EX-10.30 6 ef20012464_ex10-30.htm EXHIBIT 10.30

Exhibit 10.30

Execution Version

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

TABLE OF CONTENTS

|  |  | Page
ARTICLE 1. ORGANIZATIONAL MATTERS |  | 1
1.1 | Background |  | 1
1.2 | Name |  | 1
1.3 | Principal Place of Business |  | 2
1.4 | Business Purpose |  | 2
1.5 | Term |  | 3
1.6 | Accounting Consolidation |  | 3
1.7 | Transaction Documents |  | 5
1.8 | Ratification of Organizational Actions |  | 5
1.9 | Articles of Incorporation |  | 5
1.10 | Compliance |  | 5
1.11 | Pre-Closing Liabilities |  | 6
1.12 | Affiliates |  | 6
ARTICLE 2. DEFINITIONS |  | 6
ARTICLE 3. SHARES AND CAPITAL CONTRIBUTIONS |  | 14
3.1 | Authorized Shares |  | 14
3.2 | Initial Capital Contributions and Share Issuance |  | 14
3.3 | Return or Redemption of Capital Contribution |  | 14
3.4 | Liability of Shareholders |  | 13
3.5 | Revenue |  | 13
ARTICLE 4. FINANCING OF THE COMPANY |  | 13
4.1 | Types of Financing |  | 13
ARTICLE 5. MANAGEMENT |  | 17
5.1 | Board of Directors |  | 17
5.2 | Effect of Reduction in Photronics’ Percentage Interest on Photronics Directors |  | 19
5.3 | Effect of Reduction in DNP’s Percentage Interest on DNP Directors |  | 19
5.4 | Procedure |  | 20
5.5 | Chairman and Vice-Chairman |  | 20
5.6 | Meetings of Shareholders and of the Board of Directors; Quorum |  | 21
5.7 | Supervisors |  | 23
5.8 | Actions Requiring a Supermajority Vote of Shareholders |  | 23
5.9 | Actions Requiring a Supermajority Vote of Directors |  | 23
5.10 | Compensation of Directors and Supervisors |  | 23
5.11 | Other Activities |  | 23
5.12 | Accounting; Records and Reports |  | 23
5.13 | Indemnification and Liability of the Directors |  | 26
5.14 | Officer |  | 28
5.15 | Steering Committee |  | 30
5.16 | Non-Disclosure |  | 32
5.17 | Maintenance of Insurance |  | 33
5.18 | Related Party Agreements |  | 33
ARTICLE 6. OPERATIONS |  | 34
6.1 | Headquarters |  | 34
6.2 | Operations Plan; Annual Budget |  | 34
6.3 | DPTT Employees |  | 34

6.4 | Company Employees; Seconded Employees |  | 34
6.5 | Service Provider Documents |  | 35
6.6 | Compensation and Benefits |  | 35
ARTICLE 7. DISPOSITION AND TRANSFERS OF INTERESTS |  | 36
7.1 | Holding of Shares |  | 36
7.2 | Transfer Moratorium |  | 36
7.3 | Purchase and Sale of Remaining Interest |  | 37
7.4 | Change in Control |  | 39
7.5 | Purchase and Sale Agreement |  | 40
ARTICLE 8. [INTENTIONALLY DELETED] |  | 40
ARTICLE 9. |  | 43
9.1 | Term of this Agreement |  | 43
9.2 | Termination and Cross-termination |  | 43
9.3 | Right of Terminating Party |  | 45
ARTICLE 10. DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY |  | 47
10.1 | Limitations |  | 47
10.2 | Exclusive Causes |  | 47
10.3 | Effect of Dissolution |  | 48
10.4 | Loss of the Company |  | 48
10.5 | Liquidation |  | 49
10.6 | Dissolution |  | 50
ARTICLE 11. DISTRIBUTIONS |  | 50
11.1 | Use of Cash |  | 50
11.2 | Distributions Upon Liquidation |  | 50
11.3 | Withholding |  | 51
11.4 | Distributions in Kind |  | 51
11.5 | Limitations on Distributions |  | 52
ARTICLE 12. MISCELLANEOUS |  | 52
12.1 | Amendments |  | 52
12.2 | No Waiver |  | 52
12.3 | Entire Agreement |  | 52
12.4 | Further Assurances |  | 52
12.5 | Notices |  | 53
12.6 | Governing Law |  | 53
12.7 | Construction; Interpretation |  | 53
12.8 | Rights and Remedies Cumulative |  | 54
12.9 | No Assignment; Binding Effect |  | 54
12.10 | Severability |  | 54
12.11 | Counterparts |  | 54
12.12 | Dispute Resolution; Arbitration |  | 55
12.13 | Third-Party Beneficiaries |  | 56
12.14 | Specific Performance |  | 56
12.15 | Consequential Damages |  | 56
12.16 | Fees and Expenses |  | 56

SCHEDULES

Schedule A | List of Transaction Documents
Schedule B | [intentionally left blank]
Schedule C | Shareholders and Percentage Interest
Schedule D | Majority Board Control Items
Schedule E | Insurance Policies At Closing
Schedule F | List of Actions Requiring A Supermajority Vote of Shareholders
Schedule G | List of Actions Requiring A Supermajority Vote of Directors
Schedule H | Initial Business Plan
Schedule I | Form of Articles of Incorporation
Schedule J | Representative Funding Plan
Schedule K | Scoring Items for PDMCX Technology Partnership Proposals
Schedule L | Competitors

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.

| 1.2 | Name

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

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Chinese Name of the Company:

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 wafer scanner, wafer stepper and mask aligner, using g-line (436nm), i-line (365nm wavelength), krypton-fluoride (KrF) excimer lasers, argon-fluoride (ArF) excimer lasers, and extreme ultraviolet (EUV) wavelength light source(provided that photomasks for IC lithographic methods not considered above that may arise in the future after execution of this Agreement, the parties may refer to the Steering Committee for inclusion in the definition of the Business), except master templates and/or replica templates used for manufacturing integrated circuits by nanoimprint lithography technologies, to (i) all integrated circuit wafer fabrication facilities or other business entities including those for logic and memory production applications located in the Territory and (ii) Foreign Customers in accordance with Article 8 of this Agreement (notwithstanding the above, if a Shareholder’s Percentage Interest is above eighty percent (80%), then such Shareholder may direct the Company to sell integrated circuit photomasks or other products or services to a customer based outside of the Territory); (b) development, fabrication and sale of integrated circuit photomasks and related services, for which the Company is or has been first qualified to manufacture and supply in the Territory, for customers outside of the Territory who thereafter place orders for the same already-qualified photomasks; provided that such sales would not be subject to the noncompete obligations set forth in Section 8.1; (c) development, fabrication and sale of integrated circuit photomasks and related services for customers outside of the Territory, other than specified in (a) or (b) above, that are specifically set forth in the Business Plan after the parties refer to the Steering Committee; (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.

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| 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;

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| (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 put option to sell all of its Shares to Photronics (the “Accounting Amendment Option”) at the price (the “Accounting Amendment Closing Price”) 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 Accounting Amendment Option 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 sale and purchase of DNP’s Interest (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 product of the difference of (I) the Net Book Value of the Company Assets as of the last day of the Fiscal Month immediately prior to the date of the Accounting Amendment Option Notice, minus (II) the Net Book Value of the Company Liabilities 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 DNP as of the date of the Accounting Amendment Closing. The Accounting Amendment Closing Price shall be paid by Photronics 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, DNP shall transfer all of its Interests in the Company to Photronics, free and clear of any liens or encumbrances, and Photronics shall pay the amount of all or part of the Accounting Amendment Closing Price that Photronics will be required to pay upon the Accounting Amendment Closing to DNP 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.

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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.

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| 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 Photronics 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).

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“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.

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“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.

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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 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.

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“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.

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“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.

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“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 territory of the People’s Republic of China, solely for the purpose of this Agreement, excluding Hong Kong, Taiwan, and Macau.

“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.

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“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.

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| 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 exclusive distribution mechanism and exclusive interface (interface includes but is not limited to communicating with the customer whether in person or via e-mail or phone, order entry, shipping product and product invoicing) with respect to the Business in the Territory for all customers of the Company and the Shareholders in the Territory. The Shareholders further agree that neither Shareholder will meet with a customer of the Company in the Territory without at least one employee from the Company being present at such meeting except where indicated in Article 8.

ARTICLE 4.
FINANCING OF THE COMPANY

| 4.1 | Types of Financing

4.1.1 General. Photronics and DNP anticipate that the total investment to be made in the Company for the initial period of five (5) years from the Effective Date will be US$160,000,000, which consists of US$110,000,000 by Shareholders’ equity or convertible shareholder loan as set forth in Section 4.1.2 (the “Scheduled Contribution”) and US$50,000,000 by loan from a bank. The initial registered capital of the Company immediately after the Closing will be as set forth in the Contribution Agreement, and the total registered capital through the initial period of five years from the Effective Date will be no more than US$110,000,000. The total investment and registered capital will be contributed in several increments over a period of five (5) years from the Effective Date by the Shareholders. It is the intention of the Shareholders to fund the Company primarily with cash distributed from PDMC through dividends and/or capital reductions with a representative funding plan indicated in Schedule J. The Shareholders will make the Initial Capital Contribution to the Company such that the Percentage Interests initially will be 50.01% and 49.99% respectively pursuant to the Contribution Agreement. In no event shall Photronics or DNP be obliged to make any kind of additional investment (including the Additional Contributions, loan to the Company and guaranteeing a loan of the Company) more than their respective Percentage Interests (i.e., 50.01% for Photronics Singapore and 49.99% for DNP Asia Pacific) of the Scheduled Contribution. The Board of Directors shall be responsible for determining the type and timing of financing required to fund the operations of the Company and will evaluate Capital Contributions from the Shareholders or incurring debt from the Shareholders or from public, private or bank markets, in each case as permitted under this Agreement; the Board of Directors will then decide on the type of funding that is in the best interests of the Company at the time of the decision. The Board of Directors of the Company will have the sole authority for deciding when a capital contribution can be made by the Shareholders.

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| 4.1.2 | Shareholder Contributions.

(a) Photronics Singapore and DNP Asia Pacific shall make the Initial Capital Contribution in accordance with the Contribution Agreement for the initial 50.01% and 49.99% ownership, respectively, and the Board of Director of the Company will have authority, from time to time and when necessary, for requesting capital calls in case of any capital shortfalls that the Company may experience, and the parties agree and acknowledge that it is the intent of the parties that Photronics through Photonics Singapore will consolidate the Company and will own a minimum of 50.01%; provided, however, that DNP has the right to (i) refrain from subscribing any or all of the new Shares subsequently Issued by the Company; except that DNP shall be required to use any and all royalties payments received under the Amended and Restated License Agreement as capital contribution once all royalty payments have been paid to DNP and (ii) if it refrains from subscribing any or all of the new Shares subsequently Issued by the Company, recover its Percentage Interest up to 49.99% by way of purchase of the Shares held by Photronics Singapore and/or subscription for new Shares to be Issued by the Company (such right being collectively referred to as the “Recovery Call”). DNP may exercise the Recovery Call by giving a written notice to Photronics (the “Recovery Call Notice”). It is intention of DNP to exercise the Recovery Call by using cash distributed from PDMC or the Company through dividends and/or capital reductions made to the date of the exercise of the Recovery Call. For the avoidance of doubt, the cash that DNP intends to, or is required to, use for exercising the Recovery Call pursuant to this Section 4.1.2(a) is the net after-tax amount (including any amount of tax that has been claimed as a credit or refunded in any jurisdictions) that DNP receives as, or in exchange for, royalties, dividends or capital reductions. In the event that PDMC submits the proposal of dividend payments or capital reduction, by the board meeting or shareholders meeting of PDMC, as the case may be, DNP shall notify Photronics whether DNP will exercise the Recovery Call by using cash distributed therefrom within ninety (90) days after receiving the proposal of such dividends or capital reductions; provided that, upon receipt of DNP’s request, the Company provides the then-current Business Plan to DNP in determining whether it exercises the Recovery Call. In the event that PDMC distributes cash through dividends and/or capital reductions after DNP notifies its intention to exercise the Recovery Call, DNP shall pay the Recovery Call Price within thirty (30) days after the receipt of cash distributed by PDMC. Notwithstanding the above, during the term of this Agreement in the event PDMC declares dividend(s) and DNP does not use the dividend(s) to exercise its Recovery Call, then DNP will forever forfeit its ability to exercise the Recovery Call for the amount of the dividend(s) received and not used by DNP. If the amount of cash from such dividend or capital reduction from PDMC is not sufficient for DNP to exercise the Recovery Call, then DNP has the right to request a capital reduction of excess cash of PDMC for the amount that would allow DNP to exercise the Recovery Call; provided that such capital reduction shall be in compliance with Applicable Law and shall not have a material adverse effect on the financial conditions of PDMC, and further that such request of capital reduction shall be made within the Initial Seven-Year Term. The price of the Shares to be purchased or subscribed by DNP to exercise the Recovery Call shall be equal to the price of the Shares that have been Issued to Photronics (the “Recovery Call Price”), whether by subscription for new Shares or conversion from the convertible loan. The Recovery Call Price will apply for every capital contribution even if Photronics makes more than one capital contribution prior to DNP exercising its Recovery Call Option. In the event that Photronics contributes the amount greater than 50.01% of the Scheduled Contribution, Photronics, at its sole discretion, shall have the choice to make such Scheduled Contribution as equity or as an interest bearing convertible loan whereby at Photronics sole choice Photronics can convert the convertible loan to equity at any time prior to the Recovery Call by DNP; provided that the terms and conditions of the convertible loan from Photronics to the Company shall not be less favorable to the Company than those of a loan available to the Company from banks or other financial institutions on an arms’ length basis.

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(b) If the Board of Directors determines that the Company requires additional funding exceeding the Scheduled Contribution via a Capital Contribution from the Shareholders to the Company and such resolution is approved by the Shareholders’ meeting, the Shareholders shall have the right to make such Capital Contributions to the Company pro-rata based on such Shareholder’s Percentage Interest (the “Additional Contributions”). Request for Additional Contributions shall be made by written notice by the Board of Directors, provided that if any of the Shareholders intends to cause the Board of Directors to approve an Additional Contributions, it shall notify the other Shareholder in writing and any such written notice shall include the amount of required Capital Contribution and the required funding date (“Required Funding Date”) to be approved by the Board of Directors and shall be sent to the other Shareholder at least one hundred and fifty (150) calendar days prior to the relevant meeting of the Board of Directors. Such Required Funding Date shall correspond to the end of a Fiscal Month. All Additional Contributions shall be made in Renminbi or equivalent in US Dollars. Where the Applicable Law grants employees of the Company any subscription rights and no exception in the Applicable Law is available to the Company, the Shareholders agree to use their best efforts to cause the employees of the Company to waive any rights they may have under the Applicable Law to subscribe to any additional Shares to be Issued in connection with any Additional Contributions.

(c) In the event that any Shareholder determines to contribute less than its Percentage Interest of any requested Additional Contribution, such Shareholder shall provide notice of such determination specifying the amount of such Additional Contribution it intends to make, if any. Such notice shall be provided to the Company and to the other Shareholder as soon as practicable after such determination is made, but in any event not less than ninety (90) calendar days prior to the Required Funding Date. Any failure or delay in providing such notice shall not affect the right of any Shareholder to refrain from providing such Additional Contribution, nor shall it result in any liability for damages. If a Shareholder fails to make the full amount of a requested Additional Contribution by the Required Funding Date set forth pursuant to Section 4.1.2(a), then the full funding Shareholder may elect, in its discretion and to the fullest extent permitted by Applicable Law, to do any or a combination of the following without duplication: (i) to fund all or part of the Shortfall and receive additional Shares under Section 4.1.2(c); (ii) to fund all or part of the Shortfall as a convertible loan on market terms and conditions; (iii) to reduce the amount of the funding Shareholder’s Additional Contribution by an amount equal to the Shortfall and, if such amount was previously advanced to the Company, have the Company return such amount to the funding Shareholder; or (iv) to the extent permitted by Applicable Law, to require the Company to return to each Shareholder the full amount of the then requested Additional Contribution previously funded, provided that in no event shall any third party become a Shareholder of the Company as a result of an Additional Contribution without prior written consent of all existing Shareholders prior to such Additional Contribution.

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(d) In connection with any requested Additional Contribution, the Board of Directors shall determine the subscription price of the additional Shares equal to the Net Book Value of the Company’s Assets less the Company’s Liabilities, as of the date immediately prior to the date of the meeting of the Board of Directors approving the Additional Contributions, divided by the number of Shares outstanding immediately prior to the date of the meeting of the Board of Directors approving the Additional Contributions.

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.

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5.1.2 Evaluation of General Manager. The Board of Directors will be responsible for supervision and evaluation of the Company’s General Manager on an ongoing basis, including at least an annual review of his or her performance to ensure he or she is acting in accordance with prudent business practices.

5.1.3 Number of Directors; Appointment of Directors. Both parties shall cause the Company to hold an extraordinary general shareholders’ meeting not later than on the 15th calendar day (or a later day agreed by both parties) after the Effective Date to elect some or all Directors and supervisors of the Company and such members shall have the same term of office as provided below. The Board of Directors shall consist of seven (7) individuals (each such individual, a “Director”) and the term of their office shall be three (3) years. Subject to Sections 5.2 and 5.3 below, in the aforesaid extraordinary general shareholders’ meeting and subsequent general shareholders’ meetings of the Company in which the Directors are to be re-elected, four (4) of the representatives nominated by Photronics Singapore and three (3) of the representatives nominated by DNP Asia Pacific shall be elected as the Directors. For as long as Photronics Singapore and/or a direct or indirect Affiliate of Photronics holds more than fifty percent (50%) of Percentage Interest in the Company in the aggregate, the number of Directors to be nominated by each Shareholder and elected by the Shareholders’ meeting shall remain fixed for the Initial Seven-Year Term, and Sections 5.2, 5.3 and 5.4 shall only apply thereafter. For the avoidance doubt, Sections 5.2, 5.3 and 5.4 shall still apply even within the Initial Seven-Year Term if the Percentage Interest of Photronics Singapore and/or an Affiliate of Photronics falls below fifty percent (50%) for more than three (3) months. If a Director resigns (including by death or retirement) or is removed either by the Shareholder who nominated such Director as provided for under the Acts or in accordance with Section 5.2 or 5.3, each newly elected Director shall hold office for the remaining term of the replaced Director. Each Shareholder having the right to nominate a Director pursuant to this Section 5.1.3 shall have the right, in its sole discretion, to propose the removal of such Director at any time, by delivery of written notice to the Company with a copy to each of the other Shareholder and the Director(s) to be removed. All Shareholders are obligated to vote in the affirmative for such removal resolution during the Shareholders’ meeting. In the case of a vacancy in the office of a Director for any reason (including by reason of death, resignation, retirement, expiration of such Director’s term or removal pursuant to the preceding sentence), the vacancy shall be filled by a candidate nominated by the Shareholder that nominated the Director in question; provided, however, that in the case of a vacancy created due to a change in a Shareholder’s Percentage Interest as described in Section 5.2 or 5.3, such vacancy shall be filled in accordance with Section 5.2 or 5.3. Each Shareholder shall notify the other Shareholder and the Company of the name, business address and business telephone, e-mail address and facsimile numbers of each Director that such Shareholder has nominated. Each Shareholder shall promptly notify the other Shareholder and the Company of any change in such Shareholder’s nominated Director or of any change in their Director’s address or other contact information.

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| 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:

Photronics Singapore’s Percentage Interest | Number of Photronics Directors
> 80% | 7
> 50% and < 80% | 4
> 20% and < 50% | 3
> 0% and < 20% | 0

| 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:

DNP Asia Pacific’s Percentage Interest | Number of DNP Directors
> 80% | 7
> 50% and < 80% | 4
> 20% and < 50% | 3
> 0% and < 20% | 0

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| 5.4 | Procedure.

Following the Initial Seven-Year Term 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 three (3) months 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 DNP’s Percentage Interest shall not fall below twenty percent (20%). If the Percentage Interest of Photronics Singapore falls below fifty percent (50%) more than three (3) months, then the Chairman of the Board shall be selected from and among the Directors nominated by DNP if DNP’s Percentage Interest is above fifty percent (50%) or otherwise by the Board of Directors. If a Shareholder whose Percentage Interest fell below fifty percent (50%) subsequently increases its Percentage Interest above fifty percent (50%), such Shareholder shall have the right to nominate the Chairman of the Board 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 twenty percent (20%). If either Shareholder’s Percentage Interest falls below twenty percent (20%), then it no longer has the right to nominate the Vice Chairman until such Shareholder’s Percentage Interest increases to twenty percent (20%) or more again.

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| 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.

5.6.2 Board Meetings. The Board of Directors shall hold meetings at least once every Fiscal Quarter. Unless a higher quorum is required by Applicable Law, the presence of four (4) Directors, in each case, in person or by video conference, shall be necessary and sufficient to constitute a quorum for the purpose of taking action by the Board of Directors at any meeting of the Board of Directors. Each Director may authorize any other Director by written proxy to act for or on behalf of such Director on all matters in which such Director is entitled to participate. Each Shareholder shall be responsible for the expenses of the Director(s) nominated by such Shareholder in connection with all meetings of the Board of Directors. The Chairman of the Board shall preside at all meetings of the Board of Directors and shall have such other duties and responsibilities as may be assigned to him or her by the Board of Directors. The Chairman of the Board must include any item submitted by a Shareholder or General Manager for consideration at a meeting of the Board of Directors, may not cut off debate on any matter being considered by the Board of Directors and shall call for a vote on any matter at the request of any Director or General Manager. Each of the Directors shall have the obligation to attend each of the meetings of the Board of Directors, whether in person or by proxy, for the purpose of the quorum, provided that nothing in the foregoing shall be construed to restrict any Director on how to exercise his/her voting rights (including abstaining from voting). In the event that any of the Directors fails to attend two meetings of the Board of Directors consecutively due to reasons other than those that are unattributable to such Director or its proxy (including, without limitation, Force Majeure, accident and illness) and taking into account that such Director should use his/her best efforts to issue a proxy for such meeting, resulting in failure of reaching a quorum, it shall be deemed as a material breach and bad faith of the Shareholder who nominates such Director in performing such Shareholder’s obligations hereunder.

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5.6.3 Notice; Waiver. Except in the case of emergency as provided under the Acts, the regular quarterly meetings of the Board of Directors described in Section 5.6.2 shall in principle be held upon not less than seven (7) Business Days’ written notice. Additional meetings of the Board of Directors may be held upon the request of any Director to the Chairman of the Board, upon not less than seven (7) Business Days’ written notice (which may be given, to the extent permitted by Applicable Law, via confirmed facsimile, confirmed e-mail or other manner provided for in Section 12.5). No action taken by the Directors at any meeting shall be valid unless the requisite quorum is present.

5.6.4 Voting of Directors. Except as otherwise expressly provided in this Agreement and/or Applicable Law, all actions, determinations or resolutions of the Board of Directors shall require the affirmative vote or consent of a majority of the Board of Directors present at any meeting at which a quorum is present. Each Director shall be entitled to one (1) vote, and Directors shall be entitled to cast their vote through proxies.

5.6.5 Meetings. All meetings of the Board of Directors or the Shareholders shall be conducted in English. Directors and their proxies shall have the right to participate in all meetings of the Board of Directors by means of a video conference or similar communications equipment by means of which all persons participating in the meeting can see and hear each other at the same time and participation by such means shall constitute presence in person at a meeting.

5.6.6 Reliance by Third Parties. For convenience and subject to Applicable Laws, each party agrees that any Person dealing with the Company, Photronics Director, DNP Director, or any Officer may rely upon a certificate signed by any one Photronics Director and one DNP Director as to: (a) the identity of any Director or Officer; (b) the existence or non-existence of any fact or facts which constitute a condition precedent to acts by the Directors or Officers or in any other manner germane to the affairs of the Company; (c) the Persons who are authorized to execute and deliver any instrument or document for or on behalf of the Company; or (d) any act or failure to act by the Company or as to any other matter whatsoever involving the Company, Photronics Singapore, DNP, any Director or any Officer.

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| 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 engage or invest in, and devote their time to, any other business venture or activity of any nature and description (independently or with others), whether or not such other activity may be deemed or construed to be in competition with the Company. Neither the Company nor any Shareholder, Affiliate of a Shareholder, or Director shall have any right by virtue of this Agreement or the relationship created hereby in or to such other venture or activity of any Shareholder or its Affiliates (or to the income or proceeds derived therefrom), and the pursuit thereof, even if competitive with the business of the Company, shall not be deemed wrongful or improper.

| 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.

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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;

(f) financial statements of the Company for the five (5) most recent Fiscal Years; and

(g) minutes of all meetings of the Board of Directors and the Shareholders.

5.12.3 Reports. The Board of Directors shall also cause to be sent to each Shareholder of the Company, the following:

(a) within forty-five (45) days after the Effective Date, the Company shall provide each Shareholder with an unaudited balance sheet of the Company as of the Effective Date;

(b) within one hundred eighty (180) days following the end of each Fiscal Year, such information as may be reasonably required by the Shareholders for preparation of their respective federal, state and local income or franchise tax returns;

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(c) a copy of the Company’s federal, state and local income tax or information returns for each Fiscal Year, concurrent with the filing of such returns;

(d) within seventy five (75) days after the end of each Fiscal Year, the Company shall provide each Shareholder with an audited balance sheet, income statement and statement of cash flows for and as of the last day of the Fiscal Year then ended, prepared in accordance with GAAP and audited in accordance with GAAS as well as such other financial information as any Shareholder may reasonably request to enable such Shareholder and its Affiliates to prepare their consolidated quarterly and annual financial statements;

(e) within forty five (45) days after the end of each Fiscal Quarter or Fiscal Year, the Company shall provide each Shareholder with an unaudited balance sheet, income statement and statement of cash flows for and as of the last day of the year or quarter (as appropriate) then ended, prepared in accordance with GAAP, as well as such other financial information as any Shareholder may reasonably request to enable such Shareholder and its Affiliates to prepare their consolidated quarterly and annual financial statements; and

(f) within a reasonable period of time, notice of any material litigation filed against the Company or any written claim by a Governmental Authority of any material violation of any state, federal or foreign law, statute, rule or regulation.

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.

5.12.4 Access to Company Books and Records.

(a) To the extent not in violation of Applicable Law, the terms of the Transaction Documents and the Company’s confidential obligations (statutory or contractual) to third parties, Shareholders (personally or through an authorized representative) may, for purposes reasonably related to their interests in the Company, during reasonable business hours (i) examine and copy (at their own cost and expense) the books and records of the Company, including the records listed in Section 5.12.2, and (ii) have access to the Company’s management, internal and external accountants and attorneys, plans, properties and other assets to conduct investigations regarding the Business and assets of the Company at such Shareholder’s sole expense, and the Company shall reasonably cooperate with such Shareholder in such investigations. Any information obtained as a result of this Section 5.12.4 shall be used by a Shareholder solely for purposes reasonably related to such Shareholder’s participation in the Company and shall be subject to the confidentiality restrictions set forth in Section 12.17 of this Agreement.

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(b) Any Shareholder’s request for documents or request to inspect or copy documents or have access to the Company’s management, plans, properties and other assets under this Section 5.12.4 (i) may be made by that Shareholder or that Shareholder’s authorized representative and (ii) shall be made in writing to the General Manager and shall state the purpose of such demand. If a Shareholder is not satisfied with the response of the General Manager, the Shareholder may make such request to the Board of Directors.

| 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.

5.13.2 Expenses. Expenses incurred by an Indemnitee in defending any claim, demand, action, suit or proceeding subject to this Section 5.13 shall be advanced by the Company prior to the final disposition of such claim, demand, action, suit, or proceeding.

5.13.3 Company Expenses. Any indemnification provided hereunder shall be satisfied solely out of the Company Assets, as an expense of the Company. No Shareholder shall be subject to liability by reason of these indemnification provisions.

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5.13.4 No Other Rights. The provisions of this Section 5.13 are for the benefit of the Indemnitees and shall not be deemed to create any rights for the benefit of any other Person; provided, however, that the indemnification rights provided in this Section 5.13 will inure to the benefit of the heirs, legal representatives, successors, assigns and administrators of the Indemnitee.

5.13.5 No Liability. No Indemnitee shall be liable to the Company or to any Shareholder for any losses sustained or liabilities incurred as a result of any act or omission of any Indemnitee 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.

5.13.6 No Fiduciary Duties.

(a) In connection with the determination of any and all matters presented for action to the Shareholders, the Board of Directors or the Steering Committee, as applicable, the Shareholders acknowledge and agree that each Shareholder will be acting on its own behalf and each Representative serving on the Board of Directors or the Steering Committee will be acting on behalf of the Shareholder that appointed such Representative, to the fullest extent permitted by Applicable Law and subject to the fiduciary duties of the Representatives under the Company Act.

(b) Each Shareholder may act, and, to the fullest extent permitted by Applicable Law, will be protected for acting, in its own interest (subject to the express terms of any contract entered into by such Shareholder) without regard to the interest of the other Shareholder, and, subject to Section 5.13.6(c), each Representative may act, and, to the fullest extent permitted by Applicable Law, will be protected for acting, at the direction or control o£ or in a manner that such Representative believes is in the best interest of, the Shareholder that appointed the Representative without regard to the interest of the other Shareholder.

(c) Each of the Shareholders hereby waives, and shall cause the Company to waive, on its own behalf and on behalf of each of its subsidiaries, to the fullest extent permitted by Applicable Law, any claim or cause of action against any Shareholder or Director or member of the Steering Committee appointed by a Shareholder based on the determination of any and all matters presented for action to the Shareholders, the Board of Directors or the Steering Committee, as applicable; provided, however, the foregoing will not limit any Shareholder’s obligation under, or liability for, breach of the express terms of this Agreement, other Transaction Documents or any other agreement that they have entered into with the Company or any of its subsidiaries or the other Shareholder. Each of the Shareholders acknowledges that no Shareholder shall negotiate or enter into or request or otherwise cause the Company to negotiate or enter into any agreement or transaction that would result in such Shareholder or any of its Affiliates receiving any financial consideration or other tangible property incentive, payment or other form of financial consideration or other tangible property consideration from any Governmental Authority or Person based upon the Company’s taking an action (including hiring any employees, undertaking any construction or purchasing any equipment) or entering into such agreement or transaction other than as a Shareholder of the Company pursuant to this Agreement, and any Shareholder who receives any such consideration or other tangible property incentive, payment or other form of financial consideration or other tangible property consideration from any Governmental Authority or Person in respect of the Company’s activities, shall promptly convey such consideration or other tangible property incentive, payment or other form of financial consideration or other tangible property consideration from any Governmental Authority or Person to the Company as a supplemental Capital Contribution without consideration including any adjustment in the Shares or Economic Interest of, or balance of requested Additional Contribution owed by, such Shareholder.

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(d) The term “Representative” shall mean, with respect to a Shareholder, the Directors and members of the Steering Committee appointed by such Shareholder.

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 Board of Directors and DNP Asia Pacific, and appointed by the Board of Directors; provided, however, that if the Percentage Interest of Photronics Singapore falls below fifty percent (50%) for more than one (1) month, then the General Manager will be nominated by DNP Asia Pacific with input from the Board of Directors and Photronics Singapore and appointed by the Board of Directors, if DNP’s Percentage Interest is above fifty percent (50%) or otherwise by the Board of Directors. If a Shareholder whose Percentage Interest fell below fifty percent (50%) subsequently increases its Percentage Interest above fifty percent (50%), 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 Board of Directors 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 General Manager is unable to fulfill his duties as General Manager for any reason (including by reason of serious injury, illness or death), the Vice General Manager will take over the duties of the General Manager but will only do so until the next Board meeting at which time the General Manager will be appointed as Photronics Singapore or DNP Asia Pacific so nominated, as the case may be, in accordance with the foregoing in this Section 5.14.1.

5.14.2 Duties and Powers of the General Manager. The General Manager shall, subject to the control of the Board of Directors, have general supervision, direction and control of the day-to-day affairs of the Company and shall report directly to the Board of Directors. Unless limited by the Board of Directors or this Agreement, he or she shall have the general powers and duties of management usually vested in the office of chief executive officer of corporations and shall have such other powers and duties as may be prescribed by the Board of Directors.

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5.14.3 Other Officers; Employment; Removal. The Company may also have a chief financial officer, a secretary and such other officers as determined by the Board of Directors after input from the General Manager and the Vice General Manager, each of whom will be accountable to the General Manager (the General Manager, the Vice General Manager and any other officers elected in accordance with this Section 5.14.3, each, an “Officer” and collectively, the “Officers”). Subject to Section 5.14.1, the General Manager, the Vice General Manager and any other Officer may be removed at any time upon an affirmative vote of the majority of the Board of Directors and the consent of the Shareholder who appoints/nominates such Officer in question.

5.14.4 Duties and Powers of Chief Financial Officer. Any chief financial officer of the Company shall keep and maintain, or cause to be kept and maintained, books and records of accounts of the properties and business transactions of the Company, including accounts of its assets, liabilities, receipts, disbursements, gains, losses and capital. He or she shall disburse the funds of the Company as may be ordered by the Board of Directors and shall render to the Board of Directors at their request an account of all his or her transactions as chief financial officer and of the financial condition of the Company. Authorizations with respect to the Company’s depositories, disbursement of funds and related banking matters shall be as set forth in resolutions of the Board of Directors.

5.14.5 Duties and Powers of Vice General Manager. The Vice General Manager shall assist the General Manager and shall have such other powers and duties as may be prescribed by the Board of Directors from time to time after consultation with the General Manager and DNP Asia Pacific or Photronics Singapore, who is entitled to appoint the Vice General Manager at that time.

5.14.6 Duties and Powers of Secretary.

(a) Any secretary of the Company shall attend all meetings of the Board of Directors and all meetings of the Shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform like duties for any standing committees when requested by such committee.

(b) Any secretary of the Company shall keep, or cause to be kept, at the principal executive office or at the office of the Company’s transfer agent or registrar, as determined by resolution of the Board of Directors, a register, or a duplicate register, showing the names of all Shareholders and their addresses, Percentage Interests, the number and date of certificates issued for the same (if any), and the number and date of cancellation of every certificate surrendered for cancellation (if any).

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5.14.7 General Provisions Regarding Officers.

(a) The Board of Directors may, from time to time, designate Officers of the Company and delegate to such Officers such authority and duties as the Board of Directors may deem advisable and may assign titles (including, without limitation, president, vice-president and/or treasurer) to any such Officer. Unless the Board of Directors otherwise determines, if the title assigned to an Officer of the Company is one commonly used for Officers of a business corporation, then, subject to the terms of this Agreement, the assignment of such title shall constitute the delegation to such Officer of the authority and duties that are customarily associated with such office. Any number of titles may be held by the same Officer.

(b) Any Officer to whom a delegation is made pursuant to the foregoing shall serve in the capacity delegated unless and until such delegation is revoked by the Board of Directors for any reason or no reason whatsoever, with or without cause, or such Officer resigns.

5.15 Steering Committee

5.15.1 Scope of the Steering Committee. Immediately after the Effective Date, the Shareholders will establish a steering committee (the “Steering Committee”) to review and discuss the following matters in relation to the Company: development of photomask technology roadmap, and establishment and prioritization of goals in the development of photomask technology for future process nodes; product development partner alignment, customer partnerships, captive mask operation engagement, the R&D model for the Company. One of the key responsibilities of the Steering Committee will be to evaluate technology and business development initiatives for the Company and decide on proposals brought forth to support such technology and business development objectives using a pre-agreed evaluation criteria including criteria indicated in Schedule K.

5.15.2 Composition of the Steering Committee. The Steering Committee shall consist of four (4) members, two (2) members appointed by Photronics Singapore and two (2) members appointed by DNP Asia Pacific, and such four (4) members may include the General Manager of the Company at the discretion of the appointed Shareholder. The term of a chairman who is appointed from and among the members of the Steering Committee (the “Steering Committee Chairman”) shall be one year from its election. The Steering Committee Chairman will be initially appointed by Photronics Singapore, and thereafter the position of the Steering Committee Chairman will rotate annually between the members appointed by Photronics Singapore and those appointed by DNP Asia Pacific.

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5.15.3. Procedures of the Steering Committee. The items listed in Section 5.15.1 above shall be reviewed and determined between the parties in accordance with the following procedure:

(i) The Steering Committee shall convene regular meetings on a monthly basis for the first three months after the Effective Date; thereafter the Steering Committee will determine how often it will meet. The Steering Committee shall discuss the matters listed in Section 5.15.1 above. The Steering Committee will prepare a meeting agenda for each meeting and will keep minutes of its meetings. Agenda items will include formal review of proposals brought forth by DNP Asia Pacific, Photronics Singapore or PDMC and the sales and management functions of the Company. The Steering Committee will vote on specific matters within the charter of the committee and render decisions on specific proposals brought forth within the scope of the committee. The Steering Committee will use all reasonable efforts to amicably resolve all matters brought before the Steering Committee with a goal of resolving all matters prior to raising such matters with the Board of Directors.

(ii) In the event a proposal is brought to the Steering Committee and the Steering Committee cannot reach a unanimous decision in a timely matter, then, either Photronics Singapore or DNP Asia Pacific may declare the disagreement to the other Shareholder. If the disagreement continues to be unresolved within two (2) weeks from the date of declaration, either Shareholder may refer the unresolved proposal to the Chief Executive Officer of Photronics and the General Manager of DNP’s Fine Optronics Operations. The meeting between these executive members shall be convened within two (2) weeks after submission of either Shareholder’s request made after the lapse of the two-week period mentioned in the previous sentence, and they will meet together with the goal of trying to resolve obstacles causing the disagreement and decide the proposal.

(iii) In the event the proposal cannot be resolved at the meeting between the Chief Executive Officer of Photronics and the General Manager of DNP’s Fine Optronics Operations, then either Photonics Singapore or DNP may refer the unresolved proposal to the Board of Directors of the Company for consideration and final voting. The meeting of Board of Directors of the Company shall be convened within two (2) weeks after submission of either Shareholder’s request.

(iv) If the vote by the Board of Directors cannot be accepted by DNP, DNP will have the right, subject to Section 5.15.4 below, to exercise a put option whereby Photronics will have the obligation to purchase all of DNP Asia Pacific’s Shares in the Company pursuant to the terms and conditions set forth in Section 5.15.4 (such put option being referred to as the “DNP Exit Option”) and terminate this Agreement and the Transaction Documents to which DNP or DNP Asia Pacific is a party without any liability; provided however that the License Agreement from DNP to PDMC will continue to be in full force and effect notwithstanding the fact that the Company ceases to be a joint venture between Photronics Singapore and DNP Asia Pacific.

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5.15.4 DNP Exit Option. DNP may exercise the DNP Exit Option by giving a written notice to Photronics (the “DNP Exit Option Notice”) at any time after the expiration of the Initial Two-Year Term. Photronics agrees to use all reasonable efforts to apply for all applicable regulatory approvals or clearance within thirty (30) days after receipt of the DNP Exit Option Notice. The closing of the sale and purchase of DNP Asia Pacific’s Shares as a result of the DNP Exit Option (the “DNP Exit Closing”) shall take place as soon as commercially practicable (taking into account the necessary funds raising arrangement by Photronics Singapore) without any undue delay and shall be within three (3) Business Days after all prior regulatory approvals or clearance have been obtained. The DNP Exit Closing Price shall be equal to the product of the difference of (I) the Net Book Value of the Company Assets as of the last day of the Fiscal Month immediately prior to the date of the DNP Exit Option Notice, minus (II) the Net Book Value of the Company Liabilities as of the last day of the Fiscal Month immediately prior to the date of the DNP Exit Option Notice, divided by the number of Issued and outstanding Shares of the Company as of the date of the DNP Exit Option Notice, multiplied by the number of Shares held by DNP Asia Pacific as of the date of the DNP Exit Closing. The DNP Exit Closing Price shall be paid by Photronics pursuant to the terms and conditions agreed to upon the exercise of the DNP Exit Option, but the DNP Exit Closing Price shall be fully paid within seven (7) years from the exercise of the DNP Exit Option.

At the DNP Exit Closing, DNP shall transfer all of its Interests in the Company to Photronics, free and clear of any liens or encumbrances, and Photronics shall pay the amount of all or part of the DNP Exit Closing Price that Photronics will be required to pay upon the DNP Exit Closing to DNP. At the DNP Exit Closing, DNP shall deliver to Photronics such instrument or instruments of conveyance as Photronics Singapore reasonably requests.

DNP will not be able to exercise the DNP Exit 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 DNP Exit 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 DNP Exit 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 DNP Exit Closing Price) takes longer than sixty (60) days from the exercise of the DNP Exit Option, DNP and Photronics will agree on 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 DNP Exit Option Notice.

5.16 Business Development Team

The Company’s sales organization will have a consolidated structure reporting to a single lead who is employed by the Company, and the sales organization will have one group focused on day to day sales realization (the “Sales Function”) and a second group focused on new business development (the “Business Development Team”). The Business Development Team will be initially organized outside the Company, and will consist of one employee from PDMC, one employee from Photronics or one of its Affiliates and one employee from DNP. The initial period for assignment to the Business Development Team of members from each PDMC, Photronics and DNP appointee will be one (1) year. The Shareholders will mutually decide on the period of assignment after the initial period. The Business Development Team will report to the employee who has overall responsibility for the Company’s sales organization. The Business Development Team will also report to the Steering Committee on each Steering Committee session or upon the request of each Shareholder. The employee who will have overall responsibility for the Company’s sales organization does not have to be a resident of the Territory at the Effective Date, but it is expected that such employee may eventually reside in the Territory. All expenses (such as salary, travel, living, etc.) of members of the Business Development Team from Photronics or its Affiliates or DNP will be paid by the party appointing the member. The Company will have a sales manager who is in charge of the Sales Function based in either Xiamen or Shanghai.

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For the purpose of clarification, the employees working for the Sales Function (including those assigned from either party or its Affiliates) and the members of the Business Development Team may meet with a customer in the Territory to the extent necessary for performing such duties and functions as permitted by the Company, and may not be subject to the restrictions set forth in Section 8.3; provided however the Business Development Team will report on any such meetings and the status of any such meetings to the Steering Committee, and the Steering Committee will approve all such projects or engagements as have been developed by the Business Development Team, in accordance with the procedures of the Steering Committee set forth in Article 5.15, before the commencement of carrying out such projects or engagements.

From time to time, the engineering resources of one or both parties may be required to assist in the resolution of a customer issue and if such request is made by the Business Development Team or the Sales Function of the Company, then Photronics, DNP and/or their Affiliates will make all reasonable effort to support the request In this case, each of Photronics and DNP may, at its discretion, have its engineers attend or participate in the visit to such customer.

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.

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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 business scope and the startup plan 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 full operation 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 Budge”) 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 Date, the Company will pay remuneration substantially equal to local pay grade customarily remunerated for their respective positions and the assigning Shareholder shall be responsible for all other remuneration and costs. During the term of this Agreement from the Effective Date, DNP shall have the right to appoint three Seconded Employees to be assigned for the Company (“Three DNP Appointed Seconded Employees”), one of the Three DNP Appointed Seconded Employees will be the Vice General Manager selected by DNP in accordance with Section 5.14.1, one (1) employee will work in the Sales Function and one (1) employee will work in the manufacturing department. DNP will pay all remuneration expenses related to such employees. If the Company does not desire but DNP desires to assign any Seconded Employees (other than the Three DNP Appointed Seconded Employees) to the Company, DNP shall seek the Company’s consent for assigning such Seconded Employees to the Company and the costs for such Seconded Employees shall be solely borne by DNP. Seconded Employees will not be considered employees of the Company but rather will be considered subcontractors of the Company. 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.

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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, Seconded Employees) at its locations consistent with local practices, 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.

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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 Transfer all or any portion of its Shares to any other Person without the prior written consent of the other Shareholder, nor shall Photronics Singapore or DNP without the prior written consent of the other, directly or indirectly, Transfer its ownership interest in any wholly owned subsidiary (including any indirect wholly owned subsidiary) that owns, directly or indirectly, the Shares held by Photronics Singapore or DNP, respectively, in each case other than (i) to a wholly owned (including indirect wholly owned) subsidiary, or (ii) in a Transfer by Photronics Singapore in connection with a Change in Control of Photronics , or in a Transfer by DNP in connection with a Change in Control of DNP, as the case may be, in compliance with the terms of Section 7.4 of this Agreement. The parties agree that the Transfer of Shares by a Shareholder in contravention of this Agreement shall be void and, among other matters, constitute a material breach of this Agreement. In the event of any purchase and sale of Shares as permitted under this Section 7.2, the parties thereto shall agree to amend this Agreement accordingly.

7.2.2 Transfer Notice. If any Shareholder proposes to Transfer any of its Shares, whether directly or indirectly (the “Selling Shareholder”), such Selling Shareholder shall promptly provide written notice (the “Transfer Notice”) to the other Shareholder (the “Non-Selling Shareholder”) describing in reasonable detail the proposed Transfer, including, without limitation, the number of Shares subject to the Transfer, the nature of the Transfer, the identity of the purchaser(s) and transferee(s), the amount and form of consideration to be paid, and the anticipated closing date of the Transfer. The Transfer Notice may be updated from time to time by the Selling Shareholder by a further written notice to the Non-Selling Shareholder. The Non-Selling Shareholder shall also receive any updates to the terms of the proposed Transfer and shall have the right to obtain any information it reasonably requests from time to time in connection with the proposed Transfer.

7.2.3 Right of First Refusal. The Non-Selling Shareholder shall have a right to purchase all of the Shares subject to the proposed Transfer at the same price and upon the terms and conditions specified in the Transfer Notice, by giving a written response notice to the Selling Shareholder within thirty (30) days from the date of receipt of the Transfer Notice (or, if applicable, the date of receipt of the final update to the Transfer Notice). A failure by the Non-Selling Shareholder to provide a response notice within such thirty (30) day period shall be deemed to constitute a decision by such Shareholder not to exercise its right to purchase the Shares subject to the proposed Transfer.

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7.2.4 Co-Sale Right. In the event that the Non-Selling Shareholder does not wish to exercise its right of first refusal, the Non-Selling Shareholder shall have the right to participate in the proposed Transfer by selling any or all of its Shares to the proposed purchaser(s) or transferee(s), on the same terms and conditions as specified in the Transfer Notice. Such right to participate shall be exercised by the Non-Selling Shareholder in a written response to the Selling Shareholder within (30) days from the date of receipt of the Transfer Notice (or, if applicable, the date of receipt of the final update to the Transfer Notice), stating the number of Shares of the Non-Selling Shareholder that such Non-Selling Shareholder wishes to sell to the proposed purchaser(s) or transferee(s) (the “Response Shares”). In the event that the proposed purchaser(s) or transferee(s) do not wish to acquire all of the Response Shares, then the Non-Selling Shareholder shall be entitled to sell such number of Shares equal to the Percentage Interest of the Non-Selling Shareholder times the total number of Shares subject to the proposed Transfer.

7.2.5 The sale of all Response Shares and, if applicable, remaining Shares subject to the Transfer Notice, and full payment therefor, shall be completed within thirty (30) days after the anticipated closing date specified in the Transfer Notice (or as updated pursuant to Section 7.2.2 above). In the event that such purchase and sale is not completed within such thirty (30) day period, the Selling Shareholder shall not thereafter sell any Shares without first offering such Shares to the Non-Selling Shareholder in accordance with this Section 7.2.

7.2.6 In the event that the Non-Selling Shareholder does not exercise any right under Section 7.2.3 or 7.2.4 above, the Selling Shareholder may Transfer any of its Shares subject to the Transfer Notice at the same price and upon the terms and conditions specified in the Transfer Notice, provided that the proposed Transfer shall be completed within thirty (30) days after the anticipated closing date specified in the Transfer Notice (or as updated pursuant to Section 7.2.2 above).

7.2.7 The restrictions set forth in this Section 7.2 shall not apply to any Transfers by a Selling Shareholder to one or more of its wholly owned (including indirectly wholly owned) subsidiaries as permitted under Section 7.1.

7.2.8 Notwithstanding anything to the contrary set forth herein, no Transfer shall take place between a Shareholder and any competitor as identified on Schedule L.

| 7.3 | Purchase and Sale of Remaining Interest

7.3.1 If the Percentage Interest of a Shareholder (the “Minority Shareholder”) is twenty percent (20%) or less after the Initial Seven-Year Term, and remains at or below twenty percent (20%) for more than six (6) consecutive months the other Shareholder or a wholly owned subsidiary thereof (such other Shareholder or Affiliate thereof, the “Majority Shareholder”) shall have the option to purchase all of the remaining Interest of the Minority Shareholder at a purchase price equal to the Minority Closing Price, subject to the terms and conditions set forth below. The Majority Shareholder may exercise this purchase option by delivering a written notice of its intent to exercise to the Minority Shareholder. In addition, the Minority Shareholder shall have the option to sell all of the remaining Interest of the Minority Shareholder to the Majority Shareholder at a purchase price equal to the Minority Closing Price, subject to the terms and conditions set forth below. The Minority Shareholder may exercise this put option 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.”

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7.3.2 The closing of the purchase and sale of the Minority Shareholder’s remaining Interest (the “Minority Closing”) shall take place as soon as commercially practicable without any undue delay and shall be within three (3) Business Days after all prior regulatory approvals or clearance have been obtained. Such Minority Closing shall take place at the principal office of the Company or at such other location as the Majority Shareholder and the Minority Shareholder may mutually determine. At the Minority Closing, (i) the Minority Shareholder shall transfer its remaining Interest in the Company to the Majority Shareholder, free and clear of any liens or encumbrances, (ii) the Majority Shareholder shall pay the Minority Shareholder the amount of all or any part of the Minority Closing Price that the Majority Shareholder will be required to pay upon the Minority Closing; and (iii) the Minority Shareholder shall deliver to the Majority Shareholder such instrument or instruments of conveyance as the Majority Shareholder reasonably requests. The Majority Shareholder agrees to apply for all applicable regulatory approvals or clearance within thirty (30) days after receipt of such notice of put option from the Minority Shareholder.

7.3.3 The price for the Interests that the Majority Shareholder shall pay to the Minority Shareholder (the “Minority Closing Price”) shall be equal to the product of (i) the difference of (a) the Net Book Value of the Company Assets as of the last day of the Fiscal Month immediately prior to the date of the Minority Option Notice, minus (b) the Net Book Value of all Company Liabilities as of the last day of the Fiscal Month immediately prior to the date of the Minority 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 Minority Option Notice, multiplied by the number of the Shares held by the Minority Shareholder as of the date of the Minority Closing. The Minority Closing Price shall be paid by the Majority Shareholder pursuant to the terms and conditions agreed to upon the exercise of the option set forth in Section 7.3.1, but the Minority Closing Price shall be fully paid within seven (7) years from the exercise of such option.

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7.3.4 The Minority Shareholder 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 Minority 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 Minority Closing (i.e., receipt of all necessary regulatory approvals and completion of the transfer of the Minority Shareholder’s Interest to the Majority Shareholder but not including full payment of the Minority Closing Price) takes longer than sixty (60) days from the date of the Minority Option Notice, DNP and Photronics will agree on 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 Minority Option Notice.

| 7.4 | Change in Control

7.4.1 The parties will provide at least sixty (60) days but no more than one hundred eighty (180) days’ notice (the “Change in Control Notice”) to the other party of such proposed Change in Control; provided, that if such Change in Control is in connection with an unsolicited tender offer or proxy contest, then the parties will provide notice to the other party of such proposed Change in Control as promptly as practicable but in no event less than two (2) Business Days following the commencement of such tender offer or the notice to the Change in Control Party (defined in Section 7.4.2 below) of such proxy contest.

7.4.2 If Change in Control occurs to Photronics, Photronics Singapore, DNP or DNP Asia Pacific (respectively, the “Change in Control Party”), the other party (the “Change in Control Purchaser” which is either Photronics if the Change in Control Party is DNP or DNP Asia Pacific, or DNP if the Change in Control Party is Photronics or Photronics Singapore) will have the right to purchase all of Shares of Change in Control Party at a cash purchase price equal to the Change in Control Closing Price, subject to the terms and conditions set forth below. The Change in Control Purchaser may exercise this purchase option by delivering a written notice of its intent to exercise to the Change in Control Party. This notice shall be provided no later than twenty-one (21) days following the Change in Control Purchaser’s receipt of the Change in Control Notice. The Change in Control Purchaser agrees to apply for all applicable regulatory approvals or clearance within thirty (30) days after receipt of the Change in Control Notice. The closing of the Change in Control Purchaser’s acquisition of the Shares of the Change in Control Party (the “Change in Control Closing”) shall take place on the later of: (i) on the date of Change in Control simultaneously with such Change in Control, or (ii) within three (3) Business Days from all necessary approval from Governmental Authority for Change in Control Closing has been obtained. Such Change in Control Closing shall take place at the principal office of the Company or at such other location as the Shareholders may mutually determine. At the Change in Control Closing, the Change in Control Party shall transfer its Shares in the Company to the Change in Control Purchaser, free and clear of any liens or encumbrances, and the Change in Control Purchaser shall pay the Change in Control Closing Price by wire transfer of cash to the Change in Control Party. At the Change in Control Closing, the Change in Control Party shall deliver to the Change in Control Purchaser such instrument or instruments of conveyance as the Change in Control Purchaser reasonably requests.

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7.4.3 The price for the Interests that the Change in Control Purchaser shall pay to the Change in Control Party (the “Change in Control Closing Price”) shall be equal to the product of (i) the difference of (a) the Net Book Value of the Company Assets as of the last day of the Fiscal Month immediately prior to the Change in Control Notice, minus (b) the Net Book Value of the Company Liabilities as of the last day of the Fiscal Month immediately prior to the date of the Change in Control 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 Change in Control Notice, multiplied by the number of the Shares held by the Change in Control Party as of the date of the Change in Control Closing. The Change in Control Closing Price shall be paid by the Change in Control Purchaser pursuant to the terms and conditions agreed to upon the exercise of the option set forth in Section 7.4.2, but the Change in Control Closing Price shall be fully paid within seven (7) years from the exercise of such option.

7.4.4 The Change in Control Party 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 Change in Control 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 Change in Control Closing (i.e., receipt of all necessary regulatory approvals and completion of the transfer of the Change in Control Party’s Interest to the Change in Control Purchaser but not including full payment of the Change in Control Closing Price) takes longer than sixty (60) days from the date of the Change in Control Notice, DNP and Photronics will agree on 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 Change in Control Notice.

| 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 one (1) year after the expiration or termination of this Agreement (unless otherwise set forth in this Agreement), the parties shall not and shall ensure that its or their Affiliates, directly or indirectly, do not, whether solely or jointly with any other Person, and whether as principal, agent, director, executive officer, employee, shareholder, partner, member, joint venture partner, adviser, consultant or otherwise, carry on or engage or be or become involved in, or assist others in engaging or being involved in, any trade, business, activity or undertaking within the Territory which is or could reasonably be expected to be competitive with the Business of the Company. In the event that the Company, directly or through outsourcing to the suppliers under this Agreement, cannot supply or satisfy local customer(s) within the Territory, the parties will discuss other options to satisfy the needs of such customer(s).

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For the purpose of clarification, (i) the design, development, fabrication, and sale of master templates and/or replica templates used for manufacturing integrated circuits by nanoimprint lithography technologies, and (ii) the design, development, fabrication, sale, distribution of material, equipment, or software, and the provision of data preparation service, even if these products or services are related to photomask production, are not regarded as competitive with the Business of the Company, and neither parties nor their Affiliates will be restricted from engaging in any such business in or outside of the Territory. For activities related to (i) and (ii) above, (a) the parties will keep the Company informed of these activities through the Steering Committee, if they may lead to manufacturing of finished photomasks within the definition of the Business, (b) the manufacture and shipment of processed test masks, qualification masks or production masks directly from the parties to a customer within the Territory and within the definition of the Business under these activities will be considered a violation of the non compete obligations set forth in Section 8.1, and (c) for the purpose of this (a) and (b) and if necessary, the Company and the party(ies) who is carrying out such activities may collaborate to develop finished mask processes within the definition of the Business and such collaboration proposals will be reviewed and approved by the Steering Committee before starting. To materialize such collaboration, for activities related to (ii) above, the party(ies) who is carrying out such activities will make such materials etc. available for the Company to manufacture and ship photomasks to the customer under such collaboration.

8.1.2 During the term of this Agreement and one (1) year after the expiration or termination 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) induce or attempt to induce any supplier of the Company or any of its Affiliates to cease to supply, or to restrict or vary the terms of supply to, any of them; or (ii) solicit for employment or hire any employee, officer or director of the Company or any of its Affiliates, without the written approval of the other party; provided, however, that nothing herein shall restrict a party or its respective Affiliates from employing any employee, officer or director of the Company or any of its Affiliates who voluntarily respond to an advertisement addressed to general public for employment that is placed by or on behalf of the employing party.

| 8.2 | Business Scope of the Company

8.2.1. A purchase order placed by a company with headquarters or substantial operations in the Territory is considered to be within the business scope of the Company and therefore subject to the non-compete obligations set forth in Section 8.1, irrespective of whether photomasks manufactured under such purchase order are delivered in or outside the Territory.

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8.2.2 A purchase order placed by a company with headquarters or substantial operations outside the Territory (the “Foreign Customer”) will be classified into the following two primary categories and interpreted as follows:

(i) In the first category, if the Foreign Customer owns or controls (defined herein as having greater than fifty percent (50%) of the outstanding Shares of the entity, or ability to nominate a majority of the Board of Directors of the entity) a wafer manufacturing operation in the Territory, then a purchase order for photomasks to be used in the Territory placed outside the Territory by such Foreign Customer will be considered part of the business scope of the Company and subject to the non-compete obligations set forth in Section 8.1. Notwithstanding the above, if such Foreign Customer refuses to place purchase order with the Company, the Shareholders shall refer the issue to the Steering Committee to find mutually acceptable solution so that business opportunities of the Company, the Shareholders or its Affiliates will not be lost; and

(ii) In the second category, if the Foreign Customer places the purchase order outside the Territory and pays directly for the photomasks manufactured thereunder outside of the Territory and moreover the Foreign Customer does not own or control a wafer manufacturing operation in the Territory, then this Foreign Customer will not be subject to the non-compete obligations set forth in Section 8.1. Notwithstanding the above, the Shareholders and/or their Affiliates may have photomasks under the purchase order placed by the Foreign Customer in the second category manufactured by the Company for fulfillment under terms and conditions consistent with the original purchase order and mask manufacturing strategy, subject to approval of such Foreign Customer and further subject to the Company’s payment of a commission at the rate of five percent (5%) of the price of such photomasks to any of the Shareholders or their Affiliates who receives the original purchase order.

| 8.3 | Contact with Customers

8.3.1 The Company will be the sole interface with all customers in the Territory within the business scope of the Company, and all customer proposals involving Photronics and DNP and its or their Affiliates and within the purpose of the Steering Committee described in Section 5.1 of this Agreement will go through the Steering Committee for timely review.

8.3.2 No employees from either Photronics or DNP (including their Affiliates) can directly or indirectly contact or meet with a customer or potential customer of the Company in the Territory within the business scope of the Company unless such contact is pursuant to an overall project that has been previously approved by the Steering Committee and, is within a project under the day to day planning and management of the Company. If either party desires to have contact with a customer or potential customer of the Company in the Territory within the business scope of the Company but not pursuant to the previously approved project, such party will inform the Steering Committee of its request to have contact and the purpose thereof, and will seek approval from the Steering Committee prior to any such contact. A project coordinator will be appointed by the Steering Committee for each such approved project, contact or attendance hereunder. The project coordinator must coordinate and attend any visit to or contact with such customer or potential customer, and it is the responsibility of the project coordinator to report the project updates and progress to the Steering Committee.

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Notwithstanding the foregoing, (a) the Chief Executive Officer or Chief Technology Officer of Photronics or other positions of equivalent corporate and executive level and of a non-sales function that might be requested from time to time by Photronics to DNP or another equivalent member of Photronics’s executive management team, and (b) the Director of DNP, or General Manager or Vice General Manager of DNP’s Fine Optronics Operations or other positions of equivalent corporate and executive level and of a non-sales function that might be requested from time to time by DNP to Photronics or another equivalent member of DNP’s executive management team, and any director, officer or employee who is engaged with any business of DNP or its Affiliates which are not related to photomasks, are free to meet with a customer or potential customer in the Territory, 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

9.1.1 This Agreement shall enter into force as of the Effective Date, and remain in force throughout the duration of the Company if not terminated earlier as provided for in Section 9.1.2 or 9.2.

9.1.2 In the event that one of the Shareholders (or its Affiliates) ceases to be a shareholder of the Company for any reason, this Agreement is automatically terminated, except that the twelve (12)-months-non-compete obligations of the Shareholders after such Shareholder cease to hold Shares in the Company, as mentioned under Section 1.6.2, Section 5.15.4, Section 7.3.4 and Section 7.4.4, and the post-termination/expiration-non-compete obligation mentioned under Section 8.1 shall survive the termination 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:

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(a) in the event of a material breach of this Agreement by such other party, which such other party has failed to effectively remedy within sixty (60) days of the notice issued by the non-breaching party;

(b) in the event of the liquidation or winding up (whether voluntary or involuntary), bankruptcy, insolvency, moratorium, composition or subjection to other insolvency or quasi-insolvency procedure (whether or not judicially supervised), of or with respect to such other party, or the filing by such other party of an application with a view to being admitted or subjected to any such or other similar procedure or status, or the entering by such other party into voluntary negotiations with its creditors, or the conclusion between such other party and its creditors of voluntarily rescheduling or composition arrangements, in any jurisdiction;

(c) in the event of the acquisition by the Government of control, requisitioning or commandeering in any jurisdiction of such other party, or of all or substantially all of such other party’s business or assets; or

(d) in the event of such other party discontinuing, or being permanently or durably prevented or prohibited from continuing, its business or activities in any jurisdiction.

In the case of termination pursuant to this Section 9.2. l(a) the one-year period 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 non-compete obligations set forth therein upon the termination hereunder.

9.2.2 In addition to Section 9.2.1, this Agreement may be terminated by DNP in the event that the Company cannot achieve the status of “being operational” defined in the Outsourcing Agreement within five (5) years from the Effective Date, in which case, DNP 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 one-year period surviving after the termination set forth in Section 8.1 does not apply, and the parties will be immediately released from the non-compete obligations set forth therein upon the termination hereunder.

9.2.3 The parties agree that:

(a) the termination of this Agreement shall not (unless otherwise specified in the Transaction Documents concerned) produce the automatic cross termination of any of the Transaction Documents, unless a Transaction Document is terminated in accordance with Section 9.2.3 (c);

(b) the termination of any of the Transaction Documents shall not produce the automatic cross-termination of this Agreement;

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(c) the party who terminates this Agreement in accordance with Section 9.2.1 or 9.2.2 above shall have the right to terminate any or all of the Transaction Documents, to which it is a party without any liability; provided, however, that, in the event that this Agreement is terminated by DNP in accordance with Section 9.2.2, DNP is not entitled to terminate the Amended and Restated License Agreement or other agreement that requires DNP to supply, or grant a license to use, technology to the Company that is in effect at the time of termination will continue after such termination as long as any counterparty to the applicable agreement (the Company or PDMC) is not in breach of any of the terms and conditions thereof;

(d) the termination of this Agreement shall not affect the respective rights and obligations of the parties having accrued prior thereto, under this Agreement; and

(e) the termination rights, remedies and provisions arising from Applicable Laws shall, to the extent not waived or excluded hereby, cumulate with those specified under this Section 9.2.3.

| 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:

(a) to claim against the other party (i) compensation for losses of the Terminating Party arising from the event listed in Section 9.2.1 and/or the termination in accordance with Section 9.2.1; and (ii) reimbursement in the amount equal to the Company’s loss arising from the event listed in Section 9.2.1 and/or the termination in accordance with Section 9.2.1 multiplied by the Terminating Party’s Percentage Interest; and

(b) by giving the notice to the other party within thirty (30) days of termination of this Agreement, to (i) sell all of its Shares to the other Party at the price of (x) a sum equal to the product of (i) the difference of (a) the Net Book Value of the Company Assets as of the last day of the Fiscal Month immediately prior to the termination, minus (b) the Net Book Value of the Company Liabilities as of the last day of the Fiscal Month immediately prior to the termination, and (ii) the Percentage Interest of the Terminating Party at the time the termination or (y) the Terminating Party’s book value of the Shares, whichever is higher, or (ii) purchase all of the other party’s Shares, at the price of (x) a sum equal to the product of (i) the difference of (a) the Net Book Value of the Company Assets as of the last day of the Fiscal Month immediately prior to the termination, minus (b) the Net Book Value of the Company Liabilities as of the last day of the Fiscal Month immediately prior to the termination, and (ii) the Percentage Interest of the other party at the time the termination or (y) the other party’s book value of the Shares, whichever is lower. At the closing of the purchase of the Shares under this Section 9.3(b), (i) the selling Shareholder shall transfer its remaining Interest in the Company to the purchasing Shareholder, free and clear of any liens or encumbrances, (ii) the purchasing Shareholder shall pay the price calculated in accordance with the above by wire transfer of cash and (iii) the selling Shareholder shall deliver to the purchasing Shareholder such instrument or instruments of conveyance as the purchasing Shareholder reasonably requests. The purchasing Shareholder agrees to apply for all applicable regulatory approvals or clearance within thirty (30) days after receipt of such notice from the Terminating Party. The closing of the purchase of the Shares under this Section 9.3(b) shall take place as soon as commercially practicable without any undue delay and shall be within three (3) Business Days after all applicable regulatory approvals and clearances have been obtained.

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| 9.4 | Exceptional Exit

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

(a) In the event that the occurrence of Force Majeure (including the issue(s) between the homeland of the Exiting Party and the Territory) prevents the Exiting Party from fulfilling its obligations hereunder, and the situation continues for more than six (6) months; or

(b) In the event that the Exiting Party decides to exit the photomaks business.

9.4.2 The Exiting Party may propose a dissolution of the Company to the other party (the “Non-Exiting Party”), and:

(a) If the Non-Exiting Party agrees to the proposal of dissolution, the Company will be liquidated pursuant to Section 10.5; or

(b) If the Non-Exiting Party does not accept the proposal of dissolution, the Exiting Party shall have a put option to sell the Shares of the Company held by it to the Non-Exiting Party, and the Non-Exiting Party shall purchase such Shares from the Exiting Party. The price of the Shares to be sold by the Exiting Party hereunder (the “Exceptional Exit Price”) shall be equal to the product of the difference of (I) the Net Book Value of the Company Assets as of the last day of the Fiscal Month immediately prior to the date of the Exit Notice, minus (II) the Net Book Value of the Company Liabilities as of the last day of the Fiscal Month immediately prior to the date of the Exit Notice, divided by the number of Issued and outstanding Shares of the Company as of the last day of the Fiscal Month immediately prior to the date of the Exit Notice, multiplied by the number of Shares held by the Exiting Party as of the date of the closing of the purchase of the Shares under this Section 9.4.2(b) (the “Exceptional Exit Closing”). At the Exceptional Exit Closing, (i) the Exiting Party shall transfer its remaining Interest in the Company to the Non-Exiting Party, free and clear of any liens or encumbrances, (ii) the Non-Exiting Party shall pay the amount of all or part of the Exceptional Exit Price that the Non-Exiting Party will be required to pay upon the Exceptional Exit Closing to the Exiting Party by wire transfer of cash and (iii) the Exiting Party shall deliver to the Non-Exiting Party such instrument or instruments of conveyance as the Non-Exiting Party reasonably requests. The Non-Exiting Party agrees to apply for all applicable regulatory approvals or clearance within thirty (30) days after receipt of the Exit Notice from the Exiting Party. The Exceptional Exit Closing shall take place as soon as commercially practicable without any undue delay and shall be within three (3) Business Days after all applicable regulatory approvals and clearances have been obtained. The Exceptional Exit Price shall be paid by the Non-Exiting Party pursuant to the terms and conditions agreed to upon the exercise of the option set forth in this Section 9.4.2(b), but the Exceptional Exit Price shall be fully paid within seven (7) years from the exercise of such option. The Exiting Party 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 Exit 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 Exceptional Exit Closing (i.e., receipt of all necessary regulatory approvals and completion of the transfer of the Exiting Party’s Interest to the Non-Exiting Party but not including full payment of the Exceptional Exit Price) takes longer than sixty (60) days from the date of the Exit Notice, DNP and Photronics will agree on 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 Exit Notice.

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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:

(a) the election of all of the Shareholders;

(b) the order or judgment of competent Governmental Authority in accordance with the Acts or other Applicable Law;

(c) any Shareholder’s election, if the Company ceases operation for more than six (6) months due to Force Majeure;

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(d) the occurrence of any other event that, under the Acts or other Applicable Law, makes it unlawful, impossible or impractical to carry on the Business of the Company;

(e) the election by either Shareholder to dissolve and wind up the affairs of the Company upon (a) the occurrence of a bankruptcy of the Company, provided that the Shareholder making such election is not in default of any payment obligation to the Company or (b) the bankruptcy, dissolution or liquidation of a Shareholder, and further provided that, in either event, such election shall be made only after entry by the court presiding over the bankruptcy of an order granting relief from the automatic stay to make such election to the Shareholder making such election; or

(f) the election by a Shareholder to dissolve and wind up the affairs of the Company if the other undergoes a Change in Control, which election such electing Shareholder shall make in the event it purchases the Shares of Change in Control Party pursuant to Section 7.4.

To the fullest extent permitted by law, any dissolution of the Company 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

10.4.1 In the event that the accumulated losses of the Company exceed one-third (1/3) of the amount of the Scheduled Contribution, measured for a period of nine (9) consecutive months during the term of this Agreement (the “Measuring Period”), Photronics and DNP shall discuss in good faith and develop a plan (the “Recovery Plan”) by which certain measure(s) shall be carried out so as to recover such losses within a maximum period of twelve (12) months (the “Recovery Plan Period”), and thereafter:

(a) If Photronics and DNP agree on the Recovery Plan within ninety (90) days from the end of the Measuring Period (the “Recovery Discussion Period”), the parties shall cooperate to carry out such measure(s) as determined in the Recovery Plan, or

(b) If the Photronics and DNP do not agree on the Recovery Plan within the Recovery Discussion Period, a Shareholder whose Percentage Interests are more than fifty percent (50%) (the “Planning Party”) may carry out such measure(s) as determined in the Recovery Plan developed by the Planning Party.

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10.4.2 In the event that the accumulated losses of the Company are still exceeding one-third (1/3) of the amount of the Scheduled Contribution at the time of the expiration of the Recovery Plan Period from commencement of carrying out the Recovery Plan which is either agreed by the parties or developed by the Planning Party, Photronics and DNP shall repeat the procedure set forth in Section 10.4.1.

10.4.3 After the expiration of the initial five (5) year period from the Effective Date, if the accumulated losses of the Company exceed or are still exceeding one-third (1/3) of the amount of the Scheduled Contribution, a Shareholder whose Percentage Interests are less than fifty percent (50%) (the “Requesting Shareholder”) may request, by giving a not less than ninety (90) day written notice (the “Dissolution Notice”), the other party to agree to dissolve and liquidate the Company via a shareholder meeting conducted within ninety (90) days after receipt of such written notice, unless the Recovery Plan agreed by the parties is being carried out at the time of such request. Notwithstanding the above, the Requesting Shareholder is not entitled to give the Dissolution Notice during the period while the Recovery Plan agreed to between Photronics and DNP is being carried out. In the event that the other party (the “Remaining Shareholder”) does not agree to dissolve and liquidate the Company for any reason, the Requesting Shareholder may exercise a put option to sell all of its Shares to the Remaining Shareholder at the price equal to the Minority Closing Price by delivering a written notice, and the closing of such sale shall take place in accordance with the option procedures set forth in Sections 7.3.2 and 7.3.3. In the case of the closing of the purchase and sale of the Requesting Shareholder’s remaining Interest pursuant to this Section 10.4.3 (i.e., receipt of all necessary regulatory approvals and completion of the transfer of the Requesting Shareholder’s Interests to the Remaining Shareholder but not including full payment of the price therefor), the one-year period surviving after the termination set forth in Section 8.1 does not apply, and the parties will be immediately released from the non-compete obligations set forth therein upon the closing hereunder.

| 10.5 | Liquidation

10.5.1 Upon dissolution of the Company, the Liquidation Committee composed of the Shareholders shall be set up. The Liquidation Committee shall liquidate the Company Assets, and shall apply and distribute the proceeds thereof as follows unless otherwise provided by the Applicable Law:

(a) first, to (i) the payment of the obligations of the Company to third parties, including, but not limited to and on a pari passu basis, taxes, debts, lease and other payments to Persons other than Shareholders or their Affiliates; (ii) the expenses of liquidation; and (iii) the setting up of any reserves for contingencies, debts or liabilities to Persons other than the Shareholders or their Affiliates, whether the whereabouts of the creditor is known or unknown, which the Board of Directors may consider necessary;

(b) thereafter, amounts due to either Shareholder or their respective Affiliates (other than a Company Entity) pursuant to the relevant agreements entered into by them with the Company; and

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(c) thereafter, to the Shareholders in proportion to their Percentage Interests.

10.5.2 Notwithstanding Section 10.5.1 of this Agreement, in the event that the Board of Directors determines that an immediate sale of all or any portion of the Company Assets would cause undue loss to the Shareholders, the Board of Directors, in order to avoid such loss to the extent not then prohibited by the Acts, may either defer liquidation of and withhold from distribution for a reasonable time any Company Assets except those necessary to satisfy the Company’s debts and obligations, or, subject to Section 11.4, distribute the Company Assets to the Shareholders in kind (in accordance with the Applicable Law).

| 10.6 | Dissolution

Where the Requesting Shareholder is entitled to give the Dissolution Notice according to Section 10.4 but it does not give the Dissolution Notice within the Dissolution Notice Period, and the Remaining Shareholder thereafter desires to dissolve and liquidate the Company and notifies the Requesting Shareholder of the same within ninety (90) days from the expiration of the Dissolution Notice Period, the Requesting Shareholder shall agree to the Remaining Shareholder’s proposal to dissolve and liquidate 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):

(a) First, cash will be retained in the Company in an amount sufficient to fund the Company’s operations. Such amount will take into consideration other payments to third parties and payments of amounts due to either Shareholder or their respective Affiliates pursuant to the relevant agreements entered into by them with the Company; and

(b) Second, subject to the approval of the Board of Directors any excess cash remaining will be distributed to Shareholders pro rata based on their Percentage Interests at the time of such distribution in accordance with the Articles of Incorporation of the Company and the Acts or any distribution of the legal reserve or capital reserve under the Acts.

| 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.

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| 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 Supermajority Vote of Shareholders, the Board of Directors may determine (subject to the approval of the Supermajority Vote of Shareholders) to make a distribution in kind of Company Assets to the Shareholders, and such Company Assets shall be distributed in such fashion as to ensure that the fair market value thereof (as determined by the Board of Directors and approved by the Supermajority Vote of Shareholders) is distributed, and any items of gain or loss resulting from such distribution are allocated, in accordance with this Article 11 and Applicable Laws .

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| 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.

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| 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.

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12.7.4 Presumptions. No party, nor its counsel, shall be deemed the drafter of this Agreement for purposes of construing the provisions of this Agreement, and all provisions of this Agreement shall be construed in accordance with their fair meaning, and not strictly for or against any party.

12.7.5 A Party and the Other Party. If any provision of this Agreement (including any of Sections 9.2, 9.3, 12.9, 12.15, 12.17) mentions a party, on one hand, and the other party as a counterparty to such a party, on the other hand, Photronics and Photronics Singapore are regarded as one and the same party, and DNP and DNP Asia Pacific are regarded as one and the same party, unless the context of such provision otherwise requires.

| 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.

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| 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 senior executive officers of each of the parties for discussion and attempt at resolution in good faith among such senior executive officers. If within thirty (30) days (or such shorter time if emergency or exigent circumstances exist) of first raising the issue to the senior executive officers, the parties are unable to reach a mutually agreed resolution, then the parties hereby agree that such Dispute shall be submitted to China International Economic and Trade Arbitration Commission (“CIETAC”) for arbitration which shall be conducted in accordance with the CIETAC’s arbitration rules in effect at the time of applying for arbitration. 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 English with English speaking lawyer(s) and arbitrator(s), and that the number of arbitrator(s) required at such proceeding shall be: (a) one (1) arbitrator in the event that the disputed amount is less than 1,500,000 US Dollars, or (b) three (3) arbitrators in the event that the disputed amount is equal to or greater than 1,500,000 US Dollars.

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| 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.

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| 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)

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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

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Execution Version

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

| PHOTRONICS INC.
| By: |
| Name: Peter Kirlin
| Title: Chief Executive Officer
| PHOTRONICS SINGAPORE PTE, LTD.
| By: |
| Name: Richelle Burr
| Title: Authorized Representative
| DAI NIPPON PRINTING CO., LTD.
| By: | /s/ Mitsuru Tsuchiya
| Name: Mitsuru Tsuchiya
| Title: Corporate Officer & General Manager of Fine Optronics Operations
| DNP ASIA PACIFIC PTE. LTD.
| By: | /s/ Tsuneaki Miwa
| Name: Tsuneaki Miwa
| Title: President

JV Operating Agreement Signature Page

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SCHEDULES A-l and A-2

List of Transaction Documents

SCHEDULE A-l

Outsourcing Agreement

Amended and Restated License Agreement among DNP and PDMC

SCHEDULE A-2

Contribution Agreement

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SCHEDULE C

Shareholders and Percentage Interest
(as of completion of the Closing)

Shareholder | Percentage Interest
Photronics Singapore | 50.01%
DNP Asia Pacific | 49.99%
Addresses for Notices Purposes |
Photronics, Inc. 15 Secor Road Brookfield, CT 06804 Attn: General Counsel Tel: 203-775-9000 Fax: 203-775-5601 | Dai Nippon Printing Company, Ltd 1-1, Ichigaya Kagacho 1-chome Shinjuku-ku, Tokyo, Japan Attn: General Manager of Fine Electronics Operations Tel: +81-3-5225-8833 Fax: +81-3-5225-8899
Photronics Singapore Pte. Ltd. No. 33, Ubi Avenue 3 #03-09, Vertex Building Singapore 408868 Attn: Representative Director Tel: 203-775-5285 Fax: 203-775-5601 | DNP Asia Pacific Pte. Ltd. 4 Pandan Crescent, Singapore 128475 Attn: President Tel:+65-6361-2951 Fax: +65-6361-2979

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SCHEDULE D

Majority Board Control Items

1. Appoint Chairman

2. Appoint General Manager

3. Select, terminate or set compensation of Company management and employees

4. Approve Annual Budget

5. Approve budget for capital expenditures

6. Change the operating policies of the Company

7. Dispositions or acquisitions in the ordinary course of business

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SCHEDULE E

Insurance Policies At Closing

1. | Property Insurance: Coverage for “all risk” property insurance, insuring against physical damage on a replacement basis for assets, and insuring against resultant business interruption from insured physical damage on an actual-loss sustained basis. The property insurance limit must equal full replacement value of all physical property and one year business interruption insurance. Construction & Erection All Risks including Third Party Liability Insurance; Coverage for repair or replacement of PDMCX construction, installation of tolls from Company dock through installation (erection insurance) and liability limits of $10 million for the construction project.

2. | Transit Insurance (Cargo Insurance): Company will be included in Photronics Inc. global policy; Coverage for repair or replacement of capital equipment purchased by the JV during transit up to the invoiced amount for the equipment.

3. | Liability Insurance:

| ● | Local China Commercial general liability insurance, including but not limited to contractual liability, personal injury, completed operations, product liability and host liquor liability, coverage for bodily injury and property damage liability, with a limit of not less than CNY$6.9M (approx. US$ 1 million) for each loss occurrence and in the aggregate.

| ● | Automobile liability coverage for bodily injury and property damage liability with a limit of not less than US$1 million for any one accident, for owned, hired, and non-owned automobiles. (Currently covered under Photronics Inc. DIC Automobile Liability policy – a local China policy will be purchased after Closing when greater exposure exists).

| ● | Umbrella insurance – Company will be included in Photronics Inc. global policy; current amount of US$20 million per occurrence or in the aggregate.

4. | Workers Compensation & Employers Liability: As required by China.

5. | Directors & Officers Liability Coverage: Board of Directors will be included in Photronics Inc. global policy.

6. | Fiduciary Liability Coverage: Company will be included in Photronics Inc. global policy.

7. | Employers Practices Liability Coverage: Company will be included in Photronics Inc. global policy.

8. | Crime Coverage: Company will be included in Photronics Inc. global policy.

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SCHEDULE F

List of Actions Requiring A Supermajority Vote of Shareholders

The following actions of the Company also require a Supermajority Vote of Shareholders:

(a) make any alteration or amendment of the Articles of Incorporation of the Company, other than in respect of an amendment to increase the authorized capital of the Company by an aggregate amount up to the Capex Threshold as defined in Schedule G;

(b) effect a change of the business scope of the Company;

(c) sell, license or otherwise dispose of all or substantially all of the undertaking, or the assets of the Company, or sell, license or otherwise dispose of 50% or more of the undertaking, or the assets of the Company in any given year. It is understood that upon formation of the Company there will be no goodwill however if at anytime there exists goodwill in the Company as defined by GAAP then the sale, license, or disposal of all or substantially all of the goodwill in connection with the sale, license or disposal of the assets of the Company or the sale, license or disposal of 50% or more of the undertaking, goodwill or assets of the Company will require a Supermajority Vote of the Shareholders;

(d) approve any actions by Director(s) which competes with the Company;

(e) pass any resolution for the winding up or dissolution or liquidation of the Company or apply for the appointment of a receiver, manager or judicial manager or like officer; and

(f) subject to the exception set forth in clause (a) above, any other matters requiring resolution at the meetings of the Shareholders of the Company under the Applicable Law in the People’s Republic of China.

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SCHEDULE G

List of Actions Requiring A Supermajority Vote of Directors

The following actions of the Company also require a Supermajority Vote of Directors:

(a) make any alteration or amendment to the Articles of Incorporation of the Company, other than in respect of an amendment to increase the authorized capital of the Company by an aggregate amount up to the Capex Threshold as defined below;

(b) effect a change of the business scope of the Company;

(c) sell, license or otherwise dispose of all or substantially all of the undertaking, goodwill or the assets of the Company, or sell, license or otherwise dispose of 50% or more of the undertaking, goodwill or the assets of the Company in any given year;

(d) after the initial US$160,000,00 investment, an annual cash investment greater than $100,000,000 US Dollars (the “Capex Threshold”);

(e) approve any action(s) by Director(s) which competes with the Company;

(f) pass any resolution for the winding up or dissolution or liquidation of the Company or apply for the appointment of a receiver, manager or judicial manager or like officer; and

(g) Subject to the exception set forth in clause (a) above, and other than (1) capital increases and (2) the election of the Chairman of the Board, any other matters requiring resolution at the meetings of the Board of Directors of the Company under the Applicable Law in the People’s Republic of China.

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SCHEDULE H

Initial Business Plan

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SCHEDULE I

Form of Articles of Incorporation

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SCHEDULE J

Representative Funding Plan

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SCHEDULE K

Scoring Items for PDMCX Technology Partnership Proposals

1. | Pre-existing PoR and/or development status

- Identify specific case relevant to customer opportunity

2. | Technology acquisition cost, readiness and completeness

- Quote in US dollars through transfer and validation

- Specific status of proposed technology package for CJV and PDMC as needed

- Identification of missing components preventing CJV/PDMC from turnkey solution

3. | Technology implementation schedule and usage constraints

- Schedule by quarter for full transfer and validation

4. | Technology warranty, maintenance, CIP

- Obligation in event technology does not perform as specified after installation

- Ongoing maintenance cost

- Ongoing upgrade cost

5. | Special customer constraints

- Identification of tangible customer conditions favoring one partner

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SCHEDULE L

Competitors

Hoya Corporation

Toppan Printing

The Advanced Mask Tech Center GmbH Co KG

Taiwan Mask Corporation

Compugraphics USA

CRmicro Mask

ZWmask

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