SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED APRIL 30, 1995
( ) 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: 0-8550
PCA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0888429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
815 MATTHEWS-MINT HILL ROAD
MATTHEWS, NORTH CAROLINA 28105
(Address of principal executive offices)
(Zip Code)
(704) 847-8011
(Registrant's telephone number, including area code)
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 report), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO____
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
COMMON STOCK, $0.20 PAR VALUE 7,460,771
CLASS OUTSTANDING AT MAY 31, 1995
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
I N D E X
PART I. FINANCIAL INFORMATION: PAGE NO.
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets - April 30, 1995 and
January 29, 1995 ................................................... 1
Consolidated Statements of Income - Three Months Ended
April 30, 1995 and May 1, 1994...................................... 2
Consolidated Statement of Changes in Shareholders' Equity -
Three Months Ended April 30, 1995................................... 3
Consolidated Statements of Cash Flows - Three Months
Ended April 30, 1995 and May 1, 1994................................ 4
Condensed Notes to Consolidated Financial Statements............... 5-6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................. 7-9
PART II. OTHER INFORMATION:
ITEM 4. Submission of Matters to Vote of Security Holders ............ 10
ITEM 6. Exhibits and Reports on Form 8-K.............................. 11
SIGNATURES ............................................................ 12
EXHIBIT INDEX ......................................................... 13-14
EXHIBIT 11 ............................................................ 15
EXHIBIT 27 ............................................................ 16
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS April 30, January 29,
1995 1995
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 298,857 $ 311,759
Accounts receivable (net of allowance
for doubtful accounts of $1,466,526
and $845,843):
Due from licensor stores and customers 10,808,563 6,408,629
Other, including employee advances 1,286,699 1,263,681
Inventories 3,200,138 3,243,571
Deferred income taxes 2,255,733 1,952,293
Prepaid expenses 600,712 636,907
Total Current Assets 18,450,702 13,816,840
Property:
Land and improvements 1,169,495 1,169,495
Building and improvements 7,675,221 7,630,427
Photographic and sales equipment 40,989,399 40,884,594
Photographic finishing equipment 12,099,658 12,076,064
Furniture and equipment 9,526,172 9,475,787
Transportation equipment 205,664 205,664
Leasehold improvements 10,398,302 10,408,620
Construction in progress 1,927,225 1,629,026
Total 83,991,136 83,479,677
Less: Accumulated depreciation and
amortization 39,558,278 37,752,137
Property, net 44,432,858 45,727,540
Other Assets 12,569 12,569
Total Assets $ 62,896,129 $ 59,556,949
LIABILITIES AND SHAREHOLDERS' EQUITY April 30, January 29,
1995 1995
Current Liabilities:
Short-term borrowings $ 4,332,490 $ 974,215
Accounts payable-trade 10,352,618 11,418,568
Accounts payable--share repurchase 6,467,775 --
Accrued and withheld sales and
payroll taxes 344,677 332,432
Accrued income taxes 607,669 1,492,427
Accrued compensation 4,048,138 3,015,943
Other accrued liabilities 4,428,101 3,279,824
Total Current Liabilities 30,581,468 20,513,409
Deferred Income Taxes 3,490,693 3,083,062
Other Liabilities 2,978,742 2,928,023
Shareholders' Equity:
Preferred stock, $10.00 par value (authorized-
2,000,000 shares; outstanding-none) - -
Common Stock, $0.20 par value (authorized-
20,000,000 shares; issued-7,447,571
shares and 8,160,171 shares) 1,489,515 1,632,035
Additional paid-in capital 4,797,129 12,204,069
Retained earnings 19,722,432 19,444,035
Cumulative foreign exchange translation (150,485) (215,087)
adjustments
Total 25,858,591 33,065,052
Less: Unearned compensation 13,365 32,597
Total Shareholders' Equity 25,845,226 33,032,455
Total Liabilities and Shareholders' Equity $ 62,896,129 $ 59,556,949
</TABLE>
See Condensed Notes to Consolidated Financial Statement
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 30, May 1,
1995 1994
<S> <C> <C>
SALES.................................... $32,608,631 $29,936,444
COSTS AND EXPENSES:
Advertising and promotional costs...... 3,631,529 4,047,749
Costs of photographic sales............ 10,765,755 11,437,989
Store commissions and selling costs.... 10,375,239 9,273,647
General and administrative expenses.... 6,317,963 4,999,830
Total costs and expenses............ 31,090,486 29,759,215
INCOME FROM OPERATIONS................... 1,518,145 177,229
Interest expense, net.................. 53,961 70,278
INCOME BEFORE INCOME TAXES............... 1,464,184 106,951
INCOME TAX PROVISION..................... 613,183 43,300
NET INCOME............................... $ 851,001 $ 63,651
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Primary................................ 8,480,862 8,546,334
Fully Diluted.......................... 8,523,329 8,546,334
PRIMARY AND FULLY DILUTED EARNINGS PER
COMMON SHARE:
Net Income............................. $ 0.10 $ 0.01
CASH DIVIDENDS PER COMMON SHARE.......... $ 0.07 $ 0.07
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
2
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED APRIL 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY
COMMON STOCK PAID-IN RETAINED TRANSLATION UNEARNED
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS COMPENSATION
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 29,1995:...... 8,160,171 $1,632,035 $12,204,069 $19,444,035 $ (215,087) $ (32,597)
Net income..................... 851,001
Exercise of stock options...... 31,700 6,340 164,834
Dividends...................... (572,604)
Acquisition of Company stock... (744,300) (148,860) (7,565,092)
Compensatory stock options..... 12,550
Canceled compensatory stock
options...................... (6,682) 6,682
Foreign currency translation
adjustment................... 64,602
BALANCE, APRIL 30, 1995:....... 7,447,571 $1,489,515 $ 4,797,129 $19,722,432 $ (150,485) $ (13,365)
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
3
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 30, May 1,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 851,001 $ 63,651
Adjustments to reconcile net income to net cash used
in operating
activities:
Depreciation.......................................... 2,041,434 1,695,615
Increase in allowance for doubtful accounts........... 619,173 279,644
Provision for deferred income taxes................... 104,191 251,374
Loss on disposal of property.......................... 48,012 6,143
Compensatory stock option expense..................... 12,550 46,873
Increase in other liabilities......................... 50,719 22,905
Increase in other noncurrent assets................... - (46,907)
Changes in operating assets and liabilities:
Increase in accounts receivable..................... (5,040,981) (4,792,491)
Decrease in inventories............................. 45,960 507,132
Increase in deferred costs applicable to
unsold portraits.................................. - (197,896)
Decrease in prepaid expenses........................ 36,436 111,114
Decrease in accounts payable........................ (1,079,168) (5,372,136)
Increase (decrease) in accrued expenses............. 1,293,448 (2,180,919)
NET CASH USED IN OPERATING ACTIVITIES..................... (1,017,225) (9,605,898)
INVESTING ACTIVITIES:
Purchase of property...................................... (740,044) (6,306,121)
Proceeds from sale of fixed assets........................ 7,223 21,068
NET CASH USED IN INVESTING ACTIVITIES..................... (732,821) (6,285,053)
FINANCING ACTIVITIES:
Increase in short-term borrowings......................... 3,358,275 12,112,657
Exercise of stock options................................. 171,174 36,114
Acquisition of company stock.............................. (1,246,177) -
Cash dividends............................................ (572,604) (569,742)
NET CASH PROVIDED FROM FINANCING ACTIVITIES............... 1,710,668 11,579,029
Effect of exchange rate changes on cash................... 26,476 9,048
DECREASE IN CASH AND CASH EQUIVALENTS..................... (12,902) (4,302,874)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 311,759 5,118,896
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 298,857 $ 816,022
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Flow Data:
Interest paid........................................... $ 17,027 $ 36,432
Income taxes paid....................................... $ 1,342,384 $ 300,273
Schedule of Non-cash Financial Activities:
Stock options canceled and unearned compensation
credited.............................................. $ 6,682 $ 52,250
Acquisition of Common Stock not paid.................... $ 6,467,775 $ -
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
4
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
With respect to the significant accounting policies of PCA International,
Inc., and its subsidiaries (the "Company"), which are wholly-owned, reference is
made to note 1 of the financial statements in the Company's Form 10-K filed for
the fiscal year ended January 29, 1995. The interim financial statements
reflect all adjustments (consisting of normal recurring accruals) which are, in
the opinion of management, necessary for a fair statement of the results for the
interim periods presented.
2.STOCK OPTIONS:
The Company's 1990 Non-Qualified Stock Option Plan (the "1990 Plan")
provides for the grant of up to 1,425,000 non-qualified stock options to key
employees and non-employee Directors. As of April 30, 1995, options for
approximately 457,950 shares were exercisable and in-the-money; options for
170,500 shares were exercisable and out-of-the-money; and options for 29,850
shares were available for future grant under the 1990 Plan. As of May 1, 1994,
options for 331,550 shares were exercisable and in-the-money and options for
132,350 shares were exercisable and out-of-the-money.
The Company's 1992 Non-Qualified Stock Option Plan (the "1992 Plan")
provides for the grant of 1,725,000 non-qualified stock options to key employees
and non-employee Directors of the Company. As of April 30, 1995, options for
107,300 shares were exercisable and in-the-money, options for 201,500 shares
were exercisable and out-of-the-money; and options for 899,500 shares were
available for future grant under the 1992 Plan. As of May 1, 1994, options for
221,000 shares were exercisable and out-of-the-money.
The following table summarizes all stock option activity for the three
months ended April 30, 1995:
NUMBER OF OPTION
SHARES PRICE
OPTIONS OUTSTANDING
JANUARY 29, 1995... 1,880,550 $ 1.67-$17.00
Exercised....... (31,700) $ 1.67-$ 9.67
Canceled........ (69,700) $ 1.67-$16.33
Granted......... 42,000 $10.13
OPTIONS OUTSTANDING
APRIL 30, 1995..... 1,821,150 $ 1.67-$17.00
5
<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes all stock option activity for the three
months ended May 1, 1994:
NUMBER OF OPTION
SHARES PRICE
OPTIONS OUTSTANDING
JANUARY 30, 1994... 1,787,750 $ 1.67-$20.25
Exercised....... (8,600) $ 1.67
Canceled........ (9,900) $ 1.67-$15.59
Granted......... 21,500 $10.25
OPTIONS OUTSTANDING
MAY 1, 1994........ 1,790,750 $ 1.67-$20.25
3. COMMON STOCK:
On March 8, 1995, the Company's Board of Directors increased the number of
shares authorized for repurchase by 754,490, bringing the total number of shares
authorized for repurchase to 1,000,000. During the first quarter, the Company
purchased, in various transactions, 744,300 shares. The average purchase price
per share was $10.36.
6
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company provides portrait photography services, primarily in permanent
studios operated in Kmart stores, throughout the United States and Canada. In
its Institutional Division, the Company also provides portrait services to
church congregations through traveling promotions. The Company's Kmart Store
Division accounted for approximately 95% of sales during the first quarter of
fiscal 1995.
The Company completed the phase-out of its Kmart traveling photography
studios in July 1994. Prior to August 1994, the Company operated one-week
traveling, or portable, studio promotions in Kmart stores that did not have a
permanent studio. Because portrait services from traveling promotions were
available, on average, only seven weeks per year in any given Kmart location,
the Company has engaged for the past several years in a continuing program of
converting its traveling promotion business in Kmart stores to permanent
studios. Traveling promotion sales in Kmart stores were $1.8 million in the
first quarter of fiscal 1994.
The Company completed the conversion in all of its Kmart studio locations
to its new Digital Imaging System technology in July 1994. The new Digital
Imaging System allows customers to approve each portrait during the photography
session as each pose is displayed on a video monitor. With this technology, the
Company no longer relies on the production of portraits on a speculative basis,
but produces only those portraits which the customer purchases. The conversion
to digital technology has resulted in very significant changes in the Company is
operations, increasing the emphasis on higher quality portraits and service and
allowing the Company to improve its per-customer sales average. The Company
also has benefited from lower production costs primarily through the elimination
of waste from speculative portrait production.
During the last half of fiscal 1994, the Company restructured the
management of day-to-day operations. The new management structure has allowed
the President more time to explore ways to leverage PCA's technology and
expertise through diversification.
SEASONALITY
The Company's portrait photography business is seasonal, with the greatest
sales volume occurring in the fourth fiscal quarter during the Thanksgiving and
Christmas holiday seasons. The fourth quarters of fiscal 1994 and 1993
contributed approximately 31% and 35%, respectively, of annual sales and 79% and
93%, respectively, of earnings for such years. The Company's operations can
also be adversely affected by inclement weather.
7
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
RESULTS OF OPERATIONS
The following table presents the percentage of sales represented by the
following line items from the Company is statements of income for the periods
indicated:
THREE MONTHS ENDED
APRIL 30, MAY 1,
1995 1994
Sales........................ 100.0% 100.0%
Costs and expenses........... 95.3 99.4
Income from operations....... 4.7 0.6
Interest expense............. 0.2 0.2
Income before income taxes... 4.5 0.4
Income tax provision......... 1.9 0.2
Net income................... 2.6% 0.2%
Sales for the Company's 1995 first quarter were $32.6 million, an increase
of 9% over sales of $29.9 million for the first quarter of 1994. Operating
profit for the first quarter of fiscal 1995 was $1.5 million, an increase of
$1.3 million as compared to the corresponding period in fiscal 1994. The
operating profit margin was 4.7% in the first quarter of fiscal 1995 versus 0.6%
in the first quarter of 1994. Net income increased to $0.9 million from $0.1
million in the first quarter of fiscal 1994.
The sales increase is attributable to significantly higher average sales
per customer in Kmart permanent studios. Sales in Kmart permanent studios were
$30.9 million in the first quarter of 1995, an increase of 17%, and the average
customer purchase increased by 20% to $59.46 as compared to the first quarter of
fiscal 1994. In the fourth quarter of fiscal 1994, the average customer
purchase was $50.78. The Company attributes the increases in average sales to
consumer acceptance of its Digital Imaging System, improved compensation plans
which have enabled the Company to retain quality studio managers, and training
programs designed to enhance the portrait photography experience. Partially
offsetting these sales increases are the loss of $1.8 million in sales from the
Kmart traveling business which the Company phased out during the second quarter
of 1994 and a decline in the number of customers photographed in permanent
studios. In the first quarter of 1995, the Company photographed 519,022
customers in permanent studios (including 145 new studios opened between May 1,
1994, and April 30, 1995), a decrease of 2.2% from 530,764 in the first quarter
of 1994. The Company believes the reduction in customers photographed reflects
its emphasis on improved customer service, a decrease in retail customers
generally at Kmart stores, and the increased number of permanent portrait
studios operated by its competitors. Sales in the Institutional Division
decreased by 5% to $1.7 million in the quarter.
8
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
The increase in income from operations is attributable to higher average
sales per customer and lower production costs, which the Company is able to
achieve from its proprietary Digital Imaging System. Partially offsetting these
factors are additional incentive compensation costs incurred as the result of
higher average sales and increased profitability.
Corporate general and administrative expenses increased by $0.9 million in
the first quarter, from $1.2 million in fiscal 1994 to $2.1 million. The
increased expense was largely related to employee costs resulting from the
Company's higher income.
The income tax provision for the first quarter of fiscal 1995 was $0.6
million. This resulted in an effective tax rate of 41.9% for fiscal 1995 versus
40.5% in fiscal 1994. The increase in the effective tax rate is generally
attributable to higher state tax rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of working capital are cash from operations
and the Company's revolving line of credit. On April 30, 1995, the Company had
$4.3 million in short-term debt outstanding and $0.3 million in cash and cash
equivalents. The Company has a $16.0 million revolving line of credit with
NationsBank of North Carolina, N.A., ("NationsBank") to meet seasonal capital
requirements.
During February, March and April of 1995 (the first quarter of fiscal
1995), the Company had property additions in excess of $0.7 million, principally
for materials and equipment for the addition of 32 Kmart permanent studios.
After recent discussions with Kmart representatives, the Company expects to open
50 to 100 permanent studios in 1995. Kmart Corporation has stated that they
will continue to review their stores' performance and will selectively close
underperforming stores. Operating activities used $1.0 million in cash for the
quarter.
Shareholders' equity decreased by $7.2 million to $25.8 million,
principally due to the repurchase of 744,300 shares of Common Stock, or 9.1% of
the shares outstanding at the beginning of the quarter, of the Company's Common
Stock for $7.7 million. Net income for the quarter was $0.9 million. Dividends
paid in the quarter totaled $0.6 million.
The Company believes, based on its short- and long-term business plans,
that it has the ability to adequately fund its operating and capital expenditure
needs for fiscal 1995 from operations, augmented by borrowings under its line of
credit for seasonal credit needs. Due to the seasonality of the Company's
operations, cash is generally consumed during the first fiscal quarter. During
the remaining fiscal quarters, operating activities usually generate cash.
9
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
(a) The Annual Meeting was held on May 24, 1995.
(b)Pursuant to Instruction 3 to Item 4, this paragraph need not be
answered.
(c) At the Annual Meeting of Shareholders held on May 24, 1995, the
following four matters were voted upon and passed. The tabulation of votes
was:
(1) The election of eight Directors to serve until the 1996 Annual Meeting
of Shareholders:
<TABLE>
<CAPTION>
VOTES IN FAVOR WITHHOLD AUTHORITY
IN PERSON AS PROXY IN PERSON AS PROXY
<S> <C> <C>
R. Stuart Dickson 7,475,807 93,893
Peter B. Foreman 7,476,607 93,093
George Friedman 7,476,457 93,243
John Grosso 7,476,307 93,393
Charlotte H. 7,476,307 93,393
Mason
Joseph H. Reich 7,467,607 93,039
Albert F. Sloan 7,476,307 93,393
Stanley Tulchin 7,476,120 93,580
</TABLE>
10
<PAGE>
(2) Ratification of the proposal to approve amendments to the Company's
1992 Non-Qualified Stock Option Plan to grant certain stock options to non-
employee Directors pursuant to a formula and to allow non-employee Directors to
elect to receive their Director's compensation in the form of stock options in
lieu of cash:
VOTES IN FAVOR VOTES AGAINST ABSTENTIONS
IN PERSON AS PROXY IN PERSON AS PROXY IN PERSON AS PROXY
6,519,296 261,929 127,831
(3) Ratification of the proposal to approve the amendment to the Company's
Articles of Incorporation to eliminate certain potential liability of
Directors for monetary damages:
VOTES IN FAVOR VOTES AGAINST ABSTENTIONS
IN PERSON AS PROXY IN PERSON AS PROXY IN PERSON AS PROXY
7,272,296 138,478 121,926
(4) Ratification of the proposal to select KPMG Peat Marwick LLP to
continue as Independent Auditors for the 1995 fiscal year:
VOTES IN FAVOR VOTES AGAINST ABSTENTIONS
IN PERSON AS PROXY IN PERSON AS PROXY IN PERSON AS PROXY
7,538,341 26,013 5,346
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Computation of Primary and Fully Diluted Earnings Per Common Share
27 Financial Data Schedule
(b) Reports on Form 8-K
None
11
<PAGE>
SIGNATURES
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.
PCA INTERNATIONAL, INC.
PCA INTERNATIONAL, INC.
(Registrant)
Date: June 8, 1995 /s/ John Grosso
John Grosso
President
(Principal Executive Officer)
Date: June 8, 1995 /s/ Bruce A. Fisher
Bruce A. Fisher
Senior Vice President
(Principal Accounting Officer)
12
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NUMBER
4 Instruments defining the rights of security holders,
incorporated by reference to Exhibit 4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 3, 1992.
10(a) Amendment dated as of June 1, 1994, to Loan Agreement between PCA
International, Inc., Photo Corporation of America, PCA National,
Inc., and PCA Photo Corporation of Canada, Inc., PCA Mexico, S.A. de
C.V. and NationsBank of North Carolina, N.A., incorporated by
reference to Exhibit 10(a) to the Company's Quarterly Report on Form
10-Q for the quarter ended July 31, 1994.
10(b) Revised Exclusive License Agreement dated July 1, 1994, between
Kmart Corporation and PCA International, Inc., incorporated by
reference to Exhibit 10(b) to the Company's Amendment No. 1 on Form
10-Q/A to its Quarterly Report on Form 10-Q for the quarter ended
July 31, 1994.
10(c) New Sales Contract dated August 11, 1994, between PCA International,
Inc., and Agfa Division of Miles, Inc., incorporated by reference to
Exhibit 10(c) to the Company's Amendment No. 1 on Form 10-Q/A to its
Quarterly Report on Form 10-Q for the quarter ended July 31, 1994.
10(d) The 1990 Non-Qualified Stock Option Plan, incorporated by
reference to Exhibit 4 to the Company's Registration Statement on
Form S-8 (Registration No. 33-36793).
10(e) The 1992 Non-Qualified Stock Option Plan, as amended and restated as
of May 24, 1995.
10(f) Loan Agreement dated September 8, 1992, between PCA International,
Inc., Photo Corporation of America, PCA National, Inc., and PCA
Photo Corporation of Canada, Inc., and NationsBank of North
Carolina, N.A., incorporated by reference to Exhibit 10(o) to the
Company's Quarterly Report on Form 10-Q for the quarter ended August
2, 1992 (Commission File No. 0-8550).
10(g) Amendment dated as of September 14, 1993, to Loan Agreement between
PCA International, Inc., Photo Corporation of America, PCA National,
Inc., PCA Photo Corporation of Canada, Inc., and NationsBank of
North Carolina, N.A., incorporated by reference to Exhibit 10(g) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
July 31, 1994.
13
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PCA INTERNATIONAL, INC., AND SUBSIDIARIES
10(h) Amendment dated as of March 31, 1995, to Loan Agreement between
PCA International, Inc., Photo Corporation of America, PCA National,
Inc., PCA Photo Corporation of Canada, Inc., and PCA Mexico, S.A. de
C.V. and NationsBank of North Carolina, N.A., incorporated by
reference to Exhibit 10(h) to the Company's Annual Report on Form
10-K for the year ended January 29, 1995
11 Computation of Primary and Fully Diluted Earnings Per Common Share
27 Financial Data Schedule
14
EXHIBIT 10(E)
<PAGE>
PCA INTERNATIONAL, INC.
1992 NON-QUALIFIED STOCK OPTION PLAN
AS AMENDED AND RESTATED AS OF MAY 24, 1995
1. PURPOSE.
The purpose of the 1992 Non-Qualified Stock Option plan is to attract and
retain outstanding key management persons and to provide an incentive to, and
encourage stock ownership in, PCA International, Inc. by those persons active
in the management of
PCA International, Inc. and its subsidiaries.
2. DEFINITIONS.
(a) The term "Board of Directors" shall mean and refer to the Board of
Directors of the Company.
(b) The term "change in control" shall mean and refer to any event, the
result of the occurrence of which would be a change in control of the Company of
a nature that such event would be required to be reported in response to Item
1(a) of the Current Report on Form 8-K, as in effect on the date hereof,
promulgated pursuant to Section 13 of the Securities Exchange Act of 1934
(whether or not the Company is required to file such a report).
(c) The term "Common Stock" shall mean and refer to the shares of the
Company's $0.20 par value common stock.
(d) The term "Company" shall mean and refer to PCA International, Inc.
(e) The term "Disabled" or a "Disability" shall mean and refer to an
Optionee becoming permanently and totally disabled within the meaning of Section
22(e)(3) of the Internal Revenue Code of 1986.
(f) The term "employee" or "in the employ" shall mean and refer to persons
who are employees as determined in accordance with Section 3401(c) of the
Internal Revenue Code of 1986 and the regulations promulgated thereunder.
<PAGE>
(g) The term "management" shall mean and refer to any management capacity
in which the Optionee serves with respect to the Company or any of its
Subsidiaries including, but not limited to, serving as a director, whether or
not such Optionee is an employee of the Company.
(h) The term "Normal Retirement," except with respect to a non-employee
director, shall mean and refer to an event of Normal Retirement as defined in
the Company's Corporate Human Resources Manual as in effect at the date of such
Optionee's Normal Retirement.
(i) The term "Plan" shall mean and refer to this 1992 Non-Qualified Stock
Option Plan.
(j) The term "option" or "options" shall mean and refer to any stock option
granted pursuant to this Plan. The term "Discretionary Stock Option" or
"Discretionary Stock Options" shall mean and refer to any option authorized and
granted by the Plan Administration Committee at its discretion pursuant to
Paragraph 6(a)(i). The term "Formula Plan Option" or "Formula Plan Options"
shall mean and refer to any option issued to a member of the Board of Directors
pursuant to Paragraph 6(a)(ii). The term "Deferral Election Stock Option" shall
mean and refer to any option issued to a non-employee member of the Board of
Directors pursuant to the election of such Director to receive such option in
lieu of cash made in accordance with Paragraph 6(a)(iii).
(k) The term "Option Price" shall mean and refer to the price to be paid
upon the exercise of all or any part of any option granted under this Plan for
each share of Common Stock.
(l) The term "Optionee" shall mean and refer to any person to whom an
option is granted pursuant to this Plan.
(m) The term "Plan Administration Committee" shall mean and refer to a
committee of the Board of Directors, consisting of three or more disinterested
persons within the meaning of Regulation B240.16b-3(c)(2)(i) promulgated under
Section 16 of the Securities Exchange Act of 1934.
<PAGE>
(n) The term "Subsidiary" and "Subsidiaries" shall mean and refer to any
domestic or foreign corporation of which at least fifty percent (50%) of the
total combined voting power of all classes of stock is beneficially owned by the
Company or by any Subsidiary of the Company.
(o) The term "16(b) Officers" shall mean and refer to those officers of the
Company who are deemed to be officers for the purposes of Section 16(b) of the
Securities Exchange Act of 1934.
(p) The term "Initial Election Date" shall mean, for each member of the Board
of Directors, the later to occur of (i) the date the Third Amendment to the
Plan is adopted by the Board of Directors, or (ii) the date of such member's
initial election or appointment to the Board of Directors.
3. ADMINISTRATION.
(a) This Plan shall be administered by the Plan Administration Committee of
the Board of Directors.
(b) In the case of Discretionary Stock Options issued pursuant to Paragraph
6(a)(i), the Plan Administration Committee shall have the full authority and
discretion to determine, consistent with the provisions of this Plan, the
persons to be granted options, the times at which options shall be granted, the
number of shares of Common Stock covered by each option, the Option Price, the
method of payment for each option, the term of each option, and the other
conditions thereof.
(c) The Board of Directors shall have full authority to interpret the Plan.
The interpretation and construction by the Board of Directors of any provisions
of the Plan or any option granted under it shall be final. No member of the
Board of Directors or the Plan Administration Committee thereof shall be liable
for any actions or determinations
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<PAGE>
made in good faith with respect to this Plan or any options granted hereunder.
4. ELIGIBILITY.
(a) Discretionary Stock Options may be granted to key employees of the
Company or any of its Subsidiaries, including directors and officers of the
Company who are also key employees.
(b) Formula Plan Options and Deferral Election Stock Options may be granted
only to members of the Board of Directors who are not also employees.
5. SHARES SUBJECT TO THE PLAN.
(a) The maximum number of shares of the Company's Common Stock which may be
issued upon exercise of options granted pursuant to the Plan to any eligible
Optionee as determined in accordance with Paragraph 4 of this Plan, shall not
exceed 1,725,000 shares. The maximum number of shares stated above is subject
to adjustment under the provisions of Paragraph 5(b) below. The shares of
Common Stock to be issued upon the exercise of options may be authorized but
unissued shares or shares previously issued which have been reacquired by the
Company. In the event any option shall, for any reason, terminate or expire or
be surrendered without having been exercised in full, the shares subject to
such option but not purchased thereunder shall be available for future options
to be granted under this Plan.
(b) The maximum number of shares referred to in Paragraph 5(a) above, the
Option Price and the number of shares which may be purchased under any
outstanding option granted under this Plan shall be proportionately adjusted for
any increase or decrease in the number of issued and outstanding shares of the
Common Stock of the Company as the result of (i) the declaration and payment of
a dividend payable in Common Stock of the Company, or the division of the Common
Stock of the Company outstanding at the date hereof (or the date of the grant of
any such outstanding option, as applicable) into a greater number of shares
without the receipt of consideration therefor by the Company, or any other
increase in the number of such shares of the Company outstanding at the date
hereof (or the date of the grant of any such outstanding
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<PAGE>
option, as applicable) which is effective without the receipt of consideration
therefor by the Company, or (ii) the consolidation of the shares of Common
Stock of the Company outstanding at the date hereof (or the date of the grant
of any such outstanding option, as applicable) into a smaller number of shares
without the payment of consideration therefor by the Company, or any other
decrease in the number of such shares of Common Stock outstanding at the date
hereof (or the date of the grant of any such outstanding option, as applicable)
effected without the payment of consideration by the Company; provided,
however, the total Option Price for all shares which may be purchased upon the
exercise of any option granted pursuant to this Plan (computed by multiplying
the number of shares originally purchasable thereunder, reduced by the number
of such shares which have theretofore been purchased thereunder, by the
original option price per share before any of the adjustments herein above
provided for) shall not be changed.
In the event of a change in Common Stock as presently constituted which is
limited to a change of the Company's authorized shares with a par value into
the same number of shares with a different par value or without par value, the
shares resulting from any such change will be deemed to be the Common Stock
within the meaning of this Plan.
The foregoing adjustments shall be made by the Plan Administration
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as hereinabove expressly provided in this Paragraph 5, an
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class.
6. TERMS AND CONDITIONS OF OPTION GRANTS.
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(a) (i) Discretionary Stock Options granted pursuant to this Plan shall be
authorized by the Plan Administration Committee and shall be evidenced by an
Agreement substantially in the form of Exhibit A which is attached hereto and is
hereby incorporated by reference, with such changes therein as the Board of
Directors shall from time to time approve, all subject to the limitations
hereinafter set forth in this Paragraph 6.
(ii) (A) Formula Plan Options granted pursuant to this Plan shall be issued
pursuant to the terms and conditions set forth in Paragraphs 6(a)(ii)(B) through
6(a)(ii)(D) hereof and shall be evidenced by an Agreement substantially in the
form of Exhibit B which is attached hereto and is hereby incorporated by
reference, with such changes therein as the Board of Directors shall from time
to time approve, all subject to the limitations hereinafter set forth in this
Paragraph 6.
(B) On August 25, 1994, each member of the Board of Directors who is not an
employee shall receive, as of such date, subject to subsequent approval by the
Company's shareholders required by Rule 16b-3 promulgated under Section 16(b) of
the Securities Exchange Act of 1934, an option to purchase 10,000 shares of
Common Stock, and thereafter, each new member of the Board of Directors who is
not an employee shall receive, upon his or her becoming a director, subject to
any subsequent approval by the Company's shareholders required by Rule 16b-3
promulgated under Section 16(b) of the Securities Exchange Act of 1934, an
option to purchase 10,000 shares of Common Stock.
(C) On the day following the Company's annual meeting of shareholders each
year, every member of the Board of Directors who is not an employee shall
receive an option to purchase 2,000 shares of Common Stock.
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<PAGE>
(D) The Option Price per share of all Formula Plan Options granted
hereunder shall be the per share fair market value of the Common Stock on the
date the option is granted, determined in accordance with Paragraph 7(b) of this
Plan.
(E) The provisions of the formula contained in Paragraphs 6(a)(ii)(A) -
6(a)(ii)(D) of this Plan shall not be altered or amended more often than once
every six (6) months except as necessary to comply with the Internal Revenue
Code of 1986, as amended, or the rules thereunder.
(F) The formula contained in Paragraph 6(a)(ii)(A) - 6(a)(ii)(D) of this
Plan is intended to comply with Rule 16b-3(c)(2)(ii) promulgated under Section
16(b) of the Securities Exchange Act of 1934.
(iii)(A) Deferral Election Stock Options granted pursuant to this Plan
shall be issued pursuant to the terms and conditions set forth in Paragraphs
6(a)(iii)(B) through 6(a)(iii)(E) hereof and shall be evidenced by an Agreement
substantially in the form of Exhibit C, which is attached hereto and is hereby
incorporated by reference, with such changes therein as the Board of Directors
shall from time to time approve, all subject to the limitations hereinafter set
forth in this Paragraph 6.
(B) Each year, at least six (6) months prior to the Company's next
scheduled annual meeting of shareholders (or, for non-employee members of the
Board of Directors whose Initial Election Date shall fall within the period of
six months prior to the next scheduled annual meeting, on said Initial Election
Date), each non-employee member of the Board of Directors may, subject to any
subsequent approval by the shareholders of the Company required by Rule 16b-3
promulgated under Section 16(b) of the Securities Exchange Act of 1934, make an
irrevocable election to receive, in lieu of all (but not less than all) cash
7
<PAGE>
compensation to which such member would otherwise be entitled as a member of
the Board of Directors and any committee thereof (other than reimbursement for
expenses) for the period from the next scheduled annual meeting to the day
prior to the following annual meeting, an option granted in accordance with the
formula set forth hereinbelow; provided, however, that a non-employee member
of the Board of Directors may make his or her first election on, or at any time
prior to, his or her Initial Election Date. Subject to adjustment pursuant to
Paragraph 5(b) of the Plan, an election made hereunder shall be effective,
beginning on the Initial Election Date or the annual meeting dates following
subsequent elections, for the grant of such number of Deferral Election Stock
Options as is determined by the Plan Administration Committee to constitute an
amount of options equivalent to the cash compensation elected to be foregone.
In making such determination of equivalency, the Plan Administration Committee
shall rely upon the opinion of an independent valuation expert of recognized
standing.
Each such election shall be in writing and shall be delivered to the
Secretary of the Company. The date of grant of any such Deferral Election Stock
Option shall be such non-employee member's Initial Election Date or the annual
meeting date following a subsequent election. Any non-employee member of the
Board of Directors who has been granted a Deferral Election Stock Option may be
granted additional options under the Plan. The Company shall effect the
granting of Deferral Election Stock Options by the execution of an Agreement
substantially in the form of Exhibit C, which is attached hereto and hereby
incorporated by reference.
(C) The Option Price per share of all Deferral Election Stock Options
granted hereunder shall be the per share fair market value of the Common Stock
on the date the option is granted, determined in accordance with Paragraph 7(b)
of this Plan.
8
<PAGE>
(D) Subject to acceleration as provided below, after one (1) year, or such
greater number of years as the Plan Administration Committee shall determine,
from the date of grant, a Deferral Election Stock Option shall become
exercisable for all shares of Common Stock covered thereby. If the tenure as a
Director of any non-employee member of the Board of Directors ends during the
1-year period for which cash compensation has been waived, however, such non-
employee member's rights in such option shall be as follows:
(i) Upon the death or Disability of such non-employee member during such 1-
year period, each Deferral Election Stock Option shall become immediately
exercisable as to 100% of the shares of Common Stock covered thereby;
(ii) If the tenure as a Director of any non-employee member of the Board of
Directors ends during such 1-year period for any reason other than death or
Disability, a portion of the shares of Common Stock covered thereby shall become
immediately exercisable as follows:
(Y) The shares of Common Stock covered by a Deferral Election Stock Option
attributable to the election to forgo cash fees for the 1-year period in which
such non-employee member's tenure terminates shall be prorated and such option
shall become immediately exercisable to the extent of that portion of the shares
of Common Stock attributable
9
<PAGE>
to the time served as a Director during that 1-year period; and
(Z) As to the balance of the shares of Common Stock covered by such
Deferral Election Stock Option for such 1-year period, such option shall lapse
immediately.
Notwithstanding the foregoing, upon the occurrence of a change in control,
each Deferral Election Stock Option outstanding under this Plan shall become
immediately exercisable as to all of the shares of Common Stock covered
thereby. Once any portion of a Deferral Election Stock Option becomes
exercisable, it shall remain exercisable for the lesser of (1) 10 years after
the date of grant (or such lesser number of years as the Plan Administration
Committee shall determine) or (2) one year after the tenure of a non-employee
member of the Board of Directors terminates for any reason.
(E) The grant of Deferral Election Stock Options is intended to comply in
all respects with Rule 16b-3(d)(1) promulgated under Section 16(b) of the
Securities Exchange Act of 1934 such that all Deferral Election Stock Options
issued under the Plan shall be exempt from Section 16(b) of the Securities
Exchange Act of 1934. The provisions of the Plan relating to Deferral Election
Stock Options shall not be altered or amended more often than once every six (6)
months except as may be allowed by Rule 16b-3.
(b) Any option granted under this Plan shall terminate at such date and
time as the Optionee shall cease, for any reason other than death, Disability or
the Normal Retirement of such Optionee (including but not limited to termination
with or without cause, or resignation by such Optionee), to be continuously in
the employ or management of the Company or any of its Subsidiaries.
10
<PAGE>
(c) Subject to the provisions of Paragraph 11 of this Plan, all options
granted pursuant to this Plan shall be limited with respect to the exercise of
such options as provided in Paragraph 4 of the Agreement attached hereto as
Exhibit A or Exhibit B or Exhibit C which, by its terms, limits the time at
which options may be exercised and provides for the automatic acceleration of
permitted date of exercise of such options only in certain prescribed
circumstances.
(d) No option may be granted under this Plan after February 27, 2002, which
is ten (10) years following the date that this Plan was approved by the
Company's Board of Directors.
(e) The grant date for each Discretionary Stock Option shall be the date
upon which the grant of the Discretionary Stock Option is approved by the Plan
Administration Committee, which shall be the effective date of the Agreement
evidencing such options, or such later date as the Plan Administration
Committee may specify in the Agreement. The grant date for each Formula Plan
Option shall be the date upon which the Formula Plan Option is granted pursuant
to Paragraph 6(a)(ii)(B) or Paragraph 6(a)(ii)(C). The grant date for each
Deferral Election Stock Option for the non-employee member electing such option
shall be the Initial Election Date or the annual meeting date following a
subsequent election. Provided, however, that for the purposes of Sections
16(a) and 16(b) of the Securities Exchange Act only, the grant date of any
Discretionary Stock Option, Formula Plan Option, or Deferral Election Stock
Option subject to subsequent approval by the Company's shareholders of the Plan
or any amendment thereto shall be the date upon which such approval is duly
obtained. For all other purposes under this Plan, unless otherwise stated, the
grant date for any Discretionary Stock Option or any Formula Plan Option
subject to subsequent shareholder approval shall be the date upon which the
grant of the option is approved by the Plan Administration Committee or
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<PAGE>
automatically issued as a Formula Plan Option, and the grant date for any
Deferral Election Stock Option shall be the Initial Election Date or the annual
meeting date following a subsequent election for the non-employee member
electing such option.
7. OPTION PRICE.
(a) Determination of Option Price. Each option granted pursuant to this
Plan shall state the Option Price, which shall be determined by the Plan
Administration Committee. The Option Price for all Discretionary Stock Options
granted under the Plan shall not be less than the per share fair market value of
the Common Stock on the date the Option is granted, determined in accordance
with Paragraph 7(b) of the Plan. The Option Price for all Formula Plan Options
and all Deferral Election Stock Options granted under the Plan shall be the per
share fair market value of the Common Stock as of the close of business on the
day preceding the date the option is granted, determined in accordance with
Paragraph 7(b) of this Plan.
(b) Determination of Fair Market Value. Fair market value of the Common
Stock shall be determined by the Plan Administration Committee on the basis of
such factors as it deems appropriate; provided, that such fair market value
shall be determined without regard to any restriction other than a restriction
which, by its terms, will never lapse. If, at the time a determination of fair
market value is made, the Common Stock is admitted to trading on a national
securities exchange or is traded in an over-the-counter market, for either of
which sales prices are regularly reported, fair market value shall not be less
than the quoted sales prices reported for the last trade made in the Common
Stock on the most recent trading day preceding the date upon which the option
is granted or for which the value of the Common Stock is to be determined for
any other provision of this Plan.
8. PERMISSIBLE PROVISIONS REGARDING PAYMENT OF OPTION PRICE.
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<PAGE>
In order to enable an Optionee (including but not limited to members of the
Board of Directors and 16(b) Officers) to exercise options granted under this
Plan, the Board of Directors may determine, in the exercise of its discretion,
to (i) lend money or other property to such Optionee upon such terms and
conditions and in such amounts as the Board of Directors may determine, (ii)
grant such Optionee permission to pay the Option Price in installments, or to
accept such Optionee's note as whole or partial payment for the shares of Common
Stock to be transferred to such Optionee upon the exercise of an option granted
pursuant to this Plan, (iii) permit such Optionee to repay loans made by the
Company to such Optionee for the exercise of options with issued and outstanding
shares of the Company's Common Stock, (iv) permit such Optionee to use issued
and outstanding shares of the Company's Common Stock in payment of part or all
of the exercise price of an option, or (v) provide such other financial
assistance to such Optionee as the Board of Directors determines to be
desirable. With respect to Paragraph 8(iii) and (iv) above, the value of the
shares of the Company's Common Stock shall be the fair market value determined
in accordance with Paragraph 7(b) of this Plan.
9. NONTRANSFERABILITY. All options granted under this Plan shall not be
transferable by the Optionee, other than by will or the laws of descent and
distribution or pursuant to a domestic relations order, as defined in Section
414(p)(1)(B) of the Internal Revenue Code of 1986, which satisfies the
conditions of Section 414(p)(1)(A) of the Internal Revenue Code of 1986, and
shall be exercisable during the Optionee's lifetime only by such Optionee or by
such Optionee's guardian or legal representative.
10. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS.
(a) Subject to the terms and conditions of the Plan, the Plan
Administration Committee may modify, extend or renew outstanding options
granted under the Plan, including but not limited to a modification to
accelerate the exercise of any such outstanding options, or accept the
surrender of outstanding options (to the extent not theretofore exercised) and
authorize the granting of new options and substitutions therefor.
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<PAGE>
(b) Notwithstanding the foregoing provisions of Paragraph 10(a) of this
Plan, no modification of any option shall, without the consent of the Optionee,
impair any rights or obligations under any option theretofore granted under the
Plan, except for those modifications adopted to maintain compliance with
federal or state statutes or regulations.
11.FUNDAMENTAL CORPORATE CHANGES.
In the event of a consolidation or merger of the Company with another
corporation, or the sale or exchange of all or substantially all of the assets
of the Company, or a reorganization or liquidation of the Company, each Optionee
holding any outstanding options shall be entitled to receive, upon exercise of
any option and payment in accordance with the terms of such option, the same
number of shares of Common Stock, other securities or property as such Optionee
would have been entitled to receive upon the occurrence of such event if such
Optionee had been, immediately prior to such event, the holder of the number of
shares of Common Stock purchasable under such Optionee's option or, if another
corporation shall be the surviving corporation, such surviving corporation shall
substitute therefor substantially equivalent shares, securities or property of
such other corporation. In the event of an acquisition of the Company involving
a change in control, whether by merger, consolidation, sale of assets, sale of
stock or otherwise, options granted hereunder shall become exercisable
immediately, without regard to the deferred exercise period otherwise stated in
such options.
12. CLAIM TO STOCK OPTION, OWNERSHIP OR EMPLOYMENT RIGHTS.
No person shall have any claim or right to be granted Discretionary Stock
Options under this Plan. No Optionee, prior to issuance of the Common Stock,
shall be entitled to voting rights, dividends or other rights of a shareholder.
Neither this Plan nor any action taken hereunder shall be construed as giving
any employee or member of the Board of Directors any rights to be retained as an
employee of the Company or any of its Subsidiaries or as a member of the Board
of Directors.
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13. EXPENSES OF PLAN.
The Expenses of administering the Plan shall be borne by the Company and
its Subsidiaries.
14.AMENDMENT AND TERMINATION.
The Board of Directors may terminate this Plan or modify or amend this Plan
in such respect as the Board of Directors shall deem advisable; provided any
such modification or amendment of this Plan shall be made subject to shareholder
approval when the Board of Directors deems such shareholder approval necessary
and desirable in order to comply with federal or state securities laws, rules or
regulations or any other law, rule or regulation.
15.TAX WITHHOLDING.
The exercise of any option granted under this Plan may be made subject to
the condition that, if at any time the Board of Directors shall determine, in
its discretion, that the satisfaction of withholding tax or other withholding
liabilities under any state or federal law is necessary or desirable as a
condition of, or in connection with, such exercise or the delivery or purchase
of shares pursuant thereto, then in such event, the exercise of the option shall
not be effective unless such withholding tax or other withholding liabilities
shall have been satisfied in a manner acceptable to the Company.
16.PURCHASE OF PREVIOUSLY ISSUED SHARES.
The Board of Directors may, in the exercise of its discretion, cause the
Company to purchase shares of its Common Stock from any shareholder of the
Company who received such shares through the exercise of options granted
pursuant to this Plan or any other stock option plan adopted by the Company
(including but not limited to the Company's 1990 Non-Qualified Stock Option
Plan, 1974 Employee Stock Option Plan and 1984 Employee Stock Option Plan), who
desires to sell such shares, and who would otherwise sell such shares in an open
market transaction. The foregoing sentence shall not be construed to grant the
Company any right or obligation to purchase any of its Common Stock from any
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<PAGE>
shareholder who acquired such shares upon the exercise of any option granted
under this Plan or any other stock option plan adopted by the Company, except as
hereafter mutually agreed upon by such shareholder and the Company. Any such
purchase of Common Stock by the Company shall be at a per share price mutually
agreed upon; provided, however, such per share price shall not be greater than
the fair market value of the Common Stock determined in accordance with
Paragraph 7(b) of this Plan.
17.SIX MONTH HOLDING PERIOD.
With respect to options granted to Directors and 16(b) Officers under this
Plan, at least six (6) months must elapse from the grant date of the option to
the date that any stock acquired pursuant to such option is sold. For the
purposes of this Paragraph 17, the grant date of any option which was granted by
the Plan Administration Committee subject to subsequent shareholder approval of
the Plan or any amendment thereto shall be the date upon which such approval is
duly obtained.
18. DATE OF THE PLAN AND APPROVAL OF SHAREHOLDERS.
This Plan is dated February 27, 1992, which is the date upon which the
Board of Directors adopted the Plan. This Plan is subject to the approval of
the holders of a majority of the shares present either in person or by proxy and
entitled to vote at a duly held meeting of the shareholders at which a quorum is
present representing a majority of all outstanding voting shares either in
person or by proxy. In the event that such shareholder approval is not obtained
all options granted pursuant to the Plan shall be null and void.
19. With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934, transactions under this Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successors under the Securities
Exchange Act of 1934. To the extent any provision of the Plan or this Amendment
or any action by the Plan Administration Committee fails to so comply, such
provisions, the Plan, this Amendment, or such action shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Plan
Administration Committee.
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EXHIBIT A
PCA INTERNATIONAL, INC.
1992 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, effective as of the ___ day of _______, 19__, by and between
PCA International, Inc., a North Carolina corporation (hereinafter called the
"Company"), and ______ (hereinafter called the "Optionee");
Statement of Purpose
The Company recognizes the valuable services which have been provided and
which will continue to be provided by the Optionee to the Company or any of its
Subsidiaries as a key employee or director and is desirous of furnishing the
Optionee with an added incentive and inducement to remain with the Company or
any of its Subsidiaries and contribute to its success. The Board of Directors
of the Company has adopted, and the shareholders have approved, the 1992 Non-
Qualified Stock Option Plan, which is hereby incorporated by reference. The
Plan Administration Committee has, in granting this Option, determined that
there is a reasonable relationship between the value of this Option and the
resulting benefit to be received by the Company by reason of the grant of this
Option.
NOW, THEREFORE, in consideration of the mutual promises and representations
herein contained and other good and valuable consideration, the parties hereto
hereby agree as follows:
20. Definitions.
(a) The term "Board of Directors" shall mean and refer
to the Board of Directors of the Company.
(b) The term "change in control" shall mean and refer to any event, the
result of the occurrence of which would be a change in control of the Company
of a nature that such event would be required to be reported in response to
Item 1(a) of the Current Report on Form 8-K, as in effect on the
<PAGE>
date hereof, promulgated pursuant to Section 13 of the Securities Exchange Act
of 1934 (whether or not the Company is required to file such a report).
(c) The term "Common Stock" shall mean and refer to shares of the Company's
$0.20 par value common stock.
(d) The term "Company" shall mean and refer to PCA International, Inc.
(e) The term "Disabled" or a "Disability" shall mean and refer to an
Optionee becoming permanently and totally disabled within the meaning of Section
22(e)(3) of the Internal Revenue Code of 1986.
(f) The term "employee" or "in the employ" shall mean and refer to persons
who are employees as determined in accordance with Section 3401(c) of the
Internal Revenue Code of 1986 and the regulations promulgated thereunder.
(g) The term "management" shall mean and refer to any management capacity
in which the Optionee serves with respect to the Company or any of its
Subsidiaries, including but not limited to serving as a director, whether or not
such Optionee is an employee of the Company.
(h) The term "Normal Retirement" shall mean and refer to an event of Normal
Retirement as defined in the Company's Corporate Human Resources Manual as in
effect on the date of an Optionee's Normal Retirement.
(i) The term "Plan" shall mean and refer to the 1992 Non-Qualified Stock
Option Plan adopted by the Board of Directors and shareholders of the Company.
(j) The term "Option" or "Options" shall mean and refer to any stock option
granted pursuant to this Agreement.
(k) The term "Option Price" shall mean and refer to the price to be paid
upon the exercise of all or any part of this Option for each share of Common
Stock.
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(l) The term "Optionee" shall mean and refer to the person to whom Options
are granted pursuant to this Agreement.
(m) The term "Plan Administration Committee" shall mean and refer to a
committee of the Board of Directors, made up of three or more disinterested
persons within the meaning of Regulation B240.16b-3(c)(2)(i) promulgated under
Section 16 of the Securities Exchange Act of 1934.
(n) The term "Subsidiary" or "Subsidiaries" shall mean and refer to each
corporation of which at least fifty percent (50%) of the outstanding
common stock is owned directly or indirectly by the Company or a Subsidiary
of the Company.
21. Grant of Options. The Company hereby grants to Optionee the option
and right to purchase from the Company ____ shares of its Common Stock at an
Option Price of $___ per share, subject to the terms and conditions of this
Agreement and the Plan.
22. Termination or Expiration of Options. The Option granted hereby shall
terminate and expire as to any then unexercised rights hereunder upon the first
to occur of:
(a) 5:00 p.m. on ____,____ (which is at least three (3) months after the
exercise date of this Option, as set forth in Paragraph 4); or
(b) Such date and time as the Optionee shall cease, for any reason other
than such Optionee's death, Disability or Normal Retirement (including but not
limited to termination with or without cause, or resignation of such Optionee),
to be continuously in the employ or management of the Company or any of its
Subsidiaries; or
(c) Subject to the provisions of Paragraph 3(f) below, such date which is
three (3) months from the date that the Optionee shall cease, by reason of such
Optionee's Normal
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<PAGE>
Retirement, to be continuously in the employ or management of the Company or
any of its Subsidiaries; or
(d) Such date which is twelve (12) months from the date that the Optionee
shall cease, by reason of such Optionee's death, to be continuously in the
employ or management of the Company or any of its Subsidiaries; or
(e) Subject to the provisions of Paragraph 3(g) below, such date which is
twelve (12) months from the date that the Optionee shall cease, by reason of
such Optionee's Disability, to be continuously in the employ or management of
the Company or any of its Subsidiaries; or
(f) In the event that the Optionee shall cease, by reason of such
Optionee's Normal Retirement, to be continuously in the employ or management of
the Company or any of its Subsidiaries and, in the further event that the
Optionee shall die within three (3) months from the date such Optionee's
employment or management relationship with the Company or any of its
Subsidiaries shall cease as the result of such Optionee's Normal Retirement,
such date which is twelve (12) months from the date of such Optionee's death;
or
(g) In the event that the Optionee shall cease, by reason of such
Optionee's Disability, to be continuously in the employ or management of the
Company or any of its Subsidiaries and, in the further event that the Optionee
shall die within twelve (12) months from the date such Optionee's employment or
management relationship with the Company or any of its Subsidiaries shall cease
as a result of such Optionee's Disability, such date which is twelve (12)
months from the date of such Optionee's death.
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<PAGE>
23. Exercise of Options. Subject to the provisions of Paragraphs 3 and 11
of this Agreement and further subject to the provisions in this Paragraph 4 for
exercise of the Options granted pursuant to this Agreement in the event of the
Optionee's death or Disability or in the event of a change in control of the
Company, the Options granted pursuant to this Agreement may be exercised in full
at any time after the expiration of _____________ (___) months following the
date of this Agreement (which is at least six (6) months after the effective
date of this Agreement).
Notwithstanding the foregoing provisions of this Paragraph 4 and subject to
the provisions of Paragraphs 3 and 11 of this Agreement, in the event of the
Optionee's death or Disability or a change in control of the Company as provided
in Paragraph 9 of this Agreement, the Options granted pursuant to this Agreement
may be exercised in full by such Optionee or such Optionee's guardian, legal
representative, executor, administrator or legatee, following such Optionee's
death or Disability or a change in control of the Company.
Not less than 100 shares of Common Stock may be purchased upon the exercise
of any part of the Option at any one time unless the number of shares of Common
Stock purchased is the total number at the time purchasable under this Option.
No Option may be exercised for any fraction of a share of Common Stock.
24. Nontransferability of Option. This Option may not be sold, pledged,
assigned or transferred in any manner otherwise than by will or the laws of
descent and distribution and is exercisable during the lifetime of the Optionee
only by such Optionee or such Optionee's guardian or legal representative.
In the event of the Optionee's death, and during the periods permitted by
Paragraph 3 of this Agreement, this Option may be exercised by the executors or
administrators of the estate of the Optionee or by any person who shall have
acquired the Option directly from the Optionee by bequest or inheritance.
25. Written Notice of Exercise and Payment of Option Price.
(a) This Option may be exercised according to the terms hereof by written
notice to the Company by the Optionee
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<PAGE>
or by the Optionee's guardian, legal representative, executor, administrator or
legatee stating such person's intention to exercise this Option and specifying
the number of shares of Common Stock with respect to which the Option is being
exercised and the date on which the Optionee (or such Optionee's guardian,
legal representative, executor, administrator or legatee) will pay for such
shares of Common Stock, which date shall not be later than fifteen (15)
business days after the date of delivery of such notice to the Company.
(b) The Optionee (or such Optionee's guardian, legal representative,
executor, administrator or legatee) shall pay the full price of the shares of
Common Stock elected to be purchased hereunder in cash or by certified or bank
check, unless the Optionee and the Board of Directors shall agree to payment for
the shares of Common Stock in whole or in part by note or otherwise. The
Company shall not issue any such shares of Common Stock until they have been
paid in full or the Board of Directors shall determine that the issue of partly
paid shares does not violate any applicable state or federal law.
(c) The exercise of this Option is conditioned upon the satisfaction by the
Optionee of withholding tax or other withholding liabilities of the Company
under any state or federal law resulting from or in connection with the exercise
of this Option or the delivery or purchase of share pursuant hereto, in a manner
acceptable to the Company.
(d) The Optionee or the Optionee's guardian, legal representative,
executor, administrator or legatee shall have no rights as a shareholder with
respect to any shares of Common Stock covered by this Option until the date of
the issuance of the shares of Common Stock to such Optionee. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such Common Stock is issued, except as provided
in Paragraph 8 of this Agreement.
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<PAGE>
26. Non-Qualified Stock Options. This Option is a non-qualified stock
option and shall not be treated as an incentive stock option within the meaning
of Section 422 of the Internal Revenue Code of 1986.
27. Capital Adjustments. Without any change in the total purchase price
(computed by multiplying the number of shares of Common Stock originally
purchasable hereunder, reduced by the number of any such shares which have been
purchased hereunder, by the original Option Price before any of the adjustments
hereinafter provided for), the Option Price and the number of shares which may
be purchased hereunder shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of the Common Stock of
the Company as a result of (a) the declaration and payment of a dividend payable
in Common Stock of the Company, or the division of the Common Stock of the
Company outstanding at the date hereof into a greater number of shares without
the receipt of consideration therefor by the Company, or any other increase in
the number of such shares of Common Stock of the Company outstanding at the date
hereof which is effected without the receipt of consideration therefor by the
Company; or (b) the consolidation of the Common Stock of the Company outstanding
at the date hereof into a smaller number of shares without the payment of
consideration therefor by the Company, or any other decrease in the number of
such shares of Common Stock outstanding at the date hereof effected without the
payment of consideration by the Company.
In the event of a change in the Common Stock as presently constituted,
which is limited to a change of its authorized shares with a par value into the
same number of shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be the Common Stock
within the meaning of this Agreement.
The foregoing adjustments shall be made by the Plan Administration
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as hereinabove expressly provided in this Paragraph 8, the
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any
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<PAGE>
other increase or decrease in the number of shares of stock of any class.
28. Fundamental Corporate Changes. In the event of a consolidation or
merger of the Company with another corporation, or the sale or exchange of all
or substantially all of the assets of the Company, or a reorganization or
liquidation of the Company, the Optionee shall be entitled to receive, upon
exercise of the Option and payment in accordance with the terms of this Option,
the same number of shares of Common Stock, other securities or property as such
Optionee would have been entitled to receive upon the occurrence of such event
if such Optionee had been, immediately prior to such event, the holder of the
number of shares of Common Stock purchasable under this Option or, if another
corporation shall be the surviving corporation, such surviving corporation
shall substitute therefor substantially equivalent shares, securities or
property of such other corporation. In the event of an acquisition of the
Company involving a change in control, whether by merger, consolidation, sale
of assets, sale of stock or otherwise, this Option shall become exercisable
immediately, without regard to the deferred exercise period otherwise stated in
Paragraph 4 of this Agreement.
29. Six Month Holding Period. With respect to options granted to
Directors and 16(b) Officers under this Plan, at least six (6) months must
elapse from the grant date of the option to the date that any stock acquired
pursuant to such option is sold. For the purposes of this Paragraph 10, the
grant date of any option which was granted by the Plan Administration Committee
subject to subsequent shareholder approval of the Plan or any amendment thereto
shall be the date upon which such approval is duly obtained.
30. Required Registration Statement. This Option is exercisable in
accordance with the terms and provisions of this Agreement; provided, however,
that in the event that a registration statement filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, with respect
to the shares of Common Stock subject to this Option is not current and
effective on the date of this Agreement, this
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<PAGE>
Option shall not be exercisable until the date such registration statement is
made current and effective.
31. Notice. Any notice to be given to the Company as required by this
Agreement shall be deemed to have been given upon receipt by the Company's
secretary at 815 Matthews-Mint Hill Road, Matthews, North Carolina 28105.
32. Option is Subject to Plan. The Option granted herein is pursuant to
the Company's 1992 Non-Qualified Stock Option Plan, as in effect on the date
hereof and as hereafter amended, and is expressly granted and made subject to
the terms and conditions of such Plan.
IN TESTIMONY WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
PCA INTERNATIONAL, INC.
[CORPORATE SEAL]
By:
John Grosso, President
ATTEST:
Bruce A. Fisher, Secretary
, Optionee
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<PAGE>
EXHIBIT B
PCA INTERNATIONAL, INC.
1992 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, effective as of the ____ day of _____________, 19__, by and
between PCA International, Inc., a North Carolina corporation (hereinafter
called the "Company"), and _____________ (hereinafter called the "Optionee");
STATEMENT OF PURPOSE
The Company recognizes the valuable services which have been provided and
which will continue to be provided by the Optionee to the Company as a member of
the Company's Board of Directors and is desirous of furnishing the Optionee with
an added incentive and inducement to remain as a director of the Company and
contribute to its success. The Board of Directors of the Company has adopted,
and the shareholders have approved, the 1992 Non-Qualified Stock Option Plan, as
amended, which is hereby incorporated by reference and which provides for an
automatic grant of an Option to the Optionee.
NOW, THEREFORE, in consideration of the mutual promises and representations
herein contained and other good and valuable consideration, the parties hereto
hereby agree as follows:
1. DEFINITIONS.
(a) The term "Board of Directors" shall mean and refer to the Board of
Directors of the Company.
(b) The term "change in control" shall mean and refer to any event, the
result of the occurrence of which would be a change in control of the Company of
a nature that such event would be required to be reported in response to Item
1(a) of the Current Report on Form 8-K, as in effect on the date hereof,
promulgated pursuant to Section 13 of the Securities Exchange Act of 1934
(whether or not the Company is required to file such a report).
(c) The term "Common Stock" shall mean and refer to shares of the Company's
$0.20 par value common stock.
<PAGE>
(d) The term "Company" shall mean and refer to PCA International, Inc.
(e) The term "employee" or "in the employ" shall mean and refer to persons
who are employees as determined in accordance with
Section 3401(c) of the Internal Revenue Code of 1986 and the regulations
promulgated thereunder.
(f) The term "management" shall mean and refer to the management capacity
in which the Optionee serves with respect to the Company by serving as a member
of the Board of Directors who is not an employee.
(g) The term "Plan" shall mean and refer to the 1992 Non-Qualified Stock
Option Plan adopted by the Board of Directors and shareholders of the Company.
(h) The term "Option" or "Options" shall mean and refer to any stock option
granted pursuant to this Agreement.
(i) The term "Option Price" shall mean and refer to the price to be paid
upon the exercise of all or any part of this Option for each share of Common
Stock.
(j) The term "Optionee" shall mean and refer to the person to whom Options
are granted pursuant to this Agreement.
(k) The term "Plan Administration Committee" shall mean and refer to a
committee of the Board of Directors, made up of three or more disinterested
persons within the meaning of Regulation B 240.16b-3(c)(2)(i) promulgated under
Section 16 of the Securities Exchange Act of 1934.
2. GRANT OF OPTIONS. The Company hereby grants to Optionee the option and
right to purchase from the Company 10,000 shares of its Common Stock at an
Option Price of _________ per share, subject to the terms and conditions of this
Agreement and the Plan.
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<PAGE>
3. TERMINATION OR EXPIRATION OF OPTIONS. The Option granted hereby shall
terminate and expire as to any then unexercised rights hereunder upon the first
to occur of:
(a) At 12:00 midnight on August 26, 2004; or
(b) Subject to the provisions of Paragraph 3(d) below, such date which is
three (3) months from the date that the Optionee shall cease, for any reason
other than such Optionee's death, to be in the management of the Company; or
(c) Such date which is twelve (12) months from the date that the Optionee
shall cease, by reason of such Optionee's death, to be in the management of the
Company; or
(d) If the Optionee shall cease to be in the management of the Company and
if the Optionee shall then die within three (3) months from the date such
Optionee ceases to be in such management, such date which is twelve (12) months
from the date of such Optionee's death.
4. EXERCISE OF OPTIONS. Subject to the provisions of Paragraphs 3 and 11
of this Agreement and further subject to the provisions in this Paragraph 4 for
exercise of the Options granted pursuant to this Agreement in the event of the
Optionee's death or a change in control of the Company, the Options granted
pursuant to this Agreement may be exercised over a five (5) year period as
follows:
(a) At any time after the expiration of one (1) year following the date of
this Agreement, as to 2,000 shares of Common Stock (which is equal to 20% of the
original total grant);
(b) At any time after the expiration of two (2) years following the date of
this Agreement, as to 2,000 additional shares of Common Stock (which is equal to
20% of the original total grant);
(c) At any time after the expiration of three (3) years following the date
of this Agreement, as to 2,000 additional shares of Common Stock (which is equal
to 20% of the original total grant);
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<PAGE>
(d) At any time after the expiration of four (4) years following the date
of this Agreement, as to 2,000 additional shares of Common Stock (which is equal
to 20% of the original total grant); and
(e) In full after the expiration of five (5) years following the date of
this Agreement.
Notwithstanding the foregoing provisions of this Paragraph 4 and subject to
the provisions of Paragraphs 3 and 11 of this Agreement, in the event of the
Optionee's death or a change in control of the Company as provided in Paragraph
9 of this Agreement, the Options granted pursuant to this Agreement may be
exercised in full by such Optionee or such Optionee's guardian, legal
representative, executor, administrator or legatee following such Optionee's
death or a change in control of the Company.
The right to exercise any Option granted hereunder is cumulative during the
term of the Option as provided in this Paragraph 4. Not less than 100 shares
of Common Stock may be purchased upon the exercise of any part of this Option
at any one time unless the number of shares of Common Stock purchased is the
total number at the time purchasable under this Option. No Option may be
exercised for any fraction of a share of Common Stock.
5. NONTRANSFERABILITY OF OPTION. This Option may not be sold, pledged,
assigned or transferred in any manner otherwise than by will or the laws of
descent and distribution, or pursuant to a domestic relations order, as defined
in Section 414(p)(1)(B) of the Internal Revenue Code of 1986, which satisfies
the conditions of Section 414(p)(1)(A) of the Internal Revenue Code of 1986, and
this Option is exercisable during the lifetime of the Optionee only by such
Optionee or such Optionee's guardian or legal representative.
If the Optionee dies, and during the periods permitted by Paragraph 3 of
this Agreement, this Option may be exercised by the executors or administrators
of the estate of the Optionee or by any person who shall have acquired the
Option directly from the Optionee by bequest or inheritance.
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<PAGE>
6. WRITTEN NOTICE OF EXERCISE AND PAYMENT OF OPTION PRICE.
(a) This Option may be exercised according to the terms hereof by written
notice to the Company by the Optionee or by the Optionee's guardian, legal
representative, executor, administrator or legatee stating such person's
intention to exercise this Option and specifying the number of shares of Common
Stock with respect to which the Option is being exercised and the date on which
the Optionee (or such Optionee's guardian, legal representative, executor,
administrator or legatee) will pay for such shares of Common Stock, which date
shall not be later than fifteen (15) business days after the date of delivery of
such notice to the Company.
(b) The Optionee (or such Optionee's guardian, legal representative,
executor, administrator or legatee) shall pay the full price of the shares of
Common Stock elected to be purchased hereunder in cash or by certified or bank
check, unless the Optionee and the Board of Directors shall agree to payment for
the shares of Common Stock in whole or in part by note or otherwise. The Company
shall not issue any such shares of Common Stock until they have been paid in
full or the Board of Directors determines that the issue of partly paid shares
does not violate any applicable state or federal law.
(c) The exercise of this Option is conditioned upon the satisfaction by the
Optionee of withholding tax or other withholding liabilities of the Company
under any state or federal law resulting from or in connection with the exercise
of this Option or the delivery or purchase of shares pursuant hereto in a manner
acceptable to the Company.
(d) The Optionee or the Optionee's guardian, legal representative,
executor, administrator or legatee shall have no rights as a shareholder with
respect to any shares of Common Stock covered by this Option until the date of
the issuance of the shares of Common Stock to such Optionee. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such Common Stock is issued, except as provided
in Paragraph 8 of this Agreement.
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<PAGE>
7. NON-QUALIFIED STOCK OPTIONS. This Option is a non-qualified stock
option and shall not be treated as an incentive stock option within the meaning
of Section 422 of the Internal Revenue Code of 1986.
8. CAPITAL ADJUSTMENTS. Without any change in the total purchase price
(computed by multiplying the number of shares of Common Stock originally
purchasable hereunder, reduced by the number of any such shares which have been
purchased hereunder, by the original Option Price before any of the adjustments
hereinafter provided for), the Option Price and the number of shares which may
be purchased hereunder shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of the Common Stock of
the Company as a result of (a) the declaration and payment of a dividend payable
in Common Stock of the Company, or the division of the Common Stock of the
Company outstanding at the date hereof into a greater number of shares without
the receipt of consideration therefor by the Company, or any other increase in
the number of such shares of Common Stock of the Company outstanding at the date
hereof which is effected without the receipt of consideration therefore by the
Company; or (b) the consolidation of the Common Stock of the Company outstanding
at the date hereof into a smaller number of shares without the payment of
consideration therefor by the Company, or any other decrease in the number of
such shares of Common Stock outstanding at the date hereof effected without the
payment of consideration by the Company.
In the event of a change in the Common Stock as presently constituted,
which is limited to a change of its authorized shares with a par value into the
same number of shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be the Common Stock
within the meaning of this Agreement.
The foregoing adjustments shall be made by the Plan Administration
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as hereinabove expressly provided in this Paragraph 8, the
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any
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<PAGE>
other increase or decrease in the number of shares of stock of any class.
9. FUNDAMENTAL CORPORATE CHANGES. In the event of a consolidation or
merger of the Company with another corporation, or the sale or exchange of all
or substantially all of the assets of the Company, or a reorganization or
liquidation of the Company, the Optionee shall be entitled to receive, upon
exercise of the Option and payment in accordance with the terms of this Option,
the same number of shares of Common Stock, other securities or property as such
Optionee would have been entitled to receive upon the occurrence of such event
if such Optionee had been, immediately prior to such event, the holder of the
number of shares of Common Stock purchasable under this Option or, if another
corporation shall be the surviving corporation, such surviving corporation shall
substitute therefor substantially equivalent shares, securities or property of
such other corporation. In the event of an acquisition of the Company involving
a change in control, whether by merger, consolidation, sale of assets, sale of
stock or otherwise, this Option shall become exercisable immediately, without
regard to the deferred exercise period otherwise stated in Paragraph 4 of this
Agreement.
10. SIX-MONTH HOLDING PERIOD. With respect to options granted to
Directors and 16(b) Officers under this Plan, at least six (6) months must
elapse from the grant date of the option to the date that any stock acquired
pursuant to such option is sold. For the purposes of this Paragraph 10, the
grant date of any option automatically issued pursuant to the provisions of the
Plan subject to subsequent shareholder approval of the Plan or any amendment
thereto shall be the date upon which such approval is duly obtained.
11. REQUIRED REGISTRATION STATEMENT. This Option is exercisable in
accordance with the terms and provisions of this Agreement; provided, however,
that if a registration statement filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
shares of Common Stock subject to this Option is not current and effective on
the date of this Agreement, this Option shall not be exercisable until the date
such registration statement is made current and effective.
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<PAGE>
12. NOTICE. Any notice to be given to the Company as required by this
Agreement shall be deemed to have been given upon receipt by the Company's
secretary at 815 Matthews-Mint Hill Road, Matthews, North Carolina 28105.
13. OPTION IS SUBJECT TO PLAN. The Option granted herein is granted
pursuant to the Company's 1992 Non-Qualified Stock Option Plan, as in effect on
the date hereof and as hereafter amended, and is expressly granted and made
subject to the terms and conditions of such Plan.
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<PAGE>
IN TESTIMONY WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PCA INTERNATIONAL, INC.
[CORPORATE SEAL] By:
John Grosso, President
ATTEST:
Bruce A. Fisher, Secretary
, Optionee
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<PAGE>
EXHIBIT C
PCA INTERNATIONAL, INC.
1992 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, effective as of the ____ day of _____________, 19__, by and
between PCA International, Inc., a North Carolina corporation (hereinafter
called the "Company"), and _____ (hereinafter called the "Optionee");
STATEMENT OF PURPOSE
The Company recognizes the valuable services that have been provided and
that will continue to be provided by the Optionee to the Company as a member of
the Company's Board of Directors and is desirous of encouraging all members of
its Board of Directors to increase their stock ownership in the Company. The
Board of Directors of the Company has adopted, and the shareholders have
approved, the 1992 Non-Qualified Stock Option Plan, as amended, which is hereby
incorporated by reference and which provides for the grant of Deferral Election
Stock Options upon the election of non-employee members of the Board of
Directors to receive such Options in lieu of cash compensation as a director.
The Optionee has elected to receive Deferral Election Stock Options in
accordance with the terms of the 1992 Non-Qualified Stock Option Plan.
NOW, THEREFORE, in consideration of the mutual promises and representations
herein contained and other good and valuable consideration, the parties hereto
hereby agree as follows:
1. DEFINITIONS.
(a) The term "Board of Directors" shall mean and refer to the Board of
Directors of the Company.
(b) The term "change in control" shall mean and refer to any event, the
result of the occurrence of which would be a change in control of the Company of
a nature that such event would be required to be reported in response to Item
1(a) of the Current
<PAGE>
Report on Form 8-K, as in effect on the date hereof, promulgated pursuant to
Section 13 of the Securities Exchange Act of 1934 (whether or not the Company
is required to file such a report).
(c) The term "Common Stock" shall mean and refer to shares of the Company's
$0.20 par value common stock.
(d) The term "Company" shall mean and refer to PCA International, Inc.
(e) The term "employee" shall mean and refer to persons who are employees
of the Company as determined in accordance with Section 3401(c) of the Internal
Revenue Code of 1986 and the regulations promulgated thereunder, and the term
"non-employee" shall mean and refer to persons who are not employees of the
Company as so determined.
(f) The term "Initial Election Date" shall mean and refer to, for each
member of the Board of Directors, the later to occur of (i) May 24, 1995 (the
date the Third Amendment to the Plan was adopted by the shareholders of the
Company), or (ii) the date of such member's initial election or appointment to
the Board of Directors.
(g) The term "Plan" shall mean and refer to the 1992 Non-Qualified Stock
Option Plan adopted by the Board of Directors and shareholders of the Company,
as amended from time to time.
(h) The term "Option" or "Options" shall mean and refer to any stock option
granted pursuant to this Agreement.
(i) The term "Option Price" shall mean and refer to the price to be paid
upon the exercise of all or any part of this Option for each share of Common
Stock.
(j) The term "Optionee" shall mean and refer to the non-employee member of
the Board of Directors to whom Options are granted pursuant to this Agreement.
(k) The term "Plan Administration Committee" shall mean and refer to a
committee of the Board of Directors, made up of three or more disinterested
persons within the meaning of Regulation
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<PAGE>
B 240.16b-3(c)(2)(i) promulgated under Section 16 of the Securities Exchange
Act of 1934.
2. GRANT OF OPTIONS. The Optionee has irrevocably elected, in accordance
with the Plan, to receive the Options granted herein in lieu of all cash
compensation to which the Optionee would be entitled as a member of the Board of
Directors during the period commencing ___, and ending on the date preceding the
annual meeting of shareholders of the Company for __. The Company hereby grants
to the Optionee the option and right to purchase from the Company ____ shares of
its Common Stock at an Option Price of $___ per share, subject to the terms and
conditions of this Agreement and the Plan.
3. TERMINATION OR EXPIRATION OF OPTIONS. The Option granted hereby shall
terminate and expire as to any then unexercised rights hereunder at the earlier
of (i) 12:00 midnight on the date ten years after the date of grant, (ii) 12:00
midnight on such other date less than ten years from the date of grant as the
Plan Administration Committee shall determine, or (iii) 12:00 midnight on the
date one year after the tenure of the Optionee as a non-employee member of the
Board of Directors terminates for any reason.
4. EXERCISE OF OPTIONS. Subject to the provisions of Paragraphs 3 and 11
of this Agreement and further subject to the provisions in this Paragraph 4 for
acceleration of the exercisability of the Options granted pursuant to this
Agreement in certain events, the Options granted pursuant to this Agreement may
be exercised at any time after the date one year after the date of this
Agreement.
(a) Upon the death or Disability of the Optionee, the Options granted
hereunder shall become immediately exercisable as to 100% of the shares of
Common Stock covered by the Options granted hereunder;
(b) If the Optionee's tenure as a Director ends on or prior to 12:00
midnight on the night prior to the _____ annual meeting of shareholders of the
Company, for any reason other than death or Disability, a portion of the
shares of Common Stock covered by the Options granted hereunder shall become
immediately exercisable as follows:
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<PAGE>
(i) That portion of the shares of Common Stock covered by the Options
granted hereunder that are attributable to the election to forgo cash fees for
the 1-year period in which the Optionee's tenure as a Director terminates shall
be prorated and such Option shall become immediately exercisable to the
additional extent of that portion of the shares of Common Stock attributable to
the time served as a Director during that 1-year period; and
(iii) As to the balance of the shares of Common Stock covered by the
Options granted hereunder, the Options granted hereunder shall lapse
immediately.
(c) Upon the occurrence of a change in control, each Option granted
hereunder shall become immediately exercisable as to all of the shares of
Common Stock covered thereby.
Once the Options, or any portion thereof, become exercisable as set forth
in this Paragraph 4, they shall remain exercisable until terminated pursuant to
Paragraph 3 above.
The Options granted pursuant to this Agreement may be exercised by the
Optionee or the Optionee's guardian, legal representative, executor,
administrator or legatee. The right to exercise any Option granted hereunder is
cumulative during the term of the Option as provided in this Paragraph 4. Not
less than 100 shares of Common Stock may be purchased upon the exercise of any
part of this Option at any one time unless the number of shares of Common Stock
purchased is the total number at the time purchasable under this Option. No
Option may be exercised for any fraction of a share of Common Stock.
5. NONTRANSFERABILITY OF OPTION. The Options granted pursuant to this
Agreement may not be sold, pledged, assigned or transferred in any manner
otherwise than by will or the laws of descent and distribution, or pursuant to a
domestic relations order, as defined in Section 414(p)(1)(B) of the Internal
Revenue Code of 1986, which satisfies the conditions of Section 414(p)(1)(A) of
the Internal Revenue Code of 1986, and this Option is exercisable
-4-
during the lifetime of the Optionee only by such Optionee or such Optionee's
guardian or legal representative.
6. WRITTEN NOTICE OF EXERCISE AND PAYMENT OF OPTION PRICE.
(a) This Option may be exercised according to the terms hereof by written
notice to the Company by the Optionee or by the Optionee's guardian, legal
representative, executor, administrator or legatee stating such person's
intention to exercise this Option and specifying the number of shares of Common
Stock with respect to which the Option is being exercised and the date on which
the Optionee (or such Optionee's guardian, legal representative, executor,
administrator or legatee) will pay for such shares of Common Stock, which date
shall not be later than fifteen (15) business days after the date of delivery of
such notice to the Company.
(b) The Optionee (or such Optionee's guardian, legal representative,
executor, administrator or legatee) shall pay the full Option Price for the
shares of Common Stock elected to be purchased hereunder in cash or by certified
or bank check, unless the Optionee and the Board of Directors shall agree to
payment for the shares of Common Stock in whole or in part by note or
otherwise. The Company shall not issue any such shares of Common Stock until
they have been paid in full or the Board of Directors determines that the issue
of partly paid shares does not violate any applicable state or federal law.
(c) The exercise of this Option is conditioned upon the satisfaction by the
Optionee of withholding tax or other withholding liabilities of the Company
under any state or federal law resulting from or in connection with the exercise
of this Option or the delivery or purchase of shares pursuant hereto in a manner
acceptable to the Company.
(d) The Optionee or the Optionee's guardian, legal representative,
executor, administrator or legatee shall have no rights as a shareholder with
respect to any shares of Common Stock covered by this Option until the date of
the issuance of the shares of Common Stock to such Optionee. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for
-5-
<PAGE>
which the record date is prior to the date such Common Stock is issued, except
as provided in Paragraph 8 of this Agreement.
7. NON-QUALIFIED STOCK OPTIONS. This Option is a non-qualified stock
option and shall not be treated as an incentive stock option within the meaning
of Section 422 of the Internal Revenue Code of 1986.
8. CAPITAL ADJUSTMENTS. Without any change in the total purchase price
(computed by multiplying the number of shares of Common Stock originally
purchasable hereunder, reduced by the number of any such shares that have been
purchased hereunder, by the original Option Price before any of the adjustments
hereinafter provided for), the Option Price and the number of shares which may
be purchased hereunder shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of the Common Stock of
the Company as a result of (a) the declaration and payment of a dividend payable
in Common Stock of the Company, or the division of the Common Stock of the
Company outstanding at the date hereof into a greater number of shares without
the receipt of consideration therefor by the Company, or any other increase in
the number of such shares of Common Stock of the Company outstanding at the date
hereof that is effected without the receipt of consideration therefor by the
Company; or (b) the consolidation of the Common Stock of the Company outstanding
at the date hereof into a smaller number of shares without the payment of
consideration therefor by the Company, or any other decrease in the number of
such shares of Common Stock outstanding at the date hereof effected without the
payment of consideration by the Company.
In the event of a change in the Common Stock as presently constituted,
which change effects no modification of the Common Stock other than to change
authorized shares with a par value into the same number of shares with a
different par value or without par value, the shares resulting from any such
change shall be deemed to be the Common Stock within the meaning of this
Agreement.
The foregoing adjustments shall be made by the Plan Administration
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as hereinabove
-6-
<PAGE>
expressly provided in this Paragraph 8, the Optionee shall have no rights by
reason of any subdivision or consolidation of shares of stock of any class or
the payment of any stock dividend or any other increase or decrease in the
number of shares of stock of any class.
9. FUNDAMENTAL CORPORATE CHANGES. In the event of a consolidation or
merger of the Company with another corporation, or the sale or exchange of all
or substantially all of the assets of the Company, or a reorganization or
liquidation of the Company, the Optionee shall be entitled to receive, upon
exercise of the Option and payment in accordance with the terms of this Option,
the same number of shares of Common Stock, other securities or property as such
Optionee would have been entitled to receive upon the occurrence of such event
if such Optionee had been, immediately prior to such event, the holder of the
number of shares of Common Stock purchasable under this Option or, if another
corporation shall be the surviving corporation, such surviving corporation shall
substitute therefor substantially equivalent shares, securities or property of
such other corporation. In the event of an acquisition of the Company involving
a change in control, whether by merger, consolidation, sale of assets, sale of
stock or otherwise, this Option shall become exercisable immediately, without
regard to the deferred exercise period otherwise stated in Paragraph 4 of this
Agreement.
10. SIX-MONTH HOLDING PERIOD. Any other term or provision of this
Agreement notwithstanding, at least six (6) months must elapse from the grant
date of the Option to the date that any stock acquired pursuant to such Option
is sold. For the purposes of this Paragraph 10, the grant date of any Option
issued pursuant to the provisions of the Plan subject to subsequent shareholder
approval of the Plan or any amendment thereto shall be the date upon which such
approval is duly obtained.
11. REQUIRED REGISTRATION STATEMENT. This Option is exercisable in
accordance with the terms and provisions of this Agreement; provided, however,
that if a registration statement filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
shares of Common Stock subject to this Option is not current and effective on
the date of
-7-
<PAGE>
this Agreement, this Option shall not be exercisable until the date
such registration statement is made current and effective.
12. NOTICE. Any notice to be given to the Company as required by this
Agreement shall be deemed to have been given upon receipt by the Company's
secretary at 815 Matthews-Mint Hill Road, Matthews, North Carolina 28105.
13. OPTION IS SUBJECT TO PLAN. The Option granted herein is granted
pursuant to the Company's 1992 Non-Qualified Stock Option Plan, as in effect on
the date hereof and as hereafter amended, and is expressly granted and made
subject to the terms and conditions of such Plan.
-8-
<PAGE>
IN TESTIMONY WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PCA INTERNATIONAL, INC.
[CORPORATE SEAL] By:
John Grosso, President
ATTEST:
Bruce A. Fisher, Secretary
, Optionee
-9-
<PAGE>
<PAGE>
EXHIBIT 11
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY DILUTED
EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 30, May 1,
1995 1994
<S> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE:
EARNINGS APPLICABLE TO COMMON STOCK:
Net income.............................................. $851,001 $63,651
COMPUTATION OF COMMON SHARES AND COMMON
EQUIVALENT SHARES:
Weighted average number of common shares............... 8,109,410 8,141,205
Dilutive effect of stock options....................... 371,452 405,129
Weighted average number of common shares after
dilutive effect...................................... 8,480,862 8,546,334
EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARE:
Net income............................................. $0.10 $0.01
FULLY DILUTED EARNINGS PER COMMON SHARE:
EARNINGS APPLICABLE TO COMMON STOCK:
Net income............................................. $851,001 $63,651
COMPUTATION OF COMMON SHARES AND COMMON
EQUIVALENT SHARES:
Weighted average number of common shares
outstanding.......................................... 8,109,410 8,141,205
Dilutive effect of stock options....................... 413,919 405,129
Weighted average number of common shares
outstanding as adjusted.............................. 8,523,329 8,546,334
EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARE ASSUMING FULL DILUTION:
Net income........................................... $0.10 $0.01
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-28-1996
<PERIOD-START> JAN-30-1995
<PERIOD-END> APR-30-1995
<CASH> 298,857
<SECURITIES> 0
<RECEIVABLES> 13,561,788
<ALLOWANCES> 1,466,526
<INVENTORY> 3,200,138
<CURRENT-ASSETS> 18,450,702
<PP&E> 83,991,136
<DEPRECIATION> 39,558,278
<TOTAL-ASSETS> 62,896,129
<CURRENT-LIABILITIES> 30,581,468
<BONDS> 0
<COMMON> 1,489,515
0
0
<OTHER-SE> 24,355,711
<TOTAL-LIABILITY-AND-EQUITY> 62,896,129
<SALES> 32,608,631
<TOTAL-REVENUES> 32,608,631
<CGS> 24,772,523
<TOTAL-COSTS> 24,772,523
<OTHER-EXPENSES> 6,317,963
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,961
<INCOME-PRETAX> 1,464,184
<INCOME-TAX> 613,183
<INCOME-CONTINUING> 851,001
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 851,001
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
