<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ]Confidential, for use of the Commission
[X] Definitive proxy statement only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
________________________Photronics, Inc._________________________
(Name of Registrant as specified in Its Charter)
_________________________________________________________________
(Name of Person[s] Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
______________________________________________________________
(2) Aggregate number of securities to which transaction applies:
______________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined.):
______________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________
(5) Total fee paid:
______________________________________________________________
[ ] Fee paid previously with preliminary materials.
______________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
______________________________________________________________
(2) Form, schedule or registration statement number:
______________________________________________________________
(3) Filing party:
______________________________________________________________
(4) Date filed:
______________________________________________________________
<PAGE> PHOTRONICS, INC.
1061 East Indiantown Road
Jupiter, Florida 33477
(561) 745-1222
- ----------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 18, 1998
-------------
TO THE SHAREHOLDERS OF PHOTRONICS, INC.
Notice is hereby given that the Annual Meeting of Shareholders of
Photronics, Inc. will be held at the Hotel Inter-Continental, 111 East
48th Street, New York, New York 10017, on March 18, 1998, at 10:00 a.m.
local time, for the following purposes:
1) To elect five (5) members of the Board of Directors, each to serve
until the next Annual Meeting;
2) To approve the 1998 Stock Option Plan of the Company;
3) To ratify the appointment of Deloitte & Touche LLP as the
independent certified public accountants of the Company for the 1998
fiscal year end; and
4) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed February 9, 1998 as the record
date for determining the holders of Common Stock entitled to notice of and to
vote at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED
TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
By Order of the Board of Directors
Jeffrey P. Moonan
Secretary
February 12, 1998
<PAGE>
PHOTRONICS, INC.
1061 East Indiantown Road
Jupiter, Florida 33477
(561) 745-1222
- -------------------------------------------------------------------------
PROXY STATEMENT
For the Annual Meeting of Shareholders
to be held on March 18, 1998
The enclosed proxy is solicited by the Board of Directors (the
"Board" or "Board of Directors") of Photronics, Inc. (the "Company"),
1061 East Indiantown Road, Jupiter, Florida 33477, to be voted at the
Annual Meeting of Shareholders to be held on March 18, 1998, at 10:00
a.m. local time at the Hotel Inter-Continental, 111 East 48th Street, New
York, New York 10017, or any adjournments thereof (the "Annual Meeting").
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 stock will be
necessary to constitute a quorum.
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 represented by such proxies in favor of the
election as directors of the Company of those persons named as
management's nominees; in favor of the approval of the 1998 Stock Option
Plan; in favor of the selection of Deloitte & Touche LLP as independent
certified public accountants of the Company for the 1998 fiscal year; and
in accordance with their best judgment on any other matters which may
come before the meeting. The Board of Directors does not know of any
business to be brought before the Annual Meeting other than as indicated
in the notice.
Any shareholder who executes and delivers a proxy may revoke it at
any time prior to its use upon (a) receipt by the Secretary of the
Company of written notice of such revocation; (b) receipt by the
Secretary of the Company of a duly executed proxy bearing a later date;
or (c) appearance by the shareholder at the meeting and his request for
the return of his proxy. Any such notice or proxy should be sent to
Photronics, Inc., 1061 East Indiantown Road, Jupiter, Florida 33477,
Attention: Jeffrey P. Moonan. Appearance at the meeting without a
request for return of a proxy will not revoke a previously executed and
delivered proxy.
Only shareholders of record at the close of business on February 9,
1998 are entitled to notice of and to vote at the Annual Meeting. As of
February 9, 1998, there were 24,319,080 shares of Common Stock issued and
outstanding, each of which is entitled to one vote. Unless otherwise
noted in this proxy statement, all matters to come before the meeting
that are listed in the Notice of Meeting require, to be adopted, the
affirmative vote of a majority of those shares, present in person or by
proxy and voting at the Annual Meeting, assuming that a quorum is
present. Abstentions will be considered as present but will not be
considered as votes in favor of any matter; broker non-votes will not be
considered as present for the matter as to which the shares are not
voted. This proxy statement and the attached form of proxy are first
being sent or given to shareholders on or about February 17, 1998.
<PAGE>
OWNERSHIP OF COMMON
STOCK BY DIRECTORS, NOMINEES,
OFFICERS AND CERTAIN BENEFICIAL OWNERS
To the best knowledge of the Company based on information filed with
the Securities and Exchange Commission and the Company's stock records,
the following table sets forth the beneficial ownership of the Company's
Common Stock as of December 31, 1997, by (i) beneficial owners of more
than five percent of the Company's Common Stock, (ii) each director,
(iii) each nominee for director, (iv) each executive officer named in the
summary compensation table set forth below, and (v) all directors and
executive officers of the Company as a group.
Name and Address Amount and Nature of Percentage
of Beneficial Owner Beneficial Ownership(1) of Class
Robert J. Bollo 31,250(2) *
1061 East Indiantown Road
Jupiter, FL 33477
Walter M. Fiederowicz 52,550(2)(3) *
39 Painter Hill Road
Woodbury, CT 06798
Joseph A. Fiorita, Jr. 40,400(2) *
146 Deer Hill Avenue
Danbury, CT 06810
Yukio Tagawa 3,180,000(5) 13.1%
Toppan Printing Co., Ltd.
1, Kanda Izumi-cho
Chiyoda-ku
Tokyo, Japan 101
Constantine S. Macricostas 2,942,492(2)(4) 12.0%
1061 East Indiantown Road
Jupiter, FL 33477
Macricostas Partners, L.P. 2,280,000 9.4%
1122 Bel Air
Allen, Texas 75013
Jeffrey P. Moonan 128,750(2) *
1061 East Indiantown Road
Jupiter, FL 33477
Putnam Investments 1,964,264 8.1%
One Post Office Square
Boston, MA 02109
<PAGE>
Name and Address Amount and Nature of Percentage
of Beneficial Owner Beneficial Ownership(1) of Class
Toppan Printing Co., Ltd. 3,180,000 13.1%
1, Kanda Izumi-cho
Chiyoda-ku
Tokyo, Japan 101
Michael J. Yomazzo 351,718(2)(6) 1.4%
1061 East Indiantown Road
Jupiter, FL 33477
Directors and Executive 6,727,160(7) 27.1%
Officers as a group
(7 persons)
- -------------
* Less than 1%
- -------------
(1) Except as otherwise indicated, the named person has the sole voting and
investment power with respect to the shares of the Company's Common
Stock set forth opposite such person's name.
(2) Includes shares of Common Stock subject to stock options exercisable as
of December 31, 1997 as follows: Mr. Bollo (31,250); Mr. Fiederowicz
(33,700); Mr. Fiorita (33,700); Mr. Macricostas (175,000); Mr. Yomazzo
(130,300); and Mr. Moonan (106,200). Also includes shares subject to
forfeiture under restricted stock award grants as follows: Mr.
Fiederowicz (6,000) and Mr. Fiorita (6,000).
(3) Includes 12,050 shares owned by the wife of Mr. Fiederowicz and 800
shares owned by his child, as to which shares he disclaims beneficial
ownership.
(4) Includes 34,000 shares held by the wife of Mr. Macricostas as to which
shares he disclaims beneficial ownership. Also includes 2,280,000 shares
owned by Macricostas Partners, L.P., of which Mr. Macricostas is a
limited partner and 50,618 shares owned by the corporate general partner
of such partnership of which Mr. Macricostas is President and Director
and a significant shareholder. Mr. Macricostas disclaims ownership of
those shares not represented by his ownership interests.
(5) Includes 3,180,000 shares owned by Toppan Printing Co., Ltd. of which
Mr. Tagawa is a director, as to which shares Mr. Tagawa disclaims
ownership.
(6) Also includes 50,000 shares held by the wife of Mr. Yomazzo as to which
shares he disclaims beneficial ownership. Also includes 86,000 shares
owned by Yomazzo Associates Limited Partnership of which Mr. Yomazzo is
a general partner and a limited partner. Mr. Yomazzo disclaims ownership
of those shares not represented by his ownership interests.
(7) Includes the shares listed in notes (2), (3), (4), (5) and (6), above.
ELECTION OF DIRECTORS
A board of five (5) directors is to be elected at the Annual
Meeting. The names of, and certain information with respect to, the
nominees for election as directors, to serve until the 1999 Annual
Meeting of Shareholders and until their successors are elected and
qualified, are set forth below and were furnished to the Company by the
nominees.
If, for any reason, any of the nominees shall become unavailable 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. There
are no family relationships between any directors or executive officers
of the Company.
<PAGE>
Nominees to be elected by the shareholders:
Director
Name and Age Since Position with the Company
Walter M. Fiederowicz(1)......... 1984 Director
(51 years)
Joseph A. Fiorita, Jr.(1)........ 1987 Director
(53 years)
Yukio Tagawa..................... 1995 Director
(60 years)
Constantine S. Macricostas....... 1974 Chairman of the Board
(62 years)
Michael J. Yomazzo............... 1977 President
(55 years) Chief Executive Officer
Director
- --------------
(1) Member of the Audit Committee and the Compensation Committee.
- --------------
For the past five years, the principal occupation of each nominee
has been substantially as set forth in the above table, except as
follows:
Since August 1997, Walter M. Fiederowicz has been a private investor
and consultant. From April 1997 until August 1997, he served as the
President and Chief Executive Officer of WorldCorp., Inc., a holding
company that owns shares of common stock of World Airways, Inc. (a
leading provider of long-range passenger and cargo air transportation
services to major airlines) and of InteliData Technologies Corporation (a
provider of caller identification based telecommunications devices, smart
telephones and on-line electronics information services). Mr.
Fiederowicz served as chairman of Colonial Data Technologies Corp., (a
distributor of telecommunications equipment which subsequently merged
into InteliData Technologies Corporation) from August 1994 to March 1996.
From January 1991 until July 1994, he held various positions, including
executive vice president and chairman and served as director of Conning
and Company (the parent company of an investment firm). Mr. Fiederowicz
also serves as a director of Blau Marketing Technologies, Inc. (a
marketing firm), First Albany Companies, Inc. (the parent of a broker-
dealer) and Compensation Value Alliance, Inc. (a provider of workers'
compensation-related services).
Joseph A. Fiorita is a partner in Fiorita, Kornhaas and Van Houten,
P.C., the independent certified public accountants for the Company from
May 1973 through October 1984.
Constantine S. Macricostas, in addition to his current position,
served as Chief Executive Officer from 1974 until August 1997. Mr.
Macricostas also serves as a director of Nutmeg Federal Savings and Loan
Association and the DII Group, Inc. (a provider of integrated electronic
manufacturing products and services).
<PAGE>
Yukio Tagawa has served as a Director of the Company since
January 1997. Mr. Tagawa has served as Vice Divisional Manager for the
Electronics Division of Toppan since June 1996 and as a Director of
Toppan from June 1995. Prior to assuming such duties, Mr. Tagawa served
in other managerial capacities with Toppan since March 1991. Toppan is
a diversified manufacturing company with operations in printing and
electronics industries (including photomask manufacture) and had revenues
in excess of $11 billion during its last fiscal year.
Michael J. Yomazzo has served as Chief Executive Officer since
August 1997 and as President since January 1994. From November 1990
until January 1994, he served as Executive Vice President, from July 1989
until November 1990, he served as Senior Vice President - Finance and
Planning and since 1977, he has served as a Vice President of the Company
with responsibilities which included finance, sales and marketing.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors met four times during the 1997 fiscal year.
During fiscal 1997, each director attended at least 75% of the total
number of meetings of the Board of Directors and of all committees of the
Board on which such director served.
The Company has an Audit Committee and a Compensation Committee.
The Audit Committee's functions include recommending to the Board of
Directors the engagement of the Company's independent certified public
accountants, reviewing with such accountants the plan for and results of
their auditing engagement and the independence of such accountants. The
Audit Committee held four meetings during the 1997 fiscal year. The
Compensation Committee's functions include establishing compensation for
the executive officers of the Company and administration of the Company's
stock plans. The Compensation Committee held six meetings during the
1997 fiscal year. The Company does not have a nominating committee.
EXECUTIVE COMPENSATION
The following tables set forth certain compensation paid by the
Company for services rendered during each of the three fiscal years
during the period ended October 31, 1997 for each of the individuals who
served as an executive officer of the Company during fiscal 1997.
<PAGE>
<TABLE> Summary Compensation Table
<CAPTION>
- ---------------------------------------------------------------------------
| Annual | Long-Term |
| Compensation | Compensation | All
|-------------- |------------------| Other
| | | Awards | Comp-
| | |------------------| ensa-
| | |Restricted| Stock | tion
Name/Principal Position Year|Salary | Bonus | Stock |Options| ($)
| ($) | ($) | ($) | (#) | (1)
-------------------------------|-------|-------|----------|-------|-------
<S> <C> <C> <C> <C> <C>
Constantine S. Macricostas 1997|329,250|354,250| 0 | 0| 84,500
Chief Executive Officer 1996|322,249|322,249| 0 |100,000| 79,750
and Director(2) 1995|306,859|370,635| 0 | 0| 79,620
| | | | |
| | | | |
Michael J. Yomazzo 1997|277,290|302,290| 0 | 0| 65,392
President, Chief Executive 1996|251,836|251,836| 0 | 70,000| 59,262
Officer, Chief Operating 1995|239,845|303,635| 0 | 25,000| 59,620
Officer and Director (2) | | | | |
| | | | |
| | | | |
Jeffrey P. Moonan 1997|169,628|189,628| 0 | 0| 29,280
Senior Vice President, 1996|161,550|161,550| 0 | 35,000| 25,731
General Counsel and 1995|153,835|178,242| 0 | 0| 27,588
Secretary | | | | |
| | | | |
| | | | |
Robert J. Bollo 1997|133,421|126,673| 0 | 0| 5,337
Vice President/Finance 1996|125,954| 50,000| 0 | 35,000| 2,519
and Chief Financial 1995|119,961| 50,000| 0 | 0| 1,292
Officer (3) | | | | |
--------------------------------------------------------------------------
</TABLE>
(1) Represents premiums paid on life insurance policies owned by the
individual or their designee as to which the Company shall be entitled
to be repaid unless the respective individual satisfies certain length
of service requirements. The amount of such premiums is as follows:
Mr. Macricostas ($75,000); Mr. Yomazzo ($55,000); and Mr. Moonan ($22,500).
Also represents matching contributions by the Company pursuant to the
Company's Savings and Profit Sharing (401-k) Plan as follows: Mr.
Macricostas ($9,500); Mr. Yomazzo ($10,392); Mr. Moonan ($6,780); and
Mr. Bollo ($5,337).
(2) Mr. Macricostas served as Chief Executive Officer until August 15, 1997
and Mr. Yomazzo has served as Chief Executive Officer since August 15,
1997.
-----------------------------------------------------------------------
The Company has agreed that if the employment of Messrs.
Macricostas, Yomazzo or Moonan is terminated under certain conditions,
such officer will be entitled to continued salary and benefits for one
year. In addition, the Company has entered into agreements providing
that each of Messrs. Macricostas and Yomazzo will serve as a consultant
to the Company upon their respective retirements for a period of up to
three (3) years for a consulting fee of up to $175,000 per year. Messrs.
Macricostas and Yomazzo are also entitled to continued benefits until age
65.
The Company maintains stock option plans which allow for the grant
of stock options and restricted stock awards to directors and executive
officers of the Company as well as other employees of the Company. The
Company's stock option plans do not provide for the issuance of stock
appreciation rights ("SAR's"). There were no option grants during fiscal
1997 to the executive officers named in the summary compensation table.
The following table sets forth information with respect to option
exercises and the value of options held by such executive officers.
<PAGE>
<TABLE> Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<CAPTION>
- -------------------------------------------------------------------------
Number of Value of
Securities Unexercised
Underlying in-the-money
Unexercised Options at
Shares Options at Fiscal Year End
Acquired Fiscal Year End ($)
on Value --------------- -----------------
Exercise Realized Exerciseable / Exerciseable /
Name (#) ($) Unexerciseable Unexerciseable
- ------------ -------- --------- --------------- -----------------
<S> <C> <C> <C> <C>
Constantine
Macricostas 141,256 2,590,624 175,000/75,000 2,976,550/670,350
Michael J.
Yomazzo -0- -0- 130,300/52,500 2,202,770/469,245
Jeffrey P.
Moonan 32,500 923,848 106,250/26,250 1,852,738/234,623
Robert J.
Bollo -0- -0- 31,250/33,750 393,680/339,780
- -------------------------------------------------------------------------
</TABLE>
DIRECTORS' COMPENSATION
A fee of $1,500 for each directors' meeting attended is payable to
directors who are not also employees of the Company. Until June 1997,
the Chairman and other members of the Compensation and Audit Committees
also received a fee of $5,000 and $2,500, respectively, per year pro-
rated, for service on each such committee. Commencing June 1997, members
of the Compensation and Audit Committee were granted restricted stock
awards of 3,000 shares for their service on each of such committees over
the ensuing three (3) years, such shares to vest ratably each year.
During fiscal 1997, the Company retained Joseph Fiorita as a
consultant to perform certain accounting and tax services. Fees paid to
Mr. Fiorita in this capacity aggregated $36,000.
CERTAIN TRANSACTIONS
The Company continues to lease a building at one of its
manufacturing facilities and a contiguous parcel of land from entities
controlled by Constantine S. Macricostas. The rent paid to these
entities for the fiscal year ended November 2, 1997 was $135,309.
Financing for construction of such leased building and certain
equipment was provided through the sale of industrial development bonds
issued by the Connecticut Development Authority (the "CDA"). As lessee,
the Company was obligated to serve as guarantor of certain of the bonds
issued by the CDA. As of November 2, 1997 there were outstanding a total
of approximately $468,000 of industrial development bonds for which the
Company serves as guarantor.
<PAGE>
The Company believes that the terms of the transactions described
above with affiliated persons were no less favorable to the Company than
the Company could have obtained from non-affiliated parties.
The Board of Directors of the Company has also established a
committee composed of Messrs. Fiederowicz and Fiorita to evaluate the
purchase from Constantine S. Macricostas of a parcel of land contiguous
to the Company's Brookfield, CT operation. It is expected that this
purchase, if completed, would occur in fiscal 1998.
The Company and Toppan have engaged in numerous ongoing commercial
transactions for the purchase and sale of raw materials and finished
goods at prices based upon competitive market prices. The total amount
of sales by the Company to or from Toppan aggregated approximately
$6,944,000 during fiscal 1997. The Company believes these transactions
are negotiated as arm's-length transactions and were no less favorable to
the Company than the Company could have obtained from non-affiliated
parties. The Company and Toppan also entered into an agreement whereby
the companies share certain technology.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors was established
during fiscal 1992 and is responsible for the establishment of executive
compensation and administration of the Company's stock plans.
The Committee's philosophy is that executive compensation must be
competitive with other comparable employers to insure that qualified
employees can be attracted and retained and that the Company's
compensation practices should provide incentives and rewards for
achieving or exceeding company goals and for creating a return to the
Company's shareholders. The Committee uses three components to achieve
these goals: base salary, bonuses and stock based awards.
The Committee evaluates and establishes base salary levels in light
of economic conditions and comparisons to other similarly situated
companies. Bonuses, if any, are dependent upon a subjective evaluation
of the Company's performance and achievement of its financial and other
goals during the relevant period. Stock options and restricted stock
awards, which the Compensation Committee believes provide a strong link
between executive compensation and shareholder return, are used to
provide long-term incentives which are based on shareholder return.
While Section 162(m) of the Internal Revenue Code limits the
deductibility of certain compensation (in excess of $1,000,000 per year)
paid by the Company to named executive officers unless certain formal
requirements are satisfied, the Committee believes that its ability to
subjectively evaluate executive officer performance is an important part
of its function and its ability to provide incentives. Additionally,
compensation to the named executive officers has historically not
exceeded deductibility limits under this Section. Accordingly, the
Committee has not required that all compensation programs comply with
such Section although the Committee considers compliance with such
Section in establishing individual compensation components.
<PAGE>
In establishing compensation levels for the executive officers of
the Company, the Committee in 1992 considered compensation at companies
in the electronics industries with similar levels of sales and capital.
The companies considered were not necessarily the same as those included
in the performance chart below due to the difference in the size of the
companies considered. The Committee adjusted executive compensation in
connection with this review. Generally, the Committee believes that its
expectation of performance from the Company and its executive officers
should allow executive compensation to fall within the median to 75th
percentile of compensation at this comparison group. Since that time,
salary adjustments for the executive officers have been in accordance
with the salary adjustment budgets for the Company's other employees.
The Committee believes that its three-part approach provides reasonable
compensation to the executive which is aligned with the Company's needs
and results and balances both short and long-term goals.
Mr. Macricostas' compensation for 1997 was determined based on this
analysis. Mr. Macricostas' base salary was adjusted in 1997 in
accordance with the salary budget for other employees of the Company.
The Committee also approved the payment of a bonus to Mr. Macricostas
based on its subjective evaluation of his efforts during fiscal 1997 and
of the Company's performance during the year. Prominent factors in this
determination were the Company's ability to recognize record levels of
sales, earnings and other performance criteria during the year and to
successfully expand its operations.
In fiscal 1996, the Company had granted stock options to Mr.
Macricostas which were intended to cover more than one (1) year and
accordingly, the Committee did not grant any additional stock based
compensation to Mr. Macricostas during fiscal 1997.
In August 1997, when Mr. Yomazzo assumed Chief Executive Officer
responsibilities from Mr. Macricostas, the Compensation Committee
increased Mr. Yomazzo's base salary and provided for the future issuance
of stock options to Mr. Yomazzo in light of his new responsibilities. At
the same time, the Committee reduced Mr. Macricostas' base salary.
The compensation for the other executive officers was determined
based on the same factors used to determine Mr. Macricostas' and Mr.
Yomazzo's compensation.
Respectfully submitted,
Joseph A. Fiorita, Jr.
Walter M. Fiederowicz
<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly percentage change at October
31(*) of the indicated year in the Company's cumulative total shareholder
return on its common stock with the cumulative total shareholder return
on (i) securities traded on the NASDAQ market, and (ii) publicly traded
securities of companies which have indicated that their business falls
within Standard Industrial Classification (SIC) Code 367 (Electronic
Components and Accessories). Although the Company believes this graph
reflects favorably on the Company, it does not believe that the
comparison is necessarily useful in determining the quality of the
Company's performance or in establishing executive compensation.
Comparison of Five-Year Cumulative Total Return Among
Photronics, Inc., NASDAQ Over-the-Counter Securities
and Publicly Traded Companies with SIC Code 367
------------------------------------------------------------------
| |
| 1 |
| |
| |
600|------------------------------------------------------------------|
| |
| |
| |
| 3 |
500|------------------------------------------------------------------|
| |
| 1 |
| |
| 1 |
400|------------------------------------------------------------------|
| |
| 3 |
| 3 |
| |
300|------------------------------------------------------------------|
| |
| 1 |
| 2 |
| |
200|------------------------------------------------------------------|
| 3 2 |
| 3 2 |
| 1 |
| 2 2 |
100|------------------------------------------------------------------|
1992 1993 1994 1995 1996 1997
-------------------------------------------------------------------
| | 1992 | 1993 | 1994 | 1995 | 1996 | 1997
|-------------------------|------|------|------|------|------|------
|1 Photronics, Inc. |100.00|141.03|276.92|454.30|415.80|660.28
|-------------------------|------|------|------|------|------|------
|2 NASDAQ Stock Market |100.00|131.23|139.52|165.50|194.35|254.71
| (US) Index | | | | | |
|-------------------------|------|------|------|------|------|------
|3 Publicly Traded Compan-|100.00|155.36|186.40|347.73|374.54|528.46
| ies with SIC Code 367 | | | | | |
-------------------------------------------------------------------
- -------
* Commencing in fiscal 1997, the Company's formal fiscal year end is
determined in accordance with a 52-week fiscal year. However, for
consistency in reporting periods, a nominal year end of October 31 has
been used in the presentation.
- -------
<PAGE>
ADOPTION OF THE 1998 STOCK OPTION PLAN
The Board of Directors of the Company believes that the Company's
existing Stock Option Plans have been worthwhile in attracting and
retaining qualified personnel. As of December 31, 1997, there were
78,021 shares available for grants under the Plans. In view of such
fact, on January 20, 1998, the Board of Directors adopted, subject to
shareholder approval, the 1998 Stock Option Plan (the "1998 Plan"),
covering a maximum of 1,000,000 shares of Common Stock. In the judgment
of the Board, the ability to issue qualified and non-qualified incentive
stock options and restricted stock awards under the 1998 Plan will permit
achieving the maximum incentive effect for employees, considering tax and
other laws, individual circumstances of employees and incentives
currently offered by other corporations with which the Company must
compete in attracting and retaining qualified employees. Shareholder
approval is requested for the 1998 Plan, the text of which is set forth
in Appendix "A" of this Proxy Statement.
Options may be granted to any employee or director of the Company
and options under the 1998 Plan may be qualified or non-qualified
incentive stock options provided that qualified incentive stock options
may only be granted to employees. The 1998 Plan also allows options to
be characterized as "performance stock options" and allows for the grant
of restricted stock awards, provided that no more than ten percent (10%)
of the shares subject to the Plan can be issued pursuant to restricted
stock awards. The exercise price per share of Common Stock under each
option may not be less than the fair market value on the date of grant or
the par value of one share of the Company's Common Stock, whichever is
greater and may be paid, at the election of the holder, in cash or by
delivery of previously acquired Common Stock. Restricted stock awards
will not require the payment of any cash consideration by the recipient
to the Company. For any participant who owns stock or currently
exercisable options which in the aggregate account for more than 10% of
the voting power of the Company, the exercise price of any qualified
incentive stock option granted under the 1998 Plan must be at least equal
to 110% of fair market value on the date of grant and the aggregate fair
market value of the Common Stock (determined at the date of option grant
and based on the value of all qualified incentive stock options which
become exercisable for the first time) for which any employee may be
granted qualified incentive options under the 1998 Plan in any calendar
year may not exceed $100,000. The closing price of a share of Common
Stock as reported on the NASDAQ System for January 29, 1998 was $22-7/8.
The 1998 Plan will terminate on January 20, 2008, or earlier if the
shares reserved thereunder have been issued upon exercise of options or
vesting of restricted stock awards. The 1998 Plan is to be administered
by the Board of Directors or a compensation committee composed of at
least two (2) members of the Board.
Upon the grant of a restricted stock award under the 1998 Plan, a
certificate representing the shares of Common Stock covered by the award
will be issued in the name of the recipient of the award, after execution
by the recipient of an award agreement and any other documents which the
Board may require, but such certificate will be held in the custody of
the Company. The shares covered by the award will be subject to the
possibility of forfeiture in the event restrictions and conditions
established by the Board at the time the award is granted are not
satisfied, and such shares shall not be transferable by the recipient
unless and until they are no longer subject to forfeiture. Such
restrictions and conditions may include, among other things, specified
measures of the Company's financial performance or the individual
recipient's performance or continuation of the recipient's employment, or
<PAGE>
combinations thereof. During the period the shares covered by a
restricted stock award are subject to forfeiture, the recipient of the
award will have the rights and privileges of a stockholder as to such
shares, including the right to vote the shares, but not the right to
transfer or otherwise dispose of the shares or to receive dividends or
distributions with respect to the shares. All dividends and
distributions with respect to shares subject to forfeiture shall also be
subject to the terms of the restricted stock award. If and when the
restrictions and conditions established by the Board have been satisfied,
the recipient will have unrestricted ownership of the shares and any
dividends and distributions with respect thereto. Upon the grant of a
restricted stock award, a compensation expense will be incurred for
financial reporting purposes with respect to the shares covered by the
award equal to the fair market value of the shares at the date of grant.
This expense is reported over the period during which the shares are
subject to forfeiture.
The Board of Directors has the authority to determine, subject to
the provisions of the 1998 Plan, to which employees or directors options
or restricted stock awards are to be granted, the time at which options
and awards are to be granted, the number of shares subject to options and
awards granted to each individual from time to time, the option exercise
price per share, the period over which the options and awards vest,
whether the options are to be qualified or non-qualified incentive stock
options, the period during which each option may be exercised and the
conditions that are applicable to any restricted stock award or
performance stock option. The Board may make all other determinations
necessary for employee options and awards under the 1998 Plan. The Board
may also accelerate the vesting date of any options and awards and, with
the consent of the holder, cancel, modify or amend any option or award;
provided that the Plan prohibits a reduction of option exercise prices
except in connection with adjustments related to stock splits and other
changes in capitalization of the Company. Any shares subject to options
or awards which, for any reason, expire or are terminated or forfeited,
become available again for options and awards under the 1998 Plan.
Holders of options or awards are protected against dilution in the
event of a stock dividend, share distribution, recapitalization, merger,
consolidation, split-up, spin-off, combination or exchange of shares or
similar action. The Board of Directors may from time to time adopt
amendments to the 1998 Plan, provided that no amendments which would
increase the number of shares for which options or awards may be granted
may be effected without the consent of the holders of a majority of the
outstanding shares of Common Stock present and voting at a duly held
meeting of shareholders of the Company. The 1998 Plan may be suspended
or terminated at any time by the Board of Directors, but such action
cannot affect options or awards previously granted.
Options to the extent exercisable on the date of termination of
employment, are exercisable until thirty (30) days after termination
except in the case of retirement with the consent of the Company or
death. In the event the holder's employment is terminated for such
retirement or death, an option may only be exercised, to the extent
exercisable on the date of termination, during the six (6) months after
the date of termination. In no event, however, may any option ever be
exercised after its term has expired. All options expire immediately if
termination of employment was for cause or without the consent of the
Company.
<PAGE>
Upon the termination of employment of a recipient of a restricted
stock award, unless otherwise determined by the Board if such termination
is due to death, disability, normal retirement or with the consent of the
Company, all of the shares which then remain subject to forfeiture shall
automatically be forfeited and transferred to the Company at no cost to
the Company. The Board may, if such termination is due to death,
disability, normal retirement or with the consent of the Company, deem
that the restrictions or conditions on all or any of the shares subject
to forfeiture have been met, subject to such further terms and
conditions, if any, as the Board may deem appropriate.
The 1998 Plan provides that if a recipient of an option or award
engages in activities which are in competition with those engaged in by
the Company or other behavior contrary to the interests of the Company
within one (1) year of leaving the employ of the Company, the Company may
effect a forfeiture of any outstanding options and require such recipient
to pay to the Company an amount equal to the difference between the
market value of the shares acquired under options or awards exercised or
vested within one (1) year prior to leaving the employ of the Company
after deduction for, in the case of an option, the exercise price of the
options.
Under the Internal Revenue Code (the "Code"), no income is
recognized by the recipient of a non-qualified incentive stock option at
the time the option is granted. Upon exercise of a non-qualified
incentive stock option, the option holder will recognize ordinary income
at the time of exercise in an amount equal to the excess of the fair
market value of the shares purchased over their option exercise price;
provided, that if the holder pays the exercise price with previously
acquired Common Stock, the holder will recognize ordinary income equal to
the fair market value of that number of shares received which are in
excess of the number of shares which were tendered as payment of the
option. The Company will be entitled to a deduction equal to the
ordinary income recognized by the holder.
When an optionee or a recipient disposes of shares acquired by the
exercise of a non-qualified incentive stock option, any amount received
in excess of the fair market value of the shares used to determine
previously recognized ordinary income and the optionee's basis in any
shares tendered in payment of exercise of the option will be treated as
a long-term or short-term capital gain, depending upon the holding period
of the shares. If the amount received is less than such values, the loss
will be treated as a long-term or short-term capital loss, depending upon
the holding period of the shares.
As in the case of a non-qualified incentive stock option, upon the
grant of a qualified incentive stock option, the optionee will not
recognize income. However, unlike the holder of a non-qualified
incentive stock option, the holder of a qualified incentive stock option
will not recognize income on the exercise of the qualified incentive
stock option, but will recognize income only when he subsequently
disposes of the shares. However, the amount of the income not recognized
is a tax preference item for the purposes of the alternate minimum tax.
If the disposition is not earlier that the later of one year from the
date of exercise or two years from the date of grant of the option, the
difference between the option price and the sale price will be recognized
<PAGE>
by the optionee as income and taxed at capital gains rates. If the
disposition occurs prior to the later of one year from the date of
exercise or two years from the date of grant, the employee will recognize
ordinary income equal to the excess, if any, between (a) the lesser of
the fair market value of the shares on the date of exercise of the
option, or the amount realized on the disposition of the shares acquired
on exercise and (b) the purchase price paid for the shares, and will
recognize a long-term or short-term capital gain (depending on the
holding period) on any further gain measured by the excess if any,
between the amount received upon disposition of the shares and the fair
market value of the shares on the date of exercise of the option. If the
employee makes an early disposition of the shares, the Company will be
entitled to an income tax deduction equal to the amount recognized by the
employee as ordinary income. The transfer of stock acquired pursuant to
the exercise of a qualified incentive stock option as payment of the
exercise price in connection with the exercise of a second qualified
incentive stock option will be treated as an early disposition of such
stock if made prior to the later of two (2) years from the date of grant
or one (1) year from date of exercise, with the tax consequences
described above.
Unless a recipient of a restricted stock award elects to be taxed at
the time of grant with respect to the shares subject to the award, the
recipient will not recognize income until the possibility of forfeiture
shall lapse. When and as the possibility of forfeiture shall lapse, the
recipient will recognize ordinary income in an amount equal to the fair
market value of the shares at that time. A recipient of a restricted
stock award may elect, within thirty (30) days following the date of
grant, to recognize ordinary income at the date of the grant with respect
to the shares subject to the award in an amount equal to the fair market
value of the shares at the date of grant, determined without regard to
the possibility of forfeiture. The Company will be entitled to a
deduction at the time ordinary income is recognized by a recipient of a
restricted stock award equal to the amount so recognized. If a recipient
of a restricted stock award elects to be taxed at the date of grant and
the shares are subsequently forfeited, the recipient is not entitled to
a deduction as a consequence of such forfeiture and the Company must
include as ordinary income the amount it previously deducted with respect
to such award. Any dividends with respect to shares subject to
forfeiture pursuant to a restricted stock award granted to a recipient
who has not elected to be taxed at the date of grant of the award are
treated as additional compensation taxable as ordinary income to the
recipient and deductible by the Company when received by the recipient.
If an election has been made to be taxed at the date of grant, the
dividends represent ordinary dividend income to the recipient and are not
deductible by the Company.
To the extent that the exerciseability of any options are
accelerated on account of a proposed dissolution or liquidation of the
Company, or a sale of substantially all of the assets of the Company, or
the merger or consolidation of the Company with or into another
corporation, the value of the options at the time of vesting could be
treated as a "parachute payment" subject to an excise tax imposed on the
holder. Such consequences would only follow, however, if the total
"parachute payments" (including the value of the option) were of
sufficient magnitude to give rise to "excess parachute payments" as
defined in the Code.
<PAGE>
Section 162(m) of the Internal Revenue Code may limit the
deductibility by the Company of compensation recognized by executive
officers under options or awards to the extent it exceeds certain
threshold levels unless such options or awards are issued as "performance
stock options" as defined by Section 162(m). The 1998 Plan allows for
the issuance of performance stock options.
The foregoing, while summarizing the Federal income tax implications
with respect to options and awards which may be granted under the 1998
Plan, does not purport to be a detailed account of such tax treatment and
various current legislative and accounting proposals would alter the tax
and financial implications of options and awards under the 1998 Plan.
Adoption of the 1998 Plan is subject to the approval by the
favorable vote of the holders of a majority of the outstanding shares of
Common Stock present and voting at a duly held meeting of shareholders of
the Company.
The Board of Directors recommends a vote FOR this proposal.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Subject to ratification by the shareholders at the Annual Meeting,
the Board of Directors has appointed Deloitte & Touche LLP to serve as
the independent certified public accountants for the Company for its 1998
fiscal year end. Deloitte & Touche LLP has served as the Company's
independent certified public accountants since July 1991. Representatives
of Deloitte & Touche LLP are expected to be present at the Annual
Meeting, will have the opportunity to make a statement, if they desire to
do so, and will be available to respond to appropriate questions.
The affirmative vote of the majority of the votes cast by the
holders of the Company's Common Stock on this proposal shall constitute
ratification of the appointment of Deloitte & Touche LLP.
If the shareholders by the affirmative vote of a majority of the
Common Stock represented at the Annual Meeting do not ratify the
appointment of Deloitte & Touche LLP, the selection of independent
certified public accountants will be reconsidered by the Board of
Directors.
The Board of Directors recommends a vote FOR this proposal.
OTHER MATTERS
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 other than the proposals set forth in this Proxy Statement. If
any other matters properly come before the Annual Meeting, it is intended
that the persons named in the proxy will act in respect thereof in
accordance with their best judgment.
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company no later than
October 15, 1998 and must meet certain eligibility requirements of the
Securities and Exchange Commission. Proposals may be mailed to
Photronics, Inc. to the attention of Jeffrey P. Moonan, 1061 East
Indiantown Road, Jupiter, Florida 33477.
SOLICITATION OF PROXIES AND COST THEREOF
This proxy solicitation is being made by the Board of Directors of
the Company and the cost of such solicitation of proxies will be borne by
the Company. In addition to solicitation of the proxies by use of the
mails, employees of the Company, without extra remuneration, may solicit
proxies personally or by telephone or cable. The Company will reimburse
brokerage firms, nominees, custodians and fiduciaries for their out-of-
pocket expenses for forwarding proxy materials to beneficial owners and
seeking instruction with respect thereto.
By order of the Board of Directors
Jeffrey P. Moonan
Secretary
February 12, 1998
<PAGE>
P R O X Y
___________
Photronics, Inc.
1998 Annual Meeting of Shareholders
March 18, 1998
___________________________________________________
The undersigned hereby appoints Constantine S. Macricostas, Michael J.
Yomazzo and Jeffrey P. Moonan, or any one or more of them acting in the
absence of the others, with full power of substitution, proxies for the
undersigned, to vote at the 1998 Annual Meeting of Shareholders of
Photronics, Inc. to be held at 10:00 a.m. on March 18, 1998 at the Hotel
Inter-Continental, 111 East 48th Street, New York, New York 10017, and at any
adjournment or adjournments thereof according to the number of votes the
undersigned might cast and with all powers the undersigned would possess if
personally present.
1) To elect the following five (5) directors:
Walter M. Fiederowicz Yukio Tagawa Constantine S. Macricostas
Joseph A. Fiorita, Jr. Michael J. Yomazzo
----
---- FOR all nominees listed above (except as marked to the contrary
below).
----
---- Withhold authority to vote for all nominees listed above.
INSTRUCTION: To withhold authority to vote for any individual
nominee, print that nominee's name below:
___________________________________________________________________
2) To approve the 1998 Stock Option Plan of the Company.
----- ----- -----
----- FOR ----- AGAINST ----- ABSTAIN
3) To ratify the appointment of Deloitte & Touche LLP as the independent
certified public accountants of the Company for the 1998 fiscal year.
----- ----- -----
----- FOR ----- AGAINST ----- ABSTAIN
4) To transact such other business as may properly come before the meeting
or any adjournments thereof.
(Please date and sign proxy card on other side)
THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The shares represented by this proxy card will be voted (or not voted) on
Items 1, 2 and 3, as directed by the shareholder, but if no direction is
indicated, will be voted FOR each thereof. The management recommends a vote
FOR each of the proposals.
Please sign as name(s) appear hereon. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
____________________________________________________________________
Signature(s)
____________________________________________________________________
Signature(s)
Dated:____________________
Please mark, sign, date and return the proxy card using the enclosed
envelope.
<PAGE>
Appendix "A"
PHOTRONICS, INC.
1998 STOCK OPTION PLAN
(1) PURPOSES OF THE PLAN
The purposes of this 1998 Stock Option Plan are:
(a) To attract and retain the best available personnel for
positions of substantial responsibility (both as Employees and as
Outside Directors) in respect of the business of PHOTRONICS, INC.,
and any current subsidiary or any subsidiary which PHOTRONICS, INC.
may hereafter organize or acquire;
(b) To provide additional incentive to such personnel; and
(c) To promote the success of the business.
(2) DEFINITIONS
As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of PHOTRONICS,
INC.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Compensation Committee" shall mean a committee of the
Board composed of at least two (2) members of the Board who may be
"disinterested persons" as defined in Rule 16b-3(c)(2) promulgated
under the Securities Exchange Act of 1934, as amended (the "Act"),
or any successor provision thereto.
(d) "Common Stock" shall mean the Common Stock of the
Company.
(e) "Company" shall mean PHOTRONICS, INC.
(f) "Outside Director" shall mean a member of the Company's
Board of Directors who is not also an Employee.
(g) "Disability" shall have the meaning set forth in Section
22(e)(3) of the Code or in any successor provision thereto.
(h) "Employee" shall mean a regular, salaried common law
employee of the Company or any of its subsidiaries or affiliates.
(i) "Option" shall mean a stock option granted pursuant to
the Plan.
(j) "Option Agreement" shall mean the Stock Option Agreement
entered into between the Company and an Employee or Outside
Director upon the grant of an Option.
(k) "Option Price" shall mean the exercise price determined
pursuant to Section 4 hereof for the Shares to be issued pursuant
to any Option granted under the Plan.
<PAGE>
(l) "Optioned Stock" shall mean the stock subject to an
Option or Restricted Stock Award granted pursuant to the Plan.
(m) "Optionee" shall mean an Employee or Outside Director who
receives an Option or Restricted Stock Award.
(n) "Performance Stock Option" means an Option which is
subject to conditions which render it a Performance Stock Option
under applicable law.
(o) "Plan" shall mean this 1998 Stock Option Plan.
(p) "Restricted Stock Award" means a restricted stock award
granted pursuant to the Plan.
(q) "Restricted Stock Award Agreement" means the Restricted
Stock Award Agreement entered into between the Company and an
Employee or Outside Director upon the grant of a Restricted Stock
Award.
(r) "Share" shall mean a share of the Common Stock of the
Company as adjusted in accordance with Section 14 of the Plan.
(s) "10% Shareholder" shall mean an individual who at the
time an Option is granted hereunder owns, within the meaning of
Section 422(b)(6) of the Code, stock possessing more than 10% of
the total combined voting power of all classes of stock of the
Company or of its parent or subsidiary corporations.
(3) STOCK SUBJECT TO THE PLAN
Subject to the provisions of Section 14 of the Plan, the
maximum aggregate number of Shares which may be optioned and sold
or which may be issued and not subsequently forfeited pursuant to
Restricted Stock Awards under the Plan, is one million (1,000,000)
Shares of the Common Stock of the Company provided, that no more
than ten percent (10%) of the Shares authorized for issuance under
this Plan may be issued pursuant to Restricted Stock Awards and no
more than fifteen percent (15%) of the Shares authorized for
issuance under this Plan may be issued to any one person during any
one calendar year. Such Shares may be authorized but unissued or
may be treasury shares.
If an Option should expire or become unexercisable for any
reason without having been exercised in full or any shares issued
pursuant to a Restricted Stock Award are forfeited, the unpurchased
or forfeited Shares which were subject thereto shall, unless the
Plan shall have been terminated, become available for other
Option(s) or Restricted Stock Awards under the Plan.
(4) ADMINISTRATION OF THE PLAN
(a) Procedure
The Plan shall be administered by the Board or the
Compensation Committee. Members of the Board who are either
eligible for grants under this Plan or have been given grants under
this Plan may vote on any matters affecting the administration of
the Plan or the grant of any Options or Restricted Stock Awards
pursuant to the Plan, except that no such member shall act upon the
granting of an Option or Restricted Stock Award to himself, but any
such member may be counted in determining the existence of a quorum
at any meeting of the Board during which action is taken with
respect to the granting of Options or Restricted Stock Awards to
him.
<PAGE>
(b) Powers of the Board and the Committee
Subject to the provisions of the Plan, the Board or the
Compensation Committee shall have the authority:
(i) to grant to any eligible Employee or Outside Director
an Option or Restricted Stock Award, which shall be conditioned on
the execution by such Employee or Outside Director of an Option
Agreement or Restricted Stock Award Agreement in the form approved
by the Board or the Committee;
(ii) to determine the Option Price for any Shares to be
issued pursuant to an Option granted under the Plan, whether an
Option is to be a Performance Stock Option and the conditions
applicable to such Options, the conditions applicable to any
Restricted Stock Award, the Employees or Outside Directors to whom
and the time or times at which Options or Restricted Stock Awards
shall be granted, to determine the exercise or vesting date of
Options and Restricted Stock Awards, whether the Option shall be a
non-qualified or an incentive stock option (as defined in Section
422 of the Code or any successor provision thereto) and the number
of Shares to be represented by each Option or Restricted Stock
Award, and the term of each Option which in no event shall be more
than ten (10) years from the date of the grant of the Option (five
[5] years in the case of an incentive stock option granted to a 10%
owner);
(iii) to interpret the Plan;
(iv) to prescribe, amend and rescind rules and
regulations relating to the Plan;
(v) to determine the terms and provisions of each Option
granted under the Plan (which need not be identical) and, with the
consent of the holder thereof, to modify or amend each Option or
Restricted Stock Award; provided, however, that in no event may the
exercise price of an Option be reduced (except pursuant to Section
14) after it is issued;
(vi) to accelerate any exercise date of any Option or
Restricted Stock Award except that the exercise date of any Option
or Restricted Stock Award granted to any director or executive
officer cannot be accelerated without such holder's consent if such
acceleration would result in liability under Section 16 of the Act,
or any successor provision thereto;
(vii) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an
Option or Restricted Stock Award previously granted by the Board or
the Compensation Committee; and
(viii) to make all other determinations deemed necessary
or advisable for the administration of the Plan.
(c) Effect of Board's or Compensation Committee's Decision
All decisions, determinations and interpretations of the
Board or the Compensation Committee shall be final and binding on all
Optionees and any other holders of any Options granted under the
Plan.
<PAGE>
(5) ELIGIBILITY
Options and Restricted Stock Awards under the Plan may be
granted only to such Employees or to such Outside Directors as the
Board or the Compensation Committee shall select. An Employee or
Outside Director who has been granted an Option or Restricted Stock
Award may, if he is otherwise eligible, be granted additional
Options or Restricted Stock Awards. Incentive stock options may be
granted only to an "employee" of the Company, as that term is used
Section 422 of the Code or any successor provision thereto. No
incentive stock option may be granted to a 10% Shareholder unless
the Option Price is at least 110% of the fair market value of such
stock on date of grant and the term of such option does not exceed
five (5) years.
(6) TERM OF PLAN
Subject to the provisions of Section 22 hereof, the Plan shall
become effective on adoption by the Board. The Plan shall continue
in effect for a term of ten (10) years unless sooner terminated
under Section 18 hereof.
(7) TERM OF OPTION OR RESTRICTED STOCK AWARD
Except as provided under Code Section 422(c)(5) with respect
to a 10% Shareholder's incentive stock option and unless of shorter
duration as provided in the terms of an Option or Restricted Stock
Award Agreement, the term of each Option or forfeiture period for
a Restricted Stock Award granted under the Plan shall be determined
by the Board or the Compensation Committee but, in no event, shall
it be for a period in excess of ten (10) years from the date of
grant thereof.
(8) MAXIMUM ALLOTMENT OF OPTIONS
The aggregate fair market value (determined as of the date the
Option is granted) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by any
individual during any calendar year under the Plan and all other
plans of the Company or any parent or subsidiary of the Company
shall not exceed $100,000 or such other amount as is permitted by
the Code.
(9) OPTION PRICE
The Option Price for the Shares to be issued pursuant to any
Option shall be as stated in the Option Agreement and shall be not
less than the greater of (a) the fair market value of such Shares
on date of grant of the Option as determined by the Board or the
Compensation Committee (except that with respect to an incentive
stock option issued to a 10% Shareholder, 110% of the fair market
value), or (b) the par value of such Shares. Except pursuant to
Section 14, in no event shall the Option Price for an Option be
reduced after it is issued.
(10) EXERCISE OF OPTIONS
(a) Procedure for Exercise
Any Option shall be exercisable on such terms and conditions
as are set forth in the Option Agreement. The purchase price of
the Shares as to which an Option shall be exercised shall be paid
in full at the time of exercise at the election of the holder of an
Option:
<PAGE>
(i) in cash or currency of the United States of America;
(ii) by tendering to the Company shares of the Company's
Common Stock, then owned by him, having a fair market value equal
to the cash exercise price applicable to the purchase price of the
Shares as to which an Option is being exercised; or
(iii) partly in cash and partly in shares of the
Company's Common Stock valued at fair market value.
Such fair market value shall be determined as of the close of
the business day immediately preceding the day on which the Option
is exercised by the Board or the Compensation Committee, whose
determination shall be final and conclusive. An Option shall be
deemed to be exercised when:
(i) written notice of such exercise has been given to the
Company in accordance with the terms of the Option Agreement by the
person entitled to exercise the Option;
(ii) payment as described above for the Shares with
respect to which the Option is exercised has been received by the
Company; and
(iii) such payment is accompanied by any representations
or agreements required by the terms of this Plan or the Option
Agreement.
A holder of an Option shall not have any rights to dividends
or any other rights as a stockholder of the Company with respect to
any shares covered by his Option until such shares shall have been
issued to him as reflected by the books and records maintained by
the Company's transfer agent relating to stockholders of the
Company.
(b) Termination of Employment or Director Relationship/
Death or Disability of Optionee
(i) If an Optionee shall cease to be an Employee or
Outside Director by reason of discharge or termination, as
applicable, his right to exercise any non-qualified stock options
shall cease thirty (30) days (except to the extent otherwise
provided in [ii] below) after the date of such discharge or
termination; provided, however, that if his employment is
terminated for cause or without the consent of the Company, said
Option shall terminate immediately. The Plan shall not confer upon
any Optionee any right with respect to continuation of employment
or consulting, nor shall it interfere in any way with his right or
the Company's right to terminate such relationship at any time
subject to the provisions of any applicable contract. An Option
may be exercised under this paragraph only to the extent of the
accrued right to exercise at the time of discharge or termination,
as the case may be, and only to the extent that the Option is
otherwise exercisable pursuant to the initial term provided for in
the Option Agreement covering such Option.
<PAGE>
(ii) In the event of the death or disability of an
Optionee, any non-qualified stock options which were exercisable by
the Optionee on the date of his death or disability shall remain
exercisable for a period of six (6) months by the Optionee, the
Optionee's estate or by a person who acquired the right to exercise
the Option by bequest or inheritance. An Option may be exercised
under this paragraph only to the extent of the accrued right to
exercise at the time of death or disability, as the case may be,
and only to the extent that the Option is otherwise exercisable
pursuant to its initial term.
(11) NON-TRANSFERABILITY OF OPTIONS AND RESTRICTED STOCK AWARDS
The Option and, unless and until the shares subject to a
Restricted Stock Award are no longer subject to forfeiture, shares
subject to a Restricted Stock Award may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent or distribution and an
Option may be exercised during the lifetime of the Optionee only by
the Optionee.
(12) RESTRICTED STOCK AWARD
The Shares subject to a Restricted Stock Award shall be issued
in the name of the recipient as soon as reasonably practicable
after the date of grant of the Restricted Stock Award (and after
the recipient has executed a Restricted Stock Award Agreement and
any other documents which the Board or the Compensation Committee,
in its absolute discretion, may require) without the requirement
for payment of any cash consideration by such recipient, but shall
be held by the Company until all risk of forfeiture shall have
lapsed. Any certificate representing such Shares may bear such
restrictive legend, if any, as the Board or the Compensation
Committee may determine. Shares issued pursuant to Restricted
Stock Awards shall be subject to such restrictions, terms and
conditions as the Board or the Compensation Committee may
establish, which may include, without limitation, the achievement
of specific goals, and shall vest at such time or times as the
Board or the Compensation Committee shall determine. The Board or
the Compensation Committee may, in their sole discretion, make such
adjustments to the goals applicable to a Restricted Stock Award as
they deem necessary or advisable due to changes in criteria used
for the specific goals or other factors which they deem
appropriate.
Upon issuance of the Shares subject to a Restricted Stock
Award, the recipient shall, subject to Section ll, have all the
rights of a stockholder with respect to such Shares, including the
right to vote such Shares, but all dividends and other
distributions paid or made with respect to such Shares shall be
held by the Company subject to the restrictions, terms and
conditions of the Restricted Stock Award.
As promptly as practicable after the shares of Common Stock
subject to a Restricted Stock Award, cease to be subject to
forfeiture, the certificate representing such Shares, or a new
certificate without any inapplicable restrictive legend if the
original certificate bore a restrictive legend, shall be delivered
to the recipient or, in the event of the death of a recipient prior
to delivery, to his personal representative.
<PAGE>
In the event of the termination of employment of a recipient
of a Restricted Stock Award with the consent of the Company or due
to death, disability or normal retirement, the Board or the
Compensation Committee may, in its sole discretion, deem that the
restrictions, terms and conditions of the Restricted Stock Award
have been met for all or part of the Shares subject thereto,
subject to such further terms and conditions, if any, as the Board
or the Compensation Committee may determine.
(13) FORFEITURE OF OPTIONS AND REPAYMENT OF MARKET
VALUE OF OPTIONS OR AWARDS
If, at any time within one (1) year after an Optionee ceases
to be an Employee or Outside Director, such Optionee engages in any
activity in competition with any activity of the Company, or
inimical, contrary or harmful to the interests of the Company,
including, but not limited to:
(a) conduct related to such Optionee's employment for which
either criminal or civil penalties against the Optionee may be
sought;
(b) violation of Company policies, including, without
limitation, the Company's insider trading policy;
(c) accepting employment with or serving as a consultant,
advisor or in any other capacity to an employer that is in
competition with or acting against the interests of the Company,
including employing or recruiting any present, former or future
employee of the Company;
(d) disclosing or mis-using any confidential information or
material concerning the Company; or,
(e) participating in a hostile takeover attempt, then:
(i) Options and Restricted Stock Awards shall terminate
effective the date on which such Optionee enters into such
activity, unless terminated sooner by operation of another term or
condition of this Plan;
(ii) the aggregate difference between the exercise price
of Options exercised within one (1) year of the date (the
"Termination Date") Optionee ceased to be an Employee or Outside
Consultant and the closing market value of the Shares covered by
such Options; and
(iii) the aggregate of the closing market value for all
Shares subject to Restricted Stock Awards as to which forfeiture
provision expired within one (1) year prior to the Termination Date
shall be paid by the Optionee to the Company.
By accepting any Option or Restricted Stock Award, each
Optionee consents to a deduction from any amounts the Company owes
such Optionee from time to time (including amounts owed as wages or
other compensation, fringe benefits or vacation pay, as well as any
other amounts owed by the Company), to the extent of the amounts
the Optionee owes the Company under the foregoing paragraph.
Whether or not the Company elects to make any set-off in whole or
in part, if the company does not recover by means of set-off the
full amount the Optionee owes it, calculated as set forth above,
each Optionee agrees to pay immediately the unpaid balance to the
Company. Optionees may be released from their obligations under
this Section above only by the Board of Directors or the
Compensation Committee.
<PAGE>
(14) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event there is any change in the Common Stock through
the declaration of stock dividends, or through a recapitalization
resulting in a stock split, or combination or exchange of Shares,
or reorganization, or otherwise, the Board or the Compensation
Committee shall appropriately adjust the number or class of Shares
covered by any Option or Restricted Stock Award, as well as the
price to be paid therefor; and, in the event of any such change in
the outstanding Common Stock, the aggregate number and class of
Shares available under the Plan shall be appropriately adjusted.
No fractional Shares of the Common Stock shall be issuable on
account of any action aforesaid, and the aggregate number of Shares
then covered by the Option or Restricted Stock Award when changed
as a result of such action shall be reduced to the largest number
of whole Shares resulting from such action unless the Board or the
Compensation Committee, in its discretion, shall determine to issue
scrip certificates in respect of any fractional Shares, which scrip
certificates shall be in a form and have such terms and conditions
as the Board or the Compensation Committee in its discretion shall
prescribe.
(15) MERGER, CONSOLIDATION, ETC.
In the event that any consolidation of the Company with, or
merger of the Company into, any other corporation (other than a
consolidation or merger in which the Company is the continuing
corporation) or any sale or transfer of all or substantially all of
the assets of the Company is contemplated, the Board may provide
that any Optionee shall be given the opportunity to exercise any
and all Options which such Optionee then holds prior to such
consolidation, merger or sale of assets and, notwithstanding any
provisions of this Plan or of an Option Agreement to the contrary,
the exercisability of such Option shall be accelerated as
appropriate to allow for such exercise and the Board may terminate
each outstanding Option as of a date to be fixed by the Board or
Compensation Committee, which shall not be earlier than five (5)
days after the date such Options become exercisable.
(16) WITHHOLDING TAX
The Company may make such provisions (including accepting
Shares as payment or reducing the number of Shares to be issued) as
it may deem appropriate for the withholding of any taxes which the
Company determines it is required to withhold in connection with
the grant or exercise of any Option or Restricted Stock Award or
the disposition of any Common Stock acquired pursuant to the
exercise of an Option or Restricted Stock Award. If an Optionee
who exercises all or part of an Option subsequently disposes of
Common Stock in a "disqualifying disposition" described under Code
Section 422(c)(2), such Optionee shall so notify the Company,
forward such information as is thereby requested by the Company
and, if so requested by the Company, pay to the Company such dollar
amounts as are necessary to satisfy the Company's tax withholding
obligations resulting from such disposition.
<PAGE>
(17) TIME OF GRANTING OPTIONS
The date of grant of an Option or Restricted Stock Award under
the Plan shall for all purposes be the date on which the Board or
Compensation Committee makes the determination granting such Option
or Restricted Stock Award. Notice of the determination shall be
given to the Optionee within a reasonable time after the date of
such grant.
(18) AMENDMENT AND TERMINATION OF THE PLAN
(a) Amendment
The Board, without approval of the shareholders, may
amend the Plan from time to time in such respects as the Board may
deem advisable except that the Board may not, except with approval
of the shareholders, amend the eligibility requirements of this
Plan or increase the number of shares subject to this Plan except
as permitted by Section 14.
(b) Termination
The Board, without approval of the shareholders, may at
any time terminate the Plan.
(c) Effect of Amendment or Termination
Any such amendment or termination of the Plan shall not
affect Options or Restricted Stock Awards already granted, and such
Options or Restricted Stock Awards shall remain in full force and
effect as if this Plan had not been amended or terminated and shall
be deemed to incorporate the terms of this Plan as it existed on
the dates the Options or Restricted Stock Awards were granted.
(19) CONDITIONS UPON ISSUANCE OF SHARES
Shares shall not be issued with respect to an Option or
Restricted Stock Award granted under the Plan unless the exercise
of such Option or termination of the forfeiture period for such
Restricted Stock Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as
amended, the Act, the rules and regulations promulgated thereunder,
the requirements of any stock exchange upon which the Shares may
then be listed, and applicable state securities laws, and shall be
further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant
at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is necessary or desirable under
any of the aforementioned relevant provisions of law.
(20) RESERVATION OF SHARES
During the terms of this Plan, the Company will at all times
reserve and keep available a number of Shares sufficient to satisfy
the requirements of the Plan.
Inability of the Company to obtain from any regulatory body
having jurisdiction such authority as is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any
Shares hereunder shall relieve the Company of any liability in
respect of the non-issuance or sale of such Shares as to which such
requisite authority shall not have been obtained.
<PAGE>
(21) GOVERNING LAW
The Plan and the rights of all persons hereunder shall be
governed by the laws of the State of Connecticut, without regard to
principles of conflict of laws.
(22) MISCELLANEOUS
Participation under the Plan shall not affect eligibility for
any profit-sharing, bonus, insurance, pension, or other extra
compensation plan which the Company or any subsidiary may at any
time adopt for employees, except to the extent that any law or
regulation governing any such plan so provides. By acceptance of
a grant of an Option or Restricted Stock Award under the Plan, each
employee shall be deemed to agree that any income realized upon the
receipt or exercise thereof or upon the disposition of the shares
received pursuant thereto is special incentive compensation and
will not be taken into account as "wages", "salary" or
"compensation" in determining the amount of any payment under any
pension, retirement, incentive, profit-sharing, employee stock
purchase or deferred compensation plan of the Company or any
subsidiary.
(23) SHAREHOLDERS' APPROVAL
The Plan shall be subject to approval by the affirmative vote
of the holders of a majority of the shares of Common Stock present
and voting at a duly held shareholders' meeting within twelve (12)
months before or after adoption of the Plan by the Board and any
Option or Restricted Stock Award, granted hereunder prior to such
approval shall be conditioned thereon.
