PHOTRONICS INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of October 31, 2022. We have established and currently maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, designed to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost- benefit relationship of possible controls and procedures. Based on an evaluation of our disclosure controls and procedures as of October 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level. Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of the internal control over financial reporting based on criteria established in the Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of October 31, 2022, based on the criteria set forth by the COSO. Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, concluded that our internal control over financial reporting was effective as of October 31, 2022. The Company’s independent registered public accounting firm, Deloitte & Touche LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of October 31, 2022, as stated in their report on page 68 of this Form 10-K. Changes in Internal Control over Financial Reporting There were no changes to our internal control over financial reporting during 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 67 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Photronics, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Photronics, Inc. (the “Company”) as of October 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended October 31, 2022, of the Company, and our report dated December 23, 2022, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Report on Internal Control Over Financial Reporting.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Boston, Massachusetts December 23, 2022 68 Table of Contents ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION Not applicable. 69 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information as to Directors required by Items 401, 405 and 407(c)(3)(d)(4) and (d)(5) of Regulation S-K is set forth in our 2023 Definitive Proxy Statement which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Exchange Act within 120 days after the end of the fiscal year covered by this Form 10-K under the caption “PROPOSAL 1 - ELECTION OF DIRECTORS,” “DELINQUENT SECTION 16(A) REPORTS” and in the third paragraph under the caption “MEETINGS AND COMMITTEES OF THE BOARD”, and is incorporated in this report by reference. The information as to Executive Officers is included in our 2023 Definitive Proxy Statement under the caption “EXECUTIVE OFFICERS” and is incorporated in this report by reference. We have adopted a code of ethics that applies to our principal executive officer, chief financial officer or principal financial officer and principal accounting officer. A copy of the code of ethics may be obtained, free of charge, by writing to the executive vice president, general counsel of Photronics, Inc. at 15 Secor Road, Brookfield, Connecticut 06804. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 402 of Regulation S-K and paragraph (e)(4) and (e)(5) of Item 407 is set forth in our 2023 Definitive Proxy Statement under the captions “EXECUTIVE COMPENSATION”, “CERTAIN AGREEMENTS”, “DIRECTORS’ COMPENSATION”, “COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION” and “COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION”, respectively, and is incorporated in this report by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by Item 201(d) of Regulation S-K is set forth in our 2023 Definitive Proxy Statement under the caption “EQUITY COMPENSATION PLAN INFORMATION” and is incorporated in this report by reference. The information required by Item 403 of Regulation S-K is set forth in our 2023 Definitive Proxy Statement under the caption “OWNERSHIP OF COMMON STOCK BY DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS”, and is incorporated in this report by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by Items 404 and Item 407(a) of Regulation S-K is set forth in our 2023 Definitive Proxy Statement under the captions “MEETINGS AND COMMITTEES OF THE BOARD” and “RELATED PARTY TRANSACTIONS”, respectively, and is incorporated in this report by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by Item 9(e) of Rule 14a-101 of the Exchange Act is set forth in our 2023 Definitive Proxy Statement under the captions “Independent Registered Public Accounting Firm Fees” and “AUDIT COMMITTEE REPORT”, and is incorporated in this report by reference. 70 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following documents are filed as part of this report: Page No. 1. Financial Statements: See “INDEX TO CONSOLIDATED FINANCIAL STATEMENTS” in Part II, Item 8 of this Form 10-K for a list of financial statements filed as part of this report. 35 2. Financial Statement Schedules All schedules are omitted because they are immaterial or not applicable. 3. Exhibit Index 72 71 Table of Contents EXHIBIT INDEX Incorporated by Reference Filed or Furnished Herewith Exhibit Number Description Form Exhibit Filing Date 3.1 Certificate of Incorporation as amended July 9, 1986, April 9, 1990, March 16, 1995, November 13, 1997, April 15, 2002 and June 20, 2005 10-K 3.1 12/23/2019 3.2 Amended and Restated By-laws of the Company dated as of September 7, 2016 8-K 3.2 9/13/2016 4.1 Description of Securities of the Company 10-K 4.1 12/23/2019 4.2 Certificate of Amendment with Respect to Series A Preferred Stock, dated September 24, 2019 8-K 3.1 9/24/2019 10.1 The Company’s 1992 Employee Stock Purchase Plan 10-K 10.1 12/20/2017 10.2 Amendment to the Employee Stock Purchase Plan as of March 24, 2004 + 10-K 10.2 1/6/2017 10.3 Amendment to the Employee Stock Purchase Plan as of April 8, 2010 + 10-K 10.4 1/7/2016 10.4 Amendment to the Employee Stock Purchase Plan as of March 28, 2012 + 10-K 10.4 12/21/2018 10.5 Amendment to the Employee Stock Plan as of December 18, 2019 + 10-K 10.5 12/23/2019 10.6 2016 Equity Incentive Compensation Plan + DEF 14A 2/29/2016 10.7 The Company’s 2007 Long-Term Equity Incentive Plan + DEF 14A 2/23/2007 10.8 Amendment to the 2007 Long-Term Equity Incentive Plan as of April 8, 2010 + 10-K 10.7 1/7/2016 10.9 Amendment to the 2007 Long Term Equity Incentive Plan as of April 11, 2014 + 10-K 10.7 12/23/2019 10.10 2011 Executive Incentive Compensation Plan effective as of November 1, 2010 + 10-K 10.9 1/6/2015 10.11 Joint Venture Framework Agreement dated November 20, 2013, between the Company and Dai Nippon Printing Co., Ltd. # 10-K/A 10.19 7/8/2015 10.12 Joint Venture Operating Agreement dated November 20, 2013, between the Company and Dai Nippon Printing Co., Ltd. # 10-K/A 10.20 7/8/2015 10.13 Outsourcing Agreement dated November 20, 2013, among the Company, Dai Nippon Printing Co., Ltd and Photronics Semiconductor Mask Corporation # 10-K/A 10.21 7/8/2015 10.14 License Agreement dated November 20, 2013, between the Company and Photronics Semiconductor Mask Corporation # 10-K/A 10.22 7/8/2015 10.15 License Agreement dated November 20, 2013, between Dai Nippon Printing Co., Ltd and Photronics Semiconductor Mask Corporation # 10-K/A 10.23 7/8/2015 10.16 Margin Agreement dated November 20, 2013, among the Company, Dai Nippon Printing Co., Ltd and Photronics Semiconductor Mask Corporation# 10-K/A 10.24 7/8/2015 72 Table of Contents 10.17 Merger Agreement dated November 20, 2013, between Photronics Semiconductor Mask Corporation and DNP Photomask Technology Taiwan Co., Ltd. # 10-K/A 10.25 7/8/2015 10.18 Executive Employment Agreement between the Company and Christopher J. Progler, Vice President, Chief Technology Officer dated September 10, 2007 + 10-K 10.18 12/23/2019 10.19 Executive Employment Agreement between the Company and Richelle E. Burr dated May 21, 2010 + 10-K 10.30 1/7/2016 10.20 Executive Employment Agreement between the Company and John P. Jordan dated September 5, 2017 + 10-K 10.31 12/20/2017 10.21 Employment Agreement dated March 9, 2020, between Photronics Dai Nippon Mask Corporation, Photronics and Frank Lee 10-Q 10.36 3/11/2020 10.22 Form of Amendment to Executive Employment Agreement dated March 16, 2012+ 10-K 10.23 12/23/2019 10.23 Fourth Amended and Restated Credit Agreement dated as of September 27, 2018, among Photronics, Inc. the Foreign Subsidiary Borrower Party Thereto, the Lender Party Thereto, JPMorgan Chase Bank, N.A. as Administrative and Collateral Agent and Bank of America, N.A. as syndication agent 10-K 10.24 12/21/2018 10.24 Third Amended and Restated Security Agreement entered into as of September 27, 2018, by and among Photronics, Inc., the subsidiaries of the Company and JPMorgan Chase Bank N.A 10-K 10.25 12/21/2018 10.25 Fixed Asset Loan Agreement between Photronics DNP Mask Corporation Xiamen and Industrial and Commercial Bank China Limited Xiamen Xiang’an Branch 10-K 10.26 12/21/2018 10.26 Working Capital Loan Agreement between Industrial and Commercial Bureau China Limited Xiamen Xiang’an Branch and Photronics DNP Mask Corporation Xiamen effective as of November 7, 2018 10-K 10.27 12/21/2018 10.27 Investment Agreement between Xiamen Torch Hi-Tech Industrial Development Zone Management Committee and Photronics Singapore Pte. Ltd. 10-Q 10.35 9/2/2016 10.28 Amendment No. 1 to the Investment Agreement between Xiamen Torch Hi-Tech Industrial Development Zone Management Committee and Photronics Singapore Pte, Ltd. # 10-K 10.29 12/23/2019 10.29 Amendment No. 2 to the Investment Agreement between Xiamen Torch Hi-Tech Industrial Development Zone, People’s Government of Xiang’an Xiamen, Photronics Singapore Pte. Ltd., DNP Asia Pacific Pte and Xiamen American Japan Photronics Mask Co., Ltd. # 10-Q 10.41 3/10/2022 10.30 Amendment No. 3 to the Investment Agreement between Xiamen Torch Hi-Tech Industrial Development Zone, People’s Government of Xiang’an Xiamen, Photronics Singapore Pte. Ltd., DNP Asia Pacific Pte and Xiamen American Japan Photronics Mask Co., Ltd. # 10-Q 10.42 3/10/2022 73 Table of Contents 10.31 Contribution Agreement dated May 16, 2017 among Dai Nippon Printing Co., Ltd. (“DNP), DNP Asia Pacific Pte. Ltd. (“DNP Asia Pacific”), Photronics, Inc. (“Photronics”), Photronics Singapore Pte. Ltd., (“Photronics Singapore”), and Xiamen American Japan Photronics Mask Co., Ltd. (“PDMCX”)# 10-Q/A 10.26 12/19/2017 10.32 Joint Venture Operating Agreement dated May 16, 2017, among Photronics, Photronics Singapore, DNP, and DNP Asia Pacific# 10-Q/A 10.27 12/19/2017 10.33 Outsourcing Agreement dated May 16, 2017, among Photronics, DNP, Photronics DNP Photomask Corporation (“PDMC”) and PDMCX# 10-Q/A 10.28 12/19/2017 10.34 Amended and Restated License Agreement dated May 16, 2017 between DNP and PDMC# 10-Q/A 10.29 12/19/2017 10.35 Investment Cooperation Agreement between Hefei State Hi-tech Industry Development Zone and Photronics UK, Ltd. 10-K 10.42 12/20/2017 10.36 Master Lease Agreement dated October 12, 2020, between TD Equipment Finance and the Company 10-K 10.38 1/15/2021 10.37 Master Lease Agreement Dated September 5, 2019 between Bank of America and the Company 10-Q 10.28 9/5/2019 10.38 Fixed Asset Loan Contract dated October 1, 2020, between Hefei Photronics Mask Corporation and China Construction Bank Corporation 10-K 10.39 1/15/2021 10.39 Maximum Mortgage Contract dated October 1, 2020 between Photronics Mask Corporation Hefei and China Construction Bank Corporation Hefei Shusshan Branch 10-K 10.40 1/15/2021 21 List of Subsidiaries of the Company 10-K 21 X 23.1 Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm 10-K 23.1 X 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 10-K 31.1 X 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 10-K 32.2 X 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 10-K 32.1 X 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 10-K 32.2 X 74 Table of Contents 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 10-K 101.INS X 101.SCH Inline XBRL Taxonomy Extension Schema Document 10-K 101.SCH X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 10-K 101.CAL X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 10-K 101.DEF X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 10-K 101.LAB X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 10-K 101.PRE X 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in, Exhibit 101) X + Represents a management contract or compensatory plan or arrangement. # Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. The Company will provide a copy of any exhibit upon receipt of a written request for the particular exhibit or exhibits desired. All requests should be addressed to the Company’s general counsel at the address of the Company’s principal executive offices. ITEM 16. FORM 10-K SUMMARY Not applicable. 75 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PHOTRONICS, INC. (Registrant) By /s/ John P. Jordan By /s/ Eric Rivera John P. Jordan Executive Vice President, Chief Financial Officer (Principal Financial Officer) Eric Rivera Vice President, Corporate Controller (Principal Accounting Officer) December 23, 2022 December 23, 2022 Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ Frank Lee Frank Lee Chief Executive Officer Director (Principal Executive Officer) December 23, 2022 By /s/ John P. Jordan John P. Jordan Executive Vice President, Chief Financial Officer (Principal Financial Officer) December 23, 2022 By /s/ Eric Rivera Eric Rivera Vice President, Corporate Controller (Principal Accounting Officer) December 23, 2022 By /s/ Constantine S. Macricostas Constantine S. Macricostas Chairman of the Board December 23, 2022 By /s/ Walter M. Fiederowicz Walter M. Fiederowicz Director December 23, 2022 By /s/ Adam Lewis Adam Lewis Director December 23, 2022 By /s/ Daniel Liao Daniel Liao Director December 23, 2022 By /s/ George Macricostas George Macricostas Director December 23, 2022 By /s/ Mary Paladino Mary Paladino Director December 23, 2022 By /s/ Mitchell G. Tyson Mitchell G. Tyson Director December 23, 2022 76