Execution CopySUBORDINATION AGREEMENT     THISSUBORDINATION AGREEMENT (this “Agreement”), dated as of July 15,2005, is executed by andbetween Wells Fargo Foothill, Inc., a California corporation, in itscapacity as agent (in suchcapacity, together with its successors and assigns in such capacity,the “Agent”) for the financialinstitutions party to the Credit Agreement (as hereinafter defined), Wells Fargo Bank and itsaffiliates (together with their respective successors and assigns,collectively, the “Lenders”)and AgfaPhoto USA Corporation, a Delaware corporation and assignee of Agfa Corporation (“Creditor”)with respect to the following facts:RECITALS     WHEREAS,PCA LLC, a Delaware limited liability company (“PCA”), each of PCA’s Subsidiariesidentified on the signature pages to the Credit Agreement (as hereinafter defined) (suchSubsidiaries, together with PCA, are referred to hereinafter eachindividually as a “Borrower”,and individually and collectively, jointly and severally, as the“Borrowers”) has requested thatAgent and the Lenders enter into that certain Credit Agreement (the“Credit Agreement”), the LoanDocuments (as defined in the Credit Agreement) and other related supplements, agreements, documentsand instruments, pursuant to which the Lenders would extend certain loans and other financialaccommodations to the Borrowers, to be secured by a continuing, first-priority security interestin the Collateral (as hereinafter defined); and     WHEREAS, Creditor has extended or may extend credit to Borrowers secured by the CreditorJunior Collateral (as hereinafter defined) for the purpose of purchasing certain goods supplied toBorrowers by Creditor:     WHEREAS, Creditor and the Borrowers intend to, from time to time, amend, supplement, modify orrestate the existing supply agreement with Creditor; and     WHEREAS, Agent and Creditor desire to agree to the relative priority of their respectivesecurity interests in, and liens on, the Collateral and certain other rights, priorities andinterests as between themselves.AGREEMENT     NOW, THEREFORE, in consideration of the foregoing and the mutual covenunts hereincontained, and for other good and valuable consideration hereby acknowledged, it is hereby agreedas follows:     I. DEFINITIONS. All capitalized terms used herein (including, without limitation, in this preambleand recitals hereof) without definition shall have the meanings ascribed thereto in the CreditAgreement. In addition to those terms defined elsewhere in this Agreement, as used in thisAgreement, the following terms shall have the following meanings.     “Collateral” means all personal and real property of each Obligor in which Agent or Creditormay now or hereafter have a Lien, including without limitation all accounts, chattel paper, generalintangibles, deposit accounts, instruments, documents, investment property, inventory, equipment,fixtures and real property, wherever located, whether such Obligor now has or hereafter acquiresany rights therein.     “Creditor Junior Collateral” means (a) inventory supplied by or purchased through Creditor,and all Proceeds of the foregoing, and (b) any other assets of any Obligor provided by such Obligoras security for the Subordinated Indebtedness.     “Default Notice” means a written notice from or on behalf of Agent to Creditor of theexistence of an Event of Default.WFF/PCA:Subordination Agreement with AGFA - Execution Copy
 

 
     “Discharge of Senior Indebtedness” means indefeasible payment in full in cash of theSenior Indebtedness (other than Senior Indebtedness consisting solely of contingent indemnificationobligations under the Loan Documents) including, with respect to amounts available to be drawnunder outstanding letters of credit issued thereunder (or indemnities issued pursuant thereto inrespect of outstanding letters of credit), delivery of cash collateral or backstop letters of creditin respect thereof in compliance with the terms of the Credit Agreement in each case, after orconcurrently with termination of all commitments to extend credit thereunder.     “Event of Default” means, individually and collectively, (a) an “Event of Default” under andas defined in the Credit Agreement resulting solely from the failure of the Borrowers to make anypayment of principal, interest, fees or reimbursement obligations in respect of any SeniorIndebtedness when due, and (b) the commencement of any Insolvency Proceeding against any Obligor.     “ExerciseAny Secured Creditor Remedies” or “Exercise of Secured Creditor Remedies” means (a)the taking of any action to enforce or realize upon any Lien, including the institution of anyforeclosure proceedings or the noticing of any public or private disposition pursuant to Article 9of the UCC, (b) the exercise of any right or remedy provided to a secured creditor or otherwise onaccount of a Lien under the Loan Documents (as applicable to Agent and the Lenders), anySubordinated Debt Document, applicable law, in an Insolvency Proceeding or otherwise, including theelection to retain any collateral in satisfaction of a Lien, (c) the taking of any action or theexercise of any right or remedy in respect of the collection on, set off against, marshaling of, orforeclosure on the Collateral or the Proceeds of Collateral, (d) the sale, lease, license, or otherdisposition of all or any portion of the Collateral by or on behalf of Agent or Creditor, asapplicable, by private or public sale or other disposition or any other means permissible underapplicable law, and (e) the exercise of any other right relating to any Collateral (including theexercise of any voting rights relating to any Stock and including any right of recoupment orset-off) whether under the Loan Documents (as applicable to Agent and the Lenders), anySubordinated Debt Document, applicable law, in an Insolvency Proceeding or otherwise.     “Indebtedness” means all indebtedness, obligations and liabilities of any Obligor,whether now existing or hereafter incurred, of every kind or nature, direct or indirect, dueor not due, liquidated or unliquidated, absolute or contingent, and disputed or undisputed.     “Insolvency Proceeding” means any proceeding commenced by or against any Person under anyprovision of the Bankruptcy Code or under any other state, provincial, federal or foreignbankruptcy or insolvency law, assignments for the benefit of creditors, formal or informalmoratoria, compositions, extensions generally with creditors, or proceedings seekingreorganization, arrangement, or other similar relief.     “Obligor” and “Obligors” means each individually, and collectively, each of the Borrowers,Parent and each of their respective Subsidiaries.     “Parent”means Portrait Corporation of America, Inc., a Delaware corporation.     “Proceeds” means (a) all “proceeds” as defined in Article 9 of the UCC, each withrespect to the Collateral, and (b) whatever is recoverable or recovered when Collateral issold, exchanged, collected, or disposed of, whether voluntarily or involuntarily.     “Senior Indebtedness” means the Obligations (as defined in the Credit Agreement) and all otheramounts owing, due or secured under the terms of the Credit Agreement or the Loan Documents,including, without limitation, all Lender Group Expenses (as that term is defined in the CreditAgreement), all amounts payable to any Lender or any Issuing Lender, all principal, premium,interest, fees, attorneys’ fees, costs, charges, expenses, reimbursement obligations, any obligationto post cash collateral in respect of letters of credit or indemnities in respect thereof,indemnities, guaranties, and all other amounts payable thereunder or in respect thereof (including,in each case, all amounts accruing on or after the commencement of any Insolvency
2WFF/PCA:Subordination Agreement with AGFA - Execution Copy

 
Proceeding relating to any Obligor) irrespective of whether a claim for all or any portion ofsuch amounts is allowable or allowed in any Insolvency Proceeding. For all purposes hereunder,Senior Indebtedness shall also include all indebtedness, obligations and liabilities of theBorrowers to repay any amounts previously paid by any Borrower pursuant to the Credit Agreement orthe Loan Documents, which amounts have been returned to any Borrower or to a trustee by any Lenderpursuant to Sections 547 or 548 of the Bankruptcy Code or otherwise under other applicablelegislation.     “StandstillPeriod” means the period from and including the date of receipt by Creditor of aDefault Notice unlit the first to occur of the date on which Agent, on behalf of the Lenders, shallhave expressly waived or acknowledged the cure of the Event of Default giving rise to such DefaultNotice, in each case in writing and immediately upon the occurrence of such waiver oracknowledgment.     “Subordinated Debt Documents” means, collectively, each and every document, instrument, oragreement evidencing the Subordinated Indebtedness, as each such document, instrument or agreementmay from time to time, be amended, supplemented, modified or restated.     “SubordinatedIndebtedness’’ means any Indebtedness owed to Creditor by any Obligor (whetherby reason of subrogation rights of Creditor or otherwise).2. INTERCREDITOR AND SUBORDINATION AGREEMENT. (a) Lien Subordination and Release.Notwithstanding the date, manner or order of perfection of the Liens on the Collateral grantedto Agent or Creditor by any Obligor, and notwithstanding any provision of the UCC, or anyapplicable law or decision, as between Agent and Creditor, the following shall be the relativepriority of the Liens of Agent and Creditor in the Collateral:          (i) Agent shall have a first and prior Lien on the Collateral:          (ii) In the event Creditor hereafter acquires any security interest, lien, or otherright or interest in the Collateral, such security interest, lien, or other right or interest shallat all times prior to the Discharge of Senior Indebtedness be junior, subordinate and subject toany security interest, lien or other right or interest the Lenders or Agent now have or mayhereafter acquire in the Collateral. The subordination provided in this Section 2(a) shall applyirrespective of the time or order of attachment or perfection of any security interest,irrespective of the time or order of filing of any financing statement or other document, andirrespective of any statute, rule, law, or court decision to the contrary;          (iii) Agent shall have a first and prior Lien on the Creditor Junior Collateral andCreditor shall have a second and subordinate Lien on the Creditor Junior Collateral.     (b) Payment Subordination.          (i) Exceptas set forth, in Section 2(b)(ii) of this Agreement, unless anduntil the Discharge of Senior Indebtedness shall have occurred,Creditor shall not accept, take orreceive, by payment, in cash or in kind by way of setoff, or In any other manner, from any Obligor,the whole or any part of any sums which may now or hereafter be owing to Creditor on account of theSubordinated Indebtedness (including, without limitation, in any Insolvency Proceeding).          (ii) So long as no Standstill Period is then in effect, subject to Section 6.7 of theCredit Agreement in effect as of the date hereof, Obligors may pay to Creditor and Creditor mayreceive payments in respect of the Subordinated Obligations in accordance with the terms of theSubordinated Debt Documents.          (iii) Except as set forth in Section 2(b)(ii), Creditor agrees that it shall not take,accept or receive any other direct or indirect payment or distributions of any kind or character(whether in cash, securities, assets, by set-off, or otherwise) from any Obligor.
3WFF/PCA:Subordination Agreement with AGFA - Execution Copy

 
     (c) Payments Received by Creditor. Except as permitted in Section 2(b)(ii)hereof, if any payment or distribution of any kind or character, whether in cash, properly orsecurities, from or of any assets of Obligors, (irrespective of whether such payment ordistribution was of Collateral, or Proceeds thereof) in respect of the Subordinated Indebtedness isreceived by Creditor prior to the Discharge of Senior Indebtedness, Creditor shall receive and holdthe same in trust as trustee for the benefit of Agent and Lenders and shall forthwith deliver suchpayment, distribution, or Proceeds to Agent and Lenders in precisely the form received (except forthe endorsement or assignment by Creditor where necessary), for application on any of the SeniorIndebtedness, whether then due or not due. In the event of the failure of Creditor to make any suchendorsement or assignment to Agent and Lenders, Agent and any of its officers or agents are herebyirrevocably authorized to make such endorsement or assignment.     (d) Distributionof Proceeds of Collateral.          (i) Proceeds of the Collateral shall be applied to the Senior Indebtedness. Except assuch Proceeds arise from or constitute Creditor Junior Collateral, Agent shall have no obligationto pay any remaining Proceeds of the Collateral to Creditor but shall instead apply such Proceedsas otherwise required by applicable law; and          (ii) Proceeds of the Creditor Junior Collateral shall first be applied to the SeniorIndebtedness. After the Discharge of the Senior Indebtedness, any remaining Proceeds of theCreditor Junior Collateral shall be applied to the Subordinated Indebtedness or as otherwiserequired by applicable law.     (e) Enforcement Action.          (i) Unless and until the Discharge of Senior Indebtedness shall have occurred, andirrespective of whether an Event of Default has occurred, Creditor shall not, without the priorwritten consent of Agent:                (1) Exercise Any Secured Creditor Remedies.                (2) request or obtain collateral or security in respect of the SubordinatedIndebtedness, unless the same is first provided to Agent as collateral or security in respectof the Senior Indebtedness and subject to Section 2(a)(ii).               (3) send any notice to or otherwise seek to obtain payment directly from any accountdebtor of any Obligor in respect of the Collateral.          (ii) Agent and Creditor agree that (i) Agent shall have the exclusive right to sell,transfer or otherwise dispose of the Creditor Junior Collateral in the manner deemed appropriate byAgent without regard to any Lien of Creditor therein, without any duty to marshall assets and (ii)Creditor shall have no right to sell, transfer or otherwise dispose of the Creditor JuniorCollateral without prior written consent from Agent. Nothing contained in this Agreement shallpreclude Agent from taking any action in respect of the Senior Indebtedness or the Collateral whichAgent is otherwise entitled to take, nor shall Agent be required to give notice to Creditor priorto taking such actions, except where such notice is specifically required by law.          (iii) In the event of any sale or disposition of the Creditor Junior Collateral, whetherby Agent or Borrowers, Creditor agrees to execute and deliver all consents, releases, assignments,and other instruments with respect to the Creditor Junior Collateral, including, withoutlimitation, UCC-3 releases or termination statements or mortgage satisfactions, as Agent mayrequest in order to effect such sale or disposition.     (f) Waiverof Right to Contest Senior Indebtedness. Creditor agrees that it shall not,and hereby waives any right to, take any action to contest or challenge (or assist or support anyother Person in contesting
4WFF/PCA:Subordination Agreement with AGFA - Execution Copy

 
or challenging), directly or indirectly, whether or not in any proceeding (including in anyInsolvency Proceeding), the validity, priority, enforceability, or perfection of the Liens of Agentfor the benefit of the Lenders in any Collateral, the validity, priority, enforceability orallowance of the Senior Indebtedness or any of the claims of Agent or Lenders or any holder ofSenior Indebtedness against any Obligor or the validity or enforceability of this Agreement or anyof the provisions hereof. Creditor agrees that it will not take any action that would hinder anyExercise of Secured Creditor Remedies undertaken by Agent, on behalf of the Lenders, under the LoanDocuments, including, without limitation, any public or private sale, lease, exchange, transfer, orother disposition of any Collateral, whether by foreclosure or otherwise. Creditor hereby waivesany and all rights it may have as a junior lien creditor or otherwise to contest, protest, objectto, interfere with the manner in which Agent, on behalf of the Lenders, seeks to enforce the itsLiens in any Collateral (if being understood and agreed that the terms of this Agreement shallgovern with respect to the Collateral even if any portion of the Liens securing the SeniorIndebtedness are avoided, disallowed, set aside, or otherwise invalidated in any InsolvencyProceeding, judicial proceeding or otherwise).     (g) Acknowledgementof Liens. Creditor acknowledges and agrees that, concurrentlyherewith, Agent, for the benefit of the Lenders, has been granted Liens upon all of theCollateral, including the Credit Junior Collateral in which Creditor has been granted Liens andCreditor hereby consents thereto. Creditor agrees that it shall notobtain a Lien on any asset orCollateral to secure all or any portion of the Subordinated Indebtedness unless concurrentlytherewith, Agent obtains a Lien on such asset or Collateral and the parties hereby agree that allsuch Liens are and will be subject to this Agreement.     (h) Additional Credit Extensions. Each of Agent and Creditor shall have the right,without the consent of the other, to extend credit to any Borrower in excess of their existing orproposed credit lines, secured by the Collateral or Creditor Junior Collateral (as the case maybe), and otherwise having the same priorities as herein contained.3.INSOLVENCY PROCEEDING. (a) Continuing Priority. This Agreement is intended to beenforceable as a subordination agreement under the Bankruptcy Code(including, without limitation,Section 510 of Title II of the United States Code) notwithstanding the commencement of anyInsolvency Proceeding. In the event of any Insolvency Proceeding relative to any Obligor or anyarrangement, adjustment, composition or relief of any Obligor or such Obligor’s debts or anymarshaling of the assets of any Obligor, then, in each case, (i) all Senior Indebtedness shallfirst be paid in full in cash before any payment is made on the Subordinated Indebtedness; and (ii)any payment or distribution of any kind or character (whether in cash, securities, assets, byset-off, or otherwise) to which Creditor would be entitled but for the provisions of thisSection 3(a) (including, without limitation, any payment or distribution which may be payable ordeliverable to Creditor by reason of the payment of any other Indebtedness of such Obligor or itsSubsidiaries being subordinated to payment of the Subordinated Indebtedness) shall be paid ordelivered by the Person making such payment or distribution, whether a trustee in bankruptcy, areceiver, a liquidating trustee, or otherwise, directly to Agent to the extent necessary to makepayment in full of all Senior Indebtedness remaining unpaid. In the event that, in thecircumstances contemplated by this Section 3(a), andnotwithstanding the foregoing provisions ofthis Section 3 (a), Creditor shall have received any payment or distribution of any kind orcharacter (whether in cash, securities, assets, by setoff, or otherwise) that it is not entitled toreceive by the foregoing provisions, then and in such event such payment or distribution shall besegregated and held in trust for the benefit of and immediately shall be paid over to Agent, for thebenefit of the Lenders, in accordance with Section 2.     (b) Proof of Claim. If Agent believes that any statements or assertions in a proof ofclaim filed by Creditor are not consistent with the terms and conditions hereof; then Agent shallhave the right (but not the obligation and any failure of Agent to file such proof of claim shallnot be deemed to be a waiver by Agent of Lenders of any rights and benefits granted hereinby Creditor) in such proceeding, and hereby irrevocably is appointed lawful attorney of Creditorfor the purpose of enabling Agent to file and prove all claims therefor and to execute and deliverall documents in such proceeding in the name of Creditor or otherwise in respect of such claims, asAgent reasonably may determine to be necessary or appropriate. The Creditor shall providethe
5WFF/PCA:Subordination Agreement with AGFA - Execution Copy

 
Agent with a copy of any proof of claim filed by the Creditor in any Insolvency Proceeding. TheCreditor shall provide to the Agent all information and documents necessary to present claims asdescribed herein. The Creditor hereby agrees that, while it shall retain the right to vote itsclaims and, except as otherwise provided in this Agreement, otherwise act in any InsolvencyProceeding relative to Obligors (including, without limitation, the right to vote to accept orreject any plan of partial or complete liquidation, reorganization, arrangement, composition, orextension), the Creditor shall not; (i) take any action or vote in any way so as to directly orindirectly challenge or contest (A) the validity or the enforceability of the Credit Agreement, theother Loan Documents, or the liens and security interests granted to the Lenders with respect tothe Senior Indebtedness, or (B) the validity or enforceability of this Agreement; (ii) seek relieffrom the automatic stay of Section 362 of the Bankruptcy Code or any other stay in any InsolvencyProceeding in respect of any portion of the Collateral; or (iii) directly or indirectlyoppose any sale or disposition of the Collateral, including any sale or other disposition of theCollateral free and clear of the liens and security interests of the Creditor under Sections 363 or365 of the Bankruptcy Code or any other similar provision of applicable law.     (c) DIP Financing. If any Obligor shall be subject to any Insolvency Proceeding and theAgent shall desire, prior to the Discharge of Senior Indebtedness, to permit the use of cashcollateral or to permit such Obligor to obtain financing under Section 363 or Section 364 of TitleII of the Bankruptcy Code or any similar provision under the law applicable to any InsolvencyProceeding (“DIP Financing”) to be secured by all or any portion of the Collateral, then theCreditor agrees that it will raise no objection to such use of cash collateral or DIP Financing andwill not request adequate protection or any other relief in connection with its or their interestin any Collateral so long as (i) the pricing terms of the DIP Financing, including interest rate,fees, advance rates, lending limits and sublimits are commercially reasonable under thecircumstances, (ii) Creditor retains a Lien on the Creditor Junior Collateral (including Proceedsthereof arising after the commencement of such proceeding) with the same priority as existed priorto the commencement of the case under applicable insolvency laws, (iv) Creditor receives areplacement lien on post-petition inventory supplied by or purchased through Creditor, and allProceeds of the foregoing, to the same extent granted to Senior Agent, with the same priority asexisted prior to the commencement of the case under applicable insolvency laws, and (v)such use of collateral or DIP Financing is subject to the terms of this Agreement. Until theDischarge of Senior Indebtedness has occurred, the Creditor agrees that it shall not provide oroffer to provide any DIP Financing secured by a Lien senior to or pari passu with the Lienssecuring the Senior Indebtedness unless the Agent otherwise has provided its express writtenconsent.     (d) Reinstatement. If Agent or any Lender is required in any Insolvency Proceeding orotherwise to turn over or otherwise pay any amount to the estate or to any creditor orrepresentative of any Obligor or any other Person (a “Recovery”), then the Senior Indebtednessshall be reinstated to the extent of such Recovery. If this Agreement shall have been terminatedprior to such Recovery, this Agreement shall be reinstated in full force and effect, and such priortermination shall not diminish, release, discharge, impair, or otherwise affect the obligations ofthe parties hereto from such date of reinstatement. All rights, interests, agreements, andobligations of Agent, Lenders, and Creditor under this Agreement shall remain in full force andeffect and shall continue irrespective of the commencement of or any discharge, confirmation,conversion, or dismissal of any Insolvency Proceeding by or against any Obligor and irrespective ofany other circumstance which otherwise might constitute a defense available to, or a discharge ofany Obligor or any other Person in respect of the Senior Indebtedness. No priority or right ofAgent or Lender shall at any time be prejudiced or impaired in any way by any act or failure to acton the part of any Obligor or by the noncompliance by any Person with the terms, provisions, orcovenants of the Loan Documents or any Subordinated Debt Document, regardless of any knowledgethereof which Agent or Lender may have.4.MODIFICATIONS OF INDEBTEDNESS. (a) Senior Indebtedness. All Senior Indebtedness at anytime incurred by any Borrower shall be deemed to have been incurred, and all Senior Indebtednessheld by any holder of Senior Indebtedness shall be deemed to have been extended, acquired orobtained as applicable, in reliance upon this Agreement, and Creditor hereby waives (i) notice ofacceptance of, or proof of reliance by Agent on, this Agreement, and (ii) notice of the existence,renewal, extension, accrual, creation, or non-payment of all or any part of the Senior Indebtedness.Nothing contained in this Agreement shall preclude
6WFF/PCA:Subordination Agreement with AGFA - Execution Copy

 
Agent or any Lender from discontinuing the extension of credit to any Borrower (whether under theCredit Agreement or otherwise) or from taking (without notice to Creditor, Obligors, or any otherperson) any other action in respect of the Senior Indebtedness or the Collateral which Agent isotherwise entitled to take with respect to the Senior Indebtedness or the Collateral. Agent, onbehalf of the Lenders, shall have the right, without notice to or consent from Creditor, to amend,supplement or modify the Senior Indebtedness, in any manner whatsoever, including, withoutlimitation, any renewals, extensions or shortening of time of payments (even if such shorteningcauses any Senior Indebtedness to be due on demand or otherwise), any revision of any amortizationschedule with respect thereto, and any increase in the amount of the Senior Indebtedness, andCreditor consents and agrees to any such amendment, supplement or modification. Creditor waivesnotice of any such amendment, supplement, or modification, and agrees that no such amendment,supplement, or modification shall affect, release, or impair the subordinations contained herein.     (b) Notice of Acceptance and Other Waivers.          (1) To the fullest extent permitted by applicable low, Creditor hereby waives:(i) notice of acceptance hereof; (ii) notice of any loans or other financial accommodationsmade or extendedunder the Credit Agreement, or the creation or existence of any Senior Indebtedness; (iii)notice of the amountof the Senior Indebtedness; (iv) notice of any adverse change in the financial condition ofany Obligor or ofany other fact that might increase such Creditor’s risk hereunder; (v) notice of presentmentfor payment,demand, protest, and notice thereof as to any instrument among the Loan Documents; (vi) noticeof anyDefault or Event of Default under the Loan Documents or otherwise relating to the SeniorIndebtedness(except if such notice is specifically required to be given to Creditor under this Agreement);(vii) all othernotices (except if such notice is specifically required to be given to Creditor under thisAgreement) anddemands to which Creditor might otherwise be entitled.          (2) To the fullest extent permitted by applicable law, Creditor waives therightby statute or otherwise to require Agent to exhaust any rights and remedies with respect to theCreditor Junior Collateral which Agent or any Lender has or may have against any Obligor. Creditorfurther waives any defense arising by reason of any disability or other defense (other than thedefense that the Discharge of Senior Indebtedness has occurred (subject to the provisions ofSection 3(b)) of any Obligor or by reason of the cessation from any cause whatsoever of theliability of such Obligor in respect thereof.          (3) To the fullest extent permitted by applicable law, Creditor hereby waives:(i) any defense, set-off, counterclaim, or claim, of any kind or nature, arising directly orindirectly from thepresent or future lack of perfection, sufficiency, validity, or enforceability of any Lien onthe Creditor JuniorCollateral securing any Senior Indebtedness or any Subordinated Indebtedness; and (ii) anydefense arising byreason of any claim or defense based upon an election of remedies by Agent or any Lender withrespect to theCreditor Junior Collateral.          (4) Until such time as the Discharge of Senior Indebtedness shall have occurred(subject to the provisions of Section 3(b); (i) Creditor hereby postpones any right ofsubrogation Creditor hasor may have as against any Obligor with respect to any Senior Indebtedness: and (ii) inaddition, Creditorhereby postpones any right to proceed against any Obligor or any other Person, now orhereafter, forcontribution, indemnity, reimbursement, or any other suretyship rights and claims(irrespective of whetherdirect or indirect, liquidated or contingent), with respect to any Senior indebtedness.          (5) Neither Lenders, Agent nor any of their respective affiliates,directors, officers, employees, or agents shall be liable for failure to demand, collect or realize upon anyof the Creditor Junior Collateral or any Proceeds or for any delay in doing so or shall be underany obligation to sell or otherwise dispose of any Creditor Junior Collateral or Proceedsthereof or to take any other action whatsoever with regard to the Creditor Junior Collateral or anypart or Proceeds thereof. If Agent or Lenders honor (or fail to honor) a request by Borrowers foran extension of credit pursuant to the Credit Agreement or any of the other Loan Documents, whetherAgent or Lenders have knowledge that the honoring of (or failure to honor)
7WFF/PCA:Subordination Agreement with AGFA - Execution Copy

 
any suchrequest would constitute a default under the terms of any Subordinated Debt Documentor an act, condition, or event that, with the giving of notice or the passage of time, or both,would constitute such a default, or if Agent or Lenders otherwise should exercise any of itscontractual rights or remedies under the Loan Documents (subject to the express terms andconditions hereof), Agent and Lenders shall have no liability whatsoever to Creditor as a result ofsuch action, omission, or exercise. Lenders will be entitled to manage and supervise theirrespective loans and extensions of credit under the Loan Documents as any Lender may, in its solediscretion, deem appropriate, and any Lender may manage its loans and extensions of credit withoutregard to any rights or interests that Creditor may have in the Collateral or otherwise except asotherwise expressly set forth in this Agreement. Creditor agrees that Agent and Lenders shall incurno liability as a result of a sale, lease, license, application or other disposition of all or anyportion of the Creditor Junior Collateral or any part or Proceeds thereof in accordance with thisAgreement. Agent and Lenders may, from time to time, enter into agreements and settlements with anyObligor as it may determine in its sole discretion without impairing any of the subordinations,priorities, rights or obligations of the parties under this Agreement, including, withoutlimitation, substituting Collateral, releasing any Lien and releasing such Obligor. Creditor waivesany and all rights it may have to require Agent or Lenders to marshal assets, to exercises rightsor remedies in a particular manner, or to forbear from exercising such rights and remedies in anyparticular manner or order.     b. Modifications of Senior Indebtedness. Creditor hereby agrees that, withoutaffecting the obligations of Creditor hereunder, Agent, on behalf of the Lenders, may, at any timeand from time to time, in its sole discretion without the consent of or notice to Creditor (exceptto the extent such notice or consent is required pursuant to the express provisions of thisAgreement), and without incurring any liability to Creditor orimpairing or releasing thesubordination provided for herein, amend, restate, supplement, replace, refinance, extend,consolidate, restructure, or otherwise modify the Credit Agreement or any of the Loan Documents ina manner that would be adverse to any Borrower (as reasonably determined by Agent and Lenders),including to:          (1) change the manner, place, time or terms of payment or renew or alter, all or anyof the Senior Indebtedness or otherwise amend, restate, supplement, or otherwise modify in anymanner, or grant any waiver or release with respect to, all or any part of the Senior Indebtednessor any of the Loan Documents,          (2) retainor obtain a Lien on any property of any Person to secure any of theSenior Indebtedness, and in that connection to enter into anyadditional Loan Documents,          (3) amend,or grant any waiver, compromise or release with respect to, orconsent to any departure from, any guaranty or other obligations of any Person obligated in anymanner under or in respect of the Senior Indebtedness,          (4) release its Lien on any Collateral or other property,          (5) exercise or refrain from exercising any rights against any Obligor or anyother Person.          (6) retain or obtain the primary or secondary obligation of any Person withrespect to any of the Senior Indebtedness and          (7) otherwise manage and supervise the Senior Indebtedness as Agent shalldeem appropriate.     (c) Modifications of Subordinated Indebtedness. Agent, on behalf of Lenders, herebyagrees that, without affecting the right or obligations of Agent hereunder, Creditor may, at anytime and from time to
8WFF/PCA:Subordination Agreement with AGFA - Execution Copy

 
time, in its sole discretion without the consent of or notice to Agent or Lenders (except to theextent suchnotice or consent is required pursuant to the express provisions of this Agreement), and withoutincurring anyliability to Agent or Lenders or impairing or affecting the subordination provided for herein,Creditor may:          (1) changethe manner, place, time, or terms of payment or renew or alter, all orany of the Subordinated Indebtedness or otherwise amend, restate, supplement, or otherwise modifyin anymanner, or grant any waiver or release with respect to, all or any part of the SubordinatedIndebtedness orany of the Subordinated Debt Documents,          (2) subjectto Section 2(c)(i)(2) retain or obtain a Lien on any property ofanyPerson to secure any of the Subordinated Indebtedness, and in that connection to enter into anyadditional Subordinated Debt Documents,          (3) amend, or grant any waiver, compromise or release with respect to, or consentto any departure from, any guaranty or other obligations of any Person obligated in anymanner under or inrespect of the Subordinated Debt Indebtedness,          (4) releaseits Lien on any Collateral or other property,          (5) exercise or refrain from exercising any rights against any Obligor or any otherPerson (except as otherwise provided in this Agreement with respectto any Exercise ofSecured CreditorRemedies against any Creditor Junior Collateral),          (6) retain or obtain the primary or secondary obligation of any Person with respectto any of the Subordinated Indebtedness, and     e. otherwise manage and supervise the Subordinated Indebtedness as Creditor shalldeem appropriate.5.SUBORDINATED INDEBTEDNESS OWED ONLY TO CREDITOR. Creditor warrants andrepresents that Creditor has not previously assigned any interest in the Subordinated Indebtedness,that noother party owns an interest in any of the Subordinated Indebtedness (whether as joint holders,participants, orotherwise), and that the entire Subordinated Indebtedness is owing only to Creditor. Creditor maynot sell,assign, pledge, hypothecate or otherwise transfer any part of its interest in the SubordinatedIndebtedness orthe Collateral without Agent’s prior written consent, which consent may not be unreasonablywithheld ordelayed; provided, however, that Creditor may sell, assign, pledge, hypothecate or otherwisetransfer any partof its interest in the Subordinated Indebtedness to (a) an affiliate of Creditor, or (b) a Personthat is engaged inthe same line of business as Creditor.6. REPRESENTATIONS AND WARRANTIES. Agent represents and warrants to Creditor that it hasthe requisite power and authority to enter into, execute, deliver, and carry out the terms of thisAgreement.Creditor represents and warrants that it has the requisite power and authority to enter into,execute, deliver, andcarry out the terms of this Agreement.7.MISCELLANEOUS. (a) No Additional Rights for Any Parties Hereunder. Except as expresslyprovided for herein, all of the agreements contained herein are solely for the benefit of theparties hereto andthere are no other third parties (including without limitationObligors) who are intended to bebenefited in anyway by this Agreement, Except as expressly provided for herein, nothing contained herein isintended to affector limit in any way the Liens that each of the parties has in any and all of the assets of anyObligor, whethertangible or intangible, insofar as any Obligor and third parties are concerned, and the partieshereto reserve allof their respective Liens, and the rights to assert such interests against any Obligor and thirdparties.
9WFF/PCA:Subordination Agreement with AGFA - Execution Copy

 
     (b) Termination. This Agreement shall remain in full force and effect until all ofthe Discharge of Senior Indebtedness.     (c) Independent Credit Investigation. Neither party nor any of its respectivedirectors, officers, agents or employees shall be responsible to the other for an Obligor’ssolvency, financial condition or ability to repay the Senior Indebtedness or Creditor, or forstatements of any Obligor, oral or written, or for the validity, priority, sufficiency orenforceability of the claims of Agent or Creditor, or any Lien granted by any Obligor to theparties, Each party has entered into its respective financing agreements or arrangements with anyObligor based upon its own independent investigation, and makes no warranty or representation tothe other party nor does it rely upon any representation of the other party with respect tomatters identified or referred to in this paragraph.     (d) Limitationon Liability of Parties to Each Other. Except as provided in thisAgreement,neither party shall have any liability to the other party.     (e) Notices. All notices or demands by any party hereunder must be in writing andpersonallydelivered or sent by registered or certified mail, postage prepaid, return receipt requested,or by prepaid telex,facsimile, telecopy, telegram (with messenger delivery specified), or other method of electroniccommunication as follows:       Agent: **WELLS FARGO FOOTHILL, INC.**    400 Northpark Town Center    1000 Abernathy Road, Suite 1450    Atlanta, GA 30328    Attn: Business Finance Division Manager    Fax No.: (770) 508-1374       Creditor: **AGFAPHOTO USA CORPORATION**    100 Challenger Road    Ridgefield Park, New Jersey 07660    Attn: Bing Liem, Chief Executive Officer    Facsimile: (201) 440-6703       With a copy to: **TRAFLET & FABIAN**    264 South Street    Morristown, New Jersey 07960    Attn: Stephen G. Traflet, Esq.    Facsimile: (973) 631-6226The parties may change the address at which they receive notice by giving notice to each other inthe foregoing manner. Notices or demands sent in accordance with this Section shall be deemed tobe received on the earlier of the date of actual receipt or five (5) calendar days after depositin the United States mail.     (f) Attorneys’ Fees; etc. In any suit or action brought to enforce this Agreement orto obtain anadjudication (declaratory or otherwise) of rights or obligations hereunder, the losing partyshall pay to theprevailing party reasonable attorneys’ fees and other costs and expenses incurred by theprevailing party.     (g) Amendment. No amendment or waiver of this Agreement shall be effective unless in writingsigned by each party hereto.     (h) Successors and Assigns. This Agreement shall be binding upon and inure to thebenefit of the respective successors and assigns of each of the parties hereto.
10WFF/PCA:Subordination Agreement with AGFA - Execution Copy

 
     (i) GoverningLaw; Venue; Waiver of Jury Trial.          (i) THEVALIDITY OF THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION, ANDENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO ANDTHERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATEDHERETO SHALL BE, DETERMINEDUNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THESTATE OF NEW YORK.          (ii) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING INCONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND TO THEEXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN, COUNTY OFNEW YORK, STATE OF NEW YORK, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANYCOLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION. IN THE COURTS OF ANY JURISDICTIONWHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OROTHER PROPERTY MAY BE FOUND.CREDITOR WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THEDOCTRINE OF FORUMNONCONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING ISBROUGHT IN ACCORDANCE WITH THIS SECTION.          (iii) EACHOF THE PARTIES HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIALOF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THISAGREEMENT OR ANY OF THETRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORTCLAIMS, BREACH OF DUTY CLAIMS,AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF THE PARTIESHERETO REPRESENTS THAT EACH HASREVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWINGCONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILEDAS A WRITTEN CONSENT TO A TRIAL BY THE COURT.     (j) FurtherAction. Upon Agent’s request, Creditor will promptly take all actionsreasonably deemed appropriate by Agent to carry out the purposes ofthis Agreement.     (k) Integrated Agreement. This Agreement shall constitute the entire agreement betweenthe parties with respect to the subject matter hereof, shall supersede all prior agreements,representations or understandings between the parties and may not beamended except by a writingsigned by both parties.     (l) Additional Remedies. If Creditor violates any of the terms of this Agreement, inaddition to any remedies in law, equity, or otherwise. Agent and Lenders may restrain suchviolation in any court of law and may, in its own or any of the Obligor’s name, interpose thisAgreement as a defense in any action by Creditor.     (m) Subrogation. After the Discharge of Senior Indebtedness shall have occurred,Creditor shall be subrogated to the rights of Agent and Lenders to the extent that distributionsotherwise payable to Creditor have been applied to the payment of the Senior Indebtedness inaccordance with the provisions of this Agreement. Neither Agent nor Lenders shall have anyobligation or duly to protect Creditor’s rights of subrogation arising pursuant to this Agreementor under any applicable law, nor shall Agent or Lenders be liable forany loss to, or impairmentof any subrogation rights held by Creditor.     (n) Counterparts. This Agreement may be executed in counterparts, each of whichshall be deemed an original and all of which together shallconstitute one agreement.[Signatures follow on next page,]
11WFF/PCA:Subordination Agreement with AGFA - Execution Copy

 
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and yearfirst above written.         WELLS FARGO FOOTHILL, INC.,    a California corporation, as Agent           By: /s/ [ILLEGIBLE]     Name: [ILLEGIBLE]    Title: V.P.           AGFAPHOTO USA CORPORATION.    a Delaware corporation as assignee of AGFA CORPORATION                  By: /s/ [ILLEGIBLE]     Name: [ILLEGIBLE]    Title: President & CEO  
12WFF/PCA:Subordination Agreement with AGFA - Execution Copy

 
ACKNOWLEDGMENT     Each Obligor signatory hereto approves of and agrees and consents to, the foregoingSubordination Agreement, dated as of July 14, 2005. between AgfaPhoto USA Corporation, a Delawarecorporation, and Wells Fargo Foothill, Inc. a California corporation(the “Agreement”). Unlessotherwise defined in this Acknowledgment, terms defined in the Agreement have the same meaningswhen used in this Acknowledgment.     EachObligor signatory hereto agrees to be bound by the terms of the Agreement, and to doevery act or thing necessary or appropriate to carry out such terms. Each Obligor signatory heretofurther agree that the Agreement may be amended by Agent and Creditor without notice to, or theconsent of, such Obligor, except to the extent such amendment directly affects any rights orobligations of the Obligors under the Agreement. No Obligor is a party to or a third partybeneficiary of the Agreement.         **PORTRAIT CORPORATION OF AMERICA, INC.,**    a Delaware corporation           By: /s/ Donald Norsworthy     Its: EVP           **PCA LLC,**    a Delaware limited liability company           By: /s/ Donald Norsworthy     Its: EVP           **AMERICAN STUDIOS, INC.,**    a North Carolina corporation           By: /s/ Donald Norsworthy     Its: EVP  
13WFF/PCA:Subordination Agreement with AGFA - Execution Copy

 
         **PCA PHOTOCORPORATION OF CANADA, INC.,**    a North Carolina corporation           By: /s/ Donald Norsworthy     Its: EVP           **PCA NATIONAL LLC,**    a Delaware limited liability company           By: /s/ Donald Norsworthy     Its: EVP           **HOMETOWN THREADS LLC,**    a Delaware limited liability company           By: /s/ Donald Norsworthy     Its: EVP           **PCA NATIONAL OF TEXAS L.P.,**    a Texas limited partnership           **By:** **PCA NATIONAL LLC,**