Photronics, Inc. - SEC Filing

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FORM S-3

As filed with the Securities and Exchange Commission on June 6, 2003

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

PHOTRONICS, INC.

(Exact name of registrant as specified in its charter)

CONNECTICUT

(State or other jurisdiction of

incorporation or organization)

06-0854886

(I.R.S. Employer

Identification No.)

15 Secor Road,

Brookfield, Connecticut 06804

(203) 775-9000

(Address, including zip code, and telephone number, including area code, of

registrant’s principal executive offices)

Edwin L. Lewis

Vice President, Secretary and General Counsel

15 Secor Road

Brookfield, Connecticut 06804

(203) 775-9000

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

including area code, of agent for service)

Copy to:

Jonathan Jewett

Shearman & Sterling

599 Lexington Avenue

New York, New York 10022

Approximate date of commencement of proposed sale to the public: From time to time after this registration statement becomes effective.

If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following

box. ¨

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 of 1933, other than securities being offered only in connection with dividend or interest reinvestment plans, check the following box. þ

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 registration statement number of the earlier effective registration statement for the same offering. ¨

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 registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act, please check the following box. ¨

CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price Per Unit	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee

Debt Securities (1)	$150,000,000	100%	$150,000,000	$12,135

Common stock, par value $0.01 per share (2)	9,440,640 shares	—	—	(3)

(1)

Equals the aggregate principal amount of the securities being registered.

(2)

Such number represents the number of shares of common stock that are currently issuable upon conversion of the notes. Under Rule 416 under the Securities Act, the number of shares of common stock registered includes an undetermined number of shares of common stock that may be issued in connection with a stock split, stock dividend, recapitalization or similar event.

(3)

Under Rule 457(i), there is no additional filing fee with respect to the shares of common stock issuable upon conversion of the notes because no additional consideration will be received in connection with the exercise of the conversion privilege.

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 of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

Information in this 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 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.

PROSPECTUS

Subject to Completion Dated June 6, 2003

$150,000,000

Photronics, Inc.

2¹/4% Convertible Subordinated Notes due 2008

and

Common Stock Issuable Upon Conversion of the Notes

We issued the notes in a private placement on April 15, 2003. This prospectus will be used by selling security holders to resell their notes and the common stock issuable upon conversion of their notes.

The notes bear interest at an annual rate of 2¹/4% from April 15, 2003. We will pay interest on April 15 and October 15 of each year, beginning October 15, 2003, to record holders at the close of business of the preceding April 1 and October 1, as the case may be.

We may not redeem the notes prior to maturity.

The notes are subordinated in right of payment to all of our senior indebtedness and are structurally subordinated to all liabilities (including trade payables) of our subsidiaries. As of May 4, 2003, we had $29.8 million of senior indebtedness outstanding and our subsidiaries had $533.0 million of liabilities outstanding, excluding liabilities owed to us and minority interests.

Holders may convert the notes into shares of our common stock at a conversion rate of 62.9376 shares per $1,000 principal amount of notes, subject to adjustment, before April 15, 2008. Our common stock is quoted on the Nasdaq National Market under the symbol “PLAB.” On June 5, 2003, the last reported sale price of the common stock on the Nasdaq National Market was $17.57 per share.

Investing in the notes involves risks. See “Risk Factors” beginning on page 7.

We will not receive any of the proceeds from the sale of the notes or shares of common stock by any of the selling security holders. The notes and the shares of common stock may be offered in negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices. In addition, our shares of common stock may be offered from time to time through ordinary brokerage transactions on the Nasdaq National Market. See “Plan of Distribution.” The selling security holders may be deemed to be underwriters as defined in the Securities Act of 1933, as amended. Any profits realized by the selling security holders may be deemed to be underwriting commissions. If the selling security holders use any broker-dealers, any commissions paid to broker-dealers and, if broker-dealers purchase any notes or common stock as principals, any profits received by such broker-dealers on the resale of the notes or common stock, may be deemed to be underwriting discounts or commissions under the Securities Act.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is , 2003.

TABLE OF CONTENTS

		Page
Where You Can Find More Information		3
Summary		4
Risk Factors		7
Special Note Regarding Forward-Looking Statements		14
Use of Proceeds		15
Ratio of Earnings to Fixed Charges		15
Description of Notes		16
Description of Capital Stock		27
United States Federal Tax Considerations		29
Selling Security Holders		35
Plan of Distribution		38
Legal Matters		40
Experts		40

You should rely only on the information contained or incorporated by reference in this prospectus. We have not and selling security holders have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information appearing in this prospectus or any documents incorporated by reference is accurate only as of the date on the front cover of the applicable document. Our business, financial condition, results of operations and prospects may have changed since that date.

This prospectus is an offer to sell or to buy only the securities referred to herein, but only under circumstances and in jurisdictions where it is lawful to do so.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). You may read and copy materials that we have filed with the SEC at the public reference room that the SEC maintains at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.

Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms.

Our common stock is quoted on the Nasdaq National Market under the symbol “PLAB,” and our SEC filings can also be read at the following Nasdaq address:

Nasdaq Operations, 1735 K Street, N.W. Washington, D.C. 20006

Our SEC filings are also available to the public on the SEC’s Internet website at http://www.sec.gov.

We have filed with the SEC a registration statement on Form S-3 that registers the securities we are offering by this prospectus. The registration statement, including the attached exhibits and schedules, contains additional relevant information about us and the securities offered. The rules and regulations of the SEC allow us to omit certain information included in the registration statement from this prospectus.

The SEC allows us to “incorporate by reference” information into this prospectus that we have filed with it. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this prospectus, except for any information that is superseded by information that is included directly in this document or incorporated by reference in documents subsequently filed with the SEC.

We incorporate by reference the documents listed below and any future filings we make with the SEC (other than Current Reports furnished under item 9 or 12 of Form 8-K) under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (i) after the date of the filing of this registration statement and prior to its effectiveness and (ii) until all of the notes and common stock to which this prospectus relates have been sold or the offering is otherwise terminated:

•

Our Annual Report on Form 10-K for our fiscal year ended November 3, 2002.

•

Our Quarterly Report on Form 10-Q for our fiscal quarter ended February 2, 2003.

•

Our Current Reports on Form 8-K filed on November 12, 2002, December 12, 2002, February 25, 2003, April 2, 2003, April 22, 2003, May 8, 2003 and June 4, 2003.

You may request a copy of these filings, at no cost, by writing to us at the following address or telephoning us at (203) 775-9000 between the hours of 9:00 a.m. and 4:00 p.m., Eastern Standard Time:

Photronics, Inc.

Investors Relations Department

15 Secor Road

Brookfield, CT 06804

SUMMARY

This summary contains basic information about us and our private placement of the notes. Because it is a summary, it does not contain all of the information that you should consider before investing. You should read this entire prospectus carefully, including the section entitled “Risk Factors” and all the information that it incorporates by reference before making an investment decision.

Photronics

We are a leading manufacturer of photomasks, which are used primarily by the semiconductor industry in the manufacture of integrated circuits. A photomask is a high precision photographic quartz plate that is used as a master to transfer microscopic circuit patterns onto semiconductor wafers during the fabrication of integrated circuits.

We have nine manufacturing facilities, three of which are located in the United States, three in Europe and one in each of Korea, Singapore and Taiwan. Based upon available market information, we believe that we have a larger share of the U.S. market for photomasks than any other photomask manufacturer and are one of the largest photomask manufacturers in the world.

Photomasks are a key element in the manufacture of semiconductors. They are used to transfer integrated circuit patterns onto semiconductor wafers during the fabrication of integrated circuits and, to a lesser extent, other types of electronic components. Each integrated circuit consists of a series of separate patterns, each of which is imaged onto a different photomask. The resulting series of photomasks is then used to successively layer the circuit patterns onto the semiconductor wafer. Both semiconductor design activity and increases in the complexity of integrated circuits are driving the demand for photomasks. As the complexity of integrated circuits has increased, so has the number and complexity of photomasks used in the manufacture of a single circuit.

Photomasks are manufactured by independent manufacturers like us, and by captive manufacturers, which are semiconductor manufacturers that produce photomasks almost exclusively for their own use. Since the mid-1980s, there has been a trend in the United States and Europe toward the divestiture or closing of captive photomask operations by semiconductor manufacturers and an increase in the share of the market served by independent manufacturers.

In 2000, we completed a merger with Align-Rite International, Inc., an independent publicly traded manufacturer of photomasks in the United States and Europe, and we acquired a majority share of Precision Semiconductor Mask Corporation (“PSMC”), a photomask manufacturer based in Taiwan. In August 2001, we completed the acquisition of a majority equity interest in PKL LTD (“PKL”), a leading photomask supplier in Korea, for $56 million. In April 2002, we acquired an additional 28% of PKL in exchange for 1,212,218 shares of our common stock, and our total majority equity interest is approximately 78%. The acquisition was accounted for as a purchase and accordingly goodwill in the aggregate of $69.4 million was recorded. The operating results of PKL have been included in our consolidated statements of operations since August 27, 2001.

In 1996 and 1997, we significantly expanded our operations in international markets by acquiring existing businesses in Europe and by establishing manufacturing facilities in Singapore. Since April 2001, we have closed or announced the closing of four manufacturing facilities in North America and one in Europe. In 2001 and 2002, we acquired majority equity interests in photomask manufacturing operations in Taiwan and Korea. During the fiscal years ended November 3, 2002 and October 1, 2001, sales in North America have decreased, in part because certain North American customers have moved their semiconductor manufacturing to foundries located

in Asia. As a result, we expect to continue to increase our focus on Asian markets. In the first six months of fiscal 2003, net sales, excluding export sales, in Asia represented approximately 41% of our net sales, compared to 31% in the first six months of last year.

We sell our products primarily through a direct sales force. We presently conduct our sales activities from six sales locations in the United States, five in Europe, and one in each of China, Japan, Korea, Singapore and Taiwan. Our customers include Agere Systems, ASML Holding, Atmel Corp., Conexant, Hynix Semiconductor, Intersil, LSI Logic Corp., Macronix International Co., Maxim Integrated Products, Motorola Inc., National Semiconductor, Philips Semiconductors, Samsung, Seagate Technology, Silicon Integrated System Corp., ST Microelectronics, System Silicon Manufacturing, Texas Instruments, United Microelectronics Corp. and Winbond Electronics Corp.

We are a Connecticut corporation, organized in 1969. Our principal executive offices are located at 15 Secor Road, Brookfield, CT 06804, telephone (203) 775-9000.

Recent Developments

In August 2002, we implemented a plan to reduce our operating cost structure by reducing our work force in the United States by approximately 135 employees and by ceasing manufacturing operations at our Milpitas, California facility. As a result, we recorded total consolidation, restructuring and related charges of $14.5 million in the fourth quarter of fiscal 2002, consisting of $10.5 million of non-cash charges for the impairment in the carrying value of fixed assets, $2.5 million of cash charges for severance and benefits for terminated employees and $1.5 million of cash charges for facilities closing costs as well as lease termination costs. Through February 2, 2003, cash charges of approximately $3.6 million had been expended.

On March 25, 2003, we announced plans to further streamline our operating infrastructure in North America by ceasing the manufacture of photomasks at our Phoenix, Arizona facility and to reduce our global work force by approximately 10% to 12%, with the majority of eliminated positions resulting from our decision to cease operations at our Arizona facility. We recorded an after tax charge of $39.9 million or $1.24 per diluted share, in the fiscal quarter ended May 4, 2003, in connection with these plans. Approximately 81% of the charge is attributed to non-cash items.

On April 9, 2003, we amended our $100.0 million three-year multi-currency revolving credit facility to:

•

permit our private placement of the notes;

•

relax our financial covenants to accommodate the $39.9 million after-tax consolidation charge that we announced on March 25, 2003; and

•

relax the limitations on the total amount available for borrowing under the facility.

As of June 3, 2003, we had aggregate borrowings of $10.8 million outstanding under the facility.

On April 9, 2003, Moody’s Investors Service, Inc. assigned a rating of B3 to the notes, lowered the rating on our other convertible subordinated notes from B2 to B3 and lowered our senior implied rating from Ba3 to B1. Moody’s assigned a stable outlook as part of this rating action. On the same date, Standard & Poor’s Ratings Service assigned a rating of B to the notes, reaffirmed its B rating on our other convertible subordinated notes and reaffirmed our BB- corporate credit rating. Standard & Poor’s continued to assign a negative outlook as part of this rating action.

On June 1, 2003, we redeemed our 6% convertible subordinated notes due 2004, $62.1 million principal amount of which had been outstanding prior to the redemption.

The Offering

Securities Offered

$150,000,000 principal amount of 2¹/4% Convertible Subordinated Notes due 2008.

Maturity Date

April 15, 2008.

Interest

2¹/4% per annum on the principal amount from April 15, 2003, payable semi-annually in arrears in cash on April 15 and October 15 of each year, beginning October 15, 2003.

Conversion

You may convert the notes into shares of our common stock at a conversion rate of 62.9376 shares per $1,000 principal amount of notes, subject to adjustment, prior to the final maturity date.

Subordination

The notes are subordinated to all of our existing and future senior indebtedness and are effectively subordinated to all debt and other liabilities of our subsidiaries. As of May 4, 2003, we had $29.8 million of senior indebtedness outstanding and our subsidiaries had $533.0 million of liabilities outstanding, excluding liabilities owed to us and minority interests. The notes rank equally with our existing 4³/4% convertible subordinated notes due 2006. As of May 4, 2003, we had $62.1 million of 6% convertible subordinated notes due 2004 outstanding and $200.0 million of 4³/4% convertible subordinated notes outstanding. On June 1, 2003, we redeemed our 6% convertible subordinated notes. Neither we nor any of our subsidiaries are prohibited from incurring debt, including senior indebtedness, under the indentures governing the notes and our other convertible subordinated notes.

Redemption

We may not redeem the notes prior to maturity.

Fundamental Change

If a fundamental change (as described under “Description of Notes—Redemption at Option of the Holder”) occurs prior to maturity, you may require us to purchase all or part of your notes at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest.

Use of Proceeds

We will not receive any of the proceeds from the sale by any selling security holder of the notes or of the shares of common stock issuable upon conversion of the notes. See “Use of Proceeds.”

Trading

The notes issued in the initial private placement are eligible for trading in the PORTAL system. However, notes sold pursuant to this prospectus will no longer be eligible for trading in the PORTAL system. We do not intend to list the notes on any national securities exchange. Our common stock is quoted on the Nasdaq National Market under the symbol “PLAB.”

RISK FACTORS

You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations.

Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of the notes and our common stock could decline due to any of these risks, and you may lose all or part of your investment.

This prospectus, including the documents it incorporates by reference, also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of risks, uncertainties and other factors, including the risks faced by us described below and elsewhere in this prospectus.

Risks Relating to Our Business

We are dependent on the semiconductor industry, which, as a whole, is volatile and is currently experiencing a significant downturn.

We sell substantially all of our photomasks to semiconductor designers and manufacturers. We believe that the demand for photomasks primarily depends on integrated circuit design activity rather than the volume of semiconductor sales. Consequently, an increase in semiconductor sales does not necessarily result in a corresponding increase in photomask sales. In addition, the reduced use of customized integrated circuits, a reduction in design complexity or other changes in the technology or methods of manufacturing semiconductors or a slowdown in the introduction of new semiconductor designs could reduce demand for photomasks even if demand for semiconductors increases. Further, advances in semiconductor and photomask design and semiconductor production methods could reduce the demand for photomasks. Historically, the semiconductor industry has been volatile, with sharp periodic downturns and slowdowns. These downturns have been characterized by, among other things, diminished product demand, excess production capacity and accelerated erosion of selling prices. The semiconductor industry has been in a downturn since 2001, and we expect conditions to remain weak until at least the end of fiscal 2003. This downturn is among the worst we have experienced and has had a significant impact on our net sales and operating results. We cannot assure you as to when the current downturn will end or that it will not continue to worsen or materially adversely affect our business, financial condition and operating results in the near term.

We have recently incurred net losses and we may incur additional future net losses.

We incurred net losses of $4.0 million in fiscal 2001, $4.9 million in fiscal 2002 and $52.6 million in the first six months of 2003. These net losses were incurred primarily due to the severe downturn experienced by the semiconductor industry since 2001 and also reflect the consolidation, restructuring and related charges we have taken in response thereto. Although we have implemented a program of cost controls and asset management in order to more closely align our cost structure with the current business environment, we expect that reduced customer demand and other factors may continue to adversely affect our operating results in the near term. We currently face an environment of uncertain demand in the markets our products address. Although our near-term focus is to return to profitability, we cannot assure you as to whether or when we will return to profitability or whether we will be able to sustain such profitability, if achieved.

Our quarterly operating results fluctuate significantly and may continue to do so in the future.

We have experienced fluctuations in our quarterly operating results and we anticipate that such fluctuations will continue and could intensify in the future. Fluctuations in operating results may result in volatility in the prices of our common stock and the notes. Operating results may fluctuate as a result of many factors, including

size and timing of orders and shipments, loss of significant customers, product mix, technological change, fluctuations in manufacturing yields, competition and general economic conditions. Our customers generally order our products on an as-needed basis, and substantially all of our net sales in any quarter are dependent on orders received during that quarter. Since we operate with little backlog and the rate of new orders may vary significantly from month to month, our capital expenditures and expense levels are based primarily on sales forecasts. Consequently, if anticipated sales in any quarter do not occur when expected, capital expenditures and expense levels could be disproportionately high, and our operating results would be adversely affected. Due to the foregoing factors, we believe that period-to-period comparisons of our operating results are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance. In addition, in future quarters our operating results could be below the expectations of public market analysts and investors, which, in turn, could materially adversely affect the market prices of our common stock and of the notes.

Our industry is subject to rapid technological change and we might fail to remain competitive.

The photomask industry has been and is expected to continue to be characterized by technological change and evolving industry standards. In order to remain competitive, we will be required to continually anticipate, respond to and utilize changing technologies. In particular, we believe that as semiconductor geometries continue to become smaller, we will be required to manufacture complex optically enhanced reticles, including optical proximity correction and phase-shift photomasks. In addition, demand for photomasks has been and could in the future be adversely affected by changes in methods of semiconductor manufacturing (which could affect the type or quantity of photomasks utilized) or increased market acceptance of alternative methods of transferring circuit designs onto semiconductor wafers, which could reduce or eliminate the need for photomasks. If we are unable, due to resource, technological or other constraints, to anticipate, respond to or utilize these or other changing technologies, our business and results of operations could be materially adversely affected.

Our operations will continue to require significant capital, which we may not be able to obtain.

The manufacture of photomasks requires a significant investment in fixed assets. We expect that we will be required to continue to make significant capital expenditures in connection with our operations. We also must make capital expenditures in order to maintain technological leadership. Our planned capital expenditures for fiscal 2003 are $60 million. For the first six months ended May 4, 2003, our capital expenditures were $17.6 million. There can be no assurance that we will be able to obtain the additional capital required in connection with our operations on reasonable terms, if at all, or that any such expenditures will not have a material adverse effect on our business and results of operations.

We have been dependent on sales to a limited number of large customers; the loss of any of these customers or any reduction in orders from these customers could materially affect our sales.

Historically, we have sold a significant proportion of our products and services to a limited number of semiconductor manufacturers. During fiscal 2002, one customer accounted for 10.4% of our net sales and our five largest customers, in the aggregate, accounted for 36% of our net sales. None of our customers has entered into a long-term agreement requiring it to purchase our products. The loss of a significant customer or any reduction or delays in orders from any significant customer, including reductions or delays due to customer departures from recent buying patterns, or market, economic or competitive conditions in the semiconductor industry, could have a material adverse effect on our financial performance and business prospects. The continuing consolidation of semiconductor manufacturers may increase the likelihood and adverse effect of losing a significant customer.

We depend on a small number of suppliers for equipment and raw materials and, if our suppliers do not deliver their products to us, we may be unable to deliver our products to our customers.

We rely on a limited number of photomask equipment manufacturers to develop and supply the equipment we use. These equipment manufacturers currently require lead times of approximately 10 to 14 months between

the order and the delivery of certain photomask imaging and inspection equipment. The failure of such manufacturers to develop or deliver such equipment on a timely basis could have a material adverse effect on our business and results of operations. Further, we rely on equipment manufacturers to develop future generations of manufacturing equipment to meet our requirements. In addition, the manufacturing equipment necessary to produce advanced photomasks could become prohibitively expensive.

We use high precision quartz photomask blanks, pellicles (which are protective transparent cellulose membranes) and electronic grade chemicals in our manufacturing processes. There are a limited number of suppliers of these raw materials, and we have no long-term contracts for the supply of these raw materials. Any delays or quality problems in connection with significant raw materials, particularly photomask blanks, could cause delays in shipments of photomasks, which could adversely affect our business and results of operations. The fluctuation of exchange rates with respect to prices of significant raw materials used in manufacturing also could have a material adverse effect on our business and results of operations, although they have not been material to date.

We face risks associated with manufacturing difficulties.

Our complex manufacturing processes require the use of expensive and technologically sophisticated equipment and materials and are continuously modified in an effort to improve manufacturing yields and product quality. Minute impurities or other difficulties in the manufacturing process can lower manufacturing yields and make products unmarketable. Moreover, manufacturing leading-edge photomasks is more complex and time-consuming than manufacturing less advanced photomasks, and may lead to general delays in the manufacturing of all levels of photomasks. We have, on occasion, experienced manufacturing difficulties and capacity limitations that have delayed our ability to deliver products within the time frames contracted for by our customers. In addition, we have experienced in the past, and could experience in the future, difficulties and delays in ramping up new production facilities. We cannot assure you that we will not experience these or other manufacturing difficulties, or be subject to increased costs or production capacity constraints in the future, any of which could result in a loss of customers or could otherwise have a material adverse effect on our business and results of operations.

Our prior and future acquisitions may entail certain operational and financial risks.

In 2000, we completed our merger with Align-Rite International, Inc. and acquired a majority share of PSMC, a photomask manufacturer based in Taiwan. In August 2001, we acquired a controlling equity interest (which was further increased in 2002) in PKL LTD, a leading supplier of photomasks in Korea. We may make additional acquisitions in the future.

Acquisitions place significant demands on our administrative, operational and financial personnel and systems. Managing acquired operations entails numerous operational and financial risks, including difficulties in the assimilation of acquired operations, diversion of management’s attention to other business concerns, amortization of acquired intangible assets and potential loss of key employees of acquired operations. Sales of acquired operations also may decline following an acquisition, particularly if there is an overlap of customers served by us and the acquired operation, and these customers transition to another vendor in order to ensure a second source of supply. Furthermore, we may be required to utilize our cash reserves and/or issue new securities for future acquisitions, which could have a dilutive effect on our earnings per share. Any of these risks could have a material adverse effect on our business and results of operations.

We operate in a highly competitive industry.

The photomask industry is highly competitive, and most of our customers utilize more than one photomask supplier. In the United States, we compete primarily with DuPont Photomasks, Inc. and, to a lesser extent, with other independent photomask suppliers. Internationally, our competitors include Compugraphics, Dai Nippon

Printing, DuPont Photomasks, Hoya, Taiwan Mask Corp. and Toppan. We also compete with semiconductor manufacturers’ captive photomask manufacturing operations. We expect to face continued competition from these and other suppliers in the future. Certain competitors have substantially greater financial, technical, sales, marketing and other resources than we do. We believe that consistency of product quality and timeliness of delivery are the principal factors considered by customers in selecting their photomask suppliers. Our inability to meet these requirements could adversely affect our sales. In the past, competition led to pressure to reduce prices which, we believe, contributed to the decrease in the number of independent manufacturers. This pressure to reduce prices may continue in the future.

Our substantial international operations are subject to additional risks.

International sales, which exclude export sales, accounted for approximately 59% of our net sales in the first six months of fiscal 2003, 50% in fiscal 2002 and 36% in fiscal 2001. We believe that maintaining significant international operations requires us to have, among other things, a local presence in the markets in which we operate. This requires a significant investment of financial, management, operational and other resources. Since 1996, we have significantly expanded our operations in international markets by acquiring existing businesses in Europe, establishing manufacturing operations in Singapore and acquiring majority equity interests in photomask manufacturing operations in Korea and Taiwan.

Operations outside the United States are subject to inherent risks, including fluctuations in exchange rates, political and economic conditions in various countries, unexpected changes in regulatory requirements, tariffs and other trade barriers, difficulties in staffing and managing foreign operations, longer accounts receivable payment cycles and potentially adverse tax consequences. These factors may have a material adverse effect on our ability to generate sales outside the United States and, consequently, on our business and results of operations.

Our operating results are influenced by the performance of Asian economies.

In the first six months of fiscal 2003, we derived approximately 41% of our net sales, excluding export sales, from Asia, compared to 33.5% in fiscal 2002, 18.9% in fiscal 2001 and 9.7% in fiscal 2000. We expect sales in Asia will continue to represent a significant portion of our overall revenue mix. As a result, our business is exposed to risks presented by Asian economies. In recent years, Asian economies have been highly volatile and recessionary, resulting in significant fluctuations in local currencies, declining asset values and other instabilities. These instabilities may continue for some time or worsen, which could have a material adverse impact on our financial position and results of operations. Asian economies may also be adversely affected by the recent outbreak of severe acute respiratory syndrome (SARS) in the region and by rising tensions with North Korea.

Our business depends on management and technical personnel, who are in great demand.

Our success, in part, depends upon key managerial, engineering and technical personnel, as well as our ability to continue to attract and retain additional personnel. The loss of certain key personnel could have a material adverse effect upon our business and results of operations. There can be no assurance that we can retain our key managerial, engineering and technical employees or that we can attract similar additional employees in the future. We believe that we provide competitive compensation and incentive packages to our employees.

We may be unable to enforce or defend our ownership and use of proprietary technology.

We believe that the success of our business depends more on our proprietary technology, information and processes and know-how than on patents or trademarks. Much of our proprietary information and technology relating to manufacturing processes is not patented and may not be patentable. We cannot assure you that:

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we will be able to adequately protect our technology;

•

competitors will not independently develop similar technology; or

•

foreign intellectual property laws will adequately protect our intellectual property rights.

We may become the subject of infringement claims or legal proceedings by third parties with respect to current or future products or processes. Any such claims or litigation, with or without merit, to enforce or protect our intellectual property rights or to defend our company against claimed infringement of the rights of others could result in substantial costs, diversion of resources and product shipment delays or could force us to enter into royalty or license agreements rather than dispute the merits of these claims. Any of the foregoing could have a material adverse effect on our business, results of operations and financial position.

We may be unprepared for changes to environmental laws and regulations and we may have liabilities arising from environmental matters.

We are subject to numerous environmental laws and regulations that impose various environmental controls on, among other things, the discharge of pollutants into the air and water and the handling, use, storage, disposal and clean-up of solid and hazardous wastes. Changes in these laws and regulations may have a material adverse effect on our financial position and results of operations. Any failure by us to adequately comply with these laws and regulations could subject us to significant future liabilities.

In addition, these laws and regulations may impose clean-up liabilities on current and former owners and operators of real property without regard to fault and these liabilities may be joint and several with other parties. In the past, we have been involved in remediation activities relating to our properties. We believe, based upon current information, that environmental liabilities relating to these activities or other matters will not be material to our financial position or results of operations. However, there can be no assurances that we will not incur any material environmental liabilities in the future.

Our production facilities could be damaged or disrupted by a natural disaster or labor strike.

Our facilities in Taiwan are in a seismically active area. In addition, a major catastrophe such as an earthquake or other natural disaster or labor strikes or work stoppages at any of our manufacturing facilities could result in a prolonged interruption of our business. Any disruption resulting from these events could cause significant delays in shipments of our products and the loss of sales and customers.

Further terrorist attacks in the United States or elsewhere and an extended war with Iraq could adversely affect our business, results of operations and financial condition.

The current war with Iraq has created significant uncertainty in the U.S. and global economies. Terrorist attacks, such as the attacks of September 11, 2001 in the United States, other acts of violence or war or occurrences of political unrest in the countries where we operate are likely to create significant additional uncertainty in the economic outlook and may have a direct adverse impact on our customers. Such uncertainties may reduce or slow the demand for our products and services and hinder our growth strategy. In addition, terrorist attacks or a war could adversely impact the transportation of our products. Any of these events could result in an adverse impact on our business, results of operations and financial condition.

Risks of Investing in These Notes

The notes are subordinated in right of payment to other indebtedness and structurally subordinated.

The notes are unsecured and subordinated in right of payment in full to all our existing and future senior indebtedness. As a result of this subordination, in the event of our liquidation or insolvency, a payment default with respect to senior indebtedness, a covenant default with respect to senior indebtedness or upon acceleration of the notes due to an event of default, our assets will be available to pay obligations on the notes only after all senior indebtedness has been paid in full, and there may not be sufficient assets remaining to pay amounts due on any or all of the notes then outstanding. The indenture under which the notes have been issued will not restrict

our ability to incur indebtedness constituting senior indebtedness. We conduct our operations through our subsidiaries. Accordingly, our ability to meet our cash obligations depends, in part, upon the ability of our subsidiaries to make distributions to us, which is and will continue to be restricted by, among other limitations, applicable provisions of law. The indenture does not restrict the ability of our subsidiaries to enter into contractual restrictions on their ability to make distributions to us. Our right to participate in the assets of any subsidiary (and thus the ability of holders of the Notes to benefit indirectly from these assets) is generally subject to the prior claims of creditors, including trade creditors, of that subsidiary. The notes, therefore, are structurally subordinated to the claims of creditors, including trade creditors, of our subsidiaries. As of May 4, 2003, we had $29.8 million of senior indebtedness outstanding. As of May 4, 2003, our subsidiaries had outstanding liabilities of $533.0 million, excluding liabilities owed to us and minority interests.

We may be unable to redeem the notes if we experience a fundamental change.

If we experience a fundamental change, you are entitled to redeem all or a portion of your notes, but we may not have enough funds to pay the redemption price for all tendered notes. Our credit agreement prohibits redemption of the notes upon a fundamental change. Any future credit agreements or other agreements relating to our indebtedness may:

•

contain provisions requiring payment of indebtedness after a fundamental change; or

•

expressly prohibit our repurchase of the notes after a fundamental change.

If we experience a fundamental change at a time when we are prohibited from purchasing or redeeming notes, we could seek the consent of our lenders to redeem the notes or could attempt to refinance such debt. If we should fail to obtain our lenders’ consent or refinance such debt, we could not purchase or redeem the notes. Our failure to redeem tendered notes would constitute an event of default under the indenture which, in turn, might constitute a default under the terms of other indebtedness. If this were to occur, or if a fundamental change were to constitute an event of default under any senior indebtedness, the indenture’s subordination provisions would restrict us from paying you.

The term “fundamental change” is limited to specified transactions and may not include other events that might adversely affect our financial condition. If we were to experience a fundamental change, our obligation to offer to redeem the notes would not necessarily afford you protection. See “Description of Notes—Redemption at Option of the Holder.”

You may have difficulty selling the notes because no trading market exists for the notes.

Currently, there is no existing trading market for the notes, and we cannot assure you that a trading market will develop or that any trading market that develops will continue or allow you to sell your notes quickly. We also cannot assure you of the price at which you will be able to sell your notes if you are able to sell them at all. The initial purchasers of the notes have advised us that they intend to make a market in the notes, but they are not obligated to do so, and their market making may be interrupted or discontinued without notice.

Our stock price may continue to experience large short-term fluctuations that may significantly affect the trading price of the notes.

In recent years, the price of our common stock has fluctuated greatly and has declined sharply since April 30, 2002. Fluctuations in the trading price of our common stock will affect the trading price of the notes. These price fluctuations have been rapid and severe and have left investors little time to react. The price of our common stock may continue to fluctuate greatly in the future due to a variety of factors, including:

•

quarter to quarter variations in our operating results;

•

shortfalls in our sales or earnings from levels expected by securities analysts;

•

announcements of technological innovations or new products by us or other companies; and

•

slowdowns or downturns in the semiconductor industry.

Future public sales of our common stock may decrease the market price of our common stock.

In 2002, we issued an additional 1,212,218 shares of our common stock in connection with an increase in our equity interest in PKL. In 2002, we registered the shares with the SEC for resale in the public market. Sales of these shares, or the perception that sales will occur, may decrease the market price of our common stock.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in the sections entitled “Summary,” “Risk Factors,” and elsewhere in this prospectus, including the documents that are incorporated by reference as set forth in “Where You Can Find More Information,” that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933. Forward-looking statements are based on management’s beliefs, as well as assumptions made by and information currently available to management. These statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among others, those listed under “Risk Factors” and elsewhere in this prospectus. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of such terms or other comparable terminology.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievements. We do not assume responsibility for the accuracy and completeness of the forward-looking statements. We do not intend to update any of the forward-looking statements after the date of this prospectus to conform them to actual results.

USE OF PROCEEDS

We will not receive any proceeds from the sale by the selling security holders of the notes and the common stock into which the notes are convertible.

RATIO OF EARNINGS TO FIXED CHARGES

	Year Ended									6 Months Ended
	November 1, 1998	October 31, 1999	October 31, 2000	October 31, 2001			November 3, 2002			May 4, 2003
	Dollars in thousands
Ratio	7.4	4.0	2.2		—			—			—
Deficiency of earnings available to cover fixed charges	—	—	—	$	(3,027	)	$	(5,409	)	$	(51,789	)

For purposes of computing the ratio of earnings to fixed charges, earnings consist of the sum of our pretax income from continuing operations and fixed charges less capitalized interest. Fixed charges consist of interest expense, amortization of debt discount, premium and expense, capitalized interest and a portion of lease payments considered to represent an interest factor.

DESCRIPTION OF NOTES

The notes were issued under an indenture dated as of April 15, 2003 between Photronics and The Bank of New York, trustee. The notes are covered by a registration rights agreement dated as of April 15, 2003 among us and the initial purchasers listed in that agreement.

The following description is a summary of the material provisions of the notes and the indenture. It does not purport to be complete. This summary is subject to and is qualified by reference to all the provisions of the indenture, including the definitions of certain terms used in the indenture. Wherever particular provisions or defined terms of the indenture or form of note are referred to, these provisions or defined terms are incorporated in this prospectus by reference.

As used in this “Description of Notes” section, references to “Photronics,” “we,” “our” or “us” refer solely to Photronics and not to our subsidiaries.

General

On April 15, 2003, we issued $150,000,000 aggregate principal amount of the notes in a private placement. The notes were issued only in denominations of $1,000 and multiples of $1,000. The notes will mature on April 15, 2008 unless earlier converted or redeemed at your option upon a fundamental change.

The notes are general unsecured obligations of Photronics. Our payment obligations under the notes are subordinated to our senior indebtedness as described under “Subordination of Notes.” The notes are convertible into our common stock as described under “Conversion of Notes.” We may not redeem the notes prior to maturity.

Neither we nor any of our subsidiaries are subject to any financial covenants under the indenture. In addition, neither we nor any of our subsidiaries are restricted under the indenture from paying dividends, incurring debt or issuing or repurchasing our securities.

You are not afforded protection under the indenture in the event of a highly leveraged transaction or a change in control of us, except to the extent described below under “Redemption at Option of the Holder.”

The notes bear interest at an annual rate of 2¹/4% from April 15, 2003. We will pay interest on April 15 and October 15 of each year, beginning October 15, 2003, to record holders at the close of business on the preceding April 1 and October 1, as the case may be.

We pay interest either:

•

by check mailed to your address as it appears in the note register, provided that if you are a holder with an aggregate principal amount in excess of $2.0 million, we will pay you, at your written election, by wire transfer in immediately available funds; or

•

by transfer to an account maintained by you in the United States.

However, payments to The Depository Trust Company, New York, New York, which we refer to as DTC, will be made by wire transfer of immediately available funds to the account of DTC or its nominee. Interest will be computed on the basis of a 360-day year composed of twelve 30-day months.

We will maintain an office in the Borough of Manhattan, The City of New York, where we will pay the principal and premium, if any, on the notes and you may present the notes for conversion, registration of transfer and exchange for other denominations. This office will initially be an office or agency of the trustee.

Conversion of Notes

You may convert your notes, in whole or in part, into shares of our common stock prior to the close of business on the final maturity date of the notes, subject to prior redemption of the notes upon a fundamental change. The initial conversion rate for the notes is equal to 62.9376 shares of common stock per $1,000 principal amount of notes, subject to adjustment as described below, which represents an initial conversion price of approximately $15.89 per share.

If you have submitted your notes for redemption upon a fundamental change, you may convert your notes only if you withdraw your redemption election. You may convert your notes in part so long as the part is $1,000 principal amount or an integral multiple of $1,000. If any notes are converted during the period after a record date for an interest payment date to, but excluding, the corresponding interest payment date, then the notes must be accompanied by funds equal to the interest payable on that interest payment date on the converted principal amount, unless (1) we have specified a redemption date following a fundamental change during that period or (2) any overdue interest exists at the time of conversion with respect to such notes.

We will not issue fractional shares of common stock upon conversion of notes. Instead, we will pay cash equal to the last reported sale price of the common stock on the Nasdaq National Market on the business day prior to the conversion date. You will not receive any cash payments representing accrued interest upon conversion unless you convert on an interest payment date.

To convert your note into common stock you must do the following (or comply with DTC procedures for doing so in respect of your beneficial interest in notes evidenced by a global note held by DTC):

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complete and manually sign the conversion notice on the back of the note or facsimile of the conversion notice and deliver this notice to the conversion agent;

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surrender the note to the conversion agent;

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if required, furnish appropriate endorsements and transfer documents;

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if required, pay all transfer or similar taxes; and

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if required, pay funds equal to interest payable on the next interest payment date.

The date you comply with these requirements is the conversion date under the indenture.

We will adjust the conversion rate if any of the following events occurs:

(1) we issue common stock as a dividend or distribution on our common stock;

(2) we issue to all holders of common stock certain rights or warrants to purchase our common stock at a price per share that is less than the current market price of our common stock, as defined in the indenture;

(3) we subdivide or combine our common stock;

(4) we distribute to all holders of our common stock, shares of our capital stock, evidences of indebtedness or assets, including securities but excluding:

•

rights or warrants listed in (2) above;

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dividends or distributions listed in (1) above; and

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cash distributions.

If we distribute capital stock of, or similar equity interests in, a subsidiary or other business unit of ours, the conversion rate will be adjusted based on the market value of the securities so distributed relative to the market value of our common stock, in each case, based on the average closing sale prices

of those securities for the 10 trading days commencing on and including the fifth trading day after the date on which “ex-dividend trading” commences for such distribution on the Nasdaq National Market or such other national or regional exchange or market on which the securities are then listed or quoted.

(5) we distribute cash, excluding any dividend or distribution in connection with our liquidation, dissolution or winding up or any quarterly cash dividend on our common stock to the extent that the aggregate cash dividend per share of common stock in any quarter does not exceed the greater of:

•

the amount per share of common stock of the next preceding quarterly cash dividend on the common stock to the extent that the preceding quarterly dividend did not require an adjustment of the conversion rate pursuant to this clause, as adjusted to reflect subdivisions or combinations of the common stock; and

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1.25% of the average of the last reported sale price of the common stock during the ten trading days immediately preceding the declaration date of the dividend.

(6) we or one of our subsidiaries makes a payment in respect of a tender offer or exchange offer for our common stock to the extent that the cash and value of any other consideration included in the payment per share of common stock exceeds the current market price per share of common stock on the trading day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer; and

(7) someone other than us or one of our subsidiaries makes a payment in respect of a tender offer or exchange offer for our common stock in which, as of the closing date of the offer, our board of directors is not recommending rejection of the offer. The adjustment referred to in this clause (7) will only be made if:

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the tender offer or exchange offer is for an amount that increases the offeror’s ownership of common stock to more than 25% of the total shares of common stock outstanding; and

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the cash and value of any other consideration included in the payment per share of common stock exceeds the current market price per share of common stock on the business day next succeeding the last date on which tenders or exchanges may be made pursuant to the tender or exchange offer.

However, the adjustment referred to in this clause (7) will generally not be made if as of the closing of the offer, the offering documents disclose a plan or an intention to cause us to engage in a consolidation or merger or a sale of all or substantially all of our assets.

To the extent that we have a rights plan in effect upon conversion of the notes into common stock, you will receive, in addition to the common stock, the rights under the rights plan unless the rights have separated from the common stock at the time of conversion, in which case the conversion rate will be adjusted as if we distributed to all holders of our common stock, shares of our capital stock, evidences of indebtedness or assets as described under clause (4) above, subject to readjustment in the event of the expiration, termination or redemption of such rights.

In the event of:

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any reclassification of our common stock;

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a consolidation, merger or combination involving us; or

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a sale or conveyance to another person or entity of all or substantially all of our property and assets;

in which holders of our common stock would be entitled to receive stock, other securities, other property, assets or cash for their common stock, upon conversion of your notes you will be entitled to receive the same type of consideration which you would have been entitled to receive if you had converted the notes into our common stock immediately prior to any of these events.

You may in certain situations be deemed to have received a distribution subject to United States federal income tax as a dividend in the event of any taxable distribution to holders of common stock or in certain other situations requiring a conversion rate adjustment. See “United States Federal Tax Considerations.”

We may, from time to time, increase the conversion rate if our board of directors has made a determination that this increase would be in our best interests. Any such determination by our board will be conclusive. We would give holders notice of any increase in the conversion rate. In addition, we may increase the conversion rate if our board of directors deems it advisable to avoid or diminish any income tax to holders of common stock resulting from any stock or rights distribution. See “United States Federal Tax Considerations.”

We will not be required to make an adjustment in the conversion rate unless the adjustment would require a change of at least 1% in the conversion rate. However, we will carry forward any adjustments that are less than 1% of the conversion rate. Except as described above in this section, we will not adjust the conversion rate for any issuance of our common stock or convertible or exchangeable securities or rights to purchase our common stock or convertible or exchangeable securities.

Redemption at Option of the Holder

If a fundamental change of Photronics occurs at any time prior to the maturity of the notes, you may require us to redeem your notes, in whole or in part, on a repurchase date that is 30 days after the date of our notice of the fundamental change. The notes will be redeemable in integral multiples of $1,000 principal amount.

We will redeem the notes at a price equal to 100% of the principal amount to be redeemed, plus accrued interest to, but excluding, the repurchase date. If the repurchase date is an interest payment date, we will pay interest to the record holder on the applicable record date.

We will mail to all record holders a notice of a fundamental change of Photronics within 10 days after it has occurred. We are also required to deliver to the trustee a copy of the fundamental change notice. If you elect to redeem your notes, you must deliver to us or our designated agent, on or before the 30th day after the date of our fundamental change notice, your redemption notice and any notes to be redeemed, duly endorsed for transfer. We will promptly pay the redemption price for notes surrendered for redemption following the repurchase date.

A “fundamental change” of Photronics is any transaction or event (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise) in connection with which all or substantially all of our common stock is exchanged for, converted into, acquired for or constitutes solely the right to receive, consideration which is not all or substantially all common stock that:

•

is listed on, or immediately after the transaction or event will be listed on, a United States national securities exchange, or

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is approved, or immediately after the transaction or event will be approved, for quotation on the Nasdaq National Market or any similar United States system of automated dissemination of quotations of securities prices.

We will comply with any applicable provisions of Rule 13e-4 and any other tender offer rules under the Exchange Act in the event of a fundamental change.

These fundamental change redemption rights could discourage a potential acquiror of Photronics. However, this fundamental change redemption feature is not the result of management’s knowledge of any specific effort to obtain control of Photronics by means of a merger, tender offer or solicitation, or part of a plan by management to adopt a series of anti-takeover provisions. The term “fundamental change” is limited to specified transactions and may not include other events that might adversely affect our financial condition or business operations. Our obligation to offer to redeem the notes upon a fundamental change would not necessarily afford you protection in the event of a highly leveraged transaction, reorganization, merger or similar transaction involving Photronics.

We may be unable to redeem the notes in the event of a fundamental change. If a fundamental change were to occur, we may not have enough funds to pay the redemption price for all tendered notes. Our credit agreement prohibits redemption of the notes upon a fundamental change. Any future credit agreements or other agreements relating to our indebtedness may contain provisions prohibiting redemption of the notes under certain circumstances, or expressly prohibit our repurchase of the notes upon a fundamental change or may provide that a fundamental change constitutes an event of default under that agreement. If a fundamental change occurs at a time when we are prohibited from purchasing or redeeming notes, we could seek the consent of our lenders to redeem the notes or attempt to refinance this debt. If we do not obtain consent, we would not be permitted to purchase or redeem the notes. Our failure to redeem tendered notes would constitute an event of default under the indenture, which might constitute a default under the terms of our other indebtedness. In these circumstances, or if a fundamental change would constitute an event of default under our senior indebtedness, the subordination provisions of the indenture would restrict payments to the holders of notes.

Subordination of Notes

Payment on the notes will, to the extent provided in the indenture, be subordinated in right of payment to the prior payment in full of all of our senior indebtedness. The notes also are effectively subordinated to all debt and other liabilities, including trade payables and lease obligations, if any, of our subsidiaries.

Upon any acceleration of the principal due on the notes or payment or distribution of our assets to creditors upon any dissolution, winding up, liquidation or reorganization, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other similar proceedings, all principal, premium, if any, and interest or other amounts due on all senior indebtedness must be paid in full before the holders of the notes are entitled to receive any payment.

We may not make any payment on the notes if there has occurred (i) a default in the payment of principal, premium, if any, or interest on (including a default under any repurchase or redemption obligation with respect to) any senior indebtedness (ii) any other event of default with respect to any senior indebtedness, permitting the holders thereof to accelerate the maturity thereof, and such event of default has not been cured or waived or ceased to exist after written notice of such event of default has been given to us and the trustee by any holder of senior indebtedness. In the event that, notwithstanding the foregoing, we make any payment to the trustee or any holder of notes prohibited by the foregoing provisions and this fact has been made actually known, at or prior to the time of payment, to the trustee or the holder, as the case may be, such payment must be paid over forthwith to us or our trustee in bankruptcy, as the case may be.

We may resume payments and distributions on the notes upon the date on which such default is cured or waived or ceases to exist.

Because of the subordination provisions discussed above, in the event of our bankruptcy, dissolution or reorganization, holders of senior indebtedness may receive more, ratably, and holders of the notes may receive less, ratably, than our other creditors. This subordination will not prevent the occurrence of any event of default under the indenture.

The notes are exclusively obligations of Photronics. A substantial portion of our operations is conducted through our subsidiaries. As a result, our cash flow and our ability to service our debt, including the notes, is dependent upon the earnings of our subsidiaries. In addition, we are dependent on the distribution of earnings, loans or other payments from our subsidiaries. Any payment of dividends, distributions, loans or advances by our subsidiaries to us could be subject to statutory or contractual restrictions. Payments to us by our subsidiaries will also be contingent upon our subsidiaries’ earnings and business considerations.

Our right to receive any assets of any of our subsidiaries upon their liquidation or reorganization, and therefore the right of the holders to participate in those assets, will be effectively subordinated to the claims of

that subsidiary’s creditors, including trade creditors. In addition, even if we were a creditor to any of our subsidiaries, our rights as a creditor would be subordinate to any security interest in the assets of our subsidiaries and any indebtedness of our subsidiaries senior to that held by us.

The term “senior indebtedness” is defined in the indenture to mean the principal of (and premium, if any) and interest (including all interest accruing subsequent to the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowable as a claim in any such proceeding) on, and all fees and other amounts payable in connection with, the following, whether absolute or contingent, secured or unsecured, due or to become due, outstanding on the date of the indenture or thereafter created, incurred or assumed: (a) our indebtedness to banks, insurance companies and other financial institutions evidenced by credit or loan agreements, notes or other written obligations, (b) all of our other indebtedness (including indebtedness of others guaranteed by us) other than the notes, which is (i) for money borrowed or (ii) evidenced by a note, security, debenture, bond or similar instrument, (c) our obligations as lessee under leases required to be capitalized on the balance sheet of the lessee under generally accepted accounting principles, (d) our obligations under interest rate and currency swaps, caps, floors, collars or similar agreements or arrangements, (e) obligations of Photronics issued or assumed as the deferred purchase price of property, (f) obligations of Photronics for the reimbursement of letters of credit to the extent such obligations are senior indebtedness under clauses (a) through (c) of this paragraph, and (g) renewals, extensions, amendments, modifications, restatements and refundings of, or any indebtedness or obligation issued in exchange for, any such indebtedness or obligation described in clauses (a) through (f) of this paragraph; provided, however, that senior indebtedness does not include any such indebtedness or obligation if the terms of such indebtedness or obligation (or the terms of the instrument under which, or pursuant to which, it is issued) expressly provide that such indebtedness or obligation is not senior in right of payment to the notes, or expressly provide that such indebtedness or obligation is pari passu with or junior to the notes. The term does not include our 6% convertible subordinated notes due 2004 and our 4³/4% convertible subordinated notes due 2006, with which the notes will rank pari passu.

As of May 4, 2003, we had $29.8 million of senior indebtedness outstanding and our subsidiaries had $533.0 million of liabilities outstanding, excluding liabilities owed to us and minority interests. Neither we nor our subsidiaries are prohibited from incurring debt, including senior indebtedness, under the indenture. We may from time to time incur additional debt, including senior indebtedness. Our subsidiaries may also from time to time incur additional debt and liabilities.

We are obligated to pay reasonable compensation to the trustee and to indemnify the trustee against certain losses, liabilities or expenses incurred by the trustee in connection with its duties relating to the notes. The trustee’s claims for these payments will generally be senior to those of noteholders in respect of all funds collected or held by the trustee.

Merger and Sale of Assets by Photronics

The indenture provides that Photronics may not consolidate with or merge with or into any other person or convey, transfer or lease its properties and assets substantially as an entirety to another person, unless among other items:

•

we are the surviving person, or the resulting, surviving or transferee person, if other than us, is organized and existing under the laws of the United States, any state thereof or the District of Columbia; and

•

the successor person assumes all obligations of Photronics under the notes and the indenture.

When such a person assumes Photronics’ obligations in such circumstances, subject to certain exceptions, Photronics shall be discharged from all obligations under the notes and the indenture.

Events of Default; Notice and Waiver

The following are events of default under the indenture:

•

we fail to pay principal or premium, if any, when due upon redemption at the option of the holder upon a fundamental change or otherwise on the notes, whether or not the payment is prohibited by subordination provisions;

•

we fail to pay any interest and liquidated damages, if any, on the notes, when due and such failure continues for a period of 30 days, whether or not the payment is prohibited by subordination provisions of the indenture;

•

we fail to provide notice of the occurrence of a fundamental change on a timely basis;

•

we fail to perform or observe any of the covenants in the indenture for 60 days after notice;

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we fail to pay any indebtedness for money borrowed by us in an aggregate principal amount in excess of $15 million at final maturity or upon acceleration thereof and such default in payment or acceleration is not cured or rescinded within 30 days after written notice as provided in the indenture; or

•

certain events involving our bankruptcy, insolvency or reorganization.

The trustee may withhold notice to the holders of the notes of any default, except defaults in payment of principal, premium, interest or liquidated damages, if any, on the notes. However, the trustee must consider it to be in the interest of the holders of the notes to withhold this notice.

If an event of default occurs and continues, the trustee or the holders of at least 25% in principal amount of the outstanding notes may declare the principal, premium, if any, and accrued interest and liquidated damages, if any, on the outstanding notes to be immediately due and payable. In case of certain events of bankruptcy or insolvency involving us, the principal, premium, if any, and accrued interest and liquidated damages, if any, on the notes will automatically become due and payable. However, if we cure all defaults, except the nonpayment of principal, premium, if any, interest or liquidated damages, if any, that became due as a result of the acceleration, and meet certain other conditions, with certain exceptions, this declaration may be cancelled and the holders of a majority of the principal amount of outstanding notes may waive these past defaults.

Payments of principal, premium, if any, or interest on the notes that are not made when due will accrue interest at the annual rate of 2¹/4% from the required payment date.

The holders of a majority of outstanding notes will have the right to direct the time, method and place of any proceedings for any remedy available to the trustee, subject to limitations specified in the indenture.

No holder of the notes may pursue any remedy under the indenture, except in the case of a default in the payment of principal, premium, if any, or interest on the notes, unless:

•

the holder has given the trustee written notice of an event of default;

•

the holders of at least 25% in principal amount of outstanding notes make a written request, and offer reasonable indemnity, to the trustee to pursue the remedy;

•

the trustee does not receive an inconsistent direction from the holders of a majority in principal amount of the notes; and

•

the trustee fails to comply with the request within 60 days after receipt.

Modification and Waiver

The consent of the holders of a majority in principal amount of the outstanding notes is required to modify or amend the indenture. However, a modification or amendment requires the consent of the holder of each outstanding note if it would:

•

extend the fixed maturity of any note;

•

reduce the rate or extend the time for payment of interest of any note;

•

reduce the principal amount or premium of any note;

•

reduce any amount payable upon redemption at the option of a holder upon a fundamental change of any note;

•

adversely change our obligation to redeem any note upon a fundamental change;

•

impair the right of a holder to institute suit for payment on any note;

•

change the currency in which any note is payable;

•

impair the right of a holder to convert any note;

•

adversely modify, in any material respect, the subordination provisions of the indenture;

•

reduce the quorum or voting requirements under the indenture;

•

change any obligation of Photronics to maintain an office or agency in the places and for the purposes specified in the indenture;

•

subject to specified exceptions, modify certain of the provisions of the indenture relating to modification or waiver of provisions of the indenture; or

•

reduce the percentage of notes required for consent to any modification of the indenture.

We are permitted to modify certain provisions of the indenture without the consent of the holders of the notes.

Form, Denomination and Registration

The notes were issued:

•

in fully registered form;

•

without interest coupons; and

•

in denominations of $1,000 principal amount and integral multiples of $1,000.

Global Note, Book-Entry Form

Notes that were sold to “qualified institutional buyers” as defined in Rule 144A under the Securities Act, whom we refer to as QIBs, were evidenced by one or more global notes which were deposited with or on behalf of, DTC and registered in the name of Cede & Co., as DTC’s nominee. Except as set forth below, a global note may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee.

You may hold your interests in a global note directly through DTC if you are a participant in DTC, or indirectly through organizations that are participants in DTC (called “participants”). Transfers between participants will be effected in the ordinary way in accordance with DTC rules and will be settled in clearing house funds. The laws of some states require that certain persons take physical delivery of securities in definitive form. As a result, the ability to transfer beneficial interests in the global note to such persons may be limited.

If you are not a participant, you may beneficially own interests in a global note held by DTC only through participants, or certain banks, brokers, dealers, trust companies and other parties that clear through or maintain a custodial relationship with a participant, either directly or indirectly (called “indirect participants”). So long as Cede & Co., as the nominee of DTC, is the registered owner of a global note, Cede & Co., for all purposes, will be considered the sole holder of such global note. Except as provided below, owners of beneficial interests in a global note will:

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not be entitled to have certificates registered in their names;

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not receive physical delivery of certificates in definitive registered form; and

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not be considered holders of the global note.

We will pay interest on and the redemption price of a global note to Cede & Co., as the registered owner of the global note, by wire transfer of immediately available funds on each interest payment date or repurchase date, as the case may be. Neither we, the trustee nor any paying agent will be responsible or liable:

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for the records relating to, or payments made on account of, beneficial ownership interests in a global note; or

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for maintaining, supervising or reviewing any records relating to the beneficial ownership interests.

We have been informed that DTC’s practice is to credit participants’ accounts on that payment date with payments in amounts proportionate to their respective beneficial interests in the principal amount represented by a global note as shown in the records of DTC, unless DTC has reason to believe that it will not receive payment on that payment date. Payments by participants to owners of beneficial interests in the principal amount represented by a global note held through participants will be the responsibility of the participants, as is now the case with securities held for the accounts of customers registered in “street name.”

Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants, the ability of a person having a beneficial interest in the principal amount represented by the global note to pledge such interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate evidencing its interest.

Neither we, the trustee, registrar, paying agent nor conversion agent will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. DTC has advised us that it will take any action permitted to be taken by a holder of notes, including the presentation of notes for exchange, only at the direction of one or more participants to whose account with DTC interests in the global note are credited, and only in respect of the principal amount of the notes represented by the global note as to which the participant or participants has or have given such direction.

DTC has advised us that it is:

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a limited purpose trust company organized under the laws of the State of New York, and a member of the Federal Reserve System;

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a “clearing corporation” within the meaning of the Uniform Commercial Code; and

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a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act.

DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants. Participants include securities brokers, dealers, banks, trust companies and clearing corporations and other organizations. Some of the participants or their representatives, together with other entities, own DTC. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly.

DTC has agreed to the foregoing procedures to facilitate transfers of interests in a global note among participants. However, DTC is under no obligation to perform or continue to perform these procedures, and may discontinue these procedures at any time. If DTC is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by us within 90 days, we will issue notes in certificated form in exchange for global notes.

Certificated Notes

QIBs may request that certificated notes be issued in exchange for notes represented by a global note.

Registration Rights of the Noteholders

We entered into a registration rights agreement with the initial purchasers of the notes under which we are required to use reasonable best efforts to keep the shelf registration statement of which this prospectus is a part effective until the earlier of:

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the time when all of the registrable securities have been sold pursuant to the shelf registration statement; or

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the expiration of the holding period under Rule 144(k) under the Securities Act, or any successor provision.

When we use the term “registrable securities” in this section, we are referring to the notes and the common stock issuable upon conversion of the notes until the earliest of:

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the effective registration under the Securities Act and the resale of the securities in accordance with the registration statement;

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the expiration of the holding period under Rule 144(k) under the Securities Act; and

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the sale to the public pursuant to Rule 144 under the Securities Act, or any similar provision then in force, but not Rule 144A.

We may suspend the use of the prospectus under certain circumstances relating to pending corporate developments, public filings with the SEC and similar events. Any suspension period may not exceed:

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30 days in any three-month period; or

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an aggregate of 90 days for all periods in any 12-month period.

Notwithstanding the foregoing, we will be permitted to suspend the use of the prospectus for up to 60 days in any three-month period under certain circumstances, relating to possible acquisitions, financings or other similar transactions.

We will pay predetermined liquidated damages if the shelf registration statement is not timely made effective or if the prospectus is unavailable for periods in excess of those permitted above:

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on the notes at an annual rate equal to 0.25% for the first 90 days and 0.50% thereafter of the aggregate principal amount of the notes outstanding until the registration statement is made effective or during the additional period the prospectus is unavailable; and

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on the common stock that has been converted, at an annual rate equal to 0.25% for the first 90 days and 0.50% thereafter on an amount per share equal to $1,000 divided by the conversion rate during such periods.

A holder who elects to sell registrable securities pursuant to the shelf registration statement will be required to:

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be named as a selling shareholder in the related prospectus;

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deliver a prospectus to purchasers; and

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be subject to the provisions of the registration rights agreement, including indemnification provisions.

Under the registration rights agreement we will:

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pay all expenses of the shelf registration statement;

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provide each registered holder copies of the prospectus;

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notify holders when the shelf registration statement has become effective; and

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take other reasonable actions as are required to permit unrestricted resales of the registrable securities in accordance with the terms and conditions of the registration rights agreement.

In order to sell your registrable securities, you must complete the questionnaire that was attached to the offering memorandum for the private placement of the notes, and deliver it to us prior to your intended distribution. In order to be named as a selling security holder in the prospectus at the time of effectiveness of the shelf registration statement, you must complete and deliver the questionnaire to us on or prior to the tenth business day before the effectiveness of the registration statement. Upon receipt of a completed questionnaire after that time, together with any other information we may reasonably request following the effectiveness, we will file any amendments to the shelf registration statement or supplements to the related prospectus as are necessary to permit you to deliver your prospectus to purchasers of registrable securities, subject to our right to suspend the use of the prospectus. We will pay the predetermined liquidated damages described above to the holder if we fail to make the filing in the time required or, if such filing is a post-effective amendment to the shelf registration statement required to be declared effective under the Securities Act, if such amendment is not declared effective within 45 days of the filing. If you do not complete and deliver a questionnaire or provide the other information we may request, you will not be named as a selling security holder in the prospectus and will not be permitted to sell your registrable securities pursuant to the shelf registration statement. This summary of the registration rights agreement is not complete. This summary is subject to, and is qualified in its entirety by reference to, all the provisions of the registration rights agreement.

Rule 144A Information Request

We will furnish to the holders or beneficial holders of the notes or the underlying common stock and prospective purchasers, upon their request, the information required under Rule 144A(d)(4) under the Securities Act until such time as such securities are no longer “restricted securities” within the meaning of Rule 144 under the Securities Act, assuming these securities have not been owned by an affiliate of Photronics.

Information Concerning the Trustee

We have appointed The Bank of New York, the trustee under the indenture, as paying agent, conversion agent and note registrar for the notes. The trustee has in the past and it or its affiliates may in the future provide banking and other services to us in the ordinary course of their business.

The indenture contains certain limitations on the rights of the trustee, if it or any of its affiliates is then our creditor, to obtain payment of claims in certain cases or to realize on certain property received on any claim as security or otherwise. The trustee and its affiliates are permitted to engage in other transactions with us. However, if the trustee or any affiliate continues to have any conflicting interest and a default occurs with respect to the notes, the trustee must eliminate such conflict or resign.

DESCRIPTION OF CAPITAL STOCK

General

Our authorized capital stock consists of 2,000,000 shares of preferred stock, $.01 par value, of which no shares are issued and outstanding, and 150,000,000 shares of common stock, $.01 par value per share, of which 32,047,645 shares were issued and outstanding as of April 8, 2003.

Common Stock

The holders of shares of common stock are entitled to one vote per share on all matters to be voted upon by shareholders. At a meeting of shareholders at which a quorum is present, a majority of the votes cast decides all questions, unless the matter is one upon which, by express provision of the certificate of incorporation, the by-laws or statute, a different vote is required. There is no cumulative voting with respect to the election of directors, which means that the holders of a majority of the shares can elect all the directors if they choose to do so, and in such event, the holders of the remaining shares would not be able to elect any directors.

The holders of common stock have no preemptive rights, nor are there any redemption rights provisions with respect to common stock. The shares offered hereby, when issued and paid for, will be fully paid and nonassessable and not subject to further call or assessment by us.

The holders of common stock are entitled to such dividends, if any, as may be declared by our board of directors in its discretion out of funds legally available for that purpose. In the event of our liquidation, dissolution or winding up, the holders of our common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to the priority of preferred stock, if any, then outstanding.

At April 8, 2003, we had reserved 1,197,012 shares of common stock for issuance under our stock option plans, 177,177 shares of common stock for issuance under our employee stock purchase plan, 2,220,236 shares of common stock issuable upon conversion of our 6% convertible subordinated notes due 2004 (which were redeemed on June 1, 2003), 5,405,400 shares of common stock issuable upon conversion of our 4³/4% convertible subordinated notes due 2006 and 9,440,640 shares of common stock issuable upon conversion of the notes.

Preferred Stock

Our board of directors has the authority by resolution to issue up to 2,000,000 shares of preferred stock in one or more series and to fix the number of shares constituting any such series, the voting powers, designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including the dividend rights, dividend rate, terms of redemption (including sinking fund provisions), redemption price or prices, conversion rights and liquidation preferences of the shares constituting any series, without any further vote or action by the shareholders. For example, our board of directors is authorized to issue a series of preferred stock that would have the right to vote separately or with any other series of preferred stock on any proposed amendment to our certificate of incorporation or any other proposed corporate action including business combinations and other transactions. However, our board of directors currently does not contemplate the issuance of any preferred stock.

Certain Effects of Authorized but Unissued Stock

At April 8, 2003, there were 101,732,126 shares of common stock that were not outstanding or reserved for issuance (after giving effect to the 9,440,640 shares of common stock initially reserved for issuance upon conversion of the notes and the redemption of our 6% convertible subordinated notes on June 1, 2003) and 2,000,000 shares of unissued and undesignated preferred stock. These additional shares may be utilized for a variety of proper corporate purposes, including future public offerings to raise additional capital or facilitate corporate acquisitions. We do not currently have any plan to issue additional shares of common stock or

preferred stock, other than shares of common stock issuable under our employee stock purchase plan, upon the exercise of options issued under our stock option plans or upon conversion of our 4³/4% convertible subordinated notes due 2006 or the notes.

One of the effects of the existence of unissued and unreserved common stock and undesignated preferred stock may be to enable our board of directors to issue shares to persons friendly to current management, which could render more difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management. Our board of directors can issue the preferred stock without shareholder approval, with voting and conversion rights that could adversely affect the voting rights of the common shareholders.

Transfer Agent

The transfer agent and registrar for the common stock is Registrar & Transfer Company, Cranford, New Jersey.

Listing

The common stock is quoted on The Nasdaq National Market under the symbol “PLAB.”

UNITED STATES FEDERAL TAX CONSIDERATIONS

The following is a summary of the material U.S. federal income tax considerations relating to the purchase, ownership and disposition of the notes and common stock into which the notes may be converted, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is generally limited to holders who will hold the notes and the shares of common stock as capital assets and does not deal with special situations including those that may apply to particular holders such as tax-exempt organizations, holders subject to the U.S. federal alternative minimum tax, dealers in securities, traders in securities who elect to apply a mark-to-market method of accounting, financial institutions, banks, insurance companies, regulated investment companies, certain former citizens or former long-term residents of the United States, partnerships or other pass-through entities, holders whose “functional currency” is not the U.S. dollar and persons who hold the notes or shares of common stock in connection with a “straddle,” “hedging,” “conversion” or other risk reduction transaction. This discussion does not address the tax consequences to non-U.S. holders of notes or our common stock that are engaged in a trade or business within the United States and does not discuss the tax consequences under any state, local or foreign law. In addition, this summary does not consider the effect of the U.S. federal estate or gift tax laws.

The U. S. federal income tax considerations set forth below are based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder, court decisions, and rulings and pronouncements of the Internal Revenue Service, referred to as the “IRS”, now in effect, all of which are subject to change. Prospective investors should particularly note that any such change could have retroactive application so as to result in U.S. federal income tax consequences different from those discussed below. We have not sought any ruling from the IRS with respect to statements made and conclusions reached in this discussion and there can be no assurance that the IRS will agree with such statements and conclusions.

As used herein, the term “U.S. holder” means a beneficial owner of a note (or our common stock acquired upon conversion of a note) that is for U.S. federal income tax purposes:

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an individual who is a citizen or resident of the United States;

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a corporation, or other entity taxable 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;

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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

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a trust, if a court within the United States is able to exercise primary jurisdiction over its administration and one or more U.S. persons have authority to control all it its substantial decisions, or if the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

As used herein, a “non-U.S. holder” means a holder that is not a U.S. holder and that is not engaged in a U.S. trade or business. Non-U.S. holders are subject to special U.S. federal income tax provisions, some of which are discussed below.

If a partnership (including for this purpose any entity treated as a partnership for U.S. tax purposes) is a beneficial owner of the notes or common stock into which the notes may be converted, the U.S. tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. A holder of the notes or common stock into which the notes may be converted that is a partnership and partners in such partnership should consult their individual tax advisors about the U.S. federal income tax consequences of holding and disposing of the notes and the common stock into which the notes may be converted.

This summary discusses the tax considerations applicable to the initial purchasers of the notes who purchase the notes at their “issue price” and does not discuss the tax considerations applicable to subsequent purchasers of

the notes. The issue price is the initial offering price to investors at which a substantial amount of the notes is sold (excluding sales to brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers). This summary also assumes that the IRS will respect the classification of the notes as indebtedness for federal income tax purposes.

U.S. Holders

Taxation of Interest

Interest paid on the notes will be included in the income of a U.S. holder as ordinary income at the time it is treated as received or accrued, in accordance with such holder’s regular method of accounting for U.S. federal income tax purposes.

Constructive Dividends

Holders of convertible debt instruments such as the notes may, in some circumstances, be deemed to have received distributions of stock if the conversion price of such instruments is adjusted to the extent the adjustment results in an increase in the holder’s proportionate interest in our earnings and profits or assets. However, adjustments to the conversion price made pursuant to a bona fide, reasonable adjustment formula which has the effect of preventing the dilution of the interest of the holders of the debt instruments will generally not be considered to result in a constructive distribution of stock. Some of the possible adjustments provided in the notes (including, without limitation, adjustments in respect of taxable dividends to our stockholders or adjustments at our discretion) will not qualify as being pursuant to a bona fide reasonable adjustment formula. If such adjustments are made, U.S. holders of notes will be deemed to have received constructive distributions taxable as dividends to the extent of our current and accumulated earnings and profits even though they have not received any cash or property as a result of such adjustments. A holder’s tax basis in a note, however, generally will be increased by the amount of any constructive dividend included in taxable income. In addition, in some circumstances, an adjustment or the failure to provide for an adjustment may result in taxable dividend income to the holders of common stock. The consequences of distributions on common stock are described below under “U.S. Holders—Distributions on Common Stock.”

Conversion of the Notes for Common Stock

A U.S. holder generally will not recognize any income, gain or loss upon conversion of a note into common stock except with respect to cash received in lieu of a fractional share of common stock or common stock that is attributable to accrued interest not previously included in income. Cash received in lieu of a fractional share of common stock upon conversion will be treated as a payment in exchange for the fractional share of common stock. Accordingly, the receipt of cash in lieu of a fractional share of common stock generally will result in capital gain or loss (measured by the difference between the cash received for the fractional share and the holder’s adjusted tax basis in the fractional share). Common stock received upon conversion that is attributable to accrued interest not previously included in income will be subject to the rules described above with respect to taxation of interest. See “U.S. Holders—Taxation of Interest” above.

A U.S. holder’s tax basis in the common stock received on conversion of a note will be the same as such holder’s adjusted tax basis in the note at the time of conversion (reduced by any basis allocable to a fractional share interest), and the holding period for the common stock received on conversion will generally include the holding period of the note converted. However, a U.S. holder’s tax basis in shares of common stock considered attributable to accrued interest not previously included in income (or to cash tendered with notes converted after a record date for a particular interest payment date and prior to such interest payment date) generally will equal the amount of such accrued interest (and/or cash), and the holding period for such shares shall begin on the date of conversion.

Distributions on Common Stock

If, contrary to our current dividend policy, distributions are made on the common stock after a conversion, such distributions generally will be included in the income of a U.S. holder as ordinary dividend income to the extent of our current or accumulated earnings and profits as determined under U.S. federal income tax principles. A dividend distribution to a corporate U.S. holder may qualify for a dividends-received deduction; however, certain holding period requirements, taxable income and other limitations may apply. Distributions in excess of our current and accumulated earnings and profits will be treated as a non-taxable return of capital that reduces the U.S. holder’s basis in the common stock dollar-for-dollar until the basis has been reduced to zero, and thereafter as capital gain.

Sale or Repurchase for Cash upon a Fundamental Change

U.S. holders generally will recognize capital gain or loss upon the sale, including a repurchase by us for cash upon a fundamental change, or other taxable disposition of the notes or common stock in an amount equal to the difference between the sum of the cash plus the fair market value of any property received for such disposition (other than amounts attributable to accrued but unpaid interest on the notes not previously included in income, which will be treated as interest for U.S. federal income tax purposes) and the U.S. holder’s adjusted tax basis in the notes or common stock (as the case may be). A U.S. holder’s adjusted tax basis in a note generally will equal the cost of the note to such U.S. holder. (For a discussion of the holder’s basis in shares of our common stock, see “—Conversion of the Notes for Common Stock” above).

Prospective investors should consult their tax advisers regarding the treatment of capital gains (which may be taxed at lower rates than ordinary income for taxpayers who are individuals, trusts or estates and have held their notes or common stock for more than one year) and losses (the deductibility of which is subject to limitations).

Backup Withholding and Information Reporting

Certain noncorporate U.S. holders may be subject to IRS information reporting and backup withholding on payments of interest on the notes, dividends on common stock and proceeds from the sale or other disposition of the notes or common stock. Backup withholding of U.S. federal income tax will apply to payments made pursuant to the terms of a note or common stock (including proceeds received upon the sale, exchange, redemption, retirement or other disposition of the notes or common stock) to a U.S. holder that is not an “exempt recipient” and that fails to provide required identifying information (such as the holder’s U.S. taxpayer identification number, or “TIN”) in the manner required. Payments made in respect of a note or common stock (including proceeds received upon the sale, exchange, redemption, retirement or other disposition of the notes or common stock) must be reported to the IRS, unless the U.S. holder is an exempt recipient or otherwise establishes an exemption. Any amounts withheld from a payment to a U.S. holder under the backup withholding rules is allowable as a refund or credit against the holder’s U.S. federal income tax, provided that the required information is furnished to the IRS in a timely manner.

Non-U.S. Holders

In general, subject to the discussion below concerning backup withholding:

Taxation of Interest

Payments of interest on the notes by us or any paying agent to a beneficial owner of a note that is a non-U.S. holder generally will not be subject to U.S. withholding tax, provided that (1) such non-U.S. holder does not own, actually or constructively pursuant to the conversion feature of the notes or otherwise, 10% or more of the total combined voting power of all classes of our stock entitled to vote (2) such non-U.S. holder is not a

“controlled foreign corporation” related to us through stock ownership and (3) the IRS certification requirements summarized below are satisfied.

To satisfy the certification requirements referred to above either (1) the beneficial owner of a note must certify, under penalties of perjury, to us or our paying agent, as the case may be, that such owner is a non-U.S. holder and must provide such owner’s name and address, and TIN, if any, on Form W-8BEN (or a suitable substitute form) or (2) a securities clearing organization, bank or other financial institution that holds customers’ securities in the ordinary course of its trade or business (a “Financial Institution”) and holds the note on behalf of the beneficial owner thereof must certify, under penalties of perjury, to us or our paying agent, as the case may be, that a Form W-8BEN (or a suitable substitute form) has been received from the beneficial owner or a qualifying intermediary and must furnish the payor with a copy thereof.

Interest on notes not excluded from U.S. withholding tax as described above and not effectively connected with a United States trade or business generally will be subject to U.S. withholding tax at a 30% rate, except where a non-U.S. holder can claim the benefits of an applicable U.S. income tax treaty providing for the reduction or elimination of such withholding tax and demonstrate such eligibility to the IRS.

Sale, Exchange or Redemption of the Notes or Common Stock

A non-U.S. holder of a note or common stock will not be subject to U.S. federal income tax on gains realized on the sale, exchange or redemption of such note or common stock unless (1) such non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of sale, exchange or other disposition, and other required conditions are met, or (2) in certain circumstances, if we are, or have been at any time within the shorter of the five-year period preceding such sale or other disposition or the period such non-U.S. holder held the common stock or note, a U.S. real property holding corporation (a “USRPHC”) within the meaning of Section 897(c)(2) of the Code for U.S. federal income tax purposes.

We believe that we are not a USRPHC for U.S. federal income tax purposes. Although we consider it unlikely based in our current business plans and operations, we may become a USRPHC in the future. If we were to become a USRPHC, a non-U.S. holder might be subject to U.S. federal income tax with respect to gain realized on the disposition of notes or shares of common stock. However, in the case of a sale of our common stock or notes, such gain would not be subject to U.S. federal income or withholding tax if (1) our common stock is regularly traded on an established securities market and (2) the non-U.S. holder disposing of our common stock or notes did not own, actually or constructively (through exercise of the conversion feature in the case of the notes), at any time during the five-year period preceding the disposition, more than 5% of our common stock.

Constructive Dividends

The conversion price of the notes is subject to adjustment in certain circumstances. Certain such adjustments would give rise to a deemed distribution to non-U.S. holders of the notes. See “U.S. Holders—Constructive Dividends” above. In such case, the deemed distribution would be subject to the rules below regarding withholding of U.S. federal tax on dividends in respect of common stock. See “—Distributions on Common Stock” below.

Conversion of the Notes

A non-U.S. holder generally should not be subject to U.S. federal income tax on the conversion of a note into common stock. To the extent a non-U.S. holder receives cash in lieu of a fractional share of common stock upon conversion, such cash may give rise to gain that would be subject to the rules described above with respect to the sale, exchange or redemption of a note or common stock. See “Non-U.S. Holders—Sale, Exchange or Redemption of the Notes or Common Stock” above. To the extent a non-U.S. holder receives upon conversion common stock that is attributable to accrued interest not previously included in income, such stock may give rise

to income that would be subject to the rules described above with respect to the taxation of interest. See “Non-U.S. Holders—Taxation of Interest” above.

Distributions on Common Stock

If, contrary to our current dividend policy, distributions are made on common stock after conversion these distributions will constitute a dividend for U.S. federal income tax purposes to the extent of our current or accumulated earnings and profits as determined under U.S. federal income tax principles. Dividends paid on common stock held by a non-U.S. holder generally will be subject to U.S. withholding tax at a 30% rate, except where an applicable U.S. income tax treaty provides for the reduction or elimination of such withholding tax. A non-U.S. holder generally will be required to satisfy certain IRS certification requirements in order to claim a reduction of or exemption from withholding under a tax treaty by filing IRS Form W-8BEN upon which the non-U.S. holder certifies, under penalties of perjury, its status as a non-U.S. person and its entitlement to the lower treaty rate with respect to such payments.

Distributions in excess of our current and accumulated earnings and profits as determined under U.S. federal income tax principles will be treated as a non-taxable return of capital that reduces the non-U.S. holder’s basis in the common stock dollar-for-dollar until the basis has been reduced to zero, and thereafter as capital gain. Such capital gain will generally not be taxable to a non-U.S. holder except under the circumstances described above under “Non-U.S. Holders—Sale, Exchange or Redemption of the Notes or Common Stock.”

Backup Withholding and Information Reporting

A non-U.S. holder may have to comply with specific IRS certification procedures to establish that such holder is not a U.S. person in order to avoid information reporting and backup withholding tax requirements with respect to our payments of principal and interest on the notes and any dividends on the common stock. In addition, we must report annually to the IRS and to each non-U.S. holder the amount of any interest or dividends paid to, and the tax withheld with respect to, such holder, regardless of whether any tax was actually withheld. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which the non-U.S. holder resides.

The payment of the proceeds from the sale or other disposition of the notes or common stock to or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale or disposition of the notes or common stock will be subject to information reporting if it is to or through a foreign office of a broker that is a “U.S. related broker” unless the broker does not have actual knowledge or reason to know that the holder is a U.S. person and the documentation requirements described above are met or the holder otherwise establishes an exemption. Backup withholding will apply if the sale or disposition is subject to information reporting and the broker has actual knowledge that you are a U.S. person. Under applicable Treasury regulations, a broker is a “U.S. related broker” if it is (1) a U.S. person, (2) a controlled foreign corporation for U.S. federal income tax purposes, (3) a foreign person 50% or more of whose gross income is effectively connected with the conduct of a U.S. trade or business for a specified three-year period, or (4) a foreign partnership, if at any time during its tax year one or more of its partners are U.S. persons, as defined in Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership, or such foreign partnership is engaged in the conduct of a U.S. trade or business.

Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder will be allowed as a credit against such holder’s U.S. federal income tax liability, if any, or will otherwise be refundable, provided that the prerequisite procedures are followed and the proper information is filed with the IRS on a timely basis. Non-U.S. holders of the notes or common stock should consult their own tax advisors regarding their qualification for exemption from backup withholding and the procedure for obtaining such an exemption, if applicable.

THE PRECEDING DISCUSSION OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR U.S. FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND OUR COMMON STOCK. TAX ADVISORS SHOULD ALSO BE CONSULTED AS TO THE U.S. ESTATE AND GIFT TAX CONSEQUENCES AND THE FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND OUR COMMON STOCK, AS WELL AS THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.

SELLING SECURITY HOLDERS

We originally issued the notes in a private placement in April 2003. The notes were resold by the initial purchasers of the notes to qualified institutional buyers under Rule 144A under the Securities Act. Selling security holders may offer and sell the notes and the underlying common stock pursuant to this prospectus.

The following table sets forth information we have received as of June 6, 2003 about the principal amount of notes and the underlying common stock beneficially owned by each selling security holder that may be offered using this prospectus.

Name	Principal amount of notes beneficially owned that may be sold		Percentage of notes outstanding		Number of shares of common stock that may be sold (1)(4)	Percentage of common stock outstanding (2)
AG Domestic Convertibles, L.P.	$	1,400,000	*		88,113	*
AG Offshore Convertibles LTD.		2,600,000	1.73	%	163,638	*
AIG/National Union Fire Insurance		100,000	*		6,294	*
Alcon Laboratories		96,000	*		6,042	*
Allentown City Firefighters Pension Plan		6,000	*		378	*
Allentown City Officers & Employees Pension Fund		4,000	*		252	*
Allentown City Police Pension Plan		8,000	*		504	*
Allstate Insurance Company		500,000	*		31,469	*
Arapahoe County Colorado		15,000	*		944	*
Argent Classic Convertible Arbitrage Fund L.P.		600,000	*		37,763	*
Argent Lowlev Convertible Arbitrage Fund LLC		1,350,000	*		84,966	*
Arkansas PERS		215,000	*		13,532	*
Arlington County Employees Retirement System		166,000	*		10,448	*
Attorney’s Title Insurance Fund		25,000	*		1,573	*
Asante Health Systems		17,000	*		1,070	*
B.G.I Global Investors c/o Forest Investment Management, LLC		39,000	*		2,455	*
Boilermakers Blacksmith Pension Trust		270,000	*		16,993	*
BNP Paribas Equity Strategies SNC (6)		3,379,000	2.25		212,666	*
British Virgin Islands Social Security Board		22,000	*		1,385	*
CEMEX Pension Plan		60,000	*		3,776	*
City and County of San Francisco Retirement System		370,000	*		23,287	*
City of New Orleans		51,000	*		3,210	*
City University of New York		37,000	*		2,329	*
CooperNeff Convertible Strategies (Cayman) Master Fund, L.P.		2,827,000	1.88		177,925	*
Delaware PERS		290,000	*		18,252	*
Delaware Public Employees Retirement System		390,000	*		24,546	*
Delta Airlines Master Trust		130,000	*		8,182	*
Delta Pilots Disability and Survivorship Trust		200,000	*		12,588	*
Dorinco Reinsurance Company		370,000	*		23,287	*
Duke Endowment		50,000	*		3,147	*

Name	Principal amount of notes beneficially owned that may be sold		Percentage of notes outstanding		Number of shares of common stock that may be sold (1)(4)	Percentage of common stock outstanding (2)
Forest Fulcrum Fund LLP	$	103,000	*		6,483	*
Forest Global Convertible Fund Series A-5		464,000	*		29,203	*
Forest Multi-Strategy Master Fund SPC, on behalf of Series F, Multi-Strategy Segregated Portfolio		53,000	*		3,336	*
Froley Revy Investment Convertible Security Fund		35,000	*		2,203	*
Grace Convertible Arbitrage Fund Ltd.		3,250,000	2.17	%	204,547	*
Grady Hospital Foundation		33,000	*		2,077	*
Guardian Pension Trust		500,000	*		31,469	*
ICI American Holdings Trust		65,000	*		4,091	*
Independence Blue Cross		70,000	*		4,406	*
LLT Limited		37,000	*		2,329	*
Lyxor Master Fund c/o Forest Investment Management, LLC		179,000	*		11,266	*
Macomb County Employees’ Retirement System		140,000	*		8,811	*
Merrill Lynch Insurance Group		83,000	*		5,224	*
Morgan Stanley Convertible Securities Trust		750,000	*		47,203	*
Municipal Employees		59,000	*		3,713	*
New Orleans Firefighters Pension/Relief Fund		34,000	*		2,140	*
1976 Distribution Trust FBO A.R. Lauder/Zinterhofer		2,000	*		126	*
Nuveen Preferred & Convertible Income Fund		825,000	*		51,924	*
Occidental Petroleum Corporation		65,000	*		4,091	*
Ohio Bureau of Workers Compensation		45,000	*		2,832	*
Policeman and Firemen Retirement System of the City of Detroit		150,000	*		9,441	*
Port Authority of Allegheny County Retirement and Disability Allowance Plan for the Employees Represented by Local 85 of the Amalgamated Transit Union		325,000	*		20,455	*
Pro-mutual		190,000	*		11,958	*
Prudential Insurance Co. of America		20,000	*		1,259	*
R.B.C. Alternative Assets LP c/o Forest Investment Management, LLC		35,000	*		2,203	*
Ram Trading Ltd.		2,500,000	1.67		157,344	*
Relay 11 Holdings c/o Forest Investment Management, LLC		19,000	*		1,196	*
SCI Endowment Care Common Trust Fund—First Union		20,000	*		1,259	*
SCI Endowment Care Common Trust Fund—National Fiduciary Services		90,000	*		5,664	*
SCI Endowment Care Common Trust Fund—Suntrust		40,000	*		2,518	*
Single Hedge U.S. Convertible Arbitrage Fund		565,000	*		35,560	*
Southern Farm Bureau Life Insurance		150,000	*		9,441	*

Name	Principal amount of notes beneficially owned that may be sold		Percentage of notes outstanding		Number of shares of common stock that may be sold (1)(4)		Percentage of common stock outstanding (2)
Sphinx Convertible Arbitrage c/o Forest Investment Management, LLC	$	10,000	*		629		*
State of Oregon/Equity		950,000	*		59,791		*
State of Maryland Retirement Agency		810,000	*		50,979		*
Sturgeon Limited		479,000	*		30,147		*
Syngenta AG		50,000	*		3,147		*
The Grable Foundation		22,000	*		1,385		*
Trustmark Insurance		85,000	*		5,350		*
2000 Revocable Trust FBO A.R. Lauder/Zinterhofer		1,000	*		63		*
Union Carbide Retirement Account		530,000	*		33,357		*
United Food & Commercial Workers Local 1262 and Employers Pension Fund		300,000	*		18,881		*
Univar USA Inc. Retirement Plan		150,000	*		9,441		*
US Bancorp Piper Jaffray		6,000,000	4.00	%	377,626		1.16	%
Xavex Risk Arbitrage Fund 2		100,000	*		6,294		*
Zeneca Holdings Trust		75,000	*		4,720		*
Zurich Master Hedge Fund c/o Forest Investment Management, LLC		61,000	*		3,839		*
Any other holder of notes or future transferee, pledgee, donee or successor of any holder (3)		113,894,000	75.93		7,168,215		18.28

Total	$	150,000,000	100.00	%	9,440,640	(5)	22.75	%

* Less than 1%.

(1)

Assumes conversion of all of the holder’s notes at a conversion rate of 62.9376 shares of common stock per $1,000 principal amount of notes. However, this conversion rate will be subject to adjustment as described under “Description of Notes—Conversion Rights.” As a result, the amount of common stock issuable upon conversion of the notes may increase or decrease in the future.

(2)

Calculated based on 32,047,645 shares of common stock outstanding as of April 8, 2003. In calculating this amount for each selling security holder, we treated as outstanding that number of shares of common stock issuable upon conversion of all of that holder’s notes. However, we did not assume the conversion of any other holder’s notes, except in calculating the percentage for all selling security holders as a group.

(3)

Information about other selling security holders will be set forth in prospectus supplements, if required.

(4)

Assumes that the holders of notes, or any future transferees, pledgees, donees or successors of or from any such holder of notes, do not beneficially own any common stock other than the common stock issuable upon conversion of the notes at the initial conversion rate.

(5)

Column does not add up correctly because the fractional shares to which the holders would be entitled have been disregarded.

(6)

As of May 14, 2003, this entity also holds 11,463 shares of our common stock.

To the extent that any of the selling security holders identified above are broker-dealers, they are deemed to be, under interpretations of the SEC, “underwriters” within the meaning of the Securities Act.

With respect to selling security holders that are affiliates of broker-dealers, we believe that such entities acquired their notes or underlying common stock in the ordinary course of business and, at the time of the purchase of the notes or the underlying common stock, such selling security holders had no agreements or understandings, directly or indirectly, with any person to distribute the notes or underlying common stock. To the extent that we become aware that such entities did not acquire their notes or underlying common stock in the ordinary course of business or did have such an agreement or understanding, we will file a post-effective amendment to the registration statement of which this prospectus forms a part to designate such affiliate as an “underwriter” within the meaning of the Securities Act.

We prepared this table based on the information supplied to us as of June 6, 2003 by the selling security holders named in the table. The selling security holders listed in the above table may have sold or transferred, in transactions exempt from the registration requirements of the Securities Act, some or all of their notes since the date on which the information is presented in the above table. Information about the selling security holders may change over time. Any changed information supplied to us will be set forth in future prospectus supplements.

None of the selling security holders listed above has, or within the past three years has had, any position, office or other material relationship with us or any of our predecessors or affiliates.

Because the selling security holders may offer all or some of their notes or the underlying common stock from time to time, we cannot estimate the amount of the notes or the underlying common stock that will be held by the selling security holders upon the termination of any particular offering. See “Plan of Distribution.”

PLAN OF DISTRIBUTION

We will not receive any of the proceeds of the sale of the notes and the underlying common stock offered by this prospectus. The notes and the underlying common stock may be sold from time to time to purchasers:

•

directly by the selling security holders; or

•

through underwriters, broker-dealers or agents who may receive compensation in the form of discounts, concessions or commissions from the selling security holders or the purchasers of the notes and the underlying common stock.

The selling security holders and any such broker-dealers or agents who participate in the distribution of the notes and the underlying common stock may be deemed to be underwriters. As a result, any profits on the sale of the underlying common stock by selling security holders and any discounts, commissions or concessions received by any such broker-dealers or agents may be deemed to be underwriting discounts and commissions under the Securities Act. If the selling security holders were deemed to be underwriters, the selling security holders may be subject to statutory liabilities including, but not limited to, those of Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.

If the notes and the underlying common stock are sold through underwriters or broker-dealers, the selling security holders will be responsible for underwriting discounts or commissions or agent’s commissions. The notes and the underlying common stock may be sold in one or more transactions at:

•

fixed prices;

•

prevailing market prices at the time of sale;

•

varying prices determined at the time of sale; or

•

negotiated prices.

These sales may be effected in transactions:

•

on any national securities exchange or quotation service on which the notes or underlying common stock may be listed or quoted at the time of the sale, including the Nasdaq National Market in the case of the common stock;

•

in the over-the-counter market;

•

in transactions otherwise than on such exchanges or services or in the over-the-counter market; or

•

through the writing of options.

These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the transaction.

In connection with the sales of the notes or the underlying common stock or otherwise, the selling security holders may enter into hedging transactions with broker-dealers. These broker-dealers may in turn engage in short sales of the notes or the underlying common stock in the course of hedging their positions. The selling security holders may also sell the notes or the underlying common stock short and deliver notes or the underlying common stock to close out short positions, or loan or pledge notes or the underlying common stock to broker-dealers or financial institutions that, in turn, may sell the notes or the underlying common stock.

To our knowledge, there are currently no plans, arrangements or understandings between any selling security holders and any underwriter, broker-dealer or agent regarding the sale of the notes or the underlying common stock by the selling security holders. Selling security holders may decide not to sell all or a portion of the notes or the underlying common stock offered by them pursuant to this prospectus or may decide not to sell notes or the underlying common stock under this prospectus. In addition, any selling security holder may transfer, devise or give the notes or the underlying common stock by other means not described in this prospectus. Any notes or underlying common stock covered by this prospectus that qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to this prospectus.

Our common stock is quoted on the Nasdaq National Market under the symbol “PLAB.” We do not intend to apply for listing of the notes on any securities exchange. Accordingly, no assurance can be given as to the development of liquidity or any trading market for the notes.

The selling security holders and any other persons participating in the distribution of the notes or underlying common stock will be subject to the Exchange Act. The Exchange Act rules include, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the notes and the underlying common stock by the selling security holders and any such other person. In addition, Regulation M of the Exchange Act may restrict the ability of any person engaged in the distribution of the notes and the underlying common stock to engage in market making activities with respect to the particular notes and underlying common stock being distributed for a period of up to five business days prior to the commencement of such distribution. This may affect the marketability of the notes and the underlying common stock and the ability to engage in market making activities with respect to the notes and the underlying common stock.

Under the registration rights agreement that has been filed as an exhibit to the registration statement of which this prospectus is a part, we and the selling security holders will each indemnify the other against certain liabilities, including certain liabilities under the Securities Act, or will be entitled to contribution in connection with these liabilities.

We have agreed to pay substantially all of the expenses incidental to the registration, offering and sale of the notes and the underlying common stock to the public other than commissions, fees and discounts of underwriters, brokers, dealers and agents.

LEGAL MATTERS

The validity of the notes has been passed upon for us by Brenner, Saltzman and Wallman LLP, New Haven, Connecticut and by Shearman & Sterling, New York, New York. The validity of the shares of common stock issuable upon conversion of the notes has been passed upon for us by Brenner, Saltzman and Wallman LLP, New Haven, Connecticut.

EXPERTS

The consolidated financial statements incorporated in this prospectus by reference from the Company’s Annual Report on Form 10-K as of November 3, 2002 and October 31, 2001 and for each of the three fiscal years ended November 3, 2002, October 31, 2001 and October 31, 2000 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which contains an explanatory paragraph that describes the change in method of accounting for goodwill and other intangible assets to conform to Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets,” as discussed in Note 5 to the consolidated financial statements, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

Photronics, Inc.

2¹/4% Convertible Notes due 2008

and

Common Stock Issuable Upon Conversion of the Notes

Prospectus

, 2003

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, payable by us in connection with the distribution of the securities being registered. All of the amounts shown are estimates, except the Securities and Exchange Commission registration fee.

Securities and Exchange Commission registration fee		$12,135
Printing and engraving fees		*
Accountants’ fees and expenses		*
Legal fees and expenses		*
Trustee fees and expenses		*
Miscellaneous expenses		*

Total		*

To be completed by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under applicable Connecticut law, the Company shall provide for indemnification of its directors, officers, employees and agents. Applicable Connecticut law requires the Company to indemnify a director against judgments and other expenses of litigation when he is sued by reason of his being a director in any proceeding brought, other than on behalf of the corporation, if a director is successful on the merits in defense, or acted in good faith and in a manner reasonably believed to be in the best interests of the corporation, and in all other cases that his conduct was at least not opposed to the best interests of the corporation, or in a criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. In a proceeding brought on behalf of a corporation (a derivative action), a director is entitled to be indemnified by the corporation for reasonable expenses of litigation, if the director is finally adjudged not to have breached his duty to the corporation. In addition, a director is entitled to indemnification for both derivative and non-derivative actions, if a court determines, upon application, that the director is fairly and reasonably entitled to be indemnified. Finally, the Company maintains director and officer liability insurance which provides insurance for the Company’s directors and officers in connection with claims brought against them in their capacity as such with the Company.

Article Ninth of the Company’s Certificate of Incorporation limits directors’ monetary liability for actions or omissions made in good faith, which are later determined to be a breach of their duty as directors of the Company. Article Ninth does not eliminate or limit a director’s liability for breaches of fiduciary duty for actions or omissions which (i) involved a knowing and culpable violation of law; (ii) enabled a director or an associate (as defined in the Act) to receive an improper personal economic gain; (iii) showed a lack of good faith and conscious disregard for his duty as a director under circumstances where the director was aware that his actions created an unjustifiable risk of serious injury to the Company; (iv) constituted a sustained and unexcused pattern of inattention that amounted to an abdication of his duty; or (v) involved the improper distribution of Company assets to its shareholders or an improper loan to an officer, director or 5% shareholder. Article Ninth also does not preclude suits for equitable relief, such as an injunction, nor would it shield directors from liability for violations of the federal securities laws. Moreover, Article Ninth does not limit the liability of directors for any act or omission that occurred prior to the date the Article became effective and does not limit the potential liability of officer-directors in their capacity as officers.

II-1

ITEM 16. EXHIBIT

Exhibit
4.1		Indenture dated as of April 15, 2003 between Photronics, Inc. and The Bank of New York, Trustee
4.2		Registration Rights Agreement dated as of April 15, 2003 between Photronics, Inc., Morgan Stanley & Co. Incorporated, Merrill Lynch & Co. and J.P. Morgan Securities Inc.
4.3		Certificate of Incorporation of Photronics, Inc. dated February 24, 1969 (filed as an exhibit to the Company’s Registration Statement on Form S-1, File Number 33-11694, which was declared effective by the Commission on March 10, 1987, and incorporated herein by reference.)
4.5		Amendment to Certificate of Incorporation, dated March 16, 1990 (filed as an exhibit to the Company’s Registration Statement on Form S-2, File Number 33-34772 which was declared effective by the Commission on June 22, 1990, and incorporated herein by reference).
4.6		Amendment to Certificate of Incorporation, dated March 16, 1995 (filed as an exhibit to the Company’s Current Report on Form 8-K, dated March 24, 1995, and incorporated herein by reference).
4.7		Amendment to Certificate of Incorporation, dated November 13, 1997 (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended November 2, 1997, and incorporated herein by reference).
4.8		Amendment to Certificate of Incorporation, dated March 22, 2002 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2002, and incorporated herein by reference).
4.9		Amended By-laws of Photronics, Inc. (filed as an exhibit to the Company’s Registration Statement on Form S-1, File Number 33-11694, which was declared effective by the Commission on March 10, 1987, and incorporated herein by reference).
4.10		Form of 2¹/4% Convertible Subordinated Note due 2008 (contained in the Indenture filed as Exhibit 4.1 hereto).
4.11		Form of Common Stock Certificate (filed as an exhibit to the Company’s Registration Statement on Form S-1, File Number 33-1694, which was declared effective by the Commission on March 10, 1987, and incorporated herein by reference)
5.1		Opinion of Brenner, Saltzman and Wallman LLP
5.2		Opinion of Shearman & Sterling
8		Opinion of Shearman & Sterling as to certain United States federal income tax matters
12		Statement Regarding Computation of Ratio of Earnings to Fixed Charges
23.1		Consent of Deloitte & Touche LLP, Independent Auditors
23.2		Consent of Brenner, Saltzman and Wallman LLP (included in Exhibit 5.1)
23.3		Consent of Shearman & Sterling (included in Exhibit 5.2 and Exhibit 8.1)
25		Statement of Eligibility of Trustee on Form T-1

II-2

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement;

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment 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; and

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned registrant hereby undertakes that (i) for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon 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 Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective and (ii) for the purpose of determining any liability under the 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.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions set forth in Item 15, 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 Act 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 Act and will be governed by the final adjudication of such issue.

II-3

SIGNATURES

Pursuant to the requirements of the 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 S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Brookfield, State of Connecticut, on June 6, 2003.

PHOTRONICS, INC.

By:		/S/ SEAN T. SMITH
		Sean T. Smith Vice President and Chief Financial Officer

II-4

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date

/S/ DANIEL DEL ROSARIO Daniel Del Rosario	Chief Executive Officer and Director (Principal Executive Officer)	June 6, 2003
/S/ DANIEL DEL ROSARIO Daniel Del Rosario		June 6, 2003

/S/ SEAN T. SMITH Sean T. Smith	Vice President and Chief Financial Officer (Principal Financial Officer)	June 6, 2003

/S/ NICHOLAS N. COLONESE Nicholas N. Colonese	Vice President and Corporate Controller (Principal Accounting Officer)	June 6, 2003

/S/ CONSTANTINE S. MACRICOSTAS Constantine S. Macricostas	Chairman of the Board and Director	June 6, 2003
	Chairman of the Board and Director	June 6, 2003

/S/ WALTER M. FIEDEROWICZ Walter M. Fiederowicz	Director	June 6, 2003
/S/ WALTER M. FIEDEROWICZ Walter M. Fiederowicz	Director	June 6, 2003

/S/ GEORGE MACRICOSTAS George Macricostas	Director	June 6, 2003

/S/ MICHAEL J. YOMAZZO Michael J. Yomazzo	Director	June 6, 2003
/S/ MICHAEL J. YOMAZZO Michael J. Yomazzo	Director	June 6, 2003

/S/ WILLEM D. MARIS Willem D. Maris	Director	June 6, 2003

II-5

EXHIBIT INDEX

Exhibit
4.1		Indenture dated as of April 15, 2003 between Photronics, Inc. and The Bank of New York, Trustee
4.2		Registration Rights Agreement dated as of April 15, 2003 between Photronics, Inc., Morgan Stanley & Co. Incorporated, Merrill Lynch & Co. and J.P. Morgan Securities Inc.
4.3		Certificate of Incorporation of Photronics, Inc. dated February 24, 1969 (filed as an exhibit to the Company’s Registration Statement on Form S-1, File Number 33-11694, which was declared effective by the Commission on March 10, 1987, and incorporated herein by reference.)
4.5		Amendment to Certificate of Incorporation, dated March 16, 1990 (filed as an exhibit to the Company’s Registration Statement on Form S-2, File Number 33-34772 which was declared effective by the Commission on June 22, 1990, and incorporated herein by reference).
4.6		Amendment to Certificate of Incorporation, dated March 16, 1995 (filed as an exhibit to the Company’s Current Report on Form 8-K, dated March 24, 1995, and incorporated herein by reference).
4.7		Amendment to Certificate of Incorporation, dated November 13, 1997 (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended November 2, 1997, and incorporated herein by reference).
4.8		Amendment to Certificate of Incorporation, dated March 22, 2002 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2002, and incorporated herein by reference).
4.9		Amended By-laws of Photronics, Inc. (filed as an exhibit to the Company’s Registration Statement on Form S-1, File Number 33-11694, which was declared effective by the Commission on March 10, 1987, and incorporated herein by reference).
4.10		Form of 2¹/4% Convertible Subordinated Note due 2008 (contained in the Indenture filed as Exhibit 4.1 hereto).
4.11		Form of Common Stock Certificate (filed as an exhibit to the Company’s Registration Statement on Form S-1, File Number 33-1694, which was declared effective by the Commission on March 10, 1987, and incorporated herein by reference)
5.1		Opinion of Brenner, Saltzman and Wallman LLP
5.2		Opinion of Shearman & Sterling
8		Opinion of Shearman & Sterling as to certain United States federal income tax matters
12		Statement Regarding Computation of Ratio of Earnings to Fixed Charges
23.1		Consent of Deloitte & Touche LLP, Independent Auditors
23.2		Consent of Brenner, Saltzman and Wallman LLP (included in Exhibit 5.1)
23.3		Consent of Shearman & Sterling (included in Exhibit 5.2 and Exhibit 8.1)
25		Statement of Eligibility of Trustee on Form T-1



                                                                     EXHIBIT 4.1

================================================================================

                                PHOTRONICS, INC.

                              THE BANK OF NEW YORK
                                   as Trustee

                                   ----------

                                    INDENTURE

                                   Dated as of

                                 April 15, 2003

                                   ----------

                 2 1/4% Convertible Subordinated Notes due 2008

================================================================================



                                       TABLE OF CONTENTS



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ARTICLE 1
     DEFINITIONS
     SECTION 1.01.  Definitions...................................................................   2

ARTICLE 2
     ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES
     SECTION 2.01.  Designation, Amount and Issue of Notes........................................   8
     SECTION 2.02.  Form of Notes.................................................................   8
     SECTION 2.03.  Date and Denomination of Notes, Payments of Interest..........................   9
     SECTION 2.04.  Execution of Notes............................................................  11
     SECTION 2.05.  Exchange and Registration of Transfer of Notes; Restrictions on
           Transfer, Depositary...................................................................  12
     SECTION 2.06.  Mutilated, Destroyed, Lost or Stolen Notes....................................  18
     SECTION 2.07.  Temporary Notes...............................................................  19
     SECTION 2.08.  Cancellation of Notes Paid, Etc...............................................  20
     SECTION 2.09.  CUSIP Numbers.................................................................  20

ARTICLE 3
     REDEMPTION OF NOTES
     SECTION 3.01.  No Redemption of Notes at Option of the Company...............................  21
     SECTION 3.02.  Redemption at Option of Holders...............................................  21

ARTICLE 4
     SUBORDINATION OF NOTES
     SECTION 4.01.  Notes Subordinate to Senior Indebtedness......................................  23
     SECTION 4.02.  Payment over of Proceeds upon Dissolution, Etc................................  24
     SECTION 4.03.  Prior Payment to Senior Indebtedness upon Acceleration of Notes ..............  25
     SECTION 4.04.  No Payment When Senior Indebtedness in Default................................  25
     SECTION 4.05.  Payment Permitted If No Default...............................................  26
     SECTION 4.06.  Subrogation to Rights of Holders of Senior Indebtedness.......................  26
     SECTION 4.07.  Provisions Solely to Define Relative Rights...................................  26






                                                                                                    PAGE
                                                                                                    ----
                                                                                                 
     SECTION 4.08.  Trustee to Effectuate Subordination...........................................  27
     SECTION 4.09.  No Waiver of Subordination Provisions.........................................  27
     SECTION 4.10.  Notice to Trustee.............................................................  27
     SECTION 4.11.  Reliance on Judicial Order or Certificate of Liquidating Agent................  28
     SECTION 4.12.  Trustee Not Fiduciary for Holders of Senior Indebtedness......................  29
     SECTION 4.13.  Rights of Trustee as Holder of Senior Indebtedness; Preservation
           of Trustee's Rights....................................................................  29
     SECTION 4.14.  Article Applicable to Paying Agents...........................................  29
     SECTION 4.15.  Certain Conversions Deemed Payment............................................  29
     SECTION 4.16.  6.00% Convertible Notes due 2004 and 4 3/4% Convertible Notes
      due 2006....................................................................................  30

ARTICLE 5
     PARTICULAR COVENANTS OF THE COMPANY
     SECTION 5.01.  Payment of Principal, Premium and Interest....................................  30
     SECTION 5.02.  Maintenance of Office or Agency...............................................  30
     SECTION 5.03.  Appointments to Fill Vacancies in Trustee's Office............................  31
     SECTION 5.04.  Provisions as to Paying Agent.................................................  31
     SECTION 5.05.  Existence.....................................................................  32
     SECTION 5.06.  Maintenance of Properties.....................................................  33
     SECTION 5.07.  Payment of Taxes and Other Claims.............................................  33
     SECTION 5.08.  Rule 144A Information Requirement.............................................  33
     SECTION 5.09.  Stay, Extension and Usury Laws................................................  34
     SECTION 5.10.  Compliance Certificate........................................................  34
     SECTION 5.11.  Liquidated Damages Notice.....................................................  35

ARTICLE 6
     NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
     SECTION 6.01.  Noteholders' Lists............................................................  35
     SECTION 6.02.  Preservation and Disclosure of Lists..........................................  35
     SECTION 6.03.  Reports by Trustee............................................................  36
     SECTION 6.04.  Reports by Company............................................................  36

ARTICLE 7
     REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT
     SECTION 7.01.  Events of Default.............................................................  36
     SECTION 7.02.  Payments of Notes on Default; Suit Therefor...................................  39
     SECTION 7.03.  Application of Monies Collected by Trustee....................................  41
     SECTION 7.04.  Proceedings by Noteholder.....................................................  42
     SECTION 7.05.  Proceedings by Trustee........................................................  43


                                       ii





                                                                                                    PAGE
                                                                                                    -----
                                                                                                 
     SECTION 7.06.  Remedies Cumulative and Continuing............................................  43
     SECTION 7.07.  Direction of Proceedings and Waiver of Defaults by Majority of Noteholders....  43
     SECTION 7.08.  Notice of Defaults............................................................  44
     SECTION 7.09.  Undertaking to Pay Costs......................................................  44

ARTICLE 8
     THE TRUSTEE
     SECTION 8.01.  Duties and Responsibilities of Trustee........................................  45
     SECTION 8.02.  Reliance on Documents, Opinions, Etc..........................................  46
     SECTION 8.03.  No Responsibility for Recitals, Etc...........................................  48
     SECTION 8.04.  Trustee, Paying Agents, Conversion Agents or Registrar May Own Notes..........  48
     SECTION 8.05.  Monies to Be Held in Trust....................................................  48
     SECTION 8.06.  Compensation and Expenses of Trustee..........................................  48
     SECTION 8.07.  Officers' Certificate as Evidence.............................................  49
     SECTION 8.08.  Conflicting Interests of Trustee..............................................  49
     SECTION 8.09.  Eligibility of Trustee........................................................  49
     SECTION 8.10.  Resignation or Removal of Trustee.............................................  49
     SECTION 8.11.  Acceptance by Successor Trustee...............................................  51
     SECTION 8.12.  Succession by Merger, Etc.....................................................  52
     SECTION 8.13.  Preferential Collection of Claims.............................................  52
     SECTION 8.14.  Trustee's Application for Instructions from the Company.......................  52

ARTICLE 9
     THE NOTEHOLDERS
     SECTION 9.01.  Action by Noteholders.........................................................  53
     SECTION 9.02.  Proof of Execution by Noteholders.............................................  53
     SECTION 9.03.  Who Are Deemed Absolute Owners................................................  54
     SECTION 9.04.  Company-owned Notes Disregarded...............................................  54
     SECTION 9.05.  Revocation of Consents, Future Holders Bound..................................  54

ARTICLE 10
     MEETINGS OF NOTEHOLDERS
     SECTION 10.01.  Purpose of Meetings..........................................................  55
     SECTION 10.02.  Call of Meetings by Trustee..................................................  55
     SECTION 10.03.  Call of Meetings by Company or Noteholders...................................  56
     SECTION 10.04.  Qualifications for Voting....................................................  56
     SECTION 10.05.  Regulations..................................................................  56
     SECTION 10.06.  Voting.......................................................................  57
     SECTION 10.07.  No Delay of Rights by Meeting................................................  57


                                       iii





                                                                                                    PAGE
                                                                                                    ----
                                                                                                 
ARTICLE 11
     SUPPLEMENTAL INDENTURES
     SECTION 11.01.  Supplemental Indentures Without Consent of Noteholders.......................  58
     SECTION 11.02.  Supplemental Indenture with Consent of Noteholders...........................  59
     SECTION 11.03.  Effect of Supplemental Indenture.............................................  60
     SECTION 11.04.  Notation on Notes............................................................  61
     SECTION 11.05.  Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee..  61

ARTICLE 12
     CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
     SECTION 12.01.  Company May Consolidate on Certain Terms.....................................  61
     SECTION 12.02.  Successor Corporation to Be Substituted......................................  62
     SECTION 12.03.  Opinion of Counsel to Be Given Trustee.......................................  62

ARTICLE 13
     SATISFACTION AND DISCHARGE OF INDENTURE
     SECTION 13.01.  Discharge of Indenture.......................................................  63
     SECTION 13.02.  Deposited Monies to Be Held in Trust by Trustee..............................  63
     SECTION 13.03.  Paying Agent to Repay Monies Held............................................  64
     SECTION 13.04.  Return of Unclaimed Monies...................................................  64
     SECTION 13.05.  Reinstatement................................................................  64

ARTICLE 14
     IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
     SECTION 14.01.  Indenture and Notes Solely Corporate Obligations.............................  64

ARTICLE 15
     CONVERSION OF NOTES
     SECTION 15.01.  Right to Convert.............................................................  65
     SECTION 15.02.  Exercise of Conversion Privilege; Issuance of Common Stock on
           Conversion, No Adjustment for Interest or Dividends.................................... 65
     SECTION 15.03.  Cash Payments in Lieu of Fractional Shares...................................  67
     SECTION 15.04.  Conversion Rate..............................................................  67
     SECTION 15.05.  Adjustment of Conversion Rate................................................  67
     SECTION 15.06.  Effect of Reclassification, Consolidation, Merger or Sale....................  79
     SECTION 15.07.  Taxes on Shares Issued.......................................................  80
     SECTION 15.08.  Reservation of Shares, Shares to Be Fully Paid; Compliance with
           Governmental Requirements; Listing of Common Stock.....................................  80
     SECTION 15.09.  Responsibility of Trustee....................................................  81


                                       iv





                                                                                                    PAGE
                                                                                                   -----
                                                                                                
     SECTION 15.10.  Notice to Holders Prior to Certain Actions...................................  82
     SECTION 15.11.  Rights Issued in Respect of Common Stock Issued upon Conversion..............  82

ARTICLE 16
     MISCELLANEOUS PROVISIONS
     SECTION 16.01.  Provisions Binding on Company's Successors...................................  83
     SECTION 16.02.  Official Acts by Successor Corporation.......................................  83
     SECTION 16.03.  Addresses for Notices, Etc...................................................  83
     SECTION 16.04.  Governing Law................................................................  83
     SECTION 16.05.  Evidence of Compliance with Conditions Precedent, Certificates to Trustee....  84
     SECTION 16.06.  Legal Holidays...............................................................  84
     SECTION 16.07.  Trust Indenture Act..........................................................  84
     SECTION 16.08.  No Security Interest Created.................................................  85
     SECTION 16.09.  Benefits of Indenture........................................................  85
     SECTION 16.10.  Table of Contents, Headings, Etc.............................................  85
     SECTION 16.11.  Authenticating Agent.........................................................  85
     SECTION 16.12.  Execution in Counterparts....................................................  86
     SECTION 16.13.  Severability.................................................................  86

EXHIBIT A: Form of Note........................................................................... A-1


                                        v



                                    INDENTURE

        INDENTURE dated as of April 15, 2003 between Photronics, Inc., a
Connecticut corporation (hereinafter called the "Company"), having its principal
office at 15 Secor Road, Brookfield, CT 06804, and The Bank of New York, a New
York banking corporation, as trustee hereunder (hereinafter called the
"Trustee"), having its principal corporate trust office at 101 Barclay Street,
Floor 8W, New York, NY 10286.

                                   WITNESSETH:

        WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 2 1/4% Convertible Subordinated Notes due 2008
(hereinafter called the "Notes"), in an aggregate principal amount not to exceed
$150,000,000 and, to provide the terms and conditions upon which the Notes are
to be authenticated, issued and delivered, the Company has duly authorized the
execution and delivery of this Indenture; and

        WHEREAS, the Notes, the certificate of authentication to be borne by the
Notes, a form of assignment, a form of option to elect repayment upon a
Fundamental Change, and a form of conversion notice to be borne by the Notes are
to be substantially in the forms hereinafter provided for; and

        WHEREAS, all acts and things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute this Indenture a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized,

        NOW, THEREFORE, THIS INDENTURE WITNESSETH:

        That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated, issued and delivered, and in consideration of
the premises and of the purchase and acceptance of the Notes by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:



                                    ARTICLE 1
                                   DEFINITIONS

        SECTION 1.01. Definitions. The terms defined in this Section 1.01
(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.01 All
other terms used in this Indenture that are defined in the Trust Indenture Act
or which are by reference therein defined in the Securities Act (except as
herein otherwise expressly provided or unless the context otherwise requires)
shall have the meanings assigned to such terms in said Trust Indenture Act and
in said Securities Act as in force at the date of the execution of this
Indenture. The words "herein", "hereof", "hereunder", and words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other Subdivision. The terms defined in this Article include the
plural as well as the singular.

        "Accepted Purchased Shares" has the meaning specified in Section
15.05(g).

        "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.

        "Board of Directors" means the Board of Directors of the Company or a
committee of such Board duly authorized to act for it hereunder.

        "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which the banking institutions in The City of New
York or the city in which the Corporate Trust Office is located are authorized
or obligated by law or executive order to close or be closed.

        "Closing Price" has the meaning specified in Section 15.05(h)(1).

        "Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this Indenture such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.

                                        2



        "Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the provisions
of Section 15.06, however, shares issuable on conversion of Notes shall include
only shares of the class designated as common stock of the Company at the date
of this Indenture (namely, the Common Stock, $.01 par value) or shares of any
class or classes resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which are not subject to redemption by the
Company; provided that if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable on conversion
shall be substantially in the proportion which the total number of shares of
such class resulting from all such reclassifications bears to the total number
of shares of all such classes resulting from all such reclassifications.

        "Company" means the corporation named as the "Company" in the first
paragraph of this Indenture, and, subject to the provisions of Article 12, shall
include its successors and assigns.

        "Company Notice" has the meaning specified in Section 3.02(b).

        "Conversion Price" as of any day will equal $1,000 divided by the
Conversion Rate as of such date.

        "Conversion Rate" has the meaning specified in Section 15.04.

        "Corporate Trust Office" or other similar term, means the designated
office of the Trustee at which at any particular time its corporate trust
business as it relates to this Indenture shall be administered, which office is,
at the date as of which this Indenture is dated, located at 101 Barclay Street,
Floor 8W, New York, NY 10286.

        "Current Market Price" has the meaning specified in Section 15.05(h)(2).

        "Custodian" means The Bank of New York, as custodian with respect to the
Notes in global form, or any successor entity thereto.

        "Default" means any event that is, or after notice or passage of time,
or both, would be, an Event of Default.

                                        3



        "Defaulted Interest" has the meaning specified in Section 2.03.

        "Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.05(d) as the
Depositary with respect to such Notes, until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depositary" shall mean or include such successor.

        "Event of Default" means any event specified in Section 7.01(a), (b),
(c), (d), (e), (f) or (g).

        "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, as in effect from time to
time.

        "Expiration Time" has the meaning specified in Section 15.05(f).

        "Fair Market Value" has the meaning specified in Section 15.05(h).

        "Fundamental Change" means the occurrence of any transaction or event
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise) in connection with which all or substantially all of the Common Stock
shall be exchanged for, converted into, acquired for or constitute solely the
right to receive, consideration which is not all or substantially all common
stock that is (or, upon consummation of or immediately following such
transaction or event, which will be) listed on a United States national
securities exchange or approved (or, upon consummation of or immediately
following such transaction or event, which will be approved) for quotation on
the Nasdaq National Market or any similar United States system of automated
dissemination of quotations of securities prices.

        "Global Note" has the meaning set forth in Section 2.05(b).

        "Indenture" means this instrument as originally executed or, if amended
or supplemented as herein provided, as so amended or supplemented.

        "Initial Purchasers" means Morgan Stanley & Co. Incorporated, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc.

        "interest" means, when used with reference to the Notes, any interest
payable under the terms of the Notes and Liquidated Damages, if any, payable
under the terms of the Registration Rights Agreement.

                                        4



        "Liquidated Damages" has the meaning specified for "Liquidated Damages
Amount" in Section 2(e) of the Registration Rights Agreement.

        "Note" or "Notes" means any Note or Notes, as the case may be,
authenticated and delivered under this Indenture, including a Global Note.

        "Note register" has the meaning specified in Section 2.05(a).

        "Note registrar" has the meaning specified in Section 2.05(a).

        "Noteholder" or "holder" as applied to any Note, or other similar terms
(but excluding the term "beneficial holder"), means any Person in whose name at
the time a particular Note is registered on the Note registrar's books.

        "Offer Expiration Time" has the meaning specified in Section 15.05(g).

        "Officers' Certificate", when used with respect to the Company, means a
certificate signed by both (a) the Chairman of the Board, the Chief Executive
Officer, the President or any Vice President (whether or not designated by a
number or numbers or word or words added before or after the title "Vice
President") and (b) the Treasurer or any Assistant Treasurer, the Controller or
any Assistant Controller, or the Secretary or any Assistant Secretary of the
Company.

        "Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, or other counsel
reasonably acceptable to the Trustee.

        "outstanding", when used with reference to Notes and subject to the
provisions of Section 9.04, means, as of any particular time, all Notes
authenticated and delivered by the Trustee under this Indenture, except:

        (a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;

        (b) Notes, or portions thereof, (i) for the redemption of which monies
in the necessary amount shall have been deposited in trust with the Trustee or
with any paying agent (other than the Company) or (ii) which shall have been
otherwise defeased in accordance with Article 13;

        (c) Notes in lieu of which, or in substitution for which, other Notes
shall have been authenticated and delivered pursuant to the terms of Section
2.06;

        (d) Notes paid pursuant to Section 2.06; and

                                        5



        (e) Notes converted into Common Stock pursuant to Article 15 and Notes
deemed not outstanding pursuant to Article 3.

        "Person" means a corporation, an association, a partnership, a limited
liability company, an individual, a joint venture, a joint stock company, a
trust, an unincorporated organization or a government or an agency or a
political subdivision thereof.

        "Portal Market" means The Portal Market operated by the National
Association of Securities Dealers, Inc. or any successor thereto.

        "Predecessor Note" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note, and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.06 in lieu of a lost, destroyed or
stolen Note shall be deemed to evidence the same debt as the lost, destroyed or
stolen Note that it replaces.

        "premium" means any premium payable under the Notes, if any.

        "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

        "Record Date" has the meaning specified in Section 15.05(h).

        "Registration Rights Agreement" means the Registration Rights Agreement,
dated as of April 15, 2003, among the Company and the Initial Purchasers, as
amended from time to time in accordance with its terms.

        "Repurchase Date" has the meaning specified in Section 3.02.

        "Responsible Officer", when used with respect to the Trustee, means an
officer of the Trustee in the Corporate Trust Office assigned and duly
authorized by the Trustee to administer this Indenture.

        "Restricted Securities" has the meaning specified in Section 2.05(d).

        "Rule 144A" means Rule 144A as promulgated under the Securities Act.

        "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time.

                                        6



        "Senior Indebtedness" means the principal of (and premium, if any) and
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) on, and all fees and
other amounts payable in connection with, the following, whether absolute or
contingent, secured or unsecured, due or to become due, outstanding on the date
of this Indenture or thereafter created, incurred or assumed: (a) indebtedness
of the Company to banks, insurance companies and other financial institutions
evidenced by credit or loan agreements, notes or other written obligations, (b)
all other indebtedness of the Company (including indebtedness of others
guaranteed by the Company) other than the Notes, which is (i) for money borrowed
or (ii) evidenced by a note, security, debenture, bond or similar instrument,
(c) obligations of the Company as lessee under leases required to be capitalized
on the balance sheet of the lessee under generally accepted accounting
principles, (d) obligations of the Company under interest rate and currency
swaps, caps, floors, collars or similar agreements or arrangements intended to
protect the Company against fluctuations in interest or currency exchange rates,
(e) all obligations of the Company issued or assumed as the deferred purchase
price of property, (f) all obligations of the Company for the reimbursement of
letters of credit to the extent such obligations are Senior Indebtedness under
clauses (a) through (c) above, and (g) renewals, extensions, amendments,
modifications, restatements and refundings of, or any indebtedness or obligation
issued in exchange for, any such indebtedness or obligation described in clauses
(a) through (f) of this paragraph; provided that Senior Indebtedness shall not
include (A) any such indebtedness or obligation if the terms of such
indebtedness or obligation (or the terms of the instrument under which, or
pursuant to which, it is issued) expressly provide that such indebtedness or
obligation is not superior in right of payment to the Notes, or expressly
provide that such indebtedness or obligation is pari passu with or junior to the
Notes, (B) the Company's 6.00% Convertible Subordinated Notes due June 1, 2004
or (C) the Company's 4 3/4% Convertible Subordinated Notes due 2006.

        "Significant Subsidiary" means, as of any date of determination, a
Subsidiary of the Company that would constitute a "significant subsidiary" as
such term is defined under Rule 1-02 of Regulation S-X of the Commission as in
effect on the date of this Indenture.

        "Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or managing general partner of which is such Person or a
subsidiary of such Person

                                        7



or (b) the only general partners of which are such Person or of one or more
subsidiaries of such Person (or any combination thereof).

        "Trading Day" has the meaning specified in Section 15.05(h)(5).

        "Trigger Event" has the meaning specified in Section 15.05(d).

        "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
as it was in force at the date of this Indenture, except as provided in Sections
11.03 and 15.06; provided that, in the event the Trust Indenture Act of 1939 is
amended after the date hereof, the term "Trust Indenture Act" shall mean, to the
extent required by such amendment, the Trust Indenture Act of 1939 as so
amended.

        "Trustee" means The Bank of New York and its successors and any
corporation resulting from or surviving any consolidation or merger to which it
or its successors may be a party and any successor trustee at the time serving
as successor trustee hereunder.

        The definitions of certain other terms are as specified in Sections 2.05
and 3.02 and Article 15.

                                    ARTICLE 2
        ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

        SECTION 2.01. Designation, Amount and Issue of Notes. The Notes shall be
designated as "2 1/4% Convertible Subordinated Notes due 2008". Notes not to
exceed the aggregate principal amount of $150,000,000 (except pursuant to
Sections 2.05, 2.06, 3.02 and 15.02 hereof) upon the execution of this
Indenture, or from time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes to or upon the written order of the Company,
signed by (a) its Chairman of the Board, Chief Executive Officer, President or
any Vice President (whether or not designated by a number or numbers or word or
words added before or after the title "Vice President") and (b) its Treasurer or
any Assistant Treasurer, its Controller or any Assistant Controller or its
Secretary or any Assistant Secretary, without any further action by the Company
hereunder.

        SECTION 2.02. Form of Notes. The Notes and the Trustee's certificate of
authentication to be borne by such Notes shall be substantially in the form set
forth in Exhibit A, which is incorporated in and made a part of this Indenture.

                                        8



        Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed, or to conform to usage.

        Any Global Note shall represent such of the outstanding Notes as shall
be specified therein and shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be increased or reduced to reflect transfers or exchanges permitted hereby. Any
endorsement of a Global Note to reflect the amount of any increase or decrease
in the amount of outstanding Notes represented thereby shall be made by the
Trustee or the Custodian, at the direction of the Trustee, in such manner and
upon instructions given by the holder of such Notes in accordance with this
Indenture. Payment of principal of and interest and premium, if any, on any
Global Note shall be made to the holder of such Note.

        The terms and provisions contained in the form of Note attached as
Exhibit A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.

        SECTION 2.03. Date and Denomination of Notes, Payments of Interest. The
Notes shall be issuable in registered form without coupons in denominations of
$1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of its authentication and shall bear interest from the applicable
date in each case as specified on the face of the form of Note attached as
Exhibit A hereto. Interest on the Notes shall be computed on the basis of a
360-day year comprised of twelve (12) 30-day months.

        The Person in whose name any Note (or its Predecessor Note) is
registered on the Note register at the close of business on any record date with
respect to any interest payment date shall be entitled to receive the interest
payable on such interest payment date, except that the interest payable upon
redemption will be payable to the Person to whom principal is payable pursuant
to such redemption (unless the date of redemption is an interest payment date,
in which case the semi- annual payment of interest becoming due on such date
shall be payable to the holders of such Notes registered as such on the relevant
record date). Interest shall be payable at the office of the Company maintained
by the Company for

                                        9



such purposes in the Borough of Manhattan, City of New York, which shall
initially be an office or agency of the Trustee and may, as the Company shall
specify to the paying agent in writing by each record date, be paid either (i)
by check mailed to the address of the Person entitled thereto as it appears in
the Note register (provided that any holder of Notes with an aggregate principal
amount in excess of $2,000,000 shall, at the written election of such holder, be
paid by wire transfer in immediately available funds) or (ii) by transfer to an
account maintained by such Person located in the United States; provided that
payments to the Depositary will be made by wire transfer of immediately
available funds to the account of the Depositary or its nominee. The term
"record date" with respect to any interest payment date shall mean the April 1
or October 1 preceding the relevant April 15 or October 15, respectively.

        Any interest on any Note which is payable, but is not punctually paid or
duly provided for, on any April 15 or October 15 (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Noteholder on the relevant
record date by virtue of his having been such Noteholder, and such Defaulted
Interest shall be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:

        (1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Notes (or their respective Predecessor Notes) are
registered at the close of business on a special record date for the payment of
such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted Interest
to be paid on each Note and the date of the payment (which shall be not less
than twenty-five (25) days after the receipt by the Trustee of such notice,
unless the Trustee shall consent to an earlier date), and at the same time the
Company shall deposit with the Trustee an amount of money equal to the aggregate
amount to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Person entitled to such Defaulted Interest as in this clause
provided. Thereupon the Trustee shall fix a special record date for the payment
of such Defaulted Interest which shall be not more than fifteen (15) days and
not less than ten (10) days prior to the date of the proposed payment, and not
less than ten (10) days after the receipt by the Trustee of the notice of the
proposed payment, the Trustee shall promptly notify the Company of such special
record date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the special record
date therefor to be mailed, first-class postage prepaid, to each Noteholder at
his address as it appears in the Note register, not less than ten (10) days
prior to such special record date. Notice of the proposed payment of such
Defaulted Interest and the special record date therefor having been so mailed,
such Defaulted Interest shall be paid to the Persons in whose names the Notes
(or

                                       10



their respective Predecessor Notes) were registered at the close of business on
such special record date and shall no longer be payable pursuant to the
following clause (2) of this Section 2.03.

        (2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
or automated quotation system on which the Notes may be listed or designated for
issuance, and upon such notice as may be required by such exchange or automated
quotation system, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.

        SECTION 2.04. Execution of Notes. The Notes shall be signed in the name
and on behalf of the Company by the manual or facsimile signature of its
Chairman of the Board, Chief Executive Officer, President or any Vice President
(whether or not designated by a number or numbers or word or words added before
or after the title "Vice President") and attested by the manual or facsimile
signature of its Secretary or any of its Assistant Secretaries or its Treasurer
or any of its Assistant Treasurers (which may be printed, engraved or otherwise
reproduced thereon, by facsimile or otherwise). Only such Notes as shall bear
thereon a certificate of authentication substantially in the form set forth on
the form of Note attached as Exhibit A hereto, manually executed by the Trustee
(or an authenticating agent appointed by the Trustee as provided by Section
16.11), shall be entitled to the benefits of this Indenture or be valid or
obligatory for any purpose. Such certificate by the Trustee (or such an
authenticating agent) upon any Note executed by the Company shall be conclusive
evidence that the Note so authenticated has been duly authenticated and
delivered hereunder and that the holder is entitled to the benefits of this
Indenture.

        In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company, and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.

        SECTION 2.05. Exchange and Registration of Transfer of Notes;
Restrictions on Transfer, Depositary. (a) The Company shall cause to be kept at
the Corporate Trust Office a register (the register maintained in such office
and in any other office or agency of the Company designated pursuant to Section
5.02 being herein sometimes collectively referred to as the "Note register") in
which,

                                       11



subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Notes and of transfers of Notes. The Note
register shall be in written form or in any form capable of being converted into
written form within a reasonably prompt period of time. The Trustee is hereby
appointed "Note registrar" for the purpose of registering Notes and transfers of
Notes as herein provided. The Company may appoint one or more co-registrars in
accordance with Section 5.02.

        Upon surrender for registration of transfer of any Note to the Note
registrar or any co-registrar, and satisfaction of the requirements for such
transfer set forth in this Section 2.05, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount and bearing such restrictive legends as may be
required by this Indenture.

        Notes may be exchanged for other Notes of any authorized denominations
and of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency maintained by the Company pursuant to
Section 5.02. Whenever any Notes are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Notes which
the Noteholder making the exchange is entitled to receive bearing registration
numbers not contemporaneously outstanding.

        All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.

        All Notes presented or surrendered for registration of transfer or for
exchange, redemption or conversion shall (if so required by the Company or the
Note registrar) be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company, and the Notes shall
be duly executed by the Noteholder thereof or his attorney duly authorized in
writing.

        No service charge shall be made to any holder for any registration of
transfer or exchange of Notes, but the Company may require payment by the holder
of a sum sufficient to cover any tax, assessment or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of Notes.

        Neither the Company nor the Trustee nor any Note registrar shall be
required to exchange or register a transfer of (a) any Notes or portions thereof

                                       12



surrendered for conversion pursuant to Article 15 or (b) any Notes or portions
thereof tendered for redemption (and not withdrawn) pursuant to Section 3.02.

        (b) So long as the Notes are eligible for book-entry settlement with the
Depositary, or unless otherwise required by law, all of the Notes will be
represented by one or more Notes in global form registered in the name of the
Depositary or the nominee of the Depositary (the "Global Note"), except as
otherwise specified below. The transfer and exchange of beneficial interests in
any such Global Note shall be effected through the Depositary in accordance with
this Indenture and the procedures of the Depositary therefor. The Trustee shall
make appropriate endorsements to reflect increases or decreases in the principal
amounts of any such Global Note as set forth on the face of the Note ("Principal
Amount") to reflect any such transfers. Except as provided below, beneficial
owners of a Global Note shall not be entitled to have certificates registered in
their names, will not receive or be entitled to receive physical delivery of
certificates in definitive form and will not be considered holders of such
Global Note.

        (c) Any Global Note may be endorsed with or have incorporated in the
text thereof such legends or recitals or changes not inconsistent with the
provisions of this Indenture as may be required by the Custodian, the Depositary
or by the National Association of Securities Dealers, Inc. in order for the
Notes to be tradeable on The Portal Market or as may be required for the Notes
to be tradeable on any other market developed for trading of securities pursuant
to Rule 144A or required to comply with any applicable law or any regulation
thereunder or with the rules and regulations of any securities exchange or
automated quotation system upon which the Notes may be listed or traded or to
conform with any usage with respect thereto, or to indicate any special
limitations or restrictions to which any particular Notes are subject.

        (d) Every Note that bears or is required under this Section 2.05(d) to
bear the legend set forth in this Section (together with any Common Stock issued
upon conversion of the Notes and required to bear the legend set forth in
Section 2.05(e), collectively, the "Restricted Securities") shall be subject to
the restrictions on transfer set forth in this Section 2.05(d) (including those
set forth in the legend set forth below) unless such restrictions on transfer
shall be waived by written consent of the Company, and the holder of each such
Restricted Security, by such Noteholder's acceptance thereof, agrees to be bound
by all such restrictions on transfer. As used in Sections 2.05(d) and 2.05(e),
the term "transfer" encompasses any sale, pledge, loan, transfer or other
disposition whatsoever of any Restricted Security.

        Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), any
certificate evidencing such Note (and all securities issued in exchange therefor
or

                                       13



substitution thereof, other than Common Stock, if any, issued upon conversion
thereof, which shall bear the legend set forth in Section 2.05(e), if
applicable) shall bear a legend in substantially the following form, unless such
Note has been sold pursuant to a registration statement that has been declared
effective under the Securities Act (and which continues to be effective at the
time of such transfer), or unless otherwise agreed by the Company in writing,
with written notice thereof to the Trustee:

        THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
        OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
        LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH
        IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
        REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
        RULE 144A UNDER THE SECURITIES ACT); (2) AGREES THAT IT WILL NOT, PRIOR
        TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THIS NOTE
        UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION),
        RESELL OR OTHERWISE TRANSFER THIS NOTE OR THE COMMON STOCK ISSUABLE UPON
        CONVERSION OF THIS NOTE EXCEPT (A) TO PHOTRONICS, INC. OR ANY SUBSIDIARY
        THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
        144A UNDER THE SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM
        REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
        AVAILABLE) OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
        DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
        EFFECTIVE AT THE TIME OF SUCH TRANSFER); (3) PRIOR TO SUCH TRANSFER
        (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (2)(D) ABOVE), IT WILL FURNISH
        TO THE BANK OF NEW YORK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
        APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
        THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
        BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
        SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (4)
        AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS

                                       14



        TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS
        LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS NOTE
        PURSUANT TO CLAUSE (2)(D) ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER
        RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). THE
        INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
        REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
        RESTRICTION.

        Any Note (or security issued in exchange or substitution therefor) as to
which such restrictions on transfer shall have expired in accordance with their
terms or as to conditions for removal of the foregoing legend set forth therein
have been satisfied may, upon surrender of such Note for exchange to the Note
registrar in accordance with the provisions of this Section 2.05, be exchanged
for a new Note or Notes, of like tenor and aggregate principal amount, which
shall not bear the restrictive legend required by this Section 2.05(d).

        Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in this Section 2.05(d)), a Global Note may not be
transferred as a whole or in part except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.

        The Depositary shall be a clearing agency registered under the Exchange
Act. The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Notes in global form. Initially, the Global Note
shall be issued to the Depositary, registered in the name of Cede & Co., as the
nominee of the Depositary, and deposited with the Custodian for Cede & Co.

        If at any time the Depositary for a Global Note notifies the Company
that it is unwilling or unable to continue as Depositary for such Note, the
Company may appoint a successor Depositary with respect to such Note. If a
successor Depositary is not appointed by the Company within ninety (90) days
after the Company receives such notice, the Company will execute, and the
Trustee, upon receipt of an Officers' Certificate for the authentication and
delivery of Notes, will authenticate and deliver, Notes in certificated form, in
aggregate principal amount equal to the principal amount of such Global Note, in
exchange for such Global Note.

        Notes in certificated form issued in exchange for a Global Note pursuant
to this Section 2.05 shall be registered in such names and in such authorized

                                       15



denominations as the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. Upon execution
and authentication, the Trustee shall deliver such Notes in certificated form to
the Persons in whose names such Notes in certificated form are so registered.

        At such time as all interests in a Global Note have been redeemed,
converted, canceled or the Global Note is exchanged for Notes in certificated
form, such Global Note shall, upon receipt thereof, be canceled by the Trustee
in accordance with standing procedures and instructions existing between the
Depositary and the Custodian. At any time prior to such cancellation, if any
interest in a Global Note is redeemed, converted, repurchased or canceled, the
principal amount of such Global Note shall, in accordance with the standing
procedures and instructions existing between the Depositary and the Custodian,
be appropriately reduced or increased, as the case may be, and an endorsement
shall be made on such Global Note, by the Trustee or the Custodian, at the
direction of the Trustee, to reflect such reduction or increase.

        (e) Until the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
any stock certificate representing Common Stock issued upon conversion of any
Note shall bear a legend in substantially the following form, unless such Common
Stock has been sold pursuant to a registration statement that has been declared
effective under the Securities Act (and which continues to be effective at the
time of such transfer) or such Common Stock has been issued upon conversion of
Notes that have been transferred pursuant to a registration statement that has
been declared effective under the Securities Act, or unless otherwise agreed by
the Company in writing with written notice thereof to the transfer agent:

        THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
        UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
        OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR
        SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF
        AGREES THAT, UNTIL THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO
        SALES OF THE COMMON STOCK EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE
        SECURITIES ACT (OR ANY SUCCESSOR PROVISION), (1) IT WILL NOT RESELL OR
        OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO
        PHOTRONICS, INC. OR TO ANY SUBSIDIARY THEREOF, (B) TO A "QUALIFIED
        INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
        IN COMPLIANCE WITH

                                       16



        RULE 144A, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
        RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (D) PURSUANT TO A
        REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
        SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
        TRANSFER); (2) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO
        CLAUSE (1)(D) ABOVE), IT WILL FURNISH TO THE BANK OF NEW YORK, AS
        TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH
        CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS SUCH TRANSFER
        AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
        PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
        REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) IT WILL DELIVER
        TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED
        (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (1)(D) ABOVE) A NOTICE
        SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED
        UPON THE EARLIER OF THE TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY
        PURSUANT TO CLAUSE (1)(D) ABOVE OR UPON ANY TRANSFER OF THE COMMON STOCK
        EVIDENCED HEREBY AFTER THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE
        TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE
        SECURITIES ACT (OR ANY SUCCESSOR PROVISION).

        Any such Common Stock as to which such restrictions on transfer shall
have expired in accordance with their terms or as to which the conditions for
removal of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.05(e).

        (f) Any Note or Common Stock issued upon the conversion or exchange of a
Note that, prior to the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
is purchased or owned by the Company or any Affiliate thereof may not be resold
by

                                       17



the Company or such Affiliate unless registered under the Securities Act or
resold pursuant to an exemption from the registration requirements of the
Securities Act in a transaction which results in such Notes or Common Stock, as
the case may be, no longer being "restricted securities" (as defined under Rule
144).

        Each Holder of a Note agrees to indemnify the Company and the Trustee
against any liability that may result from the transfer, exchange or assignment
of such Holder's Note in violation of any provision of this Indenture and/or
applicable United States federal or state securities law.

        The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Note (including any transfers between or among Depositary participants or
beneficial owners of interests in any Global Note) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.

        SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes. In case any
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its written request the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and make
available for delivery, a new Note, bearing a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Note, or in lieu of
and in substitution for the Note so destroyed, lost or stolen. In every case the
applicant for a substituted Note shall furnish to the Company, to the Trustee
and, if applicable, to such authenticating agent such security or indemnity as
may be required by them to save each of them harmless for any loss, liability,
cost or expense caused by or connected with such substitution, and, in every
case of destruction, loss or theft, the applicant shall also furnish to the
Company, to the Trustee and, if applicable, to such authenticating agent
evidence to their satisfaction of the destruction, loss or theft of such Note
and of the ownership thereof.

        Following receipt by the Trustee or such authenticating agent, as the
case may be, of satisfactory security or indemnity and evidence, as described in
the preceding paragraph, the Trustee or such authenticating agent may
authenticate any such substituted Note and make available for delivery such
Note. Upon the issuance of any substituted Note, the Company may require the
payment by the holder of a sum sufficient to cover any tax, assessment or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Note which has matured or is about to
mature or has been

                                       18



tendered for redemption (and not withdrawn) or is to be converted into Common
Stock shall become mutilated or be destroyed, lost or stolen, the Company may,
instead of issuing a substitute Note, pay or authorize the payment of or convert
or authorize the conversion of the same (without surrender thereof except in the
case of a mutilated Note), as the case may be, if the applicant for such payment
or conversion shall furnish to the Company, to the Trustee and, if applicable,
to such authenticating agent such security or indemnity as may be required by
them to save each of them harmless for any loss, liability, cost or expense
caused by or connected with such substitution, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Company, the
Trustee and, if applicable, any paying agent or conversion agent evidence to
their satisfaction of the destruction, loss or theft of such Note and of the
ownership thereof.

        Every substitute Note issued pursuant to the provisions of this Section
2.06 by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion of negotiable
instruments or other securities without their surrender.

        SECTION 2.07. Temporary Notes. Pending the preparation of Notes in
certificated form, the Company may execute and the Trustee or an authenticating
agent appointed by the Trustee shall, upon the written request of the Company,
authenticate and deliver temporary Notes (printed or lithographed). Temporary
Notes shall be issuable in any authorized denomination, and substantially in the
form of the Notes in certificated form, but with such omissions, insertions and
variations as may be appropriate for temporary Notes, all as may be determined
by the Company. Every such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the Notes in certificated form. Without unreasonable delay the Company will
execute and deliver to the Trustee or such authenticating agent Notes in
certificated form and thereupon any or all temporary Notes may be surrendered in
exchange therefor, at each office or agency maintained by the Company pursuant
to Section 5.02 and the Trustee or such authenticating agent shall authenticate
and make available for delivery in exchange for such temporary Notes an equal
aggregate principal amount of Notes in certificated form. Such exchange shall be
made by

                                       19



the Company at its own expense and without any charge therefor. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits and subject to the same limitations under this Indenture as Notes in
certificated form authenticated and delivered hereunder.

        SECTION 2.08. Cancellation of Notes Paid, Etc. All Notes surrendered for
the purpose of payment, redemption, conversion, exchange or registration of
transfer shall, if surrendered to the Company or any paying agent or any Note
registrar or any conversion agent, be surrendered to the Trustee and promptly
canceled by it, or, if surrendered to the Trustee, shall be promptly canceled by
it, and no Notes shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Indenture. The Trustee shall dispose of such
canceled Notes in accordance with its customary procedures. If the Company shall
acquire any of the Notes, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Notes unless and until the
same are delivered to the Trustee for cancellation.

        SECTION 2.09. CUSIP Numbers. The Company in issuing the Notes may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Noteholders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as contained in
any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Notes, and any such redemption shall not
be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the "CUSIP" numbers.

                                    ARTICLE 3
                               REDEMPTION OF NOTES

        SECTION 3.01. No Redemption of Notes at Option of the Company. The Notes
may not be redeemed by the Company, in whole or in part, at any time prior to
April 15, 2008; provided that the Notes may be redeemed at the option of the
holders after a Fundamental Change in accordance with Section 3.02.

        SECTION 3.02. Redemption at Option of Holders. (a) If there shall occur
a Fundamental Change at any time prior to maturity of the Notes, then each
Noteholder shall have the right, at such holder's option, to require the Company
to redeem all of such holder's Notes, or any portion thereof that is an integral
multiple of $1,000 principal amount, on the date (the "Repurchase Date") that is
thirty (30) days after the date of the Company Notice (as defined in Section
3.02(b) below) of such Fundamental Change (or, if such 30th day is not a

                                       20



Business Day, the next succeeding Business Day) at a redemption price equal to
100% of the principal amount thereof, together with accrued interest to, but
excluding, the Repurchase Date; provided that, if such Repurchase Date is an
interest payment date, then the interest payable on such interest payment date
shall be paid to the holders of record of the Notes on the applicable record
date instead of the holders surrendering the Notes for redemption on such date.

        Upon presentation of any Note redeemed in part only, the Company shall
execute and, upon the Company's written direction to the Trustee, the Trustee
shall authenticate and deliver to the holder thereof, at the expense of the
Company, a new Note or Notes, of authorized denominations, in principal amount
equal to the unredeemed portion of the Notes so presented.

        (b) On or before the tenth day after the occurrence of a Fundamental
Change, the Company or at its written request (which must be received by the
Trustee at least five (5) Business Days prior to the date the Trustee is
requested to give notice as described below, unless the Trustee shall agree in
writing to a shorter period), the Trustee, in the name of and at the expense of
the Company, shall mail or cause to be mailed to all holders of record on the
date of the Fundamental Change a notice (the "Company Notice") of the occurrence
of such Fundamental Change and of the redemption right at the option of the
holders arising as a result thereof. Such notice shall be mailed by first class
mail. If the Company shall give such notice, the Company shall also deliver a
copy of the Company Notice to the Trustee at such time as it is mailed to
Noteholders. Concurrently with the mailing of any Company Notice, the Company
shall issue a press release announcing such Fundamental Change referred to in
the Company Notice, the form and content of which press release shall be
determined by the Company in its sole discretion. The failure to issue any such
press release or any defect therein shall not affect the validity of the Company
Notice or any proceedings for the redemption of any Note which any Noteholder
may elect to have the Company redeem as provided in this Section 3.02.

        Each Company Notice shall specify the circumstances constituting the
Fundamental Change, the Repurchase Date, the price at which the Company shall be
obligated to redeem Notes, that the holder must exercise the redemption right on
or prior to the close of business on the Repurchase Date (the "Fundamental
Change Expiration Time"), that the holder shall have the right to withdraw any
Notes surrendered prior to the Fundamental Change Expiration Time, a description
of the procedure which a Noteholder must follow to exercise such redemption
right and to withdraw any surrendered Notes, the place or places where the
holder is to surrender such holder's Notes, the amount of interest accrued on
each Note to the Repurchase Date and the "CUSIP" number or numbers of the Notes
(if then generally in use).

                                       21



        No failure of the Company to give the foregoing notices and no defect
therein shall limit the Noteholders' redemption rights or affect the validity of
the proceedings for the redemption of the Notes pursuant to this Section 3.02.

        (c) For a Note to be so redeemed at the option of the holder, the
Company must receive at the office or agency of the Company maintained for that
purpose or, at the option of such holder, the Corporate Trust Office, such Note
with the form entitled "Option to Elect Repayment Upon A Fundamental Change" on
the reverse thereof duly completed, together with such Notes duly endorsed for
transfer, on or before the Fundamental Change Expiration Time. All questions as
to the validity, eligibility (including time of receipt) and acceptance of any
Note for repayment shall be determined by the Company, whose determination shall
be final and binding absent manifest error.

        (d) On or prior to the Repurchase Date, the Company will deposit with
the Trustee or with one or more paying agents (or, if the Company is acting as
its own paying agent, set aside, segregate and hold in trust as provided in
Section 5.04) an amount of money sufficient to redeem on the Repurchase Date all
the Notes to be redeemed on such date at the appropriate redemption price,
together with accrued interest to, but excluding, the Repurchase Date; provided
that if such payment is made on the Repurchase Date it must be received by the
Trustee or paying agent, as the case may be, by 10:00 a.m. New York City time,
on such date. Payment for Notes surrendered for redemption (and not withdrawn)
prior to the Fundamental Change Expiration Time will be made promptly (but in no
event more than five (5) Business Days) following the Repurchase Date by mailing
checks for the amount payable to the holders of such Notes entitled thereto as
they shall appear on the registry books of the Company.

        (e) In the case of a reclassification, change, consolidation, merger,
combination, sale or conveyance to which Section 15.06 applies, in which the
Common Stock of the Company is changed or exchanged as a result into the right
to receive stock, securities or other property or assets (including cash), which
includes shares of Common Stock of the Company or shares of common stock of
another Person that are, or upon issuance will be, traded on a United States
national securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate fair market value of such stock, securities or other property or
assets (including cash) (as determined by the Company, which determination shall
be conclusive and binding), then the Person formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
shall execute and deliver to the Trustee a supplemental indenture (accompanied
by an Opinion of Counsel that such supplemental indenture complies with the
Trust Indenture Act as in force at the date of execution of such supplemental
indenture)

                                       22



modifying the provisions of this Indenture relating to the right of holders of
the Notes to cause the Company to repurchase the Notes following a Fundamental
Change, including without limitation the applicable provisions of this Section
3.02 and the definitions of Common Stock and Fundamental Change, as appropriate,
as determined in good faith by the Company (which determination shall be
conclusive and binding), to make such provisions apply to such other Person if
different from the Company and the common stock issued by such Person (in lieu
of the Company and the Common Stock of the Company).

        (f) The Company will comply with the provisions of Rule 13e-4 and any
other tender offer rules under the Exchange Act to the extent then applicable in
connection with the redemption rights of the holders of Notes in the event of a
Fundamental Change.

                                    ARTICLE 4
                             SUBORDINATION OF NOTES

        SECTION 4.01. Notes Subordinate to Senior Indebtedness. The Company
covenants and agrees, and each Holder of a Note, by his acceptance thereof,
likewise covenants and agrees, that, to the extent and in the manner hereinafter
set forth in this Article 4 (subject to the provisions of Article 13), the
indebtedness represented by the Notes and the payment of the principal of (and
premium, if any) and interest on each and all of the Notes are hereby expressly
made subordinate and subject in right of payment to the prior payment in full of
all Senior Indebtedness. Whenever in this Article 4 there is a reference, in any
context, to the principal of any Note as of any time, such reference shall be
deemed to include reference to the redemption price payable in respect of such
Note to the extent that such redemption price is, was or would be so payable at
such time, and express mention of the redemption price in any provision of this
Article 4 shall not be construed as excluding the redemption price in those
provisions of this Article 4 when such express mention is not made.

        SECTION 4.02. Payment over of Proceeds upon Dissolution, Etc. In the
event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to its creditors, as such, or
to its assets, or (b) any liquidation, dissolution or other winding up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due or to become due on or in respect of all
Senior Indebtedness in cash or other

                                       23



immediately available funds, or provision shall be made for such payment in cash
or other immediately available funds or otherwise in a manner satisfactory to
each holder of Senior Indebtedness with respect to its indebtedness, before the
Noteholders are entitled to receive any payment on account of principal of (or
premium, if any) or interest on the Notes, and to that end the holders of Senior
Indebtedness shall be entitled to receive, for application to the payment
thereof, any payment or distribution of any kind or character, whether in cash,
property or securities, which may be payable or deliverable in respect of the
Notes in any such case, proceeding, dissolution, liquidation or other winding up
or event. In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or any Noteholder shall have received any payment or
distribution of assets of the Company of any kind or character, whether in cash,
securities or other property, before all Senior Indebtedness is paid in full or
payment thereof provided for, and if such fact shall, at or prior to the time of
such payment or distribution, have been made actually known to a Responsible
Officer of the Trustee or, as the case may be, such Noteholder, then and in such
event such payment or distribution shall be paid over or delivered forthwith to
the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee,
agent or other Person making payment or distribution of assets of the Company
for application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full, after giving effect
to any concurrent payment or distribution to or for the holders of Senior
Indebtedness. For purposes of this Article 4 only, the words "cash, securities
or other property" shall not be deemed to include shares of stock of the Company
as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment which
shares of stock are subordinated in right of payment to all then outstanding
Senior Indebtedness to substantially the same extent as, or to a greater extent
than, the Notes are so subordinated as provided in this Article 4. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the conveyance
or transfer of its properties and assets substantially as an entirety to another
Person upon the terms and conditions set forth in Article 12 shall not be deemed
a dissolution, winding up, liquidation, reorganization, assignment for the
benefit of creditors or marshalling of assets and liabilities of the Company for
the purposes of this Section if the Person formed by such consolidation or into
which the Company is merged or which acquires by conveyance or transfer such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance or transfer, comply with the
conditions set forth in Article 12.

        SECTION 4.03. Prior Payment to Senior Indebtedness upon Acceleration of
Notes. In the event that any Notes are declared due and payable before their
maturity, then and in such event the holders of the Senior Indebtedness
outstanding at the time such Notes so become due and payable shall be entitled
to

                                       24



receive payment in full of all amounts due or to become due on or in respect of
such Senior Indebtedness, or provision shall be made for such payment in money
or money's worth, before the Noteholders are entitled to receive any payment by
the Company on account of the principal of (or premium, if any) or interest on
the Notes or on account of the purchase or other acquisition of Notes. In the
event that, notwithstanding the foregoing, the Company shall make any payment to
the Trustee or any Noteholder prohibited by the foregoing provisions of this
Section, and if such fact shall, at or prior to the time of such payment, have
been made actually known to a Responsible Officer of the Trustee or, as the case
may be, such Noteholder, then and in such event such payment shall be paid over
and delivered forthwith to the Company. The provisions of this Section shall not
apply to any payment with respect to which Section 4.02 would be applicable.

        SECTION 4.04. No Payment When Senior Indebtedness in Default. (a) In the
event and during the continuation of any default in the payment of principal of
(or premium, if any) or interest on (including a default under any redemption or
repurchase obligation with respect to) any Senior Indebtedness beyond any
applicable grace period with respect thereto or in the event that any other
event of default with respect to any Senior Indebtedness shall have occurred and
be continuing which would then permit the holders of such Senior Indebtedness to
declare such Senior Indebtedness due and payable prior to the date on which it
would otherwise have become due and payable, unless and until such event of
default shall have been cured or waived or shall have ceased to exist after
written notice to the Company and the Trustee by any holder of such Senior
Indebtedness, or (b) in the event any judicial proceeding shall be pending with
respect to any such default in payment or event of default, then no payment
shall be made by the Company on account of principal of (or premium, if any) or
interest on the Notes or on account of the purchase, redemption or other
acquisition of Notes. In the event that, notwithstanding the foregoing, the
Company shall make any payment to the Trustee or any Noteholder prohibited by
the foregoing provisions of this Section, and if such fact shall, at or prior to
the time of such payment, have been made known to the Trustee or, as the case
may be, such Noteholder, then and in such event such payment shall be paid over
and delivered forthwith to the Company, in the case of the Trustee, or the
Trustee, in the case of such Noteholder. The provisions of this Section shall
not apply to any payment with respect to which Section 4.02 would be applicable.

        SECTION 4.05. Payment Permitted If No Default. Nothing contained in this
Article 4 or elsewhere in this Indenture or in any of the Notes shall prevent
(a) the Company, at any time except during the pendency of any case, proceeding,
dissolution, liquidation or other winding up, assignment for the benefit of
creditors or other marshalling of assets and liabilities of the Company referred
to in Section 4.02, or under the conditions described in Sections 4.03 and 4.04,
from making payments at any time of principal of (and premium, if any) or
interest on

                                       25



the Notes, or (b) the application by the Trustee of any money deposited with it
hereunder to the payment of or on account of the principal of (and premium, if
any) or interest on the Notes or the retention of such payment by the
Noteholders, if, at the time of such application by the Trustee, a Responsible
Officer of the Trustee did not have knowledge that such payment would have been
prohibited by the provisions of this Article 4.

        SECTION 4.06. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the holders of the
Notes shall be subrogated to the extent of the payments or distributions made to
the holders of such Senior Indebtedness pursuant to the provisions of this
Article 4 to the rights of the holders of such Senior Indebtedness to receive
payments and distributions of cash, property and securities applicable to the
Senior Indebtedness until the principal of (and premium, if any) and interest on
the Notes shall be paid in full. For purposes of such subrogation, no payments
or distributions to the holders of the Senior Indebtedness of any cash, property
or securities to which the holders of the Notes or the Trustee would be entitled
except for the provisions of this Article 4, and no payments over pursuant to
the provisions of this Article to the holders of Senior Indebtedness by holders
of the Notes or the Trustee, shall, as among the Company, its creditors other
than holders of Senior Indebtedness and the holders of the Notes, be deemed to
be a payment or distribution by the Company to or on account of the Senior
Indebtedness.

        SECTION 4.07. Provisions Solely to Define Relative Rights. The
provisions of this Article 4 are and are intended solely for the purpose of
defining the relative rights of the holders of the Notes on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article 4 or elsewhere in this Indenture or in the Notes is intended to or shall
(a) impair, as among the Company, its creditors other than holders of Senior
Indebtedness and the holders of the Notes, the obligation of the Company, which
is absolute and unconditional, to pay to the holders of the Notes the principal
of (and premium, if any) and interest on the Notes as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against the Company of the holders of the Notes and creditors of
the Company other than the holders of Senior Indebtedness; or (c) prevent the
Trustee or the holder of any Note from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article 4 of the holders of Senior Indebtedness to
receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.

        SECTION 4.08. Trustee to Effectuate Subordination. Each holder of a Note
by his acceptance thereof authorizes and directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the

                                       26



subordination provided in this Article 4 and appoints the Trustee his
attorney-in-fact for any and all such purposes.

        SECTION 4.09. No Waiver of Subordination Provisions. No right of any
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder of any Senior Indebtedness, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with. Without in any way limiting the generality of the
foregoing paragraph, the holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Trustee or the
holders of the Notes, without incurring responsibility to the holders of the
Notes and without impairing or releasing the subordination provided in this
Article 4 or the obligations hereunder of the holders of the Notes to the
holders of Senior Indebtedness, do any one or more of the following: (i) change
the manner, place or terms of payment or extend the time for payment of, or
renew, increase or alter, Senior Indebtedness, or otherwise amend or supplement
in any manner Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (iii) release any Person liable in any manner for
the collection of Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.

        SECTION 4.10. Notice to Trustee. The Company shall give prompt written
notice to the Trustee of any fact known to the Company which would prohibit the
making of any payment to or by the Trustee in respect of the Notes.
Notwithstanding the provisions of this Article 4 or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect of the Notes, unless and until the Trustee shall have received written
notice thereof from the Company or a holder of Senior Indebtedness or from any
trustee therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Section 8.01, shall be entitled in all
respects to assume that no such facts exist; provided that if the Trustee shall
not have received the notice provided for in this Section 4.10 at least two
Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest on any Note), then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such money and to apply the same to the purpose
for which such money was received and shall not be affected by any notice to the
contrary which may be

                                       27



received by it within two Business Days prior to such date. Notwithstanding
anything in this Article 4 to the contrary, nothing shall prevent any payment by
the Trustee to the holders of monies deposited with it pursuant to Section
13.01, and any such payment shall not be subject to the provisions of Sections
4.02, 4.03 or 4.04. Subject to the provisions of Article 8, the Trustee shall be
entitled to conclusively rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article 4, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article 4, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.

        SECTION 4.11. Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred to in
this Article 4, the Trustee, subject to the provisions of Section 8.01, and the
holders of the Notes shall be entitled to conclusively rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the holders of Notes, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
4.

        SECTION 4.12. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness and shall not be liable to any such holders if it shall in
good faith mistakenly pay over or distribute to holders of Notes or to the
Company or to any other Person cash, property or securities to which any holders
of Senior Indebtedness shall be entitled by virtue of this Article 4 or
otherwise. With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants or obligations as
are specifically set forth in this Article 4 and no implied covenants or
obligations with respect to holders of Senior Indebtedness shall be read into
this Indenture against the Trustee.

                                       28



        SECTION 4.13. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights. The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article 4 with respect to any
Senior Indebtedness which may at any time be held by it, to the same extent as
any other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder. Nothing in this Article
4 shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 8.06.

        SECTION 4.14. Article Applicable to Paying Agents. In case at any time
any Paying Agent other than the Trustee shall have been appointed by the Company
and be then acting hereunder, the term "Trustee" as used in this Article 4 shall
in such case (unless the context otherwise requires) be construed as extending
to and including such Paying Agent within its meaning as fully for all intents
and purposes as if such Paying Agent were named in this Article 4 in addition to
or in place of the Trustee; provided that Section 4.13 shall not apply to the
Company or any Affiliate of the Company if it or such Affiliate acts as Paying
Agent.

        SECTION 4.15. Certain Conversions Deemed Payment. For the purposes of
this Article 4 only, (1) the issuance and delivery of junior securities upon
conversion of Notes in accordance with Article 15 shall not be deemed to
constitute a payment or distribution on account of the principal of or premium
or interest on Notes or on account of the purchase or other acquisition of
Notes, and (2) the payment, issuance or delivery of cash, property or securities
(other than junior securities) upon conversion of a Note shall be deemed to
constitute payment on account of the principal of such Note. For the purposes of
this Section 4.15, the term "junior securities" means (a) shares of any stock of
any class of the Company and any cash, securities or other property into which
the Notes are convertible pursuant to Article 15 and (b) securities of the
Company which are subordinated in right of payment to all Senior Indebtedness
which may be outstanding at the time of issuance or delivery of such securities
to substantially the same extent as, or to a greater extent than, the Notes are
so subordinated as provided in this Article 4. Nothing contained in this Article
4 or elsewhere in this Indenture or in the Notes is intended to or shall impair,
as among the Company, its creditors other than holders of Senior Indebtedness
and the holders of the Notes, the right, which is absolute and unconditional, of
the holder of any Note to convert such Note in accordance with Article 15.

        SECTION 4.16. 6.00% Convertible Notes due 2004 and 4 3/4% Convertible
Notes due 2006. The indebtedness evidenced by the Notes is neither superior nor
subordinated in right of payment to, and is pari passu with, the Company's 6.00%
Convertible Subordinated Notes due June 1, 2004 and the Company's 4 3/4%
Convertible Subordinated Notes due December 15, 2006.

                                       29



                                    ARTICLE 5
                       PARTICULAR COVENANTS OF THE COMPANY

        SECTION 5.01. Payment of Principal, Premium and Interest. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any (including the redemption price upon
redemption pursuant to Article 3), and interest, on each of the Notes at the
places, at the respective times and in the manner provided herein and in the
Notes. The Company covenants and agrees to pay interest on overdue principal,
premium, if any, or (to the extent that payment of such interest is enforceable
under applicable law) interest at the rate per annum specified in the Notes.

        SECTION 5.02. Maintenance of Office or Agency. The Company will maintain
an office or agency in the Borough of Manhattan, The City of New York, where the
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion or redemption and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency not
designated or appointed by the Trustee. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office or the office of agency of
the Trustee in The Borough of Manhattan, The City of New York (which shall
initially be The Bank of New York, located at 101 Barclay Street, Floor 8W, New
York, NY 10286, New York, New York).

        The Company may also from time to time designate co-registrars and one
or more offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company will give prompt written notice of any such designation or
rescission and of any change in the location of any such other office or agency.

        The Company hereby initially designates the Trustee as paying agent,
Note registrar, Custodian and conversion agent and each of the Corporate Trust
Office and the office of agency of the Trustee in the Borough of Manhattan, c/o
The Bank of New York, 101 Barclay Street, Floor 8W, New York, NY 10286, shall be
considered as one such office or agency of the Company for each of the aforesaid
purposes.

        So long as the Trustee is the Note registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 8.10(a). If
co-registrars have been appointed in accordance with this Section, the Trustee
shall mail such

                                       30



notices only to the Company and the holders of Notes it can identify from its
records.

        SECTION 5.03. Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.

        SECTION 5.04. Provisions as to Paying Agent. (a) If the Company shall
appoint a paying agent other than the Trustee, or if the Trustee shall appoint
such a paying agent, the Company will cause such paying agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 5.04:

                (1) that it will hold all sums held by it as such agent for the
        payment of the principal of and premium, if any, or interest on the
        Notes (whether such sums have been paid to it by the Company or by any
        other obligor on the Notes) in trust for the benefit of the holders of
        the Notes;

                (2) that it will give the Trustee notice of any failure by the
        Company (or by any other obligor on the Notes) to make any payment of
        the principal of and premium, if any, or interest on the Notes when the
        same shall be due and payable; and

                (3) that at any time during the continuance of an Event of
        Default, upon request of the Trustee, it will forthwith pay to the
        Trustee all sums so held in trust.

        The Company shall, on or before each due date of the principal of,
premium, if any, or interest on the Notes, deposit with the paying agent a sum
(in funds which are immediately available on the due date for such payment)
sufficient to pay such principal, premium, if any, or interest, and (unless such
paying agent is the Trustee) the Company will promptly notify the Trustee of any
failure to take such action; provided that if such deposit is made on the due
date, such deposit shall be received by the paying agent by 10:00 a.m. New York
City time, on such date.

        (b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of, premium, if any, or interest on the
Notes, set aside, segregate and hold in trust for the benefit of the holders of
the Notes a sum sufficient to pay such principal, premium, if any, or interest
so becoming due and will promptly notify the Trustee of any failure to take such
action and of any failure by the Company (or any other obligor under the Notes)
to make any

                                       31



payment of the principal of, premium, if any, or interest on the Notes when the
same shall become due and payable.

        (c) Anything in this Section 5.04 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by the Company or any paying agent hereunder
as required by this Section 5.04, such sums to be held by the Trustee upon the
trusts herein contained and upon such payment by the Company or any paying agent
to the Trustee, the Company or such paying agent shall be released from all
further liability with respect to such sums.

        (d) Anything in this Section 5.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 5.04 is subject to
Sections 13.03 and 13.04.

        The Trustee shall not be responsible for the actions of any other paying
agents (including the Company if acting as its own paying agent) and shall have
no control of any funds held by such other paying agents.

        SECTION 5.05. Existence. Subject to Article 12, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence and rights (charter and statutory); provided that the
Company shall not be required to preserve any such right if the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and that the loss thereof is not disadvantageous in
any material respect to the Noteholders.

        SECTION 5.06. Maintenance of Properties. The Company will cause all
properties used or useful in the conduct of its business or the business of any
Significant Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided that nothing in this Section shall prevent the
Company from discontinuing the operation or maintenance of any of such
properties if such discontinuance is, in the judgment of the Company, desirable
in the conduct of its business or the business of any subsidiary and not
disadvantageous in any material respect to the Noteholders.

        SECTION 5.07. Payment of Taxes and Other Claims. The Company will pay or
discharge, or cause to be paid or discharged, before the same may become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed

                                       32



upon the Company or any Significant Subsidiary or upon the income, profits or
property of the Company or any Significant Subsidiary, (ii) all claims for
labor, materials and supplies which, if unpaid, might by law become a lien or
charge upon the property of the Company or any Significant Subsidiary and (iii)
all stamp and other duties, if any, which may be imposed by the United States or
any political subdivision thereof or therein in connection with the issuance,
transfer, exchange or conversion of any Notes or with respect to this Indenture;
provided that, in the case of clauses (i) and (ii), the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim (A) if the failure to do so will not, in the
aggregate, have a material adverse impact on the Company, or (B) if the amount,
applicability or validity is being contested in good faith by appropriate
proceedings.

        SECTION 5.08. Rule 144A Information Requirement. Within the period prior
to the expiration of the holding period applicable to sales thereof under Rule
144(k) under the Securities Act (or any successor provision), the Company
covenants and agrees that it shall, during any period in which it is not subject
to Section 13 or 15(d) under the Exchange Act, make available to any holder or
beneficial holder of Notes or any Common Stock issued upon conversion thereof
which continue to be Restricted Securities in connection with any sale thereof
and any prospective purchaser of Notes or such Common Stock designated by such
holder or beneficial holder, the information required pursuant to Rule
144A(d)(4) under the Securities Act upon the request of any holder or beneficial
holder of the Notes or such Common Stock and it will take such further action as
any holder or beneficial holder of such Notes or such Common Stock may
reasonably request, all to the extent required from time to time to enable such
holder or beneficial holder to sell its Notes or Common Stock without
registration under the Securities Act within the limitation of the exemption
provided by Rule 144A, as such Rule may be amended from time to time. Upon the
request of any holder or any beneficial holder of the Notes or such Common
Stock, the Company will deliver to such holder a written statement as to whether
it has complied with such requirements.

        SECTION 5.09. Stay, Extension and Usury Laws. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of, premium,
if any, or interest on the Notes as contemplated herein, wherever enacted, now
or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impede
the execution of any

                                       33



power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

        SECTION 5.10. Compliance Certificate. The Company shall deliver to the
Trustee, within one hundred twenty (120) days after the end of each fiscal year
of the Company, a certificate signed by either the principal executive officer,
principal financial officer or principal accounting officer of the Company,
stating whether or not to the best knowledge of the signer thereof the Company
is in default in the performance and observance of any of the terms, provisions
and conditions of this Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and, if the Company shall be in
default, specifying all such defaults and the nature and the status thereof of
which the signer may have knowledge.

        The Company will deliver to the Trustee, forthwith upon becoming aware
of (i) any default in the performance or observance of any covenant, agreement
or condition contained in this Indenture, or (ii) any Event of Default, an
Officers' Certificate specifying with particularity such default or Event of
Default and further stating what action the Company has taken, is taking or
proposes to take with respect thereto.

        Any notice required to be given under this Section 5.10 or Section 4.10
shall be delivered to a Responsible Officer of the Trustee at its Corporate
Trust Office. In the event that the payment of the Notes is accelerated because
of an Event of Default, the Company shall promptly provide written notice to the
Trustee specifying the names and addresses of the holders of Senior Indebtedness
if the Trustee (and not the Company) is to provide holders of Senior
Indebtedness notice of such acceleration.

        SECTION 5.11. Liquidated Damages Notice. In the event that the Company
is required to pay Liquidated Damages to holders of Notes pursuant to the
Registration Rights Agreement, the Company will provide written notice
("Liquidated Damages Notice") to the Trustee of its obligation to pay Liquidated
Damages no later than fifteen days prior to the proposed payment date for the
Liquidated Damages, and the Liquidated Damages Notice shall set forth the amount
of Liquidated Damages to be paid by the Company on such payment date. The
Trustee shall not at any time be under any duty or responsibility to any holder
of Notes to determine the Liquidated Damages, or with respect to the nature,
extent or calculation of the amount of Liquidated Damages when made, or with
respect to the method employed in such calculation of the Liquidated Damages.

                                       34



                                    ARTICLE 6
          NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

        SECTION 6.01. Noteholders' Lists. The Company covenants and agrees that
it will furnish or cause to be furnished to the Trustee, semiannually, not more
than fifteen (15) days after each April 1 and October 1 in each year beginning
with April 1, 2004, and at such other times as the Trustee may request in
writing, within thirty (30) days after receipt by the Company of any such
request (or such lesser time as the Trustee may reasonably request in order to
enable it to timely provide any notice to be provided by it hereunder), a list
in such form as the Trustee may reasonably require of the names and addresses of
the registered holders of Notes as of a date not more than fifteen (15) days (or
such other date as the Trustee may reasonably request in order to so provide any
such notices) prior to the time such information is furnished, except that no
such list need be furnished by the Company to the Trustee so long as the Trustee
is acting as the sole Note registrar.

        SECTION 6.02. Preservation and Disclosure of Lists. (a) The Trustee
shall preserve, in as current a form as is reasonably practicable, all
information as to the names and addresses of the holders of Notes contained in
the most recent list furnished to it as provided in Section 6.01 or maintained
by the Trustee in its capacity as Note registrar or co-registrar in respect of
the Notes, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 6.01 upon receipt of a new list so furnished.

        (b) The rights of Noteholders to communicate with other holders of Notes
with respect to their rights under this Indenture or under the Notes, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.

        (c) Every Noteholder, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any agent
of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of holders of Notes made pursuant to the
Trust Indenture Act.

        SECTION 6.03. Reports by Trustee. (a) Within sixty (60) days after April
1 of each year commencing with the year 2004, the Trustee shall transmit to
holders of Notes such reports dated as of April 1 of the year in which such
reports are made concerning the Trustee and its actions under this Indenture as
may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto.

                                       35



        (b) A copy of such report shall, at the time of such transmission to
holders of Notes, be filed by the Trustee with each stock exchange and automated
quotation system upon which the Notes are listed and with the Company. The
Company will promptly notify the Trustee in writing when the Notes are listed on
any stock exchange or automated quotation system or delisted therefrom.

        SECTION 6.04. Reports by Company. The Company shall file with the
Trustee (and the Commission if at any time after this Indenture becomes
qualified under the Trust Indenture Act), and transmit to holders of Notes, such
information, documents and other reports and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act, whether or not the Notes are governed by such
Act; provided that any such information, documents or reports required to be
filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
shall be filed with the Trustee within fifteen (15) days after the same is so
required to be filed with the Commission. Delivery of such reports, information
and documents to the Trustee is for informational purposes only and the
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).

                                    ARTICLE 7
         REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT

        SECTION 7.01. Events of Default. In case one or more of the following
Events of Default (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) shall have occurred and be
continuing:

        (a) default in the payment of any installment of interest or Liquidated
Damages upon any of the Notes as and when the same shall become due and payable,
and continuance of such default for a period of thirty (30) days, whether or not
such payment is permitted under Article 4 hereof; or

        (b) default in the payment of the principal of or premium, if any, on
any of the Notes as and when the same shall become due and payable either at
maturity or in connection with any redemption pursuant to Article 3, by
acceleration or otherwise, whether or not such payment is permitted under
Article 4 hereof; or

                                       36



        (c) the Company fails to provide a Fundamental Change Notice on or
before the tenth day after the occurrence of a Fundamental Change as provided in
Section 3.02; or

        (d) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the Notes or
in this Indenture (other than a covenant or agreement a default in whose
performance or whose breach is elsewhere in this Section 7.01 specifically dealt
with) continued for a period of sixty (60) days after the date on which written
notice of such failure, requiring the Company to remedy the same, shall have
been given to the Company by the Trustee, or the Company and a Responsible
Officer of the Trustee by the holders of at least twenty-five percent (25%) in
aggregate principal amount of the Notes at the time outstanding determined in
accordance with Section 9.04;

        (e) a default under any indebtedness of the Company for money borrowed
or under any mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company in an aggregate principal amount then outstanding in
excess of $15,000,000, whether such indebtedness now exists or shall hereafter
be created, such indebtedness is not paid at final maturity (either upon its
stated maturity or acceleration thereof) and such default in payment or
acceleration has not been cured or rescinded, within a period of 30 days after
there shall have been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding Notes, a written notice specifying
such default and requiring the Company to cause such indebtedness to be
discharged or cause such default to be cured or waived or such acceleration to
be rescinded or annulled and stating that such notice is a "Notice of Default"
hereunder;

        (f) the Company shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to the Company
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of the Company or any
substantial part of the property of the Company, or shall consent to any such
relief or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against the Company, or shall
make a general assignment for the benefit of creditors, or shall fail generally
to pay its debts as they become due; or

        (g) an involuntary case or other proceeding shall be commenced against
the Company seeking liquidation, reorganization or other relief with respect to
the Company or its debts under any bankruptcy, insolvency or other similar law
now

                                       37



or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of the Company or any
substantial part of the property of the Company, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period of ninety
(90) consecutive days;

then, and in each and every such case (other than an Event of Default specified
in Section 7.01(f) or 7.01(g)), unless the principal of all of the Notes shall
have already become due and payable, either the Trustee or the holders of not
less than twenty-five percent (25%) in aggregate principal amount of the Notes
then outstanding hereunder determined in accordance with Section 9.04, by notice
in writing to the Company (and to the Trustee if given by Noteholders), may
declare the principal of and premium, if any, on all the Notes and the interest
and Liquidated Damages accrued thereon to be due and payable immediately, and
upon any such declaration the same shall become and shall be immediately due and
payable, anything in this Indenture or in the Notes contained to the contrary
notwithstanding. If an Event of Default specified in Section 7.01(f) or 7.01(g)
occurs, the principal of all the Notes and the interest and Liquidated Damages
accrued thereon shall be immediately and automatically due and payable without
necessity of further action. This provision, however, is subject to the
conditions that if, at any time after the principal of the Notes shall have been
so declared due and payable, and before any judgment or decree for the payment
of the monies due shall have been obtained or entered as hereinafter provided,
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
all matured installments of interest upon all Notes and the principal of and
premium, if any, on any and all Notes which shall have become due otherwise than
by acceleration (with interest on overdue installments of interest (to the
extent that payment of such interest is enforceable under applicable law) and on
such principal and premium, if any, at the rate borne by the Notes, to the date
of such payment or deposit) and amounts due to the Trustee pursuant to Section
8.06, and if any and all defaults under this Indenture, other than the
nonpayment of principal of and premium, if any, and accrued interest and
Liquidated Damages on Notes which shall have become due by acceleration, shall
have been cured or waived pursuant to Section 7.07, then and in every such case
the holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Company and to the Trustee, may waive all
defaults or Events of Default and rescind and annul such declaration and its
consequences; but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or Event of Default, or shall impair any
right consequent thereon. The Company shall notify in writing a Responsible
Officer of the Trustee, promptly upon becoming aware thereof, of any Event of
Default.

        In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such waiver or rescission and annulment or for any other reason or

                                       38



shall have been determined adversely to the Trustee, then and in every such case
the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been taken.

        SECTION 7.02. Payments of Notes on Default; Suit Therefor. The Company
covenants that (a) in case default shall be made in the payment of any
installment of interest upon any of the Notes as and when the same shall become
due and payable, and such default shall have continued for a period of thirty
(30) days, or (b) in case default shall be made in the payment of the principal
of or premium, if any, on any of the Notes as and when the same shall have
become due and payable, whether at maturity of the Notes or in connection with
any redemption, by declaration or otherwise, then, upon demand of the Trustee,
the Company will pay to the Trustee, for the benefit of the holders of the
Notes, the whole amount that then shall have become due and payable on all such
Notes for principal and premium, if any, or interest, as the case may be, with
interest upon the overdue principal and premium, if any, and (to the extent that
payment of such interest is enforceable under applicable law) upon the overdue
installments of interest at the rate borne by the Notes, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including reasonable compensation to the Trustee, its
agents, attorneys and counsel, and all other amounts due the Trustee under
Section 8.06. Until such demand by the Trustee, the Company may pay the
principal of and premium, if any, and interest on the Notes to the registered
holders, whether or not the Notes are overdue.

        In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.

        In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Notes under Title 11
of the United States Code, or any other applicable law, or in case a receiver,
assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or
similar official shall have been appointed for or taken possession of the
Company or such other obligor, the property of the Company or such other
obligor, or in the case of any other judicial proceedings relative to the
Company or such other obligor upon

                                       39



the Notes, or to the creditors or property of the Company or such other obligor,
the Trustee, irrespective of whether the principal of the Notes shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand pursuant to the
provisions of this Section 7.02, shall be entitled and empowered, by
intervention in such proceedings or otherwise, to file and prove a claim or
claims for the whole amount of principal, premium, if any, and interest owing
and unpaid in respect of the Notes, and, in case of any judicial proceedings, to
file such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and of the Noteholders
allowed in such judicial proceedings relative to the Company or any other
obligor on the Notes, its or their creditors, or its or their property, and to
collect and receive any monies or other property payable or deliverable on any
such claims, and to distribute the same after the deduction of any amounts due
the Trustee under Section 8.06, and any receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, custodian or similar official is
hereby authorized by each of the Noteholders to make such payments to the
Trustee, and, in the event that the Trustee shall consent to the making of such
payments directly to the Noteholders, to pay to the Trustee any amount due it
for reasonable compensation, expenses, advances and disbursements, including
counsel fees and expenses incurred by it up to the date of such distribution. To
the extent that such payment of reasonable compensation, expenses, advances and
disbursements out of the estate in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, monies, securities and other property
which the holders of the Notes may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.

        All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes.

        In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings.

                                       40



        SECTION 7.03. Application of Monies Collected by Trustee. Any monies
collected by the Trustee pursuant to this Article 7 shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:

                FIRST: To the payment of all amounts due the Trustee under
        Section 8.06;

                SECOND: Subject to the provisions of Article 4, in case the
        principal of the outstanding Notes shall not have become due and be
        unpaid, to the payment of interest on the Notes in default in the order
        of the maturity of the installments of such interest, with interest (to
        the extent that such interest has been collected by the Trustee) upon
        the overdue installments of interest at the rate borne by the Notes,
        such payments to be made ratably to the Persons entitled thereto;

                THIRD: Subject to the provisions of Article 4, in case the
        principal of the outstanding Notes shall have become due, by declaration
        or otherwise, and be unpaid to the payment of the whole amount then
        owing and unpaid upon the Notes for principal and premium, if any, and
        interest, with interest on the overdue principal and premium, if any,
        and (to the extent that such interest has been collected by the Trustee)
        upon overdue installments of interest at the rate borne by the Notes,
        and in case such monies shall be insufficient to pay in full the whole
        amounts so due and unpaid upon the Notes, then to the payment of such
        principal and premium, if any, and interest without preference or
        priority of principal and premium, if any, over interest, or of interest
        over principal and premium, if any, or of any installment of interest
        over any other installment of interest, or of any Note over any other
        Note, ratably to the aggregate of such principal and premium, if any,
        and accrued and unpaid interest; and

                FOURTH: Subject to the provisions of Article 4, to the payment
        of the remainder, if any, to the Company or any other Person lawfully
        entitled thereto.

        SECTION 7.04. Proceedings by Noteholder. No holder of any Note shall
have any right by virtue of or by reference to any provision of this Indenture
to institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also

                                       41



the holders of not less than twenty-five percent (25%) in aggregate principal
amount of the Notes then outstanding shall have made written request upon the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee indemnity reasonably
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for sixty (60) days after its
receipt of such notice, request and offer of indemnity, shall have neglected or
refused to institute any such action, suit or proceeding and no direction
inconsistent with such written request shall have been given to the Trustee
pursuant to Section 7.07; it being understood and intended, and being expressly
covenanted by the taker and holder of every Note with every other taker and
holder and the Trustee, that no one or more holders of Notes shall have any
right in any manner whatever by virtue of or by reference to any provision of
this Indenture to affect, disturb or prejudice the rights of any other holder of
Notes, or to obtain or seek to obtain priority over or preference to any other
such holder, or to enforce any right under this Indenture, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Notes (except as otherwise provided herein). For the protection and enforcement
of this Section 7.04, each and every Noteholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.

        Notwithstanding any other provision of this Indenture and any provision
of any Note, the right of any holder of any Note to receive payment of the
principal of and premium, if any (including the redemption price upon redemption
pursuant to Article 7), and accrued interest on such Note, on or after the
respective due dates expressed in such Note or in the event of redemption, or to
institute suit for the enforcement of any such payment on or after such
respective dates against the Company shall not be impaired or affected without
the consent of such holder.

        Anything in this Indenture or the Notes to the contrary notwithstanding,
the holder of any Note, without the consent of either the Trustee or the holder
of any other Note, in its own behalf and for its own benefit, may enforce, and
may institute and maintain any proceeding suitable to enforce, its rights of
conversion as provided herein.

        SECTION 7.05. Proceedings by Trustee. In case of an Event of Default,
the Trustee may, in its discretion, proceed to protect and enforce the rights
vested in it by this Indenture by such appropriate judicial proceedings as are
necessary to protect and enforce any of such rights, either by suit in equity or
by action at law or by proceeding in bankruptcy or otherwise, whether for the
specific enforcement of any covenant or agreement contained in this Indenture or
in aid of the exercise of any power granted in this Indenture, or to enforce any
other legal or equitable right vested in the Trustee by this Indenture or by
law.

                                       42



        SECTION 7.06. Remedies Cumulative and Continuing. Except as provided in
Section 2.06, all powers and remedies given by this Article 7 to the Trustee or
to the Noteholders shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any thereof or of any other powers and remedies available
to the Trustee or the holders of the Notes, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Notes to exercise any right or power accruing
upon any default or Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a waiver of any such
default or any acquiescence therein, and, subject to the provisions of Section
7.04, every power and remedy given by this Article 7 or by law to the Trustee or
to the Noteholders may be exercised from time to time, and as often as shall be
deemed expedient, by the Trustee or by the Noteholders.

        SECTION 7.07. Direction of Proceedings and Waiver of Defaults by
Majority of Noteholders. The holders of a majority in aggregate principal amount
of the Notes at the time outstanding determined in accordance with Section 9.04
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided that (a) such direction shall not be in
conflict with any rule of law or with this Indenture, (b) the Trustee may take
any other action which is not inconsistent with such direction and (c) the
Trustee may decline to take any action that would benefit some Noteholder to the
detriment of other Noteholders. The holders of a majority in aggregate principal
amount of the Notes at the time outstanding determined in accordance with
Section 9.04 may, on behalf of the holders of all of the Notes, waive any past
default or Event of Default hereunder and its consequences except (i) a default
in the payment of interest or premium, if any, on, or the principal of, the
Notes, (ii) a failure by the Company to convert any Notes into Common Stock,
(iii) a default in the payment of redemption price pursuant to Article 3 or (iv)
a default in respect of a covenant or provisions hereof which under Article 11
cannot be modified or amended without the consent of the holders of each or all
Notes then outstanding or affected thereby. Upon any such waiver, the Company,
the Trustee and the holders of the Notes shall be restored to their former
positions and rights hereunder; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon. Whenever any default or Event of Default hereunder shall have been
waived as permitted by this Section 7.07, said default or Event of Default shall
for all purposes of the Notes and this Indenture be deemed to have been cured
and to be not continuing; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.

                                       43



        SECTION 7.08. Notice of Defaults. The Trustee shall, within ninety (90)
days after a Responsible Officer of the Trustee has knowledge of the occurrence
of a default, mail to all Noteholders, as the names and addresses of such
holders appear upon the Note register, notice of all defaults known to a
Responsible Officer, unless such defaults shall have been cured or waived before
the giving of such notice; provided that except in the case of default in the
payment of the principal of, or premium, if any, or interest on any of the
Notes, the Trustee shall be protected in withholding such notice if and so long
as a trust committee of directors and/or Responsible Officers of the Trustee in
good faith determines that the withholding of such notice is in the interests of
the Noteholders.

        SECTION 7.09. Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may, in its discretion, require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; provided that the provisions of this Section 7.09
(to the extent permitted by law) shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Noteholder, or group of Noteholders,
holding in the aggregate more than ten percent in principal amount of the Notes
at the time outstanding determined in accordance with Section 9.04, or to any
suit instituted by any Noteholder for the enforcement of the payment of the
principal of or premium, if any, or interest on any Note on or after the due
date expressed in such Note or to any suit for the enforcement of the right to
convert any Note in accordance with the provisions of Article 15.

                                    ARTICLE 8
                                   THE TRUSTEE

        SECTION 8.01. Duties and Responsibilities of Trustee. The Trustee, prior
to the occurrence of an Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of
Default has occurred (which has not been cured or waived), the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.

                                       44



        No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that:

        (a) prior to the occurrence of an Event of Default and after the curing
or waiving of all Events of Default which may have occurred:

                (i) the duties and obligations of the Trustee shall be
        determined solely by the express provisions of this Indenture and the
        Trust Indenture Act, and the Trustee shall not be liable except for the
        performance of such duties and obligations as are specifically set forth
        in this Indenture and no implied covenants or obligations shall be read
        into this Indenture and the Trust Indenture Act against the Trustee; and

                (ii) in the absence of bad faith and willful misconduct on the
        part of the Trustee, the Trustee may conclusively rely as to the truth
        of the statements and the correctness of the opinions expressed therein,
        upon any certificates or opinions furnished to the Trustee and
        conforming to the requirements of this Indenture; but, in the case of
        any such certificates or opinions which by any provisions hereof are
        specifically required to be furnished to the Trustee, the Trustee shall
        be under a duty to examine the same to determine whether or not they
        conform to the requirements of this Indenture;

        (b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers of the Trustee, unless the
Trustee was negligent in ascertaining the pertinent facts;

        (c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the written direction
of the holders of not less than a majority in principal amount of the Notes at
the time outstanding determined as provided in Section 9.04 relating to the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture;

        (d) whether or not therein provided, every provision of this Indenture
relating to the conduct or affecting the liability of, or affording protection
to, the Trustee shall be subject to the provisions of this Section;

        (e) the Trustee shall not be liable in respect of any payment (as to the
correctness of amount, entitlement to receive or any other matters relating to
payment) or notice effected by the Company or any paying agent or any records
maintained by any co-registrar with respect to the Notes;

                                       45



        (f) if any party fails to deliver a notice relating to an event the fact
of which, pursuant to this Indenture, requires notice to be sent to the Trustee,
the Trustee may conclusively rely on its failure to receive such notice as
reason to act as if no such event occurred; and

        (g) the Trustee shall not be deemed to have knowledge of any Event of
Default hereunder unless a Responsible Officer of the Trustee shall have been
notified in writing of such Event of Default by the Company or the holders of at
least 10% in aggregate principal amount of the Notes.

        None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.

        SECTION 8.02. Reliance on Documents, Opinions, Etc. Except as otherwise
provided in Section 8.01:

        (a) the Trustee may conclusively rely and shall be protected in acting
upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, note, coupon or other paper or
document (whether in its original or facsimile form) believed by it in good
faith to be genuine and to have been signed or presented by the proper party or
parties;

        (b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Trustee by a copy
thereof certified by the Secretary or an Assistant Secretary of the Company;

        (c) the Trustee may consult with counsel of its own selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by it hereunder in good
faith and in accordance with such advice or Opinion of Counsel;

        (d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Noteholders pursuant to the provisions of this
Indenture, unless such Noteholders shall have offered to the Trustee security or
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities which may be incurred therein or thereby;

                                       46



        (e) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney;

        (f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by it with due care
hereunder;

        (g) the Trustee shall not be liable for any action taken, suffered, or
omitted to be taken by it in good faith and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Indenture;

        (h) the rights, privileges, protections, immunities and benefits given
to the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and each agent, custodian and other Person employed to act hereunder;
and

        (i) the Trustee may request that the Company deliver an Officers'
Certificate setting forth the names of individuals and/or titles of officers
authorized at such time to take specified actions pursuant to this Indenture,
which Officers' Certificate may be signed by any person authorized to sign an
Officers' Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superseded.

        SECTION 8.03. No Responsibility for Recitals, Etc. The recitals
contained herein and in the Notes (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.

        SECTION 8.04. Trustee, Paying Agents, Conversion Agents or Registrar May
Own Notes. The Trustee, any paying agent, any conversion agent or Note
registrar, in its individual or any other capacity, may become the owner or
pledgee

                                       47



of Notes with the same rights it would have if it were not Trustee, paying
agent, conversion agent or Note registrar.

        SECTION 8.05. Monies to Be Held in Trust. Subject to the provisions of
Section 13.04 and Section 4.02, all monies received by the Trustee shall, until
used or applied as herein provided, be held in trust for the purposes for which
they were received. Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as may be agreed in writing from time to time by the Company and the
Trustee.

        SECTION 8.06. Compensation and Expenses of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, such compensation for all services rendered by it
hereunder in any capacity (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) as mutually agreed
to from time to time in writing between the Company and the Trustee, and the
Company will pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances reasonably incurred or made by the Trustee
in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or such willful misconduct. The
Company also covenants to indemnify the Trustee (or any officer, director or
employee of the Trustee), in any capacity under this Indenture and its agents
and any authenticating agent for, and to hold them harmless against, any and all
loss, liability, claim or expense incurred without negligence or willful
misconduct on the part of the Trustee or such officers, directors, employees and
agent or authenticating agent, as the case may be, and arising out of or in
connection with the acceptance or administration of this trust or in any other
capacity hereunder, including the costs and expenses of defending themselves
against any claim (whether asserted by the Company, Holder or any other Person)
of liability in the premises. The obligations of the Company under this Section
8.06 to compensate or indemnify the Trustee and to pay or reimburse the Trustee
for expenses, disbursements and advances shall be secured by a lien prior to
that of the Notes upon all property and funds held or collected by the Trustee
as such, except funds held in trust for the benefit of the holders of particular
Notes. The obligation of the Company under this Section shall survive the
satisfaction and discharge of this Indenture.

        When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
7.01(f) or 7.01(g) with respect to the Company occurs, the expenses and the

                                       48



compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency or similar laws.

        SECTION 8.07. Officers' Certificate as Evidence. Except as otherwise
provided in Section 8.01, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of bad faith or willful misconduct on the part
of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee.

        SECTION 8.08. Conflicting Interests of Trustee. If the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.

        SECTION 8.09. Eligibility of Trustee. There shall at all times be a
Trustee hereunder which shall be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000 (or if such Person is a member of a bank holding company system, its
bank holding company shall have a combined capital and surplus of at least
$50,000,000). If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section 8.09, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.

        SECTION 8.10. Resignation or Removal of Trustee.

        (a) The Trustee may at any time resign by giving written notice of such
resignation to the Company and to the holders of Notes. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor trustee by
written instrument, in duplicate, executed by order of the Board of Directors,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so
appointed and have accepted appointment sixty (60) days after the mailing of
such notice of resignation to the Noteholders, the resigning Trustee may, upon
ten (10) business days' notice to the Company and the Noteholders, appoint a
successor identified in such notice or may petition, at the expense of the
Company, any court of competent jurisdiction for the appointment of a successor
trustee, or, if any

                                       49



Noteholder who has been a bona fide holder of a Note or Notes for at least six
(6) months may, subject to the provisions of Section 7.09, on behalf of himself
and all others similarly situated, petition any such court for the appointment
of a successor trustee. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, appoint a successor trustee.

        (b) In case at any time any of the following shall occur:

                (i) the Trustee shall fail to comply with Section 8.08 after
        written request therefor by the Company or by any Noteholder who has
        been a bona fide holder of a Note or Notes for at least six (6) months;
        or

                (ii) the Trustee shall cease to be eligible in accordance with
        the provisions of Section 8.09 and shall fail to resign after written
        request therefor by the Company or by any such Noteholder; or

                (iii) the Trustee shall become incapable of acting, or shall be
        adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
        property shall be appointed, or any public officer shall take charge or
        control of the Trustee or of its property or affairs for the purpose of
        rehabilitation, conservation or liquidation;

then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.09, any Noteholder who has been a bona fide holder of a
Note or Notes for at least six (6) months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee; provided that
if no successor Trustee shall have been appointed and have accepted appointment
sixty (60) days after either the Company or the Noteholders has removed the
Trustee, the Trustee so removed may petition, at the expense of the Company, any
court of competent jurisdiction for an appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.

        (c) The holders of a majority in aggregate principal amount of the Notes
at the time outstanding may at any time remove the Trustee and nominate a
successor trustee which shall be deemed appointed as successor trustee unless,
within ten (10) days after notice to the Company of such nomination, the Company
objects thereto, in which case the Trustee so removed or any Noteholder, or if
such Trustee so removed or any Noteholder fails to act, the Company, upon the
terms and conditions and otherwise as in Section 8.10(a)

                                       50



provided, may petition, at the expense of the Company, any court of competent
jurisdiction for an appointment of a successor trustee.

        (d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.11.

        SECTION 8.11. Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amount then due it pursuant to the provisions of Section
8.06, execute and deliver an instrument transferring to such successor trustee
all the rights and powers of the trustee so ceasing to act. Upon request of any
such successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property and funds held or collected by
such trustee as such, except for funds held in trust for the benefit of holders
of particular Notes, to secure any amounts then due it pursuant to the
provisions of Section 8.06.

        No successor trustee shall accept appointment as provided in this
Section 8.11 unless, at the time of such acceptance, such successor trustee
shall be qualified under the provisions of Section 8.08 and be eligible under
the provisions of Section 8.09.

        Upon acceptance of appointment by a successor trustee as provided in
this Section 8.11, the Company (or the former trustee, at the written direction
of the Company) shall mail or cause to be mailed notice of the succession of
such trustee hereunder to the holders of Notes at their addresses as they shall
appear on the Note register. If the Company fails to mail such notice within ten
(10) days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.

        SECTION 8.12. Succession by Merger, Etc. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially

                                       51



all of the corporate trust business of the Trustee (including any trust created
by this Indenture), shall be the successor to the Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that in the case of any corporation succeeding to all
or substantially all of the corporate trust business of the Trustee, such
corporation shall be qualified under the provisions of Section 8.08 and eligible
under the provisions of Section 8.09.

        In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee or authenticating agent appointed
by such predecessor trustee, and deliver such Notes so authenticated; and in
case at that time any of the Notes shall not have been authenticated, any
successor to the Trustee or any authenticating agent appointed by such successor
trustee may authenticate such Notes in the name of the successor trustee; and in
all such cases such certificates shall have the full force that is provided in
the Notes or in this Indenture; provided that the right to adopt the certificate
of authentication of any predecessor Trustee or authenticate Notes in the name
of any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.

        SECTION 8.13. Preferential Collection of Claims. If and when the Trustee
shall be or become a creditor of the Company (or any other obligor upon the
Notes), the Trustee shall be subject to the provisions of the Trust Indenture
Act regarding the collection of the claims against the Company (or any such
other obligor).

        SECTION 8.14. Trustee's Application for Instructions from the Company.
Any application by the Trustee for written instructions from the Company (other
than with regard to any action proposed to be taken or omitted to be taken by
the Trustee that affects the rights of the holders of the Notes or holders of
Senior Indebtedness under this Indenture, including, without limitation, under
Article 4 hereof) may, at the option of the Trustee, set forth in writing any
action proposed to be taken or omitted by the Trustee under this Indenture and
the date on and/or after which such action shall be taken or such omission shall
be effective. The Trustee shall not be liable for any action taken by, or
omission of, the Trustee in accordance with a proposal included in such
application on or after the date specified in such application (which date shall
not be less than three (3) Business Days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking any such action
(or the effective date in the case of an omission), the Trustee shall have
received written instructions in response to such application specifying the
action to be taken or omitted.

                                       52



                                    ARTICLE 9
                                 THE NOTEHOLDERS

        SECTION 9.01. Action by Noteholders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article 10, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than fifteen
(15) days prior to the date of commencement of solicitation of such action.

        SECTION 9.02. Proof of Execution by Noteholders. Subject to the
provisions of Sections 8.01, 8.02 and 10.05, proof of the execution of any
instrument by a Noteholder or its agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
holding of Notes shall be proved by the registry of such Notes or by a
certificate of the Note registrar.

        The record of any Noteholders' meeting shall be proved in the manner
provided in Section 10.06.

        SECTION 9.03. Who Are Deemed Absolute Owners. The Company, the Trustee,
any paying agent, any conversion agent and any Note registrar may deem the
Person in whose name such Note shall be registered upon the Note register to be,
and may treat it as, the absolute owner of such Note (whether or not such Note
shall be overdue and notwithstanding any notation of ownership or other writing
thereon made by any Person other than the Company or any Note registrar) for the
purpose of receiving payment of or on account of the principal of, premium, if
any, and interest on such Note, for conversion of such Note and for all other
purposes; and neither the Company nor the Trustee nor any paying agent nor any
conversion agent nor any Note registrar shall be affected by any notice to the
contrary. All such payments so made to any holder for the time being, or upon
his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon any
such Note.

                                       53



        SECTION 9.04. Company-owned Notes Disregarded. In determining whether
the holders of the requisite aggregate principal amount of Notes have concurred
in any direction, consent, waiver or other action under this Indenture, Notes
which are owned by the Company or any other obligor on the Notes or any
Affiliate of the Company or any other obligor on the Notes shall be disregarded
and deemed not to be outstanding for the purpose of any such determination;
provided that, for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, consent, waiver or other action,
only Notes which a Responsible Officer actually knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 9.04 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or any Affiliate of the Company or any such other obligor. In the case of
a dispute as to such right, any decision by the Trustee taken upon the advice of
counsel shall be full protection to the Trustee. Upon request of the Trustee,
the Company shall furnish to the Trustee promptly an Officers' Certificate
listing and identifying all Notes, if any, known by the Company to be owned or
held by or for the account of any of the above described Persons, and, subject
to Section 8.01, the Trustee shall be entitled to accept such Officers'
Certificate as conclusive evidence of the facts therein set forth and of the
fact that all Notes not listed therein are outstanding for the purpose of any
such determination.

        SECTION 9.05. Revocation of Consents, Future Holders Bound. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.01, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have consented to such action may, by filing
written notice with the Trustee at its Corporate Trust Office and upon proof of
holding as provided in Section 9.02, revoke such action so far as concerns such
Note. Except as aforesaid, any such action taken by the holder of any Note shall
be conclusive and binding upon such holder and upon all future holders and
owners of such Note and of any Notes issued in exchange or substitution
therefor, irrespective of whether any notation in regard thereto is made upon
such Note or any Note issued in exchange or substitution therefor.

                                       54



                                   ARTICLE 10
                             MEETINGS OF NOTEHOLDERS

        SECTION 10.01. Purpose of Meetings. A meeting of Noteholders may be
called at any time and from time to time pursuant to the provisions of this
Article 10 for any of the following purposes:

                (1) to give any notice to the Company or to the Trustee or to
        give any directions to the Trustee permitted under this Indenture, or to
        consent to the waiving of any default or Event of Default hereunder and
        its consequences, or to take any other action authorized to be taken by
        Noteholders pursuant to any of the provisions of Article 7;

                (2) to remove the Trustee and nominate a successor trustee
        pursuant to the provisions of Article 8;

                (3) to consent to the execution of an indenture or indentures
        supplemental hereto pursuant to the provisions of Section 11.02; or

                (4) to take any other action authorized to be taken by or on
        behalf of the holders of any specified aggregate principal amount of the
        Notes under any other provision of this Indenture or under applicable
        law.

        SECTION 10.02. Call of Meetings by Trustee. The Trustee may at any time
call a meeting of Noteholders to take any action specified in Section 10.01, to
be held at such time and at such place as the Trustee shall determine. Notice of
every meeting of the Noteholders, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting and
the establishment of any record date pursuant to Section 9.01, shall be mailed
to holders of Notes at their addresses as they shall appear on the Note
register. Such notice shall also be mailed to the Company. Such notices shall be
mailed not less than twenty (20) nor more than ninety (90) days prior to the
date fixed for the meeting.

        Any meeting of Noteholders shall be valid without notice if the holders
of all Notes then outstanding are present in person or by proxy or if notice is
waived before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.

        SECTION 10.03. Call of Meetings by Company or Noteholders. In case at
any time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least ten percent (10%) in aggregate principal amount of the Notes
then outstanding, shall have requested the Trustee to call a meeting of

                                       55



Noteholders, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed the
notice of such meeting within twenty (20) days after receipt of such request,
then the Company or such Noteholders may determine the time and the place for
such meeting and may call such meeting to take any action authorized in Section
10.01, by mailing notice thereof as provided in Section 10.02.

        SECTION 10.04. Qualifications for Voting. To be entitled to vote at any
meeting of Noteholders a person shall (a) be a holder of one or more Notes on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes on the record
date pertaining to such meeting. The only persons who shall be entitled to be
present or to speak at any meeting of Noteholders shall be the persons entitled
to vote at such meeting and their counsel and any representatives of the Trustee
and its counsel and any representatives of the Company and its counsel.

        SECTION 10.05. Regulations. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.

        The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.03, in which case the
Company or the Noteholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the holders of a majority
in principal amount of the Notes represented at the meeting and entitled to vote
at the meeting.

        Subject to the provisions of Section 9.04, at any meeting each
Noteholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Notes held or represented by him; provided that no vote
shall be cast or counted at any meeting in respect of any Note challenged as not
outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman of the meeting shall have no right to vote other than by virtue of
Notes held by him or instruments in writing as aforesaid duly designating him as
the proxy to vote on behalf of other Noteholders. Any meeting of Noteholders
duly called pursuant to the provisions of Section 10.02 or 10.03 may be
adjourned from time to time by the holders of a majority of the aggregate
principal amount of Notes represented at the meeting,

                                       56



whether or not constituting a quorum, and the meeting may be held as so
adjourned without further notice.

        SECTION 10.06. Voting. The vote upon any resolution submitted to any
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the outstanding principal amount of the Notes held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Noteholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 10.02. The record shall show the principal amount of the
Notes voting in favor of or against any resolution. The record shall be signed
and verified by the affidavits of the permanent chairman and secretary of the
meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting.

        Any record so signed and verified shall be conclusive evidence of the
matters therein stated.

        SECTION 10.07. No Delay of Rights by Meeting. Nothing contained in this
Article 10 shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Noteholders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any right
or rights conferred upon or reserved to the Trustee or to the Noteholders under
any of the provisions of this Indenture or of the Notes.

                                   ARTICLE 11
                             SUPPLEMENTAL INDENTURES

        SECTION 11.01. Supplemental Indentures Without Consent of Noteholders.
The Company, when authorized by the resolutions of the Board of Directors, and
the Trustee may, from time to time, and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:

                                       57



        (a) to make provision with respect to the conversion rights of the
holders of Notes pursuant to the requirements of Section 15.06 and the
redemption obligations of the Company pursuant to the requirements of Section
3.02(e);

        (b) subject to Article 4, to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Notes, any property or assets;

        (c) to evidence the succession of another Person to the Company, or
successive successions, and the assumption by the successor Person of the
covenants, agreements and obligations of the Company pursuant to Article 12;

        (d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Notes, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided that in respect of any
such additional covenant, restriction or condition, such supplemental indenture
may provide for a particular period of grace after default (which period may be
shorter or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default;

        (e) to provide for the issuance under this Indenture of Notes in coupon
form (including Notes registrable as to principal only) and to provide for
exchangeability of such Notes with the Notes issued hereunder in fully
registered form and to make all appropriate changes for such purpose;

        (f) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture that may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture that shall not materially adversely affect the
interests of the holders of the Notes;

        (g) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee with respect to the Notes; or

        (h) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to effect the qualifications of this Indenture
under the Trust Indenture Act, or under any similar federal statute hereafter
enacted.

                                       58



        Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any supplemental indenture, the Trustee
is hereby authorized to join with the Company in the execution of any such
supplemental indenture, to make any further appropriate agreements and
stipulations that may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
that affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.

        Any supplemental indenture authorized by the provisions of this Section
11.01 may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 11.02.

        Notwithstanding any other provision of this Indenture or the Notes, the
Registration Rights Agreement and the obligation to pay Liquidated Damages
thereunder may be amended, modified or waived in accordance with the provisions
of the Registration Rights Agreement.

        SECTION 11.02. Supplemental Indenture with Consent of Noteholders. With
the consent (evidenced as provided in Article 9) of the holders of not less than
a majority in aggregate principal amount of the Notes at the time outstanding,
the Company, when authorized by the resolutions of the Board of Directors, and
the Trustee may, from time to time and at any time, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
any supplemental indenture or of modifying in any manner the rights of the
holders of the Notes; provided that no such supplemental indenture shall (i)
extend the fixed maturity of any Note, or reduce the rate or extend the time for
payment of interest thereon, or reduce the principal amount thereof or premium,
if any, thereon, or reduce any amount payable on redemption upon a Fundamental
Change thereof, or impair the right of any Noteholder to institute suit for the
payment thereof, or make the principal thereof or interest or premium, if any,
thereon payable in any coin or currency other than that provided in the Notes,
or modify the provisions of this Indenture with respect to the subordination of
the Notes in a manner adverse to the Noteholders in any material respect, or
change the obligation of the Company to redeem any Note upon the happening of a
Fundamental Change in a manner adverse to the holder of Notes, or impair the
right to convert the Notes into Common Stock subject to the terms set forth
herein, including Section 15.06, in each case, without the consent of the holder
of each Note so affected, or (ii) reduce the aforesaid percentage of Notes, the
holders of which are required to consent to any such supplemental indenture,
modify any of the provisions of this Indenture relating to supplemental
indentures with the

                                       59



consent of holders or the provisions relating to waiver of past defaults (except
to increase any percentage contained in such provisions or to provide that other
provisions of this Indenture cannot be modified or waived without the consent of
the holders of all Notes then outstanding or each Note affected thereby), reduce
the quorum or voting requirements of this Indenture or change any obligation of
the Company to maintain an office or agency in the places and for the purposes
specified in this Indenture, without the consent of the holders of all Notes
then outstanding.

        Upon the written request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of Noteholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.

        It shall not be necessary for the consent of the Noteholders under this
Section 11.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

        SECTION 11.03. Effect of Supplemental Indenture. Any supplemental
indenture executed pursuant to the provisions of this Article 11 shall comply
with the Trust Indenture Act, as then in effect, provided that this Section
11.03 shall not require such supplemental indenture or the Trustee to be
qualified under the Trust Indenture Act prior to the time such qualification is
in fact required under the terms of the Trust Indenture Act or the Indenture has
been qualified under the Trust Indenture Act, nor shall it constitute any
admission or acknowledgment by any party to such supplemental indenture that any
such qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act. Upon the execution of any supplemental
indenture pursuant to the provisions of this Article 11, this Indenture shall be
and be deemed to be modified and amended in accordance therewith and the
respective rights, limitation of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of Notes shall
thereafter be determined, exercised and enforced hereunder, subject in all
respects to such modifications and amendments and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.

                                       60



        SECTION 11.04. Notation on Notes. Notes authenticated and delivered
after the execution of any supplemental indenture pursuant to the provisions of
this Article 11 may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may, at the Company's expense, be
prepared and executed by the Company, authenticated by the Trustee (or an
authenticating agent duly appointed by the Trustee pursuant to Section 16.10)
and delivered in exchange for the Notes then outstanding, upon surrender of such
Notes then outstanding.

        SECTION 11.05. Evidence of Compliance of Supplemental Indenture to be
Furnished to Trustee. Prior to entering into any supplemental indenture, the
Trustee shall receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article 11.

                                   ARTICLE 12
                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

        SECTION 12.01. Company May Consolidate on Certain Terms. Subject to the
provisions of Section 12.02, nothing contained in this Indenture or in any of
the Notes shall prevent any consolidation or merger of the Company with or into
any other Person or Persons (whether or not affiliated with the Company), or
successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale, conveyance or
lease (or successive sales, conveyances or leases) of all or substantially all
of the property of the Company, to any other Person (whether or not affiliated
with the Company), authorized to acquire and operate the same and that shall be
organized under the laws of the United States of America, any state thereof or
the District of Columbia; provided that upon any such consolidation, merger,
sale, conveyance or lease, the due and punctual payment of the principal of and
premium, if any, and interest on all of the Notes, according to their tenor and
the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by the Company, shall be expressly
assumed, by supplemental indenture satisfactory in form to the Trustee, executed
and delivered to the Trustee by the Person (if other than the Company) formed by
such consolidation, or into which the Company shall have been merged, or by the
Person that shall have acquired or leased such property, and such supplemental
indenture shall provide for the applicable conversion rights set forth in
Section 15.06.

                                       61



        SECTION 12.02. Successor Corporation to Be Substituted. In case of any
such consolidation, merger, sale, conveyance or lease and upon the assumption by
the successor Person, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual payment
of the principal of and premium, if any, and interest on all of the Notes and
the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Company, such successor Person shall succeed to
and be substituted for the Company, with the same effect as if it had been named
herein as the party of this first part. Such successor Person thereupon may
cause to be signed, and may issue either in its own name or in the name of
Photronics, Inc. any or all of the Notes, issuable hereunder that theretofore
shall not have been signed by the Company and delivered to the Trustee; and,
upon the order of such successor Person instead of the Company and subject to
all the terms, conditions and limitations in this Indenture prescribed, the
Trustee shall authenticate and shall deliver, or cause to be authenticated and
delivered, any Notes that previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication, and any Notes that
such successor Person thereafter shall cause to be signed and delivered to the
Trustee for that purpose. All the Notes so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Notes theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Notes had been issued at the date of the execution hereof. In the event
of any such consolidation, merger, sale, conveyance or lease, the Person named
as the "Company" in the first paragraph of this Indenture or any successor that
shall thereafter have become such in the manner prescribed in this Article 12
may be dissolved, wound up and liquidated at any time thereafter and such Person
shall be released from its liabilities as obligor and maker of the Notes and
from its obligations under this Indenture.

        In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form (but not in substance) may be made in the
Notes thereafter to be issued as may be appropriate.

        SECTION 12.03. Opinion of Counsel to Be Given Trustee. The Trustee shall
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance or lease and any
such assumption complies with the provisions of this Article 12.

                                       62



                                   ARTICLE 13
                     SATISFACTION AND DISCHARGE OF INDENTURE

        SECTION 13.01. Discharge of Indenture. When (a) the Company shall
deliver to the Trustee for cancellation all Notes theretofore authenticated
(other than any Notes that have been destroyed, lost or stolen and in lieu of or
in substitution for which other Notes shall have been authenticated and
delivered) and not theretofore canceled, or (b) all the Notes not theretofore
canceled or delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit with the Trustee, in trust, funds sufficient to pay at maturity or upon
redemption of all of the Notes (other than any Notes that shall have been
mutilated, destroyed, lost or stolen and in lieu of or in substitution for which
other Notes shall have been authenticated and delivered) not theretofore
canceled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest due or to become due to such date of maturity or
redemption date, as the case may be, accompanied by a verification report, as to
the sufficiency of the deposited amount, from an independent certified
accountant or other financial professional satisfactory to the Trustee, and if
the Company shall also pay or cause to be paid all other sums payable hereunder
by the Company, then this Indenture shall cease to be of further effect (except
as to (i) remaining rights of registration of transfer, substitution and
exchange and conversion of Notes, (ii) rights hereunder of Noteholders to
receive payments of principal of and premium, if any, and interest on, the Notes
and the other rights, duties and obligations of Noteholders, as beneficiaries
hereof with respect to the amounts, if any, so deposited with the Trustee and
(iii) the rights, obligations and immunities of the Trustee hereunder), and the
Trustee, on written demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel as required by Section 16.04 and at the
cost and expense of the Company, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture; the Company, however, hereby
agrees to reimburse the Trustee for any costs or expenses thereafter reasonably
and properly incurred by the Trustee and to compensate the Trustee for any
services thereafter reasonably and properly rendered by the Trustee in
connection with this Indenture or the Notes.

        SECTION 13.02. Deposited Monies to Be Held in Trust by Trustee. Subject
to Section 13.04, all monies deposited with the Trustee pursuant to Section
13.01, provided such deposit was not in violation of Article 4, shall be held in
trust for the sole benefit of the Noteholders and not to be subject to the
subordination provisions of Article 4, and such monies shall be applied by the
Trustee to the payment, either directly or through any paying agent (including
the Company if acting as its own paying agent), to the holders of the particular
Notes

                                       63



for the payment or redemption of which such monies have been deposited with the
Trustee, of all sums due and to become due thereon for principal and interest
and premium, if any.

        SECTION 13.03. Paying Agent to Repay Monies Held. Upon the satisfaction
and discharge of this Indenture, all monies then held by any paying agent of the
Notes (other than the Trustee) shall, upon written request of the Company, be
repaid to it or paid to the Trustee, and thereupon such paying agent shall be
released from all further liability with respect to such monies.

        SECTION 13.04. Return of Unclaimed Monies. Subject to the requirements
of applicable law, any monies deposited with or paid to the Trustee for payment
of the principal of, premium, if any, or interest on Notes and not applied but
remaining unclaimed by the holders of Notes for two years after the date upon
which the principal of, premium, if any, or interest on such Notes, as the case
may be, shall have become due and payable, shall be repaid to the Company by the
Trustee on written demand and all liability of the Trustee shall thereupon cease
with respect to such monies; and the holder of any of the Notes shall thereafter
look only to the Company for any payment that such holder may be entitled to
collect unless an applicable abandoned property law designates another Person.

        SECTION 13.05. Reinstatement. If the Trustee or the paying agent is
unable to apply any money in accordance with Section 13.02 by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 13.01 until such time as the Trustee or the paying
agent is permitted to apply all such money in accordance with Section 13.02;
provided that if the Company makes any payment of interest on or principal of
any Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the holders of such Notes to receive such payment
from the money held by the Trustee or paying agent.

                                   ARTICLE 14
         IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

        SECTION 14.01. Indenture and Notes Solely Corporate Obligations. No
recourse for the payment of the principal of or premium, if any, or interest on
any Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the

                                       64



creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer, director or subsidiary, as
such, past, present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the Notes.

                                   ARTICLE 15
                               CONVERSION OF NOTES

        SECTION 15.01. Right to Convert. Subject to and upon compliance with the
provisions of this Indenture, including, without limitation, Article 4, the
holder of any Note shall have the right, at its option, on any business day
after the original issuance of the Notes hereunder through the close of business
on the final maturity date of the Notes to convert the principal amount of the
Note, or any portion of such principal amount which is an integral multiple of
$1,000, into fully paid and non-assessable shares of Common Stock (as such
shares shall then be constituted) at the Conversion Rate in effect at such time,
by surrender of the Note so to be converted in whole or in part in the manner
provided, together with any required funds, in Section 15.02. A Note in respect
of which a holder is exercising its option to require redemption upon a
Fundamental Change pursuant to Section 3.02(a) may be converted only if such
holder withdraws its election to exercise in accordance with Section 3.02(b). A
holder of Notes is not entitled to any rights of a holder of Common Stock until
such holder has converted his Notes to Common Stock, and only to the extent such
Notes are deemed to have been converted to Common Stock under this Article 15.

        SECTION 15.02. Exercise of Conversion Privilege; Issuance of Common
Stock on Conversion, No Adjustment for Interest or Dividends. In order to
exercise the conversion privilege with respect to any Note in certificated form,
the holder of any such Note to be converted in whole or in part shall surrender
such Note, duly endorsed, at an office or agency maintained by the Company for
such purpose pursuant to Section 5.02, accompanied by the funds, if any,
required by the penultimate paragraph of this Section 15.02, and shall give
written notice of conversion in the form provided on the Notes (or such other
notice which is acceptable to the Company) to the office or agency that the
holder elects to convert such Note or the portion thereof specified in said
notice. Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of Common Stock
which shall be issuable on such conversion shall be issued, and shall be
accompanied by transfer taxes, if required

                                       65



pursuant to Section 15.07. Each such Note surrendered for conversion shall,
unless the shares issuable on conversion are to be issued in the same name as
the registration of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.

        In order to exercise the conversion privilege with respect to any
interest in a Global Note, the beneficial holder must complete, or cause to be
completed, the appropriate instruction form for conversion pursuant to the
Depositary's book- entry conversion program, deliver, or cause to be delivered,
by book-entry delivery an interest in such Global Note, furnish appropriate
endorsements and transfer documents if required by the Company or the Trustee or
conversion agent, and pay the funds, if any, required by this Section 15.02 and
any transfer taxes if required pursuant to Section 15.07.

        As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Company shall issue and shall deliver to
such Noteholder at the office or agency maintained by the Company for such
purpose pursuant to Section 5.02, a certificate or certificates for the number
of full shares of Common Stock issuable upon the conversion of such Note or
portion thereof as determined by the Company in accordance with the provisions
of this Article 15 and a check or cash in respect of any fractional interest in
respect of a share of Common Stock arising upon such conversion, calculated by
the Company as provided in Section 15.03. In case any Note of a denomination
greater than $1,000 shall be surrendered for partial conversion, and subject to
Section 2.03, the Company shall execute and the Trustee shall authenticate and
deliver to the holder of the Note so surrendered, without charge to him, a new
Note or Notes in authorized denominations in an aggregate principal amount equal
to the unconverted portion of the surrendered Note.

        Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 15.02 have been satisfied as to such Note (or portion thereof),
and the Person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
provided that any such surrender on any date when the stock transfer books of
the Company shall be closed shall constitute the Person in whose name the
certificates are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Rate in effect on the date upon which such
Note shall be surrendered.

                                       66



        Any Note or portion thereof surrendered for conversion during the period
from the close of business on the record date for any interest payment date to
the close of business on the Business Day preceding the following interest
payment date shall be accompanied by payment, in immediately available funds or
other funds acceptable to the Company, of an amount equal to the interest
otherwise payable on such interest payment date on the principal amount being
converted; provided that no such payment need be made if (a) a Fundamental
Change has occurred and the Repurchase Date specified in the Company Notice
given in connection therewith falls within such period or (b) there shall exist
at the time of conversion a default in the payment of interest on the Notes.
Except as provided above in this Section 15.01, no payment or other adjustment
shall be made for interest accrued on any Note converted or for dividends on any
shares issued upon the conversion of such Note as provided in this Article.

        Upon the conversion of an interest in a Global Note, the Trustee (or
other conversion agent appointed by the Company), or the Custodian at the
direction of the Trustee (or other conversion agent appointed by the Company),
shall make a notation on such Global Note as to the reduction in the principal
amount represented thereby. The Company shall notify the Trustee in writing of
any conversions of Notes effected through any conversion agent other than the
Trustee.

        SECTION 15.03. Cash Payments in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same holder, the number of full shares that shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof to the extent
permitted hereby) so surrendered. If any fractional share of stock would be
issuable upon the conversion of any Note or Notes, the Company shall make an
adjustment and payment therefor in cash at the current market price thereof to
the holder of Notes. The current market price of a share of Common Stock shall
be the Closing Price on the last Business Day immediately preceding the day on
which the Notes (or specified portions thereof) are deemed to have been
converted.

        SECTION 15.04. Conversion Rate. Each $1,000 principal amount of the
Notes shall be convertible into the number of shares of Common Stock specified
in the form of Note (herein called the "Conversion Rate") attached as Exhibit A
hereto, subject to adjustment as provided in this Article 15.

        SECTION 15.05. Adjustment of Conversion Rate. The Conversion Rate shall
be adjusted from time to time by the Company as follows:

                                       67



        (a) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common
Stock, the Conversion Rate shall be increased so that the same shall equal the
rate determined by multiplying the Conversion Rate in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution by a
fraction,

                (i) the numerator of which shall be the sum of the number of
        shares of Common Stock outstanding at the close of business on the date
        fixed for the determination of stockholders entitled to receive such
        dividend or other distribution plus the total number of shares of Common
        Stock constituting such dividend or other distribution; and

                (ii) the denominator of which shall be the number of shares of
        Common Stock outstanding at the close of business on the date fixed for
        such determination,

such increase to become effective immediately after the opening of business on
the day following the date fixed for such determination. For the purpose of this
paragraph (a), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company. The Company will
not pay any dividend or make any distribution on shares of Common Stock held in
the treasury of the Company. If any dividend or distribution of the type
described in this Section 15.05(a) is declared but not so paid or made, the
Conversion Rate shall again be adjusted to the Conversion Rate that would then
be in effect if such dividend or distribution had not been declared.

        (b) In case the Company shall issue rights or warrants to all holders of
its outstanding shares of Common Stock entitling them (for a period expiring
within forty-five (45) days after the date fixed for determination of
stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price (as defined below) on the date fixed for determination of
stockholders entitled to receive such rights or warrants, the Conversion Rate
shall be increased so that the same shall equal the rate determined by
multiplying the Conversion Rate in effect immediately prior to the date fixed
for determination of stockholders entitled to receive such rights or warrants by
a fraction,

                (i) the numerator of which shall be the sum of the number of
        shares of Common Stock outstanding on the date fixed for determination
        of stockholders entitled to receive such rights or warrants plus the
        total number of additional shares of Common Stock offered for
        subscription or purchase, and

                                       68



                (ii) the denominator of which shall be the sum of the number of
        shares of Common Stock outstanding at the close of business on the date
        fixed for determination of stockholders entitled to receive such rights
        or warrants plus the number of shares that the aggregate offering price
        of the total number of shares so offered would purchase at such Current
        Market Price.

        Such adjustment shall be successively made whenever any such rights or
warrants are issued, and shall become effective immediately after the opening of
business on the day following the date fixed for determination of stockholders
entitled to receive such rights or warrants. To the extent that shares of Common
Stock are not delivered after the expiration of such rights or warrants, the
Conversion Rate shall be readjusted to the Conversion Rate that would then be in
effect had the adjustments made upon the issuance of such rights or warrants
been made on the basis of delivery of only the number of shares of Common Stock
actually delivered. If such rights or warrants are not so issued, the Conversion
Rate shall again be adjusted to be the Conversion Rate that would then be in
effect if such date fixed for the determination of stockholders entitled to
receive such rights or warrants had not been fixed. In determining whether any
rights or warrants entitle the holders to subscribe for or purchase shares of
Common Stock at less than such Current Market Price, and in determining the
aggregate offering price of such shares of Common Stock, there shall be taken
into account any consideration received by the Company for such rights or
warrants and any amount payable on exercise or conversion thereof, the value of
such consideration, if other than cash, to be determined by the Board of
Directors.

        (c) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Conversion Rate in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Conversion Rate in effect at the opening of business
on the day following the day upon which such combination becomes effective shall
be proportionately reduced, such increase or reduction, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.

        (d) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of capital stock of the
Company or evidences of its indebtedness or assets (including securities, but
excluding any rights or warrants referred to in Section 15.05(b), and excluding
any dividend or distribution (x) paid exclusively in cash or (y) referred to in
Section 15.05(a) (any of the foregoing hereinafter in this Section 15.05(d)
called the "Securities")), then, in each such case (unless the Company elects to
reserve such Securities for

                                       69



distribution to the Noteholders upon the conversion of the Notes so that any
such holder converting Notes will receive upon such conversion, in addition to
the shares of Common Stock to which such holder is entitled, the amount and kind
of such Securities which such holder would have received if such holder had
converted its Notes into Common Stock immediately prior to the Record Date (as
defined in Section 15.05(h)(4)) for such distribution of the Securities), the
Conversion Rate shall be increased so that the same shall be equal to the rate
determined by multiplying the Conversion Rate in effect on the Record Date with
respect to such distribution by a fraction,

                (i) the numerator of which shall be the Current Market Price on
        such Record Date; and

                (ii) the denominator of which shall be the Current Market Price
        on such Record Date less the fair market value (as determined by the
        Board of Directors, whose determination shall be conclusive, and
        described in a resolution of the Board of Directors) on the Record Date
        of the portion of the Securities so distributed applicable to one share
        of Common Stock,

such adjustment to become effective immediately prior to the opening of business
on the day following such Record Date; provided that if the then fair market
value (as so determined) of the portion of the Securities so distributed
applicable to one share of Common Stock is equal to or greater than the Current
Market Price on the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Noteholder shall have the right to receive
upon conversion the amount of Securities such holder would have received had
such holder converted each Note on the Record Date. If such dividend or
distribution is not so paid or made, the Conversion Rate shall again be adjusted
to be the Conversion Rate that would then be in effect if such dividend or
distribution had not been declared. If the Board of Directors determines the
fair market value of any distribution for purposes of this Section 15.05(d) by
reference to the actual or when issued trading market for any securities, it
must in doing so consider the prices in such market over the same period used in
computing the Current Market Price on the applicable Record Date.
Notwithstanding the foregoing, if the Securities distributed by the Company to
all holders of its Common Stock consist of capital stock of, or similar equity
interests in, a Subsidiary or other business unit, the Conversion Rate shall be
increased so that the same shall be equal to the rate determined by multiplying
the Conversion Rate in effect on the Record Date with respect to such
distribution by a fraction

                (i) the numerator of which shall be the sum of (x) the average
        Closing Price of one share of Common Stock over the ten consecutive
        Trading Day period (the "Spinoff Valuation Period") commencing on and

                                       70



        including the fifth Trading Day after the date on which "ex-dividend
        trading" commences on the Common Stock on the Nasdaq National Market or
        such other national or regional exchange or market on which the Common
        Stock is then listed or quoted and (y) the average Closing Price over
        the Spinoff Valuation Period of the portion of the Securities so
        distributed applicable to one share of Common Stock; and

                (ii) the denominator of which shall be the average Closing Price
        of one share of Common Stock over the Spinoff Valuation Period,

such adjustment to become effective immediately prior to the opening of business
on the day following such Record Date; provided that the Company may in lieu of
the foregoing adjustment make adequate provision so that each Noteholder shall
have the right to receive upon conversion the amount of Securities such holder
would have received had such holder converted each note on the Record Date with
respect to such distribution.

Rights or warrants distributed by the Company to all holders of Common Stock
entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 15.05 (and no adjustment to the Conversion Rate under
this Section 15.05 will be required) until the occurrence of the earliest
Trigger Event, whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) to the Conversion
Rate shall be made under this Section 15.05(d). If any such right or warrant,
including any such existing rights or warrants distributed prior to the date of
this Indenture, are subject to events, upon the occurrence of which such rights
or warrants become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any and each
such event shall be deemed to be the date of distribution and record date with
respect to new rights or warrants with such rights (and a termination or
expiration of the existing rights or warrants without exercise by any of the
holders thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event (of the
type described in the preceding sentence) with respect thereto that was counted
for purposes of calculating a distribution amount for which an adjustment to the
Conversion Rate under this Section 15.05 was made, (1) in the case of any such
rights or warrants that shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Rate shall be readjusted upon
such final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash distribution, equal
to the per

                                       71



share repurchase price received by a holder or holders of Common Stock with
respect to such rights or warrants (assuming such holder had retained such
rights or warrants), made to all holders of Common Stock as of the date of such
repurchase, and (2) in the case of such rights or warrants that shall have
expired or been terminated without exercise by any holders thereof, the
Conversion Rate shall be readjusted as if such rights and warrants had not been
issued.

No adjustment of the Conversion Rate shall be made pursuant to this Section
15.05(d) in respect of rights or warrants distributed or deemed distributed on
any Trigger Event to the extent that such rights or warrants are actually
distributed, or reserved by the Company for distribution to holders of Notes
upon conversion by such holders of Notes to Common Stock.

For purposes of this Section 15.05(d) and Sections 15.05(a) and (b), any
dividend or distribution to which this Section 15.05(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets or shares of
capital stock other than such shares of Common Stock or rights or warrants (and
any Conversion Rate adjustment required by this Section 15.05(d) with respect to
such dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (and any further Conversion Rate adjustment required by Sections
15.05(a) and (b) with respect to such dividend or distribution shall then be
made), except (A) the Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution", "the date fixed for the
determination of stockholders entitled to receive such rights or warrants" and
"the date fixed for such determination" within the meaning of Sections 15.05(a)
and (b), and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of Section 15.05(a).

        (e) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding (x) any quarterly cash dividend
on the Common Stock to the extent the aggregate cash dividend per share of
Common Stock in any fiscal quarter does not exceed the greater of (A) the amount
per share of Common Stock of the next preceding quarterly cash dividend on the
Common Stock to the extent that such preceding quarterly dividend did not
require any adjustment of the Conversion Rate pursuant to this Section 15.05(e)
(as adjusted to reflect subdivisions, or combinations of the Common Stock), and
(B) 1.25% of the arithmetic average of the Closing Price (determined as set
forth in Section 15.05(h)) during the ten Trading Days (as defined in Section
15.05(h)) immediately prior to the date of declaration of such dividend, and (y)
any dividend

                                       72



or distribution in connection with the liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary), then, in such case, the
Conversion Rate shall be increased so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior to the
close of business on such record date by a fraction,

                (i) the numerator of which shall be the Current Market Price on
        such record date; and

                (ii) the denominator of which shall be the Current Market Price
        on such record date less the amount of cash so distributed (and not
        excluded as provided above) applicable to one share of Common Stock,

such adjustment to be effective immediately prior to the opening of business on
the day following the record date; provided that if the portion of the cash so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price on the record date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Noteholder shall have
the right to receive upon conversion the amount of cash such holder would have
received had such holder converted each Note on the record date. If such
dividend or distribution is not so paid or made, the Conversion Rate shall again
be adjusted to be the Conversion Rate that would then be in effect if such
dividend or distribution had not been declared. If any adjustment is required to
be made as set forth in this Section 15.05(e) as a result of a distribution that
is a quarterly dividend, such adjustment shall be based upon the amount by which
such distribution exceeds the amount of the quarterly cash dividend permitted to
be excluded pursuant hereto. If an adjustment is required to be made as set
forth in this Section 15.05(e) above as a result of a distribution that is not a
quarterly dividend, such adjustment shall be based upon the full amount of the
distribution.

        (f) In case a tender or exchange offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall expire and such
tender or exchange offer (as amended upon the expiration thereof) shall require
the payment to stockholders of consideration per share of Common Stock having a
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of Directors)
that as of the last time (the "Expiration Time") tenders or exchanges may be
made pursuant to such tender or exchange offer (as it may be amended) exceeds
the Closing Price of a share of Common Stock on the Trading Day next succeeding
the Expiration Time, the Conversion Rate shall be increased so that the same
shall equal the rate determined by multiplying the Conversion Rate in effect
immediately prior to the Expiration Time by a fraction

                                       73



                (i) the numerator of which shall be the sum of (x) the fair
        market value (determined as aforesaid) of the aggregate consideration
        payable to stockholders based on the acceptance (up to any maximum
        specified in the terms of the tender or exchange offer) of all shares
        validly tendered or exchanged and not withdrawn as of the Expiration
        Time (the shares deemed so accepted up to any such maximum, being
        referred to as the "Purchased Shares") and (y) the product of the number
        of shares of Common Stock outstanding (less any Purchased Shares) at the
        Expiration Time and the Closing Price of a share of Common Stock on the
        Trading Day next succeeding the Expiration Time, and

                (ii) the denominator of which shall be the number of shares of
        Common Stock outstanding (including any tendered or exchanged shares) at
        the Expiration Time multiplied by the Closing Price of a share of Common
        Stock on the Trading Day next succeeding the Expiration Time

such adjustment to become effective immediately prior to the opening of business
on the day following the Expiration Time. If the Company is obligated to
purchase shares pursuant to any such tender or exchange offer, but the Company
is permanently prevented by applicable law from effecting any such purchases or
all such purchases are rescinded, the Conversion Rate shall again be adjusted to
be the Conversion Rate that would then be in effect if such tender or exchange
offer had not been made.

        (g) In case of a tender or exchange offer made by a Person other than
the Company or any Subsidiary for an amount that increases the offeror's
ownership of Common Stock to more than twenty-five percent (25%) of the Common
Stock outstanding and shall involve the payment by such Person of consideration
per share of Common Stock having a fair market value (as determined by the Board
of Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors) that as of the last time (the "Offer
Expiration Time") tenders or exchanges may be made pursuant to such tender or
exchange offer (as it shall have been amended) that exceeds the Closing Price of
a share of Common Stock on the Trading Day next succeeding the Offer Expiration
Time, and in which, as of the Offer Expiration Time the Board of Directors is
not recommending rejection of the offer, the Conversion Rate shall be increased
so that the same shall equal the rate determined by multiplying the Conversion
Rate in effect immediately prior to the Offer Expiration Time by a fraction

                (i) the numerator of which shall be the sum of (x) the fair
        market value (determined as aforesaid) of the aggregate consideration
        payable to stockholders based on the acceptance (up to any maximum
        specified in the terms of the tender or exchange offer) of all shares
        validly tendered or exchanged and not withdrawn as of the Offer
        Expiration Time

                                       74



        (the shares deemed so accepted, up to any such maximum, being referred
        to as the "Accepted Purchased Shares") and (y) the product of the number
        of shares of Common Stock outstanding (less any Accepted Purchased
        Shares) at the Offer Expiration Time and the Closing Price of a share of
        Common Stock on the Trading Day next succeeding the Offer Expiration
        Time, and

                (ii) the denominator of which shall be the number of shares of
        Common Stock outstanding (including any tendered or exchanged shares) at
        the Offer Expiration Time multiplied by the Closing Price of a share of
        Common Stock on the Trading Day next succeeding the Offer Expiration
        Time,

such adjustment to become effective immediately prior to the opening of business
on the day following the Offer Expiration Time. If such Person is obligated to
purchase shares pursuant to any such tender or exchange offer, but such Person
is permanently prevented by applicable law from effecting any such purchases or
all such purchases are rescinded, the Conversion Rate shall again be adjusted to
be the Conversion Rate that would then be in effect if such tender or exchange
offer had not been made. Notwithstanding the foregoing, the adjustment described
in this Section 15.05(g) shall not be made if, as of the Offer Expiration Time,
the offering documents with respect to such offer disclose a plan or intention
to cause the Company to engage in any transaction described in Article 12.

        (h) For purposes of this Section 15.05, the following terms shall have
the meaning indicated:

                (1) "Closing Price" with respect to any security on any day
        shall mean the closing sale price, regular way, on such day or, in case
        no such sale takes place on such day, the average of the reported
        closing bid and asked prices, regular way, in each case as quoted on the
        Nasdaq National Market or, if such security is not quoted or listed or
        admitted to trading on such Nasdaq National Market, on the principal
        national securities exchange or quotation system on which such security
        is quoted or listed or admitted to trading or, if not quoted or listed
        or admitted to trading on any national securities exchange or quotation
        system, the average of the closing bid and asked prices of such security
        on the over-the-counter market on the day in question as reported by the
        National Quotation Bureau Incorporated, or a similar generally accepted
        reporting service, or if not so available, in such manner as furnished
        by any New York Stock Exchange member firm selected from time to time by
        the Board of Directors for that purpose, or a price determined in good
        faith by the Board of Directors or, to the extent permitted by
        applicable law, a duly authorized committee thereof, whose determination
        shall be conclusive.

                                       75



                (2) "Current Market Price" shall mean the average of the daily
        Closing Prices per share of Common Stock for the ten consecutive Trading
        Days selected by the Company commencing no more than 30 Trading Days
        before and ending not later than the earlier of such date of
        determination and the day before the "ex" date with respect to the
        issuance, distribution, subdivision or combination requiring such
        computation immediately prior to the date in question. For purpose of
        this paragraph, the term "ex" date, (1) when used with respect to any
        issuance or distribution, means the first date on which the Common Stock
        trades, regular way, on the relevant exchange or in the relevant market
        from which the Closing Price was obtained without the right to receive
        such issuance or distribution, and (2) when used with respect to any
        subdivision or combination of shares of Common Stock, means the first
        date on which the Common Stock trades, regular way, on such exchange or
        in such market after the time at which such subdivision or combination
        becomes effective.

                If another issuance, distribution, subdivision or combination to
        which Section 15.05 applies occurs during the period applicable for
        calculating "Current Market Price" pursuant to the definition in the
        preceding paragraph, "Current Market Price" shall be calculated for such
        period in a manner determined by the Board of Directors to reflect the
        impact of such issuance, distribution, subdivision or combination on the
        Closing Price of the Common Stock during such period.

                (3) "Fair Market Value" shall mean the amount which a willing
        buyer would pay a willing seller in an arm's-length transaction.

                (4) "Record Date" shall mean, with respect to any dividend,
        distribution or other transaction or event in which the holders of
        Common Stock have the right to receive any cash, securities or other
        property or in which the Common Stock (or other applicable security) is
        exchanged for or converted into any combination of cash, securities or
        other property, the date fixed for determination of stockholders
        entitled to receive such cash, securities or other property (whether
        such date is fixed by the Board of Directors or by statute, contract or
        otherwise).

                (5) "Trading Day" shall mean (x) if the applicable security is
        quoted on the Nasdaq National Market, a day on which trades may be made
        thereon or (y) if the applicable security is listed or admitted for
        trading on the New York Stock Exchange or another national securities
        exchange, a day on which the New York Stock Exchange or another national
        securities exchange is open for business or (z) if the applicable

                                       76



        security is not so listed, admitted for trading or quoted, any day other
        than a Saturday or Sunday or a day on which banking institutions in the
        State of New York are authorized or obligated by law or executive order
        to close.

        (i) The Company may make such increases in the Conversion Rate, in
addition to those required by Sections 15.05(a), (b), (c), (d), (e), (f) or (g)
as the Board of Directors considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.

To the extent permitted by applicable law, the Company from time to time may
increase the Conversion Rate by any amount for any period of time, the increase
is irrevocable during the period and the Board of Directors shall have made a
determination that such increase would be in the best interests of the Company,
which determination shall be conclusive. Whenever the Conversion Rate is
increased pursuant to the preceding sentence, the Company shall mail to holders
of record of the Notes a notice of the increase prior to the date the increased
Conversion Rate takes effect, and such notice shall state the increased
Conversion Rate and the period during which it will be in effect.

        (j) No adjustment in the Conversion Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent (1%) in
such rate; provided that any adjustments that by reason of this Section 15.05)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Article 15 shall be made
by the Company and shall be made to the nearest cent or to the nearest one-ten
thousandth (1/10,000) of a share, as the case may be. No adjustment need be made
for rights to purchase Common Stock pursuant to a Company plan for reinvestment
of dividends or interest. To the extent the Notes become convertible into cash,
assets, property or securities (other than capital stock of the Company), no
adjustment need be made thereafter as to the cash, assets, property or such
securities. Interest will not accrue on any cash into which the Notes are
convertible.

        (k) Whenever the Conversion Rate is adjusted as herein provided, the
Company shall promptly file with the Trustee and any conversion agent other than
the Trustee an Officers' Certificate setting forth the Conversion Rate after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment. Unless and until a Responsible Officer of the Trustee shall have
received such Officers' Certificate, the Trustee shall not be deemed to have
knowledge of any adjustment of the Conversion Rate and may assume that the last
Conversion Rate of which it has knowledge is still in effect. Promptly after
delivery of such certificate, the Company shall prepare a notice of such

                                       77



adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and
the date on which each adjustment becomes effective and shall mail such notice
of such adjustment of the Conversion Rate to the holder of each Note at his last
address appearing on the Note register provided for in Section 2.05 of this
Indenture, within twenty (20) days after execution thereof. Failure to deliver
such notice shall not affect the legality or validity of any such adjustment.

        (l) In any case in which this Section 15.05 provides that an adjustment
shall become effective immediately after (1) a record date or Record Date for an
event, (2) the date fixed for the determination of stockholders entitled to
receive a dividend or distribution pursuant to Section 15.05(a), (3) a date
fixed for the determination of stockholders entitled to receive rights or
warrants pursuant to Section 15.05(b), (4) the Expiration Time for any tender or
exchange offer pursuant to Section 15.05(f), or (5) the Offer Expiration Time
for a tender or exchange offer pursuant to Section 15.05(g) (each a
"Determination Date"), the Company may elect to defer until the occurrence of
the applicable Adjustment Event (as hereinafter defined) (x) issuing to the
holder of any Note converted after such Determination Date and before the
occurrence of such Adjustment Event, the additional shares of Common Stock or
other securities issuable upon such conversion by reason of the adjustment
required by such Adjustment Event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and (y) paying to such
holder any amount in cash in lieu of any fraction pursuant to Section 15.03. For
purposes of this Section 15.05(l), the term "Adjustment Event" shall mean:

                (i) in any case referred to in clause (1) hereof, the occurrence
        of such event,

                (ii) in any case referred to in clause (2) hereof, the date any
        such dividend or distribution is paid or made,

                (iii) in any case referred to in clause (3) hereof, the date of
        expiration of such rights or warrants, and

                (iv) in any case referred to in clause (4) or clause (5) hereof,
        the date a sale or exchange of Common Stock pursuant to such tender or
        exchange offer is consummated and becomes irrevocable.

        (m) For purposes of this Section 15.05, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Company will not pay
any dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.

                                       78



        SECTION 15.06. Effect of Reclassification, Consolidation, Merger or
Sale. If any of the following events occur, namely (i) any reclassification or
change of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 15.05(c) applies), (ii) any consolidation, merger
or combination of the Company with another Person as a result of which holders
of Common Stock shall be entitled to receive stock, other securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, or (iii) any sale or conveyance of all or substantially all of the
properties and assets of the Company to any other Person as a result of which
holders of Common Stock shall be entitled to receive stock, other securities or
other property or assets (including cash) with respect to or in exchange for
such Common Stock, then the Company or the successor or purchasing Person, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture) providing that each Note shall be convertible
into the kind and amount of shares of stock, other securities or other property
or assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a holder of a number
of shares of Common Stock issuable upon conversion of such Notes (assuming, for
such purposes, a sufficient number of authorized shares of Common Stock are
available to convert all such Notes) immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance assuming such
holder of Common Stock did not exercise his rights of election, if any, as to
the kind or amount of stock, other securities or other property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance (provided that, if the kind or amount of
stock, other securities or other property or assets (including cash) receivable
upon such reclassification, change, consolidation, merger, combination, sale or
conveyance is not the same for each share of Common Stock in respect of which
such rights of election shall not have been exercised ("nonelecting share"),
then for the purposes of this Section 15.06 the kind and amount of stock, other
securities or other property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
for each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
15.

        The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at its address appearing on the
Note register provided for in Section 2.05 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.

                                       79



        The above provisions of this Section shall similarly apply to successive
reclassifications, changes, consolidations, mergers, combinations, sales and
conveyances.

        If this Section 15.06 applies to any event or occurrence, Section 15.05
shall not apply.

        SECTION 15.07. Taxes on Shares Issued. The issue of stock certificates
on conversions of Notes shall be made without charge to the converting
Noteholder for any documentary, stamp or similar issue or transfer tax in
respect of the issue thereof. The Company shall not, however, be required to pay
any such tax which may be payable in respect of any transfer involved in the
issue and delivery of stock in any name other than that of the holder of any
Note converted, and the Company shall not be required to issue or deliver any
such stock certificate unless and until the Person or Persons requesting the
issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.

        SECTION 15.08. Reservation of Shares, Shares to Be Fully Paid;
Compliance with Governmental Requirements; Listing of Common Stock. The Company
shall provide, free from preemptive rights, out of its authorized but unissued
shares or shares held in treasury, sufficient shares of Common Stock to provide
for the conversion of the Notes from time to time as such Notes are presented
for conversion.

        Before taking any action which would cause an adjustment increasing the
Conversion Rate to an amount that would cause the Conversion Price to be reduced
below the then par value, if any, of the shares of Common Stock issuable upon
conversion of the Notes, the Company will take all corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue shares of such Common Stock at such adjusted
Conversion Rate.

        The Company covenants that all shares of Common Stock which may be
issued upon conversion of Notes will upon issue be fully paid and non-assessable
by the Company and free from all taxes, liens and charges with respect to the
issue thereof.

        The Company covenants that, if any shares of Common Stock to be provided
for the purpose of conversion of Notes hereunder require registration with or
approval of any governmental authority under any federal or state law before
such shares may be validly issued upon conversion, the Company will in good
faith and as expeditiously as possible, to the extent then permitted by the
rules and interpretations of the Securities and Exchange Commission (or any

                                       80



successor thereto), endeavor to secure such registration or approval, as the
case may be.

        The Company further covenants that, if at any time the Common Stock
shall be listed on the Nasdaq National Market or any other national securities
exchange or automated quotation system, the Company will, if permitted by the
rules of such exchange or automated quotation system, list and keep listed, so
long as the Common Stock shall be so listed on such exchange or automated
quotation system, all Common Stock issuable upon conversion of the Note;
provided that, if the rules of such exchange or automated quotation system
permit the Company to defer the listing of such Common Stock until the first
conversion of the Notes into Common Stock in accordance with the provisions of
this Indenture, the Company covenants to list such Common Stock issuable upon
conversion of the Notes in accordance with the requirements of such exchange or
automated quotation system at such time.

        SECTION 15.09. Responsibility of Trustee. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any holder of Notes to determine the Conversion Rate or whether any facts exist
which may require any adjustment of the Conversion Rate, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and any other
conversion agent shall not be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock, or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Note; and the Trustee and any other conversion agent make no representations
with respect thereto. Neither the Trustee nor any conversion agent shall be
responsible for any failure of the Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property or
cash upon the surrender of any Note for the purpose of conversion or to comply
with any of the duties, responsibilities or covenants of the Company contained
in this Article 15. Without limiting the generality of the foregoing, neither
the Trustee nor any conversion agent shall be under any responsibility to
determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.06 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Noteholders upon the conversion of their Notes after any event referred to in
such Section 15.06 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 8.01, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officers' Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.

                                       81



        SECTION 15.10. Notice to Holders Prior to Certain Actions. In case:

        (a) the Company shall declare a dividend (or any other distribution) on
its Common Stock that would require an adjustment in the Conversion Rate
pursuant to Section 15.05; or

        (b) the Company shall authorize the granting to the holders of all or
substantially all of its Common Stock of rights or warrants to subscribe for or
purchase any share of any class or any other rights or warrants; or

        (c) of any reclassification or reorganization of the Common Stock of the
Company (other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or

        (d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company;

the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register provided for in
Section 2.05 of this Indenture, as promptly as possible but in any event at
least ten (10) days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.

        SECTION 15.11. Rights Issued in Respect of Common Stock Issued upon
Conversion. Each share of Common Stock issued upon conversion of Notes pursuant
to this Article 15 shall be entitled to receive the appropriate number of
rights, if any, and the certificates representing the Common Stock issued upon
such conversion shall bear such legends, if any, in each case as may be provided
by the terms of any shareholder rights agreement adopted by the Company, as the
same may be amended from time to time.

                                       82



                                   ARTICLE 16
                            MISCELLANEOUS PROVISIONS

        SECTION 16.01. Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.

        SECTION 16.02. Official Acts by Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any Person that shall at the time be the lawful sole successor of the
Company.

        SECTION 16.03. Addresses for Notices, Etc. Any notice or demand which by
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the holders of Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Photronics, Inc., 15 Secor Road, Brookfield, CT 06804, Attention:
Treasurer. Any notice, direction, request or demand hereunder to or upon the
Trustee shall be deemed to have been sufficiently given or made, for all
purposes, if given or served by being deposited, postage prepaid, by registered
or certified mail in a post office letter box addressed to the Corporate Trust
Office, which office is, at the date as of which this Indenture is dated,
located at 101 Barclay Street, Floor 8W, New York, NY 10286.

        The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.

        Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Note register and shall be sufficiently given to him if so mailed within the
time prescribed.

        Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.

        SECTION 16.04. Governing Law. This Indenture and each Note shall be
deemed to be a contract made under the laws of the State of New York, and for
all purposes shall be construed in accordance with the laws of the State of New
York.

                                       83



        SECTION 16.05. Evidence of Compliance with Conditions Precedent,
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, other
than the original issuance of the Securities hereunder, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, and an Opinion of Counsel stating that, in the
opinion of such counsel, all such conditions precedent have been complied with.

        Each certificate or opinion provided for in this Indenture and delivered
to the Trustee with respect to compliance with a condition or covenant provided
for in this Indenture shall include: (1) a statement that the person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statement or opinion contained in such certificate or opinion is
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.

        SECTION 16.06. Legal Holidays. In any case in which the date of maturity
of interest on or principal of the Notes or the date fixed for redemption of any
Note will not be a Business Day, then payment of such interest on or principal
of the Notes need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the date of
maturity or the date fixed for redemption, and no interest shall accrue for the
period from and after such date.

        SECTION 16.07. Trust Indenture Act. This Indenture is hereby made
subject to, and shall be governed by, the provisions of the Trust Indenture Act
required to be part of and to govern indentures qualified under the Trust
Indenture Act; provided that, unless otherwise required by law, notwithstanding
the foregoing, this Indenture and the Notes issued hereunder shall not be
subject to the provisions of subsections (a)(1), (a)(2), and (a)(3) of Section
314 of the Trust Indenture Act as now in effect or as hereafter amended or
modified; provided further that this Section 16.07 shall not require this
Indenture or the Trustee to be qualified under the Trust Indenture Act prior to
the time such qualification is in fact required under the terms of the Trust
Indenture Act, nor shall it constitute any admission or acknowledgment by any
party to the Indenture that any such qualification is required prior to the time
such qualification is in fact required under the terms of the Trust Indenture
Act. If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in an

                                       84



indenture qualified under the Trust Indenture Act, such required provision shall
control.

        SECTION 16.08. No Security Interest Created. Nothing in this Indenture
or in the Notes, expressed or implied, shall be construed to constitute a
security interest under the Uniform Commercial Code or similar legislation, as
now or hereafter enacted and in effect, in any jurisdiction in which property of
the Company or its subsidiaries is located.

        SECTION 16.09. Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto, any paying agent, any authenticating agent, any Note registrar and their
successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.

        SECTION 16.10. Table of Contents, Headings, Etc. The table of contents
and the titles and headings of the articles and Sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.

        SECTION 16.11. Authenticating Agent. The Trustee may appoint an
authenticating agent that shall be authorized to act on its behalf, and subject
to its direction, in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.04, 2.05, 2.06, 2.07 and 3.02, as fully to all
intents and purposes as though the authenticating agent had been expressly
authorized by this Indenture and those Sections to authenticate and deliver
Notes. For all purposes of this Indenture, the authentication and delivery of
Notes by the authenticating agent shall be deemed to be authentication and
delivery of such Notes "by the Trustee" and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent shall be deemed to
satisfy any requirement hereunder or in the Notes for the Trustee's certificate
of authentication. Such authenticating agent shall at all times be a Person
eligible to serve as trustee hereunder pursuant to Section 8.09.

        Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to all or substantially all the
corporate trust business of any authenticating agent, shall be the successor of
the authenticating agent hereunder, if such successor corporation is otherwise
eligible under this Section 16.11, without the execution or filing of any paper
or any further act on the part of the parties hereto or the authenticating agent
or such successor corporation.

                                       85



        Any authenticating agent may at any time resign by giving written notice
of resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any authenticating agent by giving written notice of
termination to such authenticating agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time any
authenticating agent shall cease to be eligible under this Section, the Trustee
shall either promptly appoint a successor authenticating agent or itself assume
the duties and obligations of the former authenticating agent under this
Indenture and, upon such appointment of a successor authenticating agent, if
made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of such appointment of
a successor authenticating agent to all holders of Notes as the names and
addresses of such holders appear on the Note register.

        The Company agrees to pay to the authenticating agent from time to time
such reasonable compensation for its services as shall be agreed upon in writing
between the Company and the authenticating agent.

        The provisions of Sections 8.02, 8.03, 8.04, 9.03 and this Section 16.11
shall be applicable to any authenticating agent.

        SECTION 16.12. Execution in Counterparts. This Indenture may be executed
in any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.

        SECTION 16.13. Severability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, then (to the extent
permitted by law) the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

        The Bank of New York hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions herein above set forth.

                                       86



        IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed.


                                    PHOTRONICS, INC.

                                    By: /s/ Sean T. Smith
                                       -----------------------------------------
                                       Name:  Sean T. Smith
                                       Title: Vice President and Chief
                                              Financial Officer


                                    THE BANK OF NEW YORK, as Trustee

                                    By: /s/ Geovanni Barris
                                       -----------------------------------------
                                       Name:  Geovanni Barris
                                       Title: Vice President

                                       87



                                                                       EXHIBIT A

        [Include only for Global Notes:]

        [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE
"DEPOSITARY", WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE CERTIFICATES)
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND
ANY PAYMENT HEREIN IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

        [Include only for Notes that are Restricted Securities]

        [THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS,
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT); (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THIS NOTE UNDER RULE 144(K) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS NOTE OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE EXCEPT (A) TO PHOTRONICS,
INC. OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE
TIME OF SUCH TRANSFER); (3) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE (2)(D) ABOVE), IT WILL FURNISH TO THE BANK OF NEW YORK, AS



TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT;
AND (4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND
WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THIS NOTE PURSUANT TO CLAUSE
(2)(D) ABOVE OR UPON ANY TRANSFER OF THIS NOTE UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION). THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING RESTRICTION.]

                                       A-2



                                PHOTRONICS, INC.

                  2 1/4% CONVERTIBLE SUBORDINATED NOTE DUE 2008

                                                                CUSIP: 719405AD4

No.                                                                  $

        Photronics, Inc., a corporation duly organized and validly existing
under the laws of the State of Connecticut (herein called the "Company", which
term includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received hereby promises to pay to or its registered
assigns, the principal sum of DOLLARS [the principal sum set forth on Schedule I
hereto]/1/ on April 15, 2008 at the office or agency of the Company maintained
for that purpose in accordance with the terms of the Indenture, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, and to pay interest,
semiannually on April 15 and October 15 of each year, commencing October 15,
2003, on said principal sum at said office or agency, in like coin or currency,
at the rate per annum of 2 1/4%, from the April 15 or October 15, as the case
may be, next preceding the date of this Note to which interest has been paid or
duly provided for, unless the date hereof is a date to which interest has been
paid or duly provided for, in which case from the date of this Note, or unless
no interest has been paid or duly provided for on the Notes, in which case from
April 15, 2003, until payment of said principal sum has been made or duly
provided for. Notwithstanding the foregoing, if the date hereof is after any
April 1 or October 1, as the case may be, and before the following April 15 or
October 15, this Note shall bear interest from such April 15 or October 15;
provided that if the Company shall default in the payment of interest due on
such April 15 or October 15, then this Note shall bear interest from the next
preceding April 15 or October 15 to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for on such Note,
from April 15, 2003. Except as otherwise provided in the Indenture, the interest
payable on the Note pursuant to the Indenture on any April 15 or October 15 will
be paid to the Person entitled thereto as it appears in the Note register at the
close of business on the record date, which shall be the April 1 or October 1
(whether or not a Business Day) next preceding such April 15 or October 15, as
provided in the Indenture; provided that any such interest not punctually paid
or duly provided for shall be payable as provided in the Indenture. Interest
may, at the option of the Company, be paid either (i) by check mailed to the
registered address of such Person (provided that the holder of

- ----------
        /1/ For Global Notes only

                                       A-3



Notes with an aggregate principal amount in excess of $2,000,000 shall, at the
written election of such holder, be paid by wire transfer of immediately
available funds) or (ii) by transfer to an account maintained by such Person
located in the United States; provided that payments to the Depositary will be
made by wire transfer of immediately available funds to the account of the
Depositary or its nominee.

        The Company promises to pay interest on overdue principal, premium, if
any, or (to the extent that payment of such interest is enforceable under
applicable law) interest at the rate per annum of 2 1/4%.

        Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on the Notes to the
prior payment in full of all Senior Indebtedness, as defined in the Indenture,
and provisions giving the holder of this Note the right to convert this Note
into Common Stock of the Company on the terms and subject to the limitations
referred to on the reverse hereof and as more fully specified in the Indenture.
Such further provisions shall for all purposes have the same effect as though
fully set forth at this place.

        This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of the State of New York.

        This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.

                                       A-4



        IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.

                                    PHOTRONICS, INC.


                                    By:
                                       -----------------------------------------
                                       Name:
                                       Title:

Attest:
       -------------------------------
       Name:
       Title:

TRUSTEE'S CERTIFICATE OF AUTHENTICATION

This is one of the Notes described in the within-named Indenture.

THE BANK OF NEW YORK, as Trustee

By:
   -----------------------------------
   Authorized Signatory
   Name:
   Title:

Dated: April 15, 2003

                                       A-5



                             FORM OF REVERSE OF NOTE

                                PHOTRONICS, INC.

                  2 1/4% CONVERTIBLE SUBORDINATED NOTE DUE 2008

        This Note is one of a duly authorized issue of Notes of the Company,
designated as its 2 1/4% Convertible Subordinated Notes due 2008 (herein called
the "Notes"), limited to the aggregate principal amount of $150,000,000 all
issued or to be issued under and pursuant to an Indenture dated as of April 15,
2003 (herein called the "Indenture"), between the Company and The Bank of New
York, as trustee (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the holders of the Notes.

        In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of, premium, if any, and accrued
interest on all Notes may be declared by either the Trustee or the holders of
not less than 25% in aggregate principal amount of the Notes then outstanding,
and upon said declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.

        The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the Notes;
provided that no such supplemental indenture shall (i) extend the fixed maturity
of any Note, or reduce the rate or extend the time for payment of interest
thereon, or reduce the principal amount thereof or premium, if any, thereon, or
reduce any amount payable upon redemption thereof, or impair the right of any
Noteholder to institute suit for the payment thereof, or make the principal
thereof or interest or premium, if any, thereon payable in any coin or currency
other than that provided in the Notes, or modify the provisions of the Indenture
with respect to the subordination of the Notes in a manner adverse to the
Noteholders in any material respect, or change the obligation of the Company to
redeem any Note upon the happening of a Fundamental Change (as defined in the
Indenture) in a manner adverse to the holder of the Notes, or impair the right
to convert the Notes into Common Stock subject to the terms set forth in the
Indenture, including Section 15.06 thereof, without the consent of the holder of
each Note so affected or (ii) reduce the aforesaid percentage of Notes, the
holders of which are required to consent to any such supplemental indenture,
reduce the quorum or voting requirements of the

                                       A-6



Indenture or change any obligation of the Company to maintain an office or
agency in the places and for the purposes specified in the Indenture, without
the consent of the holders of all Notes then outstanding. Subject to the
provisions of the Indenture, the holders of a majority in aggregate principal
amount of the Notes at the time outstanding may on behalf of the holders of all
of the Notes waive any past default or Event of Default under the Indenture and
its consequences except a default in the payment of interest or any premium on,
or the principal of, any of the Notes, or a failure by the Company to convert
any Notes into Common Stock of the Company, or a default in the payment of the
redemption price pursuant to Article 3 of the Indenture, or a default in respect
of a covenant or provisions of the Indenture which under Article 11 of the
Indenture cannot be modified without the consent of the holders of each or all
Notes then outstanding or affected thereby. Any such consent or waiver by the
holder of this Note (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such holder and upon all future holders and owners
of this Note and any Notes which may be issued in exchange or substitution
hereof, irrespective of whether or not any notation thereof is made upon this
Note or such other Notes.

        The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
whether outstanding at the date of the Indenture or thereafter incurred, and
this Note is issued subject to the provisions of the Indenture with respect to
such subordination. Each holder of this Note, by accepting the same, agrees to
and shall be bound by such provisions and authorizes the Trustee on its behalf
to take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee his attorney-in-fact for such
purpose.

        The indebtedness evidenced by the Notes is neither superior nor
subordinated in right of payment to, and is pari passu with, the Company's 6.00%
Convertible Subordinated Notes due June 1, 2004 and the Company's 4 3/4%
Convertible Subordinated Notes due 2006.

        No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note at the place, at the respective times, at the rate and in the coin
or currency herein prescribed.

        Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.

        The Notes are issuable in fully registered form, without coupons, in
denominations of $1,000 principal amount and any integral multiple of $1,000. At

                                       A-7



the office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax,
assessment or other governmental charge that may be imposed in connection with
any registration or exchange of Notes, Notes may be exchanged for a like
aggregate principal amount of Notes of any other authorized denominations.

        The Notes may not be redeemed by the Company prior to April 15, 2008. If
a Fundamental Change occurs at any time prior to maturity of the Notes, the
Notes will be redeemable on the 30th day after notice thereof (the "Repurchase
Date") at the option of the holder of the Notes at a redemption price equal to
100% of the principal amount thereof, together with accrued interest to, but
excluding, the date of redemption; provided that, if such Repurchase Date is a
April 15 or October 15, the interest payable on such date shall be paid to the
holder of record of the Notes on the preceding April 1 or October 1,
respectively. The Notes will be redeemable in multiples of $1,000 principal
amount. The Company shall mail to all holders of record of the Notes a notice of
the occurrence of a Fundamental Change and of the redemption right arising as a
result thereof on or before the 10th day after the occurrence of such
Fundamental Change. For a Note to be so redeemed at the option of the holder,
the Company must receive at the office or agency of the Company maintained for
that purpose in accordance with the terms of the Indenture, such Note with the
form entitled "Option to Elect Repayment Upon a Fundamental Change" on the
reverse thereof duly completed, together with such Note, duly endorsed for
transfer, on or before the 30th day after the date of such notice of a
Fundamental Change (or if such 30th day is not a Business Day, the immediately
succeeding Business Day).

        Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after the original issuance of any Notes
through the close of business on the final maturity date of the Notes, to
convert each $1,000 principal amount of the Notes into 62.9376 shares of the
Company's Common Stock (the "Conversion Rate"), as such shares shall be
constituted at the date of conversion and subject to adjustment from time to
time as provided in the Indenture, upon surrender of this Note, together with a
conversion notice as provided in the Indenture (the form entitled "Conversion
Notice" on the reverse hereof), to the Company at the office or agency of the
Company maintained for that purpose in accordance with the terms of the
Indenture, or at the option of such holder, the Corporate Trust Office, and,
unless the shares issuable on conversion are to be issued in the same name as
this Note, duly endorsed by, or accompanied by instruments of transfer in form
satisfactory to the Company duly executed by, the holder or by his duly
authorized attorney.

        No adjustment in respect of interest on any Note converted or dividends
on any shares issued upon conversion of such Note will be made upon any

                                       A-8



conversion except as set forth in the next sentence. If this Note (or portion
hereof) is surrendered for conversion during the period from the close of
business on any record date for the payment of interest to the close of business
on the Business Day preceding the following interest payment date, this Note (or
portion hereof being converted) must be accompanied by payment, in immediately
available funds or other funds acceptable to the Company, of an amount equal to
the interest payable on such interest payment date on the principal amount being
converted; provided that no such payment shall be required if (a) a Fundamental
Change has occurred and the Repurchase Date specified in a Company Notice given
in connection therewith falls within such period or (b) there shall exist at the
time of conversion a default in the payment of interest on the Notes.

        No fractional shares will be issued upon any conversion, but an
adjustment and payment in cash will be made, as provided in the Indenture, in
respect of any fraction of a share which would otherwise be issuable upon the
surrender of any Note or Notes for conversion.

        A Note in respect of which a holder is exercising its right to require
redemption upon a Fundamental Change may be converted only if such holder
withdraws its election to exercise such right in accordance with the terms of
the Indenture.

        Upon due presentment for registration of transfer of this Note at the
office or agency of the Company maintained for that purpose in accordance with
the terms of the Indenture, a new Note or Notes of authorized denominations for
an equal aggregate principal amount will be issued to the transferee in exchange
thereof; subject to the limitations provided in the Indenture, without charge
except for any tax, assessment or other governmental charge imposed in
connection therewith.

        The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar) for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.

        No recourse for the payment of the principal of or any premium or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no

                                       A-9



recourse under or upon any obligation, covenant or agreement of the Company in
the Indenture or any supplemental indenture or in any Note, or because of the
creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer or director or subsidiary,
as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.

        This Note shall be deemed to be a contract made under the laws of New
York, and for all purposes shall be construed in accordance with the laws of New
York.

        Terms used in this Note and defined in the Indenture are used herein as
therein defined.

                                      A-10



                                  ABBREVIATIONS

        The following abbreviations, when used in the inscription of the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations.

TEN COM -    as tenants in common           UNIF GIFT MIN ACT -___ Custodian ___
TEN ENT -    as tenant by the entireties    (Cust)             (Minor)
JT TEN -     as joint tenants with right
             of survivorship and not as     under Uniform Gifts to Minors Act
             tenants in common              ------------------------------------
                                                          (State)

        Additional abbreviations may also be used though not in the above list.

                                      A-11



                                CONVERSION NOTICE

TO:     PHOTRONICS, INC.
      THE BANK OF NEW YORK

        The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion thereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of Photronics, Inc. in accordance with the terms of the Indenture referred
to in this Note, and directs that the shares issuable and deliverable upon such
conversion, together with any check in payment for fractional shares and any
Notes representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
provide the appropriate information below and pay all transfer taxes payable
with respect thereto. Any amount required to be paid by the undersigned on
account of interest accompanies this Note.

Dated:
      ------------------------

                                       -----------------------------------------

                                       -----------------------------------------
                                       Signature(s)

                                       Signature(s) must be guaranteed by an
                                       "eligible guarantor institution" meeting
                                       the requirements of the Note registrar,
                                       which requirements include membership
                                       or participation in the Security Transfer
                                       Agent Medallion Program ("STAMP")
                                       or such other "signature guarantee
                                       program" as may be determined by the
                                       Note registrar in addition to, or in
                                       substitution for, STAMP, all in
                                       accordance with the Securities Exchange
                                       Act of 1934, as amended.

                                       -----------------------------------------
                                       Signature Guarantee

                                      A-12



        Fill in the registration of shares of Common Stock if to be issued, and
Notes if to be delivered, other than to and in the name of the registered
holder:

- ------------------------------------
(Name)


- ------------------------------------
(Street Address)


- ------------------------------------
(City, State and Zip Code)

                                      A-13



- ------------------------------------
Please print name and address

Principal amount to be converted
(if less than all):

$
 -----------------------------------

Social Security or Other Taxpayer
Identification Number:


- ------------------------------------

                                      A-14



                            OPTION TO ELECT REPAYMENT
                            UPON A FUNDAMENTAL CHANGE

TO:     PHOTRONICS, INC.
       THE BANK OF NEW YORK

        The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Photronics, Inc. (the "Company") as to the
occurrence of a Fundamental Change with respect to the Company and requests and
instructs the Company to repay the entire principal amount of this Note, or the
portion thereof (which is $1,000 or an integral multiple thereof) below
designated, in accordance with the terms of the Indenture referred to in this
Note at the price of 100% of such entire principal amount or portion thereof,
together with accrued interest to, but excluding, such repayment date, to the
registered holder hereof.

Dated:
      ------------------------


                                       -----------------------------------------


                                       -----------------------------------------
                                       Signature(s)

                                          NOTICE: The above signatures of the
                                          holder(s) hereof must correspond with
                                          the name as written upon the face of
                                          the Note in every particular without
                                          alteration or enlargement or any
                                          change whatever.

                                          Principal amount to be repaid (if less
                                          than all):

                                          $
                                           -------------------------------------


                                          --------------------------------------
                                          Social Security or Other Taxpayer
                                          Identification Number

                                      A-15



                                   ASSIGNMENT

        For value received ______________________________hereby sell(s)
assign(s) and transfer(s) unto ___________________________________ (Please
insert social security or other Taxpayer Identification Number of assignee) the
within Note, and hereby irrevocably constitutes and appoints
______________________________________ attorney to transfer said Note on the
books of the Company, with full power of substitution in the premises.

        In connection with any transfer of the Note prior to the expiration of
the holding period applicable to sales thereof under Rule 144(k) under the
Securities Act (or any successor provision) (other than any transfer pursuant to
a registration statement that has been declared effective under the Securities
Act), the undersigned confirms that such Note is being transferred:

        [ ]     To Photronics, Inc. or a subsidiary thereof; or

        [ ]     To a "qualified institutional buyer" in compliance with Rule
                144A under the Securities Act of 1933, as amended; or

        [ ]     Pursuant to and in compliance with Rule 144 under the Securities
                Act of 1933, as amended; or

        [ ]     Pursuant to a Registration Statement which has been declared
                effective under the Securities Act of 1933, as amended, and
                which continues to be effective at the time of transfer;

and unless the Note has been transferred to Photronics, Inc. or a subsidiary
thereof, box below is checked, the undersigned confirms that such Note is not
being transferred to an "affiliate" of the Company as defined in Rule 144 under
the Securities Act of 1933, as amended (an "Affiliate").

Dated:
      ------------------------

                                       -----------------------------------------


                                       -----------------------------------------
                                       Signature(s)

                                       Signature(s) must be guaranteed by an
                                       "eligible guarantor institution" meeting
                                       the requirements of the Note registrar,
                                       which requirements include membership or
                                       participation in the

                                      A-16



                                       Security Transfer Agent Medallion
                                       Program ("STAMP") or such other
                                       "signature guarantee program" as may be
                                       determined by the Note registrar in
                                       addition to, or in substitution for,
                                       STAMP, all in accordance with the
                                       Securities Exchange Act of 1934, as
                                       amended.


                                       -----------------------------------------
                                       Signature Guarantee

NOTICE: The signature of the conversion notice, the option to elect repayment
upon a Fundamental Change or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.

                                      A-17



                                                                      Schedule I

                   [Include Schedule I only for a Global Note]

                                PHOTRONICS, INC.
                  2 1/4 Convertible Subordinated Note due 2008
No. _______

                                                            Authorized Signature
                            Notation Explaining Principal   of Trustee or
Date    Principal Amount    Amount Recorded                 Custodian
- ----    ----------------    -----------------------------   --------------------

- ----    ----------------    -----------------------------   --------------------

- ----    ----------------    -----------------------------   --------------------

- ----    ----------------    -----------------------------   --------------------

- ----    ----------------    -----------------------------   --------------------

- ----    ----------------    -----------------------------   --------------------

- ----    ----------------    -----------------------------   --------------------

- ----    ----------------    -----------------------------   --------------------

- ----    ----------------    -----------------------------   --------------------

- ----    ----------------    -----------------------------   --------------------

- ----    ----------------    -----------------------------   --------------------

- ----    ----------------    -----------------------------   --------------------

- ----    ----------------    -----------------------------   --------------------

                                      A-18



                                                                     EXHIBIT 4.2

                          REGISTRATION RIGHTS AGREEMENT

                                      among

                                PHOTRONICS, INC.

                                   as Issuer,

                                       and

                        MORGAN STANLEY & CO. INCORPORATED

               MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

                                       and
                           J.P. MORGAN SECURITIES INC.

                              as Initial Purchasers

                           Dated as of April 15, 2003



        REGISTRATION RIGHTS AGREEMENT dated as of April 15, 2003 among
Photronics, Inc., a Connecticut corporation (the "Company"), and Morgan Stanley
& Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P.
Morgan Securities Inc. (the "Initial Purchasers") pursuant to the Purchase
Agreement dated April 9, 2003 (the "Purchase Agreement"), between the Company
and the Initial Purchasers. In order to induce the Initial Purchasers to enter
into the Purchase Agreement, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Purchase Agreement.

        The Company agrees with the Initial Purchasers, (i) for their benefit as
Initial Purchasers and (ii) for the benefit of the beneficial owners (including
the Initial Purchasers) from time to time of the Notes (as defined herein) and
the beneficial owners from time to time of the Underlying Common Stock (as
defined herein) issued upon conversion of the Notes (each of the foregoing a
"Holder" and together the "Holders"), as follows:

        SECTION 1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:

        "Affiliate" means with respect to any specified person, an "affiliate,"
as defined in Rule 144, of such person.

        "Amendment Effectiveness Deadline Date" has the meaning set forth in
Section 2(d) hereof.

        "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in The City of New York
are authorized or obligated by law or executive order to close.

        "Common Stock" means the shares of common stock, $.01 par value, of the
Company and any other shares of common stock as may constitute "Common Stock"
for purposes of the Indenture, including the Underlying Common Stock.

        "Conversion Price" has the meaning assigned such term in the Indenture.

        "Damages Accrual Period" has the meaning set forth in Section 2(e)
hereof.

        "Damages Payment Date" means each April 15 and October 15.

        "Deferral Notice" has the meaning set forth in Section 3(i) hereof.

        "Deferral Period" has the meaning set forth in Section 3(i) hereof.

                                        2



        "Effectiveness Deadline Date" has the meaning set forth in Section 2(a)
hereof.

        "Effectiveness Period" means the period commencing on the date hereof
and ending on the date that all Registrable Securities have ceased to be
Registrable Securities.

        "Event" has the meaning set forth in Section 2(e) hereof.

        "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.

        "Filing Deadline Date" has the meaning set forth in Section 2(a) hereof.

        "Holder" has the meaning set forth in the second paragraph of this
Agreement.

        "Indenture" means the Indenture, dated as of April 15, 2003, between the
Company and The Bank of New York, as trustee, pursuant to which the Notes are
being issued.

        "Initial Purchasers" means Morgan Stanley & Co. Incorporated, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc.

        "Initial Shelf Registration Statement" has the meaning set forth in
Section 2(a) hereof.

        "Issue Date" means the first date of original issuance of the Notes.

        "Liquidated Damages Amount" has the meaning set forth in Section 2(e)
hereof.

        "Losses" has the meaning set forth in Section 6 hereof.

        "Material Event" has the meaning set forth in Section 3(i) hereof.

        "Notes" means the 2 1/4% Convertible Subordinated Notes Due 2008 of the
Company to be purchased pursuant to the Purchase Agreement.

        "Notice and Questionnaire" means a written notice delivered to the
Company containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as Annex A to the Offering
Memorandum of the Company dated April 9, 2003 relating to the Notes.

        "Notice Holder" means, on any date, any Holder that has delivered a
Notice and Questionnaire to the Company on or prior to such date.

        "Purchase Agreement" has the meaning set forth in the preamble hereof.

                                        3



        "Prospectus" means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all materials incorporated by reference or
explicitly deemed to be incorporated by reference in such Prospectus.

        "Record Holder" means with respect to any Damages Payment Date relating
to any Notes or Underlying Common Stock as to which any Liquidated Damages
Amount has accrued, the registered holder of such Note or Underlying Common
Stock on the April 1 immediately preceding a Damages Payment Date occurring on a
April 15, and on the October 1 immediately preceding a Damages Payment Date
occurring on a October 15.

        "Registrable Securities" means the Notes until such Notes have been
converted into or exchanged for the Underlying Common Stock and, at all times
subsequent to any such conversion or exchange the Underlying Common Stock and
any securities into or for which such Underlying Common Stock has been converted
or exchanged, and any security issued with respect thereto upon any stock
dividend, split or similar event until, in the case of any such security, (A)
the earliest of (i) its effective registration under the Securities Act and
resale in accordance with the Registration Statement covering it, (ii)
expiration of the holding period that would be applicable thereto, under Rule
144(k) or (iii) its sale to the public pursuant to Rule 144 (or any similar
provision then in force, but not Rule 144A) under the Securities Act, and (B) as
a result of the event or circumstance described in any of the foregoing clauses
(i) through (iii), the legend with respect to transfer restrictions required
under the Indenture are removed or removable in accordance with the terms of the
Indenture or such legend, as the case may be.

        "Registration Expenses" has the meaning set forth in Section 5 hereof.

        "Registration Statement" means any registration statement of the Company
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all materials incorporated by reference or explicitly deemed to be incorporated
by reference in such registration statement.

        "Restricted Securities" means "Restricted Securities" as defined in Rule
144.

        "Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.

        "Rule 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.

        "SEC" means the Securities and Exchange Commission.

                                        4



        "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.

        "Shelf Registration Statement" has the meaning set forth in Section 2(a)
hereof.

        "Special Counsel" means Davis Polk & Wardwell or one such other
successor counsel as shall be specified by the Holders of a majority of the
Registrable Securities, but which may, with the written consent of the Initial
Purchasers (which shall not be unreasonably withheld), be another nationally
recognized law firm experienced in securities law matters designated by the
Company, the reasonable fees and expenses of which will be paid by the Company
pursuant to Section 5 hereof. For purposes of determining the holders of a
majority of the Registrable Securities in this definition, Holders of Notes
shall be deemed to be the Holders of the number of shares of Underlying Common
Stock into which such Notes are or would be convertible as of the date the
consent is requested.

        "Subsequent Shelf Registration Statement" has the meaning set forth in
Section 2(b) hereof.

        "TIA" means the Trust Indenture Act of 1939, as amended.

        "Trustee" means The Bank of New York, the Trustee under the Indenture.

        "Underlying Common Stock" means the Common Stock into which the Notes
are convertible or issued upon any such conversion.

        SECTION 2. Shelf Registration. (a) The Company shall prepare and file or
cause to be prepared and filed with the SEC, as soon as practicable but in any
event by the date (the "Filing Deadline Date") ninety (90) days after the Issue
Date, a Registration Statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf
Registration Statement") registering the resale from time to time by Holders
thereof of all of the Registrable Securities (the "Initial Shelf Registration
Statement"). The Initial Shelf Registration Statement shall be on Form S-3 or
another appropriate form permitting registration of such Registrable Securities
for resale by such Holders in accordance with the methods of distribution
elected by the Holders and set forth in the Initial Shelf Registration
Statement. The Company shall use its reasonable best efforts to cause the
Initial Shelf Registration Statement to be declared effective under the
Securities Act as promptly as is practicable but in any event by the date (the
"Effectiveness Deadline Date") that is two hundred ten (210) days after the
Issue Date, and to keep the Initial Shelf Registration Statement (or any
Subsequent Shelf Registration Statement) continuously effective under the
Securities Act until the expiration of the Effectiveness Period. At the time the
Initial Shelf Registration Statement is declared effective, each Holder that
became a Notice Holder on or prior to the date ten (10) Business Days prior to
such time of effectiveness shall be named as a selling securityholder in the
Initial Shelf Registration Statement and the related Prospectus in such a manner
as to permit such Holder to

                                        5



deliver such Prospectus to purchasers of Registrable Securities in accordance
with applicable law. Subject to the following sentence, none of the Company's
security holders (other than the Holders of Registrable Securities) shall have
the right to include any of the Company's securities in the Shelf Registration
Statement. No provision in this Agreement shall prohibit or otherwise restrict
the Company's compliance with the Registration Rights Agreement dated April 4,
2002 between the Company and the investors named therein (the "PKL Agreement")
and the Company may, if required to do so by such investors pursuant to their
rights under the PKL Agreement, include Common Stock held by such investors for
registration in the Shelf Registration Statement.

        (b)     If the Initial Shelf Registration Statement or any Subsequent
Shelf Registration Statement ceases to be effective for any reason at any time
during the Effectiveness Period (other than because all Registrable Securities
registered thereunder shall have been resold pursuant thereto or shall have
otherwise ceased to be Registrable Securities), the Company shall use its
reasonable best efforts to obtain the prompt withdrawal of any order suspending
the effectiveness thereof, and in any event shall within thirty (30) days of
such cessation of effectiveness amend the Shelf Registration Statement in a
manner reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
covering all of the securities that as of the date of such filing are
Registrable Securities (a "Subsequent Shelf Registration Statement"). If a
Subsequent Shelf Registration Statement is filed, the Company shall use its
reasonable best efforts to cause the Subsequent Shelf Registration Statement to
become effective as promptly as is practicable after such filing and to keep
such Registration Statement (or subsequent Shelf Registration Statement)
continuously effective until the end of the Effectiveness Period.

        (c)     The Company shall supplement and amend the Shelf Registration
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration Statement
or if required by the Securities Act.

        (d)     Each Holder agrees that if such Holder wishes to sell
Registrable Securities pursuant to a Shelf Registration Statement and related
Prospectus, it will do so only in accordance with this Section 2(d) and Section
3(i). Each Holder wishing to sell Registrable Securities pursuant to a Shelf
Registration Statement and related Prospectus agrees to deliver a Notice and
Questionnaire to the Company prior to any intended distribution of Registrable
Securities under the Shelf Registration Statement. From and after the date the
Initial Shelf Registration Statement is declared effective, the Company shall,
as promptly as practicable after the date a Notice and Questionnaire is
delivered, and in any event upon the later of (x) ten (10) Business Days after
such date or (y) ten (10) Business Days after the expiration of any Deferral
Period in effect when the Notice and Questionnaire is delivered or put into
effect within ten (10) Business Days of such delivery date:

                (i) if required by applicable law, file with the SEC a
        post-effective amendment to the Shelf Registration Statement or prepare
        and, if required by applicable law, file a

                                        6



        supplement to the related Prospectus or a supplement or amendment to any
        document incorporated therein by reference or file any other required
        document so that the Holder delivering such Notice and Questionnaire is
        named as a selling securityholder in the Shelf Registration Statement
        and the related Prospectus in such a manner as to permit such Holder to
        deliver such Prospectus to purchasers of the Registrable Securities in
        accordance with applicable law and, if the Company shall file a
        post-effective amendment to the Shelf Registration Statement, use its
        reasonable best efforts to cause such post-effective amendment to be
        declared effective under the Securities Act as promptly as is
        practicable, but in any event by the date (the "Amendment Effectiveness
        Deadline Date") that is forty-five (45) days after the date such
        post-effective amendment is required by this clause to be filed;

                (ii) provide such Holder copies of any documents filed pursuant
        to Section 2(d)(i); and

                (iii) notify such Holder as promptly as practicable after the
        effectiveness under the Securities Act of any post-effective amendment
        filed pursuant to Section 2(d)(i);

provided that if such Notice and Questionnaire is delivered during a Deferral
Period or within 10 Business Days prior to the commencement of a Deferral
Period, the Company shall so inform the Holder delivering such Notice and
Questionnaire and shall take the actions set forth in clauses (i), (ii) and
(iii) above upon expiration of the Deferral Period in accordance with Section
3(i). Notwithstanding anything contained herein to the contrary, (i) the Company
shall be under no obligation to name any Holder that is not a Notice Holder as a
selling securityholder in any Registration Statement or related Prospectus and
(ii) the Amendment Effectiveness Deadline Date shall be extended by up to ten
(10) Business Days from the expiration of a Deferral Period (and the Company
shall incur no obligation to pay Liquidated Damages during such extension) if
such Deferral Period shall be in effect on the Amendment Effectiveness Deadline
Date.

        (e)     The parties hereto agree that the Holders of Registrable
Securities will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if

                        (i)     the Initial Shelf Registration Statement has not
        been filed on or prior to the Filing Deadline Date,

                        (ii)    the Initial Shelf Registration Statement has not
        been declared effective under the Securities Act on or prior to the
        Effectiveness Deadline Date,

                        (iii)   the Company has failed to perform its
        obligations set forth in Section 2(d) within the time period required
        therein,

                                        7



                        (iv)    any post-effective amendment to a Shelf
        Registration Statement filed pursuant to Section 2(d)(i) has not become
        effective under the Securities Act on or prior to the Amendment
        Effectiveness Deadline Date,

                        (v)     the aggregate duration of Deferral Periods in
        any period exceeds the number of days permitted in respect of such
        period pursuant to Section 3(i) hereof or

                        (vi)    the number of Deferral Periods in any period
        exceeds the number permitted in respect of such period pursuant to
        Section 3(i) hereof.

Each event described in any of the foregoing clauses (i) through (vi) is
individually referred to herein as an "Event." For purposes of this Agreement,
each Event set forth above shall begin and end on the dates set forth in the
table set forth below:

    Type of
    Event by               Beginning                       Ending
     Clause                  Date                           Date
    --------               ---------                       ------

      (i)         Filing Deadline Date            the date the Initial Shelf
                                                  Registration Statement is
                                                  filed

      (ii)        Effectiveness Deadline  Date    the date the Initial Shelf
                                                  Registration Statement becomes
                                                  effective under the Securities
                                                  Act

      (iii)       the date by which the Company   the date the Company performs
                  is required to perform its      its obligations set forth in
                  obligations under Section       Section 2(d)
                  2(d)

      (iv)        the Amendment Effectiveness     the date the applicable
                  Deadline Date                   post-effective amendment to a
                                                  Shelf Registration Statement
                                                  becomes effective under the
                                                  Securities Act

      (v)         the date on which the           termination of the Deferral
                  aggregate duration of           Period that caused the limit
                  Deferral Periods in any         on the aggregate duration
                  period exceeds the number       of Deferral Periods to be
                  of days permitted by            exceeded
                  Section 3(i)

                                        8



    Type of
    Event by               Beginning                       Ending
     Clause                  Date                           Date
    --------               ---------                       ------

      (vi)        the date of commencement        termination of the Deferral
                  of a Deferral Period that       Period that caused the
                  causes the number of            number of Deferral Periods
                  Deferral Periods to exceed      to exceed the number
                  the number permitted by         permitted by Section 3(i)
                  Section 3(i)

For purposes of this Agreement, Events shall begin on the dates set forth in the
table above and shall continue until the ending dates set forth in the table
above.

        Commencing on (and including) any date that an Event has begun and
ending on (but excluding) the next date on which there are no Events that have
occurred and are continuing (a "Damages Accrual Period"), the Company shall pay,
as liquidated damages and not as a penalty, to Record Holders of Registrable
Securities an amount (the "Liquidated Damages Amount") accruing, for each day in
the Damages Accrual Period, (i) in respect of any Note that is a Registrable
Security, at a rate per annum equal to 0.25% for the first 90 days and 0.5%
thereafter of the aggregate principal amount of such Note and (ii) in respect of
each share of Underlying Common Stock that is a Registrable Security at a rate
per annum equal to 0.25% for the first 90 days and 0.5% thereafter on the
Conversion Price on such date; provided that in the case of a Damages Accrual
Period that is in effect solely as a result of an Event of the type described in
clause (iii) or (iv) of the preceding paragraph, such Liquidated Damages Amount
shall be paid only to the Holders (as set forth in the succeeding paragraph)
that have delivered Notices and Questionnaires that caused the Company to incur
the obligations set forth in Section 2(d) the non-performance of which is the
basis of such Event. In calculating the Liquidated Damages Amount on any date on
which no Notes are outstanding, the Conversion Price and the Liquidated Damages
Amount shall be calculated as if the Notes were still outstanding.
Notwithstanding the foregoing, no Liquidated Damages Amount shall accrue as to
any Registrable Security from and after the earlier of (x) the date such
security is no longer a Registrable Security and (y) expiration of the
Effectiveness Period. The rate of accrual of the Liquidated Damages Amount with
respect to any period shall not exceed the rate provided for in this paragraph
notwithstanding the occurrence of multiple concurrent Events.

        The Liquidated Damages Amount shall accrue from the first day of the
applicable Damages Accrual Period, and shall be payable on each Damages Payment
Date during the Damage Accrual Period (and on the Damages Payment Date next
succeeding the end of the Damages Accrual Period if the Damage Accrual Period
does not end on a Damages Payment Date) to the Record Holders of the Registrable
Securities entitled thereto; provided that any Liquidated Damages Amount accrued
with respect to any Note or portion thereof repurchased by the Company upon a
fundamental change or converted into Underlying Common Stock on a

                                        9



conversion date prior to the Damages Payment Date, shall, in any such event, be
paid instead to the Holder who submitted such Note or portion thereof for
repurchase or conversion on the applicable repurchase date or conversion date,
as the case may be, on such date (or promptly following the conversion date, in
the case of conversion); provided further, that, in the case of an Event of the
type described in clause (iii) or (iv) of the first paragraph of this Section
2(e), such Liquidated Damages Amount shall be paid only to the Holders entitled
thereto pursuant to such first paragraph by check mailed to the address set
forth in the Notice and Questionnaire delivered by such Holder. The Trustee
shall be entitled, on behalf of registered holders of Notes or Underlying Common
Stock, to seek any available remedy for the enforcement of this Agreement,
including for the payment of such Liquidated Damages Amount. Notwithstanding the
foregoing, the parties agree that the sole damages payable for a violation of
the terms of this Agreement with respect to which liquidated damages are
expressly provided shall be such liquidated damages. Nothing shall preclude any
Holder from pursuing or obtaining specific performance or other equitable relief
with respect to this Agreement.

        All of the Company's obligations set forth in this Section 2(e) that are
outstanding with respect to any Registrable Security at the time such security
ceases to be a Registrable Security shall survive until such time as all such
obligations with respect to such security have been satisfied in full
(notwithstanding termination of this Agreement pursuant to Section 8(k)).

        The parties hereto agree that the liquidated damages provided for in
this Section 2(e) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities by reason of the failure of a
Shelf Registration Statement to be filed or declared effective or available for
effecting resales of Registrable Securities in accordance with the provisions
hereof.

        SECTION 3. Registration Procedures. In connection with the registration
obligations of the Company under Section 2 hereof, the Company shall:

                (a)     Prepare and file with the SEC a Registration Statement
        or Registration Statements on any appropriate form under the Securities
        Act available for the sale or transfer of the Registrable Securities by
        the Holders thereof in accordance with the intended method or methods of
        distribution thereof, and use its reasonable best efforts to cause each
        such Registration Statement to become effective and remain effective as
        provided herein; provided that before filing the Initial Registration
        Statement or related Prospectus or any amendments or supplements thereto
        with the SEC prior to the effectiveness of the Initial Shelf
        Registration Statement the Company shall, furnish to the Initial
        Purchasers and the Special Counsel of such offering, if any, copies of
        all such documents proposed to be filed and use its reasonable best
        efforts to reflect in each such document when so filed with the SEC such
        comments as the Initial Purchasers or the Special Counsel, if any,
        reasonably shall propose within five (5) Business Days of the delivery
        of such copies to the Initial Purchasers and the Special Counsel.

                                       10



                (b)     Prepare and file with the SEC such amendments and
        post-effective amendments to each Registration Statement as may be
        necessary to keep such Registration Statement continuously effective for
        the applicable period specified in Section 2(a); cause the related
        Prospectus to be supplemented by any required prospectus supplement, and
        as so supplemented to be filed pursuant to Rule 424 (or any similar
        provisions then in force) under the Securities Act; and use its
        reasonable best efforts to comply with the provisions of the Securities
        Act applicable to it with respect to the disposition of all securities
        covered by such Registration Statement during the Effectiveness Period
        in accordance with the intended methods of disposition by the sellers
        thereof set forth in such Registration Statement as so amended or such
        Prospectus as so supplemented.

                (c)     As promptly as practicable give notice to the Notice
        Holders, the Initial Purchasers and the Special Counsel, (i) when any
        Prospectus, prospectus supplement, Registration Statement or
        post-effective amendment to a Registration Statement has been filed with
        the SEC and, with respect to a Registration Statement or any
        post-effective amendment, when the same has been declared effective,
        (ii) of any request, following the effectiveness of the Initial Shelf
        Registration Statement under the Securities Act, by the SEC or any other
        federal or state governmental authority for amendments or supplements to
        any Registration Statement or related Prospectus or for additional
        information, (iii) of the issuance by the SEC or any other federal or
        state governmental authority of any stop order suspending the
        effectiveness of any Registration Statement or the initiation or
        threatening of any proceedings for that purpose, (iv) of the receipt by
        the Company of any notification with respect to the suspension of the
        qualification or exemption from qualification of any of the Registrable
        Securities for sale in any jurisdiction or the initiation or threatening
        of any proceeding for such purpose, (v) of the occurrence of a Material
        Event and (vi) of the determination by the Company that a post-effective
        amendment to a Registration Statement will be filed with the SEC, which
        notice may, at the discretion of the Company (or as required pursuant to
        Section 3 (i)), state that it constitutes a Deferral Notice, in which
        event the provisions of Section 3(i) shall apply; provided that,
        following the effectiveness of the Initial Shelf Registration Statement,
        the Company's obligation to give notice with respect to the foregoing
        clauses (i) and (vi), except in the case of a notice that constitutes a
        Deferral Notice, shall be satisfied upon filing of the relevant
        Prospectus, prospectus supplement, Registration Statement or post-
        effective amendment on the SEC's EDGAR filing system.

                (d)     Use its reasonable best efforts to obtain the withdrawal
        of any order suspending the effectiveness of a Registration Statement or
        the lifting of any suspension of the qualification (or exemption from
        qualification) of any of the Registrable Securities for sale in any
        jurisdiction in which they have been qualified for sale, in either case
        at the earliest possible moment, and provide immediate notice to each
        Notice Holder and the Initial Purchasers of the withdrawal of any such
        order.

                                       11



                (e)     Following the effectiveness of the Initial Shelf
        Registration Statement, if reasonably requested by any Notice Holder, as
        promptly as practicable incorporate in a prospectus supplement or
        post-effective amendment to a Registration Statement such information as
        the Initial Purchasers and the Special Counsel or such Notice Holders
        shall on the basis of an opinion of nationally-recognized counsel
        experienced in such matters, determine to be required to be included
        therein by applicable law and make any required filings of such
        prospectus supplement or post-effective amendment.

                (f)     As promptly as practicable furnish to each Notice
        Holder, the Special Counsel and the Initial Purchasers, without charge,
        upon the effectiveness of the Initial Shelf Registration Statement at
        least one (1) conformed copy of the Initial Shelf Registration Statement
        and the accompanying Prospectus.

                (g)     During the Effectiveness Period, deliver to each Notice
        Holder and the Special Counsel, if any, in connection with any sale of
        Registrable Securities pursuant to a Registration Statement, without
        charge, as many copies of the Prospectus or Prospectuses relating to
        such Registrable Securities (including each preliminary prospectus) and
        any amendment or supplement thereto as such Notice Holder may reasonably
        request; and the Company hereby consents (except during such periods
        that a Deferral Notice is outstanding and has not been revoked) to the
        use of such Prospectus or each amendment or supplement thereto by each
        Notice Holder in connection with any offering and sale of the
        Registrable Securities covered by such Prospectus or any amendment or
        supplement thereto in the manner set forth therein.

                (h)     Prior to any public offering of the Registrable
        Securities pursuant to a Registration Statement, use its reasonable best
        efforts to cooperate with the Notice Holders and the Special Counsel in
        connection with the registration or qualification (or exemption from
        such registration or qualification) of such Registrable Securities for
        offer and sale under the securities or Blue Sky laws of such
        jurisdictions within the United States as a majority of the holders of
        Registrable Securities reasonably requests in writing, which request may
        be included in the Notice and Questionnaire; prior to any public
        offering of the Registrable Securities pursuant to the Shelf
        Registration Statement, use its reasonable best efforts to cooperate
        with the Notice Holders and the Special Counsel to keep each such
        registration or qualification (or exemption therefrom) effective during
        the Effectiveness Period in connection with such offer and sale of
        Registrable Securities pursuant to such registration or qualification
        (or exemption therefrom) and do any and all other acts or things
        reasonably necessary or advisable to enable the disposition in such
        jurisdictions of such Registrable Securities in the manner set forth in
        the relevant Registration Statement and the related Prospectus; provided
        that the Company will not be required to (i) qualify as a foreign
        corporation or as a dealer in securities in any jurisdiction where it
        would not otherwise be required to register or qualify but for this
        Agreement or (ii) take any action that would subject it to general
        service of process in suits or to taxation in any such jurisdiction
        where it is not then so subject.

                                       12



                (i)     Upon (A) the issuance by the SEC of a stop order
        suspending the effectiveness of the Shelf Registration Statement or the
        initiation of proceedings with respect to the Shelf Registration
        Statement under Section 8(d) or 8(e) of the Securities Act, (B) the
        occurrence of any event or the existence of any fact (a "Material
        Event") as a result of which any Registration Statement shall contain
        any untrue statement of a material fact or omit to state any material
        fact required to be stated therein or necessary to make the statements
        therein not misleading, or any Prospectus shall contain any untrue
        statement of a material fact or omit to state any material fact required
        to be stated therein or necessary to make the statements therein, in the
        light of the circumstances under which they were made, not misleading,
        or (C) the occurrence or existence of any pending corporate development
        that, in the reasonable discretion of the Company, makes it appropriate
        to suspend the availability of the Shelf Registration Statement and the
        related Prospectus for a discrete period of time:

                        (i) in the case of clause (B) above, subject to the next
                sentence, as promptly as practicable prepare and file, if
                necessary pursuant to applicable law, a post-effective amendment
                to such Registration Statement or a supplement to the related
                Prospectus or any document incorporated therein by reference or
                file any other required document that would be incorporated by
                reference into such Registration Statement and Prospectus so
                that such Registration Statement does not contain any untrue
                statement of a material fact or omit to state any material fact
                required to be stated therein or necessary to make the
                statements therein not misleading, and such Prospectus does not
                contain any untrue statement of a material fact or omit to state
                any material fact required to be stated therein or necessary to
                make the statements therein, in the light of the circumstances
                under which they were made, not misleading, as thereafter
                delivered to the purchasers of the Registrable Securities being
                sold thereunder, and, in the case of a post-effective amendment
                to a Registration Statement, subject to the next sentence, use
                its reasonable best efforts to cause it to be declared effective
                as promptly as is practicable, and

                        (ii) give notice to the Notice Holders, and the Special
                Counsel, if any, that the availability of the Shelf Registration
                Statement is suspended (a "Deferral Notice") and, upon receipt
                of any Deferral Notice, each Notice Holder agrees not to sell
                any Registrable Securities pursuant to the Registration
                Statement until it is advised in writing by the Company that the
                Prospectus may be used, and has received copies of the
                supplemented or amended Prospectus or any additional or
                supplemental filings that are incorporated or deemed
                incorporated by reference in the Prospectus.

                The Company will use its reasonable best efforts to ensure that
        the use of the Prospectus may be resumed (x) in the case of clause (A)
        above, as promptly as is

                                       13



        practicable, (y) in the case of clause (B) above, as soon as, in the
        sole judgment of the Company, public disclosure of such Material Event
        would not be prejudicial to or contrary to the interests of the Company
        or, if necessary to avoid unreasonable burden or expense, as soon as
        practicable thereafter and (z) in the case of clause (C) above, as soon
        as in the reasonable discretion of the Company, such suspension is no
        longer appropriate. The Company shall be entitled to exercise its right
        under this Section 3(i) to suspend the availability of the Shelf
        Registration Statement or any Prospectus, without incurring or accruing
        any obligation to pay liquidated damages pursuant to Section 2(e), no
        more than one (1) time in any three month period or three (3) times in
        any twelve month period, and any such period during which the
        availability of the Registration Statement and any Prospectus is
        suspended (the "Deferral Period") shall, without incurring any
        obligation to pay liquidated damages pursuant to Section 2(e), not
        exceed 30 days; provided that the aggregate duration of any Deferral
        Periods shall not exceed 30 days in any three month period (or 60 days
        in any three month period in the event of a Material Event pursuant to
        which the Company has delivered a second notice as required below) or 90
        days in any twelve (12) month period; provided that in the case of a
        Material Event relating to an acquisition or a probable acquisition or
        financing, recapitalization, business combination or other similar
        transaction, the Company may, without incurring any obligation to pay
        liquidated damages pursuant to Section 2(e), deliver to Notice Holders a
        second notice to the effect set forth above, which shall have the effect
        of extending the Deferral Period by up to an additional 30 days, or such
        shorter period of time as is specified in such second notice.

                (j)     If requested in writing in connection with a disposition
        of Registrable Securities pursuant to a Registration Statement, make
        reasonably available for inspection during normal business hours by a
        representative for the Notice Holders of such Registrable Securities,
        any broker-dealers, attorneys and accountants retained by such Notice
        Holders, and any attorneys or other agents retained by a broker-dealer
        engaged by such Notice Holders, all relevant financial and other records
        and pertinent corporate documents and properties of the Company and its
        subsidiaries, and cause the appropriate officers, directors and
        employees of the Company and its subsidiaries to make reasonably
        available for inspection during normal business hours on reasonable
        notice all relevant information reasonably requested by such
        representative for the Notice Holders, or any such broker-dealers,
        attorneys or accountants in connection with such disposition, in each
        case as is customary for similar "due diligence" examinations; provided
        that such persons shall first agree in writing with the Company that any
        information that is reasonably designated by the Company in writing as
        confidential at the time of delivery of such information shall be kept
        confidential by such persons and shall be used solely for the purposes
        of exercising rights under this Agreement, unless (i) disclosure of such
        information is required by court or administrative order or is necessary
        to respond to inquiries of regulatory authorities, (ii) disclosure of
        such information is required by law, (iii) such information becomes
        generally available to the public other than as a result of a disclosure
        or failure to safeguard by any such person or (iv) such information
        becomes

                                       14



        available to any such person from a source other than the Company and
        such source is not bound by a confidentiality agreement, and provided
        further that the foregoing inspection and information gathering shall,
        to the greatest extent possible, be coordinated on behalf of all the
        Notice Holders and the other parties entitled thereto by the Special
        Counsel.

                (k)     Comply with all applicable rules and regulations of the
        SEC and make generally available to its securityholders earning
        statements (which need not be audited) satisfying the provisions of
        Section 11(a) of the Securities Act and Rule 158 thereunder (or any
        similar rule promulgated under the Securities Act) for a 12-month period
        commencing on the first day of the first fiscal quarter of the Company
        commencing after the effective date of a Registration Statement, which
        statements shall be made available no later than 45 days after the end
        of the 12-month period or 90 days if the 12-month period coincides with
        a fiscal year of the Company.

                (l)     Cooperate with each Notice Holder to facilitate the
        timely preparation and delivery of certificates representing Registrable
        Securities sold or to be sold pursuant to a Registration Statement,
        which certificates shall not bear any restrictive legends, and cause
        such Registrable Securities to be in such denominations as are permitted
        by the Indenture and registered in such names as such Notice Holder may
        request in writing at least one (1) Business Day prior to any sale of
        such Registrable Securities.

                (m)     Provide a CUSIP number for all Registrable Securities
        covered by each Registration Statement not later than the effective date
        of such Registration Statement and provide the Trustee and the transfer
        agent for the Common Stock with printed certificates for the Registrable
        Securities that are in a form eligible for deposit with The Depository
        Trust Company.

                (n)     Cooperate and assist in any filings required to be made
        with the National Association of Securities Dealers, Inc.

                (o)     Upon (i) the filing of the Initial Shelf Registration
        Statement and (ii) the effectiveness of the Initial Shelf Registration
        Statement, announce the same, in each case by release to Reuters
        Economic Services and Bloomberg Business News.

        SECTION 4. Holder's Obligations. Each Holder agrees, by acquisition of
the Registrable Securities, that no Holder shall be entitled to sell any of such
Registrable Securities pursuant to a Registration Statement or to receive a
Prospectus relating thereto, unless such Holder has furnished the Company with a
Notice and Questionnaire as required pursuant to Section 2(d) hereof (including
the information required to be included in such Notice and Questionnaire) and
the information set forth in the next sentence. Each Notice Holder agrees
promptly to furnish to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such Notice
Holder not misleading and any other information regarding such Notice Holder and
the distribution of such Registrable Securities as

                                       15



the Company may from time to time reasonably request. Any sale of any
Registrable Securities by any Holder shall constitute a representation and
warranty by such Holder that the information relating to such Holder and its
plan of distribution is as set forth in the Prospectus delivered by such Holder
in connection with such disposition, that such Prospectus does not as of the
time of such sale contain any untrue statement of a material fact relating to or
provided by such Holder or its plan of distribution and that such Prospectus
does not as of the time of such sale omit to state any material fact relating to
or provided by such Holder or its plan of distribution necessary to make the
statements in such Prospectus, in the light of the circumstances under which
they were made, not misleading.

        SECTION 5. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance by the Company of its
obligations under Sections 2 and 3 of this Agreement whether or not any
Registration Statement is declared effective. Such fees and expenses shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (x) with respect to filings required to be
made with the National Association of Securities Dealers, Inc. and (y) of
compliance with federal and state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of the Special Counsel in
connection with Blue Sky qualifications of the Registrable Securities under the
laws of such jurisdictions as Notice Holders of a majority of the Registrable
Securities being sold pursuant to a Registration Statement may designate), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities in a form eligible for deposit with The
Depository Trust Company), (iii) duplication expenses relating to copies of any
Registration Statement or Prospectus delivered to any Holders hereunder, (iv)
fees and disbursements of counsel for the Company and the Special Counsel in
connection with the Shelf Registration Statement (provided that the Company
shall not be liable for the fees and expenses of more than one separate firm for
all parties participating in any transaction hereunder), (v) reasonable fees and
disbursements of the Trustee and its counsel and of the registrar and transfer
agent for the Common Stock and (vi) Securities Act liability insurance obtained
by the Company in its sole discretion. In addition, the Company shall pay the
internal expenses of the Company (including, without limitation, all salaries
and expenses of officers and employees performing legal or accounting duties),
the expense of any annual audit, the fees and expenses incurred in connection
with the listing by the Company of the Registrable Securities on any securities
exchange on which similar securities of the Company are then listed and the fees
and expenses of any person, including special experts, retained by the Company.
Notwithstanding the provisions of this Section 5, each seller of Registrable
Securities shall pay selling expenses and all registration expenses to the
extent required by applicable law.

        SECTION 6. Indemnification.

        (a)     Indemnification by the Company. The Company shall indemnify and
hold harmless each Notice Holder and each person, if any, who controls any
Notice Holder (within the meaning

                                       16



of either Section 15 of the Securities Act or Section 20 of the Exchange Act)
from and against any losses, liabilities, claims, damages and expenses
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim)
(collectively, "Losses"), arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon 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 that the
Company shall not be liable in any such case to the extent that any such Losses
arise out of or are based upon an untrue statement or alleged untrue statement
contained in or omission or alleged omission from any of such documents in
reliance upon and conformity with any of the information relating to the Holders
furnished to the Company in writing by a Holder expressly for use therein;
provided further, that the indemnification contained in this paragraph shall not
inure to the benefit of any Holder (or to the benefit of any person controlling
such Holder) on account of any such Losses arising out of or based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus or Prospectus provided in each case the
Company has performed its obligations under Section 3(a) hereof if either (A)
(i) such Holder failed to send or deliver a copy of the Prospectus with or prior
to the delivery of written confirmation of the sale by such Holder to the person
asserting the claim from which such Losses arise and (ii) the Prospectus would
have corrected such untrue statement or alleged untrue statement or such
omission or alleged omission, or (B) (x) such untrue statement or alleged untrue
statement, omission or alleged omission is corrected in an amendment or
supplement to the Prospectus and (y) having previously been furnished by or on
behalf of the Company with copies of the Prospectus as so amended or
supplemented, such Holder thereafter fails to deliver such Prospectus as so
amended or supplemented, with or prior to the delivery of written confirmation
of the sale of a Registrable Security to the person asserting the claim from
which such Losses arise.

        (b)     Indemnification by Holders. Each Holder agrees severally and not
jointly to indemnify and hold harmless the Company and its respective directors
and officers, and each person, if any, who controls the Company (within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act) or any other Holder, from and against all Losses arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or based
upon 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,
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with information furnished to the Company by such Holder expressly
for use in such Registration Statement or Prospectus or amendment or supplement
thereto. In no event shall the liability of any Holder hereunder be greater in
amount than the dollar amount of the proceeds received by such Holder upon the
sale of the Registrable Securities pursuant to the Registration Statement giving
rise to such indemnification obligation.

                                       17



        (c)     Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 6(a) or
6(b) hereof, such person (the "indemnified party") shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying party") in
writing and the indemnifying party, upon request of the indemnified party, shall
retain counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the reasonable fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all
indemnified parties, and that all such fees and expenses shall be reimbursed as
they are incurred. Such separate firm shall be designated in writing by, in the
case of parties indemnified pursuant to Section 6(a), the Holders of a majority
(with Holders of Notes deemed to be the Holders, for purposes of determining
such majority, of the number of shares of Underlying Common Stock into which
such Notes are or would be convertible as of the date on which such designation
is made) of the Registrable Securities covered by the Registration Statement
held by Holders that are indemnified parties pursuant to Section 6(a) and, in
the case of parties indemnified pursuant to Section 6(b), the Company. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 60
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.

                                       18



        (d)     Contribution. To the extent that the indemnification provided
for in this Section 6 is unavailable to an indemnified party under Section 6(a)
or 6(b) hereof in respect of any Losses or is insufficient to hold such
indemnified party harmless, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified party or
parties on the other hand or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the indemnifying party or parties on the one hand and of
the indemnified party or parties on the other hand in connection with the
statements or omissions that resulted in such Losses, as well as any other
relevant equitable considerations. Benefits received by the Company shall be
deemed to be equal to the total net proceeds from the initial placement pursuant
to the Purchase Agreement (before deducting expenses) of the Registrable
Securities to which such Losses relate. Benefits received by any Holder shall be
deemed to be equal to the value of receiving Registrable Securities that are
registered under the Securities Act. The relative fault of the Holders on the
one hand and the Company on the other hand 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 Holders or by the Company, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Holders' respective obligations to contribute
pursuant to this paragraph are several in proportion to the respective number of
Registrable Securities they have sold pursuant to a Registration Statement, and
not joint.

        The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method or allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the Losses
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding this Section 6(d), an
indemnifying party that is a selling Holder shall not be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities sold by such indemnifying party and distributed to the
public were offered to the public exceeds the amount of any damages that such
indemnifying party 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.

        (e)     The indemnity, contribution and expense reimbursement
obligations of the parties hereunder shall be in addition to any liability any
indemnified party may otherwise have hereunder, under the Purchase Agreement or
otherwise.

                                       19



        (f)     The indemnity and contribution provisions contained in this
Section 6 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Holder or any person controlling any Holder, or the Company, or the
Company's officers or directors or any person controlling the Company and (iii)
the sale of any Registrable Securities by any Holder.

        SECTION 7. Information Requirements. The Company covenants that, if at
any time before the end of the Effectiveness Period the Company is not subject
to the reporting requirements of the Exchange Act, it will cooperate with any
Holder and take such further reasonable action as any Holder may reasonably
request in writing (including, without limitation, making such reasonable
representations as any such Holder may reasonably request), all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 and Rule 144A under the Securities Act and
customarily taken in connection with sales pursuant to such exemptions. Upon the
written request of any Holder, the Company shall deliver to such Holder a
written statement as to whether it has complied with such filing requirements,
unless such a statement has been included in the Company's most recent report
filed pursuant to Section 13 or Section 15(d) of Exchange Act. Notwithstanding
the foregoing, nothing in this Section 7 shall be deemed to require the Company
to register any of its securities (other than the Common Stock) under any
section of the Exchange Act.

        SECTION 8. Miscellaneous.

        (a)     No Conflicting Agreements. The Company is not, as of the date
hereof, a party to, nor shall it, on or after the date of this Agreement, enter
into, any agreement with respect to its securities that conflicts with the
rights granted to the Holders in this Agreement. The Company represents and
warrants that the rights granted to the Holders hereunder do not in any way
conflict with the rights granted to the holders of the Company's securities
under any other agreements.

        (b)     Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of a majority of the then outstanding Registrable Securities (with Holders of
Notes deemed to be the Holders, for purposes of this Section, of the number of
shares of Underlying Common Stock into which such Notes are or would be
convertible as of the date on which such consent is requested). Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities being sold by such
Holders pursuant to such Registration Statement; provided that the provisions of
this sentence may not be

                                       20



amended, modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence. Each Holder of Registrable Securities
outstanding at the time of any such amendment, modification, supplement, waiver
or consent or thereafter shall be bound by any such amendment, modification,
supplement, waiver or consent effected pursuant to this Section 8(b), whether or
not any notice, writing or marking indicating such amendment, modification,
supplement, waiver or consent appears on the Registrable Securities or is
delivered to such Holder.

        (c)     Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, by telecopier, by
courier guaranteeing overnight delivery or by first-class mail, return receipt
requested, and shall be deemed given (i) when made, if made by hand delivery,
(ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after
being deposited with such courier, if made by overnight courier or (iv) on the
date indicated on the notice of receipt, if made by first-class mail, to the
parties as follows:

                        (i)     if to a Holder, at the most current address
        given by such Holder to the Company in a Notice and Questionnaire or any
        amendment thereto;

                        (ii)    if to the Company, to:

                                   Photronics, Inc.
                                   15 Secor Road
                                   Brookfield, CT 06804
                                   Attention: General Counsel
                                   Telecopy No.: (203) 755-5601

                                   and

                                   Shearman & Sterling
                                   599 Lexington Avenue
                                   New York, NY 10022
                                   Attention: Jonathan Jewett
                                   Telecopy No.: (212) 848-7179

                                       21



                        (iii)   if to the Initial Purchasers, to:

                                   Morgan Stanley & Co. Incorporated
                                   Merrill Lynch, Pierce, Fenner & Smith
                                   Incorporated
                                   J.P. Morgan Securities Inc.

                                   c/o Morgan Stanley & Co. Incorporated
                                   1585 Broadway
                                   New York, New York
                                   Attention: Equity Capital Markets
                                   Telecopy No.: (212) 761-0538

                                   and

                                   Davis Polk & Wardwell
                                   450 Lexington Avenue
                                   New York, New York 10017
                                   Attention: Alan Dean
                                   Telecopy No.: (212) 450-3800

or to such other address as such person may have furnished to the other persons
identified in this Section 8(c) in writing in accordance herewith.

        (d)     Approval of Holders. Whenever the consent or approval of Holders
of a specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (as such term is
defined in Rule 405 under the Securities Act) (other than the Initial Purchasers
or subsequent Holders if such subsequent Holders are deemed to be such
affiliates solely by reason of their holdings of such Registrable Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.

        (e)     Successors and Assigns. Any person who purchases any Registrable
Securities from the Initial Purchasers shall be deemed, for purposes of this
Agreement, to be an assignee of the Initial Purchasers. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties and shall inure to the benefit of and be binding upon each Holder
of any Registrable Securities.

        (f)     Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be original and all of which taken together
shall constitute one and the same agreement.

        (g)     Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

                                       22



        (h)     Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

        (i)     Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby, and the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction, it being intended that all of the rights and privileges of the
parties shall be enforceable to the fullest extent permitted by law.

        (j)     Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and the registration rights
granted by the Company with respect to the Registrable Securities. Except as
provided in the Purchase Agreement, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
undertakings among the parties with respect to such registration rights. No
party hereto shall have any rights, duties or obligations other than those
specifically set forth in this Agreement. In no event will such methods of
distribution take the form of an underwritten offering of the Registrable
Securities without the prior agreement of the Company.

        (k)     Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Effectiveness Period, except for
any liabilities or obligations under Section 4, 5 or 6 hereof and the
obligations to make payments of and provide for liquidated damages under Section
2(e) hereof to the extent such damages accrue prior to the end of the
Effectiveness Period, each of which shall remain in effect in accordance with
its terms.

                                       23



        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

                                                  PHOTRONICS, INC.


                                                  By /s/ Sean T. Smith
                                                    ----------------------------
                                                    Name:  Sean T. Smith
                                                    Title: Vice President and
                                                           Chief Financial
                                                           Officer


Confirmed and accepted as of the date first above written:

MORGAN STANLEY & CO. INCORPORATED


By /s/ Joseph P. Coleman
  ---------------------------------
Name:  Joseph P. Coleman
Title: Managing Director


MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED


By /s/ Matthew J. Schultz
  ---------------------------------
Name:   Matthew J. Schultz
Title:  Vice President


J.P. MORGAN SECURITIES INC.


By /s/ Andrew Sanford
  ---------------------------------
Name:  Andrew Sanford
Title: Managing Director

Opinion of Brenner, Saltzman and Wallman LLP

Exhibit 5.1

June 6, 2003

Photronics, Inc.

15 Secor Road

Brookfield, Connecticut 06804

Re: Photronics, Inc. $150,000,000 2¹/4% Convertible Subordinated Notes due 2008

Ladies and Gentlemen:

We have acted as special Connecticut counsel to Photronics, Inc. (the “Company”) for the limited purpose of providing the opinions rendered herein in connection with the Registration Statement on Form S-3 (the “Registration Statement”) filed by the Company with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended, for the registration of $150,000,000 aggregate principal amount of the Company’s 2¹/4% Convertible Subordinated Notes due 2008 (the “Notes”). The Notes are convertible, according to their terms, into shares of common stock, par value $.01 per share, of the Company (the “Shares”) at the initial conversion rate of 62.9376 shares per $1,000 principal amount of the Notes, which Shares are issuable upon conversion of the Notes. The Notes and the Shares are being registered on behalf of the holders of the Notes.

In such capacity, we have examined originals or copies, certified or otherwise, identified to our satisfaction, of the Registration Statement and such other agreements, certificates of public officials, certificates of officers or other representatives of the Company and others, and such other documents, certificates and records as we have deemed relevant and necessary as a basis for the opinions hereinafter set forth.

In examining such documents, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed, photostatic or facsimile copies and the authenticity of the originals of such latter documents. As to matters of fact material to this opinion that have not been independently established, we have, to the extent we deemed appropriate, relied upon certificates or comparable documents of officers and representatives of the Company.

Photronics, Inc.

June 6, 2003

Page 2 of 2

Members of our firm are admitted to the bar in the State of Connecticut and we do not express any opinion as to the laws of any other jurisdiction and we do not express any opinion as to the effect of any other laws on the opinion stated herein.

Based upon the foregoing, and subject to the qualifications stated herein, we are of the opinion that (i) the execution and delivery by the Company of the Notes, and the performance by the Company, of its obligations thereunder, have been duly authorized by all requisite action of the Company, (ii) the Notes have been validly issued and (iii) the Shares, when issued upon conversion of the Notes, will have been duly authorized, and such Shares will be validly issued, fully paid and non-assessable.

This opinion is limited to the matters expressly stated herein, and no opinion is implied or may be inferred beyond the matters expressly stated herein. The opinions set forth herein are rendered only as of the date hereof and we assume no obligation to update or supplement any of such opinions to reflect facts or circumstances that may hereafter occur, including, without limitation, any change in applicable laws that may affect the issuance of the Shares.

We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the Registration Statement. We also consent to the reference to us under the caption “Legal Matters” in the prospectus contained in the Registration Statement.

This opinion is rendered solely for your benefit and may not be used or relied upon by any other person.

Very truly yours,

/s/ BRENNER, SALTZMAN AND WALLMAN LLP

Opinion of Shearman & Sterling

Exhibit 5.2

June 6, 2003

Photronics, Inc.

15 Secor Road

Brookfield, CT 06804

Photronics, Inc.

$150,000,000

2¹/4% Convertible Subordinated Notes due 2008

Ladies and Gentlemen:

We have acted as counsel for Photronics, Inc., a Connecticut corporation (the “Company”), in connection with the filing by the Company with the Securities and Exchange Commission (the “Commission”) of a registration statement on Form S-3 (the “Registration Statement”), covering the registration under the Securities Act of 1933, as amended (the “Act”), of $150,000,000 aggregate principal amount of the Company’s 2¹/4% Convertible Subordinated Notes due 2008 (the “Notes”), and 9,440,640 shares of the Company’s common stock, par value $0.01 per share, based upon the initial conversion rate of 62.9376 shares per $1,000 principal amount of the Notes and issuable upon conversion of the Notes. The Notes and the shares of common stock are being registered on behalf of the holders of the Notes.

In connection with the foregoing, we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents and corporate and public records as we have deemed necessary as a basis for the opinion hereinafter expressed. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents presented to us as originals and the conformity to the originals of all documents presented to us as copies. In rendering our opinion, we have relied as to factual matters upon certificates and representations of officers of the Company.

We are not admitted to practice in the State of Connecticut and, insofar as the following opinion relates to matters governed by the laws of the State of Connecticut, we have relied on the opinion of Brenner, Saltzman and Wallman LLP, the special Connecticut counsel for the Company.

Based upon the foregoing and having regard for such legal considerations as we deem relevant and assuming the due authorization, execution and delivery of the Notes by the Company and that they have been duly authenticated by the trustee, we are of the opinion that the Notes constitute valid and binding obligations of the Company, enforceable against the

Company in accordance with their terms, except as enforcement thereof may be limited by any applicable bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting enforcement of creditors’ rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law).

We hereby consent to the use of this opinion as Exhibit 5.2 to the Registration Statement and to the use of our name under the caption “Legal Matters” in the prospectus included in the Registration Statement.

Very truly yours,

/s/ SHEARMAN & STERLING

JJ/BT

Opinion of Shearman & Sterling as to Certain U.S. Federal Tax Matters

Exhibit 8

June 6, 2003

Photronics, Inc.
15 Secor Road
Brookfield, CT 06804

Photronics, Inc.

2¼% Convertible Subordinated Notes due 2008

Ladies and Gentlemen:

This opinion is furnished to you in connection with a registration statement on Form S-3 (the “Registration Statement”) and the related Prospectus (the “Prospectus”), filed by Photronics, Inc., a Connecticut corporation (the “Company”) with the Securities and Exchange Commission under the Securities Act of 1933, as amended, for the registration of $150,000,000 aggregate principal amount of the Company’s 2¼% Convertible Subordinated Notes due 2008 (the “Notes”) and the shares of the Company common stock (the “Shares”) issuable upon conversion of the Notes. The Notes and the Shares are being registered on behalf of the holders of the Notes.

We have acted as special United States federal income tax counsel for the Company in connection with the preparation and filing of the Registration Statement and the Prospectus. In this capacity, we have examined and relied upon the information set forth in the Prospectus and such other documents, agreements and instruments as we have deemed necessary as a basis for the opinion hereinafter expressed. In our examinations, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies.

Based upon the foregoing and after consideration of applicable current law, we are of the opinion that, subject to the limitations set forth therein, the discussion under the caption “United States Federal Tax Considerations” in the Prospectus accurately describes the material United States federal income tax consequences of the purchase, ownership and disposition of the Notes and the Shares acquired upon conversion of the Notes.

Our opinion is based upon the Internal Revenue Code of 1986, as amended, Treasury regulations promulgated thereunder, court decisions, and rulings and pronouncements of the Internal Revenue Service, now in effect, all of which are subject to change, possibly with retroactive effect, or to different interpretations.

We hereby consent to the use of this opinion as Exhibit 8 to the Registration Statement.

Very truly yours,

LMB/MLP

/s/ SHEARMAN & STERLING

Statement Regarding Computation of Ratio of Earnings to Fixed Charges

Exhibit 12

Photronics, Inc

Computation of Ratio of Earnings to Fixed Charges

For the five years ended November 3, 2002

	Year Ended												6 Months Ended
	November 1, 1998		October 31, 1999		October 31, 2000		October 31, 2001			November 3, 2002			May 4, 2003

Income before income taxes	$	42,870	$	22,802	$	15,464	$	(2,321	)	$	(5,498	)	$	(52,088	)
Interest expense		6,703		7,731		11,091		11,966			20,065			9,841

Numerator		49,573		30,533		26,555		9,645			14,567			(42,247	)
Denominator		6,703		7,731		12,291		12,672			19,976			9,542

Ratio		7.4		4.0		2.2		0.8			0.7			(4.4	)

Consent of Deloitte & Touche LLP

Exhibit 23.1

Independent Auditors’ Consent

We consent to the incorporation by reference in this Registration Statement of Photronics, Inc. on Form S-3 of our report dated December 6, 2002, appearing in the Annual Report on Form 10-K of Photronics, Inc. for the year ended November 3, 2002 which contains an explanatory paragraph that describes the change in method of accounting for goodwill and other intangible assets to conform to Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets,” as discussed in Note 5 to the consolidated financial statements and to the reference to us under the heading “Experts” in the Prospectus, which is part of this Registration Statement.

/s/ Deloitte & Touche LLP

Hartford, Connecticut

June 5, 2003

Statement of Eligibility of Trustee on Form T-1

Exhibit 25

FORM T-1

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

STATEMENT OF ELIGIBILITY

UNDER THE TRUST INDENTURE ACT OF 1939 OF A

CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE

ELIGIBILITY OF A TRUSTEE PURSUANT TO

SECTION 305(b)(2) ¨

THE BANK OF NEW YORK

(Exact name of trustee as specified in its charter)

New York		13-5160382
(State of incorporation if not a U.S. national bank)		(I.R.S. employer identification no.)

One Wall Street, New York, N.Y		10286
(Address of principal executive offices)		(Zip code)

PHOTRONICS, INC.

(Exact name of obligor as specified in its charter)

Connecticut		06-0854886
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

15 Secor Road Brookfield, Connecticut		06804
(Address of principal executive offices)		(Zip code)

Debt Securities

(Title of the indenture securities)

1. General information. Furnish the following information as to the Trustee:

(a) Name and address of each examining or supervising authority to which it is subject.

Name		Address
Superintendent of Banks of the State of New York		2 Rector Street, New York, N.Y. 10006, and Albany, N.Y. 12203

Federal Reserve Bank of New York		33 Liberty Plaza, New York, N.Y. 10045

Federal Deposit Insurance Corporation		Washington, D.C. 20429

New York Clearing House Association		New York, New York 10005

(b) Whether it is authorized to exercise corporate trust powers.

Yes.

2. Affiliations with Obligor.

If the obligor is an affiliate of the trustee, describe each such affiliation.

None.

16. List of Exhibits.

Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the “Act”) and 17 C.F.R. 229.10(d).

A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33 29637.)

A copy of the existing By laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.)

The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)

A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority.

- 2 -

SIGNATURE

Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 12th day of May, 2003.

THE BANK OF NEW YORK

By:		/S/ VAN K. BROWN
		Name: VAN K. BROWN Title: VICE PRESIDENT

- 3 -

Exhibit 7

Consolidated Report of Condition of

THE BANK OF NEW YORK

of One Wall Street, New York, N.Y. 10286

And Foreign and Domestic Subsidiaries,

a member of the Federal Reserve System, at the close of business December 31, 2002, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.

ASSETS		Dollar Amounts In Thousands
Cash and balances due from depository institutions:
Noninterest bearing balances and currency and coin	$	4,706,760
Interest-bearing balances		4,418,381
Securities:
Held-to-maturity securities		954,049
Available-for-sale securities		16,118,007
Federal funds sold in domestic offices		460,981
Securities purchased under agreements to resell		837,242
Loans and lease financing receivables:
Loans and leases held for sale		765,097
Loans and leases, net of unearned income		31,906,960
LESS: Allowance for loan and lease losses		798,223
Loans and leases, net of unearned income and allowance		31,108,737
Trading Assets		6,969,387
Premises and fixed assets (including capitalized leases)		823,932
Other real estate owned		660
Investments in unconsolidated subsidiaries and associated companies		238,412
Customers’ liability to this bank on acceptances outstanding		307,039
Intangible assets
Goodwill		2,003,150
Other intangible assets		74,880
Other assets		5,161,558

Total Assets	$	74,948,272

LIABILITIES
Deposits:
In domestic offices	$	33,108,526
Noninterest-bearing		13,141,240
Interest-bearing		19,967,286
In foreign offices, Edge and Agreement subsidiaries, and IBFs		22,650,772
Noninterest-bearing		203,426
Interest-bearing		22,447,346
Federal funds purchased in domestic offices		513,773
Securities sold under agreements to repurchase		334,896
Trading liabilities		2,673,823
Other borrowed money:
(includes mortgage indebtedness and obligations under capitalized leases)		644,395
Bank’s liability on acceptances executed and outstanding		308,261
Subordinated notes and debentures		2,090,000
Other liabilities		5,584,456

Total liabilities	$	67,908,902


Minority interest in consolidated subsidiaries		519,470

EQUITY CAPITAL
Perpetual preferred stock and related surplus		0
Common stock		1,135,284
Surplus		1,056,295
Retained earnings		4,208,213
Accumulated other comprehensive income		(120,108	)
Other equity capital components		0

Total equity capital		6,519,900

Total liabilities minority interest and equity capital	$	74,948,272

I, Thomas J. Mastro, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.

Thomas J. Mastro,

Senior Vice President and Comptroller

We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct.

Thomas A. Renyi
Gerald L. Hassell		Directors
Alan R. Griffith