Document:

Second amendment to credit agreement and consent, dated July 2,2004

 Exhibit 10.4 
  
 SECOND AMENDMENT TO CREDIT 
 AGREEMENT AND CONSENT 
  
 THIS SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT (the “Agreement”) is entered into as of July 2, 2004 among PCA LLC, a Delaware limited liability company (the “Borrower”), PCA INTERNATIONAL, INC., a
North Carolina corporation (“PCA-NC”), the Domestic Subsidiaries of the Borrower party hereto (collectively with PCA-NC, the “Guarantors”), the Lenders and BANK OF AMERICA, N.A., as Agent (in such capacity, the
“Agent”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to such terms in the Credit Agreement. 
  
 RECITALS 
  
 WHEREAS, the Borrower, the Guarantors, the Agent and the Lenders are parties to that certain Credit Agreement dated as of June 27, 2002, as amended by the
First Amendment to Credit Agreement dated as of September 17, 2002 (as otherwise amended, modified, supplemented, extended or restated from time to time, the “Credit Agreement”); 
  
 WHEREAS, the Borrower has requested and the Lenders have agreed to consent to
the merger of PCA-NC into Portrait Corporation of America, Inc., a Delaware corporation (“PCA-DE”) subject to the terms and conditions specified in this Agreement; 
  
 NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
  
 Section 1. Reaffirmation of Existing Debt. The Credit Parties acknowledge and confirm as of the date hereof (a) that the Agent, on behalf of the
Lenders, has a valid and enforceable first priority perfected security interest in the Collateral, subject only to Permitted Liens, (b) that the Borrower’s obligation to repay the outstanding principal amount of the Loans and reimburse the
Issuing Lender for any drawing on a Letter of Credit is unconditional and not subject to any offsets, defenses or counterclaims, (c) that the Agent and the Lenders have performed fully all of their respective obligations under the Credit Agreement
and the other Credit Documents, and (d) by entering into this Agreement, the Lenders do not waive or release (except as specifically provided in Section 2 hereof) any term or condition of the Credit Agreement or any of the other Credit Documents or
any of their rights or remedies under such Credit Documents or applicable law or any of the obligations of any Credit Party thereunder. 
  
 Section 2. Consent. Subject to the other terms and conditions of this Agreement, the Lenders hereby consent to the merger of PCA-NC into PCA-DE,
notwithstanding the terms of Sections 7.6(b), 8.4(b) and 8.16 of the Credit Agreement and Section 5(d) of the Security Agreement, provided that, immediately upon the consummation of such merger, the Agent (i) 

 shall be provided with satisfactory evidence that the merger of PCA-NC into PCA-DE has been consummated in accordance
with applicable law, including, without limitation, receipt of filed-stamped articles/certificates of merger in Delaware and North Carolina, (ii) shall have received a certified copy of the agreement and plan of merger between PCA-NC and PCA-DE and
(iii) shall have received a copy of the certificate of good standing, existence or its equivalent of PCA-DE certified as of a recent date by the State of North Carolina. 
  
 Section 3. Amendment to the Credit Agreement. 
  
 (a) Section 1.1. The definitions of “Consolidated EBITDA” and “Parent” set forth in
Section 1.1 of the Credit Agreement are hereby amended and restated in their entireties to read as follows: 
  
 “Consolidated EBITDA” means for any period for the Parent and its Subsidiaries on a consolidated basis, the sum of (i)
Consolidated Net Income for such period plus (ii), without duplication, an amount which, in the determination of Consolidated Net Income for such period has been deducted for (A) Consolidated Interest Expense, (B) total federal, state, local
or value-added taxes, domestic and foreign income taxes or other taxes, (C) depreciation and amortization, (D) Non-Recurring Expenses to the extent accrued during the period in question, (E) Consolidated Non-Cash Charges and (F) the amount of cash
bonuses paid to management in an amount not to exceed $1,000,000 during such period plus (iii) the amount of cash reimbursement payments received from Wal*Mart Stores, Inc. during such period to offset photography studio closure costs during
such period (to the extent not included in the calculation of Consolidated Net Income), minus (or plus) (iv) unrealized gains (or losses) recognized in such period pursuant to Statement of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Hedging Activities”, (or any successor or substitute provision) during such period, plus (v) to the extent not included in clause (ii) above, extraordinary charges related to workers’
compensation programs in the amount of (A) $2,000,000 for the fiscal quarter ending October 31, 2003 and (B) $800,000 for the fiscal quarter ending January 31, 2004 plus (vi) to the extent not included in clause (ii) above, additional
one-time charges in the amount of up to $1,200,000 relating to the execution of a loss portfolio transfer with respect to workers’ compensation programs, in each case on a consolidated basis determined in accordance with GAAP. Except as
expressly provided otherwise, the applicable period shall be for the four consecutive quarters ending as of the date of determination. 
  
 “Parent” means (a) prior to the effectiveness of the merger of PCA International, Inc., a North Carolina corporation,
into Portrait Corporation of America, Inc., a Delaware corporation, PCA International, Inc., a North Carolina corporation and (b) upon the effectiveness of the merger of PCA International, Inc., a North Carolina corporation, into Portrait
Corporation of America, Inc., a Delaware corporation, Portrait Corporation of America, Inc., a Delaware corporation. 
  

 2 

 (b) Section 2.1. The reference to “$10,000,000” appearing in Section 2.1(a)(iii)(C) of
the Credit Agreement is hereby deleted and replaced with a reference to “$15,000,000”. 
  
 (c) Section 3.3. The reference to “$10,000,000” appearing in Section 3.3(b)(i) of the Credit Agreement is hereby deleted and replaced
with a reference to “$15,000,000”. 
  
 Section 4.
Conditions Precedent. The effectiveness of this Agreement is subject to the satisfaction of each of the following conditions (each in form and substance reasonably satisfactory to the Agent): 
  
 (a) The Agent shall have received counterparts of this Agreement duly
executed by the Credit Parties, the Agent and the Lenders. 
  
 (b)
The Agent shall have received the following for PCA-DE: 
  
 (i) a duly executed Joinder Agreement substantially in the form of Exhibit 7.11; 
  
 (ii) (A) a copy of the certificate of incorporation of PCA-DE certified to be true and complete as of a recent date by the Secretary of
State of Delaware, (B) a certified copy of the bylaws of PCA-DE, (C) a certified copy of resolutions of PCA-DE approving and adopting the Credit Documents to which it is a party, the transactions contemplated therein and authorizing execution and
delivery thereof and (D) a copy of the certificate of good standing, existence or its equivalent certified as of a recent date by the State of Delaware; 
  
 (iii) an incumbency certificate certified as of a recent date; 
  
 (iv) an appropriate UCC financing statement in appropriate form for filing in the office of the Secretary of
State of Delaware; and 
  
 (v) an opinion of
counsel for PCA-DE relating to the Credit Documents and the transactions contemplated therein, in form and substance satisfactory to the Agent. 
  
 Section 5. Miscellaneous. 
  
 (a) The term “Credit Agreement” as used in each of the Credit Documents shall hereafter mean the Credit Agreement as amended by this Agreement.
Except as herein specifically agreed, the Credit Agreement, and the obligations of the Credit Parties thereunder and under the other Credit Documents, are hereby ratified and confirmed and shall remain in full force and effect according to their
terms. 
  

 3 

 (b) The Borrower and the Guarantors, as applicable, affirm the liens and security interests created and
granted in the Credit Agreement and the Credit Documents and agree that this Agreement shall in no manner adversely affect or impair such liens and security interests. 
  
 (c) The Borrower and the Guarantors hereby represent and warrant as follows: 
  
 (i) Each Credit Party has taken all necessary action to
authorize the execution, delivery and performance of this Agreement. 
  
 (ii) This Agreement has been duly executed and delivered by the Credit Parties and constitutes each of the Credit Parties’ legal, valid and binding obligations, enforceable in accordance with its terms, except as
such enforceability may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (ii) general principles of equity (regardless of whether
such enforceability is considered in a proceeding at law or in equity). 
  
 (iii) No consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental authority or third party is required in connection with the execution, delivery or
performance by any Credit Party of this Agreement. 
  
 (d) The
Credit Parties represent and warrant to the Lenders that (i) the representations and warranties of the Credit Parties set forth in Section 6 of the Credit Agreement are true and correct in all material respects as of the date hereof (except for
those which relate to an earlier date), (ii) no event has occurred and is continuing which constitutes a Default or an Event of Default and (iii) no Credit Party has any counterclaims, offsets, credits or defenses to the Credit Documents and the
performance of its obligations thereunder, or if any Credit Party has any such claims, counterclaims, offsets, credits or defenses to the Credit Documents or any transaction related to the Credit Documents, same are hereby waived, relinquished and
released in consideration of the Lenders’ execution and delivery of this Agreement. 
  
 (e) The Guarantors (i) acknowledge and consent to all of the terms and conditions of this Agreement, (ii) affirm all of their obligations under the Credit Documents and (iii) agree that this Agreement and all
documents executed in connection herewith do not operate to reduce or discharge the Guarantors’ obligations under the Credit Agreement or the other Credit Documents. 
  
 (f) This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by telecopy shall be effective as an original and shall constitute a representation that an executed original will be
delivered. 
  

 4 

 (g) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 
  

 5 

 Each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered
as of the date first above written. 
  

					
	 BORROWER:
	 	 	 	 PCA LLC,

	 	 	 	 	 a Delaware limited liability company

			
	 	 	By:	 	 /s/ Barry J. Feld

	 	 	Name:	 	 Barry J. Feld

	 	 	Title:	 	 CEO

			
	 GUARANTORS:
	 	 	 	 PCA INTERNATIONAL, INC.,

	 	 	 	 	 a North Carolina corporation

			
	 	 	 	 	 PCA PHOTO CORPORATION OF CANADA, INC.,

	 	 	 	 	 a North Carolina corporation

			
	 	 	 	 	 PHOTO CORPORATION OF AMERICA,

	 	 	 	 	 a North Carolina corporation

			
	 	 	 	 	 PCA NATIONAL LLC,

	 	 	 	 	 a Delaware limited liability company

			
	 	 	 	 	 AMERICAN STUDIOS, INC.,

	 	 	 	 	 a North Carolina corporation

			
	 	 	 	 	 PCA FINANCE CORP.,

	 	 	 	 	 a Delaware corporation

			
	 	 	By:	 	 /s/ Barry J. Feld

	 	 	Name:	 	 Barry J. Feld

	 	 	Title:	 	 CEO
 of each of the above-named Guarantors

	 	 	 	 	 
			
	 	 	 	 	 PCA NATIONAL OF TEXAS L.P.,

	 	 	 	 	 a Texas limited partnership

  

			
	By PCA National LLC, a Delaware limited liability company, its sole general partner
		
	 By:
	 	 /s/ Barry J. Feld

	 Name:
	 	 Barry J. Feld

	 Title:
	 	 CEO

  

	
	SECOND AMENDMENT TO CREDIT
	AGREEMENT AND CONSENT
	PCA INTERNATIONAL, INC.

					
	 ADMINISTRATIVE AGENT:
	 	 BANK OF AMERICA, N.A.

			
	 	 	By:	 	 /s/ Timothy H. Spanos

	 	 	Name:	 	 Timothy H. Spanos

	 	 	Title:	 	 Managing Director

		
	 LENDERS:
	 	 BANK OF AMERICA, N.A.

			
	 	 	By:	 	 /s/ Timothy H. Spanos

	 	 	Name:	 	 Timothy H. Spanos

	 	 	Title:	 	 Managing Director

		
	 	 	 U.S. BANK NATIONAL ASSOCIATION

			
	 	 	By:	 	 /s/ Juli K. Van Hook

	 	 	Name:	 	 Juli K. Van Hook

	 	 	Title:	 	 Vice President

  

	
	SECOND AMENDMENT TO CREDIT
	AGREEMENT AND CONSENT
	PCA INTERNATIONAL, INC.Cadmus FY 2004 Executive Incentive Plan

 Exhibit 10.1 
  
 FY 2004 Incentive Plan Description 
  
 Purpose 
  
 The Incentive Plan is designed to motivate and reward participants for the achievement of fiscal year financial and non-financial objectives that directly contribute to
the success of the various business groups and Cadmus overall. 
  
 Eligibility 
  
 Participation in the Plan is limited to
key managers at the Corporate and Group levels who have accountability for and significant impact on business strategy, business growth and profitability. Participants must be in salary grade 17 and above and their participation is confirmed at the
beginning of each Plan year. Participants must still be employed at the time of distribution generally late August following completion of the fiscal year. A minimum of six months service in an eligible position generally is required for
participation in the Plan. Awards to individuals with less than one year’s participation will be prorated based on the tenure in the eligible position. 
  
 Target Incentive Award 
  
 The Target Incentive Award is the amount that the participant is eligible to receive if the combined, weighted performance against the Plan objectives equals an overall
achievement level of 100%. Depending upon the scope and impact of the participant’s position, Target Incentive Awards range from 10% to 60% of base salary. 
  

In addition, participants are evaluated based on personal performance and objectives, which are set at the beginning of the year. For all group participants, one
common individual goal will be the achievement of the group’s overall sales budget for FY2004. The level of achievement for each participant’s overall performance and accomplishment of objectives also impacts the award. The actual award
received by the participant could be substantially higher or lower than the target amount as a result of their individual performance. 
  
 Corporate participants are evaluated based on Earnings Per Share (EPS) and business group participants on Operating Profit (OP) for their group with an added “Cadmus
Factor” based on EPS. 
  
 First Half Awards 
  
 No midyear payments will be made for FY 2004. 

 General Plan Provisions 
  
 Participation in the Plan terminates on the date the participant terminates employment with Cadmus, whether voluntary or involuntary.

  
 With the exception of disability, retirement or death, participants must be
actively employed on the date the awards are paid in order to receive an incentive award. Cadmus, at its sole discretion, may make an award to a former associate, or to the former associate’s estate, in such amount as it deems appropriate.

  
 Should a participant transfer to another business group during the Plan year,
the final award will be jointly determined and prorated for the time spent in each group. 
  
 Incentive award recommendations for all Plan participants are to be submitted to the Senior Vice President, Human Resources and Corporate Secretary by August 15, 2004. Award payments require approval by the CEO, Group
President and the Human Resource and Compensation Committee (HRCC) of the Board of Directors. Documentation of individual objectives and accomplishments may be required to be submitted along with the award recommendations at year-end. 
  
 The CEO and HRCC reserve the right to adjust the overall incentive pool and/or individual
incentive awards in their discretion for such matters and amounts as deemed necessary to meet minimally acceptable EPS requirements, to adjust for individual or division performance that falls below the Plan threshold or above the Plan maximum, or
to adjust for individual performance determined by the CEO or HRCC to require either positive or negative adjustment. 
  
 Payments will be made to participants in cash as soon as practical after the HRCC meeting in August 2004. 
  
 Nothing in this FY 2004 Incentive Plan Description or in any action taken thereunder shall affect the Company’s right to terminate at
any time and for any reason the employment of any associate who is a participant in the Plan. 
  
 Definitions 
  

			
	Base Salary	 	The base annual salary rate of a participant as of October 1 of the Plan Year or, if later, the time he or she is approved as a participant for a given year, exclusive of bonuses, commissions or
any special payments
		
	Earnings Per Share (EPS)	 	Net earnings, post incentive, but before unusual, one-time charges, gains or losses divided by average common shares outstanding. EPS does include ongoing savings from
restructuring.
		
	Operating Profit (OP)	 	Pre-incentive, operating earnings before one-time charges, gains or losses. Includes ongoing savings from restructuring.
		
	Plan Year	 	The period commencing July 1, 2003 and ending June 30, 2004 for which performance is being measured.

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