Exhibit 10.1

 

MEMORANDUM OF UNDERSTANDING

 

The undersigned parties to this action (“Action”) now pending in Travis County,
Texas, District Court have reached an agreement in principle providing for the
settlement of the Action on the terms and subject to the conditions set forth
below.

 

WHEREAS, on October 5, 2004, DuPont Photomasks, Inc. (“DPMI” or the “Company”),
agreed to be acquired by Toppan Printing Co., Ltd.. (“Toppan”) for $27.00 in
cash for each share of DPMI common stock (the “Acquisition”);

 

WHEREAS, thereafter plaintiff’s counsel reviewed DPMI’s public filings as well
as media and analyst reports regarding DPMI and the Acquisition, and on or about
October 9, 2004, filed Carpenter v. Dupont Photomasks, Inc., et al., Travis
County District Court Cause No. GN 403201, as putative class action on behalf of
holders of DPMI common stock naming as defendants the Company and its Board of
Directors including Preston M. Adcox, Isabella C. M. Cunningham, Susan
Vladuchick Sam, Robert J. Boehlke, Kevin P. Hegarty, E. James Prendergast, John
C. Sargent, William T. Siegle, and Marshall C. Turner (collectively,
“Defendants”);

 

WHEREAS, plaintiff alleges that the Acquisition constitutes a breach of the
fiduciary duties owed to the class by the Defendants;

 

WHEREAS, on or about November 8 and 12, 2004, and March 9, 2005, Defendants
filed and served their Answers to plaintiff’s Complaint, as well as Special
Exceptions thereto, denying the allegations in Plaintiff’s Original Petition and
alleging that plaintiff has failed to state a valid cause of action;

 

WHEREAS, on or about November 1, 2004, DPMI filed with the Securities and
Exchange Commission (“SEC”) a Preliminary Merger Proxy Statement setting forth
information

 

--------------------------------------------------------------------------------

 

concerning the Acquisition, which counsel for plaintiff reviewed and analyzed
along with other public filings and media and analyst reports regarding the
Acquisition;

 

WHEREAS, on or about December 23, 2004, plaintiff served a First Request for
Production of Documents seeking documents concerning the Acquisition and related
materials, and contemporaneously therewith the parties met and conferred
regarding the appropriate scope of a confidentiality agreement;

 

WHEREAS, beginning on January 11, 2005, after agreeing on the scope of the
initial document production and without waiving the right to compel or contest
additional responsive documents, Defendants produced to plaintiff hundreds of
pages of confidential Company documents in response to plaintiff’s First Request
for Production of Documents, including Board minutes and presentations by Credit
Suisse First Boston LLC (“CSFB”), the investment banker hired by Defendants in
connection with the Acquisition, which plaintiff’s counsel subsequently
reviewed;

 

WHEREAS, on or about January 28, 2005, Defendants served their objections and
responses to plaintiff’s First Request for Production of Documents;

 

WHEREAS, on February 28, 2005, Defendants filed the Definitive Merger Proxy
Statement related to the Acquisition

 

WHEREAS, between October 2004 and March 2005, after a detailed investigation and
review of the Preliminary Merger Proxy Statement and thousands of pages of
public filings and analyst and media reports, as well as hundreds of pages of
documents produced by Defendants, the parties participated in negotiations which
have lead DPMI to make certain additional disclosures relating to the
Acquisition that were included in the Definitive Merger Proxy Statement as
detailed herein;

 

--------------------------------------------------------------------------------

 

WHEREAS, plaintiff and his counsel have determined that the settlement of the
Action on the terms reflected in this Memorandum of Understanding (“MOU”) is
fair, reasonable, and adequate and in the best interest of DPMI’s stockholders;

 

WHEREAS, Defendants deny the allegations and all other charges of wrongdoing or
liability arising out of any conduct, statements, acts or omissions relating to
the Acquisition that were or could be alleged in the Action, and Defendants
continue to believe that the Acquisition is in the best interests of DPMI’s
shareholders; and

 

WHEREAS, notwithstanding their belief that the allegations are without merit,
Defendants have concluded that, in the interest of expediency, it is desirable
that the claims against them be settled on the terms reflected in this MOU, and
agreed solely in the context of settlement to make certain additional
disclosures in the Definitive Merger Proxy Statement filed with the SEC and
disseminated to DPMI shareholders.

 

NOW, THEREFORE, following discussions among counsel, there have been
negotiations between the parties which have resulted in their reaching an
agreement in principle providing for the settlement of the Action between and
among plaintiff, for himself and the class of persons on behalf of whom the
Action was brought, and Defendants on the terms and conditions set forth below
(the “Settlement”).

 

1.             Plaintiff contends that the Preliminary Merger Proxy Statement
omitted certain material information relating to DPMI and the Acquisition. 
While specifically disputing and without admitting such claims, DPMI agreed to
make certain additional disclosures in the Definitive Merger Proxy Statement
filed with the SEC and disseminated to the DPMI shareholders, some of which were
updates necessary to reflect the passage of time since the filing of the
Preliminary Proxy Statement and some of which were made in recognition of the

 

--------------------------------------------------------------------------------

 

prosecution of the Action, and the extensive discussions between counsel for
plaintiff and counsel for Defendants.  The supplemental disclosures agreed to as
part of the Settlement that were contained in the Definitive Merger Proxy are,
inter alia:

 

(a)           When Marshall Turner entered into an employment contract with the
post-Acquisition entity and the timing of the discussions about that contract;

 

(b)           A statement that the options granted to the Company’s non-employee
directors in November, 2004 were consistent with the terms of the applicable
stock option plan;

 

(c)           More detail regarding the reasons why the Company decided not to
conduct a “market check” prior to entering into the exclusivity agreement with
Toppan.

 

(d)           More detail about the past investment banking services CSFB has
performed for DPMI.

 

Plaintiff also made a request for information and a potential disclosure
regarding other indications of interest after the announcement of the
Acquisition in October 2004 and other contracts between DPMI employees and the
post-Acquisition entity.  DPMI received this request.  No other contracts
between DPMI employees and the post-Acquisition entity existed on November 1,
2004 when DPMI filed with the SEC the Preliminary Merger Proxy Statement, and no
other indications of interest had been received by DPMI.  However, as of the
time the Definitive Merger Proxy was filed and mailed to DPMI shareholders, no
other indications of interest had been received by DPMI, and three other DPMI
employees had entered into contracts with the post-Acquisition entity.  The
Definitive Merger Proxy disclosed this additional information.

 

--------------------------------------------------------------------------------

 

2.             The parties to the Action will attempt in good faith to agree
upon and execute an appropriate Stipulation of Settlement (the “Stipulation”)
and such other documentation as may be required to obtain final Court approval
of the Settlement and the dismissal of the Action upon the terms outlined in
this MOU (collectively, the “Settlement Documents”).  The Stipulation will
expressly provide, inter alia, (i) for the certification as a class for
settlement purposes of all persons who held DPMI stock between October 5, 2004
through and including the completion of the Acquisition, and their successors in
interest and transferees (“Settlement Class”) under Texas Rule of Civil
Procedure 42(b)(2); (ii) for entry of a judgment of dismissal with prejudice;
and (iii) for a release and settlement of all known and unknown claims for
damages, injunctive relief, or any other remedies against Defendants and their
respective predecessors, successors, parents, subsidiaries, affiliates and
agents (including, without limitation, any investment bankers, accountants,
insurers, reinsurers or attorneys and any past, present or future officers,
directors and employees of DPMI, their predecessors, successors, parents,
subsidiaries, affiliates, agents, and their subsidiaries, affiliates and agents)
which have been or could have been asserted by any member of the proposed
Settlement Class, including class, derivative, individual or other claims, in
state or federal court or in arbitration or similar proceedings, based upon,
arising from, or related to any matter discussed in the Definitive Merger Proxy
Statement or any disclosure related thereto or the actual or alleged acts or
omissions of Defendants relating to the Acquisition, including, without
limitation, any allegations of misrepresentations and/or omissions in the
Definitive Merger Proxy Statement, exhibits thereto, or other disclosure related
thereto, or any matter that could have been asserted in the Action (regardless
of its forum) regarding breach of fiduciary duty or other duty imposed by law
relating to any alleged failure to disclose material facts, inadequate
investigation, valuation, conflict of interest, the fairness of the

 

--------------------------------------------------------------------------------

 

transaction, both substantively and procedurally, or other breach of the duty of
care, duty of loyalty, or duty of good faith and fair dealing (the “Released
Claims”).  The Stipulation shall include a waiver of the provisions of
California Civil Code §1542 and any similar provision of the law of any other
jurisdiction.  Plaintiff and his counsel represent that they are not aware of
any alleged breaches of fiduciary duty concerning any other DPMI filings or
press releases beyond those alleged in the Action.  The Stipulation will further
provide that Defendants have denied and continue to deny that they have
committed or attempted to commit any violations of law or breached any duty owed
to DPMI or its stockholders or otherwise.  The parties shall in good faith
attempt to present to the Court a motion for preliminary approval promptly
following the date on which the Acquisition is consummated.  Pending final
approval of this Settlement, plaintiff and his counsel shall not prosecute the
Action.  The parties contemplate that confirmatory discovery, including the
review of thousands of pages of additional documents and two (2) depositions,
will be conducted in connection with the Settlement and they agree to cooperate
with regard to the scope and timing of such discovery.

 

3.             Any notice of the proposed Settlement as well as a description of
the supplemental disclosures related to the Acquisition that are necessary to
effect a final settlement for approval by the Court shall be provided at
Defendants’ expense.  The parties shall set forth the manner in which the notice
requirement shall be satisfied in the Stipulation.

 

4.             The Settlement is subject to: (a) the drafting and execution of
the Settlement Documents; (b) final Court approval of the Settlement and
dismissal of the Action with prejudice and without awarding costs to any party
(except as provided in ¶5 below); and (c) consummation of the Acquisition.  As
employed in this MOU, “final Court approval of the Settlement” means the Court
has entered an order approving the Settlement in accordance with the Settlement

 

--------------------------------------------------------------------------------

 

Documents, and that order is finally affirmed on appeal or is no longer subject
to appeal.  This MOU (including the recitals set forth above) shall be null and
void and of no force and effect should any of these conditions not be met and,
in that event, this MOU shall neither be deemed to prejudice in any way the
positions of the parties with respect to the Action nor entitle any party to
recover any costs or expenses incurred in connection with the implementation of
the MOU.

 

5.             After agreeing to take the actions set forth above, Defendants
and plaintiff negotiated the attorneys’ fees that DPMI would pay to plaintiff’s
counsel.  As part of the Settlement, DPMI has agreed that it shall pay the sum
of $299,000.00 to plaintiff’s counsel for their fees and reimbursement of
expenses and costs.  Such fees and expenses shall be paid by DPMI within
fourteen (14) days of the entry of an order by the District Court finally
approving the Settlement on the terms contained in the Settlement Documents,
even if such order may be subject to appeal.  In the event that the District
Court’s order is reversed or modified on appeal, plaintiff’s counsel shall
refund to DPMI (or the post-Acquisition entity) the advanced amount and all
interest accrued or accumulated thereon consistent with such reversal or
modification.  Interest shall be equal to the published rate identified as the
“3-Month Treasury bill.  In addition to any other rights or remedies provided by
law, DMPI or the post-Acquisition entity may recover all attorneys fees and
costs expended to enforce the terms of this paragraph.

 

6.             While retaining their right to deny liability, the Action is
being settled voluntarily by the parties after consultation with competent legal
counsel.  The releases between the parties will include releases of all counsel
in the Action.

 

7.             Plaintiff and his counsel agree to not issue any press releases
or directly or indirectly make or cause to be made any public statements
(including disclosures on any website)

 

--------------------------------------------------------------------------------

 

regarding the existence or terms of the Settlement, unless necessary to complete
the Settlement or is otherwise required by law.  Plaintiff and his counsel
acknowledge and agree that DPMI may disclose the existence and terms of the
Settlement and this MOU in any SEC filings, press releases, notices or other
public statements as DPMI determines are necessary or appropriate in light of
its obligations under applicable securities laws and listing requirements.

 

8.             This MOU may be modified or amended only by a writing signed by
all of the signatories hereto.

 

9.             The plaintiff and his counsel represent and warrant that none of
plaintiff’s claims or causes of action referred to in this MOU or that could
have been alleged in the Action have been assigned, encumbered or in any manner
transferred in whole or in part.

 

10.           Except as otherwise provided herein, this MOU shall be binding
upon and shall inure to the benefit of the parties and their respective agents,
successors, executors, heirs and assigns.

 

11.           By signing this MOU, plaintiff’s counsel represent and warrant
that the named plaintiff is a stockholder of DPMI.

 

12.           This MOU may be executed in counterparts by any of the signatories
hereto, including by telecopier, and as so executed shall constitute one
agreement.

 

13.           Each of the attorneys executing this MOU on behalf of his/her
respective client(s) hereby represents and warrants that they have full
authority to do so.

 

14.           The parties agree to take all reasonable and necessary steps to
expeditiously implement the terms of this MOU and to complete the Settlement.

 

Signed this 1st day of April, 2005.

 

--------------------------------------------------------------------------------

 

 

COUNSEL FOR JAY CARPENTER, PLAINTIFF
ON BEHALF OF HIMSELF AND THE CLASS

 

 

 

 

 

/s/ Rick Atwood

 

 

By: Rick Atwood

 

 

 

 

 

DUPONT PHOTOMASKS, INC.

 

 

 

 

 

 

/s/ Marshall Turner

 

 

By:

Marshall Turner, Chairman and Chief

 

 

Executive Officer of DuPont Photomasks, Inc.

 

--------------------------------------------------------------------------------