Costs in accordance with Section 3.06.

     Section 3.02 Fixed-Price Billing. The “Fixed-Price Billing” method means ATS shall charge the member of the Photowatt Group receiving (directly or indirectly) a Service (the “Receiving Party”) the amounts set forth on the relevant Schedule for such Service, at the times set forth on such Schedule.

     Section 3.03 Fixed-Rate Billing. The “Fixed-Rate Billing” method means ATS shall charge the Receiving Party an amount determined according to the fixed hourly rate set forth on the relevant Schedule for such Service, at the times set forth on such Schedule.

     Section 3.04 Pass-Through Billing. The “Pass-Through Billing” method means the aggregate amount of third-party, out-of-pocket costs and expenses incurred by ATS on behalf of a Receiving Party for Services provided by such third parties and (to the extent the performance of any such Service by any such third party is not substantially similar to Services provided by such third party or a substantially similar third party prior to the Effective Date) approved by such Receiving Party, which approval shall not be unreasonably withheld. Said costs shall include the costs incurred in connection with obtaining the consent of any party to an agreement to which ATS is a party where such consent is related to and reasonably required for the provision of such Service. Services provided by third parties will be billed by the third party to ATS and ATS will invoice the Receiving Party for such invoiced amounts pursuant to Section 3.06. If ATS incurs any such costs or expenses on behalf of any Receiving Party bundled

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together with costs incurred by ATS or its subsidiaries, ATS shall allocate any such costs or expenses in good faith as set forth on any applicable Schedule hereto or, if not set forth on a Schedule, then as ATS shall determine in the exercise of ATS’s reasonable judgment. ATS shall make such allocations reasonably and in good faith, and ATS or its agents shall keep and maintain such books and records as may be reasonably necessary to make such allocations. ATS shall make copies of such books and records available to the Receiving Party upon request and with reasonable notice.

     Section 3.05 Benefit Billing. Prior to the Effective Date, certain employees of the Photowatt Group participated in certain benefit plans sponsored by ATS (“ATS Plans”).

     (i) On and after the Effective Date, such employees shall continue to be eligible to participate in the ATS Plans, subject to the terms of the governing plan documents as interpreted by the appropriate plan fiduciaries. On and after the Effective Date, subject to regulatory requirements and the provisions of Section 4.01, ATS shall continue to provide Benefit Services to and in respect of such employees with reference to ATS Plans as administered by ATS prior to the Effective Date.

     (ii) The costs payable by a Receiving Party for Services related to the ATS Plans, which are included in Schedule I, shall be determined and billed as set forth in Schedule I. The Parties acknowledge and agree that some of the costs associated with certain ATS Plans will be paid principally through Photowatt employee payroll deductions for such plans as specified in Schedule I.

     (iii) Each Party may request changes in the applicable terms and provisions of any of the Benefit Services relating to the ATS Plans, approval of which shall not be unreasonably withheld by the other Party; provided, however, that changes in the terms and provisions of any of the ATS Plans shall be in the sole discretion of ATS, and ATS may (in its sole discretion) terminate or otherwise modify, in any manner, any ATS Plan at any time and from time to time. The Parties agree to cooperate fully with each other in the administration and coordination of regulatory and administrative requirements associated with ATS Plans.

     Section 3.06 Invoicing and Settlement of Costs.

     (a) ATS shall invoice the applicable Receiving Party in advance of each calendar month for the estimated Service Costs to be incurred by the applicable Receiving Party and attributable to the following month. Such estimate will be arrived at by ATS in the exercise of ATS’s reasonable judgment, based on known Fixed-Price Billing amounts and known or estimated Pass-Through Billing and Fixed-Rate Billing amounts for the month in question. All Pass-Through Billing amounts are to be invoiced when ATS is invoiced for same regardless of the period covered by the related Services. In connection with the invoicing described in this Section 3.06(a), ATS shall provide to the applicable Receiving Party the same billing data and level of detail and such other related data as may be reasonably requested by the applicable Receiving Party. Each monthly invoice will provide for any necessary adjustment so that actual Service Costs incurred in the most recently completed month match the total dollar amount collected with respect to that month.

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     (b) Each Receiving Party shall pay to ATS, on or before the beginning of each calendar month(each, a “Payment Date”), by wire transfer of immediately available funds payable to the order of ATS, all amounts properly invoiced by ATS pursuant to Section 3.06(a) for such month. If any Receiving Party fails to pay any monthly payment within 30 days of the relevant Payment Date, such Receiving Party shall be obligated to pay, in addition to the amount due on such Payment Date, interest on such amount at the Prime Rate plus 2%, compounded monthly from the relevant Payment Date through the date all such due amounts are paid. Offsetting is not permitted.

ARTICLE IV
STANDARD OF PERFORMANCE AND INDEMNIFICATION

     Section 4.01 General Standard of Service.

     (a) Subject to the limitations on liability set forth in Section 4.03, ATS will use commercially reasonable efforts to deliver the applicable Services to Photowatt at the same levels as such Services are or have customarily been provided in the past. In addition, ATS shall use commercially reasonable efforts to ensure that the nature and quality of Benefit Services provided to the Persons described in Section 3.05(i) under ATS Plans, either by ATS directly or through administrators under contract, shall be substantially the same as, or consistent with, the same services provided to or on behalf of ATS employees under ATS Plans.

     (b) Information technology Services shall continue to be provided by ATS during the term of this Agreement at the same service levels provided prior to the date of this Agreement, provided that ATS is able to obtain the necessary licenses from software and other providers (which both Parties shall use commercially reasonable efforts to obtain). Additional license or other fees, if any, that are charged by software or other providers necessary for ATS to provide information technology Services will be paid by Photowatt. Photowatt acknowledges and agrees that ATS is not in the business of providing information technology services to third parties, but has agreed to provide such services solely to assist Photowatt establish itself as an independent operating company.

     Section 4.02 Delegation. Subject to Section 4.01 above, Photowatt hereby delegates to ATS final, binding and exclusive authority, responsibility and discretion to interpret and construe the provisions of employee welfare benefit plans in which the Persons described in Section 3.05 have elected to participate and that are administered by ATS under this Agreement (collectively, “Employee Welfare Plans”). ATS may further delegate such authority to other Persons to:

     (i) provide administrative and other services;

     (ii) reach factually supported conclusions consistent with the terms of the respective Employee Welfare Plans;

     (iii) make such other decisions and take such other actions as are permitted to be delegated under the terms of the respective Employee Welfare Plans;

     (iv) make a full and fair review of each claim denial and decision related to the provision of benefits provided or arranged for under the Employee Welfare Plans

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pursuant to applicable law and any other applicable requirements, if a claimant timely requests in writing a review for reconsideration of such decisions (the party adjudicating the claim shall notify the claimant in writing of its decision on review and such notice shall satisfy applicable laws and any other applicable requirements relating thereto); and

     (v) notify the claimant in writing of its decision on review.

     Section 4.03 Limitation of Liability.

     (a) Photowatt acknowledges and agrees that (i) ATS is not in the business of providing services such as the Services to third parties, (ii) ATS has agreed to provide the Services as an accommodation to Photowatt and (iii) ATS makes no representations or warranties whatsoever, whether express or implied by statute or otherwise, regarding the Services or any other matters relating to or arising out of this Agreement.

     (b) ATS shall not have any Liability to Photowatt or any other Person under this Agreement or for any actions or inactions by any member of the ATS Group or its representatives, except for Losses resulting from the gross negligence or willful misconduct of such member of the ATS Group or its representatives; provided, however, that the foregoing shall not limit the remedies of Photowatt against a provider of any Service other than any member of the ATS Group.

     (c) Photowatt shall in all circumstances use commercially reasonable efforts to mitigate and otherwise minimize Losses to the Photowatt Group, 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 Agreement.

     (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 Indemnified Persons) hereby releases ATS from all claims for, special, indirect, consequential, incidental or punitive damages (including lost profits or savings), even if advised of their possible existence, except that a Party may recover from the other Party special, indirect, consequential, incidental or punitive damages owed to a third party in settlement or satisfaction of claims for which such Party has a right to recover from such other Party under this Agreement.

     (e) Each Party agrees that this Section 4.03 is commercially conspicuous.

     Section 4.04 Indemnification.

     (a) Subject to Section 4.03, Photowatt shall indemnify and hold harmless each ATS Indemnified Person from and against any and all Losses incurred by such ATS Indemnified Person relating to, arising out of or in connection with the Services rendered or to be rendered by any ATS Indemnified Person pursuant to this Agreement or any ATS Indemnified Person’s actions or inactions in connection with any such Services, except to the extent resulting from such ATS Indemnified Person’s gross negligence or willful misconduct.

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     (b) Subject to Section 4.03, ATS shall indemnify and hold harmless each Photowatt Indemnified Person from and against any and all Losses incurred by such Photowatt Indemnified Person to the extent relating to, arising out of or in connection with the gross negligence or willful misconduct of any ATS Indemnified Person in connection with the Services rendered or to be rendered pursuant to this Agreement.

     (c) To the extent any other Person has agreed to indemnify any ATS Indemnified Person or to hold an ATS Indemnified Person harmless and such Person provides services to any member of the ATS Group relating directly or indirectly to any employee plan or benefit arrangement for which Services are provided under this Agreement, ATS will exercise reasonable efforts (i) to make such agreement applicable to each Photowatt Indemnified Person so that such Photowatt Indemnified Person is held harmless or indemnified to the same extent as any ATS Indemnified Person and (ii) to make available to each Photowatt Indemnified Person the benefits of such agreement.

     Section 4.05 Claim Procedure. The claim procedures set forth in Section 8.3 of the Master Separation Agreement shall apply to indemnification claims under this Agreement.

ARTICLE V
TERM AND TERMINATION

     Section 5.01 Term. Except as otherwise provided in this Article V, or in Section 7.10 or as otherwise agreed in writing by the Parties, (a) all provisions of this Agreement shall automatically terminate on the date which is 12 months following the date of this Agreement and (b) a Party’s obligation to provide or to cause to be provided, and the other Party’s obligation to pay for, a Service shall cease as of such date or such earlier date determined in accordance with Section 5.02.

     Section 5.02 Termination.

     (a) The Parties may by mutual agreement terminate this Agreement with respect to one or more of the Services, in whole or in part, in accordance with this Section 5.02(a). The Parties shall meet at least quarterly to consider in good faith whether any Service (or its pricing) should be modified or terminated, taking into account the impact of such Service’s modification or termination on both Parties. To the extent that, in any such meeting, the Parties in good faith agree that any Service (or its pricing) should be modified or terminated, the Parties shall work together in good faith to determine a reasonable and appropriate schedule therefor.

     (b) Photowatt may terminate this Agreement or any individual Service for convenience by giving 30 days written notice to ATS. In the event of such termination, Photowatt shall pay ATS for any and all costs incurred by ATS in connection with such termination including third party termination charges and penalties and costs of obtaining consents to the early termination of third party contracts and any committed costs with respect to which ATS is unable to obtain a refund.

     (c) Photowatt may terminate any individual Service at any time if ATS shall have failed to perform any of its material obligations under this Agreement relating to such Service, Photowatt shall have notified ATS in writing of such failure and such failure shall have

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continued unremedied for a period of at least 30 days after receipt by ATS of written notice of such failure from Photowatt. ATS may terminate this Agreement at any time if Photowatt shall have failed to perform any of its material obligations under this Agreement, ATS shall have notified Photowatt in writing of such failure and such failure shall have continued unremedied for a period of at least 30 days after receipt by Photowatt of written notice of such failure from ATS.

     (d) ATS may terminate any individual Service that it or its representative or subcontractor is performing, upon at least 30 days written notice, if the continued performance of such Service becomes commercially impracticable, including a prohibition against continued performance in any contract with a third party providing the Service in question.

     Section 5.03 Effect of Termination.

     (a) Other than as required by law, upon termination of any Service pursuant to Section 5.02, or upon termination of this Agreement in accordance with its terms, ATS shall have no further obligation to provide the terminated Service (or any Service, in the case of termination of this Agreement) and Photowatt shall have no obligation to pay any Service Costs relating to such terminated Services or to make any other payments hereunder; provided, however, that, notwithstanding such termination: (i) Photowatt shall remain liable to ATS for Service Costs owed and payable in respect of Services provided prior to the effective date of such termination; (ii) ATS shall continue to charge Photowatt for administrative and program costs relating to benefits paid after but incurred prior to the termination of any Service and other services required to be provided after the termination of such Service, and Photowatt shall be obligated to pay such Service Costs in accordance with the terms of this Agreement; and (iii) the provisions of Articles IV, V and VII and Section 6.06 shall survive any such termination. All program and administrative costs attributable to the persons described in Section 3.05(i), under ATS Plans that relate to any period after the effective date of any such termination shall be for the account of and paid by Photowatt.

     (b) Following termination of this Agreement, with respect to any Service provided or procured by ATS, the Parties agree to cooperate with each other in providing for an orderly transition of such Service to Photowatt or to a successor service provider as designated by Photowatt. Without limiting the foregoing, ATS agrees to (i) provide to Photowatt, within 30 days of the termination of any Service relating to employee benefits, in a usable format designated by ATS, copies of all records relating directly or indirectly to benefit determinations with respect to any and all the Persons described in Section 3.05, including compensation and service records, correspondence, plan interpretive policies, plan procedures, administration guidelines, minutes, and any data or records required to be maintained by law and (ii) cooperate with Photowatt in developing a transition schedule with respect to such terminated Service.

     Section 5.04 Turnover. At or before the termination of this Agreement or of any Service provided hereunder, to expedite and facilitate the turnover, and provide for a smooth transition, of the applicable function(s), ATS will provide any cooperation or information reasonably requested by the applicable Receiving Party in connection with the applicable Receiving Party’s assumption of such function(s).

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ARTICLE VI
INSURANCE MATTERS

     Section 6.01 Photowatt Insurance Coverage During Insurance Transition Period.

     (a) Throughout the period beginning on the Effective Date and ending upon the earlier of (i) termination of the Service provided pursuant to this Article VI or (ii) termination or expiration of this Agreement in accordance with its terms (the “Insurance Transition Period”), ATS shall, subject to insurance market conditions and other factors beyond its control, maintain Insurance Policies (the “ATS Insurance Policies”) covering and for the benefit of the Photowatt Group and their respective directors, officers and employees (collectively, the “Photowatt Covered Parties”) comparable to those maintained generally by ATS covering the Photowatt Covered Parties prior to the Effective Date except that no directors and officers insurance shall be maintained for the Photowatt Covered Parties; provided, however, that if ATS determines that (i) the amount or scope of such insurance coverage will be reduced to a level materially inferior to the level of insurance coverage in existence immediately prior to the Insurance Transition Period or (ii) the retention or deductible level applicable to such insurance coverage, if any, will be increased to a level materially greater than the levels in existence immediately prior to the Insurance Transition Period, in each case other than solely as a result of the Offering, ATS shall give Photowatt notice of such determination as promptly as practicable. Upon notice of such determination, Photowatt shall be entitled to 60 days to evaluate Photowatt’s options regarding continuance of insurance coverage under said Insurance Policies and Photowatt may cancel Photowatt’s interest in all or any portion of such insurance coverage as of any day within such 60 day period provided that ATS is able to obtain any required consents of its insurers to such cancellation. The ATS Insurance Policies shall contain a waiver of subrogation in respect of any amounts paid thereunder in respect of claims or demands made against any Photowatt Covered Parties.

     (b) Photowatt shall promptly pay to ATS all amounts for premium expenses, deductibles or retention amounts, and any other costs and expenses that ATS may incur in connection with the insurance coverages maintained pursuant to this Section 6.01. Similarly, ATS shall promptly reimburse Photowatt for any applicable credits received by ATS. In addition, Photowatt may purchase insurance coverage as an alternative to that described in Schedule I, from any insurance carrier approved by ATS (which approval shall not be unreasonably withheld), and, in such case, subject to Section 5.03(a), Photowatt may terminate the insurance Services provided hereunder by ATS in whole or in part after giving reasonable notice thereof to ATS provided that ATS is able to obtain any required consents of its insurers to such cancellation.

     Section 6.02 Cooperation; Payment of Insurance Proceeds to Photowatt; Agreement Not to Release Carriers. Each Party shall share such information, including claims data, as is reasonably necessary to permit the other Party to manage and conduct its insurance matters in an orderly fashion. ATS, at the request of Photowatt, shall cooperate with and use commercially reasonable efforts to assist Photowatt in recovering Insurance Proceeds under the ATS Insurance Policies for claims relating to the Photowatt Business or the Photowatt Covered Parties, whether such claims arise under any agreement, by operation of law or otherwise, existing or arising from any past acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed before the Effective Date, on the Effective Date or during the Insurance Transition Period, and ATS shall promptly pay any such

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recovered Insurance Proceeds to Photowatt (to the extent that the right to such proceeds has not already been satisfied, whether by direct payment by the insurer or administrator, intercompany entry or otherwise). ATS and Photowatt shall not, and ATS will cause its Group members not to, take any action that would intentionally jeopardize or otherwise interfere with the other Party’s ability to collect any proceeds payable pursuant to any Insurance Policy. Except as otherwise contemplated by this Agreement, after the Effective Date, neither Party shall (nor permit any of its respective Group members to), without the consent of the other Party, provide any insurance carrier with a release, or amend, modify or waive any rights under any such policy or agreement, if such release, amendment, modification or waiver would adversely affect any rights or potential rights of such other Party (or its Group members) thereunder. However, nothing in this Section 6.02 shall (a) preclude any Group member from presenting any claim or from exhausting any policy limit, (b) require any Group member to pay any premium or other amount or to incur any Liability, or (c) require any Group member to renew, extend or continue any policy in force.

     Section 6.03 Photowatt Insurance Coverage After the Insurance Transition Period. From and after expiration of the Insurance Transition Period, Photowatt shall be responsible for obtaining and maintaining insurance programs for the Photowatt Group’s risk of loss and such insurance arrangements shall be separate and apart from the insurance programs of ATS.

     Section 6.04 Deductibles and Self-Insured Obligations. Photowatt shall be responsible on or after the Effective Date for payment of self-insured retentions, deductibles and other amounts not covered by insurance policies pertaining to the Photowatt Business. For all claims incurred on or after the Effective Date (but not for any claims incurred prior to such date), Photowatt shall reimburse ATS for all amounts necessary to exhaust or otherwise satisfy all applicable self-insured retentions, deductibles and other amounts not covered by Insurance Policies in connection with Photowatt Liabilities and Insured Photowatt Liabilities to the extent ATS is required to pay any such amounts.

     Section 6.05 Procedures with Respect to Insured Photowatt Liabilities.

     (a) Photowatt shall reimburse ATS for all Losses incurred to pursue insurance recoveries from Insurance Policies for Insured Photowatt Liabilities.

     (b) The defense of claims, suits or actions giving rise to potential or actual Insured Photowatt Liabilities shall be managed (in conjunction with its insurers, as appropriate) by ATS.

     Section 6.06 Insufficient Limits of Liability for ATS Liabilities and Photowatt Liabilities. If there are Liabilities in excess of coverage limits available under ATS’s Insurance Policies so that ATS’s Insurance Policies will not cover the Liabilities of ATS and/or Photowatt that would otherwise be covered by such Insurance Policies, then to the extent other insurance is not available to ATS and/or Photowatt for such Liabilities, the Parties will work together in good faith to determine a reasonable and equitable allocation of the proceeds of the ATS Insurance Policies between such Parties. This Section 6.06 shall terminate 10 years following the end of the Insurance Transition Period.

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     Section 6.07 Cooperation. ATS and Photowatt shall cooperate with each other in all respects, and shall execute any additional documents that are reasonably necessary, to effectuate the provisions of this Article VI.

     Section 6.08 No Assignment or Waiver. This Agreement shall not be considered as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of any member of the ATS or Photowatt Group in respect of any Insurance Policy or any other contract or policy of insurance.

     Section 6.09 No Liability. Photowatt does hereby agree, for itself and as agent for each other member of the Photowatt Group, that no ATS Indemnified Person shall have any Liability whatsoever as a result of the insurance policies and practices of ATS as in effect at any time prior to the end of the Insurance Transition Period, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, or the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise; provided, that the waiver in the foregoing clause regarding adequacy or timeliness shall not apply to ATS if Photowatt has requested in writing that ATS give a notice or otherwise make a claim to an insurance carrier and ATS fails to give such notice or make such claim in a reasonably timely manner, with reference to the standard of performance set forth in Section 4.01.

     Section 6.10 Additional or Alternate Insurance. Notwithstanding any other provision of this Agreement, during the Insurance Transition Period, ATS and Photowatt shall cooperate to evaluate insurance options and secure additional or alternate insurance for Photowatt and/or ATS if desired by and cost effective for Photowatt and ATS. Nothing in this Agreement shall be deemed to restrict any member of the Photowatt Group from acquiring at its own expense any other Insurance Policy in respect of any Liabilities or covering any period.

     Section 6.11 Forbearance and Prior Insurance Coverage.

     (a) From and after the date of this Agreement, ATS shall not, and shall cause its Group not to, take or fail to take any action if such action or inaction, as the case may be, would adversely affect the applicability of any insurance in effect on the Effective Date (other than directors and officers insurance) that covers all or any part of the assets, liabilities, business, directors, officers or employees of any member of the Photowatt Group with respect to events occurring prior to the Effective Date (“Applicable Insurance”).

     (b) ATS agrees that, from and after the Effective Date, all Applicable Insurance directly or indirectly applicable to any assets, liabilities, business, directors, officers or employees of any member of the Photowatt Group shall be for the benefit of such Group member, it being understood that such Applicable Insurance shall also be for the benefit of ATS to the extent directly or indirectly applicable to any assets, liabilities, business, directors, officers or employees of ATS or any members of its Group. Without limiting the generality of the foregoing, upon Photowatt’ reasonable request, ATS shall use reasonable efforts to modify, amend or assign all Applicable Insurance policies and arrangements (to the extent relating to the Photowatt Business) so that the applicable members of the Photowatt Group are the direct beneficiaries of such Applicable Insurance with all rights to enforce, obtain the benefit of and

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take all other action in respect of such Applicable Insurance; provided, however, that if the modifications, amendments or assignments contemplated by this Section 6.11(b) are not permissible, ATS shall, and shall cause each of its Group members to, use reasonable efforts to enter into such other arrangements as Photowatt may reasonably request to ensure that the Photowatt Group is entitled to the benefit (to the fullest extent set forth in the relevant policies and arrangements) of any Applicable Insurance.

     Section 6.12 Further Agreements. The Parties acknowledge that they intend to allocate financial obligations without violating any laws regarding insurance, self-insurance or other financial responsibility. If it is determined that any action undertaken pursuant to this Agreement or any related agreement between or involving the Parties violates any insurance, self-insurance or related financial responsibility law or regulation, the Parties agree to work together to do whatever is necessary to comply with such law or regulation while trying to accomplish, as much as possible, the allocation of financial obligations as intended in this Agreement or any such related agreement.

ARTICLE VII

MISCELLANEOUS

     Section 7.01 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 7.01 shall be invalid and ineffective ab initio.

     Section 7.02 No Agency. Nothing in this Agreement shall constitute or be deemed to constitute a partnership or joint venture between the Parties or, except to the extent provided in Section 4.02, 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.

     Section 7.03 Subcontractors. ATS may hire or engage one or more subcontractors to perform all or any of its obligations under this Agreement; provided, however, that, subject to Section 4.02, ATS shall in all cases remain primarily responsible for all obligations undertaken by it in this Agreement with respect to the scope, quality and nature of the Services provided to Photowatt and, provided further, that, in each case, the use of a subcontractor to perform ATS’s obligations would not substantially increase the costs to Photowatt.

     Section 7.04 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

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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 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.

     Section 7.05 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).

     Section 7.06 Further Assurances. On and after the Effective Date, 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.

     Section 7.07 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

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to such other address or facsimile telephone number as such Party shall have specified in a written notice given to the other Parties hereto):

(a) if to ATS, to:

ATS Automation Tooling Systems Inc.
250 Royal Oak Road
Cambridge, Ontario N3H 4R6
Attention: General Counsel
Fax No.: (519) 650-6520

(b) 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.

     Section 7.08 Time of Essence. Time is of the essence of this Agreement.

     Section 7.09 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.

     Section 7.10 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.

     Section 7.11 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

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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 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.

     Section 7.12 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.

     Section 7.13 Currency. Except as expressly provided in this Agreement, all amounts in this Agreement are stated and will be paid in Canadian currency.

     Section 7.14 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.

     Section 7.15 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.

     Section 7.16 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.

     Section 7.17 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.

     Section 7.18 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

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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 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.

     Section 7.19 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 7.19) (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 7.19(b).

     (b) Mediation. If the Dispute is to be submitted to mediation in accordance with Section 7.19(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 facilitate the voluntary resolution of the Dispute by the Parties.

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(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 7.19(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
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

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	liable to any Party for any acts or omissions in connection with any mediation conducted pursuant to this Section 7.19.
(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 7.19, 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:

(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

19

termination thereof, until such Party has fully complied with Sections 7.18(a) and (b) with respect to such Dispute.

     Section 7.20 Binding Effect. 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 Article IV, ATS Indemnified Persons and Photowatt Indemnified Persons) 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

     Section 7.21 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.

     Section 7.22 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.

     Section 7.23 Audits. Without in any way limiting any other right that either Party may have under this Agreement, each Party and/or its authorized representatives shall have the right from time to time, and upon reasonable prior notice, to enter upon any premises of the other Party during normal business hours to audit and inspect the Services provided by the other Party, including the other Party’s adherence to the provisions of this Agreement,

     Section 7.24 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 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.

[The next page is the signature page.]

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

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

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Schedule I to Transitional Services Agreement

Service (unless otherwise provided below, the identified service is only to be provided to what is currently the Spheral Solar division of ATS t = Service available to Photowatt and its subsidiaries * = Service available to the Spheral Solar Division of ATS and the employees of Photowatt Technologies USA Inc.	Billing Method (specific dollar amounts are Canadian dollars)	Description
Phone Infrastructure	1. Fixed-Price Billing: $2,497.50/month 2. Fixed-Rate Billing: $100/hour	1. Physical systems, servers, and connections. 2. Technical Assistance
Phone services (including cell phones and other wireless devices)	Pass Through	Phone service, long distance, connectivity and other fees charged by provider, and maintenance services
Network	Fixed-Price Billing: $1470/month	Network and Data systems
Computer Infrastructure	Fixed-Price Billing: $7,770/month	Physical servers, maintenance, and ERP technical infrastructure support (consulting support not included)
Software	1. Fixed-Price Billing: $3,283/month 2. Pass Through in relation to Microsoft	1. ERP software; HR software 2. Microsoft desktop software
I.T. Services	1. Fixed-Price Billing: $8,000 per month 2. Fixed-Rate Billing: $200 per hour	1. General Infrastructure Support 2. Fixed Rate to apply to any requested services beyond standard infrastructure support which ATS agrees to perform

-1-

Payroll	1. Pass Through for ADP 2. Fixed-Price Billing: $1,330/month 3. Fixed-Rate Billing: $100 per hour	1. ADP processing fees 2. Cambridge Systems Group processing time (price will be adjusted pro-rata if # of employees increases more than 20% above number as of Effective Date) 3. Fixed Rate to apply to any requested services beyond current level of processing which ATS agrees to perform (e.g. setting up separate payroll)
Human Resources	Pass Through	- Recruiting services - - EAP program - - ADP People @ work
* Benefits – Group Insurance	Pass Through	Following third party provided insurance benefits to the extent currently provided: - -life - -accidental death and dismemberment - -short and long term disability - -extended health - -dental - -health spending account (in-house programs are excluded: including scholarship program, computer purchase program, referral program, social club)
* Benefits – RRSP/401k matching	Pass Through	RRSP matching program
Facilities	Pass Through	Landscaping, snow removal, window cleaning, and irrigation maintenance
t Tax, legal, accounting, treasury and M&A services as agreed upon between the parties	Fixed-Rate Billing: Hourly rates agreed upon prior to initiation of service	Nature of service to be agreed upon on a project by project basis

-2-

t Administrative Fee	Fixed-Price Billing: $10,000 per month	Fee for administering this Agreement and the preparation of invoices under this agreement
t Insurance	Pass Through	Continuation of the existing coverages, expressly excluding D&O insurance. Note: This is in addition to insurance currently held by Photowatt International S.A.S.
Miscellaneous	Pass Through	Emergency Response
Building Maintenance	Fixed-Price Billing: $1,392 per month	Cambridge Systems Group maintenance staff services (plumbing and HVAC)

-3-

EX-10.4

EXHIBIT 10.4

          REGISTRATION RIGHTS AGREEMENT, dated as of l, 2007 (this “Agreement”), among Photowatt Technologies Inc., a corporation organized under the Canada Business Corporations Act (the “Corporation”), and ATS Automation Tooling Systems Inc., a corporation organized under the Business Corporations Act (Ontario) (“ATS”).

R E C I T A L S

          WHEREAS the Corporation is offering shares of common stock of the Corporation pursuant to an underwritten public offering (the “Offering”).

          WHEREAS the Corporation and ATS are entering into this Agreement to provide for certain rights and obligations with respect to the common shares of the Corporation held by ATS.

          NOW, THEREFORE, in consideration of the mutual agreements, covenants and conditions hereinafter set forth, the parties agree as follows:

          SECTION 1. Definitions. (a) As used in this Agreement, the following terms shall have the following meanings:

          “Affiliate” shall have the meaning specified in Rule 12b-2 under the Exchange Act, as such rule is currently in effect.

          “Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in the Province of Ontario are authorized or required by law or executive order to close.

          “Canadian Prospectus” means a prospectus (including a short form prospectus) prepared in accordance with applicable Canadian Securities Laws for the purposes of qualifying securities for distribution or distribution to the public, as the case may be, in any Province or Territory of Canada.

          “Canadian Securities Commissions” means the applicable securities commission or securities regulatory authority in each of the Provinces and Territories of Canada.

          “Canadian Securities Laws” means, collectively, the applicable securities laws of each of the Provinces and Territories of Canada and the respective regulations and rules made under those securities laws together with all applicable policy statements, blanket orders and rulings of the Canadian Securities Commissions.

          “Capital Stock” means, with respect to any Person at any time, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of capital stock, partnership interests (whether general or limited), limited liability company interests or equivalent ownership interests in such Person.

          “Commission” means the U.S. Securities and Exchange Commission or any successor agency.

          

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          “Common Shares” means the shares of common stock of the Corporation and any securities of the Corporation into which such shares may be converted or exchanged.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time.

          “Law” means any federal, state, provincial, local or foreign statute, law, ordinance, regulation, rule, code, order, other requirement or rule of law.

          “New Securities” means any Capital Stock of the Corporation, whether now authorized or not, and rights, options or warrants to purchase such Capital Stock, and securities of any type whatsoever that are, or may become, convertible into or exchangeable or exercisable for Capital Stock of the Corporation; provided that the term “New Securities” does not include (i) securities of the Corporation issued to its employees, consultants, officers or directors of the Corporation, or which have been reserved for issuance, pursuant to any employee stock option, restricted stock, stock purchase, stock bonus plan, or other similar stock agreement or arrangement approved by the board of directors of the Corporation, (ii) securities of the Corporation issued in connection with any stock split, stock dividend or recapitalization of the Corporation, (iii) securities of the Corporation issued upon the conversion or exchange of convertible or exchangeable securities of the Corporation that are outstanding as of the date of this Agreement, (iv) any right, option or warrant to acquire any security convertible into or exchangeable or exercisable for the securities excluded from the definition of New Securities pursuant to subclause (i) above if issued pursuant to any employee stock option, restricted stock, stock purchase, stock bonus plan or other similar stock agreement or arrangement approved by the board of directors or (v) securities of the Corporation outstanding on the date hereof.

          “Permitted Transferee” means a Shareholder who has acquired rights under this Agreement pursuant to Section 14(b) hereof.

          “Person” means any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Exchange Act.

          “Primary Shares” means, at any time, the authorized but unissued Common Shares; provided, however, that for the purposes of Section 2, the term “Primary Shares” shall include Common Shares held by officers and directors of the Corporation.

          “Prospectus” means the Corporation’s prospectus included in the Corporation’s registration statement on Form F-1 (File No. 333-137044), as declared effective by the Commission.

          The terms “register”, “registered” and “registration” shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

          In addition, unless inconsistent with the context: (i) the term “registration” and any references to the act of registering include the qualification under Canadian Securities Laws

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of a Canadian Prospectus in respect of a distribution or distribution to the public, as the case may be, of securities; (ii) the term “registered” as applied to any securities includes a distribution or distribution to the public, as the case may be, of securities so qualified; (iii) the terms “registration statement” includes a Canadian Prospectus; and (iv) any references to a registration statement having become effective, or similar references, shall include a Canadian Prospectus for which a final receipt has been obtained from the relevant Canadian Securities Commissions.

          “Registrable Shares” means the Common Shares held from time to time by the Shareholders. For purposes of this Agreement, any Registrable Shares shall cease to be Registrable Shares (i) when they have been registered under the Securities Act (the registration statement in connection therewith has been declared effective) and disposed of pursuant to such effective registration statement, (ii) when they are sold by a Person in a transaction in which the rights under the provisions of this Agreement are neither transferred nor assigned, or (iii) when they have been sold or distributed pursuant to Rule 144 (including, without limitation, Rule 144(k)).

          “Registration Expenses” means all out-of-pocket expenses incident to the Corporation’s performance of, or compliance with, Sections 2, 3 and 4, including, without limitation, all registration and filing fees (including filing fees with respect to the National Association of Securities Dealers, Inc.), all fees and expenses of complying with applicable securities Laws (including reasonable fees and disbursements of underwriters’ counsel in connection with any “blue sky” memorandum or survey), all printing expenses, all internal expenses, all “road show” and marketing expenses, all listing fees, all registrars’ and transfer agents’ fees, the fees and disbursements of counsel for the Corporation and of its independent public accountants, including the expenses of any special audits and/or “comfort” letters required by or incident to such performance and compliance, the reasonable fees and disbursements of one outside counsel retained by the holders holding Common Shares being registered (which counsel shall be satisfactory to the holders of a majority of the Registrable Shares being registered), but excluding Selling Expenses, if any, which shall be borne by the holders holding Common Shares being registered, in all cases.

          “Rule 144” shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

          “Rule 145” shall mean Rule 145 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

          “Rule 415” shall mean Rule 415 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

          “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time.

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          “Selling Expenses” means all underwriting discounts, commissions or brokers’ commissions and applicable transfer taxes incurred in connection with the sale or other disposition of Common Shares or other securities for or on behalf of a holder’s account.

          “Shareholder” means ATS, or any holder of Common Shares to whom the registration rights conferred by this Agreement have been transferred in compliance with Section 14 hereof, so long as such Person holds Common Shares (each such Person a “Shareholder” and, collectively, the “Shareholders”).

          “Specified Assignee” means a Shareholder who has acquired rights under this Agreement pursuant to Section 14(a) hereof.

          “Subsidiary” of any party shall mean any corporation, partnership, joint venture, association or other business entity of which such party now or hereafter owns, directly or indirectly, securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other governing body thereof.

          “Voting Interest” of the Corporation means one Common Share and any other share or unit of Capital Stock issued by the Corporation, the holders of which are ordinarily, in the absence of contingencies, entitled to one vote in the election of the Corporation’s directors (or Persons performing similar functions), or the approval of its management and policies, even if the right to vote has been suspended by the occurrence of a contingency.

          SECTION 2. Request for Registration. (a) At any time after the date 180 days after the date of the Prospectus, if the Corporation shall receive from any Shareholder (in such capacity, a “Requesting Shareholder”), a written request that the Corporation effect any registration under the Securities Act, and/or, mutatis mutandis, under Canadian Securities Laws, with respect to the sale and distribution of all or a part representing not less than 5% of the Registrable Shares in a public offering (calculated at the time that the written request is received by the Corporation), then if (x) in the case of a request in relation to the Securities Act, the then outstanding Commission has not prior to the date of such request (the “Demand Date”) declared effective a shelf registration statement with respect to all of the Registrable Shares (a “Shelf Registration Statement”) pursuant to Rule 415, or (y) in the case of a request in relation to Canadian Securities Laws, the Canadian Securities Commissions have not prior to the date of such request (also, the “Demand Date”) issued a final receipt for a base shelf prospectus with respect to all of the Registrable Shares pursuant to National Instrument 44-102 (Shelf Distributions) which is effective as of the Demand Date, the Corporation will:

     (i) promptly give written notice of the proposed registration, qualification or compliance to each of the other Shareholders (collectively, the “Non-Requesting Shareholders”); and

     (ii) as soon as practicable but in any event within 90 days, use its reasonable best efforts to effect such registration (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under applicable securities Laws, including, without limitation, “blue sky” laws or Canadian Securities Laws, and appropriate compliance with applicable regulations issued under the Securities

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Act or Canadian Securities Laws, as the case may be) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Shares as are specified in such request, together with all or such portion of the Registrable Shares of the Non-Requesting Shareholder(s) joining in such request as are specified in a written request received by the Corporation within ten (10) Business Days after written notice from the Corporation is given under clause 2(a)(i) above; provided that the Corporation shall not be obligated to effect, or take any action to effect, any such registration pursuant to this Section 2:

     (A) for a period of up to 120 days, if the board of directors of the Corporation (1) determines in good faith that (a) it is in possession of material, nonpublic information concerning an acquisition, merger, recapitalization, consolidation, reorganization, financing or other material transaction by or of the Corporation or concerning pending or threatened litigation, and (b) disclosure of such information would jeopardize any such transaction or litigation and would be seriously detrimental to the Corporation and (2) delivers written notice to the Requesting Shareholders and Non-Requesting Shareholders that, in its good faith judgment, it would not be in the best interests of the shareholders of the Corporation for such registration to be effected; provided that the Corporation shall not defer its obligation in this manner more than once in any twelve-month period;

     (B) in any particular jurisdiction in which the Corporation would be required to execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Corporation is already subject to service in such jurisdiction and except as may be required by the Securities Act or applicable rules or regulations thereunder or Canadian Securities Laws;

     (C) with respect to any Shareholder (together with its Permitted Transferees and Specified Assignees), after the Corporation has effected four (4) registrations pursuant to this Section 2(a); provided, however, that the substantially concurrent registration of Registrable Shares under the Securities Act and qualification for distribution of Registrable Shares under Canadian Securities Laws shall be counted as only one registration of Registrable Shares; provided further, however, that any request under Section 2(a) shall be deemed not to have been made if (i) it does not result in a registration that is declared or ordered effective by the applicable governmental authorities or agencies, including without limitation, the Commission, and that remains effective for not less than 30 days (or such shorter period as will terminate when all Registrable Shares covered by such registration have been sold or withdrawn), or, if such registration relates to an underwritten offering, such longer period, if any, as in the opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of the Registrable Shares by an underwriter or dealer (in either case, such period being the “Demand Period”), (ii) (x) during the Demand Period such registration is terminated by any stop order, injunction or other order or requirement of any governmental agency or court or (y) the conditions to closing specified in the underwriting agreement, if any, entered into

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in connection with such registration are not satisfied other than by reason of a wrongful act, misrepresentation or breach of an applicable underwriting agreement by the Holders (as defined below), or (iii) the Requesting Shareholders withdraw their request for registration and bear the Registration Expenses pro rata on the basis of the number of their shares requested for registration; or

     (D) if on or prior to the Demand Date, the Corporation has filed with the Commission a Shelf Registration Statement on Form F-3, and with the Canadian Securities Commissions a base shelf prospectus pursuant to National Instrument 44-102, covering the Registrable Shares which is being diligently pursued by the Corporation with the Commission and the Canadian Securities Commissions as of the Demand Date.

The registration statement filed pursuant to the request of the Requesting Shareholders and any Non-Requesting Shareholder may, subject to the provisions of Section 2(b) below, include Primary Shares.

          (b) The Corporation shall be entitled to select the managing underwriter of the underwriting; provided, however, that any such managing underwriter shall be an investment banking firm of nationally recognized reputation reasonably acceptable to the selling Shareholders representing a majority of the Registrable Shares to be included in such registration. The Requesting Shareholders and the Non-Requesting Shareholders proposing to distribute their securities through such underwriting (collectively, the “Holders”) shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting reasonably acceptable to the Corporation. Notwithstanding any other provision of this Section 2, if the managing underwriter advises the Requesting Shareholders in writing that the inclusion of all Registrable Shares and/or Primary Shares proposed to be included in such registration would interfere with the successful marketing (including pricing) of the Registrable Shares proposed to be included in such registration, then the number of Registrable Shares and/or Primary Shares to be included in such registration shall be reduced to such number as shall, in the managing underwriter’s opinion, not be likely to have such an effect, which shall be included in such registration in the following order:

     (i) first, the Registrable Shares requested to be included in such registration that are held by the Requesting Shareholders (or, if necessary, such Registrable Shares pro rata among the holders thereof based upon the number of Registrable Shares requested to be registered by each such holder);

     (ii) second, the Registrable Shares requested to be included in such registration that are held by the Non-Requesting Shareholders (or, if necessary, such Registrable Shares pro rata among the holders thereof based upon the number of Registrable Shares requested to be registered by each such holder); and

     (iii) third, the Primary Shares.

          No Registrable Shares or Primary Shares excluded from the underwriting by reason of the managing underwriter’s marketing limitation shall be included in such registration.

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          (c) In the event that a registration is requested under this Section 2 and each of the Requesting Shareholders making such request later determine not to sell their Registrable Shares in connection with the registration requested, then the Requesting Shareholders shall give prompt notice to the Corporation and the other Shareholders, as applicable, that the registration requested is no longer required and the request is thereby withdrawn. Upon receipt of such notice, the Corporation shall cease all efforts to secure registration and shall take all action necessary and reasonably practicable to prevent the commencement of effectiveness for any registration statement that it is preparing or has prepared in connection with the withdrawn request, and the Requesting Shareholders shall bear the Registration Expenses pro rata on the basis of the number of their shares requested for registration.

          SECTION 3. Piggyback Registration. (a) If the Corporation at any time proposes to register any securities under the Securities Act that would permit registration of Registrable Shares for sale to the public under the Securities Act, or, mutatis mutandis, under the Canadian Securities Laws (whether for its own account or for the account of its shareholders), the Corporation will, each such time, give prompt written notice to all holders of Registrable Shares of its intention to do so, describing such securities and specifying the form and manner and the other relevant facts involved in such proposed registration (including, without limitation, whether or not such registration will be in connection with an underwritten offering of Common Shares and, if so, the identity of the managing underwriter and whether such offering will be pursuant to a “best efforts” or “firm commitment” underwriting). Upon the written request of any holder of Registrable Shares in this section (a “Requesting Shareholder”) to include Registrable Shares in such registration (which request (i) must be delivered to the Corporation within 20 days after delivery by the Corporation of any notice pursuant to this Section 3(a), (ii) shall specify the number of Registrable Shares proposed to be included in such registration and (iii) shall state the intended method of disposition of such Registrable Shares), the Corporation shall use its reasonable best efforts to cause all such Registrable Shares to be included in such registration on the same terms and conditions as the securities otherwise being sold in such registration; provided, however, that:

     (i) if, at any time after giving such written notice of its intention to register any of such securities proposed to be registered by the Corporation and prior to the effective date of the registration statement filed in connection with such registration and/or the issuance of a receipt for a final prospectus under Canadian Securities Laws, the Corporation shall determine for any reason not to register such securities, the Corporation may, at its election, give written notice of such determination to each Requesting Shareholder and, thereupon, the Corporation shall be relieved of its obligation to register any Registrable Shares in connection with such registration (but not of its obligation to pay the Registration Expenses in connection therewith to the extent provided in Section 6 below); and

     (ii) if (A) the registration so proposed by the Corporation involves an underwritten offering of the securities to be so registered, to be distributed by or through one or more underwriters of nationally recognized standing under underwriting terms appropriate for such a transaction, and (B) the managing underwriter of such underwritten offering shall advise the Corporation in writing that, in its judgment, the number of Registrable Shares and any other securities proposed to be included in such

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offering by the Corporation should be limited (1) due to market conditions or (2) because inclusion of all Registrable Shares proposed to be included in such registration is reasonably likely to have a significant adverse effect on the successful marketing (including pricing) of the Primary Shares proposed to be registered by the Corporation, then the Corporation will promptly advise each such Requesting Shareholder thereof and may require, by written notice to each such holder accompanying such advice, that, to the extent necessary to meet such limitation, the number of Primary Shares and Registrable Shares proposed to be included in such registration shall be reduced to such number as shall, in the managing underwriter’s opinion, not be likely to have such an effect, which shall be included in such registration in the following order:

     (x) first, the Primary Shares; and

     (y) second, the Registrable Shares requested to be included in such registration (or, if necessary, such Registrable Shares pro rata among the holders thereof based upon the number of Registrable Shares requested to be registered by each such holder).

          (b) The Corporation shall not be obligated to effect any registration of Registrable Shares under this Section 3 that is incidental to the registration of any of its securities in connection with any merger, acquisition, exchange offer, transaction of the type specified in Rule 145(a), dividend reinvestment plan or stock option, restricted stock or other employee benefit plan.

          (c) The Corporation shall not be obligated to effect any registration of Registrable Shares under this Section 3 after the Corporation has effected four (4) registrations of Registrable Shares pursuant to this Section 3; provided, however, that the substantially concurrent registration of Registrable Shares under the Securities Act and qualification for distribution of Registrable Shares under Canadian Securities Laws shall be counted as only one registration of Registrable Shares; provided further, however, that any registration under Section 3 shall be deemed not to have been effected if (i) it does not result in a registration that is declared or ordered effective by the applicable governmental authorities or agencies, including without limitation, the Commission, and that remains effective for not less than 30 days (or such shorter period as will terminate when all Registrable Shares covered by such registration have been sold or withdrawn), or, if such registration relates to an underwritten offering, such longer period, if any, as in the opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of the Registrable Shares by an underwriter or dealer (in either case, such period being the “Demand Period”), (ii) (x) during the Demand Period such registration is terminated by any stop order, injunction or other order or requirement of any governmental agency or court or (y) the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied other than by reason of a wrongful act, misrepresentation or breach of an applicable underwriting agreement by the Requesting Shareholders, (iii) the Requesting Shareholders withdraw their request for registration of Registrable Shares, or (iv) more than 90% of the aggregate number of all Registrable Shares requested to be included in such registration are excluded from the offering pursuant to Section 3(a)(ii).

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          SECTION 4. Shelf Registration. The Corporation shall, at the request of a Shareholder owning at least 35% of the Registrable Shares, use its reasonable best efforts to qualify for registration on Form F-3 or any comparable or successor form or forms or the Canadian shelf prospectus system. If the Corporation has qualified for the use of Form F-3 or the Canadian shelf prospectus system, the Corporation shall, promptly after the request of a Shareholder use its reasonable best efforts to file with the Commission and/or the Canadian Securities Commissions, as the case may be, and make and keep effective, until all Registrable Shares have been sold by the Shareholder, a shelf registration statement pursuant to Rule 415 and/or the shelf registration provisions of National Instrument 44-102, as the case may be, with respect to all of the Registrable Shares. Unless otherwise requested in writing by the Shareholder, the Corporation shall include the Registrable Shares in the first registration statement on Form F-3 or shelf prospectus filed by the Corporation following the date hereof. The Corporation shall not be obligated to qualify, or to take any action to qualify, for registration pursuant to this Section 4 if the offering size would be for a value of less than U.S.$3,000,000.

          SECTION 5. Expenses. Except as provided for in Section 2(a)(ii)(C) and Section 2(c), all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to this Agreement shall be borne by the Corporation, and all Selling Expenses shall be borne by the holders of the securities so registered pro rata on the basis of the number of their shares so registered.

          SECTION 6. Holdback Agreement. (a) If the Corporation at any time shall register Common Shares under the Securities Act pursuant to Section 2 or 3 hereof for sale to the public, any Shareholders that participate in such registration shall not sell publicly, or otherwise dispose publicly of, any Registrable Shares (other than those Common Shares included in such registration pursuant to Section 2 or 3 hereof) without the prior written consent of the Corporation, for a period as shall be determined by the relevant managing underwriters. The Corporation shall obtain the agreement of any Person permitted to sell shares of stock in such registration to be bound by and to comply with this Section 7 as if such Person were a Shareholder hereunder.

          (b) If the Corporation shall at any time pursuant to Section 2 or 3 of this Agreement register under the Securities Act Registrable Shares for sale to the public pursuant to an underwritten offering, the Corporation shall not effect any public sale or distribution of securities similar to those being registered (excluding any transaction of the type identified or contemplated in Section 3(b) above), or any securities convertible into or exercisable or exchangeable for such securities, for such period as shall reasonably be determined by the managing underwriters.

          SECTION 7. Preparation and Filing. (a) If and whenever the Corporation is under an obligation pursuant to the provisions of this Agreement to use its reasonable best efforts to effect the registration of any Registrable Shares, the Corporation shall, with respect to such registration (which, for the avoidance of doubt, shall be a registration in the jurisdiction or jurisdictions requested by the Requesting Shareholder pursuant to Section 2(a) in the case of a registration under Section 2 hereof), as expeditiously as is reasonable:

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    (i) prepare and file a registration statement, in the case of a registration request pursuant to Section 2 within 90 days of such request, under the Securities Act or similar such document under applicable Canadian Securities Laws that registers such Registrable Shares to become and remain effective for a period of 30 days or, if earlier, until all of such Registrable Shares have been disposed of; provided, however, that (i) such 30 day period shall be extended for a period of time equal to the period the holder refrains from selling any securities included in such registration at the request of an underwriter of Common Shares (or other securities) of the Corporation; and (ii) in the case of any registration of Registrable Shares on Form F-3 or the Canadian shelf prospectus system, such 30 day period shall be extended, if necessary, to keep the registration statement effective until the earlier of the date that all such Registrable Shares are sold or the five year anniversary of the date of filing, provided that Rule 415 or any successor rule under the Securities Act or any corresponding rule or regulation under Canadian Securities Laws permits an offering on a continuous or delayed basis, and provided further that applicable rules under the Securities Act or other applicable securities laws governing the obligation to file a post effective amendment permit, in lieu of filing a post-effective amendment that (I) includes any prospectus required by Section 10(a)(3) of the Securities Act or (II) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information required to be included as described in (I) and (II) above to be contained in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act or corresponding continuous disclosure requirements under Canadian Securities Laws in the registration statement;

    (ii) prepare and file with the Commission or with the applicable Canadian Securities Commissions, as the case may be, such amendments (including post-effective amendments) and supplements to such registration statement or similar such document under applicable Canadian Securities Laws and the prospectus relating thereto as may be necessary, or, in the opinion of the managing underwriter, advisable to keep such registration statement or similar such document effective for at least a period of 30 days or, if earlier, until all of such Registrable Shares have been disposed of, and to comply with the provisions of the Securities Act or applicable Canadian Securities Laws with respect to the sale or other disposition of such Registrable Shares;

    (iii) use its reasonable best efforts to register or qualify such Registrable Shares under such other securities or “blue sky” Laws of such jurisdictions as the holders of the Registrable Shares reasonably request and do any and all other acts and things which may be reasonably necessary or advisable to enable such holders to consummate the disposition in such jurisdictions of such holders’ Registrable Shares; provided, however, that the Corporation will not be required (A) to qualify generally to do business, subject itself to general taxation or consent to general service of process in any jurisdiction where it would not otherwise be required to do so but for this paragraph (iii) or (B) to provide any material undertaking or make any changes in its bylaws or certificate of incorporation which the board of directors of the Corporation determines to be contrary to the best interests of the Corporation;

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    (iv) furnish without charge to each seller of such Registrable Shares and other securities such number of conformed copies of such registration statement under the Securities Act, or similar such document under applicable Canadian Securities Laws and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such registration statement or similar such document (including each preliminary prospectus), in conformity with the requirements of the Securities Act or applicable Canadian Securities Laws, as the case may be, such documents incorporated by reference in such registration statement or prospectus, and such other documents, as such seller may reasonably request in order to facilitate the sale or disposition of such Registrable Shares or other securities;

    (v) furnish to each seller of Registrable Shares a signed counterpart, addressed to such seller, of (A) an opinion of counsel reasonably acceptable to a majority of selling holders for the Corporation in customary form, scope and substance, dated the effective date of such registration statement or similar such document (or, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), received by the Corporation in connection with such registration statement, and (B) “comfort” letters signed by the independent public accountants in customary form, scope and substance who have issued a report on the Corporation’s financial statements included in such registration statement or similar such document received by the Corporation in connection with such registration statement or similar such document;

    (vi) immediately notify each seller of Registrable Shares and other securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act or applicable Canadian Securities Laws, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing or if it is necessary to amend or supplement such prospectus to comply with Law, and at the request of any such seller prepare and furnish without charge to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Shares or other securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and shall otherwise comply in all material respects with Law and so that such prospectus, as amended or supplemented, will comply with Law;

    (vii) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, or the applicable rules and regulations of any Canadian Securities Commissions, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, beginning with the first month of the first fiscal quarter after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act;

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    (viii) use its best efforts to list such Registrable Shares on each securities exchange on which the Common Shares are then listed, if such Registrable Shares are not already so listed and if such listing is then permitted under the rules of such exchange, and provide a transfer agent and registrar and a CUSIP number for such Registrable Shares not later than the effective date of such registration statement under the Securities Act, or similar such document under applicable Canadian Securities Laws;

    (ix) deliver to any underwriter to which any holder of Registrable Shares may sell such Registrable Shares in connection with any such registration (and to any direct or indirect transferee of any such underwriter) certificates evidencing such shares without bearing any restrictive legend;

    (x) make every reasonable effort to prevent or obtain the withdrawal of any stop order or other order suspending the use of any preliminary or final prospectus or suspending any qualification of the Registrable Shares at the earliest possible moment;

    (xi) make such representations and warranties to the holders of Registrable Shares being registered, and the underwriters or agents, if any, in form, substance and scope as are customarily made by issuers in secondary underwritten public offerings; and

    (xii) enter into such customary agreements (including underwriting and indemnification agreements) and cooperate with requests reasonably made by the holders of at least a majority of any Registrable Shares being sold or the managing underwriter or agent, if any, to expedite or facilitate the registration and disposition of such Registrable Shares.

The Corporation may require each seller of Registrable Shares as to which any registration is being effected to furnish the Corporation with such information regarding such seller and the distribution of such securities as the Corporation may from time to time reasonably request and as shall be required by Law or by the Commission or applicable Canadian securities regulatory authorities, as the case may be, in connection therewith.

          (b) Each holder of Registrable Shares, upon receipt of any notice from the Corporation of any event of the kind described in Section 8(a)(vi) hereof, shall forthwith discontinue disposition of the Registrable Shares pursuant to the registration statement under the Securities Act, or similar such document under applicable Canadian Securities Laws covering such Registrable Shares until such holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 8(a)(vi) hereof, and, if so directed by the Corporation, such holder shall deliver to the Corporation all copies, other than permanent file copies then in such holder’s possession, of the prospectus covering such Registrable Shares at the time of receipt of such notice.

          (c) In connection with the preparation and filing of each registration statement registering Registrable Shares under the Securities Act, or similar such document under applicable Canadian Securities Laws, the Corporation will give the Shareholders on whose behalf such Registrable Shares are to be so registered their respective counsel and accountants and any underwriters, the opportunity to review and comment on such registration statement or

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prospectus, included therein or filed with the Commission or with any Canadian securities regulatory authority, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Corporation with its officers and the independent public accountants who have issued a report on its financial statements as shall be reasonably necessary, in the opinion of such Shareholders and such underwriters or their respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act or applicable Canadian Securities Laws, as the case may be.

          (d) In connection with the sale of Registrable Shares registered pursuant to Section 2 above, if requested in writing by the Shareholders and as reasonably required or necessary to complete the sale, members of the Corporation’s management shall participate in customary “road shows” and question and answer meetings with potential purchasers of such Registrable Shares in connection with offers and sales of such Registrable Shares.

          (e) It is understood that in any underwritten offering of Registrable Shares in addition to the Common Shares (the “initial shares”) the underwriters have committed to purchase, the underwriting agreement may grant the underwriters an option to purchase a number of additional Common Shares (the “option shares”) equal to up to 15% of the initial shares (or such other maximum amount as the National Association of Securities Dealers, Inc. may then permit), solely to cover over-allotments. The Common Shares proposed to be sold by the Corporation and the Holders shall be allocated between initial shares and option shares as agreed or, in the absence of agreement, allocated pursuant to Section 3(a)(ii) in the event of a registration pursuant Section 3 hereof or allocated pursuant to Section 2(b) in the event of a registration pursuant to Section 2 hereof. The number of initial shares and option shares to be sold by selling holders shall be allocated pro rata among all such holders on the basis of the relative number of Common Shares and other securities each such holder has requested to be included in such registration.

          SECTION 8. Indemnification; Contribution. (a) In the event of any registration of any equity securities of the Corporation under the Securities Act or applicable Canadian Securities Laws, the Corporation will, and hereby does agree to, indemnify and hold harmless, in the case of any registration statement or prospectus filed pursuant to Section 2, 3 or 4 hereof or any related preliminary prospectus, issuer free writing prospectus (as defined in Rule 433(h) under the Securities Act), or issuer information (as defined in Rule 433(h) under the Securities Act) which issuer information is required to be filed pursuant to Rule 433(d) under the Securities Act, the seller of any Registrable Shares covered by such registration statement or prospectus or any related preliminary prospectus or free writing prospectus, its respective directors and officers, partners and members, each other Person who participates as an underwriter in the offering or sale of such securities, and each other Person, if any, who controls such seller or any such underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages, liabilities and expenses, to which they or any of them may become subject under the Securities Act, applicable Canadian Securities Laws or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any registration statement or prospectus under which such securities were registered under the Securities Act, any related preliminary prospectus or free writing prospectus, or any preliminary prospectus or final prospectus filed

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with applicable Canadian Securities Commissions, or any amendment or supplement thereto, or any document incorporated by reference therein, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Corporation shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus or amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Corporation for use in the preparation thereof by such seller or underwriter, as the case may be, and identified as such. This indemnity shall be in addition to any liability the Corporation may otherwise have. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director or officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller.

          (b) The Corporation may require, as a condition to including any Registrable Shares in any registration statement or prospectus filed pursuant to Section 2, 3 or 4 hereof, that the Corporation shall have received an agreement satisfactory to it from (i) the prospective seller of such securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 9(a), except that any such prospective seller shall not in any event be liable to the Corporation pursuant thereto for an amount in excess of the net proceeds of the sale of such prospective seller’s Registrable Shares so to be sold) the Corporation, each director of the Corporation and each of the Corporation’s officers who signed the registration statement or prospectus, each such underwriter of such securities, and each other Person, if any, who controls the Corporation or any such underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and (ii) each such underwriter of such securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 9(a) above) the Corporation, each officer who signed the registration statement or prospectus and each director of the Corporation, each prospective seller, and each other Person, if any, who controls the Corporation or any such prospective seller within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, with respect to any untrue statement in or omission from such registration statement, any preliminary prospectus, final prospectus, or any amendment or supplement thereto, if such untrue statement or omission was made in reliance upon and in conformity with written information furnished by such prospective seller or such underwriter, as the case may be, to the Corporation for use in the preparation of such registration statement, preliminary prospectus, final prospectus, amendment or supplement, and identified as such. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Corporation or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller.

          (c) Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding (including any governmental investigation) involving a claim referred to in either Section 9(a) above or (b) above, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding provisions of this Section 9, except to the extent that the

15

indemnifying party is materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that it may wish, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof. If, in the indemnified party’s reasonable judgment, a conflict of interest between such indemnified party and indemnifying parties may exist in respect of such claim, the indemnified party shall be entitled to participate in the defense thereof and the indemnifying party shall be liable for the fees and expenses of one but not more than one counsel for all sellers of Registrable Shares and one but not more than one counsel for the underwriters in connection with any one action or separate but similar or related actions.

          (d) If the indemnification provided for in the foregoing clauses (a), (b) and (c) of this Section 9 is unavailable to the indemnified parties in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party shall contribute to the amounts paid or payable by such indemnified parties as a result of such losses, claims, damages or liabilities (i) as between the Corporation and the holders of Registrable Shares covered by a registration statement, on the one hand, and the underwriters, on the other, in such proportion as is appropriate to reflect the relative benefits received by the Corporation and such holders, on the one hand, and the underwriters, on the other, from the offering of the Registrable Shares, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Corporation and such holders, on the one hand, and of the underwriters, on the other, in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations, and (ii) as between the Corporation, on the one hand, and each holder of Registrable Shares covered by a registration statement or prospectus, on the other, in such proportion as is appropriate to reflect the relative fault of the Corporation and of each such holder in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by the Corporation and such holders, on the one hand, and the underwriters, on the other, shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Corporation and such holders bear to the total underwriting discounts and commissions received by the underwriters. The relative fault of the Corporation and such holders, on the one hand, and of the underwriters, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Corporation and such holders or by the underwriters. The relative fault of the Corporation, on the one hand, and of each such holder, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

          (e) The Corporation and the holders of Registrable Shares agree that it would not be just and equitable if contribution pursuant to Section 9(d) were determined by pro rata allocation (even if the underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the

16

next preceding paragraph. Notwithstanding the provisions of Section 9(d), no holder of Registrable Shares shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Shares of such holder were offered to the public exceeds the amount of any damages that such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligation of the holders of Registrable Shares to contribute pursuant to this Section 9 is several in the proportion that the proceeds of the offering received by such holder bears to the total proceeds of the offering received by all holders and not joint.

          SECTION 9. Information by Holders of Registrable Shares. Each holder of Registrable Shares shall furnish to the Corporation such written information regarding such Person and the distribution proposed by such Person as the Corporation may reasonably request and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement.

          SECTION 10. Exchange Act Compliance. The Corporation shall comply with all of the reporting requirements of the Exchange Act applicable to it and shall comply with all other public information reporting requirements of the Commission which are conditions to the availability of Rule 144 for the sale of the Common Shares. The Corporation shall cooperate with each holder of Registrable Shares in supplying such information as may be necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of Rule 144.

          SECTION 11. Termination. This Agreement shall terminate upon the earlier of (a) the date on which there are no longer any Registrable Shares outstanding (b) the date on which all Common Shares owned by the Shareholders can be sold without restriction in accordance with Rule 144 and under applicable Canadian Securities Laws, rules and regulations, and (c) l, 2016. The rights and obligations hereunder of the Shareholders shall terminate at such time when neither they nor any of their respective Specified Assignees hold Registrable Shares, provided that the provisions of Section 9 hereof, the rights of any party hereto with respect to the breach of any provision hereof, and any obligation accrued as of the date of termination shall survive the termination of this Agreement.

          SECTION 12. Successors and Assigns. This Agreement shall bind and inure to the benefit of the Corporation and the Shareholders and, subject to Section 14 below, their respective successors and assigns.

          SECTION 13. Assignment. (a) If a Shareholder transfers Common Shares to another Person or Persons as provided herein, the Shareholder may transfer or assign to such Person its rights under the Agreement; provided, however, that the Corporation is given written notice at the time of or within a reasonable time after such transfer or assignment, stating the name and address of each transferee or assignee and identifying the securities with respect to which such rights are being transferred or assigned, and, provided further, that each transferee or assignee of such rights assumes all of the obligations of the Shareholder under this Agreement with respect to those Common Shares transferred to such transferee or assignee, and no such assignment or transfer shall operate to release the Shareholder from any of its obligations or liabilities hereunder.

17

          SECTION 14. Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the parties with respect to the subject matter hereof.

          SECTION 15. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by courier service, by facsimile, or by registered or certified mail (postage prepaid, return receipt requested) to the parties at the addresses specified in Exhibit I hereof (or at such other address for a party as shall be specified in a notice given in accordance with this Section 16).

          SECTION 16. Modifications; Amendments; Waivers. This Agreement may not be amended or modified, except by an instrument in writing signed by, or on behalf of, the Corporation and Shareholders representing 75% of the Registrable Shares.

          SECTION 17. Counterparts; Facsimile Signatures. This Agreement may be executed and delivered in one or more counterparts (including by telecopy), and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

          SECTION 18. Headings. The descriptive headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

18

          SECTION 19. 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.

          SECTION 20. Severability; Governing Law. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law, governmental regulation or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect as long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto 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 in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. This Agreement shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the federal laws of Canada applicable therein.

          SECTION 21. Waiver of Jury Trial. Each of the parties hereto irrevocably and unconditionally waives trial by jury in any legal action or proceeding relating to this Agreement, the transactions contemplated hereby and for any counterclaim therein.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.

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

EXHIBIT 1

NOTICE

If to ATS:	ATS Automation Tooling Systems Inc.
	250 Royal Oak Road
	Cambridge, ON
	Canada N3H 4R6
	Attention: Stewart McCuaig
	Fax Number: (519) 650-6520
If to the Corporation:	Photowatt Technologies Inc.
	25 Reuter Drive
	Cambridge, ON
	Canada N3E 1A9
	Attention: l
	Fax Number: l

REGISTRATION RIGHTS AGREEMENT

Among

PHOTOWATT TECHNOLOGIES INC.

and

ATS AUTOMATION TOOLING SYSTEMS INC.

Dated as of l, 2007

TABLE OF CONTENTS

		Page
SECTION 1.	Definitions		1
SECTION 2.	Request for Registration		4
SECTION 3.	Piggyback Registration		7
SECTION 4.	Shelf Registration		9
SECTION 5.	Expenses		9
SECTION 6.	Holdback Agreement		9
SECTION 7.	Preparation and Filing		9
SECTION 8.	Indemnification; Contribution		13
SECTION 9.	Information by Holders of Registrable Shares		16
SECTION 10.	Exchange Act Compliance		16
SECTION 11.	Termination		16
SECTION 12.	Successors and Assigns		16
SECTION 13.	Assignment		17
SECTION 14.	Entire Agreement		17
SECTION 15.	Notices		17
SECTION 16.	Modifications; Amendments; Waivers		17
SECTION 17.	Counterparts; Facsimile Signatures		17
SECTION 18.	Headings		17
SECTION 19.	Construction		17
SECTION 20.	Severability; Governing Law		17
SECTION 21.	Waiver of Jury Trial		18

EX-10.13

Exhibit 10.13

SHARE TRANSFER AGREEMENT

          THIS SHARE TRANSFER AGREEMENT (this “Agreement”), made and entered into on the [•] day of [•], 2007, by and among Photowatt Technologies Inc. (“Purchaser”), a corporation duly organized and validly existing under the laws of Canada and ATS Automation Tooling Systems Inc. (“Seller”), a corporation duly organized and validly existing under the laws of the Province of Ontario.

RECITALS

1. Seller is the beneficial owner of [•] common shares (the “Shares”) in the capital of Spheral Solar Power, Inc., a corporation duly organized and validly existing under the laws of the Province of Ontario.

2. Seller desires to sell to Purchaser and Purchaser desires to purchase from Seller the Shares on the terms and conditions hereinafter set forth.

3. This Agreement is being entered into concurrent with certain other agreements in connection with the reorganization of the Seller’s solar operations and the initial public offering of shares in the common stock of the Purchaser.

NOW THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

1. Sale and Purchase. Subject to the terms and conditions set forth in this Agreement, Seller hereby sells, transfers, assigns and conveys to Purchaser, and Purchaser hereby purchases from Seller, the Shares effective as of the date hereof (the “Time of Transfer”).

2. Purchase Price. The purchase price payable by Purchaser to Seller for the Shares is equal to the fair market value of the Shares as at the date hereof, which the parties hereto have determined to be [•] (“Purchase Price”).

3. Payment of Purchase Price. The Purchase Price shall be paid and satisfied by Purchaser by the issuance by Purchaser to Seller of [•] common shares in the capital of Purchaser (the “Consideration Shares”) having an aggregate fair market value and stated capital equal to the aggregate fair market value of the Shares. Seller hereby acknowledges receipt from Purchaser on the date hereof of the Consideration Shares in full satisfaction of the Purchase Price.

4. Subsection 85(1) and Other Tax Elections. Seller and Purchaser shall file in mutually agreeable form and within the time prescribed all elections required or desirable under the Income Tax Act (Canada), including without limitation an election under subsection 85(1) of the Income Tax Act (Canada), and any applicable provincial legislation in respect of the transfer of the Shares.

- 2 -

5. Taxes. Purchaser shall be liable for all taxes, duties or other like charges properly payable upon and in connection with the sale, conveyance, assignment and transfer of the Shares to Purchaser save and except for any income or corporation taxes payable by Seller.

6. Representations and Warranties of Seller. Seller hereby represents and warrants to Purchaser, and acknowledges that Purchaser is relying upon such representations and warranties in connection with the entering into of this Agreement and the purchase by Purchaser of the Shares, that:

6.1 Organization and Standing of Seller. Seller is a corporation duly organized and validly existing under the laws of the Province of Ontario, with full power and authority to enter into this Agreement and to sell, assign, transfer, convey and deliver the Shares to Purchaser.

6.2 Corporate Authorization. All corporate and other proceedings required to be taken by or on the part of Seller, to authorize it to execute, deliver and carry out this Agreement and to sell, assign, transfer, convey and deliver the Shares to Purchaser have been duly and properly taken. Neither the execution and delivery of this Agreement by Seller, nor compliance with its terms, will result in a breach or violation of Seller’s charter documents.

6.3 Title to the Shares. Seller has good and marketable title to the Shares, free and clear of all mortgages, pledges, liens, security interests, conditional sales or agreements, encumbrances, restrictions or charges of any kind.

6.4. Non-Resident of Canada. Seller is not a non-resident of Canada for purposes of Section 116 of the Income Tax Act (Canada).

7. Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to Seller, and acknowledges that Seller is relying upon such representations and warranties in connection with the entering into of this Agreement and the sale to Purchaser of the Shares, that:

7.1 Organization and Standing of Purchaser. Purchaser is a corporation duly organized and validly existing under the laws of Canada, with full power and authority to enter into this Agreement and with a sufficient number of authorized and unissued shares to satisfy the consideration requirements specified in Section 3 hereof.

7.2 Corporate Authorization. All corporate and other proceedings required to be taken by or on the part of Purchaser to authorize it to execute, deliver and carry out this Agreement have been duly and properly taken. Neither the execution and delivery of this Agreement by Purchaser, nor compliance with its terms, will result in a breach or violation of Purchaser’s charter documents.

7.3 Consideration Shares Validly Issued. The Consideration Shares have been validly issued in compliance with applicable law and are fully paid and non-assessable.

- 3 -

8. Survival of Representations and Warranties. The representations and warranties of the parties hereto set forth in this Agreement shall survive for a period of two years from the Time of Transfer.

9. Further Assurances and Assistance. Seller shall, from time to time, at the request of Purchaser, do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, assignments, transfers, conveyances, assurances and take such other action as Purchaser may reasonably request and as may be reasonably necessary in order to vest in Purchaser title to and possession and control of the Shares. Purchaser shall, from time to time, at the request and at the cost and expense of Seller, take such action as Seller may reasonably request to assist Seller in complying with all laws applicable to the consummation of the transactions contemplated by this Agreement.

10. General.

10.1	Successors and Assigns. Neither party hereto 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 hereto. 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 10.1 shall be invalid and ineffective ab initio.
10.2	Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. If any dispute arises out of or in connection with this Agreement, the parties hereto irrevocably (a) consent and submit to the exclusive jurisdiction of the Courts of the Province of 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.
10.3	Construction. The division of this Agreement into articles, sections, paragraphs and subparagraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms “this Agreement”, “hereof”, “herein”, “hereunder” and similar expressions refer to this Agreement and not to any particular article, section or other portion thereof and include any agreement or instrument supplementary or ancillary hereto. Words importing the singular number only shall include the plural and vice versa, and words importing the use of any gender shall include all genders. The words “include,” “includes” and “including” shall be deemed to be followed by “without limitation.”
10.4	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 hereto.

- 4 -

10.5 Counterparts; Facsimile Execution. 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. Execution and delivery of this Agreement by facsimile transmission shall constitute execution and delivery of this Agreement for all purposes, with the same force and effect as execution and delivery of an original manually signed copy hereof.

* * * * *

- 5 -

IN WITNESS WHEREOF, the parties have duly executed this Agreement effective on the day and year first above written.

PHOTOWATT TECHNOLOGIES INC.

By:

Name: [·]

Title:   [·]

ATS AUTOMATION TOOLING SYSTEMS INC.

By:

Name: [·]

Title:   [·]

By:

Name: [·]

Title:   [·]

EX-10.14

Exhibit 10.14

SHARE TRANSFER AGREEMENT

          THIS SHARE TRANSFER AGREEMENT (this “Agreement”), made and entered into on the [·] day of [·], 2007, by and among Photowatt Technologies Inc. (“Purchaser”), a corporation duly organized and validly existing under the laws of Canada and ATS Canadian Investment Holding Company Inc. (“Seller”), a corporation duly organized and validly existing under the laws of the Province of Ontario.

RECITALS

1.	Seller is the beneficial owner of [·] common shares (the “Shares”) in the capital of Photowatt International S.A.S. (“Photowatt France”), a corporation duly organized and validly existing under the laws of France.
2.	Seller desires to sell to Purchaser and Purchaser desires to purchase from Seller the Shares on the terms and conditions hereinafter set forth.
3.	This Agreement is being entered into concurrent with certain other agreements in connection with the reorganization of ATS Automation Tooling Systems Inc.’s solar operations and the initial public offering of shares in the common stock of the Purchaser.

NOW THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

1. Sale and Purchase. Subject to the terms and conditions set forth in this Agreement, Seller hereby sells, transfers, assigns and conveys to Purchaser, and Purchaser hereby purchases from Seller, the Shares effective as of the date hereof (the “Time of Transfer”).

2. Purchase Price. The purchase price payable by Purchaser to Seller for the Shares is equal to the fair market value of the Shares as at the date hereof, which the parties hereto have determined to be [·] (“Purchase Price”).

3. Payment of Purchase Price. The Purchase Price shall be paid and satisfied by Purchaser by the issuance by Purchaser to Seller of [·] common shares in the capital of Purchaser (the “Consideration Shares”) having an aggregate fair market value and stated capital equal to the aggregate fair market value of the Shares. Seller hereby acknowledges receipt from Purchaser on the date hereof of the Consideration Shares in full satisfaction of the Purchase Price.

4. Subsection 85(1) and Other Tax Elections. Seller and Purchaser shall file in mutually agreeable form and within the time prescribed all elections required or desirable under the Income Tax Act (Canada), including without limitation an election under subsection 85(1) of the Income Tax Act (Canada), and any applicable provincial legislation in respect of the transfer of the Shares.

- 2 -

5. Taxes. Purchaser shall be liable for all taxes, duties or other like charges properly payable upon and in connection with the sale, conveyance, assignment and transfer of the Shares to Purchaser save and except for any income or corporation taxes payable by Seller.

6. Representations and Warranties of Seller. Seller hereby represents and warrants to Purchaser, and acknowledges that Purchaser is relying upon such representations and warranties in connection with the entering into of this Agreement and the purchase by Purchaser of the Shares, that:

6.1 Organization and Standing of Seller. Seller is a corporation duly organized and validly existing under the laws of the Province of Ontario, with full power and authority to enter into this Agreement and to sell, assign, transfer, convey and deliver the Shares to Purchaser.

6.2 Corporate Authorization. All corporate and other proceedings required to be taken by or on the part of Seller, to authorize it to execute, deliver and carry out this Agreement and to sell, assign, transfer, convey and deliver the Shares to Purchaser have been duly and properly taken. Neither the execution and delivery of this Agreement by Seller, nor compliance with its terms, will result in a breach or violation of Seller’s charter documents.

6.3 Title to the Shares. Seller has good and marketable title to the Shares, free and clear of all mortgages, pledges, liens, security interests, conditional sales or agreements, encumbrances, restrictions or charges of any kind.

6.4. Non-Resident of Canada. Seller is not a non-resident of Canada for purposes of Section 116 of the Income Tax Act (Canada).

7. Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to Seller, and acknowledges that Seller is relying upon such representations and warranties in connection with the entering into of this Agreement and the sale to Purchaser of the Shares, that:

7.1 Organization and Standing of Purchaser. Purchaser is a corporation duly organized and validly existing under the laws of Canada, with full power and authority to enter into this Agreement and with a sufficient number of authorized and unissued shares to satisfy the consideration requirements specified in Section 3 hereof.

7.2 Corporate Authorization. All corporate and other proceedings required to be taken by or on the part of Purchaser to authorize it to execute, deliver and carry out this Agreement have been duly and properly taken. Neither the execution and delivery of this Agreement by Purchaser, nor compliance with its terms, will result in a breach or violation of Purchaser’s charter documents.

7.3 Consideration Shares Validly Issued. The Consideration Shares have been validly issued in compliance with applicable law and are fully paid and non-assessable.

- 3 -

8. Covenants of the Purchaser. Purchaser hereby covenants with the Seller that it will give Seller advance notice of any disposition of the Shares and of any other changes that Purchaser may contemplate relative to its ownership of the Shares.

9. Survival of Representations and Warranties. The representations and warranties of the parties hereto set forth in this Agreement shall survive for a period of two years from the Time of Transfer.

10. Further Assurances and Assistance. Seller shall, from time to time, at the request of Purchaser, do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, assignments, transfers, conveyances, assurances and take such other action as Purchaser may reasonably request and as may be reasonably necessary in order to vest in Purchaser title to and possession and control of the Shares. Purchaser shall, from time to time, at the request and at the cost and expense of Seller, take such action as Seller may reasonably request to assist Seller in complying with all laws applicable to the consummation of the transactions contemplated by this Agreement.

11. General.

11.1	Successors and Assigns. Neither party hereto 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 hereto. 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 11.1 shall be invalid and ineffective ab initio.
11.2	Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. If any dispute arises out of or in connection with this Agreement, the parties hereto irrevocably (a) consent and submit to the exclusive jurisdiction of the Courts of the Province of 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.
11.3	Construction. The division of this Agreement into articles, sections, paragraphs and subparagraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms “this Agreement”, “hereof”, “herein”, “hereunder” and similar expressions refer to this Agreement and not to any particular article, section or other portion thereof and include any agreement or instrument supplementary or ancillary hereto. Words importing the singular number only shall include the plural and vice versa, and words importing the use of any gender shall include all genders. The words “include,” “includes” and “including” shall be deemed to be followed by “without limitation.”

- 4 -

11.4

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 hereto.

11.5

Counterparts; Facsimile Execution. 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. Execution and delivery of this Agreement by facsimile transmission shall constitute execution and delivery of this Agreement for all purposes, with the same force and effect as execution and delivery of an original manually signed copy hereof.

* * * * *

- 5 -

IN WITNESS WHEREOF, the parties have duly executed this Agreement effective on the day and year first above written.

PHOTOWATT TECHNOLOGIES INC.

By:

Name: [·]

Title:   [·]

ATS CANADIAN INVESTMENT HOLDING COMPANY INC.

By:

Name: [·]

Title:   [·]

EX-10.15

Exhibit 10.15

SHARE TRANSFER AGREEMENT

          THIS SHARE TRANSFER AGREEMENT (this “Agreement”), made and entered into on the [•] day of [•], 2007, by and among Photowatt Technologies Inc. (“Purchaser”), a corporation duly organized and validly existing under the laws of Canada and ATS Automation Tooling Systems Inc. (“Seller”), a corporation duly organized and validly existing under the laws of the Province of Ontario.

RECITALS

1.	Seller is the beneficial owner of [•] common shares (the “Shares”) in the capital of Photowatt Technologies USA Inc. (“Photowatt USA”), a corporation duly organized and validly existing under the laws of the State of Delaware.
2.	Seller desires to sell to Purchaser and Purchaser desires to purchase from Seller the Shares on the terms and conditions hereinafter set forth.
3.	This Agreement is being entered into concurrent with certain other agreements in connection with the reorganization of the Seller’s solar operations and the initial public offering of shares in the common stock of the Purchaser.

NOW THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

1. Sale and Purchase. Subject to the terms and conditions set forth in this Agreement, Seller hereby sells, transfers, assigns and conveys to Purchaser, and Purchaser hereby purchases from Seller, the Shares effective as of the date hereof (the “Time of Transfer”).

2. Purchase Price. The purchase price payable by Purchaser to Seller for the Shares is equal to the fair market value of the Shares as at the date hereof, which the parties hereto have determined to be [•] (“Purchase Price”).

3. Payment of Purchase Price. The Purchase Price shall be paid and satisfied by Purchaser by the issuance by Purchaser to Seller of [•] common shares in the capital of Purchaser (the “Consideration Shares”) having an aggregate fair market value and stated capital equal to the aggregate fair market value of the Shares. Seller hereby acknowledges receipt from Purchaser on the date hereof of the Consideration Shares in full satisfaction of the Purchase Price.

4. Subsection 85(1) and Other Tax Elections. Seller and Purchaser shall file in mutually agreeable form and within the time prescribed all elections required or desirable under the Income Tax Act (Canada), including without limitation an election under subsection 85(1) of the Income Tax Act (Canada), and any applicable provincial legislation in respect of the transfer of the Shares.

 - 2 - 

5. Taxes. Purchaser shall be liable for all taxes, duties or other like charges properly payable upon and in connection with the sale, conveyance, assignment and transfer of the Shares to Purchaser save and except for any income or corporation taxes payable by Seller.

6. Representations and Warranties of Seller. Seller hereby represents and warrants to Purchaser, and acknowledges that Purchaser is relying upon such representations and warranties in connection with the entering into of this Agreement and the purchase by Purchaser of the Shares, that:

6.1 Organization and Standing of Seller. Seller is a corporation duly organized and validly existing under the laws of the Province of Ontario, with full power and authority to enter into this Agreement and to sell, assign, transfer, convey and deliver the Shares to Purchaser.

6.2 Corporate Authorization. All corporate and other proceedings required to be taken by or on the part of Seller, to authorize it to execute, deliver and carry out this Agreement and to sell, assign, transfer, convey and deliver the Shares to Purchaser have been duly and properly taken. Neither the execution and delivery of this Agreement by Seller, nor compliance with its terms, will result in a breach or violation of Seller’s charter documents.

6.3 Title to the Shares. Seller has good and marketable title to the Shares, free and clear of all mortgages, pledges, liens, security interests, conditional sales or agreements, encumbrances, restrictions or charges of any kind.

6.4. Non-Resident of Canada. Seller is not a non-resident of Canada for purposes of Section 116 of the Income Tax Act (Canada).

6.5 U.S. Real Property Holding Corporation. Photowatt USA is not a U.S. Real Property Holding Corporation as that term is defined by Section 897 of the U.S. Internal Revenue Code of 1986.

7. Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to Seller, and acknowledges that Seller is relying upon such representations and warranties in connection with the entering into of this Agreement and the sale to Purchaser of the Shares, that:

7.1 Organization and Standing of Purchaser. Purchaser is a corporation duly organized and validly existing under the laws of Canada, with full power and authority to enter into this Agreement and with a sufficient number of authorized and unissued shares to satisfy the consideration requirements specified in Section 3 hereof.

7.2 Corporate Authorization. All corporate and other proceedings required to be taken by or on the part of Purchaser to authorize it to execute, deliver and carry out this Agreement have been duly and properly taken. Neither the execution and delivery of this Agreement by Purchaser, nor compliance with its terms, will result in a breach or violation of Purchaser’s charter documents.

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7.3 Consideration Shares Validly Issued. The Consideration Shares have been validly issued in compliance with applicable law and are fully paid and non-assessable.

8. Survival of Representations and Warranties. The representations and warranties of the parties hereto set forth in this Agreement shall survive for a period of two years from the Time of Transfer.

9. Further Assurances and Assistance. Seller shall, from time to time, at the request of Purchaser, do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, assignments, transfers, conveyances, assurances and take such other action as Purchaser may reasonably request and as may be reasonably necessary in order to vest in Purchaser title to and possession and control of the Shares. Purchaser shall, from time to time, at the request and at the cost and expense of Seller, take such action as Seller may reasonably request to assist Seller in complying with all laws applicable to the consummation of the transactions contemplated by this Agreement.

10. General.

10.1	Successors and Assigns. Neither party hereto 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 hereto. 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 10.1 shall be invalid and ineffective ab initio.
10.2	Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. If any dispute arises out of or in connection with this Agreement, the parties hereto irrevocably (a) consent and submit to the exclusive jurisdiction of the Courts of the Province of 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.
10.3	Construction. The division of this Agreement into articles, sections, paragraphs and subparagraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms “this Agreement”, “hereof”, “herein”, “hereunder” and similar expressions refer to this Agreement and not to any particular article, section or other portion thereof and include any agreement or instrument supplementary or ancillary hereto. Words importing the singular number only shall include the plural and vice versa, and words importing the use of any gender shall include all genders. The words “include,” “includes” and “including” shall be deemed to be followed by “without limitation.”

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10.4

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 hereto.

10.5

Counterparts; Facsimile Execution. 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. Execution and delivery of this Agreement by facsimile transmission shall constitute execution and delivery of this Agreement for all purposes, with the same force and effect as execution and delivery of an original manually signed copy hereof.

* * * * *

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IN WITNESS WHEREOF, the parties have duly executed this Agreement effective on the day and year first above written.

PHOTOWATT TECHNOLOGIES INC.

By:

Name: [•]

Title:   [•]

ATS AUTOMATION TOOLING SYSTEMS INC.

By:

Name: [•]

Title:   [•]

By:

Name: [•]

Title:   [•]

EX-10.16

Exhibit 10.16

SHARE TRANSFER AGREEMENT

     THIS SHARE TRANSFER AGREEMENT (this “Agreement”), made and entered into on the [•] day of [•], 2007, by and among Photowatt Technologies Inc. (“Purchaser”), a corporation duly organized and validly existing under the laws of Canada and ATS Automation Tooling Systems Inc. (“Seller”), a corporation duly organized and validly existing under the laws of the Province of Ontario.

RECITALS

1.	Seller is the beneficial owner of [•] common shares (the “Shares”) in the capital of Photowatt International S.A.S. (“Photowatt France”), a corporation duly organized and validly existing under the laws of France.
2.	Seller desires to sell to Purchaser and Purchaser desires to purchase from Seller the Shares on the terms and conditions hereinafter set forth.
3.	This Agreement is being entered into concurrent with certain other agreements in connection with the reorganization of the Seller’s solar operations and the initial public offering of             shares in the common stock of the Purchaser.

NOW THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

1. Sale and Purchase. Subject to the terms and conditions set forth in this Agreement, Seller hereby sells, transfers, assigns and conveys to Purchaser, and Purchaser hereby purchases from Seller, the Shares effective as of the date hereof (the “Time of Transfer”).

2. Purchase Price. The purchase price payable by Purchaser to Seller for the Shares is equal to the fair market value of the Shares as at the date hereof, which the parties hereto have determined to be [•] (“Purchase Price”).

3. Payment of Purchase Price. The Purchase Price shall be paid and satisfied by Purchaser as follows: (i) as to [•] of the Purchase Price, by the issuance by Purchaser to Seller of a demand promissory note (the “Note”) in the principal amount of [•] in favour of Seller; and (ii) as to the balance of the Purchase Price, by the issuance by Purchaser to Seller of [•] common shares in the capital of Purchaser (the “Consideration Shares”) having an aggregate fair market value and stated capital equal to [•]. Seller hereby acknowledges receipt from Purchaser on the date hereof of the Note and the Consideration Shares in satisfaction of the Purchase Price.

4. Subsection 85(1) and Other Tax Elections. Seller and Purchaser shall file in mutually agreeable form and within the time prescribed all elections required or desirable under the Income Tax Act (Canada), including without limitation an election under subsection 85(1) of the Income Tax Act (Canada), and any applicable provincial legislation in respect of the transfer of the Shares.

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5. Taxes. Purchaser shall be liable for all taxes, duties or other like charges properly payable upon and in connection with the sale, conveyance, assignment and transfer of the Shares to Purchaser save and except for any income or corporation taxes payable by Seller.

6. Representations and Warranties of Seller. Seller hereby represents and warrants to Purchaser, and acknowledges that Purchaser is relying upon such representations and warranties in connection with the entering into of this Agreement and the purchase by Purchaser of the Shares, that:

6.1 Organization and Standing of Seller. Seller is a corporation duly organized and validly existing under the laws of the Province of Ontario, with full power and authority to enter into this Agreement and to sell, assign, transfer, convey and deliver the Shares to Purchaser.

6.2 Corporate Authorization. All corporate and other proceedings required to be taken by or on the part of Seller, to authorize it to execute, deliver and carry out this Agreement and to sell, assign, transfer, convey and deliver the Shares to Purchaser have been duly and properly taken. Neither the execution and delivery of this Agreement by Seller, nor compliance with its terms, will result in a breach or violation of Seller’s charter documents.

6.3 Title to the Shares. Seller has good and marketable title to the Shares, free and clear of all mortgages, pledges, liens, security interests, conditional sales or agreements, encumbrances, restrictions or charges of any kind.

6.4. Non-Resident of Canada. Seller is not a non-resident of Canada for purposes of Section 116 of the Income Tax Act (Canada).

7. Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to Seller, and acknowledges that Seller is relying upon such representations and warranties in connection with the entering into of this Agreement and the sale to Purchaser of the Shares, that:

7.1 Organization and Standing of Purchaser. Purchaser is a corporation duly organized and validly existing under the laws of Canada, with full power and authority to enter into this Agreement and with a sufficient number of authorized and unissued shares to satisfy the consideration requirements specified in Section 3 hereof.

7.2 Corporate Authorization. All corporate and other proceedings required to be taken by or on the part of Purchaser to authorize it to execute, deliver and carry out this Agreement have been duly and properly taken. Neither the execution and delivery of this Agreement by Purchaser, nor compliance with its terms, will result in a breach or violation of Purchaser’s charter documents.

7.3 Consideration Shares Validly Issued. The Consideration Shares have been validly issued in compliance with applicable law and are fully paid and non-assessable.

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8. Survival of Representations and Warranties. The representations and warranties of the parties hereto set forth in this Agreement shall survive for a period of two years from the Time of Transfer.

9. Further Assurances and Assistance. Seller shall, from time to time, at the request of Purchaser, do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, assignments, transfers, conveyances, assurances and take such other action as Purchaser may reasonably request and as may be reasonably necessary in order to vest in Purchaser title to and possession and control of the Shares. Purchaser shall, from time to time, at the request and at the cost and expense of Seller, take such action as Seller may reasonably request to assist Seller in complying with all laws applicable to the consummation of the transactions contemplated by this Agreement.

10. General.

10.1	Successors and Assigns. Neither party hereto 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 hereto. 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 10.1 shall be invalid and ineffective ab initio.
10.2	Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. If any dispute arises out of or in connection with this Agreement, the parties hereto irrevocably (a) consent and submit to the exclusive jurisdiction of the Courts of the Province of 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.
10.3	Construction. The division of this Agreement into articles, sections, paragraphs and subparagraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms “this Agreement”, “hereof”, “herein”, “hereunder” and similar expressions refer to this Agreement and not to any particular article, section or other portion thereof and include any agreement or instrument supplementary or ancillary hereto. Words importing the singular number only shall include the plural and vice versa, and words importing the use of any gender shall include all genders. The words “include,” “includes” and “including” shall be deemed to be followed by “without limitation.”
10.4	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 hereto.

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10.5 Counterparts; Facsimile Execution. 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. Execution and delivery of this Agreement by facsimile transmission shall constitute execution and delivery of this Agreement for all purposes, with the same force and effect as execution and delivery of an original manually signed copy hereof.

* * * * *

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IN WITNESS WHEREOF, the parties have duly executed this Agreement effective on the day and year first above written.

PHOTOWATT TECHNOLOGIES INC.

By:

Name: [·]

Title:   [·]

ATS AUTOMATION TOOLING SYSTEMS INC.

By:

Name: [·]

Title:   [·]

By:

Name: [·]

Title:   [·]

EX-10.17

Exhibit 10.17

ASSET TRANSFER AGREEMENT

          THIS AGREEMENT made as of the [•] day of [•], 2007.

B E T W E E N:

ATS AUTOMATION TOOLING SYSTEMS INC.
(the “Vendor”)

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PHOTOWATT TECHNOLOGIES INC.
(the “Purchaser”)

          WHEREAS the Vendor desires to sell to the Purchaser and the Purchaser desires to purchase from the Vendor the property, rights and assets described herein, on the terms and subject to the conditions hereinafter set forth;

          AND WHEREAS the Purchaser desires to issue to the Vendor [•] common shares in the capital of the Purchaser as consideration for the property, rights and assets to be transferred pursuant to the terms and conditions herein;

          AND WHEREAS, this Agreement is being entered into concurrent with certain other agreements in connection with the reorganization of the Vendor’s solar operations and the initial public offering of shares in the common stock of the Purchaser;

          NOW THEREFORE THIS AGREEMENT WITNESSES that, for the consideration hereinafter set forth, the Parties have agreed and do hereby agree with each other as follows:

ARTICLE I

INTERPRETATION

1.1 Definitions. Where used in this Agreement, unless the context or subject matter otherwise requires, the following words and phrases shall have the meanings set forth below:

“Affiliate” of any specified Person means any other Person directly or indirectly “controlling,” “controlled by” or “under common control with” (within the meaning of the Securities Act), such specified Person; provided, however, that for purposes of this Agreement, except to the extent expressly provided otherwise, the determination of whether a Person is an Affiliate of another Person shall be made assuming that no member of the ATS Group is an Affiliate of the Purchaser and vice versa;

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“Assets” means assets, properties and rights (including goodwill and rights arising under Contracts), wherever located (including in the possession of vendors, other Persons or elsewhere), whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person;

“Assumed Liabilities” means the following:

(i) any and all Liabilities of the Vendor to the extent arising out of or relating to the SSP Division or the Transferred Property, in each case whether such Liabilities arise or accrue prior to, on or after the Time of Transfer including:

(A)	any and all Liabilities of the SSP Division owed to the ATS Group pursuant to valid intercompany accounts as of the Time of Transfer;
(B)	any and all Liabilities arising from or related to Environmental Conditions (x) existing on, under, about or in the vicinity of any of the SSP Division Facilities whether prior to or after the Time of Transfer, or (y) arising out of operations occurring at any time prior to or after the Time of Transfer, of the SSP Division, the Transferred Property or the SSP Division Facilities; provided, however, that any such Liabilities with respect to the SSP Division Facilities shall be limited to such Liabilities assumed by the Purchaser pursuant to the Lease Agreement;
(C)	any and all employment-related Liabilities related to past or present employees of the SSP Division;
(D)	any and all Liabilities relating to, arising out of or resulting from any act or failure to act by any Representative of the SSP Division (whether or not such act or failure to act is or was within such Person’s authority); and
(E)	any and all tax Liabilities relating to, arising out of or resulting from the SSP Division;

(ii)	any and all Liabilities to the extent arising out of or relating to the operation of any business conducted by the Purchaser at any time after the Time of Transfer;
(iii)	any and all Liabilities of the SSP Division that are expressly listed, scheduled or otherwise clearly described herein or in any other Separation Agreement as Liabilities for which the Purchaser is to be responsible, including but not limited to, any Included Liabilities;

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(iv)	any and all Business Guarantees that are not replaced with Substitute Guarantees, or with respect to which the Vendor or any member of the ATS Group has any liability or obligation after the Time of Transfer; and
(v)	any and all obligations of the Purchaser under or pursuant to this Agreement or any other instrument entered into in connection herewith;

but excluding the Excluded Liabilities;

“ATS Group” means the Vendor and each Person that the Vendor directly or indirectly controls (within the meaning of the Securities Act), other than the Purchaser, Spheral Solar Power, Inc., Photowatt Technologies USA Inc. and Photowatt International S.A.S.;

“Business Guarantees” means various arrangements entered into by members of the ATS Group in which one or more members of the ATS Group issued or made available guarantees, sureties, bonds, letters of credit or similar instruments or are the primary obligors on other agreements, in any such case to support or facilitate the SSP Division;

“Contract” means any contract, agreement, lease, license, sales order, purchase order, instrument or other commitment that is binding on the SSP Division or any part of its property under applicable Law;

“Employees” means all of the employees of the SSP Division, including any employees on leave, disability or subject to recall;

“Environmental Conditions” means the presence in the environment, including the soil, subsurface strata, groundwater, surface water or ambient air, of any Hazardous Material at a level which exceeds any applicable standard or threshold under any Environmental Law or otherwise requires investigation or remediation (including investigation, study, health or risk assessment, monitoring, removal, treatment or transport) under any applicable Environmental Laws;

“Environmental Laws” means all Laws of any Governmental Authority with jurisdiction that relate to the protection of the environment (including ambient air, surface water, ground water, land surface or subsurface strata) including laws and regulations relating to a Hazardous Materials Release, or otherwise relating to the import, storage, distribution, labelling, sale, use, treatment, disposal, transport or handling of Hazardous Materials, or to the exposure of any individual to a Hazardous Materials Release;

“Excluded Assets” means any and all Assets of the SSP Division set out as “Excluded Assets” in the Master Separation Agreement and any and all shares in the capital stock of Photowatt Technologies Inc., Spheral Solar Power, Inc., Photowatt Technologies USA Inc., Photowatt International S.A.S., and ATS Canadian Investment Holding Company Inc.;

“Excluded Liabilities” means [•];

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“Governmental Authority” means any federal, provincial, state, local or foreign government, supranational, governmental, regulatory or administrative authority, instrumentality, agency or commission, political subdivision, self-regulatory organization or any court, tribunal or judicial or arbitral body or other governmental authority;

“Hazardous Materials” means chemicals, pollutants, contaminants, hazardous substances, dangerous substance, noxious substance, toxic substance, radioactive and biological materials, petroleum and petroleum products or any fraction thereof, hazardous waste, flammable or explosive material, radio-active material, urea formaldehyde foam insulation, asbestos, polychlorinated biphenyls, polychlorinated biphenal waste, polychlorinated biphenal related waste or any other substance or material now or hereafter declared, defined or deemed to be regulated or controlled in or pursuant to Environmental Laws;

“Hazardous Materials Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including the movement of Hazardous Materials through ambient air, soil, surface water, groundwater, wetlands, land or subsurface strata;

“Included Liabilities” means any Liabilities of the SSP Division set out as “Included Liabilities” in the Master Separation Agreement;

“Law” means any law (statutory, common or otherwise), constitution, ordinance, code, rule, regulation, guideline, executive order or other similar authority enacted, adopted, promulgated or applied by any Governmental Authority, each as amended;

“Lease Agreement” has the meaning ascribed thereto in the Master Separation Agreement;

“Liability” means any liability, obligation, cost or expense, whether known or unknown, asserted or unasserted, fixed, absolute or contingent, matured or unmatured, conditional or unconditional, latent or patent, accrued or unaccrued, liquidated or unliquidated or due or to become due, wherever or however arising (including whether arising out of any Law, Contract or tort based on negligence or strict liability), including but not limited to, any tax liability;

“Master Separation Agreement” means the Master Separation Agreement between the Purchaser and the Vendor entered into in connection with the initial public offering of common shares in the capital stock of the Purchaser;

“Parties” means the Purchaser and the Vendor, and their respective successors and permitted assigns; and “Party” means either of the Parties;

“Person” means any individual, partnership, limited partnership, limited or unlimited liability company, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, unincorporated syndicate,

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unincorporated organization, trust, trustee, executor, administrator or other legal personal representative or Governmental Authority however designated or constituted;

“Purchase Price” has the meaning ascribed thereto in Section 3.1 hereof;

“Representatives” means, with respect to any Person, any of such Person’s directors, officers, employees, consultants, advisers and agents;

“Rights” has the meaning ascribed thereto in Section 5.1 hereof;

“Securities Act” means the Securities Act (Ontario);

“Separation Agreements” has the meaning ascribed thereto in the Master Separation Agreement;

“Substitute Guarantees” means replacements for such Business Guarantees in which the Purchaser or one of its Affiliates is substituted as the primary obligor thereto;

“SSP Division” means the solar and related businesses and operations conducted by the Vendor prior to the Time of Transfer through its Spheral Solar division;

“SSP Division Facilities” means 25 Reuter Drive, Cambridge, Ontario, N3E 1A9 and such other facilities, offices and locations from which the SSP Division’s business or operations are conducted;

“Tax Act” means the Income Tax Act (Canada) and the regulations thereunder, as amended;

“Tax Value” of any Assets included in the Transferred Property means:

(i) with respect to depreciable property of a prescribed class for the purposes of the Tax Act, the least of:

(A)	the fair market value of such property at the Time of Transfer;
(B)	the Vendor’s cost of the property for the purposes of the Tax Act; and
(C)	the “undepreciated capital cost” to the Vendor of all property of that class for the purposes of the Tax Act immediately prior to the Time of Transfer;

(ii) with respect to inventory or capital property (other than property referred to in (i)), the lesser of:

(A) the “cost amount” to the Vendor of the property for the purposes of the Tax Act at the Time of Transfer; and

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(B) the fair market value of the property at the Time of Transfer;

(iii) with respect to “eligible capital property” in respect of the Purchaser’s business for the purposes of the Tax Act, the lesser of:

(A)	4/3 times the Vendor’s “cumulative eligible capital” in respect of the business for the purposes of the Tax Act immediately before the Time of Transfer;
(B)	the cost to the Vendor of the property; and
(C)	the fair market value of the property at the Time of Transfer; and

(iv) with respect to any other property, the fair market value of the property at the Time of Transfer;

“Time of Transfer” means the date hereof as set out above;

“Transferred Property” has the meaning ascribed thereto in Section 2.1 hereof;

“Transition Time” means, with respect to each service to be provided by ATS or its agents or subcontractors under the Transitional Services Agreement, the earliest of the expiry or termination of such service in relation to the Employees and such other time as mutually agreed to by the Parties hereto; and

“Transitional Services Agreement” has the meaning ascribed thereto in the Master Separation Agreement.

1.2 Currency. All sums of money which are referred to in this Agreement are expressed in lawful money of Canada.

1.3 Construction. The division of this Agreement into articles, sections, paragraphs and subparagraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms “this Agreement”, “hereof”, “herein”, “hereunder” and similar expressions refer to this Agreement and not to any particular article, section or other portion thereof and include any agreement or instrument supplementary or ancillary hereto. Words importing the singular number only shall include the plural and vice versa, and words importing the use of any gender shall include all genders. The words “include,” “includes” and “including” shall be deemed to be followed by “without limitation.”

ARTICLE II

PURCHASE AND SALE OF TRANSFERRED PROPERTY

2.1 Purchase and Sale of Transferred Property. Subject to the terms and provisions hereof, the Vendor hereby sells, transfers, assigns and conveys to the Purchaser and the Purchaser hereby purchases and accepts from the Vendor, as at and from the Time of

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Transfer, on an “as is, where is” basis any and all Assets that are used exclusively or held for use exclusively in the SSP Division other than the Excluded Assets (the “Transferred Property”).

2.2 Assumed Liabilities. As at and from the Time of Transfer, the Purchaser hereby fully and unconditionally assumes and, to the extent they become due and payable, covenants to pay or otherwise perform or discharge when done, the Assumed Liabilities, to the complete exoneration of the Vendor.

ARTICLE III
CONSIDERATION

3.1 Consideration for Transferred Property. The consideration (“Purchase Price”) payable by the Purchaser for the Transferred Property shall be an amount equal to the fair market value of the Transferred Property at the Time of Transfer, which the Parties have determined to be [•]. The Purchase Price shall be paid and satisfied by the Purchaser as follows:

(a)	as to an amount equal to the fair market value of the Assumed Liabilities, by the assumption by the Purchaser of the Assumed Liabilities pursuant to Section 2.2 hereof; and
(b)	as to the balance, by the issuance by the Purchaser to the Vendor of [•] common shares in the capital of the Purchaser (the “Consideration Shares”) having a stated capital in an amount equal to the aggregate of:

(i)	all amounts each of which is an “agreed amount” as specified in a joint election to be filed by the Parties under subsection 85(1) of the Tax Act, less the fair market value of any non-share consideration received by the Vendor from the Purchaser in respect of the Transferred Property; and
(ii)	the fair market value of all Transferred Property that are not “eligible property” as defined in subsection 85(1.1) of the Tax Act.

3.2 Allocation of Consideration. The consideration received by the Vendor for each of the properties included in the Transferred Property shall include at least one common share in the capital of the Purchaser (or fraction thereof) and the fair market value of the consideration (other than the common shares or a right to receive the common shares) received by the Vendor for each of the properties included in the Transferred Property shall not exceed the Tax Value of such property.

3.3 Section 85 Election. The Parties agree to make and file a joint election pursuant to the provisions of Section 85 of the Tax Act and any applicable provincial legislation in respect of the Transferred Property, in prescribed form and within the prescribed time, specifying such “agreed amounts” as are specified by the Vendor as will result in the disposition of such property on a tax-free basis to the Vendor. If an agreed amount specified in an initial election filed by the Parties is greater than the agreed amount which would result in a disposition of such property on a tax-free basis to the Vendor then, at the Vendor’s request, the Parties shall apply to the

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Minister of National Revenue or other taxing authority having jurisdiction for permission to amend such election to comply with this Section 3.3.

3.4 Section 22 Election. The Parties agree to elect jointly in prescribed form pursuant to Section 22 of the Tax Act and the corresponding provisions of any applicable provincial income tax legislation and on a timely basis with respect to accounts receivable pursuant to this Agreement to the extent the face value of any accounts receivable that have been or will be included in computing the income of the Vendor exceeds the consideration paid by the Purchaser for such accounts receivable.

3.5 Subsection 20(24) Tax Elections. The Purchaser and the Vendor shall, if applicable, jointly execute and file an election under subsection 20(24) of the Tax Act in the manner required by subsection 20(25) of the Tax Act and under the equivalent or corresponding provisions of any other applicable provincial income tax legislation, in the prescribed forms and within the time period permitted, as to such amount paid by the Vendor to the Purchaser for assuming future Liabilities. In this regard, the Purchaser and the Vendor acknowledge that a portion of the Transferred Assets having a value equal to the amount elected under subsection 20(24) of the Tax Act and the equivalent provisions of any applicable provincial income tax legislation is being transferred by the Vendor as a payment for the assumption of such future Liabilities by the Purchaser.

3.6 Goods and Services Tax Election. On or before the Time of Transfer, the Vendor and the Purchaser shall jointly execute and the Purchaser shall file within the prescribed time limits, an election pursuant to Section 167 of the Excise Tax Act (Canada) in order to permit the transaction contemplated hereby to be completed without goods and services tax.

3.7 Transfer Taxes. The Purchaser shall be responsible for and shall pay all federal and provincial sales taxes, goods and services taxes, and all other taxes, duties or other like charges properly payable upon and in connection with the conveyance and transfer of the Transferred Property to the Purchaser save and except any income or corporation taxes imposed on and payable directly by the Vendor.

3.8 Bulk Sales. The Vendor has specifically requested the Purchaser to waive the requirements of any applicable bulk sales legislation and the Purchaser hereby waives such requirements. The Purchaser shall be responsible for any claims arising from, or costs incurred as a result of, such waiver.

3.9 Retail Sales Act. The Purchaser hereby waives compliance with Section 6 of the Retail Sales Tax Act (Ontario). The Purchaser shall be responsible for any claims arising from, or cost incurred as a result of, such waiver.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES

4.1 Representations and Warranties of the Vendor. The Vendor hereby represents and warrants to the Purchaser, and acknowledges that the Purchaser is relying upon such

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representations and warranties in connection with the entering into of this Agreement and the purchase by the Purchaser of the Transferred Property, that:

(a)	Organization and Standing of the Vendor. The Vendor is a corporation duly organized and validly existing under the laws of the Province of Ontario, with full power and authority to enter into this Agreement and to sell, assign, transfer, convey and deliver the Transferred Property to the Purchaser.
(b)	Corporate Authorization. All corporate and other proceedings required to be taken by or on the part of the Vendor to authorize it to execute, deliver and carry out this Agreement and to sell, assign, transfer, convey and deliver the Transferred Property to the Purchaser have been duly and properly taken. Neither the execution and delivery of this Agreement by the Vendor, nor compliance with its terms, will result in a breach or violation of the Vendor’s charter documents.
(c)	Residence. The Vendor is not a non-resident of Canada for purposes of the Tax Act.
(d)	GST. The Vendor is a registrant for purpose of Part IX of the Excise Tax Act (Canada) with registration number 10033 1511 RT0001 ATS Canada.

4.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Vendor, and acknowledges that the Vendor is relying upon such representations and warranties in connection with the entering into of this Agreement and the sale to the Purchaser of the Transferred Property, that:

(a)	Organization and Standing of the Purchaser. The Purchaser is a corporation duly organized and validly existing under the laws of Canada, with full power and authority to enter into this Agreement.
(b)	Corporate Authorization. All corporate and other proceedings required to be taken by or on the part of the Purchaser to authorize it to execute, deliver and carry out this Agreement have been duly and properly taken. Neither the execution and delivery of this Agreement by the Purchaser, nor compliance with its terms, will result in a breach or violation of the Purchaser’s charter documents.
(c)	Consideration Shares Validly Issued. The Consideration Shares have been validly issued in compliance with applicable law and are fully paid and non-assessable.
(d)	GST. The Purchaser is a registrant for purpose of Part IX of the Excise Tax Act (Canada) with registration number 85043 7369 RT0001 Photowatt Tech Inc.

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(e) Other. The Purchaser is a taxable Canadian corporation for purposes of the Tax Act.

4.3 Survival of Representations and Warranties. The representations and warranties of the Parties hereto set forth in this Agreement shall survive after the Time of Transfer. The limitation period applicable to any proceeding in respect of such representations and warranties shall be as prescribed by applicable Law. To the extent the limitation period applicable to any proceeding in respect of such representations and warranties is governed by the Laws of the Province of Ontario, the limitation period shall be solely as prescribed in sections 15-17 of the Limitations Act, 2002 and any other limitation period in respect of such proceeding (including that provided for in section 4 of the Limitations Act, 2002) is extended accordingly. The rights and obligations of the Parties hereto shall survive the direct or indirect sale, assignment or other transfer by any Party of any Assets or Liabilities.

ARTICLE V
NON-ASSIGNABLE RIGHTS

5.1 Non-Assignable Rights. To the extent that any of the Transferred Property (including any of the Contracts) or any claim, right or benefit arising under or resulting from such Transferred Property (all such Transferred Property being collectively referred to as the “Rights”) is not capable of being transferred without the approval, consent or waiver of any third Person (including a Governmental Authority), or if the transfer of a Right would constitute a breach of any obligation under, or a violation of, any applicable Law unless the approval, consent or waiver of such third Person or Governmental Authority is obtained, then this Agreement shall not constitute an agreement to transfer such Rights unless and until such approval, consent or waiver has been obtained. After the Time of Transfer, and until all such Rights are transferred to the Purchaser, the Vendor shall:

(a)	maintain its existence and hold the Rights in trust for the Purchaser;
(b)	comply with the terms and provisions of the Rights as agent for the Purchaser at the Purchaser’s cost and for the Purchaser’s benefit;
(c)	co-operate with the Purchaser in any reasonable and lawful arrangements designed to provide the benefits of such Rights to the Purchaser; and
(d)	enforce, at the request of the Purchaser and at the expense and for the account of the Purchaser, any rights of the Vendor arising from such Rights against any third Person, including the right to elect to terminate any such Rights in accordance with the terms of such Rights upon the written direction of the Purchaser.

5.2 In order that the full value of the Rights may be realized for the benefit of the Purchaser, the Vendor shall, at the request and expense and under the direction of the Purchaser, in the name of the Vendor or otherwise as the Purchaser may specify, take all such action and do or cause to be done all such things as are, in the opinion of the Purchaser, necessary or proper in

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order that the obligations of the Vendor under such Rights may be performed in such manner that the value of such Rights is preserved and enures to the benefit of the Purchaser, and that any moneys due and payable and to become due and payable to the Purchaser in and under the Rights are received by the Purchaser. The Vendor shall promptly pay to the Purchaser all moneys collected by or paid to the Vendor in respect of every such Right. The Purchaser shall be responsible for any claim or Liability under or in respect of such Rights arising because of any action of the Vendor taken pursuant to this Article V.

ARTICLE VI
EMPLOYEES

6.1 Employees. The Purchaser covenants and agrees to offer employment, effective as of the Time of Transfer, to all of the Employees on substantially the same terms and conditions as those applicable to each such Employee immediately prior to the Time of Transfer. The Purchaser shall recognize the past service with the Vendor and its predecessors for all of the Employees who are employed by the Purchaser after the Time of Transfer for all purposes, statutory or otherwise.

6.2 Pension and Benefit Plans. The Vendor and the Purchaser will co-operate with each other to do all things necessary to, prior to the Transition Time for services relating to pension and benefit plans:

(a)

effect the assumption by the Purchaser of all pension and benefit obligations relating exclusively to the Employees effective as of the Transition Time and to establish the Purchaser as the sponsor and administrator of such plans, also effective as of the Transition Time; and

(b)

for all pension and benefit obligations relating to the Employees immediately prior to the Time of Transfer not assumed under Section 6.2(a) hereof, establish employee pension and benefit plans effective as of the Transition Time under which the Employees shall be eligible to participate on and after the Transition Time and which, together with the plans assumed in accordance with Section 6.2(a) hereof, provide benefits that are no less favourable in the aggregate to the benefits provided to the Employees immediately prior to the Time of Transfer.

Without limiting the generality of the foregoing, the Vendor and the Purchaser will co-operate with each other to complete all necessary plan amendments, to effect all required regulatory filings and to provide all required notices to Employees, providers and others as required.

ARTICLE VII
MISCELLANEOUS

7.1 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.

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7.2 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.

7.3 Successors and Assigns. 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 hereto. 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 7.3 shall be invalid and ineffective ab initio.

7.4 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.

7.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. If any dispute arises out of or in connection with this Agreement, the Parties irrevocably (a) consent and submit to the exclusive jurisdiction of the Courts of the Province of 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.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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          IN WITNESS WHEREOF the Parties hereto have executed this Agreement.

ATS AUTOMATION TOOLING SYSTEMS INC.

By:

Name: [·]

Title:   [·]

By:

Name: [·]

Title:   [·]

PHOTOWATT TECHNOLOGIES INC.

By:

Name: [·]

Title:   [·]

EX-10.18

EXHIBIT 10.18

LEASE OF INDUSTRIAL SPACE
SINGLE TENANT INDUSTRIAL BUILDING

THIS LEASE made as of the • day of • , 2007.

BETWEEN:

Name:	ATS AUTOMATION TOOLING SYSTEMS INC.
Address:	250 Royal Oak Road, Cambridge, Ontario, N3H 4R6
Facsimile:	519-650-6520
(the “Landlord”)
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Name:	PHOTOWATT TECHNOLOGIES INC.
Address:	25 Reuter Drive, Cambridge, Ontario, N3E 1A9
Facsimile:	519-650-6519
(the “Tenant”)

          IN CONSIDERATION of the mutual covenants contained herein, the Landlord and the Tenant hereby agree as follows:

ARTICLE 1
DEFINITIONS

1.1     Definitions. In this Lease the following terms shall have the following meanings:

(a)	“Authorities” means all applicable federal, provincial, municipal and other governmental authorities (including suppliers of public utilities), departments, boards and agencies having jurisdiction, and “Authority” shall have a corresponding meaning;
(b)	“Automatic Renewal Period” has the meaning set out in Section 3.3(c);

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(c)	“Building” means the buildings, structures and improvements from time to time during the Term erected in, upon or under the Leased Premises and all alterations and additions thereto and replacements thereof, including the building with an office area comprising a Rentable Area of approximately 26,000 square feet and a plant area comprising a Rentable Area of approximately 167,000 square feet;
(d)	“Capital Tax” means the applicable amount of any tax or taxes payable under the legislation of a province or to any political subdivision within a province by the Landlord or by each of any entity constituting the Landlord (each such entity or the Landlord severally referred to as the “taxpayer”), based upon or computed by reference to the paid-up capital or place of business of the taxpayer, as determined for the purposes of such tax or taxes; provided that for purposes hereof, the “applicable amount” of such tax or taxes shall mean the amount thereof that would be payable if the Leased Premises were the only establishment of the taxpayer in that province or any other establishment of the taxpayer therein were located outside that province; provided further that if the tax or taxes payable by the taxpayer are for a fiscal year of the taxpayer not coinciding with the Fiscal Year, the amount of such tax or taxes of such taxpayer payable by the Tenant hereunder shall be that amount payable by such taxpayer in respect of any fiscal year of the taxpayer ending during the Fiscal Year;
(e)	“Claims” means claims, losses, damages, suits, judgments, causes of action, legal proceedings, executions, demands, penalties or other sanctions of every nature and kind whatsoever, and any and all costs arising in connection therewith, including reasonable legal fees and disbursements on a substantial indemnity basis (including all such reasonable legal fees and disbursements in connection with any and all appeals);
(f)	“Commencement Date” means • , 2007;
(g)	“Compliance Audit” means a systematic and documented assessment, conducted by an Environmental Consultant, of the compliance of the business and other operations of the Tenant relating to the Leased Premises with all Environmental Laws;
(h)	“Environmental Claim” means all claims, losses, costs, expenses, fines, penalties, payments and/or damages (including, without limitation, all solicitors’ fees on a substantial indemnity basis) relating to, arising out of, resulting from or in any way connected with the Release in, on, over, upon or from the Leased Premises of any Hazardous Substance including, without limitation, all costs and expenses of any remediation or restoration of the Leased Premises and/or any property adjoining or in the vicinity of the Leased Premises;
(i)	“Environmental Consultant” means a licensed environmental engineer or other environmental professional selected by the Landlord, in its sole discretion, and

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acceptable to the Tenant, acting reasonably, to perform a Compliance Audit or Phase I Environmental Audit;

(j)	“Environmental Laws” means any law, by-law, order, ordinance, ruling, regulation, certificate, approval, consent or directive of any applicable federal, provincial or municipal government, governmental department, agency or regulatory authority or any court of competent jurisdiction, relating to environmental matters and/or regulating the import, storage, distribution, labelling, sale, use, handling, transport or disposal of Hazardous Substance;
(k)	“First Renewal Period” has the meaning set out in Section 3.3(a);
(l)	“First Renewal Right” has the meaning set out in Section 3.3(a);
(m)	“Fiscal Year” means a 12-month period, all or part of which falls within the Term, from time to time determined by the Landlord, at the end of which the Landlord’s accounts in respect of the Leased Premises are balanced for auditing or bookkeeping purposes;
(n)	“Hazardous Substance” means any contaminant, pollutant, dangerous substance, noxious substance, toxic substance, hazardous waste, flammable or explosive material, radio-active material, urea formaldehyde foam insulation, asbestos, polychlorinated biphenyls, polychlorinated biphenal waste, polychlorinated biphenal related waste, and any other substance or material now or hereafter declared, defined or deemed to be regulated or controlled in or pursuant to the Environmental Laws;
(o)	“Land” means those lands legally described in Schedule “A” and municipally identified as 25 Reuter Drive, Cambridge, Ontario, N3E 1A9, which consist of approximately 41.23 acres and are identified on the plan attached hereto as Schedule “B”;
(p)	“Lease” means this lease and all Schedules attached hereto which are referred to in this lease, and every properly executed instrument which by its terms amends, modifies or supplements this lease;
(q)	“Leased Premises” means the portion of the Land which consists of approximately 13.5 acres and is identified on the plan attached hereto as Schedule “B”, and the Building;
(r)	“Market Rent” means the annual amount of Minimum Rent which an arm’s length third party would pay as Minimum Rent (without any tenant inducements) for premises of comparable size, age and location to the Leased Premises located in the Guelph, Cambridge and Kitchener-Waterloo area (but excluding any adjustment for any value or cost attributable to the Leased Premises on account of the Tenant’s Specialized Equipment and any leasehold improvements installed by

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or on behalf of the Tenant after the Commencement Date or the cost of removal thereof) in their condition as of the time in question taking into consideration all of the terms of this Lease such that the amount of Rent payable pursuant to this Lease at the point in time in question would total the amount of rent which an arm’s length third party would then pay;

(s)

“Minimum Rent” means the amount set out in Section 4.1(a) payable in respect of each year of the Term;

(t)

“Other Taxes” means any and all taxes, levies, duties and assessments imposed on the Landlord with respect to any or all of Rent, this Lease or goods or services supplied by the Landlord or which the Landlord is responsible to provide in accordance with the terms of this Lease, whether characterized as a goods and services tax, sales tax, multi-stage sales tax, value-added tax, consumption tax or any other similar tax calculated:

(i)	as if the Landlord owned no property other than the Leased Premises;
(ii)	as if there is no sale or other dealing with the Leased Premises by the Landlord either before, during or following the Term; and
(iii)	as if the Landlord is not entitled to any input tax credits, set-offs, exceptions, exemptions or deductions from such taxes or in the calculation of such taxes;

(u)	“Person” means an individual, a partnership, a corporation, a trust, an unincorporated organization, a government or any department or agency thereof and the heirs, executors, administrators or other legal representatives of an individual;
(v)	“Phase I Environmental Audit” means a report prepared by an Environmental Consultant in accordance with the requirements of standard Z768-01, “Phase I Environmental Site Assessment”, published by the Canadian Standards Association, as amended, at the date of the Phase I Environmental Audit;
(w)	“Photowatt Technologies Group” means Photowatt Technologies Inc. and each Person that Photowatt Technologies Inc. directly or indirectly controls, within the meaning of the Securities Act (Ontario);
(x)	“Prime Rate” means the rate of interest per annum established from time to time by Bank of Nova Scotia at its head office in Toronto, Ontario as the reference rate of interest to determine interest rates it will charge on Canadian dollar loans to its Canadian customers and which it refers to as its “prime rate”;

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(y)	“Realty Taxes” means all taxes, rates, levies, duties and assessments whatsoever whether municipal, school, provincial, parliamentary or otherwise levied, imposed or assessed against the Land or any part thereof or upon the Landlord in respect thereof or from time to time levied, imposed or assessed in the future in lieu thereof, including those levied, imposed or assessed for education, school and local improvements, or other similar taxes imposed upon the Landlord or the Tenant, and including all business taxes, if any, from time to time payable by the Landlord or levied against the Landlord on account of its ownership or operation of the Land, and including all costs and expenses (including legal fees on a substantial indemnity basis and other professional fees and interest and penalties on deferred payments) incurred by the Landlord in good faith in contesting, resisting or appealing any such taxes, rates, levies, duties or assessments but excluding income or profits taxes upon the income of the Landlord;
(z)	“Release” means any release, spill, emission, leakage, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration;
(aa)	“Rent” means the aggregate of all amounts payable by the Tenant to the Landlord under this Lease;
(bb)	“Rentable Area” means an area determined in accordance with Section 4.10;
(cc)	“Sales Tax” has the meaning set out in Section 4.8(o);
(dd)	“Second Renewal Period” has the meaning set out in Section 3.3(b);
(ee)	“Second Renewal Right” has the meaning set out in Section 3.3(b);
(ff)	“Spheral Solar” means light weight, flexible crystalline solar products based on a technology which incorporates thousands of silicon spheres, bonded between thin, flexible aluminum foil substrates to form solar cells;
(gg)	“Tenant’s Employees” means the Tenant’s directors, officers, employees, servants, agents, contractors, and those for whom the Tenant is responsible at law;
(hh)	“Tenant’s Specialized Equipment” means any equipment including, without limitation, cabling, ducting, piping, supplementary HVAC, water treatment equipment and specialized leasehold improvements installed by or on behalf of the Tenant prior to or during the Term on the roof of, or elsewhere in, the Building;
(ii)	“Term” means the initial term of this Lease specified in Section 3.1 unless sooner terminated, and as this Lease may be renewed pursuant to Section 3.3(a), 3.3(b) or 3.3(c); and
(jj)	“Unleased Premises” means that part of the Land that are not part of the Leased Premises.

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1.2     Consultants. Any reference in this Lease to the Landlord’s accountant, auditor, architect, engineer, surveyor or other consultant shall be deemed to be such duly qualified consultant appointed by the Landlord in its absolute discretion.

ARTICLE 2
GRANT OF LEASE AND GENERAL COVENANTS

2.1     Grant. The Landlord hereby leases to the Tenant and the Tenant hereby leases from the Landlord the Leased Premises, to have and to hold during the Term, subject to the terms and conditions of this Lease.

2.2     Landlord’s General Covenants. The Landlord covenants with the Tenant:

(a)	for quiet enjoyment of the Leased Premises; and
(b)	to observe and perform all the covenants and obligations of the Landlord herein.

2.3     Tenant’s General Covenants. The Tenant covenants with the Landlord:

(a)	to pay Rent; and
(b)	to observe and perform all the covenants and obligations of the Tenant herein.

ARTICLE 3
TERM AND POSSESSION

3.1     Term. The Term of this Lease is two (2) years and shall begin on the Commencement Date and end on • , 2009 unless terminated earlier as provided in this Lease.

3.2     Condition of Leased Premises. The Tenant agrees to accept the Leased Premises in the condition which exists on the Commencement Date.

3.3     Rights to Renew.

(a) First Renewal — The Tenant shall have the right to renew this Lease for a further term of five (5) years (the “First Renewal Right”) commencing on • , 2009 and expiring on • , 2014 (the “First Renewal Period”), subject to the following terms and conditions:

(i) the Tenant shall not be entitled to the First Renewal Right if, at the time of the giving of the notice of exercise thereof: (A) the Tenant has received written notice from the Landlord that it is in default under this Lease and all applicable notice and cure periods have expired; or (B) the Tenant is no longer using, occupying and operating in the Leased Premises for the purposes of the

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development and manufacturing of Spheral Solar and ancillary purposes or for the solar business as it is currently being conducted by the Photowatt Technologies Group;

(ii)	the First Renewal Right shall be exercisable by notice by the Tenant to the Landlord by no later than six (6) months prior to the expiry of the initial term of this Lease;
(iii)	provided the Tenant has properly exercised the First Renewal Right, this Lease shall be renewed for the First Renewal Period on the same terms and conditions as are contained in this Lease, except that the Minimum Rent during the First Renewal Period will be as stipulated in subsection (iv) and there shall be no further right to renew (other than the Second Renewal Right set out below in Section 3.3(b));
(iv)	the annual Minimum Rent during the First Renewal Period shall be the Market Rent for the Leased Premises based on the Rentable Area of the Building as of the commencement date of the First Renewal Period and, based on this, shall be negotiated in good faith by the Landlord and the Tenant and, failing agreement by three (3) months before the commencement date of the First Renewal Period, shall be determined by a single arbitrator in accordance with the provisions of the attached Schedule “C” and the Arbitration Act, 1991 (Ontario); and
(v)	as soon as reasonably possible after the Landlord receives notice from the Tenant pursuant to Section 3.3(a)(ii), the Landlord’s architect, whose decision shall be final and binding on the Landlord and the Tenant, shall measure the Rentable Area of the Building in accordance with the provisions of Section 4.10 of this Lease, and the Landlord and the Tenant shall sign an acknowledgment as to the Rentable Area of the Building.

(b) Second Renewal — The Tenant shall have the right to renew this Lease for a second further term of five (5) years (the “Second Renewal Right”) commencing on • , 2014 and expiring on • , 2019 (the “Second Renewal Period”), subject to the following terms and conditions:

(i) the Tenant shall not be entitled to the Second Renewal Right if, at the time of the giving of the notice of exercise thereof: (A) the Tenant has received written notice from the Landlord that it is in default under this Lease and all applicable notice and cure periods have expired; or (B) the Tenant is no longer using, occupying and operating in the Leased Premises for the purposes of the development and manufacturing of Spheral Solar and ancillary

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purposes or for the solar business as it is currently being conducted by the Photowatt Technologies Group;

(ii)	the Second Renewal Right shall be exercisable by notice by the Tenant to the Landlord by no later than six (6) months prior to the expiry of the First Renewal Period;
(iii)	provided the Tenant has properly exercised the Second Renewal Right, this Lease shall be renewed for the Second Renewal Period on the same terms and conditions as are contained in this Lease, except that the Minimum Rent during the Second Renewal Period will be as stipulated in subsection (iv) and there shall be no further right to renew; and
(iv)	the annual Minimum Rent during the Second Renewal Period shall be the Market Rent for the Leased Premises based on the Rentable Area of the Building as of the commencement date of the Second Renewal Period and, based on this, shall be negotiated in good faith by the Landlord and the Tenant and, failing agreement by three (3) months before the commencement date of the Second Renewal Period, shall be determined by a single arbitrator in accordance with the provisions of the attached Schedule “C” and the Arbitration Act, 1991 (Ontario).

(c) Automatic Renewal - If the Tenant does not exercise the First Renewal Right or the Second Renewal Right as provided for in Section 3.3(a) or 3.3(b) at the end of the initial term of this Lease specified in Section 3.1 or the First Renewal Period (as the case may be), then, unless the Tenant delivers to the Landlord written notice to the contrary at least six (6) months before the expiry of the initial term of this Lease specified in Section 3.1 or the First Renewal Period, as the case may be, the Term shall be automatically renewed for a period (the “Automatic Renewal Period”) equal to the lesser of (A) six (6) months, and (B) the period required by the Tenant to perform its obligations under Sections 14.1 and 14.2. During such renewal, all of the terms and conditions of this Lease shall continue to apply except that:

(i)	the rights to renew set out in Section 3.3 and the provisions of Section 14.3 shall not apply; and
(ii)	the monthly instalment of the Minimum Rent payable by the Tenant during the Automatic Renewal Period shall be Ninety Six Thousand Five Hundred Dollars ($96,500.00) (in respect of the Automatic Renewal Period commencing at the end of the initial term of this Lease) or the monthly instalment of the annual Minimum Rent payable by the Tenant during the First Renewal

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Period (in respect of the Automatic Renewal Period commencing at the end of the First Renewal Period).

ARTICLE 4
RENT

4.1     Rent. The Tenant shall pay, without notice or demand, to the Landlord as Rent for the Leased Premises the aggregate of:

(a) Minimum Rent in respect of: (i) the initial term of this Lease, payable in advance on the Commencement Date; and (ii) the First Renewal Period and the Second Renewal Period, if applicable, payable in advance in monthly instalments on the first day of each calendar month, as follows:

Period	Per Annum
Years 1 and 2	$1.00 (which amount the Landlord acknowledges has been paid)
First Renewal Period	Market Rent (as provided for in Section 3.3(a)(iv))
Second Renewal Period	Market Rent (as provided for in Section 3.3(b)(iv))

	and (iii) the Automatic Renewal Period, if applicable, payable in advance in monthly instalments on the first day of each calendar month, in the amount as provided for in Section 3.3(c);
(b)	all Realty Taxes and Other Taxes at the times and in the manner provided in Sections 4.6 and 4.7, respectively; and
(c)	all amounts (other than payments under provisions (a) and (b) above) payable by the Tenant to the Landlord under this Lease, at the times and in the manner provided in this Lease or, if not so provided, as reasonably required by the Landlord.

4.2     Minimum Rent. With respect to the Minimum Rent set out in Section 4.1(a), the Tenant and the Landlord hereby acknowledge and agree that the Minimum Rent payable in respect of the initial term of this Lease is a nominal rate in consideration of, among other things, (i) the Tenant’s covenant to use its best efforts to use, occupy and operate in the Leased Premises for the purposes of the development and manufacturing of Spheral Solar and ancillary purposes or for the solar business as it is currently being conducted by the Photowatt Technologies Group; (ii) the Tenant’s acceptance of the Leased Premises in an “as is, where is” condition, as set out in Section 6.4; (iii) the Tenant’s clean-up or remediation obligations set out in Section 5.7, and the Tenant’s environmental indemnity set out in Section 5.7(n); and (iv) the Tenant’s restoration obligations upon the expiration or other termination of the Term set out in Section 14.1.

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4.3     Intent. It is the stated purpose and intent of the Landlord and the Tenant that this Lease shall be fully net and carefree to the Landlord.

4.4     Payment of Rent. All amounts payable by the Tenant to the Landlord pursuant to this Lease shall be deemed to be Rent and shall be payable and recoverable as Rent in the manner herein provided and the Landlord shall have all rights against the Tenant for default in any such payment as in the case of arrears of Rent. Rent shall be paid to the Landlord in lawful money of Canada, without deduction or set-off, at the address of the Landlord set out on page 1 of this Lease or to such other Person or such other address as the Landlord may from time to time designate in writing. The Tenant’s obligation to pay Rent shall survive the expiration or earlier termination of this Lease. Any Rent or other sum received by the Landlord from or for the account of the Tenant while the Tenant is in default under this Lease may be applied at the Landlord’s option to the satisfaction in whole or in part of any of the obligations of the Tenant then due under this Lease in such manner as the Landlord sees fit regardless of any designation or instruction of the Tenant to the contrary.

4.5     Partial Months Rent. If the Commencement Date is a day other than the first day of a calendar month, the instalment of Rent payable on the Commencement Date shall be that proportion of Rent which the number of days from the Commencement Date to the last day of the month in which the Commencement Date falls is of 365. If the Term ends on a day other than the last day of a calendar month, the instalment of Rent payable on the first day of the calendar month in which the last day of the Term falls shall be that proportion of Rent which the number of days from the first day of such last calendar month to the last day of the Term is of 365.

4.6     Payment of Realty Taxes.

(a)	In this section, “separate assessment” means the provision of information by the assessor which ascribes separate assessed market values to the Leased Premises and the Unleased Premises, whether or not under separate roll numbers and whether on the notice of assessment or on supplementary information provided by the assessor.
(b)	Payment — The Tenant shall pay Realty Taxes to the Landlord at the times and in the manner as directed by the Landlord but in any event prior to the dates upon which the payment of such taxes in instalments are due. If the Landlord so directs the Tenant in writing, the Tenant shall pay Realty Taxes directly to the taxing authority on or before their due date and shall provide proof of payment to the Landlord immediately thereafter. Realty Taxes in respect of the first and last years of the Term shall be adjusted between the Landlord and the Tenant.
(c)	Separate Assessment — The Tenant acknowledges that there is at the date of the making of this Lease no separate assessment for Realty Taxes with respect to the Leased Premises. If the Leased Premises and the Unleased Premises are separately assessed, the Tenant shall be responsible to pay the Realty Taxes attributable to the assessment of the Leased Premises and the Landlord shall be

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responsible to pay the Realty Taxes attributable to the assessment of the Unleased Premises;

(d) Tenant’s Proportionate Share of Realty Taxes — Unless and until there is a separate assessment of the Leased Premises, the Tenant and the Landlord shall be responsible to pay those shares of the Realty Taxes which are determined by the following principles:

(i)	The Tenant shall pay, as additional rent, all of that portion of the Realty Taxes attributable to the value of the improvements on the Leased Premises from time to time;
(ii)	The Landlord shall be responsible for all of that portion of the Realty Taxes attributable to the value of the improvements on the Unleased Premises from time to time;
(iii)	As long as the Leased Premises and the Unleased Premises are assessed in the same property tax classification:

(A)	the Tenant shall pay, as additional rent, the percentage of the Realty Taxes attributable to the land value (less any value of improvements) that the area of the Leased Premises bears to the area of the Land;
(B)	the Landlord shall be responsible for the percentage of the Realty Taxes attributable to the land value (less any value of improvements) that the area of the Unleased Premises bears to the area of the Land;

(iv)	The Landlord shall use reasonable commercial efforts to obtain the working and other papers of the taxing or assessment authority and shall provide copies of such papers to the Tenant; and
(v)	The Tenant acknowledges that the Unleased Premises may be eligible for a vacancy rebate and any such rebate in any year will in any event be for the sole benefit of the Landlord.

(e) Increase — If the Leased Premises are at any time during the Term assessed for the support of separate schools (as a result of any action taken by the Tenant) or if the Realty Taxes are increased by reason of any installations made in or upon or any alterations made in or to the Leased Premises by the Tenant or by the Landlord on behalf of the Tenant, or as a result of the issuance of any omitted or corrected assessment, the Tenant shall pay the amount of such increase forthwith to the Landlord upon receipt of notice thereof.

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(f) Decrease — If the Realty Taxes attributable to the Leased Premises are refunded to the Landlord as a result of any successful appeal or request for reconsideration or other change to the assessment or tax rate, the Landlord shall promptly pay such refund to the Tenant.

4.7     Payment of Other Taxes. The Tenant shall pay to the Landlord the amount of all Other Taxes within five days of receipt of notice from the Landlord specifying the amount of such Other Taxes. The Landlord may, at its option, estimate the amount of Other Taxes allocable to each month and require that the Tenant pay such estimated amount monthly on the first day of each calendar month during the Term. Any necessary adjustment shall be paid by the Tenant or credited by the Landlord, as the case may be, whenever required after determination of Other Taxes.

4.8     Occupancy Costs. The Tenant shall be responsible for all costs and expenses incurred during the Term whether incurred by the Tenant directly or by or on behalf of the Landlord or any manager or agent of the Landlord in or with respect to the occupancy, complete decoration, repair, administration, maintenance, improvement, replacement and operation of the Leased Premises calculated in accordance with generally accepted accounting principles and including, without limiting the generality of the foregoing, but without duplication and without profit:

(a)	all charges for the cost of heating, cooling and ventilating the Building, hot and cold water and all charges for electricity, gas and all other similar services and utilities provided to the Leased Premises;
(b)	the cost of providing, maintaining and replacing as necessary landscaping and gardening and the cost of snow and refuse removal, if requested by the Tenant;
(c)	the cost of cleaning services to the Leased Premises, including the cost of window cleaning, if requested by the Tenant;
(d)	the cost of all repairs and replacements (save and except structural repairs or replacements) to or with respect to the Leased Premises as well as the cost of any improvement or repair which is required to be made to the Leased Premises by any change in the laws, rules, regulations or orders of any governmental authority having jurisdiction;
(e)	the cost of all insurance maintained by the Landlord pursuant to Section 9.1; and
(f)	the annual amortization including interest at the Prime Rate on the unamortized amount (on a straight-line basis over the useful life or such other period as reasonably determined by the Landlord in accordance with generally accepted accounting principles) of the cost of any modifications, replacements or additions of a capital nature to the Leased Premises and/or the machinery and equipment (but not including the machinery and equipment used in the operation of the solar business) therein and thereon, where in the reasonable opinion of the Landlord

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such modifications, replacements or additions are intended to have the effect of reducing occupancy costs or resulting in energy savings or resulting in increased security, or any additional equipment or improvements required by legal requirements not in effect at the Commencement Date of the Lease and not to remedy any construction inadequacy or non-compliance with legal requirements in effect at the Commencement Date, or which in the Landlord’s reasonable opinion are for the benefit or safety of users of the Land.

Notwithstanding the foregoing, occupancy costs shall exclude the following, except if specifically included above:

(g)	interest and principal payments on financing of the Landlord, and any other debt costs or ground lease rent of the Landlord;
(h)	costs or expenses incurred with respect to the acquisition, development and construction and landscaping of the Leased Premises and any expansion thereof;
(i)	depreciation;
(j)	costs and expenses relating to structural repairs or replacements of the Leased Premises;
(k)	costs or expenses resulting from any inadequacy in the design or construction of the Leased Premises or with respect to poor workmanship or materials in connection with such construction;
(l)	any administrative, management and overhead costs of the Landlord;
(m)	all costs incurred in connection with the rectification of any work done by the Landlord in the Leased Premises which did not comply with and conform to every applicable statute, law, by-law, and regulation as of the Commencement Date;
(n)	income taxes and other taxes personal to the Landlord;
(o)	the amount of any sales tax, goods and services tax, value added tax or any similar tax (“Sales Tax”) paid or payable by the Landlord on the purchase of goods and services included in occupancy costs which is available to the Landlord as a credit in determining the Landlord’s net tax liability or refund on account of Sales Tax, but only to the extent that Sales Tax is included in occupancy costs;
(p)	the cost of any insurance premiums relating to risks or amounts which are not normally insured against by reasonably prudent owners of similar buildings;
(q)	Capital Tax;
(r)	any cost which would otherwise be included in occupancy costs, but consists of an amount paid to a corporate affiliate, parent or subsidiary of the Landlord, to the

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extent that such amount is in excess of the fair market value of the said item or service were the expense incurred in an arm’s-length transaction; and

(s) any costs which are above market costs.

4.9     Estimates of Expenses and Resolution of Disputes. Any expense payable by the Tenant hereunder may be estimated by the Landlord on whatever reasonable basis the Landlord may select if and to the extent that the Landlord cannot ascertain the actual amount of the expense. The Tenant shall pay the amount of such expense to the Landlord forthwith after receipt of notice specifying such amount. If there is any disagreement as to the amount or propriety of any amount so notified, a certificate of the auditor of the Landlord, acting reasonably, shall be conclusive as to the amount of such expense for any period to which the certificate relates.

4.10     Rentable Area. The Rentable Area of the Building shall be determined by measuring from and to the inside finish of permanent outer Building walls or from the glass line, whichever extends further and no deduction shall be made for columns, projections, stairs, elevator shafts, stacks, pipe shafts, vertical ducts, washrooms, air conditioning rooms, fan rooms or any other service facilities within the Building. For clarity, Rentable Area shall include basement or other below grade areas or mezzanine areas.

4.11     Area Determination. The Landlord may from time to time as it deems necessary cause the Rentable Area of the Building or any part thereof to be recalculated or remeasured and the cost thereof shall be payable by the Tenant to the Landlord forthwith upon demand. If any calculation or determination by the Landlord of the Rentable Area of the Building is disputed or called in question, it shall be calculated or determined by the Landlord’s architect or surveyor from time to time appointed for that purpose, whose certificate shall be conclusive and binding upon the parties hereto. If the Tenant disputes the Landlord’s calculation, the Tenant shall pay the full cost of such calculation or determination forthwith upon demand.

ARTICLE 5
USE AND OCCUPATION

5.1     Use of Leased Premises. The Tenant covenants to use its best efforts to use, occupy and operate in the Leased Premises for the purposes of the development and manufacturing of Spheral Solar and ancillary purposes during the initial term of this Lease, and for such other purposes as may be permitted by applicable laws and approved by the Landlord, which approval may not be unreasonably withheld. The Landlord hereby acknowledges and confirms that the Tenant may use, occupy and operate the Leased Premises for the solar business as it is currently being conducted by the Photowatt Technologies Group.

5.2     Compliance with Laws. The Tenant shall comply at its expense with all present and future laws, regulations and orders (including, without limitation, zoning bylaws) relating to the occupation or use of the Leased Premises, the installation and condition of the leasehold improvements, trade fixtures, furniture, machinery and equipment installed by the Tenant

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therein, the making by the Tenant of any repairs, changes or improvements therein and the conduct of any business in the Leased Premises. If alterations or improvements are necessary to comply with any of the foregoing or with the requirements of insurance carriers, the Tenant shall forthwith complete such work to the extent that it can be done within the Leased Premises and in any event shall pay the entire cost of any alterations or improvements so required.

5.3     Prohibited Uses. The Tenant shall not commit, cause or permit any nuisance or any waste or injury to the Leased Premises or any of the leasehold improvements or fixtures therein or any overloading of the floors of the Leased Premises. Without limiting the generality of the foregoing, the Tenant shall not use or permit the use of any portion of the Leased Premises for any dangerous, illegal, noxious, odorous or offensive trade, business or occurrence. The Tenant shall keep the Leased Premises free of debris or anything of a dangerous, noxious, odorous or offensive nature or which could create a fire hazard (through undue load on electrical circuits or otherwise) or undue vibration, heat or noise. The Tenant shall not use equipment or machinery in the Leased Premises in a manner that results in it being seen or heard outside the Leased Premises. The Landlord acknowledges and agrees that the Tenant’s use of the Leased Premises as carried on at the time of the Commencement Date does not contravene any of the foregoing.

5.4     Hazardous Use. The Tenant shall not do, omit to do or permit to be done anything which will cause or shall have the effect of causing the cost of the Landlord’s insurance in respect of the Leased Premises or any part thereof to be increased at any time during the Term or any policy of insurance on or relating to the Leased Premises to be subject to cancellation. Without waiving the foregoing prohibition, the Landlord may demand and the Tenant shall pay to the Landlord upon demand, the amount of any increase in the cost of insurance caused by anything so done or omitted to be done. The Tenant shall forthwith upon the Landlord’s request comply with the reasonable requirements of the Landlord’s insurers, cease any activity complained of and make good any circumstance which has caused any increase in insurance premiums or the cancellation of any insurance policy. In determining the amount of increased premiums for which the Tenant is responsible, a schedule or statement issued by the Person which computes the insurance rates for the Landlord showing the components of the rate shall be conclusive evidence of the items that make up the rate. If any policy of insurance in respect of the Leased Premises or any part thereof is cancelled or becomes subject to cancellation by reason of anything so done or omitted to be done, the Landlord may without prior notice terminate this Lease and re-enter the Leased Premises.

5.5     Permitted Signs. The Tenant shall use only such identification signs as are permitted by the Landlord, acting reasonably, from time to time and as comply with all applicable by-laws, regulations and codes as to size, location, arrangement, type of lettering, colour, appearance and design. Such signs shall contain only the name under which the Tenant carries on business from time to time.

5.6     Prohibited Signs. Except with the prior written consent of the Landlord, which consent may be arbitrarily withheld or rescinded in the Landlord’s sole discretion, or as provided in Section 5.5, the Tenant shall not paint, display, inscribe, place or affix any sign, symbol, notice, advertisement, display or direction of any kind anywhere outside the Leased Premises or

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on the interior of any glass windows or doors or elsewhere within the Leased Premises so as to be visible from the outside of the Leased Premises.

5.7     Tenant’s Environmental Covenants and Indemnity. The Tenant covenants and agrees that during the Term or as otherwise specified herein:

(a)	the Tenant and the Tenant’s Employees (which includes for the sake of clarity, its invitees who enter into the Leased Premises) shall not bring into the Leased Premises or the Land, any Hazardous Substances, except in accordance with all applicable Environmental Laws. If the Tenant or any Tenant’s Employee shall bring or create upon the Leased Premises or the Land any Hazardous Substances, then such Hazardous Substances shall be and remain the sole property of the Tenant and the Tenant shall remove the same at its sole cost at the expiration of the Term or sooner to the extent such removal is directed by any Authority or such removal is required to effect compliance with any Environmental Laws;
(b)	comply in all respects with all Environmental Laws relating to the Leased Premises or the use of the Leased Premises by the Tenant or the Tenant’s Employees;
(c)	neither the Leased Premises nor the Land shall be used for the purpose of a waste site by the Tenant or the Tenant’s Employees other than waste from production which shall be stored and disposed of pursuant to all applicable Environmental Laws;
(d)	no Hazardous Substance will be located or stored on the Leased Premises or the Land by the Tenant or the Tenant’s Employees, except in accordance with all Environmental Laws relating thereto, and the Tenant and the Tenant’s Employees shall comply with all Environmental Laws, including, but not limited to, matters relating to air pollution, noise control, on-site or off-site waste, Hazardous Substance handling, discharge, disposal or recovery, whether products or waste;
(e)	the Tenant and the Tenant’s Employees shall comply in full with the regulations of the Environmental Laws applicable to any releases into the environment (including, without limitation, into the Leased Premises) of any Hazardous Substance (a “Spill”) during the Term and caused by the Tenant or the Tenant’s Employees with respect to the notification of the Ministry of Environment and shall be responsible for Claims for costs of any clean-up or remediation as such clean-up or remediation is required by the applicable Authority and Environmental Laws, or for compensation for damage or injury suffered as a result of any such Spills;
(f)	all containers containing Hazardous Substance waste products which the Tenant or the Tenant’s Employees have introduced onto the Leased Premises shall be removed from the Leased Premises by means of delivery to a carrier licensed under the laws of the Province of Ontario and disposed of to a waste disposal site

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licensed under the applicable laws of the Province of Ontario (the Tenant hereby acknowledging and confirming that it has knowledge of the Hazardous Substance waste products which have been brought or introduced onto the Leased Premises up to and including the Commencement Date);

(g)	the processing, storage and handling of chemicals or chemical wastes by the Tenant or the Tenant’s Employees on the Leased Premises shall be conducted, in accordance with all laws;
(h)	if any Authority shall require the clean-up or remediation of any Hazardous Substance pursuant to Environmental Laws:

(i)	held in, released from, abandoned and placed upon the Leased Premises or the Land by the Tenant or the Tenant’s Employees; or
(ii)	released or disposed of by the Tenant or the Tenant’s Employees,

	then the Tenant shall at its own expense carry out all such required work of such applicable Authority and within the time required by such Authority, including preparing all necessary studies, plans and approvals and providing all bonds and other security required by such Authority, and shall provide all written reports prepared by environmental engineers with respect to all such work to the Landlord;
(i)	promptly notify the Landlord in writing of any written notice received by the Tenant by any Authority alleging a possible violation of or with respect to any matter involving any Environmental Laws relating to operations in the Leased Premises relating to any Person for whom it is in law responsible or any written notice from any other party concerning any Release or alleged Release of any Hazardous Substance by the Tenant or the Tenant’s Employees on the Leased Premises;
(j)	promptly notify the Landlord of the existence of any Hazardous Substance in or on the Leased Premises which the Tenant or the Tenant’s Employees have introduced onto the Leased Premises and such existence is in violation of Environmental Laws and provide to the Landlord a copy of any environmental site assessment of the Leased Premises conducted by or for the Tenant at any time during the Term within thirty (30) days of the Tenant receiving same;
(k)	permit the Landlord upon reasonable notice during normal business hours at its own sole cost and expense and its own risk accompanied by a representative of the Tenant provided Landlord’s entry does not materially interfere with the Tenant’s use of the Leased Premises to:

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(i)	enter to inspect the Leased Premises and operations conducted therein for the purpose of conducting environmental tests, assessments and appraisals;
(ii)	conduct environmental tests and environmental assessments or appraisals for which the Tenant may be present and may take its own samples;
(iii)	remove samples from the Leased Premises for which the Tenant may be present and may take its own samples; and
(iv)	examine and make copies of any documents or records required to be maintained by the Tenant pursuant to Environmental Laws,

	and the Landlord shall promptly repair any damage caused by such entry at its own expense;
(l)	the Landlord may from time to time during the Term, during normal business hours and upon reasonable notice to the Tenant at its own sole cost and expense and its own risk accompanied by a representative of the Tenant:

(i)

enter the Leased Premises for the purpose of causing an environmental audit of the Leased Premises to be carried out, the scope and extent of such audit to be determined by the Landlord in its sole discretion. The Tenant may be present at such audit and take its own samples, provided that in any event Landlord’s entry shall not materially interfere with the Tenant’s reasonable use of the Leased Premises and Landlord shall promptly repair any damage caused by such audit at its own expense; and

(ii)

if any such audit, or in the case of any such audit done in the last year of the Term or at the expiry, repudiation or earlier termination of the Lease (which audit shall be carried out by the Tenant at its own sole cost and expense and its own risk) and any and all of which shall be performed by a licensed environmental engineer selected by the Landlord, in its sole discretion: (a) concludes that an environmental condition in violation of Environmental Laws exists, howsoever caused, and such environmental condition existed at any time from and after •, 2003; and (b) such licensed environmental engineer recommends a clean-up or remediation or such clean-up or remediation is required to meet standards for industrial lands as set out in Environmental Laws, then the Tenant shall have liability for the clean-up or remediation and the Tenant, at its own sole cost and expense, shall immediately take such steps as are necessary so as to perform the clean-up or remediation;

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(m) notwithstanding the provisions of Section 5.7(l), the Tenant shall, at its own sole cost and expense and its own risk:

(i) conduct a Phase I Environmental Audit and any subsequent work (including, without limitation, a Phase II environmental site assessment) recommended by the Phase I Environmental Audit, and a Compliance Audit of the Leased Premises at each of the following times:

(I)	if the Tenant does not exercise the First Renewal Right, on or as soon as reasonably possible after the expiry or earlier termination of the Automatic Renewal Period occurring at the end of the initial term of this Lease; and
(II)	if the Tenant exercises the First Renewal Right, on or as soon as reasonably possible prior to or after the expiry of the initial term of this Lease; and
(III)	if the Tenant exercises the First Renewal Right, but does not exercise the Second Renewal Right, prior to or on or as soon as reasonably possible after the expiry or earlier termination of the Automatic Renewal Period occurring at the end of the First Renewal Period; and
(IV)	if the Tenant exercises the First Renewal Right and exercises the Second Renewal Right, prior to or on or as soon as reasonably possible after the expiry:

A.	of the First Renewal Period; and
B.	or earlier termination of the Second Renewal Period.

	All such audits shall be conducted by an Environmental Consultant;
(ii)	the Landlord and the Tenant shall be promptly provided with copies of all interim and final correspondence, test results, reports and assessments issued by such Environmental Consultant in connection with the audits;
(iii)	if any such audit:

(I) concludes that an environmental condition in violation of Environmental Laws exists, or Hazardous Substances are in, on, under or from the property in exceedance of standards published pursuant to Environmental Laws,

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howsoever caused, and such environmental condition existed at any time from and after •, 2003; and

(II) such Environmental Consultant recommends a clean-up or remediation or clean-up or remediation is required pursuant to applicable Environmental Laws or in order to meet standards published pursuant to Environmental Laws,

then the Tenant shall have liability for the clean-up or remediation and the Tenant, at its own sole cost and expense, shall immediately take such steps as are necessary so as to perform the clean-up or remediation; and

(n) any breach of any of the foregoing covenants and undertakings shall constitute a breach of this Lease by the Tenant, entitling the Landlord to pursue its rights and remedies hereunder subject to the applicable cure period set forth in Section 11.4. In addition, the Tenant shall indemnify and save the Landlord and its directors, officers, employees, servants, agents, contractors, successors and assigns harmless from and against any and all Claims, as a result of any breach of the obligations of the Tenant set out above in Sections 5.7(a) to 5.7(m), including without limitation, any Environmental Claim, which indemnity shall survive the expiration or termination of this Lease.

ARTICLE 6
OBLIGATIONS OF THE LANDLORD

6.1     The Leased Premises. The Landlord shall make the Leased Premises available to the Tenant on the Commencement Date, it being understood that the Landlord shall not be responsible for providing any improvements to the Leased Premises during the Term or for providing any services which are stated in this Lease to be the responsibility of the Tenant.

6.2     Systems. The operation of all systems within the Leased Premises shall be the sole responsibility of the Tenant and the Landlord shall have no responsibility for any inadequacy of performance of any systems within the Leased Premises or for the interruption or disturbance of any utility or other service normally available to the Leased Premises.

6.3     Access by Landlord. The Tenant shall permit the Landlord to enter the Leased Premises at any time outside normal business hours in case of an emergency and otherwise during normal business hours accompanied by a representative of the Tenant where such will not unreasonably disturb or interfere with the Tenant’s use of the Leased Premises or operation of its business, to examine, inspect and show the Leased Premises for purposes of leasing, sale or financing, to provide services or make repairs, replacements, changes or alterations as provided for in this Lease and to take such steps as the Landlord may deem necessary for the safety, improvement or preservation of the Leased Premises. The Landlord shall give reasonable notice to the Tenant prior to entry but no such entry shall constitute an eviction or a breach of the Landlord’s covenant for quiet enjoyment or entitle the Tenant to any abatement of Rent.

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6.4     Condition of Leased Premises. The Tenant agrees that it has entered into this Lease on the express understanding that all improvements to the Leased Premises shall be performed at the sole expense of the Tenant in accordance with the terms of this Lease. The Tenant shall accept the Leased Premises “as is, where is” in their state and condition existing at the Commencement Date including, without limitation, any environmental contamination of the Land or the Leased Premises.

ARTICLE 7
SERVICES, MAINTENANCE, REPAIR AND ALTERATIONS BY THE TENANT

7.1     Utilities. The Tenant shall be solely responsible for the cost of all utilities supplied to or for the Leased Premises including, without limitation, the cost of all electricity, gas, hot and cold water, telephone and all other utilities, services and facilities. The cost of all such utilities shall be paid to the utility supplier by the Tenant on or before their due date.

7.2     Lights, Etc. The Tenant shall be solely responsible for replacing at its expense all fluorescent tubes, light bulbs and ballasts and for the cleaning, maintaining and servicing of same, all in accordance with the standards required by the Landlord from time to time.

7.3     Heating, Ventilation and Air-Conditioning. The Tenant shall be solely responsible for the cost of all heating, ventilation and air-conditioning required in the Leased Premises or any part thereof and shall maintain therein conditions of reasonable temperature and comfort so as to prevent damage to the Leased Premises caused by the elements or otherwise.

7.4     Alterations by Tenant. The Tenant may from time to time at its own expense make changes, additions and improvements to the Leased Premises to better adapt the same to its business, provided that any change, addition or improvement shall:

(a)	comply with the requirements of any governmental authority having jurisdiction;
(b)	be made only after detailed plans and specifications therefor have been submitted to the Landlord and received the prior written consent of the Landlord, acting reasonably, all at the expense of the Tenant, including the reasonable cost of the Landlord’s consultants, if any; and
(c)	be carried out in a good and workmanlike manner and only by Persons selected by the Tenant and approved in writing by the Landlord, acting reasonably, who shall if required by the Landlord deliver to the Landlord before commencement of the work, performance and payment bonds as well as proof of workers’ compensation and public liability and property damage insurance coverage, with the Landlord named as an additional insured, in amounts, with companies and in form reasonably satisfactory to the Landlord, which shall remain in effect during the entire period in which the work will be carried out,

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provided that if any such changes, additions or improvements require modification to the heating, ventilation or air-conditioning systems in the Building, the Tenant shall be solely responsible for the cost of such modifications.

7.5     Tenant’s Work. The Tenant may install in the Leased Premises its usual fixtures and personal property in a proper manner; provided that no installation or repair shall interfere with or damage the mechanical or electrical systems or the structure of the Building. If the Tenant is not then in default hereunder, the fixtures and personal property installed in the Leased Premises by or on behalf of the Tenant may be removed by the Tenant from time to time in the ordinary course of the Tenant’s business or in the course of reconstruction, renovation or alteration of the Leased Premises by the Tenant, provided that the Tenant promptly repairs at its own expense any damage to the Leased Premises and the Building resulting from the installation and removal and provided further that in the event of removal of fixtures, the Tenant shall promptly replace such fixtures with fixtures of equal or greater quality and value.

7.6     Condition of Premises. The Tenant shall, at its expense, maintain the Leased Premises and all improvements therein in the same repair, order and condition as existing on the Commencement Date, subject to reasonable wear and tear, including, without limitation:

(a)	cleaning and removal of debris and garbage;
(b)	repainting the Leased Premises and cleaning windows and floor coverings at reasonable intervals as reasonably required by the Landlord;
(c)	making repairs and replacements as needed to the Leased Premises and all systems located therein including, without limitation, to heating, air-conditioning and ventilation equipment, glass, doors, hardware, partitions, walls, fixtures, lighting and plumbing fixtures, wiring, piping, ceilings, floors and thresholds;
(d)	providing and maintaining landscaping, gardening and snow removal;
(e)	making repairs and replacements, whether structural or otherwise to the Building and Leased Premises including, without limitation, to the roof or any parking area or facility; and
(f)	keeping the Leased Premises in a condition so as to comply with the requirements of any governmental authority having jurisdiction,

all to such standards and condition as would a careful and prudent owner of a property similar to the Leased Premises in the area in which the Leased Premises are located.

7.7     Failure to Maintain. If the Tenant fails to perform any obligation under this Article 7, then on not less than fifteen (15) days’ notice to the Tenant, the Landlord may enter the Leased Premises and perform the obligation without liability to the Tenant for any loss or damage to the Tenant thereby incurred. The Tenant shall, promptly after receiving the

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Landlord’s invoice therefor, reimburse the Landlord for all costs incurred by the Landlord in performing the obligation.

7.8     Liens. The Tenant shall pay promptly when due all costs for work done or caused to be done by the Tenant in the Leased Premises which could result in any lien or encumbrance on the Landlord’s interest in the Leased Premises or any part thereof, shall keep the title to the Leased Premises and every part thereof free and clear of any lien or encumbrance in respect of the work and shall indemnify and hold harmless the Landlord against any claim, loss, cost, demand and legal or other expense, whether in respect of any lien or otherwise, arising out of the supply of materials, services or labour for the work. The Tenant shall immediately notify the Landlord of the lien, claim of lien or other action of which it has or reasonably should have knowledge and which affects the title to the Land, the Building or the Leased Premises or any part thereof and shall cause the same to be removed within fifteen (15) days (or such additional time as the Landlord may consent to in writing), failing which the Landlord may take such action as the Landlord deems necessary to remove same and the entire cost thereof shall immediately become due and payable by the Tenant to the Landlord.

ARTICLE 8
TAXES

8.1     Landlord’s Taxes. The Landlord shall pay promptly when due (but subject to contribution by the Tenant as required hereunder) any tax, rate, levy, assessment, fee and other charge (except for taxes payable by the Tenant under this Lease) which is imposed, levied, assessed or charged by a taxing or other authority having jurisdiction and which is payable in respect of the Term or any part thereof upon or on account of the Leased Premises.

8.2     Tenant’s Taxes. In addition to taxes payable by the Tenant under Sections 4.6 and 4.7, the Tenant shall pay promptly when due every tax, rate, levy, assessment, fee and other charge which is imposed, levied, assessed or charged to or for the account of the Tenant or the Leased Premises by a taxing authority having jurisdiction and which is payable upon or on account of:

(a) operations at, occupancy of, or conduct of business in and from the Leased Premises by or with permission of the Tenant; and

(b) fixtures, improvements or personal property in the Leased Premises which do not belong to the Landlord;

provided that if the Landlord so elects by notice to the Tenant, the Tenant shall pay any such taxes payable by it under this Lease in monthly instalments to the Landlord and the Landlord shall remit the amounts to the appropriate authorities. The Tenant agrees that if, at any time and from time to time throughout the Term, any additional tax, rate, levy, assessment, fee, charge, cost, expense, penalty, fine or interest is imposed, levied, assessed or charged to or for the account of the Landlord by a taxing authority having jurisdiction and which is payable upon or on account of the Minimum Rent in respect of the initial term of this Lease, the Tenant shall

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forthwith pay fifty percent (50%) of such additional tax, rate, levy, assessment, fee, charge, cost, expense, penalty, fine or interest to the Landlord.

8.3     Right to Contest. Each of the Landlord and the Tenant (provided the Tenant is legally entitled to do so) shall have the right to contest in good faith the validity or amount of any tax, rate, levy, assessment, fee or other charge which it is responsible to pay under this Article 8 and to defer payment of such taxes to the extent permitted by law; provided that no contest by the Tenant shall involve the possibility of forfeiture, sale or disturbance of the Landlord’s interest in the Leased Premises and that, upon the final determination of any contest by the Tenant, the Tenant shall immediately pay and satisfy the amount found to be due, together with any costs, penalties and interest. If as a result of any contest by the Tenant, any tax, rate, levy, assessment, fee or other charge is increased, the Tenant shall be responsible for the full amount of such increase in respect of the period to which the contest relates and to any subsequent tax periods which commence during the Term.

8.4     Notice of Taxes. The Tenant shall promptly give to the Landlord all assessment notices, tax bills and any other notices relating in any way to the Leased Premises forthwith after receipt thereof by the Tenant.

ARTICLE 9
INSURANCE & LIABILITY

9.1     Landlord’s Insurance. During the Term, the Landlord shall place insurance coverage on the Leased Premises, which coverage shall include the following:

(a)	all risks insurance for the full reconstruction value of the Building (including the value of the foundations) as determined by the Landlord, acting reasonably;
(b)	as an extension to the insurance maintained pursuant to Section 9.1(a), insurance on the rental income derived by the Landlord from the Leased Premises on a gross rental income form with a period of indemnity of not less than the period as estimated by the Landlord from time to time which would be required to rebuild the Leased Premises in the event of complete destruction thereof;
(c)	comprehensive boiler and unfired pressure vessels insurance, including repair or replacement and rental income coverages;
(d)	comprehensive general bodily injury and property damage liability insurance; and
(e)	such other insurance which is or may become customary or reasonable for owners of buildings similar to the Building to carry in respect of loss of or damage to the Building or liability arising therefrom.

The insurance referred to in this Section 9.1 shall be carried in amounts determined by the Landlord and shall be obtained from a company or companies and be of a type and form satisfactory to the Landlord, acting reasonably. The insurance shall be written in the name of the

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Landlord with loss payable to the Landlord and to any mortgagee (including any trustee under a deed of trust and mortgage) of the Leased Premises from time to time if required by the Landlord. The policies of insurance referred to in Sections 9.1(a), (b) and (c) shall contain a waiver of the insurer’s right of subrogation as against the Tenant. The Landlord hereby waives its right of recovery against the Tenant, its employees and those for whom the Tenant is in law responsible with respect to occurrences required to be insured against by the Landlord hereunder, but only to the extent that the Landlord receives proceeds of insurance from its insurer or insurers with respect to same after making reasonable efforts to collect. All insurance required to be placed by the Landlord under the terms of this Lease shall be at the expense of the Tenant and the Tenant shall pay to the Landlord the reasonable cost of all such insurance forthwith upon demand therefor. The cost of insurance shall be adjusted between the Landlord and the Tenant on the Commencement Date and at the expiry of the Term. Notwithstanding any contribution by the Tenant to insurance premiums as provided for in this Lease, no insurable interest is conferred upon the Tenant under policies carried by the Landlord. Except as specifically provided in this Lease, the Landlord shall in no way be accountable to the Tenant regarding the use of the insurance proceeds arising from any claim. Nothing contained in this Lease shall require the Landlord to insure any of the Tenant’s equipment, machinery, stock, leasehold improvements, fixtures or any other property owned or brought onto or into the Leased Premises by the Tenant whether affixed to the Building or not.

9.2     Tenant’s Insurance. At its expense, the Tenant shall take out and thereafter maintain in force at all times during the Term insurance policies as follows:

(a)	all risks insurance on all property of every description, nature and kind owned by the Tenant or for which the Tenant is legally liable, or installed in the Leased Premises by or on behalf of the Tenant or which is located or situate within the Leased Premises including, without limitation, all leasehold improvements and Tenant’s fixtures in an amount not less than the full replacement cost thereof without deduction for depreciation. Such insurance shall be subject to replacement cost endorsement and shall include a stated amount co-insurance clause;
(b)	comprehensive broad form boiler, machinery and equipment insurance for the full replacement cost value of all boilers, pressure vessels, air-conditioning and other equipment located on the Leased Premises;
(c)	business interruption insurance in such amounts as will reimburse the Tenant for direct or indirect loss of earnings attributed to all perils commonly insured against by prudent tenants or attributable to prevention of access to the Leased Premises or to the Building as a result of such perils;
(d)	comprehensive general bodily injury and property damage liability insurance and tenant’s legal liability insurance in the minimum amount of Ten Million Dollars ($10,000,000.00) and in a form satisfactory to the Landlord, acting reasonably, and including owners and contractors protective, products and completed operations, personal injury, intentional acts, employer’s liability, occurrence

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property damage (broad form), blanket contractual and non-owned automobile liability extensions. Such insurance shall include a cross liability and severability of interest clause; and

(e) any other form or forms of insurance as the Tenant or the Landlord or the mortgagees of the Landlord reasonably require from time to time in form, in amounts and for insurance risks against which a prudent tenant would protect itself, provided such form of insurance and amounts of coverage are generally available on terms which the Tenant, acting reasonably, considers to be reasonable commercial terms,

but subject to such higher limits as the Tenant, the Landlord, acting reasonably, or any mortgagee of the Landlord’s interest in the Leased Premises may require from time to time and against such additional risks as a prudent tenant would insure. The insurance policies referred to in this Section 9.2 shall contain a waiver of the insurer’s right of subrogation as against the Landlord, the Landlord’s directors, officers, employees, servants, agents, contractors, successors and assigns and any Person for whom the Landlord may in law or by agreement be responsible or for whom the Landlord may have agreed to obtain such a waiver. Any and all deductibles shall be at the expense of the Tenant. The Tenant shall provide to the Landlord at the commencement of the Term, 30 days prior to the renewal of all insurance referred to in this Section 9.2 and promptly at any time upon request, a certificate of insurance evidencing the insurance coverages maintained by the Tenant in accordance with this Section 9.2, such certificates to be in a form acceptable to the Landlord, acting reasonably. The delivery to the Landlord of a certificate of insurance or a certified copy of an insurance policy or any review thereof by or on behalf of the Landlord shall not limit the obligation of the Tenant to provide and maintain insurance pursuant to this Section 9.2 or derogate from the Landlord’s rights if the Tenant shall fail to fully insure. All policies of insurance placed under this Section 9.2 shall be placed with a company or companies reasonably satisfactory to the Landlord. All policies shall provide that the insurance shall not be cancelled or changed to the prejudice of the Landlord without at least 30 days’ prior written notice given by the insurer to the Landlord.

9.3     Placement of Tenant’s Insurance by Landlord. If the Tenant fails to place or maintain all or any of the insurance coverages referred to in Section 9.2, the Landlord may, at its option, place all or any part of such insurance in the name of or on behalf of the Tenant and the Tenant shall pay to the Landlord upon demand all costs incurred by the Landlord in so doing, including the premium or premiums for such insurance.

9.4     Cancellation of Insurance. The Tenant covenants that nothing will be done or omitted to be done whereby any policy of insurance obtained by the Landlord pursuant to Section 9.1 shall be cancelled or the Leased Premises rendered uninsurable.

9.5     Limitation of Landlord’s Liability. The Landlord and its directors, officers, employees, servants, agents, contractors, successors and assigns shall not be liable even if grossly negligent for any damage to the Leased Premises or any property located therein caused by any latent defect or by steam, water, rain or snow which may leak into, issue or flow from any part of the Leased Premises or from the water, steam, sprinkler or drainage pipes or plumbing

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works of the same or from any other place or from any damage caused by or attributable to the condition or arrangement of any electrical or other wiring or for damage caused by interruption or failure of any service or utility or for damage however caused to books, records, files, money, securities, negotiable instruments, papers or other valuables.

9.6     Indemnity. The Tenant shall indemnify and save harmless the Landlord and its directors, officers, employees, servants, agents, contractors, successors and assigns from any and all liabilities, damages, costs, claims, suits or actions growing or arising out of:

(a)	any breach, violation or non-performance of any covenant, condition or agreement in this Lease set forth and contained on the part of the Tenant to be fulfilled, kept, observed and performed;
(b)	any damage to property while the property is in or about the Leased Premises; and
(c)	any injury to person or persons including death resulting at any time therefrom occurring in or about the Leased Premises.

9.7     Survival of Obligations and Indemnities. All obligations of the Tenant which arise during the Term pursuant to this Lease and which have not been satisfied and the indemnities and other obligations of the Tenant contained in Section 9.6 shall survive the expiration or other termination of this Lease.

ARTICLE 10
DAMAGE AND DESTRUCTION

10.1     Limited Damage to Leased Premises. If during the Term, the Leased Premises or any part thereof shall be destroyed or damaged by any hazard against which the Landlord is obligated to insure or has insured hereunder, the Landlord, if permitted by law so to do, shall proceed with reasonable diligence to rebuild and restore or repair the Leased Premises or comparable premises in conformance with current laws but only to the extent of insurance proceeds received. The covenants of the Tenant to repair shall not include any repairs of damage required to be made by the Landlord under this Section 10.1. Rent payable by the Tenant from the date of such damage or destruction until the Leased Premises are restored, shall abate to the extent of all amounts which the Landlord may receive from loss of rental insurance. If less than all of the Leased Premises is destroyed or damaged as contemplated in this Section 10.1, Minimum Rent payable by the Tenant shall abate from the date of such damage or destruction until the Leased Premises are restored, in the same proportion as the Rentable Area of the Leased Premises so damaged or destroyed is of the total Rentable Area of the Leased Premises.

10.2     Major Damage to Leased Premises. Notwithstanding anything in this Lease contained, if in the opinion of the Landlord’s architect or engineer given within 30 business days of the happening of damage or destruction, the Leased Premises shall be damaged or destroyed by any hazard against which the Landlord is obligated to insure or has insured as provided for hereunder to the extent that the Leased Premises shall be incapable of being rebuilt or repaired or restored with reasonable diligence within six months after the occurrence of such damage or

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destruction, then, either the Landlord or the Tenant may, at its option, terminate this Lease by notice in writing to the other given within 15 days after the giving of the opinion by the Landlord’s architect or engineer. If notice is given by the Landlord or the Tenant under this Section 10.2, then this Lease shall terminate from the date of such damage or destruction and the Tenant shall immediately surrender the Leased Premises and all interest therein to the Landlord and the Rent shall be apportioned and shall be payable by the Tenant only to the date of such damage or destruction and the Landlord may thereafter re-enter and repossess the Leased Premises.

10.3     No Abatement. Except as specifically provided in this Article 10, there shall be no reduction of Rent and the Landlord shall have no liability to the Tenant by reason of any injury to or interference with the Tenant’s business or property arising from fire or other casualty, howsoever caused, or from the making of any repairs resulting therefrom or to any portion of the Building or the Leased Premises.

10.4     Notify. The Tenant shall immediately notify the Landlord of any accident or defect in the Leased Premises or any systems thereof, and as well of any matter or condition which may cause injury or damage to the Building or any person or property located therein.

ARTICLE 11
DEFAULT

11.1     Interest. The Tenant shall pay monthly to the Landlord interest at a rate equal to the lesser of the Prime Rate plus five per cent per annum and the maximum rate permitted by applicable law, upon all Rent required to be paid hereunder from the due date for payment thereof until the same is fully paid and satisfied.

11.2     Costs of Enforcement. The Tenant shall indemnify the Landlord against all costs and charges (including legal fees on a substantial indemnity basis) reasonably incurred in enforcing payment of Rent hereunder and in obtaining possession of the Leased Premises after default of the Tenant or upon expiration or earlier termination of this Lease or in enforcing any covenant, proviso or agreement of the Tenant herein contained. All such costs and charges shall be paid by the Tenant to the Landlord forthwith upon demand.

11.3     Performance of Tenant’s Obligations. All covenants and agreements to be performed by the Tenant under any of the terms of this Lease shall be performed by the Tenant, at the Tenant’s sole cost and expense, and without any abatement of Rent. If the Tenant fails to perform any act to be performed by it hereunder, and the failure continues for ten (10) days following notice thereof, the Landlord may (but shall not be obligated to) perform the act without waiving or releasing the Tenant from any of its obligations relative thereto. All sums paid and costs incurred by the Landlord in so performing the act, together with interest thereon at the rate set out in Section 11.1 from the date payment was made or such cost incurred by the Landlord, shall be payable by the Tenant to the Landlord on demand.

11.4     Events of Default. If and whenever:

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(a)	all or any part of the Rent hereby reserved is not paid when due and default continues for five (5) days after written notice thereof; or
(b)	the Term or any goods, chattels or equipment of the Tenant is seized or is taken or exigible in execution or in attachment or if a writ of execution is issued against the Tenant or if a creditor takes possession thereof; or
(c)	the Tenant or any person or corporation bound to perform the obligations of the Tenant hereunder either as guarantor or indemnifier or as one of the parties constituting the Tenant takes any steps or suffers any order to be made for its winding-up or other termination of its corporate existence or becomes insolvent or commits an act of bankruptcy or becomes bankrupt or takes the benefit of any statute that may be in force for bankrupt or insolvent debtors or becomes involved in voluntary or involuntary winding-up proceedings or if a receiver or receiver/manager shall be appointed for the business, property, affairs or revenues of the Tenant or such person or corporation; or
(d)	the Tenant makes a bulk sale of its goods or moves or commences, attempts or threatens to move its goods, chattels and equipment out of the Leased Premises (other than in the normal course of its business) or ceases to conduct business from the Leased Premises; or
(e)	the Tenant vacates or abandons the Leased Premises in whole or in part or fails to actively carry on business therein; or
(f)	the Tenant fails to observe, perform and keep each and every of the covenants, agreements, provisions, stipulations and conditions herein contained to be observed, performed and kept by the Tenant (other than payment of Rent) and persists in the failure after fifteen (15) days’ written notice by the Landlord requiring the Tenant to remedy, correct, desist or comply (or if any breach would reasonably require more than fifteen (15) days to rectify, unless the Tenant commences rectification within the fifteen (15) day notice period and thereafter promptly and effectively and continuously proceeds with the rectification of the breach),

then the Landlord shall be entitled to any or all of those remedies set out in Section 11.5.

11.5     Remedies on Default. The Landlord may, at its option, in any of the cases set out in Section 11.4 and in addition to and without prejudice to all rights and remedies of the Landlord available to it either by any other provision of this Lease or by statute or the general law:

(a) be entitled to the full amount of the current month’s and the next ensuing three months’ instalments of Rent which shall immediately become due and payable and the Landlord may immediately distrain for the same, together with any arrears then unpaid;

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(b)	without notice or any form of legal process, forthwith re-enter upon and take possession of the Leased Premises or any part thereof in the name of the whole and re-let the Leased Premises or any part thereof on behalf of the Tenant or otherwise as the Landlord sees fit and remove and sell the Tenant’s goods, chattels and trade fixtures therefrom, any rule of law or equity to the contrary notwithstanding;
(c)	seize and sell such goods, chattels and equipment of the Tenant as are in the Leased Premises and may apply the proceeds thereof to all Rent to which the Landlord is then entitled under this Lease. Any such sale may be effected by public auction or otherwise, and either in bulk or by individual item, or partly by one means and partly by another, all as the Landlord in its sole discretion may decide;
(d)	terminate this Lease by leaving upon the Leased Premises notice in writing of the termination, and termination shall be without prejudice to the Landlord’s right to damages; it being agreed that the Tenant shall pay to the Landlord on demand as damages the loss of income of the Landlord to be derived from the Leased Premises for the unexpired portion of the Term had it not been terminated; or
(e)	re-enter into and upon the Leased Premises or any part thereof in the name of the whole and repossess and enjoy the same as of the Landlord’s former estate, anything herein contained to the contrary notwithstanding,

and the Tenant shall pay to the Landlord forthwith upon demand all expenses of the Landlord in re-entering, terminating, re-letting, collecting sums due or payable by the Tenant or realizing upon assets seized including tenant inducements, leasing commissions, legal fees on a substantial indemnity basis and all disbursements and the expense of keeping the Leased Premises in good order, repairing the same and preparing them for re-letting.

11.6     Availability of Remedies. The Landlord may from time to time resort to any or all of the rights and remedies available to it in the event of any default by the Tenant, either by any provision of this Lease or by statute or the general law, all of which rights and remedies are intended to be cumulative and not alternative, and the express provisions hereunder as to certain rights and remedies are not to be interpreted as excluding any other or additional rights or remedies available to the Landlord by statute or the general law.

11.7     Waiver. If the Landlord shall overlook, excuse, condone or suffer any default, breach or non-observance by the Tenant of any obligation hereunder, this shall not operate as a waiver of the obligation in respect of any continuing or subsequent default, breach or non-observance and no such waiver shall be implied but shall only be effective if expressed in writing.

11.8     Waiver of Exemption and Redemption. Notwithstanding anything contained in any statute now or hereafter in force limiting or abrogating the right of distress, none of the Tenant’s goods, chattels or trade fixtures on the Leased Premises at any time during the Term

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shall be exempt from levy by distress for Rent in arrears, and upon any claim being made for exemption by the Tenant or on distress being made by the Landlord, this agreement may be pleaded as an estoppel against the Tenant in any action brought to test the right to the levying upon of any such goods as are named as exempted in any such statute, the Tenant hereby waiving all and every benefit that could or might have accrued to the Tenant under and by virtue of any such statute but for this Lease. The Tenant hereby expressly waives any and all rights of redemption and relief from forfeiture granted by or under any present or future laws in the event of the Tenant being evicted or dispossessed for any cause, or in the event of the Landlord obtaining possession of the Leased Premises, by reason of the violation by the Tenant of any of the terms or conditions of this Lease or otherwise.

ARTICLE 12
ASSIGNMENT AND SUBLETTING

12.1     Assignment. Provided no default has occurred under this Lease, the Tenant may assign this Lease:

(a) to an assignee who is a purchaser of all or substantially all of the business of the parent company of the Tenant, an affiliate (as defined in the Business Corporations Act (Ontario)) of the Tenant, a corporation which results from the reconstruction, consolidation, amalgamation or merger of the Tenant, or a trust or partnership in which the Tenant has a substantial interest, with the Landlord’s prior written consent, which consent shall not be unreasonably withheld; or

(b) to any other assignee who, in the Landlord’s sole opinion, will not be an undesirable tenant, with the Landlord’s prior written consent, which consent may be unreasonably withheld.

12.2     Subleasing. With the Landlord’s prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned, the Tenant may, provided no default has occurred under this Lease, sublet all or any part of the Leased Premises. Notwithstanding anything else to the contrary provided in this Lease and/or any act or rule of law or regulation now or hereafter in force to the contrary, the Landlord may, in its sole and absolute discretion, refuse to give its consent to any transfer or subletting by the Tenant of less than the whole of the Leased Premises resulting in more than three (3) separate premises therein. It is expressly understood and agreed by the Tenant that except as permitted above in this Section, no further sub-subletting or parting with possession of all or any part of the Leased Premises in any way, or use or occupation of all or any part of the Leased Premises by any other Person, is permitted.

12.3     Request for Consent.Any request for the consent of the Landlord to any assignment, transfer, pledge or subletting shall be in writing and accompanied by full particulars of the terms of the proposed assignment, transfer, pledge or subletting, as the case may be, and shall contain detailed information as to the identity, business and financial status of the proposed assignee, transferee, pledgee or subtenant. The Landlord shall be deemed to be acting reasonably in withholding its consent to any proposed assignment or sublease if the Landlord determines, without limitation, that:

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(a)	the Landlord would be unable to secure the consent of any mortgagee or other Person who may have the right to approve the assignment or sublease, on terms satisfactory to the Landlord;
(b)	the business experience, financial background or creditworthiness of the proposed assignee or subtenant or its principals is insufficient or unsatisfactory;
(c)	the Landlord, acting reasonably, did not receive sufficient information, material, books or records from the Tenant or the proposed assignee or subtenant, including its principals, to enable the Landlord to make a determination concerning any of the matters set out above.

If the Tenant is of the opinion that any consent has been wrongfully withheld, its remedies in respect thereof shall not include any loss, injury or damage arising therefrom or termination of this Lease. All reasonable costs associated with considering or the giving of such consents and the preparation of necessary documentation as provided herein, including the Landlord’s reasonable legal fees on a substantial indemnity basis, shall be payable by the Tenant to the Landlord forthwith upon demand.

Provided, however, and it is made a condition to any assignment, transfer, subletting or use or occupation of the Leased Premises by any other Person that:

(d)	the proposed assignee, transferee, subtenant or user or occupant of the Leased Premises, jointly and severally with the Tenant, shall agree in writing with the Landlord to assume and perform all of the obligations, terms, covenants, conditions and agreements by this Lease imposed upon the Tenant herein in a form to be approved by the solicitor for the Landlord and shall obtain occupancy approval from the local building and fire departments, if necessary, and provide evidence thereof to the Landlord prior to taking occupancy of the Leased Premises;
(e)	the assignee, transferee, subtenant or user or occupant of the Leased Premises shall also waive any rights which it may have at common law in respect of relief from forfeiture and any rights it may have pursuant to Sections 21 and 39(2) of the Commercial Tenancies Act (Ontario), as amended from time to time;
(f)	the acceptance by the Landlord of Rent from an assignee, transferee, subtenant or user or occupant of the Leased Premises without the Landlord’s consent shall not constitute a waiver of the requirement of such consent nor shall it constitute an acceptance of such party as the Tenant;
(g)	the Landlord may, at its option, cancel the First Renewal Right and the Second Renewal Right;
(h)	the Leased Premises, at the time of the assignment, transfer, subletting or use or occupation of the Leased Premises by such other Person shall comply in all

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respects with the standard of repair and maintenance required of the Tenant pursuant to this Lease;

(i)	with respect to a sublease having a term expiring in the last twelve (12) months of the Term, the Landlord shall have received from the Tenant or the assignee, transferee, subtenant or user or occupant of the Leased Premises a cash deposit equal to the last three (3) months’ Minimum Rent hereunder (pro-rated in the case of a request relating to a portion only of the Leased Premises), as security for the performance of the repair and maintenance obligations of the Tenant and the assignee, transferee, subtenant or user or occupant of the Leased Premises, to be held by the Landlord pending delivery up of the Leased Premises (or the portion thereof which is subject to the assignment, transfer, subletting or use or occupation of the Leased Premises by such other Person) by the assignee, transferee, subtenant or user or occupant of the Leased Premises in the condition and to the standard required hereunder;
(j)	if the assignment, transfer, subletting or use or occupation of the Leased Premises by such other Person does not take place within sixty (60) days of the giving of consent by the Landlord, the consent shall, at the Landlord’s option, expire and become null and void; and
(k)	if the Lease is disaffirmed, disclaimed or terminated by any trustee in bankruptcy of an assignee, transferee, subtenant or user or occupant of the Leased Premises, the original Tenant named in this Lease will be deemed on notice from the Landlord given within sixty (60) days from the date of such disaffirmation, disclaimer or termination to have entered into a lease with the Landlord containing the same terms and conditions as in this Lease.

12.4     Excess Rent. In the event that the Minimum Rent payable under any assignment, transfer, subletting or use or occupation of the Leased Premises by any other Person during any renewal period is in excess of the Minimum Rent reserved hereunder or is in excess of the proportionate Minimum Rent reserved in the event of a sublease of part of the Leased Premises, whether the excess be in the form of cash, goods or services from the assignee, transferee, subtenant or user or occupant of the Leased Premises or anyone acting on its behalf, the Tenant shall pay all of such excess to the Landlord immediately upon receipt thereof; in the event that such excess is represented by goods or services rendered to the Tenant, the value of those goods or services shall be determined by the Landlord and the Tenant and that value shall be paid in cash to the Landlord immediately upon such determination. For greater certainty, this Section shall not apply during the initial term of this Lease specified in Section 3.1, but shall only apply during any renewal period.

12.5     Limitation. Except as specifically provided in this Article 12, the Tenant shall not assign, sublet, pledge or transfer this Lease or any interest therein or in any way part with possession of all or any part of the Leased Premises, or permit all or any part of the Leased Premises to be used or occupied by any other Person. Any transfer or other dealing with any of the shares of the Tenant having the effect of altering the identity of the shareholder or

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shareholders having the right to exercise a majority of the votes in an election of directors or otherwise changing control, directly or indirectly, of the Tenant, shall be deemed to be an assignment of this Lease which requires the prior approval of the Landlord as set out herein. The provisions of this Section 12.5 shall not apply where the Tenant’s shares are listed on a North American Stock Exchange. Any assignment, transfer or subletting or purported assignment, transfer or subletting except as specifically provided herein shall be null and void and of no force and effect. The rights and interests of the Tenant under this Lease shall not be assignable by operation of law without the Landlord’s prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned.

12.6     Documentation. No assignment, transfer, subletting or use or occupation of the Leased Premises by any other Person which is permitted under this Article 12 shall release or relieve the Tenant of its obligations under this Lease including, without limitation, the obligation to pay Rent, unless the release or relief is specifically granted by the Landlord to the Tenant in writing.

12.7     Subsequent Assignments. The Landlord’s consent to an assignment, transfer, subletting or use or occupation of the Leased Premises by any Person other than the Tenant shall not be deemed to be a consent to any subsequent assignment, transfer, subletting or use or occupation.

12.8     Advertising Leased Premises. The Tenant shall not advertise or allow the Leased Premises or a portion thereof to be advertised as being available for assignment, sublease or otherwise without the prior written approval of the Landlord as to the form, size, content and location of such advertisement, which approval shall not be unreasonably withheld, provided that no such advertising shall contain any reference to the Rent for the Leased Premises.

ARTICLE 13
TRANSFERS BY LANDLORD

13.1     Sale, Conveyance and Assignment. Nothing in this Lease shall restrict the right of the Landlord to sell, convey, assign, pledge or otherwise deal with the Leased Premises subject only to the rights of the Tenant under this Lease.

13.2     Effect of Transfer. A sale, conveyance or assignment of the Leased Premises by the Landlord shall operate to release the Landlord from liability from and after the effective date thereof in respect of all of the covenants, terms and conditions of this Lease, express or implied, except as they may relate to the period prior to the effective date, and the Tenant shall thereafter look solely to the Landlord’s successor in interest and to this Lease.

13.3     Subordination. Subject to Section 13.4, this Lease is and shall be subject and subordinate in all respects to any and all mortgages (including deeds of trust and mortgage) now or hereafter placed on the Building or the Land and all advances thereunder, past, present and future, and to all renewals, modifications, consolidations, replacements and extensions thereof; provided that the Landlord obtains from such mortgagees an agreement not to disturb the Tenant’s possession so long as the Tenant is not in default under this Lease beyond the period of

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time permitted for rectification of default. The Landlord agrees to use its reasonable commercial efforts to obtain any such non-disturbance agreement from such existing mortgagees. The Tenant agrees to execute promptly and in any event within ten (10) days after request therefor an instrument of subordination as may be requested in a form satisfactory to it, acting reasonably.

13.4     Attornment. The Tenant agrees, whenever requested by any mortgagee (herein called the “Purchaser”) by reason of foreclosure or other proceedings for enforcement of any mortgage or deed of trust, or by delivery of a deed in lieu of such foreclosure or other proceedings, to attorn to such Purchaser as a tenant under all of the terms of this Lease. The Tenant agrees to execute promptly and in any event within ten (10) days after a request by any Purchaser an instrument of attornment as may be required of it.

13.5     Effect of Attornment. Upon attornment pursuant to Section 13.4, this Lease shall continue in full force and effect as a direct lease between the Purchaser and the Tenant, upon all of the same terms, conditions and covenants as are set forth in this Lease except that, after attornment, the Purchaser and its successors in title shall not be:

(a)	liable for any act or omission of the Landlord, or
(b)	subject to any offsets or defenses which the Tenant might have against the Landlord, or
(c)	bound by any prepayment by the Tenant of more than one month’s instalment of Rent or by any previous modification of this Lease, unless the prepayment or modification shall have been approved in writing by the Purchaser or any predecessor of the Purchaser’s former interest as mortgagee in the Leased Premises.

ARTICLE 14
SURRENDER AND EXPROPRIATION

14.1     Possession. Upon the expiration or other termination of the Term, the Tenant shall immediately quit and surrender possession of the Leased Premises and all leasehold improvements in substantially the condition in which the Tenant is required to maintain the Leased Premises excepting only reasonable wear and tear and damage covered by Landlord’s insurance under Section 9.1; provided that, notwithstanding the foregoing, the Landlord shall have the right, at its sole option upon the expiration or other termination of the Term, to require that the Tenant:

(a) remove, dismantle or cause to be removed or dismantled at the Tenant’s cost all leasehold improvements in the Leased Premises, including without limitation, the Tenant’s Specialized Equipment, whether or not installed by or on behalf of the Tenant;

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(b)	restore the Leased Premises to base Building standard, as more particularly set out in Schedule “D” hereto; and
(c)	decommission the Leased Premises.

Upon surrender, all right, title and interest of the Tenant in the Leased Premises shall cease.

14.2     Tenant’s Trade Fixtures and Personal Property. At the expiration or other termination of the Term, if the Tenant is not in default hereunder, it may remove, at its expense, all of its trade fixtures, personal property and improvements, provided that the Tenant shall forthwith repair any damage to the Leased Premises resulting from such removal. After the expiration or other termination of the Term, all of the Tenant’s trade fixtures, personal property and improvements remaining in the Leased Premises shall be deemed conclusively to have been abandoned by the Tenant and may be appropriated, sold, destroyed or otherwise disposed of by the Landlord without notice or obligation to compensate the Tenant or to account therefor, and the Tenant shall pay to the Landlord upon written demand all of the costs incurred by the Landlord in connection therewith.

14.3     Overholding. If the Tenant continues to occupy the Leased Premises after the expiration or other termination of the Term without any further written agreement, the Tenant shall be a monthly tenant at an annual basic rent equal to one and a half times the Minimum Rent but subject to all other provisions in this Lease to the extent that the same are applicable to a month-to-month tenancy, and a tenancy from year to year shall not be created by implication of law. Nothing contained in this Section shall preclude the Landlord from exercising all of its rights set out in this Lease including, without limitation, the taking of any action for recovery of possession of the Leased Premises. For greater certainty, this Section shall not apply during the Automatic Renewal Period, if any, pursuant to Section 3.3(c).

14.4     Expropriation.

(a)	Taking of Leased Premises — If during the Term, all or a substantial part of the Leased Premises are taken for any public or any quasi-public use under any statute or by right of expropriation, or purchased under threat of such taking, this Lease shall, at the option of the Landlord, automatically terminate on the date on which the condemning authority takes possession of the Leased Premises (the “date of taking”).
(b)	Surrender — On any date of termination under Section 14.4(a), the Tenant shall immediately surrender to the Landlord the Leased Premises and all interest therein under this Lease. The Landlord may re-enter and take possession of the Leased Premises and remove the Tenant and the Rent shall abate on the date of taking. After such termination and on notice from the Landlord stating the Rent then owing, the Tenant shall pay the Landlord such Rent.
(c)	Partial Taking of Leased Premises — If any portion of the Leased Premises (but less than the whole) is so taken and no rights of termination herein conferred are

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exercised, the Term of this Lease shall expire with respect to the portion so taken on the date of taking. In such event, the Rent payable hereunder with respect to the portion taken shall abate on the date of taking and the Rent thereafter payable with respect to the remainder shall be adjusted pro rata by the Landlord to account for the resulting reduction in the Rentable Area of the Leased Premises.

(d) Awards — None of the provisions of this Section 14.4 shall have the effect of derogating from the rights of the Landlord or the Tenant to claim any award with respect to any taking or purchase. Upon any taking or purchase, the Landlord shall be entitled to receive and retain the entire award or consideration for the affected part of the Leased Premises and the Tenant shall not have or advance any claim against the Landlord for the value of its property or its estate or the unexpired Term of the Lease or for costs of removal or relocation or business interruption expense or any other damages arising out of the taking or purchase. Nothing herein shall give the Landlord any interest in or preclude the Tenant from seeking and recovering on its own account from the condemning authority any award or compensation attributable to the taking or purchase of the Tenant’s improvements, chattels or trade fixtures or the removal or relocation of its business and effects or the interruption of its business. If any award made or compensation paid to either party specifically includes an award on account of the other, the party first receiving the award shall promptly account therefor to the other party.

ARTICLE 15
GENERAL

15.1     Certificates. The Tenant shall, whenever requested by the Landlord, a prospective purchaser or any mortgagee (including any trustee under a deed of trust and mortgage) promptly and in any event within ten (10) days after request, execute and deliver to the Landlord or to any party designated by the Landlord a certificate in writing as to the then status of this Lease, including as to whether it is in full force and effect, is modified or unmodified, confirming the Rent payable hereunder and the then state of the accounts between the Landlord and the Tenant, the existence or non-existence of defaults, and any other matters pertaining to this Lease in respect of which the Landlord shall request a certificate, and provide such other information as may reasonably be required, including a copy of the Tenant’s most recent audited financial statements.

15.2     Entire Agreement. There is no promise, representation or undertaking by or binding upon the Landlord except such as are expressly set forth in this Lease, and this Lease including the Schedules forming part hereof contains the entire agreement between the parties hereto.

15.3     Registration. The Tenant acknowledges the confidential nature of this Lease and agrees with the Landlord not to register this Lease. If the Tenant wishes to register a caveat or notice of this Lease, the Landlord agrees to execute, at the expense of the Tenant, an acknowledgment or short form of lease sufficient for such purpose in such form as the Landlord

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shall have approved and which shall preserve the confidentiality of the Rent and other financial terms of this Lease; provided that, if there is a conflict between the provisions of such notice or short form of lease and this Lease, the provisions of this Lease shall govern. The Tenant shall, on or before the expiration or earlier termination of the Term, discharge at its cost any registration made against the Building or the Land providing notice of its interest under this Lease.

15.4     “For Lease” and “For Sale” Signs.

(a)

At any time upon: (i) the termination of the Lease by either party; (ii) the failure of the Tenant to deliver notice to the Landlord pursuant to Section 3.3(a)(ii)or Section 3.3(b)(ii); (iii) the delivery by the Tenant of notice to the Landlord indicating that the Term will not be renewed; or (iv) in the case of the Second Renewal Period, during the last six (6) months thereof, the Landlord shall have the right to place upon the Leased Premises a notice of reasonable dimension stating that the Leased Premises are “for lease” and the Tenant shall not obscure or remove such notice or permit the same to be obscured or removed.

(b)

At any time and from time to time throughout the Term, the Landlord shall have the right to place upon the Leased Premises a notice of reasonable dimension stating that the Land is “for sale” and the Tenant shall not obscure or remove such notice or permit the same to be obscured or removed.

15.5     Unavoidable Delays. If the Landlord or the Tenant shall be delayed, hindered or prevented from the performance of any of its covenants under this Lease by any cause not within its control (excluding lack of finances), the performance of the covenant shall be excused for the period during which performance is rendered impossible and the time for performance thereof shall be extended accordingly, but this shall not excuse the Tenant from the prompt payment of Rent or any of its obligations under this Lease.

15.6     Notice. Any notice required or contemplated by any provision of this Lease shall be given in writing and shall be sufficiently given if delivered or if sent by telecopy or similar form of immediate transmission and if to the Landlord, delivered to an executive officer of the Landlord at the Landlord’s head office as specified on page 1 of this Lease and if to the Tenant, either delivered to the Tenant personally (or to a partner or officer of the Tenant if the Tenant is a firm or corporation) or left at the Leased Premises (whether or not the Tenant has departed from, vacated or abandoned the same) or delivered or sent to the address specified on page 1 of this Lease. Any notice shall be deemed to have been received on the day following the date of delivery or sending. The Landlord or the Tenant may from time to time by notice in writing to the other designate another address or addresses in Canada as the address to which notices are to be sent.

15.7     Planning Act. It is an express condition of this Lease that the provisions of Section 50 of the Planning Act, R.S.O. 1990, c. P.13, and any amendments thereto or any successor statutory provisions thereof, be complied with if applicable in law. Until any necessary consent to this Lease is obtained, the Term and the Tenant’s rights and entitlement

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granted by this Lease shall be deemed to extend for a period only of 21 years less one day from the Commencement Date. The Tenant shall apply diligently to prosecute such application for such consent, and the Tenant shall be responsible for all costs, expenses, taxes and levies imposed, charged or levied as a result of such application and in order to obtain such consent. The Tenant shall at all times keep the Landlord informed of its progress in obtaining such consent and the Landlord shall co-operate with the Tenant with respect to such application. Notwithstanding the foregoing provisions of this Section 15.7, the Landlord reserves the right at any time, at the Tenant’s expense, to apply for such consent in lieu of the Tenant and the Tenant’s application is hereby expressly made subject to any application which the Landlord intends to make.

15.8     Relationship of Parties. Nothing contained in this Lease shall create any relationship between the parties hereto other than that of landlord and tenant.

15.9     Governing Law. This Lease shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the Province of Ontario.

15.10     Amendment. No amendment, modification or supplement to this Lease shall be valid or binding unless set out in writing and executed by the Landlord and the Tenant with the same degree of formality as the execution of this Lease.

15.11     Legal Costs. The Tenant shall indemnify the Landlord against all legal fees (on a substantial indemnity basis) and disbursements incurred by the Landlord or by its agents in connection with the negotiation, preparation and execution of this Lease, and any renewal, amendment, assignment, approval or consent in connection with this Lease. All such costs and charges shall be paid by the Tenant to the Landlord forthwith upon demand.

15.12     Construction. All of the provisions of this Lease are to be construed as covenants and agreements. If any provision of this Lease is illegal or unenforceable, it shall be considered separate and severable from the remaining provisions of this Lease, which shall remain in force and be binding as though the provision had never been included.

15.13     Captions and Headings. The captions and headings contained in this Lease are for convenience of reference only and are not intended to limit, enlarge or otherwise affect the interpretation of the Articles, Sections or parts thereof to which they apply.

15.14     Interpretation. Wherever necessary or appropriate in this Lease, the plural shall be interpreted as singular, the masculine gender as feminine or neuter and vice versa and when there are two or more parties bound by the Tenant’s covenants herein contained, their obligations shall be joint and several.

15.15     Time of the Essence. Time shall be of the essence hereof.

15.16     Successors and Assigns. Subject to specific provisions contained in this Lease to the contrary, this Lease shall enure to the benefit of and be binding upon the successors and assigns of the Landlord and the permitted successors and assigns of the Tenant.

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15.17     Counterparts. This Lease may be executed in counterparts and the counterparts together shall constitute an original.

15.18     Facsimile Execution. The parties agree that this Lease may be executed by either party and forwarded to the other by facsimile transmission and receipt by facsimile transmission of a copy of this Lease executed by a party shall bind the party so sending the facsimile transmission. Each of the parties agrees that forthwith after execution and forwarding by facsimile, it will forward an executed copy of this Lease by delivery to the other party.

          IN WITNESS WHEREOF the Landlord and the Tenant have executed this Lease as of the date first set forth above.

ATS AUTOMATION TOOLING SYSTEMS INC.
By:
	Name:
	Title:
By:
	Name:
	Title:
	I/We have authority to bind the Corporation.
PHOTOWATT TECHNOLOGIES INC.
By:
	Name:
	Title:
By:
	Name:
	Title:
	I/We have authority to bind the Corporation.

Schedules

“A” — Land
“B” — Plan
“C” — Arbitration
“D” — Base Building Standard

SCHEDULE “A”

LAND

Firstly: Part Lot 22, 27 Concession Beasley’s Broken Front, Township of Waterloo, designated as Parts 2, 4, 5, 6, 7 and 8 on Plan 58R-8875, save and except Parts 1 and 2 on Plan 58R-13705; subject to Instrument No. 1579993; Cambridge

Being PIN 03768-0264 (LT); and

Secondly: Part Lot 23, 26 Concession Beasley’s Broken Front, Township of Waterloo, designated as Part 1 WDR 60, except Part 1 on Plan 67R-2561, Part 4 on Plan 67R-880 and Part 1 on Plan 58R-13862; subject to Instrument No. 1579993; Cambridge

Being PIN 03768-0516 (LT).

SCHEDULE “B”

PLAN

Please see the attached plan

SCHEDULE “C”

ARBITRATION

1. Appointment of Arbitrator: Either the Landlord or the Tenant may have the Market Rent of the Leased Premises submitted to arbitration pursuant to Section 3.3 of the Lease by giving written notice to the other. The notice shall state the name of a proposed arbitrator. Within 10 days after delivery of such notice, the recipient shall respond either by agreeing to the proposed arbitrator or by proposing an alternative one. If the recipient fails to respond within such period then the arbitrator shall be the one proposed in the notice. If the parties do not agree on the arbitrator, then either the Landlord or the Tenant may apply to the court under the Arbitration Act, 1991 (Ontario), after giving five (5) days’ notice to the other of its intention to make such an application. The provisions of the Arbitration Act, 1991 (Ontario) shall apply to any such selection. The arbitrator appointed pursuant to this Schedule is referred to as the “arbitrator”.

2. Qualification of Arbitrator: The arbitrator shall be an experienced and accredited appraiser qualified by experience, education and training to determine the Market Rent in the locality of the Leased Premises.

3. Hearing: The arbitrator shall proceed immediately to determine the Market Rent. Each party shall have the right to make representations to the arbitrator concerning the Market Rent. The decision and reasons for it of the arbitrator shall be made within 30 days after the appointment of the arbitrator, subject to any reasonable delay due to unforeseen circumstances. Despite the foregoing, if the arbitrator fails to make a decision within 45 days after his or her appointment, either the Landlord or the Tenant may proceed anew with arbitration as if none had previously been proceeded with.

4. Decision and Reasons: The decision and reasons for it of the arbitrator shall be in writing and signed by the arbitrator and shall be delivered to each of the parties and shall be final and binding upon the parties on the question of the Market Rent and the parties shall be bound by such decision.

5. Costs: Unless otherwise determined by the arbitrator at the request of either of the parties, the compensation and expenses of the arbitrator shall be shared and paid in equal shares by the Landlord and the Tenant.

6. Arbitration Act, 1991: Except as otherwise expressly provided in this Lease (including this Schedule), the arbitration shall be governed by the Arbitration Act, 1991 (Ontario).

SCHEDULE “D”

BASE BUILDING STANDARD

Upon the expiration or other termination of the Term and the surrender of possession of the Leased Premises by the Tenant, the Tenant shall, at its own sole cost and expense, remove or cause to be removed the following items from the Building and perform or cause to be performed the following work:

• all retention pits in the basement shall be brought up to basement floor level and finished as per standard floor with coating

• all chemical carrying and drain pipes shall be removed from the entire Building main level and basement

• all chemicals shall be disposed of off-site in an acceptable method approved by governmental authorities

• all exhaust ducting shall be removed from the Building along with exterior drive system and vertical stacks with platforms

• exterior Nitrogen tanks, generators and associated equipments shall be removed

• the fire sprinkler system shall be put back to original coverage after removal of equipment

• all emergency shower units shall be removed along with floor curbing and entire chemical alarm system

• the roof shall be repaired after all penetrations are removed, c/w deck, insulation, EPDM and ballasting

• after all penetrations are removed, the exterior walls shall be repaired and refinished, c/w insulation, and the interior wall surfaces shall be repaired, smooth sanded and prime painted

• the floors shall be repaired and patched flush with the floor surface, and otherwise refinished after all penetrations are removed

ATS AUTOMATION TOOLING SYSTEMS INC.

- and -

PHOTOWATT TECHNOLOGIES INC.

LEASE OF INDUSTRIAL SPACE
SINGLE TENANT INDUSTRIAL BUILDING

Blake, Cassels & Graydon LLP
Box 25, Commerce Court West
Toronto, Ontario
M5L 1A9

TABLE OF CONTENTS

		Page
ARTICLE 1	DEFINITIONS	1
1.1	Definitions	1
1.2	Consultants	6
ARTICLE 2	GRANT OF LEASE AND GENERAL COVENANTS	6
2.1	Grant	6
2.2	Landlord’s General Covenants	6
2.3	Tenant’s General Covenants	6
ARTICLE 3	TERM AND POSSESSION	6
3.1	Term	6
3.2	Condition of Leased Premises	6
3.3	Rights to Renew	6
ARTICLE 4	RENT	9
4.1	Rent	9
4.2	Minimum Rent	9
4.3	Intent	10
4.4	Payment of Rent	10
4.5	Partial Months Rent	10
4.6	Payment of Realty Taxes	10
4.7	Payment of Other Taxes	12
4.8	Occupancy Costs	12
4.9	Estimates of Expenses and Resolution of Disputes	14
4.10	Rentable Area	14
4.11	Area Determination	14
ARTICLE 5	USE AND OCCUPATION	14
5.1	Use of Leased Premises	14
5.2	Compliance with Laws	14
5.3	Prohibited Uses	15
5.4	Hazardous Use	15
5.5	Permitted Signs	15
5.6	Prohibited Signs	15

-i-

TABLE OF CONTENTS
(continued)

		Page
5.7	Tenant’s Environmental Covenants and Indemnity	16
ARTICLE 6	OBLIGATIONS OF THE LANDLORD	20
6.1	The Leased Premises	20
6.2	Systems	20
6.3	Access by Landlord	20
6.4	Condition of Leased Premises	21
ARTICLE 7	SERVICES, MAINTENANCE, REPAIR AND ALTERATIONS BY THE TENANT	21
7.1	Utilities	21
7.2	Lights, Etc.	21
7.3	Heating, Ventilation and Air-Conditioning	21
7.4	Alterations by Tenant	21
7.5	Tenant’s Work	22
7.6	Condition of Premises	22
7.7	Failure to Maintain	22
7.8	Liens	23
ARTICLE 8	TAXES	23
8.1	Landlord’s Taxes	23
8.2	Tenant’s Taxes	23
8.3	Right to Contest	24
8.4	Notice of Taxes	24
ARTICLE 9	INSURANCE & LIABILITY	24
9.1	Landlord’s Insurance	24
9.2	Tenant’s Insurance	25
9.3	Placement of Tenant’s Insurance by Landlord	26
9.4	Cancellation of Insurance	26
9.5	Limitation of Landlord’s Liability	26
9.6	Indemnity	27
9.7	Survival of Obligations and Indemnities	27
ARTICLE 10	DAMAGE AND DESTRUCTION	27

-ii-

TABLE OF CONTENTS
(continued)

		Page
10.1	Limited Damage to Leased Premises	27
10.2	Major Damage to Leased Premises	27
10.3	No Abatement	28
10.4	Notify	28
ARTICLE 11	DEFAULT	28
11.1	Interest	28
11.2	Costs of Enforcement	28
11.3	Performance of Tenant’s Obligations	28
11.4	Events of Default	28
11.5	Remedies on Default	29
11.6	Availability of Remedies	30
11.7	Waiver	30
11.8	Waiver of Exemption and Redemption	30
ARTICLE 12	ASSIGNMENT AND SUBLETTING	31
12.1	Assignment	31
12.2	Subleasing	31
12.3	Request for Consent	31
12.4	Excess Rent	33
12.5	Limitation	33
12.6	Documentation	34
12.7	Subsequent Assignments	34
12.8	Advertising Leased Premises	34
ARTICLE 13	TRANSFERS BY LANDLORD	34
13.1	Sale, Conveyance and Assignment	34
13.2	Effect of Transfer	34
13.3	Subordination	34
13.4	Attornment	35
13.5	Effect of Attornment	35
ARTICLE 14	SURRENDER AND EXPROPRIATION	35
14.1	Possession	35

-iii-

TABLE OF CONTENTS
(continued)

		Page
14.2	Tenant’s Trade Fixtures and Personal Property	36
14.3	Overholding	36
14.4	Expropriation	36
ARTICLE 15	GENERAL	37
15.1	Certificates	37
15.2	Entire Agreement	37
15.3	Registration	37
15.4	“For Lease” and “For Sale” Signs	38
15.5	Unavoidable Delays	38
15.6	Notice	38
15.7	Planning Act	38
15.8	Relationship of Parties	39
15.9	Governing Law	39
15.10	Amendment	39
15.11	Legal Costs	39
15.12	Construction	39
15.13	Captions and Headings	39
15.14	Interpretation	39
15.15	Time of the Essence	39
15.16	Successors and Assigns	39
15.17	Counterparts	40
15.18	Facsimile Execution	40

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