UNITED STATES SECURITIES AND

EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1 to Form 10-Q

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2017

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission file number 0-15451

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐  No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

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PHOTRONICS, INC.

FORM 10-Q/A

EXPLANATORY

NOTE

 

The registrant has prepared this Amendment No. 1 ("Amendment") on Form 10-Q/A to its Quarterly Report on Form 10-Q for the quarterly period ended April 30, 2017 (the "Form 10-Q") for the purpose of re-filing Exhibits 10.26, 10.27, 10.28 and 10.29 to the Form 10-Q. No revisions are being made to the Company's financial statements and, except as described below, this Amendment does not reflect events occurring after the filing of the Form 10-Q, or modify or update those disclosures that may be affected by subsequent events, and no other changes are being made to any other disclosure contained in the Form 10-Q.

This Amendment is an exhibit-only filing in response to comments received from the staff of the Securities and Exchange Commission regarding a request for confidential treatment of certain portions of Exhibits 10.26, 10.27, 10.28 and 10.29 originally filed with the Form 10-Q. This Amendment is being filed solely to re-file Exhibits 10.26, 10.27, 10.28 and 10.29. Except for the changes to Exhibits 10.26, 10.27, 10.28 and 10.29, this Amendment does not otherwise update any exhibits as originally filed or previously amended. This Amendment is being filed to replace Exhibits 10.26, 10.27, 10.28 and 10.29 to include certain portions of the Exhibit that had previously been omitted or "redacted" pursuant to a request for confidential treatment. This Amendment provides revised redacted versions of Exhibits 10.26, 10.27, 10.28 and 10.29.

In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by our principal executive officer and principal financial officer are filed herewith as exhibits to this Amendment.

 

PART II

ITEM 6.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 

EXHIBITS:

 

#	Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.
*	Represents an exhibit that is filed with this Quarterly Report on Form 10-Q/A.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

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Execution Version

 

	PHOTRONICS, INC.
	By:
	Name:
	Title:

	PHOTRONICS SINGAPORE PTE LTD.
	By:
	Name:
	Title:
	DAI NIPPON PRINTING CO., LTD.
	By:
	Name:
	Title:
	DNP ASIA PACIFIC PTE. LTD.
	By:
	Name:
	Title:
	XIAMEN AMERICAN JAPAN PHOTRONICS MASK CO., LTD.
	By:
	Name:
	Title:

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

 

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JOINT VENTURE OPERATING AGREEMENT

 

OF

 

PHOTRONICS DNP MASK CORPORATION XIAMEN

 

among

 

PHOTRONICS, INC.,

 

PHOTRONICS SINGAPORE PTE, LTD

 

AND

 

DAI NIPPON PRINTING CO., LTD.

 

DNP ASIA PACIFIC PTE. LTD.

 

Dated as of May 16, 2017

 

 

 

 

SCHEDULES

 

 

JOINT VENTURE OPERATING AGREEMENT

OF

 PHOTRONICS DNP MASK CORPORATION XIAMEN

 

This JOINT VENTURE OPERATING AGREEMENT (together with the Schedules, as amended or otherwise modified from time to time, this “Agreement”) is made and entered into as of the 16th day of May, 2017, by and between Photronics, Inc., a corporation organized under the laws of the State of Connecticut, with its principal place of business at 15 Secor Road, Brookfield, Connecticut, U.S.A. (“Photronics”), Photronics Singapore Pte, Ltd., a corporation organized under the laws of Singapore with its principal place of business at No. 33, Ubi Avenue 3 #03-09, Vertex Building Singapore 408868 (“Photronics Singapore”) and Dai Nippon Printing Co., Ltd., a corporation organized under the laws of Japan with its principal place of business at 1-1, Ichigaya Kagacho 1-chome, Shinjuku-ku, Tokyo, Japan (“DNP”), and DNP Asia Pacific Pte. Ltd., a corporation organized under the laws of Singapore with its principal place of business at 4 Pandan Crescent, Singapore 128475 (“DNP Asia Pacific”), with respect to Xiamen American Japan Photronics Mask Co., Ltd. (the “Company”), a wholly owned foreign entity  formed under the Company Act of the People’s Republic of China (the “Company Act”) and the Laws of the People’s Republic of China on Wholly Foreign-Owned Enterprises (the “WFOE Act”, together with the Company Act, the “Acts”) and its implementing regulations, with its principal place of business at R203-95, South Building of Torch Square, No. 56-58 Torch Road, Gaoxin District, Xiamen, Fujian Province, China.

 

ARTICLE 1.

ORGANIZATIONAL MATTERS

 

1.1

Background

 

The Company was formed in October of 2016 as a wholly owned foreign entity in Xiamen, China, and Photronics Singapore is the sole Shareholder of the Company.  Upon the closing of the Initial Capital Contribution (the “Closing”) contemplated by the Contribution Agreement (the "Contribution Agreement") to be executed between the Company, Photronics, Photronics Singapore, DNP and DNP Asia Pacific in the form attached hereto as Schedule A-2., the Company will be a joint venture entity in which Photronics Singapore will own a 50.01% Interests and DNP Asia Pacific will own a 49.99% Interests.  The rights and liabilities of the Shareholders shall be as provided in the Acts, except as otherwise expressly provided herein.  In the event of any inconsistency between any terms and conditions contained in this Agreement and any non‑mandatory provisions of the Acts, the terms and conditions contained in this Agreement shall govern.  If any provision of this Agreement is prohibited or ineffective under the Acts, this Agreement will be considered amended to the smallest degree possible in order to make such provision effective under the Acts.  The Shareholders and the Board of Directors shall also cause the Company to take corporate actions and make filings and recordings that are necessary or advisable to effectuate the aforesaid amendment.

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

1.2

Name

 

The name of the Company after the completion of the Closing shall be as follows:

 

Chinese Name of the Company: 厦门美日丰创光罩有限公司

 

English Name of the Company: Photronics DNP Mask Co, Ltd. Xiamen or PDMCX

 

The Board of Directors may change the name of the Company from time to time, in accordance with this Agreement and Applicable Law.

 

1.3

Principal Place of Business

 

The principal place of business of the Company will be located in Xiamen, China.

 

1.4

Business Purpose

 

The purpose of the Company shall be, either singly or in cooperation with Photronics and DNP along with their Affiliates and PDMC, the (a) development, fabrication and sale of photolithographic integrated circuit photomasks for [***] considered above that may arise in the [***], the parties may refer to the [***], except m[***] used for [***], to (i) [***] and (ii) [***]; (b) [***]that such sales would not be subject to the non-compete obligations set forth in Section 8.1; (c) [***], other than [***] (a) or (b) above, that are specifically set forth in the [***]; (d) entry into any other lawful business, purpose or activity in which a company limited by shares may be engaged under Applicable Law (including, without limitation, the Act) as the Shareholders may determine from time to time, subject to and in accordance with the terms of this Agreement; and (e) entry into any lawful transaction and engagement in any lawful activity in furtherance of the foregoing purposes and as may be necessary, incidental or convenient to carry out the business of the Company as contemplated by this Agreement.  All pre-existing joint development agreement(s) and joint engineering agreement(s), which were executed by and between a customer in the Territory and Photronics or DNP before execution of this Agreement (the “Pre-closing Agreement”), will be disclosed to the Company. The Pre-closing Agreements must be referred to the Steering Committee at such time when the Pre-closing Agreements are reasonably expected to result in (i) an order of new photomasks by such customer to be delivered by Photronics or DNP to the customer in the Territory using a new process of record or (ii) direct photomask sales for commercial benefit to Photronics or DNP within the business scope of the Company. Each Shareholder is expected to keep the Steering Committee informed of the progress of such Pre-Closing Agreements on a regular basis to the extent that such customer consents to disclose to the other Shareholder. For the avoidance of doubt, all photomask sales derived from the Pre-closing Agreements within the business scope of the Company will be sold through the channel of the Company for the customers in the Territory after the completion of the joint development or joint engineering expected in the Pre-closing Agreements. For the purpose of further clarification, in no event shall this Section 1.4 be construed to amend or supersede the terms and conditions of the Pre-closing Agreements, and therefore, Photronics, DNP and the Steering Committee shall respect those terms and conditions therein, the relative parties’ intentions therein, and the determination of the customers.

 

1.5

Term

 

The term of the Company (the “Term”) is twenty (20) years, commencing from October 21, 2016 until October 20, 2036.    Notwithstanding the dissolution of the Company, the existence of the Company shall continue until termination pursuant to, and as provided in, Article 10 of this Agreement.

 

1.6

Accounting Consolidation

 

1.6.1           The Shareholders confirm and agree that, for as long as Photronics Singapore and/or an direct or indirect Affiliate of Photronics holds more than fifty percent (50%) of Percentage Interest in the Company in the aggregate, the Company is intended to be, and shall be treated as, a consolidated subsidiary of Photronics under GAAP. In the event that any term of this Agreement or any relationship, understanding or other agreement, including any Transaction Document, between or among, the Company, Photronics and DNP shall be inconsistent with any existing or future rule, principle or standard governing accounting consolidation of the Company’s financial results by Photronics and/or Photronics Singapore under GAAP, then this Agreement or such relationship, understanding or other agreement shall be modified, terminated or waived (as the case may be) (each an “Accounting Amendment”) to the minimum extent necessary to grant, allow or permit accounting consolidation of the Company’s financial results by Photronics  in accordance with Section 1.6.2.

 

1.6.2           Where Photronics believes that an Accounting Amendment may be necessary due to any existing or future rule, principle or standard under US GAAP,

 

(a)   Photronics shall promptly notify DNP of the reasons for, and content of, any proposed Accounting Amendment in writing;

 

(b)   after Photronics’ above notification, Photronics and DNP shall use all reasonable efforts to negotiate with each other with a view to reaching a written agreement for the Accounting Amendment or other mutually acceptable solution, provided however, that, if no such agreement or solution is reached by Photronics and DNP within thirty (30) calendar days after Photronics’ above notification, (i) Photronics may, in its discretion, retroactively and/or prospectively, make the Accounting Amendment to the minimum extent reasonably deemed necessary by Photronics, and shall promptly notify the Company and DNP of the content of such Accounting Amendment in writing; and (ii) after Photronics exercises its discretionary power set forth in (i) above, if the Accounting Amendment concerned involves any change in the definition of and/or any of the actions requiring a Supermajority Vote of Directors as set forth in Schedule G hereof, the definition of and/or any of the actions requiring a Supermajority Vote of Shareholders as set forth in Schedule F hereof, and/or the number of board seats of DNP in the Company hereunder, DNP shall have a [***] set forth below.  DNP may, at any time after the Accounting Amendment takes effect but only after the expiration of the Initial Two-Year Term, exercise the [***] by giving a written notice to Photronics (the “Accounting Amendment Option Notice”). Photronics agrees to use all reasonable efforts to apply for all applicable regulatory approvals or clearance within thirty (30) days after receipt of the Accounting Amendment Option Notice. The closing of the [***]  (the "Accounting Amendment Closing") shall take place as soon as commercially practicable (taking into account the necessary funds raising arrangement by Photronics) without any undue delay and shall be within three (3) Business Days after all prior regulatory approvals or clearance have been obtained.  The Accounting Amendment Closing Price shall be equal to the [***] of (I) the [***] to the [***] (II) the [***] as of the last day of the Fiscal Month immediately prior to the date of the Accounting Amendment Option Notice, divided by the number of Issued and outstanding Shares of the Company as of the date of the last day of the Fiscal Month immediately prior to the date of the Accounting Amendment Option Notice, multiplied by the number of the Shares held by [***] as of the date of the Accounting Amendment Closing.  The Accounting Amendment Closing Price shall be paid by [***] pursuant to the terms and conditions agreed to upon the exercise of the Accounting Amendment Option, but the Accounting Amendment Closing Price shall be fully paid within seven (7) years from the exercise of the Accounting Amendment Option. At the Accounting Amendment Closing, [***] shall transfer all of its Interests in the Company to Photronics, free and clear of any liens or encumbrances, and [***] shall pay the amount of all or part of the Accounting Amendment Closing Price that [***] will be required to pay upon the Accounting Amendment Closing to [***] by wire transfer of cash.  At the Accounting Amendment Closing, DNP shall deliver to Photronics such instrument or instruments of conveyance as Photronics reasonably requests.  

 

DNP will not be able to exercise the Accounting Amendment Option for the Initial Two-Year Term.

 

DNP will continue to be bound by the non-compete obligations set forth in Section 8.1 for a period of twelve (12) months following the date of the Accounting Amendment Option Notice (in which case, the one-year period surviving after the termination set forth in Section 8.1 does not apply). In the event the Accounting Amendment Closing (i.e., receipt of all necessary regulatory approvals and completion of the transfer of DNP’s Interest to Photronics but not including full payment of the Accounting Amendment Closing Price) takes longer than sixty (60) days from the exercise of the Accounting Amendment Option, DNP and Photronics will agree to a delay of the commencement date of the twelve-month period of the non-compete obligations set forth in this Section, but in no event shall such commencement date be delayed for more than sixty (60) days from the date of the Accounting Amendment Option Notice.

 

1.6.3           For the avoidance of doubt, for as long as Photronics Singapore and/or an Affiliate of Photronics holds more than fifty percent (50%) of Percentage Interest in the Company in aggregate, nothing contained herein is intended or shall allow DNP to (a) control the operations or assets of the Company in its sole discretion and (b) have the discretionary power to govern the financial, operating and personnel policies of the Company unless such actions as set forth in (a) and (b) immediately above are permitted under GAAP and agreed to between the parties hereto.

 

1.7

Transaction Documents

 

Contemporaneous with the execution of this Agreement, Photronics, Photronics Singapore, DNP, DNP Asia Pacific, PDMC and the Company have entered into the agreements listed on Schedules A-1 and A-2 hereto (collectively, the Transaction Documents").

 

1.8

Ratification of Organizational Actions

 

When necessary, the Shareholders will, by a resolution adopted by the Shareholders’ meeting of the Company, authorize the Company, and ratify all action having been taken by or on behalf of the Company (including by its Officers) prior to the date hereof, to execute and deliver the Transaction Documents to which it is a party, including all certificates, agreements and other documents required in connection therewith.

 

1.9

Articles of Incorporation

 

The Shareholders agree that, prior to or at the Closing, the Articles of Incorporation of the Company shall be amended from the current form attached hereto as Schedule I to be in the form consistent with the terms and conditions of this Agreement and the Contribution Agreement.

 

1.10

Compliance

 

For as long as Photronics, Photronics Singapore and/or a direct or indirect Affiliate of Photronics holds more than fifty percent (50%) of Percentage Interest in the Company, the Company will comply with Photronics Singapore health and safety and environmental and corporate compliance policies, procedures, programs and standards, provided that such policies, procedures, programs and standards do not violate any mandatory laws or regulations of the PRC.  In the event the Company has any concerns about any compliance matters including but not limited to antitrust concerns the Company will consult with counsel for the Company.

 

1.11

Pre-Closing Liabilities

 

Photronics agrees to be responsible for any and all liabilities and claims arising against the Company by any third party which are attributable to events occurred prior to the Effective Date; provided however that such liabilities and claims must arise out of and be directly related to the negligent acts or lack of due care by Photronics or Photronics Singapore; and provided further that the representations and warranties of Photronics and Photronics Singapore set forth in the Contribution Agreement are true and correct in all material aspects at and as of the Effective Date.  Neither Photronics nor Photronics Singapore will be liable for any and all loss or damage of the Company arising out of or in connection with (i) the design, construction, and piling agreements for an initial manufacturing facility located in Xiamen, China, (ii) the investment agreement between Xiamen Torch Hi-Tech Industrial Development Zone Management Committee and Photronics Singapore and (iii) the land purchase agreement between Xiamen Torch Hi-Tech Industrial Development Zone Management Committee and Photonics Singapore, all of which will be assumed by the Company at the Closing, provided however that such losses and damages does not arise out of and are not directly related to the negligent acts or lack of due care by Photronics or Photronics Singapore prior to the Closing.

 

1.12

Affiliates

 

Photronics and DNP hereby ensure that their respective Affiliates shall comply with the terms and conditions of this Agreement and Transaction Documents to the extent applicable to such Affiliates. Photronics and DNP hereby confirm and agree that the Shares of the Company shall be always held by either DNP or Photronics directly or by a direct or indirect wholly owned subsidiary of Photronics or DNP, as the case may be, and accordingly, Photronics and DNP may hold the Shares directly or transfer the Shares of the Company to a direct or indirect wholly owned subsidiary of Photronics or DNP, as the case may be, without the prior written consent of, but only with the prior notice to, the other party. Upon such notice, each of Photronics and DNP shall cause the Shareholders and the Company to take corporate actions and make filings and recordings that are necessary or advisable to effectuate the aforesaid transfer under Applicable Law. Any other transfers of the Shares of the Company will be subject to the terms and conditions of this Agreement.

 

ARTICLE 2.

DEFINITIONS

 

Capitalized words and phrases used and not otherwise defined elsewhere in this Agreement shall have the following meanings:

 

“Accounting Amendment” is defined in Section 1.6.1.

 

“Accounting Amendment Closing” is defined in Section 1.6.2(b).

 

“Accounting Amendment Closing Price” is defined in Section 1.6.2(b).

 

“Accounting Amendment Option” is defined in Section 1.6.2(b).

 

“Accounting Amendment Option Notice” is defined in Section 1.6.2(b).

 

 “Acts” is defined in the preamble.

 

“Additional Contributions” is defined in Section 4.1.2(a).

 

“Affiliate” of a Person means any other Person which, directly or indirectly, controls, is controlled by, or is under common control with, such Person.  The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.  A Person shall be deemed an Affiliate of another Person only so long as such control relationship exists.  Notwithstanding the foregoing, a Company Entity shall not be deemed to be an Affiliate of either DNP or Photronics, except where expressly provided in this Agreement.

 

“Agreement” is defined in the preamble.

 

“Annual Budget” is defined in Section 6.2.

 

“Applicable Law” means, with respect to a Person, any domestic or foreign, national, federal, territorial, state or local constitution, statute, law (including principles of common law), treaty, ordinance, rule, administrative interpretation, regulation, order, writ, injunction, legally binding directive, judgment, decree or other requirement or restriction of any arbitrator or Governmental Authority applicable to such Person or its properties, assets, officers, directors, employees, consultants or agents (in connection with such officer’s, director’s, employee’s, consultant’s or agent’s activities on behalf of such Person).

 

“Articles of Incorporation” means the Articles of Incorporation of the Company, as amended from time to time.

 

“Board of Directors” means, at any time, the Board of Directors of the Company.

 

“Business” means such business activities as described in Section 1.4.

 

“Business Day” means a full banking business day in the State of Connecticut, Japan and China.

 

“Business Plan” is defined in Section 6.2.

 

“Capital Contributions” means, with respect to any Shareholder, the total amount of cash and the initial agreed upon asset value of property and equipment (other than cash) and technology contributed to the capital of the Company by such Shareholder. “Cash” means cash and cash equivalents determined by the Board of Directors in good faith consistent with GAAP.

 

“Chairman of the Board” is defined in Section 5.5.

 

“Change in Control” shall be deemed to have occurred, with respect to a party, when:

 

(1)    Any “Person” or “group” (as defined below) is or becomes the “beneficial owner” (as defined below) of shares representing more than fifty percent (50%) of the combined voting power of the then outstanding securities entitled to vote generally in elections of directors of a party, as the case may be (the “Voting Stock”); or

 

(2)    A party (A) consolidates with or merges into any other Person or any other Person merges into a party, and in the case of any such transaction, the outstanding common stock of a party, as the case may be, is changed or exchanged into other assets or securities as a result, unless the stockholders of a party, as the case may be, immediately before such transaction own, directly or indirectly immediately following such transaction, more than fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation resulting from such transaction in substantially the same proportion as their ownership of the Voting Stock immediately before such transaction, or (B) conveys, transfers or leases all or substantially all of its assets to any Person.

 

For the avoidance of doubt, the delisting of Photronics from the NASDAQ Stock Market standing alone, if occurs, does not constitute a Change in Control with respect to Photronics.

 

For the purpose of this definition, a “group” means two or more Persons who, acting for a common purpose, which act based on their mutual consent in the form of a contract, an agreement or others; and a “beneficial owner” means any Person who owns the shares or other assets under his/her/its own name or under the name of a third party (i.e. a nominee) where: (i) such Person (a) provides said shares or assets or (b) provides the funds to acquire such shares or assets to the nominee directly or indirectly; or (ii) the principal has the right to manage, utilize or dispose of the shares or assets held by the nominee; or (iii) entire or partial profits or losses of the shares or assets held under the name of the nominee are assumed by the principal.

 

“Change in Control Closing” is defined in Section 7.4.2.

 

“Change in Control Closing Price” is defined in Section 7.4.3.

 

“Change in Control Notice” is defined in Section 7.4.1.

 

“Company” is defined in the preamble.

 

“Company Accountant” shall mean initially Deloitte Touche  LLP or such other independent accounting firm as appointed from time to time by the Board of Directors.

 

“Company Act” is defined in the preamble.

 

“Company Assets” means all direct and indirect rights and interests in real and personal property owned by the Company and its subsidiaries from time to time, and shall include both tangible and intangible property (including Cash). For the sake of clarity, “Company Assets” shall not be deemed to include any right or interest owned by Photronics or DNP or their respective Affiliates, including, without limitation, any rights licensed from third parties to Photronics or DNP unless authorized by such third parties.

 

“Company Entity” means the Company, or any of its directly or indirectly majority owned subsidiaries (whether organized as corporations, limited liability companies or other legal entities).

 

“Company Liabilities” means all direct and indirect liabilities and obligations of the Company and its subsidiaries from time to time including the aggregate undistributed amounts due to Shareholders to pay Chinese taxes on any income allocated to them. In determining the amount of such liabilities, any contingent liabilities, guarantees or other amounts that are not recorded on the Company’s consolidated balance sheet shall be included and reserved against at the fair probable value thereof as reasonably determined by the Board of Directors in accordance with GAAP.

 

“Directors” is defined in Section 5.1.3.

 

“DNP” is defined in the preamble.

 

“DNP Director” means any of the Directors nominated by DNP to serve on the Board of Directors in accordance with Section 5.1.3.

 

“Economic Interest” means a Person’s right to share in the pro-rata allocation of Net Profits, Net Losses and other items of income, gains, losses, deductions and credits hereunder and to receive distributions from the Company as set forth in this Agreement, but does not include any other rights of a Shareholder including, without limitation, the right to vote or to participate in the management of the Company, or, except as specifically provided in this Agreement or required under the Acts, any right to information concerning the business and affairs of the Company.

 

“Effective Date” means the date of the completion of the Closing by which the Company becomes a joint venture entity between Photronics Singapore and DNP Asia Pacific.

 

“Exchange Act” means the Securities Exchange Act of 1934 of the United States, as amended.

 

“Fiscal Months” is defined in Section 5.12.1.

 

“Fiscal Quarters” is defined in Section 5.12.1.

 

“Fiscal Year” is defined in Section 5.12.1.

 

“Force Majeure” means any cause or causes beyond the reasonable control of either party or the Company, including, but not limited to, acts of God, industrial disturbances, wars, terrorism, epidemics, blockages, embargoes, insurrections, riots, explosions, fires, earthquake, floods, perils of the sea.

 

“GAAP” means generally accepted accounting principles in the United States, as applicable, as in effect from time to time.

 

“GAAS” means generally accepted auditing standards in the United States, as applicable, as in effect from time to time.

 

“General Manager” is defined in Section 5.14.1.

 

“Governmental Authority” means any foreign, domestic, national, federal, territorial, state or local governmental authority, quasi-governmental authority, instrumentality, court, government, stock exchange or self‑regulatory organization, commission, tribunal or organization or any regulatory, administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing.

 

“Increasing Shareholder” is defined in Section 5.4

 

“Indemnified Loss” is defined in Section 5.13.1.

 

“Indemnitee” is defined in Section 5.13.1.

 

“Initial Capital Contribution” has the same meaning as defined in the Contribution Agreement.

 

“Initial Seven-Year Term” means a period of the initial seven (7) years from the Effective Date.

 

“Initial Two-Year Term” means a period of the initial two (2) years from the Effective Date.

 

“Interest” means the entire ownership interest of a Shareholder in the Company at any particular time, including without limitation, the Shareholder’s Shares and Economic Interest, any and all rights to vote and otherwise participate in the Company’s affairs, and the rights to any and all benefits to which a Shareholder may be entitled as provided in this Agreement, together with the obligations of such Shareholder to comply with all of the terms and provisions of this Agreement.  An Interest may be expressed as a number of Shares.

 

“Issue” means, for the purpose of this Agreement, the corporate actions that are necessary or advisable to have Shareholders of the Company to subscribe the Shares when the registered capital of the Company is set or increased. The total Shares Issued shall amount to the 100% equity interest of the Company during any time.

 

“Liquidating Event” is defined in Section 10.2.

 

“Liquidated Committee” is defined in Section 10.5.1.

 

“Majority Shareholder” is defined in Section 7.3.1.

 

 “Minority Closing” is defined in Section 7.3.2.

 

“Minority Closing Price” is defined in Section 7.3.3.

 

“Minority Shareholder” is defined in Section 7.3.1.

 

“Net Book Value” means, with respect to (i) any assets, the value thereof, net of accumulated depreciation, amortization and other adjustments, as would be included in a consolidated balance sheet of the entity owning such assets prepared in accordance with GAAP, (ii) any liabilities, the amount thereof as would be included in a consolidated balance sheet of the entity having the liabilities prepared in accordance with GAAP and (iii) any equity security of a Company Entity or other entity, the product of (x) the value of the assets of such entity, net of accumulated depreciation, amortization or other adjustments, as would be included in a consolidated balance sheet of the entity prepared in accordance with GAAP, minus the amount of the liabilities of such entity, as would be included in a consolidated balance sheet of such entity prepared in accordance with GAAP, multiplied by (y) a percentage equal to the percentage of the equity of such entity represented by such equity security.  Any determination of Net Book Value shall be consistent with the historic GAAP methods, procedures and election used by the Company.

 

“Net Profits” or “Net Losses” means, for each Fiscal Year or other period, an amount equal to the Company’s taxable income or loss for such year or period.

 

“Officer” is defined in Section 5.14.3.

 

“PDMC” is Photronics DNP Mask Corporation, a joint venture company of Photronics and DNP and a corporation organized under the laws of the Taiwan region with its principal place of business at 4f, #2, Li-Hsin Road, Science Park, Hsinchu, Taiwan.

 

“Percentage Interest” means, with respect to a Shareholder holding one or more Shares, its Interest in the Company as determined by dividing the number of Shares owned by such Shareholder by the total number of Shares of the Company then outstanding. For the purposes of this Agreement, the aggregate Percentage Interest of all entities directly or indirectly wholly owned by Photronics Singapore or DNP Asia Pacific, as the case may be, shall be the basis for calculating the Percentage Interest of Photronics Singapore and DNP Asia Pacific.

 

“Person” means any person or entity, whether an individual, trustee, corporation, partnership, limited partnership, limited liability company, trust, unincorporated organization, business association, firm, joint venture, other legal entity or Governmental Authority.

 

“Photronics Singapore” means Photronics Singapore Pte, Ltd., a wholly owned subsidiary company of Photronics and a corporation organized under the laws of Singapore with its principal place of business at No. 33, Ubi Avenue 3 #03-09, Vertex Building Singapore 408868.

 

“Photronics Director” means any of the Directors nominated by Photronics Singapore to serve on the Board of Directors in accordance with Section 5.1.3.

 

“Reducing Shareholder” is defined in Section 5.4.

 

“Related Party Agreement” is defined in Section 5.18.

 

“Representative” is defined in Section 5.13.6(d).

 

“Required Funding Date” is defined in Section 4.1.2(a).

 

“Seconded Employees” is defined in Section 6.4.

 

“Service Provider Documents” is defined in Section 6.5.1

 

“Share” means equity interest of the Company Issued pursuant to Article 3 of this Agreement. As of the completion of the transactions contemplated under the Contribution Agreement, the Shares of the Company are to be held at the Closing by the Shareholders in accordance with Schedule C.

 

“Shareholder” means Photronics Singapore and DNP Asia Pacific, Photronics, DNP or any direct or indirect wholly owned subsidiary of Photronics or DNP who at any time hold the Shares of the Company.

 

“Shortfall” means the dollar difference between a requested Additional Contribution and the actual amount a Shareholder pays of such Additional Contribution.

 

 “Tax” or “Taxes” means all goods and services taxes, levies, imposts and fees imposed by any Governmental Authority (domestic or foreign) of any nature including but not limited to federal, state, local or foreign net income tax, alternative or add-on minimum tax, profits or excess profits tax, franchise tax, gross income, adjusted gross income or gross receipts tax, employment related tax (including employee withholding or employer payroll tax), real or personal property tax or ad valorem tax, sales or use tax, excise tax, stamp tax or duty, any withholding or back up withholding tax, value added tax, severance tax, prohibited transaction tax, premiums tax, occupation tax, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Authority (domestic or foreign) responsible for the imposition of any such tax.

 

“Term” is defined in Section 1.5.

 

“[Territory]” means the [***].

 

“Transaction Documents” is defined in Section 1.7.

 

“Transfer” (including, with correlative meaning, the term “Transferred”) means, with respect to any Share or Economic Interest or portion thereof, a sale, conveyance, exchange, assignment, pledge, encumbrance, gift, bequest, hypothecation or o transfer or disposition by any other means, whether for value or no value and whether voluntary or involuntary (including, without limitation, by operation of law), or an agreement to do any of the foregoing.

 

“Steering Committee” is defined in Section 5.15

 

“Supermajority Vote of Directors” means the unanimous affirmative vote or consent of all Directors of the Company present at a meeting of the Board of Directors, provided that the Percentage Interest of Photronics Singapore and DNP Asia Pacific shall be at least twenty percent (20%) each.

 

“Supermajority Vote of Shareholders” means the unanimous affirmative vote or consent of all Shareholders of the Company present at a meeting of the Shareholders, provided that the Percentage Interest of Photronics Singapore and DNP Asia Pacific shall be at least twenty percent (20%) each.

 

“Vice General Manager” is defined in Section 5.14.1.

 

“Voting Stock” is defined in the definition of “Change in Control.”

 

“WFOE Act” is defined in the preamble.

 

ARTICLE 3.

SHARES AND CAPITAL CONTRIBUTIONS

 

3.1

Authorized Shares

 

The Company is authorized to Issue the Shares.  The total number of the Shares of the Company to be Issued as of the completion of the Closing shall be set forth in the Contribution Agreement.

 

3.2

Initial Capital Contributions and Share Issuance

 

The Shareholders acknowledge and agree that the names and address of each Shareholder and Percentage Interests of the Shareholders as of the completion of the Closing contemplated under the Contribution Agreement are as set forth on Schedule C.

 

3.3

Return or Redemption of Capital Contribution

 

Except as otherwise provided in this Agreement or approved by a Supermajority Vote of Shareholders: (a) no Shareholder shall demand or be entitled to receive a return of or interest on any portion of its Capital Contributions; and (b) no Shareholder shall withdraw any portion of its Capital Contributions or receive any distributions from the Company as a return of capital on account of such Capital Contributions.  Except as otherwise provided in this Agreement or approved by a Supermajority Vote of Directors, the Company shall not redeem or repurchase the Shares of any Shareholder.  Provided in all these cases that any such return, distribution or redemption that is permitted hereunder shall be pro rata based upon the Shareholders’ respective Percentage Interests and in compliance with Applicable Law.  Provided further, in all these cases that any such return, distribution or redemption that is permitted hereunder do not violate any mandatory laws or regulations of the PRC.

 

3.4

Liability of Shareholders

 

Except as otherwise required by any non-waivable provision of the Acts or other Applicable Law and except as otherwise provided in this Agreement or other agreements between the Company and one or more Shareholders or their Affiliates, no Shareholder shall be liable in any manner whatsoever for any debt, liability or other obligation of the Company, whether such debt, liability or other obligation arises in contract, tort, or otherwise solely by reason of being a Shareholder.

 

3.5

Revenue

 

The Shareholders hereby agree that the Company shall be the [***] includes but is not limited to communicating with the [***] with respect to the [***] of the [***] and the [***]. The Shareholders further agree that neither Shareholder will [***].

 

ARTICLE 4.

FINANCING OF THE COMPANY

 

4.1

Types of Financing

 

 

 

ARTICLE 5.

MANAGEMENT

 

5.1

Board of Directors

 

5.1.1           Powers.  Except as otherwise required by any non-waivable provision of the Acts or other Applicable Law or expressly provided in this Agreement, all management powers over the business, property and affairs of the Company are exclusively vested in a board of directors (the “Board of Directors”), and no Shareholder shall have any right to participate in or exercise control or management power over the business and affairs of the Company or otherwise to bind, act or purport to act on behalf of the Company in any manner. Except as otherwise required by any non-waivable provision of the Acts or other Applicable Law, the Parties hereby agree that the majority shareholder of the Company will control all such decisions that the Acts or other Applicable Law do not allow to be controlled by the Board, and all the corporate governance powers agreed to herein by the Board are also agreed to at the level of Shareholders and will be controlled by Photronics Singapore as long as it is the majority shareholder of the Company.  The Parties further agree that, in the event that the Acts or Applicable Law do not allow the majority of the Board of Directors or the majority shareholder to control any increase or decrease of registered capital in its sole discretion and as long as Photronics Singapore is the majority shareholder of the Company, DNP Asia Pacific will provide Photronics Singapore with a proxy to exercise voting rights for sixteen and two thirds percent (16 2/3%)  (or, depending on Photronics Singapore’s ownership interest at the time of the shareholders meeting, a proxy in the amount required to allow Photronics Singapore to exercise voting rights for sixty six and two thirds percent (66 2/3%) of the outstanding Shares of the Company or the then-current percentage required by the Acts or Applicable Law at the time of the Board of Directors or shareholders meeting) in favor of the increase or decrease in the registered capital proposed by Photronics Singapore and whatever corresponding changes need to be made to the Company’s Articles of Incorporation, provided that DNP reserves its right under section 4.1.2(a)(i) to refrain from subscribing any or all of such increased registered capital.  In the event DNP Asia Pacific fails to provide Photronics Singapore with such proxy, DNP Asia shall be deemed in breach of this Agreement.  Except with respect to voting for an increase or decrease in the Company’s registered capital, the above will not affect DNP’s a Supermajority Vote of Shareholders set forth in Schedule F and provided further that such proxy from DNP Asia Pacific to Photronics Singapore will not be required after the initial investment of US $160,000,000 has been reached and an annual cash investment of greater than $100,000,000 US Dollars is being proposed at the shareholder meeting.  Subject to any non-waivable provision of Applicable Law and the limitations set forth in this Agreement, the Board of Directors shall have all the rights and powers that may be possessed by the Board of Directors under the Acts, which shall include, without limitation, the power to incur indebtedness, the power to enter into agreements and commitments of all kinds, the power to manage, acquire and dispose of Company Assets, and all ancillary powers necessary or convenient to the foregoing.  Without limiting the general authority granted by the immediately preceding sentence, the majority of the Board of Directors shall have the authority set forth on Schedule D hereto.  The Board of Directors may also designate one or more persons to open bank accounts and conduct other banking business on behalf of the Company.  The Directors shall devote such time to the business and affairs of the Company as is reasonably necessary for the performance of their duties, but shall not be required to devote full time to the performance of such duties.

 

 

5.2

Effect of Reduction in Photronics Singapore’s Percentage Interest on Photronics Directors

 

Following the Initial Seven-Year Term and subject to Sections 5.1 and 5.4, the number of Directors that Photronics Singapore can nominate to or maintain on the Board of Directors shall depend on Photronics Percentage Interest as follows:

 

5.3

Effect of Reduction in DNP Asia Pacific’s Percentage Interest on DNP Directors

 

Following the Initial Seven-Year Term and subject to Sections 5.1 and 5.4, the number of Directors that DNP Asia Pacific can nominate to or maintain on the Board of Directors shall depend on DNP Percentage Interest as follows:

 

5.4

Procedure.

 

Following the [***] and subject to Section 5.1 above, if either Shareholder’s Percentage Interest should be below any of the threshold levels set forth in Sections 5.2 or 5.3 above more than [***] and if such Shareholder (the “Reducing Shareholder”) then has more nominees serving on the Board of Directors than the number to which it is entitled, such Reducing Shareholder shall immediately identify by written notice to the Company with a copy to the other Shareholder (the “Increasing Shareholder”) the nominee or nominees on the Board of Directors that will cease serving on the Board of Directors, and each such nominee shall thereupon cease to be a Director or member of the Board of Directors.  If such Reducing Shareholder fails to make such designation within five (5) Business Days after written demand by the Increasing Shareholder, the Increasing Shareholder may for and on behalf of the Reducing Shareholder and its nominee(s) (and the Reducing Shareholder hereby, and shall cause its nominee(s) to, irrevocably authorize the Increasing Shareholder to) designate by written notice to the Company with a copy to the Reducing Shareholder one or more (as appropriate) of the Reducing Shareholder’s nominees on the Board of Directors that will cease serving on the Board of Directors and each such nominee shall thereupon cease to be a Director or member of the Board of Directors. Upon the written notice described in either of the immediately preceding two sentences, the Shareholders agree to collaborate to cause the Board of Directors to convene a meeting of the Shareholders as soon as practicable to fill the vacancies created by such removals in accordance with the provisions of Sections 5.2 and 5.3.  Similarly, if a Shareholder whose Percentage Interest fell below any threshold level set forth in Section 5.2 or 5.3 subsequently increases its Percentage Interest above any such level, the process shall be reversed.

 

5.5

Chairman and Vice-Chairman

 

A Chairman of the Board of Directors (the “Chairman of the Board”) shall preside at all meetings of the Board of Directors.  The Chairman of the Board shall be selected from and among the Directors nominated by Photronics Singapore. A Vice-Chairman of the Board of Directors (the “Vice-Chairman of the Board”) shall be selected from and among the Directors nominated by DNP provided that [***] shall not fall below [***] percent ([***]%). If the Percentage Interest of Photronics Singapore falls below [***] percent ([***]%)[***], then the Chairman of the Board shall be selected from and among the Directors nominated by [***] is above [***] percent ([***]%) or otherwise by the Board of Directors.  If a Shareholder whose Percentage Interest fell below [***] percent ([***]%) subsequently increases its Percentage Interest above [***] percent ([***]%), such Shareholder shall have the right to nominate the [***] again.  In the case where the Chairman of the Board is selected by DNP in accordance with the foregoing, then the Vice-Chairman of the Board shall be selected from and among the Directors nominated by Photronics Singapore provided that Photronics Singapore’s Percentage Interest shall not fall below [***] percent ([***]%). If either Shareholder’s Percentage Interest falls below [***] percent ([***]%), then it no longer has the right to nominate the Vice Chairman until such Shareholder’s Percentage Interest increases to [***] percent ([***]%) or more again.

 

5.6

Meetings of Shareholders and of the Board of Directors; Quorum

 

5.6.1           Shareholder Meetings.  At any time, and from time to time, the Board of Directors may call meetings of the Shareholders.  Special meetings of the Shareholders for any proper purpose or purposes may be called at any time by the Board of Directors.  Written notice of any such meeting shall be given to all Shareholders.  No less than twenty (20) calendar days’ written notice shall be given for an annual meeting of the Shareholders and no less than ten (10) calendar days’ written notice shall be given for any special meetings of the Shareholders.  Each meeting of the Shareholders shall be conducted by the Chairman of the Board of Directors.  Where the Chairman of the Board is on leave or cannot exercise his power and authority for any cause, the meeting of the Shareholders shall be conducted by the Vice-Chairman of the Board, or any designee appointed in accordance with the Acts.  Each Shareholder may authorize any Person by written proxy to act for it or on its behalf on all matters in which the Shareholder is entitled to participate.  Each proxy must be signed by a duly authorized officer of the Shareholder.  All other provisions governing or otherwise relating to the convening of meetings of the Shareholders shall from time to time be established in the sole discretion of the Board of Directors (acting reasonably).  Each of the Shareholders shall have the obligation to attend the meeting of the Shareholders, whether in person or by proxy, for the purpose of the quorum, provided that nothing in the foregoing shall be construed to restrict any Shareholder on how to exercise its voting rights (including abstaining from voting).  In the event that any of the Shareholders fails to attend a meeting of the Shareholders due to reasons other than those that are unattributable to such Shareholder or its representative(s) (including, without limitation, Force Majeure, accident and illness) and taking into account that such Shareholder should use its best efforts to issue a proxy for such meeting, resulting in a failure of reaching a quorum, it shall be deemed as a material breach of this Agreement and bad faith of such Shareholder in performing its obligations hereunder.

 

 

 

5.7

Supervisors

 

The Company shall have two (2) supervisors.  Each of Photronics Singapore and DNP shall be entitled to nominate one (1) representative to be elected as the supervisors.

 

5.8

Actions Requiring a Supermajority Vote of Shareholders

 

Notwithstanding the provisions of Section 5.6.4 or any other provisions of this Agreement, the Company may not, and no Shareholder or Director may cause the Company to, take any of the actions specified in Schedule F (or any other action specified in this Agreement as requiring a Supermajority Vote of Shareholders) without obtaining the Supermajority Vote of Shareholders.

 

5.9

Actions Requiring a Supermajority Vote of Directors

 

Notwithstanding the provisions of Section 5.6.4 or any other provisions of this Agreement, the Company may not, and no Shareholder or Director may cause the Company to, take any of the actions specified in Schedule G (or any other action specified in this Agreement as requiring a Supermajority Vote of Directors) without obtaining the Supermajority Vote of Directors.

 

5.10

Compensation of Directors and Supervisors

 

The Directors and supervisors shall not be entitled to any compensation in their capacities as Directors and supervisors unless otherwise agreed upon in writing by all of the Shareholders.

 

5.11

Other Activities

 

Subject to Applicable Law, Article 8 hereof and the provisions of the Transaction Documents, the Shareholders, their respective Affiliates and the Directors may [***]in, and [***] to, any other [***]of any [***], whether or not such [***] may be [***] to be [***] with [***].  [***] by virtue of this Agreement or the relationship created hereby in or to such [***]), and the [***] thereof, even if [***].

 

5.12

Accounting; Records and Reports

 

5.12.1         Accounting and Fiscal Year.  The books, records and accounts of the Company, including for all applicable tax purposes, will be maintained in accordance with such methods of accounting as shall be reasonably determined by the Board of Directors.  The fiscal year of the Company (“Fiscal Year”), including each of the fiscal quarters (the “Fiscal Quarters”) and each of the fiscal months (“Fiscal Months”) thereof, shall correspond to that of calendar year, calendar quarters and calendar months, respectively.

 

5.12.2         Books and Records.  The Board of Directors shall cause to be kept, at such location as the Board of Directors shall reasonably deem appropriate, full and proper ledgers, other books of account, and records of all receipts and disbursements and other financial activities of the Company in accordance with Photronics’ record retention policies for as long as Photronics Singapore and/or an Affiliate of Photronics Singapore hold more than fifty percent (50%) of Percentage Interest in the Company in the aggregate.  The Board of Directors shall also cause to be kept at such location copies of each of the following:

 

(a)              a current list of the full name and last known address of each Shareholder, and the capital account, number of Shares and Percentage Interest held by each Shareholder;

 

(b)              a current list of the full name and last known address of each Director;

 

(c)              the Articles of Incorporation of the Company, including any amendments to the Articles of Incorporation;

 

(d)              the Company’s federal, state and local income tax returns and reports, if any, for the seven (7) most recent Fiscal Years;

 

(e)              this Agreement and any amendments to this Agreement;

 

 

If Japanese generally accepted accounting principles have been amended, both parties agree that; (a) the time limit set forth in this Section 5.12.3 shall be amended accordingly, and to the extent DNP deems reasonably necessary, by the notice from DNP to the Company, and (b) both parties shall cause the Company to use all reasonable efforts to send all necessary financial information as DNP may reasonably request to enable DNP and its Affiliates to prepare their consolidated quarterly and annual financial statements.

 

 

5.13

Indemnification and Liability of the Directors

 

5.13.1         Indemnification.  The Company shall indemnify and hold harmless each Director, the General Manager and all other Officers (individually, an “Indemnitee”) to the fullest extent permitted by Applicable Law from and against any and all losses, claims, demands, costs, damages, liabilities, whether joint or several, expenses of any nature (including reasonable attorneys’ fees and disbursements), judgments, fines, settlements and other amounts (each an “Indemnified Loss”) arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, in which the Indemnitee may be involved as a defendant, or threatened to be involved as a defendant (other than all claims, demands, actions, suits or proceedings brought by the Shareholder who nominated such Director, if applicable), relating to the performance or nonperformance of any act concerning the activities of the Company or by reason of the Indemnitee’s status as a Director, General Manager or Officer, as applicable, regardless of whether the Indemnitee retains such status at the time any such Indemnified Loss is paid or incurred, if (a) the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful, and (b) the Indemnitee’s conduct did not constitute an act or omission which involved intentional misconduct or a knowing violation of the law or gross negligence.  The termination of an action, suit or proceeding by judgment, order, or settlement shall not, in and of itself, create a presumption or otherwise constitute evidence that the Indemnitee acted in a manner contrary to that specified in clauses (a) or (b) above.

 

 

 

5.14

Officer

 

5.14.1        General Manager and Vice General Manager.  The Company will have a general manager (the “General Manager”) to be nominated by Photronics Singapore with input from the [***] and [***]; provided, however, that if the Percentage Interest of Photronics Singapore falls below [***] percent ([***]%) for [***], then the [***] will be nominated by [***] with input from [***] and [***] is above [***] percent ([***]%) or otherwise by the Board of Directors.  If a Shareholder whose [***] fell below [***] percent ([***]%) subsequently [***] above [***] percent ([***]%), such Shareholder shall have the right to nominate the General Manager again.  The Company shall have a vice general manager (the “Vice General Manager”) to be selected by DNP Asia Pacific with input from the [***] and Photronics Singapore; provided, however, that in the case where the General Manager is nominated by DNP Asia Pacific in accordance with the foregoing, then the Vice General Manager shall be selected by Photronics Singapore with input from the Board of Directors and DNP Asia Pacific.   In the event the [***] is unable to [***] for any reason (including [***]), the [***] will [***] but will only do so until the next [***] at which time the [***] will be appointed as [***], as the case may be, in accordance with the foregoing in this Section 5.14.1.

 

 

 

5.15

Steering Committee

 

 

 

 

5.16

Business Development Team

 

 

5.17

Maintenance of Insurance

 

The Company shall at all times be covered by insurance of the types and in the amounts set forth on Schedule E.  Such insurance coverage may be provided through the coverage under one or more insurance policies maintained by the Company, Photronics or Photronics Singapore.  A certificate of insurance will be provided by the Company to the Shareholders annually evidencing coverage.

 

5.18

Related Party Agreements

 

Photronics Singapore and DNP agree that (i) any contract, agreement, amendment, arrangement or understanding entered into after the date hereof between any Company Entity on the one hand, and either Shareholder (or any of their respective Affiliates) on the other hand (the “Related Party Agreement”), shall be on an arm’s-length basis; and (ii) Directors nominated by a Shareholder who or whose Affiliate is a party to a Related Party Agreement shall be deemed having a personal interest in such Related Party Agreement and shall refrain from voting on such Related Party Agreement at the relevant board meeting in accordance with the Acts.

 

ARTICLE 6.

OPERATIONS

 

6.1

Headquarters

 

The Company’s headquarters shall be in Xiamen, the People’s Republic of China.

 

6.2

Operations Plan; Annual Budget

 

The initial business plan of the Company is attached hereto as Schedule H that covers the [***] of the Company from execution of the Transaction Documents until commencement of full operation of the Company’s facilities. The initial business plan will not be substantially modified without the prior written consent of both Shareholders.  After commencement of [***] of the Company’s facilities, from time to time, but in no event less frequently than annually, the Board of Directors may amend or update the business plan of the Company (collectively with the initial business plan, referred to as the “Business Plan”).  The Board of Directors will also be responsible for approving an annual budget (the “Annual Budget”) on at least an annual basis at the beginning of each fiscal year.

 

6.3

Reserved [RESERVED]

6.4

Company Employees; Seconded Employees

 

The Company shall employ its own personnel and shall be their exclusive employer. In addition, certain other persons who are employed by a Shareholder or its Affiliates may be assigned by such Shareholder, to work for the Company (“Seconded Employees”).  After the Effective [***]DNP shall have the [***] will be the Vice General Manager selected by [***] in accordance with Section 5.14.1, [***].  [***] will pay all remuneration expenses related to such employees.  If the [***].  All Seconded Employees will be subject to stringent confidentiality obligations including executing a confidentiality agreement with the Company.  All Seconded Employees will report directly to the General Manager and the Vice General Manager.

6.5

Service Provider Documents

 

6.5.1           The Company shall have policies applicable to, and ensure that all of its officers, employees and third-party independent contractors, third-party consultants, and other third-party service providers enter into appropriate agreements with respect to, (1) protection of confidential information of the Company, (2) compliance with Applicable Law, and (3) other matters related to the delivery of services to, or employment of such Person by, the Company or its Affiliates.  The Company shall have policies applicable to, and ensure that all of its officers and employees enter into appropriate agreements with respect to intellectual property assignment, including invention disclosures, pursuant to which ownership to any intellectual property created in the course of employment with the Company or any of its Affiliates shall be assigned to the Company.  The Company shall have policies applicable to, and ensure that all of its third-party independent contractors, third-party consultants, and other third-party service providers that create intellectual property in the course of performing services for the Company, enter into appropriate agreements with the Company with respect to the Company’s ownership of or the Company's right to use such intellectual property.  The forms referred to in this Section 6.5.1 are collectively referred to as the “Service Provider Documents.”

 

6.5.2           Notwithstanding any preceding provisions in this Section 6.5 or elsewhere, no Seconded Employee shall be required to sign any Service Provider Documents, except with respect to acknowledgement of an agreement regarding policies of the Company addressing conduct while performing services at the premises of the Company, such as workplace safety, but excluding matters relating to protection of confidential information of the Company and intellectual property assignment, which issues have been addressed in special Service Provider Documents.  The Company shall be responsible for providing such Service Provider Documents, prepared by the Company for each Seconded Employees to the appropriate Seconded Employees, following up to make sure they are signed and for properly storing such forms; and each Shareholder shall cooperate with the Company to require their Seconded Employees to sign such special Service Provider Document when requested to do so by the Company.

 

6.6

Compensation and Benefits

 

The Company shall have compensation and benefits programs (including incentive compensation programs) for the employees of the Company (excluding, for this purpose, [***]) at its locations [***], as determined by the Board of Directors or the General Manager, as applicable, and, to the extent required by Applicable Law or this Agreement, approved by the Board of Directors.

 

ARTICLE 7.

DISPOSITION AND TRANSFERS OF INTERESTS

 

7.1

Holding of Shares

 

For so long as Photronics Singapore or DNP, directly or indirectly, owns Shares in the Company, Photronics Singapore or DNP, as applicable, must own and hold such Shares either (a) by itself or (b) through one or more wholly owned (including indirect wholly owned) subsidiaries.

 

7.2

Transfer Moratorium

 

7.2.1          Other than as specifically provided in this Agreement , no Shareholder may [***] of its Shares to any other [***], directly or indirectly, [***] its [***], respectively, in each case other than (i) [***], or (ii) [***] in connection with a [***], in compliance with the terms of Section 7.4 of this Agreement.  The parties agree that the [***] shall be [***].  In the event of any [***] as permitted under this Section 7.2, the parties thereto shall agree to [***] accordingly.

 

 

7.3

Purchase and Sale of Remaining Interest

 

7.3.1           If the Percentage Interest of a Shareholder (the “Minority Shareholder”) is [***], and remains at or below [***] for more than [***], the other Shareholder or a wholly owned subsidiary thereof (such other Shareholder or Affiliate thereof, the “Majority Shareholder”) shall have the [***] at a [***], subject to the terms and conditions set forth below.  The Majority Shareholder may [***] by delivering a written notice of its intent to exercise to the Minority Shareholder.  In addition, the Minority Shareholder shall have the option to [***], subject to the terms and conditions set forth below.  The Minority Shareholder may exercise this [***] by delivering a written notice of its intent to exercise to the Majority Shareholder. The notice delivered by the Majority Shareholder or the notice delivered by the Minority Shareholder pursuant to this Section 7.3.1 is hereinafter referred to as the “Minority Option Notice.”

 

 

7.4

Change in Control

 

 

7.5

Purchase and Sale Agreement

 

In the event of any purchase and sale of Shares under Section 7.3 or 7.4, the parties thereto shall enter into a commercially reasonable agreement to implement such purchase and sale.    The parties thereto shall also make the necessary amendments to this Agreement.

 

ARTICLE 8.

NON COMPETE

 

8.1

Non-Competition

 

8.1.1           During the term of this Agreement and [***] the [***] of this Agreement (unless otherwise set forth in this Agreement), the parties shall [***].  In the event that the [***].

 

For the purpose of clarification, (i) the [***], and (ii) the [***], and [***].  For activities related to (i) and (ii) above, (a) the parties will [***], (b) the [***], and (c) for the purpose of this (a) and (b) and if necessary, the [***].  To [***] related to (ii) above, [***].

 

8.1.2           During the term of this Agreement and [***] of this Agreement, the parties shall not and shall ensure that its or their  Affiliates do not (either personally or through an agent or otherwise) (i) [***]; or (ii) [***]; provided, however, that [***].

 

8.2

Business Scope of the Company

 

 

(i)               In the first category, if the [***] and subject to the non-compete obligations set forth in Section 8.1. Notwithstanding the above, if such [***]; and

 

(ii)              In the second category, if the [***] be subject to the non-compete obligations set forth in Section 8.1.  Notwithstanding the above, the [***].

 

8.3

Contact with Customers

 

 

Notwithstanding the foregoing, (a) the [***], and (b) the [***][***], subject to the non-compete obligations set forth in Section 8.1.

ARTICLE 9.

 

TERM AND TERMINATION OF THIS AGREEMENT

 

9.1

Term of this Agreement

 

 

9.2

Termination and Cross-termination

 

9.2.1           Notwithstanding Section 9.1, this Agreement may be terminated by either party at any time, upon notice given to the other party:

 

 

In the case of termination pursuant to this Section 9.2.1(a)  the [***] surviving after the termination set forth in Section 8.1 does not apply to the Terminating Party (defined in Section 9.3), and the Terminating Party will be immediately released from the [***] set forth therein upon the termination hereunder.

 

9.2.2           In addition to Section 9.2.1, this Agreement may be terminated by [***][***] within [***] years from the Effective Date, in which case, [***] may exercise the same option as that given to the Requesting Shareholder set forth in Section 10.4; provided that, prior to DNP exercising such option, both parties will discuss dissolution and liquidation of the Company in accordance with Section 10.4. In the case of termination pursuant to this Section 9.2.2, the [***] surviving after the termination set forth in Section 8.1 does not apply, and the parties will be immediately [***] obligations set forth therein upon the termination hereunder.

 

 

9.3

Right of Terminating Party

 

The parties agree that the party who terminates this Agreement in accordance with Section 9.2.1 (the “Terminating Party”) shall have the right:

 

 

9.4

Exceptional Exit

 

9.4.1           Photronics and DNP may terminate this Agreement by giving a [***] prior written notice to the other party if any of the following events occurs after the expiration of the [***] (the “Exit Notice”, and such party giving the Exit Notice being referred to as the “Exiting Party”):

 

 

ARTICLE 10.

DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY

 

10.1

Limitations

 

The Company may be dissolved, liquidated, and terminated only pursuant to the provisions of this Article 10, and the parties hereto do hereby irrevocably waive, to the extent permitted by Applicable Law, any and all other rights they may have to cause a dissolution, liquidation or termination of the Company or a sale or partition of any or all of the Company Assets in connection with such dissolution or liquidation.

 

10.2

Exclusive Causes

 

Notwithstanding the Acts, the following and only the following events shall cause the Company to be dissolved, liquidated, and terminated (each a "Liquidating Event"), unless otherwise set forth in this Agreement:

 

 

 

To the fullest extent permitted by law, any [***] other than as provided in this Section 10.2 shall be a dissolution in contravention of this Agreement.

 

10.3

Effect of Dissolution

 

The dissolution of the Company shall be effective on the day on which the event occurs giving rise to the dissolution (or, if a corporate action of the Company is required by the Acts, on the day such corporate action is duly taken), but the Company shall not terminate until it has been wound up and its assets have been distributed as provided in Section 10.5.1 or 11.1  of this Agreement.  Notwithstanding the dissolution of the Company, prior to the termination of the Company, the business of the Company and the affairs of the Shareholders, as such, shall continue to be governed by this Agreement.

 

10.4

Loss of the Company

 

 

10.5

Liquidation

 

 

10.6

Dissolution

 

Where the Requesting Shareholder is entitled to give the [***] according to Section 10.4 but it does not give the Dissolution Notice within the Dissolution Notice Period, and the [***] thereafter desires to [***] the Company and notifies the [***] of the same [***] from the e[***], the Requesting Shareholder shall agree to the [***] proposal to [***] the Company in accordance with Section 10.5 and shall take all relevant actions to achieve such purpose.

 

ARTICLE 11.

DISTRIBUTIONS

 

11.1

Use of Cash

 

Subject to applicable legal and contractual restrictions and to Section 11.2 and Article 10, Company cash will be treated as follows (in the following order of priority):

 

 

11.2

Distributions Upon Liquidation

 

Distributions made in conjunction with the final liquidation of the Company shall be applied or distributed as provided in Article 10 hereof.

 

11.3

Withholding

 

The Company may withhold amounts in respect of allocations or distributions if it is required to do so by any Applicable Law, and each Shareholder hereby authorizes the Company to withhold from or pay on behalf of or with respect to such Shareholder such amount of federal, state, local or foreign taxes that the chief finance officer of the Company determines the Company is required to withhold or pay with respect to any amount distributable or allocable to such Shareholder pursuant to this Agreement, provided that the Company shall provide a Shareholder with ten (10) Business Days advance written notice of the amount of any withholding to be made in respect of allocations or distributions to such Shareholder (or any Affiliate of such Shareholder) which notice shall demonstrate the calculation thereof.      Any amounts withheld pursuant to this Section 11.3 shall be treated as having been distributed to such Shareholder.  Each Shareholder will from time to time provide such other forms or documents as may reasonably be required in order to establish the status of such Shareholder for purposes of the tax laws of any applicable jurisdiction.  Each Shareholder agrees to indemnify and hold harmless the Company from any liability imposed on the Company for any action taken by the Company in reliance upon such representation of tax withholding status.  A Shareholder’s obligations hereunder shall survive the dissolution, liquidation or winding up of the Company.  If a Governmental Authority asserts in writing to any Person that the Company failed to withhold Tax at the time and/or in the amounts required by Applicable Laws in respect of a Shareholder and/or its Affiliates, then such Shareholder and/or its Affiliates, as applicable, shall promptly upon receipt of a copy of such writing accompanied by a written notice from the Company specifying that a payment is required pursuant to this Section 11.3 pay to such Governmental Authority an amount in full satisfaction of the amount of Taxes so asserted by such Governmental Authority.  If such Shareholder and its Affiliates do not promptly pay such amount to such Governmental Authority, then, unless such Shareholder provides satisfactory written evidence of settlement in full of the matter asserted by the Governmental Authority, the Company shall withhold such amount from the next distribution(s) to such Shareholder, shall promptly pay such withheld amounts over to such Governmental Authority in payment of such asserted liability for Taxes and shall treat the amounts so withheld and paid over as actually distributed to such Shareholder.

 

11.4

Distributions in Kind

 

Subject to Section 11.1, no right is given to any Shareholder to demand or receive any distribution of property other than cash as provided in this Agreement.  Upon a vote of the Board of Directors and a [***], the Board of Directors may determine (subject to the approval of the [***]) to [***], and such Company Assets shall be distributed in such fashion as to ensure that the [***] thereof (as determined by the Board of Directors and approved by the [***]) is distributed, and any items of gain or loss resulting from such distribution are allocated, in accordance with this Article 11 and Applicable Laws .

 

11.5

Limitations on Distributions

 

Notwithstanding any provision to the contrary contained in this Agreement, neither the Company nor the Board of Directors, on behalf of the Company, shall be required to or shall knowingly make a distribution to any Shareholder or the holder of any Economic Interest on account of its Shares in the Company (as applicable) in violation of the Acts or other Applicable Law.

 

ARTICLE 12.

MISCELLANEOUS

 

12.1

Amendments

 

Any provision of this Agreement may be amended if, and only if, such amendment is in writing and is duly executed by each Shareholder, provided however this Agreement will be amended to allow Photronics Singapore to implement an Accounting Amendment in accordance with Section 1.6,.  Upon the making of any amendment to this Agreement in accordance with the previous sentence, the Board of Directors shall prepare and file such documents and certificates as may be required under the Acts and under any other Applicable Law.

 

12.2

No Waiver

 

Any provision of this Agreement may be waived if, and only if, such waiver is in writing and is duly executed by the party against whom the waiver is to be enforced.  No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial waiver or exercise thereof preclude the enforcement of any other right, power or privilege nor deemed to extend to any prior or subsequent default, breach or occurrence or affect, in any way, any rights arising by such prior or subsequent default, breach or occurrence.

 

12.3

Entire Agreement

 

This Agreement, together with the Schedules and other documents referred to herein and therein, constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and supersede any and all prior oral and written, and all contemporaneous oral, agreements or understandings pertaining thereto including the Memorandum of Understanding dated November 19, 2016, between Photronics and DNP.  There are no agreements, understandings, restrictions, warranties or representations relating to such subject matter among the parties other than those set forth herein and in the Schedules and other documents referred to herein and therein.

 

12.4

Further Assurances

 

Each of the parties hereto does hereby covenant and agree on behalf of itself, its successors and its assigns, without further consideration, to prepare, execute, acknowledge, file, record, publish, and deliver such other instruments, documents and statements, and to take such other action as may be required by law or reasonably necessary or advisable to effectively carry out the purposes of this Agreement.

 

12.5

Notices

 

Unless otherwise provided herein, all notices, requests, instructions or consents required or permitted under this Agreement shall be in writing and will be deemed given:  (a) when delivered personally; (b) when sent by confirmed facsimile and followed up by delivery by overnight carrier under Clause (d) below; (c) ten (10) Business Days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) three (3) Business Days after deposit with an internationally recognized commercial overnight carrier specifying next‑day delivery, with written verification of receipt.  All communications will be sent to the addresses, email account or facsimile number listed on Schedule C (or to such other address, email account or facsimile number as may be designated by a party giving written notice to the other parties pursuant to this Section 12.5).

 

12.6

Governing Law

 

All questions concerning the construction, interpretation and validity of this Agreement and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement will be governed by and construed in accordance with the laws of the People’s Republic of China (without reference to any choice or conflicts of laws rules or principles that would require the application of the laws of any other jurisdiction).

 

12.7

Construction; Interpretation

 

12.7.1        Certain Terms.  The words “hereof,” “herein,” “hereto,” “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement.  The term “including” or “includes” is not limited and means “including, or includes, without limitation.”

 

12.7.2         Section References; Titles and Subtitles.  Unless otherwise noted, all references to Sections and Schedules herein are to Sections and Schedules of this Agreement.  The titles, captions and headings of this Agreement are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

 

12.7.3         Reference to Persons, Agreements, Statutes.  Unless otherwise expressly provided herein, (i) references to a Person include its successors and permitted assigns, (ii) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments, restatements and other modifications thereto or supplements thereof and (iii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such statute or regulation.

 

 

12.8

Rights and Remedies Cumulative

 

The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive its right to use any or all other remedies.  Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.

 

12.9

No Assignment; Binding Effect

 

Except as otherwise expressly provided herein, no party may assign, delegate or otherwise transfer any of its rights or obligations hereunder to any third party, whether by assignment, transfer, Change in Control or other means, without the prior written consent of each other party.  Any attempted assignment in violation of the foregoing shall be null and void.  Subject to the foregoing, this Agreement shall be binding on and inure to the benefit of the Shareholders, their heirs, executors, administrators, successors and all other Persons hereafter holding, having or receiving an interest in the Company.

 

12.10

Severability

 

If any provision in this Agreement will be found or be held to be invalid or unenforceable, then the meaning of said provision will be construed, to the extent feasible, so as to render the provision enforceable, and if no feasible interpretation would save such provision, it will be severed from the remainder of this Agreement which will remain in full force and effect unless the severed provision is essential and material to the rights or benefits received by any party.  In such event, the parties will use their respective best efforts to negotiate, in good faith, a substitute, valid and enforceable provision or agreement which most nearly reflects the parties’ intent in entering into this Agreement.

 

12.11

Counterparts

 

This Agreement may be executed in counterparts, each of which so executed will be deemed to be an original and such counterparts together will constitute one and the same agreement.  Execution and delivery of this Agreement by exchange of facsimile copies or PDF file bearing the facsimile signature of a party shall constitute a valid and binding execution and delivery of this Agreement by such party.

 

12.12

Dispute Resolution; Arbitration

 

The parties hereby agree that any and all claims, disputes or controversies of whatever nature (the “Dispute”), arising out of, in connection with, or in relation to the interpretation, performance, enforcement, breach, termination or validity of this Agreement, shall be first raised in writing to the [***] of each of the parties for [***] at resolution in good faith among such [***].  If within [***] (or such shorter time if emergency or exigent circumstances exist) of first raising the issue to the [***], the parties are [***], then the parties hereby agree that such Dispute shall be submitted to [***]. The arbitral award is final and binding upon the Parties.  Each party shall bear its own expenses incurred in connection with arbitration and the fees and expenses of the arbitrator shall be shared equally by the parties involved in the dispute and advanced by them from time to time as required.  Any discovery in connection with such arbitration hereunder shall be limited to information directly relevant to the controversy or claim in arbitration.  The arbitrator will state the factual and legal basis for the award.  To the extent not amended or overturned by appeal to a court of competent jurisdiction pursuant to the Arbitration Law of the People’s Republic of China, the decision of the arbitrator in any such proceeding will be final and binding and not subject to judicial review and final judgment may be entered upon such an award in any court of competent jurisdiction, but entry of such judgment will not be required to make such award effective.  The parties agree that the arbitration proceedings and decisions shall be kept confidential and that any information or documents, including any pleadings or submissions exchanged or produced in such arbitration (including, but not limited to briefs, or other documents submitted or exchanged, any testimony or other oral submissions, and any awards) shall not be disclosed beyond the arbitrator, the CIETAC, the parties, their counsel and any Person necessary to conduct the arbitration.  The parties hereby irrevocably waive, to the fullest extent permitted by Applicable Law, any objection which they may now or hereafter have to the laying of venue of any action brought for enforcement of such arbitration clause or any award resulting from arbitration pursuant to this Section 12.12 or any defense of inconvenient forum for the maintenance of any such action.  Each of the parties hereto agrees that an arbitration award in any such action may be enforced in other jurisdictions by suit on the arbitration award or in any other manner provided by Applicable Law.  The parties agree that the arbitration proceeding described in this Section 12.12 is the sole and exclusive manner in which the parties may resolve disputes arising out of or in connection with this Agreement; provided that the parties expressly agree that nothing in this Agreement shall prevent the parties from applying to a court having jurisdiction over any of the parties to this Agreement for the limited purpose of obtaining temporary and provisional or injunctive relief necessary solely to preserve the status quo or otherwise to prevent irreparable harm to a party pending the outcome of arbitration.  The parties agree that all arbitration proceeding described in this Section 12.12 shall be conducted in [***] with [***] speaking lawyer(s) and arbitrator(s), and that the number of [***]: (a) o[***], or (b) [***].

 

12.13

Third-Party Beneficiaries

 

None of the provisions of this Agreement shall be for the benefit of or be enforceable by any creditor of the Company or by any third-party creditor of any Shareholder.  This Agreement is not intended to confer any rights or remedies hereunder upon, and shall not be enforceable by, any Person other than the parties hereto, their respective successors and permitted assigns and, solely with respect to the provision of Section 5.13, each Indemnitee and each other indemnified Person addressed therein.

 

12.14

Specific Performance

 

The parties agree that irreparable damage will result if this Agreement is not performed in accordance with its terms, and the parties agree that any damages available at law for a breach of this Agreement would not be an adequate remedy. Therefore, the provisions hereof and the obligations of the parties hereunder shall be enforceable in a court or other tribunal with jurisdiction, by a decree of specific performance, and appropriate injunctive relief may be applied for an granted in connection therewith.  Such remedies and all other remedies provided for in this Agreement shall, however, be cumulative and not exclusive and shall be in addition to any other remedies that a party may have under this Agreement in accordance with Applicable Laws.

 

12.15

Consequential Damages

 

No party shall be liable to any other party under any legal theory for indirect, special, incidental, consequential or punitive damages, or any damages for loss of profits, revenue or business or damage to reputation or goodwill, even if such party has been advised of the possibility of such damages (it being understood that consequential damages arising from the breach of the confidentiality restrictions set forth in Section 12.17 shall not be considered to fall within any such category of damages).

 

12.16

Fees and Expenses

 

Except as otherwise expressly provided in this Agreement and to the extent that the Company pay fees and expenses of the Shareholders, each party hereto shall bear its own fees and expenses incurred in connection with this Agreement, the Transaction Documents and the transactions contemplated hereby and thereby, including the legal, accounting and due diligence fees, costs and expenses incurred by such party.

 

12.17

Confidentiality

 

12.17.1       Each party shall not disclose, divulge, provide, publish or provide access to third parties, and will use reasonable efforts to cause its respective Affiliates, officers, directors, members, employees, agents, representatives and advisors (collectively, such party’s “Covered Persons”) not to disclose, divulge, provide, publish or provide access to third parties, unless and solely to the extent (i) compelled to disclose by judicial or administrative process or by other requirements of Applicable Law or the applicable rules of any national securities exchange or (ii) necessary to enforce claims in a judicial or administrative proceeding, (a) the existence and content of the this Agreement and Transaction Documents and any information arising from or in connection with this Agreement and the Transaction Documents and/or the transactions contemplated hereby and (b) all documents and information concerning the this Agreement and the Transaction Documents and the transactions contemplated hereby or furnished by one party and its Covered Persons (the “Disclosing Party”), to any other party and its Covered Persons (the “Receiving Party”), except to the extent that such information can be shown by written evidence to have been (A) previously known on a non-confidential basis by the Receiving Party, (B) publicly available through no fault of the Receiving Party, (C) rightfully received from a third party without a duty of confidentiality, (D) disclosed by the Disclosing Party of such information to a third party without a duty of confidentiality on such third party, (E) independently developed by the Receiving Party prior to or without reference to any such documents or information, or (F) disclosed with the prior approval of the Disclosing Party of such documents or information. If this Agreement is terminated for any reason, the confidentiality obligations required by this Section 12.17 shall survive and be maintained as set forth below, and the Receiving Party shall return to the Disclosing Party, all documents and other materials, and all copies thereof, obtained by the Receiving Party from the Disclosing Party in connection herewith that are subject to this Section 12.17.  The Receiving Party shall use any information obtained herewith that are subject to this Section 12.17 only in relation to the performance of its obligations under this Agreement and the Transaction Documents and/or the transactions contemplated hereby.  The confidentiality obligations required by this Section 12.17 shall not apply to disclosures permitted pursuant to Section 12.17.2 hereof, and all confidentiality obligations required by this Section 12.17 shall be terminated upon the fifth anniversary of the termination of this Agreement.

 

12.17.2       Except as agreed by the parties, each of the parties agrees that it shall not, directly or indirectly, make or cause any public announcement in respect of this Agreement and the Transaction Documents or the transactions contemplated hereby without the prior written consent of the other party. Notwithstanding the foregoing, each party shall be permitted to issue any public announcements or press releases solely to the extent as required by Applicable Law or the applicable rules of any national securities exchange, provided that a draft of any such public announcement or press release be first provided by the party who issues such public disclosure to the other party no later than three (3) Business Days prior to such required public disclosure.

 

(Signature Page Follows)

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

 

	PHOTRONICS INC.
	By:
	Name:  [***]
	Title: [***]
	PHOTRONICS SINGAPORE PTE, LTD.
	By:
	Name:  [***]
	Title: [***]
	DAI NIPPON PRINTING CO., LTD.
	By:
	Name:  [***]
	Title: [***]
	DNP ASIA PACIFIC PTE. LTD.
	By:
	Name:  [***]
	Title: [***]

 

JV Operating Agreement Signature Page

 

---

 

 

SCHEDULE A-1

Outsourcing Agreement

Amended and Restated License Agreement among DNP and PDMC

 

SCHEDULE A-2

Contribution Agreement

 

(as of completion of the Closing)

 

 

 

 

1.

[***]

 

2.

[***]

 

3.

[***]

 

4.

[***]

 

5.

[***]

 

6.

[***]

 

7.

[***]

 

 

 

1.

[***].

2.

[***].

3.

[***]:

·

[***].

4.

[***].

5.

[***].

6.

[***].

 

7.

[***].

8.

[***].

 

 

The following actions of the [***]:

 

(a)

[***];

 

(b)

[***];

 

(c)

[***];

 

(d)

[***];

 

(e)

[***]; and

 

(f)

[***].

 

 

 

The following actions of the [***]:

 

(a)

[***];

 

(b)

[***];

 

(c)

[***];

 

(d)

[***];

 

(e)

[***];

 

(f)

[***]; and

 

(g)

[***].

 

 

 

 

 

 

 

1.

[***]

 

2.

[***]

 

3.

[***]

 

4.

[***]

 

5.

[***]

 

 

 

[***]

 

 

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---

---

---

---

---

---

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*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

---

AMENDED AND RESTATED LICENSE AGREEMENT

This AMENDED AND RESTATED LICENSE AGREEMENT (“Agreement”) is entered into as of the 16th day of May 2017 (“the Effective Date”), by and between  Dai Nippon Printing Co., Ltd., a corporation organized under the laws of Japan, with its principal place of business at 1-1-1, Ichigaya-Kagacho, Shinjuku-ku, Tokyo 162-8001, Japan (“DNP”) and Photronics DNP Mask Corporation (formerly known as Photronics Semiconductor Mask Coroporation), a corporation organized under the laws of the Republic of China (hereinafter “ROC” or “Taiwan”) , with its registered office at  1F, No. 2, Lising Road, Hsinchu City, Hsinchu Science Park, Taiwan, R.O.C  (“Company”).  Each of DNP and the Company is hereafter referred to as a “Party” and collectively the “Parties”.

 

RECITALS

 

WHEREAS, in order to integrate resources, reduce operating costs and expand the economic scale of each of DNP Photomask Technology Taiwan Co. Ltd.  (“DPTT”) and Photronics Semiconductor Mask Corp. which was the predecessor of the Company, DPTT agreed to enter into a Merger Agreement (“Merger Agreement”) with the Company as the surviving company;

 

WHEREAS, after the merger of DPTT into the Company, the Company  (a) became a joint venture entity directly or indirectly owned by Photronics, Inc., a corporation organized under the laws of the State of Connecticut, U.S.A. with its principal place of business at 15 Secor Road, Brookfield, Connecticut, U.S.A. (“Photronics”) and DNP as its shareholders; and (b) assumed all rights and obligations of DPTT by operation of the Business Mergers and Acquisitions Act of Taiwan, including, amongst others, the rights and obligations under the technology license agreement entered into by and between DNP and DPTT as of June 23, 2008, as amended as of June 23, 2011 and an agreed date prior to the Effective Date (collectively, the “Technology License Agreement”);

 

WHEREAS, in connection with the merger of DPTT into the Company, Photronics and DNP have entered into a Joint Venture Operating Agreement (“JV Operating Agreement”) dated as of 20^th  day of November, 2013 and Joint Venture Framework Agreement (“JV Framework Agreement”) dated as of 20^th  day of November, 2013.

 

WHEREAS, DNP who owns certain patents, patent applications, know how and invention disclosures with respect to the Licensed Products (defined below) desires to enter into this Agreement, pursuant to which DNP agrees to continue [***]  to the Company under such  subject to the terms and conditions herein;

 

WHEREAS, the Company wishes to continue using such license to make, use, distribute or otherwise dispose of Photomasks (as defined below);

 

WHEREAS, DNP and the Company are party to that certain License Agreement dated as of November 20, 2013, amended by the letter agreement dated as of March 14, 2014 and Amendment No.1 to License Agreement dated as of July 22, 2015 (the “Existing License Agreement”);

 

WHEREAS, in connection with the formation of a joint venture in PRC, Photronics and DNP, together with Photronics Singapore Pte, Ltd and DNP Asia Pacific Pte, Ltd., have entered into a Joint Venture Operating Agreement of Photronics DNP Mask Corporation Xiamen (“CJV Operating Agreement”) dated as of the 16th day of May, 2017.

 

WHEREAS, DNP and the Company desire to amend and restate the Existing License Agreement in its entirety on the terms and conditions herein set forth;

 

NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein and intending to be legally bound, the Parties hereby agree as follows:

 

ARTICLE I.

DEFINITIONS

 

Section 1.1.  Certain Defined Terms.  The following terms shall have the meanings set forth below:

 

 “Affiliate” means, with respect to any Person (as hereinafter defined), any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such Person.  For the purposes of this definition, “control,” when used with respect to any specified Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of equity interests in such Person, by contract or otherwise; and the terms “controlling” and “controlled” have correlative meanings to the foregoing.

 

 “Agreement” has the meaning set forth in the introductory paragraph hereof. 

 

“Business Day” means any day other than a Saturday, Sunday or any other day on which banks are authorized or required by law or other governmental action to close in Japan, Taiwan and the United States of America.

 

  “Control”, “Controlled” or “Controlling”, when used in reference to Know-how or Patent Rights, means the legal authority or right of a Party hereto (or any of its Affiliates) to [***]the other Party, or to otherwise [***] to such other Party, without breaching the terms of any agreement with a third party, or misappropriating the proprietary or trade secret information of a third party.

 

 “Effective Date” means the completion date of the merger contemplated under the Merger Agreement.

 

“Governmental Authority” means any nation, state, territory, province, county, city or other unit or subdivision thereof or any entity, authority, agency, department, board, commission, instrumentality, court or other judicial body authorized on behalf of any of the foregoing to exercise legislative, judicial, regulatory or administrative functions of or pertaining to government, and any governmental or non-governmental self-regulatory organization.

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

“Know-how” means any and all [***] and [***]including without limitation all [***] and other [***] whether [***], provided, however, those which are of general public knowledge and/or those subject to the Patent Rights shall be excluded .

 

 

“License” has the meaning set forth in Section 2.1 herein.

 

“Licensed Know-how” means the Know-how set forth on [***]that are [***], and other [***].

 

“Licensed Patents” means the Patent Rights set forth on Exhibit B attached hereto that are owned or Controlled during the Term of this Agreement by DNP as well as any Patent Rights claiming priority in whole or part to any Patent Rights set forth on Exhibit B.

 

 “Licensed Products” means [***], to be [***] (i) under the License set forth herein which [***] and  (ii) under the Secondary License (as defined in Section 2.1(b) below ).

 

 “Order” means any judicial, administrative or arbitral judgment, order, award, writ, decree, injunction, lawsuit, proceeding or stipulation of any Governmental Authority.

 

“Party” and “Parties” have the meaning set forth in the introductory paragraph hereof.

 

“Patent Rights” means [***] and  any [***]regarding the same, as well as any [***] in the [***]in regard to  [***]thereof.

 

“Person” means any natural person, corporation, company, limited liability company, partnership (limited or general), joint venture, association, trust, unincorporated organization or other entity.

 

“Photomasks” means photomasks, [***]used in the [***].

 

“Photronics Xiamen” means an Affiliate of Photronics established in Xiamen, PRC.

 

“PRC” means the People's Republic of China (excluding Taiwan, Hong Kong Special Administrative Region and Macau Special Administrative Region).

 

“Term” means the period commencing upon the completion of the merger contemplated under the Merger Agreement and concluding upon termination of this Agreement pursuant to Article VII herein.

 

“Territory” means [***].

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

“[***]” means [***].

 

“[***]” means any [***]

Section 1.2.  Rules of Construction and Interpretation.

 

(a)          The definitions of the terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have the same meaning and effect as the word “shall”.  The word “any” shall mean “any and all” unless otherwise clearly indicated by context.  Where either Party’s consent is required hereunder, except as otherwise specified herein, such Party’s consent may be granted or withheld in such Party’s sole discretion.

 

(b)          Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein), (ii) any reference to any laws herein shall be construed as referring to such laws as from time to time enacted, repealed or amended, (iii) any reference herein to any person shall be construed to include the person’s successors and assigns, (iv) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, and (v) all references herein to Articles, Sections or Exhibits, unless otherwise specifically provided, shall be construed to refer to Articles, Sections and Exhibits of this Agreement.

 

ARTICLE II.

GRANT OF LICENSE

 

Section 2.1.  License.  (a) In consideration for the royalty payments that have been made pursuant to the Technology License Agreement and other good and valuable consideration, (i) DNP hereby agrees to continue to [***]and hereby [***], and the Company agrees to [***]  (excluding [***]) within the [***]within or [***] in accordance with the terms and conditions hereof, effective from the [***]; and (ii) the Parties to this Agreement acknowledge that the [***]upon the [***] as of the date hereof.

 

(b)          In consideration for a royalty payment by the Company to DNP as set forth below in Section 2.1 (c) and other good and valuable consideration, DNP agrees to grant and hereby grants, and the Company agrees to accept and hereby accepts, a right to [***]within the [***]and within the scope of the Business set forth in Section 1.4 of the [***],  during the term of [***] and in accordance with the terms and conditions hereof, effective from the date hereof. For the [***]The Company shall [***] Notwithstanding the foregoing, the [***]set forth in Section 2 of the [***]shall be [***]from the [***]. Notwithstanding the immediately preceding sentence, in order for [***]in use by the [***]at the time of this Agreement may be [***]

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

(c)          As for [***]the Company will [***]to Company on a [***]will provide Company with the [***]    [***]   [***]hereby agrees that all [***] (ii) be subject to the resolution and approval of the board of directors and [***], and (iii) consistent with the terms and conditions of [***].

(d)          Company shall maintain, and shall have [***], for a period of at least [***]years, complete, accurate and sufficient records of any and all [***] and records which enable any [***]in accordance with this Agreement.  Upon [***], Company shall [***]as may be necessary to verify the compliance to this Agreement and accuracy of the [***]and [***]that Company [***]herein. Said [***].  Any such audit of the records will be at the [***] expense, except that if [***]then the expense of such audit will be borne by [***].

 

Section 2.2.  Technical Documents. DNP shall furnish the Company with the technical documents containing the Licensed Know-how by the method separately agreed between the Parties.

 

Section 2.3.   Improvements. If the Company wishes to obtain a license for any Improvements and developments relating to the Licensed Know-how or Licensed Patents which DNP obtains or comes into possession of during the Term of this Agreement in order to [***] the Company shall notify to DNP in writing of its request for the [***]subject to the terms and conditions of this Agreement by [***]For the avoidance of doubt, the terms and conditions of [***].

 

Section 2.4.  Subcontracting.  If the Company wishes to subcontract the [***], the Company shall [***]  The Company shall enter into a [***]so as to impose upon them the same obligations as the Company shall assume under this Agreement. The breach of the obligations hereunder by any Subcontractors (other than DNP) shall be deemed as the breach by the Company, and the Company shall be fully responsible for the breach by any Subcontractors (other than DNP).

 

Section 2.5.  Further License to Third Parties. (a) The Company acknowledges that DNP [***]provided however, during the term of the [***]Notwithstanding the foregoing, [***]

(b)          The Company acknowledges that DNP has the right to [***] provided however, during the term of the [***], to the extent that in case of  [***] in settlement of any dispute, claim, suit or demand made by DNP in respect of the [***] For the purpose of clarification, (i) [***]and (ii) the [***]Notwithstanding the foregoing, [***]

Section 2.6.  Marking.  In connection with the Company’s exercise of its rights under the License during the Term hereof, the Company shall comply with applicable patent marking laws with respect to the Licensed Patents, and as otherwise reasonably instructed by DNP.

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

Section 2.7.  Restrictions.  Except as otherwise provided in this Agreement, the Company hereby agrees that the Licensed Know-how that is licensed by DNP hereunder shall remain [***]The Company will [***]this Agreement. Nothing in the foregoing should restrict the Company from developing its own technology, provided that such development shall not be in breach of any obligations of the Company hereunder.

 

Section 2.8.  No Analysis. Without written permission from DNP, [***]hereunder. If such permission is granted, the [***]

 

Section 2.9 Blanks. Company currently [***]

ARTICLE III.

ROYALTIES

 

Section 3.1.   The Parties acknowledge and agree that the royalties in consideration for the [***]related thereto [***]in order to [***]in accordance with [***]Any other [***]to terms and condition negotiated by the Parties at the time of the request.

 

ARTICLE IV.

CONFIDENTIALITY

 

Section 4.1.  The Company agrees that during the Term hereof and thereafter, it shall keep the Licensed Know-how strictly confidential by employing appropriate measures and shall not, without prior written consent of DNP, [***].

 

Section 4.2.  Upon expiration or termination of this Agreement, the Company shall forthwith return or destroy in an appropriate manner, as requested by DNP, all documents and electronic data (including all copies, summaries, excerpts thereof) containing, or derived or produced partly or wholly from the Licensed Know-how.

 

Section 4.3.  The Company agrees to take all appropriate measures to comply with Article 4.1 above, including but not limited to the following: [***]

 

Section 4.4.  The Company agrees that in the event the Company has been conclusively proven to have [***].

 

ARTICLE V.

REPRESENTATIONS, WARRANTIES AND LIMITATION OF LIABILITY

 

Section 5.1.  Title and Contest.   DNP represents and warrants for a [***]Furthermore DNP hereby [***].

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

Section 5.2.  Disclaimer. EXCEPT FOR THE EXPRESS LIMITED WARRANTY SET FORTH IN SECTION 5.1 ABOVE, THE LICENSED KNOW-HOW AND LICENSED PATENTS ARE PROVIDED “AS-IS” AND WITHOUT WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE. DNP SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES OF NONINFRINGEMENT, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE LICENSED KNOW-HOW AND LICENSED PATENTS LICENSED BY DNP HEREUNDER.

 

Section 5.3.  Non-contravention.  Each Party represents and warrants that the execution of this Agreement and the grant of the License hereunder will not conflict with, or result in any breach of or constitute a default under any contract by which that Party is bound, or violate or conflict with any Order.

 

Section 5.4.  No Challenge.  The Company agrees that at no time shall it challenge directly or indirectly or assist anyone else in challenging directly or indirectly the validity and/or enforceability of any claim of any of the Licensed Patents at any time.

 

Section 5.5.  Use of Licensed Patents; No Permitted Sublicensing.   The Company represents and warrants that it shall only [***]

 

Section 5.6.  Limitation of Liability.  IN NO EVENT WILL DNP HAVE ANY LIABILITY FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER FOR BREACH OF CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR RELATED TO THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO, LOSS OF ANTICIPATED PROFITS, LOSS OF DATA, OR LOSS OF USE, EVEN IF DNP HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE CUMULATIVE LIABILITY OF DNP FOR DAMAGES HEREUNDER WILL BE SUBJECT TO THE INDEMNIFICATION BASKET AND CAP ON LIABILITY AS SET FORTH IN THE JV FRAMEWORK AGREEMENT.

 

Section 5.7  Additional Information.   [***]will be provided by DNP upon Company’s request, provided that the Company will not disclose such basic information of the [***]

ARTICLE VI.

PROSECUTION AND MAINTENANCE AND ENFORCEMENT

 

Section 6.1.  Prosecution and Maintenance.  DNP shall have sole responsibility and discretion with respect to prosecution, issuance and maintenance of the Licensed Patents.

Section 6.2.  Enforcement.  During the Term, the Company shall promptly provide written notice to DNP of any infringement of any Licensed Patents of which it becomes aware, including in such notice a reasonable level of detail regarding such infringement.

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

Section 6.3.  Cost of Action.  Unless the Parties otherwise agree, the total cost of any such action commenced by DNP, shall be borne by DNP (but excluding fees and expenses charged by separate counsel, if any, engaged by the Company).  Except as the Parties may otherwise agree in writing, any damages or settlement payments resulting from any such action commenced as set forth above, whether in an out-of-court settlement or through legal adjudication of such action, and at any time, shall be retained by DNP.

 

Section 6.4.  Cooperation.  In any infringement action that DNP may institute pursuant to this Article 6 during the Term of this Agreement, the Company hereto shall, at the request of DNP and at DNP’s sole cost, cooperate reasonably in the prosecution of such action.

ARTICLE VII.

TERM; TERMINATION

 

Section 7.1.  Term.  The term of this Agreement shall commence on the Effective Date and, shall continue unless terminated in accordance with the provisions of Section 7.2.

 

Section 7.2.  Termination.

 

(a)          DNP shall have the right to forthwith terminate this Agreement in the event of: (i) [***]Upon such termination the Company will not[***]

Furthermore, DNP may terminate the [***]will be effective immediately by DNP giving written notice of termination to the Company.

(b)          Subject to Section 7.2(a), DNP shall have the right to terminate this Agreement by [***][***]Further, DNP will be entitled to terminate this Agreement if  (i) [***] (ii) [***] (iii) [***].

Subject to Section 7.2 (a), upon the termination under this Section 7.2(b), the Company and [***]

 

ARTICLE VIII.

MISCELLANEOUS

 

Section 8.1.  Export Control. In relation to the grant of license herein, the Company agrees to comply fully and have Photronics Xiamen comply fully, with all relevant export laws and regulations (“Export Laws”) to ensure that neither (i) the Licensed Product are exported or re-exported directly or indirectly in violation of Export Laws; nor (ii) used Licensed Know-how and Licensed Patents for any purposes prohibited by the Export Laws, including but not limited to military purposes. The Company will provide DNP with necessary documentation it needs in order to comply with any Export Laws it is subject to.

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

Section 8.2.  Publicity.  Except as otherwise required by law, legal process or stock exchange rules, neither Party shall issue any press release or make any public announcement or disclosure related to the Agreement or the transactions contemplated hereunder without the prior agreement of the other Party, including with respect to the content of such release, announcement or disclosure (and, with respect in any legally required announcement, DNP and the Company shall use all reasonable efforts to consult and agree with each other with respect to the content of any such required press release or other publicity).

 

Section 8.3.  Notices.  All notices and other communications hereunder shall be in writing and shall be deemed given and effective (a) when delivered, if delivered in person, (b) when transmitted by telecopy (with confirmation of transmission received), (c) three (3) Business Days after mailing, if mailed by certified or registered mail (return receipt requested and obtained) or (d) one (1) Business Day after transmitted, if transmitted by a nationally recognized overnight courier to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

 

If to the Company

 

Photronics DNP Mask Corporation

1F, No. 2, Lising Road, Hsinchu City, Hsinchu Science Park,

Taiwan, R.O.C

Attention:  [***]

Facsimile: [***]

With a copy (which shall not constitute notice) to:

 

Photronics, Inc.

15 Secor Rd.

Brookfield, CT 06804 USA

Attention:  [***]

Facsimile: [***]

If to DNP

Dai Nippon Printing Co., Ltd.

1-1-1, Ichigaya-Kagacho, Shinjuku-ku, Tokyo 162-8001, Japan

Telephone: [***]Fax: [***]Attention:  [***]

With a copy (which shall not constitute notice) to:

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

Lee and Li, Attorneys-at-Law

7F, 201 Tun Hua No. Road

Taipei, Taiwan 10508, the Republic of China

Telephone: [***] Fax: [***]Attention：[***]

Email: [***]

and/or to such other respective addresses and/or addressees as may be designated by notice given in accordance with the provisions of this Section 8.3.

 

Section 8.4.  Expenses.  Except as otherwise expressly set forth in this Agreement, each Party hereto shall bear all fees and expenses incurred by such Party in connection with, relating to or arising out of the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby and thereby, including financial advisors’, attorneys’, accountants’ and other professional fees and expenses.

 

Section 8.5.  Entire Agreement.  This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes any previous agreements, arrangements or understandings between them relating to the subject matter hereof.  For the avoidance of doubt, the Technology License Agreement was superseded and replaced by the Existing License Agreement upon the completion of the merger contemplated under the Merger Agreement and shall be superseded and replaced by this Agreement in accordance with Section 2.1(a) above. Each exhibit hereto shall be considered incorporated into this Agreement.

 

Section 8.6.  Non-Waiver.  The failure in any one or more instances of a Party to insist upon performance of any of the terms, covenants or conditions of this Agreement, to exercise any right or privilege in this Agreement conferred, or the waiver by said Party of any breach of any of the terms, covenants or conditions of this Agreement, shall not be construed as a subsequent waiver of any such terms, covenants, conditions, rights or privileges, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred.  No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving Party.

 

Section 8.7.  Severability.  Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only as broad as is enforceable.

 

Section 8.8.  Binding Effect; Benefit.  This Agreement shall inure to the benefit of and be binding upon the Parties, and their successors and permitted assigns.  Nothing in this Agreement, express or implied, is intended to confer on any Person other than the Parties, and their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, including third party beneficiary rights.

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

Section 8.9.  Assignability.  The Company shall not assign, pledge or otherwise dispose of its rights or delegate its obligations under this Agreement in whole or in part without the prior written consent of DNP.

 

Section 8.10.  Amendments.  This Agreement shall not be modified or amended except pursuant to an instrument in writing executed and delivered on behalf of each of the Parties.

 

Section 8.11.  Headings.  The headings contained in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.

 

Section 8.12.  Governmental Reporting.  Anything to the contrary in this Agreement notwithstanding, nothing in this Agreement shall be construed to mean that a Party or other Person must make or file, or cooperate in the making or filing of, any return or report to any Governmental Authority in any manner that such Person or such Party reasonably believes or reasonably is advised is not in accordance with applicable laws.

 

Section 8.13.  Survival. The terms and conditions of Article I (to the extent necessary to give effect to this Section 8.13), Section 2.1(d), Section 2.7, 2.8, Article III, Article IV, Article V and Sections 7.2, 8.1, 8.3, 8.5, 8.6, 8.7, 8.8, 8.9, 8.10, 8.11, 8.13, 8.15, 8.16, 8.17 and 8.18 of this Agreement shall survive any termination hereof.

 

Section 8.14.  Relationship of Parties.  Neither Party has any express or implied authority to assume or create any obligations on behalf of the other or to bind the other to any contract, agreement or undertaking with any third party.

 

Section 8.15.  Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of Taiwan without reference to the choice of law principles thereof.

 

Section 8.16.  Arbitration. In the event of any dispute, controversy or claim arising out of or in connection with this Agreement (each, a “Dispute”), the Parties shall use their reasonable efforts to resolve such Dispute within a period of ninety (90) days commencing from either Party’s receipt of a notice from the other Party stating the existence of a Dispute. In the event any such Dispute is not resolved, either Party may refer such Dispute to arbitration in Taipei, Taiwan before one (1) arbitrator appointed in accordance with the ROC Arbitration Law and the Arbitration Rules of the ROC Arbitration Association. The arbitration proceeding shall be conducted in English. The award thereof shall be final and binding upon the Parties hereto.  Judgment upon such award may be entered in any court having jurisdiction thereof.

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

Section 8.17.  Equitable Relief.  The Company acknowledges and agrees that damages alone would be insufficient to compensate DNP for a breach by the Company of this Agreement and that irreparable harm would result from a breach of this Agreement.  The Company hereby consents to the entering of an order for injunctive relief to prevent a breach or further breach, and the entering of an order for specific performance to compel performance of any obligations under this Agreement.

 

Section 8.18.  Language.  The official language of this Agreement exclusively shall be, and all communications and agreements between the Parties exclusively shall be made in, the English language.  The Parties hereto waive any rights they may have under any other law to have this Agreement written in another language, and any translation of this Agreement will be solely for the convenience of the Parties.

 

Section 8.19.  Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same agreement.

(Signature Page Follows)

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

IN WITNESS WHEREOF, intending to be legally bound, the Parties have executed this Agreement as of the Effective Date.

License Agreement (DNP – PSMC) Signature Page

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

 

[***]TABLES REMOVED

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

 

LICENSED PATENTS

 

[***]

 

*** Confidential treatment has been requested by Photronics, Inc. for redacted portions of this exhibit. This copy omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been provided separately to the Securities and Exchange Commission.

 

 

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1.	I have reviewed this Quarterly Report on Form 10-Q/A of Photronics, Inc.

 

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

/s/ PETER S. KIRLIN
Peter S. Kirlin
Chief Executive Officer
December 19, 2017

 

EXHIBIT 31.2

 

I, John P. Jordan, certify that:

 

I have reviewed this Quarterly Report on Form 10-Q/A of Photronics, Inc.

 

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

 

/s/ JOHN P. JORDAN
John P. Jordan
Senior Vice President
Chief Financial Officer
(Principal Accounting Officer/
Principal Financial Officer)
December 19, 2017