Document:

exv10w9

	 	 	 	 	 

Exhibit 10.9

AMENDED AND RESTATED PROMISSORY NOTE

$20,000,000.00

October 30, 2009

PORTRAIT INNOVATIONS, INC.

2016 Ayrsley Town Blvd., Suite 200

Charlotte, North Carolina 28273

(Hereinafter referred to as “Borrower”)

WACHOVIA BANK, NATIONAL ASSOCIATION

Charlotte, North Carolina 28202

(Hereinafter referred to as “Bank”)

Borrower promises to pay to the order of Bank, in lawful money of the United States of America by
mailing to the address specified hereinafter or wherever else Bank may specify, the sum of TWENTY
MILLION and NO/100 DOLLARS ($20,000,000.00) or such sum as may be advanced and outstanding from
time to time, with interest on the unpaid principal balance at the rate and on the terms provided
in this Promissory Note (including all renewals, extensions or modifications hereof, this “Note”).

RENEWAL/MODIFICATION. This Note renews, extends and/or modifies that certain Promissory Note dated
March 19, 2009, in the original amount of $17,000,000.00, as amended, modified, renewed and/or
extended from time to time (the “Original Promissory Note”). This Note is not a novation of the
Original Promissory Note.

LOAN AGREEMENT. This Note is subject to the provisions of that certain Amended and Restated Loan
Agreement between Borrower and Bank of even date herewith, as modified from time to time (the “Loan
Agreement”).

LINE OF CREDIT. Borrower may borrow, repay and reborrow, and, upon the request of Borrower, Bank
shall advance and readvance under this Note from time to time until the maturity hereof (each an
“Advance” and together the “Advances”), so long as the total principal balance outstanding under
this Note at any one time does not exceed (i) $17,000,000, from the date of this Note through and
including August 3, 2010, and (ii) the principal amount stated on the face of this Note from August
4, 2010 through the maturity hereof, subject to compliance with all Financial Covenants under the
Loan Agreement and such further limitations described in the Loan Agreement. Bank’s obligation to
make Advances under this Note shall terminate if Borrower is in Default. As of the date of each
proposed Advance, Borrower shall be deemed to represent that each representation made in the Loan
Documents is true as of such date.

If Borrower subscribes to Bank’s cash management services and such services are applicable to this
line of credit, then the terms of such services shall control the manner in which funds are
transferred between the applicable demand deposit account and the line of credit for credit or
debit to the line of credit.

USE OF PROCEEDS. Borrower shall use the proceeds of the loan(s) evidenced by this Note for the
commercial purposes of Borrower, as follows: to refinance existing indebtedness to Bank, to
provide working capital and for general corporate purposes.

SECURITY. Borrower has granted or caused to be granted to Bank a security interest in the
collateral described in the Loan Documents, including the personal property collateral described in
that certain Pledge Agreement dated as of March 19, 2009, executed by Portrait Innovations Holding
Company in favor of Bank, and such other collateral as Borrower has granted or may consent to grant
to Bank from time to time, which shall continue to secure the Obligations.

 

 

INTEREST RATE. Interest shall accrue on the unpaid principal balance of each Advance during each
Interest Period from the date of such Advance at a rate per annum equal to 1-month LIBOR (as
defined below), plus the Applicable Margin (as defined below) then in effect (the “Interest Rate”).
Interest for each Interest Period shall accrue each day during such Interest Period, commencing on
and including the first day to but excluding the last day. “Interest Period” means each period
commencing on the first day of the calendar month and ending on the first day of the next
succeeding calendar month; provided (i) the first Interest Period shall commence on the date hereof
and (ii) any Interest Period that would otherwise extend past the maturity date of this Note shall
end on the maturity date of this Note. “LIBOR” means, with respect to each Interest Period, the
rate for U.S. dollar deposits with a maturity equal to the number of months specified above, as
reported on Telerate Successor Page 3750 as of 11:00 a.m., London time, on the second London
business day before such Interest Period begins, or, in the case of the first Interest Period, the
second London business day before the first day of the calendar month during which such Interest
Period begins (or if not so reported, then as determined by the Bank from another recognized source
or interbank quotation).

APPLICABLE MARGIN. For the purpose of calculating the Interest Rate, “Applicable Margin” shall
mean the Applicable Margin that corresponds to Borrower’s Funded Debt to EBITDA Ratio pursuant to
the below chart, adjusted on the last day of the month during which Borrower’s certification of
said Ratio is received by Bank, accompanied by the required financial statements supporting such
certification.

	 	 	 	 	 
	Funded Debt to EBITDA Ratio:	 	Applicable Margin:
	>1.50:1.00
	 	 	3.00	%
	≤1.50:1.00
but ≥1.25:1.00
	 	 	2.75	%
	<1.25:1.00
	 	 	2.50	%

Borrower’s Funded Debt to EBITDA Ratio shall be measured as of the end of each fiscal quarter on a
rolling four quarter basis. For the purposes hereof, “Funded Debt to EBITDA Ratio” shall mean the
sum of all Funded Debt, divided by EBITDA. “Funded Debt” shall mean, as applied to any person or
entity, the sum of all indebtedness for borrowed money (including, without limitation, capital
lease and synthetic lease obligations, subordinated debt (including debt
subordinated to the Bank), and unreimbursed drawings under letters of credit), or any other
monetary obligation evidenced by a note, bond, debenture or other agreement or similar instrument
of that person or entity. “EBITDA” shall mean the sum of earnings, before interest, taxes,
depreciation and amortization.

DEFAULT RATE. In addition to all other rights contained in this Note, if a Default (as defined
herein) occurs and as long as a Default continues, all outstanding Obligations, other than
Obligations under any swap agreements (as defined in 11 U.S.C. § 101, as in effect from time to
time) between Borrower and Bank or its affiliates, shall bear interest at the Interest Rate plus 3%
(“Default Rate”), except if this Note is governed by the laws of the State of North Carolina and
the original principal amount is less than or equal to $300,000.00. The Default Rate shall also
apply from acceleration until the Obligations or any judgment thereon is paid in full.

INTEREST AND FEE(S) COMPUTATION (ACTUAL/360). Interest and fees, if any, shall be computed on the
basis of a 360-day year for the actual number of days in the applicable period (“Actual/360
Computation”). The Actual/360 Computation determines the annual effective yield by taking the
stated (nominal) rate for a year’s period and then dividing said rate by 360 to determine the daily
periodic rate to be applied for each day in the applicable period. Application of the Actual/360
Computation produces an annualized effective interest rate exceeding the nominal rate.

REPAYMENT TERMS. This Note shall be due and payable in consecutive monthly payments of accrued
interest only, commencing on November 1, 2009, and continuing on the same day of each month

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thereafter until fully paid. In any event, this Note shall be due and payable in full, including
all principal and accrued interest, on August 2, 2011.

AUTOMATIC DEBIT OF CHECKING ACCOUNT FOR LOAN PAYMENT. Borrower authorizes Bank to debit demand
deposit account number 2000014787045 or any other account with Bank (routing number 053000219)
designated in writing by Borrower, commencing on November 1, 2009, for any payments due under this
Note. Borrower further certifies that Borrower holds legitimate ownership of this account and
preauthorizes this periodic debit as part of its right under said ownership.

FEES. Availability Fee. Commencing on the 1st day of the month following Borrower’s receipt of at
least $10,000,000 in additional net equity investment, and continuing on the first day of each
month thereafter, Borrower shall pay to Bank an availability fee equal to 0.375% per annum on the
difference between (i) the face amount of this Note and (ii) the outstanding principal balance of
this Note, for each day during the preceding calendar month or portion thereof, with a final
payment due and payable on the date that all principal and accrued interest is paid in full.
Amendment Fee. Borrower shall pay to Bank an amendment fee equal to one fifth of one percent
(1/5%) of the face amount of this Note ($40,000.00) on the date hereof.

APPLICATION OF PAYMENTS. Monies received by Bank from any source for application toward payment of
the Obligations shall be applied to accrued interest and then to principal. If a Default occurs,
monies may be applied to the Obligations in any manner or order deemed appropriate by Bank.

If any payment received by Bank under this Note or other Loan Documents is rescinded, avoided or
for any reason returned by Bank because of any adverse claim or threatened action, the returned
payment shall remain payable as an obligation of all persons liable under this Note or other Loan
Documents as though such payment had not been made.

DEFINITIONS. Loan Documents. The term “Loan Documents”, as used in this Note and the other Loan
Documents, refers to all documents executed in connection with the loan evidenced by this Note and
any letters of credit issued pursuant to the Loan Agreement, any applications for such letters of
credit and any other documents executed in connection therewith or related thereto, and may
include, without limitation, the Loan Agreement, this Note, guaranty agreements, security
agreements, security instruments, financing statements, mortgage instruments, any renewals or
modifications, whenever any of the foregoing are executed, but does not include swap agreements (as
defined in 11 U.S.C. § 101, as in effect from time to time). Obligations. The term “Obligations”,
as used in this Note and the other Loan Documents, refers to any and all indebtedness and other
obligations under this Note, all other obligations under any other Loan Document(s), and all
obligations under any swap agreements (as defined in 11 U.S.C. § 101, as in effect from time to
time) between Borrower and Bank, or its affiliates, whenever executed. Certain Other Terms. All
terms that are used but not otherwise defined in any of the Loan Documents shall have the
definitions provided in the Uniform Commercial Code.

LATE CHARGE. If any payments are not timely made, then Borrower also shall pay to Bank a late
charge equal to 4% of each payment past due for 15 or more days. This late charge shall not apply
to payments due at maturity or by acceleration hereof, unless such late payment is in an amount not
greater than the highest periodic payment due hereunder.

Acceptance by Bank of any late payment without an accompanying late charge shall not be deemed a
waiver of Bank’s right to collect such late charge or to collect a late charge for any subsequent
late payment received.

ATTORNEYS’ FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank’s reasonable expenses
actually incurred to enforce or collect any of the Obligations, including, without limitation,
reasonable arbitration, paralegals’, attorneys’ and experts’ fees and expenses, whether incurred
without

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the commencement of a suit, in any trial, arbitration, or administrative proceeding, or in
any appellate or bankruptcy proceeding.

USURY. If at any time the effective interest rate under this Note would, but for this paragraph,
exceed the maximum lawful rate, the effective interest rate under this Note shall be the maximum
lawful rate, and any amount received by Bank in excess of such rate shall be applied to principal
and then to fees and expenses, or, if no such amounts are owing, returned to Borrower.

DEFAULT. If any of the following occurs, a default (“Default”) under this Note shall exist:
Nonpayment; Nonperformance. The failure of timely payment or performance of the Obligations, or
default, however, denominated, under this Note or any other Loan Documents. False Warranty. A
warranty or representation made or deemed made in the Loan Documents or furnished Bank in
connection with the loan evidenced by this Note proves materially false, or if
of a continuing nature, becomes materially false. Cross Default. At Bank’s option, any default in
payment or performance of any obligation under any other loans, contracts or agreements of
Borrower, any Subsidiary of Borrower, or Borrower’s direct owner, Portrait Innovations Holding
Company, a Delaware corporation, with Bank or its affiliates (“Affiliate” shall have the meaning as
defined in 11 U .S.C. § 101, as in effect, from time to time, except that the term “Borrower” shall
be substituted for the term “Debtor” therein; “Subsidiary” shall mean any business in which
Borrower holds, directly or indirectly, a controlling interest). Cessation; Bankruptcy. The death
of, appointment of a guardian for, dissolution of, termination of existence of, loss of good
standing status by, appointment of a receiver for, assignment for the benefit of creditors of, or
commencement of any bankruptcy or insolvency proceeding by or against Borrower or any of its
Subsidiaries. Material Capital Structure or Business Alteration. Without prior written consent of
Bank, (i) a material alteration in the kind or type of Borrower’s business or that of Borrower’s
Subsidiaries or Affiliates, if any; (ii) the sale of substantially all of the business or assets of
Borrower, any of Borrower’s Subsidiaries or Affiliates, or a material portion (10% or more) of such
business or assets if such a sale is outside the ordinary course of business of Borrower, or any of
Borrower’s Subsidiaries or Affiliates, or more than 50% of the outstanding stock or voting power of
or in any such entity in a single transaction or a series of transactions; (iii) the acquisition of
substantially all of the business or assets or more than 50% of the outstanding stock or voting
power of any other entity; or (iv) should any Borrower or any of Borrower’s Subsidiaries or
Affiliates enter into any merger or consolidation. Material Adverse Change. There has occurred a
material adverse change in the business of Borrower, financial or otherwise.

FINANCIAL COVENANT NOTICE PERIOD. Notwithstanding the foregoing, Borrower’s failure to comply with
the Minimum EBITDA covenant, the Maximum Adjusted Funded Debt to EBITDAR Ratio covenant or the
Fixed Charge Coverage Ratio covenant (each as set forth in the Loan Agreement) for any reporting
period shall not constitute a Default hereunder unless the investors of Borrower fail to provide to
Bank cash collateral equal to the full amount of the Obligations (or such lesser amount as Bank
shall agree to in its sole discretion) within 10 days (a “Notice Period”) after Bank’s delivery of
written notice to the investors of Borrower (a copy of which notice shall be provided to Borrower)
of such failure of Borrower to comply. Bank shall not exercise its remedies to collect the
Obligations during any Notice Period.

REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan Documents, and such Default
(other than a payment Default) is not cured within fifteen (15) days of notice of such Default,
then Bank may, at any time thereafter, take the following actions: Bank Lien. Foreclose its
security interest or lien against Borrower’s deposit accounts and investment property without
notice. Acceleration Upon Default. Accelerate the maturity of this Note and, at Bank’s option,
any or all other Obligations, other than Obligations under any swap agreements (as defined in 11
U.S.C. § 101, as in effect from time to time) between Borrower and Bank, or its affiliates, which
shall be due in accordance with and governed by the provisions of said swap agreements; whereupon
this Note and the accelerated Obligations shall be immediately due and payable; provided, however,
if the Default is based upon a bankruptcy or insolvency proceeding commenced by or against Borrower
or any guarantor or endorser of this Note, all Obligations (other than Obligations under any swap
agreement as referenced above) shall automatically and

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immediately be due and payable. Cumulative. Exercise any rights and remedies as provided under
the Note and the other Loan Documents, or as provided by law or equity.

FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information as Bank may
reasonably request from time to time, including without limitation, financial statements and
information pertaining to Borrower’s financial condition. Such information shall be true,
complete, and accurate.

WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and the other Loan
Documents shall be valid unless in writing and signed by an officer of Bank. No waiver by Bank of
any Default shall operate as a waiver of any other Default or the same Default on a future
occasion. Neither the failure nor any delay on the part of Bank in exercising any right, power, or
remedy under this Note and the other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or remedy.

Except to the extent otherwise provided by the Loan Documents or prohibited by law, each Borrower
and each other person liable under this Note waives presentment, protest, notice of dishonor,
demand for payment, notice of intention to accelerate maturity, notice of acceleration of maturity,
notice of sale and all other notices of any kind. Further, each agrees that Bank may (i) extend,
modify or renew this Note or make a novation of the loan evidenced by this Note, and/or (ii) grant
releases, compromises or indulgences with respect to any collateral securing this Note, or with
respect to any Borrower or other person liable under this Note or any other Loan Documents, all
without notice to or consent of each Borrower and other such person, and without affecting the
liability of each Borrower and other such person; provided, Bank may not extend, modify or renew
this Note or make a novation of the loan evidenced by this Note without the consent of the
Borrower, or if there is more than one Borrower, without the consent of at least one Borrower; and
further provided, if there is more than one Borrower, Bank may not enter into a modification of
this Note which increases the burdens of a Borrower without the consent of that Borrower.

MISCELLANEOUS PROVISIONS. Assignment. This Note and the other Loan Documents shall inure to the
benefit of and be binding upon the parties and their respective heirs, legal representatives,
successors and assigns. Bank’s interests in and rights under this Note and the other Loan
Documents are freely assignable, in whole or in part, by Bank. In addition, nothing in this Note
or any of the other Loan Documents shall prohibit Bank from pledging or assigning this Note or any
of the other Loan Documents or any interest therein to any Federal Reserve Bank. Borrower shall
not assign its rights and interest hereunder without the prior written consent of Bank, and any
attempt by Borrower to assign without Bank’s prior written consent is null and void. Any
assignment shall not release Borrower from the Obligations. Applicable Law; Conflict Between
Documents. This Note and, unless otherwise provided in any other Loan Document, the other Loan
Documents shall be governed by and interpreted in accordance with federal law and, except as
preempted by federal law, the laws of the state named in Bank’s address on the first page hereof
without regard to that state’s conflict of laws principles. If the terms of this Note should
conflict with the terms of any loan agreement or any commitment letter that survives closing, the
terms of this Note shall control. Borrower’s Accounts. Except as
prohibited by law, Borrower grants Bank a security interest in all of Borrower’s deposit accounts
and investment property with Bank and any of its affiliates. Swap Agreements. All swap agreements
(as defined in 11 U.S.C. § 101, as in effect from time to time), if any, between Borrower and Bank
or its affiliates are independent agreements governed by the written provisions of said swap
agreements, which will remain in full force and effect, unaffected by any repayment, prepayment,
acceleration, reduction, increase or change in the terms of this Note, except as otherwise
expressly provided in said written swap agreements, and any payoff statement from Bank relating to
this Note shall not apply to said swap agreements except as otherwise expressly provided in such
payoff statement. Jurisdiction. Borrower irrevocably agrees to non-exclusive personal
jurisdiction in the state named in the Bank’s address on the first page hereof. Severability. If
any provision of this Note or of the other Loan Documents shall be prohibited or invalid under
applicable law, such provision shall be ineffective but only to the extent of such

5

 

prohibition or
invalidity, without invalidating the remainder of such provision or the remaining provisions of
this Note or other such document. Payments. All payments shall be mailed to Bank at Commercial
Loan Services, P. O. Box 740502, Atlanta, GA 30374-0502; or other such address as provided by Bank
in writing. Notices. Any notices to Borrower shall be sufficiently given, if in writing and
mailed or delivered to the Borrower’s address shown above or such other address as provided
hereunder, and to Bank, if in writing and mailed or delivered to Wachovia Bank, National
Association, Mail Code VA7628, P. O. Box 13327, Roanoke, VA 24040 or Wachovia Bank, National
Association, Mail Code VA7628, 10 South Jefferson Street, Roanoke, VA 24011 or such other address
as Bank may specify in writing from time to time. Notices to Bank must include the mail code. In
the event that Borrower changes Borrower’s address at any time prior to the date the Obligations
are paid in full, Borrower agrees to promptly give written notice of said change of address by
registered or certified mail, return receipt requested, all charges prepaid. Plural; Captions.
All references in the Loan Documents to Borrower, guarantor, person, document or other nouns of
reference mean both the singular and plural form, as the case may be, and the term “person” shall
mean any individual, person or entity. The captions contained in the Loan Documents are inserted
for convenience only and shall not affect the meaning or interpretation of the Loan Documents.
Advances. Bank may, in its sole discretion, make other advances which shall be deemed to be
advances under this Note, even though the stated principal amount of this Note may be exceeded as a
result thereof. Posting of Payments. All payments received during normal banking hours after 2:00
p.m. local time at the address for payments set forth above shall be deemed received at the opening
of the next banking day. Joint and Several Obligations. If there is more than one Borrower, then
each is jointly and severally obligated together with all other parties obligated for the
Obligations. Fees and Taxes. Borrower shall promptly pay all documentary, intangible recordation
and/or similar taxes on this transaction whether assessed at closing or arising from time to time.
LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES. EACH OF THE PARTIES HERETO, INCLUDING BANK BY
ACCEPTANCE HEREOF, AGREES THAT IN ANY JUDICIAL, MEDIATION OR ARBITRATION PROCEEDING OR ANY CLAIM OR
CONTROVERSY BETWEEN OR AMONG THEM THAT MAY ARISE OUT OF OR BE IN ANY WAY CONNECTED WITH THIS
AGREEMENT, THE LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN OR AMONG THEM OR THE
OBLIGATIONS EVIDENCED HEREBY OR RELATED HERETO, IN NO EVENT SHALL ANY PARTY HAVE A REMEDY OF, OR BE
LIABLE TO THE OTHER
FOR, (1) INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR (2) PUNITIVE OR EXEMPLARY DAMAGES. EACH OF
THE PARTIES HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY
HAVE OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY SUCH PROCEEDING, CLAIM OR CONTROVERSY,
WHETHER THE SAME IS RESOLVED BY ARBITRATION, MEDIATION, JUDICIALLY OR OTHERWISE. Patriot Act
Notice. To help fight the funding of terrorism and money laundering activities, Federal law
requires all financial institutions to obtain, verify, and record information that identifies each
person who opens an account. For purposes of this section, account shall be understood to include
loan accounts. Final Agreement. This Note and the other Loan Documents represent the final
agreement between the parties and may not be contradicted by evidence of prior or contemporaneous
agreements of the parties. There are no unwritten agreements between the parties.

ARBITRATION. Upon demand of any party hereto, whether made before or after institution of any
judicial proceeding, any claim or controversy arising out of or relating to the Loan Documents
between parties hereto (a “Dispute”) shall be resolved by binding arbitration conducted under and
governed by the Commercial Financial Disputes Arbitration Rules (the “Arbitration Rules”) of the
American Arbitration Association (the “AAA”) and the Federal Arbitration Act. Disputes may
include, without limitation, tort claims, counterclaims, a dispute as to whether a matter is
subject to arbitration, or claims arising from documents executed in the future, but shall
specifically exclude claims brought as or converted to class actions. A judgment upon the award
may be entered in any court having jurisdiction. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to swap agreements. Special Rules. All
arbitration hearings shall be conducted in the city named in the address of Bank first stated
above. A hearing shall begin within 90 days of demand for arbitration and all hearings shall
conclude within 120 days of demand for arbitration. These time limitations may not be extended
unless a

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party shows cause for extension and then for no more than a total of 60 days. The
expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000.00. Arbitrators shall be licensed attorneys selected
from the Commercial Financial Dispute Arbitration Panel of the AAA. The parties do not waive
applicable Federal or state substantive law except as provided herein. Preservation and Limitation
of Remedies. Notwithstanding the preceding binding arbitration provisions, the parties agree to
preserve, without diminution, certain remedies that any party may exercise before or after an
arbitration proceeding is brought. The parties shall have the right to proceed in any court of
proper jurisdiction or by self-help to exercise or prosecute the following remedies, as applicable:
(i) all rights to foreclose against any real or personal property or other security by exercising
a power of sale or under applicable law by judicial foreclosure including a proceeding to confirm
the sale; (ii) all rights of self-help including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property; (iii) obtaining
provisional or ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Any claim or controversy with regard to any
party’s entitlement to such remedies is a Dispute. Waiver of Jury Trial. THE PARTIES ACKNOWLEDGE
THAT BY AGREEING TO BINDING ARBITRATION THEY
HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A DISPUTE AS TO WHICH
BINDING ARBITRATION HAS BEEN DEMANDED.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, Borrower, on the day and year first above written, has caused this Note to
be duly executed under seal.

	 	 	 	 	 
	 	PORTRAIT INNOVATIONS, INC., a Delaware

corporation

 	 
	 	By:  	/s/ John Grosso
 	(SEAL)
	 	 	Name:  	John Grosso 	 
	 	 	Title:  	President and
Chief Executive Officer 	 
	 

8exv10w10

Exhibit 10.10

SECURITY AGREEMENT

March 19, 2009

PORTRAIT INNOVATIONS, INC.

2016 Ayrsley Town Boulevard, Suite 200

Charlotte, North Carolina 28273

(Individually and collectively “Debtor”)

WACHOVIA BANK, NATIONAL ASSOCIATION

301 South Tryon Street

T -28, NC0334

Charlotte, North Carolina 28202

(Hereinafter referred to as “Bank”)

This Security Agreement (this “Security Agreement”) is entered into this 19th day of
March, 2009, by Debtor in favor of Bank, and amends, restates and replaces in its entirety that
certain Further Amended and Restated Security Agreement dated October 27, 2008, by Debtor in favor
of Bank.

For value received and to secure payment and performance of any and all obligations of Debtor (also
referred to herein as “Borrower”) to Bank created, arising or evidenced by or under that certain
Loan Agreement dated as of the date hereof, between Debtor and Bank, the “Note” and any of the
related “Loan Documents,” each as defined therein, as any of such documents may be renewed,
extended or otherwise modified from time to time, in each case whether direct or indirect, absolute
or contingent, now existing or hereafter arising or acquired, including swap agreements (as defined
in 11 U.S.C. § 101, as in effect from time to time), future advances, and all costs and expenses
incurred by Bank to obtain, preserve, perfect and enforce the security interest granted herein and
to maintain, preserve and collect the property subject to the security interest (collectively,
“Obligations”), Debtor hereby grants to Bank a continuing security interest in and lien upon the
following described property, whether now owned or hereafter acquired, and any additions,
replacements, accessions, or substitutions thereof and all cash and non-cash proceeds and products
thereof (collectively, “Collateral”):

All of the personal property of Debtor of every kind and nature including, without limitation, all
accounts, equipment, accessions, inventory, chattel paper, instruments, investment property,
documents, letter-of-credit rights, deposit accounts, and general intangibles, wherever located.

Debtor hereby represents and agrees that:

OWNERSHIP. Debtor owns the Collateral. If Collateral is being acquired with the proceeds of an
advance under the Loan Documents, Debtor authorizes Bank to disburse proceeds directly to the
seller of the Collateral. The Collateral is free and clear of all liens, security interests, and
claims except those previously reported in writing to and approved by Bank, and Debtor will keep
the Collateral free and clear from all liens, security interests and claims, other than those
granted to or approved by Bank.

NAME AND OFFICES; JURISDICTION OF ORGANIZATION. The name and address of Debtor appearing at the
beginning of this Agreement are Debtor’s exact legal name and the address of its chief executive
office. There has been no change in the name of Debtor, or the name under which Debtor conducts
business, within the five years preceding the date hereof except as previously reported in writing
to Bank. Debtor has not moved its chief executive office within the five years preceding the date
hereof except as previously reported in writing to Bank. Debtor is organized under the laws of the
State of Delaware and has not changed the jurisdiction of its organization within the five years
preceding the date hereof except as previously reported in writing to Bank.

TITLE/TAXES. Debtor has good and marketable title to the Collateral and will warrant and defend
same against all claims. Debtor will not transfer, sell, or lease Collateral (except as permitted
herein). Debtor agrees to pay promptly all taxes and assessments upon or for the use of Collateral
and on this Security

 

 

Agreement unless contested in good faith and diligently pursued and adequate reserves therefor are
maintained by Debtor. At its option, Bank may discharge taxes, liens, security interests or other
encumbrances at any time levied or placed on Collateral. Debtor agrees to reimburse Bank, on
demand, for any such payment made by Bank. Any amounts so paid shall be added to the Obligations.

WAIVERS. Debtor agrees not to assert against Bank as a defense (legal or equitable), as a set-off,
as a counterclaim, or otherwise, any claims Debtor may have against any seller or lessor that
provided personal property or services relating to any part of the Collateral or against any other
party liable to Bank for all or any part of the Obligations. Debtor waives all exemptions and
homestead rights with regard to the Collateral. Debtor waives any and all rights to any bond or
security which might be required by applicable law prior to the exercise of any of Bank’s remedies
against any Collateral. All rights of Bank and security interests hereunder, and all obligations
of Debtor hereunder, shall be absolute and unconditional, not discharged or impaired irrespective
of (and regardless of whether Debtor receives any notice of): (i) any lack of validity or
enforceability of any Loan Document; (ii) any change in the time, manner or place of payment or
performance, or in any term, of all or any of the Obligations or the Loan Documents or any other
amendment or waiver of or any consent to any departure from any Loan Document; or (iii) any
exchange, insufficiency, unenforceability, enforcement, release, impairment or non-perfection of
any collateral, or any release of or modifications to or insufficiency, unenforceability or
enforcement of the obligations of any guarantor or other obligor. To the extent permitted by law,
Debtor hereby waives any rights under any valuation, stay, appraisement, extension or redemption
laws now existing or which may hereafter exist and which, but for this provision, might be
applicable to any sale or disposition of the Collateral by Bank; and any other circumstance which
might otherwise constitute a defense available to, or a discharge of any party with respect to the
Obligations.

NOTIFICATIONS; LOCATION OF COLLATERAL. Debtor will notify Bank in writing at least 30 days prior
to any change in: (i) Debtor’s chief place of business and/or residence; (ii) Debtor’s name or
identity; (iii) Debtor’s corporate/organizational structure; or (iv) the jurisdiction in which
Debtor is organized. In addition, Debtor shall promptly notify Bank of any claims or alleged
claims of any other person or entity to the Collateral or the institution of any litigation,
arbitration, governmental investigation or administrative proceedings against or affecting the
Collateral. Debtor will keep Collateral at the location(s) previously provided to Bank until such
time as Bank provides written advance consent to a change of location. Debtor will bear the cost
of preparing and filing any documents necessary to protect Bank’s liens.

COLLATERAL CONDITION AND LAWFUL USE. Debtor represents that the Collateral is in good repair and
condition and that Debtor shall use reasonable care to prevent Collateral from being damaged or
depreciating, normal wear and tear excepted. Debtor shall immediately notify Bank of any material
loss or damage to Collateral. Debtor shall not permit any item of Collateral to become a fixture
to real estate or an accession to other personal property unless such property is also Collateral
hereunder. Debtor represents it is in compliance in all respects with all laws, rules and
regulations applicable to the Collateral and its properties, operations, business, and finances.

RISK OF LOSS AND INSURANCE. Debtor shall bear all risk of loss with respect to the Collateral.
The injury to or loss of Collateral, either partial or total, shall not release Debtor from payment
or other performance hereof. Debtor agrees to obtain and keep in force property insurance on the
Collateral with a Lender’s Loss Payable Endorsement in favor of Bank and commercial general
liability insurance naming Bank as Additional Insured. Such insurance is to be in form and amounts
satisfactory to Bank and issued by reputable insurance carriers satisfactory to Bank with a Best
Insurance Report Key Rating of at least “A-”. All such policies shall provide to Bank a minimum of
30 days written notice of cancellation. Debtor shall furnish to Bank such policies, or other
evidence of such policies satisfactory to Bank. If Debtor fails to obtain or maintain in force
such insurance or fails to furnish such evidence, Bank is authorized, but not obligated, to
purchase any or all insurance or “Single Interest Insurance” protecting such interest as Bank deems
appropriate against such risks and for such coverage and for such amounts, including either the
loan amount or value of the Collateral, all at its discretion, and at Debtor’s expense. In such
event, Debtor agrees to reimburse Bank for the cost of such insurance and Bank may add such

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cost to the Obligations. Debtor shall bear the risk of loss to the extent of any deficiency in the
effective insurance coverage with respect to loss or damage to any of the Collateral. Debtor
hereby assigns to Bank the proceeds of all property insurance covering the Collateral up to the
amount of the Obligations and directs any insurer to make payments directly to Bank. Debtor hereby
appoints Bank its attorney-in-fact, which appointment shall be irrevocable and coupled with an
interest for so long as Obligations are unpaid, to file proof of loss and/or any other forms
required to collect from any insurer any amount due from any damage or destruction of Collateral,
to agree to and bind Debtor as to the amount of said recovery, to designate payee(s) of such
recovery, to grant releases to insurer, to grant subrogation rights to any insurer, and to endorse
any settlement check or draft. Debtor agrees not to exercise any of the foregoing powers granted
to Bank without Bank’s prior written consent.

FINANCING STATEMENTS, CERTIFICATES OF TITLE, POWER OF ATTORNEY. No financing statement (other than
any filed or approved by Bank) covering any Collateral is on file in any public filing office.
Debtor authorizes the filing of one or more financing statements covering the Collateral in form
satisfactory to Bank, and without Debtor’s signature where authorized by law, agrees to deliver
certificates of title on which Bank’s lien has been indicated covering any Collateral subject to a
certificate of title statute, and will pay all costs and expenses of filing or applying for the
same or of filing this Security Agreement in all public filing offices, where filing is deemed by
Bank to be desirable. Debtor hereby constitutes and appoints Bank the true and lawful attorney of
Debtor with full power of substitution to take any and all appropriate action and to execute any
and all documents, instruments or applications that may be necessary or desirable to accomplish the
purpose and carry out the terms of this Security Agreement, including, without limitation, to
complete, execute, and deliver any Control Agreement(s) by Bank, Debtor and Third Party(ies) that
may be or become required in connection herewith (individually and collectively the “Control
Agreement”), and any instructions to Third Party(ies) regarding, among other things, control and
disposition of any Collateral which is the subject of such Control Agreement(s). The foregoing
power of attorney is coupled with an interest and shall be irrevocable until all of the Obligations
have been paid in full. Neither Bank nor anyone acting on its behalf shall be liable for acts,
omissions, errors in judgment, or mistakes in fact in such capacity as attorney-in-fact. Debtor
ratifies all acts of Bank as attorney-in-fact. Debtor agrees to take such other actions, at
Debtor’s expense, as might be requested for the perfection, continuation and assignment, in whole
or in part, of the security interests granted herein and to assure and preserve Bank’s intended
priority position. If certificates, passbooks, or other documentation or evidence is/are issued or
outstanding as to any of the Collateral, Debtor will cause the security interests of Bank to be
properly protected, including perfection by notation thereon or delivery thereof to Bank.

CONTROL. Debtor will cooperate with Bank in obtaining control with respect to Collateral
consisting of electronic chattel paper. Debtor authorizes and directs Third Party to comply with
the terms of this Security Agreement, to enter into a Control Agreement, to mark its records to
show the security interest of and/or the transfer to Bank of the property pledged hereunder.

CHATTEL PAPER, ACCOUNTS, GENERAL INTANGIBLES. Debtor warrants that Collateral consisting of
chattel paper, accounts, or general intangibles is (i) genuine and enforceable in accordance with
its terms; (ii) not subject to any defense, set-off, claim or counterclaim of a material nature
against Debtor except as to which Debtor has notified Bank in writing; and (iii) not subject to any
other circumstances that would impair the validity, enforceability, value, or amount of such
Collateral except as to which Debtor has notified Bank in writing. Debtor shall not amend, modify
or supplement any material lease, contract or agreement contained in Collateral or waive any
material provision therein, without prior written consent of Bank. Debtor will not create any
tangible chattel paper without placing a legend on the chattel paper acceptable to Bank indicating
that Bank has a security interest in the chattel paper. Debtor will not create any electronic
chattel paper without taking all steps deemed necessary by Bank to confer control of the electronic
chattel paper upon Bank in accordance with the UCC.

ACCOUNT INFORMATION. From time to time, at Bank’s request, Debtor shall provide Bank with
schedules listing all accounts created or acquired by Debtor.

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ACCOUNT DEBTORS. If a Default should occur and be continuing, Bank shall have the right to notify
the account debtors obligated on any or all of the Collateral to make payment thereof directly to
Bank and Bank may take control of all proceeds of any such Collateral, which rights Bank may
exercise at any time.

The cost of such collection and enforcement, including attorneys’ fees and expenses, shall be borne
solely by Debtor whether the same is incurred by Bank or Debtor. If a Default should occur and be
continuing, Debtor will, upon receipt of all checks, drafts, cash and other remittances in payment
on Collateral, deposit the same in a special bank account maintained with Bank, over which Bank
also has the power of withdrawal.

If a Default should occur and be continuing, no discount, credit, or allowance shall be granted by
Debtor to any account debtor and no return of merchandise shall be accepted by Debtor without
Bank’s consent. Bank may, after Default, settle or adjust disputes and claims directly with
account debtors for amounts and upon terms that Bank considers advisable, and in such cases Bank
will credit the Obligations with the net amounts received by Bank, after deducting all of the
expenses incurred by Bank. Debtor agrees to indemnify and defend Bank and hold it harmless with
respect to any claim or proceeding arising out of any matter related to collection of Collateral.

GOVERNMENT CONTRACTS. If any Collateral covered hereby arises from obligations due to Debtor from
any governmental unit or organization, Debtor shall immediately notify Bank in writing and execute
all documents and take all actions deemed necessary by Bank to ensure recognition by such
governmental unit or organization of the rights of Bank in the Collateral.

INVENTORY. So long as no Default has occurred, Debtor shall have the right in the regular course
of business, to process and sell Debtor’s inventory. If a Default should occur and be continuing,
Debtor will, upon receipt of all checks, drafts, cash and other remittances, in payment of
Collateral sold, deposit the same in a special bank account maintained with Bank, over which Bank
also has the power of withdrawal. Debtor agrees to notify Bank immediately in the event that any
inventory purchased by or delivered to Debtor is evidenced by a bill of lading, dock warrant, dock
receipt, warehouse receipt or other document of title and to deliver such document to Bank upon
request.

INSTRUMENTS, CHATTEL PAPER., DOCUMENTS. Any Collateral that is, or is evidenced by, instruments,
chattel paper or negotiable documents will be properly assigned to and the originals of any such
Collateral in tangible form deposited with and held by Bank, unless Bank shall hereafter otherwise
direct or consent in writing. Upon a Default that is continuing, Bank may, without notice, so long
as there are outstanding Obligations, exercise any or all rights of collection, conversion, or
exchange and other similar rights, privileges and options pertaining to such Collateral, but shall
have no duty to do so.

COLLATERAL DUTIES. Bank shall have no custodial or ministerial duties to perform with respect to
Collateral pledged except as set forth herein; and by way of explanation and not by way of
limitation, Bank shall incur no liability for any of the following: (i) loss or depreciation of
Collateral (unless caused by its willful misconduct or gross negligence), (ii) failure to present
any paper for payment or protest, to protest or give notice of nonpayment, or any other notice with
respect to any paper or Collateral.

TRANSFER OF COLLATERAL. Bank may assign its rights in Collateral or any part thereof to any
assignee who shall thereupon become vested with all the powers and rights herein given to Bank with
respect to the property so transferred and delivered, and Bank shall thereafter be forever relieved
and fully discharged from any liability with respect to such property so transferred, but with
respect to any property not so transferred, Bank shall retain all rights and powers hereby given.

INSPECTION, BOOKS AND RECORDS. Debtor will at all times keep accurate and complete records
covering each item of Collateral, including the proceeds therefrom. Bank, or any of its agents,
shall have the right, no more than twice per calendar year (unless a Default has occurred and is
continuing), upon reasonable prior notice and during normal business hours, at Debtor’s expense, to
inspect, audit, and examine the Collateral and to make copies of and extracts from the books,
records, journals, orders,

4

 

receipts, correspondence and other data relating to Collateral, Debtor’s business or any other
transaction between the parties hereto. Debtor will at its expense furnish Bank copies thereof
upon request. For the further security of Bank, it is agreed that Bank has and is hereby granted a
security interest in all books and records of Debtor pertaining to the Collateral.

COMPLIANCE WITH LAW. Debtor will comply with all federal, state and local laws and regulations,
applicable to it, including without limitation, laws and regulations relating to the environment,
labor or economic sanctions, in the creation, use, operation, manufacture and storage of the
Collateral and the conduct of its business.

REGULATION U. None of the proceeds of the credit secured hereby shall be used directly or
indirectly for the purpose of purchasing or carrying any margin stock in violation of any of the
provisions of Regulation U of the Board of Governors of the Federal Reserve System (“Regulation
U”), or for the purpose of reducing or retiring any indebtedness which was originally incurred to
purchase or carry margin stock or for any other purchase which might render the Loan a “Purpose
Credit” within the meaning of Regulation U.

CROSS COLLATERALIZATION LIMITATION. As to any other existing or future consumer purpose loan made
by Bank to Debtor, within the meaning of the Federal Consumer Credit Protection Act, Bank expressly
waives any security interest granted herein in Collateral that Debtor uses as a principal dwelling
and household goods.

ATTORNEYS’ FEES AND OTHER COSTS OF COLLECTION. Debtor shall pay all of Bank’s reasonable expenses
incurred in enforcing this Security Agreement and in preserving and liquidating Collateral,
including but not limited to, reasonable arbitration, paralegals’, attorneys’ and experts’ fees and
expenses, whether incurred with or without the commencement of a suit, trial, arbitration, or
administrative proceeding, or in any appellate or bankruptcy proceeding.

DEFAULT. If any of the following occurs, a default (“Default”) under this Security Agreement shall
exist: Loan Document Default. A default under any loan Document. Collateral Loss or Destruction.
Any loss, theft, substantial damage, or destruction of Collateral not fully covered by insurance,
or as to which insurance proceeds are not remitted to Bank within 30 days of the loss. Collateral
Sale, Lease or Encumbrance. Any sale, lease, or encumbrance of any Collateral not specifically
permitted herein without prior written consent of Bank. Levy, Seizure or Attachment. The making
of any levy, seizure, or attachment on or of Collateral which is not removed within 10 days.
Unauthorized Collection of Collateral. Any attempt to collect, cash in or otherwise recover
deposits that are Collateral. Third Party Breach. Any default or breach by a Third Party of any
provision contained in any Control Agreement executed in connection with any of the Collateral.
Unauthorized Termination. Any attempt to terminate, revoke, rescind, modify, or violate the terms
of this Security Agreement or any Control Agreement without the prior written consent of Bank.

REMEDIES ON DEFAULT (INCLUDING POWER OF SALE). If a Default occurs Bank shall have all the rights
and remedies of a secured party under the Uniform Commercial Code. Without limitation thereto,
Bank shall have the following rights and remedies: (i) to take immediate possession of Collateral,
without notice or resort to legal process, and for such purpose, to enter upon any premises on
which Collateral or any part thereof may be situated and to remove the same therefrom, or, at its
option, to render Collateral unusable or dispose of said Collateral on Debtor’s premises; (ii) to
require Debtor to assemble the Collateral and make it available to Bank at a place to be designated
by Bank; (iii) to exercise its or its affiliate’s right of set-off or Bank lien as to any monies of
Debtor deposited in deposit accounts and investment accounts of any nature maintained by Debtor
with Bank or affiliates of Bank, without advance notice, regardless of whether such accounts are
general or special; (iv) to dispose of Collateral, as a unit or in parcels, separately or with any
real property interests also securing the Obligations, in any county or place to be selected by
Bank, at either private or public sale (at which public sale Bank may be the purchaser) with or
without having the Collateral physically present at said sale.

5

 

Any notice of sale, disposition or other action by Bank required by law and sent to Debtor at
Debtor’s address shown above, or at such other address of Debtor as may from time to time be shown
on the records of Bank, at least 5 days prior to such action, shall constitute reasonable notice to
Debtor. Notice shall be deemed given or sent when mailed postage prepaid to Debtor’s address as
provided herein. Bank shall be entitled to apply the proceeds of any sale or other disposition of
the Collateral, and the payments received by Bank with respect to any of the Collateral, to
Obligations in such order and manner as Bank may determine. Collateral that is subject to rapid
declines in value and is customarily sold in recognized markets may be disposed of by Bank in a
recognized market for such collateral without providing notice of sale. Debtor waives any and all
requirements that the Bank sell or dispose of all or any part of the Collateral at any particular
time, regardless of whether Debtor has requested such sale or disposition.

REMEDIES ARE CUMULATIVE. No failure on the part of Bank to exercise, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by Bank or any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any right, power or remedy. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law, in equity, or in other Loan
Documents.

INDEMNIFICATION. Debtor shall protect, indemnify and save harmless Bank from and against all
losses, liabilities, obligations, claims, damages, penalties, fines, causes of action, costs and
expenses (including, without limitation, reasonable attorneys’ fees and expenses) (collectively,
“Damages”) imposed upon, incurred by or asserted or assessed against Bank on account of or in
connection with (i) the Loan Documents or any failure or alleged failure of Debtor to comply with
any of the terms of, or the inaccuracy or breach of any representation in, the Loan Documents, (ii)
the Collateral or any claim of loss or damage to the Collateral or any injury or claim of injury
to, or death of, any person or property that may be occasioned by any cause whatsoever pertaining
to the Collateral or the use, occupancy or operation thereof, (iii) any failure or alleged failure
of Debtor to comply with any law, rule or regulation applicable to it or to the Collateral or the
use, occupancy or operation of the Collateral (including, without limitation, the failure to pay
any taxes, fees or other charges), (iv) any Damages whatsoever by reason of any alleged action,
obligation or undertaking of Bank relating in any way to or any matter contemplated by the Loan
Documents, or (v) any claim for brokerage fees or such other commissions relating to the Collateral
or any other Obligations; provided that such indemnity shall be effective only to the extent of any
Damages that may be sustained by Bank in excess of any net proceeds received by it from any
insurance of Debtor (other than self-insurance) with respect to such Damages. Nothing contained
herein shall require Debtor to indemnify Bank for any Damages resulting from Bank’s gross
negligence or its willful misconduct. The indemnity provided for herein shall survive payment of
the Obligations and shall extend to the officers, directors, employees and duly authorized agents
of Bank. In the event Bank incurs any Damages arising out of or in any way relating to the
transaction contemplated by the Loan Documents (including any of the matters referred to in this
section), the amounts of such Damages shall be added to the Obligations, shall bear interest, to
the extent permitted by law, at the interest rate borne by the Obligations from the date incurred
until paid and shall be payable on demand.

MISCELLANEOUS. (i) Amendments and Waivers. No waiver, amendment or modification of any provision
of this Security Agreement shall be valid unless in writing and signed by Debtor and an officer of
Bank. No waiver by Bank of any Default shall operate as a waiver of any other Default or of the
same Default on a future occasion. (ii) Assignment. All rights of Bank hereunder are freely
assignable, in whole or in part, and shall inure to the benefit of and be enforceable by Bank, its
successors, assigns and affiliates. Debtor shall not assign its rights and interest hereunder
without the prior written consent of Bank, and any attempt by Debtor to assign without Bank’s prior
written consent is null and void. Any assignment shall not release Debtor from the Obligations.
This Security Agreement shall be binding upon Debtor, and the heirs, personal representatives,
successors, and assigns of Debtor. (iii) Applicable Law; Conflict Between Documents. This
Security Agreement shall be governed by and construed under the law of the jurisdiction named in
the address of the Bank shown on the first page hereof (the “Jurisdiction”) without regard to that
Jurisdiction’s conflict of laws principles, except to the extent that the UCC requires the
application of the law of a different jurisdiction. If any terms of this Security Agreement
conflict with

6

 

the terms of any commitment letter or loan proposal, the terms of this Security Agreement shall
control. (iv) Jurisdiction. Debtor irrevocably agrees to non-exclusive personal jurisdiction in
the state identified as the Jurisdiction above. (v) Severability. If any provision of this
Security Agreement shall be prohibited by or invalid under applicable law, such provision shall be
ineffective but only to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Security Agreement. (vi) Notices.
Any notices to Debtor shall be sufficiently given, if in writing and mailed or delivered to the
address of Debtor shown above or such other address as provided hereunder; and to Bank, if in
writing and mailed or delivered to Wachovia Bank, National Association, Mail Code VA7628, P. O. Box
13327, Roanoke, VA 24040 or Wachovia Bank, National Association, Mail Code VA7628, 10 South
Jefferson Street, Roanoke, VA 24011 or such other address as Bank may specify in writing from time
to time. Notices to Bank must include the mail code. In the event that Debtor changes Debtor’s
mailing address at any time prior to the date the Obligations are paid in full, Debtor agrees to
promptly give written notice of said change of address by registered or certified mail, return
receipt requested, all charges prepaid. (vii) Captions. The captions contained herein are
inserted for convenience only and shall not affect the meaning or interpretation of this Security
Agreement or any provision hereof. The use of the plural shall also mean the singular, and vice
versa. (viii) Joint and Several Liability. If more than one party has signed this Security
Agreement, such parties are jointly and severally obligated hereunder. (ix) Binding Contract.
Debtor by execution and Bank by acceptance of this Security Agreement, agree that each party is
bound by all terms and provisions of this Security Agreement. FINAL AGREEMENT. This Agreement and
the other Loan Documents represent 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 oral agreements between the parties.

DEFINITIONS. Loan Documents. The term “Loan Documents” refers to all documents, including this
Agreement, whether now or hereafter existing, executed in connection with or related to the
Obligations, and may include, without limitation and whether executed by Debtor or others,
commitment letters that survive closing, loan agreements, promissory notes, guaranty agreements,
deposit or other similar agreements, other security agreements, letters of credit and applications
for letters of credit, security instruments, financing statements, mortgage instruments, any
renewals or modifications, whenever any of the foregoing are executed, but does not include swap
agreements (as defined in 11 U.S.C. § 101, as in effect from time to time). Third Party. The term
“Third Party” means any Broker, collateral Agent, Securities Intermediary and/or bank which from
time to time maintains a securities account, and is acting in such capacity, for Debtor or
maintains a deposit account for Debtor with respect to any part of the Collateral. UCC. “UCC”
means the Uniform Commercial Code as presently and hereafter enacted in the Jurisdiction. Terms
defined in the UCC. Any term used in this Agreement and in any financing statement filed in
connection herewith which is defined in the UCC and not otherwise defined in this Agreement or any
other Loan Document has the meaning given to the term in the UCC.

[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, Debtor, on the day and year first written above, has caused this Security
Agreement to be executed under seal.

	 	 	 	 	 
	 	PORTRAIT INNOVATIONS, INC.,

a Delaware corporation

 	 
	 	By:  	/s/ John Grosso
 	(SEAL)
	 	 	Name:  	John Grosso 	 
	 	 	Title:  	President and

Chief Executive Officer

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