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 28, 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)
PAGE
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Item 5. Other Events
On April 28, 1995, the Registrant satisfied the last condition
for its emergence from bankruptcy by closing on its exit financing
loans. The exit financing is a $125,000,000 three-year revolving
credit facility with The First National Bank of Boston and The CIT
Group/Business Credit, Inc., as facility agents. Under the exit
financing facility, trade suppliers who extend credit to the
Registrant will be supported by a $5,000,000 letter of credit and a
subordinated lien of $15,000,000 in the real estate properties of the
Registrant.
The foregoing description is merely a summary of certain material
matters contained in the documents that are exhibits hereto. Such
documents are incorporated by reference herein and should be read in
full to obtain a full understanding of the matters summarized herein.
Item 7. Financial Statements and Exhibits
(c) The following exhibits are part of this report:
(1) Letter of Credit and Mortgage Trust Agreement dated
May 8, 1995, between the Registrant and the Trustee,
pursuant to the trade lien and subordinated letter of
credit.
(2) Second Deed of Trust dated May 8, 1995, between the
Registrant and the Trustee, pursuant to the trade lien.
(3) Standby Letter of Credit dated May 8, 1995, issued by the
First National Bank of Boston, to the Trustee for the
benefit of the trade suppliers.
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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: June 16, 1995 By:/s/ Jeanette R. Peters
Jeanette R. Peters
Senior Vice President
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
(1) Letter of Credit and Mortgage Trust Agreement dated May 8, 1995,
between the Registrant and the Trustee, pursuant to the trade lien
and subordinated letter of credit.
(2) Second Deed of Trust dated May 8, 1995, between the
Registrant and the Trustee, pursuant to the trade lien.
(3) Standby Letter of Credit dated May 8, 1995, issued by the
First National Bank of Boston, to the Trustee for the
benefit of the trade suppliers.
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Letter of Credit and Mortgage Trust Agreement
TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DECLARATION OF TRUST . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE I DEFINITIONS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.01 Certain Defined Terms.. . . . . . . . . . . . . 3
SECTION 1.02 Certain References. . . . . . . . . . . . . . . 6
ARTICLE II ACCEPTANCE OF TRUST; DELIVERY OF TRADE VENDOR
L/C AND MORTGAGE;EXECUTION AND DELIVERY OF
SUBORDINATION AGREEMENT . . . . . . . . . . . . 7
SECTION 2.01 Acceptance of Trust.. . . . . . . . . . . . . . 7
SECTION 2.02 Delivery and Receipt of Trade Vendor L/C and
Mortgage . 7
SECTION 2.03 Execution and Delivery of Subordination
Agreement . 7
ARTICLE III DRAW NOTICE; DRAW UNDER TRADE VENDOR L/C. . . . 7
SECTION 3.01 Draw Notice.. . . . . . . . . . . . . . . . . . 7
SECTION 3.02 Draw by Trustee; Request for Vendor Information. 7
ARTICLE IV MORTGAGE DEFAULT NOTICE; REMEDIES . . . . . . . 8
SECTION 4.01 Mortgage Default Notice . . . . . . . . . . . . 8
SECTION 4.02 Action upon Receipt of Mortgage Default Notice. 8
SECTION 4.03 Remedies in Respect of Mortgage Generally. . . 8
SECTION 4.04 Appointment of a Receiver . . . . . . . . . . . 9
SECTION 4.05 Exercise of Powers. . . . . . . . . . . . . . . 9
SECTION 4.06 Remedies Not Exclusive. . . . . . . . . . . . . 9
ARTICLE V DIRECTION BY TRADE COMMITTEE. . . . . . . . . . 10
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SECTION 5.01 Direction by Trade Committee. . . . . . . . . . 10
ARTICLE VI TRUSTEE'S RIGHTS AND REMEDIES . . . . . . . . . 11
SECTION 6.01 Rights and Remedies under Security. . . . . . . 11
SECTION 6.02 Right to Initiate Judicial Proceedings, Etc.. . 11
SECTION 6.03 Limitation on Trustee's Duties in Respect of
Security. . . . . . . . . . . . . . . . . . . . 11
SECTION 6.04 Limitation by Law . . . . . . . . . . . . . . . .11
ARTICLE VII NOTICE OF PAYMENT TO TRADE VENDORS . . . . . . 12
SECTION 7.01 Notice of Payment to Trade Vendors. . . . . . . 12
ARTICLE VIII PROCEEDS ACCOUNT . . . . . . . . . . . . . . . 13
SECTION 8.01 The Proceeds Account. . . . . . . . . . . . . . 13
SECTION 8.02 Control of Proceeds Account.. . . . . . . . . . 13
SECTION 8.03 Investment of Funds Deposited in Account. . . . 13
ARTICLE IX APPLICATION OF PROCEEDS . . . . . . . . . . . . 14
SECTION 9.01 Application of Proceeds.. . . . . . . . . . . . 14
SECTION 9.02 Payment of Proceeds.. . . . . . . . . . . . . . 15
ARTICLE X ABSOLUTE RIGHTS OF TRADE VENDORS. . . . . . . . 15
SECTION 10.01 Absolute Rights of Trade Vendors. . . . . . . . 15
ARTICLE XI AGREEMENTS WITH THE TRUSTEE AND THE MORTGAGE
TRUSTEE . . . . . . . . . . . . . . . . . . . . 15
SECTION 11.01 Information as to Trade Vendors.. . . . . . . . 15
SECTION 11.02 Compensation and Expenses.. . . . . . . . . . . 17
SECTION 11.03 Stamp and Other Similar Taxes . . . . . . . . . 17
SECTION 11.04 Filing Fees, Excise Taxes, Etc. . . . . . . . . 17
SECTION 11.05 Indemnification.. . . . . . . . . . . . . . . . 18
SECTION 11.06 Further Assurances. . . . . . . . . . . . . . . 18
SECTION 11.07 Notification of Event of Default Under Credit
Agreement. . . . . . . . . . . . . . . . . . 18
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ARTICLE XII THE TRUSTEE . . . . . . . . . . . . . . . . . . 19
SECTION 12.01 Exculpatory Provisions. . . . . . . . . . . . . 19
SECTION 12.02 Delegation of Duties. . . . . . . . . . . . . . 20
SECTION 12.03 Reliance by Trustee . . . . . . . . . . . . . . 20
SECTION 12.04 Limitations on Duties of the Trustee. . . . . . 21
SECTION 12.05 Moneys to Be Held in Trust. . . . . . . . . . . 21
SECTION 12.06 Resignation and Removal of Trustee. . . . . . . 22
SECTION 12.07 Trustee Appointed Attorney-in-Fact. . . . . . . 23
SECTION 12.08 Reasonable Care.. . . . . . . . . . . . . . . . 23
ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . 24
SECTION 13.01 Amendment or Waiver.. . . . . . . . . . . . . . 24
SECTION 13.02 Subordination Agreement. . . . . . . . . . . . 24
SECTION 13.03 Notices.. . . . . . . . . . . . . . . . . . . . 24
SECTION 13.04 Headings. . . . . . . . . . . . . . . . . . . . 25
SECTION 13.05 Severability. . . . . . . . . . . . . . . . . . 25
SECTION 13.06 Claims Against Trustee. . . . . . . . . . . . . 25
SECTION 13.07 Binding Effect. . . . . . . . . . . . . . . . . 25
SECTION 13.08 Governing Law.. . . . . . . . . . . . . . . . . 25
SECTION 13.09 Counterparts. . . . . . . . . . . . . . . . . . 26
SECTION 13.10 Termination.. . . . . . . . . . . . . . . . . . 26
PAGE
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LETTER OF CREDIT AND MORTGAGE TRUST AGREEMENT
This LETTER OF CREDIT AND MORTGAGE TRUST AGREEMENT (as
amended, amended and restated, supplemented or otherwise modified
from time to time in accordance with the terms hereof, this
"Agreement") is dated as of May 8, 1995 and is entered into
between Rose's Stores, Inc., a Delaware corporation, with an
office at U.S. Highway #1 Business, Henderson, North Carolina
27536 (the "Company") and M.J. Sherman & Associates, Inc., a New
York corporation, with an office at 333 East 68th Street, New
York, New York 10021, as trustee (the "Trustee"). Initially
capitalized terms used and not otherwise defined herein shall
have the meanings set forth in Article I hereof.
RECITALS
A. On September 5, 1993 the Company filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code with
the United States Bankruptcy Court for the Eastern District of
North Carolina (the "Bankruptcy Court").
B. On December 14, 1994 the Bankruptcy Court entered
an order confirming the Company's First Amended Joint Plan of
Reorganization dated October 4, 1994 (as so confirmed, and as
modified and restated by the Company's Modified and Restated
First Amended Joint Plan of Reorganization dated April 19, 1995
which was confirmed pursuant to an order of the Bankruptcy Court
dated April 24, 1995, the "Plan").
C. On April 28, 1995 the Company, as Borrower,
entered into a Revolving Credit Agreement with The First National
Bank of Boston ("FNBB") and The CIT Group/Business Credit, Inc.
("CIT"), as Facility Agents, FNBB, as Administrative Agent, and
the lending institutions parties thereto, as Banks (as amended,
amended and restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"), pursuant to which the
Banks have made and may hereafter make financial accommodations
to the Company to facilitate consummation of the Plan and provide
working capital to the Company.
D. It is important to the success of the Company's
business that, from and after consummation of the Plan on or
about the date hereof, the Company's Trade Vendors extend terms
to the Company and deliver goods needed by the Company to
successfully operate its business.
E. For purposes of inducing the Trade Vendors to
extend terms and deliver to the Company the goods it needs to
successfully operate its business by providing security for the
Trade Obligations, simultaneously herewith, (i) the Company, as
account party, has caused FNBB, as issuer, to issue a standby
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letter of credit in the face amount of $5,000,000 (as amended,
amended and restated, supplemented, renewed, replaced or
otherwise modified from time to time, the "Trade Vendor L/C") to
the Trustee, as beneficiary, in trust for the Trade Vendors upon
the terms and conditions set forth herein, a copy of which is
annexed hereto as Exhibit A, and (ii) the Company, as grantor,
has granted to Spruillco, Ltd, as trustee (the "Mortgage
Trustee"), for the benefit of the Trustee, as beneficiary, a
Second Deed of Trust, Assignment of Rents and Security Agreement
dated as of the date hereof in the maximum principal amount of
$15,000,000, with respect to all of the interests of the Company
in the Henderson Property, subject and subordinate to the First
Deed of Trust, Assignment of Rents and Security Agreement
securing indebtedness under the Credit Agreement, dated as of
April 27, 1995, granted by the Company to Spruillco, Ltd., as
trustee, for the benefit of the Banks pursuant to the Credit
Agreement upon the terms and conditions set forth in the
Subordination Agreement, (such Second Deed of Trust granted for
the benefit of the Trustee, as amended, supplemented or modified
from time to time, the "Mortgage"), a copy of which is annexed
hereto as Exhibit C. The Henderson Property is hereinafter
sometimes referred to as the "Mortgaged Property".
F. The rights and remedies of the Trustee in respect
of the Trade Vendor L/C and the Mortgage are subject in all
respects to the terms of the Subordination Agreement, dated as of
the date hereof, among FNBB and CIT, as initial Banks, and the
Trustee (the "Subordination Agreement"), a copy of which is
attached hereto as Exhibit D.
G. This Agreement is intended to establish a trust
under which (i) the Trade Vendor L/C and the Mortgage
(collectively, the "Security"), (ii) all amounts drawn by the
Trustee under the Trade Vendor L/C (the "L/C Proceeds") and all
cash and non-cash proceeds of the Mortgaged Property (the
"Mortgage Proceeds" and collectively with the L/C Proceeds, the
"Proceeds") and (iii) the Proceeds Account, (the right, title and
interest of the Trustee in and to the Security, the Proceeds and
the Proceeds Account being herein collectively referred to as the
"Trust Estate") will be held by the Trustee in trust for, and for
the benefit of, the Trade Vendors who have not been paid in full
for goods heretofore delivered or hereafter delivered to the
Company through and including the date immediately preceding the
date on which a Draw Event and an Event of Default occur under
the Trade Vendor L/C and the Mortgage, respectively.
H. This Agreement is further intended to set forth
the terms and conditions upon which the Trust Estate will be
administered by the Trustee, the rights and remedies of the Trade
Vendors with respect to the Trust Estate and certain other
related matters.
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DECLARATION OF TRUST
NOW, THEREFORE, in order to induce the Trade Vendors to
deliver goods to the Company and to provide security for payment
of the obligations the Company has heretofore incurred subsequent
to the Filing Date (as such term is defined in the Plan) and
expects to hereafter incur to the Trade Vendors through and
including the date immediately preceding the date on which a Draw
Event occurs in the amount of the unpaid invoiced cost of goods
delivered to the Company by the Trade Vendors as shown from time
to time on the books and records of the Company (the "Trade
Obligations"), and in consideration of the premises and the
mutual agreements set forth herein, the Company hereby confirms
that it has caused the Trade Vendor L/C to be issued to the
Trustee and the Mortgage to be granted for the benefit of the
Trustee, and the Trustee does hereby declare that it holds and
will hold the Trade Vendor L/C and the Mortgage as trustee in
trust under this Agreement, and the Company does hereby consent
thereto.
TO HAVE AND TO HOLD, the Trust Estate unto the Trustee
and its successors in trust under this Agreement and its assigns
and the assigns of its successors in trust forever or until
terminated in accordance with the terms hereof;
IN TRUST NEVERTHELESS, under and subject to the terms
and conditions set forth herein for the benefit of the Trade
Vendors and for the enforcement of the payment of the Trade
Obligations, and for the performance of and compliance with the
covenants and conditions of this Agreement and the Mortgage.
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms. The following
terms shall have the following meanings as used herein (such
meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Administrative Agent" has the meaning set forth in the
Credit Agreement.
"Agreement" has the meaning set forth in the preamble
to this Agreement.
"Authorized Officer" means the Chairman, the President,
any Vice President, the Secretary or the Treasurer of a Person or
any other officer designated as an "Authorized Officer" by the
Board of Directors (or equivalent governing body) of such Person
and shall include, with respect to the Trade Committee, the
counsel to the Trade Committee.
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"Banks" has the meanings set forth in the Credit
Agreement.
"Bankruptcy Code" means Title 11 of the United States
Code, 11 U.S.C. Sections 101 et seq., as amended.
"Bankruptcy Court" has the meaning set forth in
Paragraph A of the Recitals to this Agreement.
"Business Day" means a day other than a Saturday,
Sunday or other day on which banks in Boston, New York City or in
the city in which the Trustee maintains its office administering
the Trust Estate are required or authorized by law to close.
"CIT" has the meaning set forth in Paragraph C of the
Recitals to this Agreement.
"Company" has the meaning set forth in the preamble to
this Agreement.
"Credit Agreement" has the meaning set forth in
Paragraph C of the Recitals of this Agreement.
"Draw Event" means an event after the occurrence of
which the Trustee, by certifying that such event has in fact
occurred, has the right to draw the full amount of the Trade
Vendor L/C (a copy of which is attached hereto as Exhibit A) as
provided for therein.
"Draw Notice" has the meaning set forth in Section
3.01.
"Event of Default" means an "Event of Default" under
and as defined in the Mortgage provided, that such "Event of
Default" also constitutes a Draw Event.
"FNBB" has the meaning set forth in Paragraph C of the
Recitals to this Agreement.
"Henderson Property" means the Company's warehouse
distribution center, corporate offices, data processing center
and graphics production center located in Henderson, North
Carolina.
"Individual Payment Notice" shall have the meaning set
forth in Section 7.01.
"L/C Proceeds" has the meaning set forth in Paragraph G
of the Recitals to this Agreement.
"Mortgage" has the meaning set forth in Paragraph E of
the Recitals to this Agreement.
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"Mortgage Default Notice" has the meaning set forth in
Section 4.01.
"Mortgage Proceeds" has the meaning set forth in
Paragraph G to this Agreement.
"Mortgaged Property" has the meaning set forth in
Paragraph E of the Recitals to this Agreement.
"Mortgage Trustee" has the meaning set forth in
Paragraph E of the Recitals to this Agreement.
"Note" means the Trade Debt Note, dated the date
hereof, in the maximum principal amount of $15,000,000 made by
the Company to the Trustee, a copy of which is annexed hereto as
Exhibit B.
"Permitted Investments" means (a) marketable securities
issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof having
maturities of not more than three months from the date of
acquisition, (b) time deposits and certificates of deposit of, or
money market or similar accounts with, any domestic commercial
bank of recognized standing having capital and surplus in excess
of U.S. $100,000,000 and a Keefe Bank Watch Rating of C or
better, with maturities of not more than three months from the
date of acquisition, (c) commercial paper rated at least A-1 or
the equivalent thereof by Standard & Poor's Corporation or at
least P-1 on the equivalent thereof by Moody's Investors Service,
Inc. and in each case maturing within three months after the date
of acquisition, (d) repurchase obligations with a term of not
more than thirty days for underlying securities of the types
described in clauses (a), (b) and (c) entered into with any bank
meeting the qualifications specified in clause (b) above or with
a securities dealer acceptable to the Trustee.
"Person" means an individual, a partnership, a
corporation, a business trust, a joint stock company, a limited
liability company, a trust, an unincorporated association, a
joint venture, a governmental entity or another entity of
whatever nature.
"Plan" has the meaning set forth in Paragraph B of the
Recitals to this Agreement.
"Proceeds" has the meaning set forth in Paragraph G of
the Recitals to this Agreement.
"Proceeds Account" has the meaning set forth in Section
8.01.
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"Public Payment Notice" has the meaning set forth in
Section 7.01.
"Security" has the meaning set forth in Paragraph G of
the Recitals to this Agreement.
"Senior Indebtedness" has the meaning set forth in the
Subordination Agreement.
"Subordination Agreement" has the meaning set forth in
Paragraph E of the Recitals to this Agreement.
"Trade Committee" means the Post-Effective Date Trade
Committee under and as defined in the Plan.
"Trade Obligations" has the meaning set forth in the
Declaration of Trust made in the Recitals to this Agreement.
"Trade Vendor Information" has the meaning set forth in
Section 11.01.
"Trade Vendor L/C" has the meaning set forth in
Paragraph E of the Recitals to this Agreement.
"Trade Vendor Payable Amount" has the meaning set forth
in Section 7.01.
"Trade Vendors" means trade vendors of the Company who
have extended or who hereafter extend terms to the Company for
goods delivered to the Company, other than on consignment,
through and including the date immediately preceding the date on
which a Draw Event occurs.
"Trust Estate" has the meaning set forth in Paragraph G
of the Recitals to this Agreement.
"Trustee" has the meaning set forth in the preamble to
this Agreement.
SECTION 1.02 Certain References. The words "hereof",
"herein" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement and section,
schedule and exhibit references are to this Agreement unless
otherwise specified. References to Persons include their
respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant
functions of such Persons.
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ARTICLE II
ACCEPTANCE OF TRUST;
DELIVERY OF TRADE VENDOR L/C AND MORTGAGE;
EXECUTION AND DELIVERY OF
SUBORDINATION AGREEMENT
SECTION 2.01 Acceptance of Trust. The Trustee, for
itself and its successors, hereby accepts the trust created by
this Agreement upon the terms and conditions hereof. Further,
the Trustee, for itself and its successors, does hereby declare
that it will hold the Trust Estate for the benefit of the Trade
Vendors upon the trusts herein set forth.
SECTION 2.02 Delivery and Receipt of Trade Vendor L/C
and Mortgage. On the date hereof, the Company has caused FNBB to
issue and deliver the Trade Vendor L/C to the Trustee and, on or
before the date hereof, the Company has executed and delivered
the Mortgage to and for the benefit of the Trustee. The Trustee
hereby acknowledges receipt of the Trade Vendor L/C and the
Mortgage and agrees to hold the Trade Vendor L/C and the Mortgage
in trust and for the benefit of the Trade Vendors upon the terms
and conditions set forth in this Agreement and in the Mortgage
and subject to the terms of the Subordination Agreement.
SECTION 2.03 Execution and Delivery of Subordination
Agreement. On the date hereof, the Trustee has executed and
delivered to the Administrative Agent and CIT the Subordination
Agreement in the form approved, and as directed, by the Trade
Committee.
ARTICLE III
DRAW NOTICE; DRAW UNDER
TRADE VENDOR L/C
SECTION 3.01 Draw Notice. If a Draw Event shall have
occurred, the Trade Committee shall have the right to deliver to
the Trustee at any time, at its option, an irrevocable written
notice (the "Draw Notice"), substantially in the form attached
hereto as Exhibit E, stating that a Draw Event has occurred and
directing the Trustee to promptly draw the full amount of the
Trade Vendor L/C. The Trade Committee shall, at the time it
delivers the Draw Notice to the Trustee or at any time
thereafter, deliver a copy of the Draw Notice to the Company and
the Administrative Agent.
SECTION 3.02 Draw by Trustee; Request for Vendor
Information. Upon receipt of the Draw Notice, the Trustee agrees
that it will promptly draw the full amount of the Trade Vendor
L/C, promptly deposit such amount in the Proceeds Account in
accordance with Section 8.01 and promptly request from the
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Company the Trade Vendor Information the Company has agreed to
furnish pursuant to Section 11.01.
ARTICLE IV
MORTGAGE DEFAULT NOTICE; REMEDIES
SECTION 4.01 Mortgage Default Notice. After all
Senior Indebtedness has been paid in full in cash and all
commitments under the Credit Agreement have been terminated, if
an Event of Default shall have occurred, the Trade Committee
shall have the right to deliver to the Trustee at any time, at
its option, an irrevocable written notice (the "Mortgage Default
Notice"), substantially in the form attached hereto as Exhibit F,
stating that an Event of Default has occurred and directing the
Trustee to cause the Mortgage Trustee to take such action as
therein requested by the Trade Committee with respect to the
Mortgage and the Mortgaged Property (which action may include,
without limitation, subject to the terms and conditions of the
Subordination Agreement, the institution of any remedies provided
by the Mortgage, by law or by this Agreement).
SECTION 4.02 Action upon Receipt of Mortgage Default
Notice. Upon receipt of the Mortgage Default Notice, the Trustee
shall (or at such later time as shall be the first time when such
action is permitted to be taken pursuant to the Subordination
Agreement and the Mortgage) cause the Mortgage Trustee to
promptly commence such action as is requested by the Trade
Committee in the Mortgage Default Notice or any notice
supplemental thereto authorized or permitted by the Mortgage.
SECTION 4.03 Remedies in Respect of Mortgage
Generally.
(a) The Company hereby irrevocably constitutes and appoints the
Mortgage Trustee and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact
with full power and authority in the name of the Company or its
own name, from time to time in the Mortgage Trustee's discretion,
after action by the Mortgage Trustee is permitted pursuant to the
Subordination Agreement and the Mortgage, for the purpose of
carrying out the terms of the Mortgage, to take any and all
appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the
purposes hereof and thereof and, without limiting the generality
of the foregoing, hereby gives the Mortgage Trustee the power and
right on behalf of the Company, without notice to or assent by
the Company, to do (to the extent permitted under the Mortgage)
the following:
(i) to ask for, demand, sue for, collect, receive
and give acquittance for any and all moneys due or to become
due upon or by virtue hereof and thereof,
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(ii) to receive, take, endorse, assign and
deliver any and all checks, notes, drafts, acceptances,
documents and other negotiable and non-negotiable
instruments and chattel paper taken or received by the
Mortgage Trustee in connection herewith and therewith,
(iii) to commence, file, prosecute, defend,
settle, compromise or adjust any claim, suit, action or
proceeding with respect hereto and thereto or in connection
herewith and therewith,
(iv) to sell, transfer, assign, lease or rent all
or any portion of or otherwise deal in or with the Mortgaged
Property or any part thereof as fully and effectually as if
the Mortgage Trustee was the absolute owner thereof,
(v) to make demands, give consents and releases
or partial releases, and to exercise any other rights
contemplated or permitted by the Mortgage, and
(vi) to do, at its option and at the expense and
for the account of the Company, at any time and from time to
time, all acts and things which the Mortgage Trustee deems
necessary to protect or preserve the Mortgaged Property and
to realize upon the Mortgaged Property.
SECTION 4.04 Appointment of a Receiver. If a receiver
of the Mortgaged Property or other part of the Trust Estate shall
be appointed in judicial proceedings, the Mortgage Trustee may be
appointed as such receiver. Notwithstanding the appointment of
a receiver, the Mortgage Trustee shall be entitled to retain
possession and control of all cash held by or deposited with it
or its agents pursuant to any provision of the Mortgage.
SECTION 4.05 Exercise of Powers. Subject to the
provisions of Section 5.01(c), all of the powers, remedies and
rights of the Mortgage Trustee as set forth in this Agreement
may be exercised by the Mortgage Trustee in respect of the
Mortgage and the Mortgaged Property as though set forth at length
therein and all the rights, remedies and powers of the Mortgage
Trustee as set forth in the Mortgage may be exercised from time
to time as herein and therein specified; provided, that, nothing
in this Agreement shall be construed to impose a duty on the
Mortgage Trustee to take any action without first receiving
direction from the Trustee to do the same.
SECTION 4.06 Remedies Not Exclusive.
(a) No remedy conferred upon or reserved to the Trustee or the
Mortgage Trustee herein or in the Mortgage is intended to be a
limitation exclusive of any other remedy or remedies, but every
such remedy shall be cumulative and shall be in addition to every
other remedy conferred herein or in the Mortgage or now or
<PAGE>
hereafter existing at law or in equity or by statute. All rights
and remedies of the Trustee and the Mortgage Trustee shall be
subject to the terms of the Subordination Agreement.
(b) No delay or omission of the Trustee or the
Mortgage Trustee, respectively, to exercise any right, remedy or
power accruing upon a Draw Event and an Event of Default,
respectively, shall impair any such right, remedy or power or
shall be construed to be a waiver of such Draw Event and Event of
Default, respectively, or any acquiescence therein; and every
right, power and remedy given by this Agreement to the Trustee or
by this Agreement or the Mortgage to the Mortgage Trustee may be
exercised from time to time and as often as may be deemed
expedient by the Trustee and the Mortgage Trustee, respectively.
(c) The Company expressly agrees that all rights of
action and rights to assert claims upon or under the Mortgage may
be enforced by the Mortgage Trustee without the possession of any
debt instrument or the production thereof in any trial or other
proceeding relative thereto, and any such suit or proceeding
instituted by the Mortgage Trustee shall be brought in its name
as Mortgage Trustee and any recovery or judgment shall be held as
part of the Trust Estate.
ARTICLE V
DIRECTION BY TRADE COMMITTEE
SECTION 5.01 Direction by Trade Committee. (a)
Subject to Section 6.04 and the terms of the Subordination
Agreement, if a Draw Event and Event of Default shall have
occurred and the Trustee shall have received a Draw Notice or
Mortgage Default Notice with respect thereto:
(i) in addition to taking such action as is
required by Sections 3.02 and 4.02 the Trustee shall,
subject to Section 6.04, take such other action as is
necessary and appropriate for the performance of and
compliance with the covenants and conditions of this
Agreement as the Trade Committee shall request in
writing; and
(ii) the Trustee shall follow the written
directions of the Trade Committee with respect to the
time, method and place of taking any action required by
the preceding paragraph (i) or, if no such direction is
provided, then the Trustee may take such action in the
manner it deems necessary and appropriate for the
performance of and compliance with the covenants and
conditions of this Agreement, provided that nothing in
this Agreement shall be construed to impose a duty on
the Trustee to take any discretionary action without
<PAGE>
first receiving a direction from the Trade Committee to
do the same.
(b) Nothing in this Section 5.01 shall impair the
right of the Trustee in its discretion to take or omit to take
any action deemed proper by the Trustee and which action or
omission is not inconsistent with the direction of the Trade
Committee; provided, however, the Trustee shall not be under any
obligation to take any action which is discretionary with the
Trustee under the provisions hereof without the prior written
direction of the Trade Committee.
ARTICLE VI
TRUSTEE'S RIGHTS AND REMEDIES
SECTION 6.01 Rights and Remedies under Security. This
Agreement does not enlarge or otherwise modify the rights that
the Trustee holds for the benefit of the Trade Vendors with
respect to the Trade Vendor L/C or the Mortgaged Property under
the Mortgage or under the law, and does not confer any additional
such rights, but rather is intended to provide a mechanism for
the Trustee, on behalf of the Trade Vendors to enforce such
rights. Without limiting the generality of the foregoing,
nothing in this Agreement shall permit the Trustee to exercise
any remedy with respect to the Trade Vendor L/C, or the Trustee
or the Mortgage Trustee to exercise any remedy with respect to
the Mortgaged Property, except to the extent specifically
provided under the Trade Vendor L/C or the Mortgage and except as
permitted by the Subordination Agreement.
SECTION 6.02 Right to Initiate Judicial Proceedings,
Etc. Subject to the terms of the Subordination Agreement, upon
the occurrence of a Draw Event and Event of Default, (a) the
Trustee and the Mortgage Trustee shall have the right and power
to institute and maintain such suits and proceedings as either of
them may deem appropriate to protect and enforce the rights
vested in the Trustee and the Mortgage Trustee by this Agreement
and the Mortgage and (b) the Trustee and the Mortgage Trustee may
either (and in the case of the Mortgage, after entry or without
entry), proceed by suit or suits at law or in equity to enforce
such rights and to foreclose upon the Mortgaged Property and to
sell all or, from time to time, any of the Mortgaged Property
under the judgment or decree of a court of competent
jurisdiction; provided, that, nothing in this Agreement shall be
construed to impose a duty on the Trustee to take any
discretionary action without first receiving direction from the
Trade Committee to do the same.
SECTION 6.03 Limitation on Trustee's Duties in Respect
of Security. Beyond the duties set forth in this Agreement, the
Trustee shall not have any duty to the Company or the Trade
Committee as to any Security in the Trustee's possession or
<PAGE>
control or in the possession or control of any agent or nominee
of it or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto,
except that the Trustee shall be liable for its failure to
exercise reasonable care in the handling of moneys and securities
actually received by it.
SECTION 6.04 Limitation by Law. All rights, remedies
and powers provided to the Trustee and the Mortgage Trustee by
this Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of
law, and all the provisions of this Agreement are intended to be
subject to all applicable mandatory provisions of law which may
be controlling and to be limited to the extent necessary so that
they will not render this Agreement invalid, unenforceable in
whole or in part or not entitled to be recorded, registered, or
filed under the provisions of any applicable law.
ARTICLE VII
NOTICE OF PAYMENT
TO TRADE VENDORS
SECTION 7.01 Notice of Payment to Trade Vendors. (a)
Promptly after a Draw Event and promptly after receipt of a
Mortgage Default Notice from the Trade Committee, and, in each
case, after receipt from the Company of the Trade Vendor
Information provided by the Company pursuant to Section 11.01,
the Trustee shall mail a notice (the "Individual Payment
Notice"), substantially in the form attached hereto as Exhibit G,
to each of the Trade Vendors (i) notifying each of them that (x)
a Draw Event and an Event of Default has occurred under the Trade
Vendor L/C and the Mortgage, respectively, (y) the Trustee has
drawn the L/C Proceeds under the Trade Vendor L/C and is holding
for distribution or has distributed, as the case may be, the L/C
Proceeds in accordance with the terms of this Agreement and (z)
as to any action taken by the Trustee or the Mortgage Trustee
with respect to the Mortgage, and (ii) advising each of them of
the amount of the Trade Obligations owing to each of them,
respectively, as of the date of such Trade Vendor Information
(the "Trade Vendor Payable Amount"). The Payment Notice shall
further state that the Trade Vendor Payable Amount set forth in
the Payment Notice shall be deemed correct and shall be the
amount used by the Trustee in calculating the distributions to be
made to the Trade Vendors pursuant to this Agreement, unless
within 20 days of the mailing of the Payment Notice, a Trade
Vendor shall provide to the Trustee and the Company contrary
information as to the Trade Vendor Payable Amount owed to it, in
which case, the Trustee shall reserve sufficient funds in the
Proceeds Account to provide for any disputed amount until such
dispute is resolved by the parties thereto.
<PAGE>
(b) Substantially contemporaneous with the mailing of
the Individual Payment Notices to the Trade Vendors in accordance
with clause (a) above, the Trustee shall publish a notice (the
"Public Payment Notice"), in substantially the form attached
hereto as Exhibit H, which (i) shall be published in each of the
Wall Street Journal and Women's Wear Daily once during the same
business week and once during the immediately following business
week, (ii) contains the same information as is required to be
contained in the Individual Payment Notice pursuant to clause (i)
of Section 4.01(a), (iii) states that if any Trade Vendor has not
received an Individual Payment Notice, such Trade Vendor may
notify the Trustee and the Company in writing of the amount of
the Trade Obligations owed to it and (iv) specifies a date, which
shall be 20 days after the date of first publication of the
Public Payment Notice, on or before which any Trade Creditor who
has not received a Payment Notice shall, if it wishes to receive
a distribution under this Agreement, notify the Trustee and the
Company in writing of the amount of the Trade Obligations due and
owing to such Trade Vendor. In the event the Company shall have
provided to the Trustee contrary information with respect to such
Trade Vendor, the Trustee shall reserve sufficient funds in the
Proceeds Account to provide for any disputed amount until such
dispute is resolved by the parties thereto.
ARTICLE VIII
PROCEEDS ACCOUNT
SECTION 8.01 The Proceeds Account. From and after
receipt of a Draw Notice or an Event of Default Notice and until
the L/C Proceeds and Mortgage Proceeds have been fully
distributed in accordance with the terms of this Agreement, the
Trustee shall establish and maintain a bank account at a bank
meeting the qualifications of a bank in which Permitted
Investments may be made as provided for herein, which bank
account shall be entitled the "Rose's Trade Vendor Account" (the
"Proceeds Account"). All L/C Proceeds and Mortgage Proceeds
shall be promptly deposited in the Proceeds Account and
thereafter held by the Trustee as part of the Trust Estate and
promptly distributed in accordance with Section 9.01 and the
other provisions of this Agreement.
SECTION 8.02 Control of Proceeds Account. All right,
title and interest in and to the Proceeds shall vest in the
Trustee and funds on deposit in the Proceeds Account shall
constitute part of the Trust Estate. The Proceeds Account shall
be subject to the exclusive dominion and control of the Trustee.
SECTION 8.03. Investment of Funds Deposited in
Account. To the extent the Proceeds are on deposit in the
Proceeds Account in accordance with the terms of this Agreement,
the Trustee shall invest and reinvest such funds solely in
<PAGE>
Permitted Investments. All such investments and the interest and
income received thereon shall be held in the Proceeds Account as
part of the Trust Estate. The Trustee shall have no
responsibility for any loss resulting from a fluctuation in
interest rates or the sale or other disposition of any Permitted
Investment prior to its maturity date or otherwise. The Trustee
shall have a reasonable period of time in which to reinvest the
moneys on deposit in the Proceeds Account. In addition to the
payment of expenses incurred by the Trustee pursuant to any other
Section of this Agreement, the Trustee may deduct from the funds
on deposit in the Proceeds Account all of the actual and
reasonable costs and expenses that the Trustee or the Mortgage
Trustee may incur in connection with (a) the exercise or
enforcement of any of the rights and remedies of the Trustee
hereunder or under the Trade Vendor L/C or the Trustee or the
Mortgage Trustee under the Mortgage and (b) the custody or
preservation of Trust Estate.
ARTICLE IX
APPLICATION OF PROCEEDS
SECTION 9.01 Application of Proceeds. All L/C Proceeds
and all Mortgage Proceeds and all other moneys in the Proceeds
Account shall promptly be applied as follows:
FIRST: To the payment of (i) compensation due and
payable to the Trustee for services hereunder, and (ii)
all costs, expenses and liabilities incurred by the
Trustee and the Mortgage Trustee in connection with the
exercise or enforcement of the rights, duties and
remedies of the Trustee and the Mortgage Trustee under
this Agreement, the Trade Vendor L/C and the Mortgage
including, without limitation, the reasonable fees and
disbursements of counsel for the Trustee and the
Mortgage Trustee.
SECOND: After payment in full of the outstanding
obligations described in subsection 9.01 FIRST, to the
payment of all costs, expenses and liabilities incurred by
the Trade Committee in connection with the exercise of its
rights, duties or remedies under this Agreement, including,
without limitation, the reasonable fees and disbursements of
counsel for the Trade Committee.
THIRD: After payment in full of the outstanding
obligations described in subsection 9.01 SECOND, to the
ratable payment of the Trade Obligations then outstanding;
and
FOURTH: After payment in full of all of the Trade
Obligations, to the Company or to its order, or as a court
of competent jurisdiction may direct.
<PAGE>
SECTION 9.02 Payment of Proceeds. All payments
required to be made hereunder to each of the Trade Vendors in
respect of the Trade Obligations shall be made directly to each
of the Trade Vendors, at the respective addresses for each of the
Trade Vendors provided to the Trustee by the Company pursuant to
Section 11.01 of this Agreement or at such other more current
address of which the Trustee shall become aware. All such
payments shall be (subject to any decree of any court of
competent jurisdiction) final.
ARTICLE X
ABSOLUTE RIGHTS OF TRADE VENDORS
SECTION 10.01 Absolute Rights of Trade Vendors.
Notwithstanding any other provision of this Agreement or any
provision of the Mortgage, the right of each Trade Vendor, which
is absolute and unconditional, to receive payment of the Trade
Obligations owed to such Trade Vendor on or after the due date
thereof as set forth on the books and records of the Company, to
institute suit for the enforcement of such payment on or after
such due date, or to assert its position as a creditor in a case
under the Bankruptcy Code in which the Company is a debtor, or
the obligation of the Company, which is also absolute and
unconditional, to pay the Trade Obligations owed to such Trade
Vendor at the time and place expressed therein, shall not be
impaired or affected without the written consent of such Trade
Vendor. In addition, every right of each Trade Vendor to receive
payment or collateral security from sources other than the Trust
Estate shall not be, and is not hereby, impaired or affected.
Without limiting the generality of the foregoing, no Trade Vendor
shall be hereby obligated to share with any other Trade Vendor
any proceeds of such collateral, any guaranty or right of set-off;
nor shall any Trade Vendors right to receive its ratable
share of proceeds of the Trust Estate or any part thereof
hereunder be diminished by or affected in any way by its right to
receive proceeds of any other collateral, set-off, payment upon a
guaranty or payment from any other source. In no event shall any
Trade Vendor have the right to receive more than the amount of
Trade Obligations owed to such Trade Vendor.
ARTICLE XI
AGREEMENTS WITH THE TRUSTEE
AND THE MORTGAGE TRUSTEE
SECTION 11.01 (a) Information as to Trade Vendors. In
connection with the distributions to be made by the Trustee after
the occurrence of a Draw Event and Event of Default pursuant to
Section 9.01, the Company agrees that it shall promptly deliver,
or cause to be delivered, to the Trustee, from time to time, upon
the request of the Trustee or the Trade Committee, but not more
than once each month, a list setting forth the following (the
<PAGE>
"Trade Vendor Information"): (1) the aggregate outstanding amount
of the Trade Obligations, (2) the names and addresses of all
Trade Vendors, including the contact Person at each Trade Vendor,
and the unpaid principal amount and all other unpaid amounts in
respect of Trade Obligations known to the Company to be owing to
each such Trade Vendor and (3) such other information regarding
the Trade Vendors and the Trade Obligations necessary to
effectuate such distributions as the Trustee or the Trade
Committee may reasonably request. Unless otherwise specified
herein, the Trustee may for all purposes hereunder rely on such
information provided by the Company unless (i) the Trustee shall
have actual knowledge of any inaccuracy or (ii) any Trade Vendor
shall provide contrary information with respect to such Trade
Vendor, in which case the Trustee shall proceed as set forth in
Section 7.01.
(b) Confidentiality. Except for (i) Trade Vendor
Information furnished by the Company to the Trustee pursuant to
Section 11.01(1) and (2) which is disclosed by the trustee to the
Trade Vendors in accordance with Section 7.01, and (ii) Trade
Vendor Information which is or hereafter becomes available to the
public, the Trustee shall maintain the confidentiality of any
Trade Vendor Information designated by the Company as
confidential (the "Confidential Information") and the content of
all such Confidential Information, and will not provide or reveal
the Confidential Information or its content to any Trade Vendor
or other person without the express written consent of the
Company. The Trustee shall not be permitted to use, and hereby
agrees not to use, any such Confidential Information for any
purpose other than to effectuate distributions to Trade Vendors
pursuant to this Agreement. In the event that the Trustee is
requested or required, by law or legal process, to disclose any
of the Confidential Information, the Trustee shall notify
immediately the Company of any such request, and, in such event,
the Company may seek and pursue any such action, including,
without limitation, the commencement of judicial or
administrative proceedings in law or equity. In the event that,
in the absence of a protective order or the receipt of a written
waiver from the Company, the Trustee nonetheless, in the opinion
of counsel, is compelled by law to disclose Confidential
Information concerning the Company or else be liable for contempt
or subject to other censure or penalty, the Trustee shall be
permitted to disclose such information without liability under
this Agreement only to the extent necessary to avoid such
liability, censure or penalty. The Trustee acknowledges and
agrees that the Company shall be entitled to enforce the
provisions of this Section 11.01(b) by specific performance and
injunctive relief in the event of any breach thereof by the
Trustee, any Trade Vendor or any other person. The Trustee's
obligations under this Section 11.01(b) shall survive the
termination of the other provisions of this Agreement.
<PAGE>
SECTION 11.02 Compensation and Expenses. The Company
agrees to pay to the Trustee and any successor trustee appointed
hereunder and to the Mortgage Trustee, as applicable, from time
to time upon demand, (i) reasonable compensation for the services
of the Trustee hereunder and for administering the Trust Estate
pursuant to a letter agreement, dated as of the date hereof,
between the Company and the Trustee and (ii) all the costs and
expenses of the Trustee and the Mortgage Trustee (including,
without limitation, the reasonable fees and disbursements of
counsel to the Trustee and the Mortgage Trustee and such special
counsel as the Trustee or the Mortgage Trustee elects to retain)
(A) arising in connection with the preparation, execution,
delivery, modification and termination of this Agreement or the
enforcement of any of the provisions hereof, the Trade Vendor L/C
or the Mortgage or (B) incurred or required to be advanced in
connection with the administration of the Trust Estate, the sale
or other disposition of the Mortgaged Property pursuant to the
Mortgage and the preservation, protection or defense of the
Trustee's rights under this Agreement and the Trustee's and
Mortgage Trustees rights under the Mortgage and in and to the
Trust Estate, and the exercise of the Trustee's rights under this
Agreement and the Mortgage and in and to the Trust Estate. The
Company's obligations under this Section 11.02 shall survive the
termination of the other provisions of this Agreement.
SECTION 11.03 Stamp and Other Similar Taxes. The
Company agrees to indemnify and hold harmless the Trustee and the
Mortgage Trustee from any present or future claim for liability
for any stamp or other similar tax and any penalties or interest
or other similar tax and any penalties or interest with respect
thereto, which may be assessed, levied or collected by any
jurisdiction in connection with this Agreement, the Note, the
Mortgage or the Mortgaged Property. The obligations of the
Company under this Section 11.03 shall survive the termination
of the other provisions of this Agreement.
SECTION 11.04 Filing Fees, Excise Taxes, Etc. The
Company agrees to pay or to reimburse the Trustee and the
Mortgage Trustee for any and all amounts in respect of all
search, filing, recording and registration fees, taxes, excise
taxes and other similar imposts which may be payable or
determined to be payable in respect of the execution, delivery,
performance and enforcement of this Agreement, the Note and the
Mortgage. The obligations of the Company under this Section
11.04 shall survive the termination of the other provisions of
this Agreement.
SECTION 11.05 Indemnification. (a) The Company
agrees to pay, indemnify, and hold harmless the Trustee and the
Mortgage Trustee and each of the agents thereof from and against
any and all liabilities, obligations, losses, damages, penalties,
actions, judgements, suits, costs, expenses and disbursements of
<PAGE>
any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this
Agreement, the Note, the Mortgage and the Trust Estate, unless
arising from the gross negligence or willful misconduct of the
Trustee the Mortgage Trustee, as the case may be, or such agents
thereof as are seeking indemnification or the failure of the
Trustee or the Mortgage Trustee or any such agents to exercise
reasonable care in the handling of moneys or securities actually
received by the Trustee or any such agents.
(b) In any suit, proceeding or action brought by
the Trustee or the Mortgage Trustee under or with respect to the
Trade Vendor L/C, the Note, the Mortgage or the Mortgaged
Property for any sum owing thereunder, or to enforce any
provisions thereof, the Company will save, indemnify and hold
harmless the Trustee and the Mortgage Trustee from and against
all expense, loss or damage suffered by reason of any defense,
set-off, counterclaim, recoupment or reduction of liability
whatsoever of the obligee thereunder (unless such expense, loss
or damage is caused by the gross negligence or willful misconduct
of the Trustee or the Mortgage Trustee, or the failure of the
Trustee, as the case may be, to (i) exercise reasonable care in
the handling of moneys and securities actually received by the
Trustee or the Mortgage Trustee or (ii) comply with the
provisions of Section 11.01(b) of this Agreement), arising out of
a breach by the Company of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time
owing to or in favor of such obligee or its successors from the
Company and all such obligations shall be and remain enforceable
against and only against the Company and shall not be enforceable
against the Trustee or the Mortgage Trustee, as the case may be.
The agreements in this Section 11.05 shall survive the
termination of the other provisions of this Agreement.
SECTION 11.06 Further Assurances. (a) Each of the Company and the
Trustee agrees that it will promptly correct any defect or error that may be
discovered in this Agreement, the Note or the Mortgage or in the execution,
acknowledgment or recordation thereof, as applicable.
(b) The Company agrees that from time to time, at
its own expense, promptly upon reasonable request by the Trustee
or the Mortgage Trustee, it also will do, execute, acknowledge,
deliver, record, re-record, file, re-file, register and re-register any and all
further acts, financing statements and continuations thereof, notices of
assignment, transfers, certificates, assurances, and other instruments as the
Trustee or the Mortgage Trustee may reasonably request from time to time in
order (i) to carry out more effectively the purposes of this
Agreement and (ii) to enable the Trustee to exercise and enforce
its rights and remedies hereunder and under the Trade Vendor L/C,
(iii) to subject to the lien created by the Mortgage, any of the
<PAGE>
properties, rights or interests of the Company covered or now or
hereafter intended to be covered by the Mortgage, (iv) to perfect
and maintain the validity, effectiveness and priority of the
Mortgage and the lien intended to be created thereby, (v) to
better assure, convey, grant, assign, transfer, preserve, protect
and confirm unto the Trustee or the Mortgage Trustee, as the case
may be, the rights granted or now or hereafter intended to be
granted to the Trustee under the Trade Vendor L/C or to the
Trustee or the Mortgage Trustee under the Mortgage or under any
other instrument executed in connection therewith to which it is
or may become a party, and (vi) to enable the Trustee and the
Mortgage Trustee to exercise and enforce its respective rights
and remedies hereunder and under the Mortgage, respectively;
provided, however, that this Section 11.06(b) shall not be
construed to require the Company to grant any lien other than
expressly provided for in this Agreement or affect the
limitations or the rights of the Trustee pursuant to the
Subordination Agreement. Without limiting the generality of the
foregoing, the Company will take any and all such actions
reasonably required to be taken by it pursuant to the Mortgage.
(c) The Company hereby authorizes the Mortgage Trustee
to file one or more financing or continuation statements, and
amendments thereto, relative to the Mortgaged Property without
the signature of the Company where permitted by law. A carbon,
photographic or other reproduction of this Agreement or any
financing statement covering the Mortgaged Property or any part
thereof shall be sufficient as a financing statement where
permitted by law.
(d) The Company shall furnish to the Mortgage Trustee
from time to time such reports in connection with the Mortgaged
Property as the Mortgage Trustee may reasonably request.
SECTION 11.07 Notification of Event of Default Under
Credit Agreement. The Company shall promptly notify the Trustee
of the occurrence of an Event of Default under and as defined in
the Credit Agreement.
ARTICLE XII
THE TRUSTEE
SECTION 12.01 Exculpatory Provisions. (a) The Trustee shall not be
responsible in any manner whatsoever for the correctness of any recitals,
statements, representations or warranties contained herein, all of which are
made solely by the Company. The Trustee makes no representation
as to the value or condition of the Trust Estate or any part
thereof, or as to the title of the Company to the Mortgaged
Property, or as to the validity, execution (except the Trustee's
own execution), enforceability, legality or sufficiency of this
<PAGE>
Agreement, the Trade Vendor L/C, the Mortgage or the Trade
Obligations and, except as otherwise expressly provided for
herein, the Trustee shall incur no liability or responsibility in
respect of any such matters. The Trustee shall not be
responsible for insuring the Trust Estate or the payment of any
taxes, charges, assessments or liens upon the Trust Estate or
otherwise as to the maintenance of the Trust Estate, except that
in the event that the Trustee enters into possession of a part or
all of the Trust Estate, the Trustee shall preserve the part in
its possession.
(b) The Trustee shall not be required to ascertain or
inquire as to the performance by the Company of any of the
covenants or agreements contained herein, the Mortgage or with
respect to any of the Trade Obligations.
(c) The Trustee shall not be personally liable for any
action taken or omitted to be taken by the Trustee in accordance
with this Agreement, the Trade Vendor L/C or the Mortgage except
for its own gross negligence or willful misconduct and its
failure to exercise reasonable care in the handling of moneys or
securities actually received by it.
SECTION 12.02 Delegation of Duties The Trustee may
execute any of the trusts hereof and perform any duty hereunder
either directly or by or through agents or attorneys-in-fact
(which shall not include officers and employees of the Company or
any affiliate of the Company). The Trustee shall not be
responsible for the negligence or misconduct of any agents or
attorneys-in-fact reasonably selected by it in good faith.
SECTION 12.03 Reliance by Trustee
(a) Whenever in the administration of the trusts of this
Agreement the Trustee shall deem it necessary or desirable that a
matter be proved or established in connection with the taking,
suffering or omitting any action hereunder, under the Trade
Vendor L/C or the Mortgage, unless otherwise provided herein or
therein, such matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively
proved or established by a certificate of an Authorized Officer
of the Company or the Trade Committee delivered to the Trustee,
and such certificate shall constitute a full warranty to the
Trustee for any action taken, suffered or omitted in reliance
thereon unless the Trustee shall have actual knowledge of an
inaccuracy therein.
(b) The Trustee may consult with independent counsel
and any opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or
suffered by it hereunder in accordance therewith unless the
Trustee has actual knowledge or a reason to question the validity
or accuracy of such opinion or of any assumption expressed
<PAGE>
therein as the basis for such opinion. The Trustee shall have
the right at any time to seek instructions concerning the
administration of the Trust Estate from any court of competent
jurisdiction.
(c) The Trustee may rely, and shall be fully protected
in acting, upon any resolution, statement, certificate,
instrument, opinion, report, notice, request, consent, order,
bond, or other paper or document which it reasonably believes to
be genuine and to have been signed or presented by the proper
party or parties or, in the case of cables, telecopies and
telexes, to have been sent by the proper party or parties. In
the absence of gross negligence or willful misconduct, the
Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee that conform to
the requirements of this Agreement.
SECTION 12.04 Limitations on Duties of the Trustee
(a) The Trustee undertakes to perform only the duties
expressly set forth herein.
(b) The Trustee may exercise the rights and remedies
granted to it by this Agreement, the Trade Vendor L/C or the
Mortgage, but only pursuant to the terms hereof and thereof and
of the terms of the Subordination Agreement, and the Trustee
shall not be liable with respect to any action taken or omitted
by it in accordance with the direction of the Trade Committee
subject to the terms hereof, the terms of the Trade Vendor L/C
and the terms of the Mortgage.
(c) Except as herein otherwise expressly provided, the
Trustee shall not be under any obligation to take any action
which is discretionary with the Trustee under the provisions
hereof, the Trade Vendor L/C or the Mortgage except upon the
written request of the Trade Committee. Subject to the
provisions of Section 11.01(b) of this Agreement, the Trustee
shall make available for inspection and copying by the Trade
Committee and each Trade Vendor, each certificate or other paper
furnished to the Trustee by the Company, by the Trade Committee,
by any Trade Vendor, or by any other Person, under or in respect
of this Agreement, the Trade Vendor L/C, the Mortgage, or any of
the Trust Estate.
SECTION 12.05 Moneys to Be Held in Trust. All
Proceeds and other moneys and securities received by the Trustee
under or pursuant to any provision of this Agreement, the Trade
Vendor L/C or the Mortgage shall be held in trust for the
purposes of which they were paid or held and the Trustee shall
<PAGE>
exercise reasonable care in the handling of any such Proceeds,
other moneys and securities actually received by it.
SECTION 12.06 Resignation and Removal of Trustee
(a) The Trustee may at any time, by giving 30 days
prior written notice to the Company and the Trade Committee,
resign and be discharged of the responsibilities hereby created,
such resignation to become effective upon the appointment of a
successor trustee by the Trade Committee and the acceptance of
such appointment by such successor trustee. The Trustee may be
removed at any time (with or without cause) and a successor
trustee appointed by the Trade Committee, provided that the
Trustee shall be entitled to its fees and expenses to the date of
removal. If no successor trustee shall be appointed and approved
within 30 days from the date of the giving of the aforesaid
notice of resignation or within 30 days from the date of such
removal, the Trustee shall, or the Trade Committee may, apply to
any court of competent jurisdiction to appoint a successor
trustee to act until such time, if any, as a successor trustee
shall have been appointed as above provided. Any successor
trustee so appointed by such court shall immediately and without
further act be superseded by any successor trustee appointed by
the Trade Committee as above provided.
(b) If at any time the Trustee shall become incapable
of acting, or if at any time a vacancy shall occur in the office
of the Trustee for any other cause, a successor trustee shall be
appointed by the Trade Committee and the powers, duties,
authority and title of the predecessor trustee terminated and
cancelled without procuring the resignation of such predecessor
trustee, and without any other formality (except as may be
required by applicable law) than the appointment and designation
of a successor trustee in writing, duly acknowledged, delivered
to the predecessor trustee and the Company and filed for record
in each public office, if any, in which this Agreement is
required to be filed.
(c) The appointment and designation referred to in
Section 12.06(b) shall, after any required filing, be full
evidence of the right and authority to make the same and this
Agreement shall vest in such successor trustee, without any
further act, deed or conveyance, all of the estate and title of
its predecessor, and upon such filing for record, if any, the
successor trustee shall become fully vested with all the estates,
properties, rights, remedies, trusts, duties, authority and title
of its predecessor; but such predecessor shall, nevertheless, on
the written request of the Trade Committee, the Company or its or
their successor trustee, execute and deliver an instrument
transferring to such successor all the estates, properties,
<PAGE>
rights, remedies, trusts, duties, authority and title of such
predecessor hereunder and shall deliver all moneys and securities
held by it to such successor trustee. Should any deed,
conveyance or other instrument in writing from the Company be
required by any successor trustee for more fully and certainly
vesting in such successor trustee or trustees the estate,
properties, rights, powers, trusts, duties, authority and title
vested or intended to be vested in the predecessor trustee, any
and all such deeds, conveyances and other instruments in writing
shall, on request of such successor trustee, be granted,
acknowledged and delivered by the Company.
(d) Any required filing for record of the instrument
appointing a successor trustee as hereinabove provided shall be
at the expense of the Company. The resignation of any trustee
and the instrument or instruments removing any trustee, together
with all other instruments, deeds and conveyances provided for in
this Article XII shall, if permitted by law, be forthwith
recorded, registered and filed by and at the expense of the
Company, wherever this Agreement is recorded, registered and
filed.
SECTION 12.07 Trustee Appointed Attorney-in-Fact. The
Company hereby irrevocably constitutes and appoints the Trustee
and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full
power and authority in the name of the Company or its own name
and in the place and stead of the Company, from time to time at
the direction of the Trade Committee, to take, subject to Section
5.01(b), any action and to execute any instrument which the Trade
Committee may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to the
Company representing payment, rents, issues or profits or other
distribution in respect of the Mortgaged Property or any part
thereof and to give full discharge for the same.
SECTION 12.08 Reasonable Care. The Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of the
Trust Estate if the Trust Estate is accorded treatment
substantially equal to that which the Trustee accords its own
property and reasonable care is exercised by the Trustee in
handling any moneys or securities in its possession, it being
understood that neither the Trustee nor the Mortgage Trustee
shall have any responsibility for taking any steps to preserve
rights against any parties with respect to the Mortgaged
Property, except as expressly provided for by or in accordance
with this Agreement.
<PAGE>
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01 Amendment or Waiver. (a) None of the
terms and conditions of this Agreement, the Trade Vendor L/C or
the Mortgage may be changed, waived, modified or varied in any
manner whatsoever unless in writing duly signed by the Trustee
with the consent of the Trade Committee. Any such amendment,
waiver or modification shall be binding upon the Company, the
Trade Committee, the Trade Vendors, and the Trustee and their
respective successors and assigns.
(b) Notwithstanding the provisions of paragraph (a),
the Trustee and the Company may, at any time and from time to
time, without the consent of the Trade Committee, enter into one
or more agreements supplemental hereto or to the Mortgage, in
form satisfactory to the Trustee, (i) to add to the covenants of
the Company, for the benefit of the Trade Vendors, or to
surrender any right or power herein conferred upon the Company,
or (ii) to mortgage, pledge or grant a security interest in
favor of the Trustee as additional security for the Trade
Obligations any property or assets which are required to be
mortgaged or pledged, or in which a security interest is required
to be granted, to the Trustee pursuant to the Mortgage.
SECTION 13.02. Subordination Agreement. Notwithstanding any
provision of this Agreement to the contrary, the Trustee shall
comply with the provisions of the Subordination Agreement,
including without limitation, sections 8 and 12 thereof and shall
not require the consent of the Trade Committee or any Trade
Vendor to comply with any provision of the Subordination
Agreement.
SECTION 13.03. Notices. All notices, requests, demands and
other communications provided for or permitted hereunder shall,
unless otherwise stated herein, be in writing (including telex
and telecopy communications) and shall be sent by registered or
certified mail, return receipt requested, telex, telecopier or
hand delivery;
(a) If to the Company, to P.O. Box Drawer 947, Henderson, North
Carolina 27536, Attention: Chief Financial Officer, or at such
other address as shall be designated by it in a written notice to
the Trustee and the Trade Committee;
(b) If to the Trustee, to its address at 333 East 68th
Street, New York, New York 10021, Attention: Michael J. Sherman,
or at such other address as shall designated by it in a written
notice to the Company and the Trade Committee;
<PAGE>
(c) If to any Trade Vendor, to it at the address
specified from time to time in the list provided by the Company
to the Trustee pursuant to Section 11.01.
(d) If to the Trade Committee, c/o Mattel Toys, 333
Continental Boulevard, El Segundo, California 90295, Attention:
Dorthy Fee, or at such other address as shall be designated by it
in a written notice to the Company and the Trustee, with a copy
to Otterbourg, Steindler, Houston & Rosen, P.C., 230 Park Avenue,
New York, New York 10169 Attention: Glenn B. Rice, Esq., counsel
to the Trade Committee, or at such other address as shall be
designated by such firm to the Company and the Trustee.
All such notices, requests, demands and communications shall be
deemed to have been duly given or made, (i) when delivered by
hand, (ii) five Business Days after being deposited in the United
States mail, postage prepared, (iii) when telexed with answerback
received or (iv) when telecopied with receipt acknowledged.
SECTION 13.04 Headings. Section, subsection and other
headings used in this Agreement are for convenience of reference
only and shall not affect the construction of this Agreement.
SECTION 13.05 Severability. Any provision of this
Agreement which is prohibited or unenforceable in any
jurisdiction shall not invalidate the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
SECTION 13.06 Claims Against Trustee. This Agreement
is made for the benefit of the Trade Vendors, and the Trade
Committee may from time to time enforce the rights of the Trade
Vendors as explicit beneficiaries hereunder. Any claims or
causes of action which the Trade Vendors or the Company shall
have against the Trustee shall survive the termination of this
Agreement and the termination of the Trust Estate hereunder.
SECTION 13.07 Binding Effect. This Agreement shall be
binding upon and inure to the benefit of each of the parties
hereto and, additionally, shall inure to the benefit of the Trade
Committee and its successors and assigns and the Trade Vendors
and their respective successors and assigns and nothing herein is
intended or shall be construed to give any other Person any
right, remedy or claim under, to or in respect of this Agreement
or the Trust Estate or any part thereof.
SECTION 13.08 Governing Law. This Agreement and the
rights and obligations hereunder of the Trade Committee and the
Trade Vendors shall be governed by, and construed in accordance
with, the laws of the State of New York, without regard to the
conflicts of laws principles of such State.
<PAGE>
SECTION 13.09 Counterparts. This Agreement may be
executed in several counterparts, each of which shall be an
original and all of which taken together shall constitute one and
the same instrument.
SECTION 13.10 Termination. This Agreement shall
terminate upon the earliest of (i) the expiration of the Trade
Vendor L/C, (ii) the final disposition of the Proceeds and any
other property subject to this Agreement and (iii) the
indefeasible payment in full of the Trade Obligations.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement or caused this Agreement to be duly executed by
their respective officers thereunto duly authorized as of the day
and year first above written.
M.J. SHERMAN & ASSOCIATES, INC.
as Trustee
By: _/s/ Michael J. Sherman____
Name: _Michael J. Sherman_______
Title: _President_______________
ROSE'S STORES, INC.
By: _/s/ R. Edward Anderson_____
Name: _R. Edward Anderson_______
Title: _President_______________
PAGE
<PAGE>
NORTH CAROLINA SECOND DEED OF TRUST,
ASSIGNMENT OF RENTS
VANCE COUNTY AND SECURITY AGREEMENT
THIS SECOND DEED OF TRUST, ASSIGNMENT OF RENTS AND
SECURITY AGREEMENT (the "Mortgage" or "Deed of Trust"), is made
as of the 8th day of May, 1995, by and among ROSE'S STORES,
INC., a Delaware corporation whose address is 218 South Garnett
Street, Henderson, North Carolina 27536 ("Mortgagor");
SPRUILLCO, LTD., whose address is P.O. Box 10096, Raleigh, North
Carolina 27605 ("Trustee"); and M. J. Sherman & Associates,
Inc., a New York corporation, as trustee, whose address is 333
East 68th Street, New York, N.Y. 10021 ("Mortgagee" or "Ben-
eficiary");
W I T N E S S E T H:
WHEREAS, Mortgagor is now and may hereafter become
indebted to the vendors of merchandise inventory held by Mort-
gagor for sale in its various retail store facilities and in
Mortgagor's Warehouse distribution facility located in Hender-
son, N.C. and pursuant to the Letter of Credit and Mortgage
Trust Agreement, dated as of the date hereof, between the
Mortgagor and the Beneficiary (the "Trade Credit Trust Agree-
ment") such vendors have required, as a condition to the ex-
tension of such trade debt to Mortgagor, that Mortgagor execute
and deliver to the Beneficiary for the benefit of such vendors
this Mortgage as security for a part of such indebtedness;
WHEREAS, pursuant to a Revolving Credit Agreement
dated as of April 28, 1995 (as from time to time amended,
supplemented, modified, extended or restated, the "Loan Agree-
ment") among Mortgagor, The First National Bank of Boston
("FNBB") and CIT Group/Business Credit, Inc. ("CIT"; FNBB and
CIT and any other lending institution that as of any date of
determination is a "Bank" under the Loan Agreement are referred
to herein collectively as the "Banks"), Mortgagor has executed
and delivered to the Banks as beneficiary a First Deed of Trust,
Assignment of Rents and Security Agreement dated as of April 27,
1995 (as from time to time amended, supplemented, modified,
extended or restated, the "First Mortgage") constituting a first
lien and security interest on the Mortgaged Property (as
hereinafter defined);
WHEREAS, the Banks and the Beneficiary have this date
entered into a Subordination Agreement dated as of the date
hereof (the "Subordination Agreement") setting forth the terms
of the subordination of this Mortgage to the lien and security
interest of the First Mortgage, and a copy of the Subordination
Agreement is annexed hereto as Exhibit One; and
WHEREAS, Mortgagor is the owner of the land situated
in Vance County, North Carolina, and more particularly described
on Exhibit A attached hereto and made a part hereof (the "Real
Property"), together with all buildings and other improvements
located thereon and appurtenances thereto;
<PAGE>
NOW, THEREFORE, in consideration of the indebtedness
herein recited, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Mort-
gagor has bargained and sold and by these presents does hereby
give, grant, bargain, sell, convey, remise, assign, release, set
over, pledge and otherwise transfer unto Trustee, its successors
and assigns, in trust, with power of sale, the following
property, rights, privileges and franchises, whether now owned
or hereafter acquired:
1. The Real Property and appurtenances thereof and
thereto, together with all buildings and improvements of every
kind and description now or hereinafter erected or placed
thereon and all fixtures attached to or contained in and used in
connection therewith, including, but not by way of limitation,
all shades, wall-to-wall carpeting, screens and screening,
awnings, plants, shrubs, landscaping, fences, elevators,
plumbing material, gas, electric and electronic equipment, and
all solar, thermal, wind, heating, cooling, air conditioning and
lighting fixtures, equipment and apparatus now or hereafter
attached to or used in connection with the Real Property and
improvements thereon, together with all additions, accessions,
spare parts, fittings, special tools, renewals, replacements and
substitutions of all or any part thereof (and all other items of
property of the same class whether now owned or hereafter
acquired) as well as the proceeds thereof (including insurance
proceeds) (collectively, the "Improvements") (the Real Property
and Improvements shall be collectively referred to as the
"Premises");
2. All licenses, permits, estates, interests or
other claims, both in law and in equity, which Mortgagor now has
or may hereafter acquire regarding the Premises;
3. All easements, rights-of-way and rights used in
connection with the Premises or as a means of access thereto,
and all tenements, hereditaments and appurtenances thereof and
thereto, and all water rights related to the Premises;
4. All awards and proceeds of condemnation or in-
surance for the Real Property and Improvements or the Personal
Property or any part thereof to which Mortgagor is entitled for
any taking of or casualty to all or any part of the Real Prop-
erty and Improvements or Personal Property (as hereinafter de-
fined in paragraph 6) by condemnation or exercise of the right
of eminent domain or casualty;
5. All leases, subleases, rents, issues, revenues,
royalties, rights, accounts, proceeds, fees and profits of the
Premises, including but not limited to, all amounts generated
from the business operations located on the Premises, and all
estate, right, title and interest of every nature whatsoever of
Mortgagor in and to the same, and leases, subleases and tenan-
cies concerning the same (sometimes referred to herein as
"Revenues"); and
6. A security interest in any and all fixtures,
machinery, equipment, furnishings, and other similar articles of
tangible personal property now owned or hereafter acquired by
Mortgagor attached to, located on, contained in, or used
exclusively in connection with the Premises, or any portion
thereof, and all renewals or replacements thereof or articles in
<PAGE>
substitution thereof, or accessions thereto, whether or not the
same are or shall be attached to the Premises in any manner,
whether now owned or hereafter acquired by Mortgagor, together
with all proceeds of the foregoing.
The items of personal property described in paragraphs
1-6 above are hereinafter collectively referred to as the
"Personal Property". The property, rights, estates, and leases
described in paragraphs 1 through 6 above, including the
Personal Property and the Premises, are hereinafter collectively
referred to as the "Mortgaged Property."
TO HAVE AND TO HOLD the Mortgaged Property, with the
appurtenances thereof, unto Trustee, its successors and assigns,
in trust, however, for the uses and purposes herein set forth.
Mortgagor covenants, warrants and agrees with Trustee
and Mortgagee as follows:
ARTICLE I
OBLIGATIONS SECURED
0.1 The Obligations. This Deed of Trust is executed
to secure the following (collectively, the "Obligations"): (i)
the payment and performance of the agreements and the Trade
Obligations under the Trade Credit Trust Agreement, (ii) the
Trade Debt Note, dated as of the date hereof in the maximum
principal amount of $15,000,000.00 made by the Mortgagor to the
Beneficiary (the "Trade Debt Note"), (iii) the payment and
performance of the covenants and agreements contained in this
Deed of Trust, and (iv) the payment of all additional sums as
herein provided and agreed to be made by or on behalf of Mort-
gagor, plus any sums advanced or expended by Mortgagee to pro-
tect the security for the indebtedness secured hereby.
0.2 Future Advances Secured. This Deed of Trust
secures all present and future indebtedness owing by Mortgagor
under the Trade Credit Trust Agreement, the Trade Debt Note and
this Deed of Trust (as the same may be amended, amended and
restated, supplemented, renewed, replaced or otherwise modified
from time to time, (to the extent permitted by the Subordination
Agreement) collectively, the "Loan Documents"). The amount of
present obligations secured by this Deed of Trust is Fifteen
Million Dollars ($15,000,000 ) and the maximum principal amount
of present and future obligations which may be incurred under
the Loan Documents and secured by this Deed of Trust at any one
time is $15,000,000.00. All such future obligations shall be
incurred on or before April 29, 1996, unless the time for
incurring such obligations is extended to a date which, in no
event, will be later than 15 years from the date hereof.
Pursuant to the provisions of N.C.G.S. Section 45-67 et seq.,
this Deed of Trust secures the making of present and future
advances incurred hereunder.
<PAGE>
ARTICLE II
COVENANTS AND AGREEMENTS OF MORTGAGOR
1.
1.1 Payment of Obligations. Mortgagor shall pay the
Obligations when due, all charges and fees secured by this
Mortgage and shall otherwise comply with all terms of the Loan
Documents.
1.2 General Warranty of Title. Mortgagor covenants
with Mortgagee that it is seized of the Mortgaged Property in
fee simple and has good right to bargain and sell the same in
the manner and form as is above written, and that the same is
free from all encumbrances whatsoever except those easements and
exceptions listed in the lender's title insurance policy
delivered to the Banks in connection with the Loan Agreement,
which is hereby incorporated herein, and that Mortgagor will
warrant and defend its title to the Mortgaged Property against
the claims of all third parties whomsoever.
1.3 Required Insurance; Delivery of Policies; Payment
of Premiums. Mortgagor shall at all times provide, maintain and
keep in force or cause to be provided, maintain and kept in
force, at no expense to Trustee or Beneficiary, policies of
insurance in form and amounts and issued by companies, associ-
ations or organizations reasonably satisfactory to Beneficiary
covering such casualties, risks, perils, liabilities and other
hazards as may be required by Beneficiary, including but not
limited to (i) insurance against loss or damage by fire and
other risks covered by insurance commonly known as "All Risk"
coverage in an amount sufficient to prevent the application of
any co-insurance contributions on loss and in no event less than
the then "full replacement cost" of the Improvements; (ii)
rental and business interruption insurance; (iii) comprehensive
general liability insurance on an "occurrence basis"; and (iv)
boiler and machinery insurance. All such policies of insurance
required by the terms of this Deed of Trust shall contain an
endorsement or agreement by the insurer that any loss shall be
payable in accordance with the terms of such policy notwith-
standing any act or negligence of Mortgagor or any party holding
under Mortgagor which might otherwise result in forfeiture of
said insurance and the further agreement of the insurer waiving
all rights of set-off, counterclaim or deductions against
Mortgagor.
At Beneficiary's option all policies of insurance
shall either have attached thereto a lender's loss payable en-
dorsement for the benefit of Beneficiary in form satisfactory to
Beneficiary or shall name Beneficiary as an additional insured,
subject, in each case, to the rights of the Banks as the
beneficiary under the First Mortgage. Mortgagor shall furnish
Beneficiary with a certificate of insurance for each required
policy setting forth the coverage, the limits of liability, the
name of the carrier, the policy number and the period of cov-
erage. At least thirty (30) days prior to the expiration of
each required policy, Mortgagor shall deliver to Beneficiary
evidence satisfactory to Beneficiary of the payment of premium
and the renewal or replacement of such policy continuing in-
surance in the form required by this Deed of Trust. All such
policies shall contain a provision that, notwithstanding any
contrary agreement between Mortgagor and the insurance company,
such policies will not be cancelled, allowed to lapse without
renewal, surrendered or materially amended, which term shall
include any reduction in the scope or limits of coverage,
<PAGE>
without at least thirty (30) days' prior written notice to
Beneficiary.
1.4 Application of Insurance Proceeds.
(a) Unless otherwise provided herein or in the
Subordination Agreement, the proceeds of the insurance
carried pursuant to this Mortgage shall be paid to the
Mortgagee to be applied by Mortgagee toward extinguishment
of the defect or claim or satisfaction of the liability
with respect to which such insurance proceeds may be paid.
(b) The proceeds of the insurance carried with
respect to the Improvements, including builders risk in-
surance, hazard insurance and flood hazard insurance, shall
be paid to Mortgagee and applied as follows:
(i) Except as provided in Section 2.4(d)
below, if the amount of the proceeds does not exceed
$10,000.00, the proceeds shall be paid to Mortgagor
and shall be applied to the repair or replacement of
the Improvements as necessary.
(ii) Except as provided in Section 2.4(d)
below, if the amount of the proceeds exceeds
$10,000.00, the proceeds shall be paid to and held by
the Banks under the First Mortgage for disbursement to
Mortgagor as provided in the First Mortgage.
(c) The Mortgagor will restore the Improvements
using the insurance proceeds, or cause the same to be done,
to a condition substantially equivalent to its condition
prior to the occurrence of the event to which the proceeds
were attributable.
(d) Notwithstanding the provisions contained in
Section 2.4(b) above, and subject to the provisions of the
Subordination Agreement, at the option of Mortgagee, all
insurance proceeds shall be paid to Mortgagee to be applied
against the balance due in respect of the Obligations if an
Event of Default shall have occurred and be continuing.
1.5 Assignment of Policies Upon Foreclosure. In the
event of foreclosure of this Mortgage or other transfer of title
or assignment of the Mortgaged Property in extinguishment, in
whole or in part, of the debt secured hereby, all right, title
and interest of Mortgagor in and to all policies of insurance
required by this Mortgage shall inure to the benefit of and pass
to Mortgagee or any purchaser or grantee of the Mortgaged
Property, as the case may be.
1.6 Indemnification; Subrogation; Waiver of Offset.
(a) If Mortgagee, its officers, employees,
agents, or representatives, or Trustee, are made a party
defendant to any litigation concerning this Mortgage or the
Mortgaged Property or any part thereof, or interest
therein, or in the construction, operation, or occupancy
<PAGE>
thereof by Mortgagor, then Mortgagor shall indemnify, de-
fend and hold Mortgagee, its officers, employees, agents or
representatives, and Trustee, harmless from all liability
by reason of said litigation, including the attorneys' fees
and expenses incurred by Mortgagee, its officers,
employees, agents, or representatives, or Trustee, in any
such litigation, whether or not any such litigation is
prosecuted to judgment. If Mortgagee commences an action
against Mortgagor to enforce any of the terms hereof or
because of the breach by Mortgagor of any of the terms
hereof, or for the recovery of any sum secured hereby,
Mortgagor shall pay to Mortgagee its attorneys' fees and
expenses and the right to such attorneys' fees and expenses
shall be deemed to have accrued on the commencement of such
action and shall be enforceable, whether or not such action
is prosecuted to judgment. If Mortgagor violates any term
of this Mortgage, Mortgagee may employ an attorney or
attorneys to protect its rights hereunder, and in the event
of such employment following any breach by Mortgagor,
Mortgagor shall pay Mortgagee its attorneys' fees and
expenses incurred by Mortgagee, whether or not an action is
actually commenced against Mortgagor by reason of such
breach and such sums expended by Mortgagee, until paid by
Mortgagor, shall accrue interest at the applicable rate
under the Loan Documents from the date of such expenditure
to the date of actual receipt of payment thereof by Mort-
gagee, and shall be deemed a part of the indebtedness se-
cured by this Mortgage.
(b) Mortgagor waives any and all right to claim,
or recovery against Mortgagee, its officers, employees,
agents and representatives, for loss of or damage to
Mortgagor, the Mortgaged Property, Mortgagor's property or
the property of others under Mortgagor's control from any
cause insured against or required to be insured against by
the provisions of this Mortgage.
(c) All sums payable by Mortgagor hereunder
shall be paid without notice, demand, counterclaim, setoff,
deduction or defense and without abatement, suspension,
deferment, diminution or reduction, and the obligations and
liabilities of Mortgagor hereunder shall in no way be
released, discharged, or otherwise affected (except as
expressly provided herein) by reason of: (i) any damage to
or destruction of or any condemnation or similar taking of
the Mortgaged Property or any part thereof; (ii) any
restriction or prevention of or any interference with any
use of the Mortgaged Property or any part thereof; (iii)
any title defect or encumbrance or any eviction from the
Premises or the Improvements or any part thereof by title
paramount or otherwise; (iv) any claim which Mortgagor has
or might have against Mortgagee; (v) any default or failure
on the part of Mortgagee to perform or comply with any of
the terms hereof or of any other agreement with Mortgagor
which remains uncured after the giving of any required
notice and the expiration of any applicable grace period
or, (vi) any other occurrence whatsoever, whether similar
or dissimilar to the foregoing, whether or not Mortgagor
shall have notice or knowledge of any of the foregoing,
which remains uncured after the giving of any required
notice and the expiration of any applicable grace period.
Except as expressly provided herein, Mortgagor waives all
<PAGE>
rights now or hereafter conferred by statute or otherwise
to any abatement, suspension, deferment, diminution or
reduction of any sum secured hereby and payable by
Mortgagor.
1.7 Eminent Domain. Subject to the provisions of the
Subordination Agreement, Mortgagor assigns to Mortgagee the
amount, to the fullest extent permitted by law, up to the then
outstanding balance of the Obligations, and any other sums se-
cured hereby, of any proceeds or awards which may become due by
reason of any condemnation or other taking for public use of the
whole or any part of the Mortgaged Property or any rights
appurtenant thereto, and Mortgagee may, at its option, either
apply the same to the Obligations or release the same to Mort-
gagor without thereby incurring liability to any other person.
Mortgagor agrees to execute such further assignments and
agreements as may be reasonably required by Mortgagee to assure
the effectiveness of this Section.
1.8 Actions Affecting the Security of the Mortgage.
Mortgagor shall appear in and contest any action or proceeding
purporting to affect the security hereof or the rights or powers
of Mortgagee or Trustee. If any action or proceeding affecting
the Mortgaged Property or any part thereof shall be commenced,
to which action or proceeding Mortgagee or Trustee is made a
party or in which the right to use the Mortgaged Property or any
part thereof is threatened or in which, in the opinion of
Mortgagee, it becomes necessary to defend or uphold the lien of
this Mortgage, all sums paid by Mortgagee in connection
therewith, including its attorneys' fees, shall be paid by
Mortgagor, together with interest thereon at the applicable
rate under the Loan Documents, and any such sum and the interest
thereon shall be deemed to be part of the indebtedness secured
by this Mortgage.
1.9 Actions by Mortgagee to Preserve Security, etc.
In the event that Mortgagee is called upon to pay any sum of
money to protect or sustain the lien of the Mortgage, all monies
advanced or due hereunder shall become immediately due and
payable, together with interest thereon at the applicable rate
under the Loan Documents from the date of such advance to the
date of the actual receipt of payment thereof by Mortgagee, and
shall be deemed a part of the indebtedness secured by this
Mortgage.
In the event this Mortgage is placed in the hands of
an attorney for the collection of any sum payable hereunder,
Mortgagor agrees to pay all costs of collection, including
without limitation, its attorneys' fees, costs and expenses,
incurred by Mortgagee, either with or without the institution of
any action or proceeding and in addition all costs, dis-
bursements and allowances provided by law. All such costs of
collection incurred pursuant to this Section shall be deemed to
be part of the indebtedness secured by this Mortgage.
1.10 Additional Security. In the event Mortgagee at
any time holds additional security for any of the obligations
secured hereby, it may enforce the sale thereof or otherwise
<PAGE>
realize upon the same, at its option, either before or concur-
rently with or after a foreclosure or sale hereunder without
being deemed to have made an election thereby or of having ac-
cepted the security provided hereby or the proceeds hereof or
such additional security or the proceeds thereof in full
settlement of the Notes.
1.11 Inspections, etc. Upon reasonable notice to
Mortgagor, Mortgagee, or its agents and Trustee are authorized
to enter upon or in any part of the Premises for the purpose of
inspecting the same or the Mortgaged Property and for the pur-
pose of performing any of the acts they are authorized to per-
form under the terms of this Mortgage and the other Loan Docu-
ments.
1.12 Further Assurance. Whenever requested by
Mortgagee, and subject to the provisions of the Subordination
Agreement, Mortgagor shall from time to time execute and record
or file at Mortgagor's expense such supplementary mortgages,
financing statements, and other chattel instruments as Mortgagee
may reasonably require in order to insure that all the Mortgaged
Property shall be subject to the lien created by this Mortgage
and shall be security for the payment of the Notes as herein
provided. In the event Mortgagor shall fail to execute and
record supplementary mortgages, financing statements or other
chattel instruments as required herein within ten (10) days
after written request by Mortgagee, Mortgagor hereby irrevocably
appoints Mortgagee its attorney-in-fact, coupled with an
interest, to execute and deliver such supplementary mortgages,
financing statements or other chattel instruments in the name
of, and on behalf of, Mortgagor.
1.13 Release of Security. Mortgagor agrees that no
release by Mortgagee of all or any portion of the Mortgaged
Property, or any other security for the Obligations, no subor-
dination of lien, no forbearance on the part of Mortgagee to
collect on the Loan, or any part thereof, no waiver of any right
granted or remedy available to Mortgagee and no action taken or
not taken by Mortgagee shall in any way diminish Mortgagor's
obligations to Mortgagee or have the effect of releasing
Mortgagor, from full responsibility to Mortgagee for the
complete discharge of each of Mortgagor's obligations hereunder
or under the Loan Documents.
2.
ARTICLE III
ASSIGNMENT OF REVENUES
2.1 Assignment of Revenues. Mortgagor hereby assigns
and transfers to Mortgagee the Revenues and hereby gives to and
confers upon Mortgagee the right, power and authority to collect
the same. Mortgagor irrevocably appoints Mortgagee its true and
lawful attorney-in-fact, coupled with an interest, at the option
of Mortgagee at any time and from time to time after an Event of
Default as hereinafter defined has occurred, to demand, receive
and enforce payment of, to give receipts, releases and to sue,
in the name of Mortgagor or Mortgagee, for all the Revenues and
apply the same to the indebtedness secured hereby; provided,
however, that notwithstanding the foregoing, Mortgagor shall
have the right to collect and apply to its own account the
Revenues prior to, or at any time there is not, a continuing
<PAGE>
Event of Default under the Mortgage. Mortgagee shall not be
liable to Mortgagor for any action taken or omitted in
connection with any Leases or rent or the operation of the
Premises.
2.2 Permits and Licenses. Mortgagor shall obtain and
keep in effect throughout the term of this Mortgage all permits
and licenses required for the operation of the Premises and
Mortgagor shall submit to Mortgagee copies of all such permits
and licenses and copies of all renewals thereof within 30 days
of such renewals. All of such permits and licenses are hereby
assigned to Mortgagee as additional collateral for the Notes to
the extent permitted by applicable law.
3.
ARTICLE IV
SECURITY AGREEMENT
3.1 Creation of Security Interest. Mortgagor hereby
grants to Mortgagee a security interest in the Personal Prop-
erty, including without limitation any and all property of
similar type or kind hereafter owned by Mortgagor and located on
or used in connection with the Premises for the purpose of
securing all obligations of Mortgagor set forth in this Mort-
gage. Mortgagor also grants to Mortgagee a security interest in
the Revenues to the extent they are or may be considered
"Personal Property".
3.2 Warranties, Representations and Covenants of
Mortgagor with Respect to Personal-Property. Mortgagor hereby
warrants, represents and covenants as follows:
(a) Except for the security interest granted
hereby, Mortgagor is, and as to portions of the Personal
Property to be acquired after the date hereof, shall be the
sole owner of the Personal Property. The Personal Property
is free from any adverse lien, security interest,
encumbrance or adverse claims thereon of any kind whatso-
ever except the lien of taxes not due and payable and
Permitted Liens. Mortgagor shall notify Mortgagee of, and
will defend the Personal Property against, all claims and
demands of all persons at any time claiming the same or any
interest therein.
(b) The Personal Property is not used or bought
for personal, family or household purposes.
(c) All covenants and obligations of Mortgagor
contained herein relating to the Mortgaged Property shall
be deemed to apply to the Personal Property, whether or not
expressly referred to herein.
(d) This Mortgage constitutes a "security
agreement" with respect to the Personal Property and Rev-
enues (to the extent such Revenues constitute personal
property) as that term is used in the Uniform Commercial
Code of the State of North Carolina.
<PAGE>
4.
ARTICLE V
EVENTS OF DEFAULT
Any one or more of the following shall constitute an
Event of Default under this Mortgage after the expiration of any
applicable cure or grace period:
4.1 Monetary Default.
(a) Failure of Mortgagor to make any payment
required by the Loan Documents on the due date thereof.
(b) Failure of Mortgagor to pay within ten (10)
days of demand therefor by Mortgagee the amount of any
costs, expenses or fees (including counsel fees) of Mort-
gagee, or any other amounts due under any provision of the
Loan Documents, with interest thereon as provided herein
from the date of payment thereof by Mortgagee.
(c) Failure to pay any insurance premium re-
quired hereunder when the same shall be due or to exhibit
to Mortgagee, within ten (10) days after the date called
for, receipts showing payment of any insurance premium
required hereunder.
4.2 Uninsured Damage. Damage to any of the Im-
provements or Personal Property in excess of $10,000.00 in any
manner which is not covered by insurance required hereunder;
provided, however, that the Mortgagor may cure such Event of
Default by depositing funds with the Mortgagee within thirty
(30) days of the occurrence of such damages in an amount nec-
essary to repair or replace the Improvements or Personal Prop-
erty, which funds shall be held by the Mortgagee and shall be
advanced by the Mortgagee to Mortgagor upon the presentment of
invoices for such repair or replacement in accordance with
standard construction loan disbursement procedures.
4.3 Change in Laws. The passage of any law changing
in any way the taxation of mortgages or debts secured thereby,
if Mortgagor cannot or does not pay the same within thirty (30)
days of written notice of demand therefor; provided that, if
Mortgagor does make such payment, it shall be without prepayment
premium.
4.4 Breach of Warranty. If any representation or
warranty by Mortgagor in the Loan Documents or any certificate,
statement or report heretofore or hereafter made shall be untrue
in any material respect at the time when made.
4.5 Insurance. Failure of Mortgagor to maintain or
cause to be maintained any of the insurance required under this
Mortgage.
4.6 Breach of Covenants or Agreements. Failure of
Mortgagor to fully comply with or perform any other covenant,
agreement, or other obligation of Mortgagor contained in this
Mortgage within thirty (30) days after notice thereof from
Mortgagee.
<PAGE>
5.
ARTICLE VI
REMEDIES
In the event that one or more of the Events of Default
as above provided shall occur, the remedies available to
Mortgagee shall include, but not necessarily be limited to, any
one or more of the following, subject, however, to the limita-
tions set forth in the Subordination Agreement:
5.1 Acceleration. Mortgagee may declare the entire
unpaid balance of the Obligations, together with all accrued
interest thereon, immediately due and payable without notice.
5.2 Rights Under Uniform Commercial Code. Mortgagee
may exercise any or all of the remedies available to a secured
party under the North Carolina Uniform Commercial Code, in-
cluding but not limited to:
(a) To take possession of all or any of the
Personal Property and exclude therefrom Mortgagor and all
others claiming under Mortgagor, and thereafter to hold,
store, use, operate, manage, maintain and control, make
repairs, replacements, alterations, additions and im-
provements to and exercise all rights and powers of Mort-
gagor in respect to the Personal Property or any part
thereof. In the event Mortgagee demands or attempts to
take possession of the Personal Property in the exercise of
any rights hereunder, Mortgagor promises and agrees to
promptly turn over and deliver complete possession thereof
to Mortgagee;
(b) Without notice to or demand upon Mortgagor,
to make such payments and do such acts as Mortgagee may
deem necessary to protect its security interest in the
Personal Property including without limitation, paying,
purchasing, contesting or compromising any encumbrance,
charge or lien which is prior to or superior to the secu-
rity interest granted hereunder, and in exercising any such
powers or authority to pay all expenses incurred in
connection therewith; provided, however, that the foregoing
shall not constitute, or be deemed to constitute, a consent
to any prior lien charge or encumbrance;
(c) To require Mortgagor to assemble the Per-
sonal Property or any portion thereof, at a place desig-
nated by Mortgagee and reasonably convenient to both par-
ties, and to promptly deliver such Personal Property to
Mortgagee, or an agent or representative designated by it.
Mortgagee, and its agents and representatives shall have
the right to enter upon any or all of Mortgagor's premises
and property to exercise Mortgagee's rights hereunder;
(d) To sell, lease or otherwise dispose of the
Personal Property at public sale, with or without having
the Personal Property at the place of sale, and upon such
terms and in such manner as Mortgagee may determine.
<PAGE>
Mortgagee may be a purchaser at any such sale, and unless
the Personal Property is perishable or threatens to decline
speedily in value or is of a type customarily sold on a
recognized market, Mortgagee shall give Mortgagor at least
five (5) days prior written notice of the time and place of
any public sale of the Personal Property or other intended
disposition thereof. Such notice may be mailed to
Mortgagor at the address hereinafter set forth for notices.
5.3 Foreclosure: Power of Sale. Mortgagee may apply
to Trustee to foreclose on all or any part of the Mortgaged
Property, and upon application of the Mortgagee, it shall be
lawful for and the duty of Trustee, and it is hereby authorized
and empowered to expose to sale and sell at one or more sales
all or any part of the Mortgaged Property. Any sale or sales of
the Mortgaged Property by Trustee under the power of sale herein
granted, shall be made in accordance with the applicable
requirements of the laws of the State of North Carolina relating
to the foreclosure of deeds of trust under a power of sale. The
terms of the sale shall be cash upon completion of the sale or
upon such other and additional terms as Trustee deems necessary,
proper or convenient, except as specifically limited by
applicable law or court rule. Such sale or sales may be of the
entire Mortgaged Property as a unit or of such parts or parcels
of the Mortgaged Property as Trustee deems necessary, proper or
convenient. Trustee may adjourn from time to time any sale to
be made hereunder. Should Trustee sell only a portion of the
Mortgaged Property, this Mortgage shall remain a lien upon such
unsold portion of the Mortgaged Property and Mortgagee may apply
to Trustee to foreclose on all or any part of such unsold
portion of the Mortgaged Property pursuant to this Section.
Trustee may require the successful bidder at any sale
to deposit immediately with the Trustee cash or certified check
in an amount not to exceed twenty-five percent (25%) of the bid,
provided notice of such requirement is contained in the
advertisement of sale. The bid may be rejected if deposit is
not immediately made, and thereupon, the next highest bidder may
be declared to be the purchaser upon such bid by making the
required deposit. The deposit shall be applied to the purchase
price, unless there is a resale, in which event the deposit
shall be returned. Trustee shall deliver to the purchaser or
purchasers at any sale or sales a Trustee's deed conveying
Trustee's full title to the Mortgaged Property upon such pur-
chaser or purchasers having complied with all of the provisions
of the sale or sales, including payment of all of the purchase
price in cash.
In the event the amount due on the principal debt
hereby secured and the interest thereon shall be paid after the
filing of a foreclosure proceeding, but before sale of the
Mortgaged Property, the Mortgagor shall also be required to pay
all of the expenses of any advertisement or sale, all court
costs, and all other expenses incident to or resulting from the
foreclosure proceedings under this Mortgage, including the
reasonable fees of Trustee, not to exceed three percent (3%) of
all sums due under the Obligations, and the reasonable fees of
any counsel for Trustee or Mortgagor, but if legal services are
rendered in connection with any contested matter with respect to
the foreclosure proceeding, the status or priority of the lien
and security interest of this Mortgage or otherwise, then such
counsel fees and expenses as may have been incurred by Trustee
<PAGE>
or Mortgagor, even if greater than the aforementioned amount, or
in such lesser maximum amount as may be permitted by applicable
law; provided, however, that the foreclosure may be proceeded
with unless, prior to the date on which the sale is scheduled,
payment is made by the Mortgagor of the principal and interest,
cost, expenses, commissions and fees, as provided herein.
Upon the sale(s) made under or by virtue of this
paragraph, Mortgagee may bid for and acquire the Mortgaged
Property or any part thereof.
5.4 Additional Remedies. Upon the occurrence of an
Event of Default, Mortgagee may proceed against the Personal
Property and Revenues (to the extent such Revenues constitute
personal property) as provided in and in accordance with Article
9, Part 5 of Chapter 25 of the North Carolina Statutes as then
in effect, or its election, may proceed as to the Premises, the
Personal Property and Revenues in accordance with its rights and
remedies thereto and those granted to the Trustee, all as set
forth in this Deed of Trust.
5.5 Additional Provisions. Mortgagor expressly
agrees as follows:
(a) No waiver of any default shall at any time
thereafter be held to be a waiver of any rights of Mort-
gagor or Trustee stated anywhere in the Loan Documents, nor
shall any waiver of a prior default operate to waive any
subsequent default or defaults.
(b) The obtaining of a judgment or decree on the
Obligations, whether in the State of North Carolina or
elsewhere, shall not in any manner affect the lien of this
Mortgage upon the Mortgaged Property, and the debt repre-
sented by said judgment or decree shall be secured hereby
to the same extent as the Obligations are now secured.
(c) The only limitation upon the foregoing
agreements as to the exercise of Mortgagee's remedies are
that there shall be but one full and complete satisfaction
of the indebtedness secured hereby.
5.6 Remedies Not Exclusive. Mortgagee shall be en-
titled to enforce payment of any indebtedness secured hereby and
performance of all obligations contained herein and to exercise
all rights and powers under this Mortgage and the Loan
Documents, or any laws now or hereafter in force, notwithstand-
ing some or all of the said indebtedness and obligations secured
hereby may now or hereafter be otherwise secured, whether by
mortgage, deed of trust, pledge, lien, assignment or otherwise.
Neither the acceptance of this Mortgage nor its enforcement
shall prejudice or in any manner affect Mortgagee's right to
realize upon or enforce any other security now or hereafter held
by Mortgagee, it being agreed that Mortgagee shall be entitled
to enforce this Mortgage and any other security now or hereafter
held by Mortgagee in such order and manner as Mortgagee may in
its absolute discretion determine. No remedy herein conferred
upon or reserved to Mortgagee is intended to be exclusive of any
<PAGE>
other remedy herein or by law provided or permitted, but each
shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in
equity or by statute. Every power or remedy given to Mortgagee
or to which it may be otherwise entitled may be exercised,
concurrently or independently, from time to time and as often as
may be deemed expedient by Mortgagee and it may pursue
inconsistent remedies.
6.
ARTICLE VII
MISCELLANEOUS
6.1 Statements by Mortgagor. Mortgagor, within ten
(10) days after request in person or within twenty (20) days
after request by mail, shall furnish to Mortgagee or any person,
firm or corporation designated by Mortgagee, a duly acknowledged
written statement setting forth the amount of the debt secured
by this Mortgage, and stating either that no offsets or defenses
exist against such debt; or, if such offsets or defenses are
alleged to exist, full information with respect to such alleged
offsets and/or defenses.
6.2 Subsequent Appraisals. Mortgagor acknowledges
that Mortgagee may, from time to time, obtain appraisals on the
Mortgaged Property. Mortgagor agrees to cooperate with Mort-
gagee in connection with obtaining such appraisals, including
making the Mortgaged Property available for inspection at rea-
sonable times.
6.3 Successors and Assigns. In the event title to
the Mortgaged Property or any portion thereof becomes vested in
any person or entity other than Mortgagor, Mortgagee may,
without notice to Mortgagor, deal with such successor or suc-
cessors in interest with reference to this Mortgage and the debt
hereby secured in the same manner as with Mortgagor and may
alter the interest rate and/or alter or extend the terms of
payment of the debt secured hereby without notice to Mortgagor,
and such action shall in no way affect the liability of Mort-
gagor hereunder or under the Notes or the lien or priority of
this Mortgage with respect to any part of the Mortgaged Prop-
erty. All provisions of this Mortgage shall be binding upon and
inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and assigns, except
as otherwise herein expressly provided.
6.4 Notices. All notices, requests, demands and
other communications, provided for or permitted hereunder shall,
unless otherwise stated herein, be in writing (including telex
and telecopy communications) and shall be sent by registered or
certified mail, return receipt requested, telex, telecopier or
hand delivery to; (a) if to Mortgagor, 218 South Garnett
Street, Henderson, North Carolina 27536 Attn: President; (b) if
to Trustee, 3600 Glenwood Avenue, Raleigh, North Carolina 27612
Attn: Alan Peterson; and (c) if to Beneficiary, to (i) M.J.
Sherman & Associates, Inc., as trustee, 333 East 68th Street,
New York, N.Y. 10021 Attn: Michael J. Sherman and to (ii)
Otterbourg, Steindler, Houston & Rosen, P.C. at 230 Park Avenue,
New York, N.Y. 10169 Attn: Glenn Rice.
6.5 Modification in Writing. This Mortgage may not
<PAGE>
be changed, terminated or modified orally or in any other manner
than by an instrument in writing signed by the party against
whom enforcement is sought.
6.6 Captions. The captions or headings at the be-
ginning of each Paragraph hereof are for the convenience of the
parties and are not a part of this Mortgage.
6.7 Invalidity of Certain Provisions. If any term,
clause or provision of this Mortgage shall be adjudged to be
invalid, the validity of the remainder shall not be affected
thereby, and each such term, clause or provision shall be valid
and enforceable to the fullest extent permitted by law. If the
lien of this Mortgage is adjudged to be invalid or unenforceable
as to any part of the debt, or if the lien is invalid or
unenforceable as to any part of the Mortgaged Property, the
unsecured portion of the debt as determined by Mortgagee may at
Mortgagee's option be declared due and payable and shall be
completely paid prior to the payment of the secured portion of
the debt, and all payments made on the debt, whether voluntary
or otherwise, shall be considered to have been first paid on and
applied to the full payment of that portion of the debt which is
not secured or fully secured by the lien of this Mortgage.
6.8 Governing Law. This Mortgage shall be governed
by and construed in accordance with the laws of the State of
North Carolina.
6.9 Terms. The words "Mortgagor," "Mortgagee,"
"Beneficiary," and "Trustee" together with any pronoun or pro-
nouns in connection therewith (and the possessive form of any
such pronoun or pronouns), shall include the singular, plural,
masculine, feminine and neuter, as the context may require.
Whenever used, the singular number shall include the plural, the
plural the singular, and the use of any gender shall include all
genders, as the context may require. Any list of one or more
items preceded by the word "including" shall not be deemed
limited to the stated items but shall be without limitation.
6.10 Removal or Appointment of Trustees. Mortgagee,
its successors or assigns, is hereby authorized and empowered at
any time or timed hereafter, at its option, without notice and
without specifying any reason for its action, to remove Trustee
or any successor Trustee hereunder, and in such event or in the
event of the death, resignation, or other incapacity of any
Trustee hereunder, to appoint a successor in his place and stead
by an instrument duly recorded in the office where this Mortgage
is recorded, and such new Trustee shall thereupon become vested
with all the rights, powers, duties and obligations herein
conferred upon Trustee.
6.11 Statute Inapplicable. The provisions of N.C.
Gen. Stat. Sec. 45-45.1 or any similar statute hereafter enacted
in replacement or substitution thereof shall be inapplicable to
this Deed of Trust.
6.12 Additional Obligations Secured. Mortgagor
agrees that any amounts advanced or expended by Mortgagee on
<PAGE>
behalf of Mortgagor as provided in the Loan Documents, or oth-
erwise advanced by Mortgagee to protect its security interest in
and lien on the Mortgaged Property, shall accrue interest at the
applicable rate under the Loan Documents and shall be deemed a
part of the indebtedness secured by this Mortgage.
6.13 Subordination Agreement. Mortgagor is not a
third party beneficiary of the Subordination Agreement and is
not entitled to enforce or employ as a defense any of the pro-
visions thereof. All references herein to the Subordination
Agreement are for the benefit of the Banks and in furtherance of
the provisions of the Subordination Agreement.
BUT THIS CONVEYANCE IS MADE UPON THIS SPECIAL TRUST:
If the total amount of the debt, interest, advances and other
sums secured hereby is paid in full in accordance with the terms
of the Loan Documents, this conveyance shall be null and void
and title shall revest in Mortgagor as provided by law.
IN WITNESS WHEREOF, Mortgagor has caused this in-
strument to be executed under seal by its duly authorized of-
ficers as of the day and year first above written.
ROSE'S STORES, INC.
a Delaware corporation
By: /s/ R. Edward Anderson
R. Edward Anderson
President
ATTEST:
/s/ G. Templeton Blackburn, II
Secretary
(CORPORATE SEAL)
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF VANCE
I, a Notary Public for said County and State afore-
said, do hereby certify that R. Edward Anderson personally
appeared before me this day, who, being by me duly sworn, says
he is ------ President of ROSE'S STORES, INC., a corpo-
ration, that the seal affixed to the foregoing instrument in
writing is the corporate seal of said corporation, that said
writing was signed and sealed by him in behalf of said corpo-
ration by its authority duly given, and that the said
R. Edward Anderson acknowledged the said writing to be the act
and deed of the corporation.
Witness my hand and official stamp or seal, this the
10th day of May , 1995.
/s/Pamela E. Harlow
Notary Public
My Commission Expires:
11/25/95
(SEAL)
<PAGE>
Our Ref. No.: I-031-LACO-50090180 Date:
May 8, 1995
Beneficiary: Applicant:
M.J. Sherman & Associates, Inc. Rose's Stores, Inc.
as Trustee 218 South Garnett Street
333 East 68th Street Henderson, NC 27536
New York, N.Y. 10021
Gentlemen/Ladies:
We hereby open in your favor our Irrevocable Credit
for a sum or sums not exceeding a total of US $5,000,000 (FIVE
MILLION US DOLLARS) (such amount, as reduced from time to time
pursuant to the terms hereof, the "Maximum Drawing Amount")
available by your draft by 5:00 p.m., Boston time, on the
business day following the business day of presentment on The
First National Bank of Boston, Boston, Massachusetts effective
the date hereof and expiring at Boston, Massachusetts on April
29, 1996 subject to automatic extension to a date no later than
May 30, 1996 on the terms and conditions set forth below.
For the Account of:
Rose's Stores, Inc.
218 South Garnett Street
Henderson, NC 27536
Additional details:
This letter of credit is issued to provide support for the
beneficiary as representative of certain trade creditors of the
Applicant pursuant to a certain Letter of Credit and Mortgage
Trust Agreement dated as of the date hereof between the Ap-
plicant and the Beneficiary and is being requested by Applicant
pursuant to the Revolving Credit Agreement dated as of April 28,
1995 (as from time to time amended, supplemented, modified,
extended or restated, the "Credit Agreement") among Applicant,
the lending institutions party thereto, The First National Bank
of Boston as administrative agent and The First National Bank of
Boston and The CIT Group/Business Credit, Inc. as facility
agents.
DRAFT MUST BE ACCOMPANIED BY:
Your certified statement, purportedly signed by
Michael J. Sherman, reading as follows:
"I am Michael J. Sherman, an authorized
agent of M.J. Sherman & Associates, Inc. as
trustee (the "Trustee") under that certain
Letter of Credit and Mortgage Trust Agree-
ment dated as of May 8, 1995 between Rose's
<PAGE>
Stores, Inc. and the Trustee (the "Trust
Agreement"). The amount of this drawing,
US$__________, under the First National Bank
of Boston Irrevocable Letter of Credit
No. I-031-LACO-50090108 does not exceed the
maximum drawing amount thereunder. The
Trustee has received a "Draw Notice" under
and as defined in the Trust Agreement. I
certify that after May 8, 1995 and on or
prior to the date hereof, Rose's Stores,
Inc. has commenced a bankruptcy case under
section 301 of title 11 of the United States
Code, which case has not been dismissed as
of the date hereof."
OR
"I am Michael J. Sherman, an authorized
agent of M.J. Sherman & Associates, Inc. as
trustee (the "Trustee") under that certain
Letter of Credit and Mortgage Trust Agree-
ment dated as of May 8, 1995 between Rose's
Stores, Inc. and the Trustee (the "Trust
Agreement"). The amount of this drawing,
US$__________, under the First National Bank
of Boston Irrevocable Letter of Credit
No. I-031-LACO-50090108 does not exceed the
maximum drawing amount thereunder. The
Trustee has received a "Draw Notice" under
and as defined in the Trust Agreement. I
certify that there has occurred a default in
the payment of principal or interest on the
Loans under and as defined in that certain
Revolving Credit Agreement dated as of April
28, 1995 (as amended or modified from time
to time) among Rose's Stores, Inc., the
lending institutions parties thereto, The
First National Bank of Boston and The CIT
Group/Business Credit, Inc. as Facility
Agents and The First National Bank of Boston
as Administrative Agent and that, as of the
date hereof, such payment default has con-
tinued for a period of at least thirty (30)
days and has not been cured or waived as of
the date hereof."
OR
"I am Michael J. Sherman, an authorized
agent of M.J. Sherman & Associates, Inc. as
trustee (the "Trustee") under that certain
Letter of Credit and Mortgage Trust Agree-
ment dated as of May 8, 1995 between Rose's
Stores, Inc. and the Trustee (the "Trust
Agreement"). The amount of this drawing,
US$__________, under the First National Bank
of Boston Irrevocable Letter of Credit
No. I-031-LACO-50090108 does not exceed the
maximum drawing amount thereunder. The
Trustee has received a "Draw Notice" under
and as defined in the Trust Agreement. I
certify that The First National Bank of
<PAGE>
Boston as administrative agent under that
certain Revolving Credit Agreement dated as
of April 28, 1995 (as amended or modified
from time to time) among Rose's Stores, Inc.
("Rose's"), the lending institutions parties
thereto, The First National Bank of Boston
and The CIT Group/Business Credit, Inc. as
Facility Agents and The First National Bank
of Boston as Administrative Agent has, by
notice in writing to Rose's, declared all
amounts owing with respect to the Credit
Agreement and the Notes referenced therein
to be immediately due and payable."
Presentations must be made to us at:
150 Federal Street, 4th Floor
Boston, Massachusetts 02110
Attention: Trade Services
Each draft must bear upon its face the clause: "Drawn
under Irrevocable Letter of Credit No. I-031-LACO-50090108 dated
May 8, 1995 of the First National Bank of Boston, Boston,
Massachusetts."
This letter of credit shall be automatically extended
to a date no later than May 30, 1996 upon our receipt on or
after April 2, 1996 and on or before April 29, 1996 of a cer-
tified statement, purportedly signed by Michael J. Sherman,
reading:
"I am Michael J. Sherman, an authorized agent of M.J.
Sherman & Associates, Inc. as trustee (the "Trustee")
under that certain Letter of Credit and Mortgage Trust
Agreement dated as of May 8, 1995 between Rose's
Stores, Inc. and the Trustee (the "Trust Agreement").
I certify that there has occurred a default in the
payment of principal or interest on the Loans under
and as defined in that certain Revolving Credit
Agreement dated as of April 28, 1995 (as amended or
modified from time to time) among Rose's Stores, Inc.,
the lending institutions parties thereto, The First
National Bank of Boston and The CIT Group/Business
Credit, Inc. as Facility Agents and The First National
Bank of Boston as Administrative Agent (a "Payment
Default") and that, as of the date hereof, such
Payment Default is continuing and has not been cured
or waived. Pursuant to that certain Subordination
Agreement dated as of May 8, 1995 (as amended or
modified from time to time) among M.J. Sherman &
Associates, Inc., The First National Bank of Boston
and The CIT Group/Business Credit, Inc., the Trustee
has the right to extend the expiration date of your
Irrevocable Letter of Credit No. I-031-LACO-50090108
to May [state date in May], 1996 (the "Extension
<PAGE>
Date"), which is thirty one (31) days after the date
of occurrence of the Payment Default. Accordingly, I
direct you to extend the expiration date of
Irrevocable Letter of Credit No. I-031-LACO-50090108
to the Extension Date, which date is on or before May
30, 1996."
This letter of credit may be cancelled at the option
of the Beneficiary prior to its current expiration date as
provided for herein, upon our receipt of: (1) the original of
this letter of credit accompanied by (2) Beneficiary's signed
and written consent to cancel same.
This letter of credit shall be reduced from time to
time upon our receipt of a signed and written reduction request
from the Beneficiary, reading: "We hereby authorize a reduction
of US$_________ to a new aggregate amount of US$_________ under
your letter of credit number I-031-LACO-50090108."
This letter of credit can be drawn only once whereupon
it shall be automatically and irrevocably cancelled.
Except so far as otherwise expressly stated herein,
this letter of credit is subject to the Uniform Customs and
Practice for Documentary Credits (1993 revision), International
Chamber of Commerce, Publication No. 500.
We hereby engage with you that a draft presented to us
under and in compliance with the terms of this letter of credit
will be duly honored if presented to us not later than 5:00
p.m., Boston time, on or before April 29, 1996 subject to
extension to 5:00 p.m., Boston time, on a date no later than May
30, 1996 on the terms and conditions set forth above.
Kindly address all correspondence regarding this
letter of credit to the attention or our Letter of Credit Op-
erations, P.O. Box 1763, Boston, Massachusetts 02105, or 150
Federal Street, 4th Floor, Boston, Massachusetts 02110, Atten-
tion: Robert Marshall.
Very truly yours,
/s/ Catriona M. Kent-Sheehan
Authorized Signature
