Exhibit 10.16
STOCKHOLDERS AGREEMENT
by and among
PCA INTERNATIONAL, INC.
and
CERTAIN OF THE HOLDERS OF ITS COMMON STOCK
Dated as of August 25, 1998
TABLE OF CONTENTS
Page
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Section 1. Certain Definitions 2
Section 2. Restrictions on Transfer 11
2.1 Common Stock Subject To This Agreement .........................................................11
2.2 General Restriction ............................................................................12
2.3 Transfers of Common Stock and Option Shares by Management Stockholders .........................13
2.4 Tag-Along Right ................................................................................14
2.5 Drag-Along Right ...............................................................................16
2.6 Transfers Following Initial Public Offering and Other Transfers ................................17
Section 3. Call Options 20
3.1 Call Options of the Company and the Principal Stockholder ......................................20
3.2 Closing ........................................................................................25
3.3 Termination of Call Options ....................................................................25
Section 4. Registration Rights 26
Section 5. Changes in Common Stock; Option Plan; Other 26
5.1 Changes in Common Stock ........................................................................26
5.2 Registration of Option Shares. .................................................................26
Section 6. Transferees Subject to Agreement 27
Section 7. Legends 27
Section 8. Miscellaneous 28
8.1 Amendment ......................................................................................28
8.2 Governing Law ..................................................................................28
8.3 Execution in Counterparts ......................................................................28
8.4 Notices ........................................................................................29
8.5 Entire Agreement; Headings; Gender .............................................................29
8.6 Copy of Agreement with Company .................................................................30
8.7 Specific Performance ...........................................................................30
8.8 Assignment .....................................................................................30
8.9 Third Party Beneficiary ........................................................................31
Exhibit A Parties
Exhibit B Repurchase Percentages
Exhibit C Form of Registration Rights Agreement
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STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (the "Agreement"), dated as of August
25, 1998, by and among PCA INTERNATIONAL, INC., a North Carolina corporation
(the "Company"), JUPITER PARTNERS II L.P., a Delaware limited partnership
("Jupiter"), and the other parties listed on Exhibit A hereto under the caption
"Management Stockholders" (Jupiter and the Management Stockholders are
collectively referred to herein as the "Stockholders," which term shall also
include any Person who hereafter becomes a party to this Agreement in accordance
with the terms hereof). Capitalized terms used herein and not otherwise defined
shall have the meanings specified in Section 1.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Stockholders are the holders of a substantial
portion of the issued and outstanding shares of Common Stock of the Company;
WHEREAS, the Company has entered into employment and
non-competition agreements with each of the Management Stockholders (each, a
"Employment Agreement");
WHEREAS, concurrently with the execution of this Agreement,
pursuant to that certain Stock Option Plan of the Company (the "Option Plan")
(i) the Company is granting to the Management Stockholders options to purchase
shares of Common Stock ("Management Options") at a per share exercise price of
$26.50 per share, and (ii) the
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Management Stockholders are "rolling over" previously outstanding options to
purchase shares of Common Stock ("Management Roll-over Options"), subject to the
terms and conditions set forth in the Option Plan; and
WHEREAS, the parties hereto wish to provide for certain rights
and obligations of the Stockholders with respect to the transfer, purchase and
other rights affecting the Common Stock.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Certain Definitions. For the purposes of this
Agreement, the following terms and phrases have the following meanings:
"Affiliate" means, (i) with respect to any natural Person, the
spouse of such Person, either parent of such Person or of such Person's spouse,
any descendant of any such parent, or any relative of such Person who has the
same home as such Person, and (ii) with respect to any other Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with, such Person. For purposes of this definition, the term "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
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"Affiliated Transferee," with respect to the Principal
Stockholder, means (i) any Affiliate of the Principal Stockholder, (ii) any
employee or partner of the Principal Stockholder or (iii) any employee or
partner of any Affiliate of the Principal Stockholder.
"Board" means the Board of Directors of the Company.
"business day" shall mean any day except a Saturday, Sunday or
other day on which commercial banks in New York, New York, are authorized by law
to close.
"Call for Breach" shall have the meaning specified in Section
3.1.4.
"Call for Cause" shall have the meaning specified in Section
3.1.1.
"Call for Resignation" shall have the meaning specified in
Section 3.1.2.
"Call Option" shall mean any right of the Company or the
Principal Stockholder to purchase Call Shares from a Management Stockholder
under Section 3.
"Call Shares" shall mean any Option Shares (or any outstanding
Management Options or Management Roll-over Options held by a Management
Stockholder but not yet exercised) with respect to which the Company or the
Principal Stockholder would have a purchase right if a Management Stockholder
ceased to be employed by the Company or any of its subsidiaries for any of the
reasons specified in Section 3.1.
"Call Without Cause" shall have the meaning specified in
Section 3.1.3.
"Cause," with respect to any Management Stockholder, shall
mean (i) a reasonable good faith determination by the Board that the Management
Stockholder has, in any material respect, willfully failed to follow any of the
Company's written policies or any written directives of the Board (other than by
reason of a voluntary resignation or resignation for Good Reason) and, if such
failure is susceptible of being cured as
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determined by the Board in good faith, the failure of the Management Stockholder
to cure such failure within 10 business days after receiving written notice
(stating with specificity the nature of such failure) from the Board; or (ii)
any act of willful misconduct, fraud or personal dishonesty by the Management
Stockholder involving the assets of the Company or any of its Affiliates
resulting in material economic or material reputational harm to the Company; or
(iii) the conviction of, or a plea of guilty or nolo contendere by, the
Management Stockholder to a charge of any crime involving a felony; or (iv) the
breach by the Management Stockholder in any material respect of any contract or
other agreement between the Company or any of its Affiliates and the Management
Stockholder and, if such breach is susceptible of being cured as determined by
the Board in good faith, the failure of the Management Stockholder to cure such
breach within 10 business days after receiving written notice (stating with
specificity the nature of such failure) from the Board; notwithstanding the
foregoing, with respect to those Management Stockholders who are parties to
employment agreements with the Company, and such agreements contain a definition
of "Cause," the term "Cause" herein shall be deemed to have the meaning set
forth in such employment agreement.
"Change in Control" shall mean (i) such time as the Principal
Stockholder has disposed of at least one-half of the shares of Common Stock
owned by the Principal Stockholder as of the date of this Agreement (as set
forth on Exhibit A) and no longer owns at least a majority of the outstanding
Common Stock of the Company or (ii) the consummation of a sale of all or
substantially all of the assets of the Company and its subsidiaries (other than
to the Principal Stockholder or any Affiliate of the Company);
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provided, that a Change in Control shall only be deemed to have occurred if
after the event specified in clause (i) the Company does not have any
publicly-traded securities.
"Common Stock" means the common stock, par value $.20 per
share, of the Company and any other shares of capital stock of the Company
classified as common stock hereafter authorized.
"Company" means PCA International, Inc., a North Carolina
corporation.
"Disability," with respect to a Management Stockholder, shall
be defined in the long-term disability plan maintained by the Company.
"Drag-Along Right" shall have the meaning specified in Section
2.5.
"Employment Agreement" shall have the meaning specified in the
recitals to this Agreement.
"Encumbrance" means any mortgage, lien, security interest,
pledge, claim, option, right of first refusal or other like encumbrance with
respect to any share of Common Stock, and "Encumber" shall have a correlative
meaning.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean (A) after the Initial Public
Offering, the average of the last reported sales price of the Common Stock for
the 30 consecutive trading days immediately preceding the date on which any such
determination is to be made, as reported by NASDAQ National Market System or a
national securities exchange, and (B) prior to the Initial Public Offering, the
fair market value per share of Common Stock as determined in good faith by the
Board.
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"50% Disposition Date" shall mean such time as the Principal
Stockholder has disposed of at least one-half of the shares of Common Stock
owned by the Principal Stockholder as of the date hereof (as set forth on
Exhibit A).
"Fully Diluted Shares" shall mean the total number of the
Company's outstanding shares of Common Stock on a fully diluted, fully converted
basis (assuming the exercise of all options and other securities convertible or
exchangeable into or exercisable for Common Stock).
"Good Reason," with respect to a Management Stockholder, means
(i) a material reduction of such Management Stockholder's base salary payable
during any fiscal year by the Company and its Subsidiaries or the requirement by
the Company that the Management Stockholder perform tasks which would be
demeaning or degrading to one in his position, (ii) the failure of the Company
to pay such Management Stockholder his base salary or any of his material
benefits to which he is entitled to be paid during any fiscal year, if such
failure is not cured within ten days of written notice thereof to the Company,
or (iii) material breach by the Company of any material contract or agreement
between the Company and such Management Stockholder.
"Initial Public Offering" means the first Public Offering
after the date of this Agreement which yields gross proceeds to the Company in
excess of $25,000,000 pursuant to an effective registration statement under the
Securities Act and which results in the listing or continual listing of such
Common Stock on a national securities exchange or the quotation of such Common
Stock on the NASDAQ National Market System.
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"in-the-money," with respect to options or other securities
convertible into Common Stock, shall mean any options or other such securities
the Fair Market Value of whose underlying shares of Common Stock exceeds the
then applicable exercise price.
"Involuntary Transfer," with respect to any shares of Common
Stock, means any involuntary Transfer, proceeding or action (other than a
Transfer on the death of a Management Stockholder) by or in which a Stockholder
(or his Permitted Transferee) shall be deprived or divested of any right, title
or interest in or to any of its shares of Common Stock, including, without
limitation, any seizure under levy of attachment or execution, any Transfer in
connection with bankruptcy (whether pursuant to the filing of a voluntary or an
involuntary petition under any applicable bankruptcy law) or other court
proceeding to a debtor-in-possession, trustee in bankruptcy or receiver or other
officer or agency, any Transfer to a state or to a public officer or agency
pursuant to any statute pertaining to escheat or abandoned property, any
Transfer pursuant to a divorce action or any Transfer upon or occasioned by the
legal incompetence of any Stockholder (or his Permitted Transferee) or any
Transfer to a legal representative of any Stockholder (or his Permitted
Transferee).
"Management Options" shall have the meaning specified in the
recitals to this Agreement.
"Management Roll-over Options" shall have the meaning
specified in the recitals to this Agreement.
"Management Stockholders" means the individuals listed on
Exhibit A under the caption
"Management Stockholders," any Stockholder who acquires Common
Stock from a Management Stockholder and who becomes a party to this Agreement,
and
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any other Stockholder (including any Person who acquires Option Shares) who
hereafter becomes a party to this Agreement and is denominated as a "Management
Stockholder."
"Notice" shall have the meaning specified in Section 2.4.
"Option Plan" shall have the meaning specified in the recitals
to this Agreement.
"Option Shares" shall mean any shares of Common Stock issued
pursuant to the exercise of a Management Option or a Management Roll-over
Option.
"Option Share Restriction Period" shall mean any time prior to
August 21, 2006.
"Permitted Transferee" means, with respect to a Stockholder
who is a natural person, (a) the spouse, parents, parents-in-law or siblings (by
blood or adoption) of such Stockholder or the lineal descendants (by blood or
adoption) of such Stockholder or such Stockholder's spouse, parents or siblings,
(b) a trust, the beneficiaries of which include only such Stockholder or spouse,
parents, or siblings (by blood or adoption) of such Stockholder or the lineal
descendants (by blood or adoption) of such Stockholder, spouse, parents or
siblings, or a charitable trust that is an Affiliate of such Stockholder, or (c)
upon such Stockholder's death, executors, administrators, testamentary trustees,
legatees or beneficiaries of such Stockholder.
"Person" shall mean an individual, firm, corporation, limited
liability company, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
"Potential Participant" shall have the meaning specified in
Section 2.4.
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"Principal Stockholder" shall mean Jupiter and, where the
context refers to the ownership by the Principal Stockholder of Common Stock,
shall also mean its Affiliated Transferees who own Common Stock.
"Prospective Seller" shall have the meaning specified in
Section 2.4. "Prospective Transferee" shall have the meaning specified in
Section 6.
"Public Offering" means a public offering of Common Stock
pursuant to an effective registration statement under the Securities Act.
"Public Sale" means a Transfer of Common Stock pursuant to a
Public Offering or under Rule 144 (or any successor rule) under the Securities
Act.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, in the form of Exhibit C.
"Repurchase Price" shall mean, with respect to a share of
Common Stock, the Fair Market Value thereof; provided, that if at the time of
any determination of the Repurchase Price, the Company has not completed an
Initial Public Offering, then in determining the Repurchase Price for
transactions involving a Management Stockholder who owns Call Shares with a
value in excess of $500,000, if the Management Stockholder disagrees with the
Board's determination of Fair Market Value, such Fair Market Value shall be
determined by an independent appraiser selected jointly by the Company and such
Management Stockholder, which appraiser shall determine the fair market value
per share of Common Stock (taking into consideration the lack of liquidity and
non-control nature of the Call Shares). The Management Stockholder who disagrees
with the Board's determination of Fair Market Value will pay the cost of such
appraisal unless it is
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determined by the appraiser that the Board's determination was more than 10%
lower than the appraiser's determination, in which case the Company will pay
such cost.
"Restricted Shares" means all shares of Common Stock other
than (i) shares that have been registered under a registration statement
pursuant to the Securities Act, (ii) shares with respect to which a sale has
been made pursuant to Rule 144 promulgated under the Securities Act (or any
successor rule), (iii) shares with respect to which a sale may be made pursuant
to Rule 144(k) promulgated under the Securities Act (or any successor rule), or
(iv) shares with respect to which the holder thereof shall have delivered to the
Company an opinion of counsel, in form and substance reasonably satisfactory to
the Company, to the effect that the Transfer of such shares may be effected
without registration under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Stockholders" shall have the meaning specified in the
introductory paragraph of this Agreement.
"Subsidiary," with respect to any Person, means any other
Person of which such Person owns or controls, directly or indirectly, more than
50% of the outstanding voting shares or other voting interests or equity
interests.
"Substitute Purchase Offer" shall have the meaning specified
in Section 2.4.
"Tag-Along Common Stock" shall have the meaning specified in
Section 2.4.
"Tag-Along Notice" shall have the meaning specified in Section
2.4.
"Tag-Along Right" shall have the meaning specified in Section
2.4.
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"Threshold Amount" shall mean the number of shares of Common
Stock which is equal to 20% of (i) the shares of Common Stock owned by the
Principal Stockholder on the date hereof, plus (to the extent not included in
(i)) (ii) any shares purchased by the Principal Stockholder after the date
hereof pursuant to Section 4.2 of the Agreement and Plan of Merger dated as of
April 20, 1998 by and among the Company and Jupiter Acquisition Corp.
"Transfer," with respect to any shares of Common Stock, means
any transfer, assignment, sale, gift, pledge, hypothecation or other disposition
of Common Stock or of all or part of the voting power (other than the granting
of a revocable proxy) associated with the Common Stock whatsoever, or any other
transfer of beneficial ownership of Common Stock, including, without limitation,
any Involuntary Transfer; and "Transferee" shall have a correlative meaning.
Section 2. Restrictions on Transfer.
2.1 Common Stock Subject To This Agreement. Unless otherwise
provided herein, all shares of Common Stock of the Company (including, without
limitation, any Option Shares or Call Shares) now owned or hereafter acquired by
any of the Stockholders or any Transferee thereof (including any Person who
acquires Common Stock by means of an Involuntary Transfer, but not including any
Person who acquires Common Stock pursuant to a Public Sale) shall be subject to
the terms of this Agreement.
2.2 General Restriction.
2.2.1 General. Each Stockholder agrees that he or it
will not, directly or indirectly, make any Transfer of any Common Stock, except
in compliance with the Securities Act. Each Management Stockholder further
agrees to the restrictions on
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Transfer set forth in Section 2.3. Each Stockholder agrees (i) that any direct
or indirect Transfer of Common Stock held by it will be made only in compliance
with Section 6 (Transferees Subject to Agreement), to the extent applicable, and
(ii) to be bound by the provisions of Section 2.4 (Tag-Along Right) with respect
to its Common Stock. Any Transfer effected, or purported or attempted to be
effected, not in accordance with the terms and conditions of this Agreement
shall be void and of no effect. In connection with any voided Transfer, the
Company may hold and refuse to transfer any Common Stock or certificate therefor
tendered for transfer, in addition and without prejudice to any and all other
rights and remedies which may be available.
2.2.2 Involuntary Transfer. Any Person who acquires
Common Stock from a Stockholder by means of an Involuntary Transfer shall be
deemed to have become a party to this Agreement in the place and stead of the
transferring Stockholder and shall be bound by the terms hereof; provided, that
prior to the Company transferring such Common Stock on its books and records to
such Person and prior to the exercise by such Person of any rights hereunder,
such Person shall have delivered an appropriate document, in form and substance
reasonably satisfactory to the Company, confirming that such Person takes such
shares subject to the terms and conditions of this Agreement, and such Person
thereupon shall be deemed to be a Permitted Transferee of such Stockholder.
2.3 Transfers of Common Stock and Option Shares by Management
Stockholders.
2.3.1 Each Management Stockholder agrees that he will
not, directly or indirectly, Transfer any shares of Common Stock except, subject
to compliance with Section 6 (Transferees Subject to Agreement), (i) Transfers
of Common Stock
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pursuant to the procedures, and subject to the limitations, set forth in Section
2.4 (Tag-Along Right), Section 2.5 (Drag-Along Right), Section 2.6 (Transfers
Following Initial Public Offering and Other Transfers) or transfers under the
Registration Rights Agreement, or (ii) Transfers of Common Stock to the Company
or the Principal Stockholder pursuant to the provisions of Section 3 (Call
Options) or otherwise, or (iii) Transfers of Common Stock to any Permitted
Transferee of such Management Stockholder, or (iv) Transfers consisting of
pledges of Common Stock to the Company, or (v) Transfers of Common Stock to any
Person pursuant to an Involuntary Transfer or (vi) Transfers after February 21,
2006 (which shall not require compliance with Section 6); provided that, in the
case of this clause (v), such Person shall have delivered an appropriate
document, in form and substance reasonably satisfactory to the Company,
confirming that such Person takes such shares subject to the terms and
conditions of this Agreement, and such Person thereupon shall be deemed to be a
Permitted Transferee of such Management Stockholder. Each Management Stockholder
further agrees that, notwithstanding the foregoing, he will not, directly or
indirectly, Transfer any Option Shares or Call Shares during the Option Share
Restriction Period other than pursuant to Section 2.4 (Tag-Along Right), Section
2.5 (Drag-Along Right) or Section 2.6 (Transfers Following Initial Public
Offering and Other Transfers); thereafter, such Option Shares and Call Shares
will continue to be subject to the other provisions of this Agreement.
2.4 Tag-Along Right. Other than in connection with the
exercise of the Drag-Along Right or a Call Option or pursuant to a Public Sale
permitted hereunder, in the event that any Stockholder (as used in this Section,
a "Prospective Seller") shall receive a bona fide offer to purchase shares of
Common Stock (a "Purchase Offer") from any Person
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(including, without limitation, any offer by a Management Stockholder, but not
including (a) an offer by a Permitted Transferee of such Prospective Seller or
(b) an offer by the Principal Stockholder), the Prospective Seller shall either
decline such Purchase Offer or, if the Prospective Seller determines to accept
such Purchase Offer, then, prior to accepting any Purchase Offer, arrange for
the proposed purchaser to make, in lieu of the Purchase Offer, a substitute bona
fide offer to purchase the same number of shares of Common Stock that were the
subject of the Purchase Offer, and upon the same terms as the Purchase Offer,
from the Stockholders owning Common Stock as a group in the relative proportions
and otherwise as described in the second succeeding sentence (the "Substitute
Purchase Offer"). In the event a Substitute Purchase Offer is made, the
Prospective Seller shall give the other Stockholders written notice thereof (the
"Notice") specifying (i) the number of shares of Common Stock that is the
subject of such Substitute Purchase Offer, (ii) the terms (including the
proposed date of consummation thereof, which shall be not less than 30 days
following the date of the Notice) of such Substitute Purchase Offer, and (iii)
the identity of the proposed purchaser. Upon receipt of the Notice, each
Stockholder (a "Potential Participant") shall have the right (the "Tag-Along
Right") to sell that number of shares of Common Stock equal to the product of
(a) the total number of shares of Common Stock proposed to be purchased and (b)
a fraction, the numerator of which shall be the number of shares of Tag-Along
Common Stock (as defined below) owned by such Potential Participant and the
denominator of which shall be the number of shares of Tag-Along Common Stock
owned by all Potential Participants (including the Prospective Seller) electing
to participate in such sale. For purposes of the foregoing, "Tag-Along Common
Stock" shall mean all shares of Common Stock, including shares issuable
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pursuant to options which, at the time of the Notice, are capable of being
exercised in accordance with the terms of the Option Plan or the related option
agreement and are "in-the-money." The Tag-Along Right may be exercised by a
Potential Participant by delivery, not later than 15 days after receipt of the
Notice, of a written notice (the "Tag-Along Notice") to the Prospective Seller,
which shall state the number of shares of Common Stock that such Potential
Participant wishes to include in such sale to the purchaser. The Prospective
Seller, together with any electing Potential Participants, shall participate in
any purchase made by the purchaser specified in the Notice on the terms set
forth therein (or on terms no less favorable to the purchaser) and as provided
in the Tag-Along Notice during the 90-day period following the date of the
Notice. Any purchases by such purchaser following such 90-day period shall
require a new Notice. To the extent a Potential Participant does not participate
in such sale, the Prospective Seller and the other Potential Participants may
sell that number of shares of Common Stock (in addition to the shares of Common
Stock otherwise permitted to be sold by them hereunder) equal to their
proportionate share of the number of shares with respect to which such Potential
Participant had the opportunity to sell hereunder. All Transfers made pursuant
to this Section 2.4 shall be subject to the provisions of Section 6 (Transferees
Subject to Agreement). The provisions of this Section 2.4 shall terminate when
both of the following conditions have been satisfied: (i) an Initial Public
Offering has occurred; and (ii) the Principal Stockholder no longer owns Common
Stock in excess of the Threshold Amount.
2.5 Drag-Along Right. If the Principal Stockholder proposes to
make a bona fide sale of its shares of Common Stock to a third party
un-Affiliated with the Principal Stockholder (which may include another
Stockholder) in an amount equal to at
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least 10% of the Fully Diluted Shares (which amount shall be calculated based on
the transaction in question or a series of transactions related thereto), the
Principal Stockholder shall have the right (the "Drag-Along Right"), exercisable
upon 15 days' prior written notice, to require the other Stockholders to sell a
corresponding percentage (as the percentage being sold by the Principal
Stockholder) of the number of shares of Common Stock held by such other
Stockholders to such third party upon terms no less favorable to the other
Stockholders than those that apply to the Principal Stockholder with respect to
such third party sale. For purposes of calculating such corresponding
percentage, there shall be included in such calculation (without duplication)
(i) shares of Common Stock, (ii) shares issuable pursuant to the exercise of
Management Options and Management Roll-over Options that are exercisable in
accordance with the Option Plan or the related option agreement and are
in-the-money, even if such sale is during the Option Share Restriction Period,
and (iii) Call Shares. Each Stockholder hereby agrees to cooperate with the
Principal Stockholder and to take any and all action reasonably required in
connection with the consummation of such third party sale. Without limiting the
foregoing, at the closing of any sale under this Section 2.5, each Stockholder
shall deliver certificates representing the shares of Common Stock to be sold,
duly endorsed for transfer and accompanied by all requisite stock transfer
taxes, and each Stockholder shall represent and warrant that it is the
beneficial owner of such shares free and clear of any Encumbrances, with full
authority and power to transfer such shares. All Transfers made pursuant to this
Section 2.5 shall be subject to the provisions of Section 6 (Transferees Subject
to Agreement) unless the Principal Stockholder otherwise determines. The
provisions of this Section 2.5 shall terminate when both of the following
conditions have been satisfied:
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(i) an Initial Public Offering has occurred; and (ii) the Principal Stockholder
no longer owns Common Stock in excess of the Threshold Amount.
2.6 Transfers Following Initial Public Offering and Other
Transfers.
2.6.1 From and after the date of the Initial Public
Offering, and provided that at the time of the Transfer by a Management
Stockholder referred to below the Principal Stockholder continues to own Common
Stock in excess of the Threshold Amount, a Management Stockholder and his
Permitted Transferees may Transfer shares of Common Stock held by them (other
than, until the fifth anniversary of the date hereof, any Call Shares) (x)
pursuant to the exercise of their rights under the Registration Rights
Agreement, (y) pursuant to a sale under Rule 144 of the Securities Act which is
subject to the volume limitations set forth in subparagraph (e)(1) of such Rule;
provided, that a Management Stockholder and his Permitted Transferees as a group
may only Transfer their Common Stock under clauses (x) and (y) in an aggregate
amount equal to the product of (i)(A) prior to the 50% Disposition Date,
one-half of, and (B) after the 50% Disposition Date, 100% of, the total number
of shares of Public Sale Stock (as defined below) held by such Management
Stockholder as of the date hereof (or, if such Management Stockholder and his
Permitted Transferees as a group have acquired additional Common Stock after the
date hereof in a manner that was not in violation of this Agreement, such
greater number) multiplied by (ii) a fraction, the numerator of which shall be
the aggregate number of shares of Common Stock that have been Transferred by the
Principal Stockholder prior to the date of the proposed Transfer by such
Management Stockholder, and the denominator of which shall be the total number
of shares of Common Stock held by the Principal Stockholder as of the date
hereof (or, if the Principal Stockholder has acquired additional
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Common Stock after the date hereof in a manner that was not in violation of this
Agreement, such greater number), or (z) pursuant to an exemption from the
registration requirements of the Securities Act, but only if at the time of such
Transfer by such Management Stockholder the Principal Stockholder is also
Transferring Common Stock; provided that a Management Stockholder and his
Permitted Transferees as a group may only Transfer their Common Stock under this
clause (z) in an aggregate amount equal to the product of (i)(A) prior to the
50% Disposition Date, one-half of, and (B) after the 50% Disposition Date, 100%
of, the total number of shares of Public Sale Stock held by such Management
Stockholder as of the date hereof (or, if such Management Stockholder and his
Permitted Transferees as a group have acquired additional Common Stock after the
date hereof in a manner that was not in violation of this Agreement, such
greater number) multiplied by (ii) a fraction, the numerator of which shall be
the aggregate number of shares of Common Stock then being Transferred by the
Principal Stockholder, and the denominator of which shall be the total number of
shares of Common Stock held by the Principal Stockholder as of the date hereof
(or, if the Principal Stockholder has acquired additional Common Stock after the
date hereof in a manner that was not in violation of this Agreement, such
greater number). For purposes of the foregoing, "Public Sale Stock" shall mean
all shares of Common Stock, plus all shares of Common Stock issuable pursuant to
Management Options and Management Roll-over Options, which at the time of such
proposed Transfer, are capable of being exercised in accordance with the terms
of the Option Plan or the related option agreement and are "in-the-money," but
until the fifth anniversary of the date hereof, Public Sale Stock shall not
include any Management Roll-over Options that are subject to a Call Option
pursuant to Section 3.1.3.
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2.6.2 From and after the date of the Initial Public
Offering, and provided that at the time of the Transfer referred to below the
Principal Stockholder does not continue to own Common Stock in excess of the
Threshold Amount, a Management Stockholder and his Permitted Transferees may
Transfer shares of Common Stock held by them (other than, until the fifth
anniversary of the date hereof, any Call Shares) pursuant to the exercise of
their rights under the Registration Rights Agreement or pursuant to an
applicable exemption from the registration requirements of the Securities Act.
2.6.3 At any time after the Principal Stockholder
does not continue to own Common Stock in excess of the Threshold Amount, and
there has not occurred an Initial Public Offering, a Management Stockholder and
his Permitted Transferees may transfer shares of Common Stock held by them
pursuant to an applicable exemption from the registration requirements of the
Securities Act.
2.6.4 Any shares of Common Stock Transferred pursuant
to a Public Sale or pursuant to Section 2.6.3 shall no longer be subject to the
provisions of this Agreement.
Section 3. Call Options.
3.1 Call Options of the Company and the Principal Stockholder.
3.1.1 Termination for Cause. Subject to Section 3.3
(Termination of Call Options), if the employment by the Company of any
Management Stockholder shall be terminated by the Company or any of its
subsidiaries for Cause, then (A) all Management Options held by the applicable
Management Stockholder and his Permitted Transferees shall be cancelled without
consideration and (B) the Company and the Principal Stockholder shall have the
right, but not the obligation, to purchase (the "Call for
20
Cause") from the applicable Management Stockholder and his Permitted
Transferees, and if the Company and/or the Principal Stockholder exercises such
right, such Management Stockholder and his Permitted Transferees shall have the
obligation to sell to the Company and/or the Principal Stockholder, all or any
portion of the Call Shares held by such Management Stockholder and his Permitted
Transferees (it being agreed that the number of shares subject to the Call for
Cause shall be the maximum number of Call Shares that may be held by such
Management Stockholder and his Permitted Transferees during the 180-day period
during which such Call for Cause may be exercised), at a price per share (but
not less than zero) equal to the lower of (i) $26.50 per share (less, in the
case of options, the exercise price thereof) and (ii) the Repurchase Price
(less, in the case of options, the exercise price thereof). Notwithstanding the
foregoing, following the fifth anniversary of the date hereof, the Company's
call rights under this Section 3.1.1 shall apply only to Call Shares
representing Management Options or Option Shares issued pursuant to the exercise
of Management Options and shall not apply to Call Shares representing Management
Roll-over Options or Option Shares issued pursuant to the exercise of Management
Roll-over Options. For purposes of this Section 3.1.1, a termination for Cause
shall be deemed to have occurred with respect to a Management Stockholder if
such Management Stockholder resigns from his employment with the Company after
committing any act which, with notice or lapse of time or both, would constitute
an event of Cause under the definition of "Cause."
3.1.2 Termination by Resignation. Subject to Section
3.3 (Termination of Call Options), if prior to the fifth anniversary of the date
hereof any Management Stockholder shall cease to be employed by the Company or
any of its
21
subsidiaries as a result of his resignation (other than for Good Reason and
other than a resignation which occurs after committing any act which, with
notice or lapse of time or both, would constitute an event of Cause under the
definition of such term), then the Company and the Principal Stockholder shall
have the right, but not the obligation, to purchase (the "Call for Resignation")
from the applicable Management Stockholder and his Permitted Transferees, and if
the Company and/or the Principal Stockholder exercises such right, such
Management Stockholder and his Permitted Transferees shall have the obligation
to sell to the Company and/or the Principal Stockholder, all or any portion of
the Call Shares held by such Management Stockholder and his Permitted
Transferees (it being agreed that the number of shares referred to above shall
be the maximum number of shares of Call Shares that may be held by such
Management Stockholder and his Permitted Transferees during the 180-day period
during which such Call for Resignation may be exercised) multiplied by the
percentage specified on Exhibit B opposite the relevant period in which such
resignation occurs, at a price per share (but not less than zero) equal to the
lower of (i) $26.50 per share (less, in the case of options, the exercise price
thereof) and (ii) the Repurchase Price (less, in the case of options, the
exercise price thereof).
3.1.3 Termination Without Cause. Subject to Section
3.3 (Termination of Call Options), if prior to the fifth anniversary of the date
hereof any Management Stockholder shall cease to be employed by the Company or
any of its subsidiaries for any reason whatsoever, except due to death,
Disability, termination for Cause or resignation (other than resignation for
Good Reason and resignation deemed to be a termination for Cause under Section
3.1.1), the Company and the Principal Shareholder shall have the right, but not
the obligation, to purchase (the "Call Without Cause") from
22
the applicable Management Stockholder and his Permitted Transferees, and if the
Company and/or the Principal Stockholder exercises such right, such Management
Stockholder and his Permitted Transferees shall have the obligation to sell to
the Company and/or the Principal Stockholder, all or any portion of the Call
Shares held by such Management Stockholder and his Permitted Transferees (it
being agreed that the number of shares referred to above shall be the maximum
number of Call Shares that may be held by such Management Stockholder and his
Permitted Transferees during the 180-day period during which such Call Without
Cause may be exercised) multiplied by the percentage specified on Exhibit B
opposite the relevant period in which such cessation occurs, at a price per
share equal to the Repurchase Price (less, in the case of options, the exercise
price thereof).
3.1.4 Management Stockholder Breach of Employment
Agreement. Subject to Section 3.3 (Termination of Call Options), if any
Management Stockholder materially breaches any provision of Section 6
(Noncompetition, Secrecy and Inventions) of his Employment Agreement (or any
successor provision of any successor agreement) and, if such breach is
susceptible of being cured as determined by the Board in good faith, such breach
is not cured within ten business days after receiving written notice (stating
with specificity the nature of the breach) from the Board, then (A) all
Management Options held by the applicable Management Stockholder and his
Permitted Transferees shall be cancelled without consideration and (B) the
Company, among the other rights and remedies set forth in the Employment
Agreement, and the Principal Stockholder shall have the right, but not the
obligation, to purchase (the "Call for Breach") from the applicable Management
Stockholder and his Permitted Transferees, and if the Company and/or the
23
Principal Stockholder exercises such right, the Management Stockholder and his
Permitted Transferees shall have the obligation to sell to the Company and/or
the Principal Stockholder, all or any portion of the Call Shares held by such
Management Stockholder and his Permitted Transferees (it being agreed that the
number of shares subject to the Call for Breach shall be the maximum number of
Call Shares held by such Management Stockholder and his Permitted Transferees
during the 180-day period during which such Call for Breach may be exercised) at
a price per share (but not less than zero) equal to the lower of (i) $26.50 per
share (less, in the case of options, the exercise price thereof) and (ii) the
Repurchase Price (less, in the case of options, the exercise price thereof).
Notwithstanding the foregoing, following the fifth anniversary of the date
hereof, the Company's call rights under this Section 3.1.4 shall apply only to
Call Shares representing Management Options or Option Shares issued pursuant to
the exercise of Management Options and shall not apply to Call Shares
representing Management Roll-over Options or Option Shares issued pursuant to
the exercise of Management Roll-over Options.
3.1.5 Procedure. The Company may exercise its rights
pursuant to this Section 3.1 by providing written notice to the relevant
Management Stockholder and the Principal Stockholder not later than 90 days
after written notice (the "Company Notice") from the Company to the Management
Stockholder (with a copy to the Principal Stockholder) of the event triggering
such rights, indicating the amount of Call Shares subject to the relevant Call
Option. Any portion of such Call Option not exercised within such 90-day period
shall expire with respect to the Company and be void and of no further force and
effect. Provided that the Company has not exercised its rights in full with
respect to such relevant Call Option under this Section 3.1, the Principal
Stockholder may
24
exercise the rights of the Company (with respect to that portion of the Call
Option not exercised by the Company) under this Section 3.1 on its own behalf by
providing written notice to the relevant Management Stockholder not later than
180 days after the date of the Company Notice. Any portion of the relevant Call
Option not exercised within such 180-day period shall expire with respect to the
Principal Stockholder and be void and of no further force and effect.
3.2 Closing. The closing of any purchase by the Company or the
Principal Stockholder under this Section 3 shall be held at the principal office
of the Company on the 45th day after the date on which a notice of exercise of a
Call Option is given hereunder or at such other time and place as the parties to
the transaction may agree upon. At the closing of any purchase under this
Section 3, the applicable Stockholder and his Permitted Transferees shall
deliver certificates representing the Call Shares to be sold, duly endorsed for
transfer and accompanied by all requisite stock transfer taxes, and the
Stockholder and his Permitted Transferees shall represent and warrant that each
is the beneficial owner of such shares free and clear of any Encumbrances, with
full authority and power to transfer such shares. Payment for any Call Shares
shall be made by the Company in cash or, in the event that the Company's Board
determines in good faith that it would not be advisable to make such payment in
cash because the Company is constrained by financing or other arrangements, by a
subordinated note (subordinated to all indebtedness of the Company for money
borrowed) with interest at the prime rate of NationsBank, N.A., and a maturity
of two years. At such closing, the parties shall execute and/or deliver such
additional documents as are otherwise reasonably necessary or appropriate to
consummate the transfers.
25
3.3 Termination of Call Options. Upon the occurrence of a
Change in Control, any theretofore unexercised Call Options shall terminate and
be of no further force or effect. Any shares of Common Stock Transferred in
accordance with the provisions of Section 2.4 (Tag-Along Right), Section 2.5
(Drag-Along Right) or Section 2.6 (Transfers Following Initial Public Offering)
(other than to a Person who is a Management Stockholder on the date hereof or to
any Permitted Transferee of such Management Stockholder) shall no longer be
subject to the Call Options.
Section 4. Registration Rights. The Company hereby grants to
the Principal Stockholder, the Management Stockholders and each of their
Permitted Transferees, registration rights with respect to the Common Stock on
the terms and subject to the conditions set forth in the Registration Rights
Agreement.
Section 5. Changes in Common Stock; Option Plan; Other.
5.1 Changes in Common Stock. If there is any change in the
Common Stock by way of stock split, reverse stock split, stock dividend,
reclassification, merger, consolidation, reorganization, recapitalization or any
similar means, then all appropriate adjustments to the provisions hereof shall
be made so that the rights and obligations of the parties hereto under this
Agreement shall continue with respect to the Common Stock as so changed.
5.2 Registration of Option Shares. At all times during which
the Company is subject to the requirements to file reports pursuant to Section
13 or 15(d) of the Exchange Act, the Company shall cause all Option Shares, at
any time when the options with respect thereto are exercisable, to be registered
under the Securities Act on Form S-8 (or any successor form). Nothing in this
Section 5.2 will provide any
26
Management Stockholder the right to make any transfer unless such transfer is
otherwise expressly permitted by this Agreement.
Section 6. Transferees Subject to Agreement. Each Stockholder
agrees that it will not make any Transfer (including, without limitation, to a
Permitted Transferee but excluding a Transfer in a Public Sale) unless, prior to
the consummation of any such Transfer, the Person (other than any then current
Stockholder) to whom such Transfer will be made (a "Prospective Transferee")
executes and delivers to the Company an agreement, in form and substance
reasonably satisfactory to the Company, whereby such Prospective Transferee
confirms that it shall be deemed to be a Stockholder for the purposes of, and
shall be subject to, this Agreement.
Section 7. Legends.
7.1 Each certificate evidencing shares of Common Stock shall
bear a legend in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON
THE BOOKS OF THE ISSUER UNLESS SUCH TRANSFER IS MADE PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT. THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, ALL AS SET FORTH
IN A
27
STOCKHOLDERS AGREEMENT, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER."
7.2 In the event that any shares of Common Stock shall cease
to be Restricted Shares, the Company shall, upon the written request of the
holder thereof, promptly issue to such holder a new certificate evidencing such
shares without the first two sentences of the legend required by Section 7.1. In
the event any shares of Common Stock shall cease to be subject to the
restrictions on transfer and repurchase set forth in this Agreement, the Company
shall, upon the written request of the holder thereof, promptly issue to such
holder a new certificate evidencing such shares without the third sentence of
the legend required by Section 7.1.
Section 8. Miscellaneous.
8.1 Amendment. This Agreement cannot be amended orally, but
only by an agreement in writing signed by the Company, the Principal Stockholder
and the holders of at least 50% of the shares of Common Stock held by all of the
Management Stockholders and their Permitted Transferees as a group, except that
the Company may amend Exhibit A of this Agreement to reflect changes made in
accordance with this Agreement.
8.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE, AND TO BE PERFORMED ENTIRELY, IN NEW YORK.
28
8.3 Execution in Counterparts. This Agreement may be signed in
one or more counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
8.4 Notices. All communications provided for herein shall be
in writing and,
(i) if addressed to a Stockholder, shall be delivered
or mailed or telecopied to such Stockholder at its address specified on Exhibit
A (or an annex thereto, if such Stockholder shall have become a party hereto
pursuant to Section 6), or to such other address as such Stockholder shall have
notified the Company in writing, or
(ii) if addressed to the Company, shall be delivered
or mailed or telecopied to it at PCA International, Inc., 000 Xxxxxxxx-Xxxx Xxxx
Xxxx, Xxxxxxxx, XX 00000, Attention: Xxxx Xxxxxx, Fax (000) 000-0000, with a
copy to the Principal Stockholder, c/o Jupiter Partners II L.P., 00 Xxxxxxxxxxx
Xxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx X. Xxxxxxx, Fax:
(000) 000-0000, or to such other address as the Company or the Principal
Stockholder, as the case may be, shall have notified all Stockholders in
writing. Except as otherwise expressly provided herein, any communication shall
be deemed to have been given when delivered (if delivered by hand or by
reputable overnight courier service), in the case of facsimile transmission,
when telecopied with confirmation of transmission, or if mailed, shall be deemed
to have been given three days after having been so mailed.
8.5 Entire Agreement; Headings; Gender. This Agreement
(including the Exhibits hereto) and the Agreements referred to herein embody the
entire agreement and understanding among the parties and supersede all prior
agreements and
29
understandings relating to the subject matter hereof. The headings in and date
of this Agreement are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof. The term "its" is used in this Agreement
for convenience only and shall be deemed to include, where applicable, "her or
his," and vice versa. Similarly, the pronoun "it" when referring to a
Stockholder shall be deemed to include, where applicable, "her or she" or "him
or he," and vice versa.
8.6 Copy of Agreement with Company. A counterpart of this
Agreement shall be filed with the Company at its principal office.
8.7 Specific Performance. The parties recognize that the
obligations imposed on them in this Agreement are special, unique and of
extraordinary character, and that in the event of breach by any party, damages
will be an insufficient remedy; consequently, it is agreed that the parties
hereto may have specific performance (in addition to damages) as a remedy for
the enforcement hereof, without proving damages. No party shall raise any
argument as to the sufficiency of money damages.
8.8 Assignment. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns;
provided, however, that this Agreement may not be assigned by the Company or any
of the Management Stockholders without the prior written consent of the Company,
the Principal Stockholder and the holders of at least 50% of the shares of
Common Stock held by all of the Management Stockholders and their Permitted
Transferees as a group, except that (i) the Company may assign its rights herein
to any successor to all or substantially all of its assets (by merger or
otherwise); (ii) subject to Section 6 (Transferees Subject to Agreement), any
Management
30
Stockholder may assign its rights under this Agreement to any Permitted
Transferee of its shares of Common Stock; and (iii) each Stockholder's rights
under the Registration Rights Agreement shall inure to the benefit of any holder
of Registrable Securities (as defined in the Registration Rights Agreement). Any
purported assignment made in violation of this Agreement shall be void and of no
force and effect.
8.9 Third Party Beneficiary. Nothing in this Agreement,
express or implied, is intended or shall confer upon anyone other than the
parties hereto (and their respective permitted successors and assigns) any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have hereunder signed
their names or have caused this Agreement to be duly executed by their officers
thereunder duly authorized as of the date first above written.
PCA INTERNATIONAL, INC.
By: /s/ Xxxx Xxxxxx
------------------------------------------------
Authorized Officer
STOCKHOLDERS:
/s/ Xxxx Xxxxxx
-----------------------------------------------------
Name: Xxxx Xxxxxx
/s/ Xxxxx Xxxxxx
-----------------------------------------------------
Name: Xxxxx Xxxxxx
/s/ R. Xxxxxxx Xxxxxxx
-----------------------------------------------------
Name: R. Xxxxxxx Xxxxxxx
31
/s/ Xxxxxxxx X. Xxxxxxx
-----------------------------------------------------
Name: Xxxxxxxx X. Xxxxxxx
/s/ Xxxx X. Xxxxx
-----------------------------------------------------
Name: Xxxx X. Xxxxx
/s/ Xxxxx Xxxxxx Xxxx, Xx.
-----------------------------------------------------
Name: Xxxxx Xxxxxx Xxxx, Xx.
/s/ Xxxxxx X. Xxxxxx, Xx.
-----------------------------------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
/s/ Xxxx X. Xxxxx
-----------------------------------------------------
Name: Xxxx X. Xxxxx
/s/ Xxxx X. Xxxxx
-----------------------------------------------------
Name: Xxxx X. Xxxxx
/s/ Xxxxx X. Xxxxxxxxxx
-----------------------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
/s/ Xxxx X. Xxxxx
-----------------------------------------------------
Name: Xxxx X. Xxxxx
/s/ Xxxx X. Xxxxxxx
-----------------------------------------------------
Name: Xxxx X. Xxxxxxx
/s/ Xxx Xxxxxx
-----------------------------------------------------
Name: Xxx Xxxxxx
32
/s/ Xxxxx Xxxxxxxx
----------------------------------------------------
Name: Xxxxx Xxxxxxxx
/s/ Xxxx X. Xxxxxx
----------------------------------------------------
Name: Xxxx X. Xxxxxx
33
JUPITER PARTNERS II, L.P.
By: Ganymede LLC, its general partner
By: /s/ Xxxx X. Xxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxx
Title: Managing Member
34
EXHIBIT A
PARTIES
I. PRINCIPAL STOCKHOLDER: NUMBER OF COMMON SHARES
OWNED AS OF DATE HEREOF:
Name and Address
[To Come]
II. MANAGEMENT STOCKHOLDERS:
Name and Address
[To Come]
35
EXHIBIT B
REPURCHASE PERCENTAGES
Anniversary from Repurchase Percentage
Date of Agreement ----------------------
-----------------
On or before 1st Anniversary 100%
Between 1st and on or before 2nd 80%
Anniversary
Between 2nd and on or before 3rd 60%
Anniversary
Between 3rd and on or before 4th 40%
Anniversary
Between 4th and on or before 5th 20%
Anniversary
On or After 5th Anniversary 0%
