Security Agreement Among Grantors and Wells Fargo Foothill

Exhibit 10.3

     

    SECURITY
      AGREEMENT

     

    This
      SECURITY AGREEMENT
      (this
“Agreement”)
      is
      made this 15th
      day of
      July, 2005, among the Grantors listed on the signature pages hereof and those
      additional entities that hereafter become parties hereto by executing the form
      of Supplement attached hereto as Annex
      1
      (collectively, jointly and severally, “Grantors”
      and
      each individually “Grantor”),
      and
WELLS
      FARGO FOOTHILL, INC.,
      in its
      capacity as administrative agent for the Lender Group and the Bank Product
      Providers (together with its successors and assigns in such capacity,
“Agent”).

     

     

    W
      I T
      N E S S E T H:

     

    WHEREAS,
      pursuant to that certain Credit Agreement dated as of even date herewith (as
      amended, restated, supplemented or otherwise modified from time to time,
      including all schedules thereto, the “Credit
      Agreement”)
      among
PORTRAIT
      CORPORATION OF AMERICA INC.,
      a
      Delaware corporation (“Parent
      Guarantor”),
      PCA
      LLC,
      a
      Delaware limited liability company (“PCA”),
      each
      of PCA’s subsidiaries signatory thereto (such Subsidiaries, together with PCA,
      are referred to hereinafter each individually as a “Borrower”,
      and
      individually and collectively, jointly and severally, as the “Borrowers”),
      the
      lenders party thereto as “Lenders” (such
      lenders, together with their respective successors and permitted assigns, are
      referred to hereinafter each individually as a “Lender”
      and
      collectively as the“Lenders”),
      and
      Agent, the Lender Group is willing to make certain financial accommodations
      available to Borrowers from time to time pursuant to the terms and conditions
      thereof, and 

     

    WHEREAS,
      Agent has agreed to act as agent for the benefit of the Lender Group and the
      Bank Product Providers in connection with the transactions contemplated by
      the
      Credit Agreement and the other Loan Documents, and

     

    WHEREAS,
      in order to induce the Lender Group to enter into the Credit Agreement and
      the
      other Loan Documents and to induce the Lender Group to make and extend the
      financial accommodations to Borrowers as provided for in the Credit Agreement,
      Grantors have agreed to grant a continuing security interest in and to the
      Collateral in order to secure the prompt and complete payment, observance and
      performance of, among other things, (a) the obligations of Grantors arising
      from
      this Agreement, the Credit Agreement, and the other Loan Documents, including,
      without limitation, under the Guaranty other than any Obligations arising
      pursuant to a Loan Document which expressly provides that such Obligations
      are
      unsecured, (b) all Bank Product Obligations, and (c) all Obligations (including,
      without limitation, any interest, fees or expenses that accrue after the filing
      of an Insolvency Proceeding, regardless of whether allowed or allowable in
      whole
      or in part as a claim in any Insolvency Proceeding), plus, to the extent
      provided in the Loan Documents, reasonable attorneys fees and expenses if the
      obligations represented thereunder are collected by law, through an
      attorney-at-law, or under advice therefrom (clauses (a), (b), and (c) being
      hereinafter referred to as the “Secured
      Obligations”),
      by
      the granting of the security interests contemplated by this Agreement,
      and

     

    NOW,
      THEREFORE, for and in consideration of the recitals made above and other good
      and valuable consideration, the receipt, sufficiency and adequacy of which
      are
      hereby acknowledged, the parties hereto agree as follows:

     

    1.  Defined
      Terms.
      All
      capitalized terms used herein (including, without limitation, in the preamble
      and recitals hereof) without definition shall have the meanings ascribed thereto
      in the Credit Agreement. In addition to those terms defined elsewhere in this
      Agreement, as used in this Agreement, the following terms shall have the
      following meanings:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a)  “Agent”
      has the
      meaning set forth in the preamble hereto.

     

    (b)  “Agreement”
      has the
      meaning set forth in the preamble hereto.

     

    (c)  “Books”
      has the
      meaning set forth in Section
      2.

     

    (d)  “Borrower”
      and
“Borrowers”
      have
      the meaning set forth in the recitals hereto.

     

    (e)  “Chattel
      Paper”
      has the
      meaning set forth in Section
      2.
      

     

    (f)  “Code”
      means
      the New York Uniform Commercial Code, as in effect from time to time; provided,
      however, that in the event that, by reason of mandatory provisions of law,
      any
      or all of the attachment, perfection, priority, or remedies with respect to
      Agent’s Lien on any Collateral is governed by the Uniform Commercial Code as
      enacted and in effect in a jurisdiction other than the State of New York, the
      term “Code” shall mean the Uniform Commercial Code as enacted and in effect in
      such other jurisdiction solely for purposes of the provisions thereof relating
      to such attachment, perfection, priority, or remedies.

     

    (g)  “Collateral”
      has the
      meaning set forth in Section
      2.

     

    (h)  “Commercial
      Tort Claims”
      has the
      meaning set forth in Section
      2.

     

    (i)  “Copyrights”
      means
      all of the following (whether now owned or hereafter adopted or acquired by
      a
      Grantor): copyrights and copyright registrations, including, without limitation,
      the copyright registrations and recordings thereof and all applications in
      connection therewith listed on Schedule
      1
      attached
      hereto and made a part hereof, and (i) all restorations, reversions, renewals
      or
      extensions thereof, (ii) all income, royalties, damages and payments now and
      hereafter due and/or payable under and with respect thereto, including, without
      limitation, payments under all Intellectual Property Licenses entered into
      in
      connection therewith and damages and payments for past or future infringements
      thereof, (iii) the right to sue for past, present and future infringements
      thereof, and (iv) all of each Grantor’s rights corresponding thereto throughout
      the world.

     

    (j)  “Copyright
      Security Agreement”
      means
      each Copyright Security Agreement among Grantors, or any of them, and Agent,
      for
      the benefit of the Lender Group and the Bank Product Providers, in substantially
      the form of Exhibit
      A
      attached
      hereto.

     

    (k)  “Credit
      Agreement”
      has the
      meaning set forth in the recitals hereto.

     

    (l)  “General
      Intangibles”
      has the
      meaning set forth in Section
      2.

     

    (m)  “Grantor”
      and
“Grantors”
      have
      the meanings set forth in the preamble hereto.

     

    (n)  “Intellectual
      Property”
      means
      any and all Intellectual Property Licenses, Patents, Copyrights, Trademarks,
      the
      goodwill associated with such Trademarks, trade secrets and customer
      lists.

     

    (o)  “Intellectual
      Property Licenses”
      means
      rights under or interest in any patent, trademark, copyright or other
      intellectual property, including software license agreements with any other
      party, whether the applicable Grantor is a licensee or licensor under any such
      license agreement, including, without limitation, the license agreements listed
      on Schedule
      2
      attached
      hereto and made a part hereof, and the right to use the foregoing in connection
      with the enforcement of the Lender Group’s rights under the Loan Documents,
      including, without limitation, the right to prepare for sale and sell any and
      all Inventory and Equipment now or hereafter owned by any Grantor and now or
      hereafter covered by such licenses.

     

    
      
        2

      

      
        
        

        
          

        

      

      
        
        

      

    

    (p)  “Investment
      Related Property”
      means
      (i) investment property (as that term is defined in the Code), and (ii) all
      of
      the following regardless of whether classified as investment property under
      the
      Code: all Pledged Interests, Pledged Operating Agreements, and Pledged
      Partnership Agreements.

     

    (q)  “Lenders”
      has the
      meaning set forth in the recitals hereto.

     

    (r)  “Negotiable
      Collateral”
      has the
      meaning set forth in Section
      2.

     

    (s)  “Parent
      Guarantor”
      has the
      meaning set forth in the recitals hereto.

     

    (t)  “Patents”
      means
      all of the following (whether now owned or hereafter adopted or acquired by
      a
      Grantor): patents and patent applications, including, without limitation, the
      patents and patent applications listed on Schedule
      3
      attached
      hereto and made a part hereof, and (i) all reissues, continuations,
      continuations-in-part, substitutes, extensions or renewals thereof and
      improvements thereon, (ii) all income, royalties, damages and payments now
      and
      hereafter due and/or payable under and with respect thereto, including, without
      limitation, payments under all Intellectual Property Licenses entered into
      in
      connection therewith and damages and payments for past or future infringements
      thereof, (iii) the right to sue for past, present and future infringements
      thereof, and (iv) all of each Grantor’s rights corresponding thereto throughout
      the world.

     

    (u)  “Patent
      Security Agreement”
      means
      each Patent Security Agreement among Grantors, or any of them, and Agent, for
      the benefit of the Lender Group and the Bank Product Providers, in substantially
      the form of Exhibit
      B
      attached
      hereto.

     

    (v)  “PCA”
      has the
      meaning set forth in the recitals hereto.

     

    (w)  “Pledged
      Companies”
      means,
      each Person listed on Schedule
      4
      hereto
      as a “Pledged Company”, together with each other Person, all or a portion of
      whose Stock, is acquired or otherwise owned by a Grantor after the Closing
      Date
      and, pursuant to the Loan Documents, is required to be pledged to Agent
      hereunder.

     

    (x)  “Pledged
      Interests”
      means
      all of each Grantor’s right, title and interest in and to all of the Stock now
      or hereafter owned by such Grantor, regardless of class or designation, in
      each
      of the Pledged Companies, and all substitutions therefor and replacements
      thereof, all proceeds thereof and all rights relating thereto, including,
      without limitation, any certificates representing the Stock, the right to
      request after the occurrence and during the continuation of an Event of Default
      that such Stock be registered in the name of Agent or any of its nominees,
      the
      right to receive any certificates representing any of the Stock and the right
      to
      require that such certificates be delivered to Agent together with undated
      powers or assignments of investment securities with respect thereto, duly
      endorsed in blank by such Grantor, all warrants, options, share appreciation
      rights and other rights, contractual or otherwise, in respect thereof and of
      all
      dividends, distributions of income, profits, surplus, or other compensation
      by
      way of income or liquidating distributions, in cash or in kind, and cash,
      instruments, and other property from time to time received, receivable, or
      otherwise distributed in respect of or in addition to, in substitution of,
      on
      account of, or in exchange for any or all of the foregoing.

     

    (y)  “Pledged
      Interests Addendum”
      means a
      Pledged Interests Addendum substantially in the form of Exhibit
      C
      to this
      Agreement.

     

    (z)  “Pledged
      Notes”
      has the
      meaning set forth in Section
      5(g).

     

    (aa)  “Pledged
      Operating Agreements”
      means
      all of each Grantor’s rights, powers, and remedies under the limited liability
      company operating agreements of the Pledged Companies that are limited liability
      companies.

     

    
      
        3

      

      
        
        

        
          

        

      

      
        
        

      

    

    (bb)  “Pledged
      Partnership Agreements”
      means
      all of each Grantor’s rights, powers, and remedies under the partnership
      agreements of each of the Pledged Companies that are partnerships, if
      any.

     

    (cc)  “Proceeds”
      has the
      meaning set forth in Section
      2.

     

    (dd)  “Records”
      means
      information that is inscribed on a tangible medium or which is stored in an
      electronic or other medium and is retrievable in perceivable form.

     

    (ee)  “Secured
      Obligations”
      has the
      meaning set forth in the recitals hereto.

     

    (ff)  “Security
      Interest”
      has the
      meaning set forth in Section
      2.

     

    (gg)  “Supporting
      Obligations”
      has the
      meaning set forth in Section
      2.

     

    (hh)  “Trademarks”
      means
      all of the following (whether now owned or hereafter adopted or acquired by
      a
      Grantor): trademarks, trade names, registered trademarks, trademark
      applications, service marks, registered service marks and service mark
      applications, including, without limitation, the trade names, registered
      trademarks, trademark applications, registered service marks and service mark
      applications listed on Schedule
      5
      attached
      hereto and made a part hereof, and (i) all extensions, amendments and renewals
      thereof, (ii) all income, royalties, damages and payments now and hereafter
      due
      and/or payable under and with respect thereto, including, without limitation,
      payments under all Intellectual Property Licenses entered into in connection
      therewith and damages and payments for past or future infringements or dilutions
      thereof, (iii) the right to sue for past, present and future infringements
      and
      dilutions thereof, (iv) the goodwill of each Grantor’s business symbolized by
      the foregoing and connected therewith, and (v) all of each Grantor’s rights
      corresponding thereto throughout the world.

     

    (ii)  “Trademark
      Security Agreement”
      means
      each Trademark Security Agreement among Grantors, or any of them, and Agent,
      for
      the benefit of the Lender Group and the Bank Product Providers, in substantially
      the form of Exhibit
      D
      attached
      hereto.

     

    (jj)  “URL”
      means
“uniform resource locator,” an internet web address.

     

    2.  Grant
      of Security.
      Each
      Grantor hereby unconditionally grants, assigns and pledges to Agent (and its
      agents and designees), for the benefit of the Lender Group and the Bank Product
      Providers, a continuing security interest in all personal property, of such
      Grantor whether now owned or hereafter acquired or arising and wherever located
      (hereinafter referred to as the “Security
      Interest”),
      including, without limitation, such Grantor’s right, title, and interest in and
      to the following, whether now owned or hereafter acquired or arising and
      wherever located (the “Collateral”):

     

    (a)  all
      of
      such Grantor’s Accounts;

     

    (b)  all
      of
      such Grantor’s books and records (including all of its Records indicating,
      summarizing, or evidencing its assets (including the Collateral) or liabilities,
      all of its Records relating to its business operations or financial condition,
      and all of its goods or General Intangibles related to such information)
      (“Books”);

     

    (c)  all
      of
      such Grantor’s chattel paper (as that term is defined in the Code) and, in any
      event, including, without limitation, tangible chattel paper and electronic
      chattel paper (“Chattel
      Paper”);

     

    (d)  all
      of
      such Grantor’s interest with respect to any Deposit Account;

     

    (e)  all
      of
      such Grantor’s Equipment and fixtures;

     

    
      
        4

      

      
        
        

        
          

        

      

      
        
        

      

    

    (f)  all
      of
      such Grantor’s general intangibles (as that term is defined in the Code) and, in
      any event, including, without limitation, payment intangibles, contract rights,
      rights to payment, rights arising under common law, statutes, or regulations,
      choses or things in action, goodwill (including the goodwill associated with
      any
      Trademark), Patents, Trademarks, Copyrights, URLs and domain names, industrial
      designs, other industrial or Intellectual Property or rights therein or
      applications therefor, whether under license or otherwise, rights in programs,
      programming materials, blueprints, drawings, purchase orders, customer lists,
      monies due or recoverable from pension funds, route lists, rights to payment
      and
      other rights under any royalty or licensing agreements, including Intellectual
      Property Licenses, infringement claims, rights in computer programs, information
      contained on computer disks or tapes, software, literature, reports, catalogs,
      pension plan refunds, pension plan refund claims, insurance premium rebates,
      tax
      refunds, and tax refund claims, uncertificated securities, and any other
      personal property other than Commercial Tort Claims, money, Accounts, Chattel
      Paper, Deposit Accounts, goods, Investment Related Property, Negotiable
      Collateral, and oil, gas, or other minerals before extraction (“General
      Intangibles”);

     

    (g)  all
      of
      such Grantor’s Inventory;

     

    (h)  all
      of
      such Grantor’s Investment Related Property; provided,
      however,
      in no
      event shall the Collateral include, and no Grantor shall be deemed to have
      granted a security interest in, any of such Grantor’s right, title or interest
      in any of the outstanding capital Stock of or other ownership interests in
      a
      Controlled Foreign Corporation in excess of 65% of the voting power of all
      classes of capital stock or other ownership interests in such Controlled Foreign
      Corporation entitled to vote; provided
      that
      immediately upon the amendment of the IRC to allow the pledge of a greater
      percentage of the voting power of capital Stock of or other ownership interests
      in a Controlled Foreign Corporation without adverse tax consequences to the
      Grantors, the Collateral shall include, and each Grantor shall be deemed to
      have
      granted a security interest in, such greater percentage of the capital Stock
      of
      or other ownership interests in each Controlled Foreign
      Corporation;

     

    (i)  all
      of
      such Grantor’s letters of credit, letter of credit rights, instruments,
      promissory notes, drafts, and documents (as such terms may be defined in the
      Code) (“Negotiable
      Collateral”);

     

    (j)  all
      of
      such Grantor’s rights in respect of supporting obligations (as such term is
      defined in the Code), including letters of credit and guaranties issued in
      support of Accounts, Chattel Paper, documents, General Intangibles, instruments,
      or Investment Related Property (“Supporting
      Obligations”);

     

    (k)  all
      of
      such Grantor’s interest with respect to any commercial tort claims (as that term
      is defined in the Code) listed on Schedule
      6
      attached
      hereto, any update or supplement thereto or any other schedule or notice at
      any
      time delivered to Agent with regard to any commercial tort claim of any Grantor
      (“Commercial
      Tort Claims”);

     

    (l)  all
      of
      such Grantor’s money, Cash Equivalents, or other assets of such Grantor that now
      or hereafter come into the possession, custody, or control of Agent (or its
      agent or designee) or any other member of the Lender Group;

     

    (m)  all
      life
      insurance policies owned by such Grantor with respect to any of its officers
      or
      employees;

     

    (n)  all
      of
      the proceeds and products, whether tangible or intangible, of any of the
      foregoing, including proceeds of insurance or commercial tort claims covering
      or
      relating to any or all of the foregoing, and any and all Accounts, Books,
      Chattel Paper, Deposit Accounts, Equipment, General Intangibles, Inventory,
      Investment Related Property, Negotiable Collateral, Supporting Obligations,
      Commercial Tort Claims, money, or other tangible or intangible property
      resulting from the sale, lease, license, exchange, collection, or other
      disposition of any of the foregoing, the proceeds of any award in condemnation
      with respect to any of the property of Grantors, any rebates or refunds, whether
      for taxes or otherwise, and all proceeds of any such proceeds, or any portion
      thereof or interest therein, and the proceeds thereof, and all proceeds of
      any
      loss of, damage to, or destruction of the above, whether insured or not insured,
      and, to the extent not otherwise included, any indemnity, warranty, or guaranty
      payable by reason of loss or damage to, or otherwise with respect to any of
      the
      foregoing Collateral (the “Proceeds”).
      Without limiting the generality of the foregoing, the term "Proceeds" includes
      whatever is receivable or received when Investment Related Property or proceeds
      are sold, exchanged, collected, or otherwise disposed of, whether such
      disposition is voluntary or involuntary, and includes, without limitation,
      proceeds of any indemnity or guaranty payable to any Grantor or Agent from
      time
      to time with respect to any of the Investment Related Property.

     

    
      
        5

      

      
        
        

        
          

        

      

      
        
        

      

    

    Notwithstanding
      the foregoing, “Collateral” shall not include (x) any rights or interests in any
      lease, license (including Intellectual Property Licenses), contract, or
      agreement, as such, or the assets subject thereto if under the terms of such
      lease, license, contract, or agreement, or applicable law with respect thereto,
      the valid grant of a security interest or lien therein or in such assets to
      Agent is prohibited and such prohibition has not been or is not waived or the
      consent of the other party to such lease, license, contract, or agreement has
      not been or is not otherwise obtained or under applicable law such prohibition
      cannot be waived and (y) any application for a Trademark that may be deemed
      invalidated, cancelled or abandoned to due to the grant and/or enforcement
      of a
      security interest therein unless and until such time as the grant and/or
      enforcement of such security interest will not affect the status or validity
      of
      such Trademark; provided,
      that
      the
      foregoing exclusion shall in no way be (i) construed to apply if any such
      prohibition would be rendered ineffective under the Code or other applicable
      law
      (including the Bankruptcy Code) or principles of equity, (ii) construed so
      as to
      limit, impair or otherwise affect Agent’s unconditional continuing security
      interests in and liens upon any rights or interests of Grantors in or to the
      proceeds thereof, including monies due or to become due under any such lease,
      license, contract, or agreement (including any Accounts), in each case, that
      are
      not subject to such prohibitions, or (iii) construed to apply at such time
      as
      the condition causing such prohibition shall be remedied and, to the extent
      severable, “Collateral” shall include any portion of such lease, license,
      contract, agreement or assets subject thereto that does not result in such
      prohibition.

     

    3.  Security
      for Obligations.
      This
      Agreement and the Security Interest created hereby secures the payment and
      performance of all the Secured Obligations, whether now existing or arising
      hereafter. Without limiting the generality of the foregoing, this Agreement
      secures the payment of all amounts which constitute part of the Obligations
      and
      would be owed by Grantors, or any of them, to Agent, the Lender Group, the
      Bank
      Product Providers or any of them, but for the fact that they are unenforceable
      or not allowable due to the existence of an Insolvency Proceeding involving
      any
      Grantor. 

     

    4.  Grantors
      Remain Liable.
      Anything herein to the contrary notwithstanding, (a) each of the Grantors shall
      remain liable under the contracts and agreements included in the Collateral,
      including, without limitation, the Pledged Operating Agreements and the Pledged
      Partnership Agreements, to perform all of the duties and obligations thereunder
      to the same extent as if this Agreement had not been executed, (b) the exercise
      by Agent or any other member of the Lender Group of any of the rights hereunder
      shall not release any Grantor from any of its duties or obligations under such
      contracts and agreements included in the Collateral, and (c) none of the members
      of the Lender Group shall have any obligation or liability under such contracts
      and agreements included in the Collateral by reason of this Agreement, nor
      shall
      any of the members of the Lender Group be obligated to perform any of the
      obligations or duties of any Grantor thereunder or to take any action to collect
      or enforce any claim for payment assigned hereunder. Until an Event of Default
      shall occur and be continuing, except as otherwise provided in this Agreement,
      the Credit Agreement, or any other Loan Document, Grantors shall have the right
      to possession and enjoyment of the Collateral for the purpose of conducting
      the
      ordinary course of their respective businesses, subject to and upon the terms
      hereof and of the Credit Agreement and the other Loan Documents. Without
      limiting the generality of the foregoing, it is the intention of the parties
      hereto that record and beneficial ownership of the Pledged Interests, including,
      without limitation, all voting, consensual, and dividend rights, shall remain
      with the applicable Grantor unless an Event of Default shall exist and until
      Agent shall notify the applicable Grantor of Agent's exercise of voting,
      consensual, and/or dividend rights with respect to the Pledged Interests
      pursuant to Section
      15
      hereof.


     

    
      
        6

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.  Representations
      and Warranties.
      Each
      Grantor hereby represents and warrants as follows:

     

    (a)  The
      exact
      legal name of each of the Grantors is set forth on the signature pages of this
      Agreement or a written notice provided to Agent pursuant to Section
      6.5
      of the
      Credit Agreement.

     

    (b)  Schedule
      7
      attached
      hereto sets forth all Real Property owned by Grantors as of the Closing Date.
      

     

    (c)  The
      Grantors own, license or otherwise possess the right to use all Intellectual
      Property Rights material to the conduct of their businesses as currently
      contemplated. As of the Closing Date, no Grantor has any interest in, or title
      to, any registered United States Copyrights, written Intellectual Property
      Licenses, issued United States Patents, United States Patent applications,
      registered United States Trademarks or United States Trademark applications
      except as set forth on Schedules
      1, 2, 3 and 5,
      respectively, attached hereto. The Copyrights, Intellectual Property Licenses,
      Patents and Trademarks set forth on Schedules
      1, 2, 3, and 5
      constitute a true, correct and complete listing of all registered United States
      Copyrights, written Intellectual Property Licenses, issued United States
      Patents, United States Patent applications, registered United States Trademarks
      and United States Trademark applications, respectively, that are material to
      the
      conduct of the business of any Grantor. This Agreement is effective to create
      a
      first priority perfected Lien on such Copyrights, Intellectual Property
      Licenses, Patents and Trademarks and, upon filing of the Copyright Security
      Agreement with the United States Copyright Office and filing of the Patent
      Security Agreement and the Trademark Security Agreement with the United States
      Patent and Trademark Office, and the filing of appropriate financing statements
      in the jurisdictions listed on Schedule
      8
      hereto,
      all action necessary or desirable to protect and perfect the Security Interest
      in and to on each Grantor’s Patents, Trademarks, and Copyrights has been taken
      to the extent a security interest therein can be perfected by such filings.
      

     

    (d)  This
      Agreement creates a valid security interest in the Collateral of such Grantor,
      to the extent a security interest therein can be created under the Code ,
      securing the payment and performance of the Secured Obligations. Except to
      the
      extent a security interest in the Collateral cannot be perfected by the filing
      of a financing statement under the Code, all filings necessary or desirable
      to
      perfect and protect the security interest created hereby will have been taken
      upon the filing of financing statements listing such Grantor, as a debtor,
      and
      Agent, as secured party, in the jurisdictions listed next to such Grantor’s name
      on Schedule
      8
      attached
      hereto. Upon the making of such filings, Agent shall have a first priority
      perfected security interest in the Collateral of such Grantor to the extent
      such
      security interest can be perfected by the filing of a financing statement under
      the Code.

     

    (e)  Except
      for the Security Interest created hereby, (i) such Grantor is and will at all
      times be the sole holder of record and the legal and beneficial owner, free
      and
      clear of all Liens other than Permitted Liens, of the Pledged Interests
      indicated on Schedule
      4
      as being
      owned by such Grantor and, when acquired by such Grantor, any Pledged Interests
      acquired after the Closing Date; (ii) all of the Pledged Interests are duly
      authorized, validly issued, fully paid and nonassessable and the Pledged
      Interests constitute or will constitute the percentage of the issued and
      outstanding Equity Interests of the Pledged Companies of such Grantor identified
      on Schedule
      4
      hereto
      as supplemented or modified by any Pledged Interests Addendum or any Supplement
      to this Agreement; (iii) such Grantor has the right and requisite authority
      to
      pledge, the Investment Related Property pledged by such Grantor to Agent as
      provided herein; (iv) all actions necessary or desirable to perfect, establish
      the first priority of, or otherwise protect, Agent’s Liens in the Investment
      Related Property that, pursuant to the Credit Agreement, are required to be
      taken, and the proceeds thereof, will have been duly taken, (A) upon the
      execution and delivery of this Agreement, (B) upon the taking of possession
      by
      Agent (or its agent or designee) of any certificates constituting the Pledged
      Interests, to the extent such Pledged Interests are represented by certificates,
      together with undated powers endorsed in blank by such Grantor, (C) upon the
      filing of financing statements in the applicable jurisdiction set forth on
      Schedule
      8
      attached
      hereto (as supplemented from time to time) for such Grantor with respect to
      the
      Pledged Interests of such Grantor that are not represented by certificates,
      and
      (D) with respect to any Securities Accounts for which, pursuant to the Credit
      Agreement, a Control Agreement is required to be delivered to Agent, upon the
      delivery of Control Agreements with respect thereto; and (v) such Grantor has
      delivered to and deposited with Agent (or, with respect to any Pledged Interests
      created after the Closing Date, will deliver and deposit in accordance with
      Sections
      6(a)
      and
8
      hereof)
      all certificates representing the Pledged Interests owned by such Grantor to
      the
      extent such Pledged Interests are represented by certificates, and undated
      powers endorsed in blank with respect to such certificates.

     

    
      
        7

      

      
        
        

        
          

        

      

      
        
        

      

    

    (f)  Except
      as
      otherwise provided under Sections
      5(c),
      5(d)
      or
5(e),
      no
      consent, approval, authorization, or other order or other action by, and no
      notice to or filing with, any Governmental Authority or any other Person is
      required (i) for the grant of a Security Interest by such Grantor in and to
      the
      Collateral pursuant to this Agreement or for the execution, delivery, or
      performance of this Agreement by such Grantor, or (ii) for the exercise by
      Agent
      of the voting or other rights provided for in this Agreement with respect to
      the
      Investment Related Property or the remedies in respect of the Collateral
      pursuant to this Agreement, except as may be required by in connection with
      such
      disposition of Investment Related Property by any Pledged Operating Agreement,
      Pledged Partnership Agreement, the Code or laws affecting the offering and
      sale
      of securities generally. No material Intellectual Property License to which
      such
      Grantor is a party requires any consent for such Grantor to grant the Security
      Interest granted hereunder in such Grantor’s right, title or interest in or to
      any Copyrights, Patents, Trademarks or Intellectual Property
      Licenses.

     

    (g)  Except
      as
      disclosed to Agent in writing, there is no material default, breach, violation
      or event of acceleration existing under any promissory note (as defined in
      the
      Code) constituting Collateral and pledged hereunder (the “Pledged
      Notes”)
      and no
      event has occurred or circumstance exists which, with the passage of time or
      the
      giving of notice, or both, would constitute a default, breach, violation or
      event of acceleration under the Pledged Notes. Such Grantor, if it is an obligee
      under a Pledged Note, has not, to the best knowledge of such Grantor, waived
      any
      default, breach, violation or event of acceleration under such Pledged Notes.
      The proceeds of the loans evidenced by the Pledged Notes have been fully
      disbursed and such Grantor has no obligation to make any future advances or
      other disbursements under or in respect of the Pledged Notes.

     

    (h)  Such
      Grantor has made in good faith and in accordance with the procedures and
      regulations of the United States Copyright Office and the United States Patent
      and Trademark Office, as applicable, all payments, filings and recordations
      necessary to protect and maintain its interest in the Intellectual Property
      identified on Schedules
      1, 2, 3 and 5
      in the
      United States in a manner sufficient to claim in the public record such
      Grantor’s ownership thereof, including (i) making all reasonably necessary
      registration, maintenance, and renewal fee payments; and (ii) filing all
      reasonably necessary documents, including all material applications for
      registration of such Intellectual Property.

     

    (i)  Such
      Grantor has and reasonably enforces a policy requiring all employees,
      consultants and contractors likely to participate in the development or creation
      of material Intellectual Property to execute appropriate assignment agreements,
      pursuant to which each such employee, consultant or contractor has assigned
      to
      such Grantor all of its rights, including all rights in Intellectual Property,
      in and to all ideas, inventions, processes, works of authorship and other work
      products that are material to such Grantor’s business and that were conceived,
      created, authored or developed in the course of such employee’s, consultant’s or
      contractor’s employment or engagement by such Grantor. To the best knowledge of
      such Grantor, no past or present employee or contractor of such Grantor has
      any
      ownership interest, license, permission or other right in or to any Intellectual
      Property that is material to the conduct of any such Grantor’s
      business.

     

    (j)  Such
      Grantor has taken all actions reasonably necessary to protect the
      confidentiality of the Intellectual Property that is material to the conduct
      of
      its business, including (A) protecting the secrecy and confidentiality
      of
      its confidential information and trade secrets by having and enforcing a policy
      requiring all current employees, consultants, licensees, vendors and contractors
      to execute appropriate confidentiality agreements; (B) taking all actions
      reasonably necessary to ensure that no trade secret falls or has fallen into
      the
      public domain; and (C) protecting the secrecy and confidentiality of
      the
      source code of all computer software programs and applications of which it
      is
      the owner or licensee by having
      and enforcing a policy requiring any licensees (or sublicensees) of such source
      code to enter into license agreements with appropriate use and non-disclosure
      restrictions.

     

    
      
        8

      

      
        
        

        
          

        

      

      
        
        

      

    

    (k)  No
      claim
      against such Grantor has been made in writing and is continuing or, to the
      best
      of such Grantor’s knowledge, threatened that the use by such Grantor of any
      Intellectual Property that is material to the conduct of its business does
      or
      may violate the intellectual property rights of any Person. To the best of
      such
      Grantor’s knowledge, there is currently no infringement or unauthorized use of
      any item of Intellectual Property contained on Schedules
      1, 2, 3 or 5.

     

    (l)  Other
      than those set forth on Schedule
      6
      hereto,
      no Grantor has any Commercial Tort Claim with respect to which the amounts
      claimed thereunder exceed $100,000 for any one such Commercial Tort Claim or
      $100,000 in the aggregate for all such Commercial Tort Claims of all
      Grantors.

     

    6.  Covenants.
      Each
      Grantor, jointly and severally, covenants and agrees with Agent and the Lender
      Group that from and after the date of this Agreement and until the date of
      termination of this Agreement in accordance with Section
      22
      hereof:

     

    (a)  Possession
      of Collateral.
      In the
      event that any Collateral, including Proceeds, is evidenced by or consists
      of
      Negotiable Collateral, Investment Related Property, Chattel Paper or Deposit
      Accounts, and if and to the extent that perfection or priority of Agent's
      Security Interest is dependent on or enhanced by possession or control, such
      Grantor, immediately upon the request of Agent and in accordance with
Section
      8
      but
      subject to the limitations set forth herein or in the Credit Agreement, shall
      execute such other documents and instruments as shall be requested by Agent
      or,
      if applicable, endorse and deliver physical possession of such Negotiable
      Collateral, Investment Related Property, or Chattel Paper to Agent (or its
      agent
      or designee), together with such undated powers endorsed in blank as shall
      be
      requested by Agent or grant control of such Deposit Account, as applicable,
      to
      Agent (or its agent or designee). Such Grantor hereby acknowledges and agrees
      that any such agent or designee of Agent shall be deemed to be a “secured party”
      with respect to such Collateral for all purposes.

     

    (b)  Chattel
      Paper.
      

     

    (i)  To
      the
      extent that the aggregate amount receivable by such Grantor thereunder exceeds
      $100,000 in any one case or in the aggregate for all Chattel Paper of all
      Grantors, the applicable Grantor(s) shall take all steps reasonably necessary
      to
      grant Agent control of all electronic Chattel Paper in accordance with the
      Code
      and all “transferable records” as that term is defined in Section 16 of the
      Uniform Electronic Transaction Act and Section 201 of the federal Electronic
      Signatures in Global and National Commerce Act as in effect in any relevant
      jurisdiction; 

     

    (ii)  If
      such
      Grantor retains possession of any Chattel Paper or instruments (which retention
      of possession shall be subject to the extent permitted hereby and by the Credit
      Agreement), promptly upon the request of Agent, such Chattel Paper and
      instruments shall be marked with the following legend: “This writing and the
      obligations evidenced or secured hereby are subject to the Security Interest
      of
      Wells Fargo Foothill, Inc., as Agent for the benefit of the Lender Group and
      the
      Bank Product Providers pursuant to a Security Agreement dated as of July 15,
      2005.”

     

    (c)  Control
      Agreements.
      

     

    (i)  Except
      to
      the extent otherwise permitted by Section
      6.12
      of the
      Credit Agreement, such
      Grantor shall obtain an authenticated Control Agreement, from each bank holding
      a Deposit Account for such Grantor.

     

    
      
        9

      

      
        
        

        
          

        

      

      
        
        

      

    

    (ii)  Except
      to
      the extent otherwise permitted by Section
      6.12
      of the
      Credit Agreement, such Grantor shall obtain authenticated Control Agreements,
      from each issuer of uncertificated securities, securities intermediary, or
      commodities intermediary issuing or holding any financial assets or commodities
      to or for any Grantor. 

     

    (d)  Letter
      of Credit Rights.
      If such
      Grantor is or becomes the beneficiary of a letter of credit in the amount of
      $100,000 or more for any one such letter of credit or $100,000 or more in the
      aggregate for all letters of credit with respect to which any Grantor is a
      beneficiary, the applicable Grantor(s) shall promptly (and in any event within
      5
      Business Days after becoming a beneficiary), notify Agent thereof and, upon
      the
      request by Agent, use commercially reasonable efforts to enter into a tri-party
      agreement with Agent and the issuer and/or confirmation bank with respect to
      letter-of-credit rights (as that term is defined in the Code) assigning such
      letter-of-credit rights to Agent and directing all payments thereunder to
      Agent’s Account, all in form and substance satisfactory to Agent in its
      Permitted Discretion.

     

    (e)  Commercial
      Tort Claims.
      Such
      Grantor shall promptly (and in any event within 2 Business Days of receipt
      thereof), notify Agent in writing upon incurring or otherwise obtaining a
      Commercial Tort Claim after the date hereof against any third party with respect
      to which the amounts claimed thereunder exceed $100,000 for any one such
      Commercial Tort Claim or $100,000 in the aggregate for all such Commercial
      Tort
      Claims of all Grantors, and, upon request of Agent, promptly amend Schedule
      6
      to this
      Agreement, authorize the filing of additional financing statements or amendments
      to existing financing statements and do such other acts or things deemed
      necessary or desirable by Agent in its Permitted Discretion to give Agent a
      first priority, perfected security interest in any such Commercial Tort
      Claim.

     

    (f)  Government
      Contracts.
      If any
      Account or Chattel Paper of such Grantor arises out of a contract or contracts
      with the United States of America or any department, agency, or instrumentality
      thereof, such Grantor shall promptly (and in any event within 5 Business Days
      of
      the creation thereof) notify Agent thereof in writing and, upon Agent’s request,
      execute any instruments or take any steps reasonably required by Agent, in
      its
      Permitted Discretion, in order that all moneys due or to become due under such
      contract or contracts shall be assigned to Agent, for the benefit of the Lender
      Group and the Bank Product Providers, and notice thereof given under the
      Assignment of Claims Act, as amended (31 U.S.C. § 3727; 41 U.S.C. § 15), or
      other applicable law.

     

    (g)  Intellectual
      Property.
      

     

    (i)  Upon
      request of Agent, in order to facilitate filings with the United States Patent
      and Trademark Office and the United States Copyright Office, such Grantor shall
      execute and deliver to Agent one or more Copyright Security Agreements,
      Trademark Security Agreements, and/or Patent Security Agreements to evidence
      Agent's Lien on such Grantor's Patents, Trademarks, and/or
      Copyrights.

     

    (ii)  Unless
      such Grantor reasonably determines that it is not commercially reasonable to
      do
      so, such Grantor shall have the duty, (A) to promptly sue for infringement,
      misappropriation, or dilution of any Intellectual Property and to recover any
      and all damages for such infringement, misappropriation, or dilution, (B) to
      prosecute diligently any trademark application or service mark application
      that
      is part of the Trademarks pending as of the date hereof or hereafter until
      the
      termination of this Agreement, (C) to prosecute diligently any patent
      application that is part of the Patents pending as of the date hereof or
      hereafter until the termination of this Agreement, and (D) to take all
      reasonable and necessary action to preserve and maintain all of such Grantor’s
      Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its rights
      therein, including the filing of applications for renewal, affidavits of use
      and
      affidavits of incontestability. Any expenses incurred in connection with the
      foregoing shall be borne by such Grantor. Notwithstanding the foregoing, such
      Grantor further agrees not to abandon any Trademark, Patent, Copyright, or
      Intellectual Property License that is necessary in the operation of any material
      portion of such Grantor’s business without the prior written consent of Agent.


     

    
      
        10

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iii)  Such
      Grantor acknowledges and agrees that the Lender Group shall have no duties
      with
      respect to the Trademarks, Patents, Copyrights, or Intellectual Property
      Licenses. Without limiting the generality of this Section
      6(g),
      such
      Grantor acknowledges and agrees that no member of the Lender Group shall be
      under any obligation to take any steps necessary to preserve rights in the
      Trademarks, Patents, Copyrights, or Intellectual Property Licenses against
      any
      other Person, but Agent may do so at its option from and after the occurrence
      of
      an Event of Default, and all expenses incurred in connection therewith
      (including, without limitation, reasonable fees and expenses of attorneys and
      other professionals) shall be for the sole account of Borrowers and shall be
      chargeable to the Loan Account;

     

    (iv)  Such
      Grantor agrees to take all commercially reasonable steps, including making
      all
      necessary payments and filings in connection with registration, maintenance,
      and
      renewal of Copyrights, Trademarks, and Patents in the United States Copyright
      Office, the United States Patent and Trademark Office, any other appropriate
      government agencies in foreign jurisdictions or in any court, to maintain its
      Intellectual Property Rights so long as such rights are material to the conduct
      of such Grantor’s business. Such Grantor hereby agrees to take, or cause to be
      taken, corresponding steps with respect to each new or acquired Intellectual
      Property Right to which it or any of its Subsidiaries is now or later becomes
      entitled that are material to the conduct of their businesses. Any expenses
      incurred in connection with such activities shall be borne solely by such
      Grantor. In the event any Grantor, either itself or through any agent, employee,
      licensee, or designee, files an application for the registration of any Patent
      or Trademark with the United States Patent and Trademark Office or any similar
      office or agency, such Grantor shall, promptly upon any such filing, comply
      with
Section
      6(g)(i)
      hereof.
      No Grantor shall, either itself or through any agent, employee, licensee, or
      designee, file an application for the registration of any Copyright with the
      United States Copyright Office or any similar office or agency, except in
      compliance with the provisions of Sections
      6(g)(v)
      through
(vi).

     

    (v)  Within
      30
      days of the end of each quarter, such Grantor shall provide Agent with a written
      report of all new Copyrights, Patents and Trademarks that are registered or
      the
      subject of pending applications for registrations, which were acquired,
      generated or filed by such Grantor during such quarter. In each of the foregoing
      cases, such Grantor shall cause to be prepared, executed, and delivered to
      Agent
      supplemental schedules to the applicable Loan Documents to identify such
      Copyright, Patent and Trademark registrations and applications therefor as
      being
      subject to the security interests created thereunder.

     

    (vi)  Upon
      receipt from the United States Copyright Office of notice of registration of
      any
      Copyright(s), such Grantor shall promptly (but in no event later than 10
      Business Days following such receipt) notify Agent of such registration by
      delivering, or causing to be delivered to Agent, via overnight courier,
      electronic mail or telefacsimile at the addresses designated in the Credit
      Agreement, documentation sufficient for Agent to perfect Agent’s Liens on such
      Copyright(s).

     

    (vii)  Such
      Grantor shall ensure that each of the representations and warranties contained
      in Sections
      5(h)
      through
5(j)
      hereof
      shall remain true and correct, in all material respects, at all
      times.

     

    (h)  Investment
      Related Property.
      

     

    (i)  If
      such
      Grantor shall receive or become entitled to receive any Pledged Interests after
      the Closing Date, it shall promptly (and in any event within 5 Business Days
      of
      receipt thereof) deliver to Agent a duly executed Pledged Interests Addendum
      identifying such Pledged Interests.

     

    (ii)  At
      any
      time that an Event of Default exists, all sums of money and property paid or
      distributed in respect of the Investment Related Property which are received
      by
      such Grantor shall be held by such Grantor in trust for the benefit of Agent
      segregated from such Grantor’s other property, and such Grantor shall deliver
      such property forthwith to Agent’s in the exact form received.

     

    
      
        11

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iii)  Such
      Grantor shall promptly deliver to Agent a copy of each material notice or other
      communication received by it in respect of any Pledged Interests.

     

    (iv)  Such
      Grantor shall not make or consent to any amendment or other modification or
      waiver with respect to any Pledged Interests, Pledged Operating Agreement,
      or
      Pledged Partnership Agreement, or enter into any agreement or permit to exist
      any restriction with respect to any Pledged Interests unless such Grantor is
      permitted to do so pursuant to the Loan Documents.

     

    (v)  Such
      Grantor agrees that it will cooperate with Agent in obtaining all necessary
      approvals and making all necessary filings under federal, state, local, or
      foreign law in connection with the Security Interest on the Investment Related
      Property or, at any time an Event of Default exists, any sale or transfer
      thereof.

     

    (vi)  As
      to all
      limited liability company or partnership interests, issued under any Pledged
      Operating Agreement or Pledged Partnership Agreement, such Grantor hereby
      represents, warrants and covenants that the Pledged Interests issued pursuant
      to
      any such agreement (A) are not and shall not be dealt in or traded on securities
      exchanges or in securities markets, (B) do not and will not constitute
      investment company securities, and (C) are not and will not be held
      by such
      Pledgor in a securities account. In addition, none of the Pledged Operating
      Agreements, the Pledged Partnership Agreements, or any other agreements
      governing any of the Pledged Interests issued under any Pledged Operating
      Agreement or Pledged Partnership Agreement, provide or shall provide that such
      Pledged Interests are securities governed by Article 8 of the Uniform Commercial
      Code as in effect in any relevant jurisdiction.

     

    (i)  Real
      Property; Fixtures.
      Each
      Grantor covenants and agrees that upon the acquisition of any fee interest
      in
      Real Property with a fair market value in excess of $500,000, it will promptly
      (and in any event within 5 Business Days of acquisition) notify Agent of the
      acquisition of such Real Property and will grant to Agent, for the benefit
      of
      the Lender Group and the Bank Product Providers, a first priority Mortgage
      on
      each fee interest in Real Property now or hereafter owned by such Grantor and
      shall deliver such other documentation and opinions, in form and substance
      satisfactory to Agent in its Permitted Discretion, in connection with the grant
      of such Mortgage as Agent shall request in its Permitted Discretion, including,
      without limitation, title insurance policies, financing statements, fixture
      filings and environmental audits and such Grantor shall pay all recording costs,
      intangible taxes and other fees and costs (including reasonable attorneys fees
      and expenses) incurred in connection therewith. Such Grantor acknowledges and
      agrees that, to the extent permitted by applicable law, all of its Collateral
      shall remain personal property regardless of the manner of its attachment or
      affixation to Real Property.

     

    (j)  Transfers
      and Other Liens.
      Such
      Grantor shall not (i) sell, assign (by operation of law or otherwise) or
      otherwise dispose of, or grant any option with respect to, any of the
      Collateral, except as expressly permitted by the Credit Agreement, or (ii)
      create or permit to exist any Lien upon or with respect to any of its
      Collateral, except for Permitted Liens. The inclusion of Proceeds in the
      Collateral shall not be deemed to constitute Agent’s consent to any sale or
      other disposition of any of the Collateral except as expressly permitted in
      this
      Agreement or the other Loan Documents.

     

    (k)  Other
      Actions as to Any and All Collateral.
      Such
      Grantor shall promptly (and in any event within 5 Business Days of acquiring
      or
      obtaining such Collateral) notify Agent in writing upon (i) acquiring or
      otherwise obtaining any Collateral (other than Intellectual Property Rights,
      which are governed by Section
      6(g)
      hereof)
      after the date hereof consisting of Investment Related Property, Chattel Paper
      (electronic, tangible or otherwise) which pursuant to Section
      6(b)
      hereof
      is required to be under the control of Agent, documents (as defined in the
      Code), promisorry notes (as defined in the Code) or instruments (as defined
      in
      the Code) or (ii) any amount payable under or in connection with any of the
      Collateral being or becoming evidenced after the date hereof by any Chattel
      Paper which pursuant to Section
      6(b)
      hereof
      is required to be under the control of Agent, documents, promisorry notes or
      instruments, and, upon the request of Agent and in accordance with Section
      8
      hereof
      but subject to any limitations set forth in this Agreement, promptly execute
      such other documents and instruments, or if applicable, deliver such Chattel
      Paper, documents, promisorry notes, instruments or certificates evidencing
      any
      Investment Related Property in accordance with Section
      6
      hereof
      and do such other acts or things deemed necessary or desirable by Agent, in
      its
      Permitted Discretion, to protect Agent’s Security Interest therein.

     

    
      
        12

      

      
        
        

        
          

        

      

      
        
        

      

    

    (l)  Pledged
      Notes.
      Except
      in the ordinary course of such Grantor’s business, consistent with past
      practices:

     

    (i)  such
      Grantor will not waive or release any obligation of any party to the Pledged
      Notes without the prior written consent of Agent;

     

    (ii)  such
      Grantor will not take or omit to take any action or suffer or permit any action
      to be omitted or taken, the taking or omission of which would result in any
      right of offset against sums payable under the Pledged Notes;

     

    (iii)  such
      Grantor shall give Agent copies of all material notices (including notices
      of
      default) given or received with respect to the Pledged Notes promptly after
      giving or receiving any such notice; and

     

    (iv)  without
      Agent’s prior written consent, such Grantor shall not, and shall not agree to,
      assign or surrender its rights and interests under the Pledged Notes nor
      terminate, cancel, modify, change, supplement or amend the Pledged Notes.


     

    7.  Relation
      to Other Security Documents.
      The
      provisions of this Agreement shall be read and construed with the other Loan
      Documents referred to below in the manner so indicated.

     

    (a)  Credit
      Agreement.
      In the
      event of any conflict between any provision in this Agreement and a provision
      in
      the Credit Agreement, such provision of the Credit Agreement shall
      control.

     

    (b)  Patent,
      Trademark, Copyright Security Agreements.
      The
      provisions of the Copyright Security Agreements, Trademark Security Agreements,
      and Patent Security Agreements are supplemental to the provisions of this
      Agreement, and nothing contained in the Copyright Security Agreements, Trademark
      Security Agreements, or the Patent Security Agreements shall limit any of the
      rights or remedies of Agent hereunder. 

     

    8.  Further
      Assurances.
      

     

    (a)  Each
      Grantor agrees that from time to time, at its own expense, such Grantor will
      promptly execute and deliver all further instruments and documents, and take
      all
      further action, that may be necessary or that Agent may reasonably request,
      in
      order to perfect and protect any Security Interest granted or purported to
      be
      granted hereby or to enable Agent to exercise and enforce its rights and
      remedies hereunder with respect to any of the Collateral. 

     

    (b)  Each
      Grantor hereby authorizes the filing of such financing or continuation
      statements, or amendments thereto, and such Grantor will execute and deliver
      to
      Agent such other instruments or notices, as may be necessary or as Agent may
      reasonably request, in order to perfect and preserve the Security Interest
      granted or purported to be granted hereby. 

     

    (c)  Each
      Grantor hereby authorizes Agent to file, transmit, or communicate, as
      applicable, financing statements and amendments describing the Collateral as
      “all personal property of debtor” or “all assets of debtor” or words of similar
      effect, in order to perfect Agent’s security interest in the Collateral without
      such Grantor’s signature. Each Grantor also hereby ratifies its authorization
      for Agent to have filed in any jurisdiction any financing statements filed
      prior
      to the date hereof. 

     

    
      
        13

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d)  Each
      Grantor acknowledges that (prior to the termination of this Agreement in
      accordance with the terms of the Loan Documents) it is not authorized to file
      any financing statement or amendment or termination statement with respect
      to
      any financing statement filed in connection with this Agreement without the
      prior written consent of Agent, subject to such Grantor's rights under Section
      9-509(d)(2) of the Code.

     

    9.  Agent's
      Right to Perform Contracts.
      Upon
      the occurrence of an Event of Default and during the continuation thereof,
      Agent
      (or its designee) may proceed to perform any and all of the obligations of
      any
      Grantor contained in any contract, lease, or other agreement and exercise any
      and all rights of any Grantor therein contained as fully as such Grantor itself
      could. 

     

    10.  Agent
      Appointed Attorney-in-Fact.
      Each
      Grantor hereby irrevocably appoints Agent its attorney-in-fact, with full
      authority in the place and stead of such Grantor and in the name of such Grantor
      or otherwise, at such time as an Event of Default has occurred and is continuing
      under the Credit Agreement, to take any action and to execute any instrument
      which Agent may reasonably deem necessary or advisable to accomplish the
      purposes of this Agreement, including, without limitation:

     

    (a)  to
      ask,
      demand, collect, sue for, recover, compromise, receive and give acquittance
      and
      receipts for moneys due and to become due under or in connection with the
      Accounts or any other Collateral of such Grantor;

     

    (b)  to
      receive and open all mail addressed to such Grantor and to notify postal
      authorities to change the address for the delivery of mail to such Grantor
      to
      that of Agent;

     

    (c)  to
      receive, indorse, and collect any drafts or other instruments, documents,
      Negotiable Collateral or Chattel Paper;

     

    (d)  to
      file
      any claims or take any action or institute any proceedings which Agent may
      deem
      necessary or desirable for the collection of any of the Collateral of such
      Grantor or otherwise to enforce the rights of Agent with respect to any of
      the
      Collateral;

     

    (e)  to
      repair, alter, or supply goods, if any, necessary to fulfill in whole or in
      part
      the purchase order of any Person obligated to such Grantor in respect of any
      Account of such Grantor; 

     

    (f)  to
      use
      any labels, Patents, Trademarks, trade names, URLs, domain names, industrial
      designs, Copyrights, advertising matter or other industrial or intellectual
      property rights, in advertising for sale and selling Inventory and other
      Collateral and to collect any amounts due under Accounts, contracts or
      Negotiable Collateral of such Grantor; and

     

    (g)  Agent,
      on
      behalf of the Lender Group and the Bank Product Providers, shall have the right,
      but shall not be obligated, to bring suit in its own name to enforce the
      Trademarks, Patents, Copyrights and Intellectual Property Licenses and, if
      Agent
      shall commence any such suit, the appropriate Grantor shall, at the request
      of
      Agent, do any and all lawful acts and execute any and all proper documents
      reasonably required by Agent in aid of such enforcement. 

     

    To
      the
      extent permitted by law, each Grantor hereby ratifies all that such
      attorney-in-fact shall lawfully do or cause to be done by virtue hereof. This
      power of attorney is coupled with an interest and shall be irrevocable until
      this Agreement is terminated. 

     

    11.  Agent
      May Perform.
      If any
      Grantor fails to perform any agreement contained herein, Agent may itself
      perform, or cause performance of, such agreement, and the reasonable expenses
      of
      Agent incurred in connection therewith shall be payable, jointly and severally,
      by Grantors.

     

    
      
        14

      

      
        
        

        
          

        

      

      
        
        

      

    

    12.  Agent’s
      Duties.
      The
      powers conferred on Agent hereunder are solely to protect Agent's interest
      in
      the Collateral, for the benefit of the Lender Group and the Bank Product
      Providers, and shall not impose any duty upon Agent to exercise any such powers.
      Except for the safe custody of any Collateral in its actual possession and
      the
      accounting for moneys actually received by it hereunder, Agent shall have no
      duty as to any Collateral or as to the taking of any necessary steps to preserve
      rights against prior parties or any other rights pertaining to any Collateral.
      Agent shall be deemed to have exercised reasonable care in the custody and
      preservation of any Collateral in its actual possession if such Collateral
      is
      accorded treatment substantially equal to that which Agent accords its own
      property. 

     

    13.  Collection
      of Accounts, General Intangibles and Negotiable Collateral.
      At any
      time upon the occurrence and during the continuation of an Event of Default,
      Agent or Agent’s designee may (a) notify Account Debtors of any Grantor that
      such Grantor’s Accounts, General Intangibles, Chattel Paper or Negotiable
      Collateral have been assigned to Agent, for the benefit of the Lender Group
      and
      the Bank Product Providers, or that Agent has a security interest therein,
      and
      (b) collect such Grantor’s Accounts, General Intangibles and Negotiable
      Collateral directly, and any collection costs and expenses shall constitute
      part
      of such Grantor's Secured Obligations under the Loan Documents.

     

    14.  Disposition
      of Pledged Interests by Agent.
      None of
      the Pledged Interests existing as of the date of this Agreement are, and none
      of
      the Pledged Interests hereafter acquired on the date of acquisition thereof
      will
      be, registered or qualified under the various federal or state securities laws
      of the United States and disposition thereof after an Event of Default may
      be
      restricted to one or more private (instead of public) sales in view of the
      lack
      of such registration. Each Grantor understands that in connection with such
      disposition, Agent may approach only a restricted number of potential purchasers
      and further understands that a sale under such circumstances may yield a lower
      price for the Pledged Interests than if the Pledged Interests were registered
      and qualified pursuant to federal and state securities laws and sold on the
      open
      market. Each Grantor, therefore, agrees that: (a) if Agent shall, pursuant
      to
      the terms of this Agreement, sell or cause the Pledged Interests or any portion
      thereof to be sold at a private sale, Agent shall have the right to rely upon
      the advice and opinion of any nationally recognized brokerage or investment
      firm
      (but shall not be obligated to seek such advice and the failure to do so shall
      not be considered in determining the commercial reasonableness of such action)
      as to the best manner in which to offer the Pledged Interest for sale and as
      to
      the best price reasonably obtainable at the private sale thereof; and (b) such
      reliance shall be conclusive evidence that Agent has handled the disposition
      in
      a commercially reasonable manner.

     

    15.  Voting
      Rights.

     

    (a)  Upon
      the
      occurrence and during the continuation of an Event of Default, (i) Agent may,
      at
      its option, and with prior notice (unless such Event of Default is an Event
      of
      Default specified in Sections
      7.4
      or
7.5
      of the
      Credit Agreement, in which case no such notice need be given) to the Grantors,
      and in addition to all rights and remedies available to Agent under any other
      agreement, at law, in equity, or otherwise, exercise all voting rights, and
      all
      other ownership or consensual rights in respect of the Pledged Interests owned
      by such Grantor, but under no circumstances is Agent obligated by the terms
      of
      this Agreement to exercise such rights, and (ii) if Agent duly exercises its
      right to vote any of such Pledged Interests, each Grantor hereby appoints Agent,
      such Grantor's true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote
      such Pledged Interests in any manner Agent deems advisable for or against all
      matters submitted or which may be submitted to a vote of shareholders, partners
      or members, as the case may be. The power-of-attorney granted hereby is coupled
      with an interest and shall be irrevocable.

     

    (b)  For
      so
      long as any Grantor shall have the right to vote the Pledged Interests owned
      by
      it, such Grantor covenants and agrees that it will not, without the prior
      written consent of Agent, vote or take any consensual action with respect to
      such Pledged Interests which would materially adversely affect the rights of
      Agent and the other members of the Lender Group or the value of the Pledged
      Interests or that would be inconsistent with or result in any violation of
      any
      provision of the Credit Agreement or any other Loan Document.

     

    
      
        15

      

      
        
        

        
          

        

      

      
        
        

      

    

    16.  Remedies.
      Upon
      the occurrence and during the continuance of an Event of Default:

     

    (a)  Agent
      may
      exercise in respect of the Collateral, in addition to other rights and remedies
      provided for herein, in the other Loan Documents, or otherwise available to
      it,
      all the rights and remedies of a secured party on default under the Code or
      any
      other applicable law. Without limiting the generality of the foregoing, each
      Grantor expressly agrees that, in any such event, Agent without demand of
      performance or other demand, advertisement or notice of any kind (except a
      notice specified below of time and place of public or private sale) to or upon
      any of Grantors or any other Person (all and each of which demands,
      advertisements and notices are hereby expressly waived to the maximum extent
      permitted by the Code or any other applicable law), may take immediate
      possession of all or any portion of the Collateral and (i) require Grantors
      to,
      and each Grantor hereby agrees that it will at its own expense and upon request
      of Agent forthwith, assemble all or part of the Collateral as directed by Agent
      and make it available to Agent at one or more locations where such Grantor
      regularly maintains Inventory, and (ii) without notice except as specified
      below, sell the Collateral or any part thereof in one or more parcels at public
      or private sale, at any of Agent’s offices or elsewhere, for cash, on credit,
      and upon such other terms as Agent may deem commercially reasonable. Each
      Grantor agrees that, to the extent notice of sale shall be required by law,
      at
      least 10 days notice to any of Grantors of the time and place of any public
      sale
      or the time after which any private sale is to be made shall constitute
      reasonable notification and specifically such notice shall constitute a
      reasonable “authenticated notification of disposition” within the meaning of
      Section 9-611 of the Code. Agent shall not be obligated to make any sale of
      Collateral regardless of notice of sale having been given. Agent may adjourn
      any
      public or private sale from time to time by announcement at the time and place
      fixed therefor, and such sale may, without further notice, be made at the time
      and place to which it was so adjourned.

     

    (b)  Solely
      for the purpose of enabling Agent to exercise its rights and remedies with
      respect to the Collateral under this Agreement or any other Loan Document,
      Agent
      is hereby granted an irrevocable license or other right to use, without
      liability to any Grantor for royalties or any other charge, each Grantor’s
      labels, Patents, Copyrights, rights of use of any name, trade secrets, trade
      names, Trademarks, service marks and advertising matter, URLs, domain names,
      industrial designs, other industrial or intellectual property or any property
      of
      a similar nature, whether owned or licensable by any Grantor or with respect
      to
      which any Grantor has sublicensable rights under license, sublicense, or other
      agreements, as it pertains to the Collateral, in preparing for sale, advertising
      for sale and selling any Collateral, and each Grantor’s rights under all
      licenses and all franchise agreements shall inure to the benefit of
      Agent.

     

    (c)  Any
      cash
      held by Agent as Collateral and all cash proceeds received by Agent in respect
      of any sale of, collection from, or other realization upon all or any part
      of
      the Collateral shall be applied against the Secured Obligations in the order
      set
      forth in the Credit Agreement. In the event the proceeds of Collateral are
      insufficient to satisfy all of the Secured Obligations in full, each Grantor
      shall remain jointly and severally liable for any such deficiency.

     

    (d)  Each
      Grantor hereby acknowledges that the Secured Obligations arose out of a
      commercial transaction, and agrees that if an Event of Default shall occur
      Agent
      shall have the right, to the extent permitted under applicable law, to an
      immediate writ of possession without notice of a hearing. Agent shall have
      the
      right to the appointment of a receiver for the properties and assets of each
      Grantor, and each Grantor hereby consents to such rights and such appointment
      and hereby waives any objection such Grantor may have thereto or the right
      to
      have a bond or other security posted by Agent.

     

    17.  Remedies
      Cumulative.
      Each
      right, power, and remedy of Agent as provided for in this Agreement or in the
      other Loan Documents or now or hereafter existing at law or in equity or by
      statute or otherwise shall be cumulative and concurrent and shall be in addition
      to every other right, power, or remedy provided for in this Agreement or in
      the
      other Loan Documents or now or hereafter existing at law or in equity or by
      statute or otherwise, and the exercise or beginning of the exercise by Agent,
      of
      any one or more of such rights, powers, or remedies shall not preclude the
      simultaneous or later exercise by Agent of any or all such other rights, powers,
      or remedies.

     

    
      
        16

      

      
        
        

        
          

        

      

      
        
        

      

    

    18.  Marshaling.
      Agent
      shall not be required to marshal any present or future collateral security
      (including but not limited to the Collateral) for, or other assurances of
      payment of, the Secured Obligations or any of them or to resort to such
      collateral security or other assurances of payment in any particular order,
      and
      all of its rights and remedies hereunder and in respect of such collateral
      security and other assurances of payment shall be cumulative and in addition
      to
      all other rights and remedies, however existing or arising. To the extent that
      it lawfully may, each Grantor hereby agrees that it will not invoke any law
      relating to the marshaling of collateral which might cause delay in or impede
      the enforcement of Agent's rights and remedies under this Agreement or under
      any
      other instrument creating or evidencing any of the Secured Obligations or under
      which any of the Secured Obligations is outstanding or by which any of the
      Secured Obligations is secured or payment thereof is otherwise assured, and,
      to
      the extent that it lawfully may, each Grantor hereby irrevocably waives the
      benefits of all such laws.

     

    19.  Indemnity
      and Expenses.
      

     

    (a)  Each
      Grantor agrees to indemnify, defend and hold harmless Agent and the other
      members of the Lender Group to the same extent and in the same manner as the
      indemnity made by the Borrowers pursuant to Section
      10.3
      of the
      Credit Agreement. This provision shall survive the termination of this Agreement
      and the Credit Agreement and the repayment of the Secured
      Obligations.

     

    (b)  Grantors,
      jointly and severally, shall, upon demand, pay to Agent (or Agent, may charge
      to
      the Loan Account) all the Lender Group Expenses which Agent may incur in
      connection with (i) the administration of this Agreement, (ii) the custody,
      preservation, use or operation of, or, upon an Event of Default, the sale of,
      collection from, or other realization upon, any of the Collateral in accordance
      with this Agreement and the other Loan Documents, (iii) the exercise or
      enforcement of any of the rights of Agent hereunder or (iv) the failure by
      any
      of Grantors to perform or observe any of the provisions hereof.

     

    20.  Merger,
      Amendments; Etc.
      THIS
      WRITTEN AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL
      AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
      CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
      UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No waiver of any provision of this
      Agreement, and no consent to any departure by any of Grantors herefrom, shall
      in
      any event be effective unless the same shall be in writing and signed by Agent,
      and then such waiver or consent shall be effective only in the specific instance
      and for the specific purpose for which given. No amendment of any provision
      of
      this Agreement shall be effective unless the same shall be in writing and signed
      by Agent and each Grantor to which such amendment applies.

     

    21.  Addresses
      for Notices.
      All
      notices and other communications provided for hereunder shall be given in the
      form and manner and delivered to Agent at its address specified in the Credit
      Agreement, and to any of the Grantors at their respective addresses specified
      in
      the Credit Agreement or Guaranty, as applicable, or, as to any party, at such
      other address as shall be designated by such party in a written notice to the
      other party.

     

    22.  Continuing
      Security Interest: Assignments under Credit Agreement.
      This
      Agreement shall create a continuing security interest in the Collateral and
      shall (a) remain in full force and effect until the Obligations have been paid
      in full in cash in accordance with the provisions of the Credit Agreement and
      the Commitments have expired or have been terminated, (b) be binding upon each
      Grantor, and their respective successors and assigns, and (c) inure to the
      benefit of, and be enforceable by, Agent, and its successors, transferees and
      assigns. Without limiting the generality of the foregoing clause (c), any Lender
      may, in accordance with the provisions of the Credit Agreement, assign or
      otherwise transfer all or any portion of its rights and obligations under the
      Credit Agreement to any other Person, and such other Person shall thereupon
      become vested with all the benefits in respect thereof granted to such Lender
      herein or otherwise. Upon payment in full in cash of the Obligations in
      accordance with the provisions of the Credit Agreement and the expiration or
      termination of the Commitments, this Agreement and the Security Interest granted
      hereby shall terminate and this Agreement and all rights to the Collateral
      shall
      revert to Grantors or any other Person entitled thereto. At such time, Agent
      will file or authorize the filing of appropriate termination statements or
      other
      release documents to terminate such Security Interests. No transfer or renewal,
      extension, assignment, or termination of this Agreement or of the Credit
      Agreement, any other Loan Document, or any other instrument or document executed
      and delivered by any Grantor to Agent nor any additional Advances or other
      loans
      made by any Lender to Borrowers, nor the taking of further security, nor the
      retaking or re-delivery of the Collateral to Grantors, or any of them, by Agent,
      nor any other act of the Lender Group or the Bank Product Providers, or any
      of
      them, shall release any Grantor from any obligation, except a release or
      discharge executed in writing by Agent in accordance with the provisions of
      the
      Credit Agreement. Agent shall not by any act, delay, omission or otherwise,
      be
      deemed to have waived any of its rights or remedies hereunder, unless such
      waiver is in writing and signed by Agent and then only to the extent therein
      set
      forth. A waiver by Agent of any right or remedy on any occasion shall not be
      construed as a bar to the exercise of any such right or remedy which Agent
      would
      otherwise have had on any other occasion.

     

    
      
        17

      

      
        
        

        
          

        

      

      
        
        

      

    

    23.  Governing
      Law.

     

    (a)  THE
      VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY
      PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER
      LOAN
      DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF,
      AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS
      ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED
      UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
      OF
      NEW YORK.

     

    (b)  THE
      PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
      AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN
      THE
      STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED
      IN
      THE BOROUGH OF MANHATTAN, COUNTY OF NEW YORK, STATE OF NEW YORK; PROVIDED,
      HOWEVER,
      THAT
      ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
      BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS
      TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
      EACH GRANTOR AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED
      UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF
FORUM NON CONVENIENS
      OR TO
      OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
      THIS
SECTION
      23(b).

     

    (c)  EACH
      GRANTOR AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVES ITS RIGHTS TO A JURY
      TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
      LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
      CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
      OR
      STATUTORY CLAIMS. EACH GRANTOR AND EACH MEMBER OF THE LENDER GROUP REPRESENTS
      THAT IT HAS REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
      TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
      LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
      TRIAL BY THE COURT.

     

    24.  New
      Subsidiaries.
      To the
      extent required by Section
      5.16
      of the
      Credit Agreement or any other applicable provision of any Loan Document, any
      new
      direct or indirect Subsidiary (whether by acquisition or creation) of any
      Grantor is required to enter into this Agreement by executing and delivering
      in
      favor of Agent a supplement to this Agreement instrument in the form of
Annex
      1
      attached
      hereto. Upon the execution and delivery of such supplement to this Agreement
      by
      such new Subsidiary, such Subsidiary shall become a Grantor hereunder with
      the
      same force and effect as if originally named as a Grantor herein. The execution
      and delivery of any instrument adding an additional Grantor as a party to this
      Agreement shall not require the consent of any Grantor hereunder. The rights
      and
      obligations of each Grantor hereunder shall remain in full force and effect
      notwithstanding the addition of any new Grantor hereunder.

     

    
      
        18

      

      
        
        

        
          

        

      

      
        
        

      

    

    25.  Agent.
      Each
      reference herein to any right granted to, benefit conferred upon or power
      exercisable by the “Agent” shall be a reference to Agent, for the benefit of the
      Lender Group and the Bank Product Providers.

     

    26.  Miscellaneous.

     

    (a)  This
      Agreement may be executed in any number of counterparts and by different parties
      on separate counterparts, each of which, when executed and delivered, shall
      be
      deemed to be an original, and all of which, when taken together, shall
      constitute but one and the same Agreement. Delivery of an executed counterpart
      of this Agreement by telefacsimile or other electronic method of transmission
      shall be equally as effective as delivery of an original executed counterpart
      of
      this Agreement. Any party delivering an executed counterpart of this Agreement
      by telefacsimile or other electronic method of transmission also shall deliver
      an original executed counterpart of this Agreement but the failure to deliver
      an
      original executed counterpart shall not affect the validity, enforceability,
      and
      binding effect of this Agreement. The foregoing shall apply to each other Loan
      Document mutatis
      mutandis.

     

    (b)  Any
      provision of this Agreement which is prohibited or unenforceable shall be
      ineffective to the extent of such prohibition or unenforceability without
      invalidating the remaining provisions hereof in that jurisdiction or affecting
      the validity or enforceability of such provision in any other
      jurisdiction.

     

    (c)  Headings
      used in this Agreement are for convenience only and shall not be used in
      connection with the interpretation of any provision hereof.

     

    (d)  The
      pronouns used herein shall include, when appropriate, either gender and both
      singular and plural, and the grammatical construction of sentences shall conform
      thereto.

     

    


     


    
      
        
          19

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    IN
      WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement
      by
      and through their duly authorized officers, as of the day and year first above
      written.

     

    


     

    
      	
              GRANTORS:

               

            	
              PORTRAIT
                CORPORATION OF AMERICA, INC.,

              a
                Delaware corporation,

               

               

              By: /s/
                Donald Norsworthy_________________

               

              Its: Executive
                Vice President and Chief Financial Officer

            
	 	
               

              PCA
                LLC,

               

               

              a
                Delaware limited liability company

               

               

              By: /s/
                Donald Norsworthy_________________

               

              Its: Executive
                Vice President and Chief Financial Officer

            
	 	
               

              AMERICAN
                STUDIOS, INC.,

               

               

              a
                North Carolina corporation

               

               

              By: /s/
                Donald Norsworthy_________________

               

              Its: Executive
                Vice President and Chief Financial Officer

            
	 	
               

              PCA
                PHOTO CORPORATION OF CANADA, INC.,

               

               

              a
                North Carolina corporation

               

               

              By: /s/
                Donald Norsworthy_________________

               

              Its: Executive
                Vice President and Chief Financial Officer

            
	 	
               

              PCA
                NATIONAL LLC,

               

               

              a
                Delaware limited liability company

               

               

              By: /s/
                Donald Norsworthy_________________

               

              Its: Executive
                Vice President and Chief Financial Officer

            
	 	
               

              HOMETOWN
                THREADS LLC,

               

               

              a
                Delaware limited liability company

               

               

              By: /s/
                Donald Norsworthy_________________

               

              Its: Executive
                Vice President and Chief Financial Officer

            
	 	
               

              PCA
                FINANCE CORP.,

               

               

              a
                Delaware corporation

               

               

              By: /s/
                Donald Norsworthy_________________

               

              Its: Executive
                Vice President and Chief Financial Officer

            
	 	
               

              PHOTO
                CORPORATION OF AMERICA,

               

               

              a
                North Carolina corporation

               

               

              By: /s/
                Donald Norsworthy_________________

               

              Its: Executive
                Vice President and Chief Financial Officer

            
	 	
               

              PCA
                NATIONAL OF TEXAS L.P.,

               

               

              a
                Texas limited partnership

               

              By:PCA
                NATIONAL LLC,

              a
                Delaware limited liability company

              Its:General
                Partner

               

              By:
                /s/ Donald Norsworthy_______________

               

              Its:
                Executive Vice President and 

               

               Chief
                Financial Officer

            
	
              AGENT:

            	
              WELLS
                FARGO FOOTHILL, INC.,

              a
                California corporation,

              as
                Agent

               

              By: /s/
                Cheri MacDonald_____________________

              Name: Cheri
                MacDonald_____________________

              Title:
                Vice
                President_________________________

            


    

    


     

    


     

    


     

    


     


    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    SCHEDULE
      1

     

    


     

    COPYRIGHTS

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    SCHEDULE
      2

     

    


     

    INTELLECTUAL
      PROPERTY LICENSES

     

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    SCHEDULE
      3

     

    


     

    PATENTS

     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    SCHEDULE
      4

     

    PLEDGED
      COMPANIES

     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    SCHEDULE
      5

     

    


     

    TRADEMARKS

     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    SCHEDULE
      6

     

    


     

    COMMERCIAL
      TORT CLAIMS

     

    [include
      specific case caption or descriptions per Official Code Comment 5 to Section
      9-108 of the Code]

     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    SCHEDULE
      7

     

    OWNED
      REAL PROPERTY

     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    SCHEDULE
      8

     

    


     

    LIST
      OF
      UNIFORM COMMERCIAL CODE FILING JURISDICTIONS

     

    


     

    Grantor             Jurisdictions

     

    Portrait
      Corporation of America, Inc.            Delaware

     

    PCA
      LLC                            Delaware

     

    PCA
      Photo
      Corporation of Canada, Inc.          North
      Carolina

     

    PCA
      Finance Corp.                      Delaware

     

    Hometown
      Threads LLC                  Delaware

     

    American
      Studios, Inc.                   North
      Carolina

     

    PCA
      National LLC                      Delaware

     

    PCA
      National of Texas L.P.                 Texas

     

    Photo
      Corporation of America              North
      Carolina

     

    


     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    ANNEX
      1
      TO SECURITY AGREEMENT

     

    FORM
      OF
      SUPPLEMENT

     

    SUPPLEMENT
      NO.
      ____
      (this “Supplement”)
      dated
      as of _______________, 20__, to the Security Agreement dated as of July 15,
      2005
      (as amended, restated, supplemented or otherwise modified from time to time,
      including all exhibits and schedules thereto, the “Security
      Agreement”)
      by
      each of the parties listed as “Grantors” on the signature pages thereto and
      those additional entities that thereafter become “Grantors” thereunder
      (collectively, jointly and severally, “Grantors”
      and
      each individually “Grantor”)
      and
WELLS
      FARGO FOOTHILL, INC.
      in its
      capacity as Agent for the Lender Group and the Bank Product Providers (together
      with its successors and assigns in such capacity, “Agent”).

     

    W
      I T N E
      S S E T H:

     

    WHEREAS,
      pursuant to that certain Credit Agreement dated as of July 15, 2005 (as amended,
      restated, supplemented or otherwise modified from time to time, including all
      schedules thereto, the “Credit
      Agreement”)
      among
PORTRAIT
      CORPORATION OF AMERICA INC.,
      a
      Delaware corporation (“Parent
      Guarantor”),
      PCA
      LLC,
      a
      Delaware limited liability company (“PCA”),
      each
      of PCA’s subsidiaries signatory thereto (such Subsidiaries, together with PCA,
      are referred to hereinafter each individually as a “Borrower”,
      and
      individually and collectively, jointly and severally, as the “Borrowers”),
      the
      lenders party thereto as “Lenders” (“Lenders”),
      and
      Agent, the Lender Group agreed to make certain financial accommodations
      available to Borrowers from time to time pursuant to the terms and conditions
      thereof;

     

    WHEREAS,
      capitalized terms used herein and not otherwise defined herein shall have the
      meanings assigned to such terms in the Security Agreement and/or the Credit
      Agreement; 

     

    WHEREAS,
      Grantors have entered into the Security Agreement in order to induce the Lender
      Group to make certain financial accommodations to Borrowers; and

     

    WHEREAS,
      pursuant to the Loan Documents and subject to Section
      5.16
      of the
      Credit Agreement, certain new direct or indirect Subsidiaries of any Grantor,
      must execute and deliver to Agent certain Loan Documents, including the Security
      Agreement, and the execution of the Security Agreement by the undersigned new
      Grantor or Grantors (collectively, the “New
      Grantors”)
      may be
      accomplished by the execution of this Supplement in favor of Agent, for the
      benefit of the Lender Group and the Bank Product Providers;

     

    NOW,
      THEREFORE, for and in consideration of the foregoing and other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      each New Grantor hereby agrees as follows:

     

    1.  In
      accordance with Section
      24
      of the
      Security Agreement, each New Grantor, by its signature below, becomes a
“Grantor” under the Security Agreement with the same force and effect as if
      originally named therein as a “Grantor” and each New Grantor hereby (a) agrees
      to all of the terms and provisions of the Security Agreement applicable to
      it as
      a “Grantor” thereunder and (b) represents and warrants that the representations
      and warranties made by it as a “Grantor” thereunder are true and correct in all
      material respects on and as of the date hereof. In furtherance of the foregoing,
      each New Grantor, as security for the payment and performance in full of the
      Secured Obligations, does hereby grant, assign, and pledge to Agent, for the
      benefit of the Lender Group and the Bank Product Providers, a continuing
      security interest in and to all personal property of such New Grantor including,
      without limitation, all property of the type described in Section
      2
      of the
      Security Agreement to secure the full and prompt payment of the Secured
      Obligations, including, without limitation, any interest thereon, plus
      reasonable attorneys' fees and expenses if the Secured Obligations represented
      by the Security Agreement are collected by law, through an attorney-at-law,
      or
      under advice therefrom. Schedule
      1,
      “Copyrights”, Schedule
      2,
      “Intellectual Property Licenses”, Schedule
      3,
      “Patents”, Schedule
      4,
      “Pledged Companies”, Schedule
      5,
      “Trademarks”, Schedule
      6,
      “Commercial Tort Claims”, Schedule
      7,
“Owned
      Real Property,” and Schedule
      8,
“List
      of Uniform Commercial Code Filing Jurisdictions” attached hereto supplement
Schedule
      1, Schedule
      2,
      Schedule
      3, Schedule
      4,
      Schedule
      5, Schedule
      6,
      Schedule
      7,
      and
Schedule
      8,
      respectively, to the Security Agreement and shall be deemed a part thereof
      for
      all purposes of the Security Agreement. Each reference to a “Grantor” in the
      Security Agreement shall be deemed to include each New Grantor. The Security
      Agreement is incorporated herein by reference.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.  Each
      New
      Grantor represents and warrants to Agent, the Lender Group and the Bank Product
      Providers that this Supplement has been duly executed and delivered by such
      New
      Grantor and constitutes its legal, valid and binding obligation, enforceable
      against it in accordance with its terms, except as enforceability thereof may
      be
      limited by bankruptcy, insolvency, reorganization, fraudulent transfer,
      moratorium or other similar laws affecting creditors’ rights generally and
      general principles of equity (regardless of whether such enforceability is
      considered in a proceeding at law or in equity). 

     

    3.  This
      Supplement may be executed in multiple counterparts, each of which shall be
      deemed to be an original, but all such separate counterparts shall together
      constitute but one and the same instrument. Delivery of a counterpart hereof
      by
      facsimile transmission or by e-mail transmission shall be as effective as
      delivery of a manually executed counterpart hereof.

     

    4.  Except
      as
      expressly supplemented hereby, the Security Agreement shall remain in full
      force
      and effect.

     

    5.  This
      Supplement shall be construed in accordance with and governed by the laws of
      the
      State of New York, without regard to the conflict of laws principles
      thereof.

     

    [Signature
      Page Follows]

     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    IN
      WITNESS WHEREOF, each New Grantor and Agent have duly executed this Supplement
      to the Security Agreement as of the day and year first above
      written.

     

    NEW
      GRANTORS:    [Name
      of New Grantor]

     

    


    


    By:     

    Name:     

    Title:     

    


    [Name
      of New Grantor]

     

    


    


    By:     

    Name:     

    Title:     

    


    AGENT: WELLS
      FARGO FOOTHILL, INC.,

     

    a
      California corporation,

     

    as
      Agent

     

    


    By:     

    Name:     

    Title:     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    EXHIBIT
      A

     

    COPYRIGHT
      SECURITY AGREEMENT

     

    This
      COPYRIGHT
      SECURITY AGREEMENT
      (this
“Copyright
      Security Agreement”)
      is
      made this ___ day of ___________, 20__, among Grantors listed on the signature
      pages hereof ( collectively, jointly and severally, “Grantors”
      and
      each individually “Grantor”), and WELLS
      FARGO FOOTHILL, INC.,
      in its
      capacity as Agent for the Lender Group and the Bank Product Providers (together
      with its successors and assigns in such capacity, the “Agent”).

     

    W I T N E S S E T H:

     

    WHEREAS,
      pursuant to that certain Credit Agreement dated as of July
      15,
      2005
      (as
      amended, restated, supplemented or otherwise modified from time to time,
      including all schedules thereto, the “Credit
      Agreement”)
      among
PORTRAIT
      CORPORATION OF AMERICA INC.,
      a
      Delaware corporation (“Parent
      Guarantor”),
      PCA
      LLC,
      a
      Delaware limited liability company (“PCA”),
      each
      of PCA’s subsidiaries signatory thereto (such Subsidiaries, together with PCA,
      are referred to hereinafter each individually as a “Borrower”,
      and
      individually and collectively, jointly and severally, as the “Borrowers”),
      the
      lenders party thereto as “Lenders” (“Lenders”),
      and
      Agent, the Lender Group agreed to make certain financial accommodations
      available to Borrowers from time to time pursuant to the terms and conditions
      thereof; 

     

    WHEREAS,
      the members of the Lender Group are willing to make the financial accommodations
      to Borrower as provided for in the Credit Agreement, but only upon the
      condition, among others, that Grantors shall have executed and delivered to
      Agent, for the benefit of the Lender Group and the Bank Product Providers,
      that
      certain Security Agreement dated as of July 15, 2005 (including all annexes,
      exhibits or schedules thereto, as from time to time amended, restated,
      supplemented or otherwise modified, the “Security
      Agreement”);
      and

     

    WHEREAS,
      pursuant to the Security Agreement, Grantors are required to execute and deliver
      to Agent, for the benefit of the Lender Group and the Bank Product Providers,
      this Copyright Security Agreement;

     

    NOW,
      THEREFORE, in consideration of the premises and mutual covenants herein
      contained and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, Grantors hereby agree as
      follows:

     

    1.  DEFINED
      TERMS.
      All
      capitalized terms used but not otherwise defined herein have the meanings given
      to them in the Security Agreement and/or the Credit Agreement.

     

    2.  GRANT
      OF SECURITY INTEREST IN COPYRIGHT COLLATERAL.
      Each
      Grantor hereby grants to Agent, for the benefit of the Lender Group and the
      Bank
      Product Providers, a continuing first priority security interest in all of
      such
      Grantor’s right, title and interest in, to and under the following, whether
      presently existing or hereafter created or acquired (collectively, the
“Copyright
      Collateral”):
      

     

    (a)  all
      of
      such Grantor's Copyrights and rights in or to Copyright Intellectual Property
      Licenses to which it is a party referred to on Schedule
      I
      hereto;

     

    (b)  all
      restorations, reversions, renewals or extensions of the foregoing;
      and

     

    (c)  all
      products and proceeds of the foregoing, including, without limitation, any
      claim
      by such Grantor against third parties for past, present or future infringement
      of any Copyright or any Copyright licensed under any Intellectual Property
      License.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.  SECURITY
      AGREEMENT.
      The
      security interests granted pursuant to this Copyright Security Agreement are
      granted in conjunction with the security interests granted to Agent, for the
      benefit of the Lender Group and the Bank Product Providers, pursuant to the
      Security Agreement. Each Grantor hereby acknowledges and affirms that the rights
      and remedies of Agent with respect to the security interest in the Copyright
      Collateral made and granted hereby are more fully set forth in the Security
      Agreement, the terms and provisions of which are incorporated by reference
      herein as if fully set forth herein.

     

    4.  AUTHORIZATION
      TO SUPPLEMENT.
      Grantors hereby authorize Agent unilaterally to modify this Agreement by
      amending Schedule
      I
      to
      include any future United States registered Copyrights of Grantors.
      Notwithstanding the foregoing, no failure to so modify this Copyright Security
      Agreement or amend Schedule
      I
      shall in
      any way affect, invalidate or detract from Agent's continuing security interest
      in all Collateral, whether or not listed on Schedule
      I.

     

    5.  COUNTERPARTS.
      This
      Copyright Security Agreement may be executed in any number of counterparts,
      each
      of which shall be deemed to be an original, but all such separate counterparts
      shall together constitute but one and the same instrument. In proving this
      Copyright Security Agreement or any other Loan Document in any judicial
      proceedings, it shall not be necessary to produce or account for more than
      one
      such counterpart signed by the party against whom such enforcement is sought.
      Any signatures delivered by a party by facsimile transmission or by e-mail
      transmission shall be deemed an original signature hereto.

     

    [signature
      page follows]

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    IN
      WITNESS WHEREOF, each Grantor has caused this Copyright Security Agreement
      to be
      executed and delivered by its duly authorized officer as of the date first
      set
      forth above. 

     

    
      	 	 
	 	 
	 	 
	 	
              By:     

            
	 	
               

              Name:     

            
	 	
               

              Title:     

            
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	
              By:     

            
	 	
               

              Name:     

            
	 	
               

              Title:     

            
	 	 
	 	 
	 	 
	 	
              ACCEPTED
                AND ACKNOWLEDGED BY:

            
	 	 
	 	
              WELLS
                FARGO FOOTHILL, INC.,

              a
                California corporation,

              as
                Agent

            
	 	 
	 	 
	 	 
	 	
              By:     

            
	 	
              Name:     

            
	 	
              Title:     

            
	 	 
	 	 


    

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    SCHEDULE
      I

     

    to

     

    COPYRIGHT
      SECURITY AGREEMENT

     

    Copyright
      Registrations

     

    
      	
               

              Grantor

               

            	
               

              Country

               

            	
               

              Copyright

               

            	
               

              Registration
                No.

               

            	
               

              Registration
                Date

               

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 


    

    


     

    Copyright
      Licenses

     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    EXHIBIT
      B

     

    


     

    PATENT
      SECURITY AGREEMENT

     

    This
      PATENT
      SECURITY AGREEMENT
      (this
      "Patent
      Security Agreement")
      is
      made this ___ day of ___________, 20__, among the Grantors listed on the
      signature pages hereof (collectively, jointly and severally, "Grantors"
      and
      each individually “Grantor”), and WELLS
      FARGO FOOTHILL, INC.,
      in its
      capacity as administrative agent for the Lender Group and the Bank Product
      Providers (together with its successors and assigns in such capacity,
“Agent”).

     

    W I T N E S S E T H:

     

    WHEREAS,
      pursuant to that certain Credit Agreement dated as of July 15, 2005 (as amended,
      restated, supplemented or otherwise modified from time to time, including all
      schedules thereto, the “Credit
      Agreement”)
      among
PORTRAIT
      CORPORATION OF AMERICA INC.,
      a
      Delaware corporation (“Parent
      Guarantor”),
      PCA
      LLC,
      a
      Delaware limited liability company (“PCA”),
      each
      of PCA’s subsidiaries signatory thereto (such Subsidiaries, together with PCA,
      are referred to hereinafter each individually as a “Borrower”,
      and
      individually and collectively, jointly and severally, as the “Borrowers”),
      the
      lenders party thereto as “Lenders” (“Lenders”),
      and
      Agent, the Lender Group agreed to make certain financial accommodations
      available to Borrowers from time to time pursuant to the terms and conditions
      thereof, 

     

    WHEREAS,
      the members of Lender Group are willing to make the financial accommodations
      to
      Borrower as provided for in the Credit Agreement, but only upon the condition,
      among others, that the Grantors shall have executed and delivered to Agent,
      for
      the benefit of the Lender Group and the Bank Product Providers, that certain
      Security Agreement dated as of July 15, 2005 (including all annexes, exhibits
      or
      schedules thereto, as from time to time amended, restated, supplemented or
      otherwise modified, the “Security
      Agreement”);
      and

     

    WHEREAS,
      pursuant to the Security Agreement, Grantors are required to execute and deliver
      to Agent, for the benefit of the Lender Group and the Bank Product Providers,
      this Patent Security Agreement;

     

    NOW,
      THEREFORE, in consideration of the premises and mutual covenants herein
      contained and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, each Grantor hereby agrees as
      follows:

     

    1.  DEFINED
      TERMS.
      All
      capitalized terms used but not otherwise defined herein have the meanings given
      to them in the Security Agreement and/or the Credit Agreement.

     

    2.  GRANT
      OF SECURITY INTEREST IN PATENT COLLATERAL.
      Each
      Grantor hereby grants to Agent, for the benefit of the Lender Group and the
      Bank
      Product Providers, a continuing first priority security interest in all of
      such
      Grantor’s right, title and interest in, to and under the following, whether
      presently existing or hereafter created or acquired (collectively, the
“Patent
      Collateral”):

     

    (a)  all
      of
      its Patents and rights in and to Patent Intellectual Property Licenses to which
      it is a party referred to on Schedule
      I
      hereto;

     

    (b)  all
      reissues, continuations, continuations-in-part, substitutes, extensions or
      renewals of, and improvements on, the foregoing; and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c)  all
      products and proceeds of the foregoing, including, without limitation, any
      claim
      by such Grantor against third parties for past, present or future infringement
      or dilution of any Patent or any Patent licensed under any Intellectual Property
      License.

     

    3.  SECURITY
      AGREEMENT.
      The
      security interests granted pursuant to this Patent Security Agreement are
      granted in conjunction with the security interests granted to Agent, for the
      benefit of the Lender Group and the Bank Product Providers, pursuant to the
      Security Agreement. Each Grantor hereby acknowledges and affirms that the rights
      and remedies of Agent with respect to the security interest in the Patent
      Collateral made and granted hereby are more fully set forth in the Security
      Agreement, the terms and provisions of which are incorporated by reference
      herein as if fully set forth herein.

     

    4.  AUTHORIZATION
      TO SUPPLEMENT.
      If any
      Grantor shall obtain rights to any new patentable inventions or become entitled
      to the benefit of any patent application or patent for any reissue, division,
      or
      continuation, of any patent, the provisions of this Patent Security Agreement
      shall automatically apply thereto. Grantors shall give prompt notice in writing
      to Agent with respect to any such new patent rights. Without limiting Grantors'
      obligations under this Section
      4,
      Grantors hereby authorize Agent unilaterally to modify this Agreement by
      amending Schedule
      I
      to
      include any such new patent rights of Grantors. Notwithstanding the foregoing,
      no failure to so modify this Patent Security Agreement or amend Schedule
      I
      shall in
      any way affect, invalidate or detract from Agent's continuing security interest
      in all Collateral, whether or not listed on Schedule
      I.
      

     

    5.  COUNTERPARTS.
      This
      Patent Security Agreement may be executed in any number of counterparts, each
      of
      which shall be deemed to be an original, but all such separate counterparts
      shall together constitute but one and the same instrument. In proving this
      Patent Security Agreement or any other Loan Document in any judicial
      proceedings, it shall not be necessary to produce or account for more than
      one
      such counterpart signed by the party against whom such enforcement is sought.
      Any signatures delivered by a party by facsimile transmission or by e-mail
      transmission shall be deemed an original signature hereto.

     

    [signature
      page follows]

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    IN
      WITNESS WHEREOF, each Grantor has caused this Patent Security Agreement to
      be
      executed and delivered by its duly authorized officer as of the date first
      set
      forth above.

     

    
      	 	 
	 	 
	 	
               

              By:     

               

            
	 	
              Name:     

               

            
	 	
              Title:     

               

            
	 	 
	 	 
	 	 
	 	 
	 	 
	 	
              By:     

               

            
	 	
              Name:     

               

            
	 	
              Title:     

               

            
	 	 
	 	 
	 	
              ACCEPTED
                AND ACKNOWLEDGED BY:

               

            
	 	
               

              WELLS
                FARGO FOOTHILL, INC.,

               

               

              a
                California corporation

               

               

              as
                Agent

               

            
	 	 
	 	 
	 	 
	 	
              By:     

               

            
	 	
              Name:     

               

            
	 	
              Title:     

               

            
	 	 


    

    


    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    EXHIBIT
      C

    


    Annex
      1 to Pledge and Security Agreement

    


    PLEDGED
      INTERESTS ADDENDUM

    


     

    This
      Pledged Interests Addendum, dated as of _________ ___, 20___, is delivered
      pursuant to Section 6
      of the
      Security Agreement referred to below. The undersigned hereby agrees that this
      Pledged Interests Addendum may be attached to that certain Security Agreement,
      dated as of July 15, 2005 (as amended, restated, supplemented or otherwise
      modified from time to time, including all exhibits and schedules thereto, the
      “Security
      Agreement”),
      made
      by the undersigned, together with the other Grantors named therein, to Wells
      Fargo Foothill, Inc., as Agent. Initially capitalized terms used but not defined
      herein shall have the meanings ascribed to such terms in the Security Agreement
      and/or the Credit Agreement. The undersigned hereby agrees that the additional
      interests listed on this Pledged Interests Addendum as set forth below shall
      be
      and become part of the Pledged Interests pledged by the undersigned to the
      Agent
      in the Security Agreement and any pledged company set forth on this Pledged
      Interests Addendum as set forth below shall be and become a "Pledged Company"
      under the Security Agreement, each with the same force and effect as if
      originally named therein.

     

    The
      undersigned hereby certifies that the representations and warranties set forth
      in Section
      5
      of the
      Security Agreement of the undersigned are true and correct in all material
      respects as to the Pledged Interests listed herein on and as of the date
      hereof.

     

    [___________________]

     

    


     

    By:
           

     

    Name:     

     

    Title:
          

     

    


     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    


     

    
      	
               

              Name
                of Pledgor

               

            	
               

              Name
                of Pledged Company

               

            	
               

              Number
                of Shares/Units

               

            	
               

              Class
                of Interests

               

            	
               

              Percentage
                of Class Owned

               

            	
               

              Percentage
                of Class Pledged

               

            	
               

              Certificate
                Nos.

               

            
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 


    

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    EXHIBIT
      D

     

    TRADEMARK
      SECURITY AGREEMENT

     

    This
      TRADEMARK
      SECURITY AGREEMENT
      (this
“Trademark
      Security Agreement”)
      is
      made this ___ day of ___________, 20__, among Grantors listed on the signature
      pages hereof (collectively, jointly and severally, “Grantors”
      and
      each individually “Grantor”), and WELLS
      FARGO FOOTHILL, INC.,
      in its
      capacity as Agent for the Lender Group and the Bank Product Providers (together
      with its successors and assigns in such capacity, “Agent”).

     

    W
      I T N E
      S S E T H:

     

    WHEREAS,
      pursuant to that certain Credit Agreement dated as of July 15, 2005 (as amended,
      restated, supplemented or otherwise modified from time to time, including all
      schedules thereto, the “Credit
      Agreement”)
      among
PORTRAIT
      CORPORATION OF AMERICA INC.,
      a
      Delaware corporation (“Parent
      Guarantor”),
      PCA
      LLC,
      a
      Delaware limited liability company (“PCA”),
      each
      of PCA’s subsidiaries signatory thereto (such Subsidiaries, together with PCA,
      are referred to hereinafter each individually as a “Borrower”,
      and
      individually and collectively, jointly and severally, as the “Borrowers”),
      the
      lenders party thereto as “Lenders” (“Lenders”),
      and
      Agent, the Lender Group agreed to make certain financial accommodations
      available to Borrowers from time to time pursuant to the terms and conditions
      thereof; 

     

    WHEREAS,
      the members of the Lender Group are willing to make the financial accommodations
      to Borrower as provided for in the Credit Agreement, but only upon the
      condition, among others, that Grantors shall have executed and delivered to
      Agent, for the benefit of Lender Group and the Bank Product Providers, that
      certain Security Agreement dated as of July 15, 2005 (including all annexes,
      exhibits or schedules thereto, as from time to time amended, restated,
      supplemented or otherwise modified, the “Security
      Agreement”);

     

    WHEREAS,
      pursuant to the Security Agreement, Grantors are required to execute and deliver
      to Agent, for the benefit of Lender Group and the Bank Product Providers, this
      Trademark Security Agreement;

     

    NOW,
      THEREFORE, in consideration of the premises and mutual covenants herein
      contained and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, each Grantor hereby agrees as
      follows:

     

    1.  DEFINED
      TERMS.
      All
      capitalized terms used but not otherwise defined herein have the meanings given
      to them in the Security Agreement and/or the Credit Agreement.

     

    2.  GRANT
      OF SECURITY INTEREST IN TRADEMARK COLLATERAL.
      Each
      Grantor hereby grants to Agent, for the benefit of the Lender Group and the
      Bank
      Product Providers, a continuing first priority security interest in all of
      such
      Grantor’s right, title and interest in, to and under the following, whether
      presently existing or hereafter created or acquired (collectively, the
“Trademark
      Collateral”):

     

    (a)  all
      of
      its Trademarks and rights in and to Trademark Intellectual Property Licenses
      to
      which it is a party referred to on Schedule I hereto;

     

    (b)  all
      extensions, modifications and renewals of the foregoing; 

     

    (c)  all
      goodwill of the business connected with the use of, and symbolized by, each
      Trademark and each Trademark Intellectual Property License; and

     

    (d)  all
      products and proceeds of the foregoing, including, without limitation, any
      claim
      by such Grantor against third parties for past, present or future (i)
      infringement or dilution of any Trademark or any Trademark licensed under any
      Intellectual Property License or (ii) injury to the goodwill associated with
      any
      Trademark or any Trademark licensed under any Intellectual Property
      License.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.  SECURITY
      AGREEMENT.
      The
      security interests granted pursuant to this Trademark Security Agreement are
      granted in conjunction with the security interests granted to Agent, for the
      benefit of the Lender Group and the Bank Product Providers, pursuant to the
      Security Agreement. Each Grantor hereby acknowledges and affirms that the rights
      and remedies of Agent with respect to the security interest in the Trademark
      Collateral made and granted hereby are more fully set forth in the Security
      Agreement, the terms and provisions of which are incorporated by reference
      herein as if fully set forth herein.

     

    4.  AUTHORIZATION
      TO SUPPLEMENT.
      If any
      Grantor shall obtain rights to any new trademarks, the provisions of this
      Trademark Security Agreement shall automatically apply thereto. Grantors shall
      give prompt notice in writing to Agent with respect to any such new trademarks
      or renewal or extension of any trademark registration. Without limiting
      Grantors' obligations under this Section
      4,
      Grantors hereby authorize Agent unilaterally to modify this Agreement by
      amending Schedule
      I
      to
      include any such new trademark rights of Grantors. Notwithstanding the
      foregoing, no failure to so modify this Trademark Security Agreement or amend
      Schedule
      I
      shall in
      any way affect, invalidate or detract from Agent's continuing security interest
      in all Collateral, whether or not listed on Schedule
      I.
      

     

    5.  COUNTERPARTS.
      This
      Trademark Security Agreement may be executed in any number of counterparts,
      each
      of which shall be deemed to be an original, but all such separate counterparts
      shall together constitute but one and the same instrument. In proving this
      Trademark Security Agreement or any other Loan Document in any judicial
      proceedings, it shall not be necessary to produce or account for more than
      one
      such counterpart signed by the party against whom such enforcement is sought.
      Any signatures delivered by a party by facsimile transmission or by e-mail
      transmission shall be deemed an original signature hereto.

     

    [signature
      page follows]

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    IN
      WITNESS WHEREOF, each Grantor has caused this Trademark Security Agreement
      to be
      executed and delivered by its duly authorized officer as of the date first
      set
      forth above. 

     

    
      	 	 
	 	 
	 	 
	 	
              By:     

            
	 	
               

              Name:     

            
	 	
               

              Title:     

            
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	
              By:     

            
	 	
               

              Name:     

            
	 	
               

              Title:     

            
	 	 
	 	 
	 	 
	 	
              ACCEPTED
                AND ACKNOWLEDGED BY:

            
	 	 
	 	
              WELLS
                FARGO FOOTHILL, INC.,

              a
                California corporation,

              as
                Agent

            
	 	 
	 	 
	 	 
	 	
              By:     

            
	 	
              Name:     

            
	 	
              Title:     

            
	 	 
	 	 


    

    


     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    SCHEDULE
      I

    to

    TRADEMARK
      SECURITY AGREEMENT

    


     

    Trademark
      Registrations/Applications

     

    
      	
               

              Grantor

               

            	
               

              Country

               

            	
               

              Mark

               

            	
               

              Application/
                Registration No.

               

            	
               

              App/Reg
                Date

               

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 


    

    


     

    Trade
      Names

     

    


     

    Common
      Law Trademarks 

     

    


     

    Trademarks
      Not Currently In Use

     

    


     

    Trademark
      Licenses