<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
----------------
AMERICAN STUDIOS, INC.
(NAME OF SUBJECT COMPANY)
ASI ACQUISITION CORP.
PCA INTERNATIONAL, INC.
(BIDDERS)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
030102 10 7
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------
ASI ACQUISITION CORP.
C/O PCA INTERNATIONAL, INC.
815 MATTHEWS-MINT HILL ROAD
MATTHEWS, NORTH CAROLINA 28105
TELEPHONE: (704) 847-8011
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF BIDDERS)
----------------
<PAGE> 2
COPY TO:
MARC WEINGARTEN, ESQ.
SCHULTE ROTH & ZABEL LLP
900 THIRD AVENUE
NEW YORK, N.Y. 10022
TELEPHONE: (212) 756-2000
CALCULATION OF FILING FEE
TRANSACTION AMOUNT OF
VALUATION* FILING FEE
------------ ----------
$54,504,908 $10,901.00
- --------
* For purposes of calculating fee only. This amount assumes the purchase
of 21,433,163 shares of common stock, $.001 par value (the "Shares"),
at a purchase price of $2.50 per Share and the payment of $922,000 for
the cancellation of all existing options to acquire Shares of the
Company.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(A)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: NONE
Filing Party: N/A
Form or Registration No.: N/A
Date Filed: N/A
<PAGE> 3
CUSIP No. 030102 10 7 14D-1
- -----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
ASI Acquisition Corp.
(IRS Identification number to be applied for)
- -----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
- -----------------------------------------------------------------------------
(3) SEC USE ONLY
- -----------------------------------------------------------------------------
(4) SOURCE OF FUNDS
BK
- -----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- -----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
North Carolina
- -----------------------------------------------------------------------------
(7) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON*
12,535,631
- -----------------------------------------------------------------------------
(8) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES [ ]
N/A
- -----------------------------------------------------------------------------
(9) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
58%
- -----------------------------------------------------------------------------
(10) TYPE OF REPORTING PERSON
CO
- -----------------------------------------------------------------------------
* On December 17, 1996, PCA International, Inc., a North Carolina
corporation ("Parent"), and ASI Acquisition Corp., a subsidiary of Parent
("ASI Acquisition"), entered into Stock Agreements (the "Stock Agreements")
with certain members of management and shareholders owning an aggregate of
58% of the currently outstanding shares of common stock, $.001 par value (the
"Shares"), of the Company, pursuant to which, among other things, all such
persons agreed to tender such Shares into the Purchaser's offer to purchase
all of the outstanding Shares. Pursuant to certain of the Stock Agreements,
such persons owning an aggregate of 46% of the currently outstanding Shares
also granted to Parent and the Purchaser an option to purchase such Shares
under certain circumstances. The Stock Agreements are
<PAGE> 4
more fully described in Section 12 of the Offer to Purchase, dated
December 20, 1996.
TENDER OFFER
This Schedule 14D-1 Tender Offer Statement (this "Statement") relates to the
offer by ASI Acquisition Corp., a North Carolina corporation (the "Purchaser"),
and a wholly owned subsidiary of PCA International, Inc., a North Carolina
corporation ("Parent"), to purchase all outstanding shares of common stock, par
value $0.001 per share (the "Shares"), of American Studios, Inc., a North
Carolina corporation (the "Company"), at a price of $2.50 per Share, net to the
seller in cash, without interest thereon (the "Offer Price"), upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated
December 20, 1996 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer"). Copies of the Offer to Purchase and the Letter of Transmittal are
annexed hereto as Exhibits (a)(1) and (a)(2), respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is American Studios, Inc., a North
Carolina corporation with its principal executive offices at 11001 Park
Charlotte Boulevard, Charlotte, North Carolina 28273.
(b) The information set forth in the Introduction of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
<PAGE> 5
(a-d, g) This Statement is being filed on behalf of Parent and the Purchaser
for purposes of the Schedule 14D-1. The information set forth in the
Introduction, Section 9 and Schedule I of the Offer to Purchase is incorporated
herein by reference.
(e-f) During the last five years, neither Parent nor the Purchaser, nor, to
the best knowledge of Parent and the Purchaser, the persons listed in Schedule
I of the Offer to Purchase, has been (i) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors), or (ii) a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree, or
final order enjoining future violation of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a-b) The information set forth in the Introduction, Sections 9, 11 and 12 of
the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a-c) The information set forth in Section 10 of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS.
(a-g) The information set forth in the Introduction, and Sections 7 and 12 of
the Offer to Purchase is incorporated herein by reference.
<PAGE> 6
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a-b) The information set forth in the Introduction and Section 9 of the
Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Sections 9, 11, and 12 of
the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 16 of the Offer to
Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 of the Offer to Purchase, is
incorporated herein by reference.
The incorporation by reference herein of the above-referenced financial
information does not constitute an admission that such information is material
to a decision by a shareholder of the Company whether to sell, tender or hold
Shares being sought in the Offer.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Introduction, and Sections 11 and 12 of
the Offer to Purchase is incorporated herein by reference.
<PAGE> 7
(b-c) The information set forth in Sections 12 and 15 of the Offer to
Purchase is incorporated herein by reference.
(d) The information set forth in Sections 7 of the Offer to Purchase is
incorporated herein by reference.
(e) Not Applicable.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated December 20, 1996.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
<PAGE> 8
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Text of Press Release, dated December 18, 1996.
(a)(8) Summary Advertisement, dated December 20, 1996.
(a)(9) Text of Press Release, dated December 20, 1996.
(b)(1) Commitment Letter, dated December 16, 1996, among Parent, NationsBank
N.A. and Nationsbanc Capital Markets, Inc.
(c)(1) Agreement and Plan of Merger, dated as of December 17, 1996, by and
among Parent, the Purchaser and the Company.
(c)(2) Forms of Stock Agreement, dated as of December 17, 1996, by and among
Parent, the Purchaser and certain shareholders of the Company.
(c)(3) Confidentiality Agreement, dated November 22, 1996, by and between
Parent and the Company.
(c)(4) Employment and Non-Compete Agreement, dated January 1997 between
Randy S. Bates and PCA International, Inc.
(c)(5) Employment and Non-Compete Agreement, dated January 1997 between
James O. Mattox and PCA International, Inc.
(c)(6) Employment and Non-Compete Agreement, dated January 1997 between
Shawn W. Poole and PCA International, Inc.
(c)(7) Employment and Non-Compete Agreement, dated January 1997 between
Robert Kent Smith and PCA International, Inc.
(c)(8) Employment and Non-Compete Agreement, dated January 1997 between
Ed J. Tepera and PCA International, Inc.
(c)(9) Employment and Non-Compete Agreement, dated January 1997 between
J. Robert Wren, Jr. and PCA International, Inc.
(c)(10) Escrow Agreement between Parent and the Company.
(d) None.
(e) Not applicable.
(f) None.
<PAGE> 9
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Statement is true, complete and correct.
Dated: December 20, 1996
ASI ACQUISITION CORP.
By: /s/ Bruce A. Fisher
-------------------------------
Name: Bruce A. Fisher
Title: Secretary
PCA INTERNATIONAL, INC.
By: /s/ Bruce A. Fisher
-------------------------------
Name: Bruce A. Fisher
Title: Senior Vice President
(Principal Accounting Officer)
<PAGE> 10
EXHIBIT INDEX
Exhibit
Number Exhibit Name
------- ------------
99(a)(1) Offer to Purchase, dated December 20, 1996.
99(a)(2) Letter of Transmittal.
99(a)(3) Notice of Guaranteed Delivery.
99(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
99(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
99(a)(7) Text of Press Release, dated December 18, 1996.
99(a)(8) Summary Advertisement, dated December 20, 1996.
99(a)(9) Text of Press Release, dated December 20, 1996.
99(b)(1) Commitment Letter, dated December 16, 1996, among Parent, NationsBank
N.A. and Nationsbanc Capital Markets, Inc.
99(c)(1) Agreement and Plan of Merger, dated as of December 17, 1996, by and
among Parent, the Purchaser and the Company.
99(c)(2) Forms of Stock Agreement, dated as of December 17, 1996, by and among
Parent, the Purchaser and certain shareholders of the Company.
99(c)(3) Confidentiality Agreement, dated November 22, 1996, by and between
Parent and the Company.
99(c)(4) Employment and Non-Compete Agreement, dated January 1997 between
Randy S. Bates and PCA International, Inc.
99(c)(5) Employment and Non-Compete Agreement, dated January 1997 between
James O. Mattox and PCA International, Inc.
99(c)(6) Employment and Non-Compete Agreement, dated January 1997 between
Shawn W. Poole and PCA International, Inc.
99(c)(7) Employment and Non-Compete Agreement, dated January 1997 between
Robert Kent Smith and PCA International, Inc.
99(c)(8) Employment and Non-Compete Agreement, dated January 1997 between
Ed J. Tepera and PCA International, Inc.
99(c)(9) Employment and Non-Compete Agreement, dated January 1997 between
J. Robert Wren, Jr. and PCA International, Inc.
99(c)(10) Escrow Agreement between Parent and the Company.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AMERICAN STUDIOS, INC.
AT
$2.50 NET PER SHARE
BY
ASI ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PCA INTERNATIONAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JANUARY 22, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER THAT NUMBER
OF SHARES WHICH CONSTITUTES AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A
FULLY DILUTED BASIS ON THE DATE OF PURCHASE. THE OFFER IS ALSO SUBJECT TO OTHER
TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTION 14. THE
OFFER IS NOT CONDITIONED ON THE RECEIPT OF FINANCING.
THE BOARD OF DIRECTORS OF AMERICAN STUDIOS, INC. (THE "COMPANY") HAS
UNANIMOUSLY APPROVED THE OFFER AND THE MERGER, HAS UNANIMOUSLY DETERMINED THAT
THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE
SHAREHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
---------------------
THE DEALER MANAGER FOR THE OFFER IS:
NEEDHAM & COMPANY, INC.
---------------------
December 20, 1996
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (i) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, have such shareholder's signature thereon guaranteed if required by
Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of
Transmittal (or such facsimile) and any other required documents to the
Depositary and either deliver the certificates for such Shares to the Depositary
along with the Letter of Transmittal (or facsimile) or deliver such Shares
pursuant to the procedure for book-entry transfer set forth in Section 2 or (ii)
request such shareholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for such shareholder. A shareholder
having Shares registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such broker, dealer, commercial bank,
trust company or other nominee if such shareholder desires to tender such
Shares.
If a shareholder desires to tender Shares and such shareholder's
certificates for Shares are not immediately available or the procedure for
book-entry transfer cannot be completed on a timely basis, or time will not
permit all required documents to reach the Depositary prior to the Expiration
Date, such shareholder's tender may be effected by following the procedure for
guaranteed delivery set forth in Section 2.
Questions and requests for assistance may be directed to Needham & Company,
Inc., the Dealer Manager, or to MacKenzie Partners, Inc., the Information Agent,
at their respective addresses and telephone numbers set forth on the back cover
of this Offer to Purchase. Additional copies of this Offer to Purchase, the
Letter of Transmittal, the Notice of Guaranteed Delivery and other related
materials may be obtained from the Information Agent or the Dealer Manager or
from brokers, dealers, commercial banks and trust companies.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
INTRODUCTION...................................................................... 1
The Tender Offer.................................................................. 3
1. Terms of the Offer................................................................ 3
2. Procedures for Tendering Shares................................................... 4
3. Withdrawal Rights................................................................. 7
4. Acceptance for Payment and Payment................................................ 8
5. Certain Federal Income Tax Consequences........................................... 9
6. Price Range of Shares; Dividends on the Shares.................................... 10
7. Effect of the Offer on the Market for the Shares; Exchange Act Registration;
Margin Regulations................................................................ 10
8. Certain Information Concerning the Company........................................ 11
9. Certain Information Concerning Parent and the Purchaser........................... 13
10. Source and Amount of Funds........................................................ 15
11. Background of the Offer; Past Contacts, Transactions or Negotiations with the
Company........................................................................... 16
12. Purpose of the Offer; Merger; Merger Agreement, Stock Agreements and Employment
Arrangements...................................................................... 17
13. Dividends and Distributions....................................................... 24
14. Certain Conditions of the Offer................................................... 25
15. Certain Legal Matters............................................................. 26
16. Fees and Expenses................................................................. 28
17. Miscellaneous..................................................................... 28
Schedule I. Directors and Executive Officers of Parent and the Purchaser.......... 30
</TABLE>
i
<PAGE> 3
To the Holders of Shares of Common Stock of
AMERICAN STUDIOS, INC.:
INTRODUCTION
ASI Acquisition Corp., a North Carolina corporation (the "Purchaser") and a
wholly owned subsidiary of PCA International, Inc., a North Carolina corporation
("Parent"), hereby offers to purchase all outstanding shares of common stock,
par value $.001 per share (the "Shares"), of American Studios, Inc., a North
Carolina corporation (the "Company"), at a price of $2.50 per Share, net to the
seller in cash, without interest thereon (the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, as amended from time to time, together constitute
the "Offer").
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer. The Purchaser will pay all charges and expenses of Needham & Company,
Inc. ("Needham"), as Dealer Manager (in such capacity, the "Dealer Manager"),
IBJ Schroder Bank & Trust Company, as Depositary (the "Depositary"), and
MacKenzie Partners, Inc., as Information Agent (the "Information Agent"),
incurred in connection with the Offer. See Section 16.
The Offer is conditioned upon, among other things, there having been
validly tendered and not withdrawn prior to the expiration of the Offer at least
a majority of the shares outstanding on a fully diluted basis (the "Minimum
Condition"). Based upon information furnished by the Company described below,
the Minimum Condition would be satisfied if 11,540,557 Shares were validly
tendered.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 17, 1996 (the "Merger Agreement"), by and among the Company,
Parent and the Purchaser. The Merger Agreement provides that, among other
things, as soon as practicable after the purchase of Shares pursuant to the
Offer and the satisfaction or waiver of the other conditions set forth in the
Merger Agreement and in accordance with the relevant provisions of the North
Carolina Business Corporation Act (the "NCBCA"), the Purchaser will be merged
with and into the Company (the "Merger"). At the effective time of the Merger
(the "Effective Time"), each outstanding Share (other than Shares held in the
treasury of the Company, owned by Parent, the Purchaser or any subsidiary of
Parent or held by shareholders who perfect their appraisal rights under North
Carolina law) will be converted into the right to receive $2.50 in cash or any
higher price per Share paid in the Offer, without interest (referred to herein
as the "Merger Consideration" or the "Offer Price"). See Section 12.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER
AND THE MERGER, HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE
FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
The Merger Agreement provides that promptly upon the purchase by Parent or
the Purchaser of Shares which represent at least a majority of the outstanding
Shares (on a fully diluted basis), Parent shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Board as
will give the Purchaser representation on the Board equal to the product of the
total number of directors on the Board multiplied by the percentage that the
number of Shares so accepted for payment bears to the total number of Shares
then outstanding. In the Merger Agreement, the Company has agreed, upon request
of the Purchaser, to use its best efforts promptly to cause the Purchaser's
designees to be elected as directors of the Company, including increasing the
size of the Board or securing the resignations of incumbent directors or both.
Notwithstanding the foregoing, the Company has agreed to use all reasonable
efforts to assure that, prior to the Effective Time, the Board shall have at
least two members who are neither officers of Parent or designees, shareholders
or affiliates of Parent.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including, if required by law, the approval and adoption of
the Merger Agreement by the requisite vote of the
<PAGE> 4
shareholders of the Company. See Section 12. Under the Company's Articles of
Incorporation and North Carolina law, except as otherwise described below, the
affirmative vote of the holders of a majority of the outstanding Shares is
required to approve and adopt the Merger Agreement and the Merger. Consequently,
if the Purchaser acquires (pursuant to the Offer or otherwise) at least a
majority of the then outstanding Shares, the Purchaser will have sufficient
voting power to approve and adopt the Merger Agreement and the Merger without
the vote of any other shareholder.
Under North Carolina law, if the Purchaser acquires, pursuant to the Offer
or otherwise, at least 90% of the then outstanding Shares, the Purchaser will be
able to approve and adopt the Merger Agreement and the transactions contemplated
thereby, including the Merger, without a vote of the Company's shareholders. In
such event, Parent, the Purchaser and the Company have agreed to take, at the
request of the Purchaser, all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after such acquisition,
without a meeting of the Company's shareholders. If, however, the Purchaser does
not acquire at least 90% of the then outstanding Shares pursuant to the Offer or
otherwise and a vote of the Company's shareholders is required under North
Carolina law, a significantly longer period of time will be required to effect
the Merger. See Section 12.
The Merger Agreement provides that, following the satisfaction or waiver of
the conditions to the Offer, the Purchaser will accept for payment, in
accordance with the terms of the Offer, all Shares validly tendered pursuant to
the Offer as soon as it is permitted to do so pursuant to applicable law, which
could be as early as immediately following 12:00 Midnight, New York City time,
on January 22, 1997. The Merger Agreement provides that the Purchaser may under
certain circumstances, from time to time, extend the expiration date of the
Offer beyond the time it would otherwise be required to accept validly tendered
Shares for payment, provided that in no event shall the expiration date of the
Offer be extended beyond March 31, 1997, without the consent of the Company. The
Offer will not remain open following the time Shares are accepted for payment.
Contemporaneously with the execution of the Merger Agreement, Parent and
the Purchaser entered into Stock Agreements, each dated as of December 17, 1996
(each a "Stock Agreement" and together the "Stock Agreements"), with several
shareholders (including certain members of management) (each a "Designated
Shareholder" and together the "Designated Shareholders") who beneficially own an
aggregate of 12,535,631 Shares or approximately 58% of the Company's outstanding
Shares (or approximately 54% of the outstanding Shares calculated on a fully
diluted basis). Pursuant to each Stock Agreement, each Designated Stockholder
has agreed to validly tender pursuant to the Offer and not withdraw all Shares
which are beneficially owned by the Designated Stockholder prior to the
Expiration Date (as defined herein). Stock Agreements with certain Designated
Stockholders who beneficially own an aggregate of 9,937,874 Shares or
approximately 46% of the Company's outstanding Shares (or approximately 43% of
the outstanding Shares calculated on a fully diluted basis) provide that Parent
or the Purchaser has the right to acquire from the Designated Stockholder, at
the Offer Price, all of the Designated Stockholder's Shares if (i) the Offer is
terminated, abandoned or withdrawn by Parent or the Purchaser (but provided
neither Parent nor the Purchaser has materially breached the Merger Agreement)
or (ii) the Merger Agreement is terminated in accordance with its terms. Subject
to certain conditions specified in each Stock Agreement, such right is
exercisable in whole or in part for the 45 day period following the first to
occur of the foregoing events. The Stock Agreements are more fully described in
Section 12.
Certain Conditions to the Offer
The Offer is subject to the fulfillment of a number of conditions
including, without limitation, the following:
MINIMUM CONDITION. CONSUMMATION OF THE OFFER IS CONDITIONED UPON
THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE
(AS DEFINED IN SECTION 1 BELOW) THAT NUMBER OF SHARES WHICH CONSTITUTES AT
LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE
DATE OF PURCHASE (THE "MINIMUM CONDITION"). FOR PURPOSES OF THIS OFFER, "ON
A FULLY DILUTED BASIS" MEANS, AS OF ANY DATE, THE NUMBER OF SHARES
OUTSTANDING, TOGETHER WITH SHARES THAT THE COMPANY IS
2
<PAGE> 5
THEN REQUIRED TO ISSUE PURSUANT TO OBLIGATIONS OUTSTANDING AT THAT DATE
UNDER CONVERTIBLE SECURITIES, EMPLOYEE STOCK OPTIONS, WARRANTS OR BENEFIT
PLANS OR OTHERWISE (ASSUMING ALL SUCH OPTIONS AND WARRANTS ARE THEN
EXERCISABLE).
As of the date of this Offer to Purchase, Parent beneficially owns no
Shares. According to the Company, as of December 17, 1996, there were
21,433,163 Shares outstanding. According to the Company, as of December 17,
1996, options to purchase 1,647,950 Shares were outstanding under the
Company's stock option plans. Accordingly, based on this information, as of
the date of this Offer to Purchase, there were 23,081,113 Shares
outstanding on a fully diluted basis, and the Minimum Condition would be
satisfied if at least 11,540,557 Shares are validly tendered pursuant to
the Offer and not withdrawn. As described above, pursuant to the Stock
Agreements, shareholders owning approximately 54% of the currently
outstanding Shares (on a fully diluted basis) have agreed to tender
pursuant to the Offer all Shares which are beneficially owned by them prior
to the Expiration Date.
Certain other conditions to the Offer are described in Section 14. The
Purchaser expressly reserves the right, in its sole discretion, to waive
any one or more of the conditions to the Offer. See Sections 14 and 15. The
Offer is not conditioned on the receipt of financing.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment and pay for all Shares validly
tendered and not withdrawn prior to the Expiration Date. The term "Expiration
Date" means 12:00 Midnight, New York City time, on January 22, 1997, unless and
until the Purchaser, in its sole discretion, shall have extended the period of
time during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Purchaser, will expire.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition. If the Minimum Condition is not satisfied or any or all of
the other events set forth in Section 14 shall have occurred or shall be
determined by the Purchaser to have occurred prior to the Expiration Date, the
Purchaser reserves the right (but shall not be obligated) to (i) decline to
purchase any of the Shares tendered in the Offer and terminate the Offer and
return all tendered Shares to the tendering shareholders, (ii) waive any or all
conditions to the Offer, to the extent permitted by applicable law and the
provisions of the Merger Agreement, and, subject to complying with applicable
rules and regulations of the Securities and Exchange Commission (the
"Commission"), purchase all Shares validly tendered, (iii) extend the Offer and,
subject to the right of shareholders to withdraw Shares until the Expiration
Date, retain the Shares which have been tendered during the period or periods
for which the Offer is extended or (iv) subject to the terms of the Merger
Agreement, amend the Offer. The Merger Agreement provides that the Purchaser
will not, without the consent of the Company, decrease the Offer Price, decrease
the number of Shares sought in the Offer, amend or waive the Minimum Condition,
change the form of consideration payable in the Offer or modify or change any
other condition of the Offer, except that if on the initial expiration date all
conditions to the Offer shall not have been satisfied or waived, the Offer may
be extended from time to time for a period of not greater than 20 business days;
provided that the expiration date shall not be extended beyond March 31, 1997.
In addition, the Merger Agreement provides that without the consent of the
Company, the Offer Price may be increased and the Offer may be extended to the
extent required by law in connection with such increase in the Offer Price but
not beyond March 31, 1997. The Merger Agreement provides that if, immediately
prior to the expiration date of the Offer, the Shares tendered and not withdrawn
pursuant to the Offer equal less than 90% of the
3
<PAGE> 6
outstanding Shares, the Purchaser may extend the Offer for a period of twenty
business days, provided that the Offer will not be extended beyond March 31,
1997.
The Purchaser expressly reserves the right, in its sole discretion, at any
time or from time to time, subject to the terms of the Merger Agreement and
regardless of whether or not any of the events set forth in Section 14 shall
have occurred or shall have been determined by the Purchaser to have occurred,
to (i) extend the period of time during which the Offer is open and thereby
delay acceptance for payment of, and the payment for, any Shares, by giving oral
or written notice of such extension to the Depositary and (ii) amend the Offer
in any respect by giving oral or written notice of such amendment to the
Depositary. The rights reserved by the Purchaser in this paragraph are in
addition to the Purchaser's rights to terminate the Offer pursuant to Section
14. Any extension, amendment or termination will be followed as promptly as
practicable by public announcement thereof, the announcement in the case of an
extension to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date in accordance with
Rules 14d-4(c), 14d-6(d) and 14e-l(d) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). Without limiting the obligation of the
Purchaser under such Rule or the manner in which the Purchaser may choose to
make any public announcement, the Purchaser currently intends to make
announcements by issuing a release to the Dow Jones News Service.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for any
reason, then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may retain tendered shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in Section 3. However, the ability of
the Purchaser to delay the payment for Shares which the Purchaser has accepted
for payment is limited by Rule 14e-l(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of holders of securities promptly after the termination or
withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including the Minimum Condition, subject to the Merger Agreement), the
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange
Act. The minimum period during which the Offer must remain open following
material changes in the terms of the Offer or information concerning the Offer,
other than a change in price or a change in percentage of securities sought,
will depend upon the facts and circumstances, including the relative materiality
of the terms or information. With respect to a change in price or a change in
percentage of securities sought, a minimum ten business day period is required
to allow for adequate dissemination to shareholders and investor response. If,
prior to the Expiration Date, the Purchaser should decide to increase the price
per Share being offered in the Offer, such increase will be applicable to all
shareholders whose Shares are accepted for payment pursuant to the Offer. The
Merger Agreement provides that, without the Company's consent, the Purchaser
will not decrease the price or the number of Shares sought in the Offer. As used
in this Offer to Purchase, "business day" has the meaning set forth in Rule
14d-1 under the Exchange Act.
The Company has provided to the Purchaser its list of shareholders and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares and
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the shareholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial owners of
Shares.
2. PROCEDURES FOR TENDERING SHARES
Valid Tender. For a shareholder validly to tender Shares pursuant to the
Offer, either (i) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees, or, in
the case of a book-entry transfer, an Agent's Message (as defined below), and
any
4
<PAGE> 7
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates for tendered Shares ("Share
Certificates") must be received by the Depositary at one of such addresses or
such Shares must be delivered pursuant to the procedures for book-entry transfer
set forth below (and a Book-Entry Confirmation (as defined below) received by
the Depositary), in each case prior to the Expiration Date, or (ii) the
tendering shareholder must comply with the guaranteed delivery procedures set
forth below.
Book-Entry Transfer. The Depositary will establish accounts with respect
to the Shares at The Depositary Trust Company and The Philadelphia Depositary
Trust Company (the "Book-Entry Transfer Facilities") for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in any of the Book-Entry Transfer Facilities'
systems may make book-entry delivery of Shares by causing a Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account in accordance
with such Book-Entry Transfer Facility's procedures for such transfer. However,
although delivery of Shares may be effected through book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message (as defined below), and
any other required documents, must, in any case, be transmitted to, and received
by, the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase prior to the Expiration Date, or the tendering shareholder
must comply with the guaranteed delivery procedures described below. The
confirmation of a book-entry transfer of Shares into the Depositary's account at
a Book-Entry Transfer Facility as described above is referred to herein as a
"Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARE
CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS WILL BE
DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (a) if the Letter of Transmittal is signed by the registered holder
(which term, for purposes of this Section, includes any participant in any of
the Book-Entry Transfer Facilities' systems whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
Letter of Transmittal or (b) if such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (an
"Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instructions 1
and 5 to the Letter of Transmittal. If Share Certificates are registered in the
name of a person other than the signer of the Letter of Transmittal, or if
payment is to be made or Share Certificates for Shares not tendered or not
accepted for payment are to be returned to a person other than the registered
holder of the Share Certificates surrendered, the tendered Share Certificates
must be endorsed or accompanied by appropriate
5
<PAGE> 8
stock powers, in either case signed exactly as the name or names of the
registered holders appear on the Share Certificates, with the signatures on the
Share Certificates or stock powers guaranteed as described above. See
Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share Certificates are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected if all the following conditions are met:
(i) the tender is made by or through an Eligible Institution:
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary, as provided below, prior to the Expiration Date; and
(iii) the Share Certificates representing all tendered Shares, in
proper form for transfer (or a Book-Entry Confirmation with respect to all
such Shares), together with a properly completed and duly executed Letter
of Transmittal (or facsimile thereof), with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message,
and any other required documents are received by the Depositary within
three NASD Automated Quotation System ("Nasdaq") National Market trading
days after the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) Share Certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering shareholders may be paid at different times depending
upon when Share Certificates or Book-Entry Confirmations with respect to Shares
are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE
PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS
OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The Purchaser's acceptance for payment of Shares validly tendered pursuant
to the Offer will constitute a binding agreement between the tendering
shareholder and the Purchaser upon the terms and subject to the conditions of
the Offer.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of the Purchaser
as such shareholder's attorneys-in-fact and proxies in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by the Purchaser (and any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after the date of the Merger Agreement). All such proxies will be irrevocable
and considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts such
Shares for payment pursuant to the Offer. Upon such acceptance for payment, all
prior powers of attorney, proxies and consents given by such shareholder with
respect to such Shares or other securities will, without further action, be
revoked and no subsequent powers of attorney, proxies, consents or revocations
may be given (and, if given, will not be deemed effective). The designees of the
Purchaser will thereby be empowered to exercise all voting and other rights with
respect to such Shares and other securities in respect of any annual, special,
adjourned or postponed meeting of the Company's shareholders, actions by written
consent in lieu of any such meeting or otherwise, as they in their sole
discretion deem proper. The Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser must be able to exercise
full
6
<PAGE> 9
voting, consent and other rights with respect to such Shares and other
securities or rights, including voting at any meeting of shareholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding on all parties. The Purchaser reserves
the absolute right to reject any or all tenders determined by it not to be in
proper form or the acceptance for payment of or payment for which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the
absolute right to waive any defect or irregularity in the tender of any Shares
of any particular shareholder whether or not similar defects or irregularities
are waived in the case of other shareholders. No tender of Shares will be deemed
to have been validly made until all defects or irregularities relating thereto
have been cured or waived. None of the Purchaser, Parent, the Depositary, the
Information Agent, the Dealer Manager or any other person will be under any duty
to give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. The Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding on all
parties.
Backup Withholding. In order to avoid "backup withholding" of federal
income tax on payments of cash pursuant to the Offer or the Merger, a
shareholder surrendering Shares in the Offer must, unless an exemption applies,
provide the Depositary with such shareholder's correct taxpayer identification
number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury
that such TIN is correct and that such shareholder is not subject to backup
withholding. If a shareholder does not provide such shareholder's correct TIN or
fails to provide the certifications described above, the Internal Revenue
Service (the "IRS") may impose a penalty on such shareholder and the payment of
cash to such shareholder pursuant to the Offer or the Merger may be subject to
backup withholding of 31% of the amount of such payment. All shareholders
surrendering Shares pursuant to the Offer should complete and sign the main
signature form and the Substitute Form W-9 included as part of the Letter of
Transmittal to provide the information and certification necessary to avoid
backup withholding (unless an applicable exemption exists and is proved in a
manner satisfactory to the Purchaser and the Depositary). Noncorporate foreign
shareholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares pursuant
to the Offer are irrevocable. Shares tendered pursuant to the Offer may be
withdrawn pursuant to the procedures set forth below at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after February 18, 1997
(or such later date as may apply in case the Offer is extended).
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If Share Certificates have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such Share
Certificates, the serial numbers shown on such Share Certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant to
the procedure for book-entry transfer as set forth in Section 2, any notice of
withdrawal must also specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's procedures.
Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be
7
<PAGE> 10
retendered by again following one of the procedures described in Section 2 at
any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding on all parties. None
of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer
Manager or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment and will pay for all Shares
validly tendered and not withdrawn promptly after the Expiration Date. All
questions as to the satisfaction of such terms and conditions will be determined
by the Purchaser, in its sole discretion, whose determination will be final and
binding on all parties. See Sections 1 and 14. The Purchaser expressly reserves
the right, in its sole discretion, to delay acceptance for payment of or payment
for Shares in order to comply in whole or in part with any applicable law,
including, without limitation, the HSR Act. See Section 15. Any such delays will
be effected in compliance with Rule 14e-1(c) under the Exchange Act (relating to
a bidder's obligation to pay for or return tendered securities promptly after
the termination or withdrawal of such bidder's offer).
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) Share
Certificates for (or a timely Book-Entry Confirmation with respect to) such
Shares, (ii) a Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and (iii) any other documents required
by the Letter of Transmittal. The per Share consideration paid to any
shareholder pursuant to the Offer will be the highest per Share consideration
paid to any other shareholder pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered to the Purchaser as,
if and when the Purchaser gives oral or written notice to the Depositary of the
Purchaser's acceptance for payment of such Shares. Payment for Shares accepted
for payment pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which will act as agent for validly tendering
shareholders for the purpose of receiving payment from the Purchaser and
transmitting payment to tendering shareholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT. Upon the deposit of funds with the Depositary for the purpose of making
payments to tendering shareholders, the Purchaser's obligation to make such
payment shall be satisfied and tendering shareholders must thereafter look
solely to the Depositary for payment of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer. The Purchaser will pay
any stock transfer taxes with respect to the transfer and sale to it or its
order pursuant to the Offer, except as otherwise provided in Instruction 6 of
the Letter of Transmittal, as well as any charges and expenses of the Dealer
Manager, the Depositary and the Information Agent.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-l(c) under the Exchange Act),
the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, Share Certificates for any such unpurchased Shares will be returned,
without expense to the tendering shareholder (or, in the case of Shares
delivered by book-entry transfer of such Shares into the Depositary's account at
a Book-Entry Transfer
8
<PAGE> 11
Facility pursuant to the procedure set forth in Section 2, such Shares will be
credited to an account maintained at the appropriate Book-Entry Transfer
Facility), as promptly as practicable after the expiration, termination or
withdrawal of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to Parent, or to one or more direct or indirect wholly
owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to
the Offer, but any such transfer or assignment will not relieve the Purchaser of
its obligations under the Offer and will in no way prejudice the rights of
tendering shareholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for federal income tax purposes under the Internal Revenue Code of
1986, as amended (the "Code"), and may also be a taxable transaction under
applicable state, local or foreign income or other tax laws. Generally, for
federal income tax purposes, a tendering shareholder will recognize gain or loss
equal to the difference between the amount of cash received by the shareholder
pursuant to the Offer or the Merger and the aggregate tax basis in the Shares
tendered by the shareholder and purchased pursuant to the Offer or converted in
the Merger, as the case may be. Gain or loss will be calculated separately for
each block of Shares tendered and purchased pursuant to the Offer or converted
in the Merger, as the case may be.
If Shares are held by a shareholder as capital assets, gain or loss
recognized by the shareholder will be capital gain or loss, which will be
long-term capital gain or loss if the shareholder's holding period for the
Shares exceeds one year. Under present law, long-term capital gains recognized
by an individual shareholder will generally be taxed at a maximum federal
marginal tax rate of 28%, and long-term capital gains recognized by a corporate
shareholder will be taxed at a maximum federal marginal tax rate of 35%. The
excess of capital losses over capital gains may be offset against the ordinary
income of an individual taxpayer, subject to an annual deduction limitation of
$3,000.
THE FOREGOING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY
NOT BE APPLICABLE WITH RESPECT TO SHARES RECEIVED PURSUANT TO THE EXERCISE OF
EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION OR WITH RESPECT TO HOLDERS
OF SHARES WHO ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE CODE, SUCH AS
NON-U.S. PERSONS, LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS AND
FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A HOLDER OF SHARES IN LIGHT OF
INDIVIDUAL CIRCUMSTANCES. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS
TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION
AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE
OFFER AND THE MERGER.
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<PAGE> 12
6. PRICE RANGE OF SHARES; DIVIDENDS ON THE SHARES
The Shares are listed and traded on the Nasdaq National Market under the
symbol AMST. The following table sets forth, for the quarters indicated, the
high and low sales price per Share, as reported on the Dow Jones Historical
Stock Quote Reporter Service, and the dividends paid per Share. According to the
Company, the Company has not paid dividends on the Shares since the second
quarter of 1995.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
1994:
First quarter................................................ $6 3/8 $4 $ .02
Second quarter............................................... $4 1/4 $3 1/4 $ .02
Third quarter................................................ $5 1/8 $3 1/8 $ .02
Fourth quarter............................................... $5 $2 3/4 $ .02
1995:
First quarter................................................ $3 1/8 $2 5/8 $ .02
Second quarter............................................... $3 1/8 $2 1/4 $ .02
Third quarter................................................ $3 3/4 $2 $ --
Fourth quarter............................................... $3 5/8 $ 7/8 $ --
1996:
First quarter................................................ $2 $ 15/16 $ --
Second quarter............................................... $2 $1 1/16 $ --
Third quarter................................................ $1 5/16 $ 7/8 $ --
Fourth quarter (through December 19)......................... $2 7/16 $ 7/8 $ --
</TABLE>
On November 22, 1996, the last full trading day before the announcement of
the execution of the Letter of Intent (as defined herein) to acquire the Shares
for $2.50 per Share, the reported closing sales price per Share was $1.31. See
Section 11. On December 17, 1996, the last full trading day before announcement
of the execution by the Company, Parent and the Purchaser of the Merger
Agreement, the reported closing sales price per Share was $2.19. SHAREHOLDERS
ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT REGISTRATION;
MARGIN REGULATIONS
Market for the Shares. The purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public.
Depending upon the aggregate market value and per share price of any Shares
not purchased pursuant to the Offer, the Shares may no longer meet the standards
of the National Association of Securities Dealers, Inc. (the "NASD") for
continued inclusion in the Nasdaq, which require that an issuer have at least
200,000 publicly held shares with a market value of $1 million, and have net
tangible assets of at least $1 million, $2 million or $4 million depending on
profitability levels during the issuer's four most recent fiscal years. If these
standards are not met, the Shares might nevertheless continue to be included in
the NASD's Nasdaq Stock Market with quotations published in the Nasdaq
"additional list" or in one of the "local lists." However, if the number of
holders of Shares falls below 300, or if the number of publicly held Shares
falls below 100,000, or if there are not at least two market makers for the
Shares, NASD rules provide that the securities would no longer be "qualified"
for Nasdaq Stock Market reporting, and the Nasdaq Stock Market would cease to
provide any quotations. Shares held directly or indirectly by an officer or
director of the Company, or by any beneficial owner of more than 10 percent of
the Shares, ordinarily will not be considered as being publicly held for this
purpose. If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, the Shares no longer meet the NASD requirements for continued
inclusion in any tier of the Nasdaq National Market or in any other tier of the
Nasdaq Stock Market, and the Shares are no longer included in any tier of the
Nasdaq Stock Market, the market for Shares could be adversely affected.
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<PAGE> 13
In the event the Shares no longer meet the requirements of the NASD for
inclusion in any tier of the Nasdaq Stock Market, quotations might still be
available from other sources. The extent of the public market for the Shares and
availability of such quotations would, however, depend upon the number of
holders of Shares remaining at such time, the interest in maintaining a market
in the Shares on the part of securities firms, the possible termination of
registration under the Exchange Act, as described below, and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its shareholders and to the Commission and would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement pursuant to Section 14(a) of the
Exchange Act in connection with shareholders' meetings and the related
requirement of furnishing an annual report to shareholders and the requirements
of Rule 13e-3 under the Exchange Act with respect to "going private"
transactions. Furthermore, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act of
1933, as amended, may be impaired or eliminated. The Purchaser intends to seek
to cause the Company to apply for termination of registration of the Shares
under the Exchange Act as soon after the completion of the Offer as the
requirements for such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from all stock exchanges and the registration of the
Shares under the Exchange Act will be terminated following the consummation of
the Merger.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans made
by brokers.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a North Carolina corporation with its principal offices at
11001 Park Charlotte Boulevard, Charlotte, North Carolina 28273.
The Company and its subsidiaries provide portrait photography services in
stores owned by Wal-Mart Stores, Inc. ("Wal-Mart") in 46 states in the United
States and in Mexico. The Company provides these services, which are marketed
under the Wal-Mart name, through both traveling and permanent photography
studios. The Company provides photography services in approximately 2,000
Wal-Mart stores.
Set forth below is certain selected consolidated financial information with
respect to the Company and its subsidiaries excerpted or derived from the
information contained in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 (the "Company 10-K") and the Company's Quarterly
Report on Form 10-Q for the quarter ended September 29, 1996 (the "Company
10-Q"). More comprehensive financial information is included in the Company
10-K, the Company 10-Q and other documents filed by the Company with the
Commission, and the following summary is qualified in its entirety
11
<PAGE> 14
by reference to such information. The Company 10-K, the Company 10-Q and such
other documents are available for inspection and copies thereof are obtainable
in the manner set forth below.
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS
ENDED FISCAL YEAR ENDED
-------------------------- DECEMBER 31,
SEPTEMBER 29, OCTOBER 1, ------------------------------------
1996 1995 1995 1994 1993
------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net Sales......................... $ 68,686 $ 66,659 $ 101,900 $ 94,730 $ 94,003
Gross Profit...................... $ 7,970 $ 4,444 $ 10,562 $ 22,250 $ 21,411
Operating Income (Loss)........... $ (3,915) $ (10,054) $ (8,940) $ 5,512 $ 6,039
Net Income (Loss)................. $ (5,125) $ (6,296) $ (5,992) $ 3,147 $ 3,670
Net Income (Loss) per Share....... $ (0.24) $ (0.29) $ (0.28) $ 0.15 $ 0.17
Weighted Average Shares
Outstanding.................... 21,433,160 21,399,674 21,399,232 21,632,116 21,630,003
Balance Sheet Data (at end of
period):
Total Assets...................... $ 35,603 $ 43,830 $ 34,132 $ 30,149
Total Shareholders' Equity........ $ 7,544 $ 12,671 $ 19,525 $ 18,974
</TABLE>
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, is required to file reports relating to its
business, financial condition and other matters. Information as of particular
dates concerning the Company's directors and officers, their remuneration, stock
options and other matters, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company is
required to be disclosed in proxy statements distributed to the Company's
shareholders and filed with the Commission. Such reports, proxy statements and
other information may be available for inspection at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, DC 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, NY 10048 and Citicorp Center, 500 West Madison
Street (Suite 1400), Chicago, IL 60661. Such reports, proxy statements and other
information may also be obtained at the Web site that the Commission maintains
at http://www.sec.gov. Copies of such information should be obtainable, by mail,
upon payment of the Commission's customary charges, by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, DC 20549.
Other than as set forth below, the information concerning the Company
contained in this Offer to Purchase has been taken from or based upon publicly
available documents on file with the Commission and other publicly available
information. Although Parent and the Purchaser do not have any knowledge that
any such information is untrue, neither the Purchaser nor Parent takes any
responsibility for the accuracy or completeness of such information or for any
failure by the Company to disclose events that may have occurred and may affect
the significance or accuracy of any such information.
During the course of the discussions between Parent and the Company that
led to the execution of the Merger Agreement and the agreements entered into in
connection therewith, the Company provided Parent with certain information about
the Company which is not publicly available. The information provided included
forecasts of the Company's results of operations for the fiscal years ending
December 31, 1996 and 1997, which included the following information: net sales,
$107 million and $117.7 million; gross profit, $17.4 million and $18.3 million;
and net income (loss), ($0.1) million and $0.6 million, respectively. The
foregoing forecasts were prepared solely for internal use and not for
publication or with a view to complying with the published guidelines of the
Commission regarding projections or with the AICPA Guide for Prospective
Financial Statements and are included in this Offer to Purchase only because
they were furnished to Parent. The forecasts necessarily reflect numerous
assumptions with respect to industry performance, general business
12
<PAGE> 15
and economic conditions and other matters, many of which are inherently
uncertain or beyond the Company's control. One cannot predict whether the
assumptions made in preparing the forecasts will be accurate, and actual results
may be materially higher or lower than those contained in the forecasts. The
inclusion of this information should not be regarded as an indication that
Parent, the Purchaser, the Company, or anyone who received this information
considered it a reliable predictor of future events, and this information should
not be relied on as such. None of Parent, the Purchaser or the Company assumes
any responsibility for the validity, reasonableness, accuracy or completeness of
the forecasts and the Company has made no representation to Parent or the
Purchaser regarding the forecasts described above.
9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER
Parent is a holding company engaged through its subsidiaries in the sale of
photographic color portraits of children, adults, families, and pets. Parent
provides portrait photography services, in permanent studios operated in the
United States, Canada and Puerto Rico. As of December 19, 1996, Parent operates
1,376 studios in Kmart stores in the United States and Canada, 87 studios in
Wal-Mart stores in the United States, Canada and Puerto Rico and 114 studios in
PETsMART stores in the United States and Canada. Portrait studios operating in
PETsMART locations photograph pets and pets with their owners. Parent's
developing and portrait processing facilities are located in Matthews, North
Carolina.
The Purchaser is a newly incorporated North Carolina corporation and a
wholly owned subsidiary of Parent, and to date has not conducted any business
other than in connection with the Offer and the Merger. The principal executive
offices of Parent and the Purchaser are located at 815 Matthews-Mint Hill Road,
Matthews, North Carolina 28105.
13
<PAGE> 16
Set forth below is certain selected consolidated financial information with
respect to Parent and its subsidiaries excerpted or derived from the information
contained in Parent's Annual Report on Form 10-K for the fiscal year ended
January 28, 1996 (the "Parent 10-K") and Parent's Quarterly Report on Form 10-Q
for the nine month period ended October 27, 1996 (the "Parent 10-Q"). More
comprehensive financial information is included in the Parent 10-K, the Parent
10-Q and other documents filed by Parent with the Commission, and the following
summary is qualified in its entirety by reference to such information. Parent is
subject to the informational requirements of the Exchange Act, and such reports
and other documents should be available for inspection at the Commission and
copies thereof may be obtainable from the Commission and on-line through EDGAR
in the same manner as is set forth with respect to the Company in Section 8.
PCA INTERNATIONAL, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEARS ENDED
------------------------- ---------------------------------------
OCTOBER 27, OCTOBER 29, JANUARY 28, JANUARY 29, JANUARY 30,
1996 1995 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Sales................................... $ 104,298 $ 98,129 $ 144,715 $ 144,881 $ 149,150
Income before income taxes.............. $ 3,439 $ 4,645 $ 12,863 $ 7,447 $ 8,209
Net income.............................. $ 2,012 $ 2,727 $ 7,617 $ 4,785 $ 2,712
Net income per common share and common
share equivalent (primary and fully
diluted)............................. $ 0.25 $ 0.33 $ 0.94 $ 0.56 $ 0.31
Average number of common shares and
common share equivalents
outstanding.......................... 8,147,005 8,236,618 8,110,453 8,582,267 8,822,690
Dividends declared per common share..... $ 0.21 $ 0.21 $ 0.28 $ 0.28 $ 0.28
Balance Sheet Data (at end of period):
Total assets............................ $ 70,468 $ 59,884 $ 59,557 $ 56,751
Shareholders' equity.................... $ 31,698 $ 31,235 $ 33,032 $ 30,296
</TABLE>
Except as set forth in this Offer to Purchase, none of Parent or the
Purchaser, or, to the best knowledge of Parent or the Purchaser, any of the
persons listed in Schedule I hereto, or any associate or majority-owned
subsidiary of such persons, beneficially owns any equity security of the
Company, and none of Parent, the Purchaser, or, to the best knowledge of Parent
or the Purchaser, any of the other persons referred to above, or any of the
respective directors, executive officers or subsidiaries of any of the
foregoing, has effected any transaction in any equity security of the Company
during the past 60 days.
Except as set forth in this Offer to Purchase, none of Parent or the
Purchaser, or, to the best knowledge of Parent and the Purchaser, any of the
persons listed in Schedule I hereto has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of the
Company, including, without limitation, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any securities of the
Company, joint ventures, loan or option arrangements, puts or calls, guaranties
of loans, guaranties against loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, none of Parent or the Purchaser,
or, to the best knowledge of Parent and the Purchaser, any of the persons listed
in Schedule I hereto has had any transactions with the Company, or any of its
executive officers, directors or affiliates that would require reporting under
the rules of the Commission.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between Parent or the Purchaser, or their
respective subsidiaries, or, to the best knowledge of Parent and the Purchaser,
any of the persons listed in Schedule I hereto, on the one hand, and the Company
or its executive officers, directors or affiliates, on the other hand,
concerning a merger, consolidation or acquisition, tender
14
<PAGE> 17
offer or other acquisition of securities, election of directors, or a sale or
other transfer of a material amount of assets that would require reporting under
the rules of the Commission.
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by the Purchaser to purchase all of the
Shares pursuant to the Offer, to pay fees and expenses related to the Offer and
the Merger and to refinance certain indebtedness of the Company, which will be
required to be repaid in the event the Offer is consummated, is estimated to be
approximately $73 million. The Purchaser plans to obtain all funds needed for
the Offer and the Merger through a capital contribution or loan from Parent.
Parent plans to obtain the funds for such capital contribution or loan pursuant
to the credit facility as described below.
Parent has entered into a commitment letter (the "Commitment Letter"),
dated December 16, 1996, among Parent, NationsBank, N.A. (the "Bank") and
NationsBanc Capital Markets, Inc. (the "Arranger") to provide Parent and the
Purchaser with senior and subordinated term loans (the "Term Loans Facility")
and a senior revolving credit facility (the "Revolving Credit Facility" and,
together with the Term Loans Facility, the "New Credit Facility"). The New
Credit Facility will provide for up to $100 million in borrowings. The
commitment of the Bank pursuant to the Commitment Letter is subject to
negotiation and execution of a definitive credit agreement with respect to the
New Credit Facility and related documents. The Commitment Letter is subject to
certain specified conditions including, among other things (i) the absence of
adverse changes in the relevant markets or in the regulatory environment that in
the judgment of the Arranger are likely to materially and adversely affect the
syndication of the New Credit Facility; and (ii) the absence of adverse changes
in the financial condition, business, assets, results of operations or prospects
of Parent or the Company.
Under the New Credit Facility, initial advances will be made under the
Subordinated portion of the Term Loans Facility and a Senior Tender Offer
Facility. The Senior Tender Offer Facility will bear interest at the higher of
(i) NationsBank's Prime Rate or (ii) the Federal Funds Rate plus .50% (the
"Alternate Base Rate"), plus 1%. The Senior Tender Offer Facility will be repaid
with advances under the Revolving Credit Facility and by the Term Loans.
Initially a portion of the Revolving Credit Facility and the Term Loans will
bear interest at the London Interbank Offered Rate ("LIBOR") plus 250 basis
points. Any portion of the New Credit Facility which does not bear interest
based upon LIBOR will bear interest at the Alternate Base Rate, plus 1.5%. The
Subordinated portion of the Term Loans Facility shall bear interest at the
Alternate Base Rate plus a margin ranging from 2% to 5%.
The Revolving Credit Facility matures five years from the date of closing,
the senior portion of the Term Loans Facility matures six years from the date of
closing and the subordinated portion of the facility matures seven years from
the date of closing.
A copy of the Commitment Letter is filed as Exhibit (b)(1) to the
Purchaser's Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") and
is incorporated herein by reference.
It is anticipated that the indebtedness incurred by Parent under such loans
will be repaid from funds generated internally by Parent and its subsidiaries
(including, after the Merger, if consummated, dividends paid by the Company and
its subsidiaries), through additional borrowings, through equity financing or
through a combination of two or more such sources. No final decisions have been
made concerning the method Parent will employ to repay such indebtedness. Such
decisions when made will be based on Parent's review from time to time of the
advisability of particular actions, as well as on prevailing interest rates and
financial and other economic conditions.
15
<PAGE> 18
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY
On September 4, 1996, John Grosso, President and Chief Executive Officer of
Parent, met with J. Robert Wren, Jr., Chief Executive Officer, and R. Kent
Smith, President of the Company, during which meeting Mr. Grosso indicated
Parent's interest in acquiring the Company.
On September 27, 1996, Mr. Grosso met with Mr. Wren and Mr. Smith
expressing Parent's interest in acquiring the Company for $1.75 per share in
cash. Mr. Grosso was subsequently advised that the Board of Directors of the
Company was of the view that the price proposed was not adequate and that the
Company did not wish to negotiate an acquisition proposal at that time.
Following discussions between Parent and Wal-Mart, Parent obtained a letter
from Wal-Mart dated October 23, 1996 to the effect that, if Parent acquired the
Company, Wal-Mart would allow Parent to assume the Company's agreement with
Wal-Mart, subject to its terms.
On November 14, 1996, Mr. Grosso called Mr. Wren to request a meeting with
Mr. Wren, Mr. Smith and Randy J. Bates, Chairman of the Board.
On November 15, 1996, Mr. Grosso met with Mr. Wren, Mr. Bates and Mr. Smith
and delivered to them a letter to the Board of Directors of the Company
expressing Parent's interest in acquiring the Company for $2.25 per share in
cash, subject to due diligence and certain other conditions. Mr. Grosso also
stated that Parent was concurrently contacting Merrill Lynch Capital Corporation
(the owner of 5,950,177 Shares) and further stated that, in the event an
agreement could not be reached promptly between Parent and the Company, Parent
would consider commencement of a tender offer for the Shares. Mr. Wren, Mr.
Smith and Mr. Bates informed Mr. Grosso that they would deliver Parent's
statement of its position and the written offer to the Board.
On November 19, 1996, Mr. Grosso and Mr. Bates met principally to discuss
the terms of a proposed transaction. From November 20, 1996, to November 22,
1996, Mr. Grosso and the Parent's financial advisors and members of senior
management of the Company and the Company's financial advisors continued
discussions of the terms of a proposed transaction. Mr. Grosso and the Parent's
financial advisors stated that Parent would consider offering $2.50 per Share in
cash for all of the outstanding Shares of the Company in a negotiated
transaction conditioned upon, among other things, the grant to Parent and the
Purchaser, by certain shareholders owning a majority of the outstanding Shares
of the Company, of agreements to sell their Shares. Mr. Grosso also stated that
in the event the Company and Parent failed to reach an agreement regarding
Parent's acquisition of the Company, Parent intended to proceed promptly to seek
to acquire the Shares held by Merrill Lynch and to commence a tender offer for
the outstanding Shares of the Company at a price per Share below the price
offered for a negotiated acquisition.
On November 22, 1996, Parent and the Company entered into the
Confidentiality Agreement and Parent commenced a due diligence review of the
Company.
On November 23 and November 24, 1996, members of senior management of
Parent and its legal and financial advisors negotiated the terms of a letter of
intent (the "Letter of Intent") and discussed the principle terms of the Merger
Agreement with representatives of the Company and its legal and financial
advisors, and negotiated the terms of the Stock Agreements with the Designated
Shareholders (as defined herein) and their legal advisors.
Parent and the Company executed and delivered the Letter of Intent on
November 24, 1996. On November 25, 1996, Parent and the Company issued a press
release announcing the proposed transactions.
From November 20 to December 17, 1996, certain members of the Company's
senior management met with members of senior management of Parent to discuss the
termination of their employment contracts with the Company and to negotiate the
terms of employment agreements with Parent.
From November 22 to December 17, 1996, members of senior management of
Parent and its legal and financial advisors negotiated the terms of a definitive
Merger Agreement with representatives of the Company
16
<PAGE> 19
and its legal and financial advisors. The Board of Directors of the Company and
the Board of Directors of Parent separately met a number of times to review the
terms of the transactions.
On December 17, 1996, the Board of Directors of Parent held a meeting at
which it reviewed the proposed transactions with Parent's management and
Parent's legal and financial advisors and approved the Merger Agreement and the
transactions contemplated thereby. The Board of Directors of the Company also
met on December 17, 1996. At the meeting, the Company's Board reviewed the
proposed transactions with the Company's management and the Company's legal and
financial advisors and approved the Merger Agreement and the transactions
contemplated thereby.
Parent, the Purchaser and the Company executed and delivered the Merger
Agreement on December 17, 1996. Concurrently with the execution and delivery of
the Merger Agreement, the Designated Shareholders executed and delivered the
Stock Agreements, and Parent executed and delivered into escrow employment
agreements with eleven members of the Company's management, which will become
effective upon consummation of the Offer.
On December 18, 1996, Parent and the Company issued a press release
announcing the execution of the Merger Agreement, the Stock Agreements and
employment agreements. The Purchaser commenced the Offer on December 20, 1996.
12. PURPOSE OF THE OFFER; MERGER; MERGER AGREEMENT, STOCK AGREEMENTS AND
EMPLOYMENT ARRANGEMENTS
Purpose. The purpose of the Offer, the Merger, the Merger Agreement and
the Stock Agreements is to enable Parent to acquire control of, and the entire
equity interest in, the Company. Upon consummation of the Merger, the Company
will become a subsidiary of Parent.
Merger Agreement. The following is a summary of certain provisions of the
Merger Agreement. The summary is qualified in its entirety by reference to the
Merger Agreement which is incorporated herein by reference and a copy of which
has been filed with the Commission as an exhibit to the Schedule 14D-1. The
Merger Agreement may be examined and copies may be obtained at the place and in
the manner set forth in Section 8 of this Offer to Purchase.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that upon the terms and subject to prior satisfaction or waiver of
the conditions of the Offer, the Purchaser will purchase all Shares validly
tendered pursuant to the Offer. The Merger Agreement provides that, without the
written consent of the Company, the Purchaser will not decrease the Offer Price,
decrease the number of Shares sought in the Offer, amend or waive the Minimum
Condition, change the form of consideration payable in the Offer or modify or
change any condition of the Offer, except that if on the initial scheduled
expiration date all conditions to the Offer shall not have been satisfied or
waived, the Purchaser may extend from time to time for a period of not greater
than twenty business days following the initially scheduled Expiration Date;
provided that the expiration date may not be extended beyond March 31, 1997. The
Merger Agreement provides that the Purchaser shall, on the terms and subject to
the prior satisfaction or waiver of the conditions of the Offer, accept for
payment and pay for Shares tendered as soon as it is legally permitted to do so
under applicable law; provided, however, that if, immediately prior to the
expiration date of the Offer, as it may be extended, the Shares tendered and not
withdrawn pursuant to the Offer equal less than 90% of the Shares outstanding,
the Purchaser may extend, but not beyond March 31, 1997, the Offer for a period
not to exceed twenty business days. In addition, the Merger Agreement provides
that, without the consent of the Company, the Offer Price may be increased and
the Offer may be extended, but not beyond March 31, 1997, to the extent required
by law in connection with such an increase in the Offer Price.
The Merger. Following consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, and in accordance
with North Carolina law, at the Effective Time, the Purchaser shall be merged
with and into the Company. As a result of the Merger, the separate corporate
existence of the
17
<PAGE> 20
Purchaser will cease and the Company will continue as the surviving corporation
(the "Surviving Corporation").
The respective obligations of Parent and the Purchaser, on the one hand,
and the Company, on the other hand, to effect the Merger are subject to the
satisfaction on or prior to the Closing Date (as defined in the Merger
Agreement) of each of the following conditions, any and all of which may be
waived in whole or in part, to the extent permitted by applicable law: (i) the
Merger Agreement shall have been approved and adopted by the requisite vote of
the holders of Shares, if required by applicable law and the Articles of
Incorporation, in order to consummate the Merger; (ii) no statute, rule, order,
decree or regulation shall have been enacted or promulgated by any government or
any governmental agency or authority of competent jurisdiction which prohibits
the consummation of the Merger and all governmental consents, orders and
approvals required for the consummation of the Merger and the transactions
contemplated by the Merger Agreement will have been obtained and shall be in
effect at the Effective Time; (iii) there shall be no order or injunction of a
court or other governmental authority of competent jurisdiction in effect
precluding, restraining, enjoining or prohibiting consummation of the Merger;
(iv) Parent, the Purchaser or their affiliates shall have purchased Shares
pursuant to the Offer; and (v) the applicable waiting period under the HSR Act
shall have expired or been terminated.
At the Effective Time of the Merger (i) each issued and outstanding Share
(other than Shares that are owned by the Company as treasury stock, any Shares
owned by Parent, the Purchaser or any other wholly-owned subsidiary of Parent,
or any Shares which are held by shareholders exercising appraisal rights under
North Carolina law) shall be converted into the right to receive the Offer Price
and (ii) each issued and outstanding share of the Purchaser shall be converted
into one share of common stock of the Surviving Corporation.
The Company's Board of Directors. The Merger Agreement provides that
promptly after the purchase by Parent of at least a majority of the outstanding
Shares (on a fully diluted basis) pursuant to the Merger Agreement, Parent shall
be entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as is equal to the product of
the total number of directors on such Board multiplied by the percentage that
the number of Shares so accepted for payment bears to the total number of Shares
then outstanding. The Company will, upon request of the Purchaser, use its best
efforts promptly to either increase the size of its Board of Directors or secure
the resignations of such number of its incumbent directors as is necessary to
enable Parent's designees to be elected to the Board. Until the Effective Time,
the Company shall use all reasonable efforts to retain as members of its Board
of Directors at least two directors who are neither officers of Parent, or
designees, shareholders or affiliates of Parent. The Company's obligation to
appoint the Purchaser's designees to the Board of Directors is subject to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
Shareholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger, duly call, give
notice of, convene and hold a special meeting of its shareholders (the "Special
Meeting") as soon as practicable following the acceptance for payment and
purchase of Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon the Merger Agreement. The Merger Agreement
provides that the Company will, if required by applicable law in order to
consummate the Merger, prepare and file with the Commission a preliminary proxy
or information statement relating to the Merger and the Merger Agreement and use
its best efforts (i) to obtain and furnish the information required to be
included by the Commission in the Proxy Statement (as defined herein) and, after
consultation with Parent, to respond promptly to any comments made by the
Commission with respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement (the "Proxy Statement") to be
mailed to its shareholders and (ii) to obtain the necessary approvals of the
Merger and the Merger Agreement by its shareholders. If the Purchaser acquires
at least a majority of the outstanding Shares, the Purchaser will have
sufficient voting power to approve the Merger, even if no other shareholder
votes in favor of the Merger. Pursuant to the Stock Agreements, shareholders
owning 58% of the Shares have agreed to tender such Shares, and therefore the
Purchaser will acquire at least a majority of the outstanding Shares. The
Company has agreed, subject to the fiduciary obligations of the Board under
applicable law as advised by independent counsel, to include in the Proxy
18
<PAGE> 21
Statement the recommendation of the Board that shareholders of the Company vote
in favor of the approval of the Merger and the adoption of the Merger Agreement.
Parent has agreed that it will vote, or cause to be voted, all of the Shares
then owned by it, the Purchaser or any of its other subsidiaries and affiliates
in favor of the approval of the Merger and the adoption of the Merger Agreement.
The Merger Agreement provides that in the event that Parent, the Purchaser
or any other subsidiary of Parent acquires at least 90% of the outstanding
Shares, pursuant to the Offer or otherwise, Parent, the Purchaser and the
Company will, at the request of Parent and subject to the terms of the Merger
Agreement, take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after such acquisition, without a
meeting of shareholders of the Company, in accordance with North Carolina law.
Options. Pursuant to the Merger Agreement, effective as of the earlier of
(i) Effective Time or (ii) the expiration date of the Offer (if at such time the
Shares tendered and not withdrawn pursuant to the Offer equal 80% or more) (such
earlier date the "Acceleration Time"), the Company shall cause each outstanding
employee stock option to purchase Shares (the "Employee Options") granted under
the Company's 1992 Stock Option Plan and the Company's Equity Compensation Plan
(collectively, the "Employee Option Plans") and each outstanding non-employee
director option to purchase Shares ("Director Options" and collectively with
Employee Options, the "Options") granted under the Company's Stock Option Plan
for Non-Employee Directors (together with the Employee Option Plans, the "Option
Plans"), whether or not then exercisable or vested, to become fully exercisable
and vested. The Company has obtained the agreement of each optionee under the
Option Plans to the cancellation of all outstanding Options as of the
Acceleration Time, in consideration for which (except to the extent that Parent
or the Purchaser and the holder of any such Option otherwise agree), at the
Acceleration Time Parent will cause the Company (or, at Parent's option, the
Purchaser and, in the event the Company is unable to do so, the Purchaser (which
obligation of the Purchaser Parent agrees to fund on a timely basis)) to pay to
such holders of Options an amount equal the product of (i) the excess, if any,
of the Offer Price over the exercise price of each such Option and (ii) the
number of Shares previously subject to the Option immediately prior to its
cancellation. Cancellation of Options having an exercise price equal to or in
excess of the Offer Price shall be not in excess of $100 per optionee. The
Merger Agreement also provides that notwithstanding the provisions of this
paragraph, the Company shall reasonably cooperate with Parent and the Purchaser
in structuring transactions described in this paragraph with respect to Options
so as to optimize the tax treatment of Parent or the Purchaser in connection
therewith.
Interim Operations. Pursuant to the Merger Agreement, the Company has
agreed that, except as expressly contemplated or provided by the Merger
Agreement or agreed to in writing by Parent, prior to the time the designees of
the Purchaser constitute a majority of the Board of the Company pursuant to the
terms of the Merger Agreement (the "Appointment Time"), the business of the
Company and its subsidiaries shall be conducted only in the ordinary and usual
course and, to the extent consistent therewith, each of the Company and its
subsidiaries shall use its commercially reasonable best efforts to preserve its
business organization intact and maintain its existing relations with customers,
suppliers, employees, creditors and business partners, and the Company and its
subsidiaries will not, directly or indirectly, except as permitted by Parent (i)
sell, transfer or pledge, or agree to sell, transfer or pledge, any Shares,
preferred stock or capital stock of any of its subsidiaries beneficially owned
by it; (ii) amend its Articles of Incorporation or Bylaws or similar
organizational documents; (iii) split, combine or reclassify the outstanding
Shares or any outstanding capital stock of any of the subsidiaries of the
Company; (iv) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to its capital stock; (v) issue,
sell, pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire any shares of, capital stock of any class of
the Company or its subsidiaries, other than shares reserved for issuance on
December 17, 1996 pursuant to the exercise of the Company's Options outstanding
on December 17, 1996; (vi) transfer, lease, license, sell, mortgage, pledge,
dispose of, or encumber any material assets other than in the ordinary and usual
course of business and consistent with past practice, or incur or modify any
material indebtedness or other liability; (vii) redeem, purchase or otherwise
acquire directly or indirectly any of its capital stock; (viii) grant any
increase in the compensation payable or to become payable by the Company or any
of its subsidiaries to any of its employees,
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or adopt any new or amend or otherwise increase or accelerate the payment or
vesting of the amounts payable or to become payable under any existing bonus,
incentive compensation, deferred compensation, severance, profit sharing, stock
option, stock purchase, insurance, pension, retirement or other employee benefit
plan, agreement or arrangement; (ix) enter into any employment or severance
agreement with, or, except in accordance with the existing written policies of
the Company, grant any severance or termination pay to any officer, director or
employee of the Company or any of its subsidiaries; (x) modify, amend or
terminate any of its material contracts or waive, release or assign any material
rights or claims thereunder; (xi) permit any material insurance policy naming it
as a beneficiary or a loss payable payee to be canceled or terminated without
notice to Parent; (xii) incur or assume any long-term debt or assume any
short-term indebtedness; (xiii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person, except in the ordinary course of business and
consistent with past practice; (xiv) make any loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned subsidiaries of the Company or customary loans or advances to employees in
accordance with past practice); (xv) enter into any material commitment or
transaction (including, but not limited to, any borrowing, capital expenditure
or purchase, sale or lease of assets or real estate; (xvi) change any of the
accounting principles used by it unless required by generally accepted
accounting principles; (xvii) pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
any such claims, liabilities or obligations reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes thereto of
the Company and its consolidated subsidiaries, (xviii) adopt a plan of complete
or partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
subsidiaries (other than the Merger); (xix) take, or agree to commit to take,
any action that would make any representation or warranty of the Company
contained in the Merger Agreement, in the case of any representation or warranty
not qualified by materiality, materially inaccurate or, in the case of any
representation or warranty, inaccurate in any respect at, or as of any time
prior to, the Effective Time; or (xx) enter into an agreement, contract,
commitment or arrangement to do any of the foregoing, or to authorize,
recommend, propose or announce an intention to do any of the foregoing.
No Solicitation. In the Merger Agreement, the Company has agreed that
neither the Company nor any of its subsidiaries or affiliates shall (and the
Company shall use its best efforts to cause its officers, directors, employees,
representatives and agents not to), directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent, or any of its affiliates or representatives) concerning any
merger, tender offer, exchange offer, sale of assets, sale of shares of capital
stock or debt securities or similar transactions involving the Company or any
subsidiary, division or operating or principal business unit of the Company (an
"Acquisition Proposal"). The Company also agreed to immediately cease any
existing activities, discussions or negotiations with any parties conducted
prior to the date of the Merger Agreement with respect to any of the foregoing.
The Merger Agreement provides that the Company may furnish information
concerning its business, properties or assets to any corporation, partnership,
person or other entity or group pursuant to appropriate confidentiality
agreements, and may negotiate and participate in discussions and negotiations
with such entity or group concerning an Acquisition Proposal if (1) such entity
or group has submitted a bona fide written proposal on an unsolicited basis to
the Board of the Company relating to such transaction which the Board determines
represents a superior transaction to the Offer and the Merger and (2) if, the
Board of the Company determines, only after receipt of advice from independent
legal counsel, the failure to provide such information or access or to engage in
such discussions or negotiations could cause the Board of Directors to violate
its fiduciary duties to the Company's shareholders under applicable law. The
Company will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry (and will disclose any written materials in
connection therewith), and the identity of the party making such proposal or
inquiry which it may receive in respect of any such transaction.
Indemnification and Insurance. Pursuant to the Merger Agreement, after the
earlier of (1) the Effective Time or (2) the consummation of the Offer, Parent
shall and shall cause the Surviving Corporation (or any successor to the
Surviving Corporation) to indemnify, defend and hold harmless the present and
former officers and directors of the Company and its subsidiaries with respect
to matters occurring at or prior
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<PAGE> 23
to the Effective Time to the full extent permitted under North Carolina law. The
Merger Agreement also provides that Parent or the Surviving Corporation shall
maintain the Company's existing officers' and directors' liability insurance
("D&O Insurance") for a period of not less than three years after the Effective
Time, provided that Parent may substitute therefor policies of substantially
similar coverage and amounts containing terms no less favorable to such former
directors or officers. Parent has also agreed that if the existing D&O Insurance
expires, is terminated or canceled during such period, Parent or the Surviving
Corporation will use all reasonable efforts to obtain substantially similar D&O
Insurance, but in no event shall it be required to pay aggregate annual premiums
for such insurance in excess of 150% of the aggregate annual premiums paid in
1996 and, in the event that the annual premium for insurance required to be
obtained under the Merger Agreement exceeds such amount, Parent shall maintain
as much of such insurance as may be maintained for such amount.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Purchaser with
respect to, among other things, its organization, capitalization, financial
statements, public filings, conduct of business, employee benefit plans,
insurance, compliance with laws, intellectual property, licenses, contracts,
related party transactions, litigation, tax matters, real property, consent and
approvals, vote required to approve the Merger Agreement, undisclosed
liabilities and the absence of any material adverse changes in the Company since
December 31, 1995.
Termination; Fees. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval of the shareholders of the Company, (a) by mutual consent of the Board
of Directors of Parent or Purchaser and the Board of Directors of the Company,
(b) by either the Board of Directors of the Company (in accordance with the
terms of the Merger Agreement) or the Board of Directors of Parent or the
Purchaser (i) if the Offer shall have expired without any Shares being purchased
therein, provided that such right to terminate shall not be available to any
party whose failure to fulfill any material obligation under the Merger
Agreement was the cause of, or resulted in, the failure of Parent or the
Purchaser, as the case may be, to purchase the Shares pursuant to the Offer on
or before such date; or (ii) if any Governmental Entity (as defined therein)
shall have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties shall use their reasonable
efforts to lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable, (c) by the Board of Directors of the Company (in accordance with
the terms of the Merger Agreement) (i) if, prior to the purchase of Shares
pursuant to the Offer, the Board of Directors of the Company shall have (A)
withdrawn, or modified or changed in a manner adverse to Parent or the Purchaser
its approval or recommendation of the Offer, the Merger Agreement or the Merger
in order to permit the Company to execute an agreement in principle or a
definitive agreement providing for the acquisition of the Company by merger,
consolidation or otherwise, on terms (including the per share consideration)
determined by the Board of Directors of the Company, to be superior to the
shareholders of the Company as compared to the terms of the acquisition of the
Company contemplated by the Merger Agreement, and (B) determined, only after
receipt of advice from independent legal counsel to the Company, that the
failure to take such action as set forth in the preceding clause (A) could cause
the Board of Directors to violate its fiduciary duties to the Company's
shareholders under applicable law; or (ii) if, prior to the purchase of Shares
pursuant to the Offer, Parent or the Purchaser breaches or fails in any material
respect to perform or comply with any of its material covenants and agreements
contained in the Merger Agreement or breaches its representations and warranties
in any material respect; or (iii) if Parent or the Purchaser shall have
terminated the Offer, or the Offer shall have expired, without Parent or the
Purchaser, as the case may be, purchasing any Shares pursuant thereto; provided,
that the Company may not terminate the Merger Agreement pursuant to this clause
(iii) if such termination or expiration without purchase is the result of the
Company being in material breach of the Merger Agreement; or (iv) if Parent, the
Purchaser or any of their affiliates shall have failed to commence the Offer on
or prior to five business days following the initial public announcement of the
Offer; provided, that the Company may not terminate the Merger Agreement
pursuant to this clause (iv) if such termination or failure is the result of the
Company being in material breach of the Merger Agreement, (d) by the Board of
Directors of Parent or the Purchaser (i) if prior to the purchase of Shares
pursuant to the Offer, the Board of Directors of the Company shall have
withdrawn or modified or
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<PAGE> 24
changed in a manner adverse to Parent or the Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger or shall have
recommended an Acquisition Proposal or offer, or shall have executed an
agreement in principle (or similar agreement) or definitive agreement providing
for a tender offer or exchange offer for any shares of capital stock of the
Company, or a merger, consolidation or other business combination with a person
or entity other than Parent, the Purchaser or their affiliates (or the Board of
Directors of the Company resolves to do any of the foregoing); or (ii) if Parent
or the Purchaser shall have terminated the Offer, or the Offer shall have
expired without Parent or the Purchaser purchasing any Shares thereunder,
provided that Parent or the Purchaser may not terminate the Merger Agreement
pursuant to this clause (ii) if Parent or the Purchaser has failed to purchase
Shares in the Offer in violation of the material terms thereof; or (iii) if, due
to an occurrence that if occurring after the commencement of the Offer would
result in a failure to satisfy any of the conditions set forth in Section 14,
Parent, the Purchaser or any of their affiliates shall have failed to commence
the Offer on or prior to five business days following the date of the initial
public announcement of the Offer.
In accordance with the Merger Agreement, if (1) the Board of Directors of
the Company terminates the Merger Agreement pursuant to clause (c)(i) of the
immediately preceding paragraph, (2) the Board of Directors of Parent or the
Purchaser terminates the Merger Agreement pursuant to clause (d)(i) of the
immediately preceding paragraph, (3) the Board of Directors of Parent or the
Purchaser terminates the Merger Agreement pursuant to clause (d)(ii) or (d)(iii)
of the immediately preceding paragraph and the event set forth in paragraph (e)
of Section 14 herein shall have occurred, (4) the Board of Directors of Parent
or the Purchaser terminates the Merger Agreement pursuant to clause (d)(ii) or
(d)(iii) of the immediately preceding paragraph as a result of any event set
forth in paragraph (d) of Section 14 hereof shall have occurred or (5) the Board
of Directors of Parent or the Purchaser terminates the Merger Agreement pursuant
to clause (d)(ii) or (d)(iii) of the immediately preceding paragraph as a result
of any representation or warranty of the Company in the Merger Agreement being
untrue when made or breach or failure to perform or comply with any material
obligation, agreement or covenant by the Company set forth in the Merger
Agreement having occurred, then the Company will pay Parent an amount equal to
$1.5 million and shall assume and pay, or reimburse Parent for, all reasonable
out-of-pocket fees and expenses incurred, or to be incurred, by Parent or the
Purchaser and their affiliates, in connection with the Offer, the Merger and the
consummation of the transactions contemplated by the Merger Agreement.
STOCK AGREEMENTS. The following is a summary of the material terms of the
Stock Agreements. This summary is qualified in its entirety by reference to each
form of Stock Agreement which is incorporated herein by reference and which has
been filed with the Commission as an exhibit to the Schedule 14D-1. The form of
Stock Agreements may be examined and copies may be obtained at the place and in
the manner as set forth in section 8 of this Offer to Purchase.
Tender of Shares. Concurrently with the execution of the Merger Agreement,
Parent, the Purchaser and the Designated Stockholders entered into the Stock
Agreements. Upon the terms and subject to the conditions of each such agreement,
the Designated Shareholders have agreed to validly tender (and not withdraw)
pursuant to and in accordance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer, the number of Shares owned
beneficially by the Designated Shareholders (or a total of 12,535,631 Shares,
representing 58% of the Company's outstanding Shares, or 54% of the outstanding
Shares on a fully diluted basis).
Stock Option. Certain of the Designated Shareholders who beneficially own
an aggregate of 9,937,874 Shares (or approximately 46% of the Company's
outstanding Shares, or 43% of the outstanding shares on a fully diluted basis)
have each granted to Parent an irrevocable option (a "Stock Option") to purchase
the Designated Shareholder's Shares (the "Option Shares") at a purchase price
per Share equal to the Offer Price. Pursuant to each Stock Agreement, if (i) the
Offer is terminated, abandoned or withdrawn by Parent or the Purchaser, or (ii)
the Merger Agreement is terminated in accordance with its terms, the Stock
Option will, in any such case (but provided neither Parent nor the Purchaser is
in material breach of the Merger Agreement), become exercisable, in whole or in
part, upon the first to occur of any such event and remain exercisable, in whole
or in part, until the date which is 45 days after the date of the occurrence of
such event (the "45 Day Period"), so long as: (i) all waiting periods under the
HSR Act required for the purchase of the
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<PAGE> 25
Option Shares upon such exercise, shall have expired or been waived, and (ii)
there shall not be in effect any preliminary or final injunction or other order
issued by any court or governmental, administrative or regulatory agency or
authority or legislative body or commission prohibiting the exercise of the
Stock Option pursuant to each Stock Agreement. Each Stock Agreement provides
that if all HSR Act waiting periods have not expired or been waived, or there
shall be in effect any such injunction or order, in each case on the expiration
of the 45 Day Period, the 45 Day Period shall be extended until 5 business days
after the later of (A) the date of expiration or waiver of all HSR Act waiting
periods and (B) the date of removal or lifting of such injunction or order but
in no event shall the 45 Day Period be extended beyond June 30, 1997. Under
certain circumstances Parent is required, to the extent permitted by law, to
seek to purchase all of the remaining outstanding Shares upon exercise of the
Stock Option.
Provisions Concerning the Shares. Each Designated Shareholder has agreed
that during the period commencing on the date of the Stock Agreements and
continuing until the first to occur of the Effective Time or termination of the
Merger Agreement in accordance with its terms, at any meeting of the Company's
shareholders or in connection with any written consent of the Company's
shareholders, the Designated Shareholder will vote (or cause to be voted) the
Shares then held of record or beneficially owned by such Designated Shareholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and the Stock Agreements and any
actions required in furtherance thereof; (ii) against any action or agreement
that would result in a breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement; and (iii) except as otherwise agreed to in writing in advance by
Parent, against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its subsidiaries; (B) a sale, lease or
transfer of a material amount of assets of the Company or its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries; (C) (1) any change in a majority of the persons who constitute
the board of directors of the Company; (2) any change in the present
capitalization of the Company or any amendment of the Company's Articles of
Incorporation or Bylaws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action which, in the case of
each of the matters referred to in clauses (C)(1), (2) or (3), is intended, or
could reasonably be expected, to impede, interfere with, delay, postpone, or
materially adversely affect the Merger and the transactions contemplated by the
Stock Agreements and the Merger Agreement. Each Designated Shareholder further
agrees not to enter into any agreement or understanding with any person or
entity the effect of which would be inconsistent or violative of the provisions
and agreements described above. Pursuant to the Stock Agreements, Parent has
agreed that in the event it exercises the Stock Option and purchases the Option
Shares (i) prior to the commencement of the Offer and (ii) in the absence of an
Acquisition Proposal for the Company providing consideration greater than the
Offer Price, Parent will, to the extent permitted by law, seek to purchase all
of the remaining shares of common stock of the Company outstanding at the Offer
Price pursuant to the Merger Agreement and/or the Offer.
Other Covenants, Representations, Warranties. In connection with each
Stock Agreement, each Designated Shareholder made certain customary
representations, warranties and covenants, including with respect to (i)
ownership of the Shares, (ii) the Designated Shareholder's authority to enter
into and perform obligations under the Stock Agreement, (iii) the receipt of
requisite governmental consents and approvals, (iv) the absence of liens and
encumbrances on and in respect of the Designated Shareholder's Shares, (v)
restrictions on the transfer of the Designated Shareholder's Shares, and (vi)
the solicitation of acquisition proposals. Parent and the Purchaser have made
certain representations and warranties with respect to Parent and the
Purchaser's authority to enter into each Stock Agreement and the receipt of
requisite governmental consents and approvals.
Pursuant to the Stock Agreements, Parent has agreed to indemnify the
Designated Stockholders in certain circumstances.
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EMPLOYMENT ARRANGEMENTS
Parent and each of J. Robert Wren, Jr., R. Kent Smith, Randy J. Bates,
James O. Mattox, Shawn W. Poole and Ed J. Tepera have entered into employment
and noncompetition agreements (together, the "Employment Agreements"). All of
the foregoing persons except Mr. Bates are executive officers of the Company and
Mr. Bates, Mr. Wren and Mr. Smith are directors of the Company. The agreements
have been executed by Parent and have been placed in escrow, pursuant to an
escrow agreement between Parent and the Company dated December 17, 1996 (the
"Escrow Agreement"), a copy of which is filed as an exhibit to the Schedule
14D-1. Pursuant to the Escrow Agreement, among other things, the Employment
Agreements will become effective one day following the consummation of the
Offer. The following is a summary of the material terms of the Employment
Agreements. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the
Employment Agreements, copies of which are filed as exhibits to the Schedule
14D-1.
Pursuant to his Employment Agreement, Mr. Wren will serve as Executive Vice
President, General Counsel and Assistant to the Chief Executive Officer of
Parent. Mr. Wren's base annual compensation will be $250,000 and he will be
eligible to participate in bonus programs available to other executive vice
presidents of Parent. Mr. Wren's term of employment is three years. If he is
terminated by Parent without cause during such three year term or if he
voluntarily terminates following one year of employment, he will receive a
severance payment the amount of which will depend upon the time of termination
but which will be not less than one year's base compensation. Pursuant to Mr.
Wren's Employment Agreement, Parent has agreed to grant Mr. Wren an option to
purchase 150,000 shares of the common stock of Parent ("Parent Stock") at an
exercise price equal to the trading price (as defined) of the Parent Stock on
the effective date of the grant as defined in Parent's 1996 Omnibus Long-Term
Compensation Plan (the "Plan"). Such option will be exercisable in three annual
equal increments, or immediately upon the termination of such agreement by Mr.
Wren or by the Parent without cause, and terminates 10 years from the date of
grant without regard to a termination of employment other than a termination for
cause.
Mr. Smith and Mr. Bates each will serve as a special advisor to Parent for
a four month period pursuant to their Employment Agreements. Mr. Smith will
receive monthly compensation of $12,833, and Mr. Bates will receive monthly
compensation of $13,750. After such transition period, Mr. Smith and Mr. Bates
each will be prohibited by non-compete covenants under such agreement from
competition with Parent for a period of five years and eight months in
consideration of the same monthly payments through the end of such period.
Pursuant to the Employment Agreements of Mr. Smith and Mr. Bates, Parent has
agreed to grant each such person an option to purchase 100,000 shares of Parent
Stock at an exercise price equal to the trading price of the Parent Stock on the
effective date of the grant as defined in the Plan. Such options become
exercisable on the date of grant and terminate five years from such date.
Pursuant to his Employment Agreement, Mr. Mattox will serve as a Senior
Vice President of Parent for a term of one year at a base annual compensation of
$125,000. Under such agreement, if Mr. Mattox is terminated by Parent without
cause during or after such one year term, or if he voluntarily terminates his
employment after such one year term, he will receive a severance payment of
$195,000. If he voluntarily terminates prior to the end of his one year term,
the severance payment will be $70,000. Mr. Mattox will be eligible to
participate in bonus programs made available to other senior vice presidents of
Parent. He will be granted the option to purchase 25,000 shares of Parent Stock
at an exercise price equal to the trading price of the Parent Stock on the
effective date of the grant as defined in the Plan. Such option will be
exercisable in five annual equal increments and will terminate 10 years
following the date of the grant or three months after the termination of Mr.
Mattox's employment with Parent, whichever is earlier.
The foregoing Employment Agreements (other than Mr. Poole's Employment
Agreement) contain certain non-competition covenants of varying duration
pursuant to which each officer is prohibited from providing portrait photography
services to certain persons and entities in certain geographic areas following
expiration of the terms of such Employment Agreements (without regard to the
termination of employment prior to the expiration of the term).
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<PAGE> 27
Pursuant to his Employment Agreement, Mr. Poole will be employed by Parent
for a period of four months under the supervision of the Chief Financial Officer
of Parent. Mr. Poole will receive monthly compensation of $15,624. Under such
agreement, if Mr. Poole is terminated by Parent without cause during or after
such four month term, or if he voluntarily terminates such employment following
such four month term, he will receive a severance payment of $31,248.
Pursuant to his Employment Agreement, Mr. Tepera will serve as a Senior
Vice President -- Manufacturing of Parent for a term of one year at a base
annual compensation of $115,000. Under such agreement, if Mr. Tepera is
terminated by Parent without cause during or after such one year term, or if he
voluntarily terminates his employment following such one year term, he will
receive a severance payment of 50% of his base annual compensation. Mr. Tepera
will be eligible to participate in bonus programs available to other senior vice
presidents of Parent. He will be granted, under such agreement, the option to
purchase 20,000 shares of Parent Stock at an exercise price equal to the trading
price of the Parent Stock on the effective date of the grant as defined in the
Plan. Such option will be exercisable in five annual equal increments and will
terminate 10 years following the date of the grant or three months after the
termination of Mr. Tepera's employment with Parent, whichever is earlier.
Pursuant to the Escrow Agreement, the Company has agreed, at Parent's
request, to terminate the employment of Mr. Wren, Mr. Mattox, Mr. Poole, Mr.
Tepera, Mr. Bates and Mr. Smith on the day following the consummation of the
Offer (at which time such persons will become employees of Parent as discussed
above) and to pay the amounts to which such persons are entitled under their
employment agreements with the Company in a lump sum and Parent has agreed to
provide funds to the Company necessary for the Company to pay the amounts due
under each such employee's employment agreement with the Company as a result of
such terminations. As a result of the foregoing, upon the consummation of the
Offer and a termination of employment by the Company, Mr. Wren, Mr. Bates, Mr.
Smith, Mr. Mattox, Mr. Poole and Mr. Tepera will receive payments of $539,000,
$550,000, $423,971, $180,000, $250,000 and $172,500 respectively.
The Company and Parent have had discussions concerning the possible payment
of discretionary cash bonuses to employees of the Company. The amount and other
conditions of any such bonuses have not been determined. If any such bonuses are
paid, the recipients may include executive officers of the Company and the
amounts thereof may be material.
OTHER MATTERS. Under North Carolina law, the affirmative vote of holders
of a majority of the outstanding Shares entitled to vote, including any Shares
owned by the Purchaser, would be required to approve the Merger. If the
Purchaser acquires, through the Offer or otherwise, voting power with respect to
at least a majority of the outstanding Shares, which would be the case if the
Minimum Condition were satisfied, it would have sufficient voting power to
effect the Merger without the vote of any other shareholder of the Company.
North Carolina law also provides that if a parent company owns at least 90
percent of each class of stock of a subsidiary, the parent company can effect a
merger with the subsidiary without the authorization of the other shareholders
of the subsidiary. Accordingly, if, as a result of the Offer, the Stock
Agreements or otherwise, the Purchaser acquires at least 90 percent of the
outstanding Shares, the Purchaser could, and intends to, effect the Merger
without approval of any other shareholder of the Company.
Dissenters' Rights. The following summary of the rights of dissenting
shareholders does not purport to be a complete statement of the procedures to be
followed by shareholders desiring to exercise their dissenters' rights. The
preservation and exercise of dissenters' rights are conditioned on strict
adherence to the applicable provisions of the NCBCA.
No appraisal rights are available in connection with the Offer. If the
Merger is consummated, shareholders of the Company will have certain rights
under North Carolina law to dissent and demand appraisal of, and payment in cash
of the fair value of, their Shares. Each shareholder of record (as of the date
fixed for determining shareholders entitled to notice of the meeting of
shareholders of the Company at which the Merger is to be submitted or, if the
Merger is not subject to a vote of shareholders, the date on which an agreement
of merger with respect to the Merger is adopted by the Board of Directors of the
Company) will have the right to receive fair value for such shareholder's Shares
if such shareholder objects to the Merger and
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<PAGE> 28
otherwise properly exercises such shareholder's dissenters' rights and the
Merger is consummated. If the statutory procedures for exercising or perfecting
dissenters' rights are complied with in accordance with the NCBCA, then the
Company will determine the fair value required to be paid to the dissenting
shareholders for their Shares. Any such determination of fair value would be the
value of the Shares immediately before effectuating the Merger (excluding any
appreciation or depreciation in the market value resulting from the Merger
unless exclusion would be inequitable). If a dissenting shareholder properly
objects to the Company's determination of fair value, such shareholder will have
the right to petition a court to determine the fair value of such Shares and
accrued interest, and the value so determined could be more or less than the
price per share to be paid in the Offer or the Merger.
From the time written demand for payment of the fair value is given until
either the termination of the rights and obligations arising from such demand or
the purchase of the Shares related thereto by the Company, all rights accruing
to the objecting shareholder, including voting and dividend or distribution
rights, will be suspended. If any dividend or distribution is paid on Shares
during the suspension, an amount equal to the dividend or distribution which
would have been payable on the Shares, but for such suspension, shall be paid to
the holder of record of the Shares as a credit against the fair cash value of
the Shares. If the right to receive the fair value is terminated otherwise than
by the purchase of the Shares by the Company, all rights will be restored to the
objecting shareholder and any distribution that would have been made to the
holder of record of the Shares, but for the suspension, will be made at the time
of such termination.
"Going Private" Transactions. The Commission has adopted Rule 13e-3 under
the Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances be applicable to the Merger. However. Rule
13e-3 would be inapplicable if (i) the Shares are deregistered under the
Exchange Act prior to the Merger or other business combination or (ii) the
Merger or other business combination is consummated within one year after the
purchase of the Shares pursuant to the Offer and the amount paid per Share in
the Merger or other business combination is at least equal to the amount paid
per Share in the Offer. If applicable, Rule 13e-3 requires, among other things,
that certain financial information concerning the fairness of the proposed
transaction and the consideration offered to minority shareholders in such
transaction be filed with the Commission and disclosed to shareholders prior to
the consummation of the transaction.
13. DIVIDENDS AND DISTRIBUTIONS
As described above, the Merger Agreement provides that, prior to the
Effective Time, the Company will not, except as explicitly permitted by the
Merger Agreement, (i) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock, (ii) issue, sell, pledge, dispose of or encumber any additional shares
of, or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire any shares of, capital stock
of any class of the Company or its subsidiaries other than shares reserved for
issuance on December 17, 1996 pursuant to the exercise of the Company's Options
outstanding on December 17, 1996 or (iii) redeem, purchase or otherwise acquire
directly or indirectly any of its capital stock.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) the Purchaser's rights to extend and amend the Offer at
any time in its sole discretion (subject to the provisions of the Merger
Agreement), the Purchaser shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC, including Rule
14e-l(c) under the Exchange Act (relating to the Purchaser's obligation to pay
for or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and, in the
case of an event described in the following clause (ii) or (iii), may terminate
or amend the Offer as to any Shares not then paid for, if (i) any applicable
waiting period under the HSR Act has not expired or terminated, (ii) the Minimum
Condition has not been satisfied, or (iii) at any time on or after the date of
the Merger Agreement and before the time of payment for any such Shares, any of
the following events shall occur; provided, that if the occurrence of any event
in clause
26
<PAGE> 29
(c) below is curable by the Company through the exercise of its reasonable best
efforts and for so long as the Company continues to exercise such reasonable
best efforts, Purchaser may not terminate the Offer prior to the next scheduled
expiration date:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or deemed applicable to the Offer or the Merger by any
domestic or foreign federal or state governmental regulatory or
administrative agency or authority or court or legislative body or
commission which directly or indirectly (1) prohibits, or imposes any
material limitations on, Parent's or the Purchaser's ownership or operation
(or that of any of their respective Subsidiaries or affiliates) of all or a
material portion of their or the Company's businesses or assets, or compels
Parent or the Purchaser or their respective Subsidiaries and affiliates to
dispose of or hold separate any material portion of the business or assets
of the Company or Parent and their respective Subsidiaries, in each case
taken as a whole, (2) prohibits, or makes illegal, the acceptance for
payment, payment for or purchase of Shares or the consummation of the
Offer, the Merger or the other transactions contemplated by the Merger
Agreement, (3) results in a material delay in or restricts the ability of
the Purchaser, or renders the Purchaser unable, to accept for payment, pay
for or purchase some or all of the Shares, (4) imposes material limitations
on the ability of the Purchaser or Parent effectively to exercise full
rights of ownership of the Shares, including, without limitation, the right
to vote the Shares purchased by it on all matters properly presented to the
Company's shareholders, or (5) otherwise materially adversely affects the
consolidated financial condition, businesses or results of operations of
the Company and its Subsidiaries, taken as a whole; provided that Parent
shall have used all reasonable efforts to cause any such judgment, order or
injunction to be vacated or lifted;
(b) there shall have occurred (1) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange
or in the NASDAQ National Market System, (2) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (3) a commencement of a war, major armed
hostilities or other international or national calamity directly or
indirectly involving the United States, (4) any material limitation by any
foreign or United States governmental authority on the extension of credit
by banks or other financial institutions, (5) a change in general financial
bank or capital market conditions which materially and adversely affects
the ability of financial institutions in the United States to extend credit
or syndicate loans or (6) in the case of any of the foregoing existing at
the time of the commencement of the Offer, a material acceleration or
worsening thereof;
(c) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true, or any of the representations and warranties of the Company set forth
in the Merger Agreement that are not so qualified shall not be true in any
material respect, in either case when made or immediately prior to the
expiration date of the Offer as though made on or as of such date, or the
Company shall have breached or failed in any material respect to perform or
comply with any material obligation, agreement or covenant required by the
Merger Agreement to be performed or complied with by it; or any event not
set forth in Section 3.6 of the Company Disclosure Schedule shall have
occurred having a material adverse effect on the business, financial
condition or results of operations of the Company and its Subsidiaries,
taken as a whole;
(d) any person or group shall have entered into a definitive agreement
or agreement in principle with the Company with respect to a merger,
consolidation or other business combination with the Company; or
(e) the Company's Board of Directors shall have withdrawn, or modified
or changed in a manner adverse to Parent or the Purchaser (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the
Merger Agreement, or the Merger, or recommended another acquisition
proposal, or the Board of Directors of the Company, upon the reasonable
request of the Purchaser, shall fail within 10 days to reaffirm such
approval or recommendation or shall have resolved to do any of the
foregoing; which in the reasonable judgment of Parent, in any such case,
and regardless of the circumstances giving
27
<PAGE> 30
rise to such condition, makes it inadvisable to proceed with the Offer
and/or with such acceptance for payment of or payments for Shares.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser may be waived by Parent or the Purchaser, in whole or in part at any
time and from time to time in the sole discretion of Parent or the Purchaser.
The failure by Parent or the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
15. CERTAIN LEGAL MATTERS
General. Except as otherwise disclosed herein, based on a review of
publicly available information filed by the Company with the Commission, neither
the Purchaser nor Parent is aware of (i) any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the acquisition of Shares
by the Purchaser pursuant to the Offer or the Merger or (ii) any approval or
other action, by any governmental, administrative or regulatory agency or
authority, domestic, foreign or supranational, that would be required for the
acquisition or ownership of Shares by the Purchaser as contemplated herein.
Should any such approval or other action be required, the Purchaser currently
contemplates that such approval or action would be sought. While the Purchaser
does not currently intend to delay the acceptance for payment of Shares tendered
pursuant to the Offer pending the outcome of any such matter, there can be no
assurance that any such approval or action, if needed, would be obtained or
would be obtained without substantial conditions or that adverse consequences
might not result to the business of the Company, the Purchaser or Parent or that
certain parts of the businesses of the Company, the Purchaser or Parent might
not have to be disposed of in the event that such approvals were not obtained or
any other actions were not taken. The Purchaser's obligation under the Offer to
accept for payment and pay for Shares is subject to certain conditions. See
Section 14.
Antitrust. The Offer, the Merger and the acquisition of Shares pursuant to
the Stock Agreements are subject to the HSR Act, which provides that certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the Federal Trade Commission ("FTC") and certain
waiting period requirements have been satisfied. On December 20, 1996, Parent
filed a Notification and Report Form with respect to the Offer, the Merger and
the purchase of Shares pursuant to the Stock Agreements.
Under the provisions of the HSR Act applicable to the Offer, the purchase
of Shares under the Offer may not be consummated until the expiration of a
15-calendar day waiting period following the filing by Parent. Accordingly, as
such filing was made on December 20, 1996, the waiting period with respect to
the Offer will expire at 11:59 p.m., New York City time, on January 4, 1997,
unless the Parent receives a request for additional information or documentary
material, or the Antitrust Division of the FTC terminate the waiting period
prior thereto. If, within such 15-day period, either the Antitrust Division or
the FTC requests additional information or material from Parent concerning the
Offer, the waiting period will be extended and would expire at 11:59 p.m., New
York City time, on the tenth calendar day after the date of substantial
compliance by Parent with such request. Only one extension of the waiting period
pursuant to a request for additional information is authorized by the HSR Act.
Thereafter, such waiting period may be extended only by court order or with the
consent of Parent. The Purchaser will not accept for payment Shares tendered
pursuant to the Offer unless and until the waiting period requirements imposed
by the HSR Act with respect to the Offer have been satisfied. See Section 14.
As discussed below, the HSR Act requirements with respect to the Merger and
the Stock Agreements will apply unless certain conditions are met. In
particular, the acquisition of Shares under the Stock Agreements may not be
consummated until 30 calendar days after receipt by the Antitrust Division and
the FTC of Parent's and the Company's Notification and Report Forms unless (i)
the 30-day period is earlier terminated by the Antitrust Division and the FTC or
(ii) the 15-day waiting period relating to the Offer (as described above)
expires or is terminated. The Merger may not be consummated until 30 calendar
days after receipt by the Antitrust Division and the FTC of the Notification and
Report Forms of both Parent and the
28
<PAGE> 31
Company unless an event set forth in clauses (i) or (ii) above occurs. Within
either such 30-day period, the Antitrust Division or the FTC may request
additional information or documentary in materials from Parent or the Company.
The acquisition of Shares pursuant to the Merger or under the Stock Agreements,
as the case may be, may not be consummated until 20 days after such requests are
substantially complied with by both Parent and the Company. Thereafter, the
waiting periods may be extended only by court order or with the consent of
Parent and the Company.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of Shares
pursuant to the Offer, the Merger and the Stock Agreements. At any time before
or after the Purchaser's acquisition of Shares, the Antitrust Division or the
FTC could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the acquisition of
Shares pursuant to the Offer or otherwise or seeking divestiture of Shares
acquired by the Purchaser or divestiture of substantial assets of Parent or its
subsidiaries. Private parties and state attorneys general may also bring legal
action under the antitrust laws under certain circumstances. Based upon an
examination of publicly available information relating to the businesses in
which Parent and the Company are engaged, Parent and the Purchaser believe that
the acquisition of Shares by the Purchaser will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer or other
acquisition of Shares by the Purchaser on antitrust grounds will not be made or,
if such a challenge is made, of the result. See Section 14 for certain
conditions to the Offer, including conditions with respect to litigation and
certain governmental actions.
The North Carolina Shareholder Protection Act. Chapter 55-9 of the NCBCA,
in general, limits a North Carolina corporation such as the Company from
engaging in a "Business Combination" (defined as a variety of transactions,
including mergers) with a person that is the beneficial owner of 20% or more of
a corporation's outstanding voting stock. The affirmative vote of 95% of the
voting shares of the corporation must approve any business combination with such
person. In accordance with the provisions of the Shareholder Protection Act, the
Company has provided that the provisions of the Shareholders Act shall not be
applicable to the Company.
The North Carolina Control Share Acquisition Act. Chapter 55-9A of the
NCBCA, in general, denies control shares (defined generally as 20% or more of a
corporation's voting power acquired in an acquisition) voting rights unless such
rights are granted by a resolution adopted by the shareholders. In accordance
with the provisions of the Control Share Acquisition Act, the Company has
provided that the provisions of the Control Share Acquisition Act shall not be
applicable to the Company.
Other State Laws. A number of other states have adopted laws and
regulations applicable to attempts to acquire securities of corporations which
are incorporated, or have substantial assets, shareholders, principal executive
offices or principal places of business, or whose business operations otherwise
have substantial economic effects, in such states.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. The Purchaser does not know whether any of these laws will, by
their terms, apply to the Offer and has not complied with any such laws. Should
any person seek to apply any state takeover law, the Purchaser will take such
action as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
or the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer or the Merger, the Purchaser
might be required to file certain information with, or receive approvals from,
the relevant state authorities. In addition, if enjoined, the Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer. In such case, the Purchaser may
not be obligated to accept for payment any Shares tendered. See Section 14.
29
<PAGE> 32
16. FEES AND EXPENSES
Needham is acting as Dealer Manager in connection with the Offer and
serving as financial advisor to the Purchaser and Parent in connection with the
proposed acquisition of the Company. As compensation for such services, Parent
has agreed to pay Needham an initial fee of $50,000 and $250,000, payable upon
consummation of the Offer. In addition, Parent has also agreed to pay Needham a
fee of $750,000 (less any fees theretofore paid) contingent upon consummation of
the acquisition by merger, tender offer or otherwise by Parent of the Company or
the purchase by Parent of all or substantially all of the assets, or more than
50% of the equity securities, of the Company. In addition, Parent has agreed to
reimburse Needham for its reasonable out-of-pocket expenses, including, without
limitation, reasonable fees and disbursements of its counsel, incurred in
connection with the Offer and the Merger or otherwise arising out of Needham's
engagement, and has also agreed to indemnify Needham (and certain affiliated
persons) against certain liabilities and expenses, including, without
limitation, certain liabilities under the federal securities laws.
A director of Needham, Joseph H. Reich, is also a director of Parent.
MacKenzie Partners, Inc. has been retained by the Purchaser as Information
Agent in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, telex, telegraph and personal interview and may
request brokers, dealers and other nominee shareholders to forward material
relating to the Offer to beneficial owners of Shares, The Purchaser will pay the
Information Agent reasonable and customary compensation for all such services in
addition to reimbursing the Information Agent for reasonable out-of-pocket
expenses in connection therewith. The Purchaser has agreed to indemnify the
Information Agent against certain liabilities and expenses in connection with
the Offer, including, without limitation, certain liabilities under the federal
securities laws.
IBJ Schroder Bank & Trust Company has been retained as the Depositary. The
Purchaser will pay the Depositary reasonable and customary compensation for its
services in connection with the Offer, will reimburse the Depositary for its
reasonable out-of-pocket expenses in connection therewith and will indemnify the
Depositary against certain liabilities and expenses in connection therewith,
including, without limitation, certain liabilities under the federal securities
laws.
Except as set forth above, neither Parent nor the Purchaser will pay any
fees or commissions to any broker, dealer or other person for soliciting tenders
of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies and other nominees will, upon request, be reimbursed by Parent or the
Purchaser for customary clerical and mailing expenses incurred by them in
forwarding offering materials to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the securities,
blue-sky or other laws of such jurisdiction. Neither the Purchaser nor Parent is
aware of any jurisdiction in which the making of the Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction. To the
extent the Purchaser or Parent becomes aware of any state law that would limit
the class of offerees in the Offer, the Purchaser will amend the Offer and,
depending on the timing of such amendment, if any, will extend the Offer to
provide adequate dissemination of such information to such holders of Shares
prior to the expiration of the Offer. In any jurisdiction the securities, blue
sky or other laws of which require the Offer to be made by a licensed broker or
dealer, the Offer is being made on behalf of the Purchaser by the Dealer Manager
or one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
30
<PAGE> 33
THE PURCHASER AND PARENT HAVE FILED WITH THE COMMISSION A TENDER OFFER
STATEMENT ON SCHEDULE 14D-1 (THE ("SCHEDULE 14D-1") PURSUANT TO RULE 14D-3 UNDER
THE EXCHANGE ACT, TOGETHER WITH EXHIBITS, FURNISHING CERTAIN ADDITIONAL
INFORMATION WITH RESPECT TO THE OFFER, AND MAY FILE AMENDMENTS THERETO. SUCH
SCHEDULE 14D-1 AND ANY AMENDMENTS THERETO, INCLUDING EXHIBITS, MAY BE INSPECTED
AND COPIES MAY BE OBTAINED IN THE MANNER SET FORTH IN SECTION 8 WITH RESPECT TO
THE COMPANY (EXCEPT THAT SUCH MATERIAL WILL NOT BE AVAILABLE AT THE REGIONAL
OFFICES OF THE COMMISSION).
PCA INTERNATIONAL, INC.
December 20, 1996
31
<PAGE> 34
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER
Parent. Set forth below are the name, business address and present
principal occupation or employment, and material occupations, positions, offices
or employments for the past five years of each director and executive officer of
Parent. Except as otherwise noted, the business address of each such person is
815 Matthews-Mint Hill Road, Matthews, North Carolina 28105 and, except as
otherwise noted, each such person is a United States citizen. In addition,
except as otherwise noted, each director and executive officer of Parent has
been employed in his or her present principal occupation listed below during the
last five years. Directors of Parent are indicated by an asterisk.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME 5-YEAR EMPLOYMENT HISTORY
- --------------------------------- --------------------------------------------------------------------
<S> <C>
Joseph H. Reich* Chairman of the Board of Directors of Parent. Managing Partner of
Centennial Associates, L.P. Centennial Associates, L.P. since April 1989.
900 Third Avenue
New York, New York 10022
John Grosso* President and Chief Executive Officer of Parent since 1987.
R. Stuart Dickson* Chairman of the Executive Committee, Ruddick Corporation; Chairman
2 First Union Center of the Board of Ruddick Corporation since 1968; Director of United
Charlotte, North Carolina 28282 Dominion Industries, Inc. since 1990, and Dimon Incorporated since
1995.
Peter B. Foreman* President of Sirius Corporation since 1994; Founding Partner of
Sirrus Partners, L.P. Harris Associates, L.P. from 1976-1993; Director of Eagle Food
225 West Washington Street Centers, Glacier Water Services, and National Picture and Frame
Suite 1650 Company.
Chicago, Illinois 60606
George Friedman* Chairman and Chief Executive Officer of Parallel Communications,
Parallel Communications, Inc. Inc., since 1994. Chairman and Chief Executive Officer of Gryphon
730 Fifth Avenue, Suite 1802 Development Ltd. from 1986 to 1992.
New York, New York 10019
Donald P. Greenberg Gould Schuman Professor of Computer Graphics, Director of the
109 Highgate Place Program of Computer Graphics at Cornell University and since 1968 a
Ithaca, New York 14850 member of the Faculty of Cornell.
Charlotte H. Mason* Associate Professor, The Kenan-Flagler Business School, University
4214 Swarthmore Road of North Carolina since 1985.
Durham, North Carolina 27707
Albert F. Sloan* Chairman of the Board of Lance, Inc., until 1991; Director of
3826 Silver Bell Bassett Furniture Industries, Inc., and RichFoods, Incorporated for
Charlotte, North Carolina 28211 more than five years; and Cato Corporation since 1994.
Stanley Tulchin* Director and Chairman of the Board of Reprise Capital Corporation
Stanley Tulchin Associates and Stanley Tulchin Associates. He has been a Director of the Topps
400 Post Avenue Company, Inc., since 1987 and Chairman of the Board of STA Credit
Westbury, New York 11590 Corporation since 1991.
Jan M. Rivenbark Executive Vice President and Chief Operating Officer since August
25, 1994. He has been an Executive Vice President of Parent since
1992. Before joining Parent, he was President and Chief Operations
Officer of JP Foodservice, Inc.
Eric H. Jeltrup Executive Vice President and Chief Technical Officer since August
25, 1994. He has been with Parent in various positions in research
and development and production since 1976.
Bruce A. Fisher Senior Vice President Secretary and Chief Financial Officer and
Secretary of Parent since August 25, 1994. He has been with Parent
in various positions in accounting and finance since 1977.
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME 5-YEAR EMPLOYMENT HISTORY
- --------------------------------- --------------------------------------------------------------------
<S> <C>
R. Michael Spencer Senior Vice President and Treasurer of Parent since January 6, 1992.
He has been with Parent since 1973 in various positions in
Accounting.
</TABLE>
The Purchaser. The name and position with the Purchaser of each director
and executive officer of the Purchaser are set forth below. The business
address, present principal occupation or employment, five-year employment
history and citizenship of each such person is set forth above.
<TABLE>
<CAPTION>
NAME POSITION WITH THE PURCHASER
- --------------------------------- --------------------------------------------------------------------
<S> <C>
John Grosso Director and President. See description above.
Bruce A. Fisher Secretary. See description above.
</TABLE>
33
<PAGE> 36
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each shareholder of the
Company or such shareholder's broker, dealer, commercial bank, trust company or
other nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Delivery:
P.O. Box 84 (212) 858-2611 One State Street
Bowling Green Station Attn.: Reorganization New York, New York 10004
New York, New York Operations Department Attn.: Securities Processing
10274-0084 Window, Subcellar One
Attn.: Reorganization Confirm Facsimile by
Operations Department telephone:
(212) 858-2103
</TABLE>
Questions and requests for assistance may be directed to the Dealer Manager
or the Information Agent at their respective addresses or telephone numbers set
forth below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and all other tender offer materials may be obtained from the
Information Agent or the Dealer Manager as set forth below, and will be
furnished promptly at the Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
(logo) MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Offer is:
NEEDHAM & COMPANY, INC.
445 Park Avenue
New York, New York 10022
Call Collect (212) 705-0436
34
<PAGE> 1
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
OF
AMERICAN STUDIOS, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 20, 1996
BY
ASI ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PCA INTERNATIONAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JANUARY 22, 1997, UNLESS THE OFFER IS EXTENDED.
TO: IBJ SCHRODER BANK & TRUST COMPANY
as Depositary
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Delivery:
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn.: Securities Processing Window
Attn: Reorganization Operations Department Subcellar One
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED
BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ("DTC") or the Philadelphia
Depositary Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and
collectively, the "Book-Entry Transfer Facilities") pursuant to the book-entry
transfer procedure described in Section 2 of the Offer to Purchase (as defined
below). Delivery of documents to a Book-Entry Transfer Facility does not
constitute delivery to the Depositary.
Shareholders whose certificates evidencing Shares ("Share Certificates") are
not immediately available or who cannot deliver their Share Certificates and all
other documents required hereby to the Depositary prior to the Expiration Date
(as defined in Section 1 of the Offer to Purchase) or who cannot complete the
procedure for delivery by book-entry transfer on a timely basis and who wish to
tender their Shares must do so pursuant to the guaranteed delivery procedure
described in Section 2 of the Offer to Purchase. See Instruction 2.
<PAGE> 2
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Check Box of Applicable Book-Entry Transfer Facility:
(CHECK ONE) [ ] DTC [ ] PDTC
Account Number: Transaction Code Number:
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY:
Name(s) of Registered Holder(s):
Window Ticket No. (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- -----------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEARS(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
ON SHARE CERTIFICATE(S) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- -----------------------------------------------------------------------------------------------------------
SHARE SHARES EVIDENCED
CERTIFICATE BY SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
================================================
================================================
================================================
TOTAL SHARES
- -----------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders delivering Shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate
delivered to the Depositary are being tendered hereby. See Instruction 4.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY.
LADIES AND GENTLEMEN:
The undersigned hereby tenders to ASI Acquisition Corp., a North Carolina
corporation (the "Purchaser") and a wholly owned subsidiary of PCA
International, Inc., a North Carolina corporation ("Parent"), the above
described shares of common stock, par value $.001 per share (the "Shares"), of
American Studios, Inc., a North Carolina corporation (the "Company"), pursuant
to the Purchaser's offer to purchase all outstanding Shares, at $2.50 per Share,
net to the seller in cash, without interest thereon (the "Offer Price"), upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated December 20, 1996 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, as amended from time to
time, together constitute the "Offer"). The undersigned understands that the
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer (including, if the
Offer is extended or amended, the terms and conditions of such extension or
amendment), the undersigned hereby sells, assigns and transfers to, or upon the
order of, Purchaser all right, title and interest in and to all the Shares that
are being tendered hereby and all dividends, distributions (including, without
limitation, distributions of additional Shares) and rights declared, paid or
<PAGE> 3
distributed in respect of such Shares on or after December 20, 1996
(collectively, "Distributions"), and irrevocably appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares and all Distributions, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (i) deliver Share Certificates evidencing such Shares and all Distributions,
or transfer ownership of such Shares and all Distributions on the account books
maintained by a Book-Entry Transfer Facility, together, in either case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares and all Distributions for transfer on the
books of the Company and (iii) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.
By executing this Letter of Transmittal, the undersigned irrevocably
appoints John Grosso and Bruce A. Fisher of the Purchaser as proxies of the
undersigned, each with full power of substitution, to the full extent of the
undersigned's rights with respect to the Shares tendered by the undersigned and
accepted for payment by the Purchaser (and any and all Distributions). All such
proxies shall be considered coupled with an interest in the tendered Shares.
This appointment will be effective if, when, and only to the extent that the
Purchaser accepts such Shares for payment pursuant to the Offer. Upon such
acceptance for payment, all prior proxies given by the undersigned with respect
to such Shares (and such other Shares and securities) will, without further
action, be revoked, and no subsequent proxies may be given nor any subsequent
written consent executed by the undersigned (and, if given or executed, will not
be deemed to be effective) with respect thereto. The designees of the Purchaser
named above will, with respect to the Shares and other securities for which the
appointment is effective, be empowered to exercise all voting and other rights
of the undersigned as they in their sole discretion may deem proper at any
annual or special meeting of the shareholders of the Company or any adjournment
or postponement thereof, by written consent in lieu of any such meeting or
otherwise, and the Purchaser reserves the right to require that, in order for
Shares or other securities to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser must be able to
exercise full voting rights with respect to such Shares.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, and that when such Shares are accepted for payment
by Purchaser, Purchaser will acquire good, marketable and unencumbered title
thereto and to all Distributions, free and clear of all liens, restrictions,
charges and encumbrances, and that none of such Shares and Distributions will be
subject to any adverse claim. The undersigned, upon request, shall execute and
deliver all additional documents deemed by the Depositary or Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby and all Distributions. In addition, the undersigned shall
remit and transfer promptly to the Depositary for the account of Purchaser all
Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer, and, pending such remittance and transfer
or appropriate assurance thereof, Purchaser shall be entitled to all rights and
privileges as owner of each such Distribution and may withhold the entire
purchase price of the Shares tendered hereby or deduct from such purchase price,
the amount or value of such Distribution as determined by Purchaser in its sole
discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as otherwise stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 2 of the Offer to Purchase and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. Purchaser's acceptance of such Shares for payment
will constitute a binding agreement between the undersigned and Purchaser upon
the terms and subject to the conditions of the Offer, including, without
limitation, the undersigned's representation and warranty that the undersigned
owns the Shares being tendered.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered, in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered." Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered." In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. The undersigned recognizes that Purchaser has no
obligation, pursuant to the Special Payment Instructions, to transfer any Shares
from the name of the registered holder(s) thereof if Purchaser does not purchase
any of the Shares tendered hereby.
<PAGE> 4
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not
purchased are to be issued in the name of someone other than the
undersigned.
Issue [ ] check [ ] Share Certificate(s) to:
Name --------------------------------------------------------------------
--------------------------------------------------------------------------
(PRINT)
Address ------------------------------------------------------------------
--------------------------------------------------------------------------
(ZIP CODE)
--------------------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not
purchased are to be mailed to someone other than the undersigned, or to
the undersigned at an address other than that shown under "Description of
Shares Tendered."
Mail [ ] check [ ] Share Certificate(s) to:
Name ---------------------------------------------------------------------
--------------------------------------------------------------------------
(PRINT)
Address ------------------------------------------------------------------
--------------------------------------------------------------------------
(ZIP CODE)
--------------------------------------------------------------------------
<PAGE> 5
IMPORTANT
SHAREHOLDERS: SIGN HERE
(ALSO PLEASE COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: ___________ , 19__
Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing or by a person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please provide the following information. See
Instruction 5.
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity (full title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Codes and Telephone Numbers:
- --------------------------------------------------------------------------------
HOME
-----------------------------------------------------
BUSINESS
Taxpayer Identification or Social Security No.:
- ----------------------------------------------------------------------------
(SEE SUBSTITUTE FORM W-9 INCLUDED HEREIN)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
<PAGE> 6
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or by a financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (an
"Eligible Institution"), unless (i) this Letter of Transmittal is signed by the
registered holder(s) of the Shares (which term, for purposes of this document,
shall include any participant in a Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered hereby
and such holder(s) has (have) completed neither the box entitled "Special
Payment Instructions" nor the box entitled "Special Delivery Instructions" on
the reverse hereof or (ii) such Shares are tendered for the account of an
Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in Section 2 of the Offer to Purchase. Share Certificates
evidencing all physically tendered Shares, or a confirmation of a book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility of all
Shares delivered by book-entry transfer, as well as a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) and any other
documents required by this Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the reverse hereof prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase). If Share
Certificates are forwarded to the Depositary in multiple deliveries, a properly
completed and duly executed Letter of Transmittal must accompany each such
delivery. Shareholders whose Share Certificates are not immediately available,
who cannot deliver their Share Certificates and all other required documents to
the Depositary prior to the Expiration Date or who cannot complete the procedure
for delivery by book-entry transfer on a timely basis may tender their Shares
pursuant to the guaranteed delivery procedure described in Section 2 of the
Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by
or through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by
Purchaser, must be received by the Depositary prior to the Expiration Date; and
(iii) the Share Certificates evidencing all physically delivered Shares in
proper form for transfer by delivery, or a confirmation of a book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer, in each case together with a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Depositary within three NASDAQ
National Market trading days after the date of execution of such Notice of
Guaranteed Delivery, all as described in Section 2 of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering shareholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY
BOOK-ENTRY TRANSFER). If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered." In such cases, new Share
<PAGE> 7
Certificate(s) evidencing the remainder of the Shares that were evidenced by the
Share Certificates delivered to the Depositary herewith will be sent to the
person(s) signing this Letter of Transmittal, unless otherwise provided in the
box entitled "Special Delivery Instructions" on the reverse hereof, as soon as
practicable after the expiration or termination of the Offer. All Shares
evidenced by Share Certificates delivered to the Depositary will be deemed to
have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 6, it will not
be necessary for transfer tax stamps to be affixed to the Share Certificates
evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" on the reverse hereof, the appropriate
boxes on the reverse of this Letter of Transmittal must be completed.
8. WAIVER OF CONDITIONS. The conditions to the Offer may be waived by the
Purchaser in whole or in part at any time and from time to time in its sole
discretion.
9. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Dealer Manager or the
Information Agent at their respective addresses or telephone numbers set forth
below. Additional copies of the Offer to Purchase, this Letter of Transmittal
and the Notice of Guaranteed Delivery may
<PAGE> 8
be obtained from the Information Agent or the Dealer Manager or from brokers,
dealers, commercial banks or trust companies.
10. SUBSTITUTE FORM W-9. Each tendering shareholder is required to
provide the Depositary with a correct Taxpayer Identification Number ("TIN") on
the Substitute Form W-9 which is provided under "Important Tax Information"
below, and to certify, under penalties of perjury, that such number is correct
and that such shareholder is not subject to backup withholding of federal income
tax. If a tendering shareholder has been notified by the Internal Revenue
Service that such shareholder is subject to backup withholding, such shareholder
must cross out item (2) of the Certification box of the Substitute Form W-9,
unless such shareholder has since been notified by the Internal Revenue Service
that such shareholder is no longer subject to backup withholding. Failure to
provide the information on the Substitute Form W-9 may subject the tendering
shareholder to 31% federal income tax withholding on the payment of the purchase
price of all Shares purchased from such shareholder. If the tendering
shareholder has not been issued a TIN and has applied for one or intends to
apply for one in the near future, such shareholder should write "Applied For" in
the space provided for the TIN in Part I of the Substitute Form W-9, and sign
and date the Substitute Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price to such shareholder until a
TIN is provided to the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND
SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such shareholder's correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is such shareholder's social security
number. If the Depositary is not provided with the correct TIN, the shareholder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such shareholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding of 31%.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a Form W-8, Certificate of Foreign
Status, signed under penalties of perjury, attesting to such individual's exempt
status. Forms of such statements can be obtained from the Depositary. See the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of such shareholder's correct TIN by
completing the form below certifying (a) that the TIN provided on Substitute
Form W-9 is correct (or that such shareholder is awaiting a TIN), and (b) that
(i) such shareholder has not been notified by the Internal Revenue Service that
such shareholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such shareholder that such shareholder is no longer subject to backup
withholding.
<PAGE> 9
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering shareholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the shareholder should write "Applied For" in the space provided for the
TIN in Part 1, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
shareholder until a TIN is provided to the Depositary.
ALL TENDERING SHAREHOLDERS MUST COMPLETE THE FOLLOWING:
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- Taxpayer Identification ------------------------------
FOR ALL ACCOUNTS Number -- Enter taxpayer identification Social Security Number
FORM W-9 number in the box at right. (For most ------------------------------
individuals, this is your social security Employer Identification Number
number. If you do not have a number, see
obtaining a Number in the enclosed
Guidelines.) Certify by signing and dating
below. Note: If the account is in more than
one name, see the chart in the enclosed
Guidelines to determine which number to
give the payer.
----------------------------------------------------------------------------------
DEPARTMENT OF THE PART II -- For Payees Exempt From Backup Withholding, see the enclosed
TREASURY Guidelines and complete as instructed therein.
INTERNAL REVENUE
----------------------------------------------------------------------------------
OR CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
NUMBER (2) I am not subject to backup withholding either because I have not been
PAYER'S REQUEST FOR notified by the Internal Revenue Service (the "IRS") that I am subject to
TAXPAYER backup withholding as a result of failure to report all interest or
IDENTIFICATION NUMBER dividends, or the IRS has notified me that I am no longer subject to backup
("TIN") withholding.
CERTIFICATE INSTRUCTIONS -- You must cross out item(2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (See also instructions in the
enclosed Guidelines.)
Signature _________________________ Date ____________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE
TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
</TABLE>
- --------------------------------------------------------------------------------
The Information Agent for the Offer is:
(logo) MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Offer is:
NEEDHAM & COMPANY, INC.
445 Park Avenue
New York, New York 10022
Call Collect (212) 705-0436
December 20, 1996
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
AMERICAN STUDIOS, INC.
TO
ASI ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PCA INTERNATIONAL, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) if (i) certificates
("Share Certificates") evidencing shares of common stock, par value $.001 per
share (the "Shares"), of American Studios, Inc., a North Carolina corporation
(the "Company"), are not immediately available, (ii) time will not permit all
required documents to reach IBJ Schroder Bank & Trust Company, as Depositary
(the "Depositary"), prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase (as defined below)) or (iii) the procedure for book-entry
transfer cannot be completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand or transmitted by telegram, facsimile
transmission or mail to the Depositary. See Section 2 of the Offer to Purchase.
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or by Overnight Delivery:
P.O. Box 84 (212) 858-2611 One State Street
Bowling Green Station Attn.: Reorganization New York, New York 10004
New York, New York Operations Department Attn.: Securities Processing
10274-0084 Window, Subcellar One
Attn.: Reorganization Confirm Receipt of
Operations Department Notice of Guaranteed
Delivery by Telephone:
(212) 858-2103
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to ASI Acquisition Corp., a North Carolina
corporation (the "Purchaser") and a wholly owned subsidiary of PCA
International, Inc., a North Carolina corporation ("Parent"), upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated December 20,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer"), receipt of each of
which is hereby acknowledged, the number of Shares specified below pursuant to
the guaranteed delivery procedures described in Section 2 of the Offer to
Purchase.
Number of Shares:
- -----------------------------------
Certificate Nos. (If available):
- ------------------------------------------------------
Check one box if Shares will be tendered
by book-entry transfer:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number:
- ----------------------------------
Dated:
- ----------------------------------------------
Name(s) of Record Holder(s):
- ------------------------------------------------------
- ------------------------------------------------------
Please Print
- ------------------------------------------------------
Address
- ------------------------------------------------------
Zip Code
- ------------------------------------------------------
Company Area Code and Tel. No.:
- ------------------------------------------------------
Area Code and Tel. No.:
- ------------------------------------------------------
Signature(s):
- ------------------------------------------------------
- ------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a firm that is a commercial bank, broker, dealer, credit
union, savings association or other entity which is a member in good standing of
the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
hereby (a) represents that the tender of Shares effected hereby complies with
Rule 14e-4 of the Securities Exchange Act of 1934, as amended, and (b)
guarantees delivery to the Depositary, at one of its addresses set forth above,
of Share Certificates evidencing the Shares tendered hereby in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's accounts at The Depository Trust Company or the Philadelphia
Depositary Trust Company, in each case with delivery of a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) with any required
signature guarantees, or an Agent's Message (as defined in Section 2 of the
Offer to Purchase), and any other documents required by the Letter of
Transmittal, within three Nasdaq National Market trading days after the date of
execution of this Notice of Guaranteed Delivery.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and Share
Certificates to the Depositary within the time period shown herein. Failure to
do so could result in financial loss to such Eligible Institution.
<PAGE> 3
<TABLE>
<S> <C>
- ------------------------------------------------- -------------------------------------------------
Name of Firm Authorized Signature
- ------------------------------------------------- -------------------------------------------------
Address Title
- ------------------------------------------------- Name:
Zip Code -----------------------------------------------
- ------------------------------------------------- Please Print
Area Code and Telephone No. Date:
----------------------------------------
</TABLE>
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
NEEDHAM & COMPANY
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AMERICAN STUDIOS, INC.
AT
$2.50 NET PER SHARE
BY
ASI ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PCA INTERNATIONAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, JANUARY 22, 1997, UNLESS THE OFFER IS EXTENDED.
December 20, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been engaged by ASI Acquisition Corp., a North Carolina corporation
(the "Purchaser") and a wholly owned subsidiary of PCA International, Inc., a
North Carolina corporation ("Parent"), to act as Dealer Manager in connection
with the Purchaser's offer to purchase all outstanding shares of common stock,
par value $.001 per share (the "Shares"), of American Studios, Inc., a North
Carolina corporation (the "Company"), at a price of $2.50 per Share, net to the
seller in cash, without interest thereon (the "Offer Price"), upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated December 20,
1996 (the "Offer to Purchase"), and in the related Letter of Transmittal (which,
as amended from time to time, together constitute the "Offer") enclosed
herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER
TO PURCHASE) THAT NUMBER OF SHARES WHICH CONSTITUTES AT LEAST A MAJORITY OF THE
OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE. SEE SECTION
14 OF THE OFFER TO PURCHASE. THE OFFER IS NOT CONDITIONED ON THE RECEIPT OF
FINANCING.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. The Offer to Purchase, dated December 20, 1996;
2. The Letter of Transmittal to be used by holders of Shares in
accepting the Offer and tendering Shares;
<PAGE> 2
3. The Notice of Guaranteed Delivery to be used to accept the Offer if
the certificates evidencing such Shares (the "Share Certificates") are not
immediately available or time will not permit all required documents to
reach the Depositary (as defined in the Offer to Purchase) prior to the
Expiration Date (as defined in the Offer to Purchase) or the procedure for
book-entry transfer cannot be completed on a timely basis;
4. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominees, with
space provided for obtaining such clients' instructions with regard to the
Offer;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. A return envelope addressed to the Depositary.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal and any other required documents should be sent
to the Depositary and certificates representing the tendered Shares should be
delivered, or such Shares should be tendered by book-entry transfer, all in
accordance with the instructions set forth in the Letter of Transmittal and the
Offer to Purchase. Upon the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of any
such extension or amendment), the Purchaser will purchase, by accepting for
payment, and will pay for the Shares validly tendered and not withdrawn prior to
the Expiration Date promptly after the Expiration Date. For purposes of the
Offer, the Purchaser will be deemed to have accepted for payment, and thereby
purchased, tendered Shares as, if and when the Purchaser gives oral or written
notice to the Depositary of the Purchaser's acceptance of such Shares for
payment pursuant to the Offer. In all cases, payment for Shares purchased
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) the Share Certificates or timely confirmation of a book-entry transfer of
such Shares, if such procedure is available, into the Depositary's account at
The Depository Trust Company or the Philadelphia Depositary Trust Company
pursuant to the procedures set forth in Section 2 of the Offer to Purchase, (ii)
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message (as
defined in Section 2 of the Offer to Purchase) and (iii) any other documents
required by the Letter of Transmittal.
The Purchaser will not pay any fees or commissions to any broker or dealer
or any other person (other than the Dealer Manager, the Information Agent and
the Depositary as described in Section 16 of the Offer to Purchase) in
connection with the solicitation of tenders of Shares pursuant to the Offer. The
Purchaser will, however, upon request, reimburse you for customary mailing and
handling expenses incurred by you in forwarding the enclosed materials to your
clients.
The Purchaser will pay any stock transfer taxes incident to the transfer to
it of validly tendered Shares, except as otherwise provided in Instruction 6 of
the Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JANUARY 22, 1997, UNLESS THE OFFER
IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or a facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Depositary, and certificates evidencing the tendered Shares should be delivered
or such Shares should be tendered by book-entry transfer, all in accordance with
the Instructions set forth in the Letter of Transmittal and the Offer to
Purchase.
If holders of Shares wish to tender Shares, but it is impracticable for
them to forward their Share Certificates or other required documents to the
Depositary prior to the Expiration Date or to comply with the Procedures for
book-entry transfer on a timely basis, a tender may be effected by following the
guaranteed delivery procedures specified under Section 2 of the Offer to
Purchase.
<PAGE> 3
Any inquiries you may have with respect to the Offer should be addressed to
Needham & Company, Inc., the Dealer Manager, or MacKenzie Partners, Inc., the
Information Agent, at their respective addresses and telephone numbers set forth
on the back cover page of the Offer to Purchase.
Additional copies of the enclosed materials may be obtained by calling
MacKenzie Partners, Inc., the Information Agent, collect at (212) 929-5500 or
toll-free at (800) 322-2885, from the undersigned, Needham & Company, Inc.,
telephone (212) 705-0436, or from brokers, dealers, commercial banks or trust
companies.
Very truly yours,
Needham & Company, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF PARENT, THE PURCHASER, THE COMPANY, THE
DEPOSITARY, THE INFORMATION AGENT OR THE DEALER MANAGER, OR ANY AFFILIATE OF ANY
OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR
MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER
THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AMERICAN STUDIOS, INC.
AT
$2.50 NET PER SHARE
BY
ASI ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PCA INTERNATIONAL INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK
CITY TIME, ON WEDNESDAY, JANUARY 22, 1997, UNLESS THE OFFER IS EXTENDED.
December 20, 1996
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated December 20,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer") in connection with
the Offer by ASI Acquisition Corp., a North Carolina corporation (the
"Purchaser") and a wholly owned subsidiary of PCA International, Inc., a North
Carolina corporation ("Parent"), to purchase all outstanding shares of common
stock, par value $.001 per share (the "Shares") of American Studios, Inc., a
North Carolina corporation (the "Company"), at a price of $2.50 per Share, net
to the seller in cash, without interest thereon (the "Offer Price"), upon the
terms and subject to the conditions set forth in the Offer to Purchase.
THE MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF SHARES HELD BY
US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE THE HOLDER OF RECORD
OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY
BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY
YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer to Purchase.
Your attention is invited to the following:
1. The tender price is $2.50 per Share, net to the seller in cash,
without interest thereon.
2. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Wednesday, January 22, 1997, unless the Offer is
extended.
3. The Offer is being made for all outstanding Shares.
4. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED
IN THE OFFER TO PURCHASE) THAT NUMBER OF SHARES
<PAGE> 2
WHICH CONSTITUTES AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY
DILUTED BASIS (AS DEFINED IN THE OFFER TO PURCHASE) ON THE DATE OF
PURCHASE. SEE SECTION 14 OF THE OFFER TO PURCHASE.
5. The Offer is not conditioned on the receipt of financing.
6. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal. The Offer is not being made to (nor will tenders be accepted from
or on behalf of) holders of Shares in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. Neither the Purchaser
nor Parent is aware of any jurisdiction in which the making of the Offer or the
acceptance thereof would not be in compliance with the laws of such
jurisdiction. To the extent the Purchaser or Parent becomes aware of any state
law that would limit the class of offerees in the Offer, the Purchaser will
amend the Offer and, depending on the timing of such amendment, if any, will
extend the Offer to provide adequate dissemination of such information to such
holders of shares prior to the expiration of the Offer. In any jurisdiction the
securities, blue sky or other laws of which require the Offer to be made by a
licensed broker or dealer, the Offer is being made on behalf of the Purchaser by
the Dealer Manager or one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified on the instruction form contained in this
letter. Your instructions should be forwarded to us in ample time to permit us
to submit a tender on your behalf prior to the expiration of the Offer.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING SHARES
OF
AMERICAN STUDIOS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated December 20, 1996, and the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer"), in connection with the Offer by ASI Acquisition Corp., a North
Carolina corporation (the "Purchaser") and a wholly owned subsidiary of PCA
International, Inc., a North Carolina corporation ("Parent"), to purchase all
outstanding shares of common stock, par value $.001 per share (the "Shares"), of
American Studios, Inc., a North Carolina corporation (the "Company"), at a price
equal to $2.50 per Share, net to the seller in cash.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or, if no number is indicated below, all Shares) held by you
for the account of the undersigned, upon the terms and subject to the conditions
set forth in the Offer to Purchase.
Number of Shares to be Tendered*
- ------------------------------------------------ Shares
Account Number:
- ---------------------------------
Dated:
- ---------------------------------------
SIGN HERE
Signature(s)
- --------------------------------------------------------------------------------
Please type or print name(s) here
- ----------------------------------------------------------------------------
Please type or print address(es) here
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Area Code and
Telephone Number
- --------------------------------------------------------------------------------
Taxpayer Identification or
Social Security Number(s)
- -------------------------------------------------------------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ---------------------------------------------------------
<C> <S> <C>
1. An individual's account. The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor or
guardian or committee for a incompetent
designated ward, minor, or person(3)
incompetent person
7. a. The usual revocable savings The grantor-
trust account (grantor is trustee(1)
also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under State law
8. Sole proprietorship account The owner(4)
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ---------------------------------------------------------
<C> <S> <C>
9. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- ---------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more, and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE FORM W-9 TO AVOID POSSIBLE ERRONEOUS
BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividends, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING.--If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--If you falsify certifications
or affirmations, you are subject to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE> 1
EXHIBIT 99(a)(7)
FOR IMMEDIATE RELEASE
December 18, 1996
PCA INTERNATIONAL, INC. AND AMERICAN STUDIOS, INC.
EXECUTE DEFINITIVE AGREEMENT FOR PCA TO ACQUIRE ASI AT $2.50 PER SHARE
Matthews, North Carolina, December 18, 1996 - PCA International, Inc. (NASDAQ:
PCAI) and American Studios, Inc. (NASDAQ: AMST) announced today that they have
entered into a definitive agreement on December 17, 1996 under which PCA will
acquire American Studios for $2.50 per share in cash. The total purchase price
offered by PCA for the approximately 21.4 million shares of American Studios
outstanding, plus assumption of debt and capital lease obligations, is
approximately $66 million.
The transaction has been unanimously approved by the Boards of Directors of
both companies. Under the agreement, a subsidiary of PCA will commence a cash
tender offer for all American Studios shares at $2.50 per share. Consummation
of the tender offer will be subject to, among other things, the tender of a
majority of the outstanding shares on a fully diluted basis and the expiration
or termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. The tender offer is to be followed by a merger
pursuant to which each remaining share will be converted into the right to
receive the cash price per share paid in the offer.
PCA also stated that it has entered into agreements with certain members of
management and other stockholders of American Studios pursuant to which such
persons owning an aggregate of approximately 57% of the current outstanding
shares have agreed to tender their shares into PCA's offer. Included in such
amount, such persons owning an aggregate of approximately 46% of the current
outstanding shares have granted PCA an option to purchase such shares under
certain circumstances. In addition, certain members of management of American
Studios have entered into non-complete and employment agreements with PCA to
become effective upon closing of the offer.
NationsBank, N.A., and NationsBanc Capital Markets, Inc., have delivered to PCA
a commitment letter providing for the arrangement and syndication of credit
facilities in an aggregate principal amount of up to $100 million. The credit
facilities will be available to finance the tender offer and merger and to
provide for working capital and general corporate purposes.
The tender offer will be made only pursuant to definitive offering documents,
which will be filed with the Securities and Exchange Commission and mailed to
stockholders of American Studios promptly.
American Studios provides portrait photography services in approximately 2,000
Wal-Mart stores in the United States and Mexico. American Studios operates
approximately 850 permanent studios with traveling portrait promotions
conducted periodically in the remaining
<PAGE> 2
Wal-Mart stores it services. The company also provides traveling fashion
photography services in selected Wal-Mart stores.
PCA International, Inc., provides professional portrait services in 1,577
permanent studios in the United States, Canada, and Puerto Rico. PCA presently
operates 1,376 studios in Kmart stores in the United States and Puerto Rico; 87
studios in Wal-Mart stores in the United States, Canada, and Puerto Rico; and
114 studios in PETsMART stores in the United States and Canada.
CONTACTS:
Bruce A. Fisher Shawn W. Poole
Senior Vice President Executive Vice President
Chief Financial Officer Chief Financial Officer
PCA International, Inc. American Studios, Inc.
(704) 847-8011, Ext 2404 (704) 588-4351, Ext 5310
<PAGE> 1
EXHIBIT 99(a)(8)
SUMMARY ADVERTISEMENT
This announcement is neither an offer to purchase nor a solicitation
of an offer to sell Shares. The Offer is made solely by the Offer to Purchase,
dated December 20, 1996, and the related Letter of Transmittal and is not being
made to (nor will tenders be accepted from or on behalf of) holders of Shares
in any jurisdiction in which the Offer or the acceptance thereof would not be
in compliance with the securities laws of such jurisdiction. In those
jurisdictions where securities, blue sky or other laws require the Offer to be
made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of ASI Acquisition Corp. by Needham & Company, Inc. (the "Dealer
Manager") or one or more registered brokers or dealers that are licensed under
the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AMERICAN STUDIOS, INC.
AT $2.50 NET PER SHARE
BY
ASI ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PCA INTERNATIONAL, INC.
ASI Acquisition Corp., a North Carolina corporation (the "Purchaser")
and a wholly owned subsidiary of PCA International, Inc., a North Carolina
corporation ("Parent"), is offering to purchase all outstanding shares of
Common Stock, par value $0.001 per share (the "Shares"), of American Studios,
Inc., a North Carolina corporation (the "Company"), at a price of $2.50 per
Share, net to the seller in cash, without interest thereon (the "Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated December 20, 1996 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which, as amended from time to time, together constitute
the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, JANUARY 22, 1997, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in the Offer
<PAGE> 2
to Purchase) that number of Shares which constitutes at least a majority of the
outstanding Shares on a fully diluted basis on the date of purchase. See
Section 14 of the Offer to Purchase. The Offer is not conditioned on the
receipt of financing.
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of December 17, 1996 (the "Merger Agreement"), by and among the
Company, Parent and the Purchaser. The Merger Agreement provides that, among
other things, as soon as practicable after the purchase of Shares pursuant to
the Offer and the satisfaction or waiver of the other conditions set forth in
the Merger Agreement and in accordance with the relevant provisions of the
North Carolina Business Corporation Act, the Purchaser will be merged with and
into the Company (the "Merger"). At the effective time of the Merger (the
"Effective Time"), each outstanding Share (other than Shares held in the
treasury of the Company, owned by Parent, the Purchaser or any subsidiary of
Parent or held by shareholders who perfect their appraisal rights under North
Carolina law) will be converted into the right to receive $2.50 in cash or any
higher price per Share paid in the Offer, without interest. See Section 12 of
the Offer to Purchase.
Parent and the Purchaser entered into Stock Agreements, each dated as
of December 17, 1996 (the "Stock Agreements"), with several shareholders
(including certain members of management) who beneficially own approximately
57% of the Company's currently outstanding Shares (the "Designated
Shareholders"). Pursuant to the Stock Agreements each Designated Shareholder
has agreed to validly tender pursuant to the Offer and not withdraw all Shares
which are beneficially owned by the Designated Shareholder prior to the
Expiration Date. Certain of the Stock Agreements with such shareholders who
beneficially own 46% of the Company's currently outstanding Shares provide
that, under certain circumstances, Parent or the Purchaser has the right to
acquire from the Designated Shareholder, at the Offer Price, all of the
Designated Shareholder's Shares. See Section 12 of the Offer to Purchase.
The purpose of the Offer, the Merger, the Merger Agreement and the
Stock Agreements is to enable Parent to acquire control of, and the entire
equity interest in, the Company. Upon consummation of the Merger, the Company
will become a subsidiary of Parent.
<PAGE> 3
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
OFFER AND THE MERGER, HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER
ARE FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares validly tendered and not
properly withdrawn as, if and when the Purchaser gives oral or written notice
to the Depositary (as defined in the Offer to Purchase) of the Purchaser's
acceptance of such Shares for payment pursuant to the Offer. Upon the terms
and subject to the conditions of the Offer, payment for Shares accepted for
payment pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which will act as agent for tendering
shareholders for the purpose of receiving payments from the Purchaser and
transmitting such payments to validly tendering shareholders. Under no
circumstances will interest on the purchase price for Shares be paid by the
Purchaser, regardless of any extension of the Offer or delay in making such
payment. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) the certificates evidencing such Shares (the "Share Certificates"), or
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities (as defined
in Section 2 of the Offer to Purchase) pursuant to the procedures set forth in
Section 2 of the Offer to Purchase, (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees or an Agent's Message (as defined in Section 2 of the
Offer to Purchase) and (iii) any other documents required by the Letter of
Transmittal. The Purchaser expressly reserves the right, in its sole
discretion, at any time or from time to time, subject to the terms of the
Merger Agreement to extend the period of time during which the Offer is open,
including the occurrence of any condition specified in Section 14 of the Offer
to Purchase, by giving oral or written notice of such extension to the
Depositary. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer, subject to the rights of a
tendering shareholder to withdraw his Shares. Any such extension will be
followed as promptly as practicable by public announcement thereof, such
announcement to be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date of the Offer.
<PAGE> 4
Tenders of Shares made pursuant to the Offer are irrevocable except
that such Shares may be withdrawn at any time prior to 12:00 Midnight, New York
City time, on Wednesday, January 22, 1997 (or, if the period of time for which
the Offer is extended, the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire) and, unless theretofore accepted for
payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after February 18, 1997. For a withdrawal to be effective, a written,
telegraphic or facsimile transmission notice of withdrawal must be timely
received by the Depositary at one of its addresses set forth on the back cover
of the Offer to Purchase. Any such notice of withdrawal must specify the name
of the person who tendered the Shares to be withdrawn, the number of Shares to
be withdrawn and the name of the registered holder of such Shares, if different
from that of the person who tendered such Shares. If Share Certificates
evidencing Shares to be withdrawn have been delivered or otherwise identified to
the Depositary, then, prior to the physical release of such Share Certificates,
the serial numbers shown on such Share Certificates must be submitted to the
Depositary and the signature(s) on the notice of withdrawal must be guaranteed
by an Eligible Institution (as defined in Section 2 of the Offer to Purchase),
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 2 of the Offer to Purchase, any
notice of withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided to the Purchaser its list of shareholders and
security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal and other relevant materials will be mailed to record holders of
Shares and furnished to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
shareholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
<PAGE> 5
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS
MADE WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Dealer
Manager or the Information Agent at their respective addresses and telephone
numbers as set forth below. The Purchaser will not pay any fees or commissions
to any broker or dealer or to any other person (other than the Dealer Manager
and the Information Agent) for soliciting tenders of Shares pursuant to the
Offer. Additional copies of the Offer to Purchase, the Letter of Transmittal
and all other tender offer materials may be obtained from the Information Agent
or the Dealer Manager or from brokers, dealers, commercial banks and trust
companies.
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
NEEDHAM & COMPANY, INC.
445 Park Avenue
New York, New York 10022
Call Collect (212) 705-0436
December 20, 1996
<PAGE> 1
EXHIBIT 99(a)(9)
[PCA INTERNATIONAL, INC. LETTERHEAD]
FOR IMMEDIATE RELEASE
December 20, 1996
PCA INTERNATIONAL, INC. COMMENCES $2.50 PER SHARE CASH
TENDER OFFER FOR AMERICAN STUDIOS, INC.
Matthews, North Carolina, December 20, 1996 -- PCA International, Inc.
(Nasdaq: PCAI) announced today that ASI Acquisition Corp., its wholly owned
subsidiary, has commenced a cash tender offer for all outstanding shares of
common stock of American Studios, Inc. (Nasdaq: AMST) at $2.50 per share. The
offer is being made pursuant to the previously announced merger agreement
between PCA and American Studios. The tender offer will be subject to, among
other things, the tender of a majority of the shares outstanding on a fully
diluted basis and the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. PCA previously obtained
the agreement of certain members of management and principal shareholders of
American Studios owning an aggregate of approximately 57% of the currently
outstanding shares to tender their shares into PCA's offer. Included in such
amount, such shareholders owning an aggregate of approximately 46% of the
currently outstanding shares have granted PCA an option to purchase such shares
under certain circumstances. The offer and withdrawal rights are scheduled to
expire at 12:00 midnight on January 22, 1997. Needham & Company, Inc. is
acting as Dealer Manager and MacKenzie Partners, Inc. is acting as the
Information Agent in connection with the offer.
CONTACTS:
Information Agent for the Offer is: Dealer Manager for the Offer is:
- ----------------------------------- --------------------------------
MacKenzie Partners, Inc. Needham & Company, Inc.
(800) 322-2885 (toll free) (212) 705-0436 (call collect)
(212) 929-5500 (call collect)
-- END --
<PAGE> 1
EXHIBIT 99(b)(1)
December 16, 1996
Mr. John Grosso
Chief Executive Officer
PCA International, Inc.
815 Matthews-Mint Hill Road
Matthews, NC 28105
RE: Acquisition Financing
Dear Mr. Grosso:
You have advised us that PCA International, Inc. (the "Borrower") intends to
make an offer (the "Offer") to acquire American Studios, Inc. (the "Target
Company") (hereinafter the acquisition of Target Company may be referred to as
the "Acquisition"). The Acquisition will be structured as an initial tender
offer (the "Tender Offer"), followed by a merger (the "Merger"). You have
advised us that $80 million in senior and subordinated tender facilities will
be required to finance the Tender Offer and to provide for interim working
capital and general corporate purposes and that $100 million in permanent
senior and subordinated debt financing will be required to refinance the tender
facilities, to close the Merger, to pay the costs and expenses related to the
Merger and to provide for ongoing general corporate purposes after completion
of the Merger and that no external financing other than the financing described
herein will be required in connection with the Merger.
In connection with the foregoing, NationsBank, N.A. ("NationsBank" or the
"Agent") is pleased to advise you of its commitment to provide the full
principal amount of the Credit Facilities described in the term sheet attached
hereto as Annex I (the "Term Sheet"). NationsBanc Capital Markets, Inc.
("NCMI") is pleased to advise you of its commitment, as Arranger and
Syndication Agent for the Credit Facilities, to form a syndicate of financial
institutions (the "Lenders") reasonably acceptable to you for the Credit
Facilities. All capitalized terms used and not otherwise defined herein shall
have the meanings set forth in the Term Sheet.
The commitments of NationsBank and NCMI hereunder are subject to the
satisfaction of each of the following conditions precedent in a manner
acceptable to NationsBank and NCMI in their sole discretion:
(a) each of the terms and conditions set forth herein;
<PAGE> 2
PCA International, Inc.
December 16, 1996
Page 2
(b) each of the terms and conditions set forth in the Term Sheet;
(c) execution by the Borrower, the Target Company and/or other
appropriate parties of the definitive merger or purchase agreement and
other related documentation relating to the Acquisition, in form and
substance satisfactory to NationsBank and NCMI;
(d) execution by the Borrower, NationsBank and NCMI of a fee letter
related to the Credit Facilities;
(e) the negotiation, execution and delivery of definitive
documentation with respect to the Credit Facilities consistent with
the Term Sheet and otherwise satisfactory to NationsBank and NCMI; and
(f) there not having occurred and being continuing since the date
hereof a material adverse change in the market for syndicated bank
credit facilities or a material disruption of, or a material adverse
change in, financial, banking or capital market conditions, in each
case as determined by NationsBank and NCMI in their sole discretion.
NationsBank will act as Agent for the Credit Facilities and NCMI will act as
Arranger and Syndication Agent for the Credit Facilities. No additional agents
will be appointed without the prior approval of NationsBank and NCMI.
Furthermore, the commitments of NationsBank and NCMI hereunder are based upon
the financial and other information regarding the Borrower, the Target Company
and their respective subsidiaries previously provided to NationsBank and NCMI
and are subject to the condition, among others, that there shall not have
occurred after the date of such information, in the opinion of NationsBank and
NCMI, any material adverse change in the business, assets, liabilities (actual
or contingent), operations, condition (financial or otherwise) or prospects of
the Borrower, the Target Company and their subsidiaries taken as a whole. If
the continuing review by NationsBank and NCMI of the Borrower or the Target
Company discloses information relating to conditions or events not previously
disclosed to NationsBank and NCMI or relating to new information or additional
developments concerning conditions or events previously disclosed to
NationsBank and NCMI which NationsBank and NCMI in their sole discretion
believe may have a material adverse effect on the condition (financial or
otherwise), assets, properties, business, operations or prospects of the
Borrower or the Target Company, NationsBank and NCMI may, in its sole
discretion, suggest alternative financing amounts or structures that ensure
adequate protection for the Lenders or decline to participate in the proposed
financing.
You agree to actively assist NationsBank and NCMI in achieving a syndication of
the Credit Facilities that is satisfactory to NationsBank, NCMI and you. In the
event that such syndication cannot be achieved in a manner satisfactory to
NationsBank and NCMI under the structure
<PAGE> 3
PCA International, Inc.
December 16, 1996
Page 3
outlined in the Term Sheet you agree to cooperate with NationsBank and NCMI in
developing an alternative structure that will permit a satisfactory syndication
of the Credit Facilities (but without effect on the obligations of NationsBank
hereunder and without any obligation to agree to changes in the structure that
would be materially adverse to the interests of the Borrower). Syndication of
the Credit Facilities will be accomplished by a variety of means, including
direct contact during the syndication between senior management and advisors of
the Borrower and the Target Company, and the proposed Lenders. To assist
NationsBank and NCMI in the syndication efforts, you hereby agree to (a)
provide and cause your advisors to provide NationsBank and NCMI and the other
Lenders upon request with all information reasonably deemed necessary by
NationsBank and NCMI to complete syndication, including but not limited to
information and evaluations prepared by the Borrower and the Target Company and
their advisors, or on their behalf, relating to the Acquisition, (b) assist
NationsBank and NCMI upon their reasonable request in the preparation of an
Information Memorandum to be used in connection with the syndication of the
Credit Facilities and (c) otherwise assist NationsBank and NCMI in their
syndication efforts, including by making available officers and advisors of the
Borrower and the Target Company and their subsidiaries from time to time to
attend and make presentations regarding the business and prospects of the
Borrower and the Target Company and their subsidiaries, as appropriate, at a
meeting or meetings of prospective Lenders. You further agree to refrain from
engaging in any additional financings for the Target Company (except as
described in this letter) during such syndication process unless otherwise
agreed to by NationsBank and NCMI.
It is understood and agreed that NationsBank and NCMI, after consultation with
you, will manage and control all aspects of the syndication, including
decisions as to the selection of proposed Lenders and any titles offered to
proposed Lenders, when commitments will be accepted and the final allocations
of the commitments among the Lenders. It is understood that no Lender
participating in the Credit Facilities will receive compensation from you
outside the terms contained herein and in the Term Sheet in order to obtain its
commitment. It is also understood and agreed that the amount and distribution
of the fees among the Lenders will be at the sole discretion of NationsBank and
NCMI and that any syndication prior to execution of definitive documentation
will reduce the commitment of NationsBank.
You hereby represent, warrant and covenant that (i) all information, other than
Projections (as defined below), which has been or is hereafter made available
to NationsBank and NCMI or the Lenders by you or any of your representatives in
connection with the transactions contemplated hereby ("Information") is and
will be complete and correct in all material respects and does not and will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained therein not misleading and (ii)
all financial projections concerning the Borrower and the Target Company that
have been or are hereafter made available to NationsBank and NCMI or the
Lenders by you or any of your representatives (the "Projections") have been or
will be prepared in good faith based upon reasonable
<PAGE> 4
PCA International, Inc.
December 16, 1996
Page 4
assumptions at the time that the Projections were made. You agree to furnish
us with such Information and Projections as we may reasonably request and to
supplement the Information and the Projections from time to time until the
closing date for the Credit Facilities so that the representation and warranty
in the preceding sentence is correct on the such date. In arranging and
syndicating the Credit Facilities, NationsBank and NCMI will be using and
relying on the Information and the Projections without independent verification
thereof.
By executing this letter agreement, you agree to reimburse NationsBank and NCMI
from time to time on demand for all reasonable out-of-pocket fees and expenses
(including, but not limited to, the reasonable fees, disbursements and other
charges of Moore & Van Allen, PLLC, as counsel to NationsBank and the other
Lenders) incurred in connection with the Credit Facilities and the preparation
of the definitive documentation for the Credit Facilities and the other
transactions contemplated hereby.
In the event that NationsBank or NCMI becomes involved in any capacity in any
action, proceeding or investigation in connection with any matter contemplated
by this letter, the Borrower will reimburse NationsBank and NCMI for their
legal and other expenses (including the cost of any investigation and
preparation) as they are incurred by NationsBank or NCMI. The Borrower also
agrees to indemnify and hold harmless NationsBank, NCMI and their affiliates
and their respective directors, officers, employees and agents (the
"Indemnified Parties") from and against any and all losses, claims, damages and
liabilities, joint or several, related to or arising out of any matters
contemplated by this letter (including specifically without limitation the
Offer and the Acquisition) unless and only to the extent that it shall be
finally judicially determined that such losses, claims, damages or liabilities
resulted primarily from the gross negligence or willful misconduct of
NationsBank or NCMI or any other Indemnified Party.
The provisions of the immediately preceding two paragraphs shall remain in full
force and effect regardless of whether definitive financing documentation shall
be executed and delivered and notwithstanding the termination of this letter
agreement or the commitment of NationsBank and NCMI hereunder.
As described herein and in the Term Sheet, NCMI will act as Arranger and
Syndication Agent for the Credit Facilities. NationsBank reserves the right to
allocate, in whole or in part, to NCMI certain fees payable to NationsBank in
such manner as NationsBank and NCMI agree in their sole discretion. You
acknowledge and agree that NationsBank may share with any of its affiliates
(including specifically NCMI) any information relating to the Credit
Facilities, the Borrower, the Target Company, and their subsidiaries and
affiliates.
This letter agreement may not be assigned by the Borrower without the prior
written consent of NationsBank and NCMI.
<PAGE> 5
PCA International, Inc.
December 16, 1996
Page 5
If you are in agreement with the foregoing, please execute and return the
enclosed copy of this letter agreement and the related fee letter no later than
the close of business on December 17, 1996. This letter agreement will become
effective upon your delivery to us of executed counterparts of this letter
agreement and the fee letter and, without limiting the more specific terms
hereof and of the Term Sheet and fee letter, you agree upon acceptance of this
commitment to pay the fees on the date and in the amounts set forth in the Term
Sheet and the fee letter. This commitment shall terminate if not so accepted
by you prior to that time. Following acceptance by you, this commitment will
terminate on (i) March 31, 1997 unless the Senior Tender Offer Facility and the
Senior Subordinated Facility are closed by such time and (ii) if the Senior
Tender Offer Facility and the Senior Subordinated Facility are closed, on June
30, 1997 unless the Permanent Facilities are closed by such time.
Except as required by applicable law, this letter and the contents hereof shall
not be disclosed by you to any third party (including the Target Company)
without the prior consent of NationsBank and NCMI, other than to your
attorneys, financial advisors and accountants, in each case to the extent
necessary in your reasonable judgment; provided, however, it is understood and
agreed that, after acceptance of this letter by you by execution in the space
provided below, you may disclose the terms of this letter (but not the related
fee letter) to the Target Company in connection with the Offer. Without
limiting the foregoing, in the event that you disclose the contents of this
letter in contravention of the preceding sentence, you shall be deemed to have
accepted the terms of this letter and the related fee letter.
This letter may be executed in counterparts which, taken together, shall
constitute an original. This letter, together with the Term Sheet and fee
letter, embodies the entire agreement and understanding among NationsBank, NCMI
and the Borrower with respect to the specific matters set forth herein and
supersedes all prior agreements and understandings relating to the subject
matter hereof. No party has been authorized by NationsBank or NCMI to make any
oral or written statements inconsistent with this letter. THIS LETTER SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
Very truly yours,
NATIONSBANK, N.A.
By:
-----------------------------------------
Title:
--------------------------------------
NATIONSBANC CAPITAL MARKETS, INC.
<PAGE> 6
PCA International, Inc.
December 16, 1996
Page 6
By:
----------------------------------
Title:
-------------------------------
ACCEPTED AND AGREED TO:
PCA INTERNATIONAL, INC.
By:
----------------------------------------
Title:
-------------------------------------
Date:
--------------------------------------
<PAGE> 1
EXHIBIT 99(c)(1)
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among
PCA INTERNATIONAL, INC.,
ASI ACQUISITION CORP.,
AND
AMERICAN STUDIOS, INC.
dated as of
December 17, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PAGE
<TABLE>
<S> <C>
ARTICLE I.....................................................................1
THE OFFER AND MERGER.........................................................1
Section 1.1 The Offer....................................................1
Section 1.2 Company Actions..............................................3
Section 1.3 Directors....................................................4
Section 1.4 The Merger...................................................5
Section 1.5 Effective Time...............................................5
Section 1.6 Closing......................................................6
Section 1.7 Directors and Officers of the Surviving Corporation..........6
Section 1.8 Shareholders' Meeting........................................6
Section 1.9 Merger Without Meeting of Shareholders.......................7
ARTICLE II....................................................................7
CONVERSION OF SECURITIES.....................................................7
Section 2.1 Conversion of Capital Stock..................................7
Section 2.2 Exchange of Certificates.....................................7
Section 2.3 Dissenters' Rights...........................................9
Section 2.4 Transfer of Shares After the Effective Time..................9
Section 2.5 Company Plans................................................9
ARTICLE III..................................................................10
REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................10
Section 3.1 Organization................................................10
Section 3.2 Capitalization..............................................11
Section 3.3 Authorization; Validity of Agreement; Company Action........12
Section 3.4 Consents and Approvals; No Violations.......................12
Section 3.5 SEC Reports and Financial Statements........................13
Section 3.6 Absence of Certain Changes..................................13
Section 3.7 No Undisclosed Liabilities..................................14
Section 3.8 Litigation..................................................14
Section 3.9 Employee Benefit Plans; ERISA...............................14
Section 3.10 Information in Proxy Statement..............................15
Section 3.11 No Default; Compliance with Applicable Laws.................16
Section 3.12 Licenses; Intellectual Property.............................16
Section 3.13 Taxes.......................................................17
Section 3.14 Insurance...................................................19
Section 3.15 Contracts...................................................19
Section 3.16 Related Party Transactions..................................19
Section 3.17 Real Property...............................................20
Section 3.18 Vote Required...............................................20
ARTICLE IV...................................................................20
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER..................20
Section 4.1 Organization................................................20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 4.2 Authorization; Validity of Agreement; Necessary Action.......21
Section 4.3 Consents and Approvals; No Violations........................21
Section 4.4 Information in Proxy Statement...............................21
Section 4.5 Litigation...................................................22
Section 4.6 Financing Commitment.........................................22
Section 4.7 Fraudulent Conveyance........................................22
ARTICLE V.....................................................................22
COVENANTS....................................................................22
Section 5.1 Interim Operations of the Company............................22
Section 5.2 Access; Confidentiality......................................24
Section 5.3 Consents and Approvals.......................................24
Section 5.4 No Solicitation..............................................25
Section 5.5 Brokers or Finders...........................................25
Section 5.6 Additional Agreements........................................26
Section 5.7 Publicity....................................................26
Section 5.8 Notification of Certain Matters..............................26
Section 5.9 Directors' and Officers' Insurance and Indemnification.......26
Section 5.10 Consummation of Merger.......................................28
Section 5.11 Employee Benefit Plans.......................................28
ARTICLE VI....................................................................28
CONDITIONS...................................................................28
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger...28
Section 6.2 Conditions to Parent's and the Purchaser's Obligations to
Effect the Merger............................................29
ARTICLE VII.................................................................. 29
TERMINATION................................................................. 29
Section 7.1 Termination..................................................29
Section 7.2 Effect of Termination........................................31
ARTICLE VIII..................................................................31
MISCELLANEOUS................................................................31
Section 8.1 Fees and Expenses............................................31
Section 8.2 Amendment and Modification...................................32
Section 8.3 Nonsurvival of Representations and Warranties................32
Section 8.4 Notices......................................................32
Section 8.5 Interpretation...............................................33
Section 8.6 Counterparts.................................................34
Section 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership...................................................34
Section 8.8 Severability.................................................34
Section 8.9 Governing Law................................................34
Section 8.10 Assignment...................................................34
CERTAIN CONDITIONS OF THE OFFER..........................................Annex A
</TABLE>
<PAGE> 4
Index of Defined Terms
<TABLE>
Defined Term Section No.
- ------------ -----------
<S> <C>
Agreement ................................................ Recitals
Agreements ............................................... 3.4
Acceleration Time ........................................ 2.5
Acquisition Proposal ..................................... 5.4
Appointment Date. ........................................ 5.1
Articles of Incorporation ................................ 1.3(b)
Benefit Plans ............................................ 3.9(a)
Bylaws ................................................... 1.3(b)
Certificates ............................................. 2.2(b)
Closing .................................................. 1.6
Closing Date ............................................. 1.6
Code ..................................................... 3.9(b)
Company .................................................. Recitals
Company SEC Documents .................................... 3.5
Confidentiality Agreement................................. 5.2
Director Options ......................................... 2.5(a)
Dissenting Shareholders .................................. 2.1(c)
D&O Insurance ............................................ 5.10(b)
Effective Time ........................................... 1.5
Employee Option .......................................... 2.5(a)
Employee Option Plans .................................... 2.5(a)
ERISA .................................................... 3.9(a)
ERISA Affiliate .......................................... 3.9(a)
Exchange Act ............................................. 1.1(a)
GAAP ..................................................... 3.5
Governmental Entity ...................................... 3.4
HSR Act .................................................. 3.4
Indemnified Party ........................................ 5.9(a)
Intellectual Property .................................... 3.12
Licenses ................................................. 3.12
Merger ................................................... 1.4
Merger Consideration ..................................... 2.1(c)
Minimum Condition ........................................ 1.1(a)
1995 Financial Statements ................................ 3.5
1995 10-K ................................................ 3.5
NCBCA .................................................... 1.2(a)
Offer .................................................... 1.1(a)
Offer Documents .......................................... 1.1(b)
Offer Price .............................................. 1.1(a)
Offer to Purchase ........................................ 1.1(a)
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Option Plans .............................................. 2.5(a)
Options ................................................... 2.5(a)
Parent .................................................... Recitals
Paying Agent .............................................. 2.2(a)
Preferred Stock ........................................... 3.2(a)
Proxy Statement ........................................... 1.8(a)
Purchaser ................................................. Recitals
Purchaser Common Stock .................................... 2.1
Schedule 14D-1 ............................................ 1.1(b)
Schedule 14D-9 ............................................ 1.2(b)
SEC ....................................................... 1.1(b)
SEC Documents ............................................. 3.5
Secretary of State ........................................ 1.5
Securities Act ............................................ 3.5
September 1996 10-Q ....................................... 3.5
Service ................................................... 3.9(b)
Shares .................................................... 1.1(a)
Special Meeting ........................................... 1.8(a)
Stock Agreements .......................................... Recitals
Subsidiary ................................................ 3.1
Surviving Corporation ..................................... 1.4
Taxes ..................................................... 3.13(c)
Tax Return ................................................ 3.13(c)
Trade Secrets ............................................. 3.12
Transactions .............................................. 1.2(a)
Voting Debt ............................................... 3.2(a)
</TABLE>
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of December 17,
1996, by and among PCA International, Inc., a North Carolina corporation
("Parent"), ASI Acquisition Corp., a North Carolina corporation and a wholly
owned subsidiary of Parent (the "Purchaser"), and American Studios, Inc., a
North Carolina corporation (the "Company").
WHEREAS, the Board of Directors of each of Parent, the Purchaser and the
Company has approved, and deems it advisable and in the best interests of its
respective shareholders to consummate, the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein the
parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. (a) As promptly as practicable (but in no event
later than five business days after the public announcement of the execution
hereof), the Purchaser shall commence (within the meaning of Rule 14d-2 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) a tender
offer (the "Offer") for all of the outstanding shares of Common Stock, par
value $.001 per share (the "Shares"), of the Company at a price of $2.50 per
Share, net to the seller in cash (such price, or such higher price per Share as
may be paid in the Offer, being referred to herein as the "Offer Price"),
subject to there being validly tendered and not withdrawn prior to the
expiration of the Offer, that number of Shares which represents at least a
majority of the Shares outstanding on a fully diluted basis (the "Minimum
Condition") and to the other conditions set forth in Annex A hereto. The
obligations of the Purchaser to commence the Offer and to accept for payment
and to pay for any Shares validly tendered on or prior to the expiration of the
Offer and not withdrawn shall be subject only to the Minimum Condition and the
other conditions set forth in Annex A hereto. The Offer shall be made by means
of an offer to purchase (the "Offer to Purchase") containing the terms set
forth in this Agreement, the Minimum Condition and the other conditions set
forth in Annex A hereto. The Purchaser shall not amend or waive the Minimum
Condition and shall not decrease the Offer Price or decrease the number of
Shares sought, change the form of consideration payable in the Offer, or modify
or change any of the conditions set forth in Annex A hereto without the written
consent of the Company (such consent to be authorized by the Board of Directors
of the Company or a duly authorized committee thereof), provided, however, that
if on the initial
<PAGE> 7
scheduled expiration date of the Offer, which shall be 20 business days after
the date the Offer is commenced, or on any later scheduled expiration date, all
conditions to the Offer shall not have been satisfied or waived, the Purchaser
may, in its sole discretion, extend the expiration date for a period of not
greater than 20 business days, provided further that the expiration date shall
not be extended beyond March 31, 1997 without the consent of the Company (such
consent to be authorized by the Board of Directors of the Company or a duly
authorized committee thereof). In addition, the Offer Price may be increased,
and the Offer may be extended, but not beyond March 31, 1997, but only to the
extent required by law in connection with such increase in each case without
the consent of the Company. The Purchaser shall, on the terms and subject to
the prior satisfaction or waiver of the Minimum Condition and the other
conditions set forth in Annex A hereto, as the same may be amended in
compliance with the terms hereof, accept for payment and pay for Shares
tendered as soon as it is legally permitted to do so under applicable law on
any scheduled expiration date; provided, however, that if, immediately prior to
such expiration date of the Offer, the Shares tendered and not withdrawn
pursuant to the Offer equal less than 90% of the outstanding Shares, the
Purchaser may extend, but not beyond March 31, 1997, the Offer for a period not
to exceed twenty business days, notwithstanding that all conditions to the
Offer are satisfied as of such expiration date of the Offer.
(b) As soon as practicable on the date the Offer is commenced, Parent and
the Purchaser shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will
include, as exhibits, the Offer to Purchase and a form of letter of transmittal
and summary advertisement (collectively, together with any amendments and
supplements thereto, the "Offer Documents"). The Offer Documents will comply
in all material respects with the provisions of applicable federal securities
laws and, on the date filed with the SEC and on the date first published, sent
or given to the Company's shareholders, shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by Parent or the Purchaser with respect to information
furnished by the Company for inclusion in the Offer Documents. The information
supplied by the Company for inclusion in the Offer Documents and by Parent or
the Purchaser for inclusion in the Schedule 14D-9 (as hereinafter defined) will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of Parent and the Purchaser will take all steps necessary
to cause the Offer Documents to be filed with the SEC and to be disseminated to
holders of the Shares, in each case as and to the extent required by applicable
federal securities laws. Each of Parent and the Purchaser, on the one hand,
and the Company, on the other hand, will promptly correct any information
provided by it for use in the Offer Documents if and to the extent that it
shall have become false and misleading in any material respect and the
Purchaser will take all steps necessary to cause the Offer Documents as so
corrected to be filed with the SEC and to be disseminated to holders of the
Shares, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given the opportunity to
review the Schedule 14D-1 within a reasonable time before it is
2
<PAGE> 8
filed with the SEC and Purchaser shall reasonably consider any comments
received by it from the Company or its counsel within a reasonable time prior
to filing the Schedule 14D-1 with the SEC. In addition, Parent and the
Purchaser will provide the Company and its counsel in writing with any
comments, whether written or oral, Parent, the Purchaser or their counsel may
receive from time to time from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided to the Purchaser on a
timely basis the funds necessary to accept for payment and to pay for any
Shares for which the Purchaser becomes obligated to pay pursuant to the Offer.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors, at a meeting duly called and held, has
unanimously (i) determined that each of the Agreement, the Offer and the Merger
(as defined in Section 1.4) are fair to and in the best interests of the
shareholders of the Company, (ii) approved this Agreement and the transactions
contemplated hereby, including the Offer and the Merger (collectively, the
"Transactions"), and (iii) resolved to recommend that the shareholders of the
Company accept the Offer, tender their Shares thereunder to the Purchaser and
approve and adopt this Agreement and the Merger; provided, that such
recommendation may be withdrawn, modified or amended if the Board of Directors
determines, only after receipt of advice from independent legal counsel,
failure to withdraw, modify or amend such recommendation could result in the
Board of Directors violating its fiduciary duties to the Company's shareholders
under applicable law. The Company represents that Chapters 55-9 and 55-9A of
the North Carolina Business Corporation Act (the "NCBCA") are inapplicable to
the Company, the Offer, the Merger and the Stock Agreements.
(b) Concurrently with the commencement of the Offer, the Company shall
file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9
(together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-9") which shall, subject to the fiduciary
duties of the Company's directors under applicable law and to the provisions of
this Agreement, contain the recommendation referred to in clause (iii) of
Section 1.2(a) hereof. The Schedule 14D-9 will comply in all material respects
with the provisions of applicable federal securities laws and, on the date
filed with the SEC and on the date first published, sent or given to the
Company's shareholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information furnished by
Parent or the Purchaser for inclusion in the Schedule 14D-9. The Company
further agrees to take all steps necessary to cause the Schedule 14D-9 to be
disseminated to holders of the Shares, as and to the extent required by
applicable federal securities laws. Each of the Company, on the one hand, and
Parent and the Purchaser, on the other hand, agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false and misleading in any material respect
3
<PAGE> 9
and the Company further agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated
to holders of the Shares, in each case as and to the extent required by
applicable federal securities laws. Parent and its counsel shall be given the
opportunity to review the Schedule 14D-9 within a reasonable time before it is
filed with the SEC and the Company shall reasonably consider any comments
received by it from Parent or its counsel within a reasonable time prior to
filing the Schedule 14D-9 with the SEC. In addition, the Company agrees to
provide Parent, the Purchaser and their counsel with any comments, whether
written or oral, that the Company or its counsel may receive from time to time
from the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments or other communications.
(c) In connection with the Offer, the Company will promptly furnish or
cause to be furnished to the Purchaser mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of all recordholders of the Shares as of a recent date, and shall
furnish the Purchaser with such additional information (including, but not
limited to, updated lists of holders of the Shares and their addresses, mailing
labels and lists of security positions) and assistance as the Purchaser or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of the Shares.
Section 1.3 Directors.
(a) Promptly upon the purchase of and payment for any Shares pursuant to
this Agreement by Parent or any of its subsidiaries which represents at least a
majority of the outstanding Shares (on a fully diluted basis), Parent shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as is equal to the product of
the total number of directors on such Board (giving effect to the directors
designated by Parent pursuant to this sentence) multiplied by the percentage
that the number of Shares so accepted for payment bears to the total number of
Shares then outstanding. In furtherance thereof, the Company shall, upon
request of the Purchaser, use its best efforts promptly either to increase the
size of its Board of Directors or secure the resignations of such number of its
incumbent directors, or both, as is necessary to enable Parent's designees to
be so elected to the Company's Board, and shall take all actions available to
the Company to cause Parent's designees to be so elected. At such time, the
Company shall also cause persons designated by Parent to constitute at least
the same percentage (rounded up to the next whole number) as is on the
Company's Board of Directors of (i) each committee of the Company's Board of
Directors, (ii) each board of directors (or similar body) of each Subsidiary
(as defined in Section 3.1) of the Company and (iii) each committee (or similar
body) of each such board. Notwithstanding the foregoing, after such purchase
and payment until the Effective Time (as defined in Section 1.5 hereof), the
Company shall use all reasonable efforts to have at least two members of the
Board of Directors who are neither officers of Parent nor designees,
shareholders or affiliates of Parent and Parent and Purchaser shall take no
action to prevent or inhibit the foregoing. The Company shall promptly take
all actions required pursuant to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder in order to fulfill its obligations under this
Section 1.3(a), including mailing to shareholders the information required by
such Section 14(f) and Rule 14f-1 as is necessary to enable Parent's designees
to be elected to the Company's Board
4
<PAGE> 10
of Directors. Parent or the Purchaser will supply the Company any information
with respect to either of them and their nominees, officers, directors and
affiliates required by such Section 14(f) and Rule 14f-1. The provisions of
this Section 1.3(a) are in addition to and shall not limit any rights which the
Purchaser, Parent or any of their affiliates may have as a holder or beneficial
owner of Shares as a matter of law with respect to the election of directors or
otherwise.
(b) From and after the time, if any, that Parent's designees constitute a
majority of the Company's Board of Directors, any amendment of the Restated
Articles of Incorporation of the Company (the "Articles of Incorporation") or
the Amended and Restated Bylaws of the Company (the "Bylaws"), any amendment of
this Agreement, any termination of this Agreement by the Company, any extension
of time for performance of any of the obligations of Parent or the Purchaser
hereunder, any waiver of any condition for the benefit of the Company, any
waiver of any of the Company's rights hereunder or other action by the Company
with respect to the transactions contemplated by this Agreement which
materially adversely affects the interests of the shareholders of the Company
may not be effected without the action of a majority of the directors of the
Company then in office who were not officers of Parent or designees,
shareholders or affiliates of Parent; provided, that if there shall be no such
directors, such actions may be effected by majority vote of the entire Board of
Directors of the Company.
Section 1.4 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.5 hereof), the
Company and the Purchaser shall consummate a merger (the "Merger") pursuant to
which (a) the Purchaser shall be merged with and into the Company and the
separate corporate existence of the Purchaser shall thereupon cease, (b) the
Company shall be the successor or surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of North Carolina, and (c) the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger,
except as set forth in this Section 1.4. Pursuant to the Merger, (x) the
Articles of Incorporation, as in effect immediately prior to the Effective
Time, shall be the articles of incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Articles of Incorporation, and
(y) the Bylaws, as in effect immediately prior to the Effective Time, shall be
the Bylaws of the Surviving Corporation until thereafter amended as provided by
law, such Articles of Incorporation and such Bylaws. The Merger shall have the
effects specified in the NCBCA.
Section 1.5 Effective Time. Parent, the Purchaser and the Company will
cause Articles of Merger to be executed and filed on the date of the Closing
(as defined in Section 1.6) (or on such other date as Parent and the Company
may agree) with the Secretary of State of North Carolina (the "Secretary of
State") as provided in the NCBCA. The Merger shall become effective on the
date on which the Articles of Merger have been duly filed with the Secretary of
State or such time as is agreed upon by the parties and specified in the
Articles of Merger, and such time is hereinafter referred to as the "Effective
Time."
Section 1.6 Closing. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m. on a date to be specified by the parties, which shall be no
later than the
5
<PAGE> 11
second business day after satisfaction or waiver of all of the conditions set
forth in Article VI hereof (the "Closing Date"), at the offices of Robinson
Bradshaw & Hinson, P.A., One Independence Center, 101 Street, North Tryon
Street, Suite 1900, Charlotte, North Carolina 28246-1900, unless another date
or place is agreed to in writing by the parties hereto.
Section 1.7 Directors and Officers of the Surviving Corporation. The
directors and officers of the Purchaser at the Effective Time shall, from and
after the Effective Time, be the directors and officers, respectively, of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
Bylaws.
Section 1.8 Shareholders' Meeting.
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through its Board of Directors, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Special Meeting") as promptly as
practicable following the acceptance for payment and purchase of Shares
by the Purchaser pursuant to the Offer for the purpose of considering
and taking action upon the approval of the Merger and the adoption of
this Agreement;
(ii) prepare and, after consultation with Parent, file with
the SEC a preliminary proxy or information statement relating to the
Merger and this Agreement and use its best efforts (x) to obtain and
furnish the information required to be included by the SEC in the Proxy
Statement (as hereinafter defined) and, after consultation with Parent,
to respond promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive proxy
or information statement, including any amendment or supplement thereto
(the "Proxy Statement") to be mailed to its shareholders, provided that
no amendment or supplement to the Proxy Statement will be made by the
Company without consultation with Parent and its counsel and (y) to
obtain the necessary approvals of the Merger and this Agreement by
its shareholders; and
(iii) subject to the fiduciary obligations of the Board of
Directors under applicable law as advised by independent counsel,
include in the Proxy Statement the recommendation of the Board that
shareholders of the Company vote in favor of the approval of the Merger
and the adoption of this Agreement.
(b) Parent shall vote, or cause to be voted, all of the Shares
then owned by it, the Purchaser or any of its other subsidiaries and affiliates
in favor of the approval of the Merger and the adoption of this Agreement.
Section 1.9 Merger Without Meeting of Shareholders. Notwithstanding
Section 1.8 hereof, in the event that Parent, the Purchaser or any other
subsidiary of Parent shall acquire at least 90% of the outstanding shares of
each class of capital stock of the Company
6
<PAGE> 12
pursuant to the Offer or otherwise the parties hereto shall, subject to Article
VI hereof, take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after such acquisition, without a
meeting of shareholders of the Company, in accordance with Chapter 55-11-04 of
the NCBCA.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
Shares or holders of common stock, par value $.01 per share, of the Purchaser
(the "Purchaser Common Stock"):
(a) Purchaser Common Stock. Each issued and outstanding share of the
Purchaser Common Stock shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All Shares
that are owned by the Company as treasury stock and any Shares owned by Parent,
the Purchaser or any other wholly owned Subsidiary (as defined in Section 3.1
hereof) of Parent shall be cancelled and retired and shall cease to exist and
no consideration shall be delivered in exchange therefor.
(c) Exchange of Shares. Each issued and outstanding Share (other than
Shares to be cancelled in accordance with Section 2.1(b) and any Shares which
are held by shareholders exercising appraisal rights pursuant to Chapter 55-13
of the NCBCA ("Dissenting Shareholders")) shall be converted into the right to
receive the Offer Price, payable to the holder thereof, without interest (the
"Merger Consideration"), upon surrender of the certificate formerly
representing such Share in the manner provided in Section 2.2. All such
Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such Shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in accordance
with Section 2.2, without interest, or the right, if any, to receive payment
from the Surviving Corporation of the "fair value" of such Shares as determined
in accordance with Chapter 55-13 of the NCBCA.
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Parent shall designate a bank or trust company to act
as agent for the holders of the Shares in connection with the Merger (the
"Paying Agent") to receive the funds to which holders of the Shares shall
become entitled pursuant to Section 2.1(c). Such funds shall be invested by
the Paying Agent as directed by Parent or the Surviving Corporation in direct
obligations of the United States, obligations for which the full faith and
credit of the United States is pledged to provide for the payments of principal
and interest, commercial paper rated of the highest quality by Moody's Investor
Services or Standard & Poors Rating Group or certificates of deposit, issued by
a commercial bank having at least $1 billion in assets.
7
<PAGE> 13
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates"), whose Shares were
converted pursuant to Section 2.1 into the right to receive the Merger
Consideration (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Paying Agent and shall be in such
form and have such other provisions as Parent and the Company may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for payment of the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share
formerly represented by such Certificate and the Certificate so surrendered
shall forthwith be cancelled. If payment of the Merger Consideration is to be
made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each Certificate shall
be deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.
(c) Transfer Books; No Further Ownership Rights in the Shares. At the
Effective Time, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such
Shares, except as otherwise provided for herein or by applicable law. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided
in this Article II.
(d) Termination of Fund; No Liability. At any time following one year
after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying
Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) with respect to
the Merger Consideration payable upon due surrender of their Certificates,
without any interest thereon. Notwithstanding the foregoing, neither the
Surviving Corporation nor the Paying Agent shall be liable to any holder of a
Certificate for Merger Consideration delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
8
<PAGE> 14
Section 2.3 Dissenters' Rights. If any Dissenting Stockholder shall be
entitled to be paid the "fair value" of such holder's Shares, as provided in
Chapter 55-13 of the NCBCA, the Company shall give the Purchaser notice thereof
and the Purchaser shall have the right to participate in all negotiations and
proceedings with respect to any such demands. Neither the Company nor the
Surviving Corporation shall, except with the prior written consent of the
Purchaser, voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for payment. If any Dissenting Stockholder shall fail
to perfect or shall have effectively withdrawn or lost the right to dissent,
the Shares held by such Dissenting Stockholder shall thereupon be treated as
though such Shares had been converted into the Merger Consideration pursuant to
Section 2.1.
Section 2.4 Transfer of Shares After the Effective Time. No transfer of
Shares shall be made on the stock transfer books of the Surviving Corporation
at or after the Effective Time.
Section 2.5 Company Plans.
(a) The Company shall, effective as of the earlier of (i) Effective Time
or (ii) the expiration date of the Offer (if at such time the Shares tendered
and not withdrawn pursuant to the Offer equal 80% or more) (such earlier date
referred to herein as the "Acceleration Time") cause each outstanding employee
stock option to purchase Shares (an "Employee Option") granted under the
Company's 1992 Stock Option Plan and the Company's Equity Compensation Plan
(the "Employee Option Plans") and each outstanding non-employee director option
to purchase Shares ("Director Options" and, collectively with Employee Options,
"Options") granted under the Company's Stock Option Plan for Non-Employee
Directors (together with the Employee Option Plans, the "Option Plans"),
whether or not then exercisable or vested, to become fully exercisable and
vested. Concurrently with the execution hereof, the Company has evidenced to
the Purchaser the agreement of each optionee under the Option Plans to the
cancellation of all outstanding Options as of the Acceleration Time, in
consideration for which (except to the extent that Parent or the Purchaser and
the holder of any such Option otherwise agree), at the Acceleration Time,
Parent will cause the Company (or, at Parent's option, the Purchaser and, in
the event the Company is unable to do so, the Purchaser (which obligation of
the Purchaser Parent agrees to fund on a timely basis)) to pay to such holders
of Options an amount in respect thereof equal to the product of (A) the excess,
if any, of the Offer Price over the exercise price of each such Option and (B)
the number of Shares previously subject to the Option immediately prior to its
cancellation (such payment to be net of withholding taxes). Cancellation of
Options having an exercise price equal to or in excess of the Offer Price shall
be for a consideration not in excess of $100 per optionee.
(b) Except as may be otherwise agreed to by Parent or the Purchaser and
the Company, the Option Plans shall terminate as of the Acceleration Time and
the provisions in any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any of its subsidiaries shall be deleted as of the Acceleration Time
and no holder of options or any participant in the Option Plans or any other
9
<PAGE> 15
plans, programs or arrangements shall have any right thereunder to acquire any
equity securities of the Company, the Surviving Corporation or any subsidiary
thereof.
(c) Notwithstanding the above, between the date of this Agreement and the
Effective Time, the Company shall reasonably cooperate with the Parent and the
Purchaser in structuring transactions (including those described in Section
2.5(b) above) with respect to Options so as to optimize the tax treatment of
the Parent or the Purchaser in connection therewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser as
follows:
Section 3.1 Organization. Except as set forth in Section 3.1 of the
Company's Disclosure Schedule, each of the Company and its Subsidiaries (as
defined below) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate power and authority and all
necessary governmental approvals to own, lease and operate its properties and
to carry on its business as now being conducted, except where the failure to be
so organized, existing and in good standing or to have such power, authority,
and governmental approvals would not have a material adverse effect on the
Company and its Subsidiaries, taken as a whole. As used in this Agreement, the
term "Subsidiary" shall mean all corporations or other entities in which the
Company or the Parent, as the case may be, owns a majority of the issued and
outstanding capital stock or similar interests. As used in this Agreement, any
reference to any event, change or effect being material or having a material
adverse effect on or with respect to any entity (or group of entities taken as
a whole) means such event, change or effect is materially adverse to the
consolidated financial condition, businesses or results of operations of such
entity (or, if used with respect thereto, of such group of entities taken as a
whole). The Company and each of its Subsidiaries is duly qualified or licensed
to do business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing would not in the aggregate
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole. The Company does not own (i) any equity interest in any corporation or
other entity other than the Subsidiaries or (ii) marketable securities where
the Company's equity interest in any entity exceeds five percent of the
outstanding equity of such entity on the date hereof. Exhibit 21 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995 sets forth a complete list of the Company's Subsidiaries.
Section 3.2 Capitalization. (a) The authorized capital stock of the
Company consists of 70,000,000 Shares and 1,000,000 shares of preferred stock,
par value $1.00 per share (the "Preferred Stock"). As of the date hereof, (i)
21,433,163 Shares are issued and outstanding, (ii) no Shares are issued and
held in the treasury of the Company, (iii) no shares of Preferred are
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issued or outstanding and (iv) 1,647,950 Shares are reserved for issuance upon
exercise of outstanding Options granted under the Option Plans. Section 3.2 of
the Company's Disclosure Statement sets forth the exercise price for all
outstanding Options. All the outstanding shares of the Company's capital stock
are, and all Shares which may be issued pursuant to the exercise of outstanding
options will be, when issued in accordance with the respective terms thereof,
duly authorized, validly issued, fully paid and non-assessable. There are no
bonds, debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any of its Subsidiaries issued and outstanding. Except as set forth above
and except for the transactions contemplated by this Agreement, as of the date
hereof, (i) there are no shares of capital stock of the Company authorized,
issued or outstanding, (ii) there are no existing options, warrants, calls,
preemptive rights, subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital stock
of the Company or any of its Subsidiaries, obligating the Company or any of its
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity interest
in, the Company or any of its Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests, or obligating the Company or
any of its Subsidiaries to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement or
commitment, and (iii) there are no outstanding contractual obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any Shares, or the capital stock of the Company, or any subsidiary or affiliate
of the Company or to provide funds to make any investment (in the form of a
loan, capital contribution or otherwise) in any Subsidiary or any other entity.
(b) Except as set forth in Section 3.2 of the Company's Disclosure
Schedule, all of the outstanding shares of capital stock of each of the
Subsidiaries are beneficially owned by the Company, directly or indirectly, and
all such shares have been validly issued and are fully paid and nonassessable
and are owned by either the Company or one of its Subsidiaries free and clear
of all liens, charges, claims or encumbrances.
(c) There are no voting trusts or other agreements or understandings to
which the Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the Subsidiaries.
(d) None of the Company or its Subsidiaries is required to redeem,
repurchase or otherwise acquire shares of capital stock of the Company, or any
of its Subsidiaries, respectively, as a result of the transactions contemplated
by this Agreement.
Section 3.3 Authorization; Validity of Agreement; Company Action. The
Company has full corporate power and authority to execute and deliver this
Agreement and, subject to any required shareholder approval, to consummate the
transactions contemplated hereby. The execution, delivery and performance by
the Company of this Agreement, and the consummation by it of the transactions
contemplated hereby, have been duly authorized by its Board of Directors and,
except for obtaining the approval of its shareholders as contemplated by
Section 1.8 hereof, no other corporate action on the part of the Company is
necessary to authorize the execution and delivery by the Company of this
Agreement and the consummation
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<PAGE> 17
by it of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and, assuming due and valid
authorization, execution and delivery hereof by Parent and the Purchaser, is a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms.
Section 3.4 Consents and Approvals; No Violations. Except for the filings
set forth on Section 3.4 of the Company's Disclosure Schedule and the filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), state
securities or blue sky laws, and the NCBCA, neither the execution, delivery or
performance of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby nor compliance by the Company
with any of the provisions hereof will (i) conflict with or result in any
breach of any provision of the Articles of Incorporation or the Bylaws of the
Company or of any of its Subsidiaries, (ii) require any filing with, or permit,
authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency (a "Governmental Entity"), (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of payment, termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound (the "Agreements") or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any of its Subsidiaries
or any of their properties or assets, excluding from the foregoing clause (iii)
such violations, breaches or defaults which would not, individually or in the
aggregate, have a material adverse effect on the Company and its Subsidiaries,
taken as a whole and which will not materially impair the ability of the
Company to consummate the transactions contemplated hereby. Section 3.4 of the
Company's Disclosure Schedule sets forth a list of any consents required to be
obtained in connection with the Agreements prior to the consummation of the
transactions contemplated by this Agreement. Except as set forth in Section
3.4 of the Company's Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any contract or agreement
(whether written or oral) providing for any severance or other payment upon or
following a change of control of the Company. Section 3.4 describes in
reasonable detail the nature and amount of any such severance or other
payments.
Section 3.5 SEC Reports and Financial Statements. The Company has filed
with the SEC, and has heretofore made available to Parent true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it under the Exchange Act or the Securities Act of
1933, as amended (the "Securities Act") (as such documents have been amended
since the time of their filing, collectively, the "Company SEC Documents"). As
of their respective dates or, if amended, as of the date of the last such
amendment, the Company SEC Documents, including, without limitation, any
financial statements or schedules included therein (a) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading and (b)
complied in all material
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respects with the applicable requirements of the Exchange Act and the
Securities Act, as the case may be, and the applicable rules and regulations of
the SEC thereunder. None of the Subsidiaries is required to file any forms,
reports or other documents with the SEC. The financial statements of the
Company (the "1995 Financial Statements") included in the Company's Annual
Report on Form 10K for the fiscal year ended December 31, 1995 (the "1995
10-K") and the financial statements of the Company included in the Company's
Quarterly Report on Form 10-Q for the quarter ended September 29, 1996 (the
"September 1996 10-Q") have been prepared from, and are in accordance with, the
books and records of the Company and its consolidated subsidiaries, comply in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position, if
any) of the Company and its consolidated subsidiaries at the dates and for the
periods covered thereby (subject, in the case of the financial statements in
the September 1996 10-Q, to normal year-end audit adjustments which would not
be material in amount or effect).
Section 3.6 Absence of Certain Changes. Except as disclosed in Section
3.6 of the Company's Disclosure Schedule, since December 31, 1995, the Company
and its Subsidiaries have conducted their respective businesses only in the
ordinary and usual course and there has not occurred (i) any events or changes
(including the incurrence of any liabilities of any nature, whether or not
accrued, contingent or otherwise) having, individually or in the aggregate, a
material adverse effect on the Company and its Subsidiaries, taken as a whole;
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the equity
interests of the Company or of any of its Subsidiaries; or (iii) any change by
the Company or any of its Subsidiaries in accounting principles or methods,
except insofar as may be required by a change in GAAP.
Section 3.7 No Undisclosed Liabilities. Except (a) as disclosed in the
Company SEC Documents and (b) for liabilities and obligations as set forth in
Section 3.7 of the Company Disclosure Schedule, since December 31, 1995,
neither the Company nor any of its Subsidiaries has incurred any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
that have, or would be reasonably likely to have, a material adverse effect on
the Company and its Subsidiaries, taken as a whole, or, subject to the
foregoing exceptions or for liabilities or obligations incurred in the ordinary
course of business and consistent with past practice, would be required by GAAP
to be reflected on a consolidated balance sheet of the Company and its
Subsidiaries (including the notes thereto).
Section 3.8 Litigation. Except as set forth in Section 3.8 of the
Company's Disclosure Schedule, neither the Company nor any of its Subsidiaries
is subject to any claim or pending litigation or outstanding order, writ,
injunction or decree which, insofar as can be reasonably foreseen after due
inquiry, in the future would have, individually or in the aggregate, a material
adverse effect on the Company and its Subsidiaries, taken as a whole, or a
material
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adverse effect on the ability of the Company to consummate the transactions
contemplated hereby.
Section 3.9 Employee Benefit Plans; ERISA
(a) Section 3.9 of the Company's Disclosure Schedule sets forth a list of
all material employee benefit plans, arrangements, contracts or agreements
(including employment agreements and severance agreements) of any type
(including but not limited to plans described in section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), maintained by
the Company, any of its Subsidiaries or any trade or business, whether or not
incorporated (an "ERISA Affiliate"), which together with the Company would be
under "common control" within the meaning of section 4001(a)(14) of ERISA
("Benefit Plans"). Neither the Company nor any ERISA Affiliate has any formal
plan or commitment, whether legally binding or not, to create any additional
Benefit Plan or modify or change any existing Benefit Plan that would affect
any employee or terminated employee of the Company or any Subsidiary.
(b) With respect to each Benefit Plan: (i) if intended to qualify under
section 401(a), 401(k) or 403(a) of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the "Code"), the
United States Internal Revenue Service (the "Service") has issued a favorable
letter of determination on such qualified status and on the exempt status under
section 501(a) of the Code and since such letter of determination no event has
occurred that would disqualify such plan; (ii) such plan has been administered
in all material respects in accordance with its terms and applicable law; (iii)
no breaches of fiduciary duty have occurred which might reasonably be expected
to give rise to material liability on the part of the Company; (iv) no disputes
are pending, or, to the knowledge of the Company, threatened that might
reasonably be expected to give rise to material liability on the part of the
Company; (v) no prohibited transaction (within the meaning of Section 406 of
ERISA) has occurred that might reasonably be expected to give rise to material
liability on the part of the Company; (vi) all contributions and premiums due
as of the date hereof (taking into account any extensions for such
contributions and premiums) have been made in full; and (vii) all reports
required to be filed with respect to such Benefit Plan have been properly,
accurately and timely filed.
(c) Neither the Company nor any ERISA Affiliate (a) has incurred an
accumulated funding deficiency, as defined in the Code and ERISA or (b) has any
material liability under Title IV of ERISA with respect to any Benefit Plan
that is subject to Title IV of ERISA.
(d) With respect to each Benefit Plan that is a "welfare plan" (as defined
in section 3(l) of ERISA), no such plan provides medical or death benefits with
respect to current or former employees of the Company or any of its
Subsidiaries beyond their termination of employment, other than on an
employee-pay-all basis.
(e) Except as contemplated by Section 2.5, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any individual
to severance pay or accelerate the time of payment or vesting, or increase the
amount, of compensation or benefits
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due to any individual (other than as disclosed in writing), (ii) constitute or
result in a prohibited transaction under section 4975 of the Code or section
406 or 407 of ERISA or (iii) subject the Company, any of its Subsidiaries, any
ERISA Affiliate, any of the Benefit Plans, any related trust, any trustee or
administrator of any thereof, or any party dealing with the Benefit Plans or
any such trust to either a civil penalty assessed pursuant to section 409 or
502(i) of ERISA or a tax imposed pursuant to section 4976 or 4980B of the Code.
(f) Neither the Company nor any ERISA Affiliate has at any time within the
preceding six years been obligated to contribute to any Benefit Plan that is a
"multiemployer plan," as such term is defined in section 3(37) of ERISA.
(g) With respect to each Benefit Plan, the Company has made available to
Parent or its representatives accurate and complete copies of all plan texts,
summary plan descriptions, summary of material modifications, trust agreements
and other related agreements including all amendments to the foregoing; the
most recent annual report; the most recent annual and periodic accounting of
plan assets; the most recent determination letter received from the Service;
and the most recent actuarial valuation, to the extent any of the foregoing may
be applicable to a particular Benefit Plan.
Section 3.10 Information in Proxy Statement. Prior to consummation of the
Offer, the Company shall prepare and furnish to Parent such portions of the
Proxy Statement as Parent shall specify. Such material when delivered to
Parent, and (as incorporated in the Proxy Statement) on the date mailed to
Company shareholders and at the time of the meeting of Company shareholders to
be held in connection with the Merger, will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 3.11 No Default; Compliance with Applicable Laws. The business of
the Company and each of its Subsidiaries is not being conducted in default or
violation of any term, condition or provision of (i) its respective Articles of
Incorporation or Bylaws, or (ii) to the Company's best knowledge, any federal,
state, local or foreign statute, law, ordinance, rule, regulation, judgment,
decree, order, concession, grant, franchise, permit or license or other
governmental authorization or approval applicable to the Company or any of its
Subsidiaries, excluding from the foregoing clause (ii), defaults or violations
which would not, individually or in the aggregate, have a material adverse
effect on the Company and its Subsidiaries, taken as a whole. Except as
disclosed in Section 3.11 of the Company's Disclosure Schedule, as of the date
of this Agreement, no claim or, to the best knowledge of the Company,
investigation or review by any Governmental Entity or other entity with respect
to the Company or any of its Subsidiaries is pending or, to the best knowledge
of the Company, threatened, nor to the best knowledge of the Company has any
Governmental Entity or other entity indicated an intention to assert or conduct
the same, other than, in each case, those the outcome of which, as far as
reasonably can be foreseen after due inquiry, in the future will not,
individually or in the aggregate have a material adverse effect on the Company
and its Subsidiaries, taken as a whole.
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Section 3.12 Licenses; Intellectual Property. Section 3.12 of the
Company's Disclosure Schedule sets forth a list of all registered and material
unregistered Intellectual Property (as defined below) owned by the Company and
used in the conduct of its Business and all agreements granting any right to
use or practice any right relating to the Intellectual Property (as defined
below) currently used in the conduct of the Company's business (the
"Licenses"). Except as set forth in Section 3.12 of the Company's Disclosure
Schedule, (i) to the Company's best knowledge, the Company or its Subsidiaries
is the sole owner of all of its rights under the Licenses free and clear of any
liens, claims, encumbrances or interests; (ii) to the Company's best knowledge,
the Company or its Subsidiaries is the sole owner of, or has a valid right to
use pursuant to a License, all patents and patent applications; registered and
unregistered trademarks, service marks, trade names, trade dress, logos,
company names and other source or business identifiers, including all goodwill
associated therewith; the names, likenesses and other attributes of
individuals; registered and unregistered copyrights, computer programs and
databases; trade secrets, proprietary technology, know-how, industrial designs
and other confidential information ("Trade Secrets"); any pending applications
for any of the foregoing (collectively, the "Intellectual Property") currently
used in the conduct of the Company's business, free and clear of any liens,
claims, encumbrances or interests; (iii) to the Company's best knowledge the
present or past operations of the Company or the Subsidiaries does not infringe
upon, violate, interfere or conflict with the rights of others with respect to
any Intellectual Property and no claim is pending or, to the Company's best
knowledge, threatened, to this effect; (iv) to the Company's best knowledge,
none of the Intellectual Property is invalid or unenforceable, or has not been
used or enforced or has failed to be used or enforced in a manner that would
result in the abandonment, cancellation or unenforceability of any of the
Intellectual Property and no claim is pending or, to the Company's best
knowledge, threatened, to this effect; (v) no License provision or any other
contract, agreement or understanding to which the Company is a party would
prevent the continued use by the Company or the Subsidiaries (as currently used
by the Company or its Subsidiaries) of any Intellectual Property following the
consummation of the transactions contemplated hereby; (vi) to the Company's
best knowledge, no person is infringing upon or otherwise violating any
Intellectual Property or License; (vii) there are no claims pending or, to the
Company's best knowledge, threatened in connection with any License; and (viii)
to the Company's best knowledge, no Trade Secret has been disclosed by the
Company or its Subsidiaries to any third party except subject to an appropriate
confidentiality agreement or as required by a governmental authority.
Section 3.13 Taxes. (a) Except as set forth in Section 3.13 of the
Company's Disclosure Schedule:
(i) the Company and its Subsidiaries have (x) duly filed (or
there have been filed on their behalf) with the appropriate governmental
authorities all Tax Returns (as hereinafter defined) required to be filed
by them on or prior to the date hereof, other than any filings which the
failure to make in a timely manner would not have a material adverse
effect on the Company and the Subsidiaries taken as a whole, it being
understood that the failure to file a federal income Tax Return would have
a material adverse effect on the Company and its Subsidiaries taken as a
whole, and such Tax Returns are true, correct and complete in all material
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respects, and (y) duly paid in full or made provision in accordance
with GAAP (or there has been paid or provision has been made on
their behalf) for the payment of all Taxes (as hereinafter defined)
for all periods ending through the date hereof;
(ii) there are no liens for Taxes upon any property or assets
of the Company or any Subsidiary thereof, except for liens for
Taxes not yet due;
(iii) neither the Company nor any of its Subsidiaries has made
any change in accounting methods, received a ruling from any taxing
authority or signed an agreement likely to have a material adverse
effect on the Company and its Subsidiaries, taken as a whole;
(iv) the Company and its Subsidiaries have complied in all
respects with all applicable laws, rules and regulations relating
to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441 and 1442
of the Code or similar provisions under any foreign laws) and have,
within the time and the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities
all amounts required to be so withheld and paid over under
applicable laws;
(v) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Returns of the Company or
its Subsidiaries and neither the Company nor its subsidiaries has
received a written notice of any pending audits or proceedings;
(vi) the federal income Tax Returns of the Company and its
Subsidiaries have been examined by the Service (or the applicable
statutes of limitation for the assessment of federal income Taxes
for such periods have expired) for all periods through and
including December 31, 1990, and no material deficiencies were
asserted as a result of such examinations which have not been
resolved and fully paid;
(vii) there are no outstanding requests, agreements, consents
or waivers to extend the statutory period of limitations applicable
to the assessment of any Taxes or deficiencies against the Company
or any of its Subsidiaries, and no power of attorney granted by
either the Company or any of its Subsidiaries with respect to any
Taxes is currently in force;
(viii) neither the Company nor any of its Subsidiaries is a
party to any agreement providing for the allocation or sharing of
Taxes;
(ix) neither the Company nor its Subsidiaries is a party to
any agreement, contract or arrangement (other than the employment
contracts referenced in Section 3.4 of the Company's Disclosure
Schedule) that could result, separately or in the aggregate, in the
payment of any "excess parachute payments"
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within the meaning of Section 280G of the Code, and none of the
actions contemplated or permitted by this Agreement will result in
any such payments;
(x) neither the Company nor any of its Subsidiaries has, with
regard to any assets or property held, acquired or to be acquired
by any of them, filed a consent to the application of Section
341(f) of the Code, or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by the Company or
any of its Subsidiaries;
(xi) the deductibility of compensation paid by the Company
and/or its Subsidiaries will not be limited by Section 162(m) of
the Code; and
(xii) all transactions that could give rise to an
understatement of the federal income tax liability of the Company
or any of its Subsidiaries within the meaning of Section 6662(d) of
the Code are adequately disclosed on Tax Returns in accordance with
Section 6662(d)(2)(B) of the Code if there is or was no substantial
authority for the treatment giving rise to such understatement.
(b) The net operating loss carryovers available to the Company
and its Subsidiaries are set forth in Section 3.13 of the Company's Disclosure
Schedule. Except as set forth in Section 3.13 of the Company's Disclosure
Schedule, as of the date of this Agreement, the net loss carryovers are not
subject to limitations imposed by Sections 382, 383 or 384 of the Code (or any
predecessor thereto) or otherwise.
(c) "Taxes" shall mean any and all taxes, charges, fees, levies
or other assessments, including, without limitation, income, gross receipts,
excise, real or personal property, sales, withholding, social security,
occupation, use, service, service use, license, net worth, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the Service or any
taxing authority (whether domestic or foreign including, without limitation,
any state, county, local or foreign government or any subdivision or taxing
agency thereof (including a United States possession)), whether computed on a
separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest whether paid or received, fines, penalties or
additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments. "Tax Return" shall
mean any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or Jurisdiction (foreign or
domestic) with respect to Taxes, including, without limitation, information
returns, any documents with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
Section 3.14 Insurance. As of the date hereof, the Company and each
of its Subsidiaries are insured by insurers, reasonably believed by the Company
to be of recognized financial responsibility and solvency, against such losses
and risks and in such amounts as are customary in the businesses in which they
are engaged. All material policies of insurance and fidelity or surety bonds
insuring the Company or any of its Subsidiaries or their respective
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<PAGE> 24
businesses, assets, employees, officers and directors have previously been made
available for inspection by Parent and are in full force and effect. Section
3.14 of the Company's Disclosure Schedule describes all self-insurance
arrangements affecting the Company or any Subsidiary and the aggregate amount
of all claims made under such arrangements since January 1, 1994. As of the
date hereof, there are no material claims by the Company or any Subsidiary
under any such policy or instrument as to which any insurance company is
denying liability or defending under a reservation of rights clause. To the
Company's best knowledge, all necessary notifications of claims have been made
to insurance carriers other than those which will not have a material adverse
effect on the Company and its Subsidiaries, taken as a whole.
Section 3.15 Contracts. Each Agreement (as defined in Section 3.4) is
legally valid and binding against the Company or its Subsidiaries and, to the
Company's best knowledge, each other party thereto and in full force and
effect, except where failure to be legally valid and binding and in full force
and effect would not, individually or in the aggregate, have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, and there are no
defaults thereunder by the Company or its Subsidiaries and, to the Company's
best knowledge, any other party thereto, except those defaults that would not
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole. The Company has previously made available for inspection by Parent or
the Purchaser or their representatives all material Agreements.
Section 3.16 Related Party Transactions. Except as set forth in Section
3.16 of the Company's Disclosure Schedule or in the Company SEC Reports, no
director, officer, partner, employee, "affiliate" or "associate" (as such terms
are defined in Rule 12b-2 under the Exchange Act) of the Company or any of its
Subsidiaries (i) has borrowed money from or has outstanding any indebtedness or
other similar obligations to the Company or any of its Subsidiaries; (ii) to
the best knowledge of the Company, owns any direct or indirect interest of any
kind in, or is a director, officer, employee, party, affiliate or associate of,
or consultant or lender to, or borrower from, or has the right to participate
in the management, operations or profits of, any person or entity which is (x)
a competitor, supplier, customer, distributor, lessor, tenant, creditor or
debtor of the Company or any of its Subsidiaries, (y) engaged in a business
related to the business of the Company or any of its Subsidiaries or (z)
participating in any transaction to which the Company or any of its
Subsidiaries is a party or (iii) is otherwise a party to any contract,
arrangement or understanding with the Company or any of its Subsidiaries.
Section 3.17 Real Property. The Company and the Subsidiaries, as the case
may be, have sufficient title or leaseholds to real property to conduct their
respective businesses as currently conducted with only such exceptions as
individually or in the aggregate would not have a material adverse effect on
the Company and the Subsidiaries, taken as a whole.
Section 3.18 Vote Required. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of any class
or series of the Company's capital stock necessary to approve this Agreement
and the transactions contemplated hereby.
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF
PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of North Carolina and has all requisite corporate or other power and
authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power, authority, and governmental approvals would not have a material
adverse effect on Parent and its Subsidiaries, taken as a whole. Parent and
each of its Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not, in the aggregate, have a
material adverse effect on Parent and its Subsidiaries, taken as a whole.
Section 4.2 Authorization; Validity of Agreement; Necessary Action. Each
of Parent and the Purchaser has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by Parent and the Purchaser of
this Agreement, and the consummation of the Merger and of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Parent and the Purchaser and by Parent as the sole stockholder of the Purchaser
and no other corporate action on the part of Parent and the Purchaser is
necessary to authorize the execution and delivery by Parent and the Purchaser
of this Agreement and the consummation of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and the
Purchaser, as the case may be, and, assuming due and valid authorization,
execution and delivery hereof by the Company, is a valid and binding obligation
of each of Parent and the Purchaser, as the case may be, enforceable against
each of them in accordance with its respective terms.
Section 4.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the HSR Act, state
securities or blue sky laws and the NCBCA, neither the execution, delivery or
performance of this Agreement by Parent or the Purchaser nor the consummation
by Parent or the Purchaser of the transactions contemplated hereby nor
compliance by Parent or the Purchaser with any of the provisions hereof will
(i) conflict with or result in any breach of any provision of the respective
certificate of incorporation or by-laws of Parent or the Purchaser, (ii)
require any filing with, or permit, authorization, consent or approval of, any
Governmental Entity, (iii) except as set forth on Schedule 4.3, result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent, or any of its Subsidiaries or the
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Purchaser is a party or by which any of them or any of their respective
properties or assets may be bound or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Parent, any of its
Subsidiaries or any of their properties or assets, excluding from the foregoing
clause (iii) such violations, breaches or defaults which would not,
individually or in the aggregate, have a material adverse effect on Parent, its
Subsidiaries or the Purchaser taken as a whole and will not materially impair
the ability of Parent or the Purchaser to consummate the transactions
contemplated hereby.
Section 4.4 Information in Proxy Statement. None of the information
supplied by Parent or the Purchaser specifically for inclusion or incorporation
by reference in the Proxy Statement will, at the date mailed to shareholders
and at the time of the meeting of shareholders to be held in connection with
the Merger, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading.
Section 4.5 Litigation. Neither Parent nor any of its Subsidiaries is
subject to any outstanding order, writ, injunction or decree which, insofar as
can be reasonably foreseen after due inquiry, would have a material adverse
effect on the ability of Parent or the Purchaser to consummate the transactions
contemplated hereby.
Section 4.6 Financing Commitment. Parent has received from NationsBank a
commitment letter dated December 16, 1996 (a copy of which has been heretofore
furnished to the Company) to provide funds necessary for the consummation of
the Offer and the Merger which letter has not been revoked. Parent has
accepted such commitment pursuant to its terms and has paid all fees due
thereunder as of the date hereof.
Section 4.7 Fraudulent Conveyance. Assuming the accuracy of the
representations and warranties of the Company in this Agreement, Parent has no
reason to believe that the financing to be provided to Parent to effect the
Offer and the Merger will cause (i) the fair salable value of the Surviving
Corporation's assets to be less than the total amount of its existing
liabilities, (ii) the fair salable value of the assets of the Surviving
Corporation to be less than the amount that will be required to pay its
probable liabilities on its existing debts as they mature, (iii) the Surviving
Corporation not to be able to pay its existing debts as they mature or (iv) the
Surviving Corporation to have an unreasonably small capital with which to
engage in its business.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants and
agrees that, except (i) as expressly contemplated by this Agreement, (ii) as
set forth in Section 5.1 of the Company's Disclosure Schedule or (iii) as
agreed in writing by Parent, after the date hereof, and prior to the time the
designees of the Purchaser have been elected to, and shall
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constitute a majority of, the Board of Directors of the Company pursuant to
Section 1.3 (the "Appointment Date"):
(a) the business of the Company and its Subsidiaries shall be conducted
only in the ordinary and usual course and, to the extent consistent therewith,
each of the Company and its Subsidiaries shall use its commercially reasonable
best efforts to preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees, creditors and business
partners;
(b) the Company will not, directly or indirectly, (i) sell, transfer or
pledge or agree to sell, transfer or pledge any of the Shares, Preferred Stock
or capital stock of any of its Subsidiaries beneficially owned by it; (ii)
amend its Articles of Incorporation or Bylaws or similar organizational
documents; or (iii) split, combine or reclassify the outstanding Shares or
Preferred Stock or any outstanding capital stock of any of the Subsidiaries of
the Company;
(c) neither the Company nor any of its Subsidiaries shall: (i) declare,
set aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock; (ii) issue, sell, pledge, dispose
of or encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire any shares of, capital stock of any class of the Company or its
Subsidiaries, other than shares reserved for issuance on the date hereof
pursuant to the exercise of Options outstanding on the date hereof; (iii)
transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any
material assets other than in the ordinary and usual course of business and
consistent with past practice, or incur or modify any material indebtedness or
other liability; or (iv) redeem, purchase or otherwise acquire directly or
indirectly any of its capital stock;
(d) neither the Company nor any of its Subsidiaries shall: (i) grant any
increase in the compensation payable or to become payable by the Company or any
of its Subsidiaries to any of its employees; (ii) (A) adopt any new, or (B)
amend or otherwise increase, or accelerate the payment or vesting of the
amounts payable or to become payable under any existing, bonus, incentive
compensation, deferred compensation, severance, profit sharing, stock option,
stock purchase, insurance, pension, retirement or other employee benefit plan
agreement or arrangement; or (iii) enter into any employment or severance
agreement with or, except in accordance with the existing written policies of
the Company, grant any severance or termination pay to any officer, director or
employee of the Company or any its Subsidiaries;
(e) neither the Company nor any of its Subsidiaries shall modify, amend or
terminate any of its material contracts or waive, release or assign any
material rights or claims thereunder;
(f) neither the Company nor any of its Subsidiaries shall permit any
material insurance policy naming it as a beneficiary or a loss payable payee to
be cancelled or terminated without notice to Parent;
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(g) neither the Company nor any of its Subsidiaries shall: (i) incur or
assume any long-term debt or any short-term indebtedness; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except in
the ordinary course of business and consistent with past practice; (iii) make
any loans, advances or capital contributions to, or investments in, any other
person (other than to wholly owned Subsidiaries of the Company or customary
loans or advances to employees in accordance with past practice); or (iv) enter
into any material commitment or transaction (including, but not limited to, any
borrowing, capital expenditure or purchase, sale or lease of assets or real
estate);
(h) neither the Company nor any of its Subsidiaries shall change any of
the accounting methods used by it unless required by GAAP;
(i) neither the Company nor any of its Subsidiaries shall pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of any such claims, liabilities or obligations reflected or
reserved against in, or contemplated by, the consolidated financial statements
(or the notes thereto) of the Company and its consolidated Subsidiaries;
(j) neither the Company nor any of its Subsidiaries will adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any
of its Subsidiaries (other than the Merger);
(k) neither the Company nor any of its Subsidiaries will take, or agree to
commit to take, any action that would make any representation or warranty of
the Company contained herein, in the case of any representation or warranty not
qualified by materiality, materially inaccurate or, in the case of any other
representation or warranty, inaccurate in any respect at, or as of any time
prior to, the Effective Time; and
(l) neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or
to authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 5.2 Access; Confidentiality. Upon reasonable notice, the Company
shall (and shall cause each of its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financing sources and other representatives of
Parent, access, during normal business hours during the period prior to the
Appointment Date, to all its properties, books, contracts, commitments and
records and, during such period, the Company shall (and shall cause each of its
Subsidiaries to) furnish promptly to the Parent (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request. After the Appointment Date the Company shall
provide Parent and such persons as Parent shall designate with all such
information, at such time as Parent shall request. Unless otherwise required
by law and until the Appointment Date, Parent will hold and will cause any
Representative, as defined in the Confidentiality Agreement, dated November 22,
1996 between the Company and Parent to hold
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any such information which is nonpublic in confidence pursuant to the terms of
such Confidentiality Agreement.
Section 5.3 Consents and Approvals. (a) Each of the Company, Parent and
the Purchaser will take all reasonable actions necessary to comply promptly
with all legal requirements which may be imposed on it with respect to this
Agreement and the transactions contemplated hereby (which actions shall
include, without limitation, furnishing all information required under the HSR
Act and in connection with approvals of or filings with any other Governmental
Entity) and will promptly cooperate with and furnish information to each other
in connection with any such requirements imposed upon any of them or any of
their Subsidiaries in connection with this Agreement and the transactions
contemplated hereby. Each of the Company, Parent and the Purchaser will, and
will cause its Subsidiaries to, take all reasonable actions necessary to obtain
(and will cooperate with each other in obtaining) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or other
public or private third party required to be obtained or made by Parent, the
Purchaser, the Company or any of their Subsidiaries in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement
and the Company shall, prior to consummation of the Offer have (i) used its
reasonable best efforts to obtain the consents under the agreements indicated
by one asterisk in Section 3.4 of the Company's Disclosure Schedule, and (ii)
obtained the consents under the agreements indicated by two asterisks in
Section 3.4 of the Company's Disclosure Schedule. Parent and the Purchaser
shall reasonably cooperate in the obtaining of such consents.
(b) The Company and Parent shall take all reasonable actions necessary to
file as soon as practicable notifications under the HSR Act and to respond as
promptly as practicable to any inquiries received from the Federal Trade
Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters.
Section 5.4 No Solicitation. Neither the Company nor any of its
Subsidiaries or affiliates shall (and the Company shall use its best efforts to
cause its officers, directors, employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
any of its affiliates or representatives) concerning any merger, tender offer,
exchange offer, sale of assets, sale of shares of capital stock or debt
securities or similar transactions involving the Company or any Subsidiary,
division or operating or principal business unit of the Company (an
"Acquisition Proposal"). The Company will immediately cease any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. Notwithstanding the foregoing, the
Company may furnish information concerning its business, properties or assets
to any corporation, partnership, person or other entity or group pursuant to
appropriate confidentiality agreements, and may negotiate and participate in
discussions and negotiations with such entity or group concerning an
Acquisition Proposal (x) if such entity or
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group has on an unsolicited basis submitted a bona fide written proposal to the
Board of Directors of the Company relating to any such transaction which the
Board determines represents a superior transaction to the Offer and the Merger
and (y) if the Board of Directors of the Company determines, only after receipt
of advice from independent legal counsel to the Company, that the failure to
provide such information or access or to engage in such discussions or
negotiations could cause the Board of Directors to violate its fiduciary duties
to the Company's shareholders under applicable law. The Company will
immediately communicate to Parent the terms of any proposal, discussion,
negotiation or inquiry (and will disclose any written materials received by the
Company in connection with such proposal, discussion negotiation, or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
Section 5.5 Brokers or Finders. The Company represents, as to itself, its
Subsidiaries and its affiliates, that, except as set forth in Section 5.5 of
the Company's Disclosure Schedule, no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any brokers
or finder's fee or any other commission or similar fee in connection with any
of the transactions contemplated by this Agreement and the Company agrees to
indemnify and hold Parent harmless from and against any and all claims,
liabilities or obligations with respect to any other fees, commissions or
expenses asserted by any person on the basis of any act or statement alleged to
have been made by the Company or its affiliates. The expenses of the Company
in connection with the transactions contemplated by this Agreement, including
the fees and expenses of attorneys, accountants, investment bankers, financial
advisors or similar agents or reasonable estimates thereof, are set forth in
Section 5.5 of the Company's Disclosure Schedule.
Section 5.6 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto shall use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, legal or otherwise,
to consummate and make effective the Merger and the other transactions
contemplated by this Agreement. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of the Company and Parent shall
use all reasonable efforts to take, or cause to be taken, all such necessary
actions.
Section 5.7 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release acceptable to Parent
and the Company. Thereafter, so long as this Agreement is in effect, neither
the Company, Parent nor any of their respective affiliates shall issue or cause
the publication of any press release or other announcement with respect to the
Merger, this Agreement or the other transactions contemplated hereby without
the prior consultation of the other party, except as may be required by law or
by any listing agreement with a national securities exchange or trading market.
Section 5.8 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Parent shall give prompt notice to the Company, of
(i) the occurrence or
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non-occurrence of any event the occurrence or non-occurrence of which would
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate in any material respect at or prior to the Effective Time and
(ii) any material failure of the Company or Parent, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.8 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 5.9 Directors' and Officers' Insurance and Indemnification. (a)
After the earlier of (1) the Effective Time or (2) the consummation of the
Offer, Parent shall and shall cause the Surviving Corporation (or any successor
to the Surviving Corporation) to indemnify, defend and hold harmless the
present and former officers and directors of the Company and its Subsidiaries
(each an "Indemnified Party") against all losses, claims, damages, liabilities,
fees and expenses (including reasonable fees and disbursements of counsel and
judgments, fines, losses, claims, liabilities and amounts paid in settlement
(provided that any such settlement is effected with the written consent of the
Parent or the Surviving Corporation, such consent not to be unreasonably
withheld)) arising out of actions or omissions occurring at or prior to the
Effective Time to the full extent permitted under North Carolina law, such
right to include advancement of expenses incurred in the defense of any action
or suit; provided that any determination required to be made with respect to
whether such Indemnified Party is entitled to indemnity hereunder (including
without limitation whether, with respect to the indemnification of such
Indemnified Party by the Surviving Corporation, an Indemnified Party's conduct
complies with the standards set forth under the NCBCA), shall be made at
Parent's expense by independent counsel mutually acceptable to Parent and the
Indemnified Party and; provided further, that nothing herein shall impair any
rights or obligations of any present or former directors or officers of the
Company.
(b) Parent or the Surviving Corporation shall maintain the Company's
existing officers' and directors' liability insurance, including coverage with
respect to claims arising from facts or events which occurred before the
Effective Time ("D&O Insurance") for a period of not less than three years
after the Effective Date; provided, that the Parent may substitute therefor
policies of substantially similar coverage and amounts containing terms no less
favorable to such former directors or officers; provided, further, if the
existing D&O Insurance expires, is terminated or cancelled during such period,
Parent or the Surviving Corporation will obtain substantially similar D&O
Insurance; provided further, however, that in no event shall the Company be
required to pay aggregate annual premiums for insurance under this Section in
excess of 150% of the aggregate annual premiums paid by the Company in 1996 on
an annualized basis for such purpose and, in the event that the annual premium
for insurance required to be obtained hereunder shall exceed such amount,
Parent shall maintain as much of such insurance as may be maintained for such
amount.
(c) To the extent permitted by applicable law, the articles of
incorporation and the bylaws of the Surviving Corporation for so long as it
continues to exist shall contain the provisions with respect to advancement of
expenses, indemnification and exculpation from liability set forth in the
Company's Articles of Incorporation and Bylaws on the date of this
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Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who on or prior to
the Effective Time were directors or officers of the Company, unless such
modification is required by law.
(d) In the event the Company or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity in
such consolidation or merger or (ii) transfers all or substantially all its
properties and assets to any person, then, and in each case, proper provision
shall be made so that the successors and assigns of the Company or the
Surviving Corporation, as the case may be, honor the indemnification
obligations set forth in this Section 5.9.
(e) The obligations of the Company, the Surviving Corporation and Parent
under this Section 5.9 shall not be terminated, modified or assigned in such a
manner as to adversely affect any director or officer to whom this Section 5.9
applies without the consent of such affected director or officer (it being
expressly agreed that the directors and officers to whom this Section 5.9
applies shall be third-party beneficiaries of this Section 5.9).
Section 5.10 Consummation of Merger. Parent shall, promptly following the
consummation of the Offer, take all reasonable action within its control,
including, if necessary, causing the Company to take the actions set forth in
Section 1.8 hereof and the voting of Shares held by it, to cause the
consummation of the Merger.
Section 5.11 Employee Benefit Plans. (a) With respect to any individual
who becomes an employee of Parent following termination of such individual's
employment with the Company or any affiliate, Parent shall (i) recognize all
accumulated service of such individual with the Company or any affiliate for
purposes of eligibility and vesting under all benefit plans, programs and
arrangements maintained, sponsored or contributed to by Parent (collectively,
the "Parent Plans"); (ii) to the extent commercially reasonable, waive or cause
any insurance carriers providing benefits under the Parent Plans, to waive, any
preexisting condition requirements under the Parent Plans with respect to such
individual; and (iii) to the extent that such individual satisfies the
eligibility requirements of the Parent Plans after taking into account the
requirements of (i) above, allow such individual to participate in the Parent
Plans effective as of the date on which the individual becomes a Parent
employee.
(b) Parent and the Company shall reasonably cooperate with one another to
ensure that the employee benefit plans and programs maintained by such entities
satisfy any and all nondiscrimination requirements applicable to such plans and
programs on and after the date on which Parent and the Company become part of
the same controlled group within the meaning of Section 414(b) and/or (c) of
the Internal Revenue Code of 1986, as amended.
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ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject
to the satisfaction on or prior to the Closing Date of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company, Parent or the Purchaser, as the case may be, to the extent permitted
by applicable law:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the requisite vote of the holders of the Shares, if required by
applicable law and the Articles of Incorporation, in order to consummate the
Merger;
(b) Statutes; Consents. No statute, rule, order, decree or regulation
shall have been enacted or promulgated by any government or any governmental
agency or authority of competent jurisdiction which prohibits the consummation
of the Merger and all governmental consents, orders and approvals required for
the consummation of the Merger and the transactions contemplated hereby shall
have been obtained and shall be in effect at the Effective Time;
(c) Injunctions. There shall be no order or injunction of a court or
other governmental authority of competent jurisdiction in effect precluding,
restraining, enjoining or prohibiting consummation of the Merger;
(d) Purchase of Shares in Offer. Parent, the Purchaser or their
affiliates shall have purchased Shares pursuant to the Offer; and
(e) HSR Approval. The applicable waiting period under the HSR Act shall
have expired or been terminated.
Section 6.2 Conditions to Parent's and the Purchaser's Obligations to
Effect the Merger. The obligations of Parent and the Purchaser to consummate
the Merger are further subject to the fulfillment of the following condition,
which may be waived in whole or in part by Parent and the Purchaser:
(a) Company Plans. All actions contemplated by Section 2.5 hereof shall
have been taken.
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ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval thereof:
(a) By the mutual consent of the Board of Directors of Parent or the
Purchaser and the Board of Directors of the Company.
(b) By either of the Board of Directors of the Company (subject to the
requirements, if any, of Section 1.3(b) hereof) or the Board of Directors of
Parent or the Purchaser:
(i) if the Offer shall have expired without any Shares being
purchased therein; provided, however, that the right to terminate this
Agreement under this Section 7.1(b)(i) shall not be available to any party
whose failure to fulfill any material obligation under this Agreement has
been the cause of, or resulted in, the failure of Parent or the Purchaser,
as the case may be, to purchase the Shares pursuant to the Offer on or
prior to such date; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling or
other action the parties hereto shall use their reasonable efforts to
lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable.
(c) By the Board of Directors of the Company (subject to the requirements,
if any, of Section 1.3(b) hereof):
(i) if, prior to the purchase of the Shares pursuant to the
Offer, the Board of Directors of the Company shall have (A) withdrawn, or
modified or changed in a manner adverse to Parent or the Purchaser its
approval or recommendation of the Offer, this Agreement or the Merger in
order to permit the Company to execute an agreement in principle or a
definitive agreement providing for the acquisition of the Company by
merger, consolidation or otherwise, on terms (including the per share
consideration) determined by the Board of Directors of the Company, to be
superior to the shareholders of the Company as compared to the terms of
the acquisition of the Company contemplated by this Agreement, and (B)
determined, only after receipt of advice from independent legal counsel to
the Company, that the failure to take such action as set forth in the
preceding clause (A) could cause the Board of Directors to violate its
fiduciary duties to the Company's shareholders under applicable law; or
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(ii) if, prior to the purchase of the Shares pursuant to the
Offer, Parent or the Purchaser breaches or fails in any material
respect to perform or comply with any of its material covenants and
agreements contained herein or breaches its representations and
warranties in any material respect; or
(iii) if Parent or the Purchaser shall have terminated the
Offer, or the Offer shall have expired, without Parent or the
Purchaser, as the case may be, purchasing any Shares pursuant
thereto; provided that the Company may not terminate this Agreement
pursuant to this Section 7.1(c)(iii) if such termination or
expiration without purchase is the result of the Company being in
material breach of this Agreement; or
(iv) if Parent, the Purchaser or any of their affiliates shall
have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer;
provided, that the Company may not terminate this Agreement
pursuant to this Section 7.1(c)(iv) if such termination or failure
is the result of the Company being in material breach of this
Agreement.
(d) By the Board of Directors of Parent or the Purchaser:
(i) if prior to the purchase of the Shares pursuant to the
Offer, the Board of Directors of the Company shall have withdrawn,
or modified or changed in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, this
Agreement or the Merger or shall have recommended an Acquisition
Proposal or offer, or shall have executed an agreement in principle
(or similar agreement) or definitive agreement providing for a
tender offer or exchange offer for any shares of capital stock of
the Company, or a merger, consolidation or other business
combination with a person or entity other than Parent, the
Purchaser or their affiliates (or the Board of Directors of the
Company resolves to do any of the foregoing); or
(ii) if Parent or the Purchaser shall have terminated the
Offer, or the Offer shall have expired, without Parent or the
Purchaser purchasing any Shares thereunder, provided that Parent or
the Purchaser may not terminate this Agreement pursuant to this
Section 7.1(d)(ii) if Parent or the Purchaser has failed to
purchase the Shares in the Offer in violation of the material terms
thereof; or
(iii) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any
of the conditions set forth in Annex A hereto, Parent, the
Purchaser, or any of their affiliates shall have failed to commence
the Offer on or prior to five business days following the date of
the initial public announcement of the Offer.
Section 7.2 Effect of Termination. In the event of the termination
of this Agreement as provided in Section 7.1, written notice thereof shall
forthwith be given to the other party or parties specifying the provision
hereof pursuant to which such termination is made, and
30
<PAGE> 36
this Agreement, except for the last sentence of Section 5.2 and, if such
termination occurs after the Appointment Date, Section 5.9 hereof shall
forthwith become null and void, and there shall be no liability on the part of
the Parent or the Company except (A) for fraud or for material breach of this
Agreement and (B) as set forth in this Section 7.2 and Section 8.1.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as otherwise contemplated by
this Agreement, including Section 8.1(b) hereof, all costs and expenses
incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
(b) If (v) the Board of Directors of the Company shall terminate this
Agreement pursuant to Section 7.1(c)(i) hereof, (w) the Board of Directors of
Parent or the Purchaser shall terminate this Agreement pursuant to Section
7.1(d)(i) hereof, (x) the Board of Directors of Parent or the Purchaser shall
terminate this Agreement pursuant to Section 7.1(d)(ii) or 7.1(d)(iii) hereof,
and the event set forth in paragraph (e) of Annex A shall have occurred, or (y)
the Board of Directors of Parent or the Purchaser shall terminate this
Agreement pursuant to Section 7.1(d)(ii) or 7.1(d)(iii) hereof as a result of
the occurrence of any event set forth in paragraph (d) of Annex A hereto, or
(z) the Board of Directors of Parent or Purchaser shall terminate this
Agreement pursuant to Section 7.1(d)(ii) or 7.1(d)(iii) hereof as a result of
any representation or warranty being untrue when made or breach or failure to
perform or comply with any material obligation, agreement, or covenant by the
Company set forth in paragraph (c) of Annex A hereto, the Company shall pay to
Parent (not later than two business days after termination of this Agreement)
an amount equal to $1,500,000 and shall promptly assume and pay, or reimburse
Parent for, all reasonable out-of-pocket fees and expenses incurred, or to be
incurred, by Parent, the Purchaser and their affiliates (including the fees and
expenses of legal counsel, accountants, financial advisors, other consultants,
financial printers and financing sources) in connection with the Offer, the
Merger and the consummation of the transactions contemplated by this Agreement.
In the event of any breach or failure set forth in (z) above, such $1,500,000
amount shall be paid by the Company to Parent as liquidated damages and not as
a penalty. In any such event, recovery of such liquidated damages shall be the
sole right of Parent or the Purchaser and payment of such amount shall be the
sole liability of the Company. Such amount is being fixed as liquidated
damages in any such event by reason of the fact that the actual damages to be
suffered by Parent or the Purchaser are by their nature uncertain and
unascertainable with exactness. In any such event, neither Parent nor the
Purchaser shall seek any money or other judgment against the Company, or any
officer, director or shareholder of the Company or against the assets of the
Company, and the sole recourse of Parent and the Purchaser shall be to recover
liquidated damages in the foregoing amount.
Section 8.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the shareholders of the Company
contemplated hereby, by written agreement
31
<PAGE> 37
of the parties hereto, by action taken by their respective Boards of Directors
(which in the case of the Company shall include approvals as contemplated in
Section 1.3(b)), at any time prior to the Closing Date with respect to any of
the terms contained herein; provided, however, that after the approval of this
Agreement by the shareholders of the Company, no such amendment, modification
or supplement shall reduce the amount or change the form of the Merger
Consideration.
Section 8.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time.
Section 8.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by an overnight courier service, such as Federal
Express, to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
PCA International, Inc.
815 Matthews-Mint Hill Road
Matthews, North Carolina 27102
Attention: John Grosso
Telephone No.: (704) 847-8011
Telecopy No.: (704) 847-8010
with a copy to:
Marc Weingarten, Esq.
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Telephone No.: (212) 756-2000
Telecopy No.: (212) 593-5955
and
(b) if to the Company, to:
American Studios, Inc.
11001 Park Charlotte Boulevard
Charlotte, North Carolina 28273
Attention:
Telephone No.: (314) 231-1575
Telecopy No.: (314)
with a copy to:
E. Lynwood Mallard, Esq.
32
<PAGE> 38
Petree Stockton, L.L.P.
3500 One First Union Center
301 South College Street
Charlotte, North Carolina 28202-6001
Telephone No.: (704) 338-5000
Telecopy No.: (704) 338-5125
Section 8.5 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation". As used in this Agreement, the term "affiliate(s)" shall
have the meaning set forth in Rule 12b-2 of the Exchange Act.
Section 8.6 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties.
Section 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement, and the Confidentiality Agreement (including the
documents and the instruments referred to herein and therein): (a) constitute
the entire agreement and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.9 is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
Section 8.8 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 8.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina without
giving effect to the principles of conflicts of law thereof.
Section 8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
33
<PAGE> 39
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
PCA INTERNATIONAL, INC.
By:
---------------------------------
Name: John Grosso
Title: President
ASI ACQUISITION CORP.
By:
---------------------------------
Name: John Grosso
Title: President
AMERICAN STUDIOS, INC.
By:
---------------------------------
Name:
Title:
34
<PAGE> 40
ANNEX A
Certain Conditions of the Offer. Notwithstanding any other provisions of
the Offer, and in addition to (and not in limitation of) the Purchaser's rights
to extend and amend the Offer at any time in its sole discretion (subject to
the provisions of the Merger Agreement), the Purchaser shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-l(c) under the Exchange Act (relating to the
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and, in the case of an event described in the
following clause (ii) or (iii), may terminate or amend the Offer as to any
Shares not then paid for, if (i) any applicable waiting period under the HSR
Act has not expired or terminated, (ii) the Minimum Condition has not been
satisfied, or (iii) at any time on or after the date of the Merger Agreement
and before the time of payment for any such Shares, any of the following events
shall occur; provided, that if the occurrence of any event in clause (c) below
is curable by the Company through the exercise of its reasonable best efforts
and for so long as the Company continues to exercise such reasonable best
efforts, Purchaser may not terminate the Offer prior to the next scheduled
expiration date:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or deemed applicable to the Offer or the Merger by any domestic
or foreign federal or state governmental regulatory or administrative agency or
authority or court or legislative body or commission which directly or
indirectly (1) prohibits, or imposes any material limitations on, Parent's or
the Purchaser's ownership or operation (or that of any of their respective
Subsidiaries or affiliates) of all or a material portion of their or the
Company's businesses or assets, or compels Parent or the Purchaser or their
respective Subsidiaries and affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or Parent and their
respective Subsidiaries, in each case taken as a whole, (2) prohibits, or makes
illegal, the acceptance for payment, payment for or purchase of Shares or the
consummation of the Offer, the Merger or the other transactions contemplated by
the Merger Agreement, (3) results in a material delay in or restricts the
ability of the Purchaser, or renders the Purchaser unable, to accept for
payment, pay for or purchase some or all of the Shares, (4) imposes material
limitations on the ability of the Purchaser or Parent effectively to exercise
full rights of ownership of the Shares, including, without limitation, the
right to vote the Shares purchased by it on all matters properly presented to
the Company's shareholders, or (5) otherwise materially adversely affects the
consolidated financial condition, businesses or results of operations of the
Company and its Subsidiaries, taken as a whole; provided that Parent shall have
used all reasonable efforts to cause any such judgment, order or injunction to
be vacated or lifted;
(b) there shall have occurred (1) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange or in the
NASDAQ National Market System, (2) a declaration of a banking moratorium or any
suspension of payments in
1
<PAGE> 41
respect of banks in the United States (whether or not mandatory), (3) a
commencement of a war, major armed hostilities or other international or
national calamity directly or indirectly involving the United States, (4) any
material limitation by any foreign or United States governmental authority on
the extension of credit by banks or other financial institutions, (5) a change
in general financial bank or capital market conditions which materially and
adversely affects the ability of financial institutions in the United States to
extend credit or syndicate loans or (6) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material acceleration
or worsening thereof;
(c) any of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified as to materiality shall not be true, or
any of the representations and warranties of the Company set forth in the
Merger Agreement that are not so qualified shall not be true in any material
respect, in either case when made or immediately prior to the expiration date
of the Offer as though made on or as of such date or the Company shall have
breached or failed in any material respect to perform or comply with any
material obligation, agreement or covenant required by the Merger Agreement to
be performed or complied with by it; or any event not set forth in Section 3.6
of the Company Disclosure Schedule shall have occurred having a material
adverse effect on the business, financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole;
(d) any person or group shall have entered into a definitive agreement or
agreement in principle with the Company with respect to a merger, consolidation
or other business combination with the Company; or
(e) the Company's Board of Directors shall have withdrawn, or modified or
changed in a manner adverse to Parent or the Purchaser (including by amendment
of the Schedule 14D-9) its recommendation of the Offer, the Merger Agreement,
or the Merger, or recommended another acquisition proposal, or the Board of
Directors of the Company, upon the reasonable request of the Purchaser, shall
fail within 10 days to reaffirm such approval or recommendation or shall have
resolved to do any of the foregoing; which in the reasonable judgment of
Parent, in any such case, and regardless of the circumstances giving rise to
such condition, makes it inadvisable to proceed with the Offer and/or with such
acceptance for payment of or payments for Shares.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser may be waived by Parent or the Purchaser, in whole or in part at any
time and from time to time in the sole discretion of Parent or the Purchaser.
The failure by Parent or the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
2
<PAGE> 1
EXHIBIT 99(c)(2)
<TABLE>
<CAPTION>
Number
Shareholders Party to Stock Agreement with Purchase Option of Shares
- ---------------------------------------------------------- ---------
<S> <C>
Merrill Lynch Capital Corporation 5,950,177
Randy J. Bates 1,656,187
Kathy D. Bates 127,005
James Robert Wren, Jr. Ttee Michelle Leigh Taylor
Randy J. Bates Irrevocable Trust
dtd 12/28/88 FBO Michelle Leigh Taylor 80,251
James Robert Wren, Jr. Ttee Monica Leigh Bates
Randy J. Bates Irrevocable Trust
dtd 12/28/88 FBO Monica Leigh Bates 80,251
James Robert Wren, Jr. Ttee Randy J. Bates II
Randy J. Bates Irrevocable Trust
dtd 12/28/88 FBO Randy J. Bates II 80,251
The Bates Family Foundation 114,400
The Southeastern Baptist Theological Seminary 300,000
R. Kent Smith 1,038,865
Kenneth Hester Ttee Jennifer Diane Smith
R. Kent Smith Irrevocable Trust
dtd 12/28/88 FBO Jennifer Diane Smith 83,351
Kenneth Hester Ttee Andrew Kent Smith
R. Kent Smith Irrevocable Trust
dtd 12/28/88 FBO Andrew Kent Smith 83,351
J. Robert Wren Jr. 294,685
The Wren Family Foundation 49,100
Shareholders Party to Stock Agreement without Purchase Option
- -------------------------------------------------------------
Alan P. Shaw 347,600
Norman V. Swenson 564,160
Swenson Children 230,997
Tom E. DuPree, Jr. 1,455,000
</TABLE>
<PAGE> 2
EXHIBIT 99(c)(2)
FORM OF STOCK AGREEMENT WITH PURCHASE OPTION
STOCK AGREEMENT, dated as of December __, 1996, among PCA International,
Inc., a North Carolina corporation ("Parent"), ASI Acquisition Corp., a North
Carolina corporation and a direct wholly owned subsidiary of Parent (the
"Purchaser"), and ___________________ (the "Shareholder").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Purchaser and American Studios, Inc., a North Carolina corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which the Purchaser will be merged with and into the Company (the
"Merger") (capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Merger Agreement);
WHEREAS, in furtherance of the Merger, as soon as practicable (and not
later than five business days) after the execution and delivery of the Merger
Agreement, Purchaser shall commence a cash tender offer (the "Offer") to
purchase at a price of $2.50 per share all outstanding shares of Company Common
Stock (as defined in Section 1 hereof) including all of the Shares (as defined
in Section 2 hereof) beneficially owned by the Shareholder; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Shareholder agree, and the Shareholder
has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean at any time the common stock, $.00l
par value, of the Company.
<PAGE> 3
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into the Merger
Agreement, the Shareholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, not later than the fifth business
day after commencement of the Offer pursuant to Section 1.1 of the Merger
Agreement and Rule 14d-2 under the Exchange Act, the number of shares of
Company Common Stock set forth opposite such Shareholder's name on Schedule I
hereto (the "Existing Shares", and together with any shares acquired by the
Shareholder in any capacity after the date hereof and prior to the termination
of this Agreement whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities, or by means
of purchase, dividend, distribution or otherwise, the "Shares"), all of which
are Beneficially Owned by the Shareholder. The Shareholder hereby acknowledges
and agrees that Parent's and the Purchaser's obligation to accept for payment
and pay for Shares in the Offer, including the Shares Beneficially Owned by
such Shareholder, is subject to the terms and conditions of the Offer.
(b) The transfer by the Shareholder of the Shares to the Purchaser in the
Offer shall pass to and unconditionally vest in the Purchaser good and valid
title to the Shares, free and clear of all claims, liens, restrictions,
security interests, pledges, limitations and encumbrances whatsoever.
(c) The Shareholder hereby permits Parent and the Purchaser to publish and
disclose in the Offer Documents and, if approval of the Company's shareholders
is required under applicable law, the Proxy Statement (including all documents
and schedules filed with the SEC) its identity and ownership of the Company
Common Stock and the nature of its commitments, arrangements and understandings
under this Agreement.
3. Option. In order to induce Parent and the Purchaser to enter into the
Merger Agreement, the Shareholder hereby grants to Parent an irrevocable option
(a "Stock Option") to purchase the Shares from the Shareholder (the "Option
Shares") at an amount (the "Purchase Price") equal to the Offer Price. If (i)
the Offer is terminated, abandoned or withdrawn by Parent or the Purchaser, or
(ii) the Merger Agreement is terminated in accordance with its terms, the Stock
Option shall, in any such case (but provided neither Parent nor the Purchaser
has materially breached the Merger Agreement), become exercisable, in whole or
in part, upon the first to occur of any such event and remain exercisable in
whole or in part until the date which is 45 days after the date of the
occurrence of such event (the "45 Day Period"), so long as: (i) all waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), required for the purchase of the Option Shares upon
such exercise shall have expired or been waived, and (ii) there shall not be in
effect any preliminary or final injunction or other order issued by any court
or governmental, administrative or regulatory agency or authority or
legislative body or commission prohibiting the exercise of the Stock Option
pursuant to this
<PAGE> 4
Agreement; provided that if all HSR Act waiting periods shall not have expired
or been waived or there shall be in effect any such injunction or order, in
each case on the expiration of the 45 Day Period, the 45 Day Period shall be
extended until 5 business days after the later of (A) the date of expiration or
waiver of all HSR Act waiting periods and (B) the date of removal or lifting of
such injunction or order; provided further that in no event shall the 45 Day
Period be extended beyond June 30, 1997. In the event that Parent wishes to
exercise the Stock Option, Parent shall send a written notice (the "Notice") to
the Shareholder identifying the place and date (not less than two nor more than
10 business days from the date of the Notice) for the closing of such purchase.
In the event that Parent has terminated the Offer due to the occurrence of any
event set forth in clauses (a)-(c) of Annex A to the Merger Agreement and
Parent exercises the Stock Option and purchases the Option Shares, Parent
shall, to the extent permitted by law, seek to purchase all of the remaining
shares of Company Common Stock outstanding at the Purchase Price pursuant to a
merger and/or tender offer.
4. Provisions Concerning the Company Common Stock. During the period
commencing on the date hereof and continuing until the first to occur of the
Effective Time or termination of the Merger Agreement in accordance with its
terms, the Shareholder shall, at any meeting of the holders of Company Common
Stock, however called, or in connection with any written consent of the holders
of Company Common Stock, vote (or cause to be voted) the Shares (if any) then
held of record or Beneficially Owned by the Shareholder, (i) in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and this Agreement and any actions required in furtherance
thereof and hereof; (ii) against any action or agreement that would result in a
breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement; and (iii)
except as otherwise agreed to in writing in advance by Parent, against the
following actions (other than the Merger and the transactions contemplated by
the Merger Agreement): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or
its Subsidiaries; (B) a sale, lease or transfer of a material amount of assets
of the Company or its Subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or its Subsidiaries; (C)(1) any
change in a majority of the persons who constitute the board of directors of
the Company; (2) any change in the present capitalization of the Company or any
amendment of the Company's Articles of Incorporation or Bylaws; (3) any other
material change in the Company's corporate structure or business; or (4) any
other action which, in the case of each of the matters referred to in clauses
(iii)(C)(1), (2) or (3) of this Section 4, is intended, or could reasonably be
expected, to impede, interfere with, delay, postpone, or materially adversely
affect the Merger and the actions and transactions contemplated by this
Agreement and the Merger Agreement. The Shareholder shall not enter into any
agreement or understanding with any person or entity the effect of which would
be inconsistent or violative of the provisions and agreements contained in this
Section 4.
5. Covenants, Representations and Warranties of the Shareholder. The
Shareholder hereby represents and warrants to Parent as follows:
<PAGE> 5
(a) Ownership of Shares. The Shareholder is the Beneficial Owner of the
Shares, as set forth on Schedule 1. On the date hereof, the Existing Shares
constitute all of the outstanding Shares owned of record or Beneficially Owned
by the Shareholder. The Shareholder has sole voting power and sole power to
issue instructions with respect to the matters set forth in Sections 2 and 4
hereof, sole power of disposition, sole power to demand appraisal rights and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Existing Shares with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(b) Power; Binding Agreement. The Shareholder has the legal capacity,
power and authority to enter into and perform all of his obligations under this
Agreement. The execution, delivery and performance of this Agreement by the
Shareholder will not violate any other agreement to which the Shareholder is a
party including, without limitation, any voting agreement, proxy arrangement,
pledge agreement, shareholders agreement or voting trust. This Agreement has
been duly and validly executed and delivered by the Shareholder and constitutes
a valid and binding agreement of the Shareholder, enforceable against the
Shareholder in accordance with its terms. There is no beneficiary or holder of
a voting trust certificate or other interest of any trust of which the
Shareholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such Shareholder of the
transactions contemplated hereby.
(c) No Conflicts. Except for (i) filings under the HSR Act and the
Exchange Act, (A) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority is necessary for the
execution of this Agreement by the Shareholder and the consummation by the
Shareholder of the transactions contemplated hereby and (B) none of the
execution and delivery of this Agreement by the Shareholder, the consummation
by the Shareholder of the transactions contemplated hereby or compliance by the
Shareholder with any of the provisions hereof shall (1) conflict with or result
in any breach of any applicable organizational documents applicable to the
Shareholder, (2) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
loan agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which the Shareholder is a party or by which the Shareholder or any of
its properties or assets may be bound, or (3) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation applicable to
the Shareholder or any of its properties or assets.
(d) No Encumbrances. Except as permitted by this Agreement, the Shares
and the certificates representing such Shares are now, and at all times during
the term hereof will be, held by the Shareholder, or by a nominee or custodian
for the benefit of such Shareholder, free and clear of all liens, claims,
security interests, proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder.
<PAGE> 6
(e) No Finder's Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Shareholder.
(f) No Solicitation. The Shareholder shall not, in the capacity as a
shareholder or otherwise, directly or indirectly, solicit (including by way of
furnishing information) or negotiate in response to any inquiries or the making
of any proposal by any person or entity (other than Parent or any affiliate of
Parent) concerning any merger, tender offer, exchange offer, sale of assets,
sale of shares of capital stock or debt securities or similar transactions
involving the Company or any Subsidiary, division or operating or principal
business unit of the Company. If the Shareholder receives any such inquiry or
proposal, then the Shareholder shall promptly inform Parent of the existence
thereof. The Shareholder will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Notwithstanding the
foregoing, nothing herein shall prevent the Shareholder from complying with any
fiduciary duties it may have in its capacity as an officer and/or director of
the Company.
(g) Restriction on Transfer, Proxies and Non-Interference. The
Shareholder shall not, directly or indirectly: (i) except as applicable in
connection with the transactions contemplated by Section 2 hereof, offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of the Shares or
any interest therein (any such transaction, a "Transfer"), except that
Shareholder may transfer Shares to a family member of such Shareholder or a
charitable organization provided such transferee agrees to be bound by the
provisions of this Agreement; (ii) except as contemplated by this Agreement,
grant any proxies or powers of attorney, deposit the Shares into a voting trust
or enter into a voting agreement with respect to the Shares; or (iii) take any
action that would make any representation or warranty of the Shareholder
contained herein untrue or incorrect or have the effect of preventing or
disabling the Shareholder from performing its obligations under this Agreement.
(h) Reliance by Parent. The Shareholder understands and acknowledges that
Parent is entering into, and causing Purchaser to enter into, the Merger
Agreement in reliance upon the Shareholder's execution and delivery of this
Agreement.
(i) Waiver of Appraisal Rights. The Stock holder hereby waives any rights
of appraisal or rights to dissent from the Merger that such Shareholder may
have.
(j) Access to Information. The Shareholder represents and warrants that,
in connection with the execution and delivery of this Agreement, the
Shareholder has been afforded the full opportunity to ask questions and receive
information regarding the Offer and the terms of the Merger Agreement and the
transactions contemplated thereby and the interests of any affected party.
<PAGE> 7
6. Covenants, Representations and Warranties of Parent and the Purchaser.
Each of Parent and the Purchaser hereby represents and warrants to the
Shareholder as follows:
(a) Power; Binding Agreement. Parent and the Purchaser each has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement. The execution, delivery and performance of this
Agreement by the each of the Parent and the Purchaser will not violate any
other agreement to which either of them is a party. This Agreement has been
duly and validly executed and delivered by each of the Parent and the Purchaser
and constitutes a valid and binding agreement of each of the Parent and the
Purchaser, enforceable against each of the Parent and the Purchaser in
accordance with its terms.
(b) No Conflicts. Except for (i) filings under the HSR Act and the
Exchange Act, (A) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority is necessary for the
execution of this Agreement by each of the Parent and the Purchaser and the
consummation by each of the Parent and the Purchaser of the transactions
contemplated hereby and (B) none of the execution and delivery of this
Agreement by each of the Parent and the Purchaser, the consummation by each of
the Parent and the Purchaser of the transactions contemplated hereby or
compliance by each of the Parent and the Purchaser with any of the provisions
hereof shall (1) conflict with or result in any breach of any applicable
organizational documents applicable to either of the Parent or the Purchaser,
(2) result in a violation or breach of, or constitute (with or without notice
or lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which either of the
Parent or the Purchaser is a party or by which either of the Parent or the
Purchaser or any of their properties or assets may be bound, or (3) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to either of the Parent or the Purchaser or any of their properties
or assets.
(c) No Finder's Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of either of
the Parent or the Purchaser.
7. Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
8. Stop Transfer. The Shareholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer is
made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or
<PAGE> 8
the like, the term "Shares" shall refer to and include the Shares as well as
all such stock dividends and distributions and any shares into which or for
which any or all of the Shares may be changed or exchanged.
9. Termination. Except for Section 10 hereof, and except as otherwise
provided herein, including, but not limited to, Section 3 hereof, the covenants
and agreements contained herein shall terminate upon the termination of the
Merger Agreement in accordance with its terms.
10. Indemnification. Parent shall indemnify, defend and hold harmless the
Shareholder from and against any and all losses, damages, liabilities and
expenses (including, without limitation but subject to the next sentence,
reasonable fees and expenses of outside counsel) resulting from any claim or
litigation arising out of the execution, delivery and performance by the
Shareholder of this Stock Agreement. The Shareholder shall give prompt written
notice to Parent upon the Shareholder becoming aware of any claim or action in
respect of which the Shareholder intends to seek indemnity hereunder, and
Parent shall by prompt written notice to the Shareholder be entitled to assume
the defense of such claim or action with counsel selected by the Parent and
reasonably acceptable to the Shareholder.
Notwithstanding the foregoing, if the undersigned is an officer and/or
director of the Company and the claim or litigation relates to the
undersigned's status or conduct as an officer and/or director as well as the
undersigned's execution, delivery and performance of this Stock Agreement as a
Shareholder, the undersigned shall first seek recourse under any other
indemnity or insurance coverage to which the undersigned may be entitled in
such other capacities prior to being entitled to any indemnity hereunder.
11. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation
of law or otherwise. Notwithstanding any voluntary transfer of Shares, the
transferor shall remain liable for the performance of all obligations under
this Agreement of the transferor.
(c) Assignment. This Agreement shall not be assigned by operation of law
or otherwise without the prior written consent of the other parties, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
<PAGE> 9
(d) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with
a confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to Shareholder:
Telephone No.:
Telecopy No.:
If to Parent or PCA International, Inc.
the Purchaser: 815 Matthews - Mint Hill Road
Matthews, North Carolina 27102
Attention: John Grosso
Telephone No.: (704) 874-8011
Telecopy No.: (704) 847-8010
copy to: Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Marc Weingarten, Esq.
Telephone No.: (212) 756-2000
Telecopy No.: (212) 593-5955
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and
<PAGE> 10
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore in the
event of any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be entitled,
at law or in equity.
(h) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy or
to demand such compliance.
(j) No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto.
(k) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of North Carolina, without giving effect
to the principles of conflicts of law thereof.
(l) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
(m) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
<PAGE> 11
IN WITNESS WHEREOF, Parent, the Purchaser and the Shareholder have caused
this Agreement to be duly executed as of the day and year first above written.
PCA INTERNATIONAL, INC.
By:
-------------------------------
Name:
Title:
ASI ACQUISITION CORP.
By:
-------------------------------
Name:
Title:
-----------------------------------
<PAGE> 12
SCHEDULE I
Shareholder Number of Shares
- ----------- ----------------
<PAGE> 13
FORM OF STOCK AGREEMENT WITHOUT PURCHASE OPTION
STOCK AGREEMENT, dated as of December __, 1996, among PCA International,
Inc., a North Carolina corporation ("Parent"), ASI Acquisition Corp., a North
Carolina corporation and a direct wholly owned subsidiary of Parent (the
"Purchaser"), and __________________ (the "Shareholder").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Purchaser and American Studios, Inc., a North Carolina corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which the Purchaser will be merged with and into the Company (the
"Merger") (capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Merger Agreement);
WHEREAS, in furtherance of the Merger, as soon as practicable (and not
later than five business days) after the execution and delivery of the Merger
Agreement, Purchaser shall commence a cash tender offer (the "Offer") to
purchase at a price of $2.50 per share all outstanding shares of Company Common
Stock (as defined in Section 1 hereof) including all of the Shares (as defined
in Section 2 hereof) beneficially owned by the Shareholder; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Shareholder agree, and the Shareholder
has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean at any time the common stock, $.00l
par value, of the Company.
<PAGE> 14
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into the Merger
Agreement, the Shareholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, not later than the fifth business
day after commencement of the Offer pursuant to Section 1.1 of the Merger
Agreement and Rule 14d-2 under the Exchange Act, the number of shares of
Company Common Stock set forth opposite such Shareholder's name on Schedule I
hereto (the "Existing Shares", and together with any shares acquired by the
Shareholder in any capacity after the date hereof and prior to the termination
of this Agreement whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities, or by means
of purchase, dividend, distribution or otherwise, the "Shares"), all of which
are Beneficially Owned by the Shareholder. The Shareholder hereby acknowledges
and agrees that Parent's and the Purchaser's obligation to accept for payment
and pay for Shares in the Offer, including the Shares Beneficially Owned by
such Shareholder, is subject to the terms and conditions of the Offer.
(b) The transfer by the Shareholder of the Shares to the Purchaser in the
Offer shall pass to and unconditionally vest in the Purchaser good and valid
title to the Shares, free and clear of all claims, liens, restrictions,
security interests, pledges, limitations and encumbrances whatsoever.
(c) The Shareholder hereby permits Parent and the Purchaser to publish and
disclose in the Offer Documents and, if approval of the Company's shareholders
is required under applicable law, the Proxy Statement (including all documents
and schedules filed with the SEC) its identity and ownership of the Company
Common Stock and the nature of its commitments, arrangements and understandings
under this Agreement.
3. Provisions Concerning the Company Common Stock. During the period
commencing on the date hereof and continuing until the first to occur of the
Effective Time or termination of the Merger Agreement in accordance with its
terms, the Shareholder shall, at any meeting of the holders of Company Common
Stock, however called, or in connection with any written consent of the holders
of Company Common Stock, vote (or cause to be voted) the Shares (if any) then
held of record or Beneficially Owned by the Shareholder, (i) in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and this Agreement and any actions required in furtherance
thereof and hereof; (ii) against any action or agreement that would result in a
breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement; and (iii)
except as otherwise agreed to in writing in advance by Parent, against the
following actions (other than the Merger and the transactions contemplated by
the Merger Agreement): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business
-2-
<PAGE> 15
combination involving the Company or its Subsidiaries; (B) a sale, lease or
transfer of a material amount of assets of the Company or its Subsidiaries, or
a reorganization, recapitalization, dissolution or liquidation of the Company
or its Subsidiaries; (C)(1) any change in a majority of the persons who
constitute the board of directors of the Company; (2) any change in the present
capitalization of the Company or any amendment of the Company's Articles of
Incorporation or Bylaws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action which, in the case of
each of the matters referred to in clauses (iii)(C)(1), (2) or (3) of this
Section 4, is intended, or could reasonably be expected, to impede, interfere
with, delay, postpone, or materially adversely affect the Merger and the
actions and transactions contemplated by this Agreement and the Merger
Agreement. The Shareholder shall not enter into any agreement or understanding
with any person or entity the effect of which would be inconsistent or
violative of the provisions and agreements contained in this Section 4.
4. Covenants, Representations and Warranties of the Shareholder. The
Shareholder hereby represents and warrants to Parent as follows:
(a) Ownership of Shares. The Shareholder is the Beneficial Owner of the
Shares, as set forth on Schedule 1. On the date hereof, the Existing Shares
constitute all of the outstanding Shares owned of record or Beneficially Owned
by the Shareholder. The Shareholder has sole voting power and sole power to
issue instructions with respect to the matters set forth in Sections 2 and 4
hereof, sole power of disposition, sole power to demand appraisal rights and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Existing Shares with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(b) Power; Binding Agreement. The Shareholder has the legal capacity,
power and authority to enter into and perform all of his obligations under this
Agreement. The execution, delivery and performance of this Agreement by the
Shareholder will not violate any other agreement to which the Shareholder is a
party including, without limitation, any voting agreement, proxy arrangement,
pledge agreement, shareholders agreement or voting trust. This Agreement has
been duly and validly executed and delivered by the Shareholder and constitutes
a valid and binding agreement of the Shareholder, enforceable against the
Shareholder in accordance with its terms. There is no beneficiary or holder of
a voting trust certificate or other interest of any trust of which the
Shareholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such Shareholder of the
transactions contemplated hereby.
(c) No Conflicts. Except for (i) filings under the HSR Act and the
Exchange Act, (A) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority is necessary for the
execution of this Agreement by the Shareholder and the consummation by the
Shareholder of the transactions contemplated hereby and (B) none of the
execution and delivery of this Agreement by the Shareholder, the consummation
by the Shareholder of the transactions contemplated hereby or compliance by the
Shareholder with any of the provisions hereof shall (1) conflict with or result
in any breach of any applicable organizational documents applicable to the
Shareholder, (2) result in a violation or breach of, or
-3-
<PAGE> 16
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Shareholder is a party or by which the
Shareholder or any of its properties or assets may be bound, or (3) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Shareholder or any of its properties or assets.
(d) No Encumbrances. Except as permitted by this Agreement, the Shares
and the certificates representing such Shares are now, and at all times during
the term hereof will be, held by the Shareholder, or by a nominee or custodian
for the benefit of such Shareholder, free and clear of all liens, claims,
security interests, proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder.
(e) No Finder's Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Shareholder.
(f) No Solicitation. The Shareholder shall not, in the capacity as a
shareholder or otherwise, directly or indirectly, solicit (including by way of
furnishing information) or negotiate in response to any inquiries or the making
of any proposal by any person or entity (other than Parent or any affiliate of
Parent) concerning any merger, tender offer, exchange offer, sale of assets,
sale of shares of capital stock or debt securities or similar transactions
involving the Company or any Subsidiary, division or operating or principal
business unit of the Company. If the Shareholder receives any such inquiry or
proposal, then the Shareholder shall promptly inform Parent of the existence
thereof. The Shareholder will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Notwithstanding the
foregoing, nothing herein shall prevent the Shareholder from complying with any
fiduciary duties it may have in its capacity as an officer and/or director of
the Company.
(g) Restriction on Transfer, Proxies and Non-Interference. The
Shareholder shall not, directly or indirectly: (i) except as applicable in
connection with the transactions contemplated by Section 2 hereof, offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of the Shares or
any interest therein (any such transaction, a "Transfer"), except that
Shareholder may transfer Shares to a family member of such Shareholder or a
charitable organization provided such transferee agrees to be bound by the
provisions of this Agreement; (ii) except as contemplated by this Agreement,
grant any proxies or powers of attorney, deposit the Shares into a voting trust
or enter into a voting agreement with respect to the Shares; or (iii) take any
action that would make any representation or warranty of
-4-
<PAGE> 17
the Shareholder contained herein untrue or incorrect or have the effect of
preventing or disabling the Shareholder from performing its obligations under
this Agreement.
(h) Reliance by Parent. The Shareholder understands and acknowledges that
Parent is entering into, and causing Purchaser to enter into, the Merger
Agreement in reliance upon the Shareholder's execution and delivery of this
Agreement.
(i) Waiver of Appraisal Rights. The Stock holder hereby waives any rights
of appraisal or rights to dissent from the Merger that such Shareholder may
have.
(j) Access to Information. The Shareholder represents and warrants that,
in connection with the execution and delivery of this Agreement, the
Shareholder has been afforded the full opportunity to ask questions and receive
information regarding the Offer and the terms of the Merger Agreement and the
transactions contemplated thereby and the interests of any affected party.
5. Covenants, Representations and Warranties of Parent and the Purchaser.
Each of Parent and the Purchaser hereby represents and warrants to the
Shareholder as follows:
(a) Power; Binding Agreement. Parent and the Purchaser each has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement. The execution, delivery and performance of this
Agreement by the each of the Parent and the Purchaser will not violate any
other agreement to which either of them is a party. This Agreement has been
duly and validly executed and delivered by each of the Parent and the Purchaser
and constitutes a valid and binding agreement of each of the Parent and the
Purchaser, enforceable against each of the Parent and the Purchaser in
accordance with its terms.
(b) No Conflicts. Except for (i) filings under the HSR Act and the
Exchange Act, (A) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority is necessary for the
execution of this Agreement by each of the Parent and the Purchaser and the
consummation by each of the Parent and the Purchaser of the transactions
contemplated hereby and (B) none of the execution and delivery of this
Agreement by each of the Parent and the Purchaser, the consummation by each of
the Parent and the Purchaser of the transactions contemplated hereby or
compliance by each of the Parent and the Purchaser with any of the provisions
hereof shall (1) conflict with or result in any breach of any applicable
organizational documents applicable to either of the Parent or the Purchaser,
(2) result in a violation or breach of, or constitute (with or without notice
or lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which either of the
Parent or the Purchaser is a party or by which either of the Parent or the
Purchaser or any of their properties or assets may be bound, or (3) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to either of the Parent or the Purchaser or any of their properties
or assets.
-5-
<PAGE> 18
(c) No Finder's Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of either of
the Parent or the Purchaser.
6. Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
7. Stop Transfer. The Shareholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer is
made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged.
8. Termination. Except for Section 10 hereof, and except as otherwise
provided herein, the covenants and agreements contained herein shall terminate
upon the termination of the Merger Agreement in accordance with its terms.
9. Indemnification. Parent shall indemnify, defend and hold harmless the
Shareholder from and against any and all losses, damages, liabilities and
expenses (including, without limitation but subject to the next sentence,
reasonable fees and expenses of outside counsel) resulting from any claim or
litigation arising out of the execution, delivery and performance by the
Shareholder of this Stock Agreement. The Shareholder shall give prompt written
notice to Parent upon the Shareholder becoming aware of any claim or action in
respect of which the Shareholder intends to seek indemnity hereunder, and
Parent shall by prompt written notice to the Shareholder be entitled to assume
the defense of such claim or action with counsel selected by the Parent and
reasonably acceptable to the Shareholder.
Notwithstanding the foregoing, if the undersigned is an officer and/or
director of the Company and the claim or litigation relates to the
undersigned's status or conduct as an officer and/or director as well as the
undersigned's execution, delivery and performance of this Stock Agreement as a
Shareholder, the undersigned shall first seek recourse under any other
indemnity or insurance coverage to which the undersigned may be entitled in
such other capacities prior to being entitled to any indemnity hereunder.
10. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all other prior
-6-
<PAGE> 19
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation
of law or otherwise. Notwithstanding any voluntary transfer of Shares, the
transferor shall remain liable for the performance of all obligations under
this Agreement of the transferor.
(c) Assignment. This Agreement shall not be assigned by operation of law
or otherwise without the prior written consent of the other parties, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
(d) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with
a confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to Shareholder:
Telephone No.:
Telecopy No.:
If to Parent or PCA International, Inc.
the Purchaser: 815 Matthews - Mint Hill Road
Matthews, North Carolina 27102
Attention: John Grosso
Telephone No.: (704) 874-8011
Telecopy No.: (704) 847-8010
-7-
<PAGE> 20
copy to: Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Marc Weingarten, Esq.
Telephone No.: (212) 756-2000
Telecopy No.: (212) 593-5955
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore in the
event of any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be entitled,
at law or in equity.
(h) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy or
to demand such compliance.
(j) No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto.
(k) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of North Carolina, without giving effect
to the principles of conflicts of law thereof.
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<PAGE> 21
(l) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
(m) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
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<PAGE> 22
IN WITNESS WHEREOF, Parent, the Purchaser and the Shareholder have caused
this Agreement to be duly executed as of the day and year first above written.
PCA INTERNATIONAL, INC.
By:
---------------------------------
Name:
Title:
ASI ACQUISITION CORP.
By:
---------------------------------
Name:
Title:
-------------------------------------
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<PAGE> 23
SCHEDULE I
Shareholder Number of Shares
- ----------- ----------------
-11-
<PAGE> 1
EXHIBIT 99(c)(3)
AMERICAN STUDIOS, INC.
11001 Park Charlotte Boulevard
Charlotte, North Carolina 28273
November 22, 1996
PCA International, Inc.
815 Matthews-Mint Hill Road
Matthews, North Carolina 28105
Attention: Mr. John Grosso
Gentlemen:
You have requested information in connection with your
consideration of a possible transaction (the "Transaction") involving American
Studios, Inc. (the "Company"). As a condition to the Company furnishing such
information to you, the Company requires that you agree, as set forth below,
that you and your Representatives (as defined below) will treat confidentially
and in accordance with the terms of this Letter Agreement such information and
any other information that the Company or the Company's Representatives furnish
to you in connection with a Transaction. All such information, including
without limitation any oral and written information and all notes, analyses,
compilations, forecasts, studies or other documents prepared by you or your
Representatives in connection with your or their review of, or your interest
in, the Transaction which contain or reflect any such information, is
hereinafter referred to as the "Evaluation Material", whether furnished before
or after the date of this letter.
The term "Evaluation Material" does not include information
which (i) becomes generally available to the public other than as a result of a
disclosure by you or your Representatives, (ii) was available to you on a non-
confidential basis prior to its disclosure to you by the Company or its
Representatives, or (iii) becomes available to you on a non-confidential basis
from a source other than the Company or its Representatives, provided that such
source is not known to you to be bound by a confidentiality agreement with the
Company.
The term "Representatives" as used in this letter with respect
to any person shall mean the directors, officers, employees, affiliates,
representatives (including but not limited to financial advisors, attorneys and
accountants), agents or potential sources of financing of such person. The
term "person" as used in this letter shall be broadly interpreted to include
without limitation any corporation, company, partnership, group, individual or
other entity.
You agree that you and your Representatives will use the
Evaluation Material solely for the purpose of evaluating the Transaction. You
agree that the Evaluation Material will be kept confidential by you and your
Representatives; provided, however, that (i) any of such
<PAGE> 2
Mr. John Grosso
November 22, 1996
Page 2
information may be disclosed to such of your Representatives who need to know
such information for the purpose of evaluating the Transaction (it being
understood that such Representatives shall be informed by you of the
confidential nature of such information and will agree to be bound by the terms
of this Agreement and you agree to be responsible for any breach of this
Agreement by such Representatives), and (ii) any disclosure of such information
may be made if the Company shall consent thereto in writing prior to such
disclosure; provided further, however, that neither the foregoing nor any other
provision of this letter shall be deemed to prevent you from pursuing the
Transaction in such manner as you may deem appropriate and making such public
disclosure as may be required should negotiations for the Transaction terminate.
Without the prior written consent of the other party, or
except as required by applicable law, no party hereto will disclose to any
person (other than its Representatives who are evaluating the Transaction)
either the fact that discussions or negotiations are taking place concerning
the Transaction or any of the terms, conditions or other facts with respect to
the Transaction, including the status thereof, nor that the Evaluation Material
has been made available to you.
In the event that you or any of your Representatives are
requested or required, by interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process, to disclose
any Evaluation Material, you will promptly notify the Company of such request
or requirement so that the Company may seek an appropriate protective order or
waive your or your Representative's compliance with the provisions of this
Agreement. If, in the absence of a protective order or other remedy or the
receipt of a waiver by the Company, you or any of your Representatives are
nonetheless, in the opinion of counsel, legally compelled to disclose
Evaluation Material, you or your Representative may, without liability
hereunder, furnish only that portion of the Evaluation Material which you are
advised by counsel is legally required to be disclosed.
As soon as possible upon written request from the Company or
upon the termination of your evaluation, you will return to the Company all
Evaluation Material which has been provided to you or your Representatives or,
at your option, destroy all copies of the Evaluation Material in your or your
Representatives' possession, subject to any regulatory requirement as to record
retention which may be applicable to any potential financing source in
connection with the Transaction. Such return or destruction will be confirmed
in writing at the Company's request. Notwithstanding the return or destruction
of the Evaluation Material, you and your Representatives will continue to be
bound by your obligations of confidentiality and other obligations hereunder.
You understand and acknowledge that neither the Company nor
any of its Representatives make any representation or warranty as to the
accuracy or completeness of the Evaluation Material, and that only those
representations and warranties that are made in a
<PAGE> 3
Mr. John Grosso
November 22, 1996
Page 3
definitive agreement with you when, as, and if it is executed, and subject to
such limitations and restrictions as may be specified in such agreement, will
have any legal effect.
The parties agree that unless and until a definitive agreement
with respect to the Transaction has been executed and delivered, neither party
will be under any legal obligation of any kind whatsoever with respect to the
Transaction by virtue of this or any written or oral expression with respect to
the Transaction, except, in the case of this letter agreement, for the matters
specifically agreed to herein.
It is understood and agreed that no failure or delay by either
party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver hereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any right,
power or privilege hereunder.
This letter agreement shall inure to the benefit of, and be
binding upon, the parties and their respective successors and assigns;
provided, however, that neither this agreement nor your or your
Representatives' obligations hereunder may be assigned by you or your
Representatives without the express written consent of the Company and any
purported assignment in violation hereof shall be null and void.
This letter agreement shall be governed and construed in
accordance with the laws of the State of North Carolina applicable to contracts
made and to be performed entirely in such State. This letter agreement
contains the entire agreement between you and the Company concerning the
confidentiality of the Evaluation Material, and no modification of this letter
agreement or waiver of the terms and conditions hereof will be binding upon you
or the Company, unless approved in writing by each of you and the Company.
<PAGE> 4
Mr. John Grosso
November 22, 1996
Page 4
If you are in agreement with the foregoing, please sign and
return one copy of this letter to the undersigned, which will constitute our
agreement with respect to the subject matter of this letter.
Very truly yours,
AMERICAN STUDIOS, INC.
By:
-------------------------------------
Name:
Title:
Agreed to and accepted as of
the date first above written:
PCA INTERNATIONAL, INC.
- -----------------------------------
By: John Grosso
Title: President
<PAGE> 1
EXHIBIT 99(c)(4)
EMPLOYMENT AND NONCOMPETE AGREEMENT
THIS EMPLOYMENT AND NONCOMPETE AGREEMENT ("Agreement"), made and
entered into as of the _____ day of January, 1997, by and between RANDY J.
BATES, an individual resident of Lake Wylie, South Carolina ("Bates"), and PCA
INTERNATIONAL, INC., a North Carolina corporation with its principal executive
offices located in Matthews, North Carolina (the "Company").
IN CONSIDERATION of the promises and the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions stated herein,
and in consideration of Bates' obligations and covenants, including without
limitation, those obligations and covenants set forth in Section 5 hereof, the
Company agrees to employ Bates, and Bates accepts such employment, as a Special
Advisor to the President and CEO, subject to the order, supervision and
direction of the Chief Executive Officer of the Company (the "CEO").
2. Duties. Bates shall serve the Company as Special Advisor and
shall devote to the business of the Company in the performance of his duties as
Special Advisor his best efforts and such time as may be reasonably requested by
the CEO.
In no event, during the Term of Employment, shall Bates be required to
report other than to the President and CEO of the Company. The President and
CEO shall deal with Bates in good faith and shall not require that he relocate
his residence, require unreasonable travel, or require him to perform tasks
which would be demeaning or degrading to one in his position.
As Special Advisor, Bates shall perform such duties as the President
and CEO may prescribe.
3. Term of Employment. The term of Bates' employment by the
Company hereunder shall commence as of the date hereof and shall continue for a
period of four (4) months after such commencement date (the "Term of
Employment").
4. Compensation. The base monthly compensation rate to be paid
to Bates for the services to be rendered hereunder ("Monthly Base Rate")
throughout the Term of Employment shall be Thirteen
<PAGE> 2
Thousand Seven Hundred Fifty and No/100 Dollars ($13,750.00), payable in
accordance with the Company's normal payroll practices, subject to applicable
federal and state income and social security tax withholding requirements. In
the event any of the monthly payments due hereunder shall become more than
three (3) months past due, Employee shall have the option to accelerate the
remaining payments due hereunder so that they shall be due and payable in full.
5. Noncompetition, Secrecy and Inventions.
(a) Bates specifically acknowledges and agrees that his
employment with the Company will bring him in personal contact with accounts and
customers of the Company, and will enable him to acquire valuable information as
to the nature and character of the business of the Company and the requirements
of the accounts and customers of the Company. Bates acknowledges and agrees
that in the event he were to become employed by some other employer or enter the
same or similar business as the Company on his own or in conjunction with others
in competition with the Company, such personal contacts with the customers and
accounts of the Company and the knowledge of such valuable information would
give to Bates an unfair competitive advantage.
Throughout the Term of Employment and for a period of five (5) years
and eight (8) months thereafter (Bates' Term of Employment and the period
thereafter, together, the "Term of the Covenants"), Bates shall not, directly
or indirectly, as principal, agent, manager, employee, partner, shareholder,
director, officer, consultant or otherwise, participate in or engage in the
Lines of Business, as hereinafter defined; provided, however, that Bates may
own up to one percent (1%) of the outstanding securities of any corporation
which is engaged in the Lines of Business (except the Company) so long as such
securities are traded on a national securities exchange or are included in the
National Association of Securities Dealers Quotation System. "Lines of
Business" for purposes of this Section 5 shall mean the provision of portrait
photography services through itinerant or traveling operations or permanent
studios or any other portrait photography service, the processing or developing
of photographic film in connection with such provision and any other lines of
business in which the Company may engage during the Term of Employment.
-2-
<PAGE> 3
(b) In performing the covenants set forth in this Section
5 (all of the covenants of Bates set forth in this Section 5, together, the
"Covenants Not to Compete"), Bates shall not, without limitation, during the
Term of the Covenants engage in the Lines of Business with any of the
following:
1. any client, account or customer of the Company, or
any subsidiary or affiliate of the Company, that has
done business with the Company or such affiliate or
subsidiary within two (2) years of the date of any
alleged competitive act by Employee;
2. any client, account or customer of the Company, or
any subsidiary or any affiliate of the Company, that
has transacted any business with the Company within
the twelve months preceding the date of this
Agreement;
3. Wal-Mart Stores, Inc. or any subsidiary thereof
("Wal-Mart");
4. any affiliate of Wal-Mart, including without
limitation Sam's Wholesale Club, HYPERMART*USA and
Wal-Mart SuperCenters (a "Wal-Mart Affiliate");
5. KMart Corporation or any subsidiary thereof ("KMart");
6. any affiliate of KMart, including without limitation
KMart SuperCenters (a "KMart Affiliate");
7. PETsMART, Inc. or any subsidiary thereof ("PETsMART");
8. any affiliate of PETsMART (a "PETsMART Affiliate");
9. any current or prospective institutional customer
("Institutional Customer");
10. CPI Corp.;
11. Lifetouch National School Studios, Inc.;
-3-
<PAGE> 4
12. any Wal-Mart store that does business with the
Company during the Term of the Covenants;
13. any Wal-Mart Affiliate store that does business with
the Company during the Term of the Covenants;
14. any Wal-Mart store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
15. any Wal-Mart Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
16. any PETsMART store that does business with the
Company during the Term of the Covenants;
17. any PETsMART Affiliate store that does business with
the Company during the Term of the Covenants;
18. any PETsMART store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
19. any PETsMART Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
20. any Institutional Customer with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
21. any KMart store that does business with the Company
during the Term of the Covenants;
-4-
<PAGE> 5
22. any KMart store that does business with the Company
during the Term of the Covenants;
23. any KMart store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
24. any KMart Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
25. Cifra, S.A. de C.V.;
26. Aurrera, S.A. de C.V., a subsidiary of Cifra, S.A. de
C.V.;
27. any other subsidiary of Cifra, S.A. de C.V.;
28. Olan Mills;
29. Expressly Portraits;
30. any employee or former employee of the Company, whose
employment with the Company terminated less than two
(2) years prior to Employee's association with such
employee or former employee, within a ten-mile radius
of any Wal-Mart store or any store in which the
Company has engaged in the Lines of Business within
six (6) months prior to Employee's engaging in the
Lines of Business; or
31. any person or entity in the geographic areas listed
in paragraph 10(c) hereinbelow.
(c) In performing the Covenants Not to Compete, Bates
shall not, without limitation, during the Term of the Covenants engage in the
Lines of Business in any of the following geographic areas:
1. The United States of America;
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<PAGE> 6
2. The State of Alabama;
3. The State of Arizona;
4. The State of Arkansas;
5. The State of California;
6. The State of Colorado;
7. The State of Connecticut;
8. The State of Delaware;
9. The District of Columbia;
10. The State of Florida;
11. The State of Georgia;
12. The State of Idaho
13. The State of Illinois;
14. The State of Indiana;
15. The State of Iowa;
16. The State of Kansas;
17. The State of Kentucky;
18. The State of Louisiana;
19. The State of Maine;
20. The State of Maryland;
21. The State of Massachusetts;
22. The State of Michigan;
23. The State of Minnesota;
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<PAGE> 7
24. The State of Mississippi;
25. The State of Missouri;
26. The State of Montana
27. The State of Nebraska;
28. The State of Nevada
29. The State of New Hampshire;
30. The State of New Jersey;
31. The State of New Mexico
32. The State of New York;
33. The State of North Carolina;
34. The State of North Dakota;
35. The State of Ohio;
36. The State of Oklahoma;
37. The State of Oregon;
38. The State of Pennsylvania;
39. The Commonwealth of Puerto Rico;
40. The State of Rhode Island;
41. The State of South Carolina;
42. The State of South Dakota;
43. The State of Tennessee;
44. The State of Texas;
45. The State of Utah
-7-
<PAGE> 8
46. The State of Vermont;
47. The State of Virginia;
48. The State of Washington;
49. The State of West Virginia;
50. The State of Wisconsin;
51. The State of Wyoming;
52. Mexico;
53. Canada;
54. Puerto Rico;
55. South America;
56. Latin America;
57. Asia;
58. China; and
59. Counties in each State of the United States where the
Company has customers.
(d) As applied to the categories of persons, firms and
entities and geographic areas covered by the Covenants Not to Compete, the
provisions of paragraphs 5(b) and 5(c), respectively, shall be completely
severable and independent, and any invalidity or unenforceability thereof as
applied to any of such persons, firms or entities or geographic areas shall not
affect the validity or enforceability thereof as applied to any one or more of
the other persons, firms or entities or geographic areas.
(e) Throughout the Term of the Covenants, Bates shall not
directly or indirectly cause or attempt to cause any supplier or customer of
the Company, or any of its subsidiaries or affiliates, or any governmental body
or public agency, not to do business with the Company or such subsidiary or
affiliate or to transfer all or part of its business from the Company, or
such
-8-
<PAGE> 9
subsidiary or affiliate, or otherwise interfere or attempt to interfere with
any business relationship between the Company, or any of its subsidiaries or
affiliates, and any of such suppliers, customers, government bodies or public
agencies, unless directed by the Board of Directors of the Company to so do.
(f) Bates acknowledges that irreparable injury will
result to the Company from any breach of the Covenants Not to Compete and there
is no adequate remedy at law to redress a breach or threatened breach of the
Covenants Not to Compete As a result of the foregoing, Bates agrees that the
parties seeking to enforce any of such provisions shall be entitled to an
injunction or other equitable relief against Bates to restrain him from such
breach, and Bates waives any claim or defense that the Company has an adequate
remedy at law for any such breach; provided, however, that nothing contained
herein shall prohibit the Company, or any subsidiary or affiliate of the
Company, from pursuing any other remedy it may have, including without limiting
the generality of the foregoing the recovery of damages.
(g) If any court determines that any provision of this
Section 5, or any part thereof, is invalid or unenforceable, the remainder of
this Section 5 shall not thereby be affected and shall be given full effect,
without regard to the invalid portions. If any court determines that any
provision of this Section 5, or any part thereof, is unenforceable because of
the duration or geographic scope of such provision, the parties agree that such
court shall have the power to reduce the duration or scope of such provision,
as the case may be, and the parties agree to request the court to exercise such
power, and, in its reduced form, such provision shall then be enforceable and
shall be enforced. The provisions of this Section 5 shall survive the
termination of this Agreement, for whatever reason.
(h) At all times, both during and after the termination
of his employment, Bates shall keep and retain in confidence and shall not,
without the prior written consent of the Company, disclose to any persons, firm
or corporation or otherwise use for his own benefit or the benefit of another
any of the proprietary, confidential or secret information or trade secrets of
the Company. Further, Bates and the Company agree to keep confidential the
terms and conditions of this Agreement except for such disclosure as may be
required (i) in the event of a breach of this Agreement, (ii)
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<PAGE> 10
compulsion by law or court order, or (iii) as may be required by any applicable
provision of law.
(i) In consideration of employment, and the compensation
paid to Bates as an employee of the Company, Bates hereby recognizes as the
exclusive property of, and assigns, transfers and conveys to, the Company
without further consideration each invention, discovery or improvement
(hereinafter collectively refer@ed to as "inventions") made, conceived,
developed or first reduced to practice by Bates (whether alone or jointly with
others) during the Term of Employment or within one (1) year thereafter which
relates in any way to Bates' work at the Company or any of its subsidiaries or
affiliates. Employee will communicate to the Company current written records
of all such inventions, which records shall be and remain the property of the
Company. Upon request by the Company, Bates will at any time execute documents
assigning to the Company, or its designees, any such invention or any patent
application or patent granted therefor, and will execute any papers relating
thereto. Bates also will give all reasonable assistance to the Company, or its
designee, regarding any litigation or controversy in connection with his
inventions, patent applications, or patents, all expenses incident thereto to
be assumed by the Company.
(j) As additional consideration payable hereunder and specifically
as payment for the Covenants Not to Compete, the Company shall pay to Bates the
Monthly Base Amount beginning at the end of the Term of Employment throughout
the Term of the Covenants. Such payments shall be made monthly in arrears. In
the event any of the monthly payments due hereunder shall become more than
three (3) months past due, Employee shall have the option to accelerate the
remaining payments due hereunder so that they shall be due and payable in full.
(k) Notwithstanding anything herein to the contrary, any
participation in or engagement in the Lines of Business by Interactive
Solutions, Inc., a North Carolina corporation, or any successor thereto, or by
Grant Holcomb, a resident of North Carolina, shall be a breech of this Section
5 by Employee.
6. Governing Law. This Agreement shall be construed and governed
under the laws of the State of North Carolina.
-10-
<PAGE> 11
7. Binding Nature. Except as expressly provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and assigns. The obligations and
covenants of Bates are personal in nature and, as such, are not assignable by
him.
8. Entire Agreement; Prior Oral Agreement; Amendment. This
Agreement contains the entire agreement of the parties with respect to the
matters set forth herein and supersedes all prior written and prior or
contemporaneous oral agreements or understandings of the parties hereto. This
Agreement confirms and sets forth the prior oral agreement of the parties as to
the terms and conditions of Bates' employment by the Company stated herein,
including without limitation, the obligations and covenants of Bates set forth
in Section 5 hereof, and Bates' agreement to enter into a written employment
agreement with the Company, as of the date his employment by the Company
commenced, stating such terms and conditions. This Agreement may be changed or
amended only by an agreement in writing signed by both parties hereto.
9. Severability, Invalidity or Unenforceability. The
severability, invalidity or unenforceability of any paragraph or part of any
paragraph herein shall not in any way affect the validity or enforceability of
any other paragraph or any part of any other paragraph.
10. Prior Agreements and Covenants of Bates. Bates hereby
warrants and represents that he is not a party to any agreement or binding
obligation, oral or written, that would prevent his employment by the Company,
and Bates' execution of this Agreement and his fulfillment of his duties and
obligations hereunder do not and will not violate the provisions of any
agreement, contract, loan document or other binding written or oral obligation.
11. Notices. Any notice, offer, acceptance or other document
required or permitted to be given pursuant to any provisions of this Agreement
shall be in writing, signed by or on behalf of the person giving the same, and
(as elected by the person giving such notice) delivered by hand or mailed to
the parties at the following addresses by registered or certified mail, postage
prepaid, return receipt requested, or by a third party company or governmental
entity providing delivery services in the ordinary course of business, which
guarantees delivery on a specified date:
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<PAGE> 12
If to Bates: Randy J. Bates
____________________
____________________
If to the Company: PCA International, Inc.
815 Matthews-Mint Hill Road Matthews,
North Carolina 28105
Attention: John Grosso
With copies to: Thomas B. Henson
ROBINSON, BRADSHAW & HINSON, P.A. One
Independence Center 101 North
Tryon Street, Suite 1900
Charlotte, North Carolina
28246-1900 (704) 377-2536
or to such other address as any party hereto may designate by complying with
the provisions of this Section 15.
Such notice shall be deemed given (i) as of the date of written
acknowledgment by Bates or an officer of the Company if delivered by hand, (ii)
seventy-two (72) hours after deposit in United States mail if sent by
registered or certified mail or (iii) on the delivery date guaranteed by the
third party delivery service if sent by such service.
Rejection or other refusal to accept or inability to deliver because
of changed address of which no notice has been received shall not affect the
date upon which the notice is deemed to have been given pursuant hereto.
Notwithstanding the foregoing, no notice of change of address shall be
effective until the date of receipt hereof.
16. Stock Option Grant. Bates will be granted an option to
purchase 100,000 shares of the Company's common stock on the date hereof,
having an exercise price equal to 100% of the closing price at which a share of
Common Stock trades on the date of the grant's Effective Date, all as defined
in the PCA International, Inc. 1996 Omnibus Long-Term Compensation Plan (the
"Plan"). Such option shall be treated as a nonqualified stock option for
federal income tax purposes. Such option shall terminate on a date that is
five (5) years following the date of grant and shall not terminate for any
reason prior to such date, including without limitation, the
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<PAGE> 13
termination of Bates' employment hereunder. Upon the death of Bates within
such 5 year period, the options granted hereunder will be transferred to his
estate or as directed in his will. Such options shall be exercisable in full
on the grant's Effective Date.
IN WITNESS WHEREOF, Randy J. Bates has set his hand and seal hereto
and PCA International, Inc. has caused this Agreement to be executed and sealed
in its name by its duly authorized officials as of the day and year first above
written.
BATES:
______________________________(SEAL)
RANDY J. BATES
COMPANY:
PCA INTERNATIONAL, INC.
By:
------------------------------
John Grosso
President and CEO
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<PAGE> 1
EXHIBIT 99(c)(5)
EMPLOYMENT AND NONCOMPETE AGREEMENT
THIS EMPLOYMENT AND NONCOMPETE AGREEMENT ("Agreement"), made and
entered into as of the _____ day of January, 1997, by and between JAMES O.
MATTOX, an individual resident of Charlotte, North Carolina ("Employee") , and
PCA INTERNATIONAL, INC., a North Carolina corporation with its principal
executive offices located in Matthews, North Carolina (the "Company").
IN CONSIDERATION, of the promises and the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions stated
herein, and in consideration of Employee's obligations and covenants, including
without limitation, those obligations and covenants set forth in Section 9
hereof, the Company agrees to employ Employee on an active and full-time basis,
and Employee accepts such employment, as a Senior Vice President, subject to
the order, supervision and direction of the Chief Operating Officer of the
Company (the "COO"), or another officer of the Company as determined by the
Chief Executive Officer (the "CEO").
2. Duties. Employee shall serve the Company as a Senior Vice
President and shall devote his full business time, skill and best efforts to
the business of the Company and faithfully perform such executive,
administrative and supervisory duties as may be prescribed by the COO.
Employee shall act at all times in compliance, in all material respects, with
all policies, rules and decisions adopted from time to time by the Board of
Directors of which Employee shall have received written notice. The COO shall
deal with the Employee in good faith and shall not require that Employee be
required to relocate his residence, travel to the extent that he must spend
more nights away from home than are reasonably required to further the
Company's business, or perform tasks which would be demeaning or degrading to,
one in his position.
3. Term of Employment. The term of Employee's employment by the
Company hereunder shall commence as of the date hereof and shall continue for a
period of one (1) year after such commencement date (the "Term of Employment").
<PAGE> 2
4. Base Compensation. The base annual compensation rate to be
paid to Employee for the services to be rendered hereunder ("Base Rate")
throughout the Term of Employment, except to the extent adjusted as provided
below, shall be One Hundred and Twenty-Five Thousand Dollars ($125,000.00),
payable in accordance with the Company's normal payroll practices, subject to
applicable federal and state income and social security tax withholding
requirements. Employee's Base Rate may be reviewed from time to time by the
COO and CEO and adjusted upward as Employee's performance, the performance of
the Company and other pertinent factors warrant.
5. Termination Without Cause.
(a) The Board of Directors or the CEO may terminate
Employee's employment at any time, without cause. In the event of a
termination during, at the end of, or after the Term of Employment, other than
a Termination for Cause, as hereinafter defined, the Company will pay to
Employee as severance One Hundred Ninety Five Thousand and No/100 Dollars
($195,000.00) $70,000.00 of which shall be payable within 15 days following
termination and $125,000.00 of which shall be payable in twelve (12) equal
consecutive monthly installments beginning with the month following the month
of termination. Such payments shall be made in accordance with the Company's
normal payroll practices, subject to applicable federal and state income and
social security tax withholding requirements.
(b) Employee understands and agrees that this Agreement
will not be renewed at the end of the Term of Employment. In the event the
Company does not offer employment to Employee at the end of the Term of
Employment or at any time thereafter upon the same or better terms and
conditions as set forth herein, such event shall be deemed a termination other
than a Termination for Cause and Employee shall be paid the severance set forth
in subparagraph (a) above.
(c) In the event Employee decides to terminate his employment with
the Company during the Term of Employment the Company will pay Employee
$70,000.00 within 15 days following such termination.
(d) In the event Employee decides to terminate his Employment with
the Company at any time after the Term of Employment, the Company will pay
Employee $70,000.00 within 15 days following such Termination and $125,000 in
twelve (12) equal consecutive monthly
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<PAGE> 3
installments beginning with the month following the month of termination. Such
payments shall be made in accordance with the Company's normal payroll
practices, subject to applicable federal and state income and social security
tax withholding requirements.
(e) The provisions of subparagraphs (b) and (d) shall survive the
end of the Term of Employment.
(f) In the event any of the monthly payments due hereunder shall
become more than three (3) months past due, Employee shall have the option to
accelerate the remaining payments due hereunder so that they shall be due and
payable in full.
6. Termination for Cause.
(a) The Board of Directors or the CEO shall have the
right at any time, without advance notice, to terminate Employee's employment
for cause, as hereinafter defined ("Termination for Cause").
(b) Termination for Cause shall mean termination because
of Employee's death, inability to perform his duties hereunder due to an
insured disability, theft from the Company, embezzlement of the Company's
funds, falsification of the Company's records, fraud committed against the
Company, commission of a felonious criminal act involving the Company or while
engaged in conduct of the Company's business, incompetence due to the use of or
reporting to work under the influence of alcohol, narcotics, other unlawful
drugs or controlled substances, legal incapacity, insanity, act or acts
involving dishonesty or misconduct which have or may reasonably be expected to
have a material adverse effect on the business or reputation of the Company,
breach of fiduciary duty to the Company, willful and substantial failure to
perform stated duties or lawful directives of the Board of Directors subject to
the provisions of Section 2 hereof, the CEO or other officer of the Company
designated by the CEO, or material breach of any provision of this Agreement,
including without limitation voluntary termination of this Agreement during the
Term of Employment.
(c) In the event of a Termination for Cause, Employee
shall have no right thereafter to receive any compensation or other benefits
from the Company, except for COBRA, rights under vested stock option grants and
the payment to Employee of $70,000.00 within 15 days following such Termination
for Cause. The
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<PAGE> 4
provisions of this subparagraphs (c) shall survive the end of the Term of
Employment.
(d) The provisions of Section 9 hereof shall continue to
be binding on the parties hereto notwithstanding the termination without cause
or Termination for Cause of Employee.
7. Fringe Benefits, Bonus and Tenure. Employee shall be entitled
to receive such fringe benefits, including vacation and employee benefit plans,
if any, as are set forth on Exhibit A hereto. Employee shall have the right to
fully participate in any bonus program to the same extent as that provided to
other Senior Vice Presidents or other similarly situated executives. For all
purposes related to Employee's tenure as an employee, his tenure at American
Studios, Inc. shall be added to his tenure at the Company.
8. Expenses. The Company shall reimburse Employee for those
expenses that are incurred by him in connection with the performance of his
duties under this Agreement that are consistent with Company policies and
practices, are reasonably related to the business of the Company and have been
approved, generally or specifically, verbally or in writing, by the COO or the
CEO.
9. Noncompetition, Secrecy and Inventions.
(a) Employee specifically acknowledges and agrees that
his employment with the Company will bring him in personal contact with
accounts and customers of the Company, and will enable him to acquire valuable
information as to the nature and character of the business of the Company and
the requirements of the accounts and customers of the Company. Employee
acknowledges and agrees that in the event he were to become employed by some
other employer or enter the same or similar business as the Company on his own
or in conjunction with others in competition with the Company, such personal
contacts with the customers and accounts of the Company and the knowledge of
such valuable information would give to Employee an unfair competitive
advantage.
Throughout the Term of Employment and for a period of two (2) years
thereafter (Employee's Term of Employment and the two-year period thereafter,
together, the "Term of the Covenants"), Employee shall not, directly or
indirectly, as principal, agent, manager, employee, partner, shareholder,
director, officer, consultant or otherwise, participate in or engage in the
Lines of Business, as
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<PAGE> 5
hereinafter defined; provided, however, that Employee may own up to one percent
(1%) of the outstanding securities of any corporation which is engaged in the
Lines of Business, so long as such securities are traded on a national
securities exchange or are included in the National Association of Securities
Dealers Quotation System. "Lines of Business" for purposes of this Section 9
shall mean the provision of portrait photography services through itinerant or
traveling operations or permanent studios or any other portrait photography
service, the processing or developing of photographic film in connection with
such provision and any other lines of business in which the Company may engage
during the Term of Employment.
(b) In performing the covenants set forth in this Section
9 (all of the covenants of Employee set forth in this Section 9, together, the
"Covenants Not to Compete"), Employee shall not, without limitation, during the
Term of the Covenants engage in the Lines of Business with any of the
following:
1. any client, account or customer of the Company, or
any subsidiary or affiliate of the Company, that has
done business with the Company or such affiliate or
subsidiary within two (2) years of the date of any
alleged competitive act by Employee;
2. any client, account or customer of the Company, or
any subsidiary or any affiliate of the Company, that
has transacted any business with the Company within
the twelve months preceding the date of this
Agreement;
3. Wal-Mart Stores, Inc. or any subsidiary thereof
("Wal-Mart");
4. any affiliate of Wal-Mart, including without
limitation Sam's Wholesale Club, HYPERMART*USA and
Wal-Mart SuperCenters (a "Wal-Mart Affiliate");
5. KMart Corporation or any subsidiary thereof
("KMart");
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<PAGE> 6
6. any affiliate of KMart, including without limitation
KMart SuperCenters (a "KMart Affiliate");
7. PETsMART, Inc. or any subsidiary thereof
("PETsMART");
8. any affiliate of PETsMART (a "PETsMART Affiliate");
9. any current or prospective institutional customer
("Institutional Customer");
10. CPI Corp.;
11. Lifetouch National School Studios, Inc.;
12. any Wal-Mart store that does business with the
Company during the Term of the Covenants;
13. any Wal-Mart Affiliate store that does business with
the Company during the Term of the Covenants;
14. any Wal-Mart store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
15. any Wal-Mart Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
16. any PETsMART store that does business with the
Company during the Term of the Covenants;
17. any PETsMART Affiliate store that does business with
the Company during the Term of the Covenants;
18. any PETsMART store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors
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<PAGE> 7
reasonably expects to do business during the Term of
the Covenants;
19. any PETsMART Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
20. any Institutional Customer with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
21. any KMart store that does business with the Company
during the Term of the Covenants;
22. any KMart store that does business with the Company
during the Term of the Covenants;
23. any KMart store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
24. any KMart Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
25. Cifra, S.A. de C.V.;
26. Aurrera, S.A. de C.V., a subsidiary of Cifra, S.A. de
C.V.;
27. any other subsidiary of Cifra, S.A. de C.V.;
28. Olan Mills;
29. Expressly Portraits;
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<PAGE> 8
30. any employee or former employee of the Company, whose
employment with the Company terminated less than two
(2) years prior to Employee's association with such
employee or former employee, within a ten-mile radius
of any Wal-Mart store or any store in which the
Company has engaged in the Lines of Business within
six (6) months prior to Employee's engaging in the
Lines of Business; or
31. any person or entity in the geographic areas listed
in paragraph 10(c) hereinbelow.
(c) In performing the Covenants Not to Compete, Employee
shall not, without limitation, during the Term of the Covenants engage in the
Lines of Business in any of the following geographic areas:
1. The United States of America;
2. The State of Alabama;
3. The State of Arizona;
4. The State of Arkansas;
5. The State of California;
6. The State of Colorado;
7. The State of Connecticut;
8. The State of Delaware;
9. The District of Columbia;
10. The State of Florida;
11. The State of Georgia;
12. The State of Idaho
13. The State of Illinois;
14. The State of Indiana;
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<PAGE> 9
15. The State of Iowa;
16. The State of Kansas;
17. The State of Kentucky;
18. The State of Louisiana;
19. The State of Maine;
20. The State of Maryland;
21. The State of Massachusetts;
22. The State of Michigan;
23. The State of Minnesota;
24. The State of Mississippi;
25. The State of Missouri;
26. The State of Montana
27. The State of Nebraska;
28. The State of Nevada
29. The State of New Hampshire;
30. The State of New Jersey;
31. The State of New Mexico
32. The State of New York;
33. The State of North Carolina;
34. The State of North Dakota;
35. The State of Ohio;
36. The State of Oklahoma;
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<PAGE> 10
37. The State of Oregon;
38. The State of Pennsylvania;
39. The Commonwealth of Puerto Rico;
40. The State of Rhode Island;
41. The State of South Carolina;
42. The State of South Dakota;
43. The State of Tennessee;
44. The State of Texas;
45. The State of Utah
46. The State of Vermont;
47. The State of Virginia;
48. The State of Washington;
49. The State of West Virginia;
50. The State of Wisconsin;
51. The State of Wyoming;
52. Mexico;
53. Canada;
54. Puerto Rico;
55. South America;
56. Latin America;
57. Asia;
58. China; and
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<PAGE> 11
59. Counties in each State of the United States where the
Company has customers.
(d) As applied to the categories of persons, firms and
entities and geographic areas covered by the Covenants Not to Compete, the
provisions of paragraphs 9(b) and 9(c), respectively, shall be completely
severable and independent, and any invalidity or unenforceability thereof as
applied to any of such persons, firms or entities or geographic areas shall not
affect the validity or enforceability thereof as applied to any one or more of
the other persons, firms or entities or geographic areas.
(e) Throughout the Term of the Covenants, Employee shall
not directly or indirectly cause or attempt to cause any supplier or customer
of the Company, or any of its subsidiaries or affiliates, or any governmental
body or public agency, not to do business with the Company or such subsidiary
or affiliate or to transfer all or part of its business from the Company, or
such subsidiary or affiliate, or otherwise interfere or attempt to interfere
with any business relationship between the Company, or any of its subsidiaries
or affiliates, and any of such suppliers, customers, government bodies or
public agencies.
(f) Employee acknowledges that irreparable injury will
result to the Company from any breach of the Covenants Not to Compete and there
is no adequate remedy at law to redress a breach or threatened breach of the
Covenants Not to Compete As a result of the foregoing, Employee agrees that
the parties seeking to enforce any of such provisions shall be entitled to an
injunction or other equitable relief against Employee to restrain him from such
breach, and Employee waives any claim or defense that the Company has an
adequate remedy at law for any such breach; provided, however, that nothing
contained herein shall prohibit the Company, or any subsidiary or affiliate of
the Company, from pursuing any other remedy it may have, including without
limiting the generality of the foregoing the recovery of damages.
(g) If any court determines that any provision of this
Section 9, or any part thereof, is invalid or unenforceable, the remainder of
this Section 9 shall not thereby be affected and shall be given full effect,
without regard to the invalid portions. If any court determines that any
provision of this Section 9, or any part thereof, is unenforceable because of
the duration or geographic scope of such provision, the parties agree that such
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<PAGE> 12
court shall have the power to reduce the duration or scope of such provision,
as the case may be, and the parties agree to request the court to exercise such
power, and, in its reduced form, such provision shall then be enforceable and
shall be enforced. The provisions of this Section 9 shall survive the
termination of this Agreement, for whatever reason.
(h) At all times, both during and after the termination
of his employment, Employee shall keep and retain in confidence and shall not,
without the prior written consent of the Company, disclose to any persons, firm
or corporation or otherwise use for his own benefit or the benefit of another
any of the proprietary, confidential or secret information or trade secrets of
the Company. Further, Employee and the Company agree to keep confidential the
terms and conditions of this Agreement except for such disclosure as may be
required (i) in the event of a breach of this Agreement, (ii) compulsion by law
or court order, or (iii) as may be required by any applicable provision of law.
(i) In consideration of employment, and the compensation
paid to Employee as an employee of the Company, Employee hereby recognizes as
the exclusive property of, and assigns, transfers and conveys to, the Company
without further consideration each invention, discovery or improvement
(hereinafter collectively refer@ed to as "inventions") made, conceived,
developed or first reduced to practice by Employee (whether alone or jointly
with others) during the Term of Employment or within one (1) year thereafter
which relates in any way to Employee's work at the Company or any of its
subsidiaries or affiliates. Employee will communicate to the Company current
written records of all such inventions, which records shall be and remain the
property of the Company. Upon request by the Company, Employee will at any
time execute documents assigning to the Company, or its designees, any such
invention or any patent application or patent granted therefor, and will
execute any papers relating thereto. Employee also will give all reasonable
assistance to the Company, or its designee, regarding any litigation or
controversy in connection with his inventions, patent applications, or patents,
all expenses incident thereto to be assumed by the Company.
10. Governing Law. This Agreement shall be construed and
governed under the laws of the State of North Carolina.
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<PAGE> 13
11. Binding Nature. Except as expressly provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and assigns. The obligations and
covenants of Employee are personal in nature and, as such, are not assignable
by him.
12. Entire Agreement; Prior Oral Agreement; Amendment. This
Agreement contains the entire agreement of the parties with respect to the
matters set forth herein and supersedes all prior written and prior or
contemporaneous oral agreements or understandings of the parties hereto. This
Agreement confirms and sets forth the prior oral agreement of the parties as to
the terms and conditions of Employee's employment by the Company stated herein,
including without limitation, the obligations and covenants of Employee set
forth in Section 9 hereof, and Employee's agreement to enter into a written
employment agreement with the Company, as of the date his employment by the
Company commenced, stating such terms and conditions. This Agreement may be
changed or amended only by an agreement in writing signed by both parties
hereto.
13. Severability, Invalidity or Unenforceability. The
severability, invalidity or unenforceability of any paragraph or part of any
paragraph herein shall not in any way affect the validity or enforceability of
any other paragraph or any part of any other paragraph.
14. Prior Agreements and Covenants of Employee. Employee hereby
warrants and represents that he is not a party to any agreement or binding
obligation, oral or written, that would prevent his employment by the Company,
and Employee's execution of this Agreement and his fulfillment of his duties
and obligations hereunder do not and will not violate the provisions of any
agreement, contract, loan document or other binding written or oral obligation.
15. Notices. Any notice, offer, acceptance or other document
required or permitted to be given pursuant to any provisions of this Agreement
shall be in writing, signed by or on behalf of the person giving the same, and
(as elected by the person giving such notice) delivered by hand or mailed to
the parties at the following addresses by registered or certified mail, postage
prepaid, return receipt requested, or by a third party company or governmental
entity providing delivery services in the ordinary course of business, which
guarantees delivery on a specified date:
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<PAGE> 14
If to Employee: James O. Mattox
2200 Trapper Court
Charlotte, NC 28270
If to the Company: PCA International, Inc.
815 Matthews-Mint Hill Road
Matthews, North Carolina 28105
Attention: John Grosso
With copies to: Thomas B. Henson
ROBINSON, BRADSHAW & HINSON, P.A.
One Independence Center
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
(704) 377-2536
or to such other address as any party hereto may designate by complying with
the provisions of this Section 15.
Such notice shall be deemed given (i) as of the date of written
acknowledgment by Employee or an officer of the Company if delivered by hand,
(ii) seventy-two (72) hours after deposit in United States mail if sent by
registered or certified mail or (iii) on the delivery date guaranteed by the
third party delivery service if sent by such service.
Rejection or other refusal to accept or inability to deliver because
of changed address of which no notice has been received shall not affect the
date upon which the notice is deemed to have been given pursuant hereto.
Notwithstanding the foregoing, no notice of change of address shall be
effective until the date of receipt hereof.
16. Stock Option Grant. Employee will be granted an option to
purchase 25,000 shares of the Company's common stock on the date hereof, having
an exercise price equal to 100% of the closing price at which a share of Common
Stock trades on the date of the grant's Effective Date, all as defined in the
PCA International, Inc. 1996 Omnibus Long Term Compensation Plan (the "Plan"),
a copy of which is attached hereto as Exhibit B. Such option shall be treated
as a nonqualified stock option for federal income tax purposes. Such option
shall terminate on a date that is ten (10) years following the date of grant;
provided, however, that if Employee's employment
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<PAGE> 15
with the Company is terminated prior to such date such option shall terminate
three (3) months following such termination, unless such termination occurs as
a result of employee's death or disability in which event such options shall
terminate twelve (12) months following such termination. Such options shall
become exercisable in five (5) equal annual increments on each of the first,
second, third, fourth and fifth anniversaries of the date of grant.
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<PAGE> 16
IN WITNESS WHEREOF, James O. Mattox has set his hand and seal hereto
and PCA International, Inc. has caused this Agreement to be executed and sealed
in its name by its duly authorized officials as of the day and year first above
written.
EMPLOYEE:
______________________________(SEAL)
JAMES O. MATTOX
COMPANY:
PCA INTERNATIONAL, INC.
By:
______________________________
John Grosso
President and CEO
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<PAGE> 17
EXHIBIT A
FRINGE BENEFITS
1. Employee shall be entitled to twenty (20) days paid vacation
during the first year of employment and twenty (20) days paid vacation each
year of employment thereafter. Vacation time is not cumulative.
2. Employee shall be entitled to sick leave in accordance with
the plans and procedures established by the Board of Directors.
3. Employee shall be entitled to such life insurance and
disability insurance or other disability benefits, if any, as are provided by
the Company to its employees from time to time.
4. Employee shall be entitled to receive benefits as are afforded
to other similarly situated employees.
<PAGE> 1
EXHIBIT 99(c)(6)
SHORT TERM EMPLOYMENT AGREEMENT
THIS SHORT TERM EMPLOYMENT ("Agreement"), made and entered into as of
the _____ day of January, 1997, by and between SHAWN W. POOLE, an individual
resident of Lincolnton, North Carolina ("Employee") , and PCA INTERNATIONAL,
INC., a North Carolina corporation with its principal executive offices located
in Matthews, North Carolina (the "Company").
IN CONSIDERATION of the promises and the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions stated
herein, and in consideration of Employee's obligations and covenants, the
Company agrees to employ Employee on an active and full-time basis, and Employee
accepts such employment, subject to the order, supervision and direction of the
Chief Financial Officer of the Company (the "CFO"), or another officer of the
Company as determined by the Chief Executive Officer (the "CEO").
2. Duties. Employee shall serve the Company and shall devote his
full business time, skill and best efforts to the business of the Company and
faithfully perform such executive, administrative and supervisory duties as may
be prescribed by the CFO. Employee shall act at all times in compliance, in
all material respects, with all policies, rules and decisions adopted from time
to time by the Board of Directors of which Employee shall have received written
notice. The CFO shall deal with the Employee in good faith and shall not
require that Employee be required to relocate his residence, travel to the
extent that he must spend more nights away from home than are reasonably
required to further the Company's business, or perform tasks which would be
demeaning or degrading to, one in his position.
3. Term of Employment. The term of Employee's employment by the
Company hereunder shall commence as of the date hereof and shall continue for a
period of four (4) months after such commencement date, as such period may be
extended from time to time by the Company (the "Term of Employment").
<PAGE> 2
4. Compensation. The monthly compensation rate to be paid to
Employee for the services to be rendered hereunder (the "Monthly Base Rate")
throughout the Term of Employment shall be Fifteen Thousand Six Hundred
Twenty-Four Dollars ($15,624.00), payable in accordance with the Company's
normal payroll practices, subject to applicable federal and state income and
social security tax withholding requirements.
5. Termination Without Cause.
(a) The Board of Directors or the CEO may terminate
Employee's employment at any time, without cause. In the event of a
termination during, at the end of or after the Term of Employment other than a
Termination for Cause, as hereinafter defined, the Company will pay to Employee
in a lump sum within ten (10) days after termination $31,248.00 as severance.
(b) In the event Employee decides to terminate his
employment with the Company at the end of or at any time after the first four
(4) months hereof, the Company will pay Employee the severance set forth in
subparagraph (a) above. The provisions of this subparagraph (b) shall survive
the end of the Term of Employment.
6. Termination for Cause.
(a) The Board of Directors or the CEO shall have the
right at any time, without advance notice, to terminate Employee's employment
for cause, as hereinafter defined ("Termination for Cause").
(b) Termination for Cause shall mean termination because
of Employee's death, inability to perform his duties hereunder, theft from the
Company, embezzlement of the Company's funds, falsification of the Company's
records, fraud committed against the Company, commission of a felonious
criminal act involving the Company or while engaged in conduct of the Company's
business, incompetence due to the use of or reporting to work under the
influence of alcohol, narcotics, other unlawful drugs or controlled substances,
legal incapacity, insanity, act or acts involving dishonesty or misconduct
which have or may reasonably be expected to have a material adverse effect on
the business or reputation of the Company, breach of fiduciary duty to the
Company, willful and
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<PAGE> 3
substantial failure to perform stated duties or lawful directives of the Board
of Directors subject to the provisions of Section 2 hereof, the CEO or other
officer of the Company designated by the CEO, or material breach of any
provision of this Agreement, including without limitation voluntary termination
of this Agreement during the first 4 months hereof.
(c) In the event of a Termination for Cause, Employee
shall have no right thereafter to receive any compensation or other benefits
from the Company, except for COBRA.
7. Expenses. The Company shall reimburse Employee for those
expenses that are incurred by him in connection with the performance of his
duties under this Agreement that are consistent with Company policies and
practices, are reasonably related to the business of the Company and have been
approved, generally or specifically, verbally or in writing, by the CFO or the
CEO.
8. Governing Law. This Agreement shall be construed and
governed under the laws of the State of North Carolina.
9. Binding Nature. Except as expressly provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and assigns. The obligations and
covenants of Employee are personal in nature and, as such, are not assignable
by him.
10. Entire Agreement; Prior Oral Agreement; Amendment. This
Agreement contains the entire agreement of the parties with respect to the
matters set forth herein and supersedes all prior written and prior or
contemporaneous oral agreements or understandings of the parties hereto. This
Agreement confirms and sets forth the prior oral agreement of the parties as to
the terms and conditions of Employee's employment by the Company stated herein
and Employee's agreement to enter into a written employment agreement with the
Company, as of the date his employment by the Company commenced, stating such
terms and conditions. This Agreement may be changed or amended only by an
agreement in writing signed by both parties hereto.
11. Severability, Invalidity or Unenforceability. The
severability, invalidity or unenforceability of any paragraph or part of any
paragraph herein shall not in any way affect the validity or
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<PAGE> 4
enforceability of any other paragraph or any part of any other paragraph.
12. Prior Agreements and Covenants of Employee. Employee hereby
warrants and represents that he is not a party to any agreement or binding
obligation, oral or written, that would prevent his employment by the Company,
and Employee's execution of this Agreement and his fulfillment of his duties
and obligations hereunder do not and will not violate the provisions of any
agreement, contract, loan document or other binding written or oral obligation.
13. Notices. Any notice, offer, acceptance or other document
required or permitted to be given pursuant to any provisions of this Agreement
shall be in writing, signed by or on behalf of the person giving the same, and
(as elected by the person giving such notice) delivered by hand or mailed to
the parties at the following addresses by registered or certified mail, postage
prepaid, return receipt requested, or by a third party company or governmental
entity providing delivery services in the ordinary course of business, which
guarantees delivery on a specified date:
If to Employee: Shawn W. Poole
811 N. Oak Street
Lincolnton, NC 28092
If to the Company: PCA International, Inc.
815 Matthews-Mint Hill Road
Matthews, North Carolina 28105
Attention: John Grosso
With copies to: Thomas B. Henson
ROBINSON, BRADSHAW & HINSON, P.A.
One Independence Center
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
(704) 377-2536
or to such other address as any party hereto may designate by complying with
the provisions of this Section 15.
Such notice shall be deemed given (i) as of the date of written
acknowledgment by Employee or an officer of the Company if
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<PAGE> 5
delivered by hand, (ii) seventy-two (72) hours after deposit in United States
mail if sent by registered or certified mail or (iii) on the delivery date
guaranteed by the third party delivery service if sent by such service.
Rejection or other refusal to accept or inability to deliver because
of changed address of which no notice has been received shall not affect the
date upon which the notice is deemed to have been given pursuant hereto.
Notwithstanding the foregoing, no notice of change of address shall be
effective until the date of receipt hereof.
IN WITNESS WHEREOF, Shawn W. Poole has set his hand and seal hereto
and PCA International, Inc. has caused this Agreement to be executed and sealed
in its name by its duly authorized officials as of the day and year first above
written.
EMPLOYEE:
______________________________(SEAL)
SHAWN W. POOLE
COMPANY:
PCA INTERNATIONAL, INC.
By:
______________________________
John Grosso
President and CEO
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<PAGE> 1
EXHIBIT 99(c)(7)
EMPLOYMENT AND NONCOMPETE AGREEMENT
THIS EMPLOYMENT AND NONCOMPETE AGREEMENT ("Agreement"), made and
entered into as of the _____ day of January, 1997, by and between ROBERT KENT
SMITH, an individual resident of Charlotte, North Carolina ("Smith"), and PCA
INTERNATIONAL, INC., a North Carolina corporation with its principal executive
offices located in Matthews, North Carolina (the "Company").
IN CONSIDERATION of the promises and the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions stated herein,
and in consideration of Smith's obligations and covenants, including without
limitation, those obligations and covenants set forth in Section 5 hereof, the
Company agrees to employ Smith, and Smith accepts such employment, as a Special
Advisor to the President and CEO, subject to the order, supervision and
direction of the Chief Executive Officer of the Company (the "CEO").
2. Duties. Smith shall serve the Company as Special Advisor and
shall devote to the business of the Company in the performance of his duties as
Special Advisor his best efforts and such time as may be reasonably requested
by the CEO.
In no event, during the Term of Employment, shall Smith be required to
report other than to the President and CEO of the Company. The President and
CEO shall deal with Smith in good faith and shall not require that he relocate
his residence, require unreasonable travel, or require him to perform tasks
which would be demeaning or degrading to one in his position.
As Special Advisor, Smith shall perform such duties as the President
and CEO may prescribe.
3. Term of Employment. The term of Smith's employment by the
Company hereunder shall commence as of the date hereof and shall continue for a
period of four (4) months after such commencement date (the "Term of
Employment").
4. Compensation. The base monthly compensation rate to be paid
to Smith for the services to be rendered hereunder ("Monthly Base Rate")
throughout the Term of Employment shall be Twelve
<PAGE> 2
Thousand Eight Hundred Thirty-Three and No/100 Dollars ($12,833.00), payable in
accordance with the Company's normal payroll practices, subject to applicable
federal and state income and social security tax withholding requirements. In
the event any of the monthly payments due hereunder shall become more than
three (3) months past due, Employee shall have the option to accelerate the
remaining payments due hereunder so that they shall be due and payable in full.
5. Noncompetition, Secrecy and Inventions.
(a) Smith specifically acknowledges and agrees that his
employment with the Company will bring him in personal contact with accounts
and customers of the Company, and will enable him to acquire valuable
information as to the nature and character of the business of the Company and
the requirements of the accounts and customers of the Company. Smith
acknowledges and agrees that in the event he were to become employed by some
other employer or enter the same or similar business as the Company on his own
or in conjunction with others in competition with the Company, such personal
contacts with the customers and accounts of the Company and the knowledge of
such valuable information would give to Smith an unfair competitive advantage.
Throughout the Term of Employment and for a period of five (5) years
and eight (8) months thereafter (Smith's Term of Employment and the period
thereafter, together, the "Term of the Covenants"), Smith shall not, directly
or indirectly, as principal, agent, manager, employee, partner, shareholder,
director, officer, consultant or otherwise, participate in or engage in the
Lines of Business, as hereinafter defined; provided, however, that Smith may
own up to one percent (1%) of the outstanding securities of any corporation
which is engaged in the Lines of Business (except the Company) so long as such
securities are traded on a national securities exchange or are included in the
National Association of Securities Dealers Quotation System. "Lines of
Business" for purposes of this Section 5 shall mean the provision of portrait
photography services through itinerant or traveling operations or permanent
studios or any other portrait photography service, the processing or developing
of photographic film in connection with such provision and any other lines of
business in which the Company may engage during the Term of Employment.
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<PAGE> 3
(b) In performing the covenants set forth in this Section
5 (all of the covenants of Smith set forth in this Section 5, together, the
"Covenants Not to Compete"), Smith shall not, without limitation, during the
Term of the Covenants engage in the Lines of Business with any of the
following:
1. any client, account or customer of the Company, or
any subsidiary or affiliate of the Company, that has
done business with the Company or such affiliate or
subsidiary within two (2) years of the date of any
alleged competitive act by Employee;
2. any client, account or customer of the Company, or
any subsidiary or any affiliate of the Company, that
has transacted any business with the Company within
the twelve months preceding the date of this
Agreement;
3. Wal-Mart Stores, Inc. or any subsidiary thereof
("Wal-Mart");
4. any affiliate of Wal-Mart, including without
limitation Sam's Wholesale Club, HYPERMART*USA and
Wal-Mart SuperCenters (a "Wal-Mart Affiliate");
5. KMart Corporation or any subsidiary thereof
("KMart");
6. any affiliate of KMart, including without limitation
KMart SuperCenters (a "KMart Affiliate");
7. PETsMART, Inc. or any subsidiary thereof
("PETsMART");
8. any affiliate of PETsMART (a "PETsMART Affiliate");
9. any current or prospective institutional customer
("Institutional Customer");
10. CPI Corp.;
11. Lifetouch National School Studios, Inc.;
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<PAGE> 4
12. any Wal-Mart store that does business with the
Company during the Term of the Covenants;
13. any Wal-Mart Affiliate store that does business with
the Company during the Term of the Covenants;
14. any Wal-Mart store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
15. any Wal-Mart Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
16. any PETsMART store that does business with the
Company during the Term of the Covenants;
17. any PETsMART Affiliate store that does business with
the Company during the Term of the Covenants;
18. any PETsMART store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
19. any PETsMART Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
20. any Institutional Customer with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
21. any KMart store that does business with the Company
during the Term of the Covenants;
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<PAGE> 5
22. any KMart store that does business with the Company
during the Term of the Covenants;
23. any KMart store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
24. any KMart Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
25. Cifra, S.A. de C.V.;
26. Aurrera, S.A. de C.V., a subsidiary of Cifra, S.A. de
C.V.;
27. any other subsidiary of Cifra, S.A. de C.V.;
28. Olan Mills;
29. Expressly Portraits;
30. any employee or former employee of the Company, whose
employment with the Company terminated less than two
(2) years prior to Employee's association with such
employee or former employee, within a ten-mile radius
of any Wal-Mart store or any store in which the
Company has engaged in the Lines of Business within
six (6) months prior to Employee's engaging in the
Lines of Business; or
31. any person or entity in the geographic areas listed
in paragraph 10(c) hereinbelow.
(c) In performing the Covenants Not to Compete, Smith
shall not, without limitation, during the Term of the Covenants engage in the
Lines of Business in any of the following geographic areas:
1. The United States of America;
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<PAGE> 6
2. The State of Alabama;
3. The State of Arizona;
4. The State of Arkansas;
5. The State of California;
6. The State of Colorado;
7. The State of Connecticut;
8. The State of Delaware;
9. The District of Columbia;
10. The State of Florida;
11. The State of Georgia;
12. The State of Idaho
13. The State of Illinois;
14. The State of Indiana;
15. The State of Iowa;
16. The State of Kansas;
17. The State of Kentucky;
18. The State of Louisiana;
19. The State of Maine;
20. The State of Maryland;
21. The State of Massachusetts;
22. The State of Michigan;
23. The State of Minnesota;
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<PAGE> 7
24. The State of Mississippi;
25. The State of Missouri;
26. The State of Montana
27. The State of Nebraska;
28. The State of Nevada
29. The State of New Hampshire;
30. The State of New Jersey;
31. The State of New Mexico
32. The State of New York;
33. The State of North Carolina;
34. The State of North Dakota;
35. The State of Ohio;
36. The State of Oklahoma;
37. The State of Oregon;
38. The State of Pennsylvania;
39. The Commonwealth of Puerto Rico;
40. The State of Rhode Island;
41. The State of South Carolina;
42. The State of South Dakota;
43. The State of Tennessee;
44. The State of Texas;
45. The State of Utah
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<PAGE> 8
46. The State of Vermont;
47. The State of Virginia;
48. The State of Washington;
49. The State of West Virginia;
50. The State of Wisconsin;
51. The State of Wyoming;
52. Mexico;
53. Canada;
54. Puerto Rico;
55. South America;
56. Latin America;
57. Asia;
58. China; and
56. Counties in each State of the United States where the
Company has customers.
(d) As applied to the categories of persons, firms and
entities and geographic areas covered by the Covenants Not to Compete, the
provisions of paragraphs 5(b) and 5(c), respectively, shall be completely
severable and independent, and any invalidity or unenforceability thereof as
applied to any of such persons, firms or entities or geographic areas shall not
affect the validity or enforceability thereof as applied to any one or more of
the other persons, firms or entities or geographic areas.
(e) Throughout the Term of the Covenants, Smith shall not
directly or indirectly cause or attempt to cause any supplier or customer of
the Company, or any of its subsidiaries or affiliates, or any governmental body
or public agency, not to do business with the Company or such subsidiary or
affiliate or to transfer all or part of its business from the Company, or such
-8-
<PAGE> 9
subsidiary or affiliate, or otherwise interfere or attempt to interfere with
any business relationship between the Company, or any of its subsidiaries or
affiliates, and any of such suppliers, customers, government bodies or public
agencies, unless directed by the Board of Directors of the Company to so do.
(f) Smith acknowledges that irreparable injury will
result to the Company from any breach of the Covenants Not to Compete and there
is no adequate remedy at law to redress a breach or threatened breach of the
Covenants Not to Compete As a result of the foregoing, Smith agrees that the
parties seeking to enforce any of such provisions shall be entitled to an
injunction or other equitable relief against Smith to restrain him from such
breach, and Smith waives any claim or defense that the Company has an adequate
remedy at law for any such breach; provided, however, that nothing contained
herein shall prohibit the Company, or any subsidiary or affiliate of the
Company, from pursuing any other remedy it may have, including without limiting
the generality of the foregoing the recovery of damages.
(g) If any court determines that any provision of this
Section 5, or any part thereof, is invalid or unenforceable, the remainder of
this Section 5 shall not thereby be affected and shall be given full effect,
without regard to the invalid portions. If any court determines that any
provision of this Section 5, or any part thereof, is unenforceable because of
the duration or geographic scope of such provision, the parties agree that such
court shall have the power to reduce the duration or scope of such provision,
as the case may be, and the parties agree to request the court to exercise such
power, and, in its reduced form, such provision shall then be enforceable and
shall be enforced. The provisions of this Section 5 shall survive the
termination of this Agreement, for whatever reason.
(h) At all times, both during and after the termination
of his employment, Smith shall keep and retain in confidence and shall not,
without the prior written consent of the Company, disclose to any persons, firm
or corporation or otherwise use for his own benefit or the benefit of another
any of the proprietary, confidential or secret information or trade secrets of
the Company. Further, Smith and the Company agree to keep confidential the
terms and conditions of this Agreement except for such disclosure as may be
required (i) in the event of a breach of this Agreement, (ii)
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<PAGE> 10
compulsion by law or court order, or (iii) as may be required by any applicable
provision of law.
(i) In consideration of employment, and the compensation
paid to Smith as an employee of the Company, Smith hereby recognizes as the
exclusive property of, and assigns, transfers and conveys to, the Company
without further consideration each invention, discovery or improvement
(hereinafter collectively refer@ed to as "inventions") made, conceived,
developed or first reduced to practice by Smith (whether alone or jointly with
others) during the Term of Employment or within one (1) year thereafter which
relates in any way to Smith's work at the Company or any of its subsidiaries or
affiliates. Employee will communicate to the Company current written records
of all such inventions, which records shall be and remain the property of the
Company. Upon request by the Company, Smith will at any time execute documents
assigning to the Company, or its designees, any such invention or any patent
application or patent granted therefor, and will execute any papers relating
thereto. Smith also will give all reasonable assistance to the Company, or its
designee, regarding any litigation or controversy in connection with his
inventions, patent applications, or patents, all expenses incident thereto to
be assumed by the Company.
(j) As additional consideration payable hereunder and specifically
as payment for the Covenants Not to Compete, the Company shall pay to Smith the
Monthly Base Amount beginning at the end of the Term of Employment throughout
the Term of the Covenants. Such payments shall be made monthly in arrears. In
the event any of the monthly payments due hereunder shall become more than
three (3) months past due, Employee shall have the option to accelerate the
remaining payments due hereunder so that they shall be due and payable in full.
(k) Notwithstanding anything herein to the contrary, any
participation in or engagement in the Lines of Business by Interactive
Solutions, Inc., a North Carolina corporation, or any successor thereto, or by
Grant Holcomb, a resident of North Carolina, shall be a breech of this Section
5 by Employee.
6. Governing Law. This Agreement shall be construed and
governed under the laws of the State of North Carolina.
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<PAGE> 11
7. Binding Nature. Except as expressly provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and assigns. The obligations and
covenants of Smith are personal in nature and, as such, are not assignable by
him.
8. Entire Agreement; Prior Oral Agreement; Amendment. This
Agreement contains the entire agreement of the parties with respect to the
matters set forth herein and supersedes all prior written and prior or
contemporaneous oral agreements or understandings of the parties hereto. This
Agreement confirms and sets forth the prior oral agreement of the parties as to
the terms and conditions of Smith's employment by the Company stated herein,
including without limitation, the obligations and covenants of Smith set forth
in Section 5 hereof, and Smith's agreement to enter into a written employment
agreement with the Company, as of the date his employment by the Company
commenced, stating such terms and conditions. This Agreement may be changed or
amended only by an agreement in writing signed by both parties hereto.
9. Severability, Invalidity or Unenforceability. The
severability, invalidity or unenforceability of any paragraph or part of any
paragraph herein shall not in any way affect the validity or enforceability of
any other paragraph or any part of any other paragraph.
10. Prior Agreements and Covenants of Smith. Smith hereby
warrants and represents that he is not a party to any agreement or binding
obligation, oral or written, that would prevent his employment by the Company,
and Smith's execution of this Agreement and his fulfillment of his duties and
obligations hereunder do not and will not violate the provisions of any
agreement, contract, loan document or other binding written or oral obligation.
11. Notices. Any notice, offer, acceptance or other document
required or permitted to be given pursuant to any provisions of this Agreement
shall be in writing, signed by or on behalf of the person giving the same, and
(as elected by the person giving such notice) delivered by hand or mailed to
the parties at the following addresses by registered or certified mail, postage
prepaid, return receipt requested, or by a third party company or governmental
entity providing delivery services in the ordinary course of business, which
guarantees delivery on a specified date:
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<PAGE> 12
If to Smith: Robert Kent Smith
____________________
____________________
If to the Company: PCA International, Inc.
815 Matthews-Mint Hill Road
Matthews, North Carolina 28105
Attention: John Grosso
With copies to: Thomas B. Henson
ROBINSON, BRADSHAW & HINSON, P.A.
One Independence Center
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
(704) 377-2536
or to such other address as any party hereto may designate by complying with
the provisions of this Section 15.
Such notice shall be deemed given (i) as of the date of written
acknowledgment by Smith or an officer of the Company if delivered by hand, (ii)
seventy-two (72) hours after deposit in United States mail if sent by
registered or certified mail or (iii) on the delivery date guaranteed by the
third party delivery service if sent by such service.
Rejection or other refusal to accept or inability to deliver because
of changed address of which no notice has been received shall not affect the
date upon which the notice is deemed to have been given pursuant hereto.
Notwithstanding the foregoing, no notice of change of address shall be
effective until the date of receipt hereof.
16. Stock Option Grant. Smith will be granted an option to
purchase 100,000 shares of the Company's common stock on the date hereof,
having an exercise price equal to 100% of the closing price at which a share of
Common Stock trades on the date of the grant's Effective Date, all as defined
in the PCA International, Inc. 1996 Omnibus Long-Term Compensation Plan (the
"Plan"). Such option shall be treated as a nonqualified stock option for
federal income tax purposes. Such option shall terminate on a date that is
five (5) years following the date of grant and shall not terminate for any
reason prior to such date, including without limitation, the
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<PAGE> 13
termination of Smith's employment hereunder. Upon the death of Smith within
such 5 year period, the options granted hereunder will be transferred to his
estate or as directed in his will. Such options shall be exercisable in full
on the grant's Effective Date.
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<PAGE> 14
IN WITNESS WHEREOF, Robert Kent Smith has set his hand and seal hereto
and PCA International, Inc. has caused this Agreement to be executed and sealed
in its name by its duly authorized officials as of the day and year first above
written.
SMITH:
______________________________(SEAL)
ROBERT KENT SMITH
COMPANY:
PCA INTERNATIONAL, INC.
By:
______________________________
John Grosso
President and CEO
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<PAGE> 1
EXHIBIT 99(c)(8)
EMPLOYMENT AND NONCOMPETE AGREEMENT
THIS EMPLOYMENT AND NONCOMPETE AGREEMENT ("Agreement"), made and
entered into as of the _____ day of January, 1997, by and between ED J. TEPERA,
an individual resident of Monroe, North Carolina ("Employee"), and PCA
INTERNATIONAL, INC., a North Carolina corporation with its principal executive
offices located in Matthews, North Carolina (the "Company").
IN CONSIDERATION of the promises and the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions stated
herein, and in consideration of Employee's obligations and covenants, including
without limitation, those obligations and covenants set forth in Section 9
hereof, the Company agrees to employ Employee on an active and full-time basis,
and Employee accepts such employment, as a Senior Vice President-Manufacturing,
subject to the order, supervision and direction of the Chief Technical Officer
of the Company (the "CTO"), or another officer of the Company as determined by
the Chief Executive Officer (the "CEO").
2. Duties. Employee shall serve the Company as a Senior Vice
President-Manufacturing and shall devote his full business time, skill and best
efforts to the business of the Company and faithfully perform such executive,
administrative and supervisory duties as may be prescribed by the CTO.
Employee shall act at all times in compliance, in all material respects, with
all policies, rules and decisions adopted from time to time by the Board of
Directors of which Employee shall have received written notice. The CTO shall
deal with the Employee in good faith and shall not require that Employee be
required to relocate his residence, travel to the extent that he must spend
more nights away from home than are reasonably required to further the
Company's business, or perform tasks which would be demeaning or degrading to,
one in his position.
3. Term of Employment. The term of Employee's employment by the
Company hereunder shall commence as of the date hereof and shall continue for a
period of one (1) year after such commencement date (the "Term of Employment").
<PAGE> 2
4. Base Compensation. The base annual compensation rate to be
paid to Employee for the services to be rendered hereunder ("Base Rate")
throughout the Term of Employment, except to the extent adjusted as provided
below, shall be One Hundred and Fifteen Thousand Dollars ($115,000.00), payable
in accordance with the Company's normal payroll practices, subject to
applicable federal and state income and social security tax withholding
requirements. Employee's Base Rate may be reviewed from time to time by the
CTO and CEO and adjusted upward as Employee's performance, the performance of
the Company and other pertinent factors warrant.
5. Termination Without Cause.
(a) The Board of Directors or the CEO may terminate
Employee's employment at any time, without cause. In the event of a
termination during, at the end of, or after the Term of Employment, other than
a Termination for Cause, as hereinafter defined, the Company will pay to
Employee in six (6) equal monthly installments Fifty Percent (50%) of the Base
Rate as severance. Such payments shall be made in accordance with the
Company's normal payroll practices, subject to applicable federal and state
income and social security tax withholding requirements.
(b) Employee understands and agrees that this Agreement
will not be renewed at the end of the Term of Employment. In the event the
Company does not offer employment to Employee at the end of the Term of
Employment or at any time thereafter upon the same or better terms and
conditions as set forth herein, such event shall be deemed a termination other
than a Termination for Cause and Employee shall be paid the severance set forth
in subparagraph (a) above. The provisions of this subparagraph (b) shall
survive the end of the Term of Employment.
6. Termination for Cause.
(a) The Board of Directors or the CEO shall have the
right at any time, without advance notice, to terminate Employee's employment
for cause, as hereinafter defined ("Termination for Cause").
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<PAGE> 3
(b) Termination for Cause shall mean termination because
of Employee's death, inability to perform his duties hereunder, theft from the
Company, embezzlement of the Company's funds, falsification of the Company's
records, fraud committed against the Company, commission of a felonious
criminal act involving the Company or while engaged in conduct of the Company's
business, incompetence due to the use of or reporting to work under the
influence of alcohol, narcotics, other unlawful drugs or controlled substances,
legal incapacity, insanity, act or acts involving dishonesty or misconduct
which have or may reasonably be expected to have a material adverse effect on
the business or reputation of the Company, breach of fiduciary duty to the
Company, willful and substantial failure to perform stated duties or lawful
directives of the Board of Directors, the CEO or other officer of the Company
designated by the CEO, or material breach of any provision of this Agreement,
including without limitation voluntary termination of this Agreement.
(c) In the event of a Termination for Cause, Employee
shall have no right thereafter to receive any compensation or other benefits
from the Company, except for COBRA and rights under vested stock option grants.
(d) The provisions of Section 9 hereof shall continue to
be binding on the parties hereto notwithstanding the termination without cause
or Termination for Cause of Employee.
7. Fringe Benefits. Employee shall be entitled to receive such
fringe benefits, including vacation and employee benefit plans, if any, as are
set forth on Exhibit A hereto. Employee shall have the right to fully
participate in any bonus program to the same extent as that provided to other
Senior Vice Presidents or other similarly situated executives. For all
purposes related to Employee's tenure as an employee, his tenure at American
Studios, Inc. shall be added to his tenure at the Company.
8. Expenses. The Company shall reimburse Employee for those
expenses that are incurred by him in connection with the performance of his
duties under this Agreement that are consistent with Company policies and
practices, are reasonably related to the
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<PAGE> 4
business of the Company and have been approved, generally or specifically,
verbally or in writing, by the CTO or CEO.
9. Noncompetition, Secrecy and Inventions.
(a) Employee specifically acknowledges and agrees that
his employment with the Company will bring him in personal contact with
accounts and customers of the Company, and will enable him to acquire valuable
information as to the nature and character of the business of the Company and
the requirements of the accounts and customers of the Company. Employee
acknowledges and agrees that in the event he were to become employed by some
other employer or enter the same or similar business as the Company on his own
or in conjunction with others in competition with the Company, such personal
contacts with the customers and accounts of the Company and the knowledge of
such valuable information would give to Employee an unfair competitive
advantage.
Throughout the Term of Employment and for a period of two (2) years
thereafter (Employee's Term of Employment and the two-year period thereafter,
together, the "Term of the Covenants"), Employee shall not, directly or
indirectly, as principal, agent, manager, employee, partner, shareholder,
director, officer, consultant or otherwise, participate in or engage in the
Lines of Business, as hereinafter defined; provided, however, that Employee may
own up to one percent (1%) of the outstanding securities of any corporation
which is engaged in the Lines of Business, so long as such securities are
traded on a national securities exchange or are included in the National
Association of Securities Dealers Quotation System. "Lines of Business" for
purposes of this Section 9 shall mean the provision of portrait photography
services through itinerant or traveling operations or permanent studios or any
other portrait photography service, the processing or developing of
photographic film in connection with such provision and any other lines of
business in which the Company may engage during the Term of Employment.
(b) In performing the covenants set forth in this Section
9 (all of the covenants of Employee set forth in this Section 9, together, the
"Covenants Not to Compete"), Employee shall not, without limitation, during the
Term of the Covenants engage in the Lines of Business with any of the
following:
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<PAGE> 5
1. any client, account or customer of the Company, or
any subsidiary or affiliate of the Company, that has
done business with the Company or such affiliate or
subsidiary within two (2) years of the date of any
alleged competitive act by Employee;
2. any client, account or customer of the Company, or
any subsidiary or any affiliate of the Company, that
has transacted any business with the Company within
the twelve months preceding the date of this
Agreement;
3. Wal-Mart Stores, Inc. or any subsidiary thereof
("Wal-Mart");
4. any affiliate of Wal-Mart, including without
limitation Sam's Wholesale Club, HYPERMART*USA and
Wal-Mart SuperCenters (a "Wal-Mart Affiliate");
5. KMart Corporation or any subsidiary thereof
("KMart");
6. any affiliate of KMart, including without limitation
KMart SuperCenters (a "KMart Affiliate");
7. PETsMART, Inc. or any subsidiary thereof
("PETsMART");
8. any affiliate of PETsMART (a "PETsMART Affiliate");
9. any current or prospective institutional customer
("Institutional Customer");
10. CPI Corp.;
11. Lifetouch National School Studios, Inc.;
12. any Wal-Mart store that does business with the
Company during the Term of the Covenants;
13. any Wal-Mart Affiliate store that does business with
the Company during the Term of the Covenants;
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<PAGE> 6
14. any Wal-Mart store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
15. any Wal-Mart Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
16. any PETsMART store that does business with the
Company during the Term of the Covenants;
17. any PETsMART Affiliate store that does business with
the Company during the Term of the Covenants;
18. any PETsMART store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
19. any PETsMART Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
20. any Institutional Customer with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
21. any KMart store that does business with the Company
during the Term of the Covenants;
22. any KMart store that does business with the Company
during the Term of the Covenants;
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<PAGE> 7
23. any KMart store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
24. any KMart Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
25. Cifra, S.A. de C.V.;
26. Aurrera, S.A. de C.V., a subsidiary of Cifra, S.A. de
C.V.;
27. any other subsidiary of Cifra, S.A. de C.V.;
28. Olan Mills;
29. Expressly Portraits;
30. any employee or former employee of the Company, whose
employment with the Company terminated less than two
(2) years prior to Employee's association with such
employee or former employee, within a ten-mile radius
of any Wal-Mart store or any store in which the
Company has engaged in the Lines of Business within
six (6) months prior to Employee's engaging in the
Lines of Business; or
31. any person or entity in the geographic areas listed
in paragraph 10(c) hereinbelow.
(c) In performing the Covenants Not to Compete, Employee
shall not, without limitation, during the Term of the Covenants engage in the
Lines of Business in any of the following geographic areas:
1. The United States of America;
2. The State of Alabama;
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<PAGE> 8
3. The State of Arizona;
4. The State of Arkansas;
5. The State of California;
6. The State of Colorado;
7. The State of Connecticut;
8. The State of Delaware;
9. The District of Columbia;
10. The State of Florida;
11. The State of Georgia;
12. The State of Idaho
13. The State of Illinois;
14. The State of Indiana;
15. The State of Iowa;
16. The State of Kansas;
17. The State of Kentucky;
18. The State of Louisiana;
19. The State of Maine;
20. The State of Maryland;
21. The State of Massachusetts;
22. The State of Michigan;
23. The State of Minnesota;
24. The State of Mississippi;
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<PAGE> 9
25. The State of Missouri;
26. The State of Montana
27. The State of Nebraska;
28. The State of Nevada
29. The State of New Hampshire;
30. The State of New Jersey;
31. The State of New Mexico
32. The State of New York;
33. The State of North Carolina;
34. The State of North Dakota;
35. The State of Ohio;
36. The State of Oklahoma;
37. The State of Oregon;
38. The State of Pennsylvania;
39. The Commonwealth of Puerto Rico;
40. The State of Rhode Island;
41. The State of South Carolina;
42. The State of South Dakota;
43. The State of Tennessee;
44. The State of Texas;
45. The State of Utah
46. The State of Vermont;
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<PAGE> 10
47. The State of Virginia;
48. The State of Washington;
49. The State of West Virginia;
50. The State of Wisconsin;
51. The State of Wyoming;
52. Mexico;
53. Canada;
54. Puerto Rico;
55. South America;
56. Latin America;
57. Asia;
58. China; and
59. Counties in each State of the United States where the
Company has customers.
(d) As applied to the categories of persons, firms and
entities and geographic areas covered by the Covenants Not to Compete, the
provisions of paragraphs 9(b) and 9(c), respectively, shall be completely
severable and independent, and any invalidity or unenforceability thereof as
applied to any of such persons, firms or entities or geographic areas shall not
affect the validity or enforceability thereof as applied to any one or more of
the other persons, firms or entities or geographic areas.
(e) Throughout the Term of the Covenants, Employee shall
not directly or indirectly cause or attempt to cause any supplier or customer
of the Company, or any of its subsidiaries or affiliates, or any governmental
body or public agency, not to do business with the Company or such subsidiary
or affiliate or to transfer all or part of its business from the Company, or
such subsidiary or affiliate, or otherwise interfere or attempt to
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<PAGE> 11
interfere with any business relationship between the Company, or any of its
subsidiaries or affiliates, and any of such suppliers, customers, government
bodies or public agencies, unless directed by the Board of Directors of the
Company to so do.
(f) Employee acknowledges that irreparable injury will
result to the Company from any breach of the Covenants Not to Compete and there
is no adequate remedy at law to redress a breach or threatened breach of the
Covenants Not to Compete As a result of the foregoing, Employee agrees that
the parties seeking to enforce any of such provisions shall be entitled to an
injunction or other equitable relief against Employee to restrain him from such
breach, and Employee waives any claim or defense that the Company has an
adequate remedy at law for any such breach; provided, however, that nothing
contained herein shall prohibit the Company, or any subsidiary or affiliate of
the Company, from pursuing any other remedy it may have, including without
limiting the generality of the foregoing the recovery of damages.
(g) If any court determines that any provision of this
Section 9, or any part thereof, is invalid or unenforceable, the remainder of
this Section 9 shall not thereby be affected and shall be given full effect,
without regard to the invalid portions. If any court determines that any
provision of this Section 9, or any part thereof, is unenforceable because of
the duration or geographic scope of such provision, the parties agree that such
court shall have the power to reduce the duration or scope of such provision,
as the case may be, and the parties agree to request the court to exercise such
power, and, in its reduced form, such provision shall then be enforceable and
shall be enforced. The provisions of this Section 9 shall survive the
termination of this Agreement, for whatever reason.
(h) At all times, both during and after the termination
of his employment, Employee shall keep and retain in confidence and shall not,
without the prior written consent of the Company, disclose to any persons, firm
or corporation or otherwise use for his own benefit or the benefit of another
any of the proprietary, confidential or secret information or trade secrets of
the Company. Further, Employee and the Company agree to keep confidential the
terms and conditions of this Agreement except for such disclosure as may be
required (i) in the event of a breach of this Agreement,
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<PAGE> 12
(ii) compulsion by law or court order, or (iii) as may be required by any
applicable provision of law.
(i) In consideration of employment, and the compensation
paid to Employee as an employee of the Company, Employee hereby recognizes as
the exclusive property of, and assigns, transfers and conveys to, the Company
without further consideration each invention, discovery or improvement
(hereinafter collectively refer@ed to as "inventions") made, conceived,
developed or first reduced to practice by Employee (whether alone or jointly
with others) during the Term of Employment or within one (1) year thereafter
which relates in any way to Employee's work at the Company or any of its
subsidiaries or affiliates. Employee will communicate to the Company current
written records of all such inventions, which records shall be and remain the
property of the Company. Upon request by the Company, Employee will at any
time execute documents assigning to the Company, or its designees, any such
invention or any patent application or patent granted therefor, and will
execute any papers relating thereto. Employee also will give all reasonable
assistance to the Company, or its designee, regarding any litigation or
controversy in connection with his inventions, patent applications, or patents,
all expenses incident thereto to be assumed by the Company.
10. Governing Law. This Agreement shall be construed and
governed under the laws of the State of North Carolina.
11. Binding Nature. Except as expressly provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and assigns. The obligations and
covenants of Employee are personal in nature and, as such, are not assignable
by him.
12. Entire Agreement; Prior Oral Agreement; Amendment. This
Agreement contains the entire agreement of the parties with respect to the
matters set forth herein and supersedes all prior written and prior or
contemporaneous oral agreements or understandings of the parties hereto. This
Agreement confirms and sets forth the prior oral agreement of the parties as to
the terms and conditions of Employee's employment by the Company stated herein,
including without limitation, the obligations and covenants of Employee set
forth in Section 9 hereof, and Employee's agreement to enter into
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<PAGE> 13
a written employment agreement with the Company, as of the date his employment
by the Company commenced, stating such terms and conditions. This Agreement
may be changed or amended only by an agreement in writing signed by both
parties hereto.
13. Severability, Invalidity or Unenforceability. The
severability, invalidity or unenforceability of any paragraph or part of any
paragraph herein shall not in any way affect the validity or enforceability of
any other paragraph or any part of any other paragraph.
14. Prior Agreements and Covenants of Employee. Employee hereby
warrants and represents that he is not a party to any agreement or binding
obligation, oral or written, that would prevent his employment by the Company,
and Employee's execution of this Agreement and his fulfillment of his duties
and obligations hereunder do not and will not violate the provisions of any
agreement, contract, loan document or other binding written or oral obligation.
15. Notices. Any notice, offer, acceptance or other document
required or permitted to be given pursuant to any provisions of this Agreement
shall be in writing, signed by or on behalf of the person giving the same, and
(as elected by the person giving such notice) delivered by hand or mailed to
the parties at the following addresses by registered or certified mail, postage
prepaid, return receipt requested, or by a third party company or governmental
entity providing delivery services in the ordinary course of business, which
guarantees delivery on a specified date:
If to Employee: Ed J. Tepera
528 Heather Place
Monroe, NC 28112
If to the Company: PCA International, Inc.
815 Matthews-Mint Hill Road
Matthews, North Carolina 28105
Attention: John Grosso
With copies to: Thomas B. Henson
ROBINSON, BRADSHAW & HINSON, P.A.
One Independence Center
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
(704) 377-2536
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<PAGE> 14
or to such other address as any party hereto may designate by complying with
the provisions of this Section 15.
Such notice shall be deemed given (i) as of the date of written
acknowledgment by Employee or an officer of the Company if delivered by hand,
(ii) seventy-two (72) hours after deposit in United States mail if sent by
registered or certified mail or (iii) on the delivery date guaranteed by the
third party delivery service if sent by such service.
Rejection or other refusal to accept or inability to deliver because
of changed address of which no notice has been received shall not affect the
date upon which the notice is deemed to have been given pursuant hereto.
Notwithstanding the foregoing, no notice of change of address shall be
effective until the date of receipt hereof.
16. Stock Option Grant. Employee will be granted an option to
purchase 20,000 shares of the Company's common stock on the date hereof, having
an exercise price equal to 100% of the closing price at which a share of Common
Stock trades on the date of the grant's Effective Date, all as defined in the
PCA International, Inc. 1996 Omnibus Long- Term Compensation Plan (the "Plan").
Such option shall be treated as a nonqualified stock option for federal income
tax purposes. Such option shall terminate on a date that is ten (10) years
following the date of grant; provided, however, that if Employee's employment
with the Company is terminated prior to such date such option shall terminate
three (3) months following such termination, unless such termination occurs as
a result of employee's death or disability in which event such options shall
terminate twelve (12) months following such termination. Such options shall
become exercisable in five (5) equal annual increments on each of the first,
second, third, fourth and fifth anniversaries of the date of grant.
IN WITNESS WHEREOF, Ed J. Tepera has set his hand and seal hereto and
PCA International, Inc. has caused this Agreement to be
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<PAGE> 15
executed and sealed in its name by its duly authorized officials as of the day
and year first above written.
EMPLOYEE:
______________________________(SEAL)
ED J. TEPERA
COMPANY:
PCA INTERNATIONAL, INC.
By:
______________________________
John Grosso
President and CEO
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<PAGE> 16
EXHIBIT A
FRINGE BENEFITS
1. Employee shall be entitled to twenty (20) days paid vacation
during the first year of employment and twenty (20) days paid vacation each
year of employment thereafter. Vacation time is not cumulative.
2. Employee shall be entitled to sick leave in accordance with
the plans and procedures established by the Board of Directors.
3. Employee shall be entitled to such life insurance and
disability insurance or other disability benefits, if any, as are provided by
the Company to its employees from time to time.
4. Employee shall be entitled to receive benefits as are afforded
to other similarly situated employees.
<PAGE> 1
EXHIBIT 99(c)(9)
EMPLOYMENT AND NONCOMPETE AGREEMENT
THIS EMPLOYMENT AND NONCOMPETE AGREEMENT ("Agreement"), made and
entered into as of the _____ day of January, 1997, by and between J. ROBERT
WREN, JR., an individual resident of Gastonia, North Carolina ("Employee") ,
and PCA INTERNATIONAL, INC., a North Carolina corporation with its principal
executive offices located in Matthews, North Carolina (the "Company").
IN CONSIDERATION of the promises and the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions stated
herein, and in consideration of Employee's obligations and covenants, including
without limitation, those obligations and covenants set forth in Section 9
hereof, the Company agrees to employ Employee on an active and full-time basis,
and Employee accepts such employment, as an Executive Vice President, General
Counsel and Assistant to the Chief Executive Officer, subject to the order,
supervision and direction of the Chief Executive Officer of the Company (the
"CEO") (the "CEO").
2. Duties. Employee shall serve the Company as an Executive Vice
President, General Counsel and Assistant to the Chief Executive Officer and
shall devote his full business time, skill and best efforts to the business of
the Company and faithfully perform such executive, administrative and
supervisory duties as may be prescribed by the CEO. Employee shall act at all
times in compliance, in all material respects, with all policies, rules and
decisions adopted from time to time by the Board of Directors of which Employee
shall have received written notice. The CEO shall deal with the Employee in
good faith and shall not require that Employee be required to relocate his
residence, travel to the extent that he must spend more nights away from home
than are reasonably required to further the Company's business, or perform
tasks which would be demeaning or degrading to, one in his position.
3. Term of Employment. The term of Employee's employment by the
Company hereunder shall commence as of the date hereof and shall continue for a
period of three (3) years after such commencement date (the "Term of
Employment").
<PAGE> 2
4. Base Compensation. The base annual compensation rate to be
paid to Employee for the services to be rendered hereunder ("Base Rate")
throughout the Term of Employment, except to the extent adjusted as provided
below, shall be Two Hundred and Fifty Thousand Dollars ($250,000.00), payable
in accordance with the Company's normal payroll practices, subject to
applicable federal and state income and social security tax withholding
requirements. Employee's Base Rate may be reviewed from time to time by the
CEO and adjusted upward as Employee's performance, the performance of the
Company and other pertinent factors warrant.
5. Termination Without Cause. (a) The Board of Directors or the
CEO may terminate Employee's employment at any time, without cause. However, in
the event of a termination during, at the end of or after the Term of
Employment, other than a Termination for Cause, as hereinafter defined, the
Company will pay in equal monthly installments the following severance:
(i) if such termination occurs during the first 12 months hereof,
the Base Rate for the balance of the term of this Employment Agreement;
(ii) if such termination occurs after the first 12 months hereof, but
prior to the end of the Term of Employment, 200% of the Base Rate. Such
payments shall be made in accordance with the Company's normal payroll
practices, subject to applicable federal and state income and social security
tax withholding requirements.
(b) Employee understands and agrees that this Agreement will not
be renewed at the end of the Term of Employment. In the event the Company does
not offer employment to Employee at the end of the Term of Employment or
thereafter upon the same or better terms and conditions as set forth herein,
such event shall be deemed a termination other than a Termination for Cause and
Employee shall be paid in a lump sum within 10 days of such termination
severance equal to the Base Rate.
(c) Notwithstanding anything herein to the contrary, Employee may
terminate this Employment Agreement at any time after the first 12 months
hereof and receive the following severance:
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<PAGE> 3
(i) if such termination occurs during the second 12 months hereof,
200% of the Base Rate payable in equal monthly installments;
(ii) if such termination occurs during the third 12 months hereof,
100% of the Base Rate payable in equal monthly installments; or
(iii) if such termination occurs at any time after the first 36
months hereof, 100% of the Base Rate payable in equal monthly installments.
(d) The provisions of sub-paragraph (b) and (c)(iii), above, shall
survive the end of the Term of Employment.
(e) In the event any of the monthly payments due hereunder shall
become more than three (3) months past due, Employee shall have the option to
accelerate the remaining payments due hereunder so that they shall be due and
payable in full.
6. Termination for Cause.
(a) The Board of Directors or the CEO shall have the
right at any time, without advance notice, to terminate Employee's employment
for cause, as hereinafter defined ("Termination for Cause").
(b) Termination for Cause shall mean termination because
of Employee's death, inability to perform his duties hereunder due to an
insured disability, theft from the Company, embezzlement of the Company's
funds, falsification of the Company's records, fraud committed against the
Company, commission of a felonious criminal act involving the Company or while
engaged in conduct of the Company's business, incompetence due to the use of or
reporting to work under the influence of alcohol, narcotics, other unlawful
drugs or controlled substances, legal incapacity, insanity, act or acts
involving dishonesty or misconduct which have or may reasonably be expected to
have a material adverse effect on the business or reputation of the Company,
breach of fiduciary duty to the Company, willful and substantial failure to
perform stated duties or lawful directives of the Board of Directors subject to
the provisions of Section 2 hereof, the CEO or other officer of the Company
designated by the CEO, or material breach of any provision
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<PAGE> 4
of this Agreement, including without limitation voluntary termination of this
Agreement during the first 12 months of this Employment Agreement.
(c) In the event of a Termination for Cause, Employee
shall have no right thereafter to receive any compensation or other benefits
from the Company, except for COBRA and rights under vested stock option grants.
(d) The provisions of Section 9 hereof shall continue to
be binding on the parties hereto notwithstanding the termination without cause
or Termination for Cause of Employee.
7. Fringe Benefits, Bonus and Tenure. Employee shall be entitled
to receive such fringe benefits, including vacation and employee benefit plans,
if any, as are set forth on Exhibit A hereto. Employee shall have the right to
fully participate in any bonus program to the same extent as that provided to
other Executive Vice Presidents or other similarly situated executives. For
all purposes related to Employee's tenure as an employee, his tenure at
American Studios, Inc. shall be added to his tenure at the Company.
8. Expenses. The Company shall reimburse Employee for those
expenses that are incurred by him in connection with the performance of his
duties under this Agreement that are consistent with Company policies and
practices, are reasonably related to the business of the Company and have been
approved, generally or specifically, verbally or in writing, by the CEO.
9. Noncompetition, Secrecy and Inventions.
(a) Employee specifically acknowledges and agrees that
his employment with the Company will bring him in personal contact with
accounts and customers of the Company, and will enable him to acquire valuable
information as to the nature and character of the business of the Company and
the requirements of the accounts and customers of the Company. Employee
acknowledges and agrees that in the event he were to become employed by some
other employer or enter the same or similar business as the Company on his own
or in conjunction with others in competition with the Company, such personal
contacts with the customers and accounts of the Company
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<PAGE> 5
and the knowledge of such valuable information would give to Employee an unfair
competitive advantage.
Throughout the Term of Employment and for a period of two (2) years
thereafter (Employee's Term of Employment and the two-year period thereafter,
together, the "Term of the Covenants"), Employee shall not, directly or
indirectly, as principal, agent, manager, employee, partner, shareholder,
director, officer, consultant or otherwise, participate in or engage in the
Lines of Business, as hereinafter defined; provided, however, that Employee may
own up to one percent (1%) of the outstanding securities of any corporation
which is engaged in the Lines of Business, so long as such securities are traded
on a national securities exchange or are included in the National Association of
Securities Dealers Quotation System. "Lines of Business" for purposes of this
Section 9 shall mean the provision of portrait photography services through
itinerant or traveling operations or permanent studios or any other portrait
photography service, the processing or developing of photographic film in
connection with such provision and any other lines of business in which the
Company may engage during the Term of Employment.
(b) In performing the covenants set forth in this Section
9 (all of the covenants of Employee set forth in this Section 9, together, the
"Covenants Not to Compete"), Employee shall not, without limitation, during the
Term of the Covenants engage in the Lines of Business with any of the following:
1. any client, account or customer of the Company, or
any subsidiary or affiliate of the Company, that has
done business with the Company or such affiliate or
subsidiary within two (2) years of the date of any
alleged competitive act by Employee;
2. any client, account or customer of the Company, or
any subsidiary or any affiliate of the Company, that
has transacted any business with the Company within
the twelve months preceding the date of this
Agreement;
3. Wal-Mart Stores, Inc. or any subsidiary thereof
("Wal-Mart");
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<PAGE> 6
4. any affiliate of Wal-Mart, including without
limitation Sam's Wholesale Club, HYPERMART*USA and
Wal-Mart SuperCenters (a "Wal-Mart Affiliate");
5. KMart Corporation or any subsidiary thereof
("KMart");
6. any affiliate of KMart, including without limitation
KMart SuperCenters (a "KMart Affiliate");
7. PETsMART, Inc. or any subsidiary thereof
("PETsMART");
8. any affiliate of PETsMART (a "PETsMART Affiliate");
9. any current or prospective institutional customer
("Institutional Customer");
10. CPI Corp.;
11. Lifetouch National School Studios, Inc.;
12. any Wal-Mart store that does business with the
Company during the Term of the Covenants;
13. any Wal-Mart Affiliate store that does business with
the Company during the Term of the Covenants;
14. any Wal-Mart store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
15. any Wal-Mart Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
16. any PETsMART store that does business with the
Company during the Term of the Covenants;
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<PAGE> 7
17. any PETsMART Affiliate store that does business with
the Company during the Term of the Covenants;
18. any PETsMART store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
19. any PETsMART Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
20. any Institutional Customer with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
21. any KMart store that does business with the Company
during the Term of the Covenants;
22. any KMart store that does business with the Company
during the Term of the Covenants;
23. any KMart store with which the Company previously
conducted business but no longer conducts business or
the Board of Directors reasonably expects to do
business during the Term of the Covenants;
24. any KMart Affiliate store with which the Company
previously conducted business but no longer conducts
business or the Board of Directors reasonably expects
to do business during the Term of the Covenants;
25. Cifra, S.A. de C.V.;
26. Aurrera, S.A. de C.V., a subsidiary of Cifra, S.A. de
C.V.;
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<PAGE> 8
27. any other subsidiary of Cifra, S.A. de C.V.;
28. Olan Mills;
29. Expressly Portraits;
30. any employee or former employee of the Company, whose
employment with the Company terminated less than two
(2) years prior to Employee's association with such
employee or former employee, within a ten-mile radius
of any Wal-Mart store or any store in which the
Company has engaged in the Lines of Business within
six (6) months prior to Employee's engaging in the
Lines of Business; or
31. any person or entity in the geographic areas listed
in paragraph 10(c) hereinbelow.
(c) In performing the Covenants Not to Compete, Employee
shall not, without limitation, during the Term of the Covenants engage in the
Lines of Business in any of the following geographic areas:
1. The United States of America;
2. The State of Alabama;
3. The State of Arizona;
4. The State of Arkansas;
5. The State of California;
6. The State of Colorado;
7. The State of Connecticut;
8. The State of Delaware;
9. The District of Columbia;
10. The State of Florida;
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<PAGE> 9
11. The State of Georgia;
12. The State of Idaho
13. The State of Illinois;
14. The State of Indiana;
15. The State of Iowa;
16. The State of Kansas;
17. The State of Kentucky;
18. The State of Louisiana;
19. The State of Maine;
20. The State of Maryland;
21. The State of Massachusetts;
22. The State of Michigan;
23. The State of Minnesota;
24. The State of Mississippi;
25. The State of Missouri;
26. The State of Montana
27. The State of Nebraska;
28. The State of Nevada
29. The State of New Hampshire;
30. The State of New Jersey;
31. The State of New Mexico
32. The State of New York;
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<PAGE> 10
33. The State of North Carolina;
34. The State of North Dakota;
35. The State of Ohio;
36. The State of Oklahoma;
37. The State of Oregon;
38. The State of Pennsylvania;
39. The Commonwealth of Puerto Rico;
40. The State of Rhode Island;
41. The State of South Carolina;
42. The State of South Dakota;
43. The State of Tennessee;
44. The State of Texas;
45. The State of Utah
46. The State of Vermont;
47. The State of Virginia;
48. The State of Washington;
49. The State of West Virginia;
50. The State of Wisconsin;
51. The State of Wyoming;
52. Mexico;
53. Canada;
54. Puerto Rico;
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<PAGE> 11
55. South America;
56. Latin America;
57. Asia;
58. China; and
59. Counties in each State of the United States where the
Company has customers.
(d) As applied to the categories of persons, firms and
entities and geographic areas covered by the Covenants Not to Compete, the
provisions of paragraphs 9(b) and 9(c), respectively, shall be completely
severable and independent, and any invalidity or unenforceability thereof as
applied to any of such persons, firms or entities or geographic areas shall not
affect the validity or enforceability thereof as applied to any one or more of
the other persons, firms or entities or geographic areas.
(e) Throughout the Term of the Covenants, Employee shall
not directly or indirectly cause or attempt to cause any supplier or customer
of the Company, or any of its subsidiaries or affiliates, or any governmental
body or public agency, not to do business with the Company or such subsidiary
or affiliate or to transfer all or part of its business from the Company, or
such subsidiary or affiliate, or otherwise interfere or attempt to interfere
with any business relationship between the Company, or any of its subsidiaries
or affiliates, and any of such suppliers, customers, government bodies or
public agencies.
(f) Employee acknowledges that irreparable injury will
result to the Company from any breach of the Covenants Not to Compete and there
is no adequate remedy at law to redress a breach or threatened breach of the
Covenants Not to Compete As a result of the foregoing, Employee agrees that
the parties seeking to enforce any of such provisions shall be entitled to an
injunction or other equitable relief against Employee to restrain him from such
breach, and Employee waives any claim or defense that the Company has an
adequate remedy at law for any such breach; provided, however, that nothing
contained herein shall prohibit the Company, or any subsidiary or affiliate of
the Company, from
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<PAGE> 12
pursuing any other remedy it may have, including without limiting the
generality of the foregoing the recovery of damages.
(g) If any court determines that any provision of this
Section 9, or any part thereof, is invalid or unenforceable, the remainder of
this Section 9 shall not thereby be affected and shall be given full effect,
without regard to the invalid portions. If any court determines that any
provision of this Section 9, or any part thereof, is unenforceable because of
the duration or geographic scope of such provision, the parties agree that such
court shall have the power to reduce the duration or scope of such provision,
as the case may be, and the parties agree to request the court to exercise such
power, and, in its reduced form, such provision shall then be enforceable and
shall be enforced. The provisions of this Section 9 shall survive the
termination of this Agreement, for whatever reason.
(h) At all times, both during and after the termination
of his employment, Employee shall keep and retain in confidence and shall not,
without the prior written consent of the Company, disclose to any persons, firm
or corporation or otherwise use for his own benefit or the benefit of another
any of the proprietary, confidential or secret information or trade secrets of
the Company. Further, Employee and the Company agree to keep confidential the
terms and conditions of this Agreement except for such disclosure as may be
required (i) in the event of a breach of this Agreement, (ii) compulsion by law
or court order, or (iii) as may be required by any applicable provision of law.
(i) In consideration of employment, and the compensation
paid to Employee as an employee of the Company, Employee hereby recognizes as
the exclusive property of, and assigns, transfers and conveys to, the Company
without further consideration each invention, discovery or improvement
(hereinafter collectively referred to as "inventions") made, conceived,
developed or first reduced to practice by Employee (whether alone or jointly
with others) during the Term of Employment or within one (1) year thereafter
which relates in any way to Employee's work at the Company or any of its
subsidiaries or affiliates. Employee will communicate to the Company current
written records of all such inventions, which records shall be and remain the
property of the Company. Upon request by the Company, Employee will at any
time execute documents assigning to the Company, or its designees, any
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<PAGE> 13
such invention or any patent application or patent granted therefor, and will
execute any papers relating thereto. Employee also will give all reasonable
assistance to the Company, or its designee, regarding any litigation or
controversy in connection with his inventions, patent applications, or patents,
all expenses incident thereto to be assumed by the Company.
(j) Notwithstanding anything herein to the contrary, any
participation in or engagement in the Lines of Business by Interactive
Solutions, Inc., a North Carolina corporation, or any successor thereto, or by
Grant Holcomb, a resident of North Carolina, shall be a breech of this Section
9 by Employee.
10. Governing Law. This Agreement shall be construed and
governed under the laws of the State of North Carolina.
11. Binding Nature. Except as expressly provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and assigns. The obligations and
covenants of Employee are personal in nature and, as such, are not assignable
by him.
12. Entire Agreement; Prior Oral Agreement; Amendment. This
Agreement contains the entire agreement of the parties with respect to the
matters set forth herein and supersedes all prior written and prior or
contemporaneous oral agreements or understandings of the parties hereto. This
Agreement confirms and sets forth the prior oral agreement of the parties as to
the terms and conditions of Employee's employment by the Company stated herein,
including without limitation, the obligations and covenants of Employee set
forth in Section 9 hereof, and Employee's agreement to enter into a written
employment agreement with the Company, as of the date his employment by the
Company commenced, stating such terms and conditions. This Agreement may be
changed or amended only by an agreement in writing signed by both parties
hereto.
13. Severability, Invalidity or Unenforceability. The
severability, invalidity or unenforceability of any paragraph or part of any
paragraph herein shall not in any way affect the validity or enforceability of
any other paragraph or any part of any other paragraph.
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<PAGE> 14
14. Prior Agreements and Covenants of Employee. Employee hereby
warrants and represents that he is not a party to any agreement or binding
obligation, oral or written, that would prevent his employment by the Company,
and Employee's execution of this Agreement and his fulfillment of his duties
and obligations hereunder do not and will not violate the provisions of any
agreement, contract, loan document or other binding written or oral obligation.
15. Notices. Any notice, offer, acceptance or other document
required or permitted to be given pursuant to any provisions of this Agreement
shall be in writing, signed by or on behalf of the person giving the same, and
(as elected by the person giving such notice) delivered by hand or mailed to
the parties at the following addresses by registered or certified mail, postage
prepaid, return receipt requested, or by a third party company or governmental
entity providing delivery services in the ordinary course of business, which
guarantees delivery on a specified date:
If to Employee: J. Robert Wren, Jr.
3644 Brentwood Drive
Gastonia, NC 28056
If to the Company: PCA International, Inc.
815 Matthews-Mint Hill Road
Matthews, North Carolina 28105
Attention: John Grosso
With copies to: Thomas B. Henson
ROBINSON, BRADSHAW & HINSON, P.A.
One Independence Center
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
(704) 377-2536
or to such other address as any party hereto may designate by complying with
the provisions of this Section 15.
Such notice shall be deemed given (i) as of the date of written
acknowledgment by Employee or an officer of the Company if
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<PAGE> 15
delivered by hand, (ii) seventy-two (72) hours after deposit in United States
mail if sent by registered or certified mail or (iii) on the delivery date
guaranteed by the third party delivery service if sent by such service.
Rejection or other refusal to accept or inability to deliver because
of changed address of which no notice has been received shall not affect the
date upon which the notice is deemed to have been given pursuant hereto.
Notwithstanding the foregoing, no notice of change of address shall be
effective until the date of receipt hereof.
16. Stock Option Grant. Employee will be granted an option to
purchase 150,000 shares of the Company's common stock on the date hereof,
having an exercise price equal to 100% of the closing price at which a share of
Common Stock trades on the date of the grant's Effective Date, all as defined
in the PCA International, Inc. 1996 Omnibus Long Term Compensation Plan (the
"Plan"). Such option shall be treated as a nonqualified stock option for
federal income tax purposes. Such option shall terminate on a date that is ten
(10) years following the date of grant. Such options shall become exercisable
on the earlier of (i) the termination of this Employment Agreement by Employee,
(ii) the termination by the Company without Cause of this Employment Agreement
or (iii) in three (3) equal annual increments on each of the first, second, and
third anniversaries of the date of grant. Upon the death of Employee during
such 10-year period, the options granted hereunder shall be transferred to his
estate or as directed by his will.
IN WITNESS WHEREOF, J. Robert Wren, Jr. has set his hand and seal
hereto and PCA International, Inc. has caused this Agreement to be executed and
sealed in its name by its duly authorized officials as of the day and year
first above written.
EMPLOYEE:
______________________________(SEAL)
J. ROBERT WREN, JR.
COMPANY:
PCA INTERNATIONAL, INC.
By: ______________________________
John Grosso
President and CEO
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<PAGE> 16
EXHIBIT A
FRINGE BENEFITS
1. Employee shall be entitled to twenty (20) days paid vacation
during the first year of employment and twenty (20) days paid vacation each
year of employment thereafter. Vacation time is not cumulative.
2. Employee shall be entitled to sick leave in accordance with
the plans and procedures established by the Board of Directors.
3. Employee shall be entitled to such life insurance and
disability insurance or other disability benefits, if any, as are provided by
the Company to its employees from time to time.
4. Employee shall be entitled to receive benefits as are afforded
to other Executive Vice Presidents or similarly situated executives.
<PAGE> 1
EXHIBIT 99(c)(10)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into as of December 17, 1996 by and among
AMERICAN STUDIOS, INC., a North Carolina corporation ("ASI"), and PCA
INTERNATIONAL, INC., a North Carolina corporation ("PCA").
BACKGROUND STATEMENT
The employees of ASI listed on Schedule A to this agreement (herein
referred to individually as "Employee" and collectively as "Employees") are
parties to the employment agreements with ASI described opposite their names on
Schedule A (herein referred to individually as "Existing Employment Agreement"
and collectively as "Existing Employment Agreements"). ASI, PCA and ASI
Acquisition Corp., a North Carolina corporation ("Purchaser"), have this day
entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant
to which Purchaser will make a tender offer (the "Offer") to purchase the common
stock of ASI (the "Shares"). PCA has requested and ASI has agreed that, upon the
day (the "Effective Date") immediately following the consummation of the Offer,
ASI will terminate the employment of Employees under the Existing Employment
Agreements. PCA has agreed to provide the funding of certain payments to
Employees which will be payable as a result of such termination of the Existing
Employment Agreements. On the Effective Date, PCA and each Employee will enter
into an employment agreement dated as of the Effective Date (the "PCA Employment
Agreement"). PCA has executed and delivered to THOMAS B. HENSON, attorney of
Robinson, Bradshaw & Hinson, P.A., as Escrow Agent, two (2) counterparts of the
PCA Employment Agreement for each Employee.
AGREEMENT
In consideration of the premises and the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is acknowledged, the parties hereto, intending to be legally bound, agree
for themselves, their successors and assigns, as follows:
1. PCA Employment Agreement. Two (2) counterparts of the PCA Employment
Agreement executed by PCA for each Employee will be held by the Escrow Agent
until the Effective Date at which time Escrow Agent will date each agreement as
of the Effective Date, cause it to be executed by the appropriate Employee and
deliver an executed counterpart of such agreement to such Employee and to PCA,
free of escrow.
2. Termination of Existing Agreement. PCA hereby confirms its request that
ASI terminate the Existing Employment Agreements as of the Effective Date. ASI
hereby terminates each existing Employment Agreement as of the Effective Date,
such termination being conditioned upon the consummation of the Offer.
3. Termination Payment. PCA agrees to provide funds to ASI to pay the
termination payments due the Employees under the Existing Employment Agreements
in the amounts set forth on Schedule A.
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<PAGE> 2
4. Third Party Beneficiary. ASI and PCA intend that each Employee be a
third party beneficiary of this Agreement.
5. Notwithstanding anything herein to the contrary, PCA's obligations
hereunder as to J. Robert Wren, Jr., Randy J. Bates and Robert Kent Smith is
expressly conditioned upon the tender pursuant to the Offer of 230,997 Shares
beneficially owned by the children of Norman Swenson and 30,684 Shares owned by
the children of Alan Shaw.
IN WITNESS WHEREOF, the parties have executed this agreement effective as
of the date above written.
AMERICAN STUDIOS, INC.
By: JAMES ROBERT WREN, JR.
-------------------------------------
James Robert Wren
CEO
PCA INTERNATIONAL, INC.
By: JOHN GROSSO
-------------------------------------
John Grosso
THOMAS B. HENSON executes this agreement to acknowledge his receipt of the
PCA Employment Agreements executed by PCA and his agreement to comply with
paragraph 1 of this agreement.
By: THOMAS B. HENSON
-------------------------------------
Thomas B. Henson
2 of 2
<PAGE> 3
SCHEDULE A
<TABLE>
<CAPTION>
EXISTING TERMINATION
ASI EMPLOYEE EMPLOYMENT AGREEMENT PAYMENTS
- ------------ -------------------- -----------
<S> <C> <C>
J. Robert Wren, Jr......... Employment and Noncompete Agreement $ 539,000
dated January 20, 1993, as amended
through and including the Second
Amendment to Employment and Noncompete
Agreement dated September 14, 1996.
Randy J. Bates............. Employment and Noncompete Agreement $ 550,000
dated July 15, 1988 as amended through
and including the Fifth Amendment to
Employment and Noncompete Agreement
dated November 1, 1995.
Robert Kent Smith.......... Employment and Noncompete Agreement $ 423,971
dated July 15, 1988 as amended through
and including the Fourth Amendment to
Employment and Noncompete Agreement
dated November 1, 1995.
William A. Adams........... Employment and Noncompete Agreement $ 70,700
dated September 14, 1996.
Ed J. Tepera............... Employment and Noncompete Agreement $ 172,500
dated September 14, 1996.
George A. Fazzola.......... Employment and Noncompete Agreement $ 84,000
dated September 14, 1996.
Gary W. Ingle.............. Employment and Noncompete Agreement $ 150,000
dated September 14, 1996.
James O. Mattox............ Employment and Noncompete Agreement $ 180,000
dated September 14, 1996.
K. Michael Plummer......... Employment and Noncompete Agreement $ 84,400
dated September 14, 1996.
Barry L. Chaney............ Employment and Noncompete Agreement $ 84,500
dated September 14, 1996.
Shawn W. Poole............. Employment and Noncompete Agreement $ 250,000
dated May 16, 1996.
</TABLE>
