Appendix 2: Special purpose equipment

1. Definition

Special purpose equipment is defined as follows:

• equipment, including ancillary systems, instrumentation, or special test equipment that is purchased, leased, manufactured or otherwise acquired for the purposes of the project, the item cost of which exceeds $250 000, excluding jigs, tools, dies and fixtures
• prototypes that are designed and built by the company to demonstrate the technology to be commercialized.

2. Disposal and treatment of special purpose equipment

Disposal

Except in the situation described under "Exception to repayment," below, if the company disposes of any special purpose equipment, the Minister will require the company to repay the greater of an amount equal to that determined by

• multiplying the proceeds of disposition of the special purpose equipment by the ratio of the total amount of the contribution paid by the Minister to the total amount paid by the company for supported eligible costs
• multiplying the fair market value of the special purpose equipment on the date of the transfer to commercial production, transfer outside of Canada, sale, lease or other disposition, by the ratio of the total amount of the contribution paid by the Minister to the total amount paid by the company for eligible costs. When repayment is calculated in this way, the onus is on the company to demonstrate the fair market value to the Minister's satisfaction. SADI may engage an independent third party to verify the amount.

The company must make such repayment within 30 days of the transfer to commercial production, transfer outside of Canada, sale, lease or other disposition of the special purpose equipment.

Reduction in maximum amount repayable

The maximum amount to be repaid will be reduced by the amounts repaid under the terms of "Disposal," above.

Exception to repayment

If the estimated cost as set out in the statement of work of all of the items of special purpose equipment, other than prototypes, is 30 percent or less of the total estimated eligible costs, the company will not be obligated to pay the Minister for those items the company transfers to commercial production in Canada. This exception does not result in a reduction in the maximum amount repayable.

3. Retention of special purpose equipment

When the company retains special purpose equipment for ongoing research and development in Canada (i.e. it is not disposed of, not put into commercial production, not transferred out of Canada), then it is left as part of the conditional repayment stream.

4. Costing principles

To be an eligible cost, the special purpose equipment must be necessary for the performance of the project, be described in sufficient detail in the statement of work so as to be readily identifiable, and listed on Form 5: Special purpose equipment.

If the special purpose equipment is to be modified or integrated by the company during the project, the costs related thereto will be eligible only when specifically identified in the statement of work.

Eligible costs for special purpose equipment will be the net laid-down cost to the company, after deducting trade discounts and cash discounts for prompt payment.

When applicable, periodic payments under a capital lease are eligible costs, to a maximum equal to the price of the special purpose equipment, if it were purchased at the commencement of the lease period, all interest and carrying charges excluded. For operating leases, the eligible costs are the actual lease payments incurred during the performance of the project.

Labour and material costs required to modify or adapt the special purpose equipment for the purposes of the project are eligible costs.

Unless such is otherwise allowed in the statement of work, costs of construction or alteration of plant facilities to accommodate the special purpose equipment or any other item of machinery and equipment, and any profit, fees, general and administrative overhead expenses related thereto, are not eligible.

5. Reporting

The company will report to the Minister, using Form 5: Special purpose equipment on all activities associated with special purpose equipment.

The company also agrees to monitor the location and use of all the items of equipment on that list.