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
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the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy
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Definitive Additional
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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
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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 MARCH 26,
2015
________________________________________
TO THE SHAREHOLDERS OF
PHOTRONICS, INC.:
Notice is hereby given that
the Annual Meeting of Shareholders of Photronics, Inc. will be held at the
Chrysler Boardroom at the Grand Hyatt New York, 109 E 42nd Street,
Park Avenue at Grand Central Terminal, New York, NY 10017, at 9:00 a.m. Eastern
Time, for the following purposes:
1) |
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To elect 6
members of the Board of Directors; |
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To ratify
the selection of Deloitte & Touche LLP as independent registered
public accounting firm for the fiscal year ending November 1,
2015; and |
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To
approve, by non-binding advisory 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.
The Board of Directors has
fixed February 17, 2015, as the record date for determining the holders of
common stock entitled to notice of and to vote at the meeting.
A list of those shareholders entitled to vote at the Annual Meeting
will be available for inspection by any of our shareholders for any
purpose germane to the Annual Meeting during regular business hours
at Photronics principal executive offices 20 days prior to the Annual 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 OR AUTHORIZE THE VOTING OF YOUR SHARES BY INTERNET OR
TELEPHONE PRIOR TO THE DEADLINE SPECIFIED ON YOUR PROXY CARD. NO POSTAGE IS
REQUIRED FOR MAILING IN THE UNITED STATES.
We thank you for your
continued support.
Shareholders planning on attending the meeting in person
should bring photo identification.
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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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General Counsel and
Secretary |
March 2, 2015
PHOTRONICS, INC.
15
Secor Road
Brookfield, Connecticut 06804
(203)
775-9000
______________________________
PROXY
STATEMENT
For the Annual Meeting of
Shareholders
to be held on March 26, 2015
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 March 26, 2015, at 9:00 a.m. Eastern Time at the
Chrysler Boardroom at the Grand Hyatt New York, 109 E 42nd Street, Park Avenue
at Grand Central Terminal, New York, NY 10017 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 2, 2015. Our Annual Report on Form 10-K for the fiscal year ended
November 2, 2014, 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, and 3,
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 17, 2015, are entitled to notice of and to
vote at the Annual Meeting. As of February 17, 2015, there were 66,444,095
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 (Ratification
of Selection of Independent Registered Public Accounting Firm for the Fiscal
Year Ending November 1, 2015) 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; (3) Proposal 3 (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
advisory 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 be considered as present but will not be considered as votes for
the matters as to which the shares are not voted.
2
Neither the approval nor the
disapproval of Proposal 3 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 3 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. Of the three proposals listed in the Notice of Annual
Meeting of Shareholders only the ratification of our independent registered public accounting firm under Proposal 2 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.
●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.
●Executive Sessions. The Companys Board of Directors meetings
regularly include executive sessions without the presence of management,
including the Chairman and Chief Executive Officer.
●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 17, 2015, 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 executive officers of the Company as a group.
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|
Amount and Nature of |
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Percentage of |
Name
and Address of Beneficial Owner (1) |
|
Beneficial Ownership (2) |
|
Class |
Waddell & Reed Financial, Inc. |
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7,326,026 |
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11.00% |
(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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6,239,283 |
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9.40% |
(4) |
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152
West 57th Street |
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New
York, NY 10019 |
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Dimensional Fund Advisors |
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5,247,263 |
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8.50% |
(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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Barrow, Hanley, Mewhinney & Strauss, LLC |
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4,022,853 |
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6.51% |
(6) |
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2200
Ross Avenue, 31st Floor |
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Dallas, TX 75201-2761 |
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Black Rock, Inc. |
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3,630,506 |
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5.90% |
(7) |
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40 East 52nd Street |
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New York, NY 10022 |
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Richelle Burr |
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110,572 |
(8) |
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* |
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Walter M. Fiederowicz |
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78,250 |
(8) |
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* |
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Joseph A. Fiorita, Jr. |
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217,400 |
(8)(9) |
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* |
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Liang-Choo Hsia |
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50,000 |
(8) |
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* |
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Soo
Hong Jeong |
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390,025 |
(8) |
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Peter Kirlin |
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193,750 |
(8) |
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* |
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Constantine S. Macricostas |
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1,031,690 |
(8)(10) |
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1.55% |
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George Macricostas |
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61,250 |
(8) |
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* |
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Christopher J. Progler |
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248,175 |
(8) |
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* |
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Sean T. Smith |
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315,006 |
(8) |
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* |
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Mitchell G. Tyson |
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130,500 |
(8) |
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* |
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Directors and Named Executive Officers as a
group (11 persons) |
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2,826,618 |
(11) |
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4.25% |
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* Less than 1%
(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 13, 2015, Waddell & Reed Financial,
Inc. had sole voting and dispositive power over 7,326,026 shares of Common
Stock as of December 31, 2014. |
|
(4) |
|
According
to Schedule 13G filed February 3, 2015, Donald Smith & Co., Inc. had
sole voting and dispositive power over 6,239,283 shares of Common Stock as
of December 31, 2014. |
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(5) |
|
According
to Schedule 13G/A filed on February 5, 2015, Dimensional Fund Advisors,
had sole voting and dispositive power over 5,247,263 shares of Common
Stock as of December 31, 2014. |
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(6) |
|
According
to Schedule 13G filed February 10, 2015, Barrow, Hanley, Mewhinney &
Strauss, LLC had sole voting and dispositive power over 4,022,853 shares
of Common Stock as of December 31, 2014. |
|
(7) |
|
According
to Schedule 13G/A filed February 2, 2015, Black Rock, Inc. had sole voting
and dispositive power over 3,630,506 shares of Common Stock as of December
31, 2014. |
5
(8) |
|
Includes
shares of Common Stock subject to stock options exercisable as of February
17, 2015, (or within 60 days thereof), as follows: Ms. Burr: 58,813; Mr.
Fiederowicz: 66,250; Mr. Fiorita: 70,000; Dr. Hsia: 10,000; Dr. Jeong: 210,625; Dr. Kirlin:
122,750; Mr. Constantine Macricostas: 466,875; Mr. George Macricostas:
12,500; Dr. Progler 203,875; Mr. Smith: 211,875; and Mr. Tyson:
50,000. |
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(9) |
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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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(10) |
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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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(11) |
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Includes
the shares listed in notes (8), (9) and (10)
above. |
PROPOSAL 1
ELECTION OF
DIRECTORS
The Board has nominated 6
directors to be elected at the 2015 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 2016 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 |
|
|
|
Position with the |
and (Age)
|
|
|
Director
Since |
|
Company |
Walter M. Fiederowicz |
|
1984 |
|
Director |
(68 years) |
|
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Joseph A. Fiorita, Jr. |
|
1987 |
|
Director |
(70 years) |
|
|
|
|
|
Dr. L. C. Hsia |
|
2012 |
|
Director |
(66 years) |
|
|
|
|
|
Constantine S. Macricostas |
|
1974 |
|
Chairman of the |
(79 years) |
|
|
|
Board |
|
George Macricostas |
|
2002 |
|
Director |
(45 years) |
|
|
|
|
|
Mitchell G. Tyson |
|
2004 |
|
Director |
(60 years) |
|
|
|
|
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.
Walter M. Fiederowicz has been
a private investor and consultant since August 1997. Mr. Fiederowicz is Chairman
of the Compensation Committee and Vice Chairman of the Audit 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. Mr. Fiederowicz brings leadership, extensive business and financial experience to the Board.
6
Joseph A. Fiorita, Jr., CPA,
has been a partner since 1973 at Fiorita, Kornhaas & Company, P.C., an
independent certified public accounting firm with offices located in Danbury and
Southbury, 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 and Vice Chairman of the
Compensation Committee. Mr. Fiorita
qualifies as an audit committee financial expert under applicable Securities and
Exchange Commission (SEC) audit committee rules. 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. Dr. Hsia brings an in depth knowledge and wealth of experience in the industry
to the Board.
Constantine S. Macricostas is
Chairman of the Board and Chief Executive Officer. On 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 director of RagingWire Enterprise
Solutions, Inc., (RagingWire). Mr. Macricostas is the father of George
Macricostas. Mr. Macricostas knowledge of the Company and its operations as
well as the industry 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
Data Centers, Inc., a company that provides secure data center infrastructure and managed information
technology services 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 is the son of Constantine S. Macricostas. Mr. Macricostas
brings over 23 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. Mr. Macricostas brings industry, risk management,
leadership and business experience to the Board.
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, a partner in the Clean Energy Venture Group, and
chair of the New England Clean Energy Council. He serves on the Board of the
Massachusetts Technology Collaborative and Bigbelly, Inc. a supplier of
enterprise waste management and urban connectivity solutions. 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. Mr. Tyson brings
leadership and extensive business experience as well as finance expertise to the Board.
MEETINGS AND COMMITTEES
OF THE BOARD
The Board of Directors met 6
times during the 2014 fiscal year. During fiscal 2014, each director attended
all (100%) of the regular meetings of the Board of Directors and 75% of
committee meetings of the Board on which such director served.
The Companys Board of
Directors has Audit, Compensation, 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 and SEC rules. Mr. Fiorita qualifies as an audit committee financial
expert under applicable SEC audit committee rules. The Audit Committee held 8
meetings during the 2014 fiscal year.
7
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, 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 5 meetings during the 2014 fiscal year.
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 6 times in
fiscal 2014. 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 2014 fiscal
year.
The minimum qualifications for
nominees to be considered by the Nominating Committee are experience as a
business or technology leader, the highest ethical standards, 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 2014 Annual Meeting of Shareholders.
8
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.
For the fiscal year ended November 2,
2014, 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 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 2014 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.
This report is submitted by:
Joseph A. Fiorita,
Jr.
Chairman
Walter M.
Fiederowicz
Mitchell G. Tyson
Fees Paid to the
Independent Registered Public Accounting Firm
For the fiscal years ended
November 2, 2014 and November 3, 2013, the aggregate fees for professional
services rendered by Deloitte & Touche LLP were as follows:
|
Fiscal
2014 |
|
Fiscal
2013 |
Audit Fees (a) |
|
$ |
1,139,778 |
|
|
|
$ |
1,031,323 |
|
Audit-Related Fees (b) |
|
|
336,529 |
|
|
|
|
132,300 |
|
Tax
Fees (c) |
|
|
49,525 |
|
|
|
|
247,309 |
|
All
Other Fees |
|
|
0 |
|
|
|
|
0 |
|
|
|
Total |
|
$ |
1,525,832 |
|
|
|
$ |
1,410,932 |
|
|
(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. |
9
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.
|
|
|
Served as an |
Name |
|
|
Executive Officer |
and
Age |
|
Position |
|
Since |
Richelle E. Burr, 51 |
Vice President, |
|
2010 |
|
General Counsel |
|
|
|
and Secretary |
|
|
|
Peter S. Kirlin, 54 |
President |
|
2008 |
|
Constantine S. Macricostas,
79 |
Chief Executive |
|
2008 |
|
Officer |
|
|
|
Christopher J. Progler, 51 |
Vice
President, |
|
2004 |
|
Chief Technology |
|
|
|
Officer and |
|
|
|
Strategic Planning |
|
|
|
Sean T. Smith, 54 |
Senior Vice |
|
2000 |
|
President and |
|
|
|
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. 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.
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. 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 of SPIE - The International Society of Optics and Photonics. He serves on
management boards of MP Mask, PDMC, Inpria and IMS nanofabrication. He also
serves on technical advisory boards for MP Mask and the Cymer Laser division of
ASML.
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.
10
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 2014 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 (identified in the Summary Compensation Table) as well as all participants in the Companys 2011 Executive Incentive
Compensation Plan (2011 EICP).
The following report provides
information about our compensation programs and policies as well as the outcomes
and achievements that resulted in the delivery of compensation to our Named
Executive Officers. Specific 2014 compensation information for our CEO, President and
other Named Executives Officers will be outlined in a series of tables following this
report.
Summary
In 2014 we
successfully completed a joint venture in Taiwan (PDMC). The joint venture
made us stronger and brings a superior merchant capability to Taiwan. We also
restructured our loan agreement, continued to pay down debt and strengthened our
financial position. We continued to invest and deploy advanced lithography equipment across our strategically located high-end facilities. We are now the leading
edge integrated circuit photomask merchant in the world and we believe we now have more sub-20nm capability and capacity than all our competitors
combined.
These investments and
achievements were accomplished while continuing to strengthen our financial
foundation. We ended the year with net cash of $51 million, up $29 million from
fiscal year end 2013. We were profitable and continued to generate cash.
Revenues increased 8% to $455.5 million with high-end integrated circuit revenues up 30%
to $104 million. Flat panel display revenues were up slightly to $103 million as we were
challenged for capacity at the high-end. Mainstream revenues for integrated circuit and flat panel display were
both up year-over-year.
Our compensation program for
our named executive officers received support of approximately 94% of the votes cast at our
2014 Annual Meeting. Based on the effectiveness of our compensation program and
in consideration of this years and prior years approval, the Compensation
Committee decided to continue the foundation and fundamentals of the
compensation structure for 2014.
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 primary components to achieve the Companys primary objectives: base salary,
annual cash incentives and stock-based awards. The Company minimizes its perquisites available to its employees as a whole, including its executives.
11
The Compensation Committee
believes that the three primary 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 57% of his total compensation in
2014.
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. Approximately 8% of the Named Executive Officers compensation in 2014 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 25% of the
Named Executive Officers compensation in 2014 consisted of stock-based
compensation.
Total Direct Compensation |
|
Total Compensation All Other Named |
Chief Executive Officer |
|
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.
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.
12
In establishing compensation
levels for the Companys Named Executive Officers, identified in
the Summary Compensation Table, the Compensation Committee considers
compensation at eight publicly traded companies in the semiconductor/electronics
industries with similar levels of sales and capital. These companies are
Advanced Energy Industries, Inc., Axcelis Technologies, Inc., Brooks Automation,
Inc., Cabot 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 2014
Annual Shareholders Meeting, 94% of the votes cast with respect to the advisory
vote on executive compensation voted to approve the executive
compensation paid in fiscal 2013. 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 the beginning of fiscal 2014 from $300,000 to $330,000 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 counsels.
In fiscal 2015 all Named
Executive Officers received a 2% salary increase as part of a Company-wide
salary increase.
Annual
Incentives
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.
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.
13
The Compensation Committee met
in January of 2014 and established 4 metrics for fiscal 2014 that were to be
used under the 2011 EICP.
Metric |
Target |
Actual Performance |
EBITDA (excluding the Taiwan Joint Venture) |
$139MM based on full year performance |
Not met |
Operating Margin |
5% |
Achieved |
Achieve High End Qualification Plan |
Competitively Sensitive |
Mostly Achieved |
Successfully close and fully
integrate |
|
|
Taiwan Joint
Venture |
Strategic Milestones |
Achieved |
The metrics for fiscal 2014 were EBITDA of $139 million based on full
year performance excluding the Taiwan Joint Venture (minimum EBITDA as defined in our credit agreement, is GAAP net income
plus interest expense, income tax expense, depreciation and amortization, plus (less) special items as defined), operating
margin percentage of 5% based on full year performance (operating margin is operating income, excluding one-time items
divided by sales) achievement of high end qualifications and successfully close and fully integrate the Taiwan Joint
Venture. Each of the four metrics was given equal weight and personal performance of each Named Executive was also given
the same weight as each individual metric. The maximum payout upon certification of attainment of targets for 2014 for the
Named Executive Officers (with the exception of the CEO) was 35% of the applicable Named Executive Officers base
salary. The Chief Executive Officers maximum payout was 50%. The Compensation Committee also has 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 2014, the Company was required to meet at least two of the metrics. In
December of 2014, the Compensation Committee met and reviewed the metrics established in January and also reviewed
the performance of the Company for fiscal 2014. The Compensation Committee determined that the Company achieved two out of
the four metrics established for 2014 completely and mostly completed a third. The Company did not meet the EBITDA metric.
Based on such achievement the Named Executive Officers were eligible for a cash incentive up to 35% of their respective
base salaries (with the exception of the CEO who was eligible to receive 50%). However, the Compensation Committee
considered that the EBITDA target was not met, the Company had to revise its financial guidance for the first quarter of
2014, there was a delay in memory ramp and a slow down in 28nm that was not expected and that while the Companys stock
increased year over year it increased less than market benchmarks. Therefore, the Compensation Committee decided to award
the following bonus to each of the Named Executive Officers under the 2011 EICP.
Ms.
Richelle Burr |
|
$ |
20,000 |
Dr.
SH Jeong |
|
$ |
35,000 |
Dr.
Peter S. Kirlin |
|
$ |
45,000 |
Mr.
Constantine Macricostas |
|
$ |
60,000 |
Dr.
Christopher J. Progler |
|
$ |
33,000 |
Mr.
Sean Smith |
|
$ |
25,000 |
During the third quarter of
2014, an additional cash bonus was also given to certain Named Executive
Officers and other Company employees who contributed to the successful closing
of the Taiwan Joint Venture. Dr. Progler and Ms. Burr received $30,000 each and
Dr. Kirlin and Mr. Smith received $20,000 each.
In January of 2015, the
Compensation Committee met and established goals for 2015 under the 2011 EICP.
The goals established for 2015 were: EBITDA, net income, penetrate 14nm logic
market with a leadership position at certain defined customers, and accelerate
the Companys business in a certain region of the world.
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 as well as
2013, the LTEIP was amended to increase the number of shares available for
issuance under the plan and to increase the amount of restricted stock allowed
to be issued thereunder. 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.
14
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 contributions 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 any 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. Option 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 vested 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 2014, the
Compensation Committee considered the overall performance of the Company in 2014 and also considered that the Company
successfully completed the closing of the PDMC joint venture, the Company ended the year with net cash of $51 million up $29
million from year end fiscal 2013, revenues increased 8% to $455.5 million with high-end integrated circuit revenues up 30%
to $104 million. Flat panel display revenues were up slightly to $103 million. Mainstream revenues for integrated circuit and flat panel display were both up year-over-year. However, the
Compensation Committee considered that the Company had to revise its financial guidance for
the first quarter of 2014, there was a delay in memory ramp and a slow down in 28nm that was not expected and that while
the Companys stock increased year over year it increased less than market benchmarks.
Based on the determination of
the Compensation Committee, the Named Executive Officers received the following
grants in December 2014:
|
Stock Options |
Restricted Stock |
Ms. Richelle Burr |
25,000 |
4,167 |
Dr. SH Jeong |
30,000 |
5,000 |
Dr. Peter Kirlin |
45,000 |
7,500 |
Mr. Constantine Macricostas |
60,000 |
10,000 |
Dr. Christopher J. Progler |
33,000 |
5,500 |
Mr. Sean Smith |
37,500 |
6,250 |
The stock options were granted
with an exercise price of $8.23 and will expire on December 19, 2024. The shares
of restricted stock will vest in four equal increments over the next four years.
The awards although granted in fiscal 2015 were granted for fiscal 2014
performance as well as incentive to retain the Named Executive
Officers.
The Compensation Committee is
considering adopting stock ownership guidelines for the Named Executive Officers
that would become effective in fiscal 2015.
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 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 2014, 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.
15
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.
Perquisites
The Company does not believe in offering extensive perquisites to its executive officers. It does, however, offer use of a company car or a car allowance to employees in certain positions at the Company.
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 due to the performance based exception. 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.
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.
16
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 2, 2014, to each of
the individuals who served (i) as the Chief Executive Officer; (ii) Chief
Financial Officer and (iii) the other most highly compensated executive officers of the Company whose
total salary and bonus exceeded $100,000 and (iv) one previous executive officer of the Company no longer
acting as such that would have been among the three other most highly compensated executive officers,
if he still acted in such capacity (Dr. Jeong) (such executives are collectively
referred to as the Named Executive Officers).
SUMMARY COMPENSATION
TABLE
|
|
|
|
|
|
|
|
|
|
|
|
All |
|
|
Name and |
|
|
|
|
|
|
|
Stock |
|
Option |
|
Other |
|
|
Principal |
|
|
|
Salary |
|
Bonus |
|
Awards |
|
Awards |
|
Compensation |
|
Total |
Position |
|
Year |
|
($) |
|
($) |
|
($)(1) |
|
($)(2) |
|
($) |
|
($) |
Richelle Burr |
|
2014 |
|
250,000 |
|
50,000 |
|
36,920 |
|
111,125 |
|
|
12,554 |
(3) |
|
460,599 |
Vice
President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counsel and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soo
Hong |
|
2014 |
|
475,000 |
|
35,000 |
|
22,150 |
|
66,675 |
|
|
108,000 |
(4) |
|
706,825 |
Jeong |
|
2013 |
|
475,000 |
|
0 |
|
76,440 |
|
155,080 |
|
|
108,000 |
(4) |
|
814,520 |
President
and |
|
2012 |
|
475,000 |
|
47,500 |
|
102,700 |
|
146,738 |
|
|
108,000 |
(4) |
|
879,938 |
Chief
Operating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter S. Kirlin |
|
2014 |
|
450,000 |
|
65,000 |
|
66,450 |
|
200,025 |
|
|
17,200 |
(5) |
|
798,675 |
President |
|
2013 |
|
332,000 |
|
32,000 |
|
60,060 |
|
127,941 |
|
|
17,100 |
(5) |
|
569,101 |
|
|
2012 |
|
320,000 |
|
32,000 |
|
63,200 |
|
90,300 |
|
|
17,000 |
(5) |
|
522,500 |
Constantine
S. |
|
2014 |
|
600,000 |
|
60,000 |
|
88,600 |
|
266,700 |
|
|
46,430 |
(6) |
|
1,061,730 |
Macricostas |
|
2013 |
|
600,000 |
|
60,000 |
|
109,200 |
|
232,620 |
|
|
23,208 |
(6) |
|
1,025,028 |
Chairman
and |
|
2012 |
|
600,000 |
|
60,000 |
|
355,500 |
|
507,938 |
|
|
2,617 |
(6) |
|
1,526,055 |
Chief
Executive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher J. |
|
2014 |
|
330,000 |
|
63,000 |
|
48,730 |
|
146,685 |
|
|
17,223 |
(7) |
|
605,638 |
Progler |
|
2013 |
|
300,000 |
|
30,000 |
|
54,600 |
|
116,310 |
|
|
17,254 |
(7) |
|
518,164 |
Vice
President, |
|
2012 |
|
285,000 |
|
28,500 |
|
55,300 |
|
79,013 |
|
|
16,900 |
(7) |
|
464,713 |
Chief |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Planning |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean T.
Smith |
|
2014 |
|
375,000 |
|
45,000 |
|
55,375 |
|
166,688 |
|
|
13,030 |
(8) |
|
655,093 |
Senior Vice |
|
2013 |
|
375,000 |
|
37,500 |
|
73,710 |
|
145,387 |
|
|
7,712 |
(8) |
|
639,309 |
President, |
|
2012 |
|
375,000 |
|
37,500 |
|
79,000 |
|
112,875 |
|
|
11,006 |
(8) |
|
615,381 |
Chief
Financial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 in accordance with ASC No. 718. |
|
(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 9 of
the Companys Annual Report on Form
10-K. |
|
(3) |
|
Represents car
allowance and matching contribution pursuant to the Companys 401(k)
Savings and Profit Sharing Plan. |
|
(4) |
|
Upon termination of
Dr. Jeongs employment with PKL, Dr. Jeong will receive a lump sum payment
of $108,000 multiplied by the total number of years that Dr. Jeong was
employed by PKL (including years prior to the date of his employment
agreement). The sum of $108,000 is fixed and is not subject to escalation
or increase based on any bonus or salary increase that Dr. Jeong may
receive. The Company provides Dr. Jeong with a company car and driver, as
is customary in Korea. |
|
|
|
(5) |
|
Represents car
allowance and matching contribution pursuant to the Companys 401(k)
Savings and Profit Sharing Plan. |
|
(6) |
|
Represents allowance
for personal use of a Company car and medical reimbursements. |
|
(7) |
|
Represents car
allowance and matching contribution pursuant to the Companys 401(k)
Savings and Profit Sharing Plan. |
|
(8) |
|
Represents allowance
for personal use of a Company car and matching contribution pursuant to
the Companys 401(k) Savings and Profit Sharing
Plan. |
17
GRANT OF PLAN-BASED
AWARDS TABLE
During the fiscal year
ended November 2, 2014, the following plan-based awards were granted to the
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date |
|
|
|
|
|
|
|
|
All Other |
|
|
|
Fair |
|
|
|
|
Stock |
|
Stock |
|
|
|
Value of |
|
|
|
|
Awards |
|
Awards: |
|
Exercise |
|
Stock and |
|
|
|
|
Shares of |
|
Number of |
|
Price of |
|
Option |
|
|
|
|
Stock or |
|
Shares of |
|
Option Awards |
|
Awards |
Name |
|
Grant Date |
|
Units (#)(1) |
|
Stock(1) |
|
($) |
|
$ |
Richelle Burr |
|
12/13/2013 |
|
|
4,167 |
|
|
|
25,000 |
|
|
8.86 |
|
|
148,045 |
|
SH
Jeong |
|
12/13/2013 |
|
|
2,500 |
|
|
|
15,000 |
|
|
8.86 |
|
|
88,825 |
|
Peter S. Kirlin |
|
12/13/2013 |
|
|
7,500 |
|
|
|
45,000 |
|
|
8.86 |
|
|
266,475 |
|
Constantine S. Macricostas |
|
12/13/2013 |
|
|
10,000 |
|
|
|
60,000 |
|
|
8.86 |
|
|
355,300 |
|
Christopher J. Progler |
|
12/13/2013 |
|
|
5,500 |
|
|
|
33,000 |
|
|
8.86 |
|
|
195,415 |
|
Sean
T. Smith |
|
12/13/2013 |
|
|
6,250 |
|
|
|
37,500 |
|
|
8.86 |
|
|
222,063 |
|
(1) |
|
The number of shares
of Common Stock underlying each option is equal to such number of options. |
See the Compensation Discussion and Analysis for an
explanation of the amount of salary and bonus in proportion to total compensation
and a description of the material terms of plan based awards.
18
OUTSTANDING EQUITY AWARDS
AT FISCAL YEAR-END
Name |
|
Option
Awards |
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of |
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or |
|
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units |
|
or |
|
|
|
|
|
|
No. of |
|
No. of |
|
|
|
|
|
|
|
|
|
of |
|
Units of |
|
|
|
|
|
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
Stock |
|
Stock |
|
|
|
|
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
That |
|
That |
|
|
|
|
|
|
Unexercised |
|
Unexercised |
|
Option |
|
|
|
|
|
Have |
|
Have |
|
|
|
|
|
|
Options |
|
Options (1) |
|
Exercise |
|
Option |
|
Not |
|
Not |
|
|
|
|
|
|
(#) |
|
(#) |
|
Price |
|
Expiration |
|
Vested |
|
Vested |
|
|
Grant
Date |
|
Exercisable |
|
Un-exercisable |
|
($) |
|
Date |
|
(#) |
|
($) |
Richelle Burr |
|
|
1/17/2005 |
|
|
|
2,000 |
|
|
|
0 |
|
|
|
14.56 |
|
|
|
1/17/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
6/2/2006 |
|
|
|
1,500 |
|
|
|
0 |
|
|
|
17.02 |
|
|
|
6/02/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
11/10/2008 |
|
|
|
1,750 |
|
|
|
0 |
|
|
|
0.76 |
|
|
|
11/10/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/21/2009 |
|
|
|
31,813 |
|
|
|
0 |
|
|
|
4.42 |
|
|
|
12/21/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/10/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,875 |
(2) |
|
|
|
16,856 |
|
|
|
|
12/10/2010 |
|
|
|
11,250 |
|
|
|
3,750 |
|
|
|
6.71 |
|
|
|
12/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/9/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750 |
(2) |
|
|
|
33,713 |
|
|
|
|
12/9/2011 |
|
|
|
7,500 |
|
|
|
7,500 |
|
|
|
6.32 |
|
|
|
12/9/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012 |
|
|
|
5,625 |
|
|
|
16,875 |
|
|
|
5.46 |
|
|
|
12/7/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000 |
(2) |
|
|
|
53,940 |
|
|
|
|
12/13/2013 |
|
|
|
0 |
|
|
|
25,000 |
|
|
|
8.86 |
|
|
|
12/13/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,167 |
(2) |
|
|
|
37,461 |
|
|
|
Soo Hong Jeong |
|
|
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 |
|
|
|
65,000 |
|
|
|
0 |
|
|
|
4.42 |
|
|
|
12/21/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/10/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,063 |
(3) |
|
|
|
36,526 |
|
|
|
|
12/10/2010 |
|
|
|
24,375 |
|
|
|
8,125 |
|
|
|
6.71 |
|
|
|
12/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/9/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,125 |
(3) |
|
|
|
73,044 |
|
|
|
|
12/9/2011 |
|
|
|
16,250 |
|
|
|
16,250 |
|
|
|
6.32 |
|
|
|
12/9/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012 |
|
|
|
10,000 |
|
|
|
30,000 |
|
|
|
5.46 |
|
|
|
12/7/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500 |
(3) |
|
|
|
94,395 |
|
|
|
|
12/13/2013 |
|
|
|
|
|
|
|
15,000 |
|
|
|
8.86 |
|
|
|
12/13/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
22,475 |
|
|
|
Peter
S. Kirlin |
|
|
8/29/2008 |
|
|
|
50,000 |
|
|
|
0 |
|
|
|
3.27 |
|
|
|
8/29/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/21/2009 |
|
|
|
35,000 |
|
|
|
0 |
|
|
|
4.42 |
|
|
|
12/21/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/10/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
(2) |
|
|
|
22,475 |
|
|
|
|
12/10/2010 |
|
|
|
15,000 |
|
|
|
5,000 |
|
|
|
6.71 |
|
|
|
12/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/9/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000 |
(2) |
|
|
|
44,950 |
|
|
|
|
12/9/2011 |
|
|
|
10,000 |
|
|
|
10,000 |
|
|
|
6.32 |
|
|
|
12/9/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012 |
|
|
|
8,250 |
|
|
|
24,750 |
|
|
|
5.46 |
|
|
|
12/7/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,250 |
(2) |
|
|
|
74,168 |
|
|
|
|
12/13/2013 |
|
|
|
0 |
|
|
|
45,000 |
|
|
|
8.86 |
|
|
|
12/13/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500 |
(2) |
|
|
|
67,425 |
|
|
|
Constantine
S. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macricostas |
|
|
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 |
|
|
|
225,000 |
|
|
|
0 |
|
|
|
4.42 |
|
|
|
12/21/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/10/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,063 |
(2) |
|
|
|
126,426 |
|
|
|
|
12/10/2010 |
|
|
|
84,375 |
|
|
|
28,125 |
|
|
|
6.71 |
|
|
|
12/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/9/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,125 |
(2) |
|
|
|
252,844 |
|
|
|
|
12/9/2011 |
|
|
|
56,250 |
|
|
|
56,250 |
|
|
|
6.32 |
|
|
|
12/9/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
(2) |
|
|
|
134,850 |
|
|
|
|
12/7/2012 |
|
|
|
15,000 |
|
|
|
45,000 |
|
|
|
5.46 |
|
|
|
12/7/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2013 |
|
|
|
0 |
|
|
|
60,000 |
|
|
|
8.86 |
|
|
|
12/13/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
(2) |
|
|
|
89,900 |
|
19
Name |
|
Option
Awards |
|
Stock
Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of |
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or |
|
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units |
|
or |
|
|
|
|
|
|
No. of |
|
No. of |
|
|
|
|
|
|
|
|
|
of |
|
Units of |
|
|
|
|
|
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
Stock |
|
Stock |
|
|
|
|
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
That |
|
That |
|
|
|
|
|
|
Unexercised |
|
Unexercised |
|
Option |
|
|
|
|
|
Have |
|
Have |
|
|
|
|
|
|
Options |
|
Options (1) |
|
Exercise |
|
Option |
|
Not |
|
Not |
|
|
|
|
|
|
(#) |
|
(#) |
|
Price |
|
Expiration |
|
Vested |
|
Vested |
|
|
Grant
Date |
|
Exercisable |
|
Un-exercisable |
|
($) |
|
Date |
|
(#) |
|
($) |
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 |
|
|
|
35,000 |
|
|
|
0 |
|
|
|
4.42 |
|
|
|
12/21/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/10/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,188 |
(2) |
|
|
|
19,670 |
|
|
|
|
12/10/2010 |
|
|
|
13,125 |
|
|
|
4,375 |
|
|
|
6.71 |
|
|
|
12/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/9/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,375 |
(2) |
|
|
|
39,331 |
|
|
|
|
12/9/2011 |
|
|
|
8,750 |
|
|
|
8,750 |
|
|
|
6.32 |
|
|
|
12/9/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500 |
(2) |
|
|
|
67,425 |
|
|
|
|
12/7/2012 |
|
|
|
7,500 |
|
|
|
22,500 |
|
|
|
5.46 |
|
|
|
12/7/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2013 |
|
|
|
0 |
|
|
|
33,000 |
|
|
|
8.86 |
|
|
|
12/13/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,500 |
(2) |
|
|
|
49,445 |
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/21/2009 |
|
|
|
50,000 |
|
|
|
0 |
|
|
|
4.42 |
|
|
|
12/21/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/10/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,125 |
(2) |
|
|
|
28,094 |
|
|
|
|
12/10/2010 |
|
|
|
18,750 |
|
|
|
6,250 |
|
|
|
6.71 |
|
|
|
12/10/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/9/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250 |
(2) |
|
|
|
56,188 |
|
|
|
|
12/9/2011 |
|
|
|
12,500 |
|
|
|
12,500 |
|
|
|
6.32 |
|
|
|
12/9/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/7/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,125 |
(2) |
|
|
|
91,024 |
|
|
|
|
12/7/2012 |
|
|
|
9,375 |
|
|
|
28,125 |
|
|
|
5.46 |
|
|
|
12/7/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2013 |
|
|
|
0 |
|
|
|
37,500 |
|
|
|
8.86 |
|
|
|
12/13/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250 |
(2) |
|
|
|
56,188 |
|
(1) |
|
The
options vest 25% on each of the first 4 anniversaries of the date of the
grant. |
|
(2) |
|
Represents
restricted stock awards which vest 25% on each of the first 4 anniversaries of the
date of the grant. |
20
OPTION EXERCISES AND
STOCK VESTED
FISCAL YEAR ENDED NOVEMBER 2, 2014
|
|
Option
Awards |
|
Stock
Awards |
|
|
No. of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Value |
|
No. of |
|
|
|
|
|
|
Acquired |
|
Realized |
|
Shares |
|
Value |
|
|
on |
|
on |
|
Acquired |
|
Realized |
|
|
Exercise |
|
Exercise |
|
on Vesting |
|
on Vesting |
Name |
|
(#) |
|
($) |
|
(#) |
|
($) |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
Richelle Burr |
|
|
10,626 |
|
|
|
84,819 |
|
|
|
5,750 |
|
|
|
47,525 |
|
|
|
Soo
Hong Jeong |
|
|
0 |
|
|
|
0 |
|
|
|
15,375 |
|
|
|
129,138 |
|
|
|
Peter S. Kirlin |
|
|
12,500 |
|
|
|
101,464 |
|
|
|
7,750 |
|
|
|
64,050 |
|
|
|
Constantine S. Macricostas |
|
|
0 |
|
|
|
0 |
|
|
|
33,125 |
|
|
|
274,438 |
|
|
|
Christopher J. Progler |
|
|
0 |
|
|
|
0 |
|
|
|
10,625 |
|
|
|
89,812 |
|
|
|
Sean
T. Smith |
|
|
0 |
|
|
|
0 |
|
|
|
14,625 |
|
|
|
123,551 |
|
CERTAIN
AGREEMENTS
Ms. Burr and the Company
entered into a 3 year employment agreement dated May 21, 2010. The agreement
provided for a base salary of $170,000. The Compensation Committee or the Board
of Directors reviews Ms. Burrs base salary from time to time in accordance with
normal business practices of the Company and as a result of such review may
increase her base salary. Ms. Burrs current base salary is $255,000. Ms. Burr
received a bonus of $50,000 for fiscal 2014. 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. Ms. Burr is entitled to participate in
employee benefit plans and arrangements as established by the Company for
similarly situated executives. Ms. Burr 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 Ms. Burr resigns for good reason. Ms. Burr will receive a payment equal to
100% of her base salary paid out over 12 months. The agreement also provides
severance payments equal to 150% of her 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 Ms. Burrs
stock options or similar rights will become immediately vested. Ms. Burr 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.
On January 1, 2011, the Company PK, Ltd. and Dr. Jeong entered into a 3
year employment agreement. The agreement is automatically extended for consecutive 1 year periods unless the Company
gives Dr. Jeong at least thirty (30) days notice of its intent not to renew. The agreement provided for a
base salary of $484,500. Dr. Jeong received a bonus of $35,000 for fiscal 2014. 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.
21
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
$459,000. Dr. Kirlins salary was increased in September as a result of his
promotion to President. Dr. Kirlin received a bonus of $65,000 for fiscal 2014.
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 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. 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 $612,000 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 2014, Mr.
Macricostas received a bonus of $60,000 for fiscal 2014.
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 $336,600. Dr. Progler received a bonus of $63,000 for fiscal 2014. 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. 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.
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
$382,500. Mr. Smith received a bonus of $45,000 for fiscal 2014. 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. 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.
For purpose of all the forgoing, good reason means the relocation of the Companys principal executive officer outside the United States without the employees consent or any reduction in his salary or health benefits without the employees consent.
22
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 |
|
|
4,312,262 |
|
|
|
$7.56 |
|
|
|
3,781,026 |
(1) |
|
Approved by Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Plans Not Approved by |
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
4,312,262 |
|
|
|
$7.56 |
|
|
|
3,781,026 |
|
|
(1) |
|
Represents
3,543,240 shares of Photronics Common Stock issuable pursuant to future
issuance under the Companys 2007 Long Term Equity Incentive Plan (the
LTEIP) and 237,786 shares available under the Companys Employee Stock
Purchase Plan. |
POTENTIAL PAYMENTS UPON
TERMINATION OR CHANGE IN CONTROL
Ms. Burr, Dr. Kirlin, Dr.
Progler and Mr. Smith have employment agreements with the Company that provide
for severance payments in the event of termination by the Company without cause,
termination upon a change of control or resignation by such Named Executive
Officer with good reason. The employment agreements are further described above
under the caption Certain Agreements.
Mr. Macricostas does not have
an employment agreement with the Company and, therefore, is not contractually
entitled to severance payments in the event of termination by the Company
without cause, termination upon a change of control or resignation with good
reason. The table below was prepared as if the Named Executives employment was
terminated as of November 2, 2014, the last business day of our 2014 fiscal year
and, if applicable, a change in control occurred on that date. The table also
utilizes the closing share price of Photronics Common Stock on November 2,
2014.
|
|
Severance |
|
Benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment |
|
Plans |
|
Options |
|
Restricted |
|
Total |
Name |
|
($)(1) |
|
($)(2) |
|
($)(3) |
|
Stock ($)(4) |
|
($) |
Richelle Burr |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without cause or |
|
|
250,000 |
|
|
|
18,000 |
|
|
|
|
|
|
|
|
|
|
|
268,000 |
|
resignation for good reason. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination upon change of control |
|
|
375,000 |
|
|
|
18,000 |
|
|
|
91,394 |
|
|
|
141,970 |
|
|
|
626,364 |
|
|
|
SH Jeong(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without cause or |
|
|
475,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
475,000 |
|
resignation for good reason. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination upon change of
control |
|
|
712,500 |
|
|
|
0 |
|
|
|
169,763 |
|
|
|
226,440 |
|
|
|
1,108,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean T. Smith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without cause or |
|
|
375,000 |
|
|
|
18,000 |
|
|
|
|
|
|
|
|
|
|
|
393,000 |
|
resignation for good reason. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination upon change of control |
|
|
562,000 |
|
|
|
18,000 |
|
|
|
151,781 |
|
|
|
231,493 |
|
|
|
963,274 |
|
|
|
Christopher J. Progler |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without cause or |
|
|
330,000 |
|
|
|
18,000 |
|
|
|
|
|
|
|
|
|
|
|
348,000 |
|
resignation for good reason. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination upon change of control |
|
|
495,000 |
|
|
|
18,000 |
|
|
|
117,053 |
|
|
|
175,871 |
|
|
|
805,924 |
|
|
|
Peter S. Kirlin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination without cause or |
|
|
450,000 |
|
|
|
18,000 |
|
|
|
|
|
|
|
|
|
|
|
468,000 |
|
resignation for good reason. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination upon change of control |
|
|
675,000 |
|
|
|
18,000 |
|
|
|
131,318 |
|
|
|
209,018 |
|
|
|
1,033,336 |
|
23
(1) |
|
Assumes no
bonus will be paid as part of the severance payment. The calculation was
based on base salary for fiscal 2014. |
|
(2) |
|
Assumes a
payment of $1,500 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 2, 2014, 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 2, 2014. The closing price on the date of grant
was $6.71 for the award granted on December 10, 2010, $6.32 for the award
granted on December 9, 2011, $5.46 for the award granted on December 7,
2012 and $8.86 for the award granted on December 13, 2013. The closing
price on November 2, 2014 was $8.99. |
|
(4) |
|
The value
of restricted stock assumes all unvested outstanding awards as of November
2, 2014, 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 2, 2014, multiplied
by $8.99, the applicable closing share price on November 2,
2014. |
|
(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 PK,
Ltd. |
DIRECTORS COMPENSATION
Directors who are not
employees of the Company each received an annual retainer of $40,000, in
addition to a fee of $4,000 for each directors meeting attended in fiscal
2014.
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 2014 each Director received a restricted
stock award of 12,000 shares. The restrictions on the awards lapse quarterly
over the one-year service period. We believe that providing part of the directors annual retainer compensation in the form of equity rather than cash serves to align the interest of our directors with our shareholder as they become shareholder themselves.
Directors who are also
employees of the Company are not compensated for serving on the
Board.
In fiscal 2014 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 2014,
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 $40,000 and the Vice Chairman of the Compensation Committee
receives an additional annual retainer of $20,000. In fiscal 2014, 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 $10,000. In fiscal 2014, 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 2014, the Compensation Committee recommended to the
Board the compensation to be paid to the Board for fiscal 2015. The Board, after
considering this recommendation, then established the annual compensation for
the directors. When assessing the directors compensation, the Compensation 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 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 2015 is
$40,000 and a meeting fee of $4,000. 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 2014 each Director received a restricted stock
award of 12,000 shares. The restrictions on the awards lapse quarterly over the
one-year service period.
24
In fiscal 2015, 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 2015, 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 2015, the Chairman of the Strategic Planning and Development Committee
will receive an additional annual retainer of $15,000 and the Vice Chairman
both receive additional annual retainer of $10,000. In fiscal 2015, 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 ($)(1) |
|
Total ($) |
Walter M.
Fiederowicz |
|
|
127,750 |
(2) |
|
|
106,320 |
|
234,070 |
|
Joseph A. Fiorita |
|
|
127,750 |
(3) |
|
|
106,320 |
|
234,070 |
|
George
Macricostas |
|
|
74,000 |
(4) |
|
|
106,320 |
|
180,320 |
|
Mitchell G. Tyson |
|
|
102,750 |
(5) |
|
|
106,320 |
|
209,070 |
|
Liang-Choo
Hsia |
|
|
89,000 |
(6) |
|
|
106,320 |
|
195,320 |
1. |
|
The
amounts shown for each director represents 12,000 shares of stock granted
on December 13, 2013 with a closing stock price of $8.86. The restricted
stock vests quarterly over a year. |
|
2. |
|
Represents
$40,000 as an annual retainer, $40,000 as Chairman of the Compensation
Committee, $20,000 as Vice Chairman of the Audit Committee, $24,000 for
meeting fees (6 meetings at $4,000 per meeting) and a per diem fee of
$3,750 for Board trip to Asia. |
|
3. |
|
Represents
$40,000 as an annual retainer, $40,000 as Chairman of the Audit Committee,
$20,000 as Vice Chairman of the Compensation Committee, and $24,000 for
meeting fees (6 meetings at $4,000 per meeting) and a per diem fee of
$3,750 for a Board trip to Asia. |
|
4. |
|
Represents
$40,000 as an annual retainer and $10,000 as a member of the Strategic
Planning and Technology Development Committee and $24,000 for meeting fees
(6 meetings at $4,000 per meeting). |
|
5. |
|
Represents
$40,000 as an annual retainer and $15,000 as a member of the Audit
Committee, $20,000 as Chairman of the Nominating Committee, and $24,000
for meeting fees (6 meetings at $4,000 per meeting) and a per diem fee of
$3,750 for a Board trip to Asia. |
|
6. |
|
Represents
$40,000 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 $24,000 for meeting fees (6 meetings at $4,000
per meeting). |
25
COMPENSATION
COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2014, no members
of the Compensation Committee were officers or employees of the Company or any
of its subsidiaries. During fiscal 2014, 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.
PROPOSAL
2
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 1, 2015. 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 1, 2015.
PROPOSAL
3
TO APPROVE, BY NON-BINDING ADVISORY 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 2015 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.
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 2014, 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.
26
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 member of the
Board of Directors of RagingWire, and his son, George Macricostas is Chairman of
the Board, Chief Executive Officer, President 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 2014 fiscal year, the Company incurred expenses of $1.2
million for services provided to the Company by RagingWire and had an outstanding balance of $0.1 million as of November 2, 2014. As of November 2,
2014, the Company had contracted with this service provider for various services through June 2015
at a cost of approximately $0.9 million.
Dr. Soo Hong Jeong, 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 2014, the
Company purchased $20.1 million of photomask blanks from S&S Tech of which
$4.4 million was owed to S&S Tech at November 2, 2014.
SOLICITATION OF PROXIES
AND COSTS THEREOF
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.
FORM 10-K AND ADDITIONAL
INFORMATION
The Companys annual report
filed with the SEC on Form 10-K for the year ended November 2, 2014, 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 2016 Annual Meeting of
Shareholders must be received by the Company no later than November 2, 2015 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.
27
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
Comparison of Five-Year Cumulative Total Return
Based upon an initial investment of $100 on October 31, 2009
with dividends reinvested
March 2, 2015
28
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.
ELECTRONIC 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.
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.
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 |
THIS PROXY CARD IS VALID ONLY WHEN
SIGNED AND DATED. |
The Board of Directors recommends
you vote FOR the following: |
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For All |
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Withhold All |
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For All Except |
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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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☐ |
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☐ |
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☐ |
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1. |
Election of
Directors |
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Nominees |
01 |
Walter M.
Fiederowicz |
02 |
Joseph A. Fiorita,
Jr. |
03 |
Liang-Choo
Hsia |
04 |
Constantine
Macricostas |
05 |
George Macricostas |
06 |
Mitchell G. Tyson |
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The Board of Directors recommends
you vote FOR proposals 2 and 3. |
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For |
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Against |
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Abstain |
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2 |
To ratify the selection of Deloitte & Touche LLP as
independent registered public accounting firm for the fiscal year ending
November 1, 2015. |
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☐ |
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☐ |
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☐ |
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3 |
To approve, by non-binding advisory vote, executive
compensation. |
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☐ |
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☐ |
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☐ |
For address change/comments, mark
here. (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. |
PHOTRONICS, INC.
Annual Meeting of
Shareholders
March 26, 2015 9:00 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 2015 Annual Meeting of
Shareholders of Photronics, Inc. to be held at 9:00 a.m. Eastern Time on March
26, 2015, at the Chrysler Boardroom at the Grand Hyatt New York, 109 E42nd
Street, Park Avenue at Grand Central Terminal, New York, NY 10017, and any at
adjournments or postponements thereof.
Address
change/comments: |
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(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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