-----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, TPRjc+mUCQqbP0eyyXZHgmrALurEPVyRtAsUVMpR7/Y/qullZYn217OSiUe5attT rFf23RvN9VrlZ3txwChDLw== 0001007594-97-000022.txt : 19971029 0001007594-97-000022.hdr.sgml : 19971029 ACCESSION NUMBER: 0001007594-97-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971028 SROS: NASD FILER: 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: 10-Q SEC ACT: SEC FILE NUMBER: 000-27744 FILM NUMBER: 97701696 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 10-Q 1 AUDIT LETTER SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 27, 1997 or / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ------------- Commission file number 0-27744 PCD Inc. (Exact name of registrant as specified in its charter) Massachusetts 04-2604950 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2 Technology Drive, Centennial Park, Peabody, Massachusetts (Address of principal executive offices) 01960-7977 (Zip Code) Registrant's telephone number, including area code: 978-532-8800 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Number of shares of common stock, $0.01 par value, outstanding at October 10, 1997: 6,015,932 PCD Inc. FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 27, 1997 Statements in this report concerning the future financial condition, results of operations and business of the Company are "forward-looking" statements as defined in the Securities Act of 1933 and Securities Exchange Act of 1934. Investors are cautioned that these forward-looking statements are inherently uncertain, and that actual performance and results are subject to many risk factors, including the Company's dependence on the integrated circuit package industry, the Company's dependence on its principal customers and independent distributors, fluctuations in demand for the Company's products, patent litigation involving the Company, rapid technological evolution in the electronics industry, and the like. The Company's filings with the Securities and Exchange Commission, including its 1996 Form 10-K, contain additional information concerning such risk factors, and copies of these filings are available from the Company upon request and without charge. PART I FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS The Condensed Consolidated Balance Sheets (unaudited) at September 27,1997 and December 31, 1996, the Condensed Consolidated Statements of Income (unaudited) for the three and nine months ended September 27, 1997 and September 28, 1996 and the Condensed Consolidated Statements of Cash Flows(unaudited) for the nine months ended September 27, 1997 and September 28, 1996 are presented below. See the notes to these condensed consolidated financial statements at the end thereof. 2 PCD Inc. CONSOLIDATED BALANCE SHEETS (Condensed and unaudited) (In thousands)
9/27/97 12/31/96 ------- -------- ASSETS Current assets: Cash and cash equivalents................. $23,732 $20,529 Accounts receivable, net.................. 4,250 3,578 Inventory................................. 3,098 2,608 Prepaid expenses and other current assets. 52 89 ------- ------- Total current assets............... 31,132 26,804 Equipment and improvements Equipment and improvements................ 11,332 9,716 Accumulated depreciation.................. 5,553 4,379 ------- ------- Equipment and improvements, net.............. 5,779 5,337 Other assets................................. 335 315 ------- ------- Total assets....................... $37,246 $32,456 ======= ======= LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................... $ 561 $ 627 Accrued liabilities....................... 2,766 3,123 ------- ------- Total current liabilities.......... 3,327 3,750 Stockholders' equity......................... 33,919 28,706 ------- ------- Total liabilities and stockholders' equity.......... $37,246 $32,456 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 3 PCD Inc. CONSOLIDATED STATEMENTS OF INCOME (Condensed and unaudited) (In thousands, except per share data)
Three Months Ended Nine Months Ended ------------------ ------------------ 9/27/97 9/28/96 9/27/97 9/28/96 ------- ------- ------- ------- Net sales...................... $8,077 $6,222 $21,527 $20,533 Cost of sales.................. 4,150 3,497 11,140 11,350 ------ ------ ------- ------- Gross profit................... 3,927 2,725 10,387 9,183 Operating expenses............. 1,531 1,236 4,279 4,013 ------ ------ ------- ------- Income from operations......... 2,396 1,489 6,108 5,170 Other income, net.............. 290 217 826 480 ------ ------ ------- ------- Income before income taxes..... 2,686 1,706 6,934 5,650 Provision for income taxes..... 993 638 2,562 2,104 ------ ------ ------- ------- Net income..................... $1,693 $1,068 $ 4,372 $ 3,546 ====== ====== ======= ======= Net income per share.......... $ 0.26 $ 0.16 $ 0.66 $ 0.58 ====== ====== ======= ======= Weighted average number of common and common equivalent shares outstanding........... 6,618 6,569 6,604 6,150 ====== ====== ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 4 PCD Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed and unaudited) (In thousands)
Nine Months Ended ------------------ 9/27/97 9/28/96 ------- ------- Cash flows from operating activities: Net income...................................... $ 4,372 $ 3,546 Adjustments to reconcile net income to net cash provided by operating activities Depreciation................................. 1,174 1,055 Amortization of deferred compensation........ 43 43 Allowance for uncollectible accounts......... 10 29 Tax benefit from stock options exercised..... 561 123 Changes in operating assets and liabilities: Increase in accounts receivable............ (682) (477) (Increase) decrease in inventory............ (490) 530 Decrease in prepaid expenses and other current assets................. 37 357 Increase in other assets................... (20) (19) Decrease in accounts payable............... (66) (334) Increase (decrease) in accrued liabilities. (357) 113 ------- ------- Net cash provided by operating activities 4,582 4,966 Cash flows from investing activities: Capital expenditures............................ (1,616) (1,418) ------- ------- Net cash used in investing activities.... (1,616) (1,418) Cash flows from financing activities: Proceeds from public offering................... - 10,501 Exercise of common stock options................ 237 118 ------- ------- Net cash provided by financing activities 237 10,619 ------- ------- Net increase in cash.............................. 3,203 14,167 Cash and cash equivalents at beginning of period.. 20,529 3,958 ------- ------- Cash and cash equivalents at end of period........ $23,732 $18,125 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 5 PCD Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (September 27, 1997 Unaudited) Note 1. INTERIM FINANCIAL STATEMENTS The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. This financial data should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 1996 which are included in the Company?s Form 10-K filing. Results for the interim period presented are not necessarily indicative of results to be anticipated for the entire year. Note 2. NET INCOME PER SHARE Net income per common share is computed using the weighted average number of shares of common stock outstanding and dilutive common stock equivalents from the exercise of stock options (using the treasury stock method). Fully diluted and primary net income per common share were the same for each period presented. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share, (?FAS 128") which specifies the computation, presentation and disclosure requirements of earnings per share and is effective for financial statements issued for periods ending after December 15, 1997. The Company has not yet determined the impact of FAS 128 on net income per share. Note 3. INVENTORY
9/27/97 12/31/96 ------- -------- (In Thousands) Inventory: Raw materials and finished subassemblies $2,130 $1,908 Work in process......................... 219 226 Finished goods.......................... 749 474 ------ ------ Total................................. $3,098 $2,608 ====== ======
6 Note 4. LITIGATION On August 21, 1995, the Company's wholly-owned subsidiary, CTi Technologies, Inc. ("CTi"), filed an action in the United States District Court for the District of Arizona seeking a declaratory judgment against Wayne K. Pfaff, an individual residing in Texas ("Pfaff"), and Plastronics Socket Company, Inc., a corporation affiliated with Pfaff, alleging and seeking a declaratory judgment that two United States patents issued to Pfaff and relating to certain burn-in sockets for "leadless" IC packages (the "Pfaff Leadless Patent") and ball grid array ("BGA") IC packages (the "Pfaff BGA Patent") (collectively, the "Pfaff Patents") are invalid and are not infringed by CTi, the products of which include burn-in sockets for certain "leaded" packages (including Quad Flat Paks)(the "CTi Leaded Products") and BGA packages (the "CTi BGA Products")(collectively, the "CTi Products"). Pfaff has filed a counterclaim alleging that CTi infringes the Pfaff Leadless Patent and has requested an award of damages; the counterclaim does not allege infringement of the Pfaff BGA Patent. Pfaff has also sought a permanent injunction against further infringement by CTi of the Pfaff Leadless Patent. The Company understands that Pfaff has been issued patents for the inventions covered by the Pfaff Leadless Patents in Germany, France, Great Britain, Japan and Malaysia (together with the United States, the "Territory"). Revenue from sales of CTi Leaded Products in the Territory in 1996 and 1995 was approximately $1.9 million and $5.8 million, respectively, which represented approximately 7% and 23% of the Company's net sales in 1996 and 1995, respectively. The CTi BGA Products will not make a significant contribution to revenues of the Company until years subsequent to 1996. The Pfaff Leadless Patent has been the subject of earlier litigation initiated by Pfaff against a burn-in connector manufacturer unrelated to the Company, Wells Electronics, Inc. ("Wells"), in which Pfaff alleged that the manufacture and sale of a wide range of Wells products infringed the Pfaff Leadless Patent. Included among the Wells products covered by the Pfaff litigation was a group of burn-in sockets produced by Wells for certain leaded packages (the "Wells Leaded Products"). The Wells Leaded Products compete directly with CTi Leaded Products and accept similar IC packages. The Company believes that Pfaff may assert in CTi's litigation with Pfaff that Wells Leaded Products are similar in design to CTi Leaded Products. In October 1995, the United States District Court for the Northern District of Texas (the "Texas Court") found certain claims in the Pfaff Leadless Patent to be invalid, but found other claims in the patent not to be invalid and to be infringed by certain Wells products, including the Wells Leaded Products. 7 In September 1997, United States Court of Appeals for the Federal Circuit ruled that the patent claims found by the District Court to be infringed by the Wells Leaded Products were all invalid. Unless reversed, that ruling will be binding on Pfaff in the CTi-Pfaff action in the District of Arizona. The Court of Appeals has refused Pfaff's request for reconsideration of its ruling; however, Pfaff can petition the United States Supreme Court to accept the case for review. If the Supreme Court does not accept the case for review, the case will formally end. The Court of Appeals opinion in the Pfaff-Wells case dealt specifically with six of the 22 patent claims in the Pfaff Leadless Patent. While that court's conclusion that those claims were invalid was based on reasons that are likely to apply to other patent claims as well, the Court of Appeals decision will not preclude Pfaff from asserting in the CTi-Pfaff action the patent claims that were not considered by the Court of Appeals. The CTi-Pfaff action in the District of Arizona has been stayed pending the outcome of the appeal from the Pfaff-Wells case. The Company believes, based on the advice of counsel, that CTi has meritorious defenses against any claim that CTi Products infringe the Pfaff Patent, and CTi intends to prosecute and defend vigorously its position in its declaratory judgement action and any related or subsequent litigation. There can be no assurance, however, that the Company or CTi will prevail in pending or any future litigation with Pfaff, and an adverse outcome could have a material adverse effect on the financial condition, results of operations and business of the Company. Such adverse effect could include, without limitation, the requirement that CTi pay substantial damages for past infringement and an injunction against the manufacture or sale in the United States of such products as are found to be infringing. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Quarter and nine months ended September 27, 1997 compared to the quarter and nine months ended September 28, 1996. Net sales for the third quarter ended September 27, 1997 increased 30% to $8.1 million, compared with $6.2 million for the third quarter last year. Sales of semiconductor burn-in sockets accounted for 90% of the gain, as sales in this product line in the third quarter of 1996 were severely affected by the slowdown in the semiconductor industry. Net sales for the nine months ended September 27, 1997 were $21.5 million, an increase of 5%, from $20.5 million in the comparable nine month period in 1996. Net income for the quarter rose 59% to $1.7 million from $1.1 million in the third quarter of 1996. Net earnings are $0.26 per share, compared with $0.16 per share for the same period a year ago. Net income for the nine months ended September 27, 1997 was $4.4 million, an increase of 23% from the comparable nine month period in 1996. Net earnings were $0.66 per share, compared with $0.58 per share for the same period a year ago. Gross profit increased to $3.9 million, or 48.6% of net sales, from $2.7 million, or 43.8% of net sales in the year earlier period. The effect of new product introductions and production efficiencies combined to generate this increase in gross profit as well as increased overhead absorption. For the nine months ended September 27, 1997, gross profit increased to 48.2% of net sales, or $10.4 million, from 44.7% of net sales, or $9.2 million in 1996. Operating expenses for the third quarter were $1.5 million, or 19.0% of net sales, an increase of $0.3 million, compared to expenses of $1.2 million or 19.9% of net sales in the year earlier period. This increase represents higher sales advertising and trade show costs, testing and investor relation costs. For the nine months ended, September 27, 1997, operating expenses were $4.3 million, or 19.9% of net sales compared to $4.0 million, or 19.5% of net sales in 1996. Other income for the third quarter and nine months increased to $0.3 million and $0.8 million in 1997 from $0.2 million and $0.5 in 1996, respectively. Other income consists primarily of interest income. 9 The effective rate for income taxes for the quarter ended September 27, 1997 declined to 37.0% from 37.4% for the year earlier period. MATERIAL CHANGES IN FINANCIAL CONDITION As of September 27, 1997, the Company had cash and cash equivalents of approximately $23.7 million and working capital of approximately $27.8 million. Cash provided by operating activities totaled $3.2 million for the third quarter and $4.6 million for the nine months ended September 27, 1997 compared to $2.2 million and $5.0 million for the comparable year-earlier periods. Capital expenditures were $0.7 million for the third quarter 1997 and are expected to reach $2.3 million by year end, up from $1.9 million last year. 10 PCD Inc. PART II OTHER INFORMATION Item 1. Legal Proceeding On August 21, 1995, the Company's wholly-owned subsidiary, CTi Technologies, Inc. ("CTi"), filed an action in the United States District Court for the District of Arizona seeking a declaratory judgment against Wayne K. Pfaff, an individual residing in Texas ("Pfaff"), and Plastronics Socket Company, Inc., a corporation affiliated with Pfaff, alleging and seeking a declaratory judgment that two United States patents issued to Pfaff and relating to certain burn-in sockets for "leadless" IC packages (the "Pfaff Leadless Patent") and ball grid array ("BGA") IC packages (the "Pfaff BGA Patent") (collectively, the "Pfaff Patents") are invalid and are not infringed by CTi, the products of which include burn-in sockets for certain "leaded" packages (including Quad Flat Paks)(the "CTi Leaded Products") and BGA packages (the "CTi BGA Products")(collectively, the "CTi Products"). Pfaff has filed a counterclaim alleging that CTi infringes the Pfaff Leadless Patent and has requested an award of damages; the counterclaim does not allege infringement of the Pfaff BGA Patent. Pfaff has also sought a permanent injunction against further infringement by CTi of the Pfaff Leadless Patent. The Company understands that Pfaff has been issued Patents for the inventions covered by the Pfaff Leadless Patents in Germany, France, Great Britain, Japan and Malaysia (together with the United States, the "Territory"). Revenue from sales of CTi Leaded Products in the Territory in 1996 and 1995 was approximately $1.9 million and $5.8 million, respectively, which represented approximately 7% and 23% of the Company's net sales in 1996 and 1995, respectively. The CTi BGA Products will not make a significant contribution to revenues of the Company until years subsequent to 1996. The Pfaff Leadless Patent has been the subject of earlier litigation initiated by Pfaff against a burn-in connector manufacturer unrelated to the Company, Wells Electronics, Inc. ("Wells"), in which Pfaff alleged that the manufacture and sale of a wide range of Wells products infringed the Pfaff Leadless Patent. Included among the Wells products covered by the Pfaff 11 litigation was a group of burn-in sockets produced by Wells for certain leaded packages (the "Wells Leaded Products"). The Wells Leaded Products compete directly with CTi Leaded Products and accept similar IC packages. The Company believes that Pfaff may assert in CTi's litigation with Pfaff that Wells Leaded Products are similar in design to CTi Leaded Products. In October 1995, the United States District Court for the Northern District of Texas (the "Texas Court") found certain claims in the Pfaff Leadless Patent to be invalid, but found other claims in the patent not to be invalid and to be infringed by certain Wells products, including the Wells Leaded Products. In September 1997, United States Court of Appeals for the Federal Circuit ruled that the patent claims found by the District Court to be infringed by the Wells Leaded Products were all invalid. Unless reversed, that ruling will be binding on Pfaff in the CTi-Pfaff action in the District of Arizona. The Court of appeals has refused Pfaff's request for reconsideration of it's ruling; however, Pfaff can petition the United States Supreme Court to accept the case for review. If the Supreme Court does not accept the case for review, the case will formally end. The Court of Appeals opinion in the Pfaff-Wells case dealt specifically with six of the 22 Patent claims in the Pfaff Leadless Patent. While that court's conclusion that those claims were invalid was based on reasons that are likely to apply to other patent claims as well, the Court of Appeals decision will not preclude Pfaff from asserting in the CTi-Pfaff action the patent claims that were not considered by the Court of Appeals. The CTi-Pfaff action in the District of Arizona has been stayed pending the outcome of the appeal from the Pfaff-Wells case. The Company believes, based on the advice of counsel, that CTi has meritorious defenses against any claim that CTi Products infringe the Pfaff Patent, and CTi intends to prosecute and defend vigorously its position in its declaratory judgement action and any related or subsequent litigation. There can be no assurance, however, that the Company or CTi will prevail in pending or any future litigation with Pfaff, and an adverse outcome could have a material adverse effect on the financial condition, results of operations and business of the Company. Such adverse effect could include, without limitation, the requirement that CTi pay substantial damages for past infringement and an injunction against the manufacture or sale in the United States of such products as are found to be infringing. 12 Item 2. Changes in Securities and Use of Proceeds. The Company's registration statement on Form S-1 (Commission file number 333-1266) relating to the initial public offering of shares of the Company's common stock was declared effective by the Securities and Exchange Commission on March 26, 1996. On July 3, 1997, the Company filed an amendment to its initial report on Form S-R covering the six-month period ending on June 26, 1997. None of the information required to be disclosed has changed since the filing of this amendment. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.9 Form of stock option agreements for the 1996 Stock Plan. 10.10 Form of option agreement for the 1996 Eligible Directors Stock Plan. 11.1 Statement re computation of earnings per share. 21.1 Subsidiaries of the Registrant. 27.1 Financial Data Schedule. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the period ended September 27, 1997. 13 S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PCD INC. (Registrant) Dated: October 28, 1997 /s/ John L. Dwight, Jr. ----------------- ------------------------ John L. Dwight, Jr. Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer) Dated: October 28, 1997 /s/ Mary L. Mandarino ----------------- ------------------------ Mary L. Mandarino Vice President, Finance and Administration, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 14 EXHIBIT 10.9 __________________________ Name of Optionee PCD INC. INCENTIVE STOCK OPTION AGREEMENT (PCD 1996 Stock Plan) THIS AGREEMENT is entered into by and between PCD Inc., a Massachusetts corporation with its principal office at Two Technology Drive, Centennial Park, Peabody, Massachusetts 01960-7977 (hereinafter the "Company"), and the undersigned employee of the Company (hereinafter the "Optionee"). WHEREAS, the Optionee renders important services to the Company, and the Company desires to grant an incentive stock option to the Optionee; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements herein contained, the parties hereto hereby agree as follows: 1. GRANT, EXERCISABILITY AND TERM OF OPTION. (a) The Company hereby grants to the Optionee pursuant to the PCD 1996 Stock Plan (the "Plan") the option to purchase from the Company upon the terms and conditions hereinafter set forth the number of shares ("Shares") of the $0.01 par value common stock ("Common Stock") of the Company set forth on the signature page below at the purchase price per Share so set forth (the "Option Price"). The date of grant of this option is the date set forth at the execution page of this Agreement as the "Option Date." (b) Subject to the provisions of Section 5 hereof, this option is exercisable in full or in part and shall remain exercisable until it expires on the tenth anniversary of the Option Date, unless the option is sooner terminated as hereinafter specified. Only whole Shares may be purchased pursuant to this option. 2. CONDITIONS AND LIMITATIONS. (a) The option is granted on the condition that the purchase of shares hereunder shall be for investment purposes and not with a view to resale or distribution, except that such condition shall be inoperative if the offering of Shares subject to the option is registered under the Securities Act of 1933, as amended, or if in the opinion of counsel for the Company such Shares may be resold without registration. At the time of the exercise of the option or any installment the Company may require to implement the foregoing condition and to acknowledge the Optionee's familiarity with restrictions on the resale of the Shares under applicable securities laws, and the Company may stamp such legend on the certificate representing the Shares as may be necessary or appropriate in light of the foregoing condition. (b) The Company will furnish upon request of the Optionee copies of the articles of organization of the Company, as amended, and by-laws of the Company, as amended, and such publicly available financial and other information concerning the Company and its business and prospects as may be reasonably requested by the Optionee in connection with exercise of this option. (c) The option shall not be transferable otherwise than by will or by the laws of descent and distribution, and except as provided in Section 4 the option shall be exercisable during the lifetime of the Optionee by the Optionee only. Notwithstanding the foregoing, however, if the Optionee is determined to be mentally incompetent and a guardian or conservator (or other similar person) is appointed by a court of competent jurisdiction to manage the Optionee's affairs, the guardian or conservator (or other similar person) may exercise the option on behalf of the Optionee, provided that such exercise is made within the time limits prescribed herein. (d) The option granted in this Agreement is subject to the terms, conditions and definitions of the Plan, a copy of which is attached hereto. To the extent that the terms, conditions and definitions of this Agreement are inconsistent with those of the Plan, those of this Agreement shall govern. The Optionee hereby accepts this option subject to all such provisions of the Plan and agrees that all decisions under, and interpretations of, such provisions of the Plan by the Board of Directors of the Company (the "Board") or the Committee, as defined in the Plan, shall be final, binding and conclusive upon the Optionee and his or her heirs. (e) In the event that the Company, upon the advice of counsel, deems it necessary to list upon official notice of issuance any shares to be issued pursuant to the Plan on a national securities exchange or to register under the Securities Act of 1933 or other applicable federal or state statute any shares to be issued pursuant to the Plan, or to qualify any such shares for exemption from the registration requirements of the Securities Act of 1933 under the rules and regulations of the Securities and Exchange Commission or for similar exemption under state law, then the Company shall notify the Optionee to that effect and no Shares shall be issued until such registration, listing or exemption has been obtained. The Company shall make prompt application for any such registration, listing or exemption pursuant to federal or state law or rules of such securities exchange which it deems necessary and shall make reasonable efforts to cause such registration, listing, or exemption to become and remain effective. 3. EXERCISE OF OPTION; WITHHOLDING TAXES. (a) Written notice of the exercise of the option or any installment thereof shall be given to the Company specifying the number of shares for which the option is exercised and accompanied by payment in full of the Option Price. Payment shall be made (a) in cash, (b) by check, (c) by Immediate Sales Proceeds, as defined below, (d) by delivery and assignment to the Company of shares of Company stock (provided that such shares have been held by the Optionee for at least 6 months before such delivery) owned by the Optionee (which shares have a Market Price not less than the Option Price), or (e) by any combination of the foregoing. As used herein, "Market Price" shall mean the closing price of the Common Stock as reported on the Nasdaq National Market for the relevant date (or, if such date is not a trading date or if no trades took place on such date, then such closing price for the last previous trading date or the last previous date on which a trade occurred, as the case may be); provided that if the Common Stock is no longer traded on the Nasdaq National Market on the relevant date, then the Market Price as of such date shall be determined by the Committee. Notwithstanding the foregoing, this option may not be exercised by delivery and assignment to the Company of shares of Company stock to the extent that such delivery and assignment would constitute a violation of the provisions of any law, or related regulation or rule, or any agreement or Company policy, restricting the transfer or redemption of the Company's stock. As used herein, the term "Immediate Sales Proceeds" shall mean the assignment in form acceptable to the Company of the proceeds of a sale of the Shares acquired on the exercise of this option pursuant to a procedure approved by the Company. The Company reserves the right to decline to approve any such procedure in the Company's sole and absolute discretion. (b) The Company's obligation to deliver Shares upon exercise of an option shall be subject to the Optionee's satisfaction of all applicable federal, state and local income and employment tax withholding obligations. Without limiting the generality of the foregoing, the Company shall have the right to deduct from payments of any kind otherwise due to the Optionee any federal, state or local taxes of any kind required by law to be withheld with respect to any Shares issued upon exercise of the option. 4. TERMINATION OF OPTION. In the event that the Optionee ceases to be employed by the Company or any parent or subsidiary of the Company (collectively, the "Company Group") at any time prior to the exercise of this option in full, this option shall terminate according to the following provisions: (a) If the Optionee ceases to be employed for any reason other than death or disability (as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code")), the Optionee may at any time within a period of one (1) month after the date of such cessation of employment exercise the option to the extent that the option was exercisable on the date of such cessation; (b) If the Optionee ceases to be employed because of disability (as defined in Section 22(e)(3) of the Code), the Optionee may at any time within a period of six months after the date of such cessation of employment exercise the option to the extent that the option was exercisable on the date of such cessation; and (c) If the Optionee ceases to be employed because of death, the option, to the extent that the Optionee was entitled to exercise it on the date of death, may be exercised within a period of six months after the Optionee's death by the person or persons to whom the Optionee's rights under the option shall pass by will or by the laws of descent and distribution; provided, however, that this option may not be exercised to any extent by anyone after the date of its expiration. 5. EXERCISABILITY OF OPTION. So long as Optionee remains an employee of the Company, this Option may be exercised only as follows: (i) commencing on the date of grant of this option, only to the extent of 25% of the Shares; (ii) thereafter, on each subsequent anniversary of the date of grant of this option, to the extent of an additional 25% of the Shares; less the number of Shares as to which this Option has been exercised. 6. "MARKET STAND OFF" AGREEMENT. (a) The Optionee, if requested by the Company or any managing underwriter of the Company's securities, shall agree not to sell or otherwise transfer or dispose of any Shares of the Company held by the Optionee during the period up to 180 days, as requested by the Company or such underwriter, following the effective date of a registration statement of the Company filed under the Securities Act of 1933 (except for any Company securities held by the Optionee sold pursuant to such registration statement). Such agreement shall be in writing in form satisfactory to the Company or such underwriter. The Company may impose stop-transfer instructions with respect to the Shares subject to the foregoing restriction until the end of such period. (b) The provisions contained in this Section 6 shall not apply to any transfer of Shares to or in trust for the sole benefit of the Optionee, or any member of the immediate family of the Optionee, including for this purpose the undersigned's spouse, parents, parents-in-law, issue, nephews, nieces, brothers, brothers-in-law, sisters, sisters-in-law, children - -in-law and grandchildren-in-law, provided that such transferee agrees in writing to be subject to the terms of Section 6. 7. NOTICE OF DISPOSITION OF SHARES. The Optionee hereby agrees to notify the Company promptly if the Optionee disposes of any Shares within one (1) year after the date the Optionee exercises all or part of this option or within two (2) years after the Option Date. At any time during the one or two year periods set forth above, the Company may place a legend on any certificate representing Shares requesting the transfer agent for the Company's stock to notify the Company of any such transfer, and the Optionee hereby authorizes such transfer agent so to notify the Company (whether or not such Optionee's stock certificates have been so legended). The obligation of the Optionee to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding sentence. Optionees are urged to review the description of the Plan provided by the Company for a more detailed discussion of the Federal tax consequences of such a disposition under current law. Additionally, if the Optionee is subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, or the rules and regulations promulgated thereunder, any disposition by the Optionee of the Optioned Shares purchased under the Option within six months of the date of grant may deprive the Optionee of the protection from 16(b) liability which the provisions of the Plan seek to provide. 8. $100,000 LIMITATION. Under Section 422 of the Code, the aggregate Market Price of the shares with respect to which incentive stock options granted by any member of the Company Group first become exercisable by an employee during any calendar year cannot exceed $100,000 (the "$100,000 limitation"). To the extent, if any, that the $100,000 limitation is exceeded by reason of the grant of this option, this option shall be deemed, to the maximum extent possible, if any, to be an incentive stock option, and the portion of this option that is exercisable for shares in excess of the $100,000 limitation shall be treated as a non-qualified option pursuant to Section 422(d) of the Code. 9. NOTICES. All notices or demands given pursuant to this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered by hand or sent by certified or registered mail, postage prepaid, addressed to the Company at its principal office or to the Optionee (or the Optionee's legal representatives) at the address stated in the Optionee's (or their) notice or at the Optionee's address appearing on the books of the Company. 10. NO EMPLOYMENT COMMITMENT; TAX TREATMENT. Nothing herein contained shall be deemed to be or constitute an agreement or commitment by the Company or any other member of the Company Group to continue the Optionee in its employ. Although the option granted hereunder is intended to qualify as an incentive stock option under Section 422 of the Code, the Company makes no representation about the tax treatment to the Optionee with respect to receipt or exercise of the option or acquiring, holding or disposing of the Shares, and the Optionee represents that the Optionee has had the opportunity to discuss such treatment (including the possible application of Section 83 of the Code) with the Optionee's tax adviser. The Optionee shall have no rights as a stockholder with respect to the shares subject to the option until the exercise of the option and the issuance of a stock certificate for the Shares with respect to which the option shall have been exercised. 11. ADJUSTMENTS. Upon the occurrence of any of the following events, after the Option Date, a Optionee's rights with respect to this Option shall be adjusted as hereinafter provided: (a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of this Option shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend. (b) CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated with or acquired by another entity in a merger or other reorganization in which the holders of the outstanding voting stock of the Company immediately preceding the consummation of such event, shall, immediately following such event, hold, as a group, less than a majority of the voting securities of the surviving or successor entity, or in the event of a sale of all or substantially all of the Company's assets or otherwise (each, an "Acquisition"), the Committee or the board of directors of any entity assuming the obligations of the Company hereunder (the "Successor Board"), shall, as to this Option, if still outstanding, either (i) make appropriate provision for the continuation of this Option by substituting on an equitable basis for the shares then subject to this Option either (a) the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition, (b) shares of stock of the surviving or successor corporation or (c) such other securities as the Successor Board deems appropriate, the fair market value of which shall not materially exceed the fair market value of the shares of Common Stock subject to this Option immediately preceding the Acquisition; or (ii) upon written notice to the Optionee, provide that this Option must be exercised, to the extent then exercisable or to be exercisable as a result of the Acquisition, within a specified number of days of the date of such notice, at the end of which period this Option shall terminate; or (iii) terminate this Option in exchange for a cash payment equal to the excess of the fair market value of the shares subject to this Option (to the extent then exercisable or to be exercisable as a result of the Acquisition) over the exercise price thereof. (c) RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization or reorganization of the Company (other than a transaction described in subparagraph (b) above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, the Optionee upon exercising this Option shall be entitled to receive for the purchase price paid upon such exercise the securities he or she would have received if he or she had exercised such this Option prior to such recapitalization or reorganization. (d) MODIFICATION OF INCENTIVE STOCK OPTIONS. Notwithstanding the foregoing, any adjustments made pursuant to subparagraphs (a), (b) or (c) with respect to this Option shall be made only after the Committee, after consulting with counsel for the Company, determines whether such adjustment would constitute a "modification" (as that term in defined in Section 424 of the Code) of such this Option or would cause any adverse tax consequences for the Optionee. If the Committee determines that such adjustments made with respect to this Option would constitute a modification of this Option or would cause adverse tax consequences to the holders, it may refrain from making such adjustments. (e) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or liquidation of the Company, this Option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee. 12. MISCELLANEOUS. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the Commonwealth of Massachusetts. This Agreement shall be binding upon and inure to the benefit of the heirs and legal representatives of the Optionee and the successors and assigns of the Company, but shall not be assigned by the Optionee at any time without the prior written permission of the Company, and any such attempted assignment shall be void. IN WITNESS WHEREOF the parties have executed this Stock Option Agreement as of the Option Date. _____________________________ Signature of Optionee _____________________________ Print Name of Optionee Address:_____________________ Option Date: ________________ Vesting Commencement Date: _______________________ No. of Shares: ______________ Option Price: _______________ Accepted, as the issuer of the Shares, in accordance with the terms of the foregoing Option Agreement as of the foregoing Option Date. PCD INC. By: _________________________ President ________________________ Name of Optionee PCD INC. NON-QUALIFIED STOCK OPTION AGREEMENT (PCD 1996 Stock Plan) THIS AGREEMENT is entered into by and between PCD Inc., a Massachusetts corporation with its principal office at Two Technology Drive, Centennial Park, Peabody, Massachusetts 01960- 7977 (hereinafter the "Company"), and the undersigned consultant of the Company (hereinafter the "Optionee"). WHEREAS, the Optionee renders important services to the Company (such services to be collectively herein referred to as "Service"), and the Company desires to grant a non-qualified stock option to the Optionee; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements herein contained, the parties hereto hereby agree as follows: 1. GRANT, EXERCISABILITY AND TERM OF OPTION. (a) The Company hereby grants to the Optionee pursuant to the PCD 1996 Stock Plan (the "Plan") the option to purchase from the Company upon the terms and conditions hereinafter set forth the number of shares ("Shares") of the $0.01 par value common stock ("Common Stock") of the Company set forth on the signature page below at the purchase price per Share so set forth (the "Option Price"). The date of grant of this option is the date set forth at the execution page of this Agreement as the "Option Date." (b) Subject to the provisions of Section 5 hereof, this option is exercisable in full or in part and shall remain exercisable until it expires on the tenth anniversary of the Option Date, unless the option is sooner terminated as hereinafter specified. Only whole Shares may be purchased pursuant to this option. 2. CONDITIONS AND LIMITATIONS. (a) The option is granted on the condition that the purchase of shares hereunder shall be for investment purposes and not with a view to resale or distribution, except that such condition shall be inoperative if the offering of Shares subject to the option is registered under the Securities Act of 1933, as amended, or if in the opinion of counsel for the Company such Shares may be resold without registration. At the time of the exercise of the option or any installment thereof, the Optionee will execute such further agreements as the Company may require to implement the foregoing condition and to acknowledge the Optionee's familiarity with restrictions on the resale of the Shares under applicable securities laws, and the Company may stamp such legend on the certificate representing the Shares as may be necessary or appropriate in light of the foregoing condition. (b) The Company will furnish upon request of the Optionee copies of the articles of organization of the Company, as amended, and by-laws of the Company, as amended, and such publicly available financial and other information concerning the Company and its business and prospects as may be reasonably requested by the Optionee in connection with exercise of this option. (c) The option shall not be transferable otherwise than by will or by the laws of descent and distribution, and except as provided in Section 4 the option shall be exercisable during the lifetime of the Optionee by the Optionee only. Notwithstanding the foregoing, however, if the Optionee is determined to be mentally incompetent and a guardian or conservator (or other similar person) is appointed by a court of competent jurisdiction to manage the Optionee's affairs, the guardian or conservator (or other similar person) may exercise the option on behalf of the Optionee, provided that such exercise is made within the time limits prescribed herein. (d) The option granted in this Agreement is subject to the terms, conditions and definitions of the Plan, a copy of which is attached hereto. To the extent that the terms, conditions and definitions of this Agreement are inconsistent with those of the Plan, those of this Agreement shall govern. The Optionee hereby accepts this option subject to all such provisions of the Plan and agrees that all decisions under, and interpretations of, such provisions of the Plan by the Board of Directors of the Company (the "Board") or the Committee, as defined in the Plan, shall be final, binding and conclusive upon the Optionee and his or her heirs. (e) In the event that the Company, upon the advice of counsel, deems it necessary to list upon official notice of issuance any shares to be issued pursuant to the Plan on a national securities exchange or to register under the Securities Act of 1933 or other applicable federal or state statute any shares to be issued pursuant to the Plan, or to qualify any such shares for exemption from the registration requirements of the Securities Act of 1933 under the rules and regulations of the Securities and Exchange Commission or for similar exemption under state law, then the Company shall notify the Optionee to that effect and no Shares shall be issued until such registration, listing or exemption has been obtained. The Company shall make prompt application for any such registration, listing or exemption pursuant to federal or state law or rules of such securities exchange which it deems necessary and shall make reasonable efforts to cause such registration, listing, or exemption to become and remain effective. 3. EXERCISE OF OPTION; WITHHOLDING TAXES. (a) Written notice of the exercise of the option or any installment thereof shall be given to the Company specifying the number of shares for which the option is exercised and accompanied by payment in full of the Option Price. Payment shall be made (a) in cash, (b) by check, (c) by Immediate Sales Proceeds, as defined below, (d) by delivery and assignment to the Company of shares of Company stock (provided that such shares have been held by the Optionee for at least 6 months before such delivery) owned by the Optionee (which shares have a Market Price not less than the Option Price), or (e) by any combination of the foregoing. As used herein, "Market Price" shall mean the closing price of the Common Stock as reported on the Nasdaq National Market for the relevant date (or, if such date is not a trading date or if no trades took place on such date, then such closing price for the last previous trading date or the last previous date on which a trade occurred, as the case may be); provided that if the Common Stock is no longer traded on the Nasdaq National Market on the relevant date, then the Market Price as of such date shall be determined by the Committee. Notwithstanding the foregoing, this option may not be exercised by delivery and assignment to the Company of shares of Company stock to the extent that such delivery and assignment would constitute a violation of the provisions of any law, or related regulation or rule, or any agreement or Company policy, restricting the transfer or redemption of the Company's stock. As used herein, the term "Immediate Sales Proceeds" shall mean the assignment in form acceptable to the Company of the proceeds of a sale of the Shares acquired on the exercise of this option pursuant to a procedure approved by the Company. The Company reserves the right to decline to approve any such procedure in the Company's sole and absolute discretion. (b) The Company's obligation to deliver Shares upon exercise of an option shall be subject to the Optionee's satisfaction of all applicable federal, state and local income and employment tax withholding obligations. Without limiting the generality of the foregoing, the Company shall have the right to deduct from payments of any kind otherwise due to the Optionee any federal, state or local taxes of any kind required by law to be withheld with respect to any Shares issued upon exercise of the option. 4. TERMINATION OF OPTION. In the event that the Optionee ceases to perform Service at any time prior to the exercise of this option in full, this option shall terminate according to the following provisions: (a) If the Optionee ceases to perform Service for any reason other than death or disability (as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code")), the Optionee may at any time within a period of one (1) month after the date of such cessation of employment exercise the option to the extent that the option was exercisable on the date of such cessation; (b) If the Optionee ceases to perform Service because of disability (as defined in Section 22(e)(3) of the Code), the Optionee may at any time within a period of six months after the date of such cessation of employment exercise the option to the extent that the option was exercisable on the date of such cessation; and (c) If the Optionee ceases to perform Service because of death, the option, to the extent that the Optionee was entitled to exercise it on the date of death, may be exercised within a period of six months after the Optionee's death by the person or persons to whom the Optionee's rights under the option shall pass by will or by the laws of descent and distribution; provided, however, that this option may not be exercised to any extent by anyone after the date of its expiration. 5. EXERCISABILITY OF OPTION. So long as Optionee performs Service, this Option may be exercised only as follows: (i) commencing on the date of grant of this option, only to the extent of 25% of the Shares; (ii) thereafter, on each subsequent anniversary of the date of grant of this option, to the extent of an additional 25% of the Shares; less the number of Shares as to which this Option has been exercised. 6. "MARKET STAND OFF" AGREEMENT. (a) The Optionee, if requested by the Company or any managing underwriter of the Company's securities, shall agree not to sell or otherwise transfer or dispose of any Shares of the Company held by the Optionee during the period up to 180 days, as requested by the Company or such underwriter, following the effective date of a registration statement of the Company filed under the Securities Act of 1933 (except for any Company securities held by the Optionee sold pursuant to such registration statement). Such agreement shall be in writing in form satisfactory to the Company or such underwriter. The Company may impose stop-transfer instructions with respect to the Shares subject to the foregoing restriction until the end of such period. (b) The provisions contained in this Section 6 shall not apply to any transfer of Shares to or in trust for the sole benefit of the Optionee, or any member of the immediate family of the Optionee, including for this purpose the undersigned's spouse, parents, parents-in-law, issue, nephews, nieces, brothers, brothers-in-law, sisters, sisters-in-law, children-in - -law and grandchildren-in-law, provided that such transferee agrees in writing to be subject to the terms of this Section 6. 7. NOTICES. All notices or demands given pursuant to this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered by hand or sent by certified or registered mail, postage prepaid, addressed to the Company at its principal office or to the Optionee (or the Optionee's legal representatives) at the address stated in the Optionee's (or their) notice or at the Optionee's address appearing on the books of the Company. 8. NO SERVICE COMMITMENT; TAX TREATMENT. Nothing herein contained shall be deemed to be or constitute an agreement or commitment by the Company or any other member of the Company Group to continue the Optionee in Service. The option granted hereunder is not intended to qualify as an incentive stock option under Section 422 of the Code, and the Company makes no representation about the tax treatment to the Optionee with respect to receipt or exercise of the option or acquiring, holding or disposing of the Shares. The Optionee represents that the Optionee has had the opportunity to discuss such treatment with the Optionee's tax adviser. The Optionee shall have no rights as a stockholder with respect to the shares subject to the option until the exercise of the option and the issuance of a stock certificate for the Shares with respect to which the option shall have been exercised. 9. ADJUSTMENTS. Upon the occurrence of any of the following events, after the Option Date, a Optionee's rights with respect to this Option shall be adjusted as hereinafter provided: (a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of this Option shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend. (b) CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated with or acquired by another entity in a merger or other reorganization in which the holders of the outstanding voting stock of the Company immediately preceding the consummation of such event, shall, immediately following such event, hold, as a group, less than a majority of the voting securities of the surviving or successor entity, or in the event of a sale of all or substantially all of the Company's assets or otherwise (each, an "Acquisition"), the Committee or the board of directors of any entity assuming the obligations of the Company hereunder (the "Successor Board"), shall, as to this Option, if still outstanding, either (i) make appropriate provision for the continuation of this Option by substituting on an equitable basis for the shares then subject to this Option either (a) the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition, (b) shares of stock of the surviving or successor corporation or (c) such other securities as the Successor Board deems appropriate, the fair market value of which shall not materially exceed the fair market value of the shares of Common Stock subject to this Option immediately preceding the Acquisition; or (ii) upon written notice to the Optionee, provide that this Option must be exercised, to the extent then exercisable or to be exercisable as a result of the Acquisition, within a specified number of days of the date of such notice, at the end of which period this Option shall terminate; or (iii) terminate this Option in exchange for a cash payment equal to the excess of the fair market value of the shares subject to this Option (to the extent then exercisable or to be exercisable as a result of the Acquisition) over the exercise price thereof. (c) RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization or reorganization of the Company (other than a transaction described in subparagraph (b) above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, the Optionee upon exercising this Option shall be entitled to receive for the purchase price paid upon such exercise the securities he or she would have received if he or she had exercised such this Option prior to such recapitalization or reorganization. (d) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or liquidation of the Company, this Option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee. 10. MISCELLANEOUS. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the Commonwealth of Massachusetts. This Agreement shall be binding upon and inure to the benefit of the heirs and legal representatives of the Optionee and the successors and assigns of the Company, but shall not be assigned by the Optionee at any time without the prior written permission of the Company, and any such attempted assignment shall be void. IN WITNESS WHEREOF the parties have executed this Stock Option Agreement as of the Option Date. ___________________________________ Signature of Optionee ___________________________________ Print Name of Optionee Address: __________________________ ___________________________________ Option Date: _____________________ Vesting Commencement Date: ____________________________ No. of Shares: ___________________ Option Price: $___________________ Accepted, as the issuer of the Shares, in accordance with the terms of the foregoing Option Agreement as of the foregoing Option Date. PCD INC. By: _______________________________ President EXHIBIT 10.10 _______________________ Name of Optionee PCD INC. ELIGIBLE DIRECTOR OPTION AGREEMENT THIS AGREEMENT is entered into by and between PCD Inc., a Massachusetts corporation with its principal office at Two Technology Drive, Centennial Park, Peabody, Massachusetts 01960-7977 (hereinafter the "Company"), and the undersigned non-employee director of the Company (hereinafter the "Optionee"). WHEREAS, the Optionee renders important services to the Company (such services to be collectively herein referred to as "Service"), and the Company desires to grant a non - -qualified stock option to the Optionee; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements herein contained, the parties hereto hereby agree as follows: 1. GRANT, EXERCISABILITY AND TERM OF OPTION. (a) The Company hereby grants to the Optionee pursuant to the PCD 1996 Eligible Directors Stock Plan (the "Plan") the option to purchase from the Company upon the terms and conditions hereinafter set forth the number of shares ("Shares") of the $0.01 par value common stock ("Common Stock") of the Company set forth on the signature page below at the purchase price per Share so set forth (the "Option Price"). The date of grant of this option is the date set forth at the execution page of this Agreement as the "Option Date." (b) Subject to the provisions of Section 5 hereof, this option is exercisable in full or in part and shall remain exercisable until it expires on the tenth anniversary of the Option Date, unless the option is sooner terminated as hereinafter specified. Only whole Shares may be purchased pursuant to this option. 2. CONDITIONS AND LIMITATIONS. (a) The option is granted on the condition that the purchase of shares hereunder shall be for investment purposes and not with a view to resale or distribution, except that such condition shall be inoperative if the offering of Shares subject to the option is registered under the Securities Act of 1933, as amended, or if in the opinion of counsel for the Company such Shares may be resold without registration. At the time of the exercise of the option or any installment thereof, the Optionee will execute such further agreements as the Company may require to implement the foregoing condition and to acknowledge the Optionee's familiarity with restrictions on the resale of the Shares under applicable securities laws, and the Company may stamp such legend on the certificate representing the Shares as may be necessary or appropriate in light of the foregoing condition. (b) The Company will furnish upon request of the Optionee copies of the articles of organization of the Company, as amended, and by-laws of the Company, as amended, and such publicly available financial and other information concerning the Company and its business and prospects as may be reasonably requested by the Optionee in connection with exercise of this option. (c) The option shall not be transferable otherwise than by will or by the laws of descent and distribution, and except as provided in Section 4 the option shall be exercisable during the lifetime of the Optionee by the Optionee only. Notwithstanding the foregoing, however, if the Optionee is determined to be mentally incompetent and a guardian or conservator (or other similar person) is appointed by a court of competent jurisdiction to manage the Optionee's affairs, the guardian or conservator (or other similar person) may exercise the option on behalf of the Optionee, provided that such exercise is made within the time limits prescribed herein. (d) The option granted in this Agreement is subject to the terms, conditions and definitions of the Plan, a copy of which is attached hereto. To the extent that the terms, conditions and definitions of this Agreement are inconsistent with those of the Plan, those of this Agreement shall govern. The Optionee hereby accepts this option subject to all such provisions of the Plan and agrees that all decisions under, and interpretations of, such provisions of the Plan by the Board of Directors of the Company (the "Board") or the Committee, as defined in the Plan, shall be final, binding and conclusive upon the Optionee and his or her heirs. (e) In the event that the Company, upon the advice of counsel, deems it necessary to list upon official notice of issuance any shares to be issued pursuant to the Plan on a national securities exchange or to register under the Securities Act of 1933 or other applicable federal or state statute any shares to be issued pursuant to the Plan, or to qualify any such shares for exemption from the registration requirements of the Securities Act of 1933 under the rules and regulations of the Securities and Exchange Commission or for similar exemption under state law, then the Company shall notify the Optionee to that effect and no Shares shall be issued until such registration, listing or exemption has been obtained. The Company shall make prompt application for any such registration, listing or exemption pursuant to federal or state law or rules of such securities exchange which it deems necessary and shall make reasonable efforts to cause such registration, listing, or exemption to become and remain effective. 3. EXERCISE OF OPTION; WITHHOLDING TAXES. (a) Written notice of the exercise of the option or any installment thereof shall be given to the Company specifying the number of shares for which the option is exercised and accompanied by payment in full of the Option Price. Payment shall be made (a) in cash, (b) by check, (c) by Immediate Sales Proceeds, as defined below, (d) by delivery and assignment to the Company of shares of Company stock (provided that such shares have been held by the Optionee for at least 6 months before such delivery) owned by the Optionee (which shares have a Market Price not less than the Option Price), or (e) by any combination of the foregoing. As used herein, "Market Price" shall mean the closing price of the Common Stock as reported on the Nasdaq National Market for the relevant date (or, if such date is not a trading date or if no trades took place on such date, then such closing price for the last previous trading date or the last previous date on which a trade occurred, as the case may be); provided that if the Common Stock is no longer traded on the Nasdaq National Market on the relevant date, then the Market Price as of such date shall be determined by the Committee. Notwithstanding the foregoing, this option may not be exercised by delivery and assignment to the Company of shares of Company stock to the extent that such delivery and assignment would constitute a violation of the provisions of any law, or related regulation or rule, or any agreement or Company policy, restricting the transfer or redemption of the Company's stock. As used herein, the term "Immediate Sales Proceeds" shall mean the assignment in form acceptable to the Company of the proceeds of a sale of the Shares acquired on the exercise of this option pursuant to a procedure approved by the Company. The Company reserves the right to decline to approve any such procedure in the Company's sole and absolute discretion. (b) The Company's obligation to deliver Shares upon exercise of an option shall be subject to the Optionee's satisfaction of all applicable federal, state and local income and employment tax withholding obligations. Without limiting the generality of the foregoing, the Company shall have the right to deduct from payments of any kind otherwise due to the Optionee any federal, state or local taxes of any kind required by law to be withheld with respect to any Shares issued upon exercise of the option. 4. TERMINATION OF OPTION. In the event that the Optionee ceases to be a director at any time prior to the exercise of this option in full, this option shall terminate according to the following provisions: (a) If the Optionee ceases be a director for any reason other than death or disability (as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code")), the Optionee may at any time within a period of twelve months after the date of such cessation of service as a director exercise the option to the extent that the option was exercisable on the date of such cessation; (b) If the Optionee ceases to be a director because of disability (as defined in Section 22(e)(3) of the Code), the Optionee may at any time within a period of twelve months after the date of such cessation of service as a director exercise the option to the extent that the option was exercisable on the date of such cessation; and (c) If the Optionee ceases to be a director because of death, the option, to the extent that the Optionee was entitled to exercise it on the date of death, may be exercised within a period of twelve months after the Optionee's death by the person or persons to whom the Optionee's rights under the option shall pass by will or by the laws of descent and distribution; provided, however, that this option may not be exercised to any extent by anyone after the date of its expiration. 5. EXERCISABILITY OF OPTION. So long as Optionee is an Eligible Director, this Option may be exercised only as follows: in full six months after the Option Date. 6. "MARKET STAND OFF" AGREEMENT. (a) The Optionee, if requested by the Company or any managing underwriter of the Company's securities, shall agree not to sell or otherwise transfer or dispose of any Shares of the Company held by the Optionee during the period up to 180 days, as requested by the Company or such underwriter, following the effective date of a registration statement of the Company filed under the Securities Act of 1933 (except for any Company securities held by the Optionee sold pursuant to such registration statement). Such agreement shall be in writing in form satisfactory to the Company or such underwriter. The Company may impose stop - -transfer instructions with respect to the Shares subject to the foregoing restriction until the end of such period. (b) The provisions contained in this Section 6 shall not apply to any transfer of Shares to or in trust for the sole benefit of the Optionee, or any member of the immediate family of the Optionee, including for this purpose the undersigned's spouse, parents, parents-in-law, issue, nephews, nieces, brothers, brothers-in-law, sisters, sisters-in-law, children-in-law and grandchildren-in-law, provided that such transferee agrees in writing to be subject to the terms of this Section 6. 7. NOTICES. All notices or demands given pursuant to this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered by hand or sent by certified or registered mail, postage prepaid, addressed to the Company at its principal office or to the Optionee (or the Optionee's legal representatives) at the address stated in the Optionee's (or their) notice or at the Optionee's address appearing on the books of the Company. 8. NO SERVICE COMMITMENT; TAX TREATMENT. Nothing herein contained shall entitle the Optionee to remain a director of PCD or an Eligible Director under the plan. The option granted hereunder is not intended to qualify as an incentive stock option under Section 422 of the Code, and the Company makes no representation about the tax treatment to the Optionee with respect to receipt or exercise of the option or acquiring, holding or disposing of the Shares. The Optionee represents that the Optionee has had the opportunity to discuss such treatment with the Optionee's tax adviser. The Optionee shall have no rights as a stockholder with respect to the shares subject to the option until the exercise of the option and the issuance of a stock certificate for the Shares with respect to which the option shall have been exercised. 9. ADJUSTMENTS. Upon the occurrence of any of the following events, after the Option Date, a Eligible Director's rights with respect to this Option shall be adjusted as hereinafter provided: (a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of this Option shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend. (b) CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated with or acquired by another entity in a merger or other reorganization in which the holders of the outstanding voting stock of the Company immediately preceding the consummation of such event, shall, immediately following such event, hold, as a group, less than a majority of the voting securities of the surviving or successor entity, or in the event of a sale of all or substantially all of the Company's assets or otherwise (each, an "Acquisition"), the Committee or the board of directors of any entity assuming the obligations of the Company hereunder (the "Successor Board"), shall, as to this Option, if still outstanding, either (i) make appropriate provision for the continuation of this Option by substituting on an equitable basis for the shares then subject to this Option either (a) the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition, (b) shares of stock of the surviving or successor corporation or (c) such other securities as the Successor Board deems appropriate, the fair market value of which shall not materially exceed the fair market value of the shares of Common Stock subject to this Option immediately preceding the Acquisition; or (ii) upon written notice to the Optionee, provide that this Option must be exercised, to the extent then exercisable or to be exercisable as a result of the Acquisition, within a specified number of days of the date of such notice, at the end of which period this Option hall terminate; or (iii) terminate this Option in exchange for a cash payment equal to the excess of the fair market value of the shares subject to this Option (to the extent then exercisable or to be exercisable as a result of the Acquisition) over the exercise price thereof. (c) RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization or reorganization of the Company (other than a transaction described in subparagraph (b) above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, the Optionee upon exercising this Option shall be entitled to receive for the purchase price paid upon such exercise the securities he or she would have received if he or she had exercised such this Option prior to such recapitalization or reorganization. (d) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or liquidation of the Company, this Option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee. 10. MISCELLANEOUS. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the Commonwealth of Massachusetts. This Agreement shall be binding upon and inure to the benefit of the heirs and legal representatives of the Optionee and the successors and assigns of the Company, but shall not be assigned by the Optionee at any time without the prior written permission of the Company, and any such attempted assignment shall be void. IN WITNESS WHEREOF the parties have executed this Stock Option Agreement as of the Option Date. __________________________ Signature of Optionee __________________________ Print Name of Optionee Address: _________________ __________________________ Option Date:______________ No. of Shares:____________ Option Price: ____________ Accepted, as the issuer of the Shares, in accordance with the terms of the foregoing Option Agreement as of the foregoing Option Date. PCD INC. By:___________________________ President EXHIBIT 11.1 PCD Inc. STATEMENT RE COMPUTATION OF EARNINGS PER SHARE (1) For the quarter ended September 27, 1997 Common stock outstanding, beginning of the period...................... 5,953,682 Weighted average common stock issued during the period............................ 28,002 Dilutive effect of common stock equivalents.... 636,302 --------- Weighted average number of common and common equivalent shares outstanding................ 6,617,986 ========= Net income per share........................... 0.26 ========= For the quarter ended September 28, 1996 Common stock outstanding, beginning of the period...................... 5,723,832 Weighted average common stock issued during the period............................ 39,557 Dilutive effect of common stock equivalents.... 805,680 --------- Weighted average number of common and common equivalent shares outstanding................ 6,569,069 ========= Net income per share........................... 0.16 ========= For the nine months ended September 27, 1997 Common stock outstanding, beginning of the period...................... 5,854,733 Weighted average common stock issued during the period............................ 77,775 Dilutive effect of common stock equivalents.... 671,812 --------- Weighted average number of common and common equivalent shares outstanding................ 6,604,320 ========= Net income per share........................... 0.66 ========= For the nine months ended September 28, 1996 Common stock outstanding, beginning of the period...................... 4,597,032 Weighted average common stock issued during the period............................ 764,572 Dilutive effect of common stock equivalents.... 788,619 --------- Weighted average number of common and common equivalent shares outstanding................ 6,150,223 ========= Net income per share........................... 0.58 =========
(1) All common and common equivalent shares have been restated to reflect a 12-for-1 stock split of the Company?s common stock effected in February, 1996. EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT PCD Inc. CTi Technologies, Inc. PCD Securities Corp. PCD USVI Inc. PCD Control Systems, Inc. EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY TO REFERENCE TO SUCH FINANCIAL INFORMATION 1000 9-MOS DEC-31-1997 SEP-27-1997 23732 0 4492 242 3098 31132 11332 5553 37246 3327 0 0 0 60 33859 37246 21527 21527 11140 11140 4279 0 0 6934 2562 4372 0 0 0 4372 0.66 0.66
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