T
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Connecticut
|
06-0854886
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification No.)
|
Title of each class
|
Name of each exchange on which registered
|
Common Stock, $.01 par value
|
NASDAQ Global Select Market
|
Proxy Statement for the 2015
|
|
Annual Meeting of Shareholders
|
Incorporated into Part III
|
to be held in April 2015
|
of this Form 10-K
|
ITEM 1. | BUSINESS |
ASML Holding NV
|
Jenoptik AG
|
AU Optronics Corp.
|
LG Electronics, Inc.
|
Dongbu HiTek Co. Ltd.
|
Macronix International Company, Ltd.
|
Global Foundries, Inc.
|
Micron Technology, Inc.
|
Himax Display, Inc.
|
Nanya Technology Corporation
|
Ili Technology Corp.
|
Samsung Electronics Co., Ltd.
|
IM Flash Technologies, LLC
|
Semiconductor International Manufacturing Corp.
|
Innolux Corporation
|
ST Microelectronics, Inc.
|
Inotera Memories, Inc.
|
Texas Instruments Incorporated
|
Intel Corporation
|
United Microelectronics Corp.
|
ITEM 1A. | RISK FACTORS |
· | it will be able to adequately protect its technology; |
· | competitors will not independently develop similar technology; or |
· | international intellectual property laws will adequately protect its intellectual property rights. |
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 2. | PROPERTIES |
Location
|
Type of Interest
|
|||
Allen, Texas
|
Owned
|
|||
Boise, Idaho
|
Owned
|
|||
Brookfield, Connecticut
|
Owned
|
|||
Bridgend, South Wales
|
Leased
|
|||
Cheonan, Korea
|
Owned
|
|||
Dresden, Germany
|
Leased
|
|||
Hsinchu, Taiwan
|
Owned
|
(1)
|
||
Hsinchu, Taiwan
|
Leased
|
|||
Taichung, Taiwan
|
Owned
|
(1)
|
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES |
High
|
Low
|
|||||||
Fiscal Year Ended November 2, 2014:
|
||||||||
Quarter Ended February 2, 2014
|
$
|
9.75
|
$
|
7.42
|
||||
Quarter Ended May 4, 2014
|
8.95
|
7.72
|
||||||
Quarter Ended August 3, 2014
|
9.38
|
7.92
|
||||||
Quarter Ended November 2, 2014
|
9.20
|
7.11
|
||||||
Fiscal Year Ended November 3, 2013:
|
||||||||
Quarter Ended January 27, 2013
|
$
|
6.21
|
$
|
4.56
|
||||
Quarter Ended April 28, 2013
|
7.50
|
5.81
|
||||||
Quarter Ended July 28, 2013
|
8.85
|
7.07
|
||||||
Quarter Ended November 3, 2013
|
8.89
|
7.03
|
ITEM 6. | SELECTED FINANCIAL DATA |
Year Ended
|
||||||||||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
October 30,
2011
|
October 31,
2010
|
||||||||||||||||
OPERATING DATA:
|
||||||||||||||||||||
Net sales
|
$
|
455,527
|
$
|
422,180
|
$
|
450,439
|
$
|
512,020
|
$
|
425,554
|
||||||||||
Cost and expenses:
|
||||||||||||||||||||
Cost of sales
|
(355,181
|
)
|
(322,540
|
)
|
(338,519
|
)
|
(375,806
|
)
|
(333,739
|
)
|
||||||||||
Selling, general and administrative
|
(49,638
|
)(a)
|
(48,213
|
)(c)
|
(46,706
|
)
|
(45,240
|
)
|
(42,387
|
)
|
||||||||||
Research and development
|
(21,913
|
)
|
(20,758
|
)
|
(19,371
|
)
|
(15,507
|
)
|
(14,932
|
)
|
||||||||||
Consolidation, restructuring and related (charges) credits
|
-
|
-
|
(1,428
|
)(d)
|
-
|
4,979
|
(h)
|
|||||||||||||
Operating income
|
28,795
|
30,669
|
44,415
|
75,467
|
39,475
|
|||||||||||||||
Other income (expense):
|
||||||||||||||||||||
Gain on acquisition
|
16,372
|
(b)
|
-
|
-
|
-
|
-
|
||||||||||||||
Interest expense
|
(7,247
|
)
|
(7,756
|
)
|
(7,488
|
)
|
(7,258
|
)
|
(9,475
|
)
|
||||||||||
Interest and other income (expense), net
|
3,410
|
3,892
|
3,721
|
(e)
|
2,949
|
(f)
|
2,553
|
(i)
|
||||||||||||
Debt extinguishment loss
|
-
|
-
|
-
|
(35,259
|
)(g)
|
-
|
||||||||||||||
Income before income tax provision
|
41,330
|
26,805
|
40,648
|
35,899
|
32,553
|
|||||||||||||||
Income tax provision
|
(9,295
|
)
|
(7,229
|
)
|
(10,793
|
)
|
(15,691
|
)
|
(7,471
|
)
|
||||||||||
Net income
|
32,035
|
(a)(b)
|
19,576
|
(c)
|
29,855
|
(d)(e)
|
20,208
|
(f)(g)
|
25,082
|
(h)(i)
|
||||||||||
Net income attributable to noncontrolling interests
|
(6,039
|
)
|
(1,610
|
)
|
(1,987
|
)
|
(3,979
|
)
|
(1,160
|
)
|
||||||||||
Net income attributable to Photronics, Inc. shareholders
|
$
|
25,996
|
(a)(b)
|
$
|
17,966
|
(c)
|
$
|
27,868
|
(d)(e)
|
$
|
16,229
|
(f)(g)
|
$
|
23,922
|
(h)
(i)
|
|||||
Earnings per share:
|
||||||||||||||||||||
Basic
|
$
|
0.42
|
(a)(b)
|
$
|
0.30
|
(c)
|
$
|
0.46
|
(d)(e)
|
$
|
0.28
|
(f)(g)
|
$
|
0.45
|
(h)
(i)
|
|||||
Diluted
|
$
|
0.41
|
(a)(b)
|
$
|
0.29
|
(c)
|
$
|
0.44
|
(d)(e)
|
$
|
0.28
|
(f)(g)
|
$
|
0.43
|
(h)
(i)
|
|||||
Weighted-average number of common shares outstanding:
|
||||||||||||||||||||
Basic
|
61,779
|
60,644
|
60,055
|
57,030
|
53,433
|
|||||||||||||||
Diluted
|
66,679
|
61,599
|
76,464
|
58,458
|
65,803
|
As of
|
||||||||||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
October 30,
2011
|
October 31,
2010
|
||||||||||||||||
Working capital
|
$
|
197,375
|
$
|
213,879
|
$
|
234,281
|
$
|
209,306
|
$
|
86,573
|
||||||||||
Property, plant and equipment, net
|
550,069
|
422,740
|
380,808
|
368,680
|
369,814
|
|||||||||||||||
Total assets
|
1,029,183
|
885,929
|
849,234
|
817,854
|
703,879
|
|||||||||||||||
Long-term debt
|
131,805
|
182,203
|
168,956
|
152,577
|
78,852
|
|||||||||||||||
Equity
|
739,494
|
587,831
|
586,001
|
559,756
|
495,943
|
(a) | Includes $2.5 million, net of tax, of expenses related to the acquisition of DPTT |
(b) | Includes non-cash gain of $16.4 million, net of tax, on acquisition of DPTT |
(c) | Includes $0.8 million, net of tax, of expenses related to the acquisition of DPTT |
(d) | Includes consolidation and restructuring charges of $1.4 million in connection with the discontinuance of manufacturing operations at the Company's Singapore facility. |
(e) | Includes non-cash gain of $0.1 million in connection with subsequent measurement at fair value of warrants issued to purchase the Company’s common stock. |
(f) | Includes non-cash charge of $0.4 million in connection with subsequent measurement at fair value of warrants issued to purchase the Company’s common stock. |
(g) | Includes losses recorded in connection with the acquisition of $35.4 million face amount of the Company’s 5.5% convertible senior notes, in exchange for 5.2 million shares of its common stock and cash of $22.9 million. |
(h) | Includes consolidation and restructuring credits of $5.0 million in connection with the closure of the Company's Shanghai, China, facility. |
(i) | Includes non-cash charge of $0.9 million in connection with subsequent measurement at fair value of warrants issued to purchase the Company's common stock. |
ITEM 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Year Ended
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
Net sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||
Cost of sales
|
(78.0
|
)
|
(76.4
|
)
|
(75.1
|
)
|
||||||
Gross margin
|
22.0
|
23.6
|
24.9
|
|||||||||
Selling, general and administrative expenses
|
(10.9
|
)
|
(11.4
|
)
|
(10.4
|
)
|
||||||
Research and development expenses
|
(4.8
|
)
|
(4.9
|
)
|
(4.3
|
)
|
||||||
Consolidation, restructuring and related charges
|
-
|
-
|
(0.3
|
)
|
||||||||
Operating income
|
6.3
|
7.3
|
9.9
|
|||||||||
Gain on acquisition
|
3.6
|
-
|
-
|
|||||||||
Interest expense
|
(1.6
|
)
|
(1.9
|
)
|
(1.7
|
)
|
||||||
Interest and other income (expense), net
|
0.8
|
0.9
|
0.8
|
|||||||||
Income before income tax provision
|
9.1
|
6.3
|
9.0
|
|||||||||
Income tax provision
|
(2.1
|
)
|
(1.7
|
)
|
(2.4
|
)
|
||||||
Net income
|
7.0
|
4.6
|
6.6
|
|||||||||
Net income attributable to noncontrolling interests
|
(1.3
|
)
|
(0.3
|
)
|
(0.4
|
)
|
||||||
Net income attributable to Photronics, Inc. shareholders
|
5.7
|
%
|
4.3
|
%
|
6.2
|
%
|
Percent Change
|
||||||||||||||||||||
2014
|
2013
|
2012
|
2013 to
2014
|
2012 to
2013
|
||||||||||||||||
IC
|
$
|
352.7
|
$
|
320.6
|
$
|
350.1
|
10.0
|
%
|
(8.4
|
)%
|
||||||||||
FPD
|
102.8
|
101.6
|
100.3
|
1.2
|
1.3
|
|||||||||||||||
Total net sales
|
$
|
455.5
|
$
|
422.2
|
$
|
450.4
|
7.9
|
%
|
(6.3
|
)%
|
Percent Change
|
||||||||||||||||||||
2014
|
2013
|
2012
|
2013 to
2014
|
2012 to
2013
|
||||||||||||||||
Gross margin
|
$
|
100.3
|
$
|
99.6
|
$
|
111.9
|
0.7
|
%
|
(11.0
|
)%
|
||||||||||
Gross margin %
|
22.0
|
%
|
23.6
|
%
|
24.9
|
%
|
-
|
-
|
Percent Change
|
||||||||||||||||||||
2014
|
2013
|
2012
|
2013 to
2014
|
2012 to
2013
|
||||||||||||||||
S,G&A expenses
|
$
|
49.6
|
$
|
48.2
|
$
|
46.7
|
2.9
|
%
|
3.2
|
%
|
||||||||||
% of net sales
|
10.9
|
%
|
11.4
|
%
|
10.4
|
%
|
-
|
-
|
Percent Change
|
||||||||||||||||||||
2014
|
2013
|
2012
|
2013 to
2014
|
2012 to
2013
|
||||||||||||||||
R&D expense
|
$
|
21.9
|
$
|
20.8
|
$
|
19.4
|
5.6
|
%
|
7.2
|
%
|
||||||||||
% of net sales
|
4.8
|
%
|
4.9
|
%
|
4.3
|
%
|
-
|
-
|
2014
|
2013
|
2012
|
||||||||||
Gain on acquisition
|
$
|
16.4
|
$
|
-
|
$
|
-
|
||||||
Interest expense
|
(7.2
|
)
|
$
|
(7.8
|
)
|
$
|
(7.5
|
)
|
||||
Interest and other income (expense), net
|
3.3
|
3.9
|
3.7
|
|||||||||
Total other income (expense), net
|
$
|
12.5
|
$
|
(3.9
|
)
|
$
|
(3.8
|
)
|
2014
|
2013
|
2012
|
||||||||||
Income tax provision
|
$
|
9.3
|
$
|
7.2
|
$
|
10.8
|
||||||
Effective income tax rate
|
22.5
|
%
|
27.0
|
%
|
26.6
|
%
|
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
(in millions)
|
(in millions)
|
(in millions)
|
||||||||||
Cash and cash equivalents
|
$
|
192.9
|
$
|
215.6
|
$
|
218.0
|
||||||
Net cash provided by operating activities
|
$
|
96.4
|
$
|
99.4
|
$
|
132.5
|
||||||
Net cash used in investing activities
|
$
|
(87.5
|
)
|
$
|
(66.2
|
)
|
$
|
(111.9
|
)
|
|||
Net cash provided by (used in) financing activities
|
$
|
(29.5
|
)
|
$
|
(39.8
|
)
|
$
|
4.6
|
Payment due by period
|
||||||||||||||||||||
Contractual Obligations
|
Total
|
Less Than 1 Year
|
1 – 3 Years
|
3 – 5 Years
|
More Than 5 Years
|
|||||||||||||||
Long-term borrowings
|
$
|
115,000
|
$
|
-
|
$
|
115,000
|
$
|
-
|
$
|
-
|
||||||||||
Operating leases
|
8,992
|
2,442
|
3,658
|
909
|
1,983
|
|||||||||||||||
Capital leases
|
27,186
|
10,381
|
12,166
|
4,639
|
-
|
|||||||||||||||
Unconditional purchase obligations
|
84,112
|
64,346
|
19,766
|
-
|
-
|
|||||||||||||||
Interest
|
7,102
|
4,552
|
2,355
|
195
|
-
|
|||||||||||||||
Other noncurrent liabilities
|
10,653
|
762
|
1,809
|
1,811
|
6,271
|
|||||||||||||||
Total
|
$
|
253,045
|
$
|
82,483
|
$
|
154,754
|
$
|
7,554
|
$
|
8,254
|
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Page
|
||
33
|
||
34
|
||
35
|
||
36
|
||
37
|
||
38
|
||
39
|
November 2,
2014
|
November 3,
2013
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
192,929
|
$
|
215,615
|
||||
Accounts receivable, net of allowance of $3,078 in 2014 and $3,541 in 2013
|
94,515
|
73,357
|
||||||
Inventories
|
22,478
|
18,849
|
||||||
Deferred income taxes
|
7,223
|
1,082
|
||||||
Other current assets
|
19,347
|
9,563
|
||||||
Total current assets
|
336,492
|
318,466
|
||||||
Property, plant and equipment, net
|
550,069
|
422,740
|
||||||
Investment in joint venture
|
93,122
|
93,124
|
||||||
Intangible assets, net
|
30,294
|
34,080
|
||||||
Deferred income taxes
|
11,036
|
12,455
|
||||||
Other assets
|
8,170
|
5,064
|
||||||
Total assets
|
$
|
1,029,183
|
$
|
885,929
|
||||
LIABILITIES AND EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term borrowings
|
$
|
10,381
|
$
|
11,818
|
||||
Accounts payable
|
77,779
|
59,210
|
||||||
Payables – related parties
|
8,716
|
9,211
|
||||||
Accrued liabilities
|
42,241
|
24,348
|
||||||
Total current liabilities
|
139,117
|
104,587
|
||||||
Long-term borrowings
|
131,805
|
182,203
|
||||||
Deferred income taxes
|
3,045
|
1,007
|
||||||
Other liabilities
|
15,722
|
10,301
|
||||||
Total liabilities
|
289,689
|
298,098
|
||||||
Commitments and contingencies
|
||||||||
Equity:
|
||||||||
Preferred stock, $0.01 par value, 2,000 shares authorized, none issued and outstanding
|
-
|
-
|
||||||
Common stock, $0.01 par value, 150,000 shares authorized, 65,930 shares issued and outstanding at November 2, 2014, and 61,083 shares issued and outstanding at November 3, 2013
|
659
|
611
|
||||||
Additional paid-in capital
|
520,182
|
498,861
|
||||||
Retained earnings
|
85,435
|
59,439
|
||||||
Accumulated other comprehensive income
|
21,774
|
26,403
|
||||||
Total Photronics, Inc. shareholders' equity
|
628,050
|
585,314
|
||||||
Noncontrolling interests
|
111,444
|
2,517
|
||||||
Total equity
|
739,494
|
587,831
|
||||||
Total liabilities and equity
|
$
|
1,029,183
|
$
|
885,929
|
Year Ended
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
Net sales
|
$
|
455,527
|
$
|
422,180
|
$
|
450,439
|
||||||
Cost and expenses:
|
||||||||||||
Cost of sales
|
(355,181
|
)
|
(322,540
|
)
|
(338,519
|
)
|
||||||
Selling, general and administrative
|
(49,638
|
)
|
(48,213
|
)
|
(46,706
|
)
|
||||||
Research and development
|
(21,913
|
)
|
(20,758
|
)
|
(19,371
|
)
|
||||||
Consolidation, restructuring and related charges
|
-
|
-
|
(1,428
|
)
|
||||||||
Operating income
|
28,795
|
30,669
|
44,415
|
|||||||||
Other income (expense):
|
||||||||||||
Gain on acquisition
|
16,372
|
-
|
-
|
|||||||||
Interest expense
|
(7,247
|
)
|
(7,756
|
)
|
(7,488
|
)
|
||||||
Interest and other income (expense), net
|
3,410
|
3,892
|
3,721
|
|||||||||
Income before income tax provision
|
41,330
|
26,805
|
40,648
|
|||||||||
Income tax provision
|
(9,295
|
)
|
(7,229
|
)
|
(10,793
|
)
|
||||||
Net income
|
32,035
|
19,576
|
29,855
|
|||||||||
Net income attributable to noncontrolling interests
|
(6,039
|
)
|
(1,610
|
)
|
(1,987
|
)
|
||||||
Net income attributable to Photronics, Inc. shareholders
|
$
|
25,996
|
$
|
17,966
|
$
|
27,868
|
||||||
Earnings per share:
|
||||||||||||
Basic
|
$
|
0.42
|
$
|
0.30
|
$
|
0.46
|
||||||
Diluted
|
$
|
0.41
|
$
|
0.29
|
$
|
0.44
|
||||||
Weighted-average number of common shares outstanding:
|
||||||||||||
Basic
|
61,779
|
60,644
|
60,055
|
|||||||||
Diluted
|
66,679
|
61,599
|
76,464
|
Year Ended
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
Net income
|
$
|
32,035
|
$
|
19,576
|
$
|
29,855
|
||||||
Other comprehensive income (loss), net of tax of $0:
|
||||||||||||
Foreign currency translation adjustments
|
(5,916
|
)
|
9,805
|
7,188
|
||||||||
Amortization of cash flow hedge
|
128
|
128
|
128
|
|||||||||
Other
|
(41
|
)
|
54
|
(109
|
)
|
|||||||
Total other comprehensive income (loss), net of tax
|
(5,829
|
)
|
9,987
|
7,207
|
||||||||
Comprehensive income
|
26,206
|
29,563
|
37,062
|
|||||||||
Less: comprehensive income attributable to noncontrolling interests
|
5,238
|
858
|
3,387
|
|||||||||
Comprehensive income attributable to Photronics, Inc. shareholders
|
$
|
20,968
|
$
|
28,705
|
$
|
33,675
|
Common Stock
|
Additional Paid-In
|
Retained
|
Accumulated Other Comprehensive
|
Non- Controlling
|
Total
|
|||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Interests
|
Equity
|
||||||||||||||||||||||
Balance at October 30, 2011
|
59,651
|
$
|
597
|
$
|
486,674
|
$
|
13,605
|
$
|
10,171
|
$
|
48,709
|
$
|
559,756
|
|||||||||||||||
Net income
|
-
|
-
|
-
|
27,868
|
-
|
1,987
|
29,855
|
|||||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
-
|
5,807
|
1,400
|
7,207
|
|||||||||||||||||||||
Sale of common stock through employee stock option and purchase plan
|
277
|
3
|
542
|
-
|
-
|
-
|
545
|
|||||||||||||||||||||
Restricted stock awards vestings and expense
|
108
|
1
|
901
|
-
|
-
|
-
|
902
|
|||||||||||||||||||||
Share-based compensation expense
|
-
|
-
|
2,258
|
-
|
-
|
-
|
2,258
|
|||||||||||||||||||||
Common stock warrants exercised
|
177
|
1
|
1,051
|
-
|
-
|
-
|
1,052
|
|||||||||||||||||||||
Repurchase of common stock of subsidiary
|
-
|
-
|
1,985
|
-
|
(78
|
)
|
(17,481
|
)
|
(15,574
|
)
|
||||||||||||||||||
Balance at October 28, 2012
|
60,213
|
602
|
493,411
|
41,473
|
15,900
|
34,615
|
586,001
|
|||||||||||||||||||||
Net income
|
-
|
-
|
-
|
17,966
|
-
|
1,610
|
19,576
|
|||||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
-
|
10,740
|
(753
|
)
|
9,987
|
||||||||||||||||||||
Sale of common stock through employee stock option and purchase plan
|
397
|
4
|
880
|
-
|
-
|
-
|
884
|
|||||||||||||||||||||
Restricted stock awards vestings and expense
|
158
|
2
|
1,281
|
-
|
-
|
-
|
1,283
|
|||||||||||||||||||||
Share-based compensation expense
|
-
|
-
|
2,692
|
-
|
-
|
-
|
2,692
|
|||||||||||||||||||||
Common stock warrants exercised
|
315
|
3
|
(3
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
Repurchase of common stock of subsidiary
|
-
|
-
|
600
|
-
|
(237
|
)
|
(32,955
|
)
|
(32,592
|
)
|
||||||||||||||||||
Balance at November 3, 2013
|
61,083
|
611
|
498,861
|
59,439
|
26,403
|
2,517
|
587,831
|
|||||||||||||||||||||
Net income
|
-
|
-
|
-
|
25,996
|
-
|
6,039
|
32,035
|
|||||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
-
|
(5,028
|
)
|
(801
|
)
|
(5,829
|
)
|
||||||||||||||||||
Sale of common stock through employee stock option and purchase plan
|
337
|
3
|
1,424
|
-
|
-
|
-
|
1,427
|
|||||||||||||||||||||
Restricted stock awards vestings and expense
|
172
|
2
|
1,295
|
-
|
-
|
-
|
1,297
|
|||||||||||||||||||||
Share-based compensation expense
|
-
|
-
|
2,774
|
-
|
-
|
-
|
2,774
|
|||||||||||||||||||||
Acquisition of DPTT
|
-
|
-
|
(6,291
|
)
|
-
|
410
|
105,403
|
99,522
|
||||||||||||||||||||
Conversion of debt to common stock
|
4,338
|
43
|
22,011
|
-
|
-
|
-
|
22,054
|
|||||||||||||||||||||
Repurchase of common stock of subsidiary
|
-
|
-
|
108
|
-
|
(11
|
)
|
(1,714
|
)
|
(1,617
|
)
|
||||||||||||||||||
Balance at November 2, 2014
|
65,930
|
$
|
659
|
$
|
520,182
|
$
|
85,435
|
$
|
21,774
|
$
|
111,444
|
$
|
739,494
|
Year Ended
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$
|
32,035
|
$
|
19,576
|
$
|
29,855
|
||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization of property, plant and equipment
|
72,859
|
65,994
|
78,623
|
|||||||||
Amortization of deferred financing costs and intangible assets
|
7,277
|
6,948
|
6,586
|
|||||||||
Gain on acquisition
|
(16,372
|
)
|
-
|
-
|
||||||||
Consolidation, restructuring and related charges
|
-
|
-
|
262
|
|||||||||
Share-based compensation
|
4,071
|
3,975
|
3,160
|
|||||||||
Deferred income taxes
|
4,215
|
(266
|
)
|
(615
|
)
|
|||||||
Changes in assets and liabilities:
|
||||||||||||
Accounts receivable
|
5,271
|
2,400
|
11,190
|
|||||||||
Inventories
|
(2,552
|
)
|
(891
|
)
|
4,683
|
|||||||
Other current assets
|
1,781
|
(2,744
|
)
|
(79
|
)
|
|||||||
Accounts payable, accrued liabilities and other
|
(12,224
|
)
|
4,409
|
(1,116
|
)
|
|||||||
Net cash provided by operating activities
|
96,361
|
99,401
|
132,549
|
|||||||||
Cash flows from investing activities:
|
||||||||||||
Purchases of property, plant and equipment
|
(91,085
|
)
|
(63,792
|
)
|
(96,978
|
)
|
||||||
Cash from acquisition
|
4,508
|
-
|
-
|
|||||||||
Investment in joint venture
|
-
|
-
|
(13,397
|
)
|
||||||||
Purchases of intangible assets
|
(364
|
)
|
(2,173
|
)
|
(27
|
)
|
||||||
Other
|
(544
|
)
|
(272
|
)
|
(1,541
|
)
|
||||||
Net cash used in investing activities
|
(87,485
|
)
|
(66,237
|
)
|
(111,943
|
)
|
||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from long-term borrowings
|
-
|
-
|
25,000
|
|||||||||
Repayments of long-term borrowings
|
(29,782
|
)
|
(8,314
|
)
|
(5,293
|
)
|
||||||
Purchase of common stock of subsidiary
|
-
|
(32,374
|
)
|
(15,598
|
)
|
|||||||
Proceeds from share-based arrangements
|
1,298
|
884
|
653
|
|||||||||
Payments of deferred financing fees
|
(346
|
)
|
(40
|
)
|
(198
|
)
|
||||||
Other
|
(711
|
)
|
-
|
-
|
||||||||
Net cash provided by (used in) financing activities
|
(29,541
|
)
|
(39,844
|
)
|
4,564
|
|||||||
Effects of exchange rate changes on cash and cash equivalents
|
(2,021
|
)
|
4,252
|
2,945
|
||||||||
Net increase (decrease) in cash and cash equivalents
|
(22,686
|
)
|
(2,428
|
)
|
28,115
|
|||||||
Cash and cash equivalents at beginning of year
|
215,615
|
218,043
|
189,928
|
|||||||||
Cash and cash equivalents at end of year
|
$
|
192,929
|
$
|
215,615
|
$
|
218,043
|
||||||
Supplemental disclosure of non-cash information:
|
||||||||||||
Noncash net assets from acquisition
|
$
|
110,211
|
$
|
-
|
$
|
-
|
||||||
Accrual for property, plant and equipment purchased during year
|
28,672
|
17,502
|
5,052
|
|||||||||
Conversion of debt to common stock
|
22,054
|
-
|
-
|
|||||||||
Capital lease obligation for purchases of property, plant and equipment
|
-
|
26,356
|
-
|
|||||||||
Deposit related to facility purchase
|
-
|
-
|
2,000
|
Cash and cash equivalents
|
$
|
4,508
|
||
Accounts receivable (gross amount of $28,560, of which $500 is estimated to be uncollectable)
|
28,060
|
|||
Inventory
|
1,279
|
|||
Deferred tax asset
|
9,787
|
|||
Other current assets
|
11,517
|
|||
Property, plant and equipment
|
95,431
|
|||
Identifiable intangible assets
|
1,552
|
|||
Other long-term assets
|
1,328
|
|||
Accounts payable and accrued expenses
|
(32,410
|
)
|
||
Deferred tax liability
|
(3,042
|
)
|
||
Other long-term liabilities
|
(3,291
|
)
|
||
Total net assets acquired
|
114,719
|
|||
Noncontrolling interests retained by DNP
|
57,348
|
|||
57,371
|
||||
Consideration – 49.99% of fair value of PSMC
|
40,999
|
|||
Gain on acquisition
|
$
|
16,372
|
Year Ended
|
||||||||
November 2,
2014
|
November 3,
2013
|
|||||||
Revenues
|
$
|
499,968
|
$
|
514,265
|
||||
Net income
|
$
|
23,969
|
$
|
34,922
|
||||
Net income attributable to Photronics, Inc. shareholders
|
$
|
12,169
|
$
|
21,902
|
||||
Diluted earnings per share
|
$
|
0.19
|
$
|
0.36
|
November 2,
2014
|
November 3,
2013
|
|||||||
Land
|
$
|
8,598
|
$
|
8,692
|
||||
Buildings and improvements
|
124,787
|
103,676
|
||||||
Machinery and equipment
|
1,367,691
|
1,225,091
|
||||||
Leasehold improvements
|
20,165
|
4,179
|
||||||
Furniture, fixtures and office equipment
|
12,086
|
11,546
|
||||||
Construction in progress
|
81,351
|
97,319
|
||||||
1,614,678
|
1,450,503
|
|||||||
Less accumulated depreciation and amortization
|
1,064,609
|
1,027,763
|
||||||
$
|
550,069
|
$
|
422,740
|
November 2,
2014
|
November 3,
2013
|
|||||||
Machinery and equipment
|
$
|
56,245
|
$
|
21,327
|
||||
Construction in progress
|
-
|
34,918
|
||||||
56,245
|
56,245
|
|||||||
Less accumulated amortization
|
10,430
|
4,932
|
||||||
$
|
45,815
|
$
|
51,313
|
As of November 2, 2014
|
Gross Amount
|
Accumulated Amortization
|
Net Amount
|
|||||||||
Technology license agreement
|
$
|
59,616
|
$
|
33,451
|
$
|
26,165
|
||||||
Customer relationships
|
8,716
|
6,394
|
2,322
|
|||||||||
Supply agreements
|
6,959
|
6,605
|
354
|
|||||||||
Software and other
|
6,223
|
4,770
|
1,453
|
|||||||||
$
|
81,514
|
$
|
51,220
|
$
|
30,294
|
|||||||
As of November 3, 2013
|
||||||||||||
Technology license agreement
|
$
|
59,616
|
$
|
29,477
|
$
|
30,139
|
||||||
Customer relationships
|
7,210
|
5,599
|
1,611
|
|||||||||
Supply agreements
|
6,959
|
6,381
|
578
|
|||||||||
Software and other
|
5,728
|
3,976
|
1,752
|
|||||||||
$
|
79,513
|
$
|
45,433
|
$
|
34,080
|
Fiscal Years:
|
||||
2015
|
$
|
6,120
|
||
2016
|
5,668
|
|||
2017
|
5,340
|
|||
2018
|
5,064
|
|||
2019
|
4,972
|
NOTE 5 - | JOINT VENTURE, TECHNOLOGY LICENSE AND OTHER AGREEMENTS WITH MICRON TECHNOLOGY, INC. |
As of Fiscal Year End
|
||||||||
2014
|
2013
|
|||||||
Current assets
|
$
|
31,696
|
$
|
35,794
|
||||
Noncurrent assets
|
205,457
|
177,769
|
||||||
Current liabilities
|
44,024
|
28,497
|
||||||
Noncurrent liabilities
|
6,804
|
-
|
Fiscal Year
|
||||||||||||
2014
|
2013
|
2012
|
||||||||||
Net sales
|
$
|
81,399
|
$
|
77,900
|
$
|
84,216
|
||||||
Gross profit
|
3,427
|
4,663
|
1,799
|
|||||||||
Net income
|
1,259
|
4,735
|
831
|
November 2,
2014
|
November 3,
2013
|
|||||||
3.25% convertible senior notes due in April 2016
|
$
|
115,000
|
$
|
115,000
|
||||
5.50% convertible senior notes due and converted in October 2014
|
-
|
22,054
|
||||||
2.77% capital lease obligation payable through July 2018
|
20,481
|
25,065
|
||||||
3.09% capital lease obligation payable through March 2016
|
6,705
|
10,652
|
||||||
Term loan, which bore interest at a variable rate, as defined (2.69% at November 3, 2013), repaid in December 2013
|
-
|
21,250
|
||||||
142,186
|
194,021
|
|||||||
Less current portion
|
10,381
|
11,818
|
||||||
$
|
131,805
|
$
|
182,203
|
Fiscal Years:
|
||||
2015
|
$
|
11,070
|
||
2016
|
7,546
|
|||
2017
|
5,168
|
|||
2018
|
4,698
|
|||
28,482
|
||||
Less interest
|
1,296
|
|||
Net minimum lease payments under capital leases
|
27,186
|
|||
Less current portion of net minimum lease payments
|
10,381
|
|||
Long-term portion of minimum lease payments
|
$
|
16,805
|
2015
|
$
|
2,292
|
||
2016
|
2,063
|
|||
2017
|
1,595
|
|||
2018
|
569
|
|||
2019
|
340
|
|||
Thereafter
|
1,983
|
|||
$
|
8,842
|
Year Ended
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
Expected volatility
|
61.0
|
%
|
98.0
|
%
|
102.1
|
%
|
||||||
Risk-free rate of return
|
1.4
|
%
|
0.5 – 1.4
|
%
|
0.6 – 0.9
|
%
|
||||||
Dividend yield
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
||||||
Expected term
|
4.6 years
|
4.3 years
|
4.3 years
|
Options
|
Shares
|
Weighted-Average Exercise Price
|
Weighted-Average Remaining Contractual Life
|
Aggregate Intrinsic Value
|
|||||||||
Outstanding at November 3, 2013
|
4,174,302
|
$
|
8.43
|
||||||||||
Granted
|
632,500
|
8.86
|
|||||||||||
Exercised
|
(283,083
|
)
|
3.75
|
||||||||||
Cancelled and forfeited
|
(446,938
|
)
|
19.50
|
||||||||||
Outstanding at November 2, 2014
|
4,076,781
|
$
|
7.60
|
5.6 years
|
$
|
10,778
|
|||||||
Exercisable at November 2, 2014
|
2,628,203
|
$
|
7.78
|
4.2 years
|
$
|
8,314
|
|||||||
Expected to vest as of November 2, 2014
|
1,329,318
|
$
|
7.29
|
8.2 years
|
$
|
2,261
|
Restricted Stock
|
Shares
|
Weighted- Average Fair Value at Grant Date
|
||||||
Outstanding at November 3, 2013
|
303,627
|
$
|
6.48
|
|||||
Granted
|
111,667
|
8.86
|
||||||
Vested
|
(171,563
|
)
|
7.60
|
|||||
Cancelled
|
(8,250
|
)
|
5.91
|
|||||
Outstanding at November 2, 2014
|
235,481
|
6.81
|
||||||
Expected to vest as of November 2, 2014
|
220,531
|
6.82
|
Year Ended
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
United States
|
$
|
(23,083
|
)
|
$
|
(14,164
|
)
|
$
|
(5,474
|
)
|
|||
Foreign
|
64,413
|
40,969
|
46,122
|
|||||||||
$
|
41,330
|
$
|
26,805
|
$
|
40,648
|
Year Ended
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
Current:
|
||||||||||||
Federal
|
$
|
354
|
$
|
208
|
$
|
81
|
||||||
State
|
-
|
65
|
(5
|
)
|
||||||||
Foreign
|
4,726
|
7,222
|
11,332
|
|||||||||
Deferred:
|
||||||||||||
Federal
|
-
|
-
|
-
|
|||||||||
State
|
(5
|
)
|
(181
|
)
|
-
|
|||||||
Foreign
|
4,220
|
(85
|
)
|
(615
|
)
|
|||||||
Total
|
$
|
9,295
|
$
|
7,229
|
$
|
10,793
|
Year Ended
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
U.S. federal income tax at statutory rate
|
$
|
14,465
|
$
|
9,382
|
$
|
14,227
|
||||||
Changes in valuation allowances
|
(7,575
|
)
|
1,325
|
1,806
|
||||||||
Distributions from foreign subsidiaries
|
12,674
|
1,957
|
2,073
|
|||||||||
State income taxes, net of federal benefit
|
(141
|
)
|
267
|
(1,956
|
)
|
|||||||
Foreign tax rate differentials
|
(4,864
|
)
|
(4,851
|
)
|
(3,805
|
)
|
||||||
Tax credits
|
(2,847
|
)
|
(3,967
|
)
|
(1,071
|
)
|
||||||
Uncertain tax positions, including reserves, settlements and resolutions
|
(2,255
|
)
|
1,471
|
1,984
|
||||||||
Debt extinguishment losses
|
-
|
-
|
(2,879
|
)
|
||||||||
Gain on acquisition of DPTT
|
(5,748
|
)
|
-
|
-
|
||||||||
Intercompany gain elimination
|
4,759
|
-
|
-
|
|||||||||
Equity based compensation
|
714
|
765
|
499
|
|||||||||
Other, net
|
113
|
880
|
(85
|
)
|
||||||||
$
|
9,295
|
$
|
7,229
|
$
|
10,793
|
As of
|
||||||||
November 2,
2014
|
November 3,
2013
|
|||||||
Deferred income tax assets
:
|
||||||||
Net operating losses
|
$
|
64,529
|
$
|
57,631
|
||||
Reserves not currently deductible
|
6,948
|
7,101
|
||||||
Alternative minimum tax credits
|
3,121
|
3,116
|
||||||
Tax credit carryforwards
|
8,368
|
7,051
|
||||||
Other
|
1,773
|
1,892
|
||||||
84,739
|
76,791
|
|||||||
Valuation allowances
|
(49,548
|
)
|
(56,661
|
)
|
||||
35,191
|
20,130
|
|||||||
Deferred income tax liabilities:
|
||||||||
Undistributed earnings of foreign subsidiaries
|
(5,366
|
)
|
(5,347
|
)
|
||||
Property, plant and equipment
|
(11,503
|
)
|
(890
|
)
|
||||
Investments
|
(2,660
|
)
|
(371
|
)
|
||||
Other
|
(448
|
)
|
(992
|
)
|
||||
(19,977
|
)
|
(7,600
|
)
|
|||||
Net deferred income tax assets
|
$
|
15,214
|
$
|
12,530
|
||||
Reported as:
|
||||||||
Current deferred tax assets
|
$
|
7,223
|
$
|
1,082
|
||||
Noncurrent deferred tax assets
|
11,036
|
12,455
|
||||||
Noncurrent deferred tax liabilities
|
(3,045
|
)
|
(1,007
|
)
|
||||
$
|
15,214
|
$
|
12,530
|
Year Ended
|
||||||||||||
November 2, 2014
|
November 3, 2013
|
October 28,
2012
|
||||||||||
Balance at beginning of year
|
$
|
4,757
|
$
|
3,793
|
$
|
1,824
|
||||||
Additions (reductions) for tax positions in prior years
|
3,437
|
1,224
|
1,932
|
|||||||||
Additions based on current year tax positions
|
272
|
207
|
616
|
|||||||||
Settlements
|
(3,155
|
)
|
(406
|
)
|
(518
|
)
|
||||||
Lapses of statutes of limitations
|
(318
|
)
|
(61
|
)
|
(61
|
)
|
||||||
Balance at end of year
|
$
|
4,993
|
$
|
4,757
|
$
|
3,793
|
Year Ended
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
Net income attributable to Photronics, Inc. shareholders
|
$
|
25,996
|
$
|
17,966
|
$
|
27,868
|
||||||
Effect of dilutive securities:
|
||||||||||||
Interest expense on convertible notes, net of related tax effects
|
1,426
|
-
|
6,168
|
|||||||||
Gain related to common stock warrants fair value adjustment
|
-
|
-
|
(94
|
)
|
||||||||
Earnings for diluted earnings per share
|
$
|
27,422
|
$
|
17,966
|
$
|
33,942
|
||||||
Weighted-average common shares computations:
|
||||||||||||
Weighted-average common shares used for basic earnings per share
|
61,779
|
60,644
|
60,055
|
|||||||||
Effect of dilutive securities:
|
||||||||||||
Convertible notes
|
3,945
|
-
|
15,423
|
|||||||||
Share-based payment awards
|
955
|
813
|
767
|
|||||||||
Common stock warrants
|
-
|
142
|
219
|
|||||||||
Dilutive potential common shares
|
4,900
|
955
|
16,409
|
|||||||||
Weighted-average common shares used for diluted earnings per share
|
66,679
|
61,599
|
76,464
|
|||||||||
Basic earnings per share
|
$
|
0.42
|
$
|
0.30
|
$
|
0.46
|
||||||
Diluted earnings per share
|
$
|
0.41
|
$
|
0.29
|
$
|
0.44
|
Year Ended
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
Convertible notes
|
11,085
|
6,168
|
-
|
|||||||||
Share based payment awards
|
1,911
|
2,880
|
2,587
|
|||||||||
Total potentially dilutive shares excluded
|
12,996
|
9,048
|
2,587
|
Year Ended
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
Net income attributable to Photronics, Inc. shareholders
|
$
|
25,996
|
$
|
17,966
|
$
|
27,868
|
||||||
Increase (decrease) in Photronics, Inc.'s additional paid-in capital
|
(6,183
|
)
|
600
|
1,985
|
||||||||
Increase (decrease) in Photronics, Inc.’s accumulated other comprehensive income
|
399
|
(237
|
)
|
(78
|
)
|
|||||||
Change from net income attributable to Photronics, Inc. shareholders due to issuance of shares of PDMC and transfers to or from noncontrolling interests
|
$
|
20,212
|
$
|
18,329
|
$
|
29,775
|
Year Ended
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
Net sales
|
||||||||||||
Taiwan
|
$
|
167,075
|
$
|
117,364
|
$
|
109,232
|
||||||
Korea
|
140,386
|
134,300
|
161,154
|
|||||||||
United States
|
106,740
|
127,054
|
135,170
|
|||||||||
Europe
|
38,726
|
41,126
|
40,653
|
|||||||||
All other
|
2,600
|
2,336
|
4,230
|
|||||||||
$
|
455,527
|
$
|
422,180
|
$
|
450,439
|
|||||||
IC
|
$
|
352,679
|
$
|
320,579
|
$
|
350,105
|
||||||
FPD
|
102,848
|
101,601
|
100,334
|
|||||||||
$
|
455,527
|
$
|
422,180
|
$
|
450,439
|
As of
|
||||||||||||
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||
Long-lived assets
|
||||||||||||
Taiwan
|
$
|
207,324
|
$
|
66,836
|
$
|
72,185
|
||||||
Korea
|
176,141
|
153,878
|
120,628
|
|||||||||
United States
|
158,325
|
191,518
|
177,614
|
|||||||||
Europe
|
8,259
|
10,471
|
10,262
|
|||||||||
All other
|
20
|
37
|
119
|
|||||||||
$
|
550,069
|
$
|
422,740
|
$
|
380,808
|
Year Ended November 2, 2014
|
||||||||||||||||
Foreign Currency Translation
Adjustments
|
Amortization of Cash
Flow Hedge
|
Other
|
Total
|
|||||||||||||
Balance at November 3, 2013
|
$
|
27,797
|
$
|
(562
|
)
|
$
|
(832
|
)
|
$
|
26,403
|
||||||
Other comprehensive income (loss) before reclassifications
|
(5,916
|
)
|
-
|
(41
|
)
|
(5,957
|
)
|
|||||||||
Amounts reclassified from other accumulated comprehensive income
|
-
|
128
|
-
|
128
|
||||||||||||
Net current period other comprehensive income (loss)
|
(5,916
|
)
|
128
|
(41
|
)
|
(5,829
|
)
|
|||||||||
Less: other comprehensive loss attributable to noncontrolling interests
|
770
|
-
|
31
|
801
|
||||||||||||
Other accumulated comprehensive income allocated to noncontrolling interests
|
410
|
410
|
||||||||||||||
Purchase of common stock of subsidiary
|
-
|
-
|
(11
|
)
|
(11
|
)
|
||||||||||
Balance at November 2, 2014
|
$
|
22,651
|
$
|
(434
|
)
|
$
|
(443
|
)
|
$
|
21,774
|
Year Ended November 3, 2013
|
||||||||||||||||
Foreign Currency Translation
Adjustments
|
Amortization of Cash
Flow Hedge
|
Other
|
Total
|
|||||||||||||
Balance at October 29, 2012
|
$
|
17,241
|
$
|
(690
|
)
|
$
|
(651
|
)
|
$
|
15,900
|
||||||
Other comprehensive income before reclassifications
|
9,805
|
-
|
54
|
9,859
|
||||||||||||
Amounts reclassified from other comprehensive income
|
-
|
128
|
-
|
128
|
||||||||||||
Net current period other comprehensive income
|
9,805
|
128
|
54
|
9,987
|
||||||||||||
Less: other comprehensive loss attributable to noncontrolling interests
|
751
|
-
|
2
|
753
|
||||||||||||
Purchase of common stock of subsidiary
|
-
|
-
|
(237
|
)
|
(237
|
)
|
||||||||||
Balance at November 3, 2013
|
$
|
27,797
|
$
|
(562
|
)
|
$
|
(832
|
)
|
$
|
26,403
|
November 2, 2014
|
November 3, 2013
|
|||||||||||||||
Fair Value
|
Carrying Value
|
Fair Value
|
Carrying Value
|
|||||||||||||
3.25% convertible senior notes
|
$
|
122,544
|
$
|
115,000
|
$
|
130,330
|
$
|
115,000
|
||||||||
5.5% convertible senior notes
|
$
|
-
|
$
|
-
|
$
|
37,567
|
$
|
22,054
|
First
|
Second
|
Third
|
Fourth
|
Year
|
||||||||||||||||
Fiscal 2014:
|
||||||||||||||||||||
(a)
|
(b) (c)
|
(b) (d)
|
||||||||||||||||||
Net sales
|
$
|
101,542
|
$
|
104,882
|
$
|
124,852
|
$
|
124,251
|
$
|
455,527
|
||||||||||
Gross margin
|
22,882
|
22,190
|
28,650
|
26,624
|
100,346
|
|||||||||||||||
Net income
|
2,041
|
15,950
|
7,344
|
6,700
|
32,035
|
|||||||||||||||
Net income attributable to Photronics, Inc. shareholders
|
1,993
|
15,540
|
4,186
|
4,277
|
25,996
|
|||||||||||||||
Earnings per share:
|
||||||||||||||||||||
Basic
|
$
|
0.03
|
$
|
0.25
|
$
|
0.07
|
$
|
0.07
|
$
|
0.42
|
||||||||||
Diluted
|
$
|
0.03
|
$
|
0.22
|
$
|
0.07
|
$
|
0.07
|
$
|
0.41
|
||||||||||
Fiscal 2013:
|
||||||||||||||||||||
(e)
|
(e)
|
|||||||||||||||||||
Net sales
|
$
|
99,839
|
$
|
106,680
|
$
|
109,652
|
$
|
106,009
|
$
|
422,180
|
||||||||||
Gross margin
|
21,098
|
24,789
|
27,078
|
26,675
|
99,640
|
|||||||||||||||
Net income
|
2,859
|
5,442
|
6,364
|
4,911
|
19,576
|
|||||||||||||||
Net income attributable to Photronics, Inc. shareholders
|
2,323
|
4,863
|
5,940
|
4,840
|
17,966
|
|||||||||||||||
Earnings per share:
|
||||||||||||||||||||
Basic
|
$
|
0.04
|
$
|
0.08
|
$
|
0.10
|
$
|
0.08
|
$
|
0.30
|
||||||||||
Diluted
|
$
|
0.04
|
$
|
0.08
|
$
|
0.10
|
$
|
0.08
|
$
|
0.29
|
(a) | Includes expenses of $0.5 million, net of tax, related to the acquisition of DPTT. |
(b) | Includes non-cash gain of $16.4 million, net of tax, related to the acquisition of DPTT. |
(c) | Includes expenses of $2.0 million, net of tax, related to the acquisition of DPTT. |
(d) | Includes expenses of $2.5 million, net of tax, related to the acquisition of DPTT. |
(e) | Includes expenses of $0.8 million, net of tax, related to the subsequent acquisition of DPTT. |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
ITEM 9B. | OTHER INFORMATION |
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
Page
|
|||
No.
|
|||
1.
|
Financial Statements: See "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS" in Part II, Item 8 of this Form 10-K.
|
32
|
|
2.
|
Financial Statement Schedules:
|
||
Report of Independent Registered Public Accounting Firm
|
65
|
||
Schedule II - Valuation and Qualifying Accounts for the years ended November 2, 2014, November 3, 2013 and October 28, 2012
|
66
|
||
All other schedules are omitted because they are not applicable.
|
|||
3.
|
Exhibits
|
67
|
Schedule II
|
||||||||||||||||
Valuation and Qualifying Accounts
|
||||||||||||||||
for the Years Ended November 2, 2014, November 3, 2013
|
||||||||||||||||
and October 28, 2012
|
||||||||||||||||
(in thousands)
|
||||||||||||||||
Balance at Beginning of
Year
|
Charged to Costs and
Expenses
|
Deductions
|
Balance at End of
Year
|
|||||||||||||
Allowance for Doubtful Accounts
|
||||||||||||||||
Year ended November 2, 2014
|
$
|
3,541
|
$
|
(740
|
)
|
$
|
277
|
(a)
|
$
|
3,078
|
||||||
Year ended November 3, 2013
|
$
|
3,902
|
$
|
(398
|
)
|
$
|
37
|
(a)
|
$
|
3,541
|
||||||
Year ended October 28, 2012
|
$
|
4,055
|
$
|
(203
|
)
|
$
|
50
|
(a)
|
$
|
3,902
|
||||||
Deferred Tax Asset Valuation Allowance
|
||||||||||||||||
Year ended November 2, 2014
|
$
|
56,661
|
$
|
-
|
$
|
(7,113
|
)(b)
|
$
|
49,548
|
|||||||
Year ended November 3, 2013
|
$
|
55,536
|
$
|
1,125
|
$
|
-
|
$
|
56,661
|
||||||||
Year ended October 28, 2012
|
$
|
53,063
|
$
|
3,331
|
$
|
(858
|
)(c)
|
$
|
55,536
|
(a) | Uncollectible accounts written off, net, and impact of foreign currency translation. |
(b) | Decrease offset by increase in deferred tax liability net of utilization of net operating losses. |
(c) | Primarily due to utilization of net operating losses and expiration of investment tax credit. |
10.16
|
Photronics to Micron Supply Agreement between Micron and Photronics dated May 5, 2006. (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 30, 2011)
#
|
|
10.17
|
Company to Photronics Supply Agreement between MP Mask and Photronics dated May 5, 2006. (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 30, 2011)
#
|
|
10.18
|
Special Warranty Deed dated as of February 29, 2012 (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on March 6, 2012).
|
|
Joint Venture Framework Agreement dated November 20, 2013 between the Company and Dai Nippon Printing Co., Ltd*#
|
||
Joint Venture Operating Agreement dated November 20, 2013 between the Company and Dai Nippon Printing Co., Ltd.*#
|
||
Outsourcing Agreement dated November 20, 2013 between the Company, Dai Nippon Printing Co., Ltd and Photronics Semiconductor Mask Corporation.*#
|
||
License Agreement dated November 20, 2013 between the Company and Photronics Semiconductor Mask Corporation.*#
|
||
License Agreement dated November 20, 2013 between Dai Nippon Printing Co., Ltd and Photronics Semiconductor Mask Corporation.*#
|
||
Margin Agreement dated November 20, 2013 between the Company, Dai Nippon Printing Co., Ltd and Photronics Semiconductor Mask Corporation.*#
|
||
Merger Agreement dated January 16, 2014 between Photronics Semiconductor Mask Corporation and DNP Photomask Technology Taiwan Co. Ltd.*#
|
||
10.26
|
Executive Employment Agreement between the Company and Soo Hong Jeong dated May 31, 2011 (incorporated by
reference to Exhibit 10.40 to the Company’s Quarterly Report on Form 10-Q filed on June 8, 2011).
+
|
|
10.27
|
Executive Employment Agreement between the Company and Christopher J. Progler, Vice President, Chief Technology Officer dated September 10, 2007 (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K filed on January 9, 2013).
+
|
|
10.28
|
Executive Employment Agreement between the Company and Peter Kirlin dated May 21, 2010 (incorporated by reference to Exhibit 10.42 of the Company's Quarterly Report on Form 10-Q filed on June 10, 2010).
+
|
|
10.29
|
Executive Employment Agreement between the Company and Richelle Burr dated May 21, 2010 (incorporated by reference to Exhibit 10.43 of the Company's Quarterly Report on Form 10-Q filed on June 10, 2010).
+
|
|
10.30
|
Form of Amendment to Executive Employment Agreement dated March 16, 2012 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on March 16, 2012).
+
|
|
10.31
|
Third Amended and Restated Credit Agreement dated as of December 5, 2013 (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K filed January 3, 2014)
|
|
Amendment No. 1 dated as of August 22, 2014 to the Third Amended and Restated Credit Agreement dated as of December 5, 2013.*
|
||
10.33 | Second Amended and Restated Security Agreement.* | |
List of Subsidiaries of the Company.*
|
||
Consent of Deloitte & Touche LLP.*
|
||
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
||
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
PHOTRONICS, INC.
|
|||
(Registrant)
|
|||
By
|
/s/ SEAN T. SMITH
|
January 6, 2015
|
|
Sean T. Smith
Senior Vice President
Chief Financial Officer
(Principal Accounting Officer/
Principal Financial Officer)
|
By
|
/s/ CONSTANTINE S. MACRICOSTAS
|
January 6, 2015
|
|
Constantine S. Macricostas
Chairman of the Board
Chief Executive Officer
(Principal Executive Officer)
|
|||
By
|
/s/ SEAN T. SMITH
|
January 6, 2015
|
|
Sean T. Smith
Senior Vice President
Chief Financial Officer
(Principal Accounting Officer/
Principal Financial Officer)
|
|||
By
|
/s/ WALTER M. FIEDEROWICZ
|
January 6, 2015
|
|
Walter M. Fiederowicz
Director
|
|||
By
|
/s/ JOSEPH A. FIORITA, JR.
|
January 6, 2015
|
|
Joseph A. Fiorita, Jr.
Director
|
|||
By
|
/s/ LIANG-CHOO HSIA
|
January 6, 2015
|
|
Liang-Choo Hsia
Director
|
|||
By
|
/s/ GEORGE MACRICOSTAS
|
January 6, 2015
|
|
George Macricostas
Director
|
|||
By
|
/s/ MITCHELL G. TYSON
|
January 6, 2015
|
|
Mitchell G. Tyson
Director
|
RagingWire Telecommunications, INC.
Master Services Agreement #1001.0.1
This Master Services Agreement( "Agreement" ) is entered into effective as of January 11, 2002, ( "Effective Date" ) by and between RagingWire Telecommunications, Inc., a Nevada corporation ( "RagingWire" ) and Photronics, Inc., a Florida corporation ( "Customer" ). In consideration of the mutual covenants contained in this Agreement, RagingWire and Customer agree as follows:
This Agreement sets forth the terms and conditions by which RagingWire will provide to Customer, and Customer shall accept and pay for, certain Services. Each such Service will be specifically identified and described in a Service Level Agreement ( "SLA" ) executed by the Parties and delivered by them to each other, which refer to this Agreement. RagingWire contemplates that Customer may contract for additional Services from time to time, and in each such case a new SLA will be executed, specifically identifying and describing such additional Services and referencing this Agreement. Any equipment sales and/or leases shall be covered in a written agreement separate from this Agreement.
The following capitalized terms used in this Agreement have the meanings specified in this Section 2.
2.1 Applicable Rate "Applicable Rate" means one and one-half percent (1½%) per month, or the highest rate allowed by applicable law, whichever is lower.
2.2 Confidential Information "Confidential Information" is defined in Section 6.1.1 ("Non-Disclosure").
2.3 Customer Area "Customer Area" means the portion(s) of the Data Centers made available to Customer for the placement of Customer Equipment and use of the Services.
2.4 Customer Equipment "Customer Equipment" means Customer's computer hardware, not including stored data, and other tangible equipment or other tangible personal property placed by Customer in the Customer Area. If RagingWire is undertaking any managed services with respect to the Customer Equipment such equipment shall be identified on RagingWire's standard Customer Equipment List completed by Customer and accepted by RagingWire, as amended in writing from time to time by the Parties.
2.5 Customer Registration Form "Customer Registration Form" means a collective reference to the separate documents that contain the name and contact information (e.g., pager, e-mail and telephone numbers) for each of the Representatives authorized by Customer to enter the Data Centers and Customer Area, as delivered by Customer to RagingWire and amended in writing from time to time by Customer. The documents referred to herein include, without limitation, the Customer Information Form , the Use Administrator Form , and the Individual Registration Form .
2.6 Customer Technology "Customer Technology" means Customer's proprietary technology and processes, including, but not limited to, Customer's Internet operations design, content, software tools, hardware designs, algorithms, software (in source and object forms), user interface designs, architecture, class libraries, objects and documentation (both printed and electronic), know-how, inventions, trade secrets and any related Intellectual Property Rights (whether owned by Customer, controlled by or licensed to Customer by a third party) and also including any derivative works, improvements, enhancements or extensions of the foregoing conceived, invented, reduced to practice, expressed in a tangible medium,
2.7 Data Center(s "Data Center(s)" means any of the facilities used by RagingWire to provide the Services to Customer.
2.8 Initial Term "Initial Term" is defined in Section 4.2 ("Initial Term").
2.9 Intellectual Property Rights "Intellectual Property Rights" mean any and all (by whatever name or term known or designated) tangible and intangible and now known or hereafter existing throughout the universe (a) rights associated with works of authorship, including but not limited to copyrights, moral rights, and mask-works; (b) trademark and trade name rights and similar rights; (c) trade secret rights; (d) patents, design rights, and other industrial property rights; (e) all other intellectual and industrial property rights of every kind and nature and however designated (including logos, "rental" rights and rights to remuneration), whether arising by operation of law, contract, license, or otherwise; (f) all registrations and applications (whether for patent, copyright or similar right), including all continuations, continuations-in-part, and divisionals thereof; (g) all renewals, extensions, reissues, and re‑examinations of such patents now or hereafter in force; and (h) all rights in any of the foregoing.
2.10 Notice of Service Commencement "Notice of Service Commencement" means the written notice provided by RagingWire to Customer which sets forth each Service to be provided pursuant to a SLA and the date such Service commenced.
2.11 Parties or Party "Parties" means RagingWire and Customer collectively; "Party" means either RagingWire or Customer, as the case may be, individually.
2.12 Professional Service(s) "Professional Service(s)" means any professional or consulting services provided by RagingWire to Customer, including without limitation any project based or one-time services. Any provision of Professional Services shall be governed by a written Professional Services Agreement separate from this Agreement.
2.13 RagingWire Supplied Equipment "RagingWire Supplied Equipment" means the computer hardware, software, computer code and other tangible equipment to be provided by RagingWire to Customer pursuant to a SLA.
2.14 RagingWire Technology "RagingWire Technology" means RagingWire's proprietary technology and processes, including, without limitation, the Services, software tools, hardware designs, algorithms, software (in source and object forms), user interface designs, architecture, class libraries, objects and documentation (both printed and electronic), network designs, know-how, inventions, trade secrets and any related Intellectual Property Rights (whether owned by RagingWire or licensed to RagingWire from a third party) and also including any derivative works, improvements, enhancements or extensions of the foregoing conceived, invented, reduced to practice, expressed in a tangible medium or developed by RagingWire (independently during the Term.
2.15 Renewal Term "Renewal Term" is defined in Section 4.3 ("Renewal Term").
2.16 Representative(s "Representative(s)" means the individuals authorized by Customer in writing to enter the Data Center(s) and the Customer Area including, without limitation, any employees, contractors, or agents of Customer. Each of the Representatives shall be identified in writing on an Individual Registration Form and shall have received a valid password from the Use Administrator to access the Data Center(s).
2.17 Rules and Regulations "Rules and Regulations" means RagingWire's general rules and regulations, as amended from time to time by RagingWire, governing access to the Data Center(s) and use of the Services by Customer and Customer's Representatives, including, without limitation, online conduct and the obligations of Customer and Customer's Representatives in the Data Center(s).
2.18 Section "Section" means a numbered paragraph section of this Agreement.
2.19 Service(s) "Service(s)" means the specific Services provided to Customer by RagingWire as described in each SLA executed by Customer and RagingWire, as amended from time to time; each of which is incorporated herein by reference.
2.20 Service Commencement Date "Service Commencement Date" means the date RagingWire begins providing Services to Customer, as indicated in a Notice of Service Commencement delivered by RagingWire to Customer.
2.21 Service Level Goals "Service Level Goals" is defined in Section 7.2 ("Service Level Goals").
2.22 Service Outage "Service Outage" is defined in the applicable SLA.
2.23 Service Level Agreement (SLA) "Service Level Agreement" or "SLA" means a separate written Service Level Agreement between Customer and RagingWire that provides a description of each Service to be provided by RagingWire to Customer. A SLA may contain additional information and provisions related to the Services and shall reference this Agreement. All SLA's executed by Customer and RagingWire from time to time are incorporated herein by reference and all Services provided pursuant to all SLA's are subject to the terms and conditions of this Agreement. To the extent any terms herein apply solely to a Service not specified in a SLA, such terms shall not apply to Customer.
2.24 Supplemental Emergency Services "Supplemental Emergency Services" is defined in Section 3.2 ("Supplemental Emergency Services").
2.25 Term "Term" means the Initial Term plus all Renewal Terms as defined in Section 4 ("Term").
2.26 Use Administrator "Use Administrator" is defined in Section 8.3.1 ("Use Administrator").
3.1 Delivery of Services . By executing this Agreement, RagingWire agrees to provide, and Customer agrees to accept and pay for, the Services described in each SLA during the Term. Except as provided in a separate SLA, all Services shall be deemed delivered, and the Parties' respective obligations under this Agreement shall be deemed performed, in Sacramento County, California.
3.2 Supplemental Emergency Services . Customer may request that RagingWire provide to Customer certain limited Services and/or equipment on a "one-time" or emergency basis ( "Supplemental Emergency Services" ) where such Services are not included within the scope of the Services described in the SLA's. Supplemental Emergency Services may include, for example, replacing a faulty Customer server with a RagingWire server for a temporary period of time. RagingWire will charge a reasonable fee for Supplemental Emergency Services, and Customer agrees to pay the fees for such Supplemental Emergency Services. Charges for such Supplemental Emergency Services shall be billed separately. RagingWire labor for Supplemental Emergency Services will be billed at the rates listed in Exhibit A, Basic Managed Services. RagingWire has no obligation to provide or to continue to provide any Supplemental Emergency Services. If, however, RagingWire agrees to provide any Supplemental Emergency Services upon request by Customer, such Services shall be provided subject to the availability of resources and personnel. ALL SUPPLEMENTAL EMERGENCY SERVICES PROVIDED PURSUANT TO THIS SECTION 3.2 ARE PROVIDED ON AN "AS-IS" BASIS AND EXCLUDE WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTBILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT.
4.1 Term Commencement . The term for provision of and payment for each Service will commence on the Service Commencement Date indicated in the Notice of Service Commencement.
4.2 Initial Term . RagingWire will provide each Service to Customer for an initial term commencing on the Service Commencement Date and ending on the date specified in the SLA ( "Initial Term" ); provided however that in no event shall the Initial Term end on any day other than the last day of a calendar month. In the event a SLA, or a notice termination by Customer, specifies that the Initial Term shall terminate on other than the last day of a calendar month then such Initial Term is hereby extended to the end of the calendar month at issue.
4.3 Renewal Term . Unless one of the Parties provides notice in accordance with Section 12 ("Termination"), RagingWire will automatically continue to provide each Service to Customer for additional periods of time equal to one (1) calendar year from the termination date of the Initial Term (as such may be adjusted pursuant to Section 4.2 ("Initial Term") or a Renewal Term, as applicable. Each additional period of time for which RagingWire continues to provide Services after the Initial Term is referred to herein as a "Renewal Term . "
5.1 Fees . Customer agrees to pay all fees due without set off or adjustment and in accordance with the prices for each Service listed in each SLA. Except as provided otherwise in a SLA, the price for each Service listed in each SLA shall not be altered during the Initial Term.
5.2.1 Security Deposit, Security Interest. Upon execution of each SLA, Customer agrees to pay to RagingWire, as a security deposit, an amount equal to the monthly recurring charges set forth in the SLA. The security deposit shall serve as a security for Customer's faithful performance of its obligations under this Agreement. If Customer defaults under or materially breaches any provision of this Agreement, RagingWire may use, apply or retain all or any portion of said security deposit for the payment of any amount due to RagingWire, or to reimburse or compensate, RagingWire for any liability, expense, loss or damage which RagingWire may incur by reason of such default or material breach. RagingWire shall not be obligated to keep the security deposit separate from its general accounts. No part of the security deposit shall be considered to be held in trust, to bear interest or to be a prepayment for any monies to be paid by Customer to RagingWire. Within thirty (30) days after the successful conclusion of this Agreement and the fulfillment of all of Customer's obligations hereunder, RagingWire shall return the deposit (less any offsets) to Customer.
5.2.2 Payment on Service Commencement . On the Service Commencement Date for each Service, RagingWire will invoice Customer, and Customer agrees to pay to RagingWire within thirty (30) days of such invoice, an amount equal to the sum of: (i) all non-recurring charges indicated in such SLA and (ii) the recurring charges for the remainder of the calendar month in which the Service Commencement Date occurs, prorated on the basis of a 30-day month.
5.2.3 Recurring Charges . After the month set forth in Section 5.2.2 ("Payment on Service Commencement") payment for monthly recurring charges for each successive full month will be due and payable on the first day of that month, and RagingWire will send Customer a courtesy invoice approximately two (2) weeks prior to the first day of the month for which such recurring Services are to be provided. Payment for recurring charges not received by the tenth day of the month shall be considered late and the provisions of Section 5.3 ("Late Payments") shall apply.
5.2.4 Variable and One-Time Charges . Charges for Services not included in the monthly recurring charges (e.g., burstable Internet bandwidth charges) and charges for one-time Services (e.g., Professional Services, installation work, and Supplemental Emergency Services) shall be included in a separate invoice. Payment for such Services shall be due no later than thirty (30) days after the date of such invoice.
5.3 Late Payments . Any delinquent payments shall accrue interest at the Applicable Rate from the date such payments are due.
5.4 Payment in U.S. dollars . All payments shall be made to RagingWire in U.S. dollars, preferably by means of an automatic electronic funds transfer system.
5.5 Taxes and Other Fees . All fees charged by RagingWire for Services are exclusive of all taxes and similar fees, now in force or enacted in the future, imposed on the transaction and/or the delivery of Services. Customer agrees that it will be responsible for and will pay in full all such taxes and similar fees, except for taxes based on RagingWire's net income. For purposes of this Section 5.5 only, all Services shall be deemed provided at the Data Center where such Services originated.
6. CONFIDENTIAL INFORMATION; INTELLECTUAL PROPERTY OWNERSHIP; LICENSE
GRANTS
6.1 Confidential Information .
6.1.1 Non-Disclosure . RagingWire and Customer acknowledge that each will have access to certain proprietary and/or confidential information of the other Party concerning, without limitation, the other Party's business, plans, customers, financials, technology, products, and other information held in confidence by the other Party, whether in oral, written, graphic or electronic form (collectively, "Confidential Information" ). As used in this Agreement, Confidential Information will include, but not be limited to: (i) all information in tangible or intangible form that is marked or designated as confidential; (ii) RagingWire Technology; (iii) Customer Technology; and (iv) the terms and conditions of this Agreement and any other agreements between the Parties. RagingWire and Customer each agrees, on behalf of itself, its employees and other persons to whom disclosure of Confidential Information is permitted under this Agreement, that (i) it will not use in any way, for its own account or the account of any third party, except as expressly permitted by, or required to achieve the purposes of, this Agreement, nor disclose to any third party, any of the other Party's Confidential Information.
6.1.2 Non-Confidential Information . Notwithstanding Section 6.1.1 ("Non-Disclosure"), information will not be deemed Confidential Information under this Agreement if such information: (i) is known to the receiving Party prior to receipt from the disclosing Party, as evidenced by the records of the receiving Party; (ii) becomes known (independently of disclosure by the disclosing Party) to the receiving Party, directly or indirectly, from a source other than one having an obligation of confidentiality to the disclosing Party; (iii) becomes part of the public domain or otherwise ceases to be secret or confidential, except through a breach of this Agreement by the receiving Party; or (iv) is independently developed by the receiving Party without any breach of this Agreement.
6.1.3 Protection and Preservation . Each Party on behalf of itself, its Representatives, employees, agents, and contractors, agrees that it will receive and hold all Confidential Information in trust and confidence and that it will treat all Confidential Information with the same degree of care as it accords to its own confidential information of like sensitivity, but in no event less than a reasonable level of care. Each Party shall: (i) not sell, license, transfer, publish, disclose, display or otherwise make available the Confidential Information of the other Party; (ii) not reverse assemble or reverse compile in whole or in part any applicable Confidential Information; (iii) acknowledge and take commercially reasonable steps to preserve the other Party's ownership rights in and to such other Party's Confidential Information; (iv) hold in trust and confidence and not use any Confidential Information except as necessary to perform obligations set forth in this Agreement; and (v) similarly bind in writing necessary third parties to the confidentiality obligations of this Section 6.1.3. Notwithstanding the foregoing, each Party shall have the right to disclose the other party's Confidential Information to its appropriate officers, directors, employees, auditors and attorneys on a "need to know basis". Further, each Party may disclose the other Party's Confidential Information to the extent necessary to comply with an order of an administrative agency or court of competent jurisdiction, or to enforce a Party's rights under this Agreement. As an express condition to the preceding sentence, the Party being required to disclose the information shall (i) take all reasonable steps to prevent such disclosure and (ii) provide prior written notice thereof to the other Party in sufficient time to enable the other Party to seek a protective order or otherwise contest such disclosure. Each Party agrees that it will ensure that its Representatives, employees, agents and contractors will not make use of, disseminate, or in any way disclose any Confidential Information of the other Party to any person, firm or business, except as necessary to perform obligations set forth in this Agreement and then only under a written confidentiality agreement no less restrictive than this Section 6.1 ("Confidential Information"). The obligations of non-disclosure and non use shall apply to Confidential Information for a period of three (3) years from the date of disclosure.
6.1.4 Method of Disclosure . Information disclosed in written form or electronically transmitted shall be considered Confidential Information only if it contains the legend "Confidential." Information disclosed in other-than-written form shall be Confidential Information only if the disclosing Party states that the disclosure is confidential at the time it is made and sends the recipient of the information a written summary, with an appropriate confidentiality legend, of the information so disclosed within thirty (30) days thereafter.
6.1.5 Return of Confidential Information . Upon termination or expiration of this Agreement, or upon written request of the other Party, each Party shall promptly return to the other all documents and other tangible materials representing the other's Confidential Information and all copies thereof, and shall permanently erase or destroy all Confidential Information stored by or for it in electronic, optical, mechanical, or other storage medium, and shall certify, in writing, the completion of the foregoing to the other Party.
6.2.1 Ownership . Except for the rights expressly granted pursuant to Section 6.3.1 ("Grant By RagingWire"), (i) this Agreement does not transfer from RagingWire to Customer any RagingWire Technology and (ii) all right, title and interest (including, without limitation, Intellectual Property Rights) in and to the RagingWire Technology will remain solely with RagingWire. Except for the rights expressly granted pursuant to Section 6.3.2 ("Grant By Customer"), (i) this Agreement does not transfer from Customer to RagingWire any Customer Technology and (ii) all right, title and interest (including, without limitation, Intellectual Property Rights) in and to the Customer Technology will remain solely with Customer.
6.2.2 General Skills and Knowledge . Notwithstanding anything to the contrary in this Agreement, Customer will not at any time prohibit or enjoin RagingWire from using any concepts, skills, knowledge and techniques relating to information technology that is or are acquired during the course of providing the Services, including, without limitation, skills, knowledge and information publicly known or available, generally applicable in the trade (or art), or that could reasonably be acquired in similar work performed for other customers of RagingWire. For example, and without limitation, if, during the Term, RagingWire and/or Customer working with RagingWire jointly develops a computer program or algorithm that may be generally applicable in the art, RagingWire shall have the right to use and/or modify such computer program or algorithm, at no compensation to Customer, to provide Services to [other customers of RagingWire. ] The Joint Development shall be jointly owned by RagingWire and Customer and each shall be afforded such rights as are available under applicable law, including federal copyright law.
6.3.1 Grant by RagingWire . RagingWire hereby grants to Customer a non-exclusive, non-transferable, royalty-free license, without the right to grant sub licenses during the Term, to use the RagingWire Technology solely for the purpose of receiving the Services. Customer shall have no right to use the RagingWire Technology for any purpose other than receiving the Services.
6.3.2 Grant by Customer . Customer agrees that if, in the course of providing the Services, it is reasonably necessary for RagingWire to access Customer Equipment and use Customer Technology, RagingWire is hereby granted and shall have a non-exclusive, non-transferable, royalty-free license, without the right to grant sub licenses during the Term, to use the Customer Technology solely for the purpose of providing the Services to Customer. Subject to Section 6.2.2 ("General Skills and Knowledge"), RagingWire shall have no right to use the Customer Technology for any purpose other than providing the Services.
6.4 Restrictions . The RagingWire Technology shall be used by Customer, its Representatives and agents only in a manner consistent with the rights granted in Section 6.3.1 ("Grant By RagingWire"). Customer agrees to use its best efforts to ensure that no portion of the RagingWire Technology is displayed outside the Data Center(s) or distributed in any way to any third party. Customer shall not rent, lease, license, distribute, transfer, reproduce, display, modify, publicly perform or timeshare the RagingWire Technology, or any portion thereof, or use such as a component of or a basis for products or services prepared for sale, license, lease, access or other marketing or distribution. Neither Customer nor any of its Representatives or agents shall prepare any derivative work based on the RagingWire Technology or other materials provided to Customer by RagingWire. Though not authorized to do so, should Customer or any Representative or agent create any derivative works of the RagingWire Technology, Customer, on behalf of itself and its Representative and/or agent, hereby assigns any and all right, title and interest (including, without limitation, Intellectual Property Rights) in such derivative works to RagingWire. Neither Customer nor any of its Representatives or agents shall translate, reverse engineer, decompile or disassemble the RagingWire Technology. Customer shall not allow any third party or unlicensed user or computer system to access or use the RagingWire Technology. Customer agrees not to demonstrate or disclose the results of any testing or bench-marking of the RagingWire Technology, to any third party, without RagingWire's prior written permission.
Customer Technology shall be used by RagingWire, its representatives and agents only in a manner consistent with the rights granted in Section 6.3.2 ("Grant By Customer"). Ragingwire agrees to use its best efforts to ensure that no portion of Customer Technology is displayed outside the Data Center(s) or distributed in any way to any third party. RagingWire shall not rent, lease, license, distribute, transfer, reproduce, display, modify, publicly perform or timeshare the Customer Technology, or any portion thereof, or use such as a component of or a basis for products or services prepared for sale, license, lease, access or other marketing or distribution. Neither RagingWire nor any of its representatives or agents shall prepare any derivative work based on the Customer Technology or other materials provided to RagingWire by Customer. Though not authorized to do so, should RagingWirer or any representative or agent create any derivative works of the Customer Technology, RagingWire, on behalf of itself and its representative and/or agent, hereby assigns any and all right, title and interest (including, without limitation, Intellectual Property Rights) in such derivative works to Customer. Neither RagingWire nor any of its representatives or agents shall translate, reverse engineer, decompile or disassemble the Customer Technology. RagingWire shall not allow any third party or unlicensed user or computer system to access or use the Customer Technology. RagingWire agrees not to demonstrate or disclose the results of any testing or bench-marking of the Customer Technology, to any third party, without Customer's prior written permission.
7. RAGINGWIRE'S WARRANTIES AND SERVICE LEVEL GOALS
7.1 RagingWire Warranties . RagingWire represents and warrants that it has the legal right to enter into this Agreement and perform its obligations hereunder. In the event of a breach of the warranties set forth in this Section 7.1, Customer's sole remedy shall be termination pursuant to Section 12 ("Termination"), except as provided elsewhere in this Agreement.
7.2 Service Level Goals . "Service Level Goals" means the service level goals applicable to the Services provided by RagingWire as set forth in the applicable SLA. If Customer experiences any Service performance issues, such as Service Outages, described in an applicable SLA, as a result of RagingWire's failure to provide the Services, the remedies and credits described in the applicable SLA shall apply.
7.2.1 Liquidated Damages . Except as provided elsewhere in this Agreement to the contrary, the Parties acknowledge and agree that because of the unique nature of the Services contemplated by this Agreement, it is difficult or impossible to determine with precision the specific amount of damages that might be incurred by Customer as a result of a failure of RagingWire to meet the Service Level Goals, or the specific amount that should be the responsibility of RagingWire in such circumstances. It is further understood and agreed by the Parties that Customer shall be damaged by such failure of RagingWire to meet the Service Level Goals, that it would be impracticable or extremely difficult to fix the actual damages resulting therefrom, that any credits that become payable under this Section 7.2 ("Service Level Goals") are in the nature of liquidated damages, and not a penalty, and are fair and reasonable under the circumstances, and such payments represent a reasonable estimate of fair compensation for the losses that may reasonably be anticipated from RagingWire's failure to meet the Service Level Goals.
7.2.2 Sole Remedy and Liability . In recognition of Section 7.2.1 ("Liquidated Damages") and the other provisions hereof, and notwithstanding any other provisions of this Agreement, the Parties acknowledge and agree that, as an essential part of this Agreement, the liquidated damages payable under Section 7.2.1 ("Liquidated Damages") shall be the sole and exclusive measure of damages and remedy for Customer, and the sole and exclusive liability and obligation of RagingWire, arising out of or in any way relating to RagingWire's failure to meet the Service Level Goals or any other failure or default by RagingWire in any way relating to the Services (including any Supplemental Emergency Services) or RagingWire's failure to perform or provide any Services hereunder. The Parties further acknowledge and agree that the pricing and other terms contained in this Agreement reflect and are based upon the intended allocation of risk between the Parties as reflected in this Section 7.2 ("Service Level Goals") and elsewhere in this Agreement, and form an essential part of this Agreement.
7.2.3 Maintenance . RagingWire will conduct scheduled maintenance of the Data Center(s) and Services. In addition, RagingWire may be required to perform emergency maintenance if an urgent, mission-critical, or other serious maintenance situation arises. RagingWire and Customer agree to cooperate to minimize adverse impacts to the other Party during such scheduled and emergency maintenance.
7.2.4 Limitations . THE SERVICE LEVEL GOALS SET FORTH IN THIS SECTION 7.2 ("SERVICE LEVEL GOALS") SHALL APPLY ONLY TO THE SERVICES PROVIDED BY RAGINGWIRE PURSUANT TO A SLA AND DO NOT APPLY TO (1) ANY SUPPLEMENTAL EMERGENCY SERVICES, AND (2) ANY SERVICES THAT EXPRESSLY EXCLUDE THE SERVICE LEVEL GOALS (AS STATED IN THE APPLICABLE SLA). Except as stated ELSEWHERE in this Agreement to the contrary, THIS SECTION 7.2 ("SERVICE LEVEL GOALS") STATES CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR ANY FAILURE BY RAGINGWIRE TO PROVIDE SERVICES AND/OR THE PROVISION OF DEFECTIVE SERVICES.
7.3 Selection of RagingWire Supplied Equipment; Manufacturer Warranty . CUSTOMER ACKNOWLEDGES THAT CUSTOMER HAS SELECTED THE RAGINGWIRE SUPPLIED EQUIPMENT BASED UPON ITS OWN REVIEW AND EVALUATION OF SUCH EQUIPMENT AND CUSTOMER HAS NOT IN ANY WAY RELIED UPON ANY RECOMMENDATIONS OR REPRESENTATIONS WHICH MAY HAVE BEEN MADE BY RAGINGWIRE. RAGINGWIRE DISCLAIMS ANY STATEMENTS MADE BY RAGINGWIRE RELATING THERETO. EXCEPT WITH RESPECT TO ANY EXPRESS WRITTEN WARRANTIES MADE IN THIS AGREEMENT BY RAGINGWIRE FOR SERVICES RELATED TO RAGINGWIRE SUPPLIED EQUIPMENT, CUSTOMER ACKNOWLEDGES AND AGREES THAT CUSTOMER'S USE AND POSSESSION OF THE RAGINGWIRE SUPPLIED EQUIPMENT SHALL BE SUBJECT TO AND CONTROLLED BY THE TERMS OF ANY MANUFACTURER'S OR, IF APPROPRIATE, SUPPLIER'S WARRANTY AND INDEMNITY, AND CUSTOMER AGREES TO LOOK SOLELY TO THE MANUFACTURER OR, IF APPROPRIATE, SUPPLIER (AND NOT TO RAGINGWIRE) WITH RESPECT TO ALL MECHANICAL, ELECTRICAL, SERVICE AND OTHER CLAIMS, INCLUDING, WITHOUT LIMITATION, WARRANTY AND INDEMNITY CLAIMS. THE RIGHT TO ENFORCE ALL WARRANTIES AND INDEMNITIES MADE BY SUCH MANUFACTURER OR SUPPLIER IS HEREBY, TO THE EXTENT RAGINGWIRE HAS THE RIGHT, ASSIGNED TO CUSTOMER FOR THE DURATION OF CUSTOMER'S USE OF THE RAGINGWIRE SUPPLIED EQUIPMENT. RAGINGWIRE PROVIDES NO WARRANTY OR INDEMNITY FOR ANY RAGINGWIRE SUPPLIED EQUIPMENT, FOR PERSONAL INJURY, PROPERTY DAMAGES, INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS OR OTHERWISE.
7.4 No Other Warranty . Except for the express warranties set forth in this SECTION 7 or in a sla ("Ragingwire's warranties AND SERVICES LEVEL GOALS"), the Services and the Ragingwire supplied equipment are provided on an "as is" basis, and customer's use of the Services and/or the ragingwire supplied equipment is at CUSTOMER'S own risk. RagingWire does not make, and hereby disclaims, any and all other express and/or implied warranties, including, but not limited to, warranties of merchantability, fitness for a particular purpose, noninfringement and title, and any warranties arising from a course of dealing, usage or trade practice. RagingWire does not warrant that the Services and/or USE OF the ragingwire supplied equipment will be uninterrupted, error-free, completely secure, OR THAT ALL ERRORS WILL BE CORRECTED.
7.5 Disclaimer of Actions Caused by and/or Under the Control of Third Parties . RagingWire does not and cannot control the flow of data to or from RagingWire's network and other portions of the internet. Such flow depends in large part on the PERFORMANCE of the internet Services provided or controlled by third parties. At times, actions or inactions of such third parties can impair or disrupt customer's CONNECTIONS to the internet (or portions thereof). Although RagingWire will use commercially reasonable efforts to take actions it deems appropriate to remedy and avoid such events, RagingWire cannot guarantee that such events will not occur. Accordingly, except for the negligence or willful misconduct on the part of RagingWire, RagingWire disclaims any and all liability resulting from or related to such events, AND CUSTOMER ACCEPTS SUCH DISCLAIMER WITHOUT LIABILITY TO RAGINGWIRE.
8. CUSTOMER'S REPRESENTATIONS, WARRANTIES
8.1.1 Warranties . Customer represents and warrants that: (i) it has the legal right and authority to enter into this Agreement and perform its obligations hereunder; (ii) it has the legal right and authority, and will continue to own or maintain the legal right and authority during the Term, to place and use any Customer Equipment as contemplated under this Agreement; (iii) the performance of its obligations and use of the Services (by Customer, its Representatives and customers) will not violate any applicable laws, regulations or the Rules and Regulations or cause a breach of any agreements with any third parties or unreasonably interfere with other RagingWire customers' use of RagingWire Services; (iv) all equipment, materials and other tangible items placed by Customer at the Data Center(s) will be configured and used in compliance with all applicable manufacturer specifications including, without limitation, power outlet, power consumption and clearance requirements; and (v) each Representative will be assigned a unique password, and no password will be shared or otherwise utilized by two (2) or more individuals.
8.1.2 Breach of Warranties . If Customer breaches any of the warranties in Section 8.1.1 ("Warranties"), in addition to any other remedies available at law or in equity, RagingWire will have the right, in its sole discretion, to immediately suspend any or all Services to Customer; provided, however, prior to any exercise of a remedy RagingWire will provide notice as provided in Section 12 ("Termination") and an opportunity to cure to Customer. If such breach is not cured within thirty (30) days, RagingWire shall have the right to terminate services as provided in Section 12. Customer shall be obligated to pay for Services provided due to suspension as a result of the breach.
8.2 Compliance with Laws; Rules and Regulations . Customer agrees that it shall use the Services only for lawful purposes and in accordance with this Agreement. Customer will comply at all times with all applicable laws and regulations and the Rules and Regulations, as amended by RagingWire from time to time. RagingWire may change the Rules and Regulations upon reasonable notice to Customer of at least five (5) days, which notice may be provided by posting such new Rules and Regulations at the affected Data Center. Customer acknowledges that Customer has received, read and understood the current version of the Rules and Regulations. The Rules and Regulations contain restrictions regarding online conduct (including prohibitions against unsolicited commercial email) by Customer, its Representatives and its customers. Customer agrees to comply with such restrictions and further agrees that a failure to comply with the same shall, atRagingWire's election, constitute a material breach of this Agreement. Customer further acknowledges that RagingWire exercises no controlwhatsoever over the content of the information passing through the Customer Equipment and that Customer agrees that it is Customer's sole responsibility to ensure that the information transmitted and received by Customer, its Representatives and its customers comply with all applicable laws and regulations and the Rules and Regulations.
8.3.1 Use Administrator . Promptly after the Effective Date, Customer shall designate up to two individuals to serve as the use administrator(s) ( "Use Administrator" ) for Customer. The Use Administrator shall be responsible for assigning passwords to Representatives, administering security profiles of Representatives, inputting data to the Individual Representative Form, and verifying the identity of Representatives when called upon by RagingWire to do so. The Use Administrator(s) shall also serve as the primary contact between Customer and RagingWire pertaining to the Services.
8.3.2 Representatives . For an individual to be a Representative, the individual must be identified in writing by Customer on an Individual Registration Form prior to first access to the Data Center by such Representative. All Individual Registration Forms must be authenticated by Customer's Use Administrator and a valid password issued in order to become effective. Customer must promptly submit (in writing) and authenticate any changes to the information on an existing Customer Registration Form to RagingWire. RagingWire shall have no liability whatsoever for relying on an outdated Customer Registration Form which has not been properly updated by Customer.
8.3.3 Use of Passwords . Customer acknowledges and agrees that it is solely responsible for maintaining the confidentiality of the passwords distributed to Representatives, and agrees to notify RagingWire if it discovers that the password is lost, stolen, disclosed to an unauthorized third party, or otherwise may have been compromised. Customer shall be entirely responsible for any and all activities which occur under Customer's passwords, whether or not Customer or its Authorized Users are the entity or individuals undertaking such activities.
8.3.4 Data Center Access . Except with the advance written consent of RagingWire, Customer's access to the Data Center(s)shall be limited solely to the Representatives. Representatives shall have access only to the Customer Area and are prohibited from accessing other areas of the Data Center(s) unless accompanied by an authorized RagingWire representative. Customer and its Representatives shall cooperate with and comply with all security and safety measures promulgated by RagingWire from time to time in the Rules and Regulations, including, without limitation, the use of entry and exit logs and agreements, key cards, voice, photo, biometric, or other personal identification recognition devices, and other mechanisms and devices for registering, tracking and limiting access to the Customer Area and the Data Center(s). In the event of an emergency situation, as reasonably determined by RagingWire, involving or potentially involving the Customer Equipment or the RagingWire Supplied Equipment, RagingWire may admit individuals into the Customer Area pursuant to RagingWire's Emergency Admission Procedures.
8.4 License to Use of Space . Customer acknowledges that as a user of space in the Data Center(s), Customer has no right or entitlement to any particular location or amount of square footage (except as otherwise expressly provided in a SLA), but has the right to use the Customer Area solely under a non-exclusive, non-transferable, revocable license, as provided in Sections 8.8 ("Use of Customer Area") and 13.2 ("No Lease; Other Limitations").
8.5 Restrictions on Use of Services . Except as otherwise provided in a written agreement between the Parties, Customer shall not, without the prior written consent of RagingWire (which consent may be granted or withheld in its sole and absolute discretion), resell the Services to any third parties or connect the Customer Equipment directly to anything other than the RagingWire network, equipment and facilities.
8.6 Equipment And Connections . Each piece of Customer Equipment and RagingWire Supplied Equipment installed in the Customer Area must be clearly labeled, in accordance with the standard instructions in RagingWire's Customer Guide , with Customer name (or a code name identified in writing to RagingWire) and individual component identification. Each connection to and from each piece of such equipment shall be clearly labeled with Customer's name (or code name) at the starting and ending point of the connection. Customer Equipment and RagingWire Supplied Equipment must be configured and run at all times in compliance with the appropriate manufacturer's specifications, including power outlet, power consumption, and clearance requirements. Customer must provide RagingWire with prior written notice any time Customer intends to connect or disconnect any Customer Equipment, RagingWire Supplied Equipment, or other equipment in the Customer Area.
8.7 Relocation of Customer Equipment . If it becomes necessary to relocate the Customer Equipment or RagingWire Supplied Equipment to another Customer Area or Data Center, Customer shall cooperate with RagingWire to facilitate such relocation, whether such relocation is based on the reasonable business needs of RagingWire (including, but not limited to, the needs of other RagingWire customers), the expansion of the space requirements of Customer, or otherwise. RagingWire shall be solely responsible for any costs and expenses incurred by RagingWire in connection with any such relocation and will use commercially reasonable efforts, in cooperation with Customer, to minimize and avoid any interruption of the Services.
8.8 Use of Customer Area . Customer acknowledges that RagingWire has made no representations or warranties about the physical condition of the Customer Area or the Data Center(s), their compliance with laws or their fitness for Customer's intended use. Customer agrees that Customer occupies the Customer Area on an "as-is, where-is" basis under a non-exclusive, non-transferable, revocable license for the Term. Customer agrees that if any law or regulation applicable to the Customer Area or the Data Center(s) requires that alterations or improvements be made to the Customer Area, other customer areas or the Data Center(s), to the extent such requirements result from Customer's use and occupancy of the Customer Area or the Data Center(s), Customer agrees that Customer shall pay for such alterations and improvements. Notwithstanding Customer's payment therefore, the Parties agree that all such alterations and improvements shall immediately become a part of the Data Center and the property of RagingWire or its lessor as applicable.
8.9.1 Conduct . Customer on behalf of itself and its Representatives agrees to adhere to and abide by all security and safety measures set forth in the Rules and Regulations, the Customer Guide or as otherwise established by RagingWire. A copy of the current version of the Rules and Regulations and the Customer Guide shall be made available to Customer upon request. Customer on behalf of itself and its Representatives expressly agrees to not do or participate in any of the following: (i) interfere with, make any unauthorized use of, misuse or abuse any of RagingWire's property or equipment, or that of any other RagingWire customer or third party (ii) harass or disturb any individual, including RagingWire's personnel and representatives of other RagingWire customers; or (iii) any activity that is in violation of the law or aids or assists any criminal activity while on RagingWire's property, or in connection with the Data Center(s) or the Services. additionally, customer acknowledges that neither it nor any of its representatives shall disturb, in any way, the raised floor of the data center(s).
8.9.2 Prohibited Items . Customer and Representatives shall keep the Customer Area, and common areas adjacent to it, clean and clear of debris and refuse at all times. Customer shall not, except as otherwise agreed by RagingWire in writing:
(a) Place any Customer Equipment in the Customer Area that is not properly labeled and (if RagingWire is providing managed Services) has not been identified in writing to RagingWire;
(b) Store any paper products or other combustible materials of any kind in the Customer Area (other than equipment manuals and, if applicable, immediately required printing supplies); or
(c) Bring any Prohibited Materials (as defined below) into any Data Center. Such "Prohibited Materials" include, without limitation, the following and any similar items: tobacco products and lighters; explosives and weapons; hazardous or flammable materials; spray paint cans; alcohol, illegal drugs and other intoxicants; electromagnetic devices especially those which could interfere with computer and telecommunications equipment; radioactive materials; photographic, video, or magnetic recording equipment of any kind (other than tape back-up equipment); or animals (except those specifically trained and used to provide assistance to the impaired).
(d) Bring food or drinks onto the raised floor of the Data Center(s). These items are permitted only in the designated cafeteria areas.
8.9.3 Prohibited Activities . Customer, on behalf of itself and its Representatives, agrees that it will not: (i) send unsolicited commercial messages or communications in any form to third parties (commonly known as "spam" ); (ii) engage in any activities or actions that infringe upon or misappropriate the Intellectual Property Rights of any third party, including, without limitation, using third-party copyrighted materials without appropriate permission, using third-party trademarks without appropriate permission or attribution, and using or distributing third-party information protected as a trade secret information in violation of a duty of confidentiality; (iii) engage in any activities or actions that would violate the personal privacy rights of others including, but not limited to, collecting and distributing information about Internet users without their permission, except as permitted by applicable law; (iv) send, post, or host harassing, abusive, libelous, or obscene materials or assist in any similar activities related thereto; (v) intentionally omit, delete, forge, or misrepresent transmission information, including headers, return mailing and Internet protocol addresses; (vi) engage in any activities or actions intended to withhold or cloak Customer or its customer's identity or contact information; (vii) use RagingWire's Services for any illegal purposes, in violation of any applicable laws or regulations or in violation of the rules of any other service providers, websites, chat rooms and the like; (viii) intentionally transmit or otherwise propagate computer viruses or similar destructive computer codes; (ix) disturb or anchor any item to the raised floor of the Data Center(s); (x) climb or scale any cages, ladders, racks or any support structures; (xi) engage in any other activities which may be deemed prohibited, in writing, by RagingWire, in its sole reasonable discretion; or (xii) assist or permit any persons in engaging in any of the activities described above. All of the foregoing are "Prohibited Activities" . If Customer becomes aware of any Prohibited Activities, Customer will use Customer's best efforts to remedy such Prohibited Activities immediately including, if necessary, limiting or terminating any of its Representative's access to Customer's online facilities.
8.9.4 Cameras . Customer nor any of its Representatives shall utilize, install, or configure any camera or other media device so as to view, record, or transmit any images or information regarding the Data Center(s). In order to maintain each Customer's privacy, all camera installations allowing a Customer to view their own Customer Area will be performed by RagingWire.
8.10 Suspension and Termination of Representative Access to Data Center . RagingWire shall have the right to suspend and/or terminate a Representative's access to the Data Center(s) at any time for any material failure, as determined in RagingWire's sole discretion, by such Representative to comply with the terms of this Agreement, the Customer Guide and/or the Rules and Regulations. In the event that access is terminated, Customer shall immediately take steps, to RagingWire's reasonable satisfaction, to ensure that Customer's remaining Representatives shall conform their conduct to the terms of this Agreement, the Customer Guide and the Rules and Regulations.
8.11 RagingWire Supplied Equipment .
8.11.1 Delivery and Term . On or prior to the Service Commencement Date, RagingWire shall deliver to Customer, at the designated Customer Area, the RagingWire Supplied Equipment. Customer shall have the right to use the RagingWire Supplied Equipment for the Term unless otherwise specified in the applicable SLA. Customer shall not remove any RagingWire Supplied Equipment from the Customer Area without the prior written consent of RagingWire.
8.11.2 Title. The RagingWire Supplied Equipment shall always remain the personal property of RagingWire. Customer shall have no right or interest in or to the RagingWire Supplied Equipment except as expressly provided in this Agreement and any SLA and shall hold the RagingWire Supplied Equipment subject and subordinate to the rights of RagingWire. Customer agrees to execute UCC financing statements as and when requested by RagingWire and hereby appoints RagingWire as Customer's attorney-in-fact to execute such financing statements on Customer's behalf. Customer will, at Customer's own expense, keep the RagingWire Supplied Equipment free and clear from any liens or encumbrances of any kind (except any caused by RagingWire) and will indemnify and hold RagingWire harmless from and against any loss or expense caused by Customer's failure to do so. Customer shall give RagingWire immediate written notice of any attachment or judicial process affecting the RagingWire Supplied Equipment or RagingWire's ownership thereof. Customer will not remove, alter or destroy any labels on the RagingWire Supplied Equipment stating that it is the property of RagingWire and shall allow the inspection of the RagingWire Supplied Equipment at any time.
Customer Equipment shall always remain the personal property of Customer. RagingWire shall have no right or interest in or to Customer Equipment except as expressly provided in this Agreement and any SLA. RagingWire will, at RagingWire's own expense, keep Customer Equipment free and clear from any liens or encumbrances of any kind (except any caused by Customer) and will indemnify and hold Customer harmless from and against any loss or expense caused by RagingWire's failure to do so. RagingWire shall give Customer immediate written notice of any attachment or judicial proceeding affecting Customer Equipment or Customer's ownership thereof. RagingWire will not remove, alter or destroy any labels on Customer Equipment stating that it is the property of Customer.
8.11.3 Use, Maintenance and Repair . Customer will, at Customer's own expense, keep the RagingWire Supplied Equipment in good repair, appearance and condition, other than normal wear and tear, and, if not included in the Services, shall obtain, pay for and keep in effect throughout the Term a hardware and software maintenance agreement with the manufacturer or other party acceptable to RagingWire. All parts furnished in connection with such repair and maintenance shall be manufacturer authorized parts and shall immediately become components of the RagingWire Supplied Equipment and the property of RagingWire. Customer shall use the RagingWire Supplied Equipment in compliance with the manufacturer's or supplier's suggested guidelines and in accordance with the Rules and Regulations. If Customer fails to maintain the RagingWire Supplied Equipment as described in this Section 8.11.3, RagingWire shall have the option, in its sole and absolute discretion, to: (i) retake possession of the RagingWire Supplied Equipment; and/or (ii) provide such maintenance and charge Customer the associated costs of such maintenance, and Customer agrees to pay any such charges.
8.11.4 Upgrades and Additions . Customer may affix or install any accessory, addition, upgrade, equipment or device to or on the RagingWire Supplied Equipment (other than electronic data) ( "Additions" ), provided that such Additions (i) can be removed without causing damage to the RagingWire Supplied Equipment; (ii) do not reduce the value of the RagingWire Supplied Equipment; (iii) are obtained from or approved in writing by RagingWire prior to affixing or installing such Additions to or on the RagingWire Supplied Equipment, and (iv) are not subject to the interest of any third party. No Additions shall be installed without RagingWire's prior written consent. At the end of the Initial Term, or Renewal Term (if applicable), Customer shall, at RagingWire's sole election, remove any Additions which (i) were not provided by RagingWire, and (ii) are readily removable without causing material damage or impairment of the intended function, use, or value of the RagingWire Supplied Equipment, and Customer shall restore the RagingWire Supplied Equipment to its original configuration. Any Additions, which are not readily removable, shall become the property of RagingWire, lien free and at no cost to RagingWire.
8.12 Scheduled And Emergency Maintenance . RagingWire will conduct routine scheduled maintenance of the Data Center(s) according to the maintenance schedule for the applicable Data Center, as such schedule may e modified from time to time in RagingWire's sole discretion. RagingWire shall make a copy of the then current applicable maintenance schedule available to Customer upon request. In the event that an urgent, mission-critical maintenance situation arises, RagingWire shall have to the right to perform emergency maintenance of the Data Center(s). Any such emergency maintenance, not caused solely by the actions of RagingWire shall not constitute a breach of this Agreement. To the extent circumstances allow in an emergency situation, RagingWire will make reasonable efforts to notify Customer of emergency maintenance about to be performed. During such scheduled and emergency maintenance periods, the Customer Equipment may be unable to transmit and/or receive data, and Customer may be unable to access the Customer Equipment and/or the RagingWire Supplied Equipment. Customer agrees to cooperate with RagingWire during scheduled and emergency maintenance periods. Customer further agrees that RagingWire shall have the right to access the Customer Area for the purpose of performing emergency maintenance.
9.1 RagingWire Minimum Insurance Levels . RagingWire agrees to keep in full force and effect during the term of this Agreement: (i) a broad form Commercial General Liability Insurance policy providing for coverage of at least two million dollars ($2,000,000.00) per occurrence for bodily injury and property damage; and (ii) workers' compensation insurance in an amount not less than that required by applicable law. The Commercial General Liability Insurance policy shall be (i) written on an "occurrence" policy form and not on a "claims made" form; (ii) shall be primary and not contributory with RagingWire's liability insurance; (iii) shall provide for not less than thirty (30) days' advance written notice to RagingWire from the insurer or insurers, if more than one, of any cancellation, nonrenewal, or material change in coverage or available limits of liability; and (iv) shall be issued by an insurance company with a rating of no less than A-V in the current Best's Insurance Guide, or otherwise be acceptable to Customer, and admitted to engage in the business of insurance in the state in which the Services are actually provided (notwithstanding the provisions of Section 3.1 ("Delivery of Services")). RagingWire's Commercial General Liability Insurance coverage may be provided by a combination of primary, excess, and umbrella policies, provided that those policies are absolutely concurrent in all respects regarding the coverage afforded by the policies. The coverage of any excess or umbrella policy must be at least as broad as the coverage of the primary policy. RagingWire shall ensure, and be solely responsible for ensuring, that its contractors and subcontractors maintain insurance coverage at levels no less than those required by applicable law and customary in the applicable industry.
9.2 Customer Minimum Insurance Levels . Customer agrees to keep in full force and effect during the term of this Agreement: (i) a broad form Commercial General Liability Insurance policy providing for coverage of at least two million dollars ($2,000,000.00) per occurrence for bodily injury and property damage; and (ii) workers' compensation insurance in an amount not less than that required by applicable law. The Commercial General Liability Insurance policy shall be (i) written on an "occurrence" policy form and not on a "claims made" form; (ii) shall be primary and not contributory with Customer's liability insurance; (iii) shall provide for not less than thirty (30) days' advance written notice to Customer from the insurer or insurers, if more than one, of any cancellation, nonrenewal, or material change in coverage or available limits of liability; and (iv) shall be issued by an insurance company with a rating of no less than A-V in the current Best's Insurance Guide, or otherwise be acceptable to RagingWire, and admitted to engage in the business of insurance in the state in which the Services are actually provided (notwithstanding the provisions of Section 3.1 ("Delivery of Services")). Customer's Commercial General Liability Insurance coverage may be provided by a combination of primary, excess, and umbrella policies, provided that those policies are absolutely concurrent in all respects regarding the coverage afforded by the policies. The coverage of any excess or umbrella policy must be at least as broad as the coverage of the primary policy. Customer shall ensure, and be solely responsible for ensuring, that its Representatives (including contractors and subcontractors) maintain insurance coverage at levels no less than those required by applicable law and customary in the applicable industry.
Customer shall be solely responsible to procure and maintain property insurance coverage for the Customer Equipment, the RagingWire Supplied Equipment and all other items of Customer's property from any and all risks in, on, at or about the Customer Area or the Data Center(s) at which the Services are provided, including without limitation fire, fire protection system failure and earthquake damage.
9.3 Certificates of Insurance . Customer shall (i) deliver to RagingWire certificates of insurance which evidence the minimum levels of insurance set forth in Section 9.2 ("Customer Minimum Insurance Levels"); and (ii) cause its insurance provider(s) to name RagingWire as an additional insured and to notify RagingWire in writing of the effective date of such coverage. Customer shall deliver the certificates of insurance required by this Section 9.3 to RagingWire (i) on or before the first entry of Customer or a Representative onto any Data Center; (ii) again at least thirty (30) days before the expiration date of any applicable policy; and (iii) again on renewal of any applicable policy.
RagingWire shall (i) deliver to Customer certificates of insurance which evidence the minimum levels of insurance set forth in Section 9.1 ("RagingWire Minimum Insurance Levels"); and (ii) cause its insurance provider(s) to name Customer as an additional insured and to notify Customer in writing of the effective date of such coverage. RagingWire shall deliver the certificates of insurance required by this Section 9.3 to Customer (i) on or before the first entry of Customer or a Representative onto any Data Center; (ii) again at least thirty (30) days before the expiration date of any applicable policy; and (iii) again on renewal of any applicable policy
9.4 Obligations Continue Regardless of Insurance . The insurance requirements set forth in this Section 9 ("Insurance") are independent of Customer's indemnification and other obligations under this Agreement and shall not be construed or interpreted in any way to restrict, limit or modify Customer's indemnification and other obligations or to limit Customer's liability under this Agreement.
9.5 Waiver of Subrogation Rights . RagingWire and Customer each agrees to cause the insurance companies issuing their respective insurance policies to waive any subrogation rights that those insurance companies may have against the other Party by way of contract or otherwise. RagingWire and Customer hereby waive any right that either may have against the other on account of any bodily injury or property loss or damage to the extent that such loss or damage is insured hereunder under their respective insurance policies.
10.1 Personal Injury . EACH REPRESENTATIVE AND ANY OTHER PERSON VISITING A DATA CENTER DOES SO AT HIS OR HER OWN RISK. RAGINGWIRE SHALL HAVE NO LIABILITY WHATSOEVER FOR ANY HARM TO SUCH PERSONS RESULTING FROM ANY CAUSE OTHER THAN THE NEGLIGENCE OR WILLFUL MISCONDUCT OF RAGINGWIRE.
10.2 Damage to Customer Equipment . RAGINGWIRE SHALL HAVE NO LIABILITY FOR ANY DAMAGE TO, OR LOSS OF, ANY CUSTOMER EQUIPMENT RESULTING FROM ANY CAUSE OTHER THAN THE NEGLIGENCE OR WILLFUL MISCONDUCT OF RAGINGWIRE. TO THE EXTENT RAGINGWIRE IS LIABLE FOR ANY DAMAGE TO, OR LOSS OF, CUSTOMER EQUIPMENT FOR ANY REASON, SUCH LIABILITY SHALL BE LIMITED SOLELY TO THE THEN-CURRENT MARKET VALUE OF THE CUSTOMER EQUIPMENT, EXCLUDING (i) ANY LOST DATA, (ii) LOST SOFTWARE, AND/OR (iii) LOST FIRMWARE.
10.3 Waiver of Consequential and Incidental Damages . IN NO EVENT SHALL EITHER PARTY BE LIABLE OR RESPONSIBLE TO THE OTHER OR ANY THIRD PARTY FOR ANY TYPE OF INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOST REVENUE, LOST PROFITS, REPLACEMENT GOODS, LOSS OF TECHNOLOGY, LOSS OF RIGHTS OR SERVICES, LOSS OF DATA, OR INTERRUPTION OR LOSS OF USE OF SERVICE OR EQUIPMENT, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER ARISING UNDER A THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, OR OTHERWISE.
10.4 Hazardous Materials; Assumption of Risk . CUSTOMER ACKNOWLEDGES THAT CERTAIN HAZARDOUS OR TOXIC SUBSTANCES, MATERIALS, OR WASTE (COLLECTIVELY, "HAZARDOUS MATERIALS" ), INCLUDING BUT NOT LIMITED TO BATTERY ACID, HIGH VOLTAGE ELECTRICITY, AND DIESEL FUEL, MAY BE PRESENT IN OR AROUND THE DATA CENTER(S) AND THAT CUSTOMER AND ITS REPRESENTATIVES MAY BE EXPOSED TO SUCH HAZARDOUS MATERIALS. CUSTOMER IS AWARE OF THE INHERENT RISKS OF INJURY AND PROPERTY DAMAGE INVOLVED IN RAGINGWIRE'S NORMAL OPERATIONS OF THE DATA CENTER(S), INCLUDING, WITHOUT LIMITATION, RISKS DUE TO OCCUPATIONAL OR ENVIRONMENTAL EXPOSURE TO HAZARDOUS MATERIALS KNOWN TO CAUSE CANCER, BIRTH DEFECTS, REPRODUCTIVE HARM, OR OTHER PHYSICAL AILMENTS. CUSTOMER ASSUMES ANY AND ALL KNOWN AND UNKNOWN RISKS OF INJURY AND PROPERTY DAMAGE THAT MAY RESULT FROM EXPOSURE TO HAZARDOUS MATERIALS IN OR AROUND THE DATA CENTER(S), EXCEPT FOR INJURY AND PROPERTY DAMAGE RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF RAGINGWIRE.
10.5 Maximum Liability NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, RAGINGWIRE'S MAXIMUM AGGREGATE LIABILITY TO CUSTOMER RELATED TO OR IN CONNECTION WITH THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT PAID BY CUSTOMER TO RAGINGWIRE HEREUNDER FOR THE TWELVE (12) MONTH PERIOD IMMEDIATELY PRECEDING THE FIRST EVENT WHICH GAVE RISE TO SUCH LIABILITY.
10.6 Loss of Power . RagingWire shall not be liable for any failure or delay in its performance, including a Service Outage, under this Agreement due to the loss of power to any Data Center resulting from the unauthorized activation, or the required periodic testing pursuant to State or local laws or regulations, of any of the Emergency Power Off ( "EPO" ) switches.
10.7 Basis of the Bargain; Failure of Essential Purpose . Customer acknowledges that RagingWire has set its prices and entered into this Agreement in reliance upon the limitations, exclusions, and disclaimers of liability and the disclaimers of warranties and damages set forth in this Agreement, and that such limitations, exclusions and disclaimers form an essential basis of the bargain between Customer and RagingWire. The limitations and exclusions of liability and disclaimers specified in this Agreement shall survive and apply even if the remedies provided herein are found to have failed of their essential purpose.
11.1 Indemnification By RagingWire . RagingWire agrees to indemnify, defend and hold harmless Customer from and against any and all costs, liabilities, losses, and expenses (including, but not limited to, reasonable attorneys' fees) (collectively, "Losses" ) resulting from (i) a breach of its warranties contained in this Agreement or a SLA; (ii) from any claim, suit, action, or proceeding (each, an "Action" ) brought by any third party against Customer or its affiliates alleging: (a) the infringement or misappropriation of any Intellectual Property Rights relating to the delivery or use of the Services (excluding any contributory infringement by the Customer); (b) personal injury and/or property damage to the extent caused by the [gross] negligence or willful misconduct of RagingWire; or (c) any violation of or failure to comply with the Rules and Regulations. Customer may retain its own counsel to assist in the defense of any indemnified Action, at its own expense and provided RagingWire shall retain control over such defense.
11.2 Indemnification By Customer Customer agrees to indemnify, defend and hold harmless RagingWire, its employees, agents, affiliates and customers (collectively the "RagingWire Indemnitees" ) from and against Losses resulting from (i) a breach of its warranties contained in this Agreement or SLA; (ii) any Action brought by any third party against any of the RagingWire Indemnitees alleging: (a) the infringement or misappropriation of any Intellectual Property Rights relating to the use of the Services; (b) personal injury and/or property damage to the extent caused by the negligence or misconduct of Customer or its Representatives; (c) any violation of or failure to comply with the Rules and Regulations by Customer or its Representatives; (d) any damage or destruction to the Customer Area, the Data Center(s), RagingWire Supplied Equipment or equipment of any third party caused by Customer or its Representatives; (e) damages as a result of the use or occupancy of the Customer Area or Data Center(s) by Customer or its Representatives; (f) infringement or misappropriation of any Intellectual Property Rights of any third party by Customer or its Representatives; (g) defamation, libel, slander, obscenity, pornography, or violation of the rights of privacy or publicity of any third party by Customer or its Representatives; (h) spamming, or any other offensive, harassing or illegal conduct or violation of the Rules and Regulations by Customer or its Representatives, or The RagingWire Indemnitees may retain their own counsel to assist in the defense of any indemnified Action, at their own expense and provided Customer shall retain control over such defense.
11.3 Additional Indemnities of Customer RagingWire shall have no liability for, and Customer shall indemnify, defend and hold the RagingWire Indemnitees harmless against, any Losses arising from Actions alleging any infringement of the Intellectual Property Rights of a third party resulting from (i) compliance with Customer's designs, specifications, or instructions; (ii) modification of the Services or the RagingWire Supplied Equipment by Customer or its Representatives; (iii) use of the Services or the RagingWire Supplied Equipment other than as authorized by RagingWire; (iv) use or combination of such the Services or the RagingWire Supplied Equipment with any items not supplied by RagingWire (including, without limitation, any Additions) or Customer's failure to use updated or modified versions of the Services or the RagingWire Supplied Equipment provided by RagingWire; or (v) any information provided by Customer to RagingWire.
11.4 Notice . Each Party's indemnification obligations set forth in Section 11.1 ("Indemnification By RagingWire") and Section 11.2 ("Indemnification By Customer") shall be subject to the following: (i) receiving prompt and sufficient written notice of the existence of any Action so that the indemnifying Party is not prejudiced by a lack of notice; (ii) being able, at its option, to control the defense of such Action; (iii) the indemnified party not settling any such action, claim or suit without the indemnifying party's prior written consent; and (iv) receiving full cooperation of the indemnified Party in the defense of such Action.
11.5 Enjoinment If Customer's use of the Services or the RagingWire Supplied Equipment under the terms of this Agreement is, or in RagingWire's opinion is likely to be, enjoined or RagingWire desires to limit its exposure to an Action, then RagingWire may, at its sole option and expense, either: (i) procure for Customer the right to continue using such Services or RagingWire Supplied Equipment under the terms of this Agreement; (ii) replace or modify such Services or RagingWire Supplied Equipment so that it is or they are non-infringing and substantially equivalent in function to the enjoined Services or RagingWire Supplied Equipment; or (iii) if options (i) and (ii) above cannot be accomplished despite the reasonable efforts of RagingWire, then RagingWire may terminate Customer's rights and RagingWire's obligations under this Agreement with respect to such Services or RagingWire Supplied Equipment and refund to Customer the unearned portion of any fees paid to RagingWire.
11.6 Sole and Exclusive Obligations and Remedies . THE FOREGOING INDEMNITY AND LIMITED REMEDIES ARE THE PARTIES SOLE AND EXCLUSIVE OBLIGATIONS, AND THE PARTIES SOLE AND EXCLUSIVE REMEDIES, WITH RESPECT TO INFRINGEMENT OR MISAPPROPRIATION OF ANY INTELLECTUAL PROPERTY RIGHTS.
12.1 Termination Without Cause . Either Customer or RagingWire may terminate any Services or this Agreement without cause, provided that the terminating Party notifies the other Party in writing at least one hundred and eighty (180) days prior to the end of the Initial Term (or a Renewal Term, if applicable), in which case such Services or the Agreement shall terminate at the end of such term. The termination of any particular Service will not affect Customer's obligation to pay for other Services or any other amounts due from Customer to RagingWire.
12.2.1 For Curable Breach . Subject to Section 7.2 ("Service Level Goals"), either Customer or RagingWire may terminate this Agreement if the other Party breaches any material term or condition of this Agreement and fails to cure such breach within thirty (30) days after receipt of written notice of the same, except in the case of failure to pay fees, which must be cured within five (5) business days after receipt of written notice from RagingWire. Customer may also terminate Services to be provided in the future and the obligation to pay for such future Services in accordance with the terms of the applicable SLA.
12.2.2 Insolvency . Either party may terminate this Agreement effective upon written notice if Customer: (i) becomes the subject of an involuntary petition in bankruptcy or any involuntary proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors, if such involuntary petition or involuntary proceeding is not dismissed within thirty (30) days of filing; or (ii) becomes the subject of a voluntary petition in bankruptcy or any voluntary proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors.
12.2.3 Incurable Breach E ither Party may terminate this Agreement effective upon written notice, if the other Party has breached its obligations of confidentiality set forth in Section 6.1 ("Confidential Information").
12.3 No Liability Upon Expiration . Neither Party shall be liable to the other Party for any expiration of any Service in accordance with the terms of the applicable SLA or, excepting Section 12.2 ("Termination for Cause"), this Agreement in accordance with its terms.
12.4 Effect of Termination . Upon the effective date of termination of a Service pursuant to this Agreement:
12.4.1 Termination of Service . RagingWire will immediately cease providing such Service;
12.4.2 Payment . Any and all payment obligations of Customer under this Agreement for such Service provided through the date of termination shall immediately become due and payable, and such payment obligations shall accrue interest, from the date that is thirty (30) days after the final invoice date for such Service, at the Applicable Rate; and
12.4.3 Return of Equipment . Subject to Section 12.5 ("Customer Equipment as Security"), within ten (10) business days of such termination Customer shall, with respect to such Service: (i) remove from the Data Center(s) all associated Customer Equipment (excluding any RagingWire Supplied Equipment) and any other Customer property; (ii) deliver or make available all associated RagingWire Supplied Equipment to an authorized representative of RagingWire; and (iii) return the Customer Area to RagingWire in the same condition as it was on the Service Commencement Date, normal wear and tear excepted. If Customer does not remove the Customer Equipment and other Customer property within such ten (10) business day period, RagingWire will have the option to (i) move any and all such property to secure storage and charge Customer for the cost of such removal and storage, and/or (ii) liquidate the property in any reasonable manner.
12.5 Survival. The following will survive any expiration or termination of this Agreement: Sections 3.2, 5, 6.1, 6.2, 6.4, 7.2, 7.4, 7.5, 8, 9.4, 9.5, 10, 11, 12 and 13.
13.1 Force Majeure . Excepting any financial obligations arising under this Agreement, neither RagingWire nor Customer shall be liable for any failure or delay in its performance, including Service Outages, under this Agreement due to any cause beyond its reasonable control, including, without limitation, acts of war, acts of God, earthquake, flood, fire, embargo, riot, sabotage, labor dispute, strike or lockout, failure of an energy provider to supply power, governmental act or failure of the Internet (not resulting from the actions or inactions of a Party) (each, a "Force Majeure Event" ), provided that the delayed Party: (i) gives the other Party prompt notice of such cause; and (ii) uses commercially reasonable efforts to correct such failure or delay in performance. In the event that a Force Majeure event continues for a period of five (5) business days, either party shall have the right to terminate this Agreement and any SLA upon written notice to the other party.
13.2 No Lease; Other Limitations . This Agreement is an agreement for services and is not intended to and shall not constitute a lease of any real property or a transaction for the sale of goods. Customer acknowledges and agrees that: (i) it has been granted only a non-exclusive, non-transferable revocable license to occupy the Customer Area and use the Data Center(s) and any RagingWire Supplied Equipment in accordance with this Agreement; (ii) Customer has not been granted any real property interest in the Customer Area or Data Center(s); (iii) Customer has no rights as a tenant or otherwise under any real property or landlord/tenant laws, regulations, or ordinances and to the full extent permissible under law waives and releases any rights or remedies with respect thereto; (iv) this Agreement, to the extent it involves the use of space or property leased by RagingWire, shall be subordinate to any lease between RagingWire and its landlord(s); and (v) the expiration or termination of any such lease shall terminate this Agreement as to such space or property subject to Customer retaining any rights or claims it may have against RagingWire arising from the expiration or termination of such lease. Customer hereby waives and releases any claims or rights to make a claim that it may have against the landlord(s) and RagingWire under any lease by RagingWire with respect to any Customer Equipment or other property of Customer located in the premises demised to RagingWire by such landlord(s). Customer will comply with all Rules and Regulations concerning use and occupancy of the Customer Area and other areas in the facilities. Except as expressly provided in Section 13.10 ("Assignment"), Customer shall have no right to transfer its rights of use and occupancy of the Customer Area or Data Center(s) or the RagingWire Supplied Equipment in whole or in part, and any attempted sublicense or transfer of its right of use and occupancy under the licenses granted under this Agreement shall be void.
13.3 Marketing . Customer agrees that during the term of this Agreement RagingWire may publicly refer to Customer, orally and in writing, as a customer of RagingWire upon the prior written consent of Customer. Any other public reference to Customer by RagingWire will require Customer's prior written consent which consent may be for any reason or no reason withheld.
13.4 Government Regulations . Customer will not export, re-export, transfer, or make available, whether directly or indirectly, any regulated item or information to anyone outside the United States in connection with this Agreement without first complying with all export control laws and regulations which may be imposed by the U.S. Government and any country or organization of nations within whose jurisdiction Customer operates or does business.
13.5 Non-Solicitation . During the Term, neither RagingWire nor Customer will, and each Party will ensure that its respective affiliates do not, directly or indirectly, solicit or attempt to solicit for employment any persons employed by the other Party. Customer further agrees that during the Term, it will not, directly or indirectly, solicit or attempt to solicit for employment any persons contracted by RagingWire to provide any Services to Customer.
13.6 No Third Party Beneficiaries . RagingWire and Customer each agrees that, except as otherwise expressly provided in Section 11 ("Indemnification"), there shall be no third party beneficiaries to this Agreement, including but not limited to the insurance providers for either Party or the customers of Customer.
13.7 Governing Law; Choice of Forum . This Agreement is made under and will be governed by and construed in accordance with the laws of the State of California (except that body of law controlling conflicts of law). The United Nations Convention on Contracts For the International Sale of Goods shall not apply to this Agreement. Any litigation resulting from a dispute or claim arising under or relating to this Agreement shall be resolved in a state or federal court in Sacramento, California. The Parties specifically submit to the personal jurisdiction and subject matter jurisdiction of the state and federal courts located in Sacramento, California.
13.8 Informal Dispute Resolution . The Parties shall endeavor to settle by mutual discussions in good faith any disputes or claims arising under or relating to this Agreement or any SLA, including the existence, validity, interpretation, performance, termination or breach of this Agreement or any SLA. Within ten (10) days of a Party's notice of a dispute or claim, at least one management level representative from each Party who is not directly involved in the dispute and with proper authority to resolve this matter shall meet face to face and exhaust all reasonable efforts to resolve the matter.
13.9 Severability; Waiver . If any provision of this Agreement is determined by any court of competent jurisdiction to be invalid, illegal or unenforceable to any extent, that provision shall, if possible, be construed as though more narrowly drawn, if a narrower construction would avoid such invalidity, illegality or unenforceability or, if that is not possible, such provision shall, to the extent of such invalidity, illegality or unenforceability, be severed, and the remaining provisions of this Agreement shall remain in full force and effect. The waiver of any breach or default of this Agreement will not constitute a waiver of any subsequent or continuing breach or default, and will not act to amend or negate the rights of the waiving Party.
13.10 Assignment . Customer may assign this Agreement in whole as part of a corporate reorganization, consolidation, merger, or sale of substantially all of its assets with the prior written consent of RagingWire. Customer shall not otherwise assign its rights or delegate its duties under this Agreement either in whole or in part, and any attempted assignment or delegation shall be void. This agreement will bind and inure to the benefit of each party's permitted assigns.
13.11 Notice . Any notice or communication required or permitted to be given under this Agreement may be delivered by hand, deposited with an overnight courier, sent by registered or certified mail, return receipt requested, postage prepaid, or by facsimile followed by such registered or certified mail, in each case to the address or facsimile number of the receiving Party as listed at the end of this Agreement, or at such other address or facsimile number as may later be furnished in writing by either Party to the other Party. Such notice shall be deemed to have been given upon personal delivery, three (3) days after deposit in the mail or upon electronic acknowledgment of receipt of such facsimile transmission. Notwithstanding the foregoing, notices relating to the Services (including, without limitation, invoices and Notices of Service Commencement) may be delivered from RagingWire to Customer by first class mail, postage prepaid and such notices shall be deemed to have been given three (3) days after deposit in the mail.
13.12 Relationship of Parties . RagingWire and Customer are independent contractors and this Agreement will not establish any relationship of partnership, joint venture, employment, franchise or agency between RagingWire and Customer. Neither RagingWire nor Customer will have the power to bind the other or incur obligations on the other's behalf without the other's prior written consent, except as otherwise expressly provided in this Agreement.
13.13 Entire Agreement; Counterparts; Originals . This Agreement, including all other agreements referred to in this Agreement and documents incorporated by reference, constitutes the complete and exclusive agreement between the Parties with respect to the subject matter hereof, and supersedes and replaces any and all prior or contemporaneous discussions, negotiations, understandings and agreements, written and oral, regarding such subject matter. Any terms and conditions in any purchase order or other response by Customer which are additional to or different from the terms and conditions of this Agreement are hereby deemed rejected by RagingWire without need of further notice of rejection, and shall not be of any effect or in any way binding upon RagingWire. Such purchase order or other response shall not be deemed to be made a part of this Agreement. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be changed only by a written document signed by authorized representatives of RagingWire and Customer. For purposes of this Agreement, the term "written" means anything reduced to a tangible form by a Party, including a printed or handwritten document.
13.14 Interpretation of Conflicting Terms . In the event of a conflict between or among the terms in this Agreement, a SLA, and any other document made a part hereof, the documents shall control in the following order: (i) this Agreement; (ii) the SLA; and then (iii) other documents.
13.15 RagingWire Policies and Procedures . Customer agrees to comply with RagingWire's policies and procedures, including, but not limited to, no tolerance for workplace violence, sexual harrassment, or discrimination. The Policies and Procedures are available for Customer's reference.
13.16 Time is of the Essence . Time is of the essence in RagingWire providing the Services to Customer.
13.17 Right to Inspect Customer Area . Upon advance written notice, Customer may inspect the Customer Area during normal business hours of RagingWire.
IN WITNESS WHEREOF, the Parties have read the foregoing and all documents incorporated in this Agreement and agree and accept such terms as of the Effective Date.
PHOTRONICS, INC.: |
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Exhibit A
Basic Managed Services |
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These rates apply for the length of the initial term specified in the Infrastructure SLA.
RagingWire Telecommunications, INC.
Master Services Agreement #1001.0.1
Effective as of January 11, 2002
TABLE OF CONTENTS
Approved on behalf of
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PHOTRONICS, INC.
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and its Subsidiaries
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Dated:
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________ ____, 20 __
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By: _______________________________
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Name: _____________________________
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Title: ______________________________
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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 Date
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): |
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 |
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 |
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. |
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. |
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’ |
(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: |
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 |
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
|
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 |
11. | Governing Law |
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 . |
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: |
(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.
|
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 |
-
|
if to Photronics,
|
-
|
if to DNP,
|
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. |
14. | Amendments and Waivers |
15. | Assignment |
16.
|
Severability
|
17.
|
Survival
|
18.
|
Miscellaneous
|
By:
|
||
Name:
|
||
Title:
|
By:
|
||
Name:
|
||
Title:
|
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
|
2
|
|
1.6
|
Accounting Consolidation
|
2
|
|
1.7
|
Transaction Documents
|
3
|
|
1.8
|
Ratification of Organizational Actions
|
3
|
|
1.9
|
Articles of Incorporation
|
3
|
|
1.10
|
Compliance
|
3
|
|
1.11
|
Pre-Closing Liabilities
|
3
|
|
ARTICLE 2.
DEFINITIONS
|
3
|
||
ARTICLE 3.
SHARES AND CAPITAL CONTRIBUTIONS
|
10
|
||
3.1
|
Authorized Shares
|
10
|
|
3.2
|
Initial Capital Contributions and Share Issuance
|
10
|
|
3.3
|
Return or Redemption of Capital Contribution
|
10
|
|
3.4
|
Liability of Shareholders
|
10
|
|
3.5
|
Revenue
|
10
|
|
ARTICLE 4.
FINANCING OF THE COMPANY
|
11
|
||
4.1
|
Types of Financing
|
11
|
|
ARTICLE 5.
MANAGEMENT
|
11
|
||
5.1
|
Board of Directors
|
11
|
|
5.2
|
Effect of Reduction in Photronics’ Percentage Interest on Photronics Directors
|
13
|
|
5.3
|
Effect of Reduction in DNP’s Percentage Interest on DNP Directors
|
13
|
|
5.4
|
Procedure.
|
13
|
|
5.5
|
Chairman and Vice-Chairman
|
14
|
|
5.6
|
Meetings of Shareholders and of the Board of Directors; Quorum
|
14
|
|
5.7
|
Supervisors
|
16
|
|
5.8
|
Actions Requiring a Supermajority Vote of Shareholders
|
16
|
|
5.9
|
Actions Requiring a Supermajority Vote of Directors
|
16
|
|
5.10
|
Compensation of Directors and Supervisors
|
16
|
|
5.11
|
Other Activities
|
16
|
|
5.12
|
Accounting; Records and Reports
|
17
|
|
5.13
|
Indemnification and Liability of the Directors
|
19
|
|
5.14
|
Officer
|
21
|
|
5.15
|
Management Advisory Committee
|
23
|
|
5.16
|
Non-Disclosure
|
23
|
|
5.17
|
Maintenance of Insurance
|
23
|
|
5.18
|
Related Party Agreements
|
24
|
|
ARTICLE 6.
OPERATIONS
|
24
|
||
6.1
|
Headquarters
|
24
|
|
6.2
|
Operations Plan; Annual Budget
|
24
|
|
6.3
|
DPTT Employees
|
24
|
|
6.4
|
Company Employees; Seconded Employees
|
24
|
6.5
|
Service Provider Documents
|
24
|
|
6.6
|
Compensation and Benefits
|
25
|
|
ARTICLE 7.
DISPOSITION AND TRANSFERS OF INTERESTS
|
25
|
||
7.1
|
Holding of Shares
|
25
|
|
7.2
|
Transfer Moratorium
|
25
|
|
7.3
|
Purchase and Sale of Remaining Interest
|
26
|
|
7.4
|
Change in Control
|
26
|
|
7.5
|
Purchase and Sale Agreement
|
27
|
|
ARTICLE 8.
[INTENTIOANLLY DELETED]
|
27
|
||
ARTICLE 9.
|
27
|
||
9.1
|
Term of this Agreement
|
27
|
|
9.2
|
Termination and Cross-termination
|
27
|
|
9.3
|
Right of Terminating Party
|
28
|
|
ARTICLE 10.
DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY
|
28
|
||
10.1
|
Limitations
|
28
|
|
10.2
|
Exclusive Causes
|
28
|
|
10.3
|
Effect of Dissolution
|
28
|
|
10.4
|
Loss of the Company
|
28
|
|
10.5
|
Liquidation
|
29
|
|
10.6
|
Dissolution
|
29
|
|
ARTICLE 11.
DISTRIBUTIONS
|
29
|
||
11.1
|
Use of Cash
|
29
|
|
11.2
|
Distributions Upon Liquidation
|
29
|
|
11.3
|
Withholding
|
29
|
|
11.4
|
Distributions in Kind
|
Error! Bookmark not defined.
|
|
11.5
|
Limitations on Distributions
|
29
|
|
ARTICLE 12.
MISCELLANEOUS
|
30
|
||
12.1
|
Amendments
|
30
|
|
12.2
|
No Waiver
|
30
|
|
12.3
|
Entire Agreement
|
30
|
|
12.4
|
Further Assurances
|
30
|
|
12.5
|
Notices
|
30
|
|
12.6
|
Governing Law
|
31
|
|
12.7
|
Construction; Interpretation
|
31
|
|
12.8
|
Rights and Remedies Cumulative
|
31
|
|
12.9
|
No Assignment; Binding Effect
|
32
|
|
12.10
|
Severability
|
32
|
|
12.11
|
Counterparts
|
32
|
|
12.12
|
Dispute Resolution; Arbitration
|
32
|
|
12.13
|
Third-Party Beneficiaries
|
32
|
|
12.14
|
Specific Performance
|
33
|
|
12.15
|
Consequential Damages
|
33
|
|
12.16
|
Fees and Expenses
|
33
|
Schedule A | * |
Schedule B | * |
Schedule C | * |
Schedule D | * |
Schedule E | * |
Schedule F | * |
Schedule G | * |
Schedule H | * |
Schedule I | * |
Schedule J | * |
1.1 | Background |
1.2 | Name |
1.3 | Principal Place of Business |
1.4 | Business Purpose |
1.5 | Term |
1.6 | Accounting Consolidation |
1.7 | Transaction Documents |
1.8 | Ratification of Organizational Actions |
1.9 | Articles of Incorporation |
1.10 | Compliance |
1.11 | Pre-Closing Liabilities |
3.1 | Authorized Shares |
3.2 | Initial Capital Contributions and Share Issuance |
3.3 | Return or Redemption of Capital Contribution |
3.4 | Liability of Shareholders |
3.5 | Revenue |
4.1 | Types of Financing |
5.1 | Board of Directors |
5.2 | Effect of Reduction in Photronics’ Percentage Interest on Photronics Directors |
Photronics’s Percentage Interest
|
Number of Photronics Directors
|
> 80%
|
*
|
> 50% and
≦
80%
|
*
|
≧
20% and
≦
50%
|
*
|
>
0% and < 20%
|
*
|
5.3 | Effect of Reduction in DNP’s Percentage Interest on DNP Directors |
DNP’s Percentage Interest
|
Number of DNP Directors
|
> 80%
|
*
|
> 50% and
≦
80%
|
*
|
≧
20% and
≦
50%
|
*
|
> 0% and < 20%
|
*
|
5.4 | Procedure . |
5.5 | Chairman and Vice-Chairman |
5.6 | Meetings of Shareholders and of the Board of Directors; Quorum |
5.7 | Supervisors |
5.8 | Actions Requiring a Supermajority Vote of Shareholders |
5.9 | Actions Requiring a Supermajority Vote of Directors |
5.10 | Compensation of Directors and Supervisors |
5.11 | Other Activities |
5.12 | Accounting; Records and Reports |
5.13 | Indemnification and Liability of the Directors |
5.14 | Officer |
5.15 | Management Advisory Committee |
5.16 | Non-Disclosure |
5.17 | Maintenance of Insurance |
5.18 | Related Party Agreements * |
6.1 | Headquarters |
6.2 | Operations Plan; Annual Budget |
6.3 | DPTT Employees |
6.4 | Company Employees; Seconded Employees |
6.5 | Service Provider Documents |
6.6 | Compensation and Benefits |
7.1 | Holding of Shares |
7.2 | Transfer Moratorium |
7.3 | Purchase and Sale of Remaining Interest |
7.4 | Change in Control |
7.5 | Purchase and Sale Agreement |
9.1 | Term of this Agreement |
9.2 | Termination and Cross-termination |
9.3 | Right of Terminating Party |
10.1 | Limitations |
10.2 | Exclusive Causes |
10.3 | Effect of Dissolution |
10.4 | Loss of the Company |
10.5 | Liquidation |
10.6
|
Dissolution
|
11.1 | Use of Cash |
11.2 | Distributions Upon Liquidation |
11.3 | Withholding |
11.5 | Limitations on Distributions |
12.1 | Amendments |
12.2 | No Waiver |
12.3 | Entire Agreement |
12.4 | Further Assurances |
12.5 | Notices |
12.6 | Governing Law |
12.7 | Construction; Interpretation |
12.8 | Rights and Remedies Cumulative |
12.9 | No Assignment; Binding Effect |
12.10 | Severability |
12.11 | Counterparts |
12.12 | Dispute Resolution; Arbitration |
12.13 | Third-Party Beneficiaries |
12.14 | Specific Performance |
12.15 | Consequential Damages |
12.16 | Fees and Expenses |
SHAREHOLDERS
|
||
PHOTRONICS, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
DAI NIPPON PRINTING CO., LTD.
|
||
By:
|
||
Name:
|
||
Title:
|
2.1 | Defined Terms |
2.2 | Incorporation by Reference |
3.1 | Outsource and Issuance of Purchase Orders* |
3.2 | Purchase Orders* |
3.3 | Purchase Order Terms* |
3.4 | Rescheduling and Cancellation* |
3.5 | End of Life* |
3.6 | Certain Claims* |
3.7 | Priority for New Products* |
3.8 | Qualification * . |
5.1 | Prices |
5.2 | Invoices; Payments* . |
5.3 | Taxes |
6.1 | Risk of Loss and Title |
6.2 | Delivery* |
7.1 | Suppliers Limited Warranty* |
8.1 | Term |
8.2 | Termination for Cause |
8.3 | Survival |
9.1 | Indemnification by Suppliers* |
9.2 | Indemnification by Company* |
9.3 | Procedure |
10.1 | Limited Liability* |
10.2 | Remedies |
PHOTRONICS, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
DAI NIPPON PRINTING CO., LTD.
|
||
By:
|
||
Name:
|
||
Title:
|
||
Photronics Semiconductor Mask Corp.
|
||
By:
|
||
Name:
|
||
Title:
|
Photronics, Inc.
|
Photronics Semiconductor Mask Corporation
|
||||
By:
|
By:
|
||||
Name:
|
Name:
|
||||
Title:
|
Title:
|
Dai Nippon Printing Co., Ltd.
|
||
By:
|
||
Name:
|
||
Title:
|
||
Photronics Semiconductor Mask Corporation
|
||
By:
|
||
Name:
|
||
Title:
|
2.1 | Defined Terms |
3.1 | Allocation of Net Sales During* |
3.2 | Payments |
3.3 | Outsourcing Agreement |
4.1 | EBM 8000 Priority |
4.2 | Transfer of the Products to the Company |
4.3 | Tool Acceptance |
4.4 | Sustained Capacity |
5.1 | Term |
5.2 | Termination for Cause |
PHOTRONICS, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
DAI NIPPON PRINTING CO., LTD.
|
||
By:
|
||
Name:
|
||
Title:
|
||
PHOTRONICS SEMICONDUCTOR MASK CORP.
|
||
By:
|
||
Name:
|
||
Title:
|
(1) | Photronics Semiconductor Mask Corp., a company organized and existing under the laws of the Republic of China (" R.O.C. "), with its registered office at1F, No. 2, Lising Road, Hsinchu City, Hsinchu Science Park, Taiwan, R.O.C. (" Party A "); and |
(2) | DNP Photomask Technology Taiwan Co. Ltd., a company organized and existing under the laws of the R.O.C., with its registered office at No. 6, Lising 7 th Rd., East District, Hsinchu City, Hsinchu Science Park, Taiwan, R.O.C. (" Party B "). |
1.1 | Method of Merger |
1.2 | Capital Stock |
(a) | Capital Stock of Party A . S ubject to change resulted from PSMC’s Permitted Capital Reduction (as defined below), as of the date of execution hereof, Party A has an authorized capital of * and a paid-in capital of * divided into * shares of common stock with a par value of * per share which are 100% owned directly or indirectly by Photronics. |
(b) | Capital Stock of Party B . Subject to change resulted from DPTT’s Permitted Capital Increase (as defined below), as of the date of execution hereof, Party B has an authorized capital of * and a paid-in capital of * divided into * shares of common stock with a par value of * per share, which are 100% owned by DNP. |
(c) | Capital Stock of Surviving Company . Immediately after the Closing (as defined in Article 1.5 below) of the Merger, the amount of authorized capital and that of paid-in capital of the Surviving Company shall be as set forth in Schedule II hereof. |
1.3 | Merger Consideration |
1.4 | Adjustment of Merger Consideration |
(a) | The occurrence of any event which will have a material impact on the financial circumstances of Party A or Party B, including but not limited to, the disposal by Party A or Party B of any of its material assets; |
(b) | The occurrence of any event which will have a material impact on the rights of shareholders or price of shares of Party A or Party B, such as a major disaster (natural or otherwise), major revolution in technologies, or any act of war or terrorist activity; |
(c) | Party A’s or Party B’s repurchase of treasury shares; |
(d) | Adjustment of the Merger Consideration is necessary due to change of regulation, order by relevant authorities or administrative guideline; |
(e) | The occurrence of any other major events affecting the business or operation of Party A or Party B; or |
(f) | The occurrence of any other major events that requires the adjustment of the Merger Consideration (including but not limited to either Party’s material breach of its covenants in Article III or its representations or warranties in Article IV). |
1.5 | Merger Effective Date |
1.6 | Delivery of Share Certificates and Payment of Merger Consideration |
1.7 | Articles of Incorporation, Directors and Supervisors of Surviving Company |
1.8 | Assumption of Rights and Obligations |
1.9 | Transfer of Employees |
2.1 | Mutual Conditions to Closing . |
(a) | The board of directors and shareholders meeting approvals (if required by applicable laws) for the Merger by each Party shall have been obtained, not revoked and shall remain in full force and effect; |
(b) | All prior approvals and consents required for the consummation of the Merger or in connection with the authorization, execution and performance of this Agreement from the relevant authorities (the " Regulatory Approvals ") and/or any other third party approvals (other than any approvals and consents where the failure to obtain such approvals and consents, either in any individual case or in the aggregate, would not have a material adverse effect on the Merger contemplated hereby) as listed in Schedule I shall have been duly obtained, made or given and shall be in full force and effect and shall not impose material restrictions or other material burdens on the Parties or the Surviving Company with respect to the Merger or the matters contemplated in the Transaction Agreements (as defined in the Framework Agreement); |
(c) | There shall not (i) be in effect any law, regulation, ruling or governmental order of any governmental authority which makes illegal, prevents or restricts the consummation of the Merger or other transactions contemplated by any other Transaction Agreement, the performance by the applicable Parties of their respective obligations under this Agreement or any other Transaction Agreement, or impairs the ability of the Surviving Company to own or conduct the business of Party A and Party B as previously conducted, whether directly or indirectly, (ii) have been commenced or threatened any action or proceeding by any governmental authority which seeks to prevent the Merger or the performance by the applicable Parties of their respective obligations under this Agreement or any other Transaction Agreement; and |
(d) | The Framework Agreement, the Operating Agreement and all other Transaction Agreements shall have been executed and delivered. |
2.2
|
Additional Conditions to the Obligations of Party A
|
(a) | Party B shall have performed and complied with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing , including Article 3.4 provided that a failure to obtain any third party consent that is not listed in Schedule I (Approvals) prior to the Closing should not be deemed a breach or non-performance of Article 3.5 for the purpose of this Article 2.2(a) ; |
(b) | No events or circumstances which result in an event that is materially adverse to the business, properties or assets, including contracts, customer and supplier relationships (" Material Adverse Change ") of Party B shall have occurred since the date hereof; |
(c) | All of the representations and warranties in Article IV given by Party B shall be true, accurate and not misleading in all material respects as of the date of Closing; |
(d) | Party A shall have received at the Closing a certificate issued by an executive officer of Party B, dated as of the date of Closing, in form and substance substantially as set forth in Exhibit B attached hereto; |
(e) | DNP is not in any material breach, noncompliance or other default of any provision of the Framework Agreement; |
(f) | No government order has been issued, or other government action has been taken, to prohibit Party A from completing the capital reduction in the amount set forth in Schedule II prior to the Closing for the purpose of adjustment of Party A’s evaluation for the Merger, after which capital reduction its paid-in capital should become the amount as set forth in Schedule II with a par value of * per share, which are 100% owned directly or indirectly by Photronics as of the date of Closing (“ PSMC’s Permitted Capital Reductio n ”), and Party B has not taken any action to prohibit the completion of PSMC’s Permitted Capital Reduction prior to the Closing; and |
(g) | Party B has, after obtaining all required corporate or governmental approvals, duly and legally completed capital increase in the amount set forth in Schedule II for the purpose of repaying its existing loans as of the Signing Date (the “ Existing Loans ”), after which capital increase its paid-in capital should become the amount as set forth in Schedule II with a par value of * per share, which are 100% owned by DNP, as of the date of Closing (“ DPTT’s Permitted Capital Increase ”), and Party B has*. |
2.3 | Additional Conditions to the Obligations of Party B . |
(a) | Party A shall have performed and complied with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing , including Article 3.4 provided that a failure to obtain any third party consent that is not listed in Schedule I (Approvals) prior to the Closing should not be deemed a breach or non-performance of Article 3.5 for the purpose of this Article 2.3(a); |
(b) | No Material Adverse Change of Party A shall have occurred since the date hereof; |
(c) | All of the representations and warranties in Article IV given by Party A shall be true, accurate and not misleading in all material respects as of the date of the Closing; |
(d) | Party B shall have received at the Closing a certificate issued by an executive officer of Party A, on behalf of Party A and dated as of the date of the Closing, in form and substance substantially as set forth in Exhibit C attached hereto; |
(e) | Photronics is not in any material breach, noncompliance or other default of any provision of the Framework Agreement; |
(f) | No government order has been issued, or other government action has been taken, to prohibit Party B from completing the DPTT’s Permitted Capital Increase prior to the Closing, and Party A has not taken any action to prohibit the completion of DPTT’s Permitted Capital Increase prior to the Closing; and |
(g) | Party A has, after obtaining all required corporate or governmental approvals, duly and legally completed PSMC’s Permitted Capital Reduction |
3.1 | Covenants with Respect to this Agreement |
3.2 | Issuance of shares |
3.3 | Conduct of Business of Party A or Party B with Respect to this Agreement |
(a) | the business of Party A and Party B shall be conducted in substantially the same manner as heretofore conducted and only in the ordinary course of business, and each of Party A and Party B shall use their reasonable best efforts to preserve the business organization of Party A or Party B, and to maintain the existing relations with customers, creditors, business partners and others having business dealings with Party A or Party B. |
(b) | neither Party A nor Party B shall 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; |
(c) | neither Party A nor Party B shall take any of the following actions without the prior written consent of the other Party except for the DPTT’s Permitted Capital Increase and PSMC’s Permitted Capital Reduction: |
(i) | unless otherwise permitted under Article 1.7 hereof, 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 kind; |
(iii) | make a capital 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, acquire assets 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 Merger contemplated hereunder; or |
(xiii) | make any distribution to its shareholder(s), employees and/or directors/supervisors. |
3.4 | Access to Information |
3.5 | Regulatory and Other Authorizations; Notices and Consents |
3.6 | Notification to Creditors . |
(a) | Legal Establishment and Existence . It is a corporation duly organized and validly existing under the laws of the R.O.C., and has obtained all necessary licenses, approvals, permits and other certification required for operating its existing business activities; |
(b) | Full Power and Valid Authorization . I t has full legal capacity and power and is duly and validly authorized to execute and perform this Agreement; |
(c) | Validity of the Agreement . Its execution and performance of this Agreement is not in violation of the following: (i) any provisions of applicable laws and regulations; (ii) its articles of incorporation and other applicable internal rules; (iii) any rulings, orders or dispositions of the court or relevant authorities; and (iv) any contracts, agreements, representations, undertakings, warranties, binding arrangements or any other legal or contractual obligations, except with respect to clause (i) and (iv) where the failure of such violation would not, individually or in the aggregate, have a Material Adverse Change; and |
(d) | Enforceability . T his Agreement constitutes the legally valid and binding obligations of it, enforceable against it in accordance with the terms and conditions of this Agreement, except to the extent that enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcement of creditors’ rights generally and by general principles of equity. |
5.1 | Expenses |
5.2 | Tax |
6.1 | Amendments and Modification |
6.2 | Assignment |
6.3 | Severability |
6.4 | Notices |
To Party A: | Photronics, Inc. |
Attention: | General Counsel |
Address: | 15 Secor Road |
To Party B: | DNP Photomask Technology Taiwan Co. Ltd. |
6.5 | Governing Law |
6.6 | Governing Language |
6.7 | Arbitration |
6.8 | Counterparts |
6.9 | Termination |
(a) | This Agreement constitutes binding obligations of each of the Parties and shall take effect as of the Signing Date until it has been terminated in accordance with this Article 6.9. |
(b) | Prior to the Closing, this Agreement shall terminate upon the earliest occurrence of one of the following events: |
(c) | After this Agreement has been terminated, both Parties shall adopt necessary actions to cease to proceed the Merger and either Party may request the other Party to return any and all documents, information, files, articles, plans, trade secrets, and other tangible data obtained in connection with the Merger within seven (7) business days after such termination. |
6.10 | Indemnification |
6.11 | Confidentiality |
(i) | preserve its existence and corporate structure as in effect on the date hereof, except as otherwise permitted under Section 6.03 of the Credit Agreement; |
(ii) | not change its jurisdiction of organization; |
(iii) | not maintain its place of business (if it has only one) or its chief executive office (if it has more than one place of business) at a location other than a location specified in Exhibit “A” ; and |
(iv) | not (i) have any Inventory, Equipment or Fixtures or proceeds or products thereof (other than Inventory and proceeds thereof disposed of as permitted by Section 4.1.5 ) at a location other than a location specified in Exhibit “A” or (ii) change its name or taxpayer identification number, |
PHOTRONICS, INC.,
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as a Grantor | |||
By:
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Name:
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Title:
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[OTHER GRANTORS]
1
,
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as a Grantor
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By:
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Name:
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Title:
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By:
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Name: | ||
Title: |
Attention:
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A.
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Owned Locations of Inventory, Equipment and Fixtures of the Grantors:
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B.
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Leased Locations of Inventory, Equipment and Fixtures of the Grantors
(Include Landlord’s Name):
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C.
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Public Warehouses or other Locations pursuant to Bailment or Consignment Arrangements
(include name of warehouse operator or other bailee or consignee of Inventory and Equipment of the Grantors):
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Name and Address of Record Owner: | ||
A. STOCKS:
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Issuer
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Certificate Number
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Number of Shares
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B. BONDS:
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Issuer
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Number
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Face Amount
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Coupon Rate
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Maturity
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C. GOVERNMENT SECURITIES:
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Issuer
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Number
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Type
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Face Amount
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Coupon Rate
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Maturity
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D. OTHER SECURITIES OR OTHER INVESTMENT PROPERTY
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(CERTIFICATED AND UNCERTIFICATED):
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Issuer
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Description of Collateral
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Percentage Ownership Interest
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GRANTOR
†
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Federal Employer Identification Number
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Type of Organization
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State of Organization or Incorporation
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State Organization Number
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Photronics, Inc.
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[__________]
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Corporation
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Connecticut
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[__________]
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[Other Grantors]
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[__________]
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[__________]
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[__________]
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[__________]
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[NAME OF NEW GRANTOR]
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By:
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Title:
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State or Jurisdiction
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of Incorporation or Organization
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Align-Rite International, Ltd.
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(United Kingdom)
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Photronics (Wales) Limited
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(United Kingdom)
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Photronics, B.V.
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(Netherlands)
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Photronics California, Inc.
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(California, USA)
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Photronics Idaho, Inc.
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(Idaho, USA)
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Photronics Texas Allen, Inc.
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(Texas, USA)
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Photronics MZD, GmbH
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(Germany)
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Photronics Advanced Mask Corporation
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(Taiwan, R.O.C.)
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Photronics DNP Mask Corporation (1)
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(Taiwan, R.O.C.)
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Photronics Switzerland, S.a.r.L
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(Switzerland)
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Photronics Singapore Pte, Ltd.
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(Singapore)
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Photronics UK, Ltd.
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(United Kingdom)
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PK, Ltd. (2)
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(Korea)
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PKLT
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(Taiwan, R.O.C.)
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Trianja Technologies, Inc.
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(Texas, USA)
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(1) | 50.01% owned by Photronics, Inc. and 49.99% owned by DNPJ |
(2) | 79.98% owned by Photronics, Inc., and 19.71% owned by Photronics Singapore Pte Ltd. |
1. | I have reviewed this Annual Report on Form 10-K of Photronics, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ CONSTANTINE S. MACRICOSTAS
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Constantine S. Macricostas
Chief Executive Officer
January 6, 2015
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1. | I have reviewed this Annual Report on Form 10-K of Photronics, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ SEAN T. SMITH
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Sean T. Smith
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Chief Financial Officer
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January 6, 2015
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(1) | the Annual Report on Form 10-K of the Company for the year ended November 2, 2014 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ CONSTANTINE S. MACRICOSTAS
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Constantine S. Macricostas
Chief Executive Officer
January 6, 2015
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(1) | the Annual Report on Form 10-K of the Company for the year ended November 2, 2014 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ SEAN T. SMITH
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Sean T. Smith
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Chief Financial Officer
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January 6, 2015
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