FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 24, 1995
ROSE'S STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-631 56-0382475
(Commission File Number) (IRS Employer Identification No.)
218 S. Garnett Street
Henderson, North Carolina 27536
(Address of principal executive offices) (Zip Code)
(919) 430-2600
(Registrant's telephone number, including area code)
1
<PAGE>
Item 5. Other Events
On September 5, 1993, the Registrant filed a voluntary Petition for
Relief under Chapter 11, Title 11 of the United States Code (the
"Bankruptcy Code") with the United States Bankruptcy Court for the Eastern
District of North Carolina, Raleigh Division (the "Court"). On August 1,
1994, the Registrant filed with the Court a proposed Joint Plan of
Reorganization with the consent of the official unsecured creditors
committee, the pre-petition secured senior noteholders, and the official
equity committee. On October 5, 1994, the Court approved a First Amended
Disclosure Statement that described the proposed First Amended Joint Plan
of Reorganization (the "Plan") and approving the solicitation of
acceptances and rejections of the Plan from various classes of creditors
and equity holders prior to the Court's holding a confirmation hearing. On
December 14, 1994, the Court confirmed the Plan and entered an order
("Confirmation Order") to that effect.
On February 3, 1995, the Court approved an amendment to the Plan to
set a fixed price for certain subscription rights to be offered to the
Company's equity holders. On February 13, 1995, the Court approved an
amendment to the Plan to change the record date, for determining the equity
holders entitled to receive warrants to purchase the new common stock (the
"Common Stock") to be issued by the Company upon emergence from Chapter 11
and a possible distribution of Common Stock, to the date that the Plan
becomes effective (the "Effective Date").
On April 24, 1995, the Court approved a Modified and Restated First
Amended Joint Plan of Reorganization (the "Modified Plan"), which is being
filed as an exhibit hereto together with other exhibits related to the the
Bankruptcy proceeding.
Item 7. Financial Statements and Exhibits
(c) The following exhibits are part of this report:
(1) Modified and Restated First Amended Joint Plan of Reorganization
dated April 19, 1995.
(2) Order dated April 24, 1995 approving Modified and
Restated First Amended Joint Plan of Reorganization dated
April 19, 1995.
(3) Short Term Incentive Compensation Plan.
(4) New Equity Compensation Plan
(5) The Registrant's obligations with respect to the compensation of
its officers and directors as specified in the following orders
of the Court:
2
<PAGE>
(a) Order Approving Short-Term Incentive Plan (August 4, 1994)
(b) Order Authorizing Increased Compensation of R. Edward
Anderson, President and Chief Executive Officer and Chairman
of the Board (dated October 12, 1994)
(c) Order Authorizing Increased Compensation of (i) Kathy M.
Hurley, Senior Vice President, Merchandising; (ii) Jeanette
R. Peters, Senior Vice President, Chief Financial Officer;
and (iii) George T. Blackburn, II, Vice President, Real
Estate, General Counsel, and Secretary (dated December 15,
1994)
(d) Order Authorizing Entry into Employment Agreement with R.
Edward Anderson, President and Chief Executive Officer
(dated December 15, 1994)
(e) Order Approving Consummation Bonus and Stock Option Awards
(February 14, 1995)
(f) Amended Order Approving Rejection of Termination Agreements
and Implementation of Severance Program (dated April 1, 1994)
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROSE'S STORES, INC.
Date: _______________, 1995 By:
Jeanette R. Peters
Senior Vice President
Chief Financial Officer
4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
(1) Modified and Restated First Amended Joint
Plan of Reorganization dated April 19, 1995.
(2) Order dated April 24, 1995 approving Modified
and Restated First Amended Joint Plan of
Reorganization dated April 19, 1995.
(3) Short Term Incentive Compensation Plan.
(4) New Equity Compensation Plan
(5) The Registrant's obligations with respect to
the compensation of its officers and
directors as specified in the following
orders of the Court:
(a) Order Approving Short-Term Incentive Plan
(August 4, 1994)
(b) Order Authorizing Increased Compensation of
R. Edward Anderson, President and Chief
Executive Officer and Chairman of the Board
(dated October 12, 1994)
(c) Order Authorizing Increased Compensation of
(i) Kathy M. Hurley, Senior Vice President,
Merchandising; (ii) Jeanette R. Peters,
Senior Vice President, Chief Financial
Officer; and (iii) George T. Blackburn, II,
Vice President, Real Estate, General Counsel,
and Secretary (dated December 15, 1994)
(d) Order Authorizing Entry into Employment
Agreement with R. Edward Anderson, President
and Chief Executive Officer (dated December
15, 1994)
(e) Order Approving Consummation Bonus and Stock
Option Awards (February 14, 1995)
(f) Amended Order Approving Rejection of Termination Agreements
and Implementation of Severance Program (dated April 1, 1994)
5
<PAGE>
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE: CASE NO. 93-01365-5-ATS
ROSE'S STORES, INC.,
(TAX ID #56-0382475), CHAPTER 11
Debtor.
MODIFIED AND RESTATED FIRST AMENDED JOINT PLAN OF REORGANIZATION
OF
ROSE'S STORES, INC.
April 19, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Administrative Agent" . . . . . . . . . . . . . . . . . . . 1
1.2 "Administrative Claim" . . . . . . . . . . . . . . . . . . . 1
1.3 "ADR Procedure" . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 "Allowed Claim" . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Allowed Non-Tax Priority Claim" . . . . . . . . . . . . . . 2
1.6 "Allowed Secured Claim" . . . . . . . . . . . . . . . . . . . 2
1.7 "Allowed Tax Claim" . . . . . . . . . . . . . . . . . . . . . 3
1.8 "Allowed Unsecured Claim" . . . . . . . . . . . . . . . . . . 3
1.9 "Assumed Contracts and Leases" . . . . . . . . . . . . . . . 3
1.10 "Available Cash" . . . . . . . . . . . . . . . . . . . . . . 3
1.11 "Avoiding Power Actions" . . . . . . . . . . . . . . . . . . 3
1.12 "Bankruptcy Code" . . . . . . . . . . . . . . . . . . . . . 3
1.13 "Bankruptcy Court" . . . . . . . . . . . . . . . . . . . . . 3
1.14 "Bankruptcy Rules" . . . . . . . . . . . . . . . . . . . . . 3
1.15 "Bank Group" . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 "Bank of Tokyo" . . . . . . . . . . . . . . . . . . . . . . 3
1.17 "Bar Date" . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 "Board of Directors" . . . . . . . . . . . . . . . . . . . . 4
1.19 "Business Day" . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 "Cash" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.21 "Chapter 11 Case" . . . . . . . . . . . . . . . . . . . . . 4
1.22 "Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.23 "Class" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.24 "Class 3 Common Stock Designation" . . . . . . . . . . . . . 4
1.25 "Class 5 Rights Notice" . . . . . . . . . . . . . . . . . . 4
1.26 "Class 5 Subscription Stock Designation" . . . . . . . . . . 4
1.27 "Class 5 Subscriber" . . . . . . . . . . . . . . . . . . . . 4
1.28 "Class 5 Subscription" . . . . . . . . . . . . . . . . . . . 4
1.29 "Class 5 Subscription Price" . . . . . . . . . . . . . . . . 5
1.30 "Collateral Agent" . . . . . . . . . . . . . . . . . . . . . 5
1.31 "Committees" . . . . . . . . . . . . . . . . . . . . . . . . 5
1.32 "Common Stock Interest" . . . . . . . . . . . . . . . . . . 5
1.33 "Confirmation" . . . . . . . . . . . . . . . . . . . . . . . 5
1.34 "Confirmation Date" . . . . . . . . . . . . . . . . . . . . 5
1.35 "Confirmation Orders" . . . . . . . . . . . . . . . . . . . 5
1.36 "Consummation Certificate" . . . . . . . . . . . . . . . . . 5
1.37 "Consummation Date" . . . . . . . . . . . . . . . . . . . . 5
1.38 "Contingent Claim" . . . . . . . . . . . . . . . . . . . . . 5
1.39 "Core Stores" . . . . . . . . . . . . . . . . . . . . . . . 5
1.40 "Damages Claims" . . . . . . . . . . . . . . . . . . . . . . 6
1.41 "Debtor" . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.42 "Deferred GE Obligations" . . . . . . . . . . . . . . . . . 6
1.43 "Deferred GE Obligations Agreements" . . . . . . . . . . . . 6
1.44 "Determination Date" . . . . . . . . . . . . . . . . . . . . 6
1.45 "DIP Facility" . . . . . . . . . . . . . . . . . . . . . . . 6
1.46 "DIP Financing Documents" . . . . . . . . . . . . . . . . . 6
1.47 "DIP Financing Orders" . . . . . . . . . . . . . . . . . . . 7
i
<PAGE>
Page
1.48 "Disclosure Statement" . . . . . . . . . . . . . . . . . . . 7
1.49 "Disputed Claim" . . . . . . . . . . . . . . . . . . . . . . 7
1.50 "Distribution Agent" . . . . . . . . . . . . . . . . . . . . 7
1.51 "Distribution Date" . . . . . . . . . . . . . . . . . . . . 7
1.52 "Effective Date" . . . . . . . . . . . . . . . . . . . . . . 7
1.53 "Effective Date Shares" . . . . . . . . . . . . . . . . . . 7
1.54 "Employee Stock Options" . . . . . . . . . . . . . . . . . . 7
1.55 "Equity Committee" . . . . . . . . . . . . . . . . . . . . . 7
1.56 "Equity Record Date" . . . . . . . . . . . . . . . . . . . . 8
1.57 "Estate" . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.58 "Facility Agents" . . . . . . . . . . . . . . . . . . . . . 8
1.59 "Filing Date" . . . . . . . . . . . . . . . . . . . . . . . 8
1.60 "Final Decree" . . . . . . . . . . . . . . . . . . . . . . . 8
1.61 "Final Order" . . . . . . . . . . . . . . . . . . . . . . . 8
1.62 "Full Recovery Target Amount" . . . . . . . . . . . . . . . 8
1.63 "GE Capital" . . . . . . . . . . . . . . . . . . . . . . . . 8
1.64 "GE Obligations" . . . . . . . . . . . . . . . . . . . . . . 8
1.65 "GE Master Release Agreement" . . . . . . . . . . . . . . . 8
1.66 "Intercreditor Agreements" . . . . . . . . . . . . . . . . . 9
1.67 "Interests" . . . . . . . . . . . . . . . . . . . . . . . . 9
1.68 "Management Incentive and Retention Program" . . . . . . . . 9
1.69 "Modified Plan" . . . . . . . . . . . . . . . . . . . . . . 9
1.70 "Modified Plan Confirmation Order" . . . . . . . . . . . . . 10
1.71 "New Rose's Charter" . . . . . . . . . . . . . . . . . . . . 10
1.72 "New Rose's Common Stock" . . . . . . . . . . . . . . . . . 10
1.73 "New Rose's Common Stock Secondary Distribution" . . . . . . 10
1.75 "New Rose's Common Stock Escrow Agreement" . . . . . . . . . 10
1.76 "New Rose's Warrant Agreement" . . . . . . . . . . . . . . . 10
1.77 "New Rose's Warrants" . . . . . . . . . . . . . . . . . . . 11
1.78 "Non-Voting Class B Stock" . . . . . . . . . . . . . . . . . 11
1.79 "Permitted Encumbrance Collateral" . . . . . . . . . . . . . 11
1.80 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.81 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.82 "Plan Confirmation Date" . . . . . . . . . . . . . . . . . . 11
1.83 "Plan Confirmation Order" . . . . . . . . . . . . . . . . . 11
1.84 "Plan Proponents" . . . . . . . . . . . . . . . . . . . . . 11
1.85 "Post-Effective Date Collateral" . . . . . . . . . . . . . . 11
1.86 "Post-Effective Date Financing Facility" . . . . . . . . . . 11
1.87 "Post-Effective Date GE Assumption Agreement" . . . . . . . 12
1.88 "Post-Effective Date GE Obligations" . . . . . . . . . . . . 12
1.89 "Post-Effective Date Lenders" . . . . . . . . . . . . . . . 12
1.90 "Pre-Petition Lenders" . . . . . . . . . . . . . . . . . . . 12
1.91 "Pre-Petition Lenders' Allowed Secured Claims" . . . . . . . 12
1.92 "Pre-Petition Secured Noteholders" . . . . . . . . . . . . . 13
1.93 "Pre-Petition Secured Noteholder Warrant Agreement" . . . . 13
1.94 "Pre-Petition Secured Noteholder Warrants" . . . . . . . . . 13
1.95 "Pre-Petition Secured Notes" . . . . . . . . . . . . . . . . 13
1.96 "Pre-Petition Stock Option" . . . . . . . . . . . . . . . . 13
1.97 "Pre-Petition Warrant" . . . . . . . . . . . . . . . . . . . 14
1.98 "Professional" . . . . . . . . . . . . . . . . . . . . . . . 14
ii
<PAGE>
Page
1.99 "Professional Fees" . . . . . . . . . . . . . . . . . . . . 14
1.100 "Pro-Rata" . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.101 "Reconstituted Board of Directors" . . . . . . . . . . . . . 14
1.102 "Record Date" . . . . . . . . . . . . . . . . . . . . . . . 14
1.103 "Released Parties" . . . . . . . . . . . . . . . . . . . . . 15
1.104 "Reorganized Rose's" . . . . . . . . . . . . . . . . . . . . 15
1.105 "Reserve" . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.106 "Reserve Amount" . . . . . . . . . . . . . . . . . . . . . . 15
1.107 "Retiree Claim" . . . . . . . . . . . . . . . . . . . . . . 15
1.108 "RSI" . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.109 "Second Supplemental Adequate Protection Consent Order" . . 15
1.110 "Subscription Proceeds Escrow" . . . . . . . . . . . . . . . 15
1.111 "Subscription Proceeds" . . . . . . . . . . . . . . . . . . 16
1.112 "Subordinated Claims" . . . . . . . . . . . . . . . . . . . 16
1.113 "Supplemental Adequate Protection Orders" . . . . . . . . . 16
1.114 "Unsecured Committee" . . . . . . . . . . . . . . . . . . . 16
1.115 "Voting Common Stock" . . . . . . . . . . . . . . . . . . . 16
ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS . . . . . . . . . . . 16
2.1 Criterion of Class . . . . . . . . . . . . . . . . . . . . . 16
2.2 Claims and Interests . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III PAYMENT OF ADMINISTRATIVE CLAIMS
ALLOWED TAX CLAIMS, PROFESSIONAL FEES, AND
RETIREE CLAIMS, AND TREATMENT OF GE CAPITAL . . . . . . 17
3.1 Administrative Claims . . . . . . . . . . . . . . . . . . . . 18
3.2 Allowed Tax Claims . . . . . . . . . . . . . . . . . . . . . 18
3.3 Professional Fees . . . . . . . . . . . . . . . . . . . . . . 18
3.4 Retiree Claims and Benefits Under Section 1114 of the
Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . 19
3.5 Treatment of GE Capital . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV CLAIMS NOT IMPAIRED UNDER THE PLAN . . . . . . . . . . . . . 20
4.1 Non-Impairment . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Class 1 (Non-Tax Priority Claims) . . . . . . . . . . . . . . 20
4.3 Class 2A (General Secured Claims) . . . . . . . . . . . . . . 20
4.4 Class 2B (Pre-Petition Lenders' Allowed Secured Claims) . . . 21
ARTICLE V CLAIMS AND INTERESTS IMPAIRED UNDER THE PLAN . . . . . . . . 22
5.1 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . 22
5.2 Class 3 (Unsecured Claims) . . . . . . . . . . . . . . . . . 22
5.3 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . 22
5.4 Class 5 (Common Stock Interests) . . . . . . . . . . . . . . 22
5.5 Class 6 (Pre-Petition Warrants) . . . . . . . . . . . . . . . 22
5.6 Class 7 (Pre-Petition Stock Options) . . . . . . . . . . . . 23
5.7 Class 8 (Subordinated Claims) . . . . . . . . . . . . . . . . 23
5.8 Effect of Bar Dates . . . . . . . . . . . . . . . . . . . . . 23
5.9 Non-consensual Confirmation . . . . . . . . . . . . . . . . . 24
iii
<PAGE>
Page
ARTICLE VI PROVISIONS GOVERNING DISTRIBUTIONS . . . . . . . . . . . . . 24
6.1 Distributions by Reorganized Rose's or Other Distribution
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.2 Distributions to Impaired Classes . . . . . . . . . . . . . . 24
6.2.1 Distributions of New Rose's Common Stock . . . . . . 24
6.2.2 Distribution of Subscription Proceeds . . . . . . . 26
6.2.3 Distribution of New Rose's Common Stock Secondary
Distribution . . . . . . . . . . . . . . . . . . . 26
6.2.4 Distribution of New Rose's Warrants . . . . . . . . 26
6.2.5 Listing of Common Stock and Warrants . . . . . . . . 27
6.3 Timing of Distributions . . . . . . . . . . . . . . . . . . . 27
6.4 Disputed Payments . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Delivery of Distributions and Undeliverable or Unclaimed
Distributions . . . . . . . . . . . . . . . . . . . . . . . 27
6.5.1 Delivery of Distributions in General . . . . . . . . 27
6.5.2 Distributions Held by Distribution Agent . . . . . . 27
6.5.3 Failure to Claim Undeliverable Distributions . . . . 28
6.6 Fractional Distributions and Fractional Cents; Round Lots . . 29
6.7 Full and Final Satisfaction . . . . . . . . . . . . . . . . . 29
6.8 Allocation of Distributions to Holders of Allowed Secured
Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VII MEANS OF EXECUTION . . . . . . . . . . . . . . . . . . . . 30
7.1 Funds for Distribution . . . . . . . . . . . . . . . . . . . 30
7.2 Post-Effective Date Financing Facility . . . . . . . . . . . 30
7.3 Corporate Action . . . . . . . . . . . . . . . . . . . . . . 32
7.4 Cancellation of Common Stock, Pre-Petition Warrants, Pre-
Petition Stock Options and Pre-Petition Secured Notes and
Surrender of Common Stock, Pre-Petition Warrants and Pre-
Petition Secured Notes . . . . . . . . . . . . . . . . . . 32
7.5 New Rose's Charter . . . . . . . . . . . . . . . . . . . . . 33
7.6 Voting Powers . . . . . . . . . . . . . . . . . . . . . . . . 33
7.7 Authorization and Issuance of Equity Instruments of
Reorganized Rose's . . . . . . . . . . . . . . . . . . . . 33
7.7.1 New Rose's Common Stock . . . . . . . . . . . . . . 33
7.7.2 New Rose's Warrants . . . . . . . . . . . . . . . . 34
7.8 New Rose's Common Stock Allocable to Management of
Reorganized Rose's . . . . . . . . . . . . . . . . . . . . 34
7.9 Applicability of Sections 1125 and 1145 of the Bankruptcy
Code to the New Rose's Common Stock Issued under the
Modified Plan . . . . . . . . . . . . . . . . . . . . . . . 34
7.10 Class 5 Subscription. . . . . . . . . . . . . . . . . . . . 35
7.11 Merger of RSI and Cancellation of RSI Common Stock . . . . . 36
7.12 Reserve Provisions for Disputed Claims . . . . . . . . . . . 36
7.13 Voting of Undistributed New Rose's Common Stock . . . . . . 38
7.14 Preservation or Waiver of Rights of Action of the Estate . . 38
iv
<PAGE>
Page
7.15 Use of ADR Procedure Regarding Determination and Allowance
of Damage Claims . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VIII CONDITIONS PRECEDENT TO
EFFECTIVENESS OF THE PLAN . . . . . . . . . . . . . . . . 39
8.1 Conditions to the Effective Date . . . . . . . . . . . . . . 39
8.2 Waiver of Conditions to the Effective Date . . . . . . . . . 40
ARTICLE IX DISCHARGE, RELEASES, INJUNCTIONS AND RELATED PROVISIONS . . 40
9.1 Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.2 Releases of Released Parties . . . . . . . . . . . . . . . . 41
9.3 Releases by the Debtor and Reorganized Rose's . . . . . . . . 41
9.4 Releases by Recipients of New Rose's Common Stock, New
Rose's Warrants and Cash, or Available Cash (as
applicable), and by All Other Persons . . . . . . . . . . . 42
9.5 Limitations on Amounts to be Distributed to Holders of
Allowed Claims Which Are Insured . . . . . . . . . . . . . 43
9.6 General Release of Liens . . . . . . . . . . . . . . . . . . 43
9.7 Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.7.1 Injunction Related to Claims Released by the Debtor
and Reorganized Rose's Recipients of Cash, New
Rose's Common Stock and New Rose's Warrants, or
Available Cash (if applicable), and All Other
Persons . . . . . . . . . . . . . . . . . . . . . . 44
9.7.2 Injunction Relating to the Modified Plan . . . . . . 44
9.7.3 Consent By Holders of Claims and Interests to Entry
of Injunctive Relief . . . . . . . . . . . . . . . 44
9.8 Rights of Fireman's Fund Insurance Company . . . . . . . . . 44
ARTICLE X EXECUTORY CONTRACTS, INDEMNIFICATION OBLIGATIONS,
POST-PLAN CONFIRMATION DATE TRADE CLAIMS,
CONTINUED APPLICABILITY OF BANKRUPTCY CODE . . . . . . 45
10.1 Executory Contracts and Unexpired Leases . . . . . . . . . . 45
10.2 Indemnification and Contribution Obligations . . . . . . . . 46
10.3 Post-Plan Confirmation Date Claims . . . . . . . . . . . . . 46
10.4 Continued Applicability of the Bankruptcy Code . . . . . . . 47
ARTICLE XI RETENTION OF JURISDICTION . . . . . . . . . . . . . . . . . 47
11.1 Jurisdiction From Confirmation Through the Effective Date . 47
11.2 Jurisdiction From and After the Effective Date . . . . . . . 47
ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 48
12.1 The Committees and the Post-Effective Date Trade Committee . 48
12.1.1 Dissolution of Committees . . . . . . . . . . . . . 49
12.1.2 Creation of Post-Effective Date Trade Committee . . 49
v
<PAGE>
Page
12.1.3 Post-Effective Date Trade Committee Procedures . . 49
12.1.4 Post-Effective Date Trade Committee Compensation . 49
12.1.5 Retention of Professionals . . . . . . . . . . . . 50
12.1.6 Liability . . . . . . . . . . . . . . . . . . . . . 50
12.2 Means of Cash Payments . . . . . . . . . . . . . . . . . . . 50
12.3 Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.4 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . 51
12.5 Revesting . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.7 Defects, Omissions and Amendments . . . . . . . . . . . . . 51
12.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 52
12.9 Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.10 Agreement Among the Plan Proponents . . . . . . . . . . . . 52
12.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.12 Severability . . . . . . . . . . . . . . . . . . . . . . . 54
12.13 Revocation and Withdrawal of Modified Plan . . . . . . . . 54
12.14 Effect of Withdrawal or Revocation . . . . . . . . . . . . 54
12.15 Ratification in Confirmation Orders . . . . . . . . . . . . 54
12.16 Post-Effective Date Effectuation of the Modified Plan's
Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.17 Execution . . . . . . . . . . . . . . . . . . . . . . . . . 55
vi
<PAGE>
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE: CASE NO. 93-01365-5-ATS
ROSE'S STORES, INC.,
(TAX ID #56-0382475), CHAPTER 11
Debtor.
MODIFIED AND RESTATED FIRST AMENDED JOINT PLAN OF REORGANIZATION
Rose's Stores, Inc., debtor and debtor-in-possession, Nationwide Life
Insurance Company, Wausau Preferred Health Insurance Company, Equitable
Variable Life Insurance Company, The Equitable Life Assurance Society of
the United States, Jefferson-Pilot Life Insurance Company, The Franklin
Life Insurance Company, The Franklin United Life Insurance Company, Great-
West Life & Annuity Insurance Company, American Family Life Insurance
Company, State Mutual Life Assurance Company of America, SMA Life Assurance
Company, Merrill Lynch Life Insurance Company, ML Life Insurance Company of
New York, Woodmen of the World Life Insurance Society, Knights of Columbus,
Washington National Insurance Company, The Stonehill Investment Corp.,
Central Life Assurance Company, Lazard Freres & Co., or their successors
and assigns as the case may be, the Bank of Tokyo, Ltd., the Official
Committee of Unsecured Creditors and the Official Committee of Equity
Security Holders jointly propose the following Modified and Restated First
Amended Joint Plan of Reorganization pursuant to Section 1121(a) of the
Bankruptcy Code:
ARTICLE I
DEFINITIONS
For purposes of this Modified and Restated First Amended Joint Plan of
Reorganization, the following terms shall have the meanings herein set
forth. Unless otherwise indicated, the singular shall include the plural
and the plural shall include the singular. Capitalized terms shall at all
times refer to the terms as defined in this Article. To the extent that
terms are used and not otherwise defined in this Modified Plan, they shall
have the meanings ascribed to them in the Bankruptcy Code.
1.1 "Administrative Agent" shall mean The First National Bank of
Boston, as administrative agent under the Post-Effective Date Financing
Facility.
1.2 "Administrative Claim" shall mean a Claim that is allowed under
Section 503(b) of the Bankruptcy Code and entitled to priority under
Section 507(a)(1) of the Bankruptcy Code or is otherwise determined to be
entitled to such priority by Final Order, including, without limitation,
fees and expenses of Professionals retained or to be compensated pursuant
to the
<PAGE>
Bankruptcy Code, and all fees and charges assessed against the
Debtor's Estate pursuant to 28 U.S.C. (section mark) 1930.
1.3 "ADR Procedure" shall mean the three-step alternative dispute
resolution procedure pursuant to which the Debtor and a holder of a Damages
Claims may seek to reach a determination of the amount of a Damages Claim
for purposes of allowance, and Cash payment only where a Damages Claim is
determined to be an Allowed Claim in an amount equal to or less than $500,
pursuant to and as instituted by that certain order of the Bankruptcy Court
dated April 26, 1994 entitled, "Order Approving Alternative Dispute
Resolution Procedure," and such other orders of the Bankruptcy Court
entered in connection therewith.
1.4 "Allowed Claim" shall mean a Claim that: (a) has been scheduled
by the Debtor pursuant to Section 521(1) of the Bankruptcy Code and
Bankruptcy Rule 1007, is not scheduled as disputed, contingent or
unliquidated, and is not a Claim as to which a proof of Claim has been
filed; (b) is a Claim as to which a proof of Claim has been timely-filed as
of the applicable Bar Date and no objection thereto, or application to
equitably subordinate or otherwise limit recovery, has been made as of a
given date, and on or before any applicable deadline; (c) has been allowed
by a Final Order of the Bankruptcy Court, or (d) in the case of the claims
of the Pre-Petition Lenders, the Pre-Petition Lenders' Allowed Secured
Claims. Allowed Claim shall include any portion of a Claim that is not
disputed, contingent or unliquidated. "Allowed Claim" shall not include
interest on the amount of any Claim except with respect to an Allowed
Secured Claim as permitted by Section 506(b) of the Bankruptcy Code or as
otherwise allowed by the Bankruptcy Court. Under no circumstances shall
"Allowed Claim" include Claims arising from the rejection of any agreement
pursuant to which Pre-Petition Warrants or Pre-Petition Stock Options may
be, or have been, issued or exercised.
1.5 "Allowed Non-Tax Priority Claim" shall mean that portion of an
Allowed Claim entitled to priority treatment under Section 507(a) of the
Bankruptcy Code, exclusive of Allowed Tax Claims and Administrative Claims.
1.6 "Allowed Secured Claim" shall mean that portion of an Allowed
Claim equal to the value, as determined by Final Order of the Bankruptcy
Court pursuant to Section 506(a) of the Bankruptcy Code and Bankruptcy Rule
3012, of the interest of the holder of the Allowed Secured Claim in the
property of the Estate which secures such Allowed Secured Claim by a valid
and enforceable lien, security interest and/or pledge. In the case of the
claims of the Pre-Petition Lenders, Allowed Secured Claim shall mean the
Pre-Petition Lenders' Allowed Secured Claims.
1.7 "Allowed Tax Claim" shall mean that portion of an Allowed Claim
entitled to priority under Section 507(a)(7) of the Bankruptcy Code.
2
<PAGE>
1.8 "Allowed Unsecured Claim" shall mean any Allowed Claim that is
not an Administrative Claim, an Allowed Non-Tax Priority Claim, an Allowed
Secured Claim, an Allowed Tax Claim, a Subordinated Claim, or a Claim
classified as an Interest in Classes 5, 6, and 7.
1.9 "Assumed Contracts and Leases" shall mean those executory
contracts and unexpired, non-residential real or personal property leases
which the Debtor has assumed, will assume, as of the Effective Date, or is
the subject of a motion to assume as of the Effective Date, pursuant to
Section 365 of the Bankruptcy Code by Final Order(s) of the Bankruptcy
Court.
1.10 "Available Cash" shall mean all Cash of the Debtor as of the
Effective Date.
1.11 "Avoiding Power Actions" shall mean all claims, rights and
causes of action of the Estate against any Person under Sections 544 to
550, inclusive, of the Bankruptcy Code.
1.12 "Bankruptcy Code" shall mean Title 11, United States Code, 11
U.S.C. (double section mark) 101 et seq. as in effect on the Filing
Date, as the same thereafter has been, and may be, amended.
1.13 "Bankruptcy Court" shall mean the United States Bankruptcy Court
for the Eastern District of North Carolina, Raleigh Division, or such other
court as may hereafter be granted primary jurisdiction over the Chapter 11
Case.
1.14 "Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy
Procedure, effective August 1, 1991 in accordance with the provisions of 28
U.S.C. (section mark) 2075 as the same thereafter has been, and may be, amended.
1.15 "Bank Group" shall mean, collectively, NationsBank of North
Carolina, N.A., Branch Banking & Trust Company, Crestar Bank, The Bank of
New York, Credit Lyonnais New York Branch, Credit Lyonnais Cayman Island
Branch, Central Carolina Bank and Wachovia Bank of North Carolina, N.A.,
and their successors, assigns and participants.
1.16 "Bank of Tokyo" shall mean Bank of Tokyo, Ltd.
1.17 "Bar Date" shall mean any date fixed by order of the Bankruptcy
Court as the last date on which a particular Claim against the Debtor must
be filed.
1.18 "Board of Directors" shall mean the board of directors of Rose's
as of the date immediately preceding the Effective Date.
1.19 "Business Day" shall mean any day other than a Saturday, Sunday
or legal holiday as such term is defined in Bankruptcy Rule 9006(a).
3
<PAGE>
1.20 "Cash" shall mean cash, cash equivalents (including personal
checks drawn on a bank insured by the Federal Deposit Insurance
Corporation, certified checks and money orders) and other readily
marketable direct obligations of the United States of America and
certificates of deposit issued by banks.
1.21 "Chapter 11 Case" shall mean the Debtor's case pursuant to
Chapter 11 of the Bankruptcy Code administered in the Bankruptcy Court
under case number 93-01365-5-ATS.
1.22 "Claim" shall mean a Claim against the Debtor as defined in
Sections 101(5) and 102(2) of the Bankruptcy Code.
1.23 "Class" shall mean a category of holders of Claims or Interests
which are substantially similar in nature to the Claims or Interests of the
other holders in such Class respectively, as classified pursuant to this
Plan.
1.24 "Class 3 Common Stock Designation" shall mean all of the
Effective Date Shares which are not included in the Class 5 Subscription
Stock Designation, if any, or the New Rose's Common Stock Secondary
Distribution, if any.
1.25 "Class 5 Rights Notice" shall mean the notice sent to all
holders of Common Stock Interests in Class 5 within 5 days of the Equity
Record Date advising them of their rights under the Class 5 Subscription,
including a return notification form which a Class 5 Subscriber must use to
indicate participation in the Class 5 Subscription. The Class 5 Rights
Notice effectuated the Class 5 Subscription pursuant to Section 7.10 of
this Plan, and was distributed to the holders of Common Stock Interests in
the form negotiated among the Debtor and the Committees.
1.26 "Class 5 Subscription Stock Designation" shall mean shares of
New Rose's Common Stock, if any, purchased by and issued to Class 5
Subscribers pursuant to Section 7.10 of this Plan and the Class 5 Rights
Notice.
1.27 "Class 5 Subscriber" shall mean a holder of Common Stock
Interests in Class 5 who, if any, has irrevocably elected to acquire shares
of New Rose's Common Stock pursuant to Section 7.10 of this Plan and the
Class 5 Rights Notice.
1.28 "Class 5 Subscription" shall mean the procedure by which a
holder of Common Stock Interests in Class 5 may elect to pay Cash to
acquire shares of New Rose's Common Stock, pursuant to Section 7.10 of this
Plan and the Class 5 Rights Notice.
1.29 "Class 5 Subscription Price" shall mean $6.50 per share of New
Rose's Common Stock payable by a Class 5 Subscriber pursuant to the Plan
pursuant to the order of the Bankruptcy Court dated February 3, 1995.
4
<PAGE>
1.30 "Collateral Agent" shall mean Shawmut Bank Connecticut National
Association (successor-in-interest to NationsBank of North Carolina, N.A.,
the successor-in-interest to NCNB National Bank of North Carolina) in its
capacity as the successor collateral agent for the Pre-Petition Lenders, or
any successor thereto, pursuant to the Intercreditor Agreements.
1.31 "Committees" shall mean, collectively, the Unsecured Committee
and the Equity Committee.
1.32 "Common Stock Interest" shall mean any equity interest in the
Voting Common Stock and Non-Voting Class B Stock registered on the
applicable Record Date in such stock register as may be maintained by or on
behalf of the Debtor. "Common Stock Interest" excludes any Pre-Petition
Warrants or Pre-Petition Stock Options.
1.33 "Confirmation" shall mean entry of an order of the Bankruptcy
Court confirming the Modified Plan pursuant to Sections 1127(b) and 1129 of
the Bankruptcy Code.
1.34 "Confirmation Date" shall mean the date upon which both
Confirmation Orders are entered by the Bankruptcy Court.
1.35 "Confirmation Orders" shall mean, collectively, the Plan
Confirmation Order and the Modified Plan Confirmation Order.
1.36 "Consummation Certificate" shall mean a certification of the
chief financial officer of Reorganized Rose's stating that the Effective
Date has occurred as of the calendar date thereof.
1.37 "Consummation Date" shall mean the date on which the Bankruptcy
Court enters the Final Decree.
1.38 "Contingent Claim" shall mean any Claim for which a proof of
claim has been timely filed with the Bankruptcy Court as of the applicable
Bar Date but was not filed in a sum certain and which Claim has not been
disallowed or fixed by the Bankruptcy Court at a sum certain.
1.39 "Core Stores" shall mean, collectively, the 106 discount retail
stores operated by the Debtor in the ordinary course of business and not
identified by order of the Bankruptcy Court as being the subject of any
going-out-of-business sales scheduled, as of the Effective Date, to be
commenced no later than thirty days after the Effective Date.
1.40 "Damages Claims" shall have the meaning of such term set forth
in the order of the Bankruptcy Court dated April 26, 1994 entitled, "Order
Approving Alternative Dispute Resolution Procedure."
5
<PAGE>
1.41 "Debtor" shall mean Rose's Stores, Inc., a Delaware corporation,
as debtor and debtor-in-possession during the pendency of the Chapter 11
Case through the Effective Date.
1.42 "Deferred GE Obligations" shall mean (i) the Letter of Credit
Obligations outstanding at the time of closing of the Post-Effective Date
Financing Facility and (ii) those GE Obligations which at the time of the
closing of the Post-Effective Date Financing Facility would be capable of
being satisfied in full, in Cash, except that the amount of such
obligations is not then finally determined, including, without limitation,
certain fees, costs and expenses incurred by or on behalf of GE Capital
with respect to the DIP Facility, to the extent set forth in the Deferred
GE Obligations Agreements.
1.43 "Deferred GE Obligations Agreements" shall mean those certain
agreements to be entered into by and among GE Capital, the Debtor,
Reorganized Rose's and certain other parties, each in form and substance
mutually acceptable to GE Capital, the Facility Agents and Reorganized
Rose's, the forms of which agreements shall have been filed with the
Bankruptcy Court prior to the entry of the Modified Plan Confirmation Order
and approved therein by the Bankruptcy Court subject to changes as may be
agreed to by GE Capital, the Facility Agents and Reorganized Rose's
(without any party thereto having an obligation to make any changes),
providing for (i) with respect to Letter of Credit Obligations outstanding
at the time of the closing of the Post-Effective Date Financing Facility,
either (A) the full and final release of GE Capital from any and all
reimbursement or other obligations with respect to each outstanding letter
of credit or (B) the provision of cash or other collateral by Reorganized
Rose's as described therein.
1.44 "Determination Date" shall mean that date which is the later of
(i) 105 days following the Effective Date or the first Business Day
thereafter or (ii) 20 days after the first date on which at least 2,000,000
shares of New Rose's Common Stock shall have been distributed to holders of
Allowed Claims in Class 3 and/or holders of Common Stock Interests in Class
5, unless the Post-Effective Date Committee, in its sole discretion, waives
the requirement that at least 2,000,000 shares of New Rose's Common Stock
be distributed prior to the Determination Date.
1.45 "DIP Facility" shall mean, collectively, the DIP Financing
Documents and the DIP Financing Orders, as amended.
1.46 "DIP Financing Documents" shall mean that certain "Debtor-in-
Possession Loan Agreement" dated as of September 20, 1993, together with
all agreements, documents and amendments entered into by the Debtor and GE
Capital in connection therewith.
1.47 "DIP Financing Orders" shall mean the "Final Order Authorizing
Debtor-In-Possession to Borrow Funds With Priority Over Administrative
Expenses and Secured by Liens on Property of the
6
<PAGE>
Estate" dated October 14, 1993 (the "Final DIP Order"), as such order has
been, and may be, amended and modified from time to time during the Chapter
11 Case by further orders of the Bankruptcy Court.
1.48 "Disclosure Statement" shall mean the disclosure statement filed
by the Debtor and approved by order of the Bankruptcy Court dated October
5, 1994 as containing adequate information in accordance with Section 1125
of the Bankruptcy Code.
1.49 "Disputed Claim" shall mean (i) that portion of any Claim as to
which an objection to the allowance thereof has been interposed, or an
application to equitably subordinate or otherwise limit recovery has been
made, within thirty days after the Effective Date or any other date fixed
by order of the Bankruptcy Court and which objection or application has not
been determined by a Final Order, or (ii) a Contingent Claim. Under no
circumstances may any of the Pre-Petition Lenders' Allowed Secured Claims
constitute a Disputed Claim.
1.50 "Distribution Agent" shall mean an entity which is authorized to
make distributions required to be made under this Plan in accordance with
Section 6.1 of this Modified Plan.
1.51 "Distribution Date" shall mean any date on which a distribution
is required to be made under this Modified Plan.
1.52 "Effective Date" shall mean the first Business Day, or as soon
as practicable thereafter, upon which all the conditions set forth in
Section 8.1 of this Modified Plan have been satisfied or waived.
1.53 "Effective Date Shares" shall mean the 10,000,000 shares of New
Rose's Common Stock to be issued by Reorganized Rose's on the Effective
Date for the benefit of and on account of the holders of Claims in Class 3
and/or holders of Common Stock Interests in Class 5, and officers of
Reorganized Rose's pursuant to the Management Incentive and Retention
Program.
1.54 "Employee Stock Options" shall mean those certain Pre-Petition
Stock Options granted prior to the Filing Date to employees of the Debtor.
1.55 "Equity Committee" shall mean the Official Committee of Equity
Security Holders appointed by the Office of the Bankruptcy Administrator
for the Eastern District of North Carolina to serve in the Chapter 11 Case,
as the same may be constituted from time to time.
1.56 "Equity Record Date" shall mean February 7, 1995, the Record
Date for purposes of distributing the rights to participate in the Class 5
Subscription to holders of Common Stock Interests
7
<PAGE>
pursuant to the order of the Bankruptcy Court dated February 13, 1995.
1.57 "Estate" shall mean the estate created in the Chapter 11 Case by
operation of Section 541 of the Bankruptcy Code.
1.58 "Facility Agents" shall mean The First National Bank of Boston
or The CIT Group/Business Credit, Inc., collectively, in their capacities
as facility agents under the Post-Effective Date Financing Facility.
1.59 "Filing Date" shall mean September 5, 1993.
1.60 "Final Decree" shall mean the final decree entered by the
Bankruptcy Court on the Consummation Date pursuant to Bankruptcy Rule 3022.
1.61 "Final Order" shall mean an order or judgment of the Bankruptcy
Court which has not been reversed, stayed, modified or amended and as to
which (i) the time to appeal or seek review, rehearing, reargument or
certiorari has expired, and (ii) as to which no appeal or petition for
review, rehearing, reargument, stay or certiorari proceeding is pending or
as to which any right to appeal or to seek review, rehearing, reargument or
certiorari has been waived.
1.62 "Full Recovery Target Amount" shall mean, on any applicable
date, the amount of Allowed Claims in Class 3 (except for those to be
satisfied by Cash payment pursuant to this Modified Plan or order of the
Bankruptcy Court) plus the total Reserve Amount as of such date, if any,
determined pursuant to Section 7.12 of this Modified Plan for all Disputed
Claims in Class 3.
1.63 "GE Capital" shall mean General Electric Capital Corporation, a
New York corporation.
1.64 "GE Obligations" shall mean all obligations of the Debtor to GE
Capital and certain individual and corporate affiliates under and pursuant
to the DIP Facility.
1.65 "GE Master Release Agreement" shall mean that certain agreement
to be entered into by and between GE Capital and Debtor, in form and
substance acceptable to GE Capital, the Debtor and the Facility Agents, the
form of which agreement shall have been filed with the Bankruptcy Court
prior to the entry of the Modified Plan Confirmation Order and approved
therein by the Bankruptcy Court subject to changes as may be agreed to by
GE Capital, the Facility Agents and Reorganized Rose's (without any party
thereto having an obligation to make any changes), (i) acknowledging the
payoff amount at the "Closing Event" (as defined in the order dated April
17, 1995 of the Bankruptcy Court approving the Post-Effective Date
Financing Facility) with respect to the GE Obligations (other than (a) the
Deferred GE Obligations and (b) the Post-Effective Date GE
8
<PAGE>
Obligations) and (ii) providing for, among other things, that simultaneously
upon the payment of such payoff amount to GE Capital, in Cash, and the
execution and delivery of the Deferred GE Obligations Agreements and the
Post-Effective Date GE Assumption Agreement and, in each case, such
performance as may be required thereunder prior to or upon the execution and
delivery thereof, all liens in favor of GE Capital under the DIP Facility
shall be terminated and released and GE Capital shall execute and deliver
to the Administrative Agent for filing (at the sole cost and expense of
Debtor or Reorganized Rose's) all termination statements and take such other
actions and provide such further assurances as may be reasonably requested
and prepared by the Administrative Agent (all such actions and assurances to
be taken at the sole cost and expense of Reorganized Rose's) to discharge or
evidence the discharge of all mortgages, deeds of trust and security interests
granted by the Debtor in favor of GE Capital.
1.66 "Intercreditor Agreements" shall mean, collectively, those
agreements by and among the Pre-Petition Lenders, to the extent applicable,
and the Collateral Agent, providing, as among themselves, the terms and
conditions by which, among other things, the Pre-Petition Lenders, in
conjunction with the Collateral Agent, maintain and may enforce their
respective security interests and liens in or on certain property of the
Estate, including, without limitation, that certain substitution of
collateral agent agreement dated as of September 30, 1994 by and among the
Collateral Agent, the Pre-Petition Lenders and NationsBank of North
Carolina, N.A. as predecessor collateral agent.
1.67 "Interests" shall mean collectively, all Common Stock Interests,
all Pre-Petition Warrants and all Pre-Petition Stock Options.
1.68 "Management Incentive and Retention Program" shall mean that
certain incentive and retention program covering periods both prior and
subsequent to the Effective Date, authorized by the Final Order of the
Bankruptcy Court dated February 14, 1995.
1.69 "Modified Plan" shall mean this Chapter 11 modified and restated
first amended joint plan of reorganization, reflecting such non-material
modifications to the Plan as may be required to effectuate the Post-
Effective Date Financing Facility and otherwise facilitate the tasks
required to be taken in conjunction with the Effective Date under the Plan,
inclusive of any exhibits hereto and any documents incorporated herein by
reference, as it may from time to time be amended, as and to the extent
permitted herein or by the Bankruptcy Code.
1.70 "Modified Plan Confirmation Order" shall mean the order of the
Bankruptcy Court confirming the Modified Plan pursuant to Sections 1127 and
1129 of the Bankruptcy Code and finding, inter alia, that the modifications
to the Plan embodied in the Modified Plan do not materially adversely
affect the treatment of any Claims
9
<PAGE>
or Interests under the Plan, which order
shall be in a form acceptable to all Plan Proponents, the Facility Agents
and GE Capital.
1.71 "New Rose's Charter" shall mean the restated certificate of
incorporation of Reorganized Rose's, in substantially the form to be filed
with the Bankruptcy Court on or before the Effective Date, as modified or
amended to the extent necessary and consistent with the Modified Plan, and
effective as of the Effective Date.
1.72 "New Rose's Common Stock" shall mean the no par value shares of
common stock of Reorganized Rose's authorized to be issued pursuant to the
New Rose's Charter.
1.73 "New Rose's Common Stock Secondary Distribution" shall mean any
and all Effective Date Shares remaining in the New Rose's Common Stock
Escrow as of the Determination Date for distribution to holders of Common
Stock Interests in Class 5, after distribution of shares of New Rose's
Common Stock pursuant to Section 6.2.1(b).
1.74 "New Rose's Common Stock Escrow" shall mean the escrow
established pursuant to the New Rose's Common Stock Escrow Agreement, into
which such number of the Effective Date Shares shall be deposited as
provided in Section 6.2.1(a) of this Modified Plan.
1.75 "New Rose's Common Stock Escrow Agreement" shall mean the escrow
agreement between Reorganized Rose's and the escrow agent named therein
which sets forth the terms and conditions establishing the New Rose's
Common Stock Escrow, and an escrow for undeliverable distributions under
Section 6.5 of this Modified Plan, which agreement shall be substantially
in the form as negotiated among the Debtor and the Committees to their
satisfaction and filed with the Bankruptcy Court prior to or on the
Effective Date as such document is effective as of the Effective Date.
1.76 "New Rose's Warrant Agreement" shall mean the warrant agreement
between Reorganized Rose's and the warrant agent named therein which sets
forth the terms and conditions respecting exercise and issuance of the New
Rose's Warrants, and an escrow for undeliverable New Rose's Warrants, which
agreement shall be substantially in a form as negotiated among the Debtor
and the Committees to their satisfaction and filed with the Bankruptcy
Court on or before the Effective Date, as such document may be modified or
amended and effective as of the Effective Date.
1.77 "New Rose's Warrants" shall mean the 4,285,714 warrants to
purchase New Rose's Common Stock issued to holders of Common Stock
Interests in Class 5 in accordance with Section 6.2.4 of this Modified Plan
and the New Rose's Warrant Agreement.
10
<PAGE>
1.78 "Non-Voting Class B Stock" shall mean the Non-Voting Class B
Stock of the Debtor, no par value, exclusive of any shares of Non-Voting
Class B Stock held in treasury.
1.79 "Permitted Encumbrance Collateral" shall mean any asset of
Reorganized Rose's with respect to which the Post-Effective Date Lenders
have agreed in writing by the terms of the Post-Effective Date Financing
Facility may be encumbered by a security interest, lien or other
encumbrance which is not junior and subordinate to the liens and security
interests granted to the Post-Effective Date Lenders pursuant to the Post-
Effective Date Financing Facility.
1.80 "Person" shall mean any individual, corporation, partnership,
joint venture, trust, estate, unincorporated association, committee, or
organization, governmental entity or political subdivision thereof, or any
other entity.
1.81 "Plan" shall mean the First Amended Joint Plan of Reorganization
of Rose's Stores, Inc., dated October 4, 1994, as confirmed by the Plan
Confirmation Order.
1.82 "Plan Confirmation Date" shall mean December 14, 1994, the date
on which the Bankruptcy Court entered the Plan Confirmation Order.
1.83 "Plan Confirmation Order" shall mean the Final Order of the
Bankruptcy Court entered on December 14, 1994 confirming the Plan pursuant
to Section 1129 of the Bankruptcy Code.
1.84 "Plan Proponents" shall mean, collectively, the Debtor, each of
the Pre-Petition Secured Noteholders, the Bank of Tokyo, and each of the
Committees, as proponents of the Plan and the Modified Plan.
1.85 "Post-Effective Date Collateral" shall mean, as of the Effective
Date, all presently owned or thereafter acquired assets and property of
every type of Reorganized Rose's, whether or not such assets and properties
are identified as collateral in the documents and agreements memorializing
the terms and provisions of the Post-Effective Date Financing Facility.
1.86 "Post-Effective Date Financing Facility" shall mean that
financing facility, effective as of the Effective Date, that shall be
provided pursuant to agreements and documents memorializing that certain
revolving credit facility in an aggregate principal amount of up to
$125,000,000 described in the commitment letter dated March 10, 1995 of The
First National Bank of Boston and The CIT Group/Business Credit, Inc.
authorized and approved by order of the Bankruptcy Court dated March 22,
1995, as such financing facility is approved prior to the Effective Date by
order of the Bankruptcy Court, on appropriate notice and hearing, on terms
not materially inconsistent with the terms of the aforesaid financing
commitment.
11
<PAGE>
1.87 "Post-Effective Date GE Assumption Agreement" shall mean that
certain agreement to be entered into by and among GE Capital, the Debtor,
and Reorganized Rose's, in form and substance mutually acceptable to GE
Capital, the Facility Agents, and Reorganized Rose's, the form of which
agreement shall have been filed with the Bankruptcy Court prior to the
entry of the Modified Plan Confirmation Order and approved therein by the
Bankruptcy Court subject to changes as may be agreed to by GE Capital, the
Facility Agents and Reorganized Rose's (without any party thereto having an
obligation to make any changes), whereby Reorganized Rose's shall assume
each and every of the Post-Effective Date GE Obligations.
1.88 "Post-Effective Date GE Obligations" shall mean all obligations
of the Debtor to GE Capital, GE Capital Commercial Finance, Inc., GE
Capital Corporate Finance, Inc. and their respective affiliates, and each
of their respective officers, directors, employees, attorneys and agents if
any, under (i) the DIP Facility (other than the Deferred GE Obligations),
(ii) that certain Amended and Restated Commitment Letter of GE Capital to
Rose's Stores, Inc., dated as of July 19, 1994 and the related Fee Letter
dated as of July 19, 1994 (the "GE Commitment") and (iii) that certain
Agreement Terminating Amended and Restated Letter to Provided Confirmation
Financing dated as of March 31, 1995 (the "GE Commitment Termination
Agreement"), which in light of their contingent, unmatured or unliquidated
nature are not at the time of the closing of the Post-Effective Date
Financing Facility quantifiable or otherwise capable of being satisfied in
full by the payment of Cash, including, without limitation, all
indemnification obligations of the Debtor under or pursuant to the DIP
Facility, the GE Commitment and the GE Commitment Termination Agreement.
1.89 "Post-Effective Date Lenders" shall mean, collectively, The
First National Bank of Boston, The CIT Group/Business Credit, Inc. (in all
capacities) and the other lending institutions who are, as of the Effective
Date, parties to (in whatever capacity) or who may provide financing to
Reorganized Rose's pursuant to, the Post-Effective Date Financing Facility.
1.90 "Pre-Petition Lenders" shall mean collectively, the Bank Group,
the Pre-Petition Secured Noteholders and the Bank of Tokyo.
1.91 "Pre-Petition Lenders' Allowed Secured Claims" shall have the
meaning set forth in the Second Supplemental Adequate Protection Consent
Order, and the Pre-Petition Lenders' Allowed Secured Claims as of the date
on which such Claims shall be satisfied in full pursuant to this Modified
Plan shall equal the amounts that are set forth in Exhibit C annexed to the
Second Supplemental Adequate Protection Consent Order (as of the date the
Second Supplemental Adequate Protection Consent Order was filed), plus any
and all accrued and unpaid interest, fees, expenses and charges due to the
Pre-Petition Lenders as of the date on which such Claims shall be satisfied
in full pursuant to this Modified Plan, less all amounts received with
respect thereto by the Pre-
12
<PAGE>
Petition Lenders toward satisfaction of such
claims through the date on which such Claims shall be satisfied in full
pursuant to this Modified Plan.
1.92 "Pre-Petition Secured Noteholders" shall mean the holders of the
Pre-Petition Secured Notes, to wit: Nationwide Life Insurance Company,
Wausau Preferred Health Insurance Company, Equitable Variable Life
Insurance Company, The Equitable Life Assurance Society of the United
States, Jefferson-Pilot Life Insurance Company, The Franklin Life Insurance
Company, The Franklin United Life Insurance Company, Great-West Life &
Annuity Insurance Company, American Family Life Insurance Company, State
Mutual Life Assurance Company of America, SMA Life Assurance Company,
Merrill Lynch Life Insurance Company, ML Life Insurance Company of New
York, Woodmen of the World Life Insurance Society, Knights of Columbus,
Washington National Insurance Company, The Stonehill Investment Corp.,
Central Life Assurance Company, and Lazard Freres & Co., or their
predecessors-in-interest, or successors and assigns as of the Record Date.
1.93 "Pre-Petition Secured Noteholder Warrant Agreement" shall mean
that certain agreement executed in connection with the pre-petition
refinancing of the Debtor pursuant to which Pre-Petition Secured Noteholder
Warrants were issued and which agreement further provided for the future
issuance of additional such warrants.
1.94 "Pre-Petition Secured Noteholder Warrants" shall mean those
certain Pre-Petition Warrants held by Pre-Petition Secured Noteholders and
any rights to receive future warrants pursuant to the Pre-Petition Secured
Noteholder Warrant Agreement which were not exercised prior to the Filing Date.
1.95 "Pre-Petition Secured Notes" shall mean the 11% Senior Secured
Notes due December 31, 1998, issued by the Debtor pursuant to the terms of
that certain "Combined, Amended and Restated Note Agreement" dated May 29,
1992.
1.96 "Pre-Petition Stock Option" shall mean any option to purchase an
equity interest in the Debtor's Common Stock, including, without
limitation, Employee Stock Options, and any Claims arising thereunder,
subject to subordination pursuant to Section 510(b) of the Bankruptcy Code,
arising from rescission of a purchase or sale of a Pre-Petition Stock
Option or for damages arising from such purchase and sale or for reimbursement
of contribution or occurrence of such Claim.
1.97 "Pre-Petition Warrant" shall mean any warrant issued pre-
petition to purchase an equity interest in the Debtor, including, without
limitation, Pre-Petition Secured Noteholder Warrants, and any Claims
subject to subordination pursuant to Section 510(b) of the Bankruptcy Code,
arising from rescission of the purchase or sale of a Pre-Petition Warrant
or for damages
13
<PAGE>
arising from such purchase or sale or reimbursement of
contribution or occurrence of such Claim.
1.98 "Professional" shall mean any Person (i) retained pursuant to an
order of the Bankruptcy Court in accordance with Sections 327 and 1103 of
the Bankruptcy Code and to be compensated for services pursuant to Sections
327, 328, 329, 330 and 331 of the Bankruptcy Code, or (ii) for which
compensation and reimbursement has been allowed by the Bankruptcy Court
pursuant to Section 503(b)(4) of the Bankruptcy Code.
1.99 "Professional Fees" shall mean compensation for services
rendered and reimbursement of expenses in connection with the Chapter 11
Case allowed to Professionals by order of the Bankruptcy Court pursuant to
Sections 330, 331, 1103 or 503(b) of the Bankruptcy Code. Professional
Fees as defined herein shall not include the fees of the professionals of
the Pre-Petition Lenders, which shall be paid in accordance with the
provisions of the Second Supplemental Adequate Protection Consent Order.
1.100 "Pro-Rata" shall mean the ratio of an Allowed Claim, Reserve
Amount or Interest in or respecting a particular Class to the aggregate
amount of all Allowed Claims plus Reserve Amounts or Interests in or
respecting that Class.
1.101 "Reconstituted Board of Directors" shall mean the board of
directors of Reorganized Rose's as of and after the Effective Date,
appointed pursuant to Sections 7.5 and 7.6 of this Modified Plan and as set
forth in the schedule filed with the Bankruptcy Court prior to the
Effective Date.
1.102 "Record Date" shall mean (a) for the purpose of voting on the
Plan, the date of entry of the order approving the Disclosure Statement,
(b) for the purposes of any distribution and payments under and pursuant to
this Modified Plan other than the rights to participate in the Class 5
Subscription to holders of Common Stock Interests, the Effective Date, (c)
for the purpose of distributing the rights to participate in the Class 5
Subscription to the holders of Common Stock Interests, the Equity Record
Date, and (d) for the purpose of making payments to or for the benefit of
the Pre-Petition Lenders pursuant to Section 4.4 of this Modified Plan, the
Business Day prior to the scheduled date of the closing of the Post-
Effective Date Financing Facility.
1.103 "Released Parties" shall mean, collectively, (i) all past and
present officers, directors, agents, employees, and Professionals of the
Debtor, (ii) all members, agents and Professionals of the Committees, (iii)
each of the Pre-Petition Lenders and their past and present officers,
directors, agents, employees and professionals and (iv) GE Capital, GE
Capital Corporate Finance Group, Inc. and GE Capital Commercial Finance,
Inc., and all of their respective past and present officers, directors,
agents, employees and professionals.
14
<PAGE>
1.104 "Reorganized Rose's" shall mean Rose's Stores, Inc., a Delaware
corporation, operating and conducting business pursuant to the New Rose's
Charter, as of and after the Effective Date.
1.105 "Reserve" shall mean any escrow or interest-bearing account
established to hold distributions on account of Disputed Claims, pursuant
to Section 7.12 of this Modified Plan. The amount of the Reserve shall
include interest and dividends accrued thereon.
1.106 "Reserve Amount" shall mean the dollar value of a Disputed
Claim for purposes of determining the aggregate distribution to be reserved
for a Disputed Claim pursuant to Section 7.12 of this Plan.
1.107 "Retiree Claim" shall mean a Claim arising from or relating to
retiree benefits, if any, as defined in Section 1114(a) of the Bankruptcy
Code, which is allowed under Section 1114(e)(2) of the Bankruptcy Code.
1.108 "RSI" shall mean RSI Trading, Inc., a Delaware corporation that
was a wholly owned subsidiary of the Debtor prior to its merger with the
Debtor prior to the Effective Date.
1.109 "Second Supplemental Adequate Protection Consent Order" shall
mean the "Second Supplemental Consensual Adequate Protection Order In
Connection with Payment Of Net Proceeds From "GOB2" Sales And The Filing Of
The Joint Plan Of Reorganization Of Rose's Stores, Inc." signed by the Plan
Proponents and GE Capital and entered by the Bankruptcy Court, as modified
by orders of the Bankruptcy Court dated August 30, 1994 and November 30,
1994.
1.110 "Subscription Proceeds Escrow" shall mean the escrow account
established pursuant to Section 7.10 of this Modified Plan and the Class 5
Rights Notice in connection with the Class 5 Subscription into which
Subscription Proceeds, if any, shall be deposited and from which the
Subscription Proceeds shall be distributed to holders of Allowed Unsecured
Claims in Class 3 or otherwise in accordance with Section 6.2.2 of this
Modified Plan.
1.111 "Subscription Proceeds" shall mean the aggregate amount of
Cash, if any, tendered by the Class 5 Subscribers to acquire shares
constituting the Class 5 Subscription Stock Designation pursuant to Section
7.10 of this Modified Plan and the Class 5 Rights Notice, and maintained in
the Subscription Proceeds Escrow in accordance with the Class 5 Rights
Notice pending distribution pursuant to Section 6.2.2 of this Modified
Plan. The Subscription Proceeds shall not be property of the Estate or of
Reorganized Rose's.
1.112 "Subordinated Claims" shall mean all Claims subject to
subordination pursuant to Section 510(b) of the Bankruptcy Code arising
from rescission of a purchase or sale of Voting Common
15
<PAGE>
Stock and Non-Voting Class B Stock, or for damages arising from such purchase
or sale, or for reimbursement, contribution or indemnification on occurrence
of such Claim.
1.113 "Supplemental Adequate Protection Orders" shall mean,
collectively, the "Supplemental Consensual Adequate Protection Order In
Connection with Debtor's Motion For Order Authorizing Debtor To Conduct
Additional Going Out Of Business Sales And Other Relief" signed by the
Bankruptcy Court on May 17, 1994, and the Second Supplemental Adequate
Protection Consent Order.
1.114 "Unsecured Committee" shall mean the Official Committee of
Unsecured Creditors appointed by the Office of the Bankruptcy Administrator
for the Eastern District of North Carolina to serve in the Chapter 11 Case,
as the same may be constituted from time to time.
1.115 "Voting Common Stock" shall mean the Voting Common Stock of the
Debtor, no par value, exclusive of any shares of Voting Common Stock held
in treasury, registered as of the Record Date in such stock register as may
be maintained by or on behalf of the Debtor.
ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS
2.1 Criterion of Class. A Claim or Interest is in a particular Class
only to the extent that the Claim or Interest qualifies within the
description of that Class and is in a different Class to the extent that
the remainder of the Claim or Interest qualifies within the description of
the different Class. The Debtor reserves the right to have any Claim or
Interest reclassified as appropriate and to the extent permitted by the
Bankruptcy Court. In particular, a Claim filed as a Non-Tax Priority Claim
but which does not comport with provisions of Section 507(a) of the
Bankruptcy Code shall be treated by the Debtor pursuant to Bankruptcy Court
Order as a Claim not entitled to priority, or as an Interest (as
appropriate), and the Debtor will ascribe a vote cast in connection with
this Modified Plan by a holder of such Claim to the proper Class, to the
extent permitted by the Bankruptcy Court.
2.2 Claims and Interests. All Allowed Claims and Interests are
divided into the following Classes pursuant to Sections 1122 and 1123(a)(1)
of the Bankruptcy Code, which Classes shall be mutually exclusive:
(a) Class 1 (Non-Tax Priority Claims). Class 1 consists of all
Allowed Non-Tax Priority Claims.
16
<PAGE>
(b) Class 2 (Secured Claims). Class 2 consists of all Allowed
Secured Claims. Class 2 Claims are classified further into two
subclasses:
(i) Class 2A (General Secured Claims). Class 2A consists
of all Allowed Secured Claims, other than those asserted by the
Pre-Petition Lenders, the collateral for which constitutes an
asset which is property of the Estate, and which property secures
such Allowed Secured Claims by a valid and enforceable lien,
security interest and/or pledge; and
(ii) Class 2B (Pre-Petition Lenders Secured Claims). Class
2B consists of the Pre-Petition Lenders' Allowed Secured Claims.
(c) Class 3 (Unsecured Claims). Class 3 consists of all Allowed
Unsecured Claims.
(d) Class 4. Intentionally omitted.
(e) Class 5 (Common Stock Interests). Class 5 consists of all
Common Stock Interests.
(f) Class 6 (Pre-Petition Warrants). Class 6 consists of all
Interests arising from Pre-Petition Warrants.
(g) Class 7 (Pre-Petition Stock Options). Class 7 consists of
all Interests arising from Pre-Petition Stock Options.
(h) Class 8 (Subordinated Claims). Class 8 consists of all
Subordinated Claims.
ARTICLE III
PAYMENT OF ADMINISTRATIVE CLAIMS
ALLOWED TAX CLAIMS, PROFESSIONAL FEES, AND
RETIREE CLAIMS, AND TREATMENT OF GE CAPITAL
3.1 Administrative Claims. All Administrative Claims, other than
Professional Fees, shall be paid by the Debtor in full, in Cash, (a) in
such amounts as are incurred by the Debtor in the ordinary course of its
business, or (b) in such amounts as such Administrative Claims are allowed
by Final Order of the Bankruptcy Court (i) upon the later of the Effective
Date or the date upon which the Bankruptcy Court enters a Final Order
allowing such Administrative Claim, or (ii) upon such other terms as may
exist in the ordinary course of the Debtor's business, or (iii) as may be
agreed upon between the holders of such Administrative Claims and the
Debtor. Those liabilities of the Debtor due and payable in the ordinary
course of business after the Effective Date shall be
17
<PAGE>
treated as ordinary course of business obligations of Reorganized Rose's.
3.2 Allowed Tax Claims. Allowed Tax Claims shall be paid by the
Debtor in full, in Cash, on the later of the Effective Date or the date
upon which the Bankruptcy Court enters a Final Order allowing such Allowed
Tax Claim, or upon such other terms as may be agreed to between the Debtor
and any holder of an Allowed Tax Claim; provided, however, that (i) the
Debtor may make, at its option, in lieu of payment in full of the Allowed
Tax Claims on the Effective Date, deferred Cash payments respecting Allowed
Tax Claims to the extent permitted by Section 1129(a)(9) of the Bankruptcy
Code and, in such event, interest shall be paid on the unpaid portion of
such Allowed Tax Claim at a rate to be agreed to by the Debtor and the
appropriate governmental unit or, if they are unable to agree, to be
determined by the Bankruptcy Court, and (ii) if such Allowed Tax Claim is
for a tax assessed against property of the Estate, the amount of such
Allowed Tax Claim does not exceed the value of the Estate's interest in
such property, and (iii) in the event an Allowed Tax Claim may also be
classified as a Secured Claim, the Debtor may, at its option, elect to
treat such Allowed Tax Claim as an Allowed Secured Claim. Payments to the
Internal Revenue Service with respect to any Allowed Tax Claims shall be
made in equal quarterly payments with interest at 8% per annum, accruing
from the Plan Confirmation Date until full payment is made, with the first
such quarterly payment being made within fifteen days after the Effective
Date. All Allowed Tax Claims that by their terms become due and payable
after the Confirmation Date shall be paid when due.
3.3 Professional Fees. Awards of Professional Fees for all periods
up to and including the Plan Confirmation Date shall be paid (i) first,
from those trusts or escrows established by prior order of the Bankruptcy
Court, on account of Professional Fees for which payment was requested but
not authorized by the Bankruptcy Court prior to the Plan Confirmation Date,
and, (ii) thereafter, by the Debtor in Cash, pursuant to order of the
Bankruptcy Court. During the period from the Plan Confirmation Date
through and including the Effective Date, Professionals employed by the
Debtor or the Committees may be paid compensation and reimbursement of
expenses monthly in arrears in full in Cash upon the submission of invoices
to the Debtor and the Committees. Ten (10) days after receipt by the
Debtor and the Committees of any such invoice, the Debtor shall be
authorized to pay such invoice without further order of the Bankruptcy
Court unless the Debtor and/or the Person seeking payment has received a
written objection to the payment thereof from any of the Debtor or the
Committees within such period. In the event fees and expenses of any
professional retained by the Debtor are objected to by either the Debtor or
the Committees, such fees and expenses shall be subject to and payable only
upon Bankruptcy Court approval or prior agreement of the parties. All
Professional Fees for services rendered after the Effective Date in
connection with the Debtor or Reorganized Rose's,
18
<PAGE>
as the case may be, the Chapter 11 Case and/or this Modified Plan shall be
paid by the Debtor or Reorganized Rose's, as the case may be, pursuant to
the provisions of this Plan or upon such terms as agreed to by the Debtor
or Reorganized Rose's, as the case may be, and the particular Professional
without further Bankruptcy Court review or authorization. In all
circumstances, the fees of the professionals of the Pre-Petition Lenders
shall be paid in accordance with the Second Supplemental Adequate Protection
Consent Order, and shall be paid in full, in Cash, in connection with the
closing of the Post-Effective Date Financing Facility.
3.4 Retiree Claims and Benefits Under Section 1114 of the Bankruptcy
Code. On and after the Effective Date, all Allowed Retiree Claims arising
prior to the Effective Date shall be treated as Administrative Claims, paid
in full, and all retiree benefits, as such term is defined in Section
1114(a) of the Bankruptcy Code, shall continue, at the level established or
modified pursuant to Section 1114 of the Bankruptcy Code, solely to the
extent, and for the period, that the Debtor and Reorganized Rose's is, or
may be, contractually or legally obligated to provide such benefits.
3.5 Treatment of GE Capital. Simultaneous with the closing of the
Post-Effective Date Financing Facility, (i) all of the GE Obligations
(other than (a) the Deferred GE Obligations and (b) the Post-Effective Date
GE Obligations) shall be fully and finally satisfied, in Cash, in
accordance with this Section 3.5, (ii) Reorganized Rose's shall have made
adequate provision with respect to the Deferred GE Obligations by the
execution and delivery of the Deferred GE Obligations Agreements and such
performance as may be required thereunder prior to or upon the execution
and delivery thereof, (iii) Reorganized Rose's shall have assumed each and
every of the Post-Effective Date GE Obligations by the execution and
delivery of the Post-Effective Date GE Assumption Agreement and in each
case, such performance as may be required thereunder prior to or upon the
execution and delivery thereof, and (iv) GE Capital shall enter into and
deliver the GE Master Release Agreement. Simultaneously upon such time as
(i) all GE Obligations (other than (a) the Deferred GE Obligations and (b)
the Post-Effective Date GE Obligations) are fully satisfied, in Cash (the
amount of which shall be fixed and provided to Reorganized Rose's and the
Facility Agents prior to the initial funding under the Post-Effective Date
Financing Facility), (ii) all Deferred GE Obligations are provided for by
Reorganized Rose's by the execution and delivery of the Deferred GE
Obligations Agreements and such performance as may be required thereunder
prior to or upon the execution and delivery thereof, and (iii) all Post-
Effective Date GE Obligations are assumed by Reorganized Rose's by the
execution and delivery of the Post-Effective Date GE Assumption Agreement
and such performance as may be required thereunder prior to or upon the
execution and delivery thereof, all liens, claims, interests, rights,
remedies and protections granted to GE Capital pursuant to the DIP Facility
shall be released and terminated. Notwithstanding anything to the contrary
set forth in or implied by any provisions of this Modified
19
<PAGE>
Plan, on and after the Effective Date Reorganized Rose's shall be deemed
to have assumed, without any action or the execution of any document, any
and all Post-Effective Date GE Obligations.
ARTICLE IV
CLAIMS NOT IMPAIRED UNDER THE PLAN
4.1 Non-Impairment. Claims in Class 1, Class 2A and Class 2B are not
impaired under this Modified Plan. In the event of a controversy as to
whether any holders of Claims or Interests are impaired, the Bankruptcy
Court shall, after appropriate notice and hearing, determine such
controversy. The Debtor reserves the right to re-classify Claims or
Interests as appropriate and to the extent permitted by the Bankruptcy
Court. In particular, a Claim filed as a Non-Tax Priority Claim but which
does not comport with provisions of Section 507(a) of the Bankruptcy Code
shall be treated by the Debtor as a Claim not entitled to priority or an
Interest, as appropriate, and the Debtor will ascribe a vote cast in
connection with this Modified Plan by a holder of such Claim to the proper
Class, to the extent permitted by the Bankruptcy Court.
4.2 Class 1 (Non-Tax Priority Claims). The Allowed Non-Tax Priority
Claims shall be paid in full, in Cash, on the later of the Effective Date
or the date of a Final Order allowing any such Claim in this Class 1, or
upon such other terms as may be agreed to between the Debtor and any holder
of an Allowed Claim in this Class 1.
4.3 Class 2A (General Secured Claims). The Allowed Secured Claims in
Class 2A shall be treated as follows at the Debtor's option:
(a) (i) any default, other than of the kind specified in
Section 365(b)(2) of the Bankruptcy Code, shall be cured, provided
that accrued and unpaid interest, if any, which the Debtor may be
obligated to pay with respect to such default shall be simple interest
at the contract rate and not at any default rate of interest;
(ii) the maturity of the Allowed Secured Claim shall be
reinstated as the maturity existed before any default;
(iii) the holder of the Allowed Secured Claim shall be
compensated for any damage incurred as a result of any reasonable
reliance by the holder on any provision that entitled the holder
to accelerate maturity of the Allowed Secured Claim; and
(iv) the other legal, equitable, or contractual rights to
which the Allowed Secured Claim entitles the holder shall not
otherwise be altered; provided, however,
20
<PAGE>
that as to any Allowed Secured Claim which is a nonrecourse
claim and exceeds the value of the collateral securing such
Allowed Secured Claim, the collateral may be sold at a sale
at which the holder of such Allowed Secured Claim has an
opportunity to bid; or
(b) on the Effective Date, or on such other date thereafter as
may be agreed to by the Debtor and the holder of such Allowed Secured
Claim, the Debtor shall abandon the collateral securing such Allowed
Secured Claim to the holder thereof in full satisfaction and release
of such Allowed Secured Claim; or
(c) on the Effective Date or as soon as practicable thereafter,
the holder of such Allowed Secured Claim shall receive, on account of
such Allowed Secured Claim, Cash equal to its Allowed Secured Claim,
or such lesser amount to which the holder of such Allowed Secured
Claim shall agree, in full satisfaction and release of such Allowed
Secured Claim.
4.4 Class 2B (Pre-Petition Lenders' Allowed Secured Claims). The
Pre-Petition Lenders' Allowed Secured Claims shall be paid in full, in
Cash, contemporaneous with the closing of the Post-Effective Date Financing
Facility from a portion of the funds provided thereunder, such that all
liens in favor of the Pre-Petition Lenders shall have been thereby released
and discharged. Furthermore, contemporaneous with the closing of the Post-
Effective Date Financing Facility, the Pre-Petition Lenders, or the
Collateral Agent on their behalf, shall provide to the Administrative Agent
a payoff letter acknowledging that all Class 2B Pre-Petition Lenders'
Allowed Secured Claims have been satisfied in full (except as the Debtor
and the Pre-Petition Lenders agree that Reorganized Rose's shall later
satisfy certain Claims for fees and expenses once such amounts are
determined) and that all liens in favor of the Pre-Petition Lenders have
been released, and shall have executed and delivered to the Administrative
Agent for filing all termination statements and taken such other actions
and provided such further assurances as may be requested by the
Administrative Agent to discharge or evidence the discharge of all
mortgages, deeds of trust and security interests granted by the Debtor in
favor of the Pre-Petition Lenders or their agents. All promissory notes
under all agreements with the Pre-Petition Lenders, including, without
limitation, the Pre-Petition Secured Notes and the Pre-Petition Secured
Noteholder Warrants, shall be deemed to be cancelled, annulled and
extinguished upon the payment in full of the Pre-Petition Lenders' Allowed
Secured Claims applicable thereto.
21
<PAGE>
ARTICLE V
CLAIMS AND INTERESTS IMPAIRED UNDER THE PLAN
5.1 Intentionally Omitted
5.2 Class 3 (Unsecured Claims). Except with respect to those holders
of Class 3 Allowed Unsecured Claims which are Damage Claims entitled to
receive a Cash payment in accordance with the ADR Procedure as ratified and
incorporated into this Modified Plan pursuant to Section 7.15 of this
Modified Plan, each holder of an Allowed Unsecured Claim in Class 3 shall
receive in exchange for such claim its Pro-Rata share of (i) the Class 3
Common Stock Designation, on such Distribution Dates specified by, and
otherwise in accordance with, Section 6.2.1 of this Modified Plan, and (ii)
the Subscription Proceeds, if any, not returnable to the Class 5
Subscribers pursuant to the Class 5 Rights Notice, on such Distribution
Dates specified by, and otherwise in accordance with, Section 6.2.2 of this
Modified Plan.
5.3 Intentionally Omitted.
5.4 Class 5 (Common Stock Interests). Each holder of a Common Stock
Interest in Class 5 shall receive in exchange for such interest (i) its
Pro-Rata share of the New Rose's Warrants, on such Distribution Dates as
set forth in Section 6.2.4 of this Modified Plan, (ii) its Pro-Rata share
of the New Rose's Common Stock Secondary Distribution, if any, on such
Distribution Dates as set forth in Section 6.2.3 of this Modified Plan, and
(iii) the non-transferrable right to pay Cash to acquire shares of New
Rose's Common Stock in accordance with the Class 5 Subscription pursuant to
Section 7.10 of this Modified Plan and the Class 5 Rights Notice.
5.5 Class 6 (Pre-Petition Warrants). Holders of Interests in Class 6
shall not receive any distribution whatsoever on account of such Interests,
and as of the Effective Date, all Interests in any Pre-Petition Warrants,
including, without limitation, Pre-Petition Secured Noteholder Warrants,
shall be deemed canceled, annulled and extinguished. In addition, all
agreements, including, without limitation, the Pre-Petition Secured
Noteholder Warrant Agreement, providing for the issuance of Pre-Petition
Warrants to any Persons shall be deemed rejected, provided that any and all
Allowed Claims arising therefrom shall be deemed subject to the
subordination provisions of Section 510(b) of the Bankruptcy Code, and such
holders shall receive no distribution on account of any such Allowed
Claims.
5.6 Class 7 (Pre-Petition Stock Options). Holders of Interests in
Class 7 shall not receive any distribution whatsoever on account of such
Interests, and as of the Effective Date, all Interests in any Pre-Petition
Stock Options, including, without limitation, Employee Stock Options, shall
be deemed canceled,
22
<PAGE>
annulled and extinguished. In addition, all agreements providing for the
issuance of Pre-Petition Stock Options, including, without limitation, the
Employee Stock Option Plans, to any Persons shall be deemed rejected and/or
terminated, provided that any and all Allowed Claims arising therefrom shall
be deemed subject to the subordination provisions of Section 510(b) of the
Bankruptcy Code, and such holders shall receive no distribution on account
of any such Allowed Claims.
5.7 Class 8 (Subordinated Claims). Holders of Subordinated Claims in
Class 8 shall not receive any distribution whatsoever on account of such
Claims, and as of the Effective Date, all Subordinated Claims shall be
deemed canceled, annulled and extinguished.
5.8 Effect of Bar Dates. As of the Effective Date, any Claim arising
solely on account of a proof of claim filed after an applicable Bar Date
shall be deemed disallowed and expunged, and the holder of such Claim shall
be forever barred from asserting such Claim against the Debtor or its
property, and from voting on this Modified Plan and/or sharing in any
distribution hereunder in respect of such Claim unless otherwise provided
pursuant to further order of the Bankruptcy Court. All Claims scheduled by
the Debtor as contingent, unliquidated or disputed on its voluntary
petition under Chapter 11, or on its Lists, Schedules and Statements filed
pursuant to Section 521(1) of the Bankruptcy Code and Bankruptcy Rule 1007,
shall be deemed extinguished if the respective proofs of claim in
connection with such Claims were not filed by the applicable Bar Dates,
unless otherwise provided pursuant to further order of the Bankruptcy
Court. Any Damages Claim which is asserted after the Effective Date by a
claimant who received no notice of the Chapter 11 Case ("Post-Effective
Date Damages Claim") (i) shall be liquidated pursuant to the ADR Procedure,
and (ii) once liquidated, shall be treated as an Allowed Unsecured Claim in
Class 3 and satisfied from the shares of New Rose's Common Stock maintained
in the Collective Reserve established pursuant to the Bankruptcy Court
order dated January 24, 1995 entitled "Order (i) Fixing Collective Reserve
Amount for Certain Disputed, Contingent and Unliquidated Damages Claims;
and (ii) Deeming Such Claims to be 'Disputed Claims' and Not 'Allowed
Claims' Pending Resolution of Such Claims Pursuant to the ADR Procedure"
("Collective Reserve Order") and any future orders which may be entered by
the Bankruptcy Court, provided that such shares of New Rose's Common Stock
will first be distributed to holders of Damages Claims who have filed a
proof of claim on or before the applicable Bar Date or such other date as
set by the Bankruptcy Court.
5.9 Non-consensual Confirmation. In the event that any impaired
Class of Claims or Interests shall not accept this Modified Plan in
accordance with Section 1129(a) of the Bankruptcy Code, the Plan
Proponents, with the exception of (a) the Unsecured Committee if Class 3
does not accept this Modified Plan, or (b) the Equity Committee if Class 5
does not accept this Modified Plan,
23
<PAGE>
reserve the right to (i) request that the Bankruptcy Court confirm this
Modified Plan in accordance with Section 1129(b) of the Bankruptcy Code,
or (ii) with the approval of the Plan Proponents, the Facility Agents and
GE Capital, amend this Modified Plan in accordance with Section 12.7 of this
Modified Plan.
ARTICLE VI
PROVISIONS GOVERNING DISTRIBUTIONS
6.1 Distributions by Reorganized Rose's or Other Distribution Agent.
With the approval of the Board of Directors and the Bankruptcy Court, and
subject to the terms and provisions of the Class 5 Rights Notice and the
New Rose's Warrant Agreement to the extent applicable, either Reorganized
Rose's or its designee, as Distribution Agent, shall make all distributions
required to be made under this Modified Plan on the Effective Date or such
other Distribution Date as is specified in this Modified Plan. Any entity
designated by either Reorganized Rose's or authorized by other agreement to
be a Distribution Agent and to make such distributions may employ or
contract with other entities to assist in or make the distributions
required by this Plan to the extent agreed by Reorganized Rose's. The
Distribution Agent shall serve without bond, and to the extent that the
Distribution Agent is not Reorganized Rose's, the Distribution Agent shall
receive from Reorganized Rose's reasonable compensation and reimbursement
of reasonable out-of-pocket expenses on terms acceptable to Reorganized
Rose's.
6.2 Distributions to Impaired Classes. The following shall
constitute the means of distributions to the holders of Allowed Claims and
Interests in their respective Classes:
6.2.1 Distributions of New Rose's Common Stock.
(a) Within forty-five days after the Effective Date, (i) an amount of
shares, if any, equal to 70% of the Effective Date Shares which are not
included in the Class 5 Subscription Stock Designation or the shares to be
distributed in accordance with the Management Incentive and Retention
Program pursuant to subparagraph (iii) below shall be distributed on a Pro-
Rata basis among all holders of Allowed Claims in Class 3 and the Reserves
established on account of Disputed Claims in Class 3 in accordance with
Section 7.12 of this Modified Plan, (ii) an amount of shares equal to 100%
of the Class 5 Subscription Stock Designation shall be distributed among
all Class 5 Subscribers in the manner specified in Section 7.10 of this
Modified Plan and the Class 5 Rights Notice, (iii) 150,000 of the Effective
Date Shares will be distributed in accordance with the Management Incentive
and Retention Program, and (iv) the remaining Effective Date Shares, if
any, which are not distributed pursuant to subparagraphs (i), (ii) and
(iii) above shall be deposited into the New Rose's Common Stock Escrow.
24
<PAGE>
(b) Within thirty days after the Determination Date, the Distribution
Agent which is the escrow agent of the New Rose's Common Stock Escrow shall
distribute on a Pro-Rata basis among all holders of Allowed Claims in Class
3 and the Reserves established on account of Disputed Claims in Class 3 in
accordance with Section 7.12 of this Plan, the lesser of (i) all of the
shares of New Rose's Common Stock maintained in the New Rose's Common Stock
Escrow, or (ii) such number of shares of New Rose's Common Stock having an
aggregate value, as determined in accordance with subparagraph (c) below,
when added to (x) the aggregate value, also as determined in accordance
with subparagraph (c) below, of that portion of Class 3 Common Stock
Designation distributed or deposited in accordance with subparagraph (a)(i)
above and (y) two (2) times the Subscription Proceeds payable to all
holders of Allowed Claims in Class 3 and the Reserves established on
account of Disputed Claims in Class 3 as specified in Section 6.2.2 of this
Modified Plan, equal to the Full Recovery Target Amount.
(c) The determination of value for purposes of distributions of
shares of New Rose's Common Stock maintained in the New Rose's Common Stock
Escrow pursuant to subparagraph (b) above shall be the average of the intra
day high and low average price of the New Rose's Common Stock for the
fifteen trading days prior to the Determination Date, so long as not less
than 2,000,000 shares of New Rose's Common Stock shall have been
distributed at least 20 days prior to the Determination Date unless the
Post-Effective Date Committee, in its sole discretion, waives the
requirement that at least 2,000,000 shares shall have been distributed.
(d) The shares of New Rose's Common Stock issued pursuant to this
Modified Plan shall be subject to dilution arising from the issuance of
shares by Reorganized Rose's of New Rose's Common Stock as may be
authorized or required, from time to time, (i) pursuant to the Management
Incentive and Retention Program, and (ii) by operation or exercise of the
New Rose's Warrants.
6.2.2 Distribution of Subscription Proceeds.
(a) In the event that the Subscription Proceeds total $25 million or
greater, the Subscription Proceeds in the Subscription Proceeds Escrow,
after the return of any Subscription Proceeds, including interest thereon,
to the Class 5 Subscribers if required by the Class 5 Rights Notice, shall
be distributed together with interest thereon Pro-Rata among all holders of
Allowed Claims in Class 3 and the Reserves established on account of
Disputed Claims in Class 3 pursuant to Section 7.12 of this Modified Plan.
Upon the resolution of all Disputed Claims in Class 3 in accordance with
Section 7.12 of this Modified Plan, any Cash remaining in the Subscription
Proceeds Escrow, including interest thereon, shall be distributed Pro-Rata
to holders of Allowed Claims in Class 3. Prior to the resolution of all
Disputed Claims in Class 3, if at any time or times the Subscription
Proceeds Escrow contains more than enough Subscription Proceeds to satisfy
all of the remaining
25
<PAGE>
Disputed Claims in Class 3 by payment of 50% of the Reserve Amounts established
therefor, such excess Subscription Proceeds may be distributed from time to
time among the holders of Allowed Claims in Class 3 as provided in the
preceding sentence.
(b) In the event that the Subscription Proceeds total less than $25
million, the Subscription Proceeds, together with accrued interest thereon,
shall be returned to the Class 5 Subscribers pursuant to the Class 5 Rights
Notice.
6.2.3 Distribution of New Rose's Common Stock Secondary Distribution.
Within thirty days of the Determination Date, shares of New Rose's Common
Stock constituting the New Rose's Common Stock Secondary Distribution, if
any, shall be distributed Pro-Rata to all holders of Common Stock Interests
in Class 5 in accordance with the New Rose's Common Stock Escrow Agreement.
6.2.4 Distribution of New Rose's Warrants. Within thirty days of the
Effective Date, the 4,285,714 New Rose's Warrants shall be distributed by
Reorganized Rose's to the warrant agent under the New Rose's Warrant
Agreement, who, as a Distribution Agent, shall distribute the New Rose's
Warrants on a Pro-Rata basis to all holders of Common Stock Interests in
Class 5 pursuant to the Modified Plan and the New Rose's Warrant Agreement.
Each New Rose's Warrant shall entitle the holder thereof to purchase one
share of New Rose's Common Stock from the date the New Rose's Warrants are
issued until the seventh anniversary of the Effective Date at the per share
price equal, subject to adjustment as provided in the New Rose's Warrant
Agreement, to (i) on the Effective Date, and as adjusted on each of the
first three anniversaries of the Effective Date, the Full Recovery Target
Amount divided by 10,000,000, the number of Effective Date Shares and (ii)
as adjusted on the fourth, fifth, and sixth anniversaries of the Effective
Date, 105%, 110% and 115%, respectively, of the Full Recovery Target Amount
divided by 10,000,000, the number of Effective Date Shares.
6.2.5 Listing of Common Stock and Warrants. The Debtor intends to
apply for listing of the New Rose's Common Stock and the Warrants on a
national securities exchange or quotation on the National Association of
Securities Dealers Automated Quotation National Market System.
6.3 Timing of Distributions. Except as otherwise provided in this
Article 6, or as may be ordered by the Bankruptcy Court, all distributions
shall be made on the respective Distribution Dates as specified in this
Modified Plan, or as soon as practicable thereafter, and all distributions
shall be deemed timely made if made on such respective Distribution Dates
or as soon as practicable thereafter.
6.4 Disputed Payments. In the event of any dispute between and among
the holders of Claims or Interests as to the right of any
26
<PAGE>
Person to receive or retain any payment or distribution to be made to such
Person under this Modified Plan, the Distribution Agent may, in lieu of
making such payment or distribution to such Person, instead hold such payment
or distribution until the disposition thereof shall be determined by the
Bankruptcy Court.
6.5 Delivery of Distributions and Undeliverable or Unclaimed
Distributions.
6.5.1 Delivery of Distributions in General. Except as provided in
the Class 5 Rights Notice, the New Rose's Warrant Agreement or New Rose's
Common Stock Escrow Agreement, distributions to holders of Allowed Claims
or Common Stock Interests shall be made: (a) at the addresses set forth in
the proofs of Claim filed by such holders; (b) at the addresses set forth
in any written notices of address change delivered to the Debtor and
transmitted to the Distribution Agent after the date on which any related
proof of Claim was filed; or if the information described in clauses (a) or
(b) is not available, (c) at the addresses reflected in the Debtor's
schedules of liabilities or the applicable stock register as maintained by
or on behalf of the Debtor on the applicable Record Date.
6.5.2 Distributions Held by Distribution Agent. If the distribution
to any holder of an Allowed Claim or Common Stock Interest is returned to a
Distribution Agent as undeliverable, no further distributions shall be made
to such holder, but shall be held by the Distribution Agent, unless and
until the applicable Distribution Agent is notified in writing of such
holder's then current address, at which time all previously missed
distributions shall be mailed to such holder. Undeliverable distributions
shall remain in the possession of the applicable Distribution Agent until
such time as a distribution becomes deliverable. Undeliverable Cash shall
be held in trust in segregated bank accounts in the name of the applicable
Distribution Agent for the benefit of the potential claimants of such
funds, and shall be accounted for separately. Any Distribution Agent
holding undeliverable Cash shall invest such Cash in a manner consistent
with the investment and deposit guidelines of Reorganized Rose's as
permitted consistent with the Post-Effective Date Financing Facility.
Undeliverable shares of New Rose's Common Stock or New Rose's Warrants
shall be held in trust for the benefit of the potential claimants of such
shares by the applicable Distribution Agent in numbers of shares sufficient
to fund the unclaimed amounts of such New Rose's Common Stock and shall be
accounted for separately.
6.5.3 Failure to Claim Undeliverable Distributions. Except upon a
showing of (i) excusable neglect and (ii) no prejudice to any Persons who
have received a distribution under the Plan (as determined by the
Bankruptcy Court), any holder of an Allowed Claim or Common Stock Interest
that does not assert a right to receive a distribution of Cash or shares of
New Rose's Common Stock pursuant to this Modified Plan with respect to an
undeliverable distribution
27
<PAGE>
within one year after the first distribution shall have its right to receive
such undeliverable distribution discharged and shall be forever barred from
asserting any such right for an undeliverable distribution against the
applicable Distribution Agent and Reorganized Rose's or its property.
In such cases: (i) any Cash held for distribution on account of such Allowed
Claims for undeliverable distributions (including Cash interest and maturities
on undeliverable dividends and other distributions on undeliverable shares of
New Rose's Common Stock) shall be property of Reorganized Rose's, free of any
restrictions thereon, and (ii) any shares of New Rose's Common Stock held
for issuance on account of such Claims or Common Stock Interest for
undeliverable distributions shall either be canceled or held as treasury
shares as Reorganized Rose's may determine is appropriate. To the extent
that such undeliverable Cash or shares of New Rose's Common Stock is held
by a Distribution Agent, such Distribution Agent shall return such Cash or
shares or other instruments evidencing such New Rose's Common Stock to
Reorganized Rose's. Checks issued by a Distribution Agent in respect of
distributions to the holders of Allowed Claims or Common Stock Interest
shall be null and void if not cashed within 120 days of the date of
issuance thereof. Any amount paid by Reorganized Rose's, to a Distribution
Agent in respect of such a check shall be promptly returned to Reorganized
Rose's, by such Distribution Agent. Requests for the reissuance of any
check shall be made directly to the applicable Distribution Agent by the
holder of the Allowed Claim or Common Stock Interest with respect to which
such check was originally issued. Any Claim in respect of such a check
voided pursuant to this Section shall be made on or before the later of the
first anniversary of the first distribution or 90 days after the issuance
of such check. After such date, except upon a showing of (i) excusable
neglect and (ii) no prejudice to any Persons who have received a
distribution under this Modified Plan (as determined by the Bankruptcy
Court), all claims in respect of a check voided pursuant to this Section
shall be discharged and forever barred. Nothing contained in this Modified
Plan shall require Reorganized Rose's or any Distribution Agent to attempt
to locate any holder of an Allowed Claim or Common Stock Interest.
6.6 Fractional Distributions and Fractional Cents; Round Lots. Any
other provision of this Modified Plan notwithstanding, no fractional shares
of New Rose's Common Stock or New Rose's Warrants shall be issued or
distributed in connection with this Modified Plan. Each holder entitled
under this Modified Plan to receive New Rose's Common Stock or New Rose's
Warrants shall receive the total number of whole New Rose's Common Stock
certificates or New Rose's Warrant certificates to which such holder is
entitled. Whenever any distribution to a particular holder would otherwise
call for a distribution under this Modified Plan of a fraction of a share
of New Rose's Common Stock or of a New Rose's Warrant, the Distribution
Agent will allocate separately to each such holder one whole share or
warrant, as the case may be, to such holders in order of the fractional
portion of their
28
<PAGE>
entitlements, starting with the largest such fractional portion, until all
remaining whole shares or warrants, as the case may be, have been allocated.
Upon the allocation of a whole share or warrant, as the case may be, to a
holder in respect of the fractional portion of its entitlement, such
fractional portion shall be canceled. If two or more holders are entitled to
equal fractional entitlements and the number of holders so entitled exceeds
the number of whole shares or warrants, as the case may be, which remain to
be allocated, Reorganized Rose's shall allocate the remaining whole shares or
warrants to such holders by random lot or such other impartial method that
Reorganized Rose's deems fair. Upon the allocation of all the whole shares or
warrants, as the case may be, all remaining fractional portions of the
entitlements shall be canceled and shall be of no further force and effect.
Whenever any payment of a fraction of a cent would otherwise be called for,
the actual payment shall reflect a rounding down of such fraction to the
nearest, lowest whole cent.
6.7 Full and Final Satisfaction. Except as otherwise expressly
provided herein, full and complete performance by the Debtor and
Reorganized Rose's hereunder shall be in full and final satisfaction,
settlement, release and discharge of all Claims and Interests.
6.8 Allocation of Distributions to Holders of Allowed Secured Claims.
All payments made hereunder to a holder of an Allowed Secured Claim with
respect to which there is accrued but unpaid interest as of the Effective
Date shall be allocated first to the principal amount of the Allowed
Secured Claim and then to such accrued but unpaid interest to the extent
that the amount of the payments made under this Plan to such a holder
exceeds the principal amount of such claim.
ARTICLE VII
MEANS OF EXECUTION
In addition to the provisions set forth elsewhere in this Modified
Plan regarding the means of execution, the following shall constitute the
means of execution of this Modified Plan.
7.1 Funds for Distribution. The funds utilized to make the Cash
payments hereunder have been and will continue to be generated by, among
other things, the operation of the Debtor's businesses, asset dispositions
and any Post-Effective Date Financing Facility. On any Distribution Date,
Reorganized Rose's shall cause to be available for distribution shares of
New Rose's Common Stock and the New Rose's Warrants.
7.2 Post-Effective Date Financing Facility. All loans, advances,
debts, guarantees, liabilities and obligations for monetary amounts
(whether or not such amounts are liquidated or
29
<PAGE>
determinable) owing by Reorganized Rose's to the Post-Effective Date
Lenders, and all covenants and duties regarding such amounts, of any kind or
nature, present or future, whether or not evidenced by any note, agreement
or other instrument, arising under the Post-Effective Date Financing Facility,
including, without limitation, all interest, fees, charges, expenses,
attorneys' fees and any other sum chargeable to Reorganized Rose's under
any of the documents and agreements memorializing the Post-Effective Date
Financing Facility, shall be secured by valid and enforceable liens on, and
security interests in, the Post-Effective Date Collateral. In connection
with the closing of the Post-Effective Date Financing Facility, Reorganized
Rose's shall grant, and shall be hereby deemed to grant, to the Post-
Effective Date Lenders liens and security interests in all of the Post-
Effective Date Collateral for the purpose of securing all obligations and
liabilities of Reorganized Rose's under the Post-Effective Date Financing
Facility, which security interests and liens shall constitute valid and
perfected first-priority security interests in and liens upon all Post-
Effective Date Collateral, superior to and with priority over all other
security interests and liens whether consensual or non-consensual,
statutory or otherwise, and whether existing now or in the future, except
as to that portion of the Post-Effective Date Collateral which is Permitted
Encumbrance Collateral, as to which Permitted Encumbrance Collateral the
Post-Effective Date Lenders shall have valid and perfected security
interests and liens subordinate only to, or pari passu with, as the case
may be, all valid, perfected and unavoidable liens and security interests
existing thereon as of the Effective Date and described in the Post-
Effective Date Financing Facility. The terms of the Post-Effective Date
Financing Facility shall be subject to the approval of the Bankruptcy Court
by entry of its order prior to the Effective Date, which order shall be in
form and substance reasonably satisfactory to the Plan Proponents, GE
Capital, and the Facility Agents. Simultaneously upon the satisfaction in
full, in Cash, of the GE Obligations (other than (a) the Deferred GE
Obligations and (b) the Post-Effective Date GE Obligations) and the
execution and delivery of (i) the Deferred GE Obligations Agreements and
(ii) the Post-Effective Date GE Assumption Agreement, and in each case,
such performance as may be required thereunder prior to or upon the
execution and delivery thereof, the liens and security interests granted in
favor of the Post-Effective Date Lenders shall be effective and shall be
deemed created and fully perfected immediately upon the Effective Date and
without the necessity of the execution by the Debtor or Reorganized Rose's
or filing by the Post-Effective Date Lenders of financing statements,
mortgages, security agreements or any other documents. Neither the Post-
Effective Date Lenders (nor the Facility Agents or the Administrative Agent
on their behalf) shall be required to file financing statements, mortgages,
deeds of trust, notices of lien, certificates of title or any other
instruments (collectively, "Instruments") in any jurisdiction or take any
other action in order to validate or perfect the liens and security
interests granted to the Post-Effective Date Lenders. The entry of the
30
<PAGE>
Confirmation Orders and the occurrence of the Effective
Date shall constitute immediate and full perfection of the liens and security
interests granted to the Post-Effective Date Lenders, notwithstanding any
failure of the Post-Effective Date Lenders (or the Facility Agents or the
Administrative Agent on their behalf) to file or otherwise perfect said
security interests through such Instruments or otherwise in accordance with
any state or other applicable law. Notwithstanding the foregoing, the
Post-Effective Date Lenders or any of their agents may, at their sole
discretion, choose to have the Facility Agents and/or the Administrative
Agent, file any or all of such Instruments or otherwise confirm perfection
of such liens and security interests and all such Instruments shall be
deemed to have been filed or recorded at the time and on the date of the
Effective Date. In lieu of filing some or all of such Instruments, the
Post-Effective Date Lenders or any of their agents may, at their sole
discretion, choose to have the Facility Agents and/or the Administrative
Agent, file certified copies of the Confirmation Orders or the Order
approving the Post-Effective Date Financing Facility in any place at which
any of such Instruments would or could otherwise be filed, together with
such description of collateral located within the geographic area covered
by such place of filing as the Post-Effective Date Lenders or their agents
may determine, and such filing shall have the same effect as if all such
Instruments had been filed or recorded at the time and on the date the
Effective Date. Should the Post-Effective Date Lenders so choose to have
the Facility Agents and/or the Administrative Agent, as permitted under the
Post-Effective Date Financing Facility, attempt to file such Instruments or
certified copies of the Confirmation Orders, or otherwise attempt to
confirm perfection of any or all such liens and security interests, no
defect or failure in connection with such attempt shall in any way limit,
waive or alter the fact that such liens and security interests are
effective and fully perfected immediately upon and forever after the
Effective Date. In the event that any party elects to file Instruments or
otherwise confirm perfection of the security interests granted as permitted
under the Post-Effective Date Financing Facility, said filing or other
confirmation of the security interests granted as permitted under the Post-
Effective Date Financing Facility shall in no manner whatsoever vitiate,
reduce or abrogate in any manner the first priority security interests in
respect of the collateral granted to the Post-Effective Date Lenders in
accordance with the provisions of this Modified Plan and the Post-Effective
Date Financing Facility, whether or not the Post-Effective Date Lenders or
their agents ever choose to file Instruments or otherwise confirm the
respective liens and security interests in the collateral granted to the
Post-Effective Date Lenders or their agents as authorized (but not
required) by this paragraph and irrespective of the sequence of any such
filings as between the Post-Effective Date Lenders (or their agents and
representatives) and such other party. None of the provisions set forth in
or implied by this Modified Plan, including, without limitation, Sections
3.5, 4.4 and 8.1 of this Modified Plan, shall be deemed to modify any of
the provisions of
31
<PAGE>
the Post-Effective Date Financing Facility, including, without limitation,
any closing conditions.
7.3 Corporate Action. Pursuant to this Modified Plan and Section 303
of the Delaware General Corporation Law, the following shall be deemed to
have occurred and be effective, if applicable, as provided herein, and
shall be authorized and approved in all respects, without any requirement
of further action by the stockholders or directors of the Debtor or
Reorganized Rose's, and with like effect as if such actions had been taken
by unanimous action of the stockholders and directors of the Debtor or
Reorganized Rose's, as applicable: the adoption of the New Rose's Charter
and the by-laws of Reorganized Rose's and the initial selection of
directors serving on the Reconstituted Board of Directors and officers of
Reorganized Rose's; the distribution of Cash and the issuance and
distribution of the New Rose's Common Stock, New Rose's Warrants and
implementation of the terms and provisions of the Class 5 Subscription, and
all agreements thereunder; and the implementation of the other matters
provided for under this Modified Plan involving the corporate structure of
Reorganized Rose's, or any other corporate action to be taken by or
required of Reorganized Rose's or the Debtor, as applicable, and all
agreements and transactions provided for, or contemplated in this Modified
Plan.
7.4 Cancellation of Common Stock, Pre-Petition Warrants, Pre-Petition
Stock Options and Pre-Petition Secured Notes and Surrender of Common Stock,
Pre-Petition Warrants and Pre-Petition Secured Notes. All Common Stock
Interests, Pre-Petition Warrants, and Pre-Petition Stock Options shall be
canceled, annulled and extinguished as of the Effective Date; provided,
however, that the right to receive distributions pursuant to Section 6.2 of
this Modified Plan shall survive such cancellation, annulment and
extinguishment. As of the close of business on the Effective Date, the
transfer ledgers or registers and any other records determining record
ownership of the Debtor's equity and debt instruments maintained in the
ordinary course shall be closed and there shall be no further changes in
the record holders of Claims and Interests on the books of the Debtor.
Neither the Debtor nor Reorganized Rose's shall have any obligation to
recognize any thereafter occurring transfers of Claims or Interests, but
shall be entitled instead to recognize only those Persons who were or
holders of such Claims or Interests as of the close of business on the
Effective Date, as reflected on the transfer ledgers or registers and any
other records maintained in the ordinary course. Each such holder shall
surrender or cause to be surrendered the relevant instrument, if any, to
Reorganized Rose's for cancellation (or if such instrument has been stolen,
lost, or destroyed, in lieu thereof (x) a lost security affidavit and (y) a
bond the terms of which are reasonably required by Reorganized Rose's).
Until a holder of record on the Effective Date surrenders or causes to be
surrendered the relevant instrument, such holder shall have no rights with
respect to any distribution under this Modified Plan.
32
<PAGE>
7.5 New Rose's Charter. On the Effective Date, the New Rose's
Charter will become effective. The New Rose's Charter shall, together with
the provisions of this Modified Plan, provide for, among other things, the
authorization and issuance of New Rose's Common Stock, New Rose's Warrants,
the constitution of the Reconstituted Board of Directors, and such other
provisions that are necessary to facilitate consummation of this Modified
Plan and the requirements of the Bankruptcy Code, including a prohibition
against the issuance of nonvoting equity securities in accordance with
Section 1123(a)(6) of the Bankruptcy Code. The Reconstituted Board of
Directors shall have no less than seven and no more than thirteen
directors. The Unsecured Committee in its sole discretion shall have the
right to select all but one director to serve on the Reconstituted Board of
Directors, and the Equity Committee in its sole discretion shall have the
right to select one director to serve on the Reconstituted Board of
Directors.
7.6 Voting Powers. The certificate of incorporation of Reorganized
Rose's will provide that the holders of such of the New Rose's Common Stock
as may, from time to time, be issued and outstanding, may elect, using non-
cumulative voting, all directors of Reorganized Rose's subsequent to the
initial installation of the Reconstituted Board of Directors pursuant to
Section 7.5 of this Modified Plan.
7.7 Authorization and Issuance of Equity Instruments of Reorganized
Rose's.
7.7.1 New Rose's Common Stock. Pursuant to the New Rose's Charter,
among other things, Reorganized Rose's will be authorized to issue up to
50,000,000 shares of New Rose's Common Stock. On the Effective Date,
Reorganized Rose's will issue the Effective Date Shares pursuant to this
Modified Plan and shall reserve for issuance 4,285,714 shares of New Rose's
Common Stock to effectuate the New Rose's Warrant Agreement, and shall
reserve for issuance 550,000 shares of New Rose's Common Stock to
effectuate the stock options to be granted pursuant to the Management
Incentive and Retention Program. All shares of the New Rose's Common Stock
to be issued pursuant to this Modified Plan will be, upon issuance, fully
paid and non-assessable and shall be subject to dilution as set forth in
Section 6.2.1 (d) of this Modified Plan, and the holders thereof will have
no preemptive or other rights to subscribe for additional shares.
7.7.2 New Rose's Warrants. Reorganized Rose's shall be authorized to
issue New Rose's Warrants, as provided in Sections 5.4 and 6.2.4 of this
Modified Plan and in the New Rose's Warrant Agreement, for the purchase of
New Rose's Common Stock reserved for issuance pursuant to this Modified
Plan.
7.8 New Rose's Common Stock Allocable to Management of Reorganized
Rose's. Pursuant to the Management Incentive and Retention Program, and
similar corporate policies that may be
33
<PAGE>
implemented and administered by Reorganized Rose's, on and after the Effective
Date, and on the Determination Date (if applicable), the employees identified
in accordance therewith shall receive such shares, if any, of New Rose's
Common Stock, as may be approved. Any shares of New Rose's Common Stock
distributed pursuant to the Management Incentive and Retention Program will
cause dilution with respect to the interests provided to holders of Allowed
Claims and Common Stock Interests receiving distributions of New Rose's
Common Stock pursuant to the terms of this Modified Plan.
7.9 Applicability of Sections 1125 and 1145 of the Bankruptcy Code to
the New Rose's Common Stock Issued under the Modified Plan. The protection
afforded by Section 1125 of the Bankruptcy Code with regard to the
solicitation of acceptances or rejections of the Modified Plan, and with
regard to the offer, issuance, sale or purchase of New Rose's Common Stock,
the New Rose's Warrants and the rights to participate in the Class 5
Subscription issued to and distributed pursuant to this Modified Plan,
shall apply to the full extent provided by law, and the entry of the
Confirmation Orders shall constitute the determination by the Bankruptcy
Court that the Plan Proponents and Reorganized Rose's (and if applicable,
GE Capital, GE Capital Corporate Finance Group, Inc. and GE Capital
Commercial Finance, Inc.) and each of their respective officers, directors,
partners, employees, members or agents, and each Professional, attorney,
accountant, or other professional employed by any of them, shall have acted
in good faith and in compliance with the applicable provisions of the
Bankruptcy Code pursuant to Section 1125 of the Bankruptcy Code. In
addition, the Confirmation Orders shall provide that the exemption from the
requirements of Section 5 of the Securities Act of 1933, 15 U.S.C.
(section mark) 77e, and any state or local law requiring registration for the
offer or sale of a security provided for in Section 1145 of the Bankruptcy
Code shall apply to the New Rose's Common Stock, the New Rose's Warrants and
the rights to participate in the Class 5 Subscription issued under this
Modified Plan.
7.10 Class 5 Subscription.
(a) As a Class, the holders of Common Stock Interests in Class 5
shall collectively have rights to subscribe for and purchase up to 100% of
the Effective Date Shares at the Class 5 Subscription Price, provided that
the aggregate amount of Subscription Proceeds equals at least $25 million,
all in accordance with the terms and provisions of the Class 5 Rights
Notice. To effectuate the Class 5 Subscription and elections thereunder,
within 5 days of the Equity Record Date, the Debtor sent the Class 5 Rights
Notice to each holder of a Common Stock Interest in Class 5 as of the
Equity Record Date. The Class 5 Rights Notice notified such holders of
their respective rights to acquire New Rose's Common Stock by tender and
payment of Cash, in an amount equal to the number of shares of New Rose's
Common Stock sought to be acquired multiplied by the Class 5 Subscription
Price. Such Cash was to be payable to the Distribution Agent for deposit
34
<PAGE>
into the Subscription Proceeds Escrow, which shall be held and maintained
by the Distribution Agent designated therein. Since the Subscription
Proceeds in the Subscription Proceeds Escrow as of March 31, 1995 did not
equal or exceed $25 million, the Distribution Agent shall return to each
Class 5 Subscriber the subscription payment made by such Class 5
Subscriber, together with accrued interest thereon. The Plan provided that
upon tender of the fully executed Class 5 Rights Notice and payment of the
Subscription Price, and, upon the aggregate deposit of at least $25 million
of Subscription Proceeds into the Subscription Proceeds Escrow, each Class
5 Subscriber would have the irrevocable right to receive distributions of
shares of New Rose's Common Stock constituting the Class 5 Subscription
Stock Designation pursuant to the following allocations: each Class 5
Subscriber would be allocated initially the lesser of (i) the number of
shares for which it had subscribed and tendered payment pursuant to the
Class 5 Rights Notice, or (ii) its Pro-Rata share of 100% of the Effective
Date Shares issued and outstanding on the Effective Date. Any shares of
the New Rose's Common Stock remaining unallocated after the immediately
foregoing allocation would be allocated to each Class 5 Subscriber who
subscribed for more than its Pro-Rata share of New Rose's Common Stock in
the amount of such over-subscription. If a sufficient number of shares of
New Rose's Common Stock was not available to satisfy all such over-
subscriptions, the available shares would be allocated among the Class 5
Subscribers who over-subscribed based on each such Class 5 Subscriber's
Pro-Rata share of Common Stock Interests as of the Equity Record Date for
the Class 5 Subscription. The allocation process could have involved a
series of allocations to ensure that the total number of shares available
for over-subscription was distributed on the pro-rata basis described
immediately above.
(b) The Class 5 Subscription shall and did terminate on March 31,
1995.
7.11 Merger of RSI and Cancellation of RSI Common Stock. Prior to
the Effective Date, RSI was merged into Reorganized Rose's, in accordance
with Delaware General Corporation Law and applicable orders of the
Bankruptcy Court, with the written consent of the Unsecured Committee. All
common stock of RSI shall be deemed cancelled, annulled and extinguished as
of the Effective Date if not actually cancelled, annulled and extinguished
earlier. Reorganized Rose's shall assume, to the fullest extent permitted
by law and only if such obligations have not been previously rescinded,
canceled, terminated, or rejected, or barred by order of the Bankruptcy
Court, prior to the Effective Date, all obligations relating to
indemnification and exculpation of RSI's directors, officers, employees,
fiduciaries, agents or controlling persons as of the Effective Date as
arise under applicable laws or as provided in any of (i) RSI's certificate
of incorporation in effect prior to or as of the date hereof, (ii) RSI's
by-laws in effect prior to or as of the date hereof, or (iii) any agreement
with the RSI, in each
35
<PAGE>
of these cases (i) -- (iii) with respect to matters occurring on or prior to
the Effective Date.
7.12 Reserve Provisions for Disputed Claims.
(a) All Cash, New Rose's Common Stock, or Available Cash, (as
applicable), to which a Disputed Claim otherwise would be entitled as an
Allowed Claim in a particular class as of a Distribution Date, shall not be
distributed, but, if necessary, shall be held in Reserve on the applicable
Distribution Date by the Debtor, in such amount as would have been
distributed if the holder thereof had an Allowed Claim in the full amount
of its Disputed Claim; provided, however, that if a holder of a Contingent
Claim is not receiving a distribution under this Modified Plan and such
Contingent Claim is not being discharged by this Modified Plan, or is
assumed by Reorganized Rose's, the Debtor shall not be required to reserve
any Cash, New Rose's Common Stock or Available Cash (as applicable), with
respect thereto.
(b) For the purposes of effectuating the provisions of this Section
7.12 and the distributions to holders of Allowed Claims and Common Stock
Interests, the Bankruptcy Court may fix or liquidate the Reserve Amount on
account of a particular Disputed Claim pursuant to Section 502(c) of the
Bankruptcy Code, in which event the amount so fixed or liquidated shall be
deemed the amount of the Disputed Claim pursuant to Section 502(c) of the
Bankruptcy Code for purposes of distribution under this Modified Plan. In
lieu of fixing or liquidating the amount of any Disputed Claim, the
Bankruptcy Court may determine the Reserve Amount for such Disputed Claim,
or such Reserve Amount may be fixed by agreement in writing by and between
the Debtor and the holder thereof. Each of the Debtor, the Unsecured
Committee and the Equity Committee shall have standing to (i) move for an
order of the Bankruptcy Court, pursuant to Section 502(c) of the Bankruptcy
Court, fixing or liquidating the Reserve Amount for any and all Disputed
Claims in Class 3 to be deposited into a Reserve, and (ii) object to any
Disputed Claim or any Reserve Amount fixed on account of any Disputed
Claim. In the event that any Disputed Claim has not been fixed or
liquidated pursuant to this Section 7.12(b), the Reserve Amount with
respect to such Disputed Claim shall be equal to the face amount of the
Disputed Claim.
(c) No holder of a Disputed Claim shall have any Claim against the
Cash and/or New Rose's Common Stock, reserved with respect to such Claim
until such Disputed Claim shall become an Allowed Claim. In no event shall
any holder of any Disputed Claim or unliquidated Claim be entitled to
receive (under this Modified Plan or otherwise) from the Debtor,
Reorganized Rose's or the Reserve, any payment, in Cash and New Rose's
Common Stock or other property, which is greater than the Reserve Amount
deposited into a Reserve for such Claim pursuant to this Section 7.12 plus
any interest, if applicable, earned thereon. In no event shall the
36
<PAGE>
Debtor or Reorganized Rose's have any responsibility or liability for any loss
to or of any amount reserved under this Modified Plan.
(d) When a Disputed Claim becomes an Allowed Claim, distribution on
account thereof shall be made as soon as practicable after the date of
subsequent allowance of such Disputed Claim as provided in Article 6 of
this Modified Plan, by means determined by Reorganized Rose's; provided,
further, to the extent that any such distributions include Cash, then such
distributions shall also include interest accrued from the Effective Date
(net of Pro-Rata assessment for reasonable fees and expenses incurred in
administering the Reserve).
(e) To the extent a Disputed Claim ultimately becomes an Allowed
Claim in an amount less than the amount reserved for such Disputed Claim,
then the resulting surplus of Cash, and New Rose's Common Stock, or
Available Cash (as applicable) (together with any interest, if applicable,
thereon), shall be retained by Reorganized Rose's or held in the treasury
of Reorganized Rose's, as applicable; provided, however, that any cash
remaining in the Subscription Proceeds Escrow including accrued interest
thereon, after distributions to Disputed Claims in Class 3 that become
Allowed Claims in Class 3, shall be distributed as set forth in Section
6.2.2 of this Modified Plan.
(f) Within 30 days after the Effective Date, Reserve Amounts shall
have been fixed pursuant to Section 7.12(b) of this Modified Plan for all
Disputed Claims in Class 3. Upon resolution of a Disputed Claim in Class
3, any Reserve Amount which was previously fixed for such Disputed Claim
shall be set to zero, the total Reserve Amount for Disputed Claims in Class
3 shall be reduced accordingly, and any Cash deposited in a Reserve on
account of such Disputed Claim together with accrued interest thereon shall
be distributed to the holder of such Disputed Claim to the extent that such
Disputed Claim has become an Allowed Claim, and shall otherwise be
deposited into the Subscription Proceeds Escrow.
7.13 Voting of Undistributed New Rose's Common Stock. Shares of New
Rose's Common Stock issued or reserved for issuance under this Modified
Plan shall not be voted in any election of directors of Reorganized Rose's,
or any other matter requiring the vote of shareholders, until such time as
the New Rose's Common Stock has actually been distributed to a holder of an
Allowed Claim or Common Stock Interest, or to an employee of Reorganized
Rose's entitled to receive shares of New Rose's Common Stock pursuant to
the Management Incentive and Retention Program. In addition, a holder of a
Disputed Claim shall not be entitled to vote in any election of directors
of Reorganized Rose's, or any other matter requiring the vote of
shareholders until such time as the Disputed Claim has become an Allowed
Claim, and the holder of such Allowed Claim has received its distribution
and become a shareholder of record of Reorganized Rose's.
37
<PAGE>
7.14 Preservation or Waiver of Rights of Action of the Estate.
Except as expressly provided to the contrary in this Modified Plan, such as
provided in, without limitation, Sections 9.2, 9.3 and 9.4, the
Supplemental Adequate Protection Consent Orders, the DIP Facility, or any
other contract, instrument, release, indenture or other agreement entered
into in connection with this Modified Plan, in accordance with Section
1123(b) of the Bankruptcy Code, Reorganized Rose's shall retain and may
enforce any claims, rights and causes of action that the Estate may hold
against any Person, including, without limitation, any rights of setoff or
recoupment. Reorganized Rose's or its successors may pursue any such
retained claims, rights or causes of action, as appropriate, in accordance
with the best interests of Reorganized Rose's. Notwithstanding the
foregoing, on the Effective Date, all preference and other avoidance power
actions not commenced prior to the Effective Date that the Debtor, the
Estate or Reorganized Rose's could have commenced pursuant to Sections 544,
545, 547, 548, 550 and 553 of the Bankruptcy Code, and all rights to
withhold any distribution on account of the receipt of any payment that is
recoverable under such Bankruptcy Code sections shall be deemed waived
irrevocably.
7.15 Use of ADR Procedure Regarding Determination and Allowance of
Damage Claims. Notwithstanding anything contained in this Modified Plan to
the contrary, the ADR Procedure shall govern all matters relating to the
determination and allowance of Damage Claims, and the payment of Cash only
to Damage Claims which become Allowed Claims in an amount less than $500 in
lieu of the treatment set forth in this Modified Plan for Claims in Class
3. Reorganized Rose's shall be authorized and empowered to take all action
reasonably necessary and appropriate to effectuate the ADR Procedure.
ARTICLE VIII
CONDITIONS PRECEDENT TO
EFFECTIVENESS OF THE PLAN
8.1 Conditions to the Effective Date. The following conditions must
occur and be satisfied for this Modified Plan to be effective and for the
Effective Date to occur:
(a) Confirmation must have occurred pursuant to the Confirmation
Orders.
(b) The Debtor shall have entered into a Post-Effective Date
Financing Facility sufficient for the operations of Reorganized
Rose's, and all conditions to the closing date and the initial credit
extension thereunder, other than the occurrence of the Effective Date,
shall have occurred or been waived.
38
<PAGE>
(c) The closing of the Post-Effective Date Financing Facility
and the Effective Date shall each occur by April 30, 1995,
respectively, or such later date or dates as the Plan Proponents, GE
Capital and the Facility Agents shall have agreed upon in writing.
(d) All documents and agreements contemplated to be executed or
implemented in connection with this Modified Plan including, without
limitation, those documents and agreements which are expressly
identified in this Modified Plan shall be filed with the Bankruptcy
Court in a substantially final form.
(e) The Debtor shall be able to effectuate all Cash
distributions required to be made on the Effective Date under this
Modified Plan.
(f) After giving effect to all payments to be made under the
Plan in satisfaction of Administrative Claims, Non-Tax Priority
Claims, Allowed Tax Claims, Non-Priority Tax Claims, and to satisfy in
full the GE Obligations (other than the Post-Effective Date GE
Obligations and the Deferred GE Obligations) and the Pre-Petition
Lenders' Allowed Secured Claims (including after the issuance of all
Letters of Credit required to replace outstanding letters of credit
issued under the DIP Facility or support such letters of credit),
Reorganized Rose's will have the ability to borrow at least $12
million in the aggregate under the Post-Effective Date Financing
Facility.
(g) Simultaneous with the closing of the Post-Effective Date
Financing Facility, the Pre-Petition Lenders' Allowed Secured Claims
shall be satisfied in full pursuant to Section 4.4 of this Modified
Plan, the GE Obligations shall be satisfied in full pursuant to
Section 3.5 of this Modified Plan, provided that the Deferred GE
Obligations and the Post-Effective Date GE Obligations shall be
satisfied by the execution and delivery of the agreements and
documents contemplated by Section 3.5 of this Modified Plan, and in
each case, such performance as may be required thereunder prior to or
upon the execution and delivery thereof.
8.2 Waiver of Conditions to the Effective Date. The condition
precedent set forth in Section 8.1(d) of this Modified Plan with respect to
those documents requiring negotiations between or among any of the Debtor,
the Equity Committee, the Unsecured Committee and GE Capital, may be waived
with the consent of the respective applicable parties. Otherwise, none of
the conditions precedent set forth in Sections 8.1 of this Modified Plan
may be waived except upon the express written agreement of all Plan
Proponents, the Facility Agents and GE Capital.
39
<PAGE>
ARTICLE IX
DISCHARGE, RELEASES, INJUNCTIONS AND RELATED PROVISIONS
9.1 Discharge. Except as otherwise expressly provided in Section
1141 of the Bankruptcy Code or this Modified Plan, the distributions made
pursuant to and in accordance with the applicable terms and conditions of
this Modified Plan will be in full and final satisfaction, settlement,
release and discharge as against the Debtor, of any debt that arose before
the Effective Date and any debt of a kind specified in Section 502(g),
502(h) or 502(i) of the Bankruptcy Code and all Claims and Interests of any
nature, including without limitation any interest accrued thereon from and
after the Filing Date whether or not (i) a proof of Claim or Interest based
on such debt, obligation or interest is filed or deemed filed under Section
501 of the Bankruptcy Code, (ii) such Claim or Interest is allowed under
Section 502 of the Bankruptcy Code or (iii) the holder of such Allowed
Claim or Interest has accepted this Modified Plan. Therefore, upon the
Effective Date, except as otherwise provided in this Modified Plan, all
Persons which are or could have been holders of Claims against, or
Interests in, the Debtor shall be precluded from asserting against the
Debtor or Reorganized Rose's, or any of their assets or properties, any
other or further Claims or Interests based upon any act or omission,
transaction or other activity of any kind or nature that occurred prior to
the Effective Date, and the Confirmation Order shall permanently enjoin
said holders of Claims or Interests, their successors and assigns, from
enforcing or seeking to enforce any such Claims or Interests, subject to
the occurrence of the Effective Date.
9.2 Releases of Released Parties. As of the Effective Date, each of
the Released Parties are hereby released from any and all claims asserted
or that can be asserted against such Released Party that arise out of such
Released Party's relationship with or work performed for the Debtor on or
prior to the Effective Date, other than claims which constitute (i) claims
preserved against such Released Party pursuant to the Modified Plan, (ii)
claims that arise from obligations created under or in connection with the
Modified Plan, (iii) rights pursuant to this Modified Plan or any agreement
provided for or contemplated in this Modified Plan, or (iv) claims which
may be asserted against such Released Party by an insurance carrier or the
issuer of a bond in connection with any insurance contract, reinsurance
contract, surety bond, fidelity bond, or other type of insured or bonded
obligation; provided, however, that the foregoing release provisions (i)
shall not apply to such Released Party's gross negligence or willful
misconduct, and (ii) shall not apply to (a) any Released Party who is the
subject of any action or proceeding pending as of the Effective Date to
recover property or money for the benefit of the Estate, or (b) any claims
asserted by or against any of the Debtor's present or former officers or
directors in any action or proceeding pending as of the Effective Date; and
provided, however, that (i) in the
40
<PAGE>
case of the Pre-Petition Lenders, the scope of the foregoing release as and
to the extent given by the Pre-Petition Lenders shall extend only to claims
of the Pre-Petition Lenders arising on or prior to the Effective Date against
any of the Released Parties solely in the Pre-Petition Lenders' capacity as
the holders of the Pre-Petition Secured Notes and not to the extent of any
other claims arising out of any other relationship which any of the Pre-
Petition Lenders may have with the Debtor or any of the Released Parties,
including, without limitation, any insurance, fidelity bond or suretyship
relationship; and (ii) in the case of GE Capital, the scope of the foregoing
release as and to the extent given by GE Capital shall extend only to the
claims of GE Capital arising on or prior to the Effective Date against any
of the Released Parties solely in GE Capital's capacity as the lender under the
DIP Facility and shall not extend to any other claims of GE Capital arising
out of any other relationship which GE Capital may have with the Debtor or
any of the Released Parties.
9.3 Releases by the Debtor and Reorganized Rose's. Except as, and
only to the extent, provided otherwise in this Modified Plan, as of the
Effective Date, the Debtor, the Estate and Reorganized Rose's shall be
deemed to forever release, waive and discharge all known and unknown claims
of any nature that the Debtor, its Estate, or Reorganized Rose's has, had
or may have against any Released Party for all acts and omissions through
the Effective Date other than (i) claims preserved against such Released
Party pursuant to the Modified Plan, (ii) claims that arise from
obligations created under or in connection with the Modified Plan, (iii)
any claims asserted against any of the Debtor's present or former officers
or directors in any action or proceeding pending as of the Effective Date
or (iv) claims which may be asserted against such Released Party through
subrogation or otherwise by an insurance carrier or the issuer of a bond in
connection with any insurance contract, reinsurance contract, surety bond,
fidelity bond, or other type of bonded obligation. As of the Effective
Date, the Debtor and Reorganized Rose's shall also be deemed to forever
release, waive and discharge all Avoiding Power Actions.
9.4 Releases by Recipients of New Rose's Common Stock, New Rose's
Warrants and Cash, or Available Cash (as applicable), and by All Other
Persons. Except as, and only to the extent, otherwise provided in this
Modified Plan, each Person receiving Cash, New Rose's Warrants, the right
to participate in the Class 5 Subscription and/or New Rose's Common Stock,
Available Cash (as applicable), or other distribution or payment pursuant
to this Modified Plan on account of its Allowed Claim, Administrative Claim
or Common Stock Interest, as the case may be, shall be deemed, as of the
Effective Date, to forever release, waive and discharge all known and
unknown claims of any nature arising on or prior to the Effective Date
against each of the Released Parties to the extent that such claims arise
out of such Released Party's actions or failure to act in connection with
the Debtor, the Committees, the
41
<PAGE>
Chapter 11 Case, or claims otherwise treated and discharged under this
Modified Plan, other than claims which constitute (i) claims preserved
against such Released Party pursuant to the Modified Plan, (ii) claims that
arise from obligations created under or in connection with the Modified Plan,
(iii) such Person's rights pursuant to this Modified Plan or any agreement
provided for or contemplated in this Modified Plan or (iv) claims which may
be asserted against such Released Party by an insurance carrier or the issuer
of a bond in connection with any insurance contract, reinsurance contract,
surety bond, fidelity bond, or other type of insured or bonded obligation;
provided, however, that the foregoing release provisions (i) shall not apply
to such Released Party's gross negligence or willful misconduct, and (ii)
shall not apply to (a) any Released Party who is the subject of any action or
proceeding pending as of the Effective Date to recover property or money for
the benefit of the Estate, or (b) any claims asserted by or against any of
the Debtor's present or former officers of directors in any action or
proceeding pending as of the Effective Date; and provided, however, that
(i) in the case of the Pre-Petition Lenders, the scope of the foregoing
release as and to the extent given by the Pre-Petition Lenders shall extend
only to claims of the Pre-Petition Lenders arising on or prior to the
Effective Date against any of the Released Parties solely in the Pre-Petition
Lenders' capacity as the holders of the Pre-Petition Secured Notes and not to
the extent of any other claims arising out of any other relationship which any
of the Pre-Petition Lenders may have with the Debtor or any of the Released
Parties, including, without limitation, any insurance, fidelity bond or
suretyship relationship; and (ii) in the case of GE Capital, the scope of the
foregoing release as and to the extent given by GE Capital shall extend
only to the claims of GE Capital arising on or prior to the Effective Date
against any of the Released Parties solely in GE Capital's capacity as the
lender under the DIP Facility and shall not extend to any other claims of
GE Capital arising out of any other relationship which GE Capital may have
with the Debtor or any of the Released Parties. Nothing in this Modified
Plan shall be construed as a release by GE Capital of any of the (i) GE
Obligations except by operation of Section 3.5 of this Modified Plan and
actions taken by GE Capital in connection therewith, (ii) any Post-
Effective Date GE Obligations, or (iii) any Deferred GE Obligations.
9.5 Limitations on Amounts to be Distributed to Holders of Allowed
Claims Which Are Insured. Notwithstanding any provision in this Modified
Plan to the contrary, no property shall be distributed to or retained by
the holders of Allowed Claims whose Claims may be satisfied solely pursuant
to the terms of the Debtor's applicable insurance policies. Except as
otherwise provided for in this Modified Plan, nothing in this Section 9.5
shall constitute a waiver of any claim, debt, right, cause of action or
liability that any Person may hold against any other entity, including any
of the Debtor's insurance carriers.
42
<PAGE>
9.6 General Release of Liens. Except as otherwise provided in this
Modified Plan or the Post-Effective Date Financing Facility, or in any
contract, instrument, indenture or other agreement or document created in
connection with this Modified Plan or the implementation hereof, on the
Effective Date, all mortgages, deeds of trust, liens or other security
interest against property of the Estate will be released, and all the
right, title and interest of any holder of such mortgages, deeds of trust,
liens or other security interests shall revert to Reorganized Rose's or the
Debtor, as applicable, and the successors and assigns thereof, it being
understood that simultaneous upon satisfaction of (i) the GE Obligations in
accordance with Section 3.5 of this Modified Plan and by the execution and
delivery of the agreements contemplated thereby and in each case, such
performance as may be required thereunder prior to or upon the execution
and delivery thereof, and (ii) the Pre-Petition Lenders' Allowed Secured
Claims, all liens in favor of GE Capital and the Pre-Petition Lenders shall
be deemed released without any further act on the Effective Date. Without
in any way limiting the effect of the immediately preceding sentence, all
Persons holding any mortgages, deeds of trust, liens or other security
interests released in accordance with the prior sentence, shall deliver
and/or execute from time to time, at the sole cost and expense of the
Debtor or Reorganized Rose's, any instrument or document reasonably
requested by Reorganized Rose's or the Administrative Agent to evidence or
effectuate such release.
9.7 Injunctions.
9.7.1 Injunction Related to Claims Released by the Debtor and
Reorganized Rose's Recipients of Cash, New Rose's Common Stock and New
Rose's Warrants, or Available Cash (if applicable), and All Other Persons.
As of the Effective Date and subject to its occurrence, all Persons that
have held, currently hold or may have asserted a Claim or other debt, or
liability or an interest or other right of a holder of an Interest, that is
released or terminated pursuant to Sections 9.1 (if applicable), 9.2, 9.3,
9.4 or 9.6 above are, except as provided with respect to the New Rose's
Common Stock and the New Rose's Warrants, permanently enjoined from taking
any of the following actions on account of such released Claims, debts or
liabilities or Interests: (i) commencing or continuing, in any manner or in
any place, any action or other proceeding, (ii) enforcing, attaching,
collecting or recovering in any manner any judgment, award, decree or
order, (iii) creating, perfecting or enforcing any lien or encumbrance,
(iv) asserting a set-off, right or subrogation or recoupment of any kind
against any debt, liability or obligation due to any such releasing Person,
and (v) commencing or continuing any action, in any manner or in any place,
that does not comply with or is inconsistent with the provisions of this
Modified Plan.
43
<PAGE>
9.7.2 Injunction Relating to the Modified Plan. As of the Effective
Date, except as otherwise provided herein, all Persons are permanently
enjoined from commencing or continuing, in any manner or in any place, any
action or other proceeding, whether directly, derivatively or otherwise
against any or all of the Released Parties, on account of or respecting any
claims, debts, rights, causes of action or liabilities released or
discharged pursuant to this Modified Plan, except to the extent permitted
under the Modified Plan.
9.7.3 Consent By Holders of Claims and Interests to Entry of
Injunctive Relief. Without limitation to the scope, extent, validity or
enforceability of the injunctive relief set forth in this Section 9.7 and
in the Confirmation Orders, by accepting distributions pursuant to this
Modified Plan, each holder of an Allowed Claim or Interest receiving
distributions pursuant to this Modified Plan shall be deemed to have
specifically consented to the releases and injunctions set forth in this
Article IX.
9.8 Rights of Fireman's Fund Insurance Company. Notwithstanding any
other provision in this Modified Plan, including, without limitation, those
provisions set forth in this Article IX, unless otherwise agreed, the
Modified Plan shall not impair or prejudice in any manner the right of
Fireman's Fund Insurance Company or any of its subsidiaries (collectively,
"FFIC"), (i) to make draws or otherwise enforce their rights regarding any
letter of credit issued to FFIC, (ii) to seek to compel payment of any
administrative claim held by FFIC, (iii) to assert or enforce any rights of
setoff, subrogation or recoupment; (iv) to retain or enforce any liens held
by FFIC on funds held by FFIC, or (v) to assert claims, including without
limitation contribution or indemnification claims, and obtain recovery
thereon against any Person other than a Released Party, (vi) to obtain
repayment or recovery for payments made to or for the benefit of a Released
Party on account of a claim made by such Released Party under an insurance
policy issued by FFIC, or (vii) to exercise any and all rights or remedies
arising out of or in connection with insurance services or coverage
provided by FFIC after the Effective Date. Notwithstanding the foregoing,
nothing herein shall be deemed to constitute an admission by the Debtor as
to the validity, priority or nature of any claim filed by FFIC against the
Debtor. In addition, the foregoing shall not constitute an assumption by
the Debtor of any agreement between the Debtor and FFIC, and the Debtor
expressly reserves its right to reject any such agreement. Nothing herein
shall be construed to limit or reduce any rights, remedies, liens,
priorities or protections granted to GE Capital pursuant to the DIP
Facility.
44
<PAGE>
ARTICLE X
EXECUTORY CONTRACTS, INDEMNIFICATION OBLIGATIONS,
POST-PLAN CONFIRMATION DATE TRADE CLAIMS,
CONTINUED APPLICABILITY OF BANKRUPTCY CODE
10.1 Executory Contracts and Unexpired Leases. Unless specifically
assumed by order of the Bankruptcy Court, the subject of a motion to
assume, or the subject of a motion or an order seeking additional time to
assume or reject, on the Effective Date (i) all executory contracts and
unexpired leases except for Assumed Contracts and Leases shall be deemed
rejected by the Debtor or Reorganized Rose's as of the Effective Date or as
otherwise provided for by order of the Bankruptcy Court, and (ii) the
Debtor expressly rejects and terminates the Employee Stock Option Plan and
the Pre-Petition Secured Noteholder Warrant Agreement, and Claims arising
from the rejection and termination of these and other executory contracts
or unexpired leases shall be treated in accordance with the terms of this
Modified Plan. With respect to the Assumed Contracts and Leases, in
accordance with Section 1123(a)(5)(G) of the Bankruptcy Code, upon the
later of the Effective Date or assumption, the Debtor or Reorganized Rose's
shall cure all defaults thereunder by (i) making a Cash payment of only
those amounts which are allowed, as determined by the Debtor or Reorganized
Rose's or (ii) on such terms as agreed to in writing between such claimants
and the Debtor or Reorganized Rose's. Any disputes regarding the amount
which will be paid to cure the Assumed Contracts and Leases will be
resolved by the Bankruptcy Court after notice and hearing. All non-Debtor
parties to executory contracts or unexpired leases rejected by order of the
Bankruptcy Court or, by operation of this Section 10.1 shall be required to
file a proof of claim with respect to any and all Claims arising from or
relating to such rejection no later than 30 days following the Effective
Date. Failure to so file timely such a proof of claim shall be a waiver of
such Claim, and shall have such effect and consequences as provided for in
Section 5.8 of this Modified Plan regarding the failure to file as proof of
claim by an applicable Bar Date.
10.2 Indemnification and Contribution Obligations. Reorganized
Rose's shall assume, to the fullest extent permitted by law and only if
such obligations have not been rejected or terminated prior to the
Effective Date, all obligations relating to indemnification and exculpation
of the Debtor and of all Persons who as of the Effective Date were the
Debtor's directors, officers, employees, fiduciaries, agents or controlling
persons as arise under applicable laws or as provided in any of (i) the
Debtor's certificate of incorporation in effect prior to or as of the date
hereof, (ii) the Debtor's by-laws in effect prior to or as of the date
hereof, or (iii) any agreement with, or any corporate policy relating to
indemnification in effect prior to the Effective Date of, the Debtor, in
each of these cases (i)-(iii) with respect to matters occurring on or prior
to the Effective Date. Except as
45
<PAGE>
otherwise provided in this Modified Plan, all Claims based upon contractual,
statutory or common law indemnification obligations other than those described
in this paragraph shall not survive Confirmation of this Modified Plan and
shall be discharged pursuant to Section 1141 of the Bankruptcy Code.
10.3 Post-Plan Confirmation Date Claims. Claims assertable against
the Debtor or Reorganized Rose's arising from goods, inventory and services
provided, or credit extended with respect to goods, inventory and services
provided, to the Debtor or Reorganized Rose's during the period after the
Plan Confirmation Date and prior to the Effective Date, shall be deemed
Administrative Claims and be entitled to treatment pursuant to Section 3.1
of this Modified Plan without the need for notice and hearing pursuant to
Section 503(b) of the Bankruptcy Code or further order of the Bankruptcy
Court. Moreover, in accordance with Section 365(d)(3) of the Bankruptcy
Code, the Debtor shall perform all its obligations arising from and after
the Filing Date under any unexpired lease of nonresidential real property
until such lease is assumed or rejected. In addition, the Debtor will
continue to comply with Section 365(d)(3) of the Bankruptcy Code, and the
Debtor shall perform all its obligations, in full and on time, to the
extent not inconsistent with Section 365(d)(3) of the Bankruptcy Code,
arising from and after the Filing Date under any unexpired lease of
nonresidential real property until such lease is assumed or rejected. Such
obligations shall be deemed Administrative Claims and be entitled to
treatment pursuant to Section 3.1 of this Modified Plan without the need
for notice and hearing pursuant to Section 503(b) of the Bankruptcy Code or
further order of the Bankruptcy Court. The Debtor's obligations under the
leases subject to this section only include those specified in the lease,
if any, including but not limited to rent, real estate taxes, percentage
rent, and common area maintenance charges; such charges will be pro-rated
per diem if the lease is rejected or terminated during a payment period.
10.4 Continued Applicability of the Bankruptcy Code. From the Plan
Confirmation Date through the Effective Date, the operations of the Debtor
shall be subject to the terms and provisions of the Bankruptcy Code
notwithstanding that confirmation of the Plan occurred by entry of the Plan
Confirmation Order, unless otherwise expressly provided for in the Plan and
this Modified Plan.
ARTICLE XI
RETENTION OF JURISDICTION
11.1 Jurisdiction From Confirmation Through the Effective Date. From
the Plan Confirmation Date through the Effective Date, the Bankruptcy Court
shall retain full jurisdiction over the
46
<PAGE>
Chapter 11 Case notwithstanding
that confirmation of the Plan has occurred by entry of the Plan
Confirmation Order.
11.2 Jurisdiction From and After the Effective Date. From and after
the Effective Date and until such time as all payments and distributions
required to be made, all events required to have occurred under this
Modified Plan have occurred, and all other obligations required to be
performed under this Modified Plan have been made and performed by the
Debtor or Reorganized Rose's, the Bankruptcy Court shall retain such
jurisdiction as is legally permissible, including, but not limited to, the
following:
(a) To hear and determine any and all objections to the
allowance of a Claim or Interest or any controversy as to the
classification of Claims or Interests or Reserves;
(b) To hear and determine any and all applications by
Professionals for compensation and reimbursement of expenses;
(c) To hear and determine any and all pending applications for
the rejection and disaffirmance of executory contracts and unexpired
leases and fix and allow any Claims resulting therefrom;
(d) To enable the Debtor, or Reorganized Rose's to prosecute any
and all proceedings which have been or may be brought prior to the
Effective Date, to set aside liens or encumbrances and to recover any
transfers, assets, properties or damages to which the Debtor or
Reorganized Rose's may be entitled under applicable provisions of the
Bankruptcy Code or any other federal, state or local laws except as
may be waived pursuant to this Modified Plan;
(e) To liquidate any disputed, contingent or unliquidated Claims
or Interests;
(f) To enforce the provisions of this Modified Plan and the
injunction and releases provided for in Article IX of this Modified
Plan;
(g) To correct any defect, cure any omission, or reconcile any
inconsistency in this Modified Plan or in the Confirmation Order as
may be necessary to carry out its purpose and the intent of this
Modified Plan;
(h) To hear and determine any and all Avoiding Power Actions;
(i) To determine any Tax Claim which the Debtor or Reorganized
Rose's, as applicable, may incur as a result of the transactions
contemplated herein;
47
<PAGE>
(j) To determine such other matters as may be provided for in
the Confirmation Orders confirming this Modified Plan or as may be
authorized under the provisions of the Bankruptcy Code;
(k) To resolve any and all disputes that may arise under this
Modified Plan;
(l) To hear and determine any and all administrative matters
that may arise in closing the Chapter 11 Case, including the entry of
the Final Decree; and
(m) all other matters with respect to which the Bankruptcy
Court's retention of jurisdiction over the Chapter 11 Case as is
legally permissible, including without limitation, jurisdiction as is
necessary to ensure that the purpose and intent of this Modified Plan
are implemented.
ARTICLE XII
MISCELLANEOUS
12.1 The Committees and the Post-Effective Date Trade Committee.
12.1.1 Dissolution of Committees. On the Effective Date, the
Unsecured Committee shall be deemed disbanded and the duties of the
Unsecured Committee, and the retention of its counsel and other retained
Professionals, shall automatically terminate. The Equity Committee shall
be deemed disbanded and the duties of the Equity Committee, and the
retention of its counsel and other retained Professionals, shall
automatically terminate except with respect to any pending appeal to which
the Equity Committee is a party, on the sixtieth day after the
Determination Date or the first Business Day thereafter, unless such period
is extended by order of the Bankruptcy Court on appropriate notice and
hearing. Until the duties of the Equity Committee terminate pursuant to
this Section 12.1.1, the Equity Committee shall have the right to continue
to retain its counsel and other retained Professionals, and the reasonable
fees and expenses of such Professionals shall to be treated as set forth in
Section 3.3 of this Modified Plan.
12.1.2 Creation of Post-Effective Date Trade Committee. From and
after the Effective Date, a committee shall be formed and constituted and
shall consist of five (5) members who have previously served on the
Unsecured Committee (the "Post-Effective Date Trade Committee") in an
official or ex officio capacity. The Post-Effective Date Trade Committee
shall continue in existence solely with respect to (i) any appeal of the
Confirmation Order, (ii) applications for Professional Fees, (iii)
resolution of Claims, distributions and Reserves (other than with respect
to Damage Claims), until the aggregate amount of Disputed Claims in
48
<PAGE>
Class 3 is less than $6,500,000, and (iv) such other matters as may be
proposed by the Post-Effective Date Trade Committee and approved by the
Debtor or the Reconstituted Board of Directors, as applicable, or as otherwise
provided by a Final Order of the Bankruptcy Court.
12.1.3 Post-Effective Date Trade Committee Procedures. A majority of
the Post-Effective Date Trade Committee shall constitute a quorum. One
member of the Post-Effective Date Trade Committee shall be designated by
the majority of its members as its chairperson ("Chairperson"). Meetings
of the Post-Effective Date Trade Committee shall be called by the
Chairperson upon such notice and in such manner as its Chairperson may deem
advisable. The Post-Effective Date Trade Committee shall function by
decisions made by a majority of its members in attendance at any meeting.
The Post-Effective Date Trade Committee shall adopt by-laws which shall
otherwise control its functions.
12.1.4 Post-Effective Date Trade Committee Compensation. The members
of the Post-Effective Date Trade Committee shall serve without
compensation. Reasonable expenses of the members of the Post-Effective
Trade Committee shall be reimbursed and paid by Reorganized Rose's upon
submission of bills to Reorganized Rose's or upon Final Order of the
Bankruptcy Court.
12.1.5 Retention of Professionals. The Post-Effective Date Trade
Committee shall have the right to retain the services of attorneys and
accountants which are necessary to assist the Post-Effective Date Trade
Committee in the performance of its duties. The reasonable fees and
expenses of such professionals shall be paid in accordance with Section 3.3
of this Modified Plan, upon the submission of invoices to Reorganized
Rose's and the Post-Effective Date Trade Committee. Ten (10) days after
receipt by Reorganized Rose's and the Post-Effective Date Committee of any
such invoice, Reorganized Roses's shall be authorized to pay such invoice
unless it and/or the Person seeking payment has received a written
objection to the payment thereof from any of Reorganized Rose's or the
Post-Effective Date Committee within such period. In the event fees and
expenses of any such professional are objected to, such fees and expenses
shall be payable only upon prior agreement of the parties or by order of
the Bankruptcy Court, or other court of competent jurisdiction.
12.1.6 Liability. Neither the Post-Effective Date Trade Committee
nor any of its members, designees, counsel or accountants or any duly
designated agent or representative of the Post-Effective Date Trade
Committee shall be liable for the act, default or misconduct of any other
member of the Post-Effective Date Trade Committee, nor shall any member be
liable for anything other than such member's gross negligence, willful
misconduct or fraud. None of the Post-Effective Date Trade Committee's
members, designees, agents or representatives or their respective
employees, shall incur or be under any liability or obligation by reason of
any act
49
<PAGE>
done or omitted to be done, by any member of the Post-Effective
Date Trade Committee, designee, agent or representative. The Post-
Effective Date Trade Committee may, in connection with the performance of
its functions, and in its sole and absolute discretion, consult with
counsel, accountants and its agents, and shall not be liable for anything
done or omitted or suffered to be done in accordance with such advice or
opinions. If the Post-Effective Date Trade Committee determines not to
consult with counsel, accountants or its agents, such determination shall
not be deemed to impose any liability on the Post-Effective Date Trade
Committee, or its members and/or its designees.
12.2 Means of Cash Payments. Cash payments made pursuant to this
Modified Plan shall be in United States dollars by checks drawn on a
domestic bank selected by the Debtor or Reorganized Rose's, as applicable,
or by wire transfer from a domestic bank.
12.3 Set-Offs. Except as expressly provided herein, nothing
contained in this Modified Plan shall constitute a waiver or release by the
Debtor of any right of set-off the Debtor may have, or which may be
assertable by Reorganized Rose's or the Debtor, as applicable, against any
holder of a Claim or an Interest.
12.4 Withholding Taxes. The Debtor, Reorganized Rose's, (if
applicable), or any agent making distributions under this Modified Plan
shall be entitled to deduct any federal, state or local withholding taxes
from any Cash payments made with respect to Allowed Claims or interest
thereon and Interests. If distributions of New Rose's Common Stock are
subject to any tax withholding, the Debtor, Reorganized Rose's or the agent
shall be permitted, but not required, to withhold from any Cash otherwise
to be distributed to the holder or to sell the appropriate amount of New
Rose's Common Stock otherwise to be issued to the holder and to apply the
proceeds of such sale to satisfy all or a portion of the tax withholding
obligation.
12.5 Revesting. Except as otherwise provided by this Modified Plan,
upon the Effective Date, title to all properties and assets provided for in
this Plan shall pass to Reorganized Rose's, free and clear of all Claims
and Interests, including liens or other encumbrances, of creditors and of
equity security holders, and the Confirmation Orders shall be a judicial
determination of discharge of all of the Debtor's liabilities except as
provided in this Modified Plan; provided, however, that liens and
encumbrances granted pursuant to the Modified Plan that are granted in
satisfaction, exchange, release and discharge of existing liens, shall be
deemed to have attached and to have become perfected at the time of the
attachment and perfection of those existing liens so that attachment and
perfection shall be deemed to have been continuous notwithstanding this
paragraph, the revesting of property in the Debtor and the granting of new
liens and encumbrances.
50
<PAGE>
12.6 Headings. Headings are utilized in this Modified Plan for the
convenience of reference only, and shall not constitute a part of this
Modified Plan for any other purpose.
12.7 Defects, Omissions and Amendments. The Plan Proponents may,
with the approval of the Bankruptcy Court and without notice to and consent
of all holders of Claims and Interests, but after notice to the Facility
Agents, GE Capital and the Plan Proponents, and consent by the Facility
Agents, GE Capital and the Plan Proponents, which consent shall not be
unreasonably withheld, insofar as they do not materially and adversely
affect the interests of holders of Claims and Interests, correct any
defect, omission or inconsistency in this Modified Plan in such manner and
to such extent as may be necessary to expedite the execution of this
Modified Plan. This Modified Plan may be altered or amended before or
after Confirmation as provided in Section 1127 of the Bankruptcy Code if,
in the opinion of the Bankruptcy Court, the modification does not
materially and adversely affect the interests of holders of Claims and
Interests; provided, however, that any such altered or amended plan shall
not be binding on the Facility Agents or GE Capital without their
respective consents. This Modified Plan may be altered or amended before
or after entry of the Modified Plan Confirmation Order in a manner which,
in the opinion of the Bankruptcy Court, materially and adversely affects
holders of Claims and Interests, only on consent of all Plan Proponents,
the Facility Agents, and GE Capital after a further hearing and acceptance
of this Modified Plan as so altered or modified as provided in Section 1126
of the Bankruptcy Code.
12.8 Governing Law. Except to the extent that the Bankruptcy Code is
applicable, and unless otherwise specified in an agreement entered into to
effectuate this Modified Plan, the rights and obligations arising under
this Modified Plan shall be governed by and construed and enforced in
accordance with the internal laws of the State of North Carolina.
12.9 Conflicts. Unless otherwise agreed in writing by each of the
Plan Proponents, the Facility Agents and GE Capital, in the event of any
conflict between the provisions of any of the Second Supplemental Adequate
Protection Consent Order and this Modified Plan, the Confirmation Orders,
or any other order which may be entered in the Chapter 11 Case after entry
of the Second Supplemental Adequate Protection Consent Order or any
succeeding case or proceeding, the provisions of the Second Supplemental
Adequate Protection Consent Order shall govern with regard to the matters
addressed therein, provided, however, that upon full satisfaction of the
Pre-Petition Lenders' Allowed Secured Claims pursuant to Section 4.4 of
this Modified Plan and the GE Obligations pursuant to Section 3.5 of this
Modified Plan, the Modified Plan shall govern for all purposes.
12.10 Agreement Among the Plan Proponents. The terms, provisions and
conditions of this Modified Plan constitute a mutual
51
<PAGE>
agreement reached among each of the Plan Proponents in conjunction with their
agreement regarding the terms, provisions and conditions of the Supplemental
Adequate Protection Orders, the Plan Support Consent Order, the Plan and the
Plan Confirmation Order. In the event that this Modified Plan is either (x)
abandoned or (y) fails to become effective in accordance with Section 8.1
of this Modified Plan, the Plan Proponents agree as follows:
(a) The Plan Proponents will endeavor to preserve for the
benefit of GE Capital and the Pre-Petition Lenders their respective
rights and remedies afforded them in the Supplemental Adequate
Protection Orders.
(b) Under no circumstances, other than circumstances arising as
a result of the Balloting Pre-Petition Lenders' breach of their
agreement in paragraph 7 of the Plan Support Consent Order as
determined by Bankruptcy Court Order, shall any of the Plan Proponents
support any plan of reorganization which treats the claims of the Pre-
Petition Lenders in a manner materially worse than the treatment
afforded such claims pursuant to Exhibit 5.1 to the Plan.
The foregoing agreement shall survive notwithstanding the abandonment of
this Modified Plan or the failure of the Modified Plan to become effective,
but shall be null and void, and of no force and effect, in the event that
the Effective Date of this Modified Plan occurs.
12.11 Notices. All notices, requests or demands for payments
provided for in this Plan shall be in writing and shall be deemed to have
been given when personally delivered by hand, delivered by courier or
deposited in any general or branch post office of the United States Postal
Service or received by telex or telecopier. Notices, requests and demands
for payments shall be addressed and sent, postage prepaid, or delivered,
to:
(a) Rose's Stores, Inc.: P.O. Box Drawer 947, Henderson, North
Carolina 27536, Attn: Chief Financial Officer, with a copy to
Proskauer Rose Goetz & Mendelsohn, 1585 Broadway, New York, New York
10036, Attn: Alan B. Hyman, Esq., and Smith Debnam Hibbert & Pahl,
P.O. Box 26268, Raleigh, North Carolina 27611, Attn: J. Larkin Pahl,
Esq.;
(b) the Post-Effective Date Trade Committee: Mattel Toys, Attn:
Ms. Dorothy Fee, Director Customer Relations, 333 Continental
Boulevard, El Seguendo, California 90245; with a copy to Otterbourg,
Steindler, Houston & Rosen, P.C., 230 Park Avenue, New York, New York
10956, Attn: Scott L. Hazan, Esq and Glenn B. Rice, Esq.
(c) the Equity Committee: J. David Rosenberg, Esq., c/o Keating,
Muething & Klekamp, 1800 Provident Tower, One East Fourth Street, P.O.
Box 1800, Cincinnati, Ohio 45202 with a
52
<PAGE>
copy to Lord Bissell & Brook, 115 South LaSalle, Chicago, Illinois 60603,
Attn: Benjamin Waisbren, Esq. and Burns, Day & Presnell, P.A., 2626
Glenwood Avenue, Suite 560, P.O. Box 10867, Raleigh, North Carolina
27608, Attn: Lacy M. Presnell, III;
(d) General Electric Capital Corporation: 3379 Peachtree Road,
N.E., Suite 600, Atlanta, GA, Attn: Region Operations Manager, with a
copy to Smith, Gambrell & Russell, 1230 Peachtree Street, N.E.,
Promenade II, Suite 3100, Atlanta, GA, 30309, Attn: Bruce W. Moorhead,
Esq.: and/or
(e) at any other address designated by a Plan Proponent by
notice to each holder of an Allowed Claim or Interest, and, in the
case of notices to holders of Allowed Claims and Interests, at the
last known address according to the Debtor's books and records or at
any other address designated by a holder of an Allowed Claim on its
proof of claim (or by a holder of an Interest on its proof of
interest, if any) or filed with the Bankruptcy Court, provided that
any notice of change of address shall be effective only upon receipt.
12.12 Severability. Should any provision in this Modified Plan be
determined to be unenforceable, such determination shall in no way limit or
affect the enforceability and operative effect of any or all other
provisions of this Modified Plan.
12.13 Revocation and Withdrawal of Modified Plan. This Modified Plan
shall be deemed revoked and withdrawn in the event that the Effective Date
does not occur by April 30, 1995, or such later date as established
pursuant to Section 8.1(c) of this Modified Plan; provided, however, that
nothing in this Section 12.13 shall prejudice or affect the rights of any
Person under the Second Supplemental Adequate Protection Consent Order or
the Plan Support Consent Order, except as expressly provided for in this
Modified Plan, unless and until the Effective Date of this Modified Plan
occurs.
12.14 Effect of Withdrawal or Revocation. If the Modified Plan is
revoked or withdrawn pursuant to Section 12.13 above, or if the Effective
Date does not occur by April 30, 1995 or such later date as established
pursuant to Section 8.1(c) of this Modified Plan, then this Modified Plan
shall be deemed null and void and the Plan as operative in accordance with
the "Alternative Treatment Provisions" thereof shall be reinstated and in
full force and effect, and in such event nothing contained in this Modified
Plan shall be deemed to constitute a waiver or release of any Claims or
Interests by or against any Plan Proponent or any other Person or to
prejudice in any manner the rights of any Plan Proponent or any Person in
any further proceedings involving the Debtor; provided, however, that
nothing in this Section 12.14 shall prejudice or affect the rights of any
Person under the Second Supplemental Adequate Protection Consent Order or
the Plan Support Consent
53
<PAGE>
Order, except as expressly provided for in this Modified Plan, unless and
until the Effective Date of this Modified Plan occurs.
12.15 Ratification in Confirmation Orders. The Confirmation Orders
shall ratify all transactions effected by the Debtor and/or any successors
to, or designees of, the Debtor, including Reorganized Rose's (if
applicable), by operation of an order of the Bankruptcy Court, during the
period commencing on the Filing Date and ending on the date of the Modified
Plan Confirmation Order.
12.16 Post-Effective Date Effectuation of the Modified Plan's Terms.
From and after the Effective Date, the Chairman of the Board, President,
any Executive Vice President, Senior Vice President or Vice President of
Reorganized Rose's or the Debtor, as applicable, shall be authorized to
execute, deliver, file or record such contracts, instruments, releases,
indentures and other agreements or documents and take such actions as may
be necessary or appropriate to effectuate and further evidence the terms
and conditions of this Modified Plan. The Secretary or any Assistant
Secretary of the Debtor or Reorganized Rose's, as applicable, shall be
authorized to certify or attest to any of the foregoing actions. Pursuant
to Section 1146(c) of the Bankruptcy Code, none of the following executed
in connection with any transactions consummated pursuant to this Modified
Plan shall be subject to any stamp tax, real estate transfer tax or similar
tax: (i) the issuance, transfer or exchange of New Rose's Common Stock or
New Rose's Warrants or obligations under the Post-Effective Date Financing
Facility, (ii) the creation of any mortgage, deed of trust or other
security interest or instrument necessary to perfect the same, (iii) the
making or assignment of any lease or sublease, or (iv) the making or
delivery of any deed or other instrument of transfer under, in furtherance
of, or in connection with, this Modified Plan, including any merger
agreements or agreements of consolidation, deeds, bills of sale or
assignments.
12.17 Execution. Each of the parties receiving distributions under
this Modified Plan shall take all steps, and execute all documents,
including appropriate releases, necessary to effectuate the foregoing.
54
<PAGE>
This Modified and Restated First Amended Joint Plan of Reorganization
is respectfully submitted to the United States Bankruptcy Court for the
Eastern District of North Carolina, Raleigh Division, on the 19th day of
April, 1995.
Respectfully Submitted,
ROSE'S STORES, INC.
Debtor and Debtor-in-Possession
By: (signature of R. Edward Anderson
appears here by TLG)
______________________________
R. Edward Anderson
Chairman, President and
Chief Executive Officer
55
<PAGE>
SMITH DEBNAM HIBBERT & PAHL
Counsel to the Debtor and
Debtor-in-Possession
By: (signature of Terri L. Gardner
appears here)
______________________________
J. Larkin Pahl
N.C. State Bar No. 3311
Terri L. Gardner
N.C. State Bar No. 9809
4700 New Bern Avenue
P.O. Box 26268
Raleigh, NC 27611
(919) 250-2000
PROSKAUER ROSE GOETZ & MENDELSOHN
Special Bankruptcy Counsel to the
Debtor and Debtor-in-Possession
By: (signature of Michael E. Foreman
appears here by TLG)
______________________________
Alan B. Hyman
Michael E. Foreman
Members of the Firm
1585 Broadway
New York, New York 10036
(212) 969-3000
HEBB & GITLIN
A Professional Corporation
Counsel to the Pre-Petition
Secured Noteholders
By: (signature of Michael J. Reilly
appears here by Stephani W. Humrickhouse)
______________________________
Michael J. Reilly
Thomas H. Day
One State Street
Hartford, CT 06103-3178
(203) 240-2700
56
<PAGE>
NICHOLLS & CRAMPTON, P.A.
Counsel to the Pre-Petition
Secured Noteholders
By: (signature of Stephani W. Humrickhouse
appears here)
______________________________
Gregory B. Crampton
N.C. State Bar No. 991
Stephani W. Humrickhouse
N.C. State Bar No. 9528
100 St. Albans Dr.
P.O. Box 18237
Raleigh, NC 27619
(919) 781-1311
ANDERSON KILL OLICK &
OSHINKSY, P.C.
Counsel to Bank of Tokyo, Ltd.
By: (signature of Jeffrey L. Glatzer
appears here with permission
William A. Mann)
______________________________
Jeffrey L. Glatzer
Linda Gerstel
1251 Avenue of the Americas
New York, New York 10020
(212) 278-1000
RAGSDALE, LIGGETT & FOLEY
Counsel to Bank of Tokyo, Ltd.
By: (signature of William A. Mann
appears here)
______________________________
William A. Mann
N.C. State Bar No. 2854
CrossPointe Plaza
2840 Plaza Place
Raleigh, NC 27612
(919) 787-5200
57
<PAGE>
OTTERBOURG, STEINDLER, HOUSTON
& ROSEN, P.C.
Counsel to the Official Committee
of Unsecured Creditors
By: (signature of Glen B Rice
appears here by N. Hunter Wyche, Jr.
______________________________
Scott L. Hazan
Glenn B. Rice
230 Park Avenue
New York, New York 10169
(212) 661-9100
WYCHE & STORY
Counsel to the Official Committee
of Unsecured Creditors
By: (signature of N. Hunter Wyche, Jr.
appears here)
______________________________
N. Hunter Wyche, Jr.
N.C. State Bar No. 9533
Post Office Drawer 1389
Raleigh, NC 27602-1389
(919) 821-7700
58
<PAGE>
LORD BISSELL & BROOK
Counsel to the Official Committee
of Equity Security Holders
By: (signature of Michael Yetnikoff
appears here by LP)
______________________________
Benjamin Waisbren
Michael Yetnikoff
115 South LaSalle Street
Chicago, Illinois 60603
(312) 443-0700
BURNS, DAY & PRESNELL, P.A.
Counsel to the Official Committee
of Equity Security Holders
By: (signature of Lacy M. Presnell, III
appears here)
______________________________
Lacy M. Presnell, III
N.C. State Bar No.
2626 Glenwood Avenue
Suite 560
P.O. Box 10867
Raleigh, NC 27608
(919) 782-1441
59
<PAGE>
<PAGE>
UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
- -----------------------------------X
:
In re: :
: Case No. 93-01365-5-ATS
ROSE'S STORES, INC., :
: Chapter 11
Debtor. :
:
- -----------------------------------X
ORDER APPROVING NONMATERIAL MODIFICATIONS TO
DEBTOR'S FIRST AMENDED JOINT PLAN OF REORGANIZATION
AND CONFIRMING DEBTOR'S MODIFIED AND RESTATED FIRST
AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11
OF THE UNITED STATES BANKRUPTCY CODE
UPON the motion, dated April 19, 1995 (the "Motion"), of Rose's
Stores, Inc., debtor and debtor-in-possession (the "Debtor"), seeking entry
of this Order approving nonmaterial modifications to the Debtor's First
Amended Joint Plan of Reorganization (the "Plan") and confirming the
Debtor's Modified and Restated First Amended Joint Plan of Reorganization;
and the First Amended Disclosure Statement relating to the Plan (the
"Disclosure Statement") having been approved, by order of the Court dated
October 5, 1994, as containing "adequate information", as such term is
defined in Section 1125 of the Bankruptcy Code; and the Plan having been
confirmed by order of the Court dated December 14, 1994 (the "Plan
Confirmation Order"); and the Debtor having filed its Modified and Restated
First Amended Joint Plan of Reorganization on April 19, 1995 (the "Modified
Plan"); and it appearing that good and
<PAGE>
sufficient notice of the Motion has been provided; and this Court having
examined the Motion and upon the completion of a hearing on the Motion
(the "Hearing"), with respect to which Hearing no party appeared in
objection to the Motion; and having heard evidence presented by the
parties and the representations of counsel;
THIS COURT FINDS THAT:
A. The proposed modifications to the Plan as described in the
Motion and set forth in the Modified Plan (and as authorized and approved
by this Order) have been proposed jointly by the Plan Proponents(1),
consented to by GE Capital and the Facility Agents and do not materially
adversely affect the treatment of any party receiving distributions under
the Plan and the Modified Plan. Each such modification shall be and hereby
is deemed to be accepted by all parties-in-interest who previously accepted
the Plan.
B. Substantial consummation of the Plan has not occurred, and
the Modified Plan meets the requirements of Sections 1122, 1123 and 1129 of
the Bankruptcy Code. Section 12.7 of the Plan provides the means for
amending the Plan after Confirmation and the Plan Proponents have complied
with Section 12.7 of the Plan in submitting the Modified Plan. The
circumstances of this Chapter 11 case warrant modification of the Plan, in
that the modifications set
(1) Capitalized terms not otherwise defined in this Order
shall have the same meaning ascribed to them in the Modified
Plan, first, or the Disclosure Statement, second.
2
<PAGE>
forth in the Modified Plan are necessary to effectuate the Post-Effective
Date Financing Facility and otherwise consummate the Modified Plan.
C. On or about April 5, 1995, the Debtor mailed to all parties
on the official service list a notice advising them of the proposed
modifications to the Plan and of the time and place of the Hearing.
D. Any party-in-interest required to receive notice of the
Motion and the Hearing has received due, proper and adequate notice
thereof. All parties-in-interest had the opportunity to appear and be
heard at the Hearing.
E. The following constitute all documents, agreements and
exhibits necessary for the Effective Date of the Modified Plan to occur, in
compliance with Section 8.1(d) of the Modified Plan: the New Rose's Common
Stock Escrow Agreement, the New Rose's Warrant Agreement, the Deferred GE
Obligations Agreements, the GE Master Release Agreement, the Post-Effective
Date GE Assumption Agreement, the New Rose's Charter and By-Laws, and all
agreements and documents relating to the Post-Effective Date Financing
Facility.
F. The Disclosure Statement identified Mr. R. Edward Anderson,
the Debtor's President and Chief Executive Officer to serve as a director
of Reorganized Rose's. In accordance with Section 7.5 of the Modified
Plan, the Unsecured Committee has
3
<PAGE>
advised the Debtor that the following seven (7) individuals will also
serve as directors of Reorganized Rose's: Mr. Elliot J. Stone, Mr. Joseph
L. Mullen, Mr. Joseph Nusim, Mr. Harold Smith, Mr. Denis J. Taura,
Mr. Walter F. Loeb and N. Hunter Wyche, Jr., Esq. The Equity Committee
has advised the Debtor that it has selected J. David Rosenberg, Esq.
to serve as a director of Reorganized Rose's.
G. As a result of the offer made to the holders of Common Stock
Interests in Class 5 to subscribe for and purchase up to 100% of the
Effective Date Shares at the Class 5 Subscription Price, Subscription
Proceeds in the approximate amount of $180,000 were contributed by the
Class 5 Subscribers, which Subscription Proceeds shall be returned to the
Class 5 Subscribers pursuant to Section 6.2.2 of the Modified Plan.
H. The Plan Proponents have complied with Section 1125 of the
Bankruptcy Code with respect to the Modified Plan.
I. The Court finds that each and every act and omission to act
by GE Capital, GE Capital Corporate Finance Group, Inc. and GE Capital
Commercial Finance, Inc., and all of their respective past and present
officers, directors, agents, employees and professionals, taken with
respect to each of the DIP Facility and any and all other agreements,
instruments, documents or understandings relating to or arising out of the
DIP Facility, the GE Master Release Agreement, the Deferred GE Obligations
Agreements,
4
<PAGE>
the Post-Effective Date GE Assumption Agreement, that certain
Amended and Restated Commitment Letter of GE Capital to Rose's Stores,
Inc., dated as of July 19, 1994 and the related Fee Letter dated as of July
19, 1994 and that certain Agreement Terminating Amended and Restated Letter
to Provide Confirmation Financing dated as of March 31, 1995, including,
without limitation, all calculations of principal and interest, and all
fees, expenses, costs and charges paid by the Debtor have been, were and
are (a) made or taken in good faith, (b) reasonable, (c) in compliance with
the terms of any and all applicable agreements, instruments and other
documents and (d) in compliance with, and not in contravention or violation
of, any order of this Court or applicable law.
THEREFORE, NOW, upon the Motion of the Debtor and after due
deliberation, the Court hereby ORDERS, ADJUDGES AND DECREES THAT:
1. The Motion and the relief requested therein is hereby
approved and authorized in its entirety.
2. The Plan is hereby deemed to be modified in all respects, as
and to the extent set forth in the Modified Plan. The Modified Plan shall
supersede the Plan for purposes of Section 1127(b) of the Bankruptcy Code.
5
<PAGE>
3. All holders of Claims or Interests that accepted or rejected
the Plan are deemed to have accepted or rejected, as the case may be, the
Modified Plan.
4. All references to the Plan in the Plan Confirmation Order
shall be references to the Modified Plan.
5. All references to the Post-Effective Date Lender in the Plan
shall be references to the Post-Effective Date Lenders for purposes of this
Order.
6. All findings of fact set forth in the Plan Confirmation
Order are incorporated herein by reference, and made applicable to the
Modified Plan, except that (i) the first sentence of the finding set forth
in Paragraph U entitled Feasibility (Section 1129(a)(11)) relating to the
Alternative Treatment Provisions of the Plan, shall be deleted in its
entirety for purposes of Confirmation of the Modified Plan and (ii) the
finding set forth in Paragraph Y entitled No Other Plan (Section 1129(c))
shall be modified for purposes of Confirmation of the Modified Plan to
state as follows "No other plan, except the Plan, which by this Order is
superseded by the Modified Plan, has been filed with respect to the
Debtor's Chapter 11 Case."
7. Paragraph 1 of the Plan Confirmation Order, entitled
Confirmation, shall be superseded with respect to the Modified Plan and
replaced as follows:
6
<PAGE>
"The Modified Plan shall be, and hereby is confirmed, having
met the requirements of Section 1127(b) and 1129 of the
Bankruptcy Code."
8. Paragraph 2 of the Plan Confirmation Order, entitled Record
Date, shall be superseded with respect to the Modified Plan and replaced as
follows:
"Pursuant to Rule 3021 of the Federal Rules of Bankruptcy
Procedure, the record date for the purpose of determining (i)
those holders of Common Stock Interests entitled to distributions
under the Modified Plan and (ii) those holders of Claims in
Classes 1, 2A and 3 entitled to distributions under the Modified
Plan shall be the Effective Date. The record date for the
purpose of determining holders of Claims in Class 2B entitled to
distributions under the Modified Plan shall be the first Business
Day prior to the closing of the Post-Effective Date Financing
Facility."
9. Paragraph 3 of the Plan Confirmation Order, entitled New
Agreements, is incorporated herein by reference, and made applicable to the
Modified Plan (including the Post-Effective Date Financing Facility
contemplated by and in connection with the Modified Plan), except that, for
purposes of Confirmation of the Modified Plan (i) references to the New
Rose's Common Stock Trust Agreement shall be deleted for purposes of
Confirmation of the Modified Plan and replaced with references to the New
Rose's Common Stock Escrow Agreement, (ii) references to the New Rose's
Secured Notes Documents shall be deleted, and (iii) the following phrase
7
<PAGE>
shall be inserted after the phrase "the New Rose's Warrant Agreement":
"the Deferred GE Obligations Agreements, the GE Master
Release Agreement, the Post-Effective Date GE Assumption
Agreement".
10. Paragraph 4 of the Plan Confirmation Order, entitled
Approval of Agreements, shall be deleted in its entirety for purposes of
Confirmation of the Modified Plan and replaced as follows:
"The New Rose's Common Stock Escrow Agreement, the New Rose's
Warrant Agreement, the Deferred GE Obligations Agreements, the GE
Master Release Agreement, the Post-Effective Date GE Assumption
Agreement, the New Rose's Charter and By-Laws, and all agreements and
documents relating to the Post-Effective Date Financing Facility are
each hereby approved substantially in their respective forms as filed
or to be filed with this Court, and with such changes as may be agreed
to by the parties thereto after the date of filing. The Debtor shall
perform, and is hereby authorized, empowered and directed to perform
its obligations pursuant to all such agreements as part of the
Modified Plan."
11. Paragraph 5 of the Plan Confirmation Order, entitled
Effective Date, is incorporated herein by reference, and made applicable to
the Modified Plan, except that the reference to Section 8.2 should be
modified for purposes of Confirmation of the Modified Plan to reference
Section 8.1 of the Modified Plan, and the second sentence (including
footnote 2) of such ordered provision shall be deleted in its entirety for
purposes of the Modified Plan.
8
<PAGE>
12. Paragraph 6 of the Plan Confirmation Order, entitled Effect
of Withdrawal or Revocation, shall be superseded with respect to the
Modified Plan and replaced as follows:
"In the event that the Effective Date does not occur by
April 30, 1995 or such later date as established pursuant to
Section 8.1(c) of the Modified Plan, then the Modified Plan shall
be deemed null and void, and the Plan as operative in accordance
with the "Alternative Treatment Provisions" thereof shall be
reinstated and in full force and effect, and in such event,
nothing contained in the Modified Plan shall be deemed to
constitute a waiver or release of any Claims or Interests by or
against any Plan Proponent or any other Person or to prejudice in
any manner the rights of any Plan Proponent or any Person in any
further proceedings involving the Debtor; provided, however, that
nothing in the Modified Plan shall prejudice or affect the rights
of any Person under the Second Supplemental Adequate Protection
Consent Order or the Plan Support Consent Order, except as
expressly provided for in the Modified Plan, unless and until the
Effective Date of the Modified Plan occurs."
13. Paragraph 7 of the Plan Confirmation Order, entitled
Treatment of GE Capital, shall be superseded with respect to the Modified
Plan and replaced as follows:
"Simultaneous with the closing of the Post-Effective Date
Financing Facility, (i) all of the GE Obligations (other than (a)
the Deferred GE Obligations and (b) the Post-Effective Date GE
Obligations) shall be fully and finally satisfied, in Cash, in
accordance with Section 3.5 of the Modified Plan, (ii)
Reorganized Rose's shall have made adequate provision with
respect to the Deferred GE Obligations by the execution and
delivery of the Deferred GE Obligations Agreements and such
performance as may be required thereunder prior to or upon
9
<PAGE>
the execution and delivery thereof, (iii) Reorganized Rose's shall
have assumed each and every of the Post-Effective Date GE
Obligations by the execution and delivery of the Post-Effective
Date GE Assumption Agreement and such performance as may be
required thereunder prior to or upon the execution and delivery
thereof, and (iv) GE Capital shall enter into and deliver the GE
Master Release Agreement. Simultaneously upon such time as (i)
all GE Obligations (other than (a) the Deferred GE Obligations
and (b) the Post-Effective Date GE Obligations) are fully
satisfied, in Cash (the amount of which shall be fixed and
provided to Reorganized Rose's and the Facility Agents prior to
the initial funding under the Post-Effective Date Financing
Facility), (ii) all Deferred GE Obligations are provided for by
Reorganized Rose's by the execution and delivery of the Deferred
GE Obligations Agreements and such performance as may be required
thereunder prior to or upon the execution and delivery thereof,
and (iii) all Post-Effective Date GE Obligations are assumed by
Reorganized Rose's by the execution and delivery of the Post-
Effective Date GE Assumption Agreement and such performance as
may be required thereunder prior to or upon the execution and
delivery thereof, all liens, claims, interests, rights, remedies
and protections granted to GE Capital pursuant to the DIP
Facility shall be released and terminated. Notwithstanding
anything to the contrary set forth in or implied by any
provisions of the Modified Plan, on and after the Effective Date
Reorganized Rose's shall be deemed to have assumed, without any
action or the execution of any document, any and all Post-
Effective Date GE Obligations."
14. Paragraph 8 of the Plan Confirmation Order, entitled Post-
Effective Date Financing Facility, is incorporated herein fully by
reference, and made applicable to the Modified Plan.
15. Paragraph 9 of the Plan Confirmation Order, entitled
Cancellation of Common Stock, Pre-Petition Warrants and Stock Options and
Pre-Petition Secured Notes, is incorporated herein fully by reference, and
made applicable to the Modified Plan.
16. Paragraph 10 of the Plan Confirmation Order, entitled
Distributions, shall be superseded with respect to the Modified Plan and
replaced as follows:
10
<PAGE>
"The Cash payments and other distributions required under
the Modified Plan shall be made in accordance with Article VI of
the Modified Plan."
17. Paragraph 11 of the Plan Confirmation Order, entitled
Exemption from Securities Laws, is incorporated herein by reference, and
made applicable to the Modified Plan, except that the reference to the New
Rose's Secured Notes shall be deleted for purposes of Confirmation of the
Modified Plan.
18. Paragraph 13 of the Plan Confirmation Order, entitled
Perfection of Post-Effective Date Collateral, shall be of no further force
and effect with respect to the Modified Plan.
19. Paragraph 14 of the Plan Confirmation Order, entitled
Executory Contracts and Unexpired Leases, is incorporated herein fully by
reference, and made applicable to the Modified Plan.
20. Paragraph 15 of the Plan Confirmation Order, entitled
Consummation of the Amended Plan, is incorporated herein fully by
reference, and made applicable to the Modified Plan.
21. Paragraph 16 of the Plan Confirmation Order, entitled Post-
Effective Date Effectuation of the Plan's Terms, is incorporated herein
fully by reference, and made applicable to the Modified Plan.
22. Paragraph 17(a) of the Plan Confirmation Order, entitled
NEXTRECORD scharge, is incorporatedHARein by reference, and made
11
<PAGE>
applicable to the Modified Plan, except that the following phrase shall be
deleted for purposes of Confirmation of the Modified Plan:
"and except in the event the Alternative Treatment Provisions
are effective pursuant to Section 8.1 of the Plan,".
23. Paragraph 17(b) of the Plan Confirmation Order, entitled
Discharge, is incorporated herein fully by reference, and made applicable
to the Modified Plan.
24. Paragraph 18(a) of the Plan Confirmation Order, entitled
Releases of Released Parties, is incorporated herein fully by reference, and
made applicable to the Modified Plan.
25. Paragraph 18(b) of the Plan Confirmation Order, entitled
Releases by the Debtor and Reorganized Rose's, is incorporated herein by
reference, and made applicable to the Modified Plan, except that the following
phrase shall be deleted for purposes of Confirmation of the Modified Plan:
"Except in the event that the Alternative Treatment Provisions
are effective pursuant to Section 8.1 of the Plan, as of the
Effective Date, and".
26. Paragraph 18(c) of the Plan Confirmation Order, entitled
Releases by Recipients of New Rose's Common Stock, New Rose's Secured Notes,
New Rose's Warrants and Cash, or Available Cash (as applicable), and by All
Other Persons, is incorporated herein by reference, and made applicable to the
Modified Plan, except that references to the New Rose's Secured Notes shall
be deleted for
12
<PAGE>
purposes of Confirmation of the Modified Plan and the last
sentence of the provision shall be superseded with respect to the Modified
Plan and replaced as follows:
"Nothing in the Modified Plan or this Order shall be
construed as a release by GE Capital or otherwise of any of the GE
Obligations, except by operation of Section 3.5 of the Modified Plan
and actions taken by GE Capital in connection therewith."
27. Paragraph 19(a) of the Plan Confirmation Order,
entitled Injunction Related to Claims Released by the Debtor and Reorganized
Rose's (if applicable), Recipients of Cash, New Rose's Common Stock, New
Rose's Secured Notes and New Rose's Warrants, or Available Cash (if applicable)
and All Other Persons, is incorporated herein by reference, and made
applicable to the Modified Plan, except that references to the New Rose's
Secured Notes, New Rose's Secured Notes Documents and the Supplemental Adequate
Protection Orders shall be deleted for purposes of Confirmation of the Modified
Plan.
28. Paragraph 19(b) of the Plan Confirmation Order,
entitled Injunction Relating to the Plan, is incorporated herein fully by
reference, and made applicable to the Modified Plan.
29. Paragraph 19(c) of the Plan Confirmation Order, entitled
Consent by Holders of Claims and Interests to Entry of Injunctive Relief,
is incorporated herein fully by reference, and made applicable to the Modified
Plan.
30. Paragraph 19(d) of the Plan Confirmation Order,
entitled Injunction Against Subsequent Bankruptcy Proceedings, shall be of
no further force and effect with respect to the Modified Plan.
13
<PAGE>
31. Paragraph 20 of the Plan Confirmation Order,
entitled Jurisdiction from Confirmation through the Effective Date, shall
be deleted in its entirety and replaced as follows:
"From the Plan Confirmation Date through the Effective Date,
the Bankruptcy Court shall retain full jurisdiction over the
Chapter 11 Case notwithstanding that Confirmation of the Plan has
occurred by entry of the Plan Confirmation Order."
32. Paragraph 21 of the Plan Confirmation Order,
entitled Jurisdiction from and after the Effective Date, is incorporated
herein by reference, and made applicable to the Modified Plan, except that
Provision (m) shall be of no further force and effect with respect to the
Modified Plan.
33. Paragraph 22 of the Plan Confirmation Order,
entitled Claims Involving Debtor and GOB2 Landlords, is incorporated herein
fully by reference, and made applicable to the Modified Plan.
34. Paragraph 23 of the Plan Confirmation Order,
entitled Modification or Amendment, shall be superseded with respect to the
Modified Plan and replaced as follows:
"The Modified Plan may be modified or amended before or after
entry of this Order as provided in Section 1127 of the Bankruptcy Code
and in Section 12.7 of the Modified Plan if, in the opinion of the
Bankruptcy Court, the modification does not materially and adversely
affect the interests of holders of Claims and Interests; provided,
however, that any such altered or amended plan shall not be binding on
the Facility Agents or, prior to the Effective Date, on GE Capital
14
<PAGE>
(and after the Effective Date, unless it affects GE Capital) without
their respective consents. The Modified Plan may be altered or amended
before or after the entry of this Order in a manner which, in the
opinion of the Bankruptcy Court, materially and adversely affects
holders of Claims and Interests only on consent of all Plan Proponents,
the
Facility Agents and GE Capital and after a further hearing and
acceptance of the Modified Plan as so altered or modified as provided
in Section 1126 of the Bankruptcy Code."(2)
35. Paragraph 24 of the Plan Confirmation Order, entitled
Payment of Professional Fees and Expenses, is incorporated herein by
reference, and made applicable to the Modified Plan, except that the
phrase "Plan Confirmation Date" shall be substituted for the phrase
"Confirmation Date".
36. Paragraph 26 of the Plan Confirmation Order, entitled
Failure to Claim Undeliverable Distributions, is incorporated herein by
reference, and made applicable to the Modified Plan, except that the
phrase "the Debtor, as applicable, or" shall be deleted for purposes
of Confirmation of the Modified Plan.
37. Paragraph 27 of the Plan Confirmation Order, entitled
Taxes, is incorporated herein fully by reference, and made applicable
to the Modified Plan.
38. Paragraph 28 of the Plan Confirmation Order, entitled
Treatment of Taxes, is incorporated herein by reference, and made
applicable to the Modified Plan, except that the phrase "Confirmation
Date" shall be substituted with the phrase "Plan Confirmation Date"
throughout the Paragraph.
(2) To the extent that this ordered provision conflicts
with the Modified Plan, this provision shall govern.
15<PAGE>
39. Paragraph 29 of the Plan Confirmation Order, entitled
Full and Final Satisfaction, is incorporated herein fully by reference,
and made applicable to the Modified Plan.
40. Paragraph 30 of the Plan Confirmation Order, entitled
Conflicts, shall be superseded with respect to the Modified Plan and
replaced as follows:
"Unless otherwise agreed in writing by each of the Plan
Proponents, the Facility Agents and GE Capital, in the event of any
conflict between the provisions of any of the Second Supplemental
Adequate Protection Consent Order, the Modified Plan, this Order, the
Plan Confirmation Order or any other order which may be entered in
the Chapter 11 Case after entry of the Second Supplemental Adequate
Protection Consent Order or any succeeding case or proceeding, the
provisions of the Second Supplemental Adequate Protection
Consent Order shall govern with regard to the matters addressed
therein, provided, however, that upon full satisfaction of the
Pre-Petition Lenders' Allowed Secured Claims pursuant to Section 4.4
of the Modified Plan and the GE Obligations pursuant to Section 3.5
of the Modified Plan, the Modified Plan shall govern for all purposes."
41. Paragraph 31 of the Plan Confirmation Order, entitled
Ratification of Actions, is incorporated herein by reference, and made
applicable to the Modified Plan, except that the phrase "Confirmation
Date" shall be substituted with the phrase "Date of this Order".
42. Paragraph 32 of the Plan Confirmation Order, entitled
Notice, is incorporated herein fully by reference, and made applicable
to the Modified Plan.
43. All loans, advances, debts, guarantees, liabilities
and obligations for monetary amounts (whether or not such amounts are
liquidated or determinable) owing by Reorganized Rose's to the
Post-Effective Date Lenders, and all covenants and duties regarding
such amounts, of any kind or nature, present or
16
<PAGE>
future, whether or not evidenced by any note, agreement or other
instrument, arising under the Post-Effective Date Financing Facility,
including, without limitation, all interest, fees, charges, expenses,
attorneys' fees and any other sum chargeable to Reorganized Rose's
under any of the documents and agreements memorializing the
Post-Effective Date Financing Facility, shall be secured by valid and
enforceable liens on, and security interests in, the Post-Effective
Date Collateral. In connection with the closing of the Post-Effective
Date Financing Facility, Reorganized Rose's shall grant, and shall be
hereby deemed to grant, to the Post-Effective Date Lenders liens and
security interests in all of the Post-Effective Date Collateral for
the purpose of securing all obligations and liabilities of Reorganized
Rose's under the Post-Effective Date Financing Facility, which security
interests and liens shall constitute valid and perfected first-priority
security interests in and liens upon all Post-Effective Date
Collateral, superior to and with priority over all other security
interests and liens whether consensual or non-consensual, statutory or
otherwise, and whether existing now or in the future.(3)
44. The terms of the Post-Effective Date Financing
Facility have been approved by order of the Bankruptcy Court entered
on April 17, 1995 (the "Exit Financing Order"). Simultaneously upon
the satisfaction in full, in Cash, of the GE Obligations (other than
(a) the Deferred GE Obligations and (b) the Post-Effective Date GE
Obligations) and the execution and delivery of (i) the Deferred GE
Obligations Agreements and (ii) the Post-Effective Date GE Assumption
Agreement, and in each case, such performance as may be required
thereunder prior to or upon the execution and delivery thereof, the
liens and security interests granted
(3) To the extent that this ordered provision conflicts
with the Modified Plan, this provision shall govern.
17
<PAGE>
in favor of the Post-Effective Date Lenders shall be effective and shall be
deemed created and fully perfected immediately upon the Effective Date and
without the necessity of the execution by the Debtor or Reorganized Rose's or
filing by the Post-Effective Date Lenders of financing statements, mortgages,
security agreements or any other documents. Neither the Post-Effective Date
Lenders (nor the Facility Agents or the Administrative Agent on their behalf)
shall be required to file financing statements, mortgages, deeds of trust,
notices of lien, certificates of title or any other instruments (collectively,
"Instruments") in any jurisdiction or take any other action in order to
validate or perfect the liens and security interests granted to the
Post-Effective Date Lenders. The entry of this Order and the Plan
Confirmation Order and the occurrence of the Effective Date shall constitute
immediate and full perfection of the liens and security interests granted to
the Post-Effective Date Lenders, notwithstanding any failure of the
Post-Effective Date Lenders (or the Facility Agents or the Administrative
Agent on their behalf) to file or otherwise perfect said security interests
through such Instruments or otherwise in accordance with any state or other
applicable law. Notwithstanding the foregoing, the Post-Effective Date Lenders
or any of their agents may, at their sole discretion, choose to have the
Facility Agents and/or the Administrative Agent, file any or all of such
Instruments or otherwise confirm perfection of such liens and security
interests and all such Instruments shall be deemed to have been filed or
recorded at the time and on the date of the Effective Date. In lieu of filing
some or all of such Instruments, the Post-Effective Date Lenders or any of
their agents may, at their sole discretion, choose to have the Facility Agents
and/or the Administrative Agent, file certified copies of this Order and the
Plan Confirmation Order or the Exit Financing Order in any place at which
any of such Instruments
18
<PAGE>
would or could otherwise be filed, together with such description of
collateral located within the geographic area covered by such place of filing
as the Post-Effective Date Lenders or their agents may determine, and such
filing shall have the same effect as if all such Instruments had been filed or
recorded at the time and on the date the Effective Date. Should the
Post-Effective Date Lenders so choose to have the Facility Agents and/or the
Administrative Agent, as permitted under the Post-Effective Date Financing
Facility, attempt to file such Instruments or certified copies of this Order
and the Plan Confirmation Order or the Exit Financing Order, or otherwise
attempt to confirm perfection of any or all such liens and security interests,
no defect or failure in connection with such attempt shall in any way limit,
waive or alter the fact that such liens and security interests are effective
and fully perfected immediately upon and forever after the Effective Date. In
the event that any party elects to file Instruments or otherwise confirm
perfection of the security interests granted as permitted under the
Post-Effective Date Financing Facility, said filing or other confirmation
of the security interests granted as permitted under the Post-Effective Date
Financing Facility shall in no manner whatsoever vitiate, reduce or
abrogate in any manner the first priority security interests in respect of the
collateral granted to the Post-Effective Date Lenders in accordance with the
provisions of the Modified Plan and the Post-Effective Date Financing Facility,
whether or not the Post-Effective Date Lenders or their agents ever choose to
file Instruments or otherwise confirm the respective liens and security
interests in the collateral granted to the Post-Effective Date Lenders or their
agents as authorized (but not required) by this paragraph and irrespective of
the sequence of any such filings as between the Post-Effective Date Lenders
(or their agents and representatives) and such other party. None of the
19
<PAGE>
provisions set forth in or implied by the Modified Plan, including, without
limitation, Sections 3.5, 4.4 and 8.1 of the Modified Plan, shall be deemed
to modify any of the provisions of the Post-Effective Date Financing Facility,
including, without limitation, any closing conditions.
45. Reorganized Rose's, by its authorized officer, shall
file with this Court a certification stating that (i) the Closing Event (as
defined in the Exit Financing Order) and (ii) the Effective Date has occurred,
and a notice regarding the occurrence of the Effective Date shall be served on
the official service list within ten (10) days after entry of this Order.
46. Reorganized Rose's shall file postconfirmation reports
with the Court pursuant to 11 U.S.C. section 1106(a)(7) as that provision
applies to debtors in possession by 11 U.S.C. section 1107(a). An initial
postconfirmation report reflecting the action taken by Reorganized Rose's to
consummate the Modified Plan and Reorganized Rose's estimated date of
substantial consummation shall be filed within sixty (60) days of this Order.
Until the Modified Plan has been substantially consummated, Reorganized Rose's
shall file quarterly reports beginning ninety (90) days after the filing of the
initial report. Quarterly reports shall reflect any progress made in
consummating the Modified Plan during the period covered by the report. The
postconfirmation reports shall be filed in the format prescribed by the
Bankruptcy Administrator.
47. Within thirty (30) days of substantial consummation
of the Modified Plan, as defined by 11 U.S.C. Section 1101(2), Reorganized
Rose's shall file a final report, in the format prescribed by the Bankruptcy
Administrator,
20
<PAGE>
reflecting the payments for all costs of administration and each class of
creditors, and a motion for the entry of a Final Decree pursuant to Rule
3022 of the Federal Rules of Bankruptcy Procedure.
48. Reorganized Rose's shall pay to the Clerk, United
States Bankruptcy Court, any Court costs currently due from Reorganized Rose's.
49. Reorganized Rose's shall serve a copy of this Order
on the official service list within ten (10) days of the entry of this Order
and promptly file a Certificate of Service with the Clerk.
Dated: Raleigh, North Carolina
April 24, 1995
UNITED STATES BANKRUPTCY JUDGE
21
08/04/94
ROSE'S STORES, INC.
SHORT-TERM INCENTIVE COMPENSATION PLAN
THIS SHORT-TERM INCENTIVE COMPENSATION PLAN (the "Plan) is
hereby established by Rose's Stores, Inc. (the "Company") as
authorized by the Compensation Committee of the Board of
Directors of the Company (the "Committee") to maximize the
performance and commitment of certain officers of the Company who
are essential for the future success of the Company by providing
such officers with incentives to achieve certain financial goals
for the Company.
1. EFFECTIVE DATE
This Plan shall be effective as of January 30, 1994, subject
to the approval by the court with jurisdiction over the Company's
proceeding under chapter 11 (the "Proceeding") of Title 11 of the
United States Code.
2. ELIGIBLE ASSOCIATES
The following officers of the Company shall be eligible to
receive bonuses under the terms of this Plan: executive vice
presidents, senior vice presidents, vice presidents and the
treasurer (the "Participants").
3. BONUS
Each Participant shall be entitled to the payment of bonuses
under this Plan in accordance with section 5 herein based on the
Company's cumulative Consolidated EBITDA (as defined in the
Debtor-in-Possession Loan Agreement entered into between the
Company and RSI Trading Co., as borrowers, and General Electric
Capital Corporation, as lender (the "DIP Financing Agreement"))
for the period beginning January 30, 1994 and ending July 31,
1994, and for the period beginning August 1, 1994 and ending
January 29, 1995 (each a "Period"), and each six month period
thereafter as shall be determined by the Committee.
4. MAXIMUM INCENTIVE AWARD
The maximum bonus that may become payable to a Participant
under this Plan for a Period (the "Maximum Incentive Award")
shall the following:
(i) for a Participant who is an executive vice president or
a senior vice president of the Company, seventeen and one-half
<PAGE>
percent (17-1/2%) of the Participant's annual base salary for the
Company's fiscal year commencing January 30, 1994, as determined
by the Company in its discretion; and
(ii) for a Participant who is a vice president or the
treasurer of the Company, fifteen percent (15%) of the
Participant's annual base salary for the Company's fiscal year
commencing January 30, 1994, as determined by the Company in its
discretion.
5. ENTITLEMENT TO BONUS
a. Achievement of Target Consolidated EBITDA.
If the Company's cumulative Consolidated EBITDA for a Period
equals the target cumulative Consolidated EBITDA set out in
Section 7.19(b) of the DIP Financing Agreement ("Target
Consolidated EBITDA") for such Period, as shall be confirmed by
the Committee, each Participant shall be entitled to a bonus
equal to fifty percent (50%) of the Participant's Maximum
Incentive Award.
b. Achievement of Cumulative Consolidated EBITDA Equal to
120% of Target Consolidated EBITDA.
If the Company's cumulative Consolidated EBITDA for a Period
equals one hundred and twenty percent (120%) of Target
Consolidated EBITDA for such Period, as shall be confirmed by the
Committee, each Participant shall be entitled to a bonus in an
amount equal to one hundred percent (100%) of the Participant's
Maximum Incentive Award.
c. Achievement of Cumulative Consolidated EBITDA of more
than Target Consolidated EBITDA but less than 120% of
Target Consolidated EBITDA.
If (i) cumulative Consolidated EBITDA for a Period is more
than Target Consolidated EBITDA for such Period but less than one
hundred and twenty percent (120%) of Target Consolidated EBITDA
for such Period, as shall be confirmed by the Committee, each
Participant shall be entitled to a bonus in an amount between
fifty percent (50%) and one hundred percent (100%) of the
Participant's Maximum Incentive Award as determined by linear
interpolation.
<PAGE>
6. PAYMENT OF BONUSES
a. Entitlement to Payment.
Notwithstanding any other provision of this Plan:
(i) a Participant shall be entitled to payment of a
bonus under this Plan for a Period only if such Participant is
employed by the Company on the date on which payment of bonuses
for such Period are made by the Company hereunder and such
Participant has performed at or above the expectations of the
Company (as determined by the Company in its discretion on the
basis of the Participant's performance evaluations for the
relevant Period); and
(ii) the amount of any bonus payable under this Plan
for a Period to any Participant who becomes a Participant after
the beginning of the Period shall be a pro-rata portion of the
bonus to which such Participant shall otherwise be entitled
hereunder, determined by the Company in its sole discretion on
the basis of the portion of the Period during which such
individual was a Participant.
b. Time and Form of Payment.
Payment to a Participant of all bonuses to which the
Participant is entitled hereunder shall be made in a lump sum, in
cash, within 30 days following the Effective Date (as defined in
the Company's draft plan of reorganization dated July 15, 1994)
and simultaneously with the distribution to the Company's general
unsecured creditors. If the Company does not reach the Effective
Date, no bonuses shall be payable under the Plan and no
Participant shall have a claim against the Company arising under
the Plan.
7. ADMINISTRATION OF PLAN
The Company shall be entitled to determine an individual's
entitlement to a bonus under the Plan and the amount of any such
bonus and shall otherwise administer the Plan in its sole
discretion, provided that no payment shall be made other than as
specifically provided by the terms hereof other than pursuant to
the approval of the Committee. All decisions of the Company
regarding the Plan shall be final and binding on all parties.
8. SUCCESSOR TO THE COMPANY
This Plan shall be binding upon any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, and the Company shall require any such
successor to expressly assume this Plan. As used in this Plan,
<PAGE>
"Company" shall mean the Company as defined above and any
successor to its business and/or assets as set forth above.
9. NO RIGHTS TO CONTINUED EMPLOYMENT
This Plan shall not be construed to give any Participant a
right to continued employment with, or the right to be retained
in the employ of, the Company.
10. TAXES
To the extent required by law, the Company shall withhold
any federal, state or local taxes from payments made under this
Plan, including social security taxes.
11. AMENDMENT AND TERMINATION
Subject to the authorization of the Committee, the Company
shall be entitled to amend or terminate this Plan at any time
except to the extent a benefit has already accrued hereunder.
12. MISCELLANEOUS
If any provision of this Plan shall be determined to be void
by any court of competent jurisdiction, then such determination
shall not affect any other provision of this Plan, all of which
shall remain in full force and effect. This Plan shall be
construed and enforced in accordance with the laws of the State
of North Carolina.
IN WITNESS WHEREOF, the Company hereby adopts this Plan
under seal through its duly authorized officers on this ___ day
of ________________, 1994.
ROSE'S STORES, INC.
ATTEST:
(Corporate Seal)
______________________ By:___________________________
Authorized Officer
<PAGE>
ROSE'S STORES, INC.
NEW EQUITY COMPENSATION PLAN
<PAGE>
ROSE'S STORES, INC.
NEW EQUITY COMPENSATION PLAN
TABLE OF CONTENTS
ARTICLE I GENERAL PROVISIONS 1
ARTICLE II DEFINITIONS 2
ARTICLE III ADMINISTRATION 6
ARTICLE IV INCENTIVE STOCK OPTIONS 12
ARTICLE V NONQUALIFIED STOCK OPTIONS 14
ARTICLE VI STOCK APPRECIATION RIGHTS 15
ARTICLE VII INCIDENTS OF STOCK OPTIONS AND STOCK RIGHTS 17
ARTICLE VIII RESTRICTED STOCK 20
ARTICLE IX DEFERRED STOCK 23
ARTICLE X STOCK AWARDS 26
ARTICLE XI PERFORMANCE SHARES 28
ARTICLE XII OTHER STOCK-BASED AWARDS 30
ARTICLE XIII ACCELERATION EVENTS 32
ARTICLE XIV AMENDMENT AND TERMINATION 36
ARTICLE XV MISCELLANEOUS PROVISIONS 38
i
<PAGE>
ROSE'S STORES, INC.
NEW EQUITY COMPENSATION PLAN
ARTICLE I - GENERAL PROVISIONS
1.1 The Plan is designed for the benefit of the executives and key
employees of the Corporation; to attract and retain for the
Corporation personnel of exceptional ability; to motivate such
personnel through added incentives to make a maximum contribution to
greater profitability; to develop and maintain a highly competent
management team; and to be competitive with other companies with
respect to executive compensation.
1.2 Awards under the Plan may be made to Participants in the form of (i)
Incentive Stock Options; (ii) Nonqualified Stock Options; (iii)
Stock Appreciation Rights; (iv) Restricted Stock; (v) Deferred
Stock; (vi) Stock Awards; (vii) Performance Shares; and (viii) Other
Stock-Based Awards and other forms of equity-based compensation as
may be provided and are permissible under this Plan and the law.
1.3 The Plan shall be effective as of the Effective Date of the First
Amended Joint Plan of Reorganization of Rose's Stores, Inc. dated
October 4, 1994, as may be amended or replaced (the "Effective
Date"). The Effective Date shall constitute the date on which the
Plan was adopted for purposes of the Code.
1.4 Any Awards granted in the form of Incentive Stock Options shall be
conditioned on, and subject to, approval of the Plan by the
shareholders of the Corporation within twelve (12) months following
the date on which the Plan was adopted by the Corporation. If
shareholder approval shall not be obtained within such twelve (12)
month period, any Awards granted in the form of Incentive Stock
Options shall be deemed to constitute Nonqualified Stock Options.
1
<PAGE>
ARTICLE II - DEFINITIONS
Except where the context otherwise indicates, the following
definitions shall apply:
2.1 "Acceleration Event" means the occurrence of an event defined in
Article XIII of the Plan.
2.2 "Act" means the Securities Exchange Act of 1934, as now in effect or
as hereafter amended. All citations to sections of the Act or rules
thereunder are to such sections or rules as they may from time to
time be amended or renumbered.
2.3 "Agreement" means the written agreement evidencing each Award
granted to a Participant under the Plan.
2.4 "Award" means an award granted to a Participant in accordance with
the provisions of the Plan, including, but not limited to, a Stock
Option, Stock Right, Restricted or Deferred Stock, Stock Awards,
Performance Shares, Other Stock-Based Award, or any combination of
the foregoing.
2.5 "Board" means the Board of Directors of the Corporation.
2.6 "Code" means the Internal Revenue Code of 1986, as now in effect or
as hereafter amended. All citations to sections of the Code are to
such sections as they may from time to time be amended or
renumbered.
2.7 "Committee" means the Compensation Committee or such other committee
consisting of three (3) or more members as may be appointed by the
Board to administer this Plan pursuant to Article III. To the
extent required by Rule 16b-3 under the Act, the Committee shall
consist of individuals who are members of the Board and
Disinterested Persons. Committee members may also be appointed for
such limited purposes as may be provided by the Board.
2.8 "Corporation" means Rose's Stores, Inc., a Delaware corporation, and
its successors and assigns.
2.9 "Deferred Stock" means the stock awarded under Article IX of the
Plan.
2.10 "Disability" means a disability as determined under procedures
established by the Committee or in any Award.
2
<PAGE>
2.11 "Discount Stock Options" means Nonqualified Stock Options which
provide for an exercise price of less than the Fair Market Value of
the Stock at the date of the Award.
2.12 "Disinterested Person" shall have the meaning set forth in Rule 16b-
3 under the Act.
2.13 "Early Retirement" means retirement from active employment with the
Corporation, with the express consent of the Committee, pursuant to
the early retirement provisions established by the Committee or in
any Award.
2.14 "Eligible Participant" means any executive or key employee of the
Corporation, as shall be determined by the Committee, as well as any
other person, other than a person designated as a Disinterested
Person, whose participation the Committee determines is in the best
interest of the Corporation, subject to limitations as may be
provided by the Code, the Act or the Committee.
2.15 "Fair Market Value" means, with respect to any given day, the
closing price of the Stock reported on the NASDAQ National Market
System for such day, or if the Stock was not traded on the NASDAQ
National Market System on such day, then on the next day on which
the Stock was traded, all as reported by such source as the
Committee may select. The Committee may establish an alternative
method of determining Fair Market Value.
2.16 "Incentive Stock Option" means a Stock Option granted under Article
IV of the Plan, and as defined in Section 422 of the Code.
2.17 "Limited Stock Appreciation Rights" means a Stock Right which is
exercisable only in the event of a Change in Control and/or a
Potential Change in Control, as described in Section 6.9 of this
Plan, which provides for an amount payable solely in cash, equal to
the excess of the Stock Appreciation Right Fair Market Value of a
share of Stock on the day the Stock Right is surrendered over the
price at which a Participant could exercise a related Stock Option
to purchase the share of Stock.
2.18 "Nonqualified Stock Option" means a Stock Option granted under
Article V of the Plan.
2.19 "Normal Retirement" means retirement from active employment with the
Corporation on or after age 65, or pursuant to such other
requirements as may be established by the Committee or in any Award.
3
<PAGE>
2.20 "Option Grant Date" means, as to any Stock Option, the latest of:
(a) the date on which the Committee grants the Stock Option by
entering into an Award Agreement with the Participant;
(b) the date the Participant receiving the Stock Option becomes an
employee of the Corporation, to the extent employment status is
a condition of the grant or a requirement of the Code or the
Act; or
(c) such other date (later than the dates described in (a) and (b)
above) as the Committee may designate.
2.21 "Participant" means an Eligible Participant to whom an Award has
been granted and who has entered into an Agreement evidencing the
Award.
2.22 "Performance Share" means an Award under Article XI of the Plan of a
unit valued by reference to a designated number of shares of Stock,
which value may be paid to the Participant by delivery of such
property as the Committee shall determine, including, without
limitation, cash, Stock, or any combination thereof, upon
achievement of such Performance Objectives during the Performance
Period as the Committee shall establish at the time of such Award or
thereafter.
2.23 "Plan" means the Rose's Stores, Inc. New Equity Compensation Plan,
as amended from time to time.
2.24 "Restricted Stock" means an Award of Stock under Article VIII of the
Plan, which Stock is issued with the restriction that the holder may
not sell, transfer, pledge, or assign such Stock and with such other
restrictions as the Committee, in its sole discretion, may impose
(including, without limitation, any restriction on the right to vote
such Stock, and the right to receive any cash dividends), which
restrictions may lapse separately or in combination at such time or
times, in installments or otherwise, as the Committee may deem
appropriate.
2.25 "Restriction Period" means the period commencing on the date an
Award of Restricted Stock is granted and ending on such date as the
Committee shall determine.
2.26 "Retirement" means Early Retirement or Normal Retirement.
2.27 "Stock" means no par shares of common stock of the Corporation, as
may be adjusted pursuant to the provisions of Section 3.11.
4
<PAGE>
2.28 "Stock Appreciation Right" means a Stock Right, as described in
Article VI of this Plan, which provides for an amount payable in
Stock and/or cash, as determined by the Committee, equal to the
excess of the Fair Market Value of a share of Stock on the day the
Stock Right is exercised over the price at which the Participant
could exercise a related Stock Option to purchase the share of
Stock.
2.29 "Stock Appreciation Right Fair Market Value" means a value
established by the Committee for the exercise of a Stock
Appreciation Right or a Limited Stock Appreciation Right. If such
exercise occurs during any quarterly "window period," as specified
by Rule 16b-3 under the Act, the Committee may establish a common
value for exercises during such window period.
2.30 "Stock Award" means an Award of Stock granted in payment of
compensation, as provided in Article X of the Plan.
2.31 "Stock Option" means an Award under Article IV or V of the Plan of
an option to purchase Stock. A Stock Option may be either an
Incentive Stock Option or a Nonqualified Stock Option.
2.32 "Stock Right" means an Award under Article VI of the Plan. A Stock
Right may be either a Stock Appreciation Right or a Limited Stock
Appreciation Right.
2.33 "Termination of Employment" means the discontinuance of employment
of a Participant with the Corporation for any reason. The
determination of whether a Participant has discontinued employment
shall be made by the Committee in its discretion. In determining
whether a Termination of Employment has occurred, the Committee may
provide that service as a consultant or service with a business
enterprise in which the Corporation has a significant ownership
interest shall be treated as employment with the Corporation. The
Committee shall have the discretion, exercisable either at the time
the Award is granted or at the time the Participant terminates
employment, to establish as a provision applicable to the exercise
of one or more Awards that during the limited period of
exercisability following Termination of Employment, the Award may be
exercised not only with respect to the number of shares of Stock for
which it is exercisable at the time of the Termination of Employment
but also with respect to one or more subsequent installments for
which the Award would have become exercisable had the Termination of
Employment not occurred.
5
<PAGE>
ARTICLE III - ADMINISTRATION
3.1 This Plan shall be administered by the Committee. A Committee
member who is not a Disinterested Person, with respect to action to
be taken by the Committee, shall not be able to participate in the
decision to the extent prescribed by Rule 16b-3 under the Act. The
Committee, in its discretion, may delegate to one or more of its
members such of its powers as it deems appropriate. The Committee
also may limit the power of any member to the extent necessary to
comply with Rule 16b-3 under the Act or any other law. Members of
the Committee shall be appointed originally, and as vacancies occur,
by the Board, to serve at the pleasure of the Board. The Board may
serve as the Committee, if by the terms of the Plan all Board
members are otherwise eligible to serve on the Committee.
3.2 The Committee shall meet at such times and places as it determines.
A majority of its members shall constitute a quorum, and the
decision of a majority of those present at any meeting at which a
quorum is present shall constitute the decision of the Committee. A
memorandum signed by all of its members shall constitute the
decision of the Committee without necessity, in such event, for
holding an actual meeting.
3.3 The Committee shall have the exclusive right to interpret, construe
and administer the Plan, to select the persons who are eligible to
receive an Award, and to act in all matters pertaining to the
granting of an Award and the contents of the Agreement evidencing
the Award, including, without limitation, the determination of the
number of Stock Options, Stock Rights, shares of Stock or
Performance Shares subject to an Award and the form, terms,
conditions and duration of each Award, and any amendment thereof
consistent with the provisions of the Plan. Notwithstanding the
foregoing, the Committee shall issue awards under the Plan in
accordance with the terms of the Consummation Bonus Plan adopted by
the Corporation and approved by the United States Bankruptcy Court
for the Eastern District of North Carolina. All acts,
determinations and decisions of the Committee made or taken pursuant
to grants of authority under the Plan or with respect to any
questions arising in connection with the administration and
interpretation of the Plan, including the severability of any and
all of the provisions thereof, shall be conclusive, final and
binding upon all Participants, Eligible Participants and their
beneficiaries.
6
<PAGE>
3.4 The Committee may adopt such rules, regulations and procedures of
general application for the administration of this Plan, as it deems
appropriate.
3.5 Without limiting the foregoing Sections 3.1, 3.2, 3.3 and 3.4, and
notwithstanding any other provisions of the Plan, the Committee is
authorized to take such action as it determines to be necessary or
advisable, and fair and equitable to Participants, with respect to
an Award in the event of an Acceleration Event as defined in Article
XIII. Such action may include, but shall not be limited to,
establishing, amending or waiving the forms, terms, conditions and
duration of an Award and the Award Agreement, so as to provide for
earlier, later, extended or additional times for exercise or
payments, differing methods for calculating payments, alternate
forms and amounts of payment, an accelerated release of restrictions
or other modifications. The Committee may take such actions
pursuant to this Section 3.5 by adopting rules and regulations of
general applicability to all Participants or to certain categories
of Participants, by including, amending or waiving terms and
conditions in an Award and the Award Agreement, or by taking action
with respect to individual Participants.
3.6 The aggregate number of shares of Stock which are subject to an
Award under the Plan shall be seven hundred thousand (700,000)
shares. Such shares of Stock shall be made available from
authorized and unissued or treasury shares of the Corporation.
(a) If, for any reason, any shares of Stock or Performance Shares
awarded or subject to purchase under the Plan are not delivered
or purchased, or are reacquired by the Corporation, for reasons
including, but not limited to, a forfeiture of Restricted Stock
or termination, expiration or cancellation of a Stock Option,
Stock Right or Performance Share, or any other termination of
an Award without payment being made in the form of Stock
(whether or not Restricted Stock), such shares of Stock or
Performance Shares shall not be charged against the aggregate
number of shares of Stock available for Award under the Plan,
and shall again be available for Award under the Plan.
(b) For all purposes under the Plan, each Performance Share
awarded shall be counted as one share of Stock subject
to an Award.
(c) To the extent a Stock Right granted in connection with a
Stock Option is exercised
7
<PAGE>
without payment being made in the form of Stock (whether or not
Restricted Stock), the shares of Stock which otherwise would have
been issued upon the exercise of such related Stock Option shall
not be charged against the aggregate number of shares of Stock
subject to an Award under the Plan, and shall again be available
for Award under the Plan.
3.7 Each Award granted under the Plan shall be evidenced by a written
Award Agreement. Each Award Agreement shall be subject to and
incorporate (by reference or otherwise) the applicable terms and
conditions of the Plan, and any other terms and conditions (not
inconsistent with the Plan) required by the Committee.
3.8 The Corporation shall not be required to issue or deliver any
certificates for shares of Stock prior to:
(a) the listing of such shares on any stock exchange on which the
Stock may then be listed; and
(b) the completion of any registration or qualification of such
shares of Stock under any federal or state law, or any ruling
or regulation of any government body which the Corporation
shall, in its discretion, determine to be necessary or
advisable.
3.9 All certificates for shares of Stock delivered under the Plan shall
also be subject to such stop-transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed and any
applicable federal or state laws, and the Committee may cause a
legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions. In making such
determination, the Committee may rely upon an opinion of counsel for
the Corporation.
3.10 Subject to the restrictions on Restricted Stock, as provided in
Article VIII of the Plan and in the Restricted Stock Award
Agreement, each Participant who receives an Award of Restricted
Stock shall have all of the rights of a stockholder with respect to
such shares of Stock, including the right to vote the shares to the
extent, if any, such shares possess voting rights and receive
dividends and other distributions. Except as provided otherwise in
the Plan or in an Award Agreement, no Participant awarded a Stock
Option, Stock Right, Deferred Stock, Stock Award or Performance
Share shall have any right as a stockholder with respect to any
shares of Stock
8
<PAGE>
covered by his or her Stock Option, Stock Right, Deferred Stock, Stock
Award or Performance Share prior to the date of issuance to him or her
of a certificate or certificates for such shares of Stock.
3.11 If any reorganization, recapitalization, reclassification, stock
split-up, stock dividend, or consolidation of shares of Stock,
merger or consolidation of the Corporation or sale or other
disposition by the Corporation of all or a portion of its assets,
any other change in the Corporation's corporate structure, or any
distribution to stockholders other than a cash dividend results in
the outstanding shares of Stock, or any securities exchanged
therefor or received in their place, being exchanged for a different
number or class of shares of Stock or other securities of the
Corporation, or for shares of Stock or other securities of any other
corporation; or new, different or additional shares or other
securities of the Corporation or of any other corporation being
received by the holders of outstanding shares of Stock, then
equitable adjustments shall be made by the Committee in:
(a) the limitation of the aggregate number of shares of Stock that
may be awarded as set forth in Section 3.6 of the Plan;
(b) the number and class of Stock that may be subject to an Award,
and which have not been issued or transferred under an
outstanding Award;
(c) the purchase price to be paid per share of Stock under
outstanding Stock Options and the number of shares of Stock to
be transferred in settlement of outstanding Stock Rights; and
(d) the terms, conditions or restrictions of any Award and Award
Agreement, including the price payable for the acquisition of
Stock; provided, however, that all adjustments made as the
result of the foregoing in respect of each Incentive Stock
Option shall be made so that such Stock Option shall continue
to be an Incentive Stock Option, as defined in Section 422 of
the Code.
3.12 In addition to such other rights of indemnification as they may have
as directors or as members of the Committee, the members of the
Committee shall be indemnified by the Corporation against reasonable
expenses, including attorney's fees, actually and necessarily
incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they
or any of them may be a party by reason of any
9
<PAGE>
action taken or failure to act under or in connection with the Plan
or any Award granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Corporation) or paid by
them in satisfaction of a judgment or settlement in any such action,
suit or proceeding, except as to matters as to which the Committee
member has been negligent or engaged in misconduct in the
performance of his duties; provided, that within sixty (60) days
after institution of any such action, suit or proceeding, a
Committee member shall in writing offer the Corporation the
opportunity, at its own expense, to handle and defend the same.
3.13 The Committee may require each person purchasing shares of Stock
pursuant to a Stock Option or other Award under the Plan to
represent to and agree with the Corporation in writing that he is
acquiring the shares of Stock without a view to distribution
thereof. The certificates for such shares of Stock may include any
legend which the Committee deems appropriate to reflect any
restrictions on transfer.
3.14 The Committee shall be authorized to make adjustments in a
performance based criteria or in the terms and conditions of other
Awards in recognition of unusual or nonrecurring events affecting
the Corporation or its financial statements or changes in applicable
laws, regulations or accounting principles. The Committee may
correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award Agreement in the manner and
to the extent it shall deem desirable to carry it into effect. In
the event the Corporation shall assume outstanding employee benefit
awards or the right or obligation to make future such awards in
connection with the acquisition of another corporation or business
entity, the Committee may, in its discretion, make such adjustments
in the terms of Awards under the Plan as it shall deem appropriate.
3.15 The Committee shall have full power and authority to determine
whether, to what extent and under what circumstances, any Award
shall be canceled or suspended. In particular, but without
limitation, all outstanding Awards to any Participant shall be
canceled if (a) the Participant, without the consent of the
Committee, while employed by the Corporation or after termination of
such employment, becomes associated with, employed by, renders
services to, or owns any interest in (other than any insubstantial
interest, as determined by the Committee), any business that is in
competition with the Corporation or with any business in which the
Corporation has a substantial interest as determined by the
Committee; or
10
<PAGE>
(b) is terminated for cause as determined by the
Committee.
11
<PAGE>
ARTICLE IV - INCENTIVE STOCK OPTIONS
4.1 Each provision of this Article IV and of each Incentive Stock Option
granted hereunder shall be construed in accordance with the
provisions of Section 422 of the Code, and any provision hereof that
cannot be so construed shall be disregarded.
4.2 Incentive Stock Options shall be granted only to Eligible
Participants who are in the active employment of the Corporation,
each of whom may be granted one or more such Incentive Stock Options
at such time or times determined by the Committee following the
Effective Date until the date which is ten years following the
Effective Date, subject to the following conditions:
(a) The Incentive Stock Option price per share of Stock shall be
set in the Award Agreement, but shall not be less than one
hundred percent (100%) of the Fair Market Value of the Stock at
the time of the Option Grant Date.
(b) The Incentive Stock Option and its related Stock Right, if any,
may be exercised in full or in part from time to time within
ten (10) years from the Option Grant Date, or such shorter
period as may be specified by the Committee in the Award;
provided, that in any event, the Incentive Stock Option and
related Stock Right shall lapse and cease to be exercisable
upon a Termination of Employment or within such period
following a Termination of Employment as shall have been
determined by the Committee and specified in the Incentive
Stock Option Award Agreement or its related Stock Right Award
Agreement, which period shall in no event exceed three (3)
months unless:
(i) employment shall have terminated as a result of death or
Disability, in which event such period shall not exceed
one (1) year after the date of death or Disability; or
(ii) death shall have occurred following a Termination of
Employment and while the Incentive Stock Option or Stock
Right was still exercisable, in which event such period
shall not exceed one (1) year after the date of death;
provided, further, that such period following a Termination of
Employment shall in no event extend
12
<PAGE>
the original exercise period of the Incentive Stock Option or any
related Stock Right.
(c) To the extent the aggregate Fair Market Value, determined as of
the Option Grant Date, of the shares of Stock with respect to
which Incentive Stock Options (determined without regard to
this subsection) are first exercisable during any calendar year
by any Eligible Participant exceed one hundred thousand dollars
($100,000), such options shall be treated as Nonqualified Stock
Options granted under Article V.
(d) Incentive Stock Options shall be granted only to an Eligible
Participant who, at the time the Option Grant Date, does not
own stock possessing more than 10% of the total combined voting
power of all classes of stock of the Corporation.
(e) The Committee may adopt any other terms and conditions which it
determines should be imposed for the Incentive Stock Option to
qualify under Section 422 of the Code, as well as any other
terms and conditions not inconsistent with this Article IV as
determined by the Committee.
4.2 The Committee may at any time offer to buy out for a payment in
cash, Stock, Deferred Stock or Restricted Stock an Incentive Stock
Option previously granted, based on such terms and conditions as the
Committee shall establish and communicate to the Participant at the
time that such offer is made.
4.3 If the Incentive Stock Option Award Agreement so provides, the
Committee may require that all or part of the shares of Stock to be
issued upon the exercise of an Incentive Stock Option shall take the
form of Deferred or Restricted Stock, which shall be valued on the
date of exercise, as determined by the Committee, on the basis of
the Fair Market Value of such Deferred Stock or Restricted Stock
determined without regard to the deferral limitations and/or
forfeiture restrictions involved.
13
<PAGE>
ARTICLE V - NONQUALIFIED STOCK OPTIONS
5.1 One or more Stock Options may be granted as Nonqualified Stock
Options to Eligible Participants to purchase shares of Stock at such
time or times determined by the Committee, following the Effective
Date, subject to the terms and conditions set forth in this Article
V.
5.2 The Nonqualified Stock Option price per share of Stock shall be
established in the Award Agreement and may be less than one hundred
percent (100%) of the Fair Market Value at the time of the grant, or
at such later date as the Committee shall determine.
5.3 The Nonqualified Stock Option and its related Stock Right, if any,
may be exercised in full or in part from time to time within such
period as may be specified by the Committee or in the Award
Agreement; provided, that, in any event, the Nonqualified Stock
Option and the related Stock Right shall lapse and cease to be
exercisable upon a Termination of Employment or within such period
following a Termination of Employment as shall have been determined
by the Committee and specified in the Nonqualified Stock Option
Award Agreement or Stock Right Award Agreement, which period shall
in no event exceed three (3) months unless employment shall have
terminated:
(a) as a result of Retirement or Disability, in which event, such
period shall not exceed one year after the date of Retirement
or Disability, or within such longer period as the Committee
may specify; and
(b) as a result of death, or death shall have occurred following a
Termination of Employment and while the Nonqualified Stock
Option or Stock Right was still exercisable, in which event
such period may exceed one year after the date of death, as
provided by the Committee or in the Award Agreement.
5.4 The Nonqualified Stock Option Award Agreement may include any other
terms and conditions not inconsistent with this Article V or in
Article VII, as determined by the Committee.
14
<PAGE>
ARTICLE VI - STOCK APPRECIATION RIGHTS
6.1 A Stock Appreciation Right may be granted to an Eligible Participant
in connection with an Incentive Stock Option or a Nonqualified Stock
Option granted under Article IV or Article V of this Plan, or may be
granted independent of any related Stock Option.
6.2 A related Stock Appreciation Right shall entitle a holder of a Stock
Option, within the period specified for the exercise of the Stock
Option, to surrender the unexercised Stock Option (or a portion
thereof) and to receive in exchange therefor a payment in cash or
shares of Stock having an aggregate value equal to the amount by
which the Fair Market Value of each share of Stock exceeds the Stock
Option price per share of Stock, times the number of shares of Stock
under the Stock Option, or portion thereof, which is surrendered.
6.3 Each related Stock Appreciation Right granted hereunder shall be
subject to the same terms and conditions as the related Stock
Option, including limitations on transferability, and shall be
exercisable only to the extent such Stock Option is exercisable and
shall terminate or lapse and cease to be exercisable when the
related Stock Option terminates or lapses. The grant of Stock
Appreciation Rights related to Incentive Stock Options must be
concurrent with the grant of the Incentive Stock Options. With
respect to Nonqualified Stock Options, the grant either may be
concurrent with the grant of the Nonqualified Stock Options, or in
connection with Nonqualified Stock Options previously granted under
Article V, which are unexercised and have not terminated or lapsed.
6.4 The Committee shall have sole discretion to determine in each case
whether the payment with respect to the exercise of a Stock
Appreciation Right will be in the form of all cash, all Stock, or
any combination thereof. If payment is to be made in Stock, the
number of shares of Stock shall be determined based on the Fair
Market Value of the Stock on the date of exercise. If the Committee
elects to make full payment in Stock, no fractional shares of Stock
shall be issued and cash payments shall be made in lieu of
fractional shares.
6.5 The Committee shall have sole discretion as to the timing of any
payment made in cash, Stock, or a combination thereof, upon exercise
of Stock Appreciation Rights. Payment may be made in a lump sum, in
annual installments
15
<PAGE>
or may be otherwise deferred; and the Committee shall have sole
discretion to determine whether any deferred payments may bear amounts
equivalent to interest or cash dividends.
6.6 Upon exercise of a Stock Appreciation Right, the number of shares of
Stock subject to exercise under any related Stock Option shall
automatically be reduced by the number of shares of Stock
represented by the Stock Option or portion thereof which is
surrendered.
6.7 Notwithstanding any other provision of the Plan, the exercise of a
Stock Appreciation Right is required to satisfy the applicable
requirements under Rule 16b-3 of the Act.
6.8 The Committee, in its sole discretion, may also provide that, in the
event of a Change in Control and/or a Potential Change in Control,
as defined in Article XIII, the amount to be paid upon the exercise
of a Stock Appreciation Right or Limited Stock Appreciation Right
shall be based on the Change in Control Price, as defined in Section
13.9, subject to such terms and conditions as the Committee may
specify at grant.
6.9 In its sole discretion, the Committee may grant Limited Stock
Appreciation Rights under this Article VI. Limited Stock
Appreciation Rights become exercisable only in the event of a Change
in Control and/or a Potential Change in Control, subject to such
terms and conditions as the Committee, in its sole discretion, may
specify at grant. Such Limited Stock Appreciation Rights shall be
settled solely in cash. A Limited Stock Appreciation Right shall
entitle the holder of the related Stock Option to surrender such
Stock Option, or any portion thereof, to the extent unexercised in
respect of the number of shares of Stock as to which such Limited
Stock Appreciation Right is exercised, and to receive a cash payment
equal to the difference between (a) the Stock Appreciation Right
Fair Market Value (at the date of surrender) of a share of Stock for
which the surrendered Stock Option or portion thereof is then
exercisable, and (b) the price at which a Participant could exercise
a related Stock Option to purchase the share of Stock. Such Stock
Option shall, to the extent so surrendered, thereupon cease to be
exercisable. A Limited Stock Appreciation Right shall be subject to
such further terms and conditions as the Committee shall, in its
sole discretion, deem appropriate, including any restrictions
necessary to comply with Section 16(b) of the Act.
16
<PAGE>
ARTICLE VII - INCIDENTS OF STOCK OPTIONS AND STOCK RIGHTS
7.1 Each Stock Option and Stock Right shall be granted subject to such
terms and conditions, if any, not inconsistent with this Plan, as
shall be determined by the Committee, including any provisions as to
continued employment as consideration for the grant or exercise of
such Stock Option or Stock Right and any provisions which may be
advisable to comply with applicable laws, regulations or rulings of
any governmental authority.
7.2 A Stock Option or Stock Right shall not be transferable by the
Participant other than by will or by the laws of descent and
distribution, or, to the extent otherwise allowed by Rule 16b-3
under the Act, or other applicable law, pursuant to a qualified
domestic relations order as defined by the Code or the Employee
Retirement Income Security Act, or the rules thereunder, and shall
be exercisable during the lifetime of the Participant only by him or
by his guardian or legal representative.
7.3 Shares of Stock purchased upon exercise of a Stock Option shall be
paid for in such amounts, at such times and upon such terms as shall
be determined by the Committee, subject to limitations set forth in
the Stock Option Award Agreement. Without limiting the foregoing,
the Committee may establish payment terms for the exercise of Stock
Options which permit the Participant to deliver shares of Stock (or
other evidence of ownership of Stock satisfactory to the
Corporation) with a Fair Market Value equal to the Stock Option
price as payment.
7.4 No cash dividends shall be paid on shares of Stock subject to
unexercised Stock Options. The Committee may provide, however, that
a Participant to whom a Stock Option has been granted which is
exercisable in whole or in part at a future time for shares of Stock
shall be entitled to receive an amount per share equal in value to
the cash dividends, if any, paid per share on issued and outstanding
Stock, as of the dividend record dates occurring during the period
between the date of the grant and the time each such share of Stock
is delivered pursuant to exercise of such Stock Option or the
related Stock Right. Such amounts (herein called "dividend
equivalents") may, in the discretion of the Committee, be:
(a) paid in cash or Stock either from time to time prior to, or at
the time of the delivery of, such Stock, or upon expiration of
the Stock Option if it shall not have been fully exercised; or
17
<PAGE>
(b) converted into contingently credited shares of Stock (with
respect to which dividend equivalents may accrue) in such
manner, at such value, and deliverable at such time or times,
as may be determined by the Committee.
Such Stock (whether delivered or contingently credited) shall be
charged against the limitations set forth in Section 3.6.
7.5 The Committee, in its sole discretion, may authorize payment of
interest equivalents on dividend equivalents which are payable in
cash at a future time.
7.6 In the event of death or Disability, the Committee, with the consent
of the Participant or his legal representative, may authorize
payment, in cash or in Stock, or partly in cash and partly in Stock,
as the Committee may direct, of an amount equal to the difference at
the time between the Fair Market Value of the Stock subject to a
Stock Option and the Option price in consideration of the surrender
of the Stock Option.
7.7 If a Participant is required to pay to the Corporation an amount
with respect to income and employment tax withholding obligations in
connection with exercise of a Nonqualified Stock Option, and/or with
respect to certain dispositions of Stock acquired upon the exercise
of an Incentive Stock Option, the Committee, in its discretion and
subject to such rules as it may adopt, may permit the Participant to
satisfy the obligation, in whole or in part, by making an
irrevocable election that a portion of the total Fair Market Value
of the shares of Stock subject to the Nonqualified Stock Option
and/or with respect to certain dispositions of Stock acquired upon
the exercise of an Incentive Stock Option, be paid in the form of
cash in lieu of the issuance of Stock and that such cash payment be
applied to the satisfaction of the withholding obligations. The
amount to be withheld shall not exceed the statutory minimum Federal
and State income and employment tax liability arising from the Stock
Option exercise transaction. Notwithstanding any other provision of
the Plan, any election under this Section 7.7 is required to satisfy
the applicable requirements under Rule 16b-3 of the Act.
7.8 The Committee may permit the voluntary surrender of all or a portion
of any Stock Option granted under the Plan to be conditioned upon
the granting to the Participant of a new Stock Option for the same
or a different number of shares of Stock as the Stock Option
surrendered, or may require such voluntary surrender as a condition
precedent to a
18
<PAGE>
grant of a new Stock Option to such Participant. Subject to the
provisions of the Plan, such new Stock Option shall be exercisable at
the same price, during such period and on such other terms and
conditions as are specified by the Committee at the time the new Stock
Option is granted. Upon surrender, the Stock Options surrendered shall
be canceled and the shares of Stock previously subject to them shall be
available for the grant of other Stock Options.
19
<PAGE>
ARTICLE VIII - RESTRICTED STOCK
8.1 Restricted Stock Awards may be made to certain Participants as an
incentive for the performance of future services that will
contribute materially to the successful operation of the
Corporation. Awards of Restricted Stock may be made either alone,
in addition to or in tandem with other Awards granted under the Plan
and/or cash payments made outside of the Plan.
8.2 With respect to Awards of Restricted Stock, the Committee shall:
(a) determine the purchase price, if any, to be paid for such
Restricted Stock, which may be equal to or less than par value
and may be zero, subject to such minimum consideration as may
be required by applicable law;
(b) determine the length of the Restriction Period;
(c) determine any restrictions applicable to the Restricted Stock
such as service or performance, other than those set forth in
this Article VIII;
(d) determine if the restrictions shall lapse as to all shares of
Restricted Stock at the end of the Restriction Period or as to
a portion of the shares of Restricted Stock in installments
during the Restriction Period; and
(e) determine if dividends and other distributions on the
Restricted Stock are to be paid currently to the Participant or
withheld by the Corporation for the account of the Participant.
8.3 Awards of Restricted Stock must be accepted within a period of sixty
(60) days (or such shorter periods as the Committee may specify at
grant) after the Award date, by executing a Restricted Stock Award
Agreement and paying whatever price (if any) is required.
The prospective recipient of a Restricted Stock Award shall not have
any rights with respect to such Award, unless such recipient has
executed a Restricted Stock Award Agreement and has delivered a
fully executed copy thereof to the Committee, and has otherwise
complied with the applicable terms and conditions of such Award.
20
<PAGE>
8.4 Except when the Committee determines otherwise, or as otherwise
provided in the Restricted Stock Award Agreement, if a Participant
terminates employment with the Corporation for any reason before the
expiration of the Restriction Period, all shares of Restricted Stock
still subject to restriction shall be forfeited by the Participant
and shall be reacquired by the Corporation.
8.5 Except as otherwise provided in this Article VIII, no shares of
Restricted Stock received by a Participant shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of during
the Restriction Period.
8.6 To the extent not otherwise provided in a Restricted Stock Award
Agreement, in cases of death, Disability or Retirement or in cases
of special circumstances, the Committee, if it finds that a waiver
would be appropriate, may elect to waive any or all remaining
restrictions with respect to such Participant's Restricted Stock.
8.7 In the event of hardship or other special circumstances of a
Participant whose employment with the Corporation is involuntarily
terminated (other than for cause), the Committee may waive in whole
or in part any or all remaining restrictions with respect to any or
all of the Participant's Restricted Stock, based on such factors and
criteria as the Committee may deem appropriate.
8.8 The certificates representing shares of Restricted Stock may either:
(a) be held in custody by the Corporation until the Restriction
Period expires or until restrictions thereon otherwise lapse,
and the Participant shall deliver to the Corporation a stock
power endorsed in blank relating to the Restricted Stock;
and/or
(b) be issued to the Participant and registered in the name of the
Participant, and shall bear an appropriate restrictive legend
and shall be subject to appropriate stop-transfer orders.
8.9 Except as provided in this Article VIII, a Participant receiving a
Restricted Stock Award shall have, with respect to the shares of
Restricted Stock covered by any Award, all of the rights of a
shareholder of the Corporation, including the right to vote the
shares to the extent, if any, such shares possess voting rights, and
the right to receive any dividends; provided, however, the Committee
may require that any dividends on such shares of Restricted Stock
shall be automatically deferred and reinvested in additional
Restricted Stock subject to the
21
<PAGE>
same restrictions as the underlying Award, or may require that
dividends and other distributions on Restricted Stock shall be withheld
by the Corporation for the account of the Participant. The Committee
shall determine whether interest shall be paid on amounts withheld, the
rate of any such interest, and the other terms applicable to such
withheld amounts.
8.10 If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction
Period, unrestricted certificates for such shares shall be delivered
to the Participant.
8.11 In order to better ensure that Award payments actually reflect the
performance of the Corporation and the service of the Participant,
the Committee may provide, in its sole discretion, for a tandem
performance-based or other Award designed to guarantee a minimum
value, payable in cash or Stock to the recipient of a Restricted
Stock Award, subject to such performance, future service, deferral
and other terms and conditions as may be specified by the Committee.
22
<PAGE>
ARTICLE IX - DEFERRED STOCK
9.1 Shares of Deferred Stock (together with cash dividend equivalents,
if so determined by the Committee) may be issued either alone or in
addition to other Awards granted under the Plan in the discretion of
the Committee. The Committee shall determine the individuals to
whom, and the time or times at which, such Awards will be made, the
number of shares to be awarded, the price (if any) to be paid by the
recipient of a Deferred Stock Award, the time or times within which
such Awards may be subject to forfeiture, and all other conditions
of the Awards. The Committee may condition Awards of Deferred Stock
upon the attainment of specified performance goals or such other
factors or criteria as the Committee may determine.
9.2 Deferred Stock Awards shall be subject to the following terms and
conditions:
(a) Subject to the provisions of this Plan and the applicable Award
Agreement, Deferred Stock Awards may not be sold, transferred,
pledged, assigned or otherwise encumbered during the period
specified by the Committee for purposes of such Award (the
"Deferral Period"). At the expiration of the Deferral Period
(or the Elective Deferral Period defined in Section 9.3), share
certificates shall be delivered to the Participant, or his
legal representative, in a number equal to the number of shares
of Stock covered by the Deferred Stock Award.
Based on service, performance and/or such other factors or
criteria as the Committee may determine, the Committee,
however, at or after grant, may accelerate the vesting of all
or any part of any Deferred Stock Award and/or waive the
deferral limitations for all or any part of such Award.
(b) Unless otherwise determined by the Committee, amounts equal to
any dividends that would have been payable during the Deferral
Period with respect to the number of shares of Stock covered by
a Deferred Stock Award if such shares of Stock had been
outstanding shall be automatically deferred and deemed to be
reinvested in additional Deferred Stock, subject to the same
deferral limitations as the underlying Award.
(c) Except to the extent otherwise provided in this Plan or in the
applicable Award Agreement, upon Termination of Employment
during the Deferral Period
23
<PAGE>
for a given Award, the Deferred Stock covered by such Award shall
be forfeited by the Participant; provided, however, the Committee
may provide for accelerated vesting in the event of Termination of
Employment due to death, Disability or Retirement, or in the event
of hardship or other special circumstances as the Committee deems
appropriate.
(d) The Committee may require that a designated percentage of the
total Fair Market Value of the shares of Deferred Stock held by
one or more Participants be paid in the form of cash in lieu of
the issuance of Stock and that such cash payment be applied to
the satisfaction of the federal and state income and employment
tax withholding obligations that arise at the time the Deferred
Stock becomes free of all restrictions. The designated
percentage shall be equal to the income and employment tax
withholding rate in effect at the time under federal and
applicable state laws.
(e) The Committee may provide one or more Participants subject to
the mandatory cash payment with an election to receive an
additional percentage of the total value of the Deferred Stock
in the form of a cash payment in lieu of the issuance of
Deferred Stock. The additional percentage shall not exceed the
difference between fifty percent (50%) and the designated
percentage cash payment.
(f) The Committee may impose such further terms and conditions on
partial cash payments with respect to Deferred Stock as it
deems appropriate, including any restrictions necessary to
comply with Section 16(b) of the Act.
9.3 A Participant may elect to further defer receipt of Deferred Stock
for a specified period or until a specified event (the "Elective
Deferral Period"), subject in each case to the Committee's approval
and to such terms as are determined by the Committee. Subject to
any exceptions adopted by the Committee, such election must
generally be made at least twelve (12) months prior to completion of
the Deferral Period for the Deferred Stock Award in question (or for
the applicable installment of such an Award).
9.4 Each Award shall be confirmed by, and subject to the terms of, a
Deferred Stock Award Agreement.
9.5 In order to better ensure that the Award actually reflects the
performance of the Corporation and the service of the
24
<PAGE>
Participant, the Committee may provide, in its sole discretion, for a
tandem performance-based or other Award designed to guarantee a minimum
value, payable in cash or Stock to the recipient of a Deferred Stock
Award, subject to such performance, future service, deferral and
other terms and conditions as may be specified by the Committee.
25
<PAGE>
ARTICLE X - STOCK AWARDS
10.1 A Stock Award shall be granted only in payment of compensation that
has been earned or as compensation to be earned, including, without
limitation, compensation awarded concurrently with or prior to the
grant of the Stock Award.
10.2 For the purposes of this Plan, in determining the value of a Stock
Award, all shares of Stock subject to such Stock Award shall be
valued at not less than one hundred percent (100%) of the Fair
Market Value of such shares of Stock on the date such Stock Award is
granted, regardless of whether or when such shares of Stock are
issued or transferred to the Participant and whether or not such
shares of Stock are subject to restrictions which affect their
value.
10.3 Shares of Stock subject to a Stock Award may be issued or
transferred to the Participant at the time the Stock Award is
granted, or at any time subsequent thereto, or in installments from
time to time, as the Committee shall determine. If any such
issuance or transfer shall not be made to the Participant at the
time the Stock Award is granted, the Committee may provide for
payment to such Participant, either in cash or shares of Stock, from
time to time or at the time or times such shares of Stock shall be
issued or transferred to such Participant, of amounts not exceeding
the dividends which would have been payable to such Participant in
respect of such shares of Stock (as adjusted under Section 3.11) if
such shares of Stock had been issued or transferred to such
Participant at the time such Stock Award was granted. Any issuance
payable in shares of Stock under the terms of a Stock Award, at the
discretion of the Committee, may be paid in cash on each date on
which delivery of shares of Stock would otherwise have been made, in
an amount equal to the Fair Market Value on such date of the shares
of Stock which would otherwise have been delivered.
10.4 A Stock Award shall be subject to such terms and conditions,
including, without limitation, restrictions on the sale or other
disposition of the Stock Award or of the shares of Stock issued or
transferred pursuant to such Stock Award, as the Committee shall
determine; provided, however, that upon the issuance or transfer of
shares pursuant to a Stock Award, the Participant, with respect to
such shares of Stock, shall be and become a shareholder of the
Corporation fully entitled to receive dividends, to vote to the
extent, if any, such shares possess voting
26
<PAGE>
rights and to exercise all other rights of a shareholder except to the
extent otherwise provided in the Stock Award. Each Stock Award shall be
evidenced by a written Award Agreement in such form as the Committee
shall determine.
27
<PAGE>
ARTICLE XI - PERFORMANCE SHARES
11.1 Awards of Performance Shares may be made to certain Participants as
an incentive for the performance of future services that will
contribute materially to the successful operation of the
Corporation. Awards of Performance Shares may be made either alone,
in addition to or in tandem with other Awards granted under the Plan
and/or cash payments made outside of the Plan.
11.2 With respect to Awards of Performance Shares, which may be issued
for no consideration or such minimum consideration as is required by
applicable law, the Committee shall:
(a) determine and designate from time to time those Participants to
whom Awards of Performance Shares are to be made;
(b) determine the performance period (the "Performance Period")
and/or performance objectives (the "Performance Objectives")
applicable to such Awards;
(c) determine the form of settlement of a Performance Share; and
(d) generally determine the terms and conditions of each such
Award. At any date, each Performance Share shall have a value
equal to the Fair Market Value, determined as set forth in
Section 2.15.
11.3 Performance Periods may overlap, and Participants may participate
simultaneously with respect to Performance Shares for which
different Performance Periods are prescribed.
11.4 The Committee shall determine the Performance Objectives of Awards
of Performance Shares. Performance Objectives may vary from
Participant to Participant and between Awards and shall be based
upon such performance criteria or combination of factors as the
Committee may deem appropriate, including for example, but not
limited to, minimum earnings per share or return on equity. If
during the course of a Performance Period there shall occur
significant events which the Committee expects to have a substantial
effect on the applicable Performance Objectives during such period,
the Committee may revise such Performance Objectives.
11.5 The Committee shall determine for each Participant the number of
Performance Shares which shall be paid to the
28
<PAGE>
Participant if the applicable Performance Objectives are exceeded
or met in whole or in part.
11.6 If a Participant terminates service with the Corporation during a
Performance Period because of death, Disability, Retirement or under
other circumstances in which the Committee in its discretion finds
that a waiver would be appropriate, that Participant, as determined
by the Committee, may be entitled to a payment of Performance Shares
at the end of the Performance Period based upon the extent to which
the Performance Objectives were satisfied at the end of such period
and pro rated for the portion of the Performance Period during which
the Participant was employed by the Corporation; provided, however,
the Committee may provide for an earlier payment in settlement of
such Performance Shares in such amount and under such terms and
conditions as the Committee deems appropriate or desirable. If a
Participant terminates service with the Corporation during a
Performance Period for any other reason, then such Participant shall
not be entitled to any payment with respect to that Performance
Period unless the Committee shall otherwise determine.
11.7 Each Award of a Performance Share shall be paid in whole shares of
Stock, or cash, or a combination of Stock and cash as the Committee
shall determine, with payment to be made as soon as practicable
after the end of the relevant Performance Period.
11.8 The Committee shall have the authority to approve requests by
Participants to defer payment of Performance Shares on terms and
conditions approved by the Committee and set forth in a written
Award Agreement between the Participant and the Corporation entered
into in advance of the time of receipt or constructive receipt of
payment by the Participant.
29
<PAGE>
ARTICLE XII - OTHER STOCK-BASED AWARDS
12.1 Other awards of Stock and other awards that are valued in whole or
in part by reference to, or are otherwise based on, Stock ("Other
Stock-Based Awards"), including, without limitation, convertible
preferred stock, convertible debentures, exchangeable securities,
phantom stock and Stock awards or options valued by reference to
book value or performance, may be granted either alone or in
addition to or in tandem with Stock Options, Stock Rights,
Restricted Stock, Deferred Stock or Stock Awards granted under the
Plan and/or cash awards made outside of the Plan.
Subject to the provisions of the Plan, the Committee shall have
authority to determine the Eligible Participants to whom and the
time or times at which such Awards shall be made, the number of
shares of Stock subject to such Awards, and all other conditions of
the Awards. The Committee also may provide for the grant of shares
of Stock upon the completion of a specified Performance Period.
The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.
12.2 Other Stock-Based Awards made pursuant to this Article XII shall be
subject to the following terms and conditions:
(a) Subject to the provisions of this Plan and the Award Agreement,
shares of Stock subject to Awards made under this Article XII
may not be sold, assigned, transferred, pledged or otherwise
encumbered prior to the date on which the shares are issued,
or, if later, the date on which any applicable restriction,
performance or deferral period lapses.
(b) Subject to the provisions of this Plan and the Award Agreement
and unless otherwise determined by the Committee at the time of
the Award, the recipient of an Award under this Article XII
shall be entitled to receive, currently or on a deferred basis,
interest or dividends or interest or dividend equivalents with
respect to the number of shares covered by the Award, as
determined at the time of the Award by the Committee, in its
sole discretion, and the Committee may provide that such
amounts (if any) shall be deemed to have been reinvested in
additional Stock or otherwise reinvested.
30
<PAGE>
(c) Any Award under this Article XII and any Stock covered by any
such Award shall vest or be forfeited to the extent so provided
in the Award Agreement, as determined by the Committee, in its
sole discretion.
(d) Upon the Participant's Retirement, Disability or death, or in
cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the
remaining limitations imposed hereunder (if any) with respect
to any or all of an Award under this Article XII.
(e) Each Award under this Article XII shall be confirmed by, and
subject to the terms of, an Award Agreement.
(f) Stock (including securities convertible into Stock) issued on a
bonus basis under this Article XII may be issued for no cash
consideration.
12.3 Other Stock-Based Awards may include a phantom stock Award, which is
subject to the following terms and conditions:
(a) The Committee shall select the Eligible Participants who may
receive phantom stock Awards. The Eligible Participant shall
be awarded a phantom stock unit, which shall be the equivalent
to a share of Stock.
(b) Under an Award of phantom stock, payment shall be made on the
dates or dates as specified by the Committee or as stated in
the Award Agreement and phantom stock Awards may be settled in
cash, Stock, or some combination thereof.
(c) The Committee shall determine such other terms and conditions
of each Award as it deems necessary in its sole discretion.
31
<PAGE>
ARTICLE XIII - ACCELERATION EVENTS
13.1 For the purposes of the Plan, an Acceleration Event shall occur in
the event of a "Potential Change in Control," or "Change in Control"
or a "Board-Approved Change in Control", as those terms are defined
below.
13.2 A "Change in Control" shall be deemed to have occurred if:
(a) Any "Person" as defined in Section 3(a)(9) of the Act,
including a "group" (as that term is used in Sections 13(d)(3)
and 14(d)(2) of the Act), but excluding the Corporation and any
employee benefit plan sponsored or maintained by the
Corporation (including any trustee of such plan acting as
trustee) who:
(i) makes a tender or exchange offer for any shares of the
Corporation's Stock (as defined below) pursuant to which
any shares of the Corporation's Stock are purchased (an
"Offer"); or
(ii) together with its "affiliates" and "associates" (as those
terms are defined in Rule 12b-2 under the Act) becomes the
"Beneficial Owner" (within the meaning of Rule 13d-3 under
the Act) of at least twenty percent (20%) of the
Corporation's Stock (an "Acquisition");
(b) The stockholders of the Corporation approve a definitive
agreement or plan to merge or consolidate the Corporation with
or into another corporation, to sell or otherwise dispose of
all or substantially all of its assets, or to liquidate the
Corporation (individually, a "Transaction"); or
(c) When, during any period of twenty-four (24) consecutive months
during the existence of the Plan, the individuals who, at the
beginning of such period, constitute the Board (the "Incumbent
Directors") cease for any reason other than death to constitute
at least a majority thereof; provided, however, that a director
who was not a director at the beginning of such twenty-four
(24) month period shall be deemed to have satisfied such
twenty-four (24) month requirement (and be an Incumbent
Director) if such director was elected by, or on the
recommendation of or with the approval of, at least two-thirds
of the directors who then qualified as Incumbent Directors
32
<PAGE>
either actually (because they were directors at the beginning
of such twenty-four (24) month period) or by prior operation of
this Section 13.2(c).
13.3 A "Board-Approved Change in Control" shall be deemed to have
occurred if the Offer, Acquisition or Transaction, as the case may
be, is approved by a majority of the Directors serving as members of
the Board at the time of the Potential Change in Control or Change
in Control.
13.4 A "Potential Change in Control" means the happening of any one of
the following:
(a) The approval by stockholders of an agreement by the
Corporation, the consummation of which would result in a Change
in Control of the Corporation, as defined in Section 13.2; or
(b) The acquisition of Beneficial Ownership, directly or
indirectly, by any entity, person or group (other than the
Corporation or any Corporation employee benefit plan (including
any trustee of such plan acting as such trustee)) of securities
of the Corporation representing five percent (5%) or more of
the combined voting power of the Corporation's outstanding
securities and the adoption by the Board of a resolution to the
effect that a Potential Change in Control of the Corporation
has occurred for the purposes of this Plan.
13.5 Upon the occurrence of an Acceleration Event, subject to the
approval of the Committee if the Acceleration Event results from a
Board-Approved Change in Control, all then outstanding Performance
Shares with respect to which the applicable Performance Period has
not been completed shall be paid as soon as practicable as follows:
(a) all Performance Objectives applicable to the Award of
Performance Shares shall be deemed to have been satisfied to
the extent necessary to result in payment of one hundred
percent (100%) of the Performance Shares covered by the Award;
and
(b) the applicable Performance Period shall be deemed to have ended
on the date of the Acceleration Event;
(c) the payment to the Participant shall be the amount determined
either by the Committee, in its sole discretion, or in the
manner stated in the Award Agreement. This amount shall then
be multiplied by a fraction, the numerator of which is the
number of full calendar months of the applicable Performance
33
<PAGE>
Period that have elapsed prior to the date of the Acceleration
Event, and the denominator of which is the total number of
months in the original Performance Period; and
(d) upon the making of any such payment, the Award Agreement as to
which it relates shall be deemed canceled and of no further
force and effect.
13.6 Upon the occurrence of an Acceleration Event, subject to the
approval of the Committee if the Acceleration Event results from a
Board-Approved Change in Control, the Committee in its discretion
may declare any or all then outstanding Stock Options (and any or
all related Stock Rights outstanding for at least six (6) months)
not previously exercisable and vested as immediately exercisable and
fully vested, in whole or in part.
13.7 Upon the occurrence of an Acceleration Event, subject to the
approval of the Committee if the Acceleration Event results from a
Board-Approved Change in Control, the Committee in its discretion,
may declare the restrictions applicable to Awards of Restricted
Stock, Deferred Stock or Other Stock-Based Awards to have lapsed, in
which case the Corporation shall remove all restrictive legends and
stop-transfer orders applicable to the certificates for such shares
of Stock, and deliver such certificates to the Participants in whose
names they are registered.
13.8 The value of all outstanding Stock Option, Stock Rights, Restricted
Stock, Deferred Stock, Performance Shares, Stock Awards and Other
Stock-Based Awards, in each case to the extent vested, shall, unless
otherwise determined by the Committee in its sole discretion at or
after grant but prior to any Change in Control, be cashed out on the
basis of the "Change in Control Price," as defined in Section 13.9
as of the date such Change in Control or such Potential Change in
Control is determined to have occurred or such other date as the
Committee may determine prior to the Change in Control.
13.9 For purposes of Section 13.8, "Change in Control Price" means the
highest price per share of Stock paid in any transaction reported on
the NASDAQ National Market System, or paid or offered in any bona
fide transaction related to a Potential or actual Change in Control
of the Corporation at any time during the sixty (60) day period
immediately preceding the occurrence of the Change in Control (or,
where applicable, the occurrence of the Potential Change in Control
event), in each case as determined by the Committee except that, in
the case of Incentive Stock Options and Stock Appreciation Rights
(or Limited Stock
34
<PAGE>
Appreciation Rights) relating to such Incentive Stock Options, such
price shall be based only on transactions reported for the date on
which the optionee exercises such Stock Appreciation Rights (or Limited
Stock Appreciation Rights).
35
<PAGE>
ARTICLE XIV - AMENDMENT AND TERMINATION
14.1 The Board, upon recommendation of the Committee, or otherwise, at
any time and from time to time, may amend or terminate the Plan as
may be necessary or desirable to implement or discontinue this Plan
or any provision thereof. To the extent required by Rule 16b-3
under the Act, no amendment, without approval by the Corporation's
stockholders, shall:
(a) alter the group of persons eligible to participate in the Plan;
(b) except as provided in Section 3.6, increase the maximum number
of shares of Stock or Stock Options or Stock Rights which are
available for Awards under the Plan;
(c) extend the period during which Incentive Stock Option Awards
may granted beyond the date which is ten (10) years following
the Effective Date;
(d) limit or restrict the powers of the Committee with respect to
the administration of this Plan;
(e) change the definition of an Eligible Participant for the
purpose of an Incentive Stock Option or increase the limit or
the value of shares of Stock for which an Eligible Participant
may be granted an Incentive Stock Option;
(f) materially increase the benefits accruing to Participants under
this Plan;
(g) materially modify the requirements as to eligibility for
participation in this Plan; or
(h) change any of the provisions of this Article XIV.
14.2 No amendment to or discontinuance of this Plan or any provision
thereof by the Board or the stockholders of the Corporation shall,
without the written consent of the Participant, adversely affect, as
shall be determined by the Committee, any Award theretofore granted
to such Participant under this Plan; provided, however, the
Committee retains the right and power to:
(a) annul any Award if the Participant is terminated for cause as
determined by the Committee;
36
<PAGE>
(b) provide for the forfeiture of shares of Stock or other gain
under an Award as determined by the Committee for competing
against the Corporation; and
(c) convert any outstanding Incentive Stock Option to a
Nonqualified Stock Option.
14.3 If an Acceleration Event has occurred, no amendment or termination
shall impair the rights of any person with respect to an outstanding
Award as provided in Article XIII.
37
<PAGE>
ARTICLE XV - MISCELLANEOUS PROVISIONS
15.1 Nothing in the Plan or any Award granted hereunder shall confer upon
any Participant any right to continue in the employ of the
Corporation (or to serve as a director thereof) or interfere in any
way with the right of the Corporation to terminate his or her
employment at any time. Unless specifically provided otherwise, no
Award granted under the Plan shall be deemed salary or compensation
for the purpose of computing benefits under any employee benefit
plan or other arrangement of the Corporation for the benefit of its
employees unless the Corporation shall determine otherwise. No
Participant shall have any claim to an Award until it is actually
granted under the Plan. To the extent that any person acquires a
right to receive payments from the Corporation under the Plan, such
right shall, except as otherwise provided by the Committee, be no
greater than the right of an unsecured general creditor of the
Corporation. All payments to be made hereunder shall be paid from
the general funds of the Corporation, and no special or separate
fund shall be established and no segregation of assets shall be made
to assure payment of such amounts, except as provided in Article
VIII with respect to Restricted Stock and except as otherwise
provided by the Committee.
15.2 The Corporation may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of any taxes
which the Corporation is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with any Stock Option or the
exercise thereof, any Stock Right or the exercise thereof, or in
connection with any other type of equity-based compensation provided
hereunder or the exercise thereof, including, but not limited to,
the withholding of payment of all or any portion of such Award or
another Award under this Plan until the Participant reimburses the
Corporation for the amount the Corporation is required to withhold
with respect to such taxes, or canceling any portion of such Award
or another Award under this Plan in an amount sufficient to
reimburse itself for the amount it is required to so withhold, or
selling any property contingently credited by the Corporation for
the purpose of paying such Award or another Award under this Plan,
in order to withhold or reimburse itself for the amount it is
required to so withhold.
38
<PAGE>
15.3 The Plan and the grant of Awards shall be subject to all applicable
federal and state laws, rules, and regulations and to such approvals
by any government or regulatory agency as may be required. Any
provision herein relating to compliance with Rule 16b-3 under the
Act shall not be applicable with respect to participation in the
Plan by Participants who are not subject to Section 16(b) of the
Act.
15.4 The terms of the Plan shall be binding upon the Corporation, and its
successors and assigns.
15.5 Neither a Stock Option, Stock Right, nor any other type of equity-
based compensation provided for hereunder, shall be transferable
except as provided for herein. Unless otherwise provided by the
Committee or in an Award Agreement, transfer restrictions shall only
apply to Incentive Stock Options as required in Article IV and to
the extent otherwise required by federal or state securities laws.
If any Participant makes such a transfer in violation hereof, any
obligation of the Corporation shall forthwith terminate.
15.6 This Plan and all actions taken hereunder shall be governed by the
laws of the State of North Carolina.
15.7 The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet
made to a Participant by the Corporation, nothing contained herein
shall give any such Participant any rights that are greater than
those of a general creditor of the Corporation. In its sole
discretion, the Committee may authorize the creation of trusts or
other arrangements to meet the obligations created under the Plan to
deliver shares of Stock or payments in lieu of or with respect to
Awards hereunder; provided, however, that, unless the Committee
otherwise determines with the consent of the affected Participant,
the existence of such trusts or other arrangements is consistent
with the "unfunded" status of the Plan.
15.8 Each Participant exercising an Award hereunder agrees to give the
Committee prompt written notice of any election made by such
Participant under Section 83(b) of the Code, or any similar
provision thereof.
15.9 If any provision of this Plan or an Award Agreement is or becomes or
is deemed invalid, illegal or unenforceable in any jurisdiction, or
would disqualify the Plan or any Award Agreement under any law
deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws or if it
cannot be
39
<PAGE>
construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the
Award Agreement, it shall be stricken and the remainder of the Plan
or the Award Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, this Plan is executed on this the day of
, 199 .
ROSE'S STORES, INC.
ATTEST: By: _____________________________
Authorized Officer
(Corporate Seal)
__________________________
Secretary
40
<PAGE>
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE: CASE NO. 93-01365-5-ATS
ROSE'S STORES, INC. (CHAPTER 11)
(TAX ID #56-0382475)
Debtor
___________________________
ORDER
APPROVING SHORT-TERM INCENTIVE PLAN
THIS MATTER is before the Court upon the "Motion For Order
Approving Short-Term Incentive Plan" (the "Motion") filed by
Rose's Stores, Inc, debtor and debtor in possession in the above-
captioned case (the "Debtor"). The Motion was served on the
"Official Service List" as established in the Court's "Ex Parte
Order Establishing Notice Requirements With Respect To All
Proceedings In This Case," entered on or about September 7, 1993.
Based upon a review of the record, the Court hereby finds and
concludes as follows:
1. The Debtor filed for relief under chapter 11 of the
Bankruptcy Code on September 5, 1993 (the "Petition Date").
Since that time, the Debtor has been operating as a debtor in
possession pursuant to sections 1107 and 1108 of the Bankruptcy
Code.
2. As of the date the Motion was filed, the Debtor's
operations were directed by an officer group comprised of the
president and chief executive officer ("CEO"), two (2) executive
vice presidents and one (1) senior vice president (collectively
hereinafter referred to as "Executive Officers") and eleven (11)
vice presidents and one (1) treasurer ("Vice Presidents"). The
<PAGE>
Executive Officers and the Vice Presidents are collectively
hereinafter referred to as "Officers."
3. In the Motion, the Debtor requested an order
authorizing it to implement a Short-Term Incentive Plan,
effective January 30, 1994, to assist the Debtor in motivating
its Officers throughout the reorganization by rewarding them for
achieving and exceeding designated performance targets.
4. The Short-Term Incentive Plan motivates employees to
achieve designated performance goals during the reorganization by
awarding bonuses based on the Debtor's ability to achieve and
exceed specified cash flow targets for the performance period.
These cash flow targets are referred to as "EBITDA" ("Earnings
Before Interest, Taxes, Depreciation and Amortization").
5. Under the Short-Term Incentive Plan, Officers can earn
"incentive awards," the amounts of which are based on the
Debtor's ability to achieve the designated EBITDA for the
performance period.1 The Plan provides for two (2) six (6)
month performance periods during each fiscal year which are based
on the Debtor's selling seasons. Eligible Officers may earn
Incentive Awards in either or both performance periods.
Incentive Awards for both performance periods will be paid within
thirty (30) days of the Effective Date (simultaneously with the
distribution to the general unsecured creditors), as defined in
the Debtor's draft plan of reorganization dated July 15, 1994;
provided, however, that if the
1 The Chairman of the Board is not eligible to
participate in the Short-Term Incentive Plan.
-2-
<PAGE>
Debtor fails to reach the
Effective Date, no payments will be made to the Officers and the
Officers will have no claim against the Debtor arising from the
Short Term Incentive Plan.
6. Each fiscal year, Executive Officers can earn a maximum
Incentive Award of thirty-five percent (35%) of annual base
salary, and Vice Presidents can earn a maximum Incentive Award of
thirty percent (30%) of annual base salary. Each performance
period, the Officers can earn only one-half of their annual
maximum Incentive Award.
7. Incentive Awards are earned by the Officers during each
of the two (2) six (6) month performance periods as follows:
(a) If the Debtor achieves 100% of the targeted EBITDA for
the performance period, eligible Officers will receive
50% of the maximum annual Incentive Award (or 8.75% of
annual base salary for Executive Officers and 7.5% of
annual base salary for Vice Presidents).
(b) If the Debtor achieves 120% of the targeted EBITDA for
the performance period, eligible Officers will receive
100% of the maximum annual Incentive Award (or 17.5% of
annual base salary for Executive Officers and 15% of
annual base salary for Vice Presidents).
(c) If the Debtor achieves between 100% and 120% of the
targeted EBITDA for the performance period, eligible
Officers will receive between 50% and 100% of the
maximum
-3-
<PAGE>
annual Incentive Award2.
8. The target cost of the plan is $446,080.00 at one
hundred percent (100%) of targeted EBITDA performance and the
maximum cost is $892,160.00 based on the assumptions that all
Officers are eligible to participate in the Plan and the Debtor
attains one hundred and twenty percent (120%) of the targeted
EBITDA for both performance periods for the fiscal year.
9. To be eligible to participate in the Short-Term
Incentive Plan, each Officer must be employed at the time of
payment and must have performed at or above expectations against
performance evaluations. The Short-Term Incentive Plan would
replace any other annual incentives or bonuses currently offered
to the Officers.
10. The Short-Term Incentive Plan will assist the Debtor
tremendously in its efforts to reorganize. The Short-Term
Incentive Plan will maximize operating results by instilling in
the Officers a sense of participation in the success of the
entire organization and incentives to not only achieve, but
exceed the financial objectives of the Debtor for the fiscal
year.
11. Currently, the Debtor's total compensation package is
significantly below industry practices due to the lack of short
and long-term incentives, making the Debtor vulnerable to
turnover. Other similar bankrupt companies facing this problem
have typically responded by use of performance/retention
incentives to close the gap in compensation. The implementation
of the Short-Term
2 The amount of the Incentive Award will be determined by
use of linear interpolation.
-4-
<PAGE>
Incentive Plan will begin to close the gap
between the Debtor's compensation package and the industry
standards. The Debtor plans to further close the gap in its
compensation package by proposing a long-term incentive plan in
its plan of reorganization.
12. The cost of the Short-Term Incentive Plan is
significantly less than the costs which would result should the
Debtor lose a significant number of its key Officers. Recruiting
and replacing officers during chapter 11 would not only be time-
consuming and expensive, but would also significantly distract
management from its efforts to implement the business plan.
Further, continuity of staff is essential to a rapid and
successful emergence from chapter 11. By implementing a
compensation package which is comparable to industry practices
and that of other similar bankrupt companies, the Debtor will
lessen its chances of losing key personnel.
15. The Official Committee for the Unsecured Creditors has
reviewed the Short-Term Incentive Plan, as described herein and
supports its implementation.
NOW, THEREFORE, for good cause shown, it is hereby ordered
as follows:
1. The Debtor is authorized to implement the Short-Term
Incentive Plan as in the Debtor's Motion and herein, effective
January 30, 1994.
2. No charge or assessment shall be made or allowed
against the Pre-Petition Lenders or General Electric Capital
Corporation ("GE Capital") or their respective collateral for any
obligations
-5-
<PAGE>
arising under the Short-Term Incentive Plan pursuant
to 11 U.S.C. (section mark) 506(c), or otherwise.
DATED: August 4, 1994
/s/ A. Thomas Small
Bankruptcy Judge
-6-
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE: CASE NO. 93-01365-5-ATS
ROSE'S STORES, INC., CHAPTER 11
(TAX ID #56-0382475),
Debtor
____________________________
ORDER
AUTHORIZING INCREASED COMPENSATION OF R. EDWARD ANDERSON,
PRESIDENT AND CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
THIS MATTER is before the Court upon the "Motion for Order Authorizing
Increased Compensation of R. Edward Anderson, President and Chief Executive
Officer and Chairman of the Board" (the "Motion"), filed by Rose's Stores,
Inc., debtor and debtor-in-possession in the above-captioned case (the
"Debtor"). The Motion was served on the "Official Service List" as
established in the Court's "Ex Parte Order Establishing Notice Requirements
With Respect To All Proceedings In This Case," entered on or about
September 7, 1993. Based upon a review of the record, the Court hereby
finds and concludes as follows:
1. The Debtor filed for relief under chapter 11 of the Bankruptcy
Code on September 5, 1993 (the "Petition Date"). Since that time, the
Debtor has been operating as a debtor in possession pursuant to sections
1107 and 1108 of the Bankruptcy Code.
2. At the Petition Date, the Debtor operated a chain of two hundred
and fifteen (215) discount retail stores, known as "Roses," located in
eleven (11) Mid-Atlantic and Southeastern states. At the
<PAGE>
time this motion was filed, the Debtor operated one hundred and thirteen (113)
on-going stores located in ten (10) states.
3. On August 19, 1994, George L. Jones resigned from his position
with the Debtor as president and chief executive officer. At that time,
Mr. Jones was paid an annual base salary of $595,000.00, which was approved
by Bankruptcy Court order dated June 7, 1994.
4. On August 22, 1994, the Board of Directors for the Debtor (the
"Board") called a meeting and elected Mr. R. Edward Anderson to the
position of president and chief executive officer. The Board also elected
Mr. Anderson to the position of chairman of the board. Mr. Anderson will
replace Mr. Lucuis H. Harvin who resigned from that position effective
August 23, 1994.
5. Representatives of the Senior Secured Noteholders,(1) the Bank of
Tokyo, Ltd., the Official Committee of the Unsecured Creditors, the
Official Committee of Equity Security Holders (collectively the "Creditor
Constituencies") attended the Board
(1) The "Senior Noteholders" hold approximately $70,500,000
principal amount of the Debtor's 11% Senior Secured Notes due
December 31, 1998, and include Nationwide Life Insurance Company,
Wausau Preferred Health Insurance Company, Equitable Variable
Life Insurance Company, The Equitable Life Assurance Society of
the United States, Jefferson-Pilot Life Insurance Company, The
Franklin Life Insurance Company, The Franklin United Life
Insurance Company, Great-West Life & Annuity Insurance Company,
American Family Life Insurance Company, State Mutual Life
Assurance Company of America, SMA Life Assurance Company, Merrill
Lynch Life Insurance Company, ML Life Insurance Company of New
York, Woodmen of the World Life Insurance Society, Knights of
Columbus, Washington National Insurance Company, The Stonehill
Investment Corp., Central Life Assurance Company, and Lazard
Freres & Co., or their successor and assigns.
-2-
<PAGE>
meeting and unanimously recommended that the Board elect Mr. Anderson as
the new president and chief executive officer. Counsel for General Electric
Capital Corporation attended the Board meeting and stated that the election
of Mr. Anderson to the position of president and chief executive officer
would not constitute a default under the existing Debtor-In-Possession
Loan Agreement, dated as of September 20, 1993, as amended.
6. Mr. Anderson joined Rose's in 1978 as controller, having
previously been a C.P.A. with the accounting firm of Peat, Marwick,
Mitchell. Prior to his recent promotion, Mr. Anderson served as the chief
financial officer of the Debtor and was paid an annual base salary of
$270,000.00. In this position, Mr. Anderson's job responsibilities
included supervising company finances, accounting information systems,
distribution, and risk management. A native of Goldsboro, North Carolina,
Mr. Anderson earned a bachelor's degree in business and accounting from the
University of North Carolina at Chapel Hill.
7. The Board authorized the Debtor to enter into an employment
agreement with Mr. Anderson, employing Mr. Anderson for a term effective
immediately and expiring upon the earlier of thirty (30) days after the
"Effective Date," as that term is used in the Debtor's Joint Plan of
Reorganization, filed with this Court on August 1, 1994 or April 30, 1994.
8. In the Motion, the Debtor requested authority to compensate Mr.
Anderson for his services as president and chief
-3-
executive officer and chairman of the board at an annual base salary of
$395,000.00, effective August 22, 1994. While this salary reflects an
increase from his salary as chief financial officer, it is $200,000.00
less than that approved by this Court for Mr. Jones. Further, because
Mr. Anderson will also serve as chairman of the board, his job
responsibilities will be greater than those undertaken by Mr. Jones
while serving as president and chief executive officer.
9. Mr. Anderson will continue to receive all other benefits offered
by the Debtor to its officers, including, without limitation, participation
in the Debtor's Severance Program and Short-Term Incentive Plan, both of
which were approved by this Court by earlier order.
10. The Debtor believes that Mr. Anderson is the candidate most
qualified for the position of president and chief executive officer and
chairman of the board. Mr. Anderson has approximately sixteen years of
experience with the Debtor. Mr. Anderson has been a critical participant
in the chapter 11 reorganization, particularly with respect to formulation
of the Debtor's plan of reorganization. Further, the unanimous
recommendation of Mr. Anderson by the Creditor Constituencies is a strong
indicator of their confidence in Mr. Anderson's ability to lead the Debtor
through confirmation and consummation of the Joint Plan of Reorganization.
-4-
<PAGE>
NOW, THEREFORE, for good cause shown, it is hereby ordered that the
Debtor is authorized to increase Mr. Anderson's compensation to
$395,000.00, effective August 22, 1994 to compensate him for his services
as president and chief executive officer and chairman of the board.
Dated: October 12, 1994
/s/ A. Thomas Small
UNITED STATES BANKRUPTCY JUDGE
-5-
<PAGE>
<PAGE>
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE: CASE NO. 93-01365-5-ATS
ROSE'S STORES, INC., CHAPTER 11
(TAX ID #56-0382475),
Debtor
____________________________
ORDER AUTHORIZING INCREASED COMPENSATION OF
(i) KATHY M. HURLEY, SENIOR VICE PRESIDENT, MERCHANDISING;
(ii) JEANETTE R. PETERS, SENIOR VICE PRESIDENT, CHIEF
FINANCIAL OFFICER; AND (iii) GEORGE T. BLACKBURN, II,
VICE PRESIDENT, REAL ESTATE, GENERAL COUNSEL, AND SECRETARY
THIS MATTER is before the Court upon the "Motion for Order Authorizing
Increased Compensation of (i) Kathy M. Hurley, senior vice president,
merchandising; (ii) Jeanette R. Peters, senior vice president, chief
financial officer; and (iii) George T. Blackburn, II, vice president, real
estate, general counsel, and secretary" (the "Motion"), filed by Rose's
Stores, Inc., debtor and debtor-in-possession in the above-captioned case
(the "Debtor"), pursuant to Local Bankruptcy Rule No. 4002.3(b)(1), EDNC.
Notice having been provided to creditors and parties in interest and no
objections having been filed, and having reviewed the Motion, the Court
hereby finds as follows:
1. The Debtor filed for relief under chapter 11 of the Bankruptcy
Code on September 5, 1993 (the "Petition Date"). Since that time, the
Debtor has been operating as a debtor in possession pursuant to sections
1107 and 1108 of the Bankruptcy Code.
<PAGE>
2. The Debtor currently operates a chain of one hundred and thirteen
(113) discount retail stores, known as "Rose's." The stores are located in
ten (10) states across the Mid-Atlantic and Southeast.
A. Kathy M. Hurley, Senior Vice President, Merchandising
3. Effective November 11, 1994, Rob Gruen resigned from his position
as senior vice president, merchandising. At the time of his resignation,
Mr. Gruen was paid an annual base salary of $228,000.00 and an annual
automobile allowance of $5,528.00.
4. With the approval of the board of directors, the Debtor promoted
Kathy M. Hurley to the position of senior vice president, merchandising.
Ms. Hurley came to Rose's in 1992 as vice president, general merchandise
manager for the softlines division. She has nearly 24 years experience in
the retail industry and, before joining Rose's, served in a key management
position with Weathervane Stores. Her background also includes management
positions at Gold Circle, Montgomery Ward, Service Merchandise, Hechts and
Lane Bryant. Ms. Hurley holds a bachelor's degree from Ohio University.
5. Prior to her promotion to senior vice president, merchandising,
Ms. Hurley directed the merchandising functions for the softlines division
(including apparel for women, men, boys, girls, fashion accessories,
jewelry and cosmetics) and the domestics division. Ms. Hurley was paid an
annual base salary of $170,000.00.
2
<PAGE>
6. The Debtor believes that Ms. Hurley is the candidate best
qualified to replace Mr. Gruen due to her experience in the merchandising
industry, her proven record of success at the Debtor and her familiarity
with the operations and merchandising strategy of the Debtor. In the
Motion, the Debtor requested an order authorizing it to compensate Ms.
Hurley for her services as senior vice president, merchandising with an
annual base salary of $200,000.00 and an automobile allowance of $5,528.00.
Ms. Hurley would also be eligible to receive the standard employee benefits
awarded to the officers of the Debtor.
7. Ms. Hurley's salary is approximately $28,000.00 less than that
originally approved by this Court for Mr. Gruen. Further, the Debtor does
not intend to fill the position vacated by Ms. Hurley as a result of her
promotion. Accordingly, through the promotion of Ms. Hurley, the Debtor
will save approximately $198,000.00 per year.
B. Jeanette R. Peters, Senior Vice President, Chief Financial Officer
8. On August 19, 1994, George L. Jones resigned from his position
with the Debtor as president and chief executive officer. Subsequently,
the board of directors elected R. Edward Anderson to the position of
president and chief executive officer. Prior to his promotion, Mr.
Anderson held the position of executive vice president, chief financial
officer and was paid an annual base salary of $270,000.00 and an annual
automobile allowance of $5,528.00.
3
<PAGE>
9. With the approval of the board of directors, the Debtor promoted
Jeanette R. Peters to the position of senior vice president, chief
financial officer. Ms. Peters joined Rose's in 1983 as manager of
financial planning. She also served as senior manager of financial
planning and senior financial analysis manager. Ms. Peters graduated from
the Virginia Polytechnic Institute with a bachelor of science degree in
accounting. She became a certified public accountant wile working for the
accounting firm of Peat, Marwick & Mitchell Co.
10. Prior to her promotion to chief financial officer, Ms. Peters'
job responsibilities included accounting and financial reporting and
control functions, such as sales and inventory audit, accounts payable,
payroll processing, tax, financial analysis and financial reporting. Her
annual base salary was $96,700.00. In her new position, Ms. Peters' job
responsibilities will include supervising company finances, accounting
information systems, and assets protection.
11. The Debtor believes that Ms. Peters is the candidate best
qualified to replace Mr. Anderson due to her experience and familiarity
with the Debtor's finances. In the Motion, the Debtor requested an order
authorizing it to compensate Ms. Peters for her services as senior vice
president, chief financial officer with an annual base salary of
$150,000.00 and an annual automobile allowance of $5,528.00. Ms. Peters
would also be eligible to receive the standard employee benefits awarded to
the officers of the Debtor.
4
<PAGE>
12. Ms. Peters' salary is approximately $120,000.00 less than that
originally approved by this Court for Mr. Anderson. Further, the Debtor
does not intend to fill the position vacated by Ms. Peters as a result of
her promotion. Accordingly, through the promotion of Ms. Peters, the
Debtor will save approximately $216,000.00 per year.
C. George T. Blackburn, II, Vice President, Real Estate, General
Counsel and Secretary
13. Prior to the Petition Date, the Debtor's vice president of real
estate resigned. Lois S. Williams, senior manager, real estate, assumed
the majority of the responsibilities performed by the former vice
president. In August, 1994, Ms. Williams resigned from her position.
14. With the approval of the board of directors, the Debtor has
assigned the title and responsibilities of vice president, real estate to
George T. Blackburn, II, in addition to his other responsibilities. Mr.
Blackburn joined Rose's as vice president, general counsel in 1991 and was
elected secretary of the corporation in February 1993. Before joining
Rose's, he was a partner in the law firm of Perry, Kittrell, Blackburn and
Blackburn of Henderson, North Carolina where he served for over 12 years as
legal counsel for Rose's. He completed undergraduate studies and received
his Juris Doctorate degree from the University of North Carolina at Chapel
Hill. Prior to his promotion, Mr. Blackburn was paid an annual base salary
of $77,000.00.
5
<PAGE>
15. As vice president, real estate, Mr. Blackburn's job
responsibilities will include the supervision and reconciliation of the
claims filed by the lessors of non-residential real property in the pending
chapter 11 case. Due to his close involvement in the case, he is the
person with the most knowledge about these claims and, thus, is the
individual best suited to assume these responsibilities, as well as the
other duties associated with the position.
16. In the Motion, the Debtor requested an order authorizing it to
compensate Mr. Blackburn for his services as vice president, real estate,
general counsel and secretary with an annual base salary of $100,000.00.
Mr. Blackburn would continue to be eligible to receive the standard
employee benefits awarded to the officers of the Debtor.
17. If approved, Mr. Blackburn's salary would increase by only
$23,000.00 per year which is small in comparison to the numerous job
responsibilities associated with his three positions and his critical
involvement in the chapter 11 case. Further, this increase in salary is
much less than the annual salary previously paid to Ms. Williams who
performed similar job responsibilities. Thus, the Debtor will actually
save money by promoting Mr. Blackburn.
NOW, THEREFORE, for good cause shown, the Court hereby orders that the
Debtor is authorized to increase the compensation of (i) Kathy M. Hurley to
an annual base salary of $200,000.00 per year plus an annual automobile
allowance of $5,528.00 for her services as
6
<PAGE>
senior vice president, merchandising; (ii) Jeanette R. Peters to an
annual base salary of $150,000.00 plus an annual automobile allowance
of $5,528.00 for her services as senior vice president, chief financial
officer; and (iii) George T. Blackburn, II, to $100,000.00 for his services
as vice president, real estate, general counsel and secretary.
Dated: December 15, 1994
/s/ A. Thomas Small
UNITED STATES BANKRUPTCY JUDGE
7
<PAGE>
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE: CASE NO. 93-01365-5-ATS
ROSE'S STORES, INC., CHAPTER 11
(TAX I.D. #56-0382475),
Debtor
____________________________
ORDER AUTHORIZING ENTRY INTO EMPLOYMENT AGREEMENT WITH R. EDWARD
ANDERSON, PRESIDENT AND CHIEF EXECUTIVE OFFICER
THIS MATTER is before the Court upon the Motion for Authority to Enter
into Employment Agreement with R. Edward Anderson, President and Chief
Executive Officer (the "Motion"), filed by Rose's Stores, Inc., debtor in
possession in the above-captioned case (the "Debtor"). Notice having been
provided to creditors and parties and interest and no objections having
been filed, and upon a review of the Motion, the Court hereby finds as
follows:
1. The Debtor filed for relief under chapter 11 of the Bankruptcy
Code on September 5, 1993 (the "Petition Date"). Since that time, the
Debtor has been operating as a debtor in possession pursuant to sections
1107 and 1108 of the Bankruptcy Code.
2. The Debtor currently operates a chain of one hundred and thirteen
(113) discount retail stores, known as "Rose's." The stores are located in
ten (10) states across the Mid-Atlantic and Southeast.
3. On August 19, 1994, George L. Jones resigned from his position
with the Debtor as president and chief executive officer. At the time of
his resignation, Mr. Jones was paid an annual base
<PAGE>
salary of $595,000.00 and was a party to an employment agreement with the
Debtor which was approved by this Court on June 7, 1994. On August 22, 1994,
the board of directors for the Debtor elected R. Edward Anderson, formerly
the executive vice president, chief financial officer, to replace Mr. Jones.
By order dated September 28, 1994, this Court authorized the Debtor to pay Mr.
Anderson an annual base salary of $395,000.00.
4. At the time the Debtor filed the motion seeking approval to
increase Mr. Anderson's compensation, the proposed employment agreement
with Mr. Anderson had not been finalized. Accordingly, in the Motion, the
Debtor sought Court approval to enter into an employment agreement with Mr.
Anderson. A copy of the proposed employment agreement (the "Employment
Agreement") is attached to the Motion as Exhibit "A" and is incorporated
herein by reference.
5. The terms of the Employment Agreement are substantially similar to
those of the employment agreement entered into by the Debtor with Mr. Jones,
except with respect to the events triggering the payment of severance.
6. Entry into the Employment Agreement is critical to the continued
success of the Debtor's reorganization efforts. The Joint Plan requires
the Debtor to achieve certain conditions, financial and otherwise, between
the filing of the Joint Plan and the Effective Date. Mr. Anderson's
leadership during the upcoming months is crucial to the Debtor's ability to
achieve these conditions. If the Debtor were required to replace Mr. Anderson
at
2
<PAGE>
this juncture, it would likely be devastating to its efforts to achieve
confirmation and consummation of the Joint Plan.
7. The terms of the Employment Agreement are substantially similar
to those of the employment agreement previously approved by this Court for
Mr. Jones. While the Employment Agreement does provide for a greater
number of triggering events for the payment of severance, this change is
appropriate in light of Mr. Anderson's willingness to assume the leadership
of the Debtor during this critical time. Moreover, Mr. Anderson's annual
base salary is $200,000.00 less than that previously approved by this Court
for payment to Mr. Jones, the predecessor to Mr. Anderson.
NOW, THEREFORE, for good cause shown, the Court hereby orders that the
Debtor is authorized to enter into an employment agreement with R. Edward
Anderson in a form substantially similar to that of the employment
agreement attached to the Motion as Exhibit A.
Dated: December 15, 1994
/s/ A. Thomas Small
UNITED STATES BANKRUPTCY JUDGE
3
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE: CASE NO.: 93-01-365-S-ATS
ROSE'S STORES, INC. CHAPTER 11
Debtor
(TAX I.D. #56-0382475)
___________________________
ORDER
APPROVING CONSUMMATION BONUS AND STOCK OPTION AWARDS
THIS MATTER is before the Court upon the Motion for Order Approving
Consummation Bonus and Stock Option Awards (the "Motion"), filed by Rose's
Stores, Inc., debtor and debtor in possession in the above-captioned case
(the "Debtor") on December 9, 1994, pursuant to Local Bankruptcy Rule No.
4002.3(b)(1), EDNC, authorizing the Debtor to award its officers a
consummation bonus and stock options. The Official Committee of Equity
Security Holders filed an objection to the Motion. Proper notice having
been provided to creditors and parties in interest, and based upon a review
of the record, the Court hereby finds and concludes as follows:
I.
BACKGROUND
1. The Debtor filed for relief under chapter 11 of the Bankruptcy
Code on September 5, 1993 (the "Petition Date"). Since that time, the
Debtor has been operating as a debtor in possession pursuant to sections
1107 and 1108 of the Bankruptcy Code.
2. The Debtor currently operates a chain of one hundred and thirteen
(113) discount retail stores, known as "Rose's." The
<PAGE>
stores are located in ten (10) states across the Mid-Atlantic and Southeast.
3. The Debtor's operations are directed by an officer group of only
fourteen individuals comprised of the president and chief executive officer
("CEO"), one (1) executive vice president and two (2) senior vice
presidents (collectively hereinafter referred to as "Executive Officers")
and ten (10) vice presidents ("Vice Presidents"). The Executive Officers
and the Vice Presidents are collectively hereinafter referred to as
"Officers." Since the Petition Date, the Debtor has decreased its officer
group by almost one-half.
4. The Officers are currently compensated through a combination of
base salary, severance pay and eligibility to receive bonuses biannually
pursuant to the Short-Term Incentive Plan. The Short-Term Incentive Plan,
approved by the Bankruptcy Court, awards bonuses to the Officers based on
the financial performance of the Debtor in the Debtor's two selling
seasons. The Officers did not earn any bonus in the first selling season
of 1994.
5. In the Motion, the Debtor requested an order authorizing it to
award a bonus consisting of stock or cash (the "Consummation Bonus") and to
issue stock options (the "Stock Option Awards") to the Officers upon achieving
the consummation of the First Amended Joint Plan of Reorganization, dated
October 5, 1994, as may be thereafter amended (hereinafter the "Joint Plan"),
assuming the Alternative Treatment Provisions of the Joint Plan are not
2
<PAGE>
effective, or, if said provisions are effective, the Debtor is sold.
Seven hundred thousand (700,000) shares of
common stock of Reorganized Rose's will be authorized for issuance to the
Officers in the form of stock or stock options.
6. The Joint Plan contemplates two possible scenarios--
reorganization or liquidation--depending upon the non-occurrence of certain
events between the filing of the Joint Plan and April 30, 1995, referred to
in the Joint Plan as Alternative Treatment Events.(1) If an Alternative
Treatment Event occurs (which is not waived by the necessary parties), the
Alternative Treatment Provisions of the Joint Plan will be effective, and
the company will liquidate. The Consummation Bonus and Stock Option Awards
will be payable only in the event the Alternative Treatment Provisions of
the Joint Plan are not effective or the company is sold pursuant to a
modification of the Joint Plan or the Alternative Treatment Provisions of
the Joint Plan.
II.
CONSUMMATION BONUS AND STOCK OPTION AWARDS
A. Consummation Bonus
7. The Debtor requested authority to award a consummation bonus
consisting of stock or cash to the Officers either upon consummation of the
Joint Plan or a sale of the Debtor, depending upon the events of the
chapter 11 case. Within thirty (30) days of the Effective Date, the
Officers will be awarded an aggregate number
(1) All capitalized terms used herein but not defined shall have the
meaning ascribed to them in the Joint Plan unless otherwise noted.
3
<PAGE>
of shares of New Rose's Common Stock equal to 1.5% of the total number
of shares of New Rose's Common Stock to be issued on the Effective Date
(150,000 shares, hereinafter referred to as "Consummation Shares");(2)
provided, however, such shares will not be issued if the Alternative
Treatment Provisions of the Joint Plan are effective.
8. The Consummation Shares will be allocated to the participants
based on targeted awards. Individual awards, other than to the CEO, will
vary above and below the targeted level. The CEO will be awarded a fixed
number of shares equal to 41.09% of the Consummation Shares (a total of
61,635 shares).
9. Alternatively, in the event that the Debtor is sold as a going
concern pursuant to a modification of the Joint Plan or the assets of the
Debtor are sold pursuant to the Alternative Treatment Provisions of the
Joint Plan, a bonus payable from the proceeds of sale will be awarded to
the Officers. The bonus payable to the Officers will be an amount equal to
a percentage of the ultimate proceeds of sale after payment of Allowed
Administrative Claims, Tax Claims, GE Obligations and Allowed Claims in
Classes 1, 2A and 2B of the Joint Plan (hereinafter referred to as the
"Ultimate Proceeds of Sale"). The following table sets forth the range of
the Ultimate Proceeds of Sale and the corresponding percentages to be used
to calculate the bonuses to be distributed to the Officers in the event
(2) The Joint Plan provides that on the Effective Date, 10,000,000
shares of the common stock of Reorganized Rose's, referred to
as New Rose's Common Stock, will be issued.
4
<PAGE>
that the Debtor is sold.
Sales Price Percent of the Ultimate Proceeds
of Sale
$0 to $24,999,999 0.5%
$25,000,000 to $59,999,999 1.5%
$60,000,000 and above 2.0%
11. The bonus will be allocated among the Officers in a manner
identical to the allocation of the Consummation Shares, as discussed in
paragraph 8 herein.
B. Stock Option Awards
12. The Debtor also seeks authority to award the Officers stock
options. Ninety (90) days after the Effective Date, the Officers will be
issued incentive stock options (or to the extent required by law, non-
qualified stock options); provided, however, such options will not be
issued if the Alternative Treatment Provisions of the Joint Plan are
effective. These options will grant to the Officers the right to purchase
an aggregate amount of shares of New Rose's Common Stock equal to 5.5% of
the total number of shares of New Rose's Common Stock issued on the
Effective Date (550,000 shares, assuming 10 million shares are issued on
the Effective Date). One-half of the options will be granted with an
exercise price equal to the fair market value of the stock on the date of
the grant and will have a term of five (5) years. The remainder of the
options will be granted with an exercise price equal to two times the fair
market value of the stock on the date of
5
<PAGE>
the grant and will have a term of seven (7) years. (3) All of the stock
options will vest in equal thirds beginning on the first anniversary of
the consummation of the Joint Plan.
13. The stock options will be allocated based on the face value of
the stock under the option and targeted multiples of salary. Individual
grants, other than to the CEO, will vary above and below targeted levels.
The CEO will be awarded a fixed award equal to 25% of the total stock
options to be awarded.
III.
NEED FOR THE CONSUMMATION BONUS AND STOCK OPTION AWARDS
14. The Consummation Bonus and Stock Option Awards are beneficial for
a number of reasons. First, they reward the management team for their
intense efforts to bring about a successful reorganization. If the
Alternative Treatment Events do not occur, the awards also motivate the
Officers to work diligently, upon consummation of the Joint Plan, to
increase the value of the New Rose's Common Stock to be issued on the
Effective Date by providing the management team with a stake in the future
success of the business. The increased value of the New Rose's Common
Stock, in turn, will benefit the holders of allowed unsecured claims and/or
(3) The Debtor has drafted a "New Equity Compensation Plan" which is
the formal structure by which the Consummation Bonus and Stock Options
will be awarded to the Officers pursuant to the terms of this order.
The New Equity Compensation Plan defines "Fair Market Value"
to mean "with respect to any given day, the closing price of
the Stock reported on the NASDAQ National Market System for such
day, or if the Stock was not traded on the NASDAQ National Market
System on such day, then on the next day on which the Stock
was traded, all as reported by such source as the [Compensation]
Committee may select. The [Compensation] Committee may establish an
alternative method of determining Fair Market Value."
6
<PAGE>
common stock interests depending on who is the recipient of the New Rose's
Common Stock under the Joint Plan. If the Alternative Treatment Events do
occur, the Debtor will seek to maximize the return to the creditors through
a sale of the business. The awards will certainly have a motivational
effect relative to the sale effort.
15. The Consummation Bonus and Stock Option Awards will also cause
the Debtor's total compensation package to be more comparable to industry
practices, thereby reducing the Debtor's vulnerability to turnover of key
personnel.
16. The Official Committee for the Unsecured Creditors has reviewed
the terms of the Debtor's issuance of the Consummation Bonus and Stock
Option Awards, as described herein, and has no objection to their issuance.
NOW, THEREFORE, for good cause shown, the Court hereby authorizes the
Debtor to issue the Consummation Bonus and Stock Option Awards in a manner
substantially similar to that described herein.
Dated: February 14, 1995
/s/ A. Thomas Small
UNITED STATES BANKRUPTCY JUDGE
7
<PAGE>
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE: CASE NO. 93-01365-5-ATS
ROSE'S STORES, INC. (CHAPTER 11)
(TAX ID #56-0382475)
Debtor
__________________________
AMENDED ORDER APPROVING REJECTION OF TERMINATION
AGREEMENTS AND IMPLEMENTATION OF SEVERANCE PROGRAM
THIS MATTER is before the Court upon the "Motion For Order Approving
Rejection Of Termination Agreements, Modification of Executive Employment
Agreement, and Implementation of Severance Program" (the "Motion") filed by
Rose's Stores, Inc. (the "Debtor"), debtor in possession in the above-
captioned case. The Motion was served on the "Official Service List" as
established in the Court's "Ex Parte Order Establishing Notice Requirements
With Respect To All Proceedings In This Case," entered on or about
September 7, 1993. Based upon a review of the record, arguments of
counsel, and evidence presented at the hearing on the Motion, the Court
hereby finds and concludes as follows:
1. The Debtor filed for relief under chapter 11 of the Bankruptcy
Code on September 5, 1993 (the "Petition Date"). Since that time, the
Debtor has been operating as a debtor in possession pursuant to sections
1107 and 1108 of the Bankruptcy Code.
2. As of the Petition Date, the Debtor operated a chain of two
hundred and fifteen (215) discount retail stores, known as "Roses" located
in eleven (11) southeastern states, and generated approximately 1.4 billion
in revenue per year.
<PAGE>
3. As of the Petition Date, the Debtor was the fifth largest
non-public employer in North Carolina. Of the approximately eighteen
thousand (18,000) individuals employed by the Debtor at that time, ten
thousand (10,000) were located in North Carolina. At its headquarters in
Henderson, North Carolina, the Debtor employed over one thousand four
hundred (1,400) associates, making it one of the largest employers in Vance
County.
4. As of the Petition Date, the Debtor's operations were directed by
an officer group comprised of only twenty-two individuals ("Officers").
The name of each officer, his or her respective position and a short
biographical summary is attached to the Debtor's Motion as Exhibit "A."
5. Pursuant to several orders entered on November 18, 1993, this
Court authorized payment of base compensation to the Officers (including an
automobile allowance for senior Officers) and continuation of the Debtor's
Officer Medical Reimbursement Plan. By Order dated October 25, 1993, this
Court deferred consideration of the Debtor's assumption of an Executive
Employment Agreement between the Debtor and the President and Chief
Executive Officer ("Employment Agreement") effective July 25, 1991 and the
termination agreements between the Debtor and each of the remaining
Officers ("Termination Agreements") until at least sixty (60) days from the
date of the entry of the Order. Among other things, the Employment
Agreement and the Termination Agreements provided severance pay to the
Officers under certain terms and conditions.
-2-
<PAGE>
6. In its Motion, the Debtor sought to reject the Termination
Agreements and to implement, as a replacement, a severance program
discussed more fully in the Debtor's Motion. The Debtor also requested
that this Court enter an order prohibiting any Officer from asserting a
claim for damages due to the rejection of the Termination Agreements. In
its Motion, the Debtor did not seek to assume or reject the Employment
Agreement with Mr. George L. Jones, President and Chief Executive Officer.
Instead, it sought to modify the agreement to allow the provisions of the
proposed severance program to supersede and control any provisions for
severance in the Employment Agreement.
7. As a result of discussions with the Bank Group1, the Senior
Noteholders(2), the Bank of Tokyo (collectively the "Pre-Petition Lenders"),
the Official Unsecured Creditors' Committee and the Official Committee of
Equity Security Holders regarding the
(1) NationsBank of North Carolina, N.A. ("NationsBank"),
Wachovia Bank of North Carolina, N.A. ("Wachovia"), Branch
Banking and Trust Company, Crestar Bank, The Bank of New York,
Central Carolina Bank, Credit Lyonnais. Collectively referred to
as the "Bank Group."
(2) The Franklin Life Insurance Company, The Franklin
United Life Insurance Company, Jefferson-Pilot Life Insurance
Company, Nationwide Life Insurance Company, Knights of Columbus,
Great-West Life & Annuity Insurance Company, Wausau Life
Insurance Company, Woodmen of the World Life Insurance Society,
Guarantee Mutual Life Company, The Lafayette Life Insurance
Company, Central Life Assurance Company, Equitable Variable Life
Insurance Company, The Equitable Life Assurance Society of the
United States, Merrill Lynch Life Insurance Co., ML Life
Insurance Company of New York, Washington National Insurance
Company, American Family Life Insurance Company, State Mutual
Life Assurance Company of America, and SMA Life Assurance
Company. Collectively referred to as the "Senior Noteholders."
-3-
<PAGE>
proposed severance program, the Debtor has modified the program to address
and, to the extent possible, eliminate the concerns voiced by the various
constituencies. A copy of the revised Severance Program ("Severance Program")
is attached hereto as Exhibit "A" and is incorporated in full into this Order.
The Severance Program includes all Officers and Salaried Employees, but
excludes the President and Chief Executive Officer.(3)
8. The Severance Program will provide severance pay, pursuant to
certain terms and conditions, to all Officers (except for the President and
Chief Executive Officer) and Salaried Employees(4) and will remain in effect
from the date of entry of this Order until one (1) year after confirmation
of the Debtor's plan of reorganization, a creditor's plan of
reorganization, a plan of liquidation, or the conversion of the case to
Chapter 7 of the Bankruptcy Code.
9. To briefly summarize the terms of the Severance Program, the
Officers, excluding the President and Chief Executive Officer, and Salaried
Employees are divided into three tiers, each of whom are awarded severance
benefits on the basis of their classification.
(3) The Debtor plans to address the treatment of the Executive
Employment Agreement entered into by the Debtor with the Mr.
George L. Jones, including any provision for severance, at a
later date.
(4) Salaried Employees include the following:
a) Directors (does not include the Board of Directors),
Senior Managers, Senior Buyers (approximately 57 employees)
b) Buyers, Store Managers (approximately 213 employees)
c) Exempt Managers, Other Exempt Associates (approximately
112 employees)
d) Exempt Associates (approximately 707 employees).
-4-
<PAGE>
(a) Tier 1 consists of the Executive Vice Presidents and Senior
Vice Presidents who, if eligible, would receive eighteen (18) months salary
and a maximum reimbursement of $10,000.00 for reasonable expenses incurred
in seeking another job, including outplacement assistance.
(b) Tier 2 consists of the Vice Presidents and Treasurer who, if
eligible, would receive twelve (12) months salary and a maximum
reimbursement of $7,500.00 for reasonable expenses incurred in seeking
another job, including outplacement assistance. Tiers 1 and 2 would also
continue receiving benefits of medical, dental and disability coverage (or
the present value of the lump sum equivalent thereof) for a period of three
months following termination.
(c) Tier 3 consists of all Salaried Employees who, if eligible,
would receive severance pay on the basis of their position and length of
service to the Debtor. Exhibit A sets forth the positions classified as
Salaried Employees and the corresponding amount of severance pay for each
position.
10. Severance pay awarded to Tiers 1 and 2 would be payable one-half
in a lump sum immediately upon termination and one-half in monthly
installments commencing on the first day of either the seventh or tenth
month following the date of termination depending on the level of the
Officer. Severance pay awarded to Tier 3 will be payable in weekly
installments. As a condition to receiving the full severance award, all
associates must execute a general release; otherwise, the severance award
will be one week's pay.
-5-
<PAGE>
11. Any portion of severance payable in installments will cease if
the terminated associate obtains another job. As a condition to receiving
severance pay, the terminated associate must immediately notify the
Personnel Department in writing should such associate obtain new
employment. Among any other rights the Debtor might have, the Debtor is
authorized to terminate any severance payments and to recover that portion
of severance pay awarded erroneously due to the terminated associate's
failure to provide timely or accurate written notice of re-employment.
12. An associate is eligible to participate in the Severance Program
upon the occurrence of certain "triggering" events which are set forth in
detail in Exhibit A. Triggering events include elimination of an
associate's position unless the associate is offered a comparable or better
position with the Debtor; termination of an associate's position other than
for misconduct; constructive or voluntary termination due to a material
reduction in salary or change in job responsibilities; termination due to a
chapter 11 liquidation; and termination due to conversion of the Debtor's
case to chapter 7 of the Bankruptcy Code.
13. The Debtor reserves the right to implement this Severance Program
by entering into an agreement with each of the Officers covered by the
Severance Program which solely embodies the terms and conditions of the
Severance Program and to retain the Severance Program as a corporate policy
for the Salaried Employees.
-6-
<PAGE>
NOW, THEREFORE, for good cause shown, it is hereby ordered as
follows:
1. The Severance Program shall, for all purposes, be deemed to
replace the Termination Agreements. The Debtor is authorized to implement
the Severance Program in its entirety as described herein and in Exhibit A
attached hereto.
2. The Debtor is authorized to reject the Termination Agreements
entered into by the Debtor with each of the Officers.
3. The participating Officers may not assert any claim for damages
due to the rejection of said Termination Agreements, or arising under or
otherwise connected with the Termination Agreements, or any other claim for
severance other than pursuant to the Severance Program approved by the
entry of this Order.
4. To be eligible to participate in the Severance Program, the
participating Officers must agree in writing to release any claims they may
have against the Debtor due to the rejection of said Termination
Agreements, or arising under or otherwise connected with the Termination
Agreements, or any other claim for severance other than pursuant to the
Severance Program approved by the entry of this order.
5. The Severance Program shall be deemed to replace any earlier
severance program or policy offered by the Debtor, and entry of this Order
shall bar any Salaried Employee from asserting any claim for severance
other than pursuant to the Severance Program approved by the entry of this
Order.
-7-
<PAGE>
6. No charge or assessment shall be made or allowed against the Pre-
Petition Lenders or General Electric Capital Corporation ("GE Capital") or
their respective collateral for any obligations arising under the Severance
Program pursuant to 11 U.S.C. (Section Mark) 506(c), or otherwise. To the
extent the Pre-Petition Lenders hold allowed administrative claims, other
than that provided for in paragraph 7 of the decretal clause of this Order,
the Pre-Petition Lenders will be treated for distribution purposes on par with
other cost of administration claims, including cost of administration
claims under the Severance Program. Allowed general unsecured claims,
including any such claims held by the Pre-Petition Lenders, will be
subordinate to cost of administration claims which arise under the
Severance Program.
7. The Debtor's obligations under the Severance Program are a cost
of administration subordinate to the "Post-Petition Obligations" of GE
Capital and the Pre-Petition Lenders and the $2,000,000.00 professional
carveout each as provided for and/or defined in the "Final Order
Authorizing Debtor-In-Possession To Borrow Funds With Priority Over
Administrative Expenses and Secured By Liens On Property Of The Estate"
(the "Final DIP Order"). Notwithstanding anything to the contrary herein,
without the future consent of GE Capital, the Debtor is not authorized to
pay any obligation or to take any other action under this Order or the
Severance Program which would result in any breach of the Final DIP Order,
the DIP Loan Agreement (as defined in the Final DIP Order) or
-8-
<PAGE>
any covenants thereunder. Further, the entry of this Order shall not alter,
modify or amend the provisions of the Final DIP Order.
Dated: April 1, 1994
/s/ A. Thomas Small
Bankruptcy Judge
-9-
<PAGE>
EXHIBIT "A"
ROSE'S STORES, INC.
SEVERANCE PROGRAM
Section 1
Purpose of the Program
Rose's Stores, Inc. (the "Company") intends by this Severance Program (the
"Program") to provide a method which, in the discretion of the Program
Administrator, can be utilized to provide Officers and Salaried Associates
of the Company with temporary protection against economic hardship if they
are separated from employment by the Company on account of severance as
defined in Section 3 herein.
This Program shall supersede, replace and control any and all prepetition
termination agreements and the corporate severance pay policy, except for
the employment agreement between the Company and the President and Chief
Executive Officer effective July 25, 1991.
This Program shall be effective as of the date of approval of this Program
by the court with jurisdiction over the bankruptcy filing and shall cease
to be effective one (1) year from: (a) the date of confirmation of the
Company's plan of reorganization under chapter 11 of the Bankruptcy Code of
1978, as amended (the "Bankruptcy Code"); (b) a creditor's plan of
reorganization; (c) a plan of liquidation under the provisions of Chapter
11 of the Bankruptcy Code; or (d) a conversion to Chapter 7 of the
Bankruptcy Code.
Section 2
Definitions
As used in this Program, the following words and phrases shall have the
following meanings, unless the context clearly indicates otherwise:
(a) "Associate" shall mean any person in the employment of the Company.
(b) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(c) "Length of Service" or "Active Service" shall mean the total
-10-
<PAGE>
combined months of an Associate's active employment with the Company and is
limited only to that time for which the Associate received pay from the
Company for the actual performance of services. If an Associate works
over one-half of the working days in a calendar month, he shall be credited
with a full month of Active Service for such month.
Calculations shall be based on a forty (40) hour work week for a regular
full-time Associate and on the average weekly hours worked during the three
(3) months immediately preceding the Associate's Termination Date for a
regular part-time Associate. The period for which Severance Allowance
benefits are paid shall not be counted in determining Length of Service.
(d) "Misconduct" shall mean the conviction of, or the entering of a plea
of, nolo contendere by the Associate for any felony arising out of acts of
fraud or dishonesty committed against the Company; or willful gross
misconduct deemed to be materially and demonstrably injurious to the
Company as determined by the Program Administrator. The Program
Administrator's determination that a separation from employment is due to
Misconduct shall be final and binding.
(e) "Officer" shall mean any of the following Associates of the Company:
(i) Executive Vice Presidents,
(ii) Senior Vice Presidents,
(iii) Vice Presidents, and
(iv) Treasurer.
(f) An Associate shall be deemed to be "Permanently Disabled" six (6)
months after the first date on which he is disabled by bodily or mental
illness, disease, or injury, to the extent that he is prevented from
performing his material and substantial duties of employment provided that
such disability has continued uninterrupted for such six (6) month period.
The Program Administrator shall determine that an Associate is "Permanently
Disabled". The Program Administrator's determination that an Associate is
"Permanently Disabled" shall be final and binding.
(g) "Program Administrator" shall mean the Human Resources Department of
the Company.
(h) "Salaried Associate" shall mean any of the following Associates of the
Company:
(i) Directors (not the Company Board of Directors),
(ii) Senior Managers,
-11-
<PAGE>
(iii) Senior Buyers,
(iv) Buyers,
(v) Store Managers,
(vi) Exempt Managers, and
(vii) Other Exempt Associates.
(i) "Salary" shall mean an Associate's regular annual salary from the
Company on his Termination Date exclusive of overtime, bonuses, awards,
imputed income or extraordinary payments. When used in connection with the
computation of the amount of an Associate's Severance Allowance, the
Program Administrator shall employ the following guidelines: the monthly
Salary rate shall be computed by dividing the Associate's Salary by 12, the
weekly Salary rate shall be computed by dividing the Associate's Salary by
52, and the daily Salary rate shall be computed by dividing the weekly
Salary rate by five. An Associate's Salary shall be determined by the
Program Administrator and its determination shall be final and binding on
all parties.
(j) "Severance Allowance" shall mean a payment or payments as may be
provided herein to an Associate upon termination of active employment in
consideration of the Associate's tenure and performance with the Company
and the probability that the Associate will suffer economic hardship until
the Associate obtains a new income-earning position and in further
consideration of the execution of such release as shall be determined to be
necessary by the Program Administrator. The amount of any Severance
Allowance may be reduced by any monies arising out of the employment
relationship which the Associate may owe to the Company. Payments shall be
reduced by any required deduction for taxes, withholding or benefits
provided or elected hereunder. Such pay shall not be extended by holidays
occurring during the covered period. Any portion of the severance
allowance to be paid in installments shall not be paid if the Associate
shall become actively employed as determined by the Program Administrator.
(k) "Severance Allowance Period" shall mean the period beginning on the
Associate's Termination Date through and including the ending date used as
the basis for the calculation of the Severance Allowance benefit, or, if
earlier, the date the Associate becomes actively employed as determined by
the Program Administrator.
(l) "Termination Date" shall mean the last official work day for which an
Associate receives pay for Active Service, excluding any period for which
Severance Allowance or other benefit payments hereunder are made.
-12-
<PAGE>
Section 3
Eligibility for Severance Allowance
Any Officer or Salaried Associate who is separated from employment shall be
eligible for Severance Allowance in accordance with the following rules and
restrictions:
(a) If an Associate ceases employment for any of the following reasons, he
will be entitled to receive a Severance Allowance as described below:
(i) elimination of his or her position, unless the Associate is
offered a comparable or better position with the Company as
determined by the Program Administrator,
(ii) termination of his or her employment other than for
Misconduct,
(iii) constructive or voluntary termination, within sixty (60)
days of such termination, due to a material reduction in
salary,
(iv) constructive or voluntary termination, within sixty (60)
days of such termination, due to a material change in job
responsibilities,
(v) termination of his or her employment with the Company on
account of the Associate's Permanent Disability, or
(vi) termination due to liquidation of the Company under the
provisions of chapter 11 of the Bankruptcy Code or a
conversion to a proceeding under chapter 7 of the Bankruptcy
Code.
Section 4
Calculation of Severance Allowance
The amount of any Severance Allowance, shall be calculated as follows:
Tier 1: Executive Vice Presidents and Senior Vice Presidents
The Severance Allowance shall consist of:
(a) Eighteen (18) months' Salary, one-half (1/2) payable in a lump sum
payment made as soon as administratively possible after the
Associate's Termination Date and one-half (1/2) payable in
substantially equal monthly
-13-
<PAGE>
installments over a nine (9) month period with installment payments
commencing on the first day of the tenth month following the
Termination Date; or, if the Associate shall not execute a general
release acceptable to the Program Administrator, one week's salary;
(b) Reimbursement for reasonable expenses, as determined by the
Program Administrator, incurred by the Associate in the pursuit
of subsequent employment, including any reputable outplacement
assistance, up to a maximum of $10,000. The Associate shall be
entitled to such payments until the first day of the month
following the month in which the Associate is reemployed or the
end of the six-month period beginning on the Termination Date,
whichever shall occur first; and
(c) Continued medical, dental and disability coverage under the
current Company plans for a period of three (3) months following
the Associate's Termination Date. In lieu of continued coverage
pursuant to this provision of the Program, an Associate may elect
to receive the present value of the continued coverage in a lump
sum payment made as soon as administratively possible after the
Associate's Termination Date by filing his choice with the
Company in writing within fourteen (14) days following the
Termination Date. Any benefits or payments under this section
shall be in addition to any extended group health plan coverage
to which the Associate is entitled under the provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
Tier 2: Vice Presidents and Treasurer
The Severance Allowance shall consist of:
(a) Twelve (12) months' Salary, one-half (1/2) payable in a lump sum
payment made as soon as administratively possible after the
Associate's Termination Date and one-half (1/2) payable in
substantially equal monthly installments over a six (6) month
period with installment payments commencing on the first day of
the seventh month following the Termination Date; or, if the
Associate shall not execute a general release acceptable to the
Program Administrator, one week's salary;
(b) Reimbursement for reasonable expenses, as determined by the
Program Administrator, incurred by the Associate in the pursuit
of subsequent employment, including any
-14-
<PAGE>
reputable outplacement assistance, up to a maximum of $7,500.
The Associate shall be entitled to such payments until the first
day of the month following the month in which the Associate is
reemployed or the end of the six-month period beginning on the
Termination Date, whichever shall occur first; and
(c) Continued medical, dental and disability coverage under the
current Company plans for a period of three (3) months following
the Associate's Termination Date. In lieu of continued coverage
pursuant to this provision of the Program, an Associate may elect
to receive the present value of the continued coverage in a lump
sum payment made as soon as administratively possible after the
Associate's Termination Date by filing his choice with the
Company in writing within fourteen (14) days following the
Termination Date. Any benefits or payments under this section
shall be in addition to any extended group health plan coverage
to which the Associate is entitled under the provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
Tier 3: All Salaried Associates
The Severance Allowance payable to a Salaried Associate shall be based
upon the Associate's Length of Service and shall be determined according
the following schedule:
ASSOCIATE CLASSIFICATION SEVERANCE ALLOWANCE
Class A:
Directors, Senior Three (3) weeks' Salary
Managers, Senior Buyers for each year of Active
(Pay Grades 10 and above) Service, but in no event less than
12 weeks' Salary or in excess of 26
weeks' Salary (minimum 12 weeks,
maximum 26 weeks)
Class B:
Buyers, Store Managers Two (2) weeks' salary for each year
of Active Service, but in no event
less than 12 weeks' Salary or in
excess of 26 weeks' Salary (minimum
12 weeks, maximum 26 weeks)
Class C:
Exempt Managers, Other Two (2) weeks' Salary for
-15-
<PAGE>
Exempt Associates each year of Active
(Pay Grades 7 through 9) Service, but in no event less than
6 weeks' Salary or in excess of 26
weeks' Salary (minimum 6 weeks,
maximum 26 weeks)
-16-
<PAGE>
Class D:
Exempt Associates One (1) week's Salary for
(Pay Grades 1 through 6) each year of Active Service, but in
no event less than 4 weeks' Salary
or in excess of 12 weeks' Salary
(minimum 4 weeks, maximum 12 weeks)
The above severance amounts shall be payable in weekly installments
with the initial installment beginning as soon as possible after the
Termination Date.
Installment payments made under Tiers 1, 2 and 3 shall cease upon such
date that the Associate shall become actively employed as determined by the
Program Administrator. Furthermore, if the Associate shall not execute a
general release acceptable to the Program Administrator the maximum
severance amounts shall be one week's salary.
Section 5
General Provisions Governing Severance Allowances
(a) The terms of this Program shall not affect the provision of benefits
under other plans or programs of the Company which other plans or programs
shall be governed solely by their terms and applicable law. The benefits
under any other plan or program of the Company are not continued as a
result of a Severance Allowance other than those mandated by Federal or
state regulations.
(b) Any portion of a Severance Allowance payable in installments shall
cease at such time as the Associate obtains employment with another
employer.
(c) An Associate who is dismissed due to Misconduct shall not be eligible
for a Severance Allowance or any other benefits hereunder.
(d) In no event shall any Severance Allowance (1) be paid over a period
longer than twenty-four (24) months; (2) exceed 200% of the Associate's
annual compensation as of the Termination Date; or (3) be structured so
that the payments constitute an employee pension benefit plan as defined by
Title I, Section 3 of ERISA.
(e) As a condition to receiving a Severance Allowance from the
Corporation, an Associate must immediately notify in writing the Personnel
Department of the Company if the Associate shall obtain new employment. If
the Associate fails to timely or accurately provide written notification,
as determined by the Program Administrator, the Company shall be entitled
to terminate Severance Allowance payments to the Associate and to recover
from
-17-
<PAGE>
the Associate the amount of any Severance Allowance payments
previously made to the Associate equal to the amount which was erroneously
paid on account of the failure to provide timely notice.
(f) The fact that an Associate is employed in a secondary part-time
position with another employer at the time of his termination of employment
with the Company shall have no adverse effect on his eligibility for
Severance Allowance under this Program, as determined by the Program
Administrator in its discretion.
Section 6
Administrative Information
The Program Administrator shall have the responsibility for the
administration of the Program, and shall have the discretionary authority
to determine eligibility for benefits under the Program, to otherwise
administer the Program and to construe the terms of the Program, and its
decisions shall be final and binding on all affected parties.
Section 7
Powers and Duties of Program Administrator
In addition to any implied powers and duties that may be needed to carry
out the provisions of the Program, the Program Administrator shall have the
following specific powers and duties, which powers and duties it may
exercise in its discretion:
(a) To make and enforce such rules and regulations as it shall deem
necessary and proper for the efficient administration of the Program;
(b) To interpret the Program and to decide any and all matters arising
hereunder, including the right to interpret and remedy possible
ambiguities, inconsistencies or omissions
(c) To determine and compute the amount of benefits that shall be payable
to any Associate, in accordance with the provisions of the Program;
(d) To appoint other persons to perform such responsibilities under the
Program as it may determine; and
(e) To employ one or more persons to render advice with respect to any of
its responsibilities under the Program.
Section 8
Appeals Procedure
-18-
<PAGE>
If an Associate eligible for a Severance Allowance or his legal
representative or other person designated by the Program Administrator to
receive payment on the Associate's behalf (the "claimant") is denied
benefits under this Program or disagrees with the amount of or the
determination of his entitlement to a Severance Allowance, if any, he may
request a review of his claim by notifying the Program Administrator in
writing. The request shall be reviewed and the claimant shall be notified
of the Program Administrator's decision within ninety (90) days. If the
appeal is denied, the notice shall explain the reason of the denial,
quoting the sections of the Program or other pertinent documents, if any,
used to arrive at this decision; shall provide a description of any
additional material or information that would be helpful to the Program
Administrator in further review of the claim and reasons why such material
or information is necessary; and shall provide an explanation of the claims
review procedure. If the notice does not resolve the claim to the
claimant's satisfaction, he may appeal the decision by filing a written
request for a hearing before the Program Administrator. This written
request must be filed with the Program Administrator within 60 days after
the claimant has received the written decision of the Program
Administrator. The claimant may review any applicable documents and may
also submit points of disagreement or other comments in writing.
The Program Administrator, in its discretion, may schedule a meeting with
the claimant and/or his representative within sixty (60) days after the
claimant has filed the request for review. Within sixty (60) days of the
date of the receipt of the appeal by the Program Administrator, the
claimant shall receive written notice of the Program Administrator's final
decision. However, if a hearing is held or there are other special
circumstances involved, the decision shall be given no later than within
one hundred and twenty (120) days of the date of the receipt of the appeal.
The Program Administrator shall interpret the appeals procedure set forth
in this Section 8 so as to conform to the requirements of the claims review
provisions of Part 5, Title I of ERISA.
Section 9
Miscellaneous Provisions
(a) Payments hereunder shall be made from the general assets of the
Company pursuant to Program provisions.
(b) Service of legal process may be made upon the secretary of the Company
at the office of the Company, or upon such other person as shall be
designated by the Company.
-19-
<PAGE>
(c) Except to the extent preempted by ERISA, the Program shall be
construed in accordance with the laws of the State of North Carolina.
(d) Every fiduciary shall, unless exempt by ERISA, be bonded in accordance
with the requirements of ERISA. The bond shall provide protection to the
Program against any loss by reason of acts of fraud or dishonesty by the
fiduciary or in connivance with others. The cost of the bond shall be an
expense of the Company.
(e) When any person entitled to benefits under the Program is under legal
disability or, in the Program Administrator's opinion, is in any way
incapacitated so as to be unable to manage his or her affairs, the Program
Administrator may cause such person's benefits to be paid to such person's
legal representative for his or her benefit or to be applied for the
benefit of such person in any other manner that the Program Administrator
may determine. Such payments of benefits shall completely discharge the
liability of the Program Administrator or the Company for such benefits.
(f) The records of the Program shall be maintained on the basis of the
taxable year of the Company.
(g) The Program Administrator shall cause the timely filing with proper
governmental authorities and timely furnishing to all participants of all
documents required by ERISA to be so filed and furnished.
(h) Except for the right to receive any benefit payable under the Program,
no person shall have any right, title or interest in or to the assets of
the Company because of the Program.
(i) Rights of any Associate to be employed shall not be deemed to be
enlarged or diminished by reason of the establishment of the Program, and
no Associate shall have any right to be retained in the service of the
Company by way of this Program that he would not otherwise have.
(j) Nothing contained in the Program shall impose on the Program
Administrator, the Company, or any directors, officers or employees of the
Company any liability for the payment of benefits under the Program other
than liabilities resulting from willful neglect or fraud. The liability of
the Company for benefits shall be limited to the benefits provided under
the Program. Persons entitled to benefits under the plan shall look only
to the Company for payment.
(k) Where the context permits, words in the masculine gender
-20-
<PAGE>
shall include the feminine gender and the singular shall include the plural.
(l) The headings and subheadings of the Program have been inserted for
convenience of reference and shall be disregarded in any construction of
the provisions hereof.
(m) The Company agrees to indemnify and to defend to the fullest extent
permitted by law any employee serving as the Program Administrator or as a
member of a committee designated as Program Administrator (including any
employee or former employee who formerly served as Program Administrator or
as a member of such Committee) against all liabilities, damages, costs and
expenses (including attorney's fees and amounts paid in settlement of any
claims approved by the Employer) occasioned by any act or omission to act
in connection with the Program, if such act or omission is in good faith.
(n) If any provision of the Program shall be invalid or unenforceable for
any reason, the remaining provisions shall nevertheless be carried into
effect.
This ____ day of ____________, 1994.
ROSE'S STORES, INC.
ATTEST: By:__________________________
President
___________________________
Secretary
(Corporate Seal)
-21-
<PAGE>
