<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1997 or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- -------------
Commission file number 0-27744
PCD Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2604950
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 Technology Drive,
Centennial Park,
Peabody, Massachusetts
(Address of principal executive offices)
01960-7977
(Zip Code)
Registrant's telephone number, including area code: 978-532-8800
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Number of shares of common stock, $0.01 par value, outstanding at
October 10, 1997: 6,015,932
<PAGE>
PCD Inc.
FORM 10-Q
FOR THE QUARTER ENDED
SEPTEMBER 27, 1997
Statements in this report concerning the future financial
condition, results of operations and business of the Company are
"forward-looking" statements as defined in the Securities Act of
1933 and Securities Exchange Act of 1934. Investors are cautioned
that these forward-looking statements are inherently uncertain,
and that actual performance and results are subject to many risk
factors, including the Company's dependence on the integrated
circuit package industry, the Company's dependence on its
principal customers and independent distributors, fluctuations in
demand for the Company's products, patent litigation involving
the Company, rapid technological evolution in the electronics
industry, and the like. The Company's filings with the Securities
and Exchange Commission, including its 1996 Form 10-K, contain
additional information concerning such risk factors, and copies
of these filings are available from the Company upon request and
without charge.
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The Condensed Consolidated Balance Sheets (unaudited) at
September 27,1997 and December 31, 1996, the Condensed
Consolidated Statements of Income (unaudited) for the three and
nine months ended September 27, 1997 and September 28, 1996 and
the Condensed Consolidated Statements of Cash Flows(unaudited)
for the nine months ended September 27, 1997 and September 28,
1996 are presented below. See the notes to these condensed
consolidated financial statements at the end thereof.
2
<PAGE>
PCD Inc.
CONSOLIDATED BALANCE SHEETS
(Condensed and unaudited)
(In thousands)
<TABLE>
<CAPTION>
9/27/97 12/31/96
------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $23,732 $20,529
Accounts receivable, net.................. 4,250 3,578
Inventory................................. 3,098 2,608
Prepaid expenses and other current assets. 52 89
------- -------
Total current assets............... 31,132 26,804
Equipment and improvements
Equipment and improvements................ 11,332 9,716
Accumulated depreciation.................. 5,553 4,379
------- -------
Equipment and improvements, net.............. 5,779 5,337
Other assets................................. 335 315
------- -------
Total assets....................... $37,246 $32,456
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $ 561 $ 627
Accrued liabilities....................... 2,766 3,123
------- -------
Total current liabilities.......... 3,327 3,750
Stockholders' equity......................... 33,919 28,706
------- -------
Total liabilities and
stockholders' equity.......... $37,246 $32,456
======= =======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
3
<PAGE>
PCD Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Condensed and unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ ------------------
9/27/97 9/28/96 9/27/97 9/28/96
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales...................... $8,077 $6,222 $21,527 $20,533
Cost of sales.................. 4,150 3,497 11,140 11,350
------ ------ ------- -------
Gross profit................... 3,927 2,725 10,387 9,183
Operating expenses............. 1,531 1,236 4,279 4,013
------ ------ ------- -------
Income from operations......... 2,396 1,489 6,108 5,170
Other income, net.............. 290 217 826 480
------ ------ ------- -------
Income before income taxes..... 2,686 1,706 6,934 5,650
Provision for income taxes..... 993 638 2,562 2,104
------ ------ ------- -------
Net income..................... $1,693 $1,068 $ 4,372 $ 3,546
====== ====== ======= =======
Net income per share.......... $ 0.26 $ 0.16 $ 0.66 $ 0.58
====== ====== ======= =======
Weighted average number of
common and common equivalent
shares outstanding........... 6,618 6,569 6,604 6,150
====== ====== ======= =======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4
<PAGE>
PCD Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed and unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
------------------
9/27/97 9/28/96
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 4,372 $ 3,546
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation................................. 1,174 1,055
Amortization of deferred compensation........ 43 43
Allowance for uncollectible accounts......... 10 29
Tax benefit from stock options exercised..... 561 123
Changes in operating assets and liabilities:
Increase in accounts receivable............ (682) (477)
(Increase) decrease in inventory............ (490) 530
Decrease in prepaid expenses
and other current assets................. 37 357
Increase in other assets................... (20) (19)
Decrease in accounts payable............... (66) (334)
Increase (decrease) in accrued liabilities. (357) 113
------- -------
Net cash provided by operating activities 4,582 4,966
Cash flows from investing activities:
Capital expenditures............................ (1,616) (1,418)
------- -------
Net cash used in investing activities.... (1,616) (1,418)
Cash flows from financing activities:
Proceeds from public offering................... - 10,501
Exercise of common stock options................ 237 118
------- -------
Net cash provided by financing activities 237 10,619
------- -------
Net increase in cash.............................. 3,203 14,167
Cash and cash equivalents at beginning of period.. 20,529 3,958
------- -------
Cash and cash equivalents at end of period........ $23,732 $18,125
======= =======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
5
<PAGE>
PCD Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(September 27, 1997 Unaudited)
Note 1. INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the
information presented not misleading. This financial data should
be read in conjunction with the audited financial statements and
notes thereto for the year ended December 31, 1996 which are
included in the Company?s Form 10-K filing. Results for the
interim period presented are not necessarily indicative of
results to be anticipated for the entire year.
Note 2. NET INCOME PER SHARE
Net income per common share is computed using the weighted
average number of shares of common stock outstanding and dilutive
common stock equivalents from the exercise of stock options
(using the treasury stock method). Fully diluted and primary net
income per common share were the same for each period presented.
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share, (?FAS 128") which specifies the computation,
presentation and disclosure requirements of earnings per share
and is effective for financial statements issued for periods
ending after December 15, 1997. The Company has not yet
determined the impact of FAS 128 on net income per share.
Note 3. INVENTORY
<TABLE>
<CAPTION>
9/27/97 12/31/96
------- --------
(In Thousands)
<S> <C> <C>
Inventory:
Raw materials and finished subassemblies $2,130 $1,908
Work in process......................... 219 226
Finished goods.......................... 749 474
------ ------
Total................................. $3,098 $2,608
====== ======
</TABLE>
6
<PAGE>
Note 4. LITIGATION
On August 21, 1995, the Company's wholly-owned subsidiary,
CTi Technologies, Inc. ("CTi"), filed an action in the United
States District Court for the District of Arizona seeking a
declaratory judgment against Wayne K. Pfaff, an individual
residing in Texas ("Pfaff"), and Plastronics Socket Company,
Inc., a corporation affiliated with Pfaff, alleging and seeking a
declaratory judgment that two United States patents issued to
Pfaff and relating to certain burn-in sockets for "leadless" IC
packages (the "Pfaff Leadless Patent") and ball grid array
("BGA") IC packages (the "Pfaff BGA Patent") (collectively, the
"Pfaff Patents") are invalid and are not infringed by CTi, the
products of which include burn-in sockets for certain "leaded"
packages (including Quad Flat Paks)(the "CTi Leaded Products")
and BGA packages (the "CTi BGA Products")(collectively, the "CTi
Products"). Pfaff has filed a counterclaim alleging that CTi
infringes the Pfaff Leadless Patent and has requested an award of
damages; the counterclaim does not allege infringement of the
Pfaff BGA Patent. Pfaff has also sought a permanent injunction
against further infringement by CTi of the Pfaff Leadless Patent.
The Company understands that Pfaff has been issued patents
for the inventions covered by the Pfaff Leadless Patents in
Germany, France, Great Britain, Japan and Malaysia (together with
the United States, the "Territory"). Revenue from sales of CTi
Leaded Products in the Territory in 1996 and 1995 was
approximately $1.9 million and $5.8 million, respectively, which
represented approximately 7% and 23% of the Company's net sales
in 1996 and 1995, respectively. The CTi BGA Products will not
make a significant contribution to revenues of the Company until
years subsequent to 1996. The Pfaff Leadless Patent has been the
subject of earlier litigation initiated by Pfaff against a
burn-in connector manufacturer unrelated to the Company, Wells
Electronics, Inc. ("Wells"), in which Pfaff alleged that the
manufacture and sale of a wide range of Wells products infringed
the Pfaff Leadless Patent. Included among the Wells products
covered by the Pfaff litigation was a group of burn-in sockets
produced by Wells for certain leaded packages (the "Wells Leaded
Products"). The Wells Leaded Products compete directly with CTi
Leaded Products and accept similar IC packages. The Company
believes that Pfaff may assert in CTi's litigation with Pfaff
that Wells Leaded Products are similar in design to CTi Leaded
Products. In October 1995, the United States District Court for
the Northern District of Texas (the "Texas Court") found certain
claims in the Pfaff Leadless Patent to be invalid, but found
other claims in the patent not to be invalid and to be infringed
by certain Wells products, including the Wells Leaded Products.
7
<PAGE>
In September 1997, United States Court of Appeals for the
Federal Circuit ruled that the patent claims found by the
District Court to be infringed by the Wells Leaded Products were
all invalid. Unless reversed, that ruling will be binding on
Pfaff in the CTi-Pfaff action in the District of Arizona. The
Court of Appeals has refused Pfaff's request for reconsideration
of its ruling; however, Pfaff can petition the United States
Supreme Court to accept the case for review. If the Supreme
Court does not accept the case for review, the case will formally
end. The Court of Appeals opinion in the Pfaff-Wells case dealt
specifically with six of the 22 patent claims in the Pfaff
Leadless Patent. While that court's conclusion that those claims
were invalid was based on reasons that are likely to apply to
other patent claims as well, the Court of Appeals decision will
not preclude Pfaff from asserting in the CTi-Pfaff action the
patent claims that were not considered by the Court of Appeals.
The CTi-Pfaff action in the District of Arizona has been
stayed pending the outcome of the appeal from the Pfaff-Wells
case. The Company believes, based on the advice of counsel, that
CTi has meritorious defenses against any claim that CTi Products
infringe the Pfaff Patent, and CTi intends to prosecute and
defend vigorously its position in its declaratory judgement
action and any related or subsequent litigation. There can be no
assurance, however, that the Company or CTi will prevail in
pending or any future litigation with Pfaff, and an adverse
outcome could have a material adverse effect on the financial
condition, results of operations and business of the Company.
Such adverse effect could include, without limitation, the
requirement that CTi pay substantial damages for past
infringement and an injunction against the manufacture or sale in
the United States of such products as are found to be infringing.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Quarter and nine months ended September 27, 1997 compared to the
quarter and nine months ended September 28, 1996.
Net sales for the third quarter ended September 27, 1997
increased 30% to $8.1 million, compared with $6.2 million for the
third quarter last year. Sales of semiconductor burn-in sockets
accounted for 90% of the gain, as sales in this product line in
the third quarter of 1996 were severely affected by the slowdown
in the semiconductor industry. Net sales for the nine months
ended September 27, 1997 were $21.5 million, an increase of 5%,
from $20.5 million in the comparable nine month period in 1996.
Net income for the quarter rose 59% to $1.7 million from
$1.1 million in the third quarter of 1996. Net earnings are
$0.26 per share, compared with $0.16 per share for the same
period a year ago. Net income for the nine months ended
September 27, 1997 was $4.4 million, an increase of 23% from the
comparable nine month period in 1996. Net earnings were $0.66
per share, compared with $0.58 per share for the same period a
year ago.
Gross profit increased to $3.9 million, or 48.6% of net
sales, from $2.7 million, or 43.8% of net sales in the year
earlier period. The effect of new product introductions and
production efficiencies combined to generate this increase in
gross profit as well as increased overhead absorption. For the
nine months ended September 27, 1997, gross profit increased to
48.2% of net sales, or $10.4 million, from 44.7% of net sales, or
$9.2 million in 1996.
Operating expenses for the third quarter were $1.5 million,
or 19.0% of net sales, an increase of $0.3 million, compared to
expenses of $1.2 million or 19.9% of net sales in the year
earlier period. This increase represents higher sales advertising
and trade show costs, testing and investor relation costs. For
the nine months ended, September 27, 1997, operating expenses
were $4.3 million, or 19.9% of net sales compared to $4.0
million, or 19.5% of net sales in 1996.
Other income for the third quarter and nine months increased
to $0.3 million and $0.8 million in 1997 from $0.2 million and
$0.5 in 1996, respectively. Other income consists primarily of
interest income.
9
<PAGE>
The effective rate for income taxes for the quarter ended
September 27, 1997 declined to 37.0% from 37.4% for the year
earlier period.
MATERIAL CHANGES IN FINANCIAL CONDITION
As of September 27, 1997, the Company had cash and cash
equivalents of approximately $23.7 million and working capital of
approximately $27.8 million. Cash provided by operating
activities totaled $3.2 million for the third quarter and $4.6
million for the nine months ended September 27, 1997 compared to
$2.2 million and $5.0 million for the comparable year-earlier
periods.
Capital expenditures were $0.7 million for the third quarter
1997 and are expected to reach $2.3 million by year end, up from
$1.9 million last year.
10
<PAGE>
PCD Inc.
PART II
OTHER INFORMATION
Item 1. Legal Proceeding
On August 21, 1995, the Company's wholly-owned
subsidiary, CTi Technologies, Inc. ("CTi"), filed an
action in the United States District Court for the
District of Arizona seeking a declaratory judgment
against Wayne K. Pfaff, an individual residing in Texas
("Pfaff"), and Plastronics Socket Company, Inc., a
corporation affiliated with Pfaff, alleging and seeking
a declaratory judgment that two United States patents
issued to Pfaff and relating to certain burn-in sockets
for "leadless" IC packages (the "Pfaff Leadless
Patent") and ball grid array ("BGA") IC packages (the
"Pfaff BGA Patent") (collectively, the "Pfaff Patents")
are invalid and are not infringed by CTi, the products
of which include burn-in sockets for certain "leaded"
packages (including Quad Flat Paks)(the "CTi Leaded
Products") and BGA packages (the "CTi BGA
Products")(collectively, the "CTi Products"). Pfaff has
filed a counterclaim alleging that CTi infringes the
Pfaff Leadless Patent and has requested an award of
damages; the counterclaim does not allege infringement
of the Pfaff BGA Patent. Pfaff has also sought a
permanent injunction against further infringement by
CTi of the Pfaff Leadless Patent.
The Company understands that Pfaff has been issued
Patents for the inventions covered by the Pfaff
Leadless Patents in Germany, France, Great Britain,
Japan and Malaysia (together with the United States,
the "Territory"). Revenue from sales of CTi Leaded
Products in the Territory in 1996 and 1995 was
approximately $1.9 million and $5.8 million,
respectively, which represented approximately 7% and
23% of the Company's net sales in 1996 and 1995,
respectively. The CTi BGA Products will not make a
significant contribution to revenues of the Company
until years subsequent to 1996. The Pfaff Leadless
Patent has been the subject of earlier litigation
initiated by Pfaff against a burn-in connector
manufacturer unrelated to the Company, Wells
Electronics, Inc. ("Wells"), in which Pfaff alleged
that the manufacture and sale of a wide range of Wells
products infringed the Pfaff Leadless Patent. Included
among the Wells products covered by the Pfaff
11
<PAGE>
litigation was a group of burn-in sockets produced by
Wells for certain leaded packages (the "Wells Leaded
Products"). The Wells Leaded Products compete directly
with CTi Leaded Products and accept similar IC
packages. The Company believes that Pfaff may assert in
CTi's litigation with Pfaff that Wells Leaded Products
are similar in design to CTi Leaded Products. In
October 1995, the United States District Court for
the Northern District of Texas (the "Texas Court")
found certain claims in the Pfaff Leadless Patent to be
invalid, but found other claims in the patent not to be
invalid and to be infringed by certain Wells products,
including the Wells Leaded Products.
In September 1997, United States Court of
Appeals for the Federal Circuit ruled that the patent
claims found by the District Court to be infringed by
the Wells Leaded Products were all invalid. Unless
reversed, that ruling will be binding on Pfaff in the
CTi-Pfaff action in the District of Arizona. The Court
of appeals has refused Pfaff's request for
reconsideration of it's ruling; however, Pfaff can
petition the United States Supreme Court to accept the
case for review. If the Supreme Court does not accept
the case for review, the case will formally end. The
Court of Appeals opinion in the Pfaff-Wells case dealt
specifically with six of the 22 Patent claims in the
Pfaff Leadless Patent. While that court's conclusion
that those claims were invalid was based on reasons
that are likely to apply to other patent claims as
well, the Court of Appeals decision will not preclude
Pfaff from asserting in the CTi-Pfaff action the patent
claims that were not considered by the Court of Appeals.
The CTi-Pfaff action in the District of Arizona
has been stayed pending the outcome of the appeal from
the Pfaff-Wells case. The Company believes, based on
the advice of counsel, that CTi has meritorious
defenses against any claim that CTi Products
infringe the Pfaff Patent, and CTi intends to prosecute
and defend vigorously its position in its declaratory
judgement action and any related or subsequent
litigation. There can be no assurance, however, that
the Company or CTi will prevail in pending or any
future litigation with Pfaff, and an adverse
outcome could have a material adverse effect on the
financial condition, results of operations and business
of the Company. Such adverse effect could include,
without limitation, the requirement that CTi pay
substantial damages for past infringement and an
injunction against the manufacture or sale in
the United States of such products as are found to be
infringing.
12
<PAGE>
Item 2. Changes in Securities and Use of Proceeds.
The Company's registration statement on Form S-1
(Commission file number 333-1266) relating to the
initial public offering of shares of the Company's
common stock was declared effective by the Securities
and Exchange Commission on March 26, 1996. On July 3,
1997, the Company filed an amendment to its initial
report on Form S-R covering the six-month period
ending on June 26, 1997. None of the information
required to be disclosed has changed since the filing
of this amendment.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.9 Form of stock option agreements for the 1996
Stock Plan.
10.10 Form of option agreement for the 1996 Eligible
Directors Stock Plan.
11.1 Statement re computation of earnings per share.
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the
period ended September 27, 1997.
13
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PCD INC.
(Registrant)
Dated: October 28, 1997 /s/ John L. Dwight, Jr.
----------------- ------------------------
John L. Dwight, Jr.
Chairman of the Board, Chief
Executive Officer and
President (Principal Executive
Officer)
Dated: October 28, 1997 /s/ Mary L. Mandarino
----------------- ------------------------
Mary L. Mandarino
Vice President, Finance and
Administration, Chief
Financial Officer and
Treasurer (Principal Financial
and Accounting Officer)
14
<EXHIBIT> EXHIBIT 10.9
__________________________
Name of Optionee
PCD INC.
INCENTIVE STOCK OPTION AGREEMENT
(PCD 1996 Stock Plan)
THIS AGREEMENT is entered into by and between PCD Inc.,
a Massachusetts corporation with its principal office at Two
Technology Drive, Centennial Park, Peabody, Massachusetts
01960-7977 (hereinafter the "Company"), and the undersigned
employee of the Company (hereinafter the "Optionee").
WHEREAS, the Optionee renders important services to the
Company, and the Company desires to grant an incentive stock
option to the Optionee;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein contained, the parties hereto hereby
agree as follows:
1. GRANT, EXERCISABILITY AND TERM OF OPTION.
(a) The Company hereby grants to the Optionee pursuant
to the PCD 1996 Stock Plan (the "Plan") the option to purchase
from the Company upon the terms and conditions hereinafter set
forth the number of shares ("Shares") of the $0.01 par value
common stock ("Common Stock") of the Company set forth on the
signature page below at the purchase price per Share so set
forth (the "Option Price"). The date of grant of this option
is the date set forth at the execution page of this Agreement
as the "Option Date."
(b) Subject to the provisions of Section 5 hereof, this
option is exercisable in full or in part and shall remain
exercisable until it expires on the tenth anniversary of the
Option Date, unless the option is sooner terminated as
hereinafter specified. Only whole Shares may be purchased
pursuant to this option.
2. CONDITIONS AND LIMITATIONS.
(a) The option is granted on the condition that the
purchase of shares hereunder shall be for investment purposes
<PAGE>
and not with a view to resale or distribution, except that
such condition shall be inoperative if the offering of Shares
subject to the option is registered under the Securities Act
of 1933, as amended, or if in the opinion of counsel for the
Company such Shares may be resold without registration. At
the time of the exercise of the option or any installment
the Company may require to implement the foregoing condition
and to acknowledge the Optionee's familiarity with
restrictions on the resale of the Shares under applicable
securities laws, and the Company may stamp such legend on the
certificate representing the Shares as may be necessary or
appropriate in light of the foregoing condition.
(b) The Company will furnish upon request of the
Optionee copies of the articles of organization of the
Company, as amended, and by-laws of the Company, as amended,
and such publicly available financial and other information
concerning the Company and its business and prospects as may
be reasonably requested by the Optionee in connection with
exercise of this option.
(c) The option shall not be transferable otherwise than
by will or by the laws of descent and distribution, and except
as provided in Section 4 the option shall be exercisable
during the lifetime of the Optionee by the Optionee only.
Notwithstanding the foregoing, however, if the Optionee is
determined to be mentally incompetent and a guardian or
conservator (or other similar person) is appointed by a court
of competent jurisdiction to manage the Optionee's affairs,
the guardian or conservator (or other similar person) may
exercise the option on behalf of the Optionee, provided that
such exercise is made within the time limits prescribed
herein.
(d) The option granted in this Agreement is subject to
the terms, conditions and definitions of the Plan, a copy of
which is attached hereto. To the extent that the terms,
conditions and definitions of this Agreement are inconsistent
with those of the Plan, those of this Agreement shall govern.
The Optionee hereby accepts this option subject to all such
provisions of the Plan and agrees that all decisions under,
and interpretations of, such provisions of the Plan by the
Board of Directors of the Company (the "Board") or the
Committee, as defined in the Plan, shall be final, binding and
conclusive upon the Optionee and his or her heirs.
(e) In the event that the Company, upon the advice of
counsel, deems it necessary to list upon official notice of
issuance any shares to be issued pursuant to the Plan on a
national securities exchange or to register under the
Securities Act of 1933 or other applicable federal or state
statute any shares to be issued pursuant to the Plan, or to
qualify any such shares for exemption from the registration
<PAGE>
requirements of the Securities Act of 1933 under the rules and
regulations of the Securities and Exchange Commission or for
similar exemption under state law, then the Company shall
notify the Optionee to that effect and no Shares shall be
issued until such registration, listing or exemption has been
obtained. The Company shall make prompt application for any
such registration, listing or exemption pursuant to federal or
state law or rules of such securities exchange which it deems
necessary and shall make reasonable efforts to cause such
registration, listing, or exemption to become and remain
effective.
3. EXERCISE OF OPTION; WITHHOLDING TAXES.
(a) Written notice of the exercise of the option or any
installment thereof shall be given to the Company specifying
the number of shares for which the option is exercised and
accompanied by payment in full of the Option Price. Payment
shall be made (a) in cash, (b) by check, (c) by Immediate
Sales Proceeds, as defined below, (d) by delivery and
assignment to the Company of shares of Company stock
(provided that such shares have been held by the Optionee for
at least 6 months before such delivery) owned by the Optionee
(which shares have a Market Price not less than the Option
Price), or (e) by any combination of the foregoing. As used
herein, "Market Price" shall mean the closing price of the
Common Stock as reported on the Nasdaq National Market for the
relevant date (or, if such date is not a trading date or if no
trades took place on such date, then such closing price for
the last previous trading date or the last previous date on
which a trade occurred, as the case may be); provided that if
the Common Stock is no longer traded on the Nasdaq National
Market on the relevant date, then the Market Price as of such
date shall be determined by the Committee. Notwithstanding
the foregoing, this option may not be exercised by delivery
and assignment to the Company of shares of Company stock to
the extent that such delivery and assignment would constitute
a violation of the provisions of any law, or related
regulation or rule, or any agreement or Company policy,
restricting the transfer or redemption of the Company's stock.
As used herein, the term "Immediate Sales Proceeds" shall mean
the assignment in form acceptable to the Company of the
proceeds of a sale of the Shares acquired on the exercise of
this option pursuant to a procedure approved by the Company.
The Company reserves the right to decline to approve any such
procedure in the Company's sole and absolute discretion.
(b) The Company's obligation to deliver Shares upon
exercise of an option shall be subject to the Optionee's
satisfaction of all applicable federal, state and local income
and employment tax withholding obligations. Without limiting
the generality of the foregoing, the Company shall have the
<PAGE>
right to deduct from payments of any kind otherwise due to the
Optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any Shares
issued upon exercise of the option.
4. TERMINATION OF OPTION. In the event that the
Optionee ceases to be employed by the Company or any parent or
subsidiary of the Company (collectively, the "Company Group")
at any time prior to the exercise of this option in full, this
option shall terminate according to the following provisions:
(a) If the Optionee ceases to be employed for any reason
other than death or disability (as defined in Section 22(e)(3)
of the Internal Revenue Code of 1986, as amended (the
"Code")), the Optionee may at any time within a period of one
(1) month after the date of such cessation of employment
exercise the option to the extent that the option was
exercisable on the date of such cessation;
(b) If the Optionee ceases to be employed because of
disability (as defined in Section 22(e)(3) of the Code), the
Optionee may at any time within a period of six months after
the date of such cessation of employment exercise the option
to the extent that the option was exercisable on the date of
such cessation; and
(c) If the Optionee ceases to be employed because of
death, the option, to the extent that the Optionee was
entitled to exercise it on the date of death, may be exercised
within a period of six months after the Optionee's death by
the person or persons to whom the Optionee's rights under the
option shall pass by will or by the laws of descent and
distribution;
provided, however, that this option may not be exercised to
any extent by anyone after the date of its expiration.
5. EXERCISABILITY OF OPTION. So long as Optionee
remains an employee of the Company, this Option may be
exercised only as follows:
(i) commencing on the date of grant of this option,
only to the extent of 25% of the Shares;
(ii) thereafter, on each subsequent anniversary of the
date of grant of this option, to the extent of an additional 25%
of the Shares;
less the number of Shares as to which this Option has been exercised.
<PAGE>
6. "MARKET STAND OFF" AGREEMENT.
(a) The Optionee, if requested by the Company or any
managing underwriter of the Company's securities, shall agree
not to sell or otherwise transfer or dispose of any Shares of
the Company held by the Optionee during the period up to 180
days, as requested by the Company or such underwriter,
following the effective date of a registration statement of
the Company filed under the Securities Act of 1933 (except for
any Company securities held by the Optionee sold pursuant to
such registration statement). Such agreement shall be in
writing in form satisfactory to the Company or such
underwriter. The Company may impose stop-transfer
instructions with respect to the Shares subject to the
foregoing restriction until the end of such period.
(b) The provisions contained in this Section 6 shall not
apply to any transfer of Shares to or in trust for the sole
benefit of the Optionee, or any member of the immediate family
of the Optionee, including for this purpose the undersigned's
spouse, parents, parents-in-law, issue, nephews, nieces,
brothers, brothers-in-law, sisters, sisters-in-law, children
- -in-law and grandchildren-in-law, provided that such
transferee agrees in writing to be subject to the terms of
Section 6.
7. NOTICE OF DISPOSITION OF SHARES. The Optionee hereby
agrees to notify the Company promptly if the Optionee disposes
of any Shares within one (1) year after the date the Optionee
exercises all or part of this option or within two (2) years
after the Option Date. At any time during the one or two year
periods set forth above, the Company may place a legend on any
certificate representing Shares requesting the transfer agent
for the Company's stock to notify the Company of any such
transfer, and the Optionee hereby authorizes such transfer
agent so to notify the Company (whether or not such Optionee's
stock certificates have been so legended). The obligation of
the Optionee to notify the Company of any such transfer shall
continue notwithstanding that a legend has been placed on the
certificate pursuant to the preceding sentence. Optionees are
urged to review the description of the Plan provided by the
Company for a more detailed discussion of the Federal tax
consequences of such a disposition under current law.
Additionally, if the Optionee is subject to Section 16(b) of
the Securities Exchange Act of 1934, as amended, or the rules
and regulations promulgated thereunder, any disposition by the
Optionee of the Optioned Shares purchased under the Option
within six months of the date of grant may deprive the
Optionee of the protection from 16(b) liability which the
provisions of the Plan seek to provide.
<PAGE>
8. $100,000 LIMITATION. Under Section 422 of the Code,
the aggregate Market Price of the shares with respect to which
incentive stock options granted by any member of the Company
Group first become exercisable by an employee during any
calendar year cannot exceed $100,000 (the "$100,000
limitation"). To the extent, if any, that the $100,000
limitation is exceeded by reason of the grant of this option,
this option shall be deemed, to the maximum extent possible,
if any, to be an incentive stock option, and the portion of
this option that is exercisable for shares in excess of the
$100,000 limitation shall be treated as a non-qualified option
pursuant to Section 422(d) of the Code.
9. NOTICES. All notices or demands given pursuant to
this Agreement shall be in writing and shall be deemed to have
been sufficiently given if delivered by hand or sent by
certified or registered mail, postage prepaid, addressed to
the Company at its principal office or to the Optionee (or the
Optionee's legal representatives) at the address stated in the
Optionee's (or their) notice or at the Optionee's address
appearing on the books of the Company.
10. NO EMPLOYMENT COMMITMENT; TAX TREATMENT. Nothing
herein contained shall be deemed to be or constitute an
agreement or commitment by the Company or any other member of
the Company Group to continue the Optionee in its employ.
Although the option granted hereunder is intended to qualify
as an incentive stock option under Section 422 of the Code,
the Company makes no representation about the tax treatment to
the Optionee with respect to receipt or exercise of the option
or acquiring, holding or disposing of the Shares, and the
Optionee represents that the Optionee has had the opportunity
to discuss such treatment (including the possible application
of Section 83 of the Code) with the Optionee's tax adviser.
The Optionee shall have no rights as a stockholder with
respect to the shares subject to the option until the exercise
of the option and the issuance of a stock certificate for the
Shares with respect to which the option shall have been
exercised.
11. ADJUSTMENTS. Upon the occurrence of any of the
following events, after the Option Date, a Optionee's rights
with respect to this Option shall be adjusted as hereinafter
provided:
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of
Common Stock shall be subdivided or combined into a greater or
smaller number of shares or if the Company shall issue any
shares of Common Stock as a stock dividend on its outstanding
Common Stock, the number of shares of Common Stock deliverable
upon the exercise of this Option shall be appropriately
<PAGE>
increased or decreased proportionately, and appropriate
adjustments shall be made in the purchase price per share to
reflect such subdivision, combination or stock dividend.
(b) CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger or
other reorganization in which the holders of the outstanding
voting stock of the Company immediately preceding the
consummation of such event, shall, immediately following such
event, hold, as a group, less than a majority of the voting
securities of the surviving or successor entity, or in the
event of a sale of all or substantially all of the Company's
assets or otherwise (each, an "Acquisition"), the Committee or
the board of directors of any entity assuming the obligations
of the Company hereunder (the "Successor Board"), shall, as to
this Option, if still outstanding, either (i) make appropriate
provision for the continuation of this Option by substituting
on an equitable basis for the shares then subject to this
Option either (a) the consideration payable with respect to
the outstanding shares of Common Stock in connection with the
Acquisition, (b) shares of stock of the surviving or successor
corporation or (c) such other securities as the Successor
Board deems appropriate, the fair market value of which shall
not materially exceed the fair market value of the shares of
Common Stock subject to this Option immediately preceding the
Acquisition; or (ii) upon written notice to the Optionee,
provide that this Option must be exercised, to the extent then
exercisable or to be exercisable as a result of the
Acquisition, within a specified number of days of the date of
such notice, at the end of which period this Option shall
terminate; or (iii) terminate this Option in exchange for a
cash payment equal to the excess of the fair market value of
the shares subject to this Option (to the extent then
exercisable or to be exercisable as a result of the
Acquisition) over the exercise price thereof.
(c) RECAPITALIZATION OR REORGANIZATION. In the event of
a recapitalization or reorganization of the Company (other
than a transaction described in subparagraph (b) above)
pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares
of Common Stock, the Optionee upon exercising this Option
shall be entitled to receive for the purchase price paid upon
such exercise the securities he or she would have received if
he or she had exercised such this Option prior to such
recapitalization or reorganization.
(d) MODIFICATION OF INCENTIVE STOCK OPTIONS.
Notwithstanding the foregoing, any adjustments made pursuant
to subparagraphs (a), (b) or (c) with respect to this Option
shall be made only after the Committee, after consulting with
counsel for the Company, determines whether such adjustment
would constitute a "modification" (as that term in defined in
Section 424 of the Code) of such this Option or would cause
any adverse tax consequences for the Optionee. If the
Committee determines that such adjustments made with respect
to this Option would constitute a modification of this Option
or would cause adverse tax consequences to the holders, it may
refrain from making such adjustments.
<PAGE>
(e) DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, this
Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.
12. MISCELLANEOUS. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the
Commonwealth of Massachusetts. This Agreement shall be
binding upon and inure to the benefit of the heirs and legal
representatives of the Optionee and the successors and assigns
of the Company, but shall not be assigned by the Optionee at
any time without the prior written permission of the Company,
and any such attempted assignment shall be void.
IN WITNESS WHEREOF the parties have executed this Stock
Option Agreement as of the Option Date.
_____________________________
Signature of Optionee
_____________________________
Print Name of Optionee
Address:_____________________
Option Date: ________________
Vesting Commencement
Date: _______________________
No. of Shares: ______________
Option Price: _______________
Accepted, as the issuer of the Shares, in accordance
with the terms of the foregoing Option Agreement as of the
foregoing Option Date.
PCD INC.
By: _________________________
President
<PAGE>
________________________
Name of Optionee
PCD INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
(PCD 1996 Stock Plan)
THIS AGREEMENT is entered into by and between PCD Inc., a
Massachusetts corporation with its principal office at Two
Technology Drive, Centennial Park, Peabody, Massachusetts 01960-
7977 (hereinafter the "Company"), and the undersigned
consultant of the Company (hereinafter the "Optionee").
WHEREAS, the Optionee renders important services to the
Company (such services to be collectively herein referred to as
"Service"), and the Company desires to grant a non-qualified
stock option to the Optionee;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein contained, the parties hereto hereby
agree as follows:
1. GRANT, EXERCISABILITY AND TERM OF OPTION.
(a) The Company hereby grants to the Optionee pursuant to
the PCD 1996 Stock Plan (the "Plan") the option to purchase
from the Company upon the terms and conditions hereinafter set
forth the number of shares ("Shares") of the $0.01 par value
common stock ("Common Stock") of the Company set forth on the
signature page below at the purchase price per Share so set forth
(the "Option Price"). The date of grant of this option is the
date set forth at the execution page of this Agreement as the
"Option Date."
(b) Subject to the provisions of Section 5 hereof, this
option is exercisable in full or in part and shall remain
exercisable until it expires on the tenth anniversary of the
Option Date, unless the option is sooner terminated as
hereinafter specified. Only whole Shares may be purchased
pursuant to this option.
2. CONDITIONS AND LIMITATIONS.
(a) The option is granted on the condition that the
purchase of shares hereunder shall be for investment purposes and
not with a view to resale or distribution, except that such
<PAGE>
condition shall be inoperative if the offering of Shares subject
to the option is registered under the Securities Act of 1933, as
amended, or if in the opinion of counsel for the Company such
Shares may be resold without registration. At the time of the
exercise of the option or any installment thereof, the Optionee
will execute such further agreements as the Company may require
to implement the foregoing condition and to acknowledge the
Optionee's familiarity with restrictions on the resale of the
Shares under applicable securities laws, and the Company may
stamp such legend on the certificate representing the Shares as
may be necessary or appropriate in light of the foregoing
condition.
(b) The Company will furnish upon request of the Optionee
copies of the articles of organization of the Company, as
amended, and by-laws of the Company, as amended, and such
publicly available financial and other information concerning the
Company and its business and prospects as may be reasonably
requested by the Optionee in connection with exercise of this
option.
(c) The option shall not be transferable otherwise than by
will or by the laws of descent and distribution, and except as
provided in Section 4 the option shall be exercisable during the
lifetime of the Optionee by the Optionee only. Notwithstanding
the foregoing, however, if the Optionee is determined to be
mentally incompetent and a guardian or conservator (or other
similar person) is appointed by a court of competent jurisdiction
to manage the Optionee's affairs, the guardian or conservator (or
other similar person) may exercise the option on behalf of the
Optionee, provided that such exercise is made within the time
limits prescribed herein.
(d) The option granted in this Agreement is subject to the
terms, conditions and definitions of the Plan, a copy of which is
attached hereto. To the extent that the terms, conditions and
definitions of this Agreement are inconsistent with those of the
Plan, those of this Agreement shall govern. The Optionee hereby
accepts this option subject to all such provisions of the Plan
and agrees that all decisions under, and interpretations of, such
provisions of the Plan by the Board of Directors of the Company
(the "Board") or the Committee, as defined in the Plan, shall
be final, binding and conclusive upon the Optionee and his or her
heirs.
(e) In the event that the Company, upon the advice of
counsel, deems it necessary to list upon official notice of
issuance any shares to be issued pursuant to the Plan on a
national securities exchange or to register under the Securities
Act of 1933 or other applicable federal or state statute any
shares to be issued pursuant to the Plan, or to qualify any such
shares for exemption from the registration requirements of the
Securities Act of 1933 under the rules and regulations of the
<PAGE>
Securities and Exchange Commission or for similar exemption under
state law, then the Company shall notify the Optionee to that
effect and no Shares shall be issued until such registration,
listing or exemption has been obtained. The Company shall make
prompt application for any such registration, listing or
exemption pursuant to federal or state law or rules of such
securities exchange which it deems necessary and shall make
reasonable efforts to cause such registration, listing, or
exemption to become and remain effective.
3. EXERCISE OF OPTION; WITHHOLDING TAXES.
(a) Written notice of the exercise of the option or any
installment thereof shall be given to the Company specifying the
number of shares for which the option is exercised and
accompanied by payment in full of the Option Price. Payment
shall be made (a) in cash, (b) by check, (c) by Immediate Sales
Proceeds, as defined below, (d) by delivery and assignment to the
Company of shares of Company stock (provided that such shares
have been held by the Optionee for at least 6 months before such
delivery) owned by the Optionee (which shares have a Market Price
not less than the Option Price), or (e) by any combination of the
foregoing. As used herein, "Market Price" shall mean the
closing price of the Common Stock as reported on the Nasdaq
National Market for the relevant date (or, if such date is not a
trading date or if no trades took place on such date, then such
closing price for the last previous trading date or the last
previous date on which a trade occurred, as the case may be);
provided that if the Common Stock is no longer traded on the
Nasdaq National Market on the relevant date, then the Market
Price as of such date shall be determined by the Committee.
Notwithstanding the foregoing, this option may not be exercised
by delivery and assignment to the Company of shares of Company
stock to the extent that such delivery and assignment would
constitute a violation of the provisions of any law, or related
regulation or rule, or any agreement or Company policy,
restricting the transfer or redemption of the Company's stock.
As used herein, the term "Immediate Sales Proceeds" shall mean
the assignment in form acceptable to the Company of the proceeds
of a sale of the Shares acquired on the exercise of this option
pursuant to a procedure approved by the Company. The Company
reserves the right to decline to approve any such procedure in
the Company's sole and absolute discretion.
(b) The Company's obligation to deliver Shares upon
exercise of an option shall be subject to the Optionee's
satisfaction of all applicable federal, state and local income
and employment tax withholding obligations. Without limiting the
generality of the foregoing, the Company shall have the right to
deduct from payments of any kind otherwise due to the Optionee
any federal, state or local taxes of any kind required by law to
be withheld with respect to any Shares issued upon exercise of
<PAGE>
the option.
4. TERMINATION OF OPTION. In the event that the Optionee
ceases to perform Service at any time prior to the exercise of
this option in full, this option shall terminate according to the
following provisions:
(a) If the Optionee ceases to perform Service for any reason
other than death or disability (as defined in Section 22(e)(3) of
the Internal Revenue Code of 1986, as amended (the "Code")),
the Optionee may at any time within a period of one (1) month
after the date of such cessation of employment exercise the
option to the extent that the option was exercisable on the date
of such cessation;
(b) If the Optionee ceases to perform Service because of
disability (as defined in Section 22(e)(3) of the Code), the
Optionee may at any time within a period of six months after the
date of such cessation of employment exercise the option to the
extent that the option was exercisable on the date of such
cessation; and
(c) If the Optionee ceases to perform Service because of
death, the option, to the extent that the Optionee was entitled
to exercise it on the date of death, may be exercised within a
period of six months after the Optionee's death by the person or
persons to whom the Optionee's rights under the option shall pass
by will or by the laws of descent and distribution; provided,
however, that this option may not be exercised to any extent by
anyone after the date of its expiration.
5. EXERCISABILITY OF OPTION. So long as Optionee performs
Service, this Option may be exercised only as follows:
(i) commencing on the date of grant of this option,
only to the extent of 25% of the Shares;
(ii) thereafter, on each subsequent anniversary of the
date of grant of this option, to the extent of an additional 25%
of the Shares;
less the number of Shares as to which this Option has been
exercised.
6. "MARKET STAND OFF" AGREEMENT.
(a) The Optionee, if requested by the Company or any
managing underwriter of the Company's securities, shall agree not
to sell or otherwise transfer or dispose of any Shares of the
Company held by the Optionee during the period up to 180 days, as
requested by the Company or such underwriter, following the
effective date of a registration statement of the Company filed
<PAGE>
under the Securities Act of 1933 (except for any Company
securities held by the Optionee sold pursuant to such
registration statement). Such agreement shall be in writing in
form satisfactory to the Company or such underwriter. The
Company may impose stop-transfer instructions with respect to the
Shares subject to the foregoing restriction until the end of such
period.
(b) The provisions contained in this Section 6 shall not
apply to any transfer of Shares to or in trust for the sole
benefit of the Optionee, or any member of the immediate family of
the Optionee, including for this purpose the undersigned's
spouse, parents, parents-in-law, issue, nephews, nieces,
brothers, brothers-in-law, sisters, sisters-in-law, children-in
- -law and grandchildren-in-law, provided that such transferee
agrees in writing to be subject to the terms of this Section 6.
7. NOTICES. All notices or demands given pursuant to this
Agreement shall be in writing and shall be deemed to have been
sufficiently given if delivered by hand or sent by certified or
registered mail, postage prepaid, addressed to the Company at its
principal office or to the Optionee (or the Optionee's legal
representatives) at the address stated in the Optionee's (or
their) notice or at the Optionee's address appearing on the books
of the Company.
8. NO SERVICE COMMITMENT; TAX TREATMENT. Nothing herein
contained shall be deemed to be or constitute an agreement or
commitment by the Company or any other member of the Company
Group to continue the Optionee in Service. The option granted
hereunder is not intended to qualify as an incentive stock option
under Section 422 of the Code, and the Company makes no
representation about the tax treatment to the Optionee with
respect to receipt or exercise of the option or acquiring,
holding or disposing of the Shares. The Optionee represents that
the Optionee has had the opportunity to discuss such treatment
with the Optionee's tax adviser. The Optionee shall have no
rights as a stockholder with respect to the shares subject to the
option until the exercise of the option and the issuance of a
stock certificate for the Shares with respect to which the option
shall have been exercised.
9. ADJUSTMENTS. Upon the occurrence of any of the
following events, after the Option Date, a Optionee's rights
with respect to this Option shall be adjusted as hereinafter
provided:
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of
Common Stock shall be subdivided or combined into a greater or
<PAGE>
smaller number of shares or if the Company shall issue any shares
of Common Stock as a stock dividend on its outstanding Common
Stock, the number of shares of Common Stock deliverable upon the
exercise of this Option shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be
made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
(b) CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger or
other reorganization in which the holders of the outstanding
voting stock of the Company immediately preceding the
consummation of such event, shall, immediately following such
event, hold, as a group, less than a majority of the voting
securities of the surviving or successor entity, or in the event
of a sale of all or substantially all of the Company's assets or
otherwise (each, an "Acquisition"), the Committee or the board
of directors of any entity assuming the obligations of the
Company hereunder (the "Successor Board"), shall, as to this
Option, if still outstanding, either (i) make appropriate
provision for the continuation of this Option by substituting on
an equitable basis for the shares then subject to this Option
either (a) the consideration payable with respect to the
outstanding shares of Common Stock in connection with the
Acquisition, (b) shares of stock of the surviving or successor
corporation or (c) such other securities as the Successor Board
deems appropriate, the fair market value of which shall not
materially exceed the fair market value of the shares of Common
Stock subject to this Option immediately preceding the
Acquisition; or (ii) upon written notice to the Optionee, provide
that this Option must be exercised, to the extent then
exercisable or to be exercisable as a result of the Acquisition,
within a specified number of days of the date of such notice, at
the end of which period this Option shall terminate; or
(iii) terminate this Option in exchange for a cash payment equal
to the excess of the fair market value of the shares subject to
this Option (to the extent then exercisable or to be exercisable
as a result of the Acquisition) over the exercise price thereof.
(c) RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a
transaction described in subparagraph (b) above) pursuant to
which securities of the Company or of another corporation are
issued with respect to the outstanding shares of Common Stock,
the Optionee upon exercising this Option shall be entitled to
receive for the purchase price paid upon such exercise the
securities he or she would have received if he or she had
exercised such this Option prior to such recapitalization or
reorganization.
(d) DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, this Option
<PAGE>
will terminate immediately prior to the consummation of such
proposed action or at such other time and subject to such other
conditions as shall be determined by the Committee.
10. MISCELLANEOUS. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the
Commonwealth of Massachusetts. This Agreement shall be binding
upon and inure to the benefit of the heirs and legal
representatives of the Optionee and the successors and assigns of
the Company, but shall not be assigned by the Optionee at any
time without the prior written permission of the Company, and any
such attempted assignment shall be void.
IN WITNESS WHEREOF the parties have executed this Stock
Option Agreement as of the Option Date.
___________________________________
Signature of Optionee
___________________________________
Print Name of Optionee
Address: __________________________
___________________________________
Option Date: _____________________
Vesting Commencement
Date: ____________________________
No. of Shares: ___________________
Option Price: $___________________
Accepted, as the issuer of the Shares, in accordance with
the terms of the foregoing Option Agreement as of the foregoing
Option Date.
PCD INC.
By: _______________________________
President
<EXHIBIT> EXHIBIT 10.10
_______________________
Name of Optionee
PCD INC.
ELIGIBLE DIRECTOR OPTION AGREEMENT
THIS AGREEMENT is entered into by and between PCD Inc.,
a Massachusetts corporation with its principal office at Two
Technology Drive, Centennial Park, Peabody, Massachusetts
01960-7977 (hereinafter the "Company"), and the undersigned
non-employee director of the Company (hereinafter the
"Optionee").
WHEREAS, the Optionee renders important services to the
Company (such services to be collectively herein referred to
as "Service"), and the Company desires to grant a non
- -qualified stock option to the Optionee;
NOW, THEREFORE, in consideration of the foregoing and
the mutual agreements herein contained, the parties hereto
hereby agree as follows:
1. GRANT, EXERCISABILITY AND TERM OF OPTION.
(a) The Company hereby grants to the Optionee pursuant
to the PCD 1996 Eligible Directors Stock Plan (the "Plan")
the option to purchase from the Company upon the terms and
conditions hereinafter set forth the number of shares
("Shares") of the $0.01 par value common stock ("Common
Stock") of the Company set forth on the signature page below
at the purchase price per Share so set forth (the "Option
Price"). The date of grant of this option is the date set
forth at the execution page of this Agreement as the "Option
Date."
(b) Subject to the provisions of Section 5 hereof,
this option is exercisable in full or in part and shall
remain exercisable until it expires on the tenth anniversary
of the Option Date, unless the option is sooner terminated
as hereinafter specified. Only whole Shares may be
purchased pursuant to this option.
2. CONDITIONS AND LIMITATIONS.
(a) The option is granted on the condition that the
<PAGE>
purchase of shares hereunder shall be for investment
purposes and not with a view to resale or distribution,
except that such condition shall be inoperative if the
offering of Shares subject to the option is registered under
the Securities Act of 1933, as amended, or if in the opinion
of counsel for the Company such Shares may be resold without
registration. At the time of the exercise of the option or
any installment thereof, the Optionee will execute such
further agreements as the Company may require to implement
the foregoing condition and to acknowledge the Optionee's
familiarity with restrictions on the resale of the Shares
under applicable securities laws, and the Company may stamp
such legend on the certificate representing the Shares as
may be necessary or appropriate in light of the foregoing
condition.
(b) The Company will furnish upon request of the
Optionee copies of the articles of organization of the
Company, as amended, and by-laws of the Company, as amended,
and such publicly available financial and other information
concerning the Company and its business and prospects as may
be reasonably requested by the Optionee in connection with
exercise of this option.
(c) The option shall not be transferable otherwise
than by will or by the laws of descent and distribution, and
except as provided in Section 4 the option shall be
exercisable during the lifetime of the Optionee by the
Optionee only. Notwithstanding the foregoing, however, if
the Optionee is determined to be mentally incompetent and a
guardian or conservator (or other similar person) is
appointed by a court of competent jurisdiction to manage the
Optionee's affairs, the guardian or conservator (or other
similar person) may exercise the option on behalf of the
Optionee, provided that such exercise is made within the
time limits prescribed herein.
(d) The option granted in this Agreement is subject to
the terms, conditions and definitions of the Plan, a copy of
which is attached hereto. To the extent that the terms,
conditions and definitions of this Agreement are
inconsistent with those of the Plan, those of this Agreement
shall govern. The Optionee hereby accepts this option
subject to all such provisions of the Plan and agrees that
all decisions under, and interpretations of, such provisions
of the Plan by the Board of Directors of the Company (the
"Board") or the Committee, as defined in the Plan, shall be
final, binding and conclusive upon the Optionee and his or
her heirs.
(e) In the event that the Company, upon the advice of
counsel, deems it necessary to list upon official notice of
issuance any shares to be issued pursuant to the Plan on a
<PAGE>
national securities exchange or to register under the
Securities Act of 1933 or other applicable federal or state
statute any shares to be issued pursuant to the Plan, or to
qualify any such shares for exemption from the registration
requirements of the Securities Act of 1933 under the rules
and regulations of the Securities and Exchange Commission or
for similar exemption under state law, then the Company
shall notify the Optionee to that effect and no Shares shall
be issued until such registration, listing or exemption has
been obtained. The Company shall make prompt application
for any such registration, listing or exemption pursuant to
federal or state law or rules of such securities exchange
which it deems necessary and shall make reasonable efforts
to cause such registration, listing, or exemption to become
and remain effective.
3. EXERCISE OF OPTION; WITHHOLDING TAXES.
(a) Written notice of the exercise of the option or
any installment thereof shall be given to the Company
specifying the number of shares for which the option is
exercised and accompanied by payment in full of the Option
Price. Payment shall be made (a) in cash, (b) by check, (c)
by Immediate Sales Proceeds, as defined below, (d) by
delivery and assignment to the Company of shares of Company
stock (provided that such shares have been held by the
Optionee for at least 6 months before such delivery) owned
by the Optionee (which shares have a Market Price not less
than the Option Price), or (e) by any combination of the
foregoing. As used herein, "Market Price" shall mean the
closing price of the Common Stock as reported on the Nasdaq
National Market for the relevant date (or, if such date is
not a trading date or if no trades took place on such date,
then such closing price for the last previous trading date
or the last previous date on which a trade occurred, as the
case may be); provided that if the Common Stock is no longer
traded on the Nasdaq National Market on the relevant date,
then the Market Price as of such date shall be determined by
the Committee. Notwithstanding the foregoing, this option
may not be exercised by delivery and assignment to the
Company of shares of Company stock to the extent that such
delivery and assignment would constitute a violation of the
provisions of any law, or related regulation or rule, or any
agreement or Company policy, restricting the transfer or
redemption of the Company's stock. As used herein, the term
"Immediate Sales Proceeds" shall mean the assignment in form
acceptable to the Company of the proceeds of a sale of the
Shares acquired on the exercise of this option pursuant to a
procedure approved by the Company. The Company reserves the
right to decline to approve any such procedure in the
Company's sole and absolute discretion.
<PAGE>
(b) The Company's obligation to deliver Shares upon
exercise of an option shall be subject to the Optionee's
satisfaction of all applicable federal, state and local
income and employment tax withholding obligations. Without
limiting the generality of the foregoing, the Company shall
have the right to deduct from payments of any kind otherwise
due to the Optionee any federal, state or local taxes of any
kind required by law to be withheld with respect to any
Shares issued upon exercise of the option.
4. TERMINATION OF OPTION. In the event that the
Optionee ceases to be a director at any time prior to the
exercise of this option in full, this option shall terminate
according to the following provisions:
(a) If the Optionee ceases be a director for any
reason other than death or disability (as defined in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code")), the Optionee may at any time within a period
of twelve months after the date of such cessation of service
as a director exercise the option to the extent that the
option was exercisable on the date of such cessation;
(b) If the Optionee ceases to be a director because of
disability (as defined in Section 22(e)(3) of the Code), the
Optionee may at any time within a period of twelve months
after the date of such cessation of service as a director
exercise the option to the extent that the option was
exercisable on the date of such cessation; and
(c) If the Optionee ceases to be a director because of
death, the option, to the extent that the Optionee was
entitled to exercise it on the date of death, may be
exercised within a period of twelve months after the
Optionee's death by the person or persons to whom the
Optionee's rights under the option shall pass by will or by
the laws of descent and distribution;
provided, however, that this option may not be exercised to
any extent by anyone after the date of its expiration.
5. EXERCISABILITY OF OPTION. So long as Optionee is
an Eligible Director, this Option may be exercised only as
follows: in full six months after the Option Date.
6. "MARKET STAND OFF" AGREEMENT.
(a) The Optionee, if requested by the Company or any
managing underwriter of the Company's securities, shall
agree not to sell or otherwise transfer or dispose of any
<PAGE>
Shares of the Company held by the Optionee during the period
up to 180 days, as requested by the Company or such
underwriter, following the effective date of a registration
statement of the Company filed under the Securities Act of
1933 (except for any Company securities held by the Optionee
sold pursuant to such registration statement). Such
agreement shall be in writing in form satisfactory to the
Company or such underwriter. The Company may impose stop
- -transfer instructions with respect to the Shares subject to
the foregoing restriction until the end of such period.
(b) The provisions contained in this Section 6 shall
not apply to any transfer of Shares to or in trust for the
sole benefit of the Optionee, or any member of the immediate
family of the Optionee, including for this purpose the
undersigned's spouse, parents, parents-in-law, issue,
nephews, nieces, brothers, brothers-in-law, sisters,
sisters-in-law, children-in-law and grandchildren-in-law,
provided that such transferee agrees in writing to be
subject to the terms of this Section 6.
7. NOTICES. All notices or demands given pursuant to
this Agreement shall be in writing and shall be deemed to
have been sufficiently given if delivered by hand or sent by
certified or registered mail, postage prepaid, addressed to
the Company at its principal office or to the Optionee (or
the Optionee's legal representatives) at the address stated
in the Optionee's (or their) notice or at the Optionee's
address appearing on the books of the Company.
8. NO SERVICE COMMITMENT; TAX TREATMENT. Nothing
herein contained shall entitle the Optionee to remain a
director of PCD or an Eligible Director under the plan. The
option granted hereunder is not intended to qualify as an
incentive stock option under Section 422 of the Code, and
the Company makes no representation about the tax treatment
to the Optionee with respect to receipt or exercise of the
option or acquiring, holding or disposing of the Shares.
The Optionee represents that the Optionee has had the
opportunity to discuss such treatment with the Optionee's
tax adviser. The Optionee shall have no rights as a
stockholder with respect to the shares subject to the option
until the exercise of the option and the issuance of a stock
certificate for the Shares with respect to which the option
shall have been exercised.
9. ADJUSTMENTS. Upon the occurrence of any of the
following events, after the Option Date, a Eligible
Director's rights with respect to this Option shall be
adjusted as hereinafter provided:
<PAGE>
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares
of Common Stock shall be subdivided or combined into a
greater or smaller number of shares or if the Company shall
issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of this Option shall be
appropriately increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock
dividend.
(b) CONSOLIDATIONS OR MERGERS. If the Company is to
be consolidated with or acquired by another entity in a
merger or other reorganization in which the holders of the
outstanding voting stock of the Company immediately
preceding the consummation of such event, shall, immediately
following such event, hold, as a group, less than a majority
of the voting securities of the surviving or successor
entity, or in the event of a sale of all or substantially
all of the Company's assets or otherwise (each, an
"Acquisition"), the Committee or the board of directors of
any entity assuming the obligations of the Company hereunder
(the "Successor Board"), shall, as to this Option, if still
outstanding, either (i) make appropriate provision for the
continuation of this Option by substituting on an equitable
basis for the shares then subject to this Option either (a)
the consideration payable with respect to the outstanding
shares of Common Stock in connection with the Acquisition,
(b) shares of stock of the surviving or successor
corporation or (c) such other securities as the Successor
Board deems appropriate, the fair market value of which
shall not materially exceed the fair market value of the
shares of Common Stock subject to this Option immediately
preceding the Acquisition; or (ii) upon written notice to
the Optionee, provide that this Option must be exercised, to
the extent then exercisable or to be exercisable as a result
of the Acquisition, within a specified number of days of the
date of such notice, at the end of which period this Option
hall terminate; or (iii) terminate this Option in exchange
for a cash payment equal to the excess of the fair market
value of the shares subject to this Option (to the extent
then exercisable or to be exercisable as a result of the
Acquisition) over the exercise price thereof.
(c) RECAPITALIZATION OR REORGANIZATION. In the event
of a recapitalization or reorganization of the Company
(other than a transaction described in subparagraph (b)
above) pursuant to which securities of the Company or of
another corporation are issued with respect to the
outstanding shares of Common Stock, the Optionee upon
exercising this Option shall be entitled to receive for the
purchase price paid upon such exercise the securities he or
<PAGE>
she would have received if he or she had exercised such this
Option prior to such recapitalization or reorganization.
(d) DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, this
Option will terminate immediately prior to the consummation
of such proposed action or at such other time and subject to
such other conditions as shall be determined by the
Committee.
10. MISCELLANEOUS. This Agreement shall be governed
by, and construed and enforced in accordance with, the laws
of the Commonwealth of Massachusetts. This Agreement shall
be binding upon and inure to the benefit of the heirs and
legal representatives of the Optionee and the successors and
assigns of the Company, but shall not be assigned by the
Optionee at any time without the prior written permission of
the Company, and any such attempted assignment shall be
void.
IN WITNESS WHEREOF the parties have executed this Stock
Option Agreement as of the Option Date.
__________________________
Signature of Optionee
__________________________
Print Name of Optionee
Address: _________________
__________________________
Option Date:______________
No. of Shares:____________
Option Price: ____________
Accepted, as the issuer of the Shares, in accordance
with the terms of the foregoing Option Agreement as of the
foregoing Option Date.
PCD INC.
By:___________________________
President
<EXHIBIT> EXHIBIT 11.1
<TABLE>
PCD Inc.
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE (1)
<S> <C>
For the quarter ended September 27, 1997
Common stock outstanding,
beginning of the period...................... 5,953,682
Weighted average common stock issued
during the period............................ 28,002
Dilutive effect of common stock equivalents.... 636,302
---------
Weighted average number of common and common
equivalent shares outstanding................ 6,617,986
=========
Net income per share........................... 0.26
=========
For the quarter ended September 28, 1996
Common stock outstanding,
beginning of the period...................... 5,723,832
Weighted average common stock issued
during the period............................ 39,557
Dilutive effect of common stock equivalents.... 805,680
---------
Weighted average number of common and common
equivalent shares outstanding................ 6,569,069
=========
Net income per share........................... 0.16
=========
For the nine months ended September 27, 1997
Common stock outstanding,
beginning of the period...................... 5,854,733
Weighted average common stock issued
during the period............................ 77,775
Dilutive effect of common stock equivalents.... 671,812
---------
Weighted average number of common and common
equivalent shares outstanding................ 6,604,320
=========
Net income per share........................... 0.66
=========
For the nine months ended September 28, 1996
Common stock outstanding,
beginning of the period...................... 4,597,032
Weighted average common stock issued
during the period............................ 764,572
Dilutive effect of common stock equivalents.... 788,619
---------
Weighted average number of common and common
equivalent shares outstanding................ 6,150,223
=========
Net income per share........................... 0.58
=========
</TABLE>
(1) All common and common equivalent shares have been restated to
reflect a 12-for-1 stock split of the Company?s common stock
effected in February, 1996.
<EXHIBIT>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
PCD Inc.
CTi Technologies, Inc.
PCD Securities Corp.
PCD USVI Inc.
PCD Control Systems, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY TO REFERENCE TO SUCH FINANCIAL INFORMATION
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-27-1997
<CASH> 23732
<SECURITIES> 0
<RECEIVABLES> 4492
<ALLOWANCES> 242
<INVENTORY> 3098
<CURRENT-ASSETS> 31132
<PP&E> 11332
<DEPRECIATION> 5553
<TOTAL-ASSETS> 37246
<CURRENT-LIABILITIES> 3327
<BONDS> 0
0
0
<COMMON> 60
<OTHER-SE> 33859
<TOTAL-LIABILITY-AND-EQUITY> 37246
<SALES> 21527
<TOTAL-REVENUES> 21527
<CGS> 11140
<TOTAL-COSTS> 11140
<OTHER-EXPENSES> 4279
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6934
<INCOME-TAX> 2562
<INCOME-CONTINUING> 4372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4372
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
</TABLE>
