SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant
[X]
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Filed by a Party other than
the Registrant [ ]
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Check the appropriate
box:
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[ ]
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Preliminary Proxy
Statement
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Soliciting Material Under Rule
14a-12
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Confidential, For Use of
the
Commission Only (as permitted
by Rule 14a-6(e)(2))
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[X]
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Definitive Proxy
Statement
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[ ]
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Definitive Additional
Materials
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PHOTRONICS, INC.
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(Name of Registrant as
Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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Payment of Filing Fee (Check
the appropriate box):
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[X]
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No fee required.
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Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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1)
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Title of each class of
securities to which transaction applies:
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Aggregate number of
securities to which transaction applies:
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Per unit price or
other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined):
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4)
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Proposed maximum
aggregate value of transaction:
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Total fee
paid:
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Fee paid previously
with preliminary materials:
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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1)
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Amount previously
paid:
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2)
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Form, Schedule or Registration
Statement No.:
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Filing Party:
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Date Filed:
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PHOTRONICS, INC.
15 Secor
Road
Brookfield, Connecticut 06804
(203) 775-9000
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD ON APRIL 11, 2014
TO THE SHAREHOLDERS OF PHOTRONICS,
INC.:
Notice is hereby given that the Annual
Meeting of Shareholders of Photronics, Inc. will be held at the offices of
Photronics, Inc., 15 Secor Road, Building 1, Brookfield, CT 06804 at 10:00 a.m.
Eastern Time, on Friday April 11, 2014 for the following purposes:
1)
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To elect 6 members of
the Board of Directors;
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2)
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To approve an
amendment to the Photronics, Inc. 2007 Long Term Equity Incentive Plan, as
previously amended, to increase the authorized shares for issuance from
6,000,000 shares to 9,000,000 and to amend the amount of restricted stock allowed to be issued thereunder from 15%
to 1,000,000 shares;
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3)
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To ratify the
selection of Deloitte & Touche LLP as independent registered public
accounting firm for the fiscal year ending November 2, 2014;
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4)
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To approve, by
non-binding vote, the compensation of our named executive officers; The
shareholders will also act on any other business as may properly come
before the meeting or any adjournments or postponements
thereof.
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The Board of Directors has fixed February
14, 2014, as the record date for determining the holders of common stock
entitled to notice of and to vote at the meeting.
YOUR VOTE IS IMPORTANT. ALL SHAREHOLDERS
ARE CORDIALLY INVITED TO ATTEND THE MEETING. TO ENSURE YOUR REPRESENTATION AT
THE MEETING, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
By Order of the Board of
Directors,
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/s/ Richelle E.
Burr
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Richelle E. Burr
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Vice President, General Counsel
and Secretary
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March 3, 2014
PHOTRONICS, INC.
15 Secor
Road
Brookfield, Connecticut 06804
(203) 775-9000
PROXY STATEMENT
For the Annual Meeting of
Shareholders
to be held on April 11, 2014
GENERAL INFORMATION
The enclosed proxy is solicited by the
Board of Directors (the Board or Board of Directors) of Photronics, Inc.
(the Company), to be voted at the Annual Meeting of Shareholders to be held on
April 11, 2014, at 10:00 a.m. Eastern Time at the offices of Photronics, Inc.,
15 Secor Road, Building 1, Brookfield, CT 06804 or any adjournments or
postponements thereof (the Annual Meeting). This proxy statement and the
enclosed proxy card are first being sent or given to shareholders on or about
March 3, 2014. Our Annual Report on Form 10-K for the fiscal year ended
November 3, 2013, as filed with the Securities and Exchange Commission (SEC) is
included in the Annual Report to Shareholders being made available to our
shareholders with this proxy statement.
The persons named as proxies on the
accompanying proxy card have informed the Company of their intention, if no
contrary instructions are given, to vote the shares of the Companys common
stock (Common Stock) represented by such proxies FOR Proposals 1, 2, 3 and
4, and at their discretion on any other matters which may come before the Annual
Meeting. The Board of Directors does not know of any business to be brought
before the Annual Meeting other than as set forth in the Notice of Annual
Meeting of Shareholders.
Any shareholder who executes and delivers
a proxy may revoke it at any time prior to its use. Such revocation would be
effective upon either (a) receipt by the Secretary of the Company of written
notice of such revocation; (b) receipt by the Secretary of the Company of a
properly executed proxy bearing a later date; or (c) appearance by the
shareholder at the Annual Meeting and his or her request to revoke the proxy.
Any such notice or proxy should be sent to Photronics, Inc., 15 Secor Road,
Brookfield, Connecticut 06804, Attention: Secretary. Appearance at the Annual
Meeting without a request to revoke a proxy will not revoke a previously
executed and delivered proxy.
QUORUM; REQUIRED VOTES
Only shareholders of record at the close
of business on February 14, 2014, are entitled to notice of and to vote at the
Annual Meeting. As of February 14, 2014, there were 61,626,398 shares of Common
Stock issued and outstanding, each of which is entitled to one vote. At the
Annual Meeting, the presence in person or by proxy of the holders of a majority
of the total number of shares of outstanding Common Stock will be necessary to
constitute a quorum. Assuming a quorum is present, the matters to come before
the Annual Meeting that are listed in the Notice of Annual Meeting of
Shareholders require the following votes to be approved: (1)
Proposal 1
(Election of Directors) a plurality of the votes cast by the shareholders
entitled to vote at the Annual Meeting is required to elect 6 members of the
Board of Directors; (2)
Proposal 2
(Equity Incentive Plan Amendment) a majority
of the votes cast by the shareholders entitled to vote at the Annual Meeting is
required to approve the amendments, provided that the total votes cast on the
proposal to approve the amendments to the plan represent over 50% of the
outstanding shares of Common Stock; (3)
Proposal 3
(Ratification of Selection of
Independent Registered Public Accounting Firm for the Fiscal Year Ending
November 2, 2014) a majority of the votes cast by the shareholders entitled to
vote at the Annual Meeting is required to ratify the selection of Deloitte &
Touche LLP; (4)
Proposal 4
(Executive Compensation) a majority of the votes cast
by the shareholders entitled to vote at the Annual Meeting is required to
approve the non-binding resolution approving the compensation of the named
executive officers as described in the Compensation Discussion and Analysis and
the narrative disclosure included in this proxy statement. Abstentions will be
considered as present but will not be considered as votes in favor of any
matter; broker non-votes will not be considered as present for the matter as to
which the shares are not voted.
2
Neither the approval nor the disapproval
of Proposal 4 will be binding on the Company or the Board of Directors or will
be construed as overruling a decision by the Company or the Board of Directors.
Neither the approval nor the disapproval of Proposal 4 will create or imply any
change to our fiduciary duties or create or imply any additional fiduciary
duties for the Company or the Board of Directors. However, the Company will
consider the results of this advisory vote in making future decisions on the
Companys compensation policies, and the compensation of the Companys named
executive officers.
Pursuant to the rules that govern brokers
and nominees who have record ownership of shares that are held in street name
for account holders (who are the beneficial owners of the shares), brokers and
nominees typically have the discretion to vote such shares on routine matters,
but not on non-routine matters. If a broker or nominee has not received voting
instructions from an account holder and does not have discretionary authority to
vote shares on a particular item because it is a non-routine matter, a
broker-non-vote occurs. Under the rules governing brokers, an uncontested
director election is considered a non-routine matter for which brokers do not
have discretionary authority to vote shares held by an account holder.
Additionally, as required by Section 957 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010 (the Dodd-Frank Act), advisory votes on
executive compensation and on the frequency of such votes are also considered
non-routine matters for which brokers do not have discretionary authority to
vote shares held by account holders. Only the ratification of our independent
registered public accounting firm under Proposal 3 is considered a routine
matter.
Shareholders who hold their shares through
a broker (in street name) must provide specific instructions to their brokers
as to how to vote their shares, in the manner prescribed by their
broker.
CORPORATE GOVERNANCE AND
ETHICS
Photronics is committed to the values of
effective corporate governance and high ethical standards. Our Board believes
that these values are conducive to long-term performance and periodically
reevaluates our policies to ensure they meet the Companys needs. Set forth
below are a few of the corporate governance practices and policies that we have
adopted.
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Related Party Transaction Policy.
Our Audit Committee is responsible for
approving or ratifying transactions involving the Company and related parties
and determining if such transactions are, or are not, consistent with the best
interests of the Company and our shareholders.
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Executive Sessions.
The Companys Board of Directors meetings regularly include executive
sessions without the presence of management, including the Chairman and Chief
Executive Officer.
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Shareholders Rights Plan Policy.
The Company does not have a shareholders
rights plan and is not currently considering adopting one. The Board of
Directors position is that it will only adopt a shareholders rights plan if
the Board of Directors determines that it is in the best interests of the
Company, taking into consideration all factors that it deems advisable and
appropriate.
3
BOARD OF DIRECTORS POLICIES AND
COMMITTEE CHARTERS
The Company has adopted a code of ethics
and corporate governance policy to assist the Board and its committees in the
exercise of their responsibilities. The code of ethics and corporate governance
policy apply generally to the Board and the Companys named executive officers.
Each of the Board committees has a written charter that sets forth the goals and
responsibilities of the committee. The Companys code of ethics and Board
committee charters can be found on the Companys website at
www.photronics.com.
The number of directors on our Board is
not permitted to be less than three or more than fifteen members under our
bylaws. Currently, the Board has fixed the number of directors at six members.
The Board is responsible for nominating members to the Board and for filling
vacancies on the Board that may occur between annual meetings of shareholders,
in each case upon the recommendation of the Nominating Committee. The Nominating
Committee seeks input from other Board members and senior management and may
engage a search firm to identify and evaluate potential candidates. The Board
and each of the committees of the Board conduct annual self-assessments to
determine their effectiveness. Additionally, each committee reviews the adequacy
of its charter annually and considers any proposed changes.
BOARD LEADERSHIP
STRUCTURE
The Board of Directors believes that the
current Board leadership structure, in which the roles of Chairman and Chief
Executive Officer are held by one person, is appropriate for the Company and its
shareholders at this time. The current Board leadership structure is believed to
be appropriate because it demonstrates to our employees, suppliers, customers,
and other shareholders that the Company is under strong leadership, with a
single person setting the tone and having primary responsibility for managing
the Companys operations. Currently, having the founder serve as Chairman and Chief Executive Officer has been an effective and successful approach for the Company. However the Company may adopt a different approach in the future.
The Board also has a Lead Independent
Director. Mr. Fiederowicz serves as Lead Independent Director. Mr. Fiederowiczs duties include the
following: chair any meeting of the independent directors in executive session;
facilitate communications between other members of the Board and the Chairman of
the Board/Chief Executive Officer (however, each director is free to communicate
directly with the Chairman of the Board/Chief Executive officer); monitor, with
the assistance of the General Counsel, communications from
shareholders.
The Board will continue to reexamine our
corporate governance policies and leadership structure on an ongoing basis to
ensure that they continue to meet the Companys needs.
THE BOARD OF DIRECTORS ROLE IN RISK
OVERSIGHT AND ASSESSMENT
The Company has a risk management program
overseen by senior management and approved by the Board of Directors. Risks are
identified and prioritized by senior management and each prioritized risk is
assigned to either a Board committee or the full Board for oversight. For
example, strategic risks are overseen by the full Board; financial and business
conduct risks are overseen by the Audit Committee or the full Board; risks
related to related party transactions are overseen by the Audit Committee and
compensation risks are overseen by the Compensation Committee. Management
regularly reports on enterprise risks to the relevant committee or the Board.
Additional review or reporting on enterprise risk is conducted as needed or as
requested by the Board or relevant committee.
COMPENSATION RELATED
RISK
The Company regularly assesses the risks
related to our compensation programs, including our executive compensation
programs, and does not believe that the risks arising from our compensation
policies and practices are reasonably likely to have a material effect on the
Company. Incentive award targets and opportunities are reviewed annually
allowing the Compensation Committee to maintain an appropriate balance between
rewarding high performance without encouraging excessive risk taking.
4
OWNERSHIP OF COMMON
STOCK BY
DIRECTORS, OFFICERS
AND CERTAIN
BENEFICIAL OWNERS
The following table sets forth certain
information on the beneficial ownership of the Companys Common Stock as of
February 14, 2014, by: (i) beneficial owners of more than five percent of the
Common Stock; (ii) each director; (iii) each named executive officer in the
summary compensation table set forth below; and (iv) all directors and currently
employed named executive officers of the Company as a group.
Name and Address of Beneficial Owner
(1)
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Amount and Nature of Beneficial Ownership (2)
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Percentage of Class
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Waddell & Reed Financial,
Inc.
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7,233,326
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11.70%
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(3)
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6300 Lamar Avenue
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Overland Park, KS 66202
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Donald Smith &
Co., Inc.
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5,424,685
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8.84%
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(4)
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152 West 57
th
Street
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New York, NY
10019
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Dimensional Fund
Advisors
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5,359,580
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8.73%
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(5)
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Palisades West,
Building One
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6300 Bee Cove
Road
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Austin, Texas
78746
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Steelhead Partners, LLC
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4,308,685
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6.50%
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(6)
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333 108
th
Avenue NE
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Bellevue, WA 98004
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Black Rock, Inc.
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3,681,211
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5.97%
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(7)
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40 East 52
nd
Street
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New York, NY 10022
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Barrow, Hanley, Mewhinney & Strauss, LLC
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3,451,469
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5.62%
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(8)
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2200 Ross Avenue, 31
st
Floor
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Dallas, Texas 75201-2761
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Richelle
Burr
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92,780
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(9)
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*
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Walter M. Fiederowicz
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108,250
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(9)
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*
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Joseph A. Fiorita,
Jr.
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240,900
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(9)(10)
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*
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Liang-Choo Hsia
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36,000
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(9)
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*
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Soo Hong
Jeong
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545,025
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(9)
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*
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Peter Kirlin
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156,750
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(9)
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*
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Constantine S.
Macricostas
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1,036,029
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(9)(11)
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*
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George Macricostas
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72,250
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(9)
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*
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Christopher J.
Progler
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270,175
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(9)
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*
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Sean T. Smith
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365,999
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(9)
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*
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Mitchell G.
Tyson
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152,500
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(9)
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*
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Directors and Named Executive
Officers
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3,076,658
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(12)
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4.84%
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as a group (11 persons)
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* Less than 5%
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(1)
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The address for all officers and
directors is 15 Secor Road, Brookfield, Connecticut 06804.
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(2)
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Except as otherwise indicated,
the named person has the sole voting and investment power with respect to
the shares of Common Stock set forth opposite such persons
name.
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(3)
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According to Schedule 13G/A filed
February 7, 2014, Waddell & Reed Financial, Inc. had sole voting and
dispositive power over 7,233,326 shares of Common Stock as of December 31,
2013.
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(4)
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According to Schedule 13G filed
February 10, 2014, Donald Smith & Co., Inc. had sole voting and
dispositive power over 5,424,685 shares of Common Stock as of December 31,
2013.
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(5)
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According to Schedule 13G/A filed
on February 10, 2014, Dimensional Fund Advisors, had sole voting and
dispositive power over 5,359,580 shares of Common Stock as of December 31,
2013.
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(6)
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According to Schedule 13G/A filed
February 14, 2014, Steelhead Partners, LLC, had sole voting and dispositive power
over 4,308,685 shares of Common Stock as of December 31,
2013.
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5
(7)
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According to Schedule 13G/A filed
January 30, 2014, Black Rock, Inc. had sole voting and dispositive power
over 3,681,211 shares of Common Stock as of December 31,
2013.
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(8)
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According to Schedule 13G filed February 12, 2014, Barrow, Hanley, Mewhinney & Strauss, LLC had sole voting and dispositive power over 3,451,469 shares of Common Stock as of December 31, 2013.
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(9)
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Includes shares of Common Stock
subject to stock options exercisable as of February 14, 2014, (or within
60 days thereof), as follows: Ms. Burr: 65,688; Mr. Fiederowicz: 96,250 ;
Mr. Fiorita: 118,000; Dr. Hsia: 8,000; Dr. Jeong: 370,625 ; Dr. Kirlin:
118,250; Mr. Constantine Macricostas: 415,625; Mr. George Macricostas:
35,500; Dr. Progler 214,375; Mr. Smith: 271,875 ; and Mr. Tyson:
73,000.
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(10)
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Includes 300 shares owned by the
wife of Mr. Fiorita as to which shares he disclaims beneficial
ownership.
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(11)
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Includes 34,568 shares held by
the wife of Mr. Macricostas as to which shares he disclaims beneficial
ownership.
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(12)
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Includes the shares listed in
notes (7), (8) and (9) above.
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PROPOSAL 1
ELECTION OF
DIRECTORS
The Board has nominated 6 directors to be
elected at the 2014 Annual Meeting to serve for a one year term. Each of the 6
directors of the Company that is elected at the Annual Meeting will serve until
the 2015 Annual Meeting of Shareholders or, if earlier, until their successors
are elected and qualified. Each nominee is currently a director of the Company
and has agreed to serve if elected. The names of, and certain information with
respect to, the nominees for election as directors are set forth
below.
The Company is open and receptive to
shareholder communication. If, for any reason, any of the nominees shall become
unable to stand for election, the individuals named in the enclosed proxy may
exercise their discretion to vote for any substitutes chosen by the Board of
Directors, unless the Board of Directors should decide to reduce the number of
directors to be elected at the Annual Meeting. The Company has no reason to
believe that any nominee will be unable to serve as a director.
The Board of Directors recommends that
you vote FOR the election of each of the following nominees:
Nominees:
Name and (Age)
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Director Since
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Position with the Company
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Walter M. Fiederowicz
(67 years)
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1984
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Director
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Joseph A. Fiorita, Jr.
(69 years)
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1987
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Director
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Dr. L. C. Hsia
(65 years)
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2012
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Director
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Constantine S. Macricostas
(78 years)
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1974
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Chairman of the Board
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George Macricostas
(44 years)
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2002
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Director
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Mitchell G. Tyson
(59 years)
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2004
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Director
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Messrs. Fiederowicz, Fiorita, Hsia, and
Tyson qualify as being independent under applicable NASDAQ Global Select
(NASDAQ) rules.
In addition to the information set forth
in the table above, the following provides certain information about each
nominee for election as director, including his principal occupation for at
least the past five years. Also set forth below is a brief discussion of the
specific experience, qualifications, attributes or skills that led to the
conclusion that each nominee and director should serve as a director as of the
date of this proxy statement, in light of the Companys business and
structure.
6
Walter M. Fiederowicz has been a private
investor and consultant since August 1997. During 2011, he served as Managing
Director of Painter Hill Ventures and Painter Hill Venture Fund, entities that
invest in financial services and technology companies. Mr. Fiederowicz is
Chairman of the Compensation Committee, Vice Chairman of the Audit Committee and
a member of the Executive Committee. Mr. Fiederowicz brings to the Board of
Directors substantial experience in analyzing and forecasting economic
conditions both domestically and internationally. Through his service on the
boards of other companies, he has gained extensive experience in leadership,
risk oversight and corporate governance matters.
Joseph A. Fiorita, Jr., CPA, has been a
partner since 1973 at Fiorita, Kornhaas & Company, P.C., an independent
certified public accounting firm located in Danbury, Connecticut. He is a member
of the Connecticut Society of Certified Public Accountants (CSCPA) and American
Institute of Certified Public Accountants (AICPA). He serves as an advisory
board member of various closely-held companies and charitable organizations. He
is also a Corporator for Newtown Savings Bank. Mr. Fiorita is Chairman of the
Audit Committee, Vice Chairman of the Compensation Committee and a member of the
Executive Committee. Mr. Fiorita qualifies as an audit committee financial
expert under applicable rules promulgated by the Securities and Exchange
Commission (SEC). Mr. Fiorita brings to the Board of Directors broad
experience in corporate finance, and is highly qualified in the fields of
accounting and internal controls, both of which contribute to effective service
on the Board of Directors. Through his service on the board of directors of
other companies, he has gained additional experience in risk management and
corporate governance.
Liang-Choo Hsia, was formerly Senior Vice
President and Senior Technical Advisor at Global Foundries. He joined Global
Foundries as a result of the acquisition of Chartered Semiconductor
Manufacturing where, for over ten years, he played a pivotal role in defining
roadmaps for advanced node migration and oversaw the companys participation in
the Joint Development Alliance with IBM for advanced manufacturing at the
22/20nm nodes. He joined Chartered after serving for three years as Director of
Technology Development of United Microelectronics Corporation in Taiwan. Prior
to that, he spent over a decade with IBM as an advisory scientist in various
divisions. Dr. Hsia has authored or co-authored over 100 papers and over 50
patents. He resides in Taiwan and has offices in Taiwan and Singapore. Dr. Hsia
is a member of the investment committee, Semi Taiwan, he also serves as a
Director on the Board of Everam, Inc. Taiwan, a mobile DRAM design house and on
the Board of Sequia Microelectronics Corp., Taiwan, a design house for LED power
supply chips. Dr. Hsia is Chairman of the Strategic Planning and Technology
Development Committee and is a member of the Nominating Committee.
Constantine S. Macricostas is Chairman of
the Board and Chief Executive Officer. From July 20, 2008, Mr. Macricostas
assumed the responsibility of Interim Chief Executive Officer and on April 3,
2009 he became Chief Executive Officer and President. From February 23, 2004 to
June 7, 2005, Mr. Macricostas also served as Chief Executive Officer. Mr.
Macricostas also served as Chief Executive Officer of the Company from 1974
until August 1997. Mr. Macricostas is a founder, Vice Chairman of the Board and
a director of RagingWire Enterprise Solutions, Inc., (RagingWire). Mr.
Macricostas is the father of George Macricostas. Mr. Macricostas knowledge of
the Company and its operations is invaluable to the Board of Directors in
evaluating and directing the Companys future. Through his long service to the
Company and experience in the industry, he has developed extensive knowledge in
the areas of leadership, safety, risk oversight, management and corporate
governance, each of which provides great value to the Board of
Directors.
George Macricostas is Chairman of the
Board, Chief Executive Officer, President and a founder of RagingWire, a company
that provides secure managed information technology services and data center
infrastructure to data intensive enterprises. Mr. Macricostas is a member of the
Strategic Planning and Technology Development Committee of the Company. Mr.
Macricostas is a member of the Board of Directors of the Jane Goodall Institute,
and was a finalist in the 2007 Ernst and Young Entrepreneur of the Year program.
From November 2005 to January 2007, Mr. Macricostas was Executive Vice Chairman
of RagingWire. From May 2000 through November 2010, Mr. Macricostas was Chief
Executive Officer of RagingWire. Prior to the founding of RagingWire, from
February 1996 until April 2000, Mr. Macricostas was a senior vice president of
the Company, where he was responsible for all aspects of the Companys global
information technology infrastructure. Mr. Macricostas brings over 21 years of
technical and business management experience in operations and information
technology to the Board of Directors. Through his service on the Board, he has
gained additional experience in risk management and corporate
governance.
7
Mitchell G. Tyson is an independent
business strategy and clean energy consultant and serves on multiple industry,
government and corporate boards of directors. He is also an Adjunct Professor at
the Brandeis International Business School. Until October 2010 he was the Chief
Executive Officer and a Director of Advanced Electron Beams. Prior to joining Advanced
Electron Beams in 2005, Mr. Tyson was a corporate consultant and lecturer.
Previously, Mr. Tyson served as the Chief Executive Officer of PRI Automation, a
publicly traded corporation that supplied automation systems including hardware,
software and services to the semiconductor industry. From 1987 to 2002, he held
positions of increasing management responsibility and helped transform PRI
Automation from a small robotics manufacturer to the worlds leading supplier of
semiconductor fab automation systems. Prior to joining PRI Automation, Mr. Tyson
worked at GCA Corporation from 1985 to 1987 as Director of Product Management
and served as science advisor and legislative assistant to the late U.S. Senator
Paul Tsongas from 1979 to 1985. Mr. Tyson is Chairman of the Nominating
Committee and a member of the Audit Committee of the Company.
MEETINGS AND COMMITTEES OF THE
BOARD
The Board of Directors met 5 times during
the 2013 fiscal year. During fiscal 2013, each director attended all (100%) of
the regular meetings of the Board of Directors and all (100%) of committee
meetings of the Board on which such director served.
The Companys Board of Directors has
Audit, Compensation, Executive, Nominating and Strategic and Technology
Development Committees. Members of the Audit, Compensation and Nominating
Committees are comprised of independent, non-employee directors.
The Audit Committees functions include
the appointment of the Companys independent registered public accountants,
reviewing with such accountants the plan for and results of their auditing
engagement and the independence of such accountants. Messrs. Fiederowicz,
Fiorita and Tyson are the members of the Audit Committee. All members of this
Committee are independent, non-employee directors under applicable NASDAQ rules.
Mr. Fiorita qualifies as an audit committee financial expert under applicable
SEC audit committee rules. The Audit Committee held 8 meetings during the 2013
fiscal year.
The Compensation Committees functions
include establishing the compensation levels for our executive officers and
overseeing compensation policies and programs for the executive officers of the
Company and administration of the Companys equity and stock plans. This
includes setting corporate goals and objectives relevant to compensation of our
executive officers and evaluating performance against these goals and
objectives. The Committee also reviews and makes recommendations to the Board
with respect to director compensation. Members of management, including our
Chief Executive Officer and President, our Chief Financial Officer, our Vice
President of Human Resources and our Vice President and General Counsel
participate in Compensation Committee meetings as requested by the Committee to
present and discuss the materials provided, including recommendations to be
considered relative to executive pay and competitive market practices. These
members of management assist the Committee in understanding the Companys
business plan and long term strategic direction, developing the performance
targets for our performance-based compensation and understanding the technical
or regulatory considerations as well as the motivational factors of the
decisions that are intended to drive executive and company performance. Although
the Committee solicits input and perspective from management regarding executive
compensation, the ultimate decision on executive compensation is made solely by
the Compensation Committee, and the decision regarding the Chief Executive Officers
compensation is made by the Compensation Committee without the presence of the
Chief Executive Officer. Messrs. Fiederowicz and Fiorita are the members of the
Compensation Committee. All members of this Committee are independent,
non-employee directors under applicable NASDAQ rules. The Compensation Committee
held 11 meetings during the 2013 fiscal year.
The purpose of the Executive Committee is
to permit action on behalf of the Board of Directors between meetings,
particularly in those circumstances for which a timely response is required and
full Board participation is not feasible. Messrs. Macricostas, Fiederowicz and
Fiorita were the members of the Executive Committee in fiscal 2013. The Company has decided not
to utilize an Executive Committee for fiscal 2014.
8
The purpose of the Strategic Planning and
Technology Development Committee is to assist the Board of Directors with
planning and directing the Company towards its vision and strategic goals. The
Strategic Planning and Development Committee met 4 times in fiscal 2013. Dr.
Hsia and Mr. George Macricostas are the members of the Strategic Planning and
Technology Development Committee.
The Nominating Committees functions
include the consideration and nomination of candidates for election to the
Board. Mr. Tyson and Dr. Hsia are the members of the Nominating Committee. All
members of this Committee are independent, non-employee directors under
applicable NASDAQ rules. This Committee held 2 meetings during the 2013 fiscal
year.
The minimum qualifications for nominees to
be considered by the Nominating Committee are experience as a business or
technology leader, possession of the qualities or skills necessary, the ability
to deliver value and leadership to the Company and the ability to understand, in
a comprehensive manner, the technology utilized by the Company and its customers
for the production of semiconductors and flat panel displays. If an opening for
a Director arises, the Board will conduct a search for qualified candidates. The
Nominating Committee utilizes its network of contacts to compile a list of
potential candidates, but may also engage, if it deems appropriate, a
professional search firm. The Nominating Committee will also consider qualified
candidates for Director suggested by shareholders in written submissions sent to
Photronics, Inc., 15 Secor Road, Brookfield, Connecticut 06804, Attention:
Secretary. The Nominating Committee also considers the diversity of backgrounds
and expertise represented in the Boards composition and whether a nominee is
qualified to serve may depend in part on the backgrounds of the other directors,
so that the Board of Directors as a whole has an appropriate mix of backgrounds
and breadth of experience. The Nominating Committee reviews its effectiveness in
balancing these considerations through its ongoing consideration of directors
and nominees, as well as the Nominating Committees annual self-evaluation
process. The Nominating Committee evaluates candidates in the same manner,
whether the candidate was recommended by a shareholder or not.
The Nominating Committee did not receive
any Director nominations from a shareholder for the Annual Meeting.
The Board provides a process for
shareholders to send communications to the Board or to any Director
individually. Shareholders may send written communications to the Board or to
any Director c/o Photronics, Inc., 15 Secor Road, Brookfield, Connecticut 06804,
Attention: Secretary. All communications will be compiled by the Secretary and
submitted to the Board, or the individual Directors, on a periodic
basis.
It is the Companys policy that the
Directors who stand for election at the Annual Meeting attend the Annual Meeting
unless the Director has an irreconcilable conflict and attendance has been
excused by the Board. All of the nominees who were Directors during the last
fiscal year and who are standing for election at the Annual Meeting attended the
2013 Annual Meeting of Shareholders.
AUDIT COMMITTEE REPORT
The Audit Committee is composed of three
directors, each of whom meets the independence requirements of the applicable
NASDAQ and SEC rules. The Audit Committee operates under a written charter
adopted by the Board of Directors of the Company. The Audit Committee also
undertakes a written performance evaluation of the Committee on an annual
basis.
The Audit Committee held 8 meetings during
the 2013 fiscal year. For the fiscal year ended November 3, 2013, the Audit
Committee reviewed and discussed the audited financial statements with
management, discussed with Deloitte & Touche LLP the matters required to be
discussed by Statement on Auditing Standards No. 61 (communication with Audit
Committees) as amended, as adopted by PCAOB in Rule 3200T. In addition, the
Audit Committee has received the written disclosures and the letter from
Deloitte & Touche LLP required by the applicable requirement of PCAOB
regarding Deloitte & Touche LLPs communication with the Audit Committee
concerning independence and has discussed with Deloitte & Touche LLP that
firms independence from the Company and its management. The Audit Committee
reviewed and discussed with management and Deloitte & Touche LLP, as
appropriate, (1) the audited financial statements and (2) managements report on
internal control over financial reporting and Deloitte & Touche LLPs
related opinions. The Committee considered whether the provision of non-audit
services by Deloitte & Touche LLP to the Company is compatible with
maintaining the independence of Deloitte & Touche LLP and concluded
9
that the independence of Deloitte &
Touche LLP was not compromised by the provision of such services. The Audit
Committee met with management periodically during the fiscal year to review the
Companys Sarbanes-Oxley Section 404 compliance efforts related to internal
controls over financial reporting. Additionally, the Audit Committee
pre-approved all audit and non-audit services provided to the Company by
Deloitte & Touche LLP. Based on the foregoing meetings, reviews and
discussions, the Audit Committee recommended to the Board of Directors that the
audited financial statements for fiscal year 2013 be included in the Companys
Annual Report on Form 10-K for filing with the Securities and Exchange
Commission.
The Audit Committee has a formal procedure
for reviewing complaints and inquiries about accounting and auditing matters and
violations of Company policy.
Fees Paid to the Independent
Registered Public Accounting Firm
For the fiscal years ended November 3,
2013 and October 28, 2012, the aggregate fees for professional services rendered
by Deloitte & Touche LLP were as follows:
|
|
Fiscal
2013
|
|
Fiscal
2012
|
Audit Fees (a)
|
|
|
$
|
1,031,323
|
|
|
|
$
|
1,058,678
|
|
Audit-Related Fees (b)
|
|
|
|
132,300
|
|
|
|
|
0
|
|
Tax Fees (c)
|
|
|
|
247,309
|
|
|
|
|
64,073
|
|
All
Other Fees
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
Total
|
|
|
$
|
1,410,932
|
|
|
|
$
|
1,122,751
|
|
|
(a)
|
|
Represents aggregate
fees in connection with the audit of the Companys annual financial
statements, internal controls over financial reporting and review of the
Companys quarterly financial statements or services normally provided by
Deloitte & Touche LLP.
|
|
|
|
|
|
(b)
|
|
Represents assurance
and other activities not directly related to the audit of the Companys
financial statements.
|
|
|
|
(c)
|
|
Represents aggregate
fees in connection with tax compliance, tax advice and tax
planning.
|
This report is submitted by:
Joseph A.
Fiorita, Jr.
Chairman
Walter M. Fiederowicz
Mitchell G. Tyson
10
EXECUTIVE OFFICERS
The names of the executive officers (the
Named Executive Officers) of the Company are set forth below together with the
positions held by each person in the Company. All executive officers are elected
annually by the Board of Directors and serve until their successors are duly
elected and qualified.
Name and
Age
|
|
|
Position
|
|
Served as a Named
Executive Officer Since
|
Richelle E. Burr, 50
|
|
Vice President, General Counsel
|
|
2010
|
|
|
and Secretary
|
|
|
|
|
|
|
|
Soo Hong Jeong, 58
|
|
President and
|
|
2001
|
|
|
Chief Operating Officer of Asia
|
|
|
|
|
|
|
|
Peter S. Kirlin, 53
|
|
President
|
|
2008
|
|
|
|
|
|
Constantine S. Macricostas, 78
|
|
Chief Executive Officer
|
|
2008
|
|
|
|
|
|
Christopher J. Progler, 50
|
|
Vice President, Chief Technology
|
|
2004
|
|
|
Officer and Strategic Planning
|
|
|
|
|
|
|
|
Sean T. Smith, 53
|
|
Senior Vice President and
|
|
2000
|
|
|
Chief Financial Officer
|
|
|
Richelle E. Burr
joined Photronics in 2003 as Corporate Counsel. She was
promoted to Vice President, Associate General Counsel in 2008 and was appointed
Secretary in April of 2009 prior to her appointment as General Counsel in
January 2010.
Dr. Soo Hong Jeong
was appointed President and Chief Operating Officer of Asia
on February 13, 2013. He has served as President of Asia Operations since March
22, 2004. Dr. Jeong served as Chief Operating Officer of Photronics from June
2006 to February 2013. Prior to that, Dr. Jeong served as a Vice President of
the Company and President and Chief Executive Officer of PK, Ltd. (PKL), since
August 2001.
Dr. Peter S. Kirlin
was appointed President of the Company in September of 2013.
He joined Photronics in August, 2008 as Senior Vice President, US and Europe.
Prior to joining Photronics, Dr. Kirlin was Executive Chairman of Akrion, Inc.
from January 2007 to July 2008. Prior to that Dr. Kirlin was Vice President of
Business Development at Entegris, Inc. from May 2004 to September 2006 prior to
which he was Chairman and Chief Executive Officer of DuPont Photomask,
Inc.
Constantine S.
Macricostas
has served as Chief Executive
Officer and President since April 3, 2009. In September of 2013, Dr. Kirlin was
appointed President of the Company and Mr. Macricostas remains as Chairman of
the Board and Chief Executive Officer. Prior to that, he served as Interim Chief
Executive Officer from July 20, 2008 to April 3, 2009. From February 23, 2004 to
June 7, 2005, he also served as Chief Executive Officer. From January 2002
through March 2002, he temporarily assumed the position of President. Mr.
Macricostas also served as Chief Executive Officer of the Company from 1974
until August 1997.
Dr. Christopher J.
Progler
became an executive officer on June
21, 2006. Dr. Progler has been employed by Photronics since 2001 starting with
the position of Corporate Chief Scientist. He was promoted to Vice President and
Chief Technology Officer in 2004. In 2011 Dr. Progler assumed the added
responsibility of Strategic Planning for the Company. Dr. Progler is a Fellow
and Board Member of SPIE - The International Society for Optical Engineering. He
is Co-Chair of SPIE Advanced Lithography Symposium and Associate Editor for the
SPIE Journal of Microlithography, Microfabrication and Microsystems.
Sean T. Smith
was promoted to Senior Vice President and Chief Financial
Officer on January 25, 2005. He was promoted to Vice President and Chief
Financial Officer in March 2002 after serving as Vice President and Controller.
He joined Photronics in April 2000.
11
COMPENSATION DISCUSSION AND
ANALYSIS
The Compensation Committee of the Board of
Directors (the Compensation Committee) is comprised of two of the independent,
non-employee members of the Board of Directors. Neither of these individuals was
an officer or employee of the Company at any time during fiscal year 2013 or at
any other time, and neither of them have interlocking relationships as described
in Item 407 of Regulation S-K. The Compensation Committee is responsible for
setting and administering the policies governing compensation of our executive
officers. The Compensation Committee reviews and approves, among other things,
overall annual performance for the Named Executive Officers as well as all
participants in the Companys 2011 Executive Incentive Compensation Plan (2011
EICP).
Compensation
Philosophy
The Companys compensation philosophy is
that rewarding the Companys executives for their individual and collective
efforts and contributions to the Company, in a manner that fosters teamwork and
leads to the long-term success of the Company, is in the best interests of its
shareholders. The Company also believes that delivering a substantial portion of
such rewards in the form of stock or stock options, aligns the interests of the
Companys executives with the interests of shareholders. The Companys
compensation program is designed to attract and retain talented employees by
providing adequate incentives to achieve its business objectives, while not
encouraging excessively risky behavior. The Compensation Committee periodically
reviews the Companys approach to executive compensation in light of general
economic conditions of the semiconductor industry and the Companys performance,
and makes changes when appropriate.
Compensation
Objectives
Consistent with the Companys philosophy,
the Company believes that executive compensation must be competitive with other
comparable employers in order for qualified employees to be attracted to, and
retained by, the Company, and that the Companys compensation practices should
provide incentives for driving better business performance and increasing
shareholder value. Accordingly, the four primary objectives of the Companys
compensation program, as administered by the Compensation Committee
are:
-
to provide competitive compensation to attract and
retain talented employees;
-
to advance the goals of the Company by aligning
executives interests with shareholder interests;
-
to minimize risks associated with compensation;
and
-
to balance the incentives associated with the
program in a way that provides incentives for executives to assess and manage
risks associated with the Companys business appropriately, in the context of
the Companys business strategy.
Elements of
Compensation
The Compensation Committee uses three
components to achieve the Companys primary objectives: base salary, annual cash
incentives and stock-based awards.
The Compensation Committee believes that
the three components of the Companys compensation result in a compensation
program that is competitive and aligns the Named Executive Officers interests
with shareholder value creation.
Base salaries provide each executive with
a fixed, minimum level of cash compensation. The Company believes that it is
important for retention, stability and continuity of leadership, that base
salaries be competitive with the Companys peers. Base salaries may be increased
or decreased depending upon changes in duties or economic conditions. The base
salary of the highest paid executive of the Company, its Chief Executive
Officer, was approximately 59% of his total compensation in 2013.
12
Annual cash incentives are used to promote
the achievement of specific short-term goals of the Company that correspond to
certain goals of the Company set on an annual basis and the underlying metrics
relating thereto. Since the achievement of the annual cash incentives is
determined by Company performance, and the percentage of salary awarded as
annual cash incentives for 2013 was the same for all Named Executive Officers,
the Company believes that such awards foster teamwork among the Named Executive
Officers to meet the Companys short-term objective goals. Approximately 5% of
the Named Executive Officers compensation in 2013 consisted of annual cash
incentives.
Stock-based awards are the Companys preferred approach to both
align the interests of shareholders with the executives, as well as enhance the
Companys retention goals. By virtue of the stock-based awards, the Named
Executive Officers are shareholders themselves and participate in the gains in
value of the Companys stock. Over 31% of the Named Executive Officers
compensation in 2013 consisted of stock-based compensation.
Total Direct
Compensation
Chief Executive Officer
|
|
Total
Compensation All Other Named
Executive
Officers
|
|
|
|
|
|
|
Determination of Total
Compensation
When determining total compensation, the
Compensation Committee assesses five primary factors:
-
the overall performance of the
Company;
-
the Named Executive Officers role in that
performance;
-
the compensation previously received by the Named
Executive Officer;
-
the compensation of similarly situated executive
officers working for peer group companies; and
-
shareholder feedback.
When linking the Companys performance and
the total compensation of the Named Executive Officers, the Compensation
Committee uses both the objective metrics provided for under the 2011 EICP as
well as its subjective assessment of the performance of the Company in the
context of general economic and industry trends.
When the Compensation Committee evaluates
the role of each Named Executive Officer in the performance of the Company, it
considers both the recommendation and evaluation of such Named Executive Officer
by the Chief Executive Officer (the Chief Executive Officer does not evaluate
his own performance) and the Compensation Committees assessment of each Named
Executive Officers leadership qualities, paying particular attention to the
scope of his or her duties and the collaboration of such Named Executive Officer
with other team members.
In establishing compensation levels for
the Companys Named Executive Officers of the Company, identified in the Summary
Compensation Table, the Compensation Committee considers compensation at nine
publicly traded companies in the semiconductor/electronics industries with
similar levels of sales and capital. These companies are Advanced Energy
Industries, Inc., ATMI, Inc., Axcelis Technologies, Inc., Brooks Automation,
Inc., Cabot
13
Microelectronics Corp., Entegris, Inc.,
FEI Co, Kulicke & Soffa Industries, Inc., and Veeco Instruments, Inc.
Information regarding these companies and their compensation practices is drawn
from their proxy statements. The Compensation Committee adjusts executive
compensation in connection with this review. Generally, the Compensation
Committee believes that the compensation of its executive officers should be set
near the median compensation of this comparison group; however it is also
important to the Compensation Committee that compensation reflect individual
performance and that may warrant compensation up to 20% above or below the
median.
In addition, while establishing its
compensation policies for a given year, the Compensation Committee will evaluate
the results from the most recent shareholder advisory vote on compensation to
consider the implications of such advisory vote for the compensation policies
and determine whether changes are appropriate. At the 2013 Annual Shareholders
Meeting, 98% of the votes cast with respect to the advisory vote on executive
compensation voted to overwhelmingly approve the executive compensation paid in
fiscal 2012. In light of this vote, as well as the Compensation Committees
review of the compensation arrangements discussed above, general market pay
practices for its executives and its assessments of individual and corporate
performance, the Compensation Committee determined that no significant change in
its compensation policies would be made. The Compensation Committee will
consider the results from this years and future shareholder advisory votes
regarding future executive compensation decisions.
The Compensation Committee does not use
tally sheets.
Base Salary
The Compensation Committee evaluates and
establishes base salary levels in light of economic conditions (generally and in
the regions where executives work) and comparisons to other similarly situated
companies. Base salary is designed to recognize an executives knowledge,
skills, abilities, level of responsibility and ongoing performance. The
Compensation Committee targets base salary for all executives to be at a level
consistent with our assessment of their value relative to their peers in the
labor market, while also taking into account our need to maintain costs in light
of business conditions and the challenging economic times. Any recommendations
for salary changes to any Named Executive Officers (other than the Chief
Executive Officer) are made by the Chief Executive Officer and presented to the
Compensation Committee for approval.
Dr. Proglers salary was increased in fiscal year
2013 from $285,000 to $300,000, because of strategic planning initiatives he
undertook in 2012, technology implemented on behalf of the Company and to make
Dr. Proglers salary competitive with other similarly situated chief technology
officers. Dr. Peter Kirlin was promoted to President of the Company in September
of 2013. As a result of Dr. Kirlins promotion and his increased
responsibilities, his salary was increased from $320,000 to $450,000 in
September of 2013.
Dr. Proglers salary was further increased
in the beginning of fiscal 2014 from $300,000 to $330,000 again as a result of
the strategic initiatives he implemented in 2013 and to make Dr. Proglers
salary competitive with other similarly situated technology officers. Ms. Burrs
salary was increased in the beginning of fiscal 2014 from $220,000 to $250,000
as a result of additional duties she assumed as General Counsel for the Company
and also to make Ms. Burrs salary competitive with other, similarly situated
general counsel.
Annual Incentives
During the 2011 Annual Meeting, our
shareholders approved the 2011 EICP. Participation in the 2011 EICP is limited
to key employees of the Company as designated by the Compensation Committee. The
2011 EICP is administered by the Compensation Committee, which has full power
and authority to determine which key employees of the Company receive awards
under the 2011 EICP, set performance goals and bonus targets for each fiscal
year, interpret and construe the terms of the 2011 EICP and to make all
determinations it deems necessary in the administration of the 2011 EICP,
including any determination with respect to the achievement of performance goals
and the application of such achievement to the bonus targets. The 2011 EICP sets
out quantitative and qualitative categories of business criteria upon which
performance goals are based. The business criteria measures within each category
may be assigned different weightings based upon their relative degree of
importance as determined by the Compensation Committee.
14
In the quantitative category, one or more
of the following business criteria may be used as performance measures: (i) net
sales, (ii) operating income, (iii) net income, (iv) earnings per share of
common stock, (v) net cash flows provided by operating activities, (vi) net
increase in working capital, (vii) return on invested capital, (viii) return on
equity and/or (ix) debt reduction. In the qualitative category, the business
criteria relate to objective individual performance, taking into account
individual goals and objectives. The performance goals with respect to each
category of business criteria are established by the Compensation Committee
within ninety days of the commencement of each fiscal year. Annual bonus targets
are either expressed as a percentage of current salary or a fixed monetary
amount with respect to each performance goal. At the end of each fiscal year for
which a bonus may be earned, the Compensation Committee determines each
participants level of achievement of the established performance goals.
Consistent with the relevant provisions of the Dodd-Frank Act, the Company will
clawback, or retroactively adjust if the relevant performance measures that
awards are based upon are later restated or otherwise adjusted in a manner that
would reduce the size of the award or payment. The Compensation Committee may
amend or terminate the 2011 EICP at any time provided that no amendment will be
effective prior to approval of the Companys shareholders to the extent such
approval is required to preserve deductibility of compensation paid pursuant to
the 2011 EICP under Section 162(m) of the Internal Revenue Service Code or
otherwise required by law.
The Compensation Committee met in January
of 2013 and established 5 metrics for fiscal 2013 that were to be used under the
2011 EICP.
Metric
|
Target
|
Actual Performance
|
Operating Margin Percentage
|
5%
|
7%
|
Annual Revenue Per Employee
|
$353 thousand
|
$325 thousand
|
Increased Market Share
|
Increased Market Share
|
Achieved
|
Achievement of Strategic
Milestone
|
Strategic Milestones
|
Achieved
|
Minimum Free Cash Flow
|
$40 million
|
$46
million
|
The metrics for fiscal 2013 were operating
margin percentage (operating margin percentage is operating income, excluding
one-time items, divided by sales), annualized revenue per employee, market share
gain, achievement of strategic milestones and minimum free cash flow (minimum
free cash flow is defined as EBITDA less non-financed cash capital expenditure.
EBITDA as defined in our credit agreement is GAAP net income plus interest
expense, income tax expense, depreciation and amortization, and plus (less)
special items as defined). Each of the five metrics was given equal weight. The
maximum payout upon certification of attainment of targets for 2013 for the
Named Executive Officers (with the exception of the CEO) was 25% of the
applicable Named Executive Officers base salary. The Chief Executive Officers
maximum payout was 40%. The Compensation Committee had the discretion to reduce
the maximum amount payable to any Named Executive Officer in its sole
discretion. In order for the Named Executive Officers to be eligible for a cash
bonus for fiscal 2013, the Company was required to meet at least two of the
metrics. In December of 2013, the Compensation Committee met and reviewed the
metrics established in January and also reviewed the performance of the Company
for fiscal 2013. The Compensation Committee determined that the Company achieved
four out of the five metrics established for 2013. The Company did not meet the
annualized revenue per employee metric. Based on such achievement the Named
Executive Officers were eligible for a cash incentive up to 20% of their
respective base salaries (with the exception of the CEO who was eligible to
receive 32%). However, the Compensation Committee also considered that EBITDA
declined from $135 million in 2012 to $110 million in 2013, gross margin declined
from 25% in 2012 to 24% and revenues declined 6% to $422 million from $450
million in 2012. High-end IC sales accounted for the overall decline in revenue,
primarily attributable to an Asian foundry customer for which the Company was
not qualified as a result of a node migration. Therefore, the
15
Compensation Committee decided to award a
bonus of 10% of base salary to each of the Named Executive Officers under the
2011 EICP. Based on the determination of the Compensation Committee, the
following Named Executive Officers received the following cash bonus in December
2013:
Constantine Macricostas
|
$60,000
|
Sean T. Smith
|
$37,500
|
Dr. Peter S. Kirlin
|
$32,000
|
Dr. Christopher J. Progler
|
$30,000
|
In January of 2014, the Compensation
Committee met and established goals to be used for 2014 under the 2011 EICP. The
goals established for 2014 were: EBITDA, operating margin, achievement of high
end qualification plan and successfully closing and fully integrating by the end
of October 2014 the joint venture in Taiwan that the Company announced in
November of 2013.
Long Term Equity
Incentives
The Companys long term incentive program
uses restricted stock and stock options. The plans allow for the grant of stock
options and restricted stock awards to directors and executive officers of the
Company, as well as other employees of the Company.
The Compensation Committee believes that
the grant of stock options and restricted stock awards provides a strong link
between executive compensation and shareholder return, aligning the long term
interests of its executives with those of the Companys shareholders and thereby
promoting strategic planning while minimizing excessive risk.
In March of 2007,
the Company adopted a Long Term Equity Incentive Plan (LTEIP). In April of
2010, the LTEIP was amended to increase the number of shares available for
issuance under the plan from 3 million to 6 million and the amount of restricted
stock allowed to be issued thereunder from 10% to 15% of the total shares issued
cumulatively. The LTEIP permits the grant of stock options, restricted stock,
stock appreciation rights, performance shares and performance units as well as
restricted stock units and other equity-based awards. The granting of equity
awards under the LTEIP is generally decided every December at the Companys
Board of Directors meeting. Grants to executive officers under the LTEIP are
based on job responsibilities and the potential for individual contribution
impacting the Companys overall performance. When considering grants, the
Compensation Committee exercises judgment and discretion, generally using a
sliding scale approach and also considers previous stock award grants in order
to align generally with its overall compensation philosophy. For example, the
Compensation Committee may consider reducing grants in a particular year, when a
Named Executive Officer has large realizable gains from stock award grants in
previous years. The Company generally provides restricted stock awards and stock
options to the executive officers pursuant to the terms of the LTEIP.
The annual option granting process
generally begins with the Compensation Committee providing direction to the
Chief Executive Officer as to the total number of shares available for grant for
the year. The Chief Executive Officer then provides individual grant
recommendations to the Compensation Committee (except for his own) for review
and approval. The Chief Executive Officers recommendation is a subjective
evaluation of the Named Executive Officers contribution to the Companys future
success, the level of incentive compensation previously received as well as the
market price of the common stock on the date of grant. The Compensation
Committee considers the aggregate number of shares available, the number of
shares previously awarded and the number of individuals to whom the Company
wishes to grant stock options or restricted stock awards. The Compensation
Committee reserves the right to consider the factors it considers relevant under
the circumstances then prevailing in reaching its determination regarding the
amount of each stock option and/or restricted stock award.
16
Options awards typically vest 25% per year
beginning one year after the grant date, with full vesting on the fourth
anniversary of the grant date. The options expire ten years after the grant
date, unless the employee separates earlier from the Company, at which point the
options expire 30 days after separation. The exercise price is equal to the
closing price of our common stock on the date of grant.
Restricted stock awards typically vest 25%
per year beginning one year after the grant date, with full vesting on the
fourth anniversary of the grant date. Any shares not fully vested on the date
the employee separates from the Company are forfeited.
The Chief Executive Officers grant is
determined by the Compensation Committee at its sole discretion, based on the
Compensation Committees evaluation of the Chief Executive Officers expected
contribution to the Companys future success, the level of incentive
compensation previously awarded, the overall performance of the Company, a
review of the Chief Executive Officers peer group compensation and the market
price of the Companys common stock on the date of grant.
When determining the long term incentive
grants in December of 2013, the Compensation Committee considered the overall
performance of the Company in 2013 and also considered that in 2013 EBITDA
declined from $135 million in 2012 to $110 million in 2013, and gross margin
declined from 25% in 2012 to 24% in 2013 and that revenues declined 6% to $422
million from $450 million in 2012. High-end IC sales accounted for the overall
decline in revenue, primarily attributable to an Asian foundry customer for
which the Company was not qualified as a result of a node migration.
Based on the determination of the
Compensation Committee, the Named Executive Officers received the following
grants in December 2013:
|
Stock Options
|
Restricted Stock
|
Constantine Macricostas
|
60,000
|
10,000
|
Peter Kirlin
|
45,000
|
7,500
|
Sean T. Smith
|
37,500
|
6,250
|
Dr. Christopher J. Progler
|
33,000
|
5,500
|
Dr. Soo Hong Jeong
|
15,000
|
2,500
|
The stock options were granted with an
exercise price of $8.86 and will expire on December 13, 2023. The shares of
restricted stock will vest in four equal increments over the next four years.
The awards were granted in fiscal 2014 and were granted for 2013 performance but
were also awarded to retain the Named Executive Officers.
The Compensation Committee may consider
adopting stock ownership guidelines for the Named Executive Officers.
Health and Welfare and Retirement
Benefits
The Named Executive Officers participate
in a variety of health and welfare and paid time off benefits designed to allow
the Company to retain its workforce. With the exception of the benefits
described below for Dr. Jeong, the benefits program enjoyed by the Companys
Named Executive Officers is the same as that offered to all other domestic
employees.
The Company does not have a defined
benefit pension plan or supplemental retirement plan. However, the Company does
have a Profit Sharing and Savings Plan (the Plan). The Plan is a 401(k)
compliant plan which enables participating employees to make contributions from
their earnings and share in the contributions the Company makes to a trust fund
maintained by the trustee. An account in the trust fund is maintained by the
trustee for the Plan. All employees are eligible to participate in the Plan,
except for nonresident aliens with no United States earned income
17
from the Company and temporary employees
or interns. The minimum amount that an employee can contribute is 1% and the
maximum amount is 50%. In fiscal year 2013, the Company provided a matching
contribution based on the contributions that participating employees made to the
Plan. Participating employees received a matching contribution of 50% of the
first 4% of their contribution to the Plan.
Dr. Jeong is entitled to participate in
the PKL employee benefit plans and arrangements as may be established from time
to time in Korea (which may include, without limitation, medical plan, dental
plan, disability plan, basic life insurance and business travel accident
insurance plan, as well as the Companys bonus plan(s), and stock award plans or
any successor plans thereto). The Company and PKL have the right to terminate or
change any such plans or programs at any time. Upon termination of Dr. Jeongs
employment with PKL, Dr. Jeong will receive a lump sum payment of U.S. $108,000
multiplied by the total number of years that Dr. Jeong was employed by PKL
(including years prior to the date of his employee agreement). The sum of
$108,000 shall be fixed and is not subject to escalation or increase based on
any bonus or salary increase that Dr. Jeong may receive during the term of his
agreement.
Employment
Agreements
In order to retain the Named Executive
Officers and retain continuity of management in the event of an actual or
threatened change of control, the Company has entered into employment agreements
with each of the Named Executive Officers except for Mr. Macricostas. Each
agreement covers title, duties and responsibilities and stipulates compensation
terms. Each employment agreement also sets forth the severance benefits due in
the event of a change in control or termination without cause. These employment
agreements are described below under the caption Certain Agreements. The
estimate of the compensation that would be payable in the event of a change in
control or termination without cause is described below under the caption
Potential Payments Upon Termination or Change in Control. The Compensation
Committee believes that these agreements are a competitive requirement to
attract and retain highly qualified executive officers. Before authorizing the
Company to enter into the employment agreements with the Named Executive
Officers, the Compensation Committee analyzed each of the termination and change
in control arrangements and determined that each arrangement was advisable and
appropriate under the circumstances of the Company and given the circumstances
of each of the individual Named Executive Officers. The Compensation Committee
will review these arrangements again upon the renewal of each employment
agreement. Mr. Macricostas does not have an employment agreement but does have a
consulting agreement with the Company. However, the consulting agreement has
been suspended for the period of time that Mr. Macricostas is an employee of the
Company. Mr. Macricostas became an employee of the Company on November 10,
2008.
Tax and Accounting Impact on
Compensation
Financial reporting and income tax
consequences to the Company of individual compensation elements are important
considerations for the Compensation Committee when it is analyzing the overall
level of compensation and the mix of compensation. Overall, the Compensation
Committee seeks to balance its objective of ensuring an effective compensation
package for the Named Executive Officers while attempting to ensure the
deductibility of such compensation while ensuring an appropriate and
transparent impact on reported earnings and other closely followed financial
measures.
Section 162(m) of the Internal Revenue
Code limits the amount of compensation paid to each Named Executive Officer that
may be deducted by the Company to $1 million in any year. There is an exception
to the $1 million limitation for performance-based compensation that meets
certain requirements. Historically, the compensation paid to our executive
officers has not exceeded this limit. To the extent that it is practicable and
consistent with the Companys executive compensation philosophy, the Company
intends to design its executive officer compensation policy to ensure the
deductibility of such compensation under Section 162(m) or if it is determined
not to be in the best interest of stockholders, the Compensation Committee will
abide by its compensation philosophy even if it results in a loss of
deductibility.
18
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation Committee, comprised of
independent directors, reviewed and discussed the above Compensation Discussion
and Analysis (CD&A) with the Companys management. Based on the review and
discussions, the Compensation Committee recommended to the Companys Board of
Directors that the CD&A be included in these Proxy Materials.
Respectfully submitted,
Walter M. Fiederowicz, Chairman
Joseph
A. Fiorita, Jr.
EXECUTIVE COMPENSATION
The following table sets forth certain
information regarding compensation paid or accrued by the Company for services
rendered for the three-year period ended November 3, 2013, to each of the
individuals who served (i) as the Chief Executive Officer; (ii) Chief Financial
Officer and (iii) the three other most highly compensated executive officers of
the Company whose total salary and bonus exceeded $100,000 (such executives are
collectively referred to as the Named Executive Officers).
SUMMARY COMPENSATION
TABLE
Name and Principal
Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)(1)
|
|
Option
Awards
($)(2)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
Soo Hong Jeong
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and
|
|
2013
|
|
475,000
|
|
0
|
|
76,440
|
|
155,080
|
|
108,000
|
(3)
|
|
814,520
|
Chief Operating Officer Asia
|
|
2012
|
|
475,000
|
|
47,500
|
|
102,700
|
|
146,738
|
|
108,000
|
(3)
|
|
879,938
|
|
|
2011
|
|
475,000
|
|
75,000
|
|
109,038
|
|
152,555
|
|
153,256
|
(3)
|
|
964,849
|
Peter S.
Kirlin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President
|
|
2013
|
|
332,000
|
|
32,000
|
|
60,060
|
|
127,941
|
|
17,100
|
(4)
|
|
569,101
|
|
|
2012
|
|
320,000
|
|
32,000
|
|
63,200
|
|
90,300
|
|
17,000
|
(4)
|
|
522,500
|
|
|
2011
|
|
320,000
|
|
65,000
|
|
67,100
|
|
93,880
|
|
17,062
|
(4)
|
|
563,042
|
Constantine S. Macricostas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman and Chief
Executive
|
|
2013
|
|
600,000
|
|
60,000
|
|
109,200
|
|
232,620
|
|
23,208
|
(5)
|
|
1,025,028
|
Officer
|
|
2012
|
|
600,000
|
|
60,000
|
|
355,500
|
|
507,938
|
|
2,617
|
(5)
|
|
1,526,055
|
|
|
2011
|
|
600,000
|
|
130,000
|
|
377,438
|
|
528,075
|
|
22,296
|
(5)
|
|
1,657,809
|
Christopher J.
Progler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice President,
|
|
2013
|
|
300,000
|
|
30,000
|
|
54,600
|
|
116,310
|
|
17,254
|
(6)
|
|
518,164
|
Chief Technology Officer,
|
|
2012
|
|
285,000
|
|
28,500
|
|
55,300
|
|
79,013
|
|
16,900
|
(6)
|
|
464,713
|
Strategic Planning
|
|
2011
|
|
285,000
|
|
55,000
|
|
58,713
|
|
82,145
|
|
17,571
|
(6)
|
|
498,429
|
Sean T. Smith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice
President,
|
|
2013
|
|
375,000
|
|
37,500
|
|
73,710
|
|
145,387
|
|
7,712
|
(7)
|
|
639,309
|
Chief Financial
Officer
|
|
2012
|
|
375,000
|
|
37,500
|
|
79,000
|
|
112,875
|
|
11,006
|
(7)
|
|
615,381
|
|
|
2011
|
|
360,000
|
|
85,000
|
|
83,875
|
|
117,350
|
|
7,765
|
(7)
|
|
653,990
|
(1)
|
The amounts shown in
the Stock Awards column represents the closing price of the Companys
Common Stock on the date of grant multiplied by the number of shares
awarded.
|
|
|
(2)
|
The amounts included
in this column represent the grant date fair value of the options
calculated in accordance with ASC No. 718. The assumptions used in
determining the fair value of these options are set forth in Note 10 of
the Companys Annual Report on Form 10-K.
|
19
(3)
|
The Company provides
Dr. Jeong with a company car and driver, as is customary in Korea. The
Company also pays the annual membership fee on behalf of Dr. Jeong to two
country clubs in Korea that Dr. Jeong has membership to and uses for
business purposes as is customary in Korea.
|
|
|
(4)
|
Represents car
allowance and matching contribution pursuant to the Companys 401(k)
Savings and Profit Sharing Plan.
|
|
(5)
|
Represents allowance
for personal use of a Company car and medical reimbursements.
|
|
(6)
|
Represents car
allowance and matching contribution pursuant to the Companys 401(k)
Savings and Profit Sharing Plan.
|
|
(7)
|
Represents allowance
for personal use of a Company car and matching contribution pursuant to
the Companys 401(k) Savings and Profit Sharing
Plan.
|
GRANT OF PLAN-BASED AWARDS
TABLE
During the fiscal year ended November
3, 2013, the following plan-based awards were granted to the
Named Executive
Officers
Name
|
|
Grant Date
|
|
Stock Awards
Shares of Stock
or
Units (#)
|
|
All Other Stock
Awards: Number
of
Shares of Stock(1)
|
|
Grant Date Fair
Value of Stock
and
Option Awards
$
|
Soo Hong Jeong
|
|
|
12/7/2012
|
|
|
|
14,000
|
|
|
|
40,000
|
|
|
|
231,520
|
|
Peter S. Kirlin
|
|
|
12/7/2012
|
|
|
|
11,000
|
|
|
|
33,000
|
|
|
|
188,001
|
|
Constantine S. Macricostas
|
|
|
12/7/2012
|
|
|
|
20,000
|
|
|
|
60,000
|
|
|
|
341,820
|
|
Christopher J. Progler
|
|
|
12/7/2012
|
|
|
|
10,000
|
|
|
|
30,000
|
|
|
|
170,910
|
|
Sean T. Smith
|
|
|
12/7/2012
|
|
|
|
13,500
|
|
|
|
37,500
|
|
|
|
219,098
|
|
(1)
|
|
The number of shares
of Common Stock underlying each option is equal to such number of options.
The exercise price of each option awarded is
$5.46.
|
20
OUTSTANDING EQUITY AWARDS
AT FISCAL YEAR-END
NOVEMBER 3, 2013
Name
|
|
Option
Awards
|
|
Stock
Awards
|
(a)
|
|
Grant
Date
|
|
No.
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
|
|
No.
of
Securities
Underlying
Unexercised
Options (1)
(#)
Un-exercisable
(c)
|
|
Option
Exercise
Price
($)
(d)
|
|
Option
Expiration
Date
(e)
|
|
No.
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
(f)
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
(g)
|
Soo Hong Jeong
|
|
|
2/17/2004
|
|
|
|
15,000
|
|
|
|
0
|
|
|
|
19.58
|
|
|
2/17/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
1/17/2005
|
|
|
|
125,000
|
|
|
|
0
|
|
|
|
14.56
|
|
|
1/17/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
6/2/2006
|
|
|
|
90,000
|
|
|
|
0
|
|
|
|
17.02
|
|
|
6/02/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
11/10/2008
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
0.76
|
|
|
11/10/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
12/21/2009
|
|
|
|
48,750
|
|
|
|
16,250
|
|
|
|
4.42
|
|
|
12/21/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
6/2/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
(2)
|
|
|
|
31,050
|
|
|
|
|
12/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,125
|
(3)
|
|
|
|
67,275
|
|
|
|
|
12/10/2010
|
|
|
|
16,250
|
|
|
|
16,250
|
|
|
|
6.71
|
|
|
12/10/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
12/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,188
|
(3)
|
|
|
|
100,917
|
|
|
|
|
12/9/2011
|
|
|
|
8,125
|
|
|
|
24,375
|
|
|
|
6.32
|
|
|
12/9/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012
|
|
|
|
0
|
|
|
|
40,000
|
|
|
|
5.46
|
|
|
12/7/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
(3)
|
|
|
|
115,920
|
|
|
|
Peter S. Kirlin
|
|
|
8/29/2008
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
3.27
|
|
|
8/29/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
11/10/2008
|
|
|
|
12,500
|
|
|
|
0
|
|
|
|
0.76
|
|
|
11/10/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
12/21/2009
|
|
|
|
26,250
|
|
|
|
8,750
|
|
|
|
4.42
|
|
|
12/21/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
12/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
(3)
|
|
|
|
41,400
|
|
|
|
|
12/10/2010
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
6.71
|
|
|
12/10/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
12/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
(3)
|
|
|
|
62,100
|
|
|
|
|
12/9/2011
|
|
|
|
5,000
|
|
|
|
15,000
|
|
|
|
6.32
|
|
|
12/9/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012
|
|
|
|
0
|
|
|
|
33,000
|
|
|
|
5.46
|
|
|
12/7/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
(3)
|
|
|
|
91,080
|
|
|
|
Constantine S. Macricostas
|
|
|
2/17/2004
|
|
|
|
5,000
|
|
|
|
0
|
|
|
|
19.58
|
|
|
2/17/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
1/17/2005
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
14.56
|
|
|
1/17/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/2005
|
|
|
|
5,000
|
|
|
|
0
|
|
|
|
16.65
|
|
|
2/14/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
12/21/2009
|
|
|
|
168,750
|
|
|
|
56,250
|
|
|
|
4.42
|
|
|
12/21/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
12/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,125
|
(3)
|
|
|
|
232,875
|
|
|
|
|
12/10/2010
|
|
|
|
56,250
|
|
|
|
56,250
|
|
|
|
6.71
|
|
|
12/10/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
12/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,188
|
(3)
|
|
|
|
349,317
|
|
|
|
|
12/9/2011
|
|
|
|
28,125
|
|
|
|
84,375
|
|
|
|
6.32
|
|
|
12/9/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(3)
|
|
|
|
165,600
|
|
|
|
|
12/7/2012
|
|
|
|
0
|
|
|
|
60,000
|
|
|
|
5.46
|
|
|
12/7/2022
|
|
|
|
|
|
|
|
|
|
21
Name
|
|
Option
Awards
|
|
Stock
Awards
|
(a)
|
|
Grant Date
|
|
No.
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
|
|
No.
of
Securities
Underlying
Unexercised
Options (1)
(#)
Un-exercisable
(c)
|
|
Option
Exercise
Price
($)
(d)
|
|
Option
Expiration
Date
(e)
|
|
No.
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
(f)
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
(g)
|
Christopher J. Progler
|
|
|
1/17/2005
|
|
|
|
35,000
|
|
|
|
0
|
|
|
|
14.56
|
|
|
1/17/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
6/2/2006
|
|
|
|
80,000
|
|
|
|
0
|
|
|
|
17.02
|
|
|
6/02/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
11/10/2008
|
|
|
|
35,000
|
|
|
|
0
|
|
|
|
0.76
|
|
|
11/10/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
12/21/2009
|
|
|
|
26,250
|
|
|
|
8,750
|
|
|
|
4.42
|
|
|
12/21/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
6/2/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
(2)
|
|
|
|
31,050
|
|
|
|
|
12/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,375
|
(3)
|
|
|
|
36,225
|
|
|
|
|
12/10/2010
|
|
|
|
8,750
|
|
|
|
8,750
|
|
|
|
6.71
|
|
|
12/10/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
12/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,563
|
(3)
|
|
|
|
54,342
|
|
|
|
|
12/9/2011
|
|
|
|
4,375
|
|
|
|
13,125
|
|
|
|
6.32
|
|
|
12/9/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(3)
|
|
|
|
82,800
|
|
|
|
|
12/7/2012
|
|
|
|
0
|
|
|
|
30,000
|
|
|
|
5.46
|
|
|
12/7/2022
|
|
|
|
|
|
|
|
|
|
|
|
Sean T. Smith
|
|
|
1/17/2005
|
|
|
|
75,000
|
|
|
|
0
|
|
|
|
14.56
|
|
|
1/17/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
6/2/2006
|
|
|
|
90,000
|
|
|
|
0
|
|
|
|
17.02
|
|
|
6/2/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
11/10/2008
|
|
|
|
16,250
|
|
|
|
0
|
|
|
|
0.76
|
|
|
11/10/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
6/2/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
(2)
|
|
|
|
41,400
|
|
|
|
|
12/21/2009
|
|
|
|
37,500
|
|
|
|
12,500
|
|
|
|
4.42
|
|
|
12/21/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
12/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
(3)
|
|
|
|
51,750
|
|
|
|
|
12/10/2010
|
|
|
|
12,500
|
|
|
|
12,500
|
|
|
|
6.71
|
|
|
12/10/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
12/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,375
|
(3)
|
|
|
|
77,625
|
|
|
|
|
12/9/2011
|
|
|
|
6,250
|
|
|
|
18,750
|
|
|
|
6.32
|
|
|
12/9/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,500
|
(3)
|
|
|
|
111,780
|
|
|
|
|
12/7/2012
|
|
|
|
0
|
|
|
|
37,500
|
|
|
|
5.46
|
|
|
12/7/2022
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The
options vest 25% over 4 years on the anniversary date of the
grant.
|
|
|
|
(2)
|
|
Represents
restricted stock awards which vest 12.5% over 8 years on the anniversary
date of the grant.
|
|
(3)
|
|
Represents
restricted stock awards which vest 25% over 4 years on the anniversary
date of the grant.
|
22
OPTION EXERCISES AND
STOCK VESTED
FISCAL YEAR ENDED NOVEMBER 3, 2013
|
|
Option
Awards
|
|
Stock
Awards
|
Name
(a)
|
|
No.
of
Shares
Acquired
on
Exercise
(#)
(b)
|
|
Value
Realized
on
Exercise
($)
(c)
|
|
No.
of
Shares
Acquired
on
Vesting
(#)
(d)
|
|
Value
Realized
on
Vesting
($)
(e)
|
Soo Hong Jeong
|
|
|
0
|
|
|
|
0
|
|
|
|
11,875
|
|
|
|
72,894
|
|
|
|
Peter S. Kirlin
|
|
|
0
|
|
|
|
0
|
|
|
|
5,000
|
|
|
|
27,250
|
|
|
|
Constantine S. Macricostas
|
|
|
150,000
|
|
|
|
846,000
|
|
|
|
28,125
|
|
|
|
153,281
|
|
|
|
Christopher J. Progler
|
|
|
0
|
|
|
|
0
|
|
|
|
8,125
|
|
|
|
52,456
|
|
|
|
Sean T. Smith
|
|
|
0
|
|
|
|
0
|
|
|
|
11,250
|
|
|
|
72,213
|
|
PENSION
BENEFITS
The Company does not have a
Defined Benefit Pension Plan that the Named Executive Officers participate
in.
CERTAIN
AGREEMENTS
Mr. Constantine Macricostas,
Chairman of the Board of the Company and the Company entered into a 7 year
consulting agreement dated July 11, 2005. Mr. Macricostas became Interim Chief
Executive Officer on July 20, 2008, and became an employee of the Company on
November 10, 2008. Mr. Macricostas became Chief Executive Officer and President
on April 3, 2009. Mr. Macricostas receives a base salary of $600,000 as Chief
Executive Officer. The consulting agreement between the Company and Mr.
Macricostas is suspended for the period of time that Mr. Macricostas is an
employee of the Company; however the term of the consulting agreement will be
extended for the period of time that Mr. Macricostas is Chief Executive Officer
and an employee of the Company. The Company also provides Mr. Macricostas with
supplemental health insurance, provided the premiums do not exceed $15,000 per
year, and use of an automobile owned by the Company. In fiscal 2013, Mr.
Macricostas was given a bonus of $60,000.
On January 1, 2011, the
Company and Dr. Jeong entered into a 3 year employment agreement. Unless the
Company gives written notice to Dr. Jeong at least thirty (30) days prior to the
end of the term of the agreement, the term of the agreement shall automatically
be extended for an additional one (1) year period. The agreement provided for a
base salary of $475,000. During the term of the agreement, and for a period of 2
years thereafter, Dr. Jeong has agreed not to engage in any activity that
competes with the Company or a subsidiary of the Company. Dr. Jeong is entitled
to participate in the PKL employee benefit plans and arrangements established
from time to time in Korea (which may include, without limitation, medical,
dental, disability plans, basic life insurance and business travel accident
insurance plans, and the Companys bonus plan(s), or stock award plans or any
successor plans thereto). The Company and PKL have the right to terminate or
change any such plans or programs at any time. Upon termination of Dr. Jeongs
employment with PKL, Dr. Jeong will receive a lump sum payment of U.S. $108,000
multiplied by the total number of years that Dr. Jeong was employed by PKL
(including years prior to the date of the agreement). The sum of $108,000 is
fixed, and is not subject to escalation or increase based on any bonus or salary
increase that Dr. Jeong may receive during the term of the agreement. During the
term of the agreement, the Company provides Dr. Jeong with a company car and
driver, as is customary in Korea. The Company also pays the annual membership
fee on behalf of Dr. Jeong to two country clubs in Korea that Dr. Jeong has
membership to and uses for business purposes, as is customary in
Korea.
23
Dr. Kirlin and the Company
entered into a 3 year employment agreement dated May 21, 2010. The agreement
provided for a base salary of $280,000. The Compensation Committee or the Board
of Directors reviews Dr. Kirlins base salary from time to time in accordance
with normal business practices of the Company and as a result of such review may
increase his base salary. Dr. Kirlins current base salary is $450,000. Dr.
Kirlins salary was increased in September as a result of his promotion to
President. Dr. Kirlin received a bonus of $32,000 for fiscal 2013. The agreement
is automatically extended for consecutive 1 year periods unless the Company
gives at least 30 days notice of its intent not to renew. Dr. Kirlin is entitled
to participate in employee benefit plans and arrangements as established by the
Company for similarly situated executives. Dr. Kirlin is also entitled to
receive an automobile allowance or company car in accordance with the Companys
policies and provisions applicable to other similarly situated executives of the
Company. If the agreement is terminated by the Company for reasons other than
for cause, or Dr. Kirlin resigns for good reason (good reason being
defined as the relocation of the Companys principal executive offices outside
the United States without Dr. Kirlins consent or any reduction in his salary,
or health benefits without Dr. Kirlins consent), Dr. Kirlin will receive a
payment equal to 100% of his base salary paid out over 12 months. The agreement
also provides severance payments equal to 150% of his base salary payable over
18 months in the event of involuntary termination other than for cause
(including a resignation for good reason) following a change in control and
Dr. Kirlins stock options or similar rights will become immediately vested. Dr.
Kirlin has agreed not to engage in any activity that competes with the Companys
business during the term of his employment agreement and for 12 months
thereafter.
Mr. Smith and the Company
entered into a 3 year employment agreement dated February 20, 2003. The
agreement provided for a base salary of $210,000. The Compensation Committee or
the Board of Directors reviews Mr. Smiths base salary from time to time in
accordance with normal business practices of the Company, and as a result of
such reviews may increase his base salary. Mr. Smiths current base salary is
$375,000. Mr. Smith received a bonus of $37,500 for fiscal 2013. The agreement
is automatically extended for consecutive 1 year periods unless the Company
gives at least 30 days notice of its intent not to renew. Mr. Smith is entitled
to participate in employee benefit plans and arrangements as established by the
Company for similarly situated executives. Mr. Smith is also entitled to receive
an automobile allowance or company car in accordance with the Companys policies
and provisions applicable to other similarly situated executives of the Company.
If the agreement is terminated by the Company for reasons other than for
cause, or Mr. Smith resigns for good reason (good reason being defined as
the relocation of the Companys principal executive offices outside the United
States without Mr. Smiths consent or any reduction in his salary, or health
benefits without Mr. Smiths consent), Mr. Smith will receive a payment equal to
100% of his base salary paid out over 12 months. The agreement also provides
severance payments equal to 150% of his base salary payable over 18 months in
the event of involuntary termination other than for cause (including a
resignation for good reason) following a change in control and Mr. Smiths
stock options or similar rights will become immediately vested. Mr. Smith has
agreed not to engage in any activity that competes with the Companys business
during the term of his employment agreement and for 12 months
thereafter.
Dr. Progler and the Company
entered into a 3 year employment agreement dated September 10, 2007. The
agreement provided for a base salary of $243,000 per year. The Compensation
Committee or the Board of Directors reviews Dr. Proglers base salary from time
to time in accordance with normal business practices of the Company, and as a
result of such reviews may increase his base salary. Dr. Proglers current base
salary is $330,000. Dr. Progler received a bonus of $30,000 for fiscal 2013. The
agreement is automatically extended for consecutive 1 year periods unless the
Company gives at least 30 days notice of its intent not to renew. Dr. Progler is
entitled to participate in employee benefit plans and arrangements as
established by the Company for similarly situated executives. Dr. Progler is
also entitled to receive an automobile allowance or company car in accordance
with the Companys policies and provisions applicable to other similarly
situated executives of the Company. If the agreement is terminated by the
Company for reasons other than for cause, or Dr. Progler resigns for good
reason (good reason being defined as the relocation of the Companys
principal executive offices outside the United States without Dr. Proglers
consent or any reduction in his salary, or health benefits without Dr. Proglers
consent), Dr. Progler will receive a payment equal to 100% of his base salary
paid out over 12 months. The agreement also provides severance payments equal to
150% of his base salary payable over 18 months in the event of involuntary
termination other than for cause (including a resignation for good reason)
following a change in control and Dr. Proglers stock options or similar
rights will become immediately vested. Dr. Progler has agreed not to engage in
any activity that competes with the Companys business during the term of his
employment agreement and for 12 months thereafter.
24
EQUITY COMPENSATION PLAN
INFORMATION
Plan
Category
|
|
No.
of
Shares to be
issued upon
exercise
of outstanding
options, warrants and
rights
(a)
|
|
Weighted-average
exercise price
of outstanding options,
warrants, and rights
(b)
|
|
No. of
Shares
remaining
available
for future
issuance
under equity
compensation plans
(excluding securities
reflected in column (a))
|
Equity Compensation Plan
|
|
|
4,479,929
|
|
|
|
$8.30
|
|
|
|
1,585,983
|
(1)
|
|
Approved by Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Plans Not Approved by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,479,929
|
|
|
|
$8.30
|
|
|
|
1,585,983
|
|
|
(1)
|
|
Represents
1,232,269 shares of Photronics Common Stock issuable pursuant to future
issuance under the Companys 2007 Long Term Equity Incentive Plan (the
LTEIP) and 353,714 shares available under the Companys Employee Stock
Purchase Plan.
|
POTENTIAL PAYMENTS UPON
TERMINATION OR CHANGE IN CONTROL
Dr. Jeong, Dr. Kirlin, Dr.
Progler and Mr. Smith have employment agreements with the Company that provide
for severance payments in the event of termination by the Company without cause,
termination upon a change of control or resignation by such Named Executive
Officer with good reason. The employment agreements are further described above
under the caption Certain Agreements.
Mr. Macricostas does not have
an employment agreement with the Company and, therefore, is not contractually
entitled to severance payments in the event of termination by the Company
without cause, termination upon a change of control or resignation with good
reason. The table below was prepared as if the Named Executives employment was
terminated as of November 3, 2013, the last business day of our 2013 fiscal year
and, if applicable, a change in control occurred on that date. The table also
utilizes the closing share price of Photronics Common Stock on November 3,
2013.
Name
|
|
Severance
Payment
($)(1)
|
|
Benefit
Plans
($)(2)
|
|
Options
($)(3)
|
|
Restricted
Stock ($)(4)
|
|
Total
($)
|
Soo Hong Jeong (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without cause or
|
|
|
475,000
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
475,000
|
|
resignation for good reason.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination upon change of control
|
|
|
712,500
|
|
|
|
0
|
|
|
|
248,813
|
|
|
|
315,162
|
|
|
|
1,276,475
|
|
|
|
Sean T. Smith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without cause or
|
|
|
375,000
|
|
|
|
16,800
|
|
|
|
|
|
|
|
|
|
|
|
391,800
|
|
resignation for good reason.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination upon change of control
|
|
|
562,500
|
|
|
|
16,800
|
|
|
|
210,375
|
|
|
|
282,555
|
|
|
|
1,072,230
|
|
|
|
Christopher J. Progler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without cause or
|
|
|
300,000
|
|
|
|
16,800
|
|
|
|
|
|
|
|
|
|
|
|
316,800
|
|
resignation for good reason.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination upon change of control
|
|
|
450,000
|
|
|
|
16,800
|
|
|
|
157,838
|
|
|
|
204,417
|
|
|
|
829,055
|
|
|
|
Peter S. Kirlin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without cause or
|
|
|
332,000
|
|
|
|
16,800
|
|
|
|
|
|
|
|
|
|
|
|
348,000
|
|
resignation for good reason.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination upon change of control
|
|
|
498,000
|
|
|
|
16,800
|
|
|
|
171,935
|
|
|
|
194,580
|
|
|
|
881,315
|
|
25
(1)
|
|
Assumes no
bonus will be paid as part of the severance payment. The calculation was
based on base salary for fiscal 2013.
|
|
(2)
|
|
Assumes a
payment of $1,400 per month for COBRA premiums for 12 months.
|
|
(3)
|
|
The value
of options assumes all outstanding option awards that are in the money and
as of November 3, 2013, were immediately vested upon the change of
control, regardless of whether termination of employment, for any reason,
has occurred, as provided under the Companys stock incentive plans. The
amount is calculated by multiplying the amount of unvested options granted
by the closing price on the date of grant and then deducting that number
from the number of unvested options granted multiplied by the closing
share price on November 3, 2013. The closing price on the date of grant
was $4.42 for the award granted on December 21, 2009, $6.71 for the award
granted on December 10, 2010, $6.32 for the award granted on December 9,
2011 and $5.46 for the award granted on December 7, 2012. The closing
price on November 3, 2013 was $8.28.
|
|
(4)
|
|
The value
of restricted stock assumes all unvested outstanding awards as of November
3, 2013, were immediately vested upon the change of control, regardless of
whether termination of employment, for any reason has occurred, as
provided under the Companys stock incentive plans. In the case of
restricted stock the value is based on the number of outstanding shares
that would not ordinarily have vested as of November 3, 2013, multiplied
by $8.28, the applicable closing share price on November 3,
2013.
|
|
(5)
|
|
The amount
set forth above does not include the severance payment of $108,000
multiplied by the number of years that Dr. Jeong was employed by
PKL.
|
DIRECTORS
COMPENSATION
Directors who are not
employees of the Company each received an annual retainer of $30,000, in
addition to a fee of $4,000 for each directors meeting attended in fiscal
2013.
Grants of stock as part of the Directors annual compensation are
generally made at the first Board meeting of the Companys fiscal year. For fiscal 2013 each Director received a
restricted stock award of 14,000 shares and members of the Executive Committee received an additional 14,000 shares. The
restrictions on the awards lapse quarterly over the one-year service period.
Directors who are also
employees of the Company are not compensated for serving on the
Board.
In fiscal 2013 the Chairman of the Audit Committee received an additional
annual retainer of $40,000 and the Vice Chairman received an additional annual retainer of $20,000. In fiscal 2013, the
other member of the Audit Committee received an additional annual retainer of $15,000. Members of the Audit Committee
receive a per diem payment of $1,250 for travel in connection with the Audit Committee and for Board of Director
assignments. The Chairman of the Compensation Committee received an additional annual retainer of $30,000 and the Vice
Chairman of the Compensation Committee receives an additional annual retainer of $10,000. For fiscal 2013, the members of
the Executive Committee received an additional annual retainer of $30,000. In fiscal 2013, the Chairman of the Strategic
Planning and Development Committee received an additional annual retainer of $15,000 and the Vice Chairman received an
additional annual retainer of $5,000. In fiscal 2013, the Chairman of the Nominating Committee received an additional annual
retainer of $20,000 and the Vice Chairman received an additional annual retainer of $10,000. From time to time, management
may request the involvement of one or more directors outside of board meetings in connection with the development
or consideration of strategic initiatives. The directors are paid an additional $2,500 per diem prorated fee for the
time devoted to such matters.
At the meeting of the Board of
Directors held in December 2013, the Compensation Committee recommended to the
Board the compensation to be paid to the Board for fiscal 2014. The Board, after
considering this recommendation, then established the annual compensation for
the directors. When assessing the directors compensation, the Committee reviews
the compensation of the directors of its peer group (the peer group is described
above in the Compensation Discussion and Analysis), reviewing each element of
director compensation including the annual retainer, the committee chair
retainer, meeting fees and equity awards, to determine whether the amount is
competitive and reasonable for the services provided by the directors. We
provide higher annual retainers for service as the Chair(s) of the Audit and
Compensation Committee. We do not pay a committee chair retainer to the Chairman
of the Board of Directors for service as Chair of any committee. We believe that
providing part of the directors annual retainer compensation in the form of
equity rather than cash serves to align the interests of our directors with our
shareholders as they become shareholders themselves. The annual retainer for
Directors who are not employees for 2014 is $40,000 and a meeting fee of $4,000.
26
In fiscal 2014, the Chairman
of the Audit Committee will receive an additional annual retainer of $40,000 and
the Vice Chairman will receive an additional annual retainer of $20,000. In
fiscal 2014, the other member of the Audit Committee will receive an additional
annual retainer of $15,000. Members of the Audit Committee receive a per diem
payment of $1,250 for travel in connection with the Audit Committee and for
Board of Director assignments. The Chairman of the Compensation Committee will
receive an additional annual retainer of $40,000 and the Vice Chairman of the
Compensation Committee will receive an additional annual retainer of $20,000. In
fiscal 2014, the Chairman of the Strategic Planning and Development Committee
will receive an additional annual retainer of $15,000 and the Vice Chairman
received an additional annual retainer of $10,000. In fiscal 2014, the Chairman
of the Nominating Committee will receive an additional annual retainer of
$20,000 and the Vice Chairman will receive an additional annual retainer of
$10,000. From time to time, management may request the involvement of one or
more directors outside of board meetings in connection with the development or
consideration of strategic initiatives. The directors earned an additional
$2,500 per diem prorated fee for the time devoted to such matters.
DIRECTOR COMPENSATION
TABLE
Name
|
|
Fees
Earned
or
Paid in
Cash
($)
|
|
Stock
Awards
($)(1)
|
|
Option
Awards
($)
|
|
Total
($)
|
Walter M. Fiederowicz
|
|
|
130,500
|
(2)
|
|
|
|
152,880
|
|
|
|
0
|
|
|
|
283,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph A. Fiorita
|
|
|
130,500
|
(3)
|
|
|
|
152,880
|
|
|
|
0
|
|
|
|
283,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George Macricostas
|
|
|
55,500
|
(4)
|
|
|
|
76,440
|
|
|
|
0
|
|
|
|
131,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mitchell G. Tyson
|
|
|
85,500
|
(5)
|
|
|
|
76,440
|
|
|
|
0
|
|
|
|
161,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liang-Choo Hsia
|
|
|
75,500
|
(6)
|
|
|
|
76,440
|
|
|
|
0
|
|
|
|
151,940
|
|
1.
|
|
The
amounts shown for each director represents 14,000 shares of stock granted
on December 7, 2012. The restricted stock vests quarterly over a
year.
|
|
2.
|
|
Represents
$30,000 as an annual retainer, $30,000 as Chairman of the Compensation
Committee, $20,000 as Vice Chairman of the Audit Committee, $30,000 as
Member of the Executive Committee, and $20,500 for meeting fees (5 meetings at $4,000 per meeting and $500 for meeting fee owed from fiscal 2012).
|
|
3.
|
|
Represents $30,000 as an annual retainer, $40,000 as Chairman of the Audit Committee, $10,000 as Vice Chairman of the Compensation Committee, $30,000 as Member of the Executive Committee, and $20,500 for meeting fees (5 meetings at $4,000 per meeting and $500 for meeting fee owed from fiscal 2012).
|
|
4.
|
|
Represents $30,000 as an annual retainer and $5,000 as a member of the Strategic Planning and Technology Development Committee and $20,500 for meeting fees (5 meetings at $4,000 per meeting and $500 for meeting fee owed from 2012).
|
|
5.
|
|
Represents $30,000 as an annual retainer and $15,000 as a member of the Audit Committee, $20,000 as Chairman of the Nominating Committee, and $20,500 for meeting fees (5 meetings at $4,000 per meeting and $500 for meeting fee owed from fiscal 2012).
|
|
6.
|
|
Represents $30,000 as an annual retainer, $15,000 as Chairman of the Strategic Planning and Technology Development Committee, $10,000 as Member of the Nominating Committee, and $20,500 for meeting fees (5 meetings at $4,000 per meeting and $500 for meeting fee owed from fiscal 2012).
|
27
COMPENSATION
COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2013, no members
of the Compensation Committee were officers or employees of the Company or any
of its subsidiaries. During fiscal 2013, no executive officers of the Company
served on the Compensation Committee or the Board of Directors of another entity
whose executive officers served on the Companys Compensation
Committee.
AMENDMENT TO THE 2007
LONG TERM EQUITY INCENTIVE PLAN
TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE UNDER THE PLAN
FROM
6 MILLION SHARES TO 9 MILLION SHARES AND TO AMEND THE AMOUNT OF RESTRICTED
STOCK ALLOWED TO BE ISSUED THEREUNDER FROM 15% TO 1,000,000 SHARES.
For the purpose of aiding the
Company and its subsidiaries in attracting, retaining and motivating qualified
personnel, the Company adopted a new long term equity incentive plan (the
LTEIP) in 2007. We believe that the LTEIP is essential to the Companys
continued success. In addition to stock options, stock appreciation rights,
restricted stock, performance shares and performance units, the LTEIP also
permits the granting of restricted stock units and other equity-based awards.
The awards provided under the LTEIP are vital to our ability to attract and
retain the highly skilled individuals who work for the Company and who serve on
its Board of Directors.
We need to amend the LTEIP to
increase the number of shares available for issuance under the LTEIP from 6
million shares to 9 million shares.
The approval of a majority of
the votes cast by the shareholders entitled to vote at the Annual Meeting is
needed to adopt the amendment to the LTEIP.
The text of the Amendment to
the LTEIP appears at the end of this Proxy Statement as Annex A. The following
description of the LTEIP should be read in conjunction with the full text of the
LTEIP.
Administration
The LTEIP will generally be
administered by the Compensation Committee of the Board of Directors (the Compensation Committee). The
Compensation Committee has the authority to determine, subject to the provisions
of the LTEIP, who will be granted awards, the terms and conditions of awards,
and the number of shares subject to, or the cash amount payable with respect to,
an award. The Compensation Committee may also make factual determinations in
connection with the administration or interpretation of the LTEIP. To the extent
not prohibited by applicable laws, rules and regulations, the Compensation
Committee may also, from time to time, delegate some or all of its authority
under the LTEIP to a subcommittee or to other persons or groups of persons as it
deems necessary, appropriate or advisable. Additionally, subject to applicable
laws, rules and regulations, any authority or responsibility that, under the
terms of the LTEIP may be exercised by the Compensation Committee, may
alternatively be exercised by the Board of Directors of the Company.
Eligibility
The Compensation Committee has
the authority under the LTEIP to select the individuals who will be granted
awards from among the officers, employees and directors, non-employee directors,
consultants, advisors and independent contractors of the Company or a subsidiary
of the Company.
Number of Shares
Available for Issuance
A maximum of six million
(6,000,000) shares of Common Stock (nine million (9,000,000) if the amendments to the LTEIP are approved by shareholders) may be issued under the LTEIP. Such shares
may be authorized but unissued shares, shares previously issued and reacquired
by the Company, or both. Any shares subject to awards which, for any reason,
expire or are terminated or forfeited, become available again for grant under
the LTEIP. Additionally
28
shares that are tendered or withheld to pay the exercise
price of an award or to satisfy tax withholding obligations and
exercised shares covered by a stock-settled stock appreciation right will not be
available for issuance pursuant to a new award. The Compensation Committee shall
have full authority to determine the effect of a change in control, on the
vesting, exercisability, settlement, payment or lapse of restrictions applicable
to an award under the LTEIP.
Types of Awards;
Limits
The Compensation Committee may
grant the following types of awards under the LTEIP: options; restricted stock;
restricted stock units; stock appreciation rights; performance stock;
performance units; and other awards based on, or related to, shares of the
Companys Common Stock. However, the LTEIP contains various limits with respect
to the types of awards as follows: no more than (i) fifteen percent (15%) of
such shares may be available cumulatively for grants of restricted stock or
other full value awards (1,000,000 shares may be available cumulatively for grants of restricted stock or other full value awards if the amendments to the LTEIP are approved by shareholders); and (ii) no more than fifteen percent (15%) of such
shares may be granted to any individual in any calendar year.
Stock
Options
A stock option is the right to
acquire shares of the Companys Common Stock at a fixed exercise price for a
fixed period of time (generally up to ten years). The exercise price is set by
the Compensation Committee but cannot be less than 100% of the fair market value
of the Companys Common Stock on the date of grant.
The Compensation Committee may
grant either incentive stock options or nonqualified stock options. As described
in detail below, incentive stock options entitle the participant, but not the
Company, to preferential tax treatment. The Compensation Committee determines
the rules and procedures for exercising options. The exercise price may be paid
in cash, shares, a combination of cash and shares, through net settlement
(meaning the Company withholds shares otherwise issuable upon exercise to pay
the exercise price), or by any other means authorized by the Compensation
Committee, including cashless exercise, a procedure whereby vested shares
covered by the option are sold by a broker and a portion of the sale proceeds
are delivered to the Company to pay the exercise price.
Stock Appreciation
Rights
Stock appreciation rights are
awards that entitle the participant to receive an amount equal to the excess, if
any, of the fair market value on the exercise date of the number of shares for
which the stock appreciation right is exercised over the grant price. The grant
price is set by the Compensation Committee, but cannot be less than 100% of the
fair market value of the Companys Common Stock on the date of grant. Payment to
the participant on exercise may be made in cash or shares, as determined by the
Compensation Committee. If the Compensation Committee determines at the time of
grant that a stock appreciation right may be settled only in shares, the term
may not exceed ten years. The Compensation Committee may grant stock
appreciation rights in tandem with an option.
Restricted
Stock
Restricted stock awards are
shares of Company Common Stock that are subject to cancellation, restrictions,
and vesting conditions, as determined by the Compensation Committee. The shares
may be either granted or sold to the participant.
Restricted Stock
Units
Restricted stock units entitle
a participant to receive one or more shares of Company Common Stock in the
future upon satisfaction of vesting conditions determined by the Compensation
Committee. The Compensation Committee determines whether restricted stock units
will be settled through the delivery of shares, cash of equivalent value, or a
combination of shares and cash.
29
Performance Stock and
Performance Units
Performance stock and
performance unit awards entitle a participant to receive a target number of
shares if specified performance targets are achieved during a specified
performance period. The Compensation Committee sets the performance targets and
performance period at the date of grant. When the Compensation Committee
determines the performance targets have been satisfied, performance stock and
performance units are settled through the delivery of shares of Company Common
Stock, cash of equivalent value, or a combination of cash and shares.
Section 162(m)
Performance-Based Awards
The Compensation Committee may
determine whether any award is a performance-based award for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as amended, which we refer
to as the Code. Any awards designated to be performance-based compensation
will be conditioned on the achievement of one or more specified performance
goals established by the Compensation Committee at the date of grant. The
performance goals will be comprised of specified levels of one or more of the
following performance criteria, as the Compensation Committee deems appropriate:
net income; cash flow or cash flow on investment; pre-tax or post-tax profit
levels or earnings; growth in managed assets; operating earnings; return on
investment; earned value added; expense reduction levels; free cash flow; free
cash flow per share; earnings per share; net earnings per share; return on
assets; return on net assets; return on equity; return on capital; return on
sales; operating margin; total stockholder return or stock price appreciation;
EBITDA; adjusted EBITDA; revenue; or revenue before deferral, in each case
determined in accordance with generally accepted accounting principles
consistently applied on a business unit, subsidiary or consolidated basis or any
combination thereof.
The performance goals may be
described in terms of objectives that are related to the individual participant
or objectives that are Company-wide or related to a subsidiary, division,
department, region, function or business unit. Performance goals may be measured
on an absolute or cumulative basis, or on the basis of percentage of improvement
over time. Further, performance goals may be measured in terms of Company
performance (or performance of the applicable subsidiary, division, department,
region, function or business unit), or measured relative to selected peer
companies or a market index.
The applicable performance
goals will be established by the Compensation Committee within 90 days following
the commencement of the applicable performance period (or such earlier or later
date as permitted or required by Section 162(m)). Each participant will be
assigned a target number of shares of the Companys Common Stock or cash value
payable if target performance goals are achieved. The Compensation Committee
will certify the attainment of the performance goals at the end of the
applicable performance period. If a participants performance exceeds such
participants target performance goals, the number of shares of Company Common
Stock or the cash value payable under the performance-based award may be greater
than the target number, but in no event can the amounts exceed the award limits
described above. In addition, unless otherwise provided in an award agreement,
the Compensation Committee may reduce the number of shares or cash value payable
with respect to a performance-based award even if the performance objectives are
satisfied.
Amendment and
Termination; Term
Generally, the Board may
terminate, amend, modify, or suspend the LTEIP at any time. The Company will
obtain stockholder approval of any termination, amendment, modification, or
suspension if required by applicable law or NASDAQ rule. Subject to limited
exceptions, no termination, amendment, modification, or suspension may
materially impair the rights of a participant with respect to an outstanding
award without the participants consent. Unless terminated earlier, the LTEIP
will expire in 2017, on the tenth anniversary of the effective date and no
additional awards may be granted after this date.
30
Change of
Control
In the event of a change of control of the
Company, the Compensation Committee may take steps it considers appropriate,
including accelerating vesting, modifying an award to reflect the change of
control, or providing that outstanding awards will be assumed, or substituted
for, by the surviving corporation or permitting or requiring participants to
surrender options and stock appreciation rights in exchange for a cash payout
equal to the difference between the highest price paid in the change of control
and the exercise price. Generally, unless the Compensation Committee determines
otherwise at the time of grant, the default treatment of outstanding awards upon
a change of control is as follows:
-
options and stock appreciation rights immediately
vest in full and remain exercisable until the second anniversary of the
participants termination of employment or, if earlier, the expiration of the
awards initial term;
-
restrictions imposed on restricted stock and
restricted stock units immediately lapse;
-
the performance targets with respect to
performance units, performance stock, or other awards that vest upon
satisfaction of performance objectives shall be deemed attained at target
levels; and
-
the vesting of all other awards that are specified
with respect to shares shall be accelerated.
The following events generally result in a
change of control:
-
one individual or entity acquires at least 35% of
the voting power of the Company;
-
a majority of the Company directors are replaced
by directors not approved by the Board;
-
there is a merger or consolidation of the Company
that results in new stockholders having at least 35% of the voting power of
the Company;
-
there is a sale of all or substantially all of the
Company assets; or
-
the Companys stockholders approve a plan of
liquidation or dissolution.
Repricing of Options and Stock
Appreciation Rights
Options and stock appreciation rights may
not be repriced. For these purposes, to reprice an award means (i) to reduce the
exercise or grant price, or (ii) grant a new award with a lower exercise or
grant price in exchange for the cancellation of the original award.
Adjustments or Changes in
Capitalization
In the event of a stock split, reverse
stock split, stock dividend, extraordinary cash dividends, recapitalization,
liquidation, merger or other corporate event affecting the shares of the
Companys Common Stock, the aggregate number of shares available for issuance
under the LTEIP, the various LTEIP limits, and the number of shares subject to,
and exercise or grant price of, outstanding awards may be appropriately adjusted
by the Compensation Committee.
Limited
Transferability
Generally, an award may only be
transferred upon the participants death to a designated beneficiary or in
accordance with the participants will or the laws of descent or distribution,
and, except for incentive stock options, pursuant to a domestic relations order.
The Compensation Committee also may permit limited transferability, generally to
a participants family member, a trust for the benefit of a family member, or a
charitable organization.
31
U.S. Tax Treatment of
Awards
Incentive Stock
Options
An ISO results in no taxable income to the
optionee or a deduction to the Company at the time it is granted or exercised.
However, the excess of the fair market value of the shares acquired over the
option price is an item of adjustment in computing the alternative minimum
taxable income of the optionee. If the optionee holds the stock received as a
result of an exercise of an ISO for at least two years from the date of the
grant and one year from the date of exercise, then the gain realized on
disposition of the stock is treated as a long-term capital gain. If the shares
are disposed of during this period, however, (i.e., a disqualifying
disposition), then the optionee will include in income, as compensation for the
year of the disposition, an amount equal to the excess, if any, of the fair
market value of the shares, upon exercise of the option over the option price
(or, if less, the excess of the amount realized upon disposition over the option
price). The excess, if any, of the sale price over the fair market value on the
date of exercise will be a short-term capital gain. In such case, the Company
will be entitled to a deduction, in the year of such a disposition, for the
amount includible in the optionees income as compensation. The optionees basis
in the shares acquired upon exercise of an ISO is equal to the option price
paid, plus any amount includible in his or her income as a result of a
disqualifying disposition.
Non-Qualified Stock
Options
A Non-Qualified Stock Option (NQO)
results in no taxable income to the optionee or deduction to the Company at the
time it is granted. An optionee exercising such an option will, at that time,
realize taxable compensation in the amount of the difference between the option
price and the then market value of the shares. Subject to the applicable
provisions of the Code, a deduction for federal income tax purposes will be
allowable to the Company in the year of exercise in an amount equal to the
taxable compensation recognized by the optionee.
The optionees basis in such shares is
equal to the sum of the option price plus the amount includible in his or her
income as compensation upon exercise. Any gain (or loss) upon subsequent
disposition of the shares will be a long-term or short-term gain (or loss),
depending upon the holding period of the shares.
If a NQO is exercised by tendering
previously owned shares of the Companys Common Stock in payment of the option
price, then, instead of the treatment described above, the following generally
will apply; a number of new shares equal to the number of previously owned
shares tendered will be considered to have been received in a tax-free exchange;
the optionees basis and holding period for such number of new shares will be
equal to the basis and holding period of the previously owned shares exchanged.
The optionee will have compensation income equal to the fair market value on the
date of exercise of the number of new shares received in excess of such number
of exchanged shares; the optionees basis in such excess shares will be equal to
the amount of such compensation income; and the holding period in such shares
will begin on the date of exercise.
Stock Appreciation
Rights
Generally, the recipient of a stand-alone
SAR will not recognize taxable income at the time the stand-alone SAR is
granted. If an employee receives the appreciation inherent in the SARs in cash,
the cash will be taxed as ordinary income to the employee at the time it is
received. If an employee receives the appreciation inherent in the SARs in
stock, the spread between the then current market value and the base price will
be taxed as ordinary income to the employee at the time it is received. In
general, there will be no federal income tax deduction allowed to the Company
upon the grant or termination of SARs. However, upon the settlement of a SAR,
the Company will be entitled to a deduction equal to the amount of ordinary
income the recipient is required to recognize as a result of the
settlement.
32
Other Awards
The current United States federal income
tax consequences of other awards authorized under the LTEIP are generally in
accordance with the following: (i) restricted stock is generally subject to
ordinary income tax at the time the restrictions lapse, unless the recipient
elects to accelerate recognition as of the date of grant; (ii) stock unit awards
are generally subject to ordinary income tax at the time of payment; and (iii)
unrestricted stock awards are generally subject to ordinary income tax at the
time of grant. In each of the foregoing cases, the Company will generally be
entitled to a corresponding federal income tax deduction at the same time the
participant recognizes ordinary income.
Tax Treatment of Awards to
Non-Employee Directors and to Employees Outside the United
States
The grant and exercise of options and
awards under the LTEIP to non-employee Directors and to employees outside the
United States may be taxed on a different basis.
New Awards
It is not possible to determine the awards
that will be granted and received by any particular employee or groups in the
future.
THE BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE AMENDMENT TO THE PLAN
DESCRIBED ABOVE AND RECOMMENDS
THAT YOU VOTE FOR THE
PROPOSED
AMENDMENT.
PROPOSAL 3
RATIFICATION OF THE SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Deloitte
& Touche LLP (D&T), independent registered public accounting firm, to
audit the consolidated financial statements of the Company and its subsidiaries
for the fiscal year ending November 2, 2014. We are asking you to ratify this
selection at the meeting.
A representative of D&T will attend
the meeting to answer appropriate questions and may make a statement.
Approval of this proposal to ratify the
appointment of D&T requires a majority of the votes cast by the shareholders
entitled to vote at the Annual Meeting.
The Board of Directors recommends that
you vote FOR this proposal to ratify the selection of D&T as independent
registered public accountants for Photronics, Inc. and its subsidiaries for the
fiscal year ending November 2, 2014.
PROPOSAL 4
TO APPROVE, BY NON-BINDING VOTE, THE COMPENSATION OF OUR
NAMED
EXECUTIVE OFFICERS
Pursuant to the Dodd-Frank Act, we are
asking our shareholders to provide advisory approval of the compensation of our
Named Executive Officers, as we have described it in the Compensation
Discussion and Analysis section of this proxy statement beginning on page 10.
While this vote is advisory, and not binding on the Company, it will provide
information to our Compensation Committee regarding investor sentiment about our
executive compensation philosophy, policies and practices which the Compensation
Committee will be able to consider when determining executive compensation for
the remainder of fiscal 2014 and beyond. For the reasons stated below, we are
requesting your approval of the following non-binding resolution:
RESOLVED,
that the compensation paid to the Companys Named Executive Officers, as
disclosed pursuant to Item 402 of Regulation S-K, including the Compensation
Discussion and Analysis, compensation tables and narrative discussion is hereby
APPROVED.
33
The compensation of our Named Executive
Officers and our compensation philosophy policies are comprehensively described
in the Compensation Discussion and Analysis, and its accompanying tables
(including all footnotes).
The Compensation Committee designs our
compensation policies for our Named Executive Officers to create executive
compensation arrangements that are competitive, align pay with creating
shareholder value and balance compensation risk appropriately in the context of
the Companys business strategy. Based on its review of the total compensation
of our Named Executive Officers for fiscal year 2013, the Compensation Committee
believes that the total compensation for each of the Named Executive Officers is
reasonable and effectively achieves the designed objectives of driving Company
performance, attracting, retaining and motivating our people, aligning our
executives with shareholders long-term interests and discouraging excessive
risk taking.
Neither the approval nor the disapproval
of this resolution will be binding on us or the Board of Directors or will be
construed as overruling a decision by us or the Board of Directors. Neither the
approval nor the disapproval of this resolution will create or imply any change
to our fiduciary duties or create or imply any additional fiduciary duties for
us or the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE FOR APPROVING THE
COMPENSATION OF OUR NAMED EXECUTIVE
OFFICERS
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The Company has an operating policy the
purpose of which is to ensure that contracts with entities in which any
director, officer or other member of management has a financial interest are
competitively priced and commercially reasonable. Under the policy, any such
contract must be reviewed and approved in advance by the Audit Committee. To the
extent that anyone on the Audit Committee is the person with a financial
interest, the Chief Executive Officer and Chief Financial Officer of the Company
will obtain independent assessment of the commercial reasonableness of the
contract when considered necessary.
The Company believes that the terms of the
transactions described below with affiliated persons were negotiated at arms
length and were no less favorable to the Company than the Company could have
obtained from non-affiliated parties.
The Company is a party to a long-term
service contract entered into in 2002 pursuant to which it outsources the
administration of its global wide area network and related communication
services to RagingWire Enterprise Solutions, Inc. (RagingWire), a supplier of
secure data center facilities and managed information technology services,
located in Sacramento, California. Constantine Macricostas is a founder,
majority shareholder and the Vice Chairman of the Board of Directors of
RagingWire, and his son, George Macricostas is the Chairman of the Board, Chief
Executive Officer and a founder of RagingWire. The decision to pursue an
outsourced solution to satisfy the Companys network and communication needs was
made by our management, and we obtained bids from and reviewed the service
offerings of six other global and regional vendors before RagingWire was
selected as the most favorably priced solution for its service offerings. During
the 2013 fiscal year, the Company incurred expenses of $1.7 million for services
provided to the Company by RagingWire. As of November 3, 2013, the Company had
contracted with this service provider through June 2015 for a cost of
approximately $2.2 million.
Dr. Soo Hong Jeong, President and Chief
Operating Officer of Asia, who also serves as the Chairman, Chief Executive
Officer and President of the Companys majority held subsidiary in Korea, PK
Ltd. (PKL) is also a significant shareholder of S&S Tech which serves as a
supplier of photomask blanks to the Company. In fiscal 2013, the Company
purchased $20.0 million of photomask blanks from S&S Tech of which $4.6
million was owed to S&S Tech at November 3, 2013.
34
OTHER MATTERS
We will bear the costs of solicitation of
proxies. We have engaged The Proxy Advisory Group, LLC
®
, to assist us
with the solicitation of proxies and provide related advice and informational
support, for a services fee and the reimbursement of customary disbursements
both of which are not expected to exceed $10,000 in the aggregate. In addition
to solicitations by mail, The Proxy Advisory Group, LLC and certain of our
officers may solicit proxies by telephone, email and personal interviews without
additional remuneration. We will request brokers, custodians and fiduciaries to
forward proxy solicitation material to the owners of shares of our common stock
that they hold in their names. We will reimburse banks and brokers for their
reasonable out-of-pocket expenses incurred in connection with the distribution
of our proxy materials.
As of the date of this proxy statement,
the Board of Directors knows of no matters which will be presented for
consideration at the Annual Meeting of Shareholders other than the proposals set
forth in this Proxy Statement. If any other matters properly come before the
Annual Meeting of Shareholders the persons named in the proxy will act in
respect thereof in accordance with their best judgment.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange
Act of 1934, as amended, requires the Companys executive officers and directors
and persons who beneficially own more than ten percent of a registered class of
the Companys equity securities to file an initial report of beneficial
ownership on Form 3 and changes in beneficial ownership on Form 4 or 5 with the
SEC. Executive officers, directors and greater than ten percent shareholders are
also required by SEC rules to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons, the
Company believes that during the last fiscal year, all filing requirements
applicable to its executive officers, directors and ten percent shareholders
were timely, except a form 4 was filed on May 17, 2013 for a transaction that
occurred on May 14, 2013.
FORM 10-K AND ADDITIONAL
INFORMATION
The Companys annual report filed with the
SEC on Form 10-K for the year ended November 3, 2013, which includes audited
financial statements and financial statement schedules, will be furnished, free
of charge, upon written request directed to the Secretary, Photronics, Inc., 15
Secor Road, Brookfield, Connecticut 06804 (203-775-9000).
MULTIPLE SHAREHOLDERS SHARING THE
SAME ADDRESS
The Company has adopted a procedure
approved by the SEC called householding which will reduce our printing costs
and postage fees. Under this procedure, multiple shareholders residing at the
same address will receive a single copy of the annual report and proxy statement
unless the shareholder notifies the Company that they wish to receive individual
copies. Shareholders may revoke their consent to householding at any time by
contacting Broadridge Financial Services, Inc. either by calling toll-free at
(800) 542-1061, or by writing to Broadridge, Householding Department, 51
Mercedes Way, Edgewood, New York, 11717. The Company will remove you from the
householding program within 30 days of receipt of your response, following which
you will receive an individual copy of our disclosure document.
SHAREHOLDER PROPOSALS
Shareholder proposals intended for
inclusion in the Companys proxy statement for the 2015 Annual Meeting of
Shareholders must be received by the Company no later than November 3, 2014 and must
meet certain requirements of applicable laws and regulations in order to be
considered for possible inclusion in the proxy statement for that meeting. Proposals may be mailed to Photronics, Inc. to the attention of the Secretary,
15 Secor Road, Brookfield, Connecticut 06804.
35
SOLICITATION OF PROXIES AND COSTS
THEREOF
This proxy solicitation is being made by
the Board of Directors of the Company and the cost of such solicitation of
proxies will be borne by the Company. In addition, employees of the Company,
without extra remuneration, may solicit proxies personally or by telephone or
cable. The Company will reimburse brokerage firms, nominees, custodians and
fiduciaries for their out-of-pocket expenses for forwarding proxy materials to
beneficial owners and seeking instruction with respect thereto.
The graph below presents a five year
comparison of the total cumulative return on the Companys common stock in
comparison to returns on the NASDAQ Composite indices. The comparison assumes an
initial investment of $100 and the reinvestment of dividends. The graph and
other information included under this section should not be deemed to be
soliciting material or be filed with the Securities and Exchange Commission
or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the
Securities and Exchange Act of 1934, as amended.
Comparison of Five-Year Cumulative
Total Return
Based upon an initial investment of $100 on November 2,
2008
with dividends reinvested
February 28, 2014
36
Photronics,
Inc.
2007 Long Term Equity Incentive
Plan
(as Amended on April 11,
2014)
1. Purposes of the Plan
The
purposes of the Plan are to (a) promote the long-term success of the Company and
its Subsidiaries and to increase stockholder value by providing Eligible
Individuals with incentives to contribute to the long-term growth and
profitability of the Company by offering them an opportunity to obtain a
proprietary interest in the Company through the grant of equity-based awards and
(b) assist the Company in attracting, retaining and motivating highly qualified
individuals who are in a position to make significant contributions to the
Company and its Subsidiaries.
Upon
the Effective Date, no further Awards will be granted under the Prior
Plans.
2. Definitions and Rules of
Construction
(a)
Definitions
. For purposes of the Plan, the following capitalized words shall
have the meanings set forth below:
Award
means an Option, Restricted Stock,
Restricted Stock Unit, Stock Appreciation Right, Performance Stock, Performance
Unit or Other Award granted by the Committee pursuant to the terms of the Plan.
Award Document
means an agreement,
certificate or other type or form of document or documentation approved by the
Committee that sets forth the terms and conditions of an Award. An Award
Document may be in written, electronic or other media, may be limited to a
notation on the books and records of the Company and, unless the Committee
requires otherwise, need not be signed by a representative of the Company or a
Participant.
Beneficial Owner
and
Beneficially Owned
have the meaning set forth in Rule 13d-3 under the Exchange
Act.
Board
means the Board of
Directors of the Company, as constituted from time to time.
Change of Control
means:
(i)
Any Person becomes the Beneficial Owner, directly or indirectly, of securities
of the Company representing thirty-five percent (35%)
or more of the combined voting power
of the Companys then outstanding securities; or
(ii)
The following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the Effective Date,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including, but not limited to, a consent solicitation, relating to the
election of directors of the Company) whose appointment or election by the Board
or nomination for election by the Companys stockholders was approved or
recommended by a vote of at least a majority of the directors then still in
office who either were directors on the Effective Date or whose appointment,
election or nomination for election was previously so approved or recommended;
or
(iii)
There is consummated a merger or consolidation of the Company or any Subsidiary
with any other corporation, other than (A) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior to
such merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or any parent thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or any Subsidiary of the Company, more than fifty percent (50%) of the combined
voting power of the securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such merger or consolidation, or
(B) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company representing
thirty-five percent (35%)
or more of the combined voting power of the Companys then
outstanding securities; or
(iv)
The stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale or
disposition by the company of all or substantially all of the Companys assets,
other than a sale or disposition by the Company of all or substantially all of
the Companys assets to an entity, more than fifty percent (50%) of the combined
voting power of the voting securities of which are owned by stockholders of the
Company in substantially the same proportions as their ownership of the Company
immediately prior to such sale.
Notwithstanding
the foregoing, with respect to an Award that is subject to Section 409A of the
Code and the payment or settlement of the Award will accelerate upon a Change of
Control, no event set forth herein will constitute a Change of Control for
purposes of the Plan or any Award Document unless such event also constitutes a
change in ownership, change in effective control, or change in the
ownership of a substantial portion of the Companys assets as defined under
Section 409A of the Code.
Code
means the Internal Revenue
Code of 1986, as amended, and the applicable rulings and regulations promulgated
thereunder.
Committee
means the Compensation
Committee of the Board, any successor committee thereto or any other committee
appointed from time to time by the Board to administer the Plan, which committee
shall meet the requirements of Section 162(m) of the Code, Section 16(b) of the
Exchange Act and the applicable rules of the NASDAQ;
provided, however
, that, if any
Committee member is found not to have met the qualification requirements of
Section 162(m) of the Code and Section 16(b) of the Exchange Act, any actions
taken or Awards granted by the Committee shall not be invalidated by such
failure to so qualify.
Common Stock
means the common
stock of the Company, par value $0.01 per share, or such other class of share or
other securities as may be applicable under Section 13 of the Plan.
Company
means Photronics, Inc., a
Connecticut corporation, or any successor to all or substantially all of the
Companys business that adopts the Plan.
EBITDA
means earnings before
interest, taxes, depreciation and amortization.
Effective Date
means the date on
which the Plan is adopted by the Board and approved by the Shareholders of the
Company.
Eligible Individuals
means the
individuals described in Section 4(a) of the Plan who are eligible for Awards
under the Plan.
Exchange Act
means the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
2
Fair Market Value
means, with
respect to a share of Common Stock, the fair market value on the date of
valuation of such Award as determined by the Compensation Committee; provided,
however, that with respect to an incentive stock option issued to a 10% or more
shareholder, Fair Market Value shall mean 110% of the fair market value or such
other percentage as may be permitted by the Code and regulations promulgated
thereunder.
Incentive Stock Option
means an
Option that is intended to comply with the requirements of Section 422 of the
Code or any successor provision thereto.
NASDAQ
means the NASDAQ Stock
Market, Inc.
Non-Employee Director
means any
member of the Board who is not an officer or employee of the Company or any
Subsidiary.
Nonqualified Stock Option
means
an Option that is not intended to comply with the requirements of Section 422 of
the Code or any successor provision thereto.
Option
means an Incentive Stock
Option or Nonqualified Stock Option granted pursuant to Section 7 of the
Plan.
Other Award
means any form of
Award other than an Option, Restricted Stock, Restricted Stock Unit or Stock
Appreciation Right granted pursuant to Section 11 of the Plan.
Participant
means an Eligible
Individual who has been granted an Award under the Plan.
Performance Period
means the
period established by the Committee and set forth in the applicable Award
Document over which Performance Targets are measured.
Performance Stock
means a Target
Number of Shares granted pursuant to Section 10(a) of the Plan.
Performance Target
means the
performance measures established by the Committee, from among the performance
criteria provided in Section 6(g), and set forth in the applicable Award
Document.
Performance Unit
means a right to
receive a Target Number of Shares or cash in the future granted pursuant to
Section 10(b) of the Plan.
Permitted Transferees
means (i) a
Participants family member, (ii) one or more trusts established in whole or in
part for the benefit of one or more of such family members, (iii) one or more
entities which are beneficially owned in whole or in part by one or more such
family members, or (iv) a charitable or not-for-profit organization.
Person
means any person, entity
or group within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act, except that such term shall not include (i) the Company or any of
its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, or (v) a person or
group as used in Rule 13d-1(b) under the Exchange Act.
Plan
means this 2007 Long Term
Equity Incentive Plan, as amended or restated from time to time.
Plan Limit
means the maximum
aggregate number of Shares that may be issued for all purposes under the Plan as
set forth in Section
5(a)
of the Plan.
3
Prior Plan
means the 1996 Stock
Option Plan, the 1998 Stock Option Plan, and the 2000 Stock Plan, as amended
from time to time.
Restricted Stock
means one or
more Shares granted or sold pursuant to Section 8(a) of the Plan.
Restricted Stock Unit
means a
right to receive one or more Shares (or cash, if applicable) in the future
granted pursuant to Section 8(b) of the Plan.
Shares
means shares of Common
Stock, as may be adjusted pursuant to Section 13(b).
Stock Appreciation Right
means a
right to receive all or some portion of the appreciation on Shares granted
pursuant to Section
9
of
the Plan.
Subsidiary
means (i) a
corporation or other entity with respect to which the Company, directly or
indirectly, has the power, whether through the ownership of voting securities,
by contract or otherwise, to elect at least a majority of the members of such
corporations board of directors or analogous governing body, or (ii) any other
corporation or other entity in which the Company, directly or indirectly, has an
equity or similar interest and which the Committee designates as a Subsidiary
for purposes of the Plan. For purposes of determining eligibility for the grant
of Incentive Stock Options under the Plan, the term Subsidiary shall be
defined in the manner required by Section 424(f) of the Code.
Substitute Award
means any Award
granted upon assumption of, or in substitution or exchange for, outstanding
employee equity awards previously granted by a company or other entity acquired
by the Company or with which the Company combines pursuant to the terms of an
equity compensation plan that was approved by the stockholders of such company
or other entity.
Target Number
means the target
number of Shares or cash value established by the Committee and set forth in the
applicable Award Document.
(b)
Rules of Construction
. The masculine pronoun shall be deemed to include the
feminine pronoun, and the singular form of a word shall be deemed to include the
plural form, unless the context requires otherwise. Unless the text indicates
otherwise, references to sections are to sections of the Plan.
3. Administration
(a)
Committee
. The Plan shall be administered by the Committee, which shall have
full power and authority, subject to the express provisions hereof,
to:
(i) select the Participants from the
Eligible Individuals;
(ii) grant Awards in accordance with
the Plan;
(iii) determine the number of Shares
subject to each Award or the cash amount payable in connection with an
Award;
(iv) determine the terms and
conditions of each Award, including, without limitation, those related to term,
permissible methods of exercise, vesting, cancellation, payment, settlement,
exercisability, Performance Periods, Performance Targets, and the effect, if
any, of a Participants termination of employment with the Company or any of its
Subsidiaries or, subject to Section 6(d), a Change of Control of the Company;
(v) subject to Sections 16 and 17(e) of the Plan,
amend the terms and conditions of an Award after the granting
thereof;
4
(vi) specify and approve the
provisions of the Award Documents delivered to Participants in connection with
their Awards;
(vii) construe and interpret any
Award Document delivered under the Plan;
(viii) make factual determinations
in connection with the administration or interpretation of the Plan;
(ix) adopt, prescribe, amend, waive
and rescind administrative regulations, rules and procedures relating to the
Plan;
(x) employ such legal counsel,
independent auditors and consultants as it deems desirable for the
administration of the Plan and to rely upon any advice, opinion or computation
received therefrom;
(xi) vary the terms of Awards to
take account of tax and securities law and other regulatory requirements or to
procure favorable tax treatment for Participants;
(xii) correct any defects, supply
any omission or reconcile any inconsistency in any Award Document or the Plan;
and
(xiii) make all other determinations
and take any other action desirable or necessary to interpret, construe or
implement properly the provisions of the Plan or any Award
Document.
(b)
Plan Construction and Interpretation
. The Committee shall have full power
and authority, subject to the express provisions hereof, to construe and
interpret the Plan.
(c)
Determinations of Committee Final and Binding
. All determinations by the
Committee in carrying out and administering the Plan and in construing and
interpreting the Plan shall be made in the Committees sole discretion and shall
be final, binding and conclusive for all purposes and upon all persons
interested herein.
(d)
Delegation of Authority
. To the extent not prohibited by applicable laws,
rules and regulations, the Committee may, from time to time, delegate some or
all of its authority under the Plan to a subcommittee or subcommittees thereof
or other persons or groups of persons as it deems necessary, appropriate or
advisable under such conditions or limitations as it may set at the time of such
delegation or thereafter;
provided
,
however
, that the Committee may not
delegate its authority (i) to make Awards to employees (A) who are subject on
the date of the Award to the reporting rules under Section 16(a) of the Exchange
Act, (B) whose compensation for such fiscal year may be subject to the limit on
deductible compensation pursuant to Section 162(m) of the Code or (C) who are
officers of the Company who are delegated authority by the Committee hereunder,
or (ii) pursuant to Section 16 of the Plan. For purposes of the Plan, reference
to the Committee shall be deemed to refer to any subcommittee, subcommittees, or
other persons or groups of persons to whom the Committee delegates authority
pursuant to this Section 3(d).
(e)
Liability of Committee
. Subject to applicable laws, rules and
regulations: (i) no member of the Board or Committee (or its delegates) shall be
liable for any good faith action or determination made in connection with the
operation, administration or interpretation of the Plan and (ii) the members of
the Board or the Committee (and its delegates) shall be entitled to
indemnification and reimbursement in the manner provided in the Companys
Certificate of Incorporation as it may be amended from time to time. In the
performance of its responsibilities with respect to the Plan, the Committee
shall be entitled to rely upon information and/or advice furnished by the
Companys officers or employees, the Companys accountants, the Companys
counsel and any other party the Committee deems necessary, and no member of the
Committee shall be liable for any action taken or not taken in reliance upon any
such information and/or advice.
(f)
Action by the Board
. Anything in the Plan to the contrary
notwithstanding, subject to applicable laws, rules and regulations, any
authority or responsibility that, under the terms of the Plan, may be exercised
by the Committee may alternatively be exercised by the Board.
5
4. Eligibility
(a)
Eligible Individuals
. Awards may be granted to officers, employees,
directors, Non-Employee Directors, consultants, advisors and independent
contractors of the Company or any of its Subsidiaries or joint ventures,
partnerships or business organizations in which the Company or its Subsidiaries
have an equity interest;
provided
,
however
, that only employees of the
Company or Subsidiary may be granted Incentive Stock Options. The Committee
shall have the authority to select the persons to whom Awards may be granted and
to determine the type, number and terms of Awards to be granted to each such
Participant. Under the Plan, references to employment or employed include
the engagement of Participants who are consultants, advisors and independent
contractors of the Company or its Subsidiaries and the service of Participants
who are Non-Employee Directors, except for purposes of determining eligibility
to be granted Incentive Stock Options.
(b)
Grants to Participants
. The Committee shall have no obligation to grant
any Eligible Individual an Award or to designate an Eligible Individual as a
Participant solely by reason of such Eligible Individual having received a prior
Award or having been previously designated as a Participant. The Committee may
grant more than one Award to a Participant and may designate an Eligible
Individual as a Participant for overlapping periods of time.
5. Shares Subject to the
Plan
(a)
Plan Limit
. Subject to adjustment in accordance with Section 13 of the
Plan, the maximum aggregate number of Shares that may be issued for all purposes
under the Plan shall be nine million (9,000,000) plus any Shares that are
available for issuance under the Prior Plans or that become available for
issuance upon cancellation or expiration of awards granted under the Prior Plans
without having been exercised or settled. Shares to be issued under the Plan may
be authorized and unissued shares, issued shares that have been reacquired by
the Company (in the open-market or in private transactions) and that are being
held in treasury, or a combination thereof. All of the Shares subject to the
Plan Limit may be issued pursuant to Incentive Stock Options.
(b)
Rules Applicable to Determining Shares Available for Issuance
. The number
of Shares remaining available for issuance will be reduced by the number of
Shares subject to outstanding Awards and, for Awards that are not denominated by
Shares, by the number of Shares actually delivered upon settlement or payment of
the Award. For purposes of determining the number of Shares that remain
available for issuance under the Plan, (i) the number of Shares that are
tendered by a Participant or withheld by the Company to pay the exercise price
of an Award or to satisfy the Participants tax withholding obligations in
connection with the exercise or settlement of an Award and (ii) all of the
Shares covered by a stock-settled Stock Appreciation Right to the extent
exercised, will not be added back to the Plan Limit. In addition, for purposes
of determining the number of Shares that remain available for issuance under the
Plan, the number of Shares corresponding to Awards under the Plan that are
forfeited or cancelled or otherwise expire for any reason without having been
exercised or settled or that is settled through issuance of consideration other
than Shares (including, without limitation, cash) shall be added back to the
Plan Limit and again be available for the grant of Awards;
provided
,
however
, that this
provision shall not be applicable with respect to (i) the cancellation of a
Stock Appreciation Right granted in tandem with an Option upon the exercise of
the Option or (ii) the cancellation of an Option granted in tandem with a Stock
Appreciation Right upon the exercise of the Stock Appreciation.
(c)
Special Limits
. Anything to the contrary in Section 5(a) above
notwithstanding, but subject to adjustment under Section 13 of the Plan, the
following special limits shall apply to Shares available for Awards under the
Plan:
(i) the maximum number of Shares
that may be issued pursuant to awards of Restricted Stock, Restricted Stock
Units, Performance Stock, Performance Units, other full value awards, and Other Awards that are payable in
Shares granted under the Plan shall equal one million (1,000,000) Shares in the
aggregate;
6
(ii) the maximum amount of Awards
(other than those Awards set forth in Section 5(c)) that may be awarded to any
Eligible Individual in any calendar year is fifteen percent of the Shares
measured as of the date of grant (with respect to Awards denominated in
Shares).
(d)
Any Shares underlying Substitute Awards shall not be counted against the number
of Shares remaining for issuance and shall not be subject to Section 5(c).
6. Awards in General
(a)
Types of Awards
. Awards under the Plan may consist of Options, Restricted
Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Stock,
Performance Units and Other Awards. Any Award described in Sections 7 through 11
of the Plan may be granted singly or in combination or tandem with any other
Award, as the Committee may determine. Awards under the Plan may be made in
combination with, in replacement of, or as alternatives to awards or rights
under any other compensation or benefit plan of the Company, including the plan
of any acquired entity.
(b)
Terms Set Forth in Award Document
. The terms and conditions of each Award
shall be set forth in an Award Document in a form approved by the Committee for
such Award, which Award Document shall contain terms and conditions not
inconsistent with the Plan. Notwithstanding the foregoing, and subject to
applicable laws, the Committee may accelerate (i) the vesting or payment of any
Award, (ii) the lapse of restrictions on any Award or (iii) the date on which
any Award first becomes exercisable. The terms of Awards may vary among
Participants, and the Plan does not impose upon the Committee any requirement to
make Awards subject to uniform terms. Accordingly, the terms of individual Award
Documents may vary.
(c)
Termination of Employment
. The Committee shall specify at or after the
time of grant of an Award the provisions governing the disposition of an Award
in the event of a Participants termination of employment with the Company or
any of its Subsidiaries. Subject to applicable laws, rules and regulations, in
connection with a Participants termination of employment, the Committee shall
have the discretion to accelerate the vesting, exercisability or settlement of,
eliminate the restrictions and conditions applicable to, or extend the
post-termination exercise period of an outstanding Award. Such provisions may be
specified in the applicable Award Document or determined at a subsequent
time.
(d)
Change of Control
. (i) The Committee shall have full authority to
determine the effect, if any, of a Change of Control of the Company or any
Subsidiary
on the vesting, exercisability, settlement, payment or lapse of
restrictions applicable to an Award, which effect may be specified in the
applicable Award Document or determined at a subsequent time. Subject to
applicable laws, rules and regulations, the Board or the Committee shall, at any
time prior to, coincident with or after the effective time of a Change of
Control, take such actions as it may consider appropriate, including, without
limitation: (A) providing for the acceleration of any vesting conditions
relating to the exercise or settlement of an Award or that an Award shall
terminate or expire unless exercised or settled in full on or before a date
fixed by the Committee; (B) making such adjustments to the Awards then
outstanding as the Committee deems appropriate to reflect such Change of
Control; (C) causing the Awards then outstanding to be assumed, or new rights
substituted therefor, by the surviving corporation in such Change of Control; or
(D) permit or require Participants to surrender outstanding Options and Stock
Appreciation Rights in exchange for a cash payment, if any, equal to the
difference between the highest price paid for a Share in the Change of Control
transaction and the Exercise Price of the Award. In addition, except as
otherwise specified in an Award Document (or a Participants written employment
agreement with the Company or any Subsidiary):
(1) any and all Options and Stock
Appreciation Rights outstanding as of the effective date of the Change of
Control shall become immediately exercisable, and shall remain exercisable until
the earlier of the expiration of their initial term or the second
(2
nd
) anniversary of the Participants termination of employment with
the Company;
7
(2) any restrictions imposed on
Restricted Stock and Restricted Stock Units outstanding as of the effective date
of the Change of Control shall lapse;
(3) the Performance Targets with
respect to all Performance Units, Performance Stock and other performance-based
Awards granted pursuant to Sections 6(g) or 10 outstanding as of the effective
date of the Change of Control shall be deemed to have been attained at the
specified target level of performance; and
(4) the vesting of all Awards
denominated in Shares outstanding as of the effective date of the Change in
Control shall be accelerated.
(ii)
Subject to applicable laws, rules and regulations, the Committee may provide, in
an Award Document or subsequent to the grant of an Award for the accelerated
vesting, exercisability and/or the deemed attainment of a Performance Target
with respect to an Award upon specified events similar to a Change of Control.
(iii)
Notwithstanding any other provision of the Plan or any Award Document, the
provisions of this Section 6(d) may not be terminated, amended, or modified upon
or after a Change of Control in a manner that would adversely affect a
Participants rights with respect to an outstanding Award without the prior
written consent of the Participant. Subject to Section 16, the Board, upon
recommendation of the Committee, may terminate, amend or modify this Section
6(d) at any time and from time to time prior to a Change of Control.
(e)
Dividends and Dividend Equivalents
. The Committee may provide
Participants with the right to receive dividends or payments equivalent to
dividends or interest with respect to an outstanding Award, which payments can
either be paid currently or deemed to have been reinvested in Shares, and can be
made in Shares, cash or a combination thereof, as the Committee shall determine;
provided, however,
that the terms of any reinvestment of dividends must comply with all
applicable laws, rules and regulations, including, without limitation, Section
409A of the Code. Notwithstanding the foregoing, no dividends or dividend
equivalents shall be paid with respect to Options or Stock Appreciation
Rights.
(f)
Rights of a Stockholder
. A Participant shall have no rights as a
stockholder with respect to Shares covered by an Award (including voting rights)
until the date the Participant or his nominee becomes the holder of record of
such Shares. No adjustment shall be made for dividends or other rights for which
the record date is prior to such date, except as provided in Section
13.
(g)
Performance-Based Awards
. (i) The Committee may determine whether any
Award under the Plan is intended to be performance-based compensation as that
term is used in Section 162(m) of the Code. Any such Awards designated to be
performance-based compensation shall be conditioned on the achievement of one
or more Performance Targets to the extent required by Section 162(m) of the Code
and will be subject to all other conditions and requirements of Section 162(m).
The Performance Targets will be comprised of specified levels of one or more of
the following performance criteria as the Committee deems appropriate: net
income; cash flow or cash flow on investment; pre-tax or post-tax profit levels
or earnings; operating earnings; return on investment; earned value added
expense reduction levels; free cash flow; free cash flow per share; earnings per
share; net earnings per share; return on assets; return on net assets; return on
equity; return on capital; return on sales; growth in managed assets; operating
margin; total stockholder return or stock price appreciation; EBITDA; adjusted
EBITDA; revenue; revenue before deferral, in each case determined in accordance
with generally accepted accounting principles (subject to modifications approved
by the Committee) consistently applied on a business unit, divisional,
subsidiary or consolidated basis or any combination thereof. The Performance
Targets may be described in terms of objectives that are related to the
individual Participant or objectives that are Company-wide or related to a
Subsidiary, division, department, region, function or business unit and may be
measured on an absolute or cumulative basis or on the basis of percentage of
improvement over time, and may be measured in terms of Company performance (or
performance of the applicable Subsidiary, division, department, region, function
or business unit) or measured relative to selected peer
8
companies or a market index. In addition,
for Awards not intended to qualify as performance-based compensation under
Section 162(m) of the Code, the Committee may establish Performance Targets
based on other criteria as it deems appropriate.
(ii)
The Participants will be designated, and the applicable Performance Targets will
be established, by the Committee within ninety (90) days following the
commencement of the applicable Performance Period (or such earlier or later date
permitted or required by Section 162(m) of the Code). Each Participant will be
assigned a Target Number payable if Performance Targets are achieved. Any
payment of an Award granted with Performance Targets shall be conditioned on the
written certification of the Committee in each case that the Performance Targets
and any other material conditions were satisfied. The Committee may determine,
at the time of Award grant, that if performance exceeds the specified
Performance Targets, the Award may be settled with payment greater than the
Target Number, but in no event may such payment exceed the limits set forth in
Section 5(c). The Committee retains the right to reduce any Award
notwithstanding the attainment of the Performance Targets.
(h)
Deferrals
. In accordance with the procedures authorized by, and subject
to the approval of, the Committee, Participants may be given the opportunity to
defer the payment or settlement of an Award to one or more dates selected by the
Participant;
provided
,
however
, that the terms of any deferrals must comply with all
applicable laws, rules and regulations, including, without limitation, Section
409A of the Code. No deferral opportunity shall exist with respect to an Award
unless explicitly permitted by the Committee on or after the time of
grant.
(i)
Repricing of Options and Stock Appreciation Rights
. Notwithstanding
anything in the Plan to the contrary, an Option or Stock Appreciation Right
shall not be granted in substitution for a previously granted Option or Stock
Appreciation Right being canceled or surrendered as a condition of receiving a
new Award, if the new Award would have a lower exercise price than the Award it
replaces, nor shall the exercise price of an Option or Stock Appreciation Right
be reduced once the Option or Stock Appreciation Right is granted. The foregoing
shall not (i) prevent adjustments pursuant to Section 13 or (ii) apply to grants
of Substitute Awards.
7. Terms and Conditions of
Options
(a)
General
. The Committee, in its discretion, may grant Options to Eligible
Individuals and shall determine whether such Options shall be Incentive Stock
Options or Nonqualified Stock Options. Each Option shall be evidenced by an
Award Document that shall expressly identify the Option as an Incentive Stock
Option or Nonqualified Stock Option, and be in such form and contain such
provisions as the Committee shall from time to time deem appropriate.
(b)
Exercise Price
. The exercise price of an Option shall be fixed by the
Committee at the time of grant or shall be determined by a method specified by
the Committee at the time of grant. In no event shall the exercise price of an
Option be less than one hundred percent (100%) of the Fair Market Value of a
Share on the date of grant;
provided
,
however
that the exercise price of a
Substitute Award granted as an Option shall be determined in accordance with
Section 409A of the Code and may be less than one hundred percent (100%) of the
Fair Market Value.
(c)
Term
. An Option shall be effective for such term as shall be determined
by the Committee and as set forth in the Award Document relating to such Option,
and the Committee may extend the term of an Option after the time of grant;
provided
,
however
,
that the term of an Option may in no event extend beyond the tenth
(10
th
) anniversary of the date of grant of such Option.
(d)
Exercise; Payment of Exercise Price
. Options shall be exercised by
delivery of a notice of exercise in a form approved by the Company. Subject to
the provisions of the applicable Award Document, the exercise price of an Option
may be paid (i) in cash or cash equivalents, (ii) by actual delivery or
attestation to ownership of freely transferable Shares already owned by the
person exercising the Option, (iii) by a combination of cash and Shares equal in
value to the exercise price, (iv) through net share settlement or similar
procedure involving the withholding of Shares subject to the Option with a value
equal to the exercise price or (v) by such other means as the Committee may
9
authorize. In accordance with the rules
and procedures authorized by the Committee for this purpose, the Option may also
be exercised through a cashless exercise procedure authorized by the Committee
from time to time that permits Participants to exercise Options by delivering
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds necessary to pay the exercise price and the
amount of any required tax or other withholding obligations or such other
procedures determined by the Company from time to time.
(e)
Incentive Stock Options
. The exercise price per Share of an Incentive
Stock Option shall be fixed by the Committee at the time of grant or shall be
determined by a method specified by the Committee at the time of grant, but in
no event shall the exercise price of an Incentive Stock Option be less than one
hundred percent (100%) of the Fair Market Value of a Share on the date of grant.
No Incentive Stock Option may be issued pursuant to the Plan to any individual
who, at the time the Incentive Stock Option is granted, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any of its Subsidiaries, unless (i) the exercise price
determined as of the date of grant is at least one hundred ten percent (110%) of
the Fair Market Value on the date of grant of the Shares subject to such
Incentive Stock Option and (ii) the Incentive Stock Option is not exercisable
more than five (5) years from the date of grant thereof. No Participant shall be
granted any Incentive Stock Option which would result in such Participant
receiving a grant of Incentive Stock Options that would have an aggregate Fair
Market Value in excess of one hundred thousand dollars ($100,000), determined as
of the time of grant, that would be exercisable for the first time by such
Participant during any calendar year. No Incentive Stock Option may be granted
under the Plan after the tenth anniversary of the Effective Date. The terms of
any Incentive Stock Option granted under the Plan shall comply in all respects
with the provisions of Section 422 of the Code, or any successor provision
thereto, as amended from time to time.
8. Terms and Conditions of Restricted
Stock and Restricted Stock Units
(a)
Restricted Stock
. The Committee, in its discretion, may grant or sell
Restricted Stock to Eligible Individuals. An Award of Restricted Stock shall
consist of one or more Shares granted or sold to an Eligible Individual, and
shall be subject to the terms, conditions and restrictions set forth in the Plan
and established by the Committee in connection with the Award and specified in
the applicable Award Document. Restricted Stock may, among other things, be
subject to restrictions on transferability, vesting requirements or other
specified circumstances under which it may be canceled.
(b)
Restricted Stock Units
. The Committee, in its discretion, may grant
Restricted Stock Units to Eligible Individuals. A Restricted Stock Unit shall
entitle a Participant to receive, subject to the terms, conditions and
restrictions set forth in the Plan and the applicable Award Document, one or
more Shares. Restricted Stock Units may, among other things, be subject to
restrictions on transferability, vesting requirements or other specified
circumstances under which they may be canceled. If and when the cancellation
provisions lapse, the Restricted Stock Units shall become Shares owned by the
applicable Participant or, at the sole discretion of the Committee, cash, or a
combination of cash and Shares, with a value equal to the Fair Market Value of
the Shares at the time of payment.
9. Stock Appreciation
Rights
(a)
General
. The Committee, in its discretion, may grant Stock Appreciation
Rights to Eligible Individuals. A Stock Appreciation Right shall entitle a
Participant to receive, upon satisfaction of the conditions to payment specified
in the applicable Award Document, an amount equal to the excess, if any, of the
Fair Market Value on the exercise date of the number of Shares for which the
Stock Appreciation Right is exercised over the grant price for such Stock
Appreciation Right specified in the applicable Award Document. The grant price
per share of Shares covered by a Stock Appreciation Right shall be fixed by the
Committee at the time of grant or, alternatively, shall be determined by a
method specified by the Committee at the time of grant, but in no event shall
the grant price of a Stock Appreciation Right be less than one hundred percent
(100%) of the Fair Market Value of a Share on the date of grant;
provided
,
however
, that the grant
price of a Substitute Award granted as a Stock Appreciation Rights shall be in
accordance with Section 409A of the Code and may be less than one hundred
percent (100%) of the Fair Market Value. Payments to a Participant upon exercise
of a Stock Appreciation Right may be made in cash or Shares, having
10
an aggregate Fair Market Value as of the
date of exercise equal to the excess, if any, of the Fair Market Value on the
exercise date of the number of Shares for which the Stock Appreciation Right is
exercised over the grant price for such Stock Appreciation Right. The term of a
Stock Appreciation Right settled in Shares shall not exceed seven (7)
years.
(b)
Stock Appreciation Rights in Tandem with Options
. A Stock Appreciation
Right granted in tandem with an Option may be granted either at the same time as
such Option or subsequent thereto. If granted in tandem with an Option, a Stock
Appreciation Right shall cover the same number of Shares as covered by the
Option (or such lesser number of shares as the Committee may determine) and
shall be exercisable only at such time or times and to the extent the related
Option shall be exercisable, and shall have the same term as the related Option.
The grant price of a Stock Appreciation Right granted in tandem with an Option
shall equal the per-share exercise price of the Option to which it relates. Upon
exercise of a Stock Appreciation Right granted in tandem with an Option, the
related Option shall be canceled automatically to the extent of the number of
Shares covered by such exercise; conversely, if the related Option is exercised
as to some or all of the shares covered by the tandem grant, the tandem Stock
Appreciation Right shall be canceled automatically to the extent of the number
of Shares covered by the Option exercise.
10. Terms and Conditions of Performance
Stock and Performance Units
(a)
Performance Stock
. The Committee may grant Performance Stock to Eligible
Individuals. An Award of Performance Stock shall consist of a Target Number of
Shares granted to an Eligible Individual based on the achievement of Performance
Targets over the applicable Performance Period, and shall be subject to the
terms, conditions and restrictions set forth in the Plan and established by the
Committee in connection with the Award and specified in the applicable Award
Document.
(b)
Performance Units
. The Committee, in its discretion, may grant
Performance Units to Eligible Individuals. A Performance Unit shall entitle a
Participant to receive, subject to the terms, conditions and restrictions set
forth in the Plan and established by the Committee in connection with the Award
and specified in the applicable Award Document, a Target Number of Shares or
cash based upon the achievement of Performance Targets over the applicable
Performance Period. At the sole discretion of the Committee, Performance Units
shall be settled through the delivery of Shares or cash, or a combination of
cash and Shares, with a value equal to the Fair Market Value of the underlying
Shares as of the last day of the applicable Performance Period.
11. Other Awards
The
Committee shall have the authority to specify the terms and provisions of other
forms of equity-based or equity-related Awards not described above that the
Committee determines to be consistent with the purpose of the Plan and the
interests of the Company, which Awards may provide for cash payments based in
whole or in part on the value or future value of Shares, for the acquisition or
future acquisition of Shares, or any combination thereof.
12. Certain Restrictions
(a)
Transfers
.
No Award shall be transferable other than pursuant to a beneficiary
designation under Section 12(c), by last will and testament or by the laws of
descent and distribution or, except in the case of an Incentive Stock Option,
pursuant to a domestic relations order, as the case may be;
provided
,
however
, that the
Committee may, subject to applicable laws, rules and regulations and such terms
and conditions as it shall specify, permit the transfer of an Award, other than
an Incentive Stock Option, for no consideration to a Permitted Transferee. Any
Award transferred to a Permitted Transferee shall be further transferable only
by last will and testament or the laws of descent and distribution or, for no
consideration, to another Permitted Transferee of the Participant.
(b)
Award Exercisable Only by Participant
. During the lifetime of a
Participant, an Award shall be exercisable only by the Participant or by a
Permitted Transferee to whom such Award has been transferred in accordance with
Section 12(a) above. The grant of an Award shall impose no obligation on a
Participant to exercise or settle the Award.
11
(c)
Beneficiary Designation
. The beneficiary or beneficiaries of the
Participant to whom any benefit under the Plan is to be paid in case of his
death before he receives any or all of such benefit shall be determined under
the Companys Group Life Insurance Plan. A Participant may, from time to time,
name any beneficiary or beneficiaries to receive any benefit in case of his
death before he receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, including the beneficiary
designated under the Companys Group Life Insurance Plan, and will be effective
only when filed by the Participant in writing (in such form or manner as may be
prescribed by the Committee) with the Company during the Participants lifetime.
In the absence of a valid designation under the Companys Group Life Insurance
Plan or otherwise, if no validly designated beneficiary survives the Participant
or if each surviving validly designated beneficiary is legally impaired or
prohibited from receiving the benefits under an Award, the Participants
beneficiary shall be the Participants estate.
13. Recapitalization or
Reorganization
(a)
Authority of the Company and Stockholders
. The existence of the Plan, the
Award Documents and the Awards granted hereunder shall not affect or restrict in
any way the right or power of the Company or the stockholders of the Company to
make or authorize any adjustment, recapitalization, reorganization or other
change in the Companys capital structure or business, any merger or
consolidation of the Company, any issue of stock or of options, warrants or
rights to purchase stock or of bonds, debentures, preferred or prior preference
stocks whose rights are superior to or affect the Shares or the rights thereof
or which are convertible into or exchangeable for Shares, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
(b)
Change in Capitalization
. Notwithstanding any provision of the Plan or
any Award Document, the number and kind of Shares authorized for issuance under
Section 5 of the Plan, including the maximum number of Shares available under
the special limits provided for in Section 5(c), may be equitably adjusted in
the sole discretion of the Committee in the event of a stock split, reverse
stock spit, stock dividend, recapitalization, reorganization, partial or
complete liquidation, reclassification, merger, consolidation, separation,
extraordinary cash dividend, split-up, spin-off, combination, exchange of
Shares, warrants or rights offering to purchase Shares at a price substantially
below Fair Market Value, or any other corporate event or distribution of stock
or property of the Company affecting the Shares in order to preserve, but not
increase, the benefits or potential benefits intended to be made available under
the Plan. In addition, upon the occurrence of any of the foregoing events, the
number and kind of Shares subject to any outstanding Award and the exercise
price per Share (or the grant price per Share, as the case may be), if any,
under any outstanding Award may be equitably adjusted (including by payment of
cash to a Participant) in the sole discretion of the Committee in order to
preserve the benefits or potential benefits intended to be made available to
Participants. Such adjustments shall be made by the Committee. Unless otherwise
determined by the Committee, such adjusted Awards shall be subject to the same
restrictions and vesting or settlement schedule to which the underlying Award is
subject.
14. Term of the Plan
Unless
earlier terminated pursuant to Section 16, the Plan shall terminate on the tenth
(10
th
) anniversary of the Effective Date, except with respect to
Awards then outstanding. No Awards may be granted under the Plan after the tenth
(10
th
) anniversary of the Effective Date.
15. Effective Date
The
Plan shall become effective on the Effective Date, subject to approval by the
stockholders of the Company.
12
16. Amendment and
Termination
Subject
to applicable laws, rules and regulations, the Board may at any time terminate
or, from time to time, amend, modify or suspend the Plan;
provided
,
however
, that no
termination, amendment, modification or suspension (i) will be effective without
the approval of the stockholders of the Company if such approval is required
under applicable laws, rules and regulations, including the rules of NASDAQ and
(ii) shall materially and adversely alter or impair the rights of a Participant
in any Award previously made under the Plan without the consent of the holder
thereof. Notwithstanding the foregoing, the Board shall have broad authority to
amend the Plan or any Award under the Plan without the consent of a Participant
to the extent it deems necessary or desirable (a) to comply with, take into
account changes in, or interpretations of, applicable tax laws, securities laws,
employment laws, accounting rules and other applicable laws, rules and
regulations, (b) to take into account unusual or nonrecurring events or market
conditions (including, without limitation, the events described in Section
13(b)), or (c) to take into account significant acquisitions or dispositions of
assets or other property by the Company.
17. Miscellaneous
(a)
Tax Withholding
. The Company or a Subsidiary, as appropriate, may require
any individual entitled to receive a payment of an Award to remit to the
Company, prior to payment, an amount sufficient to satisfy any applicable tax
withholding requirements. In the case of an Award payable in Shares, the Company
or a Subsidiary, as appropriate, may permit or require a Participant to satisfy,
in whole or in part, such obligation to remit taxes by directing the Company to
withhold shares that would otherwise be received by such individual or to
repurchase shares that were issued to the Participant to satisfy the minimum
statutory withholding rates for any applicable tax withholding purposes, in
accordance with all applicable laws and pursuant to such rules as the Committee
may establish from time to time. The Company or a Subsidiary, as appropriate,
shall also have the right to deduct from all cash payments made to a Participant
(whether or not such payment is made in connection with an Award) any applicable
taxes required to be withheld with respect to such payments.
(b)
No Right to Awards or Employment
. No person shall have any claim or right
to receive Awards under the Plan. Neither the Plan, the grant of Awards under
the Plan nor any action taken or omitted to be taken under the Plan shall be
deemed to create or confer on any Eligible Individual any right to be retained
in the employ of the Company or any Subsidiary or other affiliate thereof, or to
interfere with or to limit in any way the right of the Company or any Subsidiary
or other affiliate thereof to terminate the employment of such Eligible
Individual at any time. No Award shall constitute salary, recurrent compensation
or contractual compensation for the year of grant, any later year or any other
period of time. Payments received by a Participant under any Award made pursuant
to the Plan shall not be included in, nor have any effect on, the determination
of employment-related rights or benefits under any other employee benefit plan
or similar arrangement provided by the Company and the Subsidiaries, unless
otherwise specifically provided for under the terms of such plan or arrangement
or by the Committee.
(c)
Securities Law Restrictions
. An Award may not be exercised or settled,
and no Shares may be issued in connection with an Award, unless the issuance of
such shares (i) has been registered under the Securities Act of 1933, as
amended, (ii) has qualified under applicable state blue sky laws (or the
Company has determined that an exemption from registration and from
qualification under such state blue sky laws is available) and (iii) complies
with all applicable foreign securities laws. The Committee may require each
Participant purchasing or acquiring Shares pursuant to an Award under the Plan
to represent to and agree with the Company in writing that such Eligible
Individual is acquiring the Shares for investment purposes and not with a view
to the distribution thereof. All certificates for Shares delivered under the
Plan shall be subject to such stock-transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any exchange upon which
the Shares are then listed, and any applicable securities law, and the Committee
may cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
13
(d)
Section 162(m) of the Code
. The Plan is intended to comply in all
respects with Section 162(m) of the Code;
provided
,
however
, that in the event the
Committee determines that compliance with Section 162(m) of the Code is not
desired with respect to a particular Award, compliance with Section 162(m) of
the Code will not be required. In addition, if any provision of this Plan would
cause Awards that are intended to constitute qualified performance-based
compensation under Section 162(m) of the Code, to fail to so qualify, that
provision shall be severed from, and shall be deemed not to be a part of, the
Plan, but the other provisions hereof shall remain in full force and
effect.
(e)
Section 409A of the Code
. Notwithstanding any contrary provision in the
Plan or an Award Document, if any provision of the Plan or an Award Document
contravenes any regulations or guidance promulgated under Section 409A of the
Code or would cause an Award to be subject to additional taxes, accelerated
taxation, interest and/or penalties under Section 409A of the Code, such
provision of the Plan or Award Document may be modified by the Committee without
consent of the Participant in any manner the Committee deems reasonable or
necessary. In making such modifications the Committee shall attempt, but shall
not be obligated, to maintain, to the maximum extent practicable, the original
intent of the applicable provision without contravening the provisions of
Section 409A of the Code. Moreover, any discretionary authority that the
Committee may have pursuant to the Plan shall not be applicable to an Award that
is subject to Section 409A of the Code to the extent such discretionary
authority would contravene Section 409A of the Code or the guidance promulgated
thereunder.
(f)
Awards to Individuals Subject to Laws of a Jurisdiction Outside of the United
States
. To the extent that Awards under the Plan are awarded to Eligible
Individuals who are domiciled or resident outside of the United States or to
persons who are domiciled or resident in the United States but who are subject
to the tax laws of a jurisdiction outside of the United States, the Committee
may adjust the terms of the Awards granted hereunder to such person (i) to
comply with the laws, rules and regulations of such jurisdiction and (ii) to
permit the grant of the Award not to be a taxable event to the Participant. The
authority granted under the previous sentence shall include the discretion for
the Committee to adopt, on behalf of the Company, one or more sub-plans
applicable to separate classes of Eligible Individuals who are subject to the
laws of jurisdictions outside of the United States.
(g)
Satisfaction of Obligations
. Subject to applicable law, the Company may
apply any cash, Shares, securities or other consideration received upon exercise
or settlement of an Award to any obligations a Participant owes to the Company
and the Subsidiaries in connection with the Plan or otherwise, including,
without limitation, any tax obligations or obligations under a currency facility
established in connection with the Plan.
(h)
No Limitation on
Corporate Actions
. Nothing contained in the Plan shall be construed to
prevent the Company or any Subsidiary from taking any corporate action, whether
or not such action would have an adverse effect on any Awards made under the
Plan. No Participant, beneficiary or other person shall have any claim against
the Company or any Subsidiary as a result of any such action.
(i)
Unfunded Plan
.
The Plan is intended to constitute an unfunded plan for
incentive compensation. Prior to the issuance of Shares, cash or other form of
payment in connection with an Award, nothing contained herein shall give any
Participant any rights that are greater than those of a general unsecured
creditor of the Company. The Committee may, but is not obligated, to authorize
the creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Shares with respect to awards hereunder.
(j)
Successors
. All obligations of the Company under the Plan with respect to
Awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business and/or assets of the Company.
(k)
Application of Funds
. The proceeds received by the Company from the sale
of Shares pursuant to Awards will be used for general corporate
purposes.
14
(l)
Award Document
. In the event of any conflict or inconsistency between the
Plan and any Award Document, the Plan shall govern and the Award Document shall
be interpreted to minimize or eliminate any such conflict or
inconsistency.
(m)
Headings
. The headings of Sections herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of the Plan.
(n)
Severability
. If any provision of this Plan is held unenforceable, the
remainder of the Plan shall continue in full force and effect without regard to
such unenforceable provision and shall be applied as though the unenforceable
provision were not contained in the Plan.
(o)
Expenses
. The costs and expenses of administering the Plan shall be borne
by the Company.
(p)
Arbitration
. Any dispute, controversy or claim arising out of or relating
to the Plan that cannot be resolved by the Participant on the one hand, and the
Company on the other, shall be submitted to arbitration in the State of
Connecticut under the National Rules for the Resolution of Employment Disputes
of the American Arbitration Association;
provided
,
however
, that any such submission by
the Participant must be made within one (1) year of the date of the events
giving rise to such dispute, controversy or claim. The determination of the
arbitrator shall be conclusive and binding on the Company and the Participant,
and judgment may be entered on the arbitrators award in any court having
jurisdiction. The expenses of such arbitration shall be borne by the Company;
provided
,
however
,
that each party shall bear its own legal expenses unless the Participant is the
prevailing party, in which case the Company shall promptly pay or reimburse the
Participant for the reasonable legal fees and expenses incurred by the
Participant in connection with such contest or dispute (excluding any fees
payable pursuant to a contingency fee arrangement).
(q)
Governing Law
. Except as to matters of federal law, the Plan and all
actions taken thereunder shall be governed by and construed in accordance with
the laws of the State of Connecticut.
15
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PHOTRONICS,
INC.
ATTN: RICHELLE BURR
15 SECOR ROAD
BROOKFIELD, CT
06804
|
VOTE BY INTERNET
- www.proxyvote.com
|
Use the Internet to transmit your voting instructions and
for electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in
hand when you access the web site and follow the instructions to obtain
your records and to create an electronic voting instruction
form.
|
|
ELE
CTR
ONIC DELIVERY OF FUTURE PROXY
MATERIALS
|
If you would like to reduce the costs incurred by our
company in mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic delivery, please follow
the instructions above to vote using the Internet and, when prompted,
indicate that you agree to receive or access proxy materials
electronically in future years.
|
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VOTE BY
PHONE - 1-800-690-6903
|
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day before the cut-off
date or meeting date. Have your proxy card in hand when you call and then
follow the instructions.
|
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VOTE BY
MAIL
|
Mark,
sign and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Vote Processing, c/o Broadridge, 51
Mercedes Way, Edgewood, NY 11717.
|
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS:
|
KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION
ONLY
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THIS PROXY CARD IS VALID ONLY
WHEN SIGNED AND DATED.
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For
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Withhold
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For All
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All
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All
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Except
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The Board of Directors
recommends you vote FOR the following:
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o
|
o
|
o
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1.
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Election of
Directors
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Nominees
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To withhold
authority to vote for any individual nominee(s), mark For All Except and
write the number(s) of the nominee(s) on the line
below.
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01
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Walter
M. Fiederowicz
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02
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Joseph
A. Fiorita, Jr.
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03
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Liang-Choo Hsia
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04
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Constantine Macricostas
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05
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George
Macricostas
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06
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Mitchell G.
Tyson
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The Board of Directors
recommends you vote FOR proposals 2, 3, 4 and 5.
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For
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Against
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Abstain
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2
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To ratify the selection of Deloitte & Touche LLP as independent
registered public accounting firm for the fiscal year ending November 2,
2014.
|
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o
|
o
|
o
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3
|
To approve an amendment to the Photronics Inc. 2007 Long Term
Equity Incentive Plan, as previously amended, to increase the authorized shares available for
issuance from 6,000,000 to 9,000,000 and to amend the amount of restricted
stock allowed to be issued thereunder from 15% to 1,000,000
shares.
|
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o
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o
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o
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4
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To approve, by non-binding vote, executive compensation.
|
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o
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o
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o
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5
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To transact such other business as may properly come before the
meeting or any adjournment thereof.
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o
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o
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o
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For
address change/comments, mark here.
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o
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(see reverse for
instructions)
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Please sign exactly as your
name(s) appear(s) hereon. When signing as attorney, executor,
administrator, or other fiduciary, please give full title as such. Joint
owners should each sign personally. All holders must sign. If a
corporation or partnership, please sign in full corporate or partnership
name, by authorized officer.
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Signature
[PLEASE SIGN WITHIN BOX]
|
Date
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Signature
(Joint Owners)
|
Date
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Important Notice Regarding the Availability
of Proxy Materials for the Annual Meeting:
The Notice of
Proxy Statement/10-K Report is/are available at www.proxyvote.com.
|
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PHOTRONICS,
INC.
Annual Meeting of Shareholders
April 11, 2014 10:00
AM
The undersigned hereby appoints Richelle E. Burr and Sean T.
Smith, or either one of them acting in the absence of the other, with full power
of substitution, as proxies of the undersigned, and hereby authorizes each or
either of them to vote, as designated on the other side, all shares of Common
Stock of Photronics, Inc., which the undersigned is entitled to vote if
personally present at the 2014 Annual Meeting of Shareholders of Photronics,
Inc. to be held at 10:00 a.m. Eastern Time on April 11, 2014 at the Company's
headquarters located at 15 Secor Road, Building 1, Brookfield, CT 06801 , and at
any adjournments or postponements thereof.
Address
change/comments:
(If you noted any Address Changes
and/or Comments above, please mark corresponding box on the reverse
side.)
Continued and to be signed on reverse
side
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