Document:

Exhibit 10.12

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of February 20, 2003 by and between Photronics, Inc., a Connecticut corporation (the "Company"), having a principal place of business at 1061 East Indiantown Road, Jupiter, Florida 33477 and Sean T. Smith ("Executive") residing at 60 Whitney Ridge Terrace, North Haven, Connecticut, 06473.

WITNESSETH:

WHEREAS, the Company and Executive desire to enter into this Agreement to assure the Company of the continuing service of Executive and to set forth the terms and conditions of Executive's employment with the Company.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties agree as follows:

1. Term. The Company agrees to employ Executive and Executive hereby accepts such employment, in accordance with the terms of this Agreement. Subject to Section 5, the term of Executive's employment shall commence on the date hereof and continue for three (3) years thereafter unless this Agreement is earlier terminated as provided herein (the "Term"); provided, however, that unless the Company gives written notice to Executive at least thirty (30) days prior to the end of the Term of this Agreement (as the Term may be extended pursuant to this Section 1), on each anniversary of the date hereof, the Term of this Agreement shall automatically be extended for an additional one (1) year period.

2. Services. So long as this Agreement shall continue in effect, Executive shall devote Executive's full business time, energy and ability to the business, affairs and interests of the Company and its subsidiaries and matters related thereto. Executive shall use his best efforts and abilities to promote the Company's interests and shall perform faithfully the services contemplated by this Agreement in accordance with the Company's policies as established by the Board of Directors of the Company.

3. Duties and Responsibilities.

(a) Executive shall serve as the Vice President, Chief Financial Officer of the Company. In the performance of Executive's duties, Executive shall report directly to the CEO and shall have such duties, responsibilities and authority as may from time to time be assigned to the Executive by the CEO.

(b) In addition, Executive agrees to observe and comply with the policies, rules and regulations of the Company. The Company agrees that the duties which may be assigned to Executive shall be the customary duties of the office of Vice President, Chief Financial Officer and shall not be inconsistent with the provisions of the charter documents of the Company or applicable law.

4. Compensation.

(a) Base Compensation. During the Term, the Company agrees to pay Executive a base salary at the rate of $210,000 per year payable in accordance with the Company's customary payroll practices generally applicable to similarly situated employees as may be in effect from time to time (the "Base Salary"). All payments required hereunder, including the payments required by this Section 4(a), may be allocated by the Company to one or more of its subsidiaries to which Executive renders services but the Company shall remain responsible for all payments hereunder and Executive shall have no obligation to seek payment from such subsidiaries.

(b) Periodic Review. The Compensation Committee or the Board of Directors of the Company shall review Executive's Base Salary and Benefits (as defined below) from time to time in accordance with the normal business practices of the Company. The Company may in its sole discretion increase the Base Salary during the Term. The amount of any increase combined with the previous year's Base Salary shall then constitute Executive's Base Salary for purposes of this Agreement.

(c) Additional Benefits. During the Term, the Executive shall be entitled to participate in the employee benefit plans and arrangements as the Company may establish from time to time in which other employees similarly situated are entitled to participate (which may include, without limitation, bonus plan(s), medical plan, dental plan, disability plan, basic life insurance and business travel accident insurance plan, 401(k) plan, stock option or stock purchase plans or any successor plans thereto (the "Benefits")). The Company shall have the right to terminate or change any such plans or programs at any time.

(d) Automobile Allowance. During the Term of this Agreement, the Company shall provide the Executive with an automobile allowance or company car consistent with the Company's policies and provisions applicable to other similarly situated executives of the Company.

(e) Vacation. During the Term of this Agreement, Executive shall be entitled to four (4) weeks' paid vacation per calendar year, which shall not be transferable to any subsequent year.

5. Termination. This Agreement and all rights and obligations hereunder, except the rights and obligations contained in this Section 5, Section 7 (Confidential Information), Section 8 (Non-Competition), Section 9 (Intellectual Property) and Section 10 (Remedies), which shall survive any termination hereunder, shall terminate upon the earliest to occur of any of the following:

(a) Resignation without Good Reason; Retirement. Upon the resignation by Executive without Good Reason (as defined below) following at least thirty (30) days written notice to the Company or retirement from the Company in accordance with the normal retirement policies of the Company, Executive shall be entitled to receive a payment in the amount of the sum of (A) Executive's Base Salary through the date of termination to the extent not theretofore paid, (B) any compensation previously deferred by Executive (together with any accrued interest or earnings thereon), and (C) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (A), (B) and (C) shall be hereinafter referred to as the "Accrued Obligations"), in a lump sum, subject to statutory deductions and withholdings, in cash within ten (10) business days after the date of termination or any earlier time required by applicable law.

(b) Death or Disability of Executive.

(i) If Executive's employment is terminated by reason of Executive's death or disability, this Agreement shall terminate without further obligations to Executive (or Executive's heirs or legal representatives) under this Agreement, other than for:

(1) Payment of any Accrued Obligations, which shall be paid to Executive or Executive's estate or beneficiary, as applicable, in a lump sum, subject to statutory deductions and withholdings, in cash within ten (10) business days after the date of termination or any earlier time required by applicable law.

(2) Payment to Executive or Executive's estate or beneficiary, as applicable, of any amount accrued pursuant to the terms of any other applicable benefit plan.

(ii) If Executive shall become disabled, Executive's employment may be terminated only by written notice from the Company to Executive.

(iii) For the purposes of this Agreement, "disability" or "disabled" shall mean a mental or physical incapacity which prevents Executive from performing Executive's duties with the Company for a period of three hundred sixty (360) consecutive calendar days, as certified by a physician selected by the Company or its insurers.

(c) Termination for Cause.

(i) The Company may terminate Executive's employment and all of Executive's rights to receive Base Salary, and any Benefits hereunder for Cause.

(ii) Upon such termination for Cause, Executive shall be entitled to receive any Accrued Obligations, which shall be paid to Executive in a lump sum, subject to statutory deductions and withholdings, in cash within ten (10) business days after the date of termination or any earlier time required by applicable law.

(iii) For purposes of this Agreement, the term "Cause" shall be defined as any of the following

(1) Executive's material breach of any of any obligations under this Agreement (other than by reason of physical or mental illness, injury, or condition);

(2) Executive's conviction by, or entry of a plea of "guilty" or "nolo contendere" in a court of competent and final jurisdiction for any felony that impairs his ability to perform his duties to the Company or any crime of moral turpitude;

(3) Executive's commission of an act of fraud upon the Company;

(4) Executive's engaging in willful or reckless misconduct or gross negligence in connection with any property or activity of the Company or its Affiliates;

(5) Executive's repeated and intemperate use of alcohol or illegal drugs after written notice from the Board or Directors;

(6) Executive's material breach of any other material obligation to the Company (other than by reason of physical or mental illness, injury, or condition) that is or could reasonably be expected to result in material harm to the Company;

(7) Executive's becoming insolvent or filing for bankruptcy;

(8) Executive's becoming barred or prohibited by the SEC from holding my position with the Company; or

(9) Executive's violation of any duty of loyalty (i.e., engaging in self-interested transactions, misappropriation of business opportunities that belong to the Company, or a breach of Executive's fiduciary duties to the Company).

(d) Termination Without Cause; Resignation For Good Reason.

(i) Notwithstanding any other provision of this Section 5, (i) the Company, upon thirty (30) days advance notice to Executive, shall have the right to terminate Executive's employment with the Company without Cause at any time, including, without limitation, in connection expiration of the Term and (ii) Executive, upon thirty (30) days advance notice to the Company, shall have the right to resign for Good Reason.

(ii) If Executive is so terminated without Cause or resigns for Good Reason, Executive shall receive from the Company:

(1) Any Accrued Obligations through the date of termination, which shall be paid to Executive in a lump sum, subject to statutory deductions and withholdings, in cash within ten (10) business days after the date of termination or any earlier time required by applicable law.

(2) A payment ("Severance Payment") equal to twelve (12) months of Executive's current Base Salary. The Severance Payment shall be paid by the Company to Executive in equal installments in accordance with the Company's customary payroll practices generally applicable to similarly situated employees as may be in effect from time and shall be subject to statutory deductions and withholdings.

(3) To the extent permitted by applicable law and the terms of the plans, the continuation of medical and dental plan benefits for a period of three hundred sixty (360) days ("Benefit Period"), provided that Executive shall be required to make all required contributions to such plans as Executive did prior to the date of termination date. Subsequent to the Benefit Period, Executive will be eligible to continue medical insurance coverage for any remaining period required under COBRA.

(iii) As used in this Agreement, the term "Good Reason" shall mean (i) (except as set forth in Section 5(e)) the relocation of the Company's principal executive offices to a location outside the contiguous 48 United States without the consent of Executive or (ii) any reduction in salary or benefits contrary to this Agreement, without the consent of Executive.

(iv) As a condition to receiving the payment and benefits extension contemplated by this Section 5(d), Executive agrees to execute and deliver to the Company the Release substantially in the form attached to this Agreement as Exhibit A.

(e) Change of Control.

(i) For purposes of the Agreement, a "change of control" means, and shall be deemed to have taken place, if;

(1) any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity or person, or any syndicate or group deemed to be a person under Section 14 (d) (2) of the Exchange Act, is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities entitled to vote in the election of directors of the Company;

(2) during any period of two (2) consecutive years (not including any period prior to the execution of this Agreement) individuals who at the beginning of such period constituted the Board and any new directors, whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least three-fourths (3/4ths) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board;

(3) there occurs a reorganization, merger, consolidation or other corporate transaction involving the Company (a "Transaction"), and shareholders of the Company immediately prior to such Transaction do not, immediately after the Transaction, own more than 50% of the combined voting power of the Company or other corporation resulting from such Transaction; or

(4) there is a "change in control" of the Company within the meaning of Section 280G of the U.S. Federal internal revenue code of 1986.

(ii) For the purposes of this Section 5(e), the term "Good Reason" shall mean the relocation of the Company's principal executive offices to a location which is more than fifty (50) miles from its then-current location without the consent of Executive.

(iii) In the event Executive is terminated by the Company for any reason (other than for Cause as defined in Section 5(c) thereof, but including a resignation for Good Reason as defined in Section 5(e)(ii)), during the period three (3) months before or two (2) years following a "change in control" of the Company (or any successor), Executive shall be entitled to receive a cash payment equal to eighteen (18) months of Executive's current Base Salary and the benefits described in Section 5(d)(iii) of the Agreement. Upon such "change of control" during the Term, the Term of this Agreement shall automatically be the period equal to the longer of (i) two (2) years from the date of the "change of control" or (ii) the remaining period of the initial three (3) year Term after the "change of control". In no event shall Executive be entitled to receive both the Severance Payment described in Section 5(d) hereof and the "change of control" payment described in this Section 5(e).

(iv) Any payments to be made to Executive in connection with this Section 5(e) shall be made in a lump sum, subject to statutory deductions and withholdings, in cash within ten (10) business days after the date of termination or any earlier time required by applicable law.

(f) Tax Consideration.

(i) In the event that the aggregate of all payments or benefits made or provided to the Executive under this Agreement and under all other plans and programs of the Company (the "Aggregate Payment") is determined to constitute a Parachute Payment, as such term is defined in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code"), the Company shall pay to the Executive an additional amount (the "Gross-Up Amount"), prior to the time any excise tax ("Excise Tax") is imposed by Section 4999 of the Code is payable with respect to such Aggregate Payment, which, after the imposition of all excise, federal, state and local income taxes, enables the Executive to retain a total amount equal to the Aggregate Payment prior to the payment of the Gross-Up Amount. Notwithstanding the foregoing, if it shall be determined that the Executive is entitled to receive the Gross-Up Amount, but the portion of the Aggregate Payment that would be treated as a Parachute Payment does not exceed 125% of the greatest amount that could be paid to the Executive such that the receipt of the Aggregate Payment would not give rise to any Excise Tax (the "Safe Harbor Amount"), then no Gross-Up Amount shall be paid to the Executive and the Aggregate Payment shall be reduced to the Safe Harbor Amount.

(ii) All determinations required to be made under this Section 5(f), including whether the Aggregate Payment constitutes a Parachute Payment, the amount of the Gross-Up Amount to be paid to the Executive, if any, and the determination of the Safe Harbor Amount, if applicable, shall be made in good faith by the by the Company's regular outside auditors (the "Accounting Firm"); provided, however, that such Accounting Firm presents its rationale and supporting calculations to the Executive upon his request and shall in good faith work to resolve any discrepancies raised by accountants or lawyers chosen by the Executive who present reasonable critiques of the determination. If a dispute over the methodology or conclusions of the Accounting Firm cannot be resolved between the parties, an impartial accounting firm shall be consulted to resolve the dispute. All fees and expenses of the Accounting Firm incurred in connection with the retention of the Accounting Firm pursuant to this Section 5(f) shall be borne by the Company. All fees and expenses of the accountants and lawyers chosen by the Executive and, if retained, the additional accounting firm, incurred in connection with the resolution of any disputes pursuant to this Section 5(f) shall be borne by the non-prevailing party.

(iii) As a result of uncertainty in the application of Sections 280G and 4999 of the Code at the time of the determination by the Accounting Firm, the parties hereto acknowledge and agree that it is possible that the Company will have paid a Gross-Up Amount that exceeds the amount that the Company should have paid pursuant to this Section 5(f) (the "Overpayment") or that the Company will have paid a Gross-Up Amount that is less than the amount that the Company should have paid pursuant to this Section 5(f) (the "Underpayment"). In the event the Accounting Firm, in a written opinion delivered to the Company and to the Executive, determines that, based upon the assertion of a deficiency by the Internal Revenue Service against the Executive, which the Accounting Firm believes has a high probability of success, an Overpayment has been made, then any such Overpayment shall, to the extent permitted under applicable law (including Section 402 of the Sarbanes-Oxley Act of 2002), be treated for all purposes as a loan to the Executive which the Executive shall promptly repay to the Company together with interest at the Applicable Federal Rate provided for in Section 7872(f)(2) of the Code; provided, however, the Executive may contest any such determination by the Accounting Firm at his own expense. In the event the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive together with interest at the Applicable Federal Rate provided for in Section 7872(f)(2) of the Code.

(g) Treatment of Stock Options Upon a Termination.

(i) If this Agreement is terminated pursuant to clause (e) of this Section 5, all stock options or similar rights granted to Executive pursuant to the Company's stock option plans shall immediately vest as of the date of termination and Executive may exercise any such vested stock options for a period of 390 days following such termination, but in no event later than ten (10) years after grant.

(ii) If this Agreement is terminated pursuant to clause (c) of this Section 5, all stock options granted to Executive pursuant to the Company's stock plans shall terminate immediately.

To the extent that the Executive has been granted stock options intended to be incentive stock options under Section 422 of the Internal Revenue Code, such stock options shall cease to be incentive stock options and shall be treated as nonqualified stock options if the options are exercised by the Employee more than three (3) months (one year in case of death or disability as defined in Section 422 of the Internal Revenue Code) following termination of employment.

Except as expressly modified by this clause (g) of this Section 5, all stock options and similar rights granted under the Company's stock plans shall remain subject to all of the terms and conditions of the applicable stock plans and agreements evidencing the grants thereof.

(h) Status of Executive During Exclusivity Period. If this Agreement is terminated pursuant to clauses (a), (b), or (d) of this Section 5, during Executive's Exclusivity Period the Executive shall be deemed and treated as an employee of the Company for the purposes of all payroll, benefits, welfare and stock option plans.

(i) Exclusive Remedy. Executive agrees that the payments other benefits provided and contemplated by this Agreement shall constitute the sole and exclusive obligation of the Company in respect of Executive's employment with and relationship to the Company and that the full payment thereof shall be the sole and exclusive remedy for any termination of Executive's employment. Executive covenants not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment.

6. Business Expenses. During the Term of this Agreement, to the extent that such expenditures satisfy the criteria under the Internal Revenue Code or other applicable laws for deductibility by the Company (whether or not fully deductible by the Company) for federal income tax purposes as ordinary and necessary business expenses, the Company shall provide the Executive with reimbursement of reasonable business expenses incurred by the Executive while conducting Company business in a manner consistent with the Company's policies and provisions applicable to the Executives of the Company.

7. Confidential Information.

(a) Executive acknowledges that the nature of Executive's employment by the Company is such that Executive shall have access to information of a confidential and/or trade secret nature which has great value to the Company and which constitutes a substantial basis and foundation upon which the business of the Company is based. Such information includes (A) trade secrets, inventions, mask works, ideas, processes, manufacturing, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments or experimental work, designs, and techniques; (B) information regarding plans for research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; (C) information regarding the skills and compensation of other employees the Company or its affiliates, including but not limited to, their respective business plans or clients (including, without limitation, customer lists and lists of customer sources), or information relating to the products, services, customers, sales or business affairs of the Company or its Affiliates (the "Confidential Information").

(b) Executive shall keep all such Confidential Information in confidence during the Term of this Agreement and at any time thereafter and shall not disclose any of such Confidential Information to any other person, except to the extent such disclosure is (i) necessary to the performance of this Agreement and in furtherance of the Company's best interests, (ii) required by applicable law, (iii) lawfully obtainable from other sources, or (iv) authorized in writing by the Board. Upon termination of Executive's employment with the Company, Executive shall deliver to the Company all documents, records, notebooks, work papers, and all similar material containing any of the foregoing information, whether prepared by Executive, the Company or anyone else.

8. Non-Competition. Executive covenants and agrees that commencing on the date hereof and continuing for the entire Term of Executive's employment and for period of twelve (12) months thereafter (the "Exclusivity Period"), Executive shall not, and shall cause each of its affiliates (if applicable) not to:

(a) Acquire any controlling ownership interest in or engage, directly or indirectly, for themselves or as agent, consultant, employee or otherwise, in any business which is competitive with or damaging to the business of the Company or any subsidiary of the Company, whether such business is now owned or hereafter organized or acquired;

(b) Undertake the planning for or organization of, directly or indirectly, alone or in combination with any person or entity any business activity which is competitive with or damaging to the business of the Company or any subsidiary of the Company;

(c) Solicit, attempt to solicit, or assist others in soliciting or attempting to solicit, directly or indirectly, any business related to the business of the Company from any customers or prospective customers of the Company; for the purposes of this Section 8, the term "customer" means any entity or person who is or has been a client or customer of the Company during the time which Executive was employed with the Company, and the term "prospective customer" means a person or entity who became known to the Company during the time which Executive was employed with the Company as a result of that person's or entity's interest in obtaining the services or products of the Company; and

(d) Solicit, attempt to solicit,or assist others in soliciting or attempting to solicit, directly or indirectly, for employment or any similar capacity, any person who is an employee of, or an independent contractor for, the Company or its direct or indirect subsidiaries, parents or Affiliates or who was such an employee within twelve (12) months prior to the date of such solicitation or attempted solicitation.

(e) Executive acknowledges that in the event of his employment with the Company terminates for any reason, Executive will be able to earn a livelihood without violating the foregoing restrictions.

(f) If any provision or clause, or portion thereof, within this Section 8 shall be held by any court or other tribunal of competent jurisdiction to be illegal, invalid, or unenforceable in such jurisdiction, the remainder of such provision shall not be thereby affected and shall be given full effect, without regard to the invalid portion. It is the intention of the parties that, if any court construes any provision or clause within this Section 8, or any portion thereof, to be illegal, void or unenforceable because of the duration of such provision or the geographic area or matter covered thereby, such court shall reduce the duration, area, or matter of such provision, and, in its reduced form, such provision shall then be enforceable and shall be enforced.

9. Intellectual Property.

(a) Executive has no interest (except as disclosed to the Company) in any inventions, designs, improvements, patents, copyrights and discoveries which are useful in or directly or indirectly related to the business of the Company or to any experimental work carried on by the Company. Except as may be limited by applicable law, all inventions, designs, improvements, patents, copyrights and discoveries conceived by Executive during the Term of this Agreement which are useful in or directly or indirectly related to the business of the Company or to any experimental work carried on by the Company, shall be the property of the Company. Executive will promptly and fully disclose to the Company all such inventions, designs, improvements, patents, copyrights and discoveries (whether developed individually or with other persons) and will take all steps necessary and reasonably required to assure the Company's ownership thereof and to assist the Company in protecting or defending the Company's proprietary rights therein.

(b) Executive also agrees to assist the Company in obtaining United States or foreign letters patent and copyright registrations covering inventions assigned hereunder to the Company and that Executive's obligation to assist the Company shall continue beyond the termination of Executive's employment but the Company shall compensate Executive at a reasonable rate for time actually spent by Executive at the Company's request with respect to such assistance. If the Company is unable because of Executive's mental or physical incapacity or for any other reason to secure Executive's signature to apply for or to pursue any application for any United States or foreign letters patent or copyright registrations covering inventions assigned to the Company, then Executive hereby irrevocably designates and appoints the Company, each of its duly authorized officers and agents as Executive's agent and attorney-in-fact to act for and in Executive's behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by Executive. Executive will further assist the Company in every way to enforce any copyrights or patents obtained including, without limitation, testifying in any suit or proceeding involving any of the copyrights or patents or executing any documents deemed necessary by the Company, all without further consideration but at the expense of the Company. If Executive is called upon to render such assistance after the termination of Executive's employment, then Executive shall be entitled to a fair and reasonable per diem fee in addition to reimbursement of any expenses incurred at the request of the Company.

10. Remedies. The parties hereto agree that the services to be rendered by Executive pursuant to this Agreement, and the rights and privileges granted to the Company pursuant to this Agreement, are of a special, unique, extraordinary and intellectual character, which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages in any action at law, and that a breach by Executive of any of the terms of this Agreement will cause the Company great and irreparable injury and damage. Executive hereby expressly agrees that the Company shall be entitled to the remedies of injunction, specific performance and other equitable relief to prevent a breach of this Agreement by Executive. This Section 10 shall not be construed as a waiver of any other rights or remedies which the Company may have for damages or otherwise.

11. Return of Property. Executive agrees to return, on or before the termination date, all property belonging to the Company, including but not limited to computers, PDA, telephone and other credit cards, Company business records, Company automobile (if applicable), etc.

12. Severability. If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.

13. Succession. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Agreement for all purposes. As used herein, "successor" and "assignee" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires the stock of the Company or to which the Company assigns this Agreement by operation of law or otherwise. The obligations and duties of Executive hereunder are personal and otherwise not assignable. Executive's obligations and representations under this Agreement will survive the termination of Executive's employment, regardless of the manner of such termination.

14. Notices. Any notice or other communication provided for in this Agreement shall be in writing and sent if to the Company to its principal office at:

Photronics, Inc.

15 Secor Road, PO Box 5226

Brookfield, Connecticut 06804

Attention: Corporate Secretary

or at such other address as the Company may from time to time in writing designate, and if to Executive at the address set forth above or at such address as Executive may from time to time in writing designate. Each such notice or other communication shall be effective (I) if given by written telecommunication, three (3) days after its transmission to the applicable number so specified in (or pursuant to) this Section 14 and a verification of receipt is received, (ii) if given by certified mail, once verification of receipt is received, or (iii) if given by any other means, when actually delivered to the addressee at such address and verification of receipt is received.

15. Adequate Consideration. Executive acknowledges that the cash severance and other benefits to be provided by the Company to Executive are not available under any current plan or policies of the Company. Accordingly, Executive further acknowledges that the payments and benefits under this Agreement provide adequate consideration for Executive's obligations to the Company contained in Section 7 (Confidential Information), Section 8 (Non-Competition), Section 10 (Remedies) and Exhibit A (Release).

16. Entire Agreement. This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes any prior agreements, undertakings, commitments and practices relating to Executive's employment by the Company.

17. Amendments. No amendment or modification of the terms of this Agreement shall be valid unless made in writing, duly executed by both parties.

18. Waiver. No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof or of any other right, nor shall any single or partial exercise preclude any further or other exercise of such right or any other right.

19. Governing Law. This Agreement, and the legal relations between the parties, shall be governed by and construed in accordance with the laws of the State of Connecticut without regard to conflicts of law doctrines and any court action arising out of this Agreement shall be brought in any court of competent jurisdiction within the State of Connecticut.

20. Attorneys' Fees. If any litigation shall occur between Executive and the Company which litigation arises out of or as a result of this Agreement or the acts of the parties hereto pursuant to this Agreement, or which seeks an interpretation of this Agreement, the prevailing party shall be entitled to recover all costs and expenses of such litigation, including reasonable attorneys' fees and costs.

21. Withholding. All compensation payable hereunder, including salary and other benefits, shall be subject to applicable taxes, withholding and other required, normal or elected employee deductions.

22. Counterparts. This Agreement and any amendment hereto may be executed in one or more counterparts. All of such counterparts shall constitute one and the same agreement and shall become effective when a copy signed by each party has been delivered to the other party.

23. Headings. Section and other headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

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

THE COMPANY

PHOTRONICS, INC.

By: ____________________________

Name:

Title:

EXECUTIVE

/s/ SEAN T. SMITH

Name: Sean T. Smith

EXHIBIT A

RELEASE

1. I signed an Employment Agreement with Photronics, Inc. (the "Company"), dated February 20, 2003 (the "Agreement"), wherein I agreed to the terms applicable to certain terminations of employment with the Company. Pursuant to the terms of the Agreement, I am entitled to certain severance payments and benefits, described in the Agreement, provided that I sign this Release.

2. In consideration of the severance payments described in the Agreement, I, on behalf of myself, my heirs, agents, representatives, predecessors, successors and assigns, hereby irrevocably release, acquit and forever discharge the Company and each of its respective agents, employees, representatives, parents, subsidiaries, divisions, affiliates, officers, directors, shareholders, investors, employees, attorneys, transferors, transferees, predecessors, successors and assigns, jointly and severally (the "Released Parties") of and from any and all debts, suits, claims, actions, causes of action, controversies, demands, rights, damages, losses, expenses, costs, attorneys' fees, compensation, liabilities and obligations whatsoever, suspected or unsuspected, known or unknown, foreseen or unforeseen, arising at any time up to and including the date of this Release, save and except for the parties' obligations and rights under the Agreement. In recognition of the consideration set forth in the Agreement, I hereby release and forever discharge the Released Parties from any and all claims, actions and causes of action, I have or may have as of the date of this Release arising under any state or federal civil rights or human rights law, or under the Federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder ("ADEA"). By signing this Release, I hereby acknowledge and confirm the following: (a) I was advised in writing by the Company in connection with my termination to consult with an attorney of my choice prior to signing this Agreement, including without limitation, the terms relating to my release of claims arising under ADEA and any other law, rule or regulation referred to above; (b) I was given a period of not fewer than 21 days to consider the terms of this Agreement and to consult with an attorney of my choosing with respect hereto; and (c) I am providing the release and discharge set forth in this paragraph only in exchange for consideration in addition to anything of value to which I was already entitled.

3. The Agreement and this Release may be revoked by me within the 7-day period commencing on the date I sign this Release (the "Revocation Period"). In the event of any such revocation, all obligations of the Company under the Agreement will terminate and be of no further force and effect as of the date of such revocation and both the Company and I will have and be entitled to exercise all rights that would have existed had the Agreement and Release not been entered into. No such revocation will be effective unless it is in writing and signed by me and received by the Company prior to the expiration of the Revocation Period.

_________________________ ______________

Name Date

_________________________ ______________

Witness DateExhibit 10.19

 

JOINT VENTURE FRAMEWORK AGREEMENT

This Joint Venture Framework Agreement (“Agreement”) is entered into on this 20th day of November, 2013 by and between Photronics, Inc., a corporation organized under the laws of the state of Connecticut, U.S.A. with its principal place of business at 15 Secor Road, Brookfield, Connecticut, U.S.A. (“Photronics”) and Dai Nippon Printing Co., Ltd., a corporation organized under the laws of Japan with its principal place of business at 1-1, Ichigaya Kagacho 1-chome, Shinjuku-ku, Tokyo, Japan (“DNP”). (Photronics and DNP are hereinafter individually a “Party” and collectively the “Parties”.)

	1.	Objective

	1.1	The objectives of this Agreement are to set forth the agreements between the Parties to effect (a) the acquisition by Photronics Semiconductor Mask Corp., a subsidiary of Photronics organized under the laws of Taiwan, the Republic of China (hereinafter “ROC” or “Taiwan”) with its current principal place of business at 1F, No. 2, Lising Road, Hsinchu City, Hsinchu Science Park, Taiwan (“PSMC”) of DNP Photomask Technology Taiwan Co., Ltd., a subsidiary of DNP organized under the laws of Taiwan with its principal place of business at No.6, Lising 7th Rd., East District, Hsinchu City 30078 Hsinchu Science Park, Taiwan (“DPTT”), by way of a statutory merger under the laws of Taiwan whereby PSMC shall survive (the “Business Combination”); (b) the issue of shares of PSMC to DNP as consideration for the Business Combination; and (c) the execution of the Transaction Agreements (defined below).

	1.2	For the purposes of this Agreement, the term “Transaction Agreements” shall refer to the following documents (as each is defined herein):

(a)  this Agreement;

(b)  the Merger Agreement, the form of which is attached hereto as Exhibit 1-1;

(c)  the Joint Venture Operating Agreement, the form of which is attached hereto as Exhibit 1-2;

(d)  the Outsourcing Agreement, the form of which is attached hereto as Exhibit 1-3;

(e)  the License Agreement between Photronics and PSMC, the form of which is attached hereto as Exhibit 1-4; and

 

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(f)  the License Agreement between DNP and PSMC, the form of which is attached hereto as Exhibit 1-5 (together with the License Agreement between Photronics and PSMC hereinafter “License Agreement”).

The term “Joint Venture Agreements” shall refer to the agreements referred to in items (a), (c), (d), (e) and (f) above in this Section.

	1.3	The schedules and exhibits after duly executed shall form part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement, and any reference to this Agreement shall include such schedules and exhibits.

	1.4	References to “Affiliates” in this Agreement shall refer to, with respect to any person, a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such person, where “control” for the purposes of this definition (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and actions of a person, whether through the ownership of voting securities, by contract or credit arrangement, as trustee or executor, or otherwise.

	2.	Business Combination in Taiwan

Subject to the applicable laws of the ROC and the restrictions thereunder, the Parties shall use their reasonable efforts, acting in good faith, to carry out each of the steps and tasks relating to the proposed Business Combination, substantially within the respective contemplated timeframe, set forth in the Project Timetable attached hereto as Exhibit 2 (the “Project Timetable”); provided, however, the Parties acknowledge that the Project Timetable is subject to revision and change from time to time and thus, the failure by a Party to accomplish any step or task within the respective preferred timeframe described in the Project Timetable shall not be deemed a material breach, noncompliance or other default of this Agreement if the Party has been reasonably diligent in carrying out such step or task. In the event of a material delay of the preferred timeframe set out in the Project Timetable, the Parties will promptly meet and discuss in good faith a revised preferred timeframe and amend the Project Timetable in writing.

	3.	Cooperation and Support

	3.1	The Parties shall use their reasonable best efforts to take or cause to be taken all actions required to consummate the transactions contemplated hereby. In addition, the Parties hereto shall file or supply, or cause to be filed or supplied, all material applications, notifications and information required to be filed or supplied by them pursuant to applicable laws in connection with the transactions contemplated hereby. Each Party hereto shall use its reasonable best efforts to obtain all waivers, consents and approvals from governmental authorities and third parties required to be obtained by such Party for the

 

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consummation of the transactions contemplated hereby, other than any waivers, consents and approvals where the failure to obtain such waiver, consent and/or approval, either in any individual case or in the aggregate, would not have a material adverse effect on the transactions contemplated hereby. Each Party hereto shall cooperate in good faith with the other Party hereto in order to achieve the timely consummation of the transactions contemplated hereby.

	3.2	Notwithstanding the foregoing, the Parties understand that their communications and activities under the Transactions Agreements are subject to various applicable laws and regulations, including anti-trust and related competition laws. Each of the Parties hereby agree to use its reasonable best efforts to take or cause to be taken all actions required and to work with each other to cause the transactions contemplated hereby to be in compliance with such laws and regulations.

	4.	Execution of Transaction Agreements and Regulatory Approval Procedures

	4.1	Each of the Parties shall execute the Joint Venture Agreements concurrently with their execution of this Agreement. The Joint Venture Agreements (except for this Agreement) will have an effective date as of the closing of the Business Combination.

	4.2	It is understood that Photronics holds approximately * (“Restructuring Transaction”) in accordance with the Project Timetable subject to the proviso of Section 2 hereof. Photronics and DNP agree that they shall respectively cause PSMC and DPTT to sign the Merger Agreement promptly (but in no event later than ten (10) calendar days) after PSMC has become *

	4.3	Subject to the compliance of the Parties in regard to their respective obligations under the Transaction Agreements and except as otherwise agreed by the Parties in writing after the date hereof, the Parties agree that regulatory approvals necessary to consummate the Business Combination are as set forth in the Schedule I of the Merger Agreement.

 

	5.	Representations and Warranties and Further Covenants

	5.1	Photronics hereby represents and warrants that each of the representations and warranties set forth in Exhibit 5-1 are true and correct in all material respects as of the date hereof, and as of the closing of the Business Combination.

 

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	5.2	DNP hereby represents and warrants that each of the representations and warranties set forth in Exhibit 5-2 are true and correct in all material respects as of the date hereof, and as of the closing of the Business Combination.

	5.3	Photronics and DNP further agree on the relevant net working capital of PSMC and DPTT respectively as set forth in the NWC Proposal attached hereto as Exhibit 5-3 (the “NWC Proposal”). Photronics and DNP hereby covenant to, and shall cause PSMC or DPTT, as applicable, to implement and carry out their respective obligations under the NWC Proposal. In the event that there is a need to extract or inject cash by Photronics and/or DNP from PSMC and/or DPTT as the case may be after the closing of the Business Combination according to the NWC Proposal, Photronics and DNP shall make their best efforts to cooperate with each other in good faith to carry out such cash extraction or injection.

	5.4	Photronics hereby covenants that it will, and it will also cause PSMC to, and DNP hereby covenants that it will, and it will also cause DPTT to, consummate the terms and the respective obligations set forth in Section 1.9 of the Merger Agreement on the transfer of DPTT employees to the surviving entity resulting from the Business Combination.

	5.5	During the period of time between signing this Agreement and the closing of the Business Combination, DNP and DPTT will use * to the extent reasonably possible under the circumstances. Furthermore, the Parties (DNP, Photronics along with their subsidiaries PSMC and DPTT) agree to collaborate and apply best effort to * by which the Parties can confirm * , DNP and DPTT *. In the event that the *

	
6.

	
Standstill

	6.1	Each of the Parties agree, and undertake to cause their Affiliates, not to sell, pledge, hypothecate, assign, encumber, or otherwise directly or indirectly transfer any of their shares in PSMC or DPTT to any person prior to the closing of the Business Combination; for clarification, this standstill restriction does not apply to any actions taken by Photronics and/or any of its Affiliate(s) to carry out the Restructuring Transaction (including but not limited to the release and re-creation of pledge over PSMC shares currently pledged as described in Section 6.4 (i)).

	6.2	The Parties agree, and undertake to cause their Affiliates, not to sell, pledge, hypothecate, assign, encumber, or otherwise directly or indirectly transfer any of their shares in, or any rights to any interest in the surviving entity resulting from the Business Combination, except as otherwise agreed in the Joint Venture Operating Agreement.

 

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	6.3	Photronics undertakes to cause PSMC, and DNP undertakes to cause DPTT, commencing with the date first above written and ending as of the date of the closing of the Business Combination:

		(a)	to conduct the business in substantially the same manner as heretofore conducted and only in the ordinary course of business, to use its reasonable best efforts to preserve its business organization, and to maintain the existing relations with customers, creditors, business partners and others having business dealings with PSMC and DPTT, respectively;

		(b)	not to pass any resolution for its winding up, bankruptcy, re-organization or dissolution or liquidation or apply for the appointment of a receiver, manager or judicial manager or like officer; and

		(c)	not to take any of the following actions without the prior written consent of the other Party except for DPTT’s Permitted Capital Increase (as defined in the Merger Agreement), Restructuring Transaction and PSMC’s Permitted Capital Reduction (as defined in the Merger Agreement):

		(i)	unless otherwise permitted under Article 1.7 of the Merger Agreement, amend its articles of incorporation or make any material change in any policy on corporate governance, internal control, accounting or the like;

		(ii)	issue, sell, transfer, dispose of or create encumbrances over any shares, securities, or options;

		(iii)	make a capital increase/reduction or split or combine any of its capital stock or securities;

		(iv)	redeem, purchase or otherwise acquire directly or indirectly any of its capital stock or securities;

		(v)	enter into any business outside the existing scope of business, change the scope of the existing business or cease carrying on business;

		(vi)	sell or otherwise dispose of all or substantially all of its assets to any third party or contract to do so;

		(vii)	change its auditors;

		(viii)	change its financial year end or tax accounting year end;

		(ix)	except in the ordinary course of its business, and except for the acquisition/lease (an related lease liability) of the * and * from Photronics or one of Photronics’

 

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Affiliates, acquire assets from third parties in excess of * in the aggregate;

		(x)	create or establish any subsidiary, acquire any interest in any other person or entity or enter into any joint venture, business alliance or partnership;

		(xi)	except in the ordinary course of its business, make any borrowings, incur any indebtedness or enter into any financial commitments, guarantees or provision of any kind of security;

		(xii)	enter into any M&A transaction (such as merger, spin-off, business transfer/assumption and share exchange) other than the Business Combination contemplated under the Merger Agreement; or

		(xiii)	make any distribution to its shareholder(s), employees and/or directors/supervisors.

	6.4	Notwithstanding anything to the contrary set forth herein or in the Section 7.2.1 of the Joint Venture Operating Agreement, the Parties agree that (i) Photronics’ or its Affiliate(s)’ *

	
7.

	
Effectiveness of this Agreement

	7.1	This Agreement constitutes binding obligations of each of the Parties and shall take effect as of the date hereof until it has been terminated in accordance with this Section 7.

	7.2	This Agreement shall terminate upon the earliest occurrence of one of the following events:

(a)  the written consent of the Parties;

(b)  by written notice delivered by the non-defaulting Party to the Party in default, in the event of any material breach, noncompliance or other default of any provision of this Agreement or any other Transaction Agreement, which, if capable of cure, is not cured within thirty (30) calendar days after receipt by

 

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such defaulting Party of a written notice, which shall specify such default, from the non-defaulting Party;

(c) by written notice from either Party to the other Party hereto, in the event that (i) the Closing (as defined under the Merger Agreement) does not occur on or prior to * (or such later date agreed by the Parties in writing) or (ii) any of the regulatory approvals necessary to consummate the Business Combination set forth in the Schedule I of the Merger Agreement has been disapproved by the relevant competent authority by a final decision that is unable to be changed by re-application or supplemental filing; or (iii) the * and notice is given under Section 5.5 hereof to terminate; and

(d) upon any termination of the Merger Agreement.

	8.	Dispute Resolution

	8.1	The Parties hereby agree that any and all claims, disputes or controversies of whatever nature, arising out of, in connection with, or in relation to the interpretation, performance, enforcement, breach, termination or validity of this Agreement and/or any other Transaction Agreement (except for the License Agreement for the purpose of this Section 8), shall be first *.

	8.2	If, within thirty (30) days (or such shorter time if emergency or exigent circumstances exist) of first *, the Parties are unable to reach a mutually agreed resolution, then the Parties hereby agree that such claims, disputes or controversies shall be resolved by a binding arbitration, to be held in Taipei at the ROC Arbitration Association (the “Association”), under the ROC Arbitration Law and the Arbitration Rules of the ROC Arbitration Association. 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. The arbitrator shall render its final award within six (6) months, subject to extension by the arbitrator upon substantial justification shown of extraordinary circumstances, following conclusion of the hearing and any required post-hearing briefing or other proceedings ordered by the arbitrator. 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 Taiwan, 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

 

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or exchanged, any testimony or other oral submissions, and any awards) shall not be disclosed beyond the arbitrator, the Association, the Parties, their counsel and any person necessary to conduct the arbitration, except as may be required in recognition and enforcement proceedings or otherwise permitted under Section 9.1. 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 8 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 8 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 8 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 * , or (b) three (3) arbitrators in the event that the disputed amount is equal to or greater than * .

	9.	Confidentiality

	
9.1

	
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 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 Transaction Agreements and any information arising from or in connection with the Transaction Agreements and/or the transactions contemplated hereby and (b) all documents and information concerning the Transaction Agreements 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

 

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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 9 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 9. The Receiving Party shall use any information obtained herewith that are subject to this Section 9 only in relation to the performance of its obligations under the Transaction Agreements and/or the transactions contemplated hereby. The confidentiality obligations required by this Section 9 shall not apply to disclosures permitted pursuant to Section 9.2 hereof, and all confidentiality obligations required by this Section 9 shall be terminated upon *.

	9.2	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 the Transaction Agreements or the transactions contemplated hereby without the prior written consent of the other Party, and the Parties agree that they shall undertake not to, and to cause either PSMC or DPTT, as applicable, not to, directly or indirectly, make or cause to be made any such public announcement without the prior written consent of the applicable 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 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 five (5) Business Days (defined in the Joint Venture Operating Agreement) prior to such required public disclosure; provided further that, in case that reports on Form 8-K need to be filed according to the Securities Exchange Act of 1934 of the United States, such draft shall be provided to the other Party no later than three (3) Business Days.

	10.	Expenses

Each Party shall pay its own fees and expenses incurred with respect to the preparation and negotiation of the Transaction Agreements.

	11.	Governing Law

THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE INTERNAL LAWS OF TAIWAN WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS RULES THEREOF.

 

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	12.	Indemnification

		12.1	Each of the Parties hereby agrees to indemnify the other Party that is not in default under this Agreement and/or any other Transaction Agreement and its Affiliates, directors, supervisors, officers, employees, agents, and successors (collectively the “Non-Breaching Party”) against, and agrees to hold the Non-Breaching Party harmless from, any and all claim, cost, damage, loss, liability and expense (including without limitation reasonable attorneys’ fees and expenses in connection with any action, suit or proceeding) of any nature whatsoever suffered or incurred by the Non-Breaching Party resulting from or in connection with a breach of this Agreement and/or any other Transaction Agreement by such Party (each, a “Loss”).

		12.2	Procedures for Indemnification.

(a)  The party seeking indemnification under Section 12 hereof (the “Indemnified Party”) agrees to give prompt notice to the Party against whom indemnity is sought (the “Indemnifying Party”) of the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought hereunder; provided that the failure to notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have materially and adversely prejudiced the Indemnifying Party. The Indemnifying Party shall not be liable under this Section 12.2 for any settlement of Third Party Claims (as defined below) effected without its consent and in violation of Section 12.2(b) hereof.

(b)  The Indemnifying Party shall be entitled to participate in the defense of any claim asserted by any third party and arising from the breach of obligations under this Agreement and/or any other Transaction Agreement (“Third Party Claim”) and, subject to the limitations set forth in this Section 12.2, shall be entitled to control and appoint lead counsel for such defense, in each case at its expense, provided that prior to assuming control of such defense, the Indemnifying Party must acknowledge that it would have an indemnity obligations for Loss resulting from such Third Party Claims as provided under this Section 12.2. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled or obligated to assume or maintain control of the defense of any Third Party Claim nor pay the fees and expense of counsel retained by the Indemnified Party if (i) the Third Party Claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation against the Indemnified Party and/or willful misconduct or gross negligence of the Indemnified Party, or (ii) the Third Party Claim seeks an injunction or equitable relief against the Indemnified Party.

(c)  If the Indemnifying Party shall assume the control of the defense of any Third Party Claim in accordance with the provisions of Section 12.2(b), the Indemnifying Party shall obtain the prior written consent of

 

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the Indemnified Party (which shall not be unreasonably withheld or delayed) before entering into any settlement of such Third Party Claim.

(d)  The Indemnified Party shall be entitled to participate in the defense of any Third Party Claim and to employ one law firm as separate counsel of its choice for such purpose. The reasonable fees and expenses of such separate counsel shall be borne by the Indemnified Party, provided that the Indemnifying Party shall not pay the reasonable fees and expenses of such separate counsel, (i) incurred by the Indemnified Party prior to the date the Indemnifying Party assumes control of the defense of the Third Party Claim and the Indemnifying Party is not otherwise required to assume control of the defense of such Third Party Claim, or (ii) if representation of both the Indemnifying Party and the Indemnified Party by the same counsel would create a conflict of interest.

(e)  The Indemnified Party shall take all reasonable steps to avoid or mitigate its Losses upon and after becoming aware of any event or condition which would reasonably be expected to give rise to any Losses that are indemnifiable under this Agreement and/or any other Transaction Agreement, including taking all reasonable steps to enforce any claim for indemnification for such Losses under any contract with any third party (including any insurance coverage) that may cover any portion of such Losses.

		12.3	Limitations on Indemnification.

	(a)	No claim pursuant to this Section 12 may be asserted after the expiration of twelve (12) months from the date of the closing of the Business Combination or March 31, 2015, whichever is later, except with respect to any claims for indemnification with respect to the representations and warranties contained in following Sections:

- as for Exhibit 5-1

A.I. * ;

B.I. * ;

B.III * ;

B.IV * ; and

B.VII * ;

- as for Exhibit 5-2

A.I. * ;

B.I. * ;

B.III * ;

B.IV * ; and

B.VII * ;

(collectively, the “Fundamental Representations”), each of which shall survive for a period of four (4) years after the date of the closing of the Business Combination or March 31, 2015, whichever is later.

(b)  No indemnity or reimbursement for Losses asserted under this Section 12 shall be required of the Indemnifying Party (i) for any individual Loss (or

 

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group of related Losses) that is less than * (or its equivalent in other currency, the “Individual Basket”) (provided, that for the avoidance of doubt, any such Loss shall not be applied towards the Basket), (ii) unless and until the aggregate amount of Losses suffered by the Indemnified Party exceeds * (or its equivalent in other currency, the “Basket”), at which point, the Indemnifying Party shall be liable only for such Losses in excess of * , subject to the other limitations set forth herein, and (iii) to the extent the aggregate amount of all such Losses suffered by the Indemnified Party and indemnified by the Indemnifying Party in excess of * (or its equivalent in other currency, the “Cap”); provided that the Individual Basket, the Basket and the Cap shall not be applicable to any Losses asserted in respect of fraud, willful misconduct or gross negligence of the Indemnifying Party or its Affiliates, directors, supervisors, officers, employees, agents, and successors; provided further that the Cap shall not be applicable to any Losses asserted resulting from or in connection with a breach of the Fundamental Representations.

(c)  For the avoidance of doubt, (i) each indemnification obligation set forth in this Section 12 shall be calculated on an after-tax basis; and (ii) all Losses shall be decreased by any recoveries from third parties and any tax benefits relating to such Losses.

(d)  In no event shall either Party or any of its Affiliates, officers, directors, supervisors, employees, agents or assigns be liable for any consequential, incidental, punitive, special, exemplary or other indirect damages, including, by way of example and not limitation, loss of business, profits, use, data, or other economic advantage.

		(e)	Notwithstanding the foregoing, Sections 12.3(a) and 12.3(b) shall not apply to any breach or default of the obligations set forth in the Joint Venture Operating Agreement, the Outsourcing Agreement and the License Agreement.

	
12.4

	
Sole and Exclusive Remedy.

Without prejudice to other remedy otherwise and expressly provided in other Transaction Agreements which are intended to operate from and after the closing of the Business Combination (including, without limitation, *), this Section 12 shall be the sole and exclusive remedy of the Parties for any breach of the representations, warranties, covenants or agreements contained in this Agreement and the Merger Agreement.

	13.	Notices

	13.1	All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered personally, (b) mailed, certified or registered mail with postage prepaid, (c) sent by next-day or

 

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overnight mail or delivery, or (d) sent by fax with electronic confirmation of delivery, as follows:

	
-

	
if to Photronics,

Photronics, Inc.

15 Secor Road

Brookfield, CT 06804

Telephone: +1- 203-775-9000

Fax: *

Attention: General Counsel

with a copy to:

LCS & Partners

5th floor, Sec. 5, No. 8, Sinyi Road

Taipei, Taiwan, Republic of China

Telephone: +886 2 2729 8000

Fax: *

Attention: *.

	
-

	
if to DNP,

Dai Nippon Printing Co., Ltd.

1-1, Ichigaya Kagacho 1-chome, Shinjuku-ku, Tokyo, Japan

Telephone: *

Fax: *

Attention: *

 

with a copy to:

*

*

*

*

Fax: *

 

or, in each case, at such other addresses as may be specified in writing to the other Party hereto.

	13.2	All such notices, requests, demands, waivers and other communications shall be deemed to have been received (a) if by personal delivery on the day after such delivery, (b) if by certified or registered mail, on the fifth business day after the mailing thereof, (c) if by next-day or overnight mail or delivery, on the day delivered or (d) if by fax, on the next day following the day on which such transmission was sent, provided that a copy is also sent by personal delivery, overnight courier or certified or registered mail.

 

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	14.	Amendments and Waivers

No amendment, modification or discharge of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in writing and duly executed by or on behalf of Photronics and DNP. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the Party granting such waiver in any other respect or at any other time. Neither the waiver by any of the Parties hereto of a breach of or a default under any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights or privileges hereunder. The rights and remedies herein provided are cumulative and none is exclusive of any other, or of any rights or remedies that any Party may otherwise have pursuant to applicable laws.

	15.	Assignment

In no event may any rights or obligations under this Agreement be assigned by either Party to another person without obtaining prior written approval from the other Party.

	
16.

	
Severability

If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement, and the balance of the Agreement shall be interpreted as if such provision were so excluded, and shall be enforceable in accordance with its terms.

	
17.

	
Survival

Unless otherwise indicated by context, Sections 7 to 9 and 11 to 18 and such other sections as are intended by their nature or by their terms to survive any expiration or termination shall survive the expiration or termination of this Agreement.

	
18.

	
Miscellaneous

This Agreement shall supersede any previous agreement and understanding between the Parties and all their respective Affiliates with regard to the same subject. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the Parties hereto. This Agreement may be signed in counterparts.

 

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- Remainder of Page Intentionally Left Blank –

 

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For and on behalf of

Photronics, Inc.

	
By:

		 
	
Name:

	 	 
	
Title:

	 	 

For and on behalf of

Dai Nippon Printing Co., Ltd.

	
By:

		 
	
Name:

	 	 
	
Title:

	 	 

Framework Agreement Signature Page

 

16

- Exhibit 1-1 -

*

 

17

*

- Exhibit 1-2 –

*

 

18

- Exhibit 1-3 –

*

 

19

- Exhibit 1-4 -

*

 

20

- Exhibit 1-5 -

*

 

21

- Exhibit 2 -

*

 

22

-Exhibit 5-1 -

*

 

23

-Exhibit 5-2 –

*

 

24

- Exhibit 5-3 –

*

 

25

Exhibit A. *

*

 

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