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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED AUGUST 3, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM _______________ TO ________________
Commission File Number: 0-8550
PCA INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0888429
--------------------------- ---------------------
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
815 MATTHEWS-MINT HILL ROAD
MATTHEWS, NORTH CAROLINA 28105
(Address of principal executive offices)
(Zip Code)
(704) 847-8011
--------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days.
YES __X__ NO____
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
COMMON STOCK, $0.20 PAR VALUE 7,826,329
- ---------------------------------- ----------------------------------
CLASS OUTSTANDING AT SEPTEMBER 1, 1997
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<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
I N D E X
<TABLE>
<CAPTION>
<C> <C> <C>
PART I. FINANCIAL INFORMATION: PAGE NO.
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets - August 3, 1997 and
February 2, 1997................................... 1
Consolidated Statements of Income - Three Months and Six Months
Ended August 3, 1997 and July 28, 1996......................... 2
Consolidated Statement of Changes in Shareholders' Equity - Six
Months Ended August 3, 1997..................................... 3
Consolidated Statements of Cash Flows - Six Months Ended August
3, 1997 and July 28, 1996................................... 4
Condensed Notes to Consolidated Financial Statements............ 5
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................... 5-8
PART II. OTHER INFORMATION:
ITEM 6. Exhibits and Reports on Form 8-K................................ 8
SIGNATURES ................................................................ 9
EXHIBIT INDEX ................................................................ 10-11
</TABLE>
<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------------------
August 3, February 2,
ASSETS 1997 1997
- -------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents............................$ 2,454,931 $ 1,536,234
Accounts receivable (net of allowance for
doubtful accounts of $960,120 and $867,961):
Due from licensor stores and customers................9,053,197 6,702,335
Other, including employee advances......................517,896 602,349
Inventories................................................7,332,835 9,814,682
Deferred income taxes......................................9,050,901 6,853,985
Prepaid expenses.............................................870,490 1,490,918
------------ ------------
Total Current Assets.................................29,280,250 27,000,503
------------ ------------
Property:
Land and improvements......................................2,380,984 2,443,939
Building and improvements.................................12,281,514 12,883,962
Photographic and sales equipment..........................55,407,869 61,902,588
Photographic finishing equipment..........................15,335,694 18,660,080
Furniture and equipment...................................10,982,637 14,188,792
Transportation equipment.....................................280,735 477,073
Leasehold improvements....................................15,943,701 17,935,712
Construction in progress...................................3,020,785 1,120,788
------------ ------------
Total Property......................................115,633,919 129,612,934
Less: Accumulated depreciation and
amortization...........................................57,838,211 71,348,374
------------ ------------
Property, net........................................57,795,708 58,264,560
------------ ------------
Intangible Assets............................................61,799,314 60,256,854
Other Assets..................................................2,711,103 1,139,305
------------ ------------
Total Assets..............................................$.151,586,375 $146,661,222
============ ============
See Condensed Notes to Consolidated Financial Statements.
- ------------------------------------------------------------------------------------------------
August 3, February 2,
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1997
- ------------------------------------------------------------------------------------------------
Current Liabilities:
Short-term borrowings.....................................$ 13,500,000 $ -
Current portion of long-term debt........................... 2,500,000 -
Accounts payable-trade.......................................17,773,213 19,799,067
Accrued insurance.............................................9,135,567 6,705,199
Accrued income taxes.................................... .......199,128 1,643,816
Accrued compensation..........................................5,431,481 5,924,407
Other accrued liabilities....................................11,730,455 15,399,563
----------------- -----------------
Total Current Liabilities...............................60,269,844 49,472,052
----------------- -----------------
Long-term debt..................................................52,034,950 58,679,770
----------------- -----------------
Other Liabilities................................................4,451,432 4,868,660
----------------- -----------------
Shareholders' Equity:
Preferred stock, $10.00 par value (authorized--
2,000,000 shares; outstanding--none).............................- -
Common Stock, $0.20 par value (authorized--
20,000,000 shares; issued--7,807,029 shares and
7,607,129 shares)...........................................1,561,406 1,521,426
Additional paid-in capital.....................................8,619,416 5,838,131
Retained earnings.............................................24,793,375 26,334,992
Cumulative foreign currency translation
adjustments.................................................(144,048) (53,809)
----------------- -----------------
Total Shareholders' Equity................................34,830,149 33,640,740
----------------- -----------------
Total Liabilities and Shareholders' Equity.....................$.151,586,375 $ 146,661,222
================= =================
</TABLE>
1
<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 3, July 28, August 3, July 28,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
SALES................................ $ 47,136,830 $ 31,116,836 $ 105,828,639 $ 67,204,822
COSTS AND EXPENSES:
Advertising and promotional costs... 3,662,180 3,430,743 7,976,080 7,064,532
Costs of photographic sales......... 18,700,959 11,346,407 40,495,617 23,250,809
Store commissions and selling costs. 17,396,766 10,565,958 36,289,128 22,313,324
General and administrative expenses. 8,590,881 5,373,681 18,767,293 12,164,921
Amortization of intangibles......... 508,837 -- 964,575 --
Total costs and expenses........... 48,859,623 30,716,789 104,492,693 64,793,586
INCOME (LOSS) FROM OPERATIONS........ (1,722,793) 400,047 1,335,946 2,411,236
Interest expense, net............... 1,651,113 16,760 3,270,496 35,307
INCOME (LOSS) BEFORE INCOME TAXES.... (3,373,906) 383,287 (1,934,550) 2,375,929
INCOME TAX PROVISION (BENEFIT)....... (1,734,286) 150,990 (938,256) 1,004,854
NET INCOME (LOSS).................... $(1,639,620) $ 232,297 $ (996,294) $ 1,371,075
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Primary............................. 8,446,136 8,058,625 8,290,047 7,963,550
Fully Diluted....................... 8,579,629 8,069,996 8,528,643 8,127,361
PRIMARY AND FULLY DILUTED EARNINGS PER
COMMON SHARE:
Net Income (Loss)................. $ (0.19) $ 0.03 $(0.12) $ 0.17
CASH DIVIDENDS PER COMMON SHARE..... $ 0.07 $ 0.07 $0.07 $ 0.14
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
2
<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED AUGUST 3, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY
COMMON STOCK PAID-IN RETAINED TRANSLATION
---------------------------------
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS
--------------- ---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, FEBRUARY 2, 1997............... 7,607,129 $ 1,521,426 $ 5,838,131 $ 26,334,992 $ (53,809)
Net income (loss)....................... (996,294)
Dividends............................... (545,323)
Exercise of stock options............... 199,900 39,980 2,781,285
Foreign currency translation
adjustment........................... (90,239)
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BALANCE, AUGUST 3, 1997................. 7,807,029 $ 1,561,406 $ 8,619,416 $ 24,793,375 $ (144,048)
=========================================================================================
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
3
<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
August 3, July 28,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................ $ (996,294) $ 1,371,075
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization .......................... 7,501,651 4,486,704
Decrease in allowance for doubtful accounts............. 92,864 243,761
Provision for deferred income taxes..................... (2,196,916) (323,554)
Loss on disposal of property............................ 4,283 208,987
Decrease in other liabilities........................... (431,740) (69,791)
(Increase) decrease in other noncurrent assets.......... (1,571,798) 1,140
Changes in operating assets and liabilities:
Increase in accounts receivable........................ (2,362,055) (2,565,284)
Decrease (increase) in inventories..................... 2,480,660 (2,305,781)
Decrease (increase) in prepaid expenses................ 633,615 (29,560)
(Decrease) increase in accounts payable................ (2,021,688) 981,936
Decrease in accrued expenses........................... (3,163,990) (1,460,471)
NET CASH (USED IN) PROVIDED FROM OPERATING ACTIVITIES... (2,031,408) 539,162
INVESTING ACTIVITIES:
Purchase of property..................................... (6,132,155) (5,426,876)
Purchase of Canadian assets.............................. - (1,193,311)
Purchase of American Studios, Inc........................ (2,531,562) -
Proceeds from sale of fixed assets....................... 1,200 8,721
NET CASH USED IN INVESTING ACTIVITIES.................... (8,662,517) (6,611,466)
FINANCING ACTIVITIES:
Increase in borrowings................................... 9,355,180 4,419,048
Exercise of stock options................................ 2,821,265 3,214,417
Acquisition of Company stock............................. - (4,190,625)
Cash dividends........................................... (545,323) (1,047,347)
NET CASH PROVIDED FROM FINANCING ACTIVITIES.............. 11,631,122 2,395,493
Effect of exchange rate changes on cash.................. (18,500) 178,608
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......... 918,697 (3,498,203)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......... 1,536,234 3,914,513
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ 2,454,931 $ 416,310
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Flow Data:
Interest paid........................................... $ 5,421,900 $ 62,160
Income taxes paid....................................... $ 2,190,462 $ 2,872,023
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
4
<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
With respect to the significant accounting policies of PCA
International, Inc., and its subsidiaries (the "Company"), which are
wholly-owned, reference is made to note 1 of the financial statements in the
Company's Form 10-K filed for the fiscal year ended February 2, 1997. The
interim financial statements reflect all adjustments (consisting of normal
recurring accruals) which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is engaged, through its subsidiaries, in the sale of
photographic color portraits of children, adults, and families. The Company
operates primarily in the discount retail segment through approximately 2,000
permanent portrait studios within Kmart and Wal-Mart stores. The Company
operates 975 portrait studios in Kmart in the United States and Puerto Rico. In
Wal-Mart, the Company operates 1,005 permanent portrait studios in the United
States, Canada, Puerto Rico, Mexico, and South America, and services
approximately 1,350 additional locations with traveling promotions. In its
Institutional Division, the Company provides portrait services to church
congregations and day care facilities through traveling promotions.
Sales in the discount retail portion of the Company's business,
comprising Kmart and Wal-Mart portrait studios, were $45.1 million, or 95.6% of
total sales, during the second quarter of fiscal 1997. PCA's fiscal 1997 results
include the operations of American Studios acquired in January 1997.
During the second quarter of fiscal 1997, the Company completed several
initiatives related to the American Studios' acquisition which strategically
improved the quality of its studio asset base in both Wal-Mart and Kmart.
Specifically, the Company completed the closing of approximately 400
underperforming studios, converted 600 non-digital Wal-Mart studios to PCA's
digital imaging technology, and trained over 1,500 studio personnel to operate
the new digital technology and point-of-sale systems installed throughout
Wal-Mart. As part of its ongoing program to optimize access to customers, the
Company opened 55 new portrait studios in the second quarter and a total of 80
new studios for the first half of fiscal 1997. Also in the quarter, the Company
discontinued its pilot program in PETsMART stores and closed 114 studios in
PETsMART in the United States and Canada.
The Company utilizes a proprietary digital imaging system which was
designed and engineered in-house by the Company's technology and manufacturing
staff, ensuring complete control of all aspects of the system. The system allows
customers to instantly view digital proofs of each pose on a color monitor as
they are photographed and select only the highest quality and most pleasing
poses for further consideration. Following the photography session, the customer
chooses the exact poses to be produced in the specific portrait sizes and
quantities desired. The
5
<PAGE>
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PCA INTERNATIONAL, INC. AND SUBSIDIARIES
===============================================================================
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
digital imaging system is integrated with the Company's automated production
facility. With the digital imaging system, the Company has benefited from higher
average customer purchases, improved customer satisfaction, and lower production
costs realized through the elimination of waste from speculative portrait
production.
SEASONALITY
The Company's portrait photography business is seasonal. Sales volume
in the second quarter is typically the lowest volume for the year with the
greatest sales volume occurring in the fourth quarter during the Thanksgiving
and Christmas holiday seasons.
RESULTS OF OPERATIONS
PCA's fiscal 1997 second quarter and year-to-date results include the
operations of American Studios acquired in January 1997. The Company's
consolidated sales for the second quarter were $47.1 million, an increase of
51.5% compared with sales of $31.1 million in the second quarter of 1996.
Consolidated sales for the first six months of fiscal 1997 were $105.8 million,
an increase of 57.5%, compared with $67.2 million reported in the first half of
1996. The increase in sales for the second quarter and first half was due to two
primary factors: an increase in customers photographed resulting principally
from the acquisition of American Studios' Wal-Mart business which offset the
loss of customers due to studio closings, and higher customer sales average in
the discount retail segment of the business. The Company operated 1,980 portrait
studios at the end of the second quarter, an increase of 542 over comparable
1996 second quarter, and a net decline of 425 from the 1997 first quarter.
The following table presents the percentage of sales represented by the
following line items from the Company's statements of income for the periods
indicated:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
AUGUST 3, July 28, AUGUST 3, July 28,
1997 1996 1997 1996
------------- ----------- ------------- ----------
Sales............................. 100.0% 100.0% 100.0% 100.0%
Costs and expenses................ 102.6 98.7 97.8 96.4
Amortization of intangible assets. 1.1 - 0.9 -
------------- ----------- ------------- ----------
Income (loss) from operations..... (3.7) 1.3 1.3 3.6
Interest expense.................. 3.5 0.1 3.1 0.1
------------- ----------- ------------- ----------
Income (loss) before income taxes.
(7.2) 1.2 (1.8) 3.5
Income tax provision (benefit).... (3.7) 0.5 (0.9) 1.5
------------- ----------- ------------- ----------
Net income (loss)................. (3.5)% 0.7% (0.9)% 2.0%
============= =========== ============= ==========
</TABLE>
During the quarter, the Company reported a loss from operations of $1.7
million, compared to operating income of $0.4 million in the 1996 second
quarter. The operating losses were in line with Company expectations, and due to
significant planned investments and expenditures related to the American
Studios' acquisition, digital studio conversion, costs associated with the
closing of 400 underperforming studios, and other Company initiatives completed
in the quarter. Included in the 1997 second quarter is $509,000 expense for
6
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PCA INTERNATIONAL, INC. AND SUBSIDIARIES
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
amortization of intangible assets and $1.7 million interest expense, both
relating to the American Studios' acquisition.
Certain expense ratios as a percentage of sales shifted on a
quarter-to-quarter basis. Advertising and promotional expenses declined to 7.8%
of sales from 11.0% of sales in the 1996 second quarter due in part to a
lessening of the promotional environment experienced in the retail portrait
market. Cost of photographic sales increased to 39.7% of sales from 36.5% of
sales in the year-ago quarter due to the integration of the American Studios'
processing facility, a higher mix of business from non-digital studios and
traveling promotions which operated in speculative mode, and increased labor
expenses to effect studio closings and conversions. Commission and selling
expense levels rose to 36.9% of sales from 34.0% of sales in the 1996 second
quarter, principally due to increased labor expenses to effect studio closings
and conversions. General and administrative expenses rose slightly as a
percentage of sales to 18.2% versus 17.3%.
The income tax provision for the second quarter of 1997 resulted in a
benefit of $1.7 million, compared to an expense of $0.2 million in the second
quarter of last year. The increase in the effective tax rate in the 1997 period
is attributable to the amortization of intangible assets expense of $0.5 million
which does not provide any tax benefit.
The Company reported a net loss of $1.6 million compared to net income
of $0.2 million in the year-ago quarter. Included in the 1997 quarter is
interest expense of $1.7 million and amortization of intangible assets of $0.5
million, relating to the American Studios' acquisition. Loss per share for the
1997 second quarter was $0.19 compared to earnings per share of $0.03 in the
same quarter last year. For the 1997 second quarter, there were 8,579,629 fully
diluted shares outstanding of common stock, a 6.3% increase over the prior year.
The Company reported a net loss for the 1997 six-months of $1.0 million, or a
loss of $0.12 per share, versus net income of $1.4 million, or $0.17 per share,
in the 1996 six-month period. Interest expense of $3.3 million and the
amortization of intangible assets of $1.0 million, both related to the
acquisition of American Studios, are included in the 1997 six-month results.
In the fourth quarter of fiscal 1996, the Company reserved $6.0 million
for the closing of underperforming discount store portrait studios. The Company
expects the costs for separation pay and restoration of these studios to be
below amounts previously reserved. It is anticipated that leasehold write-offs
and other costs related to the closing of 114 PETsMART studios will approximate
the lower cost for the discount store closings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of working capital are cash from
operations and the Company's $25 million revolving line of credit. As of August
3, 1997, the Company had $2.5 million in cash and cash equivalents and $13.5
million in short-term borrowings. The Company has a $25 million revolving line
of credit to meet seasonal capital requirements.
During the quarter, the Company had property additions of $2.8 million,
principally for materials and equipment for conversion of 600 non-digital
Wal-Mart portrait studios, the addition of 55 new permanent portrait studios in
Wal-Mart and Kmart stores, and the upgrading of certain processing equipment in
the Company's lab and processing facilities. Currently, the Company estimates
capital expenditures for fiscal 1997 will be approximately $12 million which
includes
7
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PCA INTERNATIONAL, INC. AND SUBSIDIARIES
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
the planned opening of approximately 200 new portrait studios during
the year. The Company was able to fund its capital expenditures from cash on
hand and its revolving line of credit.
Shareholders' equity decreased by $0.3 million to $34.8 million.
Options exercised in the second quarter increased shareholders' equity by $1.8
million offset by a second quarter net loss of $1.6 million and a dividend
payment of $0.5 million paid in the quarter.
The Board of Directors of the Company approved a $0.07 per share
quarterly cash dividend payable on October 7, 1997, for shareholders of record
as of September 15, 1997.
The Company believes, based on its short- and long-term business plans,
that it has the ability to adequately fund its operating and capital expenditure
needs for fiscal 1997 from operations, cash on hand, and its revolving line of
credit. As of August 3, 1997, $11.5 million was available under the Company's
revolving credit facility. On May 28, 1997, the Company's Board of Directors
authorized a $10 million prepayment of the Company's term loan, which was funded
from cash on hand and its revolving line of credit. The prepayment was made on
May 29, 1997, at which time the Company had $55.0 million remaining on its term
loan.
NOTE REGARDING PRIVATE SECURITIES LITIGATION REFORM ACT: The foregoing
discussion contains certain forward-looking statements regarding expected studio
openings. These statements are based on the Company's belief and assumptions, as
well as information currently available to the Company's management. Although
the Company believes that the expectations reflected in such forward-looking
statements are reasonable, there can be no assurance that such expectations will
prove to be correct. In particular, new studio openings will depend on the
economy generally, the operations of Kmart and Wal-Mart, the performance of the
portrait studio industry generally, and of the Company, and other factors.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Computation of Primary and Fully Diluted Earnings Per
Common Share
27 Financial Data Schedule
(b) Reports on Form 8-K
None
8
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PCA INTERNATIONAL, INC. AND SUBSIDIARIES
================================================================================
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PCA INTERNATIONAL, INC.
------------------------------------------
(Registrant)
Date: September 17, 1997 /s/ John Grosso
------------------------------------------
John Grosso
President
(Principal Executive Officer)
Date: September 17, 1997 /s/ Bruce A. Fisher
------------------------------------------
Bruce A. Fisher
Senior Vice President
(Principal Accounting Officer)
9
<PAGE>
PCA INTERNATIONAL, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<C> <S> <C>
INDEX NO. PAGE NO.
DESCRIPTION
3(a) Restated Charter, as amended to date.
3(b) Bylaws of PCA International, Inc. as amended to date,
incorporated by reference to Exhibit 3.4 to the Company's
Quarterly Report on Form 10-Q, Commission File No. 0-8550,
for the quarter ended May 3, 1992.
4 Instruments defining the rights of security holders,
incorporated by reference to Exhibit 4 to the Company's
Quarterly Report on Form 10-Q, Commission File No. 0-8550, for
the quarter ended May 3, 1992.
10(a) License Agreement dated July 29, 1992, between Wal-Mart
Corporation and American Studios, Inc., incorporated by
reference to Exhibit 10.1 to American Studios, Inc. 1992
Form S-1 (Registration No. 33-58958).
10(b) License Agreement dated May 10, 1996, between Kmart Corporation
and PCA International, Inc., incorporated by reference to
Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q
for the quarter ended April 28, 1996.
10(c) Sales Contract dated August 11, 1994, between PCA
International, Inc. and Agfa Division of Miles, Inc.,
incorporated by reference to Exhibit 10(c) to the Company's
Amendment No. 1 on Form 10-Q/A to its Quarterly Report on Form
10-Q for the quarter ended July 31, 1994.
10(d)* The 1990 Non-Qualified Stock Option Plan, incorporated by
reference to Exhibit 4 to the Company's Registration
Statement on Form S-8 (Registration No. 33-36793).
10(e)* The 1992 Non-Qualified Stock Option Plan, as amended,
incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form S-8 (Registration No. 33-51458).
10(f) Loan Agreement dated January 27, 1997, between PCA
International, Inc., PCA Photo Corporation of Canada, Inc., PCA
Specialty Retail Photo Corporation, Inc., Photo Corporation of
America, PCA National, Inc., ASI Acquisition Corp., and
NationsBank, N.A., as Agent, incorporated by reference to the
Company's Schedule 14D-1 and Schedule 13-D, Amendment No. 3,
dated January 27, 1997.
10(g) Loan Agreement dated February 28, 1997, between PCA
International, Inc., PCA Photo Corporation of Canada, Inc., PCA
Specialty Retail Photo Corporation, Inc., Photo Corporation of
America, PCA National, Inc., ASI Acquisition Corp., and
NationsBank, N.A., as Agent, incorporated by reference to
Exhibit 10(g) to the Company's Annual Report on Form 10-K for
the year ended February 2, 1997.
10(h) Sales Contract dated September 1, 1993, between Agfa Division
of Miles, Inc., and American Studios, Inc., incorporated by
reference to Exhibit 10.93 to American Studios, Inc. Form
10-K for fiscal 1993, Commission File No. 0-20510.
10(i) Merger Agreement dated December 17, 1996, between PCA
International, Inc., ASI Acquisition Corp., and American
Studios, Inc., incorporated by reference to the Company's Form
8-K dated January 23, 1997.
10(j) 1996 Omnibus Long-Term Compensation Plan, incorporated by
reference to Exhibit 10(j) to the Company's Quarterly
Report on Form 10-Q for the Quarter ended April 28, 1996.
10(l)* Employment and Noncompete Agreement dated December 17, 1996,
between Randy J. Bates and PCA International, Inc.,
incorporated by reference to Exhibit 10(l) to the Company's
Annual Report on Form 10-K for the year ended February 2, 1997.
</TABLE>
10
<PAGE>
PCA INTERNATIONAL, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<C> <S> <C>
INDEX NO. PAGE NO.
DESCRIPTION
10(m)* Employment and Noncompete Agreement dated December 17, 1996,
between Robert Kent Smith and PCA International, Inc.,
incorporated by reference to Exhibit 10(m) to the Company's
Annual Report on Form 10-K for the year ended February 2, 1997.
10(n)* Employment and Noncompete Agreement dated December 17, 1996,
between J. Robert Wren, Jr., and PCA International, Inc.,
incorporated by reference to Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the year ended February 2, 1997.
10(o)* Employment and Noncompete Agreement dated June 9, 1997, between
John Grosso and PCA International, Inc.
10(p)* Employment and Noncompete Agreement dated June 9, 1997, between
Eric Jeltrup and PCA International, Inc.
10(q)* Employment and Noncompete Agreement dated June 9, 1997, between
Bruce Fisher and PCA International, Inc.
11 Computation of Primary and Fully Diluted Earnings per Common Share.
27 Financial Data Schedule.
*Management contract or compensatory plan or arrangement
required to be filed as an exhibit.
</TABLE>
11
<PAGE>
<PAGE>
EMPLOYMENT AND NONCOMPETE AGREEMENT
THIS EMPLOYMENT AND NONCOMPETE AGREEMENT ("Agreement"), made and
entered into as of the 9th day of June, 1997, by and between JOHN GROSSO, 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").
BACKGROUND STATEMENT
Employee currently is employed by the Company and holds the position of
President, Chief Executive Officer and a Director. Employee has worked for the
Company in these positions of responsibility and authority for more than ten
(10) years and has been instrumental in successfully developing, expanding and
increasing the business and earnings of the Company. The Company desires to
ensure that the services of Employee will continue to be available to it on a
mutually satisfactory basis. In the course of his employment with the Company,
Employee has had access to trade secrets and proprietary information of the
Company and will, as an employee of the Company, continue to have access to
trade secrets and proprietary information of the Company. Accordingly, Employee
has and will continue to acquire the knowledge and ability to compete with the
Company. The Company has offered Employee an employment agreement on the terms
and pursuant to the conditions hereof, including the stability and security
provided to Employee by the arrangement provided for herein. The parties agree
that the execution and delivery of this Employment Agreement is a condition
precedent to the benefits extended to Employee hereunder. Employee agrees that
the benefits provided for herein are adequate and sufficient consideration for
the covenants made by Employee hereunder, including, without limitation, the
covenants not to compete.
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 6 hereof, the
Company agrees to employ Employee on an active and full-time basis, and Employee
accepts such employment, as President, Chief Executive Officer and a member of
the Board of Directors, subject to the order, supervision and direction of the
Board of Directors of the Company (the "Board").
2. DUTIES. Employee shall serve the Company as President, Chief
Executive Officer and a Director and shall devote
<PAGE>
substantially all of his 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 Board. 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 which Employee shall have
received written notice. The Board 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; EVERGREEN PROVISIONS. (a) The term of Employee's
employment by the Company hereunder shall commence as of the date hereof, June
9, 1997, and shall continue for a period of four (4) years after such
commencement date or to such later date to which the term of this Agreement may
be extended pursuant to this Section 3 (the "Term of Employment"). The Term of
Employment shall be evergreen and shall be extended automatically for one day
effective at 5:00 p.m. of each day. As a result, the remaining Term of
Employment shall always be, and never be less than, four (4) years.
4. BASE COMPENSATION AND BENEFITS. (a) The initial annual base
compensation rate to be paid to Employee for the services to be rendered
hereunder beginning with the commencement date of this Agreement through the
first anniversary on June 9, 1998, shall be Two Hundred Fifty Four Thousand One
Hundred Dollars ($254,100.00), payable in accordance with the Company's normal
payroll practices, subject to applicable federal and state income and social
security tax withholding requirements.
(b) Beginning on the first anniversary of this Agreement, June 9, 1998,
and continuing throughout the remaining Term of Employment, the annual base
compensation rate shall be Three Hundred Four Thousand ($304,000), payable in
accordance with the Company's normal payroll practices, subject to applicable
federal and state income and social security tax withholding requirements. (the
"Base Rate").
(c) Employee's Base Rate may be reviewed from time to time by the Board
and adjusted upward as Employee's performance, the performance of the Company
and other pertinent factors warrant at any time during the term of this
Agreement.
(d) Employee shall have the right to fully participate in any
Management Bonus Program to the same extent or greater than as previously
provided to Employee prior to the execution of this Agreement. Any bonus payable
to Employee under such Management Bonus Program shall be paid in a manner
consistent with the
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Company's past practice with respect to payment of bonuses. Notwithstanding the
foregoing, any bonus opportunity provided to Employee under a current or future
Management Bonus Program shall at least equal an opportunity to earn up to sixty
percent (60%) of the Base Rate for the year to which such bonus relates. Any
operating or financial objectives on an annual basis related to the payment of
the annual bonus award to the Employee will be consistent with and equal to the
same operating or financial objectives for any of the Company's other senior
executives.
(e) Employee shall be entitled to receive such benefits as were
afforded to Employee prior to the execution of this Agreement including but not
limited to the following:
(i) Employee shall be entitled to twenty-one (21) days of
paid vacation during each year of employment plus all Company sponsored
holidays;
(ii) Employee shall be entitled to sick leave in
accordance with the plans and policies established by the
Company for all employees;
(iii) Employee shall be entitled to such medical insurance,
life insurance and disability and salary continuation benefit programs,
if any, as are provided by the Company to its employees from time to
time; and
(iv) Employee shall be entitled to participation in the
Company's 401K Plan, pension plan and/or profit sharing plans.
(f) The Company shall reimburse Employee for those expenses that are
incurred by him in connection with the performance of his duties under this
Agreement, are consistent with Company policies and practices, and are
reasonably related to the business of the Company.
5. EVENTS OF TERMINATION. (a) The following shall be events of
termination under this Agreement: (i) termination by the Company without cause;
(ii) termination as a result of Employee's death or total disability (as defined
in the long term disability plan maintained by the Company); (iii) termination
by Employee as a result of a Change in Control; and (iv) termination by the
Company for Cause. The effective date for all such terminations shall hereafter
be referred to as the "Termination Date".
(b) In the event of a termination of this Agreement in accordance with
subparts (i) or (ii) above, within ten (10) business days after the Termination
Date, the Company shall pay to Employee, (or, in the event of his death, his
written designee or, if he has no written designee, to his spouse or, if he
leaves no spouse and has no written designee, to his estate,) in cash a lump
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<PAGE>
sum amount equal to forty-eight (48) months of average monthly compensation
received during the preceding five (5) year period and calculated as follows:
Employee's total cash and non-cash compensation from the Company as reported on
line one (1) of his form W-2s (total wages, tips, and other compensation) for
the five (5) calendar year period immediately preceding the Termination Date
will be divided by sixty (60) to determine an average monthly compensation rate
for the prior five (5) year period and then such amount shall be multiplied by
forty-eight (48). In addition, all options or other rights to acquire the
Company's Common Stock, $.20 par value per share, (the "Stock") previously
granted to Employee shall immediately become fully vested without any further
action on behalf of either Employee or the Company and notwithstanding any
contrary provision in any stock option plan, agreement or similar document and
Employee shall have a period beginning on the Termination Date and ending twelve
months thereafter to exercise any stock options or right to acquire the Stock.
(c) The Employee, at his discretion and free will, may terminate his
employment hereunder for any reason at any time during the Term of Employment
following a Change in Control and receive the lump sum cash payment equal to
35.99 months of average compensation as described and calculated above. In
addition, all options or other rights to acquire the Company's Common Stock,
$.20 par value per share, (the "Stock") previously granted to Employee shall
immediately become fully vested without any further action on behalf of either
Employee or the Company and notwithstanding any contrary provision in any stock
option plan, agreement or similar document and Employee shall have a period
beginning on the Termination Date and ending twelve months thereafter to
exercise any stock options or right to acquire the Stock. Notwithstanding the
foregoing or any other provision of this Agreement, the aggregate present value
of the payments in the nature of compensation to (or for the benefit of) the
Employee that are, for purposes of Section 280G of the Internal Revenue Code,
contingent upon a change in ownership as described in ss. 280G(b)(2)(A)(i), and
that would otherwise constitute "parachute payments," as defined in ss. 280G,
shall not exceed 2.9999 times the Employee's "base amount" as such term is
defined for purposes of ss. 280G. For purposes of this Agreement, "Change in
Control" means that any Acquiring Person, as defined herein, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended), directly or indirectly, of voting securities of the
Company representing 30% or more of the aggregate voting power of the Company's
then-outstanding securities. For purposes of this Agreement, "Acquiring Person"
means any person or entity other than Employee, Centennial Associates, L.P.,
Joseph H. Reich, or the Company.
(d) The Board of Directors shall have the right at any time, without
advance notice, to terminate Employee's employment for cause, as hereinafter
defined ("Termination for Cause") or without
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<PAGE>
cause. Termination for Cause shall mean termination because of conviction by a
court of competent jurisdiction of theft from the Company, conviction by a court
of competent jurisdiction of embezzlement of the Company's funds, conviction by
a court of competent jurisdiction of falsification of the Company's records,
conviction by a court of competent jurisdiction of fraud committed against the
Company, conviction by a court of competent jurisdiction 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 subject to the provisions of Section 2 hereof, or material breach of any
provision of this Agreement.
(e) 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 base salary accrued but unpaid and expenses incurred but not repaid
to Employee, in each case only until the effective date of Termination for
Cause, and COBRA and rights under vested stock option grants, 401(k), vacation
plans and other accrued and vested employee benefits.
(f) The provisions of Section 6 hereof shall continue to be binding on
the parties hereto notwithstanding the termination without cause or Termination
for Cause of Employee.
6. 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
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<PAGE>
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 6 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 6 (all of the
covenants of Employee set forth in this Section 6, 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");
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");
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<PAGE>
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
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>
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, 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;
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<PAGE>
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;
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
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<PAGE>
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;
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;
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<PAGE>
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 6(b) and 6(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 6, or
any part thereof, is invalid or unenforceable, the remainder of this Section 6
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
6, 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 6 shall survive the termination of this Agreement,
for whatever reason.
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<PAGE>
(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 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.
7. GOVERNING LAW. This Agreement shall be construed and governed under
the laws of the State of North Carolina.
8. 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.
9. 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 6 hereof, and Employee's agreement to enter into
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<PAGE>
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.
10. 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.
11. 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.
12. TIME OF THE ESSENCE. Time is of the essence.
13. ARBITRATION. Any dispute arising in connection with this Agreement
(other than with respect to Section 6) shall be finally and conclusively
determined in accordance with the rules of the American Arbitration Association
of Charlotte, North Carolina, whose determination shall be final and binding on
the parties, be entitled to be enforced to the fullest extent permitted by law
and be entered in any court of competent jurisdiction. Each party shall pay all
fees, costs and expenses, including legal fees and expenses, incurred by such
party in connection with any such arbitration, and the fees, costs and expenses
of any arbitrator(s) appointed or selected pursuant to this Section 13 shall be
shared equally by the parties hereto.
14. INDEMNIFICATION. To the fullest extent permitted or required by the
laws of the State of North Carolina, the Company shall indemnify and hold
harmless (including the advance payment of expenses) Employee, in accordance
with the terms of such laws, if Employee is made a party, or threatened to be
made a party, to any threatened, pending, or contemplated suit or proceeding
(whether civil, criminal, administrative or investigative) by reason of the fact
that Employee is or was an officer or director of the Company or any subsidiary
or affiliate of the Company, against expenses (including reasonable attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any such action, suit or proceeding. The
Company's obligations under this paragraph will survive the termination of this
Agreement for any reason whatsoever.
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<PAGE>
15. D&O LIABILITY INSURANCE. During the Term of Employment, the Company
shall maintain customary directors' and officers' liability insurance.
16. 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: John Grosso
9603 Tresanton Drive
Charlotte, North Carolina 28210
If to the Company: PCA International, Inc.
815 Matthews-Mint Hill Road
Matthews, North Carolina 28105
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 16.
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.
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<PAGE>
IN WITNESS WHEREOF, John Grosso 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)
JOHN GROSSO
COMPANY:
PCA INTERNATIONAL, INC.
BY: _______________________________
JOSEPH H. REICH
CHAIRMAN OF THE BOARD
BY: _______________________________
BRUCE A. FISHER
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
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<PAGE>
EMPLOYMENT AND NONCOMPETE AGREEMENT
THIS EMPLOYMENT AND NONCOMPETE AGREEMENT ("Agreement"), made and
entered into as of the 9th day of June, 1997, by and between ERIC H. JELTRUP, 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").
BACKGROUND STATEMENT
Employee currently is employed by the Company and holds the position of
Executive Vice President and Chief Technical Officer. Employee has worked for
the Company in positions of responsibility and authority for several years and
has been instrumental in successfully developing, expanding and increasing the
business and earnings of the Company. The Company desires to ensure that the
services of Employee will continue to be available to it on a mutually
satisfactory basis. In the course of his employment with the Company, Employee
has had access to trade secrets and proprietary information of the Company and
will, as an employee of the Company, continue to have access to trade secrets
and proprietary information of the Company. Accordingly, Employee has and will
continue to acquire the knowledge and ability to compete with the Company. The
Company has offered Employee an employment agreement on the terms and pursuant
to the conditions hereof, including the stability and security provided to
Employee by the arrangement provided for herein. The parties agree that the
execution and delivery of this Employment Agreement is a condition precedent to
the benefits extended to Employee hereunder. Employee agrees that the benefits
provided for herein are adequate and sufficient consideration for the covenants
made by Employee hereunder, including, without limitation, the covenants not to
compete.
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 6 hereof, the
Company agrees to employ Employee on an active and full-time basis, and Employee
accepts such employment, as an Executive Vice President and Chief Technical
Officer, subject to the order, supervision and direction of the Chief Executive
Officer of the Company (the "CEO").
2. DUTIES. Employee shall serve the Company as an Executive Vice
President and Chief Technical Officer and shall devote
<PAGE>
substantially all of his 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; EVERGREEN PROVISIONS. (a) The term of Employee's
employment by the Company hereunder shall commence as of the date hereof, June
9, 1997, and shall continue for a period of three (3) years after such
commencement date or to such later date to which the term of this Agreement may
be extended pursuant to this Section 3 (the "Term of Employment"). The Term of
Employment shall be evergreen and shall be extended automatically for one day
effective at 5:00 p.m. of each day. As a result, the remaining Term of
Employment shall always be, and never be less than, three (3) years.
4. BASE COMPENSATION AND BENEFITS. (a) The annual base compensation
rate to be paid to Employee for the services to be rendered hereunder shall be
Two Hundred Twenty Thousand Dollars ($220,000.00), payable in accordance with
the Company's normal payroll practices, subject to applicable federal and state
income and social security tax withholding requirements (the "Base Rate").
(b) Employee's Base Rate may be reviewed from time to time by the Board
and adjusted upward as Employee's performance, the performance of the Company
and other pertinent factors warrant at any time during the term of this
Agreement.
(c) Employee shall have the right to fully participate in any
Management Bonus Program to the same extent or greater than as previously
provided to Employee prior to the execution of this Agreement. Any bonus payable
to Employee under such Management Bonus Program shall be paid in a manner
consistent with the Company's past practice with respect to payment of bonuses.
Notwithstanding the foregoing, any bonus opportunity provided to Employee under
a current or future Management Bonus Program shall at least equal an opportunity
to earn up to fifty percent (50%) of the Base Rate for the year to which such
bonus relates. Any operating or financial objectives on an annual basis related
to the payment of the annual bonus award to the Employee will be consistent with
and equal to the same operating or financial objectives for any of the Company's
other senior executives.
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<PAGE>
(d) Employee shall be entitled to receive such benefits as were
afforded to Employee prior to the execution of this Agreement including but not
limited to the following:
(i) Employee shall be entitled to twenty-one (21) days (or
such greater number as is consistent with Company policy in effect at
such time) of paid vacation during each year of employment plus all
Company sponsored holidays;
(ii) Employee shall be entitled to sick leave in
accordance with the plans and policies established by the
Company for all employees;
(iii) Employee shall be entitled to such medical insurance,
life insurance and disability and salary continuation benefit programs,
if any, as are provided by the Company to its employees from time to
time; and
(iv) Employee shall be entitled to participation in the
Company's 401K Plan, pension plan and/or profit sharing plans.
(e) The Company shall reimburse Employee for those expenses that are
incurred by him in connection with the performance of his duties under this
Agreement, are consistent with Company policies and practices, and are
reasonably related to the business of the Company.
5. EVENTS OF TERMINATION. (a) The following shall be events of
termination under this Agreement: (i) termination by the Company without cause;
(ii) termination as a result of Employee's death or total disability (as defined
in the long term disability plan maintained by the Company); and (iii)
termination by the Company for Cause. The effective date for all such
terminations shall hereafter be referred to as the "Termination Date".
(b) In the event of a termination of this Agreement in accordance with
subparts (i) or (ii) above, within ten (10) business days after the Termination
Date, the Company shall pay to Employee, (or, in the event of his death, his
written designee or, if he has no written designee, to his spouse or, if he
leaves no spouse and has no written designee, to his estate,) in cash a lump sum
amount equal to thirty six (36) months of average monthly compensation received
during the preceding five (5) year period and calculated as follows: Employee's
total cash and non-cash compensation from the Company as reported on line one
(1) of his form W-2s (total wages, tips, and other compensation) for the five
(5) calendar year period immediately preceding the Termination Date will be
divided by sixty (60) to determine an average monthly compensation rate for the
prior five (5) year period and then such amount shall be multiplied by thirty
six (36). In addition, all options or other rights to acquire the Company's
Common Stock, $.20
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<PAGE>
par value per share, (the "Stock") previously granted to Employee shall
immediately become fully vested without any further action on behalf of either
Employee or the Company and notwithstanding any contrary provision in any stock
option plan, agreement or similar document and Employee shall have a period
beginning on the Termination Date and ending twelve months thereafter to
exercise any stock options or right to acquire the Stock.
(c) The Board of Directors shall have the right at any time, without
advance notice, to terminate Employee's employment for cause, as hereinafter
defined ("Termination for Cause"). Termination for Cause shall mean termination
because of conviction by a court of competent jurisdiction of theft from the
Company, conviction by a court of competent jurisdiction of embezzlement of the
Company's funds, conviction by a court of competent jurisdiction of
falsification of the Company's records, conviction by a court of competent
jurisdiction of fraud committed against the Company, conviction by a court of
competent jurisdiction 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 subject to the
provisions of Section 2 hereof, or material breach of any provision of this
Agreement.
(d) 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 base salary accrued but unpaid and expenses incurred but not repaid
to Employee, in each case only until the effective date of Termination for
Cause, and COBRA and rights under vested stock option grants, 401(k), vacation
plans and other accrued and vested employee benefits.
(e) The provisions of Section 6 hereof shall continue to be binding on
the parties hereto notwithstanding the termination without cause or Termination
for Cause of Employee.
6. 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
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<PAGE>
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 6 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 6 (all of the
covenants of Employee set forth in this Section 6, 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. 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
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;
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<PAGE>
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;
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;
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<PAGE>
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;
24. The State of Mississippi;
25. The State of Missouri;
26. The State of Montana
27. The State of Nebraska;
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<PAGE>
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;
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;
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<PAGE>
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 6(b) and 6(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 6, or
any part thereof, is invalid or unenforceable, the remainder of this Section 6
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
6, or any
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<PAGE>
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 6 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 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.
7. GOVERNING LAW. This Agreement shall be construed and governed under
the laws of the State of North Carolina.
8. 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.
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<PAGE>
9. 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 6 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.
10. 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.
11. 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.
12. TIME OF THE ESSENCE. Time is of the essence.
13. ARBITRATION. Any dispute arising in connection with this Agreement
(other than with respect to Section 6) shall be finally and conclusively
determined in accordance with the rules of the American Arbitration Association
of Charlotte, North Carolina, whose determination shall be final and binding on
the parties, be entitled to be enforced to the fullest extent permitted by law
and be entered in any court of competent jurisdiction. Each party shall pay all
fees, costs and expenses, including legal fees and expenses, incurred by such
party in connection with any such arbitration, and the fees, costs and expenses
of any arbitrator(s) appointed or selected pursuant to this Section 13 shall be
shared equally by the parties hereto.
14. INDEMNIFICATION. To the fullest extent permitted or required by the
laws of the State of North Carolina, the Company shall indemnify and hold
harmless (including the advance payment of expenses) Employee, in accordance
with the terms of such laws, if Employee is made a party, or threatened to be
made a party, to any threatened, pending, or contemplated suit or proceeding
(whether civil, criminal, administrative or investigative) by reason of the
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<PAGE>
fact that Employee is or was an officer or director of the Company or any
subsidiary or affiliate of the Company, against expenses (including reasonable
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any such action, suit or
proceeding. The Company's obligations under this paragraph will survive the
termination of this Agreement for any reason whatsoever.
15. D&O LIABILITY INSURANCE. During the Term of Employment, the Company
shall maintain customary directors' and officers' liability insurance.
16. 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: Eric H. Jeltrup
7431 Timber Ridge Drive
Charlotte, North Carolina 28227
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 16.
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.
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<PAGE>
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, Eric H. Jeltrup 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)
ERIC H. JELTRUP
COMPANY:
PCA INTERNATIONAL, INC.
BY: _______________________________
JOHN GROSSO
PRESIDENT AND CEO
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<PAGE>
EMPLOYMENT AND NONCOMPETE AGREEMENT
THIS EMPLOYMENT AND NONCOMPETE AGREEMENT ("Agreement"), made and
entered into as of the 9th day of June, 1997, by and between BRUCE A. FISHER, 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").
BACKGROUND STATEMENT
Employee currently is employed by the Company and holds the position of
Senior Vice President and Chief Financial Officer. Employee has worked for the
Company in positions of responsibility and authority for several years and has
been instrumental in successfully developing, expanding and increasing the
business and earnings of the Company. The Company desires to ensure that the
services of Employee will continue to be available to it on a mutually
satisfactory basis. In the course of his employment with the Company, Employee
has had access to trade secrets and proprietary information of the Company and
will, as an employee of the Company, continue to have access to trade secrets
and proprietary information of the Company. Accordingly, Employee has and will
continue to acquire the knowledge and ability to compete with the Company. The
Company has offered Employee an employment agreement on the terms and pursuant
to the conditions hereof, including the stability and security provided to
Employee by the arrangement provided for herein. The parties agree that the
execution and delivery of this Employment Agreement is a condition precedent to
the benefits extended to Employee hereunder. Employee agrees that the benefits
provided for herein are adequate and sufficient consideration for the covenants
made by Employee hereunder, including, without limitation, the covenants not to
compete.
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 6 hereof, the
Company agrees to employ Employee on an active and full-time basis, and Employee
accepts such employment, as a Senior Vice President and Chief Financial Officer,
subject to the order, supervision and direction of the Chief Executive Officer
of the Company (the "CEO").
2. DUTIES. Employee shall serve the Company as a Senior Vice President
and Chief Financial Officer and shall devote
<PAGE>
substantially all of his 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; EVERGREEN PROVISIONS. (a) The term of Employee's
employment by the Company hereunder shall commence as of the date hereof, June
9, 1997, and shall continue for a period of three (3) years after such
commencement date or to such later date to which the term of this Agreement may
be extended pursuant to this Section 3 (the "Term of Employment"). The Term of
Employment shall be evergreen and shall be extended automatically for one day
effective at 5:00 p.m. of each day. As a result, the remaining Term of
Employment shall always be, and never be less than, three (3) years.
4. BASE COMPENSATION AND BENEFITS. (a) The annual base compensation
rate to be paid to Employee for the services to be rendered hereunder shall be
One Hundred Fifty Five Thousand Two Hundred Fifty Dollars ($155,250.00), payable
in accordance with the Company's normal payroll practices, subject to applicable
federal and state income and social security tax withholding requirements (the
"Base Rate").
(b) Employee's Base Rate may be reviewed from time to time by the Board
and adjusted upward as Employee's performance, the performance of the Company
and other pertinent factors warrant at any time during the term of this
Agreement.
(c) Employee shall have the right to fully participate in any
Management Bonus Program to the same extent or greater than as previously
provided to Employee prior to the execution of this Agreement. Any bonus payable
to Employee under such Management Bonus Program shall be paid in a manner
consistent with the Company's past practice with respect to payment of bonuses.
Notwithstanding the foregoing, any bonus opportunity provided to Employee under
a current or future Management Bonus Program shall at least equal an opportunity
to earn up to forty percent (40%) of the Base Rate for the year to which such
bonus relates. Any operating or financial objectives on an annual basis related
to the payment of the annual bonus award to the Employee will be consistent with
and equal to the same operating or financial objectives for any of the Company's
other senior executives.
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<PAGE>
(d) Employee shall be entitled to receive such benefits as were
afforded to Employee prior to the execution of this Agreement including but not
limited to the following:
(i) Employee shall be entitled to twenty-one (21) days of
paid vacation during each year of employment plus all Company sponsored
holidays;
(ii) Employee shall be entitled to sick leave in
accordance with the plans and policies established by the
Company for all employees;
(iii) Employee shall be entitled to such medical insurance,
life insurance and disability and salary continuation benefit programs,
if any, as are provided by the Company to its employees from time to
time; and
(iv) Employee shall be entitled to participation in the
Company's 401K Plan, pension plan and/or profit sharing plans.
(e) The Company shall reimburse Employee for those expenses that are
incurred by him in connection with the performance of his duties under this
Agreement, are consistent with Company policies and practices, and are
reasonably related to the business of the Company.
5. EVENTS OF TERMINATION. (a) The following shall be events of
termination under this Agreement: (i) termination by the Company without cause;
(ii) termination as a result of Employee's death or total disability (as defined
in the long term disability plan maintained by the Company); and (iii)
termination by the Company for Cause. The effective date for all such
terminations shall hereafter be referred to as the "Termination Date".
(b) In the event of a termination of this Agreement in accordance with
subparts (i) or (ii) above, within ten (10) business days after the Termination
Date, the Company shall pay to Employee, (or, in the event of his death, his
written designee or, if he has no written designee, to his spouse or, if he
leaves no spouse and has no written designee, to his estate,) in cash a lump sum
amount equal to thirty six (36) months of average monthly compensation received
during the preceding five (5) year period and calculated as follows: Employee's
total cash and non-cash compensation from the Company as reported on line one
(1) of his form W-2s (total wages, tips, and other compensation) for the five
(5) calendar year period immediately preceding the Termination Date will be
divided by sixty (60) to determine an average monthly compensation rate for the
prior five (5) year period and then such amount shall be multiplied by thirty
six (36). In addition, all options or other rights to acquire the Company's
Common Stock, $.20 par value per share, (the "Stock") previously granted to
Employee
-3-
<PAGE>
shall immediately become fully vested without any further action on behalf of
either Employee or the Company and notwithstanding any contrary provision in any
stock option plan, agreement or similar document and Employee shall have a
period beginning on the Termination Date and ending twelve months thereafter to
exercise any stock options or right to acquire the Stock.
(c) The Board of Directors shall have the right at any time, without
advance notice, to terminate Employee's employment for cause, as hereinafter
defined ("Termination for Cause"). Termination for Cause shall mean termination
because of conviction by a court of competent jurisdiction of theft from the
Company, conviction by a court of competent jurisdiction of embezzlement of the
Company's funds, conviction by a court of competent jurisdiction of
falsification of the Company's records, conviction by a court of competent
jurisdiction of fraud committed against the Company, conviction by a court of
competent jurisdiction 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 subject to the
provisions of Section 2 hereof, or material breach of any provision of this
Agreement.
(d) 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 base salary accrued but unpaid and expenses incurred but not repaid
to Employee, in each case only until the effective date of Termination for
Cause, and COBRA and rights under vested stock option grants, 401(k), vacation
plans and other accrued and vested employee benefits.
(e) The provisions of Section 6 hereof shall continue to be binding on
the parties hereto notwithstanding the termination without cause or Termination
for Cause of Employee.
6. 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
-4-
<PAGE>
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 6 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 6 (all of the
covenants of Employee set forth in this Section 6, 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");
-5-
<PAGE>
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
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;
-6-
<PAGE>
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;
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;
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<PAGE>
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;
24. The State of Mississippi;
25. The State of Missouri;
26. The State of Montana
27. The State of Nebraska;
-8-
<PAGE>
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;
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;
-9-
<PAGE>
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 6(b) and 6(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 6, or
any part thereof, is invalid or unenforceable, the remainder of this Section 6
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
6, or any
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<PAGE>
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 6 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 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.
7. GOVERNING LAW. This Agreement shall be construed and governed under
the laws of the State of North Carolina.
8. 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.
-11-
<PAGE>
9. 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 6 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.
10. 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.
11. 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.
12. TIME OF THE ESSENCE. Time is of the essence.
13. ARBITRATION. Any dispute arising in connection with this Agreement
(other than with respect to Section 6) shall be finally and conclusively
determined in accordance with the rules of the American Arbitration Association
of Charlotte, North Carolina, whose determination shall be final and binding on
the parties, be entitled to be enforced to the fullest extent permitted by law
and be entered in any court of competent jurisdiction. Each party shall pay all
fees, costs and expenses, including legal fees and expenses, incurred by such
party in connection with any such arbitration, and the fees, costs and expenses
of any arbitrator(s) appointed or selected pursuant to this Section 13 shall be
shared equally by the parties hereto.
14. INDEMNIFICATION. To the fullest extent permitted or required by the
laws of the State of North Carolina, the Company shall indemnify and hold
harmless (including the advance payment of expenses) Employee, in accordance
with the terms of such laws, if Employee is made a party, or threatened to be
made a party, to any threatened, pending, or contemplated suit or proceeding
(whether civil, criminal, administrative or investigative) by reason of the
-12-
<PAGE>
fact that Employee is or was an officer or director of the Company or any
subsidiary or affiliate of the Company, against expenses (including reasonable
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any such action, suit or
proceeding. The Company's obligations under this paragraph will survive the
termination of this Agreement for any reason whatsoever.
15. D&O LIABILITY INSURANCE. During the Term of Employment, the Company
shall maintain customary directors' and officers' liability insurance.
16. 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: Bruce A. Fisher
12908 Hidden Hills Lane
Charlotte, North Carolina 28210
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 16.
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.
-13-
<PAGE>
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, Bruce A. Fisher 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)
BRUCE A. FISHER
COMPANY:
PCA INTERNATIONAL, INC.
BY: _______________________________
JOHN GROSSO
PRESIDENT AND CEO
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<PAGE>
EXHIBIT 11
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY DILUTED
EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
August 3, July 28, August 3, July 28,
1997 1996 1997 1996
PRIMARY EARNINGS PER COMMON SHARE:
EARNINGS APPLICABLE TO COMMON STOCK:
Net income.......................................$ (1,639,620) $ 232,297 $(996,294) $ 1,371,075
============== =========== ============ ============
COMPUTATION OF COMMON SHARES AND
COMMON EQUIVALENT SHARES:
Weighted average number of common shares........ 7,761,749 7,469,353 7,696,476 7,468,868
Dilutive effect of stock options................ 684,387 589,272 593,571 494,682
------------- ------------ ------------ ------------
Weighted average number of common shares after
dilutive effect................................ 8,446,136 8,058,625 8,290,047 7,963,550
============== =========== ============ ============
EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARE:
Net income..................................... $ (0.19) $ 0.03 $ (0.12) $ 0.17
============== =========== ============ ============
FULLY DILUTED EARNINGS PER COMMON SHARE:
EARNINGS APPLICABLE TO COMMON STOCK:
Net income...................................... $ (1,639,620) $ 232,297 $(996,294) $1,371,075
============== =========== ============ ============
COMPUTATION OF COMMON SHARES AND
COMMON EQUIVALENT SHARES:
Weighted average number of common shares
outstanding.................................. 7,761,749 7,469,353 7,696,476 7,468,868
Dilutive effect of stock options............... 817,880 600,643 832,167 658,493
------------- ------------ ------------ ------------
Weighted average number of common shares after
dilutive effect............................... 8,579,629 8,069,996 8,528,643 8,127,361
============== =========== ============ ============
EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARE ASSUMING FULL DILUTION:
Net income..................................... $ (0.19) $ 0.03 $ (0.12) $ 0.17
============== =========== ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1998
<PERIOD-START> FEB-03-1997
<PERIOD-END> AUG-03-1997
<CASH> 2,454,931
<SECURITIES> 0
<RECEIVABLES> 10,531,213
<ALLOWANCES> 960,120
<INVENTORY> 7,332,835
<CURRENT-ASSETS> 29,280,250
<PP&E> 115,633,919
<DEPRECIATION> 57,838,211
<TOTAL-ASSETS> 151,586,375
<CURRENT-LIABILITIES> 60,269,844
<BONDS> 0
0
0
<COMMON> 1,561,406
<OTHER-SE> 34,830,149
<TOTAL-LIABILITY-AND-EQUITY> 151,586,375
<SALES> 105,828,639
<TOTAL-REVENUES> 105,828,639
<CGS> 84,760,825
<TOTAL-COSTS> 84,760,825
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,270,496
<INCOME-PRETAX> (1,934,550)
<INCOME-TAX> (938,256)
<INCOME-CONTINUING> (996,294)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (996,294)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
