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Exhibit 10.20

 

JOINT VENTURE OPERATING AGREEMENT

OF

PHOTRONICS DNP MASK CORPORATION

between

PHOTRONICS, INC.

and

DAI NIPPON PRINTING CO., LTD.

Dated as of November 20, 2013

 

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SCHEDULES

Schedule A

*

Schedule B

*

Schedule C

*

Schedule D

*

Schedule E

*

Schedule F

*

Schedule G

*

Schedule H

*

Schedule I

*

Schedule J

*

 

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JOINT VENTURE OPERATING AGREEMENT

OF

PHOTRONICS DNP MASK CORPORATION

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 20th day of November, 2013, by and between Photronics, Inc., a corporation organized under the laws of the state of Connecticut, U.S.A. with its principal place of business at 15 Sector Road, Brookfield, Connecticut, U.S.A. (“Photronics”) 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”), with respect to Photronics DNP Mask Corporation, whose name as of the date of this Agreement is Photronics Semiconductor Mask Corporation (the “Company”), a company limited by shares organized and formed under the Company Act of the Republic of China (the “Act”) with its principal place of business at 1F, No. 2, Lising Road, Hsinchu City, Hsinchu Science Park, Taiwan.

ARTICLE 1.

ORGANIZATIONAL MATTERS

1.1

Background

The Company was formed on October 6, 1997 under the Act and will become the joint venture entity contemplated by the Merger Agreement (the "Merger Agreement") to be executed between the Company and DNP Photomask Technology Taiwan Co., Ltd., a corporation organized under the laws of the R.O.C., with its principal place of business at No. 6, Lising 7^th Rd., East District, Hsinchu City, Hsinchu Science Park, Taiwan, R.O.C. Upon execution of the Merger Agreement, Photronics will be the sole Shareholder of the Company directly or indirectly, and upon the contributions contemplated under such Merger Agreement, DNP will also become a Shareholder of the Company. The rights and liabilities of the Shareholders shall be as provided in the Act, 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 Act, the terms and conditions contained in this Agreement shall govern. If any provision of this Agreement is prohibited or ineffective under the Act, this Agreement will be considered amended to the smallest degree possible in order to make such provision effective under the Act. 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.

1.2

Name

The name of the Company after the completion of the Merger contemplated under the Merger Agreement shall be 台灣美日先進光罩股份有限公司 (Photronics DNP Mask Corporation). The Board of Directors may change the name of the Company from time to time, in accordance with this Agreement and Applicable Law.

 

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1.3

Principal Place of Business

The principal place of business of the Company will be located in 1F, No. 2, Lising Road, Hsinchu City, Hsinchu Science Park, Taiwan.

1.4

Business Purpose

The purpose of the Company shall be *.

1.5

Term

The Company shall continue until the Company is terminated, dissolved or liquidated in accordance with this Agreement and the Act. 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

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

(b) after Photronics’ above notification, *

 

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1.7

Transaction Documents

Contemporaneous with the execution of this Agreement, Photronics, DNP, their respective subsidiaries and the Company have entered into the agreements listed on Schedule A-1 hereto and will have agreed to the final form and substance of the exhibits attached as Schedule A-2, as applicable (collectively, the “Transaction Documents”). The timing and execution of the Transaction Documents is governed by the Framework Agreement.

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 as of the completion of the Merger contemplated under the Merger Agreement, the Articles of Incorporation of the Company shall substantially be in the form attached hereto as Schedule I.

1.10

Compliance

For as long as Photronics and/or an Affiliate of Photronics hold more than fifty percent (50%) of Percentage Interest in the Company, the Company will comply with Photronics health and safety and environmental and corporate compliance policies, procedures, programs and standards. 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

DNP agrees to be responsible for any and all DPTT Pre-Closing Liability, and Photronics agrees to be responsible for any and all PSMC Pre-Closing Liability.

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).

 

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

“Act” 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. The parties acknowledge and agree that neither DNP nor Photronics is presently controlled by any other Person. 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” shall mean all activities related to or reasonably required in connection with the design, development fabrication and sale of integrated circuit photomasks.

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

“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 (other than cash) contributed to the capital of the Company by such Shareholder.

 

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“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 Photronics or DNP, when: *

 

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.

 

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“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 Taiwanese 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 designated by DNP to serve on the Board of Directors in accordance with Section 5.1.3.

“DPTT” means DNP Photomask Technology Taiwan Co., Ltd., a company limited by shares incorporated under the Act.

"DPTT Pre-Closing Liability" means any and all liabilities and claims arising against DPTT (whether or not made against DPTT or against the Company after the completion of the Merger as contemplated in the Merger Agreement) by any third party which are attributable to events occurred prior to the completion of the Merger as contemplated in the Merger Agreement and are not: (i) reflected in the latest financial statements of DPTT which were made available to Photronics prior to the execution of this Agreement; (ii) taken into consideration and reflected by the relevant adjustment(s) made under Exhibit 5-3 (NWC Proposal) of the Framework Agreement (excluding those that are not required to be taken into consideration thereunder); and (iii) otherwise indemnified by DNP pursuant to Section 12 of the Framework Agreement or recovered from third parties.

“Economic Interest” means a Person’s right to share in allocations 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 Act, any right to information concerning the business and affairs of the Company.

 

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“Effective Date” means the date of the Closing (as defined in the Merger Agreement).

“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 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.

“Framework Agreement” means the Joint Venture Framework Agreement of even date herewith executed by and between Photronics and DNP.

“GAAP” means generally accepted accounting principles in Taiwan and/or United States, as applicable, as in effect from time to time.

“GAAS” means generally accepted auditing standards in Taiwan and/or 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.

“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.

“Liquidating Event” is defined in Section 10.2.

 

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“Liquidators” is defined in Section 10.5.1.

“Majority Shareholder” is defined in Section 7.3.1.

“Management Advisory Committee” is defined in Section 5.15.

“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,*.

“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.

“Overseas Customers” shall mean *.

“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 or DNP, as the case may be, shall be the basis for calculating the Percentage Interest of Photronics and DNP.

“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” is defined in the preamble.

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

“PSMC” means Photronics Semiconductor Mask Corporation, a company limited by shares incorporated under the Act.

"PSMC Pre-Closing Liability" means any and all liabilities and claims arising against the Company by any third party which are attributable to events occurred prior to the completion of the Merger as contemplated in the Merger Agreement and are not: (i) reflected in the latest financial statements of the Company which were made available to DNP prior to the execution of this Agreement; (ii) taken into consideration and reflected by the relevant adjustment(s) made under Exhibit 5-3 (NWC Proposal) of the Framework Agreement (excluding those that are not required to be taken into consideration thereunder); and (iii) otherwise indemnified by Photronics pursuant to Section 12 of the Framework Agreement or recovered from third parties.

 

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“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. Shares may be issued in whole numbers of a fractional interest. As of the completion of the Merger contemplated under the Merger Agreement, the Shares are to be held by the Shareholders in accordance with Schedule C.

“Shareholder” means a Person owning Shares.

“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 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.

“Territory” means * .

“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 other 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.

“Supermajority Vote of Directors”*.

 

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“Supermajority Vote of Shareholders”*

“Vice General Manager” is defined in Section 5.14.1.

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

ARTICLE 3.

SHARES AND CAPITAL CONTRIBUTIONS

3.1

Authorized Shares

The Company is authorized to issue equity interests (which should be common shares with the par value at * per share) in the Company designated as “Shares”. The total number of authorized Shares and issued Shares of the Company as of the completion of the Merger contemplated under the Merger Agreement shall be set forth in the Merger Agreement.

3.2

Initial Capital Contributions and Share Issuance

The Shareholders acknowledge and agree that the names and address of each Shareholder, Percentage Interests of, and number of Shares owned by, the Shareholders as of the completion of the Merger contemplated under the Merger 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 Board, the Company shall not redeem or repurchase the Shares of any Shareholder. Provided in all three 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.

3.4

Liability of Shareholders

Except as otherwise required by any non-waivable provision of the Act or other Applicable Law and except as 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* .

 

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ARTICLE 4.

FINANCING OF THE COMPANY

4.1

Types of Financing

ARTICLE 5.

MANAGEMENT

5.1

Board of Directors

 

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5.2

Effect of Reduction in Photronics’ Percentage Interest on Photronics Directors

Subject to Section 5.4 below, the number of Directors that Photronics can appoint to or maintain on the Board of Directors shall depend on Photronics Percentage Interest as follows:

5.3

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

Subject to Section 5.4 below, the number of Directors that DNP can appoint to or maintain on the Board of Directors shall depend on DNP Percentage Interest as follows:

5.4

Procedure.

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 three (3) months and if such Shareholder (the “Reducing Shareholder”) then has more designees 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 designee or designees on the Board of Directors that will cease serving on the Board of Directors, and each such designee 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 designee(s) (and the Reducing Shareholder hereby, and shall cause its designee(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 designees on the Board of Directors that will cease serving on the Board of Directors and each such designee 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.

 

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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 appointed by Photronics; provided, however, *

5.6

Meetings of Shareholders and of the Board of Directors; Quorum

 

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5.7

Supervisors

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

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 and the provisions of the Transaction Documents*

 

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5.12

Accounting; Records and Reports

 

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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.

 

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5.13

Indemnification and Liability of the Directors

 

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5.14

Officer

 

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5.15

Management Advisory Committee

The Shareholders will establish a management advisory committee (the “Management Advisory Committee”) relating to the following matters:

The composition of the Management Advisory Committee shall consist of six (6) members, three (3) members appointed by Photronics and three (3) members appointed by DNP, and such six (6) members may include the General Manager of the Company at the discretion of the appointed Shareholder. The Management Advisory Committee shall convene regular meetings consistent with the number of meetings of the Board of Director provided however the Management Advisory Committee shall generally meet one to three days in advance of the Board of Directors meeting. The Management Advisory Committee shall discuss the matters listed above. The Management Advisory Committee may at its own discretion put forth resolutions and vote on specific matters to be discussed at the subsequent meeting of the Board of Directors, and may also publish minutes of its meetings and submit such minutes to the Board of Directors, provided however that the Management Advisory Committee shall be an advisory capacity only and shall have no power to vote on or make any decisions with respect to any matters reserved to the Board of Directors; though not obligated to act on any input from the Management Advisory Committee, the Board of Directors will in good faith take inputs raised by the Management Advisory Committee into full consideration.

5.16

Non-Disclosure

The parties acknowledge and agree that Section 9 of the Framework Agreement shall be applied for the proprietary or nonpublic information disclosed by one party to another party in connection with this Agreement.

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 or by either Shareholder. A certificate of insurance will be provided by the Company to the Shareholders annually evidencing coverage.

 

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5.18

Related Party Agreements *

ARTICLE 6.

OPERATIONS

6.1

Headquarters

The Company’s world headquarters shall be in Taiwan.

6.2

Operations Plan; Annual Budget

The initial business plan of the Company will be a combined business plan including synergies and is attached hereto as Schedule H. From time to time, but in no event less frequently than annually, the Board of Directors may amend or update a 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

DPTT Employees

Unless otherwise agreed by Photronics and DNP, on or before thirty (30) calendar days before the completion of the Merger contemplated under the Merger Agreement, * shall be provided with an offer to become employees of the Company from and after the completion of the Merger contemplated under the Merger Agreement, which contain terms consistent with the following: *

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”). *

6.5

Service Provider Documents

 

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6.6

Compensation and Benefits

The Company shall have compensation and benefits programs (including incentive compensation programs) for the employees of the Company *

ARTICLE 7.

DISPOSITION AND TRANSFERS OF INTERESTS

7.1

Holding of Shares

For so long as Photronics or DNP, directly or indirectly, owns Shares in the Company, Photronics 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

 

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7.3

Purchase and Sale of Remaining Interest

7.4

Change in Control

 

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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.

[INTENTIOANLLY DELETED]

ARTICLE 9.

TERM AND TERMINATION OF THIS AGREEMENT

9.1

Term of this Agreement

 

9.2

Termination and Cross-termination

 

 

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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:

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 Act, 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:

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 Act, 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

In the event that the accumulated losses of the Company*.

 

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10.5

Liquidation

10.6

Dissolution

*

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

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. *

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 Act or other Applicable Law.

 

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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 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 Act 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 April 2, 2013 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).

 

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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 Taiwan (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

12.8

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.

 

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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, arising out of, in connection with, or in relation to the interpretation, performance, enforcement, breach, termination or validity of this Agreement, shall be first * .

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.

 

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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 5.16 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.

(Signature Page Follows)

 

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

JV Operating Agreement Signature Page

 

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