.

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pryw4sv5Xc624Y3lKNjNuiNZrpHJ4JMM8lSXc65HjEgzeHaT2Id5Cctu4y9cRZet lNCx/ocZzhzaPEHVMx43Mw== 0001007594-02-000019.txt : 20020422 0001007594-02-000019.hdr.sgml : 20020422 ACCESSION NUMBER: 0001007594-02-000019 CONFORMED SUBMISSION TYPE: SC TO-I PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20020422 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PCD INC CENTRAL INDEX KEY: 0001007594 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 042604950 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I SEC ACT: 1934 Act SEC FILE NUMBER: 005-49968 FILM NUMBER: 02616507 BUSINESS ADDRESS: STREET 1: TWO TECHNOLOGY DR STREET 2: CENTENNIAL PARK CITY: PEABODY STATE: MA ZIP: 01960 BUSINESS PHONE: 5085328800 MAIL ADDRESS: STREET 1: 2 TECHNOLOGY DRIVE CITY: PEABODY STATE: MA ZIP: 01960 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PCD INC CENTRAL INDEX KEY: 0001007594 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 042604950 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I BUSINESS ADDRESS: STREET 1: TWO TECHNOLOGY DR STREET 2: CENTENNIAL PARK CITY: PEABODY STATE: MA ZIP: 01960 BUSINESS PHONE: 5085328800 MAIL ADDRESS: STREET 1: 2 TECHNOLOGY DRIVE CITY: PEABODY STATE: MA ZIP: 01960 SC TO-I 1 scheduleto.htm TENDER OFFER DOCUMENT .

______________________________________________________________________________

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________

SCHEDULE TO

TENDER OFFER STATEMENT

UNDER

SECTION 14(d)(1) OR 13(e)(1) OF THE

SECURITIES EXCHANGE ACT OF 1934

_______________________________

PCD INC.

(Name Of Subject Company (Issuer) And Filing Person (Offeror))

OPTIONS TO PURCHASE COMMON STOCK, PAR VALUE $0.01 PER SHARE

(Title Of Class Of Securities)

n/a*

(Cusip Number Of Class Of Securities)

John L. Dwight, Jr.

President And Chief Executive Officer

PCD Inc.

2 Technology Driver

Peabody, MA 01960-7977

(978) 532-8800

(Name, Address And Telephone Number Of Person Authorized To Receive Notices And Communications On Behalf Of Filing Person)

COPIES TO:

Thomas C. Chase

Hill & Barlow

One International Place

Boston, MA 02110

(617) 428-3000

CALCULATION OF FILING FEE

-----------------------------------------------------------------------------------------------------------------------

TRANSACTION VALUATION+ AMOUNT OF FILING FEE

-----------------------------------------------------------------------------------------------------------------------

$218,079 $20.06

-----------------------------------------------------------------------------------------------------------------------

+ Calculated solely for purposes of determining the filing fee. This amount assumes that options to purchase 213,000 shares of common stock of PCD Inc. having an aggregate value of $218,079 as of April 22, 2002 will be exchanged and/or cancelled pursuant to this offer. The aggregate value of such options was calculated based on the Black-Scholes option pricing model. The amount of the filing fee was calculated by multiplying the transaction value by $92.00 per million or .000092.

[ ] Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid: Not Applicable.

Form Or Registration No.: Not Applicable.

Filing Party: Not Applicable.

Date Filed: Not Applicable.

[ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

[ ] third party tender offer subject to Rule 14d-1.

[X] issuer tender offer subject to Rule 13e-4.

[ ] going-private transaction subject to Rule 13e-3.

[ ] amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ]

___________________________

* There is no trading market or CUSIP Number for the options. The CUSIP Number for the underlying common stock is 693 18P 106.

* * * * *

ITEM 1. SUMMARY TERM SHEET.

The information set forth under "Summary Term Sheet" in the Offer to Exchange all Outstanding Options for New Options dated April 22, 2002 ("Offer to Exchange"), a copy of which is attached hereto as Exhibit (a)(1), is incorporated herein by reference.

ITEM 2. SUBJECT COMPANY INFORMATION.

(a) The name of the issuer is PCD Inc., a Massachusetts corporation ("PCD" or the "Company"). The address of its principal executive offices is 2 Technology Drive, Peabody, Massachusetts 01960-7977. The telephone number at that address is (978) 532-8800.

(b) This Tender Offer Statement on Schedule TO relates to an offer by the Company to exchange most of the options outstanding under the 1996 Stock Plan (the "1996 Plan") to purchase approximately 213,000 shares of the Company's Common Stock, par value $0.01 per share ("Option Shares"), for new options that will be granted under the 1996 Plan (the "New Options"), upon the terms and subject to the conditions set forth under "The Offer" in the Offer to Exchange. If you are not an employee of PCD or one of its subsidiaries, or if you received your first option grant under the 1996 Plan after January 1, 2002, you will not be eligible to accept the Offer. The information set forth under "The Offer" in the Offer to Exchange is incorporated herein by reference.

(c) The information set forth in the Offer to Exchange under Section 8 ("Price range of shares underlying the options") is incorporated herein by reference.

ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.

(a) The filing person is the issuer. The information set forth under Item 2(a) above is incorporated herein by reference.

ITEM 4. TERMS OF THE TRANSACTION.

(a) The information set forth in the Offer to Exchange under "Summary Term Sheet," Section 2 ("Number of options; Expiration Date"), Section 4 ("Procedures for tendering options"), Section 5 ("Withdrawal rights and change of election"), Section 6 ("Acceptance of options for exchange and issuance of new options"), Section 7 ("Conditions of the offer"), Section 9 ("Source and amount of consideration; terms of new options"), Section 12 ("Status of options acquired by us in the offer; accounting consequences of the offer"), Section 13 ("Legal matters; regulatory approvals"), Section 14 ("Material U.S. federal income tax consequences"), and Section 15 ("Extension of offer; termination; amendment") are incorporated herein by reference.

(b) The information set forth in the Offer to Exchange under Section 11 ("Interests of directors and officers; transactions and arrangements concerning the options") is incorporated herein by reference.

ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND ARRANGEMENTS.

Not applicable.

ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.

(a) The information set forth in the Offer to Exchange under Section 3 ("Purpose of the offer") is incorporated herein by reference.

(b) The information set forth in the Offer to Exchange under Section 12 ("Status of options acquired by us in the offer; accounting consequences of the offer") is incorporated herein by reference.

(c) The information set forth in the Offer to Exchange under Section 3 ("Purpose of the offer") is incorporated herein by reference.

ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

(a) The information set forth in the Offer to Exchange under Section 9 ("Source and amount of consideration; terms of new options") and Section 16 ("Fees and expenses") is incorporated herein by reference.

(b) Not applicable.

(d) Not applicable.

ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.

(a) Not applicable.

ITEM 9. PERSON/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.

(a) Not applicable.

ITEM 10. FINANCIAL STATEMENTS.

(a) The information set forth on pages 23 through 41 of PCD's Annual Report on Form 10-K for its fiscal year ended December 31, 2001 is incorporated herein by reference. The information set forth in Section 18 ("Miscellaneous") of the Offer to Exchange, regarding the locations at which our Annual Report on Form 10-K can be inspected and copies obtained, is incorporated herein by reference.

(b) Not applicable.

ITEM 11. ADDITIONAL INFORMATION.

(a) The information set forth in the Offer to Exchange under Section 13 ("Legal matters; regulatory approvals") is incorporated herein by reference.

(b) Not applicable.

ITEM 12. EXHIBITS.

(a)(1) Offer to Exchange all Outstanding Options for New Options dated April 22, 2002.

(2) Election Form.

(3) Announcement of Option Exchange Program from John L. Dwight, Jr., dated April 22, 2002.

(4) Notice to Change Election from Accept to Reject.

(5) Form of Promise to Grant Stock Option(s).

(6) PCD Inc. Annual Report on Form 10-K for its fiscal year ended December 31, 2001, filed with the SEC on March 20, 2002 and incorporated by reference.

(b) Not applicable.

(d)(1) PCD Inc. 1996 Stock Plan

(g) Not applicable.

(h) Not applicable.

ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3.

(a) Not applicable.

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true, complete and correct.

PCD Inc.

                                                                                    By:   /s/ John L. Dwight, Jr.
                                                                                          John L. Dwight, Jr.
                                                                                          President and Chief Executive Officer

Date: April 22, 2002

INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION

(a)(1) Offer to Exchange all Outstanding Options for New Options dated April 22, 2002.

(a)(2) Election Form.

(a)(3) Announcement of Option Exchange Program.

(a)(4) Notice to Change Election from Accept to Reject.

(a)(5) Form of Promise to Grant Stock Option(s).

(d)(1) PCD Inc. 1996 Stock Plan

EX-1 3 mainofferdoc.htm MAIN OFFERING DOCUMENT .

_____________________________________________________________________

OFFER TO EXCHANGE ALL OUTSTANDING OPTIONS FOR NEW OPTIONS

(THE "OFFER TO EXCHANGE")

_______________________________________________________________________

THIS SUPPLEMENT CONSTITUTES PART OF THE SECTION 10(a) PROSPECTUS

RELATING TO THE PCD INC. 1996 STOCK PLAN

April 22, 2002

____________________________________

PCD INC.

OFFER TO EXCHANGE ALL OUTSTANDING OPTIONS FOR NEW OPTIONS

(THE "OFFER TO EXCHANGE")

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,

EASTERN DAYLIGHT TIME, ON MAY 21, 2002 UNLESS THE OFFER IS EXTENDED.

PCD Inc. ("PCD" or the "Company") is offering eligible employees the opportunity to exchange all outstanding options to purchase shares of PCD common stock for new options which we will grant under the PCD Inc. 1996 Stock Plan (the "1996 Stock Plan"). We are making the offer upon the terms and conditions described in this Offer to Exchange (the "Offer to Exchange"), the related Announcement of Option Exchange Program from John L. Dwight, Jr. dated April 22, 2002 (the "Announcement"), and the Election Form (which together, as they may be amended from time to time, constitute the "Offer" or "Program").

The number of shares subject to the new options to be granted to each eligible employee will be equal to the number of shares subject to the options tendered by the eligible employee and accepted for exchange. Subject to the terms and conditions of this Offer, we will grant the new options on or about the first business day which is at least six months and one day after the date we cancel the options accepted for exchange. You may tender options for all, some or none of the outstanding, unexercised shares subject to an individual option grant. All tendered options accepted by us through the Offer will be cancelled as promptly as practicable after 5:00 PM Eastern Daylight Time on the date the Offer ends. The Offer is currently scheduled to expire on May 21, 2002 (the "Expiration Date") and we expect to cancel options on May 24, 2002, or as soon as possible thereafter (the "Cancellation Date"). IF YOU TENDER ANY OPTIONS FOR EXCHANGE, YOU ALSO WILL BE REQUIRED TO TENDER ALL OPTI ONS GRANTED TO YOU DURING THE SIX MONTH PERIOD PRIOR TO COMMENCEMENT OF THE OFFER. This means that if you participate in the Offer, you will be required to tender all options granted to you since October 22, 2001.

The Offer is not conditioned on a minimum number of options being tendered. Participation in the Offer is completely voluntary. The Offer is subject to conditions that we describe in section 7 of this Offer to Exchange.

You may participate in the Offer if you are an otherwise eligible employee of PCD or one of our subsidiaries, and you first received an option grant under the 1996 Stock Plan on or before January 1, 2002. Directors of PCD, including directors who are also employees, and employees who first received option grants under the 1996 Stock Plan after January 1, 2002 are not eligible to participate. In order to receive a new option pursuant to this Offer, you must remain an employee as of the date on which the new options are granted, which will be at least six months and one day after the Cancellation Date.

If you tender options for exchange as described in the Offer, and we accept your tendered options, then, subject to the terms of this Offer, we will grant you new options under the 1996 Stock Plan.

The exercise price per share of the new options will be 100% of the fair market value on the date of grant, as determined by the closing price reported by the Nasdaq National Market on the last business day before the date of grant.

Each new option will be exercisable for the same number of shares as remained outstanding under the tendered options.

Each new option granted will vest in accordance with the vesting schedule of the cancelled options, as follows:

a) any shares that were fully vested on the date that the Offer expires will be fully vested,

b) all unvested options on the date the Offer expires that would have been fully vested on the date the new options are granted (at least six months and one day from the date this Offer expires) will be fully vested, and

c) all remaining unvested options will have a vesting schedule that is equivalent to what would have been in place had the cancelled option remained in
effect. For example

1) An employee cancels an option that is 5/16th (one year plus one quarter) vested at the time of cancellation

2) The new grant occurs at least 6 months and one day (two quarters) after cancellation.

3) The replacement option will be 7/16th vested at the time of grant

Although the Board of Directors has approved the Offer, neither we nor our Board of Directors makes any recommendation as to whether you should tender or not tender your options for exchange. You must make your own decision whether or not to tender your options.

Shares of PCD common stock are traded on the Nasdaq National Market under the symbol "PCDI." On April 15, 2002, the closing price of our common stock reported on the Nasdaq National Market was $1.09 per share.

WE RECOMMEND THAT YOU EVALUATE CURRENT AND HISTORICAL MARKET QUOTES FOR OUR COMMON STOCK, AMONG OTHER FACTORS, BEFORE DECIDING WHETHER TO TENDER YOUR OPTIONS.

THIS OFFER TO EXCHANGE HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE SEC) OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS OFFER TO EXCHANGE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

You should direct questions about the Offer or requests for assistance or for additional copies of this Offer to Exchange, the Announcement, and the Election to Jack Sheehan, Chief Financial Officer, at PCD Inc., 2 Technology Drive, Peabody, MA 01960 (telephone: (978) 532-8800). You should also request a Notice to Change Election from Accept to Reject from Jack Sheehan if applicable.

IMPORTANT

If you wish to tender your options for exchange, you must complete and sign the Election Form in accordance with its instructions, and fax or hand deliver it and any other required documents to Jack Sheehan at fax number (978) 538-3026, no later than 5:00 p.m. on May 21, 2002.

We are not making the Offer to, and we will not accept any tender of options from or on behalf of, option holders in any jurisdiction in which the Offer or the acceptance of any tender of options would not be in compliance with the laws of that jurisdiction. However, we may, at our discretion, take any actions necessary for us to make the Offer to option holders in any of these jurisdictions.

WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER YOU SHOULD TENDER OR NOT TENDER YOUR OPTIONS THROUGH THE OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT, IN THE RELATED ANNOUNCEMENT, ELECTION FORM AND NOTICE TO CHANGE ELECTION FROM ACCEPT TO REJECT. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US.

TABLE OF CONTENTS
		PAGE
Summary Term Sheet		1
Certain Risks of Participating in the Offer		8
Introduction		11
The Offer		12
1. Eligibility 2. Number of options; Expiration Date 3. Purpose of the Offer 4. Procedures for tendering options 5. Withdrawal Rights and Change of Election 6. Acceptance of options for exchange and issuance of new options 7. Conditions of the Offer 8. Price range of shares underlying the options 9. Source and amount of consideration; terms of new options 10. Information concerning PCD 11. Interests of directors and officers; transactions and arrangements concerning the options 12. Status of options acquired by us in the Offer; accounting consequences of the Offer 13. Legal matters; regulatory approvals 14. Material U.S. Federal Income Tax Consequences 15. Extension of Offer; termination; amendment 16. Fees and expenses 17. Additional information 18. Miscellaneous		12 12 13 14 14 16 17 18 19 22 23 23 23 24 26 27 27 28
Schedule A Information Concerning the Directors and Executive Officers of PCD Inc		A-1
Schedule B Summary Financial Information		B-1

SUMMARY TERM SHEET

The commencement date of the offer is April 22, 2002 (the "Commencement Date").
The offer allows employees to cancel existing stock options, whether vested or unvested, and receive an equivalent number of "at-the-money" stock options at least six months and one day after cancellation of the existing stock options (the "New Grant Date").
The offer is being made only to employees who were participants in PCD's stock option plan before January 1, 2002. The offer is not available to employees who received PCD options for the first time after January 1, 2002.
All employees (subject to the preceding sentence), including officers, can participate in the offer. Directors, including officers who are directors, cannot participate.
The number of options granted to the employee following the six month and one day period will be the same number as the number of options cancelled (subject to any intervening stock splits, etc.).
The exercise price of the new options will be the market price of our common stock on the New Grant Date, as measured by the closing price of our stock on the last business day before the New Grant Date.
Employees can elect to cancel all, some or none of their existing options.
However, if an employee elects to cancel any options, then, in addition, all options granted in the six month period immediately prior to the commencement date of the offer must also be cancelled.
Eligible employees will have until May 21, 2002 (at least twenty (20) business days from the commencement date of the offer) (the "Expiration Date") to decide if they wish to participate. We plan to cancel properly tendered options on the day which is the third business day following the end of the 20-day period (the "Cancellation Date"). The six month and one day period begins following the Cancellation Date.
The option exchange resets the employee's holding period for income tax purposes as to any options which are exchanged.
The timing of the offer is designed so that the Company will not have to incur any stock compensation expense as a result of the option exchange.
During the six month and one day period, no other option grants may be made to the employees who are participating in the offer (such grants would disallow the "compensation expense-free" aspect of the offer to the Company).
The Company cannot provide "stock price protection" to participating employees during the six month and one day period. Participating employees must bear the risk of market movements in the stock price during the period.
Participating employees must remain employed during the six month and one day period in order to receive a new grant.
The vesting schedule for the new option grants will be calculated so that employees have the same number of vested options following the six month and one day period as they would have had under the cancelled options.
If the Company is acquired prior to the New Grant Date by way of a merger or similar transaction whereby the liabilities of the Company are assumed, the acquiror must honor our commitment to grant you new options. In such event, your new option would be subject to the terms and conditions of the acquiror's stock option plan. If the Company is acquired prior to the New Grant Date other than by a merger or similar transaction or if the acquiror does not have a comparable stock option plan, the Company will use commercially reasonable efforts to obtain fair compensation for your options although the Company can make no guarantees regarding the results of its efforts.

The following are answers to some of the questions that you may have about the offer. We urge you to read carefully the remainder of this Offer to Exchange, the accompanying Announcement of Option Exchange Program from John L. Dwight, Jr., dated April 22, 2002 (the "Announcement"), and the Election Form which together, as they may be amended from time to time, constitute the "Offer") because the information in this summary is not complete, and additional important information is contained in the remaining documents. We have included page references to the remainder of this Offer to Exchange where you can find a more complete description of the topics in this summary.

WHAT SECURITIES ARE WE OFFERING TO EXCHANGE?

We are offering to exchange all outstanding, unexercised options to purchase shares of common stock of PCD held by eligible employees for new options we will grant under the 1996 Stock Plan (the "1996 Stock Plan"). (Page 11)

WHY ARE OPTIONS TO PURCHASE SHARES OF COMMON STOCK OF PCD UNDER THE 1992 STOCK OPTION PLAN EXCLUDED FROM THIS OFFER?

Most of the options outstanding under the 1992 Stock Option Plan expire before November 26, 2002. (Page 11)

WHO IS ELIGIBLE TO PARTICIPATE?

Employees are eligible to participate if (1) they are employees of PCD Inc. or one of PCD's subsidiaries as of the date the Offer commences and the date on which the tendered options are cancelled and (2) they first received an option grant under the 1996 Stock Plan on or before January 1, 2002. Members of the Board of Directors, including employee directors, are not eligible to participate. In order to receive a new option, you must remain an employee as of the date the new options are granted, which will be at least six months and one day after the Cancellation date for the tendered options. If PCD does not extend the Offer, the new options will be granted on or about the New Grant Date. (Page 12)

ARE EMPLOYEES OUTSIDE THE UNITED STATES ELIGIBLE TO PARTICIPATE?

Yes, employees outside the United States are eligible to participate. However, we urge all employees to consult with their own tax advisors about the tax consequences of participating in the Offer before deciding whether to participate. (Page 12)

WHY ARE WE MAKING THE OFFER?

We believe that granting stock options motivates high levels of performance and provides an effective way to recognize employee contributions to the success of our company. The Offer provides an opportunity for us to Offer eligible employees a valuable incentive to stay with our company. Some of our outstanding options, whether or not they are currently exercisable, have exercise prices that are significantly higher than the current market price of our shares. We believe these options are unlikely to be exercised in the foreseeable future. By making this Offer to exchange outstanding options for new options that will have an exercise price equal to the market value of the shares on the New Grant Date, we intend to provide our eligible employees with the benefit of owning options that over time may have a greater potential to increase in value, which creates better performance incentives for eligible employees and thereby maximizes stockholder value. (Page 13)

WHAT ARE THE CONDITIONS TO THE OFFER?

The Offer is not conditioned on a minimum number of options being tendered. Participation in the Offer is completely voluntary. The conditions are described in Section 7 of this Offer to Exchange. (Page 17)

ARE THERE ANY ELIGIBILITY REQUIREMENTS THAT YOU MUST SATISFY AFTER THE EXPIRATION DATE OF THE OFFER TO RECEIVE THE NEW OPTIONS?

To receive a grant of new options through the Offer and under the terms of the 1996 Stock Plan, you must be employed by PCD or one of its subsidiaries as of the date the new options are granted.

As discussed below, subject to the terms of this Offer, we will grant the new options on or about the first business day which is at least six months and one day after the date we cancel the options accepted for exchange. If, for any reason, you do not remain an employee of PCD or one of its subsidiaries through the date we grant the new options, you will not receive any new options or other consideration in exchange for your tendered options that have been accepted for exchange. (Page 12)

HOW MANY NEW OPTIONS WILL YOU RECEIVE IN EXCHANGE FOR YOUR TENDERED OPTIONS?

If you meet the eligibility requirements and subject to the terms of this Offer, we will grant you new options to purchase the number of shares equal to the number of option shares you tender. New options will be granted under our 1996 Stock Plan, unless prevented by law or applicable regulations. All new options will be subject to a new option agreement between you and us. You must execute the new option agreement before receiving new options. (Page 12)

WHEN WILL YOU RECEIVE YOUR NEW OPTIONS?

We will grant the new options on or about the first business day which is at least six months and one day after the date we cancel the options accepted for exchange. Our Board of Directors will select the actual grant date for the new options. If we cancel tendered options on the Cancellation Date, which is the scheduled date for the cancellation of the options (the third business day following the Expiration Date of the Offer), the new options will not be granted until the New Grant Date, at the earliest. You must be an employee on the date we grant the new options in order to be eligible to receive them. (Page 16)

WHY WON'T YOU RECEIVE YOUR NEW OPTIONS IMMEDIATELY AFTER THE EXPIRATION DATE OF THE OFFER?

If we were to grant the new options on any date which is earlier than six months and one day after the date we cancel the options accepted for exchange, we would be subject to onerous accounting charges. We would be required for financial reporting purposes to treat the new options as variable awards. This means that we would be required to record the non-cash accounting impact of decreases and increases in the company's share price as a compensation expense for the new options issued under this Offer. We would have to continue this variable accounting for these new options until they were exercised, forfeited or terminated. The higher the market value of our shares, the greater the compensation expense we would have to record. By deferring the grant of the new options for at least six months and one day, we believe we will not have to treat the new options as variable awards.

IF YOU TENDER OPTIONS IN THE OFFER, WILL YOU BE ELIGIBLE TO RECEIVE OTHER OPTION GRANTS BEFORE YOU RECEIVE YOUR NEW OPTIONS?

No. If we accept options you tender in the Offer, you may not receive any other option grants before you receive your new options. Because of accounting rules that could apply to these interim option grants as a result of the Offer, we will defer until the new option grant date the grant of any additional options for which you may otherwise be eligible before the new option grant date to avoid incurring compensation expense against our earnings. If we decide to grant you any additional options before the grant date for the new options, we may issue a Promise to Grant Stock Option(s) to you on the date when such grant would no longer subject us to these onerous accounting charges as a result of the exchange Offer. However, if you are no longer employed at PCD or one of its subsidiaries on the date of grant of the new options, you will not receive new options even if a Promise to Grant Stock Option(s) has been issued to you. (Page 16)

WILL YOU BE REQUIRED TO GIVE UP ALL YOUR RIGHTS TO THE CANCELLED OPTIONS?

Yes. Once we have accepted options tendered by you, your options will be cancelled and you will no longer have any rights under those options. (Page 16)

WHAT WILL THE EXERCISE PRICE OF THE NEW OPTIONS BE?

Accordingly, we cannot predict the exercise price of the new options. Because we will not grant new options until on or about the first business day that is at least six months and one day after the date we cancel the options accepted for exchange, the new options may have a higher exercise price than some or all of your current options. We recommend that you evaluate current and historical market quotes for our shares, among other factors, before deciding whether or not to tender your options. (Page 20)

WHEN WILL THE NEW OPTIONS VEST?

The vesting of the newly issued options will be in accordance with the vesting schedule of the cancelled options. You will receive credit for vesting accrued prior to the cancellation of the tendered options and will receive credit for the period between the cancellation of the tendered options and the grant of the new options. (Page 20)

Each new option granted will vest as follows:

any shares that were fully vested on the date that the Offer expires will be fully vested,
all unvested options on the date the Offer expires that would have been fully vested on the date the new options are granted (at least six months and one day from the date the tendered options are cancelled) will be fully vested, and
all remaining unvested options will have a vesting schedule that is equivalent to what would have been in place had the cancelled option remained in effect.

WHAT IF WE ENTER INTO A MERGER OR OTHER SIMILAR TRANSACTION?

It is possible that, prior to the grant of new options, we might effect or enter into an agreement such as a merger or other similar transaction. The Promise to Grant Stock Option(s) which we will give you is a binding commitment, and any successor to our company will be required to honor that commitment if there is a merger of the Company or similar transaction whereby the liabilities of the Company are assumed. However, if your new options were to be granted under the acquiring company's stock option plan, these options would be subject to the terms and conditions of the acquiring company's stock plan and related form of agreement.

If the transaction involves an acquisition by means other than a merger or similar transaction or if the acquiror has no comparable stock plan, the Company will use commercially reasonable efforts to obtain fair compensation for the exchange participants, based on the deal consideration and other relevant factors. There can be no assurance that the Company will succeed in its efforts. Further, if the transaction involves an offer made directly to stockholders to acquire PCD's stock prior to the New Grant Date, you will not be eligible to participate in such offer.

You should be aware that the types of transactions described above could have a substantial impact on our share price or the share price of the acquiring company, including potentially substantial appreciation in price. Depending on the structure of this type of transaction, tendering option holders might be deprived of any further price appreciation in the shares associated with the new options. For example, if our shares were acquired in a cash merger shortly after the New Grant Date, the fair market value of our shares, and hence the price at which we grant the new options, would likely be a price at or near the cash price being paid for the shares in the transaction, yielding limited or no financial benefit to a recipient of the new options for that transaction. In addition, in the event of an acquisition of our company for stock prior to the New Grant Date, tendering option holders would receive options to purchase shares of a different issuer.

ARE THERE CIRCUMSTANCES WHERE YOU WOULD NOT BE GRANTED NEW OPTIONS?

Yes. Even if we accept your tendered options, we will not grant new options to you if we are prohibited by applicable law or regulations from doing so. We will use reasonable efforts to avoid the prohibition, but if it is applicable on and after the first business day that is at least six months and one day after we cancel the options accepted for exchange, you will not be granted a new option. (Page 24)

Also, if you are no longer an employee on the date we grant new options, you will not receive any new options. (Page 12)

IF YOU CHOOSE TO TENDER AN OPTION WHICH IS ELIGIBLE FOR EXCHANGE, DO YOU HAVE TO TENDER ALL THE SHARES IN THAT OPTION?

No. We will accept partial tenders of options, as well as the remaining portion of an option which you have partially exercised subject to the paragraph below. Accordingly, you may tender one or more of your option grants in their entirety, or any portion of one or more grants, or none of your grants. Your Election Form must specify the number of shares you are tendering under each option, and you will be granted a "balancing" option for the untendered portion of any partially tendered option.

Also, if you decide to tender any of your options, then you must tender all of your options that were granted to you during the six month period prior to the commencement of the Offer. For example, if you received an option grant in March 2002 and a grant in February 2002 and you want to tender your March 2002 option grant, you would also be required to tender all options under your February 2002 option grant. (Page 12)

WHAT HAPPENS TO OPTIONS THAT YOU CHOOSE NOT TO TENDER OR THAT ARE NOT ACCEPTED FOR EXCHANGE?

Nothing. Options that you choose not to tender for exchange or that we do not accept for exchange remain outstanding until they expire by their terms. However, please refer to the information contained in Item 14 below regarding possible tax consequences, even if you choose not to participate in the Offer.

WILL YOU HAVE TO PAY TAXES IF YOU EXCHANGE YOUR OPTIONS IN THE OFFER?

If you exchange your current options for new options, you should not be required under current law to recognize income for U.S. federal income tax purposes at the time of the exchange. Further, at the grant date of the new options, you will not be required under current law to recognize income for U.S. federal income tax purposes. For employees residing both in and outside of the United States, we recommend that you consult with your own tax advisor to determine the tax and social insurance consequences of the Offer under the laws of the country in which you live and work. (Page 24)

IF YOUR CURRENT OPTIONS ARE INCENTIVE STOCK OPTIONS, WILL YOUR NEW OPTIONS BE INCENTIVE STOCK OPTIONS?

If your current options are incentive stock options, your new options will be granted as incentive stock options to the maximum extent they qualify as incentive stock options under the tax laws on the date of the grant. For options to qualify as incentive stock options under the current tax laws, the value of shares subject to options that first become exercisable by the option holder in any calendar year cannot exceed $100,000, as determined using the option exercise price. The excess value is deemed to be a non-qualified stock option, which is an option that is not qualified to be an incentive stock option under the current tax laws. (Page 16)

WHEN WILL YOUR NEW OPTIONS EXPIRE?

Your new options will expire ten years from the date of grant, or earlier if your employment with PCD terminates. (Page 19)

WHEN DOES THE OFFER EXPIRE? CAN THE OFFER BE EXTENDED, AND IF SO, HOW WILL YOU BE NOTIFIED IF IT IS EXTENDED?

The Offer expires on the Expiration Date, at 5:00 p.m., Eastern Daylight Time, unless it is extended by us. We may, in our discretion, extend the Offer at any time, but we cannot assure you that the Offer will be extended or, if extended, for how long. If the Offer is extended, we will make a public announcement of the extension no later than 8:00 a.m., Eastern Daylight Time, on the next business day following the previously scheduled expiration of the Offer period. (Page 12)

HOW DO YOU TENDER YOUR OPTIONS?

If you decide to tender your options, you must deliver, before 5:00 p.m., Eastern Daylight Time, on the Expiration Date (or such later date and time as we may extend the expiration of the Offer), a properly completed and executed Election Form and any other documents required by the Election Form via facsimile or hand delivery to Jack Sheehan, Chief Financial Officer of PCD. This is a one-time offer, and we will strictly enforce the tender offer period. We reserve the right to reject any or all tenders of options that we determine are not in appropriate form or that we determine are unlawful to accept. Subject to our rights to extend, terminate and amend the Offer, we currently expect that we will accept and cancel all properly tendered options promptly after the expiration of the Offer. (Page 14)

DURING WHAT PERIOD OF TIME MAY YOU WITHDRAW PREVIOUSLY TENDERED OPTIONS?

You may withdraw your tendered options at any time before the Offer expires at 5:00 p.m., Eastern Daylight Time, on the Expiration Date. If we extend the Offer beyond that time, you may withdraw your tendered options at any time until the extended expiration of the Offer. In addition, although we currently intend to cancel validly tendered options promptly after the expiration of this Offer, if we have not accepted and cancelled your tendered options by June 17, 2002, you may withdraw your tendered options at any time after June 17, 2002. To withdraw tendered options, you must deliver to us via facsimile or hand delivery to Jack Sheehan a signed Notice to Change Election From Accept to Reject, with the required information while you still have the right to withdraw the tendered options. You should request the form of Notice to Change Election From Accept to Reject from Jack Sheehan. Once you have withdrawn options, you may re-tender options only by again following the deliver y procedures described above. (Page 15)

CAN YOU CHANGE YOUR ELECTION REGARDING PARTICULAR TENDERED OPTIONS?

Yes, you may change your election regarding particular tendered options at any time before the Offer expires at 5:00 p.m., Eastern Daylight Time, on the Expiration Date. If we extend the Offer beyond that time, you may change your election regarding particular tendered options at any time until the extended expiration of the Offer. In order to change your election, you must deliver to us via facsimile or hand delivery a new Election Form, which includes the information regarding your new election, and is clearly dated after your original Election Form. (Page 15)

WHAT DO WE AND THE BOARD OF DIRECTORS THINK OF THE OFFER?

Although the Board of Directors has approved the Offer, neither we nor our Board of Directors makes any recommendation as to whether you should tender or not tender your options. You must make your own decision whether or not to tender options. For questions regarding tax implications or other investment-related questions, you should talk to your own legal counsel, accountant and/or financial advisor.

WHOM CAN YOU TALK TO IF YOU HAVE QUESTIONS ABOUT THE OFFER?

For additional information or assistance, you should contact:

          John J. Sheehan, III
          Vice President and Chief Financial Officer
          PCD Inc.
          2 Technology Drive
          Peabody, MA 01960
          (978) 532-8800

CERTAIN RISKS OF PARTICIPATING IN THE OFFER

Participation in the Offer involves a number of potential risks, including those described below. This list briefly highlights some of the risks and is necessarily incomplete. Eligible participants should carefully consider these and other risks and are encouraged to speak with an investment and tax advisor as necessary before deciding whether and to what extent to participate in the Offer. In addition, we strongly urge you to read the rest of this Offer to Exchange, along with the Announcement, and the Election Form before deciding whether and to what extent to participate in the exchange Offer. The list of risks does not include certain risks that may apply to employees who live and work outside of the United States; again, we urge you to consult with an investment and tax advisor as necessary before deciding whether to participate in this exchange offer.

ECONOMIC RISKS

PARTICIPATION IN THE OFFER WILL MAKE YOU INELIGIBLE TO RECEIVE ANY OPTION GRANTS UNTIL THE NEW GRANT DATE AT THE EARLIEST.

Employees are generally eligible to receive option grants at any time that the Board of Directors or Compensation Committee chooses to make them. However, if you participate in the Offer, you will not be eligible to receive any option grants until the New Grant Date at the earliest.

IF THE STOCK PRICE INCREASES AFTER THE DATE YOUR TENDERED OPTIONS ARE CANCELLED, YOUR CANCELLED OPTIONS MIGHT HAVE BEEN WORTH MORE THAN THE REPLACEMENT OPTIONS THAT YOU HAVE RECEIVED IN EXCHANGE FOR THEM.

For example, if you cancel options with a $3.00 exercise price per share, and PCD's stock price appreciates to $4.00 before the replacement grants are made, your replacement option will have a higher exercise price than the cancelled option.

IF YOUR EMPLOYMENT TERMINATES PRIOR TO THE GRANT OF THE REPLACEMENT OPTION, YOU WILL RECEIVE NEITHER A REPLACEMENT OPTION NOR THE RETURN OF YOUR CANCELLED OPTION.

Once your option is cancelled, it is gone for good. Accordingly, if your employment terminates for any reason prior to the grant of the replacement option, you will have the benefit of neither the cancelled option nor the replacement option.

THE COMPANY INVESTIGATES STRATEGIC OPPORTUNITIES FROM TIME TO TIME WHICH, IF CONCLUDED, COULD AFFECT THE PRICING AND/OR TERMS OF YOUR NEW OPTIONS.

The Company engages in discussions from time to time regarding potential strategic opportunities, including financings, strategic partnering relationships, and acquisitions. If any of these transactions were to occur before the new options are granted, your new options could be granted at a higher exercise price, and could be subject to terms and conditions required by an investing or acquiring party.

TAX-RELATED RISKS FOR U.S. RESIDENTS

YOUR REPLACEMENT OPTION MAY BE A NONQUALIFIED STOCK OPTION, WHEREAS YOUR CANCELLED OPTION MAY HAVE BEEN AN INCENTIVE STOCK OPTION.

If your cancelled option was an incentive stock option, your new option will be an incentive stock option, but only to the extent it qualifies as such under the Internal Revenue Code of 1986, as amended. For options to qualify as incentive stock options, the value of shares subject to options that first become exercisable by the option holder in any calendar year cannot exceed $100,000, as determined using the option exercise price. It is possible that by participating in this exchange, the New Option will cause you to exceed this limit and some or all of your New Option will be treated as nonqualified stock options. In general, nonqualified stock options are less favorable to you from a tax perspective. For more detailed information, please read the rest of the Offer to Exchange and see the tax disclosure set forth in the prospectus for the 1996 Stock Plan.

YOUR REPLACEMENT INCENTIVE STOCK OPTIONS WILL BE SUBJECT TO A NEW HOLDING PERIOD FOR CERTAIN FAVORABLE TAX TREATMENT.

Holders of incentive stock options receive certain favorable tax treatment under the Internal Revenue Code. First, you will not incur ordinary income tax when you exercise an incentive stock option (although you may be subject to alternative minimum tax). Second, any profit you realize when you sell shares acquired upon the exercise of an incentive stock option will be taxed at the capital gains rate. However, in order to qualify for this treatment, you may not sell your option shares earlier than one year after the date of exercise and two years after the date of grant. If you participate in the Offer, you will be canceling your existing options and receiving a new grant. Therefore, you will lose the benefit of any holding period under the old options and you will begin a new holding period under the new options. If you want to receive the tax benefits accorded to incentive stock options, you will not be able to sell your option shares before November 26, 2004. Please see Section 14, "Material U.S. Federal Income Tax Consequences," below for a more detailed description of the tax treatment of incentive stock options. You should consult with your tax advisor for further information about this risk.

BUSINESS RELATED RISKS

For a description of risks related to PCD's business, please see Section 18 of this Offer to Exchange.

INTRODUCTION

PCD Inc. is offering to exchange all outstanding options to purchase shares of PCD common stock held by eligible employees for new options we will grant under the 1996 Stock Plan. An "eligible employee" refers to employees of PCD and certain of its subsidiaries who are employees both as of the date the offer commences and as of the date the tendered options are cancelled. Members of our Board of Directors, including employee directors, are not eligible to participate in the exchange Offer. We are making the offer upon the terms and the conditions described in this Offer to Exchange and in the related Announcement, and the Election Form.

The number of shares subject to the new options to be granted to each eligible employee will be equal to the number of shares subject to the options tendered by the eligible employee and accepted for exchange. Subject to the terms and conditions of this Offer, we will grant the new options on or about the first business day which is at least six months and one day after the date we cancel the options accepted for exchange. The New Grant Date for the new options will be November 26, 2002, at the earliest, unless the Offer is extended, in which case the grant date of the new options will be similarly extended. You may tender options for all, some or none of the unexercised shares subject to an individual option grant until the Expiration Date. All tendered options accepted by us through the Offer will be cancelled on the third business day following the Expiration Date or as soon as possible thereafter. If you tender any options for exchange, you will be required to also tender all options granted to you during the six month period immediately prior to the Offer period. This means that if you participate in the Offer, you will be required to tender all options granted to you October 22, 2001.

The Offer is not conditioned on a minimum number of options being tendered. The Offer is subject to conditions that we describe in section 7 of this Offer to Exchange.

If you tender options for exchange as described in the Offer and we accept your tendered options, then, subject to the terms of this Offer, we will grant you new options under our 1996 Stock Plan.

Each new option will be exercisable for the same number of shares as remained outstanding under the tendered options.

The new options will vest in accordance with the vesting schedule of the cancelled options. Each new option granted will vest as follows:

any shares that were fully vested on the date that the Offer expires will be fully vested,
all unvested options on the date the Offer expires that would have been fully vested on the date the new options are granted (at least six months and one day from the Cancellation Date) will be fully vested, and
all remaining unvested options will have a vesting schedule that is equivalent to what would have been in place had the cancelled option remained in effect.

As of April 15, 2002, options to purchase 213,000 shares of PCD common stock under the 1996 Stock Plan were issued and outstanding, of which options to purchase approximately 213,000 shares, constituting approximately 100% were held by eligible employees.

THE OFFER

1. Eligibility.

Employees are "eligible employees" if they (i) are employees of PCD Inc. or one of PCD's subsidiaries as of the date the Offer commences and the date on which the tendered options are cancelled and (ii) received their first option grant under the 1996 Stock Plan on or before January 1, 2002. However, members of the Board of Directors, including employee directors, are not eligible to participate in the Offer. The directors of PCD are listed in Schedule A to this Offer to Exchange. Because most of the options outstanding under the 1992 Stock Option Plan ("1992 Plan") expire before November 26, 2002, we have decided to exclude options under the 1992 Plan from this Offer.

In order to receive a new option, you must remain an employee as of the date the new options are granted, which will be at least six months and one day after the Cancellation Date. If PCD does not extend the Offer, the new options will be granted on or shortly after the New Grant Date.

2. Number of options; Expiration Date.

Subject to the terms and conditions of the Offer, we will exchange all outstanding, unexercised options held by eligible employees that are properly tendered and not validly withdrawn in accordance with Section 5 before the Expiration Date, in return for new options. We will accept partial tenders of options for any portion of the shares subject to an individual option grant. Therefore, you may tender options for all, some or none of the shares subject to each of your eligible options. If you tender only part of an option, we will issue you a "balancing" option for the untendered shares. In addition, if you tender any option grant or portion thereof for exchange, you will be required to also tender all options granted to you during the six month period prior to the date the Offer commenced. This means that if you participate in the Offer, you will be required to tender all options granted to you since October 22, 2001.

If your options are properly tendered and accepted for exchange, the options will be cancelled and, subject to the terms of this Offer, you will be entitled to receive one or more new options to purchase the number of shares of common stock equal to the number of option shares tendered by you and accepted for exchange, subject to adjustments for any stock splits, stock dividends and similar events. All new options will be subject to the terms of our 1996 Stock Plan, and to a new option agreement between you and us. If, for any reason, you do not remain an employee of PCD or its subsidiaries through the date we grant the new options, you will not receive any new options or other consideration in exchange for your tendered options that have been accepted for exchange. This means that if you quit, with or without a good reason, die, become disabled, or we terminate your employment, with or without cause, prior to the date we grant the new options, you will not receive anything for the options that you tendered and we cancelled.

The term Expiration Date means 5:00 p.m., Eastern Daylight Time, on May 21, 2002, unless and until we, in our discretion, have extended the period of time during which the Offer will remain open, in which event the Expiration Date refers to the latest time and date at which the Offer, as so extended, expires. See Section 15 of this Offer to Exchange for a description of our rights to extend, delay, terminate and amend the Offer.

If we decide to take any of the following actions, we will publish notice or otherwise inform you in writing of such action:

increase or decrease the amount of consideration offered for the options,
decrease the number of options eligible to be tendered in the Offer, or
increase the number of options eligible to be tendered in the Offer by an amount that exceeds 2% of the shares issuable upon exercise of the options that are subject to the Offer immediately prior to the increase.

If the Offer is scheduled to expire at any time earlier than the tenth (10th) business day from, and including, the date that notice of the increase or decrease is first published, sent or given in the manner specified in Section 15 of this Offer to Exchange, we will extend the Offer so that the Offer is open at least ten (10) business days following the publication, sending or giving of notice.

We will also notify you of any other material change in the information contained in this Offer to Exchange.

For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Daylight Time.

3. Purpose of the Offer.

We issued the options outstanding to provide our eligible employees with additional incentive, to promote the success of our business, and to encourage our eligible employees to continue their employment with us.

One of the keys to our continued growth and success is the retention of our most valuable asset, our employees. The Offer provides an opportunity for us to Offer our eligible employees a valuable incentive to stay with PCD. Some of our outstanding options, whether or not they are currently exercisable, have exercise prices that are significantly higher than the current market price of our shares. We believe these options are unlikely to be exercised in the foreseeable future. By making this Offer to exchange outstanding options for new options that will have an exercise price equal to the market value of the shares on the grant date, we intend to provide our eligible employees with the benefit of owning options that over time may have a greater potential to increase in value, create better performance incentives for employees and thereby maximize stockholder value. However, because we will not grant new options until at least six months and one day after the date we cancel the options accepted for exchange, the new options may have a higher exercise price than some or all of our current outstanding options.

From time to time we engage in strategic transactions with business partners, customers and other third parties. We may engage in transactions in the future with these or other companies which could significantly change our structure, ownership, organization or management or the make-up of our Board of Directors, and which could significantly affect the price of our shares. If we engage in such a transaction or transactions before the date we grant the new options, our shares could increase (or decrease) in value, and the exercise price of the new options could be higher (or lower) than the exercise price of options you elect to have cancelled as part of this Offer. As outlined in Section 9, the exercise price of any new options granted to you in return for your tendered options will be the fair market value of the underlying shares on the date of grant, as determined by the closing price reported by the Nasdaq National Market on the last business day before the date of grant. You will be at risk of any such increase in our share price before the grant date of the new options for these or any other reasons.

Neither we nor our Board of Directors makes any recommendation as to whether you should tender or not tender your options, nor have we authorized any person to make any such recommendation. You are urged to evaluate carefully all of the information in this Offer to Exchange and to consult your own investment and tax advisors. You must make your own decision whether or not to tender your options for exchange.

4. Procedures for tendering options.

Proper Tender of Options.

To validly tender your options through the Offer, you must, in accordance with the terms of the Election Form, properly complete, execute and deliver the Election Form to us via facsimile (fax number (978) 538-3026) or hand delivery to Jack Sheehan, along with any other required documents. Jack Sheehan must receive all of the required documents by 5:00 PM Eastern Daylight Time on the Expiration Date.

THE DELIVERY OF ALL DOCUMENTS, INCLUDING ELECTION FORMS AND ANY NOTICES TO CHANGE ELECTION FROM ACCEPT TO REJECT AND ANY OTHER REQUIRED DOCUMENTS, IS AT YOUR RISK.

Determination of Validity; Rejection of Options; Waiver of Defects; No Obligation to Give Notice of Defects.

We will determine, in our discretion, all questions as to the form of documents and the validity, form, eligibility, including time of receipt, and acceptance of any tender of options. Our determination of these matters will be final and binding on all parties. We reserve the right to reject any or all tenders of options that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept properly and timely tendered options that are not validly withdrawn. We also reserve the right to waive any of the conditions of the Offer or any defect or irregularity in any tender of any particular options or for any particular option holder. No tender of options will be deemed to have been properly made until all defects or irregularities have been cured by the tendering option holder or waived by us. Neither we nor any other person is obligated to give notice of any defects or irregularities in tenders, nor will anyon e incur any liability for failure to give any notice. This is a one-time offer, and we will strictly enforce the Offer period, subject only to an extension which we may grant in our sole discretion.

Our Acceptance Constitutes an Agreement.

Your tender of options pursuant to the procedures described above constitutes your acceptance of the terms and conditions of the Offer. OUR ACCEPTANCE FOR EXCHANGE OF YOUR OPTIONS TENDERED BY YOU THROUGH THE OFFER WILL CONSTITUTE A BINDING AGREEMENT BETWEEN US AND YOU UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE OFFER.

Subject to our rights to extend, terminate and amend the Offer, we currently expect that we will accept promptly after the expiration of the Offer all properly tendered options that have not been validly withdrawn.

5. Withdrawal Rights and Change of Election.

You may only withdraw your tendered options or change your election in accordance with the provisions of this Section.

You may withdraw your tendered options at any time before 5:00 p.m., Eastern Daylight Time, on the Expiration Date. If we extend the Offer beyond that time, you may withdraw your tendered options at any time until the extended expiration of the Offer. In addition, if we have not accepted your tendered options for exchange by 5:00 p.m., Eastern Daylight Time, on June 17, 2002, you may withdraw your tendered options at any time thereafter.

To validly withdraw tendered options, you must deliver to Jack Sheehan via facsimile or hand delivery, in accordance with the procedures listed in Section 4 above, a signed and dated Notice to Change Election From Accept to Reject, with the required information, while you still have the right to withdraw the tendered options.

To validly change your election regarding the tender of particular options, you must deliver a new Election Form to Jack Sheehan via facsimile or hand delivery, in accordance with the procedures listed in Section 4 above. If you deliver a new Election Form that is properly signed and dated, it will replace any previously submitted Election Form, which will be disregarded. The new Election Form must be signed and dated and must specify:

the name of the option holder who tendered the options,
the original number of shares for which each tendered option was exercisable,
the grant date of each option to be tendered,
the exercise price under each option to be tendered,
the total number of shares exercised under each option; and
the total number of shares being tendered for cancellation under each option.

Except as described in the following sentence, the Notice to Change Election From Accept to Reject (which you must request from Jack Sheehan if necessary) and any new or amended Election Form must be executed by the option holder who tendered the options to be withdrawn exactly as the option holder's name appears on the option agreement or agreements evidencing such options. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or another person acting in a fiduciary or representative capacity, the signer's full title and proper evidence of the authority of such person to act in that capacity must be indicated on the notice of withdrawal.

If you wish to withdraw a Notice to Change Election From Accept to Reject, you must properly re-tender the withdrawn options before the Expiration Date by following the procedures described in Section 4. Otherwise, any options you withdraw will thereafter be deemed not properly tendered for purposes of the Offer and will remain outstanding.

Neither we nor any other person is obligated to give notice of any defects or irregularities in any Notice to Change Election From Accept to Reject or any new or amended Election Form, nor will anyone incur any liability for failure to give any notice. We will determine, in our discretion, all questions as to 100 the form and validity, including time of receipt, of Notices to Change Election From Accept to Reject and new or amended Election Forms. Our determination of these matters will be final and binding.

6. Acceptance of options for exchange and issuance of new options.

Upon the terms and conditions of the Offer and as promptly as practicable following the Expiration Date, we will accept for exchange and cancel options properly tendered and not validly withdrawn before the Expiration Date. Once the options are cancelled, you will no longer have any rights with respect to those options. Subject to the terms and conditions of this Offer, if your options are properly tendered and accepted for exchange, these options will be cancelled as of the date of our acceptance, which we anticipate to be the Cancellation Date, and you will be granted new options on or about the first business day that is at least six months and one day after the date we cancel the options accepted for exchange. If the options you tendered were incentive stock options, your new options will also be incentive stock options, to the extent they qualify as incentive stock options under the Internal Revenue Code of 1986, as amended. All other newly granted opti ons will be nonqualified stock options. Thus, subject to the terms and conditions of this Offer, if your options are properly tendered by the Expiration Date, the scheduled Expiration Date of the Offer, and accepted for exchange and cancelled on the Cancellation Date you will be granted new options on or about the New Grant Date. If we accept and cancel options properly tendered for exchange after the Cancellation Date, the period in which the new options will be granted will be similarly delayed. As promptly as practicable after we accept and cancel options tendered for exchange, we will issue to you a Promise to Grant Stock Option(s), by which we will commit to grant stock options to you on a date no earlier than the New Grant Date covering the same number of shares as the options cancelled pursuant to this Offer, provided that you remain an eligible employee on the date on which the grant is to be made.

If we accept options you tender in the Offer, we will defer any grant to you of additional options for which you may be eligible before the new option grant date until after the new option grant date, so that you will be granted no new options for any reason until at least six months and one day after any of your tendered options have been cancelled. We will defer the grant to you of any additional options in order to avoid incurring compensation expense against our earnings as a result of accounting rules that could apply to these interim option grants as a result of the Offer. We may issue to you a Promise to Grant Stock Option(s), which is a binding commitment to grant you an option or options on a date no earlier than the New Grant Date, at the then-current market price, provided that you remain an eligible employee on the date on which the grant is to be made.

Your new options will entitle you to purchase the number of shares which is equal to the number of shares subject to the options you tender, as adjusted for any stock splits, stock dividends and similar events. If, for any reason, you are not an employee of PCD or its subsidiaries through the date we grant the new options, you will not receive any new options or other consideration in exchange for your tendered options which have been cancelled pursuant to this Offer.

We will accept partial tenders of your eligible option grants, including the remaining portion of an option which you have partially exercised. Accordingly, you may tender one or more of your option grants, or any portion of one or more of your option grants, but only to the extent such grant has not previously been exercised. If you tender only a portion of an option, we will issue a "balancing" option for the untendered shares. In addition, if you tender any option grant or portion thereof for exchange, you will be required to also tender all options granted to you during the six month period prior to commencement of the Offer period. This means that if you participate in the Offer, you will be required to tender all options granted to you since October 22, 2001.

Within twenty-four (24) to forty-eight (48) hours of the receipt of your Election Form or your Notice to Change Election From Accept to Reject, PCD will e-mail the option holder a Confirmation of Receipt (provided you give us a valid e-mail address at the time of submitting your Election Form). However, this is not by itself an acceptance of the options for exchange. For purposes of the Offer, we will be deemed to have accepted options for exchange that are validly tendered and not properly withdrawn as of the time when we give oral notice to the option holders or written notice by delivery of a Promise to Grant Stock Option(s). Subject to our rights to extend, terminate and amend the Offer, we currently expect that we will accept promptly after the expiration of the Offer all properly tendered options that are not validly withdrawn.

7. Conditions of the Offer.

Notwithstanding any other provision of the Offer, we will not be required to accept any options tendered for exchange, and we may terminate or amend the Offer, or postpone our acceptance and cancellation of any options tendered for exchange, in each case, subject to Rule 13e-4(f)(5) under the Securities Exchange Act, if at any time on or after the Commencement Date and prior to the Expiration Date, any of the following events has occurred, or has been determined by us to have occurred, and, in our reasonable judgment in any case and regardless of the circumstances giving rise to the event, including any action or omission to act by us, the occurrence of such event or events makes it inadvisable for us to proceed with the Offer or with such acceptance and cancellation of options tendered for exchange:

there shall have been threatened or instituted or be pending any action or proceeding by any governmental, regulatory or administrative agency or authority that directly or indirectly challenges the making of the Offer, the acquisition of some or all of the tendered options pursuant to the Offer, or the issuance of new options, or otherwise relates in any manner to the Offer, or that, in our reasonable judgment, could materially and adversely affect our business, condition, income, operations or prospects or materially impair the contemplated benefits of the Offer to PCD;
there shall have been any action threatened, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be eligible to the Offer or PCD, by any court or any authority, agency or tribunal that, in our reasonable judgment, would or might directly or indirectly:

(1) make the acceptance for exchange of, or issuance of new options for, some or all of the tendered options illegal or otherwise restrict or prohibit consummation of the Offer or that otherwise relates in any manner to the Offer;

(2) delay or restrict our ability, or render us unable, to accept for exchange, or issue new options for, some or all of the tendered options;

(3) materially impair the contemplated benefits of the Offer to PCD; or

(4) materially and adversely affect PCD's business, condition, income, operations or prospects or materially impair the contemplated benefits of the Offer to PCD;

there shall have occurred any change, development, clarification or position taken in generally accepted accounting standards that could or would require us to record compensation expense against our earnings in connection with the Offer for financial reporting purposes;
a tender or exchange Offer for some or all of our shares, or a merger or acquisition proposal for PCD, shall have been proposed, announced or made by another person or entity or shall have been publicly disclosed; or
any change or changes shall have occurred in PCD's business, condition, assets, income, operations, prospects or stock ownership that, in our reasonable judgment, is or may be material to PCD or may materially impair the contemplated benefits of the Offer to PCD.

The conditions to the Offer are for PCD's benefit. We may assert them in our discretion regardless of the circumstances giving rise to them before the Expiration Date. We may waive them, in whole or in part, at any time and from time to time prior to the Expiration Date, in our discretion, whether or not we waive any other condition to the Offer. Our failure at any time to exercise any of these rights will not be deemed a waiver of any such rights. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this Section 7 will be final and binding upon all persons.

8. Price range of shares underlying the options.

The shares underlying your options are currently traded on the Nasdaq National Market under the symbol "PCDI." The following table shows, for the periods indicated, the high and low sales prices per share of our common stock as reported by the Nasdaq National Market, as adjusted for stock dividends and stock splits.

	HIGH	LOW
FISCAL YEAR 2002 Quarter ended March 31, 2002	2.06	0.62
FISCAL YEAR 2001 Quarter ended March 31, 2001 Quarter ended June 30, 2001 Quarter ended September 30, 2001 Quarter ended December 31, 2001	8.69 7.44 5.54 3.00	6.00 3.78 2.38 0.84
FISCAL YEAR 2000 Quarter ended March 31, 2000 Quarter ended June 30, 2000 Quarter ended September 30, 2000 Quarter ended December 31, 2000	7 ^1/2 9 ^1/8 11 ^1/2 11	4 ^3/16 3 6 ^1/2 5 ^5/8

As of April 15, 2002, the last reported sale price during regular trading hours of our common stock, as reported by the Nasdaq National Market, was $1.09 per share.

WE RECOMMEND THAT YOU EVALUATE CURRENT AND HISTORICAL MARKET QUOTES FOR OUR COMMON STOCK, AMONG OTHER FACTORS, BEFORE DECIDING WHETHER TO TENDER YOUR OPTIONS.

9. Source and amount of consideration; terms of new options.

Consideration.

We will issue new options to purchase shares of common stock under our 1996 Stock Plan in exchange for the outstanding options properly tendered and accepted for exchange by us, which options will be cancelled. The number of shares subject to the new options to be granted to each option holder will be equal to the number of shares subject to the options tendered by the option holder and accepted for exchange and cancelled by us, as adjusted for any stock splits, reverse stock splits, stock dividends and similar events. If we receive and accept tenders of all outstanding options from eligible employees, subject to the terms and conditions of this Offer we will grant new options to purchase a total of up to approximately 213,000 shares of common stock. The shares issuable upon exercise of these new options would equal approximately 2.45% of the total shares of our common stock outstanding as of April 15, 2002.

Terms of New Options.

The new options will be granted under our 1996 Stock Plan. A new option agreement will be entered into between PCD and each option holder who has tendered options in the Offer for every new option granted. The terms and conditions of the new options may vary from the terms and conditions of the options tendered for exchange, but generally this will not substantially and adversely affect the rights of option holders. Because we will not grant new options until at least six months and one day after the date we cancel the options accepted for exchange, the new options may have a higher exercise price than some or all of the options, including as a result of a significant corporate event. The following description summarizes the material terms of our 1996 Stock Plan and the options to be granted under the 1996 Stock Plan:

1996 Stock Plan.

The maximum number of shares available for issuance through the exercise of options granted under our 1996 Stock Plan is 324,000. Our 1996 Stock Plan permits the granting of options intended to qualify as incentive stock options under the Internal Revenue Code and options that do not qualify as incentive stock options, referred to as nonqualified stock options.

Administration.

The 1996 Stock Plan is administered by the Compensation Committee of our Board of Directors (the "Administrator"). Subject to the other provisions of the Plans, the Administrator has the power to determine the terms and conditions of the options granted, including the exercise price, the number of shares subject to the option and the exercisability of the options.

Term.

Options generally have a term of ten (10) years. Incentive Stock Options granted to an employee who, at the time the incentive stock option is granted, owns stock representing more than 10% of the voting rights of all classes of stock of PCD or an affiliate company have a term of no more than five (5) years.

Termination.

Except as your option agreement otherwise provides, your options will terminate following the termination of your employment (except for death or disability), unless the options are exercised, to the extent that they were exercisable immediately before such termination, within one (1) month following your termination. In the event that the termination of your employment is by reason of permanent or total disability or death, you, or your executors, administrators, legatees or distributees of your estate, may exercise any option held by you at the date of your employment termination, to the extent that it was exercisable immediately before such termination, within six months following such termination.

The termination of your option under the circumstances specified in this section will result in the termination of your interests in our 1996 Stock Plan. In addition, your option may terminate, together with our stock option plans and all other outstanding options issued to other employees, following the occurrence of certain corporate events, as described below.

Exercise Price.

The Administrator determines the exercise price at the time the option is granted. For all eligible employees, the exercise price per share of the new options will be 100% of the fair market value on the date of grant, as determined by the closing price reported by the Nasdaq National Market on the last business day before the date of grant.

However, the exercise price may not be less than 110% of the closing price per share reported by the Nasdaq National Market on the last business day before the date of grant for options intended to qualify as incentive stock options granted to an employee who, at the time the incentive stock option is granted, owns stock representing more than 10% of the voting rights of all classes of stock of PCD or an affiliate company.

Vesting and Exercise.

Each stock option agreement specifies the term of the option and the date when the option becomes exercisable. The terms of vesting are determined by the Administrator. Options granted by us generally vest at a rate of 25% of the shares subject to the option upon grant, and then 25% of the total shares subject to the option vest each year thereafter, provided the employee remains continuously employed by PCD.

The new options granted through the Offer will vest as follows:

any shares that were fully vested on the date that the Offer expires will be fully vested,
all unvested options on the date the Offer expires that would have been fully vested on the date the new options are granted (at least six months and one day from the date this Offer expires) will be fully vested, and
all remaining unvested options will have a vesting schedule that is equivalent to what would have been in place had the cancelled option remained in effect.

Payment of Exercise Price.

You may exercise your options, in whole or in part, by delivery of a written notice to us together with a share subscription or purchase form which is accompanied by payment in full of the eligible exercise price. The permissible methods of payment of the option exercise price are determined by the Administrator and generally include the following:

check, or
delivery of a properly executed notice together with such other documentation as the Board of Directors and the broker, if applicable, shall require to effect exercise of the option and delivery to us of the sale or loan proceeds required to pay the exercise price.

Adjustments Upon Certain Events.

If there is a change in our capitalization, such as a stock split, reverse stock split, stock dividend or other similar event, and the change results in an increase or decrease in the number of issued shares without receipt of consideration by us, an appropriate adjustment will be made to the price of each option and the number of shares subject to each option.

If, following the New Grant Date, there is a sale of all or substantially all of our assets, or we merge with another corporation, your options will be assumed or replaced with new options of the successor corporation. If the successor corporation does not assume or substitute your options, you will either (i) be required to exercise any vested portion within a specified period of time, after which all unexercised options shall terminate, or (ii) receive a cash payment in exchange for termination of your options equal to the excess of the fair market value of the underlying shares (to the extent vested) over the exercise price of such options. (These terms will not necessarily apply if a sale or merger occurs before the new options are granted.)

If there is a liquidation or dissolution of PCD, your outstanding options will terminate immediately prior to the consummation of the liquidation or dissolution. The Administrator may, at the discretion of the Board of Directors, provide for the acceleration of the exercisability of any option.

Transferability of Options.

New options, whether incentive stock options or non-qualified stock options, may not be transferred, other than by will or the laws of descent and distribution. In the event of your death, options may be exercised by a person who acquires the right to exercise the option by bequest or inheritance.

Termination of Employment.

If, for any reason, you are not an employee of PCD from the date you tender options through the date we grant the new options, you will not receive any new options or any other consideration in exchange for your tendered options that have been accepted for exchange. This means that if you quit, with or without good reason, become disabled, die, or we terminate your employment, with or without cause, before the date we grant the new options, you will not receive anything for the options that you tendered and which we cancelled.

Registration of Option Shares.

A total of 324,000 shares of common stock issuable upon exercise of options under our 1996 Stock Plan have been registered under the Securities Act on registration statement on Form S-8 filed with the SEC. All the shares issuable upon exercise of all new options to be granted before the Offer will be registered under the Securities Act. Unless you are one of our affiliates, you will be able to sell your option shares free of any transfer restrictions under applicable U.S. securities laws.

U.S. Federal Income Tax Consequences.

You should refer to Section 14 of this Offer to Exchange for a discussion of the U.S. federal income tax consequences of the new options and the options tendered for exchange, as well as the consequences of accepting or rejecting the new options under this Offer to exchange. If you are an employee based outside of the United States, you should consult with your own tax advisor to determine the tax and social insurance consequences of this transaction under the laws of the country in which you live and work.

Our statements in this Offer to Exchange concerning our 1996 Stock Plan and the new options are merely summaries and do not purport to be complete. The statements are subject to, and are qualified in their entirety by reference to, all provisions of our 1996 Stock Plan and the forms of option agreement under the 1996 Stock Plan. Please contact us at PCD Inc., 2 Technology Drive Peabody, MA 01960 (telephone: (978) 532-8800), to receive a copy of our 1996 Stock Plan and the forms of option agreement thereunder. We will promptly furnish you copies of these documents at our expense.

10. Information concerning PCD.

Our principal executive offices are located at PCD Inc., 2 Technology Drive Peabody, MA 01960 and our telephone number is (978) 532-8800.

We design, manufacture and market electronic connectors for use in semi-conductor burn-in, industrial interconnect and avionics industries. We market over 6800 electronic connector products in three product categories, each targeting a specific market. These product categories are semi-conductor, burn-in sockets, industrial interconnects and avionics junction modules and relay sockets.

The financial information included in our annual report on Form 10-K for the fiscal year ended December 31, 2001 is incorporated herein by reference. See "Additional Information" beginning on page 26 for instructions on how you can obtain copies of our SEC filings, including filings that contain our financial statements.

We have included a selected summary of our financial information in Schedule B. The selected historical consolidated statement of operations data for the years ended December 31, 2001 and 2000 and the selected historical balance sheet data as of December 31, 2001 and 2000 have been derived from the consolidated financial statements included in our annual report on Form 10-K filed on March 20, 2002, which was audited by PricewaterhouseCoopers LLP, independent public accountants. The balance sheet data as of December 31, 1999 is derived from audited consolidated financial statements on file with the Securities and Exchange Commission. The information contained herein should be read together with our consolidated financial statements and related notes.

11. Interests of directors and officers; transactions and arrangements concerning the options.

A list of our directors and executive officers is attached to this Offer to Exchange as Schedule A. As of March 25, 2002 our executive officers and non-employee directors (eight (8) persons) as a group beneficially owned options outstanding under our 1996 Stock Plan to purchase a total of 90,000 shares, which represented approximately 41% of the shares subject to all options outstanding under the 1996 Stock Plan as of that date. Options to purchase our shares owned by directors, including employee directors, are not eligible to be tendered in the Offer.

None of the directors are eligible to participate in the Offer. All of the officers, other than John L. Dwight, Jr., listed on Schedule A are eligible to participate in the Offer. We do not currently know which, if any of the these officers intends to participate in the Offer. Any officer who chooses to participate must do so on the same terms and conditions as any other participant in the Offer.

Except as otherwise described herein, there have been no transactions in options to purchase our shares or in our shares which were effected during the 60 days prior to April 22, 2002 by PCD or, to our knowledge, by any executive officer, director or affiliate of PCD.

12. Status of options acquired by us in the Offer; accounting consequences of the Offer.

Options we acquire through the Offer will be cancelled and the shares subject to those options will be returned to the pool of shares available for grants of new options under the 1996 Stock Plan. To the extent these shares are not fully reserved for issuance upon exercise of the new options to be granted in connection with the Offer, the shares will be available for future awards to employees and other eligible plan participants without further stockholder action, except as required by applicable law or the rules of the Nasdaq National Market or any other securities quotation system or any stock exchange on which our shares are then quoted or listed.

We believe that we will not incur any compensation expense solely as a result of the transactions contemplated by the Offer because:

we will not grant any new options until a business day that is at least six months and one day after the date that we accept and cancel options tendered for exchange, and
the exercise price of all new options will equal the market value of the shares of common stock on the date we grant the new options.

13. Legal matters; regulatory approvals.

We are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by our exchange of options and issuance of new options as contemplated by the Offer, or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of our options as contemplated herein. Should any such approval or other action be required, we presently contemplate that we will seek such approval or take such other action. We cannot assure you that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions, or that the failure to obtain any such approval or other action might not result in adverse consequences to our business. Our obligation under the Offer to accept tendered options for exchange and to issue new options for tendered options i s subject to the conditions described in Section 7.

If we are prohibited by applicable laws or regulations from granting new options immediately after the day that is 6 months and 1 day from the date that we cancel the options accepted for exchange, when we currently expect to grant the new options, we will not grant any new options. We are unaware of any such prohibition at this time, and we will use reasonable efforts to effect the grant, but if the grant is prohibited throughout the period we will not grant any new options and you will not get any other consideration for the options you tendered.

14. Material U.S. Federal Income Tax Consequences.

The following is a general summary of the material U.S. federal income tax consequences of the exchange of options pursuant to the Offer. This discussion is based on the Internal Revenue Code, its legislative history, Treasury Regulations thereunder and administrative and judicial interpretations thereof as of the date of the Offer, all of which are subject to change, possibly on a retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of option holders.

Option holders who exchange outstanding options for new options should not be required to recognize income for federal income tax purposes at the time of the exchange. We believe that the exchange will be treated as a non-taxable event. WE ADVISE ALL OPTION HOLDERS CONSIDERING EXCHANGING THEIR OPTIONS TO MEET WITH THEIR OWN TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER.

Incentive Stock Options.

Under current law, an option holder will not realize taxable income upon the grant of an incentive stock option under our 1996 Stock Plan. In addition, an option holder generally will not realize taxable income upon the exercise of an incentive stock option. However, an option holder's alternative minimum taxable income will be increased by the amount that the aggregate fair market value of the shares underlying the option, which is generally determined as of the date of exercise, exceeds the aggregate exercise price of the option. Except in the case of an option holder's death or disability, if an option is exercised more than three months after the option holder's termination of employment, the option ceases to be treated as an incentive stock option and is subject to taxation under the rules that apply to non-qualified stock options.

If an option holder sells the option shares acquired upon exercise of an incentive stock option, the tax consequences of the disposition depend upon whether the disposition is qualifying or disqualifying. The disposition of the option shares is qualifying if it is made:

at least two years after the date the incentive stock option was granted, and
at least one year after the date the incentive stock option was exercised.

The two-year and one-year periods described above are referred to as "holding periods."

If the disposition of the option shares is qualifying, any excess of the sale price of the option shares, over the exercise price of the option will be treated as long-term capital gain taxable to the option holder at the time of the sale. Any such capital gain will be taxed at the long-term capital gain rate in effect at the time of sale. If the disposition of the option shares is not qualifying, which we refer to as a "disqualifying disposition," the excess of the sale price of the option shares over the exercise price will be taxed at the time of the sale as follows:

The amount up to the excess of the lower of (a) the fair market value of the shares at the time the option was exercised or (b) the sale price, over the exercise price will be ordinary income for income tax purposes and the balance, if any, will be long-term or short-term capital gain, depending upon whether or not the shares were sold more than one year after the option was exercised.

Unless an option holder engages in a disqualifying disposition, we will not be entitled to a deduction with respect to an incentive stock option. If an option holder engages in a disqualifying disposition, we will be entitled to a deduction equal to the amount of compensation income taxable to the option holder.

If you tender incentive stock options and those options are accepted for exchange, the new options will be granted as incentive stock options to the maximum extent they qualify. However, you will begin a new holding period for purposes of determining whether any disposition of the underlying shares is a qualifying disposition as described above.

For options to qualify as incentive stock options, the value of shares subject to options that first become exercisable in any calendar year cannot exceed $100,000, as determined using the option exercise price. The excess value is deemed to be a non-qualified stock option. You should note that if the new options have a higher exercise price than some or all of your current options, or if a significant number of options are vested on the date of grant (to equal your current vesting schedule), the new options may exceed the limit for incentive stock options.

We note that there is a risk that any incentive stock options you have may be affected by the Offer, even if you do not elect to exchange your options. We believe that you will not be subject to current U.S. federal income tax if you do not participate in the option exchange program. We also believe that the option exchange program will not change the U.S. federal income tax treatment of subsequent grants and exercise of your incentive stock options (and sales of shares acquired upon exercise of such options) if you do not participate. However, the IRS may characterize the option exchange program as a "modification" of those incentive stock options, even if you decline to participate. In 1991, the IRS issued a private letter ruling in which another company's option exchange program was characterized as a "modification" of each incentive stock option eligible for exchange. This does not necessarily mean that our Offer will be viewed the same way. Private lett er rulings issued by the IRS represent the IRS's opinion as to the specific facts presented by a specific person or company. The person or company receiving the letter may rely on it, but no other person or company may rely on the letter ruling or assume the same opinion would apply to their situation, even if the facts at issue are similar. However, such letters may indicate how the IRS will view a similar situation. Therefore, we do not know if the IRS will assert that the Offer constitutes a "modification" of all incentive stock options that are eligible to be tendered. If the IRS successfully asserts this position, the holding period for your options to qualify for favorable tax treatment could be extended. Accordingly, to the extent you sell your incentive stock option shares prior to the lapse of any extended holding period, your incentive stock option could be taxed as a nonqualified stock option. You should consult your tax advisor about the likely tax effects of the Offer on your options, whether or not they are exchanged.

Non-Qualified Stock Options.

Under current law, an option holder will not realize taxable income upon the grant of an option which is not qualified as an incentive stock option, also referred to as a nonqualified stock option. However, when an option holder exercises the option, the difference between the exercise price of the option and the fair market value of the shares subject to the option on the date of exercise will be compensation income taxable to the option holder.

We will be entitled to a deduction equal to the amount of compensation income taxable to the option holder if we comply with eligible reporting requirements.

WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER.

15. Extension of Offer; termination; amendment.

We expressly reserve the right, in our discretion, at any time and from time to time, and regardless of whether or not any event listed in Section 7 has occurred or is deemed by us to have occurred, to extend the period of time during which the Offer is open and thereby delay the acceptance for exchange of any options by giving oral or written notice of such extension to the option holders or making a public announcement thereof.

We also expressly reserve the right, in our reasonable judgment, prior to the Expiration Date to terminate or amend the Offer and to postpone our acceptance and cancellation of any options tendered for exchange upon the occurrence of any of the events listed in Section 7, by giving oral or written notice of such termination or postponement to you or by making a public announcement thereof. Our reservation of the right to delay our acceptance and cancellation of options tendered for exchange is limited by Rule 13e-4(f)(5) promulgated under the Securities Exchange Act, which requires that we must pay the consideration Offered or return the options tendered promptly after termination or withdrawal of a tender Offer.

Subject to compliance with applicable law, we further reserve the right, in our discretion, and regardless of whether any event listed in Section 7 has occurred or is deemed by us to have occurred, to amend the Offer in any respect, including, without limitation, by decreasing or increasing the consideration Offered in the Offer to option holders or by decreasing or increasing the number of options being sought in the Offer.

Amendments to the Offer may be made at any time and from time to time by public announcement of the amendment. In the case of an extension, the amendment must be issued no later than 8:00 a.m., Eastern Daylight Time, on the next business day after the last previously scheduled or announced Expiration Date. Any public announcement made through the Offer will be disseminated promptly to option holders in a manner reasonably designated to inform option holders of the change. Without limiting the manner in which we may choose to make a public announcement, except as required by applicable law, we have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a press release to the Dow Jones News Service.

If we materially change the terms of the Offer or the information concerning the Offer, or if we waive a material condition of the Offer, we will extend the Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the Securities Exchange Act. These rules require that the minimum period during which an Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend on the facts and circumstances, including the relative materiality of such terms or information.

If we decide to take any of the following actions, we will publish notice or otherwise inform you in writing of these actions:

we increase or decrease the amount of consideration offered for the options,
we decrease the number of options eligible to be tendered in the Offer, or we increase the number of options eligible to be tendered in the Offer by an amount that exceeds 2% of the shares issuable upon exercise of the options that are subject to the Offer immediately prior to the increase.

If the Offer is scheduled to expire at any time earlier than the tenth (10th) business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified in this Section 15, we will extend the Offer so that the Offer is open at least ten (10) business days following the publication, sending or giving of notice.

16. Fees and expenses.

We will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of options pursuant to this Offer to Exchange.

17. Additional information.

This Offer to Exchange is part of a Tender Offer Statement on Schedule TO that we have filed with the SEC. This Offer to Exchange does not contain all of the information contained in the Schedule TO and the exhibits to the Schedule TO. We recommend that you review the Schedule TO, including its exhibits, and the following materials which we have filed with the SEC before making a decision on whether to tender your options:

1. PCD's annual report on Form 10-K for our fiscal year ended December 31, 2001, filed with the SEC on March 20, 2002; and

2. the description of our shares contained in our Registration Statement on Form 8-A, filed with the SEC on February 12, 1996 (file number 000-27744).

These filings, our other annual, quarterly and current reports, our proxy statements and our other SEC filings may be examined, and copies may be obtained, at the following SEC public reference rooms:

        450 Fifth Street, N.W.
        Room 1024
        Washington, D.C. 20549

You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330.

Our SEC filings are also available to the public on the SEC's Internet site at http://www.sec.gov.

Our common stock is quoted on the Nasdaq National Market under the symbol "PCDI" and our SEC filings can be read at the following Nasdaq address:

        Nasdaq Operations
        1735 K Street, N.W.
        Washington, D.C. 20016

Each person to whom a copy of this Offer to Exchange is delivered may obtain a copy of any or all of the documents to which we have referred you, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents) at no cost, by writing to us at PCD Inc., 2 Technology Drive, Peabody, MA 01960 or telephoning us at (978) 532-8800.

As you read the foregoing documents, you may find some inconsistencies in information from one document to another. If you find inconsistencies between the documents, or between a document and this Offer to Exchange, you should rely on the statements made in the most recent document.

The information contained in this Offer to Exchange about PCD should be read together with the information contained in the documents to which we have referred you.

18. Miscellaneous.

This Offer to Exchange and our SEC reports referred to above include "forward-looking statements." When used in this Offer to Exchange, the words "anticipate," "believe," "estimate," "expect," "intend" and "plan" as they relate to PCD or our management are intended to identify these forward-looking statements. All statements by us regarding our expected future financial position and operating results, our business strategy, our financing plans and expected capital requirements, forecasted trends relating to our services or the markets in which we operate and similar matters are forward-looking statements. However, please note that the safe harbors under the Private Securities Litigation Reform Act (Section 27A of the Securities Act and 21E of the Securities Exchange Act) do not apply to statements made in connection with this Offer. The documents we filed with the SEC, including our annual report on Form 10-K filed on March 20, 2002, discuss some of the risk s that could cause our actual results to differ from those contained or implied in the forward-looking statements. Some of these risks include:

our dependence on the semiconductor burn-in industry from which we derive a significant percentage of our net sales;
our dependence or principal customers;
senior credit facility obligations in which failure to meet certain covenants or make payments would result in an event of default;
fluctuations in our quarterly operating results, which may affect our stock price;
international sales and operations wherein a prolonged economic downturn could have a material adverse effect on the Company;
our need to manage transitions from products using present technology to those that utilize next generation technology;
our ability to maintain the proprietary and confidential aspects of the products as they are releases, breaches of which could have a material adverse effect on the financial condition, results of operations and business of the Company;
the need to retain key officers and employees, where the loss of any key personnel could affect our ability to successfully grow our business;
volatility in our stock price based on our operating results and stock market fluctuations; and
failure to meet Nasdaq National Market System Listing Requirements which could result in less market visibility and thus adversely affect the price of our common stock.

We are not aware of any jurisdiction where the making of the Offer is not in compliance with applicable law. If we become aware of any jurisdiction where the making of the Offer is not in compliance with any valid applicable law, we will make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law, the Offer will not be made to, nor will tenders be accepted from or on behalf of, the option holders residing in such jurisdiction.

WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER YOU SHOULD TENDER OR NOT TENDER YOUR OPTIONS THROUGH THE OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION IN THIS DOCUMENT OR DOCUMENTS TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT, THE MEMORANDUM FROM JOHN L. DWIGHT, JR. DATED APRIL 22, 2002, THE ELECTION FORM AND THE NOTICE TO CHANGE ELECTION FROM ACCEPT TO REJECT. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US.

PCD Inc.

April 22, 2002

SCHEDULE A

INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF PCD INC.

The directors and executive officers of PCD Inc. and their positions and offices as of March 25, 2002 are set forth in the following table:

NAME	POSITION AND OFFICES HELD
John L. Dwight, Jr. John J. Sheehan, III John T. Doyle Jeffrey A. Farnsworth Theodore C. York James D. Switzer Jerome D. Brady John E. Stuart	President, Chief Executive Officer and Chairman of the Board Vice President, Treasurer and Chief Financial Officer Vice President, Industrial/Avionics Division Vice President, and General Manager, Wells-CTI-USA Director Director Director Director

The address of each director and executive officer is: c/o PCD Inc., 2 Technology Drive, Peabody, MA 01960.

SCHEDULE B

SUMMARY FINANCIAL INFORMATION

	Year Ended December 31,
	2001	2000	1999
	(in thousands, except per share amounts)
Consolidated Statement of Operations Data: Net sales Gross profit Income (loss) from operations Interest income (expense), net Net income (loss)	$ 36,615 11,328 (6,293) (3,417) ($21,583)	$ 61,957 28,467 11,067 (4,630) $ 3,783	$ 51,838 23,855 5,636 (4,558) $ 679
Net income (loss) per share: Basic Diluted	$ (2.43) $ (2.43)	$ 0.44 $ 0.42	$ 0.08 $ 0.08
Weighted Average Shares: Basic Diluted	8,890 8,890	8,624 9,088	8,521 9,049

	December 31,
Consolidated Balance Sheet Data: Working capital (deficit) Total assets Total debt Stockholders' equity	2001 $ 5,187 86,837 39,612 41,143	2000 $ (10,934) 109,113 35,873 62,547	1999 $(12,910) 114,786 49,600 58,024

EX-2 4 announcement.htm ANNOUNCEMENT OF OFFER

ANNOUNCEMENT OF OPTION EXCHANGE PROGRAM

FROM: John L. Dwight, Jr.

TO: All Employees

SUBJECT: OFFER TO EXCHANGE OPTIONS

DATE: April 22, 2002

IMPORTANT NEWS -- PLEASE READ IMMEDIATELY AND TAKE ACTION BEFORE MAY 21, 2002.

The Board of Directors has adopted resolutions offering to all eligible employees who hold stock options the opportunity to exchange their outstanding stock options for options exercisable at the fair market value of our stock on or about November 26, 2002 (the "New Grant Date"). We are making the offer upon the terms and conditions described in the Offer to Exchange, this Announcement of Option Exchange Program (the "Announcement"), and the Election Form. Please read these documents carefully before you make any decisions regarding the offer. This offer expires at 5:00 PM Eastern Daylight Time on May 21, 2002 (the "Expiration Date").

If you elect to participate in this exchange, the existing unexercised stock option(s) you elect to tender (the "Old Option") will be cancelled and a promise to grant a new option (the "New Option") will be issued. The New Option will be for the same number of shares (split-adjusted) as your Old Option(s). The New Option will be granted under the terms of our 1996 Stock Plan (the "1996 Stock Plan"). This offer may be accepted or rejected as to each grant or none of your grants. There must be strict adherence to the following rules:

ELIGIBILITY

1. All current employees of PCD Inc. ("PCD" or the "Company") or any of our subsidiaries are eligible to participate in the exchange, except for (i) any employees who received their first PCD option grant after January 1, 2002; and (ii) any directors, including directors who are also employees of the Company (myself, Theodore C. York, James D. Switzer, Jerome D. Brady and John E. Stuart).

THE NEW OPTION

1. All grants cancelled pursuant to this program are eligible to be exchanged for a New Option.

2. The New Option will be priced at the fair market value of our stock on the day we grant the New Option (expected to be on or about the New Grant Date), which is defined as the closing price of our stock on Nasdaq on the last business day before the date of grant. THERE IS A POSSIBILITY THAT THE EXERCISE PRICE OF THE NEW OPTION COULD BE HIGHER THAN THE EXERCISE PRICE OF THE OLD OPTION, RESULTING IN A LOSS OF SOME STOCK OPTION BENEFIT.

3. The New Option will be vested in accordance with the vesting schedule of the Old Option.

4. If your employment with the Company terminates for any reason, including voluntarily OR involuntary termination, disability or death prior to the New Grant Date, you will not receive a New Option.

5. All other rules of the 1996 Stock Plan will be applied.

ELIGIBLE GRANTS AND OPTION CANCELLATION RULES

1. All option grants issued to eligible employees are eligible for exchange for a New Option, assuming your election is received by 5:00 PM Eastern Daylight Time on the Expiration Date or, if we have extended the offer, by the new expiration of the offer.

2. Any of your outstanding, unexercised options may be cancelled. If you elect to cancel an Old Option, it may be cancelled in whole or in part.

3. If you decide to cancel a grant, all grants issued since October 22, 2001 (within the six months prior to commencement of the offer) must also be cancelled. All cancelled grants will be replaced with a promise to issue a New Option at least six months and one day after the date the Old Options are cancelled (a "Promise to Grant Stock Option(s)"). We expect to grant the New Option on or about the New Grant Date, unless we have to change the date because the offer had been extended.

4. Individuals canceling a grant pursuant to this program will not be eligible for additional grants until after the New Grant Date. In lieu thereof, the Company may issue additional Promises To Grant Stock Option(s).

5. Once your Old Options are cancelled, you will not be able to exercise your Old Options, even if you terminate employment and do not receive a New Option.

6. All New Options will be the same type of options as your Old Options, to the extent allowed by law.

7. All rights to cancelled grants will be irrevocably forfeited.

THIS OFFER IS NOT A GUARANTY OF EMPLOYMENT FOR ANY PERIOD. YOUR EMPLOYMENT WITH THE COMPANY REMAINS "AT WILL" EMPLOYMENT AND MAY BE TERMINATED AT ANY TIME BY EITHER YOU OR THE COMPANY, WITH OR WITHOUT CAUSE OR NOTICE.

All eligible option holders must complete a PCD Inc. Offer to Exchange Options Election Form ("Election Form") and hand deliver or fax a signed copy to Jack Sheehan at (978) 538-3026 by the Expiration Date, no later than 5:00 p.m. Eastern Daylight Time. You are required to make your election to "accept" the exchange agreement and identify the option grant(s) being cancelled if you wish to participate.

PCD will e-mail a confirmation of receipt within 48 hours of receiving your Election Form.

IF YOUR ELECTION IS RECEIVED AFTER 5:00 PM EASTERN DAYLIGHT TIME ON MAY 21, 2002, IT WILL NOT BE ACCEPTED AND YOU WILL BE CONSIDERED TO HAVE DECLINED TO ACCEPT THE EXCHANGE OFFER.

FREQUENTLY ASKED QUESTIONS

The following are answers to some of the questions that you may have about this offer. I urge you to read carefully the Offer to Exchange and the Election (both of which are attached) because the information in this Announcement is not complete, and additional important information is contained in the remaining documents.

GENERAL QUESTIONS ABOUT THE PROGRAM

1. WHAT SECURITIES ARE WE OFFERING TO EXCHANGE?

We are offering to exchange all outstanding and unexercised PCD stock options held by eligible employees for New Options under the 1996 Stock Plan.

2. WHY ARE WE MAKING THE OFFER TO EXCHANGE?

We implemented the offer to exchange because a considerable number of employees have stock options, whether or not they are currently exercisable, that are priced significantly above our current and recent trading prices. We believe these options are unlikely to be exercised in the foreseeable future. This program is voluntary and will allow employees to choose whether to keep their current stock options at their current exercise price, or to cancel those options in exchange for a New Option for the same number of shares to be granted on a date at least six months and one day from the date we cancel the tendered options, the New Grant Date. We expect the New Grant Date to be November 26, 2002. We hope that this program will improve the current underwater options issue, but this cannot be guaranteed considering the ever-present risks associated with a volatile and unpredictable stock market. By making this offer to exchange outstanding options for New Options that will have an exercise price equal to the market value of our common stock on the New Grant Date, we intend to provide our employees with the benefit of owning options that over time may have a greater potential to increase in value, creating better performance incentives for employees and thereby maximizing stockholder value.

3. WHO IS ELIGIBLE?

With the exception of (i) any member of PCD's Board of Directors, including myself, Theodore C. York, James D. Switzer, Jerome D. Brady and John E. Stuart, and (ii) any employee who first received an option grant after January 1, 2002, any current employee of PCD or its subsidiaries with a stock option at any price is eligible. You must be an employee as of May 21, 2002 (the "Commencement Date"), the date this offer commences, and remain an employee as of the date the options are cancelled in order to participate in this offer. In order to receive a new grant, you must remain an eligible employee as of the New Grant Date. Participation in the exchange offer is strictly voluntary.

4. WHY ARE OPTIONS TO PURCHASE SHARES OF PCD UNDER THE 1992 STOCK OPTION PLAN EXCLUDED FROM THIS OFFER?

Most of the options outstanding under the 1992 Stock Option Plan expire before November 26, 2002.

5. WILL EMPLOYEES OUTSIDE THE UNITED STATES BE ELIGIBLE TO PARTICIPATE?

Except as noted above, all employees with stock options are eligible.

6. HOW DOES THE EXCHANGE WORK?

The offer to exchange will require an employee to make a voluntary, irrevocable election to cancel outstanding stock options by 5:00 P.M. Eastern Daylight Time on the Expiration Date (unless we extend the offer), in exchange for a one-for-one grant of a New Option to be issued on the New Grant Date and priced at PCD's closing market price on the last business day before the New Grant Date. The New Options will retain the original vesting schedule of the cancelled options and will be subject to the terms and conditions of the 1996 Stock Plan. The duration of the New Option will be ten (10) years, commencing on the New Grant Date. To participate, employees must cancel any and all PCD options granted since October 22, 2001; but may choose to cancel some, all, or none of their options granted prior to October 22, 2001.

7. WHAT DO I NEED TO DO TO PARTICIPATE IN THE OFFER TO EXCHANGE?

To participate, you must complete the Election Form, sign and date it, and ensure that Jack Sheehan, our Chief Financial Officer, receives it no later than 5:00 P.M. Eastern Time on the Expiration Date. You can return your form either by fax at (978) 538-3026 to Jack Sheehan or you may hand deliver it to Jack at PCD Inc., 2 Technology Drive, Peabody, MA 01960.

8. IS THIS A REPRICING?

This is not a stock option repricing in the traditional sense. Under a traditional stock option repricing, an employee's current options would be immediately repriced and PCD would have a variable accounting charge against earnings.

9. WHY CAN'T PCD JUST REPRICE MY OPTIONS, AS I HAVE SEEN DONE AT OTHER COMPANIES?

In 1998, the Financial Accounting Standards Board adopted unfavorable accounting consequences for companies that reprice options. If we were to simply reprice options, the company's potential for profitability in the future would be in serious jeopardy, as we would be required to record a charge against earnings on any future appreciation of the repriced options.

10. WHY CAN'T I JUST BE GRANTED ADDITIONAL OPTIONS?

Because of the large number of underwater options currently outstanding at PCD, a total grant of additional options would have a negative impact on PCD's outstanding shares and earnings per share. Additionally, PCD has a limited pool of options that it is allowed to grant, without stockholder approval, and therefore our current reserves must be conserved for new hires and ongoing grants.

11. WOULDN'T IT BE EASIER TO JUST QUIT PCD AND THEN GET REHIRED?

This is not an alternative for us because this would be treated the same as a repricing if the rehire and resulting re-grant are within six months of the option cancellation date. Again, such a repricing would cause PCD to incur a variable accounting charge against earnings. In addition, by leaving PCD and being rehired later, an employee would not necessarily receive credit for prior service for vesting purposes

12. IF I PARTICIPATE, WHAT WILL HAPPEN TO MY CURRENT OPTIONS?

Options designated to be exchanged under this program will be cancelled on or about May 24, 2002 (the "Cancellation Date")

13. WHAT IS THE DEADLINE TO ELECT TO EXCHANGE AND HOW DO I ELECT TO EXCHANGE?

The deadline to participate in this program is 5:00 P.M. Eastern Daylight Time on the Expiration Date, unless we extend the offer. This means that Jack Sheehan must have your form in his hands before that time. We have no plans to extend the offer, but if it is extended, you will be notified. We reserve the right to reject any or all options elected for exchange that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept properly and timely elected options that are not validly withdrawn, subject to our rights to extend, terminate and amend the offer

14. WHAT WILL HAPPEN IF I DO NOT TURN IN MY FORM BY THE DEADLINE?

If you do not turn in your Election Form by the deadline, then you will not participate in the option exchange, and all stock options currently held by you will remain intact at their original price and subject to their original terms.

15. DURING WHAT PERIOD OF TIME MAY I WITHDRAW PREVIOUSLY ELECTED OPTIONS?

You may withdraw the options you have elected for exchange at any time before 5:00 P.M., Eastern Daylight Time, on the Expiration Date. To withdraw options elected for exchange, please request a Notice to Change Election from Accept to Reject from Jack Sheehan and submit it to him by 5:00 P.M. Eastern Daylight Time on the Expiration Date. Once you have withdrawn your election to exchange options, you may re-elect to exchange options only by again following the delivery procedures described in the Instructions to the Election Form. If we extend this offer, you may withdraw your previously elected options until the new expiration of the offer.

16. MAY I CHANGE MY MIND ABOUT WHICH OPTIONS I WANT TO TENDER FOR EXCHANGE?

Yes, you may change your election at any time before the offer expires. In order to change your election, you must properly fill out, sign and date a new Election Form and deliver it to Jack Sheehan by hand delivery or by fax to (978) 538-3026 by 5:00 P.M. Eastern Daylight Time on the Expiration Date. Once you have done this, your previous Election Form will be disregarded. If we extend this offer, you may change your election until the new expiration of the offer.

17. AM I ELIGIBLE TO RECEIVE FUTURE GRANTS IF I PARTICIPATE IN THIS EXCHANGE?

Because of the accounting limitations, participants in this program are ineligible to receive any additional stock option grants until after the New Grant Date.

18. WILL I HAVE TO PAY TAXES AS A CONSEQUENCE OF MY PARTICIPATION IN THIS EXCHANGE?

Neither the cancellation of your options nor your receipt of a replacement option should give rise to a taxable event for you, but we recommend that you consult with your own tax advisor to determine if there are any tax consequences to tendering options for exchange that will apply to you, particularly if you reside outside the United States. If you exchange your current options for New Options, you will not be required under current law to recognize income for U.S. federal income tax purposes at the time of the exchange. Further, at the date of grant of the New Options, you will not be required under current law to recognize income for U.S. federal income tax purposes. The grant of options that do not have a readily ascertainable fair market value is not recognized as taxable income in the United States. For employees residing both in and outside of the United States, we recommend that you consult with your own tax advisor to determine the tax and social insurance conseq uences of electing to exchange options pursuant to the offer. All employees are strongly urged to read the Offer to Exchange for an additional discussion of the potential tax consequences.

19. HOW SHOULD I DECIDE WHETHER OR NOT TO PARTICIPATE?

We understand that this will be a challenging decision for all employees. The program does carry considerable risk, and there are no guarantees of our future stock performance. Therefore, the decision to participate must be each individual employee's personal decision.

20. WHAT DO MANAGEMENT AND OUR BOARD OF DIRECTORS THINK OF THE OFFER?

Although our board of directors has approved this offer, neither we nor our board of directors make any recommendation as to whether you should elect to exchange or refrain from exchanging your options. Our board of directors is not eligible to participate in the offer.

21. WHAT IF I LEAVE PCD BETWEEN THE DATE MY OPTIONS ARE CANCELLED AND THE DATE THE NEW OPTIONS ARE GRANTED?

You will have forfeited the options tendered and accepted for exchange and you will receive no New Options. Once the offer to exchange expires (at 5:00 P.M. Eastern Daylight Time on the Expiration Date, unless the offer is extended), your election to tender your options is not revocable. Therefore, if you leave PCD or one of its subsidiaries voluntarily, involuntarily, or for any other reason, including death or disability, before your New Option is granted, you will not have a right to any stock options that were previously cancelled, and you will not have a right to the New Option that would have been issued on the New Grant Date. THEREFORE, IF YOU DO NOT REMAIN AN ELIGIBLE EMPLOYEE ON THE NEW GRANT DATE, YOU WILL NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE. YOU ALSO WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR THE OPTIONS ELECTED TO BE EXCHANGED IF YOU DO NOT REMAIN AN ELIGIBLE EMPLOYEE ON THE NEW GRANT DATE.

22. WHAT ARE THE DIFFERENT KEY DATES REFERRED TO IN THE DOCUMENTS?

There are a number of important dates in the offering documents that you will see over and over again. The Commencement Date is the date of this Announcement (April 22, 2002) and the day that starts the twenty day countdown in which you must decide whether or not to participate in the stock option exchange program. The Expiration Date, May 21, 2002, is the last day that you may tender your old options for New Options and the last day you may change your mind if you initially agreed to participate. The Cancellation Date, May 24, 2002, is three business days following the Expiration Date and the day that we officially cancel your Old Option(s). Although there is a three day delay, you may not change your decision within those three days. The New Grant Date, November 26, 2002, is the date that we grant you your New Option.

SPECIFIC QUESTIONS ABOUT THE CANCELLED OPTIONS

23. WHICH OPTIONS CAN BE CANCELLED?

If you are eligible and elect to participate in this offer, you may opt to cancel one or more options, or any part of those options, granted under our 1996 Stock Plan with respect to those options granted to you prior to October 22, 2001. If you elect to cancel any options, you are required to cancel all options granted to you on or after October 22, 2001.

24. CAN I CHOOSE WHICH OPTIONS I WANT TO CANCEL, IF I HAVE MULTIPLE OPTIONS?

You may choose to cancel one or more options, or any part of those options with respect to those options granted to you prior to October 22, 2001. It is up to you to pick which options, if any, you would like to tender for exchange. However, if you wish to participate in this program, you are required to cancel all options granted to you on or after October 22, 2001.

25. CAN I CANCEL THE REMAINING PORTION OF AN OPTION THAT I HAVE ALREADY PARTIALLY EXERCISED?

Yes, any remaining outstanding, unexercised portion of an option can be cancelled. The New Option will be on a one-for-one basis but only in replacement of the portion of the option cancelled.

26. CAN I SELECT WHICH PORTION OF AN OPTION TO CANCEL?

Yes, we will accept partially tendered options for cancellation and exchange subject to the answers provided in Questions 22-24 above. You must specify the number of shares you are tendering for cancellation under each option listed on your Election Form, and you will receive a "balancing" grant for the untendered amount as promptly as practicable following the expiration of the offer period.

27. IF I CHOOSE TO PARTICIPATE, WHAT WILL HAPPEN TO MY OPTIONS THAT WILL BE CANCELLED?

If you elect to participate in this program, then on the Cancellation Date, or as soon as we can after that, we will cancel all of your outstanding options that were granted since October 22, 2001, plus any others that you elected to cancel. You will not have a right to be granted any further options from us until the New Grant Date, when your New Options will be issued.

SPECIFIC QUESTIONS ABOUT THE REPLACEMENT OPTIONS

28. WHAT WILL BE MY NEW OPTION SHARE AMOUNT?

Employees who participate in this program will receive a new replacement stock option on the New Grant Date exercisable for the number of shares cancelled under the old stock option(s) (subject to adjustment for stock splits, combinations, etc.). Each New Option will be granted under the 1996 Stock Plan pursuant to a new option agreement between you and us.

29. WHAT WILL BE THE VESTING SCHEDULE OF MY REPLACEMENT OPTIONS?

The vesting schedule for all replacement options granted in this program will be exactly the same as the vesting schedule for the cancelled options. Therefore, no employee will lose or gain vesting in the replacement option.

30. WHAT WILL MY NEW OPTION EXERCISE PRICE BE?

The exercise price for the New Options to be granted on the New Grant Date will be the fair market value of our stock on the date of grant, which is defined as the last reported sales price of our common stock on the Nasdaq National Market on the last business day before the date of grant. BECAUSE WE WILL NOT GRANT NEW OPTIONS UNTIL AT LEAST SIX MONTHS AND ONE DAY AFTER THE DATE WE CANCEL THE OPTIONS ACCEPTED FOR EXCHANGE, THE NEW OPTIONS MAY HAVE A HIGHER EXERCISE PRICE THAN SOME OR ALL OF YOUR CURRENT OPTIONS. WE RECOMMEND THAT YOU OBTAIN CURRENT AND HISTORICAL MARKET QUOTATIONS FOR OUR COMMON STOCK, AMONG OTHER FACTORS YOU CONSIDER, BEFORE DECIDING WHETHER TO ELECT TO EXCHANGE YOUR OPTIONS.

31. WHAT WILL MY NEW OPTION TYPE BE, INCENTIVE STOCK OPTION OR NONQUALIFIED STOCK OPTION?

Generally, you will receive the same option type you currently have. If you are a United States employee and your cancelled stock options were incentive stock options, your New Option will be an incentive stock option to the extent it qualifies as such under the Internal Revenue Code of 1986, as amended. If your cancelled options were nonqualified stock options, your New Option will be a nonqualified stock option. Please read the Offer to Exchange for additional information regarding the tax treatment of your options. In addition, we recommend that you consult your own tax advisor to determine the tax consequences of electing to exchange options pursuant to this offer.

32. WHEN WILL I RECEIVE MY REPLACEMENT OPTIONS?

We will grant the New Options on the New Grant Date, which will be at least six months and one day after the date the Old Options are cancelled. If we cancel options elected for exchange on the Cancellation Date, the third business day after the scheduled expiration date of the offer, the New Grant Date of the New Options will be on or about November 26, 2002.

33. WHY WON'T I RECEIVE MY NEW OPTIONS IMMEDIATELY AFTER THE EXPIRATION DATE OF THE OFFER?

If we were to grant the New Options on any date which is earlier than six months and one day after the date we cancel the options accepted for exchange, we would be required for financial reporting purposes to record a compensation expense against our earnings. By deferring the grant of the New Options for at least six months and one day, we believe we will not have to record such a compensation expense.

34. WHEN WILL I RECEIVE MY NEW OPTION AGREEMENT?

Your New Option agreement will be sent to you as promptly as practicable after the New Grant Date.

35. WHAT WILL BE THE TERMS AND CONDITIONS OF MY REPLACEMENT OPTIONS?

Your New Options will be subject to the terms and conditions of the PCD Inc. 1996 Stock Plan. The terms and conditions of this plan are described in the Offer to Exchange. As noted above, the vesting schedule for the New Option will be exactly the same as the cancelled option. The terms and conditions of these plans are described in the Offer to Exchange.

36. CAN I HAVE SOME EXAMPLES OF HOW AN OFFER TO EXCHANGE MIGHT WORK?

Example 1

Assumptions:

               Your Hire Date: January 1, 2001
               Your Original Stock Option: 1,000 shares, granted on February 15, 2001
               Your Original Stock Option Price: $18.00
               Your Original Vesting Schedule: 250 shares vest February 15, 2001, then annually thereafter until fully vested on February 15, 2004
                 or until termination of employment.
               Your Original Option Expiration Date: February 14, 2011
               Hypothetical Stock Price on New Option Grant Date: $4.00
               New Grant Date: November 26, 2002

Using the above assumptions for the sake of illustrating the offer to exchange, we would cancel your original stock option on the Cancellation Date. On the New Grant Date, we would grant you a new option for 1,000 shares, and in this example using the purely hypothetical stock price of $4.00, your new exercise price would be $4.00. The vesting schedule for this New Option will be the same as for the prior option, and therefore will be vested as to 500 shares on the New Grant Date, and will continue to vest 25% on each February 15 through 2004. The Expiration Date of the New Option will be the close of business on the day before the tenth anniversary of the New Grant Date.

Example 2

Assumptions:

               Your Hire Date: December 2, 2001
               Your Original Stock Option: 1,000 shares, granted on December 2, 2001
               Your Original Stock Option Price: $3.188
               Your Original Vesting Schedule: 250 shares vest December 2, 2001, then annually thereafter until fully vested on December 2, 2004
                 or until termination of employment.
               Hypothetical Stock Price on New Options Grant Date: $4.00
               New Grant Date: November 26, 2002

Using the above assumptions for the sake of illustrating the offer to exchange, we would cancel your original stock option on the Cancellation Date. On the New Grant Date, we would grant you a New Option for 1,000 shares, and in this example using the purely hypothetical stock price of $4.00, your new exercise price would be $4.00. (Please note that this is higher than your original stock option price). The vesting schedule for this New Option will be the same as for the prior option, and therefore will have vested 250 shares by the New Grant Date and will continue to vest annually, beginning on December 2, 2002, through December 2, 2004.

37. WHAT HAPPENS IF PCD IS ACQUIRED BEFORE THE REPLACEMENT OPTIONS ARE GRANTED?

If we are acquired before the New Grant Date by way of a merger or similar transaction whereby the liabilities of PCD are assumed, the surviving corporation would inherit our obligation to grant replacement options. However, the replacement options would be options to purchase shares of the surviving corporation, and the exercise price would be equal to the market price of the surviving company's stock on the date of grant. For example, if we were acquired by means of a merger, the number of shares would be equal to the number of our shares that you would have received, multiplied by the exchange ratio that was used in the merger. In this case, your options would be subject to the terms and conditions of the acquiring company's stock option plan. If we are acquired before the New Grant Date by means other than a merger or similar transaction or if the acquiror does not have a similar stock option plan, we will use commercially reasonable efforts to obtain fair compensation fo r your options, based on the deal consideration and other relevant factors. Keep in mind, however, that we can make no guarantee regarding the results of these efforts. Please read the Offer to Exchange for more information.

38. AFTER THE GRANT OF THE NEW OPTIONS, WHAT HAPPENS IF MY OPTIONS AGAIN END UP UNDERWATER?

We are conducting this offer only at this time, considering the unusual stock market conditions that have affected many companies throughout the market, and particularly in our business sector. This is therefore considered a one-time offer and is not expected to be offered again in the future. Since your stock options are valid for ten years from the date of initial grant, subject to continued employment, the price of our common stock will likely be subject to continued fluctuation over the long term. WE CAN PROVIDE NO ASSURANCE AS TO THE PRICE OF OUR COMMON STOCK AT ANY TIME IN THE FUTURE.

39. WHAT DO I NEED TO DO TO PARTICIPATE IN THE OFFER TO EXCHANGE PROGRAM?

To participate, you must properly complete the Election Form, sign and date it, and ensure that Jack Sheehan receives it no later than 5:00 P.M. Eastern Daylight Time on Tuesday, May 21, 2002 or, if we extend the offer, no later than the new expiration of the offer. You can return your form either by fax to (978) 538-3026, or hand deliver it to Jack Sheehan, PCD Inc., 2 Technology Dr., Peabody, MA 01960. If you need an additional copy of the Election Form, you may contact Jack at (978) 532-8800. The company will provide additional copies at no expense to you.

EX-3 5 electionform.htm FORM OF ELECTION FORM FOR OPTION EXCHANGE .

PCD INC.

OFFER TO EXCHANGE OPTIONS

ELECTION FORM

I have received, have read and understand the Offer to Exchange, the Announcement of Option Exchange Program from John L. Dwight, Jr., each dated April 22, 2002, and the Election Form (together, as they may be amended from time to time, constituting the "Offer"), offering to eligible employees the opportunity to exchange outstanding stock options ("Old Options") for options exercisable at the fair market value on or about November 26, 2002 (the "New Grant Date"), issued under the PCD Inc.1996 Stock Plan. This Offer expires at 5:00 P.M. Eastern Daylight Time on May 21, 2002 (the "Expiration Date").

I understand that if I elect to cancel my Old Options in exchange for the promise to issue a new option (the "New Option"), the number of shares will remain the same and the original vesting schedule for the Old Options will be applied to the New Option. I understand that for each option or partial option I cancel, I lose my right to all outstanding unexercised shares so cancelled. I have read the Offer and understand the possible loss of my cancelled stock options if employment is terminated for whatever reason before the New Grant Date. I UNDERSTAND THAT THERE IS A POSSIBILITY THAT THE EXERCISE PRICE OF THE NEW OPTIONS COULD BE HIGHER THAN THE EXERCISE PRICE OF THE OLD OPTIONS RESULTING IN A LOSS OF SOME STOCK OPTION BENEFIT. I ALSO UNDERSTAND THAT IF I ELECT TO CANCEL ANY OPTIONS, ALL OPTIONS GRANTED IN THE SIX MONTHS PRIOR TO CANCELLATION, I.E., SINCE OCTOBER 22, 2001, WILL ALSO BE CANCELLED AND REPLACED WITH NEW OPTIONS. I AGREE TO ALL TERMS OF THE OFFER.

Subject to the above understandings, I would like to participate in the Offer as indicated below. I HAVE READ AND FOLLOWED THE INSTRUCTIONS ATTACHED TO THIS FORM.

Please check the box and note the grant date, original grant number, and number of options being tendered for each stock option grant with respect to which you agree to have such grant and all stock option grants since October 22, 2001 cancelled and replaced pursuant to the terms of this Election Form.

You may change the terms of your election to tender options for exchange by submitting a new Election Form or a Notice to Change Election From Accept to Reject prior to the 5:00PM Eastern Daylight Time on the Expiration Date.

[ ] Yes, I wish to tender for exchange each of the options specified below (and on any additional sheets which I have attached to this form), along with all options granted since October 22, 2001:

GRANT DATE	NUMBER OF SHARES GRANTED	EXERCISE PRICE	NUMBER OF SHARES EXERCISED	NUMBER OF SHARES TENDERED/ TO BE CANCELLED
_____________	___________	____________	____________	____________
_____________	___________	____________	____________	____________
_____________	___________	____________	____________	____________
_____________	___________	____________	____________	____________

[ ] I have attached an additional sheet listing my name and any additional grants I wish to cancel.

I understand that all of the tendered options will be irrevocably cancelled on the Expiration Date.

______________________________________          _______________________________
EMPLOYEE SIGNATURE                               SOCIAL SECURITY NUMBER/
                                                            NATIONAL INSURANCE/
                                                            NATIONAL ID/TAX FILE NUMBER

______________________________________ _______________________________
EMPLOYEE NAME (PLEASE PRINT) DATE AND TIME

______________________________________
E-MAIL ADDRESS

RETURN TO JACK SHEEHAN NO LATER THAN 5:00 PM EDT
ON MAY 21, 2002 VIA FACSIMILE AT (978) 538-3026 OR HAND DELIVERY
PCD WILL SEND AN E-MAIL CONFIRMATION WITHIN 48 HOURS OF RECEIPT
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1. Delivery of Election Form.

A properly completed and executed original of this Election Form (or a facsimile of it), and any other documents required by this Election Form, must be received by Jack Sheehan either via hand delivery or via the facsimile number listed on the front cover of this Election Form on or before 5PM Eastern Daylight Time on May 21, 2002 (the "Expiration Date").

THE METHOD BY WHICH YOU DELIVER ANY REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE COMPANY. YOU MAY HAND DELIVER YOUR ELECTION FORM TO JACK SHEEHAN AT PCD INC. (THE "COMPANY"), OR YOU MAY FAX IT TO HIM AT THE NUMBER LISTED ON THE FRONT COVER OF THIS ELECTION FORM. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY.

Tenders of options made through the Offer may be withdrawn at any time before the Expiration Date. If the Offer is extended by the Company beyond that time, you may withdraw your tendered options at any time until the extended expiration of the Offer. In addition, although the Company currently intends to accept your validly tendered options promptly after the expiration of the Offer, if the Company fails to accept your tendered options before 5:00 p.m., Eastern Daylight Time, on June 17, 2002, you may withdraw your tendered options at any time after June 17, 2002. To withdraw tendered options you must request a Notice to Change Election From Accept to Reject from Jack Sheehan and deliver such signed and dated form, or a facsimile of the form, with the required information to the Company while you still have the right to withdraw the tendered options. Withdrawals may not be rescinded and any Eligible Options withdrawn will thereafter be deemed not properly tendered for purpos es of the Offer unless the withdrawn options are properly re-tendered before the Expiration Date by delivery of a new Election Form following the procedures described in these Instructions.

Tenders of options made through the offer may be changed at any time before the Expiration Date. If the Offer is extended by the Company beyond that time, you may change your election regarding particular tendered options at any time until the extended expiration of the Offer. To change your election regarding particular tendered options while continuing to elect to participate in the Offer, you must deliver a signed and dated new Election Form, with the required information, following the procedures described in these Instructions. Upon the receipt of such a new, properly signed and dated Election Form, any previously submitted Election Form will be disregarded and will be considered replaced in full by the new Election Form.

The Company will not accept any alternative, conditional or contingent tenders. All tendering option holders, by signing this Election Form (or a facsimile of it), waive any right to receive any notice of the acceptance of their tender, except as provided for in the Offer to Exchange.

2. Inadequate Space.

If the space provided in this Election Form is inadequate, the information requested by the table on this Election Form regarding the options to be tendered should be provided on a separate schedule attached to this Election Form. Print your name on this schedule and sign it. The schedule should be delivered with the Election Form, and will thereby be considered part of this Election Form.

3. Tenders.

If you intend to tender options through the Offer, you must complete the table on this Election Form by providing the following information for each option that you intend to tender:

number of shares originally subject to option,
grant date,
exercise price,
the total number of shares exercised under the option; and
the total number of shares being tendered under the option.

You may tender all, none or some of the unexercised shares subject to the options you decide to tender subject to the restrictions described herein. If you make a partial tender of any option, we will issue you an option for the untendered amount (subject to the same terms as the original grant) as promptly as practicable following the Expiration Date. Note that if you intend to tender any of the options that were granted to you, then you must tender all Eligible Options that were granted to you during the six month period prior to the Commencement Date.

4. Signatures on This Election Form.

If this Election Form is signed by the holder of the Eligible Options, the signature must correspond with the name as written on the face of the option agreement or agreements to which the options are subject without alteration, enlargement or any change whatsoever.

If this Election Form is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, that person should so indicate when signing, and proper evidence satisfactory to the Company of the authority of that person so to act must be submitted with this Election Form.

5. Other Information on This Election Form.

In addition to signing this Election Form, you must print your name and indicate the date and time at which you signed. You must also include a current e-mail address and your identification number, such as your social security number, tax identification number or national identification number, as appropriate.

6. Requests for Assistance or Additional Copies.

Any questions or requests for assistance, as well as requests for additional copies of the Offer to Exchange or this Election Form may be directed to Jack Sheehan at PCD Inc., 2 Technology Drive, Peabody, MA 01960, telephone number 978-532-8800. Copies will be furnished promptly at the Company's expense.

7. Irregularities.

All questions as to the number of option shares subject to options to be accepted for exchange, and the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of options will be determined by the Company in its discretion. The Company's determinations shall be final and binding on all parties. The Company reserves the right to reject any or all tenders of options the Company determines not to be in proper form or the acceptance of which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the right to waive any of the conditions of the Offer and any defect or irregularity in the tender of any particular options, and the Company's interpretation of the terms of the Offer (including these instructions) will be final and binding on all parties. No tender of options will be deemed to be properly made until all defects and irregularities have been cured or waived. Unless waived, any defects or irregularitie s in connection with tenders must be cured within such time as the Company shall determine. Neither the Company nor any other person is or will be obligated to give notice of any defects or irregularities in tenders, and no person will incur any liability for failure to give any such notice.

IMPORTANT: THE ELECTION FORM (OR A FACSIMILE COPY OF IT) TOGETHER WITH ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE COMPANY, ON OR BEFORE 5:00 P.M. ON THE EXPIRATION DATE.

8. Additional Documents to Read.

You should be sure to read the Offer to Exchange, all documents referenced therein, and the Announcement of Option Exchange Program from John L. Dwight, Jr. dated April 21, 2002 before deciding to participate in the Offer.

9. Important Tax Information.

You should refer to Section 14 of the Offer to Exchange, which contains important U.S. federal income tax information. If you live or work outside the United States, you should consult with your tax advisor regarding the tax consequences of the Offer which may apply to you.

10. Miscellaneous.

A. Data Privacy. By accepting the Offer, you hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, PCD Inc. and/or any affiliate for the exclusive purpose of implementing, administering and managing your participation in the Offer.

You understand that PCD Inc. and/or any affiliate may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the stock option plan and this Offer ("Data"). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Offer, that these recipients may be located in your country, or elsewhere, and that the recipient's country may have different data privacy laws and protections than in your country. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the stock option plans and this Offer. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the stock option plans and this Offer. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or withdraw the consents herein by contacting in writing your local human resources representative. You understand that withdrawal of consent may affect your ability to participate in this Offer and exercise or realize benefits from the stock option plans.

B. Acknowledgment and Waiver. By accepting this Offer, you acknowledge that: (i) your acceptance of the Offer is voluntary; (ii) your acceptance of the Offer shall not create a right to further employment with your employer and shall not interfere with the ability of your employer to terminate your employment relationship at any time with or without cause; and (iii) the Offer, the Old Options and the New Options are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

EX-4 6 promise.htm FORM OF PROMISE TO GRANT NEW OPTION .

FORM OF PROMISE TO GRANT STOCK OPTION(S)

In exchange for your agreement to cancel certain stock options ("Old Options") you received from PCD Inc. ("PCD"), PCD hereby promises to grant you a stock option or options covering ________ shares of PCD's common stock (the "New Option(s)"), on or about November 26, 2002 (the "New Grant Date"). You understand that the exercise price of the New Option(s) will be the closing price of PCD's common stock as listed on the Nasdaq National Market on the last business day before the date of the replacement grant. Each New Option will vest according to the same vesting schedule as the Old Option it replaces, subject to your continued employment with PCD on a full-time basis or on your being on a bona fide leave of absence as described below. Each New Option will otherwise be subject to the standard terms and conditions under PCD's 1996 Stock Plan (the "Plan") and applicable form of stock option agreement. However, if PCD is acquired prior to the date on which your New Options are to be granted subject to a merger or similar transaction whereby the liabilities of PCD are assumed, you will receive options to purchase shares of the acquiring company's stock, and the number of options you receive would be based on the terms of the acquisition. In addition, those options would be subject to the terms of the acquiring company's stock option plan and related form of agreement. If PCD is acquired by means other than a merger or similar transaction or if the acquiror does not have a comparable stock plan, however, PCD will use commercially reasonable efforts to obtain fair compensation for your New Options based on the deal consideration and other relevant factors. However, there is no guarantee that PCD will be successful in its efforts.

In order to receive the New Option(s), you must be employed by PCD in a full-time capacity or be on a bona fide leave of absence that was approved by PCD in writing (if the terms of the leave provide for continued service crediting or when continued service crediting is required by law), as of the New Grant Date (or such later date as the New Options are granted). This promise to grant does not constitute a guarantee of employment with PCD for any period. Your employment with PCD remains "at-will" and can be terminated by either you or PCD at any time, with or without cause or notice. If you voluntarily terminate your employment with PCD or if PCD terminates your employment for any reason, including without limitation voluntary termination, death, disability or involuntary termination with or without cause, before the New Grant Date, you will lose all rights you have to receive any New Options.

This Promise is subject to the terms and conditions of the Offer to Exchange dated April 22, 2002; the Announcement of Option Exchange Program from John L. Dwight, Jr., President of PCD, dated April 22, 2002; and the Election Form previously completed and submitted by you to PCD, each of which is incorporated herein by reference. The documents described herein reflect the entire agreement between you and PCD with respect to this transaction. This Promise may only be amended by means of a writing signed by you and a duly authorized officer of PCD.

Signed as an agreement under seal this ___ day of ______, 2002.

PCD INC.

By:________________________________

Accepted and agreed by:

_________________________________
Print Name:

EX-5 7 formchangeelection.htm FORM OF FORM TO CHANGE ELECTION .

PCD INC.

OFFER TO EXCHANGE OPTIONS

NOTICE TO CHANGE ELECTION FROM ACCEPT TO REJECT

I previously received a copy of the Offer to Exchange, the Announcement of Option Exchange Program from John L. Dwight, Jr., dated April 22, 2002, and an Election Form. I signed and returned the Election Form, in which I elected to accept PCD Inc.'s ("PCD") offer to exchange (the "Offer") some of or all of my options. I now wish to change that election and reject PCD's Offer to exchange my options. I understand that by signing this Notice and delivering it to Jack Sheehan by 5:00 PM Eastern Daylight Time on May 21, 2002 (the "Expiration Date"), I will be able to withdraw my acceptance of the Offer and reject the Offer to exchange options instead. I have read and understand all the terms and conditions of the Offer to exchange options. I have read and understand the instructions attached to this Notice.

I understand that in order to reject the Offer, I must sign, date and deliver this Notice via facsimile or hand delivery to Jack Sheehan by 5:00 PM Eastern Daylight Time on the Expiration Date.

I understand that by rejecting the Offer to exchange options, I will not receive any New Options pursuant to the Offer and I will keep the Old Options that I have. My Old Options will continue to be governed by the PCD Inc. 1996 Stock Plan (as applicable) by the existing option agreements between PCD Inc. and me.

I understand that I may change this election, and once again accept the Offer to exchange options, by submitting a new Election Form to Jack Sheehan via facsimile prior to 5:00 PM Eastern Daylight Time on the Expiration Date.

[ ] Yes, I wish to withdraw my previously tendered options in full and I do not accept the Offer to exchange any options.

I have signed this Notice and printed my name exactly as it appears on the Election Form.

___________________________________ ________________________________
EMPLOYEE SIGNATURE DATE AND TIME

___________________________________ ________________________________
EMPLOYEE NAME (PLEASE PRINT) E-MAIL ADDRESS

___________________________________
SOCIAL SECURITY NUMBER/NATIONAL
INSURANCE/NATIONAL ID/
TAX FILE NUMBER

RETURN TO JACK SHEEHAN NO LATER THAN

5:00 PM EDT ON MAY 21, 2002 VIA FACSIMILE AT (978) 538-3026

PCD WILL SEND AN E-MAIL CONFIRMATION WITHIN 48 HOURS OF RECEIPT

INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1. Delivery of Notice to Change Election From Accept to Reject.

A properly completed and executed original of this Notice to Change Election From Accept to Reject (or a facsimile of it), and any other documents required by this Notice to Change Election From Accept to Reject, must be received by Jack Sheehan either via hand delivery or via the facsimile number listed on the front cover of this Notice to Change Election From Accept to Reject on or before 5:00 PM Eastern Daylight Time on May 21, 2002 (the "Expiration Date").

THE METHOD BY WHICH YOU DELIVER ANY REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE COMPANY. YOU MAY HAND DELIVER YOUR NOTICE TO CHANGE ELECTION FROM ACCEPT TO REJECT TO JACK SHEEHAN AT PCD INC. (THE "COMPANY"), OR YOU MAY FAX IT TO HIM AT THE NUMBER LISTED ON THE FRONT COVER OF THIS NOTICE TO CHANGE ELECTION FROM ACCEPT TO REJECT. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY.

Although by submitting a Notice to Change Election From Accept to Reject you have withdrawn all of your tendered options from the Offer, you may change your mind and re-accept the Offer until the expiration of the Offer. Tenders of options made through the Offer may be made at any time before the Expiration Date. If the Offer is extended by the Company beyond that time, you may tender your options at any time until the extended expiration of the Offer. To change your mind and elect to participate in the Offer, you must deliver a new signed and dated Election Form, or a facsimile of the Election Form, with the required information to the Company, while you still have the right to participate in the Offer. Your options will not be properly tendered for purposes of the Offer unless the withdrawn options are properly re-tendered before the Expiration Date by delivery of the new Election Form following the procedures described in the Instructions to the Election Form.

IF YOU DO NOT WISH TO WITHDRAW ALL YOUR TENDERED OPTIONS FROM THE OFFER, YOU SHOULD NOT FILL OUT THIS NOTICE TO CHANGE ELECTION FROM ACCEPT TO REJECT. IF YOU WISH TO CHANGE YOUR ELECTION WITH RESPECT ONLY TO PARTICULAR OPTIONS, YOU SHOULD SUBMIT A NEW ELECTION FORM INSTEAD. To change your election regarding particular tendered options while continuing to elect to participate in the Offer, you must deliver a signed and dated new Election Form, with the required information, following the procedures described in the Instructions to the Election Form before the Expiration Date or, if the Offer is extended, before the extended expiration of the Offer. Upon the receipt of such a new, properly signed and dated Election Form, any previously submitted Election Form or Notice to Change Election From Accept to Reject will be disregarded and will be considered replaced in full by the new Election Form.

By signing this Notice to Change Election From Accept to Reject (or a facsimile of it), you waive any right to receive any notice of the withdrawal of the tender of your options, except as provided for in the Offer to Exchange.

2. Signatures on This Notice to Change Election from Accept to Reject.

If this Notice to Change Election From Accept to Reject is signed by the holder of the Eligible Options, the signature must correspond with the name as written on the face of the option agreement or agreements to which the options are subject without alteration, enlargement or any change whatsoever.

If this Notice to Change Election From Accept to Reject is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, that person should so indicate when signing, and proper evidence satisfactory to the Company of the authority of that person so to act must be submitted with this Notice to Change Election From Accept to Reject.

3. Other Information on This Notice to Change Election from Accept to Reject.

In addition to signing this Notice to Change Election From Accept to Reject, you must print your name and indicate the date and time at which you signed. You must also include a current e-mail address and your identification number, such as your social security number, tax identification number or national identification number, as appropriate.

4. Requests for Assistance or Additional Copies.

Any questions or requests for assistance, as well as requests for additional copies of the Offer to Exchange or this Notice to Change Election From Accept to Reject may be directed to Jack Sheehan, Chief Financial Officer, at PCD Inc., 2 Technology Drive, Peabody, MA 01960, telephone number 978-532-8800. Copies will be furnished promptly at the Company's expense.

5. Irregularities.

All questions as to the validity, form, eligibility (including time of receipt) and acceptance of this withdrawal from the Offer will be determined by the Company in its discretion. The Company's determinations shall be final and binding on all parties. The Company reserves the right to reject any or all Notices to Change Election From Accept to Reject that the Company determines not to be in proper form or the acceptance of which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the right to waive any of the conditions of the Offer and any defect or irregularity in the Notice to Change Election From Accept to Reject, and the Company's interpretation of the terms of the Offer (including these instructions) will be final and binding on all parties. No Notice to Change Election From Accept to Reject will be deemed to be properly made until all defects and irregularities have been cured or waived. Unless waived, any defects or irregularities in connection with Notices to Change Election From Accept to Reject must be cured within the time as the Company shall determine. Neither the Company nor any other person is or will be obligated to give notice of any defects or irregularities in Notices to Change Election From Accept to Reject, and no person will incur any liability for failure to give any such notice.

IMPORTANT: THE NOTICE TO CHANGE ELECTION FROM ACCEPT TO REJECT (OR A FACSIMILE COPY OF IT) TOGETHER WITH ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE COMPANY, ON OR BEFORE THE EXPIRATION DATE.

6. Additional Documents to Read.

You should be sure to read the Offer to Exchange, all documents referenced therein, and the Announcement of Option Exchange Program from John L. Dwight, Jr. dated April 22, 2002 before deciding whether to participate in the Offer.

7. Important Tax Information.

You should refer to Section 14 of the Offer to Exchange, which contains important U.S. federal income tax information. If you live or work outside the United States, you should consult your tax advisor regarding tax consequences which may apply to you before deciding whether to participate in the Offer.

EX-6 8 stockplan96.htm 1996 STOCK OPTION PLAN 96stockplan PCD INC.

PCD 1996 Stock Plan

1. Purpose. The purpose of this PCD 1996 Stock Plan (the "Plan") is to advance the interests of PCD Inc., a Massachusetts corporation (the "Company"), by strengthening the ability of the Company to attract, retain and motivate key employees, consultants and other individual contributors of or to the Company or any present or future parent or subsidiary of the Company (the "Company Group") by providing them with an opportunity to purchase or receive as bonuses stock of the Company and thereby permitting them to share in the Company's success. It is intended that this purpose will be effected by granting (i) incentive stock options ("Incentive Options") which are intended to qualify under the provisions of Section 422 of the Internal Revenue Code of 1986, as heretofore and hereafter amended (the "Code"), and non-statutory stock options ("Nonqualified Options") which are not intended to meet the requirements of Section 422 of the Code and which are intended to be taxed under Section 83 of the Code (both Incentive Options and Nonqualified Options shall be collectively referred to as "Options"), (ii) stock purchase authorizations ("Purchase Authorizations"), (iii) stock bonus awards ("Bonuses") and (iv) Stock Appreciation Rights ("SARs").

2. Effective Date. This Plan was adopted by the Board of Directors of the Company (the "Board") on January 30, 1996 (the "effective date" of the Plan). Options, Purchase Authorizations, SARs and Bonuses granted under this Plan are subject to approval of such Plan by the stockholders of the Company on or before January 29, 1997.

3. Stock Covered by the Plan. Subject to adjustment as provided in Section 9 below, the shares that may be made subject to Options, Purchase Authorizations, SARs or Bonuses under this Plan ("Shares") shall not exceed in the aggregate 324,000 shares of the common stock (giving effect to the 12-for-1 stock split approved by the Board of Directors on January 26, 1996), $0.01 par value, of the Company ("Common Stock"). Any Shares subject to an Option, SAR or Purchase Authorization which for any reason expires or is terminated unexercised as to such Shares, any Shares reacquired by the Company pursuant to forfeiture or a repurchase right hereunder, and any Shares subject to an SAR which are not issued upon exercise of the SAR may again be the subject of an Option, Purchase Authorization, SAR or Bonus under the Plan. The Shares purchased pursuant to Purchase Authorizations or the exercise of Options under this Plan or issued as Bonuses or pursuant to SARs may, in whole or in part, be either authorized but unissued Shares or issued Shares reacquired by the Company.

4. Administration. This Plan shall be administered by the Compensation Committee of the Board (the "Committee"), whose construction and interpretation of the Plan's terms and provisions shall be final and conclusive. Each member of the Committee shall be, and shall have been at all times within the one-year period ending on the date of his appointment to the Committee, a person who in opinion of counsel to the Company is (i) a "disinterested person" as such term is used in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) an "outside director" as such term is used in proposed regulation 1.162-27(e)(3) under Section 162(m) of the Code. The Committee shall have authority, subject to the express provisions of the Plan, to construe the Plan and the respective Options, Purchase Authorizations, SARs, Bonuses and related agreements, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of the respective Options, Purchase Authorizations, SARs, Bonuses and related agreements, and to make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Option, Purchase Authorization, SAR, Bonus, or related agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the sole and final judge of such expediency. No member of the Committee and no delegate of the Committee shall be liable for any action or determination under the Plan made in good faith. Notwithstanding the foregoing, the Committee shall have authority to establish guidelines for the grant of Options, Purchase Authorizations, SARs and Bonuses to key employees of the Company Group who are not executive officers of the Company and to delegate to th e Company's Chief Executive Officer the authority to grant Options, Purchase Authorizations, SARs and Bonuses, within such guidelines, to such eligible non-executive key employees.

5. Eligible Recipients. Options, Purchase Authorizations, SARs and Bonuses may be granted to such key employees, consultants or other individual contributors of or to the Company Group, including without limitation members of the Board who are employees and members of any medical scientific or technical advisory boards, as are selected by the Committee or (except as to employees who are Company executive officers) by the Committee's delegate pursuant to section 4 above (a "Participant"); provided, that only employees of the Company Group shall be eligible for grant of an Incentive Option.

6. Duration of the Plan. This Plan shall terminate ten (10) years from the effective date hereof, unless terminated earlier pursuant to Section 12 hereafter, and no Options, Purchase Authorizations, SARs or Bonuses may be granted or made thereafter.

7. Terms and Conditions of Options, Purchase Authorizations, SARs and Bonuses. Options, Purchase Authorizations, SARs and Bonuses granted or made under this Plan shall be evidenced by agreements in such form and containing such terms and conditions as the Committee shall determine; provided, however, that such agreements shall evidence among their terms and conditions the following:

(a) Price. The purchase price per Share payable upon the exercise of each Option or the purchase pursuant to each Purchase Authorization and the price per Share at which Shares may be received upon the exercise of each SAR granted or made hereunder shall be determined by the Committee at the time the Option, Purchase Authorization or SAR is granted or made. Subject to the condition of paragraph 7(k)(i), if applicable, the purchase price per Share payable upon the exercise of each Incentive Option granted hereunder shall not be less than one hundred percent (100%) of the Market Price (as such term is defined below) per Share of the Common Stock on the day the Incentive Option is granted. The purchase price per Share payable on exercise of each Nonqualified Option or upon the purchase of Shares pursuant to each Purchase Authorization granted hereunder shall be not less than eighty-five percent (85%) of the Market Price per Share of the Common Stock on the date of the grant. Bonus Shares and Shares issued pursuant to SARs shall be issued in consideration of services previously rendered, which shall be valued for such purposes by the Committee. No share shall be issued for less than its par value, paid in cash, property or services. As used herein, "Market Price" shall mean the closing price of the Common Stock as reported on the Nasdaq National Market System 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 System on the relevant date, then the Market Price as of such date shall be determined by the Committee equal to the fair market value of the Common Stock in accordance with applicable provisions of the Code then in effec t.

(b) Stock Appreciation Rights. Stock Appreciation Rights shall be grants entitling a Participant to receive an amount in cash or Shares or a combination thereof having a value equal to or less than the excess of the Market Price per share of the Company's Common Stock on the date of exercise over the Market Price per share of the Company's Common Stock on the date of grant, multiplied by the number of Shares with respect to which the SAR shall have been exercised.

(d) Exercise of Options and SARs. Each Option and SAR shall be exercisable for the full amount or for any part thereof and at such intervals or in such installments as the Committee may determine at the time it grants such Option or SAR; provided, however, that no Option shall be exercisable with respect to any Shares later than ten (10) years after the date of the grant of such Option (or five (5) years in the case of Incentive Options to which paragraph 7(k)(ii) applies). An Option or SAR shall be exercisable only by delivery of a written notice to the Company's Treasurer, or any other officer of the Company designated by the Committee to accept such notices on its behalf, specifying the number of Shares for which the Option or SAR is exercised and, in the case of an Option, accompanied by either (i) payment or (ii) if permitted by the Committee, irrevocable instruct ions to a broker to promptly deliver to the Company full payment in accordance with paragraph 7(e)(ii) below of the amount necessary to pay the aggregate exercise price. With respect to an Incentive Option, the permission of the Committee referred to in clause (ii) of the preceding sentence must be granted at the time the Incentive Option is granted.

(e) Payment. Payment shall be made in full (i) at the time the Option is exercised, (ii) promptly after the Participant forwards the irrevocable instructions referred to in paragraph 7(d)(ii) above to the appropriate broker, if exercise of an Option is made pursuant to paragraph 7(d)(ii) above, or (iii) at the time the purchase pursuant to a Purchase Authorization is made. Payment shall be made either (a) in cash, (b) by check, (c) if permitted by the Committee (with respect to an Incentive Option, such permission to have been granted at the time of the Incentive Option grant), by delivery and assignment to the Company of shares of Company stock (provided that such shares have been held by the Participant for at least 6 months before such delivery) having a Market Price (as determined by the Committee) equal to the exercise or purchase price, (d) if permitted by the Committee, s tated in the agreement evidencing the Option or Purchase Authorization, and to the extent permitted by any applicable law, by the Participant's recourse promissory note, which note must be due and payable not more than five (5) years after the date the Option or Purchase Authorization is exercised, or (e) by a combination of (a), (b), (c) and/or (d). If shares of Company stock are to be used to pay the exercise price of an Incentive Option, the Company prior to such payment must be furnished with evidence satisfactory to it that the acquisition of such shares and their transfer in payment of the exercise price satisfy the requirements of Section 422 of the Code and other applicable laws. Notwithstanding the foregoing, the purchase or exercise price of an Option or Purchase Authorization may not be paid by delivery and assignment to the Company of shares of Company stock and the exercise price of an Option may not be paid through irrevocable instructions to a broker as referred to in Paragraph 7(d)( ii) above to the extent that such delivery and assignment or the execution of such irrevocable instructions would constitute a violation of the provisions of any law (including without limitation Section 16 of the Exchange Act) or related regulation or rule, or any agreement or policy of the Company, restricting the transfer or redemption of the Company's stock.

(f) Withholding Taxes; Delivery of Shares. The Company's obligation to deliver Shares upon exercise of an Option or SAR or upon purchase pursuant to a Purchase Authorization or issuance pursuant to a Bonus shall be subject to the Participant'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 Participant any federal, state or local taxes of any kind required by law to be withheld with respect to any Shares issued upon exercise of Options or SARs or purchased or issued pursuant to Purchase Authorizations or Bonuses. The Participant may elect to satisfy such obligation(s), in whole or in part, by (i) delivering to the Company a check for the amount required to be withheld or (ii) if the Committee in its sole discretion approves in any specific or general case, having the Company withhold Shares or delivering to the Company already-owned shares of Common Stock, having a value equal to the amount required to be withheld, as determined by the Committee.

(g) Non-Transferability. No Option, SAR or Purchase Authorization shall be transferable by the Participant otherwise than by will or the laws of descent or distribution, and each Option, SAR or Purchase Authorization shall be exercisable during the Participant's lifetime only by the Participant.

(h) Termination of Options, SARs and Purchase Authorizations. Nothing in this Plan or in any agreement representing any Option, Purchase Authorization, Bonus or SAR shall restrict the right of any member of the Company Group to terminate the employment of any Participant at any time and for any reason, with or without notice. Each Purchase Authorization and SAR shall terminate and may no longer be exercised if the Participant ceases for any reason to provide services to a member of the Company Group. Except to the extent the Committee provides specifically in an agreement evidencing an Option for a lesser period (or a greater period, provided that in the case of Incentive Options such period shall not exceed three months), each Option shall terminate and may no longer be exercised if the Participant ceases for any reason to provide services to a member of the Company Group in accorda nce with the following provisions:

                    (i)    if the Participant ceases to perform services for any reason other than death or disability (as defined
                    in Section 22(e)(3) of the Code), the Participant may, at any time within a period of one month after the
                    date of such cessation of the performance of services, exercise the Option to the extent that the Option
                    was exercisable on the date of such cessation;

                    (ii)   if the Participant ceases to perform services because of disability (as defined in Section 22(e)(3) of
                    the Code), the Participant may, at any time within a period of six months after the date of such cessation
                    of the performance of services, exercise the Option to the extent that the Option was exercisable on the
                    date of such cessation; and

                    (iii)  if the Participant ceases to perform services because of death, the Option, to the extent that the
                    Participant was entitled to exercise it on the date of death, may be exercised within a period of six months
                    after the Participant's death by the person or persons to whom the Participant's rights under the Option
                    pass by will or by the laws of descent or distribution;

provided, however, that no Option, SAR or Purchase Authorization may be exercised to any extent by anyone after the date of its expiration; and provided, further, that Options, SARs and Purchase Authorizations may be exercised only as to Vested Shares (as defined in the applicable agreement with the Participant) after the Participant has ceased to perform services for any member of the Company Group.

(i) Rights as Stockholder. A Participant shall have no rights as a stockholder with respect to any Shares covered by an Option, SAR, Purchase Authorization or Bonus until the date of issuance of a stock certificate, if any, in the Participant's name for such Shares.

(j) Repurchase of Shares by the Company. Any Shares purchased or acquired upon exercise of an Option or SAR or pursuant to a Purchase Authorization or Bonus may in the discretion of the Committee be subject to repurchase by or forfeiture to the Company if and to the extent and at the repurchase price, if any, specifically set forth in the option, purchase, SAR or bonus agreement pursuant to which the Shares were purchased or acquired. Certificates representing Shares subject to such repurchase or forfeiture may be subject to such escrow and stock legending provisions as may be set forth in the option, purchase, SAR or bonus agreement pursuant to which the Shares were purchased or acquired.

(k) 10% Stockholder. If any Participant to whom an Incentive Option is granted pursuant to the provisions of the Plan is on the date of grant the owner of stock (as determined under Section 424(d) of the Code) possessing more than 10% of the total combined voting power or value of all classes of stock of the Company, its parent, if any, or subsidiaries, then the following special provisions shall be applicable:

(i) The exercise price per Share subject to such Option shall not be less than 110% of the fair market
value of each Share on the date of grant; and

(ii) The Option shall not have a term in excess of five years from the date of grant.

(l) Confidentiality Agreements. Each Participant shall execute, prior to or contemporaneously with the grant of any Option, SAR, Purchase Authorization or Bonus hereunder, the Company's then standard form of agreement relating to nondisclosure of confidential information, assignment of inventions and related matters.

(m) Aggregate Limitation. The maximum number of Shares with respect to which any Options, SAR, Purchase Authorizations or Bonuses may be granted under the Plan to any individual during each successive twelve-month period commencing on the effective date of the Plan shall not exceed 50,000 shares (giving effect to the 12-for-1 stock split approved by the Board of Directors on January 26, 1996).

(n) Restrictions on Exercise and Sale. With respect to Participants who are directors of the Company or executive officers of the Company for purposes of Section 16 of the Exchange Act, and if required to comply with rules promulgated under said Section 16, (i) no Option, Purchase Authorization, Bonus or SAR that provides for exercise, a vesting period, a restriction period or the attainment of performance standards shall permit unrestricted ownership of shares of the Common Stock by the Participant for at least six months after the date of grant or award of such Option, Purchase Authorization, Bonus or SAR, and (ii) no Shares acquired pursuant to this Plan (other than shares of Common Stock acquired as a result of the granting of a "derivative security" within the meaning of said Section 16) may be sold or otherwise disposed of for at least six months after such acquisition.

8. Restrictions on Incentive Options. Incentive Options granted under this Plan shall be specifically designated as such and shall be subject to the additional restriction that the aggregate Market Price, determined as of the date the Incentive Option is granted, of the Shares with respect to which Incentive Options are exercisable for the first time by a Participant during any calendar year shall not exceed $100,000. If an Incentive Option which exceeds the $100,000 limitation of this paragraph 8 is granted, the portion of such Option which is exercisable for shares in excess of the $100,000 limitation shall be treated as a Nonqualified Option pursuant to Section 422(d) of the Code. In the event that such Participant is eligible to participate in any other stock incentive plans of the Company, its parent, if any, or a subsidiary which are also intended to comply with the provisions of Section 422 of the Code, such annual limitation shall apply to the aggregate number of shares for which options may be granted under all such plans.

9. Adjustments. Upon the occurrence of any of the following events, a Participant's rights with respect to Options, SARs or Purchase Authorizations granted to such Participant hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in the written agreement between the Participant and the Company relating to such Option, SAR or Purchase Authorization:

(a) Stock Dividends and Stock Splits. If, after the effective date of the 12-for-1 stock split referred to in Section 3, 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 Options, SARs and Purchase Authorizations 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 outstanding Options, SARs and Purchase Authorizations, either (i) make appropriate provision for the continuation of such Options, SARs and Purchase Authorizations by substituting on an equitable basis for the shares then subject to such Options, SARs or Purchase Authorizations 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 such Options, SARs and Purchase Authorizations immediately preceding the Acquisition; or (ii) upon written notice to the Participants, provide that all Options, SARs and Purchase Authorizations 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 the Options, SARs and Purchase Authorizations shall terminate; or (iii) terminate all Options, SARs and Purchase Authorizations in exchange for a cash payment equal to the excess of the fair market value of t he shares subject to such Options, SARs and Purchase Authorizations (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, a Participant upon exercising an Option, SAR or Purchase Authorization 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 Option, SAR or Purchase Authorization prior to such recapitalization or reorganization.

(d) Modification of Incentive Options. Notwithstanding the foregoing, any adjustments made pursuant to subparagraphs (a), (b) or (c) with respect to Incentive Options shall be made only after the Committee, after consulting with counsel for the Company, determines whether such adjustments would constitute a "modification" of such Incentive Options (as that term in defined in Section 424 of the Code) or would cause any adverse tax consequences for the holders of such Incentive Options. If the Committee determines that such adjustments made with respect to Incentive Options would constitute a modification of such Incentive Options or would cause adverse tax consequences to the holders, it may refrain from making such adjustments.

(e) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, each Option, SAR and Purchase Authorization 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.

(f) Issuances of Securities. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Options, SARs or Purchase Authorizations. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company.

(g) Fractional Shares. No fractional shares shall be issued under the Plan and the Participant shall receive from the Company cash in lieu of such fractional shares.

10. Investment Representations; Transfer Restrictions. The Company may require Participants, as a condition of purchasing Shares pursuant to the exercise of an Option or SAR or to a Purchase Authorization or receipt of shares as a Bonus, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Shares for the Participant's own account for investment and not with any present intention of selling or otherwise distributing the same, unless there shall be an effective registration statement under the Securities Act of 1933, as amended (the "1933 Act"), with respect thereto, and to such other effects as the Company deems necessary or appropriate (including without limitation confirmation that the Participant is aware of any applicable restrictions on transfer of the Shares, as specified in the by-laws of the Company or otherwise) in order to comply with federal and appl icable state securities laws.

11. Definitions.

(a) The term "employee" shall have, for purposes of this Plan, the meaning ascribed to "employee" under Section 3401(c) of the Code and the regulations promulgated thereunder.

(b) The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as heretofore and hereafter amended.

(c) The term "parent" shall have, for purposes of this Plan, the meaning ascribed to it under Section 424(e) of the Code and the regulations promulgated thereunder.

(d) The term "subsidiary" shall have, for all purposes under this Plan, the meaning ascribed to it under Section 424(f) of the Code and the regulations promulgated thereunder.

12. Termination or Amendment of Plan. The Committee may at any time terminate the Plan or make such changes in or additions to the Plan as it deems advisable without further action on the part of the stockholders of the Company, provided:

(a) that no such termination or amendment shall adversely affect or impair any then outstanding Option, SAR, Purchase Authorization, Bonus or related agreement without the consent of the Participant holding such Option, SAR, Purchase Authorization, Bonus or related agreement; and

(b) that no such amendment which (i) increases the maximum number of Shares subject to this Plan (except to the extent provided in Sections 3 and 9), (ii) materially increases the benefits accruing to Participants, (iii) materially modifies the requirements as to eligibility for participation in the Plan, or (iv) makes any other change which, pursuant to the Code or regulations thereunder or Section 16(b) of the Exchange Act and rules and regulations promulgated thereunder, requires action by the stockholders may be made without obtaining, or being conditioned upon, stockholder approval.

With the consent of the Participant affected, the Committee may amend outstanding Options, SARs, Purchase Authorizations, Bonuses or related agreements in a manner not inconsistent with the Plan. The Committee shall have the right to amend or modify the terms and provisions of the Plan and of any outstanding Incentive Options granted under the Plan to the extent necessary to qualify any or all such Options for such favorable federal income tax treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under Section 422 of the Code.

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